Long, but well worth your time to read......Duck And Cover——-The Lull Is Breaking, The Storm Is Nigh

Duck And Cover——-The Lull Is Breaking, The Storm Is Nigh | David Stockman's Contra Corner: "As subsequent history has now proven, AIG’s $800 billion globe spanning balance sheet at the time was perfectly solvent at the subsidiary level.
Not a single life insurance contract, P&C cover or retirement annuity anywhere in the world was in jeopardy on the morning of September 16th.
The only thing gone awry was that the London-based CDS (credit default swap) operation of AIG’s holding company was monumentally illiquid.
Joseph Cassano and the other latter-day geniuses who were running it had spent two decades picking up nickels (CDS premium) in front of a steamroller, while booking nearly the entirety of these winnings as profits—all to the greater good of their fabulous bonuses.
But now, as the underlying securitized mortgage market imploded, they needed to meet huge margin calls on insurance contracts they had written against mortgage CDOs.
In truth, however, the whole mountain of CDS was bogus insurance because AIG’s holding company did not have a legal call on the hundreds of billions of cash and liquid assets ensconced in dozens of its major subsidiaries.
.....But it also did something else; it destroyed the remaining vestiges of financial market stability and honest price discovery. 
After 6-years of the central bank tsunami, two-way markets were gone; the shorts were dead; skeptics were out of business; greybeard investors had retired; speculators regularly bought downside “protection” (i.e. puts on the S&P 500) for chump change; and the law of “buy the dips” became unassailable.

Even more crucially, capital markets were transformed into rank casinos that were virtually devoid of all economic information……except, except the word clouds, leaks and sound bites of central bank speakers and their tools in the press and monitors in the banks, brokerage houses and hedge funds.

At length, this meant that the only reason to buy was that virtually every risk asset class was rising; and it also meant that the only risk worth worrying about in a day-trading market was from the verbal emissions of central bankers and their Wall Street accomplices and stooges.

So as long as the central bank con job lasted, there was no reason not to buy, buy, buy. 
The financial world’s greatest clown, Jim Cramer of CNBC, became a prophet in his own time. Indeed, the man’s stupendous insouciance became embedded in the casino itself."