There are so many players and so many moving parts in the financial/economic/monetary crisis that the world is currently experiencing, and so many “experts”, each with their own bias, babbling their book with overly obtuse language designed to obscure the fact that they have no idea what they are talking about and especially (like everyone else) no idea what is going to happen next, that the whole mess seems extremely complicated.

But it’s not really.

To be sure, the world and the world’s interlinked economies are a complex system and thus immune to any kind of simple explanation or analysis. But the issue that is really ailing us is fairly simple.

Here is a quote from a recent essay by Jeffrey Snider of Atlantic Capital Management that sums it up:

What is really happening across the world is the peeling back of the façade of the last few decades of monetarism. The banking system, per se, is not the problem. The problem is that the world has too many existing claims on its created productive assets and the perceptions of the world's ability to create additional productive assets.

That is the root of the ongoing financial crisis in a nutshell. Colloquially translated, he’s saying there is too much debt. But the nuance of identifying the real issue as too many existing claims on the world’s productive (i.e. wealth creating) assets is a much more accurate way of saying it. 

And to put the cherry on top of this simple diagnosis of what is wrong, the current uncertainty in financial markets essentially comes down to one question: will the gap that Snider identifies between the productive wealth in the world and the number of claims on that wealth be primarily reconciled by slashing the claims [DEFLATION] or by increasing the global money supply so drastically that the claims will be nominally satisfied, but in currency that has lost most of its value [HYPERINFLATION]?

Complex system. Simple issue.