A world that depends on what it can't possibly understand is asking for trouble.

For the longest time, stock and bond markets were fairly simple. Stocks were shares of companies sold to generate capital for that company when it needed to expand. Bonds were promises to pay interest on capital borrowed. Really, most people kept most of their money in savings accounts, that paid - when I grew up - around 5 1/4 percent. Banks lent that money to people who wanted to buy homes for a couple hundred basis points over their borrowing costs. It was a much simpler system, which served to much more directly benefit borrowers and savers.

Now, this system bears no relevance to what’s going on out there in finance. Savers can’t use bank accounts to save. They’re actually losing money if they do, because real interest rates are below zero. So they plow money into “stocks”, whatever that means these days. It could be an ETF, an emerging market Mutual fund, or Apple. Well how do you evaluate Apple? They make some cool stuff, and China’s big and growing. Sure. And that’s about where it ends for most folks. What about China falling? What about the European debt crisis? What about Japan’s demographic problem? What about the US’s inability to do anything right?

Now certainly external effects have always played a part in financial market pricing, but it really does seem like things are getting different-er. Globalism is a huge part of that. There’s too much going on around the globe to be able to understand how various asset prices will be affected. And the lower barriers of entry to investing through basically “web based games” like Charles Schwab, etc bring so much more noise into the markets, and presumably make the herd behavior much worse.

So is this just a zero-sum game, where the level of complication just goes up more, and that benefits either the lucky or the brilliant? Probably mostly.

But I also think there may be an overall confidence effect: how can the average investor know what the hell to do with her money? With market opacity at all-time levels and growing, what do you trust?

The absence of an easy “no brainer” solution like savings account, is in my mind a really, really bad idea. And threatens to wipe out (again) those unsophisticated investors who get caught in risk assets. So what ends up happening is the savings of those folks gets transferred to more sophisticated (or lucky) folks. Making people even more scared and uncertain.

I think this uncertainty is really bad for the global economy. And adds incredible noise, and the possibility for huge blow-ups. To put it simply, we’re just not smart enough to understand the system we’ve created. And this is very dangerous imho. Because those with no savings and no job and no hope become violent. Wars begin. People die. Just look to the Middle East.

So what is my solution? We need to simply the global financial system closer to something our little human brains can understand. Yes, at the expense of liquidity. Yes, at the expense of potentially greater rewards for a few. But as soon as you get dependent on any system you don’t understand, you’re asking for trouble.