For the past several years, I have had a running joke with my friends that I am "Triple Short The World." For those who don't follow financial markets, "short" means that you are effectively betting on the price of something going down, and not up. "Triple short" means that you are making that bet three times over.

The reason that this joke has come about is because it's true. I've invested heavily in exchange traded funds (ETFs) that increase roughly 3% for every 1% that the S&P 500 or the price of gold goes down. The reverse is also true: for every 1% that the S&P 500 or the price of gold goes up, the ETFs go down 3%. Sometimes the ratio isn't quite exact, but it's normally pretty close, and there is enough trading volume to keep the whole thing afloat.

This is obviously a risky set of bets that I do not necessarily recommend. Timing matters and mine has not been especially great. It also involves leverage, and it involves a firm belief in a precipitous market decline that has for the past four years been proven wrong day after day as markets have risen.

But I'm finally comfortable predicting that it will all look very different very shortly—within a few months. (Do I stand to gain from convincing others that I am right? Yes. So feel free to take all of this with so many grains of salt.)

Most of what they taught us in economics at Harvard (and most of what they still teach at all major univerities) was and is complete nonsense, evidenced by the fact that the department's best students in my class proceeded to work at Goldman Sachs, Bear Stearns, Lehman Brothers, Credit Suisse, and other respected investment banks and lesser-known hedge funds shortly after graduation, where they proceeded to destroy the world with the very same economic theories (read "rubbish") they and their bosses had learned. I've long believed that anything beyond basic supply and demand theory is about as reliable as voodoo. Should you think that I'm politically biased, I'm not a pro-regulation tax-and-spend liberal and I'm not an anti-government Republican. I'm certainly not a libertarian. I'm a centrist who believes that all of the philosophies I just mentioned are so broad that taken alone, each is destructive to society in the end for want of much-needed nuance.

That all being said, there is one thing that we learned about in the worst course I ever took, Economics 1010a, and in high school before that, that does matter, and that one thing is the monetary policy set by the Federal Reserve. It doesn't matter in the way we were taught, which involved pretty graphs involving unemployment and formulas and rules. It matters in a way that psychologists, and not economists, would recognize, where the effects of a select few New Yorkers believing that it matters, and an even more select few New Yorkers truly understanding why it matters, makes it actually matter a million times more than it actually does.

Interest rates have been effectively zero since December, 2008. The Fed has been giving banks free money. And the banks have been using that free money to buy every asset they can get their hands on, whether it's a barrel of oil or a house or a share of stock in a worthless social network.

That includes assets in my neighborhood. I'm thirty years old. I've lived in Silicon Valley since I was twenty-three. Would I like a one-bedroom apartment for myself now that I am indisputably an adult? I would. My parents certainly had no problem finding a place to live when they were thirty. Can I afford such accomodations? Not a snowball's chance in Hell. Nice, and by "nice" I mean respectable-for-a-middle-class-person-to-live-in, one bedroom apartments in Palo Alto are renting for $3,800. Lest you think that I am exaggerating for effect, know that I am not the only one noticing these astronomical prices.

Recently a blogger documented his decision to leave the Valley for Portland, Oregon, where the cost of living does not require one to be a multi-millionaire. A good friend of mine already dropped out of his Stanford PhD program to work on a startup, but soon decided to live with his parents in Philadelphia for the purpose of saving money. (It now seems like a wise move.) Another friend just gave two weeks notice to his current employer, a major law firm, and will move back east to live with his parents, where he will teach himself to program.

As for my house, I'm moving, but not because of the price, which will go up 34% from my original 2007 monthly rent when the next tenants move in on August 1. I simply don't want to live next to toxic waste.

In other words, the scales have tipped. The Valley is so unaffordable, not to mention hazardous to health, that at the current rate there will be no one left to work or live in it except for an exclusive circle of hallucinating "visionaries" and investors. The New York Times has been running similar pieces about the insane New York real estate market. The S&P 500 has been at or near all-time record highs for more days than I can count recently.

Real estate bubbles have a tendency to be contagious, as we found out in the last recession, and as the Asian "tiger" economies learned in 1997. Add in the inevitable rise in interest rates—the end of free money for banks, some of which have come to depend upon it—and the likelihood that such global contagion will cause China's markets to seize up for more than a day, an unstable Europe, and at least one civil war (unfortunately, now maybe two) in the Middle East, and you have yourself all of the ingredients necessary for an economic catastrophe of epic proportions.

My parents' investment philosphy, which worked well for them and for many of their generation, was to buy and hold. Of course, this is premised on the notion that America A) is the dominant world power that B) will continue to expand decade after decade thanks to reasonably good leadership when compared with other nations. I'm not sure those assumptions hold true anymore, and the markets sure don't look the way they used to before 1995. Congress is indeed setting new records—for dysfunction. Bill Moyers's excellent documentary piece on Frontline, Two American Families, paints a scary picture of the nation we live in. It doesn't even mention Detroit.

As far as I can tell, we are in new territory: The New Economy, but not the kind that you're used to hearing about. It's an economy where all three branches of government are useless; there are no checks and balances. There are no leaders save for a cartel of about fifty multi-national corporations all managed by the same old, mostly white people. An economy where the rich literally don't care if everyone else just keels over dead. Thanks to the treasonous Congressional Republicans, the libertarians have effectively won. It's each man for himself—which has been true for a long while—but what's really bad is that it's about to get much, much worse.