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And the Buddhist would say...

With the first decade of the twenty-first century behind us, there's only one thing to say: Whew, we made it! The world didn't end after 9/11, the Iraq War, the bankruptcy of Lehman Brothers or the deepest recession since the Great Depression. Can I be forgiven for thinking that somehow the U.S. will find its way out of this mess? (Obviously, war won't work this time: We're already in two of them.)

At the sixth annual Absolute Return Symposium in New York City in November, a grimmer view dominated, especially among macro managers like Hayman Capital Partners's Kyle Bass, Clarium Capital's Peter Thiel, Balestra Capital's Jim Melcher and Passport Capital's John Burbank. To a man, all think the U.S. is headed for hyperinflation, gold belongs in everyone's portfolio (though I'm not sure they would suggest buying at today's prices), and the government has totally screwed things up.

It's the huge deficits we are running—to pay for George W. Bush's war in the Middle East, continued by President Barack Obama, and the latter's efforts to patch up the economic mess decades of financial deregulation wrought—that everyone is worried about.

There are ways out of this, even though they aren't painless. First of all, raise taxes. This is going to hurt hedge funds, but probably not as much as a default of U.S. Treasuries. After all, as one of the macro managers told me at the Symposium, only 10% of his portfolio is in gold.

Second, stand behind tough regulation of the financial industry. I'm so tired of hearing that it wasn't hedge funds that caused the crisis; it was the highly regulated banks. Of course the collapse of Wall Street wasn't the fault of hedge funds (even though we now know that John Paulson did have subprime securities created just for him to short). But does anyone out there running a hedge fund really believe the banking system was heavily regulated? The whole point of the financial engineering boom of the past 30 years (CDS, CDOs, etc.) was to find ways around bank regulatory capital requirements.

Even Alan Greenspan now admits that the enlightened self-interest that free market fanatics endorse didn't work. Why? Because human beings aren't rational. The news of the biggest insider trading scandal ever to hit hedge funds brought this response from one hedge fund investor, and it has become my favorite saying:

"When is greed enough? The Buddhist would say, 'It's never enough.'"

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