To be fair, some of us saw this coming. Did you ever read blogs like Mish, Daily Reckoning, Prudent Bear etc. I have read them for years (at least 7 years in some cases), and they have been saying these things, based on very rational considerations such as historical comparisons to debt levels and so on. Bill Bonner of Daily Reckoning, in particular, unveiled his "trade of the decade" around 2000: sell the Dow, buy Gold based on VERY FUNDAMENTAL grounds. At that time Dow was ~12,000, gold was around $250/ounce. Today, Dow is ~7300 and gold is at $1000/ounce. Not bad for a long term prediction.

Following a lot of their advice, at a personal level, for example, I sold my home a few years ago (for a tidy profit), have zero debt, I am in mostly cash + CDs, have some gold etc. I haven't made much money on my investments (except in gold, and except the tidy profit on my home) but I haven't lost anything at all over the past 10+ years, simply because I didn't "play" the markets. I have a lot of gun powder dry ... I hope to pick up some great companies at 10+% dividend yield at some point, for example.

Many people did see it coming. Most of them were the Austrian-school libertarian types - in politics, check out Ron Paul's speeches going back several years, as an example.

The unfunny part is that the exact types of mainstream Keynesians who didn't see it coming are claiming they have the fix for all this mess. That is what should make you really afraid. Most of us who saw all this coming think these morons will screw it up even more than it is already screwed up. How is that possible? Think World War III, just as one scenario or Zimbabwe/Weimar Republic for another scenario (and a nightmare that combines World War III + Zimbabwe, if you are really into horror stories!) ...

Is it all psychology? Absolutely not. Debt is REAL. There is nothing psychological about 10x (or 40x) leverage. Psychology simply accentuates the direction, but real fundamental factors are involved here.