I am a huge Michael Lewitt fan. And this letter is one of his better ones. It will make you think, and on a wide range of topics. I especially like his opening lines: "As Rogoff and his co-author Maurice Obstfeld put it in the magnificent, awe-inspiring Foundations of International Macroeconomics…, ’The behavior of dynamically inefficient economies wreaks havoc with much of our intuition about the laws of economics.’ Put more bluntly, dynamic inefficiency makes a large part of macroeconomics worthless. Financial markets are in a sense ahead of academic macroeconomics in responding: traditional ‘fundamentals’ have now largely been transformed into one overarching ‘fundamental’: the assessment of solvency. As a result, markets are exhibiting binary behavior (‘risk-on’ or ‘risk-off’). Mathematically, dynamic inefficiency, bubbles and Ponzi games are linked very closely together. The world economy has become a collection of Ponzi games. And which country’s assets constitute a ‘safe haven’ is largely a question of whether one country’s Ponzi game can attract new participants (or even hold on to existing ones) longer than another’s."