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Off the Cuff: Look Like an Idiot Now or Later?

Bubble markets force you to choose
Friday, November 22, 2013, 1:31 PM

In this week's Off the Cuff podcast, Chris and Charles discuss:

  • Overly Complacent Markets
    • Prices reflect expectations of eternal perfection
  • Think Like a Criminal
    • If you want to reap short-term profits in today's markets
  • Manipulation Magnifies the Destructive Potential of Bubbles
    • Makes them fall harder because systemic trust is eroded
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Why Social & Environmental Imbalances Are Becoming the Biggest Risks

As the story becomes more desperate
Tuesday, November 19, 2013, 2:14 PM

Executive Summary

  • The growing risk of disinflation
  • Why instability in the U.S. is accelerating
  • The danger of social rifts emerging in the near future between economic classes
  • Why environmental constraints and social instability may trump energy issues going forward

If you have not yet read What Happened to the Future?, available free to all readers, please click here to read it first.

If this is the case, it echoes the realization now dawning on economists in the U.S. that an acceleration in the economy, which many expected, is simply not going to arrive. As was discussed in previous essays, OECD GDP growth appears to be converging once again at a level below 2.00%. The U.S. is on track to achieve only 1.6% GDP growth this year. This is a primary reason why inflation, again outside of natural resources has still not broken out, or even appeared. Moreover, the U.S. and the OECD could once again be on the verge of disinflation.

One notable and important piece of the disinflation puzzle is the continued growth in inequality. As income growth narrows to a tiny vanishing point among workers, it’s become increasingly difficult to mount economic growth across many industries. Demand for goods from the 1% is robust. Demand from the rest of the populace continues to dwindle. It may be hard to believe, but policy makers, politicians, and gasp! even economists and financiers used to be deeply concerned about wealth inequality. Today, it’s as if enough time has passed for an entire generation to forget the destructive structural damage that long-term inequality can wreak on an economy.

For those of you who remember, one of the more severe cases of wealth inequality for many decades was the country of Brazil. Tellingly, it was not until Brazil elected a reformer, Lula, that the country left behind its days of boom-and-bust, debt crises, inflation, and general instability and embarked on its current path as a more balanced, sustainable economy. Coincidence? Not likely.

But what’s really scary is... » Read more

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Off the Cuff: Bad Moon Rising

All the risks from 2008 are back & bigger than before
Friday, November 15, 2013, 10:38 PM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • Growing Demand for Bad Ideas
    • Politicians are showing an astounding ignorance of how money works
  • We're In Another Bubble
    • Bigger and more dangerous than before
  • A Shortage of Sanity
    • Malinvestments galore
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A Fed Insider Comes Clean

And validates our worst suspicions
Wednesday, November 13, 2013, 1:02 AM

After they behaved badly and almost ruined the entire world financial system while pocketing fat fees along the reckless road they laid down, the big banks got 'made whole' by the Federal Reserve.

While couched at the time in fancy acronyms, a lot of complexity, and some good old motherhood and apple pie (that is, the Fed talked about helping the economy recover and people get their jobs back), the truth of the matter is simply that the Fed cared only about helping the big banks repair their balance sheets. » Read more

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Off the Cuff: The Anxiety Gap

If things are so great, why are we so unhappy?
Thursday, November 7, 2013, 1:42 PM

In this week's Off the Cuff podcast, Chris and Charles discuss: » Read more

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rangizzz

How to Overcome Diminishing Returns

Avoiding and reversing their effects
Monday, November 4, 2013, 3:26 PM

Executive Summary

  • Identifying the 8 characteristics that signal a system is experiencing diminishing returns
  • The powerful advantages simplification can offer
  • Debt-avoidance as a forward strategy
  • The criticality of creating parallel, self-reliant systems

If you have not yet read Our Era’s Definitive Dynamic: Diminishing Returns, available free to all readers, please click here to read it first.

In Part I, we surveyed examples of diminishing returns and touched upon the forces that generate devotion to systems beset by diminishing returns. In Part II, we’ll look a little deeper into the dynamics, with an eye on avoiding being ensnared in systems that are doomed by dwindling yields and rising costs.

Characteristics of Diminishing Return Systems

1. Friction. Sources of what I term 'friction' include procedural impedance between dissimilar systems, fraud, inefficiencies, and processes that no longer add value but that are accepted as “the way things work.” (I wrote about systemic friction for Peak Prosperity in 2011: How Much of the U.S. Economy Is Friction?)

Common examples include the proliferating “reward cards” from retailers that fill our wallets and purses with low-value complexity and our absurdly complex income tax system that costs billions of dollars while serving primarily as a conduit for special-interest tax breaks.

2.  “Solutions” that do not address the root problem.  One example is our healthcare system’s haphazard approach to mental health: A great many mentally ill people who fall between the system’s cracks end up being incarcerated, in essence passing the cost and responsibility for mental healthcare to the already-burdened criminal justice system. Imprisoning the mentally ill is clearly a diminishing-return “solution” to our systemic lack of mental health care. » Read more

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Farmland LP

Off the Cuff: An Opportunity to Own Productive Farmland (Revisited)

Without having to run a farm yourself
Friday, November 1, 2013, 8:34 PM

In this week's Off the Cuff podcast, Chris and Craig discuss sustainable farmland -- specifically, a model for how investors can own it.

Two years ago, we announced this model on our site: » Read more

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The Near Future May See One of the Biggest Wealth Transfers in Human History

Which side will you be on?
Friday, October 25, 2013, 12:34 AM

Executive Summary

  • Why GDP growth is very unlikely to support the rate of credit growth the Fed wants
  • If it can't, what is most likely to happen?
  • Why the current bubble threatens to end in one of the biggest wealth transfers in human history
  • How to increase your odds of being on the right side of that transfer

If you have not yet read Part I: The Fed Can Only Fail, available free to all readers, please click here to read it first.

The (Delusional) Plan: Growth Will Cover Past & Future Debts

Currently, the U.S. debt-to-GDP ratio stands at around 350% in 2013. This is an historically elevated number, so much so that we really don't have anything in our economic history books to tell us what comes next. Robust economic growth, we suppose, that can reduce that imbalance painlessly.

But looking at the past 220 years of history, we find that the average yearly growth in U.S. GDP has been 3.8%:

(Source

Now, I have some quibbles with the idea that the U.S. will be able to sustain that long-run average of 3.8% over the next 30 years, because debt levels are already crushing growth, as are high oil prices (double whammy!). But let's spot the Fed every advantage here. 

If U.S. GDP grows at 3.8% annually, but credit grows at 8%, that means the nation's debt-to-GDP ratio would balloon to 1,130% by 2043. That's equivalent to someone with a $50,000 salary carrying $57 » Read more

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Off the Cuff: The Tarnishing of American Exceptionalism

Self-inflicted sabotage
Thursday, October 24, 2013, 1:01 AM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • The Tarnishing of the American Image
    • Government shutdown, drones, NSA spying, military intervention...
  • A Recovery in Europe?
    • No way, despite the recent PR offensive
  • A Coming Crisis of Confidence
    • When the Fed can no longer move markets, watch out
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Kicking the Can, As Expected

The recent deal in Congress solves nothing, resolves nothing
Thursday, October 17, 2013, 4:23 PM

I didn't get too worked up analyzing what might happen in the event of a U.S. default on its debt, because I knew in my heart of hearts that such a move would have required some serious political spine.

This is something that is completely lacking in both parties right now, so I didn't worry about any other outcome besides an eleventh-hour agreement to kick the can a bit further down the road. » Read more