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The Worst Threat We Face Is Right Here At Home

The Federal Reserve is ruining us
Friday, February 16, 2018, 8:58 PM

Last week, volatility made a long-overdue return to the US and global equity markets.

It began with a 2-day back-to-back violent drop. Day 3 saw a big rebound, swiftly followed by two more days of gut-wrentching losses. And then finally, last Friday, the day saw massive swings both high and low, ending with a huge upside run.

During this period the S&P 500 lost more than 300 points.  Since then, though, the market has been steadily rising.

Is the danger past?  Are the markets safe once more?  

And if so, did the markets recover organically? Or were they rescued by The Plunge Protection Team (PPT)?

The answer matters.

If such intervention was rare we could almost justify it, if it took the form of simple, pre-arranged circuit breakers that shut the market down for a "cooling off" after they’ve moved too far, too fast. Indeed, these already exist, and are sufficient in our view.

But if such market interventions are routine, persistent, and generally depended on by the major market participants, then they're highly destructive over the long term. 

Sadly, we live with the latter.

Insiders get stinking rich by front-running the scheme (check). Normal adjustments are prevented (check), allowing dangerous bubbles of extreme overvaluation to form (check), while fostering malinvestment (check).

Do this long enough and you end up with a deformed economy, an eroded social structure, and markets that no longer function as appropriate mechanisms for capital distribution and economic signaling. 

This is where we find ourselves today.

Modern-Day Soviet Crop Reports

In the former Soviet Union, the communist method of assuring economic progress was to set targets for production. Famous among them were the crop reports.

In these, year after year, the various regional oblast (province) authorities would declare having met or exceeded the crop targets, despite rarely ever truly doing so. 

These crop reports were so famously unreliable that the Kremlin leadership eventually took to obtaining their information from US satellite reconnaissance data rather than their own internal reporting from local Communist Party bosses.

Basing next year’s crop planting decisions on these reports often led to famines, and sometimes even mass starvation of entire regions.

Poor data = Bad decisions. 

The Soviet crop reports are now a famous example of an unreliable measure that led to disastrous consequences. Because of the false reporting, poor decisions were made. Eventually it became clear to even the Soviets that attempting to centrally micro-manage a major economy is an act of folly.   

Too much of this and too little of that were produced.  Cement, steel, and auto quotas harmed rather than helped for obvious reasons; poor information flows assured that production decisions were late or flawed or both. All this contributed dearly to the Soviet economy's collapse.

The lessons here are instructive and simple:

  1. centralized management of complex systems doesn’t work, and
  2. bad data leads to bad outcomes

Today’s stock and bond markets are no different than the Soviet crop reports of old.  They mainly represent what a small committee of central planners believe are the right numbers to achieve very broad macro-economic goals. 

Enormous damage has already been done by the interventions and distortions resulting from the pursuit of the delusional aims of todays central planners (with the world's central banking cartel being the most culpable).

But it's poised to get a lot worse from here.

A Great Irony

The ironic parody of all the current US concern over the possibility of Russian meddling in US elections is that virtually nobody from either political party seems the slightest bit concerned that the US is actually recreating the very worst mistakes of the now-defunct Soviet empire. 

In point of fact, the Federal Reserve has done far more self-inflicted harm to long-term US interests than anything that Russia has been accused of, let alone been proven to have done. At this point, there’s no contest between the two. 

If the damage inflicted by the Federal Reserve had been done by a terrorist organization, it would for certain be public enemy #1.

Consider that, under the Greenspan/Bernanke/Yellen Federal Reserve, the following has occurred:

  • Pension plans, both public and private have been ruined.  Millions of future retirees and taxpayers will not have trillions of dollars they would and should otherwise have to support them in their later years.
  • Income inequality is at the highest its been in over 100 years
  • Wealth inequality is also at historical extremes
  • Student debt is now nearly $1.5 trillion, up ~ $1 trillion since 2007
  • More than a trillion dollars of interest payments on savings accounts has been forfeited  -- denying funds to the next generation for use in business creation, household formation, and education.
  • Total debt in the US and globally is up massively since the 2008 Great Recession (itself a central banking accident), and now stands at more than $233 trillion worldwide.

These are among a few of the destructive results of the Federal Reserve’s decision to lower interest rates to 0% in order to reward the big banks, well connected private equity firms, and unrestrained government borrowing.

Of course, when you print money (as the Fed does) you cannot create wealth; you only transfer it from one party to another. 

Put another way, the Federal Reserve and its foreign partners (the BoJ, ECB, etc.) have been picking winners and losers.

Losers have been seniors dependent on a fixed income, Millennials and every generation following them, and savers, pensioners, and taxpayers. The winners have been the banks, the ultra-rich, entrenched political parties, rentiers, and baby boomers with sizable financial portfolios.

Here's just one example of the kind of devastation the Fed's deeply unfair actions have wrought. A simple Google search on "pension" brings up the following spate of alarming headlines:

The catastrophic losses that will result from these massive pension shortfalls is nothing less than an act of domestic terrorism by the Federal Reserve. They will haunt the US for generations.

There should be serious consequences for destroying the futures of tens of millions of retirees, on purpose --and knowingly -- simply so big banks could not just enjoy fat profits, but record fat profits, for nearly ten years in a row:

Put more bluntly: approximately 90% of US citizens have been financially and economically tossed under the bus simply so that the already-rich could get a little richer. If that’s not a form of terrorism, I don’t know what is.

This chart shows the future burden amassed under the last three Federal Reserve Chairmanships:

None of that could have happened under responsible banking practices. Instead, such excess was enabled and encouraged by an activist Federal Reserve that loosened and loosened some more whenever reality began to exert itself. 

They did this to reward themselves and their colleagues and banking associates.  It has been a series of self-dealings and unchecked conflicts of interest.

My point here? None of this was done by accident. It has been deliberate and done with full intent to create exactly the conditions in which we find ourselves.

Sure, we could go ahead and obsess over the claim that somehow an insignificant $100k worth of Facebook ads purchased by Russia are somehow responsible for our current misery and overall state of domestic neglect. But we'd be focusing on entirely the wrong parties.

The worst threats we face are right here at home.

Conclusion

As bad as the damage done so far has been, the real pain has not yet begun.

The entire command-and-control system of the US and other western economies and markets has resulted in several decades of increasingly poor decision making and mal-investment. 

When it comes to repaying the current global debt levels of ~310 % of GDP, we can confidently predict that such a debt load can never be repaid. They can only try to roll it over as long as they can -- which can't go on much longer without real consequence. Mounting losses are certain at this point.

When it comes to underfunded promises and entitlement programs, such as pensions and social security (clocking in at nearly 800% of GDP!), there’s really only one all-important question that matter at this point: Who’s going to eat the losses?

In Part 2: It's Even Worse Than You Think, we reveal the much further extent of the racket being run against the public by the world central banking cartel, and how it's efforts to continue this racket have sentenced us all to another massive financial/economic crisis -- one that is both now inevitable, necessary, and overdue.

By preventing that which should happen, the central banks have set the stage for an enormously dangerous and disruptive market crash.  The kind that forces markets to close for days and weeks on end.  The kind that leads to major banking crises punctuated by 'holidays’ where depositors can not access their money.  The kind where disorder and social unrest becomes a real risk.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

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33 Comments

HodgePodge's picture
HodgePodge
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The Federal Reserve is ruining US

This is all pretty obvious to those of us that have been following this issue for the last 20 years. 

What I want to know is what can we do about it? Even the discussion on how to protect ourselves

has been had. Seems to me we are taking about the end of our democracy as we knew it, and we are just

waiting for the revolution.

MKI's picture
MKI
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Posts: 73
Who’s going to eat the losses?

Who’s going to eat the losses?

Much of this "debt" are undeserved promises, like pension, or entitlements, like SS or Medicare, where people are getting far more than they put in.

I certainly lack sympathy for pensions "lost". Cash it out and get a 401k like the rest of us. If you have a pension, you are the elite so should tighten the belt (I had a pension for 3 years, cashed it out). Many minimum wage workers who service the pension-owner lifestyle don't even get vacations or sick leave. In fact, most of the pensions are for fat-cat government workers who have basically stolen tax dollars from the poor working class. The faster these pensions go bust? The better.

Same goes for Medicare and SS. These are just straight payments from the young to the old, and the young have gotten the shaft. We can see this in the "IOU" graph above; nearly all of the increase was to Medicare since 2000. Just a straight wealth transfer from young to old, and the old never had many kids, making it necessary to import cheap labor. Reap: sow.

I sure hope at least the student loans are defaulted upon; modern indentured servants, and I doubt many will have to have to pay them back...Bernie or somebody like him will see to that. It will be the holders of the debt who lose their shirts, as it should be. Need a Jubilee where all debt was written off every so often just to get things restarted.

So I guess I don't see any problem at all. I'm not young myself, but all this "debt" is merely a wealth transfer from young to old and it's embarrassing. The sooner the gravy-train collapses, the better.

LesPhelps's picture
LesPhelps
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MKI wrote:Much of this
MKI wrote:

Much of this "debt" are undeserved promises, like pension, or entitlements, like SS or Medicare, where people are getting far more than they put in.

Same goes for Medicare and SS.

MKI, I’m guessing you didn’t spend 40 plus years paying substantial Social Security and Medicare tax, while at the same time watching the government misappropriate the funds?

Undeserved? HOGWASH!  I’ll never get back near what I paid in, much less the funds I would have if I invested same.

Pension promises could only be considered undeserved if I did not make my employer more money than my salary and benefits, including pension, over the course of my career.  Since I made my employer far more than I was compensated, that statement doesn’t bear close scrutiny either.

You present your opinions like they are indisputable facts.  Not so.

Uncletommy's picture
Uncletommy
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Eating the losses? Boomer diet?

From an interview with a "Personal finance expert" on increase in borrowings from retirement funds to make ends meet:

"When you borrow from your RRSP, you're borrowing from yourself, and there's no one knocking on your door saying, 'Hey, you borrowed $20,000, now give it back,' because you've taken it from you own account."

She recommends looking at other ways to access money like taking a short-term low-interest loan or using a line of credit as a more "financially sound" way to deal with financial problems.

"That also puts you on a payment plan, so it makes you a little bit more accountable for the money that you actually borrowed," she said.

And, we wonder why we're in this situation. It is comforting the banks are looking out for our best interests!

MKI's picture
MKI
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Stealing from the future is coming to an end

LesPhelps: I’m guessing you didn’t spend 40 plus years paying substantial Social Security and Medicare tax, while at the same time watching the government misappropriate the funds?

Over 30 plus years. I'm just realistic how a) SS & Medicare are just a regressive tax on poor workers, and how b) the young have been screwed by people of your and my age without shame.

But whether my facts are indisputable is really irrelevant, isn't it? As CM's article clearly shows: our gravy train of stealing from the future is coming to an end. It's only a question of when. And since the youth don't have much money, those who actually do have savings/property in plain sight (pensions, 401ks, Medicare, SS) who are going to have it taken to cover the bill...just another reason to own some precious metals outside the system...

LesPhelps's picture
LesPhelps
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MKI wrote: I'm just
MKI wrote:

 I'm just realistic how a) SS & Medicare are just a regressive tax on poor workers, and how b) the young have been screwed by people of your and my age without shame.

I’ve known for a very long time, that the US Government was not going to return any of the Social Security money I was required to pay.

I took and take exception to your calling it undeserved in your first post.  That only applies to people who are getting money that they never paid in.

In this post, I take exception to the young people being screwed.  I did not screw the young people.  Most of the people I associate with did not screw the young people.  

I’d argue that the government screwed today’s youth.

But, look around you.  Today’s young are making the same mistakes that some baby boomers made.  If the millenials had been baby boomers, they would have done exactly what some of us did.

Mark_BC's picture
Mark_BC
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LesPhelps wrote: In this
LesPhelps wrote:

In this post, I take exception to the young people being screwed.  I did not screw the young people.  Most of the people I associate with did not screw the young people.  

I’d argue that the government screwed today’s youth.

And I take exception to the argument that the government screwed us. The government is broke, so it too got screwed. It's just passing the buck down the line, taking orders from Central Command.

The Fed and elitists screwed us all, including the government.

SagerXX's picture
SagerXX
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This is like...

...listening to two guys side by side, kneeling, face down, with their necks in guillotines, arguing about who built the guillotines.  (love y'all anyway!)

MillenialFalcon's picture
MillenialFalcon
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Not true at all.  Que Bob

But, look around you.  Today’s young are making the same mistakes that some baby boomers made.  If the millenials had been baby boomers, they would have done exactly what some of us did.

 

Not true at all.  Que Bob Dylan: The times they are a changin'

Mohammed Mast's picture
Mohammed Mast
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Solutions?

The Amerikan sheeple are too stupid to understand much of this.

Go into a bank and ask any teller how money is created. these are people who handle it every day for a living. You will get a blank stare. The only politician who had a snowball's chance in hell of changing anything was Ron Paul. Look what happened to him. (of course had he been elected they would have killed him)

The vast majority of Amerikans have virtually no savings. They cannot participate in the solutions offered here, which revolve around buying gold and silver. The discussions here are geared towards those that have savings and investments. There are endless charts illustrating this. 

The only possible solution is an alternative monetary system. This has been provided by the introduction of crypto currency. The implications of this possibility are all but ignored here. Cryptos has been reduced to nothing more than an investment vehicle which completely misses the point of why BTC was developed in the first place. The early adopters saw this clearly, unfortunately they have now been supplanted by investors.

To keep doing the same thing over and over again and expecting different results is a form of insanity

 

Luke Moffat's picture
Luke Moffat
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Too much Optimism?
Mohammed Mast wrote:

The only possible solution is an alternative monetary system. This has been provided by the introduction of crypto currency. The implications of this possibility are all but ignored here. 

Hi Mohammed,

You're not being pessimistic enough about the problem. The only possible solution isn't an alternative monetary system, the only thing that will save the current system is an abundance of cheap energy for the masses. Bitcoin will not replenish the North Sea Oil Fields, nor will it give the USA access to vast amounts of conventional oil once again.

I think such 'miracles' obfuscate the issues which Homo Sapiens are facing - we are a species intricately tied to the process of combustion - from cooking most of our foods as a form of pre-digestion, to an economy which is a nothing more than a transition of energy and the transportation of energy derived products.

All the best,

Luke

 

Uncletommy's picture
Uncletommy
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Stewing in your own juices?

Solutions? I think the founding fathers of the the US probably captured the sentiments of the issue rather succinctly:

"Prudence, indeed, will dictate that government long established should not be changed for light and transient causes; and, accordingly, all experience hath shown, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed."

Change can come in many forms. Comfortable?

"The truth will set you free; but, first it will make you miserable"

Mohammed Mast's picture
Mohammed Mast
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Pessimistic enough.

Your response actually is not a response to what I posted. I kept my comment within the confines of the original post whereas yours ranged far afield. The post is about the monetary systen not fossil fuels. 

No one has ever accused me of not being pessimisstic enough.However if you would wish to confine the discussion to monetary issues I would be happy to continue. I see no solutions here for anyone other than the investor class. I do not see any discussion of what would be really meaningful for the average Amerikan. This is my point. unless and until people adopr an alternative democratic  monetary system then they will remain debt serfs working the lord's fields.

LesPhelps's picture
LesPhelps
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Luke Moffat wrote: The only
Luke Moffat wrote:

The only possible solution isn't an alternative monetary system, the only thing that will save the current system is an abundance of cheap energy for the masses.

Removing the energy constraint will only bring the next constraint into play.

In the not so long run, growth is simply not sustainable in a constrained environment.

LesPhelps's picture
LesPhelps
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Mark_BC wrote: And I take
Mark_BC wrote:

And I take exception to the argument that the government screwed us. The government is broke, so it too got screwed. It's just passing the buck down the line, taking orders from Central Command.

The Fed and elitists screwed us all, including the government.

I won’t argue about the Fed and elitists, but the governments wiiligness to spend beyond their means for decades, rests squarely on their shoulders.  Congress has always had the option of making sound and fiscally prudent decisions.  Granted, their donations and kickbacks would have suffered, but the option was there.

timeandtide's picture
timeandtide
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Actually, we all screwed ourselves

I don't think all this finger-pointing is very helpful although it is absolutely symptomatic of the change in mood that has been moving toward the negative/pessimistic since the real value top in the markets in 2000.

The top I am referring to is of the Dow priced in terms of the price of gold. The economic recovery since then (2000 not 2009) has been modest, despite bouts of extreme optimism during this period - the housing bubble, the bond market bubble and now, again, the equity bubble.

The unusual aspect of the whole 18 year period has been the refusal of the economy to take off. There were periods of crazy confidence that ignited speculation in the markets underpinned by the confidence (or is it really fear?) that induced market participants to buy the bond market down to negative interest rates.

It is too easy to blame the central banks. Most of the time they do not lead the market, they follow it. Central bankers are part of the herd too.

Debt is the problem. In the graph above, private debt and government debt are about the same and both are swamped by Medicare debt. People don't have to take on debt to buy over-priced houses, cars, university education, equities etc but they do because they look at what everyone else is doing so they join the herd. Finger-pointing is just a way of avoiding the acknowledgement that we have all been damn fools. 

The rich may have done better out of the Greenspan / Bernanke / Yellen put than the plebs like us but it is too early to tell what the eventual outcome will be because there really is nowhere to hide. The mood is becoming more intensely negative and I expect the current enthusiasm for the idea that economies around the world are gaining strength to fizzle out.

The herd has made the first fearful dashes south but the main stampede is yet to come. I am reminded of the great flocks of starlings that come together in the autumn and swirl round directionless with sudden spurts in one direction or another followed by a return to the black swirling cloud. Inevitably, one of those spurts carries further, the swirling cloud becomes directional and follows the spurt south to Africa to avoid the winter freeze. 

Mark_BC's picture
Mark_BC
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timeandtide wrote:I don't
timeandtide wrote:

I don't think all this finger-pointing is very helpful although it is absolutely symptomatic of the change in mood that has been moving toward the negative/pessimistic since the real value top in the markets in 2000.

The top I am referring to is of the Dow priced in terms of the price of gold. The economic recovery since then (2000 not 2009) has been modest, despite bouts of extreme optimism during this period - the housing bubble, the bond market bubble and now, again, the equity bubble.

The unusual aspect of the whole 18 year period has been the refusal of the economy to take off. There were periods of crazy confidence that ignited speculation in the markets underpinned by the confidence (or is it really fear?) that induced market participants to buy the bond market down to negative interest rates.

It is too easy to blame the central banks. Most of the time they do not lead the market, they follow it. Central bankers are part of the herd too.

Debt is the problem. In the graph above, private debt and government debt are about the same and both are swamped by Medicare debt. People don't have to take on debt to buy over-priced houses, cars, university education, equities etc but they do because they look at what everyone else is doing so they join the herd. Finger-pointing is just a way of avoiding the acknowledgement that we have all been damn fools. 

The rich may have done better out of the Greenspan / Bernanke / Yellen put than the plebs like us but it is too early to tell what the eventual outcome will be because there really is nowhere to hide. The mood is becoming more intensely negative and I expect the current enthusiasm for the idea that economies around the world are gaining strength to fizzle out.

The herd has made the first fearful dashes south but the main stampede is yet to come. I am reminded of the great flocks of starlings that come together in the autumn and swirl round directionless with sudden spurts in one direction or another followed by a return to the black swirling cloud. Inevitably, one of those spurts carries further, the swirling cloud becomes directional and follows the spurt south to Africa to avoid the winter freeze. 

Since we're all gonna face the guillotine let's duke it out!! I disagree that the plebs didn't have to go into debt. They DID have to go into debt to live a normal middle class life. That's the whole point of debt surfdom!!! The elites use the banks to gut middle class wealth, and maintain the illusion of middle class wealth by offering us back some of what they have stolen, in the form of mortgages and loans!!!! Without debt, the average pleb has nothing!!

The Fed is TOTALLY to blame for this. The only fault the average person has is from being so stupid to allow it to happen. We have all been SHAFTED

timeandtide's picture
timeandtide
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Which comes first - the horse or the cart?

You may have a point Mark_BC but I am not entirely convinced.

Did the plebs go into debt because they had to or did going into debt raise prices so much that making ends meet in the aspirational social climate that prevailed from the early 1980s became impossible without further borrowing? I suggest that what happened over the last 36 years happened because we wanted it to happen or were not concerned enough to do something about it. The herd is the herd and we are part of it.

The early 80s began with high interest rates smashing inflation which was running near 10% through the 70s.  Fed Chairman is given the credit for this but it was a period of intense pessimism. Equity yields were extraordinarily high as were bond yields because people were selling rather than buying. Only a few bucked the trend - people like Warren Buffet. The mood changed in the early 80s, inflation had been crushed for the time being and the republicans under Reagan were feeling so full of themselves they decided that debt no longer mattered. The whole country was starting to feel the same. The October crash of 1987 was regained by the end of the year. The country was on a roll. So was inflation again. By the time of the Clinton administration, the bond vigilantes were stalking the exchanges. In the year from October 1993 the 10 year rate had climbed fro 5.2% to 8%. That had the effect of forcing the Clinton administration and Congress to take action to rein in the deficit and rates dropped to 4% by November 1998. 2 months earlier LTCM had been bailed out in a deal worth $3.6 billion involving the Fed and several banks. That was after John Meriwether had been given 1 hour to make up his mind and offload his disaster for $250 million to a bunch of likely lads - namely, Goldman Sachs, AIG and Warren Buffet! He baulked and went with the Greenspan bailout. The start of the Greenspan put.

My point, though, is that the economy is not Wall St or the central bank. The economy is the people. LTCM and all the other hedge funds that were springing up at the time were a result of the demand to invest, speculate and use various financial services by the people as a whole. A lot of this is indirect. In an expanding economy more people buy more cars which they wish to insure. The insurance companies need to invest the insurance premiums so more money goes into the market. This just happens to be the end of a long cycle (in Elliott Wave terms it is a Grand Supercycle) that began in the late 18th century and is ending now. Being a much larger cycle than the many cycles within it, the consequences will be more severe. 

I don't think anyone could do anything to alter this cycle. It must run its course. I think it is nature's way of recalibrating. Growth is always followed by a setback. Its the way of the world and blaming anyone is meaningless because it won't change anything.

After the crash of 1929, Congress brought in the Glass-Steagall Act of 1933. Talk about shutting the stable door after the horse has bolted! Through the 70s, 80s and 90s the financial institutions found ways to get around the act with new financial products and it was finally dumped in 1999 just in time for the implosion of the dotcom bubble.

The more things change, the more they stay the same.

Hotrod's picture
Hotrod
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Corrupt money system at fault

I maintain that it is the paper based, debt backed money system that requires the ever expanding debt to increase that will eventually collapse.  The budget will never be balanced, as it would become an instant Great Depression if that were to happen.  We're all on this runaway freight train and the bridge is out ahead.

MKI's picture
MKI
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Which comes first - the horse or the cart?

Timeandtide: My point, though, is that the economy is not Wall St or the central bank. The economy is the people.

I was going to say something more on this thread, but you've said everything I wanted to, only said it better. Thanks!

The only point I might add: immigrants keep pouring into the US. Why? Because they find it very easy to get ahead here. The last 36 years has been a time of peace and prosperity. Anyone could have got rich and/or had a large and prosperous family just by working hard.

Granted, it's getting much harder today than the 1960s when all you needed to get ahead was a Frisbee. But it's not yet impossible today. To put it another way: Americans have become fat and spoiled and then we complain it's not fair. Well, that's true. It's not fair. The elites always screw the underclass. The solution: expect it and work harder.

jturbo68's picture
jturbo68
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and avoid the rush ....

 

If I were a millennial, im not sure I would choose to buy into the system as it is, and is ever becoming.   How many more turns of the screw should young people buy into?

As JMG (I think) says, collapse now and avoid the rush

timeandtide's picture
timeandtide
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Expect it and work harder

Wise words MKI. I don't think that we can avoid a very serious recession or perhaps a depression. In some ways we have been in a smouldering recession for a decade judging by the very low growth figures and high unemployment for most of this period. The figures are looking slightly better at the moment but the amount of money printed over the last year by Japan, Europe, China and the US dwarfs anything that has gone before. Of course the central banks have not run out of ammunition - printing money out of thin air could go on forever. However, despite what we might think of the those with their hands on the monetary levers, they are humans subject to the same impulses of optimism and pessimism as the rest of us. Their resolve to do whatever it takes is fading. They are not complete idiots and they are bankers after all. They cannot but notice that they have driven themselves into a narrowing canyon. There is no room left to turn round and such is their momentum that they have wedged themselves.

All we can do is get rid of as much debt as we can as fast as we can. Debt is lethal in a deflation because the debt grows as the monetary unit gains more purchasing power with the drop in prices due to the deflation.

This will hit the elite very hard too. Buy backs have been the favoured financial engineering tool over the last few years and it has mostly been done with borrowed money. Double whammy of trouble here - first buying into over-priced stocks and secondly using debt to do it. No need to worry about the billionaires though. A 90% loss on a billion still leaves a handy $100 million!

Regarding immigrants - the US has been built into the amazing economic and cultural leader that it is today as a result of several centuries of diverse immigrant input. My own country, Australia, is much younger but has benefited hugely from immigration. Yet in both countries there are powerful anti-immigrant forces at work led by reactionary populists. These things will pass but they are a powerful sign of the times and the encroaching negativity and pessimism.

The world has to get its accounts back in order to move forward again. That will be a messy process but there is so much technological creativity simmering away in the background that there is plenty of reason for optimism. This recent post in Forbes is encouraging: 

https://www.forbes.com/sites/richkarlgaard/2018/02/09/why-technology-pro...

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timeandtide
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Buying into the system

I don't think millennials (or anyone for that matter) have that much choice - we are the system whether we actively take part or not. The problem is that too few are  buying into the system. The system is there for us to buy into and use the democratic process. We might not have the money but we have the numbers and we have the internet.

Its not just millennials, we all need to wake up from the smothering fog of complacency that has enveloped us and start asking questions of those who represent us and keep at it. Don't accept anything at face value. Yes, there will always be elites but the people came a long way in the last 400 years. A king was executed in England, there was a revolution in the US and in France. Another revolution in Russia lost the plot but progress was made. We don't need or have to have those sort of violent revolutions but without a revolution in their mindset people will continue to enslave themselves.

Life is not fair. There is no point in envy. If you want something you do your best to get it without trampling over others. Trouble is we do tend to trample over others or we try to take shortcuts. Debt, as it has come to be used, is a classic example of a shortcut. Housing debt has become a Ponzi scheme. It is not self-liquidating except by capital gain and that capital gain is not by added value but by the Ponzi effect of new money constantly entering the market.

Student debt at $1.5 trillion will never be paid back. What a waste to have so many kids with degrees flipping burgers or waiting on people. Why is it that HR demands a stupid piece of paper before they will employ someone?  A degree tells you nothing about the person except that they got a degree. I guess it's partly laziness and mostly a misplaced idea that a company will save money by letting someone else pay for the education or training. Just another aspect of the cynical approach taken by the financial engineers and accountants to "Other people's money".

Most kids would be better off getting a job in their teens and working up from there and doing short bouts of training every as and when required.

Wealth and success in the West has made everyone lazy. We take democracy for granted. We let someone else do it for us. In particular we have let money and the corporations and institutions with lots of it take over the democratic process via the hordes of lobbyists encamped around the parliaments of the world. 

 

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Mohammed Mast
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Things could always be worse

We could all be Tibetans

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timeandtide
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The awfulness of being Tibetan!

You are so right Mohammed Mast. Being other than oneself is just too awful to contemplate!

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HOD
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our blog

so,are we a fringe-blog?  

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MKI
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Expect it and work harder

T&T: All we can do is get rid of as much debt as we can as fast as we can. Debt is lethal in a deflation because the debt grows as the monetary unit gains more purchasing power with the drop in prices due to the deflation. This will hit the elite very hard too.

Points to consider:

1) Most of the elite are too smart to get involved with debt. So debt has become a class thing, with the elite exploiting the poor who are too ignorant, desperate, or uncaring to know the difference. Much like the indentured servants of early America. Expect a backlash with economic repercussions. Not good.

2) Expect social implosion/riots in Europe and the US (can't speak to oz). We've never seen this uncontrolled of movement of people in the history of humanity. In the US: no longer a melting pot, everyone is racially divided and live & vote this way (blacks voted 90% for Obama, for example, and if whites had not voted? Hillary would have won every single state. If the US was the same racial composition as 1960 Trump would have overwhelmingly won every single state). This isn't a democracy. In the 1960s the US was 80% European heritage. Now it's about 50% and falling and segregating. Fact: democracy doesn't work without a melting pot, it's rather a  civil war. This will have economic consequences soon enough.

3) Family breakdown will have economic consequences. In 1960 80% of children were raised in stable families. Today, children are not raised in stable families on the whole and look at the health consequences alone for economic issues (metabolic syndrome, for example).

4) Prosperity due to technology: masking all the above is the unbelievable growth of wealth due to modern technology. The internet and mobile phones are bigger than the printing press, allowing the cognitive elite to leap ahead of the proles with no end in sight. The rich will keep getting richer, and the poor will have few jobs or hope. I can't see this ending well except for the elite.

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timeandtide
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The elite, debt, social breakdown, prosperity

Points:

 

  1. I think you will find that the elite are just as partial to debt as anyone else, if only to mitigate their taxation obligations.
  2.  The uncontrolled movement of people is nothing new. The idea of controlled/uncontrolled movement suggests that you think the powers-that-be are losing control. Is that really true or has fear and pessimism twisted people's ideas to the extent that they now fear migrants. Are there more people now trying to cross the border than ever before? Has much really changed or are these fearful imaginings stoked by a populist politician and a sensationalist media? Is lack of control the end result of a historical process of cause and effect? Think of the incursions into the Roman Empire and its eventual collapse. Think Ghengis Khan. Think of the US invasion of Afghanistan and Iraq. Think of the aftermath of the Second World War. Think of Syrian refugees in Europe - 1 million to Germany alone. Think of partition on the Indian sub-continent.
  3. I think you are jumping to an unproven conclusion about why 90% of blacks voted for Obama. Sure, it was something that had always seemed impossible - probably more impossible than a white female President - but Obama was voted in during the worst stockmarket collapse since 1929. If you go through the Presidencies you will find that there is always a winning vote for the opposite party during or shortly after significant stockmarket falls (see Robert Prechter's book: Socionomic Causality in Politics). Also, white voters overwhelmingly voted him in.
  4. I don't understand your statement that Democracy does not work without a melting pot. I do think it would work a lot better if corporate and private donations were limited and voting (as in Australia) was compulsory.
  5. Yes, I do expect that there will be significant social unrest. What else do you expect? We do not live in a Utopia. More change takes place than ever before at the hand of the legislators pen but, as President Trump so aptly put it, the Washington swamp needs draining. There are political and bureaucratic swamps all over the world. They cost too much money and they favour special interests (none of which is new) but if they have gone too far, people will kick up a ruckus. That's humans for you. It's what makes history. Of course it will have economic consequences. You can't make an omelette without breaking eggs.
  6. I think prosperity is a result of great technology which is a result of creativity and the enquiring mind. It takes capitalism to support creativity and turn it into something that adds value and creates wealth. So much of the apparent wealth of stocks like Facebook, Amazon, Apple ,Netflix and Google is due to the massive amount of debt money which has demolished the purchasing power of most currency units. The real wealth is there of course but it may not be there tomorrow.  The creation of the personal computer and the internet was as epochal as the printing press. Mobile phones are fantastic examples of personal tech which have essentially ensured that many people have gone in to debt to indulge in narcissistic behaviour. I am sure, though, that mobile phones have brought greater benefits to Africans, Bangladeshis and many other poorer peoples of the world than they have to most westerners because they had no phones at all.
  7. The opportunities sprouted by the internet through the "gig economy" are surely more useful to ordinary people than the rich and an enormous opportunity for more people than ever to take the bull by the horns and be independent by working for themselves. 
MKI's picture
MKI
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IThe elite, debt, social breakdown, prosperity

I don't understand your statement that Democracy does not work without a melting pot.

Bosnia. 'Nuff said.

Is that really true or has fear and pessimism twisted people's ideas to the extent that they now fear migrants. Are there more people now trying to cross the border than ever before?

Yes. Air travel and modern technology has allowed people to move rapidly without the longer time necessary to get to know each other and adust to the native culture. And yes, it's a flood if not restricted. If the US were to open her boarders, it would be civil war in a decade. Oz, too, but I note they are shooting boats instead...

Your point on Rome is exactly my point. Rapid immigration is THE sign of a collapsing empire. That's the West today. Regarding Afghanistan, that's just military attack and then going away, not a replacement of a people, like natives in America or Oz were displaced (or Anglos are being displaced in CA, or Romans were displaced). Look at the economics of CA for an economic and political future of the US. This is your original point: it's people that make up the nation, not pols.

The opportunities sprouted by the internet through the "gig economy" are surely more useful to ordinary people than the rich and an enormous opportunity for more people than ever to take the bull by the horns and be independent by working for themselves. 

Only for the cognitive elite. The fast majority of humanity is not like this. They just want a nice job where they are told what to do and it pays the bills. They want and expect US 1950-1970, not the modern welfare state.

Hey I agree the world isn't perfect and never has been. But the world is also tribal in nature, and I think this is a major blind spot for the West, especially the demographically older who haven't had a lot of experience with immigration and other cultures who are not ideological, so much as tribal. They vote race, us vs them, period. There are economic consequences to this cultural disunity, methinks, and that's going to play out a lot bigger than corporate malfeasance. I hope I'm wrong. Good convo, regardless.

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jennifersam07
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Great discussion

Wealth and success in the West has made everyone lazy. We take democracy for granted. We let someone else do it for us. In particular we have let money and the corporations and institutions with lots of it take over the democratic process via the hordes of lobbyists encamped around the parliaments of the world. 

 

Timeandtide -- who are you? Your comments are breathtaking. I am inspired. After decades of observation, I am right there with you: it's not helpful to oversimplify and blame someone. We have to get to the point where we can think through the 'chaff' that is generated by all the 'influence peddling' and take the long view. The internet will eventually allow the truth to shine through and good people can figure out the way forward. Meanwhile, I offer this video for comfort:. Who says globalization is a bad thing?

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timeandtide
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Accepting responsibility for your own life

Hi Jennifer - Thank you for your kind comments and the video of the Leningrad Cowboys. A lot of fun and tongue in cheek irony going on there! Globalization is what defines the modern world yet it is coming in for criticism and stands accused of taking jobs from rich countries and transferring them to China and elsewhere. Many of these jobs are not exactly the most thrilling ways to earn a crust - vast assembly lines and so on - but they do present problems to governments in some of the rich countries. Loss of wage tax revenue and escalating social welfare costs. The answer cannot be to crack down on free trade which has always been associated with the periods of greatest wealth creation. Unfortunately, we seem headed in that direction and it will hurt everyone.

Who am I? No one in particular. My name is Nick Marshall and I run a small internet business in Cairns, Australia. We list holiday homes so we are a kind of microscopic AirBnB. No grand delusions of dominating the world. No pretensions to scale. Just a local business helping other local business run by humans rather than algorithms. You can read more about it here: http://www.cairnsholidayhomes.com.au/about-us.html 

My world view has been strongly influenced by the work of Robert Prechter, the founder of Elliott Wave International and his unique way of seeing and understanding what it is that drives humans and human society. He calls this Socionomics. I have been a stock market trader for 30+ years and seeing the market from an Elliott Wave perspective has been a huge help. I have mostly avoided the market for the last few years preferring to remain in the safer realm of cash. Now I am back on the short side.

The name I use, timeandtide, is a reflection of my interest in Elliott Waves and also that great line from Brutus in Shakespeare's Julius Caesar: “There is a tide in the affairs of men / Which, taken at the flood, leads on to fortune.”

I have worked for myself since my early 20s. It is a more precarious way of life as I only had myself to rely on until I was married. Apart from the obvious advantage of not being beholden to anyone the great long term advantage is that you are always thinking ahead. With no guaranteed income I have always been in the habit of thinking about where the next quid will come from and being suitably cautious with what I have saved in the knowledge that I may have to stretch it out longer than I hope to. On the other hand, you cannot work for yourself without having an entrepreneurial  mindset which implies a willingness to take calculated risk. Nothing ventured, nothing gained but a willingness to pull the plug quickly if the plan is not working out. There is never any point in crying over spilt beans or blaming others. Caveat emptor is a sensible approach to life. Everyone makes mistakes -  learn from them rather than agonise over them.

I began using the internet in the 90s. At that time I was running a wilderness lodge in North Queensland and had been without a phone for 4 years as we were too remote. Of course when we were connected I very quickly bought my first PC and started exploring the internet. My hard drive was a whopper of 200Mb!

Our hardest job without a phone (the nearest one was  a public one 5km away outside a pub called The Lion's Den) was advertising ourselves. At that time we used to take out a very expensive ad in the national paper (The Australian) twice a month and my nearest neighbour who had a phone would take enquiries, call me on the 2 way and I would trot down to the pub to call the enquirer back. It might seem a rather quaint and exotic way to do business but it worked. So, when I got the phone and the internet I thought that I had stumbled into communications nirvana. In many ways it was brilliant until the gate-keepers arrived and began subjecting us to the tolls that are a huge cost on business. I was lucky with my holiday home listing site. I got a good domain name and we started early (2005) so we have always managed to be seen on google. I did rather naively once think that the internet would level the playing field and lower marketing costs for small businesses. It did for a while. The global reach of the internet is a big step-up from the reach of a national newspaper but, like most small business, most of my customers are just national or local. I spend as much on marketing as I always did, I just pay a different set of gate-keepers.

Globalization has its benefits but I think it has also resulted in a concentration of the gate-keepers. For example, I read recently that 80% of worldwide travel expenditure has its ticket clipped by Priceline and Expedia. That seems a bit of an exaggeration but the point about monopolization remains. Crushing competition is the opposite of the evolutionary process which thrives on competition.

Small business and the middle class is the well-spring of wealth creation where money goes round and round providing incentive, reward and innovation. In a monopolistic world, money is simply syphoned out of the economy and hoarded or (thanks to the genius of the financial engineers) spent on share buybacks and cancellation of shares to artificially raise the earnings per share. It would be better spent on real investment which creates jobs and new wealth.

The knotty problem and one of the reasons why corporations have been reluctant to invest in organic growth is that their customers are so tapped out with housing debt, student debt, you-name-it debt. We have eaten into the future. Until that debt is wiped off the slate by bankruptcies and/or forgiven, we are in an economic quagmire. One way or another it will be cleared and it will be messy. Let's hope that the lesson will be learned about debt. Too much debt is like too much weight, it drags you down.

Here are a couple of Ted talks from the plutocrat side of the fence who are not immune to the problems facing us:

https://www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitc...

https://www.ted.com/talks/paul_tudor_jones_ii_why_we_need_to_rethink_cap...

 

New_Life's picture
New_Life
Status: Gold Member (Offline)
Joined: Apr 18 2011
Posts: 279
Great thoughts, interested in Elliot Wave
timeandtide wrote:

My world view has been strongly influenced by the work of Robert Prechter, the founder of Elliott Wave International and his unique way of seeing and understanding what it is that drives humans and human society. He calls this Socionomics. I have been a stock market trader for 30+ years and seeing the market from an Elliott Wave perspective has been a huge help. I have mostly avoided the market for the last few years preferring to remain in the safer realm of cash. Now I am back on the short side.

T&T - really appreciated reading your thoughts, great contributions.

Interesting you know Elliot Wave, have you tried applying it to trading a major Cryptocurrency?  They seem to lend themselves very well to traders who are well versed in EW

timeandtide's picture
timeandtide
Status: Bronze Member (Offline)
Joined: Apr 3 2010
Posts: 66
Elliott Wave

Hi New_Life,

Thank you for your kind comment.

Elliott Wave International have been following the bitcoin waves for a while. Yes, they do show classic 5 wave form before making a top. I have no interest in bitcoin. I don't really understand it and have no desire to. The distributed ledger technology behind bitcoin and ethereum is way more interesting and possibly points a way forward to a more secure internet but it does seem to be extremely dependent on a lot of computer processing power and power to run it.

 

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