Forecast 2018 — What Could Go Wrong? by James Howard Kunstler

James Howard Kunstler presents a plethora of potentially problematic possibilities. From Kunstler at kunstler.com:

Markets

If you take your cues from Consensus Trance Central — the cable news networks, The New York Times, WashPost, and HuffPo — Trump is all that ails this foundering empire. Well, Trump and Russia, since the Golden Golem of Greatness is in league with Vladimir Putin to loot the world, or something like that.

Since I believe that the financial system is at the heart of today’s meta-question (What Could Go Wrong?), it would be perhaps more to the point to ask: what has held this matrix of rackets together so long? After all, rackets are characterized by pervasive lying and fraud, meaning their operations don’t add up. Things that don’t comport with reality are generally prone to failure so sooner or later they have to implode.

Financial markets have been surging supernaturally on “liquidity” since 2009 — and by “liquidity” I mean “money” (digital credit from thin air) supplied by the Federal Reserve, in rotation with the other sovereign central banks, BOE, ECB, BOJ, PBOC, from whence it pings ‘round the world, wherever the lure of the main chance sparkles. Trillions wafted into the stock and bond markets, levitating them as a sort of stage-managed misdirection from the sickening spectacle of wobbling real stuff economies. In 2017, The Dow Jones Industrial Average recorded an astounding 5,000 point year-on-year upzoom, with 12 months of gains and no loser months, and a string of 71 record highs.

America’s central bank, the Federal Reserve, acted as if pumping up the stock markets was the only thing that mattered. The result was a Potemkin economy, a glittering Wall Street false-front with a landscape of “flyover” squalor and desolation behind. The Fed now works at cross-purposes with itself by raising the Fed Funds rate a quarter-point every few months, and supposedly “shrinking” (ha!) their balance sheet — dumping bonds onto the market plus “retiring” termed out bonds, which allows the Fed to disappear the principal paid by the borrowers, namely the US Treasury, or the quasi-governmental werewolf called Freddie Mac (The Federal Home Loan Mortgage Corporation), which bundles all kinds of janky mortgages into giant bonds the Fed buys in order to artificially pump up the real estate market. Did your eyes glaze over yet? That’s the great thing about finance: it’s bewildering, so that when shit goes wrong, nobody notices until its way too late.

To continue reading: Forecast 2018 — What Could Go Wrong?

 

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