Something’s got to give in the US and global economy. From MN Gordon at economicprism.com:
Mankind’s willful determinations to resist the natural order are in vain. Still, he pushes onward, always grasping for the big breakthrough. The allure of something for nothing is too enticing to pass up.
Systems of elaborate folly have been erected with the most impossible of promises. That prosperity can be attained without labor. That benefits can be paid without taxes. That cheap credit can make everyone rich.
Central to these promises are the central government and central planning authorities. They take your money and, in return, they make you a dependent. They promise you a secure retirement, and free drugs, while running a scheme that’s well beyond anything Charles Ponzi ever dreamed of.
According to the government’s statistics, the economy has never been better. By the official numbers, we’re living in a magical world of full employment, 2.3 percent price inflation, and the second-longest growth period in the post-World War II era. Agreeable reports like these are broadcast each month without question.
Still, we have some reservations. How come, with the nirvana of full employment, 62 percent of all U.S. jobs don’t pay enough to support a middle class life? An economy with full employment should be an employee’s market; one where employees can name their price.
Surely, workers would select a middle class life if they could. But they can’t…because full employment’s a sham.
An $8 Trillion Purge
This week brought forth new evidence that we’re living in a world of epic disorder. A world that’s so full of shams it’s often unclear what’s real and what’s deception. Yet what’s lucidly clear is that the scope and scale of the ultimate quietus is so immense, one can hardly fathom its completion.
In the interim, madness and folly prevail with acute enthusiasm. The stock market, a crude barometer of fear and greed, is currently registering great uncertainty. The mood vacillates from one extreme to the next with wild abandon.
Last month, the S&P 500 dropped 215 points, or roughly 7.3 percent. This marked its worst month since February 2009. But that was nothing…
Goldman’s VIP Basket plummeted 11.5 percent in October. And FANG stocks – the digital economy’s best of the best – crashed 21 percent. All in all, global equity markets purged $8 trillion in shareholder wealth.
The U.S. economy, if you go by the government’s numbers, appears to be healthy and growing. The latest Commerce Department report showed third quarter gross domestic product increased at a 3.5 percent annualized rate. On the surface, everything looks fabulous. But just a scratch below the surface, a different picture is revealed.
The fiscal year 2018 deficit came in at $779 billion, an increase of 17 percent from 2017. The fiscal year 2019 deficit is projected to top $1 trillion. With deficit spending at these levels, GDP growth is more representative of the rate the government is going broke than real increases in economic productivity.
In other words, like the stock market, the economy’s growth days are numbered…
Pushing Past the Breaking Point
No doubt, the upcoming tests facing the economy will be observable in the aggregate numbers and statistics. How much GDP contracts, or how high unemployment rises, are loosely quantifiable. They can be calculated and charted, though we wouldn’t place much credence in them.
The real tests facing the economy are less measurable. They cannot be counted up and expressed as a percent. Nor can they be charted over time. But that doesn’t mean these tests are any less observable than a calculated statistic.
To be clear, the tests facing the economy have little to do with markets and everything to do with central government. Over the last 30 years, as the Fed and the Treasury colluded to rig the financial system in earnest, wealth has become ever more concentrated in fewer and fewer insider hands. The effect over this latest period of expansion has been a disparity that’s so magnified few can ignore it.
This trend will be further intensified by the forthcoming depression. What’s more, bitterness and contempt for wealthy insiders is already much higher than it was during prior business cycles. Without question, this bitterness and contempt will increase to a fever pitch when this business cycle turns down.
Discontent throughout the broad population will take a financial crash and an economic collapse, and transform it into a complete societal breakdown. Then the central government will fail the test of its making.
But, alas, the discord will provide the perfect cover for a much larger central authority. They’ll offer promises to fix things while delivering a much wider range of wealth inequality.
They won’t stop. They’ll push it to the breaking point…and then they’ll push it some more.