Category Archives: Collapse

The Pension Train Has No Seat Belts, by John Mauldin

Pensions are the same unsustainable trajectory as the rest of our debt-saturated world. From John Mauldin at mauldineconomics.com:

In describing various economic train wrecks these last few weeks, I may have given the wrong impression about trains. I love riding the train on the East Coast or in Europe. They’re usually a safe and efficient way to travel. And I can sit and read and work, plus not deal with airport security. But in this series, I’m concerned about economic train wrecks, of which I foresee many coming before The Big One which I call The Great Reset, where all the debt, all over the world, will have to be “rationalized.” That probably won’t happen until the middle or end of the next decade. We have some time to plan, which is good because it’s all but inevitable now, without massive political will. And I don’t see that anywhere.

Unlike actual trains, we as individuals don’t have the option of choosing a different economy. We’re stuck with the one we have, and it’s barreling forward in a decidedly unsafe manner, on tracks designed and built a century ago. Today, we’ll review yet another way this train will probably veer off the tracks as we discuss the numerous public pension defaults I think are coming.

Last week, I described the massive global debt problem. As you read on, remember promises are a kind of debt, too. Public worker pension plans are massive promises. They don’t always show up on the state and local balance sheets correctly (or directly!), but they have a similar effect. Governments worldwide promised to pay certain workers certain benefits at certain times. That is debt, for all practical purposes.

If it’s debt, who are the lenders? The workers. They extended “credit” with their labor. The agreed-upon pension benefits are the interest they rightly expect to receive for lending years of their lives. Some were perhaps unwise loans (particularly from the taxpayers’ perspective), but they’re not illegitimate. As with any other debt, the borrower is obligated to pay. What if the borrower simply can’t repay? Then the choices narrow to default and bankruptcy.

Today’s letter is chapter 6 in my Train Wreck series. If you’re just joining us, here are links to help you catch up.

To continue reading: The Pension Train Has No Seat Belts

Advertisements

America’s Greatest Crisis Upon Us…Debt-to-GDP Makes It Clear, by Chris Hamilton

The current trajectory of US government spending and debt growth is unsustainable. From Chris Hamiton at economica.blogspot.com:

America in the midst of the greatest crisis in its 242 years of existence.  I say this based upon the US federal debt to GDP (gross domestic product) ratio.  In the history of the US, at the onset of every war or crisis, a period of federal deficit spending ensued (red bars in graph below) to overcome the challenge but at the “challenges” end, a period of federal austerity ensued.  Until now.  No doubt the current financial crisis ended by 2013 (based on employment, asset values, etc.) but federal spending continues to significantly outpace tax revenues…resulting in a continually rising debt to GDP ratio.  We are well past the point where we have typically began repairing the nation’s balance sheet and maintaining the credibility of the currency.  However, all indications from the CBO and current administration make it clear that debt to GDP will continue to rise.  If the American economy were as strong as claimed, this is the time that federal deficit spending would cease alongside the Fed’s interest rate hikes.  Instead, surging deficit spending is taking place alongside interest rate hikes, another first for America.

The chart below takes America from 1790 to present.  From 1776 to 2001, every period of deficit spending was followed by a period of “austerity” where-upon federal spending was constrained and economic activity flourished, repairing the damage done to the debt to GDP ratio and the credibility of the US currency.  But since 2001, according to debt to GDP, the US has been in the longest ongoing crisis in the nation’s history.

But what is this crisis?  The chart points out the debt to GDP surges in order to resolve the Revolutionary war, the Civil War, WWI, and WWII. But the debt to GDP surges since 1980 seem less clear cut.  But simply put, America (and the world) grew up and matured, but the central banks and federal government could not accept this change.  Instead, the CB’s and Federal government wanted perpetual youth…growth without end.  The chart below shows the debt to GDP ratio but this time against the decelerating growth of the total US population as a percentage (black line) but also against the faster decelerating growth of the 0-65yr/old population (yellow line).

To continue reading: America’s Greatest Crisis Upon Us…Debt-to-GDP Makes It Clear

How the Last Superpower Was Unchained, by Tom Engelhardt

The fall of the USSR may have been the worst thing to ever happen to the US. From Tom Engelhardt at tomdispatch.com:

Think of it as the all-American version of the human comedy: a great power that eternally knows what the world needs and offers copious advice with a tone deafness that would be humorous, if it weren’t so grim. If you look, you can find examples of this just about anywhere. Here, for instance, is a passage in the New York Times from a piece on the topsy-turvy Trumpian negotiations that preceded the Singapore summit. “The Americans and South Koreans,” wrote reporter Motoko Rich, “want to persuade the North that continuing to funnel most of the country’s resources into its military and nuclear programs shortchanges its citizens’ economic well-being. But the North does not see the two as mutually exclusive.”

Think about that for a moment. The U.S. has, of course, embarked on a trillion-dollar-plusupgrade of its already massive nuclear arsenal (and that’s before the cost overruns even begin). Its Congress and president have for years proven eager to sink at least a trillion dollars annually into the budget of the national security state (a figure that’s still rising and outpaces by far that of any other power on the planet), while its own infrastructure sags and crumbles. And yet it finds the impoverished North Koreans puzzling when they, too, follow such an extreme path.

Clueless is not a word Americans ordinarily apply to themselves as a country, a people, or a government. Yet how applicable it is.

And when it comes to cluelessness, there’s another, far stranger path the United States has been following since at least the George W. Bush moment that couldn’t be more consequential and yet somehow remains the least noticed of all. On this subject, Americans don’t have a clue. In fact, if you could put the United States on a psychiatrist’s couch, this might be the place to start.

To continue reading: How the Last Superpower Was Unchained

“No Escape”: Don’t Expect A Yemeni Version Of The White Helmets, by Tyler Durden

Nobody caterwauls for innocent victims and dead children when they’re victims of a US ally’s war. From Tyler Durden at zerohedge.com:

Have you noticed the almost complete lack of video footage showing the ongoing Arab and US coalition aerial bombardment of Yemen’s key port city of Al Hudaydah?

Reuters reports the following:

“People are scared. The warships are terrifying and warplanes are flying overhead all the time,” university student Amina, 22, who lives near the port, told Reuters by telephone.

“People are fleeing the city to the countryside, but for those with no relatives there or money, there is no escape.”

Don’t expect a Yemeni version of the “White Helmets” to emerge with high-tech cameras, slick new gear, and professional uniforms capturing Yemen’s starvation and slow death under US, Saudi, and UAE warplanes.

Smoke rises from Al Hudaydah city of Yemen after Saudi-led coalition air attack. Image source: Anadolu, Getty

Don’t expect prime time news broadcasts to feature images of emaciated Yemeni babies — easily located on social media channels in the thousands.

And yet he numbers are staggering, as Reuters reports further:

The United Nations says 22 million Yemenis need humanitarian aid, and the number at risk of starvation could more than double to more than 18 million by year end unless access improves.

No, there won’t be rebel leaders in Yemen beamed into CNN studios via Skype to detail the suffering of civilians under the brutal siege, because this isn’t Syria… it’s Yemen, where the US and its allies have not only imposed a full military blockade of land, air, and sea on an urban population of half a million people, but have also ensured a complete media blackout of on the ground footage and reporting.

As we noted in our initial coverage the complete media and humanitarian blockade on the contested port city of Al Hudaydah means confirmation of the rapidly unfolding events have been hard to come by, though we featured what’s purported to be some of the earliest social media footage of the assault, now in its second day.

To continue reading: “No Escape”: Don’t Expect A Yemeni Version Of The White Helmets

Here We Go Again: Our Double-Bubble Economy, by Charles Hugh Smith

Blowing bubbles has become the official economic policy. From Charles Hugh Smith at oftwominds.com:

The bubbles in assets are supported by the invisible bubble in greed, euphoria and credulity.
Well, folks, here we go again: we have a double-bubble economy in housing and stocks, and a third difficult-to-chart bubble in greed, euphoria and credulity.
Feast your eyes on Housing Bubble #2, a.k.a. the Echo Bubble:
Here’s the S&P 500 stock index (SPX): no bubble here, we’re told, just a typical 9-year long Bull Market that has soared from a low in 2009 of 666 to a recent high of 2802 in January of this year:
Here’s a view of the same bubble in the Dow Jones Industrial Average (DJIA):
Is anyone actually dumb enough not to recognize these are bubbles? Of course not. Those proclaiming that “these bubbles are not bubbles” know full well they’re bubbles, but their livelihoods depend on public denial of this reality.
And so we’re inundated with justifications of bubble valuations, neatly bound with statistical mumbo-jumbo: forward earnings (better every day in every way!), P-E expansion, and all the rest of the usual blather that’s spewed by status quo commentators and fund managers at the top of every bubble.
The problem with bubbles is they always pop. The market runs out of Greater Fools and/or creditworthy borrowers, and so sellers overwhelm the thinning ranks of buyers.
Those dancing euphorically, expecting the music will never stop, are caught off guard (despite their confidence that they are far too clever to be caught by surprise), and the panic-driven crowd clogs the narrow exit, leaving a ballroom of bag-holders to absorb the losses.
The other problem with bubbles is that we’ve become dependent on them as props holding up a rotten, corrupt status quo. Since the economy can no longer generate sufficient prosperity to go around via actual increases in productivity and efficiency, those skimming most of the gains rely on “the wealth effect” generated by expanding asset bubbles to create a dreamy illusion of prosperity.
Here’s the third consequence of bubbles: the gains flow to the very top of the wealth-power pyramid: there is no other possible output of the bubble, since roughly 80% of all assets are owned by the top tier of households, and the majority of financial assets are owned by the top .1% (one-tenth of one percent).

250,000 Lives at Risk as US-Backed Saudi Coalition Begins Siege of Yemeni Port, by Middle East Monitor

Nothing good will come from this siege, and many innocent Yemenis will die. From the Middle East Monitor via theantimedia.org:

The Saudi-led coalition has launched an attack on Yemen’s port city Hudaydah, Al Jazeera reported today.

Air strikes began pounding Hudaydah, supporting a ground assault by the Yemeni government led by internationally recognised President Abd Rabbuh Mansur Hadi. Houthi positions on the outskirts including Seham and Qazabah have been targeted already.

The Yemen National Army’s open source network on Telegram began referring to the attack as operation “golden victory.”

Early this morning, the Houthi-run Al-Masirah TV channel reported targeting Saudi-led coalition warships in the Red Sea. Two missiles were used to attack the warships, causing damage to them. No other information on casualties was given.

The move comes as part of efforts to regain control of Hudaydah, Yemen’s most strategic port which serves as much as 80 per cent of aid for Yemenis in addition to its positioning in the Bab Al Mandeb strait, a vital maritime shipping route. The United Arab Emirates (UAE), a member of the coalition, set yesterday as a deadline for the Houthis to withdraw from Hudaydah under UN-led negotiations or attack. Negotiations broke down and UN staff evacuated in fear of a lethal attack.

It is estimated that 250,000 lives will be impacted by the attack on Hudaydah, according to the United Nations. Without access to the civilians caught up in the crossfire there will be catastrophic humanitarian and infrastructure impacts, human rights groups have warned.

Weapons smuggling into Yemen

The Saudi-led coalition continues to accuse the Houthis of using the Hudaydah port to smuggle Iranian weapons, despite the coalition continually monitoring the Bab Al Mandeb strait which leads to the port. There has been no empirical evidence to suggest that the Houthis are receiving arms via the Hudaydah port. UN experts part of the Yemen panel, continue to question the accusation.

To continue reading: 250,000 Lives at Risk as US-Backed Saudi Coalition Begins Siege of Yemeni Port

Libya “Before And After” Photos Go Viral, by Tyler Durden

Obama kind of, sort of admitted that Libya was the low point of his presidency, but Hillary Clinton, that interventions biggest cheerleader, has never acknowledged that it was a disaster, nor has she apologized for it. From Tyler Durden at zerohedge.com:

A Libyan man who took photos of himself posing at various spots across Beghazi in 2000 has revisited the same locations 18 years later to photograph life under the new “NATO liberated” Libya.

The “before and after” pics showing the utter devastation of post-Gaddafi Libya have gone viral, garnering 50,000 retweets after they were posted to an account that features historical images of Libya under Gaddafi’s rule between 1969 and 2011.

It appears people do still care about Libya even if the political elites in Paris, London, and Washington who destroyed the country have moved on. Though we should recall that British foreign secretary Boris Johnson was caught on tape in a private meeting last year saying Libya was ripe for UK investment, but only after Libyans “clear the dead bodies away.” 

We previously detailed in Libya’s Slave Auctions And African Genocide: What Hillary Knew how Libya went from being a stable, modernizing secular state to a hellhole of roving jihadist militias, warring rival governments, and open-air slave auctions of captured migrants.

Yet what the viral photos confirm is that Libya was once a place of sprawling hotels, wide and clean city streets, functioning infrastructure, and lively neighborhoods. But these very places are now bullet-ridden ruins rotting amidst the political backdrop of the ‘Mad Max’ style chaos unleashed immediately after US-NATO’s bombing the country into regime change.

Hillary still says that she has no regrets even after Obama timidly voiced a half-hearted and too-little-too-late Libya mea culpa of sorts in 2016.

Though Hillary’s beloved Libyan Al Qaeda …”rebels” — legitimized and empowered through broad support from the West — are now among the very militias hosting slave auctions and fueling the European refugee crisis, she’s never so much as hinted that regime change in Libya left the country and much of the region in shambles. Instead, she simply chose to conclude her role in the tragic story of Libya with her crazed and gleeful declaration of “we came, we saw, he died.”

Regime change enthusiasts everywhere please take note of what your blind jingoism has wrought.

To continue reading: Libya “Before And After” Photos Go Viral