Category Archives: Economy

The “Biblical” Default Wave Arrives: Here Is The Avalanche Of Bankruptcies Unleashed By Coronavirus, by Tyler Durden

This article examines just corporate debt and bankruptcies, but rest assured similar avalanches are coming in every category of debt. From Tyler Durden at zerohedge.com:

Two months ago, we said that it was just a matter of time before a “biblical” wave of bankruptcies was about to be unleashed on the US as a result of the coronavirus pandemic…

… and sure enough, the first wave is corporate defaults is starting to wash across US shores, with companies in every industry – from retailers, to airlines, and restaurants – but also sports leagues, a cannabis company and an archdiocese plagued by sex-abuse allegations. These are some of the more than 110 companies tracked by Bloomberg that have declared bankruptcy in the U.S. this year and blamed Covid-19 in part for their demise.

While some were in deep financial trouble even before governors ordered non-essential businesses shut to help contain the spread of the virus, most will reorganize and emerge from court smaller and less-indebted. But the hardest hit, are liquidating assets and closing for good.

Among the filers are some of the most iconic names of US business: Hertz, J.C. Penney and as of last week, Brooks Brothers, too. However most are small and medium-sized businesses scattered across the country. Their downfall might not normally garner much attention, but it does underscore the full extent of the damage Covid-19 has inflicted on the economy.

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To Hell in a Hand Basket, by David Stockman

The debt the US government has piled on the three last months, added to what it already has, will surely sink the economy. From David Stockman at lewrockwell.com:

The eruption of government red ink literally defies imagination. The deficit figure topped $863 billion during the month of June alone.

Indeed, the number is so massive that it’s hard to put it in context. But consider this: When your editor joined the Reagan campaign in the summer of 1980, the public debt was also $863 billion and it had taken 192 years and 39 presidents to get there.

So during the last 30 days, the clown brigade which passes for a government in Washington has actually borrowed nearly two centuries worth of debt!

Indeed, the numbers for June are so bad as to give ugly an entirely new definition:

  • June receipts of $242 billion were down by 28% or –$92 billion from last year;
  • June outlays totaled $1.105 trillion, representing a +$713 billion or 182% increase from last year;
  • Leading the charge was SBA outlays of $511 billion compared to $80 million last year – and, yes, that’s the PPP boondoggle and it amounts to a 4,400% gain;
  • Not far behind was unemployment benefits at $116 billion compared to $2 billion last year;
  • There was also a $70 billion increase in the cost of student loans owing to CARES act repayment deferrals and an adjustment for massively higher student loan defaults in the future than had been previously assumed;
  • And the red ink total for June, which is usually a low deficit month due to estimated tax payments, rose from $8 billion last year to the aforementioned $863 billion.

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The World Is Drowning In Debt, by Daniel Lacalle

The numbers are terrifying, and their real-world consequences will be even more so. From Daniel Lacalle at dlacalle.com:

According to the IMF, global fiscal support in response to the crisis will be more than 9 trillion US dollars, approximately 12% of world GDP. This premature, clearly rushed, probably excessive, and often misguided chain of so-called stimulus plans will distort public finances in a way in which we have not seen since World War II. The enormous increase in public spending and the fall in output will lead to a global government debt figure close to 105% of GDP.

If we add government and private debt, we are talking about 200 trillion US dollars of debt, a global increase of over 35% of GDP, well above the 20% seen after the 2008 crisis, and all in a single year.

This brutal increase in indebtedness is not going to prevent economies from falling rapidly. The main problem of this global stimulus chain is that it is entirely oriented to support bloated government spending, and artificially low bond yields. That is the reason why such a massive global monetary and fiscal response is not doing much to prevent the collapse in jobs, investment, and growth. Most businesses, small ones with no debt and no assets, are being wiped out.

Most of this new debt has been created to sustain a level of public spending that was designed for a cyclical boom, not a crisis and to help large companies that were already in trouble in 2018 and 2019, the so-called ‘zombie’ companies.

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The new deal is a bad old deal, by Alasdair Macleod

The Internet’s best economist explains why the New Deal was a huge mistake, and why we’re about to repeat it, except this time only huger. From Alasdair Macleod at goldmoney.com:

So far, the current economic situation, together with the response by major governments, compares with the run-in to the depression of the 1930s. Yet to come in the repetitious credit cycle is the collapse in financial asset values and a banking crisis.

When the scale of the banking crisis is known the scale of monetary inflation involved will become more obvious. But in the politics of it, Trump is being set up as the equivalent of Herbert Hoover, and presumably Joe Biden, if he is well advised, will soon campaign as a latter-day Roosevelt. In Britain, Boris Johnson has already called for a modern “new deal”, and in his “Hundred Days” his Chancellor is delivering it.

In the thirties, prices fell, only offset by the dollar’s devaluation in January 1934. This time, monetary inflation knows no limit. The wealth destruction through monetary inflation will be an added burden to contend with compared with the situation ninety years ago.

Introduction

Boris Johnson recently compared his reconstruction plan with Franklin D Roosevelt’s New Deal. Such is the myth of FDR and his new deal that even libertarian Boris now invokes them. Unless he is just being political, he shows he knows little about the economic situation that led to the depression.

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Safety First is a Bad Ideology, by Diana W. Thomas

At what point do the costs of preventing or ameliorating a risk outweigh the benefits of doing so, and does it matter if someone else is bearing the costs? From Diana W. Thomas at aier.org:

bubble wrap

When you walk out of your house, or enter the public street, you are on shared ground, a community space. During the pandemic of 2020, community spaces that are private venues, like Disney, have closed down just as often as community spaces that are public venues, like schools and playgrounds.

Public and private distinctions do not make a difference. Risk is the key factor to understanding why common spaces are closed and likely to remain so, at least in the way we were used to. In what is called the asymmetric loss function, a decision maker’s cost of a mistake in one direction is many times greater than the cost of error in the other direction.

Individuals with asymmetric loss functions are extremely risk averse when it comes to potential losses. Individuals often employ asymmetric loss functions in everyday life. For most people being 30 minutes early for a flight, for example, is much less costly than being 30 minutes late.

But, because people are different, individuals decide for themselves how late they can arrive and risk missing a flight. Things get trickier when decisions regarding risk tolerance are made for common spaces and groups, because one size doesn’t always fit all. Weighing downside risks too heavily can be socially costly, because some valuable private activities are prohibited.

Historically and across cultures, individual risk-taking is associated with growth and prosperity while minimizing risk and emphasizing potential social losses is not. In the last several decades, public tolerance of risk has shifted towards lower socially acceptable levels of risk-taking and in the long run, these changes may leave us all worse off.

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Does the Next Presidential Election Even Matter? by the Saker

Whoever wins, the US empire will continue its deep decline, both domestically and internationally. From the Saker at unz.com:

Just by asking the question of whether the next Presidential election matters, I am obviously suggesting that it might not. To explain my reasons for this opinion, I need to reset the upcoming election in the context of the previous one. So let’s begin here.

The 2016 election of Donald Trump

The first thing which, I believe, ought to be self-evident to all by now is that there was no secret operation by any deep state, not even a Zionist controlled one, to put Donald Trump in power. I would even argue that the election of Donald Trump was the biggest slap in the face of US deep state and of the covert transnational ruling elites this deep state serves. Ever. My evidence? Simple, look what these ruling “elites” did both before and after Trump’s election: before, they ridiculed the very idea of “President Trump” as both utterly impossible and utterly evil.

As somebody who has had years of experience reading the Soviet press or, in another style, the French press, I can honestly say that I have never seen a more ridiculously outlandish hate campaign against anybody that would come even close to the kind of total hate campaign which Trump was subjected to. Then, as soon as he was elected, the US neo-liberals (who are not liberals at all!) declared that Trump was “not their President”, that Trump was put into power by Putin and that he was a “Russian asset” (using pseudo-professional jargon is what journos typically do to conceal their abject ignorance of a complex topic) and, finally, that he was a White racist and misogynist who will deeply divide the country (thereby dividing the country themselves by making such claims).

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Doug Casey on the Dangers of Global Regulation

Regulation is almost always counterproductive, whether it’s global or not. From Doug Casey at caseyresearch.com:

Rachel’s note: Regular readers know Doug Casey believes you can always bet on the government to do the wrong thing. Whether it’s the dangerous response to the COVID-19 pandemic, or overregulation abroad, government intervention often creates more problems than it solves.

And today, Doug discusses the dangers surrounding globalism… and explains why we actually live in a fascist system…

Daily Dispatch: Doug, we’d like to get your take on the question of “Globalist vs. Globalism.” Not so long ago, the right was in favor of embracing a global economy, in order to access cheaper labor and other benefits of outsourcing. Whereas the left was against that whole idea, as they wanted to be more protectionist in their local economy.

But now, to the average man at least, that seems to have flipped. Now the right seems to be more protectionist, and the left wants to be more global. Is that an overly simplistic take on things? What’s your view?

Doug Casey: Well, to start with, these are just labels that don’t really mean anything – other than deciding what variety of statism you want.

The truth is that individuals and companies should be able to trade with each other with absolutely no restrictions, interference, or comment of any type from governments. No quotas, no duties, no incentives… nothing.

Governments bring absolutely nothing to the party. It’s a sham, a myth, and a delusion that government acts in the interest of the country it controls. Government (and the people who control it) act in their own interests and those of their cronies. I’m sorry if that sounds harsh, and runs counter to what we were taught in grade school civics, or what sanctimonious Deep Staters like to repeat. But it’s the case with late-stage U.S. “capitalism.”

“Globalists,” “Globalism,” there’s barely any difference. It’s just busybodies deciding what products the real producers may or may not create, and what entrepreneurs can or can’t do. Saying one is good and the other is bad is the wrong way to look at it. It politicizes the question.

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Major Tax Increases are About to Slam America as Cities and States Want You to Pay for Covid Fallout, by Isaac Davis

Cities and states have locked down economies and allowed rioters to destroy businesses, and now they want their taxpayers to pick up the tab. They can’t squeeze blood from stones, though. From Isaac Davis at wakingtimes.com:

Just prior to the global Coronavirus outbreak, serious signs of an emerging financial crisis began to emerge. As people were beginning to realize that yet another central bank engineered ‘bust’ was coming down on us, we were thrown into lockdown, shuttering millions of businesses and sending millions of people to the unemployment line.

Now, a few months later, we are starting to realize just how deep the economic fallout will be, and Americans are scrambling to adjust their lifestyles to a totally new world order. At the top of the food chain, though, is government. City, county, state and federal.

In the midst of such a bizarre and frightful socioeconomic crisis, the tax man is hurting too. Tax revenues at all levels of government have plummeted like never before, and the pain is especially acute for city budgets who’ve seen sales tax revenue nosedive. While the American citizenry is seeing a drastic drop in income, so is Uncle Sam and all of his bureaucratic agencies.

Take a look at some of the numbers.

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Governors Reinstate Lockdowns To Combat Recovering Economy, from The Babylon Bee

U.S.—Governors across the country have reinstated lockdowns mere weeks after slowly starting to lift them, citing a “concerning spike” in jobs and the economy.

Worried that the increase in jobs, prosperity, and happiness would hurt them in November, they reacted to the economic upturn quickly, shutting down businesses and locking people back in their homes.

“We can’t let this economic spike continue,” said California Governor Gavin Newsom. “That would go against SCIENCE. The SCIENTISTS say that locking down an entire population is the best way to prevent dangerous economic spikes.”

“Also, we wanted to mention that this message was brought to you by PlumpJack Estate Winery. Use code NEWSOM for 10% off your next tasting!”

The governors noticed that people were happier with their lives, glad they could go back to work and reopen their businesses, and having fun outside. Unable to tolerate this kind of freedom and general satisfaction with life in the age of Trump, they scrambled to lock back down.

“We’re seeing a concerning rise in the number of people disregarding the government and going on with their lives,” said Governor Gretchen Whitmer. “If you’re outside enjoying yourself or contributing to the economy, I’ll get you, my pretty! And your seeds too!”

https://babylonbee.com/news/governors-reinstate-lockdowns-to-combat-recovering-economy

Strange Days, by the Zman

It’s impossible to get your bearings in the current confusion and chaos. From the Zman at theburningplatform.com:

Way back in the time before corona, it was conventional wisdom that shutting down the economy would have dire consequences for the economy. Whether you were on the panic side or the skepticism side, you were sure that locking down the economy was going to be bad for the economy. The stock market losing a third of its value in a week seemed to confirm it. No matter the truth of the virus, the consequences was going to be an unprecedented economic depression.

Here we are four months on and the world does not look like anyone imagined it when this all started. The promised bodies in the streets never materialized. The virus has thus far been a sever flu season hyped up by mass media. The promised depression has not made an appearance. The streets are still mostly empty during the work day and many businesses are still closed. Those that are open have all sorts of restrictions and they seem to have fewer customers.

What we don’t have is people out banging their pots and pans demanding the government do something about the economy. A lifetime ago a handful of white people showed up at state capitols demanding the end of the lock downs, but that soon gave way to swarms of blacks and Antifa promising to burn the cities. Otherwise, the productive portion of society seems to have gone back to sleep. Those working from home, work from home and those not working stay home.

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