Tag Archives: Current Depression

Global Warning, by Egon von Greyerz

The earth is about to get much cooler and so too is the earth’s economy. From Egon von Greyerz at goldswitzerland.com:

“Sic Transit Gloria Mundi” (Thus passes the glory of the world). This phrase was used at the papal coronations between the early 1400s and 1963. It was meant to indicate the transitory or ephemeral nature of life and cycles.

As we are now facing the end of a major economic, political and cultural cycle, the world is likely to experience a dramatic change which very few are prepared for. Interestingly, the peak of economic cycles often coincide with the peaks in climate cycles. At the height of the Roman Empire, which was when Christ was born, the climate in Rome was tropical. Then the earth got cooler until the Viking era which coincided with the dark ages. Continue reading

Trump Can’t Stop America From Going Broke, by Bill Bonner

Living beyond our means is living beyond our means, and compounding interest is compounding interest. From Bill Bonner at bonnerandpartners.com:

POITOU, FRANCE – From comedy… to farce… to tragedy.

We laugh. We guffaw. And then we wish we hadn’t bought a house in inner-city Baltimore.

Already, in Charm City, police helicopters peer into our windows… sirens wail at 3 a.m.… and the monuments to our dead ancestors disappear in the night.

What will happen when the real crisis comes… when the debts come due… and the feds can no longer afford to pay off their crony friends and zombie clients?

ZIP Code Politics

Where you stand on the important issues depends largely on where you sleep.

If you live in a ZIP code favored by the Deep State – most of which are on the two coasts – you are likely to approve of the system and disapprove of anyone who threatens to shake it up.

Your stocks are up. Your house is up. Your café latte and Pinot Grigio are waiting for you. You may have even voted for Hillary and counted on her to keep the good times coming.

If you live in a ZIP code in “flyover country,” on the other hand, you may see things differently.

A report from the Economic Innovation Group think tank:

One in six Americans lives in an economically distressed community.

In total, 52.3 million individuals live in economically distressed ZIP codes. […] Such communities can be found in every region of the country and in rural areas, suburbs, and city centers. […]

Perhaps most troubling, the prime years of the national economic recovery bypassed many of America’s most vulnerable places altogether.

Far from achieving even anemic growth from 2011 to 2015, distressed communities instead experienced what amounts to a deep ongoing recession, with a 6% average decline in employment and a 6.3% average drop in business establishments.

The Bonner & Partners research department, headed by Joe Withrow, is on the case. He’s checking the figures… county by county. And the picture is worse than we thought.

Remember, the system runs on credit. And the feds (with their crony friends on Wall Street) control where the credit goes.

Not surprisingly, it ends up in their bank accounts, investments, enterprises, and salaries – in big businesses and boondoggles around the big megapolises on the East and West Coasts.

If Washington calculated inflation, wages, and employment honestly, we would see that most of the rest of the U.S. has been in a near-depression for the entire 21st century.

Stay tuned…

To continue reading: Trump Can’t Stop America From Going Broke

Why The Markets Are Overdue For A Gigantic Bust, by Chris Martenson

When this bubble finally busts, it will be the biggest bust in history. From Chris Martenson at peakprosperity.com:

Let me begin with a caveat: confirmation bias is an ever-present risk for an analyst such as myself.

If you’re not familiar with the term, ‘confirmation bias’ suggests that once we’ve invested time and emotional energy into developing a worldview, we’ll then seek information to confirm that view.

After writing about the economy for so many years, I’m now so convinced that we can’t print our way to prosperity that I find myself seeing signs confirming this view everywhere, every single day. So that’s the danger to be aware of when listening to me.  I’m going to keep repeating this mantra and Im going to keep finding data that supports this view.

Based on lots of historical inputs, I have concluded that Printing money out of thin air can engineer lots of things, including asset price bubbles and the redistribution of wealth from the masses to the elites.  But it cannot print up real prosperity.

As much as I try, I simply cannot jump on the bandwagon that says that printing up money out of thin air has any long-term utility for an economy. It’s just too clear to me that doing so presents plenty of dangers, due to what we might call ‘economic gravity’: What goes up, must also come down.

Which brings us to this chart:

The 200 bubble blown by Greenspan was bad, the next one by Bernanke was horrible, but this one by Yellen may well prove fatal.  At least to entire financial markets, large institutions, and a few sovereigns.

It’s essential to note that more than two-thirds of the net worth tracked in the above chart is now comprised of ‘financial assets.’  That is, paper claims on real things. 

As the central banks have printed with abandon over the past decade, they’ve created the most extreme gap between real things (GDP) and the claims on those same things (Net Worth) in all of history.

To continue reading: Why The Markets Are Overdue For A Gigantic Bust

Over The Last 10 Years The U.S. Economy Has Grown At EXACTLY The Same Rate As It Did During The 1930s, by Michael Snyder

They called the 1930s the Great Depression. Who knows what they’ll call the last 10 years, but it’s managed to only match the Great Depression’s economic growth rate. That’s according to the government’s dubious statistics. From Michael Snyder at theeconomiccollapseblog.com:

Even though I write about our ongoing long-term economic collapse every day, I didn’t realize that things were this bad.  In this article, I am going to show you that the average rate of growth for the U.S. economy over the past 10 years is exactly equal to the average rate that the U.S. economy grew during the 1930s.  Perhaps this fact shouldn’t be that surprising, because we already knew that Barack Obama was the only president in the entire history of the United States not to have a single year when the economy grew by at least 3 percent.  Of course the mainstream media continues to push the perception that the U.S. economy is in “recovery mode”, but the truth is that this current era has far more in common with the Great Depression than it does with times of great economic prosperity.

Earlier today I came across an article about President Trump’s new budget from Fox News, and in this article the author makes a startling claim…

The hard fact is that the past decade’s $10 trillion in deficit spending has produced the worst economic growth as measured by Gross Domestic Product in our nation’s history.  You read that right, in the past decade our nation’s economy grew slower than even during the Great Depression. This stagnant, new normal, low-growth economy is leaving millions of working age people behind who have given up even trying to participate, and has led to a malaise where many doubt that the American dream is attainable.

When I first read that, I thought that this claim could not possibly be true.  But I was curious, and so I looked up the numbers for myself.

What I found was absolutely astounding.

The following are U.S. GDP growth rates for every year during the 1930s

1930: -8.5%
1931: -6.4%
1932: -12.9%
1933: -1.3%
1934: 10.8%
1935: 8.9%
1936: 12.9%
1937: 5.1%
1938: -3.3%
1939: 8.0%

When you average all of those years together, you get an average rate of economic growth of 1.33 percent.

That is really bad, but it is the kind of number that one would expect from “the Great Depression”.

So then I looked up the numbers for the last ten years

2007: 1.8%
2008: -0.3%
2009: -2.8%
2010: 2.5%
2011: 1.6%
2012: 2.2%
2013: 1.7%
2014: 2.4%
2015: 2.6%
2016: 1.6%

When you average these years together, you get an average rate of economic growth of 1.33 percent.

To continue reading: Over The Last 10 Years The U.S. Economy Has Grown At EXACTLY The Same Rate As It Did During The 1930s

From Ol’ Remus on the coming deflation

Ol’ Remus and SLL are in agreement: it’s going to be bad. From Ol’ Remus at woodpilereport.com:

Imagine a deflation so severe, so catastrophic and long-lasting, with so many banks collapsing that cash all but ceased to circulate. Imagine towns and cities so desperate for physical currency they printed their own . Imagine cash having measurably more buying power with each passing week. Imagine half of all banks closing their doors forever. Imagine surviving banks making a dependable and risk-free real profit from money they didn’t lend. This was the Depression, and it lasted for about a decade.

Before the Crash of 1929 there had been pullbacks, in 1923 and again in 1926, significant but short, each lasting a year, each followed by greater expansion than before. Soon everything that wasn’t agriculture became a bubble. It’s understandable, everything was new—radio, paved highways, movies with sound, refrigerators, air travel and skyscrapers—it was the dawning of a new era with an incandescently bright future.

The forward looking would be the foremost citizens of this new era, which meant buying in. And buy in they did. Mortgages, car loans, time payments—and for 16% of the population, stocks on margin.

If the crash was unimaginable, the follow-on catastrophe was unthinkable. The economy immediately contracted in one memorable spasm. In mere weeks the future went from daydreams of opulent splendor to a search for lost change in the couch cushions. The middle class became the poor, the poor became the destitute. Then it got worse. The gross national product declined by a third. Trust in government and finance crumbled away. Populism ran the table. Regime change was in the air.

Today a dark consensus is forming of a similar debacle, probably in the fourth quarter, possibly sooner. The evidence is compelling: record highs in the stock market supported by inflation* and bubbles and the Plunge Protection Team, a Shiller price-earnings ratio at 29x, negative returns for the bottom 250 of the SP500, accelerating consumer and retail bankruptcies. Major crimes on Wall Street and in DC go uninvestigated, trust in government and finance is in the single digits, unsold new and used cars are constipating the pipeline, real unemployment is far above official numbers, and the middle class is tapped out.

It’s a given the stock exchanges will crash. Beneath the financial highway lies an ever-growing sinkhole and one day the market will be overweight enough to crash through. Price discovery will have been served at last. The prudent are thinking past it to second order events, where the demons live.

More photos from the Crash of ’29 will appear in upcoming Woodpile Reports.

* Inflation since 1929 is 1,330%. This gives an idea of how severe a runaway deflation could be. Using 1929 as the base, if we squeezed the accumulated inflation out of it, a twenty dollar bill would be worth $286 in purchasing power.

http://www.woodpilereport.com/html/index-480.htm

The Next Recession May Be A Complete Reset Of All Asset Valuations, by John Mauldin

This is a good article, except the “May” in the title should be replaced with “Will.” From Mauldin at mauldineconomics.com:

Sometime this year, world public and private plus unfunded pensions will surpass $300 trillion. That is not even counting the $100 trillion in US government unfunded liabilities. Oops.

These obligations cannot be paid. A time is coming when the market and voters will realize this.

Will voters decide to tax “the rich” more? Will they increase their VAT rates and further slow growth? Will they reduce benefits? No matter what they decide, hard choices will bring political turmoil.

And that, of course, will mean market turmoil.

The Great Reset Will Cause a Horrible Global Recession

We are coming to a period I call “the Great Reset.” As it hits, we will have to deal, one way or another, with the largest twin bubbles in the history of the world. One of those bubbles is global debt, especially government debt. The other is the even larger bubble of government promises. The other is the even larger bubble of government promises.

History shows it is more than likely that the US will have a recession in the next few years. When it does come, it will likely blow the US government deficit up to $2 trillion a year.

Obama took eight years to run up a $10 trillion debt after the 2008 recession. It might take just five years after the next recession to run up the next $10 trillion.

Here is a chart my staff at Mauldin Economics created in late 2016 using Congressional Budget Office data. It shows what will happen in the next recession if revenues drop by the same percentage as they did in the last recession (without even counting likely higher expenditures this time).

Source: Mauldin Economics

To continue reading: The Next Recession May Be A Complete Reset Of All Asset Valuations

Where Do You Go in a Hurricane? by Jeff Thomas

Jeff Thomas predicts a class 5 economic, financial, and political hurricane will make landfall in the US. From Thomas at internationalman.com:

Where Do You Go in a Hurricane?
As a West Indian, I’ve lived through quite a few hurricanes in my time. My level of responsibility in each varied quite a bit. I was eight years old in my first hurricane and I thought it was great fun, as it was so exciting during the hurricane and, afterward, the landscape had changed so much that I had lots of new places to play.

On the other end of the scale, in 2004, my country, the Cayman Islands, experienced a Category 5 hurricane, with winds up to 200 miles per hour that sat on us without moving for 36 hours. I was responsible for ensuring that safety be provided for scores of my employees prior to the hurricane. After the storm, one of my companies took on the complete rebuilding of the country’s wholesale and retail food distribution facilities in order to ensure that the country’s population would have the most essential commodities—food and water. (A big change in level of responsibility over the years.)

In addition to having spent decades planning for hurricane damage, I’ve also spent decades as an economist, planning for major economic storms. In 1999, I determined that the world would experience what Doug Casey has termed a Greater Depression that would be more devastating than any economic event the world had ever seen. I predicted that it would happen in stages and that the final stage would be the most devastating. I would have been quite pleased to have been incorrect, but unfortunately, my predictions have come to pass. I believe we’re now quite close to the final destruction stage, a period that will lead to the collapse of many of the world’s formerly strongest economies, coinciding with a period of devastating warfare. In both the economic and warfare cases, those who are the world’s major players will believe that they’ll be able to control the extent of devastation and even profit from it, but events will go beyond their control and take on a life of their own.

To continue reading: Where Do You Go in a Hurricane?

Canaries In Extremis, by Robert Gore

Most people’s strongest memory of the last financial crisis was the September 2008 bankruptcy of Lehman Brothers. However, thirteen months prior to that, August 2007, two Bear Stearns’ mortgage hedge funds went bankrupt. That was the bell tolling for the housing market, the mortgage securities market, and—because of the leverage and the interconnections—the global financial system itself. The Dow Jones Industrial Average would not make its high for another couple of months, but for those who knew what they were looking for, the Bear Stearns’ bankruptcies signaled the impending reversal in financial markets and the economy.

Sometimes one has to see the big picture, and sometimes looking at a host of smaller pictures is more worthwhile. While housing and mortgage finance were the epicenters of the last crisis, there will probably be no single identifiable catalyst for the next one. Not because there are no central-bank sponsored debt-driven bubbles out there, but because there are so many of them, all over the world. Multiple coal mine canaries are in extremis and they’re sending the same message as the Bear Stearns’ bankruptcies did.

If the US real economy is not already in a recession, it’s on the verge. Since 2014, the economy has lost 32,000 manufacturing jobs, while adding 547,000 food service jobs. Factory orders have declined on a year-over-year basis for 22 straight months, the longest non-”official” recessionary streak in history. As of August, the Cass Freight Index of transactions by large, non-bulk-commodity shippers has fallen year-over-year for eighteen straight months. Orders for new long-haul trucks have been in a twenty-month downtrend, and orders last month were the worst for a September since 2009. Volvo Trucks North America, Freightliner (a unit of Daimler), Navistar, and Paccar have announced or implemented layoffs this year.

The Merchandise World Trade Monitor topped out in January, 2015 and July’s number takes it back to the reading for September 2014. The world’s seventh largest container carrier, South Korea’s Hanjin, recently filed for bankruptcy. Closures and consolidation are the orders of the day for the remaining shippers. Bear markets, overcapacity, and gluts in a range of commodities, other raw materials, intermediate goods, and finished goods garnered a lot of headlines last year and early this year. The headlines have faded but not the underlying conditions. It will take years—far beyond the media’s attention span—and substantial pain before those conditions are remedied or even ameliorated.

Only in Wall’s Street’s bizarro world can the goods economy be dismissed as a small part of the overall economy, which is supposedly driven by finance and services. What does the finance industry finance and the service economy service? In many instances—this will come as no surprise to anybody but Wall Streeters—manufacturing, mining, oil extraction and refining, shipping and trade; all the sectors that are taking gas. Also no surprise: real economy deterioration affects finance and the rest of the service economy.

In August, commercial and industrial loans made by US banks fell for the first time since October 2010. The automobile sector has been a bright spot in the economy, but the lending, particularly subprime lending, that has fueled sales is unraveling. Delinquencies and defaults are rising for subprime auto loans. The delinquency rate is rising even for prime auto loans, although the absolute rate remains low. The aggregated earnings of companies in the S&P 500 have been down for five straight quarters, and will most likely be down for the quarter just ended. In 2015 and all but certainly for 2016, those companies have paid out more in share buybacks and dividends than they have earned.

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US commercial bankruptcy filings were up 38 percent year-over-year in September. For the first nine months of 2016 they were up 28 percent from the same period in 2015. Bankruptcy is no longer confined to the oil patch and mining industry. Notably, filings by retailers and restaurants, two bulwarks of the service economy, are increasing. In the last two weeks, four restaurant chains have filed. Say good-bye to that industry’s stellar job growth.

The recovery since 2009, such as it is, has bestowed most of its meager blessings on those in the top 1 percent of income and wealth. Here’s another inescapable reality for Wall Streeters: a central bank exchanging its conjured-from-thin-air fiat debt scrip for the government’s thin-air fiat debt scrip does not, cannot, produce anything of real economic value. It drives down the interest rate on the government’s fiat debt and it provides a windfall for the 1 percenters who can borrow at low or negative rate and propel asset prices. For the rest of us it’s inconsequential at best, but generally deleterious.

The inconsequentiality of debt monetization is confirmed by the real world details enumerated above, which indicate the weakest so-called recovery on record is faltering and will soon end, if it has not already done so. There is, of course, no chance that even the faltering will be officially recognized before the election. SLL has maintained that the period since 2009 is merely an interlude in an ongoing depression, similar to respites during the Great Depression. By discouraging true savings, adding to the debt pile, and driving down the return on investment, debt monetization has hindered rather than helped the real economy. The anemic growth rate since 2009 is not despite skyrocketing government debt and soaring central bank balance sheets, but because of them. FDR and his hapless New Dealers would be proud.

Weakness is even percolating up to the rarified ranks of the 1 percent. Rents are falling and high-end real estate sales slowing in Silicon Valley, the Bay Area, New York, and Houston, formerly pockets of economic strength. The art market, especially for “art” that most of us don’t call “art,” has noticeably softened. The demand for luxury goods isn’t what it used to be, and many purveyors have issued revenue and profit warnings. Those markets have been propelled by Chinese, Russian, and Arab buyers, but home economies are facing challenges and they’re pulling in their horns.

The “donut” of the global economy is history’s greatest debt bubble, fueled by governments and central banks. The unimportant “hole” is whatever critical hot spot ultimately sends markets and economies down the drain. Who knows which crisis will be assigned the “blame” for the impending cataclysm. The odds-on-favorite is the looming European banking crisis, but here are plenty of other contenders—a pension fund or insurance company driven to insolvency by ZIRP and NIRP, Chinese debt, an upside break out in Middle Eastern or Ukrainian hostilities, political turmoil in Europe or the US—take your pick. No matter which possibility proves out, be prepared. Things will get very ugly, very fast.

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What If We’re in a Depression But Don’t Know It? by Charles Hugh Smith

SLL has said the depression started in either 1987 or 2000 (see “The Humungous Depression“). Charles Hugh Smith thinks if we’re not in a depression, we’re very close to it. From Smith at oftwominds.com (for linked articles and charts, please refer to original article linked below):

Just for the sake of argument, let’s ask: what if we’re in a Depression but don’t know it? How could we possibly be in a Depression and not know it, you ask? Well, there are several ways we could be in a Depression and not know it:

1. The official statistics for “growth” (GDP), inflation, unemployment, and household income/ wealth have been engineered to mask the reality

2. The top 5% of households that dominate government, Corporate America, finance, the Deep State and the media have been doing extraordinarily well during the past eight years of stock market bubble (oops, I mean boom) and “recovery,” and so they report that the economy is doing splendidly because they’ve done splendidly.

I have explained exactly how official metrics are engineered to reflect a rosy picture that is far from reality.:

What’s the Real Unemployment Rate? That’s the Wrong Question September 14, 2016

Fun with Fake Statistics: The 5% “Increase” in Median Household Income Is Pure Illusion September 19, 2016

Here’s Why Wages Have Stagnated–and Will Continue to Stagnate August 15, 2016

Could Inflation Break the Back of the Status Quo? August 5, 2016

What Happens When Rampant Asset Inflation Ends? August 4, 2016

Revealing the Real Rate of Inflation Would Crash the System August 3, 2016
Inflation Hidden in Plain Sight

I also also asked a series of questions that sought experiential evidence rather than easily gamed statistics for the notion that this “recovery” is more like a recession or Depression than an actual expansion:

If Everything Is So Great, How Come I’m Not Doing So Great? September 12, 2016

Rather than accept official assurances that we’re in the eighth year of a “recovery,” let’s look at a few charts and reach our own conclusion. Let’s start with the civilian labor force participation rate–the percentage of the civilian work force that is employed (realizing that many of the jobs are low-paying gigs or part-time work).

Does the participation rate today look anything like the dot-com boom that actually raised almost everyone’s boat at least a bit? Short answer: No., it doesn’t. Today’s labor force participation rate is a complete catastrophe that can only be described by one word: Depression.

To continue reading: What If We’re in a Depression But Don’t Know It?

Hard Times & False Narratives, by Jim Quinn

SLL is not the only one who believes America has been in a humungous depression since the turn of the century. From Jim Quinn at theburningplatform.com:

The mainstream media mouthpieces for the establishment peddle false narratives, disingenuous storylines, and outright propaganda to keep the ignorant masses confused, oblivious to reality, misinformed, and passively submissive to the opinions of highly paid “experts” and captured fiscal authorities. The existing social order likes things just as they are.

They reap ill-gotten riches, wield unchecked power, and control the minds of the masses. They are the invisible government consciously manipulating the minds, habits and opinions of the multitudes in order to dominate society, control the levers of government, and accumulate obscene levels of wealth through manipulation of the currency and domination of the banking and corporate interests.

One of the false narratives being flogged by the establishment propaganda peddlers is the mass retirement of Baby Boomers causing the plunge in the employment to population rate from 64.4% in 2000 to 59.7% today. They need to peddle this drivel, because the difference between these two rates amounts to 12 million missing jobs. The employment to population ratio is currently at 1984 levels. Any critical thinking person with basic math skills realizes the government reported unemployment rate of 5% is an Orwellian farce.

Over 40% of working age Americans aren’t working, amounting to 102 million people, and the establishment touts the ludicrous lie of a 5% unemployment rate. With only 123 million Americans employed full-time and virtually all the job “growth” since 2009 in non-producing low paying service jobs in the retail, restaurant, hospitality and healthcare industries, wages and household income remain stagnant. The 12 million shortfall in jobs isn’t due to Boomers retiring, as this chart proves beyond a shadow of a doubt. Only an Ivy League educated economist or CNBC talking head could pretend to be confused.

We know for a fact 10,000 Americans have been turning 65 years old every day for the last few years and will for the next fifteen years. When the employment to population ratio peaked in 2000 at 64.4%, the ratio for senior citizens was only 12%. It had remained between 10% and 12% for over two decades. There were 35 million Americans over 65 years old in 2000, and 31 million of the them were not employed. They made up a large portion (44%) of the 70 million people not in the labor force.

Today there are 48 million Americans over 65 years old, and 39 million of them are not employed. The establishment narrative is blown to smithereens by the FACT they now only account for 41% of the 94 million people not in the labor force. There are only 14 million more employed Americans today than in the year 2000, while there are 5 million more employed Americans over the age of 65. They have accounted for 36% of all the jobs created in the last 16 years. The percentage of senior citizens working is at an all-time high of 18.9% and rising.

The narrative of retiring Baby Boomers being the cause for the plunging participation rate is entirely false. The data is not hidden. It’s easily accessible. Any CNBC pundit, Wall Street Journal reporter, or Ivy League MBA Wall Street analyst with even a smattering of math skills could discern the truth. Based on the fact they continue to flog false narratives, makes you believe their job and intent is to obscure the truth, obfuscate the facts, and paint a rosy picture for their establishment bosses. There are almost 4 million less Americans aged 16 to 55 employed today than there were in 2007. Does that happen in an economic recovery?

To continue reading: Hard Times & False Narratives