Tag Archives: Depression

The High Price of COVID-19 Lockdowns, by Bill Bonner

We may be repeating ourselves here, but the cure for Covid-19 has been far, far worse than the disease. From Bill Bonner at rogueeconomics.com:

SAN MARTIN, ARGENTINA – We begin today with a new study by the RAND Corporation.

It tallies a little more of the hidden cost of House Arrest.

ABC News reports:

Now, new data shows that during the COVID-19 crisis, American adults have sharply increased their consumption of alcohol, drinking on more days per month, and to greater excess. Heavy drinking among women especially has soared. […]

“The magnitude of these increases is striking,” Michael Pollard, lead author of the study and a sociologist at RAND, told ABC. “People’s depression increases, anxiety increases, [and] alcohol use is often a way to cope with these feelings. But depression and anxiety are also the outcome of drinking; it’s this feedback loop where it just exacerbates the problem that it’s trying to address.”

The bills will continue to trickle in for years. Jobs lost. Companies bankrupted. Careers and families stifled and stunted.

Job Cuts

Yesterday came more news of job cuts. Here’s Bloomberg:

American Airlines Group Inc. and United Airlines Holdings Inc. will start laying off thousands of employees as scheduled, spurning Treasury Secretary Steven Mnuchin’s appeal for a delay as he negotiates with Congress over an economic relief plan that includes payroll support for U.S. carriers.

American is furloughing 19,000, while United is laying off about 13,000.

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Dark Years and Fourth Turning, by Egon von Greyerz

Hard times are here. From Egon von Greyerz  at goldswitzerland.com:

In an ephemeral world, few things survive. I am not talking about species or human beings whose existence on earth is also transitory. Instead I am referring to social and financial systems which are now coming to an end.

In July 2009 I wrote an article called The Dark Years Are Here. It was reprinted again in September 2018.

Here is an extract from my original article:

“The Dark Years will be extremely severe for most countries both financially and socially. In many countries in the Western world there will be a severe depression and it will be the end of the welfare state. Most private and state pension schemes are also likely to collapse. It will be a worldwide depression but some countries may only have a deep recession. There will be famine, homelessness and misery resulting in social as well as political unrest. Different type of government leaders and regimes are likely to result from this.
How long will the Dark Years last? There is a book called ”The Fourth Turning” written by Neil Howe. He has identified a pattern that repeats itself every 80 years. The pattern has been extremely accurate in the Anglophile world. We have recently entered the Fourth Turning which is the final 20 years of the cycle. According to Howe we are in the early stages of a 20 year period of economic and institutional upheaval. This is a period of Crisis when the fabric of society will change dramatically. Previous Fourth Turnings have been the American Revolution, Great Depression and World War II. According to Howe the Crisis will be substantially worse before it is over and it will last for another circa 20 years.
All of this is not good news and we hope that we and Howe are wrong regarding the severity and length of this crisis. But we fear that we are both right. We must stress again that never previously has the whole world entered a downturn simultaneously in such a fragile state both financially and economically which is why the Dark Years are likely to be so devastating and long lasting.”

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How to Tackle the Depression Head On, by MN Gordon

To tackle a depression head on, the first step is to admit its inevitability, and to pretend that government and central bank debt and spending will prevent one only makes the problem worse. From MN Gordon at economicprism.com:

I want to see people get money.” – Donald J. Trump, U.S. President, September 17, 2020

“Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet.” – Steven Mnuchin, U.S. Secretary of the Treasury, September 14, 2020

Money for the People

The real viral contagion that has infected the American populace is not an illness of the body.  It’s something far worse than COVID-19.  The American populace is suffering from an illness of the mind.

The general malady, as we diagnose it, is the unwavering belief that the government has an endless supply of free money, and the expectation that everyone, except the stinking rich, has claim to it.  Why pursue self-reliance and independence when a series of stimulus acts promises the more abundant life?  This viral contagion’s really ripped through the population in 2020.

For example, just a year ago, the American populace thought they could all live off the forced philanthropy of their neighbors.  That to pay Paul you had to first rob Peter.  The CARES Act proved to Boobus americanus that, without a shadow of a doubt, there’s free ‘money for the people’ in Washington.  Sí se puede!

This week the Congress did its part to further the greatest show on earth.  The people want stimulus.  Congress intends to get to them, in good time.

Of course, the need to sprinkle the Country with printing press money was already a foregone conclusion.  There was no discussion of the wisdom of not having a stimulus bill.  The debate at hand was centered on how much.

Crazy Nancy wants $3.4 trillion.  Senate Republicans want $500 billion.  Something called the House Problem Solvers Caucus wants $2 trillion.

President Trump wants Republicans to “go for the much higher numbers.”  His rationale: “it all comes back to the USA anyway (one way or another!).”

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When Will We Admit Covid-19 Is Unstoppable and Global Depression Is Inevitable? by Charles Hugh Smith

“Abandon all hope, ye who enter here.” Charles Hugh Smith outlines the bleak coronavirus case. From Smith at oftwominds.com:

Given the exquisite precariousness of the global financial system and economy, hopes for a brief and mild downturn are wildly unrealistic.

If we asked a panel of epidemiologists to imagine a virus optimized for rapid spread globally and high lethality, they’d likely include these characteristics:

1. Highly contagious, with an R0 of 3 or higher.

2. A novel virus, so there’s no immunity via previous exposure.

3. Those carrying the pathogen can infect others while asymptomatic, i.e. having no symptoms, for a prolonged period of time, i.e. 14 to 24 days.

4. Some carriers never become ill and so they have no idea they are infecting others.

5. The virus is extremely lethal to vulnerable subpopulations but not so lethal to the entire populace that it kills its hosts before they can transmit the virus to others.

6. The virus can be spread by multiple pathways, including aerosols (droplets from sneezing/coughing), brief contact (with hotel desk clerks, taxi drivers, etc.) and contact with surfaces (credit cards, faucets, door handles, etc.). Ideally, the virus remains active on surfaces for prolonged periods, i.e. 7+ days.

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The Fed’s Liquidity Response Is Too Little Too Late – But That Was Always The Plan… by Brandon Smith

The problem with Brandon Smith’s hypothesis is that no amount of central bank liquidity will be enough to prevent or even forestall the deflationary depression that’s coming. It’s a question of magnitude. Say the world’s central banks expanded their balance sheets by $100 trillion, which is roughly five times what they expanded their balance sheets during the last financial crisis. There is at least $1 quadrillion—or at least 10 times that $100 trillion—in debt, unfunded liabilities, contingent liabilities, securitized commodities and derivatives out there that will unravel and implode. Central bankers will be like someone trying to refill Lake Mead with a garden if Hoover Dam were to collapse. Smith and legions of other economic commentators overestimate the importance of central banks to an economy. Smith may be right, central bankers may want to bring down the global economy, but even if they desired the exact opposite they couldn’t do so with the amount of debt and other financial promises out there. Central bankers are important because they promote debt through monetization and interest rate suppression, but debt, not central bankers, has become the true linchpin of modern economies. They have never been mere puppets dancing on central bank strings. Nevertheless, Smith always makes important points about the liberty movement and that’s particularly true with this article. From Smith at alt-market.com:

The globalists and banking elites have been running the “order out of chaos” scam for a long time, centuries in fact. One thing that practice does is make people of otherwise average intelligence appear brilliant. One thing that organized conspiracy does is make a group of highly vulnerable criminals appear omnipotent and untouchable. Ultimately, it’s all about time. The globalists have had lots of time to tune and refine their methods for manipulating the collective psyche of the masses.

They make mistakes often, but as long as no one confronts them directly and removes these people from the equation, they simply set up shop elsewhere under a different name using different masks and continue their insidious work. As long society is still stricken with ignorance and assumes that such conspiracies are “impossible”, the elites have a free hand to victimize the population further. As long as academic idiots misinterpret Occam’s Razor and insist that the evidence of conspiracy does not matter because it does not fit with their narrow notion of “the simplest explanation”, they prop up the banking cartel and allow it to thrive.

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The Three Ds of Doom: Debt, Default, Depression, by Charles Hugh Smith

The world is at the precipice of a gigantic debt-contraction and depression. From Charles Hugh Smith at oftwominds.com:

“Borrowing our way out of debt” generates the three Ds of Doom: debt leads to default which ushers in Depression.

Let’s start by defining Economic Depression: a Depression is a Recession that isn’t fixed by conventional fiscal and monetary stimulus. In other words, when a recession drags on despite massive fiscal and monetary stimulus being thrown into the economy, then the stimulus-resistant stagnation is called a Depression.

Here’s why we’re heading into a Depression: debt exhaustion. As the charts below illustrate, the U.S. (and global) economy has only “grown” in the 21st century by expanding debt roughly four times faster than GDP or earned income.

Costs for big-ticket essentials such as housing, healthcare and government services are soaring while wages stagnate or decline in purchasing power.What’s purchasing power? Rather than get caught in the endless thicket of defining inflation, ask yourself this: how much of X does one hour of labor buy now compared to 20 years ago? For example, how much healthcare does an hour of labor buy now? How many days of rent does an hour of labor buy now compared to 1999? How many hours of labor are required to pay a parking ticket now compared to 1999?

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These 8 Red Flags Warn Us We’re Speeding Toward an Economic Collapse RIGHT NOW, by Daisy Luther

We’ve been speeding toward economic collapse for a long now, but maybe the capitalized RIGHT NOW means it’s just around the corner. From Daisy Luther at theorganicprepper.com:

This isn’t exactly an article loaded with Christmas cheer, but there’s a very good reason that my family has strictly limited our holiday splurges this year. It’s because all the signs right now seem to indicate the US is hurtling toward an economic collapse.

It’s inevitable, of course. Our economy has been artificially propped up for decades, since abandoning the gold standard. We’re $21 trillion dollars in debt, an unfathomable number. The fact that other countries still lend us money boggles the mind. If the United States was a person with such a high ratio of debt that we aren’t paying off, we wouldn’t even be able to buy a car with one of those 25% interest loans, that’s how bad our credit would be.

Not only that, but there are some parties who seem to want to see the economy go belly up for their own greedy and nefarious purposes.

Here are the red flags that have me concerned about an imminent economic collapse.

The stock market is crashing.

Right now, the market is on track for a month that is equivalent to the crash of 1929, when the Great Depression began.  Both the Dow Jones Industrial Average and the S&P 500 are down by 8% during a month that is usually really good. Michael Snyder reported:

The ferocity of this stock market crash is stunning many of the experts, and many investors are beginning to panic.  Back in early October, the Dow hit an all-time high of 26,951.81, but on Monday it closed at just 23,592.98.  That means that the Dow has now plunged more than 3,300 points from the peak of the market, and many believe that this stock crash is just getting started. (source)

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Are We (Collectively) Depressed? by Charles Hugh Smith

Is repressed anger leading to widespread depression? From Charles Hugh Smith at oftwominds.com:

We need to encourage honesty above optimism. Once we can speak honestly, there is a foundation for optimism.
Psychoanalysis teaches that one cause of depression is repressed anger.
The rising tide of collective anger is visible in many places: road rage, violent street clashes between groups seething for a fight, the destruction of friendships for holding the “incorrect” ideological views, and so on. I Think We Can Safely Say The American Culture War Has Been Taken As Far As It Can Go.
A coarsening of the entire social order is increasingly visible: The Age of Rudeness.
This raises a larger question: are we as a society becoming depressed as we repress our righteous anger and our sense of powerlessness as economic and social inequality rises?
Depression is a complex phenomenon, but it typically includes a loss of hope and vitality, absence of goals, the reinforcement of negative internal dialogs, and anhedonia, the loss of the joy of living (joie de vivre).
Depressive thoughts (and the emotions they generate) tend to be self-reinforcing, and this is why it’s so difficult to break out of depression once in its grip.
One part of the healing process is to expose the sources of anger that we are repressing. As psychiatrist Karen Horney explained in her 1950 masterwork, Neurosis and Human Growth: The Struggle Towards Self-Realization, anger at ourselves sometimes arises from our failure to live up to the many “shoulds” we’ve internalized, and the idealized track we’ve laid out for ourselves and our lives.
The recent article, The American Dream Is Killing Us does a good job of explaining how our failure to obtain the expected rewards of “doing all the right things”(getting a college degree, working hard, etc.) breeds resentment and despair.
Since we did the “right things,” the system “should” deliver the financial rewards and security we expected. This systemic failure to deliver the promised rewards is eroding social mobility and the social contract while generating frustration, anger, etc.
To continue reading: Are We (Collectively) Depressed?

The Humungous Depression, by Robert Gore

SLL will be on vacation 5/17-5/21 and will not be posting. Posting will resume 5/22. 

Economic depressions unfold slowly, which obscures their analysis, although they are simple to understand. Governments and central banks turn recessions into depressions, which are preceded by unsustainable expansions of debt untethered from the real economy. The reduction and resolution of excess debt takes time, and governments and central banks usually act counterproductively, retarding necessary adjustments and lengthening the adjustment, and consequently, the depression.

If one dates the beginning of a depression from the beginning of the unsustainable expansion of debt that preceded it, then the current depression began in 1987. Newly installed chairman of the Federal Reserve Alan Greenspan quelled a stock market crash, flooding the financial system with fiat liquidity. It was a well from which he and his successors would draw repeatedly. Throughout the 1990s he would pump whenever it appeared the market and the US economy were about to dump. In 1999, he pumped because the Y2K computer transition might adversely affect the economy and financial system (it didn’t).

If one dates the beginning of a depression from the time when the benefits of debt are, in the aggregate, outweighed by its burdens, the depression began in 2000, with the implosion of the fiat-credit fueled, high-tech and Internet stock market bubble. Unsustainable debt and artificially low interest rates lower the rate of return on productive investment and saving, increasing the relative attractiveness of speculation. Central bankers and their minions refer to this as “forcing investors out on the risk curve,” crawling way out on a limb for fruitful returns. They have no term for when markets saw off the branch, as they did in 2000 and again in 2008.

Most people don’t see 2000 as the beginning of a depression, but Washington and Wall Street cloud their vision. Stock markets were once essential avenues for raising capital and valuing corporations. Since central bankers’ remit was broadened to their care and feeding, stock markets have become engines of obfuscation. The “wealth effect” supposedly justified solicitude for markets: a rising stock market would increase wealth, spending, and economic growth. For seven years a rising market has coexisted with an anemic rebound and one hears little about the wealth effect anymore. The stock market is the preeminent symbol of economic health, so keeping it afloat has become a political exercise. Sure, central bankers and governments know what they’re doing, just look at those stock indices.

Let’s look at those stock indices. They are measured in fiat debt units, the entirely elastic quantity of which is in the hands of governments and central banks. What if stock indices are valued in a less ephemeral currency, say gold, aka “real money”? By that measure, the DJIA divided by the price of an ounce of gold reached its all-time high of about 41 ounces in May 1999, or just before the depression began. That ratio collapsed to under 7 ounces in September 2011, and currently stands at about 14. If you paid for the Dow in 1999 with gold, you’ve lost 65 percent on your original investment.

There is a general awareness that real family incomes have gone nowhere since the turn of the century; it’s often offered as a reason for the Trump and Sanders ascendancies. Other, less well-known indicators have also deteriorated or declined. What David Stockman defines as “breadwinner” jobs in construction, manufacturing, white-collar professions, governments, and full-time private services, which on average pay more than $50,000 per year, peaked in January 2001 and are still about 3 percent below that peak. The growth in employment since 2001 has been in lower paying part-time jobs, restaurants, retail, medical services, and education, which explains the stagnation in incomes. Two other important measures—labor hour inputs and real net investment—have gone nowhere since 2001. An economy in which hours worked and real investment are not growing is an economy that is not growing.

The US economy has been losing altitude for sixteen years. While debt monetization and interest rate suppression have fueled housing and equity booms, they can’t mask the underlying deterioration. President Obama will be the first president to have presided over an economy that never achieves 3 percent annual growth. That’s by government figures, which must be taken with a shaker of salt. Employment statistics are especially dubious. To the public, they are right behind the stock market as an economic indicator. They are subject to a variety of pertinent criticisms, including their seasonal adjustments and the birth-death model of new business formation, which continues to add to employment although, sadly, more businesses are currently dying than are being born. The government also has a vested interest in understating inflation. Many of the benefits it pays are indexed to inflation, and interest rates on government debt incorporate an inflation premium. Understating inflation overstates the growth of real GDP, probably third on the list of statistics to which the public pays attention.

The Great Depression was not a straight downhill run. There were multiple, widely hailed “recoveries” and stock market rallies, but in 1938 the economy was in worse shape than when Franklin Roosevelt was elected in 1932, and the government was bigger, more intrusive, and more in debt (the same can be said about the government since 2000). Depressing it is to contemplate how government turning a recession into the Great Depression, but consideration of what Japan has done since its stock market topped out in 1989 can leave one pondering the choice of pills, noose, or handgun.

The Japanese have copied every page of the Keynesian and monetarist playbooks: government debt, public works spending, and regulatory expansion, and central bank monetization of assets and interest rate suppression. Multiple recoveries have been punctuated by multiple contractions. Capitalism has remarkable recuperative powers, but screw with an economy long enough and you not only prevent recuperation, you do lasting damage. Japan and Europe—also beset by persistent economic idiocy—have shown little growth or innovation for decades, leaving the economic idiots responsible muttering about supposed, self-exculpatory, secular stagnation. As the US economy glide paths into zero-and-below land, Washington, Wall Street, and the Ivy League’s best are muttering the same thing.

Nothing is more telling than birthrates, and in Europe, Japan, and the US, birthrates are below the replacement rate of 2.1 births per couple. When planned, having babies expresses confidence in the future. The Japanese buy more adult than baby diapers, illustrating the demographic crunch and falling dependency ratios (the ratio of able-bodied and employed workers to the population requiring outside support), which understandably increases pessimism and further decreases birth rates among the young.

They see a bleak future and they’re not wrong. The global economy hit stall speed with the commodities crash in 2014 and another rendezvous with terra firma looms. Never has the world been more in debt. True recovery won’t happen until most of it has been repudiated and written off. The current depression is already longer than the Great Depression. By the time it’s over, economic historians will be calling it the Humongous Depression.

This is Crisis Progress Report 18. For the first 17, see the Debtonomics Archive.


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Davos, Dalio, and a Depression?! by Bill Tilles and Len Hyman

From Bill Tilles and Len Hyman at wolfstreet.com:

When Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, referred to a possible economic depression as he was being interviewed at the World Economic Forum at Davos, it does not mean what most people think it means.

Most of us think about recessions and depressions in a linear way. That is, a depression is a really, really bad recession featuring even higher levels of unemployment and lower overall levels of economic activity.

But for Mr. Dalio, recessions are kind of normal, business-cycle related economic events that regularly occur every 5-10 years or so. The economy begins to overheat, the Fed raises rates in response (the removal of the “punch bowl”), business activity slows perhaps a bit too much in response, and voila! A recession results.

Depressions on the other hand are secular or long term, occurring much less frequently. That’s because according to Mr. Dalio, it takes a long time (perhaps decades) to accumulate the excess levels of corporate and government debt that end up triggering this type of economic event. A depression is a condition where more debt cannot be added to the system and instead it must be reduced, or as we say, deleveraging must occur. A depression always threatens systemic solvency.

There are several hallmarks of a systemic deleveraging or depression if you will:

  1. Various asset classes begin to be sold (like oil and gas wells today for example)
  2. As a result of these widespread asset sales, prices decline
  3. Equity levels decline as a result
  4. This triggers more selling of assets
  5. Since there is less worthwhile collateral available credit levels contract.
  6. Overall economic activity declines. In short, there isn’t enough cash flow being generated to service all the accumulated debt. As a result assets have to be sold, bankruptcies become more common

What makes this such a pernicious process is that it is a self-reinforcing cycle of economic negativity.

To continue reading: Davos, Dalio, and a Depression?!