Tag Archives: Growth

Females & Births, As Rudimentary As We Can Get, by Chris Hamilton

Demographic charts say deleveraging, deflation, and depression are in our future. Read ’em and weep. From Chris Hamilton at econimica.blogspot.com:

First, chart of the century…literally.  For those engrossed in the current and engulfing repo fiasco, QE, and monetization…it is helpful to pull back and clarify what it is that is causing the existing economic and financial system to fail?  It was, is, and will be a Ponzi to its last day and Ponzi’s fail for lack of new suckers.  In this case, those willing and able to undertake new credit (debt) that enlarges the money supply in our fractional reserve system.  The chart below shows the global annual growth of the 20 to 65 year-olds versus 65+ year-olds (both excluding Africa).  20 to 65 year-olds world over utilize credit (debt) while 65+ year-olds extinguish debt (deleverage).  So long as the growth of those levering up outstripped those deleveraging, the system could continue.  But as you’ll note, in 2008, the entire global system shuddered as accelerating growth of potential workers ceased and began decelerating…while the growth of non-workers accelerated.  By about 2024, the annual growth of non-workers (deleveragers) will overtake annual growth of potential workers (debtors).  Those rapidly extinguishing debt in old age will outnumber those undertaking the new debt.  Those in retirement or in death offloading assets will outnumber those buying those assets.  The non-technical name for this is a “shit-show” and this is why central banks, federal governments, and ultra wealthy are aligning ever tighter to save themselves.

Putting Monetization Into Perspective. Or “When It Becomes Serious, You Have To Lie”, by Chris Hamilton

The government borrows more money than the actual growth of the economy. In other words, a dollar’s worth of debt no longer buys a dollar’s worth of growth, even by the government’s screwed-up definition of growth. From Chris Hamilton at economica.blogspot.com:

Since 2007, marketable federal debt has exploded by $12 trillion while Intragovernmental debt has risen a relatively gentle $2 trillion…all while the Federal Reserve directed Federal Funds Rate has been pushed to zero.  And after a short respite from ZIRP, another push to ZIRP is almost surely in process, or even a furtherance, moving into NIRP and the paying of lenders to undertake loans.  But why?

 

We Can’t “Grow Our Way Out” of Debt, by Bill Bonner

We’re no longer getting enough economic bang from each additional buck of debt to reduce the debt pile. From Bill Bonner at bonnerandpartners.com:

YOUGHAL, IRELAND – Today, we turn to something no one cares much about, even though it threatens to cause the biggest financial calamity in US history:

Debt.

Glorious Valhalla

Total U.S. debt – public and private – now approaches $74 trillion. The economy that supports this debt has grown steadily, but nowhere near fast enough to keep up with it.

As we remarked yesterday, money is time. So when you owe money, what you really owe is time. And time is not something you can fool around with. It comes and it goes… no matter what you think or what you do.

Historically, Americans have owed 1.5 days of work in the future for every day of work in the present. That is, the ratio of debt to GDP averaged about 1.5 to 1 for the first eight decades of the 20th century.

Then, debt went up, and now stands at 3.5 days of future GDP for every day of present output.

Have we arrived in some great and glorious Valhalla, where the old rules no longer apply, where debt no longer matters… or where time is no longer our master, but our servant?

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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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The slow return of Eurosclerosis, by Thomas Kirchner and Paul Hoffmeister

Eurosclerosis, the slow or no growth disease caused by overtaxation, overregulation, too much government, and rigid labor markets, is creeping up on Europe once again. From Thomas Kirchner and Paul Hoffmeister at camelotportfolios.com:

With protests by yellow vests in France approaching their six month anniversary and the European economy showing signs of not a temporary dip, but prolonged weakening, it is a good moment to take a step back and analyze the current situation as well as its implications for the medium to long-term outlook for Europe.As we see it, European economies have been weakening significantly, and even worse, Germany, the European Union’s largest economy comprising almost 21% of the area’s GDP in 2018[i], is on the verge of recession. With Germany the economic locomotive of the euro area, there may not be much reason to be optimistic. The country’s economic problems appear to be structural, due to high taxes, excessive government spending, failed energy policies and other regulatory constraints. Thinking about the years ahead, we aren’t optimistic that the policy response from the German government — as well as other European governments such as in France, Italy and Greece — will be strong enough to avoid a prolonged economic malaise for the continent. As a result, we believe that the global economy will suffer from Eurosclerosis in the coming years.

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Figure 1: GDP of EU Member States and Share of Total. Source: Statistics Times.

The State of the Economy, by Paul Craig Roberts

Paul Craig Roberts takes apart contemporary government “economics” and “economic statistics.” From Roberts at paulcraigroberts.org:

Dear Readers: We live in a Matrix of Lies in which our awareness is controlled by the explanations we are given.  The control exercised over our awareness is universal.  It applies to every aspect of our existence.  In the article below I show that not only is our understanding of the economy controlled by manipulation of our minds, but also the markets themselves are controlled by official intervention.  

In brief, you can believe nothing that you are officially told.  If you desire truth, you must support the websites that are committed to truth.

The State of the Economy

Paul Craig Roberts

The story line is going out that the economic boom is weakening and the Federal Reserve has to get the printing press running again.  The Fed uses the money to purchase bonds, which drives up the prices of bonds and lowers the interest rate.  The theory is that the lower interest rate encourages consumer spending and business investment and that this increase in consumer and business spending results in more output and employment. 

The Federal Reserve, European Central Bank, and Bank of England have been wedded to this policy for a decade, and the Japanese for longer, without stimulating business investment.  Rather than borrowing at low interest rates in order to invest more, corporations borrowed in order to buy back their stock.  In other words, some corporations after using all their profits to buy back their own stock went into debt in order to further reduce their market capitalization!  

Far from stimulating business investment, the liquidity supplied by the Federal Reserve drove up stock and bond prices and spilled over into real estate.  The fact that corporations used their profits to buy back their shares rather than to invest in new capacity means that the corporations  did not experience a booming economy with good investment opportunities. It is a poor economy when the best investment for a company is to repurchase its own shares.

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The Faster America “Grows”, The Faster America Goes Bust, by Chris Hamilton

Since 10/1/07, the US has achieved 44 cents worth of growth for every dollar worth of debt. As the title implies, we’re “growing” our way to insolvency. From Chris Hamilton at economica.com:

As of October 1st of 2007 (the start of the 2008 Federal Government fiscal year), federal debt stood at $9 trillion and 70 billion.  In the subsequent ten years and five months, the US federal debt has grown $11 trillion and 805 billion and now stands at $20 trillion and 875 billion (chart below).  Over the same period, US GDP grew $5 trillion and 169 billion.  Simply put, for every $1 of new federal debt undertaken, the US achieved $0.44 cents of economic activity or “growth”.

However, as the chart below shows, the huge increase in federal debt (red line) was accompanied by a minimal increase in interest payable on all that debt (blue line).  The boxes detail the total debt incurred during each period against the annual increase in interest payments on that additional debt.  The Federal Reserve is primarily to thank for the cheapening of debt and encouragement to undertake all that debt, but many fear the same Fed is set to hike those interest payments with its ongoing rate hikes.

In five months of fiscal year 2018 (through Feb 28), the Treasury has already issued $630 billion in new debt.  The Treasury is on pace to issue $1.2+ trillion in new debt (2017 was a mere $672 billion increase).  But let’s be conservative and assume the Treasury reins it in and “only” issues another $370 billion over the next seven months…for a nice round $1 trillion in new debt.  Big numbers are hard to comprehend, so I’ll show just the added responsibility from the debt undertaken in 2018, per every full time employee in the US (there are 127 million FT US employees):

+$31 per work day
+$157 week
+$658 month
+$7.9 thousand annually

This would be in addition to the $163 thousand every full time employee is already responsible for.  But, sadly, this vastly understates the issue.  According to the Treasury’s 2017 Financial Report of the US Government, the “total present value of future expenditures in excess of future revenues” is $49 trillion in addition to the federal debt!!!  Simply said, Social Security and Medicare require $49 trillion here and now to allow that money to grow at a compounded annual rate in conjunction with estimated future tax revenues to meet the present and future payouts that have been promised.

To continue reading: The Faster America “Grows”, The Faster America Goes Bust 

Last Two Times After Our Dear Government Reported Data Like This, Stocks Crashed, by Wolf Richter

Earnings, unlike stock prices, have been going down for several years. From Wolf Richter at wolfstreet.com:

Wall Street claims surge in stocks is based on rising corporate earnings.

So, let’s see. The Commerce Department’s Bureau of Economic Analysis released its third estimate of fourth quarter 2016 GDP and corporate profits today. This second revision of its first estimate of January 27 contains more data and is considered a more accurate approximation of what happened in the vast, devilishly hard-to-quantify US economy.

In terms of GDP, the fourth quarter was revised up slightly, but there were adjustments for prior quarters, and overall GDP growth for the year 2016 remained at a miserably low 1.6%. We’ve come to call this the “stall speed.” It’s difficult for the US economy to stay aloft at this slow speed. As Q4 gutted any hopes for a strong finish, GDP growth in 2016 matched the worst year since the Great Recession.

And corporate profits, despite a stock market that has been surging for years, are even worse. A lot worse. They’ve declined for years. In fact, they declined for years during the prior two stock market bubbles, the dotcom bubble and the pre-Financial-Crisis bubble. Both ended in crashes.

However, Wall Street remains assiduously silent on this.

The BEA offers various measures of corporate profits, slicing and dicing them in different ways. One of them is its headline number: “Corporate profits with inventory valuation and capital consumption adjustments.”

It estimates “profits from current production,” based on profits before taxes, not adjusted for inflation, but with adjustments for inventory valuation (IVA) and capital consumption (CCAdj).These adjustments convert inventory withdrawals and depreciation of fixed assets (as they appear on tax returns) to the current-cost economic measures used in GDP calculations.

It’s a broad measure, taking into account profits by all corporations, not just the S&P 500 companies. This measure is reflected in the first chart below. Later, we’ll get into after-tax measures without those adjustments. They look even worse.

To continue reading: Last Two Times After Our Dear Government Reported Data Like This, Stocks Crashed

Barack Obama Is Now The Only President In History To Never Have A Year Of 3% GDP Growth, by Tyler Durden

Average growth during Obama’s two terms was 1.48 percent. If inflation was understated by 1.48 percent, there was no real growth during that time. From Tyler Durden at zerohedge.com:

Following today’s extremely disappointing US GDP growth data, we have the final nail in the coffin of President Obama’s economic reign. Not only is the average annual growth rate of just 1.48% during Obama’s business cycle the weakest of any expansion since at least 1949, he has just become the only President to have not had even one year of 3% GDP growth.

An average annual GDP growth of 1.48% during Obama’s two terms…

As a reminder to a few blinkered media types, this means President Obama’s “recovery” has officially been the worst recovery in US history (despite adding almost $10 trillion to the national debt)…

And worse still, Barack Obama is the only president in US history to never have a year of economic growth over 3.0%…

As we noted previously, every other president in American history, even the really bad ones, had at least one year when U.S. GDP grew by at least 3 percent. But this has not happened under Obama even though he has had two terms in the White House.

As a reminder, this dismal economic track record came at the same as President Obama almost doubled the National Debt…

When ‘fake news’ and ‘peddling fiction’ meet ‘alternative facts’.

http://www.zerohedge.com/news/2017-01-27/barack-obama-now-only-president-history-never-have-year-3-gdp-growth

Ungovernability, by Raúl Ilargi Meijer

A grim prognosis on the health of governments in Europe and the US. From Raúl Ilargi Meijer at theautomaticearth.com:

Over the summer I introduced a two-fold assertion: 1) global economic growth is over (and has been for years and won’t come back for many more years) and 2) the end of growth marks the end of all centralization, including globalization. You can read all about these themes in “Globalization Is Dead, But The Idea Is Not” and “Why There is Trump” There are also extensive quotes of the second essay in wicked former UK MI6 spymaster Alastair Crooke’s “‘End of Growth’ Sparks Wide Discontent”.

When I say ‘the end of growth’, I don’t mean that in a Limits to Growth kind of way, or peak oil or things like that. Not because I seek to invalidate such things, but because I mean economics, finance only. Our economies simply ceased growing, and quite a few years ago. The only reason that is not, and very widely, recognized is the $21 trillion and change that central banks have conjured up ostensibly to kickstart a recovery that always remains just around the corner.

That those $21 trillion will have massive negative effects on all of us is not my point either right now. Just that growth is gone. And that’s hard enough to swallow for a system that’s based uniquely on that growth. That is what this ‘essay’ is about: what consequences that will have.

All that said, I don’t have the idea that too many people are willing to accept the notion of the end of eternal economic growth (let alone right this minute), nor of globalization’s demise. Which may be partially understandable, but not more than that. Instead, quite a few people may honestly feel that the end of growth will make ‘leaders’ try for more, not less, centralization/globalization, but that, if it happens, is temporary. Unless, as I wrote earlier, we see dictators in the west.

Because, as I said in those articles, the overbearing principle is, and must be, that when centralized power ceases to deliver benefits to people, they will no longer accept that decisions about their – ever poorer- lives are taken by people hundreds or thousands of miles away from where they live. People allow that only when they reap sufficient benefits from it. With growth gone, there are no such benefits left. Look at Greece and Italy and Brexit, and look at why Trump is where he is.

Since it will apparently take a while for the above to sink in – which is not because I’m wrong-, I’m a little hesitant to introduce the next assertion, which is very closely related to the other two and takes it a step further. That assertion is that there are multiple countries in the western world -and perhaps beyond- today that run a serious risk of becoming de facto ungovernable. I’ll refrain from using the term anarchy.

I’ve been playing around in my head for a while with the thought that it is striking that the last two major global powers, which together have dominated world politics and economics for over 200 years, look well on their way towards becoming ungovernable. It is perhaps even more striking that nobody appears to understand or even contemplate this.

Both Britain and America are caught in an apparent trap in which various groups of their citizens blame each other for everything that’s going wrong with their lives -which admittedly is plenty-. But that’s where the end of growth and globalization comes in: societies are in urgent need of new ways of organizing themselves, of formulating new goals, priorities and policies.

To continue reading: Ungovernability