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Guest Post: Why the World Is Financially Doomed in Four Charts

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

Why the World Is Financially Doomed in Four Charts

The global economy is doomed to implosion, and here are four charts which explain why.

Though the complexities may appear endless, the global economy's coming implosion is really fairly easy to understand: here are four charts which do the heavy lifting. It boils down to these basics:

1. When money is dear and difficult to borrow, then productivity and capital accumulation are encouraged, speculation, malinvestment and debt-based consumption are discouraged.

2. When money is "free" (zero-interest rate policy) and liquidity is unlimited, then the opposite conditions hold: speculation in risk assets, malinvestment and debt-based consumption are all encouraged, and productivity and capital accumulation are heavily discouraged.

3. When debts exceed the value of the underlying assets, the only way out of the Tyranny of Debt is to write off the debt on both the borrower and lender's balance sheets, wiping out their capital via liquidation and bankruptcy.

4. The "extend and pretend" policy pursued by all major nations is simply transferring the impaired debt from private hands to the taxpayers (public debt), crippling the economy with higher taxes and higher debt service.

5. The Central State's "extend and pretend" policy requires heavy borrowing every year to prop up the status quo, pushing the Central State (or equivalent, i.e. the Eurozone) into an inescapable double-bind: either continue increasing public debt and cripple the economy with high taxes and high public-debt servicing costs, or let the financial status quo of "profits are private, losses are public" implode.

The first path leads to default, as the Tyranny of Debt cannot be masked for long, while the second path wipes out the Financial Power Elite which feeds the politicians.

Here are the charts. Note how the speculative economy created the illusion of rising wealth for the bottom 90%, an illusion stripped away by the Default Economy.

In essence, the Financial Power Elites profited immensely from creating this illusory wealth which gave the bottom 90% the false sensation that their declining earnings and purchasing power were being offset by the "magic" of asset bubbles.

Then, when the bubble popped, the Financial Power Elites transferred the impaired assets to the taxpayers, a process which is still underway. The politicos of both parties are complicit; behind the simulacra of toothless "reforms," this process proceeds in myriad ways (Bank of America transferring toxic debt to Fannie/Freddie, etc.) Behind the smokescreen of conjuring a "wealth effect" to foster more consumption, the Fed's purchase of Treasuries (QE2) serves this transfer-of-debt-to-the-public process.

This same process is playing out throughout the global economy: Greece, Ireland, the U.S., and eventually, in China when its monumental property bubble pops.



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Thu, 01/06/2011 - 13:16 | 852973 Dr. Doom
Dr. Doom's picture

But the Dow will be at 36,000 so I will feel wealthy

Thu, 01/06/2011 - 13:24 | 853001 Wynn
Wynn's picture

hang on to that wealth, you'll need it to buy your 2 oz jars of gruel, if you can find any

Thu, 01/06/2011 - 13:32 | 853047 rustybenelli
rustybenelli's picture

I never have anything to dink when I read the comments section. Wynn your comment was so funny,im still laughing.

Thu, 01/06/2011 - 18:13 | 854089 FEDbuster
FEDbuster's picture

The "wealth effect" fades fast, kinda like the first guy to receive a 100 trillion dollar Zimbabwe bank note for a bag of rice.

Thu, 01/06/2011 - 18:44 | 854167 markmotive
markmotive's picture

We're well on our way...the political attitude is borrow 'till broke.

"...failure to raise the limit would precipitate a default by the United States..."

He said's the full text:

Thu, 01/06/2011 - 19:07 | 854228 flacon
flacon's picture

Viva Ludwig von Mises!

Thu, 01/06/2011 - 19:55 | 854394 Voluntary Exchange
Voluntary Exchange's picture

A system based on theft,  fraud and "legalized" violence (your "government" ) will expand until  its growing level of crime can no longer be sustained. When people go along with being taxed they support murder, theft, fraud.  Should they be surprised that they become the eventual victims of  the predators they continue to feed?


It is not good people who are attracted to monopolies of "legal" force, it is the violent and evil.  Good people seek not the "legal" power to steal from others (taxation), thieves do.  Good people seek not the power to lie without consequences, the corrupt do (and they write "laws" to make it "legal"). So why do people think they can ever obtain something good from "government" when it is the place where a clever criminal can act without being caught?

Let's stop being "free range slaves" in the free range "farms" of the wicked!


Thu, 01/06/2011 - 13:25 | 853007 buzzsaw99
buzzsaw99's picture


Thu, 01/06/2011 - 13:26 | 853014 nope-1004
nope-1004's picture

Either borrow heavily to sustain status quo, or default on debt.


Who will be the lender under the first scenario?  To me scenario 1 is simply more Ponzinomics - ie. treasury / fed / PD charade.  It can't last.


Thu, 01/06/2011 - 13:38 | 853081 SheepDog-One
SheepDog-One's picture

Theyre only keeping it going to some predetermined point...these people arent STUPID after all, theyre fully aware theyre running a market pumping Ponzi. The default will come, when its planned, and that will be when the world war is kicking off full steam.

Thu, 01/06/2011 - 14:07 | 853213 Raynja
Raynja's picture

People don't want to admit/see that this has never ended any other way.

Thu, 01/06/2011 - 20:00 | 854414 Seer
Seer's picture

"The default will come, when its planned, and that will be when the world war is kicking off full steam."

There's a lot of truth in this if you understand how it's always been.  The rich/elites have always stirred the pot of divisiveness such that they could uncork it/pour it out when the time comes.  Set it up such that the <people of country X, "coloreds," socialists, poor> are demonized, and when the curtain starts parting a bit further (the men behind the curtain can no longer hide) the media will be unleashed to focus on the "others."  Quite sad, it's an age-old game, and even so-called more intelligent people that lurk here don't see it, meaning that it's likely really ingrained in a whole hell of a lot of people (Manchurian Candidates?).

Thu, 01/06/2011 - 17:46 | 854006 AnAnonymous
AnAnonymous's picture

 It can't last.


It cant last. But still it can last for the next 48 years. So you wont be bother by it.

As long as there are resources to buy, the US can buy them through  debts pyramid schemes.

First thing I checked out back in  2008. How long the US could practise US business style.

Thu, 01/06/2011 - 17:59 | 854045 DFCtomm
DFCtomm's picture

I think most intelligent people agree that it can't last. The 64 dollar question is when does it all come down. You indicate that in 2008 you did some type of research that led you to believe it could last for the next 46 years. Want to share so that we can judge the validity of your assertion?

Thu, 01/06/2011 - 18:16 | 854092 DaveyJones
DaveyJones's picture

yes, I fear they might be onto the scam. And in 48 years we'll be adding (given the momentum) a trillion dollars of debt every second. Just get a night job I guess

Thu, 01/06/2011 - 19:02 | 854211 tmosley
tmosley's picture

The longest lasting Fiat currency regime in the history of the planet was 50 years in Mongol China.  The US dollar has been fully fiat for 40.

I'm not sure we are going to break the record at the rate we are going.  Remember that the Yuan Dynasty had tribute coming to it from half of the world.  Come to think of it, not so different from today.

Thu, 01/06/2011 - 13:44 | 853094 InconvenientCou...
InconvenientCounterParty's picture

The Bernank issues statement on food inflation: " Human flesh is a significant source of protein. It stands to reason that eating your own flesh is an effective course of action provided the heartbeat is not affected. To maintain the proper and sustainable balance, nibble at non-essential areas such as the toes. The key to sustainable consumption, is to recognize when the heart beat is disrupted. At that time the prudent course of action is to moderate the consumption rate."



Thu, 01/06/2011 - 13:55 | 853165 eftian
eftian's picture


Thu, 01/06/2011 - 13:58 | 853184 Hal n back
Hal n back's picture

that ties into the death panels where we would have a good supply of that protein.

Thu, 01/06/2011 - 17:01 | 853851 malikai
malikai's picture

I'm afraid not. We will need them for pyrolysis conversion to oil, gas, and minerals. This is far more important than feeding the serfs. 

Thu, 01/06/2011 - 14:32 | 853332 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

stands to reason that eating your own flesh is an effective course of action

Ouroboros Bitchez!

Thu, 01/06/2011 - 14:50 | 853397 jmac2013
jmac2013's picture

Soylent Green Bitchez!

Thu, 01/06/2011 - 17:19 | 853920 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

I think Stephen King once wrote "they taste just like lady fingers".

Thu, 01/06/2011 - 14:15 | 853231 hambone
hambone's picture

I dare Charles Hugh Smith to name that financial doom in 3 2 charts...ok Charles Hugh Smith, name that financial doom in 1 chart...

Tyler, tell Charles what he's won!!!

Thu, 01/06/2011 - 16:53 | 853813 Michael
Michael's picture

Just like in Zimbabwe.

Thu, 01/06/2011 - 16:56 | 853822 Michael
Michael's picture

Just like in Zimbabwe.

Thu, 01/06/2011 - 17:45 | 854002 Michael
Michael's picture

Just like in Zimbabwe.

Thu, 01/06/2011 - 17:49 | 854009 AnAnonymous
AnAnonymous's picture

Sure. A lot of non Zimbabweans suffered from starvation because of Zimbabwe monetary policy.

Just like the US.

Thu, 01/06/2011 - 23:21 | 854960 ThirdCoastSurfer
ThirdCoastSurfer's picture

 Little noticed Mexico is way ahead of you. It passed 36,000 a long time ago and should pass 40,000 soon. It's previous all time high was just under 33,000 in Oct 2007.

If you think things are good here, you should see the hoard of children begging in the streets down there. The 40% that are well off just can't imagine why the remaining 60% aren't in the market so as to improve their condition.  

Thu, 01/06/2011 - 13:18 | 852982 Village Idiot
Village Idiot's picture

What about the bat devil?

Thu, 01/06/2011 - 15:02 | 853447 cougar_w
cougar_w's picture

She not a devil, she's an angel. And since you ask, she's busy:

Bringing new meaning to the term "inflated assets".

Thu, 01/06/2011 - 13:20 | 852985 SDRII
SDRII's picture

favorable revisions

Thu, 01/06/2011 - 13:22 | 852994 LawsofPhysics
LawsofPhysics's picture

Dr. doom,


Could you be more specific regarding the date the DOW will be at 36,000?  It just shit my shorts (so to speak).

Thu, 01/06/2011 - 13:31 | 853036 Dr. Doom
Dr. Doom's picture

September 2014

Thu, 01/06/2011 - 14:00 | 853185 DonnieD
DonnieD's picture

I wonder if Naseem Taleb buys Dow 30,000 calls or Dow 5,000 puts for his armageddon scenario?

Thu, 01/06/2011 - 14:19 | 853273 Star Warrior
Star Warrior's picture

Both via a Straddle Play, their both Armegedon scenario's

Sat, 01/08/2011 - 11:10 | 858573 h3m1ngw4y
h3m1ngw4y's picture

on your thinking why dow 36000 (or 50k as in this video) is a very bad number. its more a real 85% loss to your real wealth:

do not juggle with numbers do the thinking behind the numbers to see what it means

its more a fatal attractor for me

Thu, 01/06/2011 - 13:33 | 853049 Yardfarmer
Yardfarmer's picture

posters should honor the attributions. in this case,martin armstrong's prediction of a DOW 36,000. after which parabolic blowoff. will implode and settle to 400. of course timing is everything and therein lies the rub.

Thu, 01/06/2011 - 13:21 | 852996 lynnybee
lynnybee's picture

when's this thing finally going to collapse ?   i'm the laughing stock of my friends & family .    i'm even stockpiling my daughter's home because she refuses to get sucked into this insanity !   I've got the silver, I've got the foodstuffs ........ & if I mention total economic collapse just one more time, they're going to have me committed !!

Thu, 01/06/2011 - 13:28 | 853013 Wynn
Wynn's picture

at least your prepared, some of us will only be eating birds and fish as they fall from the sky :-)

Thu, 01/06/2011 - 13:43 | 853097 Implicit simplicit
Thu, 01/06/2011 - 13:50 | 853132 sabra1
sabra1's picture

is there shake 'n bake for crow?

Thu, 01/06/2011 - 14:25 | 853300 centerline
centerline's picture

Be careful around here.  You are likely to get several recipes.

Thu, 01/06/2011 - 14:45 | 853384 KickIce
KickIce's picture

First pointer, since they're falling a couple thousand feet you will not require any meat tenderizer....

Thu, 01/06/2011 - 19:36 | 854334 lincolnsteffens
lincolnsteffens's picture


Love it ..."meat tenderizer" I got a belly laugh out of that!!

Thu, 01/06/2011 - 19:19 | 854278 MakeMineADouble
MakeMineADouble's picture

Here is three right off the top of my head:

Thu, 01/06/2011 - 14:18 | 853256 Pegasus Muse
Pegasus Muse's picture

I shall survive.  Oh, the savagery of it .... eating nut munchers .... poor little critters. 


Thu, 01/06/2011 - 15:05 | 853458 getplaning
getplaning's picture

That's hilarious. Actually, the squirrels like it. I have a pecan tree in my yard in Texas, and my kid has a trampoline. One morning I looked out the window and three squirrels were jumping on it. Swear to God.

Thu, 01/06/2011 - 15:25 | 853517 Rodent Freikorps
Thu, 01/06/2011 - 18:51 | 854186 Michael
Michael's picture

Mana from heaven. Yum.

Thu, 01/06/2011 - 13:30 | 853033 Commander Cody
Commander Cody's picture

Be more low key!  Don't pontificate, question.  Be a skeptic versus a no-it-all contrarian.  That is all.

Thu, 01/06/2011 - 17:48 | 854012 tmosley
tmosley's picture

"no-it-all contrarian"

I'm gonna have to use that one!

Thu, 01/06/2011 - 18:42 | 854163 andybev01
andybev01's picture

Too bad it can't be used in a verbal discussion.

Thu, 01/06/2011 - 13:33 | 853054 KickIce
KickIce's picture

Good question, I still can't figure out how we made it past the gold whistle blower, thought for sure that would result in a run on physical.  I think it will revolve around commodities and especially food, whether it be shortages or people simply can't afford it.

Like I tell my kids.  If it doesn't happen then we have a good laugh at my expense.  WHEN it happens, I'm going to expect some serious groveling.

Thu, 01/06/2011 - 20:07 | 854437 Seer
Seer's picture

"Like I tell my kids.  If it doesn't happen then we have a good laugh at my expense.  WHEN it happens, I'm going to expect some serious groveling."


Thu, 01/06/2011 - 13:35 | 853066 LTJ
LTJ's picture

Looks like you've prepared for the worst.

Something someone said some time ago on this forum:

"I'd rather be 2 years early than 5 minutes late."

May as well relax - because it ain't gonna happen until it happens.

Thu, 01/06/2011 - 18:35 | 854142 Max Hunter
Max Hunter's picture

I like that... It's hard to come to terms with the preparation necessary for a collapse when everything seems to be business as usual indefinately.. Nonetheless, the risk/reward for being prepared for a collapse is a pretty easy decision.. I live my life like I always have, it's just now i'm prepared in case it does change..

Harry... did you junk him??

Thu, 01/06/2011 - 18:45 | 854172 andybev01
andybev01's picture

In the Ark fairytale, everyone thought Noah was off his rocker too.

Sat, 01/08/2011 - 11:17 | 858581 h3m1ngw4y
h3m1ngw4y's picture

as the saying goes, it wasn´t raining either when noah built the ark.


Thu, 01/06/2011 - 14:06 | 853208 ZakuKommander
ZakuKommander's picture

One would think that the weaponry you have accumulated to protect everything would reduce the annoying laughter to nervous tittering.

Thu, 01/06/2011 - 14:13 | 853251 robobbob
robobbob's picture

downplay the end of the world stuff. this is like life insurance. you don't buy it hoping to use it, but it's there just in case.

buy things you normally use anyway, and rotate your stock

Will it hurt you to have 20 extra boxes of detergent? 40 cans of spagettios? bulk potatoes? use them as normal, just keep replacing them. FIFO stock

Thu, 01/06/2011 - 17:03 | 853856 trav7777
trav7777's picture

It ISN'T!  there's not going to be a MOMENT where "TSHTF"

People foolishly thought because the statement "the collapse of Rome" takes a second or two to read that the ACTUAL collapse of Rome took a second or two.  It didn't; the thing took centuries.

Even Weimar played out over years.  Life goes on even if the banks lock up.

Thu, 01/06/2011 - 18:02 | 854051 LFMayor
LFMayor's picture

Yeah, like Yugo in the early 90's.  Life goes on.  It gets exciting, short and violent, too.

Thu, 01/06/2011 - 18:09 | 854079 unununium
unununium's picture

Correct regarding Weimar.  We are at about 1921 where TSHTF in late 1923.

Thu, 01/06/2011 - 18:18 | 854098 DaveyJones
DaveyJones's picture


 get the goddam garden going 

Thu, 01/06/2011 - 18:38 | 854156 Max Hunter
Max Hunter's picture

Even if we did have 2 years, would it be wise to procrastinate preparation?.. I'm not taking that chance..

Thu, 01/06/2011 - 20:21 | 854481 Seer
Seer's picture

Soviet Union.

One cannot rule out a quick crash any more than one can call for a slow collapse.  No one knows how this will go.  Unlike other collapses, the US is different in that it is filled with spoiled, entitled "children" armed with nukes...

Thu, 01/06/2011 - 17:16 | 853914 freeloader2011
freeloader2011's picture

IM wit ya. Whens this thing going down? I guess nwo wants to lay another 3-5 trillion on our backs before we get our turn to bend ove3r

Thu, 01/06/2011 - 13:23 | 852999 cocoablini
cocoablini's picture

The only way out of this mess is not more credit and debt, but a bondholder slaughter. Its too bad, but in a depression insolvency is pretty much the only way out. Or, the economy never resets and wealth creation can never occur again. the Plutocrats hate this, as they have been enjoying a state-sanctioned conversion of debt to wealth on the taxpayers' backs. The rich have been snapping up railroads, stocks, gold, silver and real estate thanks to the rich bailouts. They should have been wiped out.
Now, the debt ceiling is coming up. If we can't add more indebtedness, then we are going into a massive deflationary depression again. What a GREAT option

Thu, 01/06/2011 - 15:00 | 853448 ElvisDog
ElvisDog's picture

Too bad the bondholders are the bankers and other wealthy people who run this country. Your solution would pre-suppose that the bondholders would willingly take the pain for the long-term good of society. Since they are mostly sociopaths, that is not very likely to happen.

Thu, 01/06/2011 - 17:12 | 853896 Common_Cents22
Common_Cents22's picture


Yep, kinda like expecting CONgress to vote themselves out of a job by implementing term limits.   Ain't gonna happen.

Thu, 01/06/2011 - 13:22 | 853000 John Law Lives
John Law Lives's picture

Que Tyler's alias (a.k.a. Robo) with a bullish stock chart.

The countdown to an idiot appearance begins in three, two, one...

Thu, 01/06/2011 - 13:24 | 853006 Village Idiot
Village Idiot's picture


Thu, 01/06/2011 - 13:38 | 853074 KickIce
KickIce's picture

lol.  you're not right.


Thu, 01/06/2011 - 13:41 | 853084 Oh regional Indian
Oh regional Indian's picture



Thu, 01/06/2011 - 13:53 | 853153 woolly mammoth
woolly mammoth's picture

Best one of the day!

Still laughing.

Thu, 01/06/2011 - 18:52 | 854187 andybev01
andybev01's picture

double+, good one.

Thu, 01/06/2011 - 13:43 | 853098 Bastiat
Bastiat's picture

" . . . with a bullish stock chart." 

And tits!  Titty pics act like a stun grenade on the male brain and make it more receptive to boner charts.

Thu, 01/06/2011 - 14:27 | 853301 John Law Lives
John Law Lives's picture

Yes, they do.  Hetero men love looking at tits.  It is directly tied to our basic survival instincts.  Firm, robust tits portend healthy female members of the species.

Thu, 01/06/2011 - 14:32 | 853324 Rodent Freikorps
Rodent Freikorps's picture

Wide hips, bitches.


Thu, 01/06/2011 - 14:51 | 853416 John Law Lives
John Law Lives's picture

Wide hips = Breader's hips.

Big tits and wide hips.  Many women in South America tend to fit that description.

Thu, 01/06/2011 - 19:33 | 854311 RafterManFMJ
RafterManFMJ's picture

What does this woman work at a fish fry?

Thu, 01/06/2011 - 13:24 | 853004 Wyndtunnel
Wyndtunnel's picture

I fucking hope a measurable number of Billionaires get the Ceausescu treatment when the dust settles.

Thu, 01/06/2011 - 13:32 | 853039 topcallingtroll
topcallingtroll's picture

Wont happen....sorry! But you can pick up crumbs here and there like me and get yourself in the top five percent....what? Are you too good to pick up a few crumbs from the plutocrats and get Obama-rich yourself?

Thu, 01/06/2011 - 13:31 | 853018 Dr. Acula
Dr. Acula's picture

This article doesn't take into account the modern advances in the science of econometrics. Why should I believe Mr. Smith? Is he a Nobel prize-winning economic wizard like Dr. Krugman? I think not.

I am sure our politicians are well-informed on these issues. Armed with the tools of science, they are working hard behind the scenes to guide our economy and prevent any imminent collapses.

And since the US Treasury can always create as much money as needed, shifting unpayable debts onto the US Government seems like the logical thing to do to prevent good banks from collapsing and good businesses from failing. When debt is transferred to everyone, so that everyone owes it, it's almost like nobody owes it.


Thu, 01/06/2011 - 13:36 | 853040 nope-1004
nope-1004's picture

Then I almost don't owe any money on my mortgage anymore.  Sweet!

And you're right:  Failures should not be allowed to fail.  That's just so '70's.


Thu, 01/06/2011 - 13:38 | 853073 umop episdn
umop episdn's picture

Exponential growth, bitchez.

Debt growing exponentially is enough, all by itself, to crash the economy.

Dr. Bartlett will explain it all in the first few minutes of this lecture.

Thu, 01/06/2011 - 20:56 | 854569 Seer
Seer's picture

Hat's off to you for mentioning Dr. Bartlett.  Most important/impactual presentation I have EVER watched.  If people don't get the fundamentals then they've got ZERO chance (well, randomness would say that there's is a 'chance,' but it sure as heck isn't very high/probably).

NOTE: The guba link (where I've always referenced this presentation) doesn't appear to be functional anymore.

Thu, 01/06/2011 - 13:38 | 853082 Implicit simplicit
Implicit simplicit's picture

You think econonmics is a science? You are starting with a false premise.

Thu, 01/06/2011 - 14:01 | 853113 Dr. Acula
Dr. Acula's picture

Of course econometrics is a science. While superstitious people worry about yellow rocks, experts like Krugman and Bernanke are actually busy working out the differential equation solutions necessary to properly balance the economy.


Thu, 01/06/2011 - 15:12 | 853485 cougar_w
cougar_w's picture

Differential equations?

No that's not right. What is necessary to properly balance the economy is that the banks be allowed to go bankrupt, assets be allowed to find their price without artificial supports, bookkeeping standards be enforced, and representations of money (FRNs) be tied to things of actual value like metals.

I'm a mathematician and no math is required. What is required is political will and leadership, both of which are entirely extinct.

Thu, 01/06/2011 - 15:42 | 853575 Implicit simplicit
Implicit simplicit's picture

If econmomics was a science, then accounting would be the metric to be used. However, because economics is not a science and this is not a true democracy, they were able to conviently change the accounting rules to keep the banks solvent. Its called cheating, and it is typical in a corrupt crony capitalistic system where the rich spit on the middle class and poor.

Thu, 01/06/2011 - 19:04 | 854216 Vendetta
Vendetta's picture

Oh yeah... differential equations will solve the problems of fraud and corruption on a massive scale.  /sarcasm off

Fri, 01/07/2011 - 05:16 | 855385 LudwigVon
LudwigVon's picture

He is being facetious...

Thu, 01/06/2011 - 15:34 | 853550 Implicit simplicit
Implicit simplicit's picture

Using metric measuring systems with biology, chemistry and physics is science. Using metric measuring systems on economics is purely theoretical with null hypothesis that are drawn from conveniently short windows of time. Krugman and Bernake use confidence and hope, as you do, to influence a capitalistic system that is doomed to fail because of  the structual flaws of fiat fractal debt leverage which is unsustainable. Facing reality would allow a reboot but they refuse to fail, and failure is inevitable in the boom and bust cycles of capitalism The poor will revolt. The system will collapse.

Thu, 01/06/2011 - 15:59 | 853595 akak
akak's picture

Dr. Acula,

Thanks for the absurdist humor!


PS: Are you by chance a proctologist?  I ask, because you seem to be pulling a whole lot of crap out of somebody's ass!

Thu, 01/06/2011 - 18:39 | 854151 doggings
doggings's picture

Of course econometrics is a science. While superstitious people worry about yellow rocks, experts like Krugman and Bernanke are actually busy working out the differential equation solutions necessary to properly balance the economy.

bwhahahahahahahahaha!!!!!  .. funniest thing Ive read all year. brilliant.

Thu, 01/06/2011 - 18:55 | 854196 andybev01
andybev01's picture

I honestly think that the good Doc is working on some sort of grand, existential spoken-word project, and ZH is his beta test site.

Or he is completely off of his nut.

Either way it makes for good comedy.

Thu, 01/06/2011 - 13:43 | 853092 LawsofPhysics
LawsofPhysics's picture

Sounds great with major one problem.  Cheap energy and cheap labor are the only things that drive a real economy, not cheap paper.   Moreover, all of the economic models from these nobel brains depend on growth.  Damn that finite planet with its finite resources.

What happens when you have a pile of "wealth" or a drug for every disease (thanks to all that science), but not enough fresh water or food to feed everyone you saved with all those great medications?

I like your line about "it's almost like nobody owes it".  Really? if so, let's wipe it all out and start over.

People really want to believe that they can accumulate enough wealth so that they don't have to work and live high on the hog.  Unfortunately, the Laws of Physics (there are real things that all people need to survive) will always win, so go out and prove yourself every day people.  God and Nature make no promises regarding your health or whether you will be here tomorrow.

If ONLY the U.S. government LET the bad business fail, they did the opposite.  Have you been paying any attention to what has been happening for the last 30+ years?

Thu, 01/06/2011 - 13:57 | 853131 Dr. Acula
Dr. Acula's picture

>...labor are the only things that drive a real economy

Labor is actually not that important. It's spending that drives the economy. That's why extending unemployment benefits is so important. Per Galbraith: "Spending and Taxes are the Gas and Brake Pedals of the Economy"

>Have you been paying any attention to what has been happening for the last 30+ years?

Yes, our GDP is higher than ever. We are the wealthiest and most powerful country on this planet, all thanks to economic science.

Thu, 01/06/2011 - 14:27 | 853309 tmosley
tmosley's picture

You're both wrong.  It's leverage on labor that drives the economy.  If brute force could provide anything, the Khmer Rouge would be the world's top economic power.  If nominal spending could, it would be Zimbabwe.

Capital investment provides leverage on labor.  Like when someone built the first fishing net.  Spending is not possible without return on capital.

Thu, 01/06/2011 - 15:14 | 853491 cougar_w
cougar_w's picture

You are all heretics. What drives the economy is sex.

Thu, 01/06/2011 - 15:39 | 853562 Rodent Freikorps
Rodent Freikorps's picture

I thought that drove everything.

Thu, 01/06/2011 - 17:51 | 854020 tmosley
tmosley's picture

For guys, it's the same thing.  We provide the lever, you provide the labor!

Thu, 01/06/2011 - 18:13 | 854090 High Plains Drifter
High Plains Drifter's picture

weaponized pussy?


Thu, 01/06/2011 - 21:55 | 854765 Hulk
Hulk's picture

Oh, thats disappointing...

Thu, 01/06/2011 - 17:59 | 854038 AnAnonymous
AnAnonymous's picture

Yes, our GDP is higher than ever. We are the wealthiest and most powerful country on this planet, all thanks to economic science.


A statement of fact. And indeed, the US has developped more than anyone else the art of extorting the weak and farming the poor, a sure path to wealth.

Economics is just the bed time story told to cover the real game going on.

Fri, 01/07/2011 - 05:26 | 855390 LudwigVon
LudwigVon's picture

Cheap energy and cheap labor are the only things that drive a real economy, not cheap paper.

No. They are important but do not drive the economy. We have relatively cheap labor when regarding productivity, infrastructure & much of the added value work that is accomplished in the US bearing in mind the inflation here. Cheap energy is possible through NG, Uranium and Thorium. 



Thu, 01/06/2011 - 13:50 | 853126 ebworthen
ebworthen's picture


Dr. Acula - This is either razor sharp sarcasm or utter stupidity.  I'm guessing sarcasm.


Thu, 01/06/2011 - 13:59 | 853191 Bastiat
Bastiat's picture

I'm guessing dead serious.

Thu, 01/06/2011 - 15:14 | 853490 Wyndtunnel
Wyndtunnel's picture

I can't tell. It works both ways...

Thu, 01/06/2011 - 15:59 | 853616 KnightsofNee
KnightsofNee's picture

Don't you know? It is a new paradigm. No need to try and tell. For example, if you have the word “good” then you do not need another word “bad” to express its opposite- “ungood” will do the job. And you don’t need words like Excellent or Splendid; instead you can say “plusgood” or “doubleplusgood”. You get it?  2+2=5, " This double speak is easy! We are all freaking doomed! At least that is what Mogambo tells me all the time.

Thu, 01/06/2011 - 15:59 | 853615 akak
akak's picture

I'm guessing dead serious.

You are 100% correct.

It is the "Dr." that clinches it.

Thu, 01/06/2011 - 17:54 | 854026 tmosley
tmosley's picture

Dr. Acula





Thu, 01/06/2011 - 18:59 | 854207 andybev01
andybev01's picture


Thu, 01/06/2011 - 18:31 | 854101 Dr. Acula
Dr. Acula's picture

LOL, it was fun but I'm tired of my jokes.

>This article doesn't take into account the modern advances in the science of econometrics

Econometrics, like "climate change" studies, is not a science but rather it is childishly playing games with numbers. There are no reproducible experiments in economics: the market is forever in a state of ceaseless change. Unlike in physics, there are no numeric constants in economics; only varying market data. It is impossible for anyone to observe the effects of any change ceteris paribus.

I should add that, unlike econometrics, praxeology does offer a way to grasp the subject.

> Is he a Nobel prize-winning economic wizard like Dr. Krugman?

Note that the "Nobel prize in economics" is not at all like other Nobel prizes. This award is the invention of a central bank and should be valued accordingly.

>>...labor are the only things that drive a real economy

>Labor is actually not that important. It's spending that drives the economy.

Actually, both points of view are nonsense. It is like saying "the flow of blood is what drives the human body". Meanwhile, you completely neglect the nerve impulses, digestion, respiration, sex drive, cognitive functions, excretion, etc. The truth is that nothing and everything "drives" the economy.

>Per Galbraith: "Spending and Taxes are the Gas and Brake Pedals of the Economy"

This is similarly ridiculous. Instead of viewing the economy as a car that goes slower or faster, a better metaphor might be a self-healing organism infected with toxin-creating parasites.

>Yes, our GDP is higher than ever

This is also nonsense, unless your goal is to be like Zimbabwe. GDP is not scientifically valid. As valuations are not quantities, it is impossible to compare or add the subjective valuations of two people or even that of the same person at different times. Furthermore, GDP as commonly defined completely neglects the scarce and important economic good of leisure. And as Ludwig von Mises wrote, how can you assign a value to a country's climate, or the skill of its people? A business may be sold in exchange for money, but a country cannot.

Thu, 01/06/2011 - 19:10 | 854249 Dr. Sandi
Dr. Sandi's picture

There are no reproducible experiments in economics

I submit that there are reproducible experiments, but they are not easy to repeat in a human lifetime.

Just put the pedal to the metal, (or the whore to the floor) and run it as fast as you can. Invariably it will leave the road at some point, resulting in a crash with massive injuries.

Thu, 01/06/2011 - 21:02 | 854579 Seer
Seer's picture


Thu, 01/06/2011 - 13:31 | 853032 Rodent Freikorps
Rodent Freikorps's picture

That headline was just funny as hell.

Thu, 01/06/2011 - 13:32 | 853041 asteroids
asteroids's picture

The first person to say "NO" wins. Iceland looks better and better every day.

Thu, 01/06/2011 - 16:03 | 853625 KnightsofNee
KnightsofNee's picture

Actually, hanging out with Doug Casey at his new settlement in Argentina is looking pretty good.

Thu, 01/06/2011 - 13:32 | 853043 junkhand
junkhand's picture



better to be a year early than a day late.


enjoy the peace of mind your preps are giving you, no matter what may come to pass.

Thu, 01/06/2011 - 13:34 | 853052 Kaiser Sousa
Kaiser Sousa's picture

any doubt about who is the government should now be erased...

(Reuters) - President Barack Obama on Thursday picked JP Morgan Chase executive William Daley as his new White House chief of staff as part of a major retooling of his team, a senior White House official said.

Thu, 01/06/2011 - 13:36 | 853062 Commander Cody
Commander Cody's picture

One tool replaces the other.

Thu, 01/06/2011 - 13:59 | 853175 Kaiser Sousa
Kaiser Sousa's picture

would b nice to know what spineless mother fucker patrols the Hedge junking without offering refutation or counterpoints...

cowardice Bitchez...

Thu, 01/06/2011 - 14:02 | 853193 Hal n back
Hal n back's picture

what's nice is Daley's learning curve viz a viz chicago machine politics is rather brief since he discussed it every nite at te dinner table


All he has to do is find out of he can learn the Obama way.


Thu, 01/06/2011 - 14:51 | 853417 Poofter Priest
Poofter Priest's picture

Hmmm, yes this Daley is the brother to the soon to be ex Mayor Daley who suddenly; after Raum Emanual declared his interest in becoming the next mayor of Chicago, declared he was not going to run for another term.

That's just coincidence....really. I'm sure.

Thu, 01/06/2011 - 17:10 | 853885 trav7777
trav7777's picture

Disfuckinggusting.  Daley?  The legacy of a crook.

From unions to politics to JPM???  WTF.  Sprinkle in a dose of family nepotism and interlocking executive and you have a fucking catastrophe.

TPTB are now the kids of the last set of PTB...and there are probably lifelong democrap voters lining up to lick Daley's asshole and worship the spawn of their King

Thu, 01/06/2011 - 17:58 | 854036 Spigot
Spigot's picture

Dearest God in Heaven!

This President is indeed a total toad of Finance.

Congress has better get moving to cut this beast to pieces ASAP.


Thu, 01/06/2011 - 13:35 | 853056 doomandbloom
doomandbloom's picture

Well doom is my middle name..i mean first name...

Thu, 01/06/2011 - 13:33 | 853057 cocoablini
cocoablini's picture

This is not my wife! This is not my beautiful house!

Into the blue again, after the money's gone!

Thu, 01/06/2011 - 16:04 | 853635 KnightsofNee
KnightsofNee's picture

Burning down the house!

Thu, 01/06/2011 - 13:34 | 853058 Commander Cody
Commander Cody's picture

Isn't some Fed PHD gonna come along and adjust the charts solving the debt problem?  I eagerly await.

Thu, 01/06/2011 - 13:34 | 853059 packman
packman's picture

Excellent high-level summary, IMO.  Here's a timeline I'd put on these:

1st chart = 1995

2nd chart = 2005

3rd chart = 2015  (IMO we're not quite there yet - e.g. RE assets are still priced higher than they were in 1995)

4th chart = 2025

This assumes that the housing bubble ends up being our undoing.  We may be in for one though more before it all unravels.

Thu, 01/06/2011 - 13:40 | 853080 Freddie
Freddie's picture

Hope & Change.

Thu, 01/06/2011 - 13:42 | 853088 SheepDog-One
SheepDog-One's picture

OK who is the ass hat who is junking every post today?

Thu, 01/06/2011 - 13:45 | 853106 Commander Cody
Commander Cody's picture

Not me, but thank you and may I have another.

Thu, 01/06/2011 - 14:57 | 853431 Commander Cody
Commander Cody's picture

Thanks again.

Thu, 01/06/2011 - 13:47 | 853117 KickIce
KickIce's picture

No kidding, either you should be forced to make a reply or rename it.  The "chicken shit" or "hit and run" option work for me.

Thu, 01/06/2011 - 19:12 | 854258 Dr. Sandi
Dr. Sandi's picture

Relax. If you're not being junked, you're not contributing. It's an honor!

Thu, 01/06/2011 - 15:23 | 853514 cougar_w
cougar_w's picture

I think it means that the ZH comments section has about 6 months to live. That's about when the trolls, shills and wankers will have simply taken over.

Wasn't that long ago they had to nuke anon comments. Not much leverage remaining after that lever was pulled. I guess the next thing will be to limit the number of comments per day tied to how long the account has been active on the site. Hey Tyler, you listening? Not much time remaining to get this house in order.

Thu, 01/06/2011 - 19:15 | 854263 Dr. Sandi
Dr. Sandi's picture

There's always the pay to play option. Send money, send material, send old eyeglasses. Since the trolls have nothing to contribute but their charm, they go away.

Thu, 01/06/2011 - 16:33 | 853740 done with them all
done with them all's picture

The 'one junk punk' has struck again. no not me- if I junk I'll comment as well

Thu, 01/06/2011 - 17:13 | 853894 trav7777
trav7777's picture

why, does TD send you a fucking bill based on how many junks you accrue?

Who gives a shit who is junking posts?  There is no consequence to it

Thu, 01/06/2011 - 18:11 | 854086 Cheesy Bastard
Cheesy Bastard's picture

+1 "Don't touch my junk" holds true for airports.  In cyber space it just doesn't matter all that much.

Thu, 01/06/2011 - 13:47 | 853120 gwar5
gwar5's picture

Uh, Charles, you forgot to put the "YOU ARE HERE" arrow on one of those graphs for us.  

Never mind, I know. We are 3+. They're not done dumping on us yet.

What if the Bernank just stop printing and blamed Ron Paul? How would that play out?

JPM would look good with the silver shorts.



Thu, 01/06/2011 - 13:56 | 853167 Dr. Porkchop
Dr. Porkchop's picture

Well, since we know this money printing is a foregone conclusion, Ben has set the controls for the heart of the sun, I figure that each passing day they keep the scam going before its final collapse is a gift. An opportunity to prepare.

Thu, 01/06/2011 - 15:23 | 853516 cougar_w
cougar_w's picture

Sadly, that about sums it up.

Thu, 01/06/2011 - 14:14 | 853235 Threeggg
Threeggg's picture

I cant believe it............. Fauxbusiness is talking live to Pizza and Soup stores trying to convince the sheeple that businesses are hiring.

Pizza and Soup Stores ! ?

We are fucked !

P.S. you can see the collusion between the anchors to present a growing economy to the sheeple. When every they have a guest for an interview about the economic situation and he/she says something negative you can see the other anchors look over to the producers (off set) give them a shit looking face and then they cut the guest short from expanding on their reasoning, or the anchor themselves will poo-poo the set discussion.

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