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Guest Post: Why the World Is Financially Doomed in Four Charts
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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Oh no. When the pizza and soup stores are doing well, it means a recovery is in process. /sarcasm off
Even Gordon Gekko has done a 180:
http://www.youtube.com/watch?v=vscG3k91s58 - 1987
http://www.youtube.com/watch?v=l95dIwOJOm0 - 2010
Just ordered 10,000 more primers and 10 lbs of powder (thats stuff you make your own ammo with for you non-shooting, big-city apartment dwellers)
Slacker. 10 pounds won't take a heavy BMG more than a week to burn through.
Yeah, but you can make about 3000 rounds of .223 or 700 .300 RUM.
really?! you are going to use 50 cal BMG for protection or hunting? please, who are you trying to fool. IF you shot a 50 BMB in your house it would go through the wall of the room, tthrough the next room's wall, through the brick veneer, through your neighbors brick veneer and through a couple of HIS rooms.
It's humor. Relax. Though you just gave me an idea on how to kill all my neighbors without leaving the kitchen.
50 caliber humor for the win.
.223 for drilling steel. .308 for light brickwork, 50 bmg for demolition.
I know it's odd that I ask this, but why the excess extra primers man? You still jittery over this last shortage?
I've been casting .36 (000) and .40 (?- big) round balls from wheel weights and loading up 12 gauge with WSF for 11/8 loads. Initial tests pending.
Blunderbusses, bitches! No need for complicated shit like shell-loading! For the REAL run-and-gun-ers!
Not sure if it was Monday or Tuesday but Larry Kudlow was interviewing two guests who he assumed were both "big bulls"...first bull says stocks to the moon and he goes to 2nd guest who Larry states believes stocks will go to 1350...guest says yes but believes this will be followed by a huge correction due to massive unsustainable spending, H&S's top. That is the last thing this guest is allowed to say. Other guest calls H&S caller "irresponsible" and that these sorts of calls are exactly the opposite of what the market needs, that "they" are trying to build confidence.
Funny, the video cannot be found on CNBC's stored videos???
This is pervasive. I suspect that the MSM have no actual future in Western civilization. Not sure what will take their place --- just maybe nothing will --- but the media will not go forward in any recognizable form.
"I suspect that the MSM have no actual future in Western civilization."
Yes they will, as compost!
True position limits by the CFTC and the transparency of the activities of HSBC and JPM would start the ball rolling and gold would be a moonshot. But's that's exactly why there never will be position limits in any short term. Extend and Pretend is infinite; get used to it as you and your family downsize to a FEMA approved tent.
when they legislate death, then most people will wake up
apparently fluoride in water reduces children's iq by ~8 points (youtube 'hyperreport') - only this way could the marvel of the human brain be reduced to a dysfunctional protoplasmic heap.
one would have expected average IQ to be falling over the past 30, 40, 50 years, and the opposite has occurred
From the same people who brought you "low inflation", "low unemployment", and "rising wages", it's "rising IQs"!
By Govco.
Fluoride does decrease I.Q., but the level of exposure has to be farily high. Wellwaters in rural India, China, Africa and elsewhere sometimes contain these high levels, which are approximately 5-10 times the levels used in the U.S. to fluoridate water. Fluoride antagonizes iodine, which is a critical nutrient for brain development and I.Q. The combination of high fluoride intake AND iodine deficiency causes disastrous brain developmental defects and very low I.Q.
IQ will always average 100 because it's the average.
I'm thinking that 100 IQ points won't buy you as much actual sapience as it did 50 years ago though. Like everything that's based on fiat figures, IQ is always suspect.
It's intellectual inflation, and it's all around us. Soon, a 100 IQ won't be enough to set the time on a clock radio.
"one would have expected average IQ to be falling over the past 30, 40, 50 years, and the opposite has occurred"
This is BS statistical lies. I've seen studies showing the exact opposite, with a gaussian average dropping by 4 points in 10 years in Great Britain.
I guess it's just like the access to college education. The numbers went higher, but did the quality of formation go higher? I wouldn't trust any "study" on the matter, as the only ones allowed to study the subject are liberal sociologists.
Someone who seriously thinks people are smarter today than in the 1920s should be sterilized.
Let me write a little narrative to explain these charts:
1) Banks want to own the world
2) Banks see a stable economy and begin to parasitize it, eventually creating an unsustainable credit bubble that infects everything.
3) The bubble bursts and the Banks force the government to bail them out, exponentializing the public debt, destroying the power of the government to govern or to marginally enforce laws (particularly regarding financial crimes).
4) With the Government and the nation's citizens and real businesses on the ropes, the Banks then use their freshly printed digital dollars to rape the nation, plunder its wealth and productive capacity and in the end...
5) the banks own the world (for a short time)
Class, for extra credit, what asset class should real citizens of this nation invest in, to preserve their remaining wealth until the Banks get torched by the enraged populous??, which occurs proximate to the Government's destruction of the currency???
(not jesting here in the slightest, my friends)
Fully automatic weaponry and full metal jackets with hollow-points.
I believe that the next 'terror attack' will be done by a white male, targeting banks or other financial institutions. There are a lot of unemployed, angry, ex-military types out there with ptsd and a chip on their shoulder who just spent a long time in the middle east observing insurgent tactics up close and personal. Don't think for a second that some of them haven't been taking notes.
Since (infered by your avatar) you are already in the bush, yes, you get full credit.
I can sense that you are not jesting. Well played.
For the extra credit I'll hazard "arable land, an ox and a large well-armed family" primarily because looting, chaos and hyperinflation render all other assets short-term volatile, including food. How'd I do?
You did well. You and your tribe survived and positioned yourselves as a nexus for the re-establishment of local government and commerce. Your progeny will be reveared for the wisdom of their forebearers. History books of the later era will include your names as examples of those forward thinking re-pioneers who forged the shards of chaos into the new America.
Congratulations!
That's great, thanks.
However since I'm a large predator and I eat people it's probably not going to work out that way. It's okay, I'm used to it.
Predators do not live long. I would suggest that you reconsider your line of work. Possibly automobiles would work for you :-)
Styrofoam and gasoline?
Banks are only tools of power. The AIM _IS_ POWER, control. Doesn't matter whether it's at the end of a gun or the front of a bank vault. YOU work, THEY don't.
Power doesn't want all of our junk homes, cars and funishings! If they had all of that, then what? Are they going to sell it? Should be clear that this isn't going to happen.
I'm not sure if it's intentional or a massive miscalculation on TPTB's part, but the entire paradigm is collapsing. They are scambling to come up with some other scheme to keep themselves in power, but this won't happen, as the necessary resources to plunder (to continue the growth Ponzi) isn't there.
The curtain is being pulled back. They failed to account for the (little) back dog/swan.
Looks like the "Buy Physical Silver to Destroy JP Morgan" trade marked the top tick in price. LMFAO!!!!!!!
Looks like the short-term drop in gold and silver marks the top in snide and superficial anti-precious metals trolling.
Let's see who's laughing in six months.
Don't worry when it falls from 50 to 46 the top callers will be out in full force again
[pur-spi-kas-i-tee]
–noun
1.
keenness of mental perception and understanding; discernment; penetration.
2.
Archaic . keen vision.
"The market can stay irrational longer than you can stay solvent."
Can I ask, is there some way to print Zero Hedge articles without all the sidebar and top bar nonsense? I'd like to print this out to save it for later, but the bars squeeze the living heck out of the main text.
There's a 'printer friendly version' link at the top that takes you to exactly such an article. However, it doesn't include the lovely comments which on ZH are often considered more important than the article itself.
I mean, why read a cogent piece with references and data when you can scroll to such original and insightful pieces of wisdom as 'Gold Beeeatches!'
There's a 'printer friendly version' link at the top that takes you to exactly such an article. However, it doesn't include the lovely comments which on ZH are often considered more important than the article itself.
I mean, why read a cogent piece with references and data when you can scroll to such original and insightful pieces of wisdom as 'Gold Beeeatches!'
There's a 'printer friendly version' link at the top that takes you to exactly such an article. However, it doesn't include the lovely comments which on ZH are often considered more important than the article itself.
I mean, why read a cogent piece with references and data when you can scroll to such original and insightful pieces of wisdom as 'Gold Beeeatches!'
I can see you were trapped in a zerohedge timewarp for a while. I hope you don't hold a gun for a living
God forbid I miss the comments ;) Thanks y'all.
Every post on this thread has been serial junked .There should be a "junked by" button where responsibility is taken .Wasn't the reason for the junk button to alert for spammers .
I continue to utterly marvel that you people are so fixated on this junk thing
I agree with you except for Robo Trader, he is just fun to Junk, like JR Ewing the man you love to hate.....
Just don't touch my junk.
Spigot makes sense to me. Basically the story of human society. Whilst I appreciate that morality, ethics and, dare I say, spirituality have no place in economics or politics, may I suggest that one may learn a lot about this from the story of Jesus Christ. IMHO his message was that the Scribes and Pharisees and their money-changing goons have to be expelled if man is to be able to find his raison d'etre.
The unemployment rate can't go down because we have no consumer manufacturing jobs or construction jobs anymore. The globalists made sure those types of jobs ain't coming back.
Most manufacturing has a limited life anyway, in which case perhaps it was good to get rid of some of it before it died? Problem is that nothing is replacing it- idle hands and all...
You're all getting it wrong.
The public service sector debt is just the Foreplay to the massive INFLATION orgasm!
One very soon day the other pillars will shoot up straight and the world is in balance again.
No more dead birds, no more food riots and electric i-cars for everyone!
"Peak Oil'
"Peak Gold, Silver and last but not least....employment..."
My cousin knows a psychohistorian from beyond Asimov that says to short personal hygiene products to the end of time.
Then Obama must be The Mule; though not sterile, his policies are all stillborn.
Charles Hugh Smith should do an essay on public and private pensioners.
75% of Americans are not eligible for a pension when they retire. The 25% WHO ARE RECEIVING PENSIONS ARE GUARANTEED BY THE 75% WHO DON'T GET A PENSION.
The pensioners in America are parasites that have killed their host. I hope they are happy greedy little suckers. In the end the pensioners will get nothing.
I am very intererested in this "science" of economics. Is there a book on it?
B.B.
Sorry Smith, there are some errors with the first chart. In a healthy economy there are no taxpayers nor public debt.
I wouldn't shed one tear if dc were hit by a nuclear bomb tonight.
Not one.
I'm assuming that you probably live in DC then?
Karma!, bitches!