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"We're Stuck In An Escher Economy Until The Existing Structure Collapses And Is Rebuilt On Stronger Principles"

Tyler Durden's picture





 

Submitted by F.F. Wiley of Cyniconomics

M.C. Escher And The Impossibility Of The Establishment Economic View

It’s easy to show that public institutions such as the Federal Reserve and Congressional Budget Office (CBO) are routinely blindsided by economic developments. You only need to compare their past predictions to real events to see these organizations’ deficiencies.

More importantly, we can demonstrate that their struggles are all but certain to continue. This may sound like a difficult task, but we’ll argue that it’s easier than you think. Using historical data and basic economic concepts, we’ll explain not only why the establishment view is wrong but that the underlying principles are fundamentally flawed. The implication is that existing policies are destined to fail.

To make our case, we’ll start with the CBO’s current forecasts for real per capita GDP (economic growth net of inflation and population growth):

Our regular readers already know that the CBO is abnormally bullish on near-term growth, based on its long-standing assumption that the gap between actual and potential output will swiftly close. But this won’t be our focus here. In fact, we’ll assume the CBO gets this part of its outlook right. We’ll be shocked if it does, but let’s pretend.

We’ll then examine the forecasted path for interest rates:

The interest rate outlook is an offshoot of the policy establishment’s overall approach. Monetary stimulus is expected to be removed as it guides the labor market toward full employment, allowing interest rates to return to normal levels.  At that point, natural economic forces are believed to be strong enough to preserve a normal, healthy economy. Establishment economists have near complete faith that this is a sound and reliable process.

But closer examination reveals a few cracks. Consider that the chart above shows quite a jump in interest rates, which begs the question: How will the economy weather such a development?

We’ll look to history for possible answers. We calculated the change in rates on three month Treasury bills for every eight quarter period since 1953, which breaks down like this:

We then reviewed past economic outcomes conditioned on the rate buckets above. Note that the forecasted 2015 to 2017 rate change of 3.2% (the leap from 0.2% to 3.4% in Chart 2) falls in the final bucket. Therefore, this bucket is especially relevant to the economy’s likely performance in the next rate cycle. We circled it in the charts below:

While the results speak for themselves, I’d be remiss if I didn’t add qualifiers. For one, the sample sizes fall as you move from left to right across the charts. Moreover, history doesn’t always foretell the future; this time could be different.

But the thing is: the data makes perfect sense. Higher interest rates have obvious effects on risk taking and debt service costs. It stands to reason that the economy won’t just sail through the large rate hikes needed to restore historic norms.

If anything, the charts likely understate the future effects of rising rates, because today’s debt levels are far higher than average historic levels. Any normalization must also include a wind-down of unconventional measures such as quantitative easing, which presents additional challenges.

Yet, the official outlook calls for steady improvement both through and beyond the rate jump. As shown in Chart 1, the CBO predicts that per capita GDP growth will accelerate to over 3% before settling back to a trend rate of 1.2%.  Forecasts for 2018 and 2019 average a healthy 1.5%, despite the figures in Chart 5 showing virtually no growth after large interest rate increases in the past.

Here’s the corresponding outlook for employment, followed by two more reasons to expect forecasts to fail:

 

(See here for background on the corporate leverage multiples and here for more on the stock valuation figures.)

In a word, the CBO’s projections are preposterous. They ignore effects that are clear in the data and obvious in real life. But the charts reveal more than just forecasting flaws at a single governmental institution. More broadly, the assumption of a smooth and lasting return to normality is standard practice for mainstream economists, particularly those at the Fed.

Essentially, economists are hardwired to focus on the near-term effects of policy stimulus, while dismissing long-term effects that are often far more important. Standard models fail to account for either natural cyclicality or the payback seen in Charts 4 to 6. Although establishment economists often speak about sustainable growth, they really mean any growth that restores GDP to where they believe it should be. They don’t seriously contemplate the unsustainable growth that occurs when the economy is over-stimulated through credit and financial asset channels. And the charts above demonstrate these deficiencies.

Worse still, this analysis doesn’t tell the whole story. We could have easily tripled the chart sequence with other indicators of Fed-fueled credit and asset market froth – from record margin debt to lax loan covenants to soaring public debt – that also show heightened risks of another bust.

We suggest giving some thought to the data shown above and considering its message for the future. Send it to the smartest people you know and get their opinions. In the meantime, here are our conclusions:

  1. Even if the economy returns to full employment under existing policies, it won’t remain there after (and if) interest rates normalize.
  2. Based on today’s debt and valuation levels (charts 8-9, for example), rising interest rates will have an even harsher effect than suggested by the 60 year history (charts 4-6).
  3. Contrary to the establishment’s “sustainable recovery” narrative, the most plausible outcomes are: 1) interest rates normalize but this triggers another bust, or 2) interest rates remain abnormally low until we eventually experience the mother of all debt/currency crises.

Conclusion 3 restated: We’re stuck in an Escher economy (see below), thanks to the impossibility of the establishment economic view, and this will remain the case until the existing structure collapses and is rebuilt on stronger policy principles.

 


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Sat, 11/09/2013 - 11:36 | Link to Comment Headbanger
Headbanger's picture

What's the old saying?  "Perception is Reality"

Even if it makes no sense at all!

Sat, 11/09/2013 - 11:48 | Link to Comment nope-1004
nope-1004's picture

In a debt based economy, "growth" is only achieved by increasing debt levels.

Last 25 years or so have been driven by decreasing lending standards and interest rates, both of which have a natural limit.  We're at that limit.  Now it's just musical chairs with employment figures, inflation figures, and bank balance sheets.

Collapse has to happen for this pig to turn around.

 

Sat, 11/09/2013 - 11:58 | Link to Comment falak pema
falak pema's picture

debt based economy for the 99%...

Nuance; it is a huge profit based economy for the 1%.

This is inverted totalitarianism and stage managed elected congress and controlled democracy in regulatory capture.

What global neo feudalism is to nation state is what Caesar was to Republic. 

Don't let the farce acted on the stage fool you about the cold and calculated mindset behind the curtain. 

Sat, 11/09/2013 - 12:07 | Link to Comment spine001
spine001's picture

Wiley, redo your charts with real present value us dollars using the old cpi. And create a scenario were most of the 4% GDP per capita growth comes fromnthe CPI and not real growth. You will see then why the FED zis doing this. They want to dilute or monetiz3 current CDOs.

Sat, 11/09/2013 - 12:18 | Link to Comment Abi Normal
Abi Normal's picture

When you have a foundation built on sand what happens?  The last 100 years of progressive policy and legislation is our sand!!!

The Fed is in a box, no way out without a lot of pain or much pain, that is the endgame now!

Will it be loss of confidence, no more loans to Uncle Sam and a deep depression, or will it be out of control Stagflation? 

Only time will tell, but the mother of all bubbles is about to pop.

Prepare accordingly!

Sat, 11/09/2013 - 12:27 | Link to Comment MeMadMax
MeMadMax's picture

Anyone else notice interest rates will be "allowed to rise" after the end of the obamanation?

Wanna bet a 100 bones that if the shillary or some other demnut gets elected into the house of white that interest rates will stay low?

Sat, 11/09/2013 - 12:34 | Link to Comment Chris Jusset
Chris Jusset's picture

Original statement: "interest rates remain abnormally low until we eventually experience the mother of all debt/currency crises."

Rephrase: "interest rates remain abnormally low until we eventually experience THE MOTHER OF ALL BUBBLES."

 

The Fed is doing everything possible to keep interest rates artificially low for as long as possible ... IOW, the Fed is intentionally trying to blow the mother of all bubbles. 

Sat, 11/09/2013 - 12:50 | Link to Comment Shocker
Shocker's picture

Current Job Picture - http://www.dailyjobcuts.com

,

Sat, 11/09/2013 - 13:56 | Link to Comment OutLookingIn
OutLookingIn's picture

 

 

Nine. (9) Meals from ANARCHY.

Sat, 11/09/2013 - 15:10 | Link to Comment SRSrocco
SRSrocco's picture

THERE'S NO REBUILDING ON STRONGER PRINCIPLES

While I agree that the whole system is a Ponzi Scheme, I don't see a NEW & HEALTHIER ECONOMY in the future as there won't be the energy to so do:

MUST READ: The Bursting of the Shale Gas Bubble
Sat, 11/09/2013 - 20:00 | Link to Comment prains
prains's picture

100% AGREE

 

the future is really being planned out on a global scale towards a dwindling energy supply. It's gonna be a real small club and easily 5 billion won't be in it. Lot's of protein is gonna rot in the sun, the question is......will it be YOU

Sat, 11/09/2013 - 13:47 | Link to Comment fxrxexexdxoxmx
fxrxexexdxoxmx's picture

The FED, a privately owned for profit group, is using its power to enrich and remove all debt from these owners friends and family.

It is no more complicated than that.

It is a bitch that this process steals wealth from every single person and entity which uses their medium of exchange but that is what happens when finacially ignorant society allow a few individuals to control  nation(s) currency.

End the FED or else it never ends.

Sat, 11/09/2013 - 15:38 | Link to Comment daveO
daveO's picture

Right! Rates normalize only after bad loans disappear.

Sat, 11/09/2013 - 21:18 | Link to Comment zhandax
zhandax's picture

Agreed, but it is entirely possible that just as US inflation is diffused throughout the world due to the reserve status of the dollar, that collapse can also be diffused throughout the world.  Not inevitable, mind you, but possible.

Sat, 11/09/2013 - 22:54 | Link to Comment StychoKiller
StychoKiller's picture

Hmm, $1Trillion in sutdent loans, moar ninja car loans -- I don't think "disappear" means what you think it means.

Sat, 11/09/2013 - 12:39 | Link to Comment GMadScientist
GMadScientist's picture

Progressives...like Ronald Reagan? So funny that the dipshit hoards still can't admit that this end-game was started in the 80s BY THEM.

Sat, 11/09/2013 - 12:55 | Link to Comment disabledvet
disabledvet's picture

"them" would be "everybody" martini man. we all had to go back to work back then to pay for the 70's. I know I sure did. this is a bailout "of New York City, by New York City, For New York City." they're more than ready to handle the collapse that they've created with blowhorns of CNBC sounding out "no bubble" and "you're a loser if you're not long." the rest of us out in "flyover country" here have to find factories to work in, products to make, services to render, etc. wages have collapsed, you get what you get where you get it. welfare is for the rich now...

Sat, 11/09/2013 - 13:00 | Link to Comment Abi Normal
Abi Normal's picture

LOL, coming from a proggy, I expect no less!

You mean 1880's don't you ROFLMAO!!!  Progressives, err, Fabian Socialists took over a LONG time ago my friend.  You can't see it now, but you will see the full retard of their beliefs soon my loony tunes liberal friend.

The Wolf in Sheeps clothing, will be exposed to the masses, and people like you will have been caught with your 'collective' pants around your ankles, what are ya gonna do then?  Twist in the wind, bubba!

The red pill, blue pill thing doesn't work with me, just so you know.

Sat, 11/09/2013 - 13:54 | Link to Comment Harbanger
Harbanger's picture

"still can't admit that this end-game was started in the 80s BY THEM."

Are you kidding me? started in the 80's.

Can you name me one single Keynesian Economist who is not a liberal progressive socialist?
Democrats, Liberals, Progressives, and all Socialists follow Keynesian Economic Principals.
The principle that the government can spend tax payer money
and borrow from Bankers increasing our debt (ie, The Fed spending our future tax payer money) to redistribute and prioritize the needs of their centrally planned society/economy.
 
The result of 100 years of progressivism is massive bureaucracy with thousands of middle men, cronyism and incompetence. 
The FED, which was given to us by Progressive Woodrow Wilson, was unconstitutional and an act of treason.  Ironically, like our modern progressive in chief, he said he was "sorry" after the fact.   Fck You!, to Wilson, Barry, Ben and all the other socialists who bankrupted our republic.

Sat, 11/09/2013 - 14:40 | Link to Comment falak pema
falak pema's picture

economists dont run the country; they work for the politicians who work for big business; thats been the pecking order in the US.

Economists are like the Bishops and Shamans of old, they spin the holy word that the King wants to hear as New Mantra.

Its all about POWER and power in the US is in the hands of the big Industrialists since the US went continental and industrial in an empty continent with huge resources. These guys have been the capitalists of monopoly markets at the mines and the wells where the RM were and they allowed a semblance of markets in front of the consumer. Their Competitive Advantage lay in vertical integration and economies of scale which ONLY the big boys could achieve. Thats the history of US capitalism.

Don't blame the spin doctor, blame the king.

Sat, 11/09/2013 - 15:43 | Link to Comment smartstrike
smartstrike's picture

Yes , it's a very quick jump to collapse economics:

 

  • Nixon takes US off the gold standard
  • Reagan raises Social Security taxes on labor
  • Reagan uses huge Social Security surpluses to cut taxes on the rich from 70% to 39%
  • Regan begins massive deficit spending and pays huge interest rate income to former taxpayers
  • Bush cuts taxes further citing data which includes Payroll taxes collections as proof that US Budget is nearly balanced
  • Bush expands deficit spending and starts two wars
  • Private Business runs up Debt in excess of $45 Trillion

Modern era: saving the economy for the rich

Sat, 11/09/2013 - 18:58 | Link to Comment Abi Normal
Abi Normal's picture

You are a fruitloop, go back to your hole, please!

Sat, 11/09/2013 - 11:59 | Link to Comment uncle.bigs
uncle.bigs's picture

GDP Growth can accelerate on flat debt levels if money velocity picks up.  0% interest rates are creating a strong incentive to spend and a disincentive to save.  This economy is just starting to pick up steam and the top is nowhere in sight.

Sat, 11/09/2013 - 12:15 | Link to Comment moneybots
moneybots's picture

"0% interest rates are creating a strong incentive to spend and a disincentive to save."

 

We have had ZERO rates for 5 years, yet i don't see any spending binge.

47 million people are on food stamps.  40% earn less than the inflation adjusted minimum wage of 1968.  Almost half of the jobs created last month were low wage.

0% interest rates are making the rich, richer.

Sat, 11/09/2013 - 12:47 | Link to Comment uncle.bigs
uncle.bigs's picture

Have you looked at the revenue growth for some of the major retailers and consumer companies?  Strong.  Polaris, Ulta, Buffalo Wild Turds...many others.  Come on Bro.  Don't buy into the doom and gloom BS because revenues and profits are very strong.  Read the financial statements.

Sat, 11/09/2013 - 21:40 | Link to Comment Dadburnitpa
Dadburnitpa's picture

Useful idiot.  

Sat, 11/09/2013 - 12:41 | Link to Comment Abi Normal
Abi Normal's picture

LOL, where is your GDP growth now? 1.5%? That is laughable my friend.  Velocity of money picking up?  You must be joking right?  Where is this locomotive you call steam to this economy?  Just scraping by is all.

The only thing holding up the Casino Market is Fed Stimulus and bond buying, keeping interest rates artificially low and swelling a huge balance sheet of $4 trillion?

You mean the Oligarchy, mandating our every move, removing freedom for some security, mandating statists all?

When you see the folly and complete breakdown due to what Obamacare is going to do alone, you will not feel so euphoric?

Please open your eyes to the reality before you!  

Sat, 11/09/2013 - 12:03 | Link to Comment spine001
spine001's picture

Dear F.F. Wliey , account for real past and future inflation and you will see why the FED is doing this.

Sat, 11/09/2013 - 13:38 | Link to Comment kito
kito's picture

@nope-- collapse will only be the next leg down for this country. This country grew and "prospered" due to an old paradigm that is now dying.

Sat, 11/09/2013 - 16:52 | Link to Comment nope-1004
nope-1004's picture

Agree, but change doesn't appear to be too attractive to TPTB.  So IMO change will be forced by nature as this drags on, and when you force someone to do something they dont want to do, they do so kicking and screaming.

 

Sat, 11/09/2013 - 11:46 | Link to Comment CH1
CH1's picture

World's largest outdoor insane asylum.

Sat, 11/09/2013 - 13:07 | Link to Comment Abi Normal
Abi Normal's picture

Look into their eye's, it is a dead giveaway tell.  The inmates are running the asylum and we are going to pay a heavy price for their actions.

 

Sat, 11/09/2013 - 11:46 | Link to Comment DeadFred
DeadFred's picture

It doesn't matter if it makes sense as long as it has CHARTS!

Sat, 11/09/2013 - 12:09 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Let's revisit reality.

1) Money and economics are invented concepts.  They don't exist in nature.  They are largely bullshit.

2) The world has never before seen itself dependent on automation to the extent that it's required to keep 7 billion people alive.  Automation has destroyed the jobs of the less intelligent (sub 100 IQ).  Now, and forever (the F word), that FULL 1/2 of the population will be a burden to the other half.  This remains so until walking behind an oxen plow returns to society as a vital job.

3) 7 billion are fed by oil and that is not going to change.  For tractors to get the necessary acreage harvested or planted by the end of harvest or planting season you have to have hundreds of horsepower.  1 horsepower is 745 watts.  Electrics will NEVER do this, certainly not before oil gets short.  It is oil and always will be oil, until oil is short and that 100,000 acre farm doesn't get planted.

4) And so 3) is why all these "reset" musings are silliness.  The downward trajectory of society is sourced in these two relentless forces (automation and net oil joules scarcity) that say FOREVER.  Money and economics are a joke confronted by these two forces.  There will be no Reset.  There will be a sudden, smashing event, and the resultant lower level of civilization will be permenent.  There is no reset and recovery.  There is reset and remain down.

Sat, 11/09/2013 - 12:23 | Link to Comment moneybots
moneybots's picture

"Automation has destroyed the jobs of the less intelligent (sub 100 IQ). Now, and forever (the F word), that FULL 1/2 of the population will be a burden to the other half.  This remains so until walking behind an oxen plow returns to society as a vital job."

Artificial intelligence will come after the other half.

 

 

 

Sat, 11/09/2013 - 14:54 | Link to Comment akak
akak's picture

 

Artificial intelligence will come after the other half.

Terminator 4: Victory of the Keynesians

Sat, 11/09/2013 - 12:30 | Link to Comment ebworthen
ebworthen's picture

Precisely.

Sat, 11/09/2013 - 12:35 | Link to Comment Carl Popper
Carl Popper's picture

Re arrange the economy so that the bottom 20 percent works as servants to the top 50 percent.

That is better than putting them all on government transfer payments. We can have workers comp for servants so that the person who hires them doesnt lose his house due to a worker's slip and fall.

Have a 5 dollar per hour minimum wage but subsidize their healthcare and housing.

Sat, 11/09/2013 - 16:01 | Link to Comment Carl Popper
Carl Popper's picture

So the guy who downvoted me wants free money from the government and not have to work for it lol

There was a reason for the property requirement to vote, so selfish lazy people could not vote themselves free money from others.

I am at least willing to subsidize your healthcare and housing, dude, but you gotta give something back otherwise you are just a complete parasite.

Sun, 11/10/2013 - 09:30 | Link to Comment trader1
trader1's picture

i actually greened you, but...

 

the best thing is people has money enough to do what they really want to be creative, to develop what they can do for other people or need for theirself. And so we start this thing, basic income.

 

And basic income means enough money to live without need. And in Switzerland it's only a number to say 2,500 francs. I don't know how many it is in the States. It's not to be rich. It's simply to say, today we are rich enough and there are goods enough that we can say everybody needs an income to live. And why shall we--why have we to bound it to conditions?

 

And it's an idea, for example, of the '60s in the United States. Milton Friedman tried such things. It was a negative income tax, called so.

 

And we can say it's a moment in the world, it's a new century, a new vision, a social vision to say, set the people free by living, and then they do their things. And they are paid for their work, but the basic has to be sure for everybody.

 

And so we go with this in Switzerland. And the thing in Switzerland is that you have this direct democracy. And that means you can go with such wishes, such an idea. What really changed many things and let you look to all this facts new and to--yeah, it's a bit of philosophical thing, but it's a moral thing. [source]

 

A basic income is an income unconditionally granted to all on an individual basis, without means test or work requirement. It is a form of minimum income guarantee that differs from those that now exist in various European countries in three important ways:

  • it is being paid to individuals rather than households;
  • it is paid irrespective of any income from other sources;
  • it is paid without requiring the performance of any work or the willingness to accept a job if offered.

Liberty and equality, efficiency and community, common ownership of the Earth and equal sharing in the benefits of technical progress, the flexibility of the labour market and the dignity of the poor, the fight against inhumane working conditions, against the desertification of the countryside and against interregional inequalities, the viability of cooperatives and the promotion of adult education, autonomy from bosses, husbands and bureaucrats, have all been invoked in its favour.

But it is the inability to tackle unemployment with conventional means that has led in the last decade or so to the idea being taken seriously throughout Europe by a growing number of scholars and organizations. Social policy and economic policy can no longer be conceived separately, and basic income is increasingly viewed as the only viable way of reconciling two of their respective central objectives: poverty relief and full employment.

There is a wide variety of proposals around. They differ according to the amounts involved, the source of funding, the nature and size of the reductions in other transfers, and along many other dimensions. As far as short-term proposals are concerned, however, the current discussion is focusing increasingly on so-called partial basic income schemes which would not be full substitutes for present guaranteed income schemes but would provide a low - and slowly increasing - basis to which other incomes, including the remaining social security benefits and means-tested guaranteed income supplements, could be added.

Many prominent European social scientists have now come out in favour of basic income - among them two Nobel laureates in economics. In a few countries some major politicians, including from parties in government, are also beginning to stick their necks out in support of it. At the same time, the relevant literature - on the economic, ethical, political and legal aspects - is gradually expanding and those promoting the idea, or just interested in it, in various European countries and across the world have started organizing into an active network. [source]

 

 

Sat, 11/09/2013 - 12:40 | Link to Comment Skateboarder
Skateboarder's picture

Thanks for summarizing my gut instinct into four easy points.

If Japan is any indication of how long can kicking can continue, we have a long, long way to go, and a lot more freedom to lose, i.e "may I go to the bafroom, massa?"

Sat, 11/09/2013 - 12:51 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture

Japan should NOT be used as the indicator of the future US model...it would be a mistake:

 

Japan has had the benefit of ALL major economies maintaining some sort of balanced growth during that time---1980-present.

 

Japan finances the debt internally.  The only saving grace to Japan and its downfall WAS the technological 'export economy'!

 

Those two reasons are why JAPAN is different and unique in regards to other large Developed economies.

Sat, 11/09/2013 - 14:23 | Link to Comment Skateboarder
Skateboarder's picture

CE, I find myself echoing both of our sentiments at different points of time. When other folks say we don't have much time, I echo the sentiment of my previous post. When other folks say we have lots of time, I echo the sentiment of your post. The reality about to traspire? Somewhere between these two extremes, because no one wants the party to end just yet.

The real battle is between automation and oil scarcity as CiO put. However, the battle of the fiats and the derivatives giving birth to a hopeful return to a gold standard, in conjunction with slow radiation poisioning giving everyone cancer, will either inspire the human species to seek enlightenment as a whole, or perish.

Sat, 11/09/2013 - 13:52 | Link to Comment HardAssets
HardAssets's picture

The 'scarcity' meme rears its ugly head

What if there really is enough for everyone and scarcity is an illusion ?

A way to control people.

Is this idea  'un thinkable' ?

How well is the thinkable approach working ?

Sat, 11/09/2013 - 14:37 | Link to Comment Skateboarder
Skateboarder's picture

If oil wasn't scarce, why the hell would you go through the effort of putting giant rigs in the oceans?

The dinos and the ecosystems that carried them were huge man, and they left behind a lot of carbon. Megarainforests of aeons past... And a bunch of stone stackers show up a few hundred million years later burning it all with a magical expectation that this supply replenish itself eternally.

I'm sure this place looks fun from outer space.

Sat, 11/09/2013 - 17:11 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

"What if there really is enough for everyone and scarcity is an illusion ?"

Without talking about things discussed by another (30 story tall oil rigs at sea vs 20 ft wooden platforms of 1920s vintage, both of which drill(ed) holes that flow(ed) the same 20,000 barrels/day), I'll just note a different point.

Your question was asked . . . when?  In what year?  Maybe there was enough in 1950 for 4 billion people.  If that was "enough" then (presuming "just sufficient" defines "enough"), how can that be enough at 7 billion?

Or is the presumption there is enough for 12 billion?  Or 20 billion?  You do have to pick a number. 

And then after you do, the conclusion is there is not enough for that number + 1.

Sat, 11/09/2013 - 23:03 | Link to Comment CultiVader
CultiVader's picture

John Michael Greer's "The Long Descent" is a fairly reasonable description of "what's next"

 

Sat, 11/09/2013 - 16:04 | Link to Comment El Vaquero
El Vaquero's picture

It's nice to see people who understand that it is oil that is important.  Either we have an economic collapse that hastens the collapse that dwindling oil supplies would bring about anyway, or we wait and dwindling oil supplies will cause the collapse anyway.  We haven't just made oil an integral part of our society, we have also squandered a lot of it.  I've had a couple of people ask me why I don't use product XYZ in my garden.  My response:  I want to be able to grow my own food without being reliant on heavy industry or oil.

 

Long nixtamalization with wood ash

Sat, 11/09/2013 - 16:15 | Link to Comment El Vaquero
El Vaquero's picture

Oh, and one thing to expand upon:

 

3) 7 billion are fed by oil and that is not going to change.  For tractors to get the necessary acreage harvested or planted by the end of harvest or planting season you have to have hundreds of horsepower.  1 horsepower is 745 watts.  Electrics will NEVER do this, certainly not before oil gets short.  It is oil and always will be oil, until oil is short and that 100,000 acre farm doesn't get planted.

It's more than just the tractor that uses oil when it comes to food.  Petrochemicals are used in pesticides/herbicides.  Oil derived plastics are used in packaging.  Oil derivatives are used in shipping and running refridgeration units during that shiping.  I'm sure you'd find petrochemicals being used as preservatives too, and I bet even the ink used in the labeling is often oil based.  I'm sure you could go through and find other oil uses as well.  I've read that just running the tractors is something like 15% or 20% of the total usage with our food system.  I don't know if that's true, but I do know that tractors are only one component of the whole picture. 

Sun, 11/10/2013 - 01:52 | Link to Comment macbone
macbone's picture

^^^ laughing at the assumptions of the oil wizards above^^^
The Malthusian foolishness will bewitch the human race from now till doomsday. Special credit for the rocket scientist who asked why we are now drilling from the surface of the ocean. Doesn't have anything to do with the fact that 7\8's of the earths surface is covered by the ocean does it????

We will have destroyed our current system lonnnnnnggg before we hit peak oil. God bless us all, even the fools.

Sun, 11/10/2013 - 02:52 | Link to Comment El Vaquero
El Vaquero's picture

I'm sorry, I deal in hard numbers whenever possible and estimates whenever not possible.  Those numbers and estimates point to one conclusion:  Oil is getting harder and harder to extract.  The earth will never run out of oil.  It will just get so expensive that you won't be able to afford to drive your car.  So tell me, which costs more, both in FRNs and in energy, drilling a hole in Texas where oil comes gushing out, or building a 20 story floating drilling rig that drills for oil on the bottom of the ocean?  Because those days of oil just gushing out of the ground are all but over. 

Sat, 11/09/2013 - 16:30 | Link to Comment Lordflin
Lordflin's picture

While I disagree that these forces are necessarily uncompromising, nor do I particularly see the relevance of money as somehow not natural... the assumption here draws from the use of the word natural, as if what man does somehow has no real place in the world, money, in some form is quite natural to humans, and any arguement to the contrary dates back to a point in antiquity with very few to offer testimony... the suggestion that automation, and technology in general, has its downside certainly has merit. In fact, I would offer that the persuit of knowledge to the exclusion of wisdom may well be man's downfall.

But all this begs the point of the article. That somehow the Fed, along with the CBO has somehow gotten things wrong. And while this is preaching to the choir, the concentration of wealth that has resulted from the creation of mountains of debt is hardly by accident. To believe these folks are so inured to so called Keynesian ecconomics as to be unable to see beyond is a leap of faith I and probably most others here are unable to make.

To take this a step further... we have a president who is little more than a place holder. In my 61 years I have never seen a man occupy that office who has had so little interest in governing. Even that is an over statement... Unless the issue becomes embarrasing to the point that it is obvious even to the masses, he is most ususally on vacation or a golf course, or both. So, if no one is running the country, and no one is, than it seems obvious that running the country no longer has relevance in the minds of those most able to effect an outcome.

So if the president is doing nothing more than occupying space and time, what is intended to come next? In light of that question, the fact that interest rates are bound to rise in the event of a recovering economy, assuming more than a nominal recovery... which is hardly news... is of questionable value...

And in light of the question 'what will come next' is perhaps the more interesting question... what will be left?

 

 

Sat, 11/09/2013 - 17:06 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

"While I disagree that these forces are necessarily uncompromising, nor do I particularly see the relevance of money as somehow not natural... the assumption here draws from the use of the word natural, as if what man does somehow has no real place in the world, money, in some form is quite natural to humans,"

This is a valid issue.  I noted item number 1) that money is invented and economics is the study of an imagined concept for a particular reason -- that being that your point extends.  Man's place in the world permits him to redefine the imaginary concept.  If money numbers on a screen say that 50% population decline is about to happen, those numbers can be changed by decree.  Man's place allows him to change the definition of something imaginary to begin with.

The contrast was intended to be joules.  The joules in a crude barrel are not subject to decree.  The calories the human body requires are not subject to decree. 

Physics matters.  Imagination doesn't.

Sat, 11/09/2013 - 20:07 | Link to Comment prains
prains's picture

Crash !~!!!!  wat yu doin goin all maffs an such ???

 

agree in spirit but disagree in terminology what you describe is the reset and will easily be a century if not more in duration. BUT anything that terminates this current oligarchickorprofascist regime is THE RESET. How far and wide our A-holes get ripped as a result is conjecture. But i do agree humans can sink really fucking LOW....just look at Jamie"lick my own balls" Dimon

Sat, 11/09/2013 - 11:48 | Link to Comment Aeternus
Aeternus's picture

Someone should put the bernank in the ring with this guy for ten rounds.

 

http://www.youtube.com/watch?v=473SR1x8lW0

Sat, 11/09/2013 - 11:55 | Link to Comment michael_engineer
michael_engineer's picture

The perception of solvency matters in ways.   Just saying.

It buys time in trying to paradigm shift from increasing inputs, etc to a new normal or new paradigm.

Sat, 11/09/2013 - 12:49 | Link to Comment NitneLiun
NitneLiun's picture

"Buying time" is just another way of saying "kicking the can down the road." It ain't gonna end well.

Sat, 11/09/2013 - 12:32 | Link to Comment chubbar
chubbar's picture

OT, but anyone see this little blurb about Lois Lerner sharing info with the FEC? Tell me this wasn't about disabling opponents to Obama.

http://washingtonexaminer.com/irs-lois-lerner-gave-confidential-tea-party-tax-info-to-fec-violating-law/article/2538263

Excerpt:

The Internal Revenue Service shared highly confidential tax information of several Tea Party groups in the IRS scandal with the Federal Election Commission, a clear violation of federal law, according to newly obtained emails.

The public watchdog group Judicial Watch told Secrets Thursday that it was former scandal boss Lois Lerner who shared the information on groups including the American Future Fund and the American Issues Project.

The emails obtained by Judicial Watch show that the IRS, which was considering the tax status of the groups, gave the FEC the tax returns of the groups, including income, expenditures and staff pay. The emails also revealed the exact working of the prying political questions the IRS wanted the groups to reveal, such as their goals and the requests for brochures and ads.

Sat, 11/09/2013 - 12:48 | Link to Comment doctor10
doctor10's picture

all these articles serve to obscure the elephant in the room-which that the corporate-fascist amalgamation that comprises the "US Gov'mt" as of 2013 has managed to make capital worthless in the USA.

 

expect PLENTY more such obscuring articles and interviews as they try to paper over  and endeavor to sweep this fact under the carpet.

"You hear me-don't believe you're lyin' eyes" stuff-

 

 

unfortunately history hasn't many, if any, harmonious resolutions to such messes.

Sat, 11/09/2013 - 11:35 | Link to Comment Ban KKiller
Ban KKiller's picture

Growth is what, exactly? Growth for whom? Ah...the banksters!

People? Growth? Not unless we take all our money out of Wall Street and invest on Main Street with people you know. 

Wall Street is not rigged. Ask Jamie Dimon. 

Sat, 11/09/2013 - 11:35 | Link to Comment CharlieSDT
CharlieSDT's picture

Fuck you Yellen!

Sat, 11/09/2013 - 11:37 | Link to Comment Theta_Burn
Theta_Burn's picture

Not a chance without a deep cull of the establishment..

Sat, 11/09/2013 - 11:42 | Link to Comment cossack55
cossack55's picture

Energy/water/food shortages should handle the culling well.  If not, well, there are always nukes.

Sat, 11/09/2013 - 11:47 | Link to Comment CH1
CH1's picture

If we just stop playing their game, it ends.

Sat, 11/09/2013 - 12:37 | Link to Comment Carl Popper
Carl Popper's picture

Thats what the russian peoples did. Still took a long time to collapse the USSR

Sat, 11/09/2013 - 11:39 | Link to Comment tradewithdave
tradewithdave's picture

If a job is a human right, then what ever happened to those Wal-mart greeters?

Is it too late to vote for Ross Perot?

Sat, 11/09/2013 - 12:27 | Link to Comment moneybots
moneybots's picture

"Is it too late to vote for Ross Perot?"

 

It was always too late to vote for Ross Perot.  He never wanted the job.

Sat, 11/09/2013 - 12:42 | Link to Comment GMadScientist
GMadScientist's picture

Right. That's why he spent his own money...because he "didn't want the job". LOL

The big-eared fool thought he could convince Americans that running a country as if it were a business was a good idea (repeated later by Governor Duncecap from Alaska).

Sat, 11/09/2013 - 13:09 | Link to Comment disabledvet
disabledvet's picture

"the great sucking sound." all jobs moved to China. he simply pointed out the obvious. "not sustainable." to say he was right turned out to be an understatement. everything was "masked" by the tulip mania of the 90's. take a look around and behold the bankruptcies...interest rates have in fact already soared.

Sat, 11/09/2013 - 12:31 | Link to Comment ebworthen
ebworthen's picture

tradewithdave said:  "what ever happened to those Wal-mart greeters? "

Sam Walton died and the MBA's took over.

Sat, 11/09/2013 - 12:43 | Link to Comment GMadScientist
GMadScientist's picture

They started eating into margins and they couldn't make any money off of "dead peasant insurance" anymore.

Sat, 11/09/2013 - 13:23 | Link to Comment TBT or not TBT
TBT or not TBT's picture

Dollars to donuts most of them are dead or one foot and four more toes in the grave. 

Sat, 11/09/2013 - 15:43 | Link to Comment PrintemDano
PrintemDano's picture

Ross Perot was nothing but a shill to ensure the Dem got elected. He sucked off the government teat his entire life.  Anyone supporting Perot was nothing but a proverbial useful idiot.

Sat, 11/09/2013 - 11:41 | Link to Comment MrBoompi
MrBoompi's picture

Although interest rates can affect employment, the overall trend towards higher unemployment (as reflected in labor force participation rate) is due more to the worldwide phenomenon of business seeking the lowest cost manufacturing wages. Off shoring jobs will cause continued job losses in developed countries and of the jobs remaining, the trend will be towards lower wages and fewer hours. Even ZIRP won't bring these jobs back. Increases in GDP May sound great, but what good is this when the economy does not benefit 80% of the population?

Sat, 11/09/2013 - 12:02 | Link to Comment moneybots
moneybots's picture

"Even ZIRP won't bring these jobs back. Increases in GDP May sound great, but what good is this when the economy does not benefit 80% of the population?"

 

When you take out the QE, GDP is negative this quarter.  The positive GDP number is nothing other than money printing.

 

Sat, 11/09/2013 - 11:43 | Link to Comment Oquities
Oquities's picture

the mrs. and i thought we were fine since we moved to the north woods.  we had acres of hard wood to burn to offset the tripled utility prices brought about by carbon burning limits.  then one day the GPS enabled, variable-heat seeking drones spotted our chimney fire.....

Sat, 11/09/2013 - 12:22 | Link to Comment Wahooo
Wahooo's picture

...but just before the drone could fire, you cut loose with the Russian ZU-23M1 autocannon you purchased with bitcoins and blew that mutherfucker out of the air.

Sat, 11/09/2013 - 12:49 | Link to Comment GMadScientist
GMadScientist's picture

Confirming that most of your belief system is based on the rationality possessed by a 10 year old boy with ADHD.

Sat, 11/09/2013 - 12:54 | Link to Comment Oquities
Oquities's picture

...and just before the drone exploded, it transmitted video of the incoming from its source near the GPS targeted chimney.  so the mrs. and i scooted through our prep tunnel into our underground, lead covered bunker, where we proceeded to watch Forrest Gump once again...

Sat, 11/09/2013 - 17:56 | Link to Comment starfcker
starfcker's picture

Now that's a post! (hey NSA, i didn't say i liked it)

Sat, 11/09/2013 - 12:48 | Link to Comment GMadScientist
GMadScientist's picture

Who will be making these drones for them and how will they be paid again?

Sat, 11/09/2013 - 12:58 | Link to Comment Oquities
Sat, 11/09/2013 - 11:43 | Link to Comment 6th of May
6th of May's picture

Good article - Thanks for that one guys

Sat, 11/09/2013 - 12:18 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I do coke

So I can work longer

So I can earn more

So I can do more coke

So I can work longer

So I can earn more

So I can do more coke

Wash, rinse, repeat ad nauseum

Anyone notice how the mental conditioning at work there that slow and steady repeat if I can, I can, I can, I can like chinese water torture.

Circular reasoning moving faster and faster like water down the drain with the added bonus of someone in the background singing I'm always chasing rainbows.

Sums all these people's mindsets up. The policies, lies and the hopium they are constantly selling is just a natural consequence of this.

https://www.youtube.com/watch?v=XGAVTwhsyOs

Sat, 11/09/2013 - 12:47 | Link to Comment GMadScientist
GMadScientist's picture

Clearly, working smarter was not an option for this one.

Sat, 11/09/2013 - 11:54 | Link to Comment moneybots
moneybots's picture

"Using historical data and basic economic concepts, we’ll explain not only why the establishment view is wrong but that the underlying principles are fundamentally flawed. The implication is that existing policies are destined to fail."

 

The law of cycle.  Boom ends in bust.  UP phase ends in DOWN phase.  Existing policies ARE destined to fail due to the down phase of the cycle.

Any policy will fail when the phase of the cycle turns down.  Greenspan was hailed as The Maestro when the phase of the cycle was UP.  When the cycle turned down, Greenspan was exposed for what he was.  Note how Greenspan now tries to blame anything else but himself, but when he was The Maestro he didn't credit those same things as being the cause of a successful economy, stock or housing market.

 

Sat, 11/09/2013 - 12:44 | Link to Comment GMadScientist
GMadScientist's picture

Exposed? The incomprehensible idiot is still lauded as a financial genius to this day outside of ZH. If Americans had risen up and started shooting bankers when LTCM got bailed out, we might not be in this situation now.

 

Sat, 11/09/2013 - 12:00 | Link to Comment adr
adr's picture

Or are we stuck in this economy until it collapses and is completely rebuilt on shyster principles?

Seems to be what we are going for. Obama's transformation of America has been focused on rewarding the parasite classes. All to make the top few parasites exceedingly rich and powerful.

We are heading back to feudal times with Lords fighting Lords, raids to capture hot young women for the Noblemen's pleasure. Wars fought because Blankfein is angry that Dimon has a bigger castle.

The brave Goyim of Sorosian waged an epic battle with the Goyim of Dimonsia ending with the Dimonsians triumphant after suffering heavy losses. Lord Dimon was relived to hear that a large cache of Sorosian women were liberated to breed more Goyim for Dimonsia's defense.

The post apocalyptic movies and hundreds of book series have been made to condition the youth of America to that scenario. Instead of questioning the coming of The Hunger Games, they have been conditioned to embrace it. "Dude, this is like going to be so frickin awesome. I'm going to so murder you in like the first minute."

Sat, 11/09/2013 - 13:30 | Link to Comment TBT or not TBT
TBT or not TBT's picture

The popularity of zombie does indicate a foreboding out there, about existing inner deadness and purposelessness.   I blame materialist secular progressivism, personally.   It is rabidly, systematically anti-family, and humans are instinctively pro-family, and pro-tribal. 

Sat, 11/09/2013 - 12:06 | Link to Comment World of Debt
World of Debt's picture

Nice... it's just a WORLD OF DEBT!! See the video "WORLD OF DEBT" (HILARIOUS) HERE:

https://www.youtube.com/watch?v=99xsqxzJnXs

Sat, 11/09/2013 - 12:09 | Link to Comment World of Debt
World of Debt's picture

See KARL DENNINGER STOCK PICKS--MUST SEE! JUST BELOW:

https://www.youtube.com/watch?v=XqWIS0O2gIk

Sat, 11/09/2013 - 12:25 | Link to Comment shinobi-7
shinobi-7's picture

But we already know that the interest rates cannot "normalize" for as soon as they hedge up even fractionally the market will scream bloody murder!

Sat, 11/09/2013 - 12:39 | Link to Comment Carl Popper
Carl Popper's picture

The problem with waiting for collapse and system reset to solve things is that it can take decades of misery (and increasing authoritarianism trying to keep things together)

We have a long slow gradual decent into misery before revolution. Look at the soviet union and the people's republic of korea.

Sat, 11/09/2013 - 12:45 | Link to Comment GMadScientist
GMadScientist's picture

We've made it through the first 80 years...expect 80 more.

Sat, 11/09/2013 - 12:54 | Link to Comment Carl Popper
Carl Popper's picture

We actually have it pretty easy and an impressive economy if we have enough surplus to feed so many idle people.

You aint seen nothing yet if you think it is a bad economy now.

Sat, 11/09/2013 - 12:33 | Link to Comment venturen
venturen's picture

Is that Escher or Krugman or are they the same?

Sat, 11/09/2013 - 17:55 | Link to Comment akak
akak's picture

It must be Escher, because if it were a Krugman all the windows would be broken.

Sat, 11/09/2013 - 12:48 | Link to Comment Carl Popper
Carl Popper's picture

Free Francis Sawyer!

(and dont forget to buy the T shirt)

Sat, 11/09/2013 - 12:50 | Link to Comment Brazen Heist
Brazen Heist's picture

Once those interest rates hike, the bubble goes POP

Sat, 11/09/2013 - 13:17 | Link to Comment q99x2
q99x2's picture

Oh god I'm going to puke if I read another article that trys to cover up for the banking cartel and the regime that is killing Americans around all of us. Dude they are working on the elderly folks now for Crissakes.

Sat, 11/09/2013 - 13:33 | Link to Comment W74
W74's picture

Brave New World wasn't far off when life got capped at 60.  Only elites will be granted exemptions because....muh discrimination or muh fairness or something similar.

Sat, 11/09/2013 - 13:27 | Link to Comment epwpixieq-1
epwpixieq-1's picture

The economy will not collapse ON ITS OWN. It will do that when enough people have decided that it is enough.

Having lived via the collapse of the socialist experiment in Eastern Europe, I, and for that manner everyone with similar experience and observational intuition, can make parallels in this complex system development.

It finally comes to the choice of the masses, due to the fact that the establishment, as observed in the article, has no incentive whatsoever to change the dynamic for wealth distribution in the system.

So every person (and family), feeling the economic pressure downturn, or being able to observe better conditions in other places of the world, will have to make a choice:

1. Move to another part of the world and try to start a new life, away from this mess. (System change)

2. Continue sucking the downwards economic pressure. (System is unchanged)

3 Trying to decrease the pressure by moving on higher part of the ladder. (not many people can do that). This is equivalently to 2. The equivalence is due to the fact that one stays in the system and leaves the system unchanged but tries to change ONLY its own relevant place in the system. (System in unchanged)

4. Ignite a revolution and try to change the system with force. (System change)

There is quite a complex dynamic between these 4 options. Option 1 will not be available to many Americans, if they want to integrate in the society somewhere else, as comparatively the general level of US collage educational system is below the international standard ( for the developed countries ). And  I am not even trying to compare the high school eduction at all ( basically only with high school one usually does not have a change abroad.

In deteriorating system option 3 will not be available to many people as well, so what is left to the masses are 2 and 4. finally the dynamics between forces ruling 2 and 4 will define the future of this country. The history has shown that 2 has its limits, and finally 4 comes to play with a full force.

To summarize: there will be a revolution, the question is only when and who will benefit from it, for what we have seen is that the ruling machine leaves no crisis to waist.

 

Sat, 11/09/2013 - 14:44 | Link to Comment Seeking Aphids
Seeking Aphids's picture

Succinct review of the situation, R. I think you may be right. I especially like the (unintentional?) but hilarious sp mistake at the end: "the ruling machine leaves no crisis to waist"......how very well put! All of us 99%ers are having to tighten our belts!

Sat, 11/09/2013 - 15:37 | Link to Comment Seer
Seer's picture

"It finally comes to the choice of the masses"

Um... it comes down to one thing and one thing only: RESOURCES (well, that's a grouping, but anyway...)

Mother Nature is the one that calls the shots on resources.  We're just running around pretending that we have any control over things.  Mother Nature is saying: "No more growth for you, you've overdrawn your account."

We can point at this and at that, but in the end friction always comes when there are resource shortages (which is why wars happen).  TPTB chess-players were quite aware that we'd get to this point, which is why so much activity in corraling ME Oil and in all those "control Africa's population" campaigns.  It was only ever a matter of time before China broke out, and population increases (resource demands) in general.  TPTB could never have contained things to their satisfaction, as overall forces are just not controllable.  It's now come down to how to deflect and to slow down the trainwreck that is certain.

The ONLY question that is any real long-term value is whether we'll ever get it that we cannot seek perpetual growth (not on a finite planet, and I don't think that we've yet found an infinite one).

Anyway, good stuff from you as to the short-term stuff for individuals to guide their paths as the bridges crumble...

Sat, 11/09/2013 - 17:14 | Link to Comment Seer
Seer's picture

Looks like there's another clueless fuck running around out there slinging arrows... (to down-arrow this you'd have to believe that virtual trumps physical- moron)

Sat, 11/09/2013 - 13:25 | Link to Comment ak_khanna
ak_khanna's picture

llusion of Democracy today.

People sponsored by the rich, make false promises to the masses to get elected. Distribute national wealth amongst themselves and their sponsors (Industrialists) and when that is not enough borrow money from rest of the world and continue the distribution process. The borrowed money has to be paid back by taxing the masses keeping in mind that tax rules are made such that the politicians and their sponsors pay minimum or no taxes.

End of political tenure, rinse and repeat till the whole system breaks down and the world wealth is cornered by a minuscule of the population.

www.marketoracle.co.uk/Article40231.html

Sat, 11/09/2013 - 15:43 | Link to Comment Seer
Seer's picture

Humans are funny, aren't they?

If there's no "power chair" then all the power-hungry really have no way of inflicting themselves upon large numbers of people...

"world wealth is cornered by a minuscule of the population"

I don't worry about this because most of that "wealth" is really only pretend wealth*, it's based on its existence in a crumbling world/system.  The real issue is what it's always been, and that's cornering control over Food, Shelter and Water.  And for these I'd figure that, given their necessity to live, that people will be able to break through whatever barriers that TPTB may errect to keep them away (laws are quite meaningless when the only way to survive is by breaking them).

* And when you consider that it's all about "confidence," well... it takes all of us to create that illusion that they have "wealth"- if we don't subscribe to it then they're not going to skim their livelihoods from it/us.

Summation: the concern ought to be about "control" (it's about POWER, not "wealth"); if you can control things then you are are set.

Sat, 11/09/2013 - 13:34 | Link to Comment Peter Pan
Peter Pan's picture

Neither the debt levels nor the present interest rate structure are normal or even conducive to sustainability.

It is for this reason that I have always maintained the need for a destruction of half of the debt and a doubling of the interest rate as a first step to normalization.

This should curtaill malinvestment, speculation, profligate deficit spending as well as restore rewards for savers.

The reduction in debt followed by a doubling of rstes will of course impact asset values but this is part of the correction.

The governments of the world would do well to confiscate money hiding in tax havens to provide further relief. There should be a presumption of illegality for this type of holding unless proven otherwise.

Large trade imblances must be avoided or at least not recycled as has been the case in the USA with China.

The finance sector would shrink drmatically due to the halving of debt ( but no increase in their margins arising from the doubling of rates). In other words the benefit of any rate increase should all flow to the saver.

The longer we delay the culling of thiese extreme debt levels, the greater will be its destruction down the track both to itself as well as the economy and society.

Sat, 11/09/2013 - 13:39 | Link to Comment TBT or not TBT
TBT or not TBT's picture

Which half of the debt would you cancel?   You would be entirely destroying in the same stroke, a whole lot of somebodies' assets.   You get that, right?

As to doubling interest rates, you would thereby still be SETTING them.   Don't you get that setting of interest rates by ANY monopoly central planning authority is how we got here?     Misallocation of capital, malinvestment in the Austrian sense, is least worst in a freed money market, not in some centrally planned one.

You are suggesting more draconian control-freaky solutions here, that happen to fit your prejudices and extremely limited.   It takes an entire market full of actors, each with their skills and assets and special knowledge, to make a functioning economy. 

Sat, 11/09/2013 - 13:56 | Link to Comment Peter Pan
Peter Pan's picture

I hear what you are saying TBT but this is a once off aftervwhich the market place will be better able to find its equilibrium.

Think back and you will see that interest rates and debt levels have been moving away from the mean in opposite directions with banks being the big winners until of course they went too far.

You may think my formula has to do with prejudices but you need to realise that the present formula of haircuts without debt destruction is even more prejudiced and is simply designed to save the banks (the ship) and to drown the saver(the passenger).

Sat, 11/09/2013 - 14:37 | Link to Comment Seeking Aphids
Seeking Aphids's picture

Very good points Peter. What is QE if not a debt holiday for the banks? The ultralow interest rates are simply a way of allowing the govt to maintain an unsustainable debt and level of spending....rates will be kept low until this is dealt with (never?)......inflating their way out of this mess is the optimal choice for the govt but at what cost to the 99% even if this option were possible? We are seeing spots of inflation but also major areas of deflation (commodities) so I don't think their plan is working.  Doubtful that there will be a voluntary reset of debt....will likely happen via crisis (crash) or inflation if the Fed gets its way.....btw what does Tinkerbell think about all of this? I have always valued her opinion.......

Sat, 11/09/2013 - 15:20 | Link to Comment Peter Pan
Peter Pan's picture

I think a crash is most likely although sick systems can last for decades. One only has to look at the old Soviet Union and the case of North Korea. 

Sat, 11/09/2013 - 15:25 | Link to Comment Seer
Seer's picture

When it's localized perhaps, but this one's going global.  The US has been propped up and those propping it up can no longer do so.  And if those others are weak, well, we're all going down- the rush to the exits will be sudden and furious.  I'm thinking that things will look like the scenario painted in the movie Rollover.

Sat, 11/09/2013 - 19:24 | Link to Comment Arnold
Arnold's picture

Thorazine and one of those white jackets that tie nicely in the back should suit you sir!

It didn't begin there, but the setting aside of primary bond holder contracts (GM bail out) certainly was the start of your plight...........

Sat, 11/09/2013 - 13:34 | Link to Comment dizzyfingers
dizzyfingers's picture

http://www.mybudget360.com/labor-force-participation-means-tested-programs-jobs-employment-report/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+mybudget360%2FQePx+%28My+Budget+360%29

Another million here can't find jobs, another million there can't find jobs...  Eventually that adds up to some real losses of tax revenue!

Sat, 11/09/2013 - 13:36 | Link to Comment RubberJohnny
RubberJohnny's picture

The realm of human experience is actually rather limited.

If you're unable to take a financial kick in the balls and recover, you might as well go and suck on a tail pipe.

Sat, 11/09/2013 - 13:41 | Link to Comment q99x2
q99x2's picture
FEC to allow bitcoin donations to political campaigns

Its on like Donkey Kong. Gonna break 400 today  

  • High:$395.00000
  • Sat, 11/09/2013 - 13:47 | Link to Comment yogibear
    yogibear's picture

    The Fed's game of printing to inflate historic asset bubbles continues until forced to stop through a currency crisis.

    Fed member banks should continue stuffing reserves overses and posting losses on the mark to fantasy balance sheets. 

    Bank heads would do well to hold hidden assets overseas and ask for Fed bailouts in the future. Too Big to fail round 2.

    The Fed's Balance sheet is phony as well with their mark to fantasy.

    Sat, 11/09/2013 - 15:21 | Link to Comment Seer
    Seer's picture

    Yeah, they'll continue to do what they've been doing until they cannot.

    Not sure where there's any safehaven abroad, though...  suspect it's more about playing a shell game, constantly shuffing things around such that people lose track of where things are.

    Sat, 11/09/2013 - 13:45 | Link to Comment much obliged
    much obliged's picture

    Establishment view looks plausable if a president signs John Kennedy's Executive Order 11110. Interest rates could go up without burdening government with the effects of debt.

    Sat, 11/09/2013 - 13:46 | Link to Comment muleskinner
    muleskinner's picture

    MC Escher was a wormwood addict and couldn't recognize his own image when he looked in the mirror.  Drank too much of the good ol' absinthe and went a little goofy.  

    As long as oil is available to grow enough food to keep 7 point 2 billion people alive and have a good distribution system, then all will be well.

    Be sure to buy the 20 count McNuggets.

    Sat, 11/09/2013 - 13:55 | Link to Comment RubberJohnny
    RubberJohnny's picture

    Get loaded to the extent you accuse MC Escher of being and send us one of your etchings.

    Pulling 'facts' from some bullshit site concerning a great human being, just doesn't cut it.

    Sat, 11/09/2013 - 14:27 | Link to Comment much obliged
    much obliged's picture

    No, it doesn't cut it. But some people think that it's too extreme to think about government printing enough of its own money to get out of debt overnight. And State printing its own money too and letting the market drive the interest rate level. The intrinsic efficiency of smaller government taking over federal debt is an anathema to actually cutting spending in government. Eliminate all the taxes. Straight inflation is more equitable than government tinkering with who should and shouldn't be taxed.

    Sat, 11/09/2013 - 15:40 | Link to Comment muleskinner
    muleskinner's picture

    I never used a bullshit web site to inform anyone about a potential fact.  I read the information in a Penthouse magazine ca. 1977.

    Nice try, though.

    You have to see the original to appreciate MC Escher's work.

    Sat, 11/09/2013 - 15:18 | Link to Comment Seer
    Seer's picture

    What's the point of discussing MC Escher?  I thought it was all about the symbolism of illusion (or is that illusion of symbolism?).  Anyway... figuring that it was more about providing some trivia (on Escher)...

    "As long as oil is available to grow enough food to keep 7 point 2 billion people alive and have a good distribution system, then all will be well."

    More people since you posted.  Less oil since you posted.  It's not staying static (but I think I catch your sarcasm).

    Sat, 11/09/2013 - 14:12 | Link to Comment RubberJohnny
    RubberJohnny's picture

    Don't sweat the small stuff.

    Barry Soetoro has all of our backs.

    Sat, 11/09/2013 - 14:19 | Link to Comment Infinity
    Sat, 11/09/2013 - 14:44 | Link to Comment insanelysane
    insanelysane's picture

    1.  The Escher analogy is dead on.

    For a government that wants to dictate and control their citizens' lives, "for the good of the nation", they never ever suggest that student loans should only be given to students that are pursuing degrees that "are for the good of the nation" and force the unemployed to work for their handout, "for the good of the nation."

    A nation with so many needs and the ability to print unlimited money should not have the lowest labor participation rates for the last 40 years.  However, the FSA will revolt if they are actually asked to do anything.

    Sat, 11/09/2013 - 15:14 | Link to Comment Seer
    Seer's picture

    The govt is the tool of the rich.  Don't mistake a "tool" with the actual manipulators: what good is it screaming at a tool?

    Sat, 11/09/2013 - 15:13 | Link to Comment Seer
    Seer's picture

    "this will remain the case until the existing structure collapses and is rebuilt on stronger policy principles."

    Oh, oh!  Please... can I suggest that those principles include a note that perpetual growth on a finite planet isn't possible?  If not, then good fucking luck avoiding starting at this same heap of shit once again (and again screaming about how we need better "principles," when, once again, we attempt to think we can out-smart mother nature, if only we are less corrupt to one another...).

    Sat, 11/09/2013 - 17:11 | Link to Comment Bazza McKenzie
    Bazza McKenzie's picture

    Too simplistic.  You confuse growth with the extration of resources rather than new and increased functionality using decreasing resources and in fact developing technologies that create new resources.

    Sat, 11/09/2013 - 17:34 | Link to Comment Seer
    Seer's picture

    "technologies that create new resources."

    Pardon?

    The First Law of Thermodynamics has been overturned?

    Techonlogy is a PROCESS, it is NOT a thing, it's not MATTER.  It represents a recipe.  It could be a wonderful recipe, but it takes raw inputs and energy to TRANSFORM things in to the "product/result."

    If you toss out the fakes like financials and "re-distributors" (such as Walmart) you'll see that it's energy companies wield the most capital.

    If you look at US trade balance you'll see that it pretty much peaked around the time that its oil production and exports did.  This same pattern can be spotted with any country, watch their next exports drop as a result of diminishing exports of natural/raw materials.

    So, I flat out reject the notion that technology makes matter appear, let alone that it can CREATE something from nothing (create a net increase in matter).  Yeah, call me old-fashioned...

    Sat, 11/09/2013 - 15:32 | Link to Comment Jack Burton
    Jack Burton's picture

    It is true enough, the world economy can not stand a real market interest rate being set. What we have now is so artificial an economy that it could never withstand market forces returning or real price discovery. Only a collapse of present day finance capitalism and then a rebuild will allow a free market to reform. The main champions of so called capitalism and free markets has been the one's most involved in setting up communism for the 1% in the form of central bank policies, open market juicing for wealth effect, and the holding down of interest rates to zirp. Not to mention unlimited money printing. When you look at societies bottom 90%, you see some at the top of this still prospering, but as you creep down that scale it gets worse and worse. It is safe to say that of average people, the only one's doing well work for cities, counties, school districts, states, the federal government and vast and growing military industrial secret police spy state. That is a lot of people, but their incomes are all tax payer dependent. As the tax payer dies a slow death from a weak economy and the new regressive taxation systems at all levels, they will simply run out of cash to pay in taxes so your average NSA employee can buy that dream home, buy their daughter a prom dress and a new convertiable to go with it, send the kids to soccer camp and plan expensive schools for them. Make NO mistake about this. All these new spy employees and the old CIA and FBI, ICE, ATF, Customs and Immigration, police and agents of all types, THEY live a good life, and they support the supression of all your freedoms, because it puts the good life into their reach. Left to the real economy, these fuckers whould be hopelss. Not least of which because their repressive personalities do not suit a real business world environment.

    Sat, 11/09/2013 - 17:35 | Link to Comment Seer
    Seer's picture

    "and then a rebuild"

    People keep saying this but I am not seeing how they're pulling this rabbit out of the hat.

    Rebuild with what?

    Rearranging balance sheets is meaningless when it's all ficticious.

    Somewhere along the line REAL PHYSICAL assets will have to be shuffled, and while most here realize the problem as it would apply to PMs they fail to realize that this same insufficiency exists with a WHOLE lot more PHYSICAL stuff.

    Fuck it, I'm REBUILDING NOW!  And I don't require/demand that others do shit, or run around sounding the bell about all the evils that "others" are doing.

    Keep planning the "revolution."  But if you think that you're going to do "better" then you really ought to have some plan for AFTERwards.

    "but as you creep down that scale it gets worse and worse."

    There's 750 MILLION people in India living on $0.50/day!  My wife, who is from Manila, grew up "poor" (when toilet paper is a luxury you cannot afford- well, yeah, how bad are we really?).

    Sat, 11/09/2013 - 18:15 | Link to Comment starfcker
    starfcker's picture

    sure jack, the .gov employees are no different from the party members in cuba or china or the USSR. only thing i would disagree is that our taxes are paying them. the print is what's keeping this sucker afloat. talk about taxes is head scratching about what to do next. in the big plan of the gold team, carbon taxes were supposed to come before printing. not being able to get that scheme operational has been a real wrench in the gears of funding globalization. the ways they are plundering the stored wealth of the middle classes are more brutish and create more hostility, but this was going to happen one way or the other.

    Sat, 11/09/2013 - 21:39 | Link to Comment itstippy
    itstippy's picture

    "All these new spy employees and the old CIA and FBI, ICE, ATF, Customs and Immigration, police and agents of all types, THEY live a good life, and they support the supression of all your freedoms, because it puts the good life into their reach."

    Relax, Jack.  For every tight-ass massive-ego control-freak government Law And Order employee on the State payroll there are 50 beligerant anti-social wildass fucktards roaming around to counter-balance things.  There's no way for the Stasi to keep them all in line.

    These desperadoes pee in the stairwells & hallways of their urban appartment buildings, or break liquor bottles in the "yards" of their small-town ruined houses.  For fun they ingest methampetamine, get in a car or pickup truck (still carrying their stash), and go careening down the street bouncing off other people's cars.  They shoot at, beat on, stab, and stomp their peers.  They can't read and have no interest in learning how.  They're a Hell of a lot of fun to party with, but don't piss them off or count on them for anything.  They're absolute fuck-all rebels.

    So, we've got them to fall back on.  Our own Free Shit Army of revolutionary Freedom Fighters to battle the King's redcoats. 

    Feel better?

    Sat, 11/09/2013 - 23:54 | Link to Comment wisehiney
    wisehiney's picture

    i'm telling ya dog, they are fighting like hell for a higher rate, not a lower one. Hope you paddled today/tonight.

    Sat, 11/09/2013 - 19:10 | Link to Comment Arnold
    Arnold's picture

    What we need is a good old fashioned Extraterestrial threat.

     

    http://en.wikipedia.org/wiki/Mars_Attacks!

    Sat, 11/09/2013 - 20:35 | Link to Comment polo007
    polo007's picture

    According to BMO Capital Markets:

    https://app.box.com/s/38q5x8x29vv25ujcg7ef

    November 8, 2013

    In Search of the Mythical Market Correction

    Strong Market Performance Has Amplified Correction Chatter

    Many clients we speak with are convinced that the market is on the verge of correction. Sure, the stocks have been on an impressive and almost uninterrupted run these past few months, but we believe performance patterns alone are not enough to justify directional market calls. Instead, investors should consider the macro and fundamental backdrop along with risk-taking levels to determine whether or not the performance is justified. From our perspective, the data simply do not support the correction talk and we remain committed to our optimistic market outlook through year-end and into 2014. As such, we believe those investors waiting to “buy on the dip” are likely to be disappointed.

    Performance Patterns Have Followed the Script

    Despite the fact that it has been over a year since the last major market pullback, recent performance patterns are not totally unprecedented. In fact, the current bull market has already produced as many 5%-10% and 10%+ pullbacks as the prior six bull markets dating back to 1970, on average. The main difference has been the duration between corrections, which has been roughly half the average since 1970 even with the latest correction free period. Therefore, the past year or so can be at least partially viewed as a reversion to the mean since more investors are beginning to accept this market for what we believe it is – the early to middle stages of a secular cycle that has at least five more years of life in it.

    Macro Trends Contradict the Correction Talk…

    The one thing that almost all market corrections during bull markets have in common is that they are usually triggered by a Fed rate hike or a spike in oil prices. In addition, high levels of confidence, expensive market valuation, and underperformance from Financials are also typically associated with bull market corrections. Fortunately, most of these conditions are nonexistent in the current environment making the probability of any sort of major market correction very low over the near term, in our view.

    …As Does the Absence of Excessive Risk Taking

    Excessive risk taking has been another common precursor to meaningful market pullbacks based on our experience. However, the risk measures we track suggest no indication of excessive risk-taking by investors.

    Sun, 11/10/2013 - 02:15 | Link to Comment ak_khanna
    ak_khanna's picture

    llusion of Democracy today.

    People sponsored by the rich, make false promises to the masses to get elected. Distribute national wealth amongst themselves and their sponsors (Industrialists) and when that is not enough borrow money from rest of the world and continue the distribution process. The borrowed money has to be paid back by taxing the masses keeping in mind that tax rules are made such that the politicians and their sponsors pay minimum or no taxes.

    End of political tenure, rinse and repeat till the whole system breaks down and the world wealth is cornered by a minuscule of the population.

    www.marketoracle.co.uk/Article40231.html

    Sun, 11/10/2013 - 15:00 | Link to Comment Nimby
    Nimby's picture

    This isn't the "illusion of democracy"; this IS democracy.

    Do NOT follow this link or you will be banned from the site!