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Guest Post: What If There's A Recession In 2014?

Tyler Durden's picture


Submitted by Gonzalo Lira via Gonzalo Lira blog,

If policymakers were gunfighters, they’d be out of bullets: They have run out of effective policy tools to improve the economy.

So the question is simple: If there is a recession in 2014, and policymakers are out of bullets, how will it play out across the American economy?

Recently, Deutsche Bank’s Jim Reid very astutely pointed out that the current “expansion” of the U.S. economy is on its fifth year—the seventh longest in history.

We are due for a recession.

Now, before facing up to a possible 2014 recession, let’s ask ourselves: What happened during the last recession?

No one can quite agree as to the specific causes of the 2007–09 recession—and fighting that particular fight isn’t the point of this essay. But we can all more or less agree that global overindebtedness caused a mini-Minsky Moment, whereby borrowers could no longer borrow enough to keep from defaulting on their previous loans. Hence September 2008. Hence the collective global “Ahhh!!!!” moment that we all recall with such sweet and fond nostalgia.

To stave off what looked like financial and economic Armageddon, the Treasury Department first under Henry Paulson and then under Timothy Geithner, and the Federal Reserve under Ben Bernanke, basically threw money into the economy: The Treasury’s Troubled Asset Relief Program (TARP) originally authorized $700 billion to buy up toxic assets, while the Fed created the Maiden Lane vehicles, lowered interest rates to zero (zero interest-rate policy, ZIRP), and simultaneously created money by way of the various iterations of Quantitative Easing (QE).

Combined, these Treasury and Fed programs prevented the bankruptcies of the so-called “systemically important” (a.k.a., “Too Big To Fail”) banks, and provided the U.S. Federal government with the cash to carry out the 2009 stimulus program. After all, had it not been for the Fed’s purchases of Treasury bonds by way of QE, the yields on the government’s bonds would have risen so high that the stimulus program could not have been financed, let alone the +$1 trillion deficits of 2009, 2010, 2011 and 2012.

But screw the deficit—the Treasury and Fed measures saved everybody’s bacon. Equities crashed? Houses underwater? 401(k)’s in the toilet? Thanks to TARP, ZIRP and QE, they rebounded.

Rather than take the hit, work out the bad loans, and organically regrow the economy, the Treasury and Fed measures were essentially morphine—or heroin—to dull the pain of the Global Financial Crisis: They made us feel great, but the disease is still there.

Overindebtedness. Bad debts piled on top of bad debts.

Now because of the Treasury’s and especially the Fed’s morphine/heroin drip, starting in Q3 of 2009, the American economy’s gross domestic product has been expanding, which economists hail as the end of the 2007–09 recession, and the beginning of the current “expansion”.

(Re. the “expansion”: Nevermind that unemployment was scrapping 10% as late as Q3 of 2011, and that as of Q4 of 2013, we are still at 7% U-3 unemployment—and this U-3 figure ignores the long-term unemployed, who have simply given up, reducing the employment participation rate to historic lows, thereby skewing the real unemployment figure something awful.)

So here we are in Q4 of 2013, staring down the barrel of 2014, suspecting—fearing—that we might have a recession staring right back at us.

Question: What could the Federal government and the Federal Reserve realistically do, to avert a recession in 2014? Or if not avert it, at least ameliorate its effects?

Oh boy . . .

Insofar as the Federal government is concerned, realistically, nothing. In 2008, facing what appeared to be the end of the financial world, Congress was snookered into agreeing to the Bush Administration’s $700 billion TARP bailout. Then in 2009, the incoming Obama Administration had two winds at its back—the Global Financial Crisis, which required the incoming administration to do something, anything; and the fact that Obama was the new prez, who’d won decisively with his deceptive talk of “hope”. Thus the $787 billion stimulus package.

Combined, the Bush TARP and the Obama stimulus were some $1.5 trillion mainlined into the American economy.

Today, five years after his inauguration, and after the Government shutdown and the botched Obamacare launch, Obummer just doesn’t have the pull. More to the point, the Democratic caucus does not trust him. So Democrats on the Hill will not stick their necks out for an Obama stimulus program. So the O-Administration’s economic brain trust might come up with all sorts of plans to preëmptively stop a 2014 recession—but they don’t have the votes to make these plans happen.

As to a repeat of the Henry “Give-us-all-your-money-or-the-banks-will-die!” Paulson scare tactics—they won’t work today, not after the nasty taste left by the one in 2008.

So macro-economically speaking, Barack Obama is walking around with an empty peashooter: He can’t even wave the threat of using it without seeming foolish.

Turning now to the Federal Reserve: They might be packing a big ol’ .45 Magnum, but they are most definitely out of bullets. They can’t lower interest rates any further than they have—what are they going to do, start charging people who deposit money in banks? This is the problem with hitting the lower bound: You can’t go any lower than ZIRP. At best, the Fed could expand QE even further, and buy up even more Treasury debt. But then any impact from more QE will be marginal, assuming it has any effect at all.

So if the Federal government and the Federal Reserve are essentially out of bullets, what’s going to happen to us law-abiding citizens when the Big Bad Recession comes rolling into town?

First off, no one can seriously or responsibly doubt that a recession will not come. Even if the American economy by some miracle manages to sneak through 2014 with positive numbers, a downturn will hit in 2015 anyway. Don’t believe me? Check out this chart:

Click to enlarge.

I have grounded, non-orthodox reasons to think that a recession will hit in 2014, reasons which I will expand upon during my live presentation next Thursday (see here). But even if you don’t buy my heterodox reasons, the orthodox business cycle would confirm that a recession is on its way.

So to weather it, you’d have to know what’s going to happen.

A basic outline is pretty clear:

Stocks will take the brunt of the beating, once recession-fever hits—after all, equities are floating on nothing but QE, and everybody knows it.

Bonds won’t do so well either, at least not corporate issuance. Treasury bonds will continue trending with flat yields, if only because the Federal Reserve will probably signal that it will continue (or even expand) QE. Treasury bonds will also continue high because of a simple safe-haven play . . . but there won’t be the sense of today’s Treasuries being the rock-solid Treasuries of yore: There will be more volatility in the T-bond markets. A greater willingness to exit Treasuries at a moment’s notice, especially if there are hints of inflation.

Real estate? Forget it—it’ll be another popping bubble, with the same damage as the last one.

The only store of value will be commodities. Not just precious metals, but all commodities: Industrials, agros, and fossil fuels. It will simply make more sense for the investment community to rotate out of iffy stocks and dodgy bonds, and rotate into physical commodities. Why? Because there is too much liquidity.

If there is such a rotation from equities and bonds into commodities, then the prices of food and transportation will rise—precipitously.

Thus we will have inflation, possibly severe inflation. But the Fed will be loathe to rein in inflation via interest rate hikes.

You know the saying about owning a hammer, and everything looking like a nail? The Fed cannot conceive of any way in which to help the economy that does not involve keeping interest rates low. The Fed under Bernanke (and Greenspan previously, who was guilty of the same sin) does not understand that it is not the job of the Fed to maintain full employment, stable prices, and a solvent banking sector. The Fed’s only mission is to ensure the stability of the fiat currency. Full employment? That’s the Federal government’s problem. Banking sector solvency? That’s not the government’s problem, that’s the free market’s problem.

But the Fed, blinded, thinks that it has to support the banking sector and try to do something about employment. Thus it has lowered interest rates to laughable/insane levels. And it cannot raise them because of its own bias: “You don’t raise interest rates during a recession” is practically a Zen koan with the Fed economists.

If commodities start to rise, as a market reaction to falling stock prices and a need to find an investment safe-haven, then inflation will rear its ugly head and hurt the American economy very, very badly. But the Fed—repeating exactly the same error that brought us stagflation—will not raise interest rates to quell it. The Fed will be too frightened of smothering the economy during a recession to raise rates and defend the currency.

Thus the Fed will stand pat with ZIRP and QE, come a recession in 2014.

In other words, the government will not be able to save the economy. This is the single point I’m trying to make here: If you think for a second that the Federal government and the Federal Reserve will step in once again and save everyone’s bacon (like the last time), then you have not been paying attention to what I’ve been saying—or been paying attention to how truly helpless the Obama Administration and the Fed really are.

The Federal government and the Federal Reserve are out of bullets.

Which means we are on our own come a recession. And we’ll be paying not only for the recession of 2014, but also for the recession of 2007-09, which was deferred, but not worked out.

In other words, a recession in 2014 just might well be The Big One.

Oh boy . . .

Okay, that’s my thinking—here’s my pitch: This coming Thursday, at 8pm EST, I’m going to give a live presentation that’s going to look into all these issues in a lot more detail—really start us thinking seriously about what to do, if and when a recession hits the American economy. The title of this web seminar? Simple:

What A Recession in 2014 Will Look Like

Click on the link—and in case you missed it, here it is again. In this live presentation, I will expand on this brief essay, and will take audience questions, too.

If you’re not sure if I’m an idiot or not, check out my appearance on Max Keiser last year and see for yourself:



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Tue, 12/17/2013 - 12:40 | 4254214 Buckaroo Banzai
Buckaroo Banzai's picture


Tue, 12/17/2013 - 12:44 | 4254232 NotApplicable
NotApplicable's picture

What is this "last recession" nonsense?

Tue, 12/17/2013 - 12:46 | 4254255 corporatewhore
corporatewhore's picture

let's count the ways we've recovered:

labor participation rate----check

growth in wages---check

growth in jobs available--check

real unemployment rate---check

real foreclosures occurring or hidden off market by banks--check


i could go on but the champagne's getting warm.  yeah, a real recovery enjoyed by all.

Tue, 12/17/2013 - 12:48 | 4254262 Boris Alatovkrap
Boris Alatovkrap's picture

Is better than is recover, is absolute stellar prosperity this year... ...for global bankster class.

Tue, 12/17/2013 - 12:57 | 4254296 Pladizow
Pladizow's picture

As long as everyone is preaching collapse - it wont happen!

Tue, 12/17/2013 - 13:06 | 4254327 Skateboarder
Skateboarder's picture

"What if" huh... Gonzo must not have seen the DJIA '29 vs '13 chart.

Tue, 12/17/2013 - 13:07 | 4254332 Pladizow
Pladizow's picture

Lira excludes:

1. Pensions need 8% and will look to equities

2. Sovereign debt crises will chase capital into equities

3. Europe and Japan are worse off - capital will flee to US equities

4. Threat of bail-ins - more money may flee to equities

5. Fed stops paying interest on excess reserves - more money into trading equities.

Tue, 12/17/2013 - 13:31 | 4254393 Oracle of Kypseli
Oracle of Kypseli's picture

<<< What does the fed do in the whiff of a recession? >>>  

As everyone knows, anticipates and expects: MORE OF THE SAME

Tue, 12/17/2013 - 14:23 | 4254552 B.J. Worthy
B.J. Worthy's picture

1. Pensions can't increase equity exposure on a whim.

2. Sovereign debt crises will chase capital into GOLD

3. Europe and Japan are worse off - capital will flee to GOLD

4. Threat of bail-ins - more money may flee to GOLD

5. Fed stops paying (virtually zero) interest on excess reserves - banks won't notice because they're already in the after-hours of their BTFATH party.

Tue, 12/17/2013 - 15:11 | 4254664 Pladizow
Pladizow's picture

1. Of course they can

2. So why not for the last 2.5 yrs

3. Gold is not large enogh for global capital

4. Likely but not on the same scale as equities

5. Banks will have more capital to BTFATH.

Tue, 12/17/2013 - 13:02 | 4254314 fasTTcar
fasTTcar's picture

If you like your recession, you can keep your recession.

Tue, 12/17/2013 - 15:32 | 4254707 Buckaroo Banzai
Buckaroo Banzai's picture

Never gets old!

Tue, 12/17/2013 - 17:06 | 4255062 Diogenes
Diogenes's picture

Yes it does.

Tue, 12/17/2013 - 18:02 | 4255200 Crabshacker
Crabshacker's picture

If you like the same ol' shit you can keep your...

Tue, 12/17/2013 - 13:49 | 4254440 ZH Snob
ZH Snob's picture

Americans seem to have a collective john-wayne-romantic-fantasy rooted deep in their denial, mixed of course with a weary cynicism that misinforms them that everything comes out OK in the end for Ameriica, that boys will be boys, that their lying and stealing is nothing new.  and back to sleep they go.

what they fail to comprehend is this movie will not have a happy ending, and the boys have grown into relentless greedy savages who are waging economic war against them and will not stop until they are destroyed

Tue, 12/17/2013 - 14:19 | 4254546 corporatewhore
corporatewhore's picture

we are a part of a rhythm nation

Tue, 12/17/2013 - 15:51 | 4254760 AGuy
AGuy's picture

"What If There's A Recession In 2014?"

The Head line should have been "What if there ISN"T a recession in 2014?"

Obamacare has virtually guarenteed a recession in 2014. since people will have to fork over a lot more money for Insurance premiums AND pay a much higher deductable. The Healthcare sectors is going to take at least a 10% cut if not more, unless it repealed soon.


Tue, 12/17/2013 - 12:47 | 4254233 hedgeless_horseman
hedgeless_horseman's picture



Recession?  The business cycle is dead. Bernanke and the other central bankers drowned it and the bond vigilantes in a deluge of liquidity.

It is sychronized diving from here on out.

Tue, 12/17/2013 - 12:46 | 4254252 Joe Davola
Joe Davola's picture

It isn't a recession, unless they say it's a recession.

Tue, 12/17/2013 - 12:50 | 4254261 insanelysane
insanelysane's picture

it's a slowww, jobless recovery, dammit!

Tue, 12/17/2013 - 12:51 | 4254270 hedgeless_horseman
hedgeless_horseman's picture



It's an, "L-shaped recovery."

Tue, 12/17/2013 - 13:00 | 4254310 Buckaroo Banzai
Buckaroo Banzai's picture

It's pining for the fjords!

Tue, 12/17/2013 - 12:52 | 4254277 Boris Alatovkrap
Boris Alatovkrap's picture

Slow, jobless economy with lots inflation, little growth, dropping productivity, evaporation of wealth, disintegration of individual liberty,... but lots, lots, lots, lots of money, more money can even print!

Tue, 12/17/2013 - 12:52 | 4254275 Harbanger
Harbanger's picture

There's too much liquidity in the banking system but they haven't eased lending or made money cheap on main street since 2008.  I think that's the next card (again).  That may be what sets off runaway inflation.

Tue, 12/17/2013 - 12:58 | 4254292 Boris Alatovkrap
Boris Alatovkrap's picture

Too much liquidity!? No, that is like too much vodka for alcoholic lush, like too much viscosity in bowel infect by dysentery, too much anti-coagulant in blood stream of sickle cell anemic.

Tue, 12/17/2013 - 13:05 | 4254300 hedgeless_horseman
hedgeless_horseman's picture



Too much liquidity!? No, that is like too much vodka for alcoholic lush...

That, Boris, may be the smartest comment I have read on this site this year.

The third option is for the Federal Reserve to create credit to pay the bills Congress runs up. Nobody objects, and most Members hope that deficits don't really matter if the Fed accommodates Congress by creating more money. Besides, interest payments to the Fed are lower than they would be if funds were borrowed from the public, and payments can be delayed indefinitely merely by creating more credit out of thin air to buy U.S. treasuries. No need to soak the rich. A good deal, it seems, for everyone. But is it?

Tue, 12/17/2013 - 15:49 | 4254747 SDShack
SDShack's picture

That's the end game. The threat in 2008 was bond vigilantes, and that was born out in the EU in 2009, 2010, 2011, 2012, etc. That's why the Fed owns 1/3 of the bond market. Another recession means MOAR QE until the Fed owns 51% of the bond market, and thus effectively neutrailizes the bond vigiliantes. That takes a big weapon away from what little real financial market still exists. Then all that printed money liquidity has very few places to go. It has to go into equities, or real assets. This is just being set up as a repeat of 2008 all over again. A recession to crash equities and real assets, but without the option to protect yourself with bonds since the Fed will control that market. So it is panic the serfs to sell whatever real assets and equities they have by tanking that system with an engineered recession. Then the elites BTFD using gift money from the Fed. One more time will just about complete the wealth transfer from the middle class to the elites.

Tue, 12/17/2013 - 16:43 | 4254978 DaddyO
DaddyO's picture

Time to join the resistance movement...

Resist the FED....


Tue, 12/17/2013 - 13:32 | 4254404 madcows
madcows's picture

I don't know about that.  4% mortgage rates, buy a car with zero down and no job, etc... and people still aren't going all out.  It's tough to have runaway inflation when people don't have income, and are loaded down with existing debt.

The next bullet would be to drop money from a helicopter, b/c their attempts to issue cheap credit through the banks hasn't really worked.

Tue, 12/17/2013 - 14:06 | 4254491 walküre
walküre's picture

They forgot that 99% of the people are not wired to put more leverage upon leverage. That's a privilege only reserved and understood by 1% of the population. Purely coincidental that this group of 1% has managed to become filthy rich.

Joe and Jane Sixpack may have taken the cheap credit offerings when they came in, they may have overextended themselves and run into a trap but they haven't even come close to understanding how cheap and cheaper credit can work for them if they maintain their credit ratings.

That is because neither Joe nor Jane Sixpack have a direct line to Ben or Janet to get the latest hot stock tips and get the heads-up about how many billions the Fed will be rotating into the TBTF banks which are serving the 1% who understood and played the game well.

The Fed will do nothing to support Joe or Jane Sixpack as they have feasted on their corpses and are not interested to reviving zombie consumers. Get it into your heads. The Fed is now in control of government more than ever as it owns more of the treasury's debt than ever. They will come for the collateral now to satisfy the debt service on higher interest rates.

The Fed wants higher rates to keep pleasing the 1% in this next round of "Fuck me harder Ben and Janet". Unless we fuck them back and shoot them, the parasites will not stop torturing the host which is all of us.

Tue, 12/17/2013 - 14:08 | 4254501 Harbanger
Harbanger's picture

"their attempts to issue cheap credit through the banks hasn't really worked."

Sorry, I hadn't seen your reply.  A car with zero down may just be dealerships moving their inventory rather than sitting on it.  Rates are low now, but they made it much more difficult to qualify for a mortgage or line of credit since the last crash. (rightfully so because of all the subprime defaults)  So there's room for them to go back to easy/subprime credit lending to pump liquidity into Main street.

Tue, 12/17/2013 - 14:11 | 4254506 MachoMan
MachoMan's picture

We have cost push inflation, not demand pull...  In other words, the effects of inflation can come at us in two primary ways...  ground up and top down...  and while I agree that ground up isn't happening, top down is absolutely happening...  this is why we get a bifurcated economy where everything we use and need (that we don't buy on debt) is skyrocketing in price, while everything we consider assets (and is debt laden) is decreasing...  [demand pull would have more universal price increases].  If you have enough money, then you can get out of the way of the steam roller....

Why do you think they want to ignite inflation proper?  The money drop to the banks is exactly what they want...  the system is designed for a purpose, after all...  the problem for them is that an ever increasing amount of the money that is supposed to be locked up in the system is seeping out...  this is where the effects of inflation come into play...  because it is possible to have inflation without having price increases if velocity is zero...  however, the best laid plans of mice and men.

Tue, 12/17/2013 - 14:31 | 4254584 corporatewhore
corporatewhore's picture

people aren't running out

its because my EBT card is zeroed out, i need a medical procedure at the emergency room (FREE!) and i've got to get a free turkey for xmas being handed out at the corner by some charity.

btw, i need my mega millions ticket and also give me one of those smirnoff airplane bottles.

Tue, 12/17/2013 - 13:06 | 4254324 AmCockerSpaniel
AmCockerSpaniel's picture

This recession talk is of little use here. We are informed, and for the most part have taken what ever measures we can. As for the rest..... They will just keep doing what they have been doing (it's all they have, or want to do). They will print to pay unemployment, and snaps. That is all. The gulf between the 0.1% and everyone else will just keep getting wider. They like that (they are not trying to do anything about it...RIGHT) It will end in war, here or over seas.

Tue, 12/17/2013 - 12:59 | 4254301 tradebot
tradebot's picture

Simply make more bullets

Tue, 12/17/2013 - 13:52 | 4254464 hidingfromhelis
Tue, 12/17/2013 - 15:19 | 4254675 Jumbotron
Jumbotron's picture

What the HELL does he mean that they've run out of bullets?


These asshole anal-cysts.....errr.....lysts think that QEternity's volume control is set to 10 already.'s not even up to 3 yet.  And the dial goes to 11 !!!!!!

Here's what they are going to do.  They are going to hyper-inflate this debt away.......because they are more afraid of a deflationary implosion than ANYTHING else.  Besides......there is no money to be made in a deflationary collapses until afterwards.  But a QEternity inspired carry trade all the way to the currency collapse......OH YEAH !!!!

DOW 35,000 here we come.  And let a recession come.  Fuck it !    That will just allow the Fed and the psychopaths to consolidate more power.  Think about it.  You think the politicians have ANY answers for the failing economy.  They abdicated that role 100 years ago this year.  So they are automatically, both Republicans and Democrats, going to tell Yellin and the Fed to "get to work".  Do whatever is necessary to ease the pain of my constiuents so I can keep my job and my paycheck and my perks and most importantly of pension.

Mark my haven't seen ANYTHING yet by the Fed.

Recession.....bah !!!!

Tue, 12/17/2013 - 12:38 | 4254215 Strider52
Strider52's picture

Like asteroids and earthquakes, it's not a question of if, it's 'when'.

Tue, 12/17/2013 - 13:00 | 4254302 Boris Alatovkrap
Boris Alatovkrap's picture

Most worse part of asteroid is lasting itch and chronic inflamation.

Wed, 12/18/2013 - 13:27 | 4257575 Boris Alatovkrap
Boris Alatovkrap's picture

Worse part of central bank fiat regime is chronic inflation.  Boris is preference asteroid.

Wed, 12/18/2013 - 13:25 | 4257577 Boris Alatovkrap
Boris Alatovkrap's picture

Worse part of central bank fiat regime is chronic inflation.  Boris is preference asteroid.

Tue, 12/17/2013 - 12:44 | 4254234 TheFourthStooge-ing
TheFourthStooge-ing's picture

"This is it, Lamont! This is the big one! You hear that, Elizabeth? I'm comin' to join you!"

Tue, 12/17/2013 - 16:47 | 4254982 DaddyO
DaddyO's picture

Wasn't Lamont the son?


Tue, 12/17/2013 - 12:44 | 4254236 Bryan
Bryan's picture

They are not "out of bullets" by any stretch.  There's lots more paper and ink left, damn the hyperinflation, FULL PRINT AHEAD!

Tue, 12/17/2013 - 12:46 | 4254256 insanelysane
insanelysane's picture

Agree.  All they need to do is eliminate the income tax and the economy would soar.  They could then just pay government expenses with freshly printed stuff.

Tue, 12/17/2013 - 12:57 | 4254287 Bryan
Bryan's picture

Silly, isn't it?  I don't get their approach.  It's OK to print money and increase the debt into the trillions, because debt doesn't matter and can be inflated away.  But it's not OK to print money indefinitely because hyperinflation is an issue?  I'm sure in their twisted minds that hyperinflation really is OK (as obviously the Zimbabweians and Weimarians thought too) but it's just a hassle to keep issuing bills with 2 or 3 more zeroes on them.   I think they really think this way... at least that's the attitude I remember from Econ 101 class in college.  Seriously.

Tue, 12/17/2013 - 13:14 | 4254350 XitSam
XitSam's picture

"... basically threw money into the economy"

Please correct me if I'm wrong ... they didn't throw money, they threw more debt!

Tue, 12/17/2013 - 14:48 | 4254630 BigJim
BigJim's picture

 Agree.  All they need to do is eliminate the income tax and the economy would soar.  They could then just pay government expenses with freshly printed stuff.

Agree also. Bammy can't get the Repugs to agree to a 'stimulus package'? Sure... but they'd eat up a 'tax-elimination' package like it was going out of style. And the QE necessary to 'pay' for it.

Private sector generation of moneylike collateral helps policymakers over long periods by:

  • Slowly reducing the demand for money
  • Increasing financial deepening
  • Supporting financial globalization

The more restricted the private sector’s ability to create safe, liquid, and moneylike collateral, the harder the public sector must work to supply it through deficits and easy monetary policy.

And there goes the problem with Volker making CDO's no longer collateral for more credit creation!


Tue, 12/17/2013 - 18:30 | 4255261 naughtius maximus
naughtius maximus's picture



Meanwhile in a congressional office a desparate politican reading zerohedge gets this great idea.. Of course! we don't have to tax people! WE CAN JUST PRINT THE MONEY!!!!!


But I've thought about this happening for years. You know it, I know it. This IS GOING TO HAPPEN!!!

Think how popular this is going to be. Its going to be huge!



wide is the gate that leads to destruction....

Tue, 12/17/2013 - 12:45 | 4254250 JamesBond
JamesBond's picture

once you embark on a ZIRP policy, nothing will or can change the status quo of interest rates except destruction of the economy or war.




Tue, 12/17/2013 - 15:26 | 4254697 dracos_ghost
dracos_ghost's picture

TPTB still on target for Keynesian stupidity:

Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better. -- Keynes

It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”

I find the last quote funny(in a depressing kind of way), a better translation "We are being run by short bus retards, so smoke 'em if you get 'em, literally"

Tue, 12/17/2013 - 12:46 | 4254251 Dr. Engali
Dr. Engali's picture

Next year at this time we will be reading: "What if There is a Recession in 2015?". By the way, we never left the depression we have been in since 2000.

Tue, 12/17/2013 - 12:49 | 4254257 ArrestBobRubin
ArrestBobRubin's picture

What you said Doc.

Tue, 12/17/2013 - 21:00 | 4255578 layman_please
layman_please's picture

It just proves 5 years is more than enough for sheeple to forget how 'normal' economy looked like.

Beating will continue until morale improves.

Tue, 12/17/2013 - 12:56 | 4254280 PrecipiceWatching
PrecipiceWatching's picture


Correct me if I'm wrong, but by most economic metrics, aren't we already in a Depression, much worse than the government created "Great Depression" of the 1930s?

Hidden of course by the massive and insane government spending, and manufacturing of fiat out of thin air?

It sure seems to be working.  Maybe these Keynesian/Socialist/Thieving MFs are right after all.....


Tue, 12/17/2013 - 14:24 | 4254557 Professor Fate
Professor Fate's picture

It you don't already realize we're in a depression just cut off the SNAP assistance, HUD housing aid, phantom tax refunds et al and see what happens in the streets of cities like Philadelphia, Miami, and Los Angeles.  Society in the U.S. is living on borrowed time and likely sooner, rather than later, the "Pay Balance in Full" option will come in the mail.  It may just take on catalyst to start the ball rolling and the parasitic ObamaCare may be just that catalyst as it sucks the last vestiges of disposable income from the near-extinct middle class.  Fate the Magnificent continues to purchase 1921 Morgans from APMEX in preparation.

Fate the Magnificent
"Push the Button, Max"

Tue, 12/17/2013 - 14:49 | 4254597 PrecipiceWatching
PrecipiceWatching's picture

So you like Silver over Gold?


Also, why 1921 Morgans instead of plain old bullion coins or bars?

I already have a large amount of bagged "junk" silver dimes and quarters.



Tue, 12/17/2013 - 16:40 | 4254949 Professor Fate
Professor Fate's picture

Because Morgan and Peace dollars are universally recognizable and very easy to barter with.  I just like the Morgans and 1921s are the least collectible (cheapest).


Tue, 12/17/2013 - 17:51 | 4255171 PrecipiceWatching
PrecipiceWatching's picture

Good advice, and sound thinking IMO.



Tue, 12/17/2013 - 15:20 | 4254683 Jumbotron
Jumbotron's picture

The psychopaths think that by NOT DROPPING anymore we are out of recession.

But we are still in the DEPRESSION that the RECESSION dug for us.  Just because we made it up the side just a little bit does not mean we are out of the pit yet.

Tue, 12/17/2013 - 16:18 | 4254854 PrecipiceWatching
PrecipiceWatching's picture

The word "yet" seems overly optimistic to me.

The numbers are so big, the government/Fed behavior so criminally abhorrent, and the resultant "pit" so deep, that I don't see any way out of this, short of crash and burn.


Tue, 12/17/2013 - 17:52 | 4255179 Jumbotron
Jumbotron's picture

Oh....don't get me wrong.  I used the word yet in the context of what an optimist or another one of these psycho economists might think.

I 1000% agree with your assesement.  This will end in blood and tears.......there is no other way.  What we find ourselves in is a 30 + / - year Grand Deleveraging Cycle in which we collapse in stages.....sometimes small, sometimes large.,,,,sometimes slow......others more quickly.

Depending on what is done or not done.....or in SPITE of what is done or not done by the psychopaths in the halls of political and financial power......will only determine how quickly or slowly we get to some sort of equilibrium and reset after the collapse.   But it is coming and is indeed already happening.  NOTHING CAN STOP IT !

Tue, 12/17/2013 - 19:06 | 4255340 PrecipiceWatching
PrecipiceWatching's picture

Well said!



Tue, 12/17/2013 - 15:55 | 4254774 AGuy
AGuy's picture

"Correct me if I'm wrong, but by most economic metrics, aren't we already in a Depression"

Yup, but that does not mean it can't worse. 2014 will likely have a recession in a depressed economy. Does it Make Sense Now?



Tue, 12/17/2013 - 16:06 | 4254808 PrecipiceWatching
PrecipiceWatching's picture

Let me dig out my college Economic (or Classical Mythology) textbooks and get back to you.  LOL.

Tue, 12/17/2013 - 12:51 | 4254264 astoriajoe
astoriajoe's picture

Out of bullets?

From what I hear, they've got plenty of those...

And I don't mean the metaforic kind.

Tue, 12/17/2013 - 12:50 | 4254267 Drifter
Drifter's picture

More bullshit.

It's been a depression since '08, QE is looting plain and simple (trillions for wall street zero for the people), and zerocare will crash what's left of the economy in 2014.

Tue, 12/17/2013 - 12:55 | 4254273 zippy_uk
zippy_uk's picture

Economic plan 'B'

Dear citizen, in the event of a global thermo economic collapse:


1. Identify a fall out room in your living area

2. Clear all contents, but leave a small table

3. Bend over table, using the brace position with legs apart

4. Brace for impact


Economic survival is about being prepared, so be prepared to have much lower economic aspariations

and in general know your new place in the world. You government may take over your home if you




Tue, 12/17/2013 - 13:57 | 4254474 Bryan
Bryan's picture

And don't ever forget your towel!

Tue, 12/17/2013 - 12:57 | 4254285 WTFUD
WTFUD's picture


Tue, 12/17/2013 - 12:57 | 4254288 tlnzz
tlnzz's picture

The very next time the Federal Government gets in a bind, they will go after private pension funds and "bail-ins". There’s plenty of money in private pension funds. The only problem up to now is how to steal it, and how to get away with stealing it.

Tue, 12/17/2013 - 14:28 | 4254575 B.J. Worthy
B.J. Worthy's picture

No problem at all, really. Detroit didn't even require lube.

Tue, 12/17/2013 - 16:03 | 4254786 SDShack
SDShack's picture

I agree that's the plan, but the only way they can pull that off is to instill so much fear in the people that they are willing to be bailed in on their pensions. That means a massive stock market crash. Something on the order of at least 50%, and probably much more. Not so sure TPTB are ready for that on a national scale. Too much unknown about how the masses react if that happens. TPTB can't risk riots in the streets with the anger directed at Wallstreet and bankers. Pitchforks and guillotines are the only thing they fear. So I suspect we are quite a way from playing the bail in pension card... but I am positive they have a contingency plan for it eventually. But that will come after all the other easy assets are already taken. Still a lot of private property held by ordinary citizens. That has to change first. I suspect the plan is to use Detroit as a model. Just keep letting those various shitholes fail one after another and keep the confiscations small and under the national radar. It will get interesting when a state and not a city contemplates bankruptcy. That's when you will know TPTB are about ready to launch the final solution.

Tue, 12/17/2013 - 12:56 | 4254289 fijisailor
fijisailor's picture

It's not that they're out of bullets.  It's that they can only shoot paint balls now.  How many of those does it take to kill the beast?

Tue, 12/17/2013 - 12:59 | 4254298 q99x2
q99x2's picture

Glad they are going to have a 2014 this year.

Tue, 12/17/2013 - 13:16 | 4254364 No Euros please...
No Euros please we&#039;re British's picture

Gonna party like it's 1929.

Tue, 12/17/2013 - 20:16 | 4255466 tlnzz
tlnzz's picture

Or 1860. You know what came next.

Tue, 12/17/2013 - 13:04 | 4254315 WTFUD
WTFUD's picture

The great ' what if?' not ' what the fuck. . "
Get a fucking proper job if this is the best shit. . .

Blog on the landscape.

Tue, 12/17/2013 - 13:06 | 4254320 eddiebe
eddiebe's picture

Is this a trick question? Last time I checked, we never got out of the last recession.

Tue, 12/17/2013 - 14:34 | 4254587 forwardho
forwardho's picture

Indeed, I reject the whole premise of this article. There has  been no recovery.

We were told a lie, based on manipulated numbers from the BLS.


Tue, 12/17/2013 - 13:23 | 4254348 Yen Cross
Yen Cross's picture

    The only thing that has flourished in the last (5) years is the Free Shit Army and the Banksters that throw gobs of cash at the politicians. The middle class has been completely fucking gutted in the process. I think this ACA debacle might just be what finally waterboards the economy to death.

Tue, 12/17/2013 - 13:17 | 4254367 ejmoosa
ejmoosa's picture

We've not seen a natural acceleration/expansion of the US economy in decades....

Tue, 12/17/2013 - 13:20 | 4254376 WTFUD
WTFUD's picture

Ok down arrow ' what if i clubbed you to death while you were clubbing a baby seal to death? ' would i be out for christmas 2015?

Tue, 12/17/2013 - 13:26 | 4254385 squid427
squid427's picture


You rock for the Sanfoford and Son reference

Tue, 12/17/2013 - 13:30 | 4254394 Shadow750
Shadow750's picture

"They" are not yet out of bullets.  There is a lot more money for them to steal yet.  401K plans, savings deposits, HELOCS they can foreclose on etc etc etc.....

Tue, 12/17/2013 - 13:38 | 4254421 squid427
squid427's picture

@Yen Cross

Thank you for that amazing video you posted last week about the HFT traders, truly jaw dropping stuff. I put it up on my twitter and begged people to watch it. Not a single reply.

Tue, 12/17/2013 - 13:50 | 4254451 Yen Cross
Yen Cross's picture

    Thanks. I'm glad you got something out of it.

Tue, 12/17/2013 - 13:43 | 4254433 moneybots
moneybots's picture

"To stave off what looked like financial and economic Armageddon, the Treasury Department first under Henry Paulson and then under Timothy Geithner, and the Federal Reserve under Ben Bernanke, basically threw money into the economy"


They threw money to the bankers, not into the economy.

Tue, 12/17/2013 - 17:19 | 4255105 Westcoastliberal
Westcoastliberal's picture

Exactly. Banksters are doing just fine; the economy, not so much.

Tue, 12/17/2013 - 13:52 | 4254457 SmittyinLA
SmittyinLA's picture

this is a no brainer, we will invade Africa

Tue, 12/17/2013 - 13:52 | 4254458 moneybots
moneybots's picture

"And we’ll be paying not only for the recession of 2014, but also for the recession of 2007-09, which was deferred, but not worked out."


And 2008 was also deferred from 2001, which was not worked out and the recession that should have followed the 20% DOW drop in 1998, which was deferred, but not worked out, resulting in blowing the top off the nasdaq.

They keep trying to defer the full correction of excesses, while piling up even more.



Tue, 12/17/2013 - 13:56 | 4254468 moneybots
moneybots's picture

"Combined, the Bush TARP and the Obama stimulus were some $1.5 trillion mainlined into the American economy."


Mainlined into the banks.  Denninger pointed out that the trillions the government have borrowed have roughly matched the bank losses in the 2008 crash.

Tue, 12/17/2013 - 14:13 | 4254511 Straw Dog
Straw Dog's picture

"But the Fed, blinded, thinks that it has to support the banking sector and try to do something about employment."

The Fed is OWNED  by the banking sector. To quote Charles Hugh-Smith:

The Fed has a dual mandate, and no, it's not stable prices and employment. The Fed's real dual mandate is:

 1) Preserve and protect the banking sector's power and share of the national income

 2) Preserve and protect the Fed's political and institutional power.

To the Fed, the economy and employment are secondary considerations to the above

Tue, 12/17/2013 - 14:17 | 4254527 robertocarlos
robertocarlos's picture

Those TARP assets are worth at least 50% more now. And those GM shares were a winner.

Tue, 12/17/2013 - 16:15 | 4254853 gatorengineer
gatorengineer's picture

They have had little experiments everywhere.   Japan, Cyprus, Poland.  They are not out of bullets by a long shot.


They are also not out of made up statistics by a long shot.


Dec 2014

Unemployment 6 percent

GDP 2%

QE4EVA 100 Billion a month

S&P 2000


Tue, 12/17/2013 - 16:26 | 4254887 theprofromdover
theprofromdover's picture

This reminded me again of my thoughts at the time in 2008. What allowed them to consider Goldman Sachs a bank, and even more, what made them 'of systemic importance'?

Just brushed under the carpet -Little Timmay and Hank the Hoarse should have been hauled off to SingSing.

Had the squid been put out of its misery, I suspect the entire banking system would have been cleansed in weeks

Tue, 12/17/2013 - 16:25 | 4254893 22winmag
22winmag's picture

We've been in a *supressed depression* for five years now.


I'm sick to death of these silly "What if there is a recession" headlines.

Tue, 12/17/2013 - 17:16 | 4255088 Westcoastliberal
Westcoastliberal's picture

I'm with you, 22.  The recession has blossomed into a full blown Depression if you look at the real economy instead of gov and Wall St bullshit.  The actions taken by the oh-so revered academics reminds me of this clip:

Tue, 12/17/2013 - 17:10 | 4255071 el Gallinazo
el Gallinazo's picture

"But the Fed, blinded, thinks that it has to support the banking sector and try to do something about employment."

Duh!  The Fed is a private corporation owned by the big banks and thus by the real owners of the giant banks.  Does Lira think it is owned by We, the People?  Preserving the giant insolvent banks is their only true mandate.  The employment thing and tapering is just blowing smoke up our collective assholes. Nomi Prins got that one totally right, though I do not have confidence in her opinion that the Fed will hold it together for 2014 without a serious conflagration.

As to inflation and commodities, Lira has not even considered the deflationary effects of a "recession" on steroids.  But PM's and tangible things, especially the really essential ones like food, will hold value better than paper promises.   When the world central banks lose control of interest rates (or loose control) so that the 10 year goes above 3.5-4%, then the whole quadrillion in derivatives comes tumbling down.  When it happens, it will end the global financial system as we know it.  (New World) Order from Chaos.  However, our owners seem to have some serious surprises for us in 2014-15, and it will not be business as usual.  Lindsey Williams, despite his ludicrous and hokey presentation style, with his geezer "elite friends" may have nailed it this time.  What really tipped me off about William's last presentation was that he knew the real deal about the "smart" digital meters and what their true purpose is.  Defintely not the sort of thing I would expect him to be on top of unless his "elite friends" were feeding him the real deal. Time to hide in a Faraday cage.

Tue, 12/17/2013 - 17:19 | 4255104 wtlf555
wtlf555's picture

I totally disagree. There is plenty that the Fed and Treasury could do. There is no end to QE other than consumer inflation or bubbles popping. With misallocated capital and inventories consumer deflation is probably more likely. And if bubbles pop the resulting drag on the real economy usually decreases demand and decreases consumer inflation. Don't get me wrong at some time their will be hyperinflation but only when the supply of cash to the public (not the primary dealers) is high and only after debt is written off - years away.


In the meantime I see this happening. QE to the rich will no loger be the hip thing. For political reasons and fear of killing the host. QE will move to the public. Not because the govt or cb wants to but through necessary appeasement

* more Walmart events where a large corp takes a hit on EBT cards but is bailed by the government - in effect giving the public free money

* some token of penance for the ACA being such a sh$%^$tshow. A tax credit of $2,000 for every household that purchased insurance

* either the trillion dollar coin or the Fed/govt writing off treasuries on the Fed balance sheet to provide ample wiggle room

The game is almost up - 2014/2015 are going to be the years of appeasement to the masses so that the con can continue 

A recession in 2014 would easily weaken the host enough the the game could end. The financial/govt cabal will make sure that does not happen. getting QE directly to the public will continue the con 2-3 years. Like a drug dealer giving free product to a junkie to ease the jitters so the junkie can go rustle up some real money

While talking with my 22 yo son about my generation and his grandmothers generation spending all we made plus borrowing $500,000 per person so that each person lived a million $ standard of living and that his generation will be expected to pay it back and somehow live at the same time effectively a standard of living in poverty I told him his generation needs be suspicious of the free handout and maybe think about crashing the system

The sooner the system crashes the sooner the rebalancing effects are felt by those responsible as opposed to the innocents

I never did come up with a concrete way 30-40 million gen y and z'ers could crash the system. They could be joined by 100 million or so others who do not have government jobs or pensions and therefor nothing to lose.


If 130 million people took all their cash out of the banking system at once?

If 130 million people bought an ounce of gold each with cash or on credit?

I'm not advocating bad things but my sons generation is in a bad place - they can work as indentured servants at a drastically reduced standard of living for the rest of their lives or they could endure a finite financial calamity/depression which would not dramitically affect there already subsistance living but would give them a free future. In this free future they would walk among civil pensioners and those who relied on government promises who had absolutely nothing and were literally starving to death. I hope that my sons would have compassion but ultimatly they nor their peers are not required to live burdened by others mistakes.  


Tue, 12/17/2013 - 17:26 | 4255117 RMolineaux
RMolineaux's picture

Lira is apparently unaware that the Fed is required by law to maintain full employment.  That requirement, of course, can contradict its mandate to maintain a stable currency.  So it has to strike a balance.  The Fed also has responsibilities to supervise member commercial banks.  It has woefully neglected those responsibilities during the past two decades, thereby exacerbating the crash of 2008.  A stock market flop in 2014 can certainly be expected.  Will corporations continue to buy back stock to protect management bonuses?   I believe that is a certainty, providing they con continue to borrow at zero interest rates.  But how will Yellen the magician keep interest rates low without buying Treasuries?  Perhaps China will buy more Treasuries subject to certain conditions.

Tue, 12/17/2013 - 17:46 | 4255152 ncdirtdigger
ncdirtdigger's picture

GREEN SHOOTS AHEAD! I feel moar betterer now.

Tue, 12/17/2013 - 18:42 | 4255291 CoastalCowboy
CoastalCowboy's picture

Just think how much worse things would be if Obama were not our president! /SARC

Someone had to say it, and the "p" in president was not capitalized on purpose. I just want to barf whenever some drooler ever brings up that statement.

Tue, 12/17/2013 - 22:52 | 4255783 The Final Straw
The Final Straw's picture

The Fed needs only 1 magic bullet. Just ask JFK.


Wed, 12/18/2013 - 06:43 | 4256405 kurt
kurt's picture

Too much self promotion here for me and it DOESN'T answer the question it poses. This reminds me of Rumsfeld answering the question he wanted you to ask and not the one you did, and then proceeding to ask and answer his own questions. 


It would look like: a shoeless man in a cardboard box city, feet purple. A dead guy. A innocent girl being raped by her uncle because they had to move in together, and mom is out prostituting herself. San Diego to Fresno visually identical to northern Baja Mexico. Horse carts back on the streets. A dead family. A burned up neighborhood. Broken glass. Puke.

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