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When The New Normal Fails: The "Problem With Traditional Economics" In A Bizarro, Centrally-Planned World
They call it the New Normal(sic) for a reason: that reason is that as a result of 6+ years of central-planning interventions in the global economy, an experiment that has grown far more monstrous than anything the USSR ever tried to do, everything is now broken: all conventional economic linkages, relationships and correlations you learned about in university are no longer applicable or practical in a world that has taken both Keynesian and monetary theory beyond their wildest extremes.
The result is a ghoulish, macabre collage of mishmash theories applied haphazardly in hopes that something will finally stick, and if not, at least kick of the day of reckoning a little longer.
All of that will fail, and, just as the Austrian economists predicted from day one, the entire house of cards will come crashing down in a heap of record credit. Yes, it could have been different, had the people in charge taken the correct, but difficult decision when Lehman failed, and purged the system of its credit excesses. But they didn't, as that would have wiped out trillions in equity value where the bulk of the "wealth" and net worth of the legacy status quo is located.
So they kicked the can.
For all those sick and tired of watching the grotesque pantomime in which only the rich get richer, while everyone else is ever more impoverished, we have good news - the experiment is coming to an end. Only it is not us postulating that the entire "modern" economic system is on its last breath - here are seven slides from Citi explaining the very much intractable "problems with traditional economics", and why the economic Titanic, floating on an ocean of central bank liquidity, is approaching the proverbial iceberg.
So, without further ado, here is everything that is broken with the traditional economic system as applied in today's bizarro world.
* * *
At the top level, the problem reduces to some quite simple axioms: savings, assets = liabilities, credit creation, and the inability to do so when there is simply too much debt already.
When the disconnect between theory and reality detailed above manifests itself in the real world, people finally start asking questions, such as "who really creates money." They are stunned when they learn the answer, an answer which also explains why the created credit flows into assets and not into the broader economy.
Because where in theory monetary injection should lead to benign economic inflation and GDP growth...
... Instead the $5 trillion+ in excess reserves promptly found their way into the "other" inflation: asset prices, such as bonds and stocks, such as a 10 Year at 2.5%, such as the S&P at 2,000.
But why is inflation rushing into assets and not labor, wages, and broad prices levels? Simple: as Citi says, "credit will be created wherever it sees the most attractive return", or in the case of the New Normal, stock buybacks for example, if only for equity holders.
So since credit won't go where it should, the Fed thinks it can nudge it, and yet it fails as iteration after iteration of the "same old" is tried (QE1, QE2, QE3, soon QE4, etc) and assets rise to ever higher levels, the economy remains worse than ever, and the central planners are increasingly without options if and when a true shock to the system occurs. As Citi warns "wearing lifejackets doesn't stop the bath overflowing"
End result: more of the same in a closed loop, as the Keynesians and the monetarists say the only thing they can say when all their efforts fail: let's do it again, but this time MORE!... or, in the words of Citi's Matt King, "You can't unblock the plughole by pouring in more water." But the Fed sure can and will try.
And, as Citi concludes, if you leave the taps on even more, nothing happens to the economy, "but it does make financial assets float."
Translation: whereas in 2007 the mantra was "as long as the music is playing, you've got to get up and dance", the maxim of the New (ab)normal should probably be: "as long as the water is flowing, one has to get down and swim."
Just hope you have a lifejacket on when, to paraphrase T.S. Eliot, rational voices finally wake us, and we drown.
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The terrifying truth!
FAIL
Here's to hoping the rich have purchased some shiny to leave behind after we've dumped them headfirst into a chipper / shredder.
Guillotines are sooo... old school.
But why is it taking so fucking long? With all those swimmers it must be a very large bathtub??
Central Banks printing money and backstopping corrupt banks/corporations/insurers is the problem.
It devalues and defames the labor of the individual.
Taxation/regulation without consent or representation... in other words, theft, period.
"Full FAITH and credit"...
The general discrediting of governments, and/or democracy, for conducting or allowing "central planning," is misleading. The problem is that the so-called "central planning" is based on ENFORCED FRAUDS, which are the result of the best organized gangs of criminals, the biggest gangsters, the banksters, applying the methods of organized crime to capture control over the powers of government.
People who blame "democracy," and/or label what exists as "socialism" etc., are not perceiving correctly. REAL "central planning" is doing what is was designed to do. It is an error to think that social engineering does not work. However, it works in ways which serve the interests of the best organized gangs of criminals who are able to thereby dominate the political processes, so that the "central planning" is actually an integrated system of legalized lies, backed by legalized violence, which is delivering fantastic short-term benefits to those who made and maintained that system.
In my view, most of the articles on Zero Hedge are too superficial. Only some of the comments are somewhat superior. (Of course, those are way better than the bullshit about this presented on the mass media.) The REAL situation is the governments are the biggest form of organized crime, controlled by the best organized gangs of criminals. The more they benefit from being able to to that, then the more they can do it, so that their "central planning" is actually the triumph of the best organized criminals controlling the government to benefit them, while screwing everyone else. Of course, those systems are operated by the best professional liars and immaculate hypocrites that money can buy, and therefore, enough of the people are fooled enough of the time by those lies, especially since those lies have been backed by violence for generation after generation. However, any facile notions that the "solutions" are return to relatively more "free markets" are pie in the sky impossible ideals, since the already established systems are central banks doing their kind of central planning, which works fantastically well to benefit them. Since nothing less than a radical revolution could change the established systems, it is actually silly to recommend "returning to more free market capitalism."
A deeper analysis reveals that civilization not only operates according to the principles and methods of organized crime, but also MUST necessarily do so, because humans operate as entropic pumps of energy. We could have a greater use of information, that enabled higher consciousness, so that the systems of organized lies operating robberies were in better overall dynamic equilibria. However, those kinds of genuine solutions which are based on the REAL situation are practically impossible, since the few that penetrate more deeply towards understanding the banksters as the SOURCE of the problem, as the SOURCE of the public "money" supply, as frauds enforced by governments, still tend to be too superficial, and so, propose silly "solutions" based on going backwards, to the same old-fashioned impossible ideals, which never really existed, and anyway, could never really exist.
When the New Normal fails, there will be psychotic breakdowns and crazy collapses into chaos of the established systems, since vast amounts of energy has been pumped into building social storms, that are going to surely blow through, for the reasons stated in that article above:
"When the disconnect between theory and reality detailed above manifests itself in the real world, people finally start asking questions, such as "who really creates money." They are stunned when they learn the answer, an answer which also explains why the created credit flows into assets and not into the broader economy."
However, in my view, it is goofy to think that Austrian economic theories would somehow provide better "solutions," when those are still operating within the same frame of reference of false fundamental dichotomies and their related impossible ideals. If enough people understood that MONEY IS MEASUREMENT BACKED BY MURDER, then we might be able to develop better solutions to the problems, which necessarily require real, radical, revolutions to be resolved.
Changes made by such radical revolutions in the SOURCE of the public money supply should be inspired by intellectual scientific revolutions. However, despite Zero Hedge being relatively one of the best alternative news Web sites, in my opinion it follows the typical pattern of about 90% better analysis, followed by about 10% collapsing back to the same old bullshit "solutions" which would actually make the opposite continue to happen in the real world, because those "solutions" are NOT realistic, since those continue to be based on impossible ideals.
Since the production of destruction controls production, the most important form of the "labor of the individual" is how they participate in the production of destruction. However, we are drowning under the bullshit social stories of the biggest bullies, especially the banksters, which indeed have made a Bizarro Mirror World ... BUT, things are actually way more BACKWARDS than any of the featured articles on Zero Hedge present, while only some of the comments appear to approach a better understanding. "The problems with traditional economics" are much more profound than are generally understood, because those trace back to enormous errors in the philosophy of science.
The triumphs of enforced frauds engaged in the central planning of the political economy are facets of the degree to which the vast majority of human beings understand almost everything backwards, which contradictions keep on getting more significant, as progress in science and technology gets employed inside of social pyramid systems based on backing up lies with violence.
My view is that we need better "central planning." However, that should not be seen as in a false fundamental dichotomy against "free markets." ... MEANWHILE, I suppose, it practically does not matter whether my analysis is correct. The established systems are based on backing up lies with violence, in which systems the only significant opposition groups are controlled to stay within the same frame of reference, which means that we are NOT going to get any better "central planning," except, perhaps, after the established systems madly destroy themselves! In effect, we will thereby get a return to some "free markets" in the worst possible ways, as the runaway triumphs of enforcing frauds madly destroy themselves, resulting in the psychotic breakdowns and collapses into crazy chaos, as severe social storms blow through, making any other theoretically better solutions be nothing much more than dust in that wind.
The real question is: in what kind of world will we wake up the next day?
Don't think pretty!
I finished building my Mad Max car a few months ago, just FYI.
Cool! I've got a 25 year old Suzuki GV 1400 Cavalcade. I could remove the mufflers and screw some human skulls on the top case and saddle bags. Then we can team up and scare everybody shitless. Think of the free women and beer.
A world filled with politicians against brickwalls blindfolded.
The criminal JustUs system.
Right now, the most important thing for the central banks and their owner international banks is to try to find some way for any future disaster not to be pinned on them. In the past they just blamed it on governments or rogue leaders. No one is buying the evil foreign people meme anymore.
I am guessing that they would like to find some way to keep their heads if not all of their wealth in the event things go badly and they are blamed for everything.
It is what happens when parasites cannot control their parasitic nature and take things too far.
Until printing money stops working, they will print money at every problem.
Very, very glad Zerohedge finally is calling the whole balance sheet of the Fed as ...excess reserves. Very glad. Thank you.
I can't manage to convince people of that fact, yet
It is quite simple to understand the economy:
Goods flow one way, and money flows the counter way
Goods create money. Money does not create goods.
Money only claims goods
It is that simple.
Reserves and Credit/debt are created simultanesouly
But:
Credit/debt is self extinguishing via pay off or default
Reserves are NOT self extinguishing.
Fed or Central Gov has to exinguish them, otherwise they float around CLAIMING FUTURE OUTPUT
Those are called: wait for it...........
SAVINGS
Youi must understand the difference between:
RESERVES
CREDIT/DEBT
You can't understand how the system works if you do not understand the difference between both
your ECON book is old and outdated, Krugman said so and he has a Nobel Prize...
Fed purchased $5 trillion of derivative losses from bank oligarchs.
Still ongoing until somebody is shot. Soon
Foo Fighters - No Way Back
http://www.youtube.com/watch?v=fTaOlBWcl48 (3:17)
"Centrally planned" = Ownership.
you're p0wned.
speak for yourself, I hold my titles...
kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/9/22_Two_Shocking_Charts_Expose_The_Stunning_Collapse_In_The_US.html
The Financial Times put it this way: “The fall in traffic volumes on U.S. roads since 2004 has undercut the financial assumptions behind a series of deals devised in the middle of last decade during an infrastructure investment boom.” Note that the FT mentions “U.S. roads” in the plural because what is happening in Indiana is not unique. It is happening across the United States.
Simple. Debt burden = deflation = lower long term rates = tbonds higher. Sell the rips. Buy the dips. Rinse and repeat. Like taking candy from an afflicted baby.
Articles like this only play into the charade of "We tried". The presumption is the Fed is an honest central bank trying hard to "do the right thing".
The reality is that as a cartel for the private banks they never expected Fed money printing to do anything but enrich themselves -the banksters - which it has with taxpayers debt.
There is no point telling us to put our lifejackets on.
As in the SImpsons' cartoon wear the two aliens run for office wear Clition and Bush mask and are demasked beofre the election they reply "What are you going to do you only have a two party system"
The vote is a placebo to allow people the illusion they live in a democracy. All representives must run as independents and no party. On major issues there must be referendums.
The is what the 99% is about.
They 99% have no control over the exportation of the jobs of the middle class, robbing senoirs with 1 % interest, doctors robbing the population with riducuous pricing and so on.
Ps
Where's the referumdum votes for:
"Should we abolizh the Fed?"
"Should past fed govenrners be sued and charge criminally for their theft?"
Should the CEO of the major banks be sued for the theft of trillions?"
The Fed caused the dot-om bubble it caused the housing bubble and it has caused this stock buuble.
I can't put my lifejacket on it was stolen.
Lawsofphysics: speak for yourself, I hold my titles...
Yea, how's that hut tax?
....and about that slave tax on top of it? How's that workin' out for ya?
You don't own shit. You own the temporary right to us the shit you have title to for as long as you pay your masters.
You fucking humans are funny bunch, you pay rent to live on your own planet.
When the "taxman" lives next door, I am pretty confident in my "ownership.
Hey asshat, all organisms pay rent you dumb fuck (work or starve, eat or be eaten - what's a little tax in that context?).
If you are paying more than 15% tax you are a dumb fuck.
"The government comes for the regular people first" - Bill Cosby.
I wouldn't be the first to post this but it seemed too apropos:
TOOL - Learn To Swimhttps://www.youtube.com/watch?v=D7ErpFBO7RI
Am really beginning to enjoy the Fallout from this Kabuki Theatre which rises exponentially week by week month by month year by year.
Well Noah ( Barry ) once he built an Arc . . . . .
and patched it up with greenbacks . . . . .
One more bailout . . .
You say this like its stupidity. Its not. Its economic warfare, tonto.
We're the indigenous people.
increase in income equals decrease in debt which equals more room for more debt which equals pallets of cash coming out of black helicopters near you.
all hail the god of fiat. heil dinarius, heil god!
lawsofphysics:When the "taxman" lives next door, I am pretty confident in my "ownership.
So stop paying property taxes and get back to me. I'm pretty sure your taxman neighbor ain't gonna be sticking up for you. He works for the SKIM, not you.
Name calling never helps your POV.
You do not own shit.
Nothing.
"If you are paying more than 15% tax you are a dumb fuck."
But if you're gonna go with name calling...I'm guessing your the dumphuck if you're actually paying 15%.
I pay ZERO income tax.
It can be done. Legally.
Your taxman neighbor works for this guy.
http://www.washingtontimes.com/news/2014/sep/23/obama-salutes-marines-wi...
Hate to break it to you but the centrally planned economy in the US began with the New Deal. Its successes and failures since then are America's economy.
If you can figure out what happened and why during that time, you may have a handle on what is happening now and where it will lead. It's not where most people think.
Agreed, but it was put on steroids with Johnson's "Great Society". The New Deal was not immoral, it was bad economics. Great Society was immoral and QE is approaching satanist. But thats how the Bolsheviks and neo Bolsheviks roll ... when they are physically allowed to.
Well if Citi is publishing this credo now, at this stage, they must have sold off all of their bad debt and be seriously short some debt markets. ZH was talking the same thing 5 years ago.