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"Hope Is Not Good Policy" - Saxo Bank Warns The Entire World Is Headed For A Minsky Moment

Tyler Durden's picture




 

By Saxo Bank's Steen Jakobsen

Surely not this old chestnut – again?

‘Interest on debt grows without rain’ – Yiddish proverb

This proverb explains most of what goes on in policy circles these days. We are now watching Extend-and-Pretend, Episode VI: Promises for improvement amid ever growing debt levels.

In brief, we’re still working with the same dog-eared script we were introduced to all of five years ago, when markets had stabilised in the wake of the financial crisis: maintain sufficiently low interest rates to service the debt burden.

In other words, pretend to have a credible plan, but never address the structural problems and simply buy more time. But while we were able to get away with this theme for an awfully long time, the dynamic is now changing as the risk of low inflation (and even deflation) is a brick wall for the extend-and-pretend meme. Yes, interest does grow without rain, and the cost of maintaining and servicing debt grows especially fast in a deflationary regime.

Mads Koefoed, Saxo Bank’s macro economist, projects US growth at around 2.0% for all of 2014. That will be the sixth year with US growth near 2.0%, so despite lower unemployment and a record high S&P500, the economy has a hard time escaping that 2.0% level.

The US may be getting back to work, but why are growth rates
so stubbornly stuck at the 2.0% mark? Photo: Thinkstock

Any talk of higher interest rates is hard to take seriously when US growth is going nowhere and world growth is considerable weaker than was expected back in January (or as recently as July, for that matter). It seems everyone has forgotten that even the US is a part of the global economy.

The fourth quarter is always the most politically interesting time of year. Countries need to get their new budgets in order. The EU, IMF and World Bank will need to pretend they agree or accept the weaker data, which has to mean bigger deficits.

It’s a tiresome exercise to watch denial-in-action as EU governments and other policymakers try to make something so obviously unpalatable go down easy in their internal reporting. '

It’s obvious that buying more time (extending) is always the number one priority, followed by projecting (pretending) that forward looking growth will reach an ever-higher trajectory in order to make the budget fit within the supposed constraints. Or in France’s case, the recent unilateral abandonment of meeting budget targets for the next two years is already a fait accompli. Who’s next?

Such behaviour would cost you your job in the private sector, but in the economic model of 2014, which reminds us more of the Soviet Union than a market based economy, it’s par for the course. But, many would protest, it would be even worse if we hadn’t done so much to “save the system”, right?

Well maybe, except for the fact that those economies where the belief in State Capitalism is strongest – Russia, China and France – are all at the end of the line. Time has caught up.

Negative productivity, capital flight and a system built on protecting the elite is failing.

France is now moving from recession to depression. China is moving quickly from denial towards a mandate for change, Russia’s future has not looked this bleak since the late 1990s. Meanwhile, the US continues at a sluggish 2.0% rate of growth. Investors and pundits seem to have forgotten that we were promised 2014 would be the end of the crisis.

China's efforts to build a better, more prosperous society has led to a rethink
of its economic policies in the last 12 months. Photo: Thinkstock

Instead, we are speeding towards the inflection point at which debt becomes harder to service because pretend-and-extend policy making has created a depression in investment and consumption.

The public debt loads continue to inflate across Europe: Portugal’s public debt has ramped up to a staggering 130% of GDP, up from about 70% in 2007. Greece’s public debt load, even after the restructuring of Greek debt a few years ago, has swelled to 175% of GDP. The EU now has far more systemic risk than it did at the beginning of the crisis.

With zero growth or as our economist Mads sees it, 0.6% with the arrow pointing down, debt levels continue to rise relative to GDP. And most importantly, the current flirt with deflation will make servicing the growing debt even more expensive.

The nightmare for both the European Central Bank and the world is deflation, as it’s a tax on debtors and a boon to net savers. The new reality is that we currently stand face-to-face with the very deflation risk that just about everyone denied could ever happen when Q1 outlooks were written.

Two other global threats (or time bombs, if you will) outside of the EU are risks from the growing costs of servicing debt in China and the US. In China, the governments – national and local – have piled up considerable debt, but it is the overall debt service costs in all of China that are the real concern, which have only grown so large with the dangerous assumption by Chinese banks, companies and citizens that they can count on a public bailout.

According to a Societe Generale analyst, total debt service costs (including maturing debt and roll overs) in China are at nearly 39% of GDP. Compare that with the closer to 25% of GDP for the US in 2007.

In the US, interest on US government debt cost over 6% of budget outlays in 2013. This is relatively down from its worst levels when interest rates were much higher, but only because the Federal Open Market Committee has so drastically lowered the costs for the US government to issue debt with a zero interest rate policy.

And now the debt load is vastly larger than it was before the financial crisis, at 80% of GDP (net debt according to IMF) versus 45% of GDP a mere 10 years ago.

So are we actually to believe that the Federal Reserve can lift the entire front-end of the curve from 0-1% (current rates out to three years) to 2-4% over the next two years without adding massive further stress onto the deficit, and only adding to the debt?

Servicing 2% interest when growth is 2% means you are doing worse than standing in place if you also have a budget deficit.

Whatever the timing, the US, China and Europe are all headed for another Minsky moment: the point in debt inflation where the cash generated by assets is insufficient to service the debt taken on to acquire the asset. Productivity growth in the US last year was +0.36%. The real growth per capita was about 1.5%.

Anything which is not productivity is consumption of capital. So, the only way to grow an economy without productivity growth is to do so temporarily through the use of debt – about 75% debt and 25% productivity growth, in this case.

Since the 1970s, US productivity growth rates have fallen by 81% – the move onto the internet has ironically made us bigger consumers and less productive. Had we remained at pre-1970s productivity, the US GDP would have been 55% higher and the outstanding debt to GDP would be easily fundable.

* * *

Anecdotally, and by way of conclusion, I just returned from Singapore on business.

Singapore, to me, used to be the most rational business model around. Its founder Lee Kuan Yew was one of the greatest statesmen in history. Now, productivity is collapsing in Singapore. They are, like us, becoming the Monaco of the world — an economy based on consumption and not on productivity and growth.

The developed economies are growing old in demographic terms, but we’re still not wise enough to realise that our current model is a Ponzi scheme rushing toward its inevitable Minsky moment. No serious policymaker or central banker is talking about the truth told by simple maths and hoping that things turn out well. Hope is not good policy and it belongs in church, not in the real economy.

Bastion of forward -thrusting, aggressive capitalism Singapore has recently witnessed
a collapse in productivity that epitomises the global malaise. Photo: Thinkstock

 

 

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Sat, 09/27/2014 - 20:11 | 5263683 TuPhat
TuPhat's picture

So does this mean it's all bad?

Sat, 09/27/2014 - 20:14 | 5263697 knukles
knukles's picture

Not necessarily.  The guys at Goldman have a nice bridge you can buy.

Sat, 09/27/2014 - 20:19 | 5263709 NoDecaf
NoDecaf's picture

Hope is not a plan.

 

A common saying in the army. It's one of the positive things I got from there...

Sat, 09/27/2014 - 20:20 | 5263715 knukles
knukles's picture

That's right.  But when you add in some Change with the Hope, then you're all set 
Now, what about a nice bridge?
No?
Could I interest you in a Perpetual War, loved by Progressives?

Sat, 09/27/2014 - 20:53 | 5263770 rwe2late
rwe2late's picture

 

Why do you only single out alleged "progressives"?

Are Bush, Cheney, David Cameron, the Secretary Generals of NATO,

CEOs of MIC corporations,

Netanyahu, et al,  all "progressives" in your imagination?

Sat, 09/27/2014 - 21:06 | 5263786 X.inf.capt
X.inf.capt's picture

another saying from the army

BOHICA!

bitchez!

something tells me when this falls apart, someone other than the bankers will catch the blame...like the liberals, conservatives, goverment, pensioners, welfare recipients, tea party, YOU, ME, my dog....or someone...

Sat, 09/27/2014 - 23:17 | 5264057 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

Well, yes, margin debt is extreme now, I wonder how THAT fits into the USD being so strong now, I am befuddled, and I dug around...

Gold, Bitcoin, crude oil, cotton, food commodities are all down.  Treasuries and stocks are only up a little bit (past three months, as the US$ has screamed higher).

EDIT: + 1 for another factor/reason the US$ is up...

"King Dollar?"

http://goo.gl/2GmeMi

         
Sat, 09/27/2014 - 23:38 | 5264095 max2205
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XXX RATED MOBILE ADS....COME ON TYLER

Sat, 09/27/2014 - 22:54 | 5264023 KnuckleDragger-X
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We could do something about it right now but it would require a lot of economic pain so they keep pushing it off to the future where the pain will be so much worse. I expect to see a very uncivil war, not one started by people of the patriotic stripe but by the leeches when their goodies are cut off. The government will try to go full Marxist and nationalize everything but that'll just speed up the avalanche.

Sun, 09/28/2014 - 13:32 | 5264977 TBT or not TBT
TBT or not TBT's picture

The middle class will have to take the hit.   They don't have the voting power of the new permanent majority coalition consisting of the well connected elite and the government dependent(the FSA of course, but also large businesses that own their regulators/congresscritters, the entire education establishment pre-K to postdoc, unionized government workers, social security dependents, Medicaid/care dependents.... list very incomplete).  

This is end game for our Republic.  As predicted/feared by those who set it up explicitly to have very limited means and roles.  

Sat, 09/27/2014 - 21:07 | 5263787 nmewn
nmewn's picture

Here's the thing about "progressives" to me.

They live in some as yet undiscovered world (and never will be discovered because its not real) where they think people can be made to conform to the perfect model of "progressivism" which is never defined (conveniently) and highly malleable in the first place.

It manifests itself in many things such as, speech & thought control, commonly called PC. Also as (for example) Big Gulp & gun control, right up till the point they want a Big Gulp or need a gun to defend themselves against what they advocated for, then its always someone elses fault they have neither oddly enough.

How do you define "progressive"?

Sat, 09/27/2014 - 21:16 | 5263815 Anusocracy
Anusocracy's picture

Someone who forces others to conform to a failed belief system that is different from the failed belief system that fascists force others to conform to.

Sat, 09/27/2014 - 21:38 | 5263884 nmewn
nmewn's picture

Lets not bring crony-greens into the discussion ;-)

Sat, 09/27/2014 - 22:04 | 5263943 NoDebt
NoDebt's picture

'Progressives' is just one (in a long line of) fancy names for people who what to control everything.  Those at the top of the movement don't give a shit about the issues they claim they care about (where are all the anti-war protesters for what's going on in Syria, for example?).  It's a means to an end- control.  And nothing more.

Sat, 09/27/2014 - 22:23 | 5263979 nmewn
nmewn's picture

Yes, it is always and always has been, about control.

And I wish whoever is junking rwe2late would stop, he asked a straight forward question, am I the only one who will green him?

Sat, 09/27/2014 - 22:57 | 5264032 X.inf.capt
X.inf.capt's picture

+1

to you and rwe...

Sat, 09/27/2014 - 22:58 | 5264038 KnuckleDragger-X
KnuckleDragger-X's picture

Its all bread and circuses but eventually they run out of bread and the circus leaves town...

Sun, 09/28/2014 - 08:00 | 5264416 Eyeroller
Eyeroller's picture

Yet 'progressives' have successfully convinced the sheeple (with the help of the lapdog press) that they are the ones who care about the little guy.

Sun, 09/28/2014 - 08:09 | 5264424 kaiserhoff
kaiserhoff's picture

They haven't convinced anyone. It's all about bribes and abuse of power.

If you mean the propaganda on the boob tube, the Jew York shit isn't really working any more.

Sat, 09/27/2014 - 22:25 | 5263983 booboo
booboo's picture

Don't get me started on the "crony greens".

I had a local government environmental head tell me to my face that if I (a builder) was applying for the needed permit from them there would be a fee but if the landowner on who's land the home was being built on was applying for it the fee would be waived because I was a profiteer. I just sat there mouth agap and finally said, "you do realize that the consumer ultimately pays for everything.... right?"

I don't think she understood. It's a defect in their brain, really! They are mentally retarded.

 

 

Sat, 09/27/2014 - 22:56 | 5264029 nmewn
nmewn's picture

Had the same thing, don't know how I'm going to do this without divulging what I do (its important to me that I not) but here goes.

I was called to a meeting because "governmental arborists" said "You can't cut down these trees!"

After two hours of back & forth (me chuckling throughout) about why the trees had to go, another government offical finally stood up and said what needed to be said "If you (the arborists) insist on saving these trees all you have to do is sign off on this piece of paper holding ______ blameless for the design which you are creating a flaw in, with the attendent claims on property damage & public safety. We'll be happy to move forward with your revision, sign here."

Put on the spot, the trees came down ;-)

Its not like they were one hundred year old oak trees either, they were sweet gums and assorted trash trees but it was surprising to me (and enlightening) that a major project for the public good gound to a complete halt over two departments within government fighting over authority and how two twenty year old "arborists" could stop "progress/maintenance" in its tracks...they felt they had that much authority and apparently did.

For a month...lol.

Sun, 09/28/2014 - 11:35 | 5264758 Gromit
Gromit's picture

An environmentalist enjoys making other people dance to his tune at no cost or liabilty to himself.

 

Sun, 09/28/2014 - 07:02 | 5264380 Cloud9.5
Cloud9.5's picture

A progressive is an anal retentive control freak who wants to organize the world into his twisted version of utopia.  He cares not how much misery and death he causes in the process.  The end justifies the means.  The needs of the many outweigh the rights of the few.  Square pegs will be fitted into round holes.  At the end of the day, his view of perfect order and civility is only realized in a grave yard. 

Sun, 09/28/2014 - 08:00 | 5264414 nmewn
nmewn's picture

Sometimes I look on in stunned amazement. Lets take the cartoonish "Life of Julia" for yet another example of "progressive propaganda" and we'll even leave aside the entire premise of that (that the people are too stupid to be spoken to as adults and must be related to through cartoons, as children).

Here we had an political ad openly advocating that without the miracle of the state stealing from someone else in order to give to Julia, Julia would be destitute. The people doing this ad (and who approved it to air) must think Julia can't do anything for herself (misogynist-sexist?) and it also supplanted the idea of a man sharing Julia's life with .gov as that man. The same idea they did with their Great Society nonsense that wrecked the black family unit for decades, which is only now starting to recover somewhat.

The lesson of the state being powerful enough to give you everything you want is also powerful enough to take everything you have is apparently not taught in public anymore.

Moar dependency please! ;-)

Sun, 09/28/2014 - 13:43 | 5264992 TBT or not TBT
TBT or not TBT's picture

The welfare state is an equal opportunity destroyer.   It's worth reading about the desolation of the permanent British underclass by the same processes.

Sun, 09/28/2014 - 04:33 | 5264288 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

Well said. Some of the people around here apparently need reminding that the anti-war movement has progressive grassroots to this very day.

Sun, 09/28/2014 - 10:33 | 5264651 Steve in Greensboro
Steve in Greensboro's picture

Progressives call themselves that because "commie" sounds so retrograde.

Sun, 09/28/2014 - 22:25 | 5265983 robobbob
robobbob's picture

i offer no defense for bush, et al

but to remind you

it was quintessential progresive professor turned president that dragged america into WW1, suspended civil rights and created the nwo prototype the league of nations

and it was silver spoon trust fund baby country club progressive FDR who turned a nasty depression into a lost decade, drove america permenantly onto the road to serfdom, took every opportunity to steer america into WW2 rather than avoid it, suspended civil rights, imprisoned american citizens without cause, and had a known communist agent as a close advisor while working on forming nwo 2.0

republican chicken hawks  and neo con types are constantly starting nasty little wars for fun and profit, but when you need a massive drag out bloodletting, no one has done it better the those oh so compassionate and sophisticate progressives.

Sat, 09/27/2014 - 20:51 | 5263772 NoDecaf
NoDecaf's picture

I'll ante up with an overpriced bridge over the Hudson (along with funds raided from the EPA), I see your perpetual war and I raise you 10 million new EBT cards.

 

 

Sun, 09/28/2014 - 08:06 | 5264422 Help Is Not Coming
Help Is Not Coming's picture

I'll buy it only if I can fly "white" flags from it at 3:00 AM.

Sat, 09/27/2014 - 21:11 | 5263798 Bossman1967
Bossman1967's picture

why do you single out progressives?
because they suck ass. bush was a progressive Cheney evil but obama is the worst president of all time all progressives

Sat, 09/27/2014 - 21:37 | 5263879 Anusocracy
Anusocracy's picture

Neocons are fascists, Obamaites are progressive flavored fascists.

Because the most effective way to survive in government is as a fascist, eventually everyone running government will be fascists.

Sat, 09/27/2014 - 21:49 | 5263916 nmewn
nmewn's picture

One of my favorite sayings is "Bush came in as a social conservative and left as a conservative socialist."

I don't think he vetoed anything put before him, neither has Obama. Growth of the state is all that matters to fascists. What people should be observing is who is saying "Gimme moar!" Not who is saying no, no more, enough already.

There is where you'll find your fascists.

Sat, 09/27/2014 - 22:42 | 5264009 Anusocracy
Anusocracy's picture

Yes. They are both governmentalists and therefore hirelings of the elites and enemies of productive people.

Sun, 09/28/2014 - 11:47 | 5264773 EINSILVERGUY
EINSILVERGUY's picture

Excellent characterization of 43.

I remember when people pushed his compassionate conservative message. 43 is a NWO progressive just like his Daddy. He figured out that the only way to win was to lie to conservatives. I think Bush is a progressive just like Obama but Bush gets it from growing up an a blue blood elitist (He is no Texan contrary to the yarn spun about him). Obama comes to it as a committed Alynsky communist. They come from different sides of the sprectrum but they ultimately believe in the supremacy of the state. Obama will do the most damage but Bush 43 laid the ground work

Sun, 09/28/2014 - 13:49 | 5265004 TBT or not TBT
TBT or not TBT's picture

The roosevelts and the supreme court of the time laid the groundwork.   That was the era we branched off onto the road to perdition.   We the people started voting ourselves goodies from the public treasury and empowering an unchecked permanent fourth branch of government to take what it and its bought off voters voted for.   Demagoguery is a word with ancient Greek roots.  

Sat, 09/27/2014 - 22:12 | 5263960 knukles
knukles's picture

Gentlemen, gentlemen, gentlemen....
I merely pointed out that the current Progressive administration has furthered the Perpetual War and its Progressive supporters support siad kinetic actions.

However, in response to why they're singled out?
As I just said, they're in charge right now... either in actuality or nominally.... I care not which for purposes of this discussion... and thus, the Progressives, who so ever screamed and yelled bloody murder about Bush's wars, killing oo f Brown People, illegally, crimes against humanity, curtailment of freedoms under the Patriot Act, so on and so forth, have doubled and tripled down upon the very same.

That's why I cited them

It has nothing to do with the blue/red analysis, Hegelian Dialectic or anything else of that nature.

They've become that which, upon principles, they despise.... they have no principles.

Sat, 09/27/2014 - 23:04 | 5264050 KnuckleDragger-X
KnuckleDragger-X's picture

I'm pretty sure that Hegelian Dialectic crosses into Godwin's Law territory...  :-))

Sun, 09/28/2014 - 13:52 | 5265007 TBT or not TBT
TBT or not TBT's picture

And so be it.   We need to remind people that fascism does not equal Hitler, and Hitler/the Nazis were not uniquely evil among totalitarian systems.   

Sun, 09/28/2014 - 05:16 | 5264312 Kirk2NCC1701
Kirk2NCC1701's picture

Minsky moment, my ass! After all the Ponzi moments in this Potemkin village, the Gulf will widen into a Tonkin(sky) moment.

A Reset will occur, and the Sheeple will be as clueless after the shearing and fleecing, as before.

Same as it ever was, same as it ever was...

Sun, 09/28/2014 - 05:28 | 5264322 Kirk2NCC1701
Kirk2NCC1701's picture

Hope is not a Plan or Policy in the military, Project Management or respectable Business Plans, but it's a CORE Policy in Organized Religion.

Sell 'em Hope, Faith and Heaven, and they'll buy ANYTHING off the self-appointed middlemen, and they'll maintain their lifestyle in perpetuity.

Sat, 09/27/2014 - 20:27 | 5263700 JustObserving
JustObserving's picture

 the point in debt inflation where the cash generated by assets is insufficient to service the debt taken on to acquire the asset

You don't think geniuses like Yellen can maintain near-zero interest rates forever? Neither do I.

And let's not forget the at least $130 trillion in unfunded liabilities in the US. Only about $1,260,000 per taxpayer.  And growing at $70,000 per taxpayer per year.

 


Sat, 09/27/2014 - 21:07 | 5263788 NaN
NaN's picture

How long has Japan had low interest rates?

Sun, 09/28/2014 - 01:37 | 5264216 hobopants
hobopants's picture

Japan (until recently) has maintained a giant trade surplus making that possible...we don't have one of those.

Sat, 09/27/2014 - 20:18 | 5263701 NoDebt
NoDebt's picture

Do not doubt for one second that the elites are not WELL aware of this situation.  There will be a collapse, but at a time of their choosing, when they have the pieces in place to again gain control in the aftermath.

I hope very much that you all are enjoying this "recovery" because what comes after will be a lot worse.  

Sat, 09/27/2014 - 20:30 | 5263734 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

FEMA camps

Sat, 09/27/2014 - 22:07 | 5263950 NoDebt
NoDebt's picture

They don't need anything so overt.  Fear alone is their fencing system.  The "enemies of the state" will be turned in by their own families.

Sat, 09/27/2014 - 21:29 | 5263866 eyesofpelosi
eyesofpelosi's picture

More lottery tickets.

Sat, 09/27/2014 - 20:17 | 5263703 TeamDepends
TeamDepends's picture

"Hope is not good policy." Tell that to the progressives six years ago.

Sat, 09/27/2014 - 20:24 | 5263722 knukles
knukles's picture

Don't date yourself!
Tell them NOW!
They'll say it's all the Republican's fault.
Just remind them of all the good shit they managed when they had a super majority.
So enriching to cast light upon darkness, bring love and understanding to the masses, one slight at a time.

Sat, 09/27/2014 - 20:39 | 5263747 TeamDepends
TeamDepends's picture

Nothing but love and unicorn kisses under that colorful umbrella, and everyone's invited!*
*Does not include rednecks

Sun, 09/28/2014 - 11:15 | 5264728 Eyeroller
Eyeroller's picture

Christians also need not apply. 

Sat, 09/27/2014 - 20:18 | 5263706 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

im long on the singapore dollar, fuck this guy

Sun, 09/28/2014 - 14:38 | 5265078 TheReplacement
TheReplacement's picture

Thanks for the detailed rationale behind your statement and insult.  You must have been on your shool's debate team - varsity even.

To me, going from "extend and pretend" to facts and figures put out by the very same people behind "extend and pretend" invalidated the whole thing.

None of it is real.

Sat, 09/27/2014 - 20:17 | 5263707 Moe Hamhead
Moe Hamhead's picture

Anybody know where I can buy a farm?

Sat, 09/27/2014 - 20:32 | 5263737 kaiserhoff
kaiserhoff's picture

http://farmprogress.com/prairie-farmer

The Prairie Farmer is the trade magazine of agriculture.  For high dollar investment, it's the place to start.

To find a few acres in the country near you, avoid real estate agents like the plague.  Read the Weekly Shopper/Trader/Throw away rag with all the local contractors ads.  You'll find older people, with a sincere interest in keeping land in good hands, and they will sometimes finance the deal.  Happy shopping;)

Sat, 09/27/2014 - 20:48 | 5263767 HenryHall
HenryHall's picture

The smart money says that North Florida is the best place in the USA to be when it all goes sideways.

Sat, 09/27/2014 - 22:48 | 5264016 mjcOH1
mjcOH1's picture

You want someplace cold enough for mother nature to do the killin' during the first winter.

Sat, 09/27/2014 - 23:09 | 5264054 KnuckleDragger-X
KnuckleDragger-X's picture

Yep, just pick a newspaper from any small town in flyover country...

Sat, 09/27/2014 - 20:18 | 5263708 Boondocker
Boondocker's picture

Keep stacking...bullets and beans....the shiny stuff too.

Sat, 09/27/2014 - 20:35 | 5263742 NoPension
NoPension's picture

I'll pretend to work , and you pretend to pay me.

As long as the grocery store accepts the Monopoly money, all is good.

A .gov pension would be so much easier. If I had only pretended to work for the government for 30 years.

Oh well...

Sat, 09/27/2014 - 20:19 | 5263711 Yen Cross
Yen Cross's picture

   lmfoa.  Long, "sock dominoes"...  Those guys "get it".

Sat, 09/27/2014 - 20:21 | 5263718 Moe Hamhead
Moe Hamhead's picture

Not to worry, there is a reset button.

(I think they carry it around with the Commander and Chief Golfer, in a coded black box.)

Sat, 09/27/2014 - 20:27 | 5263726 nmewn
nmewn's picture

Quick! Hard pivot to ebola infected squirrels rampaging through Ferguson with AK47's shouting Allloooo Acorn!!!

Sat, 09/27/2014 - 20:39 | 5263746 bardot63
bardot63's picture

Intelligent piece.  But I ask, what evidence exists the US economy is showing signs of recovery?  All signs quoted here are based on numbers that are as suspect as the Federal Reserves ability to create a soft landing, or any landing for that matter.  I certainly don't believe numbers coming from government or quasi-government sources.  I look instead at unemployment numbers, food stamp recipient numbers, national debt numbers, student loan numbers, personal debt figures and -- the most revealing tell of all -- the artificially, immorally suppressed gold price.  All those tell me this nation is in deep shit.  And the only thing growing is the dung heap, getting higher.

In think pieces like this, analysts usually can't look very closely at the deterioration of the very foundation that helped to make this nation great -- a farming and manufacturing workforce that produced more than it consumed, which once upon a time had a can-do spirit.  We are no different than the author's description of Singapore.  The good news is the bad news -- most of the rest of the world is in the same shape.  One Minsky moment will not be enough.

Sat, 09/27/2014 - 20:44 | 5263763 himaroid
himaroid's picture

Seems like they have figured it out again. Just before the ZH crowd. Again.

Sat, 09/27/2014 - 21:10 | 5263785 itstippy
itstippy's picture

Can't we just raise the federal cigarette tax $0.25 and end Saturday mail delivery?  Those are tough sacrifices I know, but the budget situation is bad and we're all in this together.

Bake sales, car washes, and walk-a-thons are also good ways to raise cash, and they bring people together for worthy causes.  Maybe have "penny drives" in the elementary schools so the little tykes can participate too.

Sat, 09/27/2014 - 21:30 | 5263864 Rubbish
Rubbish's picture

Don't you dare touch my pennies...

 

Bitchez

Sun, 09/28/2014 - 18:13 | 5265515 oddjob
oddjob's picture

Glimpse into the future, picture an MRAP mowing everybody down at the walk-a-thon.

Sat, 09/27/2014 - 21:13 | 5263805 starman
starman's picture

Just look around you retail is dead car sales are falling housing sales in the gutter! There is no recovery and there's actually 0 growth.
It's only credit expension and inflation until deflation!
Hedge accordingly it's gonna be a long winter.

Sat, 09/27/2014 - 21:19 | 5263826 q99x2
q99x2's picture

The NWO didn't have to addressthe structural issues. They've prepared to kill us instead..

Sat, 09/27/2014 - 21:23 | 5263840 mrpxsytin
mrpxsytin's picture

A lot of people talk about the diminshing return on investment. But lately I've been considering the diminishing return on consumption. For a business to be profitable it needs to be able to find enough consumers for its goods or services. But what happens when the consumer reaches a point where it becomes neutral or even burdensome to increase consumption?

If I can afford to drink a bottle of whisky a day (and actually do it), am I going to enjoy drinking two bottles a day if efficiency of production can drop the price by half? 

In my small part of the world I live next to a restuarant strip. At first there was one Mexican food shop, then in the space of 12 months there are now 6. Now, I'm noticing each shop is having to massively discount their offerings. They all offer the same products, tacos and burritos, so the only way to differentiate is on price. But how many tacos and burritos can a human eat? 

I think we are seeing the diminishing returns on consumption as an absolute point where this system will fail. The only way is to increase population, or to increase consumption in goods and services that are currently unattainable to the general masses. Ferraris for all!

Sun, 09/28/2014 - 07:37 | 5264400 The Most Intere...
The Most Interesting Frog in the World's picture

Ladies and gentlemen (given the crowd here me included I am using the broadest possible definition for these two terms) we have a winner!!!!  Exactly why easy currency leads, in the end, to zero, nothing, notta, one cent of real growth.  Any short term gain is completely offset by free market forces reacting to what is initially not a free market event.  

Sun, 09/28/2014 - 11:37 | 5264760 Gromit
Gromit's picture

A crisis of overproduction leading to........

Sat, 09/27/2014 - 21:54 | 5263924 JenkinsLane
JenkinsLane's picture

Ya think?

Sat, 09/27/2014 - 22:18 | 5263972 Yen Cross
Yen Cross's picture

 The sad thing is that women will probably hold these statistics as "terms of endearment".

 I love women, and I love my Mother, but even my Mother knows how men ran amok during the 50's-70's.

 She sees the same thing happening " penduleum swung" to the other side. (currently)

 

Sat, 09/27/2014 - 22:27 | 5263984 Peter Pan
Peter Pan's picture

The governments of the world are desperately attempting to generate growth but little do they stop to think that the growth that is being generated is mostly flowing to a very small percentage of the population, so that in reality there is virtually no growth as far as the general populace is concerned and in fact quite the opposite.

As for hope not being a good strategy, it must be pointed out that the super rich have a strategy while the poor are confined to hope. Once this hope is exhausted the situation will be quite combustible. The only alternative is for the elite to somehow successfully transform the USA into a type of North Korea. This may seem impossible given the internet and the already exisiting level of awareness but a false flag event, an Ebola type outbreak or some other situation may well propel the whole situation to one of long term suffering and darkness.

Sat, 09/27/2014 - 23:38 | 5264088 Notsobadwlad
Notsobadwlad's picture

Growth is not a certainty, nor is it needed. It is simply the current paradigm. Sure there are consequences for having no "growth" (however that is defined). There are also consequences for creating extra fiat and giving it to one's cronies.

One part of the media tells how wonderful things are. Another part of the media tell us how terrible things are. Who are we to believe ... or are we to believe our own eyes and ears and feelings?

Sat, 09/27/2014 - 23:02 | 5264046 AdvancingTime
AdvancingTime's picture

 If the economy was healthy and balanced we would not be experiencing slow growth while massive amounts of money are being printed and poured into the system. The crux of our problem remains in the fact that both people and governments have lived beyond their means by taking on debt they cannot repay. Over the last several decades we have created entitlement societies built on the back of the industrial revolution, technological advantages, capital accumulated from the colonial era, and the domination of global finances.

Promises were made on the assumption that the advantages we enjoyed would continue in both Europe and the US. Ever greater prosperity and entitlements were to be sustained through debt financed consumption growth. In that eerie fantasy world, debt fueled consumption was to be the catalyst to bring about evermore growth. Debt does matter and the following article delves deeper into why kicking the can down the road will ultimately fail.

 http://brucewilds.blogspot.com/2014/08/modern-monetary-theory-is-wrong-d...

Sat, 09/27/2014 - 23:21 | 5264068 I Write Code
I Write Code's picture

Yes, but I think it really is all different now, and not just the Fed printing endlessly, it's the discovery that maybe the Fed *can* print endlessly without inflation, indeed that the Fed *must* print endlessly to maintain.

Just maybe, the problem isn't a US recovery in production, maybe we have an excess of production because the world is just that efficient these days, we can't keep doubling the number of iPhones every year forever, can we?  Or the size of iPhones, LOL.

If any of the old rules still applied I'd agree with more of what he said here, but I really do think it's all different now, just nobody has quite figured out what the new rules are.  And y'all know, we'll probably learn it the hard way.

Sun, 09/28/2014 - 07:08 | 5264381 The Most Intere...
The Most Interesting Frog in the World's picture

I think to say it will be different this time is assuming that collectivelly, globally, we have been in this situation before.  Where, together, virtually all developed countries are following a path of economics that is far better suited to communism than to capitalism.  I dont believe we have been here before.  You cannot even compare this to 2007.  Further, I could easily argue that 2000 valuations were more reasonable and expected returns more likely to be higher than now.  What is happening now, the foundation of what is underneath everything, is the equivalent of Jello.  And if you decide to build your house on a foundation of Jello, no matter how great and no matter how high quality the finishings of the floors above, the whole structure will eventually collapse.

Sat, 09/27/2014 - 23:32 | 5264087 Notsobadwlad
Notsobadwlad's picture

But then again, here is suburbia, everything still seems normal... and our business is fine.

Who am I to believe?

Sun, 09/28/2014 - 06:53 | 5264371 The Most Intere...
The Most Interesting Frog in the World's picture

No doubt people were saying the same the evening of September 10, 2001.

Sun, 09/28/2014 - 00:37 | 5264156 q99x2
q99x2's picture

The guys in the last photo are playing with my retirement chips. Fuckers.

Sun, 09/28/2014 - 00:59 | 5264183 user2011
user2011's picture

There are good bankers ? Bankers giving warning ? They are the one who fucked the rest of us. And they have a change of heart ?! This is truly the end of world.

Sun, 09/28/2014 - 04:27 | 5264287 taggaroonie
taggaroonie's picture

I would like to request some educated clarification.

I can understand how higher interest rates can make the deficit harder to finance, but the debts, as in already-issued treasuries, are gone-burger, as far as the state goes, until eventual redemption in debased US lira.

So why the resistence to the normalization of interest rates?

I thank, in advance, any honest attempt to bring me up to speed.

Sun, 09/28/2014 - 07:21 | 5264388 The Most Intere...
The Most Interesting Frog in the World's picture

Since governments and banks around the world have virtually eliminated the risk of loss there is no hope of a return to "normalization".  You cant on one hand say there will be no losses, but then complain that returns should be x.  It makes no sense.  The ROR on something with zero risk of loss especially in real terms is ZERO!  I know, I know, we want risk free and 10%.  Yes, it will happen initially when the investment with risk is converted to risk free, just like a boost to an economy when rates go lower, but sooner than later investors rush in and equilibrium is reached and the returns are gone.

Sun, 09/28/2014 - 04:55 | 5264304 trader1
trader1's picture

I realized our true nature is spirit, not body, that we are eternal beings, and God’s love is unconditional ‘n’ there’s nothing we can ever do to change that. It is only our illusion that we are separate from God, or that we are alone. In fact the reality is we are one with God and He loves us. Now, if that isn’t a hazard to this country… Do you see my point? How are we gonna keep building nuclear weapons, you know what I mean? What’s gonna happen to the arms industry when we realize we’re all one. Ha ha ha ha ha! It’s gonna fuck up the economy! The economy that’s fake anyway! Ha ha ha! Which would be a real bummer. You know. You can see why the government’s cracking down. - Bill Hicks

Sun, 09/28/2014 - 06:40 | 5264364 rex-lacrymarum
rex-lacrymarum's picture

It is precisely because a full-fledged fiat money system was adopted in 1971 ("temporarily"), that all of this has happened. All non-monetary explanations of the process are to be dismissed. Vast credit and money supply growth has misallocated so much capital and led to so much capital consumption due to falsifying economic calculation that we have arrived at a point where a massive crisis either way (either a deflationary collapse or an inflationary conflagration of the underlying monetary system) seems to have become unavoidable. 

Sun, 09/28/2014 - 11:17 | 5264730 Eyeroller
Eyeroller's picture

There is nothing more permanent than a temporary Gubmint program.

Sun, 09/28/2014 - 08:50 | 5264471 Last of the Mid...
Last of the Middle Class's picture

Work peons two jobs for your fiat that buys half of what it used to  as the world banks print more to cover bad debts.

Sun, 09/28/2014 - 10:39 | 5264670 tradewithdave
tradewithdave's picture

Altucher 20,000!

www.tradewithdave.com

#defloation

Sun, 09/28/2014 - 11:58 | 5264802 felix2
felix2's picture

Late 90's. A friend met an economist who reported directly to the board of directors of a major US manufacturer. Economist invited friend to party and I came along. Economist knew more about my employer's work than I did. I asked him what we should do about the national debt. He said: Cancel it. I argued what about tax reduction etc? Nope. Reset. No other solution.

Fast forward. Now I know pushing forward the debt allowed the powerful to postion themselves and install controls to channel the anarchy towards - what?

Now in so deep more debt cant make it worse, we use debt to build a fantasy Amerika and re elect buffoons.

Pre 911 we still had some level of national IQ, national loyalty, and the welfare state hadnt reached 40 percent. I used to think the move to open America to China was for free trade. Today I believe they opened up to China to keep the Ponzi going longer.

I couldnt figure out why the economist, who could turn me inside out, was so ruthless. Now I know he was the smart one. He was paid to identify trends and predict outcomes.

Back then we were taught cancelling such debt was unthinkable. We were not taught that if cancelling a national debt is unthinkable then we must establish limits. We were trained like monkies

 

 

Sun, 09/28/2014 - 13:17 | 5264958 fishwharf
fishwharf's picture

Let's hope this time the Minsky Moment is followed by Robespierre Redux.

Sun, 09/28/2014 - 17:46 | 5265467 robertocarlos
robertocarlos's picture

Put those old people to work. Instead of chess they can play checkers, at Wal-Mart.

Sun, 09/28/2014 - 17:49 | 5265475 FredFlintstone
FredFlintstone's picture

Make them work to be eligible for SS and Medicare.

Sun, 09/28/2014 - 23:19 | 5266045 robnume
robnume's picture

Good article. Yep, real mathematics never die, whether or not the FASB wants them to. Facts are what matter and we ain't getting any real facts from the Feral gov't. But then, one can always "hope", huh?

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