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Why Living In A Post-Bubble World Is No Fun
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
What do we do when the bubble economy cannot be reflated?
It is generally conceded that we are living in an era of Peak Everything: peak central bank omnipotence, peak powerless of the non-elites, peak wealth inequality, peak media-induced delusion, peak market-rigging, peak bogus official statistics, peak propaganda, peak bread and circuses, peak deception, peak distraction, peak sociopathology, peak central statism, peak debt, peak leverage, peak derealization--need I go on?
Peaks generate bubbles. Bubbles reach extremes and then they pop. There is nothing mysterious about this causal chain: peaks generate extremes that manifest as bubbles, which eventually implode as extremes revert to the mean and mass delusions are shattered by the unwelcome reality that extremes are not sustainable.
The status quo solution to the devastation of a popped bubble is to inflate another even bigger bubble. If debt reached extremes that imploded, the solution is to expand debt far beyond the levels that caused the implosion.
If fudging the numbers triggered a loss of confidence, the solution is to fudge the numbers even more, so they no longer reflect reality at all.
If gaming the system crashed the system, the solution is to game the system even harder.
If the masses protest their powerlessness, the solution is to push them further from the centers of power.
And so on.
This blowing new bubbles to replace the ones that popped works for a while, but at the expense of systemic stability. Each new bubble requires pushing the system to new extremes that increase the risk of instability and collapse.
In other words, the stability of the new bubble is temporary and thus illusory.
The processes used to inflate the new bubble suffer from diminishing returns. The nature of stimulus-response is that overuse of the stimulus leads to diminishing responses. This is a structural feature that cannot be massaged away.
Goosing public confidence in the status quo with phony statistics and rigged markets works splendidly the first time, less so the second time, and barely at all the third time. Why is this so? The distance between reality and the bubble construct is now so great that the disconnection from reality is self-evident to anyone not marveling at the finery of the Emperor's non-existent clothing.
The system habituates to the higher stimulus. If the drug/debt has lost its effectiveness, a higher dose is needed. This is the progression of serial bubbles. Then the system habituates to the higher dose/debt, and the next expansion of debt must be even greater.
This dynamic can be visualized as The Rising Wedge Model of Breakdown, which builds on the well-known Ratchet Effect: the system enables easy expansion of debt, leverage, employees, etc., but it has no mechanism to allow contraction. Any contraction triggers systemic collapse.
When the system's ability to inflate another bubble breaks down, it's no longer fun. It's no longer fun to be a consumer when credit is no longer free, it's no longer fun to be a politco when the money spigot is no longer wide open, it's no longer fun to be a market rigger when the markets have imploded, and so on.
It is generally conceded that the global economy is currently experiencing a third bubble. The first expanded in the 1990s and popped in 2000, the second one expanded in 2002 and burst in 2008, and the third one inflated in 2009 and has yet to implode.
We can anticipate the popping of this third bubble, and this opens a line of inquiry few have taken: what if the popping of this third bubble breaks the bubble inflation machinery? In other words, what if there can be no fourth bubble to bail out the status quo, due to the systemic limitations of bubble-blowing as a solution to previous bubbles popping?
Given that we're still in Peak Central Bank Omnipotence, it is widely believed central banks can continue inflating bubbles of confidence, assets, debt and consumption at will, essentially forever.
But what if the fourth bubble can't reach the heights of the third bubble? What if the debt and leverage required to inflate the fourth bubble breaks down before the fourth bubble can even reach the heights needed to make everyone who bet the farm on the status quo whole?
Few dare ask these questions as they raise a terrifying follow-on question: what do we do when the bubble economy cannot be reflated?
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Answer to the article's question: buy gold and silver.
This bubble is made out of vagina
It will stretch forever but will nwver tear
Yes spend all your hard earned cash on a violence magnet. I'm sure that'll be fun.
http://thearchdruidreport.blogspot.com/2014/11/dark-age-america-hoard-of...
Hey,
Since you are so concerned about it...
Move to fucking Cuba.
The Archdruid writes well and has some excellent insights into post peak oil but he is wrong about gold in that latest post. Gold preserves wealth through time and has done this for thousands of years. Just because this fact irritates some intellectuals - and however many words they write about how irrational the use of gold is, it will not change human nature.
Yup.
I love the Archdruid. He is an amazingly level headed analyst (for someone named "Archdruid"). But last week's posting was a disappointment.
There are two subjects that invariably cause whoever is talking about them, no matter how intelligent, to immediately lose 50 points from their I.Q.; gold & guns.
"There are two subjects that invariably cause whoever is talking about them, no matter how intelligent, to immediately lose 50 points from their I.Q.; gold & guns."
It is interesting and hilarious that the gold and gun bugs believe they're the only ones immune to this.
Recent history doesn't seem so clearcut to me. A lot of Jews with a lot of gold didn't do so well. A lot of Americans with a lot of gold got taken to the cleaners by FDR.
Don't bet the farm on any one thing ... everything can fail, including the purchasing power of gold.
What is this author talking about? There are tremendous opportunities in these "interesting time". The best part is that it should be clear to everyone that there are absolutely no rules or laws to prevent you from doing what you want!!!
Moral hazard is funny like that, thank the Federal Reserve.
No rules or laws to prevent you from doing what you want huh..
Like what? Raping your neighbors kids? Killing somebody over a parking spot?
You're a fucking idiot.
You can murder and molest, it’s just expensive.
Michael Jackson and OJ come to mind…. And that weird guy from The Who.
And Bill Cobsy.
He's starting to sound like America's version of that fuck-tard Saville from England who was their most popular entertainer but was a psycho child molestor and most likely a child murderer too.
Let's not forget Bob Hope. Maybe he taught Cosby the ropes?
Quite the conversation I've had with others' what our society will be like when not influenced by the old and new testaments.
Some should consider the implications.
WTF? You give yourself away. I am talking about rules and regulations regarding the implementation of new technology and new innovations. No rules motherfucker, true freedom of thought and innovation means great opportunity you stupid fuck.
(although the NSA might want to look into want you are up to when your are not blogging)
Relax.
People who do stupid shit like that will not have benefit of a corrupt justice system backing them up.
They will get caught and get abrupt street justice.
Won't be a fucking social worker whining about the sicko's value to society and shit like that.
Just a buch of angry neighbors and parents ripping scumbags apart.
The takeaway: When shit gets that bad, being somewhere that people aren't is gonna be priceless.
Bingo. "Mob rule" is very much a doube-edged sword like that. "Folks" in America need to be careful what they wish for.
Yeah but that kind of "no rules" will probably get you shot dead.
An armed society is a polite society -- Robert Heinlein
Yea sci fi reference!
Hey ZH, can we get an update on that guy that was stuck between a rock and a hard place on his CYNK?
This is a repost from the earlier topic concerning the dude who's ACA bill doubled. I think it's relevent to this "post bubble" topic. What do most ZH'ers expect to happen when the last bubble pops? Here's my take on it.
"Every time (or most every time) I feel myself start to get caught up in feeling angry about this ACA Tax/Charade I remember something that calms me down.
No matter how much the gov't charges you this year and possibly next year, very soon this whole show collapses. I don't just mean ACA but everything. There is no mathmatical way that this gov't keeps the balls in the air past 2016. We are seeing the East rapidly gear up for a non-dollar world to the point that almost weekly a MAJOR announcement is being made concerning this activity.
Japan is months away from completely losing control of its monetary system, when it goes the whole shebang goes.
Practically every state has a pension problem that renders the state itself insolvent.
Most middle class americans are so cash strapped that they don't have an extra $300/mo in cash leftover after expenses (not that the expenses are necessairly "bare bones").
Right now the economy is collapsing rapidly, which exacerbates both (lack of) revenue from taxation as well as increased costs due to unemployment and other entitilements.
There is NO WAY out but forward through a complete collapse of both our monetary system and as a result, our gov't and it's programs that require a currency that has purchasing power both here and abroad (due to our imbalance of trade, need for oil, etc).
That means that these ridiculous programs of redistribution of wealth have to come to an end. There isn't anyway around it. It's going to be a complete collapse and repudiation of socialism and big gov't.
Everyone needs to prepare for a future that results from a collapsing currency. That means all gov't employee's to include police/military not able to be paid (maybe they will stick around and do their jobs for food that FEMA has stockpiled?). A sudden stop to most if not all economic activity and most importantly, the fucking thugs that are currently being paid via EBT to stay home and not pillage/burn, will be set free to do that very activity. Get yourself some decent firearms and ammo/food/clothes right now while you still have the ability. Just MHO. www.daemoninternational.com Web site sucks but they deliver excellent quality and fast (great prices on 300 blackout SBRs w/suppressors, $1,000 cheaper than closest competitor, for those of you in states not controlled by dems). Great prices on ammo at www.bulkammo.com google a local co-op, lay in bulk grains, beans, rice, etc that you seal in food grade 5 gal. pails (available at Lowe's or Home Depot) Use mylar bags (ebay) properly sealed in the pails. Good luck
www.gunbot.net
http://www.armslist.com/
While I generally agree, these guys are really good at keeping balls in the air. I don't think we make it to 2020, but we could make it past 2016.
I'd definitely advocate preparations, and such preps taking priority over accumulation of AU if you haven't made them.
"When the system's ability to inflate another bubble breaks down, it's no longer fun."
You mean I didn't realize that all this time I was having fun?
Hey, I know that graph. It's the first one I ever saw when I joined ZH.
Sooner or later every kid breaks their bubble wand.
"what if the popping of this third bubble breaks the bubble inflation machinery? In other words, what if there can be no fourth bubble to bail out the status quo, due to the systemic limitations of bubble-blowing as a solution to previous bubbles popping?"
Your optimism is showing, Charles.
Grow your own...
Tune in, turn on and drop out. Still works and freaks the elite.
Who said living in this world was fun, bubble or no bubble?
http://www.post-gazette.com/sports/high-school-football/2014/11/18/High-...
"Our administration felt it was important to give our kids the opportunity to go to the game," said Chuck Crummie, the athletic director at Central Catholic. "It's a big event for the school and for the kids. The academic part of school is sometimes enhanced by the athletic part. It doesn't happen very often that the finals are on a day where you might have to cancel school."
No, Chuck. It's not. Keep repeating that line. It's worked so well thus far. No wonder the Chinese are pulling ahead us. And those from India, too.
Fools.
Because you may become a lab-rat:
"The first big test of the new conditions was the 1929 crash. Banksters reduced the money supply to the market, eliminating competitors and leading to poverty millions of Americans. The same happened, more or less in the 2007-2008 financial crisis."
http://failedevolution.blogspot.gr/2013/12/december-23-2013-banksters-ce...
"How all these connected to the Greek experiment?"
http://failedevolution.blogspot.gr/2014/05/already-happens-capitalism-de...
"In a fiat, or paper currency regime, we can ALWAYS generate positive levels of inflation" - THE BERNANK
"In a fiat, or paper currency regime, we can ALWAYS generate positive levels of inflation" - THE BERNANK
"In a fiat, or paper currency regime, we can ALWAYS generate positive levels of inflation" - THE BERNANK
Easy on the caffeine.
Lowering the cost of money only works if you can fool enough people to accept a vlaue loseing medium (cheap money) in exchange for a good with riseing value, because you decreased its cost. Its a con. But as long as the con works so do the con-boys.
So bubbles are an illusion its the value of that currency that has fallen the value of the good stays the same.
The value of a cookie doesnt change, its the value of the currency that changes.
The last bubble will be WWIII. after that there will be nothing more to popp,
(except your wife, maybe)
Einstein had quite the revelation on WW4. You should look it up.
it (WW4) will be fought with sticks and stones...
Then its time to clean house. Lock & load.
" TRUTH is the greatest of all national possessions. A State, a People, a System which suppresses the truth or fears to publish it, deserves to collapse.
Kurt Eisner , 1867-1919
Very learned of you to know the name. But it should also be noted that Eisner's government experimented with the concept of absolutely free money as well and eventually the brotherhood of the fememord got him.
Wish i could buy a full page ad in every paper in the country with that quote alone...
What can we do? Sit back and enjoy the spectacle of course!
what do we do when the bubble economy cannot be reflated?
dance a merry jig upon the slowly cooling corpse of corporatism?
There is ALWAYS a new bubble in the pipeline....
http://talltalk.info/pensions-kept-afloat-by-one-ponzi-scheme-after-anot...
Its shocking that no one is covering the FACT that congress introduced a NEW DISTRESSED MORTGAGE REFINANCE BILL, WITH NO APPRAISALS....in July of this year
Ya think this will cause a bubble?
Did it pass? If so I'm in... Take the money and run...
Peak insanity for sure. The global orgy of malfeasance is at a fever pitch.
Get in on the beginning of next bubble and join the 1%.
Survival Minuteman Silo Condos?
Or welding equipment, depending on which side of the silo door you find yourself on.
Since by economic definition I am a 1%er I guess that means I shot for the .1%.
Hey Charles, you might want to think about causality a little more.
Ummm... the peak occurs just before and as the bubble pops.
Bubbles always burst... this one will burst quite violently.
http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...
"Few dare ask these questions as they raise a terrifying follow-on question: what do we do when the bubble economy cannot be reflated?"...
Think this is a wake up call for the Bank of England, EU and Federal Reserve?....
"While Hungary was never as close to Russia as Ukraine, an astounding 72 percent of Hungarians said in 2010 most Hungarians are worse off than they were under communist rule when they were intrinsically linked to Russia and the rest of the Eastern Bloc."...
Believe Hungary, Poland and the Czech Republic are busy these dayz asking themselves the very same question?...
Why the fuck would anyone in Eastern Europe want to join the EU now when they see the economic train wreck only getting more visible in Western Europe and the United States with each passing day, not to mention their cultural ties and more importantly in analyzing both the short and long-term prospects the logistics of energy that only Russia can give them?...
That and the fact that the U.S. and EU are rather blatant in attempting to start an epic confrontation with that energy giant that sits on their border(s)!
it's a bubble wrapped in a bubble inside an bubble.
When the Middle ages regressed into the age of the black plague, of black guelph conspiracies destroying the power of secular rulers of city states (republics), to the benefit of the corrupt papal church, a popular reaction arose in Florence to resist both financial demise and black death.
The former having been provoked by incessant political Guelf/Ghibelline wars in Italy, as under the compounding effect of the French 100 years war bankruptcy of its banks through Edward III's inability (or unwillingness) for paying his war debts to the Tuscan banks of Peruzzi and Bardi.
In those deadly years of pestilential death and financial decadence, Boccaccio wrote his masterpiece : the Decameron, about how the young people of Florence forgot their troubles and enjoyed their bubble existence in a secluded villa. It became a masterpiece of medieval literature.
It is very relevant to the zeitgeist of our times in the new Florence of this age : New York, the banker's heaven now crumbling under unmanageable debt and fear of Ebola syndrome.
How the turbulent years of 1350s, in that regressionary age; (whereas the 11 and 12 centuries were years of cultural and economic expansion); saw a shrinkage of world population-- (under the combined ethnic cleansing of Mongol and Turkmen Asian wars and European intra-feudal conflicts-- begin to resemble our current age's trajectory.
All ruled by the burgeoning activities of those trading multinationals Venice and Genoa, whose ships brought those rats from one continent to another. The Oligarchs and multinationals of that age.
History never fails to remind Man of his memory lapse of lessons learned, lost and refound (the hard way).
Economic growth generally follows population growth. At some point in the relatively near future, global population growth will stop, and ultimately will go into reverse. Within a few decades of that turning point, absolute economic growth in any given country will shift permanently into reverse. This might look locally like unremitting economic collapse, as formerly used land falls into disuse in some places and former economic activity ceases. We should be prepared to adjust our understanding of what constitutes "growth" in such a situation.
"It is generally conceded that we are living in an era of Peak Everything:"
It is? By whom - 'Peak Prosperity'...? I will 'generally concede' that we are (equally) living in an era of hyper-peak $Fear-for-profit by opportunistic salesmen who have a nose for sniffing out monthy $$$fees...
hahaha...
you need to look macro - the last great bubble is fiat currency - and thats going to pop.
Rather than the bubble analogy, I liken the economic situation to the chugging of an engine that's starved of fuel...sputter, chug chug, sputter, whiiirrrrr, sputter, chuggachug, klunk...*silence*
Some date the start of the stimulus to the founding of the Fed, or the abandonment of the gold standard. Both are good arguments. But I put the start of the modern age in 1991 when Greenspan started diddling rates to support Gulf War I and started the series of stock market and real estate bubbles, then 2001 and the legalization of CDS and other derivatives, and the repeal of Glass-Steagall. Then 2008 and the old world blew away, and the Obama regime began and did nothing about any of it.
However the old world is gone. It's not coming back, unless we crash back to the horse and buggy age. We're all going to be living on the Fed's solyent green for the rest of our lives. CHS has to get that through his head.
Its lonely in the saddle when the horse is dead.
Seems like in all ways, things are getting worse.
Bats may hold henipavirus threat for W Africa: study
A family of lethal viruses that has leapt from bats to humans in Australia and Asia may also pose a threat in West Africa, where bats are butchered for meat, scientists reported Tuesday.
"While I generally agree, these guys are really good at keeping balls in the air. I don't think we make it to 2020, but we could make it past 2016."
Pols always finagle so that the collapse will happen on the other guys' watch. If the reds were smart, they'd opt out for a while.