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Who's On The Other Side Of The Trade?
Submitted by Bill Bonner via Bonner & Partners,
Our opinion – unchanged from the bottom of the crisis in 2009 to today – has been not only that the economy was not recovering, but also that it couldn’t recover – not as long as the feds were on the case. This week, we have more evidence…
A Massive Shift in Wealth
Six years after the “recovery” train supposedly left the station, and GDP is backing up again. That is according to the feds’ own numbers, just revised. They tell us that the economy shrank at a 0.7% annual rate in the first quarter. Household spending growth, meanwhile, was cut in half from the last quarter of 2014.
If there were any recovery, it certainly isn’t visible in these numbers. Which shouldn’t surprise you. Instead of unloading excess and unpayable debt, the feds were adding more. According to McKinsey, global debt grew by $57 trillion between the fourth quarter of 2007 and the fourth quarter of 2014.
Worse, cheap credit has shifted real wealth from Main Street to Wall Street.
In doing so, the feds have perverted the entire system… and stopped real growth. After all, Main Street – factories and businesses – is where wealth is created, not on Wall Street.
The rich – who own financial assets – got richer. The poor, the young, and middle class – who mostly have only their labor to offer – got poorer.
Since 2009, the U.S. stock market almost tripled shareholders’ portfolios.
But it added nothing to the net worth of the working stiffs, as illustrated by the following calculation: In 1982, a typical workingman could buy the entire S&P 500 with 15 hours of his time. Now, the poor fellow would have to work two and a half weeks to get his hands on the same assets.
Dangerously Dysfunctional
The system is corrupt… and dangerously dysfunctional. But why does no one say so?
Opinion makers such as Paul Krugman and Larry Summers misunderstand intentionally. As though the feds had not put up enough obstacles already, they want more. “More regulation!” “More redistribution!” “More credit… more spending… more debt… more wars… more crackpot schemes of all sorts!”
They want more “management” by the same people who’ve made such a mess of it already – people such as themselves. And the elite (and almost everybody else) is 100% behind them.
They are committed to trying to protect and extend the magical economy of the last three decades. This was made possible by a huge increase in debt. This led to big increases in stocks, bonds, real estate, contemporary art… and bonuses on Wall Street.
Almost everybody wants to see the past three decades continue.
But who speaks for the next three decades? Who speaks for Main Street… for the young… and for the unknown, surprise-filled future?
Who stands with the mysterious angels, inviting a depression to clear away the mistakes of the last three decades… and cheering on creative destruction, as it whacks the cronies and starves the zombies?
We do!
This is the point we have been edging toward in a recent controversial Diary issue. Everyone wants more credit, more inflation, more bubbles, more subsidies, and more special privileges.
Who’s on the other side of the trade?
Almost no one.
But for the last 20 years, we’ve been building a network of researchers, analysts, economists, and (sometimes quirky) thinkers that is independent of Wall Street, government, and academia.
No cronies. No zombies. No fast talkers or midnight walkers.
Our motto: Sometimes right, sometimes wrong, and always in doubt. Every day, we try to connect the dots. How come central banks, big business, Wall Street, government, and academia are all on the side of the policies that don’t work? How come the old… notably fast-aging baby boomers… have gone over, too, to take the devil’s part?
A Pernicious Bias
We are not just referring to the financial and monetary policies of the last six years, but also to a deeper and more pernicious bias.
The U.S. federal government has been running almost continual budget deficits – effectively passing the cost of today’s benefits on to tomorrow’s wage earners – since the Carter administration.
The Fed has been fighting credit corrections – while being the handmaiden of credit bubbles – since the 1980s. And for the last six years, the feds have been so actively and aggressively defending the past that the future hasn’t had a chance.
It was obvious from the get-go that adding more debt, bailouts, and regulatory weight was not going to make progress any easier. Still, recovery was always “right around the corner.”
But each corner we looked around revealed no recovery at all. And now, we have just turned another corner… and the train is going nowhere!
There are fewer real breadwinner jobs today than there were 15 years ago. The average household income is lower, too. You might think Janet Yellen would throw up her hands: “Really, what we are doing isn’t working. So, we’ll stop doing it.”
Fat chance. That would be the equivalent of the U.S. military, the CIA, NSA, and all the defense contractors in Northern Virginia admitting: “These wars in the Middle East aren’t getting us anywhere. Frankly, we can’t even remember who is an enemy and who is a friend. From now on, we’ll let the local people sort out their own problems.”
Not going to happen.
Because the Fed’s easy money has corrupted the entire system…
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Maybe this girl...
http://www.spiegel.de/international/world/interview-with-ex-russian-inte...
Check out what Hussman Funds had to say;
http://hussmanfunds.com/wmc/wmc150601.htm
"The Federal Reserve hasn’t created a perpetual money machine. No, no, no, no, no. What the Fed has done is to encourage investors to chase yields and to speculate, to the point where stocks are now so overvalued that they can be expected to enjoy no further return at all over the coming decade."
Unfortunately the millennials and their children are unknowingly on the other side of the trade, but once they find out and realize they won’t work for the holders of the debt (boomers) without present compensation the tables will turn. This is a generalization, of course there are many creditors and debtors, but one thing is for sure we will find out that this debt Ponzi is not a zero sum game like Krugman would have us believe
The Black Swan.
Hussman goes onto say "As long as only a few investors attempt to do so, any individual can cash out, but only by successfully selling their shares to some other investor at current levels. In aggregate, investors can’t exit, because somebody has to hold the stuff. "
Central Banks are now holding the stuff. Crushing everyone else. Buyers of last resort and all that.
And you think the west isnt doing the same on a 100x scale?
I am from the New york Times and I don't approve this message
Nobody pays for cows in the west, when they can milk their neighbors cow for free.
The FED is doing what it was chartered to do from Jekyll Island...steal, dissemble...rinse, repeat.
Correct, the 2008/9 bailout and QE program are the largest intergenerational theft in human history.
That's easy as there is only one party now that is on the side of the trade - Central Banks and more specifically, The FED! Period. End of story. This is the only party that has the ability to react to a run for the exit, whether it be from credit, equities, FX, etc. The real question isn't who is on the other side of the trade but rather but BS will be spun to hide the fact that the FED is the only market maker left in town. Should be a great story with a Hollywood tragic ending.
more likely what, a bag of resistors and chips...
Karma is a bitch... Everything they've done is basically beat on the economy with a giant hammer till it bends the way you want, but if you keep beating on it, it will break. Cracks are showing everwhere and we're near the breaking point and things will get worse faster as they beat on it even harder.....
Everyone wants more credit, more inflation, more bubbles, more subsidies, and more special privileges.
Who’s on the other side of the trade? Its the question everyone is asking and that everyone knows. Its almost retarded even asking it.
fuck I am tired of doing the right thing and being penalized for it.
End the fucking FED!!
Penalized is the understatement of the day.
Its the Terminator banksters who are on the other side. They have gotten so much plastic surgery that they went from cyborg to full blown machines. Like in that movie the terminator or battlestar gallactica.
If you don't know who is on the other side of the trade, its probably you, in some form or another.
Just like the sucker at the poker table.
I like that comparison.
If you start to doubt who will be on the other side of the trade when everyone is going one way, than you are probably asking the wrong question.
You should be asking, am I in the right market?
And then you should be asking yourself which assets don't even require a market to hold their value in times of distress?
I think we all know the answer. The question is do we have the stamina to stay with them?
A endless black hole, sucking the life out of the 99.9% of us.
I now understand the anarchist of the early 20th century.
Every holder of paper is on the other side of the trade. As the currency is debauched all other dollars (indeed all other fiat 'backed' by dollars) loses value.
The naked truth is that there are so many dollars out there that they are worthless now. If central banks (they won't) and private holders of bonds (they will) panic it could be over in a Nanex nanosecond.
Hold on, when it is over we'll marvel we did not see it coming.
Look this is really somewhat simple if not diabolical, the Saul Alinsky worshiping progressives have reached their endgame. All the progressive policies from the very beginning with Teddy Roosevelt and then more damaging Wilson and F.D.R. are being imposed and this perversion is the result we are forced to live through today!
We will hopefully have the option over the next year and a half to have an open and honest debate about the state of the Republic. When you have a Socialist like Bernie Sanders gaining real traction, then we can finally decide between a Socialist dystopia or the return to the rule of law and the free market system that made this country the envy of the world!
It will be a "Communal Communist" Bernie Sanders / Obama big Guberment from cradle to the grave, or you will DEMAND true leadership and return to the Constitutional Republic our founders granted us through divine inspiration. Its the individual! Your EQUAL justice! Not some perversion of progressive(red and blue alike) social justice! Ted Cruz has the Republic and the Countries best interests at heart. If we pray for a morally sane leadership with respect for ALL AMERICANS not just the leaders chosen few, we have a chance! We are not a Monarchy, there is no King and the sooner we dump the pomp and worship of the cult of Obama and the most progressive administration ever, the sooner we heal!
Rand Paul as Treasury Secretary and then a full repeal of Dood Frank / Obamacare and the Fed, let the system finally clear. It will be hell, no doubt, but this Fed controlled slow death is destroying not only the Republic but the Fed infection has corrupted the entire world's monetary system. Thier reset will be deadly, worldwide we need true leadership, not some Demi-god who actually believes his own bullshit!
Freedom is a rarity, true freedom like we take for granted here has never been seen before the Founding Of The United States Of America! If we go dark, that's it, game over! We have to survive, the Republic must stand!
May the good Lord bless and watch over this fragile little experiment in freedom / man's self rule we call America...
+1 Beautiful thing.
This is why I tell all the Second Amendment gun nuts ranting for an armed revolution, "you don't need your guns, you will shoot the wrong people". Like this guy they have not a clue what is really going on, all they "know" is the propaganda they've been fed on behalf of the .01%ers. Save this guys IP. No reeducation camp for him, straight to the Guillotine.
What??? Us??? Are you saying we were CORRUPT???
/www.youtube.com/watch?v=pfpEHwARhvc
One word answer: Obamanomics
Two word answer: Stupid Obamanomics.
Three word answer: F**king Stupid Obamanomics.
Concluding, we just experienced an 7 year affirmative action presidency with the help of the Fed.
What did anyone expect?
I agree, except all Obama has done is to continue the 8 years of George W. Bushonomics, and all he did was to continue the 8 years of Clintonomics, and all he did was to continue the 4 years of George H.W. Bushonomics, and all he did was to continue the 8 years of Reaganomics...you get the idea.
It ain't "Socialism" to divert the entire economy to Wall Street. It wasn't Obama's idea, either. More likely, it's the only logical outcome of a financial system of lending at interest, where debt is actually money. To have a system like that, you have to have infinite markets, resources, energy, and money. We live on a finite planet. We aren't going to find any more continents. We can make money infinite, but only by having it be abstract. This is the result of that.
swmnguy....(just so you know, I agree with your post)......
It is fashionable to blame "the other side" and push labels like conservative or liberal.....but the real problem is an economic system that is built on the expectations of constant growth and resources that never end. When we add in the belief that a person's labor is ONLY a cost to be contained rather than an integral part of the process.....(without a useful job, people can't participate in the economy and it doesn't matter how 'efficiently' the costs are managed if a huge segment of the population can't participate).....and then add in the US move to "financial services" instead of useful manufacturing....we have a receipe for disaster. Our current course has been followed and perpetuated by both parties.
the feds have perverted the entire system… and stopped real growth. After all, Main Street – factories and businesses – is where wealth is created, not on Wall Street.
Wall-Street and It's Bankers believe that they are the most important and deserving sector of American economic life. The idea that foreign asset stripping and market manipulation is how wealth is produced is fatally flawed. Yet, America has launced a new global offensive to gain power over foreign nations to asset strip them, while at home, the Wall-Street Bonanza of printed money and total market manipulation is still the main focus of economic activity. The nation itself is suffocating in debt, in over priced housing, education and health care. Add in a burden of Government police state, spy state and war state, all using borrowed of taxed trillions. America is only alive today due to the extraordinary, international power to print dollars, and have all the world provide labor, services, assets and resources in return for the American printed dollars. A cursory analysis of 2015 American economic proves this beyond dispute. That is why the military and spies have taken center stage in the American system. Look around you, the most well funded and richest entities in this country are the military and intelligence agencies. The 1% take most private wealth for themselves, and leave all public wealth to the military, police and spy agencies.
We've gone past the point of No return and Moar a long time ago. Seedless and Juiceless there's nothing left to mortgage BAR plebeian scalps.
http://www.anyclip.com/movies/nurse-betty/the-scalping/
Every dollar made is another one lost by someone else.
It's a rigged game.
They can spin or stop that roulette wheel any time.
Zero sum aptly defines the sum of your intellectual capacity.
What you think infinity equals zero?
Go stick your head in a bucket of KFC.
That be the FED. They have an infinite supply of money so they don't care how much it costs to purchase everything.
Who is on the other side of virtually every trade today is... the small and gradually deminishing percentage of mankind who is honest, ethical, productive and benevolent.
Once another 25% to 50% of them decide to "go galt", the world collapses for the vast majority... human predators and parasites. That is, unless they wait too long and the predators have sufficient machine infrastructure established to keep them fed and happy, in which case the parasite class will be exterminated by the predator class. And a few of the more diligent and resourceful and prepared human producers survive in their secure self-sufficient digs in the boonies.
In any plausible scenario from this point forward, the vast majority (and possibly all) human beings are toast.
PS: Also, "trade" is the wrong term (in the article title), because "trade" is a voluntary interaction. So these questions should ask "who is on the other side of the rape or slaughter".