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Pop Goes The Bubble

Tyler Durden's picture




 

Submitted by Dmitry Orlov via ClubOrlov blog,

I know that many people see national finances as an impenetrable fog of numbers and acronyms, which they feel is best left up to financial specialists to interpret for them. But try to see national finances as a henhouse, yourself as a hen, and financial specialists as foxes. Perhaps you should pay a little bit of attention—perhaps a bit more than one would expect from a chicken?

By now many people, even the ones who don't continuously watch the financial markets, have probably heard that the stock market in the US is in a bubble. Indeed, the price to earnings ratio of stocks is once again scaling the heights previously achieved just twice before: once right before the Black Tuesday event that augured in the Great Depression, and again right around Y2K, when the dot-com bubble burst. On Black Tuesday it was at 30; now it's at 27.22. Just another 10% is all we need to bring on the next Great Depression! Come on, Americans, you can do it!
 

 

These nosebleed-worthy heights are being scaled with an extremely shaky economic environment as a backdrop. If you compensate for the distortions introduced by the US government's dodgy methodology for measuring inflation, it turns out that the US economy hasn't grown at all so far this century, but has been shrinking to the tune of 2% a year.
 

And if you ignore the laughable way the US government computes the unemployment rate, it turns out that the real unemployment rate has grown from 10% at the beginning of the century to around 23% today.
 

So how can an ever-shrinking economy with a continuously rising unemployment rate be producing ever-higher stock valuations?

Simple! The stock prices are being driven up by the actions of the Federal Reserve. Since the great financial crisis of 2007, when the entire financial system almost collapsed, the Federal Reserve, through its Quantitative Easing (QE), has been making funds available at minimal cost to a set of financial institutions deemed “too big to fail.” (What that means is that they cannot be allowed to fail, because that would almost bring down the entire financial system again, but must be artificially propped up no matter what.) This financial life support has dramatically driven up the Fed's balance sheet, which now stands at $4.5 trillion (it was less than $1 trillion before the great financial crisis of 2007).
 

The mechanism by which QE drives up stock prices is indirect, but the connection is easy to trace. The Fed makes money available by buying up various types of securities: lots of mortgage-backed securities (many of them worthless, but the Fed doesn't care), lots of US Treasuries (and the Fed should care that they don't become worthless), plus a little of this and that.

By doing so, the Fed artificially drives down interest rates on what are traditionally the safest investments—those that people like to put their savings in if they don't want to risk losing them. But when the returns on these “safe” investments become lower than the rate of inflation, the risk of loss becomes 100%, and people are forced to choose between other, less “safe” options, and watching their savings slowly evaporate. The pressure to find ways to invest money more gainfully drives money out “safe” investments and into unsafe, speculative ones: stocks, that is. And this has created the bubble in stocks.

At this point, someone might want to ask a perfectly reasonable question: What is the purpose of having a stock market anyway? Well, theoretically, its purpose is to provide public companies with a way to raise money for their operations. Investors look for safe but gainful ways to allocate their capital, and, through their efforts, allocate this capital efficiently, so that it drives an economic expansion, and produces prosperity. But there is no economic expansion, and no prosperity! Maybe that's because public companies haven't been making use of the stock market to raise funds to invest in productive activities. And what have they been doing instead? They have been taking advantage of very low interest rates to borrow money, and using that money to buy back their own stock:
 

Why? Because that drives up the price of their stock, and because their chief executives (who already make 300 times more than their employees) are even more hugely rewarded if the stock price goes up. Hearing this causes some people to exclaim: “Hey, that's corruption!” No, it's just the American way of doing business. But what, pray tell, is the difference? In any case, stock buybacks are now going for a new all-time record. (The previous record was set right around when the entire financial system almost collapsed, in 2007.) According to WSJ, “The rise now puts 2015 on pace to reach $1.2 trillion worth of announced buyback programs, shattering the 2007 record of $863 billion in authorized buybacks, Birinyi said Thursday.”

Now, please note that it is not the purpose of a stock market to keep shareholders happy through borrowing and stock buybacks: this is unproductive for the economy as a whole. Also please note that this can't go on forever. The Fed has been lowering interest rates more or less continuously since 1982, when the then Fed Chairman Paul Volcker succeeded in fighting off inflation by briefly hiking the rate up above 18%. Continuously dropping interest rates make it possible for big financial players to gamble with borrowed money almost risk-free. If they gain—great; if they lose—they can still be sure of being able to roll over their debts at a lower rate, and play again.

But then in 2009 the Fed funds rate went to zero, and stayed there. This condition has a fancy name: Zero Interest Rate (Monetary) Policy, or ZIRP. Because it's an actual “policy,” that makes it all right; it's the difference between falling flat on your face because you tripped and stretching out on the sidewalk just to do some yoga.

The rate would like to go negative, but it can't. Because, you know, that's the kind of debt even I wouldn't turn down (by the way, I don't have any debt). It's the kind of debt where you give me your money, and then you keep paying me periodically to hold on to it, or spend it, or gamble it away—that's none of your business—until forever, because I have no intention of ever paying you back; I'll just keep rolling it over at ever more negative interest rates, and you will have to go on lowering them, because if you don't I might cut down on my gambling and crash the financial system again. If you agree to these terms, then you might as well also give away your wallet and your car keys—just to see what happens.

The Fed dropping interest rates below zero would be approximately as funny as that. And so the Fed funds rate is stuck at zero: it can't go down and it can't go up. The Fed keeps making periodic threats about raising it—by a whopping 1/4 of 1%—and this causes a brief swoon in the financial markets each time, but then everything goes back to normal (if you want to call it that). If the Fed ever did raise the rate, that would pop the bubble, and we'd be right back to collapsing like it's 2007.

It is worth noting that these financial shenanigans are having a profound effect on the real economy of jobs and goods and services: they are starving it. Many observers have noted that the Fed's actions are driving up wealth inequality to ever-greater heights. But this is just blah-blah-blah: wealth inequality in the US has been on the rise practically forever, with just a few minor setbacks here and there, so there is nothing new here. Ever-increasing wealth inequality is as American as eating out of a bag, neck tattoos, gaudy diamond engagement rings, knee-length swimming trousers and Mickey Mouse. They might as well claim that Fed policies are making Americans fat, lazy and stupid. Are they?

But the ever more bloated financial sector is definitely crowding out the other sectors of the economy—ones which actually produce goods and services that people use. No matter how easy monetary policy becomes, the opportunities to invest in the real economy just aren't there. Consider:

  • You want to invest in agribusiness? Well, Americans are already fat as pigs; the last thing they need is more high fructose corn syrup.

 

  • You want to invest in the automotive industry? Well, the people are already spending an average of 14% of their waking hours driving mostly short distances, sitting in traffic, breathing carbon monoxide and giving themselves mild but progressive brain damage; where do you want to go with that?

 

  • You want to invest in gadgets? Well, Americans are already glued to a screen of one sort or another throughout most of their waking hours. Sure, there are lots of business plans out there, but most of them look a lot like this:

1. Monetize sexting (or whatever)
2. ???
3. Profit!

(By the way, I think that's called Snapchat, and its valuation is around $15 billion.) But none of them seem like real breakthroughs, because they still require people to be glued to their little screens 24/7, and we have already achieved that. We'd need to make gadgets for their gadgets to play with, to free up their time so that they can get something useful accomplished, but nobody has figured out how to do that yet.

  • You want to invest in military hardware? Well, nobody wants tired old American stuff; just about everybody—even our friends the Iraqis, and now even the Saudis—are interested in buying Russian. Plus the Americans don't even know what to do with the stuff they already have. Accidentally give some more of it to ISIS or to the Yemenis? Abandon it in Afghanistan for the Taliban to play with? The latest plan is to stockpile it on Russia's borders, so that the Russians can use it for target practice, blowing it up with their long-range artillery without having to invade anyone.

And so on.

And so all that Americans can do with all this free money is gamble with it. There are lots of worthwhile ways to spend money—build public transportation, for instance—but the problem is that none of them make money. And that, stupid though it seems, is a requirement. But creating a huge, wasteful financial casino alongside the real economy doesn't help the real economy—it crowds it out. And it doesn't really make money either; it makes bubbles. This should in some measure explain the more or less continuous economic shrinkage that has been happening in the US so far this century.

It is also worth noting that, dire though these negative effects already seem, Americans have by no means seen the worst of it yet. The story one commonly hears is that the US is the richest country on earth. Well, that may be true, on average, if you include financial wealth (which tends to be rather ephemeral), overvalued real estate (which is another great big bubble), promises that won't be kept (such as the various retirement schemes that will never pay out) and much else that isn't quite real. But it is definitely true that the US also has the largest group of incredibly poor people—much poorer than the poorest person in the poorest country on Earth.

Their wealth is measured in the hundreds of thousands of dollars—but with a negative sign in front. They are deep in debt from investing in overvalued real estate (most houses in the US aren't really worth the skinny little sticks that hold up their roofs), or from getting an overpriced higher education (which has qualified them to serve coffee), or from running up other kinds of debt. Some of them may still look rich and prosperous for the moment, but that's only because... you guessed it, four whole decades of ever-lower interest rates! Once interest rates start ticking up, and their entire incomes are gobbled up by interest payments, they will start looking as destitute as they actually are.

How might this transition come about? Well, it might be catastrophic: some day some fat pig of a trader comes back from his 1000-calorie buffet lunch and passes a massive volume of gas. His explosive flatulence causes his colleagues to either faint, projectile vomit all over their trading terminals, or run for the exits. In the meantime, their high-frequency trading algorithms, left unattended, flash-crash the entire financial system to kingdom come.

But let's not wax apocalyptic here, because a much more mundane scenario will do just as well. Some day soon the stock market suffers a wee drop. This causes a little bit of a shuffle toward the exits and into “safe” investments in the form of US government debt. But that day there are a few more sellers of US government debt than usual, and the price of it drops. That's because over a third of it is held by foreign entities, many of which have been working hard to get out of the US dollar for some time now. China is at the top of the list with $1.3 trillion in US Treasuries, and has been busy signing bilateral trade agreements that circumvent the dollar system. Spooked by the sudden drop, foreigners start dumping US Treasuries. The traders see an advantage in getting out of stocks and into the suddenly much cheaper Treasuries, the trickle turns into a stampede, and stocks and Treasuries both crash because there are now many more sellers than buyers of either.

Next, the sellers of Treasuries rush to sell off their hoard of US dollars for other currencies—the ones they now use to trade with each other—and the dollar drops in value. The resulting scene looks like this. The stock market has cratered (so it's time to break open your child's piggybank and buy her a handful of railroad and utility stocks). US Treasuries are trading at a fraction of their face value, promising huge gains once they reach maturity—but to be paid out in worthless dollars. The Fed is helpless to do much of anything except print-print-print more worthless dollars as long as there is more paper and the lights are still on. The US Treasury starts trying to issue debt denominated in foreign currencies—with poor results, because foreign investors think that the US is too risky. The terms “capital controls” and “national default” are thrown around, just like they are in Greece at this very moment.

Regardless of what the Fed tries to do or say, the effective new interest rates are much higher, and most borrowers are no longer able to roll over, never mind expand, their debt. This includes the federal government, US states and municipalities, and corporations: kiss your benefits and your retirements good-bye. For importers, securing access to imports, such as oil, now involves borrowing in foreign currencies—at exorbitant rates of interest because the US is now a bad credit risk.

It is only at this point that I imagine an appreciably large number of Americans will put down whatever they happen to be mindlessly stuffing into their faces, pull their eyeballs away from the nearest screen, look at each other and ask: “Why did this happen?” Well, I am no financial expert, and yet I was able to piece all of this together based on freely available information, much of it from the US Government and the Federal Reserve, the rest from sources such as shadowstats.com, which I know and trust, and from having watched things collapse at other times and in other places.

So, let me ask you some questions: What, if anything, is unclear to you about any of this? Does any of this come as a surprise? Why do you think this is this so difficult for so many people to understand? and, What are you waiting for?

 

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Tue, 06/23/2015 - 19:11 | 6227556 OC Sure
OC Sure's picture

 

 

It is more precise and easier to convey if you just simply say that Fractional Reserve Banking is a contradiction in terms. There can either be Full Reserve Banking or Fractional Reserve Counterfeiting. Go one step further and remove the smoke and mirrors - There is either banking or there is counterfeiting. 

Were never one more sliver of currency sliced or blip digitized, what would everyone have to do? Actually produce value to obtain their share of the existing pool of currency?

 

In a banking system, value is necessarily added everywhere, every which way possible. 

In a counterfeiting system, value is subtracted everywhere, every which way possible. 

Tue, 06/23/2015 - 19:32 | 6227644 Bobbo
Bobbo's picture

Counterfeiting = The Ultimate Skim

Tue, 06/23/2015 - 20:27 | 6227830 ebworthen
ebworthen's picture

Thanks for that, very well said.

Tue, 06/23/2015 - 23:17 | 6228289 Protector_Romeo
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Are you a self motivated hard working individual and you want to be in charge of your own income. Make $500 -$2000 weekly easy. Join my money team. No scam no bull... www.earnmore9.com

Tue, 06/23/2015 - 19:11 | 6227558 Philo Beddoe
Philo Beddoe's picture

I retired 10 minutes ago. I made a massive profit posting comments about the Greek Exit. If you wanna be like me and retire early I suggest you visit www.greekexitbullshitcoverupgreaterbullshit.com

Tue, 06/23/2015 - 19:34 | 6227649 Bobbo
Bobbo's picture

Here, too:

http://zombo.com/

Tue, 06/23/2015 - 20:23 | 6227819 cigarEngineer
cigarEngineer's picture

Oh hello Mr. Bernanky. Fancy seeing you here

Tue, 06/23/2015 - 19:11 | 6227563 prefan4200
prefan4200's picture

Pretty accurate summation, Dmitry.  The only part you left out was the post-script, when US society breaks down and its citizens, in order to survive, are cooking their dogs and neighbors over backyard make-shift firepits fueled by their chopped-up furniture.

Tue, 06/23/2015 - 19:44 | 6227673 WhackoWarner
WhackoWarner's picture

Nope not the dogs just the neighbours.  Lke the one down the road who complained about my 3 well behaved dogs.  She goes on the spit first.

Tue, 06/23/2015 - 19:15 | 6227589 YOU
YOU's picture

it cant happen here... this time is different... quit being so negative...

Tue, 06/23/2015 - 19:28 | 6227625 falconflight
falconflight's picture

Let me shut down this author and the web site; Confederate flag wavers!  ;0

Tue, 06/23/2015 - 19:31 | 6227635 Bobbo
Bobbo's picture

Is it just me, or does Dmitry seem a little hostile right now?

By the way, ...

And so all that Americans can do with all this free money is gamble with it.

I don't recall receiving any of it so I could gamble, too.  I feel left out.

Well, it seems to me to be, ...

Money for Nothin and the Reich for free

Stay tuned for the next chapter in ...

[Mr. Global] takes over the world

Tue, 06/23/2015 - 19:53 | 6227699 kaiserhoff
kaiserhoff's picture

This was pointless, insulting, and stoopid even by recent standards.

I fear the end is near.  The editors don't even pretend to care.

Tue, 06/23/2015 - 20:07 | 6227762 Philo Beddoe
Philo Beddoe's picture

I prefer the stupidity of yesteryear as well. The problem with the information age is that one comes to the realization of how fucking retarded people are very quickly.  In days of yore tales of retardness would pass by village gossip, horse and buggy or steamship.  By the time the tales of retardedness reached the attentive listener he/she would be too busy attending to the demands of daily survival to give a shit. 

Tue, 06/23/2015 - 19:31 | 6227636 THE 4th Quadrant
THE 4th Quadrant's picture

You're only immune if you are a dual citizen.

Tue, 06/23/2015 - 19:32 | 6227640 Atomizer
Tue, 06/23/2015 - 19:35 | 6227652 hendrik1730
hendrik1730's picture

It's clear to me - since several years now.

Tue, 06/23/2015 - 19:47 | 6227682 GRDguy
GRDguy's picture

I was going to write something, but making the effort is soooo stupid.  There's no need to preach to the ZH choir, as they already understand; the other great unwashed don't even know ZH exists.

Tue, 06/23/2015 - 19:56 | 6227718 NoPension
NoPension's picture

Yup. At this point, fuck it.

Tue, 06/23/2015 - 20:16 | 6227800 CourtJester
CourtJester's picture

While I agree, there is some value in the occasional article like this to pass on to family and friends.  So, you know, when the time comes, you can proudly proclaim...

 

SEE I FUCKING TOLD YOU!

 

Until then, we're crackpots.

Tue, 06/23/2015 - 20:57 | 6227926 snowlywhite
snowlywhite's picture

ZH should fetch a new motto... https://en.wikipedia.org/wiki/The_Tartar_Steppe

 

you'll be in the same place in 10 years, much like this idiot who expects the US dollar to stop being reserve ccy.

 

while US dollar not being the world reserve ccy would be a boon for americans, well, tough luck, the rest of the world doesn't want that. Keep waiting...

Tue, 06/23/2015 - 21:40 | 6228038 SgtShaftoe
SgtShaftoe's picture

Dear god. I hope for your own sake that last statement was not meant in sincerity.

When the US loses reserve currency status the United States will be analogously buttfucked by a supernova. It would definitely NOT be a "boon for Americans".

Secondly, I can appreciate the point of view for your first point. However, this isn't some bullshit hollywood film that fits the story into 90 minutes or less. This is reality. There often is not a happy ending. Despite your genetic and sociological paradigm of "problem, action, resolution", that's just not how it really works. This shit takes time... a long time, but when it finally goes, it could rip your fucking neck off.

I don't think we have much longer to wait, a year possibly until a stock market crash, followed likely by a QE4 by the Fed, then a possible reprieve followed by a total loss of confidence. After that, a shitstorm will touch most of the world. Read Gibbon's "Rise and Fall of the Roman Empire" then get back to me. Hell, just read the historical timeline of the french revolution. Both were dirty, nasty and long in duration.

Tue, 06/23/2015 - 23:36 | 6228345 TheReplacement
TheReplacement's picture

"...buttfucked by a supernova."

That is just one helluva thing to say to a man.

Wed, 06/24/2015 - 04:04 | 6228663 snowlywhite
snowlywhite's picture

if US loses it's reserve ccy status., all it'll happen is their deficit will drop pretty fast.

 

It's pretty inane to imagine that the US can't produce the chinese gadgets that mostly US designs in the 1st place. Or that life will end if God forbid, there won't be a new iPhone model to buy each year...

 

and yes, holders of debt will lose some, debtors will win some. Since US has a mountain of it, it'll be overall better off.

 

It has food, it has oil. Nope, Armageddon won't come... And Gibbon's book is only outdated by 200 years. Otherwise, I liked it in my childhood.

 

that being said, since everyone is happy with the current setup, doubt it'll happen anytime soon. And there's nothing to take it's place anyway.

 

p.s. - "Il deserto dei Tartari" is a book. Not a movie. A good one actually. It's about someone that spends his life waiting. Like the ZH crowd waits for Armageddon. There won't be any; it'll be a recession and a rebalance.

Wed, 06/24/2015 - 06:07 | 6228762 Cactus
Cactus's picture

I think the US will adjust to the losing of its world currency status. People will make do and mend but the real problems will be its relations in the world i.e. hardly friendly to allies any more. So when the US needs help who will be there for her? I'm thinking import/export trade for useful stuff, seems you only have military, prisons, agriculture (with unpredictable weather) some oil, a few tourist spots all available on a weaker world currency. It will be a big adjustment for you folks, you had it good for a while, your leaders (good or evil) will have to get used to less power now.

Wed, 06/24/2015 - 08:05 | 6228830 snowlywhite
snowlywhite's picture

I don't live in US. But since it has the biggest military... That usually gets you listened to. Russia has no economy worth talking about, nor did it ever had in the last 200 years. Yet everyone was very careful not to piss them off.

otherwise, it's pretty easy to make US self suficient in no time if needed.

 

The only problem is that, if US is self suficient, the rest of the world will be royally screwed. Because then everyone would have to rebalance their economies. And good luck having China or Japan or any other mercantilistic power do that.

 

US is currently the dump hole for everyone else's over production. Without that hole... it ain't gonna be pretty for the rest(unemployment, accounting the losses from all the overcapacity malinvestment, etc). And rest assured, Europe won't pick up the tab from US. Even if it wouldn't be led by Germany. This is a continent of nations, despite all the bs from EU.

 

In 1930s, the empire was the one that recovered the fastest. US was the most affected. Won't be different this time, only that in place of UK you have US. And contrary to UK, US has a ton of resources.

 

p.s. - again, who can take over? The only miracle that happened in China is how they managed to destroy the entire country in 30 years. Worst scenario(and that's a distinct possibility) is the 1984 one. Couple of continental blocks, permanent imbalance, ordinary people getting screwed everywhere.

Wed, 06/24/2015 - 08:56 | 6229110 Cactus
Cactus's picture

Yes, I think the US will survive but it will be seen differently on the world stage, friendless, top heavy militia, biggest debtor.
Whereas Russia & China are making trade deals around the world and the rest of the world will manage.

The UK will be worse off in the next crash for sure (10% GDP depends on financial sector eek!) and big importer as well. I guess our Commonwealth friends will help us out.
Its true that China has ruined its country but lets not forget the Fukishima spill killing the Pacific as well, more worrying as it doesn't reach the news anymore.

The real tragedy is that the world doesn't get good leaders elected all at the same time meaning little progress is ever made. Its a worrying trend that countries are are forming blocs (less democracy) refer to the EU, see the politcal unrest /disconnect with voters, less power we have now. The TPTB desperate for it to work using debt as their tool.

In the meantime, we will just have to be prepared as best we can and expose the globalist system and its ways. There is some hope, people are waking up to the austerity hoax.

Wed, 06/24/2015 - 09:34 | 6229234 snowlywhite
snowlywhite's picture

democracy is a pretty easy to game system. Ok, it worked in the beginning since most of the elected were themselves part of the elite and part of them were idealistic. Bu now, especially with the power of mass media... it goes to the highest bidder. All you have to do is buy the your pony. Especially when you convinced everyone that a 2 party system is key to stability. You get two ponnies. Heck, you can buy them both to be on the safe side :p

 

regarding debt - don't think that it matters. US will default; either via devaluation(most probably) or via straight default. Ok; and? People ignoring economics history will say it's unfair and launch a tirade about morality and crap. Fine; and? Life won't stop.

Wed, 06/24/2015 - 11:14 | 6229611 Cactus
Cactus's picture

Money & media sure do corrupt everything to get power. People know the system is corrupt hence the introduction of new parties to fool the sheeple that there is an alternative when really it just sorts out the rebels. (UKIP & Tea Party)

I think the US economy will crash suddenly, nothing to back it up with, just a feeling as the world is too volatile and bond markets are wobblying now. How long before derivitives blow up? Deuche Bank / Greece?

Regarding debt...I see debt as serfdom . Life will go on Jim but not as we knew it. Slavery never went away. Right back to early Empire days through to the industrial age we had division of labour, economies of scale and cronyism and we accepted MONEY for our labours. Money systems run by our rich class! Perhaps bitcoin is one of the disrupters and old fashioned bartering will become popular. It is the price we think that reflects our labours is a problem. We don't value it enough. 

Tue, 06/23/2015 - 21:59 | 6228083 OC Sure
OC Sure's picture

 

"I was going to write something, but making the effort is soooo stupid.  There's no need to preach to the ZH choir, as they already understand; the other great unwashed don't even know ZH exists."

 

Leave the pulpit and the choir. Tell 2 friends to tell 2 friends? Move the fight club out of the basement and into an arena?

Maybe advocate a second convention of states per Article V instead of vigilante justice?

(...and don't forget to click on all the cool advertisements)



Tue, 06/23/2015 - 19:57 | 6227722 skillyhog
skillyhog's picture

Holy SHIT i love Dmitry's summaries - funny and simple:  "Business Plan:  1. Monetize sexting, 2. ??? 3. Profit!"  That is the way I naturally talk, so I'm inclined to dig these.  I'm slowly getting it, with no mba or background in economics and sifting thru a freakin' MOUNTAIN of bullshit a mile high - from MSM to panicky doom-and-gloomers to trolls to anti-trolls (they troll in the opposite to erode credivility) to my now trusted sources that has taken so much research and thought in order to trust.  Makes me wish i could go back and not be such a panicky town-crier just bc i discovered Jekyll Island and believed in "conservatives".  I now have fun with it and people respond more willingly instead of the glazed over eyes and desparation to feign a siezure in the hallway to avoid hearing what they already intuitively understand and dread.

Regardless, this whole labyrinth is like watching my son walk around with an armload of coat hangers, all tangled up and you can fucking  forget trying to sort it out.  It gets tiring, mentally. Funny as hell ZH comments and clever summaries every once in a while like Dmitry's keep me up.

Tue, 06/23/2015 - 20:15 | 6227794 BI2
Tue, 06/23/2015 - 20:30 | 6227839 MagicMoney
MagicMoney's picture

2x post. Sorry.

Tue, 06/23/2015 - 20:30 | 6227847 MagicMoney
MagicMoney's picture

Well I don't know where they get that CEOs make 300x more than their workers. Seems made up, but yes the article is mostly correct, but you could of shorten the article and summarize it. Fed wants people out of savings into investments and consumption. That's the point of suppressing interest rates. The theory that savings is evil, and contributes nothing to economic well being, but savings is the last safe asset you have, you make safety a loser, you force people into risky behavior. The theory goes that investing in stocks to companies and start ups is much more preferable than safety in savings. They want hyper lenders, hyper investments, and hyper consumption. Total irresponsible monetary policy by the Fed, but like all good Keynesians, hey, if we don't do this, the economic deflationary spiral is just around the corner, one more BANZAI befoe the whole thing dies. Instead the whole thing acts like a sedative for the economy. Economy doesn't seem like it's going no where, not down, or, up. Just going sideways.

Tue, 06/23/2015 - 21:52 | 6228064 SgtShaftoe
SgtShaftoe's picture

Dude, the NY Times has done studies on the level of inequality in the west and they're in the bag for DC. It has reached an, if not unprecedented, then nearly record level in recorded history. Just fucking google it for christ's sake.

This article was too long... really. Have you ever read Cervantes, Dickens, anything on paper?

Tue, 06/23/2015 - 20:39 | 6227876 eddiebe
eddiebe's picture

"Perhaps you should pay a little bit of attention—perhaps a bit more than one would expect from a chicken?"

Ain't gonna happen, at least not til it's too late.

Tue, 06/23/2015 - 21:20 | 6227985 newdoobie
newdoobie's picture

BRWAACK! cluck cluck

Tue, 06/23/2015 - 20:58 | 6227932 biggestbrother
biggestbrother's picture

I just sold EVERYTHING and long USD

 

Now this may be a year early but its a sure bet. 

Wed, 06/24/2015 - 02:41 | 6228611 qomolangma
qomolangma's picture

This is an excellent, succinct article for the many "general readers" outside the ZH scope, may not be felt so by the many ZH frequent but it highlights some easily digestable graphs for the eyes-opening of the laymen. IMHO it suits very well to be sent out to the many commoners/sheeople/whatever label :-) and I do!

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