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"Null Entropy" & The Festering Reality Of Global Economic Growth
Via Mint Partners' Bill Blaine,
I have a gut feel the recent wild swings are a precursor of a more insidious trend... which is definitely not going to be our friend!
This could fester into something far more cancerous than just an EM/China crisis. It could crystallise out a reversal of sentiment towards the global systemic distortions of market values driven by government QE programmes since 2008. These central Bank distortions have dominated asset prices since 2009.
For instance, ask yourself why stocks are so high when growth remains so fragile and the outlook for corporates is getting worse. QE persuaded folk to buy stocks because i) bond yields were so falsely low, and ii) they kidded themselves low rates meant stock positive growth was just around the corner. For a long time we’ve been warning too many asset classes look like bubbles set to burst on such flimsy non-causal linkages. After years of low interest rates, low energy costs and low wages, the global economy is still pants.
If you take all the key “drivers” of global economic growth, they increasingly look negative. In terms of economic policy, most central banks have gone into ease mode and devaluation. Coordinated global growth through trade agreements have stalled on protectionism. Growth forecasts are falling. No surprises that volatility is rising.
These factors are all contributing to the much deeper problem of how to trade zero real growth.
I described the concept of “Null Entropy” to a journalist y’day – the threat of long-term zero growth and stagnation. (Others call variations of the same economic malaise to be the “new normal”.) Despite 5-years of low/zero interest rates, low energy costs, minimal wage inflation, and lots of cheap talk about coordinated economic growth drivers, the world is drifting without any economic wind to propel it forward.
The failure of central banks, politics and markets are only partly to blame. The deflationary threat has discouraged real growth investment. It doesn’t matter most corporate balance sheets are pretty robust today, or that banks are lending again – entrepreneurs see little point in investing in goods, services, new plants or jobs when rates are so low, deflation is at the fore, and the business outlook is so negative when major markets like China will be closed because of dollar strength, commodities are crashing and business risks are escalating at a scary pace!
Null Entropy – political failure, central bank manipulation and entrepreneurial disinterest. Now it’s set to see real corporate crisis as the new normal bites. The growth figures we do see are local aberrations. Take a look at container rates – record lows. Look at global steel production – 68% of global capacity. There are few signs global commodities are set to rise. Low oil prices look to be firmly established as a long-term feature. Who would want to invest into that picture?
Somehow the global economy needs a jump start – but how? Global coordination has been anything but a screaming success. Any attempt to raise interest rates - as we’ve seen since the Taper Tantrum last year - simply triggers further shock. As this crisis and uncertainty deepens, it feels to me that further distortion by central banks is more rather than less likely, and it will be a bad thing!
With zero growth and a lack of inflation to ease away over indebtedness, it’s possible the next few years will contain some real policy and market surprises. Like making national debt currently held by central banks simply vanish. The effect will be to confirm the massive money creation that happened during QE, which should have been inflationary as too much money was chasing fewer assets – but it still isn’t happening except to create financial asset bubbles! I
Now these bubbles are finally bursting, perhaps its better news for real asset inflation – but rising wage pressures in a depressed economy will have all kinds of stagflationary negative effects. I’m beginning to fear for the corporate bond market…..
Moreover, the social consequences of Null Entropy will be fascinating to watch – especially in terms of politics. It’s potentially great timing by Jeremy Corbyn in his run for leadership of the Labour party – blame capitalism for the lack of jobs, debt and urban deprivation. Or Trumptastics in the US – the basis of which only Donald and his hair understand. The days of political clownery aren’t over yet.
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No more CLINTON, No more BUSH, eva!
Amen.....my brother.
Amen to your amen. Can we get another?
Bush is goooooooooooood
Triple digit whipsaw days are not a good sign for Bulls. Go look at the action prior to the last collapse.
Exactly. Eerily similar.
Still waiting for the junk bond explosion to surface and run it's course.
"Stimulate the ecocomy"? If the past is any indicator, war has seemed to "work".
Aren't there already about 50 wars going?
Those are just armed conflicts. Not enough shock & awe for a real man's war.
AND no more Obama's!!!
Does this mean you won't be contributing to Biden?
There is no real growth in the land of the free. Inflation is adjusted lower to create a fake growth
The Chapwood Index for 2014 was 9.7% and official CPI in the land of the free was only 0.8%. So the Nominal GDP of 5.6% for 2014 becomes real GDP of -4.1%.
The revised real GDP for years 2011 to 2013 worked out to -6.2%, -6.5%, -6.5% respectively.
What is the Chapwood Index?
"The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation."
http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...
Infaltion rates are kept low so SS cost of living raises will not go up.
Fiscal anemia caused by pumping too hard and watering down value with fiat.
Fiscal Aenima. Learn to swim.
Leeches and vampires always cause anaemia.
We need a war with an alien planet. Break their windows.
Massive comet impact on the way..
9/23.........bitchez !!!11
"Choppers!" (Radar O'Reilly)
I will vote for the wig of Trump running seperatly for President.
Wombat for prez 2016.
Deez Nutz Merkin
Off Topic: I always know that if I miss a day at ZH I can catch up on what happened by reading MW:
http://www.marketwatch.com/story/apple-ceo-tim-cook-may-have-violated-se...
jumpstart, how? hang banksters is a good start, remove the manipulation
Loss of confidence in CBs and .gov? Didn't Armstrong have something to say about this?
Posted 2015.651
Just exactly who waited until now to have a loss of confidence?
I too think we are in for 20 years of flat growth.....I do not see the new app to take us to the next level....self driving cars are not going to be it....immigration is what is going to be our big problem in the next few years....and cost tillions....and they are not good economic generators...they destroy economies...Europe will be the first to fail because of it....
There is going to be a boom in holes and boxes.
If we are going to adopt the Japanese model, lets start by removing our shoes before entering my home, shall we?
Japanese yen is not a world reserve currency. The shockwaves that result from the realization that we are still in a recession (depression) in the US will cause a fallout of awesome proportion.
Tick tock, tick tock...
Otherwards we are fkd...
Everything green cwazy... no fundimentals.
no pe
OT:
On this day in Hx 8/25:
-Galileo demonstrates his 1st telescope to Venetian lawbreakers
-New Orleans founded by French colonists
Thank you ZH for approving my registration, finally. I thought I was gonna have to buy the Tshirt to gain membership. Sheesh.
BTW, ZH appears to be a site where the educated outweigh the scammers and
"where all the women are strong, all the men are good-looking, and all the children are above average."
I think I waited 7-8 weeks before I got my account, but some people get approved in a few days.
@Ralph
Spoilsport!
Welcome dumb_funded
Brave having the word dumb in your user name........................think before you post..............unless you are trying to be funny!
PS I never practice what I preach!
PPS not sure about the ...........BTW, ZH appears to be a site where the educated outweigh the scammers and "where all the women are strong, all the men are good-looking, and all the children are above average."
Are appears.........................appearances can be deceptive!
`These factors are all contributing to the much deeper problem of how to trade zero real growth.`
QE created the bubble, remove QE and pay the price.
Yesterday many were poking fun at buy the dip recommendations. Do you want to profit or whine?
Do you want to profit or whine?
whine...............more whine ...............always want more wine!
It’s been a great run since Limits of Growth was published in 1972. None of us wanted to hear it back then but the truth was in the numbers. Nobody wants to hear it now but exponential contraction is now following four thousand years of exponential growth. Buckle up boys and girls. Forget those caught up in the cargo cult. Consumerism is dead in the water. Transition is the order of the day.
Transitioning to barter should be interesting. Burning and looting is hardwired in though for lots of folks. Transitioning to that should be seamless.
Entropy:
noun
1.Thermodynamics.
- (on a macroscopic scale) a function of thermodynamic variables, as temperature, pressure, or composition, that is a measure of the energy that is not available for work during a thermodynamic process. A closed system evolves toward a state of maximum entropy.
- (in statistical mechanics) a measure of the randomness of the microscopic constituents of a thermodynamic system. Symbol: S.
2.(in data transmission and information theory) a measure of the loss of information in a transmitted signal or message. 3.
(in cosmology) a hypothetical tendency for the universe to attain a state of maximum homogeneity in which all matter is at a uniform temperature (heat death) 4.
a doctrine of inevitable social decline and degeneration. Is the author really aware of what entropy is?
that left alone in nature "things" tend toward disorder rather than becoming more orderly...
'Null Entropy' would mean 'totally' frozen, which pretty much requires time to stop. (though
in black holes null entropy may exist, it is argued... a bit dated )
Evidence for a null entropy of extremal black holes
http://journals.aps.org/prd/abstract/10.1103/PhysRevD.61.084018
Anyway, Null Entropy......fozen ecnomy, no growth.
First Tim Cook, now Marketwatch: Buy Apple’s stock today, or you’re crazy: Reeves
Prognosis is not good.
The economy must grow and will grow, for some time ahead it will grow in a negative way. It is only necessary to rebase the formulas then the trendlines will continue ever upward.
Growth, growth, growth... that's all we ever hear from the establishment mouthpiece. Maybe that's the problem. Maybe there's a problem with the capatalist paradigm, i.e. growth is good, there must be growth, growth in manufacturing, growth in goods, growth in profits, growth, growth, growth. When you think about it, the basic premise and assumption of our current economic system is insane. Of course there cannot be unlimted growth, or even constant growth. What happens when a human cell grows uncontrollably? Cancer - which consumes and eventually posions, pollutes, and kills its own body/enviornment. Maybe its time to rethink this whole assumption if we want to continue to live here on the planet Earth. Have we become slaves to a philosophy that needs to be moderated and fine-tuned for our existing planetary conditions? Or, like food junkies, will we keep eating the mental shit they feed us, turning faulty assumptions into hard-core beliefs, until we all eat ouselves to death and explode?
The infinite growth model is killing this planet. 50 species a day going extinct.the writings on the wall.
This guy has no clue.
Our currency system cannot survive null entropy. That is a design feature, because it requires new borrowing to pay off the old borrowing in order to create base money. Null entropy, as he calls it, will mean that there does not exist enough money in the next round of currency roll-over to pay for the last roll-over plus interest. Not enough money, to pay back loans on main street means deflation. But not enough money to rollover Treasuries means currency collapse...because the Dollar is the Fed's liability and Govt bonds, its balancing assets.
You can have Null entropy in the yen because it creates a currency arbitrage. You can't in the Dollar because it collapses foreign CB balance sheets, which collapses their currencies in turn, then their bonds, which the Fed also hold, and thence the Dollar.
Entrepreneurs are disinterested because there is no positive payback for the effort. Shortly, the converged currency-gov't system is so extractive that there is no net productivity in production itself, but only in the loan arbitrage - betting on net inflation - that production allows. For a long time now, entrepreneurship has only paid when payback dollars are smaller than loan dollars; loan dollars that can only be gotten with proof of production.
With the currency system in disarray, and the regulatory system growing rapidly, there is no justification for entrepreneurial risk.
The author of this item makes an interesting proposal: that the Fed should simply "erase" some of the government debt it holds. But what would be the other side of the transaction? It would have to be the excess reserves of member commercial banks. These commercial banks would then have to reduce their balances due from the Fed. How would they offset that entry? By reducing the balances due to depositors, or by reducing their paid-in capital?
Growth, growth, growth... that's all we ever hear from the establishment mouthpiece. Maybe that's the problem. Maybe there's a problem with the capatalist paradigm, i.e. growth is good, there must be growth, growth in manufacturing, growth in goods, growth in profits, growth, growth, growth. When you think about it, the basic premise and assumption of our current economic system is insane. From Gadfly
It is debt money system that predicates this "growth" behavior. Most natural occuring growth curves grow quickly and then taper off. For example, when you are born, you grow quickly and then stop growing during the bulk of adulthood.
A debt money system projects an exponential growth curve onto a natural growth curve world.
In other words, makind has trapped himself with a systemic mismatch.
At moment of hypothecation, a gap is formed. More is required back than what was created. This is systemic baked into the cake fraud as part of banking credit finance.
Also, banker credit does not vector into growth areas that can pay back the gap in usury, it vectors into those areas that are flat natural curves, like consumption, or even into negative areas like finance capital.
There is another gap in prices, and that is waste and losses in manufacturing. This then forces prices up, which forces wages up, which then makes people run to take out more debts. The debts then have a gap, so people take out more debt/money. When they cannot pay the debts, they either get their property harvested, or if they have enough "power" they will force their debt instruments to roll-over.
A roll-over incorporates the former usury into the principle of new debt instrument, which then make the usury demands go exponential.
Permanent floating money (debt free) that doesn't have a counter in debt, will not make exponential demands on a natural world.
Some credit is ok, but it needs to be used appropriately.
www.sovereignmoney.eu
(Change the money system, or man has a bleak future. Man does respond to money and prices as his signaling mechanism.)
We have trapped ourselves-in that a government that creates a society where 50% of greater of the citizens receives a monthly federal subsidy or payment, simply has selected for a populationthat has lost the ability to think ciritcally enough to be productive producers that enhance the tax base
One of the reasons for the lack of productivity was explained in the 1800s, by Henry George. You get economic depressions when "rents" overpass the point at which production ceases. Especially telling when you understand that "economic rents" include all forms of extraction from the productive class by the unproductive "rentier" class. The "rentier" class includes banking, insurance, government, and those who control the monetary system.
So, in other words, when economic rents start to absorb pretty much 100% of productive activity, production is real likely to cease: Null Entropy. People will not normally work for free.
So there's that.
But anyone who has ever decided they would like to do something productive knows that you aren't allowed to. You must get someone's permission, and permission is likely to be denied. Try selling your goat milk or goat cheese. In our state it is now illegal for farmers' market vendors to sell any produce they didn't grow themselves; i.e., they can't purchase from growers further south to have produce available ahead of the season, or even sell the cherries and peaches from a neighboring farm. Massive regulation is a bar to entry to many other forms of production.
The US could actually have a vibrant economy consisting largely of agriculture, small manufactures, and mom-and-pop retail and service establishments. We don't, and it's because such enterprises are either illegal, or because the rentier class extracts 100%--or more--of the profits.
Stagnation is normal for you humans. Your golden age has ended. You could click the Start Golden Age button on a great person, but that isn't an effective long term solution.