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Game Over
When the Fed embarked on its mission to rescue the economy in 2009 it did so on the following premise: Save the banks by re-inflating the housing and stock markets via easy money and, as a result, companies would hire and the eventual scarcity of labor would produce wage growth with the end result that the resulting inflation would permit for a tightening cycle to normalize rates.
The problem: After 7 years and trillions of dollars in debt and balance sheet expansion there is no inflation nor is there any wage growth. And the reason for this is a structural one that central banks have been refusing to acknowledge and admit: The massive underlying shift in technology that is radically changing the global labor market. Not for the better, but for the worse.
And this shift has enormous implications for investors, the economy, society at large and the stock market. And these implications have the potential to signal Game Over for this bull market.
Before we get into this let’s briefly address the recent history in the stock market:
For years investing was easy. You just threw money at a market that never stopped going up. And when it occasionally fell, it was because the Federal Reserve had just ended a QE program. But not to worry, the next one was just around the corner. And sure enough every Federal Reserve press release or press conference produced an orgasmic buying feast every time the word “accommodative” was mentioned. Easy money, we have your back, the Bernanke put. You know the gig. Then we had the taper tantrum when Ben Bernanke merely mentioned the possibility of QE ending. Oh, but not to worry, we will stay at ZIRP. Free money for a long time to come and don’t worry we will let you know way in advance when we will raise rates. And even better: QE will be everywhere. In Japan, in Europe. And if things were to get really bad (i.e. the Ebola scare) we will bring QE4 back (Bullard, October 2014). But not to worry any issues are just transitory. Inflation is just around the corner don’t you know?
And for years the narrative worked. Markets went on to make ever new highs, even in 2015 after QE3 ended, spurred on by an unprecedented move of global QE and dozens of interest rate cuts. The ECB launched QE and the DAX even got to over 12K, the Nasdaq went over 5,000 and new highs and the news media and bloggers were giddily writing articles how it was different this time. But there was something odd about these new highs. Most stocks were not participating, in fact, most stocks started correcting while markets made new highs despite this negative divergence. It was a rally of the few, the big cap stocks, while the majority was left behind and we could see it in the charts:
But then something happened. Something symbolic at first. A young woman threw glitter at Mario Draghi in April and the DAX lost 12K and never saw it again. Then there was anxiety about Greece. The math didn’t work, but as we expected they found a way to kick the can. Then China numbers didn’t add up and its growth story began to implode.
In July we outlined the Big Bad Bear Case and pointed toward this structurally weakening $NYSE price chart:
Since then the August flash crash has reconnected price with the moving averages highlighted in the chart:
Price discovery took place in the course of only a couple of days and was stopped by circuit breakers during that flash crash day in August.
From a trading perspective it was a good time to pursue a “buy weakness” strategy as we had been outlining ( i.e. Navigating the next rally), but the next move was in Janet Yellen’s hands. Would she exude confidence and give markets certainty by raising rates finally or would she blink again and extend the uncertainty that markets had been struggling with.
We made our continued “buy weakness” stance very much contingent on this outcome. In “Biding Time Remix” we outlined:
If Janet Yellen doesn’t raise rates and chickens out it’s the same nonsense all over again as it indicates weakness and a worried Fed. So ironically not raising rates may be bearish.
We know the answer now and we promptly flipped bearish into the ramp toward 2020 $SPX as we discussed in Technical Charts on September 17.
So why didn’t the Fed raise rates and why has the reaction been so bearish this time around?
To start with the Fed propagated complete uncertainty again and markets don’t like uncertainty. The “when will they hike game” immediately restarted with predicable results:
Well done Janet, well done. pic.twitter.com/1ef9oLtxAo
— Northy (@NorthmanTrader) September 18, 2015
But this is the side show. The real issue, in my mind, is a global recognition that the next downturn may have already begun which brings us to the real meat of the issue here and one that the Fed is very well aware of, and indeed is reacting to: The destruction of middle class jobs.
In this context note that the most important news flashes this past week or so did not come from Janet Yellen, but rather came in the form of large scale mass layoff announcements:
HP -30,000, Deutsche Bank – 23,000, Johnson Controls -3,000, Qualcomm -1,300
My take is that these large layoffs are just the beginning. And in this new economy of little to no wage earnings power by employees coupled with ongoing technological advancements these trends will continue to erode the structural economic base as all these high wage workers will not be absorbed into other high paying jobs.
Read closely what HP’s CEO Meg Whitman stated justifying the layoffs:
It’s remarkable what’s happening to our services business. As new technologies come in, we’ve got to restructure that labor force to low-cost locations, to much more automation than we have today.
It’s all right there. Low cost and automation. Throw out people. So they save $2.7 billion a year and immediately spend another $1 billion on buybacks and of course won’t stop there:

Jim Cramer had an on point segment on this issue this week. He gets it and also understands that this is the primary reason the Fed did not raise rates. Money quote: “Hiring lower numbers of lower wage workers to do the remaining jobs that are not wiped out by automation”:
What an insult to these employees who now have to figure out how to make a living elsewhere. No, jobs are being destroyed globally through automation and fewer people are needed. The trend has been in place for years and is only accelerating:
35% of jobs to be taken by robots
So fewer people needed due to technological innovation. But it gets worse. While fewer people are needed rapid population growth is increasing the supply equation: Recent projections have been upped again and the latest stats have to make one wonder how there will be enough infrastructure, resources and jobs to sustain the ever increasing masses of people:
It’s no coincidence that global headlines are dominated these days by immigration and mass migration toward American and Europe. More and more people looking for better jobs and lives and wealthy societies looking for ways on how to deal with the influx of people.
This is the structural firewall all the central banks have been and continue to be up against and it’s rapidly coming to a head. For years and decades central bankers have sought to manage any bad news. Recessions, crashes, wars, economic cycles, etc. In the process of attempting to ward off any bad news they also created or helped foment one bubble after another. The tech bubble, the housing bubble and now the debt bubble.
The reality is all these bubbles and subsequent economic disasters have been managed by one primary tool: Long term reduction in interest rates:
But what has it produced with the Fed all in?
Here’s the brutal reality:
Bullish? I don’t think so, and this is before the next downturn has officially begun and with central banks all in.
So with this backdrop the Fed claims it wants to raise rates. Good luck.
Which brings me to the here and now. What I continue to see is a binary set-up. In order to avoid a massive bear market bulls need new highs. Full stop. That $COMPQ chart in my double top tweet the other day makes this perfectly clear:
The biggest double top ever? $COMPQ pic.twitter.com/YEg8XkCPqU
— Northy (@NorthmanTrader) September 16, 2015
The plainly observable fact remains that stock markets have not been able to sustain new highs without central bank intervention:
In lieu of any evidence to suggest that markets can make new highs on their own, one has to surmise that the Fed will, at some point, have to bring back QE. The trigger? Lower stock market prices. And this what it’s all about at the end of the day. In Europe an expansion of QE is already on the table:
- ECB’S COEURE SAYS GLOBAL GROWTH PROSPECTS HAVE DARKENED, HAVE WORSENED MARKEDLY IN EMERGING MARKET ECONOMIES
- ECB’S COEURE SAYS ECB CAN ADAPT QE ASSET PURCHASE PROGRAMME IF DOWNWARD RISKS TO INFLATION ENTRENCH
And in the UK there’s now talk of a rate CUT amidst signs of a signs that the third phase of global financial crisis is looming:
In a wide-ranging speech that called on central bankers to think more radically to fend off the next downturn – including the notion of abolishing cash – Haldane warned the UK was not ready for higher borrowing costs.
“In my view, the balance of risks to UK growth, and to UK inflation at the two-year horizon, is skewed squarely and significantly to the downside,” he said. “Against that backdrop, the case for raising UK rates in the current environment is, for me, some way from being made.”
Given the range of risks facing the economy, there is every chance the next rate move could be a cut instead of an increase.
“Were the downside risks I have discussed to materialise, there could be a need to loosen rather than tighten the monetary reins as a next step to support UK growth and return inflation to target”.
So central bankers know what’s up and so does Janet Yellen and hence they are staying all in and are ready to do more.
And hence the rest of 2015 and into 2016 is very much a binary battle for control with very different potential outcomes.
Technically markets are facing massive potential heads and shoulders patterns and broken trend lines with bearish price implications on confirmation on the one hand:
Yet on the other hand central banks are eager to right it all yet again by the time positive seasonality takes over by the end of the year paving the way for a 1998 like save and push to new all time highs:
In principle the stage is now set for a retest of lows and potential break of price into October. Remember the Fed is not data dependent as it claims, it is market dependent. And, for now, the market has sent a clear message with its price rejection at the monthly 5EMA this week:
The message: The game is over. The trend has changed. And the Fed knows it. The question is: What will it do about it? Roll-over or fight? But will it matter much if it fights? Janet Yellen clearly lost the crowd this week as “accommodative” was met with a resounding SELL as confidence has been shaken. Her job is now to win back confidence. Whether she can or not is now largely determined how the binary set-up we face here plays out. Bottom line: Bulls need a 1998 like repeat to save this year.
How did the Fed manage the big correction in the Fall of 1998: It cut rates of course:
Well, good luck with that this year.
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The trend is not your friend.
this is much more than a financial crisis...
During the Great Depression the Fed financed FDR’s bull shit policies that lead to 20% unemployment in 1938. They also doubled the reserve requirement in 1937.
The Fed hopes and prays the public is gullible enough to buy into the fiscal stimulus again. If not, if Texas and other states say fuck it and game is over for the. Fed.
Sooner or later people will realize what a bull shit money is and what real money is.
I saw a bunch of charts and some had lines on them. Pretty much covered everything but it could have used a little more Brawndo.
Bullish.
Helicopter Money here it comes. Get ready to catch.
Jesus..... the guy quotes Jim Cramer.
If that didn't make you lose your fucking lunch nothing will.
I also disagree with the premise that the FED had any interest whatsoever in the idea that main street would see the trickle down effects he mentions.
The only goal then, as it is now, is to keep financial institution's balance sheets from detonating. The fact that grandpa and grandma, who worked their entire lives, played by the rules, were frugal, and planned ahead, are now surviving on cat food and working as greeters at Walmart to survive, did not even cause a moment's pause for these assholes.
At a more normal interest rate, their financial planning would have gotten them through their twilight years relatively comfortably.
Now that they are having to cannibalize their principal due to 0% interest rates just to stay above water, they're basically fucked.
It also means jobs that might have been taken by a youngster, who is just starting out, are now unavailable.
Makes me want to puke.
The fact that grandma and grandpa are cannibalizing everything they worked for tells you everything you need to know about the INTENT of the Fed... it's not to help the masses, but to exploit the masses at the benefit of the elites. Welcome to the New Feudal World Order.
VIX-termination, QE4, ZIRP, E-mini manipulation, USD/JPY manipulation, banging the close, market self-help breakdowns, circuit breakers, futures margin rises, RRR cuts, Yuan fixes.... they will throw everything at this market to keep it from crashing.
But you don’t understand!
Isn't that Bix Weir's Road to Roota thesis? All this is a DELIBERATE effort to destroy the current Fed/Financial system and 'reboot' - starting over?
The 'good' thing about this theory is that some people recognized and anticipated the mess caused by the Fed and the current banking system and developed a concerted long term plan to destroy it the only way possible - a complete crash WITH plans to start over that included husbanding natural resources for an economic rebuilding of the US.
Unfortunately I don't believe anyone is that noble minded or altruistic - the only long term plans that 'work' seem to be evil in nature benefitting only a very few at the expense of many.
"the only long term plans that 'work' seem to be evil in nature benefitting only a very few at the expense of many" - it's the sociopath way.... and there is no better example of a sociopath then a banker or a politician.
reacting to: The destruction of middle class jobs.
Twenty + years late....that started in the 90's with outsourcing and China. American standard of living is down 43% in last thirty years....
TLDR; but heard that Cramer was mentioned so at least I haven't lost much time here.
Dont you worry, all those muslim migrants who throw chritians overboard for praying will bring us growth!
After 7 years and trillions of dollars in debt and balance sheet expansion there is no inflation
Chapwood Index shows real inflation in US.
In 2014, it was 9.7% - 1212% of official US inflation (0.8%)
http://www.chapwoodindex.com/
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.
So btfd?
Glitter party!
:)
Wishfull thinking. Said it a million times on this site - it's not over until you could walk up to a person on the street and they would know what the Fed even is or there are food riots. Until then we have a ways to go. If Yellen announced QE4 tomorrow we would be up 10% in a week. Until that's not the case the game has a ways to go
Awl, man. The trend lines looks so explanitory! Is that street interview anytime soon?
Yes. spluttering engines do not collapse when there are still spare parts and mechanics around. Some unpalatable hard truths...still plenty of disorganized prey around and wastelands to be made and then there is still cannabalism among the Predators.
Stopped reading after it was said.'there is no inflation'.......
Some fancy clothes they wear, huh?
I wish I did the same. The article went on to rant about how the economy is dying because robots are terkin er jerrrbs.
You can argue the magnitude, but if you are saying it's not impacting jobs, you're a fool.
That's right. Ask everyone at Blockbuster how secure they feel once Redbox hit the streets.
Oh....wait.....
What's Redbox? I have Netflix...
Redbox still goes strong because they're all outside the three financial bellweathers of the nation.
McDonalds, Wal Mart, and Walgreens/CVS
Janet can still cut, to negative rates.
That might be looked at as QE on Krokodil.
They want us to hate the migrants and crowds and crime and filth. They are wearing us out so we go along, along with feeling that losing a few hundred billion or more humans isn't such a bad idea.
You lost me at Jim Cramer...
Lost me too at Jim Cramer.
somebody inform Jim you cant taper a ponzi scheme and thats why rates didn't rise
Game over... insert silver coin
In a surreal world; the destruction of lives is the normal and every person for themselves; it ends badly.
14 years after they started blowing up the money supply, manipulating any thing and everything that could tell the tale of an economy and economic theory in ruin, the general trading public just woke up, but don't worry, it'll be another 15 years before they mention the R or the D word. It was game over in 2008, the body just happened to fall against the wall so as to seem proped up, let the body hit the floor, or whats left of the corpse.
Stopped reading after it was said that Jim Cramer gets it.
Northman trader has been right about a lot recently. I read his articles and he's been on point these last few weeks. Called the bottom after that "black" monday, then said sell on no rate rise. Hit it exactly.
no retail, no crash
wheres the shoeshine boy now?
Medical student; good luck with that...hope you go into pain management since there is a lot of it and much more to come literally and figuratively. Proctology might not be bad to remove the various objects that will need removing in the coming months and years.
Just remember; all the Academic, Medical, Dental, and any other field you can name are all controlled by the gate-keepers, thus all the hoops and money you must have to get into the club.
And correcting outcomes from the other frictional producing practices that represent demand generation in that market. Not that there is anything wrong with that.
- Ned
{doggies now have a leader in this market}
20 20 charts....
Here is some B.S. "Markets went on to make ever new highs, even in 2015 after QE3 ended, spurred on by an unprecedented move of global QE and dozens of interest rate cuts." QE has never ended since all the Central Banks are interconnect via Basal. Not to mention the backdoor QE the FED is doing at a tune of a trillion per month and counting and on the backs of the taxpayers; how convenient. Amazing how far greed drives the human; no matter the color or stripe or place on the totem pole.
I was mildly encouraged that the PBoC dumping of UST essentially undid QE3. PBoC doin' a gigantic FU.
If Greenspan was the Meastro, Yellen is the Fiddler.
I think you meant the strings on the fiddle; thus being played like a fiddle.
And Dimon's the diddler.
Scooby's going to get a cash out refi on his dog house when rates go negative. Then by gold and move to Russia.
At the border, they will have a Scooby message for you: Bye, gold.
These Luddites have been blaming automation since the Industrial Revolution. Yet over that same time, the job market expanded along with population and living standards. It's a favorite scapegoat for the job killing actions of government regulation and taxes.
Production lowers costs and leaves consumers with savings to spend elsewhere. But taxes and regulations discourage production and eat up savings.
Trend is not destiny. What worked for the last 100 years doesn't work for the next 100, unless your ideology demands it.
Saying that people have been arguing about automation for a long time does not mean it'll be true forever. This is a logical fallacy and a poor argument.
The difference between then and now is that it used to be that machines required operators. There were weaknesses in the machines that humans had to overcome, vision, tactile response, etc. Those days are over. Things are not the same.
And production lowers costs and leaves consumers with savings, but if they don't have a way to earn money, it's irrelavent.
The difference this time to all the Technotopians out there that use the fallacy of the Luddite argument is this.
Never before has tech been so small, so widespread, so smart, so seamless, and....so reliable. And all these attributes are increasing exponentially.
In other words.....more "human" and...."more" than human, every year.
And less of everything that makes humanity bad for profits. Sickness, stress, unions, demands, theft, corruption, insurance, benefits.....and most importantly of all.....a paycheck. The cost benefit of a machine is ORDERS of magnitude better than a human. And will increasingly be so every year based on the attributes I mentioned above.
Things this time are indeed different. The singularity is here. It's just not about humans becoming more like machines. Quite the opposite. It's the machines that are becoming more human. And more than human.
Production lowers costs and leaves consumers with savings to spend elsewhere.
Ahhh....spoken like a true textbook ivory tower believer. Not someone who actually gets out in the real world.
We have had that envrionment ever since the 70's when Japan began to import cheap gas sipping cars over here and our native car companies never recovered.
We have NEVER......NEVER......had so much cheap shit laid before our feet that can do magic.....I mean outright magic......the kind that could if we took it back in time get us burned at the stake for a witch or warlock.
But where has that gotten us? A hollowed out economy and people who spend more on storage rent than their mortgage.
The problem, you idiot, is not more excess money to spend on useless iCrap or another Carribean Cruise for you to puke your guts out after getting a Cruise Bug.
The problem itself IS EXCESS MONEY. EXCESS MONEY THAT IS OTHERWISE KNOWN AS DEBT. WITH NO INTEREST RATE ATTACHED TO IT TO MATTER !
Get your head out of your ass and your textbooks. We live on a FINITE WORLD. EXCESS DEBT FUELS THE ILLUSION THAT WE CAN HAVE INFINITE CHEAP PRODUCTION ON A FINITE PLANET !
All about more profitable Chinese-made iPhones and outsourcing jobs for cheaper labor. Deflationary as more and more people must be on Social Security Disability or welfare to live.
Decades ago people would have boycotted companies that did this. Americans have become stupified in accepting their jobs being sent overseas.
Ahhh....spoken like a true textbook ivory tower believer. Not someone who actually gets out in the real world.
LOL. Most of my career was spent designing machines for factory automation.
The problem itself IS EXCESS MONEY. EXCESS MONEY THAT IS OTHERWISE KNOWN AS DEBT. WITH NO INTEREST RATE ATTACHED TO IT TO MATTER !
That's a problem caused by government meddling, not by production.
The problem, you idiot, is not more excess money to spend on useless iCrap or another Carribean Cruise for you to puke your guts out after getting a Cruise Bug.
Yes! Yes! It's bad that people spend their money having fun. LOL!
We live on a FINITE WORLD.
Earth's crust has more resources than the human race can possibly consume. If it bothers you that much, you can always kill yourself.
Sigh. All right old man. You win. I didn't know you knew all about geology along with your PhD in economics and mechanical engineering.
So....tell me gramps.....when are you going to invent the machine that is powered by perpetual motion that can cheaply harvest all those resources REGARDLESS of government meddling ?
I mean....you're so fucking smart....you should have already come up with some gee whiz technology to replace politicians by now.
Here's a clue dick for brains. The planet DOES have untold riches on top and below. We, on the other hand, REGARDLESS if we had ZERO REGULATION, would never have the money to extract it all to continue the dream of perpetual growth. I'm sure you've heard of the Law Of Diminishing Returns. Well....unlike your Libertarian Sci-Fi beliefs....that law works on Earth just as much as the Law of Thermodynamics.
Why is it that most Libertarians I meet, who considered themselves so smart and who pat themselves on the back for their use of "reason" are nothing more than modern day "alchemists" ?
So Ghost in the Shell is now?
"If I could just be more human..."
Ask IBM's Watson
Saying that people have been arguing about automation for a long time does not mean it'll be true forever. This is a logical fallacy and a poor argument.
Yours is an old argument and as false as it ever was. It comes from a failure to imagine how much better this world would be without government meddling. The cost of government alone consumes enormous resources, more than what can be supported by production. It is government that has outlived its usefulness, not automation. Improvements in production will continue for as long as humans want to live better lives - that's the driving force. Things have yet to be invented that we can't imagine today. If they make it to market, it will be for good reasons, not bad.
Right......bad ol gubmint meddling.
Look gramps....stay out of the business of diagnosing. You suck at it.
Government meddling is a SYMPTOM....not the problem. The problem is inanate human corruption. It takes many forms. Government meddling is but one. Corporate greed and graft is another.
In fact, shit for brains, most goober mint "meddling" is simply CORPORATE meddling passed through the government so the Corporations can keep their hands clean.
Even if we were to have your Libertarian fantasy come true and we were to live in a "Government Meddling" free world you would still have rampant CORPORATE meddling and corruption. It would be a CORPORATE government instead. But still...a government and one even less beholden to the people.
Not to mention your blessed market. Which is just a code word for people. And peope are the root of all corruption. I haven't seen a government or corporation yet NOT run by people. So you think givernment is corrupt. Blame the people. Corporations are corrupt. Blame the people. People want Cheetos and Sodas and Cigarettes and drugs. These are markets, lets provide them what they want. So from corrupt desires of the people we get corrupt companies providing corrupt goods and services. We now have a medical crisis because of that. Now we have a corrupt government of the people for the people, in bed with corrupt Big Medicine and Big Insurance....and we get corrupt HMO'S which eventually turns into something we call "ObamaCare". Which Obama had little to do with since it was written by "free market" public corporations known as the Insurance Companies.
Government, my ideological (or is that "idiotlogical") friend is NOT the problem. We are.
FWIW, I agree with you 100% and consequently disagree with your wordy detractors...
but making a real estate speculator President will fix everything.
No, electing another Bush or Clinton will fix everything...
/s
he does have a lot of large scale bankruptcy experience
I've considered this matter. My conclusion: We're totally fucked.
Why all the words -- do you know you are analyzing the behavior of Narcissists and Sociopaths in places of Control?
"Madman (Running Through The Fields)"
You look at me, what do you see now?
Is it so bad, or am I just sad?
Are you in doubt? Is there is a way out?
I've seen the crack, I cannot come back
https://www.youtube.com/watch?v=vAaHVQRs690
The men at the Fed gave the turtle this turd. Assholes, but expected.
All these analyis ans charts look very compellin. But still not adding up. If the prediction in this article is correct, we'll have one of the worst stock market corrections ever probably even worse than 2008.
However, just one things doesn't add up. Obama's legacy and Biden getting in the race. If stock market tanks and roils the economy with it bye bye Biden and bye bye Democrats for the next 8 years. No way they win if stock market goes full on bearish.
My bet is that Yellen/Obama will do everything possible for one last hurray untik Nov 2016 or maybe even January 2017.
Bottomline, no way this market tanks until after the Presidential election cycle. Occams's Razor my friend.
Forget the Jew bitch, the Himie boys in the Fed set her up to take the fall, she was so giddy to get the head job she forgot to tink. This phony Fed ship is going down and she ain't got a life jacket to save herself. its geting close to shiney time and maybe a case of roundies.
Old Mrs kelly's just bought a new dress, spent half the groceries and most of the rent. She says that happy is better by far, And the money she has you can keep in jar.
Can you see the money tree, growing in their hearts? If you had their lives to lead, would you ever start?
Money Tree (1970)
Easy. NIRP soon
Too soon will vaporize what little confidence is left in the Fed. To tell you the truth, it doesn't matter what they do anymore. The game is up. Any pop in the market will be sold into with vengence until another market bottom is found in a year or two.
Only two choices: repudiate or inflate
I see commercial here:
“Zerohedge – saying “Game Over” “Doomsday is here” for US and dollar since 1882”
http://youtu.be/h81oiF7VIOw
At least with automation taking more and more American jobs our leaders have the foresight to seal off the border and not bring in refugees....oh...wait.
It's not Yellen's job, nor the Fed's, to hold equity valuations aloft. This article reads a little like a demand for a fresh Greenspan put. Yes, markets are overvalued. Yes, MoMo players are going to leave when the MoMo play stops working. It's not the Fed's problem.
A former software-writer "entrepreneur" just put up his own crowd-funding website to back him building houses on spec in my neighborhood. I think there is an indicator in this somehow, I am not sure. He clearly has enough skills to build a website but he can't make money writing his software apps. He thinks construction projects are a "quickie" that requires little or no prior experience. He clearly wouldn't know the front from the back of a sheet of drywall. But, I thought this was the reason we saved Chase and WellsFargo, to lend to small business. People who want out of the momo, can paypal him a few k and trust him not to get on a plane back home with it. Or fund his kid's private school fees. decisions, decisions.
Game Over or The Case For The Next QE:
"In lieu of any evidence to suggest that markets can make new highs on their own, one has to surmise that the Fed will, at some point, have to bring back QE."
Automation- I was in a european factory last week; they had a machine -probably €1.2 million max. capital cost, with 2 guys operating it. I reckoned that machine turned over €60 million a year on a single shift. 20 years ago, that product couldn't have been made with less than 100 guys, and not half as well.
That company had to move with the technology, or die. So they moved. I reckon they have maybe 150 guys on site now, but their turnover has multiplied 20 times, 50 times (?) and they have loads of new, sophisticated products.
In the West we have to embrace the technology, and beat the emerging nations with brilliant new advances -unless we want our people's standard of living to half.
The secret is to have a great education system, and a tax system that promotes innovation.
We have neither.
If it's true what you are saying, which I think it is, my question is: Who will buy all this stuff made by these robots taking into account that these robots took a lot of Jobs and wages have only gone down?
Maybe the concept of a basic guaranteed income isn't such a bad idea after all. In some countries like the Netherlands a test with 'basic income' has already started because we know that there simply won't be enough jobs for everybody.
The alternative maybe massive unrest in a global deflationary spiral.
"...Save the banks by re-inflating the housing and stock markets via easy money..."
"...companies would hire and the eventual scarcity of labor would produce wage growth..."
"And the reason for this is a structural one that central banks have been refusing to acknowledge and admit: The massive underlying shift in technology that is radically changing the global labor market."
Totally wrong analysis.
Reinflating the housing and stock bubbles with easy money was not the goal. It was the method of keeping the total amount of credit that backs the currency stable.
The theory about companies hiring and wage growth is a fantasy we told ourselves. It has nothing to do with interest rate or moneary policy because the Fed's mandates are a sham for the press, nothing more.
The 'structural problem' has nothing to do with technology, because real earnings is measured in productivity, not wages. Wages are just the consequence of productivity. Wages lacking productivity have to come from somewhere, and the only place they can come from is the productive. Meaning you have to rob the productive of the benefits of their productivity in order to pay someone else to be unproductive. This produces a powerful incentive to be unproductive.
NO. THE STRUCTURAL ISSUE IS IN THE VERY DESIGN OF DEBT-BASED FIAT CURRENCY. AND IT IS UNAVOIDABLE SO LONG AS WE CONTINUE TO USE SUCH A SYSTEM:
The Debt-Based-Fiat-Currency-System uses a face value of debt to secure the creation of an equal amount of currency.
But the debt side of the currency bears an interest rate, while the currency side does not.
The result is that there is never enough money to pay both the debt and the interest. Not enough money anywhere. NEVER. Because that is the design of the currency system.
Instead new debts must be taken on that are equal to the size of the old debt plus accumulated interest. That new debt will then underwrite the creation of an amount of currency equal to its face-value...and the game begins again.
o THIS MEANS THAT A FAILURE TO EXPAND DEBT WILL CAUSE THE CURRENCY SYSTEM TO COLLAPSE.
o THIS MEANS THAT THE VERY DESIGN OF THE CURRENCY SYSTEM IS GEARED TOWARDS CONTINUOUS MONETARY AND PRICE INFLATION.
(Stick that in your mandate, Fed.)
o THIS MEANS THAT THE DESIGN OF THE SYSTEM EXPLICITLY AND INTENTIONALLY PUNISHES SAVINGS, AND SUBSIDIZES BORROWING.
o THIS MEANS THAT THE DESIGN OF THE SYSTEM EXPLICITLY AND INTENTIONALLY DELIVERS GREATER WEALTH TO FINANCIAL BUSINESSES, AND CENTRAL BANK CRONIES THAN IT DOES TO ANYONE ELSE...INCLUDING ANY AND ALL 'PRODUCTIVE' LABOR.
This last one is the Gem because it is the consequence of using a Ponzi-scheme for a currency system:
o AND FINALLY THIS MEANS THAT THE PORTION OF EACH DEBT ROLL-OVER THAT IS ACCUMULATED INTEREST CONTINUALLY INCREASES, WHILE THE PORTION THAT IS 'PRINCIPAL' (representing real physical things) IS EVER DECREASING. AND WHEN THERE IS TOO LITTLE PRINCIPAL (real stuff) TO SERVICE THAT ACCUMULATED DEBT (theoretical) EITHER REAL INTEREST RATES MUST COME DOWN OR THE CURRENCY SYSTEM COLLAPSES...BECAUSE (going back to the original point) THERE IS NEVER ENOUGH MONEY TO PAY OFF BOTH THE DEBTS AND THE INTEREST, BUT THE INTEREST GETS PAID FIRST (meaning that any default in a unit of debt wipes out the currency needed to service other debts in a chain reaction).
Everything that is happening is happening because of the design of the currency system.
The amount of the debt backing the currency that represents 'real stuff' has grown too small relative to the amount representing accumulated interest. They now need negative interest to keep debt expanding and keep the currency system from collapsing.
The rest of the economic conditions you see are consequences of that system and our current place in its life-cycle.
Get it?