The Deflation Monster Has Arrived
Submitted by Chris Martenson via PeakProsperity.com,
As we’ve been warning for quite a while (too long for my taste): the world’s grand experiment with debt has come to an end. And it’s now unraveling.
Just in the two weeks since the start of 2016, the US equity markets are down almost 10%. Their worst start to the year in history. Many other markets across the world are suffering worse.
If you watched stock prices today, you likely had flashbacks to the financial crisis of 2008. At one point the Dow was down over 500 points, the S&P cracked below key support at 1,900, and the price of oil dropped below $30/barrel. Scared investors are wondering: What the heck is happening? Many are also fearfully asking: Are we re-entering another crisis?
Sadly, we think so. While there may be a market rescue that provide some relief in the near term, looking at the next few years, we will experience this as a time of unprecedented financial market turmoil, political upheaval and social unrest. The losses will be staggering. Markets are going to crash, wealth will be transferred from the unwary to the well-connected, and life for most people will get harder as measured against the recent past.
It’s nothing personal; it’s just math. This is simply the way things go when a prolonged series of very bad decisions have been made. Not by you or me, mind you. Most of the bad decisions that will haunt our future were made by the Federal Reserve in its ridiculous attempts to sustain the unsustainable.
The Cost Of Bad Decisions
In spiritual terms, it is said that everything happens for a reason. When it comes to the Fed, however, I’m afraid that a less inspiring saying applies:
Yes, it’s easy to pick on the Fed now that it’s obvious that they’ve failed to bring prosperity to anyone but their inside coterie of rich friends and big client banks. But I’ve been pointing out the Fed’s grotesque failures for a very long time. Again, too long for my tastes.
I rather pointlessly wish that the central banks of the world had been reined in by the public before the crash of 2008. However the seeds of their folly were sown long before then:
(Source)
Note the pattern in the above monthly chart of the S&P 500. A relatively minor market slump in 1994 was treated by the then Greenspan Fed with an astonishing burst of new money creation -- via its ‘sweeps” program response, which effectively eliminated reserve requirements for banks .That misguided policy created the first so-called Tech Bubble, which burst in 2000.
The next move by the Fed was to drop rates to 1%, which gave us the Housing Bubble. That was a much worse and more destructive event than the bubble that preceded it. And it burst in 2008.
Then the Fed (under Bernanke this time) dropped rates to 0%. The rest of the world’s central banks followed in lockstep (some going even further, into negative territory, as in Europe’s case). This has led to a gigantic, interconnected set of bubbles across equities, bonds and real estate -- virtually everywhere across the globe.
So the Fed's pattern here was: fixing a small problem with a bad decision, which lead to an even larger problem addressed by an even worse decision, resulting in an even larger set of problems that are now in the process of deflating/bursting. Three sets of increasingly bad decisions in a row.
The amplitude and frequency of the bubbles and crashes are both increasing. As is the size and scope of the destruction.
The Even Larger Backdrop
The even larger backdrop to all of this is that the developed world, and recently China, have been stoking growth with debt, and have been doing so for a very long time.
Using the US as a proxy for other countries, this is what the lunacy looks like:
As practically everybody can quickly work out, increasing your debts at 2x the rate of your income eventually puts you in the poor house. As I said, it’s nothing personal; it’s just math.
But somehow, this math escaped the Fed’s researchers and policy makers as a problem. Well, turns out it is. And it’s now knocking loudly on the world’s door. The deflation monster has arrived.
The only possible way to rationalize such an increase in debt is to convince oneself that economic growth will come roaring back, and make it all okay. But the world is now ten years into an era of structurally weak GDP and there are no signs that high growth is coming back any time soon, if ever.
So the entire edifice of debt-funded growth is now being called into question -- at least by those who are paying attention or who aren't hopelessly blinkered by a belief system rooted in the high net energy growth paradigms of the past.
At any rate, I started the chart in 1970 because it was in 1971 that the US broke the dollar’s linkage to gold. The rest of the world complained for a bit at the time, but politicians everywhere quickly realized that the loss of the golden tether also allowed them to spend with wild abandon and rack up huge deficits. So it was wildly popular.
As long as everybody played along, this game of borrowing and then borrowing some more was fun. In one of the greatest circular backrubs of all time, the central banks and banking systems of the developed world all bought each other’s debt, pretending as if it all made sense somehow:
(Source)
The above charts show how hopelessly entangled the worldwide web of debt has become. Yes, it's all made possible by the delusion that somehow being owed money by an insolvent entity will endlessly prevent your own insolvency from being revealed. How much longer can that delusion last?
All of this is really just the terminal sign of a major credit bubble -- a credit era, if you will -- drawing to a close.
I will once again rely upon this quote by Ludwig Von Mises because apparently its message has not yet sunk in everywhere it should have:
“ There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
~ Ludwig Von Mises
Well, the central banks of the world could not bring themselves to voluntarily end the credit expansion – that would have taken real courage.
So now we are facing something far worse.
Why The Next Crisis Will Be Worse Than 2008
I’m not just calling for another run of the mill bear market for equities, but for the unwinding of the largest and most ill-conceived credit bubble in all of history. Equities are a side story to a larger one.
It’s global and it’s huge. This deflationary monster has no equal in all of history, so there’s not a lot of history to guide us here.
At Peak Prosperity we favor the model that predicts ‘first the deflation, then the inflation’ or the "Ka-Poom! Theory" as Erik Janszen at iTulip described it. While it may seem that we are many years away from runaway inflation (and some are doubting it will or ever could arrive again), here’s how that will probably unfold.
Faced with the prospect of watching the entire financial world burn to the figurative ground (if not literal in some locations), or doing something, the central banks will opt for doing something.
Given that their efforts have not yielded the desired or necessary results, what can they realistically do that they haven't already?
The next thing is to give money to Main Street.
That is, give money to the people instead of the banks. Obviously puffing up bank balance sheets and income statements has only made the banks richer. Nobody else besides a very tiny and already wealthy minority has really benefited. Believe it or not, the central banks are already considering shifting the money spigot towards the public.
You might receive a credit to your bank account courtesy of the Fed. Or you might receive a tax rebate for last year. Maybe even a tax holiday for this year, with the central bank monetizing the resulting federal deficits.
Either way, money will be printed out of thin air and given to you. That’s what’s coming next. Possibly after a failed attempt at demanding negative interest rates from the banks. But coming it is.
This "helicopter money" spree will juice the system one last time, stoking the flames of inflation. And while the central banks assume they can control what happens next, I think they cannot.
Once people lose faith in their currency all bets are off. The smart people will be those who take their fresh central bank money and spend it before the next guy.
In Part 2: Why This Next Crisis Will Be Worse Than 2008 we look at what is most likely to happen next, how bad things could potentially get, and what steps each of us can and should be taking now -- in advance of the approaching rout -- to position ourselves for safety (and for prosperity, too)
Click here to read Part 2 of this report (free executive summary, enrollment required for full access)
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The question in my mind is how much do the masses have to lose before they decide it's better to spend their savings before they lose the balance. I think it's almost everything.
In a deflationary economy, fortunes are made in reverse to an inflationary economy. You come out ahead by not playing and not losing. Be neither a borrower or a lender.
In a deflationary economy you want to have as much debt as possible, and the ones who will be truly fucked are the ones that owe zero on their homes.... Think about it.
I'm not so sure about that. As home prices collapse, debtors will wind up owing more on their house then what it can sell for. The IRS considers a default as a taxable gain on what the bank lost.
Alas, because of property taxes, your local government owns your house.
I try to keep my living expenses as low as I practically can. That's why I avoid debt. It paid off when I was once out of work for two years.
I think you got that backwards. Think about it. Lets say you have a $100k annual income and buy a house with a $300k loan. Now, 10 years later due to high inflation you are making $200k. You will now have a much easier time paying off that mortgage and the house is worth $600k.
Let's say that instead of inflation, there is deflation and your income drops to $70k over that 10 year period due to job loss and settling for less. Your house is now worth $180k and you are under water and having trouble keeping up on payments for the $300k loan.
If your house in paid for under inflation you could get in trouble trying to pay your property taxes, insurance and utilities if you are retired. Your house will be worth a lot more, but you may get squeezed. Under deflation your house will be worth less, which should not trouble you unless you bought more than you needed as "an investment". Everything else will cost less for the house: taxes, insurance, utilities not to mention food and clothing.
As someone who has paid off his home and who is looking forward to retirement, inflation scares me whereas deflation not so much.
Exactly!
Keep in mind, however, that nothing is static. While there's no way I could possibly accurately predict what will happen, there seems to be a big consensus that one thing follows another, that being that "inflation" (in the context of currency circulation) would follow "deflation," as a last-gasp attempt.
Best is to minimize (control as much as possible) one's expenses. Food, Shelter and Water. I've got the later two fairly well handled, still working on the first (Food).
Yes, he's got it backwards. Gigantic fail there.
Inflation is a debtors' best friend. Deflation is the "enemy" -- it's why governments do everything in their power to avoid it.
So, serious question for all. Where would you put a wad ($350-400k) of cash right now if you were sitting on it in a bank savings account? The house is now paid for, no revolving debt, my 401k is moved all in a money market fund and have about a years worth of income in PM sitting in the safe, and also own a several hundred acre timber farm I inherited a few years ago when mom died. Not trying to humble brag and realize I'm in better shape than most, and this is just hooker aand blow money, but looking at cash just sitting that a number of years ago I would have invested in stocks and bonds or real estate just freezes me up. Thoughts (besides spending it on hookers and blow)?
Buy a little more Pms. Double your current stock.
Buy a year supply of food if you don't already have it. Walton Feed and Augusan Farms are good companies.
Obtain little things you need but never think of, like WD-40 and gaffers tape. Extra hardware, fishhooks, cheap but decent tools, etc. Manufactured goods that are hard to make outside an industrial process, but are currently very cheap and useful. Take care of them and they won't go bad, and should shit get thick they may prove to be invaluable.
Spend the rest on something you enjoy. Take a safari. Tour the chateus of France. Buy a beater car and fix it up. Spend it on something that will give you memories you can treasure for the rest of your life.
Want memories to treasure? HOOKERS'N'BLOW!
Build a biogas plant and a sawmill that runs on biogas on your timber farm. Keep it as high-spec yet low-tech as possible, then mothball it.
NZ Governemnt stock.
Top interest rate/ food-producing nation/ prospect of appreciating currency.
What's not to like?
Actually I had to deal with a similar amount recently: I put it into some top-quality soil . . . . some 65 acres of it.
The biggest housing bubble in the world.
"New Zealand is the most expensive country in the world to buy property on a price to income basis, a new report by Fitch ratings agency states."
http://robinwestenra.blogspot.co.nz/2016/01/the-biggest-housing-bubble-i...
All true. Very few high incomes in NZ. Hence the high ratio of price to income. But that is talking about McMansions in Auckland. No sane person resides or purchases a house there. It's a sewer.
But I did not recommend investment in housing, although there are bargains in the boondocks. Government stock , taxpayer guaranteed. What's not to like?
You want a real housing bubble?
Try Sydney.
Short-term: TVIX
then cash-out with a 3x or 4x windfall, likely this year.
Medium-term: physical gold & silver + full pantry/food, ammo, TP, etc., perhaps farmland if you can handle it.
Long-term: physical gold & silver + land, and the ammo needed to protect it all.
There are a lot of variables to that depending on what you want to do and where you want to do it. You can retire to an island in Thailand if you like.
I like the point behind your question which is that investing in the stock market is a bad risk, unlike years ago. I now generally hate stocks. I realize they are manipulated and diluted by the incompetent self-serving CEO's. They are pumped up by the Fed and they are grossly overrated by the rating agencies. They are hyped by people who profit from the hype.
I remember my last brilliant stock play. It was my own company which was stagnant and share prices had dropped to where the dividend was paying about 7% based on the stock price. I put about $100k which was most all my 401k at the time into it figuring I either get 7% and/or I get stock appreciation. Our company had boasted of never decreasing the dividend in 150 years.
The new CEO who came in after the last one left with almost $300mil (sealed and estimated) soon cut the dividend in half and the stock dropped about 25% immediately. The asshole was a trial lawyer, not even from our industry and a well known Obama sycophant. Leftists talk good game but they play a terrible game.
It was then that I realized that companies could painfully dilute their shares (like mine had) reducing your percentage stake, play with dividends, issue different classes of stock and generally screw around with these pieces paper much the same way the government can wreck a currency. Your "stock" is only worth what the CEO and CFO want it to be. It has no real fixed value. A bond trader friend told me it is better to own the corporate debt. More rights and first claim if things go belly up.
So, you want to throw your whole nest egg into a nest of vipers who really do the blow and hookers you reference? I agree with you. Stay out of that, especially now that stupid, idiot blind funds simply buy the whole market without regard to quality and earnings. It's retarded.
I've got something that you might consider. I work for a world famous Aerospace company that has a smelly little black and white animal as it's logo (think pepe' le pew). But on the side, I'm an inventor, who holds patents and I'm looking for funding for a product that I've been working on for a year.
Pretty much recession and depression proof, because anybody who works on their own cars and their families vehicles, would love to have this. I've had nothing but positive reviews, from shops, auto retail parts store employees and regular folks.
Consider that there's nearly 250 million vehicles out there, with an average age of 11 years old. If you sold this product to only 1/4 of 1% of that market, I estimate that you'd pull in $3.5 million dollars. What you have, would cover not only the startup, but it would fund the thing for an entire year and then some.
Check it out at CarInfoCard.com.
Is that you sytanding by the corvette or the audi?
Cool idea, good luck!
Buy an island in the caribbean and use a female guidance counselor to lure girls from south florida high schools to the island and invite bill clinton and european royals.
"So, serious question for all. Where would you put a wad ($350-400k) of cash right now if you were sitting on it in a bank savings account?"
Invest in enough solar to go 100% off grid.
No, in a true deflationary economy, you avoid debt (mortgages) and PM, and own tons of cash. Cash that you'll need to survive in comfort and style, and to snap up deals/steals on fire sales.
That's how the Bushes snapped up the Crawford ranch: when some schmuck was forced into a desperation sale.
"The question in my mind is how much do the masses have to lose before they decide it's better to spend their savings before they lose the balance."
Savings?
More than half of Americans — 56 percent, to be exact — have less than $1,000 combined in their checking and savings accounts, according to a recent survey, Forbes reported.
This is to say, most Americans are living paycheck-to-paycheck.
http://www.alternet.org/economy/myth-middle-class-most-americans-dont-ev...
Furthermore, almost two-thirds of Americans — 63 percent — do not have enough in their savings for an emergency. A substantial majority of Americans would need to borrow money if faced with an unexpected expense.
Deflation on Wants. Inflation on needs. Privatize Gains. Socialize Losses. Crony Capitalism is dying. Stagflation. The worst of all the isms. Good Riddance.
All the various defintions of "isms" out there are now obsolete. It's getting harder and harder to just throw "crony" on there to make it sound better.
"It is what it is"
- Bill Belichick
lower interest rates, like i said it is just math, nothing inflamatory...
ok, so refi tyme on the mortgage? get in the mortgage business, seriously...
always an opportunity, there is some optimism, ha...
With all due respect to Mises, Hayek and the other Austrian economists who are respected on this forum, I think Marx's explanation squares better with reality. Capitalism is a system where the holders of capital use their capital to rob the workers of everything. Eventually, the capitalists (what we would call bankers and CEOs today) steal everything. When that happens, the system collapses.
This article speaks of the Fed's failures, but the Fed has done what it was intended to do with perfect precision, namely, to bankrupt the poor and middle class. The bankers might make some noise about giving us some free money, and we might even see some tokenism, but it will only be to keep us from rioting while the last billionaires helicopter out to their wilderness keeps. Inflation, in the classic sense, is when too much money is in too many hands. Thus, we aren't going to see inflation anytime soon. The end game has been achieved, which was to steal every last crumb from us. We can't spend what we don't have, so deflation is what we'll get for the foreseeable future.
"the holders of capital use their capital to rob the workers of everything."
Actually it is the predators and other sociopaths (bankers etc.) who do that. Your brush is too broad. Capitalism is not the enemy.
Well yes and no.
I would argue that we're biologically created to be in much closer harmony with the earth. The problem is actually this disconnection that has occured.
It is warping the spiritual underpinnings of our existence. We begin to lose our way.
Life isn't that complicated but we are making it so through our quest for technology. It will be our undoing.
Harmony between man and the environment which nurtures him is not a new or radical concept. It is not even necessarily a spiritual concept. Today we Taoists call it sustainability. It is otherwise just uncommon good sense.
"I would argue that we're biologically created to be in much closer harmony with the earth."
Created? Perhaps "evolved." Anyways...
We're no different than bacteria. Humans will grow until they encounter a mass die-off. Not sure that this is really what I'd call being in "harmony with the earth." Ultimately the environment dictates what is and what isn't possible.
I agree. Both the capitalists and anti-capitalists are wrong. As another poster stated, the problem is in the very idea of eternal growth. Marx in no way opposed this, he believed that capital had internal contradictions which could be exploited by the proletariat - allowing them to eventually seize the means of production and create a dictatorship of the proletariat. This was his contradiction, he basically left the idea of perpetual growth open-ended, and assumed the natural good of the proletariat, as if they would choose to abolish the state once they seized it.
But much of the working class is fine with work, they even adore it. They do not see it as their labour being stolen from them, it is just the way of the world. In reality, it is the future and the wealth of real labour which is being taken from all of us. Mechanized production makes machines of all of us; 'bourgeoisie' and 'proletariat' alike. And in such a system there is no hope for the future, nothing of quality we can build for our children.
In a sense, the ruling class has been proletarianized, they are slaves to the machine just like everyone else. Standing by and trying to manipulate and interpret numbers until they barf on stage in front of a crowd. The work is now killing them, as their biology catches up to the runaway of a false environment.
I think these cycles are run by the elites/Red Shield/Black Hand Nobility every 70 to 90 years to crash countries so they can loot and take over countries. They steal the wealth of the people.
Look at The Civil War. Both sides backed by the banksters. It was just to loot the south of it's wealth. Who were the carpet baggers who came in the south and stole everything? Same type of non-Christian people who ran the Bolsheviks project they stole everything in Russia and murdered 25+ million Christian Russians and at leats 6 million Ukrainian Christians?
The issue is "growth." No empire has ever escaped collapse, regardless of religion.
"Go forth and multiply." And on a finite planet! Eventually resource scarcity would produce waring factions (just as proven by history).
Every fucking group has felt itself superior to others (which comes in handy when those resource shortages finally come around- gives justification for killing), always laying the blame for human nature at someone else's feet.
I agree with you that Marx's diagnosis is spot on however the utility of his solutions are proven to be historically negative.
Life is not fair the native American's had evolved over generations, a very eloquent solution to the human condition that was actually more advanced than the Europeans because it was more in tune with our roots as a species.
It was exterminated by greater technology.
The Ted K was right is the best way I can sum it all up
https://www.youtube.com/watch?v=wheTogztk0A
Ted K may have been a little crazy, but he wasn't nuts... and he wasn't wrong, either.
But does deflation mean interest rates stay close to the zero bound?
In a collapsing economy what is the risk premium for lending money to business?
Which way for interest rates?
Back to normal? (5-10%)
Just for context, right now here in Godzone , a term loan , fixed interest five year, backed by prime food -producing land , is available at 6.8%.
Great question!
What's the risk premium for over-pumping oil into a declining market?
One has to view it in the context of saving a business via taking on what would otherwise be BAD decisions. Ugh! Yeah, doesn't sound right, yet, that's pretty much how it'll have to go down. Either close up shop for good or put the pedal to the metal and see if you can outlast your competitors. Of course, this is all under the mistaken idea that there's going to be an up-tick/up-cycle. Whether it is or isn't, however, kind of means little anyway: go out swinging and die, or just die. Figure that one's Accounts Payable and Accounts Receivable departments will be swapped, rather, the NAMES will be swapped- everyone will continue doing the exact same thing! (force folks to withhold payments; look to pay accounts as quickly as possible)
Negative interest rates are an attempt to force liquidity flow. Those best able to take advantage of transactions will do so even if that means giving away money! And if you think about it the sub-prime crap was pretty much just that. Difference now is that it's pretty much now out in the open and officially sanctioned by all.
For "The System" this is going to turn out badly, VERY badly.
I get your point Snooz but this is the common misatribution of capitalism. Here is maybe my all time favorite quote from Bastiat:
Man can live and satisfy his wants only by ceaseless labor; by the ceaseless application of his faculties to natural resources. This process is the origin of property.
But it is also true that a man may live and satisfy his wants by seizing and consuming the products of the labor of others. This process is the origin of plunder.
Now since man is naturally inclined to avoid pain -- and since labor is pain in itself -- it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it.
When, then, does plunder stop? It stops when it becomes more painful and more dangerous than labor.
It is evident, then, that the proper purpose of law is to use the power of its collective force to stop this fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder.
But, generally, the law is made by one man or one class of men. And since law cannot operate without the sanction and support of a dominating force, this force must be entrusted to those who make the laws.
This fact, combined with the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort, explains the almost universal perversion of the law. Thus it is easy to understand how law, instead of checking injustice, becomes the invincible weapon of injustice. It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people, their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds.
- Frederick Bastiat
This "plunder" occurs in Communism, monarchy, the mafia and is the basis for basic crimes like robbery. A robber is someone who lets you work for something and then takes the results of your work. Why? Because it is way easier than working for it himself.
Capitalism unfettered is a voluntary trade. The damage anyone can do without government force is severely limited. In voluntary relationships trust must be earned. How much money would you put into banks if there was no government guarantee? How well would you choose a bank? When all accounts everywhere are guaranteed how do you differentiate quality? How much of your money can a single banker get versus the Fed?
More, not less freedom is the direction to go.
Capitalism is still growth-based and will, as it already has, fail.
"Capitalism unfettered is a voluntary trade. The damage anyone can do without government force is severely limited. In voluntary relationships trust must be earned."
But yet "laws" are expected to hold, and from what force? It's a chicken-and-egg issue.
Sadly, all our attempts at structuring ourselves will only be proven effective in building up to a big correction to the norm (pure nature). Either one pays one's daily lumps or looks to survive some bomb being dropped (and having zero chance of dealing with). I really don't seeing there being any "win," Nature is deceptive; humans are OF nature.
Capitalism and fraudulent money are incompatible. Even though the FED was created way back in 1913, the gold standard (honest money) wasn't finally abandoned until 1971. That's when everything our founding fathers fought for was given away by the crook, Nixon. We have been living in a growing Soviet system since 1971. It's a fraudulent fiat credit bubble that feeds off fewer and fewer fools (taxpayers) every year.
That's funny. In your world, capitalism is the thief -- but in mine it's the government that has both hands in my wallet (through taxes on my income and the products I buy), which it then redsitributes to themselves, the bankers, other cronies and the free shit army who votes them into office.
One of us lives in fantasyland.
In the real world, it is mano a mano.
Yes, it is. As technology progresses, I think humans will have to find a way to change themselves if they want to survive. Mano a mano wasn't too bad with swords, but with nukes it gets too dangerous, IMHO>
It is the difference between free market capitalism and crony capitalism. Crony capitalism is the thief, and it controls the Government. That's why the Government has its hand in the wallets of the "people", at the same time it repeatedly bails out the crony capitalists.
I think the root principle is that free market capitalism cannot exist without honest money, and the Crony capitalists and the Fed dishonest money creators are the same people.
The FED is a skimming operation, it skims productivity 'fat' for it's owners. It actually allowed people to keep most of their productivity (witness higher standards of living) through most of it's existence. Then, along came Alan Greenspan. His incompetence created a horrendous credit bubble. Now, since Berflunkie took rates down to zero 7 years ago, they have become a slaughter house operation. They are now actively killing the economy with their parasitism, just like the Communists did in Russia. The names have changed, but the results are the same. Too much money in too few hands. End the FED!
I don't think Greenspan was incompetent. I think he was just a good actor.
Everything we are seeing today is a replay of what the Fed did before the Great Depression. The Fed is designed to do this.
I think Marx's explanation squares better with reality. Capitalism is a system where the holders of capital use their capital to rob the workers of everything.
It's a common error to conflate free market capitalism with crony capitalism. Free markets imply free exchange; there is no robbery. Exchange under government law is coerced - robbery.
Marx had a stupid explanation that what a worker produced belonged to the worker.
Marx wasn't stupid, but he may have been idealistic.
I find it as hard to find countries practicing free market capitalism as to find countries practicing what Marx prescribed. It seems to me that the Marxist countries get captured by central bankers and become fascist, and the free market capitalism countries get captured over by central bankers and become fascist.
Apparently, fascism is a very effective tool, though it is only a tool which has only one use: stealing.
"there are no signs that high growth is coming back any time soon, if ever"
The really simple question to ask is " Name the field of industry or technology that could produce another wave of rapid world growth?"
The China expansion did indeed drive a huge growth wave. Canada, Australia, Brazil, Russia and others gained much growth feeding the China growth. But with the EU fiscally weak, and facing a no growth future, or if there is any growth, it will all be population growth related.
It seems that capitalism in 2016 has only one formula left to squeeze growth out of an economy. That is to increase the overall number of people in a given economy. Population growth is thus called for by most markets. That is what they want.
Take the UK. They brag about out performing the rest of the EU. Yet all that is simply down to mass migration. More people in an economy means more GDP. This does not mean that boats are being lifted, it just means more boats.
Yep. TPTB figured it out a few years ago.
TPTB know they have completely stripped the middle class in "first world" nations, and that they therefore need a new market to strip, and know that that will require them to CREATE that new market.
Behold... the Overpopulation Growth Market. "Migrants" and "families".
So, TPTB have been making damn sure every third-world country enables hard-line "breed em and don't worry who's going to feed em" tribes. In South America it's Catholics. In the Near East it's Muslims AND Hindus. Any ruler who doesn't enable "breed em" is Hussein'd or Gaddafi'd.
TPTB, at the same time, have been having their MSM presstitutes tell us that we "need" to "rescue" all those "migrants" and "families" created by those "breed em" tribes.