The Floodgates Begin To Open

Tyler Durden's picture

Submitted by John Rubino via,

It’s now clear that what governments did to counter the Great Recession may have delayed systemic collapse, but did not resurrect the old normal. Growth around the world is anemic – which is to say debt continues to increase faster than the productive capacity to service it – and inflation (the other way to shrink a debt burden) remains below target.

Now “anemic” is becoming “non-existent.” In the US, mini-credit-bubbles like auto loans, home mortgages and student loans are sputtering, leading economists to dial back their rosy scenarios for 2016. The Atlanta Fed’s GDPNow forecast for Q3 growth, for instance, was a robust 3.8% in August but is now less than 2% — and still falling.


Not surprisingly, everyone is starting to panic. In the UK, where admittedly Brexit has created a unique situation:

Mark Carney: Bank of England will tolerate higher inflation for the sake of growth

(Telegraph) – Official data on Friday showed house building, infrastructure and public construction all slumped in August, indicating that the UK’s building industry is slowing sharply and could even enter a recession. Construction output dropped by 1.5pc in the month, an unexpected drop after growth of 0.6pc in July, according to the Office for National Statistics. Separate Bank of England figures showed banks suffered a big drop in demand in the months following the Brexit vote as fewer Britons were prepared to take major financial decisions. Demand for mortgages dipped strongly, with a net balance of 44pc of banks reporting a fall in customer interest – the biggest negative score in almost two years.


Bank of England Governor Mark Carney told an audience in Nottingham that the current environment of low inflation was “going to change”, with the drop in the value of the pound likely to push up prices across the economy. He said food prices were likely to be affected first, signaling that the situation was “going to get difficult” for those on the lowest incomes as the UK moves “from no inflation to some inflation”.


Inflation, which stood at 0.6pc in the year to September, is expected by some economists to climb close to 3pc by the end of next year. This would be a full percentage point above the Bank of England’s 2pc target.


“We’re willing to tolerate a bit of an overshoot in inflation over the course of the next few years in order to cushion the blow and make sure the economy can adjust as well as possible,” said Carney. He said the Bank was not “indifferent to the level of sterling”, but added: “Our job is not to target the exchange rate, our job is to target inflation”.

Here in the US – where our problems are more representative of the developed world in general — the Fed has stopped paying even lip service to its price stability mandate:

Fed’s Yellen says ‘high-pressure’ policy may be only way back from crisis

(Reuters) – The Federal Reserve may need to run a “high-pressure economy” to reverse damage from the 2008-2009 crisis that depressed output, sidelined workers, and risks becoming a permanent scar, Fed Chair Janet Yellen said on Friday in a broad review of where the recovery may still fall short.


Though not addressing interest rates or immediate policy concerns directly, Yellen laid out the deepening concern at the Fed that U.S. economic potential is slipping and aggressive steps may be needed to rebuild it.

Yellen, in a lunch address to a conference of policymakers and top academics in Boston, said the question was whether that damage can be undone “by temporarily running a ‘high-pressure economy,’ with robust aggregate demand and a tight labor market.”


“One can certainly identify plausible ways in which this might occur,” she said. Looking for policies that would lower unemployment further and boost consumption, even at the risk of higher inflation, could convince businesses to invest, improve confidence, and bring even more workers into the economy.


Jeffrey Gundlach, chief executive of DoubleLine Capital, said he read Yellen as saying, “‘You don’t have to tighten policy just because inflation goes to over 2 percent…Inflation can go to 3 percent, if the Fed thinks this is temporary.”


“If strong economic conditions can partially reverse supply-side damage after it has occurred, then policymakers may want to aim at being more accommodative during recoveries than would be called for under the traditional view that supply is largely independent of demand,” Yellen said. It would “make it even more important for policymakers to act quickly and aggressively in response to a recession, because doing so would help to reduce the depth and persistence of the downturn.”

Strip out the buzzwords and focus-grouped phrasing and we’re left with a bunch of economists whose models have stopped working and who see no alternative (since their life’s work is the tending of such models) to cranking the knob up to 11 and seeing what happens.

Individual countries have in the past tried “temporarily higher rates of inflation,” and the result has always and everywhere been a kind of runaway train that either jumps the tracks or slams into some stationary object with ugly results. In other words, the higher consumption and investment that might initially be generated by rising inflation are more than offset by the greater instability that such a policy guarantees.

But never before has the whole world entered monetary panic mode at the same time, which implies that little about what’s coming can be said with certainty. It’s at least probable that a combination of massive deficit spending and effectively unlimited money creation will indeed generate “growth” of some kind. But it’s also probable that once started this process will spin quickly out of control, as everyone realizes that in a world where governments are actively generating inflation (that is, actively devaluing their currencies) it makes sense to borrow as much as possible and spend the proceeds on whatever real things are available, at whatever price. Whether the result is called a crack-up boom or runaway demand-pull inflation or some new term economists coin to shift the blame, it will be an epic mess.

And apparently it’s coming soon.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
RafterManFMJ's picture a world where governments are actively generating inflation (that is, actively devaluing their currencies) it makes sense to borrow as much as possible and spend the proceeds on whatever real things are available, at whatever price.

Way ahead of ya!!

Manthong's picture

Heh..  heh…

Just wait until the economic genius’s figure out that earned income is not capable of sustaining the debt anywhere anymoar.

Fireworks, anyone?

Paul Kersey's picture

The "old normal" was pre-bubbles and pre-1971, when the US still had a partially gold-backed dollar. In the "old normal", the US was the world's largest creditor nation. In the "new normal", the US is the world's largest debtor nation. The "old normal" is dead and buried, while the "new normal" is the Walking Dead.

NoPension's picture

I'll take a check.

Here's an idea. Just load up a couple of million debit cards, and mail them out. That should get things cranking.

( until the postman figures out what's in that envelope, anyhow)

It's no dumber than a trillion dollar coin.

Loftie's picture
Loftie (not verified) NoPension Oct 16, 2016 7:36 PM

You're Right. Instead they're busy sending money to FOREIGN RACISTS.

eatthebanksters's picture

Central banks will tolerate inflation to stimulate growth...what a crock of horseshit.  Its all about inflating out of debt.  Guess what, the rich are gonna get richer and the little people are about to get smaller as the record wealth divide continues to break new territory.  Can we just put these people up against  wall?

Creative_Destruct's picture

"Strip out the buzzwords and focus-grouped phrasing and we’re left with a bunch of economists whose models have stopped working and who see no alternative (since their life’s work is the tending of such models) to cranking the knob up to 11 and seeing what happens."

If your perscription isn't working, by all means, OVERDOSE on it.

If it doesn't work, at least the OD may put you out of your misery.

philipat's picture

Hey Loftie, previously known as mofio then santafe then Aristotle of Greece then Gargoyle then bleu then oops then most recently lance-a-lot. I see you have now introduced Jack McGriff (member for 1 week) to post complimentary responses to Loftie so I’m guessing that Jack McGriff will be your next name now that Loftie has been exposed? It also explains how you can now give yourself two upvotes instead of the previous one? It also means you will be able to “Talk to yourself” again. I miss those old self-conversations between mofio, santafe and Aristotle of Greece but they do say that talking to yourself is the first sign of mental illness?

You are a serial spammer and a serial pain in the ass. Might I politely suggest that you go fuck yourself? And get a life.

PS. You might have noticed that my attempt to expose you for what you are is always the same. That’s because your Spam is always the same (Using fake links to your BS site which has no connection to your comments, which are deliberately dramatic to encourage people to click on the fake link) so it seems only fair that my exposure of your crap should also always be the same. An eye for an eye.

Déjà view's picture

A Chicken In Every Pot...

-Herbert Hoover

Chicken bones as soup stock for remaining 99%...

-Déjà view

Oldwood's picture

The economic geniuses figured that out years ago. Their job is to prevent "the people" from figuring it out...or more accurately accepting it as reality (we really already know this is true, we simply allow ourselves to be deceived).

Public and private debt around thw world holds all the proof to anyone who might want to know.

It's not a matter of the glass of milk half empty or half full, it's a matter of the glass getting increasing more empty and no one is refilling it with anything but increasingly dirty water.

Uchtdorf's picture

I wish I could upvote you +1,000

GreatUncle's picture

Its coming ... if anything people should be looking at Japan as that is what happens in the end.

"debt continues to increase faster than the productive capacity"

In my terms the real economy is shrinking in relative terms with all the money creation and the real economy is tending to 0 real fast. This is where Japan and now the west has lost control and why Clinton goes round bragging about minimum wage and EBT when that is a treatment for failed monetary policy.

The final part is that when the economy is so small then in effect you may as well just CTRL-P and hand it to the 0.1% directly no need for anything else and a direct infusion of QE into the wealthiest pockets.

I said relative because if the bankers ever wake up the CTRL-P needs to target the real economy and the money should come from the top not more CTRL-P and more debt making it worse or at best no change. They need to close the gap, but hey-ho been saying it since 2008 but who gives a fuck right?

Mcguyver's picture

Exactly .... Purchase productive assets that will allow you to generate an income or make you more of an asset to your local community

Mcguyver's picture

Exactly .... Purchase productive assets that will allow you to generate an income or make you more of an asset to your local community

Money Counterfeiter's picture
Money Counterfeiter (not verified) Oct 16, 2016 6:05 PM

"I killed the bank"  Andrew Jackson .

Whiskey Badger's picture

"The banks killed me."  John F. Kennedy

SoilMyselfRotten's picture

"The Chicago Cubs killed me." Ernie Banks

Oldwood's picture

Hillary will kill any of us who can't afford to PAY.

GreatUncle's picture

Podesta will make a movie of Hillary killing the "deplorables" for objecting to pay to play = a bribe.

Downpayment for the "deplorables snuff movie"  = Scalia is $1.5 mill and on final production it is $15 mill.

Scrubbing Bubblez's picture
Scrubbing Bubblez (not verified) Oldwood Oct 16, 2016 10:52 PM

Or testify against the Clinton Crime Family!

Two Theives and a Liar's picture

We wont need another article to tell is doom is upon us once it's really upon us...

until then...moar popcorn please..I have another debate to prepare for..

ONEwarrior's picture

That debate may be better than The Walking Dead? 

Butter on my popcorn please. I might can take it better when it's greased up.

LetThemEatRand's picture

Oh good.  Lower wages and fewer jobs, but higher inflation.  What could go wrong?    Neo-feudalism, bitches.  


Oldwood's picture

Inflation for everything we MUST have, and lower prices for everything know the stuff we still make and sell in OUR jobs?

The Chinese will crush our remaining manufactures and many of our service companies with significantly lower prices. The PRICE of things is directly relevant what we have to pay with...our income and savings, which are both on a downward trend in real dollar value. Meanwhile our government will be calculating how to squeeze out even more wealth from the remaining fools with jobs to cover the cost of those ENTITLED.

richinSpirit's picture

Some work different than others is part of an issue I see in your post. You need faith to survive. Your own or someone elses. Some people work with faith more directly and can get easily destractable in this country. Sometimes entitled is just another way of saying feeding the "full faith and credit" needed to continue, collectively.

Just don't call those people batteries simply because their electro-chemical signaling is used as part of incomprehensible methods; as comprehensible methods are perhaps a quarter or less of what is really needed for much of anything to continue. To get all arethmatic on potential, expected, uncomprehensible, individual groups of mutual-interaction.

Kidbuck's picture

Nobody ever asked me if I wanted to contribute some of my purchasing power each year to the banksters. Then again, I have never been polled in a presidential election. Maybe I don't exist.

wombats's picture

You don't.  ZH readers don't count to the "elites" who know what's good for the world.

Soul Glow's picture

Look at this shithole of a house in the boonies outside Eugene Oregon for sale at $320k!  Talk about a bubble!

Libtard's picture

Hmm...its on 5 acres in Eugene. Sounds about right to me.

G-ray's picture

but...but Otto Porticha designed this home...  has to mean something around 200k

ZD1's picture

Peoples Republic of Eugene where mean clipped haired lesbians wearing plaid flannel are the norm?


A weird looking house on 5 acres in Eugene would be perfect for a lesbian separatist commune. 

ONEwarrior's picture

Do they make that is a pants suit for Hillery, I mean Killery, no Hitlery. Oh to hell with, you know, her>


Nobody For President's picture

But it's a university town - some assistant prof is sure to snap it up.

DC Beastie Boy's picture

Hell yes open the flood gates!

"All I need are some tasty waves, a cool buzz, and I'm fine."

iAmerican2's picture

Rome and their Talmud Khazar Christ-killer partner/hirelings, who run the FedScam, openly claim to "own the world and all on it."

What better way than their money scheme to try to pull it off...satanically. 

Death for Treason with Full Expropriation and Banishment

Trump 2016 - Thank God for the Apocalypse Mr. Trump is enunciating.

Listen up, America. 

ToSoft4Truth's picture

There's only so much to go round.


If we want more stuff, we need to abandon the dead-weight which steals our resources.

max_leering's picture

hey Rubino, quit peddlin' that god-damned fiction!


now move along peasants, nothing more to see here... move along

nmewn's picture

Everyone does realize, mainstream Keynesian trained economists are the very best & brightest governments around the world have to offer...right? ;-)

deimos178's picture

If you laid all the economists in the world end to end you still wouldn't reach a conclusion. Might as well hang them.

sinbad2's picture

One economist predicted that the capitalist system would collapse due to over production and under consumption in 1850.

But don't worry, because he said that the system would reboot via war, and we would continue repeating the boom and bust, and the intervening slaughter.

Now who is going to volunteer to die, to protect the economy?

gregga777's picture

I'm just waiting for all of these insane asset bubbles to burst and for the S*** to really hit the fan. Starving people aren't going to listen to reason, on the laughable assumption that the hereditary inbred subnormal IQ elite morons (aka Intellectual Yet Idiot classes) can even spell "r-e-a-s-o-n". I'm just going to sit back and enjoy listening to the all of the lame excuses as the status quo criminals are led to the gallows and guillotines.

If you have a strong stomach it should be hilariously entertaining to hear the KKK (Klinton Krime Klan), the Bush Krime Klan, the banking gangsters, the Con Street Swindlers, the crony capitalist conporate criminals, the neoconservative war criminals, the mainstream media & entertainment oligopoly propaganda whores and the various and assorted political parasites all screaming:

* "But, I was doing God's work!";

* "I never had sex with that woman. Monica Lewinsky!"

* "I never called his rape victims bimbos! Really!"?
* "I'm a woman of the People!"

* "I was the first black President!"

* "I was against the [Iraq] War after I voted for War!"

* "I never gloated 'We came, We saw, He died' about Qaddafi!"

* "They made me read their lying propaganda on the nightly news every night!"

* "But 2% inflation is good for the peasants, I mean economy!"

I'm saving my popcorn for the greatest show in world history.

Fishy Rickster's picture

One of the most foolish and intransigent men I ever met wss a successful physicist.  He was celebrated in his field, but was (is?) a closed minded social moron who walked the nazi/progressive line in lock step with the other academics with whom he associated.

Kirk2NCC1701's picture

"...and apparently it's coming soon"

Where have I heard or read "Soon" or "Near" before on this site? 

UnschooledAustrianEconomist's picture

Tylers getting impatient. Got to understand.

Buster Cherry's picture

It usually starts with "And so it begins" or just plain "it begins"..

I Write Code's picture

Strip out the buzzwords and focus-grouped phrasing and we’re left with a bunch of economists whose models have stopped working and who see no alternative (since their life’s work is the tending of such models) to cranking the knob up to 11 and seeing what happens.

It's the wrong knob, and they know that, but I don't think many others in DC do.

Also, there is a question of what is "normal"?  Many people think that 2005, say, was "normal", but it was not, it was "bubble".  I'm willing to grant that the Fed *has* got us back to "normal" (if being a heroin addict is "normal"), but that is far less than 2005.

And I don't think we are ever going to see anything like "normal" again, if normal is something between 1985 and 1995.  That's gone, folks.  The New Normal is going to be something else - and I really mean, something else.

bankbob's picture

"If you take every Economist in the country and line them up end to end, they will all be pointing in different directions."

Harry Truman.