America Is The Poisoned Chalice

Tyler Durden's picture

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Neither candidate in the US presidential election has had many specifics to offer on their economic ideas and projected policies, and that may be a smart move for both. If only because none of the two has indicated any real understanding of what awaits America as per November 9. And I don’t mean where the stock markets will be tomorrow morning, or the price of gold, though short term volatility is obviously certain.

The November 7 rally on Wall Street made plenty clear where everyone’s bets are placed -on Hillary-, so much so that there’s not much of a rally left if she wins. A Trump win could well see some panic, downward pressure for the dollar and stocks, upward pressure for gold, but there’s no telling how long that would last.

It’s the medium to long term future that’s far more interesting. Because who wins makes no difference for the reality of the US economy. It’s been abysmal for years, and there are no plans available for turning that around. Government debt – across the board- and budget deficits don’t help, but they’re not the biggest deal; the US controls its own currency.

It’s private debt, consumer debt, that will offer the winner his or her poisoned chalice. With 94 million Americans not counted as part of the workforce, and untold million others in jobs that pay hardly or no living wage, with so many millions of jobs that no longer pay sufficient or even any benefits, consumer spending has nowhere to go but down.

In an economy where that spending is good for 70% of GDP - perhaps a bit less by now, a bad enough sign - taking spending power away from people is deadly. The only way people have been able to either keep up appearances or even just make ends meet is going into debt.

 

This graph from Wolf Richter shouldn’t really need any explanation, but people have been so numbed by endless repetitions of sunny skewed data that it does. Sure, mortgage debt no longer looks as bad, thanks to foreclosures, jingle mail etc. So Wolf depicts debt without mortgages.

In just 9 years, from let’s say Bear Stearns to roughly this summer, consumer debt in America has gone up more than 50% ex-mortgages. And it’s not as if it was low in 2007, quite the contrary. The graph shows us what the American economy has survived on. It’s as plain vanilla as that. It’s the only graph you need, all the rest is just decoration. And it’s every inch as scary as it looks.

There was a time when America worked for its money, for its homes, for its cars, its healthcare, for the education of its children. There was a time when America produced and sold enough to be able to afford all that. Those days are long gone. Today, the prospect is one of borrowing more money to be able to pay back what you borrowed yesterday.

If and when interest rates start to rise, either in and of themselves or because the Fed has an epiphany, all that debt will get much harder, and much more expensive, to repay. Increasingly, Americans will unceremoniously and rapidly start to fall off the back end of the truck, and one by one lower consumer spending even more.

There’s nothing a new president can do about this. There is a slight difference, granted, in that Hillary largely thinks she can let things continue as they have -but look at that graph, they cannot continue!-, while Donald Trump wants to tear up international trade deals and bring back jobs to America.

Trump’s idea look a tad wiser, but so much manufacturing infrastructure has been obliterated that there’s no telling how fast it can be rebuilt. It’ll take years, for sure. Moreover, America cannot produce most items as cheap as many other countries can, so already squeezed consumers will get squeezed even more.

It’ll have to be back all the way to Henry Ford, paying people more so they can afford what they produce. But, again, look at that graph. If Americans didn’t have that debt burden, and again that’s ex-mortgages, the ‘Ford model’ might have been more feasible. It is not now.

Either of the candidates would have had to base their campaigns on a story of ‘we need to take a few steps back in order to do better later’, and that’s still a politically deadly message in today’s realm of eternal growth, fictional as it may be. People will vote for the better promise, not for the more realistic one. After all, how can they tell? It’s not as if the media will enlighten them.

There’s only one set of possible circumstances under which people will even just accept the ‘few steps back’ idea, and that’s wartime. Which is exactly what Hillary seems to be going for, judging from her neverending anti-Russia, anti-Putin and anti-Assad ‘utterances’ that look very hard to step back from. Maybe she understands America’s economic predicament better than I think?!

I like Wikipedia’s definition of a Pyrrhic victory, couldn’t hardly have put it better myself: A Pyrrhic victory is a victory that inflicts such a devastating toll on the victor that it is tantamount to defeat. Someone who wins a Pyrrhic victory has been victorious in some way. However, the heavy toll negates any sense of achievement or profit.”

That sounds about right. I just have the idea that Hillary would enjoy it a bit more, and more blindly, than the Donald would. But it wouldn’t make much difference regardless. Obama’s had the luck that he’s been able to hide the economic downfall on his watch behind a $10+ trillion increase in the Fed balance sheet and a multiple trillion, 50% increase in household debt.

The next president won’t have any such gift thrown into their laps. The new president will have to empty the poisoned chalice.

Imagine being -almost- 70 years old, well-off, and still wanting that job. What’s that make a body? In urgent need of a lifetime of therapy? Mariana Trench-deep unhappy?

And on top of that both candidates already know close to half the country hates their guts to begin with.

Remember, not even Socrates could beat the poisoned chalice.

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WTFUD's picture

Hold on if 94 million American's are not counted as part of the workforce and only 130 million expected to vote with 64% saying Employment is No.1 Concern then TRUMP in LANDSLIDE.

. . . however, i'm not counting my molotov cocktails until they're thrown.

kappal_toba_dhurr_ne_thook's picture

I believe that Trump will hammer the final nail into the USA coffin. 

Whodathunkit's picture

Don't forget to mix some oil in those Molotov cocktails. It helps the gas to 'stick'. Or this from Wikipedia. petroleum jelly, tar, strips of tyre tubing, nitrocellulose, XPS foam, motor oil, rubber cement, detergent and dish soap have been added to help the burning liquid adhere to the target and create clouds of thick, choking smoke.[4]

The Jackal's picture

Being conservative in nature, I prefer the cheaper and readily available alternative; styrofoam.

yippee kiyay's picture
yippee kiyay (not verified) The Jackal Nov 8, 2016 10:26 PM

And who poisoned the chalice? http://wp.me/p4OZ4v-3z

Mano-A-Mano's picture
Mano-A-Mano (not verified) yippee kiyay Nov 8, 2016 10:27 PM

We shouldn't drink it then.

lonnng's picture
lonnng (not verified) Mano-A-Mano Nov 8, 2016 10:28 PM

dang, already took a sip.

philipat's picture

SPAM ALERT: Serial spammer DO NOT click on his fake links which are completely unconnected to his comment.Current active accounts: Yippee Kiyay, lonnng, letsit, Mano-A-Mano, techies-r-us, beauticelli and stizazz plus some others under review. He doesn’t actively Spam with every account and uses some just to “talk to and congratulate himself”.
Previous names include but not limited to: mofio, santafe, Aristotle of Greece, Gargoyle, bleu, oops, lance-a-lot, Loftie, toro.
Shit Tylers, this asshole has more accounts than the rest of us combined!. Can’t you IP block him? And his conversations with himself are now taking up half of each thread.

Obadiah's picture

I have believed now for over the past 7-8 months that Trumps win and Brexit ARE the deadly wounds mentioned in Revelations 13:3 against the Beast ( The One World Lucifarian System) that stands upon the waters ( People ).

So now we know that the False Christ ( One Who Looks and Acts Just Like Christ with Lightning in his hands) will come to heal the Beast ( Re-installing the One World system ). After he has fooled so many as the false christ and has captured all of the un-learned, the 7th Trumps sounds and JESUS The REAL Jesus kicks their asses ONCE AND FOR ALL.

Buckle up kids, lots of tough roads to travel as people clamor for the One World System to be re-installed so there is a chicken in every pot and money in your pocket.

These are the most exciting time in the history of this earth age.

He picked you to be here at this time.

What is your calling?

jmack's picture

Luntz already calling it for HRC

GunnerySgtHartman's picture

I heard Luntz calling it for HRC over the weekend.  He has a lot to lose by Trump winning, because a Trump victory will blow Luntz and his polling out of the water.

RaceToTheBottom's picture

It would be interesting to see that debt graph inflation adjusted.  Not saying it would change the thrust, but debt increases when the currency has been devalued.  Now if salaries kept pace, it might be a wash which we all know we are stuck in the late 70 for salaries.

No mater how you slice it, the serfs come out losers.

Money Counterfeiter's picture
Money Counterfeiter (not verified) Nov 8, 2016 8:10 PM

Nuke Israel and this shit stops.

King Tut's picture

And the Upper West Side

asteroids's picture

Sadly, it doesn't matter who wins tonight. Almost all of the budget is entitlements. If HRC wins, the country goes bankrupt during her term. If Trump wins, there's a chance that destroying Obozocare and reforming medical costs might change the long term outcome. Buy precious metals.

NotApplicable's picture

The only difference between who wins is the speed of the collapse. If Trump wins, TPTB collapse all of the props and blame the whole mess on him. Otherwise, fedgov debt will continue to pile up until any collapse can be blamed on WWIII.

Walter_Sobchak's picture

Gas the k!kes.  End the fed.  Print greenbacks.  Problem solved.

WTFUD's picture

You can bet your bottom dollar, well ok the Banks have already bet them on your pension, whatever, behalves, that the Establishment will have Plan A, B, C, D . . . to steal this Election, unlike that in Iraq and other War Zones they create, where it's just simple ol' Plan A.

General Titus's picture

HL Mencken said to never undersestimate the stupidity of the American voter.  The DemocRat voters have a severe case of cognitive dissoance and low IQ, as Hillary was the main cheerleader for Billy Boy's NAFTA & WTO creation which destroyed our economy. 

They installed communist terrorists using the liberal Democracy model in SA & the former Rhodesia, and those nations have turned into cesspools.  They also have antiCaucasian affirmative action programs just like we do....................................

Cabreado's picture

With Communication, a wrench is thrown into the spokes of "history repeats."

It's ALL uncharted now.

Do it up, America.

Swamidon's picture

All the group suffering distracts from the opportunity that presents itself for the individual.  The competition is between Melinnials and by all accounts it doesn't take much to rise above that herd, especially when so many of them are unable to assume responsible supervisory positions.  Success will come to those who change their basic attitudes.   

PresidentCamacho's picture

Its to just cull all liberals amd everything over 65.

Lumberjack's picture

Fox news in Boston reports first time voters voted Clinton 50 to 30 Trump. That has to be the illugal votes as the exit polls show everyone else at 75 Trump to 25 Clinton.

SgtShaftoe's picture

You automatic earth people have been peddling the same tired and worn fucking path for 10 years spouting that rate increases are imminent but conveniently forget the ease in which central banks can push the button for the printing press.  Rates will not be going up in real terms until the reserve currency changes.  The western and eastern currencies for that matter will burn in a splendid inferno.  They may try for a .25 bp move for optics only.  However, rate increases would destroy the FED's balance sheet so it will not be done  period. 

RaceToTheBottom's picture

You can critique Schiff on his presentation and his timing, but that part of his spiel has been spot on.  

They will not raise rates, they cannot.

TuPhat's picture

Total destruction of the dollar will destroy the Fed's balance sheet.  They don't want that.  The reason the US already has higher rates than europe and many other countries is to stabilize the dollar.  They will raise rates when they have to in order to avoid collapse.  They will eat some losses to preserve their power.  In the end it will collapse anyway.

SgtShaftoe's picture

Once they started down the inflationary path they gave up their control of the outcome.  They may believe they can control the outcome but they are fools to do so.  The FED cannot control psychology.  They are in way over their head and dependent on models.  Models are a joke.  Just read your Taleb to understand that point. 

Cabreado's picture

"However, rate increases would destroy the FED's balance sheet so it will not be done period. "

It's not a policy decision, or a legislative one at first...

it is a correction in control structure, driven by an awakened (and therefore enabled) citizenry.

Sounds like bullshit?
No... it's in process...

Nobody ever said it would be Easy...

Nobodys Home's picture

Why does anyone write an article like this? No one knows? We are all fucking retarded?  On election night? Really?

edit...sgt shaftoe seems to have a bit of sense.

But who cares? We might have Hillacunt......Please! No!

elmo jones's picture

America deserves Hillary for choosing comfort over justice . Pray God is merciful and grants us TRUMP. 

I Write Code's picture

The flagon with the dragon has the brew that is true.

/had to be said