The Great Misconception Of A Return To "Normal"

Tyler Durden's picture

Submitted by Chris Hamilton via Econimica blog,

Since 2009, there has been ongoing discussion of the size & composition of major central bank balance sheets (I'm focusing on the Federal Reserve Bank, European Central Bank, and the Bank of Japan) but little discussion of why these institutions felt (and continue to feel) compelled to "buy" assets.  The chart below highlights the ongoing collective explosion of these bank "assets" since 2009 after a previous period of relative stability.

These institutions clearly have the capability and willingness to digitally conjure "money" from nothing and have felt compelled to remove over $10 trillion worth of assets from the markets since 2009.  This swap of illiquid assets for liquid cash had (and continues to have) the effect of squeezing the prices of the remaining assets higher (more money chasing fewer assets=price appreciation).

A prime example of that squeeze, the US stock market total valuation (represented by the Wilshire 5000, below) is $10 trillion higher than the "bubble" peak of 2008...and $11 trillion higher than the 2001 "bubble" peak.  Likewise, US federal debt since 2008 has increased guessed it, $10 trillion.

The narrative seems to be that 2009 was a one off event and that the central banks role was and still is to "stabilize" the situation until things "normalize".

But right there...that idea that 2009 was a "one-off" or "abnormal" couldn't be more wrong.  So what is "normal" growth, at least from a consumption standpoint?  Normal is never the same is ever changing and must be constantly rediscovered.  To determine "normal" growth in consumption, all we need do is figure the change in the quantity of consumers (annual population growth) and the quality of those consumers (their earnings, savings, and utilization of credit).  The chart below details the ever changing "normal" that is the annual change in the under 65yr/old global population broken down by wealthy consuming nations (blue line) and the rest of the (generally poor) world (red line).  The natural rate of growth in consumption has been declining ever since 1988 (persistently less growth in the population on a year over year basis)...but central banks and central governments have substituted interest rate cuts and un-repayable debt to maintain an unnaturally high consumption growth rate.

Consider, the annual change of the 0-64yr/old global population (black columns) peaked at 85 million a year in 1988.  Since then, annual population growth among the under 65 set has fallen 33% to 57 million.  HOWEVER, the under 65yr/old population growth among the 35 OECD nations plus China, Brazil, & Russia (again, blue line) has collapsed by 95% from peak growth in 1972 to just 1.6 million this year.  The rest of the worlds 0-64yr/old population growth (primarily in Africa) has likewise peaked but is now just beginning it's deceleration (red line).

But the OECD/China/Russia/Brazil total combined population will grow by nearly 16 million this year...and as the chart below highlights, the growth will be almost entirely among the 65+yr/olds living longer than their predecessors.  In fact, from 2018 onward, all population growth among these nations will be the 65+yr/olds refusing to die versus depopulation among the under 65yr old populations.

And because so many believe the population changes are estimates of something projected that may or may not take place in the future...nah.  The chart below shows total births per five year periods for the combined OECD nations plus China, Russia, & Brazil.  The total number of births peaked from 1965 to 1970 at nearly 265 million births (ave. of 53 million annually)? and have been steadily declining since, now down to 183 million (or ave. of 37 million annually)?.  In fact the UN medium estimate for births from 2015 through 2050 looks awfully optimistic (from a growth standpoint).  Regardless the larger total population and immigration, these nations continue to produce fewer children (aka, consumers).

Why the focus on the OECD+CRB?  They collectively consume over 70% of all global oil, even a greater % of imports, and generally are the nexus of global consumer growth.  This is the population with all the earnings, savings, and access to credit...and they will be shrinking significantly for decades to come.  In short, there will be fewer of them, appreciation in real wages has long been stagnant and isn't likely to support higher consumption, and ZIRP inspired interest rates can generally go no lower (and this isn't even getting into the innovation, automation, and "robotization" of the work place that is replacing millions of jobs).

So let's again consider the "normal" growth the central banks are anticipating vs. the central banks balance sheets.  The chart below should be all you ever need to know why central banks are all in and will only continue to double down on a losing hand.  Plainly, growth is all that matters in our current system and the consumer base responsible for this growing consumption will be shrinking indefinitely (again growth among these nations peaked nearly 5 decades ago).  All the decades of interest rate cuts and resultant debt since 1981 were only a substitute to artificially boost consumption of the waning annual growth of the consuming population.  The only thing you can count on presently are central bank balance sheets continuing to rocket higher in a vain attempt to maintain a false that assumes "normal" growth is just around the corner.

The misconception is that "normal" demand will return and allow central banks to cease purchasing assets and allow these quasi banks to sell these assets back to the market.  In our lifetimes, there will be no period of like growth in consumer demand than we saw over the past half century.  In fact, the declining quantity & quality of the combined populace of the OECD, China, Brazil, & Russia will likely negatively offset the meager consumption growth from among the rest of the world.  Simply put, the days of consumption driven economic growth are at an end...and asset appreciation is now entirely a collusion of federal governments and central banks to never again allow a free and unfettered market to determine asset prices.

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hooligan2009's picture

great work and some of the most insightful i have seen.

fits in with my theory of when the house of cards starting wilting before tumbling.

that is, there is a new "rate" to be discovered - that is the "drawdown rate" - that is the annual rate of usage of capital by those in retirement.

check out japan - its drawdown rate is 5% - the G7 is at 1% heading for the same number over the next twenty years.

in aother 20 years, there will be no savings at all in japan - a feature that japanese think is just fine, since they can monetize government debt and enforce negative rates on the money the government borrows - neat trick - a bankrupt nation borrowing huge amounts for a profit by charging itself negative rates..


decentralisedscrutinizer's picture


Almost all the world’s economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their military force resides. The only way to regain our sovereignty as a constitutional republic is to severely curtail the privileges of any corporation doing business here. As a free nation, we really have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't take the incorporation of private transnational banks for granted anymore. The government must be held responsible only to the electorate, not fictitious entities, if we are ever to restore sanity, much less prosperity, to the world.




It was a loophole in our Constitution that allowed corporate charters to be so easily obtained it created a swamp of corruption around our capital. It is a swamp that can't be drained at this point because the Constitution  doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 Convention for which the electorate will need consensus beforehand. Seriously; an Article 5 Constitutional Convention could solve that problem in days. This is what I think it will take to save the world; and nobody gets hurt:




28th Amendment


Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to:


1, prohibitions against any corporation;


a, owning another corporation,


b, becoming economically indispensable or monopolistic, or


c, otherwise distorting the general economy;


2, prohibitions against any form of interference in the affairs of;


a, government,


b, education, or


c, news media, and


3, provisions for;


a, the auditing of standardized, current, and transparent account books, and


b, the establishment of a state and municipal-owned banking system


c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.




The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual States, smaller sovereign nations, and eventually to buy out the Federal government itself. Now that these fictitious entities own the USA and command its military infrastructure, by virtue of the Federal Reserve Corporation, and run it by virtue of regulatory capture, MSM propaganda, and Congressional lobbying they’ve set their sights on the creation of an all-inclusive global financial empire. The US Constitution is the “Kingpin” of the whole global Machine.


gregga777's picture

The United States of America's Feral Gangster Government (USAFGG) and the Goldman Sachs Feral Reserve System (GSFRS) LIE about everything.  The USAFGG and the GSFRS say that :

  • unemployment is ~4.5%;
  • annual inflation is only ~2%

But, in reality:

  • ~96,000,000 working aged Americans are unemployed;
  • ~45,000,000 receive food stamps to keep them from starving;
  • Inflation is really running at at least 7% per year, meaning the since 2009 the REAL economy has been shrinking;
  • since 2009 millions of full-time jobs have disappeared and have been replaced by minimum wage part-time jobs and TRUE unemployment is ~23%;

Whom do you believe?  Your own eyes?  Or, the LYING government and LYING criminals at the Goldman Sachs Feral Reserve System?


Creative_Destruct's picture

"The misconception is that "normal" demand will return and allow central banks to cease purchasing assets and allow these quasi banks to sell these assets back to the market."

 "Normal" is always defined by the Keynesians as the unsustainable demand level that existed prior to the downturn from a bubble. 

Gotta restore that demand, even though it is based on INSANE debt levels.

Keynsians ALWAYS neglect the idioticly overheated conditions that contribute to artifically unstainable demand before economic downturns.

The bottom line: The "normal" conditions prior to the bubble bursting were highly ABNORMAL (and unsustainable).

Now that we have had SERIAL bubbles, the previous demand is unachievable without MASSIVE RELEVERAGING ( ak.a. masssive new DEBT).

Only way that happens is with fiscal and monetary stimulation that will likely cause a loss of confidence in the currency.

Then all HELL will break loose. Welcome to Venezuela, hope you like the dumpster cusine...

Stormtrooper's picture

Well...., I do need new glasses so maybe I'm not seeing as clearly as the geniuses at the Federal Reserve.

max2205's picture

Longest war in usa history still ongoing... burp 

frank further's picture

And the Orange Dickhead is considering doubling down on that.

wwxx's picture

OMG, so really The Bernanke's & others are the economic birth control, that we all should of known we needed, but were just to ignorant to understand it all.  Sure The Bernanke somehow enjoys insulated sex & his 'new normal condom' is even stress tested, but JohnQPublic would rather fuck skin-less~~~~just saying.



illuminatus's picture

So the central banks buy up everything of real value with fake money to help us all out. How nice of them.

dlfield's picture

Yep, and crowd out opportunities for us while picking winners and losers.

besnook's picture

the key to the fiat ponzi scheme is an ever increasing population taking out ever increasing debt. without population increases the system is finished. only a gold backed money can survive the demographics but that won't happen until the present system collapses.

LN's picture

Normal was replaced with abnormal while we were sleeping.  Welcome to the NEW normal.


Blankfuck's picture

Gimme some of the Fed Fucker ponzi money! I didnt get mine! WTF? Who took it all? You Fed Reserve backstabbing mother fuckers. Now its me and others who have to foot the bill of "who got" that ponzi money. You know, those who live in high places in multi million dollar homes, have the finest cars, shallow pretty woman whores, nice yachts, finest food etc... Damn it seems like its been ongoing since the fed has been established. Well it same old isnt it?  The privledged ones with the money make more and more while crumbs go to the rest! Those who cant borrow millions to make millions. I can be trump too if i had the money to make money. The fucker banksters keep it for the privledged ones!

albanian's picture

Trump gona fiks every thing!!!

Let it Go's picture

Something is very wrong with our system. One indication of just how messed up and flawed the global markets have become is reflected in the way central banks across the world are now buying stocks. This has become a part of their response to correcting the forces of past excesses.

One thing is clear, the central bank's large foray into stock ownership represents more than just a moral hazard and in many ways, it paves the path for a liquidity crisis in our future. More on this subject in the article below.

Tonterias's picture

It will grow until Goldman decides

Ajax_USB_Port_Repair_Service_'s picture

Instead of an income tax refund check the IRS sends you shares of Facebook or some other quality stock.

That should help keep things rolling.