Yes, This Time It Is Different: But Not In Good Ways

Tyler Durden's picture

Authored by Charles Hugh Smith via OfTwoMinds blog,

Yes, this time it's different: all the foundations of a healthy economy are crumbling into quicksand.

The rallying cry of Permanent Bulls is this time it's different. That's absolutely true, but it isn't bullish--it's terrifically, terribly bearish. Why is this time it's different bearish going forward? The basic answer is that nothing that is structurally broken has actually been fixed, and the policy "fixes" have fatally weakened the global financial system.

Let's go over a handful of the many ways that this time it's different, starting with the unprecedented level of central bank support of asset prices via the purchase of financial assets such as stocks and bonds.

Central Banks Have Purchased $2 Trillion In Assets In 2017

A trillion here, a trillion there, and pretty soon you're talking real "money":

As virtually everyone who follows finance knows, these monumental purchases have pushed bond yields / interest rates lower and stocks higher, while super-low mortgage rates have inflated a new global housing bubble that's now bigger than the previous bubble that burst with such devastating consequences.

The net consequence of this 8-year long orgy of inflating global assets has backed the central banks into a corner, as the asset bubbles demand two incompatible policies:

1. "normalize" rates and central bank balance sheets by reducing / ending central bank purchases of assets

2. continue the rampant expansion of central bank balance sheets / purchases of assets lest these bubbles pop, destroying tens of trillions in "wealth" (more properly, phantom wealth).

You can't have it both ways, and so the central bankers keep their sweaty palms on the steering wheel and their foot on the accelerator, speeding for the cliff, i.e. the point at which bubbles pop despite central bank buying.

This time is also different in the unprecedented mis-alignment of labor markets, worker skills, productivity and wage growth. As I have explained many times here, wage growth is the essential foundation for self-sustaining economic expansion based on purchases funded by debt. (The current global economy requires expanding debt to fund expanding consumption and the servicing of existing debt.)

This time it's different, as wages have stagnated for the bottom 95%. Even with full employment and 6 million job openings, wages aren't rising because they can't rise; employers can't afford to pay more and labor overhead costs like healthcare insurance and workers compensation are siphoning off income that could have gone to wages.

This time it's different because productivity is also stagnating, despite the many trillions dumped into financial markets. All the trillions flow into speculative gambles backstopped by central banks, not productive investments--those are too risky. It's much smarter to put free cash into speculative financial games (stock buy-backs, etc.) that are backstopped by central banks or state agencies.

Meanwhile, low-income workers can't afford to live in high-cost cities, and small businesses can't afford to pay higher wages for low-productivity jobs. It must be extremely frustrating to central bankers and politicos: they can force-feed corporations and financiers with limitless free money for speculation, but they can't force people to start and operate small businesses or take on more debt--except those mired in the delusion that college diplomas are the guaranteed key to financial security.

The bloated, self-serving higher education sector is failing to provide the knowledge and skills employers need in the fast-changing 4th Industrial Revolution, even as it enslaves millions in student-loan servitude. The debt trap: how the student loan industry betrays young Americans (via Joel M.).

As I outline in my books The Nearly Free University and the Emerging Economy and Get a Job, Build a Real Career and Defy a Bewildering Economy, the system that we need and that is in reach (if we could only escape the death-grip of the higher education/finance cartels) is one based on dynamic apprenticeships in the real world-- not just for blue-collar trades and crafts (the traditional apprenticeship model) but for all jobs, from filmmaking to coding to management.

As a result of these structurally broken systems, there are millions of low-productivity jobs and many high-skill positions that can't be filled. The dynamic nexus of labor markets, education/training, productivity and wage growth is broken, utterly and completely, despite the "all is well" bleatings of the self-serving cartels reaping billions from the current parasitic feudalism.

Yes, this time it's different: all the foundations of a healthy economy are crumbling into quicksand. Nothing that is broken has been fixed, and the central banks' one "fix"--inflating asset bubbles--guarantees the destruction of all the phantom wealth this "fix" has generated.

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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c2nnib2l's picture

who cares ?

have you seen the charts ? markets are detached from the economy for some time now 

there is not going to be another crash or even a small correction 

and gold hammer is waiting for tomorrow London open 



Five Star's picture

What's different this time is that banks have over $2 trillion in excess reserves waiting to flow into financial assets...

4shzl's picture

Just another humiliating kick in the crotch for the bears.

Creepy_Azz_Crackaah's picture

ZH, Suggestion: Maybe limit the "We're All Gonna Die" articles to two per day?

NoDecaf's picture

Great idea. I'm all doomed out since I realized it is happening in real time.

Washing over us like waves from Irma. One ridiculous headline after another.

yogibear's picture

Yes, central banksters plan on taking gold down again.

With ever more printing and gold naked shorting.

Gets more rigged every day as they own more.

grasha87's picture

I have created a free market currency that helps alleviate unemployment and recessions that the Fed creates, and it's based on Say's law:

scaleindependent's picture

Shirley you jest and do not mean that it will NEVER crash.

They are just delaying a bigger crash. I agree, no crash in the short term.

But ever?

JRobby's picture

"the foundations of a healthy economy"

Nothing that we have seen for the past 20 years

wisehiney's picture

Alot-alot of unreplaced skill retiring in droves every single fucking day.

CoCosAB's picture

It sure looks like a Pyramide Scheme!

Rebelrebel7's picture

And yet, there is no safety net anywhere! If people have cash deposits in banks or credit unions, even if those institutions are solvent, they frequently shift money, depositors money, to institutions that are not solvent in a giant check kiting scheme! If you trust a bank safety deposit box for storing gold, when you can't   trust the bank with your cash deposits, you are not facing the reality of their total disregard for their customers!

If you store it in your house, it could be stolen or it could be  seized in civil asset forfeiture.


Rebelrebel7's picture

All the mighty mighty men, what  you save is what you lose out in the end- Bush

Watch "Bush Cold Contagious" on YouTube

abgary1's picture

How long can this continue?


Rebelrebel7's picture

Please clue me in if you ever find out, in addidtion to what "this" will be replaced with. 

SunTzu2U's picture

And the dollar is down 15% vs Canandian Dollar since May. 10% down vs. Euro, Down 7% vs. Gold. Stock market rally is illusion.


Osmium's picture

And yet, the dollar is still the worlds reserve currency.  Does not make any sense to me.

Rebelrebel7's picture

Lol! Why the fuck not?! It's all worthless anyways, but if you win, at least you have bragging rights!

venturen's picture

Until you break up the criminal US mega isn't going to change.

adolphz's picture

The crash is coming.  Zero hedge is basically just been try to cash it too early. After every last suckered trader is broke from ryomg to sell the market then it will collapse. In meantime SHEP WAVE is calling market,

grasha87's picture

I have created a free market currency that helps alleviate unemployment and recessions that the Fed creates, and it's based on Say's law:

vollderlerby's picture

"Zero hedge is basically just been try to cash it too early"

6 years too early.  Just a tad .....  That's 6 YEARS of missing out on the monster bull run. That's like getting fucked in the asshole by an elephant.  

grasha87's picture

I have created a free market currency that helps alleviate unemployment and recessions that the Fed creates, and it's based on Say's law:

vollderlerby's picture

No, it's NOT easy being a genius in this market, especially when reading all the doom porn on this site.  Can't run against the herd, no matter how dumb the herd is.  Join them, put in a generous trailing stop loss to avoid the bull traps and then yes, you too can be a genius.