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Guest Post: Shhhh… It’s Even Worse Than The Great Depression

Tyler Durden's picture




 

Submitted by Mark McHugh from Across the Street

Shhhh…It’s Even Worse Than The Great Depression

According to Wikipedia, Narcissistic personality disorder (NPD) affects one percent of the population and has little to do with looking at yourself in the mirror.  It has a lot to do with unrealistic fantasies of success, power and intelligence.   Some NPD sufferers become cult leaders or mass murderers, the rest become  economists and policy-makers.   Despite having a highly elevated sense of self-worth,  narcissists have fragile self-esteem and  handle criticism unpredictably, so let’s keep this to ourselves….

Velocity of money is the  frequency with which a unit of money is spent on new goods and services.   It is a far better indicator of economic activity than GDP, consumer prices, the stock market, or sales of men’s underwear (which Greenspan was fond of ogling).  In a healthy economy, the same dollar is collected as payment and subsequently spent many times over.  In a depression, the velocity of money goes catatonic.  Velocity of money is calculated by simply dividing GDP by a given money supply.  This VoM chart using monetary base  should end any discussion of what ”this” is and whether or not anybody should be using the word “recovery” with a straight face:

In just four short years, our “enlightened” policy-makers have slowed money velocity to depths never seen in the Great Depression.  Hard to believe, but the guy who made a career out of Monday-morning quarterbacking the Great Depression has already proven himself a bigger idiot than all of his predecessors (and in less than half the time!!).  During the Great Depression, monetary base was expanded in response to slowing economic activity, in other words it was reactive  (here’s a graph) .  They waited until the forest was ablaze before breaking out the hoses, and for that they’ve been rightly criticized.  Our “proactive”  Fed elected to hose down a forest that wasn’t actually on fire, with gasoline, and the results speak for themselves.  With the IMF recently  lowering its 2012 US GDP growth forecast to 2%, while  the monetary base is expanding at about a 5% clip, know that velocity of money is grinding lower every time you breathe.

The Fed’s refusal to recognize the importance of velocity of money quickly goes from idiotic to insidious.  Here’s a question:  If I give you 50¢ and as a result of that transaction, you owe me $1.00, what interest rate have I charged you?  Obviously, I’ve charged you 100% interest and I don’t give a rat’s ass about you or your kids.  I’m pure evil and you’re pure stupid.  But believe it or not, this kind of master-slave  arrangement isn’t enough to satisfy a true narcissist.   The narcissist needs to be exalted for his actions, no matter how unjust. 

He likes to be thought of as “accommodative.”

In 2011, every dollar of GDP growth created $2.08 in debt.  In real life, that’s 108% interest plus the nominal rate, and our twisted leaders want  you say, “Thank you sir, may I have another!”

2011 wasn’t an anomaly either; it’s the new normal.  Since the Bush deficit increases (to call a spade a spade) went into effect,  the rise in debt has exceeded the rise in GDP 6 of the last 10 years (the four years of positive GDP-minus-Debt can be directly attributed to the housing bubble).  That never happened in the U.S. during Great Depression/WWII era.  One place where it did happen was in the Weimar Republic (which shortly thereafter became known as Nazi Germany) .  No one’s ever done a better job of explaining how quickly things unraveled there than Art Cashin (this is an absolute MUST read):

In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed.

 ….In 1913, the total currency of Germany was a grand total of 6 billion marks. In November of 1923 that loaf of bread we just talked about cost 428 billion marks.

So I’ve got a whole bag of “Fuck You!” for anyone who still thinks nothing could be worse than another Great Depression.  The path we’re on ends with mountains of corpses when the great experiment fails. 

America’s most prestigious education institutions have become grooming salons for malignant narcissists.  Men and women high on their own self-important sense of entitlement, but short on any sense of honor or duty (like passing a budget or arresting someone who stole a billion dollars) and devoid of any real insight or achievement.  So far it’s working out quite nicely for them:

Fun fact:  Washington DC now boasts, by far, the highest and fastest growing income per capita in America.

No matter what color Kool-aid you prefer, a Harvard Law School graduate who wipes his ass with the constitution will occupy the White House  until 2016.   Any flavor difference you think you detect is artificial.  Neither party has any intention of balancing the budget or stopping the generational rape of America.  They exist only to give you the illusion of choice.

There’s another reason nobody wants you thinking about velocity of money and triple-digit principle-based interest rates.  When you get comfortable with the idea that the same dollar gets spent over and over in the economy,  you’ll begin to reconcile that notion with the fact that total government spending (Federal, State and Local) accounted for over 40% of GDP  in 2011.  Then it becomes clear that you are already living in on of those countries where the government controls everything (call it whatever -ism you want).   Next thing you know,  you’ll start connecting the dots between the nation’s skyrocketing public debt and the private fortunes amassed by a select few, and no one who’s in on the fix wants that.

Better than one in seven Americans are now on food stamps thanks to Washington’s disastrous policies, but narcissists refuse to recognize the consequences of their own actions.  That’s how they sleep at night.  They see themselves as saviours, feeding the inferior huddled masses too stupid to fend for themselves, so of course they deserve more money.  The only thing they learn from shitty results is that they need more power, more control and more money.  

The so-called “fiscal cliff” represents nothing more than a return to policies proven far less dysfunctional than the current ones, but Washington doesn’t see it that way. Instead they want you to beg them to save you from this horrific monster and adore them when they double down on policies that serve to increase your dependency on them.

By any and all reasonable measures, it’s worse than the Great Depression, and still deteriorating.  Just remember that truth is the narcissist natural enemy before you speak.

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Mon, 08/20/2012 - 16:49 | 2721632 fireangelmaverick
fireangelmaverick's picture

So what u r saying is Buy the fucking dip?

Mon, 08/20/2012 - 16:51 | 2721644 Nadaclue
Nadaclue's picture

lol

Mon, 08/20/2012 - 16:59 | 2721682 vmromk
vmromk's picture

I take umbrage with the Bernank being labled an idiot.

More appropriately, he should be called a MOTHERFUCKING IDIOT.

 

Mon, 08/20/2012 - 17:04 | 2721690 nope-1004
nope-1004's picture

The word "billion" gets thrown around today like it's some small number.  Is a billion cars a lot of cars?  Is a billion people a large crowd?  What about a billion dollars?  Some perspective:

A billion seconds ago it was 1980.  A billion minutes ago was the time of Jesus.  A billion hours ago was the stone age.  A billion days ago no one walked upright.

Yet a billion dollars ago was 8 hours and 20 minutes at the present clip that Ben hyper-depresses the world.  Fiat is clearly worthless.

This government is sick!!  Massive depression we are in, held together with paper clips and perception economics.  What a joke.

Mon, 08/20/2012 - 17:08 | 2721709 Abiotic Oil
Abiotic Oil's picture

Whatever ails the economy, it is nothing that 750 million hollow points can't solve.

Mon, 08/20/2012 - 17:18 | 2721736 idea_hamster
idea_hamster's picture

A month later it was $670 million (wide spread rioting broke out)

...because, as everyone knows, $669,999,999 for a loaf of bread is where we all draw the line, dammit!

Mon, 08/20/2012 - 17:28 | 2721773 francis_sawyer
francis_sawyer's picture

The Social Security Administration got 174,000 too (in case granny gets upset with how much less catfood her check buys her now ~ they'll bust a cap in her ass)...

& NOAA (the weathermen), got 46,000 rounds incase people who need to grow a potato in their back yard start bitching about the lack of rainfall...

Mon, 08/20/2012 - 17:43 | 2721818 Precious
Precious's picture

"The Hero" by Roger Lowenstein of The Atlantic.

What does that tell you.  

It tells me the Zionists are one giant, concerted propaganda machine.

Mon, 08/20/2012 - 17:51 | 2721845 ratso
ratso's picture

The assumption here is that Bernanke is causing or is responsible for the slow down in the velocity of money.  The slow down is a measure of how deep the recession was and how the recession destroyed the some of the underlying financial structure of our economy.  Blaming Bernanke for it is tantamount to blaming him of bad weather and HIV.  

Mon, 08/20/2012 - 18:18 | 2721911 sumo
sumo's picture

Blaming Bernanke is tantamount to holding one of those responsible to account.

But wait, the new improved USA-brand of fascism-light doesn't believe in holding those in power responsibile for their actions.

Carry on, enjoy the coming bloodbath from your delightful getaway home in the Caymans,

 

 

Mon, 08/20/2012 - 21:09 | 2722292 FEDbuster
FEDbuster's picture

"Whatever ails the economy, it is nothing that 750 million hollow points can't solve."

American civilian gun owners (90-100 million) own enough guns (est. 300 million +) to arm every American citizen, and US civilian ammo sales are estimated at 5 billion rounds per year vs. government purchases (including military) of 1.5-2 billion rounds, just sayin.

Mon, 08/20/2012 - 21:17 | 2722310 economics9698
economics9698's picture

Enough to kill some politicians and central bankers.

Mon, 08/20/2012 - 23:02 | 2722576 AldousHuxley
AldousHuxley's picture

http://2.bp.blogspot.com/-Qj7KPuFin9k/Tw2EtfAgIOI/AAAAAAAABRg/EZpAhyYI5F...

 

 

Fed uses a simple formula to calculate the rate. Used to be Taylor rule, but now Mankiw Rule.

 

inflation - unemployment with some political pull....

Thu, 08/23/2012 - 17:32 | 2731761 Dark Space
Dark Space's picture

The domestic agencies such as DHS (and to a lesser extent NOAA and others) actually ordered over a billion rounds, it's just that 750mm were hollow points. They're ordering the same amount of ammo for domestic use than the ENTIRE US military is ordering for two active war zones and 146 countries that we are NOT at war with... People keep coming back at this like it's not a big deal that they're ordering this much ammo for use against Americans, but it is a REALLY big deal.

To make the math easy those 100mm civilian gun owners (using your numbers) are buying 5 billion rounds per year, that's only 50 rounds per gun owner. That isn't surprising - I bought 10 times that this past weekend and burned through half of it at the range getting ready for deer season and just having fun plinking targets (mostly the latter). DHS just bought enough to shoot every American in the head 3.87 times, and nearly 3,000 rounds for each employee AND contractor on DHS' payroll - that is obscene.

Mon, 08/20/2012 - 21:54 | 2722306 economics9698
economics9698's picture

Wow ratso got a -38 on the counter.  Beats my record.

Mon, 08/20/2012 - 22:23 | 2722464 Carp Flounderson
Carp Flounderson's picture

Agree, impressive!  Thats my +1 there.  Hedgie group-think on economics is a great market indicator.  Back in the housing bubble days, someone saying the bubble was about to pop would easily get a -100 on a system like this.  Nowadays, all the noobs watch a 5 minute ron paul clip on economics and think the world will end soon.  Anyone who disagrees is obviously wrong lol.  For the record, time is near for all in.

Mon, 08/20/2012 - 19:46 | 2722115 Roandavid
Roandavid's picture

MDB?

Is that you?

Mon, 08/20/2012 - 21:20 | 2722314 WhiteNight123129
WhiteNight123129's picture

MDB stop your bullshit alright?

 

Mon, 08/20/2012 - 23:01 | 2722572 JeffB
JeffB's picture

"Blaming Bernanke for it is tantamount to blaming him of bad weather and HIV. "

No, I think it's a little more like blaming a drunk driver for killing a family after he hit their car head on while driving the wrong direction on the highway.

The results of some decisions are predictable.

It's been known for more than a century that when a central bank gooses an economy by artificially holding down interest rates, that the artificial boom will be followed by a crash as surely as night follows day.

YouTube - Austrian Theory of the Trade Cycle

It has also been known for many decades that the resultant malinvestments caused by such destructive central bank actions must necessarily be liquidated for an economy to begin the healing process.

Bernanke has been the "doctor" trying to save the heroin addict from a painful crash by administering ever higher and higher doses of heroin to minimize the pain.  in the short run.

Mon, 08/20/2012 - 23:30 | 2722613 HardAssets
HardAssets's picture

'velocity' of money ?

meh

Here's one good explanation of why its not worth mentioning:

http://mises.org/daily/918

Economists like to number crunch all sorts of crap. It helps to confuse everyone.

Despite this, - IMO the upcoming Greatest Depression will make the 1930s look like a picnic

Mon, 08/20/2012 - 17:53 | 2721852 johnQpublic
johnQpublic's picture

so what yer sayin is bring on the nazi's?

Mon, 08/20/2012 - 19:33 | 2722081 Precious
Precious's picture

Aww fuck off you stupid, pre-programmed tool. Nobody said anything about that, except you.  But you're too ignorant and brainwashed to even know what a motherfucking jackass chump you are.  You just match patterns with your snotty, lefty, junk infested head.

Mon, 08/20/2012 - 22:06 | 2722410 masterinchancery
masterinchancery's picture

Lowenstein should commit suicide for writing that article.

Mon, 08/20/2012 - 20:53 | 2722257 WhiteNight123129
WhiteNight123129's picture

LOL.... I am going to die laughing....

Mon, 08/20/2012 - 18:16 | 2721899 El
El's picture

LOL! My first thought on reading that was...they waited until bread was 670 million before they rioted? Seriously?

Mon, 08/20/2012 - 19:10 | 2722039 ersatzteil
ersatzteil's picture

But their salaries adjusted to the rate of inflation, right? 5,000% raise bitchez! Marks in my backpack, Berlin for the weekend!

Mon, 08/20/2012 - 21:51 | 2722369 smlbizman
smlbizman's picture

they must of had double coupons....

Tue, 08/21/2012 - 00:15 | 2722762 Demologos
Demologos's picture

Its the Germans!  They are a well-disciplined bunch.  Look at how quiet they are now as Merkel sells them down the river to the banks, again.

By the way, I don't know the mechanism, but they somehow added zeros to the paper money to somewhat keep pace with the price of bread.  The riots must have started when there was no room to add zeros.

Tue, 08/21/2012 - 01:11 | 2722854 Vendetta
Vendetta's picture

When it was only $2 million a loaf, that was okay.  However, if they only had Walmart supercenters they could have gotten a loaf for 659 million and saved 11 million marks... enough for 1/8 of a pat of butter.

Wed, 08/22/2012 - 02:09 | 2726405 AustriAnnie
AustriAnnie's picture

I don't think they rioted at a certain PRICE.

They rioted after a certain period of TIME (the amount of time probably to eat what was in the pantry and start getting really hungry)

 

Mon, 08/20/2012 - 17:50 | 2721835 Precious
Precious's picture

Hollow point bullets for the citizendum.  

This is what happens when a country abandons morality.  

History demonstrates it time and time again around the world.  And all the while, people rationalize it away.  In fact, it's going to get a lot worse before better.

Mon, 08/20/2012 - 20:12 | 2722178 rocker
rocker's picture

New guys in town will take social security, medicare and medicaid money.

Will place in stock market.  Puff, all gone, sorry citizens of the NWO.

Mon, 08/20/2012 - 18:47 | 2721970 BlackSunshine
BlackSunshine's picture

Effects of inflation....

Being a millionare is now meaningless (that's right, won't get you in any Forbes list anymore).

Billion is the new million.

Trillion is the new Billion....etc.

 

Mon, 08/20/2012 - 19:19 | 2722053 JustObserving
JustObserving's picture

"Yet a billion dollars ago was 8 hours and 20 minutes at the present clip that Ben hyper-depresses the world."

Debt and unfunded liabilties increase by $1 billion every 63 minutes and 45 seconds in the US of A. Or by $22.6 billion a day.

Mon, 08/20/2012 - 20:03 | 2722150 Al Gorerhythm
Al Gorerhythm's picture

Let me condence for you;

"This government is sick!!  Massive depression we are in, held together with paper clips and perception economics.  What a joke."

government is sick!!  a joke.

Mon, 08/20/2012 - 20:12 | 2722163 Freddie
Freddie's picture

Hope & Change Depression.  ZH is filled with plenty of libtards who still love the muslim.

Mon, 08/20/2012 - 21:30 | 2722329 Almost Solvent
Almost Solvent's picture

I heart U

Tue, 08/21/2012 - 13:00 | 2724264 RKDS
RKDS's picture

They're in fine company with the conservitards who worship the dollar.

Tue, 08/21/2012 - 00:14 | 2722759 fasTTcar
fasTTcar's picture

Here is some perspective.

You want a million dollars?  Save $500 per week for 40 years.

You want a billion dollars?  Save $500,000 per week for 40 years.

Mon, 08/20/2012 - 22:48 | 2722534 monad
monad's picture

Prisoner of the Year

Mon, 08/20/2012 - 16:53 | 2721651 nope-1004
nope-1004's picture

No, what he's saying is "your money won't buy much during this dip".

 

Mon, 08/20/2012 - 16:54 | 2721656 Vincent Vega
Vincent Vega's picture

Not to put words in anyone's mouth but I think what he is actually saying is: Fuck You Bernanke!

Mon, 08/20/2012 - 17:05 | 2721703 Manthong
Manthong's picture

Bernanke Bucks Belong Buried in Bullion Boxes.

Mon, 08/20/2012 - 17:46 | 2721827 TrillionDollarBoner
TrillionDollarBoner's picture

Bernanke's Buck-Fuck will Bury a Billion Bullion Boxes

fixed it

Tue, 08/21/2012 - 20:40 | 2725847 franzpick
franzpick's picture

We should be as wise, in not being enticed into the dark, overgrown Bernanke financial forest, as was the female doe who, upon emerging from the woods, declared "I'll never go in there for two bucks again...".

Mon, 08/20/2012 - 17:41 | 2721811 withnmeans
withnmeans's picture

Unfortunately it is about what he is not saying, "This is the beginning of an all out World War".

Bad things do happen in cycles as well as the good things. Time to get rid of the riff raff ? 


Mon, 08/20/2012 - 23:53 | 2722712 JeffB
JeffB's picture

or "Your money won't buy anything, dip."

Mon, 08/20/2012 - 18:56 | 2722001 Careless Whisper
Careless Whisper's picture

His initial investment in Facebook was $500,000 --- he sold $600 million of stock in the (very well played) IPO; last week he sold another $400 million of stock. He still owns 5 million shares, currently worth $100 million. So he's either a really smart guy or a master of the pump and dump.

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