Mauldin: 8 Charts That Show How Insane The Economy Is Today

Authored by John Mauldin via,

Since the 2008 financial crisis, there’s been a growing number of ridiculous, inane, and otherwise nonsensical economic interventions from our central bankers that fill the daily economic headlines.

I have gone from the occasional smile to scratching my head now and then to "WTF" moments.

All that said, the economists who designed these interventions had their reasons. They thought lower interest rates and liquidity injections would create jobs, spur investment, and eventually produce inflation.

Then the idea was to reduce the stimulus before inflation got out of control. The problem is that none of these wishes came true.

The Philips Curve That Doesn’t Work Anymore

The key gauge of central bankers for assessing this tricky process is the unemployment rate.

An economy at “full employment” is one in which inflation is right around the corner. The theoretical relationship looks something like this – chart from Gary Shilling.

In fact, we now have very low unemployment, accompanied by stubbornly low inflation.

Why is that? No one really knows.

All sorts of theories are floating around, but none have yet proven helpful in restoring the Phillips Curve.

Here’s reality, via Gary Shilling:


The Median Household Is Back Where It Was in the 1990s

The result is a strange economy in which the people who want jobs mostly have them—but remain deeply dissatisfied, stressed, overleveraged, and often angry. See this graph of real median household income, from my friend Murat Koprulu.

This is median, not average, household income. That means half of households are doing better and half worse. It’s also inflation-adjusted, so the amounts are consistent over time.

We see that the median family is roughly back where it was 20 years ago, in the mid-1990s. Worse, it’s still far below where it was ten years ago before the financial crisis. Is it any wonder people are mad?


Education Has Become a Risk Rather Than an Opportunity

One more absurdity.

In the US, we often think education is the key to getting ahead. That's not necessarily the case anymore. Here’s another chart Murat sent me, showing real average hourly wages by education level.

From 2007–2014, possessing an advanced degree enabled you to “get ahead” only in a relative sense. Your wages stayed flat while those of the less-educated fell.

Notice how having “some college” was actually more negative for wages than having only a high school education. How can that be?

Possibly because going to college without obtaining a degree leaves you in debt with less practical experience than your peers who went straight to work after high school.

To that point, student debt is quickly becoming a problem for everyone. Look at this chart from Grant Williams on student loan debt held by the federal government. Do we add that to our national debt?

Taxpayers are on the hook for over a trillion dollars in student debt. Unlike mortgage or business debt, student debt is backed by no tangible asset you can repossess. It bought knowledge that now hopefully resides in the student’s brain, but it may have just gone in one ear and out the other.

That makes this debt uniquely risky. You and I are taking that risk, like it or not.


Stock Market Cap Is Near the Dot-Com Peak

And here’s another chart from Grant Williams, showing stock market capitalization to GDP. We are only another healthy bull market run away from being back to dot-com bubble levels. A run that many of my friends firmly believe awaits us.

The US stock market as a percentage of GDP is now far bigger than it was at the housing bubble’s peak, and it’s rapidly approaching the dot-com bubble peak. That ought to make us a little nervous as we watch the Dow hit new all-time highs.


Insane Currency Pegs and the Global Market Driven by False Beliefs

And we will close this series of anomalies with a note I got from Louis Gave this morning. Rather than just looking for absurdities in the developed world, Louis’ research team at GaveKal scours the entire world in depth every day.

So he gives us a few lesser-known absurdities. [My comments will be in brackets.]

Usually currency pegs are not a bad place to start when looking for absurdities.

What are the odds of Lebanon keeping its peg now that Saudi won’t bankroll it? After all, you have a pegged currency with current account deficit in double digits relative to GDP:

And once the Lebanese peg goes, will it be like Thailand in 1997 with Bahrein, Qatar, Oman, Egypt, Pakistan and ultimately Saudi all following suit?

If so, you can kiss goodbye to those large defense orders…

There are many other ideas. A lot of them linked to the craziness in the bond market (negative swiss yields, Italian junk below UST, etc…). But how about this one:

Okay, John back. Please note the serious level of sarcasm in the right-hand column above: “Good thing there is no common thread in the above names...” It’s all tech and all digital in the top seven. Note, however, that Exxon Mobil keeps hanging in there.

The above is why I love Louis and read his analysis every time I get a chance.

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JRobby Crazy Or Not Tue, 11/28/2017 - 10:38 Permalink

All of these tools are useless when the inputs are falsified numbers.Raising rates and "unwinding" the FED BS that QE created while unemployment is still around 20%, consumers are maxed out, and incomes have not grown for decades is total insanity. AGREE! TAKE THE POWER FROM THE INSANE!!!!For we everyday slaves: STARVE THE BEAST !!!!!!!

In reply to by Crazy Or Not

PT Five Star Tue, 11/28/2017 - 10:45 Permalink

Income vs Capital Gains.  (Hint:  Income requires you to have customers.  It also requires your customers to have some kind of Income.) The battle between earnt-money and borrowed-money.  There was a time when this battle was not so fierce.  Now earnt-money is losing.

In reply to by Five Star

junction Crazy Or Not Tue, 11/28/2017 - 10:50 Permalink

What Mauldin is using graphs for is to say is that most of us are screwed.  Those wage charts ignore one salient fact, that in the 1980s, most people's middle class jobs came with low cost group health insurance and a defined pension.  Those benefits are a thing of the past for everyone except employees in the public sector.  And even for government employees, many pensions are in jeopardy due to the corruption of the politicians in charge of these plans.  I just heard on Coast To Coast AM an expert on painkillers say that 50% of Americans over age 65 suffer chronic pain and that new CDC guidelines discourage doctors from providing drugs that can alleviate this pain.  Instead, take Tylenol, a liver poison.  Aside from people lkike Mauldin, all we get is propaganda from our Big Brother masters.

In reply to by Crazy Or Not

Crazy Or Not junction Tue, 11/28/2017 - 11:16 Permalink

Yes, all the stats and all the figures - but its still the Central Banker's Game, the pharmacist's game, the congressman's... All the times the Govt. f++ks us all, but still you and I stand for constitution and patriotism. The pain I felt when I really understood that all those things had passed and knew in my heart that there were no countries or governments or flags that I could respect, that meant what they were supposed to mean. All had been desicrated 1000 times over, all who gave for them utterly cheated in one vast ponzi of greed. I'm not sure I'm smart enough to know what is really the answer to this. Maybe Ryan Bundy's right, maybe Assange, William Binney, Kim Dotcom, John McAfee... I don't know, I don't even know if what I'm told about them is true or a fabrication in a ISIS studio. But I'm sick of this Banker's world MIC shit. you're ready - give me a call, this is fight club :-

In reply to by junction

rejected junction Tue, 11/28/2017 - 11:19 Permalink

Your post is correct but I'd like to add....Almost every drug causes liver damage if over dosed. Tylenol overdose is set at 4000 mg per day. That's 8-10 pills per day!Tylenol for most is a very poor pain drug,,, which is why Goobermint allows its sale OTC.  Also is why many Overdose.I am over 65 and know others that are over 65 and none of us take these strong pain killers. The expert states 50% but the 50% that take the drugs are in their 80's and 90's.  Duh!Goobermint is simply restricting their availability which will make them more money from street sales.They could care less if Granny is in pain....... unless, of course,  it's their Granny.  And today I'm not real sure about that. In the past human life was precious,,, today it's a scourge to the planet. I'll let the reader decide.Yes the article is a sham,,, some truths but with important points left out to create a narrative. 21st century propaganda.....

In reply to by junction

HRClinton Crazy Or Not Tue, 11/28/2017 - 11:23 Permalink

Beyond the headline, I saw some charts and read Blah, Blah, Blah. Blah.If you don't like the Official Economy, you should've joined the Parallel Economy. AU + BTC = Money in Parallel Economy De-Dollarize, birches. If you want to go Galt and and want to revolt, leave dollars and go crypto. Got clarity?  Got balls bigger than a chicken?[sound of clucking chicken]

In reply to by Crazy Or Not

PT Tue, 11/28/2017 - 10:40 Permalink

Oh noes!  The rent is due and we have no munny!  Quick, check behind all the cushions on the sofa!  Two dollars twenty five?  That'll never pay the rent!  Better give it all to the rent man anyway.  Perhaps he'll let us stay another week, even though we've only been able to give him loose change for the last 20 years ...  ... perhaps if we didn't already work for him, we could get a job somewhere else where we get paid with munny! ... 

Ghordius Tue, 11/28/2017 - 10:45 Permalink

51'000 USD median (yes, median, not average) household income

look, I'll be brutally frank: your glass is nearly full, Mrs and Mr America. no, it was fuller, once. but there it is: Exceptional does not last forever. never did, in history

you can either count your blessings (they are many) and get your act together or... cry me a river for a situation 80% of humanity would gladly exchange for theirs

rant end, I still have that Churchillian faith that you, America, will do "the right thing... after you explored all other options"

Hugh_Jorgan gatorengineer Tue, 11/28/2017 - 11:31 Permalink

Sorry, but the chart is for median after tax income. If you "earn" $51k you don't qualify for freebies, bud. Not that you are terribly prosperous at that income level, mind you.

What you should be talking about are the losers that work maybe 150 days per year; with 4 kids from 4 different, deadbeat baby-daddys, who get $20K in income assistance on your dime.

In reply to by gatorengineer

rejected Tue, 11/28/2017 - 10:56 Permalink

In fact, we now have very low unemployment, accompanied by stubbornly low inflation. Apparently this pundit doesn't eat, own a car or own a home and believes everything goobbermint charts indicate.

Clowns on Acid Tue, 11/28/2017 - 11:07 Permalink

Maudlin is just an entertainer for the "supposed" in the know boomers. This article could have been written after QE3.... but entertainers have to keep their message slow and just a bit out of line of mainstream media. 

Angry White Guy Tue, 11/28/2017 - 11:10 Permalink

I am SO FUCKING sick and tired of these idiot asshat economists claiming 'stubbonly low inflation' WHAT FUCKING COUNTRY ARE YOU STUDYING, ANYWAY!?!Sure, LCD TVs are not inflating, but EVERYTHING else NEEDED to live, like food, energy, housing and healthcare is RUNAWAY inflation.I'm tired of living in a country flooded with LIES....LIES all over everyone and everything.

Stevious Angry White Guy Tue, 11/28/2017 - 13:43 Permalink

Then leave, and I'm not being cynical.Thailand, the Philipines, Panama, or Mexico are great examples.Unfortunately though, what you say is true, though not energy which I'm afraid to say, compared to distant past (pre-1964) is still quite cheap.  But you are right on with housing (in many areas); healthcare (in all areas) and food not so much.You're young.  You do not remember 1979 or 1982 when a "good" house mortgage was 14%.  The problem is: If you hold variable debt, for instance let's say $10,000 visa debt, or variable auto or house loan. "If/when" inflation returns, the holder of such debt is so royally screwed.I do completely agree, the entire world is flooded with lies, deception, mirrors and smoke.It's fascinating. 

In reply to by Angry White Guy

Gadocat Tue, 11/28/2017 - 11:12 Permalink

The problem is discretionary income.  The people have none.  We have workers who are purchasing new cars because they cannot afford to repair their old car.  The government needs to lower taxes until the average worker finally can afford to spend on something other than food and healthcare -- this will spur inflation and the economy will thaw.