Entrenched Fiscal Deficits Since 2008
The most obvious costs emanating from 2008 are the ongoing budgetary deficits run by every major developed country in the world. Generally, I have only been counting the accumulated U.S. deficits of $5 trillion+ and running at ~$1 trillion per year. However, almost every major developed country in the world - except for a handful of Nordic countries, Switzerland and Korea - are now running secular recurring deficits to support their economies. None of these countries running these large deficits has an exit strategy to get to a viable economy. These deficits represent that part of the economy that went away after 2008 and has been missing ever since.
Central Bank Dopium: A Faustian Bargain
The most obvious costs emanating from 2008 are the ongoing budgetary deficits run by every major developed country in the world. Generally, I have only been counting the accumulated U.S. deficits of $5 trillion+ and running at ~$1 trillion per year. However, almost every major developed country in the world - except for a handful of Nordic countries, Switzerland and Korea - are now running secular recurring deficits to support their economies. None of these countries running these large deficits has an exit strategy to get to a viable economy. These deficits represent that part of the economy that went away after 2008 and has been missing ever since.
Central Bank Dopium: A Faustian Bargain
The other major "cost" of course that I pound away upon ad nauseam is the amount of Central Bank debt monetization, known as Quantitative Easing here in the U.S. The total U.S. accumulated balance is now at roughly $3 trillion and going up by $85 billion every single month, indefinitely. The Fed in its latest "policy" puts no end date on these monetizations, because they think they can preclude the stock market dopium junkies from having another vomit-fest, by keeping the needle in the junky's arm indefinitely. Globally, the amount of debt monetization has been put at roughly $9 trillion. All of that $9 trillion represents new "hot money" in the global financial system, used to fund the various "carry trades" which means borrowing in one currency and lending in another. A strategy that works of course until it doesn't. The Asian currency crisis of 1997 that almost brought down the entire world economy was caused by "hot money" being unwound out of the fast growing "tiger" economies of East Asia - Thailand, Singapore, Korea etc. Now picture that scenario on steroids with an additional $9 trillion of highly leveraged money that needs to go back to where it came from very quickly in the event of a global dislocation. Equally important, these Central Banks have absolutely no exit strategy for all of this monetary stimulus. They will either have to keep pumping more money into the system until inflation begins to occur or until there is a deflationary collapse. There is no viable scenario under which they gently begin to unwind their positions back into the market which would cause interest rates to rise and hence bring about a collapse, assuming one had not already occurred. As is the theme of this blog, I don't see any risk of a wage-price inflationary spiral, if only because people need jobs to have wages. Therefore, similar to 2007, speculators will gorge on debt until lenders get nervous and we all find out (again) that this entire massively leveraged asset levitation model does not go in reverse.
Zero Interest Rates: Let Them Eat Dog Food
The third largest cost emanating from 2008, albeit "hidden" is this ongoing zero interest rate policy. This policy of keeping interest rates at 0% here in the U.S. is literally bankrupting old age pensioners. Pension contribution models going back decades were not established based on an assumption of 0% interest rates for years on end. A typical historically normalized interest rate would be somewhere in the 3-5% range for short-term interest rates and of course higher for longer durations. Therefore, by keeping interest rates at these levels indefinitely, the Fed has guaranteed that anyone retired or retiring in this timeframe will fall far short in their retirement savings. Which of course, just means they will have to "borrow" even more money from future generations - via intragenerational transfers (aka. Social Security/Medicare) - in order to fund their retirement. I say "borrow" in quotes of course, since we know the money will never be paid back. Which is all just another way of saying that future generations are going to pay for these zero percent interest rates via higher taxes and lower incomes for decades to come. Today's retirees will say they deserve their share of Social Security/Medicare money since they paid into them, however, they are not taking into account the fact that Defense spending doubled in the past decade. The semi-literate Faux-News generation wants guns and butter, whereas history and reality says pick one or the other. They picked both, only because they assumed that their children and grandchildren could be pillaged to pay for it.
Doubling Down On Greed and Malfeasance
Another cost that I posted earlier this week is the fact that the deposit insurance fund is still massively underfunded and corrupt policy-makers gave banks until 2020 to get it back up to a whopping 1.35% of deposits. Sounds like there is still a major shortage of money in the banking industry. Oh wait, bank profits are now back at 2007 levels. For U.S. banks alone, that's $35 billion of profit per quarter ! Apparently they don't have enough money to make good on their commitments to the taxpayers at large who bailed them out, but plenty of money to dole out to shareholders. It's a corrupt fucking system, run by a bunch of corrupt fucking pigs. It needs to collapse - and it will.
Zero Interest Rates: Let Them Eat Dog Food
The third largest cost emanating from 2008, albeit "hidden" is this ongoing zero interest rate policy. This policy of keeping interest rates at 0% here in the U.S. is literally bankrupting old age pensioners. Pension contribution models going back decades were not established based on an assumption of 0% interest rates for years on end. A typical historically normalized interest rate would be somewhere in the 3-5% range for short-term interest rates and of course higher for longer durations. Therefore, by keeping interest rates at these levels indefinitely, the Fed has guaranteed that anyone retired or retiring in this timeframe will fall far short in their retirement savings. Which of course, just means they will have to "borrow" even more money from future generations - via intragenerational transfers (aka. Social Security/Medicare) - in order to fund their retirement. I say "borrow" in quotes of course, since we know the money will never be paid back. Which is all just another way of saying that future generations are going to pay for these zero percent interest rates via higher taxes and lower incomes for decades to come. Today's retirees will say they deserve their share of Social Security/Medicare money since they paid into them, however, they are not taking into account the fact that Defense spending doubled in the past decade. The semi-literate Faux-News generation wants guns and butter, whereas history and reality says pick one or the other. They picked both, only because they assumed that their children and grandchildren could be pillaged to pay for it.
Doubling Down On Greed and Malfeasance
Another cost that I posted earlier this week is the fact that the deposit insurance fund is still massively underfunded and corrupt policy-makers gave banks until 2020 to get it back up to a whopping 1.35% of deposits. Sounds like there is still a major shortage of money in the banking industry. Oh wait, bank profits are now back at 2007 levels. For U.S. banks alone, that's $35 billion of profit per quarter ! Apparently they don't have enough money to make good on their commitments to the taxpayers at large who bailed them out, but plenty of money to dole out to shareholders. It's a corrupt fucking system, run by a bunch of corrupt fucking pigs. It needs to collapse - and it will.
