Wednesday, September 11, 2013

A Totally Unsustainable Way of Life. Ending Badly.

As annoying as it may be, I feel obligated to constantly reiterate the fact that the consumption-oriented lifestyle, enjoyed by all developed nations, is an artifact of the past. It's in sudden death double overtime. The ongoing transfers of income that are now necessary to keep the profligate developed-nation ponzi borrowers on life support, are all coming from poor nations via recurring trade deficits. We will continue borrowing from the poor nations, until such time as they realize that they will never get their money back and/or the markets collapse, whichever comes first...

Voodoo Economics - Belief In the Mathematically Impossible
I just read this article stating that the combined liabilities of the U.S. are a mere 17 times higher than the stated debt. It's a totally ludicrous figure that only a country run by frat-boys playing around with a reserve currency, could possibly accumulate. And of course it's due to all of the various accounting frauds that have been propagated by successive administrations and Congress over the years - reclassifying liabilities as assets, and/or lending from one entity to another to cancel each other out i.e. borrowing from Social Security to fund general expenditures etc. History's largest-ever shell game. Unfortunately, a figure that high could never be resolved by a totally dysfunctional political process now fully preoccupied with merely giving the appearance of actually functioning. A total lack of political willpower, originating decades ago, was at the root cause of this crisis, so the highly enfeebled political willpower of today is no match for a problem that has grown orders of magnitude larger in the meantime. The root cause of the problem itself is that the consumption-oriented lifestyle is not sustainable on a planet of 7 billion people, all competing for the same resources. Once trade was globalized, the only question on the table was how far would the developing world's standard of living rise and how far would the developed world's standard of living fall to equalize the trade imbalances. Now we know the answer. Under the Neocon-inspired 30+ year specious paradigm of "Supply Side Economics" aka. "Voodoo Economics" - a system of one-way trade was contrived whereby jobs and industries were exchanged for debt, with billionaires brokering the transfer while monetizing the massively increased profit stream in the form of higher share prices. Every time the Dow ticks higher, the Middle Class can hear the sound of the invisible jobs liquidation machine grinding away in the background. And the worst part in all of this is that the developing world's standard of living of course didn't rise much at all in the meantime, since those nations built their own domestic ponzi-style crony economies while Third World wages were crowded out by unprecedented corporate profit margins. That entire course of events, merely implies that the developed world standard of living now has to fall, to correct the massive trade imbalances.

Ceteris Paribus
What is really interesting is that the article then says that other countries are much better off in terms of their future liabilities, relative to the U.S. - particularly Australia and Canada. The methodology behind this calculation is to match outgoing cash flows to inbound receipts based upon projections of future GDP. However, as always, it's the assumptions that really matter. Those who would extrapolate Canada or Australia's GDP out into the indefinite future, obviously were not around in the late 1970s and early 1980s. Back then, as now, the commodity markets were booming and real estate in Canada was likewise setting the pace. Then, however, the U.S. went into recession in early 1980. Commodities collapsed. Energy prices collapsed. Real estate collapsed. Canada's recession was similar to that of the U.S. except about three times longer and much deeper. I got my first part-time job in 1984 because that was the first year since 1980 that the Western Canadian economy was no longer shrinking. Canada and Australia are massively leveraged to global ponzi capitalism, so the attached projections are all "ceteris paribus" ("all else being equal"). Which in the real world means all heads are equally shoved up their own asses. Add in the ephemeral Chinese economy and then the presumed stability of the commodity/resource story gets really delusional.

A Wrap-Around Clusterfuck
We often also hear that country's such as Germany represent the strong Euro nations whereas the "peripheral" nations represent the weak part. First off, were it not for the Euro of course, this would not be the case i.e. currency exchange rates would adjust to equalize the ongoing trade imbalances. In addition, Germany's trade surplus represents other nations' trade deficit. It's a zero sum game. Were those other nations to leave the Euro and/or address their trade deficit, then Germany's trade surplus would no longer exist. So to the extent that the so-called peripheral nations continue to accumulate debt to fund their trade deficits, it's all just a wrap-around clusterfuck, because they have to borrow from Germans to buy goods from Germany. Again, anyone who thinks that this scenario makes Germany's long-term economic situation any more sustainable than Italy's can't do basic math or understand basic logic.

Ultimately ALL of the developed nations are in the same unsustainable situation and are just trading pieces of paper back and forth to pretend that the consumption-oriented lifestyle is indefinitely sustainable. The developing nations' willingness to forego current consumption in exchange for worthless pieces of paper has subsidized the developed-nations' lifestyle. Now we have reached a point of manic desperation just to keep this shit show levitated by any means possible. It's sad and utterly pathetic. My definition of a man does not include someone who is totally consumed with inventing new forms of alchemy to bankrupt the next generation of great-grandchildren down the line, all while immersing himself in the latest comfort-seeking luxuries. It begs the question, what kind of "men" will remain on the other side of this fiasco, when the real heavy lifting begins and life doesn't revolve around who won the game last night ?