The globalized economy is a colossal Ponzi Scheme in which the vast majority survive on the bread crumbs falling off the table. The possibility of 7 billion people achieving a consumption-oriented lifestyle is zero, so the World Bank conveniently set the poverty line at $1.25/day to legalize global slavery. As long as someone else's children are doing the suffering, it's "all good". Post-2008, this illusion was extended merely by plundering all future generations.
Consumption Zombies discarded the Thanksgiving holiday to gain a "headstart" on buying cheap junk that was equally available three weeks ago as it was on Thursday and Friday. Meanwhile, not once did they stop to consider all of the retail employees who forfeited their Thanksgiving as well, so that the Idiocracy could buy an Xbox at 2am on Friday. And suffice to say, none of these dumbfucks ever stopped to think about who actually makes all of this "merchandise" and why it is that Chinese factory slave wages are 1/10th the level of a Starbucks barista. That will be the Faustian Assumption made by this shrink-wrapped Idiocracy: No thought given. No thanks given. Never once thinking - "There, but for the Grace of God Go I".
How Long Do We Have to Keep Pretending?
Which collapse are we waiting for anyway? Middle class incomes are down 10% in 15 years. Middle Class wealth is at a 20 year low. Sovereign ponzi debts are double what they were 7 years ago. Commodities are collapsing in real time. Globalization peaked in 2007. Most if not all financial commentators enjoy incomes and wealth levels that are orders of magnitude higher than the average family. Therefore, the typical commentator will be the last ones to personally realize that the "final collapse" is already well underway. The first step in reading ANY economic/financial article right now is to pretend that the collapse isn't already well underway, then proceed to hear about how it *could* happen at some distant and totally unforeseeable point in the future.
"Look Ma, no hyperinflation"
And for *some* reason, today's commentators seem uniformly incapable of acknowledging that Third World deflation is at the root cause of this fiasco, including the cheap capital emanating from Central Banks. The Money Supply grew 1,000% since 1980 while inflation fell the entire time. Cheap labour and cheap capital are compliments of Third World wage slaves. Central Banks are merely along for the ride:
Borrowing from Third World wage slaves
A recurring trade deficit axiomatically implies recurring borrowing
Federal Debt versus Net Exports:
Globalization Peaked in 2007, but let's just keep pretending that it didn't:
The Faustian Assumption: "It Can't Happen to Me" It is.
My credibility as a market prognosticator has been systematically compromised by Central Banks, Russian programmed HFT Bots, and Prechter & Co, who have likewise been betting against the impossible for years straight. Despite global inequality and poverty rising every year since 2008, accompanied by a 40% increase in global debt, the U.S. stock market has defied logic and reality as it always does in its lead up to another crash landing. I always expected that the corporate estate sale that went into overdrive in 2000 and then into Shock Doctrine overdrive in 2008, would catch up to me personally and professionally, so I "hedged" accordingly. That market hedging strategy would be far too much pain for the average drone who is conditioned to leverage themselves 300% to the status quo so they can parade their latest trinkets as a sign that they're keeping up with the Dow Jones' just fine, thanks. For me, however, it was merely prudent to hedge against the musical chairs corporate downsizing game which has been relentlessly chewing through white collar jobs for 15+ years straight and which decimated the blue collar sector in the decades prior. Arguably my own job has been "on the line" non-stop for 6 years now, but now I know that barring some miracle it will likely be phased out sometime in the second half of 2015. I get to put myself out of my own job, as a reward for 15 years of service.
This is what the fucktards in the media and typical "commentators" don't get - this job killing machine is coming for all of us - the silent majority having been ploughed under already. They have no voice in the mannekin media, so they essentially don't exist. Just like the billions of slaves worldwide living on $2.50/day or less don't exist except when they are being adopted by Angelina Jolie.
And suffice to say that if the job killing machine is reaching manic levels now during the greatest profit margin expansion in human history, what does that portend for the remaining "good" jobs when the collapse of 2008 resumes from where it left off?
I fully accept that the stock market can and has remained irrational longer than anyone can remain solvent. However, as a hedge against eating dog food, I nevertheless keep one eye open at all times to the ever-growing market risks. Despite the stock market's denial today - diverging ever greater from reality than what was witnessed in 2000 and 2007 - nevertheless, reality is closing in on all sides, on this ossified society fully incapable of facing reality on any level.
The rapid declines in Treasury yields and oil these past few weeks since the Fed's QE bond buying ended, are the widely ignored canaries in the coalmine that this latest cycle is ending amid record stock market optimism, record margin debt, and minimal hedging. Today's historically elevated stock prices held aloft by HFT Bots on minimal volumes represent a notional illusion. They represent the marginal price that will be paid by the next Bot trading on millisecond boundaries amidst non-existent selling. And the real issue, is that NO ONE knows where all of that 0% interest rate money flowed these past 6 years - mortgages, Cov-lite loans, junk bonds, municipal bonds, Ponzi sovereign bonds, massively leveraged currency carry trades etc. No one can save the markets now, not Central Banks acting in collusion, not the Russian HFT programmers.
China is the only major economy having had ZERO recessions in the past 20 years. In 2008, China's growth rate slowed to a "mere" 6%, and it's currently ~7%. Central Planning = No recessions for decades.
For some *unknown* reason, 0% interest rates still haven't fixed the problems caused by 1% interest rates
...And the $33 trillion of global stimulus was siphoned off into offshore bank accounts leaving nothing to show for it except more debt. All while Third World wage deflation continues to bury jobless "consumers", who are already buried in debt "No one saw that coming"
The Fed stopped buying Treasury bonds a month ago and yet yields keep falling. Below shows the massive and growing divergence between stocks and Treasury bonds. Despite $3.8 trillion in Quantitative Easing, Treasury yields are heading back down towards 2009/2012 levels with absolutely nothing to stop them from going lower:
One of these rising wedges is not like the other (anymore)
Crude Oil is also signalling a massive slowdown in global markets
Crude Oil versus Emerging Market stocks:
Central Banksters bailed out lenders by doubling the debts of borrowers. A "strategy" by and for morons.
"We all see the problems, we chart them, we track them...we know they're huge"
Semiconductors and oil service stocks cross over late in the cycle since Semis are the earliest cyclicals whereas oil service are late cycle. The "signal" worked flawlessly ahead of Lehman in 2008.
The red line is the Semioconductor ETF Minus the Oil Services ETF - to indicate relative strength inflection points, like the one that occurred in July 2008 and the one that occurred this past July 2014. The crossover signal worked in 2011 as well...
i.e. How it turned into a Ponzi Scheme to the benefit of the few
Corporate zombies reduced life to a conspicuous consumption contest At the most fundamental and personal level, the reason why Globalization failed is because this era's predominant philosophy of "Rational Self-interest" views life as a competition - a zero sum game consisting of "winners" and "losers". This of course is a stunted Westernized way of thinking, which values material gratification above internal gratification. And no doubt, the systematic corporate colonization of the developed world implanted this doctrine into their subservient Borg. An overwhelming preoccupation with external gratification led to stagnation and decay "Greed is Great" An experiment in greed and gluttony taken to their extreme conclusion:
That refugee mentality then contaminated the global economy leading to a system of widescale exploitation, which was rationalized in the pulp fiction Ponzinomic text books spewed forth from every soon-to-be-bankrupt University. It was only a matter of time before "consumers" were fully cleaved from "producers" in the Ponzinomic lexicon, leading to a one-sided economy with massive wealth and financial imbalances. According to current economic orthodoxy, when prices are reduced, "consumers" ALWAYS benefit, leaving aside the fact that they have no jobs and/or stagnant wages. How so many dumbfucks fell for something that asinine is a testament to the power of greed and self-interest, confirming my overriding hypothesis that people will believe ANYTHING, if it's in their immediate self-interest to do so.
The U.N. Conference on Trade and Development : "Prior to the Great Recession, buoyant consumer demand in the developed countries seemed to justify the adoption of an export-oriented growth model by many developing and transition economies. But that expansion was built on unsustainable global demand and financing patterns. Thus, reverting to pre-crisis growth strategies cannot be an option."
Q: When you say "Not an option" - how does that affect Black Thursday at Walmart?
Where was I - How this inherent exploitation flaw in the human DNA can be "fixed" is anyone's guess, however, to paraphrase Albert Einstein, we know with certainty that the refugee level of thinking that created this colossal disaster is not the level of thinking that can fix it.
"The signs are everywhere, after years of central-bank collusion to douse the world with free money: historically low yields even on the riskiest cov-lite junk bonds; corporate profit margins at the upper extreme of the range; record valuations of stocks
Junk bonds are enjoying the most extraordinary bubble ever.
As long as cheap new money is available to service or pay off old debt, defaults are rare.
This is the new theme: we see the problems, they’re everywhere. We track them, we chart them, we understand them, we know they’re huge, and denying or rationalizing them would make us look silly, though plenty of folks are still denying and rationalizing them. There will be a reset of some sort, these crazy valuations will unravel, corporate profit margins will revert to the mean by overshooting it, defaults will cascade through the system, trillions will go up in smoke.
The hypothesis of this blog has always been that imported Third World deflation would swamp the Developed World and force a latent convergence of living standards. 2008 of course appeared to be that "Minsky" Moment, but then Bernankenstein and the League of Extraordinary banksters went dumpster diving and rescued Globalization from self-implosion. Or did they?
Wage Deflation + Cost of Living Inflation = Middle Class Annihilation
Post-2008, Third World deflation indeed flooded the developed world, but recognizing that, Central Banksters counter-flooded the world with new money to "offset" the impacts of deflation. However, all they did was rescue the wealthy from deflation, the Middle Class has been buried under ever-growing personal debt, ever-growing sovereign debt, and higher costs of living.
Middle Class Purchasing Power has been Obliterated
We've been so focused on that "one-time" adjustment that apparently the smoke and mirrors occurring in the meantime obfuscated the fact that the convergence of living standards has been happening all along. Third World Deflation has manifested itself in stagnant wages, a broken job market, foodstamps, and child poverty, meanwhile inflation has manifested in the cost of everything else, most notably: food, energy, education, medical - only those things that are essential to survival. This convergence in real-time has all been "covered up" by an ever-rising Dow, ongoing debt accumulation, bogus unemployment statistics, foodstamps, extended unemployment benefits, minimal welfare, and most importantly - abject denialism on the part of the lamestream media and wealthiest individuals.
Convergence is Well Underway
The thesis remains the same: the Third World was never bootstrapped to our standard of living so the developed world is right now being lowered to their standard of living, in real time. The fact that it's occurring behind a smoke screen of lies and bullshit doesn't make it any less real.
Disposable Humanity Since 2000, GDP grew 35% while median household income fell 10%
Therefore, the inevitable one-time final "event" will merely bring the acknowledgement to the self-absorbed elite, that their Ponzi party is over. The ultra-wealthy won't stop partying until their magic show reaches surprise finale
Most economists and commentators are clueless about the corporate job killing machine
Having worked at 10 major corporations in 24 years, mostly as an IT Consultant, I've had the dubious pleasure of witnessing how the sausage gets made. Back in the 1990s we were told that IT was the career of the future, with "limitless opportunities". When the DotCom bubble collapsed, the future got truncated to yesterday. All of those "future IT jobs" went straight to India. Now this subsequent decade and a half roller coaster has been a continual game of musical chairs wherein each boom and bust cycle leaves fewer and fewer good jobs, not just in IT of course, but in every field. And it's the corporate errand boys who stay who get to lay off their colleagues and pretend that they won't be the next ones on the firing line. The water mark of corporate stooges keeps rising higher and higher. Soon they will put everyone out of work, including themselves, it's merely a matter of time. Musical Chairs Visualized: Corporate Profits versus GDP
And because one company's costs are another company's revenues, the inevitable stagnation of revenue could only be made up for with Central Bank provided leverage, on an ever-growing scale. In lieu of revenue growth, companies turned to "leveraged recapitalizations" to pay for special dividends and stock buybacks. Central Banks have become the handmaidens to the obliteration of the Middle Class.
Meanwhile, it's an established fact that small businesses create more jobs than large corporations on an aggregate basis. So Central Banks have been subsidizing major corporations which have been decimating small businesses using their scale advantages, cost of capital advantages and Third World outsourcing advantages. What's my point? My point is that these limitless growth marketing shells known as multinational corporations are net takers from a balanced economy. They only thrive in an imbalanced economy up until such time as they have fully cannibalized it and left behind the empty husk. They contribute to supply but are net extractors of demand. Corporate colonization is the virus feeding on the carcass of the world economy. In the real world there is no such thing as limitless growth. Something to think about for next time. If there is one. P.S. People ask me - what would it take to make me "bullish"? Collapse. And nothing short of it.
"For years, the holiday shopping season started the day after Thanksgiving on "Black Friday," but retailers hungry for sales are pushing the frenzy up one day. Walmart, Kmart, Sears, Macy's, JC Penney, Target, Kohl's, Best Buy, Staples, Sports Authority, Toys R Us, Big Lots, RadioShack, Office Max, Office Depot [A mere] Three states - Massachusetts, Maine and Rhode Island -- ban stores from opening on the holiday. At this rate, Thanksgiving will soon be better known as Black Thursday."
WTF? Who will teach them "Exceptionalism" and spread McDonald's and Starbucks to every corner of the Earth?
"We can't borrow our grandchildren into oblivion anymore"
WTF? How will we fund tax cuts for RomneyBots and $500 million dollar fighter planes?
"We can't bailout the Wall Street casino anymore"
WTF? Who is going to buy my GoPro shares?
"We can't print money anymore"
WTF? Who is going to buy my GoPro shares?
"We can't buy oil from terrorist sponsoring nations anymore and, we can't inject fracking waste water into clean aquifers anymore"
WTF? I need to drive my daughter to soccer practice in my Suburban 3 times per week 50 miles roundtrip
"We can't trade openly with Third World nations anymore"
WTF? What about Black Thursday at Walmart? Who will make my iGadgets?
"We can't liquidate jobs and entire industries for a few quarters of extra profits anymore" WTF? Who's going to tell the Billunaires they're about to become Millunaires? "We can't feed our kids Frankenfood anymore" WTF? Premature death by diabesity is "consumer choice"
Voters give the lies 100% approval and the liars 8% approval This was never about intelligence, it was solely about honesty
There is nothing to show for $33 trillion of "stimulus", except more debt
First came the forced Wall Street bailout which paid out the GreedBots on their bets against the Middle Class. Next came the past six years' Shock Doctrine strategy by which the exact same people, via their government sock puppet lackeys, extracted an additional $33+ trillion into offshore bank accounts, leaving the Middle Class holding the bag. All between episodes of the Kardashians.
2008 was the wake up call that the most corrupt people on the planet are running a global Ponzi scheme
Wealthy Americans are oblivious to income inequality
The wealthy believe that Middle Class Americans are "different" than Europeans, and will passively accept ever-increasing poverty into the indefinite future
If this continues, it will lead to bloody revolution
Trickle Down (Voodoo/Supply Side/Reaganomics) is an abject failure
Businesses want rich customers and low cost employees
Higher wages for the middle class would lead to increased demand, more profits and a better economy for everyone
Despite being one of the few wealthy commentators who understands the gravity of the situation, he still can't admit that as long as businesses can source from the Third World for cents on the dollar, then higher wages will lead directly to unemployment. And 0% interest rates make the "robot" mass automation economy a very likely reality (leading to sovereign bankruptcy), as the cost of capital is zero and the cost of higher wages is unemployment. Central Banks in conjunction with industrial arbitrage due to failed trade policy, are impoverishing the middle class.
Imported Third World Poverty has driven the marginal cost of labour AND capital to zero, with the *only* downside being the obliteration of the Middle Class It gets better (or actually a lot worse). Today, an apologist for the status quo refuted Hanauer's above concerns with some hardcore denialistic logic:
War is Spectacle "The war is not meant to be won, it is meant to be continuous. Hierarchical society is only possible on the basis of poverty and ignorance. ... The war is waged by the ruling group against its own subjects and its object is not the victory, but to keep the very structure of society intact." [George Orwell, "1984"] Archaeology Update for: XI.XVIII.MMXIV "Keynesian Stimulus" NeoCon-style Here we see an example of contemporary comedy highlighting the pervasive cynicism during the late Industrial Collapse Era: via ZH: U.S. Foreign Policy aka. "Create your own customers"
Here we see misallocation of capital to the least productive part of society: General Dynamics: New All Time High Today "Markets can remain irrational a lot longer than most people can remain solvent"
"But, people can remain irrational a lot longer than any market can remain solvent" Here we see widely ignored reality "hiding" in broad daylight...
California which is experiencing its worst drought in state history has turned to water extraction from underground aquifers on a massive scale in order to offset the loss of above ground reservoirs. None of this of course is a result of man-made Global Warming because the Energy Industry and its copious stooges have denied any and all connection between climate change and carbon.
Enter Fracking, which we all know is the Energy Industry's equivalent of using Crack Cocaine to solve drug dependency. It turns out that the Fracking Industry has been pumping waste water back into California's drinking water aquifers - up to 3 billion gallons worth. And we can be sure that this isn't happening in any other state, since we've yet to hear about it from the lamestream media which is still ensuring that all window washers are safe on tall buildings.
Denialism is a disease like Alzheimer's - it affects people's ability to think about anyone except themselves more than :15 minutes into the fucking future. Denialists are not just in denial about Global Warming, they are in denial about everything pertaining to the future of this planet beyond the next quarter's profits.
It's a disease caused by Corporate Colonization: the taking over of the planet by lobotomized drones on behalf of Corporate interests to enrich a few thousand billionaires. Government is just along for the ride.
"Fortunately, fracking waste water isn't bad for the environment" The Truth is LiberalTM
Because 22,000 children dying every single day, of poverty, isn't news. It's just the usual apocalypse we've come to expect. Seven 9/11s every single day in the Third World. C'est la vie. The Society of the Spectacle: "All that once was directly lived has become mere representation. The decline of being into having, and having into merely appearing. The historical moment at which the commodity completes its colonization of social life."
A Society of voyeurs who would rather watch life than live it. Even life itself has been discarded.
Global debt has never been higher in human history 40% higher than 2008 The Greed Feedback Loop Gamblers use borrowed money to buy financial assets, drive up the prices, and then claim that higher prices indicate reduced risk...!? Financial Stress Self-Delusion Index The Subprime Era is circled in Blue. No, they never learn.
Priced for Perfection Year-end Bonus This will work out fine as long as no one sells. Ever.
All it takes to make people believe in the impossible is self-interest and enough time
Post-2008, the exact same psychopaths responsible for that disaster had an easy job convincing the dunced masses that 0% interest rates would succeed where 1% had failed catastrophically. After all, this decaying corpse of an old age home, we euphemistically call "society", was curled up in the fetal position and willing to guzzle any amount of Kool-Aid from their economic cult leaders running amok.
Globalization is the biggest lie in human history
Given enough time and self-interest, human beings will believe literally anything. How else did we end up with infinite conflicting versions of mankind's dispensation from God's reality - aka. religion. The more people who believe something, the more ludicrous and impossible the lie. The belief that the Globalized ponzi economy could ever raise the standard of living for the poorest people on this planet, is by far the biggest and most grotesque lie ever sold. Ironically, it's having the exact opposite effect, of bankrupting people who've bet their entire future on indefinite exploitation.
We live in the nuclear age, now blundering straight into anarchy, so one way or "the other" human beings are going to be weaned off of their fascination with fairy tales told by serial liars. Central Banks gave people a tighter noose to wrap around their necks, and they took it with gusto:
Wall Street plans to dump 42 IPOs by year end (or until Skynet breaks)
Half of Wall Street wants the market to levitate ever-higher, so they can fatten their year-end bonus. The other half of Wall Street wants to dump as much junk into the market as possible, so they can fatten their year-end bonus. We already know that Etraders always lose in the long-term, but who will win in the next 6 weeks?
Post 9-11, the Fed provided 1% "Patriot Loans" which funded the housing bubble and subprime. When that all collapsed like a cheap tent, global policy-makers then turned to 0% interest rates to fund Sovereign Ponzi Bonds, *Special* Dividends, stock buybacks, ghost cities in China, Vancouver crack shacks, quarter billion dollar London penthouses and a fake Dow.
And everyone is back onboard with the program like nothing ever happened: