Monday, March 13, 2017

Aging Empires: Paper Tigers And Obligatory Lying

2008 was the wake up call that the consumption oriented lifestyle is a dead end for anyone welded to it...

Globalization has systematically weakened every nation on the planet with the possible exception of Cuba. No country can now afford the heavy mantle of global hegemon. The consumption oriented lifestyle was arbitraged vis-a-vis the Third World to support the stock market. The developing nations could never bootstrap themselves up to a middle class lifestyle, due to an unlimited glut of global cheap labour. Meanwhile, the developed nations sold their middle class for corporate dividends, creating a chasmic gap in demand, papered over with non-amortizing debt. An aging society having preference for return on capital over return on labour.

All of the above chicanery was aided and abetted by corporate-assisted euthanasia - junk food, junk culture, and fake news. A society of self-medicated corporate robots dutifully carrying out economic fratricide. Until it's their turn to go under the bus to make the quarter. 

Hegemonics 101: Debt Is "GDP"
The only reason that the U.S. can fake reflation and monetary tightening right now is because the rest of the world is doing the opposite. The world's capital flows to the U.S., financing the 1% GDP growth that is 2.9% borrowed money. A sleight of hand projecting the delusion of reflation for a stoned Idiocracy desperate to believe anything other than the truth. Leave aside that the economic fundamentals deteriorate continuously in the background as the economy can't sustain higher borrowing costs eight years into a debt binge. Inbound liquidity is hiding insolvency. Bernie Madoff is wondering why he's the one in jail. 

Self-imploding fake reflation visualized:
U.S. industrial production (24 month rate of change) with short-term interest rates

Don't try this at home...

ZH: Fed Rate Hike Is Death Knell For Reflation Trade
Oil with interest rates (log scale):

S&P 500 earnings yield with interest rates

"No blind man saw it coming"

Wall Street is monetizing global collapse again. Shocker.

ZH: Wall Street's Next Big Short: Imploding Shopping Malls

Raising rates at the end of the cycle. Bad idea visualized:

The Ponzi cycle is in its latest stage prior to final collapse - the bidding up of asset values solely for the sake of momentum, without any regard to long-term viability or solvency. All good until gamblers inevitably realize that the last fool has been found. 

And then the hot money goes home. In another time zone.

The key takeaway is that all of the world's would-be contenders for role of the next great hegemon are playing the same game right now by ignoring their collapsing domestic economies. They are all paper tigers, lacking the economic and demographic capacity to extend themselves beyond their own shores.

That discovery is instantaneous and binary. The interim denial and self-medication will only make the final realization that much more jarring and seemingly "abrupt" for anyone with their head up their ass for eight years straight.

Mother Nature will prevail. With heavy assistance from corporate-assisted euthanasia. There IS a God, and she's not happy with the hairless monkey.