Globalization was supposed to merge the standard of living of developed and developing nations. And it did. Just in the exact opposite direction that we were told it would...
The signature of a banana republic is the surfeit of zero sum schemes and frauds. Likewise, this Roman Circus has now devolved into 100% confidence game, with the right leader for the job. Somehow he's convinced them that rising interest rates, absconded tax cuts, chasmic budget deficits, trade wars, election fraud, and EM Implosion, constitute the best news in two decades.
He's good, I give him that much:
"Four percent GDP growth, with four percent borrowed money. Why didn't anyone try this sooner?"
Arthur Laffer, the Godfather of Supply Side Voodoo Economics, happily admits that cheap labor exploitation is now pivotal to the survival, I mean "prosperity", of America's workforce. What began as an unhealthy addiction, is now a dependency:
The signature of a banana republic is the surfeit of zero sum schemes and frauds. Likewise, this Roman Circus has now devolved into 100% confidence game, with the right leader for the job. Somehow he's convinced them that rising interest rates, absconded tax cuts, chasmic budget deficits, trade wars, election fraud, and EM Implosion, constitute the best news in two decades.
He's good, I give him that much:
"Four percent GDP growth, with four percent borrowed money. Why didn't anyone try this sooner?"
Arthur Laffer, the Godfather of Supply Side Voodoo Economics, happily admits that cheap labor exploitation is now pivotal to the survival, I mean "prosperity", of America's workforce. What began as an unhealthy addiction, is now a dependency:
“China is a huge plus to the U.S. because without China there is no Walmart, and without Walmart there is no middle class or lower class prosperity in America.”
The inconvenient truth of course is the exact opposite of what the Sith Lord would have us believe: Due to free trade with China, and the Walmartification of the U.S. economy, there is no longer a middle class nor such a thing as lower class "prosperity" in America.
"America" has become synonymous with always taking the easiest way out. What was once an industrial powerhouse built upon hardwork and long-term investment, is now an economy predicated upon expedient gimmicks, inter-generational theft, Third World exploitation, and outright fraud.
To wit, ten years this month since Lehman, and what was learned from 2008?
How to trust Wall Street all over again?
Borrowing our way out of a debt crisis?
Money printing: the secret to effortless wealth?
Rolling back post-2008 banking rules and de-regulating corruption?
Rolling back post-2008 banking rules and de-regulating corruption?
Taking from the working poor and giving to the rich?
This era wasn't as much a failure of modern economic theory, as it was a failure to adhere to basic economic principles. Most fundamentally, the asinine separation of supply and demand, which is the basis of Globalization. Supply in one locale, demand in another. An inherently imbalanced arrangement brokered by non-amortizing debt.
It took almost forty years for Supply Siders to finally acknowledge that there is no such thing as "free trade". Leave aside the millions of lost jobs, and thousands of lost factories, the right is just now realizing that intellectual property aka. "know how" is the last line of defense. Larry Kudlow is tasked with closing the barn door now that his "free trade" ilk let all of the horses out.
But that is by no means the full extent of their economic illiteracy. Just as "free trade" was once believed to be free, the delusion of the day is that borrowed tax cuts are "free money". The assiduously ignored principle operating against them is the "crowding out" effect, whereby government deficit borrowing has the effect of crowding out other borrowers. The U.S. tax cut has crowded out Emerging Markets via the dollar rally and the fact that foreign central banks must tighten alongside the Fed to defend their currencies.
"Argentina's currency meltdown this past week returned the focus to the pain in emerging markets, which is likely to continue as long as trade wars persist and the dollar continues to firm."
"Crowding out" is by no means limited to foreign borrowers. Borrowers in the U.S. have been crowded out as well, as we learn via the weekly housing report.
The industry mouthpiece cited in the article invents all manner of excuses, but sadly, facts don't lie:
From a gambling standpoint, a few things have been ignored in the casino as well. First and foremost the U.S. is not "decoupled" from global risk. Secondly, the investment cycle is cyclical, therefore it can't be extended indefinitely using borrowed money. Granted, I say this amid the ubiquitous refrain: "Why did nobody try this sooner?". Third and most importantly, rising bond yields are a sign that it's time to rotate out of stocks back to bonds. Not a sign to short bonds and over-allocate to stocks.
This past week marked a new all time closing high in the Nasdaq and S&P 500. A high not confirmed by the rest of the world. Not confirmed by the majority of U.S. sectors. Not confirmed by the majority of U.S. stocks. And not confirmed by the economically-sensitive Dow.
So I decided to determine when the Dow last diverged so much from the S&P 500.
It turns out it was exactly ten years ago:
It was due to the fact that speculation in Tech/growth was rampant:
Speculation this year has been massively accelerated by front-running stock buybacks. Apple's 2018 stock buyback alone equates to 20% of total S&P 500 buybacks in 2017. Yes, you read that right.
Front-running visualized:
Melt-up has also been assisted by manic short-covering in Retail caused by late-cycle inflation readings feeding back as corporate "revenue"
Front-running visualized:
Melt-up has also been assisted by manic short-covering in Retail caused by late-cycle inflation readings feeding back as corporate "revenue"
These are some dumb fuckers, I'll give you that much...
In other words, it was Ponzi reflation
Of the 'Conomy
And stocks
