Friday, March 30, 2012

The Illusion Formerly-Known-As-The-Economy

One chart to rule them all
This chart (below) of U.S. Federal Government debt says it all.  

It took 229 years, from the founding of the country to 2005, for U.S. Federal debt to reach the $7.75 trillion mark (which by coincidence is roughly half of GDP).  In just the 7 years since that date, the debt has doubled again to $15.5 trillion (as of this writing): 

And as you can see above, the red extrapolation into the future shows that the debt will be triple the 2005 level within just 4 more years.  So the debt accumulation ratio is 229:7:4 [single:double: triple] i.e. the debt accumulation rate is still accelerating and yet the economists tell us that the economy is recovering !  Politicians at the behest of their rent seeking special interest groups are borrowing the country into oblivion.  

The chart below shows long-term debt history (extrapolated to 2016), which as you can see is going parabolic:

I realize that some Economists use "net" debt figures v.s. the "gross" debt figures that I used.  Because they assume that money a country owes itself doesn't count.  This is why (to date), no one has gone Minsky over the fact that Japanese debt exceeds 200% of GDP, by far the highest in the world - because economists rationalize that most of the debt is held by the Japanese.  Imagine what it will feel like to be a Japanese pensioner and find out that you just lost your life savings because the global bond market decided one day enough is enough.  At that point, bullshit rationalizations about "just owing oneself" will seem pretty stupid.  And the economists will all say, "oh, I guess we were wrong"...

Thursday, March 29, 2012

That Minsky Moment

As my depiction of the Idiocracy would predict, today's thought dealers (politicians, economists, media infotainers) have an infantile obsession with avoiding the truth and reality.  So we ask, what would it take to get our policy-makers to face reality and begin to craft some realistic long-term solutions to these economic problems?

Waiting for the Minsky Moment
We have what I would call a Wile E. Coyote economy that has run off the cliff and is suspended (temporarily) only by Central Bank liquidity programs.  All we are waiting for now is the Minsky Moment.

Sunday, March 25, 2012

Fools and their Money

[Updated: March 25th] I had to update this post, because I just read Barry Ritholtz's comments in Barron's and I almost shit a brick.  He says that the Bears need to "put up or shut up" i.e. the onus is now on us bears to prove why this rally could end.  Excuse me?  Are we living in some sort of parallel universe here?  All you have to do is look at the first chart below to see that the market is still lower than it was 13 years ago.

Tuesday, March 20, 2012

Idiocracy Mortgages Its Own Grandchildren

This just in, the Idiocracy just mortgaged its grandchildren to pay for (the past) four years of Extend and Pretend.

And now for the price tag:

Sunday, March 18, 2012

Deflation #Winning !

(Sorry couldn't resist the Charlie Sheen reference.  Now, he would be the perfect official spokesman of the Idiocracy).

As you know, I like charts a lot, because they are objective, and therefore preclude me from for example having to watch CNBC with the sound turned on, and other excruciating experiences.  In my last post, I mentioned some key divergences in the markets that bear watching closely.  As always, I am looking for data points that either confirm or refute the deflationary crash thesis.  Right now, stocks are pointing strongly toward a reflation of the economy.  However, more than any other market, the stock market is the key (short-term) barometer of social mood, therefore it's volatile, emotional and prone to manipulation.  Other markets are less speculative and therefore can serve as reliable indicators of what is really going on in the economy.

Sunday, March 4, 2012

Dispatches from the Idiocracy

Anyone assimilating the facts from this blog or any other source of reality has to find some way to reconcile society's pervasive complacency in the face of economic annihilation.  The only way this is possible is to dissect and understand the zeitgeist of the time - or what I call The Idiocracy.