The fact that full Ponzi recognition has not yet occurred, is overwhelming proof that the vast majority of people on this planet - or should I say those with decent income - are totally bought in to and sold out to the Globalized Ponzi Scheme. This confirms the axiom that it's easier to fool a million people, than it is to fool ten, especially when they are stewed in junk food and junk culture. Maintaining this grand delusion is the job of commercial media outlets which have wholeheartedly embraced the sugar coated infotainment format to spoon feed a pablum hungry aging population desperate to believe that the status quo is infinitely sustainable. As I pointed out recently, this willful ignorance by the average citizen and all of our policy leaders, comes at a very steep cost at this late juncture. Had we woken up to the inherent unsustainability of this model years ago, we could have taken action to mitigate the effects of its collapse by adopting a more sustainable model. In choosing the path of pure self-delusion and wishful thinking we have found lethal new ways to ever-inflate the credit bubble, ensuring a massively destructive outcome...
Doing the Solo Wrap-Around (Bent over, head straight up own ass)
At this time, it's literally impossible to ignore the warning signs flashing across this impending catastrophe. I constantly point to debt levels and debt growth as a primary indicator. Lack of sustainable action out of Washington or Europe are secondary indicators. The most obvious indicator and one that historians in retrospect will not believe could be ignored, is the Federal Reserve's ludicrously desperate attempt to pump trillions of dollars back into the money supply to keep it from collapsing. Picture a balloon full of air that springs a leak and then someone trying to reinflate the balloon while the leak grows in size. It's impossible. Not only is it impossible it's desperately futile - We can't build a sustainable economy by increasing the supply of money. Anyone who believes we can at this juncture, is making their own conscious choice to ignore reality.
At this time, it's literally impossible to ignore the warning signs flashing across this impending catastrophe. I constantly point to debt levels and debt growth as a primary indicator. Lack of sustainable action out of Washington or Europe are secondary indicators. The most obvious indicator and one that historians in retrospect will not believe could be ignored, is the Federal Reserve's ludicrously desperate attempt to pump trillions of dollars back into the money supply to keep it from collapsing. Picture a balloon full of air that springs a leak and then someone trying to reinflate the balloon while the leak grows in size. It's impossible. Not only is it impossible it's desperately futile - We can't build a sustainable economy by increasing the supply of money. Anyone who believes we can at this juncture, is making their own conscious choice to ignore reality.
A Morally Devoid Society, Bankrupting Its Own Grandchildren
The bigger picture perspective is that this entire past three decades of "growth" was all premised on a massive lie. When globalization really took off in the 70's and especially in the 1980's, it was under the proposition that "they" the Third World would make the cheap things and we would make the high value products. That was the big lie we were told by the "expert" economists of the day. It was all premised on Ricardian Comparative Advantage, which is the biggest delusion of modern economics - the idea that in a static growth economy, one country taking over production from another country won't lead to unemployment. That all resources "freed up" in the first country will be deployed to higher value added industries. Back then, it was easy to believe this fantasy. After all, the Japanese at the time, were making a lot of cheap junk (i.e. in the 1970s). Of course, it didn't take long for the Japanese to make the Ricardian-based assumption look stupid, because by the late 1980's they were making all sorts of high end products and their cars were (and still are) of vastly superior quality. Those of us over 40 will recall the angst and hand-wringing in the late '80s and early '90s speculating that the Japanese economic model was inherently superior to the U.S. model. Of course, when Japan fell into its 20+ year deflationary funk, apologists for the American model claimed victory. Clearly that Pyrrhic victory only gave the American Ponzi model an extra 20 years of sudden death overtime. At this juncture, now the Koreans make the best TVs and smartphones (granted, if you include iPhoney5, that's still China) and the Chinese make pretty much everything else. Meanwhile, Americans have been "freed up" to make Cappuccinos. Just yesterday it was announced that the U.S. is now ranked fifth worldwide in manufacturing, and steadily losing competitiveness. So now we need to ask ourselves the key question - if these Third World countries are making the high end products and we have switched to a low productivity service-based economy, why are Americans still making far higher wages than workers in those other countries ? This is the fundamental question for our time. The answer is clearly due to the various market interventions and distortions that make up "Extend and Pretend" - secular fiscal deficits, secular trade deficits, household debt, decreased savings rate, and inflation of the money supply, all of which are inherently unsustainable and unstable.
Opt In or Opt Out (We Are All In By Default)
Which gets me to to the major point of this blog post. Quite some time ago, we as a society could have woken up to the fact that those other countries want the same lifestyle we enjoy and that they are willing to work harder than we are to gain it. At that point, we reached a crucial fork in the road to face reality and retool the economy to become more competitive. Alternatively we could choose to put our collective head in the sand and attempt to borrow our way to prosperity. Clearly we chose the latter path. In doing so, instead of choosing a slow and controlled adjustment in our standard of living to converge with that of the Third World, we instead chose to propagate Extend and Pretend policies into oblivion, therefore we implicitly chose the option of a very abrupt one time adjustment in our standard of living which one can imagine won't be a good time had by all. So at this late juncture it's now up to each of us individually to decide whether or not to take personal measures (reduce market risk, reduce debt, increase savings) to mitigate the impacts of this inevitable lifestyle "adjustment". Bear in mind, however, per the title of this post, we are now in the very late stages of the "Slowly at first" phase, which will give way to the "all at once" acceleration phase.
p.s. From a very short-term market standpoint, every site and commentator I read or listened to on Friday was unanimous in saying we are deeply "oversold" and due for a bounce. That's all well and good, just keep in mind that historically all crashes have occurred when the market was already "oversold" i.e. it's that all important "surprise" effect that occurs when everyone is on the same side of the boat thinking that the market is "oversold" and hence safe to own - that causes the panic.
