One More Hit Off the Crack Pipe

Just. One. More.

Denninger seems to write the same blog post about every three days. I commend him on this. It’s hard to write about the same topic over and over and remain relevant and interesting. Yet, despite that difficulty, he pulls it off.

See his latest here.

When debt grows faster than output on a compound basis the two curves inevitably run away from one another and must always result in a collapse.

This is not a political issue, it is not a left or right issue, it is a function of simple mathematics.  Those who were IPOing these businesses in the 1990s and who were building and selling houses into the ramp in the 2000s were simply believing that they would unload the bag on you before the leverage pyramid in that particular part of the economy fell over.

That’s all the last thirty years was folks, and now we’re desperately scrambling on a global basis to find just one more sucker.  To obtain just one more hit off the crack pipe.  To stave off death just one more day and draw one more breath.

The days of the indebted nation state as the central power are coming to a close. Simple as that. How do you adjust, adapt, and overcome to not only survive, but thrive in the new societal construct?

It’s all ball bearings now days

See Zerohedge link.

While the key market moving event from last Friday may have been Bernanke’s Jackson Hole speech which merely left the door open to future QE episodes, the most important event from an economic standpoint was the first GDP revision Q2, which dropped from preliminary 1.3% to a sub stall speed, in real terms, 1.0%. What is just as important is that as the following chart from Bloomberg demonstrates, the YoY change in real GDP, which is now at 1.5%, is a slam dunk indicator of recession: “Since 1948, every time the four-quarter change has fallen below 2 percent, the economy has entered a recession. It’s hard to argue against an indicator with such a long history of accuracy.” Bernanke agreed that “growth has for the most part been at rates insufficient to achieve sustained reductions in unemployment.”

Couple of things here:

  1. The numbers as a predictor hold true. Do the math, look at the history.
  2. A continuing trend of little to no manufacturing volume, zero employment creation because of capital constraints, and high unemployment – likely 18 to 20%.

Another day, another disappointing real-time indicator declines AND is below consensus estimates.  In fact, every manufacturing index for the month of August has missed expectations and signaled further weakness.  As Bernanke, the IMF, and most Wall St. economists cling to the notion of a second-half acceleration, the rest of us are witnessing a deterioration in global growth which is unprecedented.

I honestly do not know if this is the big collapse, or just another western doldrum. From some angles it looks as if the nation state archetype has finally run its course. From others, it does look like Japan in 1991. As in, we are headed for a lost decade of stagflation’esque low interest rates with increasing dotgov intervention in the markets.

I would argue (haphazardly) that western nation states don’t typically follow that kind of pattern. Western nation states tend to go on large, industrially funded killing sprees across the world for fun & profit.

Vox Day has pointed out something that for whatever reason I have ignored for years and years, and that is this:

The second world war destroyed the manufacturing base of almost every industrialized nation on the earth except America. That is what led to our prosperity throughout this century.

There are those out there that pontificate that China is waiting in the wings to take our place. I disagree as that is not a nation state as we would traditionally think of it. China is more of a conglomeration of factions that kinda, sorta have a common goal. Until they unite and better suppress some of the internal issues facing them as a tribe, they will never be a player on the world’s stage. A mercantilist bubble cannot sustain itself as a global power.

Whatever crisis is coming (it is almost upon us) will be epic.

As shown, the current three month change is the largest in the history of the model.  In other words, the collapse in real-time economic data (such as ISM, German IFO, etc.) over the past three months is the sharpest of the last two decades for which data is available.

Got popcorn?

Your Tinfoil May Not be Too Tight

Slippery slopes abound, and yes Virginia, this can happen here.

Think not of grand conpiracies, but of angles of motivation.

If you are a dotgov quisling with a cushy job dispensing justice from your G-Ride at will, would you really support controls and funding cuts to see that lifestyle go by the wayside? Especially while your neighbors in the private sector flail and have trouble feeding their kids?

Random thoughts on a Tuesday morning…

Brutality

Wow, that kinda sucked. Wonder what today will bring?

I will ask this question again:

How do you use the new environment variables to your advantage so that you can thrive?

Keep your heads up and your wits about you today. Yesterday afternoon I found myself completely unproductive because I was sitting on the edge of my chair surfing through the doom & gloom. Kind of a wild ride from about 2 to 4.

I fear that today will bring much of the same. It has not been since 9/2001 that I have been this distracted by level of crazy.

 

More To Support The Road Ahead

And I’m not talking about the Bill Gates book either. How about that for a throwback?

Anyway, I digress…

See Mr. Denninger’s latest.

Here’s the real money quote:

Well, fine.  Just be aware of one thing: The next big collapse in the markets leaves The Fed and government with no ammunition to counteract it – rates are at zero and QE didn’t work except to crank up the price of food and energy.

How do you prepare to weather the first bits of this storm? What does your local support system look like when the price of diesel is at $10 a gallon on a long timeline? How do you support and feed your family (& tribe) when the local Publix/Kroger/Albertsons isn’t getting regular shipments of Little Debbies?

They don’t call the Big Die Off for nothing.

You must weather the storm first and come out the other side with a plan for yourself and your tribe.

Your energy costs are going up. Your food costs are going up. Your standard of living is going to change radically – more so than in the last century. Your freedoms will be curtailed even further.

Think! Think about how you survive and then later on, after things have shifted, THRIVE.

Always Something Left to Remind Me

Boom!

Go read Vox Day’s book and you will have a better understanding of where we actually are. Karl is awesome, but Vox puts these tickers into a broader perspective and allows you to see what is going on from a macro perspective.

There are rough (very rough) waters ahead.

The theater happening on the national and international level is just a show. The following will happen:

  • The US’s credit rating will take a hit.
  • Interest rates and credit availability will rise and contract respectively.
  • You will lose ever more of your personal liberties.
  • The dollar’s value will fall even further, reducing your purchasing power.
  • Commodities like food, energy, and fuel will rise in price accordingly.

Times are going to get a lot worse and the mask of the last four years will be lifted in the short term.

Readers, 2012 and beyond will look nothing like the last 30 years…

More On Resiliance

Comments on this post are pretty good. I like the idea of AUS or France, but family ties would not allow the Matson house to do something that drastic.

And while this is true:

A six month stockpile of canned/freeze dried goods and two dozen boxes of ammo won’t get you through it.  You need a real game plan.

Being prepared enough to thrive during and post the initial system shock will go a long way. Not being hungry or completely defenseless will help you think clearly. I propose that you have 12 months + worth of supplies. It is cheap, an excellent investment against all kinds of systemic vulnerabilities, and will give you the ability to render direct aid to those around you, further building your tribe in times of crisis.

The ability to defend the above seems only logical.

Didn’t Expect it to Take This Long

I spoke about this earlier in the week.

Karl posted about it (more eloquently & elaborately than i) this morning. I felt it worthy another comment.

I am very surprised (really, i am) that this has only now come to a head. Macro forces being what they are, I estimated that around December of 2010 you would start seeing reports of this from the state controlled media. While this Christmas season was abysmal, it got the spin treatment in force.

Perhaps this is a calculated effort? /me puts on tinfoil hat.

Perhaps it’s time to watch the other hand?

 

What Did You Expect to Happen?

Americans using credit for basic necessities.

The Matson household is not a big proponent of credit. We tend to save, buy used, and whenever possible, save the difference. We are not however, militantly opposed to credit. Sometimes it can be an asset, though like a loaded firearm or chainsaw, you need to be wary, careful, and suspect of it at all times.

Keeping outstanding consumer debt is kinda stupid, but again, sometimes positive cash flow winds out over a giant lump sum purchase on depreciating assets. This is my opinion won long and hard by the school of hard knocks and life’s little lessons – I seriously do not welcome yours. YMMV…

The info in the above article does not surprise me in the slightest. The crack addict will do anything to maintain his supply despite not having resources to get it. There is always a way.

The new poor in America have DVD/Bluray, big screens, notebooks, and various other accoutrements that even western Europeans find excessive in their upper classes. Like and “Democracy” we are decadent beyond any reasonable scope and are about to wake up to a reality that is harsh by the past two generations standards.