The nation’s economy is not growing. There is now a near-complete disconnect between the map and the territory. The debt-deflation monster has barely begun to tear apart the economy and already the BEA has devolved into a bizarre Orwellian MinEcon. This was inevitable, given the way Keynesians turned “animal spirits”, or as they are now known, “consumer confidence” into a fetish that articulated a concept of lying one’s way into prosperity.
No doubt future generations will look on the period from 1950 to 2010 as an age lost to deception, where growth was believed to be the result of debt and deceit, national prosperity the result of outsourcing jobs, and industrial growth through free trade. The observable fact is that there is another word for a “service economy” and that is “an unproductive economy with high unemployment”.
Once you realize that there is no spoon, you can go on and prosper.
In my opinion, the epicenter of the “next wave” of the financial collapse is going to be in Europe. But that does not mean that the United States is going to be okay. The reality is that the United States never recovered from the last recession and there are already a lot of signs that we are getting ready to enter another major recession. A major financial collapse in Europe would just accelerate our plunge into a new economic crisis.
My personal opinion is that we have an imminent collapse ahead of us in the Euro Zone. There will be some kind of marginal stick save to keep them from tumbling over the cliff, and maybe, if they are lucky, one after that to prolong the high. After that, it will be nosedive to the canyon floor.
This will allow for some kind of US holdout, but inevitably, the schemes will stop working.
The truth is, we are in a global depression. We have essentially been in this since 2008, and the last few years of upward trending has been future demand pulled into the present by massive state based subsidies and inflationary spending. As this unwinds, we will see what could have been less suckage in 2008 had we as a nation let the financial and banking industries go through a bankruptcy and reorganization.
We will at some point have to suffer the consequences of our actions.
I believe the tipping point to this is Europe. I believe that tipping point event is only a short time in the future.
Either the YesMen have infiltrated Italy’s biggest, and most undercapitalied, bank, or the stress of constant, repeated lying and prevarication has finally gotten to the very people who know their livelihoods hang by a thread, and the second the great ponzi is unwound their jobs, careers, and entire way of life will be gone.
Europe’s common currency is virtually dead. The euro’s doomed situation. The only open question now is, that European governments and the European Central Bank’s desperate rearguard action even number of days to keep the spirit in Greece. For the moment, when Athens is declared bankrupt, a “10 magnitude” earthquake will shake Europe, which will be the overture to a whole new era in the life of the old continent.
Indeed, Greece is not only bankruptcy will mean that the Greek government securities holders did not get back their money invested, but also to the interior of the state will not be able to meet its debts.
From the moment only Greek teachers, doctors, police, army, ministry and local government employees will not receive a salary, just as the seniors did not expect nyugdíjukra good time. The ATM is emptied in minutes. The local banks are stuck holding government securities, an immediate liquidity crisis, devaluation of the Greek banking system in total collapse. Thus the savings of depositors is totally wasted because the Greek government deposit insurance or guarantee was now living. Bankkártyájukról since then, not only at home will not be able to withdraw some money, but the world’s only automatájából not. The benzinkutakból run out of fuel, as well as food from the grocery store. Greece is practically a full stop at least a decade of life and dramatic drop in poverty in the country as a whole.
The problem is that in this case, the disaster can not stop at the Greek border, but great speed and momentum tovagy?r?z?dik then the entire euro zone, Europe, and finally shake the world. Channel for the spread of infection, of course, such a scenario would also back the banking system. Indeed, the international banks in Greece suffered hundreds of billions of euros t?kevesztésükön too soon be forced to lock hitelkereteit other banks, which will have to do with a country where – according to investors’ expectations – the Greek thunderbolt strike again.
And when the banks no longer trust each other, not to lend to each other, the international financial markets stop. This in turn means that all financial institutions left alone with clients.
Yes, I know that Apple has 10% of its enterprise value in cash. I know the firm has no debt. But I also know that the company spends like crazy on R&D and sell-through is everything to a firm that is playing in this space. The problem with these sorts of firms is that when you’re running on afterburners it’s nearly impossible to pull back without losing control and crashing, simply because you’ve built a culture and corporate environment that is filled with “true believers” operating at a corporate level where everything has gone right — and thus you all believe it will continue to.
Amazon’s primary “lever” is the ability to play around the edge of the sales tax system. This gives it an instant 6% (on average) price advantage over everyone else, more than enough to offset the shipping costs (which you pay in any event; whether shipped directly to you or to a retail store, you still pay for it in the product price somehow.)
But that sales tax loophole is going to close. Over the next few years states will find a way, as the revenue shaft is getting out of hand for them.
Like Karl said, not a “crash coming tomorrow” kind of thing, but a future speculation. Tax loopholes such as the one that powers Amazon close. Unless there is some kind of majick lobby by Bezos, this is bound to happen as tax revenues further contract at the state level. The Apple thing is also simple. Markets dry up for stuff like this, though I do see the consumer public in many cases giving up on other necessities before their techno-baubles.
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.
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?