Topic: The Economy is Going to Implode

[Libertas]

Debt Freeze 15 weeks and counting.

And our own Greek isle ready to sink - http://hosted.ap.org/dynamic/stories/C/CB_PUERTO_RICO_ECONOMY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-06-30-16-16-43

Gringo taxpayer bailout time, eh?

[Weisshaupt]

I guess I should be happy the MSM said anything

True, our budget deficit this year will be lower than it has been, just $486 billion compared to $1.4 trillion as recently as 2009. But this is just a temporary respite. Within the next couple of years the deficit will start to rise again. By 2025, we will again face trillion-dollar shortfalls.

And even a $486 billion deficit adds to our ever growing debt. Our national debt currently approaches $18.2 trillion, roughly 101% of GDP. That’s right. We owe more than the value of all the goods and services produced in this country every year. It is as if your credit-card bills exceeded your entire pay check.That’s not quite as bad as Greece, of course, whose debt exceeds 177% of their GDP. But it is worse than countries like France or Spain.
nd give us time! Like Greece, the driving force behind our debt is the growing cost of entitlement programs for health care and retirement. If one includes future unfunded liabilities for Social Security and Medicare, our real debt exceeds $90 trillion. That’s more than five times our GDP. Greece is still in worse shape — their unfunded liabilities top 875% of GDP — but we’re gaining.

At the heart of Greece’s problems lies a government grown too big, too intrusive, and too expensive. The Greek government spent nearly half of the country’s GDP last year (49.3%), and that actually represents a decline from the 51.8% it averaged since 2006. The Greek’s may complain about austerity, but they’ve hardly practiced it.

Our government is far smaller than Greece’s today. Federal spending is just 20.5% of GDP. But, according to the Congressional Budget Office’s alternative fiscal scenario, that could rise to almost 34% by mid-century. Factoring in state and local government spending, which already accounts for roughly 14.4% of GDP, total government expenditure in the US could reach 48% to 50% in 2050, roughly Greek levels.

But of course don't mention the fact that the changed how GDP was calculated, and that there is really no reason to believe govt deficit numbers. After all - the government hasn't borrowed a dime in months now.  Now add in the economic drag and cost of Obama care, the fact that its driving only part time employment--  the fact that the Dollar is being marginalized....

Of course, the United States has some advantages that the Greeks lack. Greece owes a significant share of its debt to foreign governments, while the majority of American debt is domestically held. The United States also faces low borrowing rates, while Greece has been effectively shut out of capital markets. The US debt may be bad, but in many ways we are the fastest horse in the glue factory. As long as the euro remains in crisis, we will continue to be able to borrow money at absurdly low interest rates.

Yeah, we have the reserve currency. We can just devalue it by printing it. Yea!  And we borrow money at low rates not because the Euro is doing poorly, but because the Bureaucrats at the Fed set the rate so low that saving is now impossible and Treasury Bonds now have negative real returns.  But everything is awesome and there is still time to avert this train wreck.

No sorry, its over folks. And not in 40 years, but within 10.  The rest of the world is not going to continue blindly using increasing devalued dollars for trade.. and they are certainly not going to continue holding them in reserve.

The danger for the United States is that spending on entitlements will surge in the coming decades, which means that, absent reform, they take over the economy. Investors would respond to the weaker economic outlook by demanding higher returns in order to continue investing in US bonds, which would further drive up interest costs, making our problems even worse. And, of course, unlike Greece, there aren’t other countries or organizations available to bail us out.

Um, hey moron. The Fed is already Bailing us out. Remember too big to fail? That is why the interest rates are low. That is why they are loaning huge sums of  money to banks so they can ensure the Bond auctions do not fail....that is why the banks are paying huge percentages of the money they borrow back as "taxes" - its all just a huge money laundering scheme now to make the fed printing look legit instead of the criminal counterfeiting it really is.  We are already in the death spiral-- Yes Greece is in worse shape but 101%  or so is the tipping point as is shown in "This time is different" and the unfunded liabilities are massive and 90 trillion is on the low side.. and this article doesn't even touch on the trillions of derivatives that have effectively spread the bad debt to every country - they are all dominos now waiting to fall because of it.

[Libertas]

http://www.cnbc.com/id/102806720]Trading in all symbols was halted on the New York Stock Exchange floor Wednesday due to an apparent technical issue.

Technical issue!   

"The NYSE said all open orders would be canceled, according to Reuters."

Mission accomplished.  Time bought to reset the roulette wheel...

Can't have good cronies take a hit now can we?!

[Pandora]

Yah, that's what I thought as well, "technical issues?"  Unh hunh.

[Glock32]

LOL, yeah.  Right.  China's stock is teetering on what has been called 1929, and now the NYSE just happens to have a "glitch" that just happens to result in no trading.  Sure thing.

Another site I go to always refers to the stock exchange as the Casino.  It fits.

[Weisshaupt]

Ann Barnhardt's take

“There is no bid. There. Is. No. Bid.”

So the Chinese stock market is collapsing and has gone no-bid and is being shut down, prices on the street in Greece are already being quoted in Drachma, and now the NYSE has gone no bid, and it is being blamed on a tech glitch.  Riiiiiight.  United Airlines, the Wall Street Journal and ZeroHedge all had simultaneous “tech glitches” too.

Ask not for whom the Black Swan honks.  It honks for thee.

Here is the full version of my Economics Presentation from ARSH 2012, and I have it keyed to begin at the 2:09:40 mark, where I discussed how the markets would go no bid when the black swan event happened, and thus the urgency of getting out before that happened.

If you didn’t get out of the markets I simply cannot feel sorry for you.

[richb]

It will be something like this that brings down the financial house of cards.   It will be something really small,  that no one has thought of,  not even us.   It will be the spark that brings it all down.   

Things will be running like they have been, and one day that something happens,  it will just stop working.  Just like that. 

They will try and try to get it back,  but it will never work again.   Not for one second.  That spark,  where ever it is,  will make it impossible to go back.

I think it will take everyone out.  The financials of the world are just too tied together to have anyone escape.   Every government money system on the planet is systematically corrupt so I don't see anyone really be able to take advantage of it.   Not even China.   One will collapse after another,  in a matter of days. 

Its going to be a mess. 

It could also be complete avoided with real reforms,  but the elite think they know better,  that they can control it.   It will be uncontrolable.

[Libertas]

There is no regrowth without a purging fire...

And a fire of sufficient ferocity will not discriminate between crony or serf...

[Libertas]

Casino action sucks...

http://www.zerohedge.com/news/2015-07-12/gmos-montier-shifts-50-cash-sees-3-hellish-scenarios-markets

...yeah, way to go Captain Obvious.

The only "no sh*t?" Jimmy quote you need - "It’s very hard to find value".

Yeah. 

But, not that holding fiat will get you anywhere...still better than entering the casino...

Oh, and in more good news...

Retail/Wholesale collapse.

http://www.zerohedge.com/news/2015-07-12/america-we-have-problem

Did I say "good" news?  Purely an Obamian perspective...

[Libertas]

Food for thought...



http://www.usatoday.com/story/news/nation/2015/07/20/collapsed--10-bridge-given-rating-just-last-year/30428515/

...our economy keeps getting "A" ratings too..

 

[Pandora]

This is turd-world, banana-republic stuff.  Welcome to Amerikka.

[Libertas]

Greenspan barks at the moon...

Yeah, Congressweasels are going to cut spending...



..."Plunder & Deceit" is funded by grotesquely wasting national wealth for generations to come.

Timely tome, that.



Perhaps somebody will be left to rebuild a sensible society and take measures that prog scum is dealt harshly with at the outset...

[Glock32]

Food for thought...



http://www.usatoday.com/story/news/nation/2015/07/20/collapsed--10-bridge-given-rating-just-last-year/30428515/

...our economy keeps getting "A" ratings too..

 

Good thing we spent nearly a trillion dollars on that "stimulus" that was supposed to be used on infrastructure.  Banana republic indeed.

[Libertas]

Can't be a good banana republic without massive corruption and fraud.

 

Come to think of it...can't be a good banana republic without a junta or coup either!

 

[Libertas]

http://hosted.ap.org/dynamic/stories/C/CB_PUERTO_RICO_DEBT_CRISIS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-08-03-19-21-43

Puerto Rico goes tits up...

Looks like the perfect Obama state to me...

[Weisshaupt]

http://ourfiniteworld.com/2015/08/10/how-economic-growth-fails/

an interesting article (via zh) that basically explains, among other things why wage stagnation is inevitable.

4. The over-arching problem as we reach diminishing returns is that workers become less and less efficient at producing desired end products.

When an economy starts hitting diminishing returns, we find that the economy produces goods less and less efficiently. It takes more worker-hours and more resources of various kinds (for example, fracking sand and deep sea drilling equipment) to produce a barrel of oil, causing the cost of producing a barrel of oil to rise. Usually this trend is expressed as a rising cost of oil production:

Looked at a different way, the number of barrels of oil produced per worker starts decreasing (Figure 7). It is as if the worker is becoming less efficient. His wages should be reduced, based on his new lack of productivity

Because value is based on what people need or want. Not on how hard you work.  Welcome to reality.  And he has an interesting discussion of energy that is very much in line with my own thoughts on the subject:

The amount a person can produce reflects a combination of his own labor and the resource he has to work with. If energy products are available, they act like energy slaves. With their assistance, humans can do things that they could not do otherwise–move goods long distances, quickly; operate machines (including computers) that can help a worker do tasks better and more quickly; and communicate long distance by means of the telephone or Internet. While technology plays a major role in making energy products useful, the ultimate benefit comes from the energy products themselves.

We have been using a rising amount of energy products since our hunter-gatherer days (Figure 10). In fact, the use of energy products seems to distinguish humans from other animals....

In fact, Figure 11 seems to indicate that changes in energy consumption precede changes in world economic growth, strongly suggesting that growth in energy consumption is instrumental in raising economic growth. The recent steep drop in energy consumption suggests that the world is approaching another major recession, but this has not yet been recognized in international data.

and in the end it comes back to debt

Once debt defaults begin, commodity prices are likely to drop even further. Such a drop is likely to lead to even more loan defaults, especially by commodity producers (such as oil companies) and commodity exporters. Prices of equities can be expected to drop as well, because the problems of the debt system will affect businesses of all kinds..

Which really sucks because the real estate and preps you buy now will be worth less in real terms later -- especially when you consider  the drop in demand that will occur during a war/die-off.  This will affect both gold and silver as well - especially silver as 90%  of its current cost can be attributed to actual industrial demand.  Of course, if actually adopted as money, the money demand may far off set the loss of industrial demand. Or it may not. 

In the end "value" will still be the same. What can you  (or the thing you own)  do to get others what  they want and need. If you can't produce something others want in the new situation - then you are screwed.  However this contraction is likely to result in a full societal breakdown and loss of the rule of law - possibly even on the local level.  The good news is the lowered demand for fuel will probably make such fuel "cheap" again-- especially in the ares of the country were fossil fuels are extracted and refined.  The lack of rule of law may even make the starting of new refineries easier ( and the lack of regulation/law will probably also increase the local pollution as well. But then that is what the libtards voted for. ) But it will be like going back to square one again. Hopefulyl without the people who put us there.

[Libertas]

Yeah, interesting times ahead.

It's odd too, that while not unprecedented, the fact that the US as so far (beyond all those people culled from the work force and those still working who've had their real earnings and future earnings plundered) has avoided any major shocks, despite the best efforts of Team Obama, crony capitalists and sundry other neerdowells...but it certainly feels less stable and more contrived.  I think the PTBs know the wheels are about the fly off the cart which is now speeding toward a high cliff with no bridge.  I think the PBoC devaluation is a not too subtle jab at the American kabuki economy...a dare to the PPT and cronies here to take the bait.  I think people are off their rocker if they actually think there will be a last-man-standing here with anything but a handful of flaming sh*t in their hands.

[Weisshaupt]

Its funny how ZH'ers always talk past each other... Look at this  ZH article


and this comment...

DebtTheNewEquity


The majority of the debts are written in USD, when you have debt you are short that currency.  We have a lot of USD debt and a lot of overpriced assets backing that debt.  When those assets start going down in value those short the dollar clambor to get some to service their debt and the currency rises.  Thus it always has been, and thus shall ever be.

Yes the first  part of this ride is  "deflationary"  because at first people TRY to pay their debts - like this guy says- the dollars become "more valuable" as people try to scramble to pay...  THEN it becomes obvious that there aren't enough of those cute little units and the Government steps in to devalue them by making more -   Which then creates a flight for security to the next domino currency that appears stronger (and in fact driving it stronger) , with the Currency of last resort still being the dollar.
This guy is completely ignoring the obvious next step - the govt bailout and money printing  to prevent its own banks from failing and its economy from collapsing.

Yes the money printing is always in response to a deflationary pressure where there aren't enough units to pay debts... Its also an admission that the debts won't be paid at the value those units previously held.  Money devaluation is an implicit partial default on the debt - without ever having to sit at a table across from your creditors to talk about haircuts. But as the dollar gets stronger this is an excellent time to be taking those dollar reserves and buying real things with them...and this recent devaluation from China is probably  about doing just that ---  they may even pump it a few more times. If China/Russia/BRICS whatever have enough gold and other commodities to create "better" money than what the US prints on "faith"  then it really doesn't matter what happens to the Yuan.  The Blue or Red dollars get issued and then China issues real(er) money based on things and not (soley) on promises of the labor of future generations. This, along with an established international trading  system secures the adoption of the new currency  and the dollar is no longer worth the ink its printed with.

It just amazes me how some people just stop their thinking at a point which is comfortable to them. It will be deflationary. The money in my bank account goes up in value. All is well.  You know,  till it isn't, and the spending power of that money begins to decrease.   Its a balancing act, but one the Fed has to loose eventually--and they will loose it by printing -- because its the only tool they have. The only question is if it will be controlled and gradual or sudden.


.

[Libertas]

Its funny how ZH'ers always talk past each other... Look at this  ZH article


and this comment...

DebtTheNewEquity


The majority of the debts are written in USD, when you have debt you are short that currency.  We have a lot of USD debt and a lot of overpriced assets backing that debt.  When those assets start going down in value those short the dollar clambor to get some to service their debt and the currency rises.  Thus it always has been, and thus shall ever be.

Yes the first  part of this ride is  "deflationary"  because at first people TRY to pay their debts - like this guy says- the dollars become "more valuable" as people try to scramble to pay...  THEN it becomes obvious that there aren't enough of those cute little units and the Government steps in to devalue them by making more -   Which then creates a flight for security to the next domino currency that appears stronger (and in fact driving it stronger) , with the Currency of last resort still being the dollar.
This guy is completely ignoring the obvious next step - the govt bailout and money printing  to prevent its own banks from failing and its economy from collapsing.

Yes the money printing is always in response to a deflationary pressure where there aren't enough units to pay debts... Its also an admission that the debts won't be paid at the value those units previously held.  Money devaluation is an implicit partial default on the debt - without ever having to sit at a table across from your creditors to talk about haircuts. But as the dollar gets stronger this is an excellent time to be taking those dollar reserves and buying real things with them...and this recent devaluation from China is probably  about doing just that ---  they may even pump it a few more times. If China/Russia/BRICS whatever have enough gold and other commodities to create "better" money than what the US prints on "faith"  then it really doesn't matter what happens to the Yuan.  The Blue or Red dollars get issued and then China issues real(er) money based on things and not (soley) on promises of the labor of future generations. This, along with an established international trading  system secures the adoption of the new currency  and the dollar is no longer worth the ink its printed with.

It just amazes me how some people just stop their thinking at a point which is comfortable to them. It will be deflationary. The money in my bank account goes up in value. All is well.  You know,  till it isn't, and the spending power of that money begins to decrease.   Its a balancing act, but one the Fed has to loose eventually--and they will loose it by printing -- because its the only tool they have. The only question is if it will be controlled and gradual or sudden.


.

BAM!  Nailed it!

And I don't doubt the ChiCom's will devalue some more, they are going to force the Fed to take the bait, and yes the question is only one of controlled, gradual or sudden...with controlled the least likely option.  It will look gradual until it becomes sudden.

[Libertas]

OK, so with everything that is going on...this September/October period was looking a little spotty to me anyway...and now the interesting Power of "7" seems to be in play this year.  Seriously, can we have more ominous indicators?  We made the "Death Cross" twice recently and there are all the other charts of doom we've seen updated and growing worse, the idiots in government keep spending like drunken dictators, the Fed is boxed in (todays FOMC minutes are likely to be yet another iteration in artful dodging!) and when those asshats meet again on 9/14 there could be blood letting in that gathering and coming out of that the Yellen conference on 9/17 is likely to be either one of the most pathetic performances on record or one of the briefest.  On the next day (9/18) we have the next "Triple witching Hour".  It could be entertaining, that last hour of trading.  If there is trading.

Anyway, it might be a good idea if you have plans to finish, to finish them soon.

ETA - Wow, is today a busy day...plenty of stuff to build upon going into September!

This will have repurcussions.

Obama job/wealth destruction continues unabated.

Non-viable in the long-run risky digital crypto-currencies are not immune from monkeyhammering.

Equity turmoil...

http://www.zerohedge.com/news/2015-08-19/nasdaq-drops-below-5000-maginot-line-sp-under-2100-dow-under-18000

http://www.zerohedge.com/news/2015-08-19/sp-500-breaks-below-key-technical-support

http://www.zerohedge.com/news/2015-08-19/stocks-are-tanking-dow-down-200pts-near-mondays-lows

US fiat dropping and PMs climbing and the ChiCom's pump more Yuan while St Louis Fed says all this QE was a big fricken mistake...and we haven't got to the rate hike yet!

Oh, yeah...this is High Kabuki theater boys and girls!