Home » Posts tagged 'Wall Street' (Page 2)
Tag Archives: Wall Street
The report from RealtyTrac last week proves beyond the shadow of a doubt the supposed housing market recovery is a complete and utter fraud. The corporate mainstream media did their usual spin job on the report by focusing on the fact foreclosure starts in 2013 were the lowest since 2007. Focusing on this meaningless fact (because the Too Big To Trust Wall Street Criminal Banks have delayed foreclosure starts as part of their conspiracy to keep prices rising) is supposed to convince the willfully ignorant masses the housing market is back to normal. It’s always the best time to buy!!!
The talking heads reading their teleprompter propaganda machines failed to mention that distressed sales (short sales & foreclosure sales) rose to a three year high of 16.2% of all U.S. residential sales, up from 14.5% in 2012. The economy has been supposedly advancing for over four years and sales of distressed homes are at 16.2% and rising. The bubble headed bimbos on CNBC don’t find it worthwhile to mention that prior to 2007 the normal percentage of distressed home sales was less than 3%. Yeah, we’re back to normal alright. We are five years into a supposed economic recovery and distressed home sales account for 1 out of 6 all home sales and is still 500% higher than normal.
The distressed sales aren’t even close to the biggest distortion of this housing market. The RealtyTrac report reveals that all-cash purchases accounted for 42% of all U.S. residential sales in December, up from 38% in November, and up from 18% in December 2012. Does that sound like a trend of normalization? There were five states where all-cash transactions accounted for more than 50% of sales in December – Florida (62.5%), Wisconsin (59.8%), Alabama (55.7%), South Carolina (51.3%), and Georgia (51.3%). In the pre-crisis days before 2008, all-cash sales NEVER accounted for more than 10% of all home sales. NEVER. This is all being driven by hot Wall Street money, aided and abetted by Bernanke, Yellen and the rest of the Fed fiat heroine dealers.
The fact that Wall Street is running this housing show is borne out by mortgage applications languishing at 1997 levels, down 65% from the 2005 highs. Real people in the real world need a mortgage to buy a house. If mortgage applications are near 16 year lows, how could home prices be ascending as if there is a frenzy of demand? Besides enriching the financial class, the contrived elevation of home prices and the QE induced mortgage rate increase has driven housing affordability into the ground. First time home buyers account for a record low percentage of 27%. In a normal non-manipulated market, first time home buyers account for 40% of home purchases.
Price increases that rival the peak insanity of 2005 have been manufactured by Wall Street shysters and the Federal Reserve commissars. Doctor Housing Bubble sums up the absurdity of this housing market quite well.
The all-cash segment of buyers has typically been a tiny portion of the overall sales pool. The fact that so many sales are occurring off the typical radar suggests that the Fed’s easy money eco-system has created a ravenous hunger with investors to buy up real estate. Why? The rentier class is chasing yields in every nook and cranny of the economy. This helps to explain why we have such a twisted system where home ownership is declining yet prices are soaring. What do we expect when nearly half of sales are going to investors? The all-cash locusts flood is still ravaging the housing market.
The Case-Shiller Index has shown price surges over the last two years that exceed the Fed induced bubble years of 2001 through 2006. Does that make sense, when new homes sales are at levels seen during recessions over the last 50 years, and down 70% from the 2005 highs? Even with this Fed/Wall Street induced levitation, existing home sales are at 1999 levels and down 30% from the 2005 highs. So how and why have national home prices skyrocketed by 14% in 2013 after a 9% rise in 2012? Why are the former bubble markets of Las Vegas, Los Angeles, San Diego, San Francisco and Phoenix seeing 17% to 27% one year price increases? How could the bankrupt paradise of Detroit see a 17.3% increase in prices in one year? In a normal free market where individuals buy houses from other individuals, this does not happen. Over the long term, home prices rise at the rate of inflation. According to the government drones at the BLS, inflation has risen by 3.6% over the last two years. Looks like we have a slight disconnect.
This entire contrived episode has been designed to lure dupes back into the market, artificially inflate the insolvent balance sheets of the Too Big To Trust banks, enrich the feudal overlords who have easy preferred access to the Federal Reserve easy money, and provide the propaganda peddling legacy media with a recovery storyline to flog to the willingly ignorant public. The masses desperately want a feel good story they can believe. The ruling class has a thorough understanding of Edward Bernays’ propaganda techniques.
“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of.”
Ben Bernanke increased his balance sheet by $3.2 trillion (450%) since 2008, and it had to go somewhere. We know it didn’t trickle down to the 99%. It was placed in the firm clutches of the .1% billionaire club. Bernanke sold his QE schemes as methods to benefit Main Street Americans, when his true purpose was to benefit Wall Street crooks. 30 year mortgage rates were 4.25% before QE2. 30 year mortgage rates were 3.5% before QE3. Today they stand at 4.5%. QE has not benefited average Americans. They are getting 0% on their savings, mortgage rates are higher, and their real household income has fallen and continues to fall.
But you’ll be happy to know banking profits are at all-time highs, Blackrock and the rest of the Wall Street Fed front running crowd have made a killing in the buy and rent ruse, and record bonuses are being doled out to the men who have wrecked our financial system in their gluttonous plundering of the once prosperous nation. Their felonious machinations have added zero value to society, while impoverishing a wide swath of America. Bernanke, Yellen and their owners have used their control of the currency, interest rates, and regulatory agencies to create the widest wealth disparity between the haves and have-nots in world history. Their depraved actions on behalf of the .1% will mean blood.
Just as Greenspan’s easy money policies of the early 2000’s created a housing bubble, inspiring low IQ wannabes to play flip that house, Bernanke’s mal-investment inducing QEternity has lured the get rich quick crowd back into the flipping business. The re-propagation of Flip that House shows on cable is like a rerun of the pre-bubble bursting frenzy in 2005. RealtyTrac’s recent report details the disturbing lemming like trend among greedy institutions and dullard brother-in-laws across the land.
- 156,862 single family home flips — where a home is purchased and subsequently sold again within six months — in 2013, up 16% from 2012 and up 114% from 2011.
- Homes flipped in 2013 accounted for 4.6% of all U.S. single family home sales during the year, up from 4.2% in 2012 and up from 2.6% in 2011
The easy profits just keep flowing when the Fed provides the easy money. What could possibly go wrong? Home prices never fall. A brilliant Ivy League economist said so in 2005. The easy profits have been reaped by the early players. Wall Street hedge funds don’t really want to be landlords. Flippers need to make a quick buck or their creditors pull the plug. Home prices peaked in mid-2013. They have begun to fall. The 35% increase in mortgage rates has removed the punchbowl from the party. Anyone who claims housing will improve in 2014 is either talking their book, owns a boatload of vacant rental properties, teaches at Princeton, or gets paid to peddle the Wall Street propaganda on CNBC.
Reality will reassert itself in 2014, with lemmings, flippers, and hedgies getting slaughtered as the housing market comes back to earth with a thud. The continued tapering by the Fed will remove the marginal dollars used by Wall Street to fund this housing Ponzi. The Wall Street lemmings all follow the same MBA created financial models. They will all attempt to exit the market simultaneously when their models all say sell. If the economy improves, interest rates will rise and kill the housing market. If the economy tanks, the stock market will plunge, creating fear and killing the housing market. Once it becomes clear that prices have begun to fall, the flippers will panic and start dumping, exacerbating the price declines. This scenario never grows old.
Real household income continues to fall and nearly 25% of all households with a mortgage are still underwater. Young people are saddled with $1 trillion of government peddled student loan debt and will not be buying homes in the foreseeable future. Dodd-Frank rules will result in fewer people qualifying for mortgages. Mortgage insurance is increasing. Obamacare premium increases are sucking the life out of potential middle class home buyers. Retailers have begun firing thousands. The financial class had a good run. They were able to re-inflate the bubble for two years, but the third year won’t be a charm. In a normal housing market 85% of home sales would be between individuals using a mortgage, 10% would be all cash transactions, less than 5% of sales would be distressed, and 40% would be first time buyers. In this warped market only 40% of home sales are between individuals using a mortgage, 42% are all cash transactions, 16% are distressed sales, 5% are flipped, and only 27% are first time buyers. The return to normalcy will be painful for shysters, gamblers, believers, paid off economists, Larry Yun, and CNBC bimbos.
Monopoly power in all its forms–in our system, crony capitalism and its partner, the neofeudal state–enables theft on a systemic scale.
If a monopoly forces its customers to pay more for low-quality goods and services because they have no choice, how is that not theft?
If the Mafia raises the price of “protection” on small businesses (another case of monopoly and no other choice), how is that extortion not theft?
When a local government raises junk fees to fund its cronies’ excessive (i.e. non-market-rate) salaries and pensions, how is that monopoly power to extort more money from those with no other choice any different from Mafia extortion/theft?
If a pharmaceutical company extends a patent on a costly medication by changing the dosage slightly, how is that not theft via regulatory capture? If a government contractor charges the Pentagon $1,000 for a hammer (all those overhead charges, tsk-tsk–lobbying corrupt politicos costs a lot, you know), how is that not theft of taxpayers’ money?
When the Federal Reserve drops the yield on savings to near-zero to funnel all that stolen wealth to its cronies on Wall Street, how is that not theft?
Monopoly power in all its forms–in our system, crony capitalism and its partner, the neofeudal state–enables theft on a systemic scale. When crony capitalism and the state are essentially one system, the propaganda organs of the state and mainstream corporate media combine to persuade the stripmined populace that their theft is not theft, it’s “capitalism and democracy at work.” This is known as The Big Lie. What we have is systemic theft, predation and exploitation.
Calling things what they really are would upset the apple cart of systemic exploitation.Let’s Call Things What They Really Are in 2014 (January 15, 2014)
Correspondent Jeff W. explains that all this systemic theft is inherently deflationary:
All forms of stealing are deflationary. Stealing cuts into the average citizen’s disposable income, it reduces how much he can buy. Because there are now fewer dollars chasing more goods, deflation is the inevitable result. Stealing is actually worse than a zero-sum game. Society loses more than the thief takes. In addition to losses from theft, a victim often has to spend more on security measures. Theft also has a chilling effect on capital investment and commerce in general.Consider how many different kinds of theft the American citizen is exposed to: street crime, sickcare industry ripoffs, legal system ripoffs including huge fines for traffic violations, high taxes, interest earnings on his savings that amount to ZIRP, a corporatist state determined to suppress his wages by any means necessary, unending victimization at the hands of predators enabled and protected by the state. If he owns a small business, he has to deal with a corrupt regulatory state, higher taxes, and an enlarged menagerie of predators. Today there are thieves everywhere.
So one big deflation trend is theft. As theft increases, deflation increases. As society collapses and thieves start roaming freely all over the landscape, a deflationary collapse can be expected—absent a determined and persistent campaign of money printing.
Exhibit A for the case that stealing is deflationary is the Dark Ages.Stealing was rampant in the Dark Ages. How did people react to that? By “going medieval.” They wore clothing that made them look poor so as to avoid attracting the attention of thieves. Their dwellings looked poor for the same reason. If they had cash, they would bury it in the ground; no one could be trusted. Unless one was an insider who could get protection from the state, no one’s property was safe.
Capital investments were much too risky, and out of the question. What were the price characteristics of the Dark Ages? Wages were low. Real estate valuations low. Prices of manufactured items (such as they were) were low. Only food was expensive. People can cut back on clothing and shelter, but there is a limit to how much they can cut back on food. In the Dark Ages, people really hunkered down and just focused on basic survival.
Exhibit B is Detroit. Detroit for many years has been a high crime area, i.e. it had lots of thieves running around. What are the price characteristics of Detroit? Wages low. Real estate valuations low. There is very little manufacturing being done inside the city limits today because of high property taxes and crime. There is also very little capital investment for the same reasons.
There is a vicious circle at work here. 1) Thieves control the government; 2) Which results in increased stealing; 3) Deflation results from that; 4) Which gives the thieves a reason to print money and give it to themselves; 5) Which enriches the thieves some more; 6) Which gives them more resources they can use to consolidate their control of the government; 7) Back to step 1.
Many people seem confused about how there could be deflation in the paper (or digital) money era. If they would recognize how much stealing is going on, and if they understood the powerful deflationary effect of stealing, then perhaps they would not be so surprised to observe price decreases, particularly in wages and the prices of manufactured products.
Thank you, Jeff, for explaining the causal connection between systemic theft and deflation. To all those terrified of deflation (for example, central bankers and their cronies holding trillions of dollars in phantom assets and illusory collateral), the solution is obvious: get rid of systemic theft. But since those terrified of deflation are at the top of the monopoly-power thievery pyramid, that is asking the impossible: for the thieves to relinquish their power to steal.
Venezuela Devalues Bolivar By Another 44% For Some, Still 600% Higher Than Black Market Due To 50% Inflation | Zero Hedge
Less than a year ago, Venezuela shocked the world when it launched the “first nuke” in the ongoing currency wars (which despite having dropped off the front pages, have certainly not ended), by devaluing its currency, the Bolivar from 4.30 to the USD to 6.30, in the process crushing the profits of many companies that operate(d) in the TP-deprived socialist paradise (which as we reported earlier is about to experience food shortages).
Earlier today, Venezuela Oil Minister and Economy Vice President Rafael Ramirez announced on state television that the country just devalued the official Bolivar exchange rate again by another whopping 45%, for some.
Specifically, Venezuelans traveling abroad and airlines will use Sicad FX rate which was last 11.36 bolivars per dollar. Those spared from the most recent devaluation, for now, are students abroad, pensioners, retirees, consular and diplomatic services who will continue using 6.3 bolivars/USD rate. This follows comparable steps taken in late December, when the Bolivar was devalued by the same amount for any non-residents and tourists entering the nation, as the nation unrolled its centrally-planned currency regime in which the Bolivar is offered through a dollar-auction system called Sicad.
The WSJ reported at the time:
Venezuela earlier this year launched a dollar-auction system called Sicad where some importers and tourists could request hard currency at a rate weaker than the official exchange rate of 6.3 bolívares. The government never formally disclosed the exchange rate used in Sicad but local analysts and companies that have participated in the auctions say the rate is close to 12 bolívares per dollar.
Venezuela will increase usage of Sicad in 2014 and will deliver $5 billion into the local economy through the system, according to Mr. Ramirez.
Still, Wall Street analysts widely expect Venezuela to pull off a full-scale devaluation of its currency in the near-term, a move that would help the government shore up a its finances by capturing more in local-currency terms when it converts dollars earned through oil sales.
Indeed, the reason why today’s move is largely meaningless and purely optical, is because there is still an 85% differential between the official rate, and what one can get for a dollar on the black market.Which as the chart below shows is substantially higher, and at last check was 78.38 Bolivars per dollar. Said otherwise, the brand new official exchange rate, which will soon be implemented for everyone, is still 590% higher than the real clearing price of the currency on the black market.
Curious why the currency is crashing so fast? Perhaps ask the 50% (and rising) annual inflation in the socialist paradise.
WSJ chimes in again:
“This new tourist rate is not as compelling as the black market, but it does represent a step in the right direction,” Russ Dallen, a partner at Caracas Capital Markets, said in a note to clients.
“For my colleagues on Wall Street that come down to Venezuela, now supposedly when you use your U.S. credit cards for expenses, you will get billed at this 11.3 rate, not the 6.3 rate,” Mr. Dallen added.
Sadly, for a government seeking to refill its coffers with much needed dollars in order to avoid what soon may be starvation as food distributors don’t have dollars with which to pay their vendors, it will have to be far more generous in what it offers those who have the greenback, instead of continuing to encourage the use of the black market, where the money is simply hoarded by enterprising members of the population.
Oh, and for those confused, the reason why the Caracas stock exchange is the best performing stock market in the world in the past year…
… The answer is simple: follow the gray line showing the true “value” of the Bolivar.
“I was part of that strange race of people aptly described as spending their lives doing things they detest, to make money they don’t want, to buy things they don’t need, to impress people they don’t like.” ― Emile Gauvreau
If ever a chart provided unequivocal proof the economic recovery storyline is a fraud, the one below is the smoking gun. November and December retail sales account for 20% to 40% of annual retail sales for most retailers. The number of visits to retail stores has plummeted by 50% since 2010. Please note this was during a supposed economic recovery. Also note consumer spending accounts for 70% of GDP. Also note credit card debt outstanding is 7% lower than its level in 2010 and 16% below its peak in 2008. Retailers like J.C. Penney, Best Buy, Sears, Radio Shack and Barnes & Noble continue to report appalling sales and profit results, along with listings of store closings. Even the heavyweights like Wal-Mart and Target continue to report negative comp store sales. How can the government and mainstream media be reporting an economic recovery when the industry that accounts for 70% of GDP is in free fall? The answer is that 99% of America has not had an economic recovery. Only Bernanke’s 1% owner class have benefited from his QE/ZIRP induced stock market levitation.
The entire economic recovery storyline is a sham built upon easy money funneled by the Fed to the Too Big To Trust Wall Street banks so they can use their HFT supercomputers to drive the stock market higher, buy up the millions of homes they foreclosed upon to artificially drive up home prices, and generate profits through rigging commodity, currency, and bond markets, while reducing loan loss reserves because they are free to value their toxic assets at anything they please – compliments of the spineless nerds at the FASB. GDP has been artificially propped up by the Federal government through the magic of EBT cards, SSDI for the depressed and downtrodden, never ending extensions of unemployment benefits, billions in student loans to University of Phoenix prodigies, and subprime auto loans to deadbeats from the Government Motors financing arm – Ally Financial (85% owned by you the taxpayer). The country is being kept afloat on an ocean of debt and delusional belief in the power of central bankers to steer this ship through a sea of icebergs just below the surface.
The absolute collapse in retail visitor counts is the warning siren that this country is about to collide with the reality Americans have run out of time, money, jobs, and illusions. The most amazingly delusional aspect to the chart above is retailers continued to add 44 million square feet in 2013 to the almost 15 billion existing square feet of retail space in the U.S. That is approximately 47 square feet of retail space for every person in America. Retail CEOs are not the brightest bulbs in the sale bin, as exhibited by the CEO of Target and his gross malfeasance in protecting his customers’ personal financial information. Of course, the 44 million square feet added in 2013 is down 85% from the annual increases from 2000 through 2008. The exponential growth model, built upon a never ending flow of consumer credit and an endless supply of cheap fuel, has reached its limit of growth. The titans of Wall Street and their puppets in Washington D.C. have wrung every drop of faux wealth from the dying middle class. There are nothing left but withering carcasses and bleached bones.
The impact of this retail death spiral will be vast and far reaching. A few factoids will help you understand the coming calamity:
- There are approximately 109,500 shopping centers in the United States ranging in size from the small convenience centers to the large super-regional malls.
- There are in excess of 1 million retail establishments in the United States occupying 15 billion square feet of space and generating over $4.4 trillion of annual sales. This includes 8,700 department stores, 160,000 clothing & accessory stores, and 8,600 game stores.
- U.S. shopping-center retail sales total more than $2.26 trillion, accounting for over half of all retail sales.
- The U.S. shopping-center industry directly employed over 12 million people in 2010 and indirectly generated another 5.6 million jobs in support industries. Collectively, the industry accounted for 12.7% of total U.S. employment.
- Total retail employment in 2012 totaled 14.9 million, lower than the 15.1 million employed in 2002.
- For every 100 individuals directly employed at a U.S. regional shopping center, an additional 20 to 30 jobs are supported in the community due to multiplier effects.
The collapse in foot traffic to the 109,500 shopping centers that crisscross our suburban sprawl paradise of plenty is irreversible. No amount of marketing propaganda, 50% off sales, or hot new iGadgets is going to spur a dramatic turnaround. Quarter after quarter there will be more announcements of store closings. Macys just announced the closing of 5 stores and firing of 2,500 retail workers. JC Penney just announced the closing of 33 stores and firing of 2,000 retail workers. Announcements are imminent from Sears, Radio Shack and a slew of other retailers who are beginning to see the writing on the wall. The vacancy rate will be rising in strip malls, power malls and regional malls, with the largest growing sector being ghost malls. Before long it will appear that SPACE AVAILABLE is the fastest growing retailer in America.
The reason this death spiral cannot be reversed is simply a matter of arithmetic and demographics. While arrogant hubristic retail CEOs of public big box mega-retailers added 2.7 billion retail square feet to our already over saturated market, real median household income flat lined. The advancement in retail spending was attributable solely to the $1.1 trillion increase (68%) in consumer debt and the trillion dollars of home equity extracted from castles in the sky, that later crashed down to earth. Once the Wall Street created fraud collapsed and the waves of delusion subsided, retailers have been revealed to be swimming naked. Their relentless expansion, based on exponential growth, cannibalized itself, new store construction ground to a halt, sales and profits have declined, and the inevitable closing of thousands of stores has begun. With real median household income 8% lower than it was in 2008, the collapse in retail traffic is a rational reaction by the impoverished 99%. Americans are using their credit cards to pay their real estate taxes, income taxes, and monthly utilities, since their income is lower, and their living expenses rise relentlessly, thanks to Bernanke and his Fed created inflation.
The media mouthpieces for the establishment gloss over the fact average gasoline prices in 2013 were the second highest in history. The highest average price was in 2012 and the 3rd highest average price was in 2011. These prices are 150% higher than prices in the early 2000′s. This might not matter to the likes of Jamie Dimon and Jon Corzine, but for a middle class family with two parents working and making 7.5% less than they made in 2000, it has a dramatic impact on discretionary income. The fact oil prices have risen from $25 per barrel in 2003 to $100 per barrel today has not only impacted gas prices, but utility costs, food costs, and the price of any product that needs to be transported to your local Wally World. The outrageous rise in tuition prices has been aided and abetted by the Federal government and their doling out of loans so diploma mills like the University of Phoenix can bilk clueless dupes into thinking they are on their way to an exciting new career, while leaving them jobless in their parents’ basement with a loan payment for life.
The laughable jobs recovery touted by Obama, his sycophantic minions, paid off economist shills, and the discredited corporate legacy media can be viewed appropriately in the following two charts, that reveal the false storyline being peddled to the techno-narcissistic iGadget distracted masses. There are 247 million working age Americans between the ages of 18 and 64. Only 145 million of these people are employed. Of these employed, 19 million are working part-time and 9 million are self- employed. Another 20 million are employed by the government, producing nothing and being sustained by the few remaining producers with their tax dollars. The labor participation rate is the lowest it has been since women entered the workforce in large numbers during the 1980′s. We are back to levels seen during the booming Carter years. Those peddling the drivel about retiring Baby Boomers causing the decline in the labor participation rate are either math challenged or willfully ignorant because they are being paid to be so. Once you turn 65 you are no longer counted in the work force. The percentage of those over 55 in the workforce has risen dramatically to an all-time high, as the Me Generation never saved for retirement or saw their retirement savings obliterated in the Wall Street created 2008 financial implosion.
To understand the absolute idiocy of retail CEOs across the land one must parse the employment data back to 2000. In the year 2000 the working age population of the U.S. was 213 million and 136.9 million of them were working, a record level of 64.4% of the population. There were 70 million working age Americans not in the labor force. Fourteen years later the number of working age Americans is 247 million and only 144.6 million are working. The working age population has risen by 16% and the number of employed has risen by only 5.6%. That’s quite a success story. Of course, even though median household income is 7.5% lower than it was in 2000, the government expects you to believe that 22 million Americans voluntarily left the labor force because they no longer needed a job. While the number of employed grew by 5.6% over fourteen years, the number of people who left the workforce grew by 31.1%. Over this same time frame the mega-retailers that dominate the landscape added almost 3 billion square feet of selling space, a 25% increase. A critical thinking individual might wonder how this could possibly end well for the retail genius CEOs in glistening corporate office towers from coast to coast.
This entire materialistic orgy of consumerism has been sustained solely with debt peddled by the Wall Street banking syndicate. The average American consumer met their Waterloo in 2008. Bernanke’s mission was to save bankers, billionaires and politicians. It was not to save the working middle class. You’ve been sacrificed at the altar of the .1%. The 0% interest rates were for Jamie Dimon and Lloyd Blankfein. Your credit card interest rate remained between 13% and 21%. So, while you struggle to pay bills with your declining real income, the Wall Street bankers are again generating record profits and paying themselves record bonuses. Profits are so good, they can afford to pay tens of billions in fines for their criminal acts, and still be left with billions to divvy up among their non-prosecuted criminal executives.
Bernanke and his financial elite owners have been able to rig the markets to give the appearance of normalcy, but they cannot rig the demographic time bomb that will cause the death and destruction of our illusory retail paradigm. Demographics cannot be manipulated or altered by the government or mass media. The best they can do is ignore or lie about the facts. The life cycle of a human being is utterly predictable, along with their habits across time. Those under 25 years old have very little income, therefore they have very little spending. Once a job is attained and income levels rise, spending rises along with the increased income. As the person enters old age their income declines and spending on stuff declines rapidly. The media may be ignoring the fact that annual expenditures drop by 40% for those over 65 years old from the peak spending years of 45 to 54, but it doesn’t change the fact. They also cannot change the fact that 10,000 Americans will turn 65 every day for the next sixteen years. They also can’t change the fact the average Baby Boomer has less than $50,000 saved for retirement and is up to their grey eye brows in debt.
With over 15% of all 25 to 34 year olds living in their parents’ basement and those under 25 saddled with billions in student loan debt, the traditional increase in income and spending is DOA for the millennial generation. The hardest hit demographic on the job front during the 2008 through 2014 ongoing recession has been the 45 to 54 year olds in their peak earning and spending years. Combine these demographic developments and you’ve got a perfect storm for over-built retailers and their egotistical CEOs.
The media continues to peddle the storyline of on-line sales saving the ancient bricks and mortar retailers. Again, the talking head pundits are willfully ignoring basic math. On-line sales account for 6% of total retail sales. If a dying behemoth like JC Penney announces a 20% decline in same store sales and a 20% increase in on-line sales, their total change is still negative 17.6%. And they are still left with 1,100 decaying stores, 100,000 employees, lease payments, debt payments, maintenance costs, utility costs, inventory costs, and pension costs. Their future is so bright they gotta wear a toe tag.
The decades of mal-investment in retail stores was enabled by Greenspan, Bernanke, and their Federal Reserve brethren. Their easy money policies enabled Americans to live far beyond their true means through credit card debt, auto debt, mortgage debt, and home equity debt. This false illusion of wealth and foolish spending led mega-retailers to ignore facts and spread like locusts across the suburban countryside. The debt fueled orgy has run out of steam. All that is left is the largest mountain of debt in human history, a gutted and debt laden former middle class, and thousands of empty stores in future decaying ghost malls haunting the highways and byways of suburbia.
The implications of this long and winding road to ruin are far reaching. Store closings so far have only been a ripple compared to the tsunami coming to right size the industry for a future of declining spending. Over the next five to ten years, tens of thousands of stores will be shuttered. Companies like JC Penney, Sears and Radio Shack will go bankrupt and become historical footnotes. Considering retail employment is lower today than it was in 2002 before the massive retail expansion, the future will see in excess of 1 million retail workers lose their jobs. Bernanke and the Feds have allowed real estate mall owners to roll over non-performing loans and pretend they are generating enough rental income to cover their loan obligations. As more stores go dark, this little game of extend and pretend will come to an end. Real estate developers will be going belly-up and the banking sector will be taking huge losses again. I’m sure the remaining taxpayers will gladly bailout Wall Street again. The facts are not debatable. They can be ignored by the politicians, Ivy League economists, media talking heads, and the willfully ignorant masses, but they do not cease to exist.
“Facts do not cease to exist because they are ignored.” – Aldous Huxley
This Graceless Age…
The consumption-oriented lifestyle could in no way scale across 7 billion people, so this was always a zero sum game between haves and have nots.
Global policy-makers saved the globalized ponzi scheme from itself in 2008. Now having squandered all resources, the odds that they can save it again are somewhere between zero and impossible. The first melt-down to weaken the model. This next one to kill it, for good…
The New Rome
Worthless political thought dealers. Vacuous media buffoons. Country club CEOs hell bent on liquidating their own country. Wall Street greed idolators. Self-important billionaires sprinkling their Central Bank-inflated wealth on the indolent masses. Hollywood’s fake gods and goddesses saving the world one comic book remake at a time. Steroid-bloated millionaire athletes pimping factory slave made sneakers to poverty-stricken inner city youth at $150 a pair. Testosterone-depleted boy-men running around like refugees, incapable of anything beyond their own immediate self-gratification. Idiocratic masses, stewing in a lethal cauldron of junk food and junk culture – too stoned to realize how stoned they are.
Life Without SUVs: Inconceivable
Third grade math indicates that the consumption-oriented lifestyle is in no way scalable across 7 billion people. In the U.S. alone, 5% of the world’s population consume 20% of global resources. It’s a tale of moral and intellectual bankruptcy that today’s thought dealers would allow so much legacy industrial assets to be liquidated just to propagate the fundamentally unsustainable for a few years longer. Despite doubling 229 years worth of national debt in just the past 7 years, today’s dumbfucked leaders, clueless academics, and the Idiocracy at large just can’t face the idea that their overriding mission to consume this planet, is now ending.
Anyone who reads this after-the-collapse, must come to terms with the fact that they were financially bludgeoned merely because they took all of the above decadence for granted – “business as usual”. And the fact that they were incapable of third grade math or otherwise had their heads buried straight up their own ass. Even at this late stage, the vast majority are totally bought in to the status quo and its inherent exploitation-based mentality. It’s totally unquestioned.
What to tell the grandchildren?
“Yeah, we thought it was odd – trying to borrow our way out of a debt crisis. And we really felt bad about bankrupting your generation, but those shopping sprees were fantastic. Personally, I was skeptical trusting the same morons with the global financial system after they crashed it in 2008, but then Bernanke gave them a free bailout and a lot more gambling money, so they seemed happy. I was really taken aback when the Chinese stopped lending us their money – after all, we’d been paying them $.10 on the dollar in wages. Totally ungrateful. Overall though, I’ll be honest, I was too busy watching the Dow, the NFL and Faux News, so I really had no clue what the hell was going on in the real world…”.
And now, we just learned, 400 Priests defrocked by the Pope over a two year period, for child molestation. A thousand plus years of shameful secrets disgorged in one exhale. Do we really believe that this is all a modern problem? That this legacy of sexual abuse has not been secretly propagated for centuries? Of course not. Suffice to say, This is a bad time to be left faithless, going into what will very likely be the most deadly period in human history.
I highly doubt that the U.S. would ever turn full blown communist – let’s face it, today’s phony Obama-socialism is nothing more than foodstamp-based riot control while billionaires complete the estate sale. Those Americans who honestly think that the U.S. is on the verge of socialism, need to take their first-ever trip outside of the U.S. and get some fucking perspective. That said, there are several well known countries where opinions are turning decidedly against capitalism, not the least of which is Japan. Suffice to say, the age of Sociopathic Corporations run by sociopathic frat boys is coming to its inevitable bad ending.
What difference can one man make in all of this madness? I’ve met enough good people in my lifetime to know that they are out there. They are just few and far between. Therefore the hope is that the impending “reset” bludgeons today’s amoral self-absorbed jackasses and their dumbfuck ideas into abject oblivion, all while keeping enough of decent humanity still intact to rebuild upon.
I realize that’s a stretch, but it’s all I’ve got…
P.S. Scroll down. My new blog background reflects the end of a graceless age and the (eventual) promise of a new and better one. Not the end. The beginning.
Or it might just be the stronger Prozac. Who knows?
I was born and raised in New York City, on the east side of Manhattan (with a brief intermezzo in the long Island Suburbs (1954 – 1957) though I have lived upstate, two hundred miles north of the city, for decades since. I go back from time to time to see publishers and get some cosmopolitan thrills. One spring morning a couple of years back, toward the end of Mayor Bloomberg’s reign, I was walking across Central Park from my hotel on West 75th Street to the Metropolitan Museum of Art when I had an epiphany.
Which was that Central Park, and indeed much of the city, had never been in such good condition in my lifetime. The heart of New York had gone through a phenomenal restoration. When I was a child in the 1960s, districts like Tribeca, Soho, and the Bowery were the realms of winos and cockroaches. The brutes who worked in the meatpacking district had never seen a supermodel. Brooklyn was as remote and benighted as Nicolae Ceausescu’s Romania. The Central Park Zoo was like a set from Riot in Cellblock D, and the park itself was desecrated with the aging detritus of Robert Moses’s awful experiments in chain-link fencing as a decorative motif. Then, of course, came the grafitti-plagued 1970s summed up by the infamous newspaper headline [President] Ford to City: Drop Dead.
Now, the park was sparkling. The sheep’s meadow was lovingly re-sodded, many of Frederick Law Olmsted’s original structures, the dairy, the bow bridge, the Bethesda Fountain, were restored. Million dollar condos were selling on the Bowery. Where trucks once unloaded flyblown cattle carcasses was now the hangout of movie and fashion celebrities. Brooklyn was a New Jerusalem of the lively arts. And my parents could never have afforded the 2BR/2bath apartment (with working fireplace) that I grew up in on East 68th Street.
The catch to all this was that the glorious rebirth of New York City was entirely due to the financialization of the economy. Untold billions had streamed into this special little corner of the USA since the 1980s, into the bank accounts of countless vampire squidlets engaged in the asset-stripping of the rest of the nation. So, in case you were wondering, all the wealth of places like Detroit, Akron, Peoria, Waukegan, Chattanooga, Omaha, Hartford, and scores of other towns that had been gutted and retrofitted for suburban chain-store imperialism, or served up to the racketeers of “Eds and Meds,” or just left for dead — all that action had been converted, abracadabra, into the renovation of a few square miles near the Atlantic Ocean.
Nobody in the lamebrain New York based media really understands this dynamic, nor do they have a clue what will happen next, which is that the wealth-extraction process is now complete and that New York City has moved over the top of the arc of rebirth and is now headed down a steep, nauseating slope of breakdown and deterioration, starting with the reign of soon-to-be hapless Bill de Blasio.
Mayor Bloomberg was celebrated for, among other things, stimulating a new generation of skyscraper building. There is theory which states that an empire puts up its greatest monumental buildings just before it collapses. I think it is truthful. This is what you are now going to see in New York, especially as regards the empire of Wall Street finance, which is all set to blow up. The many new skyscrapers recently constructed for the fabled “one percent”— the Frank Gehry condos and the Robert A.M. Stern hedge fund aeries — are already obsolete. The buyers don’t know it. In the new era of capital scarcity that we are entering, these giant buildings cannot be maintained (and, believe me, such structures require incessant, meticulous, and expensive upkeep). Splitting up the ownership of mega-structures into condominiums under a homeowners’ association (HOA) is an experiment that has never been tried before and now we are going to watch it fail spectacularly. All those towering monuments to the beneficent genius of Michael Bloomberg will very quickly transform from assets to liabilities.
This is only one feature of a breakdown in mega-cities that will astonish those who think the trend of hypergrowth is bound to just continue indefinitely. It will probably be unfair to blame poor Mr. de Blasio (though he surely can make the process worse), even as it would be erroneous to credit Michael Bloomberg for what financialization of the economy accomplished in one small part of America.
What is not intelligible to me is not necessarily unintelligent.
As we know, there are known knowns. There are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know. But there are also unknown unknowns, the ones we don’t know we don’t know.
–Donald Rumsfeld, Former U.S. Secretary of Defense
We live in an age of enlightenment, in the belief that the entire universe is open to our inspection and more than this, that it is theoretically all intelligible to us. If we just apply enough science and enough rationality, nature will reveal all its secrets to us in ordered sets of data that we can then use to control the entire world around us.
That we can wrest a comfortable life from the Earth is, however, nothing special. Plants and animals do this without resorting to colleges, symposia or research laboratories. And, humans used to do it without these things as well. Ancient Greeks–if they survived childhood diseases, war and the occasional plague–regularly managed to live into their 60s and 70s among balmy Mediterranean breezes. It’s not that there hasn’t been any progress; it’s just that we may not have made as much progress as we think.
And yet, in the age of Big Data we have become ever more enamored with the representations of the world that we gather in the form of numbers and words, believing (wrongly) that the map is the territory.
My father used to annoy his business partners by offering quick-fire solutions to problems–solutions that worked with distressing regularity. When pressed, he often could not explain why these solutions would work, only that he knew they would. His partners, suspicious of things that could not be rendered into rational discourse, eventually bought him out. How could they trust such intuitions, even if they appeared to be on target?
In his book Antifragile: Things that Gain from Disorder (from which I’ve drawn several ideas for this piece) author Nassim Nicholas Taleb cites the above quotation by Nietzsche and calls it “the most potent sentence in all of Nietzsche’s century.” We tend to dismiss things we cannot understand: “If I cannot understand it, then it must not exist.” And there is the seemingly less pernicious, “If I cannot understand it, it must not be important.”
The second notion is actually more pernicious. I can show convincingly that a person who does not understand a well-supported fact is merely ignorant. But it is much harder to convince someone that something which he or she doesn’t understand–but doesn’t deny either–is actually important enough to pay attention to. Climate change comes to mind.
This is the conundrum of the modern world. The world is so complex that it seems hopeless to try to understand how all things human and natural work together. We live in an age that calls out for explanations of nature and society that provide something genuinely revelatory to the layperson. What we mostly get, however, is hucksterism and public relations, information designed to mislead rather than clarify. Under the circumstances, we are lucky if we occasionally discover a small and perhaps fleeting truth.
We often believe that the explainers know what they are talking about because they speak with such conviction. The economists, the Wall Street analysts, the technical geniuses, the captains of industry, the billionaires, the airwave pundits, they must know something we don’t or they wouldn’t be that successful. But what they know isn’t necessarily what they are telling us. And, what they are telling us is, in any case, almost always designed to advance their interests, not ours.
In such a world, how shall we get through the day? It is best to start from humble premises:
- Nature knows better than we do in most things. It’s been tested for a lot longer than any human invention.
- No one knows the future, but we should strive to make ourselves less vulnerable to damage from extreme events which are the ones that can really hurt us.
- Beware of anyone who tells you he or she knows the future with certainty. Unless you are speaking with, say, a scientist calculating the orbit of a planet, such a person is a fraud.
- Our social relations–our loves and friendships–are more important than anything else because they are our true anchors in an uncertain world.
- The longer a practice or design has been around, say, a book versus an e-reader, the longer it is likely to be around. It has endured the test of time.
- There is wisdom in insecurity to quote Alan Watts. We actually live in an insecure and uncertain world. Those who promise to free us from our anxiety and insecurity are merely trying to manipulate us for their own gain. (I would distinguish such people from bona fide practitioners who help those with paralyzing anxiety reduce it to a manageable level.) Do not trust people or pills that promise to end your anxiety. Even if you get temporary relief, the actual uncertainty in your life and the universe will remain.
- Just because the world is uncertain doesn’t mean it is implacably hostile. Sometimes good things come from an uncertain future if we are wise enough to be on the lookout for them.
None of these principles will deliver you from all of life’s difficulties. But they can help you avoid hucksters who simply wish to exploit you by placing you in harm’s way while they reap the benefits.
Only when we accept that we have a rather limited understanding of the world we live in are we able to act in ways that are prudent for ourselves and our communities and respectful of the Earth and of our fellow beings, human and otherwise.
Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at firstname.lastname@example.org.
If you don’t know what it is yet – that means it’s working. The secrecy, that is. But once Pandora’s Box is opened, there’s no putting anything back. It will go down in history as one of the worst, oppressive plagues to saturate the planet.
Like Spider Man trying to stop a train from going over with nothing but his strength and shooting threads; we are going to need all the Web we can get to stop the fast-tracking Trans-Pacific Partnership from running over us. Perhaps more aptly, it is a tangled web we’ll be left trapped in as prey if we do nothing.
Here’s a crash-course and the easiest approach – all guesswork removed. But first, here’s a sampling of what you can kiss goodbye if this mammoth piece of legislation goes through…
What’s left of our jobs, food safety, Internet freedom, natural medicine, small farming, choice in medicine, financial regulation, privacy and more. Basically, all your rights. It permeates every area of your life, it’s been ramrodded through the Senate, and the media is not saying anything. It grants the likes of Monsanto, Wall Street and other huge entities full reign with immunity.
Kiss any last American sovereignty goodbye and say hello to your new global crypto-corpocracy complete with international tribunals and the end of domestic law – from your newly refurbished prison cell, of course. After all, you clicked on the wrong Internet link! And your ISP was watching and reported you. In the near future, this article could be enough to jail me, ban my whole family from the Internet, have computers seized and delete the website. No more videos that piece other clips together, or anything that hints at “infringement,” no more fair use, so no more non-corporate news.
It’s been shrouded in secrecy, especially from the People and Congress, planned behind closed doors for years, and proponents are searching for sponsors to have the President push it through now that Congress is back from recess.
The Trans-Pacific Partnership n. 1. A “free trade” agreement that would set rules on non-trade matters such as food safety, internet freedom, medicine costs, financial regulation, and the environment. 2. A binding international governance system that would require the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and any other country that signs on to conform their domestic policies to its rules. 3. A secret trade negotiation that has included over 600 official corporate “trade advisors” while hiding the text from Members of Congress, governors, state legislators, the press, civil society, and the public.
Here’s your crash course link on the TPP. You’ll be ready for take-off in no time. They’ve made it that simple:
After being mind-blown and catching your breath, you can do the absolute easiest thing there is to do by using Twitter with the hashtag #NOFastTrackTPP (but wait, there’s more).
Don’t use social media? No problem, scroll down. For social media users, here are the easiest things you can do, besides sharing memes and links on Facebook. Share things to Reddit andStumbleUpon. Everyone should call their reps (below).
See the Twitter storm event – still going. Pull any memes – share. Only use this hashtag for social media: #NOFastTrackTPP. Using other hashtags and adding more will split the trends.
Next, Tweet your little heart out to your reps and others. Easily find them by clicking the “Discover” button and typing “congressman” in the search. All their Twitter names appear. Find celebrities, they often re-tweet. Example: @repfitzpatrick or @RepBera
@RepBera NO to Fast Track Authority and TPP, or we will not re-elect!! #NoFastTrackTPP
Here’s another: “Do NOT sponsor FastTrack! Vote NO on TPP! #NoFastTrackTPP”
Some reps have stood against the TPP, so first you might want to see this:
– OR –
Use a general message for everyone: “I will NEVER support the Trans-Pacific Partnership#NOFastTrackTPP”
Want to jump into the Twitter storm? Easy. Sign up at Twitter, it runs you through a few-second tour and you can figure out the rest, see Help, or ask friends. Use the hashtag #NOFastTrackTPP on Facebook statuses.
Non-Social Media Users:
Find all your representatives’ info/forms in one-click. Just click on your state:
Contacting the Congress
Or use this:
Call President Obama: 202-456-6213
Call your Representative: 202-225-3121
or Toll Free (877) 762-8762
(Breathe and talk slowly. You will do just fine. Be polite and confident.)
“Hi, this is (your full name). I am a constituent of Rep/Senator (name). I live in (name of city). I am calling to request that Rep/Sen (name) vote NO on Fast Track Authority. It is important to me that Congress follows the Constitutional directive to negotiate international trade and that all trade agreements are given full consideration, debate and amendments as needed.
Do you know Rep/Sen (name) position on Fast Track Authority? Will he/she vote Yes or No? (wait for an answer)
Do you know Rep/Sen (name) position on the Trans Pacific Partnership Agreement? Will he/she vote Yes or No? (wait for an answer)
(regardless of their response, just continue)
Once again, I am requesting that Rep/Sen (name) vote NO on Fast Track Authority and NO on the TPP! Please be sure he/she gets my message. Thank you.”
Go to the Crash-Course site and print off PDFs to share. Actually, that whole website is designed to help you take action, online and off. You can still share the hashtag in any way you choose – it gets the point across fast.
If you can target these two reps, you could stop the fast-track today:
1) MIKE QUIGLY (IL-05)
District: (773) 267-5926
2) GREG MEEKS (NY-05)
D.C. (202) 225-3461
District: 347-230-4032 & 718-725-6000
Twitter: Gregory Meeks
Lastly, if you have done something, no matter how small to derail the TPP fast track – THANK YOU!!
Special thanks also to Andrew Pontbriand, Emily Laincz and Nick Bernabe for their tireless organizing, efforts and information – and to all those who joined them. Without them, this article wouldn’t be – nor will it with the TPP!
Recent posts by Heather Callaghan:
The Disenchantment of American Politics
Considering the problems we face as a nation, the torpor and lassitude of current politics in America seems like a kind of offense against history. What other people have allowed circumstances to run over them like so many ‘possums sleeping on the highway?
The financial disturbances of recent years especially have trashed millions of households, yet the fat middle (no pun intended) of the broad public (ditto) seems strangely content with all the tawdry sideshows of the day — Black Thursday, the Kardashians, the NFL playoffs, Twitter, texting, twerking, side boobs — taking little-to-no interest in politics while their prospects for a habitable future swirl around the drain. How might we account for such supernatural passivity?
And, since human affairs don’t remain static indefinitely, in what direction might things go when the political mood finally heaves and shifts? The possibilities are unsettling.
A Failure to Lead
If you care about poll numbers, they tell a simple story of contempt for the current crop of US political leaders. Congress rates a 12 percent approval rating and President Obama, at 35 percent, scores lower than Richard Nixon did in the midst of the Watergate fiasco. I’m surprised that Obama’s numbers aren’t lower (and I voted for him, twice). After all, few American lives were actually touched by the lies and shenanigans that spun off of Watergate, and money was an inconsequential part of it. But a whole lot of people were affected by Obama’s dissimulations around the Affordable Care Act, while his tragic failure to reestablish the rule of law in banking from the get-go in 2009 probably amounts to impeachable malfeasance. Add to this the NSA domestic spying operations revealed by Edward Snowden plus the troops indefinitely garrisoned in Asian countries and you have a portrait of a creeping Orwellian contagion.
The only whiff of rebellion in the air lately has emanated from the so-called conservative end of the political spectrum: the Tea Party. Its complaints mainly range around the offenses of Big Government, though a certain incoherence pervades its agenda as a whole. (I will get to that presently.) I am sympathetic to gripes against the size and reach of government but I’m convinced that the swerve of US politics in the not-distant future will hinge on the failure of government at this scale to conduct any business competently. Anyway, as a veteran of the hippie uprising of the 1960s, when the Left was insurgent against an obdurate “establishment,” it’s interesting to observe the perverse flip-flop of history that has now put the Tea Party in charge of rebellion central.
The failures of the Left these days are pretty obvious and awful. They got their storybook change-agent elected president and he hasn’t done a darn thing in five years to halt the wholesale racketeering that pervades our national life. Obama’s Department of Justice is home to more zombies than the Grand Cemetery of Port-Au-Prince. The Attorney General’s office essentially signed off on prosecuting bank fraud when Lanny Breuer, chief of the Criminal Division, declared some banks too big to jail. End of story, as Tony Soprano used to say.
Obama promised to brick up the revolving door between Wall Street and the federal agencies and he only added more turnstiles to the gate. Most of the government officials involved in the 2009 TARP program and related crisis management operations are now pulling in six figure salaries at the banks and hedge funds they formerly regulated, while a veteran fixer (Mary Jo White) from the whitest white shoe fixit law shop in the land (Debevoise & Plimpton) was appointed to head the SEC a year ago.
The Left, as represented by President Obama and a majority in the US Senate, did nothing to arrest the ongoing corporate hijacking of the USA. When the Supreme Court ruled in the Citizens United case (2010) that corporations could buy elections via unlimited campaign contributions under the free speech clause of the constitution, Obama had the chance to propose new legislation or a constitutional amendment to redefine the distinction between human persons and corporate “persons.” You’d think that as a constitutional lawyer, he would have been eager to lead on this. But he just ignored the historic opportunity and, anyway, he was on the receiving end of gobs of corporate “free speech” money to run his reelection campaign.
Apart from its pitiful roll-out bugs, the Affordable Care Act has the odor of the biggest insurance scam in history. People joke these days about Obama serving George W. Bush’s fourth term. The internal contradictions of Democratic Party behavior under Obama have only driven political cynicism to new heights. The millennial generation must feel horribly swindled by it.
A Paucity of Good Options
As for the rebellious conservative Tea Party faction, it is hard for me to square their umbrage at Big Government with their avidity for foreign wars (and support for the military-industrial rackets behind them), their failure to oppose the security-state activities of the NSA (while branding whistleblower Snowden “a traitor”), their love of corporate commercial tyranny a la Wal-Mart, their devotion to economically suicidal suburban sprawl, their zeal to control the social and sexual conduct of their fellow citizens, and their efforts to impose religion in civic affairs — all of which is to ask, what do they mean when they shout about “liberty?”
These contradictions probably seem abstruse compared to the gritty plight of ordinary citizens getting monkey-hammered in an economy that can provide neither decent incomes nor dignified, meaningful social roles for classes of people who could be earnest, honest, and enterprising given the chance. This gets to a more general failure across the political spectrum to apprehend the larger changing dynamics of our time — resource scarcity, capital impairment, contraction, environmental collapse, population overshoot — and to frame a coherent response to these developments. In short, the politicians seem to have no idea where history is taking us, and no road-map to prepare for the journey to get there.
There will probably always be some alignment of Left and Right in politics, but from time to time the packages they come in and the ideologies they contain are in desperate need of either rehabilitation or dissolution. I’d bet that we may soon see the demise of both the Democratic and Republican parties as they are currently structured. They’ve been around an awful long time now, and their presence probably provides a certain reassuring familiarity, but that is also the same growth medium as contempt. The useless and tiresome public quarrels they spawn these days, the kabuki theater debt ceiling showdowns, the can-kickings, and other evasions of responsibility, erode basic institutional trust to a dangerous degree; the people lose faith in the courts, the news media, the banks, the value of their money, and eventually all authority. The two major parties function as mere conduits for all the racketeering operations that define life in this nation today. The mature two-party system may prove to have been a transient product of America’s industrial heyday, which is now over despite the euphoria over stock bubbles, shale oil, computers and other new technology. If the two old parties dry up and blow away, will anyone shed a tear for them? When that happens, there may not be enough political vitality left at the federal level to reconstitute them in new packaging.
If party politics are weak, muddled, and contradictory, the divisions between Americans are starkly clear: wealth in America has never been so unevenly distributed — the fabled one percent versus everyone else. Despite the election of a mixed-race president, and the wish-fulfillment fantasies of Hollywood, race relations in the USA remain tense. 2013 was the year of the “knockout” game for black teenagers randomly targeting “woods” (i.e. non-black “peckerwoods”), some of whom died. It was the year of George Zimmerman’s acquittal in the Trayvon Martin case and the echoing recriminations.
Divisions between men and women are tragically compounded by the dangerous dynamics of work in America that leave many men (especially men) in a vacuum of purpose, meaning, and potency. It is almost impossible these days for low-skilled men to support a family. The indignity of this thunders through broken communities and the penitentiary cellblocks. But the anomie is also expressed in the higher ranks of an economy where office work can be done by anybody, and gender confusion lately has been valorized as a compensating mechanism for the marginalization of men and the failure of manhood. The political blowback from this, when it comes, is apt to be fierce. Look no further than Duck Dynasty.
The ongoing national culture war pits the “traditional values” faction against the sexual libertarians; the red states against the blue states; urban against the conflated suburban and rural; the Christian fundamentalists against an array of other positions and belief groups; the entitlement “socialists” against the “free market” conservatives.
Perhaps most divisive of all will be the schism between the young and the old over the table scraps of the dying industrial economy.
These tensions will not remain unresolved indefinitely.
In Part II: Get Ready For Strange Days, we’ll forecast the direction that this resolution may follow. The last time the USA faced a comparable political convulsion was the decade leading into the Civil War, but this time it will be more complex and confusing and it will have a different ending. A dominant theme will be a continued loss of faith in the Federal government to solve our ills, and a re-emergence of reliance on local support networks at the state, municipal, community and family levels.
This devolution will likely play out very differently across the major regions of the US. And most will follow this course unwillingly.
Strange days are coming.
By Adam English 2013-12-31
Here we are, at the last day of a year that has defied all the odds.
The Dow and S&P 500 have posted out-sized gains in spite of what can generously be called tepid economic growth.
The regional governors and economists over at the Fed are undoubtedly enjoying the afterglow of their resounding success with the latest tapering announcement a couple weeks ago.
Investors, banks, and policymakers are most likely enjoying their holiday vacations while planning what to do with the fat bonus checks that are en route.
Of course, the disenfranchised poor are worse off than ever. Millions just lost their only source of money for food, and millions more are stuck in a downward spiral of debt traps and part-time work.
But these downtrodden masses don’t have any money to pour into the markets to boost gains. To the market and policymakers, they were only included when it came time to package self-enriching schemes in populist rhetoric.
Tomorrow, it’ll be time to start thinking about the next set of yearly returns, and none of the big players are worried.
Next year promises more of the same in their eyes. The Easy Money Battle of 2013 was won.
Unfortunately, many of them don’t see that it was a Pyrrhic victory. The cost is already too high to succeed in the end.
A Terrible Record
Clearly, the temptation in the market is to take the latest Fed announcement and ensuing rally as a call to double down on wildly bullish sentiment as 2014 starts.
I have little doubt that we’ll see this shaken out of the market sometime in the first half of next year. When you take a look at the Fed’s record on tapering announcements, it doesn’t look good.
By my count it has one win, one tie, and five losses.
The first mention of winding down QE programs came back on May 22nd. Hints of a reduction in stimulus measures in the Federal Open Market Committee (FOMC) minutes caused an immediate 1% drop in the Dow and a volatility spike.
On June 19th, there were no taper hints. Ben learned his lesson. However, the markets still knew it was imminent. The Dow closed down 1.3% while the S&P 500 fell 1.4%.
July’s announcement caused a 0.7% drop for the Dow and another volatility spike.
September was an aberration and a virtual tie because the government shutdown distracted everyone.
October saw no date set for a taper. There was some volatility and a slight dip in the markets for the afternoon.
Then on December 18th, the November FOMC minutes were released, causing a 290-point gain in the Dow and exuberant front-page headlines.
It’s clear the Fed’s record is pretty abysmal, filled with fumbles and confusion. But the trend appears to suggest that the markets have made peace with the idea. At least on the surface.
So what changed over time?
The overall tone of the statements and Bernanke’s remarks suggests that the Fed is still very “dovish” and willing to err on the side of caution. That helped, but it isn’t enough on its own.
In reality, the folks at the Fed spent the last half-year scratching their heads trying to figure out how to make a taper palatable to the markets. The result was a massive concession in how the taper would proceed.
The Fed now intends to hold interest rates at historic lows past the point when the unemployment rate falls to 6%. This is a large adjustment — over 1% lower than in earlier statements.
The flow of easy money into corporations has been extended through most — if not all — of 2014.
Wall Street could take or leave the $10 billion per month trimmed from bond purchases as long as the virtually free money guaranteed by low interest rates keeps flowing with no real end in sight.
Corporate Cash Cow
The rate banks pay on overnight loans, or the federal funds rate, was at 4.5% in late 2007. As the recession bit into the economy, it was slashed to 0.25% and has stayed there ever since.
Long-term rates quickly followed suit and fell from over 5% in 2007 to record lows near 1.5% in the second half of 2012. Since the beginning of 2013, 10-year Treasuries have crept back to 3%, still well below normal levels.
Corporations capitalized on the low interest rates by issuing $18.2 trillion of bonds worldwide since 2008. Currently outstanding corporate debt has risen over 50% to $9.6 trillion over the same period.
Many of these loans were simply created to push corporate debt obligations out as far as possible. Instead of using them to create growth, it just delays loans from maturing until 2017, 2018, or 2019.
Interest paid by U.S. businesses peaked in 2007 at $2.83 trillion, and then it fell sharply to $1.34 trillion in 2011, the last year data is available from the St. Louis Fed.
At the end of the recession in 2009, companies listed on the S&P 500 paid roughly $4 a share in interest per quarter. Now, they are paying around $1.50 a share in interest on average.
These dramatically lowered interest rates account for an estimated 50% of total profit growth, not including indirect savings from lower leasing or rental costs.
Stock buybacks using debt-fueled funding have also been very popular and have provided quick boosts to stock prices and created earnings per share increases that are not based on growth or performance.
In fact, earnings have tripled since 2000, back when the economy was in far better shape.
The Fed has created a massive boom for corporate America through historically cheap debt and that is what the markets wanted to keep most of all. The Fed capitulated and the markets rejoiced.
Meanwhile, the EBITDA margin (earnings before interest, tax, depreciation, and amortization divided by total revenue) operating profitability peaked at 25.6% in late 2007 and recently fell below 20%.
Of course, this can’t possibly last in perpetuity. Debt will become more expensive, and payments will eat into profit margins.
We have not seen the last time the Fed will disappoint markets, create a volatility spike, and ultimately drive losses for investors.
Still On Shaky Ground
Going forward, the Fed and anyone in the market have a handful of things to remember that should temper the irrational exuberance we’re seeing in the market.
First, Fed policy is overly dependent on creating artificially high asset prices to alter economic behavior for investors and companies. The economy has not substantially improved enough to subsist on meaningful corporate growth, consumer spending, or housing sales.
Secondly, the impact of easy money through abnormally low interest rates is hard to quantify, especially in the short-term. Bullish markets that overextend their gains on very uncertain stimulus will inevitably see very disruptive corrections.
Finally, the Fed is not the only central bank that is actively pushing asset prices higher and fighting to maintain economic and financial stability. China, Japan, and Europe are all using extraordinary measures to intervene.
If any of these major economies see demand that is too weak, experience corporate or bank liquidity and credit crunches, or fail to juggle sovereign debt, the domestic economy will take the full brunt of the blow.
The Fed has fully deployed all of its tools to spur growth while expanding its balance sheet by about $4 trillion with little real effect. Economists put the total return for the Fed’s intervention as low as 0.25% of GDP.
As we close the books on 2013 with large gains for the markets and on a high-note for the Fed, we know what to expect for now. The Fed will have to continue pushing you to put your wealth into the market, and the big players will keep holding the rallying market hostage as they rake in massive profits.
However, the cost has been too high. The Fed may push the day of reckoning well into 2014 or beyond, but there is no way around the correction and burden it will place on us all.