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You deserve a realistic account of the economy you’re joining.

Dear high school graduates: please glance at these charts before buying into the conventional life-course being promoted by the status quo.

Here’s the summary: the status quo is pressuring you to accept its “solutions”: borrow mega-bucks to attend college, then buy a decaying bungalow or hastily constructed stucco box for $800,000 in a “desirable” city, pay sky-high income and property taxes on your earnings, and when the stress of all these crushing financial burdens ruins your health, well, we’ve got meds to “help” you–lots of meds at insane price points paid for by insurance– if you have “real” insurance without high deductibles, of course.

Here’s the truth the status quo marketers don’t dare acknowledge: every one of these conventional “solutions” only makes the problem worse. Student loan debt only makes your life harder, not easier, as the claimed “value” of a college degree is based on the distant past, not the present. The economy is changing fast and the conventional “solutions” no longer match the new realities. But don’t expect anyone profiting from the predatory profiteering higher-education cartel to admit this.

The high cost of housing isn’t “solved” by buying in at the top of an unprecedented bubble. Buying into bubbles only makes the problem worse, for all bubbles eventually pop.

The “solution” to crushing levels of debt is not to borrow more just to prop up a rotten, corrupt, dysfunctional and self-serving status quo. In effect, the young generations are being groomed to be the hosts for the parasitic classes that feed on young taxpayers, student loan debt-serfs, young buyers of bubble-priced housing, unaffordable sickcare “insurance” and all the rest of the status quo “solutions.”

…click on the above link to read the rest of the article…

The U.S. Economy In Two Words: Asymmetric Gains

June 2, 2018

The U.S. Economy In Two Words: Asymmetric Gains

The Status Quo is in trouble if the bottom 95% wake up to the asymmetric gains that are the only possible output of our hyper-financialized economy.

The core dynamic of the U.S. economy in this era is asymmetric gains: the gains in income, wealth and power are increasingly concentrated in the top slice of the economy and society, while the income, wealth and power of the majority stagnate or decline.

The Status Quo must paper over this widening gulf with threadbare narratives that no longer match reality: for example, we’re an ownership society. We sure are: the vast majority of the nation’s productive assets are owned by the top 5%.

The U.S. economy has changed, but the transformation is largely invisible to the average participant and conventional economist. The previous iteration of the economy expired in the 1970s, an era of stagflation (stagnant growth and rising inflation that eroded the purchasing power of most households), higher energy costs and increasing global competition, an era in which the “external costs” of industrial-scale pollution finally came home to roost and the early stages of digital technologies began impacting human labor.

Stocks and bonds were destroyed in the 1970s. Investing capital in industrial production no longer generated outsized profits.

The 1980s ushered in a New Economy based on financial magic: the outsized profits flowed to those with access to credit and the tools of financialization: buying assets with borrowed money, selling the assets off in the global marketplace and reaping enormous gains by producing no goods or services.

We now inhabit a hyper-financialized economy in which the only way to get ahead is to speculate. For the middle class, this means speculating in housing: if you hit the jackpot and your house soars in value, then leverage this new wealth into the cash needed to buy a second property–or extract the equity to fund a more luxe lifestyle.

…click on the above link to read the rest of the article…

Propaganda, Human Consciousness, And The Future Of Civilization

May 23, 2018

Propaganda, Human Consciousness, And The Future Of Civilization

A duck floats past two fish, looks down and says “Morning boys! How’s the water?” The fish swim on for a bit, then one of them turns to the other and says, “What the fuck is water?”

Corporatist propaganda is to western civilization what water is to fish. Our culture is saturated in it; it informs so many levels of our worldview and most of us never even examine any of them. It informs all aspects of culture, from our beliefs about what’s going on in the world to our understanding of history to what issues we think we’re supposed to care about on a given day to what opinions we think we’re allowed to choose from. People think they know what’s going on in their society, why their country fought this or that war, how their nation’s government and economy operate, when really they don’t know any of those things. All their most basic assumptions about their world, their culture, and even who they are as individuals is fully pervaded by mass media propaganda narratives.

In early tribal cultures, humans depended on campfire stories passed on from one generation to the next to tell them what the world is and how to interpret their experiences in it. Now that role has fallen exclusively to a few highly consolidated corporate media conglomerates whose billionaire owners have a vested interest in maintaining the warmongering plutocratic power establishment that is loosely centralized in the United States, because in that power establishment they get to live as kings.

…click on the above link to read the rest of the article…

The Next Recession Will Be Devastatingly Non-Linear

May 23, 2018

The Next Recession Will Be Devastatingly Non-Linear

The acceleration of non-linear consequences will surprise the brainwashed, loving-their-servitude mainstream media.

Linear correlations are intuitive: if GDP declines 2% in the next recession, and employment declines 2%, we get it: the scale and size of the decline aligns. In a linear correlation, we’d expect sales to drop by about 2%, businesses closing their doors to increase by about 2%, profits to notch down by about 2%, lending contracts by around 2% and so on.

But the effects of the next recession won’t be linear–they will be non-linear, and far more devastating than whatever modest GDP decline is registered. To paraphrase William Gibson’s insightful observation that “The future is already here — it’s just not very evenly distributed”: the recession is already here, it’s just not evenly distributed– and its effects will be enormously asymmetric.

Non-linear effects can be extremely asymmetric. Thus an apparently mild decline of 2% in GDP might trigger a 50% rise in the number of small businesses closing, a 50% collapse in new mortgages issued and a 10% increase in unemployment.

Richard Bonugli of Financial Repression Authority alerted me to the non-linear dynamic of the coming slowdown. I recently recorded a podcast with Richard on one sector that will cascade in a series of non-linear avalanches once the current asset bubbles pop and the current central-bank-created “recovery” falters under its staggering weight of debt, malinvestment and speculative excess.

The Intensifying Pension Crisis (37-minute podcast)

The core dynamic of the next recession is the unwind of all the extremes:extremes in debt expansion, in leverage, in the explosion of debt taken on by marginal borrowers, in malinvestment, in debt-fueled speculation, in emerging market debt denominated in US dollars, in financial repression, in political corruption–the list of extremes that have stretched the system to the breaking point is almost endless.

…click on the above link to read the rest of the article…

Steven Pinker’s Ideas About Progress Are Fatally Flawed. These Eight Graphs Show Why.

May 18, 2018

Steven Pinker’s Ideas About Progress Are Fatally Flawed. These Eight Graphs Show Why.

It’s time to reclaim the mantle of “Progress” for progressives. By falsely tethering the concept of progress to free market economics and centrist values, Steven Pinker has tried to appropriate a great idea for which he has no rightful claim.

In Enlightenment Now: The Case for Reason, Science, Humanism, and Progress, published earlier this year, Steven Pinker argues that the human race has never had it so good as a result of values he attributes to the European Enlightenment of the 18^th century. He berates those who focus on what is wrong with the world’s current condition as pessimists who only help to incite regressive reactionaries. Instead, he glorifies the dominant neoliberal, technocratic approach to solving the world’s problems as the only one that has worked in the past and will continue to lead humanity on its current triumphant path.

His book has incited strong reactions, both positive and negative. On one hand, Bill Gates has, for example, effervesced that “It’s my new favorite book of all time.” On the other hand, Pinker has been fiercely excoriated by a wide range of leading thinkers for writing a simplistic, incoherent paean to the dominant world order. John Gray, in the New Statesman, calls it “embarrassing” and “feeble”; David Bell, writing in The Nation, sees it as “a dogmatic book that offers an oversimplified, excessively optimistic vision of human history”; and George Monbiot, in The Guardian, laments the “poor scholarship” and “motivated reasoning” that “insults the Enlightenment principles he claims to defend.” (Full disclosure: Monbiot recommends my book, The Patterning Instinct, instead.)

In light of all this, you might ask, what is left to add? Having read his book carefully, I believe it’s crucially important to take Pinker to task for some dangerously erroneous arguments he makes. Pinker is, after all, an intellectual darling of the most powerful echelons of global society.

…click on the above link to read the rest of the article…

What Lies Beyond Capitalism and Socialism?

May 2, 2018

What Lies Beyond Capitalism and Socialism?

The status quo, in all its various forms, is dominated by incentives that strengthen the centralization of wealth and power.

As longtime readers know, my work aims to 1) explain why the status quo — the socio-economic-political system we inhabit — is unsustainable, divisive, and doomed to collapse under its own weight and 2) sketch out an alternative Mode of Production/way of living that is sustainable, consumes far less resources while providing for the needs of the human populace — not just for our material daily bread but for positive social roles, purpose, hope, meaning and opportunity, needs that are by and large ignored or marginalized in the current system.

One cognitive/emotional roadblock I encounter is the nearly universal assumption that there are only two systems: the State (government) or the Market (free trade/ free enterprise). This divide plays out politically as the Right (capitalism, favoring markets) and the Left (socialism, favoring the state). Everything from Communism to Libertarianism can be placed on this spectrum.

But what if the State and the Market are the sources of our unsustainability?What if they are intrinsically incapable of fixing what’s broken?

The roadblock here is adherents to one camp or the other are emotionally attached to their ideological choice, to the point that these ideological attachments have a quasi-religious character.

Believers in the market as the solution to virtually any problem refuse to accept any limits on the market’s efficacy, and believers in greater state power/control refuse to accept any limits on the state’s efficacy.

I often feel like I’ve been transported back to the 30 Years War between Catholics and Protestants in the 1600s.

…click on the above link to read the rest of the article…

Playing for All the Marbles

April 6, 2018

Playing for All the Marbles

Global Plunge Protection Teams must be ordering take-out food; every night is a long one now.

The current stocks/bonds game is for all the marbles, by which I mean the status quo now depends on valuations and interest rates remaining near their current levels for the system to function.

If interest rates soar and/or stocks plummet, the game is over: pension funds collapse, tax revenues drop, debt based on high asset valuations defaults, employment craters and the much-lauded “wealth effect” reverses into a “negative wealth effect” (i.e. everyone looking at their IRA or 401K statement feels poorer every month).

Let’s scan a few relevant charts to understand why this game is for all the marbles. Given the systemic fragility of the global economy, a crash in one asset class or a rise in interest rates trigger defaults, sell-offs, etc. that forcibly revalue other assets.

So the Powers That Be can’t afford to let any asset crash, as a crash will bring down the entire system. Why is this so? The resiliency of the system has been eroded by permanent central bank/central state intervention/stimulus. Withdrawing the stimulus means markets have to go cold turkey, and they’ve lost the ability to do so.

Permanent stimulus creates dependencies and distortions, and both the distortions and the dependencies introduce a host of unintended consequences. What’s the “market price” of assets? You must be joking: the “market” prices assets based on policies of permanent stimulus and asset purchases by central banks.

In effect, markets have been hijacked to function as signaling mechanisms(everything’s great because your IRA account balance keeps going up) and as floors supporting pensions, insurance companies, IRAs/401Ks, etc.: all these financial promises are only plausible if asset valuations keep rising.

Fly in the ointment #1: equity valuations have lost touch with the real economy, as measured (imperfectly) by GDP:

…click on the above link to read the rest of the article…

Solutions Only Arise Outside the Status Quo

March 21, 2018

Solutions Only Arise Outside the Status Quo

Solutions are only possible outside these ossified, self-serving centralized hierarchies.

Correspondent Dan F. asked me to reprint some posts on solutions to the systemic problems I’ve outlined for years, most recently in How Much Longer Can We Get Away With It? and Checking In on the Four Intersecting Cycles. I appreciate the request, because it’s all too easy to dwell on what’s broken rather than on the difficult task of fixing what’s broken.

I’ve laid out a variety of solutions to structural problems in my many books, and I’ll attempt a brief synthesis in this post.

1. The dynamics of stagnation are built into the system. Centralized systems optimize specific solutions to a specific set of problems that prompted the development of the system.

In the U.S., the empire that resulted from the global effort to win World War II and the Cold War competition with the Soviet Union spawned centralized bureaucracies to manage the complexities and budgets of this new era.

In effect, the system was optimized to the circumstances of 1950 or perhaps 1960. Though circumstances have changed, the system remains essentially unchanged, except bureaucracies and budgets have ballooned in response to the dynamics of bureaucracies: the initial purpose erodes and is replaced with self-aggrandizement of insiders and bureaucratic bloat.

As the systems optimized for a bygone era start failing, due to the erosion of accountability and transparency as insiders mask their self-serving ineffectiveness, the organizational structure attempts to meet the challenges by doing more of what’s failing: since every layer of bureaucracy now has a constituency that will fight to the death to maintain its power, budget and perquisites, a ratchet effect is the dominant dynamic: budgets and power cannot decline due to resistance, but the path to increases in power and budget is well-greased.

Since the structures are optimized for a bygone era, the institutions are fundamentally incapable of responding effectively or reforming themselves.The universal solution to failing institutions and hierarchies is to throw more money at the failings in the doomed hope that doing more of what’s failed will magically solve the systemic problems.

…click on the above link to read the rest of the article…

The Status Quo Will Reign

March 1, 2018

The Status Quo Will Reign

This month’s stock market correction is still fresh in everyone’s mind. Many have even begun to wonder if the era of dark money was truly over.

How will the recent correction affect the Fed’s dark money policies?

The consensus explanation for the correction was that inflation was rising and that would precipitate faster rate increases. The Feb. 2 unemployment report gave the impression that higher worker wages could lead to a higher inflationary trend.

I don’t buy this at all. I believe these fears of inflation are overblown.

As my colleague Jim Rickards has explained, the Feb. 2 report revealed that total weekly wages were actually declining and that labor force participation was unchanged. And the year-over-year gain in wages only seemed impressive compared with the extremely weak wage growth of recent years.

After accounting for existing inflation, Jim argued, the real gain was only 0.9%. That’s weak relative to the 3% or even 4% real wage gains typically associated with economic expansions since the end of World War II.

In short, Jim concludes, “the story about the “hot” economy with inflation right around the corner does not hold water.”

I agree.

Meanwhile, the latest report on U.S Gross Domestic Product (GDP) for the fourth quarter of 2017 was nothing to write home about. At 2.6% annual growth, it was 0.3% lower than expectations. That’s not the sign of an overheating economy. But those in the financial media considered it positive because it showed 2.80% growth in real personal consumption.

But if you look beneath the surface, what you’d see is that consumers aren’t actually doing well across three core areas that “govern the ability of individuals to spend.”

…click on the above link to read the rest of the article…

The Ghosts of 1968

February 14, 2018

The Ghosts of 1968

The hope of 1968 that public demonstrations can actually change the power structure has been lost.

1968 was a tumultuous year globally and domestically. The Prague Spring in Czechoslovakia–a very mild form of political and cultural liberalization within the Soviet bloc–was brutally crushed by the military forces of the Soviet Union.

The general strikes and student protests of May 1968 brought France to a standstill as demands for social and political change called the entire status quo into question.

On the other side of the planet, the Cultural Revolution was remaking China’s still-youthful revolution, to the detriment of the political status quo, the intelligentsia and the common people.

The U.S.was convulsed with assassinations, civil unrest and mass demonstrations against the war in Vietnam and the political status quo (the Democratic Party convention in Chicago).

Ironically, much of the world was benefiting from two decades of rising prosperity and the demise of colonialism. When expectations exceed actual opportunities, discontent is the result. When the power structure is deaf to the discontent, a cycle of repression and disorder feed on each other.

Fifty years on, the ghosts of 1968 are still with us. With the advantage of hindsight, 1968 was the culmination of the belief that it was still possible for the common people to change the political and social order in a positive fashion– to remake the status quo power structure into something more humane, accessible, just and fair.

The Western status quo bent but did not break. Nothing in the developed-world power structures actually changed. The status quo did break down in China, but the breakdown was not liberating; it was a catastrophe of injustice and destruction without precedent.

…click on the above link to read the rest of the article…

Is the 9-Year Long Dead Cat Bounce Finally Ending?

February 6, 2018

Is the 9-Year Long Dead Cat Bounce Finally Ending?

Ignoring or downplaying these fundamental forces has greatly increased the fragility of the status quo.

The term dead cat bounce is market lingo for a “recovery” after markets decline due to fundamental reversals. Markets tend to bounce back after sharp declines as participants (human and digital) who have been trained to “buy the dips” once again buy the decline, and the financial media rushes to reassure everyone that nothing has actually changed, everything is still peachy-keen wonderfulness.

I submit that the past 9 years of market “recovery” is nothing but an oversized dead cat bounce that is finally ending. Here is a chart that depicts the final blow-off top phase of the over-extended dead cat bounce:

Why are the past 9 years nothing but an extended dead cat bounce? Nothing that’s fundamentally broken has been fixed, and none of the dynamics that are undermining the status quo have been addressed.

The past 9 years have been one long dead cat bounce of extend and pretend, i.e. do more of what’s failed because to even admit the status quo is being undermined by fundamental forces would panic those gorging at the trough of the status quo’s lopsided rewards.

This 9-year dead cat bounce was pure speculation driven by cheap central bank credit and liquidity. Demographics, environmental degradation, the decline of middle class security, the erosion of paid work, the bankruptcy of public and private pension plans, the global debt bubble, soaring wealth and income inequality, the corruption of democracy into a pay-to-play bidding war, the destruction of price discovery via market manipulation by those who have turned markets into signaling devices that all is well, the laughable distortion of statistics to mask the real world decline in our purchasing power (inflation is near-zero–really really really), the perverse incentives to leverage up bets in financial instruments that have no connection to the real-world economy–none of these have been addressed in the market melt-up.

…click on the above link to read the rest of the article…

The Rowboat (Wages) and the Yacht (Assets)

February 1, 2018

The Rowboat (Wages) and the Yacht (Assets)

As I keep saying: the status quo has divested the working and middle classes.

The reason why the status quo has failed and is fragmenting is displayed in these three charts of wages, employment and assets: wage earners (labor) are in a rowboat trying to catch the yacht of those who own assets (capital).

Here is a chart of weekly wages of those employed fulltime: up a gargantuan $4/week in the 18 years since 2000. Let’s see, $4 times 52 week a year–by golly, that’s a whole $208 a year. Brand new Ford F-150, here we come!

If we go back 38 years to 1980–an entire lifetime of work–we find real (adjusted for official inflation, which seriously understates big-ticket expenses such as rent, healthcare and college tuition/fees) wages have notched higher by $10/week–a gain of $500 annually.

If we adjusted wages by real-world income, we’d find wages have declined since 1980 and 2000.

Here’s employment by age group since the year 2000. THose who can’t afford to retire are still dragging their tired old bones to work while employment for the under-55 cohort hasn’t even returned to the levels of 2000.

Meanwhile, asset valuations have soared. Those who own capital (assets) have done very, very well, those who trade their labor for dollars–they’ve gone nowhere.

Households with two regular jobs could afford to buy a house in Seattle, Brooklyn, or the San Francisco Bay Area in 1995. By 2005, they were priced out. Can a household with median income ($59,000 annually) afford a crumbling shack in any of the white-hot housing markets? You’re joking, right?

The cold reality is wage-earners are tugging on the oars of a water-logged rowboat, trying to catch up with the sleek yacht of asset owners. The system has been rigged to reward those who own assets (capital) or who can borrow immense sums of nearly-free money (credit) to buy assets.

…click on the above link to read the rest of the article…

As US Global Influence Recedes, Secession Demands Grow

January 13, 2018

As US Global Influence Recedes, Secession Demands Grow

One of the more welcomed outcomes of the paring back of the US State Department bureaucracy is the elimination of scores of “status quo enthusiasts.” Since the end of World War II, the State Department’s ranks have been populated by foreign service officers and career diplomats who have championed the international status quo. These minions of Foggy Bottom received encouragement for their protective stance on post-World War II and Cold War in President George H. W. Bush’s speech on September 11, 1990, which was titled, “Toward a New World Order.” Under the “new world order,” regional and global security concerns would supplant democratic independence movements. The immediate effect of this “order” was brutal crackdowns on secession in the periphery of the former Soviet Union, including Abkhazia, South Ossetia, Nagorno-Karabakh, Transnistria, as well as in Somalia, the Kurdish regions of Iraq and Turkey, Sudan, and Ethiopia. However, in Yugoslavia, which the United States and European Union wanted to see dissolved, secessionists in seven constituent states were encouraged to secede from the federation. That resulted in the bloodiest military conflicts in Europe since World War II.

Leaders of secessionist groups visiting Washington were traditionally shunned by the State Department. These hapless would-be presidents and prime ministers would be lucky to meet with a low-ranking State Department employee. However, if their independence movements were championed by the Central Intelligence Agency, they would get red carpet treatment. Such was the case with Secretary of State Madeleine Albright’s favorite Balkans “toy boy,” Hashim Thaci, the leader of the terrorist Kosovo Liberation Army and now President of the Republic of Kosovo, which was carved out of Serbia but is still unrecognized by many of the world’s most important nations, including China and Russia.

…click on the above link to read the rest of the article…

Social Change Will Upend the Status Quo

January 11, 2018

Social Change Will Upend the Status Quo

The nation is fragmenting because the Status Quo is failing the majority of the citizenry.

The core narrative of the Status Quo is that nothing fundamental needs to be changed: all the problems can be solved with more “free money” (borrowed from the future at low rates of interest) and a few policy tweaks such as Universal Basic Income (UBI) (the topic of my new book Money and Work Unchained).

This core narrative is false: everything needs to change, from the bottom up.And that of course terrifies those gorging at the trough of status quo wealth and power.

The power structure can manipulate financial metrics, but it can’t manipulate rising wealth/power inequality or social discord. Whatever you think of President Trump, his election is a symptom of profound social discord–discord which author Peter Turchin explains is cyclical and cannot be squashed with phony reforms like UBI or police-state repression.

The nation is fragmenting because the Status Quo is failing the majority of the citizenry. The protected few are reaping all the benefits of the Status Quo, at the expense of the unprotected many.

As I have outlined many times, this unsustainable asymmetry is the only possible outcome of our socio-economic system, which is dominated by these forces:

1. Globalization–free flow of capital, labor arbitrage (workers must compete with the lowest-cost labor around the world).

2. Nearly free money from central banks for bankers, financiers and corporations.

3. Pay-to-play “democracy”– wealth casts the only votes that count.

4. State protected cartels that privatize gains and socialize losses.

5. A political system stripped of self-correcting feedback and accountability.

…click on the above link to read the rest of the article…

Yes, But at What Cost?

January 9, 2018

Yes, But at What Cost?

This is how our entire status quo maintains the illusion of normalcy: by avoiding a full accounting of the costs.

The economy’s going great–but at what cost? “Normalcy” has been restored, but at what cost? Profits are soaring, but at what cost? Our pain is being reduced–but at what cost?

The status quo delights in celebrating gains, but the costs required to generate those gains are ignored for one simple reason: the costs exceed the gains by a wide margin. As long as the costs can be hidden, diluted, minimized and rationalized, then phantom gains can be presented as real.

Exhibit One: the US public debt. If you borrow and blow enough money, it’s not too difficult to generate a bit of “growth”–but at what cost?

Exhibit Two: opioid deaths. One of the few metrics that’s climbing as fast as the national debt is the death rate from prescription and synthetic opioids:

Exhibit Three: student loan debt. Here’s a chart of debt that is federally originated but paid by individual students: the infamous student loan debt that has shot up over $1 trillion in a few years.

You see the point: the cost are skyrocketing but the gains are diminishing. The costs of maintaining the illusion of “normalcy”–for example, that going to college is “still affordable”– are soaring, while the gains of a college education are declining as credentials and diplomas are is oversupply. (What’s scarce are the real-world skillsets employers actually need.)

Americans are in pain, and the cartel-sickcare “solution”–“non-addictive opioids”–is reaping a horrendous toll on all who trusted the sickcare system to deliver non-addictive painkillers. Should the newly addicted sufferer no longer be able to get the synthetic opioid prescribed, the option of choice is street smack (heroin), and this is why heroin deaths are soaring along with deaths caused by synthetic opioids.

…click on the above link to read the rest of the article…

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