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Here’s What an American Economic Collapse Could Actually Look Like (And How It May Be a Lot Different Than Folks Expect)

January 15, 2019

Here’s What an American Economic Collapse Could Actually Look Like (And How It May Be a Lot Different Than Folks Expect)

When we think of “economic collapse” our imaginations usually lead us immediately to the desperation we’ve witnessed in places like Venezuela or Greece. We think of starvation, a complete lack of medical care, and waves of suicide by people who simply can’t survive. We imagine an apocalyptic societal breakdown that is immediately visible.

Here in America, I suspect the collapse is going to look a lot different than it has in these other countries…at least, at first. And in my description, it’s entirely likely you’ll see that many of these signs have been happening all around us for years.

It will be gradual.

The thing with collapses that we see in the media is that we are seeing the end results of events that have been slowly declining for years. Venezuela was one of the wealthiest countries in the world back until the mid-1980s, due to their rich oil reserves. Then oil prices collapsed and their fall began. It was actually several decades though before it was truly evident that the country was in trouble.

Preparedness bloggers here have been sounding the warning bell since 2008 (at least) when our economy went into a recession. While the US managed to dig its way out of that to at least an illusion of renewed prosperity, it’s questionable how much of that return was real and how much of it was propaganda.

It’s unlikely that we’ll see just one event that says clearly to everyone, “Hey, our economy has collapsed. The Great Depression 2.0 has arrived, today, January 14, 2019, due to X event.”

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

The Depression of 2019-2021?

December 30, 2018

The Depression of 2019-2021?

The profound question which transcends all this day-to-day market drama over the holidays is the nature of the economic slowdown now occurring globally. This slowdown can be seen both inside and outside the US. In reviewing the laboratory of history — especially those experiments featuring severe asset inflation, unaccompanied by high official estimates of consumer price inflation — three possible “echoes” deserve attention in coming weeks and months. (History echoes rather than repeats!)

Will We Learn from History — And What Will Soon Be History?

The behavioral finance theorists tell us that which echo sounds and which outcome occurs is more obvious in hindsight than to anyone in real time. As Daniel Kahneman writes (in Thinking Fast and Slow):

The core of hindsight bias is that we believe we understand the past, which implies the future should also be knowable; but in fact we understand the past less than we believe we do – compelling narratives foster an illusion of inevitability; but no such story can include the myriad of events that would have caused a different outcome .

Whichever historical echo turns out to be loudest as the Great Monetary Inflation of 2011-18 enters its late dangerous phase. Whether we’re looking at 1927-9, 1930-3, or 1937-8, the story will seem obvious in retrospect, at least according to skilled narrators. There may be competing narratives about these events — even decades into the future, just as there still are today about each of the above mentioned episodes. Even today, the Austrian School, the Keynesians, and the monetarists, all tell very different historical narratives and the weight of evidence has not knocked out any of these competitors in the popular imagination.

The Stories We Tell Ourselves Are Important

And while on the subject of behavioral finance’s perspectives on potential historical echoes and actual market outcomes, we should consider Robert Shiller’s insights into story-telling (in “Irrational Exuberance”):

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

Mad World

November 20, 2018

MAD WORLD

And I find it kinda funny, I find it kinda sad
The dreams in which I’m dying are the best I’ve ever had
I find it hard to tell you, I find it hard to take
When people run in circles it’s a very very
Mad world, mad world

The haunting Gary Jules version of the Tears for Fears’ Mad World speaks to me in these tumultuous mad times. It must speak to many others, as the music video has been viewed over 132 million times. The melancholy video is shot from the top of an urban school building in a decaying decrepit bleak neighborhood with school children creating various figures on the concrete pavement below. The camera pans slowly to Gary Jules singing on the rooftop and captures the concrete jungle of non-descript architecture, identical office towers, gray cookie cutter apartment complexes, and a world devoid of joy and vibrancy.

The song was influenced by Arthur Janov’s theories in his book The Primal Scream. The chorus above about his “dreams of dying were the best he ever had” is representative of letting go of this mad world and being free of the monotony and release from the insanity of this world. Our ego fools us into thinking the madness of this world is actually normal. Day after day we live lives of quiet desperation. Despite all evidence our world is spinning out of control and the madness of the crowds is visible in financial markets, housing markets, politics, social justice, and social media, the level of normalcy bias among the populace has reached astounding levels, as we desperately try to convince ourselves everything will be alright. But it won’t.

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

Eric Peters: “If US Stocks Finally Crack, Most People Will Conclude We’re Headed Into Another Depression”

October 21, 2018

Eric Peters: “If US Stocks Finally Crack, Most People Will Conclude We’re Headed Into Another Depression”

Hypothetical

“I was asked to lay out the case for the US being mid-cycle,” said my favorite strategist. “Residential housing is 4% of GDP now, that’s consistent with past recessionary levels. So perhaps it jumps to 8%,” he continued.

“Equipment and machinery spending is just 6% of GDP.” Pretty consistent with previous recessions. “So maybe both expand, and incomes rise.” Which leads to higher inflation and shrinking profit margins. “Then perhaps the Fed tolerates rising prices which means that nominal growth remains strong even if real growth rates slow,” he postulated.

“So in that case, workers do better, and companies are worse off on a relative basis. But in that 7% nominal GDP world, inflation might mask the pain well enough to allow stocks to sail through,” continued my favorite strategist.

“You think about that hypothetical and it’s possible,” he said. “But then you listen to what the companies are saying, and you walk away with the sense that there’s just no way.” Homebuilding stocks are -30% from the January highs.

“If you just look across the spectrum, interest-sensitive equities are screaming late-cycle.”

“Making the mid-cycle case raised my conviction that we’re late-cycle,” he said. “America’s fiscal boost masked the natural cycle dynamics.” The US is the outlier. In dollar terms, of the major markets, only American stocks are higher on the year.

“So if US stocks catch up and crash from here, what happens next?” he asked rhetorically. “I think most people will conclude we’re headed into another depression. But I think there will be great things to buy. Probably in the places that are already crashing and burning.”

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

The Market Isn’t The Economy: A Snapshot From The Depression

October 17, 2018

The Market Isn’t The Economy: A Snapshot From The Depression

“We gathered on porches; the moon rose; we were poor.

And time went by, drawn by slow horses.

Somewhere beyond our windows shone the world.

The Great Depression had entered our souls like fog.” – Pantoum of the Great Depression – Donald Justice.

Wall Street insiders relish market troughs.

They bask sanguine in their confidence of history. Tenured pros are comforted in the belief that monetary and fiscal stimulus triggers are cocked and at the ready, reinforced in the knowledge that taxpayers without choice in the matter, will again, be the bail-out solution.

In a last irony to turn the blade in the back slowly, this group confidently takes credit for saving a system they helped to bust in the first place.

They are the strong hands who patiently await to scoop up shares when markets falter. As the smart money, these players unload inflated shares to the ‘dumb’ money or retail investors at “FOMO” or fear-of-missing-out emotional peaks.

The masses are advised to blind buy and hold. Retail investors are cajoled as “brave” if they “ride it out.” And whatever “it” is can be counted in years, even decades. Time is precious to us mere mortals. Our lives are finite; Wall Street lives on forever. The precious time it takes to break-even is ignored. Not relevant.

One of my favorite Nashville-based songwriters Drew Holcomb begins a song with a seminal line:

“Time steals every paradise I’ve been looking for.”

When Wall Street prospers, Main Street doesn’t necessarily follow a similar, prosperous path.

For example, Pew Research Center outlines that overall, American Household wealth has not fully recovered from the Great Recession. As early as 2016, median wealth of all U.S. households was $97,300; well below median wealth of $139,700 before the recession began in 2007.

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

Why Is The Media Warning A Recession Is Expected “By The End Of 2020” That Will Be “Worse Than The Great Depression”?

October 11, 2018

Why Is The Media Warning A Recession Is Expected “By The End Of 2020” That Will Be “Worse Than The Great Depression”?

The mood of the mainstream media is really starting to shift dramatically. At one time they seemed determined to convince all of us that happy days were here again for the U.S. economy, but now some mainstream news outlets are openly warning that the next recession will be “worse than the Great Depression”. Do they really believe that this is true, or is there some other purpose behind their bold headlines? Of course it isn’t exactly difficult to predict that another recession is coming, because the U.S. economy has experienced recession after recession ever since the Federal Reserve was first established in 1913. But the phrase “worse than the Great Depression” implies that what we will soon be facing will be the worst economic downturn in all of U.S. history. That is a very bold statement to make, and it should not be done lightly.

That is why I have been absolutely astounded by some of the mainstream headlines that I have been seeing lately. For example, the following comes from a New York Post article entitled “Next crash will be ‘worse than the Great Depression’: experts”…

“We think the major economies are on the cusp of this turning into the worst recession we have seen in 10 years,”said Murray Gunn, head of global research at Elliott Wave International.

And in a note, he added: “Should the [US] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue.”

And here is an excerpt from an article posted on MSN entitled “Experts warn the next recession will be ‘worse than the Great Depression’ and predict it will hit US within two years as $247 trillion global debt outdoes 2008”…

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

Why Is The Media Warning A Recession Is Expected “By The End Of 2020” That Will Be “Worse Than The Great Depression”?

October 9, 2018

Why Is The Media Warning A Recession Is Expected “By The End Of 2020” That Will Be “Worse Than The Great Depression”?

“We think the major economies are on the cusp of this turning into the worst recession we have seen in 10 years,”said Murray Gunn, head of global research at Elliott Wave International.

And in a note, he added: “Should the [US] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue.”

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

Inverted Global Yield Curve Creates “The Perfect Cocktail For A Liquidity Crunch” As The IMF Warns Of “A Second Great Depression”

October 7, 2018

Inverted Global Yield Curve Creates “The Perfect Cocktail For A Liquidity Crunch” As The IMF Warns Of “A Second Great Depression”

Why would the IMF use the phrase “a second Great Depression” in a report that they know the entire world will read? To be more precise, the IMF stated that “large challenges loom for the global economy to prevent a second Great Depression”. Are they saying that if we do not change our ways that we are going to be heading into a horrific economic depression? Because if that is what they are trying to communicate, they would be exactly correct. At this moment, global debt levels are higher than they have ever been before in all of human history, and in their report the IMF specifically identified “global debt levels” as one of the key problems that could lead to “another financial meltdown”…

The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reforms needed to protect the system from reckless behaviour, the International Monetary Fund has warned.

With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.

And the IMF report also seemed to indicate that global central banks were responsible for the situation in which we now find ourselves.

In the report, an “extended period of ultralow interest rates” was blamed for “the build-up of financial vulnerabilities”…

The IMF Global Financial Stability report read: “The extended period of ultralow interest rates in advanced economies has contributed to the build-up of financial vulnerabilities.

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

These Four Predicted The Global Financial Crisis; Here’s What They Think Causes The Next One

September 16, 2018

These Four Predicted The Global Financial Crisis; Here’s What They Think Causes The Next One

A different kind of hurricane slammed into the American East coast, the nation and ultimately the world ten years ago today.

Amidst the multiple introspective columns and soul searching that naturally occurred this week, which looked back on the missed warning signs behind the 2008 financial collapse exactly a decade ago this weekend, there is a small group of people whose opinions are actually worth paying attention to.

Though arguably no single individual accurately called all aspects of the crisis in its entirety, precipitated by the implosion of Lehman Brothers, some did very publicly predict key facets with prophetic clarity. As Market Watch’s Howard Gold explains in his profile of four analysts the world should have been listening to: “People warned about subprime mortgage loans, derivatives, and too much leverage, but nobody, to my knowledge, said a bursting housing bubble would cause a global crisis that would lead to the demise of venerable financial firms, require trillion-dollar taxpayer bailouts, and cause a recession that rivaled only the Great Depression in its magnitude.”

Trouble is like many religious prophets of ancient history, they were rejected at the time, cast as dour harbingers of gloom and doom.

*Clockwise from upper left: Gary Shilling, Jim Stack, Raghuram Rajan and John Mauldin. Via MarketWatch*

Here are four names and their very public warnings that attempted to jolt the financial and banking sectors out of their sleepy stroll toward the abyss before 2008, as well as their predictions for the next big one, and what to look out for.

Howard Gold interviewed each, and laid out the key quotes summarizing then and now…

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

Oil Prices Have Been Rising And $4 A Gallon Gasoline Would Put Enormous Stress On The U.S. Economy

September 4, 2018

Oil Prices Have Been Rising And $4 A Gallon Gasoline Would Put Enormous Stress On The U.S. Economy

Thanks to increasing demand and upcoming U.S. sanctions against Iran, oil prices have been rising and some analysts are forecasting that they will surge even higher in the months ahead. Unfortunately, that would be very bad news for the U.S. economy at a time when concerns about a major economic downturn have already been percolating. In recent years, extremely low gasoline prices have been one of the factors that have contributed to a period of relative economic stability in the United States. Because our country is so spread out, we import such a high percentage of our goods, and we are so dependent on foreign oil, our economy is particularly vulnerable to gasoline price shocks. Anyone that lived in the U.S. during the early 1970s can attest to that. If the average price of gasoline rises to $4 a gallon by the end of 2018 that will be really bad news, and if the average price of gasoline were to hit $5 a gallon that would be catastrophic for the economy.

Very early on Tuesday, the price of U.S. oil surged past $70 a barrel in anticipation of the approaching hurricane along the Gulf Coast. The following comes from Fox Business…

U.S. oil prices rose on Tuesday, breaking past $70 per barrel, after two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane.

U.S. West Texas Intermediate (WTI) crude futures were at $70.05 per barrel at 0353 GMT, up 25 cents, or 0.4 percent from their last settlement.

If we stay at about $70 a gallon, that isn’t going to be much of a problem.

But some analysts are now speaking of “an impending supply crunch”, and that is a very troubling sign. For example, just check out what Stephen Brennock is saying…

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

Depression then Hyperinflation Coming – Charles Nenner

July 21, 2018

Depression then Hyperinflation Coming – Charles Nenner

Renowned geopolitical and financial cycle expert Charles Nenner says don’t believe the Federal Reserve when it says it expects “the strong performance of the economy will continue.” According to Nenner, it’s about to go the other way—down. Nenner explains, “Definitely, later this year, the interest rates are going lower, and it could be much lower. We did work on all kinds of economic indicators. Employment is not going to be as good anymore as they say. Inflation is not going to be as strong as they expect. The commodity index is breaking down. Copper cycles are down. Crude oil cycles are down. Soon, everybody is going to wake up again and say hey, what’s going on? It is very interesting how Wall Street is approaching all the indicators. . . . If you do your homework, everything actually looks like the economy is weakening.”

How bad is this financial cycle going to get? Nenner is not afraid to use the “D” word. Nenner contends, “Still, the Fed talks like this could continue forever, and it’s the longest expansion. So, why do you think this time is going to be different? If you start with this low of GDP and interest rates and then you get to recession or depression, then you definitely get into at least disinflation.”

So, does Nenner see an actual depression coming soon? Nenner says, “Yeah, I have been saying that for many years. . . . Yes, if you look at the . . . long term cycles. Yes, we are going to a hyperinflation, but first, we are going to have a deflation scare. . . . We have one more scare of deflation before we get into real big inflation problems. It is a matter of timing. So, it could be a couple of years away.”

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

The End of Growth

June 23, 2018

The End of Growth

Either it ends, or we do.

More and more, I hear that folks are feeling frustrated and betrayed, combined with a sense of loss and despair. I feel this way, too.

As I’ve written recently, I observe this is due more than anything else to a widespread demoralization society is suffering from.

Certainly the statistics reflect this. Suicides in the US are up 30% since the turn of the millennium, obesity is at epidemic proportions, mortality rates are rising especially among white working-class Americans, and our national opioid addiction is now the “epidemic of epidemics.”

To these we can also add falling birthrates and the truly startling shift towards a younger age for the onset of depression; declining from age 30 now to age…14(!)

When an organism gives up on self-care, breeding, or its will to live, it’s suffering from a tremendous amount of strain that is cutting it off from its own life force. A dispirited lion wasting away in a cage has a lot in common with the average American today.

At a deep level, what ails us is not a host of unrelated, intractable problems, but the fact that our model of pursuing eternal economic growth simply isn’t working anymore. It doesn’t work for the planet’s increasingly strained ecosystems, nor does it work for the bottom 99% of folks in society (i.e., the non-elites).

The various health epidemics noted above are merely symptoms of a larger acute spiritual crisis.

But viewed at a certain angle, this may be a good sign.

Why? Because in order to shift from one model to another, the old one first has to become unbearable.

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

Feeling Isolated?

June 8, 2018

Shutterstock

Feeling Isolated?

If so, you’re not alone

Does anyone else in your life share your concerns for the future?

Is there someone you talk with regularly about the unsustainability of our current economic and ecological trajectories?

Do you have friends and/or family members who support your efforts to develop a more resilient lifestyle?

If you answered “no” to these questions, you’re not an outlier. In fact, the #1 most commonly-reported complaint we hear from Peak Prosperity readers is that they feel alone and isolated when it comes to the warnings delivered in The Crash Course.

The end of economic growth. Declining net energy. Accelerating resource depletion. These are MASSIVE existential threats to our way of life — to our species’ survival, even. Most PPers can’t comprehend why *everyone* isn’t obessively talking about these dangers.

But very few people are. Truthfully, most don’t want to; for a wide variety of reasons.

So that leaves us, the conscientious critical thinkers, alone by ourselves to worry and plan.

Does this sound like you? If so, read on…

Wired For Connection

Humans are biologically wired for social connection.

Until just recently, historically-speaking, humans typically existed in small tribal groups of 30-60 people, where the degree of unity and cohesiveness of the group directly determined its odds of survival. Facing constant adversity from the weather, predators, other tribes, etc — every member of the group had a role and a duty to perform.

We’ve delved into this topic deeply in the past, particularly in our podcast with Peabody Award-winning author Sebastian Junger.

In his book Tribe, Junger observes how far modern life is from the conditions our distant ancestors evolved from. We are so dis-connected from each other now that the lack of community is manifesting in alarming ways in today’s society.

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

Social Media, Not Religion, The Opium Of The People

May 7, 2018

Social Media, Not Religion, The Opium Of The People

Religious suffering is, at one and the same time, the expression of real suffering and a protest against real suffering. Religion is the sigh of the oppressed creature, the heart of a heartless world, and the soul of soulless conditions. It is the opium of the people. – Karl Marx, A Contribution to the Critique of Hegel’s Philosophy of Right

Social media is becoming the new whipping boy and poster child for all that ills our culture and contributing to its decline.

We added our two cents in a recent post, Why Google Is A Short,

…social media probably generates negative productivity. We read some time ago the average American spends 40 minutes per day playing Farmville. How does planting virtual corn add to the GDP?

Though we are more ambivalent about Google, Facebook is doing some severe psychological damage to an entire generation, including my 15-year daughter. They spend much of their time competing with trophy photos loaded up on Instagram. Never gonna win that game, which leads to increased anxiety and depression for an entire generation.

The Google Short

That brings us to the Google (we are old school and can’t bring ourselves to call it Alphabet) short.

Imagine when a politician has his/her epiphany that all those porn searches they have done over the years on Google are stored somewhere and could be hacked and released to the public? That will ignite a prairie fire of potential legislation, which will spread faster than you can say SNAP. – GMM, Apr 24th

Our Friend Weighs In

We received this email from a very close friend yesterday,

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

A Modest Plan

January 25, 2018

A Modest Plan

Rembrandt van Rijn The Storm on the Sea of Galilee 1633
On March 18, 1990, the painting was stolen by thieves disguised as police officers. They broke into the Isabella Stewart Gardener Museum in Boston, MA, and stole this painting, along with 12 other works. The paintings have never been recovered, and it is considered the biggest art theft in history. The empty frames still hang in their original location.

This is an article written by Dr. D, who last month wrote a series at the Automatic Earth entitled Bitcoin Doesn’t Exist.

It shouldn’t surprise you that bitcoin plays a cameo in his Modest -but actually quite grand- Plan as well.

Dr. D: With all the talk about the bubble market, people are once again saying Donald Trump is a fool, he should never have taken credit for a Dow that’s about to collapse. In addition, how does he think he can get away with claiming we have a great economy made greater? He said in the election the economy was terrible and the Dow was a bubble, that’s why he won.

But hold on: you have to remember, they’re politicians; they may be dishonest but they’re not stupid. Let’s try a scenario to see what they’re thinking:

We have a situation in the U.S. where 100 million people are out of the workforce, the real economy is on life-support, debt is crushing, and monetary velocity is at an all-time low. The Fed’s every effort at market-rigging, lowering rates and pumping in money, bailing out the banks and giving unearned interest for Fed deposits have run up both the housing market and the stock market, neither of which is their legal mandate. If either one goes higher, they’ll pop as workers, particularly millennials, have no income to buy houses, and stocks are levitating on just 5 insider-paid FAANG stocks.

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

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