Home » Posts tagged 'depression'

Tag Archives: depression

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Desperate Money Printing Leads to Depression – Dr. Marc Faber

Desperate Money Printing Leads to Depression – Dr. Marc Faber

Legendary investor, economist and market forecaster Dr. Marc Faber thinks central banks (CB) are not going to cut back the money printing.  Just the opposite.  He predicts CBs are going to print even more money at a faster pace to hold the failing economic system together for a little while longer.  Dr. Faber explains, “What is perceived to be safe, namely cash, isn’t safe anymore.  It is unsafe.  You ask me what is safe?  I don’t know what is safe anymore when you have money printers who print money indefinitely.  I don’t think they can stop.  I actually think they have to accelerate their money printing.  So, stocks may go up, but in real terms, it doesn’t mean your standard of living will go up.  Maybe the standard of living of the 50 richest people in the world will go up, but not the standard of living of the typical American . . . or the average American.  That standard of living will go down. . . . All the money printing is a desperate measure to keep the voters from rebellion.”

Dr. Farber predicts that not only are we going to see more asset inflation, but dramatic wage inflation too.  Dr. Faber, who holds a PhD in economics, says, “What I think will happen, and most people have not really considered, we will get wage inflation.  For the first time since the late 1970’s, we will get accelerating wage inflation, and in some cases, quite dramatic.   In some states, the minimum wage is $15.  I could see that going up to $30 per hour very quickly.  I don’t think inflation is ‘transitory’ (as the Fed proclaims).  We will not have stagflation.  We will have something worse.  We will have rising prices and a depression in the standard of living of most people.”

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

 

 

What Will You Do When Inflation Forces U.S. Households To Spend 40 Percent Of Their Incomes On Food?

What Will You Do When Inflation Forces U.S. Households To Spend 40 Percent Of Their Incomes On Food?

Did you know that the price of corn has risen 142 percent in the last 12 months?  Of course corn is used in hundreds of different products we buy at the grocery store, and so everyone is going to feel the pain of this price increase.  But it isn’t just the price of corn that is going crazy.  We are seeing food prices shoot up dramatically all across the industry, and experts are warning that this is just the very beginning.  So if you think that food prices are bad now, just wait, because they are going to get a whole lot worse.

Typically, Americans spend approximately 10 percent of their disposable personal incomes on food.  The following comes directly from the USDA website

In 2019, Americans spent an average of 9.5 percent of their disposable personal incomes on food—divided between food at home (4.9 percent) and food away from home (4.6 percent). Between 1960 and 1998, the average share of disposable personal income spent on total food by Americans, on average, fell from 17.0 to 10.1 percent, driven by a declining share of income spent on food at home.

Needless to say, the poorest Americans spend more of their incomes on food than the richest Americans.

According to the USDA, the poorest households spent an average of 36 percent of their disposable personal incomes on food in 2019…

As their incomes rise, households spend more money on food, but it represents a smaller overall budget share. In 2019, households in the lowest income quintile spent an average of $4,400 on food (representing 36.0 percent of income), while households in the highest income quintile spent an average of $13,987 on food (representing 8.0 percent of income).

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

Inflation watch: Beware the ides of March

Inflation watch: Beware the ides of March

President Biden has now had his $1.9 trillion stimulus package passed into law, and it will not be the last in the current fiscal year. Covid is not over and is sure to resurge with new variants next winter.But even assuming that is not the case, we still have to contend with the aftermath of the pre-covid conditions, whereby banks had run out of balance sheet capacity combined with trade tariffs predominantly aimed at China. These conditions were a doppelganger for late-1929, and between 8 February and 20 March the S&P500 index faithfully tracked a similar course to that of October 1929.

As far as possible, this article quantifies inflationary financing of government spending from March to September last year, and already sees evidence on the CBO’s own figures of that exceptional covid response being exceeded in the first half of the current fiscal year just ending. It points to something which no one has really foreseen, that the rate of monetary inflation has increased beyond the banking system’s capacity to accommodate it.

Even if the US manages to emerge from lockdowns in the coming months, the legacy of the turn in the credit cycle, trade tariffs and supply chain disruption threatens a full-scale depression. There can be no doubt monetary inflation will accelerate, and we are beginning to see the consequences in rising bond yields.
Introduction

It is nearly a year since the Fed on 23 March 2020 responded to stock market pressures and cut its funds rate to the zero bound and followed that three days later by increasing quantitative easing to $120bn every month. A further $300bn credit was to be directed at businesses, employers and consumers. The Primary Market Corporate Credit Facility and the Secondary Market Corporate Credit Facility allowed the Fed to directly support corporate bond prices for large employers.

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

The First “Global Inflationary Depression” Is Very Possible

The First “Global Inflationary Depression” Is Very Possible

It is possible that we might soon be witness to the first global inflationary depression. This is not a mix of words we normally see placed together. Several factors make this scenario possible. First, we seldom have depressions but instead, tend to roll through mild recessions, however, what we face may be far more severe. Second, in the past, times of falling economic activity have generally been deflationary as defaults rise but this time, not so much. Third, but not least, in the past, many events tended to be regional rather than global, but over the years as economies have become more interconnected the resulting codependency presents an increased possibility of problems spreading across the world.Currently, the biggest source of demand comes from governments and not working people earning a living or businesses growing. If you remove all the money being spent on Covid-19 vaccinations, tests, and a slew of inefficient spending that has created little long-term benefits to the economy the GDP would fall like a stone. The money flowing from the central banks and governments has created the so-called “pent up demand” we have been hearing about and predictions of 5% or more GDP growth next year. In truth, capacity utilization is down even while trillions of new dollars pour into the system. This is the logic behind saying a depression may be in the wings.

China’s Economy Shows Signs Of Slowing

Recently several articles have appeared indicating the big boost China experienced post-Covid-19 has come to an end. China’s economy was the first to recover from the Covid-19 collapse due to trillions of credit pumped into the economy at home as well as Americans rushing out to buy imported goods using stimulus money…

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

 

Deflation: Friend or Foe?

Deflation is the most feared economic phenomenon of our time. The reason behind this a priori irrational fear (why should we be afraid of prices going down?) is the Great Depression. The most severe economic crisis of the 20th century was accompanied by a massive deflationary spiral that pushed prices down by 25% between 1929 and 1932 (this is equivalent to an annualized inflation rate of minus 7% over that period). Given the impact that the Great Depression had on the social imaginary of the American and European societies, it isn’t surprising that people tend to associate deflation with crises and economic hardship.

Fears of deflation have even led monetary authorities all over the world to set positive inflation targets. The ECB, for instance, defines price stability as an annual inflation rate of “below, but close to, 2%” even though, strictly speaking, price stability should imply that an annual increase in the price level of 0%.  Similarly, the Federal Reserve aims at an inflation rate of 2% over the long run, whereas the Reserve Bank of Australia has an inflation target of between 2 and 3%.

Despite the bad press deflations gets, the historical evidence suggests that deflation isn’t as bad as people may think. Using a sample of 38 countries over the period 1870-2013, four economists from the Bank for International Settlements find that, on average, countries experienced economic growth during deflation years. In fact, if we look only at the postwar era, data reveals that per capita growth has been higher during deflation years as opposed to inflation years.

This isn’t the only piece of evidence that supports the idea that deflation isn’t necessarily detrimental to economic growth. A 2004 paper covering 17 countries show that the Great Depression is the only period in the 19th and 20th centuries in which there is a strong link between deflation and depression…

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

Lockdowns Make Time Stand Still


Rembrandt van Rijn Student at a table by candlelight c.1642
We would by now have expected the narrative surrounding COVID19 to be simpler to understand, but it’s not. We may understand much more about the disease and everything that has to do with it, but we’re finding there is so much that has been left unsaid, not discussed, neglected.

The discussion has been stuck in an All Else Being Equal (Ceteris Paribus) mode, but all things do not remain equal. It’s not even as if you get rid of the disease, all your problems go away. Not only do various COVID measures inflict huge damage on economies, on people’s jobs and incomes, they also cause entire new sets of health problems.

Epidemiologists and virologists are not equipped for such massive problems. They may be able to say the odd wise word in their field -and even that will be 90% rear-view mirror stuff, because they must compare what they see to what happened in the past-, but the disease doesn’t only affect their field. It affects many fields they have no knowledge of.

Their ideas are then taken on board by economists, not exactly the most scientific of sciences, and off go the government policies. But that was 6-7 months ago, and we learned so much since, right? By now we have involved for instance mental health experts on a large scale, right? Yeah, sure.

The point is, you can’t force lockdowns, masks etc. onto people, without looking at what the consequences of that will be. Because all things do not remain equal for 6-7 months.

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

How to Tackle the Depression Head On

How to Tackle the Depression Head On

“I want to see people get money.” – Donald J. Trump, U.S. President, September 17, 2020

“Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet.” – Steven Mnuchin, U.S. Secretary of the Treasury, September 14, 2020

Money for the People

The real viral contagion that has infected the American populace is not an illness of the body.  It’s something far worse than COVID-19.  The American populace is suffering from an illness of the mind.

The general malady, as we diagnose it, is the unwavering belief that the government has an endless supply of free money, and the expectation that everyone, except the stinking rich, has claim to it.  Why pursue self-reliance and independence when a series of stimulus acts promises the more abundant life?  This viral contagion’s really ripped through the population in 2020.

For example, just a year ago, the American populace thought they could all live off the forced philanthropy of their neighbors.  That to pay Paul you had to first rob Peter.  The CARES Act proved to Boobus americanus that, without a shadow of a doubt, there’s free ‘money for the people’ in Washington.  Sí se puede!

This week the Congress did its part to further the greatest show on earth.  The people want stimulus.  Congress intends to get to them, in good time.

Of course, the need to sprinkle the Country with printing press money was already a foregone conclusion.  There was no discussion of the wisdom of not having a stimulus bill.  The debate at hand was centered on how much.

Crazy Nancy wants $3.4 trillion.  Senate Republicans want $500 billion.  Something called the House Problem Solvers Caucus wants $2 trillion.

President Trump wants Republicans to “go for the much higher numbers.”  His rationale: “it all comes back to the USA anyway (one way or another!).”

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

Harvest at Chez Cog

HARVEST AT CHEZ COG

It became obvious to Mrs. Cog and I by early February of this year (2020) that the next phase of socioeconomic crumble/chaos was being implemented both here in the USA as well as throughout the world. The rabbit hole just got deeper. Or more accurately, the deeper rabbit hole was just revealed.

Regardless of whether one believes the COVID-19 pandemic is real or not (we fall into that vast gray area in-between, which we are confidently informed by the mainstream media doesn’t actually exist) what is extremely hard to deny is the pandemic is being used politically to further enrich the already obscenely rich while turning the little people screws even tighter.

Case in point….27 million people remain unemployed (with more to follow as we enter the next stage of Great Depression 2.0) while the personal wealth of Jeff Bezos just passed $200 Billion…essentially doubling in less than 7 months.

For those of you who are like me and have a hard time with large numbers (I’m lost after counting 10 fingers and 10 toes) 200 billion is 200,000 times one million dollars. One billion is a thousand million. 200 billion is two hundred thousand million.

Clearly Bezos doesn’t need to sweat the rent or mortgage.

What this all meant to us back in February was we needed to accelerate our plans to install a greenhouse, along with other final touches to our little homestead we call home sweet home. While the capital improvements are never finished, the greenhouse was the last major building block we’d planned for many years.

Like busy beavers trying to beat the rising creek, we have been going non-stop since spring. Not only did I personally build and install the greenhouse on top of the contractor assisted leveled and graveled building pad (I also trenched in water and electric) but we also expanded the tilled portion of our fenced in garden by about 30%. This was all above and beyond the ‘normal’ things that need to be done in order to maintain our semi self sufficient lifestyle.

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

The Numbers Tell Us That The ‘Economic Recovery’ Is Dead And Businesses Are Failing At A Staggering Pace

The Numbers Tell Us That The ‘Economic Recovery’ Is Dead And Businesses Are Failing At A Staggering Pace

Even though economic conditions were absolutely awful, during the month of June the mainstream media kept insisting that the U.S. economy was “recovering” and the stock market kept surging on every hint of good news.  But now the “economic recovery” narrative is completely dead, because the numbers clearly show that the U.S. economy is rapidly moving in the wrong direction.  On Thursday, the Labor Department announced that another 1.416 million Americans filed new claims for unemployment benefits last week.  Prior to this year, the all-time record for a single week was just 695,000, and so we are talking about a level of unemployment that is absolutely catastrophic.  But what is really alarming many analysts is that the number for last week was quite a bit higher than the number for the week before.  Many states are rolling out new restrictions as the number of confirmed COVID-19 cases continues to surge, and this is having a huge impact on economic activity.  For months I have been warning that fear of COVID-19 would prevent economic activity from returning to normal levels for the foreseeable future, and that is precisely what has happened.

Overall, more than 52 million Americans have filed new claims for unemployment benefits over the past 18 weeks, and that makes this the biggest spike in unemployment in U.S. history by a very wide margin.

In fact, this dwarfs all previous spikes by so much that the others are not even worth mentioning.

Of course it isn’t just the employment numbers that are depressingly bad.  According to Jefferies, in late June 19 percent of all U.S. small businesses were closed, but now that number has risen to 24.5 percent

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

The new deal is a bad old deal

The new deal is a bad old deal

So far, the current economic situation, together with the response by major governments, compares with the run-in to the depression of the 1930s. Yet to come in the repetitious credit cycle is the collapse in financial asset values and a banking crisis.

When the scale of the banking crisis is known the scale of monetary inflation involved will become more obvious. But in the politics of it, Trump is being set up as the equivalent of Herbert Hoover, and presumably Joe Biden, if he is well advised, will soon campaign as a latter-day Roosevelt. In Britain, Boris Johnson has already called for a modern “new deal”, and in his “Hundred Days” his Chancellor is delivering it.

In the thirties, prices fell, only offset by the dollar’s devaluation in January 1934. This time, monetary inflation knows no limit. The wealth destruction through monetary inflation will be an added burden to contend with compared with the situation ninety years ago.

Introduction

Boris Johnson recently compared his reconstruction plan with Franklin D Roosevelt’s New Deal. Such is the myth of FDR and his new deal that even libertarian Boris now invokes them. Unless he is just being political, he shows he knows little about the economic situation that led to the depression.

It would not be unusual, even for a libertarian politician. FDR is immensely popular with the inflationists who overwhelmingly wrote the economic history of the depression era. In fact, FDR was not the first “something must be done” American president, a policy which started with his predecessor, Herbert Hoover. But the story told is that FDR took over from heartless Hoover who had failed to step in and rescue the economy from a free-market catastrophe, by standing back and letting events take their course instead.

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

Drumbeats of the Epocalypse: The Economic Death March Has Come to Town!

Drumbeats of the Epocalypse: The Economic Death March Has Come to Town! 

Photo of breadlines during the Great Depression

The coronavirus pandemic inflicted a “swift and massive shock” that has caused the broadest collapse of the global economy since 1870 despite unprecedented government support, the World Bank said.

“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions Ceyla Pazarbasioglu….

The depth of the crisis will drive 70 to 100 million people into extreme poverty.

Yahoo! News

The Depression is deep, and the pain is wide.

Yet, the NADAQ is a rocket, attempting to break out of earth’s atmosphere. As I wrote several days ago and reiterated yesterday, saying I’d follow up with greater detail today, this bubble in stocks is the most extreme euphoria ever seen. It will, however, blow when the initial burst of good news from reopening gives way to the reality of all that did not recover after reopening.

That endless lineup of headlines is arriving now.

Since COVID-19 has been rebuilding its claimed outbreaks around the nation in the news, the market has become troubled, knocking the S&P 500 and the Dow back down to that seemingly magical 61% retracement fibonacci line on the charts that really big rallies after really big crashes like to top out at. 

As I mentioned yesterday, the Nasdaq has pressed on ahead in a tear. Here is how it looks relative to the rest of the economy (GDP). See if this picture looks stable to you:

Northman Trader

And how well did that work out last time?

“Ahh,” you may say, “but this time it is only because then denominator (GDP) has crashed so hard.” 

“Nay,” I say.

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

Global Trade Recovery Could Be Weakened By Multiple Disputes

Global Trade Recovery Could Be Weakened By Multiple Disputes

According to CPB Netherlands Bureau for Economic Policy Analysis, world trade experienced an “unprecedented” decline in April as major economies suffered from strict lockdowns due to coronavirus. The volume of global trade in goods dropped by 12.1% MoM in April (the largest monthly contraction since records began in 2000). On a three-month moving average, the index was also down 7.2% in April (largest decline since March 2009) and should contract even more in May.

However, WTO Director‑General, Roberto Azevêdo, noted that “The fall in trade we are now seeing is historically large – in fact, it would be the steepest on record. But there is an important silver lining here: it could have been much worse.” In the details, the latest WTO report highlighted that “In light of available trade data for the second quarter, the April forecast’s pessimistic scenario, which assumed even greater health and economic costs than what had transpired, appears less likely.”

As a matter of fact, latest high frequency data suggest that the worst seems behind us (if there is no second coronavirus wave later this year) with the Baltic Dry Index recovering since late May/early June. Looking at the 20-day moving average, the index could even turn positive on a YoY basis in early July.

The ongoing normalization (reopening) in China, Eurozone, several U.S. states and Asian countries imply that both private investment and household expenditures will mechanically rebound from 3Q20 so that global trade growth will exit almost two years of recession.

Nevertheless, excluding several risks such as a second coronavirus wave, several trade disputes could slow the recovery. First of all, the long-lasting clash between U.S. and China. Despite positive comments from U.S. officials, the latest figures showed that, even if China boosts significantly its purchases of U.S. goods, it will be far from meetings U.S. demands defined in the “phase one” agreement.

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

Americans Have Already Skipped Payments On More Than 100 Million Loans, And Job Losses Continue To Escalate

Americans Have Already Skipped Payments On More Than 100 Million Loans, And Job Losses Continue To Escalate

Those that have been hoping for some sort of a “V-shaped recovery” have had their hopes completely dashed.  U.S. workers continue to lose jobs at a staggering rate, and economic activity continues to remain at deeply suppressed levels all over the nation.  Of course this wasn’t supposed to happen now that states have been “reopening” their economies.  We were told that things would soon be getting back to normal and that the economic numbers would rebound dramatically.  But that is not happening.  In fact, the number of Americans that filed new claims for unemployment benefits last week was much higher than expected

Weekly jobless claims stayed above 1 million for the 13th consecutive week as the coronavirus pandemic continued to hammer the U.S. economy.

First-time claims totaled 1.5 million last week, higher than the 1.3 million that economists surveyed by Dow Jones had been expecting. The government report’s total was 58,000 lower than the previous week’s 1.566 million, which was revised up by 24,000.

To put this in perspective, let me once again remind my readers that prior to this year the all-time record for a single week was just 695,000.  So even though more than 44 million Americans had already filed initial claims for unemployment benefits before this latest report, there were still enough new people losing jobs to more than double that old record from 1982.

That is just astounding.  We were told that the economy would be regaining huge amounts of jobs by now, but instead job losses remain at a catastrophic level that is unlike anything that we have ever seen before in all of U.S. history.

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

No, The U.S. Economy Will Definitely Not Be Returning To “Normal”. In Fact, Things Will Soon Get Even Worse.

No, The U.S. Economy Will Definitely Not Be Returning To “Normal”. In Fact, Things Will Soon Get Even Worse.

2020 has been quite a year so far.  It has been one nightmare after another, and yet the economic optimists continue to insist that economic activity will soon snap back to normal levels somehow.  So the economic optimists aren’t really alarmed by the fact that the core areas of our major cities have been torched, gutted and looted by rioters, because they assume that all of this violence is just a temporary phenomenon and that any damage that has been done can be repaired.  And they aren’t really alarmed by the fact that the COVID-19 pandemic is starting to escalate again.  In fact, over the last seven days we have seen the number of newly confirmed cases around the globe hit levels that we have never seen before.  They just assume that “the worst is behind us” and that the vast majority of the businesses and jobs that have been lost during this pandemic will be quickly recovered.

Wouldn’t it be wonderful if they were actually correct?

Sadly, the truth is that economic conditions will not be returning to normal.  Yes, some of the jobs that were lost will be recovered as states start to “reopen” their economies.  But more than 100,000 businesses have already permanently closed during this new economic downturn, and all of those jobs are lost forever.

And yes, the level of economic activity will rise as states end their lockdowns, but it will still be much lower than it was before COVID-19 started spreading like wildfire in the United States.

At this point, even the perpetually optimistic OECD is admitting that global economic activity as a whole will be way down in 2020

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

Most U.S. States Have ‘Reopened’ Their Economies, So Why Does Unemployment Continue To Spiral Out Of Control?

Most U.S. States Have ‘Reopened’ Their Economies, So Why Does Unemployment Continue To Spiral Out Of Control?

This wasn’t supposed to happen.  Once states started to “reopen” their economies, the tsunami of unemployment was supposed to end.  But instead, we continue to see Americans lose jobs at a pace that is far beyond anything we have ever seen before in all of U.S. history.  All the way back in 1982, there was a week when 695,000 Americans filed initial claims for unemployment benefits, and that all-time record was never broken until this year.  Of course we have seen monster number after monster number here in 2020, and we just learned that last week another 1.877 million Americans filed new claims for unemployment benefits…

Filings for unemployment insurance claims totaled 1.877 million last week in a sign that the worst is over for the coronavirus-related jobs crisis but that the level of unemployment remains stubbornly high.

Economists surveyed by Dow Jones had been looking for 1.775 million new claims. The Labor Department’s total nevertheless represented a decline from the previous week’s upwardly revised total of 2.126 million.

So even though more than 40 million Americans had already lost their jobs in 2020, there were still enough people losing their jobs last week to surpass the old record from 1982 by more than a million.

Just think about that.

Overall, a grand total of 42.6 million Americans have now lost their jobs since the pandemic began, and that makes this the largest spike in unemployment in all of U.S. history by a very wide margin.

And when the monthly employment report comes out on Friday, the official U.S. unemployment rate is expected to surpass 20 percent

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
Click on image to purchase