The Fools In Town Are On Our Side

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Chasing the chimera of 3% growth is chasing the past. Trying to MAGA is trying to recreate yesterday. Like Humpty Dumpty you can not put American prosperity back together again. The circumstances that created that BROAD BASED MC after WW2 no longer exist. In the best case scenario America is reverting back to a demographic of 1910 economically. Small very wealthy "Robber Barron" Upper Class, smallish MC and large unwashed working poor class.

The Global economy of scale depends upon mass consumerism of that Broad Based MC, where people are continuously buying new product to feed that monster of growth. If you figure that the USA has a 21T USD economy a 3% growth rate means that it needs to grow by 630B this year and 660B next year, continuing on exponentially every year there after. At some point it does not work anymore. Consumers run out of money and credit not to mention the planets resources. Then the Global system implodes....sic deflates.

The US hit the wall in 2008, the banks had over leveraged themselves on residential RE and when my dog couldn't make the payment on the 500K loan the house of cards collapsed. Since then the economy has been struggling along, being helped by the juicing of the FED and the HEAVY deficit spending of the US government. The end result of this juicing is that the banks and corporations have returned to being healthy. Which in the scheme of things is necessary in that the modern life as constituted by the economy of scale could not continue on without those institutions functioning. NOTABLY while those institutions have amassed some 4T in ON SHORE CASH from corporate profits they have NOT DEPLOYED that capital back into job creating factories which would benefit the American people. Now why would that be? The answer is simple corporations are not going to invest capital to manufacture products where there is no one to buy them because the people do not have the where with all to do so.

The American consumer has been limping along being faced with off shoring of jobs, technology, lessor paying jobs, no more cash and credit to the eyeballs. This has been the trajectory of the American MC since 1975. The MC has shrunk and people like to cling to their guns, religion and notion that they are MC. When in fact most people no longer fit that metric. Their lifestyle is bought on credit and or increasingly government subsidies that at least keeps some food on the table. Hungry people create revolutions that get nasty real quick.

While the current tax reform bill is a transient factor in an ongoing trajectory it is worth nothing that the authors and sponsors of the bill are gambling that corporations are going to do the right thing and invest monies back into the US economy. So that not only is there a general prosperity but eventually an increased tax revenue stream to offset continually higher governmental expenditures most notably to SS and Medicare. Corporations failing to do the right thing will amount to the tax bill being a gift by the government to those corporations as the deficits will continue to explode with a vengeance.

There are two factors that are worrisome as they are not clearly defined nor dealt with in the elite leaderships assessment of the situation. The first is that the where with all of the American people to conspicuously consume as needed by the global economy is severely limited (they are broke). Secondly the governmental dynamic of the past 50 years of business as usual spending like a drunken sailor on shore leave has not abated. If the government moderated it's spending it would give the tax reform bill a better chance of being successful as it would relieve the pressure to perform.

Reality is that what broke in 2008 was not the banks who got caught holding the short end of the stick but the American people's ability to conspicuously consume. In the 2000's RE was the engine of growth and prosperity where the wealth effect propelled the economy forward. When that came to an end so did growth in the economy. There in essence is the situation and problem. Since 2008 the FED and government have picked up the spending slack with their juicing of the economies. Now with the Equity Markets as of late experiencing a "parabolic" rise and return of RE values we are once again creating a wealth effect bubble. The question here is it real or is it brought to you by the FED with it's guaranteeing an activist monetary policy and US governmental deficit spending. The FED balance sheet went from 800B in 2008 to 4.5T in 2017, that means the dollar in your pocket has lots of new siblings. The US government has gone from 11T in debt at the end of 2008 to nearly 22T at the end of 2017. All of those new USD's have to go someplace? Further deficits are set to explode as the Boomers hit SS and Medicare age. Those are contractual promises to pay the American people back for their contributions to the system for the decades of their working life.

So the question as of late becomes is the US creating another symptomatic wealth effect bubble with the rise in Equities and RE? Is this latest parabolic rise in Equities a euphoric blow off rally, only to be left with a massive hangover once the party is over? The underlying thing that makes all of this highly vaunted hoopla about a resurgent economy ring hollow is that the American people are not sharing in a broad based prosperity. They are struggling along with little or no savings and huge debts trying to make ends meet.


This is neither politics nor religion BUT economics.

[KFC911]

I enjoyed reading that...thanks!

[Crowbob]

Well put, Tabdullah praise be upon you.

Though numbers do not lie, they do not tell the entire story. Economics is essentially a social science. Rather than give up, or go on welfare, or on disability or some other unearned income scheme, there actually appears to be the beginnings of renewed faith in earning money and keeping more of it.

Previously I held the pessimist's view. That being the republic had lost its identity and with it the will to strive in the present for a better future. The populist/socialist/entitlement/dependency factions are currently in a panic.

In addition, as with all transitions there is enormous stress. Like it or not, we are now firmly wedded to global economics. It appears that this nation still has the capacity to emerge as the leader in this brave new world.

The grip held on us by the MSM seems to be weakening as we grapple with the digital age. We can fight back against open borders, corruption, political correctness, victimhood and identity politics. No one knows what it will look like when we come out the other side but it sure as hell seems to me that suddenly it is possible that we will come out the other side.

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My thinking is not tied to the Bread and Circus of the entitlement society. The rise of entitlements is more symptomatic than causation. As opportunity slips away entitlements rise to fill the gap.

The US after WW2 picked up and carried old English mercantilism to new heights creating an intertwined Global Economy of Scale. A wag might say that it is based upon USD imperialism at it's foundation. Upon this USD I build my church. Now some people might really chafe at that one but they suck off the teat of the largess that it has provided them.

Numbers are only snap shots in time. I have always taken economics as being a human endeavor and therefore organic in nature. Markets and economies react on emotion and sentiment. Thee is no way to quantify that, it is all subjective. If you can figure out the collective emotional sentiment well then.........

[Por_sha911]

Tabs, regardless of whether what you say is true, I have this one question:
Do you ever dwell on something positive or do you just walk around all day with a sandwich board saying "The end is near"?

In most cases, when it comes to economics you and I seem to have similar stances. The difference3 is that in my world (like at work but maybe you aren't familiar with that), we scorn the Negative Nancys that complain about the negatives unless they have a solution.

[pwd72s]

Bitcoin will save us, right?

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Originally Posted by Por_sha911

Tabs, regardless of whether what you say is true, I have this one question:
Do you ever dwell on something positive or do you just walk around all day with a sandwich board saying "The end is near"?

In most cases, when it comes to economics you and I seem to have similar stances. The difference3 is that in my world (like at work but maybe you aren't familiar with that), we scorn the Negative Nancys that complain about the negatives unless they have a solution.

I collect a pension from being employed.

What I have written is a realistically clear and concise assessment of the situation. There is no plus nor minus bias to it. Any negativity that you might feel is your own emotional reaction to what the reality of the situation is. The fact that you decry and castigate those that assess the situation realistically shows a level of denial and delusion in your own thinking. Part of the problem is the level of denial and delusion in the American mindset. Your unwillingness to face the facts leads to instability and furthering the seeds of your own destruction. As Lemmings march in unison to the cliff.

At some point the MD is going to tell you that there is nothing that can be done for you. At that point the solution has been presented to you, resolving the problem.

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Originally Posted by pwd72s

Bitcoin will save us, right?

Some of the old folks on this Board had parents that enlightened them about the DEpression...and as such are painfully aware of the circumstances that we face as a a nation and world. The farther away you are from those facts the less real those facts become. Until you have no conception of what reality is....

Unfortunately it seems to be the case that at that time those painful lessons are retaught...call it a primer in remedial economics.

[aschen]

The economy needs everybody to buy more junk so that everyone can buy more junk. Growth in the aggregate sense is overated

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Originally Posted by aschen

The economy needs everybody to buy more junk so that everyone can buy more junk. Growth in the aggregate sense is overated

Well yeah! It is a vicious circle that we find our selves in.

We are the dog chasing it's own tail around and around we go...the break came in 2008. Now they are doing their damdest to restart the music. Failing that we fall.

[recycled sixtie]

Tabs says the patient is dying but provides no solutions. So what will happen is the patient will die perhaps three years or fifty years from now. So he will be right either way.

[Por_sha911]

Even though it may be true, do you really want someone telling you 10 times a day "you are going to die and probably sooner than you think"? Now, if they were to say "here is your state of health but if you do thus and such you can live longer" then that is constructive warning. Otherwise, it is merely self-congratulatory pontification.

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Originally Posted by Por_sha911

Even though it may be true, do you really want someone telling you 10 times a day "you are going to die and probably sooner than you think"? Now, if they were to say "here is your state of health but if you do thus and such you can live longer" then that is constructive warning. Otherwise, it is merely self-congratulatory pontification.

What would the economy look like if the US government didn't have a 680b deficit and did not add roughly 11T to the debt since 09? Where would we be today if that didn't happen?

[Por_sha911]

I don't think you are listening to me. I have been against deficit spending since the early 70's. I have no argument with your distaste for the way our govt spends. I just don't see where for your doom and gloom pontification is of any value unless you have an answer to set us on a better course. If not, then constantly repeating "you're gonna die" is like a nagging wife: of no value and just irritating.

[fanaudical]

Here's a challenge for the group (and I'm going to play, too):

Let's assume Tabs is correct. What do we collectively do about it?

I think we all realize that we as a civilization can only produce a finite amount of "stuff" before we've consumed all resources and nobody has anything left viable to trade for the "stuff". How do we shift world economy from a "perpetual growth mode" to whatever the next phase needs to be to ensure continuity of our civilization?

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Originally Posted by Por_sha911

I don't think you are listening to me. I have been against deficit spending since the early 70's. I have no argument with your distaste for the way our govt spends. I just don't see where for your doom and gloom pontification is of any value unless you have an answer to set us on a better course. If not, then constantly repeating "you're gonna die" is like a nagging wife: of no value and just irritating.

Is there an easier way for a junkie to go through withdrawl? Until the junkie hits bottom and has a moment of clarity it is going to be more of the same old spike of smack in the arm. Always looking for that magic pink cloud high. Always looking for that next score so that they can fix and MAGA.

The reality is that every junkie is a setting sun. By keeping that reality in sharp focus you can better maintain perspective and navigate the shoals as they appear. You won't as easily be caught unawares. You.wont be gullible and taken in by the junkie jive.

Now you are looking for a way to get that next score to MAGA. That is what you want, another spike to make it all right again. Problem is you already either pawned or sold off everything that wasn't nailed down to keep that buzz going.

[manbridge 74]

My dad was a dentist and always said “We will always be able to eat because people need their teeth attended to. Even if just extractions are needed.” I think we need more real education instead of the hippy dippy degrees that produce no real value. Instead the student loans create even more debt that savers like me will be expected to pay off.

So what is the end game with all this debt? Who is going to come calling for their money and when? As in the USD will equal the Mexican peso in year 2020? 2040?

Tabs, you need to go see the new Winston Churchill movie. America needs true inspiration more than anything right now.....

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Originally Posted by fanaudical

Here's a challenge for the group (and I'm going to play, too):

Let's assume Tabs is correct. What do we collectively do about it?

I think we all realize that we as a civilization can only produce a finite amount of "stuff" before we've consumed all resources and nobody has anything left viable to trade for the "stuff". How do we shift world economy from a "perpetual growth mode" to whatever the next phase needs to be to ensure continuity of our civilization?

I call it the post industrial world. Look to the history of Western Europe after the fall of the western Roman empire. Or the end of the Egyptian Old Kingdom. Human history does not indicate easy transitions. Through out history it has been virtually cold turkey, change out of necessity not choice. Civilization will morph as the old Roman ways did into what became the Renaissance and Enlightenment.

It will be the end of the age of materialism and a return of asceticism. Less will be more. You can already see that happening with the younger generation.

[tabs]

I have laid it out before. By having clarity and definition about your situation you can keep your wits about you while others are losing their heads. If you have clarity you can withstand a lot more uncertainty, instability and fear without panicking.

If you know it is going to be painful you can grit your teeth and bear it.

[RKDinOKC]

I'd be happy to give my observation in terms I hope everyone can understand.

I mowed lawns when I was a teen. I made a LOT of money mowing lawns. I charged half what everyone else charged if you let me mow once a week instead of every 2 weeks like most did. $7 as opposed to $15. Because I mowed more often I could mulch the clippings and did not have any grass clippings to bag and take care of. I also edged before I mowed, then used the first swath around the edges to pickup and discharge the edging clippings onto the lawn so they could be mulched as well. One guy stayed home from work because he wanted to see how I mowed and edged his back yard without getting clippings in the pool. Not only a cleaner job, I could do a typical yard in 20 minutes as opposed to an hour or longer. I had 46 lawns I mowed on a weekly basis. That was only 15 hours and 20 minutes a week. Was making $300 bucks a week when minimum wage was just over $1.

Now I have neighborhood teens and my newphew's teens mow my yard. Not because I can't or don't have time, I like to feel like I am helping them like I was helped. Every teen that has mowed my yard I tell them how I used mow and the trick of mowing once a week and edging first so I didn't need a leaf blower to clean the edges. Not one of them offered to do my hard for half and mow weekly. They came by every other week or longer and spent much more time mowing my yard. None of them changed to edging first and using the mower to clean up the edges and used a blower. And every one of them let the grass get so tall it had to be caught and bagged also taking longer and left bags for me to haul to the curb on trash day. Every one of these teen quit mowing lawns and I see them working someplace like Walmart. I myself never got a job like that because I could make more money and in less time mowing yards.

That is what is wrong with America today. Ignorance does not know something. Stupid not only does not know, but does not learn.

I've also watch my local Independent Porsche shop. The owner and 2 mechanics retired. This left the son that was doing most of the work and only 1 other mechanic. He has tried over and over to hire mechanics. The problem is not that they don't know how to do the work. hey have a computer program that shows exactly what to do. The problem is they would rather talk, text, and socialize than work. I think that falls under stupid.