Economist Daniel Lacalle offers his thoughts on the European economy in a YouTube video.
What LaCalle says about the Eurozone also applies to the US.
What’s Next for America?
For a 20-point discussion of what to expect, please see Nothing is Working Now: What’s Next for America?
No V-Shaped Recovery
Here’s the correct viewpoint: The Covid-19 Recession Will Be Deeper Than the Great Financial Crisis.
Simply put, a quick return to business as usual is not in the cards.
Inflation or Deflation?
Meanwhile, the debate over inflation or deflation continues.
Will it be Inflation or Deflation?
If you believe the answer is inflation, then you do not understand the importance of credit and demand shocks. Click on the link for discussion.
Mike “Mish” Shedlock
There is no supply shock. Wiemar was the result of Germany being stripped of all its goods and resources after the war by the Treaty of Versailles .
NO inflation ? Well then, let them increase all the printing, QE, bailouts, helicopter money etc, NO problemo !
It’s not “no inflation.” It’s “inflation is already done.” And may have overshot even the Fed’s ability to sustain it.
Compare broad money / outstanding credit today with pre Fed, 110 years ago. That’s inflation we have already experienced, inflation which have distorted the economy, and inflation which have transferred resource control from competent people to FIRE racket leeches.
But to continue inflating, despite the mark to market of much of the credit which enabled that inflation up until now falling rather abruptly, is a lot harder. Which is why we may go through a bout of deflation now.
But that doesn’t in any way mean inflation is “no problemo.” Instead, inflation is exactly the “problemo.” The “problemo” behind Boeing no longer being able to build planes; behind no company being able to make ends meet in America hence moved to China; behind homeless people in every city and increasingly every town; behind self righteous halfwits screaming for totalitarian government to brutally rob children at gunpoint to “save” what they have been told is “their” “pension” despite that money having been long since burned; behind America’s younger and coming generations of best and brightest no longer being able to get together in their Palo Alto garages after work to found the next HP and Apple because they have to sit in multi hour traffic jams to the back of beyond to afford a house with a garage just so that idle, useless leeches and their banksters can collect unearned usury; and hence ultimately behind why America is no longer competitive nor competent at anything at all. Including even such fundamental basics as maintaining above replacement rate fertility. So it’ll go extinct. As befits totalitarian, financialized dumps.
If you are receiving unemployment it seems you should be able to pay your rent and other bills.
Not if the purpose of “unemployment” is anything other than to offer backhanded, lightly obfuscated, help to those you are paying rent and bills to.
Third party taxpayers are picking up the tab for this. Some/many of those just about may be OK with preventing fellow Americans from straight up starving or freezing to death.
But I suspect many fewer of them, would be willing to pay taxes simply to make sure idle landlords get to collect more usury rent than they otherwise would.
When will politicians ever learn that we get an abundance of whatever is incentivized:
Make borrowing stupidly cheap = get too much borrowing.
Prop up zombie corporations = get more zombie corporations.
Save companies with a bailout = get more companies that need a bailout.
Set unemployment benefits too high = get more unemployment.
Make mortgage forbearance mandatory = get more nonperforming mortgages.
I know@Mish has been beating the deflation drum, “If you believe the answer is inflation, then you do not understand the importance of credit and demand shocks.” There is a missing ingredient that Mish is not discussing, however. What happens when there is a collapse in the real economy due to supply shock, demand shock, and bad policy concurrent with record money creation being shoveled in to prop up unproductive assets? This has been tried before, hasn’t it? Weimar?
What do you think,@Mish ? Are all the ingredients coming into place? If not, then why not?
Important to keep in mind GDP numbers are q/q & annualized. The consensus, at least for the US, is for real GDP in dollars to not eclipse the high until 2022 or later.
This morning’s governor’s report indicated state tax revenue levels won’t return until late 2021, and that’s with aerospace manufacturing showing up to work.
“What’s Next for America?”
…
Well, if the CARES Act wasn’t bad enough for small business (UE receive $600/week in addition to states UE benefits thru July 31st. Good luck getting them back to work). Now landlords in the crosshairs.
New York Times:
#CancelRent Is New Rallying Cry for Tenants. Landlords Are Alarmed.
As unemployment soars across the country, tenants rights groups and community nonprofits have rallied around an audacious goal: to persuade the government to halt rent and mortgage payments — without back payments accruing — for as long as the economy is battered by the coronavirus.
Rent and mortgage payments should be postponed, with no requirement for “balloon” payment for all those in forced lay-off/furlough due the coronavirus lockdown. The loan term should be extended as though the time that people are in forced lay-off/furlough never existed. Everybody higher up in the pyramid scheme should suffer the same consequences as all those in the base of the pyramid.
Any forbearance needs to be negotiated between a landlord and tenant. A contract has been signed by both parties.
Many properties are owned via REITs which held by institutional investors … pensions being one.
Property tax is THE major source of tax revenue for most local governments.
“Any forbearance needs to be negotiated between a landlord and tenant. A contract has been signed by both parties.”
“A contract” also has to be interpreted, and enforced, at great expense , by a third party.
That expense needs to be covered by someone. If that someone is anyone other than whomever feels he stands to benefit from such “negotiations”, that someone is being robbed.
Now, if either of the two direct parties feels like picking up the entire cost for operating courts and police departments required for his contract’s interpretation and enforcement, fine.
But otherwise, the overriding goal is to minimize costs to third parties. Who have no business being forced to pay for any of it. And you very much don’t achieve that, by conducting millions of individual “hand billions to lawyers to bicker over pennies” negotiations.
I have no argument with your statements … but there are going to be a whole lot of legal challenges raised against contracts that were effectively abrogated by executive fiat.
RE: “Property tax is THE major source of tax revenue for most local governments.”
And there is a major conflict of interest when the party demanding payment of the property tax is the very same party that issued the executive order that forbade its citizens from earning their income to pay the tax by shutting down their employment.
As I said … Everybody higher up in the pyramid scheme should suffer the same consequences as all those in the base of the pyramid.
Banks run the show and won’t allow rent cancellation or mortgage cancellation. It feeds the trough the pigs feed in.
EU is China’s largest trading partner (and China is EU’s 2nd largest behind US).
Just waiting for the Black Swan to appear (massive devaluation of yuan) … and Mr Market’s reaction …