I had lots of fun on the Lance Roberts show today.
Every time I am on with Lance, I cannot help thinking about WLS.
On Sunday evenings, Art Roberts had an oldies show with the theme “Hey baby they’re playin our song”
Forget about that. For economic reality, check out Lance Roberts.
I do not know why my lighting is so red in the videos, it’s not shown up that way before. Otherwise the quality is good.
YouTube links follow.
The Fed Cannot Fix What’s Already Broken
https://www.youtube.com/watch?v=2S6rYEQp0Rw
Problems in the EU
https://www.youtube.com/watch?v=2vVjwLXbE-A
What the Next Recession Will Look Like
https://www.youtube.com/watch?v=LriqgegRinA
Don’t Expect a Crash
https://www.youtube.com/watch?v=T-G749kUHx8
SoundCloud Links
The Fed Cannot Fix What’s Already Broken
What the Next Recession Will Look Like
In that last clip, I side with economist Daniel Lacalle in that we will not have a “crash”.
Curiously, it will be far worse than a crash for Pension plans.
Side Notes
Recall the Buckingham’s hit “Hey Baby they’re Playin Our Song“.
The Buckinghams named their hit song after the first edition of Art’s show, on WLS in the 60’s.
Real Radio notes “The theme song was written for the show by the Chess Records studio band. Leonard Chess was one of my dearest friends and the theme song was his gift to me in 1965. I used it on WLS on Sunday nights for 5 years.”
Topics Discussed in the Podcasts
- Eight Reasons a Financial Crisis is Coming
- Expect a “Lost Decade”, Stock Market Rout “Only Just a Start”
- Junk Bond Bubble in Six Images
- Mortgage Rates Hit 7-Year High
- Tariff Scorecard: 57 Companies Bitch About Trump’s Tariffs, 7 Give Positive View
- Vanishing Middle: Political Polarization in the US and Europe
- California Ground Zero in Upcoming Real Estate Bust
- Merkel’s Legacy: Refugee crisis, the Splintering of Germany, Brexit
- Eurozone Growth Slows to 4-Year Low, Italy Stagnates, Global Recession Risk Up
We covered a lot of territory in those four clips and we both had a lot of fun doing it. Apologies for the red cast on the video from my side.
Mike “Mish” Shedlock
Let’s review how investors in government bonds get paid. They receive a credit in the currency of the country. That credit can be exchanged for paper cash, or retained in digital format, and used to exchange for other goods and services. There is nothing real about any of this, it is merely an artifical convention. And so it can go on forever, as there is nothing real there.
The day to day machinations are artificial. But they do have real effects. It’s not purely monopoly money, since the claims that the printed, and freely handed to the privileged in return for nothing, money represent; can and will be used as excuses, by courts and others, to justify sticking guns in people’s faces. Absent that crucial backing and promise of real world intervention, the game truly would be just an innocent game for toffs to play. But, that backing is there.
For awhile, this backing of the monopoly game the Fed welfare queens get to play, can be achieved by increasing the systemic debt load on the designated patsies (that’d be productive people). As that debt load is nominally a claim on the patsies’ future output. Over time, though, those debt loads become more and more farcical, as it becomes harder and harder to keep up the pretense that they will ever be repaid.
The Fed can forestall that day by constantly lowering rates, eventually into negative territory, but at some point, push will come to shove. And the claims will be tested. That’s when laws will be “amended,” or perhaps just “reinterpreted” to allow for ever more direct reinstitution of the more traditional tenets of indentured servitude. “People must work off their debt, after all,” the well indoctrinated bonobos will be told… And, being no more insightful nor intelligent than simple well indoctrinated bonobos, the bonobos will likely nod their heads in agreement….
At least they will, if The West’s more recent history is anything to go by. Back in the civilized era, those thusly designated as servants, would just pack up, get their guns, and head West. Leaving behind whatever self righteous rabble who may have insisted they held “claims” on them. Safe in the knowledge that one of the crucial features of more civilized places, is an ultimately symmetric distribution of guns. And that, no matter what money printers and ambulance chasers may do, “deem”, “find”, “hold” or “decide” wrt to the output of other people’s work, none of it really stands up to the leadslug test.
We have never truly left the last recession. It has mostly been a mirage.
Hi Mish,
I am a long time reader.
However, something is seriously wrong with your website.
The articles do NOT stay on the screen (because ads keep pushing them here and there). So, I cannot read the articles. In fact, I get severe headaches.
So, I am going to check back once in a while.
If it stays the same I am afraid I physically cannot read your articles.
It’s too bad because I have been reading your site for many, many years.
And here’s the point that you need to understand. The US Treasury borrows those dollars and it goes on the total debt taxpayers owe. The true deficit that adds to the debt is actually much higher than the number you see in the news. It brings to mind the scene in the Wizard of Oz, when they wizard says, “Pay no attention to the man behind the screen.”
Household and corporate debt is growing fast, too, and not just in the US. Here’s a note from Lakshman Achuthan.
Notably, the combined debt of the US, Eurozone, Japan, and China has increased more than ten times as much as their combined GDP [growth] over the past year.
Yes, you read that right. In the last year, the world’s largest economies are generating debt 10X faster than economic growth. Adding debt at that pace, if it continues, will boost the debt-to-GDP ratio at an alarming rate.
Lakshman continues.
Remarkably, then, the global economy—slowing in sync despite soaring debt—finds itself in a situation reminiscent of the Red Queen Effect we referenced 15 years ago, when tax cuts boosted the US budget deficit much more than GDP. As the Red Queen says to Alice in Lewis Carroll’s Through the Looking Glass, “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
I am trying to imagine a scenario in which this ends in something less than chaos and crisis. The best I can conceive is a decade-long (and possibly more) stagnation while the debt gets liquidated. But realistically, that won’t happen because debtors won’t let it, and they outnumber lenders. Hence, something like the Great Reset will happen first.
The rational course would be to delay the inevitable as long as possible. Yet in the US, at least, we’re hastening it.
Fail Fast always trumps can kicking.
By far the best course of action, is to get rid of all distortions yesterday. As then, people can get back to doing something productive again.
Things may be a bit chaotic for a short while, especially for those who the distortions have been protecting and enriching at the expense of others. But that’s no different than things perhaps being a bit chaotic for a band of thieves when the cops kick down the doors. Which is hardly reason for the cops to abstain from doing so.
Living a lie, with ones head in the sand, worried about all the, always imaginary, hobgoblins one is being told will scare one if one lifts ones head to face reality, is never a good choice. Instead, just man up, get rid of the nonsense, let the chips fall where they may, and move on to build a future in a better world. One not built solely on theft and harassment.
I do see a crash at some point because of how equities and other markets trade at nanoseconds. There is more likely to be a panic we saw b/c of how information flows. The computers can stop trading but once they start again it will be more selling. Pricing on bonds and other opaque instruments will be hard to find and that will creep into equities and the broader economy. The global debt crisis will bring down the entire globe over next half decade but things will look up as we emerge from more wars and crises by 2027. Right now each dollar spent globally creates about 8x the debt. We actually have an inverse relationship between money spent and debt. I think we will look back on 2017 and 2018 as golden years to have sold equities once all is said and done.
As long as the Fed stands ready to make up excuses for bailing out any meaningful correction in the price of stuff those whose backs it has own, any selling will be counteracted by dip buying by those betting on the Fed.
The pension plans need lower interest rates. Higher interest rates would be deadly.
Actually pensions like higher interest rates. Easier to buy bonds and predict returns.
Great conversation.
For America – it sounds like seven lean years of negative 7% contractions (on average), per year, is coming.
It will start with the housing bubble popping. Then spread.
Very few safe harbors. Gold. Cash. Treasuries. Maybe emerging markets.