Home

If health is wealth, and it most certainly is the highest form of wealth, then we would be well-served to take charge of our health-wealth in terms of what behaviors we can sustainably modify. Longtime correspondent J.F. (MD) recently shared a fascinating graphic ranking the leading causes of death in the U.S. (2016 data, pre-pandemic) compared to searches on Google and what the media reports.

Borrowing a quarter of the nation’s entire economic output every year to prop up an ineffective, corrupt status quo is putting a Band-Aid over a tumor. If we misdiagnose the disease, our treatment won’t work. We’re all familiar with medical misdiagnoses, which lead to procedures and prescriptions that can’t possibly fix the patient’s illness because the source has been missed or misinterpreted.

If you think this scale of stimulus is sustainable and consequence-free, you must be mainlining. Wall Street’s euphoria knows no bounds, so how can this be the Winter of Our Discontent?

Perhaps we have collectively “lost our mind.” Perhaps what we need is not a new technology but a new way of living that uses existing technologies to echo “old ways” that worked rather well on much lower energy consumption. The Great Reset is much in the news–the proposed top-down plan for combating climate change designed by the global elites, who then as now will be jetting around in private aircraft while dictating exactly how the rest of us will reduce our carbon footprints.

Oops. Looks like the Fed’s magic (and our luck) have finally run out. Now that we’re teetering on the edge of the cliff, it might be a good idea to retrace how we stumbled down to this crumbling, precarious ledge. As I’ve discussed for the past 15 years, there are a handful of systemic forces that have taken us to the point of no return.

The U.S. stock and bond markets and its entire financial system now teeter on the edge of collapse if there is even a slight hint that 1) the Fed won’t give more free candy to Wall Street or 2) the Fed has lost control of the Dead Money Economy it has created.

One glance at this chart explains why the status quo is locked on “run to fail” and will implode in a spectacular collapse of the unsustainable debt super-nova.. For those who suspect the status quo is unsustainable but aren’t quite sure why, I’ve prepared a simple chart that explains the financial precariousness many sense.

This essay from June 2008 continues to receive reader comments, so I’m republishing it here in 2021 as an offering to new readers. I’m not trying to be difficult, but I can’t help cutting against the grain on topics like surviving the coming bad times when my experience runs counter to the standard received wisdom.

Poor powerless Fed, poor starving cannibals, poor zombies turning to dust. That’s the American economy once the curtains are ripped away. Setting aside the fictional flood of zombie movies for a moment, we find the real-world horror is the cannibalization of our economy, a cannibalization that is now complete.

The “wait and see” economy is about to face its moment of truth, and one truth is the $1.8 trillion being passed out like candy is already spent. The defining phrase of the U.S. economy for the past year is “wait and see”: every enterprise impacted by the pandemic that didn’t close immediately has been in “wait and see” mode, clinging on to the hope that once the pandemic ends then everything will roar back to life, bigger and better than before.

Those looking up from their “free fish!” frolicking will see the tsunami too late to save themselves. It’s an amazing sight to see the water recede from the bay, and watch the crowd frolic in the shallows, scooping up the flopping fish. In this case, the crowd doing the “so easy to catch, why not grab as much as we can?” scooping is frontrunning inflation, the universally expected result of the Great Reflation Trade.

The over-indebted, overcapacity global economy an only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral. For those seeking a summary, here is the global financial endgame in fourteen points:

The mutually reinforcing crises aren’t in the future, they’re here now, and Jay Powell’s shuck-and-jive has lost its magical powers to cloak the rot with speculative bubbles. How many more times do we have to watch Jay Powell claim his speculative bubble isn’t a bubble, and that his massive expansion of billionaires’ fortunes will magically create jobs for all those living in the real world he’s created of stagnation, social depression and inequality?

Any economy stupid enough to rely on the insane distortions of GDP “growth” as its primary measure will richly deserve a Darwin Award when it inevitably collapses in a putrid heap of squandered resources and capital. We’re told the gross domestic product (GDP) measures growth, but what it really measures is waste: capital, labor and resources that are squandered and then mislabeled “growth” for PR purposes.

Perhaps we need an honest national dialog about declining expectations, rising inequality, social depression and the failure of the status quo. Even as the chirpy happy-talk of a return to normal floods the airwaves, what nobody dares acknowledge is that “normal” for a rising number of Americans is the social depression of downward mobility and social defeat.

Is that really what you want to spend your time doing, paying higher taxes? “No matter how much money I make, they will always print more. I can’t print anymore time.”

Kill authentic price discovery, you also kill markets, and in killing markets, you kill allocation of capital and risk management, and in killing those, you kill the economy. Back when prosperity was authentic, the Federal Reserve had little need for public relations.