Submitted by Charles Hugh-Smith of OfTwoMinds blog,
What I see as extremes that must necessarily end badly, others see as mere extensions of recently successful policies and trends.
A long-time reader recently chastised me for using too many maybe’s in my forecasts. The criticism is valid, as “on the other hand” slips all too easily from qualifying a position to rinsing it of meaning.
That said, given that we’re in uncharted waters, maybe’s become prudent and certainty becomes extremely dangerous. I have long held that the financial policy extremes that are now considered normal are unprecedented in the modern era: extremes in debt, leverage, risk, complexity and willful obfuscation of these extremes.
Consider the extent to which sky-high asset valuations and present-day “prosperity” depend on extremes of leverage: autos purchased with no money down, homes purchased with 3.5% down payments and FHA loans, stocks bought on margin, stock buybacks funded by loans, student loans issued with zero collateral, and so on–an inverted pyramid of “prosperity” resting precariously on a tiny base of actual collateral.
Since we have no guide to the future other than the past, we extrapolate past trends. Human nature hasn’t changed over the short time-frames of civilizations (i.e. the past few thousand years), so in terms of human drives, emotions and responses, the past is an excellent guide to the range of human responses to crisis, euphoria, greed, fear, etc.
But extending trends is a shifting foundation for forecasts, as trends end and reverse, generally without telegraphing the end of an era. Few in 1639 China foresaw the collapse of the status quo Ming Dynasty a mere five years hence.
With the hindsight of history, we can discern the cracks in the Ming Dynasty before its collapse, but once we shift to our own era, things become less certain.
In my view, we’re drifting in uncharted seas.
I have covered the dangers of certainty before: Certainty, Complex Systems, and Unintended Consequences (February 14, 2014)
What I see as extremes that must necessarily end badly, others see as mere extensions of recently successful policies and trends. Let’s review a few of the many extremes that we now accept as ordinary and harmless.
Consider how much new debt is now required to lift GDP (“growth”) off the flat line:
The slightest pause in the expansion of credit nearly collapsed the entire global economy:
Extraordinary central state and bank policies have boosted the wealth of those closest to the Federal Reserve’s money spigot and left everyone else poorer:
It’s not just real income that’s declined–so has household wealth.
Incentives to borrow money to obtain a college degree are declining while student loan debt hits astounding extremes:
Feel free to extend this line of Federally funded student debt: where does it end?
The Federal Reserve has pushed astonishingly extreme policies for six years. Now that the Fed owns significant chunks of the Treasury bond and mortgage bond markets, it’s being forced to limit these easing programs:
All the Fed money-printing and bond buying has sent money velocity in the real economy into a tailspin: this is good, right? No, actually it’s a calamity. Money has slipped into a coma.
Extend the trendlines in these charts, and then ask yourself: where do they end? What will they trigger as they push ever deeper into uncharted waters?
People all want certainty.
We want someone to tell us how it’s going to be.
This is why slavery is preferable to liberty. As Sallust wrote 2000 years ago, Most men don’t desire liberty, most only wish for a just master.
Everyone wants to live on a benign plantation where they’re told what to do but treated fairly well.
If someone comes along and says, “Hey, I’m not so sure about what’s going on,” people complain that they prefer a “man with a plan.”
No wonder political hucksters multiply like fleas on a dog.
Yes we’re at full steam in uncharted waters, and there’s a field of icebergs dead ahead!
And there are submerged rocks, blood-thirsty pirates and a looming typhoon nearby.
Oh, and did we mention that the galley is almost out of food, the tanks are almost out of water, the engine is making a weird grinding noise and we haven’t the slightest idea in what direction land may be.
But not to worry…
Cramer said the bottom is in, and we’ve had 4 days of vertical rally including today’s 1.85% (so far) moonshot.
What’s not to love and trust?
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It’s going to be fucking bloody
We have certainty. We will certainly have a disaster I don know if the graph means anything but the Cramer Indicator is really scarey. That guy is not only wrong but intentionally so. He is a Judas goat.
The ossilators are showing a short term rebound though.
Damn, but I wish I knew the future…the timing that is.
We all know that we’re in an unsustainable trend, but that was just as true 20 years ago as now. We’re just much, much higher now, and so when the dive begins it will begin from high altitude.
The sudden stop is going to hurt, but until then it’s party on, dude.
Cramer vs Casey
Cramer called the bottom, Casey is calling the top and to prepare for the worst, now.
It’s not just that the economic waters in which the average American swims are completely uncharted.
That is bad enough.
What is so freaking intolerable is that the Oligarchs keep CHUMMING the waters with their easy credit/financial theft whilst they steam by in their mega yachts sipping $500/bottle champagne.
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