Guest Post by Jim Kunstler
The blow-off orgy in the stock markets is supposedly America’s consolation prize for what many regard as the electoral bad acid trip of the Trump presidency. Sorry to tell you, it’s just another hallucination, something you’re going to have to come down from. Happy landings!
While the markets have roared parabolically up, in Technicolor, with sugar-on-top, that ole rascal, Reality, is working some hoodoo in the other rings of this psychedelic circus: namely the dollar and the bond market. The idiots on NPR’s Marketplace and the Cable TV financial shows haven’t noticed the dollar tanking the past several months or the interest rates creeping up in the bond markets. Well, isn’t that the point of living as if anything goes and nothing matters, the mantra of the age?
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Alas , things are connected and consequences await. It would be rich if a flash crash ripped the Dow, S & P, and the Nasdaq to shreds twenty minutes after the Golden Golem of Greatness finished schooling the weenies of Davos on the bigly wonderfulness of his year in office. In fact, it would be a crowning comic moment in human history. I can imagine Trump surrounded by the fawning Beta Boys of Banking as the news comes in. Poof! Suddenly, he is alone in the antechamber backstage, nothing left of his admirers but the lingering scent of aftershave. The world has changed. The dream is over. In the mirror he sees something that looks dimly like Herbert Hoover in a polka-dot clown suit, with funny orange wig….
A financial smash-up is really the only thing that will break the awful spell this country is in: the belief that everyday life can go on when nothing really adds up. It seems to me that the moment is close at hand. Treasury Secretary Mnuchin told the Davos crowd that the US has “a weak dollar” policy. Is that so? Just as his department is getting ready to borrow another $1.2 trillion to cover government operations in the year to come. I’m sure the world wants nothing more than to buy bucket-loads of sovereign bonds backed by a falling currency — at the same time that the Treasury’s partner-in-crime, the Federal Reserve, is getting ready to dump an additional $600 billion bonds on the market out of its over-stuffed balance sheet. I’d sooner try to sell snow-cones in a polar bomb-cyclone.
When folks don’t want to buy bonds, the interest rates naturally have to go higher. The problem with that is your country’s treasury has to pay the bond-holders more money, but the only thing that has allowed the Treasury to keep borrowing lo these recent decades is the long-term drop of interest rates to the near-zero range. And the Fed’s timid 25-basis-point hikes in the overnight Fed Fund rate have not moved the needle quite far enough so far. But with benchmark ten-year bond rate nosing upward like a mole under the garden toward the 3.00 percent mark, something is going to give.
How long do you think the equity indexes will levitate once the bond market implodes? What vaporizes with it is a lot of the collateral backing up the unprecedented margin (extra borrowed money) that this rickety tower of financial Babel is tottering on. A black hole is opening up in some sub-basement of a tower on Wall Street, and it will suck the remaining value from this asset-stripped nation into the vacuum of history like so much silage.
Thus will begin the harsh era of America screwing its head back on and commencing the salvage operation. We’ll stop ricocheting from hashtag to hashtag and entertain a few coherent thoughts, such as, “…Gee, it turns out you really can’t get something for nothing….” That’s an important thought to have when you turn around and suddenly discover you’ve got nothing left.
Kunstler is way outside of his area of relevant knowledge with this article, and trying to pretend he isn’t.
Kunstler’s shots at Trump are silly and pointless, but his points about the strip mined and financialized American economy and government(s) are completely correct. The 1929 blowoff rally went on for 8 months AFTER the Fed had started pulling the plug, and with trade declining…then came the moment of reality.
Very well said, anon
Kunt – “electoral bad acid trip of the Trump presidency”
Suggest you head over to below link: Big List of 178 Trump accomplishments in 367 days
http://www.wnd.com/2017/11/4621979/
To me, it’s like a good acid trip.
The trip is good so far, but it will all evaporate in the wake of any amnesty deal, or if Trump fails to punish the large number of treasonous individuals in the FBI, DOJ, etc…..
“Well, isn’t that the point of living as if anything goes and nothing matters, the mantra of the age?”
I think the above is what we were thinking as HS juniors and seniors
actually. “Acid” was everywhere, abundant and cheap. Way cheaper
than a movie ticket. Some shitbags in gov were sending that stuff
(and more) raining down in my city at the time. Now it is raining
heroin and speeds and medical opiates. The mantra is “kill the sheep
in every way possible/and make em” suffer”….to reference a Jewish
sentiment in a prior posting…some wish for revenge.
I can’t imagine anyone having an adjustable rate mortgage in this day of zero down, zero interest, and zero accountability, but in the 80s, when the First Government Bailout occurred coinkydinkily with Bush the Elder’s signature on it, there were a whole lot of changes made to the way the banking industry does business. Foundations too.
Being a young adult in the early 1980s really sucked. Jobs were scarce and Nancy was telling us all to Just Say No to drugs while Ollie was hauling them into Mena, Arkansas while arming a bunch of Freedom Fighters trying to take over a nation overrun by feudal drug lords and corrupt police agencies. Our friends and family were strewn across the country as industries shifted from suburban community centered customer bases to centralized, computer-driven societies where the customer could be increasingly conditioned to interface with screen and machine. By the time Microsoft became a household name and windows opened up to show us a different sort of world, the idea of everyone using their home as collateral for thousands of dollars worth of unsecured debt, much spent for meals and entertainment, was not only common, it had grown expected as a way of life for a middle class formerly working in large manufacturing facilities, usually on union wage scale.
With corporations downsizing and moving operations overseas, those attempts to hide a middle class slowly falling into poverty catapulted us into the dotcom bubble. We never recovered any true fiscal restraint after the Carter years. Ronnie was a true patriot, I believe, but he was also the world’s biggest delegator. He trusted those military experts and some of them got us where we needed to be. Others? There are always snakes in the grass. They set up the biggest Defense Contracts swindle since someone sold that Trojan Horse idea to the leaders of Troy. Now they are called government partners in the public-private sphere which controls where all the tax dollars come from and where they are spent.
Bond rates will rise and that will cause interest rates to rise. Money will leave the stock market but any large crashes will be mysteriously halted by late-day trading. That will continue off and on for a month or so until they have managed to squeeze every drop of blood from you and your children’s children. Then, the crash will be allowed.
So, yes. Happy Landings.
And Happy Trails. Today, I see the dentist and will get fitted for a crown.
Finally, my kingdom awaits.
Very nice compilation Maggie. The 80’s also saw 21% interest on
any personal loans. It wasn’t until the 90’s that 8% was considered
a great “deal” for a home loan. This administration/and especially
former administrations, would rather spend billions and trillions
on bribing foreign countries and war paraphernalia/war murder/
and wars for profit than to invest in the US and in the American
people. First we will be impoverished, then starved. The deep state
is an indiscriminate killing machine, and the US is being looted.
Trump? All my fingers and toes are crossed and I am praying for
the best outcomes.
I hoped that made sense, Suzanna. It’s been a rough day with a dentist visit the main event, culminating with a temporary crown and a jaw half numb STILL.
Nick and I were talking about the interest rates for loans when we first bought homes. He was a wet behind ears Airman First Class (two-striper) with a wife and a baby and a little 1000 sq ft home with an adjustable rate mortgage and within three years they had to walk away because the payment had doubled. It was a good thing for Nick my credit was so very good when we married so I could take out a mortgage for a house, what with his bankruptcy and all. Haha.
It was a terrible time to be a first-time homebuyer, especially if you were young with kids. Several of my friends ended up in terrible loans during that S&L ordeal. Remember that one?
Good thing there is bitcoin to invest in … oops wait..uh oooh …
https://www.zerohedge.com/news/2018-01-26/over-400-million-stolen-hacked-japanese-cryptocurrency-exchange
Yawn.
“…Gee, it turns out you really can’t get something for nothing….” On the contrary, bet you got paid for saying nothing new. Again.
Too many people let their political emotions get in the way of growing their net worth. During Obama’s time in office it was people on the right wanting the markets to stay down forever and gold to save the day even though it was obvious the stock markets were entering a new uptrend and gold was entering a bear market.
Now it’s people on the left begging for a market collapse so the evil Trump can be dethroned. When it comes to building wealth, it really pays to be politically agnostic. This market will definitely top and begin a new bear trend, just not yet, but possibly before the end of this year. If you missed the last eight years of this epic bull market, that’s too bad because it’s nearing the end. Anyone over the age of 50 may not see a blow off top like we’re about to see in their lifetime again. When the time is right in the near future, it will be gold’s turn to shine again. These things go on and on regardless of which idiots control Congress or the White House.
Losing 10% on the currency exhange isn’t much of a cost when you made 50% in the stock exchange over the same period.
Be sure and take it “off the table”. Bulls get rich and bears get rich but pigs get slaughtered.
This would have been a perfect Kunstler article to include the word “janky.”
And yet, he didn’t.
-1, JHK, -1
In case it becomes lexicon-worthy, what exactly does “janky” mean?
It’s my favorite Kunstler word.
It means, you know, janky.
I thought it was a synonym of hinky?
Beat to shit.
So broken the fixed parts need fixing.
What is truly “sugar coated” are his prose, in another attempt to avoid reconciling his past false prophecies with his latest vomit of words. Quite a schtick he has going.
This country of I GADGET and FACE BOOK distracted brain dead zombies has the president that they deserve – a fucking former REALITY T V STAR (you’re fired) and a SCUM BAG business man who personally bragged in ‘THE ART OF THE DEAL’ how he took advantage of others.
Maybe that’s as close as we can get to Andrew Jackson is these days of whine and roses…