In my last 'top 10' post I said it would be my last entry, but I've decided to break my word and do one since things have been so active out there lately.
For those that want to read previous 'Top 10 Reasons This Recession Will Never End" entries can view them here:
Top 10 Reasons This Recession Will Never End
Update 1
Update 2
Update 3
Update 4
Update 5
Update 6
So on with the show...
1. Crashes hurt for a long time - unchanged -
Not much has changed on this front. No recovery in sight for as far as the eye can see. The Fed is almost out of bullets and really has no ways left to stimulate the economy.
Because society currently runs on a debt-model where it's not about what you can afford but rather what you can finance, we haven't even seen the full effects of the crash. We won't see those until we can no longer finance the debt and the bills must be paid.
We've caught a glimpse of what that will look like with the town of Scranton. Having gone bankrupt, Scranton's mayor put all public-paid employees on a minimum wage salary. Police, firemen, you name it... your new salary $7.50 an hour.
So while we aren't seeing these kinds of measures across the West, they are coming. Four years in to this crash and the pain is only going to get worse (although since it hasn't yet, we've left this variable as being rated unchanged compared to our last update).
2. Until Debt do us Part - unchanged -
What more do we have to say on this front... LIBOR. If anyone had any suspicions about just how corrupt and manipulated the system had become, they can surely have no more doubt. Whether it be MF Global (Corzine is still walking around a free man), JPM's whale trade (using tax payer money to essentially gamble their socks off), the non-transparency of the Federal Reserve or the Libor scandal, one thing you can be 100 per cent sure of, no one is following any of the 'rules' that are on the books.
Regulators aren't regulating, prosecutors aren't prosecuting, and bankers aren't banking (they are running casinos where the dice are loaded).
The public seems to be waking up to the reality that the 'law' does not apply to the banking industry or corporations - regulators are in bed with the banks and the banks fund the politicians who look the other way when they break the laws.
4. Anxiety - worse -
While it's hard to imagine anxiety levels getting worse, they appear to be doing so. Folks are starting to realize that Obama is not going to save the world; that what we are facing is truly a 'new norm' - which ironically was the whole point of this thread when I started it. This recession is never going to end and people are starting to realize that.
Every year more and more people are ending up unemployed. Just to absorb new entrants into the job market, the US has to create about 150,000 jobs a month. The US is creating about 80,000 a month. Not hard to do the math, that means there's 70,000 per month who need a job but can't get one (or nearly a million a year who are chronically unemployed).
Now, add to this the millions who lost their jobs in 2008, 2009, 2010, 2011 and 2012 and you've got a sustained and growing unemployed populace. The unemployment rate only declines because the government simply stops counting people after a certain period of time.
Unless they all invent the next Facebook, getting a job in 2014 (assuming Bernanke is right and we'll be in 'recovery' by then) is already too late for them. Six years of unemployment will have wiped out most of those people and permanently relegated them to the working (or not working as it may be) poor. Even if they get a job again, they will never make up for the six years of lost income.
Even those who managed to keep their jobs but saw their home value crash and stocks crash, have (will have) lost six years of compounding interesting they were counting on. Their retirement hopes are currently undergoing drastic changes.
And even for those who have escaped the impact of the recession, many of them are taking a beating, working harder and longer for the same or less than before. Many are just white-knuckling things hoping that things get better, but eventually many of these people are going to develop health problems.
A new type of anxiety is starting to set in (chronic / helplessness anxiety?) as each of the various demographics mentioned above are starting to realize that their situation is not going to change. This is not temporary. This is the new norm.
6. Shareholder model breakdown - slightly worse -
While the markets have lost three-plus per cent the past three days, the markets are relatively unchanged. Although the bond markets are telling you everything you need to know. We are fast approaching a NIRP (negative interest rate policy) environment.
The Swiss and Germans already have NIRP bonds. You can read more about emerging NIRP here.
Why would anyone pay a bank to hold their money? While I don't fully understand NIRP, the only logical reason is when you don't want to keep your money in your country's bank for fear that it will collapse and you'll have nothing in the end.
So while stocks haven't crashed yet, the demand for bonds (ie. safety) continues to grow and in some areas is so high that banks can actually get away offering negative interest rates on bonds and people will buy them.
This behaviour and sentiment will eventually hit stocks and we'll likely see a crash as the last of the 'gamblers' finally get out of a market that has been sinking for four years.
7. Lowest Common Denominator Thinking - no longer measurable -
For those that want to read previous 'Top 10 Reasons This Recession Will Never End" entries can view them here:
Top 10 Reasons This Recession Will Never End
Update 1
Update 2
Update 3
Update 4
Update 5
Update 6
So on with the show...
1. Crashes hurt for a long time - unchanged -
Not much has changed on this front. No recovery in sight for as far as the eye can see. The Fed is almost out of bullets and really has no ways left to stimulate the economy.
Because society currently runs on a debt-model where it's not about what you can afford but rather what you can finance, we haven't even seen the full effects of the crash. We won't see those until we can no longer finance the debt and the bills must be paid.
We've caught a glimpse of what that will look like with the town of Scranton. Having gone bankrupt, Scranton's mayor put all public-paid employees on a minimum wage salary. Police, firemen, you name it... your new salary $7.50 an hour.
So while we aren't seeing these kinds of measures across the West, they are coming. Four years in to this crash and the pain is only going to get worse (although since it hasn't yet, we've left this variable as being rated unchanged compared to our last update).
2. Until Debt do us Part - unchanged -
The US Debt Ceiling fast approaching and politicians are doing nothing, not even talking about it. It's clear that no one is going to cut spending or deal with the impending debt-crisis any time soon. So for better or worse, it seems as though the ruling class is more than ready to let the entire country sink in to debt-driven poverty.
3. Eroded Trust - worse -
3. Eroded Trust - worse -
Regulators aren't regulating, prosecutors aren't prosecuting, and bankers aren't banking (they are running casinos where the dice are loaded).
The public seems to be waking up to the reality that the 'law' does not apply to the banking industry or corporations - regulators are in bed with the banks and the banks fund the politicians who look the other way when they break the laws.
4. Anxiety - worse -
Every year more and more people are ending up unemployed. Just to absorb new entrants into the job market, the US has to create about 150,000 jobs a month. The US is creating about 80,000 a month. Not hard to do the math, that means there's 70,000 per month who need a job but can't get one (or nearly a million a year who are chronically unemployed).
Now, add to this the millions who lost their jobs in 2008, 2009, 2010, 2011 and 2012 and you've got a sustained and growing unemployed populace. The unemployment rate only declines because the government simply stops counting people after a certain period of time.
Unless they all invent the next Facebook, getting a job in 2014 (assuming Bernanke is right and we'll be in 'recovery' by then) is already too late for them. Six years of unemployment will have wiped out most of those people and permanently relegated them to the working (or not working as it may be) poor. Even if they get a job again, they will never make up for the six years of lost income.
Even those who managed to keep their jobs but saw their home value crash and stocks crash, have (will have) lost six years of compounding interesting they were counting on. Their retirement hopes are currently undergoing drastic changes.
And even for those who have escaped the impact of the recession, many of them are taking a beating, working harder and longer for the same or less than before. Many are just white-knuckling things hoping that things get better, but eventually many of these people are going to develop health problems.
A new type of anxiety is starting to set in (chronic / helplessness anxiety?) as each of the various demographics mentioned above are starting to realize that their situation is not going to change. This is not temporary. This is the new norm.
6. Shareholder model breakdown - slightly worse -
The Swiss and Germans already have NIRP bonds. You can read more about emerging NIRP here.
Why would anyone pay a bank to hold their money? While I don't fully understand NIRP, the only logical reason is when you don't want to keep your money in your country's bank for fear that it will collapse and you'll have nothing in the end.
So while stocks haven't crashed yet, the demand for bonds (ie. safety) continues to grow and in some areas is so high that banks can actually get away offering negative interest rates on bonds and people will buy them.
This behaviour and sentiment will eventually hit stocks and we'll likely see a crash as the last of the 'gamblers' finally get out of a market that has been sinking for four years.
7. Lowest Common Denominator Thinking - no longer measurable -
Things are too fluid right now to be able to monitor this variable. See my last post for reasons why.
8. Globalization - unchanged -
War with Iran still on the table. War with Syrian still on the table. Russia moving war ships in to the middle east. Suicide bomber in Israel (unknown source, conjecture that Iran was behind it).
Basically nothing much has changed on the global front.
9. Baby Boomer Cost - unchanged -
Nothing new here, same old variables unfolding as expected.
10. Extremism - worse -
The Libor scandal is an example of extremist behaviour, but that's been going on for the last four years (people have only become aware of it lately).
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| James Holmes, killed 12, shot 58 at Colorado theatre premiere of Batman movie |
But on a societal level, we are unfortunately seeing extremist behaviours rear their ugly head again. Aside from the violence we are seeing in Chicago - over 275 killings this year so far (heck, Canada has less than 600 killings per year for the whole country) - we obviously had the recent Colorado shooting at the movie theatre.
This all comes on the heels of the mass shooting in Norway, the cannibal story of the man who ate most of another man's face in public in California and the killer in Canada who killed, dismembered, had sex with the body parts and then shipped the body parts around the country to various institutions.
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| Bob Diamond, ex-CEO of Barclays, answers questions at parliament as to why they manipulated Libor rates |
While it's folly to try and identify causes behind these occurrences (since we don't have details regarding causality), my personal belief is that the prevalence of extremist behaviour (in all its forms) rises as the health of society declines. The more stress people are under (financial, professional, academic, etc.) , the less hope they have for the future, the less positive their surrounding environment is, the more negative media content is, etc., all of these things seem to spawn an increase in prevalence in extremist behaviour.
What causes someone to 'snap' is too lengthy a discussion, but there can be no question that recessionary forces increase the likelihood of people snapping and doing things they might not in a less stressful societal environment.
The more 'insane' society becomes (endless wars, corrupt bankers, corrupt politicians, flooding the American populace with guns, news media beholden to corporate interests over the truth, etc.) it is only logical that the prevalence of insanity (and insane behaviour) rises accordingly.
The key though is prevalence. There have always been insane people doing insane things, but are we getting MORE insane people than before?
I keep hoping that we will enter a more sane period, but I don't see that happening until criminal bankers (not all bankers mind you, just the criminal ones) are brought to justice and politicians can no longer be bought off. Until that happens, I don't think we are going to turn the corner and we'll keep going down this insane path.
11. Bonus: inflation - unchanged -
Nothing changed on this front. We continue to see both inflation and deflation occurring at the same time.
It's really sad that no variables have turned slightly better since the last update. It's also a big reason why I think you want to get out of the stock market now (or very soon). There are no positive signs that the world is coming out of this recession and without real economic growth most of the above variables will continue to get worse.
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