The End of The US Recovery? Rising Prices For Essentials, Systemically High Unemployment, Stagnant Wages, Profound Behavioral Issues, Debt & Liabilities Set To Increase $70 Trillion, Central Banking Measures Have Lost Their Effectiveness, And ‘Fiscal Cliff’ Reckoning Day Is Near
CHARLES HUGH SMITH: The Last Christmas in America?
The end of work and the end of mass affluence: welcome to The Last Christmas in America (TLCIA).
American Vehicle Miles Driven Haven’t Been This Low Since The 1990s
…What about the impact of volatile gasoline prices? How much of a factor has that been in the trend? I’ll close with an overlay of the population-adjusted miles driven and gasoline prices since the early 1990s.
As is readily apparent, the correlation is fairly weak over the entire timeframe (+0.32). And, despite the volatility in gasoline prices since the onset of the Great Recession, the correlation since December 2007 has been even weaker (-0.26). There are profound behavioral issues apart from gasoline prices that are influencing miles driven. These would include the demographics of an aging population in which older people drive less, continuing high unemployment, and the ever-growing ability to work remote in the era of the Internet….
Diving into the fiscal economic mess – Fiscal cliff a reckoning for decades of poor financial management and massive debt based spending.
The media is making it appear that the fiscal cliff is a sudden event. Like a countdown to a New Year’s party. Yet this cliff was as predictable more than a decade ago as we spent more than we took in as an economy. The challenge is real because our spending is so much more that what is coming in. Sure, we can go into deeper debt and allow the Fed to issue trillion dollar bailouts to the banking system yet what we have gotten in return over the last five years is now a low wage economy. We now bask in reports that show unemployment rates falling not because of substantial job growth but because people are dropping out of the economy like flies hitting the light. The fiscal cliff can really be summed up in one major chart.
Fiscal cliff in one chart
The fiscal cliff has been a quickly approaching development similar to clouds over the horizon for a couple of decades but when this recession hit, our spending far outstripped our revenues:
Paul Volcker – “The straightforward central banking measures have lost their effectiveness. …
Volcker continuing from the 50 minute mark:
“The straightforward central banking measures have lost their effectiveness. They have gone as far as they could go.”
The full video from NYU:
US Debt & Liabilities Set To Increase A Staggering $70 Trillion
KWN: Today Egon von Greyerz spoke with King World News about what the world is facing going forward as well as the recent turbulent action in the gold and silver markets. Greyerz, who is founder of Matterhorn Asset Management in Switzerland, had this to say: “If we look at the gold market, Eric, it’s interesting that Japanese pension funds are now actually starting to invest in gold. And some of them are putting 1.5% to 3% of their assets in gold. This is totally new.”
Egon von Greyerz continues:
“Actually, institutional investment into gold, currently, is only about 0.3%. So we are talking about Japanese funds putting 1.5% to 3% or five to ten times as much (into gold) as the world average….
The Lie that Prosecuting Bank Fraud Will Destabilize the Economy Is What Is REALLY Destroying the Economy
Failing to Prosecute White Collar Crime Guarantees a Weak and Unstable Economy … and Future Financial Crashes
The Departments of Justice and Treasury are pretending that criminally prosecuting criminal banksters will destabilize the economy.
The exact opposite is true.
Failing to prosecute criminal fraud has been destabilizing the economy since at least 2007 … and will causehuge crashes in the future.
After all, the main driver of economic growth is a strong rule of law.
Nobel prize winning economist Joseph Stiglitz says that we have to prosecute fraud or else the economy won’t recover:
The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.
I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That’s the point. There were victims all over the world.
Economists focus on the whole notion of incentives. People have an incentive sometimes to behave badly, because they can make more money if they can cheat. If our economic system is going to work then we have to make sure that what they gain when they cheat is offset by a system of penalties.
Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future.
(Review of the data on accounting fraud confirms that fraud goes up as criminal prosecutions go down.)