Month: March 2018

One month after Goldman announced its buyback desk had its “busiest week ever“, when corporate stock repurchases saved the market from crashing in the aftermath of the February 5 VIXplosion which sent the market into a 10%  correction in just days, companies remain one of, if not the biggest buyer of stock.

According to Bank of America’s flow desk, last week, BofAML clients were big net buyers of US equities, purchasing $3.6bn in stock, following a week of selling. In terms of products, net buying was mostly via ETFs as single stocks saw net sales for the third week.

Broken down by investors type, hedge funds were the sole net buyers, while Institutional clients and private clients were net sellers.

However it was the amount of corporate buybacks that was once again remarkable, because as BofA notes, stock repurchases by corporate clients (i.e. corporations), not only remained elevated, above $1.5Bn for the third week, but also one of the “largest weekly buyback In our data history“, led by Banks and Financials buying back their stock last week (just in case there is still confusion why Jamie Dimon was so confident to buy JPM stock at the “Dimon Bottom”).

In total, YTD buybacks purchased via BofA’s desk totaled nearly $11 billion (up +53% YoY), and the strongest start to a year since 2014.

And, if JPM is right in its forecast that a record $842 billion in stock will be repurchased this year, $842BN will be repurchased this year, or just shy of $3 billion every single trading day…

…. this is just the beginning as companies do everything in their power, and issue as much debt as they can (using the proceeds to fund buybacks) to prevent their stock from dropping.

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As ZeroHedge readers are doubtless aware, massive student loans have become an anchor around the necks of millions of young graduates – who are finding it increasingly difficult to break out from under the yoke of crippling debt. 

Outstanding student debt has more than doubled since the 2009 lows alongside the world’s biggest experiment in synthetic economic growth thanks to quantitative easing – standing at nearly $1.5 trillion. 

And times are still “good” so to speak…

As we reported in January, nearly 40% of student loans taken out in 2004 are projected to default by 2023 according to a report by the Brookings institute.

This is a major problem – one which will either resolve through a resurgent economy, or tacking another Trillion plus onto the national debt once bankruptcy laws are changed and debt forgiveness becomes the next generation’s problem (you don’t actually think the banks will take the hit, do you?)

Until then, young Americans are drowning in debt, unable to improve their standard of living, and are significantly worse off than their parents generation.

Millennials are now graduating with excessive levels of debt – often used not just for tuition, but living expenses as well. Their baby boomer parents, meanwhile, enjoyed entering into their 20s with little to no debt, significantly high purchasing power – enabling a typical family to afford a mortgage and a decent standard of living on one salary. Boomers, unencumbered by crippling debt, were also able to begin saving much earlier – thus taking advantage of compound interest. 

The math isn’t looking good for the kids… Using a an assumption of $40,000 in debt upon graduation (the class of 2016 average was $37,172 and it’s growing):

For example, say you graduate with $40,000 in debt and you owe a 4% interest rate for 15 years. While the federal government expects the loans to be paid back in 10 years, it takes the average Wisconsin graduate 19.7 years to pay off a loan for a bachelor’s degree. Therefore, it’s a reasonable example. In this mock example, monthly payments would be $295.88 and $53,257.53 in total. If you don’t have student loans at graduation like many baby boomers and you put $295.88 in a diversified portfolio which returns 6% per year, you will have $86,477.68 after 15 years. Therefore, the difference between someone with student loans and without them ends up being $139,735.21. The difference grows exponentially as the student loans grow because the interest paid and the returns on the potential savings increase. –UPFINA

The bottom line: it’s taking much longer for new graduates to dig their way out of debt, start saving, and earn enough to retire comfortably. It’s simply not penciling out anymore for many Americans. 

About that inheritance…

Millennials drowning in debt hell are also facing a shrinking inheritance, should they be so fortunate to receive one – as their boomer parents are plowing through their savings and chipping away at the equity in their homes. Eight years of low interest rates have also drastically undermined the return savers and retirees were counting on. 

As we reported yesterday, a study released by GoBankingRates reveals that older people planning their retirement have cause for concern. Forty-two percent of Americans are facing their golden years with less than $10,000 in savings. A lack of savings and planning has reduced what should be an enjoyable time in seniors’ lives to a period of stress and worries for many. (h/t Virginia Fidler via GoldTelegraph.com)

A 2007 study by the Insured Retirement Institute found that 24% of boomers have no retirement savings – the lowest number since the study started in 2011. 

Only 55% of Baby Boomers have some retirement savings and, of those, 42% have less than $100,000. Thus, approximately half of retirees are, or will be, living off of their Social Security benefits. –Barbara A. Friedberg

 

In other words: 

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Authored by Daniel Nevins via FFWiley.com,

“This reminds me of the late 1960s when we experimented with low rates and fiscal stimulus to keep the economy at full employment and fund the Vietnam War. Today we don’t have a recession, let alone a war. We are setting the stage for accelerating inflation, just as we did in the late ‘60s.”
—Paul Tudor Jones

As soon as the GOP followed its long-promised tax cuts with damn-the-deficit spending increases (who cares about the kids, right?), you knew to be ready for the Lyndon B. Johnson reminders.

And it’s worth remembering that LBJ pushed federal spending higher, pushed his central bank chairman against the wall (figuratively and, by several accounts, also literally) and eventually pushed inflation to post–Korean War highs.

Inflation kept climbing into Richard Nixon’s presidency, pausing for breath only during a brief 1970 recession (although without falling as Keynesian economists predicted) and then again during an attempt at wage and price controls that ended badly. Nixon’s controls disrupted commerce, angered businesses and consumers, and helped clear a path for the spiraling inflation of the mid- and late-1970s.

So naturally, when Donald Trump and the Republicans pulled off the biggest stimulus years into an expansion since LBJ’s guns, butter and batter the Fed chief, it should make us think twice about inflation risks—I’m not saying we shouldn’t do that.

But do the 1960s really tell us much about the inflation outlook today, or should that outlook reflect a different world, different economy and different conclusions?

I would say it’s more the latter, and I’ll give five reasons why.

1—Technology

I’ll make my first reason brief, because the deflationary effects of technology are both transparent and widely discussed, even if model-wielding economists often ignore them. When some of your country’s largest and most impactful companies are set up to help consumers pay lower prices, that should help to, well, contain prices.

2—Globalization

Globalization is another well-worn theme (I can hear the yawns), but it still gets overlooked. In the 1960s, developing countries hadn’t yet found much of a path to US consumers and businesses, such that America’s economy was protected from hundreds of millions of potential dollar-a-day workers. That’s no longer the case, and inflation fundamentals are no longer the same. As long as trade pathways remain open (watch the tariff war), policy makers should find it much harder to cook up inflation than they did fifty years ago.

As a measure of globalization, the chart below shows imports of goods separated by whether they come from developed or emerging markets (imports from emerging markets being more likely to dampen inflation) and comparing 1965 to 2017:

Of course, inflation responds not only to specific imports but also to the general threat posed by foreign competition. Nonetheless, the chart confirms the obvious—2018’s economy is less prone to inflation than the insular 1965 economy.

3—Private Debt

Just as increasing debt brings spending forward (more today, less tomorrow), it also brings inflation risks forward (again, more today, less tomorrow). If you borrow enough to drive private debt-to-GDP ratios well above 100%—as modern, developed nations tend to do—that can set up a disinflationary counterweight to crush any rise in inflation. The mechanism works like this:

1. Inflation rises

2. The inflation increase spooks bond investors and the central bank, lifting interest rates higher.

3. In an economy that’s heavy with private debt, the increase in rates puts a dent in spending while stifling further credit creation.

4. As credit dries up, pricing power disappears and disinflationary forces overwhelm the initial impetus to inflation.

In other words, in a debt-dependent economy, inflation breeds deflation.

Where does that leave us in our discussion of whether the 1960s should influence the inflation outlook today?

At a current reading of 150% of GDP, private nonfinancial debt is about two-thirds of GDP higher than it was in 1965, when it was only 84% of GDP. That’s relevant because 1965 was just before inflation began its ascent—core inflation climbed from 1.5% in 1965 to 3.1% in 1966 and 1967 and 4.7% in 1968. Private nonfinancial debt is also only 15% of GDP lower than it was in 2007, when it reached 165% of GDP, just before the global financial crisis seized up credit markets.

You’ll surely interpret those figures in your own special way, but to me they make the 1960s–70s experience a reach for today’s economy. That’s not to say we won’t see another severe inflation–interest rate spiral at some time in the future—we could see exactly that when investors give up on America’s public finances and force a debt restructuring. But that’s unlikely to happen anytime soon. In my opinion, America won’t restructure her federal debt until the 2040s at the earliest, because the Treasury market has enough history, inertia and central bank sponsorship to overcome junk-bond fundamentals. I expect a few more contractions in private credit markets—either with or without the inflation increase included in the steps above—before bond traders start treating Treasuries like they treated subprime adjustable-rate mortgages ten years ago.

4—Wage Growth

But how about a wage–price spiral—that’s how tax cuts and government spending increases should spark inflation, right?

Maybe so, but once again the 1960s don’t travel well to the third millenium. In the 1960s, both sides of the wage-negotiation table operated differently than they do today.

Wage earners bargained extra aggressively in the decades immediately after World War 2, thanks to union-friendly legislation in the 1930s and 1940s. In addition to annual pay gains of as much as 5% or more, they demanded substantial increases in pension and health benefits. And to make sure inflation volatility wouldn’t dilute their negotiating wins, they insisted on indexation—pay that automatically ratchets higher with each year’s inflation outcome.

Wage payers, meanwhile, were confident they could both inflate and grow their way into higher wages. They drew that confidence from a dearth of foreign competition, a belief the economy was more resilient than ever before (some thought the “New Economics” embraced by John F. Kennedy and then LBJ would abolish the business cycle), and in some industries, protective regulations that have long since been dismantled.

Even more importantly, wage payers were less profit-centric and more likely to apply a “stakeholder” approach to corporate governance. They protected the interests of each of their stakeholders, and wage earners were near the top of that list. In other words, higher wages didn’t send executives to the window ledge—companies just resolved to cover growing wage bills by selling more widgets while charging a higher price for each one.

So in hindsight the 1960s practically ordered up a wage–price spiral, as if selecting a flavor from Howard Johnson’s 28 choices. Needless to say, conditions in 2018 aren’t quite the same. Compared to the 1960s, businesses are more likely to fight wage increases and less able to raise prices.

And that’s not all, because the comparison should also consider how long it takes for a spiral to become established. I would say it takes quite a while, and here’s a chart that supports my position:

The chart’s blue line shows wage growth increasing from close to 3% to about 4% during 1965, just ahead of the beginning of the rise in core inflation. By comparison, the red line shows wage growth stuck at 2.5% as of the last data release. In other words, inflation didn’t begin its 1960s climb until wage growth was about two-thirds higher than the current rate. Of course, productivity growth was also higher in the 1960s, but that doesn’t explain away the stability of wage inflation as of this writing.

So what’s the bottom line when it comes to wage–price spirals?

Well, the cool kids will continue to call for rising wages, as they’ve been doing for several years now. This may be the year they get it right, but I wouldn’t put too much of your own pay package behind that bet. In fact, I recommend waiting it out. Considering “spiral” is something of a misnomer (unless it comes from a commodity shock, cost-push inflation is more like a slow stroll), let’s wait for real evidence of rising wages before sounding any alarms. With the current expansion soon to be nine years old, there’s an excellent chance of the business cycle ending after only a mini-spiral—one similar to the last three expansions—or even no spiral at all.

5—The Circular Flow

My final reason for discounting the 1960s might be the most important, because it gets at the types of imbalances that have triggered many high inflation episodes in world history. It relies on a variation on Monetarism that corrects for the Monetarists’ flawed treatment of money and banks.

In particular, leading Monetarists based their theories on research connecting money supply growth to GDP growth (both real growth and inflation), but without realizing their data was mostly showing a connection between bank lending and GDP growth. Instead of allowing that bank loans bring money into existence, they modeled banks as conduits, not creators, of the “initial monetary impulse.”

The Monetarists’ mistake wasn’t fatal, at first, because the monetary aggregates they followed, such as M2, correlated strongly with bank lending. But after the aggregates helped them predict inflation successfully in the late 1960s and 1970s, correlations weakened and the Monetarists’ forecasts became unreliable.

Confusing?

I recently covered this topic in detail, such as in last month’s “An Inflation Indicator to Watch.” In that 3-part article, I explained how we can spot both inflationary and disinflationary imbalances in the “circular flow,” referring to the circular relationship between spending and income. Here are the most important examples:

1. Inflationary imbalances can arise when bank lending injects purchasing power into the circular flow, boosting spending above the prior period’s income. This is the piece that modifies Monetarism, by replacing the money measures Monetarists favor, such as M2, with measures that correlate more strongly with purchasing power and GDP, such as bank-created money.

2. Disinflationary imbalances can arise when spending doesn’t adequately recycle back to income, opening a leak in the circular flow, which can happen, for example, when a country runs a substantial trade deficit.

Putting the types of imbalances together, we can construct an indicator that gives us a birds-eye view of inflation risks. When the indicator rises, inflation risks are high, and when it falls, inflation is likely to be contained apart from cyclical volatility. Here are the indicator’s readings for the current expansion versus the 1960s expansion:

The chart provides yet another perspective on differences between the 1960s and today. It shows that inflationary circular-flow patterns were prevalent in the 1960s, whereas patterns of recent years have been benign. (For diagrams that depict the patterns I’m describing, see “An Inflation Indicator to Watch,” or for even more background, see my recently published book, Economics for Independent Thinkers.)

Conclusions

For a variety of reasons, I don’t buy the argument that we’re about to take a 1960s–70s-style inflation ride. I get the LBJ comparisons, and I can appreciate them, but current policy makers should find it harder to lift inflation than at the post–WW2 high water mark for insularity, labor strength and stakeholder-friendly corporatism. Moreover, private debt levels and circular flow analysis both suggest any inflation increase would be short-lived. In other words, LBJ never faced America’s current mix of disinflationary forces, and those forces are no pushovers.

*  *  *

Author’s note: As far as I can tell, only two authors have written trade books that focus mostly on America’s 1960s, 1970s and early 1980s battle with high inflation: William Greider (Secrets of the Temple) and Robert Samuelson (The Great Inflation and Its Aftermath). Greider’s book was widely read and praised (I’ve cited it in past articles), whereas Samuelson’s didn’t receive the attention it deserved. Samuelson not only blamed inflation on the macroeconomics profession’s arrogance and ineptitude (not a good strategy for winning mainstream acceptance) but had the misfortune of releasing the hardcover just as the financial sector imploded in autumn 2008. In any case, both books helped inform my article above.

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Hours after accepting President Trump’s offer to become the new director of the President’s National Economic Council, CNBC personality Larry Kudlow returned to his old stomping ground Wednesday afternoon to answer a series of softball questions lazily lobbed by his (soon-to-be-former) colleagues.

About mid-way through the interview, Kudlow was asked about Trump’s views on the dollar. Followers of currency markets will remember the burst of volatility that Treasury Secretary Steven Mnuchin accidentally unleashed when he appeared to disavow the US’s longstanding commitment to its “strong dollar” policy.

 

First official lie as head of NEC

*KUDLOW: NO REASON TO BELIEVE TRUMP DOESN’T WANT STRONG DOLLAR

— shinebox (@ljzaz) March 14, 2018

 

His response? “I have no reason to believe the president doesn’t support a strong, stable dollar.”

 

Trump picks camera-proven Kudlow as top economic aide https://t.co/EBpWmhmLuY

— darryldeanwilliams (@darryldean57) March 14, 2018

 

The dollar clawed back losses in the afternoon after subdued inflation data, comments from Mario Draghi and the continuing fallout from the abrupt firing of Rex Tillerson forced it lower earlier in the session. It’s unclear how much of an impact Kudlow’s comments had on the dollar. CNBC noted that, typically, commenting on the dollar is typically delegated to the Treasury Secretary.

“I’m not saying the dollar has to go up 30 percent, I’m just saying let the rest of the world know that we are going to keep the world’s international reserve currency steady,” Kudlow added. “That creates confidence at home.”

He later drove his point home by saying he would buy the dollar and sell gold.

 

New WH economic chief Larry “King Dollar” Kudlow: “I would buy the dollar and sell gold.” #NYP

— Michael Gray (@12mgray) March 14, 2018

 

So far that’s not been a great trade, Larry…

Throughout the interview, Kudlow adhered to the Trump policy playbook.

When asked about David Stockman’s assertion that President Trump is setting Kudlow up to fail because of the president’s die-hard protectionism, Kudlow defended Trump’s plan to impose targeted tariffs on Chinese imports.

“I think China has earned a tough response, not only from the US. The US could lead a coalition of large trading partners and allies against China. You could call it a sort of ‘trade coalition of the willing’.”

“My problem with the steel and aluminum tariffs as they were originally announced might do harm to importers of steel and aluminum.”

* * *

Moving on to taxes, Kudlow commented on a report about “phase two” of the Trump administration’s tax reform.

 

If Kudlow had his druthers, he would get rid of filibusters and the reconciliation process, subjecting every piece of legislation to an up-or-down vote.

“This is the 21st century it’s the information age and they’re behaving like it’s the 1830s. I would just do a vote, up-or-down, first one to fifty wins – or first one to fifty plus Pence wins.”

Later in the interview, Kudlow reiterated that his top priority at the NEC would be maintaining a stable currency and stable prices.

He added that Nafta needs to be “reupholstered in many different ways.”

Returning to the topic of trade, Kudlow said he’s afraid there would be negative consequences for the US economy because it’s so intertwined with the economies of Canada and Mexico.

At one point, Kudlow recounted the story of getting “the call” from Trump. Kudlow was reportedly eating dinner at Cipriani in midtown Manhattan Tuesday night when Trump called to offer him the job. He abruptly left the restaurant and finished the call in the backseat of a taxi cab. Trump had previously called him that Sunday to discuss the job while Kudlow was playing tennis in Connecticut.

“Just to talk to him for 30-40 minutes at a clip for three or four days a week – it’s a wonderful thing,” Kudlow said.

“He asks good questions…if I try and give him the Kudlow thing…he’s going to come back and ask questions.”

Kudlow went on to defend Trump’s tax reform proposal, likening it to a business doing capex spending. He explained that he doesn’t have a problem for businesses borrowing money to invest in infrastructure – which he said the US is doing with its tax and infrastructure plans.

* * *

For those who are unfamiliar with Larry Kudlow, CNBC published a video outlining his views, and his career history…

 

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Authored by Maria Fotopoulos via Medium.com,

Last week’s visit to California by Attorney General Jeff Sessions showed just how extreme California’s leadership has become. For the elected officials of California who may have forgotten, the U.S. AG heads the United States Department of Justice and is the chief lawyer for the United States government. It’s kind of a big deal  – rather an important position. Perhaps the holder of said position has earned a modicum of respect.

But that doesn’t really matter to California’s extremist legislators and government officials. Starting with Gov. Jerry Brown and on to Calif. Senate President Pro Tempore Kevin de Leon, Attorney General Xavier Becerra, Representative Maxine Waters, Representative Adam Schiff and Representative Nancy Pelosi, among others, as evidenced by their words, they believe that all who don’t hold their extreme views, which include subverting rule of law, are fair game for any verbal character assassination and abuse.

Note Gov. Brown’s tantrum thrown against Sessions when he was here in California. The Trump administration is “full of liars” and is “going to war against the state of California,” Brown said.

Brown then accused Sessions of engaging in a “political stunt” and making “wild accusations” before he attacked Sessions for being from the South  –  Alabama, no less! Oh, the horror!

Brown fell short of calling for a lynching of the old white guy.

In the delirium and delusion of extremism, Brown understandably is confused as to who is going to war against whom. What caused him to unleash his attack? Sessions speaking the truth.

As AG, Sessions and the Department of Justice have taken legal action against the state of California in a lawsuit which alleges that California has violated the U.S. Constitution by passing three state statutes which “obstruct or otherwise conflict with, or discriminate against, federal immigration enforcement laws.”

It’s certainly overdue, but finally there’s a line in the sand drawn against California’s defiance. As has been widely reported and discussed, California has for years worked to blur the distinction in the state between American citizens and those living and working here illegally.

This continual blurring in California has led to granting illegal aliens driver’s licenses, creating taxpayer-funded programs for illegal aliens to fight deportation and permitting illegal aliens to practice law, along with many other benefits, as more and more California cities began identifying themselves as sanctuary cities for illegal aliens. And, finally the entire state declared itself a sanctuary state.

source: michaelpramirez.com

The mass importation of people, and often poverty, has helped create a state that no longer can claim the “Golden” title. As I wrote last week, today’s California is no longer the Golden State and land of plenty, except for the privileged few.

Calling the state out on its infractions is well overdue. Many Californians will thank AG Sessions for taking California to task for its sanctuary laws as radical maneuvers that threaten public safety and open the country to even more illegal immigration.

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Two months ago, Facebook struck fear into the hearts of digital publishers by unveiling changes to its news feed algorithm that would de-prioritize news and advertising while elevating personalized content – like photos from your cousin’s wedding.

CEO Mark Zuckerberg justified the decision by citing several studies purporting to show that people are happier when they’re not constantly bombarded with news. But by de-prioritizing news, Facebook will inevitably bury “fake news” with it. And while this might not be the most nuanced strategy, it should get those pesky Senate Democrats (who threatened to pass laws to hold Facebook accountable for foreign powers’ election meddling).

Barely a month after Facebook changed up its newsfeed, the shift claimed its first casualty, a women’s lifestyle website called LittleThings. 

And fast-forward to today, Axios is reporting that Facebook has decided to throw a sop to publishers by launching a new section of its new Watch page – its hub for original video content – where it will work with media companies to provide engage daily content.

Furthermore, Facebook will share its advertising revenue with the media companies, per the Wall Street Journal.

Why it matters: This would be the first standalone news product for national news in Watch. The tech company previously launched several products, like Instant Articles and Facebook Live, with an array of publishers which included but was not limited to news companies.

While Facebook is reportedly in talks with 10 media organizations to produce the videos, and it shared some of its content guidelines with Axios.

• The content needs to be a minimum of three minutes.

• Facebook plans on launching the feature this summer and testing what works best.

• Sources say Facebook is working strategically with publishers to understand budget needs and monetization opportunities on the platform.

By launching the service, Facebook is hoping to generate “more meaningful engagement” on its platform, Axios said…

The big picture: Facebook is trying to create more meaningful engagement on its platform. While executives have said they don’t know exactly how they will measure meaningful engagement through comments and shares, creating a news product that’s native to the platform and includes content from vetted publishers will hopefully drive less passive engagement and curb the spread of misinformation on its platform.

Campbell Brown, the head of news partnership for Facebook, said in a statement that the offering is an attempt to “innovate on news programming tailored to succeed in a social environment.”

“Timely news video is the latest step in our strategy to make targeted investments in new types of programming on Facebook Watch… As part of our broader effort to support quality news on Facebook, we plan to meet with a wide-range of potential partners to develop, learn and innovate on news programming tailored to succeed in a social environment. Our early conversations have been encouraging, and we’re excited about the possibilities ahead.”

While Facebook would have you believe that this is part of its push to stay relevant while imposing more of a wall between its personal and news content, there could be a clear ulterior motive here: If it’s successful, Facebook will control the purse strings for a badly needed source of revenue. That will give the company much more leverage over its media “partners”…and, in turn, the exact slant of the content they publish…

News organizations recognize this, and some expressed reservations about the product to WSJ.

That said, given the prospects of exposure on the world’s biggest social network and potential revenue from lucrative video ad sales, some news publishers are still considering participating in the Facebook Watch news initiative — under the right circumstances.

“I think anytime Facebook is willing to pay, we’re more willing to play,” said a publishing executive familiar with the program. “The problem is that when these pilot programs expire, there is still no clear revenue channel. Then you’re stuck.”

Facebook famously offered some media companies money to offset production costs – as well as a sliver of the ad revenue – when it launched its Watch product last year.

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Authored by Charles Hugh Smith via OfTwoMinds blog,

If you think this is a robust, resilient, stable system, please check your Ibogaine / Hopium / Delusionol intake.

Correspondent James D. recently asked for an update on the four intersecting cycles I’ve been writing about for the past 10 years. Here’s the chart I prepared back in 2008 of four long-term cycles:

1. Generational (political/social)

2. Price inflation/wage stagnation (economic)

3. Credit/debt expansion/contraction (financial)

4. Relative affordability of energy (resources)

Here are four of the many dozens of essays I’ve written on these topics over the past decade:

Long Cycles: Cheaper Goods, Costlier Capital, Income Disparity Increases (August 1, 2008)

Beyond the False Dawn: Global Crisis 2020-2022 (February 18, 2011)

A Disintegrative Winter: The Debt and Anti-Status Quo Super-Cycle Has Turned (December 5, 2016)

We’re in a Boiling-Point Crisis of Exploitive Elites (June 19, 2017)

The key point that’s not communicated in the chart is there are dynamics that interact with each of these cycles. For example, demographics are influencing each of these trends in self-reinforcing ways.

Governments are borrowing more to fund the promises made to seniors decades ago when there were relatively few retirees compared to the working populace. Now that the ratio of those collecting government benefits to workers is 1-to-2 (one retiree for every worker), the system is buckling.

The “solution” is to borrow increasing sums from future taxpayers to fund pay-as-you-go healthcare and pension programs for retirees.

Technology is another dynamic that is actively influencing all these cycles in self-reinforcing ways. As technology is substituted for human labor, wages stagnate and the size of the populace paying taxes dwindles accordingly. The “solution” is once again to borrow more to substitute for declining purchasing power.

The dynamics driving wealth/income inequality and the rise of politically/financially dominant elites are also powering these cycles. As Peter Turchin has explained–a topic covered in my essay When Did Our Elites Become Self-Serving Parasites? (October 4, 2016)– social disunity / discord rises when the number of people promised a spot in the elite far exceeds the actual number of slots available.

In summary, the four cycles are intact and poised to intersect in a very messy fashion within the next decade. various centralized efforts have been made to paper over the secular stagnation, political polarization, brewing generational wars, resistance to globalism, rising cost of capital, decay of opportunity, soaring debts, rising dominance of speculation / malinvestment /mis-allocation of capital, diminishing returns on centralization, the marriage of Orwell, Huxley and Kafka in officially sanctioned propaganda, increasingly dysfunctional and self-serving institutions and the rising costs of energy, but every one of these makeshift efforts further erodes the resilience of the overall system and increases systemic fragility and vulnerability to self-reinforcing failures of key subsystems.

Here are a few charts that illustrate the trends / cycles:

Total systemic debt: note that the tiny wobble in credit expansion in 2008 nearly collapsed the entire global financial system.

Here’s political polarization: notice any common ground?

The elites that are safely protected by the moat of the status quo are doing just fine while the disgruntled debt-serfs who were promised security and rising wages/wealth are massing beyond the moat.

Meanwhile, asset bubbles and soaring debt are the status quo’s go-to fix for every problem:

If you think this is a robust, resilient, stable system, please check your Ibogaine / Hopium / Delusionol intake.

*  *  *

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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