Titanic Problem For The Economy
“The world economy is like an ocean liner without lifeboats” said chief economist Stephen King of HSBC (London based ‘Hongkong and Shanghai Banking Corporation’ – the world’s third largest multinational bank by assets).
“Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery — both in the US and elsewhere — has been distinguished by a persistent munitions shortage. This is a major problem.”
Translation: They are out of ammo (tricks, plugs, patches, fixes) and the next crash is going to be ‘real’ (real bad). And although many of us already know this, the fact that he said it publicly, might mean that it’s coming sooner rather than later…
Treasury yields have not risen, the budget deficit is not falling, debts are increasing, and welfare payments are still on the rise.
King went on to highlight four things:
1. Households and businesses will lose confidence in the economy, and the “equity bubble” will burst with collapsing stock prices.
2. Nonbank financial systems (pension funds, insurance companies) will increasingly not be able to meet future obligations.
3. Forces beyond the Federal Reserve’s control (e.g. China, commodity prices, and others).
4. The Fed could cause the next recession by raising interest rates too soon (they’re caught in a trap of sorts).
The problem is this…
We haven’t had a REAL recovery.
I read this comment recently which rang true… “What we have been calling a recovery isn’t actually a sustainable growth model marked by wage increases, budget deficit decline, or steadily rising interest rates coupled with growth.” “We are like gold miners that have been amassing a pile of fools’ gold who are about to find out they didn’t amass the real thing.”
The so called recovery has been fools’ gold. It’s not real. It has been an illusion at the expense of a disastrous and yet to come ‘collapse’ of the current system as we know it today.
We have not recovered from the last recession and have only been ‘technically’ out of it due to accounting twists, re-definitions, and many other smoke-and-mirrors tricks. This current ‘recession’ is even somewhat comparable (in some ways) to the ‘Great Depression’, with the difference being that people are still eating and there are ‘no lines’ due to EBT cards and massive deficit spending. The next downturn however will likely look quite different. The next recession will likely become a full on depression.
I recently read the following statement on a comment thread which is likely fairly accurate:
“75% of the population lives paycheck to paycheck and are essentially broke.” “25% to half of population spend a huge portion of their monthly income on rent or mortgage and have only a small amount left for food or buying consumer goods.”
Translation: The majority of the population has little to no disposable income, and when this thing crashes, it’s going to be magnified in a potentially disastrous way.
Sooner or later the ‘powers-that-be’ will finally run out of other peoples money.
You can only keep up the smoke and mirrors game for so long and then it all comes tumbling down. Like someone who has to lie to cover up the previous lie, eventually there is the truth…
Bubble economy….bubble world. Watch out when it pops!