Tag Archives: 5) Global Macro

Maintaining the illusion of confidence, permanence and stability serves the interests of those benefiting from the bubbles and those who prefer the safety of the herd, even as the herd thunders toward the precipice. The misconception that collapse is an all or nothing phenomenon is common: Either the system rights itself with a bit of money-printing and rah-rah or it collapses into post-industrial ruin and gangs are battling over the last stash of canned beans....

Great swaths of the American workforce are already on strike or slipping away from the dead-end treadmill. America’s labor shortage is complex and doesn’t lend itself to the simplistic expectations favored by media talking heads. The Wall Street cheerleaders extol the virtues of “getting America back to work” which is Wall-Street-speak for getting back to exploiting workers to maximize corporate profits. Long-term demographics have combined with cultural changes and...

As I often note here, when you push the pendulum to an extreme of wealth and income inequality, it will swing to the opposite extreme minus a tiny bit of friction. The depth of America’s indoctrination can be measured by the unquestioned assumption that Capital should earn 15% every year, rain or shine, while workers are fated to lose ground every year, rain or shine. And if wages should ever start ticking upward even slightly, then the Billionaires’ Apologists are...

All debt-fueled speculative bubbles pop, even as cheerleaders claim otherwise. The expansion of Housing Bubble #2 is clearly visible in these two charts of house valuations, courtesy of the St. Louis Federal Reserve database (FRED). The first is the Case-Shiller Index, which as you recall tracks the price of homes on an “apples to apples” basis, i.e. it tracks price movements for the same house over time. Note that this is an index chart where the index is set at 100...

There is a downside to steel reinforcing bars: they rust. The second most remarkable thing about the sudden collapse of the Florida condo building was the rush to assure everyone that this was a one-off catastrophe: all the factors fingered as causes were unique to this building, the implication being all other high-rise reinforced concrete condos without the exact same mix of causal factors were not in danger. Before we accept this conveniently feel-good conclusion,...

What’s striking about our thought experiment is how little reliable data we have about the transmissibility of our hypothetical Virus Z and the long-term consequences of its mutations. Let’s run a thought experiment on a hypothetical virus we’ll call Virus Z, a run-of-the-mill respiratory variety not much different from other viruses which are 1) very small; 2) mutate rapidly and 3) infect human cells and modify the cellular machinery to produce more viral...

The unraveling of social cohesion has consequences. Once social cohesion unravels, the nation unravels. My recent posts have focused on the systemic financial risks created by Federal Reserve policies that have elevated moral hazard (risks can be taken without consequence) and speculation to levels so extreme that they threaten the stability of the entire financial system. These risks are well known, though largely ignored in the current speculative frenzy. But...

The Fed’s “choice” is as illusory as the “wealth” the Fed has created with its perfection of moral hazard. The belief that the Federal Reserve possesses god-like powers and wisdom would be comical if it wasn’t so deeply tragic, for the Fed doesn’t even have a plan, much less wisdom. All the Fed has is an incoherent jumble of expedient, panic-driven “saves” it cobbled together in the 2008-2009 Global Financial Meltdown that it had made inevitable. The irony is the...

The unraveling of America’s social order is accelerating, and denial will not save us from the consequences of the plundering of the social contract. What kind of nation boasts a record-high stock market and an unraveling social order? Answer: a failed nation, a nation that has substituted artifice for realism for far too long, a nation that now depends on illusory phantoms of capital, prosperity and democracy to prop up a crumbling facade of “wealth” that the...

Risk has not been extinguished, it is expanding geometrically beneath the false stability of a monstrously manipulated market. One of the most under-appreciated investment insights is courtesy of Mike Tyson: “Everybody has a plan until they get punched in the mouth.” At this moment in history, the plan of most market participants is to place their full faith and trust in the status quo’s ability to keep asset prices lofting ever higher, essentially forever. In other...