Crash Respite? But for How Long?

MUM’s the word, in Economics.  Except, instead of silencio  it now stands for Making Up Money.  Which is what the G20 is orchestrating; reshuffling debt and making-up borrowing to make it  appear all is well.  Buying time on the Global Titanic.

A Thought Experiment:  I owe you $10-bucks; it’s all the money I have.  You owe me $10-bucks; and it’s all the money you have.  Our friends understand that both of us are broke, when comes down to it.

An economist comes by and says.  “I can make both of you look more prosperous by Making Up Money.”

Howzat work?”

Producing a copy machine, he copies each of us $10,000. Paper is everywhere.

He also rewrites our mutual debt so that I now owe you (newly printed) all the money I have.  That’s $10,010.  You do the same, just to keep the monetary injection equal.

Tell me how this fixed anything,” you ask the economist.

“Insofar as the two of you are concerned, there has been no change.  BUT, your friends?  Onlookers? No matter what the  debt, if the numbers are big enough, no one will question your worth!”

Was it the late Senator Edward Dirksen who said it best:?  “If you owe the bank $5,000 dollars, you have a problem.  If you owe the bank $500-million, the bank has a problem.”

It’s useful to step back and see how “hole patching” of the Global Titanic is coming along.

Past Economic Depressions, you see, have been localized They have been confined to specific areas::The Weimar Republic and more recently  Zimbabwe.  The USA, too, during ours own (not so) Great Depression.

Thanks to the interconnectivity of the world nowadays, a never-before-scene possibility arises which is easy to articulate but less-easy to model.  International market linkages, in all three major domains (foreign exchange/FOREX, equities, and commodities) are now linked via arbitrage.

Squeeze on any one of these, say FOREX in Europe, and eventually the impacts will ripple to commodities in, oh, Asia for example.

Thus, we can focus on the several aspects of Depressions that (going Dangerfield here) “Don’t get enough respect.”

  • Information asymmetry
  • Trade asymmetry
  • Expectations asymmetry

It’s likely (says the literature, at least by implication) that modern instant communications to (most) market players has reduced the risk of a single-market-washout.  A high-speed crash, while an eventual outcome, may not be the primary source of collapse globally.  Never had a global crash before.

Trade asymmetry is a slow-motion bleed-out and it’s why the US is presently holding out for trade equality.  Regardless of opinions on Trump, if we don’t “fix trade” the future of America dims to MM50 – Mostly Mandarin in 50-Years.  That’s because with compound interest, America will be unable to make even interest payments.  Our once-great nation will hav e effectively traded itself into collapse. Are we that stupid?  You won’t like the Chinese answer….

Which leaves us eyeing the third vector for clues; financial relationships.  Some important ones to consider:

  • Value of the dollar vs. Yuan and Euro
  • Prices in the PGM (precious metals group)
  • Distracting Abstractions like Bitcoin and cryptos.

Momentarily, we seem to be resting a bit.  Noise trading on the FOREX, Gold and Silver are semi-stable in the $1,500/$18.00 range.  Bitcoins? Right around $10,250.

While there are lots of reasons for the market to decline, there are three reasons that would need to change in order for us to get wildly bearish – just yet.

  1. The market is above the 50-day moving average.  This Yahoo Finance chart hints the S&P 50 DMA is down around 2,939 and we’re holding 30-odd points above that.  Also, our Peoplenomics Aggregate is also above a key level that has in the past been a reasonable proxy of when to be long or short the market.  More on this for subscribers tomorrow.
  2. The Federal Reserve’s Consumer Debt report out yesterday was decidedly positive.
  3. And we have a fresh set of Small Business leanings to consider today.

A drill-down into these two latter points may be instructive:

National Federation of Independent Business  survey just in comes with the headline “Small Business Economy Remains Steady, Despite Doom and Gloom Narrative That’s Hampering Expectations…” and picks it up from there:

“WASHINGTON, D.C. (Sept. 10, 2019) — The NFIB Small Business Optimism Index fell 1.6 points to 103.1, remaining within the top 15 percent of readings. Overall, August was a good month for small business. However, optimism slipped because fewer owners said they expect better business conditions and real sales volumes in the coming months. Job creation accelerated, positive earnings trends improved, and quarter-on-quarter sales gains remained strong.

“In spite of the success we continue to see on Main Street, the manic predictions of recession are having a psychological effect and creating uncertainty for small business owners throughout the country,” said NFIB President and CEO Juanita D. Duggan. “Small business owners continue to invest, grow, and hire at historically high levels, and we see no indication of a coming recession.”

It’s not a  bad report.  Within the top 15% of all time readings.

The other Big Positive that isn’t getting much airplay on the financial networks (for what we’d guess are either political reasons or simple ineptitude) is a smoking hot Federal Reserve Consumer Debt Report for July.

I’d underline the July revolving (credit card) use being up strongly.

Which really frames the question in our opening headline today:  For now, there could be something of a Crash Respite.  But the dangling question is “For how long?”

Historically, revolutions happen when governments don’t deliver on their promises.  In some ways, Barack Obama was under-promising with his “new normal” that featured less growth.  When little was delivered?  People put up with it.

But, the Trump expansion has shown that what “gets delivered” is also a product of what people’s expectations are.  One could cast Obama as a “glass-half-empty” kind of guy while Trump is not only a “glass-half-full” kind of fellow, but he’d also toss out new business ideas: “Why don’t you start a glass-filling business and stop being so damn negative?”

Notwithstanding, the derelict congress, now infested with junior “take-down-America” socialists are likely to drive the final nails in.

Slow Motion Inflation is Still Here

What cost a single dollar in 1913 (with the Fed seized money power from the FedGov) today costs about $25.80.

That’s $25.25 based on the Minneapolis Fed inflation calculator and our own estimate of 2.2 percent inflation for 2019 which won’t be in the calculator until next year.

When you divide $25.80 into 100 cents, you find actual purchasing power of the “modern dollar” to be 3.875% of what it was just 106-years ago.  Thus, if you saved $1,000 when the Fed took over in 1913, and just held onto it – not putting it to work – you’d be able to buy something priced at $38.75 today. Well, except it would be more like $34.85 (3.485% remaining value) because we need to really pay the 10% sales taxes, right?  Economists sweep this last 10% bendover under the rug, but it’s real and never mentioned.

Of course, it works the other way, too:   A $10,000 house in 1913 would be priced today just under $259,000.  Maybe two to ten times that if you bought in a high-growth urban area.  Think the South Bay and Seattle’s Eastside (Bellevue, Redmond, Kirkland, Bothell, Renton corridor).  Again, the huge property tax bite is never mentioned in real estate “appreciation” either.  Just keeping your thinking clear.  In fact, in America, until alloidial title returns, everyone rents from at least the government, but let’s set that aside…

A weather-eye to real estate, despite the rampant negativity being pimped by the controlled corporate press, we don’t believe the Global Titanic sink today.  Sure, its in trouble but until the EU hits the financial rocks and real estate prices get sketchy. cautious optimism and that glass-filling start-up sound good.

There’s a crash in our future, just not today, or even likely until at least October.  Crashes don’t happen at market peaks.

Which Leaves Things That Matter

Stories about Hollywood this (Joker) and that (Hanks as Rogers) aside (being semi-cultural icons), the rest of today’s news flow is back to summer doldrum-like:

US Futures Drift Higher On Chinese Invitation To Bagholders, Trade And Central Bank Optimism” on ZeroHedge looks interesting…Dow futures were still down a shade.

Projecting power? North Korea fires projectiles after offering to resume U.S. talks.  What makes this linguistically so interesting is that someone at the top is “mind-feeding” the word “projectiles” not missiles.  Either that or the MSM is the biggest bunch of uncreative numbskulls in the Universe.  (OK, maybe some of column a, some of column b, then…)

For those watching “The War Between the ‘Nets” (as the internet moves toward breakup into Asian, European, and North American nodes), please note how the head of the EU’s global internet shakedown of Big Tech is sticking around.  Netplosion isn’t a word yet, but give it time and runaway megalomaniacs in Europe.

Speaking of EU victims:Violent retail crime leading to PTSD for shop staff, report says…”  Care to take the side bet on whether the perps are native Birts or those force-fed imports demanded by the Brussel srouts?  Open Border lessons for the stupid are free.

You Follow Cameron and Tyler? Winklevoss Twins Launch a Crypto Storage Service.”  Kinda sounds like a Crypto online bank to this doddering old man I shave…  Hmmm…how could such a bank be robbed, I wonder, academically of course!

Mental Acuity Test:  If we headlined “Ray Charles Meets Alibaba” would you get it?  Here’s the headline hint: “Alibaba set for ‘big challenge’ as flamboyant chairman Ma departs…”

For your slower classmates: Alibaba’s boss is Jack Ma and Ray Charles sang what?   (This is one from the easy deck…)

How Washington Could Save China: China’s Pork Prices Soar, Adding to Beijing’s Troubles.  Say, don’t we have a pork barrel or two in D.C. to contribute?  Might help trade talks, too…

Attention Button-Pressing Phone Apes: iPhone 11 to be unveiled at Apple event.  (Our backwoods idea of an Apple Event runs to washed, cored, and sliced.)

Off to scramble the rest of life…pork out if you can.

Write when you get rich (or when the toast comes up),

28 thoughts on “Crash Respite? But for How Long?”

  1. George,

    Don’t forget the influence of legal and illegal mind-altering pharmaceuticals on traditional market/economic analyses.


  2. Dude – George – We have seen the enemy, and it is the FED and their brethren CB’s..

    U almost went there..part way down the trail so to speak, but U must have seen the “big ugly” lurking down that trail..

    late stage extreme currency debasement – we just need Rates to be taken DEEPER into NEGATIVE territory as economies compete for weakest currency.

    And So –

    Assets that Retain their Value = an Asset that can NOT be PRINTED!
    Dividend Paying Stocks, Commodity Currencies including Gold, BTC’s

    Worst Assets – Sovereign Bonds, Paper Money – both with theoretical Infinite Supply.

  3. The toast came up.

    The stock market looks like it is on an undecided bubble, not knowing whether to go up or down. All my indicators point up, but see above. 3 days trading above the 50 day moving, flat Bollinger Bands, & positive Stochastics. In todays market, I think it is best to buy & stay long. The long term outlook for the market is MUCH, MUCH HIGHER LEVELS with some pain in between.

    • In the case of the USA, a nation shall rise against itself, & all the fool’s shall fall in line.

      “But wicked men and imposters will go on from bad to worse, deceiving and leading astray others and being deceived and led astray themselves.” [2 Timothy 3:13]

  4. George, for clarity, when you say South Bay, what are you referring to? The wealth in the Bay Area is everywhere. The hot areas are the San Francisco..which is a city and County….The Peninsula consisting of San Mateo County…The Silicon Valley (most use that term because it is internationally recognized and defined) that covers most of Santa Clara County. The East Bay which cover both Alameda and Contra Costa counties and the North Bay which cover Marin, Sonoma and Napa counties. The Peninsula and San Francisco have the most concentrated wealth, with Santa Clara’s Palo Alto, Los Altos, Mountain View, Cupertino, Saratoga and Los Gatos being the wealthiest of that County. The term South Bay, while historically a regional term, is now rarely used. The metro area has developed well beyond that term and geographic monicker.

    As far as your comment..”Again, the huge property tax bite is never mentioned in real estate “appreciation” either.” Remember in California, there are no property tax increases on owner occupied homes due to Prop 16. Whatever you purchase your home for…that is the basis for your property tax as long as you own the home…unless you do an addition or sell it …then, it is reassessed. While you own it and live in it, It can’t go up, but in a downturn, you can petition to negotiate it downward.

    • Couple of things: Know a guy who bought the top of a mountain (was it 123 acres?) up hill from los gatos on the cheap in the low prices at the end of the 60s or early 70’s. He finally took the money (many zeroes) and moved on. My point was to illustrate the distortions. A home in Los Gatos which was around 50K new in the early 70’s is in the millions now.

      My point about taxes is that it’s a cost of ownership, nevertheless. Try not paying it and see who owns the home.

      • One of the most important preps for operating in a transition to a credit deflation environment is making sure you can pay your property taxes when the credit system and associated final institutions are indisposed. Because this is so totally outside the experience of the current crop of debt slaves, the idea of people stuffing fortunes in their mattresses sounds like low comedy. But back in the Depression era, hoarding financial instruments was the norm.


      Santa Clara County is located at the southern end of California’s San Francisco Bay Area. The county’s urbanized area is known locally as the South Bay or Santa Clara Valley. It includes the cities of Campbell, Cupertino, Gilroy, Los Altos, Los Altos Hills, Los Gatos, Milpitas, Monte Sereno, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara, Saratoga and Sunnyvale.

      The South Bay is known around the world as “Silicon Valley” due to its high concentration of silicon chip-making, software and high-technology companies headquartered in the area.

      • I thought so – after all well lived there for a year (So. San Fran, Oyster Point Marina on our boat) and I worked in the south bay (Fremont) and transited San Jose, Los Gatos and up the “backside to miss 101” every evening…but hey, the place has grown and I get that.

  5. The owner/creator of Adapt 2030 on YT who is in Taiwan now, said that China killed 300 million swine to stop the swine flu pandemic in their livestock. The government is paying farmers to switch to raising fish.

  6. alibaba has everything.

    Want an Anti-aircraft Drone Gun Emp Jammer Blocker Drone Uav Jammer Portable Gps Signal Blocker – 9 grand but Ali hates drones too and has it:

    Want to run a teeth whitening operation from your garage – Ali has got you, cheap.

    Original Manufacturer Wholesale Zoom Dental Machine Laser Teeth Whitening Light

  7. About the icrap– er, iphones, I’m still resisting. I’m using an old flip phone handed down from a neighbor (years ago) to my husband, and then to me after AT&T upgraded everything to 3G or faster only phones. My holdout is 3G and I’m hoping they don’t upgrade again anytime soon. That would require I get something new, and I love that the old one still works fine for my needs, which doesn’t include constant data streaming or frequent minutia detail postings on social media. Regrettably, I do foresee I will have to get a newer phone in the future, but for now I love my old, ugly, cannot be killed flip phone!

    • They are no longer phones, they are hand held computers that just happen to be able to make phone calls. There are more than 2 million programs for these phones that for some reason people find useful.

      When you hold a smart “phone” in your hand, you have access to every bit of human knowledge that exists at that point in time. You also have the ability to communicate directly with 3/4 of the world’s population.

      If you don’t know how to use that knowledge, then stick with a telephone and let the world pass you by. You will not be missed. I remember people who refused to leave a message on voicemail, much less get voicemail for themselves.

      When my wife and I got our first smartphones, we replaced 17 different electronic devices in our home. The number is now up to 21. Apple finally gave me my dream software that measures. I start the app, wave it around the room, and gives me dimensions of rooms as fast as I can walk through them. Want to know the dimensions of a window? You can get that from anywhere in the room without a ladder.

      They also include a magnifier, I can point the phone at a distant object, click it and then enlarge what I want to see at my leisure. It also works like a magnifying glass, it can enlarge that tiny sliver in your finger and show it to you half an inch wide under a blindingly bright light. No more squinting to read labels on products in the store either.

      I can get a map of anywhere in 3 seconds. I can get a picture of anything you can name in less. Ever seen what the root system of the Peruvian ground apple looks like?

      It gives me directions to anywhere in the world, including what plane, train, bus, taxi etc. to take and where to catch them at what time. I get turn by turn instructions in my car, and it shows me a PICTURE of the intersection and indicates what street to turn onto, and the front of the business/house I am trying to find.

      We still hand write our grocery list. I simply snap a picture of it when I walk out the door. I haven’t lost one yet.

      I used to belong to a computer club that had a monthly meeting where we worked with seniors teaching them how to use their computers to get on the internet and do email. I still remember the sad faces when I was forced to tell some of them that if they insisted on using a dial up connection that they no longer mattered in the tech world.

      And I am not typing this comment. I am dictating it. You want to leave a story from your life for your grandchildren? Click one button and it will record it and type it out. Save it in your own voice if you like.

      My devices also read to me, anything that appears in print can be listened to with voice. And I can translate a conversation in two languages as fast as the conversation takes place in more than 50 languages.

      My advice, get on the bandwagon and upgrade regularly, because the older you get the harder it is to learn how to use them. And the more skillful you become, the simpler your life gets.

      • Well said. “every tool is a hammer”, including a smart phone. It really depends on how you master the tool, not the other way round.

    • I used an LG VX4500 (Verizon) for 15 years. I bought a case of ’em, two years past release off fleabay for $10 so every time one found a puddle or fell off a roof, I just loaded up the next. Verizon forced an upgrade several months ago by eliminating coverage for everything below 3G. I got an armored Kyocera E4610 (Dura XV) flip phone to replace it. I have no idea why I need 4G for the 80 texts and 30-40 business calls I make every month, but maybe I’ll get 15 years out of this one, too, before VZW obsolesces 4G…

      • 4G allows tethering. I have a smart phone which I tether my computer equipment too. This means I don’t need an ISP. Which is fine because I don’t pay for cable TV, I stream using the tethered phone.

        My 4G smart phone through T-mobile costs $75.00 a month for all unlimiteds.

  8. When interest rates go negative, it nullifies the rules/laws of economics and they no longer apply. So whatever you thought you knew about markets, banking, finance, etc. no longer applies. It might look the same on the outside, but it does not work the same.

    Since the chap wood indicates that the true rate of inflation has been more than 7% for more than 7 years, the true interest rates have been negative for some time. Think back and see if this matches your experience.

  9. USSA Government Asks Apple & Google To Hand Over Info On Gun Owners

    The authoritarian dystopian future has been here for a while now, but this is simply more evidence of humanity’s disregard for freedom and independence. The United States government has demanded that Apple and Google (who are both politically biased towards the left) hand over any information they have on gun owners in the USSA.

    Entire article may be read here:

    Mac Slavo is like if JW Rawles wrote for a tabloid (or the NYT…), but he does get interesting at times.
    For the slow studies: USSA is “United Socialist States of America.”

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