So much for the Holidays, huh? Peoplenomics will be back on regular schedule Saturday…
There are two occasions when the “back-end crew” of an airliner will tell you “Please return your seatbacks and tray-tables to their upright and locked position.”
One occasion is when it’s time to descend for landing. The other? When the pilot fears he may (as the old airline joke goes) “Run out of airspeed, altitude, and ideas at the same time.”
Which frames our thinking on long waves in the economy in general and how this late-winter/spring period could shake-out, in particular.
In last weekend’s Peoplenomics.com report, I mentioned three bands where we could potentially reverse and head higher. But this is not a prediction or recommendation. More like noticing an airliner flying high overhead, seeing its nose pointed earthward, and wondering how it will all work out…
As you can see, this is a weekly view of markets dating back to 1999 and comparing it with the trajectory of things in the 1929 post-Crash period.
What’s different about the present track and the 1929 time-series is the Federal Reserve’s diddling with money.
For example, in 1929, if you had a $100-bill, it would only cost $75.35 to buy 1929’s $100 worth of goods by 1933. Holding cash made a lot of sense that time around. On the other hand, the depression-era Fed could not pull certain financial strings because the Federal Reserve was bound by convertibility of precious metals.
Convertibility into “real” money (gold and silver) had to be done-away with for the Fed’s papering over to work, so as a result, BOTH gold AND silver were confiscated. It would be 1974 before president Nixon would get us totally off the gold standard.
Now, let’s consider a more recent hiccup in the economy: The Housing Bubble collapse that bottomed in 2009. However, unfettered by convertibility, the Fed simply “made up money” effectively inflating their way through a potential economic depression. The CPI only dropped from 219,96 in July 2008 to a low of 210.228 in December 2008. Other than that, prices were going UP. There was no incentive to hold cash. The Fed saw to that.
America has arrived in the financial engineering paradise called Variable Value Money. By deftly printing up enough of the stuff, Ben Bernanke’s helicoptering notion (dumping oodles of billions from helicopters to keep the illusion of solidity of the system intact) was actually run. It just didn’t get widely noticed because people really ain’t as bright as we’d like to believe.
Today, we don’t have a convenient bubble popping except the one in stocks..
Which gets us to the phenomenally important question who’s going to get screwed next?
It’s a useful axiom to recall that “In every economic calamity, some class of customer gets screwed.” In 1929, it was the over-extended stock players. But, in the 2009 event, it was the over-extended home buyers. In the mid 1970’s recession it was people who drove gas-hogs…
Who’s over-extended today?
Simply: the U.S. Government. Which is why it’s so important for the Fed to raise rates, even though it may cause a recession. Like virtually all other kinds of business, government has the same “grow or die” problem with its business models faced by other CEO’s.
That’s why the Mexico Border showdown (where tear gas was fired overnight as the Soft War with Mexico begins to harden) is so critical. The Shadow Government (the unelected bureaucracy) desperately needs more population in order to justify bureaucratic growth. In the end it’s tax and spend.
In a sense they are right: As a 2013 article in Forbes explained, there’s a calculation called the government employees to population ratio that may be revealing. Even here, there’s a ton of “wiggle-room” because while government headcounts may vary a bit, government spending has continued to increase. Lots of “government jobs” have been “outsourced”
which make it all a big game of liar’s poker to figure out.
Thing is, bureaucrats know that government is a large flywheel that can power the economy through rough patches.
We’re there, but both political parties have gotten wrapped around the axles of socialism and the radical left effectively doesn’t want borders. Ignorant of how Europe has been torn-apart by unfettered immigration (and the EU has gone through an explosion is social services costs as a result) the US seems likely to go down the same (stupid) path.
Our view of Reality says government is looking for an excuse to grow. The “excuses?” Well, it was global warming, but since the sun has inconveniently gone to sleep and may be there for an extended period, the rebranding to climate change has been pulled. People, lacking inventiveness and gumption follow the most obvious of pied-pipers. Climate has been changing for hundreds of millions of years not requiring fund-raising, action groups, or polarization.
Word that China’s growth rate is slowing dramatically. But, we don’t hear from environmentalists cheering this – as they should since China dumps in more CO2 emissions than any ot her country in the world, but admittedly, the US leads in CO2 per capita.
Yet, management science says there’s an answer to be found to all these problems. It’s all there in calculations. It’s just whoever is “driving the spreadsheets” isn’t being heard by the shut-down government. The latest Pelosi/democrat plan to end the shutdown has been labeled a non-starter by the Tweeter-in-Chief.
Which gets us to the impasse as we begin the year with a whole orchestra of sour notes.
Not only did the Chinese market plummet more than 700-points overnight, but that pencils out to 2.77 percent. As such things do, the effects are rippling around the world: European markets were bleeding all over the monitors here and it looked like a 300-point dive at the open based on the futures being down more than that with three hours to run for the open.
What’s a body to do?
Other than seat backs and tray tables to their fully upright and locked position?
Tomorrow, both the ADP and Challenger Job numbers will give us some insight what to expect in the federal jobs report due out Friday.
Only other biggie could be Jerome Powell’s speaking mid-Friday morning.
Most of what’s passed off as news is personally useless – since there’s nothing you can do about most of it: But, stories like these get us to thinking:
The latest social media gaffe asgets us to thinking” At what point should government operate social media as a public utility? Use the ad revenue to pay down the federal debt? Sell all that personal data to itself?
Technology is already “cooking our brains” with cell phone radiation and if I read this article right, your hands might be next:.
Yet-another hat looks like it’s in the ring for 2020 as Mitt Romney: Trump has caused worldwide dismay.
Our long-term skepticism of Europe, Brexit, and the British comes through as a:Yes, it takes time to cross real borders.
For Ure Reading List
Former NY Times editor Jill Abramson’s new book “Merchants of Truth: The Business of News and the Fight for Facts” Rips the NY Times for it’s anti-Trump boas andopines they have a financial incentive to bash, according to this story on Fox. Book is due for release Feb. 5th but you can pre-order…
Also in the “merchanting” arena, toss in the 2011 “Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming” and you’ll get a better sense of our thinking around here.
Off to another hard day of clicking, so moron the ‘morrow….