Yeah, I’ve been writing about the Second Depression since 1997 here, and one of the hardest parts of economics is figuring out just how this time’s rhyme will play.
As you remember, from my rambling discourses, what happens in a global depression is that you have consumers begin to tighten up all at once. They stop spending money on the frivolous and useless, right?
And so, in one of the worst economic timing debacles of all time, still unfolding on us, America has gone from one of the looser tax deals to something much, much tighter. Not only have we bumped up rates (the Senate is democrats and so’s Obama as least on paper) so you’re not only going to pay a LOT more income tax this year, but on top of it, you’ll also being paying more for healthcare.
Economic reality check”: You don’t add healthcare coverage for 30-million people and do it free. So the middle class gets the bill. The rich will buy or deduct out of it.
Now – without getting bitter about this stuff – it is what it is.
But this leaves policyfakers (sic) with a lot of problems: When an economy is trying to collapse, about the only hiring that can be done is governmental. We have 21-million people working in government for round numbers.
Now we need to hire more – Ebola and such.
So the higher tax part makes sense.
As a CONSEQUENCE though, between O-care and higher withholding, guess what happens to real disposable income? Toilet.
People stop discretionary spending. Look at the restaurant stocks. A lot of them are reporting fewer people going out to eat. People are trying to save money – and with little success.
What then happens is the money the one percenters have tied up in banks doesn’t have anything to do because people are not borrowing money and because of that, we are about to begin the second leg down which should test the lows of 2009 and if we hold there, we’ll be lucky. Bank rates continue to collapse.
Watch the 10-year Treasury futures Horrible.
Now let’s turn back to the policyfakers: How do they respond?
Simple! They try to push money out into the economy but it will be too little, too late because as we’ve been screaming all along, if the Velocity of Money is imploding, the effort to push money out is like pushing on a wet noodle.
How wet?
In Sweden this morning, Reuters and Bloomberg report the rates just went to zero. Not for us little guys, but for the big guys. The thinking is that if money gets cheap enough, someone is going to borrow and that will create jobs.
Dream on.,
The fairytale world is about to come crashing down because reality operate differently than economics.
To my point about Elon Musk being one of the most honest business leaders out there when it comes to thinking about the dangers of artificial intelligence. Well, guess what? Robots and AI ABSOLUTELY ENSURE A 30% unemployment rate in the next 10-years.
There simply are not going to be enough jobs to keep 7-billion people working and fed because machines will take the jobs, there will be no job income to tax, or if there is, government will claim a right to all of it, and that’s what leads downstream to a global revolution.
And I’m sure the jihadists are planning to fan the fires and play the old game of divide and conquer, and for details reread the Moorish Conquests.
The Collapse Won’t Start for a Day or Three
This despite the Durable Goods disaster this morning:
New Orders
New orders for manufactured durable goods in
September decreased $3.2 billion or 1.3 percent to
$241.6 billion, the U.S. Census Bureau announced
today. This decrease, down two consecutive months,
followed an 18.3 percent August decrease. Excluding
transportation, new orders decreased 0.2 percent.
Excluding defense, new orders decreased 1.5 percent.
Transportation equipment, also down two consecutive
months, led the decrease, $2.8 billion or 3.7 percent to
$73.4 billion.
Shipments
Shipments of manufactured durable goods in
September, up three of the last four months, increased
$0.1 billion or 0.1 percent to $245.6 billion. This
followed a 1.8 percent August decrease.
Fabricated metal products, up eight of the last nine
months, drove the increase, $0.2 billion or 0.6 percent to
$30.5 billion.
Unfilled Orders
Unfilled orders for manufactured durable goods in
September, up seventeen of the last eighteen months,
increased $3.8 billion or 0.3 percent to $1,168.7 billion.
The Dow is presently looking to open up 50, but that’s because the dollar is weaker (so it takes more of them to buy the Dow) and then as a consequence of THAT we see gold climbing back…
Now About the Housing Picture
Once upon a time, owning a home was the smartest thing you could do. Since 2009? Let’s roll with this morning’s Case Shiller/S&P/Dow Jones (and whoever) as they lay out housing reality:
New York, October 28, 2014 – Data through August 2014, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, continue to show a deceleration in home price gains.
The 10-City Composite gained 5.5% year-over-year and the 20-City 5.6%, both down from the 6.7% reported for July. The National Index gained 5.1% annually in August compared to 5.6% in July.
On a monthly basis, the National Index and Composite Indices showed a slight increase of 0.2% for the month of August. Detroit led the cities with the gain of 0.8%, followed by Dallas, Denver and Las Vegas at 0.5%.