This morning’s report was to have been titled “What’ll Be Left Standing? (2) The Matrix” but something much more important is coming into focus: Yes, a huge blow-off top in the stock market with a Dow north of 20,000 is likely in the wings. But it takes a lot of background to understand the dynamics and where it leads. One reason to expect it is in the Fed’s Consumer debt report out late Friday.
In our Wednesday report, we delved into some of the drivers of the New Depression and explored how certain social trends, like “children” living with their parents well into adulthood are helping moderate what would otherwise likely be a much steeper and faster descent into economic hell. Of course, the flip side of it isn’t all that pretty: Kids coming home drive the parents to work well past what could otherwise have been an early retirement age, but for the kids that don’t have the jobs to support the home sales that live in the “house that Jack built.” Note to nonsubscribers: Finest nursery tale ever, and it explains more about economics than most four-year programs and a good number of post-grad schools:
This is the horse and the hound and the horn
That belonged to the farmer sowing his corn
That kept the rooster that crowed in the morn
That woke the judge all shaven and shorn
That married the man all tattered and torn
That kissed the maiden all forlorn
That milked the cow with the crumpled horn
That tossed the dog that worried the cat
That chased the rat that ate the cheese
That lay in the house that Jack built.
But, then again, most economists I would argue, know plenty of math yet don’t grasp the circularity firmly. Or, to put it nicely, they don’t know Jack. We’ll be sure to mention when subsequent tertiary ripple effect circularity or the general dynamic stochastic equilibrium model is made into a nursery rhyme.
We dispense with our review of headlines this morning because of the importance of the underlying economic shift that’s just now getting underway.
Stand by to ROAR. With apologies to Prince for the poor play of his 1983 smash-hit ‘Party like it’s 1999”, We’re gonna partly like it’s 1927.