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I Have Some Bad News About the Economy


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2022 Oct 15, 5:36am   8,009 views  131 comments

by Patrick   ➕follow (60)   💰tip   ignore  

https://www.hennessysview.com/p/i-have-some-bad-news-about-the-economy?publication_id=572577&post_id=78488561&isFreemail=true


Accounts are widely out of balance

How bad, you might be asking yourself, will the economy get? We’re about to find out.




The orange line is US wealth. The blue line is US GDP. The gap is the amount of wealth American households and non-profits must surrender. You see, these two lines must move in lockstep. They do over time. When they get out of sync, something will put them back into sync.

The gap is debt.

Accounts must be settled. It’s called “a reckoning.” And the reckoning is here knocking on the door.

To put this gap into historical perspective, here’s an extended view of the same data with Dr. Hunt’s markups.




From 1951 to about 1997—the year the Monica Lewinsky story broke and Howe and Strauss published The Fourth Turning—the two lines moved in lockstep. Then Alan Greenspan decided to tinker, to grow wealth without growing GDP and without kicking off inflation. ...

What that gap represents is one of two things:

Money stolen from other people (other economies).

Money stolen from future generations of Americans.

How We Borrow from the Future
A few years ago, in the 1990s, we heard a lot of stories parents going to jail for identify theft perpetrated against their own children. About 1990, the government required babies to have a Social Security Number before they left the hospital. (I remember because it happened between our second and third children.)

Some shiftless parents soon realized they could apply for credit using their kids’ SSNs. They could default, and the creditor could do nothing. You can’t collect from a six-week-old infant.

This, of course, constituted credit fraud, so the parents who did this (and there were many) went to jail. (Not sure what happened to their kids who were left with no parents and lousy FICO score, but that’s not the point.)

The point is, all of us have been doing what those parents do only legally. The government allows us to run up our kids’ and grand kids’ debt as long as we do it with the government’s approved identity-theft programs.

So we did.

If you look at that chart, about 1/3 of our household and non-profit wealth is stolen from other generations or other countries. And we have to pay it back. Now. Or soon. ...

How We Borrow from the World
Some months ago, I wrote a series of posts about the US dollar (USD) as the world’s reserve currency and the petrodollar. (Here and here.) To summarize, almost all international debt is settled with USD regardless of the two local currencies involved. Britain settles its debts with Costa Rica in USD, etc. This includes the oil markets. Saudi Arabia, in turn, buys US treasuries (national debt) as a store of value for its copious oil profits. This allows the US run up massive debt knowing there’s always a market for our bonds.

Until there’s not.

Have you notice that Saudi Arbia is drifting out of the US orbit?

I wrote it about in those earlier posts, but the most certain sign of the Kingdom’s pending divorce with from Uncle Sam happened this week. Saudi Arabia disclosed that Joe Biden tried to strong-arm the Saudis into delaying OPEC+ oil production cuts until after the November elections. In diplomatic worlds, this was a slap in the face insult to the US and, particularly, to the Biden regime.

Rumors say Biden threatened to cut military sales to the Saudis if the OPEC+ cuts were announced before the elections. Not only did OPEC+ announce the cuts on its timetable, the Kingdom told the world about Biden’s threat (without disclosing the exact terms or names). Among “partners,” such public humiliation is a sign of pending breakup.

In return, the State Department and Joe Biden announced they would reevaluate the US’s strategic arrangements with Saudi Arabia after the election. That should be interesting.

What it means is that the US might not have as eager a buyer for debt as we’ve grown accustomed to. And that means the price of US treasuries will decline. Less demand means lower prices. When the price of bond goes down, the interest goes up. ...

I’m not saying the Saudis are about to stop taking our checks—I’m saying the for the first time since the Nixon administration, they’re acting like they might. Which means the are going to demand a bigger discount—the difference between the face value of the bond and sale price. That discount is the interest, and the bigger the discount, the less cash we have to spend tomorrow.

That’s one way to close that gap. You reduce the amount of cash you get in return for a future promise to pay. The amount you owe stays the same, but the amount you get now gets smaller.

How Our Kids Get Their Money Back
Remember the two ways we built that gap between wealth and GDP? That’s the first way. The holder of US treasuries want to cash their bonds, and they don’t want to buy new ones.

The gap begins to shrink, and that shrinking is mostly in household wealth.

The second way is intergenerational theft. So how do our kids and grandkids force their accounts settled?

Have you heard about the labor participation rate? Have you heard about the labor shortage?

An odd thing about the jobs numbers in recent months. While the number of “new jobs,” also known as “new hires,” has been strong, the number of people working has been going down, down, down. Why is that? ...

The kids aren’t taking our post-dated checks, either. They’re simply not participating in the US economy—at least, not in the official US economy. They siphoning of that excess household wealth NOW, in the present. They are not working in ways that grows the blue line (GDP). They’re shrinking the gap by lowering the orange line (wealth).

Wonder where inflation is coming from? We’re spending the excess household wealth without increasing the products and services available to buy with it. Inflation is how future generations close that gap. They spend your excess wealth without producing. And it’s happening right before our eyes. ...

In truth, we will only lose our ill-gotten gains.

While, we didn’t personally rob from the kids and foreigners, we were participants in a rigged game—a game that’s getting unrigged in a hurry. We enjoyed the spoils of the petrodollar and zero interest rates.

This account-settling process is called a reckoning, which sound harsh because it is.

https://www.epsilontheory.com/hollow-men-hollow-markets-hollow-world-2/

« First        Comments 93 - 131 of 131        Search these comments

93   AD   2024 Mar 8, 10:08am  

Yeah did Zuckerberg regularly sell stock like he did recently when Facebook was around $85 to $110 a share about a year ago ?

How rigged or manipulated was Facebook stock after Cheryl Sandberg left Facebook ? The media was on a blitz about how Tik Tok was going to replace Facebook.
94   AD   2024 Mar 8, 10:13am  

Rin says


I think you're confusing the basic RSI with the Stochastic RSI.


Yes Rin, I use the simple or basic version of RSI, just like MACD for me is 200 SMA minus 50 SMA. I also monitor put to call ratio for volume and open interest, and daily volume versus average volume. That's about it Mi$ter Rin.

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95   AD   2024 Mar 8, 10:28am  

I appreciate the recommendation and insight. I am going to read more about it and adopt it as far as selling covered calls for non-shit stocks like Amazon. This may be helpful when considering rolling down (to lower strike price) the covered call during intraweek trading when the stock has downside risk.

I appreciate it normalizes RSI.
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96   AD   2024 Mar 8, 12:09pm  

Googl hit its 200 day moving average a couple of days ago (around $130) and then rallied to $138.08 for today's high.

I see your StochRSI (21 days) chart for Googl and looks like its barely above 0 during this week and possibly we have more upside going into next week.

Yesterday I rolled up from strike $137 for Googl that expires today to a $144 strike for next Friday. I got worried Googl was going to pop and rally +3.5% on expiration day 8 March.

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97   AD   2024 Apr 6, 10:36pm  

.

Of the 303,000 new jobs created in March 2023, the biggest increases were in health care (72,000), the government (71,000), leisure and hospitality (49,000), and construction (39,000).

Almost 45% of the new jobs are in sectors driven by government spending such as Health and Human Services. MishTalk website has covered this before.

Wages up 4.1% for last 12 months (versus government-reported annual inflation of around 2.7%), and the forecast was 200,000 new jobs. Also the unemployment rate dropped by 0.1% to 3.8%.

https://www.foxbusiness.com/economy/us-jobs-report-march-2024

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99   HeadSet   2024 Apr 7, 7:17am  

gabbar says





I am a bit skeptical of these "high level executives" who cannot find jobs. It sounds like entitled individuals who only know how to kiss butt in their former place of employment. If one is so skilled, why not start your own business?
100   Rin   2024 Apr 7, 8:23am  

HeadSet says

If one is so skilled, why not start your own business?


Many execs don't know their heads from their asses. They only know how to push ppl around in big organizations and thus, they tend to follow their B-school cohorts, company to company. Once that network runs dry, they're just like any Joe out there.
101   AD   2024 Apr 7, 8:55am  

Rin says

They only know how to push ppl around in big organizations and thus, they tend to follow their B-school cohorts, company to company. Once that network runs dry, they're just like any Joe out there.


I have a friend that worked IT network management and use to work the C Level support jobs.

He said they acted like they were in high school at the C Level. I wonder if they are so fixated on EQ plus Machiavelli that there is not any part of their brain that functions as far as IQ related skills like troubleshooting, problem solving, creative design, etc.

And I wonder what we see at Boeing relates to that type of C Level culture or paradigm.

If that is true at the C Level that means the company or organization will unravel quickly if your workforce of worker bees such as front line managers are blue hairs and DEI morons.

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102   NuttBoxer   2024 Apr 8, 9:27pm  

HeadSet says

I am a bit skeptical of these "high level executives" who cannot find jobs. It sounds like entitled individuals who only know how to kiss butt in their former place of employment. If one is so skilled, why not start your own business?


I've lived in blue collar neighborhoods and watched them get squeezed for over 10 years. How do you think Trump got elected? We just interviewed two very qualified SDET's, and I don't think either one got selected. How do you think companies stay profitable when everything costs more, and everyone's spending less?
103   AD   2024 Apr 8, 10:07pm  

NuttBoxer says

How do you think companies stay profitable when everything costs more, and everyone's spending less?


They need just the right amount of an Asian and White male slave workforce to keep them financially solvent. All the bonuses and promotions from their hard work go to the blue hair and DEI hires.

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104   DemocratsAreTotallyFucked   2024 Apr 9, 7:20am  

AD says

White male slave workforce to keep them financially solvent. All the bonuses and promotions from their hard work go to the blue hair and DEI hires.


That describes Google.
105   NuttBoxer   2024 Apr 9, 9:43am  

I just heard I'll be getting a raise and bonus. Also, we recently had a DEI survey sent out(anonymous). I let loose. Time to stop coddling the losers.
107   AD   2024 May 7, 11:10pm  

.

If stock market crashes at least 20% within 3 months of the November election then the Democrats and Biden are in more trouble.



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108   AD   2024 May 8, 12:30pm  

.

https://www.newsweek.com/economy-america-outlook-biden-1896902

the media trying to downplay how bad the economy is, especially with about 5 months before the election

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110   AD   2024 Jul 5, 9:36pm  

It was a very poor job report considering that over half the jobs "gains" in June 2024 were with government and healthcare.

https://www.cnn.com/2024/07/05/economy/june-jobs-report-final/index.html

206,000 total jobs added in June 2024 based on Biden's Bureau of Labor Statistics.

70,000 jobs added was for public sector or government
34,100 jobs added for education
48,600 jobs added for healthcare (which is primarily funded by Medicare and Medicaid)

8,000 jobs lost for manufacturing
17,000 jobs lost for professional services

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111   AD   2024 Jul 7, 8:59am  

CNN is starting to show capitulation. But I wonder if they are slow walking the reporting on how bad the economy is. This is to ensure least amount of damage to Biden's campaign.

https://www.cnn.com/2024/07/07/economy/stocks-week-ahead-services-sector-slow-restaurants-stores/index.html

,

"A food services business surveyed by ISM said “sales and traffic remain soft compared to last year,” blaming “high gas prices in California and constant news about inflation and restaurant menu prices.”

Spending at restaurants and bars declined 0.4% in May, according to the latest Commerce Department figures on retail sales. A retail company told ISM: “With inflation continuing, will customers have enough discretionary funds to spend?”

Knightley provided CNN an analysis of government data showing that Americans in the top 20% of earners were responsible for a large share of spending on services related to transportation (air travel and cruises), recreation, food and finance.

The bottom 60% of households by income accounted for a larger proportion of spending on health care services."
112   komputodo   2024 Jul 7, 10:53am  

AD says

constant news about inflation and restaurant menu prices.”

yeah its not the actual inflation and high menu prices, its the NEWS about them.
113   AD   2024 Jul 7, 5:13pm  

komputodo says

AD says

constant news about inflation and restaurant menu prices.”

yeah its not the actual inflation and high menu prices, its the NEWS about them.


yeah blame the messenger in order to distract from the message

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114   AD   2024 Jul 9, 4:19pm  

.

https://californiaglobe.com/fr/u-s-business-bankruptcies-up-40-since-january-2023-small-biz-up-60

The American Bankruptcy Institute has bad news: Small business Chapter 11 business reorganization bankruptcy filings increased 60 percent from April 2023 to April 2024. Commercial Chapter 11 business filings increased 40 percent from April 2023 to April 2024, with high interest rates and high inflation to blame.

“Fading hopes of lower interest rates are likely contributing to the increase in filings, as companies that may have held out hope for rate cuts at the beginning of the year come to terms with the reality that they will remain higher for longer,” S&P Global reported.

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115   RWSGFY   2024 Jul 9, 6:01pm  

AD says

.

https://californiaglobe.com/fr/u-s-business-bankruptcies-up-40-since-january-2023-small-biz-up-60

The American Bankruptcy Institute has bad news: Small business Chapter 11 business reorganization bankruptcy filings increased 60 percent from April 2023 to April 2024. Commercial Chapter 11 business filings increased 40 percent from April 2023 to April 2024, with high interest rates and high inflation to blame.

“Fading hopes of lower interest rates are likely contributing to the increase in filings, as companies that may have held out hope for rate cuts at the beginning of the year come to terms with the reality that they will remain higher for longer,” S&P Global reported.

.


Go woke - go broke!

PS. Who needs these paper money loans when you can deal in silver coins, amirite?
116   AD   2024 Jul 9, 8:22pm  

RWSGFY says

Go woke - go broke!


Thank you Joe Biden for this.

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117   RWSGFY   2024 Jul 10, 6:48am  

AD says

RWSGFY says


Go woke - go broke!


Thank you Joe Biden for this.

.


Sadly, both geriatrics currently in the race lended their hand to the inflation: Trump signed $2.2T "stimulus" in March 2020
and Potato signed $1.9T one exactly 1 year later. Let's give credit where credit is due.
118   NuttBoxer   2024 Jul 10, 7:39am  

I think the real credit, still to both of them, is for the Scamdemic. Possibly the biggest small business disaster in US history.
119   RWSGFY   2024 Jul 10, 7:46am  

NuttBoxer says


I think the real credit, still to both of them, is for the Scamdemic. Possibly the biggest small business disaster in US history.


The point of having a presidential republic is to have somebody at the very top making judgement calls. Obviosly a number of very bad calls were made wrt the scamdemic: aping the Chicoms "lockdown" policies, the "Warp Speed", the two "stimulus" bills, etc.
120   NuttBoxer   2024 Jul 10, 8:57am  

Constitutionally, I would say guiding recommendations. But we've diverged so far from the original intent(limited government), I doubt my statement even makes sense.
121   DemocratsAreTotallyFucked   2024 Jul 10, 9:21am  

RWSGFY says

The point of having a presidential republic is to have somebody at the very top making judgement calls. Obviosly a number of very bad calls were made wrt the scamdemic: aping the Chicoms "lockdown" policies, the "Warp Speed", the two "stimulus" bills, etc.


Yes. We had a de-facto triumvirate running the executive functions under the Articles of Confederation. And that was deemed a failure for the reasons you mention.

That's ultimately we don't have an Executive Council like the Swiss currently do. That option was discussed by the Founders.
122   zzyzzx   2024 Jul 10, 9:40am  

HeadSet says

gabbar says






I am a bit skeptical of these "high level executives" who cannot find jobs. It sounds like entitled individuals who only know how to kiss butt in their former place of employment. If one is so skilled, why not start your own business?


If they were really high level executives then they should have plenty of money stashed away for the proverbial rainy day, and not panicking.
123   AD   2024 Jul 11, 12:26am  

zzyzzx says

If they were really high level executives then they should have plenty of money stashed away for the proverbial rainy day, and not panicking.


Good point, but maybe the majority have too lavish and expensive of a lifestyle and it would be too painful to tighten the budget belt, despite their cash savings and other assets.

I'm glad I'm not trapped in a lavish lifestyle in order to be happy.
.
124   Al_Sharpton_for_President   2024 Jul 11, 5:13am  

RWSGFY says

the two "stimulus" bills, etc

Congress passed these bills. Blame those bozos.
125   Eric Holder   2024 Jul 11, 8:56am  

Al_Sharpton_for_President says


RWSGFY says


the two "stimulus" bills, etc

Congress passed these bills. Blame those bozos.



POTUS has the power of veto. And both above mentioned "geriatrics" were actually very excited about sending "stimulus" checks with their names on them.
126   ForcedTQ   2024 Jul 11, 9:21am  

Looks like firms are getting rid of the mature and knowledgeable employees that cost them more money so that they can keep doing things they think they want to. It will be hard for these actually qualified employees to be rehired if the industry is shifting to hiring mostly know nothings that are infinitely moldable and always bend the knee.
127   DemocratsAreTotallyFucked   2024 Jul 11, 10:08am  

ForcedTQ says

Looks like firms are getting rid of the mature and knowledgeable employees that cost them more money so that they can keep doing things they think they want to. It will be hard for these actually qualified employees to be rehired if the industry is shifting to hiring mostly know nothings that are infinitely moldable and always bend the knee.


Yeah. You get laid off in your early 50s, you stay laid off.
128   RWSGFY   2024 Jul 11, 10:44am  

ForcedTQ says

Looks like firms are getting rid of the mature and knowledgeable employees that cost them more money so that they can keep doing things they think they want to. It will be hard for these actually qualified employees to be rehired if the industry is shifting to hiring mostly know nothings that are infinitely moldable and always bend the knee.


In tech they are not getting rid of per se, just don't get pay raises fast enough to at least follow the inflation. It's not uncommon to have some wet-behind-the-ears fresh grad with latest buzzwords in their resume to get paid more than an old guy one or two rungs higher on the ladder. When layofs come it's these younguns who get trimmed first, because it looks better in the spreadsheet, both in salary and severance.
129   RWSGFY   2024 Jul 11, 10:48am  

DemocratsAreTotallyFucked says

ForcedTQ says


Looks like firms are getting rid of the mature and knowledgeable employees that cost them more money so that they can keep doing things they think they want to. It will be hard for these actually qualified employees to be rehired if the industry is shifting to hiring mostly know nothings that are infinitely moldable and always bend the knee.


Yeah. You get laid off in your early 50s, you stay laid off.


Anecdotally it's more like 1 out of 3. Whether the ones who got hired achieved their previous TC is unknown though.
130   AD   2024 Jul 11, 8:55pm  

The "middle household" (below the top 10% and above the bottom 50%) owns about 30.6% of household wealth in the USA.

The top 50% owns 97.5% of household wealth in the USA. That is some serious bifurcation going on in the USA economy.

Read below.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

From Federal Reserve Bank of St Louis webpage " The State of U.S. Wealth Inequality "

https://www.stlouisfed.org/institute-for-economic-equity/the-state-of-us-wealth-inequality

For the 4th quarter of 2023:

The top 10% of households by wealth had $6.7 million on average. As a group, they held 66.9% of total household wealth.

The bottom 50% of households by wealth had $50,000 on average. As a group, they held only 2.5% of total household wealth.
131   AD   2024 Jul 11, 11:28pm  

Money supply M2 should be around $19 trillion (based on continuing linear trend from January 2015).

Still a lot of liquidity in the economy though not as much relatively based on inflation.

Hopefully it stays around $21 trillion long enough for it to fall back on the linear trend line.

M2 :
January 2015: $11.8 trillion
February 2020: $15.4 trillion
March 2022: $21.7 trillion (all time high)
current : $20.95 trillion

https://fred.stlouisfed.org/series/M2SL

.

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