Source: The Automatic Earth
Lewis Wickes Hine Berry pickers shack, Anne Arundel County, Maryland 1909
US home sales, mortgage originations, GDP growth, labor participation rate, there’s a long litany of horrendous numbers, especially when you realize this is not supposed to be a “normal” phase in the economy, but a recovery, which according to historical precedents should show better than normal numbers, not worse. Either that or it’s not a recovery. If you can only ‘create’ 280,000 new jobs when almost a million Americans leave the labor force in just one month(!), you have issues; you might want to get a few therapy sessions in.
That the Fed under Yellen came with happy recovery tidings and more taper on the same day we learned that there are now 102 million working age Americans who don’t have a job carries an under- and overtone of irony that’s hard to beat. America looks good on the surface because those parties that have access to your – future – income and wealth make money on the crap table. But as soon as the risk of losing on that table increases, which is just a matter of time (because big players know volatility when they see it), they’re pulling out with their gains, markets go down, interest rates go up, and you’ll be left with the bill to make up for the difference. Baked into the cake. You’re already, today, much poorer than your bank statement says. That statement simply ignores the debts the country has entered into in your name.
If nothing else, it should be very evident to everyone who follows the markets, and the economy at large, be it professionally or out of “simple” curiosity, that there is a inherent volatility in today’s global financial events that is probably unique in history. That volatility may seem to be shrouded in the world’s central banks’ very determined action of unleashing an entire year’s worth of global GDP into those same markets, but what many don’t understand is that this only increases volatility. And that it must and will, of necessity, backfire later, at a date to be determined in the future. Know what tomorrow is? That’s right, tomorrow, too, is the future.
There are plenty of voices who claim the recovering US economy will lift China and perhaps even Japan out of their slump, but I think you can guess by now what I think about that idea. When your GDP grows at a 0.1% clip, you don’t even look likely to save yourselves, let alone others. 47% less new homes sold over the May 1-3 holiday in China, it’s just another number, but it doesn’t look good, does it? China, like the US, puts on a brave face, but I get this overwhelming impression that neither of the two will be able to help the other recover their recovery. China is still the country that sells trinkets and electronics to Americans and Europeans, and neither of them have the sort of economy that says they’ll start buying more of either anytime soon, probably never again.
Japan is a basket case, we’ll see a whole bunch of very “disappointing” data come from the rising sun this year. Japan has bet the house on exports, and those exports are not going anywhere despite the 20% plunge in value of the yen. Toyota’s doing fine and raking in riches, but Sony is getting clobbered for the exact same reason Toyota is not: the dramatic failure of Abenomics.
How about Europe? ECB head Mario Draghi needs to crash down the euro into the beggar thy neighbor game well underway, but his options are not nice to him. Pushing down interest rates from 0.25% is a very limited game, while pushing them into negative territory for real rates is a game so risky he’ll be reluctant to try. The only other option seems to be to launch QE, but there’s oodles of reluctance there as well, and moreover it’s unlikely any bold steps will be taken so close to the EU elections May 22-25, after which it can take a while before the new power relations are established.
Europe should have let go of the PIIGS years ago, in fact they should never have entered the eurozone, it would have been much better for everyone except the banks and the Brussels cabal, and there is still no way Greece is ever going to be Germany. WHich, in essence, is all you need to know about Europe. I still hope one country, one is all it takes, has the audacity to leave the euro, lest all of them are dragged down into the same debt ridden swamp. The Greeks, Spanish, Italians and Portuguese deserve much better than to be some power-hungry clique’s whipping boys, but they need to be master in their own homes to do it.
So. Who’s left? Emerging markets? You got to be kidding. If Yellen’s taper means one thing, it’s rich world capital coming home to New York, Frankfurt and London. Oh wait, London. Can Britain save the global, or the American, recovery? A country where real wages have dropped 8% over the past few years? You see, economies don’t work that way. A recovery is when everyone, or at least the broad population, starts to become better off. There’s no sign of that, obviously, in Britain. In fact, it sort of like exemplifies where the entire world has gone formidably off track: a government that hands over it’s citizens capital to investors, which temporarily lifts asset markets, combined with a red carpet for foreign investors who owe their money to other governments’ handing over their own citizens capital, and who drive up local property prices beyond the ceiling, combined with a scheme to entice enough actual Britons into buying homes at those artificially elevated prices. What that exemplifies is the Ponzi scheme the entire global economic system, if you can still call it that, has become. And every Ponzi scheme has a best before date.
To summarize, no-one and nothing is going to help the recovery recover. What we see in the financial press has turned into a propaganda war, but there is no trust left, and no confidence, there’s only central banks and governments with their fingers in your children’s pockets. But nobody has any idea what your children will generate in wealth or income. What if the economy collapses?
The only thing we’re sure of is volatility. And that tells us that the entire “system” could crumble just as easily tomorrow as the day after. But crumble, and implode, explode, collapse, it will. Ponzi schemes always do.
TLB recommends you visit http://www.theautomaticearth.com for more great articles and pertinent information.
See original article here: http://www.theautomaticearth.com/debt-rattle-may-5-2014-whos-going-to-help-the-recovery-recover/