Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Who’s Going To Help The Economic Recovery Recover?

Economics / Economic Recovery May 06, 2014 - 09:57 AM GMT

By: Raul_I_Meijer

Economics

Hey, say what you will, but I’m not one to dodge the more difficult questions. And in the case of this one, I have no idea what the answer would be either. I think calling what we’ve seen to date a recovery is far too much of a semantic stretch in the first place, but even then, even if we assume a hypothetical economic recovery has occurred in America, it’s just about literally in a world of trouble.


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.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
Raul Ilargi Meijer Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules