The Cheap Credit Trap

The Federal Reserve is making noises about cutting interest rates for the first time in several years. The reason is the trade dispute with China and now Mexico is potentially having an impact on the global economy. Even though it is only a signal of an intention, markets rallied on the news. Global investors and their robot traders love cheap credit from the Federal Reserve, so anytime there is the promise of more cheap credit, there is a rush into equities. It is a reminder of what actually drives stock indices.

It used to be that recessions were seen as a correctives for the system, as they eliminated unproductive and parasitic elements from the economy. In good times, all sorts of inefficiencies are tolerated, as everyone is making money. When times get tight, everyone gets serious again. Inefficient businesses and industries fail, thus putting those resources into more productive areas. The recession was the economy’s way of policing itself, so it was considered a necessary, if unpleasant, feature.

No one thinks like that today. Any sign of a downturn produces panic, especially among office holders. Part of it is no one has any respect for office holders, so voters will look for any reason to throw the bums out. For people who live off the public, losing an election is worse than death. Another part of it seems to be the sense among the ruling classes that they have only a tenuous grip on power. This is a bread and circus world now and they better make sure both are in ample supply.

That’s all speculation, of course, but it’s also a reminder of the long running problem that no one can figure out how to remedy. That is the interest rate trap. Lowering rates to address a slowing economy or a financial crisis is easy. Raising the rates back up again appears to be impossible. It has been over a decade since the mortgage crisis and the Federal Reserve is still trying to unwind its position and bring rates back up to historic norms. This news suggests they will never pull it off.

One reason the Federal Reserve is trapped in a world of ultra-low interest rates is the world economy is based on credit. The foundation of the credit system is U.S. treasuries. When the government borrows money, it is also creating an asset to be used in the financial system. Stable and predictable interest rates make treasuries valuable collateral, as their value will never decline. In fact, the market has an insatiable appetite for American sovereign debt. Those super-low rates are a big part of it.

Of course, the flip side of this is the U.S. government can only exists as it does with super-low borrowing rates. Current debt stands at $22 trillion and goes up by a trillion per year, give or take. Even if the so-called fiscal conservatives got all the items on their wish list, the cost of the great Baby Boomer retirement guarantees massive borrowing for the next several decades. That is only possible in a world of cheap credit, so both sides of the debt transaction need super-low interest rates.

Then there is the retail side. Whole industries have become hooked on super-low borrowing rates. Imagine what happens to housing if mortgage rates return to historic norms, in terms of interest rates and terms. Imagine what happens to the car business when car makers cannot offer 84-month terms and low interest rates. The answer is these industries shrink considerably and take the economy into a depression from which it would unlikely recover. These industries need low rates to survive now.

Now, there is an argument that borrowing rates are normal for a highly efficient modern economy. Historic averages are not useful, as the world where men paid debts with gold coin, or mortgages were processed by hand, is nothing like today’s world of automation and complex financial instruments. There is a lot of truth to this. Automation has not just made transaction processing faster, it has made it more reliable, thus reducing systemic risk and friction. Cheap rates are a reflection of cheaper costs in the system.

There’s also the fact that central banks have greater control of the global economy than at any time in human history. The microprocessor has had no greater impact on the world than in the financial system. Not only do central banks have more information about the state of the economy, they have tools that allow them to see trends before they get going, thus allowing them to anticipate problems before they reach crisis level. It’s not perfect, but managed capitalism is more efficient and predictable.

That said, the main tool central banks have in fighting a financial crisis is lowering borrowing rates. The reason they could soften the blow of the mortgage crisis is they could spread the cost of remedying it across the following decades. In the simplest terms, the Federal Reserve used a payment plan to cover the cost of fixing the mortgage crisis in 2008. That was only possible with the room to lower rates and borrow heavily from the private economy to soak up bad debt and warehouse it at the Fed.

Inevitably, this topic leads to questions about whether the current credit based economy is sustainable in the long run. The old joke about “in the long run, we’re all dead” is true here as well. The current monetary system has been in place since the Louvre Accords in the 1980’s. While there have been recessions, there have been no depressions that threaten the political order. The ability to borrow has never been stronger, which means the West should be able to manage the great demographic change over.

Still, there is that haunting sense that this credit regime is a slow-motion bust-out where social capital is turned into cash and used to perpetuate the current order. At some point, when the West is nothing but a shopping mall full of strangers, with no connection to one another, what happens then? The West is haunted by the sense that the true cost of cheap credit makes the credit based economy unsustainable. In the end, the cultural capital will have been exhausted and there will be nothing left to borrow.

To contribute to my Escape From Lagos Fund

Or, You can send money to me at:

P.O. Box 432
Cockeysville, MD 21030-0432

newest oldest most voted
Notify of
Member

Cockeysville!! That’s funny seems appropriate somehow

Anyway, I think we have to have a collapse, I think it’s the only way white people survive. If we continue on as it is and there is no collapse any fighting back against the anti white elements will just create more of them and eventually the levers of government are going to be completely out of our hands and used against us. White people are becoming the global scapegoat. That’s really bad for white people as long as there is a global order.

Member

Wasn’t it Mises that said that a recession is when money is returned to it’s rightful owners? Something like that, but I guess corrections that mean anything are off the table now.

We really do need a painful correction or something worse will take care of this for us. Maybe it is already happening but only a slow arduous process , drip by drip. (insert boiling frog analogy here). As Pat Buchanan said, America was a greater country long before she became a prosperous own. Hell, what we have now is not prosperity but Bugman economy.

ROBERT SYKES
Guest
ROBERT SYKES

It was J. P. Morgan speaking about depressions.

Calsdad
Guest
Calsdad

It takes an awful lot of fake money to keep the empire alive and fund the globohomo elite’s reign over us. Martin Armstrong writes extensively about this. Destroying the money supply has a long history in human civilizations and is one sure sign that the whole enterprise is going down the shitter. In ancient times the rulers ruined money by gradually diluting the percentage of precious metals that were used to mint coins. In a healthy society and economy – the coins would have been pure gold or silver. As the rulers get more and more corrupt – the %… Read more »

Compsci
Guest
Compsci

Cal, that’s right. Best to hedge with some commodity that retains some intrinsic value. Gold and silver will do. The rich of course do this instinctively and have such holdings in abundance, whether land, oil, or other commodities. I’m sure some here have other creative ideas. But US greenbacks—that’s a long term scam. Here’s an example, taken from none other than the “reality” show, Pawn Stars. Simplified version: Some old guy comes in with a restored car, 1933 Packard or something. They elaborate on the history of the car. Built in the depression for rich folk, it sold for $3000.… Read more »

3g4me
Guest
3g4me

When I first went overseas in the 1980s, I found most other countries’ monetary coins unusual, but those from the Soviet Union in particular reminded me of play money – they were so lightweight and clearly of no intrinsic value. That’s how I now regard American coins – I wasn’t really aware, as a kid, that our dimes contained real silver or our pennies real copper, but today the coins are all featherweight and obviously hold no intrinsic value nor contain any real metal. We’re the monopoly economy with monopoly money.

Tacitus
Guest
Tacitus

Very nice post, and change of pace. My thoughts on the matter are: money/currency as a tool is useful to the extent that it provides a reliable proxy for wealth. Money is fungible, which physical goods are not, therefore we consider it a medium of financial exchange. The US remaining the world reserve currency is the ONLY thing keeping this Ponzi scheme treading water. When that is no longer the case, things will get very interesting, and frankly it will signal the end of the post WWII era. I don’t think there will be a replacement, at least not any… Read more »

Yves Vannes
Member

What about the rise of the Renminbi as the rising coin of trade with the East Asian bloc? It’s already surpassed the Euro. Wouldn’t that make our cheap debt a lot more expensive? If China and Japan cooperate, stop buying so much of our debt and impose the Renminbi on more and more trading partners wouldn’t we be in even more of a pickle? A system driven by so much debt cannot be all that anti-fragile. It doesn’t have to be replaced, just loose enough of its appeal to make things more difficult for our masters. The dollar replaced the… Read more »

Member

Any nation foolhardy enough to try to withdraw from the oil dollar system will find the USMC knocking on their door. They are the enforcer for our banking system.

A.B Prosper
Guest
A.B Prosper

The US would be utterly destroyed in a war against China , Clown World USA doubly so. Also nukes.

Also China has a long standing grudge vs. Japan and so an alliance is going to be shaky.

Yves Vannes
Member

If China and Russia cooperate…

It would cost everyone something in the short term but in the long run the rest of the world would be a lot better off.

Excluding our greatest ally, the entire world is sick of our constant beating if the war drums. They are eager to see us taken down several pegs. The only reason they haven’t yet stuck it to us is that we will drag a lot of them into the abyss with them.

At some point they will have had enough.

Tacitus
Guest
Tacitus

Yves: I guess you haven’t been to East Asia, but one of the defining characteristics is how much the Chinese, Japanese, and Koreans hate each other. The Japanese are well aware of the fact that burgerland is the only thing standing in the way of China. If China were to destroy any country, it would undoubtedly be Japan.

Yves Vannes
Member

I’ve traveled to East Asia a lot during the past few decades. A degree of economic cooperation has always gone on and has steadily increased. Conscious efforts are being made to smooth out their political differences. They have a ways to go yet but they have a lot of incentive to make it work…largely because they expect the US to continue to decay thanks to our obsession with diversity. They don’t want to be caught flat footed. They both see us as increasingly erratic and thus increasingly dangerous. They understand that we are not the master of our own house… Read more »

Sean Detente
Member

@yves – I’ve lived in Tokyo for going 25 years and my observations pretty much line up with yours. The Chinese will get pissy whenever a Nip PM visits Yasukuni, but it’s the same dog-and-pony show they always trot out for the Chinese public. Used to be, even just ten years ago, Chinese tourists were a general PITA, Koreans were even worse, and white Westerners were everything in between. Now, the Chinese are tolerable, the Koreans still the same, but more noticeably – the quality of the average white tourist has went down markedly.

Sean Detente
Member

Nm

Member

We are in for an energy based economy. An energy denominated currency.

Member
Felix_Krull

Any sign of a downturn produces panic, especially among office holders. Andrew Yang writes in “The War On Normal People”, that the next recession is the Zombie Apocalypse. Granted, a lot of people say that every time, but he gives a pretty compelling argument that this one is really The Big One. Essentially that at the moment, cheap labor is holding back capital investments in disruptionary tech, mainly AI. But next time a recession hits, argues Yang, we’ll see The Great Displacement, with mass unemployment and robots flipping burgers, driving trucks, doing surgery, dentistry and diagnostics: already today, an AI… Read more »

Member

There’s a long way to go to get there with a decreasing IQ and diversity standards that keep out the smart people. It’s not going to happen.

Federalist
Guest
Federalist

Felix, this makes a lot of sense. We’re probably not at the point yet, technologically speaking, of replacing doctors and lawyers, etc. But a lot of low wage jobs could probably be eliminated with existing technology.
Automation is being held back by a glut of low wage workers, particularly in light of immigration. Does Yang say why cheap labor will end, though? Or do you have a theory? It seems that even with a major recession, there would still be more than enough low wage workers to go around.

Member
Felix_Krull

Does Yang say why cheap labor will end, though?

He doesn’t think cheap labor will end, he thinks that when the next recession effects mass layoffs, tens of millions of jobs will be replaced by even cheaper robots. I’ve not finish his book yet, so I haven’t gotten to the bit about UBI, only the gloom and doom.

Interestingly, he writes that a lot of his rich friends are building prepper bunkers – “escape hatches” overseas. The Cloud People think there’s a reckoning coming.

Al from da Nort
Guest
Al from da Nort

Felix; See if Yang tells how those rich folks plan to get to their bunkers and how they’ll hold them against hungry locals. Under conditions of general disorder the roads will be quite possibly unusable. For some idea of how this might go down look up some video of hurricane evacuation and remember that those traffic jams were ‘orderly’ (done under orders along announced and pre-planned routes by folks with clear common interests). Even if they have private jets, they will still need to get to them over those same roads. And this assumes no turmoil at the destination airport.… Read more »

Member
Felix_Krull

See if Yang tells how those rich folks plan to get to their bunkers and how they’ll hold them against hungry locals.

He doesn’t go into specifics. I agree with you entirely, and I suspect Yang does too.

Triff
Guest
Triff

Mega Yachts and Helicopters are the
preferred “bug out” tools of the super rich

Compsci
Guest
Compsci

From what I hear, the bunkers are primarily out of the country. Smallish States that are isolated by ocean.

Member
Felix_Krull

the bunkers are primarily out of the country.

Yes, he didn’t say where. I’ve heard that Patagonia is a popular retreat.

They’re delusional. We’ll have them delivered to us by their hosts, tortured, trussed up and hooded, ready for the show trials.

Compsci
Guest
Compsci

The problem with AI and robotic replacement is the same as it ever was. When the robots take over, who buys the crap they produce—services and products. The unemployed?

Yang’s $12k UBI won’t cut it and it won’t buy the rich “security” nor society stability. It will simply produce more recruits for the inevitable rebellion.

Member
Felix_Krull

Yang’s book is 250 pages and well written. Lots of sections with statistics you can skip, if you’re familiar with the basics of income distribution.

Alzaebo
Guest
Alzaebo

Singh pointed out a machine in the grapevines and told me his former human crew of 100 braceros is now down to 5. A Nevada hay farmer showed me his involuntarily new $250, 000 bailer and said he had had to reduce his longtime crew of 11 down to 3, as E-verify refused to verify. These are Mexican families that have been with these farms back to great-grandpa. I’ve heard the same from farmers from Nebraska to Maryland, and in Mexico. Whole Mexican farm towns are simply being seized by Cartel- and they have 200 young women with no chance… Read more »

Lorenzo
Guest
Lorenzo

I don’t feel sorry for the hay farmer who had to buy a baler when his illegal labor stream dried up. He should look on the bright side: Had he violated tax laws instead of labor statutes, he’d be in jail instead of in debt for a piece of capital equipment.

Alzaebo
Guest
Alzaebo

Not illegal. Lorenzo, his complaint was that he had filed and complied with every agency from local, state and fed, but that fed kept giving him the runaround. His crew had been with him over 30 years, since taking over their roles from their dads, from their grandads, back about 120 years. Not illegals, but regular green card guest workers. The settled systems of us and our neighbors are being torn apart. Krull’s comment made me realize that nobody has noticed the death of European yeoman farmers and their long traditions. Now I’ll never get to pick chestnuts in Denmark… Read more »

Pimpkin\'s nephew
Guest
Pimpkin\'s nephew

Well said, Alzaebo.

Hun
Guest
Hun

120 years of generations of green card guest workers. Makes total sense.

Calsdad
Guest
Calsdad

LOL.
Hay balers? that’s the best example of automation people can come up with?

Hay balers have been around since the late 1800’s. All that has happened since then is incremental improvements in efficiency.

Go look at the stats for how many people lived on farms in the late 1800’s vs now.

The great displacement of farm workers thru mechanization happened a LONG time ago.

Dinothedoxie
Guest
Dinothedoxie

Yep, and it was one of the causes of the Great Depression in the 30s that everyone ignores today.

Alzaebo
Guest
Alzaebo

Yes, thanks Dixie- when you’re not allowed enough humans to drive the tractor bailers and harrowbeds (as I did in high school), you have to buy their huge monstrocity and build a barn for it.

Member

Doomsday prophets sell more books. 2007 wasn’t much worse than the ‘82 recession Reagan had to deal with (and which had worse unemployment). Both were bad recessions, but they did clean house economically. 2007 just took longer to climb out of because of the bailouts, “stimulus” and Obama/Obamacare.

China and immigration are huge problems that must be dealt with, but on the whole, we are in good shape economically-speaking. The $22T question is whether debt really matters. So far, it doesn’t, but there are thousands of politicians and bureaucrats who are like “hold my beer”…

ROBERT SYKES
Guest
ROBERT SYKES

The significant point is that despite historically low interest rates we also have very low inflation, below about 2%. This suggests the world’s economy is in a deflationary period and that the historically low interest rate are preventing across the board price collapse.

Member

I would not believe the “2% inflation rate.” The cost of things a family requires to keep above water (food, education, real estate, transportation, health care) have not increased by a mere 2% a year, but by some multiple.

Sure, LCD teevees are cheaper. As are PCs per unit processing power. But decreased teevee/PC cost is not what will have an impact on how many kids a married couple decides to raise.

Compsci
Guest
Compsci

At this very minute, I sit in a dealer show room waiting for my truck to have the oil changed. The new trucks run $54k sticker! The old one I bought new in 2002 about $25k. OK, bigger, more electronics, etc. But that ain’t no 2% yearly inflation.

A.B Prosper
Guest
A.B Prosper

There is deflation but its masked by the USG for example borrowing or minting around 3.5% of the GDP every single year and a vast cheap credit resulting in a finance driven economy This has resulted in vast stock buybacks hurting useful investments and huge real estate price increases, lousy parts of So Cal, Mexico El Norte where I live, prices are twice what they should be do to bankers , investors and Chinese carpetbaggers The effect of this is, more or less is high housing costs and with the labor surplus driven constant wage arbitrage combined with easy divorce… Read more »

Compsci
Guest
Compsci

A.B., I hear ya, but…1963 American morf’d into 2019 American. 1963 American produced the current immigration and civil rights laws. Something more than simply taking power has got to happen, least the cycle come around again.

There has got to be a sea change in the basic philosophy of the country codified into statute. Some here say, that comes with a return to a 90% White majority. But 1963 had a 90% White majority and we couldn’t keep what we had. Not sure we will be smarter next time around.

General Lee
Guest
General Lee

Yes, nice change of pace. I would like more like this.
Were you deplatformed from subscribestar or something?

General Lee
Guest
General Lee

I would posit a question: what are you guys’ thoughts on bitcoin and crypto currencies? I wouldn’t mind reading a post on that.

Al from da Nort
Guest
Al from da Nort

General; For sure it depends on why you’d be using it. One thing to bear in mind about bitcoin, etc. is crypto-currencies’ utter dependence on steady electric supply, well protected servers and high bandwidth com links. If SHTF time comes, all such assumptions become questionable. Likewise there is vulnerability to scam. Hard to enforce a contract against someone you only deal with over the inter webs. Since crypto-bucks exist in competition with national currencies, it’s hard to imagine some country or other’s secret service*/financial police riding to the rescue in case of a dispute. I seem to recall that something… Read more »

Member
Felix_Krull

Sorry to be more off-topic than usual, but it’s election day in Denmark, so I thought I’d give you guys a quick run-down. The Danish parliament is – with a few footnotes – elected proportionally. There are presently nine parties in parliament, traditionally divided into two loose coalitions, ‘blocks’ – Red Block and Blue Block. (With red being the Commies.) Look at it as if the two blocks correspond to the Dems/Reps, with the factions within these, formalized as autonomous, but allied parties. After an election, the queen orders the leader of the biggest party to build her a government.… Read more »

Member

That’s horribly. Controlled opposition is everywhere it seems. Thanks for posting that

Member
Felix_Krull

Same thing happened with Nigel Farage. You win a triumphant, glorious victory, and then you decide to drop the ball when it’s time to reap the rewards?

That’s chapter one in “Shit That Never Happens in Politics.”

Member

Oh, no-no-no no way Jose! We have it from our humble host that Farage is super smart for throwing away his UKIP organization, the original Brexit victory, and the political capital from that victory.

Obviously you are missing something. Like Spinal Tap, your DPP just chose to be more selective in their fan base..

Member
Felix_Krull

And two anecdotes from the Danish election season: A globalist party – the party that ran on a “Crash Stop” in 2015 and is the incumbent holder of the PMO – released a video about how real Moslems lived. We meet a nubile Muslima running around in scarf, yoga pants and a sweater that is short enough for a good, clean ass-shot. We see her doing a lot of totally normal Danish stuff, like flirting with an anaemic, pale, nerdy-looking boyscout, or marrying a suave, not-overtly-gay POC, we see her in the shower and so forth. Only, it’s a Danish… Read more »

Member
Felix_Krull

“When you’re done jerking, vote for Jokke”.

He lost his seat.

Rogeru
Guest
Rogeru

Sounds like the DPP was controlled opposition, blatantly so. Thats horrible. Somebody needs to wake Holger Danske, his people need him!

Member
Felix_Krull

The thing is, they weren’t managed opposition from the start. They had fought long and valiantly for Denmark, (almost) up until the moment they sold out. The Progress Party in Norway – who’ve been in government for almost a decade – did the same as the DPP, and the Sweden Democrats are showing tendencies as well. Marine ousted her father because he offended the nose – go figure. Farage is a different creature. I think he was bent from the get-go. He has successfully destroyed UKIP and substituted a one-issue movement for a party with a real political program. All… Read more »

A.B Prosper
Guest
A.B Prosper

Holger Danske would be nice but Denmark is going OK (from Vox Day’s blog) For the last two decades the anti-immigrant party has supported successive right-wing governments in exchange for the implementation of their restrictive immigration policies. But as those policies have now been broadly adopted by almost all Danish parties, the Danish People’s Party has lost its unique appeal with voters. https://www.dailymail.co.uk/news/article-7106581/Denmark-election-Centre-left-Social-Democrats-expected-win.html It also appears that the policy adoption is being carried through I for one am glad of this, if European nation wish to be Leftist and most appear to prefer it for a lot of good reasons,… Read more »

Member
Felix_Krull

That is sort of true: the establishment parties have begun talking tough, but the only real measure of their efficacy is the net number of permanent residency permits handed out, and while the rate of growth is lower than in other West European countries, it’s still rising. The right-wing PM before the outgoing one, Anders “Fogh of War” Rasmussen, shut down some family reunification options, but he simultaneously opened up for foreign ‘students’, travelling all the way from Pakistan to study Islam in Denmark, producing government grants to our madrassas. What this election has demonstrated to our political classes, is… Read more »

Yves Vannes
Member

Does the fate of Noa Pothoven have any traction there?

Member
Felix_Krull

Noa Pothoved.

Dutch dude. Never heard of him.

When I get to be the chairman of the European Commission, I’ll decree that people from the Netherlands are Hollandic Hollanders from Holland and speak Hollandish. None of this Dutch-business anymore.

Damn, it’s bad enough to be confused with a Swede.

Yves Vannes
Member

Sorry, thought she was a Dane.

17 year old girl who was raped when she was 14.

Never got over the depression and just committed ‘assisted suicide’.

Member
Felix_Krull

I see.

I find assisted suicide rather tasteless, but it’s a free country. You want to blow your brains out, go ahead. You want to pay a nurse give you a hot shot because you’re too chicken stick yourself with a needle, god bless you.

Alzaebo
Guest
Alzaebo

Yes, we know you regret that comment. Poor, poor girl- our home lands, our beloved people, I want to murder half the fucking world sometimes.

3g4me
Guest
3g4me

I, too, am guilty of often confusing Dutch with Danish – but only as adjectives! I used to work with a Dutch guy when I was posted overseas and I know that Geert Wilders (nationalist but in a nose-approved, anti-muslim only way) is not Scandinavian.

Member
Felix_Krull

No worries, everybody’s used to it, and to be fair, Denmark and the Netherlands are amazingly similar: small, flat countries with proud naval traditions, tall, blond people, a language that sounds like you’re having a brain aneurysm, bikes everywhere and a relaxed attitude to sex and drugs.

Alzaebo
Guest
Alzaebo

Jutes, Angles, Saxons, I can’t tell one goddam Northman from another.

3g4me
Guest
3g4me

Felix, very best of luck with your FU to the political establishment. Hope Rasmus Paludan proves to have more testicular fortitude than Trump. Back in the heady days of the 2016 campaign I bought a “Trump, because F U” t shirt. Today you could not pay me to wear it. Probably make a decent dust cloth.

Totally off topic – my favorite workout music is from the Danish band Volbeat. They’re supposed to finally be in the DFW area in the fall, but with bands I don’t care for and ticket prices beyond my budget.

Member
Felix_Krull

I’m sorry to report that Paludan, with a most disappointing 1,8%, didn’t even make it into parliament, and New Right only just made it with 2,4%. It seems all the disillusioned Danish People’s Party-voters went back to the establishment parties, especially the parties most responsible for the immigration disaster in the fist place. So unless they fuck up, we’re facing four years of Commie rule, with a cabinet full of strong, empowered wahmen of both genders. (No offense to all the fine, upstanding ladies in here.) Fuck my life, I hate democracy. The only upside is that the Danish People’s… Read more »

3g4me
Guest
3g4me

Felix – sorry for the disappointing results. Yes, democracy (or rule by MPAI) sucks.

Nori
Guest
Nori

Felix,you are where we were in 2016. Very harsh.

Never,ever give up,nor let these worthless,prickless dykes get you down.

Their “New World Order” is not going according to plan.

Normie
Guest

What % did the Hardline politician get?

Citizen of a Silly Country
Guest
Citizen of a Silly Country

The dropping of interest rates has been great for U.S. stock investors and, to a degree, bond holders, but they’re now staring down the barrel of a decade of expected low returns in both asset classes. Bonds are expected to basically nothing over inflation, while U.S. stocks – which were pushed up by lowering interest rates and the flood of credit – are liking to earn 2% to 4% annual above inflation, possibly less if you get reversion to the mean. The CAPE is extremely high as are pretty much all other valuation indicators. In addition, corporate profits as a… Read more »

Member

Z, “Rightwing Progressives”. Good term from yesterday. I was watching TV the other day and discovered that the original king of rightwing progressives, George Will, now works for MSNBC as a roundtable guy doing his WiseCon thing. I’ve been watching this toe-head since I was a little kid. Seems he fades away. Comes back. Fades. I’ll assume he’s dead. But he always pops back up on my TV somehow, never looking older than 64. He’s never going to die is he. We’re stuck with this android forever. I can’t imagine beating up an old man. But I honestly would have… Read more »

DLS
Guest
DLS

I used to actually like George Will until I realized it was all a big con. Just saw him interviewed by Ted Koppel. This “staunch conservative” was advising us to vote for anyone but Trump in 2020 as a way to save conservatism. Huh? If I recall he did the same in 2016. Yeah, conservatism would be better with Hillary in charge of everything. Pressed on his view of the two new Supreme Court justices, he said any Republican president would have given us similar judges. First, no other Republican could have won in 2016, so hello RBG 2.0 and… Read more »

Member

DLS: “I used to actually like George Will until I realized it was all a big con.” Same, back in the early days. Though I always knew he was a major moral hypocrite even back then for his Zionism. Israel could’ve poisoned the Palestinian baby water supply and Will would have found some elegant way of excusing it. He really is a slippery little wordsmith. The only way to deal with him is to suddenly slap him in the face mid-sentence and kick his skinny ass out the exit door. I’ve still kept all his ‘collected columns’ books because depending… Read more »

Gravity Denier
Guest
Gravity Denier

“I’ve still kept all his ‘collected columns’ books because depending on the topic he’s a fine writer and thinker.”

Yes, that’s what’s so frustrating. His writing is stylish, he wears his learning lightly, he’s enjoyable to read — and it’s all in the service of the Republican establishment.

Pimpkin\'s nephew
Guest
Pimpkin\'s nephew

All in service of the establishment, you mean. Will’s writing struck me as good, even impressive, back in the 1980s when I lived in DC and worked my way through the WP every morning. It was the Reagan imperium, and Will was down with the Reagan vibe. Of course he would have been into the Ford vibe, or the GB I vibe, had things gone differently. In those halcyon days – it is fair to say – he would have gone into the ‘loyal opposition’ vibe so important to ‘principled conservatives,’ had one of the Dem blockheads succeeded in grabbing… Read more »

Member

Pimp: “Dude, we don’t live in Europe where there are twenty parties to vote for…” Funny. Hadn’t thought about that. Good point to use when someone is trying to slam you solely for voting for Trump. Re. Krauthammer. Psycho-but-not-psycho-Jew. If you support Israel he’d go to bat for you. May even kill for you. Mean like black venom. Whatever support he gave Trump was assuredly driven by Trump’s pro Jew stance. Not his impending death. Will and Kraut are similar LibCons. You can hate Kraut but respect him as a man. You can’t do that with Will.

williamwilliams
Guest
williamwilliams

If you meet George Will socially, beat him.
He will know why.

Ris_Eruwaehdiel
Guest
Ris_Eruwaehdiel

I liked George Will when I was a teenager and read his books and columns. Then I read “The Suicide of the West” by James Burnham. That was my first step towards the dissident right.

Pimpkin\'s nephew
Guest
Pimpkin\'s nephew

Well said. Why are we stuck forever with people like George Will and David Gergen? Who are these people and do they even exist? Are they holograms? At times my will to live is sustained ONLY by the hope that I can read the obituaries of such people. It’s like the world stopped rotating in 1990, and people on TV stopped getting old. “Who is George Will” should be a Jeopardy answer in a “1980s pundits’ column. For example: Alex Trebek – “This influential conservative columnist long associated with the Washington Post wrote a surprisingly dull book about baseball called… Read more »

Member

Pimp: “Why are we stuck forever with people like George Will and David Gergen? Who are these people and do they even exist?” Z used the term ‘logrolling”. I think yesterday. I’d heard the word before but finally looked it up. Con.Inc. just won’t call each other out on stuff. One hopeful byproduct of that much-discussed David French hit-piece in Human Events is that Con writers saw how much attention they can get by naming names on their own side. Punching right. Not just making abstract arguments. Hope to see more pieces like that against their own. They may start… Read more »

Drake
Guest
Drake

Many companies these days act like they are in a recession and are constantly trying to eliminate some of their inefficiencies. They seem more cost disciplined than the binge and purge style company leadership of decades ago. The flip-side is – corporate leadership is more myopic than ever. The SVP’s I work with on corporate strategy care only about this year and next. Anything beyond that is meaningless to them because if they don’t meet objectives this year, they won’t be here. If they do and make themselves look good enough, they’ll probably get a better job somewhere else. It… Read more »

JR Wirth
Guest
JR Wirth

Despite the technological innovations of the last few decades, certain truths remain. One truth is that no one person, entity, or government can borrow themselves into prosperity. A lot of people think that inflation will take off just around the corner. Yes, in the long run inflation will be wildly out of control, but in the short run, the next few years, we’re going to see a deflationary crash. Inflation happens at the time of credit expansion. All of that QE went into asset prices, housing, stocks, etc. Even a cheap, 1960s built condo with aluminum windows in my neighborhood… Read more »

Dutch
Guest
Dutch

Incessantly low interest rates are a mechanism for maintaining the financial and economic status quo. The culling of the economic herd is always put off until another day—until that day comes. Big business loves the maintenance of the status quo, as they shave costs (jobs and wages) and pump the stock price, and gobble up smaller competitors with all that inflated stock and with financing at zero rates. Part of the game is getting the public to buy into all of this with their investment dollars, and using the central banks to help push things along. The end game is… Read more »

Da Booby
Guest

Everyone looks at Japan, and says, “See, you can borrow money forever without consequences.”

Problem is, despite sky-high levels of government debt, Japan still remains the biggest creditor nation on earth:

https://www.cnbc.com/2019/05/23/reuters-america-japan-keeps-top-creditor-nation-status-as-external-assets-grow.html

The US is the largest debtor nation on earth, by contrast, at least among 1st world countries. Plus, Japan is dependent on the US for its security and a big chunk of its export market (trade surplus).

The US can probably stay out of trouble so long as the dollar is the reserve currency. When, if, or how that will change is anyone’s guess.

Citizen of a Silly Country
Guest
Citizen of a Silly Country

Dissidents waiting for the “big crash” to make their move will be waiting a very long time indeed. The U.S. economy has a lot of problems, but it’ll keep on chugging along for a long while. Don’t wait for some dramatic collapse.

Drake
Guest
Drake

I agree. It’s fragile in many way that people like Matt Bracken have laid out – Just-in-time logistics means that inventory levels are incredibly low. So a real war or massive natural disaster could bring the whole thing done. But without that kind of outside event, it’ll run for quite some time even with an abusive idiot like Obama calling the shots.

Member

Cheap credit will inevitably be replaced by “debt forgiveness”…outright cash payouts. This protects the Progressive Project’s farm team from much-needed cost-reductions, scores an easy “W” for the vote-buyers, is the perfect emotional manipulative tool to use on our feminine culture, and is the only thing cheaper than free credit. The last big recession, the so-called “banking crisis”, was mainly the by product of lending money to people who never should have been lended to combined with a few thousand Wall Street investment bankers who were playing the market on leverage (borrowed money). In both cases, when things went south, neither… Read more »

Member

I see the Woodpile is burnt.
I’ll miss Remus

Drake
Guest
Drake

Nooooo!

miforest
Guest
miforest

What! woodpile is gone?

Dutch
Guest
Dutch

The other side never sleeps. Smoke ‘em while you got ‘em.

PawPaw
Guest
PawPaw

One by one, we watch our shipmates being drug under by the monsters of the deep.

Member

I’ve no idea what you guys are talking about. Is this inside humor for Goldberg having left NR?

Member

He’s back. For a little while the site for sale splash screen was showing.

Frip go to

http://www.woodpilereport.com/

You’re welcome.

Alzaebo
Guest
Alzaebo

One of the true masters, Frip

A.B Prosper
Guest
A.B Prosper

Its up and fine, I was there a minute ago. He’s self hosting anyway and not subject to SJW whims to much a degree.

miforest
Guest
miforest

” the West is nothing but a shopping mall full of strangers” no actually ” a chineese owned shopping mall full of broke unemployed deeply indebted strangers who hate each other ” . . what could possibly go wrong.

A.B Prosper
Guest
A.B Prosper

You forgot “with the most heavily armed civilian population on planet Earth.” eek.

CAPT S
Guest
CAPT S

Good post. I understand the financial efficiencies via technology and algorithms. But, the begged question: What’s the unprofessed worldview and motivation of the algorithm writers? Algorithm writers and programmers are human, with human ambitions. A lot of folks think an algorithm is mere arithmetic and wholly neutral, when in fact it’s loaded with a myriad of assumptions. And there’s the fly in the ointment … whose assumptions, and to whose end? Which seemingly leaves us with the Bolshevik question, Who, whom? Or put into capitalist terms, Who is manipulating Whom? As I see official reports of a great economy, low… Read more »

Pimpkin\'s nephew
Guest
Pimpkin\'s nephew

Thank you for the PO.

Now I can send hard cash, in unmarked bills, to an obscure PO box. I love this whole dissidence thing we’ve got going here. It’s kind of neat, when you think about it. We’re effectively criminals now, if not by what we do, but how we think.

Z man, when you get your dough from me, let me know by a +1 or some nonsense like that that the package has been delivered.

Member

“I love this whole dissidence thing we’ve got going here. It’s kind of neat, when you think about it.” Until recently I sort of felt that way too. But now that I’m a few episodes into The Man in the High Castle. And with doxing on the mind. Well, to put it as manly as I can. I’ve got some serious trepidation going.

Pimpkin\'s nephew
Guest
Pimpkin\'s nephew

Maybe you are right, Frip. I have no idea what ‘The Man in the High Castle’ is – some kind of TV serial or comic strip, at a guess. So I have decided to send Z man nothing. Can’t be too careful in dangerous times.

I am always sensitive to reason. Thank you.

Michael Bradley
Member

I believe Von Mises wrote extensively about the credit trap. 🙂

Pimpkin\'s nephew
Guest
Pimpkin\'s nephew

Stinky MacFarland’s observations on the credit trap are sadly overlooked, to our impending woe.

TomA
Guest
TomA

The integrity of any nation’s currency is a surrogate measure of social trust. And you can’t have civilization without social trust. The collapse of the mega financial institutions will occur when the currency becomes valueless, at which point social trust becomes first-person again. What happens when there is no longer enough money to feed the federal government beast? What will the beast do in order to eat? The answer to that question should be of interest to everyone.

Dinothedoxie
Guest
Dinothedoxie

The fear expressed at the end of the article is driven by a residual belief that “money” is ultimately some real, tangible thing that must be used to settle accounts at some end point. That belief is understandable as it was largely real throughout most of human history, ultimately based on silver or gold monetism. It’s hard for people to accept and come to terms with the reality that money in the modern world is entirely intangible – imaginary. The federal debt is not a problem and there will be no debt apocalypse because it will never be repaid. Ever.… Read more »

Sam J.
Guest
Sam J.

“…One reason the Federal Reserve is trapped in a world of ultra-low interest rates is the world economy is based on credit….: “…Current debt stands at $22 trillion and goes up by a trillion per year…” This needs to be more plainly stated. ALL currency in the USA is based on debt. I know this sounds absurd and unbelievable but if you look this up it’s true. If we get rid of the debt we will have NO currency. This includes all loans, bonds, all money is based on debt. It’s a system designed to siphon money from citizens to… Read more »