Gail Tverberg on what to expect…

Out of 8 billion reality denying fire apes there are less than a hundred that are capable of explaining in a few sentences what’s actually going on with the economy. Tim Watkins is one of them. I’m pretty sure his denial genes are defective. Seriously. Except when he whines about austerity which he avoids in this essay.

https://consciousnessofsheep.co.uk/2020/05/26/two-money-tricks/

The contradiction at the heart of this money trick is that the only “value” behind the central bank currency which has been used to purchase all of these bonds and to maintain artificially low interest rates is the state’s ability to tax the wealth of the future population sufficiently to repay the debt with interest. This, in turn, requires that we somehow learn how to have infinite growth on a finite planet.

In the immediate aftermath of the 2008 crash, few serious analysts would have believed that the global system would have survived more or less intact for more than a decade. Conventional oil extraction had peaked in 2005 – triggering the chain of events which brought the banks down three years later. What nobody could have foreseen was the way that central bank manipulation would force investors who were seeking higher yields to invest in a hydraulic fracturing industry which borrowed billions of dollars from investors to extract millions of dollars’ worth of oil from the source rock. As Nicole Foss once put it – if conventional oil was like drinking draught beer from a glass, fracking was the equivalent of sucking the spilled dregs from the carpet.

Nevertheless, the spurt of oil from the US shale plays – which flooded the market and crashed the price – was just enough to prevent the western economies from collapsing while two Asian economies – India and especially China – turned to the last of the planet’s coal reserves to generate the final spurt of growth to an industrial economy that has now passed its peak.

While many will eventually blame the SARS-CoV-2 pandemic and the actions taken to mitigate its impact for the collapse of the global economy, the warning signs had already been apparent in 2019. Consumer spending had slumped and most consumer-facing businesses were being engulfed by a retail apocalypse which had only spared essentials like food together with a handful of online outlets which used gig-economy labour to keep costs down. Meanwhile, parking lots around the planet have been steadily filling up with new cars which can neither be sold nor leased to businesses and consumers who are already loaded up with debt and see little prospect of income/profit growth anytime soon.

The majority of economist and politicians – entirely ignorant of the role of energy in the economy – will assume that one or other means of reflating the currency supply in the aftermath of the pandemic – either through some equivalent of a long-term war bond to hold the pandemic debt or via government currency printing and public spending – will be sufficient to restore the economy to some version of “normal” (by which they usually mean the abnormal period of growth between 1953 and 1973). In the absence of an energy-dense alternative to depleting supplies of economically extractable oil, however, the trend away from automation toward manual labour which began after 2008 is likely to accelerate.

As real terms wages decline in response to this process of simplification, it will eventually become apparent to all concerned that the debt we have been running up on the assumption that growth will last forever is, in fact, never going to be repaid. When that happens, there will likely be a huge crash in the value of any “asset” that exists as mere bits on a bank computer. Hard assets like land and precious metals may experience a big rise in prices as those who manage to sell financial assets before the crash seek somewhere safe to park their wealth. But even these may be of little value – in the short-term at least – in the event that the value of currency itself collapses.

It has always been in the gift of governments to mitigate the coming downturn. A period of managed de-growth is far more preferable than a sudden anarchic collapse. Unfortunately, this would involve the ruling elite to acknowledge that a large part of its supposed wealth is going to disappear in any case. But no ruling elite has ever accepted this proposition at a point at which it might – just – save itself from its own folly. Instead, most failed civilisations spent their final years in a vain struggle to restore their fortunes long after the material bases had disappeared. The current media push for even more austerity and even more spending cuts at a time when both households and businesses are curbing their spending suggests that our civilisation will be no different.

Even with the highest unemployment rate in more than 80 years, the U.S. Stock Market continues higher regardless of the lousy economic data and fundamentals. However, without the massive money printing and liquidity injections by the Federal Reserve, the stock market indexes would be substantially lower.

Unfortunately, the Fed is now forced to prop up the markets because stock markets have now become the economy, instead of the other way around. With the total U.S. Equity Market Cap to GDP Ratio now nearly 140%, it is more than double the 68% mean average for the past 70 years 1950. And, if we look at the markets back in the 1950s, it took 24 years for the Dow Jones Index to double from 500 to 1,000.

Thus, from 1958 to 1982, the Dow Jones Index traded in that 500-1,000 range. So, the real driver of the economy before the 1990s was the “Physical economy,” not the stock market. Well, that’s all changed today because the Stock Market is now the most important part of the economy. Interestingly, it only took seven years for the Dow Jones Index to double from the 14,000’s to 29,500 (Oct 2019).

https://srsroccoreport.com/chart-of-the-week-the-unemployment-rate-signals-the-dow-jones-index-to-crash-to-this-level/

Put another way, limits to growth, specifically net per capita energy, has forced us to rely on growth in paper assets rather than physical assets to keep our debt backed fraction reserve monetary system from collapsing on itself.

Nobody rants about reality denial better than Mac10. His tirade today made me laugh. And he’s mostly right despite not understanding MORT and the other science behind what we observes.

https://zensecondlife.blogspot.com/2020/05/nature-won.html

Nature Won. Thank God.

The Trump carbon tax is due. Payable in denialistic dumbfucks. The ONLY thing I’ve enjoyed about this failed gambit over the past decade, is that the stakes kept getting raised. And now, it all makes perfect sense.

There’s no audience for reality anymore. Because there never was one, in the history of humanity. Which is how we ended up with 8,000 religions but who’s counting. Everyone smoking their own brand of bullshit, while enjoying extreme conviction in what won’t happen.

Now however these idiots have a right to be worried. Their entire way of life is circling the toilet, like a massive turd, while they watch, mesmerized.

Fortunately, for us realists i.e. all five of us, the world is not ending – far from it, only a failed way of life is ending. And those who cling to it will go down with the ship. So it can come as no surprise that today’s geezers are living in fear – after all, this disaster that was supposed to blow up on future generations is blowing up on THEM.

Just when you think everyone else is about to get fucked over, come to find out, you ARE everyone else.

For her part, Mother Nature could not be happier. The birds are singing, the sun is shining, and the world is still turning. Everything else is a minor detail. A self-inflicted crisis fabricated by hairless monkeys.