By Ajit Varki: Why Men Are Destroying the Planet (Planet: Critical Interview)

I don’t usually care for Charles Hugh Smith’s essays however today he’s pretty good.

All this yabbering about central banks finding the right policies to keep the wheels on is nonsense. Given that they created the everything bubble with free money there is nothing they can do to prevent another great depression.

https://charleshughsmith.blogspot.com/2023/03/the-everything-bubble-and-global.html

This made me laugh out loud.

I love Tim Watkins’ clarity of thought and ability to concisely explain complex topics. Today he explains what’s really going on in the economy. It’s an explanation you will not hear from almost any investment/economic expert, nor banker, nor mainstream news, nor political leader.

We live in a reality free world now.

https://consciousnessofsheep.co.uk/2023/03/24/time-trap/

One of the remaining myths about currency, is the idea of the bank reserve – the belief that their has to be a token, a central bank reserve or a piece of precious metal, against which banks multiply their lending. The reality – which will become better known when the coming crisis is over – is that the only limit on bank lending within the Eurodollar system is perceived counterparty risk. That is, so long as an international bank believes that the corporation or nation which wants a loan is good for the repayment, they can create as many dollars as they wish… entirely independently of the US Treasury or the Federal Reserve.

By 2022, the big multinational banking and financial corporations had radically altered their perception of counterparty risk. In part this was due to the lack of investment during lockdown, in part the impact of broken supply chains and the rising cost of essentials, and in part the likely impact of state and central bank policy. Either way, they began the process of tightening lending standards, while seeking to generate a safe cash cushion on their own ledger books. In practice, they ceased rolling over the debts of zombie households, companies and even countries, while buying up whatever “safe” government debt they could find – in theory, governments cannot go broke because they can always screw their taxpayers for more currency. Although this might not work out in practice.

The feedback signal from the collective change in multinational financial institutions’ behaviour is what is known as a “yield curve inversion” – one of the most historically accurate predictors of a near-term economic downturn. A yield curve inversion occurs because the global financial corporations are prepared to lend to the government in the long-term at a lower interest rate than they could get by simply parking their money at the central bank overnight. They only do this when their data – which is far more accurate than the data used by governments and central banks – points to a weakening economy.

To some extent, this becomes a self-fulfilling prophesy, since the main consequence of the institutional behaviour change is to pull currency away from the real economy. That is, zombie households and companies which had been servicing their debts are no longer able to do so – at least, not at an interest rate they can afford… a process not helped by the central banks raising interest rates at the fastest pace in history.

This sets up what analyst Jeff Snider refers to as the “2008 trap.” When it comes to interest rate rises, it can take months for the effects to filter through. And so, viewed through the lens of employment and GDP data – which, remember, tells us about how the economy used to be, not how it is going to be – the picture looks far more positive than it ought to. The result is that economists and central bankers begin to talk about “soft landings” or even no landing at all, just at the point that inverted yield curves – synchronised across the western economies for the first time in history – are pointing to the mother of all economic downturns just weeks from now.

On a much longer timescale, we have lived through a growing gulf between the nominal value of debt and currency claims on the economy and the true value of the economy itself for more than half a century. Each time it has faltered, the “solution” has been to inject even more debt into the system. But by 2008, we had reached “peak debt” – which is, in reality peak resources, as there is no longer enough surplus energy and resources to expand the real economy any further. And so, the reckoning that states and bankers have been putting off for decades – in shorthand, the bursting of the “everything bubble” – is at hand.

It could be that the only question left to be resolved is how much of what was considered to be “too big to fail” last time around will prove to be too big to save this time?

I remember noticing that covid began simultaneous with mysterious stresses in the repo market and that it provided political cover for printing money to keep the wheels on a little longer.

https://boriquagato.substack.com/p/kitten-corner-special-kinds-of-stupid

so, i don’t mean to sound critical or anything, but jeez you guys, it sure takes a special kind of stupid to spend the combined annual GDP’s of france AND italy on “covid response” and not manage to build a single new hospital or med school…

https://www.gao.gov/products/gao-23-106647

The federal government has provided about $4.6 trillion to help the nation respond to and recover from the COVID-19 pandemic. Tracking federal spending is complex—especially at this unprecedented magnitude. As part of its ongoing and comprehensive review of the federal pandemic response, GAO oversees and regularly reports on this spending.

Six COVID-19 relief laws enacted in 2020 and 2021 provided about $4.6 trillion of funding for pandemic response and recovery. As of January 31, 2023, the most recent date for which government-wide information was available, the federal government obligated a total of $4.5 trillion and expended $4.2 trillion, or 98 and 90 percent, respectively, of these relief funds as reported by federal agencies to the Department of the Treasury in accordance with Office of Management and Budget guidance.