Economic pressures

[Danny B]

Pre-globalism tax schemes that no linger work

Stockman does not like Trump and here, he writes about all the bad things that the GOP is doing. The guy is very smart but, not infallible. Heer are a few quotes.
Five shutdowns occurred while you editor was a member of the US House (1977-1981) and another six during his stint as director of OMB. The idea back then, needless to say, was that shutdowns came about mainly when anti-spenders refused to capitulate to the incessant demands of the swamp creatures for more appropriations, pork and graft.

The Donald's asinine action last fall in trigging the prospective March deportation of 700,000 Dreamers has merely created the opportunity for the xenophobic anti-immigrant faction of the GOP to take a stalled appropriations process hostage for purely partisan purposes.

That's right. There would have been absolutely nothing wrong with adding a rider to the pending CR to avoid the insanity of shipping 700,000 innocent residents----85% of whom are employed or in school----back to the "home" countries they barely remember, if at all. And all because their parents committed a misdemeanor crossing the US border decades ago in search for work; and in an economy that is now fixing to see a 10 million reduction over the next two decades in the native born workforce owing to the quasi-barren white wombs of contemporary social fashion.

I can assure you that illegally entering the country is not a misdemeanor. Stockman does make the point here that the native birth rate just isn't high enough.
,,an interim game of political chicken about 700,000 Dreamers, who at the end of the day will not be deported and who will eventually get a path to citizenship.

That's because they, and millions of more immigrants to come, comprise the only available "growth" margin for the US work force in the decades ahead; and therefore constitute the next generation of Tax Mules which will be absolutely necessary to support today's 50 million retirees.

The southern border was left open to compensate for the lack of births in the native population. Has anyone worked out how many births America needs in a fully automated "work force"?
Nor does it bear upon the current momentum-driven madness of the stock market, and especially not on the nation's $19.5 trillion economy. The impact of shutdowns in the past has been zilch, and so it likely will be again. Total BS
For crying out loud, not a single dime of the big juice from the Federal budget----entitlements, mandatory and interest expense (75% of total outlays)----will be slowed down by a nano-second owing to the "shutdown".

After all, the reason Washington is operating on its 3rd CR of the fiscal year and struggled a whole weekend to get a fourth one lasting a mere 16 days, lies in the utter irresponsibility of the Trump GOP approach to fiscal policy.

These clowns want to spend $120 billion on disaster relief without a single dime of off-setting cuts; raise defense by $80 billion when the Pentagon is already a $620 billion swamp of waste; appropriate $33 billion for an utterly idiotic Wall on the Mexican border when the problem could be solved by cancelling the $32 billion per year "War on Drugs" and putting up guest worker sign-up booths along the border.
Contra Corner » The Shutdown Scam: The GOP Is Now The Second “Government Party”

Stockman wants to see fiscal responsibility. GOV spends 24% of the GDP. What does he think will happen if GOV stops all that spending? Armstrong points out that GOV never pays off the public debt. Does it really matter if the deficit goes way up?
Meanwhile, it is not just the trillions of added red ink to fund tax cuts for corporations and the wealthy and to finance the GOP spending spree that is at issue. The GOP is proving itself to be the second pro-government party in even more insidious and craven ways.

To wit, it can no longer say with an iota of credibility that the short-term inconvenience of the shutdown is occurring in the name of 150 million current taxpayers and future generations of unborn Federal debt mules.
Will these tax mules even have a job?
To wit, the GOP is targeting $4.6 trillion of spending versus a post-tax bill revenue take which will be lucky to generate $3.4 trillion of receipts. Relative to the US economy that amounts to the absurdity of taxing 16.5% of GDP while spending 22.5%----and during month #111 thru months #123 of the current so-called business expansion.

The collapse in employment and aggregate wages has made it painfully obvious that the State can't survive on just taxes from workers. Stockman is thinking in pre-globalism strategies.
only tool left to stop the nation's fiscal doomsday machine---a government shutdown to bargain for deep spending cuts---into a complete scam and farce.

Needless to say, that's the real reason why this time is so very different. They will kick the can again on February 8 and several more times thereafter---until they run out of cash and smack into the reinstated debt ceiling of $20.44 trillion some time in March.
The Treasury will be borrowing up to $1.2 trillion on FY 2019 just as the Fed is unloading $600 billion from its bloated balance sheet.
Aside from all this, interest rates are going up. It will be increasingly expensive to service public debt. The treasury needs $trillions more at the same time that the CB intends to cut back. Every month that goes by, it will become more and more obvious that FED GOV won't be able to service the debt. It is already obvious that it can't pay it back.
Are "they" trying to create an impasse where the FED refuses to monetize U.S. treasury debt? Will this be used as an excuse for the Treasury to take over money creation?

Thomas Edison, “But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good. "
The FED GOV can't pay off the debt. FED GOV can't pay service on the debt unless the FED prints the money. FED GOV is pedal-to-the-metal in borrowing and spending. Will the default cascade be used as an excuse to rile up the "end the FED people"? Will the Treasury create some kind of crypto / blockchain organization to manage the money supply?

[Danny B]

Rising debt service

The private banks create debt-money and, the central bank creates base-money. The CB tops-off the private banks if there isn't enough new credit created to supply the funds for debt service. The CB targets 2% a year of inflation for the money supply. The CB makes a good profit as long as the economy is expanding. If the economy contracts, the CB has to do a LOT more printing to keep to make up the difference. Base money is interest-free. The FED tries to keep that to a minimum.
Since the FED is owned by private banks, they don't want a bunch of debt-free money in the system. BUT, if the system threatens contraction / deflation, free-money is doled out to the private bankers.

Uncle Sam does not get debt-free money from the FED. Sam could just print the money but, that would leave the bankers out in the cold. So, the bankers monetize treasury bonds and send dollars to the treasury. Here is a graph of what the FED balance sheet looked like before the 2008 bank meltdown.
http://s.marketwatch.com/public/reso...0818115920.jpg
The FED claims that they are going to sell off this debt. If nobody wanted it when it was fresh, nobody is going to want it now. A big part of this debt is mortgage backed securities.
http://s.marketwatch.com/public/reso...0818115920.jpg
Nobody wants them.

The FED has $4.5 trillion is paper assets that it wants to sell but, nobody wants it. As the FED raises rates, FED GOV debt gets more and more expensive.
"Economists with Deutsche Bank expect the extra debt the Treasury must issue to fund President Donald Trump’s tax package and the amount of debt the Federal Reserve plans to redeem at maturity this year will bloat issuance to about $1tn in 2018. That’s up more than 50 per cent from a year earlier and, when coupled with a 30 per cent rise in the amount of corporate debt that’s due to mature, leaves questions of who the eventual buyer will be.“
“If demand for US fixed income doesn’t double over the coming years then US long rates will move higher, credit spreads will widen, the dollar will fall, and stocks will probably go down as foreigners move out of depreciating US assets,”

The FED must grossly increase it's QE or, nobody will buy FEDGOV debt.
“The big four US retail banks sustained a near 20 per cent jump in losses from credit cards in 2017, raising doubts about the ability of consumers to fuel economic expansion. “People are using their cards to get from pay cheque to pay cheque,” said Charles Peabody, managing director at the Washington-based investment group Compass Point. “There’s an underlying deterioration in the ability of the consumer to keep up with their debt service burden.” Recently disclosed results showed Citigroup, JPMorgan Chase, Bank of America and Wells Fargo took a combined $12.5bn hit from soured card loans last year, about $2bn more than a year ago.”
https://northmantrader.com/2018/01/2...rest-payments/
The cost of debt service is rising all around.
"Interest on debt alone was $32B for 1 month.
During the same month the year prior it was $25B:"
The debt-ceiling fight is going to flare up every few weeks. ,,,run out of cash and smack into the reinstated debt ceiling of $20.44 trillion some time in March."
Will the budget battle cause investors to get nervous about U.S. debt?

"China’s financial regulator has vowed to rescue the Chinese banking system immediately to avert a banking crisis when the bubble bursts, issuing a blanket guarantee that no major institution will be allowed to fail."
This gives them more incentive to gamble.
“We have too much debt in our system. If something bad happens, we have learned from the US financial crisis, and we will move very swiftly to contain the risk so that panic caused by a small institution does not spread,”
China promises bank rescue in next crisis as market prophets warn on rising US rates

The brightest from Harvard and Yale;
"This brings us back to the mystery of what’s driving the US stock market higher than all others. It’s not the “Trump effect,” or the effect of the recent cut in the US corporate tax rate. "
"The truth is that it is impossible to pin down the full cause of the high price of the US stock market."
NO MENTION of cross-border capital flows.
https://www.zerohedge.com/news/2018-...-turn-suddenly

Bitcoin can become reserve asset – Epoch Times The hackers will just love that.
1/23 ‘Perfect storm’: global financial system showing danger signs – Brisbane Times OZ is hooked in pretty tight with China. They will get hit hard.
1/23 TD Ameritrade CEO warns “never seen client cash levels this low” – Zero Hedge Remember, Americans were all-in months ago. maximum leverage brings minimum cash levels. At present, the continuing levitation of prices is from investors who see American markets as being the least worst. The margin calls from hell will hit both if them.
1/23 Goldman: “risk appetite is now at its highest level on record” – Zero Hedge Yeah, we kinda figured that.
1/23 Kuroda pushes back against speculation tightening is near – Bloomberg The BOJ just talks and bounces around.
1/23 Bitcoin a ‘gift from God’ to help humanity sort out its money mess – Max Keiser

EXCELLENT article from Armstrong.
"If we had simply created the money instead of borrowing it, the national debt would be less than 50% of what it is today."
https://www.armstrongeconomics.com/a...out-inflation/

[Danny B]

Propping up zombies to maintain employment

Snips from Brisbane.
Nine years of emergency money has had a string of perverse effects and lured emerging markets into debt dependency, without addressing the structural causes of the global disorder.
This time central banks are holding a particularly ferocious tiger by the tail. Global debt ratios have surged by a further 51 percentage points of GDP since the Lehman crisis, reaching a record 327 per cent (IIF data).
"Pharmaceutical companies are subject to laws forcing them to test for unintended consequences before they launch a drug, but central banks launched the huge social experiment of QE with carelessly little thought about the side-effects," he said.

The US Federal Reserve is already reversing bond purchases - ignoring warnings by former Fed chair Ben Bernanke - and will ratchet up the pace to $US50 billion ($62.4 billion) a month this year. It will lead to a surge in supply of US Treasury bonds just as the Trump Administration's tax and spending blitz pushes the US budget deficit toward $US1 trillion
This doesn't seem accidental.
At best, the implication is that yields on 10-year Treasuries - the world's benchmark price of money - will spike enough to send tremors through credit markets.
The latest stability report by the US Treasury's Office of Financial Research warned that a 100 basis point rate rise would slash $US1.2 trillion of value from the Barclays US Aggregate Bond Index, with further losses once junk bonds, fixed-rate mortgages, and derivatives are included.
The FED lit the fuse. 1/10 of a percent knocks off $1.2 trillion of value. The FED would like to go up another 2 1/2 to 3% Many of the derivatives are interest rate swaps. The FED wants to jack up interest rates. What is the nominal value of those interest rate swaps?
"at the end of June 2014, the total notional amount of outstanding contracts was $563 trillion"
Apparently, the FED has signed on to blow up the derivatives market.

The global fall-out could be violent. Credit in dollars beyond US jurisdiction has risen fivefold in 15 years to over $US10 trillion. "This is a very big number. As soon as the world gets into trouble, a lot of people are going to have trouble servicing that dollar debt,
While banks now have high capital buffers, the risk has migrated: to investment funds concentrated in crowded trades. The share of equities traded in "dark pools" outside the exchanges has mushroomed to 33 per cent.
1/3 of equities traded OUTSIDE of exchanges. NO circuit breakers.

RBI Capital warned in its investor letter that these funds could lead to a "liquidity crash". Deutsche Bank has advised clients to take out June 2018 "put" options on the S&P 500 - a hedge against a market slide
The great disinflation of the last three decades was essentially a global "supply shock". The opening-up of China and the fall of the Berlin Wall added 800m workers to the traded economy, depressing wages and unleashing a tsunami of cheap goods.
Most of these added workers moved from the farm to the factory. They did NOT move to the middle class when they only earned 30 bucks a month. They permanently depressed wages.
Central banks intervened "asymmetrically" with each cycle, letting booms run but stepping in with stimulus to cushion busts. The BIS says one result was to keep insolvent "zombie" companies alive and block the creative destruction that leads to rising productivity.
Productivity is NOT the problem. These zombie companies are kept alive to maintain jobs and consumption.

While higher inflation is needed in one sense to right the global ship - since it lifts nominal GDP faster, and whittles down debt - the danger is that the shock of higher rates will hit first.
We already have HIGH inflation in the upper loop. We are slowly getting price inflation in the lower loop with no offsetting wage inflation.
Central banks are now caught in a "debt trap". They cannot hold rates near zero as inflation pressures build, but they cannot easily raise rates either because it risks blowing up the system.
The upper loop was a parasite on the producing economy. EVERYBODY tried to rent out their money and the trade became too crowded. The CBs tried to save all the banks and all the investors. Free money went up by $200 trillion but, there wasn't a corresponding increase in goods and services.

Global finance has become so sensitive to monetary policy that central banks risk triggering a downturn long before they have built up the safety buffer of 400 to 500 basis points in interest rate cuts needed to fight recessions.
"We are running out of ammunition. I am afraid that at some point this is going to be resolved with a lot of debt defaults.
These boneheads are talking about a safety cushion of 1/2% buildup so that they can cut the buildup to fight the next recession.
https://www.brisbanetimes.com.au/bus...23-p4yyr2.html

Getting the horse before the cart.
"To have hope in our future, we must have more children."
In P.D. James’ dystopian novel “The Children of Men,” the unthinkable has happened — people have stopped having children.
Last year, the U.S. birthrate, already declining for years, hit a historic low — 1.77 per woman — largely driven by a collapse in childbearing by people of the millennial generation. The decline has been rapid. Only a decade ago it was 2.1, the rate necessary to keep a population stable.
"Demographers and social scientists have plenty of theories as to what is causing this loss of “will to breed” — delayed marriage, increased use of contraception, failure to launch, the extreme cost of higher education, public policies that are unfriendly to families, the increased secularization of society."
NO mention of the fact that it costs about $245,000 to raise ONE child, even without any college.

"Others think limits on contraception will have the same effect."
"Having children, says Emmanuel Gobry, of Ethics and Public Policy Center advocacy group, is “a signal that people are willing to commit to the most enduring responsibility on Earth, which is raising a child.”
This is true but, ONLY for responsible people.
https://www.newsday.com/opinion/comm...ids-1.16230654

1/24 Taunts from bulls come in: “stupid to hold cash” – Mish
Warren Buffett's $109 Billion Cash Problem: How Much Longer Will It ...
https://www.fool.com/.../warren-buff...-how-much.aspx
Nov 7, 2017

[Danny B]

Unicorns and Faerie dust

I read SO much mis-information that it is stunning. There are so many writers who think that they have the answers to the big problems.
"2. If the Fed raises rates, that will draw in trillions of world capital "
"3. Enough money flowing into the U.S. will create demand for the US$, and the US$ will rise"
This will make $15 trillion in dollar-denominated foreign debt too expensive to service.
"4. The US$ rising will attract foreign buyers into U.S. investment and together the stock market will counterintuitively rise."
"5. The Fed will detect overheating and raise rates again and again in a reinforcing cycle, drawing capital to only the U.S."
Raising rates will make domestic debt service impossible.
"6. The massive investment re-industrializes the U.S. to some extent while the high US$ gives some relief to Main Street."
No it doesn't. A strong dollar makes for cheap imports.

"7. Foreign buying, better jobs, and low exchange rates hold off the housing collapse, while all the mortgage bonds are also sold overseas."
Jobs won't get better and wages won't go up.
"8. Emerging markets are hammered by the high US$ and fail, driving ever-more capital to safe havens like the US.
9. Ultimately, the U.S. does what all reserve currencies do and fails LAST."
"10. The whole world, strangled by the US and its dollar have no choice but to reject the US system entirely in private contracts and move to an alternative.

11. We now have at least three alternatives: the CIPS/Yuan banking bloc, gold, and cryptocurrencies. They aren’t exclusive: the most likely outcome is a gold-backed trading note priced in Yuan on a blockchain, perhaps in the Shanghai Exchange." Sounds plausible.
"13. The U.S., like every nation since Adam Smith, defaults on its $20T in $ debt – and all its internal consumer, corporate, and pension debt – using “hyperinflation” of the dollar. New twist is that, instead of gold, it hyperinflates vs. cryptos or the new world exchange standard as planned in 1971 and publicized in 1988."
Really stupid idea.
"14. The reset occurs, no one dies (in the U.S.), supply chains are maintained, oil flows, and the economy stops being a feral, diabolical means of theft and control and returns to being a fair, voluntary exchange. For now."
Supply chains are NOT maintained.
Then, he gives a list of 10 things that will be much improved in this brave new world.
https://www.theautomaticearth.com/20...a-modest-plan/
Just like most others, he finds it very convenient to ignore reality.

Our new reality will not include "better jobs".
Self-driving cars will leave third of people unemployed | Daily Mail Online
We're going to "upskill" and "reskill" and, everybody will have a job.
https://www.rt.com/news/416814-women...-robots-davos/
So, what are all those displaced women going to do with their free time? Harvard has the answer.
Sex robots could make men obsolete | Daily Mail Online

Ray Dalio is the "bond king". He uses AI to do all the trading.
1/24 Ray Dalio sees a ‘market blowoff’ coming – CreditWritedowns
1/24 Ray Dalio says bond bear market has begun – Zero Hedge
1/24 Stocks slip from records, turn negative, as tech rolls over – CNBC
1/24 US oil prices top $65 a barrel for the first time since Dec. 2014 – CNBC
So, oil went up and bonds & stocks went down. What happens if oil goes up a LOT?
"Lukoil CEO warns against sharp growth in oil prices up to $150."
TASS: Business & Economy - Lukoil CEO warns against sharp growth in oil prices up to $150
1/24 Illinois late with more than $1b in payments in 2017 – Rock River Times Just the start.

[Danny B]

Why Tax?,,,,, yield curve

Here is an excellent article on the role of taxes.
https://www.counterpunch.org/2018/01...netary-theory/
The State is quite worried about going broke. Armstrong makes it clear that all States eventually default. In Japan, the CB is 100% on-board with preserving the financial power of the State and will print ANY amount of bonds.
"Put another way, as far as the head of the BoJ is concerned… it doesn’t matter how much currency he prints: tens of billions of yen, hundreds of billions of yen, even trillions of yen… all that matters is where Japanese bond yields are trading.

This is the literal textbook for Central Bankers around the world: devalue your currency in order to maintain the bond bubble."
https://www.zerohedge.com/news/2018-...-are-worthless
Mnuchin is talking down the dollar. Will the FED follow through and print enough to force it down? Is the recent tax cut an indication that taxing will be abandoned in favor of just printing?
The CBs MUST maintain the yield curve. BUT, "Those who have bought the long-term assuming that the short-term rate hikes will be modest for some time making a yield of about 2.65% attractive, may discover that the yield curve just may swing into a negative position again rather uncontrollably rather than intentionally."
https://www.armstrongeconomics.com/m...e-yield-curve/

[Danny B]

Stockman and Price

Theoretically, the U.S. GOV has a printing press and can never default. The FED seems to be holding on tight to the control panel of the printing press. The private sector is a different story,,, same for State and local GOV. The 2008 defaults threatened to drag down the banks and the entire financial system. FED GOV is trying to use the printing press to help everybody who does NOT have one. Evidently, the FED is trying / planning to slow down the press. The FED supported the finance system when the producing economy could not. The wage and manufacturing crash ensure that the organic economy will never return to the gold old days.

The FED claims that it wants to raise rates to normal. BUT, the FED is owned by private banks. A return to 5% would set off a cascade of defaults and wipe out the private banks. The FED is like a dam on a river holding back a growing lake of bad debt. U.S. GOV debt is a big part of that lake. So, FED GOV has a printing press but, that doesn't mean that it can prevent a general default. The ZIRP that makes debt service "manageable" has also ruined every entity that depends on interest-income. By "preventing" the collapse of State debt (for now), the State has initiated the default of everybody who doesn't have their own press. ZIRP may have temporarily saved the upper loop but, it hurt all the rest.

There is a lake full of zombies that fills more everyday. The default cascade has been postponed while the lake fills more and more.
Stockman writes a very good article about the zombie pile-up. I'll do a couple of excerpts but, you should read all of it. H ereally puts the information together.

Contra Corner » Flying Blind, Part 1: How Bubble Finance Destroys Economic Efficiency And Rationality "Someday it will be recorded by historians that the turning point in modern economic history occurred when the central banks pivoted to QT under the mistaken conclusion that they had delivered the nirvana of Full Employment to main street.

No they haven't. There are 43 million food stamp recipients, 102 million adults without jobs (of which only 50 million are 65 or older), stagnant real wages, 30% lower real median household net worth (since the late 1990s), and $67 trillion of public and private debt outstanding which all suggest otherwise."
"Likewise, it now appears that Netflix will generate operating free cash flow of almost negative $9 billion over the five years ending in 2018. Yet its market cap has soared to $110 billion based on pure speculative momentum."

The CB has tried to pump in so much "money" that it HAS to flow everywhere. Lots of people don't want to go into shaky investments but, have no other choice.
https://www.investopedia.com/terms/t...lternative.asp

Sr. Price has a good article but, you have to read it twice. The guy is really brilliant but, he sometimes is in denial of human nature.
"Such a transformation, in full concordance with the doctrines of the Austrian Schools of Economics, would immediately re-vitalize the world's economy, due to its inevitable consequences: 1. The immediate stimulation of hope for a better future, in all nations. 2. The immediate activation of all able-bodied individuals to work as hard as possible, in order to obtain the precious money of gold and silver. 3. The re-emergence of the principle which has ruled human life in all ages past: "He who does not work, shall not eat" to motivate all those who waste their lives in idleness."
"The illusions which now occupy millions of idle minds would vanish: dreams such as populating the planet Mars; inhuman fantasies to "automatize" work by means of robots, in order to eliminate human labor; vain investigations of "Artificial Intelligence", when what will be needed will be the intrinsic asset of all humans: human intelligence,"
I just don't see a rollback of automation in the future.

http://www.24hgold.com/english/news-...nas+Price&mk=1

[Danny B]

The decay of the sovereign bond market

Here is a graph of total public debt, https://thumbor.forbes.com/thumbor/9...%3Fwidth%3D960
Armstrong has long predicted a crash in public debt.
https://www.armstrongeconomics.com/a...c-not-private/
Spending on social programs, https://www.heritage.org/sites/defau...hart-1-825.jpg

"Among alternative analysts, cynicism runs rampant over a government shutdown. “Who cares?!” many of them will say, “Let it shut down!” But there are some concerns here, primarily the concern of full faith in U.S. debt issuance."
"this internal conflict though theatrical in nature can still produce a lack of faith in Treasury bonds and the dollar internationally. And frankly, faith is all that our economy has left to sustain itself.

If the funding battle continues with ever shorter stop gaps or with an extended period of government shutdown, there is a possibility that the largest foreign investors in U.S. debt and the dollar will begin dumping their holdings."
https://www.zerohedge.com/news/2018-...etting-weirder

Jim Willie; "The magnificent event that occurred ten years ago has been called the Global Financial Crisis, centered and triggered by the Lehman Brothers failure as a firm. It was actually a suffocation event with killjob, whereby both Goldman Sachs and JPMorgan bought several $billion in Lehman mortgage bonds and never paid for them, thereby killing Lehman from a very severe sudden liquidity drain."
"This year will see sovereign bonds enter failure, in an unprecedented manner. Watch the USGovt debt and a possible restructure event (technical default). This year will see entire national banking systems enter failure, in an unprecedented manner. Watch Italy for the bank runs and collapse. "
"Three ancient empires in China, Russia, and Persia are cooperating to bring the Eurasian Trade Zone to life, in an unstoppable process. They will usher in the Gold Standard, first in trade payments, then in bank reserves, finally in currencies. The USDollar-based hegemony must be forced to yield one step at a time. "
The U.S. dollar is the unrivalled king of the currencies, in part because it has never been cancelled. The Eurasian group knows that the Yuan can never displace the dollar. They will use the "gold trade note".

"The magnificent crisis that is unfolding in this new year has been given a name by the Jackass as the Systemic Lehman Global Breakdown Event. Since the Lehman failure, all insolvent structures have become more insolvent, fortified with more leverage, flushed with more funny money, and been kept in place as the power center for the USGovt istelf. The Wall Street banks stole the $700 billion in TARP Funds as a launching pad for sacking Washington DC in a grand fascist display. The broken silos of financial corruption have grabbed political powers, and written US legislation. In the last ten years, nothing has been fixed, or event attempted toward remedy. "
"What was seen in 2008 with Lehman failure will next be seen on a systemic level, since instead of remedy, the entire system has been subjected to same abuses that led to the mortgage finance and housing bust."
The finance system became too crowded with too many people all trying to rent out their money. The bankers tried to preserve the nominal value of ALL collateral when the markets just wouldn't support said value. The organic economy is even less able to support bloated values in the face of falling wages.
"desperate set of gestures designed to sustain the power structure at the expense of the system’s integrity and viability. Instead, the central banks have gone completely insane, putting gigantic support mechanisms under the USGovt debt"
"The banker elite, with the central bank helm and their big bank servile outposts, have elevated the systemic risk to levels never seen before on the globe. They have lashed the big banks together with derivatives, ready for common fate. They have unleashed unsterilized hyper monetary inflation for six years running, and called its heresy as good. They have linked together the financial markets to the sovereign bonds"

"They have permitted the USGovt debt to go out of control, far above the annual $1.0 trillion deficit admitted. ,,,phony USTreasury Bond demand when almost no demand exists. "
"The thread to be pulled on the sweater will be the USTreasury Bond complex. It is the trigger, the fuse, the most crucial link, evident within the entire picture. For the last year, the the USTreasury Yield Curve has become much more flattened, a danger signal."
"The Jackass has maintained for a few years running that the QE experiment kills capital, renders businesses as unprofitable, and will eventually wreck the economies. It is happening in recognized fashion. As the USTreasury Bonds falter, they will take down the US stock market and other sovereign bonds. We are on the verge to see a decline in the USDollar, the USGovt debt security, and the US stock market simultaneously."
2018: Yearly Forecasts for Systemic Breakdown

Once again, we see that paper dollars are king but, sovereign dollar bonds are toilet paper.

[Danny B]

When will the stampede start?

Where to start?
"This long-term, secular expansion of the (economic) pie naturally generated more demands for additional entitlements and rights, as the economy could clearly support the extra costs of allocating additional wealth and resources to the many. From the point of view of the few (the elites), their own wealth continued expanding, so there was little resistance to expanding retirement, education and healthcare entitlements.

But in the 21st century, the expansion of the pie stagnated, and for many, it reversed. Adjusted for real-world inflation many households have seen their net incomes and wealth decline in the past decade.

Despite the endless media rah-rah about “growth” and “recovery,” it is self-evident to anyone who bothers to look beneath the surface of this facile PR that the pie is now shrinking. This dynamic is increasing inequality rather than reducing it."
This is true to a point. Remember that most of the pie is debt notes. The pie is made of smoke.
"The unwelcome reality is that the economy is changing in fundamental ways that cannot be reversed with policy tweaks, protests or wishful thinking.

Consider the percentage of the gross domestic product (GDP) that goes to employee compensation (wages and salaried). Labor’s share of the GDP has been in a downtrend since 1970, which not coincidentally was the peak of secular productivity:"
Labor can't consume and, productivity falls. The rich can't consume anyway near commensurate with the wealth they hold. Here is the graph
http://media.peakprosperity.com/imag...-fed-chart.jpg
https://www.peakprosperity.com/blog/...ginning-starve

Most of this inequality is TRANSIENT.
Personal savings have crashed and , everyone is living on their credit card.
https://www.zerohedge.com/sites/defa...%20-%20CC1.JPG

"If you account for the actual inflation rate then GDP growth has been consistently around -2% since 2001. If you were to use a real economic measure like NNP instead of GDP I suspect the numbers would be even more deplorable."
https://www.zerohedge.com/news/2018-...avid-rosenberg
"remember that during obamas last year they revised how the gdp was calculated otherwise we would have negative numbers now. gdp is a joke. they have obama care premiums in the gdp. That isn’t real. It is a tax not a product."

"markets saw a record $33.2bn inflow to equity funds this week, record $12.2bn inflow to active funds, $1.5bn into gold (50-week high)"
" broken by region, it was more of the same as U.S. equities saw $7bn of inflows, Europe $4.6bn, Japan $3.4bn; while EM funds had the 2nd best week of inflows on record at $8.1bn.
On the credit IG bond funds gain $2b in 57th straight week of inflows, HY bond funds see outflows of $2.5b, EM debt inflows $1.6b"
The article goes on to show that $BILLIONS are flowing in like water.
https://www.zerohedge.com/news/2018-...just-triggered
It is impossible for retail investors to pump that much cash into the system, so that only leaves Central Banks as the culprits.
Printing cash like a Crypto conjuring tokens out of thin air and buying assets with it.
"Bank of America Merrill Lynch's "Bull & Bear" indicator is sending a sell sign, which has been accurate 11 straight times since the firm started tracking it in 2002."

Dollar-denominated debt, https://www.armstrongeconomics.com/w...-debt-up-10-5/
"This illustrates the banking crisis that is still brewing in Europe even after nearly 10 years of quantitative easing. There is little prospect for this crisis to be fixed. All that can happen is to postpone the inevitable."
https://www.armstrongeconomics.com/w...-indefinitely/

[Danny B]

Stocks go up on unlimited pixels

1/28 Japanese cryptocurrency exchange loses over $500m to hackers – CNBC
Japan To Repay Bitcoin Owners $425 Million Stolen By Hackers
1/26 Ransomware remains weapon of choice for hackers – Silicon
You can forget about BTC for the time being.
Gold is valuable because it takes hard work to produce it. The CBs only need to click a mouse to pour $trillions into the stock and asset markets. In the case of barter, you traded one valuable item for another valuable item. In the case of early paper currencies, you traded a receipt for a valuable item for a different valuable item. The bankers started the practice of creating too many receipts. Moving forward in time, the bankers created receipts for valuable items that didn't yet exist. Since nobody knows the future, there was no limit on creating receipts. While a currency has a tenuous connection to something tangible and valuable, a GOV bond is tied to the full faith and credit of the State.
GOV debt is rated as AAA by rating agencies even though, all States eventually default. The U.S. has never cancelled it's currency but, it has devalued it compared to gold. America managed to value it's currency in oil after it lost the link to gold. More countries are pulling out of this arrangement. Nobody is buying new Treasury debt and "somebody" is monetizing it under the table.

From 1776 through 2007, the US issued just over $9 trillion in US Treasury debt to pay for stuff which "we" wanted but "we" were unwilling to tax ourselves to pay for.
From 2008-->2014, the US Treasury nearly issued as much debt as it had in the previous 230+ years.
The State claims that domestic buyers are buying most issuance, http://www.zerohedge.com/sites/defau...0407_econ2.png
"As China and the BRICS ceased net buying Treasury debt in July 2011 (and never returned), the BLICS appeared and rates went down (Detailed HERE). As the Fed ceased QE1 and all economists knew rates must rise...rates shocked 100% of economists and fell by a third. As the Fed tapered and ceased QEIII and foreigners likewise ceased buying Treasury's from '14 onward, "other" took over and rates hardly budged!?! Not exactly the hallmarks of a "free market"."
https://www.zerohedge.com/news/2017-...ther-seriously
The BLS claims that unemployment is 4.1%. The FED claims that they have stopped QE.

"The U.S. ran a $71.6 billion Goods Trade Deficit in December, the largest goods deficit since July 2008’s $76.88 billion. The U.S. likely accumulated a near $550 billion Current Account Deficit in 2017
Rest of World holdings of U.S. financial asset began the nineties at $1.738 TN; closed out 2008 at $13.699 TN; and ended Q3 2017 at $26.347 TN. It’s gone rather parabolic
Credit Bubble Bulletin : Weekly Commentary: America First and the Decapitation of King Dollar

"The bull market that began in 2009, has now entered the final stage of “capitulation” as investors throw caution to the wind and charge headlong into the markets with reckless regard for the consequences."
When the CBs print free money, they don't worry about losses.
"Of course, it isn’t surprising given the massive amounts of liquidity continually injected into the financial markets and global Central Banks have now figured out that continually rising financial markets solve much of the world’s ills. Simply, with enough liquidity, you can cover up bad (credit risks) by guaranteeing holders they will never default.

"It’s genius. It’s a “no lose” investment scheme.
Unfortunately, we have seen this repeatedly in the past.
In the 1980’s it was “Portfolio Insurance” – a “no lose” investment program that eventually erupted into the crash of 1987. But not before the market went into a parabolic advance first."
"In the 1990’s – it was the dot.com phenomenon which was “obviously” a “no lose” proposition. Even after Alan Greenspan spoke of “irrational exuberance,” two years later the market went parabolic once again."
"Then in 2006-2007, banks invented the CDO-squared, a collateralized derivative obligation based on other collateralized derivative obligations. It was a genius way to invest with “no risk” because the real estate market had never crashed in history."
https://realinvestmentadvice.com/wee...ibly-go-wrong/

Keep in mind that the 10 year rate is at 2.62%.
"If interest rates go up even modestly, halfway to their normal level, you will see a collapse in the stock market,” Kenneth Rogoff.
https://www.zerohedge.com/news/2018-...e-stock-market

The higher that the markets go, the closer they are to their eventual rolling over. The higher the markets go, the more uneasy people get. This is expressed by "put" options. When the markets are a sure bet, they receive lots of "call" orders. "In fact VIX and the S&P are up for 3 straight weeks - the longest streak since Feb 2013.

Typically this is interpreted negatively as it would seem people are paying up for downside protection as stocks go ever higher and ever more parabolic.

But 2018 has been anything but typical: It appears that everyone's buying calls into the rally, accelerating it in the process!"
"Thus the rise in VIX (which measures the 'around the money' implied vol of the S&P) is being driven higher by exceptional demand for calls - upside levered bets that this crazy melt-up continues"
https://www.zerohedge.com/news/2018-...-madness-looks
You get the idea. The CBs not only buy stocks, they buy call options to drive up optimism. Investors forget that one of the market participants has a printing press. It remains to be seen just how far they can stretch this optimism.
Armstrong, "Additionally, the entire world is gearing up for the monetary crisis cycle. This means we are witnessing the prologue and that is the shift from public to private assets on a global scale."
It's easy to prove that the CBs are buying up most of U.S. treasury debt. It's equally easy to see that the CBs are inflating the asset markets.
Everybody is starting to focus on return of capital rather than return on capital. A lot of people read Armstrong. A lot of people can see the implied risk of sovereign debt.
Forget all the nonsense that you hear that the FED ended QE years ago. This is the same kind of BS that you hear about the unemployment rate.

So, apparently U.S. Sovereign debt is going to crash. Armstrong said that the "deep state" will bring it all down trying to hold on to power. So, who is the Deep State? Who brought us the Police state?
This is a crosspost;
http://www.energeticforum.com/307816-post6545.html

http://www.energeticforum.com/307817-post6546.html
The thing to keep in mind is; it takes a lot of wealth to keep America going. For the last few decades, we have substituted paper money to get wealth from the R.O.W.
"The U.S. ran a $71.6 billion Goods Trade Deficit in December,"
We have been running the printing presses in hyperdrive. All governments eventually default. It isn't likely that we can maintain our standard of living with $70 B of stuff (per month) no longer flowing into the country.
Will the CIA / FBI crash it all down trying to retain their empire? Will the police state dwindle away when GOV goes broke?

[wayne.ct]

Definition of Inflation

M1, M2, Real GDP and CPI Growth: 1970s vs. Now - AEI

There are a variety of inflation measures which can basically be interpreted to mean there are an equal number of definitions of "inflation". One cannot rely on dictionaries and encyclopedias for such a thing. They don't really cover the spectrum.

M1, M2, Mx, CPI, crude oil, nat gas, etc. can all be used as a proxy for inflation. One person's inflation could be another person's "so what?"

The problem seems to be public perception of value in the aggregate. What one person does in opposition to the general masses cannot have much of an effect. It is when general perception shifts that the devaluation of paper money (i.e. fiat) becomes visible.

What measure would you or someone else apply to gauge this factor? I would say this is indeed the single most important critical factor, but I am open to other views. Consumer confidence can likewise be measured in a variety of ways. The most popular measure of consumer confidence is, I am afraid, highly suspect. E.g. consumer spending is up (confidence or not confidence?) AND "savings" is down. Again, is that a sign of confidence or lack of confidence? The volume of dollar transactions is so huge that it is beyond the ability of the "average" consumer to conceive, much less understand. The consumer and producer alike behave based on their perception of value at the time a transaction is finalized. Unless there is a "shock" to the system, they continue as if everything is more or less the same as the day before.

This is a huge momentum in the system and any true "shock" is papered over by the subservient media. At the same time, phony "shocks" are propagated ad nauseum until the population is unable to cope with the volume of "fake news". This could go on for a long time.

What metric or set of metrics is most indicative? (In your opinion or the opinion of someone you follow?)

[Danny B]

Inflation vs confidence

Inflation is accurately described as; an increase in the money supply. It was later amended to : an increase in the supply of money and credit. As more and more of the increase in the money supply was supplied with increased credit, the finance system became more and more dependent on confidence and sentiment. The entire upper loop is leverage to the max. The lower loop can not leverage it's wages. We can only pull future wages to the present to buy a house. The housing crash was a situation where the banks had to depend on the wages of the lower loop to stave off default in the bloated RE market. RE prices shot up at the same time that real wages slipped down.
The CB can inflate the money supply and confidence in the upper loop. The CB can't do much to inflate wages or confidence in the lower loop. The CBs have inflated the income and spending of those in the upper loop. They can not do the same for those in the lower loop. When a bank creates money, it is creating new debt. When the FED creates money, it is debt-free. The FED tries to offset wage deflation in the lower loop by injecting free money into the upper loop. Since the upper loop is mostly superfluous, the economy doesn't lose any real productivity.
If they injected tons of free money into the lower loop, we would quit our jobs.

The whole idea of keeping us poor to keep us working, has hit a giant bump in the road. Automation is wiping out whole sectors of employment.
THEN, there is the "skills gap" "The skills gap in the U.S. is substantial. The National Federation of Independent Business found that as of first-quarter 2017, 45 percent of small businesses reported that they were unable to find qualified applicants to fill job openings."
At the same time "higher education" is turning out lots of people with no job prospects.
We have 2 distinct loops of the economy. We have completely different levels of confidence between the two loops. The economy is far more susceptible to confidence than it is to the money supply.

[Danny B]

Sovereign debt weakening

Well, I've written quite a bit about the stock market. Armstrong is predicting 39,000. China shows about $1 billion a year capital flight. China is creating more new credit than the FED, ECB and BOJ put together. This inspires investors to flee to a jurisdiction that has lower debt creation. The ECB is still printing $60 billion a month. Even the Swiss national bank (SNB) is buying hundreds of $millions in U.S. stocks. The investors send their capital to whatever jurisdiction appears to inflate the least. The FED publicly announced the end of QE. If you look at the stock indexes, you could easily believe that the FED, and not just cross-border capital flows was upholding the stock indexes.

If you look at the bond markets, it is all one big farce. The BLICS never bought treasuries. The State now claims that households are buying treasuries. Remember when we used to buy U.S. Savings Bonds? Nobody is doing that any more. So, capital is fleeing to U.S. stock markets. NOBODY is fleeing to U.S. sovereign bond markets. The FED buys them under the table and out the back door.

The stock market is important for just one reason. Many investors use the stock indexes as a barometer for the financial health of the State. These same investors also use the unemployment rate as an indication of the financial health. They can EASILY learn that close to 100 million of working age are not in the labor force. They prefer to look at the 4.1% number from the BLS. This wilful blindness will come back to haunt them. They have dumped money into passive investment funds because they are too lazy to do due diligence.

The stock markets are a barometer of the financial health of the private sector. The sovereign bond market is a barometer of the financial health of the State. The treasury has been a serial liar about that health. NOW, the stresses are building up fast!
"Finally, however, the era of QE and massive monetization is over and done. As the US Treasury gets set to issue upwards of $1.2 trillion of new bonds in the fiscal year (2019) starting in October and the Fed ramps its bond dumping rate to $600 billion per year, the question recurs: Who is going to buy $1.8 trillion of bonds within a 12-month period at current rates (2.65%)."
The Treasury can conjure up imaginary buyers of U.S. debt,,, up to a point. Can the FED conjure up legitimate buyers for it's bond portfolio? The FED can buy Treasury paper with thin-air money. NOBODY but a central bank can buy FED debt with thin-air money. It isn't likely that the FED can liquidate it's portfolio.
The bankers and the FED inflated the money supply by about 2% a year. They had to create new money to supply the liquidity for debt service. This constant 2% growth, over time, inflated the wages and prices in America to the point where we priced ourselves out of competition in foreign markets. The investor class just grew TOO BIG. The constant inflation kept them going at the cost of killing the lower loop.
Contra Corner » The Donald’s Davos Delusions

The Treasury Bond markets are getting quite worried.
https://www.cnbc.com/2018/01/26/trea...rgo-warns.html
All the Treasury yields are going up, https://assets.bwbx.io/images/users/...v2/1000x-1.png
Bond yields are going up, https://www.bloomberg.com/news/artic...into-overdrive
https://www.bloomberg.com/news/artic...into-overdrive
The problem is; if the 10 year goes to 3.5% it will wipe out much of the markets.
Here is a graph of CB printing, https://www.zerohedge.com/sites/defa...0macquarie.jpg
This is just a long-running story. EVERYBODY wanted to rent out their money. When the productive sector shrunk from the blood-sucking parasites, they cranked up the money-machine to survive.
https://www.zerohedge.com/news/2018-...l-about-change
"World markets are like a pie crust stretched across the roof of a volcano!"

The FED and the State are trying to inflate and have the money flow into the bond markets. "Shiller has even conceded that bond markets also fail to correlate to inflation. It is the past that rules the future."
Armstrong, "Inflation is still relatively modest, but the job market is at its healthiest in years, and the unemployment rate is at a 17-year low. All of this baffles the analysts. They think this should lead to higher wages for workers, which could push inflation higher across the economy, but then there is the technology boom replacing workers."
"Among the analysts at least, there is more recent optimism and more complacency after being wrong for the first 8 years."
https://www.armstrongeconomics.com/f...ish-in-stocks/

"This "intervention", as well as the recent retail capitulation which has seen retail investors unleashed across stock markets, buying at a pace not seen since just before both the 1987 and 2008 crash, helps explain why stocks have - for now - de-correlated from central bank balance sheets."
"What happens next? Well, if the Citi correlation extrapolation is accurate, and historically it has been, it would imply that by mid-2019, equities are facing a nearly 50% drop to keep up with central bank asset shrinkage. "
The CBs can't really afford to shrink their asset purchases but, they can't continue either.
https://www.zerohedge.com/news/2018-...tocks-are-next

Comments, "The Fed tightening by selling off it's balance sheet will soak up dollars at a time when hundreds of billions are coming home and hundreds of billions for investment to capitalize upon the new tax reform."
"since trumps tax "win" came after the fed shrinkage policy, one could deduct that trump covered, saved, the feds stupidity this time.

but until I see real wage increases, all this is meaningless to the average joe blowhard, like me, as inflation is onward and upward, the real thief of any perceived gains.."
"We said, as INFLATION is INSIDIOUS in nature because people ABSORB inflation on GOODS that they MUST have and repudiate those NOT-NEEDED new assets, like a brand new stinking car. It is slow brewed, meant to only distract and then the Government STATS show us: "OH NO, there is not ENOUGH inflation yet." This crock of **** has been brewing a long time. I track what my family spends and we are SPENDING A LOT more on daily consumables and a lot less on new Motorcycles, RV's, cars, homes, etc."
Consumption shifts out of luxuries and resides just in necessities. Without wage inflation, there can't very well be price inflation. People just stop buying when the price goes too high.

"The MSM is full of comments like "bringing offshore US corporate profits back to the USA" and by implication to the USD.

Most people, including the MSM commenters, do not know that most of the so-called "offshore US corporate profits" are actually already in:
1. USD or USD-denominated assets
2. located in accounts in the USA

The fact is that the so-called "offshore US corporate profits" are only just an accounting classification of the profits, NOT the physical location of the profits, so that the money/assets get subject to income tax when the money/assets are moved out of the "offshore" account and into an "onshore" account."
"Credit is going to dry up. Mortgage interest is going to rise, and additionally millions of people won't be able to subsidize their low income with credit cards. That's why the money grubbing slave driver Trump is president. He's gonna have to deploy homeland security to beat millions of people with clubs."

Here is a chart on debt creation, https://www.peakprosperity.com/sites...1-29_650px.jpg
So, stocks are the place to be because bonds are starting to roll over. Well, stocks are doing all that great either, https://www.marketwatch.com/story/us...ry_top_stories

[Danny B]

Kunstler, bonds

OK, so, Treasury yields are going up, https://assets.bwbx.io/images/users/...v2/1000x-1.png
Kunstler, "But with benchmark ten-year bond rate nosing upward like a mole under the garden toward the 3.00 percent mark, something is going to give.

How long do you think the equity indexes will levitate once the bond market implodes? What vaporizes with it is a lot of the collateral backing up the unprecedented margin (extra borrowed money) that this rickety tower of financial Babel is tottering on. A black hole is opening up in some sub-basement of a tower on Wall Street, and it will suck the remaining value from this asset-stripped nation into the vacuum of history like so much silage."
"Treasury Secretary Mnuchin told the Davos crowd that the US has “a weak dollar” policy. Is that so? Just as his department is getting ready to borrow another $1.2 trillion to cover government operations in the year to come. I’m sure the world wants nothing more than to buy bucket-loads of sovereign bonds backed by a falling currency "
Happy Landings - Kunstler

1/29 Dow drops more than 170 points on rising rate fears – CNBC
1/29 The ECB and the euro are the only glue holding Europe together – CNBC $60 billion a month buys a lot of glue.
1/29 How long before the bond selloff slams stocks? – Zero Hedge
1/29 US savings rate hits crisis lows amid soaring credit card debt – Zero Hedge We're spending ourselves down.
1/29 A record 32% of used car trade-ins are underwater – Zero Hedge This didn't affect the value of my '82 MBZ diesel.

1/29 Koch Brothers’ network to spend up to $400m for midterm election cycle – CNBC Elections were always for sale. They're just getting more open about it.
1/29 Hackers are making U.S. ATMs spit out cash like slot machines – WaPo
1/29 Mexico police find enough fentanyl to kill millions en route to US – Zero Hedge

[Danny B]

Underconsumption

Notes on underconsumption;
"In underconsumption theory in economics, recessions and stagnation arise due to inadequate consumer demand relative to the amount produced. It means that there is an overproduction and a demand crisis.
One of the early underconsumption theories says that because workers are paid a wage less than they produce, they cannot buy back as much as they produce. Thus, there will always be inadequate demand for the product.
In his book Underconsumption Theories (International Publishers, 1976) Michael Bleaney defined two main elements of classical (pre-Keynesian) underconsumption theory. First, the only source of recessions, stagnation, and other aggregate demand failures was inadequate consumer demand. Second, a capitalist economy tends toward a state of persistent depression because of this.

Falling consumer demand need not cause a recession, since other parts of aggregate demand may rise to counteract this effect. These other elements are private fixed investment in factories, machines, and housing.
So, where did the money and wages come from to utilize these new factories, machines and housing?
Marx, "It is sheer redundancy to say that crises are produced by the lack of paying consumption or paying consumers. The capitalist system recognizes only paying consumers.
Marx argued that the primary source of capitalist crisis was not located in the realm of consumption, but rather, in production. In general, as Anwar Shaikh has argued, production creates the basis for consumption, because it puts purchasing power into the hands of workers and fellow capitalists. To produce anything requires the individual capitalist to buy machines (capital goods) and employ workers.
What if the workers are robots?
"He argues that as the capitalists compete with each other, they strive to replace human laborers with machines. This raises what Marx called "the organic composition of capital." However, capitalist profit is based upon living, not "dead" (i.e., machine) labor. Thus as the organic composition of capital rises, the rate of profit tends to fall. Eventually, this will cause a fall in the mass of profit, giving way to decline and crisis."
Stagnant wages (relative to labor productivity) mean that working-class consumer spending also stagnates.
"Some growth of working-class consumption occurred, but corresponded to increased indebtedness. "

"The problem with this kind of economic boom is that it becomes increasingly unstable, somewhat akin to a bubble affecting a financial market. Eventually (in 1929), the over-investment boom ended, leaving unused industrial capacity and debt obligations,
Second, once a recession has occurred (e.g., 1931–33), private investment can be blocked by debt, unused capacity, pessimistic expectations, and increasing social unrest. In this case, capitalists try to raise their rates of profit by cutting wages and raising labor productivity (by speeding up production). The problem is that while this may be rational for the individual, it is irrational for the capitalist class as a whole. Cutting wages relative to productivity lowers consumer demand relative to potential output. With other sources of aggregate demand blocked, this actually hurts profitability by lowering demand. Devine terms this problem the under-consumption trap.

"the deep-rooted belief in the utility of luxury and the evil of thrift. Thrift, in fact, was regarded as the cause of unemployment, and for two reasons: in the first place, because real income was believed to diminish by the amount of money which did not enter into exchange, and secondly, because saving was believed to withdraw money from circulation."[4]
The argument was that governmental intervention, especially spending on public works programs, was essential to restore the balance between production and consumption. The theory strongly influenced Herbert Hoover and Franklin D. Roosevelt to engage in massive public works projects.
https://en.wikipedia.org/wiki/Underconsumption

[Danny B]

Underconsumption,,,, Economica

Here are a couple of articles that you should read in full. I won't excerpt them. They are obvious enough and, YOU are smart enough.
https://econimica.blogspot.com/2018/...taking_29.html

https://econimica.blogspot.com/2016/...y-utterly.html

https://econimica.blogspot.com/2017/...orph-into.html
We are NOT in stasis. We are NOT in recovery. There is NOTHING the State can do to increase the birth rate. Besides that, there are a lot of powerful groups pushing for a big reduction in population. Our credit system DEMANDS expansion. Not only is our domestic population, aggregate wages and consumption falling, all of the major power-brokers are trying to hold on to their power base,,, at the expense of the system.

"When a few such deals blow up – as bubble assets always eventually do – investors will start wondering what’s going to blow up next. And they’ll find not just a few but many, many bad ideas lurking in their “low risk” accounts. The resulting stampede for the exits will look familiar to anyone who lived through the tech stock and housing busts of previous decades.

With one big difference. This time around crappy, crazy paper is not just in tech stock and ABS portfolios. It’s everywhere. Trillions of dollars of sovereign debt will tank along with the sketchy shopping mall and emerging market infrastructure bonds. The resulting bust will be more broad-based and therefore way more interesting than anything that’s come before."
https://dollarcollapse.com/bonds/get-into-my-bond-fund/

Leverage has flowed into EVERYTHING. Default will flow out of EVERYTHING.