This post When the “Fix” Increases Systemic Fragility, Things Fall Apart appeared first on Daily Reckoning.
All the “fixes” have fatally weakened the real economy, and created a dangerous illusion of “wealth,” “growth” and solvency.
The “fix” of the last eight years worked, right? This was the status quo’s “fix”:
1. Massive expansion of debt: sovereign, household and corporate, all in service of a) bringing consumer demand forward b) fiscal stimulus funded by debt c) corporate stock buybacks to boost stock valuations d) asset bubbles in real estate, bonds, stocks, bat guano futures, etc.
2. Monetary stimulus, i.e. creating and distributing money at the top of the wealth/power pyramid so corporations and the super-wealthy could buy more assets with free money for financiers issued by central banks.
3. Gaming statistics such as unemployment and metrics such as stock indices to generate the illusion of “growth,” “stability” and “wealth.”
4. Saying all the right things: the “recovery” is creating millions of jobs, inflation is low, virtue-signaling is more important than actual increases in inflation-adjusted wages, etc.
This “fix” has fatally weakened the real economy.
The cost of maintaining the illusions of “growth,” “stability,” “wealth” and solvency is extremely high, and hidden from view: systemic fragility has increased to the point of brittleness.
What is fragility?
Fragility is the result of an erosion of resilience, redundancy, adaptability, accountability, honesty, feedback and willingness to sacrifice today’s consumption for tomorrow’s productivity and systemic stability.
The status quo “fix” has gutted resilience, redundancy, adaptability, accountability, honesty, feedback and willingness to sacrifice today’s consumption for tomorrow’s productivity.
Can anyone who isn’t a lackey on the payroll of the Powers That Be provide any credible evidence that the U.S. economy is more resilient after eight years of debt-dependent “recovery”?
For the past several years, central banks have funneled credit and liquidity into the banks at the top of the wealth-power pyramid. Very little of this new “wealth” has trickled down to the bottom 90% of households in the real economy who have seen their earnings stagnate and their costs rise.
Now that debt and essentials are absorbing much of the bottom 90%’s earnings, there’s little fuel left for additional debt-based consumption. This is why we see auto sales plummeting, for example.
You see the conundrum facing central banks. All the new money did was inflate asset bubbles in assets owned largely by the wealthy.
Bottom line: the next recession won’t be “fixed” with the central bank playbook of more free money for financiers.
The entire status quo is based on the delusion that rapidly rising debt will never generate any negative consequences.
America’s national debt, extended a mere dozen years into the future, is expected to double from the current $20 trillion to $40 trillion. And that assumes 1) trillions of dollars in private and local government pensions don’t implode and have to be bailed out by the federal government, a bail-out that will have to be paid by borrowing more money, 2) a recession doesn’t slash federal tax revenues.
Color me skeptical that doubling the debt in 12 years won’t have …read more
Source:: Daily Reckoning feed
The post When the “Fix” Increases Systemic Fragility, Things Fall Apart appeared first on Junior Mining Analyst.