We have spent a considerable amount of time writing about economic issues; mainly about the incessant and incredible stupidity of your elected “representatives” and their minions the un-elected un-representatives (apparatchiks) who actually control the economy. And yes. This is a runoff sentence, so don’t tell you English professor about it. Since then, we have dealt with a number of subjects foreign to this topic, but must now return to it. At least for the duration of this piece. But where to begin, where to begin… oh… yes! Let’s see: YOU ARE SCREWED.
This clear enough for you?
Yes, nothing has changed since we published Operation Scorched Earth - The New Economic Policy and Operation Scorched Earth Is Right On Track. And how can we possibly forget The 1.5 Quadrillion USD Bet - What Can Possibly Go Wrong?
Yes, we are still forecasting doom and gloom. But doom first.
Yes, we are still blaming the government for it.
Yes, there is exactly zero chances of solving this problem without a very large (we are being ridiculously optimistic here) economic disaster.
And yes, politicians will find other creative ways to keep the party going until something gives in.
Allow us to provide you with some numbers, for your education, entertainment and general depression. People with health care issue should abstain from reading beyond this point. You have been warned.
To the numbers!
Combined debt (public and private) is now higher than in 2007 (pre debacle).
Combined debt (of countries “that matter”) is now at a ridiculous 265% of GDP.
Combined debt (of emerging markets or countries that “do not matter”) is about 170% GDP. Only.
USD loans to emerging markets is about $3 Trillion USD, about twice its 2007 levels.
Off-shore borrowing of USD is about $10 Trillion USD thanks to QE in the US.
Much of the world financial system is anchored to the USD.
EUR debt is surging to the tune of about $800 Billions in the first quarter due to EU QE.
Global banks borrowed about $2.8 Trillion EUR to “invest”… ejem… in “global oportunities”.
Well, those are the numbers. Officially. The real ones? Who knows. As we mentioned before the biggest pile of money is in would-be money in the derivatives market to the tune of $1.5 Quadrillion USD and highly leveraged anywhere from 1:1 to 1:100 at least! Mostly denominated in USD.
And now, ladies and gentlemen comes the stupidity of the year. The US Federal Reserve may raise interest rates. A tiny bit, mind you, but they may.
If they do, chances are excellent this may trigger a super-2007 economic tsunami of galactic proportions. No, we are not exaggerating. If there are intelligent beings in the universe, we sincerely hope they are not watching the supreme stupidity of our politicians. Because if they do they will soon realize we are not intelligent beings and we will be relegated to the dustbin of the great galactic society (assuming one exists).
But after all this is said and done, you still don’t get it, do you? Of course not! Why would you? You are seeing a more-or-less regular economic surface which looks more-or-less calm to you. There are no major waves and no major events on the surface. Just like in 2007. Why worry right? Just like in 2007. But the truth is that you will be screwed anyway, just like in 2008. But worse.
We wish we when. We wish we could tell you how. We wish we ourselves knew (to make a fortune and live happily ever after) but we don’t. All we know is that it is going to happen. Sooner than later. Although central bankers are good at coming out with new and exciting way to pass on the problem to the next political sucker, they are quickly running out of options. If you look carefully, you will notice that all their dealings had to do with printing; in one way or another. Under a different name. Using different tools. Under different semantics. Using different methods. But when everything is said and done, it is still printing. And it is not working.
Let us say this again:
IT IS NOT WORKING
If modern monetarist theories would be correct, by now they have printed so much money that we should be living in a golden economic era. Yet, what we got is nothing short of noise, in a scientific understanding. You see dear reader, when a scientist measure something, anything, this measurement always include an error. If this measurement is performed time and time again, what we will obtain is the average of the measurement and a band surrounding this average composed of noise. Yes, there are signal changes within the noise, but the average does not change. This is exactly what is happening at the global level. There is quite a bit of noise being produced by central banks, but the averages are not changing. All long term true indicators are pointing down. Problem is, the “supreme effort” that was exerted by central banks lead them directly into the Japanese trap. The world economy is not only far, far worse now that it would have been should they would not have intervened in 2008. Not only that, they (we) are so addicted to debt (easy money – low interest rates) that there is no way out. The addict must die.
Let’s repeat our message yet again:
IT IS NOT WORKING
And with this comforting thought we leave you for today, safe in the knowledge that we have helped to make your life just a little bit more miserable. After all, why should politicians and central bankers have all the fun?
Note: please see the Glossary if you are unfamiliar with certain words.