“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises
The surreal nature of this world as we enter 2015 feels like being trapped in a Fellini movie. The .1% party like it’s 1999, central bankers not only don’t take away the punch bowl – they spike it with 200% grain alcohol, the purveyors of propaganda in the mainstream media encourage the party to reach Caligula orgy levels, the captured political class and their government apparatchiks propagate manipulated and massaged economic data to convince the masses their standard of living isn’t really deteriorating, and the entire façade is supposedly validated by all-time highs in the stock market. It’s nothing but mass delusion perpetuated by the issuance of prodigious amounts of debt by central bankers around the globe. And nowhere has the obliteration of a currency through money printing been more flagrant than in the land of the setting sun – Japan. The leaders of this former economic juggernaut have chosen to commit hari-kari on behalf of the Japanese people, while enriching the elite, insiders, bankers, and their global banking co-conspirators.
Japan is just the point of the global debt spear in a world gone mad. Total world debt, excluding financial firms, now exceeds $100 trillion. The worldwide banking syndicate has an additional $130 trillion of debt on their insolvent books. As if this wasn’t enough, there are over $700 trillion of derivatives of mass destruction layered on top in this pyramid of debt. Just five Too Big To Trust Wall Street banks control 95% of the $302 trillion U.S. derivatives market. The reason Jamie Dimon and the rest of the leaders of the Wall Street criminal syndicate commanded their politician puppets in Congress to reverse the Dodd Frank rule on separating derivatives trading from normal bank lending is because these high stakes gamblers want to shift their future losses onto the backs of middle class taxpayers – again. The bankers, with the full support of their captured Washington politicians, will abscond with the deposits of the people to pay for their system destroying risk taking, just as they did in 2008 by holding taxpayers hostage for a $700 billion bailout.
Only the ignorant, intellectually dishonest, employees of the Deep State, CNBC cheerleaders for the oligarchy, or Ivy League educated Keynesian loving economists choose to be willfully ignorant regarding the true cause of the 2008 implosion of the worldwide financial system. The immense expansion of credit in the U.S. from 2000 through 2008 was created, encouraged, supported and sustained by Alan Greenspan, Ben Bernanke and their cohorts at the Federal Reserve through their reckless lowering of interest rates and abdication of regulatory oversight, as their owner banks committed the greatest financial control fraud in world history. Total credit market debt in the U.S. grew from $25 trillion in 2000 (already up 100% from $12.5 trillion in 1990) to $53 trillion by 2008.
The bankers, politicians, mainstream media corporations, and mega-corporations that run the show lured Americans into increasing their credit card, auto loan, and student loan debt from $1.6 trillion in 2000 to $2.7 trillion in 2008, while extracting over $600 billion of phantom home equity from their McMansions. And it was all spent on things they didn’t need, produced in Chinese slave labor factories. The mal-investment boom was epic and the collapse in 2008 would have purged the bad debt, punished the risk takers, bankrupted the criminal banks, reset the financial system, and taught generations a lesson they needed to learn – excess debt kills. Instead of voluntarily abandoning the madness of never ending credit expansion and accepting the consequences of their folly, the world’s central bankers and captured politician hacks chose to save bankers, billionaires, and the ruling elite at the expense of the common people.
The false storyline of government austerity continues to be peddled to the public, but is nothing but pablum served to the mentally infantile masses, while the criminals continue to manufacture debt out of thin air, pillage the wealth of the working class, gamble recklessly knowing it’s with taxpayer funds, debase their currencies in an effort to make their debts easier to service, and enrich themselves and their cohorts, while impoverishing the little people. Consumer credit card debt peaked at $1.02 trillion in mid-2008. After hundreds of billions in bad debt write-offs by the Wall Street banks and shifted to the taxpayer, the American consumer has purposefully avoided running up credit card debt on Chinese produced crap, despite the urging of bankers, the mainstream media and politicians to revive our warped, debt laden, consumption dependent economy. Credit card debt is currently $140 billion BELOW levels in 2008, despite the never ending propaganda about an economic and jobs recovery. The fake Wall Street created housing recovery is confirmed by the fact mortgage debt outstanding is $1.4 trillion LOWER than 2008 heights and mortgage applications are hovering at 1999 levels.
The Greenspan/Bernanke/Yellen Put lives on. So, while credit card debt is 14% below 2008 levels, student loan and auto loan debt has soared by 47%, up $769 billion from its early 2010 lows. The Fed and their government minions have desperately accelerated their credit expansion in a futile effort to revive our moribund, debt saturated, welfare/warfare empire of delusion. After temporarily plateauing at $52 trillion in 2010, the acceleration of consumer credit, issuance of corporate debt to fund stock buybacks, and of course the $5 trillion added to the National Debt by Obama, have driven total credit market debt to an all-time high of $58 trillion. In addition, the Fed expanded their balance sheet by $3.6 trillion through their various QE schemes, funneling the interest free funds to their Wall Street owners to create the illusion of economic recovery through a stock market surge. The .1% never had it so good.
Of course, the U.S. has not been alone in attempting to cure a disease caused by excessive debt by issuing trillions in new debt. It is clear to anyone not in the employ of the Deep State that central bankers in the U.S. are working in concert with central bankers in Europe and Japan to keep this farcical Keynesian nightmare from imploding under an avalanche of deflation, wealth destruction, chaos and retribution for the guilty. The Federal Reserve used every means at their disposal to hide the fact they bought over $400 billion of mortgage backed securities from European banks and in excess of $1.5 trillion of their QE benefited foreign banks. It was no coincidence that one day after the Fed ended QE3, the Bank of Japan announced a massive “surprise” increase in purchases of bonds and stocks. It wasn’t a surprise to Janet Yellen, as this was the plan to keep stock markets rising, record Wall Street bonuses being paid, and further enrichment of the .1% global elite. The Japanese stock market has surged 18% since the October 31 announcement, with the U.S. market up 10%. Now it is time for Draghi to pick up the baton and create another trillion or two to support the lifestyles of the rich and famous. Central bankers know who they really work for, and it’s not you.
With global worldwide debt now exceeding $230 trillion we have far surpassed the point of no return. There is no mathematical possibility this debt will ever be repaid. And this doesn’t even include the hundreds of trillions of unfunded liability promises made by corrupt politicians around the world. The level of total global debt to global GDP, at nosebleed levels of 210% in 2008, has escalated past 240% as central bankers push the world towards a final and total catastrophe. With U.S. credit market debt of $58 trillion and GDP of $17.6 trillion, the U.S. is a basket case at 330%. The UK, Sweden and Canada are on par with the U.S.
But Japan takes the cake with total debt to GDP exceeding 500% and headed higher by the second. Their 25 year Keynesian experiment by mad central bankers and politicians enters its final phase of currency failure. Negative real interest rates, trillions wasted on worthless stimulus programs, and currency debasement have failed miserably, so Abe’s solution has been to double down and accelerate failed solutions. Only an Austrian economist can appreciate the foolishness of such a reckless act.
“Credit expansion is the governments’ foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous. – Ludwig von Mises
Madness in the Land of the Setting Sun
“The Japanese economy is burdened with an unusually bad demographic problem, made much worse by the burdens of insider dealing, crony capitalism, and zombie banks and their corporations. And its greatest burden of all is an elite that serves itself and its friends first and foremost, and that finds a greater kinship with its global counterparts than with the people whose interests it purports to represent.” – Jesse
The Japanese society and economy is dying a slow suffocating death. The Ministry of Health, Labor and Welfare reported earlier this week, while Japan recorded 1.0 million births in 2014, or the lowest number in recorded history; this was offset by 1.27 million deaths: also the highest on record.
Japan is in the throes of a demographic death and debt spiral. The politicians add debt at ever increasing levels and because no investor in their right mind would buy debt with negative real yields while the government devalues the currency, the Japanese central bank buys the debt – along with domestic and foreign stocks for good measure. The debt will never be repaid because it can’t. Even a miniscule increase in interest rates would ignite a conflagration of epic proportions, as the interest on the debt would blow the Japanese deficit sky high. Japan has a population of 127 million and at the current fertility rate of 1.4, will be below 100 million by 2045 and below 85 million by 2060. Old people can’t have babies, so this is a virtual certainty. Social programs, debt, and unfunded liabilities need a growing population and positive economic growth in order to be paid and honored. This is an impossibility in Japan. It’s just a matter of time before default and collapse sweep over this once proud empire like the tsunami that struck their shores a few years ago.
The Japanese people get it and are not cooperating with the authorities by spending money they don’t have, while the ruling class reaps the benefits of free money and stock market gains and they are left with declining real wages and high inflation for food and energy which must be imported. The debt can only be paid through real tax increases or stealth tax increases through inflation. The Japanese people realize Abenomics is a farce and continue to hoard their remaining wealth, preparing for the cataclysm which beckons. They know how bankers and politicians treat their constituents. The little people will be thrown under the bus with welfare and social benefit cuts, while the ruling class will be left unscathed and further enriched. The nation will have gone full cycle, from extreme poverty after World War II to a global economic powerhouse by 1990 and back to a broken nation when this charade of debt collapses.
Booms brought about by credit expansion ALWAYS end in a contractionary bust. It’s just a matter of when. The level of mal-investment in Japan, Europe, China and the U.S. during the boom created by central bankers is almost incomprehensible in its scale of absurdity. The only beneficiaries have been bankers, corporate insiders, politicians, and shadowy billionaires hiding in plain sight. The illusory boom has already impoverished the working class and the coming bust will invoke civil unrest, social chaos and war.
“Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump. The boom squanders through mal-investment scarce factors of production and reduces the stock available through overconsumption; its alleged blessings are paid for by impoverishment.” – Ludwig von Mises
Live by the Debt, Die by the Debt
“Credit expansion is the governments’ foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous.” – Ludwig von Mises
Abenomics may be benefitting corporate insiders, bankers and politicians, but not the working class or senior citizen savers. Real wages declined by 4.8% in December, the largest decline since 1998. As the Keynesians have implemented every Krugman recommendation for the last five years, real wages have relentlessly declined for 30 months in a row. But at least they have created double digit inflation in everyday living expenses like food and energy. The Japanese Misery Index (unemployment plus inflation) now stands at levels last seen in 1981. Mission accomplished Abe.
The Japanese housing market has plunged to 2009 levels despite 35 year mortgage rates being cut in half since 2009. If borrowing at 1.56% for 35 years can’t revive their housing market, maybe they should just give the houses away. With a rapidly aging population, middle aged workers seeing their real wages falling, and less young people entering the workforce, the Japanese housing market is DOA at any interest rate.
As Goes Japan, So Goes the World
Japan just happens to be ahead of the curve on the path to collapse. Europe isn’t far behind. In a shocking turn of events, it seems a bad debt problem cannot be solved by issuing more bad debt. The country which kicked off the EU financial crisis and their round of credit expansion – Greece – is imploding again. Greece, with a 26% unemployment rate, government debt to GDP of 175%, a budget deficit equal to 12% of GDP, and incapable of making their debt payments, had 3 year bonds yielding just over 3% in September. Today they yield 12%. I wonder who invested in Greek bonds at 3%. The Greek stock market had gone up by 170% since mid-2012 because their future was so bright. It has now fallen by 60% in the last nine months. Greece was a basket case bankrupt country in 2012. It is more bankrupt today. The mal-investment in Greece, aided and abetted by Goldman Sachs, created a false boom that is going bust. When it inevitably collapses it will take down many European banks and plunge Europe into depression.
With Japan in a depression, Europe in a recession, China experiencing a slow motion real estate collapse, Russia headed into recession, Brazil in recession, and all Middle East oil producing countries ($500 billion decrease in oil revenues in 2015) headed south, the U.S. is the prettiest horse in the glue factory. You can ignore the dramatic flattening of the yield curve and the plunge in 10 year treasury yields from 3% to 2.1% over the course of 2014. We’ve got Obamacare spending and military spending to pump up our GDP and the Federal Reserve to pump up our stock market. Mortgage applications at 15 year lows, new home sales at previous recession lows, real median household income 9% lower than 2008, 19% of all households on food stamps, real unemployment exceeding 15%, and the real nasty aspects of Obamacare about to hammer businesses and individuals, all add up to a fantastic year ahead for our welfare/warfare empire of debt.
The global economy is imploding. Stock markets do not reflect the economic circumstances of the average person in Asia, Europe or the U.S. Governments across the globe have been captured by banking, corporate and military interests. They have used their power to subsidize rich elite oligarchs at the expense of the common people. Their weapons have been debt, control of interest rates, ability to rig stock, bond and currency markets, and media propaganda to convince the masses these criminal actions have actually benefited them. The people are beginning to realize government is not their friend. Trusting the government to solve the problems they created which led to the 2008 worldwide financial collapse, is insane. They have saved their .1% benefactors, while impoverishing billions. Now that their “solutions” are failing again, they will use real weapons wielded by soldiers, police and prison guards to enforce their decrees and self-serving laws. The year of consequences may have finally arrived. The people versus their governments is crystallizing as the impending chaotic clash which will turn violent, bloody and vicious. Your freedom will depend upon the outcome.
“It is important to remember that government interference always means either violent action or the threat of such action. The funds that a government spends for whatever purposes are levied by taxation. And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know that any disobedience or resistance is hopeless. As long as this is the state of affairs, the government is able to collect the money that it wants to spend. Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.” – Ludwig von Mises
Full article: Sayonara Global Economy (Zero Hedge)