“Rarely have so many large economies been so ill-equipped to manage a recession” and “the next bust will be unlike any other”
Yes, the clock’s ticking louder, louder, warns the Economist, “only a matter of time before the next recession strikes.” Unfortunately, the “rich world is not ready.” America’s not prepared. You are not ready.
Get it? America’s 95 million investors are at huge risk. Remember the $10 trillion losses in the crash and recession of 2007-2009? The $8 trillion lost after the dot-com technology crash and recession of 2000-2003? This is the third big recession of the century. Yes, America will lose trillions again.
Especially with dead-ahead predictions like Mark Cook’s 4,000-point Dow correction. And Jeremy Grantham’s warning of a 50% crash around election time, with negative stock returns through the first term of the next president, beyond 2020. Starting soon.
Why is America so vulnerable when the next recession hits? Simple: The Fed’s cheap-money giveaway is killing America. When the downturn / correction / crash hits, it will compare to the 2008 crash. The Economist warns: “the world will be in a rotten position to do much about it. Rarely have so many large economies been so ill-equipped to manage a recession,” whatever the trigger.
With today’s near-zero interest rates, our Fed and central banks worldwide have little “wiggle room” to add more monetary stimulus. And even if Congress decided to act on the much needed, highly effective “growth boosting investment in infrastructure,” today’s zero interest makes it impossible “to launch a big fiscal stimulus.”
No wonder Grantham says the “next bust will be unlike any other.” The Fed and central banks worldwide have taken on all this leverage that was out there and put it on their balance sheets,” giving trillions to the top 1%, the world’s 1,826 billionaires, accelerating the inequality gap and fueling a new people’s revolution.
Investors unprepared for 50% stock market losses dead ahead
Meanwhile, distractions are everywhere: It’s not just happy talk about a roaring bull market in tech, a modest recovery, GDP growth topping 2%. Rather it’s the relentless buzz on America’s 24/7 media choking the American mind with trivia.
One: The bizarre presidential primaries featuring the carnival barker of the Trump Casinos gambling against the Koch Bros, the owner of the Vegas Sands and 15 other contestants in their wild-card game of “Political Jeopardy” being played for control of the GOP brand (but no regard for the will of the American people).
Two: Another soap opera is the historic morality war with Pope Francis and billions of revolutionaries pitted against the 19th century Grand Climate Science Denying Fossil Fuel Conspiracy of Big Oil and the GOP. And both these soaps are almost as much fun as “Jurassic World,” Nascar racing and the network daytime soaps combined.
Then of course there’s all the Clash of the Titans between two political dynasties, the heir apparent of the Bush crown versus the Clintons for the right to take over as titular head of a tenuous global anarchy of 1,826 billionaires, 67 of whom own half the assets of the entire world, the one percent whom politicians bow to more than the other 99% of America’s citizens.
Yes, with 95 million average investors risking it all in the volatile Wall Street casino, it’s virtually impossible for any normal folks to concentrate on the ticking time bomb that’s warning of a recession dead ahead … when the bubble pops and the bear takes over the economy … because it really is “only a matter of time,” as the Economist keeps warning that the “rich world,” the Fed, Congress, all America really is not ready for a new recession … and neither are you.
America is its own enemy, trapped in new irrational exuberance
What’s even more disturbing than the near certainty of Grantham, Cook and the Economist in the dark predictions is what’s driving them: America’s self-delusional narcissism, overoptimism and irrational exuberance from the happy-talking bulls, which sets us up for huge losses, as in the recessions of 2000-2003 and 2007-2009, with trillions in lost market cap.
Individually and collectively, whether Washington, Corporate America, Silicon Valley or Main Street, most Americans secretly believe in the American Dream, at least for themselves, perpetual opportunity, perpetual growth, perpetual prosperity. When we surveyed Wall Street years ago we found a 93% bias toward positive thinking, and a tendency to ignore or substantially discount bearish signals, to “accentuate the positive, minimize the negative.”
This behavioral tendency puts individual investors, stock markets, even nations at great risk. Harvard financial historian Niall Ferguson, author of “Colossus: The Rise and Fall of the American Empire,” asked rhetorically in a Los Angeles Times column:
“America, a Fragile Empire: Here today, gone tomorrow … could the United States fall that fast?” Yes. America could fall very, very fast, triggering an economic collapse with losses in trillions, the historic game-changer demanding a political course correction, like the 1908 antitrust laws, the 1932 banking and securities laws … or today’s massive takeover of American government by an anarchistic oligarchy of superrich billionaires.
Next crash, an ‘accelerating sports car … a thief in the night!’
The point, it’s sudden, fast, and you won’t see it coming. Nor will America’s leaders. Unprepared, says the Economist, unable to act in time to avoid the recession dead ahead.
Says Ferguson, “for centuries, historians, political theorists, anthropologists and the public have tended to think about the political process in seasonal, cyclical terms … we discern a rhythm to history. Great powers, like great men, are born, rise, reign and then gradually wane.”
In that scenario, “whether civilizations decline culturally, economically or ecologically, their downfalls are protracted.” We believe “the challenges that face the United States are often represented as slow-burning … threats seem very remote.”
“But what if history is not cyclical and slow-moving but arrhythmic?” What if history is “also capable of accelerating suddenly, like a sports car? What if collapse does not arrive over a number of centuries but comes suddenly, like a thief in the night?”
What if the collapse of our great capitalist world is dead ahead, in the next decade? What if we’re so deep in denial, we are totally unprepared, thanks to today’s zero-interest Fed policy? Yes, you’ve been forewarned: America, and you, are in a loud, rapid countdown to another crash and recession and negative returns till 2020 … tick … tick … tick …
[by Paul B. Farrell, writing for MARKETWATCH]
As always, posted for your edification and enlightenment by
NORM ‘n’ AL, Minneapolis