Wednesday, November 19, 2014

From Pope Francis to Warren Buffett; Warnings of Global Economic Collapse

Add me to that list, although I am arguably less well known. Since 2008 I have been writing that the world economy has yet to fall off the edge of the table. Now, that argument is gaining traction, but only in private conversations and even there it’s precious little comfort.

Recovery (if one even dares use that term) has been restricted to the gamblers…always a sign of havoc to come. Commodities (set off by weakness in all other sectors) seemed the only game left for the enormous tide of money seeking a place to profit. The Dow soared as wages dropped and another bubble is set to pop. The logical mind would assume that a consumer society must have consumers, but we chose to hang them out to dry. Wal-Mart, Tesco, McDonalds and down-line retailers are all against the wall, as buyers were given little choice but to turn to debt as a life-style.

With Mr. and Mrs. Everyman hard up and struggling, it’s no surprise that what we falsely labeled as ‘growth’ and ‘recovery’ is proving unsustainable. The ears of those whistling past the graveyard refused to hear the well-founded populist message of Elizabeth Warren. It was (and remains) an early-warning that is fast becoming a too-late truth. Whether heard or not, the tree still falls in the forest.

I have long held that the Federal Reserve threw its trillions in ‘quantitative easing’ in the wrong direction—paying down bank and investment fraud, while leaving the public to stew in an increasingly thin broth. Europe did the same, but later and more timidly. The whole experiment was purposefully clouded by language, inventing a new term instead of calling it what it was--bailing out greed so the greedy could go back to the tables for another round of chicanery.

What goes round comes round and the result was clear for those who had any degree of judgment and paying the least bit of attention.

The banks, the investment community, the Congress, press, media and its assorted pundits eagerly climbed on board, cheering the chimera of recovery as actual fact. Europeans are less easily flim-flammed and have known the EU was in deep and long-term trouble. Even so, their bankers drank the same Kool Aid and will fall as the world economy collapses.

Two bubbles have burst, in both commodities and tech markets. George Monbiot of Britain’s Guardian newspaper reports,
“China now resembles the US in 2007. Domestic bank loans have risen 40% since 2008, while “the ability to repay that debt has deteriorated dramatically”. Property prices are falling and the companies that run China’s shadow banking system provide “virtually no disclosure” of their liabilities. Just two days ago the G20 leaders announced that growth in China “is robust and is becoming more sustainable”. You can judge the value of their assurances for yourself.”

I don’t know how ‘yourself’ values those assurances, but ‘myself’ heard exactly those words from Alan Greenspan and the Harvard Business Review (billing itself as Ideas and Advice for Leaders) just prior to the 2007 blowout. The unreliable but undeniable Harvard Business Boys missed both 1929 and 2007 by unprecedented yardage and hail-Mary long passes, overthrown into the end zone. Yet a Harvard MBA is still purported to mean something other than Masters of Bullshit Anonymous.

Go figure.

Flying blind and taking the world for a ride, one might expect something more valuable and insightful to result from the G20 leaders than to shun and embarrass Vladimir Putin. The Group of Twenty may posit themselves as an international forum for the governments and central bank governors from 20 major economies, but judging from the above statement they clearly have their collective heads up their collective asses.

Quite clearly, Warren and the Pope were not on the guest list.

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