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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Commentary Of The Month
October 13, 2015
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DANGEROUS ACCOMMODATION

By David Stockman

With every passing week that money market rates remain pinned to zero by the Fed, the magnitude of the financial catastrophe hurtling toward Main Street America intensifies. That’s because 80 months – and counting – of zero interest rates are fueling the most stupendous gambling frenzy that Wall Street has ever witnessed or even imagined. Sooner or later, therefore, this mother of all financial bubbles will splatter, bringing untold harm to millions of households which have been lured back into the casino.

The household sector is stranded at “peak debt” and, consequently, there is no interest rate low enough to elicit a spree of consumer borrowing and spending. On the eve of the financial crisis in Q1 2008, total household debt outstanding – including mortgages, credit cards, auto loans, student loans and the rest – was $13.957 trillion. That compare to $13.568 trillion outstanding at the end of Q1 2015.  That’s right. After 80 months of ZIRP and an unprecedented incentive to borrow and spend, households have actually liquidated nearly $400 billion or 3% of their pre-crisis debt.

Accordingly, after 80 months of showering Wall Street with what is a wholly unnatural and perverse financial windfall – that is, zero cost in the money market – the Fed has ignited a rip-roaring inflation. But the inflation is in the financial market, not the supermarket.

So with academia on its payroll and Wall Street on its gift list, there is no one left to state the obvious. Namely, that by fueling the most fantastic inflation of financial assets in world history the Fed and its convoy of global central banks have sown its opposite in the main street economy. To wit, there is now a massive deflationary tidal wave cresting on the planet, and it was manufactured entirely by the central banks. Consumers and governments are stranded at “peak debt” and can no longer live beyond their means by leveraging their balance sheets to the breaking point, as they did in the 30 years leading to the financial crisis.

As a consequence, the world economy is drowning in malinvestment and excess capacity for virtually every commodity from oil to iron ore and for every stage of downstream industrial production from refineries to blast furnaces, pipe and tube mills, ship-building facilities, car plants and container ships, ports and warehouses.  Moreover, two decades of lunatic money printing have also drastically roiled the global capital and currency markets.  During the last 20 years of financial inflation, the Keynesian central bankers have forced world money managers to scour the globe looking for yield regardless of risk – a toxic form of malinvestment which is now violently reversing.