– Saturn Devouring His Son (image above) is the name given to a painting by Spanish artist Francisco Goya. It depicts the Greek myth of the Titan Cronus, who, fearing that he would be overthrown by one of his children, ate each one upon their birth.
Deny it all you want, but the global economy appears to be headed into recession. It became clear the cycle had started to turn once the FAANG stock bubble popped and the U.S. stock market plunged 20% late last year. The optimists among us insist this is merely a growth scare or blip as we saw in 2016, but that scenario looks increasingly unlikely.
As usual, the bond market tends to give us signals before more obvious evidence emerges. As such, I received a lot of insight from the following tweet.
36% of the US yield curve is now inverted across 30-year to overnight rates!
It is just as high as it was at the start of the tech and housing busts.
This is not another 2016 soft landing scenario. Watch what the credit market is telling us. pic.twitter.com/VCISGvzqDk
— Otavio (Tavi) Costa (@TaviCosta) February 6, 2019
Moreover, we’re also starting to see hard evidence of a slowdown. Earlier today, the EU Commission slashed growth forecasts for the region, and bad data emerged from of Germany.
German December export orders fell 11% (YonY), lowest level since Oct, 2008 (just after Lehman crash). Yes,, SoKorea orders drop last year was canary. Now, Germany(&EU falling into RECESSION (along w/China&others), courtesy of @JeffSnider_AIP https://t.co/OO2oc0uZHI pic.twitter.com/fpq6WVi3Me
— Harald Malmgren (@Halsrethink) February 7, 2019
What I find most fascinating about all of this is how the U.S. stock market has gone vertical for the last six weeks based on the idea the Federal Reserve can come in and save the day, yet the Fed hasn’t committed to doing anything at this point. As such, the market seems to be pricing in very little risk of a full-blown recession, an event that seems more likely over the next twelve months than at any point in the past decade.
From what I can tell, nobody wants to actually consider the prospect of a global recession because establishment institutions and the status quo paradigm simply can’t handle one. This is because nothing structurally changed in the aftermath of the last one.
The biggest consequence of central bank and government policy following the financial crisis of ten years ago was that the already rich and powerful became even wealthier and more powerful. As state-sponsored inequality boomed, significant portions of the global population finally realized the whole thing is a rigged sham, and populist movements swept the globe.
As I’ve said time and time again, humanity is currently living in the midst of the largest global debt bubble in human history, and nothing’s improved on that front since the last crisis. In fact, the situation has gotten demonstrably worse.
There has been no deleveraging pic.twitter.com/EWDEnIF5hP
— THE LONG VIEW ⚫️ (@HayekAndKeynes) February 4, 2019
The reason I’ve become so focused on the economic cycle is because we’re already in the middle of a revolutionary/populist political cycle, which began in earnest with the Brexit vote in mid-2016 and the election of Donald Trump later that year. More recently, we’ve seen populists win in Italy and the blossoming of an impressively sustained and very determined Yellow Vests movement in France.
All of this political energy is a direct consequence of central bank policy, entrenched oligarchy and government corruption. We’re now at the point where significant percentages of the population in countries around the world want to metaphorically burn the whole thing down. Once the economic cycle kicks in and joins the political cycle already underway, then you’ll see the real fireworks.
The other night my wife and I watched the late, great Anthony Bourdain’s Parts Unknown visit to Pittsburgh. In describing the motivations behind pro-Trump voters in the region, the mayor of Braddock, Pennsylvania said a local explained the prevailing sentiment to him in the following way:
“If the economy’s not gonna work for me, then I don’t want it to work for anybody.”
That perfectly sums up the situation in many regions of the U.S., and it’s also why the Fed can’t do what it did the last time around. While many Americans were against the bailouts a decade ago, we now have ten years of evidence to examine how it all played out — and the results aren’t pretty.
Most troubling is we have an entire generation of young people saddled with massive piles of student loan debt who can’t buy homes or start families due to financial circumstances. Meanwhile, American life expectancy has been dropping for three years in a row, and birth rates are at a thirty year low. This does not paint the picture of a prosperous, healthy, and functioning society.
An entrenched system hangs on until you get revolution, collapse or both.
Welcome to the next 5 years.— Michael Krieger (@LibertyBlitz) February 7, 2019
When it comes to “the system” as it pertains to the U.S., I can think of several key things I expect to change radically by 2025:
- U.S. dominance of the global financial system and the USD as sole and indispensable global reserve currency will end.
- Unipolar geopolitical world order through which the U.S. empire and its military beats all non-client states into submission one way or the other will end. Multi-polar world order to emerge.
- Death of the neocon and neoliberal political consensus, both domestically and in the realm of foreign policy.
- Peak Corporatism — Populist politics on both the right and left will unite around the idea that corporations are too powerful and harm competition. Tech giants, banks, etc, will finally be put in their place one way or the other.
- Massive Spending — Populism + recession = massive government spending. Everyone will talk about how we have unlimited funds to bailout banks and start wars, but no money to actually help people and improve infrastructure. This will resonate with most people.
These are just a few of the very big picture changes I foresee, and they can happen a lot faster than people realize, particularly once the economy tanks. I think many expect the status quo to survive the next downturn and consolidate power and wealth even more, like they did the last time around. On this point I strongly take the other side. The status quo and its institutions will not survive the next turn of the cycle. Beyond that, it’s still anyone’s guess as to what emerges on the other side.
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loss of global dollar supremacy would certainly end a lot of denial including manifest destiny
viva la venezuela! and south americans regaining some of their original territory?
if Climate gives the world time
Thank you for your latest post Michael. You are not the only one saying that we are heading into a global recession. Charles Hugh Smith and John Williams are saying the same thing. That is very good company.
Worst case scenario: WW3 (Unfortunately, I do not expect the US to react to the loss of its empire as meekly as the USSR did).
Best case scenario: The empire collapses and the U.S. becomes an openly fascist state in the urban areas with many rural areas becoming completely lawless and essentially governed by militia groups.
No–it isn’t going to be pretty.
Just in time for the collapse phase of the psycho-policital cycle according to psycho-history.
1st year strong phase: Trump draining the swamp, deal maker, trump economy boom. Or Obama’s messiah phase.
2nd year cracking phase: Some more doubts appearing if Trump will be able to win against the opposition. Stock market sideways.
Next 6 months-2y: Collapse phase. Stock market down. Trump is too weak to win against the swamp.
After that: Upheaval phase: Fight against the identified evil enemy. Depending on the enemy this is where war can break out.
See here:
https://psychohistory.com/books/foundations-of-psychohistory/chapter-7-the-fetal-origins-of-history/
As for war itself and how cultural progress happens see here:
https://psychohistory.com/books/the-origins-of-war-in-child-abuse/
If only Trump were trying to drain the swamp, instead of being the bankster/MIC shill he is…
Fractional banking & never ending government borrowing has dealt itself it’s final losing hand . Intresting aspect to all this is now we are supposed to step in and save the rich ???
I don’t think so .. corrupt corporations, politicians,and bankers will reap the whirlwind, you’ll see .
I think the underlying conceptual issues go much deeper than current economic and political corruption.
As mobile organisms, we evolved a sequential thought process, in order to navigate the environment. Along with the narrative storytelling that is the basis of civilization, we view time as the present moving past to future and assume there is some ideal destination to it all, from moral purity, to great wealth. Yet time is an effect of change turning future to past. Potential, actual, residual. It’s an effect, similar to temperature, pressure, color, frequency, etc.
Nature cares little for our assumptions and desires and primarily functions as a balance and tension between polarities. Essentially thermodynamics. Galaxies are cycles of energy radiating out, as mass and form coalesce in.
Since we have reached the edge of our petri dish, our religions and cultures will have to transition from an ideals based linearity, to more of a yin/yang circularity.
As for religion, the fallacy of monotheism is that a spiritual absolute would be the essence of sentience, from which we rise, not an ideal of wisdom and judgement, from which we fell. More the new born, than the wise old man. This top down father figure lawgiver and his Ten Commandments gave us the Divine right of Kings as the political model for the next 1500 years.
The last point is that money is the contract enabling mass societies to function, not just a commodity to mine from society. It’s a medium of exchange, not a store of value.
In the body, blood is the medium and fat is the store, or for cars, roads are the medium and parking lots are the store. We own money like we own the section of the road we are on, as it’s functionality is in its fungibility.
Capitalism has mutated from the efficient transfer of value to the manufacture of money as an end in itself. Much of which is stored as government debt, vastly motivating public corruption.
Our tools become our gods.
We need to store value in strong communities and healthy environments. As it is now, we have atomized societies, mediated and thus taxed by finance. It really is the Matrix .
As the executive and regulatory function, government is the central nervous system of society. Finance is the circulation system. Currently finance is having its Marie Antoinette moment. It’s like the heart telling the hands and feet they don’t need so much blood and should work harder for what they do get.
As monarchy came to realize, it is a two way street. They serve, if they want to be served.
That´s some good thoughts and perspectives.
Is not the frenetic new moralism blossoming especially with the left just a desperate, and doomed to fail, attempt for a new religious basis? What other force can be strong enough to produce stupidity on such a massive scale?
And the cryptos that was going to liberate us, have they not adapted completely into the same pattern of thought as the existing dysfunctional ideas of money?
I would like to agree with your assessment. But it will take a violent revolution to wrest power from the bankers and I just don’t think US people have it in them. Many unemployed types join the military and they wouldn’t want to lose their jobs
For the majority of people alive today in the western world some great shock is required to show up the delusions of just continuing on the same path of seemingly least resistance.- More QE, AOC “free everything for everyone” at no cost to anyone.
What that urgently needed shock is? We all hope it will not be too shocking. Financial collapse? Yellow Vest uprising? Chaos, war, and hardship elsewhere? Chaos, war, and hardship HERE!!!
Some say the latter is already the case, only not officially declared. Maybe it’s just not shocking enough yet.
Whether we call the current economic environment hyper-inflation or hyper- debt; it is all the same thing. We are slowly getting poorer. The limiting factor is resources. At some point there will be shortages of resources which will send tremors through the economic system.
This wisdom from the great writer Tom Robbins is even more relevant today due to Bitcoin and other crypto currencies:
“Whenever a state or an individual cited ‘insufficient funds’ as an excuse for neglecting this important thing or that, it was indicative of the extent to which reality had been distorted by the abstract lens of wealth. During periods of so-called economic depression, for example, societies suffered for want of all manner of essential goods, yet investigation almost invariably disclosed that there were plenty of goods available. Plenty of coal in the ground, corn in the fields, wool on the sheep. What was missing was not materials but an abstract unit of measurement called ‘money.’ It was akin to a starving woman with a sweet tooth lamenting that she couldn’t bake a cake because she didn’t have any ounces. She had butter, flour, eggs, milk, and sugar, she just didn’t have any ounces, any pinches, any pints. The loony legacy of money was that the arithmetic by which things were measured had become more valuable than the things themselves.”
― Tom Robbins (“Skinny Legs and All”)
Michael is absolutely bang-on with his analysis and I agree with all he says and projects. My book, ‘The Financial Jigsaw’ describes the senarios about to play out this year and next and explains much more about our dysfunctional global economy and financial system.
A pdf of the manuscript is available free on request to: [email protected]
I like the analysis, but my own thinking is that the U.S. will persist in its denial of “a debt problem”, and continue to fund the Pentagon its 750 Billion dollar yearly budgets. And we will go on fighting endless wars to spend those billions and build more bases. It won’t be until the dollar is utterly eviscerated that things will change. The Pentagon/Oligarchy will not care that citizens suffer, as long as they have their money and their wars – the Pentagon’s real game is – maintain the funding.
Ok, let’s say this scenario as described is spot-on:
The entire global financial system buoyed by the hegemony of the petrodollar is teetering precariously on twisted stilts above the abyss of global economic depression, with socialist amnesiacs poised to surf a wave of populism onto the beaches of totalitarian despotism, riding a plank embossed with “Eat the Rich” painted garishly in rainbow colors,.
In the process, the current Powers That Be (who, I will remind you, have started and won 2 world wars while taking the world from kerosene lighting to near instantaneous data transfer worldwide at near-zero cost to the end-user, all in the last 100 years, splitting the atom along the way) will prove utterly impotent to stand against or adapt to the righteous wrath “of the people” they have previously dominated since the dawn of time.
Let’s say that’s 100% really going to happen.
How do you play that TODAY?
What actions do you take, TODAY, to prepare for such an event?
Short the market? Market is gonna be gone and dollars will be worthless.
Stockpile ammo and lentils in your backyard bunker? OK, just don’t tell anyone you’re doing it.
Stack gold bullion in your basement? Go for it, just don’t tell anyone you’re doing it.
Bullet to the head? Logical, but pussy.
Now let’s say there is a 75% chance of that happening, in your lifetime… how do you play THAT today?
Short the entire financial market? If you win, you still get nothing.
Build a bunker and stockpile ammo and lentils? Again, quite an allocation of current resources but at least you can eat those lentils and go plinking if you’re wrong.
Stack bullion? Still doable. But those nasty bankers sure are good at using their fiat to suppress the price of hard assets traded on a futures exchange.
Bullet to the head? You’re just a pessimist.
Now let’s say there is only a 50% chance of that happening.
All of the options above are looking ridiculous now, yes?
So why not just assume that shit ain’t gonna happen and rely on your benevolent rulers to keep up the good job and take us the rest of the way?
If you look at the actual tape, things have gone pretty well for the vast, vast majority of the population of the planet.
Appreciating your work, thank you for the energy of tracking, categorizing…haha…doing proper journalism for the people.
https://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf
https://www.youtube.com/watch?v=6v9Q4xukS3s
Namaste,
Stacey Abend