2018’s valuation records are astounding in that they show the S&P 500 to be more fundamentally over-valued than it was at the prior two historic stock market valuation peaks in 1929 and 2000, bona fide speculative manias.
– From Crescat Capital’s recent investor letter
Cycles are perhaps the most natural and common occurrence in the universe. The planets orbit the sun, seasons change, day turns to night and night back to day, humans are born, grow old and die.
Some of these cycles are more pleasant to think about than others, but their consistent occurrence remains factually unassailable. Indeed, it could be said that a human life itself consists of an endless series of encounters with various cycles. Cycles of the natural world and cycles created by humans themselves. Human created cycles are the focal point of today’s piece.
I’ve been writing a lot about cycles over the past few months since it’s become increasingly clear that the artificial economic cycle we’ve been living in for about a decade is on its last leg. In order to understand how significant this is, it’s important to recap what the last ten years actually represented.
It didn’t represent a healthy economic growth cycle, but rather an insanely irresponsible, and arguably criminal, manufactured bubble boom where central banks printed enormous amounts of money to inflate asset prices like stocks, bonds and real estate. In this deranged mission they succeeded, but at a great cost to social stability.
5/ To narrow it down even further, it wasn't just very rich boomers, it was very rich boomer financial types. They love stocks, bonds and real estate even more than the average boomer. So they went nuts.
— Michael Krieger (@LibertyBlitz) January 18, 2019
While many still attempt to deny it, any honest assessment of the post-crisis response will conclude that government and central bank policy helped further enrich the people who needed help the least. As such, we’re now sitting on wealth concentration in America at the highest levels since right before the Great Depression.
In 1929 — before Wall Street’s crash unleashed the Great Depression — the top 0.1% richest adults’ share of total household wealth was close to 25%, according to Zucman’s paper, which was distributed by the National Bureau of Economic Research.
Those rates plunged in the early 1930s and continued dropping to below 10% in the late 1970s, findings show. Rates have been on the rebound since the early 1980s, and are currently close to 20%.
Other researchers have also drawn parallels between the present and the past. The Economic Policy Institute, a left-leaning Washington D.C. think tank, estimates that America’s top-earning 1% took in 22% of all national income. The organization said in 1928, 23.9% of the country’s income went to the top 1%.
The average person may not be able to describe in detail how the financial system works, but it hasn’t been lost on the masses that the bailouts and subsequent bubble driven recovery benefitted a particular segment of the population far more than others. This understanding has led to a surge in populism throughout the developed world.
While those with their heads in the sand try to blame Russia or racism for Trump’s election, what created the fertile political ground for that to happen was the corrupt and deceitful response to the financial crisis. As such, we’re now several years into a populist political cycle that shows no signs of dissipating, and the economic cycle should be joining it shortly.
Equally significant is the generational cycle. Birth rates are at a 30-year low in part because millennials are too broke and in debt to buy homes and start a family. This is now the largest voting bloc in American politics, and I highly doubt they’ll just sit around and continue to get systemically fleeced well into their 30s. This is why socialism is becoming popular.
Socialism for the rich has worked so well in the United States that now the poor want it too!
— Chris Carolan $=1/∞ (@spiralcal) February 11, 2019
The point I’m trying to make is we have a whole bunch of major cycles all at key inflection points simultaneously colliding with each other, yet the consensus view seems to be that the status quo’s just gonna continue along as it has in the past.
It won’t. The next few years will change everything.
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Mike, consider getting a lightning node/wallet and accepting $1 donations as well as BTC. Fees are less and folks love spending lightning. Thanks for all you do…
Comming soon to a street / city near you !!
As mobile organisms we evolved a sequential thought process in order to navigate the environment. Which has been attenuated by narrating our journeys to each other and building civilizations out of the cumulative knowledge.
So we think this process of the point of the present, moving past to future, is fundamental. Even Physics codifies it as measures of duration.
The reality is that action/change turns future to past. Potential, actual, residual. Tomorrow becomes yesterday, because the earth turns.
Duration is the present, dynamic state, as events form and dissolve.
So time is an effect, like temperature, pressure, color, etc. There is no dimension of space, because the present consumes the past, in order to be informed by it. Causality and conservation of energy .
So as mobile organism, we think we are going somewhere and have this ideals based culture, where if some of anything is good, more must be better, but nature is all about the feedback.
Even galaxies are cosmic convection cycles. Energy out, form/mass in.
Just as we are driven by the energy processed by the gut and heart, while the brain sorts through the information .Motor and steering.
If this wave left you in its wake, watch for the next. It will be even bigger.
Correction: no dimension of time.
Although not funny for decades, this topic is too easy. Practically writes itself, one could spend hrs on the matter – https://youtu.be/ATTMB4gH3sU
It will be interesting to watch what happens to and with the American economy. The dollar is still a strong world wide medium of exchange, which allows the U.S. to “do what it wants”. And we continue to give the Pentagon, what will amount to 1.466 trillion for this year and the last – this puts it in scale.. They will of course fight to maintain that level of funding should things go South. And we will suffer for that.
Excellent article yet again Brandon. What do you think about this:
I do wish that commentators would correct the erroneous IMF real GDP figures:
“…..the pace of real global GDP growth: 3.7 percent according to IMF data),”
I have written a book about this and much more on how the fraudulent statistics completely distort these economic models – a free pdf of my manuscript is available on request to: [email protected]
We all wonder why the 95% have not benefitted from increased incomes over these last 30 years and wealth disparity is massive too, not to mention the lack of productivity which is confounding economists.
The answer for me is simple: There has been no growth in GDP for at least since 2008 and in fact it has been negative – we are all getting poorer and everybody knows this in their hearts which is why they are confused. And it’s not difficult to prove. Nominal GDP is reduced by the ‘deflator’ – the rate of inflation in a given period.
The problem is that inflation is very difficult to measure and the best approximation I have found is John Williams at: http://www.shadowstats.com/alternate_data/inflation-charts and
http://www.shadowstats.com/alternate_data/gross-domestic-product-charts
If you study these two charts you will find that USA has been in recession ever since 2000! This explains a lot about what’s taking place in the real economy. Labour stats too are grossly misreported We have 20% unemployment if measured in truth – depression levels!
http://www.shadowstats.com/alternate_data/unemployment-charts
Peter, who is this Brandon you are talking about?
Opps sorry Michael, I was on another blog and forgot to change gears! Please forgive :-)))
@Michael- forget it, he’s rolling.
I’m not a Millennial, but I like the part about them not getting screwed indefinitely. People like AOC are inevitable when a system disproportionately benefits the 60+ crowd. When you consider that they benefited from a certain type of socialism, the Chris Carolan quote seems particularly apt.
And yes, post-TARP America has been completely bonkers. Such rampant inequality can only lead to strife.
I’m not convinced that the Millennials are really turning to socialism. If they are, why have Cortez and Sanders issued only mealy-mouthed proclamations about Trump’s Venezuelan coup? For his part, Sanders has always been a pretty stalwart supporter of the Empire. It seems like the Millennials are less interested in economic justice for all (including the right of foreign countries to forge their own path free of American interference), but just want the system to work better for THEM the way it has for rich Boomers and to a lesser degree, Gen-X’ers.
The crimes of the empire against foreign nations and the economic crimes of the rich and their corrupt political cronies here at home are two sides of the same coin. You can’t stop one without stopping the other. While I agree that the bailouts helped create the political climate that led to Trump, the current wave of distrust and resentment really began with the Iraq War (don’t forget that Trump first caught fire in the Republican primaries by daring to call that war a mistake). Either of of those two events would have dealt a crippling blow to the legitimacy of America’s ruling elites. Together, they are devastating.
I congratulate Michael for his actions to suit his always interesting words, re getting rid of adds revenue and discussing the dubious value of “chasing clicks”. True freedom is in some respects necessarily a solitary undertaking, or at least there is no such thing as collective granted freedom.