Premium Archives
by
Chris Martenson
Executive Summary
- Desperate central banks are dangerous central banks
- Why wealth disparity will get worse
- The list of what comes next as central banks lose control
- What you should do in advance
If you have not yet read When This Ends, Everybody Gets Hurt available free to all readers, please click here to read it first.
What’s really happened since 2008 is that central banks decided that a little more printing with the possibility of future pain was preferable to immediate pain. Behavioral economics tells us that this is exactly the decision we should always expect from humans. History says as much, too.
It’s just how people are wired. We’ll almost always take immediate gratification over deferred, and similarly choose to defer consequences into the future, especially if there’s even a ridiculously slight chance they won’t materialize.
So instead of noting back in 2008 that it was unwise to have been borrowing at twice the rate of our income growth for the past several decades — which would have required a lot of very painful belt-tightening — the decision was made to ‘repair the credit markets’ which is code speak for: ‘keep doing the same thing that got us in trouble in the first place.’
Also known as the ‘kick the can down the road’ strategy, the hoped-for saving grace was always a rapid resumption of organic economic growth. That’s how the central bankers rationalized their actions. They said that saving the banks and markets today was imperative, and that eventually growth would return, justifying all of the new debt layered on to paper-over the current problems.
Of course, they never explained what would happen if that growth did not return. And that’s because the whole plan falls apart without really robust growth to pay for it all.
And by ‘fall apart’ I mean utter wreckage of the bond and equity markets, along with massive institutional and sovereign defaults. That was always the risk, and now we’re at the point where…
The Consequences Playbook
PREVIEW by Chris MartensonExecutive Summary
- Desperate central banks are dangerous central banks
- Why wealth disparity will get worse
- The list of what comes next as central banks lose control
- What you should do in advance
If you have not yet read When This Ends, Everybody Gets Hurt available free to all readers, please click here to read it first.
What’s really happened since 2008 is that central banks decided that a little more printing with the possibility of future pain was preferable to immediate pain. Behavioral economics tells us that this is exactly the decision we should always expect from humans. History says as much, too.
It’s just how people are wired. We’ll almost always take immediate gratification over deferred, and similarly choose to defer consequences into the future, especially if there’s even a ridiculously slight chance they won’t materialize.
So instead of noting back in 2008 that it was unwise to have been borrowing at twice the rate of our income growth for the past several decades — which would have required a lot of very painful belt-tightening — the decision was made to ‘repair the credit markets’ which is code speak for: ‘keep doing the same thing that got us in trouble in the first place.’
Also known as the ‘kick the can down the road’ strategy, the hoped-for saving grace was always a rapid resumption of organic economic growth. That’s how the central bankers rationalized their actions. They said that saving the banks and markets today was imperative, and that eventually growth would return, justifying all of the new debt layered on to paper-over the current problems.
Of course, they never explained what would happen if that growth did not return. And that’s because the whole plan falls apart without really robust growth to pay for it all.
And by ‘fall apart’ I mean utter wreckage of the bond and equity markets, along with massive institutional and sovereign defaults. That was always the risk, and now we’re at the point where…
by
charleshughsmith
Executive Summary
- The 6 Factors
- Rising inequality
- Reversion to the mean
- Cost overages
- Diminishing returns
- Misleading measurement
- Expertise mismatch
- Why the 'success' of the Federal Reserve and other world central banks is ultimately dooming them to failure
If you have not yet read Why Our Central Planners Are Breeding Failure available free to all readers, please click here to read it first.
In Part 1, we examined a variety of reasons why the apparent success of Keynesian monetary and fiscal policy may be transitional and brief rather than permanent.
Here in Part 2, we delve into the six other dynamics that make success destabilizing.
Rising Inequality—Perceived and Real
The highly touted “recovery” has been highly uneven in its distribution. The benefits of rising income and wealth have flowed disproportionately to the top 5%, 1% and even 1/10th of 1%. Those who didn't make it onto the limited-seating Recovery Bus feel the gap between the prospects and wealth of the top tier and their own wealth and prospects widening. Indeed, psychological studies find that we assess our wealth and social position not by our actual material prosperity, but by the narrowing or widening of the perceived wealth gap with our peers.
This is precisely the situation in the U.S. and China. Both economies are supposedly expanding smartly, but the gains are concentrated in a relative few hands; the Rising Prosperity Bus has few seats. The vast majority perceive themselves as being left behind, and that is highly…
The 6 Reasons The Next Economic Rescue Will Fail
PREVIEW by charleshughsmithExecutive Summary
- The 6 Factors
- Rising inequality
- Reversion to the mean
- Cost overages
- Diminishing returns
- Misleading measurement
- Expertise mismatch
- Why the 'success' of the Federal Reserve and other world central banks is ultimately dooming them to failure
If you have not yet read Why Our Central Planners Are Breeding Failure available free to all readers, please click here to read it first.
In Part 1, we examined a variety of reasons why the apparent success of Keynesian monetary and fiscal policy may be transitional and brief rather than permanent.
Here in Part 2, we delve into the six other dynamics that make success destabilizing.
Rising Inequality—Perceived and Real
The highly touted “recovery” has been highly uneven in its distribution. The benefits of rising income and wealth have flowed disproportionately to the top 5%, 1% and even 1/10th of 1%. Those who didn't make it onto the limited-seating Recovery Bus feel the gap between the prospects and wealth of the top tier and their own wealth and prospects widening. Indeed, psychological studies find that we assess our wealth and social position not by our actual material prosperity, but by the narrowing or widening of the perceived wealth gap with our peers.
This is precisely the situation in the U.S. and China. Both economies are supposedly expanding smartly, but the gains are concentrated in a relative few hands; the Rising Prosperity Bus has few seats. The vast majority perceive themselves as being left behind, and that is highly…
by
Chris Martenson
Executive Summary
- The 'Perfect Storm' of woe being applied to Russia
- Why the West may end up hurt worse by its efforts than Russia is
- Russia's most likely set of responses, and their global implications
- Why are we willing to let our leaders play nuclear "Russian roulette", for stakes we don't agree with?
If you have not yet read The Road To War With Russia available free to all readers, please click here to read it first.
The Perfect Storm
Russia, like Venezuela and other oil exporting nations is facing a very large set of financial and economic problems as a result of the low oil prices.
Besides the loss of oil export revenues, there are associated hits to their local currencies and rising yields on their sovereign debt which raises the cost of borrowing money. This is a triple whammy and if it goes on long enough can lead to the outright default of the country on its debt, which is a hugely destabilizing moment.
Russia faces 'perfect storm' as reserves vanish and derivatives flash default warnings
Jan 6, 2015
Russia’s foreign reserves have dropped to the lowest level since the Lehman crisis and are vanishing at an unsustainable rate as the country struggles to defends the rouble against capital flight.
Central bank data show that a blitz of currency intervention depleted reserves by $26bn in the two weeks to December 26, the fastest pace of erosion since the crisis in Ukraine erupted early last year.
Credit defaults swaps (CDS) measuring bankruptcy risk for Russia spiked violently on Tuesday, surging by 100 basis points to 630, before falling back slightly.
Markit says this implies a 32pc expectation of a sovereign default over the next five years, the highest since Western sanctions and crumbling oil prices combined to cripple the Russian economy.
Total reserves have fallen from $511bn to $388bn in a year. The Kremlin has already committed a third of what remains to bolster the domestic economy in 2015, greatly reducing the amount that can be used to defend the rouble.
(Source)
It's clear that Russia is experiencing quite a bit of difficulty from all this, and as we saw above, they pin a lot of the troubles on a concerted effort by the west to bring about exactly the conditions that are troubling them.
However, left out of all the stories about Russia's relative difficulties is that fact that with oil's price slide there are winners and losers in every corner of the globe. In terms of the local impact based on the local currency Russia is the least impacted of them all because…
Why No One Should Want This To Devolve Further
PREVIEW by Chris MartensonExecutive Summary
- The 'Perfect Storm' of woe being applied to Russia
- Why the West may end up hurt worse by its efforts than Russia is
- Russia's most likely set of responses, and their global implications
- Why are we willing to let our leaders play nuclear "Russian roulette", for stakes we don't agree with?
If you have not yet read The Road To War With Russia available free to all readers, please click here to read it first.
The Perfect Storm
Russia, like Venezuela and other oil exporting nations is facing a very large set of financial and economic problems as a result of the low oil prices.
Besides the loss of oil export revenues, there are associated hits to their local currencies and rising yields on their sovereign debt which raises the cost of borrowing money. This is a triple whammy and if it goes on long enough can lead to the outright default of the country on its debt, which is a hugely destabilizing moment.
Russia faces 'perfect storm' as reserves vanish and derivatives flash default warnings
Jan 6, 2015
Russia’s foreign reserves have dropped to the lowest level since the Lehman crisis and are vanishing at an unsustainable rate as the country struggles to defends the rouble against capital flight.
Central bank data show that a blitz of currency intervention depleted reserves by $26bn in the two weeks to December 26, the fastest pace of erosion since the crisis in Ukraine erupted early last year.
Credit defaults swaps (CDS) measuring bankruptcy risk for Russia spiked violently on Tuesday, surging by 100 basis points to 630, before falling back slightly.
Markit says this implies a 32pc expectation of a sovereign default over the next five years, the highest since Western sanctions and crumbling oil prices combined to cripple the Russian economy.
Total reserves have fallen from $511bn to $388bn in a year. The Kremlin has already committed a third of what remains to bolster the domestic economy in 2015, greatly reducing the amount that can be used to defend the rouble.
(Source)
It's clear that Russia is experiencing quite a bit of difficulty from all this, and as we saw above, they pin a lot of the troubles on a concerted effort by the west to bring about exactly the conditions that are troubling them.
However, left out of all the stories about Russia's relative difficulties is that fact that with oil's price slide there are winners and losers in every corner of the globe. In terms of the local impact based on the local currency Russia is the least impacted of them all because…
by
charleshughsmith
Executive Summary
- The key requirements for being a word power
- Is the "superpower" model sustainable in today's age?
- The key ability to leverage resources
- Which country(ies) is most likely to dominate in this century?
If you have not yet read Who Will Be Tomorrow's Superpower? available free to all readers, please click here to read it first.
In Part 1, we surveyed the nature of power to explore the concept of superpowers. In this Part 2, we look at power as the ability to solve problems.
What Are the Available Resources?
Solving problems in the real world is not an abstract project, though abstract concepts may undergird the solutions. In the real world, we have to use whatever resources are available, with an eye on cost, scale and sustainability.
Alternative energy offers a useful example. Almost everyone agrees that alternatives to fossil fuels would be beneficial, but what is generally overlooked is the tiny scale of alternatives in the current scheme of things. Depending on what’s being included as alternative (hydropower, etc.), alternative energy sources currently comprise a few percentage points of total energy consumption.
To scale alternatives up to even 50% of current consumption will require not just a monumental amount of capital investment; it also requires the invention and manufacture of new systems of energy storage on an equally vast scale.
As has been noted many times, this capital investment includes an extended period of fossil fuels consumption, as we need huge amounts of energy to construct alternative sources and storage systems. Some have characterized this as building an aircraft in the air while keeping your current aircraft aloft.
As Peak Prosperity members know well, capital has a variety of forms, all of which work together: financial, intellectual, social, human, cultural and symbolic. All these forms of capital must be…
Who Will Dominate This Century?
PREVIEW by charleshughsmithExecutive Summary
- The key requirements for being a word power
- Is the "superpower" model sustainable in today's age?
- The key ability to leverage resources
- Which country(ies) is most likely to dominate in this century?
If you have not yet read Who Will Be Tomorrow's Superpower? available free to all readers, please click here to read it first.
In Part 1, we surveyed the nature of power to explore the concept of superpowers. In this Part 2, we look at power as the ability to solve problems.
What Are the Available Resources?
Solving problems in the real world is not an abstract project, though abstract concepts may undergird the solutions. In the real world, we have to use whatever resources are available, with an eye on cost, scale and sustainability.
Alternative energy offers a useful example. Almost everyone agrees that alternatives to fossil fuels would be beneficial, but what is generally overlooked is the tiny scale of alternatives in the current scheme of things. Depending on what’s being included as alternative (hydropower, etc.), alternative energy sources currently comprise a few percentage points of total energy consumption.
To scale alternatives up to even 50% of current consumption will require not just a monumental amount of capital investment; it also requires the invention and manufacture of new systems of energy storage on an equally vast scale.
As has been noted many times, this capital investment includes an extended period of fossil fuels consumption, as we need huge amounts of energy to construct alternative sources and storage systems. Some have characterized this as building an aircraft in the air while keeping your current aircraft aloft.
As Peak Prosperity members know well, capital has a variety of forms, all of which work together: financial, intellectual, social, human, cultural and symbolic. All these forms of capital must be…
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