Recovery
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
Gregor Macdonald
Executive Summary
- Fertility rates are experiencing a "natural decrease" at record levels across the U.S.
- Poverty rates are rising across the country, despite the "recovering" economy
- What exactly is "powering" U.S. economic growth? Perhaps much less than realized.
- Why we are likely in the calm before the storm when corporate profits peak right before an economic downturn
- The 3 most likely scenarios for the stock market from here
If you have not yet read Part I: Marking the 4-Year Reflationary Rally: How Much Better Off Are We Really?, available free to all readers, please click here to read it first.
One of the challenges the U.S. stock market will increasingly face in the years ahead is continued growth in the Dependency Ratio. The U.S. Census Bureau alerted us to this trend back in 2010. For keen observers of demographics, this couldn’t have been a surprise). The rate at which the Dependency Ratio is growing, and is set to grow further, is accelerating:
The U.S. Census Bureau reported today that the dependency ratio, or the number of people 65 and older to every 100 people of traditional working ages, is projected to climb rapidly from 22 in 2010 to 35 in 2030. This time period coincides with the time when baby boomers are moving into the 65 and older age category…The expected steep rise in the dependency ratio over the next two decades reflects the projected proportion of people 65 and older climbing from 13 percent to 19 percent of the total population over the period, with the percentage in the 20 to 64 age range falling from 60 percent to 55 percent…“This rapid growth of the older population may present challenges in the next two decades,” said Victoria Velkoff, assistant chief for estimates and projections for the Census Bureau's Population Division. “It's also noteworthy that those 85 and older — who often require additional caregiving and support — would increase from about 14 percent of the older population today to 21 percent in 2050.”
This is precisely one of the key, ongoing headwinds that faced Japan's stock market for 20 years. When Japan's economy moved steadily into its low-growth phase, unable to generate sufficient jobs, fertility rates and household formation declined rapidly. As I explained in The Arrival of Japan's Sunset, these will not be cured by the current devaluation of the yen, despite naïve cheerleading. And neither will they be solved here in the U.S.
But in contrast to Japan, the United States is only just embarking on its slow growth phase. Its demographically challenged culture and economy will reinforce each other as we move ahead in time. And, it's not just the retiring class of workers that will massively increase the Dependency Ratio in the U.S. in years ahead…
Why This Recovery Is Coming to an End
PREVIEW by Gregor MacdonaldExecutive Summary
- Fertility rates are experiencing a "natural decrease" at record levels across the U.S.
- Poverty rates are rising across the country, despite the "recovering" economy
- What exactly is "powering" U.S. economic growth? Perhaps much less than realized.
- Why we are likely in the calm before the storm when corporate profits peak right before an economic downturn
- The 3 most likely scenarios for the stock market from here
If you have not yet read Part I: Marking the 4-Year Reflationary Rally: How Much Better Off Are We Really?, available free to all readers, please click here to read it first.
One of the challenges the U.S. stock market will increasingly face in the years ahead is continued growth in the Dependency Ratio. The U.S. Census Bureau alerted us to this trend back in 2010. For keen observers of demographics, this couldn’t have been a surprise). The rate at which the Dependency Ratio is growing, and is set to grow further, is accelerating:
The U.S. Census Bureau reported today that the dependency ratio, or the number of people 65 and older to every 100 people of traditional working ages, is projected to climb rapidly from 22 in 2010 to 35 in 2030. This time period coincides with the time when baby boomers are moving into the 65 and older age category…The expected steep rise in the dependency ratio over the next two decades reflects the projected proportion of people 65 and older climbing from 13 percent to 19 percent of the total population over the period, with the percentage in the 20 to 64 age range falling from 60 percent to 55 percent…“This rapid growth of the older population may present challenges in the next two decades,” said Victoria Velkoff, assistant chief for estimates and projections for the Census Bureau's Population Division. “It's also noteworthy that those 85 and older — who often require additional caregiving and support — would increase from about 14 percent of the older population today to 21 percent in 2050.”
This is precisely one of the key, ongoing headwinds that faced Japan's stock market for 20 years. When Japan's economy moved steadily into its low-growth phase, unable to generate sufficient jobs, fertility rates and household formation declined rapidly. As I explained in The Arrival of Japan's Sunset, these will not be cured by the current devaluation of the yen, despite naïve cheerleading. And neither will they be solved here in the U.S.
But in contrast to Japan, the United States is only just embarking on its slow growth phase. Its demographically challenged culture and economy will reinforce each other as we move ahead in time. And, it's not just the retiring class of workers that will massively increase the Dependency Ratio in the U.S. in years ahead…
by
JHK
by
charleshughsmith
Executive Summary
- Intervention in the housing market by central planners is experiencing diminishing returns
- The four major trend reversals most likely to depress housing prices in the coming future
- The power deflationary force of reversion to (or perhaps below?) the mean
- Why demographics do not support rising prices
If you have not yet read Part I: The Unsafe Foundation of Our Housing 'Recovery', available free to all readers, please click here to read it first.
In Part I, we sketched out the larger context of the housing market: the dramatic rise of mortgage debt, the stagnation of income for 90% of households and the unprecedented scope of Central Planning intervention in the housing and mortgage markets.
In Part II, examine what will likely cause this nascent rise in housing prices to reverse, and to resume the decline Central Planning halted in 2009.
Intervention Has Only One Way to Go: Diminishing Returns
As noted in Part I, every Central Planning support of the mortgage and housing markets has already been pushed to the maximum, so there is nowhere left to go. Interest rates are already negative, over 90% of the mortgage market is backed by Federal agencies, the Fed has already pledged to buy trillions of dollars in mortgages, etc.
Four years of this massive intervention has stripped the mortgage and housing markets of the ability to price risk, capital, and assets. This has created a culture of supreme complacency, as participants have come to believe interest rates will stay near-zero for the foreseeable future and Central Planning intervention is permanent.
But nothing is permanent in life. And the current extremes of intervention and complacency have set the stage for some important reversals:
The Forces That Will Reverse Housing’s Recent Gains
PREVIEW by charleshughsmithExecutive Summary
- Intervention in the housing market by central planners is experiencing diminishing returns
- The four major trend reversals most likely to depress housing prices in the coming future
- The power deflationary force of reversion to (or perhaps below?) the mean
- Why demographics do not support rising prices
If you have not yet read Part I: The Unsafe Foundation of Our Housing 'Recovery', available free to all readers, please click here to read it first.
In Part I, we sketched out the larger context of the housing market: the dramatic rise of mortgage debt, the stagnation of income for 90% of households and the unprecedented scope of Central Planning intervention in the housing and mortgage markets.
In Part II, examine what will likely cause this nascent rise in housing prices to reverse, and to resume the decline Central Planning halted in 2009.
Intervention Has Only One Way to Go: Diminishing Returns
As noted in Part I, every Central Planning support of the mortgage and housing markets has already been pushed to the maximum, so there is nowhere left to go. Interest rates are already negative, over 90% of the mortgage market is backed by Federal agencies, the Fed has already pledged to buy trillions of dollars in mortgages, etc.
Four years of this massive intervention has stripped the mortgage and housing markets of the ability to price risk, capital, and assets. This has created a culture of supreme complacency, as participants have come to believe interest rates will stay near-zero for the foreseeable future and Central Planning intervention is permanent.
But nothing is permanent in life. And the current extremes of intervention and complacency have set the stage for some important reversals:
by
Adam Taggart
Total 8 items
Community
by blaggers 
GoldSilver.com
Learn more