patrick.net

I get the point that if there is a black hole in this system, any additional flow of money will always eventually fall into it.

In a system with a limited amount of money (gold standard), this kind of system would quickly result in a crash, as debts can't be paid and default/contagion takes place, leading to a new cycle. Limited money means limited possible run in the system, a sinus type of outcome rather than exponential.

Now with the government/central banks being a "white hole" producing an unlimited amount of cash, the economy becomes more and more a direct flow from the white to the black hole. No collapse happens, but the tidal forces still destroy a lot of what used to amount to a normal capitalistic economy.

I can fix this mess in a day. The government issues a check every year for the total income reported on a tax return up to about $15,000 and prints the money.

-------------

Thats not a solution, because it still leaves those without an income out in the cold. A better solution would be to eliminate the federal income tax, and print whatever money is needed to fund the governments expenses.

errc says

A better solution would be to eliminate the federal income tax, and print whatever money is needed to fund the governments expenses.

A scene from patnet?
https://en.wikipedia.org/wiki/The_Haywain_Triptych

Heraclitusstudent says

A scene from patnet?

As some of you here know, I love art and post historical art photos every night on facebook

and can tie them sometimes to economics..... above

The Haywain Triptych (Center Panel). Hieronymus Bosch, 1516. #bosch

Ironworker says

Almost 8 years roaring US stock market. The recession is due.

I saw the 4Q07-2009 recession coming from late 2006, when I first learned a) how much fraud was in the housing market and b) how much of the economy was being driven by the $1T/yr new mortgage debt flow we were enjoying 2004-2006:

Real (2009-dollars) per-capita (age 15-64) consumer debt growth, YOY.

Note we've just crawled back to the baseline last year, we're not all that overextended now.

Recessions come for reasons, they don't just appear like earthquakes or hurricanes.

The Fed's not going to tighten lending like it did in the 50s thru 80s.
Consumer debt is under control.
Governments can borrow all they want at super-cheap rates.
Boomers are edging into retirement, and that's going to open up new jobs for Gen Y and also increase the demand side as the boomers finally start drawing down their lifetime savings accumulated from the 70s to now.

Health sector jobs are going to continue growing to take care of all these old people:

Health jobs as % all jobs

Not saying we're not going to see a recession this decade, but I don't see what is going to get it going.

Now, if Hillary wins and the GOP still holds the House, then, yeah, there could be an utter shit show for 4 to 8 years, making the gov't sector as crazy as some third-world banana republic.

Bellingham Bill says

Recessions come for reasons, they don't just appear like earthquakes or hurricanes.

Clap Clap Clap

Jim Rodgers recently said we will have a recession because we are over due for time

Economic cycles don't die of old age, they need a over investment thesis ... Tech 2000, Housing 2007

Fed funds rising to fight inflation

2007 prime age labor force growth peaked so we were due to a slow down regardless

So, the over investment thesis in this cycle? Oil? commercial real estate?

The cycle is old for sure...

But mother economics... she is a serial killer.. she wants to get caught.. she will leave you real big clues for when the recession is coming

If recessions are so easy to understand after they've happened, how come nobody sees them coming ahead of time and does anything about it?

Or should we feel confident that this time they've figured it out?

exfatguy says

Or should we feel confident that this time they've figured it out?

Don't follow them.... Them... vested interest ...

Follow the data....

Data makes it clear when we hit..

1. Unemployment Claims
2. (LEI) leading economic indicators
3. Fed rates hikes fighting inflation

The real hard core variable is to find what sector has created the biggest supply and demand imbalance and if it that can create recession

So many people got 2015 and 2016 recession call wrong because they were following PMI data with out context .. there recession calls never happened.

You can tell the difference between real economic trackers and false ones looking to making a $$$

Numbers can't lie.. only people, poets, politicians, promises.. these are lies, numbers are the closest thing we have to the handwriting of God

I won't fall you guys, trust me on this.. I am always looking out to recessionary data lines, while the cycle is old.. she still has some legs left

Logan Mohtashami says

Numbers can't lie.. only people, poets, politicians, promises.

Numbers also don't tell a full story. GDP is growing because of ridiculous healthcare spending as we are over medicating ourselves and trying to fix fat people through drugs, test,and doctor visits instead of food and exercise.

Oil is below $50 even after the dollar sell off. That's recessionary. Oil companies have been able to reap off consumers for 2 years. Finally someone is looking at it: http://www.marketwatch.com/story/major-oil-refiners-investigated-by-california-attorney-general-2016-06-30

I can respect that.

Here's my analysis, coming completely non-partisan although it won't seem that way:

At the end of Democratic Presidencies, the economy tends to be doing well, but only if that President served two terms. At the end of Republican Presidencies, the economy tends to be doing bad regardless of the number of terms held.

That said, I'm probably still going to vote for Trump... hey, I might be able to buy a house once it's all over! :D

tr6 says

instead of food and exercise.

as someone who trains all year round, I agree with you on this one

Logan Mohtashami says

Data makes it clear when we hit..

1. Unemployment Claims

2. (LEI) leading economic indicators

3. Fed rates hikes fighting inflation

Yes, and watching the yield curve would have helped predict most recessions in the last 50 years. But it may be different now, being that things are broken and all (ZIRP).

exfatguy says

If recessions are so easy to understand after they've happened, how come nobody sees them coming ahead of time and does anything about it?

Markets are forward looking. The markets will likely be in a serious correction or worse by the time Logan is certain a recession is coming. What is the famous quote ? Something like, "the stock market has predicted 9 out of the last 5 recessions."

marcus says

Yes, and watching the yield curve would have helped predict most recessions in the last 50 years. But it may be different now, being that things are broken and all (ZIRP).

In the last 50 years falling Industrial production over 1% year over year would have meant recession too. Things are much different in this cycle for sure

So many people banked on this metric giving us a recession late 2015 and for sure 2016

marcus says

Markets are forward looking. The markets will likely be in a serious correction or worse by the time Logan is certain a recession is coming. What is the famous quote ? Something like, "the stock market has predicted 9 out of the last 5 recessions."

Why do so many Patnetters think a recession is just around the corner? We are still recovering from a hangover from the last recession.
The stock market is at all times high in spite of world economic problems. There is no recession on the horizon.

There is a recession on horizon. It will follow bubble. And if it is in US equities which I think it will be, we have a ways to go. The biggest gains are to be gained just before the bubble pops.

Ironworker says

The recession is due.

This time it's different. It's a new paradigm. No more recessions.

Ironman says

Strategist says

The stock market is at all times high

If you think the stock market is an accurate representation of the overall economy, you need to put down the wine glass RIGHT NOW!

I literally did. So I could pour a second glass. And I stuck some masking tape over the computer camera lens.

Ironman says

Strategist says

The stock market is at all times high

If you think the stock market is an accurate representation of the overall economy, you need to put down the wine glass RIGHT NOW!

Actually, the stock market is usually 6 to 9 months ahead of the economy.

Ironman says

Strategist says

Actually, the stock market is usually 6 to 9 months ahead of the economy.

OK, so why has the stock market basically flat-lined since Fall of 2014?

Damn recovery isn't done yet. Blame Obama.

Ironman says

Did turning off the QE spicot in the Fall of 2014 have anything to do with the flat lining?

Probably. I believe it's the housing that took us down, and it's housing that will take us back up. Obama has failed to ignite either.

Ironman says

Strategist says

Probably. I believe it's the housing that took us down, and it's housing that will take us back up.

You must be on glass 4..... Who's going to buy all these houses to take us back? Boomers are downsizing and Millennials don't have two nickles to rub together?

I just started glass 2. If there are bidding wars in California, why can't the rest of the nation afford the much cheaper homes outside of California?

Strategist says

Obama has failed to ignite either

Obama didn't break the economy. And he didn't have the power to fix it either.

Read the forums, read a lot. Than Use your own judgment what's comming next. That's the best you can do.

Because nobody really knows.

My gut feeling is telling me that we are still going up for some time. Not too long. Maybe substantially. I'm fully invested. And if I'm wrong, that's fine. That's the best I can do. Do the same gentlemen! Use your own judgment. Because even Logans valid arguments are not Writen in stone.

marcus says

Strategist says

Obama has failed to ignite either

Obama didn't break the economy. And he didn't have the power to fix it either.

Obama prevented us from going into a depression. I give him credit for that, but he has clearly failed to engineer a complete recovery. Seven years and no recovery is ridiculous. He needs to focus on housing.

Strategist says

Obama prevented us from going into a depression. I give him credit for that, but he has clearly failed to engineer a complete recovery. Seven years and no recovery is ridiculous. He needs to focus on housing.

Obama produced the best recovery possible for asset holders. What do you mean by focusing on housing? Building more? Because interest rates are pretty low. If they built a lot of houses, supply would increase and prices would go down.

just any guy says

This time it's different. It's a new paradigm. No more recessions.

This is actually my thesis, yes.

They really threw out the rulebook 2009-2013.

Shows how the Fed injected $1.2T of new money into the economy through to mid-2010 by funding mortgage originations, in addition to the liquidity games they were playing with their existing wad of treasuries (I can't pretend to understand it but they "lent" like $300B of their treasuries to TBTF so they'd have assets on their books or something).

In 2011 they pumped another $800B into the economy by buying government debt directly (or indirectly but same difference, new money was being created in NYC). Then after the 2012 election was over and done they had free hands to go back to work pumping up the money supply, and they pulled the lever on both pumps, adding another $1.6T to the economy 2013-2014.

Is annual % growth of the age 15-64 population, showing that 1960-80 was a helluva demographic upswing, 1.5% to 2% of "growth" was simply more bodies joining the workforce.

Things are different now, with the boomers leaving about as fast as Gen Y arrives.

(The big spikes in 1990 and 2000 were 'hey, where did all these Mexicans come from??')

We have an economy now that doesn't really need to "grow" any more.

Shows Real (2009 dollars) GDP per working-age (15-64) person is $80,000 now, double what it was in the early 70s.

Isn't $160,000/yr per couple enough to run a household? Why or why not?

Presidents have very little velocity factor due to their structural power in the U.S.

Logan Mohtashami says

Presidents have very little velocity factor due to their structural power in the U.S.

Unless they can get Congress to open the taps . . .

Annual YOY % growth of Federal spending, 2009 dollars.

The 50's spike was Korea, LBJ saw a nice boost with Great Society and trying to keep SVN out of the ruble bloc, Raygun's 8 budgets look flat but are major mountains compared to Clinton's 8 budgets, as he was being shut down by the initial neoliberal austerity mania of the early 90s and then the Gingrich Congress after 1994.

The twin peaks in the last recession are TARP and then ARRA I suppose, then Congress started playing sequester games, trying to make Obama a one-term president-failure like Carter.

Bellingham Bill says

Unless they can get Congress to open the taps . .

A lot U.B. , mandatory payouts, Stimulus package pushed with a lot tax cuts, not a lot spending outside of mandatory items

Just look at how many countries 3 year and on are lower than our 1 year yield

Goodness

#USA

Wow, that above chart is basically ranking countries by my desire to live there . . .

Except Finland, my ancestors left that place for a reason

Bellingham Bill says

Wow, that above chart is basically ranking countries by my desire to live there .

Top 3 countries on that list hate immigrants. You will always be a second class citizen there.

tr6 says

Strategist says

Obama prevented us from going into a depression. I give him credit for that, but he has clearly failed to engineer a complete recovery. Seven years and no recovery is ridiculous. He needs to focus on housing.

Obama produced the best recovery possible for asset holders. What do you mean by focusing on housing? Building more? Because interest rates are pretty low. If they built a lot of houses, supply would increase and prices would go down.

We cannot have an economic recovery without a housing recovery. As simple as that.

I was OK being 2nd-class in Japan for most of the 90s, after all it is their country and we gaikokujin are guests more or less.

Most Japanese IME were happy to make this respect a two-way street, I bring my gaijin A-game and they cut me the necessary slack.

As for Germany, my earliest known ancestor was a Hessian who allegedly absconded from British service during the Revolutionary War so I certainly look more German than Japanese.

The Swiss have a NIIP at 120% of GDP according to Wikipedia, and I respect that greatly, even this wealth position wasn't achieved as honestly as the Swedes or Norwegians (breaking even and at 170%, respectively).

We're at negative 40%, btw.

My plan now is to spend some vacation time touring the socialists paradises this decade, and either retire there or Japan next decade.

Every time I go to a Target or Costco I just want to get the hell out of California. Then again Bellingham might work I guess, and no income tax is a good thing for retirees : )

I saw.. lets give a Big cheer.... to any America who leaves this country!

More Job openings

Lock them all out .... never let them back in ..... unless they write a letter of apologize

Logan Mohtashami says

I saw.. lets give a Big cheer.... to any America who leaves this country!

More Job openings

Lock them all out .... never let them back in ..... unless they write a letter of apologize

Ha ha ha Logan. You wish you had that power! But you are missing the point. What makes America great is the emigration. You lock the door and this country is going down. Nice note from all star economist!

Ironworker says

You lock the door and this country is going down.

Isn't my humor transparent enough ;-)

What is remarkable about America today is that ... coming off the Great Recession and the first decline in prime age labor force growth in decades

America... itself had the most stable economy in the world. People forget all the drama the world economies have had since 2011.

France declared a economic state of emergency
China has had 2 major domestic economic issues since 2011
Brazil .. no comment
Germany dealing with it's old demographic profile and all the Euro members with the 2012 Euro Bond market Crisis ( People simply forgot this drama)
Japan .... a race to debase the Yen to push stocks and in and out negative GDP for many years now
UK... was doing fine up until the Bretexit ... which is a shame I had a a lot U.S. U.K charts to counter Japan and Germany but U.K is slipping and they have a good young demographic profile too

Then all the smaller economies Russia, Argentina, Puerto Rico, Ukraine ... etc etc

Even with a legit oil and commodity crash.. the trend of unemployment claims still stayed steady in the U.S and not even the fall of Industrial production could break us.

Very Impressive!

Logan Mohtashami says

I saw.. lets give a Big cheer.... to any America who leaves this country!

More Job openings

Lock them all out .... never let them back in ..... unless they write a letter of apologize

For every American that leaves there are a thousand willing to take his place.
Adios baby
Sayonara
Auf Wiedersehn
and good riddance