I think we’ve all wondered just how long an economy built on fake money and debt can keep going – we may be about to find out.
Forget about the stock market slide for a bit – at any rate, it might shoot up 500 points tomorrow on a rumor that the Chinese central bank is going to print up 67 trillion-zillion Yuan. But there are some things which make you wonder about how things are going:
Walmart is going to close 269 stores. Of course, they also plan to open some stores – but it will be a net reduction in Walmart locations in 2016.
Conveniently after the market closed, the Fed estimated 4th quarter 2015 growth at a mere 0.6%.
Empire State manufacturing drops to a low not seen since 2009.
GM/Ford credit risk is pretty high.
Corporate earnings are not exactly what you’d like them to be.
Sports Authority decided they’d rather not pay their debts right now. The energy isn’t right, I guess…
And, a house which has sat empty in San Francisco since 2000 and has holes in the roof and fire damage is listed for $600,000.00.
If all of this – and there is plenty more out there – doesn’t give you a whiff of 2008, then I don’t know what will.
To be sure, I’m ready for some magical trick of debt and fake money to pull us through at least until the day after Election Day. The Powers That Be have managed to keep this ball in the air for seven years and I’m not at all certain they don’t have more in their bag of trickery (though getting unemployment down to 5% by magically removing people from the labor force appears to have gone as far as it can…to get it to 4.5% would take some really interesting “calculations”). But the fundamental problems remain:
1. We have far more debt – personal and government – than we can repay at the moment. This is because
2. We don’t make, mine and grow nearly enough to pay for our debts and current operating expenses and
3. Far too many people are out of the productive economy for the productive economy to support.
Eventually, it all goes smash. Whether it happens this year or next or in 2019 or what have you is immaterial – it will go smash unless and until we radically alter how we do business. We need to balance the budget (it could be done in under five years from any day we say, “go” on); we need to remove the taxes and regulations which prevent full exploitation of America’s vast resources; we need to make welfare far more inconvenient than working (and thus force people back into the productive economy if they are in any way capable of participating). All of these things are currently impossible – because the political class in power doesn’t want to do it. And they don’t want to do it because doing it would remove the need for, precisely, the political class in power (ie, politicians who “solve” problems and “do the business of the American people”). Will 2016 usher in a different sort of political class? Probably not – even electing someone like Ted Cruz would only be a step in the right direction…but unless someone is really willing to go to the mat (like Scott Walker did in Wisconsin) to take on the deep, structural reforms, all we’ll be doing is, at best, delaying the day of reckoning.