It is quite fascinating that the ultimate case for continued equity and bond price growth comes from the unspoken assumption that we will get another round or rounds of QE.
This open assumption is that things are so good that we are about to move into perpetual growth mode as the recovery breaks away into the growth.
I suppose this is easy to believe when the backstop is still there. Or that the headline numbers will never be allowed to never turn down again. Alas, very few seriously question the true source of that growth – artificial stimulus based on nothing.
Except for strength of tiny porcelain tea cup sitting at the edge of a table set upon the world’s most active and dangerous fault line – confidence.
The underlying macro data – the reality of growth or lack thereof against the faith, or the ‘smart money’ consensus, is yet another story that would otherwise guide the crucial understanding of where we are in the grand scheme – and what we can do.
Combine this with the open fact that as of May 2015, 93,194,000 million Americans are currently not in the labor force.
Is the retirement wave? No. In fact that segment has remained fully employed. The long held age wave boom cycle ‘deflationista’ guarantee once again falls flat. This hollowing out of productive capacity is the human component and the most important representation of just how disconnected from reality we’ve become.
The middle class has been squeezed. The engine behind real growth is gone. Generations to come have been bled dry already.
Without the engine, there is no growth. Sadly, no growth means no debt service. No debt service is a direct threat to the systems of power. Without that, nature becomes a threat. If you aren’t, you are dying. There is no way they can let that happen.
The effect on people is falling household wealth and wages, unfunded retirement, the death of home equity, lack of savings and disposable income. Mirrored by the surging prison population and the surveillance state, the rise of black market labor against a broken and drastically uneven income tax structure guaranteeing a future of defaults.
Of course banking fees, utility fees/rates, phone fees/rates, cable fee/rates, internet fees/rates, property taxes and government fees go up along with education, food, and now surging gas prices.
This hollowing out must be filled with something. Better to keep them tolerant. Make them criminals, happy to have the safety of three square meals per day – or literally starve.
And so they will push on the string. They will continue to paper over the issues. They will in the holes, while transferring wealth and lining the pockets of a more and more extremely concentrated elite.
This is a death cycle, foreshadowed by the artists long ago. Orwell’s boot.
They must continue to print to keep it afloat. To keep the government transfer payments fully funded. This is core – the inner camshaft that drives the bread and circus – the first mal-investment.
How much more absurd does it need to get?
Sure, there are infinite, more benign euphemisms – from QE to balance sheet expansion to the rise of SDRs to the sheer fantasy of ‘mark to market’. But all of this intervention rests on a very thin layer of faith and confidence. .
It may appear that the grand equations of finance are now complete. But there is no math for the entirety of nature. Only for small periods along the cycle. Yet basic arithmetic tells us they must print until it all breaks.
The more they monetize, the more debt they must create to keep it going, the sooner and sooner confidence will be lost and the currency will die, as it does, over and over again.