For all of you who like charts, this is a guest post by Josh Clark at chartistfriendfrompittsburgh.blogspot.com. I'll let it speak for itself.
Josh Clark: Business Insider published the presentation David Rosenberg gave at last week's Big Picture conference. There are 57 slides in the show. One of them shows the 5 year percent change of household net worth. It's an extremely bearish chart.
And it's a chart that lends itself to clear curvilinear wave analysis.
I knew FRED had this data so I decided to check it out for myself. And then I realized Rosenberg was looking at the raw data in a way that FRED does not allow. They provide a year over year percent function but not a five year option. That's when I decided it was time to spend some time with Excel.
Here are the results...
Household net worth hit a high of $67 trillion in 2007. It's now $5 trillion lower.
When the stock market starts falling apart again expect household net worth to collapse with it.
Here's what household net worth looks like on a straight five year change basis - a total disaster.
Here's what the DJIA looks like on that basis - not exactly bullish.
Here's what the DJIA looks like on a five year percent change basis - another winner.
Here's what household net worth looks like on a straight year over year change basis - get ready for another wave of massive wealth destruction.
And finally no discussion of household net worth would be complete without looking at it in "real" terms. Here's the data adjusted for energy inflation - since 1995 there has been no real wealth creation.
There is one way to protect yourself from the effects of the upcoming wave of wealth destruction - ride the collapse down like Pasquale Buzzelli by shorting the market. Some of the stock charts I have recently analyzed show the potential for 90% price declines over the next few years.
On Orlov's scale of societal collapse, there would be a linear sequence of financial, commercial, political, social and finally cultural collapse.
But this sequence is not proceeding in a linear fashion. The US is far advanced in social and cultural collapse, while the dollars percieved integrity may postpone financial, commercial and political collapse, its the disintegrating structures of the rule of law domestically which may prove the definitive blow to the US empire, resulting in massive civil strife.
In regard to overconsumption and misallocation, the criminal oligarchy considers the US population as superfluous assets needing liquidation, now that the extraction of their labor value is complete.
All economic activity is leveraged on the facilitation and maintenance of a food surplus, and the US is hardly able to produce any food surplus internally without the trappings of empire. Otherwise the centre cannot hold and will consume itself.
My background was in investing where I made good returns for a few years because I had methods of forecasting that were unusual. One part was to follow a companies supply and waste and apply it against a stocks returns to confirm posted earnings. Another was to track misleading statements to see if they were increasing or decreasing.
I pulled out of the markets 10 years ago due to highly deceptive accounting practices and a world wide trend of shortages.
Capitalism only works if there are surpluses. By its own definition it is the redistribution of wealth. If there is no surplus capitalism will not work. This is always the case. Don't believe it then look at any third world economy. No 3rd world economy benefits from capitalism if there is no real surplus and in fact all the worst cases of dire position are only capitalist 3rd world economies.
What this article proves along with others likewise printed is that we have consumed the grand surplus. We will continue to receive less of the pie because there is less in total. What I mean is never before in even recent history has so much land been put to agricultural use there is no significant amount of useful land yet to be cultivated. Mines have mined out all significant finds and vanes are much smaller today. Fishing industries around the world have fished the stock to its limits. Oil is pulled out of the ground at an ever slower pace. In each and every place consumption is meeting its roadblock of raw material. There is no new find that compares in quality and quantity to what our fathers found.
So this is what is happening - the end of an empire - the end of a concept of capitalism. Its only a problem if one is totally leaning on the idea of capitalism. The idea that we need to consume to feel better. The idea that our neighbours needs don't matter. The idea that we can consume our way out of a problem.
Its a good thing. The math of the situation is coming home to rest - we consume greatly past our ability to contribute. No one is working hard enough to consume 10 years of natures energy in a few months. Then to believe that your children are deserving of even greater consumption - I will be glad when this evil is over.
Honestly, the US is mostly under martial law already. Military checkpoints are appearing everywhere, and combat units are being prepared to engage the citizenry on all fronts. DHS is heavily entrenched and armed to full capacity, moreover with the appropriation of 1.4 billion bullets and the 30.000 [weaponised?] drones to be unleashed.
Now battallions of indoctrinated homeland-jugend to be deployed.
These are permanent FEMA corps, making the militarised Emergency Management a permanent feature, while domestic military command and control functions are largely transferred to FEMA directly.
The widespread political persecution of lawful dissenters for protected political speech and political activism denotes a demonisation campaign of anyone deemed a constitutionalist, in preparation for round-ups and purges.
If a nationwide state of emergency is declared, likely as a result of fullscale economic collapse or hyperindignation, most scenario's project open civil war between the hellspawn 'government' and that part of the population who will resist the takeover. A civil war could then result in dollar hyperinflation or perhaps hyperdeflation, depending on fate.
If at any point full disarmament of the citizenry is attempted too openly, civil war will almost certainly be triggered, as prudence would dictate kinetic constitutionalism.
Only a select few combined disaster scenarios, such as those involving a pandemic bioweapon release, might interfere with the emergence of a coherent resistance of the citizenry and some portion of the military against the enemy takeover.
If there is no civil war, in either swift or prolonged collapse, the hostile occupying force now in control of the government will otherwise most certainly proceed with systematic extermination of the US population, the evidence for genocidal preparation is everywhere to see. All the infrastructure for mass concentration of [displaced] populations is in place, having an obvious dual use under guise of natural or manmade disaster contingencies [collapse and pandemic scenarios included]. Its undeniable that if the FEMA camps have a combined capacity for interning up to 50 million people, in cascading logistical collapse, there would not be sufficient food supply to keep interned people alive in those camps for 're-education', if that was ever the enemy's intent.
In several scenario's, only a timely and proportionate civil war or constitutionalist military coup may prevent a successful and complete genocide of all targeted groups [at least 40-60 million people, basically anyone with a functional moral memory, especially the veterans], and the subsequent establishment of a supertyranny, although full military conquest/liberation of the US by either side would result in >90% casualty rate of the population.
Of course these scenarios are oversimplified with only two sides, red and blue teams under a singular ideological divide [not democratic/republican], while there will likely be geographic and racial subdivisions of the participating combatants, multiple state insurrections and secessions are also possible.
Perhaps the collapse will be so instantaneous that the police state would not activate and commence purging but instead become unravelled, the DHS and military personnel would desert, go home to protect their families rather than follow orders.
Something completely different may happen instead, but as I see it, many plausible scenario's [admitting the full reality of tyranny and its dark synergy with economic collapse] leave the US with no more than 100 million people left alive by 2020. I pray none of the worst scenarios happen, the collapse itself will be dire enough.
Does borrowing to pay for todays consumption drive prices up?
The rule of thumb is that 7% causes a doubling in 10 years.
Therefore, prices, without considering improvements in mfg or compounding should, after 50 years, have doubled 5 times.
A 10 cent large coke should be about 50 cent.
Do you think that we have had only a 2% inflation over the last 50 years?
Check your facts and memory at.
1957 Sandwich Menu From Woolworth's...
Thanks for the response. I think that when our perception is challenged by facts to the contrary, it is better to look at things through a different lens, to make sure we have it right. In the present case, we know the USA economy is contracting. Also, the USA dollar is slowly losing World Reserve Currency status, as nations stop using the dollar for bilateral trade.
What are the implications of this? First of all, since the USA's population is still growing, but the amount of stuff we produce is declining, there is less stuff per person. And since the dollar is SLOWLY losing World Reserve status, our ability to mooch off the rest of the world (ROW) is SLOWLY declining. So our total intake of stuff is declining on BOTH fronts, foreign and domestic.
So to make the 'deflation' argument, you have to argue that available 'money' will decline faster than the supply of goods available for purchase. I just don't see this happening. For example, food stamps are certainly a money substitute, at least as long as food stores accept them. Do you see this supply of money declining? Obviously not. It is increasing sharply. This is one of several factors in the rise in food prices.
I agree, in theory, that with the USA govt. running a GAAP deficit of $5 trillion per year, the fact that we don't have $25/gal gasoline is odd, and indicates that there are a lot of deflationary forces. But with Ron Paul's elimination from the Presidential field last Spring, it is pretty much set in stone that the federal GAAP deficit is headed to $10 trillion, per YEAR, within a few years.
This is where I think you are making your mistake. They will not be able renege on social security and medicare claims, without declaring martial law and instituting currency controls, effectively ending the dollar's reign as world reserve currency, which is, of course, hyper inflationary. So these $100's of trillions in claims will be paid with 'out of thin air' money.
We are in for several years of massive deleveraging, and the extinguishing of excess claims to underlying real wealth is deflation by definition. The debt monetization is not keeping pace with contraction even under relatively favourable circumstances, and those circumstances are coming to an end. 'Printing' will be facing an even bigger headwind soon enough. The risk of hyperinflation lies down the line, after the credit contraction has run its course. That is years away, unless of course you live in the European periphery, where the growing risk of currency re-issue could reduce the time between credit collapse and a classic currency hyperinflation considerably.
“A new study by the non-partisan Congressional Research Service (CRS) using data from the past 65 years found that there is no correlation (PDF) between top tax rates and economic growth. But it doesn’t stop there. The study also found that there is a correlation between the reduction in top tax rates and the increasing concentration of wealth toward the top of the income distribution. The report, Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945, is also clear that this is not only about tax rates on regular income, and points out (PDF) that “changes in capital gains and dividends were the largest contributor to the increase in income inequality since the mid-1990’s.”
This practice leads to income inequality.
My local barbershop owner is not giving up his lifestyle.
Last year, at this time, he raised prices by $2.00 to $12.00.
This year he raised prices by another $2.00 to $14.00.
Since the majority of his clients are seniors, on fixed income, he must be losing a number of his clients.
He might have too many gov. friends advising on what to do to keep his lifestyle.
Would prices go lower or would profits increase when PE firms get involved?
The question doesn't need an answer.
In the coming hyperinflation, their dollar denominated assets will be worth zero, same as my dollar denominated assets. A billion times zero is the same as 100 times zero, lol.
I suppose that some of them are all set up on small tropical islands, but they could have done that with $25 million. Twenty five billion buys no extra benefit, for an individual. And how are they going to feed their small armies, when their dollars are worthless?
There is not a true market of competition.
Is this the real "free market" that we have always been living under?
I can't even imagine the "feed fest" that could be happening in Europe.
It must be nice to have access to free money and free loans to be able to make a killing.
"Thanks to motions filed by the New York Times, a federal judge in Boston released court filings this week that had previously been under seal in a class action, anti-trust lawsuit — Dahl v. Bain Capital Partners — against the eleven biggest and most blue-chip names in the private-equity industry, including Blackstone, Carlyle, Goldman, and TPG. [...]
No wonder the defendants had been keen to keep the case under wraps. The 221-page complaint goes through 27 transactions, and with each, presents not only persuasive economic analysis, but more important, damning e-mails showing how the heads of each of the firms were involved in submitting sham bids, sharing information about their offers, working with management of the target companies to restrict the sales process, enforcing elaborate systems of quid pro quos (for instance, not submitting a bid with the expectation of being cut in on that deal or future deals), and other forms of market manipulation. The messages make clear that the intent was to reduce competition and buy the companies on the cheap. [...]
Private equity firms concentrate enormous financial power in comparatively few hands. Their $2 trillion of assets under management, which they augment with a typical $3 of borrowed money for every $1 of their investors’ money that they put down, translates into $8 trillion of buying power. Compare that to the roughly $16 trillion value of the U.S. stock markets at year end 2011. More people in the U.S. work for companies owned by PE funds than belong to unions. More than half the corporate debt in the U.S. is rated junk, and the high leverage used by PE firms in their deals is far and away the biggest culprit. [...]
I wish there had been more space in the TNR post to provide extracts from e-mails, which are typically among either the heads of the mega buyout firms, or other managing directors. They show a clear understanding of what they were up to. These players were engaged in an effort to collude, by submitting sham bids, not bidding in the auction but being invited in as a co-investor on that deal later or getting a slice of a future deal, all clearly intended to buy the target companies at more favorable prices. You really need to skim the filing. If you thought the quotes from the Libor traders in the FSA’s letter to Barclays were damning, they pale in comparison to this. [...]
As Matt Taibbi has pointed out, bid rigging is not like what the Mafia does, it IS what the Mafia does."
Unfortunately, the economy bulls are leaving something very significant out: defaults. The data is pretty clear. In the latest quarter, first and second lien charge-offs were $303.7 billion (with Home Equity Lines of Credit defaults high and continuing to rise). Meanwhile, aggregate consumer debt dropped by $53 billion. That’s better than 2012 Q1, but the drop in debt from defaults is six times larger than the total drop in debt.
Consumers aren’t paying down their debts, they are simply defaulting. And here’s another way to look at the problem. One in seven Americans is being pursued by a debt collector. And the average amount of that debt pursued has increased by about 8% in just six months."
Short the equities? OK, inflation adjusted, or nominally?
And, no one knows when the Fed begins buying equities en mass, if they haven't already started. It's their last "Wealth Effect" fairy. They have about chewed the sweet out of the bonds. Where to from zero?
Demographics? What about Mutual Funds? The ultimate financial pyramid scheme? All uninsured. All facing 20 years of net withdrawals. Shhh, don't want to create an avalanche. But anyone with a dime in these things is a gambler, not an investor.
Poverty here we come, or back to living within our means? It's subjective.
The illusion of security in life is just that. Back to basics.
Worse, some who think they still have assets may find they don't when they try and redeem them. Even those 'lucky' enough to have defined benefit pensions guaranteed by a company, municipality or state may find it is gone or reduced when they seek to draw it.
People have been focused on the 'fiscal cliff' of late and that is a serious problem but there is also a demographic cliff nearing as the post KOREAN war baby boomers (1953-61) reach retirement age. This cohort is bigger than the WW2 baby boom and when they start drawing down their assets or pension funds do the same to make the monthly withdrawals you have to ask... who will be the buyers?
You want to load up on tangible items. Gold is o.k., but with the ever present risk of confiscation, I would suggest a basket of as many different tangible items as you can store. Gold, iron, pipe fittings, copper, lumber, seeds, propane tanks (filled), etc.
When the DOW is at 32,000, you won't want to answer the phone, it will be a margin call, lol. Yeah, I know the economy sucks. Do you think that will stop the Fed from buying stocks?
- ► 2013 (16)
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- ► March (3)
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- ► 2012 (90)
- ► December (3)
- ► November (2)
- ► October (5)
- • 29 - Nicole Foss And Max Keiser Talk Greed, Fear, Downward Spirals And Risk Divisions
- • 23 - Japan Is Not A Good Example Of How Deflation Typically Plays Out
- • 16 - Household Net Worthless: Poverty Here We Come
- • 11 - What Happens When The Core Starts To Rot
- • 05 - The IMF -Inadvertently- Condemns The Eurozone
- ► September (5)
- ► August (8)
- • 30 - A Big Bad Brick Wall
- • 25 - Dear Angela, It's Time To Do The Right Thing
- • 19 - India Power Outage: The Shape of Things to Come?
- • 14 - The People Are Guaranteed to Lose
- • 10 - The Seductive Promises of Counterfeit CULTures
- • 07 - Here's The Science That Can Solve The Crisis
- • 04 - Lessons From the Full Tilt Ponzi
- • 01 - Culturally Programmed Myths of Omnipotence
- ► July (10)
- • 29 - How Will We Handle Our Losses?
- • 26 - Our Debts Must be Redeemed
- • 24 - Einstein's Definition of Gluttony
- • 22 - Super Rich Stash At Least $21 Trillion In Secret Tax Havens
- • 18 - Jeff Rubin and Oil Prices Revisited
- • 16 - Report: The Golden Dilemma
- • 12 - Europe Is Sliding Back Into Its Own Past
- • 10 - Libor was a criminal conspiracy from the start
- • 08 - Hubris Before The Storm
- • 03 - Unconventional Oil is NOT a Game Changer
- ► June (11)
- • 29 - Angela Merkel is Playing You For Fools
- • 23 - This Is Not America
- • 21 - Spanish Cook Books
- • 18 - Capital Flight, Capital Controls, Capital Fear
- • 18 - The Orkin Man: Which Side Are You On?
- • 15 - Goodness! Gracious! Great Wall's on Fire!
- • 13 - Autoimmune Finance: The System Attacks Itself
- • 09 - Europe: A Thousand Miles Behind
- • 06 - Welcome to the No-Growth Paradigm
- • 03 - If you love your kids, stop the bond bonanza
- • 01 - The truth about Europe - There is no solution Part 2: Growth doesn't rhyme with crunch
- ► May (9)
- • 29 - Espana en Fuego
- • 27 - Mammon is Hungry: Husband's Suicide One Day, Wells Fargo to Evict Wife The Next
- • 23 - All Hail the Greek Exit
- • 20 - Homo sapiens v. FWS
- • 18 - Deterrence is Dead
- • 17 - A world terrified by impotent ghosts from the past
- • 13 - Discovering the "End" in "Extend & Pretend"
- • 11 - There Is Not Enough Money On Planet Earth
- • 05 - China, or How To Live in Interesting Times
- ► April (8)
- • 29 - Beyond Zero Emissions: What's Wrong with Big Green Tech
- • 27 - The Limits to Mankind
- • 25 - Revisiting the Physical Risks of Debt
- • 22 - General Thoughts about Luck
- • 18 - Spain, Land of Magical Financial Realism
- • 09 - Money in Politics
- • 06 - Learning to Think in Multiple Scales
- • 02 - Disaster Capital Hits Europe
- ► March (14)
- • 29 - The Nature of Tipping Points
- • 28 - The Death of the Entertainment Industry
- • 27 - The Shock Doctrine has come to New Zealand
- • 24 - Becoming the Bank
- • 22 - To Where Our Oppositional Culture Takes Us
- • 20 - You wouldn't know it to look at it
- • 16 - An Introduction to Agent-Based Modeling
- • 13 - Juking the Stats: Our Culture of Manipulation
- • 11 - Get Ready to be Disappointed With "Sterilized" QE3
- • 09 - Revisiting the Financial Fingerprint of Instability
- • 06 - Why Liquidity is No Longer Enough
- • 05 - Their Assumptions are Getting Very Ugly
- • 03 - The Original Street Artist
- • 01 - Modern Myths that Destroy Humanity
- ► February (9)
- • 28 - When the Deflation Tsunami Hits, Losing the Least is a Winner
- • 26 - Our Depraved Future of Debt Slavery (Part III)
- • 24 - Our Depraved Future of Debt Slavery (Part II)
- • 22 - Our Depraved Future of Debt Slavery (Part I)
- • 20 - The Torture of the European Periphery
- • 18 - We're Still Sinking With the Titanic
- • 15 - Political Theater Will Kill the Status Quo
- • 13 - Die Wahrheit Macht Frei
- • 04 - Who Killed the Money Printer?
- ► January (6)
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Nicole Foss Lecture Tour:
AUSTRALIA/NEW ZEALAND March-June 2013
New Zealand May/June Dates still available
June 5 Takaka
Palm Beach Hall 7.30pm
June 6 Nelson
St Joseph’s Hall, Manuka St, 7.30pm
June 7 Port Motueka
June 9 Christchurch
WEA Rooms, 59 Glouscester St. 6.30pm
June 11 Christchurch
Polytechnic for Technology, Imagitech Theatre 12pm
June 12 Christchurch
BHU Organic Centre, Lincoln University 12.10pm
June 13 Timaru
Aoraki Polytechnic, Arthur Street 3pm
June 16 Oamaru
Oamaru Opera House. Thames St 10am
June 18 Dunedin
Pine Hill School Hall, 11 Hislop St, Pine Hill 7.30pm
June 19 Dunedin
Burns 2 Lecture Theatre, 95 Albany Street, University of Otago 6pm
June 22 Auckland
June 24 Auckland
US Fall 2013 - Dates Available
Request Lectures: StoneleighTravels •at• gmail •dot• com.
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