"'When I use a word,' Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean.'
`The question is,' said Alice, `whether you can make words mean so many different things.'
`The question is,' said Humpty Dumpty, `to be the master — that's all.'"
Lewis Carroll
"The current trend in the United States economy is not sustainable. This is a realization that will penetrate the national consciousness slowly and unevenly. Most economists agree on how this cycle will end (even if it is only privately), but the great debate is in the details of how, and most importantly, when.
If one does not accept that the situation is unsustainable, and believes that things can continue on endlessly just as they are, with the United States consuming the bulk of the world’s savings and production because of who we are, then perhaps this is symptomatic of the national epidemic we now suffer which the ancient Greeks called
hubris.'Where else will they put their surplus if not our debt? To whom will they sell their goods if not to us? Who will teach them how to live, and govern them?' History shows that even if such trends last far beyond most expectations, eventually a day of reckoning arrives, in some frequently repeated patterns of systemic failure.
Things rarely reach a turning point when we expect it. A true sea change is slow to permeate the mentality of most people, because our experience is that what happened yesterday will happen again tomorrow, and a long cyclical turn occurs gradually and incrementally. We forget what happened even a few years ago. Predictions of a continuance of recent trends are the common currency of most pundits...
However, and this is a common sense notion that has been nearly forgotten by our generation, we have the ability to act in such a way so as to make the improbable more likely to occur, to tempt fate by our actions. For example, there is a certain probability of sustaining an automobile accident in the normal course of our daily activities. High risk behaviors, such as speeding excessively or drinking while driving, increase the chance of an accident. If one engages in high risk activity, and nothing unusual happens, we become emboldened and think that since we were able to drink moderately and drive last month, so we can drink and drive this month and thereafter. Perhaps next month we drink a little more for an indulgence, and again nothing happens. This cycle continues until something changes our behavior, or simply ends when we literally hit the wall.
It would be our contention that the US is like such a driver, and we have been economically tempting fate with increasingly risky behaviors. We are persuaded that there is almost nothing we cannot do, almost nothing that can happen, that is beyond our control. It is the propensity for people to increase and repeat what they have been doing over time, to tempt fate through repeated and increasingly risky behavior, and to forget the possibility of a sequence of unfortunate events if you will, that gives rise to memorable events in history...
Predicting the failure of a complex system is not easy. One can examine it as a whole, and determine that it will fail, and often calculate what must change in order to allow the system to function more reliably. But it is often beyond our power to calculate exactly how it will fail, and consequently when it will fail. This does not invalidate the observation that the system will ultimately fail. It merely underscores the unpredictability of timing a failure with the degrees of freedom inherent in a calculation with a large number of exogenous variables. It is not easy to predict exactly when a chronic DWI will demolish their automobile, but it remains relatively predictable to say that they will do so as long as they maintain
their current mode of behavior...
There are four major economic tipping points:
o Demand: a break in the level of consumption in the US caused by the
unwillingness or ability of households to incur further debt to support
consumption beyond real wage growth
o Supply: a major disruption in the supply of an essential commodity like
energy, food, or raw materials, or even the realization that a major
commodity is in shorter supply than expected, such as silver or oil.
o Monetary: an inability or unwillingness of foreign central banks to continue to
monetize the US trade deficit and budget deficit through the recycling of
their trade surplus into US debt securities.
o Systemic failure: the failure of major counter parties that threatens the
US financial system, particularly in the hugely leveraged derivatives
market.
There is still time to end this spiral of decline.
Jesse, Forecast: The Humpty Dumpty Economy, Jesse's Crossroads Cafe, 2005
"For these are a rebellious people, deceitful children, unwilling to
listen to the instructions of the Lord. They say to their seers, ‘Do not
see!’ and to the prophets, ‘Say nothing of what is right. Tell us only
things that please us — prophesy illusions."
Isaiah 30:9-10
I thought today might be a good day to review an economic forecast for the US that made and posted on my old site, Jesse's Crossroads Cafe, on Yahoo Geocities in 2005.
Before you judge it too harshly try to remember what was happening in 2005, and what people were thinking. The predominant opinion seemed to be a recovery, but with a virtually inevitable risk of deflation because of debt destruction.
I did quite a bit of analysis and posting about the coming 'currency wars' and the nature of money in a fiat environment. Most of it fell on deaf ears, because people don't listen except to quickly cobble together whatever ragtag rebuttal to support their own bias, laced with flourishes of pettiness.
The markets skyrocketed last night when Trump announced that a ceasefire and peace negotiations would be proceeding with Iran. He neglected to include Netanyahu in those discussions, which were primarily driven by Pakistan and China, and not his brilliant negotiation.
Since Israel has a key role to play in making this ceasefire a reality, and since they have never honored any ceasefire in recent memory, the temptation to be skeptical is perhaps warranted.
They are obviously polishing up J. D. Vance to be the next President, whenever that might be, but I can't help but thinking unless the Democrats pull out some rerun of past failure, which in itself is no long shot, then he might be a bit of a hard sell.
I don't see much to make one enthusiastic, on either side of the aisle. If Humpty Trumpty has a great fall, there are an ample number of humps eager to replace him. And the jackals are gathering, even among his own.
They lie, and admire their own lying. It's their natural form of self-expression.
So, will this ceasefire result in the opening of the Strait of Hormuz, and peace breaking out in Iran, Lebanon, and dare we hope, the West Bank and Gaza?
Can Trump finally stand up to Netanyahu, and put America's interests first?
Let us pray and hope, as gentle as lambs, but as wary as the circumstances and past history would suggest. And given the continuing attacks on Lebanon by Israel, it is already faltering.
"The pride of Satan is hard for us on earth to comprehend, and therefore it is easy to fall into error and to share in it, even imagining that we are doing something grand and fine." Fyodor Dostoevsky, The Brothers Karamazov
In the long term things appear to be dismal for the US economy. The damage that the Trump administration, and the administrations of the past several presidents, have been doing are taking a toll.
Gold and silver rallied sharply, and gold in particular was smacked back down. The currency war is alive and well, and gold is a popular participant to the dismay of the Western Banks who have been allowing gold to move steadily to strong hands to the East.
The Dollar has fallen off a bit and is hanging out on the 98 handle.
Recession is underway in the US. Trump has squandered a dwindling stock of precious resources on foolish adventures, and the debt is becoming a serious problem, moreso than in the past.
Gradually, and then, alas, all at once is the likely outcome in this sort of unfettered mega-trend.
If we do get a break in the price of oil and its related products stock up, because while Netanyahu's coalition has sway in the Knesset, there will be no peace in the Middle East.
And then there is Ukraine, and the failing leadership in Europe.
It's a perfect storm of venal incompetency in the West it seems, and that is not promising.
I do not like most politicians in general. Of course there are some glowing exceptions, but their halos fade quickly, as power tends to attract the unattractively corruptible. But this current crop of shameless liars and self-serving ciphers in high office is daunting.
Continue making your preparations and various arrangements during this lull in the storm.
There is still some time to bring into effect meaningful reform, but the odds continue to deteriorate.
Have a pleasant evening.