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Free Minds & Free Markets

When the Bubble Bursts, We're So Screwed

All we have to show for 9 years of economic expansion is record amounts of debt, and all long-term fiscal problems ignored.

"If something cannot go on forever," the economist Herbert Stein famously wrote, "it will stop."

Stein's Law, as that dictum and its variations have come to be known, originally referred to ever-widening budget deficits, though quickly expanded to include phenomena such as economic booms. We may soon watch the rule assert itself on both counts.

You need not search hard for trend lines that are reaching the near-forever stage. The equities markets, even after last week's bloodbath, are still in the midst of the longest bull run (defined as avoiding a 20% drop from peak) since World War II. There have been 12 economic expansions in the U.S. during that time; 11 were shorter than our current 111 months, as calculated by the National Bureau for Economic Research. If growth lasts until next summer, we'll break that record, too.

And did we put our houses in order after all that growth? Nope! "Consumer debt is at an all-time high," reports American Banker, adding cheerfully: "The crisis did not teach us a lesson about the perils of borrowing too much." Personal savings are down. And during the just-ended fiscal year, the federal government also ran its largest budget deficit in six years.

There are housing bubbles, auto bubbles, tech micro-bubbles, art bubbles. Banksy shredded his own just-sold $1.4-million painting, and now it's said to be worth even more.

The trade war with China really kicks in after Jan. 1. The Grim Reaper is all warmed up in the bullpen, waiting for the opening riff from "Welcome to the Jungle."

Yet some enthusiasts claim the sky is perfectly clear of storm clouds. Asked Sunday on Fox News whether there were any sign of concern, National Economic Council Director Larry Kudlow said, "not at the present time," adding, "The economy is in terrific shape. We are in an economic boom. People thought it would be impossible. The reality is we are clicking on all cylinders. They are absolutely crushing it, profits are rising, confidence is up, blue-collars are up, wages are up."

Bulls are right until the moment they're wrong, and so far during the Trump presidency they have a far better track record than the bears. But what happens when the music finally stops?

Not only are individual Americans unprepared for this eventuality, being leveraged with historical amounts of debt, their governments at all levels are in even worse shape. Recessions dampen tax receipts while spiking demand for state services. But instead of using the economic expansion to prepare for that rainy day, politicians have blown record-size holes in their budgets.

Consider that just as we enter this new era of higher interest rates the annual federal deficit is set to once again cross $1 trillion — yes, the same threshold that drove so many tea partiers nuts (and rightly so) back in 2009-2013. Debt service is the fastest growing major item in the federal budget, estimated at $390 billion for next year, and expected to close in on the $1-trillion mark within a decade.

As Rep. Thomas Massie (R-Ky.), one of only a handful of federal legislators remotely serious about fiscal issues, recently tweeted, "the federal government spent 10 times as much money paying interest on the debt … as it did on all roads and bridges. … The debt isn't just a burden for our kids and grandkids, it's a burden for us!"

Think of how much our politics have changed since the last long economic expansion (1991-2001). Back then, when there were nominal budget surpluses, Democratic presidential nominee Al Gore wanted to put those savings in a "lock box" in order to shore up Social Security in advance of the long-awaited stress test of the baby boom generation retiring. George W. Bush preferred tax cuts, but also made a bid for Social Security reform, which would fizzle on the launch pad of his second term.

Every year between 1997 and 2013, the president, whether Democratic or Republican, mentioned in his State of the Union address the need to reform old-age social programs before demographics render them unsustainable. No more.

Donald Trump rose to power by repudiating the entitlement-reform agenda of House Speaker Paul D. Ryan (R-Wis.), who has been subsequently chased out of politics. Democrats now campaign on expanding, not reforming, Medicare.

Sadly for juveniles of all stripes, problems do not disappear just because you no longer mention them. The Congressional Budget Office, whose sobering predictions made constant headlines in the Obama years back when Republicans pretended to care about fiscal responsibility, predicts that the Social Security trust fund will run out of money in 2031, after which recipients are required by law to receive an across-the-board 25% benefit cut.

On the state level, public-sector pension promises are already straining budgets to the breaking point from Sacramento to Syracuse. You think those problems will get any better when the next recession hits? Last time around a Democratic president with majorities in the House and Senate showered hundreds of billions to bail out misgoverned states. Now close your eyes and imagine President Trump doing the same.

The zero-sum battle over government resources is brutal enough with unemployment near all-time lows. Though it feels almost cruel to say so, if you think politics are ugly now, just wait until the return of Stein's Law.

This article originally appeared in the Los Angeles Times.

Photo Credit: Wells Fargo

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  • Drave Robber||

    Money isn't what it used to be.

    (and get off my lawn)

  • DrZ||

    Neither is nostalgia.

  • Fist of Etiquette||

    "And this editor-at-large puts the blame squarely on you, the American voter."

  • newshutz||

    Well, not me, because no one I ever voted for has won.

  • sarcasmic||

    I can accurately predict the outcome of an election by taking the inverse of my ballot.

  • DarrenM||

    That's good to know. Now no one else has to vote.

  • RoyMo||

    If Alf Landon had won we wouldn't be in this mess.

  • Ron||

    your still at fault for not voting for teh correct person

  • afk05||

    As it should be. We are all to blame. Everyone loves to point fingers, blame the big bad government, Wall Street, bad fortune, the economy, etc., but we all play the game and allow it to happen. We don't revolt or speak loudly enough about this. How many people have forgotten about 2008, and keep living in debt?

    How many people have no choice because the unemployment numbers are completely inaccurate? Go to the job listings and see how many positions are asking for candidates that don't exist, too many qualifications and skills requirements to get through the ATS systems, and how little money they are offering for these jobs. But yet we keep electing the same people, not speaking up about corporatism, doing the same thing and expecting different results.

    Everyone's a snowflake (everyone), but we are all too scared to actually do anything or to step outside our comfort zone.

  • ||

    Go to the job listings and see how many positions are asking for candidates that don't exist, too many qualifications and skills requirements to get through the ATS systems, and how little money they are offering for these jobs.
    ...
    not speaking up about corporatism

    You do realize that speaking up about corporatism does very little to resolve whatever problem you think corporatism represents, right? That all the excessive qualifications for underpaying jobs can be completely obviated by starting you own business, right?

  • CLM1227||

    Go to the job listings and see how many positions are asking for candidates that don't exist, too many qualifications and skills requirements to get through the ATS systems, and how little money they are offering for these jobs.

    My brother-in-law was complaining of the same thing.

    How many of those skill reqs fall off when they supply the unfilled jobs to international head-hunters?

  • kinghiram91||

    I agree. When the housing market fell in 08, EVERYONE was to blame for that. From the poor dumb shmucks taking mortgages they KNEW they couldn't afford, to the lenders who also KNEW the guy working part-time at McDonald's couldn't afford them, to the Clinton Administration who rammed a bill through Congress known as the Fair & Equal Housing Act, claiming that "Everyone should be able to own a home". That Act enabled the banks to start the predatory lending that started the whole mess.

  • LarryA||

    FTFY:
    "That Act enabled the mandated that banks to start the predatory lending that started the whole mess."

    Follow bankers around; and note that 90% of their decisions are made to comply with federal or state law. Probably 99.9% of the decisions that screw a customer are mandated.

  • Oli||

    Who cares about job requirements? Just apply if you somewhat fit part of the profile and act like a competent and decent human being at the interview.

  • Jerryskids||

    Hey, at least they've resurrected the program to sell houses to people with bad credit and no money down so that's got to be good for the construction industry and good for the economy - we can borrow our way out of this debt if we borrow big enough.

  • BestUsedCarSales||

    When it inevitably explodes, we'll be able to blame banks fully again, maybe even nationalize them.

  • Robert||

    So...you quote Kudlow to the effect that the forecast is good, but no economist to the effect that it's bad? Does that say something?

  • jello.beyonce||

    Shadowstats.

    The National Economic Council (NEC) of the United States is the principal forum used by the President of the United States for considering economic policy matters....thus Larry Kudlow has to say what Herr Trump tells him to say.
    He's merely a talking head, not a true Economist.

    The more one hears about how good the economy is, the more they need to worry. It's called propaganda.
    If the economy were truly good, they wouldn't have to keep trying to ram that idea down our throats.

    I've been in politics, PR, marketing and advertising for a long, long time. When a show or event is a guaranteed sell-out, you don't need to advertise it.
    When you're worried about ticket sales, you start running ads that say "tickets are going fast" or "seats are limited" or other vague statements, trying to convince people to buy tickets (relying on the "fear of loss" technique or create hype).

    Large budget deficits don't happen in a good economy.
    Tariffs (veiled taxes) don't happen in a good economy.
    Low labor force participation (hidden unemployment) doesn't happen in a good economy.
    Mass immigrant deportations don't happen in a good economy.

    "Indicators" like GDP and unemployment, are too easily manipulated.
    There's still over 102 MILLION Americans out of work.

    No wonder this country is so angry. The lies Americans are being fed aren't playing out in real life.

    Buy more....think less.

  • ||

    I've been in politics, PR, marketing and advertising for a long, long time. When a show or event is a guaranteed sell-out, you don't need to advertise it.

    So, if I read you correctly, your argument, if compelling on its own, wouldn't require you to advertise your credentials. That if you used your credentials to bolster your argument that should've been compelling on its own, it doesn't make your argument compelling as much as highlight the fact that both your argument and your credentials are shit.

  • Red Tony||

    Once again, mad.c with the trollpost. Listing of background credentials lends weight to his argument.

  • TrickyVic (old school)||

    ""Listing of background credentials lends weight to his argument."'

    I believe that's a fallacy called appeal to expert. Just because you have a particular expertise, doesn't mean you argument is true.

    This isn't a comment on jello's argument. Just pointing out the fallacy.

  • Griffin3||

    Oiy, he has a good point. Bust his chops if you want, but I see no counter-argument here.

    A big part of it, is at least fractionally the result of government itself. When a doctor has to spend 40% of her time doing paperwork (with no eventual benefit) instead of seeing patients, it lowers productivity. It results in less doctoring being done, which is less benefit to everyone, not just the doctor.

    When the rest of the paperwork gets so great that a 4-person (1 doc, 2 nurses, 1 phone) requires 2 extra people just to handle HIPAA compliance and mandated insurance requirements, productivity falls further. Two new jobs are created, but they produced nothing of worth to anyone, just huge binders full of strangely repetitive paper.

    This problem is spreading through all sorts of jobs; more and more effort is spent on useless paper, less time is spent doing actual productive work. Why haven't people made more of an effort* to say, hey, this is enough, I'm mad as heck, I'm not doing this any more?

    [I'm afraid this response got conflated with afk05, above]

  • Griffin3||

    [* people have said they aren't doing it any more. No one even bothers to see, but there is a humongous number of people working gray market these days, fixing cars, trimming grass, repairing computers, hacking facebook. Regulate people enough, and they will go where the regulations aren't. Good on them.]

  • ||

    This problem is spreading through all sorts of jobs; more and more effort is spent on useless paper, less time is spent doing actual productive work.

    I don't disagree with this. However, is post has some... idiosyncratic, anachronistic, and oxymoronic aspects to it. Advertising your credentials on the internet, like anyone believes you or gives a shit, was just the biggest red flag. He then goes on to talk about metrics that people haven't really highlighted in a decade list a bunch of stuff that just doesn't happen in a good economy without any context or justification. Mass immigrant deportations happen in good, bad, and mediocre economies and kinda de facto depend on foreign economies.

    When was the last time you turned listened to a report of the US economy and got the message "The US economy is OK, nothing to see here!" I don't exactly disagree with the message "Don't buy into propaganda." but following it up with "and it's all propaganda. Except me." isn't compelling.

    For someone who claims to have spent decades in marketing and advertising, I can see why he got out.

  • CE||

    And kill all those jobs?

  • Nardz||

    "I've been in politics, PR, marketing and advertising for a long, long time."

    So, bullshit.
    You've spent your life being bullshit.
    Cool

  • Sevo||

    "I've been in politics, PR, marketing and advertising for a long, long time. When a show or event is a guaranteed sell-out, you don't need to advertise it."

    This is the web. Nobody believes your fake creds.

  • jello.beyonce||

    Shadowstats.

    The National Economic Council (NEC) of the United States is the principal forum used by the President of the United States for considering economic policy matters....thus Larry Kudlow has to say what Herr Trump tells him to say.
    He's merely a talking head, not a true Economist.

    The more one hears about how good the economy is, the more they need to worry. It's called propaganda.
    If the economy were truly good, they wouldn't have to keep trying to ram that idea down our throats.

    I've been in politics, PR, marketing and advertising for a long, long time. When a show or event is a guaranteed sell-out, you don't need to advertise it.
    When you're worried about ticket sales, you start running ads that say "tickets are going fast" or "seats are limited" or other vague statements, trying to convince people to buy tickets (relying on the "fear of loss" technique or create hype).

    Large budget deficits don't happen in a good economy.
    Tariffs (veiled taxes) don't happen in a good economy.
    Low labor force participation (hidden unemployment) doesn't happen in a good economy.
    Mass immigrant deportations don't happen in a good economy.

    "Indicators" like GDP and unemployment, are too easily manipulated.
    There's still over 102 MILLION Americans out of work.

    No wonder this country is so angry. The constant barrage of lies Americans are being fed aren't playing out in real life.

  • JesseAz||

    Who is ramming good economic news down our throats? The mainstream media sure isn't. They barely mention positive economic news under trump. Compare their love of 2% growth in articles to Trump's over 3%. New York times writes an article monthly about the economy crashing. Even reason is yelling the trade wars will destroy us all. And now an article about a crash! So where is this ramming coming from?

  • LiborCon||

    It's hard to beat incumbents when the economy is good. So let's start writing about how bad a good economy is.

  • CE||

    The job market is hotter than ever. Most people who are out of work aren't looking all that hard.

  • Robert||

    OK, so a boom can't go on forever. They always stop. But what does that say about the world beyond the stoppage? It always gets going again, because recessions can't go on forever either. What might be useful is some forecasting about the net effect, i.e. the remainder of the boom + the following bust; overall, will we still be ahead?

  • JesseAz||

    Why did we start thinking economic corrections are a bad thing? The modern liberal is basically claiming we should save Sears because they've been around so long. Corrections are good. They reallocate investments to positive markets.

  • Marcus Aurelius||

    Well, they also want to pay a living wage to anyone regardless of economic value created, so...

  • Marcus Aurelius||

    They also want people to vote regardless of whether or not they've done research on the candidates, so...

  • Lester224||

    Maybe we should make everyone take a test before they vote. Then if they don't know enough U.S history, or they only know the name of one candidate, or they can't spell Republican, they don't get to vote.

    Wait, that's illegal isn't it.

  • JesseAz||

    Most voters probably don't even know the name till they see the party letter on a ballot.

  • DesigNate||

    As Just Sayin has pointed out many times, the modern Democrat is just as much a conservative as their Republican counterpart. They're just conservative about different things, some of the time.

  • DarrenM||

    No. A recession can't go on forever, but does it matter to you if it doesn't end until long after you're dead?

  • Robert||

    Yes, we have a lot of debt, but a lot of assets too. Those aren't exclusively in savings acc'ts (where they don't do anything directly). What's the bottom line?

  • FreeRadical||

    Assets become over leveraged in debt. Prices are driven up to unsustainable levels due to money created by the Fed.

    So, the concept of an "asset" becomes massively over estimated. This is especially true in houses, property, and stocks.

    And having money is savings accounts does a lot. It builds actual debt-free assets. It keeps prices down as people actually pay for things instead of going into easy debt and drive prices up. It's a stabilizing force.

  • Nardz||

    Yes.
    A debt based economy is bullshit, as it drives prices up because people can buy on credit what they can't afford up front, driving prices up for all.
    This may make sense for large ticket investments, but throws the curve off as credit is used to buy everything.

  • afk05||

    Exactly.

  • Conchfritters||

    Yes - let's sell Yosemite to the Chinese for $20 trillion, and then we can have a fresh start.

  • SQRLSY One||

    Sell Yosemite? Is that the future that you see?

    I call your fake future and raise you the REAL future!

    Unlike the rest of you poor slobs, I have a reliable crystal ball! So here goes…

    2020: National debt = 120% of GNP. Donald Trump easily wins re-election by promising a large budget for a new Department of Disputing Elizabeth Warren's Native American Ancestry, and for Making the Liberals Cry.

    2024: National debt = 130% of GNP. Elizabeth Warren is elected POTUS; She promised a large budget for a new Department for Making the GOP-tards Cry. Elon Musk's projects are fabulously successful, and Americans are emigrating en masse to Mars. Given the choice of either continuing to pay hideously large fees to the USA IRS, or renouncing America citizenship, the Martians pay $15,000 each to renounce America citizenship, but even the millions of Martian-American exit fees are like micro-farts in a hurricane… They make no difference in the national debt!

  • SQRLSY One||

    2028: National debt = 150% of GNP. New POTUS Bernie Sanders wins by promising free health care and PhD educations for everyone who can spell the word "free", plus, a free pony for everyone under 15 years of age. Some USA states are getting ready to split off of the USA, and renounce their "fair" share of the USA debt. Hispanic illegal humans are scrambling for the exits back south, as most employable Americans seek black-market low-wage jobs to escape exorbitant taxes.

    2032: National debt = 230% of GNP. All states have split off of the USA, leaving behind only Washington, DC, with the entire national debt. DC promptly declares bankruptcy. All states with nuclear-weapons bases, having very well learned from Ukraine having given up its share of USSR nukes, and getting invaded by Russia later on, have kept their own nukes.

    2036: Montana and Wyoming unite, feeling a patriotic urge to restore the united USA towards its former fully Glory Days. In a quest for military glory, they have a full-scale nuclear exchange with California. The USA's needs have now been met: Both the liberals AND the conservatives are forced to cry!

  • Qsl||

    Isn't the standard ploy to wage war on your creditors? Goose GDP, get rid of your "extra", and go colonialist?

    Not that we haven't had an audition of that for the past decade or so.

    Should the US collapse, so will a good chunk of the western world. Gonna be an interesting ride.

  • Gilbert Martin||

    The federal government has a lot of assets too.

    Assets that it can sell off to pay down debt.

    Like the almost 50% of the total land in California that is directly owned by the federal government. And lots of land in other western states as well.

  • afk05||

    Because all we need is more strip malls.

  • MSimon||

    Naked strip malls.

  • MSimon||

    Naked strip malls.

    And strip naked malls.

  • Marcus Aurelius||

    Amazon will put them out of business.

  • RoyMo||

    you clearly know nothing about the state of retail.

  • JesseAz||

    Yes. Strip malls account for 100% of private property. You're dumb. There are even privately managed parks. Shocking!

  • JFree||

    Fuck you asshole.

    That is NOT federal land. It is state/tribal land that the feds have refused to release to the states or to individuals or to tribes. Mostly for the purpose of keeping the West unpopulated - and hence politically unimportant - by controlling the sources of water.

    There may be very good reasons for the feds to declare their incompetence and venality at living up their terms of statehood - and let the Western states secede and form a new nation. And negotiate what portion of the total federal debt those states will assume. But THAT is the only way it will happen. Not through some asset-stripping that corporatist assholes like you always see as the solution.

  • RoyMo||

    Well they sure as heck aren't going to give it to the states, and if they sell it off the states will at least start to collect some property tax. But sure make the deluded perfect the enemy of the good.

  • Gilbert Martin||

    Based on some if his other posts about "rent on raw land" his is evidently a Georgist.

    Delusion is part of the package.

  • Gilbert Martin||

    "That is NOT federal land. It is state/tribal land that the feds have refused to release to the states or to individuals or to tribes."

    I see you're back again making more assertions that you can't prove.

  • JFree||

    And once again - you're wrong. Colorado Statehood Act - same is true for every western state.

    Boundaries. That the said state of Colorado shall consist of all the territory included within the following boundaries, to­ wit: commencing on the thirty­seventh parallel of north latitude where the twenty­fifth meridian of longitude west from Washington crosses the same; thence north, on same meridian, to the forty­first parallel of north latitude; thence along said parallel west to the thirty­second meridian of longitude west from Washington; thence south on said meridian, to the thirty­seventh parallel of north latitude; thence along said thirty­seventh parallel of north latitude to the place of beginning.

    Colorado is rectangular just like every map shows. The only thing the feds retain outside statehood is subsurface mineral rights for land they refuse to appropriate. They chose not to appropriate Western land because a)until 1930 or so Eastern banks did not want silver (or domestic gold) competing with the gold they controlled so they wanted the feds (not states with silver) to be in charge of mining law/licensing and b)after 1920 House representation that is zero-sum means incumbents don't want to lose seats with peep shifts to those states.

    But if the feds try to sell to a foreign sovereign, then CO is no longer a state bound by any terms of statehood.

  • Gilbert Martin||

    And of course the fed's have lots of other assets that can be sold as well once we cut down the federal government's activities down to it's actual Constitutionally enumerated powers.

    How many office buildings do the feds own to house the Commerce Department, the Energy Department, HHS, HUD, etc. etc?
    Once all those unnecessary government departments are completely eliminated all those buildings can be completely sold off.

  • EscherEnigma||

    More importantly, the Fed has a lot of assets it can point at it's creditors and say "do you feel lucky, pick?"

  • ||

    Yes, we have a lot of debt, but a lot of assets too. Those aren't exclusively in savings acc'ts (where they don't do anything directly). What's the bottom line?

    Upper estimates of these assets, gold, land, buildings and all are on the order of a few trillion, 5 at the most. Bare land out west that doesn't have minerals under it and that you can't get water to isn't enticing to anyone. Especially a country like China. The Japanese? Maybe.

    However, for lots of assets, there quickly becomes a question about whether you're buying land, a building, or whatever, vs. buying (and maintaining) a piece of a failing/failed infrastructure system. Detroit privatizing its parking wasn't going to save it. When Chicago privatized its parking meters, it wound up costing them money.

  • CE||

    The bottom line is that if you are over-extended, things will get bad again.
    If you've managed to save up some cash, it will be inflated away.
    It's lose-lose.

  • Woody Chip Hurrrrr?||

    Bankruptcy, bub. Solves all problems.

  • CDRSchafer||

    That's why we have all these weapons. Come and take it.

  • DarrenM||

    Exactly. Our wise leaders know we're going to declare bankruptcy, so we need a strong military to fend off the creditors.

  • Woody Chip Hurrrrr?||

    I came up with a shiny new conspiracy theory in the interim. Has Trump ever been in bankruptcy? Don't know, but the concept seems like something he could whole-heartedly embrace -- sticking it to someone else while you go on with life in a different direction. Maybe his whole trade war thingie is merely to get the Chinese riled up, and his budget busting deficits are to get Americans riled up, so he can get teh US Government to declare bankruptcy -- with the misconception that he can leave the Chinese holding the bag while the US govt goes back to spending like crazy.

  • EscherEnigma||

    Yes, he has declared bankruptcy multiple times.

  • DenverJ||

    Whoosh

  • sarcasmic||

    Consider that just as we enter this new era of higher interest rates the annual federal deficit is set to once again cross $1 trillion — yes, the same threshold that drove so many tea partiers nuts (and rightly so) back in 2009-2013.

    Remember all those war protesters who mysteriously disappeared when a Democrat waltzed into the White House? I suspect we won't see any tea partiers protesting the debt while there is a Republican in there, though they may mysteriously reappear the next time a Democrat holds that office. Principals, not principles.

  • ||

    In a backhanded defense of the Tea Party, a lack of resurgence on their part could represent their demise as much as their partisanship. It's widely regarded that the shenanigans pulled with regard to the debt ceiling hurt the cause rather than helped it. It's kinda hard to have a movement when the core policy prescriptions do that and the reason you don't show up to the next debt ceiling fight is because your input counts as much as Michelle Bachmann's.

  • JesseAz||

    The tea party wing of the house keeps voting against spending bills. It's the other assholes.

  • DesigNate||

    Weren't Massey, Amash and Paul elected by the tea party wave? I'm pretty sure they consistently vote against the ridiculous spending bills.

  • DenverJ||

    Yeah the tea party started under Bush The Younger, but keep rewriting teh histories.

  • sarcasmic||

    Now's the time to sell your house and move into an apartment. Then scoop up a nice house on the cheap when the bubble bursts. Well, that's my plan anyway.

  • Bubba Jones||

    In many places it is too late. The market is already soft. And your wife doesn't want to live in an apartment.

  • sarcasmic||

    My wife left a couple years ago, so I couldn't give two shits what she wants.

  • sarcasmic||

    ex, rather

  • Marcus Aurelius||

    Because of the soft "market"?

  • Nardz||

    Marcus Aurelius, imperator

  • jasno||

    Got divorced last year and had to sell to pay off the ex. Now I'm living the apartment life and loving it. I guess I'll snatch up some cheap real estate if the market crashes. I really don't have any desire to own a house again though. In the past year I haven't had to worry about yard work, busted water heaters, or what color paint to use. I suspect a lot of millennials feel the same way. Single-family residential may take a permanent hit in the near future.

  • FreeRadical||

    I have a lot of equity in my house. And it's not part of any kind of retirement plan nor am I otherwise dependent on it financially. Plus I'm in Texas where people are smarter and do less stupid shit. So the markets are more stable. I'm good.

  • Lester224||

    We're paying off the house as fast as we can. It's just a place to live though.

  • Gilbert Martin||

    Or you could stay put and sell short real estate related stocks - such as home builders like Toll Brothers or Lennar. Or buy put options on them.

    You can put on and unwind those positions at any time with a few clicks on a computer keyboard - far faster than buying and selling actual real estate.

  • afk05||

    Already did that. Just waiting it out. Cashed out at the peak in July.

  • afk05||

    Already sold the house.

  • CE||

    Already did.

  • CE||

    Already did. Maybe a year too early, but better than a year too late.

  • B Wilds||

    Sadly what is seen by many as "a good economy" is simply an illusion build of massive deficit spending! The situation today is in many ways "historically unique" due to a decade long expansion of government spending.

    While we fixate on an improving GDP the national debt is not just growing but it is exploding. An under-reported and unnoticed report was issued last week by the Office of Management and Budget which is required to from time to time review and update the U.S. federal budget. The report titled the "Mid-Session Review" paints a far bleaker forecast of the deficit going forward than originally predicted.

    James Grant and Jim Chanos recently participated in a talk at the New York Historical Society, both men make it perfectly clear they see what is being cast upon us is a giant fraud. We should be dubious of those making promises this will end well. The article below delves into the bleak deficit numbers now being predicted.

    http://brucewilds.blogspot.com.....-cast.html

  • jello.beyonce||

    Wealth inequality, per the WTID, is at an all time high, eclipsing even that of 1927-1928 (just before the first Great Depression).
    The stock market, and corporations, have been highly consolidated by a few firms (like the "Big Three" - Vanguard, State Street, BlackRock), whom have led the charge for corporate stock buybacks...leading to higher EPS (rather than genuinely higher profits). Though higher revenue has been achieved by creating virtual monopolies (by owning the largest numbers of shares of each of the largest "competing" companies in most every single industry, thus reducing true competition and driving prices up).
    Coca-Cola, PepsiCo and 7Up/Dr Pepper are largely owned by the same largest firms.
    Ditto for the largest "competing" U.S. airlines, the largest tech companies, the largest telecoms, etc.

    The stock market has been highly manipulated, by those firms, as they have acquired a plurality of ownership, thus rising stock pricing by reducing available shares (supply/demand).

    A very similar scenario occurred in the late 1920's...just prior to the first Great Depression.
    Yet people were sold on the propagandist campaign called the "Roaring 20's)....and convinced to go into further debt, as they spent more, trying to keep up with the pseudo-prosperity.

  • afk05||

    I see people on LinkedIn every day, highly qualified and educated, that still can't find jobs, yet they keep touting these unemployment and jobs numbers. The methodology for the data is suspect, as is the actual jobs themselves. There are so many places that post jobs, interview people, and then never fill the jobs and finally stop listing them. They are collecting resumes and writing off candidate searches for tax purposes.

    Then there are the ATS systems, and listings that require qualifications and experience for five different roles, and the ATS system rejects anyone not meeting all of the criteria or matching the algorithms. Also, the salaries they are offering for many jobs is lower than what they should be. I have an ex-colleague with a masters, 14 years of experience and very personable that has been offered jobs with a salary of $45,000. That is the same as what he started out as after school over a decade ago.

    There will always be income inequality, but extreme inequality and wage stagnation, with increased costs of living, debt and inflation should be a major concern even to the most fiscally conservative.

  • FreeRadical||

    The unemployment numbers are a sham. They don't take into account labor participation rate. If that were included the number is over 20%

  • JesseAz||

    Labor participation is up the last two years .

  • DesigNate||

    They're a sham, but they're the same sham calculations that were being used under Obama's admin.

    And maybe those people on LinkedIn need to either start their own business, take a pay cut and work somewhere else, or go into a more physically demanding field.

  • Echo Chamber||

    James Grant is the smartest, most articulate, person I know whose prognosis's never come to pass.
    Eventually that broken watch is going to be right, but it's been a long, long wait.

  • FreeRadical||

    Why do I always have to mention that the trust fund has no real assets - even to libertarianism writers? Why do they keep repeating the nonsensical notion of them running out of money at some year xxxx?

    The trust fund is debt that the government owes itself. It's already out of money.

    When a bond it cashed-in, the money has to come from somewhere. Either spending is reduced somewhere else and current taxes are used to pay, taxes are raised and extra revenue is used to pay, or new debt is created somewhere else. You get the gold star if you picked option 3.

    The Fed creates money out of thin air by creating bonds that are loaned to banks. New money will be created to move the debt from the trust fund to some other fund. In the process, those bonds become cash in the hands of beneficiaries. That is the literal realization of "money out of thin air".

    Then of course, devaluation, inflation, crash, blah blah blah...

  • FreeRadical||

    Autocorrect caused me to type "libertarianism writers", but I meant to write "libertarianish", given the recent performance of Reason's writers.

  • NotAnotherSkippy||

    Well, because they're not very libertarian and are only fiscally conservative when it meets with their social goals. You might as well ask why they claimed even "nominal" surpluses from 20 years ago when treasury has showed increasing debt since 1958.

    So basically take Wapo and add opposition to minimum wage and you've got the reason fiscal position.

  • JFree||

    Why don't you knock it off with them negative waves? Why don't you dig how beautiful it is out here? Why don't you say something righteous and hopeful for a change?

  • Shirley Knott||

    "Be nicer to socialists."

  • OldGuy||

    It's a mother, beautiful bridge, and it's gonna be there. Ok?

  • Merl3noir||

    It goes much deeper than that. Personal debt used to be largely held by the upper middle class and the upper class. The poor largely had no access to debt. Today the poor owe the largest portion of personal debt. But in addition to government and Personal debt, Business debt is at record levels. The bulk of that debt is coming due in the next 2 years, and many of the companies can't afford to pay that debt. BBB rated bonds, (Bonds one step above junk bonds) are the largest portion of bonds. Many of those bonds ought to be rated as junk bonds except for creative reporting that does not hold up to recommended accounting practices. Of course if you think Corporations engage in shady accounting look at the things the Government allows itself to do. Any CFO who ran their books the way the Government does would be put into prison for such poor accounting,

    Of course Larry Kudlow is right, at the moment there is no sign of a down turn. Many leading indicators are very close to going from green to yellow, but so far everything is still green for the Bull market to continue.Despite the long bull market stocks are still cheap. Most annalists I follow are expecting things to stay positive for the next 18 to 24 months.

    However, when things do turn south, it will be a blood bath, for at least a decade.

  • ThomasD||

    "Today the poor owe the largest portion of personal debt."

    That is practically axiomatic, because by restricting consideration to 'personal debt' you have already selected for the 'poor.' Because having assets (even if you owe on them) generally marks you as 'non-poor.' And if you do owe on your assets that figure will commonly exceed all your other debts combined.

    Run those numbers again based upon total household debt.

  • This Machine Chips Fascists||

    "Welcome to the Jungle" was GnR. Grim Reaper is responsible for the much much worse "See You in Hell".

  • Ken Shultz||

    He wasn't referring to that Grim Reaper.

  • Ken Shultz||

    There is one thing that is getting back on track--we're unwinding QE. This is one of the big reasons why yields rose and the market took a hit last week. The Fed isn't buying treasuries like it did. Insulating the market from shocks is one of the reasons why we've had such a long expansion, and putting the markets on notice that equity investments are risky again is a good thing.

  • Conchfritters||

    Could be worse - we could be like Germany where the 10 year Bund yields something like 0.4%, and the economy there is still stagnant. I'm glad interest rates are rising - seniors need to invest in CDs that aren't yielding squat, and the Fed needs more powder for the next time the economy goes south.

  • FreeRadical||

    I don't know much about the "unwinding" of the QE. I'm genuinely curious. Do you have a quick link or some info to add? Of course, I could do my own research.

  • JFree||

    Here's one source (late 2017) - Wolf Street

    Yes unwinding is happening. At a pace that will be complete in 35 years. So no - unwinding isn't really happening unless you think the next crisis/bailout is 35+ years away. Wall St and its favored clients are still sitting on their gift of $3.5 trillion in free money.

  • Ken Shultz||

    That's factually incorrect. Buying less treasuries than we did before is the beginning of unwinding all that, and dumping all those treasuries at the same time would be profoundly stupid. In the meantime, unwinding over a period of 30 years means an immediate impact on the 30 year treasury. Giving the markets time to adjust to the new reality makes a ton of sense, and making things better is a big change from making things worse. If unwinding QE at this pace were insignificant, the market wouldn't have reacted the way it did last week. After all, what do you know that the market doesn't know?

  • steve sturm||

    "Bulls are right until the moment they're wrong, and so far during the Trump presidency they have a far better track record than the bears. But what happens when the music finally stops?"

    A more immediate question is 'what would cause the music to stop?'. Per Newton, something has to happen to turn optimism into pessimism. Left unchecked, a growing economy is, notwithstanding physics, a perpetual motion machine.

    And I know there's a contradiction in the two previous sentences.

  • sarcasmic||

    Left unchecked, a growing economy is, notwithstanding physics, a perpetual motion machine.

    That's not true. People make mistakes. Bubbles happen. And then they correct themselves as people reallocate their assets. Problems occur when the government prolongs asset relocation. That's what caused the Great Depression and Great Recession. If government leaves people alone, this reallocation process is relatively short and sweet.

  • wearingit||

    " Democrats now campaign on expanding, not reforming, Medicare."

    Rather dim view of it. US spends 17% of GDP on healthcare and twice as much as our northern neighbor with overall worse results (taking into account the many uninsured, etc.) An expansion might actually make proper use of the money and allows for capping costs. I mean, if anyone bothered to look outside our shores they could see a bunch of useful ideas to do healthcare better.

  • JFree||

    In theory I agree.

    In practice - until the govt can actually deliver improvements (in delivery, costs, etc) with either the VA model or the Medicare model; there is zero reason to believe they can do a damn thing with an additional patient base.

    I did this stuff for big employers a long ways back. And the ONLY way to deliver that in an insurance-based system is to have the guts to stand up in front of people who are pissed that you have taken their free lunch away from them. If those people who are pissed are the ones who decide whether you keep your job, that's very unlikely to happen.

    Adult conversations about this stuff can happen in other countries. Americans are not adults about this stuff.

  • Marcus Aurelius||

    Healthcare is designed not to do better.

    When we have state medical boards that have legal ability to deny any facility from buying new equipment, prices are not going to drop (ie, why would any county need TWO MRI machines???)

  • JFree||

    re MRI's and other big capital equipment - the VA model (same as muni/univ hospitals) would work (same as Kaiser or Mayo). It's quite easy to predict how much and what major capital equipment patients of that facility need. That's just actuarial/statistical stuff. So buy it and run it at full capacity - and only contract/offer to others at the margin. That turns the expense into a fixed expense - and when paid back that fixed expense is zero/low which can be used to lower costs of other patient services.

    It's the insurance and private non-profit facility model that fails with capital stuff. The non-profit, at the end of the year, is always going to blow its operating profits on shiny new toys. Cause the only other options for it are to use those operating profits to lower service costs - or lose its non-profit status. And since insurance (whether govt or private) doesn't take on any capital costs/risks themselves, they end up having to try to micromanage everyone else's capital decisions. Which fails.

    Private non-profits are the worst possible way to manage capital-intensive operations - because the 'non-profit' structure doesn't do balance sheets well. Those countries that do the social insurance (bismarck) model also tend to be dominated by muni/uni/public-owned hospitals with for-profit hospitals as most of the remainder.

  • Ron||

    Are you referring to Canada where without informing guardians of children they put to death after harvesting their organs to sell for a profit since its the only way they can stay afloat. thats some good healthcare. don't take your kid to a hospital in Canada unless you don't want your kid anymore

  • Greg F||

    US spends 17% of GDP on healthcare and twice as much as our northern neighbor with overall worse results (taking into account the many uninsured, etc.)


    Living a stones throw away from Canada and my wife and I both having worked for Canadian companies I have to disagree.
    1. Have lost 2 Canadian friends who would have survived with US health care while sitting on waiting lists.
    2. My wife had a major heart attack. Upon returning to work her Canadian counterparts commented that had she been Canadian she would be dead.
    3. If you have the right connections in Canada you will get prompt treatment. In reality it's a two tiered system. I have witnessed this first hand.

  • NotAnotherSkippy||

    And when they get in trouble they ship ppl off to the US. Canadian healthcare is a disaster.

  • wearingit||

    Well, in your position you would disagree. Do we not act as if people have died because they don't actually have health insurance here?

    All these anecdotes are useless without comparing them to anecdotes to the US.

  • I am the 0.000000013%||

    The 'better outcomes' is bullshit.

    Part of it is we report things differently, and part of it is that we are a much wealthier society that kills people through living to excess.

    Let's face it. If people were poor enough where they had to walk a couple blocks to and from public transportation several times a day rather than getting in their car in their home garage and driving it to a parking garage and never walking outside for more than a handful of steps, we'd be a lot healthier as well.

  • Gilbert Martin||

    "Think of how much our politics have changed since the last long economic expansion (1991-2001). Back then, when there were nominal budget surpluses, Democratic presidential nominee Al Gore wanted to put those savings in a "lock box" in order to shore up Social Security in advance of the long-awaited stress test of the baby boom generation retiring."

    Uh huh.

    And that was an accounting fiction every bit as much as the so-called social security "trust fund" is right now.

  • FreeRadical||

    Yup. There was never a surplus.

  • ThomasD||

    Kinda makes you question the credibility of anyone who offers that nonsense uncritically.

  • Bubba Jones||

    I don't get it. The talking heads on the news tell me that we have annual corrections of 10%. If true, then what is magical about 20%?

    If we have a 40% rise before the next 20% correction, then does it matter?

    And I thought the real problem was entitlement spendig. Which means the fix will be 80% tax rates and massive tax avoision.

  • sarcasmic||

    "avoision"

    Is that like a New Yock thing?

  • FreeRadical||

    Hmm, cool new word. It means avoidance, but with a more painful, invasive, cutting edge. Avoidance + incision.

  • Bubba Jones||

    "the arrangement of one's financial affairs so as to avoid or minimize tax liability in such a way that it is not clear whether this constitutes lawful avoidance of tax or illegal tax evasion."

  • DarrenM||

    It's legal if you can get away with it.

  • Gilbert Martin||

    "Not only are individual Americans unprepared for this eventuality, being leveraged with historical amounts of debt, their governments at all levels are in even worse shape."

    Speak for yourself.

    Not all individual Americans are financially unprepared or irresponsible in their own lives.

    Those are the people who will be targeted by both the irresponsible government and the other irresponsible Americans to bail themselves out.

  • PubliusVA||

    "As Rep. Thomas Massie (R-Ky.), one of only a handful of federal legislators remotely serious about fiscal issues, recently tweeted, 'the federal government spent 10 times as much money paying interest on the debt … as it did on all roads and bridges. … The debt isn't just a burden for our kids and grandkids, it's a burden for us!'"

    Well, roads and bridges are not supposed to primarily be the responsibility of the federal government, so not sure what that fact proves.

  • RoyMo||

    Try explaining to people that the National Road was extremely controversial.

  • Sarah Palin's Buttplug||

    The Fed quit buying Treasuries in 2012, you clown.

  • earthandweather||

    That isn't accurate...They took payment in treasuries when their's matured.

  • Weigel's Cock Ring||

    Gillespie and Welchie Boy, almost exactly ten years ago: "The Libertarian Moment: Despite all leading indicators to the contrary, America is poised to enter a new age of freedom."

    So why exactly were they so bullish on America back then? Because their messiah Block Insane Yomomma and the democrats just got voted into power.

    Why are they so miserable and bearish on America now? Because they're liberal democrats and have seen their power all but vanish. Gillespie has been whining almost nonstop on Twitter about how horrible everything is since the day Trump won the election, just like every other leftard.

  • ThomasD||

    Even worse, unlike Obama Trump has actually done libertarian things while in office.

    The rat bastard.

  • MiloMinderbinder||

    There was a time when Reason loved bubbles.

    Remember this ReasonTV classic from before the Great Recession?

    https://tinyurl.com/y7q8eugm

  • DuplicationCube||

    Someone's been listening to Tom Woods...

  • Rob Misek||

    We're so screwed because we've got a market-based economy designed like a casino with House rules and odds.

    My working hands are my economy.

    Maybe we should design a new economy, one that doesn't feature recessions and depressions.

  • OldGuy||

    "...The reality is we are clicking on all cylinders..."

    Clicking cylinders is generally a signal of something wrong. LOL

  • Griffin3||

    Means oil is not getting to your tappets, right?

  • Gilbert Martin||

    One lesson for those who have been fiscally responsible in their individual lives is to take steps now to minimize the future increases in taxation and/or wealth grab from government to bail out the irresponsible (both inside and outside of government).

    The new federal tax law lowered the tax rates and broadened the tax brackets. That's not going to last.

    For those who have managed to accumulate significant sums in tax deferred accounts such as IRA's, 401K's , 403B's, etc., it would be prudent to start systematically converting portions of those to Roth IRA's. You will have to take the tax hit on it when you do - at current rates but then what's in there grows tax free after that. You have to start taking taxable distributions on those tax deferred accounts at 70 1/2 and will likely be paying higher rates on that income then.

  • ||

    You will have to take the tax hit on it when you do - at current rates but then what's in there grows tax free after that.

    The problem is not the tax hit, it is the penalty on early withdrawal.

  • DarrenM||

    If the principal grows enough or taxes increase enough, the additional tax hit could be more than the early withdrawal penalty.

  • Gilbert Martin||

    There is no penalty for withdrawal once you reach 59 1/2.

    Furthermore, a Roth IRA conversion is not a withdrawal. You do a trustee to trustee transfer of whatever dollar amount you want to convert. The cash never goes through your hands. They 10% penalty does not apply to Roth IRA conversions no matter what age you are.

    You will have to pay the income tax though just as you would if you did make a withdrawal.

  • Echo Chamber||

    "Last time around a Democratic president with majorities in the House and Senate showered hundreds of billions to bail out misgoverned states. Now close your eyes and imagine President Trump doing the same."

    Dems will have no problem showering billions again on blue states harmed by elimination of the SALT deduction, once they are back in power.

  • Griffin3||

    Republicans will have no problem showering billions again on red states harmed by budgetary incompetence, or any other state, if they think it will buy them some votes ... or kick the can two years down the road.

  • Lester224||

    We're already showing billions on red states in the way of farm subsidies. And most of this if for big corporate farms (there are very few "small family farms" left.

  • ThomasD||

    The collective sound of all the howls of misery emanating from various states early next year, as many people sit down with their W-2s, only discover that there will be no refund, and quite possibly even a bill due, is going to be glorious.

    Maybe then they'll understand the wisdom of cutting taxes.

  • M.L.||

    There are virtually no politicians who are actually deficit hawks. The most they will do is harp on this talking point a bit when the other party is in power.

    More importantly, this will not change for the foreseeable future and maybe ever, for somewhat obvious reasons.

    Long term implications? Who knows.

    Short term -- Trump in particular is a deficit dove who subscribes to the "deficits don't matter" school of thought. This seems very obvious. However, he is actually more than willing to slash a lot of federal spending to the bone, other than the biggest items of military (except maybe foreign interventions) and entitlements of course, the latter because he rightly perceives that this is a political nonstarter. But he simply does not care about upsetting the apple cart with federal employees, contracting, foreign aid and military interventions, and all other special interest groups with regard to spending, and this makes him actually very unique and better than most.

    So, short term implication is this -- If you think spending is high now under Trump, just wait and see if Democrats gain either house of Congress. There is no limit to the spending that Trump will consent to in order to get Democrats to pass bills.

  • Sevo||

    What horseshit.
    'SOMETHING'S GONNA HAPPEN SOME TIME!!!!'
    Journalism, that ain't.

  • JesseAz||

    You're only screwed if you pull out all your investigation during the short term recession. Based on the economic ignorance of the average reason writer, yes they should be scared. The rest of us? Nope.

  • Sevo||

    "You're only screwed if you pull out all your investigation during the short term recession."

    Pretty sure you meant "investment", and I agree.
    My personal loss from the 2008 melt-down is precisely $0.00. I didn't sell at the bottom, simply waited for that ol' 'return to trend'.

  • Duelles||

    Some Kudos to New Mexico. Erased a big deficit and has a surplus with no tax increase. Not that all is well within the state, but damn, it can be done even in a poor state. Hope that the next governor and legislature doesn't screw it all up!

  • Griffin3||

    Yeah. Expect New Mexico to top the list of "States screwed over by the big bail-in of 202X", right there with Texas and North Dakota.

  • MattXIV||

    "Every year between 1997 and 2013, the president, whether Democratic or Republican, mentioned in his State of the Union address the need to reform old-age social programs before demographics render them unsustainable"

    Yet there was only one instance where the president was willing to actually expend political capital pushing reforms, which was so politically disastrous that it helped flip the Senate. Actual reform will never happen absent a crisis because it loses elections. This is a feature of the way the programs are financed intended to make their repeal politically difficult, not a bug (either raising taxes or cutting benefits mobilizes a large group for which the change is purely negative). The change in the last several years just seems to be we're being bullshitted about it less since the pretense that there is any viable reform plan has been dropped.

  • Dillinger||

    i'm an optimist.

  • earthandweather||

    Finally, Reason is talking about the economy as if it is the most important thing. Our fiscal and monetary policy has been irrational for decades and insane for the last ten years. We are screwed.

  • BillyG||

    I'm looking at some of the statistics cited and go "so what". From the car article for instance:

    Consumers are stretching out both the size and duration of loans because prices paid for new vehicles has climbed more than 10% over the last five years.

    Well, let see... inflation was up 7.2% in that time so we're really looking at a 2.8% increase. Is that a big deal?

  • ThomasD||

    And how much of that increase was due to the ever expanding regulatory requirements placed upon manufacturers?

    Imagine trying to bring a stock VW Rabbit back into production, they'd never let you.

  • EscherEnigma||

    Yep. The Boomers ducked us.

  • Michael Cook||

    As I understand the national debt, a lot of it is owed to foreigners. Nations can always renege on their obligations, or international commerce and communications can be completely disrupted long-term for either man-caused reasons (some degree of high tech war) or natural reasons (super volcano, big asteroid.)

    Wealth in the age of electronic bookkeeping is a curious thing. My household has a 5 yr-food supply and a garden (our doctors only allow us a handful of calories per day anyhow so food really stretches.) I have a wine cellar that will primarily go for trade items

  • NoVaNick||

    No worries! Everything will be just ducky once the Democrats take back Congress, the Senate, and Presidency two years from now and give us all free healthcare, education, housing, birth control, and income (not necessarily jobs) for life.

  • NotAnotherSkippy||

    I think you just posted the opening for dozens of reason pieces in 2020.

  • Truthteller1||

    I've heard this same sky is falling bullshit for 50 years.

  • Hank Phillips||

    Translation: I paid interest on looter politician debts that "shall not be questioned" for 50 years, and comprehension has not yet dawned.

  • MarkT1967||

    The trade war with China will be nothing. For each trade imbalance of 150 billion we erase our gdp will grow by a 1%.
    Ross Perot was right. Clinton was wrong. real estate values are not ridiculous. Earnings are good. We build an economy one manufacturing job a t a time. Trump is cutting government spending by 5%. The problem is the DEMS.

  • polijunkie100||

    "Though it feels almost cruel to say so, if you think politics are ugly now, just wait until the return of Stein's Law."

    Or, as Kipling called them, the 'Gods of the Copybook Headings'.

  • Michael Cook||

    For immediate survivalist needs, groceries, generators, gasoline, guns. For longer term, God, strong local neighborhood associations, pragmatic, intelligent leadership, and good intelligence networks to warn your little corner of the world when hostile hordes are eyeing you.

    Regards Kipling, Churchill, and the evolution of industrialism and European imperialism into World War I, it has always struck me as curious how the two most advanced, prosperous nations in the world (Britain and Germany) which had never had a great history of warring with each other, should be impelled to do so after 1900.

    Britain, which had fought many wars against France and more recently against Russia (including a covert struggle over Afghanistan) made those two countries its vital allies!

    Neither Britain nor Germany had enough farm land to feed their own population, so the contest kinda came down to whom would be able to stop the other from importing food. Germany lost that battle, twice, despite marvelous advances in the building and use of submarines.

  • ||

    1. "...economic expansion..." = monetary expansion, not wealth growth. 2. Average income is down, not up. Both spouses have to work more for less, compared to the '50s. 3. Seed capital is less, approaching zero. How will America borrow when it can't even pay the interest on what it owes? What will happen to the collateral when it is taken by the lenders and the lenders are foreclosed on by their lenders? 4. What do you call a bankrupt nation? Answer: A nation of debt slaves.
    But fear not, TPTB have an ace in the hole to stop a rebellion during an economic collapse. Oh, wait, it bails them out, not the public. Run-away inflation + mass unemployment/underemployment = war. When at war, domestic unrest is quelled, easily repressed. And domestic control (repression) gives more political power to the politicians which is what they crave more than riches. This period will be known as "America's Greatest Depression" in a best-case scenario. Or worse case, WWIII. Either way, it won't be non-violent.
    Empires tend to win every war and then collapse from the cost. And their public will continue the deadly cycle.

  • JBSparks||

    21 trillion in the hole and little to show for it. Why is that is?

  • Johnny B||

    Because deficits are future taxes, and the future doesn't get to vote today

  • Tim DeRoche||

    We're all Keynsians now...except when the boom comes and Keynes says to tighten our belt.

    http://www.timderoche.com/2018.....ere-not-2/

  • tommhan||

    People just love to preach doom and gloom during the good times, it is like they WANT it to end so they can say, I told you so>

  • Hank Phillips||

    I was wondering why Matt never got to the point, all the way up to mention of the LA Times. Pointlessness is everything to the looter press, and this article still beats anything else in the LA Times by a mile. Mentioning the Laffer Curve would have gotten the article all over the cutting room floor.

  • Michael Cook||

    So, anyhow, is China going to agree to make some compromises and forge a new economic relationship with the USA, or are they going to calculate that they are strong enough already to take America down and create a new China-centered Prosperity Sphere of cowed neighbors?

  • vek||

    Well, the nation may be going to hell in a hand basket... But I've been getting my financial house pretty well situated. That's all anybody can do really. I need to snag some more silver actually... If you adjust for inflation it is priced VERY low right now.

    But yeah, be prepared yourself, and there ya go. If the SHTF you may well be able to benefit from it if you're well situated.

  • flyfishnevada||

    Cool! If this can all happen about the time we'll be looking to get off the road and buy a house, it would be great. Really stretches the budget when you can buy real estate for pennies on the dollar.

  • Gasherbrum||

    Required by law to make 25% cut in SS in 2031? Feh. If 40+ years of faithless oversight and execution of immigration law proves one thing, it is that Congress and the Executive can ignore laws without any long term consequence to them.

  • Michael Cook||

    Now on the Rush Limbaugh Pollyanna side of things, I can see Repubs holding on to the House by the skin of our shinny-shin-shins, gaining big in the Senate, and coasting into the presidential election year with our national and the global economy still purring along happy enough at how everything is going.

    Why shouldn't the global economy continue to grow at 4%? Plenty of new consumers out there. Plenty of resources and other than rare earths few of those are so essential than substitute resources couldn't make up any shortages.

    All we need is for the up-and-comers to acquire sufficient purchasing power and for all the political powers to play nice.

    Affordable energy is magic key to this wonderland, and that doesn't mean pie-in-the sky subsidized dumb energy that makes corporations like Siemons richer because their idiot socialist cronies like to clutter the landscape with their towering bird-bashers.

  • CoachBeef||

    David Stockman was abused viciously yesterday by Stuart Varney and Elizabeth MacDonald on FoxBusiness for his usual doomcasting. Their anger at him indicates that they just don't disagree with his bearish warnings, they have a RELIGIOUS belief in talking up the economy, even if it carries demonstrably massive downside risks. They club bears over the head for not predicting exactly when a crash will happen. But do commentators bash structural engineers who warn that a bridge is unstable? No, because the engineering analysis is seen to be a better predictor of failure because human behavior is not a factor. But structural engineers can't predict WHEN a bridge will fail any better than Austrian econ financial risk analysts... but both know the structure is unstable. Maybe the bulls think human behavior is a magic factor that can avert a collapse. I would argue human behavior is as much an instability factor as a stability factor...if not more toward instability when government creates a subsidy that incentivizes runaway investment speculation. By the time the bulls realize their hubris is hubris, it will be too late. Prescription:
    Downsize, become self-sufficient, have a trade you can barter, build survival alliances, train for survival, and stockpile weapons and ammo. This next crash will not be recoverable by bailouts and QE. A lot of people are gonna die.

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