CRASH2: The fact that it hasn’t happened yet is not a reason for the smug to smirk

2359clockThe fiscal, economic, productivity and social theories of neoliberal globalism are clearly not working for anyone except a tiny minority making money on the bourses and/or in the shadow banking system. Both those areas of ‘commerce’ are now light years out of wack with the real physical economic situation on terra firma.

An overview

In the US, the so-called U3 figure gives an unemployment rate of around 5.3%, but no professional observer of any merit believes the number any more: starting with Bill Clinton and right the way through to Obama today, long-term unemployed (LTUs) are simply dropped off the statistics. It must rank as one of the greatest statistical scams of all time, but it is remarkable how few Americans are aware of what’s really going on there.

If one measures American LTUs using the pre-Clinton approach – so-called ‘U6’ – the US rate of unemployment today is 23%.

That’s a staggering 35.5 million unemployed workers.

Are the wages of those in work any better?

Nope: the US Labor Stats Bureau observes that 2015 wage levels are almost exactly the same as they were in 2010.

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One in nine people of working age in the EU are unemployed (June2015)

That’s 23.3m men and women

In the year 2000 it was 20 million

In 2011, it was 22.7 million

Since 2007, real wages have been falling consistently.

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In the UK, Real wages of the typical worker have fallen by almost 10% since 2008. That compares with the trend of 2% yearly real wage growth from 1980 to the early 2000s.

Over 40% of men and 27% of women in work say they would like to work longer hours.

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Most markedly of all, Japan has seen a marked switch away from full-time into part-time work. The switch has been driven by employers, who have lacked confidence in Japan’s economic recovery. And it has occurred, by and large, against the wishes of Japan’s workforce. There are more people now working part-time in Japan who would rather work full-time than there are unemployed people.

After adjusting for inflation, real wages are falling rapidly. Thomsonreuter comments, ‘We are unlikely to see a meaningful pick-up in wage growth in Japan until employers have the confidence to take on more full-time workers, thereby reducing the pool of hidden unemployed.’

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Some obvious conclusions
Employees in “westernised” States feel under-employed and underpaid. They feel less secure, less valued, and increasingly desperate. Not surprisingly therefore, productivity is falling everywhere. Neoliberal economists and politicians seem puzzled by this. I’m not surprised by this, just depressed at the blinkers-on-in-the-tunnel vision they employ.
78 million citizens in these four powerhouse economies are sitting doing nothing, and receiving poorer benefits as investment bank bailouts and liabilities have grown and grown alongside fruitless Quantitative Easing that has thus far been hugely quantitative but without easing anything to do with the problems faced by under-utilised labour.
The fiscal, economic, productivity and social theories of neoliberal globalism are clearly not working for anyone except a tiny minority making money on the bourses and/or in the shadow banking system. Both those areas of ‘commerce’ are now light years out of wack with the real physical economic situation on terra firma.
Why the stock markets must crash
While those of us rooted to the ground are seeing everything either stagnating or going into reverse, the bourses of the world have been powering ahead. Both Zirp and QE have aided in this process – by pushing cheap money straight to the bottom line, which in turn pushes up dividends and thus share values. Both these results are completely counterfeit and almost entirely uncorrelated to real levels of commercial output, sales and profits.
The first major sign of reality intruding has made itself felt on the Shanghai Index. The rout there has only been stopped by draconian panic measures by Beijing. Risibly, the Chinese measures have caused a rebound on other stock exchanges and pumped up the oil price, but this is merely tickling the avalanche: in the last three weeks, the departure of dollars from western stock markets has been in the billions – and accelerating noticeably.
The increasing use of short-term debt to rush into false Bull surges acts as a panic accelerator once the tide turns: investors wind up selling not just to get out, but in order to raise money to pay off debts incurred in acquiring loss-making stocks. It really is a case of the Dutch Tulip piercing the South Sea Bubble.
In a last desperate bid to boost exports back up to previous levels, Beijing has announced it will let the Yuan float somewhat. In a world where poor demand is driving down prices anyway, this is a bit like lighting a fuse and then rushing to beat it to the powder keg. Other Asian suppliers will respond, Western goods will become even less competitive, deflation will worsen, and cash-strapped workers will buy cheap – thus raising the West’s import bills. At the end of that road, everyone dies.
When will they make an end of it?
It’s no good smirking at how many times I’ve called the crash outcome since 2009: this is worse than Schadenfreude – it’s staying in the queue and giggling as the bus ploughs into it. The simple truth is that had banking madness been controlled and sovereign fiscality forgiveness been applied, we could handle what’s coming. But the kicking at incoming tides has continued unabated. Without fiddled figures, money-printing, QE, Zirp, price rigging, and gold price suppression, Crash2 would be long gone by now.
The fact that it’s now roughly twelve years late means the tectonic fault/volcano magma principle applies: the longer nothing happens, the more likely it is that San Francisco will be flattened and Pompeii buried.
If you trawl around the better-informed business and investment websites, almost all of them now expect a major stock market correction in 2015, hardly any of them believe the euro has a long-term future, nobody thinks the EU is really facing up to its migrant emergency, and only the official mouthpiece nitwits like Hugo Dixon believe debt forgiveness can be avoided.
The Social response
Once the unpicking becomes unravelling and then eventually chaos, everything on the Western political landscape will change: the US Presidential election, the UK’s EU referendum, the reaction of ClubMeds to further austerity, the Australian liberal government, and the Abe administration in Japan will all be facing uncharted shallows at the same time.
Most disturbing of all, the rekindling of tired old Marxist claims to have a monopoly of wisdom when it comes to social and economic engineering will quickly become a conflagration. Those who believe in scaling down towards community mutualised entrepreneurialism will be pushed aside by the collectivist sloganeers.
If that happens, it will prove to be the final curse of neoliberal lunacy.

26 thoughts on “CRASH2: The fact that it hasn’t happened yet is not a reason for the smug to smirk

  1. But, but, but isn’t Technology MEANT to deliver lives of less work and toil? Wasn’t the Grand Theory of the Future one where we would ALL lead lives of leisure, as the machines did all the work???

    OK, enough sarcasm.

    Nice piece, John. Could be summarised as “Humans have made their bed. Now they get to lie in it.”
    Or alternatively “Cassandra is not necessarily wrong if she is early with her predictions.”

    Sadly, if you are expecting any ACTION you will be disappointed. Humans (en masse) only act when forced to by external circumstances. Look at Greece – still (mostly) clinging to the delusion despite their collapsing economy. Revolutions are not pretty precisely because they are driven by external events and human emotion rather than via logical thought processes and rational thinking.

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  2. Looks like another culling of the population is required.
    Those at the top will just have to start another war, probably not nuclear because that might spoil the view and negatively affect their way of life, but another ground war with plenty of casualties would do the trick.

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  3. The stupidity of men is absolutely astounding, consciously or unconsciously every person accepts the boom/bust cycle and with the full knowledge that a bust is coming they completely ignore that glaring fact in favour of battering and ridiculing the few true voices trying to warn of the impending economic doom, It reminds me of the modern internal combustion engine that is starved of either oil or coolant, it heats up and heats up with warning lights flashing furiously until it finally comes to a sharp, catastrophic and instantaneous halt.
    Rowan is absolutely correct above “The biggest problem facing humanity today is humans.”

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  4. For the most part humans don,t have time (or care) to look at the way the economy works,they are to busy trying to put bread on the table, it will take a seismic shift to get them motivated,as said previously if if think NVE is going to do it your mad,stamping your feet never got anything done.

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  5. Thanks for another Crash 2 article JW. So are you now saying that “Crash 2” is actually just a “major stock market correction”. Really? You are aware that stock prices go up and down – and sometimes down and down. ‘Twas ever thus. Nothing to be scared of. People will adapt and survive, the sun will come up tomorrow. Chill out and enjoy life! :-)

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  6. Walking through Town shops closed or closing like WHS & many more turning it into a ghost town etc & in house of Fraser lots of space were once you couldn’t walk now you can lay down & read war & peace before someone walks around you! & choice well getting less & less small piles bigger gaps on shelves bigger walk ways all trying to hide the fact that shops can’t keep up restocking to previous levels because not getting the returns needed on the previous stock & the lack of demand for even the new stock they carry.

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  7. You have heard of burnout but have you heard of “Bore Out”? It is the symptom of bad management and underemployment and about 25% of people now admit to having it.

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  8. Now Tuesday 11th August 2015,the Chinese have devalued their currency just enough to cause a few palpitations and if we think this is the end of devaluation and deflation to the rest of the world well think again.Meanwhile the US Dollar strengthens whilst the cognoscenti flee Europe,Asia,South America and anywhere else that has been screwed over by the oh so well connected elite for the “safety”of US Treasuries.

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  9. n thoughts on “CRASH2: The fact that it hasn’t happened yet is not a reason for the smug to smirk”

    I wonder if this time ’round whether the majority will be able to, as you say, ” Chill out and enjoy life! :-) /”

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  10. spot on the pulse again JW. so good to read how it actually is. to stay in touch with our own humanity is the challenge we will all have to face. its like watching king Cnut slowly drown while proclaiming the tides going out. or the recovery is happening or whatever.. watch out for martial law!

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  11. John — sorry to go off topic but what happens if you are affected by sudden death syndrome ?

    Being as I suspect one who holds the virtue of forward planning in high esteem I trust you have availed of an equally concise mind waiting in the wings to succeed you such that the seamless continuum of your oratory is not in any way interruptrd ( leaving the faithful hanging on your last uttered /revered mot juste (??!) )

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  12. WW1 and the Spanish Flu – didn’t stop population increase.
    WW2 – also failed to stop population increase.
    Both barely made a dent in the long-term increase of humans.
    The time to limit human population was well before it reached 7+ billion.

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  13. Oh, I don’t think anybody is being smug or smirking. I think it’s just a different appraisal of the situation, when you consider that TPTB ignore/break every rule/law when it suits them why, does that not apply to the fiscal world? These are after all not natural laws, they are laws/rules enacted by the TPTB designed for them and them alone, when they no longer work for them, they just change them or ignore them, which is exactly what has happened since about 2008. We have witnessed classic examples, defaults not being defaults or credit events when it suits.
    Take China, yes it should have experienced a much bigger correction and it didn’t because Beijing stepped in, doesn’t mean it wasn’t going to happen, they just took steps to ensure that it didn’t at that time, whether or not they can contain that remains to be seen, but in essence it didn’t crash completely, there was a fall, albeit a large one, but no crash per se.
    It isn’t so very different from gold and commodities, interest rate manipulation, if there wasn’t that manipulation then things would be very different but, the truth is, they are manipulated, and that’s how they are avoiding a massive correction, all they are doing is changing the rules to suit the circumstances, the natural laws of a free market no longer apply, it’s a completely rigged game, does anybody think similar events that happened in China won’t happen here should the need arise? The only way we will experience a crash is, if it is designed to happen, and don’t forget, TPTB have much more to lose with all the extra wealth they have created for themselves over the last few years.

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  14. And another one – to save the minuscule percentage of overall government spending that pays benefits to new migrants, the government is considering laws that would effectively block certain benefits to all those under 22 years old.
    Yet nary a word about trying to save the millions paid each year to already-rich landowners required by the CAP.
    Humans.
    Gah.

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  15. Can’t help thinking that Dada is a reincarnation of Johns old ‘friend’ the bankrupt taxpayer….. Same MO and same tired phrases…… Any agreement from other long term Sloggers ??

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  16. Ahhh once again we can find common ground….. Water…… An issue which is likely to raise fresh issues in the medium term.

    Certain parts of the UK are already showing as potential for massive shortages…..

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  17. In theory governments/central banks can spend. hundreds of billions to buy stocks or their derivatives making a crash or even a 10% correction or even end a bear market unpossible.

    While fat fingers of government or quasi government origin on the buy side are now routine in the US they are never acknowledged. Now China has virtually said the government is buying stocks.

    Now puzzle me this, can the US allow Commies to beat them at this capitalism thing capitalism thing by making tens of millions richer?

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  18. Surely what’s going on in China has been going on in the Anglo-American world since 2007!? I wonder what the Germanic/european mind thinks of this neoliberal experiment – they must be laughing into their collective sleeves. What with the americans still thinking they rule the world and the Brits still think people are interested in their opinions. Don’t make me laugh. Europe especially is determined to humiliate Britain, as though they hate the fact Britain was the only european country not to be beaten by Germany.

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  19. Dear Rowan, are you volunteering to lay down your life for mine? If yes please don’t, we need more original thinkers such as yourself to solve The Problem of Humanity.

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  20. I’ve been out of the UK 20 years. Is WH Smiths going the way of Woolies? Where else can one do an honest day’s shoplifting? Didn’t kids learn their trade at the Pick N Mix back in the day? I was myself too much of a chicken but my mates did.

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  21. Perhaps a distinction needs to be made as to where that increase is happening – it’s not amongst the indigenous population of western-style “democracies”, which are mostly declining. The fastest-growing birthrate in the UK and other European states is Muslim and there’s very little persuading possible to change the mindset involved.

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  22. Pingback: Releasing the beast | Gabriel Vents

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