“There Will Be No Recovery”

economic Armageddon"There will be no recovery." This line is one I use often. I am sure readers are tiring of it. Yet these five words, I believe, accurately summarize our future.

No time frame is reflected in the statement, but a "long one" is implied. Obviously there will be a recovery at some point, just not within a time frame considered normal. I began using these words long before the declared recovery in June 2009. The statement certainly has been correct since before then and until today. The declared end of the recession in 2009 was then and is especially in hindsight, ill-advised. One can imagine it as Orwellian propaganda, but not economics.  There has been no recovery and many economic statistics have deteriorated in this declared period of recovery.

armageddonpoliticalWill there ever be a recovery? Sure, but it will not come before a cataclysm. The cataclysm will shake the economy, financial markets and perhaps society itself in a manner never seen in this country. A cleansing, a catharsis, a complete purging of the economy, financial markets and government must occur before healing can commence. The cancer eating our essence must be excised. The process will be neither quick nor pleasant, but it is a precondition to true recovery.

Jim Quinn published a new piece that touches on this topic. Mr. Quinn generally places his analysis into the context of The Fourth Turning by Strauss and Howe. While I have never been enamored of cycle theories of history, Strauss and Howe have managed to tie causation back to individual behavior via a sort of collective, generational memory whereby history "repeats" four clearly defined twenty-year cycles. According to their calculations, we are in the fourth turning, the last of the twenty-year periods, This phase is the destructive one that leads to a re-birth and renewal of the eighty-year cycle.

We are but five years or so into this last stage. While one doesn't have to agree with Strauss and Howe, it is not difficult to imagine matters getting worse, much worse, before this ends. The time frame could easily be a couple of decades (15 more years according to the cycle).

Here are some relevant observations by Mr. Quinn regarding the "recovery:"

Those who continue to tout a non-existent economic recovery have focused on the manufactured stock market and housing recovery, extrapolating those trends without understanding how it has been achieved. A master plan implemented through the collusion of the Federal Reserve, Treasury Department, Executive branch, Wall Street cabal, and corporate media conglomerates has created the illusion of recovery. Make no mistake about it, those in power held clandestine meetings and had covert discussions that will never see the light of day in transcripts or recordings. They developed a strategy to save themselves, their fellow cronies, and the corporate interests that run this country. They threw the middle class, senior citizens, and young people under the bus in their sordid determination to retain their power, wealth and control. Their multi-faceted plan has been rolled out as follows:

  1. Reduce interest rates to 0% so Wall Street banks could borrow for free and reinvest in Treasuries, therefore earning risk free profits so they could rebuild their non-existent capital. The Wall Street banks also used the free money to generate trading profits using their HFT supercomputers, with only the occasional glitch (JP Morgan London Whale $9 billion slipup, Corzine blowing up his firm and stealing $1.2 billion from ranchers & farmers). The ability to borrow at 0% has spurred these financial institutions to make 0% loans to subprime auto buyers and offer 7 year 0% interest deals on behalf of furniture, electronics, and appliance retailers. This Keynesian solution is supposed to spur demand and generate new jobs. The reality is that Bernanke’s ZIRP has transferred $400 billion of annual interest income from savers and senior citizens to the Wall Street bankers, while setting the table for more massive bad debt write-offs when the millions of subprime borrowers default.
  2. The Federal Reserve and the Treasury Department forced the FASB to scrap mark to market accounting, allowing the Wall Street banks to fraudulently value their worthless assets. The Federal Reserve than tripled their balance sheet from $900 billion to $2.95 trillion by purchasing almost $1 trillion of toxic mortgage debt from the Wall Street banks at full face value of the debt. The Fed purchased Treasuries to artificially lower mortgage rates and attempt to spur a housing recovery.
  3. The Wal Street banks have purposely manipulated the foreclosure process and restricted the inventory of foreclosures available to purchase. In conjunction with Fannie Mae and Freddie Mac, large inventories of foreclosed properties have been sold in bulk to connected Wall Street firms at above market prices and positioned as rental properties. The FHA has done their part by guaranteeing 3% down payment mortgages and putting taxpayers on the hook for the billions in losses to come. Fannie and Freddie have already lost $200 billion of taxpayer money since 2008 on behalf of the Wall Street banks. The concerted effort to restrict the supply of homes available for sale resulted in the price of homes sold rising in 2012. Those in power are attempting to resuscitate the millions of heavily indebted underwater home occupiers at the expense of the young and frugal who would buy when home prices dropped to a clearing level. The same people who created the first housing bubble are attempting to re-inflate it as a solution to our economic woes.
  4. Despite the fact that individual investors have pulled billions out of the stock market over the last three years, the stock market has managed to approach all-time highs. This has been the lynchpin of their plan. The sole purpose of every QE initiated by Bernanke has been to elevate the stock market. Academics like Bernanke and Krugman sell the “wealth effect” storyline to the masses as a way to spur consumer spending. The only wealth effect is to shift the wealth of the working middle class to the ruling class who own the stocks and control the markets. As each QE has further enriched the 1%, the inflationary impact on energy, food, and clothing has destroyed the lives of millions in the middle class who own virtually no stocks. The gap between the uber-rich ruling class and the peasants has never been wider.

The master plan has succeeded in delaying the worst of the Crisis, further enriching the oligarchs, further impoverishing the middle class, fanning the flames of revolution across the globe, provoking foreign adversaries, inciting anger among the populace and darkening the mood of the country. Those predicting a return to the peaceful autumn like days of the late 90s reveal their ignorance of history. Winter is here and there are many dark days ahead before Spring is discernible. The linear thinking crowd who hang their hats on never ending progress spurred by technological innovation and a limitless supply of cheap resources are denying reality. Delusion and hope for a better tomorrow is not a strategy. We have entered the 5th year of this ongoing Crisis. Fourth Turnings do not fizzle out; they build to a societal earth shattering crescendo (American Revolution, Civil War, Great Depression/WWII). Economic, financial, social and global conditions do not progress during a twenty year Crisis period, driven by the generational configuration that arises once every 80 years. An epic struggle between good and evil, rich and poor, government and governed, young and old, nation and nation, awaits us over the next fifteen years. No matter what happens in 2013, it will be driven by the core elements of this Crisis – Debt, Civic Decay, and Global Disorder.


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  1. I think two days ago, I stumbled with your blog from an article about top Austrian econ blogs. I am glad that I found your site and thereby receiving confirmation of my scattered thoughts. Reading your post, I feel alarmed and worried about our country. At least there in the US, the Austrian voice is now being listened to. Here in our country, there is a deafening silence. Not even one politician or economist diagnosed correctly the impact of this global crisis on "emerging" markets. In fact, the official position of our government is that the PH is now ready to be a tiger economy in the coming decades. Is it correct to suppose that the sudden boom of our economy is due to the pulling out of investors from US stock market and transfering their funds on emerging markets?


    1. RChavez,

      Glad you found the site and it is helpful. When you speak of “sudden boom in our economy,” I assume that you refer to some economy other than the US. Money is leaving the US, not in great numbers yet, but increasing from prior years. New investment is easier to commit in other countries than here. Now individuals are becoming concerned and moving their funds out. Some merely move to ETFs oriented to non-US investments while others take their money, and sometimes themselves, out of the country. Renunciation of US citizenship has become an increasing problem for the government.

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