Stockman is deeply critical of the Fed’s grand experiment and he is right, it will end in ugliness. Probably an historic ugliness. When? No one can say, we are operating in sort of an economic hall of mirrors right now. (And have been for a long time.) Things are distorted all over the place. However, even in a hall of mirrors gravity continues to work. Like gravity, the market mechanism also continues to work no matter what the current economic reflection.
Trucks move goods. Goods and services make an economy. Trucks run on petroleum. Petroleum prices are down solidly. Yet trucking appears to be hurting. What’s going on?
And by the way, may God bless all the long (and short) haul truckers.
We’ll see. The market is down today but has been solidly up for a few weeks (after a dismal start to the year). But the underlying economic reality hasn’t changed. The deep fundamentals are not good and they haven’t been good for a long time.
The boat payment is always the first to go. Or maybe the snowmobile in Canada.
This is decline folks. Though it is by no means irreversible. This country has long suffered under presidents and congresses which were more interested in perpetuating a Washington centered agenda than in creating a climate for real prosperity. A little regulation here. An extra tax there. A sweetheart deal here. A war in some Middle Eastern corner we have no business in there. Each year the economy is eroded. Each year our debt increases. Each year the quality of leadership appears to decline.
There is a battle raging in economic circles right now. Are we headed for a relatively imminent (and severe) recession or are we not?
Let the old dead wood in the economy burn off. Renewal is not long in coming. But central banks would rather further distort the economy in an effort to avoid the inevitable. (In so doing the eventual economic fire burns much hotter than it would have otherwise.)
The central bankers fundamentally have little or no faith in the market mechanism. Let markets clear and then growth will appear, similar to a burned down forest. Burn off the dead economic wood.
In December as junk bonds began being really buffeted we asked whether a recessionary storm was on the way. Now even the guys on TV are openly talking about a recession.
It’s funny. No one ever wants to say “recession.” But what is happening in oil and in China reminds me very much of the rumblings and tumblings in the US housing market in 2007-2008. I can remember screaming at the TV as the real estate bulls were trotted out back then.
I am sorry but we can’t help reposting this tweet from the president from last week.
We also can’t help posting this graphic from last year.
Pay attention to what the graphs actually say and what the measurements are, but it is pretty clear, even before the likes of Bloomberg and CNBC started talking about a looming recession a recession was looming.
It is still too early to call “recession.” But better now if one is an investor than when it is too late.
We like “green” energy. The water in my childhood home in the 80s was heated by solar panels. We like wind, and the rest. But we like it within the market.
Green energy can exist within the market despite what many people believe. In a world of 6 billion people and growing there is absolutely a market for cleaner energy sources. In many parts of the world solar particularly makes sense on micro levels. Lives can be made better with solar.
I was listening to an economist the other day talking about the continued slide in the price of oil. He said that despite the lower fuel prices there did not appear to be the significant bump in consumer activity as some have predicted.
We have argued that pressure from the low price of oil, caused in large part by the Saudis, would negatively affect the American heartland where the fracking revolution had been rolling. Now recession appears to be creeping across the prairie states and into Texas,
As we have said before here, we do not particularly like Mr. Soros but he is someone who is worth listening to.
Word is that many people at Davos (the superconvention of financiers, economists, world leaders, and celebrities going on right now in Switzerland) have been trying to convince themselves that China is still going to be OK, that a “soft landing” can in fact be engineered in the Ultimate Crony Capitalist State. But there is a growing list of pretty smart people who think that a Chinese “soft landing”
For the record, we have been calling this for a good while now. We warned of slowing in the Ultimate Crony Capitalist State, China. We warned that the great neo-Keynesian experiment was destined for an ugly end (and we are by no means the only ones who said this).
Is this THE turn? It looks increasingly so but the next few months will show us for sure. Will it be worse than 2008?