The Crash of 2016 Gets Closer Every Day
By Thom Hartmann A...
The denial of fundamental economic principles is setting the world up for another Great Crash. Although wages have been flat or declining since the West started following Thatchernomics and Reaganomics in the late '70s and early 1980s, the stock market has risen to all-time highs. Billions – hundreds of billions – have been made by individuals on Wall Street. Meanwhile over 60,000 factories have closed in United States just in the past 14 years, and over 50 million Americans are either unemployed or underemployed.
In Europe, with the exception of the Scandinavian countries who are ignoring our economic advice, the situation is very similar. Other then Germany, which is becoming a major extractor of wealth from the rest of the EU, European countries and Great Britain are following the same fallacy that has been driving US economic policy for more than 30 years.
The Financial Times on June 29, 2014, with reporting by Sam Fleming and Claire Jones, lead their front page with the warning that "Bank for International Settlements warns 'Euphoric' Markets." The article notes that capital markets are "extraordinarily buoyant," according to the Bank of International Settlements, and argues that central banks around the world "should not fall into the trap of raising rates 'too slowly and too late.'"
They correctly point out how low interest rates have caused an explosion worldwide of corporate debt. Meanwhile, not noted in the article, for-profit corporate banks have discovered that instead of lending money to working-class people to buy homes or cars, it has become more profitable to simply borrow from central banks at very low interest rates, often less than 1%, and then park that money in government treasuries which pay 2% or 3%, in effect loaning the country's money back to the same government at a profit.
Similarly, huge transnational corporations from tech companies to pharmaceutical companies, are hoarding cash in offshore tax havens where it's not available to stimulate local economies, or they're making acquisitions based on fiscal strategies rather than how to best manufacture the best product.
Completely lost in the debate between the BIS and the IMF over simulative central-bank strategies is a simple economic fact. Economies are driven by demand, and the principal component of demand is wages.
Instead, the Financial Times noted that the Bank of International Settlements is "calling for policymakers to halt the steady rise of debt burdens around the world and embark on reforms to boost productivity." This echoes the old Reaganomics line that increased productivity equals a growing economy. Make more things and people will buy more things.
But productivity has been rising steadily in the United States since the 1930s, but since the early 1980s it has become uncoupled from wages, which have remained flat or fallen. Even as individual companies become more productive, producing more goods with lower costs and less labor, the economy has been stagnant because there is little demand for those goods. And that's because of the simple Econ 101 maxim, which dates back to Adam Smith, that demand is what drives economies, and that wages are the principal driver of demand.
The majority of American workers spend 100% or more (they go in debt) of their wages, and all but the top few percent of American workers save anything close to even 10% of their wages. It is their spending that creates demand. As wages flatten or drop, and as the ability of unemployed people to continue buying things is cut by the Republican efforts to cut long-term unemployment over the past six months, demand falls.
Meanwhile, large corporations, wealthy people, and banks are all making money simply playing with money. This "financialization" of our economy is driving us to the edge of a massive crash. Policymakers, from the Fed to the IMF to the BIS to the US Congress and the White House should all be looking back at the lessons of the 1930s – because we're about to learn them all over again.
Wages for working people, not the wealth of the rich, corporate income, or banking profits are what both drive and sustain an economy. As long as those wages remain stagnant or falling, there will not be sufficient demand to keep an economy from collapsing under the weight of its own high-end gamblers and the growing debt of its young and working-class people just trying to get by.
While inflation Hawks are hysterical about the possibility of our repeating the inflation of the 1970s if central banks raise their rates or stop buying bad corporate or good government debt, they fail to remember that most of the inflation of that era was driven by oil price shocks, and that it did not, by and large, impair the ability of average people to continue to gain wealth and buy homes.
(With rare exceptions, inflation is not caused by government borrowing or "money printing," but by shortages in essential commodities. In the United States in the 70s it was principally oil shortages that drove inflation; more recently in Zimbabwe it was food. The intentional hyperinflation of Germany in the 1920s was simply a "screw you" response to the Treaty of Versailles, which imposed punishing debt on Germany for World War I, and which John Maynard Keynes warned would provoke the next great war. He was right and the conventional wisdom among international policymakers was wrong.)
History – and the examples of Germany and Scandinavia – show us that high levels of unionization, trade and taxation policies that favor the working class over the rich, and heavy regulation of the banking and speculative industries will build a strong and healthy working and middle-class, and thus a strong and healthy economy. Instead, the United States and much of the EU still cling to Thatchernomics and Reaganomics, and the result is the continuing decline of both economies.
Until the corporate elite and our billionaire class are under control, and our working class once again can enter the middle class, we stand at the precipice of a great crash. Without vigorous governmental action to radically reduce student and working family debt, increase wages, and suppress speculation, that crash comes closer to us every day.
Comments
#2
DAnneMarc: Just sayin'...but AIW did mention having to install Java and what a lot of people do is to install it and forget about it and never use it and it just sits their waiting to be exploited. She also mentioned her concern that the USG may one day take down web blogs and that she may need an alternative way of communicating messages that won't be censored. Or, maybe I read more into that than was meant.
Anyway, if you want to prepare for the future, it would be a good idea to become aware of the tools that you can use to help stay connected to those you want to stay connected to without being spied on by anyone. Of course, if you don't care that the USG or other hackers can read your private messages then...never mind.
#3
Inflict their beliefs on others. Marc. Isn't that what the left is trying to do by pushing Socialist beliefs on others. Nobody has to work for or follow any of the Green family beliefs. hobby lobby doesn't hold a gun to anyone's head. America is a free country. It is a pretty fine line of what the Greens do and what unions do. When you join a union part of your dues may go to a political party you don't like That has beliefs you don't agree with. What is the difference?
#4
Hey Marc, my pleasure. Been wanting to do that for the longest time. Lots more where that came from.
Believe it or not, I can't read music worth a damn. That goes for chord charts as well as detailed script. Nope; I'm strictly an ear person. I actually write music a lot better than I can read it. Guess I'm kind of an oddball that way.
Anyway I'm really stoked about having found another way for us to connect. You're a cool dude, Marc; you're fun to hobnob with and I like how you think. While I'll never be a Christian, I really appreciate your perspective on all that. You think for yourself. I don't have to agree with you 100% of the time to appreciate that.
I also love how passionate you are about the separation of church & state, and the eloquence with which you defend it. Considering the fragile status with so many of the basic principles our founding fathers laid out, it seems the wall between church & state gets fuzzier year by year. And I agree with everything you've said about those celebrity evangelicals… just fascists by a different name!
Thanks again for guiding me through the chat thing. I'm stoked. - Aliceinwonderland
P.S. Sandlewould, where art thou?
#5
Palindromedary ~ We had to install the java to use the chat room to privately instant message our email addresses to each other; and, it wasn't as simple as it sounds. There are probably better ways. My system rejected java. Trying to overcome it I notice it mentioned that java is installed in everything including cell phones. I used my phone for the chat and AIW used here computer. She didn't have any issues with the java. If its really that big of a vulnerability maybe she should uninstall it after she gathers all the emails she wants. I don't have that problem.
I'm not sure what you mean by USG. Is that US Government? If so I am interested in any tools that I can use to insure privacy. I just assumed that anything I wrote or sent was automatically Hoovered up and stored somewhere. We only shared email addresses. If the government can't figure out my email address from my DMV records, or all the letter and petitions I've signed to Congress and the POTUS they are pretty stupid. It bothers me more that some hacker could get ahold of my email address; however, there are already a multitude of shady people who have it that also disturb me quite a bit. What REALLY disturbs me even more is how many emails I get that just assume I need penis enhancement. How do they know I even have one? I would love nothing more than to banish all these strangers and weirdos from my email.
If you can shed any light on that please do. However, please keep it in simple English and go easy on the acronyms. It might just take more time than it is worth. Most of that last post of yours went straight over my head. Thanks for trying though.
All I really wanted to do is ensure that I can keep in touch with AIW without this blog. It would be nice to do the same thing with you. If you're game meet me or AIW in the chat room and we'll shoot you our emails. Just say what time so we'll be there together. You can find the chat room by hitting the "community" button. Then look for the "chat room " link. You'll need java though to use it. Then look for a button with the outline of people on it. That will take you to the list of everyone in the chat room at that time. Look for our names and click on them. That gives you the private chat box.
Of course, we'd all be interested in alternative suggestions of staying in touch too if you have any. Thanks for any help! Much appreciated!
#6
Palin, thanks for the heads-up on all that regarding Java. Much appreciated. - AIW
#7
Aliceinwonderland ~ Yeah, I'm stoked too. Finally able to share things we couldn't before. We gotta invite Sandlewould and--if he's interested--Palindromedary too. This is fun.
#8
Quote Kend:Inflict their beliefs on others. Marc. Isn't that what the left is trying to do by pushing Socialist beliefs on others.
Kend ~ Isn't it past your bedtime?
Socialism is a political system not a belief in a deity. Socialism would work perfectly in a democracy and is only the philosophical enemy of Capitalism. Whatever the majority of people decide to vote on in a democracy is not forcing anything on anyone. Therefore, in order for a democracy to function properly it has to be independent of religion because there is no vote in religion. That is why our Constitution strictly prohibits Congress from making any law respecting an establishment of religion. The Green family is trying to get around that by creating a public high school curriculum that focuses in depth on the Bible to the full exclusion of all other faiths. That creates a situation where one religion is pushed at the youth level on all students at exclusion of all others. If the Green family wanted to make a curriculum of all world religions, spending equal time exploring all that would be fine with me. If the Green family wanted to make a curriculum for private or Sunday schools that focused on the Bible at exclusion of all other religions that would be fine to. If they directed their course to the college level that would be fine too. However, that is not their intent is it? They want to indoctrinate our youth into a one world religious view only--just like Hitler did. I have a BIG problem with that.
Quote Kend:Nobody has to work for or follow any of the Green family beliefs. hobby lobby doesn't hold a gun to anyone's head.
Kend ~ Quite on the contrary they do. When you hire young unskilled workers and pay them a living wage you are essentially holding a gun to their heads and forcing them to accept any policy you hand out. Especially, if finding another good paying job or moving back home with mom and dad are not an option. This is where a labor union would come in really handy to stand up to these religious fascists for these otherwise helpless and defenseless workers.
Quote Kend:America is a free country. It is a pretty fine line of what the Greens do and what unions do. When you join a union part of your dues may go to a political party you don't like That has beliefs you don't agree with. What is the difference?
Kend ~ The difference is that at the end of the day with a union you will receive all the benefits you've earned and it will be YOUR CHOICE as to which ones you chose to use and chose not to use. I think the big difference here is you think the choice should be the employer and we think it should be the individual. After all, it is the individual worker whose labor pays for those benefits and it is the individual's body and life that those benefits will affect. Don't you think those benefits should be the choice of the individual?
#9
Gee Marc, isn't it ironic how conservatives like spouting off all this tripe about "individualism"... until it comes to matters like healthcare coverage; specifically a worker's right to choose what benefits to pay for, rather than her employer's right to decide what she can and cannot have with her hard-earned coverage! Hah-hah! Guess that concept isn't always so convenient for conservatives, in their adamant but lame attempts to defend the indefensible. - AIW
#10
Correct Alice, workers have a right to choose the health care they want...that wouldn't be the case with single payer, you only get what's offered. You assume you'll get everything you want with single payer....not true. Most unions are against single payer for that very reason....No Choice
#11
By the way, I am using Tails with TOR right now. I just booted up my computer with the USB stick that now has the tails.iso on it and it acts as my Operating System instead of the normal Windows Operating System. Only RAM memory is used and it is erased when the USB drive is removed or the computer is shut down. Nothing gets written to my normal Windows hard drive so I don't have to worry much about someone snooping or planting a trojan. It uses Iceweasel browser and it uses TOR to randomly select various TOR routes in order to hide my identity (hides my IP). I could also use encryption, in addition to TOR's encrypted routes, but for that last leg of the journey, which is TOR's weakest link because TOR has to be unencrypted before it goes to the intended recipient but your additional encryption would not be unencrypted until it reached the intended recipient. If that last node (link), just prior to the intended recipient, is owned by the NSA (and I'm sure they have quite a few) then they can see everything..which is why you should also use encryption in addition to TOR. You can print, once you set up the configuration for it. And you can save data to another USB stick. You can also get into your normal hard drive to save stuff after you enter a password....but that's not recommended. Tails is a tool that is much better than not using one but there are still a few things that it can't do. Man-in-the-Middle attacks can still happen if they are targeting you. You probably wouldn't want to use TOR for any heavy internet usage like downloading/uploading videos because TOR is slower than without it because it has to travel through all of those random routes...some are even on the other side of the Earth. But messages are usually no problem.
#12
Aliceinwonderland: You're welcome.
DAnneMarc: I only load Java on my computer when I really need it because some other program needs it. Then, when I no longer need it, I uninstall it. As long as you keep it updated all the time you may never have a problem. But it has been a constant problem because they are all the time finding bugs that have lived in the code for years before they discover it.
After reading the book "Behold a Pale Farce" by Bill Blunden and Violet Cheung it makes me think that we are all being made fools of, and played for suckers: by the whole profit driven computer industry...the Malware Industrial Complex....by our government.
About the only thing you can do to fight back is to use only Open Source software where the code is open for scrutiny by many thousands of people who can understand it and discover "hidden" code if there is any. In Closed Source (MicroSoft, Apple, etc) you have to take their word for it. And we already know that these companies have sold us out not only for the dollars but have given in to the NSA snoops.
If there were never any bugs in software, there wouldn't be any need for constant updating and reliance upon security companies who "protect" us from the bad guys. And then there would be no more profit to be made if code was written securely in the first place. And, again, all these companies may be selling us out to the likes of the NSA.
#13
Right. Like choosing salad over soup or fries. Or 31 flavors of ice cream... Choices, choices, choices! Yum, yum. Which death panel should I apply for? Let me see... ODS? Blue-Cross-Double-Cross? United Health? Aetna or Cigna (or whatever the hell they're called)... what a nice big smorgasboard of extortionists to choose from! All more than happy to take our hard-earned cash! Wow what a deal! Whoopie. Where do I sign up?
I'm well aware that many (if not most) small business owners are against single payer. I think they are stupid; most likely under Rupert Murdoch's little spell. Even if people aren't born stupid, TV will make them stupid. Especially since this corporate fascist take-over of our media. As for unions... well, I'm not so sure about that. I remain unconvinced, where unions are concerned. - AIW
#14
AIW -- Just to support what you are saying. Recently, Northrup Grumman dropped our medigap coverage. We are signing up with exchange. They have a comparison printout between the plans they are offering: Anthem, Blue Shield, Humana and United Healthcare. They list about 3 pages of features provided by each plan. Each plan offers exactly the same features. Even the words are the same.
#15
kend -- It is a democracy. We the People are supposed to get it done. However, the 1% has bought our representatives. The only thing the prez can do is fight them off.
If those investors are from carbon corps, I hope they stay far away from my country.
#16
I'm usually the one to agree with Thom, but be pessimistic about any sort of changes. I think we're both in agreement about where our economy is headed and how little there can be done to stop it. I can only hope that humanity will become stronger and wiser on the other side.
#17
Thom
I was alerted to your prediction of the 2016 crash.
You are absolutely right. By different means - more mathematical using the development of the DOW from inception - in July 2010 I included a forecast in my book that a completed sequence would be seen between 16,000-18,000. From the manner it has developed it should be the higher target around 18,000-18,500. I suspect this will peak around the end of Q4 and will trigger a correction to the entire rally from inception. This suggests a similar type of development that has been seen in the Nikkei Index from 1990 which, as long as the 21,000 area is not exceeded, is not yet complete.
#18
Ian -- Thom often has Ravi Batra, an economist from SMU, on his program. Ravi has ofter mentioned 2016 as the year of the crash. I think Thom relies on the expertise of Ravi for Thom's prediction.
#19
Chuckle8
I don't follow economics at all to be honest. I have never found it particularly useful. My methodology is mathematical based and so far the bullish development has gone according to expectations. I can see the final high much closer to the end of this year rather than 2016. The 18,000-18,500 area should be about right. I can believe that the initial reaction lower (to 12K-13K) will not be considered a crash but there'll not be a new high from there. It seems more likely that the major decline, that will be called the crash, will occur in 2016.
#20
Ian -- I find it interesting that you do not find economics useful because you like a methodology that is mathematically based. The main fault I have with economics is that it is too mathematically based. Paul Krugman pointed this out in an article in Sunday NY Times magazine. He was implying that since economists need tractable mathematical solutions they cherry pick data. He stated mea culpa.
I think that is why I like Larry Beinharts (a novelist) view of the economy. He says for the economy to be doing well not only does the GDP have to be having positive gains, so do the DOW, the number of jobs and the median wage (inflation adjusted). Tract that!
#21
Chuckle8
Well, I started tracking the DOW in July 2010 when I developed this methodology. It's based on past moves (waves) and requires certain ratios for each type of wave. The targets from the all fractals must generate common targets. (that avoids cherry picking...) At that time (price at 9,500) I forecast the 12,800 target, the 20% drop and then move back to the 14K high. The only part that fooled me was the shallow correction from just below 14K - I had expected deeper. However, all that did was suggest that the final high would be higher than the average target (from the inception of the DOW.) From that low we are around 2/3rds of the way through the last leg.
For economists I quote John Kenneth Galbraith:
Economics is extremely useful as a form of employment for economists.
The only function of economic forecasting is to make astrology look respectable.
#22
How quaint...I mean Quant!
http://tabbforum.com/opinions/the-secret-world-of-algos-a-high-frequency...
#23
Ian -- Have you tried to apply your methodology starting in 2002? I picked that year because it was 6 years before the 2008 crash, and 2010 is six years before the predicted 2016 crash.
I have a link to J.K. Galbraith quotes. The ones you gave are included. Maybe that is why I like Larry Beinhart view of the economy, since he is a novelist.
#24
chuckle8
I applied my methodology from 100 years of monthly data, but made an assumption that the first price of the DOW was around 25. Frankly from 25 - 18,000 that doesn't make an iota of difference as we get to the end of the rally. The methodology also requires that all instrinsic legs of the moves also have applicable ratios. So this is a system based on integrated wave development. Therefore, there's no element of time involved. I hadn't even noticed those 6-year events!
#25
Well, the high certainly won't come this year.... should be next but will have to see how the rally develops...
#26
And 18,000-18,500 was the top... as suggested over a year ago...
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Kend ~ I'm not mad at anyone exercising freedom of religion or speech. You can say and worship anything you want. I draw the line when people inflict their beliefs on others. Freedom ends when it affects the freedoms of others. What the Green family intends to do is to use their pulpit of money to inflict their own belief system on other people for control and profit. That is not what our country is about. That is not what independance day is about. It is a disgrace, a crime, and unconstitutional. It is nothing less than when the English Crown declared war on the American colonists in 1776 for refusing to submit to their control. Like those brave colonists I consider anyone trying to inflict their belief system on me an act of war. Don't let my outrage surprise you.
PS Your grammar... is getting worse!