Stocks have tanked this week the world over as American Economic Depression Denial (AEDD) has transitorily subsided and Standard and Poor’s downgraded U.S. Government debt. A historic move that naturally sent everyone into a feeding frenzy, buying…uhhh…well, U.S. Government debt.
Wait, what did they buy? That’s right. Imagine the political pressure S&P must have faced not to do this. Yet, they still felt the need to drop the U.S. from the AAA club. This is the same agency that couldn’t stomach issuing any type of warning regarding the real estate market pre-2008 and just now downgraded Fannie and Freddie. It’s the equivalent of a doctor informing his chemotherapy patient that it might be prudent to give up smoking.
Despite the seemingly counter-intuitive nature of this reaction, it’s actually quite obvious why Treasuries are still appealing. Everyone knows that QE3 is imminent. Also, China and other nations with trade surpluses as well as numerous foreign central banks are basically forced into them. The question is: What do we do when every option for dealing with this deflationary nightmare is both unpalatable and unpredictable?
Europe, and most of the world, is currently facing the same economic vortex that we are. Massive debts based on an infinite growth paradigm that is unsustainable and collapsing. Any option requires disruptions in basic necessities reaching those who require them, on a massive scale. The economic systems meant to facilitate transactions involving energy, food, shelter and currencies are breaking down. The CBOE volatility index (VIX) suggests that market fear is around the September 2008 level. Gold is now at around $1720 per ounce. Treasuries remain poised for Bernanke, who as we speak, is scouring his tool shed for that last nail, to do his traditional Danse Macabre. Unemployment is an abomination and the recent farce regarding the debt ceiling is an undeniable indication that our government is in complete crisis. Yet, there are still pundits and all other manner of vegetable, animal and mineral debating nugatory hyperbole.
Right vs. left, austerity vs. spending, deflation vs. inflation, hawkish or dovish, Keynes vs. Hayek, Greenspan vs. himself, and on and on it goes. The euro vs. the dollar and to peg or not to peg. Denial, my friends. Denial! None of this means anything except in hindsight. Anyone who doubts that the trajectory we are on could in no way be stopped by any sort of policy is suffering from chronic AEDD.
Austerity? Bernanke is already hinting at QE3, and unemployment is only 9.1% (of course, unless you look at a real employment statistic like U6 for example, which is at 16%). Inflation? Well, possibly price inflation and/or hyperinflation with the right set of circumstances. Who cares? We are still left with the same problem of a broken economic system that won’t be fixed until resources have some relationship with actual supply and demand — because, as of now, the global marketplace is breaking. There are pockets of balance but it is failing and taking much of society down with it. Hence, the riots and protests all over the world.
Accelerating this collapse is probably the best option we have. That’s why the austerity and balanced budget crowd are really just arguing about what polish to use on the brass of the titanic. If a heroin addict found out he had a week to live, why ask him to kick cold turkey? It’s too late. Bring on the QE. Cash for clunkers, why not? Give away underwater mortgages…. C’est la vie. Sure, these are dumb tactics but who cares? Let’s party. You want to kick old ladies out of their HUD programs. Why? It’s not going to save the economy. Balance the budget? Okay, go for it. Let’s see how that works out, Sisyphus. Force China to let the Yuan appreciate or OPEC to increase the supply of oil. Denial, my friends… denial.
Yeah, we all know to buy physical gold and to keep our faith in the validity of the silver market. We all know how to play QE and to buy farmable land. However, as the “Black Swans” continue swarming the global marketplace at an ever-increasing rate, the fact is that tangible physical realities are being ignored by most of us informed “collapsists.” As S&P plays games with illusory downgrades, oil and drinkable water are disappearing. Crops are having strangely disastrous seasons. As many are flooding ETF’s with all the irrational exuberance of a rabid dog, prisoners, the elderly, the mentally ill and many less expecting victims are about to find themselves homeless while wandering around neighborhoods of vacant mcmansions. Rearranging tax codes and regulations will not prevent this. There is only one cure for AEDD and it’s coming soon. Let’s all help to facilitate this inevitable conclusion as delaying it will only make it worse.