- By Bill Bonner
"Bill, you admit that you are often wrong...or 'early'..." begins a sympathetic letter, "so what makes you any different from all the other economists on Wall Street?"
Good question. And we'll work our way around to an answer.
But first, we will remind readers that our opinion, unchanged from the bottom of the crisis in '09 to today, was not only that the economy was not recovering, but that it couldn't recover - not as long as the feds were on the case.
Today, we have more evidence. Six years after the 'recovery' train supposedly left the station, and GDP is backing up again. That is according to the feds' own numbers, just revised. They tell us that the economy shrank at a 0.7% rate in the first quarter. Household spending growth, meanwhile, was cut in half from the last quarter of 2014.
If there were any recovery, it certainly isn't visible in these numbers. Which shouldn't surprise you. Instead of unloading excess and unpayable debt, the feds were adding more. According to McKinsey, $57 trillion has been added to world debt levels since the bottom of the '09 crisis. Worse, cheap credit was shifting real wealth, from Main Street to Wall Street. In doing so, they perverted the whole system...and stopped real growth. After all, Main Street - factories and businesses - is where wealth is created, not on Wall Street.
The rich - who own financial assets - got richer. The poor, the young and middle classes, with only their labor to offer, got poorer. The stock market alone more than doubled stockholders' net worth since '09. But it added nothing to the net worth of the working stiffs, as illustrated by the following calculation: in 1982, a typical working man could buy the entire S&P 500 with 15 hours' worth of his time. Now, the poor fellow will have to work two and a half weeks.
The system is corrupt...and dangerously dysfunctional. But why does no one say so? Opinion makers such as Paul Krugman and Larry Summers misunderstand, intentionally. As if the fed had not put up enough obstacles already -- they want more. "More regulation!" "More redistribution!" "More credit, more spending, more debt, more wars, more crackpot schemes of all sorts!"
They want more 'management' by the same people who've made such a mess of it already - people like themselves. And the elite (and almost everybody else) is 100% behind them. They are committed to trying to protect and extend the magical economy of the last 3 decades. That economy was made possible by a huge increase in debt ...which led to big increases in stocks, bonds, real estate, contemporary art, and bonuses on Wall Street. Almost nobody doesn't want to see the past three decades continue.
But who speaks for the next three decades? Who speaks for Main Street...for the young...for the unknown, surprise-filled future? Who stands with the mysterious angels, inviting a depression to clear away the mistakes of the last 3 decades...and cheering on creative destruction as it whacks the cronies and starves the zombies?
This is the point we have been edging towards in our last few diary entries. Everyone wants more credit, more inflation, more bubble, more subsidies and more special privileges. Who's on the other side of the trade? Almost no one.
But for the last 20 years, we've been building a network of researchers, analysts, economists, and (sometimes quirky) thinkers that is independent of Wall Street, government, and academia. No cronies. No zombies. No fast talkers or midnight walkers.
Our motto: sometimes right, sometimes wrong, and always in doubt.
Every day, we try to connect the dots. How come central banks, big business, Wall Street, government and academia are all on the side of the policies that don't work? How come the old...notably fast-aging baby boomers...have gone over, too, to take the devil's part? We are not just referring to the financial and monetary policies of the last 6 years, but to a deeper and more pernicious bias. The US government has been running persistent budget deficits - effectively passing the cost of today's benefits on to tomorrow's wage earners - since the Carter administration. The Fed has been fighting credit corrections - while allowing credit bubbles - since the '80s. And for the last 6 years, the feds have been so actively and aggressively defending the past that the future hasn't had a chance.
It was obvious from the get-go that adding more debt, bail outs and regulatory weight was not going to make progress any easier. Still, recovery was always 'right around the corner.' But each corner we looked around revealed no recovery there. And now, we have just turned another corner...and the train is going nowhere!
There are fewer real breadwinner jobs today than there were 15 years ago. Household incomes are lower too. You might think Janet Yellen would throw up her hands: "Really, what we are doing isn't working. So, we'll stop doing it."
Fat chance. That would equivalent of the US military, the CIA, NSA and all the defense contractors in Northern Virginia admitting: "These wars in the Mideast aren't getting us anywhere. Frankly, we can't even remember who is an enemy and who is a friend. From now on, we'll let the local people sort out their own problems."
Not going to happen.
Because the whole system has been corrupted by the feds' easy money.
More to come...
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.