Not a Plunge but a Long, Slow Grind Lower

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Without any real end in sight. That’s what’s different this time.

On the surface, it was the kind of report that has been dogging the US economy for a while.

Orders to US factories for durable goods dropped “unexpectedly” – as the media put it – by 2.2% in May from the prior month, on a seasonally adjusted basis, according to the Commerce Department. “Unexpectedly,” it seems because orders had risen 3.3% in April and 2.0% in March, and the trend henceforth would be upward. But instead, it was a broad-based decline, with some real doozies.

The generally volatile orders for transportation equipment fell 5.6%, as military aircraft orders plunged 34.1%, and as orders for motor vehicles and parts fell 2.8%.

The drop in automobile orders is worrisome. After years of booming, the auto sector set an all-time record last year in terms of total unit sales in the US. It’s a huge sector, making up a big part of manufacturing and about 20% of total retail sales. If it weakens, the economy will lose one of its last strong pillars [read… What Will Sink the US Auto Boom?].

Orders for machinery, primary metals, computers, electronic products, as well as electrical equipment, appliances, & components – they all fell.

And how is business spending doing? When businesses don’t invest and spend, they don’t grow, and the economy has trouble expanding. Business spending is a crucial driver of economic growth. Everyone has been hoping that businesses would open their wallets. Orders for “nondefense capital goods excluding aircraft” – the category that serves as a measure of business spending – were supposed to rise 0.3%.

Instead, they fell 0.7% to $62.4 billion. Down for the third month in a row. And the lowest level since April 2011!

The chart shows this long, slow slump of business spending. Note the V-shaped recovery in business spending after the Financial Crisis, the end of that recovery in March 2012, at $70.1 billion. Which is 12.3% higher than today’s figure! It was followed by 2.5 years of stagnation that ended in September 2014. At which point, the decline set in:


But here’s where “it’s different this time.” This measure of business spending boomed before the prior recessions. Then either just before or during the prior recessions, these orders essentially crashed. Businesses turned off the money spigot. They didn’t dilly-dally around. They went into survival mode and stopped spending. And these orders for core capital goods crashed, both times.

This time, core capital goods orders languished for 2.5 years by bouncing up and down but not going anywhere. Then they started to decline – a long, slow slump of business spending, not a crash!

That’s what’s different this time.

We have seen this pattern in numerous other factors: a slow grind lower, with plenty of upticks in between that give everyone hope that this is finally over and that growth will commence henceforth.

It shows up in measures like inventories, which have ballooned since late 2014 and are now disconcertingly high, as sales have consistently disappointed. And the inventory-to-sales ratio has reached post-Lehman crisis levels:


The out-of-whack inventory-to-sales ratio means that a lot of capital is tied up in inventories. Normally, companies crack down when their inventories get out of line. They do so by slashing their orders and by cutting prices on their goods. A sharp inventory correction, as it spreads up the supply chain and across the nation, can contribute to a recession.

But this time, companies are trying to whittle down their inventories here and there in tiny micro steps, and they’re doing so even more slowly than their sales have been falling, hence the crisis-level inventory-to-sales ratio. There’s no sense of urgency. But sales are still declining!

Industrial production falls into the same pattern. After moving sideways for a while, it is now in a decline, but not a plunge [read… OK, I Get it, the US is a Service Economy, but this Looks Terrible]

It’s as if everything in the real economy were stuck in this pattern where a period of stagnation is followed by decline. Not a crash – but an uneven, long, slow grind lower that then begins to feed on itself without any real end in sight, and without that V-shaped recovery that would follow a plunge in economic activity.

This comes as the Fed and other central banks have been flooding the economy for nearly eight years with essentially free liquidity, while debt everywhere has blown off the charts and as QE and the negative-interest-rate absurdity rule in Europe and Japan. That’s what’s different this time!

Before the Fed decided to embark on its perhaps endless journey of financial repression, when businesses saw trouble, they reacted to stay alive. This time, the world is awash in cheap liquidity. There’s no sense of urgency. Investors can no longer demand any real return on their money. The calculation of risk has been eliminated from the financial equation.

So the economy, doped to its ears with monetary cocaine and bogged down in debt, can barely stumble along zombie-like, perhaps for years to come, without catalyst for growth, and without catalyst for that plunge that is necessary to cleanse out the excesses and provide a fresh start. And this is what central banks have accomplished with their monetary policies.

Instead of spending money on productive activities, companies have been doing something else with this flood of cheap liquidity. It has become a huge force, but it’s going to fizzle. Read…  Here’s What Fueled the Rally in Stocks since February

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  75 comments for “Not a Plunge but a Long, Slow Grind Lower

  1. michael
    June 24, 2016 at 10:19 pm

    It will be a slow grind down as the US pursues the Japanese economic model. The only solution is higher interest rates, as the FED watches the altimeter fall. Hopefully Trump will fire Janet Yellen in January. My recommendation, FEDxit

    • Petunia
      June 25, 2016 at 9:12 am

      I just saw an article with a slide show on the new Japanese minimalism. They are trying to sell poverty as some kind of new great lifestyle. The new Japanese minimalism includes no grooming products of any kind in the bathrooms, the barest amount of clothing, and even the least possible amount of food in the refrigerator.

      It is beyond disgusting that in the US they are also trying to brainwash us with the new tiny house propaganda. Live in a shed it’s great!

      • illumined
        June 25, 2016 at 9:23 am

        The environmentalist movement has been trying to sell us that for decades. I’ve actually been told that the early 1900’s lifestyle is “the best” because we’d use fewer resources. After all, “living with less” is “sustainable”…..all while Al Gore gets to live in his mega mansion and fly private jets.

        • Bill
          June 25, 2016 at 1:21 pm

          The environmental movement is doing it’s best to make us a third world country, with a few requisite leaders well above the rest of us, of course.

        June 25, 2016 at 9:37 am

        Petunia, to a point “minimalism” can be a good thing. I limited my purchases, years ago. I think more than twice before I buy and when I do buy, it is to further keep it simple. An Example (though not a perfect one):

        I am fortunate enough to afford new cars, BUT, I don’t want to waste any more than I have to, thus, IF I can not find what I want, exactly or at least 90% of what I want, used at 1 or 2 years old, I will buy new. And when I buy new, I order what I want being a picky as I want.

        Then, what do I do further to “minimalize” this? I keep all of my cars for approx. 10 years. I wear it out. The happy part is that over this time I am driving exactly what I want: The color, the options, the look, etc. So, for 10 years I am “happy”, have what I want, and use the auto up. One car, one decision, and after about 4-5, it’s paid for and I still am “in love with it”.

        This is not real “minimalism”, but if you do the same thing to clothes, appliances, etc. it works. I hate “stuff” (Thank you George Carlin) and accumulation. Also, Fung Shui is all based on simplicity, order and function…and it does add to a peaceful life.

        • Petunia
          June 25, 2016 at 1:34 pm

          I am a big fan of minimalism which is why I looked at the article in the first place. This was a perversion of the idea. There is a big difference between simplicity and deprivation.

      • frederick
        June 25, 2016 at 2:52 pm

        Nothing wrong with simplifying alittle Pet İ sure dont miss the big house in Sag Harbor with the 2 Porsches and all the accompianing stress İm living in a rented place on the Turkish Riviera No mortgage No credit card bills Life is good let me tell you when you realize whats really important in life The japs may be onto something

  2. Blackbox
    June 24, 2016 at 11:03 pm

    As a layman follower of the economy and monetary topics I continue to struggle with the possibility of treasuries dropping into negative rate territory. I do see now (I believe) a path where this happens in the US with or without the FEDs blessing. Perhaps Wolf can confirm. The scenario of late for the 10 yr treasury yield have been fluctuations from 1.75% to 1.45%. The lower bound occurring in the heat of the brexit vote. This is basically due to money rushing out of high risk assets into US treasuries as a safe haven or into dollars which also affects the yield downward on treasuries.

    That said, what if we see continual shocks like the brexit from other markets on a hastening frequency? Each time a rush to US safety (being the cleanest dirty shirt) where yields push further lower as bond demand and bond price increase each time. This seems to be the equivalent of a hot money flows into the US. So as each foreign market cracks under pressure (or drops out of the EU) the treasury yield is forced downward.

    When it goes negative via these external events you now have a hot potato situation with these 10yr treasury bonds. People keep buying them, not to hold for 10 years but to hold maybe a year and (as demand and price keep going up) they flip it to someone else pocketing the appreciation, handing it off to the next greater fool to hold. And if its held to term the holder gets back less than face value. So there is incentive to keep turning these over faster and faster to collect on that appreciation and not get stuck with the negative at the end ? Would this not lead to an out of control negative rate bubble scenario in bonds?

    Never mind at the same time the dollar shoots through the roof killing our exports, depressing oil prices (killing junk bonds) and likely causing hell with China’s currency with temper tantrum Yuan devaluations in the ongoing currency war? Please forgive me for this tangent from the article. The mention of negative rates keeps sparking my imagination !

    • Agnes
      June 25, 2016 at 1:35 am

      Europeans have seen their currency demolished more often than we…that is why Gold went up in GPB overnight
      22%…and they have to pay VAT. I think Petunia and others are right that Gold is overvalued….mainly because silver and gold are tied at the hip and silver is way out of proportion right now.

      • frederick
        June 25, 2016 at 2:57 am

        Agnes İ disagree that gold is overvalued when you look at the expansion of the worldwide money supply Silver is even more undervalued than gold in my opinion

      • Petunia
        June 25, 2016 at 9:14 am

        I would stay away from diamonds as well. The coloring and treating of all stones make investing in gems not worth the risk.

        June 25, 2016 at 9:43 am

        Silver is silver. Gold is gold. I can not really understand this concept that the price of one had anything to do with the price of the other.

        Does the price of copper, or iron ore, have anything to do with the price of Silver? Any “historical” ratios? No.

        Does the price of gasoline, or aluminium, have anything to do with the price of Gold?

        Mankind has the ability to see relations where there are none. We like patterns so much, we may be inventing them. Silver, in the 1800’s got so plentiful that many nations, like Germany, went’ off any “silver standard”. China back then, only wanted silver for payment and did not care much about gold as money. Why? the best answer is……as a child says……..”BECAUSE”.

        • frederick
          June 26, 2016 at 12:42 am

          The reason simple “they are both considered monetary metals” historically and therefore seperate from all other commodities

        • Agnes
          June 27, 2016 at 4:05 am

          >.> <.<

          With fiat money no one knows what stuff is worth…but people used to care and some still do. I agree that "you can't eat Gold"


          "you can't eat paper either."

          The "distilled human perspiration"(c)LJD 1972 that we exchange for goods is easier when someone is not diluting the currency.

          Marginal utility comes into it even in barter, that is why there are ratios. Besides…trading is easier when one knows something is overbought or oversold.

        • Agnes
          June 27, 2016 at 4:07 am
      • Vespa P200E
        June 25, 2016 at 10:09 am


        What is your rationale for gold and silver are overvalued?

        Granted the $60 increase overnight appears to be over-reaction but global FIAT currencies woes are becoming more obvious. Euro will continue to be under pressure and there is this aura of global CBs desire to devalue their currencies. That said USD will return as the de facto stalwart currency as even JPY strengthened quite a bit after Brexit. Good for us in US with strong USD but not so good for the inflation and corporate profit.

        I’ve been actively buying gold coins from eBay from legit dealers taking advantage of eBay Bucks back on 2 accts for $1k/qtr cash back ($100 cashback per coin often way under spot with $100 max per qtr per acct).

        • Agnes
          June 27, 2016 at 4:29 am

          Vespa , I was not clear enough…silver is way way way undervalued. And the silver to gold ratio is out of whack, so of the two, gold is overpriced.

          The ratio comes from what was perceived to be the long-term mining ratio at roughly 15 to 1.

          But it turns out that silver “floats” to the top of silver/gold mines and there is proportionally less of it as one mines deeper. Current mines are at roughly 11 to one(how do I know this? I read mining reports from stocks my Dad wanted me to study)

          Government can’t print silver or gold and their monetary marginal utility is undisputed (see antal e. fekete


 (winner of the 1996 Internationa Currency Prize)

          sorry slow in answering..only on a few times a week

  3. Jonathan
    June 24, 2016 at 11:17 pm

    Worsening global demographics, peak debt, peak consumerism, ballooning real inflation in necessities, declining real income for the masses…The CBs do know this, but admitting so is tantamount to suicide so they cherry-pick any uptick, no matter how laughably small in sea of decline, as a victory of monetary insanity.

    • night-train
      June 25, 2016 at 2:41 am

      Jonathan: Good comment. The CBs do look for the smallest uptick and quickly plant the flag. Quickly followed by the media talking heads parroting the latest talking points. I guess if one is not as engaged as the readers here, it must sound like background noise.

        June 25, 2016 at 10:25 am

        If the Stock Market does not maintain it’s levitation and if Bonds collapse, then the Insurance market, the Annuity Market, and all Pension funds (Think Illinois, California) are bankrupt. Seriously bankrupt.

        Most pension plans assume a 7%+ annual return. What do they get today? 0.5%. Just wait till Gov bonds offer -1.0% then that means the pension plan is PAYING the government ,or GM, to plant their retirement funds with them. Bankrupt.

        To keep the over-all World economy spinning, the Central Banks have to do the -% rate game. But, in doing so, they are destroying the smaller groups that I mentioned above. To keep the countries going, they will, no doubt, without remorse, destroy the Teacher’s Pension Funds. What do they care. The Central Banks get most of their profits from the % charged on government bonds, etc. and the governments get their funds from taxes on the teachers.

        Politicians, top 1%, Central Banks win. People lose. Or, to put it more clearly, the Kings win and the peasants pay. Nothing has changed for 10,000 years.

  4. John Doyle
    June 24, 2016 at 11:56 pm

    I really doubt there will ever be more “good times” This long slow decline you write about is the new normal, a normal which will itself accelerate.
    Time is up !

  5. marty
    June 25, 2016 at 12:11 am

    “The generally volatile orders for transpiration equipment fell 5.6%,…”

    ??? I think you meant transportation equipment. ;-)

    • June 25, 2016 at 12:43 am

      Thanks. Must be one of my more hilarious typos.

      • night-train
        June 25, 2016 at 2:51 am

        Wolf: Maybe transpiration equipment sales are what we need. In the form of a legalized cannabis industry. Perhaps the industry would not live up to some of the promises promoters have made, but then, we might not care all that much either. :)

  6. Tom Welsh
    June 25, 2016 at 5:02 am

    It has been said that, “Capitalism is the extraordinary belief that the nastiest of men for the nastiest of reasons will somehow work for the benefit of us all”.

    What you have just described is the inevitable consequence of a system that rests on that claim. As time goes by, the nastiest of men get more and more power – and, to everyone’s amazement, use it to enrich themselves and impoverish everyone else. Who knew?

    • nick kelly
      June 25, 2016 at 12:40 pm

      And you get to comment on a computer that would have cost a million dollars 30 years ago- courtesy of evil Bill Gates and evil Steve Jobs etc. chasing the rainbow.

        June 25, 2016 at 1:57 pm

        Correct. As Gordon Gekko said: “Greed is Good”

        I have A/C in my home due to the greed of Mr.Carrier.

        I have jets to fly on, where I can go from Miami to LA in 6 hours due to the GREED of Mr. Boeing, Mr. McDonald, Mr Lockheed, etc.

        I have a HUGE GAS GUZZLLING truck due to the GREED of Henry Ford and it runs on cheap gas (as cheap as 1920) due to the GREED of Mr. Rockefeller, etc.

        Greed Is Good.

        • JerryBear
          June 26, 2016 at 2:04 am

          The greed we are dealing with here that involves Wall Street and the big Financiers is of an entirely different kind than the motivation of the great industrialists. The kind of greed we are dealing with has nothing “good” about it but is entirely destructive and malignant. I think for your own survival you had better be aware of the difference. Do not defend great villains by unjust and undeserved comparison with the genuine heroes of capitalism.

      • Cambric Finish
        June 30, 2016 at 7:13 pm

        I assume you are using Bill Gates and Steve Jobs as a metaphor for the benefits Capitalism brings to all of us. If anything, what the BIll Gates and Steve Jobs example shows is how incredibly unfairly the Capitalist system distributes its wealth. In this case, enough wealth to a couple individuals, enough wealth to exert measurable influence on how our society operates. An alternative Capitalist metaphor could be “one rotten apple…” given how wealthy “Capitalist” interests now direct our government representatives and their bureaucrats to ever more unequal distribution of wealth from our collective labor. So, for increasingly more of us, there really are “evil” capitalists.
        Also, it is ironic to select the Personal Computer as evidence of Capitalist ingenuity because if any product bears a massive government imprint, it is the PC. One might lavish extensive praise to the myriads of far-sighted decisions made by so many nameless government bureaucrats, who approved so much funding for the basic science and “miniaturization” technology that led to the development of the microprocessor, allowing the replacement of those 30 million dollar behemoths. Anyway, without further belaboring these points, since this is a blog about surveying our foggy financial landscape, I just want to defend the real complexity of human “progress” from the over-simplified models presented by our Libertarian and Free Market friends. For full disclosure, I am one of the non-Libertarian class of computer programmers who has been programming computers in Silicon Valley since 1972.

        • June 30, 2016 at 7:38 pm

          Wow, since 1972 … the end of an era, the end of punch cards!!! Cambric, you have my admiration that you’re still at it.

          We do have come a long way! I was just a kid then, with a summer job that included carrying immensely heavy card-board boxes filled with punch cards up five floors into the attic of the building. That company had just bought a computer system that functioned, amazingly, without punch cards.

  7. Silly Me
    June 25, 2016 at 6:10 am

    Market manipulation is possible only if there is a touch of uncertainty. When everything is owned by a select few, that factor stops working and there is nothing left to invest into, only the manipulation of the real world. No wonder a slightly sloping road to hell is all that is left open.

  8. wholy1
    June 25, 2016 at 7:05 am

    Yup, it’s a PROCESS, just about like everything else.
    A slow incremental descent into a corporate-controlled technocratic feudalism of dumbed-down, debt-ridden, drugged, debilitated and DISTRACTED, subsidized serfs “existing” on doled-out “grain and games”.
    ” ‘Merkaan’ Mushroom Majority” CHOOSING to continue vegetating on the corp-controlled MSM’s dung in the dark. Sad and pathetic!

  9. Dan Romig
    June 25, 2016 at 7:09 am

    Wolf, your second to last paragraph sums things up perfectly.

    I live in Minnesota, and my state needs to invest $300 million a year for the next decade on roads and bridges, but the two party duopoly cannot pass a gas tax increase or bonding bill to pay for it. With the Fed dishing out ‘monetary cocaine’, its high time for federal, state and city infrastructure investment. That is one way to kick-start the economy and improve the quality of life.

    As you so accurately state, we’ll stumble along for years to come without a catalyst, and, in my view, watch the wealth transfer continue from the masses to the Uber-elite.

    • Petunia
      June 25, 2016 at 9:22 am

      I lived in Florida where they collected gas taxes which were spent everywhere but the roads. The roads in Boca Raton always looked great, in minority neighborhoods they barely responded when a sink hole opened up. The bulk of the money went to higher salaries and every other give away the commissioners could think of. Some of these taxes had expiration dates, but they never went away. Beware!

      • Ptb
        June 25, 2016 at 10:46 am

        Same thing in San Diego. After years of sewer rebuild taxes ($50/month/house) it was discovered that all the money had been routed to the general fund and not sewer rebuilding. So they then passed a new law that said the money had to go to actually rebuilding the sewers. You can’t make this crap up.

        June 25, 2016 at 10:56 am

        Petunia, it is all over government.

        Do you remember in Florida when they sold the “Lottery” game? Oh, X% will go for Education. Isn’t that wonderful!!!!!

        So, let’s see. They bring in $100 Million for education that first year, and what do they do? They DECREASE the regular State funding for Education by….$100 Million.

        Then, the set up a Lottery Department and pay outrageous wages. The head of the department makes like, $250,000 a year + Benefits, with Vice-Presidents all over the place making $150,000 a year….and if you look closely, you will notice all the plush jobs have last names similar to those already working for the State of Florida.

        These are all games. Fake, State manufactured, overpaid jobs where the bulk of the money never gets to the original reason. This is why a true conservative-libertarian instinctively knows that the most cost effective program is never a State program.

        Want the most affordable health care possible? Keep the STATE out. Want the most affordable and best University Educations? Keep the STATE out. Want the most affordable and best sports bars……..well, you have those right now….. and that is because the STATE, so far, has nothing to do with sports bars.

        • Dan Romig
          June 25, 2016 at 1:57 pm

          Event H., yes indeed, it is the state.

          I’m a Libertarian in most every sense, but there does need to be government built infrastructure to facilitate interstate commerce amongst other things that are needed for 330 million humans to exist in this country.

          My home town of Minneapolis is the poster child for lack of infrastructure maintenance; I-35W on 1 August 2007 fell into the mighty Mississippi. Thirteen people died in the collapse.

    • wholy1
      June 25, 2016 at 5:55 pm

      Exactly! ” . . . wealth transfer continue from the masses to the Uber-elite.”
      EVERYTHING else is a distraction to the PROCESS of wealth consolidation and transfer with WAR being the finale as said [d]elites exit stage left to their remote armored redoubts to make even more filthy lucre funding ALL the combatants.

  10. Ptb
    June 25, 2016 at 7:40 am

    Technology is advancing at a fast pace. The real game changer headed our way is automation of most low skill level jobs. This will really take away what little wealth the 99% had managed to hang onto in the last 20 years. This current rise in popular discontent should only grow as the trend in automation grows.

    • Petunia
      June 25, 2016 at 9:27 am

      I think automation is also coming to high end jobs like the medical profession. A computer can keep much better track of a list of symptoms than any doctor can. The computer can also compare symptoms and treatments to all medical events in the past. I think the medical profession has priced itself out, but they don’t know it yet.

        June 25, 2016 at 11:04 am

        This will work if the patient is willing to submit to the computer programs, but most patients, particularly women, want “contact” and time with the Doctor.

        Look how many complaints are filed concerning the “attitude” of the Doctor or Nurse. Patients complain all the time about the “personality” issues even though that has absolutely NOTHING to do with health care. (As you can tell by my nasty comment….I am in the health care business).

        If patients are willing to sit down and be tested by machines and then accept the computer program diagnosis and treatment, have no smile from the staff, are given their co-pay/deductible bill, and then dismissed, then YES, it will work. BUT, patients, mostly women, judge the effectiveness of the medical treatment by how much the “like” the medical staff.

        The likableness of the staff has absolutely nothing to do with the medical aspect. The patient should want the best doctor possible even if his/her personality sucks. Personality does not cure you. Knowledge of your problem does. Health care is not, and should not, be retail, or restaurant service, or a happy smiling face selling you a 50 cent coffee for $4.95 at Starbucks.

        As Joe Friday said: “Just the facts Mamm, just the facts”. (some of you are wondering who the hell “Joe Friday” is)

    • JerryBear
      June 26, 2016 at 2:34 am

      Now I think people are beginning to understand what Marx was talking about. He didn’t regard Capitalism as an unmitigated evil. He regarded it as a potent force for sweeping away feudalism and developing the productive forces to an unprecedented degree. The French Revolution was the all time classic Capitalist revolution against Feudalism and Theocracy. But Marx predicted that Capitalism was inherently unstable and would eventually self destruct. i see no reason whatsoever to doubt him. Or can any of you envision any kind of solution to our current crisis?

      • night-train
        June 26, 2016 at 3:20 am

        JerryBear: I think you summed it up nicely. Any economic system is subject to abuse and outliving its viability. If we aren’t careful, Capitalism may fail spectacularly. And probably will, because too many view it more as a religion than just a human construct with many flaws.

        • Thomas Malthus
          June 26, 2016 at 3:47 am

          A system that requires infinite growth – in a finite world – was doomed to fail

          Unfortunately it is failing during my lifetime :(

  11. Pakilolo
    June 25, 2016 at 8:35 am

    We can grow our way out of this stagnant economy by dealing with it’s greatest problem… Climate Change. We can put solar on every rooftop. Windmills. Switch our transportation to electric. Insulate houses. Efficiency, efficiency, efficiency! New technology that actually means something. We will have to stop warring. We will need leadership that has not sold us out to the Koch Brothers. The old economic model is closed to us if we want to survive on Planet Earth – our only home.

    • Petunia
      June 25, 2016 at 9:44 am

      Alternative energy and climate change are two separate issues. I am all for pollution control and renewable energy sources. I don’t think renewable energy methods need to make economic sense, if the buyers want to pursue it as social policy.

      However, I worked on Wall St. when they were coming up with the global warming scam. It was devised as a method of imposing a tax on all businesses which would be controlled and skimmed by Wall St. I admit I thought they were all crazy and didn’t think the American public would fall for it. But here we all are. Just like they buy the ratings they want, they bought the research they needed. People need to look at the origin of the funding of the people pushing this agenda.

      • night-train
        June 26, 2016 at 3:40 am

        Petunia: I have respect for your views, many of which are no doubt, hard won. But your argument that climate change is a Wall Street scheme is not born out by facts on the ground. Sea level rise alone is having to be dealt with in places like Miami, where it is projected to cost billions.

        Faux research was purchased. But it was purchased by fossil fuel energy interests through astroturf organizations funded by the Koch Brothers, et al. Organizations like the Heartland Institute. As a geologist, I am sure man has had a profound impact on the planet. And whatever we do in the future, we are already going to pay dearly for the problems we have already created. This should be dealt with as a science issue, not as a political football. Ultimately, we are all in the same boat and should be looking for long term solutions together.


        • Petunia
          June 26, 2016 at 9:10 am

          I lived in south Florida for 15 years, never farther than 15 minutes driving time from the beach, and I visited Florida in my youth as well. The beaches are the same with the exception that some have been expanded by dumping more sand. The climate change supporters kept saying that the sea levels have risen 6 inches in the past decade, which would have put me under the sea anywhere I was in Florida. The whole thing is a giant scam.

          Florida is at sea level. Any rise in the sea level would put the entire peninsula under water. There are some areas in Miami, that I know of, which are under sea level. They flood during any significant rainfall. This has always been the case. These are the pictures you keep seeing when they want to prove that Florida is sinking. The whole subject is a scam which is why they keep relabeling it, global warming, climate change, ……

          Just because some elitist’s views coincide with the truth is no reason to switch sides.

        • Thomas Malthus
          June 26, 2016 at 3:51 pm

          Entire islands disappear as violent gangs steal sand amid global shortage

          ‘Activists and government officials confronting black-market sand mining gangs have been killed’

          A global shortage of sand has prompted violent black market gangs to steal large amounts from rivers and beaches and even the complete disappearance of dozens of small islands, according to an author working on a book about the problem.

          Sand is used as a main ingredient in cement and concrete in buildings, to make glass, in roads and in massive land reclamation projects in places like Singapore and Dubai.

          If all the sand used by humans in a single year was turned into a wall it would be 20 metres high, 20 metres wide and stretch all the way around the equator.

          In an article for the New York Times, writer and journalist Vince Beiser said: “Sand is the essential ingredient that makes modern life possible. And we are starting to run out.

          “That’s mainly because the number and size of cities is exploding, especially in the developing world. Every year there are more people on the planet, and every year more of them move to cities. Since 1950, the world’s urban population has ballooned to over 3.9 billion from 746 million.

          “From 2011 to 2013, China used more cement than the United States used in the entire 20th century.”

          Desert sand, shaped by the wind, is often unsuitable for use in construction as it is too round and does not stick together as well as the rougher sand produced by water erosion.

          “Usable sand is a finite resource … To get the sand we need, we are stripping riverbeds, floodplains and beaches,” Mr Beiser wrote.


        • Tim
          June 26, 2016 at 10:58 am

          Hey, Petunia, along with the points you make about the Wall street creation of global warming, is the ‘reframing’ or re-purposing of phenomena. E.G., in older geology, oceanography textbooks and others, can be seen discussions about subsidence. Florida, and east coast, like Virginia, are sinking. Virginia has a classic subsidence coastline. This is independent of ocean level changes from ice melt, it is relative to the crust levels and motions of plates. So the spinmeisters, take it out of context, as evidence of something, that it has nothing to do with. We could have global cooling, and build up of ice levels in the arctic and antarctic, and Florida would still be sinking. This kind of out of context spin casting occurs in many other areas also. The public just doesn’t have the background to know. Compartmentalization, it’s a feature.

      • JerryBear
        June 26, 2016 at 3:43 am

        Do you happen to know the Eskimo word for “robin”? Well guess what, they don’t know either, but they need to make one up because now they have them. Just this spring thousands of Flamingos appeared in South Holland. Normally they never get any farther north than the southernmost coast of Spain. Some of the local farmers thought they were pink swans. All sorts of really weird things are happening. This is quite objectively factual too. Global warming is not just some kind of scam, although I am quite sure Wall Street has come up with some scheme to exploit it. But please stop denying reality when you can see it in front of your very eyes. That is not a good thing. What we can or should do about global warming is an entirely different matter.

        • Thomas Malthus
          June 26, 2016 at 3:45 am

          It’s real – but there is nothing we can do about it

          We need to burn increasing amounts of fossil fuels because that is what powers civilization.

          It is a sad situation

      • Meme Imfurst
        June 26, 2016 at 8:49 am

        Since you live in south Florida, I know your aware of the “scam” that Miami has to pump to keep some roads free of invasive rising “scam”.
        Why even in Norfolk the Navy is have a major problem keeping the “scam” at bay and is bringing in experts from Copenhagen ( who have built a 40 high wall to keep future “scams” from flooding the country). The efforts to keep this “scam” away from the front door is spreading like good investment advice.

        I can look out my window and where I saw dry land only 5 years ago, I now see puddles of “scam” everywhere 24/7/365. In some places the “scam” is so pervasive that only ducks can profit from the ‘scam”.

        Yes, indeed, Wall Street created this “scam” and we all appreciate your bringing the ‘scam’ to our attention so now we can just ignore it.

        • Petunia
          June 26, 2016 at 9:23 am

          Florida does have the best water management system I have ever seen. They do it to protect the everglades and the drinking water supply. The reason most communities invest heavily in water management has nothing to do with rising sea levels. It is all about protecting the everglades, the drinking water, and to manage the flooding caused by HURRICANES.

          If you look at the sky line of Miami in the past and now, you will see that they are building closer and closer to the coast. Do you honestly think they would be building skyscrapers they know will fall into the ocean, or moving into them. Even in Miami they are not that crazy.

        • night-train
          June 26, 2016 at 9:59 am

          The Miami area is built on “rotten limestone, which is essentially fossilized coral. One of the rock’s characteristics is that it is very porous. Streets are often flooded during unusually high tides, because the incoming tide actually runs under the city through solution conduits within the rock. Huge pumping stations are being installed to try to cope with the frequent flooding.

          Florida’s water management programs are necessary to try to protect the resource from surface contamination because so much of the state is karst. As sea level continues to rise, Florida is going to be subjected to many costly problems. Beach erosion, salt water contamination of aquifers and inundation of areas formerly dry most, if not all the year. And the higher sea level rises, the problems become more complex and costly.

  12. Paulo
    June 25, 2016 at 9:16 am

    Sure there will be a long-term slow decline. It is called entropy.


    “The idea of entropy comes from a principle of thermodynamics dealing with energy. It usually refers to the idea that everything in the universe eventually moves from order to disorder, and entropy is the measurement of that change.”

    From the the EIA, St Louis fed, and Labyrinth Consulting:

    (In 2016 dollars, adjusted/constant)
    “Since 2009, oil has never been more expensive. The average price in real May 2016 dollars is $83 per barrel, the highest in history (Figure 10). This average includes the year of low oil prices in 2009 after The Financial Crisis and the two years since the mid-2014 oil-price collapse.

    From the same article:
    “Those who believe that Peak Oil is a failed observation do not understand that it was never about running out of oil. Peak Oil was always about running out of cheap oil. That is an indisputable fact.”

    From Wolf’s Post:
    “So the economy, doped to its ears with monetary cocaine and bogged down in debt, can barely stumble along zombie-like, perhaps for years to come, without catalyst for growth, and without catalyst for that plunge that is necessary to cleanse out the excesses and provide a fresh start. And this is what central banks have accomplished with their monetary policies.”

    During the Clinton and Reagan boom years the average price of oil was $33.00/bbl in 2016 dollars. (Thanks to North Sea coming on-stream and Alaskan high production.) That was the catalyst for Growth we remember, longingly.

    From ’08 until present the average oil price is $83.00/bbl, the current ‘bust’ included in these stats. (referenced in the above link in graphed form).

    Substituting Debt for cheap energy in order to ‘goose’ the economy as experienced by all of us since 2008, for whatever basket of political reasons, is not a long term solution.

    Get used to lower levels of consumption, living, and opportunities going forward. What provided the surge in all our expectations, (what we call a normal and robust economy) , including material goods production/consumption, ample food stocks, and ballooning population growth, was the vast quantities of very cheap oil. Sorry, those days are gone. Don’t believe me? Check out the stats in the linked article.

    Hopefully, a push into renewables will provide modest employment opportunities. But the smorgasboard orgy of the past is over. Life’s meaning and personal satisfaction will have to be found elsewhere.


      June 25, 2016 at 11:11 am

      Uh, if you compare the price of a gallon of gas in the US, today, to the price about the 1920’s, using 1920’s prices, gasoline is actually CHEAPER today.

      Even at, about, $2.25 gallon today, it is less, accounting for paper induced iflation, than the 15 cents a gallon back then.

      • frederick
        June 26, 2016 at 12:57 am

        Todays price is certainly NOT cheaper than 1970 when my part time after school job at minimum wage plus tips and one hour salary after taxes could pay for 20 gallons of premium gasoline but that was before Nixon took us off the gold standard and the dollar plummetted Ah the good ole days (except for Vietnam and racism of course)

    • JerryBear
      June 26, 2016 at 3:50 am

      Paulo, you seriously misunderstand the concept of “entropy” but nearly all laymen do. Please note that beautiful ordered snowflakes form from totally disordered water vapor, so it is not as simple as you think. But the general principle does apply. If things are not maintained they fall apart. Rust never sleeps. It is not enough to create order, you have to actively keep it going.

        June 27, 2016 at 9:54 am

        Snowflakes form when heat is released from water vapor. This heat is what is used to create the order of the flake. Heat is used up and is released. This is why when it begins to snow, it feels a bit warmer than right before the snow was created. Water vapor in the air was warmer than the snow and gave you that feeling, but once the water “turned” into snow, it released this heat, you felt it, then it dissipated and you now it got “cold” again.

        This is an “open system”. Another example is how plants can grow. How can CO2 and H20 form plants cells, etc? Well, it is the heat from the sun (in various wave lengths, but still, we can call it heat). So if you have a source of heat, you can, in a smaller system (the plant cell) actually counter act Entropy.

        Entropy is relevant in a closed system or the ultimate closed system, the entire Universe. Heat moves around and some things become more ordered (plant cells and snowflakes) while the ENTIRE SYSTEM is not. The entire system is winding down and losing order, will individual parts of it can still grow.

        Entropy says that over time there will be no “pockets” or sources of heat and the entire Universe will be at the same temperature (pretty damn close to “0”) and then there will be no way to grow a plant cell or snowflake.

        BUT, as long as we have our SUN burning itself out for our benefit, we can GROW plants, snowflakes, children, etc. In the end, we will all have “0” heat differential and nothing. The Sun + the Earth is losing in the long run, but until then, we can “grow” things on Earth at the expense of the Sun.

        • JerryBear
          July 10, 2016 at 1:28 am

          Not quite there yet. When matter spreads out or heat radiates out that is an increase in entropy. The universe constantly increases in entropy as a whole because it is always expanding. It can never reach thermodynamic equilibrium no matter what happens with the matter in it. It can organize it in all sorts of ways without violating the 3rd Law. When water molecules form a highly ordered snow flakes, that is a decrease in entropy but that is more than balanced by the radiating away of heat of crystallization which represents an increase in entropy overall.

          The highly ordered Solar System developed from a highly chaotic cloud of gas and dust, but this does not violate the 3rd Law as 99% of the original cloud was flung out into space increasing its entropy and thus balancing out the fact that 1% became more ordered to form our Solar System.

          Life constantly fights entropy by maintaining a flow of energy (energy tends to flow in the direction of increasing entropy) which allows the maintenance of order. If that flow of energy is stopped then life irreversibly disintegrates into chaos (i.e. dies).
          On a more subtle level there is not only an energy flow, but life feeds on order and excretes chaos. When we eat a delicious meal, the biochemicals in it are highly ordered in various complicated ways but what ends up coming out is not only reduced in chemical energy but far more chaotic. The same atoms go in and come out but the difference between the two is very large nonetheless and a matter of energy and entropy.

          Entropy is a subtle thing and requires careful consideration of its ramifications.

  13. William
    June 25, 2016 at 9:47 am

    The IT hardware market revenue is characterized by the above chart. Old, big tech just slides sideways or downwards slowly. However, the downward pull is accelerating as Amazon Web Services forces monumental shifts in IT. Amazon is doing to the tech world what Apple did to mobile phones (Nokia, Blackberry, Motorola).

    • Vespa P200E
      June 25, 2016 at 10:15 am

      Tech world wins while AMZN, GOOG, MSFT and even AAPL crowds into the web service sector. Expect over CAPEX investment and overcapacity leading to dog eat dog pricing as there really is no special IP on cloud computing.

  14. Nicko
    June 25, 2016 at 10:09 am

    The next thirty years will see 2 billion new people call this planet home. They’ll be in Africa/MENA and Asia; that is where middle class consumer growth will come from.

    • LG
      June 25, 2016 at 10:15 am

      Right, like in the last 6000 years?!

      • Nicko
        June 26, 2016 at 9:25 am

        Guess who was the best performing stock market in Asia this year? Pakistan! Yes, that basket case of a country has a huge growing consumer class. China is splurging $45 billion building silk road infrastructure in Pakistan (including a huge nuclear power plant). People will always need stuff.

    • nick kelly
      June 25, 2016 at 3:38 pm

      Asia no doubt. Africa? South Africa is rapidly looking like the next Zimbabwe, running neck and neck with Nigeria.
      And those are among the better ones. Zaire, Congo- don’t ask.

  15. LG
    June 25, 2016 at 10:13 am

    No worries ladies and gents soon as Barnes and Noble starts serving booze we can all read books and get wasted at the same time! USA #1!

  16. Yancey Ward
    June 25, 2016 at 11:09 am

    Probably many of you do read him, but if you don’t, start doing so! Jeffrey Snider has been covering this slow grind down for years now.

    • KHS71
      June 25, 2016 at 2:03 pm

      Thank you. I book marked his page. Always looking for someone who does not hype.

  17. June 25, 2016 at 12:28 pm

    As every user [and TV viewer] knows, euphoria and hyperactivity can be maintained through crack and crank for only so long before the addict “crashes,” and quite possibly dies.

    The effects of the economic crystal meth [financial engineering/QE] have maxed out, and is typical in addiction, the relatives and community are expected to clean up the mess, which they had no part in creating.

    One of the first steps in the process of rehabilitation is to stop enabling the addict, and then on a community level to eliminate, or at least tightly restrict/control, the supply of the abused substance, and to eliminate the glorification and promotion of the abused/addicting substance, for example tobacco advertising and product placement.

    • Vespa P200E
      June 25, 2016 at 4:33 pm

      Good analogy but how many addicts really come off the wagon?

      I think it’s becoming more like addiciton to ophiod pain pills leading to heroin overdose. Global CBs are the street corner drug dealers but running out pain pills so forced to dig ever deeper into something more sinister like NIRP since QE and ZIRP highs are fading. Next up when NIRP looses its high is outright helicopter money to save the world from deflation bringing about the dreaded stagflation whch will lead to uprising everywhere.

      • June 25, 2016 at 6:54 pm

        RE: “Next up when NIRP looses its high is outright helicopter money to save the world from deflation bringing about the dreaded stagflation which will lead to uprising everywhere.”
        Actually “helicopter money” may be viable if done correctly, possibly in the form of a “Guaranteed Basic Income.” This money would be largely in the hands of the people, at least to start, and would be spent by most on basics such as food, shelter and clothing. It would of course eventually disappear into the same black hole as the QE and Z/NIRP money, but would circulate at least a few times.

        This could be financed by the imposition of a progressive capital levy against all assets held by American citizens/corporations and resident aliens, no matter where the asset may be physically or legally located, thus limiting tax evasion/avoidance. Because the major assets for most people are their home and vehicle, which are already heavily taxed, a high asset threshold, for example 20X median annual income, would seem equitable.

        • Meme Imfurst
          June 26, 2016 at 9:08 am

          “This could be financed by the imposition of a progressive capital levy against all assets held by American citizens/corporations and resident aliens, no matter where the asset may be physically or legally located, thus limiting tax evasion/avoidance. ”

          It already exists and is called the “intangible tax” (in Florida )and “personal possession/property tax” ( in Virginia) and just about every state has it. It is not the same as RE tax or a license plate tax. In Florida if you hold a mortgage for example, that income is subject to the “intangible tax”. In Virginia, your furniture, car, etc. is subject to “personal property tax”

          In the near future, what will be taxed is automation. And, if you can’t or won’t tax automation in all forms, you best get a plan to keep the unemployed hordes at bay, growing by the millions every year.

  18. Thomas Malthus
    June 25, 2016 at 4:22 pm

    “So the economy, doped to its ears with monetary cocaine and bogged down in debt”


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