There’s a Significant Risk of Cascading Defaults in Form of a “Debtors’ Strike”

The bailouts are better described as organized protection racket run by banks, hedge funds, private equity investors & large corporations.

By Karen Parker Feld, The Irreverent Economist at Paladin Advisors:

The Fed has used the coronavirus crisis to double down on a failed strategy of supporting financial markets while the real economy declines. Our latest Quarterly Market Outlook & Strategy letter describes the consequences that are likely to result. It’s called, “Through the Looking-Glass,” because whenever Alice (aka Karen) peers through the mirror at our financial markets, she sees that everything is reversed.  We are definitely running the Red Queen’s Race now.

Our cyclical models suggest we are, perhaps, a third of the way through the stock market’s re-pricing, although the Federal Reserve’s asset-purchase programs make any kind of market forecast hazardous. We feel most confident in saying that this is not a liquidity crisis. It most certainly is a solvency crisis, and not easily remedied.

The inexorable rise in the ratio of US debt to GDP is prima facie evidence of the unfortunate fact that most of the funds borrowed over the past few decades—by households, corporations and the government—were not put to productive use.

The Fed, like the European Central Bank, and the Bank of Japan before it, has tried to generate inflation through easy monetary policy, with the goal of reducing the real burden of our massive debts.

However, all attempts have been self-defeating, because the extra liquidity encouraged ever more unproductive borrowing, which can never be repaid.  Inflation cannot be marshaled to reduce debts in a liquidity trap; it will only arrive once these have been written down.

In describing our central bank, financial historian James Grant, as usual, puts it best:  The firemen are also the arsonists. Having lured investors out onto the furthest limb of the risk tree, the Fed had no choice but to play its final hand. Now that the Fed and Treasury have assumed control of the financial system, it’s hard to imagine a good (i.e., rational, efficient and transparent) mechanism through which the government will pick winners and losers via its asset purchase decisions. Whose debts will be written off, how were those beneficiaries chosen, and what evidence is there that a clean slate will catalyze  growth?

And what are taxpayers getting in exchange for their generosity? A financial system whose risks have once again been socialized, but whose rewards remain in a limited number of private hands.

The taxpayer will hold the bag for defaulted loans, but is not guaranteed an equity stake in the companies the government is bailing out. In an Irreverent Economist blog post I described the move as “nationalization” of our financial system, given the wide scope of government control. But that’s not quite right, since the public does not have ownership rights. It is better described as an organized protection racket run by banks, hedge funds, private equity investors, and large corporations.

We believe there is significant risk of cascading defaults in the form of a “debtors’ strike,” as households and businesses seek to retain whatever cash they can get their hands on. This outcome seems more likely than in 2008, which witnessed strategic defaults by some mortgagors.

The coronavirus provides a focal point around which large numbers of debtors may focus their anger and frustration at the disproportionate support given to Wall Street vs. Main Street. It’s one thing when a person feels like he or she is the only one struggling financially. But when 30% of the workforce is in the same boat, there is far less stigma associated with saying “I’m done.”

Policymakers have been repeating the same mistake for 20 years, and the reckoning has now arrived. When US captains of financeleading politicianssports team owners and media personalities start calling bullshit on corporate and hedge fund bailouts, you know we’re in the 9th inning of this game. Policies change when no one — not even those who benefit from them — accepts them as fair.

Whatever happens in financial markets, it is unlikely that consumer spending will rebound quickly. Americans will undoubtedly realize that they need a larger margin of safety against unexpected shocks.  Household savings will continue to rise, which will slow the recovery in the economy.  Absent a quick resolution of uncertainty surrounding the coronavirus — which we deem unlikely — businesses will be dealing with complex and difficult choices that inhibit planning and hiring decisions. Needless to say, the dismantling of global supply chains and rising geopolitical tensions will not help. By Karen Parker Feld, Paladin Advisors

Now even the fig leaf is gone. Read…  Corruption in the Time of Coronavirus

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  275 comments for “There’s a Significant Risk of Cascading Defaults in Form of a “Debtors’ Strike”

  1. Stuart says:

    Rent strikes and massive civil disobedience are inevitable given the “Let them eat cake” attitude of Trump. Are we doomed ? In the absence of leadership from the top what will happen ? Will we see modern day versions of “Hoovervilles”, and call them
    “Trump Towns” ? Has anyone received their $1200 yet ?

    • motorcycle guy says:

      Stuart,

      The answer to your question is, YES.
      My daughter and her family have already received their stimulus check, $3900.00 for two adults and three children.
      I won’t comment on the reminder of your post as your TDS is showing.

      • noname says:

        I thought it maxed out at $3400.
        Wow, each kid gets $500 yet I get $0.
        Awesome!

        • p coyle says:

          well. that’s what you get for not choosing to be poor, and have a bunch of kids.

          that’s the way this works, right?

        • noname says:

          @ p coyle

          I actually would be considered “poor”, mostly. I have no income, therefore I get no free socialistic bucks. But I’ll be paying for them in the years to come, to be sure. Paying for all these bailouts I got no cent from.

          Disgusted and disgruntled.

        • Joe Saba says:

          Noname said – I have no income, therefore I get no free socialistic bucks. But I’ll be paying for them in the years to come.

          Really – how so – from your NO INCOME??
          or are you posing like so many others

        • noname says:

          Joe Saba, use some abduction and figure it out for yourself. I’ll give you one helper: I’m no poseur.

      • Gunnar says:

        good..

    • Seen it all before, Bob says:

      Yes, many people got their checks by now.

      They were much needed government socialist checks to pay for food, rent and mortgages.

      Let’s see if the US government keeps sending the socialist checks to pay for May.

      Shouldn’t the tax cuts cover this?

      • Joe Saba says:

        I bought tires
        tire store was SUPER BUSY – when I asked he said that stimulus checks must be why since they have double traffic THIS WEEK

    • Russ jabara says:

      No check here in CA, In fact I haven’t talked to anyone who has received it

    • sierra7 says:

      Karen Feld:
      I see no basis whatsoever that the masses will increase their savings at all. Where would those funds come from when so many Americans (workers) are eye-ball-to-eyeball in debt already; most of their $$$$ going to just survive and living in a world of still declining wages. At most I do see them making small changes in their spending habits vis-vis pre-virus disaster or re-ordering their priorities.
      More savings. Not a chance.

    • Clete says:

      Stuart: We received our 2,400 a few days ago. Rotated it right back into the local economy by hiring a tradesman to do something we maybe could have done ourselves (although a lot worse).

      • Satya Mardelli says:

        Clete – we did the exact same thing. A local plumber got every penny of our stimulus check. Couldn’t have been happier (me and the plumber).

  2. Tony says:

    A debt strike across the board is in order. All interest payments should be suspended by the government, credit cards, student loans, car loans, income taxes. The debts can remain, but without the accrual of interest.
    That way government can handed the responsibility of assuring that *eventually*, the debts will be repaid through government’s wise policy decisions. That would pressure on them from the financial maggot colony.

    In addition, all Governors who order ‘lock downs’ should immediately give up all their pay and benefits for the duration of the state lock down.
    –State governments will be not be allowed to issue pay increases or bonuses to state workers during the lock down.
    –All home foreclosures/forfeitures and rental evictions will be suspended for the unemployed in the states with lock downs (until the lock down ends).
    –States with lock downs with have to pay for the health insurance benefits of employees who were unemployed during the state lock down

    • RepubAnon says:

      The dominos are starting to fall. The consumer economy’s foundation is built upon the sand of the falling consumer household income. Now that the corona virus is washing away the economy’s foundation, it’s starting to crumble. Giving money to the big banks won’t stop this.

    • Stephen says:

      I guess plagiarism is the best form of flattery. I wrote these exact (in the last 4 paragraphs) words here on WolfStreet in the comments section several days ago. But, that’s ok, because they are good policies to implement and I borrowed some of the ideas from Martin Armstrong anyway (although I bothered to change Armstrong’s verbiage).

      • Wolf Richter says:

        Karen,

        Just to make sure… It looks like Stephen was replying to Tony and talking about his comment, the way I read it.

        Also, we have a form of debt jubilee enshrined in our bankruptcy law. That’s how it should be used, on a case by case basis with equity holders and creditors of those specific entities paying the price.

        Someone’s debt is someone else’s asset, and if you forgive the debt, you destroy the asset.

        There are about $40 trillion in fixed income assets in the US, which means $40 trillion in debt on the other side. And if you blow it up all at the same time, you’re not going to get a paycheck or be able to withdraw money from the ATM or buy groceries, in our credit-based economy.

        There needs to be an established process on a case by case basis, and we have that process in our bankruptcy code. It works pretty well if it is allowed to do its job.

      • Tony says:

        Be flattered, I copied it from a skywriter over Santa Monica!

    • Observer says:

      You can’t participate in a debt strike if you have no debt… so I guess I’m on the sidelines for this one!

      • DR DOOM says:

        Observer: no way you are on the side lines . You are an example to be repeated by others around you that have been wounded by debt. Stay in the game and pay it forward to others.

      • John Taylor says:

        Many citizens are already participating via a renter’s strike. Nearly 1/3 of apartment rents were unpaid in April.

        • Cas127 says:

          JT,

          2nd survey 7 to 10 days later, saw non-pmt fall to 16%.

          Reportedly.

        • Memento mori says:

          Bill 828 in California is now mandating that all landlords cut rents by 25% for 12months and in case of eviction after this period, it will be for the landlords to prove in court that the tenant couldn’t pay, totally nuts.

        • Wolf Richter says:

          Memento mori,

          All kinds of wacky bills are introduced that end up going nowhere. This one seems to fall into that category.

        • sierra7 says:

          J.Taylor:
          Many small business owners early on voiced their opinions on not paying April 2020 rents on warehouses, offices, etc. Even before the “help” acts were given birth to. First hand evidence from Greater Bay Area small business owners.

        • Joe Saba says:

          and I got 100% rent collection this month
          even rented out empty unit
          then again I screen diligently

      • WES says:

        Observer:

        What you are forgetting are the debts governments have runup in your name!

        Naturally they expect you to stick around and pay!

        • Observer says:

          Well, I have the option to take citizenship in three other countries and renounce my US citizenship, so the government shouldn’t be counting on my contributions.

        • Joe Saba says:

          bye bye observer
          don’t let door hit you in ass before you leave
          make sure IRS gets forwarding address as they’ll want piece

      • Philip Frank says:

        We missed out!
        We who are without debt “Failed” to make debt work for us.

        • Joe Saba says:

          in 2009 I was up to eyeballs in debt
          today – only mortgage on my house
          no stocks or wally street crap to worry about
          like my assets in hand and PAID FOR

      • Jean says:

        Best strike possible is to REFUSE TO CONSUME.

        My savings rate is about 70%. Best f*ck you possible to capital owners imho.

        • paul easton says:

          I have been following a policy of minimal consuption, and if I must buy try not to buy American. But due to the bad company I keep as well as my own evil nature, I am not saving. My disposable income goes to the consuption of a certain expensive recreational substance. I should really think about the ethics of this. But it certainly can’t be worse than paying US taxes.

        • Yerfej says:

          People like you are funny. Does it EVER occur to you that your actions are designed to not play the game rather than to focus on the most personal benefit? If you were to exist forever maybe you would win but reality is you need to maximize your good times cause the end never stops approaching.

        • paul easton says:

          @Yerfej People like you are funny. You think your personal benefit comes from spending more money. Good luck with that.

        • S says:

          >>Best strike possible is to REFUSE TO CONSUME.<<

          I must say your 3 capitalized words are all anyone needs to remember.

          Why investigate and penalize China at the government level or protest against the U.S. government for bailing out Wall Street speculators? Just substantially slow consumption of Chinese goods and the impact will hit China and hit U.S. taxation of the goods. Of course, this will lead to deflation and lower currency velocity and so another round of money printing by the Fed will come from it. But at least I feel like I am fighting back against the inevitable.

      • OutWest says:

        No debt? Those of us who save get to finance this thing.

      • BaritoneWoman says:

        And they call us “deadbeats” for paying our bills in full and on time? Yeeesh.

        • Prairies says:

          I had an upstanding goods supplier who always pays his bills on time get a call from his bank saying they had some advice to help him “make more money”. The bank simply told him to stretch his payments to 60 days overdue so he would have more cash in the bank account instead of zeroing out the amounts owing his suppliers. Dumbest thing we ever heard.

        • Jeff says:

          You’ve been called a deadbeat for paying your bill in full and on time? Tell me more, because I simply don’t get it.

          From my perspective, nobody has ever commented on my bill paying. Only the bank/utility/etc. knows and none of them have ever chosen to call me any kind of name…

        • Joe Saba says:

          a DEADBEAT is consumer who uses his cc and then pays them off EVERY MONTH
          since 1995 I’ve paid exactly $000,000.00 of interest to cc companies
          and I buy my vehicles on 1 payment plan(cash)

      • rankinfile says:

        Property Taxes will always be following you.

    • Top-GUN says:

      Debt strike,,, BS on that,,.
      I’m a creditor, yes I have money and I lend to people..
      I expect to get my money back with interest

      • NewGuy says:

        Good luck. Like they say, you have to be on the right side of the trade.

      • p coyle says:

        as a creditor, you hope to get your money back with interest. that is the definition of risk. you gonna send fat tony to break my kneecaps in order to collect? glad i wasn’t stupid enough to borrow money from you.

        • Jeff says:

          Where does the “stupid…” come into this? If somebody chooses to lend money in the hopes of making money over the long-term, why is that bad?

          I’m not talking about a place like Wells Fargo, or any company that’s big enough to be lobbying Congress for rules that put them at an advantage.

          If I save up $100k and want to invest it, why not lend it to others?

      • BrianC says:

        What are you using as an interest rate benchmark? How do you measure your risk? The central banks have all contributed to mis-pricing of all risk assets. Why are you so sure you’ve got it right?

      • Poolside at the Decline says:

        “I expect to get my money back with interest”. Old rules….
        ———–

        New Rule is: Whatever the government says you get, you get. Contract obligations retroactively modified, extinguished, delayed, etc by Government decree. Civil courts refusing to hear non-payment proceedings, or enforce warrants of eviction, etc.

        Imagine what this “new rule” is going to do to real estate values in rental markets. Current owners defaulting, Potential new owners pricing in: (i) inability to timely enforce non-payment proceeding judgements and warrants of eviction; (ii) rules of evidence changed to place additional burdens of landlords, etc. There is going to be a bloodbath. I would not be surprised to see a 50% drop in values.

        • Tony says:

          Okay, I will not pay my credit cards, rent, or taxes until later.

          As far as interest on that debt, I am happy to pay .01%, compounded, the same rate that I get on my bank deposits. Fair is fair.

        • Joe Saba says:

          working on billing govt already
          $1,000 an hour is my rate and I WILL COLLECT
          don’t want to enforce court order – oops so sorry your electric got cut

      • Joe Saba says:

        I’m glad I got out of my lending to others
        just 1 or 2 that I need to foreclose on(underlying assets soon to be mine again)
        so don’t pay – that moratorium is about to end and I will not hesitate to seize for non-payment

      • rankinfile says:

        Is your brother a doctor or lawyer?
        \Perhaps Hollywood Mogul?

    • NewGuy says:

      I thought that Trump was taking us in this direction, but I guess the thought of Wall St. boys not profiting off of stock/bond sales was too much for him.

    • dr.odyssey says:

      Holy Moly…now that is some debt…

      https://www.treasurydirect.gov/NP/debt/current

      I think we are going to need a bigger wazoo…

  3. Citizen AllenM says:

    LOL, massive deflation due to collapsing leverage.

    Gee, hoocoodanode?

    In short, assets might have been in a huuuuuuuuge bubble, but hey,
    reality might be a little harsh right now….

    Oil just fell through $17 a barrel, every single primary producer in the USA will be shutting in production after they deliver the last hedged barrel.

    Wild disparity in the difference between COMEX and metals cash and carry markets, lol.

    • Counterpointer says:

      Well, hello ol mucker, Hoocoodanode indeed!

      Maybe this time we’ll see that ya can’t fix a solvency crisis by hosing liquidity at it.

      I know I’ve been saying this for 12 years, but surely my day will come!

      C

      • c smith says:

        “…ya can’t fix a solvency crisis by hosing liquidity at it.”

        Sure ya can! Just a matter of degree…a big enough hose and a large enough reserve is all you need. The dollar is near all-time highs! So the reserve is there…

        • rankinfile says:

          So why did they let all of the roads,bridges,airports,water and gas pipes crumble then?

          First World my butt!

    • Shiloh1 says:

      Didn’t mean to plagiarize your comment, I hadn’t read that far down yet!

    • renterinNYC says:

      Omg Calculated Risk crowd is back!!!

      I MISSED ALL OF YOU!!!

  4. Phoenix_Ikki says:

    It will be a long road ahead and perhaps debtors strike is the next logical step for most that were victimized by this socialize the loss and privatize the gain system. A final revolt for a lack of a better word. Honestly if it doesn’t happen I have no hopes for our society, it would only mean we are so used to the system that subjugate us as victim, the will to fight back is completely absence and carry in as debt slave is the “normalcy” we glamour for.

    • Tony says:

      Here’s a brief primer for all the top 10%ers who have no idea of what life is like for America’s 60% Underclass:
      “the system that subjugate us as victim,”
      https://charleshughsmith.blogspot.com/2020/04/while-top-10-and-fed-cheer-stocks.html
      1. Income is insecure as shift/hours per week/gigs are all uncertain.
      2. When you are at your job, you’re overloaded with work: the pressure never lets up.
      3. You have long commutes, long hours.
      4. There are insufficient rewards and recognition for your labors: low pay, no stock options, supervisors pressured to fire people, not praise them.
      5. There’s no trust or community at work; you’re either competing for miserable pay in the gig economy, or you work with a constantly shifting mix of people. There’s no trust or support.
      6. Every day is an object lesson in unfairness: all you see are workers being treated unfairly while invisible bosses skim huge paychecks or millions/billions in stock options.
      7. You cannot value or have pride in your work because the product/service is garbage, as defined and dictated by your overlords,..

      • Phoenix_Ikki says:

        Good stuff and agreed to all the points. This epidemic also present a giant opportunity for shock doctrine to come into play quite nicely. Think about the lack of consideration for any moral hazard for throwing couple of trillions at the market all in the names of saving “free market” capitalism. Junk bond be blessed. At least in 08, there was a faint gesture of fake concerns from some members of the institute about moral harzard of TARP. This time around, nope, not even going to bother to pretend. Bigger the disaster, the more free reign these ghouls get for removing any checks and balance.

      • Martin says:

        Perfectly describes working at CVS. The purpose of changing a person’s hours every week is to prevent them from having a second job or a set schedule that can fit in college. Then they limit you to 30 hours, not enough to make a living on, because at 32 they have to pay benefits. And they wonder why the employees shoplift food. Ha !

    • Philip Frank says:

      Agreed!

    • paul easton says:

      This is a new idea for me. My credit cards are pretty much maxed out. So I could just say FU who needs credit anyway. But in fact I believe I need a credit card to rent a car. Can I rent a car with cash?

  5. Seneca’s Cliff says:

    How will this 3-12month (or longer) hiatus from financial BAU affect the widespread use of the alimighty credit score? At some point the masses may realize they have nothing left to lose. Also the Sheriff’s may lose their taste for eviction actions and seizures. Then all bets are off and the rent and debt strikes will sweep the land.

    • p coyle says:

      i doubt the sheriffs will lose their taste for asset seizures. but what do i know.

      • Debt Wazoo says:

        Actually they have, at least temporarily. Try getting a sheriff to sieze anything right now.

        They’ve got their hands full with more important stuff, like preventing and investigating the mass of burglings going on right now. Lots of small businesses with nobody there 24×7. Places that used to be open 24×7 and aren’t anymore. Equipment that’s bolted down can’t be relocated but it can still be stolen.

        • Debt Wazoo says:

          … which includes stuff that’s wired into the building, like expensive electronics (audio systems, networking switches).

          Removing it and reinstalling it costs half of what it was to have it put in originally, so unless you think there’s a >50% chance of burglary you leave it there.

          Toilet paper might be back in stores, but the “LOOTERS WILL BE SHOT” signs are still sold out.

    • economicminor says:

      Right now, for the foreseeable future, the courts are shut down due to Shelter at Home policies of most states. So filing for eviction isn’t even possible. Sheriff won’t evict without a court order and you can’t get one. Who knows how long this will last or what kind of chaos will ensue when this virus crisis is over but for now, renters could not pay and there is virtually nothing legal a landlord can do in many locals.

  6. Saltcreep says:

    This article feeds straight into my confirmation bias. I also think that at some point a nation level debtors strike against the Eurodollar system will evolve.

    • p coyle says:

      for all its faults, i think that was what occupy wall street was about. we saw how that turned out. it’s going to take a little more, shall we say, effort.

    • Tim says:

      ……after Argentina?

      Turkey, Italy?

  7. The idea of a debtors strike assumes debtors have choice of paying what they can’t. I have no idea what the future holds but if past is prologue then those with the most will get the most help while the rest of us will be allowed to sink. This time it really is different than any crisis gone before because so many have lost so much in such a short time. Always it’s the taxpayers who are expected to pay the freight except now there are at least 30 million fewer taxpayers than there were just 3 months ago.

    • Jdog says:

      The optimism by some that this thing will be over in a month or two borders on insanity. News out today discusses how the small business bail out loans only went to 5% of all businesses, and how it is now all gone. 95% of businesses will not get anything.

      Larger businesses with legal departments were able to get their applications approved first and received multi million dollar grants, while mom and pop operations were still trying to figure out what to do.

      That means business closings and layoffs are going to be almost as bad as if the government did nothing.

      This is exactly what I predicted, government being corrupt, would mishandle this whole thing terribly and what little aid they did provide would be stolen by the people who provide the political bribes known as “campaign financing”.

      In the mean time the working class is about to experience both massive unemployment, and massive drops in salaries as the supply / demand ratio for labor becomes very unfavorable to labor.

  8. Crush the Peasants! says:

    99% of Americans were opposed to the Wall Street bailout, but that still went through. The fellow in charge of massive fraud at Goldman Sachs became US Treasury Secretary. The NY PD spied on the Occupy Wall Street protestors and turned over the info to the criminal banks. The pitchforks and torches never really came. As long as video games, weed and streaming is available, the masses will continue to sleep.

    • Paulo says:

      Terrific article, and Crush I agree with the quiet masses statement. I just want to add EBT cards have also kept the lid on with a few groceries. And those temporary food banks that started in the early ’80s, now the lineups are generational. And folks are still worried about the cost of virus testing and hospital care.

      The mule is tired of being whipped, and there are now so many calling out every other side, how can there not be building anger?

      It’s been just one month of restricted behaviour. It’s been a 3 week economic downturn. Normal is not coming back like a light switch. One month, and counting. What will it take for adults to say enough, already?

      The article talked about twenty years of debt. It talked about inflation paying down debt, (just debase the currency). There are comments about people not paying back what they owe, what they were lent in good faith and by contract. Justify it any way you want, but basically you are talking insurrection. And it’s been just one month of social distance restrictions. One month. Counting.

      Gordon Lightfoot said it this way:

      Black day in July
      Motor city madness has touched the countryside
      And through the smoke and cinders
      You can hear it far and wide
      The doors are quickly bolted
      And the children locked inside
      Black day in July
      Black day in July
      And the soul of Motor City is bared across the land
      As the book of law and order is taken in the hands
      Of the sons of the fathers who were carried to this land
      Black day in July
      Black day in July
      In the streets of Motor City is a deadly silent sound

      ……. You can look up the rest of the lyrics. If I copied it I would be banned from WS for a long time. And that was written in what? ’68?

      See you in the moderation doghouse, streeters. Take care. Or as Doctor Bonnie Henry says to us BCers every day, “Be calm. Be kind. Stay safe.”

      regards Paul S

      • WES says:

        FYI Warning!

        Speaking of the Motor City, anyone driving in Michigan should put on gloves and a facemask if they ever get pulled over by police!

        It is a $500 fine if you do not have gloves and facemask on when police approach you in your car!

        Per lawyer working for a big bailed out company!

        • neplusultra says:

          You need to include more sources than hearsay lol. This is why old people are so brain dead and voted us into this mess. Jesus

      • cb says:

        Paulo said: “There are comments about people not paying back what they owe, what they were lent in good faith and by contract.”
        _________________________________

        It’s one thing not paying back what you owe when you were lent real value or real money. It’s another when you figure you have been duped by the system, been lent funny money against FED induced bubble collateral, then choose to walk from that collateral after the bubble pops. One problem with that picture is having to leave your hard earned down payment behind.

        The scumbag FED has created a bunch of debt slaves to serve the rentier class. When slaves figure they can walk, sometimes they do.

        • Tony says:

          CB, even better is when the slaves not only refuse to pay, but Stay instead of walk away.

          “We will be happy to pay what we owe in rent, mortgages, credit cards, and taxes, when the Federal Reserve creates sufficient money for us to acknowledge our own and our ancestors tax payments, dying in Vietnam, Iraq and Afghanistan, and equitably shares future revenues with us instead of wasting them on losing wars and corporate tax breaks.”
          Said with a big smile :-)

        • Jdog says:

          The problem is that ethics flow from the bottom up, not the other way around. When a society has a corrupt government, it is because the society itself is corrupt and tolerates corruptness.

    • Shiloh1 says:

      The Rhinos shut down the non-AstroTurf Tea Party and the big city Dem mayors shut down Occupy. MSM did their utmost to discredit them, just like they did to Perot, who represented the last off-ramp to avoid disaster of big finance, big government, big military and globalism.

      • NewGuy says:

        That’s a good one Shiloh.

      • VintageVNvet says:

        Shiloh,
        Just in case younger folks here do not remember what happened to Ross Perot, it’s my memory that the guy had a lot on the ball, was a self made gazillionaire of the early tech world, (Texas Instruments?) and decided to bring intelligence, competence, and common sense to the national political situation by using his millions (all it took back when a million was real money) to run for pres.
        He dropped out when the ”powers that be/were” threatened his family, although I do not remember him ratting out who done it.
        It is also my understanding that this has happened to other actually qualified folks since Ike, including the Kennedy bros, and just another reason that We the Peons must vote FOR only public funding of elections, term limits, etc., to stop the criminal activity of the folks stealing our wealth once again with these latest schemes.

        • California Bob says:

          “Texas Instruments?”

          Electronic Data Systems.

        • FluffyGato says:

          Perot didn’t drop out; he was on the ballot in most, if not all, states.

        • Heff says:

          “…You implement that NAFTA, the Mexican trade agreement, where they pay people a dollar an hour, have no health care, no retirement, no pollution controls, et cetera, et cetera, et cetera, and you’re going to hear a giant sucking sound of jobs being pulled out of this country right at a time when we need the tax base to pay the debt and pay down the interest on the debt and get our house back in order.”

          H. Ross Perot

    • Walt Heisenfart says:

      Free bread and the games in the Colosseum can distract the public for only so long.

  9. Willy2 says:

    – Wrong. If the FED, ECB, etc, etc want to create inflation then they should target households and NOT the banks.

    • Wolf Richter says:

      Tell THEM that :-]

    • economicminor says:

      Part of the problem with inflation in current environment is that globally, there is a glut of productive capacity.. to get prices to rise you need more money chasing fewer goods.. what we had and still will have is to many goods.. to easy to produce them. And now with Shelter at Home in place across much of the US, demand isn’t there. It would take an awful lot of money in the hands of the consumers to create any inflation outside assets. Even with assets there is a risk in holding them when those worker bees who underpin the entire asset debt structure are unemployed and not spending.

      • Jdog says:

        Inflation is not even a possibility now. We are looking at massive deflation, the likes of which almost no one alive today has ever seen.

    • Pedro says:

      The money still ends up with the largest corporations. People spend the money right into the hands of the big industrial players. Amazon, Exxon, Walmart , Costco.

      So either way it’s corporate welfare. Albeit with the benifit of people getting first dibs.

      Direct wallstreet bailouts is about protecting jobs ultimately. So the question is which is most efficient? I don’t know myself.

  10. timbers says:

    The Fed has been encouraging non savings and debt.

    The Fed needs to encourage actual, real, savings and investment. Not gambling as it has been encouraging.

    Effective Monday, April 20, the Fed should:

    1). Set it’s interest rates at 3.00% with possible future increases aimed at rate normalization.

    2). The Fed should reverse all it’s QE and bailouts. It should terminate immediately all margin lending to buy stocks. It should loudly say stocks are overvalued. It should proclaim loudly it will never buy junk bonds, because that would be wrong. It would be wrong because buying that which has failed will only encourage more failure and crowd out success. This action would all the Fed to truly support and enable “credit markets to function in a way that supports the greater economy.”

    3). The Fed should follow polices that encourage people and corporations to save and invest, not borrow. And it should say this loudly.

    4). The Fed should loudly tell our elected officials they must use fiscal stimulus to invigorate the economy.

    • Saltcreep says:

      Timberrrrrr! Sorry, couldn’t resist a cheap shot. But, seriously, stay clear of the entire canopy falling on short notice should such measures be announced!

      Btw I disagree with fiscal stimulus, too, as we have to learn to live much more modestly within our long term natural resource limits as they flow, and currently mostly ebb, and we simply should not try to stimulate any overconsumption artificially.

    • George W says:

      If the Fed implemented even a portion of what you are suggesting, King
      dollar would surge and crush what is left of the emerging markets including China and Russia.

      The resulting, emerging market social unrest alone could lead to WW3.

      Also, big government needs the Fed to stay omnipotently relevant in the eyes of the masses. The Fed can never be marginalized as with few tools left big government could be next.

    • cb says:

      Would it be better to just end the FED?

    • Lisa_Hooker says:

      And then timbers woke up.
      It was all just a dream.

  11. Social Nationalist says:

    Treasury has little control. Most of it is the aristocracy trying to stay in power. Fact is, by the 70’s, the system needed lengthy deleveraging as Marxists pointed out, but that meant total collapse of everything built since wwii.

  12. qt says:

    The way I see it one person’s Debt is another person’s Asset. Like some person spending is another person income. Why are we bailing out companies that didn’t save all those profits and wasted all on buybacks?

  13. Brant Lee says:

    You know the banks (supported by the Gubment) are licking their chops at some of the coming prime property, with paid down loans, to foreclose on. Another few months and things should be just right for the pickings. Here comes Santa Clause in July snatching up the cream for a few cents on the dollar.

    • polecat says:

      Ain’t it just Grand, that Congressf#ck.. to a one, and by a ‘voice vote, no less…. birthed this monsterous CARES XXX!ACT to screw the plebians .. seven ways to Sunday.

      Big Club, and all that !!

      • polecat says:

        And yes … I think that they did this knowingly, with the i tent to personally gain from this ‘unwasteful’ crisis .. for moarrr $$$ And moarrr Power !

        Instead of tearing down the Bastille, as in the French tradition, We should build one .. to house THEM!

      • sierra7 says:

        Polecat (and others):
        Small business (over 35 years) in Santa Clara V. CA, no debt owners husband and wife with 5 permanent employees/techies/service….
        Owners applied for the “care act” assistance; missed the first round (why any “rounds” is beyond me) of money; spoke to their bank and they are #12 in line for next round of funds; all their employees have already received their $1200 and most the additional $600 supplements.
        Re-negotiated rent for next couple months like so many other of their customers/competitors.
        This money in this Act is a huge help for small businesses helping them to bridge the crisis. If the “shut-down” lasts for 6 months or longer all bets are off.
        Then there will be a cataclysmic financial disaster.
        So there are some good stories of assistance from the “Care Act” versus all the doom and gloom and or negativity about the government assistance.

        • polecat says:

          Don’t ya just love that whenthe Bankster/Corporates need to be made ‘liquid’ it’s Step Right Up and collect Your GRIFT ! ….. but when small business and the mopes need dire help, it endless hoops, means testing, and a permentent dunking into the killing-pool of impending Congressional/Fed sponsored penury !

          I hate these people with all my heart !

    • Shiloh1 says:

      Paid down? Then prior to foreclosure, lever up and Asset Strip, like Mitt.

      • Synergy says:

        To lever up real estate means you need to get a cash out refi. Which bank or lender is going to allow that now?

  14. Tonymike says:

    There are some who are stating that the giant ponzi scheme called american finance and the fed, are looking to cancel out the debt owed to China to the tune of 1 trillion dollars over the farce of the covid19 nonsense. They further state that China and perhaps Germany may use a commodity based currency to put a stake in the heart of the dollar. Only time will see if the fools, the sycophants, and quislings of wall street will cut their own throats with a move like this.
    Full faith and credit my as*.

    There is a saying: You may choose to ignore reality, but you can’t choose to ignore the consequences of ignoring reality.

  15. Rcohn says:

    Karen
    Another terrific article.
    One question , what is going to prevent the government from running even larger deficits 30%,40%,50% of gdp?In the past interest rates would be the governor of budget deficits . But by allowing the FED to buy any amount of Treasury debt with no consequences , that brake no longer exists .

    • Jdog says:

      The government still has to pay interest on their debt. It currently amounts to almost 20% of the budget. With falling tax receipts, and rising debts, that number is only going to increase. Unless they change past habits, it will soon start limiting what the Government can spend….

    • Karen says:

      The US is in a unique situation—a net debtor country that also sponsors the world’s reserve country—which is what allowed us to dig ourselves into this hole. It’s unclear how long this can continue or how far we could go with escalating deficits, but the experience of the 1960s, when the US broke the dollar’s link to gold, suggests we cannot carry on like this forever. (If you’re a nerd, Google Triffin Dilemma). Our models point to a significant US$ decline, once the flight-to-safety run is over.

      The strong dollar is, additionally, a drag on S&P 500 earnings, 40% of which are earned overseas.

      • Jonathan Vause says:

        surely it continues until the market considers safe haven assets to be as risky as emerging market assets?

        • WES says:

          Jonathan:

          I would rewrite that slightly to “when government backed assets are considered as risky as emerging markets!

      • paul easton says:

        Someone told me the dollar is help up by the fact that OPEC insists on dollars for its oil. But now that there’s a glut of oil they can’t afford to be so finicky. So watch out for falling eagle droppings.

      • raxadian says:

        That will only last while the world uses the US Dollar.

        I am amazed that people are not running to gold with how well the USA is handling the current pandemic.

        Truly the power of mental inertia is amazing.

        Mental inertia is when people keeps doing things just because they been doing them for a while and they have worked on the past. Even when the don’t work anymore people still keep doing them in the belief they should. Eventually that “momentum” stops and people changes what they do.

  16. NY Geezer says:

    The debtors strike appears to be gaining momentum nationwide. Its built on John Paul Getty’s remark that if you owe the bank $100 the bank owns you but if you owe the bank hundreds of millions of dollars you own the bank.

    The strike’s rationale is that individually most money, much of it unjustly to, e.g.: 1) overcharging/surprise billing owners of the healthcare system; 2) to colleges and universities for excessive charges for an education that is inadequate and over hyped; 3) to landlords for extortionate rent; and 4) to banks for what used to be illegal loan shark interest rates and charges. It is futile for one to complain individually because the creditors own her/him. BUT collectively, that’s different as the collective debt is at least $14.5 Trillion of total debt, and that is where the debt strikers have power. Collectively, they own the system because the system’s very existence depends on voluntary uncontested debt payments for fear of what the system can do to individuals who do not pay.

    • Karen says:

      Precisely.

      • Shiloh1 says:

        Denninger has been talking about your – 1) on healthcare billing – forever. If I plumber or car mechanic did that they’d be in prison.

        • Shiloh1 says:

          If / when the colleges try to charge their regular tuition for on-line “out of an abundance of caution due to the virus”, then watch for a massive gap year strike. It’s also another racket with no legitimate price discovery.

    • Cas127 says:

      NYG,

      “Collectively, they own the system because the system’s very existence depends on voluntary uncontested debt payments for fear of what the system can do to individuals who do not pay.”

      What would stop a rotted Fed from simply printing to pay off those “repudiated” debts…therefore simply creating more inflation for every dollar holder…including repudiators?

      It is a doomed, asinine game, but it is in essence what has been going on for 20 yrs, under various guises.

      The end comes when US citizens start to stop using the too-debased dollar as currency. Then the Fed loses all control and things get pretty friggin’ crazy before they start getting better – DC and all its f*ckery pokery will be cut out of the loop.

      • economicminor says:

        Well, the FED has to have a mechanism to get those computerized digits from their system into the real economy. In the past they have lent it to some entity by buying their accumulated treasury bonds or mortgage backed securities..thus freeing up trapped capital. Or passing it along to the government in trade for treasury bonds. All debt eventually gets interest paid and rolled over.

        The government basically spent it or in extreme cases just gave it to insiders thru bail outs. Some suggest they could buy stocks outright..

        Little of this went into the real economy. Mostly it just caused assets to inflate.

        The current round of stimulus by the government is different though in that it will go directly to those who consume. Problem is that it isn’t even an adequate amount to pay current payments. Much less cause inflation. They would have to create a lot more and pass it out freely in much larger quantities to create a situation where to much money was chasing to few goods or services.

  17. Frank Miller says:

    Taxpayers’ bail out of corporations via the FED is harsh. Not right.

    Should not happen. what should happen is free market. The jobs and assets will remain and be renewed, if useful. The exe-team should get fired appropriately. The shareholders should have demanded more rights and votes. Constructive and productive.

    If it happens, then the public should obtain majority control; significant, like 80%. Just like any other free market buyer of last resort would demand. Nationalize any corporation seeking bailouts; fire the exe-team, fix it and sell it for a profit. Otherwise, we improve shareholder rights, they can fix it themselves and earn their pay, or face shareholder revolt.

    Also, if corporations are legally defined as persons and get bailout, then real people should be bailed out too. (ie: gift of $??? per person; tax rates will deal with claw backs). That people “got” offered more loans and encouraged back to work and into harms way, is cruel.

    The decision for zero rates has already been made. So printing has zero cost, with ZIRP, if the FED and bankers are shoved out of the way. One time deal; along with dual rate tiering; a one time zero rate for immediate liquidity issues and economic recovery, and a significant base reset rate for all new debt with new and stringent controls and market rates for all new debt so that risk can be priced in. We may have to elect some real public interest minded politicians while at it.

    We need a rational and pubic-interest reset. The debt is huge. $70T USA. $250T world wide. Just the reported stuff. Ignores: liabilities, off book, private, unfunded pensions, derivatives. We need a reset on: debt, rates, and especially on the the damaging policies that lead us into this mess. And more than financial needs fixing too. An replace the people responsible too; accountability is important. We would not hire an incompetent doctor to look after our kid. We would not hire a fox to look after our hen house. So why are we electing wealth managers for the wealthy and uncredentialed people to run the place.

    So easy to write this stuff. lol However, l would like to see a move to rational public interest solutions. Look around world wide and adopt the best practices in education, health care, governance, etc; no need to invent the wheel. Hire some independent credentialed experts with a resume of public interest, they will guide us.

    The irrational alternatives and political blow back may feel good initially, but will leave us in a worse place.

    Better we try a rational and public interest approach. Policy from: Critical thinking. Researched. Experience. Accountable. This is doable and lasting.

    • andy says:

      Some great thinking Frank.

      A few ideas:
      – incentivize savers and investors
      – disincentivize speculators and borrowers
      – which means true price discovery for money – something the Fed and CBs elsewhere have denied for years.
      – bail-ins not bail-outs for corporate America.
      – fair minimum wage, so no American worker is dependent on tips – a dreadful practice which highlights not American generosity but American societies meanness in not paying fair wages.
      – fair healthcare pricing ($5000 overnight stay/$1000 doctor visit/$150,000 annual cost of single prescriptions is not OK), and free basic healthcare for all Americans, (like UK, Canada, Australia, NZ)
      – pricing on credit card debt limited to 3% above Fed funds rate. (give Main St funds at same rate as Wall St)
      – college education available at $1000 pa online with online exams, matching cost of supply.

      • VintageVNvet says:

        Just one example: friend went to hospital for less than 24 hours due to low blood pressure event: $88,000.00 for nothing more than being watched closely!
        Beyond ABSURD, and hence a very clear signal of at least the beginning of the end of any such nonsense, similar to the signals of the SM and RE markets when they get to the same level of absurdity.

  18. Michael says:

    The stock market correction is over. Perhaps we will retest the bottom but that’s it. There’s not going to be any debt revolt because the federal government will move the inflation from assets to things you need to survive. We are in the Jim Morrison economy, “no one gets out alive”

    • Jdog says:

      The correction is just beginning, and the chance of inflation is nil. Debt default causes deflation, and debt default seems to becoming the new rallying cry…
      Socialism carries with it the moral hazard of people thinking they are entitled. When times get hard, they simply throw a tantrum and refuse to pay their bills….

      • andy says:

        Socialism carries with it the moral hazard of people thinking they are entitled. When times get hard, they simply throw a tantrum and refuse to pay their bills….

        Jdog, sounds like you are referring to – GM, AIG, Boeing, hedge funds, Repo market, Primary Banks, corporate America, and still to come, City of Chicago, State of Illinois, and countless State munis.

        • Jdog says:

          Yes, corporations are created as a socialist entity by government who gives them special legal standing and privileges.
          Our forefathers warned us of the dangers of corporation and to not allow them to exist. We did not listen.
          Unfortunately the socialist agenda has now become pervasive throughout our culture, and it will reap the same destruction here that it has reaped everywhere it has been allowed to exist.

      • Stuart says:

        As well they should. We have not done anything to deserve mass and instantaneous poverty. Rent strike now. Where can I get a pitchfork ?

  19. DR DOOM says:

    Karen Parker’s post is the plain speak of everyday people and it is the speech of a Patriot. Yes Virginia there are Patriots.

    • Karen says:

      Thank you!

      I sometimes call myself a bleeding heart libertarian, but I do believe in public service, and this nation has seen some extraordinary public servants. It would help if we stopped kidding ourselves about being better than everyone else, and honest about the challenges we face.

      • Unamused says:

        It would help if we stopped kidding ourselves about being better than everyone else, and honest about the challenges we face.

        It’s probably better if you don’t. Illusions are about the only thing holding the country together.

        If Americans were honest about the challenges they face half of them would go wandering off to find Shangri-La in the Valley of the Blue Moon, and you can’t here from there. No telling what would happen to the other half.

      • andy says:

        Great comment Karen.

        Two themes are key at present (looking past Coronaviris):

        1. US debt, and level of debt globally
        2. Central bank money printing/debt monetisation.

        The US certainly has some big issues to face, which will of course affect the globe. I worry that the debate is so polarised in the US, that the sides are simply blaming each other, instead of dealing with the issues. Here’s three of them:

        1. US democracy has been taken over by vested interests and is run by the big Finance, MIC, Pharma/Healthcare, & MSM oligopolies. From here in Australia, it looks like Americans are sick of it, which is why Trump got/probably will be re – elected.

        Filmed at the Midland Theatre in Newark, Ohio on October 7, 2016 – NB: Before Nov 2016.

        2. Most Americans I know are lovely people, and have absolutely no idea how much damage your country has done around the world with endless warring at huge financial and human cost over the last 70 years: go visit the American War Museum in Ho Chi Min City, Vietnam, for a start

        3. What concerns me most is the Fed balance sheet graph: the Fed has lost control of the money supply and is likely to soon lose control of the price of money:

        4. Inequity in American society, currently being exposed by Covid19. major issues are lack of nationwide free basic healthcare, lack of basic liveable minimum wage, winner take all philosophy with weak government and the 1% ers gaming the system.

        Who knows where it all goes, but I am sure of one thing: at $23trn debt and 3-5% annual deficit, the US cannot repay its debt in purchasing power. The US is bankrupt, except that people do not yet (want to?) recognise it, and the Fed/Treasury is rigging the price of money to disguise it. It can repay by printing but that is not the same thing.

        • Wolf Richter says:

          andy,

          “go visit the American War Museum in Ho Chi Min City, Vietnam, for a start”

          The American War Museum I went to see in 1996 was in Hanoi.

        • R Hughes says:

          Yes war museum is in H C M C old Saigon, maybe there are two. It is amazing eye opening experience of all the damage US has done and for what. Oh 50,000 American dead.

          Go to Chucki (SPELLING?) Tunnels exhibit, outside city and crawl thru and you see what the vietnamese people were made of in resisting the US.

          If only average Americans had half this toughness to resist effectively what Karen writes about.

  20. charles 2 says:

    Racket is the appropriate word, and RICO indictments would be the appropriate legal answer (as in 2008) if the legal system was not part of the scam too.

  21. Nikola Tesla says:

    So a nation of deadbeat debtor’s is now going to make all loans ‘non-performing-loans’ great

    Then FED can give everybody free money forever.

    Who here believes this fairy tale?

    Oh, and long ago the savers funded the debtor’s, and there existed ‘bond vigilantes’, now all money is free, and there is no self correcting mechanism.

    Default is on the horizon

  22. CoronaBonds says:

    My dream would be for the Fed to offer CornaBonds to anyone with an income less than $250,000, which would pay a 5% interest rate so we could ignore the Wall Street casino for the rest of our lives, and let the top 10% scalp each other into perpetuity. Instead of printing money, the fed should borrow the money from American savers and pay a fair interest rate. Question: Why is the Fed printing tax payer owned money to drive the stock market up when the stock market is 35% owned by foreigners? Where is the fed mandate to make foreigners rich? Not sure how somone in China getting rich off our fed makes life better for the average American. Why is this not discussed in the financial media?

    • Endeavor says:

      The stock market is the payoff for globalism and can be pumped and dumped by the enlightened supporters.

  23. Unamused says:

    Karen: “It’s unclear how long this can continue or how far we could go with escalating deficits”

    About five more years at most is the best-case scenario. The worst-case scenario is that the system implodes any day now.

    Probably nobody here remembers when I promised that they would continue to rob the country until there’s nothing left to steal. They actually finished that up a few years ago.

    Now they’re stealing, in advance, everything the country will produce until the end of history. The good news is that it’s really not all that much. The bad news is that it’s really not all that much because there isn’t much history left.

    Since most Americans are already debt peons and wage slaves most people in the US won’t notice much difference, except for the contaminated food, the raging pandemic, and the subsistence lifestyle.

    The worse news is that the SARS-CoV-2 infection rate in the US is 80 to 100 times that which has been reported, which does explain some of the anomalies in the statistics. It’s because the ramp up of testing stalled two weeks ago and is unlikely to ever meet the actual need, among other things.

    I’ll hold off on the worst news. No, no, don’t thank me. I tremble at your doom.

    • tom says:

      No worries, I’m headed for a speak easy tomorrow night.
      You posted in here some time ago that we were all doomed
      because of climate change. Wuhan, the big melt or big freeze, were
      all screwed….or so master gates says. Me…. I’m going out with my boots on.

      • Jdog says:

        Problem is you will probably take a few innocent people with you….
        But the me generation really does not seem to care about that….

        • tom says:

          If your concerned, stay home.
          I promise I will not come knocking on your door.
          And I sure as sh*t will not report you if I see you leaving
          your lock down.

          If that’s the ME category, I’ll live it as best I can.

    • Implicit says:

      Tell it like it is!
      The country and the world require major change, and it can’t be stopped, mathematically impossible.
      The jig is up; there is a pandemic of greedy, anti-capitalistic, unpatriotic, and wrong spirited ethics by the present decision makers.
      2008 was just an epidemic; this is the finale These decisions are far more destructive than any flu virus could dream. C19 virus is only jealous of their virulence. and long term destructive ways.
      The sad thing is that people use hope illogically’, so as not to face reality
      There are a lot more human outliers gathering into a flock of black swans. Let’s start over again. Only empathetic free people can do it the right way for the next generation, Tear it down, and build it better!

      • cb says:

        Implicit said: “The jig is up; there is a pandemic of greedy, anti-capitalistic,”

        Here I was thinking they were the consumate capitalists, just attempting to get all the capital in the “right” hands ……

    • Greg Hamilton says:

      Un,
      If we are all doomed, (and we are eventually) we all might as well have a good time. So go out and enjoy life!

  24. Marc says:

    Hi all

    I’m really confused about just what is going on as none of it makes any sense at all. We now have worldwide unemployment rises at a rate and to numbers not seen for decades. We have bankruptcies of so many company’s that were once household names and I’m sure many more to follow. We have also seen huge bailouts to try and stop other favoured companies to continue to struggle on at a cost of Trillions yet still whilst seeing no end to the current crisis yet the stock markets continue to rise seriously on what news is this being validated? It sure as hell isn’t going to be earnings or profits any time in the near future that’s for sure.

    How is this even logical or possible? If anyone ever had any doubt the whole corrupt system is rigged what further proof could they need. So yes in the coming months those that control all will be coming for all and any assets that they can still steal and I’m just not sure everyone is just going to roll over and let them this time they may of just pushed it all a little to far this time. As the weak and the poor are going to be most of us instead of just a small minority that most didn’t care about and could just ignore.

    There is now so much debt and so little profit generation is it even possible to service the debt never mind pay it off ever.
    We are all either going to end up living under true oppression and tyranny or things are going to have to radically change and I really don’t think just talking will ever achieve it and the alternatives are going to be real messy.

    • Karen says:

      What really worries me is this: what happens in society if the stock market keeps going up while the economy craters and deaths mount. This falls squarely into the “be careful of what you (investor) wish for” category. It’s like bumping into an old friend who tries to cheer you up after your beloved spouse of 50 years has died. Adds insult to injury, producing infuriation.

      Technicians talk about bearish divergences, but a huge gap between the market’s mood and society’s mood strikes me as very dangerous.

      • Icanwalk says:

        A bifurcation of the economy? Well, if that is the case, what could possibly go wrong?

        • Karen says:

          That’s been going on for ages…but things can change suddenly when a simmering insult turns into a slap in the face. Wake up call.

      • Cas127 says:

        Karen,

        “if the stock market keeps going up while the economy craters and deaths mount. ”

        Much more dangerous question…what happens if SFH/rent prices keep going up as the rest of the real economy craters – that has actually been going on in a lower key for the last 5 or so yrs (sellers/landlords know they are being paid in diluted gvt scrip…).

        50%+ median income going to decaying housing stock will lead to upheaval faster than stock mkt’s delusional valuations.

        The Quadrillion Dollar Question (so very Weimar…) – for 20 yrs where have all the affordability oriented homebuilders/new mkt suppliers vanished to…

        You can see the Fed in 2001 saying, “We’ve cut rates in half, now mtg pmts will fall by half, and there will be a homebuilders boom to hoover up all the millions of recently unemployed”.

        20 yrs empirical reality – incumbent homebuilders simply slapped a doubled price tag on identical house, keeping mtg pmts constant and inflating SFH mkt to delusion. No boom in demand (since no effective price cut), millions remain unemployed for yrs and yrs. And still no new mkt entrants to supply affordable housing product that uses ZIRP to actually *lower* housing costs.

        When the Revolution comes, it will be over housing costs and not stock mkt onanism.

        • Malthus says:

          Simple answer. Permits. Proprety taxes. Rent control.

        • cb says:

          @ Malthus –

          and concentrated ownership ………………..

        • neplusultra says:

          Mao had an effective solution to this problem…

        • cb says:

          @ neplusultra –

          so did Henry George …..

        • Jdog says:

          …what happens if SFH/rent prices keep going up as the rest of the real economy craters –

          Can’t happen. Housing like everything else exists within a market.
          Prices have been going up because people have been bidding up the prices, but they really don’t have the money to pay for them. They are promising to pay in the future. Now it is clear they will not be able to keep their promise to pay, so the housing goes back on the market, but the market now has no buyers.
          The prices have to go down.

      • NewGuy says:

        I think the Fed realizes that too. That’s why they tapered the QE candy so the obvious Fed/market relationship isn’t so obvious. With ammunition like that, who knows, a Dem might win the WH. Of course, they would do the same.
        And good article. You have a flair with words.

      • Implicit says:

        For the stock market junkies pushing the market up while everything goes to shyte. The train is leaving the station soon.

        “I see you hanging out the window, the very one you saw so clearly thru before. You don;t need a crystal ball tell you that train don’t run here anymore.
        And when the train gets busted open, to find an empty space inside, and you get slapped right out of your slumber to find that you don’t got a face to hide.:

        Lines from Robert Hunter’s “That Train Don’t Run Here Anymore”- Poet, musician and writer for the Grateful dead- RIP

      • HD says:

        This is an absurd case of financial engineering leading a life of its own versus the reality of us, the little people. It reminds me somewhat of that tale about American GI’s discovering part of the gold reserve’s third reich in some German salt mine in march or april 1945, when suddenly a local government official observed that the American’s couldn’t touch it because it was urgently needed to pay the wages of the Reichsbahn employees that month.

        Completely and utterly out of touch, like kids trying to grab as many iou’s as they can just before their expiration date.

        Just you wait when the derivative mess detonates. You ain’t seen nothing yet. If they can’t keep that from catching fire, God help us all.

      • sierra7 says:

        Karen:
        “….gap between the market’s mood and society’s mood strikes me as very dangerous.”
        My edit:
        “….gap between the market’s (mood) fantasies and society’s (mood) ‘reality’ strikes me as very dangerous.

      • Cambric Finish says:

        Greatly, oversimplifying due to space, going way back, if we use the “Powell Memo” as a marker for the start of a long term program to rehabilitate Corporate America’s reputation and advance “conservative” ideology, the success of this program has succeeded beyond the wildest expectations of the original goals. And to your point, it may have actually overshot its mark so far that it is now self-destructive to those who continue to push the same ideas. No matter whether you think Jeff Bezos is a business genius or robber baron, the fact his fortune went up $24 billion during a pandemic where tens of thousands are dying and Amazon workers look like the victims, this is the basis for some novelist to begin immediately writing about a dystopian future world by just penning the chapters from what one reads in the daily news, so ”…Amazon executive asks workers to donate their sick leave to shareholders so the stock can rise benefiting all Americans.”

    • Unamused says:

      How is this even logical or possible?

      It’s like Dr. Rambeau said, just before he escaped back to the Other Plane of Reality: magic is loose in the world, and anything is possible.

      Anything, as in, the Fed printing up enough money to buy out the entire US, economy and all, finishing it off with a Chapter 7 liquidation, and handing it over to The Chosen One so he can have his way with it, like that Frank character in Blue Velvet.

      There is now so much debt and so little profit generation is it even possible to service the debt never mind pay it off ever[?]

      No.

      We are all either going to end up living under true oppression and tyranny

      Correct.

      or things are going to have to radically change and I really don’t think just talking will ever achieve it and the alternatives are going to be real messy.

      It’s not as if it’s an extinction-level event, at least not for everybody. That comes later, and it’s really more of a process anyway. This is more of an introduction to The New World Order, or, if you please, disorder.

      Many months ago, I promised the world would turn into a kafkaesque nightmare, and everybody who read my comment assumed I was exaggerating. No, I wasn’t exaggerating. I just didn’t expect it to finish up under the cover of a pandemic.

      The worst is still to come, but I’m not going to issue any further projections because those who are paying attention have already had quite enough. Those who are not paying attention are partying on the beach at Jacksonville getting infected.

      • Jean says:

        > The worst is still to come, but I’m not going to issue any further projections

        Bring it!!!

    • Unamused says:

      I’m really confused

      No you’re not. You actually understand it rather well.

      It really is an unmitigated disaster. You’re just having difficulty accepting it.

      • Marc says:

        @Unamused

        Your right I’m not really confused at all but I used that as the best way to put across my views without wanting to alarm or incite panic in others.

        I’m well beyond accepting it and have seen it coming for a long time now. I may not like where I see this all heading and this Pandemic really has just accelerated the process and brought it more into peoples reality as the illusion breaks down and it all becomes much more obvious to all.

        Unfortunately I think my vision of whats still to come may indeed be very similar to where you see this heading. I wish I wasn’t a realist and could happily live in denial but that’s just not me but agree no point in alarming all with those thoughts just now.

    • Greg Hamilton says:

      Marc,
      I think you have to understand the principle of inversion. That explains our current situation.

  25. Wes says:

    Well written and to the point. A few weeks ago individuals/entities were actually taking physical delivery of 100 ounce gold contracts. When interest rates move towards zero and beyond the opportunity cost to hold gold goes to zero. Ray Dalio also recently made the analogy of the current market being similar to March 1932.

  26. max says:

    “Inflation cannot be marshaled to reduce debts in a liquidity trap;”

    There is a make-believe monster in the closet called a liquidity trap. Keynesian economists fear the liquidity trap almost as much as they fear not getting tenure. The liquidity trap takes place when prices fall. Yes, fall! You know, like the price of computer disk storage falls, which will destroy civilization if lots of other things are mass-produced and get cheaper. The horror!

    Keynesianism’s logic is that falling prices will reduce investment opportunities. You know, the way Henry Ford lowered the price of Fords,

    By the way FED can send check of $5 million to all households in the USA to test if liquidity trap is real.

    “It is better described as an organized protection racket run by banks, hedge funds, private equity investors, and large corporations.”

    Of course, protection started in 1782:

    The Bank of North America was a private bank first adopted on May 26, 1781, by the Confederation Congress, and opened in Philadelphia on January 7, 1782. …Nation’s first de facto central bank.

    It was succeeded in its role as central bank by the First Bank of the United States in 1791.

  27. Mr Wake Up says:

    Talking bobble heads say the people should have reserves for emergencies, but what about the corporations buying back their shares blowing any potential reserves? No requirement for these companies to hold reserves for 6 months?

    Many had tremendous profits but over a decade after only 2 weeks of no profits they require bailouts??

    It’s pretty obvious at this point the swamp draining consisted of the American people.

    Bring the manufacturer’s back to the states give them 10 years tax free status, give the employees their payroll tax back in a savings/ investment account over 10 years.

    Ban sales tax on small local mom and pop shops do something give them a break they are at such a disadvantage. We dont have free markets anyways… Amazon partially gained strength off the sales tax loophole for years. Retroactively have them restore the funds they never collected can go back to the broke municipalities. Eternal bailouts what happens when this artificial well runs dry again in a few weeks another round of fiat bailouts??

    I guess when the debt gets out of control they can just go back to selling zipcodes to Blackstone.

  28. GotCollateral says:

    > “The Fed, like the European Central Bank, and the Bank of Japan before it, has tried to generate inflation through easy monetary policy, with the goal of reducing the real burden of our massive debts.”

    > “However, all attempts have been self-defeating, because the extra liquidity encouraged ever more unproductive borrowing, which can never be repaid. ”

    “But…But… we’re not like Japan, we’re not like europe, it’ll never happen here”… is what I hear when talk about the n225 analogs while FRBNY going down the same rabbit hole as the BOJ/ECB… yeah… i’ll continue to be leveraged short junk bonds (like i was going into pre-covid-19), leveraged short paper gold, and long physical gold with plenty of cash (USD/IDR/JPY), and wait for the folks with their head up their assess to figure out who is going to be interest in rolling over all this trash on their books while i look to swoop in for pennies on the dollar after they get wiped out.

  29. Shawn says:

    In a previous article, you said, “The Fed will lend to SPVs against this collateral which, when leveraged, could fund $4-5 trillion in asset purchases. That includes municipal bonds, non-agency mortgages, corporate bonds, commercial paper, and every variety of asset-backed security. The only things the government can’t (transparently, yet) buy are publicly-traded stocks and high-yield bonds.”

    So when do you think or under what circumstances will the Fed start purchasing stocks if it’s not happening already through SPVs? Of have they been doing this indirectly in the form of stock buy backs for some time.

    • Karen says:

      Bingo. The buybackers will have to lie low for a while, but the private equiteers are revving their engines.

    • Robert says:

      The thing to keep in mind is that any time you see “Fed” (or any of the central banks) think “the banks that own the Fed.” Because they are the beneficiaries of ZIRP (better yet, for the European banks, NIRP) , and they and their subsidiaries are licking their chops at the prospect of acquiring, say, an Exxon or a BP at 50% off, or a miner at 60-70% off, for appetizers.

  30. andy says:

    Replace bail-outs with bail-ins.

  31. A says:

    I disagree. Americans have voted away their liberty with 40 years of tax cuts for the rich. The billionaires now pay a lower effective tax rate than the middle class in the good times and get government bailouts in the bad times. They buy up all the real estate and own all the stocks.

    There is no liberty left for the middle class. What other choice do they have other than to pay rents to the monopolists? Be starving and homeless?

    The only thing left for the middle class is to use their votes. And as long as they vote for centerists in the primaries and conservatives in the general, the system keeps functioning exactly as the billionaires intend and the middle class’ power weakens even more.

    • Dan Romig says:

      Yes; the only thing left is to use your votes.

      If you have voted for the red/blue tag team duopoly at federal elections for Congress and President, where we are now falls on you. If you vote for red/blue this November, where we go falls on you.

      Cathy (Jacqueline Bisset) : “What will happen to us in time?”
      Bullitt (Steve McQueen): “Time starts now.”

    • Tk says:

      Hey Fantasy by someone who doesn’t understand Banking, history, or money mechanics. What is really happening is the fraction reserve working in reverse which is the teal reason for such bailouts. Lending Competition, technological advances, and more efficient trading is whittling down banks and financial markets. Fractional Banking is the only way modern governments are staying afloat and now this is dissolving. Your going to have breakdowns of various governments in the future not consumers.

    • Yerfej says:

      The rich already pay enough taxes it is the SPENDING that is the issue. The US just pisses money away on anything and everything and EVERYONE is complicit in the process. Stop all immigration and the pursuit of GDP growth, stop offshoring, and focus on expecting something of people for the services they receive. Being wealthy doesn’t mean its acceptable to spread cash while asking nothing in return.

      • cb says:

        “only in America do you get a bunch of redneck hillbillies and libertarian postal workers supporting low taxes for the rich”

        somebody said that ………..

      • neplusultra says:

        hahahhahahahahahahahahahahahahahahahahahahaha

        good one!

  32. George W says:

    A debtors strike with the country hoarding toilet paper?

    How many tp hoarding consumers are mentally prepared to lose their rentals/homes in a debtors strike?

    If things continue evictions will happen and landlords will fold.
    Credit card holders will stop making payments, declare bankruptcy and banks will go under.

    One can “Strike” for a long time, current laws only allow one to default for a very short period of time.

    Resolution will be a slow painful process for all parties.

    • George W says:

      Give me toilet paper or give me death…

      Ha, Ha, now I was beyond the legal limit, many beers ago.(sic)

      • GotCollateral says:

        You need more toiler paper… plenty of S-NT 11.0% FTR 2025 toilet paper available to wipe those cheeks with. You might have to fight Jerome for it though.

        • Robert says:

          Just ask your congressman to send you the latest State of the Union transcript- that should suffice for the rest of the year.(make sure it includes the part where President Trump brags about spending $2,000,000,000,000 on defense(and both sides of the aisle rise as one whooping and cheering (I am not joking)- that takes care of any constipation problems as well)

        • polecat says:

          Jerome is endowed with a mighty big gullet.

          Me thinks that eventually, he will put Mr. Creosote to shame.

    • MC01 says:

      Now you people have to explain me one thing: why are people hoarding toilet paper in countries like the US and Germany? Why are people so obsessed with it? Newspapers are still being printed and delivered and that’s pretty much the only use I can think for them.

      • polecat says:

        We still uh, ‘hoard’ the yellow pages (yes, they still continue to print those relics from yesteryear, annually) in case of emergencies, once our tower of 2-Ply is depleated …

        .. a little course on the tush though.

        They also do double duty in lighting pyre to flame, when the time comes to sacrifice central bansters to the lord of light !

  33. Karen says:

    You forgot to mention the economics PhD from Stanford. Yes, I was baptised in the deep end of the neoliberal pool. I pulled myself out of it. I could have stayed where I was, but I was turned off—sometimes enraged—by what I saw along the way. The adjustment took a while, but I have always been keen to look at facts and data and learn from them. You’ll note a quote from Maya Angelou on my most recent blog post: “Do the best you can until you know better. Then, do better.”

    Also, I’m a Midwesterner. That made a big difference.

    • Root Farmer says:

      Karen,

      Great article and I really enjoyed your blog. Especially enjoyed the link to the segment with Chamath. The look of horror in the other guests faces. They struggled with the reality he was describing, some of them desperate in their denial. The host was a tool.

      Great stuff …, but back to work. People need help.

    • GotCollateral says:

      Fellow Midwesterner (Ohio) here, ChemE baptized at Brown before learned better, never could quite fit in anywhere though (never could fully drink the kool-aid from anywhere I lived/worked/played) so now I calc my cross asset correlations, deltas, gammas, and extreme value distribution shifts from SE Asia lol

    • Shiloh1 says:

      Karen, how close are you to Catherine Austin Fitts’ views that this sh/tshow is just getting started? She had a interview with Greg Hunter in usawatchdog about 2 weeks ago and he was speechless at some points. Way beyond financial implications.

  34. WES says:

    George:

    If evicted, at least they can take their tp with them!

  35. Michael Engel says:

    1) A small 3bdr house in PA CA rent for = $4K-$5K/m.
    2) GOOGL, AAPL, AMZN and the rest of silicon valley offices
    are closed.
    3) Silicon valley employees, if the are lucky, work from home .
    4) High tech co save a lot of money by renting employees PA homes for free.
    5) Neither paying the cost of conference calls and other expenses involved , including cafeteria food for employees for free.
    6) 2020 options and bonuses are gone.
    7) Div payments might be cut, ex AMZN, but the dividend yield will be rise,
    because prices will fall.
    8) High tech hording cash cutting cost can absorb JPM, BAC, GS… like Warren Buffett, protecting them from virus attacks

  36. Michael Engel says:

    SF CA Chinese consulate will get eviction, because they strike US.

  37. Unamused says:

    I never thought I’d see the day when the highest ranking US politicians would openly allow their friends to rob the country blind, and then turn around and advise the American people to commit suicide so they can make even more money.

    And yet, here we are. Even in my darkest feverish imaginings I still managed to underestimate these guys. My mistake.

  38. TonTon says:

    … just to give a slightly opposing view to the comments and article above. In my east asian location things are largely returning to normal. Most people are quite upbeat. It’s interesting to see the mass effects of a pandemic causing different reactions in populations around the world but how everyone follows a pattern of moving toward an acceptance of the new normal. I have a very high level qualification in a somewhat related medical science field (different career now) and given my location also I have been following the science papers of this from very early. It is over 2 orders of magnitude less bad than it was looking at one point in the beginning. I was amazed that people seemed so dismissive of a highly infectious virus, with a long incubation period that appeared to have a very high death rate in the 4th week of January along with having many asymptomatic spreaders. The world seemed insane to be so complacent about this. I even predicted a massive stock market drop and that the irrationality would move in the opposite direction once it hit western shores. Now I think that things will be much better in a few months than people expect them to be at this moment in time (given people are quite apocalyptic that should not be hard).
    The global economy will still be very badly affected but I think that people will be more accepting of the new normal and the emotional outlook will be brighter. Humans are resilient (don’t attack me too much, just thought the comments needed a glimmer of hope).

    • Karen says:

      TonTon,

      Yes, this will pass, and people will gain perspective on the risks associated with this virus. However it may not be the perspective you’re experiencing, because coronavirus is not the primary problem in this country. Rather, it has revealed deeper problems that can no longer be ignored, and which are very hard to fix. For example: our obscenely costly and convoluted health care system.

      • Saylor says:

        Karen and TonTon,
        Your words give me the impression of uh…, non-consideration that this virus is not going away. For ‘them’ to find a cure for this virus would be that of finding a cure for the common cold (a goal as yet to be achieved after decades of pursuit). I find your positions to be intelligent, well formed and nicely presented. But the phrase ‘this will pass’ I do not have faith in. This along with the encroaching climate change is going to drive the mill of which we are the grist.

        • Karen says:

          What I mean is that the panic attack will pass, not the virus. I agree, we are in it (or some version of “it”) for the long haul. Antibody tests/treatments are the most promising, but hardly a silver bullet. More in the quarterly letter if you don’t mind a few more words.

  39. Canadian says:

    These fantasies of “mass strikes” and “organized defaults” are hilarious, not to mention counterproductive.

    The idea that “corporations and the rich” are responsible for the profligate spending of the average American is silly; meanwhile, the average American is soft and weak. They break down because someone called them a mean name on social media… just the prospect of not being able to get the iPhone 12XL+ will shut down any “insurrection” before it starts.

    These fantasies make for some interesting blog posts, but as predictions and policy, they’re pointless.

    • Yerfej says:

      Exactly. Being charitable with others money is fashionable and trendy but it results in the misallocation of capital. Spreading cash around with no expectation of anything in return is a great ploy for those political elites who “need” dependents but it does nothing positive for society. That is why the government supports the never ending creation of “victims”, it meets their needs. I don’t mind paying taxes, I just hate wasting the money just because people refuse to take off the blinders.

    • cb says:

      You must be right ……………..
      the FED, the corporations, the lobbyists, and the bought politicians have nothing to do with the current state of the countries finances

      it’s all because Joe Sixpack wants to own a house, and spends to much money on pizza night …………

      • Canadian says:

        Did the Fed force consumers to buy new luxury cars and abandon affordable cars, which most manufacturers discontinued due to lack of demand?

        Did lobbyists hold guns to the heads of consumers and compel them to purchase exotic luxury overseas vacations on credit?

        Did lobbyists compel people to buy high end homes, 50% larger than they were thirty years ago, with no down payment?

        Did bought politicians orchestrate a conspiracy to make people buy dmartphones that last a year, financed along with service plans for the whole family that cost more than a new car payment per month?

        • cb says:

          @ Canadian –

          Sorry Canadian, but the average American doesn’t buy high end luxury cars, doesn’t buy high end luxury overseas vacations, buy high end homes, or pay more for phone service plans that cost more than a new car payment.

          And when you say the average American is soft and weak, do you mean as compared to the average Canadian?

    • neplusultra says:

      A Canadian calling Americans soft. That’s rich

      • Canadian says:

        You should not mistake politeness for softness.

        Spend a winter in the Canadian prairies and learn how soft Canadians are.

  40. Michael Engel says:

    Edith & Archie Bunker tp hording.

  41. Root Farmer says:

    Karen,

    Great article and I really enjoyed your blog. Especially enjoyed the link to the segment wit Chamath. The look of horror in some of the other guests faces, priceless. They struggled with the reality he was describing, some of them desperate in their denial. The show host was a complete tool.

    Great stuff …, but back to work. People need help.

    • Karen says:

      Those two CNBC interviews were the most exhilarating thing I’ve seen in ages. I think a lot of people experienced glee at hearing someone like him say those words.

  42. Karen says:

    Isn’t that exactly what you would expect in a wealthy, but now declining, empire? People became complacent after being told for decades that America is superior, as if this would magically produce great results in their personal lives. The pot of gold was always just over the rainbow, which delusion enabled unrealistic levels of spending and borrowing. This psychosis occurs up and down the income spectrum, and throughout business…it’s everywhere. I think that’s what happens when the growth people counted on to bail them out of poor choices disappears.

    That said, it’s actually pretty hard to live on the median US income given the high cost of key items such as health care, housing, and post-secondary education. Thomas Philippon of NYU a has gathered evidence on how much higher cost structures are in this country, due to the aforementioned racketeering. People take on debt as a way of avoiding uncomfortable tradeoffs, and also because they see others able to afford this things and think their situation might be temporary. Inequality is a tough pill to swallow, and it’s become extreme in the US, both in relation to other countries and to our own postwar history. There are multitudes of predatory actors in the US financial system who are all too willing to take advantage of people’s wishful thinking.

    There are some certified baddasses in the FIRE movement, such as Peter Adeney, who are trying to retrain brains for a new world of self-reliance. Interestingly, a lot of Canadians in that crowd. But it’s slow going from what I can see.

    I am not advocating debt relief as social policy, and certainly not as a way to continue with the same consumer-oriented bs that got us into this mess. My upbringing was all bootstraps. I’m merely suggesting that those who extended loans that cannot be repaid be mindful that the risks are two-way. If there is a revolt I doubt it will be “organized” as such; more like a spontaneous recognition that the system is simply no longer operable.

    • Yerfej says:

      When a society caters to the whims and fancies of everyone (rich, middle class, and poor) its destruction is inevitable. If the concept of poverty were static then of course it could be overcome but as you allude people demand what others have whether they’re rich or poor. The ONLY reason the US (all western nations) are in trouble is because the political system enriches the elites by spending others money that they don’t have. Adults would address this reality but alas those are few and far between.

    • polecat says:

      In ’09, after receiving a modest inheritance, I paid off our mort gage in full, and commenced to put in the Murican version of a Russian kitchen garden, utilizing 75% of the domicile towards food production. We have some raised vegetable beds, fruit trees, berries of various sorts, grapes .. along with laying hens and backyard honeybees. The remaining 25% is shop space dedicated toward repair & reuse purposes, solar dryer, and what I refer to as our ‘staycation station’ – no expensive exotic destination (with all the attendent ‘rental and conveyance costs) required. We have but few $assets, but we haave no debt to speak of, so far ..
      We mostly eat at home, cooking from scratch. We can & preserve when there is a season’s abundance, both from our labors, and those of local farmers.
      This, in short, is the kind of life that will be in the running, for those who have no recourse but to shead the insane hyper-neolibracon merry-go-round we’ve all been spinning on these post-war years.

      • Lisa_Hooker says:

        Sounds idyllic. How’s the taxes? How do you obtain the currency needed to pay the taxes? Thanks.

  43. John says:

    Karen,
    Or should I say Alice. I remember things when I read. Very interesting and thoughtful presentation on what all of us are facing, in many different ways.

    • Karen says:

      Thank you. The commenters here at Wolf Street are insightful (and often witty) which makes it fun to participate. It’s impressive—though not surprising given the caliber of his own contributions—that Wolf has created such a dynamic and respectful dialogue. It does feel like we are learning from one another. And even if we can’t solve any of the world’s problems, we’ll have a good laugh on the way down!

  44. Michael Engel says:

    1) US total credit market debt as percentage of GDP is 350%.
    2) If this number will correct, due to defaults, to 100%, to bubble base, it will affect the stock market LT PE ratio.
    3) Robert Shiller : From PE 45 in 2000 an a-b-c down to wave A in 2009
    @ 13, during the financial crisis. Up in wave B in 2020
    and down in wave C.
    4) How far down below LT PE will go and how long it will take, nobody know.
    5) All we know is that 2000 peak was much higher than the 1929 peak @ 33.
    6) We might be correcting in EW Grand Supercycle wave IV.
    7) It coincide with Sir John Glubb : “the fate of empires” pdf. A study
    of 3,500 years history, not 11 years from 2009 to 2020.
    8) In 1932 the DOW dividends yield was 10.2%.
    9) In 1946 dividends yield was 7.8%.
    10) In 1949 the yield was 6.9%.
    11) High dividends yield is a great opportunity to buy.

  45. Michael Engel says:

    1) After Spencer Pierceval was gently eliminated, Lord Liverpool, – post 1812-1815 war with James Madison and Andrew Jackson, – learnt his lesson, cut gov debt by more than 50% and rejuvenated the British Empire for the next 100 years.
    2) Liverpool won FIFA club world cup, beating Brazilian Flamengo, and
    will 100% become 2020 EPL champ, in 2021, thanks to Lord Jurgen Klopp.

  46. gorbachev says:

    I have a few rentals.The kids 20’s in age were all let go.The

    leader phoned and asked if they could pay half rent .I agreed

    but said they still owed the difference.After a week of feeling

    guilty I phoned and told them that the money owed would be waived.

    I imagine I will still have to help out at some later point.

    The lesson for me is people want to pay their bills.I’m not

    sure about insurrection.

    • Seen it all before, Bob says:

      I am in the same position. I think negotiation is the key.

      My couple of tenants also lost the jobs in March but could pay April rent. I am grateful and asked how they were doing. They are stretched thin but we offer fairly low rent.

      We’ll see for May. Maybe they will offer me one of their 5 snowmobiles in lieu of rent. They have old used cars so they are not living extravagantly

      When times were good they tended to spend hobbies on toys and not savings but given they didn’t make much in the first place, maybe that is human nature.

    • Jdog says:

      They are all going to be getting at least $1K a week from unemployment, probably more than they made working… not sure why they can’t pay rent.

  47. Tonymike says:

    @Wolf,
    There is an American War museum in both Hanoi and Ho Chi Minh City. After visiting both, I have a new awareness of the brutality of the colonial French and they were bastards as well. De Gaulle (excuse the pun) of them thinking they could come back after losing the war during WW2 and thinking they could pick up and rule over Vietnam again. Oh, the white man’s burden.
    PS:The Vietnamese make sure to send their school children to the museum so that they can learn their history. Every time I attended, there were plenty of children there to understand how to fight oppression. Wish our children learned that.

    • sierra7 says:

      TonyMike:
      RE Vietnam, DeGaulle:
      DeGaulle threatened at nearing end of WW2 and “talks” were really ongoing between the “allies”, to not back NATO planning if US didn’t allow France back into Vietnam.
      Also re France actions and reactions in Algeria…..similar.

  48. breamrod says:

    you know if wages had keep up with productivity gains we wouldn’t be in such a decline. But when most of the increases in productivity has flowed to capital and not equally to labor then you have a problem. The average wage would probably be in the 60 to 80,000 range instead of 50% making 30 or below. But don’t worry all of this will eventually lead to revolution as it always has down thru history!

    • Robert says:

      The aristocracy only had swords, pikes and muskets to defend themselves in those days- today they’ve got various poison gases, bullets rubber and otherwise, directed-energy-beams to blind or deafen, not to mention armored cars, tanks- have I left anything out?- armed drones. Today’s revolutionary faces a real uphill battle.
      The only positive outcome that comes to mind is that with a decimated tax base, at least a few layers in the massive bureaucratic layer cake reaching to the skies will crumble a bit.

      • neplusultra says:

        Don’t underestimate the power of a guerilla campaign meant to instill terror if it gets to that point. A few well-timed assassinations. Being wealthy is no fun if you’re constantly looking over your shoulder…

  49. Tom Pfotzer says:

    If you’ve read this far in the thread then possibly you’re wondering to yourself “what now?”.

    The economy is tottering, might collapse, might limp on for a few more years. It’s now a “when” and not an “if”. What was once well-concealed is now obvious.

    So, what next? Even if we debt jubilee, jingle-mail, rent-strike…that will give us a moment’s satisfaction, and it will also leave us in fundmentally the same position.

    Most of us are in sinking boats, and torpedoing other boats so they sink (deservedly in some cases) does not patch the hole in our personal boat.

    Please rebut that statement if you disagree.
    ==============

    What is the next move after the shriek and revolt?

    We still have to devise and implement an alternative. That alternative is currently either undefined or not well known. Therefore the majority of us are stuck.

    It’s clear that we need to invent something else that’s workable. The problem(s) are so big, and involve so many of us, and many of our sacred cows. We don’t know where to start.

    Naturally, we are bollixed by uncertainty and fear.

    What’s a good antidote to fear?

    Develop a clear statement of our common problems would help a lot. Boil the commotion down to a list of five core problems, clearly stated.

    Then generate a list of actions that each of us can take to address those common problems.

    Then go implement those actions, and report back on how things are going, so we can speed up the learning process for all of us.

    We need strategies that each of us can start on tomorrow. Tasks with no external dependencies, no top-down approvals necessary. Steps each of us can do ourselves, starting right now.

    To find that list of to-dos, I think we need to pick a place to start, and a time to start. Please let me and one another know if/when you’re ready to pick a place and a time to start, and I’ll join you and try to help.

    • cb says:

      Problems:
      1. Debt

    • kitten lopez says:

      i’m SWOONING!!!! THANK YOU FOR THIS MIND SHIFT!!!
      i’m still reading responses. may have to respond below later. i started responding to Unamused before it’s time.

      man… i dig Karen’s work and what she inspired here. but Wolfstreet is shifting/changing its tenor in the comments section. it’s subtle and also obvious…

      i think i like where the minds here are going. it’s rather beautiful.

  50. Charles Reese says:

    I thought I would add my Pollyanna(ish) idea to solve the economic problems of the US. I believe the problem is fairly simple and the solution is simple as well. The problem is (and has been for a long time) that the resources of the consumer have not kept up with supply. Supply being greater then demand means that there are few reasons to invest in increasing supply and most investment now is geared toward replacing existing supply for more efficiency, this has the effect of exacerbating the gap between supply and demand.

    I think the solution is to give everyone who has a social security number a certain sum of money each week. The amount of money to be calculated quarterly based on a formula taking into account the inflation rate, the capacity utilization rate, the employment rate, the GDP growth rate, etc. The goal would be to stimulate demand to achieve a high rate of GDP growth while keeping inflation under control and providing an incentive for business to make new productive investment. A GDP growth rate of 4-6 percent as we had after the war would solve a multitude of problems.
    To keep this from getting to long I won’t go into some secondary details as to how there needs to be a small minimum payment coupled with a (formula variable) national sales tax and the FED would need to normalize interest rates etc..

  51. Michael Engel says:

    1) Begging a is best, begging don’t cost a dime. start begging and whining, curb your ego, before u call your lawyer. Lawyers collect from u with little begging.
    2) When a macho landlord declare a war, his tenants will break your walls windows and floors.
    3) Once a bad tenant is evicted, u take pictures and sue. Then, invest capex to fix the broken place, because the former tenant misbehaved.
    4) There is no guarantee that the landlord will find a good tenant
    in a depressed market and that he will behave better. After spending money on RE agencies and waiting, the new tenant is an enigma. An empty apartment, an empty cost center x time wasted cost money.
    5) In today market its difficult to evict to begin with. If the tenant have no dime on his name in the bank, it will be difficult to collect debt.
    6) Your lawyer will salivate when a small problem become a forest fire.
    7) Some tenants will benefit from eviction. Without eviction notice, with no income, your tenant might collect housing support. Both u, his landlord and him, are stuck for life.
    8) This downturn have just begun.
    9) If your tenant well behaved, his distress is your test.
    10) If u misbehave u will pay a heavy price.
    11) If your tenant is evil, waiting to strike, don’t make him an enemy.
    12) Your asset, your $500,000 capital, in his pocket.
    So be careful.

  52. Robert says:

    When Karen Feld says “The Fed has used the coronavirus crisis to double down on a failed strategy of supporting financial markets” she misses the point that the Fed is 1. supporting the interests of the banks that own it, and 2. using funds created through the imposition of trillions in new national debt to pick the bones of distressed business and amass natural resources.
    At the end of the Revolutionary War, when “not worth a Continental referred to the currency and U.S. debt, Alexander Hamilton and his cronies (backers of the first U.S. central bank), bought up debt paper for pennies on the dollar, and then lobbied for legislation paying them 100%- in gold.(this is the part they weren’t teaching Lin-Manuel Miranda in P.S. 103. Ditto today

    • Jdog says:

      Robert, you are a well educated man, a rare thing today.
      Prior to the great depression, most farm and ranch land was owned by private citizens. After the depression, most of the farm and ranch land was owned buy corporations and conglomerates.

      Today most people are employed by small business, and privately owned small business makes up a large part of our economy.
      Any guesses on who is going to own most business and employ most people when this is all over?

      During depressions, the banks foreclose on bad debt and take the collateral properties, they then sell those properties off to their corporate clients at sharply deflated prices.

      I will be willing to hazard a guess that much of the money Congress is saying is going to rescue small business, is actually going to corporations to purchase the private distressed businesses for pennies on the dollar.

      As the man said, it is a big club, and you aint part of it…

  53. Buck Turgidson says:

    Strikes are temporary.

    Politicians (doesn’t matter the party), banks, the fat cat companies walking away with piles of cash, the media… Those of us who are losing everything right now won’t forget.

    A reckoning is coming.

  54. lisa2020 says:

    I am totally cooperative in the efforts of the super monopolized financially rigged financialized systems to not allow me to purchase any of their products and financialized money streams. Nobody can blame me for participating in any level of any kind of boycott, other than what they have created themselves. More power to them. Just don’t buy anything, except the absolute bare necessities. Wait em out at home or in a tent, or in a confined sandbox of their choice. Just stop participating in any of the money flows. Stay local, buy local, and sell local.

  55. Sunny129 says:

    BRAVO!
    Finally some one calling it A SPADE is a SPADE!

    Thank you Ms Karen Parker Feld and also Wolfsreet for posting this!

    This anomaly has been going on for more than a decade but masked debt on debt but now Corona has uncovered the ROT under financial/global Banking system!
    Even the WSJ Editorial Board agrees with you – a shocker!
    excerpts:
    The Fed is rescuing weaker credits as well as the strong, is diving ever-deeper into risky assets, and is putting Wall Street ahead of companies across Middle America.’

    This means the Fed will in effect buy the worst shopping malls in the country and some of the most indebted companies. The opportunities for losses will be that much greater. Treasury is backstopping losses, but the taxpayer risks here are greater than what the Fed took on in 2008-2009.

    The Fed may feel all of this is essential to protect the financial system’s plumbing and reduce systemic risk until the virus crisis passes, but make no mistake that the Fed is protecting Wall Street
    WSJ April 13. ’20

  56. nofreelunch says:

    Strike away. The credit companies will keep score. As a saver, I will pay attention to the scores, and place my savings accordingly. As the expression goes “capital goes to where it is treated best”. You can say the credit score companies are crooked, but that’s what us savers have to go by. Ultimately, if you strike, you will still pay, just more later to make up for it. Everyone knows the game, they just don’t want to admit it.

  57. joe says:

    Interesting twist on “if you owe the bank 100K they own you, if you owe the bank 100M you own them.”

    If 100 owe the bank 1M they own you, if 1,000,000 owe the bank 100B you all own them.

    Disclosure: I don’t owe the banks anything, but if there is to be a mass protest and withholding of bank payments, let me know and I will borrow a lot.

  58. saylor says:

    Dear Karen…, I went to your quarterly report. In short, I read it, re-read it and then forwarded the link to some friends. I am so happy you have chosen to contribute here.

  59. Pelican says:

    What is really needed is a “tax payers’ strike”. Any creative ideas on how to show the middle finger to the taxman, as a simple wage-earner?

    • Jdog says:

      You have no political power as an individual, or even as a small group.
      Political power comes from large groups who control large amounts of labor and capital.
      The real problem in America today is ignorance. The average American does not have a clue about what is happening or why. They are basically brainwashed by a government school system and corporate owned media.
      If they do get angry and decide to revolt, they have no idea who to revolt against or why. They are divided and unorganized without a common goal or enemy. We have now become Idiocracy.
      The key to change is education, and it must happen at a grass roots level. Unless people understand the game, they have 0% chance of ever being able to even play much less win.
      This kind of site, and the discussions that go on here are crucial to educating people who can then go one to educate others. The most contagious thing in the world are not viruses, it is knowledge. Knowledge is what the people in power fear more than anything because their control and manipulation is only as effective as their deception.

      • Dan Romig says:

        Well said Jdog.

        What is the common goal? Who is the enemy? Those are two very basic, and important questions.

        As an ex-jock, I use sports as an analogy to much of life’s questions and in trying to analyze what’s happening – past, present and future tense. Wolf and Karen are definitely on ‘our team,’ and most of us have other teammates out there as well. “Coach Richter” is a good way to look it I reckon.

        The common goal should be to have legitimate free markets returned for all of us to compete in. And to be able to compete on an equal playing field with the same rules for everyone. That clearly is not the case with what the Fed and Treasury are doing, and doing together.

        The enemy is Congress, and Coach’s words lead the way for our team to see this: “The Fed can always do what it wants, it has shown that. Congress should care, but doesn’t. Congress applauds every time the Fed figures out how to get around the legal restrictions in the Federal Reserve Act.” (From April 18, 2020 at 2:50 pm on ‘Coronavirus Drives Barrage of New Lobbying Activity’)

        I put it more bluntly. Congress and the Fed are breaking the law! The average American is waking up to this fact. The tricky problem is not just what will they do about it, armed with this knowledge, but what can they do about it?

        At a grass root level, the only game to play takes place every other November on a Tuesday, and every single American who is over 18 years old (with a few exceptions, i.e. the incarcerated) gets to get in the game and try to win. But, voting for any incumbent in Congress or the Executive branch, or any candidate who is a member of the red/blue team; the team that’s breaking the law at our expense, is playing to lose.

        Let’s all play to win this November!

        • Lisa_Hooker says:

          A free market. Try selling your vote and you will find out what it is worth. The votes of Senators and Congress are an entirely different matter.

  60. ewmayer says:

    “Policymakers have been repeating the same mistake for 20 years” — Implying that it’s not a ‘mistake’ at all, but rather deliberate policy. As in , feature, not bug. Who do you think our esteemed policymakers actually work for?

  61. kitten lopez says:

    Jdog, i don’t think “Knowledge” among the populace is as dangerous as you think, or i used to think. / photographers went to the Viet Nam war to try and help STOP it but it became just more disaster porn for us to get used to.

    we artists and writers jump up and down scrawling warnings or ideas of utopian ideas, but it’s mostly been masturbatory self indulgence time wasting like us writing on the internet since it all started.

    but everything’s been talk all talk and no action. all BS. from the smallest chit chat to international policy.

    but what i do think is dangerous is a mix of what Unamused wasn’t expecting–nor i–which is just how incredulous and out of touch the People In Charge are, in asking us to commit suicide so’s they can make even MORE money….

    combined with Nothing Left to Lose. that’s the exciting X factor, as being “suicidal” or Dying a Death of Despair can inspire a whole new set of unexpected things, least of all things like debt strikes, because when a lot of people have Nothing Left to Lose…

    things get interesting. and hella scary because just like New Years Eve is for Amateur Partiers, we’re at the place where people like the guy above still think it’s worth it to be quiet and polite and not alarm or disturb others’ faux-peace or (delirium).

    and i’m relieved to see the tenor of comments HERE, of all places, start to go from the obvious rants of helplessness and future fantasy actions (mostly from the rash of new commenters to this site i’ve never seen before), to practical non-governmental solutions for NOW and a way of thinking and readying the MIND and will for much of the FUTURE coming up.

    Petunia… it’s almost time for you to come back. / it’s a phase they all have yet to go through. the only reason i’m actually optimistic about the continued or uptick in relevance of people like you and me, is because we’ve done this before. losing everything and how we thought the world and life was. and we were SMART as hell. / or so we thought.

    and that’s COLLECTIVE AMERICAN THOUGHT now.

    yeah. screw the VIRUS. / what’s coming down is waaaaay worse than any virus.

    but already i’m heartened because yeah… this is the Destruction/Renaissance thing KALI was all about getting us used to. we cannot be in a Binary red/blue good/evil world now. it’s delightfully upside down. for better and worse.

    but my dear Tom Pfotzer did that cool jujitsu thing where you focus away from the panic down into what ONE CAN DO.

    that made me smile because it’s bad ass and radical.

    this place is exceeding my expectations. / funny because i actually ran through and wondered, ‘when will Unamused deem it worthy to step back in and tell us something he realized or thought?’

    i laughed when you said they overstepped and went beyond your wildest expectations. / mine, too.

    and again… THAT’s where things are gonna get interesting. when you were too powerful to pay attention to your “opponent” and then you’re oblivious and well…

    it’s already been said ish gets hella interesting once you’ve “died” and have nothing left to lose. / interesting in many ways beyond just two.

    everything is that Farmer and Horse parable. the one where he gets a horse, someone says, “what luck!” / he shrugs says, “maybe.” / his son rides horse gets broken luck, someone says, “bad luck!” / he says, “maybe.” / war breaks out, can’t take son because of broken leg… what luck! maybe…

    the only true and real reason i ever did ANYTHING exciting and scary in my life was because i’ve always been vaguely or outwardly suicidal– but waaaay too chicken to kill myself without Plausible Deniability.

    but the funny thing about not clinging to life in that buried alive “safe” way (of this lockdown), is that when i got suicidal and acted without being so fussy about not ever dying, is when i most enjoyed life and being alive and in my body.

    so phases are coming that must be gone through to get to the other side of despair. / i guess that’s why i groan for all that’s coming but i also am relieved it’s all out in the open finally. that’s necessary.

    but after a life of talking people down from despair at 3am and having them pretend nothing happened come sunlight, i realized people change when they’re gonna change in their own time and not ours.

    so i am finally at a beautifully clueless humble oblivious place where masses of PEOPLE all at ONCE are going to swim like fish into a few basic “consciouses” and Karen’s work is speaking to THAT for me and i find it hella exciting because who knows where and how it’s gonna go NOW?

    i once heard Michael Africa (from MOVE) on Black Agenda Report Radio say that the way to rebel wasn’t by dying or taking to the streets, but by not needing the STUFF.

    i laughed and laughed like it was the end of a TV show because after years of thinking it’d take a bloodbath in the streets to get any kind of justice (thus new boss will be same as old boss), i realized what others are mentioning here… Don’t need the STUFF.

    James argues with me on that. but that’s because he wants it to be DON’T NEED THE STUFF—- AND DEMAND THE ABILITY TO HAVE A GOOD LIFE.

    but right now we’ve got a ways to go when the NYTimes is putting up editorials telling rich folks to pay their domestics, or they have creepy step n’ fetchit editorials from the domestics expressing their written shock and indignance at being treated unfairly.

    nah… we’re NOT There yet. it’s got nada to do with “knowledge.” we’re trained meat cows.

    this is Animal territory. something will have to spark past and beyond that commenter above who was too embarrassed or unsure about screaming WE’RE FUUUUUUUUCKED. he wants to still be polite and not make anyone “uncomfortable” when we are entering an era of nothing but Trigger Warnings.

    this is where folks like Petunia and Tom Pfotzer push you under the cold water, smack your face and get you to stop babbling and focus.

    x

    • Karen says:

      “ the way to rebel wasn’t by dying or taking to the streets, but by not needing the STUFF.”

      THIS

  62. Fat Chewer. says:

    Guys, the microanalysis is getting a bit old. You can use any measurement you want, but what we are seeing here is the slow motion decline of the West and the rise of the modern feudal state.

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