Waiting For The Other Shoe To Drop

Well, here we are waiting for the other shoe to drop, which is an English idiom meaning we're waiting for something to happen, usually something bad. This definition comes from the always useful Urban Dictionary.

To await an event that is expected to happen, due to being causally linked to another event that has already been observed. Gets its origin from the joke in the example.

A guest who checked into an inn one night was warned to be quiet because the guest in the room next to his was a light sleeper. As he undressed for bed, he dropped one shoe, which, sure enough, awakened the other guest. He managed to get the other shoe off in silence, and got into bed. An hour later, he heard a pounding on the wall and a shout: "When are you going to drop the other shoe?" Thus the term "waiting for the other shoe to drop."

What are we waiting for? Another global economic crisis and another recession in the United States. What are the causes which create our reasonable expectation that we will have a crisis? That depends. Do we want to talk about proximate causes? Do we want to talk about ultimate (historical) causes? Or do we want to talk about very deep ultimate (natural) causes?

• The Proximate Cause — structural imbalances in the world economy, especially in balance sheets, have not been addressed since the financial crisis in late 2008. What we have mostly seen since then amounts to an attempt by governments and central bankers to fix solvency (debt) problems through the creation of more debt. All kinds of debt are far higher than they were in the 20th century, excluding the temporary debt accrued to fight World War II. This includes both private (financial, household, non-financial corporate) and public (government) debt.

• The Ultimate (Historical) Causes — This is the Empire's decline, trends which have been some 30 years in the making. In America, these trends include debt accumulation, health care costs, college tuition costs, loss of manufacturing jobs, wealth & income inequality, general cultural impoverishment, decaying infrastructure, loss of opportunity (upward mobility), Imperial militarism, and other destructive tendencies. Obviously some of these trends occurred in most of the world's "advanced" economies, including Europe and Japan.

• The Very Deep Ultimate (Natural) Causes — This is of course a reference to Human Nature. All human successes, no matter how brightly they shine in the present, are merely temporary. We can move from Dubuque to Boise, but we can not get away from ourselves. Failure and breakdown are baked into the cake. I'll quote the philosopher Immanuel Kant, and leave it at that—

  Out of the crooked timber of humanity, no straight thing was ever made.

So now we are waiting for the other shoe to drop. Any disruptive economic dislocation that happens now will make an already bad situation very much worse. How bad is it?

In an otherwise worthless column called Washington vs. The Middle Class, MSN Money reporter Anthony Mirhaydari cited some statistics gathered by economist David Rosenberg, who I have sometimes quoted on this blog. The list is incomplete, but indicative of where we stand. Here they are—

• Forty-five million Americans (one in seven) are on food stamps.
• One in seven is unemployed or underemployed.
• The percentage of those out of work defined as long-term unemployed is the highest (42%) since the Great Depression.
• Fifty-four percent of college graduates younger than 25 are unemployed or underemployed.
• Forty-seven percent of Americans receive some form of government assistance.
• Employment-to-population ratio for 25- to 54-year-olds is now 75.7%, lower than when the recession "ended" in June 2009.
• There are 7.7 million fewer full-time workers now than before the recession, and 3.3 million more part-time workers.
• Eight million people have left the labor force since the recession "ended" — adding those back in would put the unemployment rate at 12% instead of 8.2%.
• The number of unemployed looking for work for at least 27 weeks jumped 310,000 in May, the sharpest increase in a year.
• Just 14% of high-school graduates believe they will have a more successful financial future than their parents.
• The male unemployment rate for ages 16 to 19 is 27%; for ages 20 to 24, it is 13%.
• Because of structural problems such as negative home equity (which keeps people from moving for work) and skills erosion (from long-term unemployment), UBS economists estimate that the economy's natural unemployment rate has increased from 5.7% before the recession to 8.6% now. This acts as a speed limit on potential economic growth.
• Between 2007 and 2010, median family net worth fell nearly 40%, while median inflation-adjusted incomes before taxes fell nearly 8%.

Therefore it is obvious that another global financial crisis and recession in the United States will make any kind of "normal" life unachievable for millions of Americans over and above those who lives have already been disrupted. This could happen in the near future, maybe even this month or next, although one can never be sure of timing. That's why so many "bearish" investors (e.g. Jim Rogers, Jim Chanos, Gary Shilling, Hugh Hendry) are often too early in their predictions. They know what's going to happen well in advance, but sometimes mistakenly assume the disaster will happen sooner rather than later. Thus they are too early to short whatever market they're playing to make money off the crisis. Regarding timing, crises often occur in the fall.

This is the last in a series of articles I've published over the last two weeks on this subject. Now there is nothing to do but follow developments and wait. I'll move on other things unless events justify new posts on the coming global recession (e.g. such as its official arrival).

I was sad to see that my colleague "Bill Hicks" (obviously a pseudonym) has (temporarily?) suspended publishing his blog The Downward Spiral. From the tenor of his remarks, it appears that he quit in disgust. Naturally it occurred to me to chuck it all in when I saw that, and for many of the same reasons he cites, including his very important yadda, yadda argument—

Greece...yadda, yadda bailouts...yadda, yadda Obama/Romney/Paul/Gingrich/Cain/Bachmann's gonna save us...yadda, yadda lies damn lies and government statistics,...yadda, yadda The Bernanke...yadda, yadda Vampire Squid...yadda yadda muppets...yadda, yadda austerity...yadda, yadda stimulus...yadda, yadda fuck the hell off already

The main difference between Bill and me in this regard is that writing DOTE is still fun for me, but writing the Downward Spiral had become a burden to him. Otherwise I sympathize with his position completely. It is truly disgusting to witness the daily yadda, yadda. Revolting. Deeply offensive. It's enough to make me want to live the life of recluse in a location off the beaten path (and near the ocean) where I can keep my human contact down to a bare minimum. And one day I will do that, and publish for the public indifferently, assuming the intertubes are still up and running at that time. But not right now.

Comments

[MJJP]

I might just put your site in my favorites. This was enjoyable reading.

[T E Cho]

Dave,

Spot on again, it's how our reality now feels and is.

And in high resolution.

Tick... Tick... Tick.

Keep us posted.

Hope you can move before the SHTF .

[Wanooski]

Southern coastal Oregon is a good place for that Dave. The population is fairly sparse, there is still a good bit of wilderness, and of course the ocean is still out there.

But, we are still waiting on all that debris from Japan...

And some of the people that do live out here are insufferable, ignorant, wave yer flag, run over small animals for fun hicks.

But other than that it's fairly quiet and enjoyable.

[NoHype]

It's fascinating to see the "SHTF" acronym always posited as though it's in the future. In my world, the S has already hit the F. All we're doing now is waiting to see how long the blades hold up under the sheer volume of it.

I won't be shedding any tears for middle America. They deserve what's coming to them. I'm sorry to be so blunt, but since they're so insistent on the "spare the rod" meme, I say "OK. Great. Apparently you only learn the hard way. Have at it."

[BS]

Overpopulation, period. The US solution to overpopulation appears to be stopping immigration. We see all the yada yada about economic growth but nothing about limits to growth from the talking heads.

There have been several hints of your limits in regards to this blog. IMHO, you are one of the very few that actually thinks about the real problems and discusses them with the few of us that take the time each day to read what you have to say.

Keep it up. Accept donations other that through pay pal. I have a thing about them.

[DML]

Thanks for your writing! I laughed out loud today, at home and alone. yes yadda yadda is full on at this point..riding the yadda yadda wave.........

[Dave Cohen]

@DML, others

I want to make it clear if I didn't already, that yadda-yadda quote is directly from Bill.

-- Dave

[Bill Hicks]

Hey, Dave, thanks for the tribute. I'm reducing my exposure to the yadda, yadda, but I'll still be a loyal reader of yours. :)

[Anywhere But Here Is Better]

Dave, if humanly possible (and I really mean humanly, as opposed to the other beings walking the planet who appear human-like but surely are some other creature) please continue your postings. Just like good music, reading your sapient words has become one of the few interesting moments making up the dull day.

I'm down on my uppers these days, but if you can find another vehicle for tips rather than the paypal bete noire, I would like to chuck in something as a small measure of my appreciation for you taking the trouble to inform us fellow prisoners of earth.

All the best to you and your mom, Oliver

PS - Bill H, I understand where you're coming from but if you can keep up the flow of intelligence through your comments on DOTE, that would be great.

[Alexander Ač]

Hello Dave, I know you frequently write about our fuc*ed ocean... and our forests are fuc*ed just as well...:

North America is witnessing the largest pine-beetle epidemic in recorded history.

http://www.theatlantic.com/national/archive/2012/06/as-politicians-debate-climate-change-our-forests-wither/258549/

Alex

[Ben]

Dave, Rancho Palos Verdes is absolutely beautiful. There great hiking trails, great views--Santa Catalina Island and Palos Verdes Hills are so beautiful that it's surreal--and it's sparsely populated. That said there are many pretentious people - think privilege meets oblivious meets hyper-socialized and you'll get a sense of what many people are like there.

[Andrew Kirk]

Wow, just a great post. Should be required reading for all thinking Americans, if that's not an oxymoron. Makes me proud to have graduated from Pitt.