This is as good a time as any to introduce you to my Vicious Circle of Futility, or using the Buddhist metaphor, The Wheel of Suffering. Here it is, with the original caption, from my June 4, 2009 article The Decline of the American Empire—
Original Caption—As problems become more intractable over time, our resistance to making real changes to confront those problems, our social inertia, becomes more entrenched. Thus the solution to debt-based economic problems is more debt. The solution to liquid fuels problems is marginally more fuel efficient cars, not alternatives to driving. We study an expansion of the rail system instead of building one to provide an actual alternative to flying or driving between cities. We dream of hypothetical biofuels in the far-off future to solve an oil supply problem in the here & now.
On November 5, 2009, I followed-up that first article with Decline of the Empire—Now What?
Has anything changed? Or, put another way, has the Empire taken any positive steps to solve any of its problems? Sadly, the answer is No. Since Obama became President, the United States has an unblemished record of failure, so business as usual = futility continues.
No financial reform, Wall Street is running wild. No health care reform, costs are still soaring. No major energy saving initiatives, future oil price shocks are assured. No attempts to put our economy on a sound footing. Etc.
Nada, zip, zilch, zero, nil, nothing.
Prosperous denizens of our Imperial Capital continue to live in a Delusional Bubble. Corruption is unceasing. Our disastrous debt mounts, hanging over us like the Sword of Damocles. In subtle & not-so-subtle ways, the Federal Reserve monetizes the debt. The Housing Market is on life-support. The States are broke but will receive no help. Pointless but expensive foreign wars—both in terms of lives and dollars—grind on day after day. Unemployment is very high and will stay that way for years—many jobs will never return. The Bureau of Labor statistics lowers the joblessness rate by removing people from the labor force. Real wages did not increase over the past decade. There was no growth to speak of in private sector jobs during those years. The trade deficit grows worse...
Today John Mauldin alerts us to A View from the NBER Recession Indicators by Hussman Funds' William Hester. Mauldin notes that "there is some debate about whether the recession is over" and mentions what he and others have called our "statistical recovery." From Hester—
The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) sets the official dates for the beginning and end of recessions. One might imagine that these are not exciting meetings, but the next few may be livelier. That's because the major indicators they follow to determine whether the economy is in expansion or is contracting are sending off conflicting messages. One of the major indicators that the group follows is consistent with an economic recovery. One is unimpressive, but not strongly at odds with a recovery. The two remaining indicators imply that the economy may still be in recession.
This divergence has led committee members to express different views of where the economy is in the business cycle. Following the November employment report (but before last week's disappointing job loss) Robert Hall, who currently heads the Business Cycle Dating Committee, said that the report "makes it seem that the trough in employment will be around December. The trough in output was probably sometime in the summer. The committee will need to balance the mid-year date for output against the end-of-year date for employment."
We get graphs like this—
This current "business cycle" compared with the average change in previous cycles
We can debate all day long about whether the recession is over, but I'm here to tell you something: this is not a "business cycle" recession, this is not just some particularly bad phase we had to be followed by a recovery as in previous business cycles. I can't emphasize this point enough.
Past "growth" in the economy was driven by two huge Bubbles—unwarranted asset price inflation. One showed up in the stock market, driven by innovations in the internet & telecommunications. The other, bigger bubble, was in housing. Consumption was fueled by crazy debt levels based on the illusion of wealth. Most of that economic growth was phony. Ben Bernanke's "Great Moderation" was a sleight-of-hand, a magician's trick. The United States is, and has been, in the midst of a long, slow, steady deterioration, and unless we seriously attempt to arrest that Decline, we are toast.
If you want to hear another version of what I'm talking about, listen to Michael Pento, senior market strategist with Delta Global Advisors. He's a smart guy.
Toast. Inside the Beltway, they can fiddle while Rome burns. That's what self-interested arsonists do, but in the meantime...
Silent but deadly, The Wheel of Suffering turns & turns & turns...
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