Well, and perhaps this is just my own paranoia, but I believe we are heading for a super Global economic crash. I am not sure it will be so much a 2008 type crash, as 2008 part 2, the 'Empire Strikes' back sort of crash. All the cans they kicked down the road in 2008, are hitting a wall.
Even apart from that, we are statistically past the point of no return for a bear market / recession historically by several months now. The big question is not a matter of if, but when will a new recession start; however, there is always the even more disturbing sub-question about has it already started. The fun with recessions are, they tend to only be obvious in the rear view mirror.
Everywhere I look, and the brexit vote was a rather good test of this, it is like there is a recession stocking the halls of central banks, looking for good reason to crash the markets. Brexit simply was not sufficiently important to bring the Global economy and markets to their knees.
There was an interesting quote the other day, from a hedge fund manager, that claims it was said to him in private by the head of a central bank, something to the effect, "The dirty secret to monetary stimulus by central banks is, it only works if everyone else is not doing the same".
I am not even sure the source is trustworthy, but the logic seems sound. Let's all race to the bottom, by printing more and more money, to make our currency cheaper (relative to what?), to make our exports cheaper (to whom?), so that we will create jobs (for what?), so that our population will buy more stuff (from whom, for what?), and that will save the Global economy and we will all live happily ever after.
Well, to kick it off, I thought this article pretty much captured all of the above, and the 100 trillion dollar elephant in the room:
http://www.newsmax.com/Finance/DavidSto ... id/737897/
He takes a current look at the payroll taxes collected vs. the U.S. rosy political number that claims there was a rise in hiring. The reason:
To my knowledge, there is no sentient employer in the US who sends payroll tax money to Washington based on phantom jobs owing to seasonal adjustments, birth-death imputations or trend-cycle adjusted models which recalibrate shop floor headcounts to fit a prior trend.
The payroll tax is saying only a 0.5% rise, year over year; but, then he explains why that number is likely overstating the employment number. The largest decreases, are related to things like contractors and company bonuses, that are the first things to get cut in an economic slow-down. Even more, the types of jobs, based on the taxes paid, are rapidly decreasing in quality. Massive jumps in hospitality, hotel industry, bar tender type jobs. Which earn way, way less, and work far fewer hours per week. In other words, the product in the GDP, is being generated by more people doing less. The whole article is really worth a read.
Essentially, at the moment, or so the central bank bed-time story goes right now, the U.S. economy although sluggish, is still growing and jobs are being added, and thus the World is saved. The U.S. economy, even though it is obvious most of the rest of the World is in serious trouble, can prop up the Global GDP sufficiently for all of us. Well, yea, perhaps, buuuuuut, that is not what is really going on.
That has not been going on for about a year now, perhaps two years, by my back of the napkin calculations.
The thing that needs answering, is what brings it down. Where is the Black Swan (which is a popular employment of a old Philosophical tool these days, but a bit abused)? Is it China? The EU? Does the bond market blow-up? Currency leverage? EU banks?
I honestly think it is almost irrelevant, which match in the box started the fire when the building is in full flames. It will be the reaction (or lack of action), that will matter. Will the fire department get there in time, and will they have sufficient water to put this one out?
Not looking so good. So, again, the 'when' is likely more important. My money, like the last one, will be somewhere around the U.S. presidential election. Politics, more than economics, is driving this show right now, both inside the U.S. and internationally.