Friday, January 24, 2020

Davos 2020: Record Global Fraud

The masses have been led to believe that everything is going fine economically, sadly nothing could be further from the  inconvenient truth. Trump has weaponized financial markets against the masses, in order to fabricate the illusion of synthetic prosperity. In the process creating the biggest and most explosive bubble in human history...

I am sure that today's "elite" gathered at Davos are more than happy to switch the conversation to climate inaction, in order to avoid discussing inaction on economic inequality, which is solely to their benefit: 

Global corporations are the source of ALL global deflation. 

Every time corporations swap out a high wage worker for a low wage worker they create underemployment, which is deflationary. Underemployment is the biggest economic crisis of our age, but it's never discussed. Today's politicians and economists eager to show progress where there is none, constantly tout the lowest-ever unemployment rate, which conveniently only includes people who are actively seeking work. Underemployment includes those who are working part-time because they can't get full time work, those who have been laid off and forced to take a low wage job, and those who graduate but can't get a job in their chosen field - educated baristas. The underemployment problem has been rampant since 2008. And totally ignored, by everyone. 

Labor share of the economy:

Unfortunately, there are no shortage of low wage workers on this planet. Which is why on a global basis, there has never been anything approaching "full employment". Which is also why wages have collapsed in recent decades and will remain collapsed until this problem stops being ignored. Corporations can easily arbitrage one worker against another, one country against another. They do it every day. 

Central banks can't create these record low interest rates in a vacuum. Those who would blame central banks for this crisis, ignore the underlying cause of deflation, which is underemployment. They ignore the root cause, for political reasons, and of course ideological reasons. They can't bring themselves to blame the private sector for this epic disaster. Uncontrolled greed, the root cause. The number of people who benefit from this model has steadily decreased, and now they can all fit into a small town in Switzerland. where they can pretend to be fixing problems. When in fact they are the sole beneficiary of NOT fixing the problems. 

Central banks have followed corporate deflation lower, essentially monetizing poverty. This poverty capital has now been over-invested in every industry on the planet. A ticking time bomb, that when it explodes, will reveal the true cost of 2008. Cheap poverty capital has created more debt and has automated more jobs. It's not the solution, it's the problem. It's a deflationary death spiral. While the quantity of jobs has never been higher, the quality of jobs has never been lower.

Corporations have systematically strip-mined wages, pensions, and now healthcare to continuously increase profit. What appears to work "great" at the individual company level, is a total disaster economically, on an aggregate basis. Companies are cannibalizing their own customer base through underemployment. 

The elimination of pensions has placed all expectations of retirement on an historically overvalued stock market. Which is why this society has invented so many fraudulent gimmicks to keep stock prices artificially inflated. First off by engaging in record debt-financed stock buybacks to reduce share count and give the illusion of growth. Secondly of course via central bank liquidity programs. Sadly, none of these short-term gimmicks will work longer-term. This is all just an epic fraud. The current mega bubble masks the underlying collapse in sustainable aggregate profits. Which peaked in 2014 on an aggregate basis.

All of this fraud has culminated in the Trump Super Bubble - the largest combined fiscal and monetary financial weapon of mass destruction in human history. Bought with both hands by brain-washed masses, in the prospect of early retirement, which is forthcoming far sooner than expected.

Trump has now weaponized financial markets against the masses. Human history's biggest asset bubble has artificially inflated his approval rating. In this mega financial bubble, Trump is listened to and cheered, no matter what. Human history's biggest Jedi Mind Trick:

In summary, as interest rates fall in lockstep with underemployment, the stock market is now levitating at the expense of the economy. Accelerating its melt-up as the economy marches steadily towards recession, as predicted:

"The worse the reality of the economy becomes, the more we take on the reflexive belief in further and dramatic monetary expansion and the more attractive the stock market looks"

When this final bubble bursts "unexpectedly", policy-makers and the herd at large will have to make an inevitable choice, to choose the economy over stocks. At that point real "valuations" will converge with economic reality. Which means that even "cyclically-adjusted" earnings projections today, are not anywhere near the realm of reality.

This is not the end of another cycle, this is the end of a fraudulent way of life.

Just remember one thing, "No one saw it coming".