Recession (depression?) worse than ’08 coming?

The other day, I expressed some hopeful views that the low price of oil would lead to an overall invigorated economy (even while some areas like Texas dependent on oil production would suffer).  Historically, low oil prices have almost invariably led to economic boom times.

But, we do not live in normal times.  Never has government, business, or personal debt been so high.  Never has government so artificially sustained what paltry economic “growth” there has been with such enormous measures.  That is to say, there is very little government can do to rectify an economic downturn (and probably much less gov’t should do).

That’s the thinking in the article below from a bearish economist at CNBC.  Given China’s economic crisis and the beating the markets have taken over the past few weeks, you certainly won’t find me arguing against his prognostication:

The S&P 500 has begun 2016 with its worst performance ever. This has prompted Wall Street apologists to come out in full force and try to explain why the chaos in global currencies and equities will not be a repeat of 2008. Nor do they want investors to believe this environment is commensurate with the dot-com bubble bursting. They claim the current turmoil in China is not even comparable to the 1997 Asian debt crisis.

Indeed, the unscrupulous individuals that dominate financial institutions and governments seldom predict a down-tick on Wall Street, so don’t expect them to warn of the impending global recession and market mayhem……

……..this inevitable, and by all accounts brutal upcoming recession, will coincide with two unprecedented and extremely dangerous conditions that should make the next downturn worse than 2008. [Did we ever even leave a recession?  I know what the Obama administration says, but I don’t trust them or their statistics at all. I think much of the country has remained in relatively flat growth ever since 2007.

First, the Fed will not be able to lower interest rates and provide any debt-service relief for the economy. In the wake of the Great Recession, former Fed Chair Ben Bernanke took the overnight interbank lending rate down to zero percent from 5.25 percent and printed $3.7 trillion. The Fed bought longer-term debt in order to push mortgages and nearly every other form of debt to record lows. [And left the US economy fundamentally destablized as a result.  That Bernanke may have been hoodwinked by shyster hedge fund managers to allow them to keep their 8-9 figure bonuses I’ll just gloss over for now]

The best the Fed can do now is to take away its 0.25 percent rate hike made in December.

Second, the federal government increased the amount of publicly-traded debt by $8.5 trillion (an increase of 170 percent), and ran $1.5 trillion deficits to try to boost consumption through transfer payments. Another such ramp up in deficits and debt, which are a normal function of recessions after revenue collapses, would cause an interest-rate spike that would turn this next recession into a devastating depression.

It is my belief that, in order to avoid the surging cost of debt-service payments on both the public and private-sector level, the Fed will feel compelled to launch a massive and unlimited round of bond purchases. However, not only are interest rates already at historic lows, but faith in the ability of central banks to provide sustainable GDP growth will have already been destroyed, given their failed eight-year experiment in QE.

Therefore, the ability of government to save the markets and the economy this time around will be extremely difficult, if not impossible. Look for chaos in currency, bond and equity markets on an international scale throughout 2016. Indeed, it already has begun.

It’s past time to find safe havens.  I did late last  year.  Not that the options are all that great.

There is an argument to be made that the incredible growth in prosperity the world has seen since the late 1700s is ultimately unsustainable and quite possibly unnatural.  For most of human history growth in wealth and productivity has been very slow.  There have been a few exceptions – the ancient Mediterranean world from about 200 BC to AD 200, China over roughly a similar period – where wealth accumulated very quickly (along with technological development and gains in productivity), and then followed by a period of reversal and long stagnation.  Birth rate (and infant survival) was a key factor in both the growth and the decline.

I wonder about this (in very brief form) because I have had the sense for a while that we may be looking at a very long period of technological, economic, and cultural stagnation if not outright reversal.  This is all grounded in the worldwide collapse in birthrate and the moral enervation of the West (the world’s leading culture), to the degree that many leaders seem to long for the barbarians to come and finish them off.

This is all very speculative and I certainly don’t have a lot of facts in support of my claim, it’s just a vague but growing sense I’ve had for some time. But I doubt I’m alone, given the explosion of “prepping” and similar trends.

Gold and (productive) land are probably some things very much worth having on hand.