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Wednesday, March 13, 2013

We're Here

The fortune tellers are out in force predicting away everything from where the Dow will be in a year to where Gold will be in a year, to where Europe will be in a year to where US GDP will be in a year.


I can predict the present:
We're here:  Gold is hovering around $1600 an ounce: solidly in its long term uptrend.

We're here: The Dow is back exactly to where it was 5 years ago before the banking crisis hit.

We're here: The Fed's balance sheet has ballooned out with 3 Trillion dollars of new debt, the Federal Government's balance sheet has ballooned out with 5 Trillion dollars of new debt, Unfunded Liabilities have ballooned by tens of Trillions of dollars of new debt, and the consumer balance sheet is pretty well unchanged.

We're here: Official Unemployment has dropped to about 7.7 percent while the broad unemployment rate (the one used in 1980) has dropped to 14.5 percent.   Teen unemployment is at 24 percent.

We're here: Everyone is predicting that the economy has healed and the European crisis is contained.

We're here;  Rates here and in Europeare still at ZERO for the fifth straight year.  In Japan they are at ZERO for the 20th straight year.  There is no way to increase rates without creating an impossible debt service burden.

We're here: Everyone is predicting the Fed will start its exit strategy soon.

We're here: Bernanke has said that NO EXIT STRATEGY WILL EVER BE NECESSARY.

We're here: Employment gains of just under 200,000 for the last three months has everyone predicting the economy is healing.

We're here: 200,000 is the number of new entrants into the job market every month.

In other words: The World Wide Debt Crisis has stabilized at the moment through the central bank issuance of Tens of Trillions of New Debt. 

There is no exit strategy. 

There is no way to bring down debt without disrupting the temporary stabilization.

How long can this equilibrium  be maintianed?

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