"We risk becoming the best informed society that has ever died of ignorance"
- Rubén Blades

"You can't make up anything anymore. The world itself is a satire. All you're doing is recording it"
- Art Buchwald

"It's getting exciting now, two and one-half. Think of everything we've accomplished, man. Out these windows, we will view the collapse of financial history. One step closer to economic equilibrium"
- Tyler Durden

"It is your corrupt we claim. It is your evil that will be sought by us. With every breath, we shall hunt them down."
- Boondock Saints

Monday, September 19, 2011

When Is It Appropriate To Say "I Meant Well"?

Money Base
I just saw a headline on Drudge about the Greek default possibly "tipping the US back into Recession".  Sad to report but not a shock to those who are worth their two cents, we never left it.  I'm not surprised.  GDP is following the exact same path it was on prior to the massive inflation of the money supply.  Real Rates are negative currently with inflation at 3.6% annually and 10Y CMT yielding less than the FRED data shows, closing today with a yield of 1.95%.  We have systematically engineered lower rates so the US can maintain its insane levels of borrowing.  Couple this with erratic leadership and immoral manipulation of the economy with the drivel that we have a "free economy" and you have a melting pot that increases in temperature slowly until it explodes with boiling liquid, burning everyone that is holding a spoon and stirring the hodge-podge mixture.  We're in for a lot of trouble here as the politicians enter into their campaigns for re-election in the hopes of continuing the trip down the lazy river being aided by their more-than-willing servants.  American citizens are currently experiencing a market of commerce where their unit of exchange is decreasing in value and also is being printed and spent by their rulers.  The future rests with people like this.

Total Public Debt
10Y Minus CPI = Real Rate
The American economy is contracting.  The value of its currency is depreciating at a rapid rate.  Europe is in such a mess that the current scenario in the US actually looks so good, its worth storing your currency in US treasury's, enabling the government to borrow at rates so low the politicians begin to giggle with girlish joy.  Extravagant promises will be made over the next year partnered with rhetoric that would make you think American's are voting for the next absolute ruler.  No one person can fix the mess in the US, no President, no House-Speaker, no blog.  The US is going to need a massive a shock to its psyche to have a chance at getting back on course.  Each quarter gone by where employment increases and people living off government hand-outs swell is an exponential variable in the calculation of the length of time it will take to regain any level of bragging rights.  America is back above its per-crash levels of consumption and the real disposable income levels are their highest since the 2008 liquidity trap.   So long as shows like Jersey Shore are able to capture the attention, creativity and mental strength of the population we can not possibly expect to regain the extra peg of value we used to possess in terms of human capital

Real Disposable Income
For the short term the US is looking like a heavy sell outside of the premium (which is the only reason money has value anymore here) of the civilians obedience to law and order (which seems to deteriorate each passing day).  With uncertainty in the future regarding political polarization, division among the civilians along religious, racial, and social lines will cause severe cracks and weakness in the foundation of democracy.  With emotions being the filter for information and relationships, objective thinking to reality and valuations will be skewed when placed upon this template for disaster.  I issue causing when treading the waters in the US economy over the long-term by means of financial asset transit.  I believe the market participants have discovered ways to pull positive Alpha in the near term and the ones with the most money are no longer investing in the ways we might think.  Look what Obama and his administration have done, look what Bush did too.  I can not figure out when it will be appropriate for either of them to say "I meant well".