https://www.marketwatch.com/story/g...crush-the-us-economy-2019-12-11?mod=home-page ‘We live in a bizarre world dominated by magical-thinking’ ‘If money doesn’t loosen up, this sucker will go down.’ President George W. Bush famously uttered those words a decade ago as the U.S. government was scrambling to restore liquidity and calm panicky markets during the upheaval of the financial crisis. A few years after that, Berkshire Hathaway’s BRK.A, +0.45% Warren Buffett hailed Bush’s comment as “the greatest economic statement of all time.” At the time, Buffett said Berkshire always has at least $20 billion in cash. “Some day in the next 100 years when the world stops again, we will be ready,” he explained to a group of M.B.A. students in 2013. “There will be some incident, it could be tomorrow — at that time, you need cash. Cash at that time is like oxygen.” Fast forward to this week, and that day could soon be upon us, according to Charles Hugh Smith of the Of Two Minds blog, who warned that this “sucker is finally going down” and no amount of “loose money” will be able to stop it. “We live in a bizarre world dominated by magical-thinking,” he wrote in his latest post, “a world in which the Federal Reserve creating more dollars out of thin air is supposedly the solution to everything.” But that’s clearly not the case. There are several “knotty structural problems” that he says can’t be helped by an accommodative monetary policy, including unsupportable pensions, mounting consumer debt, a health-care system that’s bankrupting the country, outrageous student loan debt, funding unwinnable wars, etc. The “loose money” approach is actually “metastasizing” a new set of problems that will ultimately “bring this sucker down.” All that free-flowing Fed cash is nothing more than “socially useless financial activity” that, he says, enriches a few at the top and leaves the rest of the country behind. It all adds up to what Smith sees as the same “toxic concoction” that has led to the destruction of economies throughout history. “The great karmic irony is [the banks and financiers] rigged and gamed the system so rapaciously, absolutely confident there’s no end to the loose money, that they’ve overlooked the increasing fragility of the entire system they’ve ruthlessly exploited,” he wrote. “This sucker is going down, and sooner than we think.”
and I would argue that the mentioned structural problems are more complex and intractable than ever before in US history. I believe the buildup of these imbalances will eventually climax with a USD meltdown followed by a market crash that will exceed the 2008 GFC and will be more like the bear market of the 1930s followed by a depression followed by decades long stagnation not unlike Japan's.
What is missing from this 'toxic concoction' are shit pile OTC derivatives and subprime MBS and CDO's - at least in Countries with stress tested banking systems. It's worthwhile to note that in the US, the regulator independently runs the stress tests - while in Europe, the regulator relies upon the bank regulatory compliance department.
In order to complete the Terrible Circle that led to the U.S. financial crisis, you had to have the rating agencies grade the MBSs and CDOs as if there was no incest-by-construction in their make-up. "AAAs all 'round!" and Yay! team. Except the rating agency was down the hall from the underwriters, the risk was *not* unrelated, and each mortgage failure spelled geometrically-additive doom for the next. "Cascade" and all that. Having (our) regulator run stress tests independent of the regulatee certainly helps -- but it's sure not a panacea, either.
%% Most of the state pension plans are in good shape [except ILL+ 1 or 2 others; WSJ article on all state pension plans] The ACA/obama Care trainwreck problem was solved with killing the dumb gov mandate.LOL As far as ''unwinnable wars''LOL, he is stuck in the Vietnam time trap, + he doesnt know much about winning wars also.,
Pshaw... There is nothing to worry about. Enjoy the ride! The stock market "forecasts" 6 to 12 months in advance!! LOL