It Won’t Be A Repeat Of 2008

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by Karl Denninger, Market Ticker:

It’s going to be far worse.

The “divide” has widened — a lot — in the last 10 years, the “official” start of the “bull” run.

Yes, salaries are up some on a median basis.  But debt is up much more, and what’s worse despite the “wonders” of zero interest for the rich and powerful, including corporations, the credit card interest rate is up since that time.

The percentage of people living “paycheck to paycheck” is higher now than then — by quite a lot.  You don’t have to go far to find someone making $60,000 a year who is functionally bankrupt, running on their credit cards and sitting on a crazy amount of debt — with less than $500 in the bank.

Auto loans are longer in both duration and higher in interest.  No, car, no job if you need it to get to work.  Automakers have been factoring the near-zero interest rates they get for “buyers” — turning said buyers into effective lessors with negative amortization and pushing up the average price in the process — from under $28,000 in 2008 to more than $35,000 last year.

Remember, we’ve had no inflation…. so they all say on the TeeVee.

Student loans have been completely federalized since 2008, and worse, they’re all non-dischargeable now too, and then to top off that insult the “servicers” are screwing people left, right and center — and despite working for the Federal Government in that regard not one indictment for that screwing has issued.

Nor has anyone gone to jail who worked or still works for Wells ****You, despite repeatedly screwing millions of Americans.  If you’re in the finance business in any way it certainly appears you have a license to screw people.

HECM issuers and servicers (also federally regulated!) are doing it too.  Nobody cares about that one much at all, which shouldn’t surprise.  After all if you’re a student you’re alive — the people who get ****ed by the HECM servicers are heirs, and unless whoever is minding the estate is both a pitbull and willing to bite off someone’s head they’ll steal whatever equity they can find in the house when the person who took the loan dies — and this is after they’ve already illegally tampered with the chain of title which can greatly complicate managing to sell the house and discharge the debt.  Why not, since those are federally guaranteed too, so if they did something outrageously uneconomic or even illegal they get paid anyway.  Don’t even get me started on the outrageous-inflated appraisals involved in that game, not that it should surprise seeing as nobody went to prison for appraisal fraud in 2008 either!

Obamacare, which was put into place after 2008, has completely destroyed the incentives for small business entrepreneurship.  By putting an effective tax rate in excess of 70% on the second $20,000 a single person earns start-up firms, where by definition there’s a lot of risk and yet not a lot of pay, have been crippled.  The big guys love that, of course; getting the government to shoot your competitors in the head for you is always nice.  But entrepreneurship has always been the path to the moderately wealthy from the wage slave class and it got slammed shut, on purpose, by Obama.

Trump and his first two years of a fully-Republican Congress did not do one ****ing thing to fix it either.

Meanwhile the media “gives credit” to The Fed — and specifically Bernanke and Yellen — in making the stock market go up.  In other words they celebrate fraud committed on a grand scale never before contemplated — over ten trillion dollars worth of it in federal deficits explicitly enabled on an intentional basis.

But now the heroin supply from The Fed has stopped — not because the Fed or Congress wants it to, but because they were running into the coffin corner between “effective” and “lethal” doses.  As a result the artificially boosted economy is slowing down.  The Fed knows it.  Powell reversed course, publicly.

Will it matter?

No:  The malinvestment and theft he and his two predecessors enabled and cheered onward hasn’t gone away and it will detonate.

The Fed’s chair shows up every six months in Congress and proclaims not only their previous rank violations of the law, declaring that rather than “stable” prices (zero change), which is their federal legal mandate, they have intentionally forced up prices — and that they intend to continue doing so.  Rather than ordering the Sargent at-Arms to take the jackwad sitting in the witless chair out in chains both the business media and Congresspeople cheer.  This is a literal middle finger to the law, given under oath, and not only does everyone shrug in indifference they cheer it on despite it causing what is going to destroy this nation fiscally and, for most of its citizens, personally.

Will it blow up in everyone’s face today?

Is the last week in the market the start of it?

Maybe, maybe not.

But will it go up in smoke by 2024 or thereabouts, when Medicare runs out of buffer and its 75% operating deficit becomes fully exposed in the budget?

Yep.  That much I’m sure of.

The handle has been pulled and we’re circling the drain.

What is The Fed going to do then?  Health care will be north of 20% of GDP by then (it’s there now, basically), with 80% of it being stolen.  Gonna put 600,000 people out of work in an afternoon in that “field”?  How many foreclosure signs and repo’d cars will that generate, and what’s the knock-on from it?  That’s the right place to start, by the way, along with the “big tech” and immediately normalizing interest rates and selling off all of the excess bonds on the balance sheet.  Yeah, that would blow up a lot of companies, but it would be over in a few months and within a year the economy would be on the mend with business operating costs down 10-15% — permanently.

We had the opportunity to fix this in 2008 and 2009 at half the total economic pain we must accept now.  Instead of resolving it the US House legalized balance sheet fraud — literally commanding FASB to endorse same and then both the Congress and White House destroyed entrepreneurship.  The market bottomed on that very day and all of it since has been a scam.

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