Sunday, January 17, 2021

Tag: The Crash Has Only Just Begun

The Crash Has Only Just Begun

by Charles Hugh Smith, Of Two Minds:

Everything, including a rational, connected-to-reality, effective financial system, is on back-order and unlikely to ship any time soon.

While the stock market euphorically front-runs the Fed and a V-shaped recovery, the reality is the crash has only just begun. To understand why, look at income and debt.┬áIncome–earned and unearned–is in free-fall, while debt–which must be serviced by income–is exploding higher.

Bailouts are not a permanent substitute for income.┬áIn the short-term, bailouts–in the form of payments to everyone who’s lost their source of earned income, i.e. their job–is a necessary substitute for lost income. But longer term, subsidizing income with borrowed money weakens the currency and the economy, as productivity stagnates.