Op-Ed: Markets finally get it — Recession inbound, Main Street on bread and water


ByPaul Wallis
DIGITAL JOURNAL
August 5, 2024

Wall street: — © Digital Journal

It’s taken two years for the Masters Morons of the Universe to see the obvious. Heavily indebted birdbrained corporations and maxed-out bad debt have no level of resistance to reality. They’ve just noticed.

2008 could well have been just the entrée to what’s possible now. They haven’t learned a thing. Big capital could get vaporized.

This will be the World’s Dumbest Recession, or perhaps depression. This is what happens when you talk yourself into believing that “debt is good” and borrow your way into bankruptcy for a few decades with help from an illiterate, irresponsible credit sector that doesn’t know its own business.

The finance sector must have the combined IQ of an empty KFC bucket. Nothing in there except the memory of a smell. The sector usually notices nothing, particularly its own self-inflicted disasters. Real money is vanishing in huge amounts in “adjustments” to a situation that never needed to exist.

It’s come to this. The world’s stock markets have just wiped out a lot of money in a fit of uncharacteristic realism. That’s a lot of money people thought they had, gone in a day or so. You can expect that to turn into a stampede if things get worse.

Also remember those investments were already losing money in real terms due to real-world price increases. Not “inflation”, which is an averaged-out euphemism. Real costs and prices have spiked, and any averages are irrelevant.

Let’s clarify, bozos – Every single price rise means your money is worth less.

Every price rise impacts the costs of the entire supply chain. Your buying power, the only real measure of wealth, decreases. These bigger numbers can never be “great numbers”.

Unemployment, that other unconvincing excuse for everything, is rising. Given that interest rates supposedly reflected anti-inflation measures because of higher employment, what now?

It’s hard to figure out the rationales. Is the logic that because people don’t have jobs you can make money cheaper for rich corporate lenders? So the millions of struggling people can borrow for a bit less?

If so, it’s another disaster in progress. If people with no money have to borrow, a booming market in bad personal loans and fake credit is the more likely scenario. It’ll take at least 5 years for these vacuous financial geniuses to figure it out.

Of course, all the other uncompromised capital is getting very reluctantly dragged into the black hole as costs rise. Prices rise anyway. Credit gets more expensive. None of that solves anything. It just makes it worse. More debt is self-destructive. Getting a few bucks extra means nothing when you need more bucks than you’re making.

Interest rates at central bank level are the least of the issues. It doesn’t matter if the rates go up or down by a few basis points. It doesn’t affect your financial reality directly, if at all. Your bills and costs don’t go down by a few basis points.

The problem is that people have no money coming in. It’s all going out on expenses only a ghoul could have predicted. Nor does anyone seem to know where more money can come from.

Nor are there any controls in place. You’d have to go back to COVID economics to make this house of cards stand up again.

The property sector, the big support beam of the capital market, is trapped in itself by itself. Cash buyers are OK. Everyone else is trying not to go broke and avoid losing money if they can. Mortgage defaults have been escalating for at least a year. There are a few lazy trillions that nobody needs, right?

You have rental properties that nobody can afford to rent. Maintenance and other overheads are getting more expensive. You have condos nobody can afford to buy because of charges. Property taxes are gnawing the bones. Forced sales, if you can actually sell anything, are inevitable.

In the commercial environment, this has translated dollar for dollar into a choice of lousy and truly tough calls. You have no customers because they have no money. Inventories are turning into stale money going nowhere.

Nor is there much actual “management” of the macroeconomic disasters in process. A totally unfocused, constipated, and effectively irrelevant political chaos created this mess.

The worst damage is to the credibility of investment as a whole. What are the incentives for investment? Nostalgia? Because that’s about all that’s on the table right now. Who’s going to believe this collection of train wrecks is a good investment environment? Who’s going to believe a word, whether the information is good or not?

On the purely domestic level, there are no excuses. Pew Research did a survey years ago that found that American households couldn’t handle a $400 hit to the monthly budget. Since then, costs of living have exploded.

Simple auto loans and other mainstream credit defaults are at plague levels. They can’t get better until the heat goes out of price rises. That fictional money is evaporating faster than anything else and it’s already hitting the books hard. Portfolios are going to start looking bad soon enough.

What are the solutions, you ask from your palatial twig?

Deflation. These costs can never work.

Writedowns. Unavoidable anyway.

Debt regulation enforcement. Like you’ve got a choice.

Lose the “buy a degree” idiots and hangers-on. These guys couldn’t run a dunghill.

Ditch those damn debts before they kill you. Your debts are who you are. They’re also be who you will be, if you’re not careful.

Get some really good sales guys to invent courses for kids in grade school for financial management.