You Can Fake A Bull Market Only So Much: MacroFor An Economic Perspective

Current and 2nd Edition.

Focus on growth for the sake of growth by the corporations all the time, and the constant endeavor by the governments and the monetary authorities to manufacture demand at any cost is sheer madness. Substituting a natural business cycle with a credit cycle on steroids has never worked well in any country at any time. The longest bull market in the U.S. history juiced by easy money can’t fake it anymore as a slowing global economy with a trade war in tow likely morphs into a recession by 2020. A purge of the stupidity and reckless excesses is coming.

Debt is a global sedative of our times and the world is awash in debt, both public and private. Global debt now tracks at $244 trillion or 318% of global GDP spread across governments, corporations, and households. For a reference point of the madness, U.S. government debt at the end of 1981 crossed $1 trillion mark for the first time, but now its annual budget deficit is at a $1 trillion mark, and is projected to rise every year into the foreseeable future. Total U.S. debt is currently at ~$70.5 trillion or ~350% of its GDP, and accounts for 29% of the global total.

Debt saturation in the extreme around the world is now setting the stage for an economic collapse because the math does not work. The collapse does not have to be dramatic. More likely it is a process where unviable debt is like a corrosive grease that lubricates in the short term but sows the seeds for inevitable destruction in the long term.

At the core of the capital abuse are the central banks who have more than the required hubris and a long history of creating asset bubbles and then coming to the “rescue” to clean up the mess later. Only that the latest version of the bubble has come amidst deflation driven by technology and globalization, has gone on an unobstructed path for a decade, has infected every asset class, has gone global, has been extreme in terms of machinations, and stands out as the largest monetary experiment in the history of mankind. A pyramid scheme that has no parallel and that was designed and executed in a way that it exclusively served the interests of the global elite, who have structurally captured all the operating levers of the economy. The masses - including the vital middle class that is essential as a stabilizing force for any economy to thrive - were left to fend for themselves. With nothing but crumbs to settle for, the displaced middle class has spurred the popular discontent that is readily visible in the cultural, demographic, economic, geographic, social spheres in many countries. This discontent, in turn, has catalyzed anger into a political weapon.

The global easy money party that made a joke of capitalism, concentrated incomes, wealth, and power in the hands of the few, and made idiots look like geniuses may finally be getting over as central banks are trapped by their own policies and are backed to a corner now. On the broader financial markets when the veil is finally lifted, math and wrath will be unforgiving on the altar of corporate and economic truth. In the end, it is not so much about a bull market or a bear market, but it is about recapturing economic sanity by getting rid of the perverse, parasitic, and predatory policies and practices to keep the social compact viable. If not, chaos makes its grand entrance.

This 2nd edition of the book ties the roles of monetary madness, fiscal dystopia, debt saturation, trade, demographics, globalized crony capitalism, and the debt-driven bull market in widening income and wealth disparities to the extremes and shines the light on the crazy political byproduct, Democratic Socialism that is emerging as revenge on capitalism. It is a modest attempt to highlight the risks as investors navigate change and volatility. The aim is to inform in a relatable visual format so one can think, and then think through on the issues and their long-term implications.