Musings Report 2017-5 2-4-17 The Overlapping Crises Are Coming, Regardless of Who Is Elected
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The Overlapping Crises Are Coming, Regardless of Who Is Elected
Commentators seem split into three camps: those who see Trump as a manifestation of smoldering social/economic ills, those who see Trump and his supporters as the cause of those ills, and those who see Trump as both manifestation and cause of those ills.
I think this misses the point, which is the overlapping crises unfolding in this decade--energy, debt, demographics, the erosion of the social contract and the control of elites--will continue reinforcing each other regardless of who has been elected or who is in power.
Historical analysis seems to swing between the "Big Man/Woman" narrative that views individuals as the drivers of history, and the "Big Forces/it's all economics" narrative that sees individual leaders as secondary to the broad trends that are beyond the control of any individual or group.
So while the mainstream views President Lincoln as the linchpin of the Civil War--his election triggered the southern secession--from the "Big Forces/it's all economics" view, Lincoln was no more than the match that lit a conflict that was made inevitable by forces larger than the 1860 election.
The tension between these narratives is valuable, as history cannot be entirely reduced to individual decisions or broad forces (weather, resource depletion, financial crisis, geopolitical upheaval, demographics, plague, etc.). The dynamic interplay between the two shapes history.
Individuals do matter. Taking the Civil war as an example, the Union military leadership before Grant and Sherman was either subpar or disastrously poor. The North could have lost the war with such leadership in the field. Grant alone possessed the character (borne of numerous crushing failures in his pre-Civil War life) and the tactical-strategic-logistics moxie to overcome the inherent weaknesses of the North (long supply chains into hostile territory, the need for offensives against a defensive foe, etc.).
The status quo is falling apart for deeply systemic, structural reasons: promises made when growth was robust, debt was modest, energy was cheap and the work force was far more numerous than those dependent on the state's "pay as you go" pension and welfare programs-- these promises made in yesteryear can no longer be kept, regardless of who's in power. We cannot get blood from a turnip, and those who claim we can are only exacerbating the coming crises with their fantasies and denials.
I've been addressing these slow-moving, inevitable crises for the past 10 years. Despite the illusion of tepid "growth" and the maintenance of the status quo, beneath the surface everything is becoming much more fragile and prone to collapse (i.e. "phase shift").
Even Timothy Geithner concedes this in his recent Foreign Affairs article on how to deal with the next global financial crisis. The central banks and states have expended virtually all their ammunition--lowering interest rates, creating money out of thin air to bolster systemic liquidity, buying bonds and other assets to prop up shaky markets, and borrowing immense sums to prop up government spending--and there is little left for the next crisis.
This sober view--that some additional central bank trickery can save the system in the next financial crisis--assumes things that are unlikely to be true: what if energy is no longer cheap and abundant? What if global weather isn't conducive to grain surpluses? What if central banks buying stocks no longer props up the market? What if debt finally reaches levels that cannot be sustained?
Could Hillary, or a set of other leaders in other nations, forestall these deeply structural crises? The short answer is no. The only thing a leader can actually do is lower expectations so the erosion of promises will be accepted as inevitable, and bolster modest hope while demanding sacrifices of all those who have benefited from the status quo.
If we look back on great leaders who dealt with one crisis after another, we find they didn't actually make the crises go away; they only managed them on the margins, and spoke to the need to make sacrifices for a better future.
If we set aside the rose-colored glasses, we find that Franklin Roosevelt didn't actually "lead the nation out of Depression." The nation was still deeply entrenched in the Depression in 1940, after 8 years of FDR's leadership. It took World War 2 and federal borrowing and spending on an unimaginable scale to extricate the U.S. from the grip of bad debt and stagnation.
Which brings us to Trump. Since no one can actually forestall or make these overlapping crises disappear, a focus on the individual leader's actions is a distraction.
Yes, an individual can manage the margins of crisis more or less effectively. But overlapping crises are not a war, with a victorious and a vanquished side. As Peter Turchin and other writers I have quoted and discussed for many years have detailed, these structural trends play out regardless of policy tweaks or grand pronouncements. Leaders who manage to ease the decline or temporarily reverse it are considered successes; those who exacerbate the decline are considered failures.
In many cases, "good" leaders simply got lucky; enemies self-imploded, harvests increased, etc., and modest reforms managed to increase tax revenues and put off bankruptcy.
But a focus on individual leaders distracts us from this sobering reality: there is no way to actually forestall the reckoning as the forces of demographics, financial exploitation, debt and energy grind up the status quo.
Summary of the Blog This Past Week
The Central Banks Face Unwelcome Realities: Their Policies Boosted Wealth Inequality and Failed to Generate "Growth" 2/3/17
The Central Banks Pull Back: Now It's Up to Fiscal Policy to "Save the World" 2/2/17
The Triumph of the Technocrats 2/1/17
The Fix-Nothing Farce of Symbolic Politics 1/31/17
Why Our System Is Broken: Cheap Credit Is King 1/30/17
Best Thing That Happened To Me This Week
Managed to remain semi-coherent (at least I hope I did) through multiple podcasts/ interviews: with the X22 Report, KMO C-Realm radio, two podcasts with Drew Sample and an interview on GoldSeek Radio.
Market Musings: Checking in on the US Dollar
As longtime readers know, I've been bullish on the US dollar (USD) for the past 5 years for a variety of structural reasons that have played out as expected. Nothing fancy here--all I've done is consider global capital flows, relative safety, the mismatch between dollars being created and debt denominated in dollars, Triffin's Paradox and safe havens in a world of increasingly risky financial debt and leverage.
Commentators have been speculating that the Trump administration wants a weaker USD to boost exports (a constant refrain of every administration for decades), while others (for example, my colleague Mish Shedlock) are seeing signs of an impending "currency war" with the euro.
It's hard to tell if either of these narratives have any predictive value, so let's glance at a monthly chart of the USD.
The USD spent 2 years consolidating after its massive run-up in 2014-early 2015. That consolidation phase was dominated by two wedges, both of which broke to the upside--the second one decisively.
Now that the USD finally broke out to a new high, some consolidation is to be expected, including a retest of old congestion levels (support/resistance).
A bearish MACD and stochastic reflect this consolidation/retest. This consolidation could reach down to the 50-week Moving Average; currently price is testing the 20-week MA.
The USD seems to trace out these long-term wedges before breaking out to the upside. It would surprise me if it traced out another wedge here in Q1 and Q2 2017.
From Left Field
Broken Assumptions of Governance -- solid critique of governance schemes...
Offshore oil rig market needs to shed equipment (via Joel M.) -- excess capacity is everywhere..
Absolution, Deceit and Renewables -- renewable energy realities are fudged, ignored, or presented falsely...
Trump Isn't the Only Older Worker Staying on the Job -- we all need the money, honey....
India Is Not The Next China -- sobering wake-up call on the non-inevitability of democracy generating functional markets and level playing fields...
‘Trump makes sense to a grocery store owner’ -- Taleb skewers the "experts"....
IMF admits disastrous love affair with the euro and apologises for the immolation of Greece -- a little late, folks...
McMansion Hell -- interesting review of what makes McMansions so unattractive in terms of basic design....
Prevailing Gray Swans: The Clear and Present Danger List
The intolerance of the left: Trump's win as seen from Walt Disney's hometown
Income Percentile Calculator for 2016 US Data -- if you're curious where you fit into the income spectrum...
U.S. Wage Disparity Took Another Turn for the Worse Last Year -- no surprise here: gains concentrated in the top 5% and up...
Mark Blyth: The AthensLive Interview (23:04) (via Zeus Y.)
"I hate luxury. I exercise moderation... It will be easy to forget your vision and purpose once you have fine clothes, fast horses and beautiful women. [In which case], you will be no better than a slave, and you will surely lose everything." Genghis Khan
Thanks for reading--