Global Recession Accelerating toward Depression

storm clouds

The weather forecast says sunny and mild. Let’s go shopping. (Wikipedia Photo)

With the mainstream media devoting 80% of their time covering the contest to see what color uniform the captain of the USS Titanic will be wearing in 2017; with the Tea Party Taliban — 40 fundamentalist members of the House of Representatives — bringing the federal government to its knees; the storm clouds of a great global depression are building into our skies from all directions, largely unacknowledged even as they begin to blot out the sun.

Any economy is a pyramid whose broad base is comprised of the middle class — people who have enough money to provide a decent life for themselves. They do this by spending their money on the necessities of life, thus giving life to businesses organized to provide them with those necessities. This activity is called trade, and where there is no trade, there is no economic life.

Even as recession looms there is plenty of trade going on. But it’s not so much trade in the necessities of life, but gambles on the future value of necessities, on short positions and leveraged positions and junk debt and derivatives and indexes, indulged in by riverboat gamblers throwing around other peoples’ money. The one percent of the world’s population who own 50% of the world’s wealth are having a wonderful time at the casino, they’re getting richer by the minute and will tell you that everything is wonderful.

But the trade in the necessities of life, the trade that sustains economies instead of blowing them up, as the gamblers always do, is in desperate trouble, for one overwhelming reason. In most of the world today, the people who must buy the necessities of life don’t have the money to do so. Or to put it another way, the broad foundation of the pyramid is collapsing.

According to one of the world’s largest banks, Britain’s HSBC, global trade volume was down 8.4% in the first half of this year (the latest numbers are for June). That means, sayeth the bankers, that we — all of us, the whole world — are already in a dollar recession.

For decades, the driver of the world economy has been China, as it flooded the world with cheap exports and feverishly imported oil, coal, concrete, steel and dollars.  Now the driver is coasting, rapidly losing power: imports to China were down 20% in September (year-to-year) and exports were off 3.7%. The China Containerized Freight Index, which has been tracking shipping volumes for 17 years, has been dropping precipitously for over a year and has just hit an all time low.

The Masters of the Universe (irony alert: this is the term of art used here to denote the class of hedge fund, equity management shadow bankers who routinely blow up the world for profit) who saw the Chinese decline coming assumed that the world’s other emerging markets, such as Brazil, Turkey, India, Russia and the like, would pick up the slack. Indeed, the Masters turned firehoses of capital on the emerging markets for the past several years, inflating bubble after bubble after bubble in their frantic rush to realize the returns on investment of their dreams.

The dreams have turned to nightmares. The collapse in commodity prices (a consequence of the slowing of the developed economies), among other things, has wrecked the frail emerging markets, and the firehoses of capital are pointing the other way. The International Monetary Fund and the Bank of England, among many others, are warning that the billions of dollars of investment capital now being sucked out of the emerging economies, and trillions of dollars in loans that can never be repaid, pose an existential threat to the economies of the world.

If you think the U.S. is immune from these raging financial fires, think again. Debt, like dry tinder, is everywhere and the hot winds are spreading and fanning embers everywhere:

  • American retail giants that once dominated the world — McDonald’s, Walmart, Sears, Microsoft, Hewlett-Packard, even Facebook and Twitter — are sick and dying, their revenue, profit and stock vital signs weak and thready, as they say in the ICU. The surgeons are hacking off limbs — closing stores and firing people — as fast as they can, trying to save the organism.
  • The shipping of goods within the U.S. — the bedrock measure of buying and selling, has declined every month (year-to-year) since February, and that includes September, the peak month for shipping holiday merchandise to stores for selling in the season in which many stores make their profit for the year.
  • A report from CNBC showing both retail sales and wages flatlining was headlined: “Consumers shutting down as US economy deflates.”

It’s happening all over the world.

This has been a bulletin from The Daily Impact. We now return you to our regular programs: financial advice from Don “I’m really, really rich” Trump and self-defense classes from Dr. Ben “shoot that guy behind the counter” Carson.


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3 Responses to Global Recession Accelerating toward Depression

  1. Tom says:

    Great job here Mr. Lewis. The fact that the entire world is in financial, social, and environmental decline (we’ll leave mental and physical health and a few others aside for now) is becoming patently obvious (long before the 2019 i predicted that this would be the case). i don’t expect there to be much of a Christmas shopping season this year for most of the U.S. citizens (since they’re pretty much tapped out), and the former spending holiday will probably dry up completely in the next few years as stores close, thereby laying off millions (due to the suppliers ALSO laying off, because of these retail cutbacks, and manufacturers closing down or becoming mere shadows of their former selves – and this long “domino” effect will eventually gut the global banking system in the process, since people won’t be able to repay their debts). We’ll see food shortages beginning probably next year (though they are actually here now if you care to look at some specifics).

    As the environment continues to degrade (see wildfires wreaking havoc on CO2 levels, not to mention methane which is at the critical level, flooding, etc.) the ability to produce enough food will begin to falter and collapse. Once the trucking stops, it’s only a matter of weeks before the economy crashes completely and we have CHAOS taking over.

    “Too Furious For Human Intervention” — Climate Feedbacks Spur Out of Control Wildfires From Indonesia to Brazil

    • colinc says:

      Speaking of dominoes

      Joshua: Shall we play a game?

      David Lightman: [typing] Love to. How about Global Thermonuclear War?


  2. Lawrence Miller says:

    Ref: Global Recession Accelerating Toward Depressiom

    Tom – Charles Hugh Smith recently stated in one of his blogs that the Chinese are pouring100s of billions into our economy, primarily into real estate and land purchases. If this is true, then that would explain to me why the US economy still seems to be hanging onto the illusion of “recovery”. I speculate that when this alleged Chinese spigot runs dry, then we will finally join the global economic crash for real.

    Lawrence Miller