Posted by Ben Curran on May 07, 2020 at 08:32:55:
Dear Dr Janson
you asked recently whether this crash is the Fall of the Great City of Babylon? Charles Hugh Smith has placed an essay entitled "THIS ISN'T JUST ANOTHER CRASH" on dailyreckoning.com in which he says the following:
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"The correlations of the last decade or two are not high-probability indicators of the future, as the entire brittle construct of fictional capital and extremes of globalization and financialization all unravel at once.
Here are a few of the many consequential differences between all the previous recessions and the current situation:"
Mr Smith goes on to list 18 differences, of which I have copied a few below. He is writing about the United States economy, but his comments are widely applicable across the first world.
Difference 1: "Households have never been so dependent on debt as a substitute for stagnating wages.
Difference 3: Corporations have never been so dependent on debt (selling bonds or taking on loans) to fund money-losing operations (see Netflix) or stock buybacks designed to saddle the company with debt service to enrich insiders.
Difference 4: The stock market has never been so dependent on what amounts to fraud (stock buybacks) to push valuations higher.
Difference 9: The economy has never been in such thrall to sociopaths who have mastered the exploitation of the letter of the law while completely overturning the spirit of the law.
Difference 10: Households and companies have never been so dependent on 'free money' gained from asset appreciation based on speculation, not an actual increase in productivity or value.
Difference 11: The ascendancy of self-interest as the one organizing directive in politics and finance has never been so complete, and the resulting moral rot never more pervasive."
Mr Smith comments further:
"While the stock market euphorically front-runs the Federal Reserve Bank and an expected V-shaped recovery, the reality is that the crash has only just begun. To understand why, look at income and debt. Income, earned and unearned, is in free-fall, while debt - which must be serviced by income - is exploding higher....
....The crash has only just begun. Everything, including a rational, connected-to-reality, effective financial system, is on back order, and unlikely to ship anytime soon."
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So yes, Dr Janson, it seems that Mr Charles Hugh Smith is expecting this to be The Big One.