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Our Super-Leveraged Economy Will Make the Next Recession Devastating

Of Two Minds  ( Original )
MAY 23, 2018

The entire US economy is leveraged to the hilt in every possible way. Mortgage debt, student debt, credit debt, margin debt; prodded by Fed policy, we have consumed an enormous amount of future productivity already, well before it has occurred.

And that is a major problem. That future productivity will have to come from somewhere, in direct opposition to a major demographic shift that will see an increasingly large proportion of the US population becoming elderly while birth rates set new all-time lows. Less net productive citizens + more net consumptive citizens is exactly the opposite of what we will need.

The world cannot be bought on credit forever. The same mechanics that have resulted in the failure of every fiat currency ever will work their predictable magic on the US dollar, as its masters continue to make the same mistakes as all their historical antecedents have done: Printing more and more, with nothing to back it up, marching it irrevocably into oblivion.

Here are charts that reveal the extremes that have been reached to maintain the illusion of "recovery" and normalcy: total credit has exploded higher, after a slight decline very nearly brought down the global financial system in 2008-09:

The massive expansion of assets purchased by central banks will eventually be slowed or even unwound, removing the rocket fuel that's pushed stocks and bonds to the moon:

The acceleration of non-linear consequences will surprise the brainwashed, loving-their-servitude mainstream media. The number of small businesses that suddenly close will surprise them; the number of homeowners jingle-mailing their "ownership" (i.e. obligation to pay soaring property taxes) to lenders will surprise them; the number of employees being laid off will surprise them, and the collapse of new credit being issued will surprise them.

ORIGINAL SOURCE: The Next Recession Will Be Devastatingly Non-Linear by Charles Hugh Smith at Of Two Minds on 5/22/18