An unknown but likely staggeringly large percentage of small
business owners in the U.S. are an inch away from calling it quits and closing shop.
charles hugh smith
Timothy Leary famously coined the definitive 60s counterculture phrase, “Turn on, tune in, drop out” in 1966. (According
to Wikipedia, In a 1988 interview with Neil Strauss, Leary said the slogan was “given to him” by Marshall McLuhan during a lunch in New York City.)
An updated version of the slogan might be: Turn Off, Tune Out, Drop Out: turn off mobile
phones, screens, etc.; tune out Corporate Media, social media, propaganda, official and unofficial, and drop out of the status quo economy and society.
Dropping out of a broken, dysfunctional status quo in terminal decline has a long history. The chapter
titles of Michael Grant’s excellent account of The Fall of the Roman Empireidentify the core dynamics of decline:
The Gulfs Between the Classes
The Credibility Gap
The Partnerships That Failed
The Groups That Opted Out
The Undermining of Effort
Our focus today is on The Groups That Opted Out. In the decline phase of the Western Roman Empire, people dropped out by abandoning tax-serfdom for life in a Christian monastery (or as a worker on monastery lands) or by
removing themselves to the countryside.
Today, people drop out in various ways: early retirement, disability or other social welfare, homesteading or making and saving enough money in the phantom-wealth economy that they can quit official work in middle
We can see this in the labor participation rates for the populace at large, women and men. The labor participation rate reflects the percentage of the population that’s in the workforce, either working or actively looking for work.
the number of people in the workforce has declined significantly is well-known. The US Census pegs the number of people ‘not in the labor force’ at 95 million. This includes people who are disabled, in school, etc., so the number should be taken
with a grain of salt. But the decline in the relative size of the labor force is remarkable:
Interestingly, the labor participation rate for women has held steady compared to the entire populace.
Now compare it to the labor participation rate
for men, which has absolutely cratered:
The difference between genders is striking.Gender roles in society and the economy are clearly causal factors. Many have speculated that the decline in traditional strongholds of male employment such as manufacturing
explain the decline of males in the workforce. As for the high participation of women, we might speculate that being caregivers for children and elderly parents requires earning an income, and as these responsibilities continue to fall more heavily on females,
it may be that fewer women have the option of dropping out.
As for turning off, consider this account of tech overlords turning off their own childrens’ access to screens (via GFB): A Dark Consensus About Screens and Kids Begins to Emerge in Silicon
Valley “I am convinced the devil lives in our phones.”
I’ve written about mobile phone and social media addiction many times, so the reluctance of tech elites to let their own children suffer the ravages of digital addiction isn’t
As for tuning out, the strident voices of political polarization are not as widespread as generally perceived: Hidden Tribes: A Study of America’s Polarized Landscapefound that the rabidly leftist / “progressive” tribe
is a mere 8%, and their opposite tribe on the right is equivalently modest in number.
It doesn’t take much observation to surmise that the majority in the middle are tuning out both polarizing extremes. Partisans may view this abandonment as negative,
i.e. apathy, but this would be misreading the situation: the reality is the majority are tired of the poisonous polarities and the stultifying, going-nowhere toxic frenzy that destroys participants’ equilibrium and sanity.
An unknown but likely
staggeringly large percentage of small business owners in the U.S. are an inch away from calling it quits and closing shop. At some point the ever-higher costs of burdensome, mostly useless bureaucratic compliance and complexity, the ever more costly junk
fees, filing fees, permits, penalties and taxes, the higher costs of labor overhead (healthcare insurance, workers comp, etc.) and the ever-rising costs of materials and services make it an easy decision to drop out of the rat race and either sell the business
to someone less grounded in reality or just close it down.
Those who tire of being nailed by “tax the rich” schemes can drop out by earning less. Sell out, move out, drop out. Unfortunately for all those who depend on the Savior State, the
state cannot force people losing money and their mental health to continue operating enterprises. (At least not yet.) Once small business and the productive wealthy (i.e. upper middle class) sell out, move out and drop out, it’s game over for the “tax
the rich” crowd and the local economy.
Dropping out is an increasingly attractive option. For those unable to drop out, turning off and tuning out are increasingly attractive options.
Understanding the Global Recession of 2019 November 12, 2018 charles hugh smith
Isn't it obvious that repeating
the policies of 2009 won't be enough to save the system from a long-delayed reset?
2019 is shaping up to be the year in which all the policies that worked in the past will no longer work. As we all know, the Global Financial Meltdown / recession
of 2008-09 was halted by the coordinated policies of the major central banks, which lowered interest rates to near-zero, bought trillions of dollars of bonds and iffy assets such as mortgage-backed securities, and issued unlimited lines of credit to insolvent
banks, i.e. unlimited liquidity.
Central governments which could do so went on a borrowing / spending binge to boost demand in their economies, and pursued other policies designed to bring demand forward, i.e. incentivize households to buy today what
they'd planned to buy in the future.
This vast flood of low-cost credit and liquidity encouraged corporations to borrow money and use it to buy back their stocks, boosting per-share earnings and sending stocks higher for a decade.
of these policies has created a dangerous confidence that they'll work in the next global recession, currently scheduled for 2019. But policies follow the S-Curve of expansion, maturity and decline just like the rest of human endeavor: the next time around,
these policies will be doing more of what's failed.
The global economy has changed. Demand has been brought forward for a decade, effectively draining the pool of future demand. Unprecedented asset purchases, low rates of interest and unlimited liquidity
have inflated gargantuan credit / asset bubbles around the world, the so-called everything bubble as most asset classes are now correlated to central bank policies rather than to the fundamentals of the real-world economy.
Keenly aware that they've
thinned their policy options and financial buffers to near-zero, central banks are struggling to normalize their policies by raising rates, reducing their balance sheets by selling assets and tightening lending conditions / liquidity.
for central banks, global economies are now junkies addicted to zero interest rates and central bank stimulus / support of bond markets, stock markets and real estate markets. The idea of normalization is to slowly inch the financial system and economy back
to levels that were normal in previous eras, levels that allowed some room for central banks to respond to recessions and global financial crises by lowering rates and extending credit to insolvent lenders.
But reducing the drip of financial heroin
hasn't ended global economies' addiction to extraordinary easy financial conditions. Rather, it's illuminated the dangers of their continued addiction.
As soon as authorities attempt to limit their support / stimulus, markets wobble into instability.
The entire economic structure of "wealth" is now dependent on asset bubbles never popping, for any serious decline in asset valuations will bankrupt pension funds, insurers, local governments, zombie companies and overleveraged households--every entity which
is only solvent as long as asset bubbles expand or maintain current valuations.
So how do central banks normalize their unprecedented policies without popping the asset bubbles they've created? The short answer is: they can't. Rising interest rates
are a boon to savers and Kryptonite to borrowers--especially over-leveraged borrowers who must roll over short-term debt and borrow more just to maintain the illusion of solvency.
As if this wasn't enough to guarantee recession in 2019, there's the
unintended consequences of capital flows. Capital famously flows to where it's treated best, meaning wherever it earns the highest yields at the lowest risk, and where the rule of law protects capital from predation or expropriation.
When all central
banks pursued roughly the same policies, capital had options. Now that the Fed has broken away from the pack, capital has only one option: the U.S. The Federal Reserve should have begun normalizing rates etc. back in 2013, and if they'd been wise enough to
do so then even baby steps over the past 5 years would have led to a fairly normalized financial environment.
But Ben Bernanke and Janet Yellen blew it, so it's been left to the current Fed leadership to do the heavy lifting over a much
shorter timeline. Predictably, pulling away the punch bowl has spoiled the asset-bubble party, and now all the asset bubbles are increasingly at risk of deflating.
But the yields and relative risk available in US-dollar denominated assets is starting
to look a lot more attractive and lower risk than assets denominated in yen, yuan and euros. Capital flows tend to be self-reinforcing: as capital flows out of at-risk economies, it dampens investment, speculation and spending as the economy is drained of
Owners of assets notice this decay and so they decide to sell and move their capital to safer ground. Selling begets selling, and pretty soon nobody's left to catch the falling knife, ie. buy assets that are rapidly losing value.
is what surprised Alan Greenspan (by his own account) in 2008: bubbly markets quickly become bidless, that is, buyers vanish and sellers who want to unload their assets for cash find nobody's willing to part with cash for a plummeting asset.
bank "solution" to bidless markets is to become the buyer of last resort: when no sane investor will buy bonds, stocks or real estate, then the central bank starts buying everything in sight.
We are already seeing this in action as Chinese governmental
agencies have started quietly buying empty flats in ghost buildings to prop up the housing market. The idea here is to restore confidence with a relatively modest burst of quiet buying. But when markets turn and confidence is lost, sentiment can't be restored
so easily: sensing their last chance is at hand, sellers dump assets at a quickening pace, overwhelming the modest central bank buying.
This leaves the central bank with a stark and sobering choice: either let the asset bubble collapse and accept the
immense destruction of "wealth," or buy the whole darn market. This is the unintended consequence of employing unprecedented policies for a decade: like using antibiotics every day for years, eventually resistance develops and the "fix" no longer works.
Now that central banks have inflated assets into the stratosphere, there's $300 trillion in global financial assets sloshing around seeking higher yields and capital gains. How much of this $300 trillion can central banks buy before they destabilize currencies?
How much can they buy before they run out of political goodwill?
Isn't it obvious that repeating the policies of 2009 won't be enough to save the system from a long-delayed reset?
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