The Pin to Pop This Mother of All Bubbles?

Global macro economic data has been weak for many years, but there's now a very real chance of a world-wide recession happening in 2017.

Why? A dramatic and worsening shortfall in new credit creation.

The world's major central banks have, again, done the world an enormous disservice. Instead of admitting that maybe/perhaps/possibly the practice of issuing debt at more than twice the rate of underlying economic growth was a very bad idea over the past several decades, they instead doubled down and created an even larger debt monster to be dealt with.

The resulting global asset price bubble -- or, more accurately, set of nested and incestuously intertwined bubbles -- can collectively be called the Mother Of All Bubbles (MOAB). None has ever been larger in history.

As with all prior bubbles, it shares the collective delusion that there's such a thing as a free lunch. History has seen many attempts to eat this elusive meal, with each generation convinced that they were the chosen ones who could finally crack that nut.

So, dutifully, our central bankers have tried, and tried again, to deliver that free lunch -- i.e. to print up prosperity.

But, alas, prosperity cannot be printed out of thin air. All that can be accomplished by central bank slight of hand is a transfer of wealth. Central banks steal from the many to give to the few. They are the reverse Robin Hoods of our day.

They also encourage everyone to steal from the future, which is what excessive borrowing really represents. It's future consumption taken today at the expense of tomorrow.

The most charitable thing that can be said about the central banks is that perhaps they actually believed their own BS, but I seriously doubt it. Even the most dense of observers has noticed by now that we are 9 years into the 'emergency measures' and nothing even remotely close to healthy economic growth has emerged.

One year of emergency measures is already a bit too long. 3 years is embarrassing. 9 years tells you that the Fed isn't in this for the reasons they state. Instead, they are orchestrating the largest wealth transfer in all of history, from the many to the few.

Once you realize this is their goal, then they've succeeded amazingly. Mission accomplished!

We have the widest wealth and income gaps in all of history. The big banks have complete control of the political and financial machinery of every country of the world. And the corporate controlled media simply cheerleads the whole thing, convincing most people it's all been for their own good.

Honestly, from a planning and execution standpoint, I have to give the central banking cartel very high marks for pulling off such a magnificent heist almost completely undetected by the average person.

Of course, they needed lots of assistance from a complaint media.

Economic Propaganda

Propaganda noun - information, especially of a biased, emotionally charged or misleading nature, used to promote a political cause or point of view.

Let's turn now to exploring the ways that the media serves to deliver propaganda instead of providing useful context and essential information.

People are anxious these days. One explanation for this is that their personal lives are getting harder and more difficult on multiple fronts. Wages are flat (to down) and expenses are skyrocketing. There's no sense of safety, and everybody can sense the massive injustice of the reverse Robin Hood policies of the central banks and governments.

Injustice, of course, makes us very unhappy. That's true of all social creatures, ranging from primates to dogs. Fairness matter -- a lot. And when systems or individuals operate unfairly, then the other participants tend to withdraw and/or give up. If things become bad enough, however, the victims get angry and will eventually retaliate.

To keep this unfairness from boiling over, a couple of tricks of the government's trade are to first get the afflicted parties blaming the wrong people -- preferably each other, as opposed to the actual perpetrators of the unfairness. This works great; we see it in police pitted against protesters, even though they both are being unfairly treated in similar ways by the system. Ditto for the left vs. right protests that have been erupting all over the world.

A second trick is to simply confuse everyone, to try and convince them that nothing unfair has actually happened in the first place. This is achieved through lies, either by omission or commission, and this is now daily fare in the leading mainstream news outlets. And I use the term 'news' very, very loosely.

What results when we are told (and/or believe) one thing but our experiences indicate another, is cognitive dissonance.

Cognitive Dissonance -- noun - the state of having inconsistent thoughts, beliefs, or attitudes, especially as relating to behavioral decisions and attitude change.

The creation of 'inconsistent thoughts or beliefs' is now an entrenched industry with hundreds of billions of advertising dollars at its disposal. It's now so thoroughly part of the societal fabric that many of its most advanced practitioners have no idea that they are even carrying out a sophisticated program of deception with savant-like precision.

Born, bred and raised within the system of delusion, they're unaware of their own role, or why they're playing it.

Let's pull an example I found, easily enough, in this morning's news cycle (6-16-17).

Today's propaganda headline from Bloomberg is a classic:


This U.S. expansion may be moving like a tortoise, but it's on its way to win the race.
Widely disdained for its relatively weak growth and pay gains, the expansion is about to complete its eighth year -- and it's headed to become the longest on record, according to a Bloomberg survey of economists. Respondents put a 60 percent probability, based on the median estimate, on the growth streak running through at least July 2019 and thereby reaching 121 months, topping the 10 years of gains during the 1990s.
The U.S. economy looks pretty healthy right now when you think in terms of sectors that could blow up," said Stephen Stanley, chief economist at New York-based Amherst Pierpont Securities LLC. Having avoided any “violent bounceback" during the recovery, “most sectors seem to have room to run," signaling continued moderate growth, he said.
A strong job market, subdued inflation, low borrowing costs and healthier finances will be a tailwind for consumer spending while business investment, a laggard so far, is expected to join the drivers of growth. Even trade may become less of a drag.
(Source)

This Bloomberg article is a really strong effort by the media to spin things as being much rosier than they are. Many people's direct experiences will be completely counter to the happy-talk put forth in this article, which basically readsl like the intro to Garrison Keillor's Lake Woebegone radio program, which told of a magical place where all the women are strong, all the men are good looking, and all the children are above average."

In other words, a fantasy land where the supporting data provided cannot possibly be correct.

So let's review the amazing list of data, shall we?

  • Economists agree, this expansion will become the longest on record
  • The US economy looks pretty healthy right now
  • Most sectors have room to run
  • There's a strong job market
  • Inflation is subdued
  • There's also something called 'healthier finances'

Given all that, you'd be a total loser to think anything other than "Everything is awesome!"

But is that true?

Well, once you take a closer look at each of these authoritative claims, they are anything but clear-cut and certain. If you question any of them, or even just dig slightly into them, questions swirl up like flies from a knocked-over garbage pail.

To begin, if we choose to question the “strong jobs market", we quickly come across charts such as this one:

(Source)

In this less-than-"amazing" chart we see that the “strong job market" is actually the most horrifically weak one in the entire data series. The illusion of “strength" has been manufactured by the hocus-pocus of excluding people off of the unemployment rolls, so they simply aren't counted in the “strong" number.

It's an old trick. If you're counting the unemployed, then the best way to have a rosier number is to not count people who don't have a job as 'unemployed.' You call them something else ("out of the labor force") and revise them away.

If you don't count them, they don't exist, right? That then allows the media to trumpet the Fed's victory in creating today's “strong job market."

If this wasn't so patently, ridiculously Orwellian, and didn't create so much human misery, it would be funny.

How anyone can, with a straight face, claim that this is a “strong job market" is beyond me. It's not. And the record number of homeless people showing up in every major and minor city in the US validates the data in the chart above.

So that's cognitive dissonance area #1: Being told we have a strong job market while your own eyes see homeless people everywhere, and people looking for jobs report extreme difficulty landing anything beyond a part-time, minimum wage gig.

Next we turn to the idea that “inflation is subdued." While we've shredded this idea mercilessly in such areas as our Crash Course chapters on Fuzzy Numbers and Inflation, as well as in our podcast with Ed Butowski, the creator of the Chapwood Index, you can just as easily use your own personal observations and a few pieces of data to destroy this farce of 'subdued inflation.'

Let's start with car prices. According to the BLS, new cars have not gone up in price at all over the past ten years. In fact, according to their calculations, a new car costs exactly the same today as it did back in 1997, a full twenty years ago:

But your own eyes and personal experience may have noticed something different. If you've made a car purchase over the past 20 years, you've probably observed that actual out-of-pocket costs to purchase a new vehicle have steadliy risen from just over $19,000 in 1997 to over $33,000 today:

(Source)

Where the US government is convinced that cars costs exactly as much as they did 20 years ago, your personal experience might be that they are not terribly far away from costing 100% more.

The explanation for the difference is that the BLS has decided that today's automobile is vastly improved compared to that of 20 years ago. It believes that your dollar buys you nearly 100% more "car" than it did before, so the whole thing is a wash.

This is the magic of “hedonic improvements" which I am not entirely unsympathetic to. If things improve and we pay the same amount for them, then that's a gain in living standards, of a sort.

But the idea that “inflation is too low" is anchored in the idea that we are paying the same for things today as we were yesterday. The very essence of cognitive dissonance is being told that things cost twice as much but they haven't gone up in price.

That the issue at play here. While the Fed frets about inflation being too low -- you struggle to afford rising new car costs, as well as the skyrocketing associated fees like maintenance and insurance.

Another prime area for "fuzzy numbers" is in living expenses related to housing. According to the government ,housing costs have been modestly rising by an average of less than 3% per year for a decade:

However, these charts from Charles Hughes Smith show that the experience of homebuyers in many major metropolitan areas is anything but subdued:

(Source)

Add all this up and what do you get?

A very different impression of the state of 'the economy' than Bloomberg is working hard to present.

And even more egregious than the misinformation is the complete inappropriateness for the media to praise economic 'strength' while ignoring the role of debt in bringing about the growth being celebrated. If the 'prosperity' is simply due to a drunken debt-binge, it should be criticized, not lauded.

The Pin To Pop This Mother Of All Bubbles?

Which brings us to a very important risk factor to the over-leveraged global economy: declining credit impulse.

Unfamiliar with the term? You won't be for long.

Defined as net new credit to GDP, credit impulse is one of the best statistical predictors of recession. As of today, credit impulse has gone negative across the world for the first time since the start of the Great Recession.

In Part 2: Everything You Need To Know About The Credit Impulse, we lay out the evidence for why there's a credit impulse-driven recession on the way. It will come whether or not the underlying economy is recovering or not.

Why? Because the amount of debt creation was absolutely massive across the globe, particularly in China. The excessive debt service will simply overwhelm the economy -- it won't even be a close fight.

Click here to read the report (free executive summary, enrollment required for full access)

From the moment the 33-year-old Thomas Jefferson arrived at the Continental Congress in Philadelphia in 1776, he was on the radical side. That caused John Adams to like him immediately. Then the Congress stuck Jefferson and Adams together on the five-man committee to write a formal statement justifying a break with Great Britain, and their mutual admiration society began.

Jefferson thought Adams should write the Declaration. But Adams protested, saying, “It can't come from me because I'm obnoxious and disliked." Adams reasoned that Jefferson was not obnoxious or disliked, therefore he should write it. Plus, he flattered Jefferson, by telling him he was a great writer. It was a master class in passing the buck.

So, over the next 17 days, Jefferson holed up in his room, applying his lawyer skills to the ideas of the Enlightenment. He borrowed freely from existing documents like the Virginia Declaration of Rights. He later wrote that “he was not striving for originality of principle or sentiment." Instead, he hoped his words served as “an expression of the American mind."

It's safe to say he achieved his goal.

The five-man committee changed about 25 percent of Jefferson's first draft of the Declaration before submitting it to Congress. Then, Congress altered about one-fifth of that draft. But most of the final Declaration's words are Jefferson's, including the most famous passage — the Preamble — which Congress left intact. The result is nothing less than America's mission statement, the words that ultimately bind the nation together. And words that we desperately need to rediscover because of our boiling partisan rage.

The Declaration is brilliant in structure and purpose. It was designed for multiple audiences: the King of Great Britain, the colonists, and the world. And it was designed for multiple purposes: rallying the troops, gaining foreign allies, and announcing the creation of a new country.

The Declaration is structured in five sections: the Introduction, Preamble, the Body composed of two parts, and the Conclusion. It's basically the most genius breakup letter ever written.

In the Introduction, step 1 is the notificationI think we need to break up. And to be fair, I feel I owe you an explanation...

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another…

The Continental Congress felt they were entitled by “the Laws of Nature and of Nature's God" to “dissolve the political bands," but they needed to prove the legitimacy of their cause. They were defying the world's most powerful nation and needed to motivate foreign allies to join the effort. So, they set their struggle within the entire “Course of human events." They're saying, this is no petty political spat — this is a major event in world history.

Step 2 is declaring what you believe in, your standardsHere's what I'm looking for in a healthy relationship...

This is the most famous part of the Declaration; the part school children recite — the Preamble:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That's as much as many Americans know of the Declaration. But the Preamble is the DNA of our nation, and it really needs to be taken as a whole:

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

The Preamble takes us through a logical progression: All men are created equal; God gives all humans certain inherent rights that cannot be denied; these include the rights to life, liberty, and the pursuit of happiness; to protect those rights, we have governments set up; but when a government fails to protect our inherent rights, people have the right to change or replace it.

Government is only there to protect the rights of mankind. They don't have any power unless we give it to them. That was an extraordinarily radical concept then and we're drifting away from it now.

The Preamble is the justification for revolution. But note how they don't mention Great Britain yet. And again, note how they frame it within a universal context. These are fundamental principles, not just squabbling between neighbors. These are the principles that make the Declaration just as relevant today. It's not just a dusty parchment that applied in 1776.

Step 3 is laying out your caseHere's why things didn't work out between us. It's not me, it's you...

This is Part 1 of the Body of the Declaration. It's the section where Jefferson gets to flex his lawyer muscles by listing 27 grievances against the British crown. This is the specific proof of their right to rebellion:

He has obstructed the administration of justice...

For imposing taxes on us without our consent...

For suspending our own legislatures...

For quartering large bodies of armed troops among us...

Again, Congress presented these “causes which impel them to separation" in universal terms to appeal to an international audience. It's like they were saying, by joining our fight you'll be joining mankind's overall fight against tyranny.

Step 4 is demonstrating the actions you took I really tried to make this relationship work, and here's how...

This is Part 2 of the Body. It explains how the colonists attempted to plead their case directly to the British people, only to have the door slammed in their face:

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury...

They too have been deaf to the voice of justice... We must, therefore... hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

This basically wrapped up America's argument for independence — we haven't been treated justly, we tried to talk to you about it, but since you refuse to listen and things are only getting worse, we're done here.

Step 5 is stating your intent — So, I think it's best if we go our separate ways. And my decision is final...

This is the powerful Conclusion. If people know any part of the Declaration besides the Preamble, this is it:

...that all political connection between them and the State of Great Britain, is and ought to be totally dissolved...

They left no room for doubt. The relationship was over, and America was going to reboot, on its own, with all the rights of an independent nation.

And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

The message was clear — this was no pitchfork mob. These were serious men who had carefully thought through the issues before taking action. They were putting everything on the line for this cause.

The Declaration of Independence is a landmark in the history of democracy because it was the first formal statement of a people announcing their right to choose their own government. That seems so obvious to us now, but in 1776 it was radical and unprecedented.

In 1825, Jefferson wrote that the purpose of the Declaration was “not to find out new principles, or new arguments, never before thought of… but to place before mankind the common sense of the subject, in terms so plain and firm… to justify ourselves in the independent stand we are compelled to take."

You're not going to do better than the Declaration of Independence. Sure, it worked as a means of breaking away from Great Britain, but its genius is that its principles of equality, inherent rights, and self-government work for all time — as long as we actually know and pursue those principles.

On June 7, 1776, the Second Continental Congress met in Philadelphia at the Pennsylvania State House, better known today as Independence Hall. Virginia delegate Richard Henry Lee introduced a motion calling for the colonies' independence. The “Lee Resolution" was short and sweet:

Resolved, That these United Colonies are, and of right ought to be, free and independent States, that they are absolved from all allegiance to the British Crown, and that all political connection between them and the State of Great Britain is, and ought to be, totally dissolved.

Intense debate followed, and the Congress voted 7 to 5 (with New York abstaining) to postpone a vote on Lee's Resolution. They called a recess for three weeks. In the meantime, the delegates felt they needed to explain what they were doing in writing. So, before the recess, they appointed a five-man committee to come up with a formal statement justifying a break with Great Britain. They appointed two men from New England — Roger Sherman and John Adams; two from the middle colonies — Robert Livingston and Benjamin Franklin; and one Southerner — Thomas Jefferson. The responsibility for writing what would become the Declaration of Independence fell to Jefferson.

In the rotunda of the National Archives building in Washington, D.C., there are three original documents on permanent display: the Constitution, the Bill of Rights, and the Declaration of Independence. These are the three pillars of the United States, yet America barely seems to know them anymore. We need to get reacquainted — quickly.

In a letter to his friend John Adams in 1816, Jefferson wrote: “I like the dreams of the future, better than the history of the past."

America used to be a forward-looking nation of dreamers. We still are in spots, but the national attitude that we hear broadcast loudest across media is not looking toward the future with optimism and hope. In late 2017, a national poll found 59% of Americans think we are currently at the “lowest point in our nation's history that they can remember."

America spends far too much time looking to the past for blame and excuse. And let's be honest, even the Right is often more concerned with “owning the left" than helping point anyone toward the practical principles of the Declaration of Independence. America has clearly lost touch with who we are as a nation. We have a national identity crisis.

The Declaration of Independence is America's thesis statement, and without it America doesn't exist.

It is urgent that we get reacquainted with the Declaration of Independence because postmodernism would have us believe that we've evolved beyond the America of our founding documents, and thus they're irrelevant to the present and the future. But the Declaration of Independence is America's thesis statement, and without it America doesn't exist.

Today, much of the nation is so addicted to partisan indignation that "day-to-day" indignation isn't enough to feed the addiction. So, we're reaching into America's past to help us get our fix. In 2016, Democrats in the Louisiana state legislature tabled a bill that would have required fourth through sixth graders to recite the opening lines of the Declaration. They didn't table it because they thought it would be too difficult or too patriotic. They tabled it because the requirement would include the phrase “all men are created equal" and the progressives in the Louisiana legislature didn't want the children to have to recite a lie. Representative Barbara Norton said, “One thing that I do know is, all men are not created equal. When I think back in 1776, July the fourth, African Americans were slaves. And for you to bring a bill to request that our children will recite the Declaration, I think it's a little bit unfair to us. To ask our children to recite something that's not the truth. And for you to ask those children to repeat the Declaration stating that all men's are free. I think that's unfair."

Remarkable — an elected representative saying it wouldn't be fair for students to have to recite the Declaration because “all men are not created equal." Another Louisiana Democrat explained that the government born out of the Declaration “was used against races of people." I guess they missed that part in school where they might have learned that the same government later made slavery illegal and amended the Constitution to guarantee all men equal protection under the law. The 13th, 14th, and 15th Amendments were an admission of guilt by the nation regarding slavery, and an effort to right the wrongs.

Yet, the progressive logic goes something like this: many of the men who signed the Declaration of Independence, including Thomas Jefferson who wrote it, owned slaves; slavery is evil; therefore, the Declaration of Independence is not valid because it was created by evil slave owners.

It's a sad reality that the left has a very hard time appreciating the universal merits of the Declaration of Independence because they're so hung up on the long-dead issue of slavery. And just to be clear — because people love to take things out of context — of course slavery was horrible. Yes, it is a total stain on our history. But defending the Declaration of Independence is not an effort to excuse any aspect of slavery.

Okay then, people might say, how could the Founders approve the phrase “All men are created equal," when many of them owned slaves? How did they miss that?

They didn't miss it. In fact, Thomas Jefferson included an anti-slavery passage in his first draft of the Declaration. The paragraph blasted King George for condoning slavery and preventing the American Colonies from passing legislation to ban slavery:

He has waged cruel war against human nature itself, violating its most sacred rights to life and liberty in the persons of a distant people who never offended him, captivating and carrying them into slavery in another hemisphere... Determined to keep open a market where men should be bought and sold, he has prostituted his negative for suppressing every legislative attempt to prohibit or to restrain this execrable commerce.

We don't say “execrable" that much anymore. It means, utterly detestable, abominable, abhorrent — basically very bad.

Jefferson was upset when Georgia and North Carolina threw up the biggest resistance to that paragraph. Ultimately, those two states twisted Congress' arm to delete the paragraph.

Still, how could a man calling the slave trade “execrable" be a slaveowner himself? No doubt about it, Jefferson was a flawed human being. He even had slaves from his estate in Virginia attending him while he was in Philadelphia, in the very apartment where he was writing the Declaration.

Many of the Southern Founders deeply believed in the principles of the Declaration yet couldn't bring themselves to upend the basis of their livelihood. By 1806, Virginia law made it more difficult for slave owners to free their slaves, especially if the owner had significant debts as Jefferson did.

At the same time, the Founders were not idiots. They understood the ramifications of signing on to the principles described so eloquently in the Declaration. They understood that logically, slavery would eventually have to be abolished in America because it was unjust, and the words they were committing to paper said as much. Remember, John Adams was on the committee of five that worked on the Declaration and he later said that the Revolution would never be complete until the slaves were free.

Also, the same generation that signed the Declaration started the process of abolition by banning the importation of slaves in 1807. Jefferson was President at the time and he urged Congress to pass the law.

America has an obvious road map that, as a nation, we're not consulting often enough.

The Declaration took a major step toward crippling the institution of slavery. It made the argument for the first time about the fundamental rights of all humans which completely undermined slavery. Planting the seeds to end slavery is not nearly commendable enough for leftist critics, but you can't discount the fact that the seeds were planted. It's like they started an expiration clock for slavery by approving the Declaration. Everything that happened almost a century later to end slavery, and then a century after that with the Civil Rights movement, flowed from the principles voiced in the Declaration.

Ironically for a movement that calls itself progressive, it is obsessed with retrying and judging the past over and over. Progressives consider this a better use of time than actually putting past abuses in the rearview and striving not to be defined by ancestral failures.

It can be very constructive to look to the past, but not when it's used to flog each other in the present. Examining history is useful in providing a road map for the future. And America has an obvious road map that, as a nation, we're not consulting often enough. But it's right there, the original, under glass. The ink is fading, but the words won't die — as long as we continue to discuss them.

'Good Morning Texas' gives exclusive preview of Mercury One museum

Screen shot from Good Morning Texas

Mercury One is holding a special exhibition over the 4th of July weekend, using hundreds of artifacts, documents and augmented reality experiences to showcase the history of slavery — including slavery today — and a path forward. Good Morning Texas reporter Paige McCoy Smith went through the exhibit for an exclusive preview with Mercury One's chief operating officer Michael Little on Tuesday.

Watch the video below to see the full preview.

Click here to purchase tickets to the museum (running from July 4 - 7).

Over the weekend, journalist Andy Ngo and several other apparent right-leaning people were brutally beaten by masked-gangs of Antifa protesters in Portland, Oregon. Short for "antifascist," Antifa claims to be fighting for social justice and tolerance — by forcibly and violently silencing anyone with opposing opinions. Ngo, who was kicked, punched, and sprayed with an unknown substance, is currently still in the hospital with a "brain bleed" as a result of the savage attack. Watch the video to get the details from Glenn.