Dog Whistle Signals the Start of Depression 2.0
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Well the dog whistle has been blown. The signal was sent. Nobody can hear it except people of wealth and influence though so few will even know that an elite club has all been called to attention. This feeding call however is scarier than most where Joe Public is concerned. It has not been heard for 90 years. Even those students of the economy who have been waiting for this moment to happen are still not quite sure its the real thing.
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But let me assure you its worse than most of us can even imagine.
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Its the dog whistle announcing that the next depression is about to get underway. Its the whistle that tells the informed that another housing collapse is impending, unemployment is going to soar and a bankruptcy cycle begin as defaults get underway. Its a clarion call that is a clear warning to begin selling off overpriced assets and moving back into cash as the world heads into its second major secular deflation of the past 100 years. These things are regular features of the market incidentally. But they are spaced so far apart that almost nobody ever catches on to the cyclical nature of the event.
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As we all know, almost everything is priced at sky high these days. Homes, bonds, stocks, art, collectibles and farmland are all at nosebleed levels. Only crypto coins have faltered thus far. The Federal Reserve has been ratcheting up interest rates in an open attempt to return them to their long term average. We will get there. It has already been discussed out loud as the terminal point where current inflation will start to whither and blow away.
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Most market watchers still dont believe the authorities really intend to take us that far. Instead they keep imagining that the worlds largest Central Bank which is behind much of the current market mayhem is on a confused course they themselves dont understand and will soon see the error of their ways and pivot back to lowering rates. I love that word pivot. It makes Central Banking sound like a sport. I can imagine those suited grey guys with badminton rackets in their hands twisting in the air on one heel before pivoting into the backhand.
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So sorry my friends. The pundits are wrong again. Because one of the richest men in the world just said the words that have not been heard in 90 some years. On November 20th, Jeff Bezos told Americans it was time to stop spending money. He told them to keep some dry powder cash on hand because tough times were coming. He warned them to postpone buying big ticket items like fridges and stoves and start squirreling away the extra money instead. Because they were going to need it when the recesssion hits next year. “Batten down the hatches” he said before adding, “take some risk off the table”.
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Wow…that is some obvious dog whistle. Not even a little bit subtle.
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Keep Cash on Hand – Jeff Bezos
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Jeff Bezos is now the official signalman. Because he just advocated for a cessation of consumption spending in an economy that is driven 70% by consumer expenditures. And now we know without doubt that a depression is coming followed by much lower prices. Its an economy where cash will outperform all other asset classes in a world of hurt where almost everything else goes into decline. And conveniently for those with well fortified bank accounts its going to happen at a time when the US Dollar is rapidly gaining strength versus its peers. You could not find a better set of circumstances for savers and investors to find themselves.
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The thing is, this is almost exactly how the Great Depression was set off with business leaders of the day talking about belt tightening and a general retrenchment of business was deemed necessary for their own survival. Back then, few seemed to understand the importance of the consumer to the strength of the economy nor how it was linked directly to employment levels. Back then there was very little hard data on the impact of social mood on the economy and terms like “expectations” were not yet in vogue. So all the wrong actions were taken by business leaders and government and the economy slumped into a decade long malaise.
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This time around we do not have that excuse. So Bezos comments are surely deliberate and well thought out. He is telling us both what can be expected and what other wealthy people like him would like to see happen. They want assets on sale again. They want markets to fall. Warren Bufffet has seen the writing on the wall and has reportedly shored up his cash position in preparation to take advantage of the bargains that are certain to arise. Berkshire now holds 107 billion in cash for the next rainy day according to this years annual shareholders meeting.
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So take heed friends. Those of you with ears, hear it well. A crash is coming and you may also lose your job when it arrives. The signs of the decline are already all round us. Falling like leaves from a tree about to enter the next winters cold. What is coming is an economic reset and it will be seen in real time. Like I stated earlier, this is a regular feature of the markets. This reliable deflation cycle returns again and again to wipe the slate clean before the next period of growth can get underway and fresh leaves emerge. But this time its actually being announced for all to hear.
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This time it will surely be televised.
Wow ! Welcome back Farmer .
Very Well Written Eye Opening Post
Most of us just dismissed Bezos warning
Excellent Observations
Not one in a Million would have caught the meaning and put it all together.
Thanks a ton for this insight
sheesh
Glad to be back Fully. Thanks for the kind words my friend.
Too early.
Depression v2.0 should kick off in late 2024 to early 2025 and last 3 years into 2028.
There is one last hurrah to come, as they hyperinflate the money supply starting next year. Money supply will at least double first.
Forecasting is generally a mugs game, Spock. Luckily we both know that already however I do agree with you there will be quite a bit more monetary expansion as things evolve. Those increases to the money supply can come in either an expansionary economy or one that is in contraction of course and my bet is we will be outright recession when the next rounds come in 2023. If we can get our forecasts even half right we have probably done a pretty good job divining the future. So I have not put any dates on the prediction since what I am seeing is more a case of efforts to shift sentiment than the shift itself.
What I mean is that the public is only slowly coming to grips with how profound this interest rate hiking cycle is but they have not yet fully responded to the reality that is obviously in the works. Nor has consumption really suffered very badly so far despite mood deteriorating. The onset of an obvious recession will start to awaken some. Others will not understand the trap they were in until housing prices have actually suffered a stiff decline that is obvious in reported numbers. By then it will be too late to escape the pain and in typical fashion they will try to hold through the corrective phase. If our coming recession morphs into an actual depression though there will be a lot of regret. Hardly one or two in a hundred seem bright enough to actually have sold at the top and put the cash in the bank. The fiction of real estate wealth is thus laid bare. Your home truly is only worth what others will pay. If its a depression we get……best of luck extracting that fantasy equity.
Housing prices are fairly sticky though and changes in that area often seem to happen at glacial speeds. Homeowners are thus lulled into a sense of complacency. They see a big drop in sales demand but do not associate that with their own economic well being as prices appear to be holding strong. There are legitimate signs to give us pause for concern though as we have seen demand drop so sharply in conjunction with a rate cycle that has not yet ended. I watch the lumber futures for one and while there is currently some support, the lows are not yet in warning us new construction will be treading water for quite some time. My view is that lumber is heading below 100 dollars next year. The Dallas Fed meanwhile is calling for a 20% decline in prices for US housing during 2023. I do not doubt that for a moment.
https://www.cbsnews.com/news/housing-home-prices-could-drop-20-mortgage-rates-dallas-fed/
So can we rule out two quarters of negative growth for 2023? And if housing does bust as the Dallas Fed suggests then who is to say next year will post any growth at all? One thing is certain. This rate hiking cycle is entirely artificial having been built around the myth that we have genuine inflation and it needs to be tamed. What we have really seen is inflation develop out of orchestrated events impacting the supply side and that has created cover for the fact the consumer is actually tapped out and growth is already nearly nonexistant.
The other thing that is important in my view is that we have not yet seen a major sovereign default occur. FTX is this years big corporate failure. There will be more in 2023. Those failures will need to take place before the US faces any real trouble and dominoes start to fall. But a combination of rising rates and strengthening dollar assures us the cracks are forming now. Serious damage is taking place outside the US at the moment. Stress levels are hitting extremes for debt servicing of US dollar denominated obligations. I guess its just a matter of who will fail first. But the kind of policies being employed to tame inflation are also the same ones that will assure a sovereign default (or many) are inevitable in the coming months and years.
So is there an actual date for the start of Depression 2.0? Probably not. We won’t likely be seeing soup lines this time. But unemployment could actually be worse in percentage terms versus the 1930’s even as it takes place within a system of social program supports. Its no coincidence in the bigger picture of our coming economic reset that Tech companies have all abruptly turned to layoffs and cutbacks of staff levels or that this appears to be a growing trend across all industry lately. And the curious sudden crash in shipping volumes and rates these past few months seem to be telling us the consumer is already exhausted or there are big problems in Chinese production systems. The ingredients for the next crisis are all coming together at once. Some say it will be the euro itself and Europe that kick off the next crash and they could be right.
On that score, who exactly is Bezos and Amazons primary customer? Its China of course. So when Bezo’s tells US consumers to stop spending who exactly is going to see a decline in their exports and shipments? And who will be most impacted by a slowdown if the American consumer goes cold? We do know that China is on the ropes with heavy debt as well. The Fed rate hiking cycle is hitting them harder than even US business stateside. We can only wonder if the powers that be are really trying to tip China into a hard recession and test leadership over there. Speculative thinking of course. But I have to ask since the impacts delivered to countries outside the US of the high dollar and rising rates combined are creating some really unique stresses.
Bezos is in the Davos club, so take anything he says with a grain of salt.
While Sir Farmer made some great points and Sir Spock is likely correct about at least one attempt to stave off the economic collapse before it completely takes hold, I take exception, as I have over the last twenty years or so everytime someone calls for a deflationary collapse. You CAN’T have deflation when you aren’t on a gold standard. Every instance of deflationary collapses, in this country or elsewhwere, occurred when the country was on a gold stadard that limited the creation of money. In the cases where the country wasn’t on a gold standard you can have collapses but they were from inflation destroying the fiat because of excessive money creation. That is what we can look forward to once again.(even though it may be a first for the US)
Thanks Farmer for your thoughts. A good cleansing is necessary. Both monetary and ideological resets. Always difficult to predict but I believe we are seeing the consumer pullback on spending. Anyone renewing a mortgage that was set at 2% is now facing 6% +. Thats three times the interest portion of their previous mortgage. How much higher will rates go? We are about to discover over the next year.
In the 30’s the US Government instituted the CCC and the WPA. It gave us the National Parks, road, public works and other infrastructure that we enjoy to this day. Canada had similar programs but to a lesser extent.
In BC, BCHydro just gave a onetime $100 credit on account holder’s bills. The Feds have upped the GST rebate for those who qualify. They are able to shower the population with currency inputs to stave off the inevitable. More currency printing to come I’m sure. The coming depression will level the middle class. More mom and pop businesses will disappear. Covid did a good job but the depression will finish off most. Planned? I think so. The Government will continue to award the population with goodies to appease them while leading to the UBI which will be administered by the Digital ID.
The all important Black Friday sales should be interesting. I may be wrong but most young families are struggling with increasing costs of everything. Most have been conditioned to buy on credit which will be difficult to pay off.
My thoughts are that we should know more after Q1 2023. We need to get through the Northern Winter heating season and the Holiday shopping period.
Thanks for your post.