Ilargi: Sucking Spoilt Milk From A Bloated Dead Sow

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Yves here. Ilargi’s vantage is closer to Europe than that of most NC readers, although he starts with teh stunningly lousy first quarter GDP release as a point of departure. Yet when we asked readers how their local economy seemed to be doing just two days ago, readers all over the country, particularly in California, Utah, and Texas, pointed to signs of robust activity. But even in those areas, the less affluent were left behind, or even worse, suffering due to stagnant incomes meeting rising housing costs. And some readers also had data points in some of the seemingly hottest spots, like San Francisco and WAshington DC, that the veneer of prosperity was thiner than it seemed.

So the problem isn’t that we don’t have a recovery, it’s that the people who are doing well are politically more powerful than those that aren’t and also are increasingly isolated from the have-nots, so they don’t see or can pretend not to see what is happening on the other end of the food chain. So to paraphrase William Gibson, while Ilargi’s future may already be here, it is not very evenly distributed.

By Raúl Ilargi Meijer, editor-in-chief of The Automatic Earth. Originally published at Automatic Earth

With US GDP growth ‘officially’ back where it belongs, in the Arctic zone close to freezing on the surface but much worse in real life, for reasons both Albert Edwards and Ambrose Evans-Pritchard (not exactly a pair of Siamese twins) remarked this week; that is, excluding the “biggest inventory build in history, the economy contracted sharply”, it’s time for everyone to at long last change the angle from which they view the world, if not the color of their glasses.

But ‘everyone’ will resist, refuse and refute that change, leaving precious few people with an accurate picture of the – economic – world. Still, for you it’s beneficial to acknowledge that very little of what you read holds much, if any, truth or value. This is true when it comes to politics, geopolitics and economics. That is, the US is not a democracy, it is not the supreme leader of the world, and the American economy is not in recovery.

Declining business investment, a record inventory build and extreme borrowing to hold share prices above water through buybacks, it all together paints a picture of a very unhealthy if not outright dying economy, and certainly not one in which anything at all is recovering. But how are you supposed to know?

The entire financial media should change its angle of view, away from the recovery meme (or myth), but the media won’t because the absurd one-dimensional focus on that perpetuated myth is the only thing that makes the present mess somewhat bearable, palatable and, more importantly, marketable, to the general public.

This has the added simultaneous benefit of keeping that same general public from understanding how sinister the myth really is; it can only be upheld by greatly increasing the debt levels which burden their shoulders, in hidden ways. If the media can no longer keep the consequences of the debt increases hidden, the game is up.

And there are undoubtedly many people who find it more important right now to profit from the whole scale distortion by central banks of what were once the financial markets, than they find it to know the truth and understand the system they owe their gains to. But that may no be all that smart; they risk losing their gains again overnight. You can’t rely on what you don’t understand. So here are a notes:

1 – There are no markets anymore (and therefore no investors either).

There are ways to make money, but that’s not the same thing. Markets must of necessity reflect – the performance of – underlying economies, and to even pretend today’s markets do that is preposterous. Financial markets these days exclusively reflect central banks’ pumping money into their respective bankrupt banking systems, a practice poetically known as QE. Markets need to be functional in order to be called markets and if they don’t we should find another term to label them with.

Or, in other words, present day western economies – and their former markets – are being artificially propped up by either making already poor people poorer today, making them poorer tomorrow, or both. It’s the only way left to make things look passable. And those who still desire in these non-markets to call themselves ‘investors’ are merely little piglets sucking spoilt milk oozing from the teats of their mother sow’s long-dead bloated corpse.

2 – You have no idea what anything is truly worth.

Central bank stimulus across the globe has fully demolished price discovery. And whether you like it or not, financial markets can not and do not function without it. Lots of people try to make us believe that central bank announcements have momentarily taken the place of price discovery, but that is nonsense. And if you don’t know what any asset is really worth, how can you be sure you want to own it other than for myopic short-term reasons?

3- There is no recovery now, and there’s not one around the corner.

The weight of our debt, just to name one thing, has kept us from turning that corner for 7-8 years now, and the weight is getting more forbidding, not less. Publishing falling unemployment numbers while out-of-labor-force data rise (to a record 93 million working age Americans today) is an insult to everyone’s intelligence, not a sign of economic health. Whatever is seen as recovery or expansion is a testament to the power of illusion and propaganda, not the power of the economy. If you choose to look at the world from a point of view that focuses only on recovery, you’re not going to understand what is happening, because there is no recovery anywhere in sight.

4- You can’t trust anything your government and media say.

The entire apparatus is geared towards selling you a doctored image of the world you live in, instead of presenting you with reality. Not because as Jack Nicholson said “You can’t handle the truth”, but because you knowing the truth is not in the interest of those who run governments, nations and supranational organizations. You’re caught in a trap somewhere between Goebbels and Orwell, and it takes a lot of energy to escape it, energy you will be inclined and tempted to instead use to improve your position inside the trap. Just like everyone else does. We are social animals, we are disposed to do as those around us do.

As I said above, you can’t trust anything you hear or read about politics, geopolitics and economics:

• The US is not a democracy. You can’t have a democracy and SuperPacs at the same moment. For the hundredth time: if you allow money into your political system, it will end up buying the entire system. And if you allow endless amounts of money to enter it, that process is greatly accelerated.

• The US is not the supreme leader of the world. Today’s world doesn’t allow for a supreme leader. Neither does it need one. Countries like Russia and China will not tolerate American supremacy to dictate what they do. Not economically, and not militarily. This is very hard to stomach for parts of American society, but they’re going to have to get used to it. Going to war over these issues is pointless. Unfortunately, it increasingly looks like the entire globe will have to find that out the hard way. The very hard way.

• The American economy is not in recovery. I already mentioned the creative jobs numbers accounting. Also, without Fed intervention, asset prices (bonds, stocks, real estate..) would be much lower. This would have been a lot healthier for everyone, except for banks and their shareholders. But once QE is unleashed, there is no smooth exit possible. It will need to continue until it self-implodes.

At present, Japan is leading the way to economic self-immolation, but the US and Europe must inevitably follow. The only thing that helps is what the banks most resist: restructuring, cutting the leverage from the debt. But all we get is fantasy stories about how the crisis was left behind. Stories that of course all 42 million or so Americans on foodstamps and tens of millions of otherwise underpaid can confirm. Why am I even trying to show that, and why, there is no recovery?

We need to start thinking from the perspective of what we can and must do if and when that elusive and illusionary recovery is not going to happen. Decisions made from that point of view will substantially differ from those taken in order to ‘produce’ the recovery, which is the only perspective that exists in politics, media and indeed the minds of 99% of the population today.

We need to think about how we’re going to lay a foundation, as solid as we can, under our societies now, with the means we still possess to achieve that, knowing there will be times when those means will be increasingly less available. We’re not doing that, because we focus only on a world that does manage to attain a recovery. We truly think the world is one-dimensional.

Which is why, among other things, we strive to make individuals richer, and fail to see that this makes communities and societies poorer. Everything seems fine as long as we deny the bigger picture, and because we like things to look fine, we stick to that one dimension of our world that is ourself. And ignore each other.

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  1. Cassiodorus

    “Which is why, among other things, we strive to make individuals richer, and fail to see that this makes communities and societies poorer. Everything seems fine as long as we deny the bigger picture, and because we like things to look fine, we stick to that one dimension of our world that is ourself. And ignore each other.”

    This political response is what I’ve been calling the “conservative continuum” in operation. The liberals and progressives and traditional socialists and communists are all really conservatives, hoping to make reality look nice and pretty and pretending that nothing has changed since the Seventies so that in their minds the utopia of money will come to fruition (which is really just a set of false, symbolic hopes, 31 flavors of lie, because all of the above categories behave in real life as if the utopia of money is already here). The “conservative continuum” is that spectrum of political belief that believes that the utopia of money is the only utopia worth achieving.

    It’s been quite clear for some time, then, that the great masses of people of present-day world society find the politics of the “conservative continuum” to be crap, worth neither participation nor discussion. Maybe a few conscious people, having studied politics and having learned to identify and recognize the “conservative continuum” in operation, are really looking for the secret passageway through which they might escape the political prison which the “conservative continuum” constitutes today. A lot of these people are embittered former “progressives” — folks who recognize that no cheerleading for any established-party political figure (e.g. Bernie Sanders, or whatever set of Bernie Sanders-equivalents exist in the rest of the world) is really going to save us. The utopia of money can no longer be adorned, as Bernie Sanders might, with (ultimately unattainable) promises of a benefits program or two for ordinary people. Something far, far more radical is clearly necessary. I think we start with “food sovereignty” and La Via Campesina, but that’s another story.

    The preliminary problem, then, is to recognize the “conservative continuum.” The only political instrument left standing in today’s world is a system of global governance that can no longer do anything outside of propping up the profit rate for a few huge corporations. This political outcome is the ultimate result of the utopia of money in the era of neoliberalism — the present era — participation will ultimately be limited to those who are “too big to fail,” and who will thus be bailed out time and time again.

    1. sd

      There just one problem. Those large multinational corporations are not in fact profitable. If they were, they wouldn’t need all of the bail outs, subsidies, incentives, tax shelters, grants, and other financial gadgetry that shifts large cash flows to those at the top. That’s all that’s really going on, everything else is just window dressing.

      1. Cassiodorus

        “Bailout” is merely the way in which the profit made from investing in politicians is realized.

      2. Claudia

        They’re cannibals, feeding on bites of those who do real work as they pass by. Preying on the poor is what the modern world is about.

  2. Dr. Luny

    You’re caught in a trap somewhere between Goebbels and Orwell, and it takes a lot of energy to escape it, energy you will be inclined and tempted to instead use to improve your position inside the trap. Just like everyone else does. We are social animals, we are disposed to do as those around us do.

    This is the dilemma I’m struggling with. It takes a lot of time to keep out of the trap and there are many other traps lurking along my path out. I find myself tempted off course by very misguided critical strains of thought like those proffered by charlatans like Alex Jones and various online anti-semites. It seems increasingly difficult to construct an alternative narrative of world events without falling prey to a variety of paranoiac delusions. This isn’t really surprising given that it is increasingly obvious that our society is not run along the lines we are lead to believe by the mainstream narrative, and conspiracy abounds in politics, economics, and warfare. We have to sift through a sea of unsubstantiated facts and sensational claims to find the credible evidence suggesting conspiracy and truly sensational developments. One gets better at this over time, yet how can one invest in understanding the world and at the same time hold a steady 9-5, let alone the 10- and 12-hour shifts my peers are increasingly working. I’m torn between being able to understand the world and make a meaningful contribution to public discourse, and being able to support myself in this precarious economy. Given my nature I can’t help but prioritize the former, but what kind of a life does that leave for me to lead?

    I see quite clearly that I could cut out all of my current events, history, and economics reading, spruce up my LinkedIn account, hit the gym, land a lucrative job, and find some materialistic chick to white-picket myself in with. I just can’t help but feel that pursuing that lifestyle isn’t sustainable in the long run, and given the truly exceptional period we’re living in, I want to be able to devote my time to building my understanding of the transformations humanity is going through. Should I pile on the debt to go to grad school? Should I emigrate? Should I drop out and grow potatoes? No one is presenting me a model of what I can do considering my priorities and assessment of society’s prospects, and all the intellectuals of my generation are facing the same dilemmas. Perhaps that fact itself will bear strange and hopeful fruit.

    1. ambrit

      Conflating Alex Jones with anti-semites in general is quite funny. The real anti-semites call Jones a Zionist lapdog, among other things. Calling both groups charlatans is a blanket condemnation of propagandistic proportions. Even the infamous stopped clock occasionally gets it right.

      1. Dr. Luny

        I didn’t mean to conflate them, but I do think he’s a charlatan. A more complete list would have included the LaRouche organization, Russian and Russian-supported propaganda operations, Iranian Propaganda, Israeli Propaganda, various Libertarian and Anarcho-Capitalist groups, people trying to sell gold *cough*zerohedge*cough*, people excessively fixated on the Rothschilds and Rockefellers, the list goes on and on. A lot of their messages have a kernel of truth to them that you don’t get in the mainstream narrative, but there are a lot of lies and misrepresentations to sort through. It’s a maddening environment.

    2. human

      Don’t view of it as “dropping out.” View it as joining a sustainable food movement. Something that is of ultimate importance.

  3. Noneof any

    I know this piece is clearly against imperialism, but I have a big beef about China and Russia’s economic threats against Non existent US protectionism.

    China’s aggressive attempts to corner trade on certain industry’s with subsidies, selective enforcement of patents, a vast system of implicit rules making it difficult or impossible to due business there without moving production as well, and of course tariffs and devalued currencies, are all clearly responsible for a lot of economic damage.

    The only way the US, and other countries can counter this pattern is by enacting the same kind of policies and using tax tools to compensate. Every time it’s suggested though China and Russia suddenly have very passionate opinions about how the US’s internal finances should be run, and all sorts of threats get thrown at us.

    Unless we tell them that were willing do something like put a forty percent tariff on all foreign imports and an equal subsidy for internal production and hiring, and that this should be considered no different from when China or other countries did the same thing, then we are essentially saying that our protection/domestic measures will always be allowed to be held to a double standard against theirs.

    1. Yves Smith Post author

      I hate to tell you, but the US has fully cooperated with China’s behavior. US companies have outsourced aggressively to China. No one put a gun to their heads. The US Treasury is required to certify twice a year as to whether any country is engaged in currency manipulation. Certain sanctions immediately follow. The Treasury repeatedly refused to do so even when the consensus estimate among economists was that the remninbi was undervalued by 40%. Similarly, the US has been extremely cautious in filing WTO cases against China, and China has filed tit-for-tat countersuits. Mind you, the US also had cases along different lines where China was unlikely to have as obvious countersuits, such as its extensive subsidies of coated paper manufacturers. The US filed a case against China and Indonesia and then abandoned it.

      The US under its various trade treaties can’t slap tariffs on imports as you suggest. Moreover, even if it could, a horde of US multinationals would go to war against the Administration and every member of Congress who supported that measure. In addition, the US is now dependent on Chinese sources for many critical imports, such as ascorbic acid (an essential food preservative) where China has a monopoly and chips (where China is a big enough supplier that making chips more costly would have nasty knock-on effects).

      1. Noneofmany

        I know it’s against our trade treaties but I’m basically saying we should abandon them, or just say that as long as other countries violate them in such explicit proportions then we’ll consider them void. Political consequences be damned. We can get by with an acerbic acid squeeze for a while, we can’t keep losing vital manufacturing and jobs.

        It woul’d be a pain to deal with but economic soverenty is something people can really get riled up over, especially when there’s a foreign hostile that is can be very plausibly blamed for our biggest threat to our prosperity.

      2. Jim Tarrant

        I believe this economic (and hence political) interdependence demonstrates pretty clearly that we are in the final stage of the historical transition from the era of sovereign nation-states to the emerging era of what I am calling The Global Oligarchy. In the latter world, transnational companies both “private” and nominally state-owned dictate the economic (and hence political) rules for all. The problem is that this new era is not just an updated version of the Middle Ages where the Catholic Church and the Ummayid Caliphate arguably established civilizations that provided identities and a common culture based on religion (though terribly flawed, of course). The Global Oligarchy has no vision other than greed and the exercise of power purely for narrow self-aggrandizement. This is likely simply to lead to endless infighting among the members of the oligarchy, which will prove to be extremely unstable and ultimately doomed as a system. And we haven’t even talked about climate change.

        1. ex-PFC Chuck

          I believe this economic (and hence political) interdependence demonstrates pretty clearly that we are in the final stage of the historical transition from the era of sovereign nation-states to the emerging era of what I am calling The Global Oligarchy.

          Aka The Market State as predicted in The Shield of Achilles: War, Peace and the Course of History, published in 2002 by Philip Bobbitt who, as Lyndon Johnson’s nephew, obviously has no connection to The Oligarchy.

          Bobbitt traces the evolution of the modern state, which he asserts emerged in northern Italy during the Renaissance, from the 15th century onward through a new phase approximately once a century. The emergence of each new phase was mediated by a major war, the most recent being what he regards as the great war of the 20th century which encompassed both World Wars and the Cold War (1914-1991). Thus the birth of The Market State from the corpse of the State Nation (or is it Nation State; not having the book at hand I don’t recall the order of these penultimate two in his schema).

      3. Oregoncharles

        Is the US really unable to manufacture ascorbic acid?

        Surely this is just a business decision by those who perfectly well COULD make it. Businesses respond very well to financial motivators.

        1. hunkerdown

          If I understand correctly, industrial volumes of ascorbic acid are made by fermentation; the Chinese process uses a second strain of mutant organism to perform multiple steps of the synthesis. In other words, biologics are a sort of artificial life form. Captive symbionts don’t just scale up on demand.

    2. PlutoniumKun

      As Yves says, that bird has already flown. Unless all international agreements are torn up, that sort of retaliation is not possible (and given the way in which the ChinAmerica economy has developed, it would probably be self destructive). Of course, the US did perfect this sort of mercantilism in the 19th Century, but abandoned it when it suited it to do so. China is doing nothing more or less than Germany, the US, and other Asian countries have done many times in the past.

      The one caveat to this is the issue of entertainment and piracy. Its not an area I’m an expert in, but 10 years ago i thought Hollywood was insane to try to expand into China. I thought piracy would make it chronically unprofitable – it had already destroyed once vibrant film industries such as in Hong Kong (my Chinese room mate at the time used to regularly download Hollywood films which hadn’t even been released in the US yet!). But somehow, they have managed to persuade the Chinese to tighten up enough that Hollywood movies do indeed make big profits on major cinema releases.

      The French have always been masters at protectionism ‘within the rules’. There is a story that the Japanese tried to ban the imports of French ski’s on the basis that ‘French ski’s are designed for european snow, not Japanese snow – they are therefore potentially dangerous’. To the surprise of the Japanese negotiators, the French accepted that there may well be a hazard with the ski’s. They then mentioned that they’d found a similar problem with Japanese car tyres on European roads – they just didn’t grip very well because they were designed for Japanese roads. The Japanese got the message and allowed French ski’s in.

      1. tom

        Better than that, I read in the Asahi Shimbun that Japanese intestines were different from American intestines and they could not process American beef, only Japanese beef.

      2. Noneof many

        But that’s the kind of thing I’m talking about. Theirs just no equivalent to these sort of shenanigans on our side. They backed off only from a threat of retaliation. But we’ve come to a point we’re this sort of thing has been all but officially acknowledged as the norm to such a degree that saying we’ll do the same invites wildly disproportionate threats from them.

        It’s reasonable to allow some leeway in negotiations, but no one can send the message that there’s no limit to the concessions you’ll make in the name of peace and reason. At some point there has to be a threat of retaliation, even if it’s not pretty or completely fair.

        The bird may have flown but we could still shoot it down. Consequences be damned, or else, in the long term were essentially conceding that there are no consequences.

  4. Marko

    We’re in transition , one that will proceed in fits and starts , painfully for the majority. The problem today is we still have an economy designed to provide goods and services for a broad middle class – one that no longer exists. We’ll transition , eventually , to one that exclusively services the “plutonomy” of Citi’s dreams , elucidated in a report by them a few years ago. There will be no attempts to revive the middle class – that would simply delay the transition. Thus the ineffective QE , ZIRP , etc. , and the apparent ( but deceptive ) world-class ineptitude of Eurozone technocrats. The intense push behind the free-trade deals indicates the desire to move the process along. The end-point will be signaled when global wages for labor converge to a common level. For U.S. workers , that’ll ll be quite a free fall.

    Young people should start preparing now. The economy will be overwhelmingly one of services , much more so than today , and you’ll have to be very good at what you do , since the competition for tips will be fierce. ( You weren’t expecting wages , I hope ). Specialization will be key. Don’t think “personal trainer” , think ” biceps sculptor “. Not “hair stylist” , rather ” nose hair stylist “. You may even have to go so far as to specialize in right nostrils vs left nostrils in order to capture a marketable niche.

    It sounds dreadful , I know , but don’t worry , you’ll get used to it. Plenty of people are in similar positions today and they manage to hold up. Besides , you’ll really have no choice if you want to survive.

    1. ambrit

      The determining factors will be first, how many people choose to opt out of the ‘formal’ economy, and second, how hard the PTB try to force everyone to conform. Either way, as Phyl and I have learned from a lifetime of trying ourselves, it will not be an easy life. Then, the question becomes, when sacrifices become necessary, to whos’ benefit do you want those sacrifices dedicated? It is a choice, albeit a hard one.

    2. tim s

      Good luck with that. Sucking up to liar’s, cheats, and ignorant beneficiaries of a stacked, perverted system is not much of a life plan, at least for the long term. If these people were building anything sustainable, your thinking my be right, but I see no stability and much negativity in the general population.

    3. EoinW

      This is based on the assumption the 1% remain in control. Though they have all the advantages to do so, there is no guarantee that will happen. One must take for granted they know what they are doing. As masters of a parasitic system they seem to be pushing the host to a premature death. Hardly behavior to give one confidence in their abilities. If anything about the 1% stands out it is their incompetance. But time will tell whether they have a plan or are simply reacting to each surprise that comes their way(or are following a philosophy of “hear no evil” “see no evil” “speak no evil”). Like the Wright brothers getting their first plane airborne and immediately hitting the autopilot. Not a good idea when you have no autopilot.

      1. Marko

        ” If anything about the 1% stands out it is their incompetence.”

        Well , if nothing else , they’re pretty good chefs. They’re masters , in fact , at slow-boiling frogs. Over the last few decades they’ve cooked up a couple hundred million of them ( i.e. the 99% ) and scarcely a one has seen fit to jump out of the pot. Fresh young frogs are tossed in the pot with those that are fully-cooked – the meat literally falling off their bones – and the newbies show no concern , just sitting there , soaking.

        If the 1% is incompetent , it’s not much of a problem for them , because the 99% is comatose.

        1. EoinW

          Agreed! Sometimes a bad accident victim is deliberately put into a coma. Is that what we are doing to ourselves to avoid reality? The idea 1% can rule 99% is mathematically absurd. Yet that is human history.

          The only thing about the frog jumping out of the pot, it’s a leap into the unknown.

          1. hunkerdown

            The 1%, with the help of the 19%, can rule the 99%. That 19% aren’t going away; they’re merely being right-sized and reminded who they work for.

            If there are only two contestants in a battle, it’s a show, not a fight.

        2. tim s

          If you think that 99% are comatose, you’re way off. It is safe to say that 99% do not agree on which way out of our predicament and may still be confused by propaganda, but that is a far cry from comatose. It’s much safer to say that the 1% have a tiger by the tail, which they can neither hold onto nor let go. If the 1% were true masters and the rest comatose, then explain the need for all of the police/military force they hide behind.

          The boiling frogs, as you say, are caught in an increasingly dysfunctional system that at one time worked much better than it does now in important regards. The wheels are coming off and many sense it, although many are in a state of paralyses to some degree. Paralysis can snap in short time, – comas, not so quickly.

        3. ex-PFC Chuck

          If the 1% is incompetent , it’s not much of a problem for them , because the 99% is comatose.

          I beg to differ! There’s only about 98% comatose. Then there’s the other, shrill 1%, who hang out at places like Naked Capitalism.

      2. Brooklin Bridge

        It’s a conundrum; on the one hand the .01% must be pretty smart to have orchestrated such a tightly controlled illusion that produces generations of ideologically hard wired frogs for the boil while at the same time (the other hand) they are such idiot lunatics as to engineer into their economic and social system a guaranteed self destructive and irreversible dive to collapse.

        1. hunkerdown

          I doubt they would do it if they were not certain they have a not-unfavorable next move planned. An economic collapse just means distribution isn’t decided by money anymore. Why is it you think they’d rather not be rid of that, and find some positional good less potentially beneficial to those who must be kept poor in order that they remain industrious?

  5. PlutoniumKun

    On the subject of anecdotal reporting of local economies, I’m in Dublin, and here is my take on the Irish economy – and it chimes to a significant extent with what Illargi says.

    To almost everyones surprise, the Irish economy has done exceptionally well the past two years. The figures are good, and the feeling ‘on the ground’ is very good. You can feel things moving – new shops and bars opening, construction sites opening up, apartment blocks sealed up half built in 2008 are now being finished off. There has been a surge in my area in openings of Polish groceries, which is always a sign that employment is up, the Poles fulfilling the role of a floating flexible labour base for construction sites and shops. Residential property prices have been surging the past 2-3 years, especially in Dublin. While initially, it was only in areas where there was a clear property shortage (mostly big family houses in Dublin), it has extended now to most properties and most geographical areas. Mortgages are still quite restrictive – anecdotally, the big banks are not extending lending, even to people with very good credit, but they are lending more widely, allowing first timers to get onto the market. The initial surge seemed mainly to involve investors getting in while prices were low – it does seem now that its ‘regular’ people who are starting to buy and renovate.

    The recovery is very geographically restricted however. Dublin is booming, but small towns throughout the country are still struggling – many are visibly dying, a combination of poor rural and regional economies with extra competition created by new roads and out of town investments. There are slight signs of things getting better with employment, but its not strong or vigorous.

    There is very much a ‘dual’ economy emerging, with people in certain sectors (mainly foreign owned hi-tech) companies doing very well, getting regular pay rises, etc., while on the baseline, I don’t think there is any evidence that people are getting more money in their pockets. That said, I don’t see evidence of a real decline in living standards among the poor either – its just a general stagnation, although for many families, at least their kids are getting jobs, which does mean (for a country with a very young demographic profile), that families have a bit more disposable income.

    There is one huge elephant on the horizon – while private debt levels have declined somewhat, the country still has a massive debt load due to taking on the banks, and accumulated deficits over the recession. This hasn’t changed at all, and the lack of inflation means it can’t be ‘grown’ or ‘inflated’ away, as the debt accumulation of the 1980’s was during the 1990’s. One way this will play out is in repossessions. There were few if any repossessions during the recession as it made no sense for banks to take worthless properties. But now prices are surging, it seems that banks feel that now is the time to move in. They have been focusing on high profile wealthier people (mostly property developers who used their expensive private homes as collateral – banks are now moving in to seize some of these), but I suspect it won’t be long before this starts to go down the chain. However, for historical reasons, this is a very sensitive political topic in Ireland (memories of landlord evictions in the 19th Century, etc), so it will be interesting to see if it is a nettle the banks will grasp. They may have little choice in the matter.

    In some respects, the Irish economy is unique. It is one of the most open economies in the world, and has the advantage of having a foot in three camps – lots of US companies based here, the UK a big trading partner, and Europe as an almost equal partner. So the drop in the euro is a huge benefit – maybe more than for any other European country. its also clear that the fact that the Irish government is seen as tame means that a fair slosh of QE money does tend to go Irelands way – mainly into property.

    Of course, this also means that Ireland is affected worse by a downturn in any one of the three main trading blocks – and a downturn in 2 of the 3 is potentially very dangerous. I suspect that the next few years will be very bad for the Eurozone and Sterling. If domestic growth can’t keep the debt loads in the background (i.e. if slow growth means further debt growth), then its very bad news. However, for now, the economy is in much better shape I think than most had any right to expect a few years ago. But that debt load is still there.

  6. Mary Wehrheim

    When I was a child back in the 50s, my greatest economics teacher was the game of “Monopoly.” It showed me that the whole end game of Capitalism was consolidation of money into the hands of one winner. To keep the game going…when one of us had too much money we would redistribute some of the “winner’s” money to the other players and continue. By instinct we followed the dicta “From each according to his each according to his need.” We were budding socialists in the making. But we knew the game is all over when one person ends up with all. Too bad this point is lost on most economists. I know the financiers and multi-corps control America, Inc and Europe, Inc. How much is Russia and China under the control of their plutocrats? I remember when the USSR first tanked, the Harvard boys waded in to facilitate Russia’s handover to their plutocrats. How will the end game get played out…we know there will be no mass redistribution of funds…who are (will be) the major players in these final consolidations of power? I taught history for 25 years and came in late to “follow the money.”

  7. Brooklin Bridge

    This is quite an amazing post! It should be Bernie Sander’s speech, verbatim, in announcing his run for President. And it should be his speech should he win the nomination. And his speech should he win the Presidency. And his address to the nation each and every year he is in office. With due credit to the author. Of course that idea is as much of a pipe dream as the illusion of a “recovery” in a system too far broken for recovery to have any possible chance, at least where words have meaning. But if only for the spectacle, even a glimmer of this broadcast into homes everywhere would be like water to the desert seed.

  8. VietnamVet

    During the Great Depression the bankers let my paternal grandfather keep his business operating. But, in 1939 when the economy started to perk again they repossessed it. He started another one until the bankers told him it was time to retire in the 1950s. The difference between today and the Great Depression is that the bankers are international crooks who don’t have to worry about jail time. Also, the bad debt that can’t be paid back hasn’t been separated from the good debt. Instead the money holders are intent on destroying sovereign states and pillaging the surfs. Greece and Ukraine are the visible tips of the gigantic iceberg that the Western economy hit. Nobody dares to acknowledge the truth less they lose their jobs and grants. The media plays “Better Times are Coming” while the ship sinks.

  9. TG

    Triple Kudos. IMHO you have struck the spike true and square. No I don’t know what to do about it either, but mindless wishful thinking is not a plan. And we need to stop being so frikkin polite and when things are going downhill stop twisting ourselves into pretzels to see ‘the other side of the truth’… At some point even-handedness simply must give way to outrage. Keep up the good work.

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