America is worried about a recession 11 years on since a banking collapse led to a brief contraction for about two years between 2008 and 2010 with the depth of it in 2009.
Since then, America has seen one of the greatest bull run in history, but not the greatest, hence perhaps why it still doesn’t feel like boom times.
This very zoomed out chart of monthly candles shows at the depth of the recession on or around April 1st 2009, America’s economy – or at least its stocks – went back to the beginning of 1997 at about 6,400 for Dow Jones.
Unlike currently, 1997 did feel like boom times. That’s because if we go to the previous low in or around October 1987, stocks were at about 1,500.
Precisely a decade later in or around October 1997, stocks were at nearly 9,000, a 6x increase.
That was a time when the then Russian president danced on stage, when a newly elected young Tony Blair sang Cool Britannia, when the greatest political scandal in the world was who the American president had slept with, when the government had no state or group enemies as general peace had largely descended on earth.
Two years later, in 1999, stocks went up again to about 11,500, a near 10x increase since 1987.
Now that did feel like boom times. History had ended, fools claimed. The year 2000 felt as if a coming new world – for the better. Dreams were aplenty, of flying cars and much else, but some devils thought all this was too nice, that the government needed some state/group enemy, that people were having too much fun and politicians were almost losing relevance, so 2000 did bring a new world, but for the worst.
Hence stocks start falling. They recover again to a peak of 14,000 in 2006-7, but then a whole decade is pretty much wiped out in 2009.
Looking at that data makes it quite clear why there was a popular largely peaceful revolt in or around 2010, and why it doesn’t quite feel like boom times in 2019.
The stock market currently stands at nearly 27,000, not even a doubling since the peak a decade ago, and since the bottom it’s only a 4x increase.
So the stock market might look like its been in a great bull-run, and it has to some extent, but not that great.
Worries over geopolitical destabilization, however, from Brexit, to China relations, to Arabia’s continued war in Yemen which has made oil prices volatile, has raised concerns that the economy might turn.
Whether it does and how is currently being decided by the people in a number of extremely important elections or government formations starting in Israel, and Austria, and an imminently expected election in UK and of course the presidential election in USA which is now not that far away.
From Israel to America, those elections and their outcome may well decide what happens not in the next few years, but decades, as the world stands at a significant crossroad with a choice between nationalism and liberalism.
The former is usually not good for the economy. Nationalist Trump has increased spending on the military even as FED has to effectively print money because the market can not bear the trillion a year in debt offerings by the United States government.
This injection comes at the expense of necessary reforms, beginning with the liberalization of money raising markets by the repealing of the discriminatory Securities Act.
The chances of this happening any time soon appear very slim due to the capture of the American regulator, SEC, by banks of which the Securities Act discriminates in favor at the expense of all ordinary Americans.
The blatant conflict of interest of the SEC chair being married to a Goldman Sachs banker was of course raised not once during the congressional approval hearings because these congressmen and women rely on such bank “donations” to win their own “elections.”
So what we currently have is pantomime politics. Clowns arguing about hair-styles and anything else that keeps them busy from actually engaging their congressional duties of modernizing economic acts to fit a new age.
In Britain, it’s arguably even worse. Bankers and their lakies are pretty much in government. To distract from their rigging of the economy they are engaging in a geopolitical game that speaks of nationalism without heed or care of its predictable end result.
It’s the exact playbook they used the last time banks collapsed in 1929. Then too they used “elections” to enforce the most atrocious direct hot war on the masses.
The political mass murder of the young future leaders of the left in Norway last decade, however, where they met from the entire world, has left no real political opposition to strategic geopolitical proposed or attempted changes.
So it is now left to others in areas outside of politics to engage the political process because who has power matters and it can matter decisively.
Especially where the economy is concerned, a reformer is needed to implement more free market for all, while enforcing less free market for giant global corporations.
Without that structural change, the economy risks becoming sclerotic because the full potential of the population is constrained by the time requirement of 9-5 work and the full freedom of giant corps to crush any start-up competition by quite often just buying it out to close it.
The Security Act’s investment prohibitions make the above far worse for start-ups have to be under direct orders of billionaire VCs who currently act as gatekeepers of innovation, and often are its first limitation.
A pipeline of sorts thus can be seen which can explain why the internet is becoming walled. The foundations of that pipeline are the Security Act’s prohibitions, which limits start-up options to billionaire orders, billionaires who teach the young how to build monopolies, and thus constrain considerably economic dynamism.
Without that innovative engine – which must be based on the premise of monetary freedom – the real economy can not grow beyond mere population growth.
Without real growth, what might develop is a system where money growth is growth. The result of such system is likely to be the fruition of Marx’s prediction for money growth is government growth, to the point effectively the entire economy is communistic in all but name.
Just as in Soviet Russia there was initially only state giant companies, then state medium companies, then state even small businesses, and finally farms too were engulfed by an all powerful out of touch state, so too a greater and greater reach by the government in the United States can bring more and more under control to the point even farm production is not independently owned.
An indirect state control, through restrictive laws, its greater and greater enforcement, its greater and greater requests for papers and licenses, its greater control over money by carrying more and more debt, and in many cases its direct control over the economy in all but name.
That happens to be the prediction of both Marx’s and Hayek’s, two giants of the economy that came from completely opposed political views.
Under that analysis, a recession is perhaps not likely currently. Trump would just not let it as we’ve seen with his ordering of the FED to money print.
Something which we are not well placed currently to say whether it is right or wrong, but its consequence is greater control over the economy by the government.
That’s from so called conservatives, the free market lovers. You can imagine the other side, and perhaps you can now understand why they called themselves national socialists.
For where the economy is concerned, America is moving to the left, while socially they’re moving to the right.
In words of course the Trump administration would consider the proposition they are moving to the left as laughable, but simple analysis makes it quite clear why some working class support him.
He is putting up protectionist barriers, telling them they’ll have a stable 9-5 job like their grandfathers, while not telling them if they want to start their own business they might have it far more difficult than their fathers.
The social aspect is then used to lump “undesirables” with their political opponents, in this case urban America: the entrepreneurs, the small to medium business owners, the free market lovers, the ones that actually create these jobs but now more and more have to go through some controlled pipeline to do so.
Boris Johnson said it best: fuck business. Then, just in case anyone had doubts, he tried to assure by saying he was the only one that stood up for banks.
Unaware perhaps Johnson stands, the classic historian, that modern banks are often in direct competition with ordinary businesses and usually chain them.
Bitcoin and cryptos in general do provide an alternative. Trump however has stated he does not like bitcoin. We have assumed Boris does, but we’re actually not quite sure following some recent consultation by FCA.
Yet this space is global, but its prowess is mainly concentrated in the English speaking world. That can change, and if economic reforms are not undertaken perhaps it may well do with Berlin for example rising as an edge tech hotspot.
Especially if there’s a recession there may be more of a drive to bypass investment prohibitions with the crypto ecosystem being a sort of index fund where instead of buying Apple stocks, you buy a bitcoin and through it you sort of buy a part of the entire bitcoin economy.
So while some claim as a risky asset bitcoin might not fare well in a recession, the crypto is actually uncorrelated and lately has not even responded to macro events.
That’s in part because while in a simple way one can say what Dow Jones does is determined by some testosterone fueled men at Wall Street who implicitly coordinate and thus have a certain crowd movement, in bitcoin it’s a completely different crowd.
In bitcoin it’s more Venezuelans, or people in Africa receiving funds from family, or companies in China receiving payments from international buyers.
How much these transfers grow or change might be more relevant than what the economy does as although, for example, there may be less buyers from Chinese companies in an economic slowdown, if there are more Chinese companies that use bitcoin for that purpose, then bitcoin itself might still grow because its economy is growing.
Another reason why bitcoin is uncorrelated is because while the stock market in US is limited to the US economy, the bitcoin economy is pretty much the entire globe.
There are different dynamics, therefore, giving bitcoin its own specific factors and so making it uncorrelated except for perhaps very temporarily.
So what would happen in a recession depends more on what would happen to bitcoin’s real adoption.
As in those circumstances there might be concerns about haircuts and all the rest, you’d think it would increase especially considering the US debt is currently manageable in part because the economy is growing, so keeping up with debt growth.
If the economy turns, government debt would start growing very quickly, increasing monetary devaluation, and thus perhaps making cryptos more attractive.
So a recession could well be good for bitcoin, but a growing economy has been good too, so that aspect might make less difference because it’s more about the growth of the bitcoin economy which would benefit from less investment prohibitions for startups, recession or no.
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