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Page added on December 27, 2015

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The Next Recession Will Be A Barn-Burner

For those who enjoyed his encyclopedic 2015: Year In Review, this week we spend an hour with David Collum to ask: After processing through all of that information, what do you think the future is most likely to bring?

Perhaps it comes as little surprise that he sees the global economy headed back down into recession, one that will be deeper and more damaging than the 2008 crisis:

In 2008/9, while the equity markets when down, the bond markets went up. And that buffered an awful lot of pensions and 401Ks and endowments and things like that. And so people felt pain, but they didn’t realize that there was an offsetting gain. They did not notice that part as much, but I think the next downturn is going to be concurrent bond market collapse and equity collapse and there will be no slack in that downturn.

 

I think stocks and bonds are both at ridiculously high levels now. The bond market can only go down from here, right? I mean, it can keep going up for a while, but there is just nothing left to be squeezed out of it. Interest rates are at seven hundred-year lows, supposedly – they’re certainly at stupid lows, right. You have a third of Europe at negative rates… And so I think at some point the bond market’s got to collapse. It will start in the high yield market, and that is happening right now. Then it’ll spread, maybe treasuries will get bid to the stratosphere, but at some point you’ve got to get a real return. And so bonds have to sell off to get back to that real return — after all, all crises are credit crises, right,? And then equities are going to go once there’s not leverage out there for share buy backs and stuff like that.

That’s why I think the next recession is going to be a barn-burner. 


92 Comments on "The Next Recession Will Be A Barn-Burner"

  1. makati1 on Sun, 27th Dec 2015 7:30 pm 

    The US is still in a recession, IF you look behind the lies and spin.

    What we are coming into is another Great Depression that will make the last one seem like a party. That is, IF TPTB don’t decide we need another world war to distract the sheeple and provide a new location to place blame for their failure/greed. Americans are good at that.

  2. pennsyguy on Sun, 27th Dec 2015 8:48 pm 

    Right again Mak! Most people don’t see reality as long as they have an income. It’s becoming easier to wake up as an unperson who can’t believe that the good life has evaporated, and no demagogue/messiah will bring it back.

  3. ohanian on Sun, 27th Dec 2015 10:55 pm 

    The market as remain irrational longer than you can remain not insolvent

  4. markisha on Mon, 28th Dec 2015 1:20 am 

    Excellent comment, makati, but I must add why only Americans we are all the same. Can you imagine any other country on the world to be left as an only superpower, things would be much worst I think

  5. makati1 on Mon, 28th Dec 2015 1:33 am 

    Markisha, the Us, with the help of the City of London, directs/controls the major banking industry in the world today. The US dominates the Western countries and uses the IMF and WB as clubs on any country that tries to defy it. It has so fucked up the world economy that it is solely to blame for what is coming. That is why so many countries are moving away from the USD as fast as possible and out of the Western controlled banks and toward the new Chinese and Russian ones.

    The US is NOT the only superpower. It got that title temporarily by the same deceit, lies and illegal methods that it still uses today. But those days are over. The US just hasn’t accepted that … yet. It will.

  6. Anonymous on Mon, 28th Dec 2015 2:44 am 

    The ultimate logical fallacy. Sure the american empire is ‘kinda bad’, but have seen the others?, they would be waaaaay worse. How do I know this? Because the american empire is kinder and gentler than all those other empires(CNN and faux assure me this is the case).

    The notion that ‘some other superpower’ would be infinitely worse, other than the american one is just another form of special pleading. And its not even clear some ‘other’ country would even really want to be a ‘superpower’. If the conduct of the ‘contender superpowers’ is anything to go by, then it is not hard to imagine they would, or could be, a huge improvement over the current one.(Mind you, the bar is set pretty low….)

  7. Davy on Mon, 28th Dec 2015 4:10 am 

    Anonymous, what part of Canada are you from. I am doing a personal study of the place. Just curious.

  8. Go Speed Racer on Mon, 28th Dec 2015 4:20 am 

    The last recession started 9 years ago. Since then, the Americans have gotten dumber and fatter.

    Such generous portions of stupidity, should help to make our next recession much more severe.

    Escape to Canada. Live in a shack in the woods.

  9. Davy on Mon, 28th Dec 2015 4:46 am 

    2016.

    This appears to be the year shaping up to be the year the economy begins a “noticeable” decline. The current numbers are just within an envelope of manipulation to mask what is clearly segmented recession. We have had enough economic activity to claim we are not in recession.

    The reality is different if you look at regions, population segments, and business sectors. For example oil and gas was in a huge expansion but now is in contraction. Some areas had high end housing growth we now see this under preasure. The wealthy have seen net worth gains but I suspect a strong market contraction will leave many in this group feeling diminished.

    If we look around the world the picture is a clear recession especially in resource republics like Canada and industrial export nations like China. The economic numbers in China are fantasy numbers. Everyone knows this but the facade of growth must be maintained in China for global health. All countries rely on China so a Chinese crash cannot be acknowledged without acknowledging a global slowdown. China is such a huge country there are still plenty of indicators people can call upon to argue growth. Car sales are one I hear constantly or oil consumption.

    We are now really in a phase of confidence and status quo empathy that allows continued global liquidity. There are so many negatives but the habituation to status quo behavior supersedes this. All those moral hazards of “good news is bad news”, “extend and pretend”, and false economic narratives allow the frog to boil.

    What are investors to do anyway? Where can you take money when there is no certainty. Price discovery is relative. Valuations shift with this broad based moral hazard. When lies are legitimatized anything is possible.

    This is where we are and that is anything is possible in the realm of decline. When your economic narrative is a house of cards any card can collapse the house.

    We are in for some serious surprises. It is hard to tell if we are going to see a severe economic adjustment but we will see the stage props in taters. The play may go on with the audiance in horror but no panic and rushing to the doors. There are no doors is the problem so even if the house of cards starts to fall we may see it fall in slow motion. There is no reason why this economic collapse has to be a loud bang.

    That said the pain and suffering will be the same. What is worse a quick pain or a slow drawn out debilitating pain? We are facing quick pain or slow unmanageable pain with no medicine.

  10. Davy on Mon, 28th Dec 2015 5:11 am 

    We are seeing a lot of news out of the land of milk and honey lately most not good. Got Gold?

    http://www.zerohedge.com/news/2015-12-27/what-gold-does-currency-crisis-canadian-edition

  11. markisha on Mon, 28th Dec 2015 6:24 am 

    makati I must disagree with you . Every country in this world is made of same type of people so USA is not worst then others believe me

  12. JuanP on Mon, 28th Dec 2015 6:53 am 

    Markisha “Can you imagine any other country on the world to be left as an only superpower, things would be much worst I think”

    Not necessarily. I can hardly see how things could get worse if some other country was in power. This global financial, economic and political systems created, dominated, and controlled by the USA are literally making the only world we have to live in uninhabitable, not just for humans but for most living species, too. How could the world be any worse than it is? I honestly can’t imagine it. I sometimes wish the Nazis had won WWII, because I am convinced they couldn’t possibly have done worse.

    I can understand Americans living in denial making that claim, though. You need to live with yourselves and you will invent any story to calm your dirty consciences. The basic point, Markisha, is the people of the world simply want Americans to pack their bags and go home to America. We don’t want Yankees occupying, attacking, bombing and stealing from our countries. Is that too hard for you to understand? Would you like to have your country bombed for no good reason? If you can’t help yourselves and stop bombing shit, then please, by all means, knock yourselves out by killing each other in the USA and leaving the rest of us alone to live our lives in peace the way we want.

    Yankees go home! You are not welcomed anywhere else.

  13. Davy on Mon, 28th Dec 2015 7:07 am 

    Markisha, you hit on a point I mention often and the geopolitical gamers deny. The rest of the world is part of the same game. Russia and China are behaving just as bad and have the potential to be much worse.

    Russia is a mafia run country where anything is possible with a megalomaniac mafia don running the show. This don has a willing and able military very happy at the opportunity to flex its muscle.

    China is a communist run capitalistic system seeking world domination economically along with increase region domination of Southeast Asia.

    These countries have little freedoms to speak of with little or no checks and balances. We have people on this board claiming this is what we need for honesty and integrity. We basically have a global world in an out of control descent at all levels. Anyone preaching winners and losers in this environment is blinded by ideology.

  14. markisha on Mon, 28th Dec 2015 8:30 am 

    Thats right Davy. and Juan can you tell me any better sistem other than capitalisam. Which function of course not on the paper. I don’t like capitalisam but unfortunately there is none. I have never been in America , my wish is to visit it one day, to see it from first hand.

  15. Davy on Mon, 28th Dec 2015 8:47 am 

    Merkisha where are you from?

  16. makati1 on Mon, 28th Dec 2015 8:50 am 

    markisha, the US is one of the most dangerous places on earth. 100 people per day are killed in car accidents and thousands hurt. Then there are the 100 murders everyday. 20% of the population are on tranquilizers and other mood drugs causing an average of one multiple terrorist activity every day. The food is mostly genetically modified and has residues of poisons left for you to consume. Everything you do is spied upon and recorded by the government.

    So, come and see for yourself, if you are not from one of the banned countries or a minority that will be persecuted by the narrow minded, uneducated populace. The US is NOT as portrayed in movies or TV. Not even close.

  17. GregT on Mon, 28th Dec 2015 8:53 am 

    “Juan can you tell me any better sistem other than capitalism.”

    In case you haven’t been paying attention markisha, capitalism has nearly run it’s course. When it is finally done, we will not have a planet left that is capable of supporting life as we know it. Destroying the planet at the expense of life itself, to temporarily line the pockets of the greedy few, is hardly the best system that human beings have ever come up with.

  18. paulo1 on Mon, 28th Dec 2015 9:00 am 

    Davy,

    Hey ho and all the best 2016.

    I have learned, as a very proud Canadian, to separate the American system from the American people, and did so long ago. Our Canadian Bay Street parasites now pulling Trudeau’s strings are hand in glove with Wall Street and London. Indeed, our Brit heritage and American proximity ensures this. Shit floats on top of the water no matter what country the lake is in.

    The Zero Hedge articles on Canada’s demise are laughingly overstated and alarmist. If you take the following sectors away from our supposed dire economy, over-priced properties in Vancouver, Victoria, Toronto, and a few other places, plus…the folks in the oil sector who leveraged their insane wages into a debt orgy of buy any toy you feel like, most of our country is doing just fine.

    To quote my favourite ex-employer who died about 15 years ago; “, yeah it looks pretty shitty this winter and we probably won’t turn a prop, but the little old guy (his partner) will work his trapline and I’ll run the town grader and plow…..we’ll be just fine. And you guys made enough this season to get by through the winter. We’ll be alright”.

    Most of our respective populations have forgotten how to suck it up and get by….get better….survive. Even in small towns the mindset is urban; the same clothing, styles, fast food, video games, dumb phones, whatever. But when push comes to shove those that want to survive will do whatever it takes for themselves and their family. We always had a big garden, a deer or two in the freezer, sheds of firewood….and that was when I lived in town. I used to raise rabbits when times were tough, for food. We ate well, very well. We have never missed a meal.

    My question to you is: when it gets skinny and tough out there, do you want to live in a country that has ample resources, water, land, and space…. that is cooperative in nature as per single payer medical coverage and fiscal transfer payements across the Provinces and Territories? Or, do you wish to remain in a country that is over-armed, divided, with extreme divisons of wealth and opportunity, which suffers frightening weather fluctuations of drought, wind, and flooding, and actually considers a Trump or Clinton leadership as a viable answer to stability?

    It’s pretty sane up here, boyo, trust me. On Christmas Eve we had our usual gathering of folks whose family is dispersed. It was a house of: fishermen, an ironworker, teachers, professors, ex-military, a horticulturist, a stage set designer, pilot,cook/chef, and faller. Some were from the city, some from Australia and Europe, and some from remote coastal inlets. There were even a couple of ex-Americans. The common thread was our friendships. Every one of these folks have a home paid for, money in the bank, and are in mostly good health. Most are prepared for a stark future, although many do not appreciate the gravity that you and I seem to share. Even my thirty something kids would be able to suck it up and get by in a downturn as well as most of their friends.

    Anyway, Zero Hedge is entertaining, but is mostly a negative flippant joke (especially the commentators). I wouldn’t put too much stock in what they write about Canada.

    regards….paulo

  19. Rodster on Mon, 28th Dec 2015 9:03 am 

    “The US is still in a recession, IF you look behind the lies and spin.”

    NO, if you look past the lies and spin the WORLD has been in a DEPRESSION since 2008.

    There fixed it for ya !

  20. makati1 on Mon, 28th Dec 2015 9:08 am 

    Rodster, still sucking up that government Koolaid, I see. LOL

  21. markisha on Mon, 28th Dec 2015 9:15 am 

    GregT
    TELL ME THE BETTER ONE
    Davy I am from Serbia

  22. markisha on Mon, 28th Dec 2015 9:18 am 

    Makati I v heard different opinions, but anyway it is not black or white I know

  23. twocats on Mon, 28th Dec 2015 9:24 am 

    http://www.bloomberg.com/news/articles/2015-12-28/the-year-nothing-worked-stocks-bonds-cash-go-nowhere-in-2015

    2015 was a flat to down year across the sum of markets. What changed? No QE, which ended in October of 2014. So now we have an economic system that is inscrutable, with no foundation. Every new event is now a potential Black Swan, and it won’t take a very dramatic occurrence to capsize the global economic ship.

  24. Rodster on Mon, 28th Dec 2015 9:26 am 

    “Rodster, still sucking up that government Koolaid, I see. LOL”

    I guess you’re so used to drinking Asian kool-aid that you can’t fathom that the entire world went into the crapper in 2008. 😉

  25. GregT on Mon, 28th Dec 2015 9:28 am 

    markisha,

    Small local communities based on familiar and societal cooperation, and environmental stewardship and sustainability. The exact opposite of capitalist consumerism.

  26. Rodster on Mon, 28th Dec 2015 9:29 am 

    GregT on Mon, 28th Dec 2015 8:53 am

    In case you haven’t been paying attention markisha, capitalism has nearly run it’s course. When it is finally done, we will not have a planet left that is capable of supporting life as we know it. Destroying the planet at the expense of life itself, to temporarily line the pockets of the greedy few, is hardly the best system that human beings have ever come up with.

    ^^^^^^^^^^^^^^ This !!!!

    I couldn’t have said it better, bravo.

  27. makati1 on Mon, 28th Dec 2015 9:29 am 

    Rodster, I have an open mind. You do not appear to have one. 2008 was bad, but most of the world pulled out of it and moved ahead. The West and it’s wannabees didn’t.

  28. markisha on Mon, 28th Dec 2015 9:33 am 

    greg, on the country scale ,

  29. Rodster on Mon, 28th Dec 2015 9:35 am 

    The money system we have in place today requires that we consume, consume, consume to keep the hamster in the cage from stopping. Except the hamster is winded and if it keeps going it will drop dead.

    Just look at what’s happening in Asia as the world slows down even more and China has NO clue what to do with it’s overcapacity and oversupply. That’s why things no longer last. It’s not intended to because it if doesn’t break or replaced the global eCONomy grinds to a halt.

    We are at the end game just by witnessing all the games the Central Banks are playing around the world. Eventually people won’t be able to take on anymore debt and the system collapses because it’s already in a terminal state, only kept alive by global Monopoly money. Que up the hamster !

  30. Rodster on Mon, 28th Dec 2015 9:39 am 

    “Rodster, I have an open mind. You do not appear to have one. 2008 was bad, but most of the world pulled out of it and moved ahead. The West and it’s wannabees didn’t.”

    Oh really!? You have an OPEN MIND Mak? Your open mind consists of Asia doing good and the West sucking wind.

    I on the other hand along with Davy and Greg have been telling you, we’re all in the same sinking boat. There will be NO winners, we all lose. You OTOH think Asia will escape because it’s Asia and you’re better than the rest.

    To quote a line from the movie the Princess Bride: “Maybe that word doesn’t mean what you think it means”. You have a pretty distored view of an open mind, sir.

  31. Rodster on Mon, 28th Dec 2015 9:43 am 

    And Mak you seriously need an education on economics because your view is totally way off and wrong !

    The only reason China did not collapse was because they dumped nearly $35 TRILLION of monopoly money to keep the hamster running in it’s cage. Just from the BDI numbers alone, China has slowed waaaaaaaay down. Core commodity prices have been in free fall to reflect that. They are selling copper and iron at a lost. So yeah, in your world I guess China is doing great.

  32. joe on Mon, 28th Dec 2015 9:44 am 

    I’m sorry, I don’t agree with anyone here. Demand is causing a limits to growth issue. China has not used the US in the way it did in the last business cycle, even with zero interest rates, the last recession in 08 was the biggest scam in history. They lent to the world at low rates, then jacked up the rate when everyone got hooked, then they pulled the plug when nobody could pay.
    https://www.newyorkfed.org/markets/statistics/dlyrates/fedrate.html

    Europe was the same, China almost collapsed but it’s economic sovereignty saved it because it could intervene directly in its market, and Obama used TARP in the same way to save the US by forcing banks to take loans to save them.

    Now at 0.25 interest rate they are hoping that nations will start getting into debt again. So this is the beginning of a new cycle, and while some nations may practice caution, the banksters have played this song many times, and know it well.
    We are at more risk now from overpopulation, caused by aging in terms of driving forward demand, because old people globally don’t drive much and use more government resources, so the question will be if governments will simply pay for spending themselves, or make young workers do it. One side causes risk and the other squashes demand.
    This (and GW) will likely be the main prime movers of economic policy in the future, so bumps aside, expect massive disagreements over government spending, which is why people like Trump want to shape the future, they don’t want to be the ones paying.

  33. GregT on Mon, 28th Dec 2015 9:53 am 

    markisha,

    Countries are tax farms for the elite. Nothing more than imaginary lines drawn in the sand used to control human livestock. When one is born into such a system, it is difficult to imagine
    life outside of it. This is known as normalcy bias. Those humans that do manage to make it through the bottleneck, (if any do) will need to rethink their relationships with one another, and with the planet that has given all of us life. If they do not, our species is a dead end.

    To see the farm, is to leave it.

    https://www.youtube.com/watch?v=Xbp6umQT58A

  34. markisha on Mon, 28th Dec 2015 9:58 am 

    Now at 0.25 interest rate they are hoping that nations will start getting into debt again .
    how can somebody go into the debt when he didnt do it with 0% int rate.

  35. markisha on Mon, 28th Dec 2015 10:00 am 

    Yes Greg but there is no escape from those farms we are screwed . So capitalism is the only functioning system like it or not. What will be next we will see.

  36. GregT on Mon, 28th Dec 2015 10:18 am 

    markisha,

    Do you believe that capitalism is a viable system for a family? How about for a small local community?

    “So capitalism is the only functioning system like it or not.”

    Capitalism is not sustainable, whether it is currently functioning or not. Any system built on infinite exponential growth will ultimately collapse in on itself. We either learn our lessons and change our ways when this system collapses, or we will continue down the path to planetary extinction. It doesn’t get any simpler.

  37. markisha on Mon, 28th Dec 2015 10:19 am 

    Nice link greg. Yes few individual can escape from the farm I almost get away with it hahahah, but I ve lost the illusion long time ago , 90% of humans are sheeps and that”s why we have farms on the first place, and as I said the best farming system is capitalism don”t you see hahahah

  38. markisha on Mon, 28th Dec 2015 10:22 am 

    Capitalism is not sustainable, I agree but that s all we’ve got. Yes the families function today as corporation, everything else are the exceptions which confirm the law , unfortunately

  39. Rodster on Mon, 28th Dec 2015 10:42 am 

    joe on Mon, 28th Dec 2015 9:44 am

    Demand is causing a limits to growth issue.

    —————————————-

    I don’t agree with you there. DEBT is causing limits to growth. Demand is way down because the plebs are tapped out.

  40. JuanP on Mon, 28th Dec 2015 10:43 am 

    Markisha, I am not for or against any particular system. As far as I am concerned the problem is humans, not systems. Systems designed and operated by humans will be defective by definition. The only systems I care for are natural systems, and all economic systems, particularly capitalism, are responsible for destroying the natural ecosystems I love. I just spent an hour weeding and mulching one of the butterfly gardens I manage and planting milkweeds, I couldn’t care less about human systems, I don’t believe in any of them. I don’t believe in democracy, either.

  41. GregT on Mon, 28th Dec 2015 10:44 am 

    I don’t believe that human beings collectively have the ability to change markisha. Greed is too powerful a motivating characteristic. The only thing that will ultimately keep us in check, will be the natural environment that we believe we are somehow in control of. We aren’t. Overshoot is going to catch up to us, in a very bad way.

  42. ghung on Mon, 28th Dec 2015 10:50 am 

    Economic systems are ultimately adaptive to resource, environmental and energy constraints. Since our current form of capitalism requires immense amounts of everything, it’s a sure bet that economies will adapt to something very different in the not-too-distant future.

  43. markisha on Mon, 28th Dec 2015 10:58 am 

    Yes Juan the problems are humans. and good for you if you can avoid them but that is very difficult , and we are social beings we need company. As “stupid “Marx once said homo economicus on the first place so unfortunately we need some kind of economic structure to live in.

  44. JuanP on Mon, 28th Dec 2015 11:00 am 

    Markisha, Welcome to the forum. I have strong opinions, but I also welcome different views. I hope you stay around. We have a lot of fights here, but we are an extraordinary bunch of exceptional freaks.

  45. JuanP on Mon, 28th Dec 2015 11:09 am 

    Yes, Markisha. We do need some form of economic structure, and I have no idea what it should be, but my intuition tells me more primitive and equitable societies had something going there. Unfortunately, those societies didn’t stand a chance against more sophisticated, expansive, aggressive, violent, and unequal ones.

    And, no, I haven’t managed living by myself. I wish! I live sorrounded by more than 10 million people in South East Florida and they drive me crazy every single day.

  46. markisha on Mon, 28th Dec 2015 11:14 am 

    Greg , if we don’t change collectively we are caput

  47. Rodster on Mon, 28th Dec 2015 11:26 am 

    markisha on Mon, 28th Dec 2015 11:14 am

    Greg , if we don’t change collectively we are caput
    ——————————————
    I don’t see change happening because of our current money system. We have danced, fell in love and got married to fractional reserve banking. The current eCONomic system has been built around it. The entire planet is locked into it and the BRICS and AIIB Banks are just offshoots of our current Banking Cabal.

    It’s what’s driving infinite growth on a finite planet. It the economic wheels stop so does the planet. It’s the reason all the central banks are doing what they have to, to keep the system from imploding. And when it does and it will, everything comes to a grinding halt, including Asia.

  48. markisha on Mon, 28th Dec 2015 11:31 am 

    yes juan we will see whats a gonna be

  49. markisha on Mon, 28th Dec 2015 11:35 am 

    It must be good for us hahahahah that s why there is no changes

  50. joe on Mon, 28th Dec 2015 12:57 pm 

    Debt at 0% means paying back the ‘principle’ only, it’s still debt though. Bonds and money 101, debt issued at 0% needs no economic growth to pay it back, that’s why so called lift off has been so cautious, because inflation is low, there is little to kick economic activity on, interest is like a speculator whipping a donkey.

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