The Crash Course - Chris Martenson [118]
For their part, the markets, especially the bond markets, have become impatient and are showing signs of severe strain, with aggressive sell-offs and rallies beginning to resemble the violent lurching of a fast-moving car that has just lost its grip on a wet road. The whipsaws take out a couple of sizable hedge funds, creating new opportunities for the central banks to ride to the rescue and bail out the broken bets of the well-monied risk players. Public opinion of such bailouts is at an all-time low, so these interventions are now carried out in as much secrecy as possible.
The data the summit participants have before them is truly puzzling. Asia, especially China, is still enjoying economic growth, whereas the developed world is mired and sinking. Some point out that China isn’t burdened with the same debt loads as the developed world, assuming, therefore, that this must be the root of the problem. Others note that China produces actual things, while the developed world has become overly dependent on financial services that produce wealth by virtue of their ability to shuffle paper back and forth, so perhaps the problem is fundamentally one of production. Still others note that a command economy like China’s might have some advantages after all.
On day two of the meeting, an energy analyst responsible for one small piece of the data landscape quickly recounts her part to the assembled teams: Global oil production, while down from last year, is still sufficient to supply the markets, because the developed world is using less oil as it sorts through its economic troubles. China continues to import more coal and now accounts for 55 percent of world consumption of this resource, which, again, isn’t an issue at present for the developed economies because their own demand is down. Because there are no major issues over energy supplies at present, the participants quickly turn their attention back to the pressing matter of jump-starting the economies of the developed world.
Ideas are bandied about, but finally, inevitably, the decision is made: They must be bolder than before—a true crisis calls for true leadership. It’s time to double down on the amount of thin-air money that is printed up and distributed into the economy through a complicated variety of quantitative easing efforts and governmental fiscal stimulus.
The markets go wild—for a while. In nine months, the efforts wear off, the economy resumes shrinking, and yet China continues to consume more and more energy. The developed world remains stuck in an economic rut, puzzled as to why fiscal and monetary policy no longer seem to be working. They decide, boldly, that next time they’ll have to pull much more aggressively on the fiscal and monetary levers than ever before, because the problem must certainly be one of insufficient quantity. They soon do this in marvelously coordinated fashion, with every media outlet faithfully repeating the prepared talking points, but once again, the results prove to be disappointing.
All are stumped, all are mystified; the tried-and-true theories have failed again. More money, more liquidity, more spending . . . but it has not worked this time as it has in the past. What could be the problem?
Unemployment continues to climb. Individual U.S. states are nearly fully insolvent, due to a combination of excessive pension promises that are now coming due and falling state revenues. Whole industries, especially in the discretionary sectors, fare especially poorly, even as basic goods and services manage to neither grow nor shrink. It’s almost as if the simpler industries are somehow more robust than the complicated ones. Along the way, there are numerous false rallies