CT Blue

Pam Martens, at Wall Street on Parade, reviews the evidence for a worldwide deflationary spiral:

Collapsing yields, collapsing commodity prices are the result of distorted income dispersal, otherwise known as income inequality.

Last August, researchers at the Federal Reserve released a study showing the fragility of the U.S. consumer. The Fed’s Division of Consumer and Community Affairs found that 52 percent of Americans would not be able to raise $400 in an emergency from their checking account, savings or borrowing on a credit card that they would be able to pay off when the next statement arrived.

There is a delicate equilibrium of income distribution that sustains growing economies. When income distribution becomes insanely skewed to the top 10 percent, deflation is the inevitable outcome.

To express it another way, when workers are stripped of an adequate share of the profits of their productive labors on behalf of the corporation, they can’t consume an adequate amount of the corporate output. Supply gluts develop and deflation follows.

I have read similar analyses elsewhere, which leads me to believe that the current economic good news may be transient; we are reaping, perhaps, the benefits of lower oil prices, while we have not yet experienced the bad effects of the conditions that led to that price decline.

Income inequality, sooner or later, will come back to at least nip the hand that fed it.

Someone, though apparently it's not clear who, once said that god takes care of fools, children, drunkards and the United States of America. I'm afraid that god may very well be off his game as we look ahead, if we are indeed heading toward yet another economic downturn. Timing was fairly good the last time around; the people responsible for the Great Depression were in power when it occurred, and they were replaced by the right people as soon as the country had a chance to do so. But we mustn't fool ourselves into thinking that it was a result of rational thought on the part of the voters. Hoover was in when it happened; he promised more of the same; so people voted for Roosevelt. It just so happened that the non-existent god, in his wisdom, lined things up just right. The people who got the blame deserved it, but that was largely fortuitous.

Fast forwards to 2016, the year everyone on our side thinks will be a walk away win for us. Assume, for the moment, that the economy is in free fall. Who you gonna blame? It won't matter that it is Republican policies (and, to be honest, Democratic craveness) that have gotten us where we are, nor will it matter that they will run on the promise of giving us more of what got us into trouble in the first place. They will be pointing the finger at Obama and the Democrats, and they will win, even if they nominate a crazy person, which they likely will. All three branches of government will be controlled by people who are, to be as charitable as I can be, close to certifiably insane.

Now, there is always a silver lining. It won't take long for people to realize that the Republicans only made a bad situation worse, despite the efforts of the beltway propaganda machine to cover for them. 2018 might be a good year for us, if the Republicans don't change the laws and prevent us from voting, and 2020 might be even better. We might even be in a position to gerrymander ourselves into a Congressional majority. But by then it really might be too late. They'll be able to do a lot of damage in four years, and it could be irreperable. So, here's hoping Ms. Martens is wrong about the coming crash, but don't count on it. God has been distracted by a bunch of fools, children and drunkards, and his attention has strayed from the USA.