The Great D beats the Best O

In the world of American style football, it is often said that a great D always beats a fantastic O.

In this example the great D here is called a Great Depression which beats a Fantastic Opulence, which is what has transpired in the transference and velocity of wealth.

Time Magazine published an article on Monday, September 19… 1938 called “Concentrated Wealth”.

The article stated:

“Piqued by the saying that there was increased concentration of wealth, Dr. Rufus Stickney Tucker, rumbly-voiced associate economist for General Motors, year ago began studying The Distribution of Income among Income Taxpayers in the U. S., 1863-1935. His chief conclusions, which he presents in a mass of charts: There is a great concentration of wealth, but it is far less than it once was, for "persons with incomes equivalent in purchasing power to between 4,000 and 10,000 1929 dollars have become a much larger proportion of the population since 1916, and those with incomes equivalent to $50,000 or more have become a smaller proportion.” 

In the soon to be released October 10, 2011 Time Magazine, author Jeffrey D. Sachs writes: 

“America was once the great middle-class society. Now we are divided between rich and poor, with the greatest degree of inequality among high-income democracies. The top 1% of households take almost a quarter of all household income--a share not seen since 1929. An economy this lopsided cannot prosper. The poor and working classes are squeezed. The rich are increasingly absenting themselves from the country's troubles. Their businesses sell goods and outsource jobs to China; their homes are behind gated walls; much of their corporate income is in offshore tax havens.”

Forget Gov. Rick Perry’s insensitivity, in modern times, as a young American of the Civil Rights era, ever thinking of endorsing or using the “N” word on a commercial establishment. The number one forgotten word, ironically proposed as the rationale for having Ben Bernanke in charge of the Federal Reserve in the first place. “D”epression.

It is the taboo of the airwaves, boob-tube and political pundits, be it the incumbent President and the veritable loons in the GOP, save Rep. Ron Paul and Gov. Gary Johnson, that refuse to call IT what IT is… an "F-styled" DEPRESSION. Ok, it’s not a complete F-styled yet. But it is a depression with a capital “D” and it’s getting ready to become a classic F-styled Depression at any given time, given the instability of socio-economic variables that surround the so-called recovery.

Eight months ago, on Valentine’s Day, in the midst of our so-called “economic recovery” the following are market comparisons of the debt, equity and commodities leading indicators for the capital markets compared with today.

Starting with the U.S. Treasury yield curve, one might say it looks rather normal with short run maturities occupying the lower end of yields and longer run occupying the upper band of risk free rates.

A closer inspection however shows that the slope and grade of returns that would compound over time couldn’t feed a mouse farm from anti-biotic tainted rotting grain stock.

Ten years ago, post 9-11 and post tech market crash, at the beginning of 2002, headlong into a recession and a yield trough, rates still reflected a marginal risk free return and the impetus to lend to small business.

Keep in mind that the VIX is the volatility index on the S&P 500, or better known as the fear index. Also keep in mind that oil, not gold, is a harbinger for inflation, consumption, industrial production and output, has slipped dramatically from year to date highs of $113 in April 2011. 

By the classic definition is “a severe and prolonged recession characterized by inefficient economic productivity, high unemployment and falling price levels. In times of depression, consumers’ confidence and investments decrease, causing the economy to shut down. The classic example of this occurred in the 1930’s when the Great Depression shook the global economy.”  

Liquidations 

Run, run, run away and live to steal another day. 

The real story is the difference between 2002 and today. The last 8 months have been a colossal disaster in terms of asset liquidations: 

Gold up from 1,365 to 1,900 and down sharply to 1,600;

Oil up from 84.81 to 113 and down sharply to 77;

Dow Jones Industrial Average up from 12,680 to 12,800 and down to 10,500, down 17% along with every other major stock market index, while the fear index, the VIX soared over 177%. 

Yet in all of the glory of growth… all market averages are flat to slightly higher than nearly 10 years ago! That is an astounding loss of compound wealth, kneecapped by a jaw dropping loss in real property values. 

Add this to a downward slopping yield curve and if these numbers compounded by a loss of resources and high unemployment don’t spell... D-E-P-R-E-S-S-I-O-N, then it is truly a loss of American intellect and understanding as to what is really going on in the United States of Depression. 

It’s no wonder the top 1% of the wealthy in America have gotten 23% of all new wealth created and/or transferred in the U.S. in the last ten years versus the historical average of 9%. 

If the wealthy are hiding their money, I can’t say I blame them. 

If they’re keeping competition at bay by the contrarian support and saber rattling against illicit regulatory burdens that kill small business but only hurt big business, it suits big business just fine the way things are going. Less employment, means less cost burdens, means higher productivity, means better earnings, but ultimately, given the risk return metrics of this market about to turn itself off, means cannibalism. 

Here’s the liquidation tale of the tape: 

Gold selling off into liquidation – Bubble Pop Bubble Gum Blow Off Winner of 2011.

Oil selling off into deflation and depressed global economic condistions – 2^nd Place

Treasuries, the modern day mattress money bank of the 2^nd millennium – 3^rd Place.

Stock Market Indicies down again – 4^th Place. 

A Treasury Trove of Vomit

At zero, where do you spring hope eternal? Yields are flat and getting flatter as a result of Project Twister, the Federal Reserve’s latest and greatest trick to tame inflation and support a low rate regime for lending. 

Lending? Is that the joke of the decade? 

What lending? 

This country is in a depression. I didn’t cause it, I’m just depressed by it like everyone else trying to create new jobs through an entrepreneurial spirit that has been capsized by idealism in a new age communal ideology that taxes should pay for walking zombies like banks, the unemployed and new government jobs that pay the highly innovative and upwardly mobile creators of tomorrow’s economic growth with today’s line employee capacity to stand around and do nothing. 

Lift your glasses and toast! Here’s to the great recession once again and if you catch someone pressing their tongue to their teeth to spout the big D… shoot first, censor and stop them before they spread common sense.