Just as the world failed to realize in 1914 that it was atop a powder keg about to explode in the catastrophe of the First World War, similarly today economy watchers are complacent and ignore the dark clouds that are about to burst.
It was only a few years ago that the world’s economy appeared to be on the verge of collapse. Banks were in distress because of bad loans, the housing industry was suffering from the crash triggered by over-leveraged buyers, corporate profits were in a steep decline, and automobile sales fell drastically.
Then the U.S. central bank poured literally trillions of dollars into the monetary system and managed to stave off an imminent disaster.
A grand illusion appeared, based on the fanciful notion that money printing and trillions of dollars of budget deficits would once again entail an economic recovery. If that were the case we all should move to Zimbabwe, which carried similar measures to a ridiculous extreme. The foregoing is like psychics, illusionists, who claim that supernatural events such as ringing bells and levitating tables are taking place.
Over the past five years something similar is occurring in our economy. Unemployment rates are declining only because hundreds of thousands have dropped out of the labour market as there are few full-time jobs that could be pursued.
Consumer prices supposedly are stable if one “adjusts” for quality improvements and permits substituting expensive items with less cost alternatives, and share prices are not over-priced compared to the artificially low interest rates.
Yet Yale economist Robert Shiller has stated that, taking inflation into account, share prices are more than 50 per cent above reasonable levels. The surprising situation is that so many people accept that all is well; widespread complacency is at a many-year decade high.
Lets us look at the facts.
Inflation is raging in bubbles such as top level real estate, share prices have been rising based on higher price-earnings ratios. The price of collectibles has gone to absurd levels. John Kennedy’s rocking chair and Michael Jackson’s gloves commanded ludicrous premiums; real estate prices reached such an alarming level that government authorities feel compelled to take counter-measure.
Gold prices, a barometer of the economy, are manipulated, and no one is allowed to know if U.S. gold reserves actually exist. Inevitably, fatal concerns will appear, and those who are true believers will have a day of reckoning.
Some time ago the great U.S. magician, Houdini, tried one trick too many. He assumed that the past is a prologue to the future. His final stunt led to a fatal conclusion.
Clearly, the current crop of Houdini-like mimics should remember that!