The Illusion of Stability, The Inevitability of Collapse
The comments below are an edited and abridged synopsis of an article by Charles Hugh Smith
Beneath the illusory stability of rising GDP, the extremes of debt, leverage, stimulus and speculative frenzy required to keep the phantom wealth bubble from imploding are all rising parabolically.
Imagine being at a party to celebrate the vast wealth generated in the last ten months in stocks, cryptocurrencies, real estate and just about every other asset class. The lights flicker briefly but the host assures the crowd that the generator powering the party is working perfectly.
Being a skeptic, you slip out on the excuse of bringing in more champagne and pay a visit to the generator room. To your horror, you find the entire arrangement held together with duct tape and rotted 2X4s, the electrical panel is an acrid-smelling mess of haphazard frayed wire, and the generator is overheated and vibrating off its foundation bolts. Whatever governor the engine once had is gone, and it clearly won’t last the night.
The party is the US economy, and the generator room is the Federal Reserve, its proxies and the US Treasury, all running to failure. What we’re experiencing in real time is the illusion of stability and the inevitability of collapse. Smith has prepared a few charts to illuminate this reality.
Smith details the illusion of stability and says collapse is now inevitable: Parabolic blow-off expansions generate instabilities that cannot be suppressed by doing more of what’s failing; that is called run to failure for a reason: The only possible outcome is systemic failure, i.e. the collapse of the phantom wealth bubble, a collapse which will bring down the entire machinery of bubble-blowing.
“Before you pop that bottle of champagne, you better check out the generator room first. Duct tape, frayed wiring, the scent of overheated metal and rotted 2X4s are not going to keep the party lights going much longer.”