MARK MCHUGH: According to Wikipedia,
Narcissistic personality disorder (NPD) affects one percent of the
population and has little to do with looking at yourself in the mirror.
It has a lot to do with unrealistic fantasies of success, power
and intelligence. Some NPD sufferers become cult leaders or mass
murderers, the rest become economists and policy-makers. Despite
having a highly elevated sense of self-worth, narcissists have fragile
self-esteem and handle criticism unpredictably, so let’s keep this to
ourselves….
Velocity of money is
the frequency with which a unit of money is spent on new goods and
services. It is a far better indicator of economic activity than GDP,
consumer prices, the stock market, or sales of men’s underwear (which
Greenspan was fond of ogling). In a healthy economy, the same dollar is
collected as payment and subsequently spent many times over. In a
depression, the velocity of money goes catatonic. Velocity of money is
calculated by simply dividing GDP by a given money supply. This VoM
chart using monetary base should end any discussion of what ”this” is
and whether or not anybody should be using the word “recovery” with a
straight face:
In just four short years, our
“enlightened” policy-makers have slowed money velocity to depths never
seen in the Great Depression. Hard to believe, but the guy who
made a career out of Monday-morning quarterbacking the Great Depression
has already proven himself a bigger idiot than all of his predecessors
(and in less than half the time!!).
During the Great Depression,
monetary base was expanded in response to slowing economic activity, in
other words it was reactive (here’s a graph) . They
waited until the forest was ablaze before breaking out the hoses, and
for that they’ve been rightly criticized. Our “proactive” Fed elected
to hose down a forest that wasn’t actually on fire, with gasoline, and
the results speak for themselves. With the IMF recently lowering its
2012 US GDP growth forecast to 2%, while the monetary base is expanding
at about a 5% clip, know that velocity of money is grinding lower every
time you breathe.
The Fed’s refusal to recognize the importance of velocity of money quickly goes from idiotic to insidious. Here’s
a question: If I give you 50¢ and as a result of that transaction, you
owe me $1.00, what interest rate have I charged you? Obviously, I’ve
charged you 100% interest and I don’t give a rat’s ass about you or your
kids. I’m pure evil and you’re pure stupid. But believe it or not,
this kind of master-slave arrangement isn’t enough to satisfy a true
narcissist. The narcissist needs to be exalted for his actions, no matter how unjust.
He likes to be thought of as “accommodative.”
In 2011, every dollar of GDP growth created $2.08 in debt. In real life, that’s 108% interest plus the nominal rate, and our twisted leaders want you say, “Thank you sir, may I have another!”
2011 wasn’t an anomaly either; it’s the new normal. Since the Bush deficit increases
(to call a spade a spade) went into effect, the rise in debt has
exceeded the rise in GDP 6 of the last 10 years (the four years of
positive GDP-minus-Debt can be directly attributed to the housing
bubble). That never happened in the U.S. during Great Depression/WWII
era. One place where it did happen was in the Weimar Republic (which
shortly thereafter became known as Nazi Germany) . No one’s ever done a
better job of explaining how quickly things unraveled there than Art
Cashin (this is an absolute MUST read):
In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed.….In 1913, the total currency of Germany was a grand total of 6 billion marks. In November of 1923 that loaf of bread we just talked about cost 428 billion marks.
So I’ve got a whole bag of “Fuck You!” for
anyone who still thinks nothing could be worse than another Great
Depression. The path we’re on ends with mountains of corpses when the
great experiment fails.
America’s most prestigious education
institutions have become grooming salons for malignant narcissists. Men
and women high on their own self-important sense of entitlement, but
short on any sense of honor or duty (like passing a budget or arresting
someone who stole a billion dollars) and devoid of any real insight or
achievement. So far it’s working out quite nicely for them:
Fun fact: Washington DC now boasts, by far, the highest and fastest growing income per capita in America.
No matter what
color Kool-aid you prefer, a Harvard Law School graduate who wipes his
ass with the constitution will occupy the White House until 2016. Any
flavor difference you think you detect is artificial. Neither party
has any intention of balancing the budget or stopping the generational
rape of America. They exist only to give you the illusion of choice.
There’s another
reason nobody wants you thinking about velocity of money and
triple-digit principle-based interest rates. When you get comfortable
with the idea that the same dollar gets spent over and over in the
economy, you’ll begin to reconcile that notion with the fact that total
government spending (Federal, State and Local) accounted for over 40%
of GDP in 2011. Then it becomes clear that you are already living in
on of those countries where the government controls everything (call it
whatever -ism you want). Next thing you know, you’ll start connecting
the dots between the nation’s skyrocketing public debt and the private
fortunes amassed by a select few, and no one who’s in on the fix wants
that.
Better than one in seven Americans are now
on food stamps thanks to Washington’s disastrous policies, but
narcissists refuse to recognize the consequences of their own actions.
That’s how they sleep at night. They see themselves as saviours,
feeding the inferior huddled masses too stupid to fend for themselves,
so of course they deserve more money. The only thing they learn from
shitty results is that they need more power, more control and more
money.
The so-called “fiscal cliff” represents
nothing more than a return to policies proven far less dysfunctional
than the current ones, but Washington doesn’t see it that way. Instead
they want you to beg them to save you from this horrific monster
and adore them when they double down on policies that serve to increase
your dependency on them.
By any and all reasonable measures, it’s
worse than the Great Depression, and still deteriorating. Just remember
that truth is the narcissist natural enemy before you speak.
***
Notes for nerds:
The Fed calculates and publishes M1 velocity, M2 velocity (currently at all-time lows) and MZM velocity
(also at all-time lows), however velocity of monetary base (which has
data back to 1918) must be calculated manually by dividing GDP by
monetary base. Here’s the link to that chart with downloadable data:
William T. Gavins Fed paper on understanding recent changes to the monetary base:
This chart, with downloadable data
compares changes in National Debt vs. Changes in GDP, so it shows how
much bang for the buck you’re getting. 2002-2011, 9.3 Trillion in
National Debt has produced 4.8 Trillion in GDP growth, making the
effective interest rate (based on repaying principal only) 94%.
If you’re not familiar with malignant narcissism (I wasn’t until very recently):
Art Cashin’s terrific piece on the Weimar collapse:
Foodstamp data:
2011 Total Government spending:
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