- One Last Look At The Real Economy Before It Implodes – Part 1
by Brandon Smith, http://www.alt-market.com/
We are only two months into 2015, and it has already proven to be the most volatile year for the economic environment since 2008-2009. We have seen oil markets collapsing by about 50 percent in the span of a few months (just as the Federal Reserve announced the end of QE3, indicating fiat money was used to hide falling demand), the Baltic Dry Index losing 30 percent since the beginning of the year, the Swiss currency surprise, the Greeks threatening EU exit (and now Greek citizens threatening violent protests with the new four-month can-kicking deal), and the effects of the nine-month-long West Coast port strike not yet quantified. This is not just a fleeting expression of a negative first quarter; it is a sign of things to come.
Stock markets are, of course, once again at all-time highs after a shaky start, despite nearly every single fundamental indicator flashing red. But as Zero Hedge recently pointed out in its article on artificial juicing of equities by corporations using massive stock buybacks, this is not going to last much longer, simply because the debt companies are generating is outpacing their ability to prop up the markets.
This conundrum is also visible in central bank stimulus measures. As I have related in past articles, the ability of central banks to goose the global financial system is faltering, as bailouts and low-interest-rate capital infusions now have little to no effect on overall economic performance. The fiat fuel is no longer enough; and when this becomes apparent in the mainstream, all hell will indeed break loose.
The argument that banks can prop up the system forever is now being debunked. In this series of articles, I will cover the core reasons why this is happening, starting with the basis of all economics: supply and demand.
The Baltic Dry Index has been a steadfast indicator of the REAL economy for many years. While most other indexes and measures of fiscal health are subject to direct or indirect manipulation, the BDI has no money flowing through it and, thus, offers a more honest reflection of the world around us. In the past two months, the index measuring shipping rates and international demand for raw goods has hit all-time historical lows, plummeting 57 percent over the course of the past 12 months and 30 percent for the year to date.