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The Economic Fractalist
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  • February 2012: The Debt Leveraged, Asset Saturated, Asset Over-Valued Triply Saturated Global Macroeconomy 0 comments
    Jan 28, 2012 2:34 PM
    Saturation Macroeconomics so well describes the end January 2012 terminal 17th week nonlinear implosion time area for US assets and the global macroeconomy.

    From the December 2011 posting ....

    "For the Wilshire a Lammert second fractal of 60-61 weeks (2.5x) ended in August of 2010. The third fractal of 2x 48 weeks ended in July of 2011. The decay fourth is expected to be 1.5 to 1.6x in length or approximately 38-39 weeks."

    " to complete the Federal Reserve's supported QE1 and QE2" 2009 Wilshire *x/60-61/48/38-39 week :: x/2.5x/2x/1.5-1.6x ideal growth and decay fractal."

    This is still the operative fractal pathway ...

    The final 38-39 week Wilshire decay will be an August 2011 9/17 of 17-18/12-13 week sequence ... During the last 13 weeks the foundation for the Euro and the European union will be severely tested and money will flow into US debt instrument resulting in 150 year low interest rates..

    Growth of the US economy and growth of asset valuations have been debt driven phenomena.

    Corporations, large banks, and the rich who have first access to the nation's money own most of the US's 37-38 trillion dollars of debt. That debt has been manageable over the last 50 years because the inflation growth of wages and asset valuations have generally paralleled debt growth.

    But the growth of that debt is approaching an asymptotic level and nearly all of the growth in the economy over the last 3- 4 years can be related to debt expansion by the federal government.

    Total US private, corporate, governmental debt has doubled roughly every 9 years. 4 trillion in 1980, 8 trillion in 1989, 16 trillion in 1998, and 32 trillion in 2007. In the last 4 years total debt has grown to 37.5 trillion with the federal government contributing directly 5 trillion on the books and more off the books.

    With normal 9 year historical doubling of debt growth a total of 64 trillion of US debt would have been expected by 2016 with associated inflation related growth of wages and corresponding low unemployment rates expected. The expected debt load expansion via historical progression would be about 48 trillion in 2012 vice the 38 trillion.

    By 2052 debt growth at historical 9 year doubling times would be 1014 trillion with little problem in paying for entitlements and national defense. Inflation of assets and wages would offset the debt just as they have been doing so reliably over the last 50 years.

    The odd 50 year linear-appearing equilibrium system of debt expansion, wage inflation, asset inflation, and asset creation has met an asymptotic Waterloo caused by asset overproduction, fixed debt related asset over-valuation, US 2000-2010 decade fixed employment, US corporate facilitated world competition stagnant US wages, and now the polarized US two party system owned exclusively by the elite.

    The last asset bubble steepled to the sky by a collusion of an ultra greedy financial industry, politicians, and a laissez faire approach of the private central banks created the asymptotic saturated macroeconomy that now exists.

    The US macroeconomy is now saturated with a 3-8 year oversupply of overvalued housing units and traveling along and against a 38 trillion dollar debt saturation asymptotic line.

    In a milleiu of declining real estates prices, an enormous over supply of overvalued housing, a larger percentage of lower paying service sector US jobs, and with a real unemployment rate of 12-15 using historical employment percentage of population levels- the ability to honor debt obligations on the 38 trillion is suspect. As well US financial industry exposure to defaulting european debt will have further pressure on liquidation of a portion of thie 2012 38 trillion of debt.

    Add to this the ongoing absolutely gridlocked frosty politics of DC where there are no moderates in either US party to reach a consensus. Needed by 2016 is an extra 26 trillion of debt accumulation to match historical 9 year levels and continue the US economic system that has been operative for 50 years.

    Does 2012 represent the macroeconomic system's time area asymptote of new debt creation, asset creation, major asset (increasing) valuation, job numbers, and total wage valuation - a collective saturation asymptotote before a nonlinear decline?

    The Nikkei's current valuation relative to past valuations provide a guide. Only during four years since 1983 has the Nikkei been lower than its current valuation: 1983, 2003, 2008, and 2009. And in each of those years there were higher valuations than the Nikkei's current valuation of 8560.

    The global political arena is strongly biased for retrenchment and resulting debt default. Borrowed funds for entitlements and defense spending directly promote real economic activity and help to increase the debt expansion toward the historical 64 trillion dollar goal by 2016. All government spending has become now a recurrent acrimonious issue of political gaming. There are no statesmen left in the United States. All government spending is on the chopping block.

    Expansion of debt at its historical rate preserves and creates US jobs and maintains debt obligations. All elements the young workers who are looking for a job and the entitled 0.1 percent bond holders win with labor derived wages and inflated asset prices to maintain he viability of existing debt obligations.

    The asymptotic saturated system is poised for a nonlinear devaluation of assets (with the nonparadoxically exception of long term US debt).

    For the Nikkei starting about January 1988 a 57/129/106 of 116 month decay fractal is observable with the third decay composed of a 19/49/40 of 51 month decay fractal. From the October 2008 low the Nikkei is following a 6/15/12/10 of 10 month fractal.

    Notice the monthly lows defining a Lammert fractal series starting in March 2009. A Wilshire 5/13/10/7 month :: x/2.5x/2x/1.5x growth and decay fractal is observed ending in October 2011. The interpolated fractals of interest is a Wilshire 6/15/12/10 of 10 month fractal starting in October of 2008 and a 7/17/14/6 of 10-11 month fractal starting in September 2008.

    And so the Wilshire's quarterly progression from 1982 of 34/85 quarters is further incorporpoarted in the larger 1982 :: 9/23 of 23 year fractal.

    For the Wilshire a 9/17/13 week fractal series starting in August 2011 would conclude the final 10 to 11 months of the 7/17/14/10-11 fractal beginning in September 2008 with lower lows following the 2008 and 2009 weekly fractal patterns and completing the 1988 57/129/ 106 of 116 month Nikkei decay fractal.

    Expect nonlinearity of US asset valuations.

    Expect nonlinearity of US asset valuations consistent with the qualitative characteristics of a debt dependent US macroeconomy now at the limits of a further needed 26 trillion of debt expansion by 2016 to maintain the system's historical debt growth. With repayable debt ultimately denominated in housing prices and wages, only the federal government has the ability to use the nation money system and provide the debt growth needed to maintain asset price stability. Few understand this. Congress is frozen in inaction and lack of understanding of how the system works.

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