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Next Stop: Recession!

Chris Martenson profile picture
Chris Martenson


  • We've enjoyed years of "recovery" since the Great Financial Crisis by literally papering over our problems with newly-printed money, instead of addressing their root causes.
  • Despite more than a decade of an "all-hands-on-deck" propping up of the financial markets, all the central bankers have to show for it is the widest wealth gap in history coupled with stagnant wages.
  • It's kind of hard to ask people to embrace shared sacrifice during tough times after the political and financial elites greedily lined their own pockets at the expense of everyone else during the good days.

We've enjoyed years of "recovery" since the Great Financial Crisis by literally papering over our problems with newly-printed money, instead of addressing their root causes.

But we've now arrived at the awkward part of the story; when all of our prior mistakes finally catch up with us, and the plot heads in a much darker direction.

Despite more than a decade of an "all-hands-on-deck" propping up of the financial markets, all the central bankers have to show for it is the widest wealth gap in history coupled with stagnant wages.

That, and a skyrocketing cost of living.

B.S. From The BLS

Depending on which OECD country you live in, you can take your 'official' inflation measure and multiply it by either 2x or 3x to get the true rate.

For example, in the US, we've been told that inflation is running at just under 2% for years. In reality, it's been trucking along at closer to 4% to 6% (for rural and urban dwellers, respectively).

To summarize the situation simply: the central banks have been printing up new money and then handing most of it to the wealthy (via QE, which boosts the prices of the assets the rich own). Then they put on a good show of "worrying about inflation being too low" when the government issues its laughably doctored numbers.

Anybody living in the real world (especially those trying to live on a fixed income) already knows that their actual inflation is much higher than 2%. Ditto for anybody that has bought a car, is paying for college tuition, depends on prescription medication, or has recently been to a hospital.

Here are two examples of how ridiculous the situation is now:

Average New-Car Prices Up More Than 4 Percent Year-Over-Year for January 2019 on Tesla, Full-Size Trucks


This article was written by

Chris Martenson profile picture
Dr. Chris Martenson is an independent economist and author of a popular website, ChrisMartenson.com. His Crash Course video series explores the intertwining significance of the “three E’s”—the economy, energy, and environment and offers articulate, dynamic insight into the workings of our monetary system. Chris earned a PhD in neurotoxicology from Duke University, and an MBA from Cornell University. His background as an educator helps him animate complex material with wisdom and humor. A fellow of the Post Carbon Institute, Chris’s work has appeared on PBS and been cited by the Washington Post. He is a contributor to the Huffington Post and FinancialSense.com. Chris is an accomplished presenter who has offered the Crash Course seminar all over the United States. The online course has been translated into several languages, and been viewed nearly a million times. His website offers ongoing commentary and rigorously factual analysis into financial and energy-related issues and events as they unfold.

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Comments (68)

eh, If I listened to every yahoo with a recession theory, I would have never made a dime in the market.
Your singing the blues and Im your lead guitarist. Thing is politicians are excellent are painting crap. Whatever it takes to ease the pain for my campaign. Its funny how people have been so mad at Trump for his trade war with China because the markets hit some bumps but no one really cared about them stealing our technology. Its hilarious actually how short sighted everyone is. Were all screwed no doubt but forecasting a recession to come soon is simply betting against our politicians. And they dont care much for losing. Any scheme or slight of hand to kick the can further down the road will surely pass.

Who wants to be the guy to save us when all he will get is a 4 year term, booed everywhere he goes tomatoes in the face and a boot in the rear when hes done? Then historians desecrate their legacy by reliving the struggle and lack of popularity during his time. Would you like to live like that? Most people who sell horse crap for a living like our politicians do not want that to be the worlds memory of them. Even if it was for the greater good.
11 Feb. 2019
People won't take action until it cracks them upside their head and the damage is done....
perceptions_now profile picture
Good Luck, WE are ALL going to NEED IT!
We could reduce our wages 50% and still be rich compared to most of the world. We are so spoiled we dont know how good we have it. As a matter of fact, a recession is on it's way, has to be. We made it through all the rest , right? Why are we crying now? Our biggest problems is our terrible spending habits in this country. For Americans , it is so bad they are going to basically self destruct and loose everything. The reason is, well, I hate to say it but so many Americans are stupid. They just need everything. New trucks @ 80K? I'm sure some bone head is out there buying one as we speak and maxing his credit but " needs " it cause it's cool, then he looses his job in 1 yr. He has an I Phone, 600 bucks, a few dogs , $ 2,000 per yr. , trips boats, ETC. and does not save a dime. The problem is worse cause Congress is the same way. These people have no idea our government pick pocketed their credit card, chalked up $67,000 of credit for every person in their household and has not gotten the bill yet. If you tell them this , they will not comprehend and think it's not real. They are that dumb. When they do comprehend, they will say " I'm not paying it" . Not knowing they will with higher prices and inflation and lower standard of living. So, yes , it is going to end badly somehow. When it does end badly, people that have been saving their butts off will swoop up cheap , way undervalued stocks cause stupid people have to cash in to pay for their stupidity. The smart people will also buy their land and houses to rent them back to .. ... wait for it ... ... yep, the stupid people that lost their houses., , and the "wealth disparity " grows even more. It's not the rich mans fault he is smart and frugal, it's the stupid people that are stupid and spend every penny they ever made and then some. I am done feeling sorry for these stupid people.
Let's see how smart the savers feel when Bolsheviks (fun fact: derived from the word большинство, "majority", literally meaning "one of the majority" a.k.a. 99%) come to re-distribute wealth. What you think of as astute investment looks like exploitation by the bourgeois to the proletariat.

From each according to their assets, to each according to their wants is the mantra I'm hearing.
danwatson888 profile picture
Chris - I agree with you that the "wealth-gap" is widening, and certainly politics is making it more difficult to show success or even be successful however, I see no recession in biotech or medtech sectors right now, (maybe later this year?). Some positive news just today on SA =
Respectfully and good luck to all in 2019
Dan Watson
I am long = ($MRK), ($BMY) , ($SGEN), ($REGN) and many other biotech's
Great article, the haters dont get the fact that capitalism isnt working... the so called strongest nation and economy on earth wouldnt have near half its population living paycheck (or welfare check, social security check, etc) to paycheck. The environmental collapse you mentioned is the epitome of this failure, with huge numbers of species facing extinction. Unless you believe in mythology, we are directly related to these living beings that are being wiped out, basically we are killing our family members and calling it cost of doing business .. as far as the market, they will print $$ until they cant
Wesley Pehling profile picture
@mr clark Even the poorest in America have seen their standard of living rise dramatically in the last several decades.
jimbo162 profile picture
So socialism is the answer? Ask those folks in Venezuela how that's working out for them.
Downtown10 profile picture
A large portion (if not most) of those living paycheck to paycheck today are doing so because they can't manage their money and are living beyond their means. They could make $4000/wk and would still be living paycheck to paycheck. Don't blame that on capitalism.

The generation born between 1920-1940 (living through some lean years) knew how to manage money, except they arguably had the opposite problem and are dying with large estates.
hat_trick3 profile picture
here are a few examples why the inflation debate is so polarizing.

1) The cost of credit has collapsed. This has greatly mitigated the effects of rising costs for large expenditures. Consumers have taken on more debt and not really noticed.
Ask yourself who is in a worse position.
1) the 1995 college graduate with $15,000 in student debt at 8.5%
2) the 2018 college graduate with $30,000 in student debt at 3.7%

1) a 250,000 house at 8% mortage in 1995
2) a 500,000 house at 4% in 2018

I remember my first car was $15,000, and I paid 9% on the auto loan. My last car was $38,000, (i paid cash) but the loan option was under 4%.

Both real loans have gone up dramatically, but the the net expense of the borrower hasn't risen so much. Here is inflation, but did it matter?

within the top 5% of income earners, inflation is everywhere, whether it is the lift ticket prices at Vail, the broadway show in NYC, or the beach rental in (fill in the blank fancy coastal town) or how about premium wine or prime steak, or professional legal fees now approaching about $500 per hour in most cities.
but for the bottom 95%, and more so with the lower class, prices for most everything have collapsed, whether it's the $12 for two pizzas deal at the local pizzeria, the cost of buying milk (at aldi or other places, its $2 a gallon, or the cost of gasoline is lvery low, and what about natty gas, or utiliites, we're paying less per Kwh than ever before., Let's also not forget the prices for drugs like marijuana and meth have fallen off a cliff, as have the delivery of nicotine through vaping and the move toward hard spirits like cheap vodka and whisky. Entertainment is mostly free throught the internet and free streaming as is music.
Many more examples.
Wesley Pehling profile picture
@hat_trick3 The products you can buy have also improved dramatically. A phone purchased today is orders of magnitude superior to a similar product purchased in 2008. Modern cars last far longer and have hundreds of features that didn't even exist fifty years ago. The cost of medical care has increased, but the efficacy of that care is much better. People who like discussing inflation seem to pretend that the products available today are exactly the same as those decades ago.
hat_trick3 profile picture
I agree with you.

The same might be said about health care inflation too.
The delivery and efficacy of medicine improves every year...
Hat trick you make some great points,reminds me of the book Freakonomics.
It always amazes me how people poo-poo information they don't like or want to think about. I have no doubt inflation is under-reported as I know where my money goes. The things I think are truly important in your articles concern now we live and ignore reality. We have tremendous problems staring us in the face and we ignore them, or as some slow-witted person above mentioned just because we wiped out a species of tree frog I should be worried. Such immature and callous comments are made by too many people because they don't want to have to give up anything to continue doing what they always do. When the time comes and the economic and environmental collapse occur, these fools will be the loudest whiners looking for someone to blame. At that point who cares how much money you have or what stocks should I buy. Man will have proven he is ignorant, lazy and probably the stupidest species on the planet.

Good article. Thanks!
KIA Investment Research profile picture
"as some slow-witted person above mentioned just because we wiped out a species of tree frog I should be worried."

Funny you call the guy "slow-witted" when the rest of us knew he was 1) being facetious, and 2) making a point.
Stephen Aust profile picture
I'm sitting here at my desk at MarketCycle Wealth Management, looking up.

I have a sign above my desk that states: "If you are correct, but early, then you are still wrong."

I have a second sign that states: "It is not logical to be bearish in a bull market."
Wesley Pehling profile picture
Really bad article. The author claims that nothing has been done to address the causes of the Great Recession. He never described the causes or the failure to address them. He then made some pretty baseless claims about the reported rate of inflation being manipulated by the BLS. People are definitely paying more for cars, but this is because they're buying more expensive cars. My decision to buy a pair of jeans for $100 from Nordstrom instead of a $25 pair from Old Navy would be considered inflation to this author.
This is a silly article. What if I were to point out that oil prices today are less than 50% of what they were five years ago and talk about how the government is obviously covering up DEFLATION? Prices are just collapsing! That would be bogus, just as discussion of average selling price for vehicles is as well. This is just someone who has drunk the koolade and now believes that the government lies in these statistics and America cannot continue to prosper. I get that these people exists; we will always those who accept conspiracy theories. I just think it sad that Seeking Alpha chooses to promote them.
There's no good or bad in the market, there's only your position.

If I can hat trick my performance during and after the last 2 recessions I'll be exceptionally happy. Hell, if I do half as well I'll be ecstatic.

I will agree the timing and depth of this recession could be a bad thing long term. We could definitely see socialism 2020 -- and that's an outcome that's historically been awful for just about everyone playing.
@Leo Plotkin I was doing OK before a greater than 100% loss in a short time.

Now I need 200 bagger, and probably will have to wait for the next recession. Got to double my money 8 times in a row. Only thing is the Fed is so active in this market we might never see a bear market again.
Where the problem lies is even though stated unemployment is very low, growth is as well, which can only mean that the "new" jobs "created" do not pay enough for workers to afford anything.

While debt is increasing faster than growth, which is 2%-3%, with so called record low unemployment something doesn't add up.

If more people are working than before but growth isn't accelerating, than the jobs must be all minimum wage or temporary.

No matter how you slice it, the ballooning debt will be the anchor that sinks the ship, but at least some will profit from increased dividends due to companies buying back billions in stock.
Chicken of the Cave profile picture
Since the blue tree frog is dying off, I should sell all my stocks?

Just recommend you axe the bit about the circle of life and all that jazz... otherwise a thought inspiring article!
I do a lot of pricing in multiple industries on many of the projects I work on and I often refer to BLS and have to laugh at how inaccurate the numbers are compared to the reality in those industries
Inflation probably is 6-8%, true. Recession means nothing to stock prices at this point- actually it means Fed easing and higher stock prices.
Cambridge STR profile picture
I have four mortgages. I love inflation.
Yes, inflation indeed helps the debtor... by both increasing the value of your your real estate holdings (hopefully), while paying off the mortgages in increasingly worthless dollars.
However, you are a sitting duck if a deflationary spiral or crash sets in
jimbo162 profile picture
@lilkanna2018 really? Stocks lose on average 40% during recessions. The bigger the recession the bigger the loses. My charts show recessions hit every 7-9 years like clockwork. You can generally look at car sales as a good indicator, when people aren't buying cars it hits. The numbers are getting scary. With last months polar vortex combined with a 35 days gov't shutdown i expect first quarter earnings to be BAD. I am not saying the end is here but, stocks may be in for a correction sooner rather than later.
JakFrost profile picture
So ..... BLS is an acronym for the Kelley Blue Book?

Or some government bureau of statistics? I didn't catch what it was, although it was often referred to in the article.

Secondly, I do agree with most of the points of this article, although I don't think it in itself was particularly convincing. I think if you already thought this way, it seemed rather true, but if you didn't, you certainly wouldn't be persuaded.

Not a bad article, but not great. I appreciate the work put into it.

Good luck to all!
P.S. I DO think that most (all) of the government statistics are baloney; I try to get a sense of the 'usual' baloney, and trade off variances of it.
I'm wondering with many individuals owing on the federal taxes, that the big purchases will decline, thereby decreasing consumer confidence and hastening the recession outlook.
Cambridge STR profile picture
Possibly: $500 lower refunds on average for 100m households will be $50B removed from spending. With an economic multiple of 2.3, the potential impact could be around 1% of GDP.
Finally an honest article. I will say that a large majority of America is not even ready for a storm let alone a deep recession or depression unlike all others.
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