Happy 2016! World equity and commodity markets welcomed in the new year with a record-breaking crash. By now, most will have forgotten how bad it was; many more never heard it when it happened.
In the first week of trading, the Dow Jones made history, falling a whopping 6.2 percent. The Standard & Poor’s 500 plunged 5.9 percent, and the tech-heavy Nasdaq tanked 7.3 percent. From developed nations to emerging markets, the equity-market meltdown went viral. By month’s end, global stocks had wiped out $15 trillion in value.
“Not to worry” was the business media’s and pundits’ refrain. The word on The Street: It’s merely a market correction that presents a buying opportunity.
In fact, former Reagan White House Budget Director David Stockman noted: “…Wall Street continually tells you that the market is not that overvalued. . .
I have pointed out. . . actual earnings are down 15 percent. The market is expensive, it is exceedingly expensive, and it’s really. . . 21 times earnings. Therefore, the whole bubble vision on valuations of the market is terribly misleading. Even the Wall Street version of earnings is going to be hard to maintain when the global recession sets in, and then investors are going to suddenly discover that the market is drastically overvalued. . .” (http://davidstockmanscontracorner.com)
Despite such factual data, despite Japan’s negative Gross Domestic Product, despite the United States and Europe’s skimpy GDP growth and emerging markets mired in recession, the business media continues to write off the massive global equity market selloff as unwarranted behavior. However, “Global Recession,” forecast first by the Trends Research Institute over two months ago and which the media ignored, is based on statistical facts, not behavioral emotions.
Since the market rout began, we noted in our Trend Alerts and nightly Trends in the News broadcasts that the media’s micro message that China’s slowdown and plunging oil prices were responsible for the market mayhem were only parts of a much larger picture. Yes, the sustained economic slowdown of China, a major importer of raw materials and the world’s No. 2 economy is, and was, a factor weighing down the markets. And with world oil prices plummeting some 70 percent from June 2014, it was and is seriously impacting oil-producing nations, the energy industry and its workforce.
However, absent from any deep discussion or serious analysis in the business media — or from governments — is the role of central bankers who, since the Panic of ’08, have artificially pumped up failing markets with massive doses of monetary methadone that masked the true economic indicators and hard numbers that signal a global meltdown.
WALL STREET, NOT MAIN STREET
Since the Panic of ’08, central banks and their respective governments have sold the same tired tale to the public: Had it not been for their ingenious “too big to fail” initiatives that saved banks and bailed out busted businesses, the bottom would have fallen out of the US economy, along with much of the civilized world. Thanks to central-bank intervention, an economic Armageddon was avoided.
However, as indisputable facts and hard data prove, central banks’ quantitative-easing stimulus schemes and record-low interest-rate policies have made the “too big” banks some 40 percent bigger while rewarding hedge-fund masters, investment bankers and multinationals who merged and acquired their way to ever-greater wealth and larger market share.
Since the Panic of ’08, central banks’ quantitative easing and zero- and negative-interest-rate policies frantically fed and rewarded the financial sector at the expense of working men and women, who, by any number of measures, have seen dramatic, starkly quantifiable declines in their standard of living.
In fact, the latest Oxfam report shows that 62 of the richest people in the world own as much wealth as half the world’s population. And, that infamous 1 percent, made famous by the Occupy Wall Street protestors in 2011, own more wealth than the other 99 percent combined, according to Oxfam.
By all quantitative measurements, the great divide has widened in the reality of a growing wealth gap. Again, as the Oxfam study reveals, society has splintered in two worlds, with a few “haves” and several billion “have nots.”
Thus, when global equity markets began to tank at the start of 2016, while there were signs of panic on The Street, there was calm on Main Street. As we detailed in our Trend Alerts and Trends in the News broadcasts, the historic news barely broke into mainstream media. In fact, The New York Times, the self-proclaimed “newspaper of record,” buried the news of the worst first week of a new year in stock market history on the bottom of the second-to-last page in Saturday’s business section… and made no mention at all in Sunday’s edition.
And in the following weeks of January, the trend line remained constant. From major newspapers to major broadcast media, the dire news of the market dive was afforded second-billing at best. So, while phones might have rung a bit more at investment firms with calls from nervous investors, there was deafening silence from the common citizen.
For the millions of indentured students who owe over $1 trillion in college debt, Wall Street worries are a world away.
For the millions of millennials living with parents, too poor to live on their own and frozen out of the housing market, whichever way the stock markets move is not their pocketbook issue.
For boomers and seniors saddled with debt, past retirement age, forced into low-paying jobs to survive, with no pensions and no savings, stock portfolios are a trip down memory lane of something their parents used to own.
For the hundreds of millions barely scraping by, living paycheck to paycheck, the broke and the busted with no jobs and no future, for whom the bottom already has fallen out, the 45 million on food stamps, the 1.5 million homeless — whatever happens on Wall Street has no effect on their daily struggle for survival.
SEE NO EVIL, SPEAK NO EVIL
Indeed, the meltdown that central bankers claim to have avoided due to their money-pumping strategies was not avoided. It was masked, unfolding slowly and incrementally. And as the economic meltdown continues, the mainstream media and political parties running the nation refuse to add it up.
n adjusted for inflation, median US household income is below 1999 levels. Tens of millions are holding down multiple low-paying part-time jobs. Entrepreneurial dreams are fading fast; career paths have narrowed. Stocking shelves, working cash registers, packing and shipping — it’s the new world order.
And while the government brags that the unemployment rate is around 5 percent, the labor force participation rate of 62.7 percent hovers around 40-year lows. The majority of the new jobs created don’t pay a living wage. According to the Social Security Administration, 38 percent of American workers in 2014 made less than $20,000 a year; 51 percent made less than $30,000; 63 percent made less than $40,000; and 72 percent made less than $50,000.
NUMBERS ARE SCARY
Moreover, from Shanghai to Wall Street, equity markets worldwide are being slammed by sustained and widening equity turbulence. A year ago, we predicted the dramatic downward spiral in the price of oil and most other commodities. And, as very few in the mainstream of business news would see, we forecast that demand — from raw materials to finished goods — would fall to much lower levels:
“The collapse of commodity prices is strictly a supply-and-demand issue that portends the onset of a long deflationary trend cycle. An expanding majority of consumers around the world are earning less income and often moving deeper in debt. And, the ripple effect from China — the world’s second-largest economy, slowing down after a decades-long spending spree — has helped create a glut of product. That’s resulting in a disparity between what’s available to purchase in the marketplace and the financial ability and practical need to purchase and process raw materials and manufacture goods.” (Trends Journal, Autumn 2015.)
China and oil may get the business headlines, but the deepening cracks in major and emerging economies across the globe are the inevitable price the world is paying for the falsely propped-up economies by central banks imposed upon We the People.
Unlike the Great Depression, when the market crash suddenly sent millions to bread lines, this crash happened under a blunt knife, slowly and methodically, cushioned by a propaganda machine espousing the virtues of “the disaster was avoided,” while lining the pockets of a merger/acquisition/takeover world that values consolidation over innovation, manufacturing, entrepreneurial growth, product development and individual creativity.
Even when markets began to tumble in 2008, the “working” public still had a connection to Wall Street: As Wall Street goes, so go their investments, their futures, their careers, their homes. That was the general consensus and hard reality.
However, following the January 2016 market meltdown that plunged many equity markets around the world into bear territory and the US market into correction, most still remain deaf to the closing bell. The connection is gone. Yes, there was panic on The Street, but as illustrated, for the millions who long ago divested from any personal interest in or connection to Wall Street, the historic down note ringing in the New Year meant little. TJ