01-05-13 Macro Analytics – 2013 THEMES – Charles Hugh Smith

Rising SYSTEMIC FRAGILITY is increasing the odds of an “unexpected” breakdown.
it is now reaching a “Threshold of Vulnerability”.

The FED LOSSES POLITICAL CAPITAL in 2013.
We are witnessing a reduced impact of each QE version,
Expect Hope to Turn to Fear when this occurs.
ECONOMIC STAGNATION and PERMANENT ADOLESCENCE
Using the Japanese Model, diminishing opportunities are resulting in new youth behavior.
Probabilities of a STOCK MARKET DECLINE increase.
Revisitng the Coppock Killer Curve.
The debate about recession or no recession is meaningless; incomes are declining for most households and corporate profits will take a hit as the global slowdown increases and the US dollar rises.
The VELOCITY OF MONEY dooms the Fed’s liquidity/stimulus policies.
People either are afraid to invest, don’t see any viable investments or it is FEAR and a growing Crisis of Trust.
The Fed has done its best for four years to push investors into risk assets (by lowering yields on safe savings to near-zero) and to push households to borrow and spend more. The fundamental failure of their policies is that all the liquidity is simply now becoming “dead money.”
INCOME is the foundation of real economic growth. It is declining in real terms.
Nominally income appears to have grown 24% since 2000. Adjusted for inflation, it has declined by almost 10%.
However, the Middle Class have seen their income decline by MORE than 10%
SMALL BUSINESS—the Engine of Growth—is in a Long Term Structural Decline.
Uncertainty, higher taxes and regulatory fees/costs have eroded the incentives to risk capital and the time to start and expanding a small business.