Normalcy bias is a rather horrifying thing. It is so frightening because it is so final; much like death, there is simply no coming back. Rather than a physical death, normalcy bias represents the death of reason and simple observation. It is the death of the mind and cognitive thought instead of the death of the body.
Ever since the derivatives collapse of 2008 the public has been regaled with wondrous stories of recovery in the mainstream to the point that such fantasies have become the "new normal". These are grand tales of the daring heroics of central bankers who “saved us all” from impending collapse through gutsy monetary policy and no-holds-barred stimulus measures.
Alternative economists have not been so easy to dazzle. Most of us found that the recovery narrative lacked a certain something; namely hard data that took the wider picture into account. It seemed as though the mainstream media (MSM) as well as the establishment was attempting to cherry-pick certain numbers out of context while demanding we ignore all other factors as “unimportant.”
We just haven’t been buying into the magic show of the so called “professional economists” and the academics, and now that the real and very unstable fiscal reality of the world is bubbling to the surface, the general public will begin to see why we have been right all these years and the MSM has been utterly wrong.
Mainstream economists have done absolutely nothing in the way of investigative journalism and have instead joined a chorus cheerleading for the false narrative, singing a siren’s song of misinterpreted statistics and outright lies drawing the masses ever nearer to the deadly shoals of financial crisis.
Why do they do this? Are they part of some vast conspiracy to mislead the public?
Not necessarily. While central banks and governments have indeed been proven time and again to collude in efforts to cover up financial dangers, most economists in the media are simply greedy and ignorant. You have to remember, they have a considerable stake in this game.
Many mainstream economists tend to have sizable investment portfolios and they base their careers partly on the successes they garner in the annual profits they accumulate playing the equities roulette. They also have invested so much of their public image into their pro-market and recovery arguments that there is no going back. That is to say, they have a personal interest in using their positions in the media to engineer positive market psychology (if they are able) so that their portfolios remain profitable. Not to mention, their professional image is at stake if they ever acknowledge that they were wrong for so long about the underlying health of the real economy.
This atmosphere of deluded self interest also generates a cult-like collectivist attitude. There is a lot of mutual back scratching and mutual ego stroking in the MSM; a kind of inbred conduit of regurgitated arguments and unoriginal talking points, and people in the club rarely step out of line because they not only hurt their own investment future and career, they also hurt everyone in their professional circles. Meaning, no more cocktail party invitations to the Forbes rumpus room...
This is not to say that I am excusing their self interested lies and disinformation. I think that many of these people should be tarred and feathered in a public square for attempting to dissuade the public from preparing in a practical way for severe economic instability. I do not think they see themselves as being responsible to the people who actually take their nonsense seriously and their attitude needs adjustment. I am only explaining how it is possible for an entire profession of supposed “experts” to be so wrong so often. Mainstream financial analysts WANT to believe their own lies as much as many in the public want to believe them.
Like I said, normalcy bias is a rather horrifying thing.
One of the root pieces of disinformation in the mainstream that feeds all other lies is the disinformation surrounding falling global demand. MSM pundits cannot and will never fully admit to the cold hard reality of collapsing demand within the global economy. If they are forced to admit to falling demand, then the facade of a steady or recovering U.S. economy crumbles.
I covered the facts behind falling global demand for raw goods and consumer goods last year in part one of my six-part article series, 'One Last Look At The Real Economy Before It Implodes.' The hard evidence and numbers I presented have only become more important in recent months.
For example, U.S. inventories are building and freight shipments are declining in the U.S. as retailers cite falling demand for goods as the primary culprit. Official retail sales numbers for the holiday season of 2015 have come in flat. When one takes into account real inflation in prices, consumer sales are actually far in the negative. According to the more accurate methods the U.S. government used to use in their calculations of CPI in the 1980’s, we are looking at annual price inflation rate of around 7%. Price inflation does not necessarily equal improved sales.
Energy usage has been crushed since 2008. Despite a growing population and supposedly a growing economic system, oil consumption in 2014 according to the World Economic Forum dropped to levels not seen since 1997.
This is the exact opposite of what should be happening and it is the opposite of mainstream projections for oil consumption made back in 2003. This is why inventories and storage for oil across the globe are reaching capacity in a manner never seen before. American demand for oil is not growing exponentially as expected because Americans cannot afford to support such growth anymore. Falling energy demand at these extreme levels is an undeniable indicator of a failing economic system.
Of course, mainstream economists in their desperation to keep market psychology rolling forward and the equities casino producing profits seek to spin this problem as an “oversupply” issue rather than a demand issue. And this is where the disparity in their arguments begins to bleed through.
Here is the problem presented in the mainstream; what came first, the chicken or the egg? Did falling demand lead to oversupply and thus a fall in prices? Or, is demand remaining steady and is overproduction the cause of falling prices? Yes, let's confuse the issue instead of looking at the obvious.
As already linked above, it was falling demand which came first in 2008, and demand which continues to fall in relation to past trends. Have producers failed to reduce oil production to match falling demand? Yes. But this does not change the fact that oil demand today is well below levels needed to sustain the kind of economic growth markets have come to expect. Mainstream economists attempt to distract by hyper-focusing on supply, or twisting the discussion into an either/or scenario. Either it is a supply problem, or it is a demand problem, and they assert it is only a supply problem. This is not reality.
In fact, both can and often do exist at the same time, though one problem usually feeds the other. Falling demand does tend to result in oversupply in any particular sector of the economy. The bottom line, however, is that in our current crisis demand is the driving force and supply is a secondary issue. Supply is NOT the driving force behind the volatility in oil markets. Period.
This same chicken and egg distraction rears its ugly head in discussions on shipping markets as well.
The mainstream claim that the historic implosion of the Baltic Dry Index is nothing more than a problem of “too many ships” operating in the cargo market has been throttled, dissected and debunked so many times that you would think that it is surely dead. But the lie just will not die.
Mainstream propaganda houses like The Economist and Forbes continue to produce articles on a regular basis which deny the issue of falling demand for raw goods and claim that oversupply of vessels is the root cause of the BDI losing around 98 percent of its value since its highs in 2008.
I haven’t seen any of these articles offer actual stats or evidence to back their claims that oversupply of ships is the culprit and that demand is not a legitimate issue. But beyond that, why does the mainstream seem so hell bent on dismissing the BDI as a reliable economic indicator? Well, because shipping rates fall when demand falls, thus, when the BDI falls, it signals a lack of global demand. This is a fact they refuse to accept. When the BDI falls by 98 percent since the 2008 highs preceding the derivatives crisis, this signals a disaster in the making.
So, let’s stamp out the “too many ships came first” disinformation once and for all, shall we?
Shipping companies like Maersk Lines have already publicly admitted that falling global demand is the core problem behind falling rates and that supply is a secondary driver. They view the current financial crisis to be “worse than 2008”.
The fact that the largest shipping company in the world is warning of falling demand does not seem to be having any effect on the mainstream talking heads, though.
So, what do major shipping companies do when demand is falling and too many ships are operating on the market? Do they field those ships anyway and drive rates down even further? No, that makes no sense.
What companies do is either leave ships idle in port or scrap them. According to BIMCO (Baltic And International Maritime Council), 2015 was the busiest year since 2012 for the scrapping of older ships to make way for new arrivals. This process of scrapping ships or storing them idle destroys the argument that too many ships are driving falling rates in the BDI. In fact, as chief shipping analyst Peter Sand of BIMCO stated last year:
“The increase in Capesize scrapping comes at a much needed time for the market. Looking at the development so far this year the fleet growth has actually been negative, with a reduction of 0.8 %.”
I hope the garbage peddlers at Forbes and The Economist caught that — NEGATIVE growth of ship supply, not massive over-growth of ship supply. The scrapping increase was also across the board for other models of ships, not just the Capsize, and the increase of cargo capacity by new ships has been negligible. Yet, shipping rates continue to plummet to historical lows. Only falling demand, as Maersk Lines admits, explains the crash of the BDI in light of this information.
China in particular has been offering considerable incentives to those companies that do scrap older ships, to the point that some are even scrapping semi-new ships in order to cash in.
Now, this is not to say there is not an “oversupply” of ships. There are indeed many ships within cargo fleets that are not in operation. But again, this is because demand has declined so completely that even with increased scrapping and idling, shipping companies cannot keep up. Falling demand OCCURRED FIRST, and oversupply is nothing more than a symptom of this root problem.
So, mainstream hacks, can we please put the “too many ships” nonsense to rest and get on with a real discussion on obvious issues of demand? Stop focusing on the symptoms and examine the cause for once.
These are just a few of the hundreds of fundamental problems plaguing the global economy today, and they are all problems that the mainstream continues to ignore or dismiss out of hand. Which brings us to the now accelerating volatility in stock markets.
Stock markets are crashing, there is no other way to paint it. They are crashing incrementally, but crashing nonetheless. When you have violent swings in equities and commodities between 5 percent and 10 percent a day, then something is very wrong with your economy and has been wrong for some time. If global consumption and demand were really steady or growing, then you would not see the kind of systemic backlash in the financial system that we are now seeing. If companies listed on the Dow were making legitimate profits due to a healthy consumer base and enjoying solid expansion, stocks would not be increasingly volatile. If investors and mainstream analysts actually looked at the real numbers in demand (among other things), then the strange behavior in markets would be easy for them to understand. They will not look at such numbers until it is too late.
Instead, markets have chosen to chase headlines, and here is where the ugly circle of normalcy bias and cognitive dissonance completes itself. There are no positive indicators within the fundamentals today to energize market faith or market investment. So, investors and algorithmic trading computers track news headlines instead. The MSM hacks now have the power (along with central banks and governments) to create massive stock rallies with one or two carefully placed news tags, such as “Russia To Discuss Oil Production Cuts With OPEC.”
Market speculators and trading computers jump on these headlines without verifying if they are true. In most cases, they end up being false or just hearsay from an “unnamed source.” And so, the markets then crash further down into the abyss, waiting for the next headline to bolster activity even for a day.
The sad truth is, if any of these headlines turned out to be legitimate, their effect would still be meaningless in the long run as the overwhelming weight of the fundamentals continues to topple poorly placed optimism. Now that the investment world no longer has the certainty of central bank intervention as a useful tool, they don’t know if bad news is good news or if good news is bad news. The fact that the system is moving into a death spiral without the psychological crutch of central bank stimulus measures should tell you all you need to know about the supposed recovery since 2008.
No society wants to admit economic failure or economic sabotage, and this is why the con-game is able to continue in the face of so much concrete truth. Ultimately, the market trends and economic trends will flow into the negative. In the meantime, expect massive market rallies, rallies which will then disintegrate in a matter of days. And, whatever happens, never take what mainstream economists say very seriously. They have failed the public for long enough.
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written by Pablo , February 17, 2016
Since 2008, demand has disappeared.
Some of it is due to consumers waking up to the fact that they can't afford the American dream. (peak debt)
Some of it is due to a great demographic shift underway, aging folks no longer spend, because they no longer work (the lucky ones). Those that do spend are a small subset, most old folks are on fixed income.
The generation following the boomers seems to have taken a different path, they can't get stable career jobs with pensions and big pay checks, so they are either contract workers or small business. (low end workers provide low demand)
The MSM still lives in the false narrative of the boomers who all had big steady paychecks, and the mental state known as "keeping up with the neighbors"
The Big banks and the MSM still think there is some magic way they can unlock all the assets now dedicated to an uncertain future (your IRA) to spur current demand and get us over the hump (the consumer demand is 70% of US GDP)
All this boils down to the stunning fact that:
There is not going to be a return to a consumer driven economy in our lifetime, and nobody has figured out how to replace it. And whatever type of economy replaces this fake consumer model, it most likely will be as unsustainable as this one.
There is no profit in sustainability, it is not a model that is taught in the IVY leagues of doom. This country was built on wealth extraction, so until they find the next deposits of un-obtainum, please continue with the current broken system.
sorry for the dooms and glooms, but this is the alt universe, and we don't piss on you and tell you it is rain.
written by TC Horn , February 17, 2016
Finally, the words that have been running through my head for years...this is right on!!! Also says much about the human race, we are now experiencing a collective psychosis.
written by Lawfish , February 17, 2016
I work at a large law firm where I've worked since 2004. Beginning with the crash in 2008, business has steadily declined across the board, yet we continue to open offices in new cities, thinking this will be the solution that will bring back the business. It simply isn't happening; yet the "management" of the firm refuses to accept it.
Their "solutions" have been to steadily fire people who aren't profit centers and heap more and more work on support staff (we've gone from 1 secretary to 2 attorneys to 1 secretary to 4 attorneys since then), and to chastise attorneys out of the management class to bill an unattainable minimum number of hours (getting blood from a stone). They refuse to accept that perhaps the economy is in contraction and we should manage the firm accordingly.
Frankly, I'm holding on for dear life, trying to scrape up enough billable hours to keep my job.
written by shutupnsing , February 17, 2016
Brandon, I thought you banned Krugman from AM! GREAT post! Especially loved the opening paragraph...
written by Pologrounds , February 17, 2016
Great info about the ship breaking business. That is most likely where the 'America's Sixty Families' trust fund money has gone to for solid returns, all behind the scenes of course. Warren Buffet prob has them in-house by now, along with rail car scrap businesses.
I received a college degree in economics, and just about the only thing that holds true from any of the concepts I've learned (in the real world), is that corporations lag in their timing of layoffs. Supply and demand statistics have become so polluted that you don't even know what to take as valid information at this point in time.
written by justanobserver , February 17, 2016
Pologround,
What does that huge market of 80 million really want to buy from the U.S.?
Chinese make damn near everything cheaper and even though they do appreciate our gold and silver (since they buy it in the metric shit ton from us) we are running an $800 billion a year trade deficit with them and the rest of the world.
Maybe they will buy some military crap to offset the cost to us to buy F-35's which are so shabbily built (in Bernie's state among other places) that they will not have operational guns for dogfighting until 2019.
Which is why the Pentagram is even considering arsenal planes (loaded with extra air to air missiles) to escort the F35's.
Of course, the clowns that run the Pentagon gave up on arsenal ships (basically a flat in appearance cruiser or destroyer with dozens of cruise missiles) as the idea was stupid and expensive.
Observing is good.
written by Pologrounds , February 17, 2016
I'd guess produce, logging, automobiles (via global economy tentacles), mining of coal and various other metals on a smaller scale and land. Foreign corporations are buying extreme amounts of acreage in the Midwest, in addition to the foreign purchases of real estate in cities (ex. Manhattan).
China is run by the West, via a Kuhn, Loeb connection (many thanks to another contributor to Dean Henderson's blog for the clarity). I hope they don't buy MIC equipment from us.....the last thing the world needs is more conflict/war.
written by Ishk , February 18, 2016
"There is no profit in sustainability, it is not a model that is taught in the IVY leagues of doom."
The definition of profit needs to be redefined. Increasing one's monetary wealth at the expense of one's ecosystem is net negative. Sustainable actions offer the potential to improve lifestyles without such offsetting effects. In my books, sustainable actions... the pursuit of quality in place of quantity... that's where true profit is found.
I'm not talking about greenwashing. I'm talking about a genuine shift toward life in harmony with our ecosystem. Mankind has looked to dominate and extort the environment for too long. Due to scale, it is possible to see ourselves as separate organisms from our planet, but we are not. What becomes of man as the environment becomes more toxic or otherwise damaged? Our bad decisions eventually catch up with us, causing disease and turning our disharmony back on us.
The notion of financial optimization as positive/profitable is wrong. I'm glad to see this maligned belief exiting stage left; there will be great pains as we learn, but a better world will emerge. Stewardship is the way forward.
written by priya sharma , February 18, 2016
More turbulence (in any direction) can come when European markets start opening.Also watch out for volatile and sudden swings in day’s trading pattern in U.S. markets today.
written by Bulltard , February 18, 2016
More of the same is coming our way. They did not do all they did in the last seven years to just stop now.
These are not wild swings anymore. The markets have been going up each day for a week now.
Also, it is clear Russia and OPEC will work together to halt the slide in oil (don't care what you call it... freeze, cut, etc.)
Did you see what Bullard has said?
Perhaps it is time to admit you were wrong about your calls?
It happens.
They control it all. You CANNOT outsmart them.
written by Brandon Smith , February 18, 2016
@Bulltard
Which calls were those, and how have I been wrong yet? Are you basing your assumption merely on events of the past few days? Because you might look like a dummy next week when equities and oil fall off a cliff yet again. If you are not looking at the year long trend and are another one of those dupes that tracks daily headlines and daily swings thinking you have your finger on the pulse of the economy I'm afraid you are only going to end up embarrassing yourself.
written by Brandon Smith , February 18, 2016
This is why it is foolish to base your market assumptions on short term dead cat bounce rallies:
Crude Extends Losses As Saudi Minister Says "Will Not Cut Oil Production" To Support Prices
http://www.zerohedge.com/news/2016-02-18/crude-extends-losses-saudi-finmin-says-will-not-cut-oil-production
written by justanobserver , February 18, 2016
Pologrounds,
All those resources and consumer goods can be had less expensively from other suppliers than the good ole US of A.
Bulltard,
The Saudi's just this morning said no cut in production. And poof! goes the run up in oil when coupled with builds in the inventory numbers like distillates, gasoline, etc.
Try observing.
written by Pologrounds , February 18, 2016
I think the timeline for the purchasing of resources and goods now from the U.S. is a long play on the waning strength of this country. Establishing a foothold now, so that the reighpe and pillage of this country, all the way down to 4th world level, can be performed efficiently. One example is Saudi Arabia buying up Midwest farmland, to produce and ship farm products to Saudi Arabia, conserving their own resources and using up ours. Brandon is absolutely right.....we must look at the longer term. The leaders of the world are positioning (China investing heavily in Africa and South America). U.S. hegemony's time is up. Global repositioning is happening daily. All depends on how far ahead you want to look.
written by shutupnsing , February 18, 2016
@Ishk ~ You do realize you're speaking UN-eze rather fluently, don't you?
written by Bulltard , February 18, 2016
Oh I'm observing all right. I see oil solidly in the green, despite Zero Hedge's "end of the world" headline this morning.
By the way, did Zero Hedge relay Russia Today's article on a potential Russian oil cut of 14% in the next 4 years?
My guess is they did not as they never publish anything that does not fit into their "apocalypse is near" narrative.
written by justanobserver , February 18, 2016
Bulltard,
If you were observant you would notice oil up solidly 12 cents (at 2:20 Eastern time) when it was up $1.31 this morning.
And that is not Zerohedge. So. if your observing is one trick pony don't day trade.
written by Ishk , February 18, 2016
The UN plans for the peons to embrace austerity while the elite remain privileged in their materially focused lives. I advocate a common belief in stewardship, and actions in accordance. Where they would see divergence between the haves and have nots, I would see convergence. Where they suggest world police, I suggest a resurgence of values, ethics, and morals as defining attributes of all... those achieving such lifestyles would be the new elite... rich not for material goods but all the immaterial subjective worth life can offer. Riches would be of the soul and spirit, supported by one's contributes to local society, and conformity would be based on trust and a desire to be more, as opposed to the fear approach used today and in the proposed UN model.
Read My Big TOE and consider how a society focused on cooperation would differ from today's. I've already outlined several divergences from the UN's plan.
written by Brandon Smith , February 18, 2016
@Bulltard
You are conveniently overlooking the fact that oil is down nearly 50% in the past 6 months. Look, I know who you are, Chaban. Come back here in 6 - 12 months and if all is well in the markets, THEN you can claim that I was wrong. Do not come back here every time the markets are up for a few days, claim I was wrong, and then skulk away when they lose everything they gained. It's pathetic, and it's also a waste of my time.
written by shutupnsing , February 18, 2016
...as long as you're a Liberty man. Please forgive my insinuation. It comes from living in New York where "sustainability" has become the Progressive's new favorite word, beating out "coexistence"! :-)
written by Seymour , February 18, 2016
http://www.truthdig.com/eartotheground/item/ glenn_greenwald_hillary_clinton_vows_to_embrace_an_extr
emist_20160218
Well let's call this an "Israel Bias", where USA is Gaza, and all USA citizens are Palestinians.
Nobody seems to be able to put their finger on the cause of "Normalcy Bias", but clearly Hillary knows who rules AmeriKKKa.
written by Dean Striker , February 20, 2016
@Brandon gets it right, again, still, some-more.
3When real jobs in America are disappearing, and more are under-/unemployed, of course Demand must fall. More for food and less for trinkets (and oil and other fun-stuff). The lies to hide the problems from too much Ruling keep getting bigger.
The stock market reflects only that investors have few if any good places to park their money. No magic -- that's the result of the zero-interest games. At some point we'll be seeing it all fall into that big hole of utter Collapse. More fun for the foolish!
