Immigration Mainly Benefits Those "Entering A Country"

Like it or not, those in charge of such things as controlling our borders are letting immigration reshape the world. This is happening far faster than most people can imagine. What has escaped many people is that this has broad ramifications for our future. It will take several years or decades before the impact of allowing hundreds of millions of low-skilled immigrants into developed nations reveals it does not always create a win-win situation.

Let's call a spade a spade, immigration mainly benefits those entering a country and not the country's current residents. Otherwise, countries would have to pay people to come rather than build fences to keep them out. The cost of integrating these immigrants into society is not small. Back in July of 2022, it was reported that the British government was spending more than £6.8 million ($8.4 million) a day on housing prospective asylum seekers and Afghan nationals in hotels across Britain.

Continuing with Britain as an example, migrants that left France in small boats have been overwhelming British officials. The Home Office staff and border chiefs reported to U.K. lawmakers that over 38,000 prospective asylum seekers had landed in Britain via the English Channel in 936 small boats by the end of October 2022. This is even after some 28,000 crossing attempts had been thwarted by French authorities. The majority of those who arrived in Britain were placed in hotels after the makeshift processing centers created to handle them reaching full capacity.

All said, it is estimated this immigration fiasco is already costing British taxpayers close to £2.5 billion ($3.1 billion) a year and is likely to increase as the processing backlog grows. Adding to this ugly picture is that many of those residing in hotels have been doing so for at least a year. Of the thousands of asylum seekers who arrived via the Channel last year, 96 percent are still awaiting a decision on their asylum request and, of the 4 percent that has been processed, an overwhelming 85 percent have been granted asylum.

All indications are that more immigrants are on their way. The wave of people migrating from poor countries to lands of "milk and honey" is unlikely to abate unless harsh measures are taken. A Gallup survey in 2021 indicated that 16% of adults across the world, or roughly 900 million people said they would like to move to another country. And of course, many would end up taking other family members with them putting the total well over a billion. This desire to move to another country is at its highest level in a decade. Many of these people live in poor areas such as sub-Saharan Africa, Latin America, and parts of Asia. While their desire to relocate is easy to understand, this does not mean most well-to-do countries are excited to welcome them in.

Fences Only Slow The Tide

Another recent survey by The Trafalgar Group found that only fourteen percent of Americans agreed that citizenship should be granted to those who have entered the country illegally. The vast majority were against blanket amnesty for illegal immigrants. Surprisingly. since many of these people are from Mexico, was that fewer than three percent of Hispanic voters said that illegal immigrants should be allowed to permanently remain. 

To be clear, immigrants are often allowed or even welcomed into a country under the guise or rationale that we need more workers or that a growing population propels economic growth forward, both these claims are massively flawed. The fact is, these needs can often be better addressed by simply redeploying and making better use of existing labor and capital. With the flow of immigrants into the country you don't just get workers you get people and many of these must be provided for costing the nation far more than they will ever produce.

The Wall Street Journal has noted that Germany has not been successful in turning enough of the nearly 13 million people flowing into the country since 2015 into workers. Unemployment among Germans is roughly 5 percent while those from other countries is at 12 percent. In short, only one in three immigrants has a tax-paying job. The migrants that do work often work in low-skilled low-paying jobs that require the state to continue paying out welfare benefits.

This Is Akin To An Invasion

Germany's failure to convert migrants into workers has resulted in increasing the number of welfare recipients and more crime. This has caused Berlin to consider moving towards a points-based immigration system next year similar to Australia’s or Canada’s. Such efforts are aimed at bringing  in "better-qualified" foreigners. Still, with so many of the new arrivals slipping in as asylum seekers, it is difficult to limit the number of new arrivals with little employment potential.

No-Go Zones In Europe Show Resistance To Assimilate

The no-go zones in Europe stand as a testament to many immigrants' desire not to assimilate into a culture. Adding to the problem is the acceptance of a country to non-assimilation by demanding that local governments and schools bend over backward to meet the needs of these people by printing forms and teaching in multiple languages. These programs help them survive even if they resist adopting and adapting to the cultural norms of their new country. 

Poor immigration policies are far more costly than most people realize and drain valuable resources away from other citizens. The idea those flowing into a country will respect its culture and adopt its values is not guaranteed. The notion that migrants can be kept in line and made to behave through increased surveillance and technology is also a reach. By this, I'm referring to some of the social control and shaping methods being used by the Chinese and other governments.

With all of what you have read in mind, borders are a creation of man and men set the rules as to who crosses them and on what terms. While it may seem unfair to exclude or deny individuals the right to enter, we must remember that life is unfair and this is a reality of life. Regardless of how you feel about this, you had better prepare for an invasion. What is yours won't be yours for long if you allow others to simply take it for the asking. Quality countries and their citizens have something very special and it is logical that they want to protect it.

 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

The Fallout From A Nuclear War Cannot Be Discounted

The fallout that would come from a nuclear war should not be discounted. Only by facing the ugly reality of such an event can we be motivated to make sure it never happens. This is a subject so appalling most of us avoid thinking about a nuclear attack in realistic terms. Other than seeing such horrific scenes in movies few of us can envision how the world would be immediately transformed following such an event. 

It seems that warmongers may not be taking to heart the implications of their actions. Rest assured many of the perpetrators of such an event, and those they love would be tucked away in their bunkers safe from harm with visions of resurfacing in positions of power when things calm down. If you think the picture I paint is too grim, the sad thing is you may need to give the situation a bit more thought.

Around 15,000 Nuclear Bombs Exist

Around 15,000 nuclear bombs exist today and almost all of them are many times more powerful than the ones unleashed at the end of World War II.  They target large and important areas and once launched the missiles that deliver these bombs move fast. This means people will have little or no time to prepare for their arrival.

Few of us want to delve into the idea that all the things we perceive as normal and good could vanish in the blink of an eye. The fallout we would be forced to deal with would not be limited to only the nuclear kind falling from the sky. It would include the impact of such an event on society. Simply put, imagine the unimaginable. Even before we deal with death and destruction other issues emerge. The one thing few will argue is that it would create a degree of chaos far beyond anything most of us have ever experienced.

It is difficult to imagine the fear that would be generated if even the power of one of these bombs is unleashed. People would scurry out of areas that were considered possible targets like rats leaving a sinking ship. Unfortunately, it is difficult to scurry over clogged roadways. This is when the realization would dawn upon people rushing to move themselves and their families to safety that such places are few and far apart. 

This is where "rubber would meet the road" or things be put to the test. Some people would without thinking risk life and limb for others or a family pet, while others would think only of themselves. Knowing it only takes a few bad apples to spoil the rest, with little accountability, I expect man's inhumanity to man would quickly surface. It would be wise to expect ugly acts of selfishness too far outnumber those of kindness.

Places Where It Might Be Safe To Go

We need to feed into this scenario that it is likely stores will not reopen in the following weeks. Where would they get workers? Also, what is the likelihood of shipments coming in to restock shelves? The same should be expected when it comes to all utilities. Not only water and electricity but even the flow of natural gas would stop. The combination of damage, few skilled workers reporting to their jobs, and general chaos create a grim picture of a post-nuclear war world. 

Not only are we looking at shortages and a total breakdown of the supply chain we must consider the fact much of society would most likely adopt a "survival of the fittest" attitude. This would rapidly become apparent as carjackings soared, looting exploded, and guns come out. As far as getting medical help, expect that to be nonexistent. Adding to the misery of those that survive will be the radiation flowing from nuclear plants that could not be shut down and the weather which in many areas tends to run either too cold or too hot through much of the year.

Guessing the odds of a nuclear bomb exploding above our heads is not easily done. If you happen to be close to such a blast, it would be a moot point in that you would not even have time to say, "Oh shit!" The heat would instantly turn you to toast sparing you the agony of having to deal with the fallout or suffering a slow painful death.  

The Damage From A Nuclear Bomb Is Massive

Most of us do not have access to a fully stocked bomb shelter and if we did, there is no guarantee we could get to it. While moving to an area out in the middle of nowhere and stocking up on supplies that would spoil over time is the best way to improve your chance of survival, it is not something most people are willing or choose to do considering this may never happen. 

The article above describes and touches on just a few of the hellish things we could encounter in the following a post-apocalypse event. With this in mind, it would be wise to create a plan to survive the aftermath if that is your goal. Such a plan would not only greatly enhance your chance of surviving but make life more comfortable than if you leave things totally to chance. 

 

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Is Biden "Finally" In Serious Trouble?

I very seldom watch Fox News or Tucker Carlson but he recently attracted my attention with a piece titled; "Biden is in serious trouble tonight."This was in reference to the recent dust-up over Biden's sloppy handling of classified documents. He compares Joe Biden to former New York Governor Cuomo noting Cuomo's rapid fall from grace. 

Carlson says that when a political party feels a politician can no longer do anything for the party they are quick to throw them under the bus. In this case, Carlson points out that Biden's big mistake is that following the midterm election, Biden on several occasions voiced interest in staying around for another term in office. His running for office in 2024 is something most Democrats don't relish.  

As Tucker Carlson gave his take on the discovery of President Biden's mishandled classified documents, he points out that the mishandling of classified documents has opened a can of worms that Biden may be unable to close. This article is not a glorious expos'e but rather the observation that as an old-time politician Biden is as crooked as a country road. Here is the link to the Carlson piece; https://www.youtube.com/watch?v=oe8XvgJsn60 in case I misinterpreted any of it.

With Republicans controlling the House, they now have the power to launch an investigation that is likely to spiderweb into areas of his life Biden would rather keep sheltered from the public. Each thread they pull on has the potential to unravel into stories of corruption and Biden has left a lot of places to look at for proof of misdeeds. Biden's reputation is ripe for plucking considering for years allegations of misdeeds have been swirling around what is often referred to as the "Biden crime family."

Carlson, in his broadcast, paints a picture of how Biden could be offed the stage by not only Republicans but members of his own party. He likened the situation to what we saw when Gov. Andrew Cuomo suddenly announced that he would step down after a wave of scandals, many of them involving sexual harassment, ensnared his administration and left him facing impeachment. Politics is an occupation where a dramatic fall from grace can come fast and furious. 

The same media that tends to fawn over a politician can also be quick to bring out the knives and stab them in the back. It could be argued that Biden never has had a large thronging group of admirers but was rather placed in a position of power as the least bad choice as a result of backroom deal-making. This implies Biden's strings are being pulled by someone behind a curtain. 

Some people even have gone as far as likening or calling Biden's administration "Obama 3.0" or “Obama’s third term.” This implies Biden's strings are being pulled by someone behind a curtain. While few Americans relish the rise of Kamala Harris to President, that is what we might be facing. This could be taken as evidence our political system is flawed beyond repair.

The FBI Came Hard During Trump Raid

Returning to the issue of classified documents, a former Obama administration ethics chief recently criticized Joe Biden's handling of classified documents as a breach of national security protocols. It has also been pointed out this scandal is being handled far differently than former President Donald Trump's Mar-a-Lago situation. All in all Biden's current dilemma should not be swept under the rug as a simple mistake by a forgetful but well-meaning public servant. 

Adding to the fire is the issue of whether Biden camp's failure to disclose the mishandling of classified material found before the 2022 midterms could be considered election interference. Since then more document mishandling has been reported by the New York Times. It seems that "additional pages of classified information" have been found at President Biden's Delaware home. 

Attorney General Merrick Garland announced in a well-publicized press conference appointed a special counsel to investigate Biden's handling of classified materials. It is debatable as to whether Garland did this to appear impartial or is part of a move to usher Biden from the Presidency and out to pasture. This development dovetail with new revelations coming out such as claims Hunter Biden was paying Joe Biden an outrageous fifty thousand dollars a month to rent the Wilmington, Delaware house where classified documents were recently found.

Hunter listed the "Monthly Rent" as $49,910, in the house where the documents were found, this is about $550,000 for the eleven months he indicated he lived there. This is in an area where the most expensive homes rent for $6,000 per month. What is going on here, tax evasion or money laundering? This raises some serious questions. Hunter was supposedly broke at the time but paying his wealthy father far more for rent than anyone can imagine.

This ties back into an email from Hunter's business partner James Gilliar about a venture with Chinese state-funded energy company CEFC China Energy. The email stated that Hunter and his partners would receive 20% of the shares in the new business, with 10% going to James Biden and the other 10% being “held by H for the big guy." Tony Bobulinski, another one of Hunter’s former business partners, claims Joe Biden was the individual referred to as the “big guy.” We also have been told that Hunter made statements to his daughter in early 2019 that include, "But don’t worry, unlike pop, I won’t make you give me half your salary."

It appears that Hunter was taking millions of dollars from businessmen tied to Chinese military intelligence while living in the house rented from his father. This is where the classified material, including documents relating to foreign nations, was found. During this time, Hunter Biden was in the grip of a debilitating addiction to cocaine and alcohol and suffered from frequent blackouts and loss of memory. While a case has not been made that Hunter Biden while in this state of mind gave documents to the Chinese it seems very possible.

The ties Biden's family had with the Chinese government, including military intelligence, have benefited them greatly. We know Hunter and the entities President Biden’s brother controlled received at least $4.8 million from the Chinese energy conglomerate CEFC. This company is tied to the Chinese military. But there is more, Hunter Biden received an additional $1 million from Patrick Ho, a CEFC official that was convicted and sentenced to three years in prison.

None of this bodes well for the President and gives the impression the Chinese government was bribing him and his family. Remember that both giving and taking bribes is a crime and opens up a pathway to blackmail. Biden looks "very dirty" and this is before we even start reviewing dealings in Ukraine, Russia, and even Iraq. Treason is defined as an act of disloyalty against a nation or national sovereign by a citizen of that nation. Such an act of betrayal can result in a death sentence. 

While nobody is talking about treason, I have to wonder if the shoe fits. Many Americans have lost faith in Washington and the justice system as a whole. With that in mind and after witnessing the shenanigans flowing from our nation's capital is it any wonder low expectations exist as to whether we will get a clear picture of what the Bidens have been up to over the years?

 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Alzheimer's And Dementia Intrudes Into Everything

To those interested in how certain events alter a lifestyle, let me misspell any doubt you might have as to whether living with an elderly person with Alzheimer's or dementia alters your life. To be blunt, it tends to wear you down, ruin your life, or turn it into a living hell. This is not an attempt to compare it to any of the other ugly negative woes that inflict man or enter uninvited into our lives. 

Confused, delusional, and dependent on you, they are always there. They are the last thing you want to think about as you close your eyes to sleep and the last thing you want to think about when you open them in the morning. Even during the night, you hear them talking to imaginary people and rambling around the semi-contained part of the house where they can't hurt themselves. 

It should be noted that we should not expect a person's natural personality to change just because of dementia or Alzheimer's. A person known to be "difficult" will likely remain so. This means traits such as exaggerating, manipulating, and generally just being nasty and hard to deal with will continually resurface and not stay buried. This and dealing with their hallucinations, a common symptom of these diseases makes the challenge of caring for such a person even less pleasurable.

And Yes, They Do Hallucinate

An example of how devastating these diseases are took place recently in the parking lot at Sam's Club. During a mental meltdown, 94-year-old mom started frantically screaming that some people had just stolen her daddy and her baby. Considering her age both these possibilities seem unlikely. In such a case rationally talking to such a person does little to calm them down. While you might imagine people flocked to her aid, they didn't. Instead, they looked down and walk a little faster in another direction. In fact, nobody even offered help by returning the cart to the store.

While not putting upon you physical pain, like many of the other curses we face, these diseases rob the caregiver of their freedom and nibbles at their soul. It is always there and limits everything you do. The mindless babbling, the potential for an emotional meltdown, and the constant and never-ending intrusions creep into every part of your day. Those talking to them during a phone call or brief encounter may think the dementia sufferer they are talking to is lucid but that is because they do not realize the person they are talking to does not even know who they are. 

Did you have a hard time getting here? How's the family? Or, Is it getting any warmer out there are all questions dementia sufferers use to mask their confusion. At times these people can be spot on but most of the time they are not. When they do drop the ball and reveal they are oblivious to the world around them, the person experiencing a brief encounter with them generally interprets this as a rare occurrence rather than the norm. Often this is done to avoid admitting just how far the disease has progressed. 

After telling them a dozen times who you are over several hours you can ask them, "do you know who I am?" and generally the answer is no. This is one of the reasons we in the trenches that find ourselves caring for such a person sometimes, consider them as simply "bat shit crazy." Another thing, those suffering from memory loss are not always easy go lucky and happy, in fact, they often have little reason to be. Mixed in with their confusion is often anger at losing themself and their independence as well as fear and paranoia over what the future will bring as they get worse.

Protecting Them From Themself

All you can do is try to guide them and limit the damage they do. You constantly have to remind yourself it is not their fault, they never wanted to be this way. This leaves you trying to dispense compassion the best you can. They may not want to be a burden, but they are and society does not want them. The ugly truth is that the care they are likely to get in any "paid-for setting" is suspect. Such situations are filled with difficulty and danger. 

What do we know about the abuse and threats both physical and mentally put upon these people by the so-called poorly paid healthcare workers at the bottom of the system? Most of the promises of society to lend a hand are a lie and generally come to naught. These promises amount to no more than an expensive bureaucratic circle jerk. Enough said, bitching about the situation may clarify it but changes little. Most sane people that take on the task of caring for someone with dementia do so not so much by choice but feel they have to. 

The above reflects my experience during this rather difficult year. This was not written for the blog but in reaction to distant relatives that try to paint the situation of taking care of mom as no real problem. Some even allude to the notion it must be nice to be able to do things with her. For others of you facing a similar situation or should I say burden, I decided to put it out there for readers to see. For the record, these diseases are becoming very common. For more on this subject please visit the link below to see an article that appeared here last April.  https://brucewilds.blogspot.com/2022/04/living-with-older-parent-suffering-from.html

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Claims Of A Lower CPI Cannot Inflate Away Reality

Yes, we have a problem, and claims of a lower CPI cannot inflate away the reality that inflation hurts consumers. To start with consider the argument inflation is much higher than the government reports. That said, Jay Powell is most likely very serious about ending the Fed put which has been a huge contributor to the wealth effect and inequality. This has also been a big driver of financial and economic growth.

If Powell accomplishes his goal it is expected to result in a more "responsible" and less speculative financial system. As things stand, most Americans are watching their wages falling behind the price of goods. As people are forced to buy less economic growth slows. This would of course extend down to falling prices as the wealth effect slams into reverse. All this brings with it risk and probably a lot of pain. This issue is intensified because the ability to simply roll over debt and refinance has been greatly diminished. Both liquidity and rates reduce this possibility. Trends are not friendly to growth anywhere in the world.

Lower CPI Does Not Signal Growth Ahead

Even if inflation drops like a stone, that does not mean it will not return with a vengeance or signal growth will pick up. Feeding into this is that many people today do not want to work. The five-day service sector office work week became a thing of the past when people were told to stay home during the pandemic. Mediocre production on the part of workers coupled with the potential that Geo-political issues may soon create a slew of new commodity shortages. Supply chain problems and disruptions tend to limit the supply side of growth.

Powell's decision to risk driving the economy into the dirt to create a more sustainable economic future conflicts with the priority of politicians. Their main goal is to get reelected, and if this means handing out free money to stimulate the economy, so be it. The big question is how big the next wave of checks will be, $2,000 maybe $3,000? An issue we cannot ignore is that each stimulus has less effect than the one before. 

A matter that should overshadow the liquidity/interest rate argument is rooted in the importance of savers being rewarded and not punished over time. Lowering interest rates because inflation drops a tad does not address the need of savers to be able to earn a safe return on their savings. This means allowing them to benefit even after both taxes and inflation. Bogus promises by the government to meet this need by selling Treasury Inflation Protected Securities (TIPS) fall short. Anyone wishing to protect a substantial nest egg will find the government greatly limits such purchases.

Flipping back to the stock market and the idea people should buy stocks because we are in a bear market and they have had a big pullback could be flawed. If indeed we are in the process of a stock market bubble popping, they could continue down a lot farther. So far we have not seen a total capitulation where investors come to a place where they want nothing to do with stocks. 

Consider the famous John Maynard Keynes quote; "Markets can remain irrational longer than you can remain solvent." This is true for both the upside and downside. Flawed is thinking stocks will come soaring back. History shows following such a fall it can take several decades before this happens.

Trying to put together all the opposing views being thrown out there into some kind of order, is a mind-boggling task. The notion all currencies are about to be debased may have more to do with governments than central banks. This feeling of distrust in the future value of so-called "paper money" may spur inflation higher as people swap it for real assets. One thing remains certain amongst all this noise and that is protecting our buying power and wealth will continue to tax our ingenuity. 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

A Country Can't Save Both Its Currency And Its Bonds

I have adopted the position that when a central bank allows its government to overspend and abuse its currency, something has to give. You could say this is one of the unwritten laws of fiat currencies. Time and time again history has proven this to be true and it is the reason many people claim gold is the only true form of money that cannot be corrupted. In a world where everything seems subject to manipulation, this claim about gold is still up for debate. 

The overspending by governments coupled with inflation has really started to affect the perceived value of currencies in relation to other currencies. As these relationships break the losers are the people holding the de-valuated currency. Of course, many factors feed into how we value a currency but the crux of this article is not about whether a currency is over or undervalued but rather what a country must do to defend its value if it comes under attack.

Brent Johnson of Santiago Capital is credited with coining the term the "Dollar Milkshake Theory." It explains how our debt-based monetary system can cause the US Dollar to rise despite the increasing liquidity injections around the world. Whether this was a "grand master plan" or a situation that just developed over time, it is something that may bode well for the dollar. Johnson recently took part in a discussion that included subjects such as the future price of oil, housing, and the probability of a huge global recession. 

About 28 minutes into the discussion which came out in both video and transcript form; https://www.completeintel.com/weekahead/300-crude-housing-japan-recession-oil Johnson conveys what many of us see as a truth that haunts fiat currencies. This is rooted in the fact that when the value of a currency falls, a country and its central bank cannot save both its currency and its bonds. In his "slightly edited" words;

    "The problem is you cannot, and this is for every country, the US included, again, there’s a progression in how it’ll go, but you cannot save both the bond market and the currency market because they work at cross purposes. Whatever you do to save the bond market hurts the currency. Whatever you do to save the currency hurts the bond market. And every central bank in history has promised they won’t sacrifice the currency, and every central bank in history has ultimately sacrificed the currency.

And the reason they always choose the currency over the bond or the reason they always choose to sacrifice the currency over the bond market is for two reasons. One, the currency affects the citizens more than the government, and the bond market affects the government more than citizens. So they’re going to bail themselves out before they bail the citizens out. And the second thing is if the bond market blows up and the banking system blows up, there is no longer a distribution system for the government to raise money.

So they can’t let the bond market blow up because then they can’t get money anymore. And then if they can’t get money, they can’t operate. So this is a very long way of saying that I understand why the market moved the way it did. I think maybe in the short term it makes sense, but in the medium to long term, it doesn’t make any sense to me at all. Again, kind of watch what they do, not what they say."

He later added "The problem, as we’ve kind of figured out and found out that it’s very hard to just get four for four or 5% inflation. It goes from 2% to 12% pretty quickly. They don’t have as much control as they think they do, right? And the problem with four or 5% inflation, you can kind of get away with it because it’s annoying and it is frustrating, but it’s not totally ruining your life. But with 8, 9, 10, 12, 15, 80% inflation, that starts to ruin the pledge life, as you mentioned. And that’s when they start to push back from a political perspective. And that’s what central banks and governments don’t want. They don’t want the populace revolting" 

When you think about the true motivators driving this "system," it is logical the government and central banks would throw the populace under the bus. This is about their survival. As to the question of equal pain, those in power justify taking raises to offset the impact of inflation under the idea we "need them" to steer things forward for the "greater good." 

While Johnson's remarks were aimed at what is most apparent in the actions of Japan, this truth is problematic to all fiat currencies. For more on the Dollar Milkshake Theory see; https://www.bing.com/videos/search?q=brent+johnson+milkshake+theory&view=detail&mid=82EA8634B5A01BE1506782EA8634B5A01BE15067&FORM=VIRE

 

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Liquidity Is More Important Than Interest Rates

It would be best to consider the idea that if you have good credit you will always be able to get a loan a myth. This is not about you, it is about markets and reality. People learn in a credit crunch that liquidity is far more important than interest rates. We are currently in a credit tightening cycle and it seems that greed has temporally overshadowed the potential this has to impact the economy. 

Many years of an easy credit environment have numbed people to the reality that credit is not a guaranteed right. This is a reality that can hit us like a slap in the face. The notion you stand a snowball's chance in hell of getting a loan in such an environment has yet to dawn on many people.  

Part of what we will see in the coming months could be simply an adjustment in the flow of capital to those that want it most or can afford it. Much of what may develop is a lack of willingness to lend considering the possibility the risk of not being repaid will increase in a difficult economy. The existence of so-called "loan sharks" underlines the idea that if someone is desperate to borrow money they will often put themselves in danger to do so. Loan sharks, which generally operate outside the law, offer loans at extremely high-interest rates and have strict terms of collection if the loan is not repaid. 

Most people having not experienced such an environment may have difficulty imagining such a scenario. This is partially due to what may be considered "memory bias" or "recency bias." This can result in confusion as new situations arise. Memories tend to be clouded by people incorrectly believing that recent events will likely occur again. This tendency obscures the probability the future may be quite different from the past and leads people to make poor decisions based on the recent past.

Like many businesses, the banking sector has changed over the years. While I have had some difficulty pulling up numbers to support my premise, the banking industry today is far different than it was a few decades ago. The chart above is from 2015, a similar chart from 2011 shows net interest income at 55%, I suspect it has continued to drop over the years. 

A bank is a financial institution licensed to accept deposits and make loans. Not only do banks protect our money, they lend out this money to create profits. But they also perform a lot of other financial services. That said, banks are not shy about placing upon customers a lot of fees and other charges.

• The three main business segments for a bank are retail banking, wholesale banking, and wealth management.
• Retail banking or personal banking involves deposits, mortgages, loans, and credit cards.
• Wholesale banking is related to sales and trading and mergers and acquisitions.
• Wealth management generates revenue through retail brokerage services and asset management.

The simple and ugly truth is banks are not "good neighbors" there to serve and be concerned about the community. Banks do not make much money on small loans at low-interest rates. The cost of making these loans far outweighs the income flowing from them even before factoring in the risk of default. This is why most small businesses must turn to other sources in order to find financing and a lot of these are loans "hidden off the balance sheet" at much higher rates. When push comes to shove, the banks will be fast to throw you under the bus. 

Interest Rates Have Fallen Over The Decades

 

This swings back to the title of this piece, interest rates are still very low compared to those we experienced during the 80s and 90s. To someone in need of a loan a quarter or even a few full points of interest is often not as big a deal as the availability of credit. When credit windows slam closed people get scared and shadow banking or unregulated lending soars.

Liquidity is the life blood of commerce. The massive growth in the financial sector versus Main Street, the GDP, and the real economy has made debt a major concern. Credit markets will be coming under a lot of pressure as a great deal of this debt coming due. Adding to the problem is that much of it is short-term debt that must be rolled over or extended. It will be interesting how this plays out in a "risk off" environment.

Some of these facts underline the importance of liquidity. The Fed is boxed in by the hyper-reaction of investors to anything it does. It needs to get investors to refocus on profits, margins, and risk. The combination of cheap money, and too much of it, has fueled speculation and blown the lid off markets in recent years. This makes it difficult to argue the stock market has been efficient in discovering the true value of companies.  

Clearly, 2022 was the year of interest rate hikes, and while they may continue higher,  2023 will be the year where they really begin to take a toll on the economy. While recessions halt inflation the issue is just how much irreparable damage it will inflict on Main Street and society as the "lag effect" hits us in the face. The stock market is not cheap, earnings will most likely fall and stock prices with them. In response, expect tapped-out consumers to cut back on spending, unemployment to rise, and a lot of small businesses to fail. 

A lack of liquidity can be poisonous. When you need money, whether the amount is small or large, not being able to get it can lead to a life-changing or grave outcome. Contagion from one area tends to spill over into other sectors of the economy and markets. It is important to point out that housing values are a far bigger issue for most Americans than stocks. Still, these markets do influence each other. Dealing with a "bubble economy" is always a problem and results in investors and people, in general, to buy high and sell low, often with devastating consequences.

 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

The Global Financial System Is A Rube Goldberg Machine

Much Of The Economy Is Like This Machine

More than one economist, big wig CEO, and Fed watcher has alleged the problems haunting the financial system have very deep roots. These people often contend governments and central banks have not fully rectified the problems causing the great financial crisis of 2008. Instead, they have merely papered over our failures by printing money and flooding the system with liquidity.

Let's just cut to the chase. Overall, the global financial system is not a well-designed efficient machine. Instead, it is a cobbled-together mess all glued together in a haphazard way to get the job done. To make matters worse, this system is greased by the greed of those who benefit from stealing a little from here and there. In the real world, things are usually not intentionally designed to be complicated but the reality is that they just are. 

This means that more often than we would like to admit, systems thrown together with various parts or pieced together haphazardly are prone to be unreliable. When we try to explain events in terms of cause and effect the bigger picture has a way of getting lost. Often hidden away is the risk that results when complex poorly built systems become codependent upon other poorly built systems. Bestselling author Nassim Taleb who wrote, "The Black Swan" detailed in his book how when something is highly complicated highly improbable and unpredictable events can and do occur.

While pondering the conundrum that has become our current economy, I stumbled upon an analogy. Simply put, the global economy is like a Rube Goldberg machine. These are "goal-oriented" contraptions built in a ridiculously complicated way to perform what would normally be a simple task. History shows we often have no idea what is driving events until long after they have transpired and even then the picture is blurred by interpretation. The lens by which we peer at events is firmly controlled by those with an agenda. These people control our government, big business, and mainstream media. When we look at the individuals leading these various factions we should feel little reason for faith or calm. 

For a grand display of an incredible and impressive Rude Goldberg machine click on this link https://www.youtube.com/watch?v=qybUFnY7Y8w and watch the video. I don't think you will be disappointed. The fact is, competitions are held to build these machines. In such a contest the designer makes a great deal of effort to complicate the task in an entertaining way by adding far more steps than are necessary. If nothing else it is proof some people have far too much time on their hands. 

The Direction In Which Things Fall Matter

The problem with getting a good handle on what is about to happen is complicated by the massive number of variables built into events. For example, guessing what a central bank might do is one thing, however, how do you make allowances for the money created to stimulate the nation's economy rushing out of the country at the tap of a button or companies using the money to buy back stock or pursuing a leveraged hostile takeover rather than investing in a new plant and equipment. The argument could be made that central banks can stack the deck but when it gets too high and begins to fall they may not be able to control the direction or who it will crush.

Just because a market or investors have reacted in a certain way in the past is no guarantee that faced with a similar situation their response will be the same or that once we hit a tipping point a self-feeding loop will not develop and take control. We have become very complacent and accepted the idea those in power will continue being creative enough to keep the economy moving forward. This includes thinking they can prolong current trends. Like a complicated Rube Goldberg machine with many moving parts, the failure of just one piece to perform as expected can alter the way events unfold. 

 

History is littered with many caution signs as to just how difficult it is to interpret current events and their possible impact on tomorrow. This makes it clear that looking in the rear-view mirror gives us a better image of events than predictions as to what might happen in the future. Part of this contraption that controls our world is the huge but hidden world of high-frequency trading algorithms, payment for order flow & dark exchanges. This coupled with such things as stock buybacks destroy true price discovery.  My point is, it might be wise not to have a great deal of faith in our global financial system because not only is it highly leveraged but it is severely flawed. In short, because of corruption and other issues, our current system does not even meet the criteria of a well-designed Rube Goldberg machine.

 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)