We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon
Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
"Worse than 2008"... is probably true. How can it not be, in the "everything bubble"... when the bubble pops ?
That said... look at a chart for the S&P in 2007/2008... and what you see is... just like in 2007, the market peaked in June... and after that it had some bad days... But, then, the Great Recession "officially began" (but, when was it reported as having begun ?) in December 2007... and the stock market didn't actually crash until March of 2008... <insert rants on history of GFC here>... before they "papered over" the problems...
So, "it's different this time" always being true... HOW is it different ?
I'm not wanting to focus on that today in terms of "feature"... so let's dispose of that quickly, in which I'd say:
First, that "papering over" the dumpster fire revealed in 2008... with "we got this" using derivatives and XXX leverage... is unlikely to contain much less enable resolving problems. It is virtually a guarantee that the error in origination of a problem... left unchecked... will make problems vastly larger over time: Youtube Short: Door to Hell Burning For 50 YearsAnd, related to that in time (say, from 1987)... the banks awareness... and the BIS post 2010 planned suppression enabling banks in stockpiling gold.
Second, MOPE has "worked"... only in terms of significantly delaying market recognition of reality - that in other times would have been factored into market pricing a long time ago... fostering "real" corrections of errors in policy... actually enabling "fixing it" versus preventing it being fixed by suspending market functions. In this cycle the market has floated on by "bad news" that has been deliberately not reported... as if it didn't exist... by virtue of official conspiracy to not report it. So, yeah... the risk inherent in the market bubble that has been inflated [deliberately... like wiring a building for demolition... without issuing eviction notices] is vastly larger than most people are able to recognize, now... even those who are aware of it likely not fully understating what an unwinding might look like in a worst case outcome.
That done, in context here today... I'm asking... "HOW is it different ?"... purely in relation to the "same" elements in timing and degree... as they relate to the metronome in Fed policy, its impacts, and the markets [MOPE impaired] ability recognize and value "reality"... and to keep time.
The Fed being "late to the party"... is not quite right ? "Late to awareness the party is over", maybe ? But, then... late "by how much" ?
And, if the Fed is "late" in recognizing reality... it seems to me the market is only "more so" ? Those saying "the Fed doesn't set rates... the market does"... may be right, as a technical matter... with the Fed merely announcing market driven reality, belatedly... but, all that says is... the market is just as wrong as the Fed and more so... if and as it drives the Fed's errors... and as the numbers don't lie in terms of market pricing consistently lagging changing reality... if not lagging Fed action... still just as badly lagging market reality as the Fed... with the difference between the Fed and the market being less relevant than their shared divergences from reality. If the government is lying about reality to "spoof" markets and the delay the Feds actions... the market and the Fed are both equally as complicit in wanting to be lied to... corruptly, willingly going along with it... it not being just the media refusing to speak truth?
That is rather the point in what was broken in 2008... remaining broken, now... as markets don't work any more... with control removed from the aggregate in aware opinion enabling freely made choices... to be invested instead in "control" ? It is that control... which allows errors in steering to force prices to diverge more wildly from value over time... and impose markets vesting in the resulting errors in lieu of attaching rewards to those seeing the reality with greater correctness.
In the prior event...
The Fed paused rate increases at 5.25% in July 2006 [versus pausing at ~5% in July 2023]. In 2007, the market peaked in June [just as it did in June of 2024]... as the Fed delayed cutting rates until August, [the same now, only to September in 2024], then, down to 4.75% in October 2007... 4.5% in November...
As the Fed dithered... the recession "officially" began in December of 2007... with rates at 4.25%... Rates were 4% in January... 3% in February... 2.5% in March. After some initial feints lower from June of 2007, the market finally crashed in earnest in March of 2008... and the Fed dropped rates to 2% in April of 2008.
Six months after the markets crashed... it was clear by September of 2008 that the inputs made were not having the desired effect... That set of problems in the nature of the Fed's blind spots re cause and effect and timing... are only much larger today... given "sluggish transmission effects" in the aggregate, given the "supply chain" issues, and other trade war related friction, in impacts imposed by "the rest of the global economy"... the global economy being deeply interconnected, by design... while polity pretends economies operate in isolation from the reality of the extant market structures.
Resuming cuts, finally... from 2% in September 2008... to 1% in October... down to 0.50% in November... and 0% in December 2008... where rates stayed until August of 2015... because the lagged responses fostered a depth in economic damage being done that nothing they were willing to allow... other than passage of time... was able to address the problem...
“Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined,” noted the FOMC in its statement accompanying the December 16, 2008 decision. “Financial markets remain quite strained and credit conditions tight.”
"It was an almost historical level of understatement."
More correct would have been "sorry, we killed it... but we still won't allow any real correction of error to occur"... because "correction" requires "change"... and "change" requires recognition or admission of error, punishment and correction of error... requiring a surrender to failure as the fact, and then the excision and retirement of the failure and its drivers... which those with an greater interest in maintaining control... over an interest in better function... will not tolerate... The failed policies that led to 2008... resulted in those who created the problem being promoted... instead of "corrected". Back then, they broke the system and avoided being held responsible... Today, they fully control it... and, only more, refuse to allow their sustained failures to be a reason to separate them from power... In theory, in spite of its failure in the prior cycle, you get another chance to vote for change, or not, in November... ?
Those are two sides of " the same thing"... as revolution through change being enabled by voting for it... and change enabled by free market functions as people "vote" with choices expressed in $... each operate to prevent big failures... by enabling continual small corrections... instead of entrenching systemic corruption.
Obstruct change by voting or free market functions... and change will be less frequent... and vastly more destructive when it occurs... by violence instead of votes... systemic collapse instead of correction...
Back then, in 2008... "American families saw their home values collapse, and the stock market didn’t reach its bottom until early 2009. The unemployment rate grew from 5% in December 2007 to 10% by October 2009." And that was in consequence of... "NOT change"... with the necessary correction being prevented ?
Given implementation of "control" since then, versus "change"... how does "then" compare to today ?
"Lagging recognition"... is a correct enough partial answer... as liars replace leaders... and as people refuse to... don't want to... believe things have gone that terribly wrong...
The end is near... but not yet here ? Recognition events... precede change...
The market hasn't crashed yet ? Housing prices haven't imploded, yet. The inevitable global financial crisis "on steroids", with an unknown scale in unchecked derivatives risks as fuel... all that being "the same" as 2008 only "more so"... all which has been delayed in recognition since 2008 while the risks were growing massively larger...and it hasn't begun to unwind, yet ? Recognition is growing, now. And, this time, there is both massively larger debt risk, and no easy escapes... pairing to impose a resulting lack of systemic flexibility... It's far, far worse than what existed in 2008 ? Add in currency risks... and an ongoing acceleration from "competition" to trade wars... ramping into what is shaping up as pre-positioning for the start of (or, expansion into) global conflict... as "WW III" ? None of this is "new" or "news" to those paying attention. But... it does define the context, today... and thus it alters the meaning inherent in Powell's statement as "the time has come"... for long delayed recognition events to begin... all of which events are linked across a wide range of interests... including "finance, trade, economics"... without end limits there.
The "understatement" of employment problems in December 2008... is only massively greater today... with the government conspiring to falsify reporting of the statistics ? How does that awareness... of the divide between reality and "spoofed" awareness... alter the calculus in computing "where we are now" versus the correlation with historical timelines ?
It perhaps puts the Fed roughly... how far... behind where they were in 2009 ?
Does the description in the "historical level of understatement" delivered in December of 2008... understate the reality extant today far more... at a time well prior to the events that preceded "getting there"... then ?
It may be poised to be presented as "an accelerated entry" event... when awareness is corrected to reality in things like "spoofed" employment statistics... still with election outcomes (and control of power) hinging on sustaining the public illusions "a little bit longer" ? But, then... who ever wins... likely holds "the bag" far more than "power"... as recognition events / reality proceeds to foster and force change at an accelerating pace... in spite of the pretensions of those who "rule over us"... who we grudgingly tolerate and mostly try to ignore. When "rule over us"... proves more than a bit inconvenient... that illusion will evaporate with others.
So, are we synched to "the start of events" in markets, today... on a mirrored time line parallel to that which began with the market decline in June... 2024 being a comparable with the decline in June of 2007 ?
Or, are we instead synched to a start of "larger" events in decline, and resulting change... on a time line that began long ago... with recognition of the reality only temporarily delayed... in 2007 - 2008... with change coming now... that cannot be similarly delayed, again... as the capacity no longer exists to absorb the impacts of failure... without failing ? What metrics apply to allow relevant situational awareness ? "Trust in media"... "trust in politicians"... "control" being exercised... but not able to be hidden ? Evidences of deliberate efforts in disruption and destabilization... no longer able to be hidden ? Nothing seems it is being successfully hidden, now... if you want to look ?
It looks, on the face of it... as if September 2024... mirrors September of 2007 in "market perception"... leading us to expect markets might sustain that pattern... perhaps crashing in March of 2025 as they did in March of 2008 ?
But, beyond "market perception"... it all looks different in relative position re the "economic reality" today ?
Back then... the Fed was "off" by six months, with rates held at 2% during a "pause" sustained from April to October. But, today ?
September 2024 in "stocks" seems to mirror where the market was in September of 2007... while September 2024 in employment... seems to mirror where the economy was in December of 2008...now putting the Fed "behind the curve" in the change required relative to the prior event by... five quarters ???
The market has dodged "market recognition events"... the economy has NOT dodged "economic reality" ?
And, the gap poised between the two... is a new and unique source of additional market "amplification" risk?
Employment reality today... the equivalent to that described in December 2008 (and perhaps far worse... even only if 2008 standards in metrics were applied ?)... That says the Fed has held rates too high by 5% for over a year and a half... as having held rates at over 5% from April of 2023 to September 2024...
In 2008... the damage done by that error in "too high, too long"... in result of under-estimating the real weakness and attendant risks that "control" imposes... required rates being held at zero for almost 7 years (Dec 2008 - Jan 2016)...was imposed by waiting 6 months too long to begin cutting with rates held over 5%... and then, again, with rates being held too high at 2% for another 6 months... before being reduced to zero.
Average it out over time... as rates in 2007-2008 being held too high by 3.5% for a year...
In 2024... rates were again held too high, too long... held 6 months too long at 5% too high from "stocks" view, in hindsight... exactly as true now, if seeing it as a strict "market" parallel between 2007 and 2024...
But, from an "employment" perspective... today, rates have again been held too high, too long, by 5%... first after delaying raising them for over a year as wrong about "transitory"... then raising much too far, much too fast... as I noted here in posts re "over-steering"... and where it leads... But... "too high, too long"...
1.) for over 18 months... as the difference between the September 2007 start of "rates cuts" and the December 2008 "employment picture"... given we have the December 2008 employment picture right now (and worse)... with stocks still blindly stuck back in September 2007... when this is December 2008 in the reality in employment.
2.) too high, too long by an additional margin defined as the degree too which , and the period of time over which, reality in employment has diverged from market perception of reality... Include in that not only the margins in error imposed by "spoofing" in official reports... but also the errors in divergences imposed by changes in reporting standards over time... when "reality" doesn't diverge from "reality"... because "we" opt to cheat in what is counted and what is not... and pretend the fake numbers are what matters, not the reality.
The reality is worse than perception by another factor... as errors adopted in accounting tend to propagate in amplifications of the errors in math enabled... as accepting errors in inputs without corrections... is at least additive in fostering a growing and persistent percentage of "fake" values in baselines... which are used in subsequent computational iterations... resulting in applying a growing bias favoring error amplification...
"Believing your own propaganda"... without keeping a separate set of rigorously accurate books... introduces growing errors... requiring "it's vastly worse than you think"... (in performance, as corruption) within a range of potentials that is a time function of the actual aggregates in accumulation and amplification of errors.
That results in... and requires... cultural corruption... society accepting "go along to get along" with the awareness that " it's all fake, anyway"... and thus, it "doesn't matter"... because... nothing to be done ?
That's a submission to corruption which persists until reality reasserts itself... and it turns out that errors in appraisal, and the differences between "real" and "fake"... do matter... and quite a lot. That's as true in things like (Russian/Chinese/American) military capability... as it is in real and relative values and capacities in economies... and, ultimately, in the underlying (relative) value inherent in competing ideas and beliefs... with (ability in perception of, and) rigor in attachment to truth (and reality) ultimately being empowering... while "relativism" in "all choices are equal"... as inducing others or detaching oneself from connection to reality by choice, as is often fostered by those seeking control over others, given it is both "surrender to fraud", as "submission to control"... enabled by fostering the requisite lack of judgement in others... ?
All which to say... don't be complacent re timelines based on misreading history... and don't ignore that "soft landings" require... that none of what I'm addressing is "real" as a source of risk.
