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posted on 25 September 2016

What If We're In A Depression But Don't Know It?

by Charles Hugh Smith, Of Two Minds

If it isn't a Depression, it's a very close relative of a Depression.

Just for the sake of argument, let's ask: what if we're in a Depression but don't know it? How could we possibly be in a Depression and not know it, you ask? Well, there are several ways we could be in a Depression and not know it:

  1. The official statistics for "growth" (GDP), inflation, unemployment, and household income/ wealth have been engineered to mask the reality

  2. The top 5% of households that dominate government, Corporate America, finance, the Deep State and the media have been doing extraordinarily well during the past eight years of stock market bubble (oops, I mean boom) and "recovery," and so they report that the economy is doing splendidly because they've done splendidly.

I have explained exactly how official metrics are engineered to reflect a rosy picture that is far from reality.:

What's the Real Unemployment Rate? That's the Wrong Question September 14, 2016

Fun with Fake Statistics: The 5% "Increase" in Median Household Income Is Pure Illusion September 19, 2016

Here's Why Wages Have Stagnated--and Will Continue to Stagnate August 15, 2016

Could Inflation Break the Back of the Status Quo? August 5, 2016

What Happens When Rampant Asset Inflation Ends? August 4, 2016

Revealing the Real Rate of Inflation Would Crash the System August 3, 2016

Inflation Hidden in Plain Sight

I also also asked a series of questions that sought experiential evidence rather than easily gamed statistics for the notion that this "recovery" is more like a recession or Depression than an actual expansion:

If Everything Is So Great, How Come I'm Not Doing So Great? September 12, 2016

Rather than accept official assurances that we're in the eighth year of a "recovery," let's look at a few charts and reach our own conclusion. Let's start with the civilian labor force participation rate--the percentage of the civilian work force that is employed (realizing that many of the jobs are low-paying gigs or part-time work).

Does the participation rate today look anything like the dot-com boom that actually raised almost everyone's boat at least a bit? Short answer: No., it doesn't. Today's labor force participation rate is a complete catastrophe that can only be described by one word: Depression.

Wages as a percentage of GDP has been in a 45-year freefall that can only be described as Depression for wage earners:

Notice what happened when the Federal Reserve started blowing serial asset bubbles in 2000: GDP went up but wages went down. Is this a recession or depression? It's your call, but if you're the recipient of the stagnating wages, it's depressing.

Meanwhile, the top 5% who own most of the assets that have been bubbling higher have been doing great. The Depression is only a phenomenon of the bottom 95%:

Look at the rocket ship of corporate profits. What happened around 2001 to send corporate profits on a rocket ride higher? The Fed happened, that's what:

Here's the Fed balance sheet: to the moon!

Free money for financiers and corporations fueled the stock market buyback boom:

Which fueled the stock market bubble:

Is the economy in a Depression? Not if you're a corporate bigwig skimming vast gains from corporate buybacks funded by the Fed's free money for financiers.

But if you're a wage earner who's seen your pay, hours and benefits cut while your healthcare costs have skyrocketed--well, if it isn't a Depression, it's a very close relative of a Depression.

Recent interviews:

The Entire Economic System Is One Big Illusion (X22 Report) (37:41 min)

Optimizing Bad Policy Guaranteed to Fail (Financial Sense Newshour podcast) (24:35 min)

My new book is #6 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book's website.

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