Suspended Reality

This chart (via) marks the point where economics switches into ontology (and not in a good way). Global government debt issuance — undiminished in its absolute scale — has for the first time ever been entirely swallowed by money production. Postmodernism has unambiguously triumphed, at least temporarily. It’s a thing of wonder, and not a bad exemplification of objective evil (as Gnon acts upon it). Reality, for the moment, is benched. (This does not end well — but we know that, right?)

Government Debt Net Issuance 2015_0

SoBL has a highly relevant forecast post addressing this syndrome, which has been a long time coming, and no doubt has at least a little further to go.

February 10, 2015admin 42 Comments »

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42 Responses to this entry

  • Henry Dampier Says:

    Some people don’t know this, because of the way that they weight different types of knowledge. They tend to discount the many people who have felt the same way about similar novel schemes to suspend the laws of political economy. They always believe that the short-term burst in apparent prosperity will last forever, and ignore when the pattern of production turns out to be insupportable due to some combination of maintenance costs and lack of final demand.

    They see the short term data that shows prosperity in some sectors, but discount the historical patterns or theoretical impossibility of conjuring prosperity from nothing, or even understanding the basic processes of economic calculation or what money and credit are.

    Shale bubble, South Sea bubble, mobile app bubble, high-end-fast-food bubble, assignat bubble, government paper bubble, reichmark bubble, EUR bubble, etc. etc. — they all have similar processes acting behind them, but a bad theoretical framework leads people to examine all these phenomena in isolation, mistaking small variations in their working for profound differences. If they can rationalize why it is different this time, they will focus on that detail which makes it different to the exclusion of all other things.

    This is because the truth is horrible, and requires taking actions that are politically unpopular, to the point to which the majority will reliably oppose it. However, the people who take these sort of tightening or harder-money actions are almost always acclaimed by history. Even the small step back taken by Volcker is nigh-universally acclaimed apart from some elements of the radical left, although it was broadly opposed at the time as a measure that would kill ‘economic growth.’


    E. Antony Gray (@RiverC) Reply:

    About the other link admin posted on the twit, it’s interesting to see how they don’t understand the costs of certain things. If someone said, “If X amount of oil entered the economy it would have Y effect” someone would immediately say, “but the oil doesn’t just enter the economy – unless there is a sudden windfall of oil in an existing depleted well (an improper estimation of existing reserves) there is a cost to building the wells, transporting the oil… cost of pollution and waste, etc.” There is a certain point at which the cost of putting more oil into the economy offsets any benefit, and even if the economy would be boosted z percent. This is one reason I don’t believe in peak oil — there’s ridiculous amounts of oil (and the oil is slowly being generated) and if demand gets too high price goes up, making more costly oil sensible to put into the economy. And since the base cost is significant, once it is paid, if the price goes down they may still keep drilling since the ongoing cost isn’t so prohibitive.

    About education though, there’s a weird co-option of a certain cultural premise – that of the Brahmins – about liberal education. Realistically, within their subculture being education is an end to itself, needing no justification. This is similar to how as a Christian, I need no reason to believe; belief is an end in itself. But that doesn’t stop me from coming up with ‘reasons to believe’. Some of them might be good, others, not so good. What is strange here, however, is that it isn’t transparent to them that they’re putting the cart before the horse. Education has costs and higher education, quite tremendous costs. The costs don’t go down with a higher number of educated (college, university) people, but the value of the education does simply by merit of rarity and numbers of valuable connections available (limited by dunbar number.)

    MOOC’s are sort of the great white hope for more realistic hanger-ons, “well, university is too costly in the current model, but if we just use mass education techniques…” (still doesn’t get around the fact that the value of an education is decreasing. It just temporarily staves off the cost going too high.)

    The elephant in the room always is, but where will the money to finance that education come from? The answer presently seems to be, well, from the money those educated people will make once they complete their education — they will get loans. So how much of that boost to the economy is going to be eaten up by the loans, with the flat cost and decreasing value of the degrees? In other words, it is possible that all of that supposed gain to the economy will be earmarked to pay the loans needed to educate those people.

    I guess we can’t blame them, they don’t run a business. If you take out a loan to do business, you have to include paying off that loan in projections of future profit. Money cost is a real thing, it’s called Usury.


    Scelus Maximus Reply:

    Don’t forget the degeneracy bubble; it vomits out the mud in which all of these other bubbles grow.


    vxxc2014 Reply:

    The Majority Mr. Dampier of Who? Who is this majority?

    It’s the Majority of Public Opinion makers.

    Kennan talks about this in American Diplomacy in a different context.

    Public Opinion is usually the compromised pundit, academic and political class.

    The people are generally in favor of hard money, now and always.

    They might want Silver money instead of Gold…but that nightmare chart is nothing they’d endorse.


    Posted on February 10th, 2015 at 3:48 pm Reply | Quote
  • RorschachRomanov Says:

    Marxism taught me to be leery of the injection of necessary causal extants into the order of history, but this would cause even Tolkien’s schizophrenic troll to leave his ring.

    Postmoderns had the hubris to think that the map, conditioned by our monkey brains, could supplant the territory.

    ‘Whom the gods would destroy they first make mad.’


    Henry Dampier Reply:

    The map is the territory for the macro-ists. Their actions are measured by their impacts on the maps, and not the territory. The maps can be fussed with at will, but the territory can’t.


    Rasputin Reply:

    Disavowal of the Real in lieu of the Virtual is the single most significant pathology of our age.


    Alrenous Reply:

    Consumer confidence -> “If voters are happy, then we can make more stuff!”
    I don’t think they’re really so dumb as to believe this. Rather, they want happy voters and rationally know they needn’t care about actual material wealth flows.


    Lucian Reply:

    Which is somewhat tragic, because Korzybski, a military man, was all about the territory. And a great prose stylist too.


    Posted on February 10th, 2015 at 4:06 pm Reply | Quote
  • blogospheroid Says:

    What’s the significance of this metric turning negative? I don’t understand. A similar exercise done for a country like canada, norway or singapore, which have had very good fiscal discipline, would show negative and for a fairly long time too. (i.e. money issuance would have been a positive number and government debt issuance would have been a very small number or even negative) Please correct me if my understanding is wrong.


    admin Reply:

    It’s the naked transformation of fiscal incontinence into monetary debauchery.


    Kgaard Reply:

    This is a good chart of the budget deficit by month. Improving drastically. I recognize this is not the cumulative budget deficit.


    vimothy Reply:

    From the chart it appears as though the US is still a sovereign debt issuer to the tune of half a trillion, net of CB purchases. But what does this mean? And is it good, or bad? Perhaps someone can explain.

    blogospheroid Reply:

    1. Going negative in this metric is considered a “bad thing”
    2. Fiscally continent countries will show negative on this metric and for a long time.
    2.a. Countries that are repaying their old debt, now that their tax inflows are good (say that the educated kids have grown up and are contributing to the economy) will also show negative on this metric.They issue more money, to pay down their debt and issue very little new debt.

    1 and 2 are contradictory. Sorry to have to spell it out, but this metric turning negative looks like a sign of either a return to fiscal discipline or of a country aging (issuing less debt due to its reduced infrastructure demands).

    You’re having a reflex reaction to this due to MONEY ISSUANCE, OMG!! But the way to check whether the money issuance is sustainable is to look at projected inflation rates, a totally different metric. Inflation rates are low everywhere, even non-manipulated ones like billion prices project. Go ahead and buy all the survival supplies or go buy physical gold and silver and place your very own bet on hyperinflation. Nobody is stopping that in most countries. The fact that the above demand is not tilting the inflation rates is a market signal, just one that ZH’ers don’t like to listen to.


    Kgaard Reply:

    Nick … If the issue is fiscal incontinence, shouldn’t you be running a chart of annual deficits/GDP and perhaps the 10-year T-bond yield? Surely budget deficits are soaring?


    admin Reply:

    Monetary debauchery is ultimately worse than fiscal incontinence, since the latter has a nadir short of radical social collapse (which the former doesn’t).


    Posted on February 10th, 2015 at 4:30 pm Reply | Quote
  • vimothy Says:

    This is excessively melodramatic. It’s also quite hard from the graph to discern what exactly is going on. I note that Zero Hedge do not link to the report or attempt to explain what they post in any significant way.


    admin Reply:

    How is it at all hard to see exactly what is going on?


    vimothy Reply:

    It’s a measure of *net* issuance, so it doesn’t tell us if sovereign debt has collapsed, central bank purchases have shot up, or something more measured has happened. There’s no way to extract A and B from (A – B).

    You can also look back to the period around 2008 where net issuance was immensely positive. What Zero Hedge (and this blog) seem to imply is that this was somehow more healthy than the present situation. But that’s crazy, and it requires an explanation.


    Posted on February 10th, 2015 at 5:45 pm Reply | Quote
  • Suspended Reality | Reaction Times Says:

    […] Source: Outside In […]

    Posted on February 10th, 2015 at 7:41 pm Reply | Quote
  • Alrenous Says:

    Perhaps this betrays my ignorance…but I need a glossary here. (I accept my ignorance that I may cure it.)

    ‘Monetization’ of debt? What?
    So my guess is Feds are buying all the treasury bonds, that is, Fed is loaning to the government. Oddly this one-step laundering process is successfully tricking people into thinking it’s not money printing, however, the Fed is funding these purchases from the press.
    However, this conflicts with other things I’ve read about the deviousness of modern money printing.

    Corrections, please.


    Kgaard Reply:

    It’s all just zerohedge bullshit. The one thing the US DOESN”T have a problem with is finding buyers for its debt. That’s why people are happy to loan it money at 2% for 10 years. The Fed is buying the debt simply as a technical way to put more cash into the banking system in order to keep prices from falling and to get unemployment a bit lower. The Fe is prevented from just printing money, or it might do that instead.

    Anyway this all may end by the end of the year. The US economy is getting better and better and the Fed will probably move away from zero rates by year-end.


    Exfernal Reply:

    How about a circle of countries, each buying debts of one another, but not directly reciprocally? How would that show, it at all?


    vimothy Reply:

    Firstly, the Fed is a bank, an intermediary. If it lends to the government, it can only do so by borrowing from the people. The private sector own the Fed’s liabilities, ergo, they fund its assets.

    Secondly, if you take a step back from the melodrama and look at the graph which is supposed to have provoked it, you might notice that, for the most recent period, the US government’s debt issuance net of central bank purchases is actually significantly positive, to the tune of a cool half a trillion. Phew!


    Posted on February 10th, 2015 at 10:26 pm Reply | Quote
  • vxxc2014 Says:

    There’s nothing to see with Derivatives either. Especially top row middle 6/14 total.

    It’s just Bank of International Settlements Bullshit.


    Posted on February 10th, 2015 at 11:01 pm Reply | Quote
  • SanguineEmpiricist Says:

    Zerohedge is a great way to distort your thinking. Everything at zerohedge is alarmist. I want to trust it but I can’t.


    grey enlightenment Reply:

    Indeed. Imagine how many folks were scared into selling their stocks – or worse – shorting the market in what has been one of the greatest bull markets ever. That goes for both stocks and treasury bonds, and ZH has been bearish on both. Hiveminds are not healthy.


    admin Reply:

    Zero Hedge is one of the very few sources of economic information that still holds to the hypothesis that reality exists.


    Marxist toady Reply:

    Is it our greatest misstep to assume that it still does?

    Or, at least, to assume that Gnon abides by our proscriptions about it. — I think admin’s most notable transition, in terms of philosophy, was not across the political spectrum, but the ontological spectrum: from the insight that reality is a dynamic chaos to the pious demand that it is a stable adjudicator.


    admin Reply:

    It seems to me the question is more about the ontological privileges of human subjective decision — on which my skepticism has been a rare thread of resilient consistency (woven through chaos).

    If governments can simply declare wealth into existence, then no limitations can be placed upon them at all.

    Kgaard Reply:

    “Zero Hedge is one of the very few sources of economic information that still holds to the hypothesis that reality exists.” That is a good point … but also the source of their error. They do not understand money as it currently exists and is used. Hence they are subject to all kinds of mistakes. Actually the whole flow of analysis is one big SYSTEMATIC mistake because they get their basic premise wrong. Coincidentally, Krugman comments on this precise problem today.®ion=Body#more-38116

    Technically Krugman is right about this: The Republicans and right-wingers and Zerohedge are horrible at thinking about money — as money is currently construed. But where they might be right is in recognizing that money doesn’t have to be a scam sort of creation in the first place. Seems to me this all comes into being with the birth of the Fed. Before that, money was tied to an ASSET, albeit through the intermediary of a bank that was levered 10-1.

    Money used to come into being via the discovery of gold. Now it comes into being in an extremely contorted way that perhaps 1 person in 20 understands — i.e. the Fed doing repos with banks. Is this not a conspiracy at its heart? It may work better than gold … but it’s still shady. As Rothbard says, those standing closest to the presses get the most benefit out of this system.

    Krugman doesn’t acknowledge this aspect of the story at all. He just assumes everyone should understand and accept the Fed as god. Now, at the moment, that’s exactly the way the situation is. So to be ACCURATE in forecasting economic activity one must view things through this lens. Doesn’t mean it’s not a scam.


    Izak Reply:

    If 20 out of 20 people understood the economy, what would that do to it?

    Does the economy benefit from fears of hyperinflation? It seems like that would drive up consumer spending.

    I don’t know how these things work so there is no trick to my questions here.

    Kgaard Reply:

    No I don’t think it helps if people fear hyperinflation. They stop investing, take their money out of banks, demand higher interest rates. You see this in places like Ukraine and Nigeria, which go along for years with stable exchange rates but ZERO confidence that that stability will ensue. Interest rates stay high, growth stays low. And eventually the inevitable happens and the currencies collapse. What you want if you’re a central banker is expectation of 1-2% CPI ad infinitum.

    pseudo-chrysostom Reply:

    or in other words, people making maps of the territory is also part of the territory.

    SanguineEmpiricist Reply:

    It’s more just the constant doom and gloom. What can you do with the production of counterfeit credit however.

    I get the feeling some times that young kids are coming home after school reading all the depressing extreme right stuff and then complimenting it with things like zero hedge. It could definitely leave your world view with a tint of melancholy.


    Posted on February 10th, 2015 at 11:07 pm Reply | Quote
  • vxxc2014 Says:

    ZH is ok when they start spilling the beans on HFT etc…they go off into alarmism and alarmist related sales pitches way too much.

    But about market cheating they’re pretty insightful. LOL.


    Posted on February 11th, 2015 at 1:59 am Reply | Quote
  • Was Enlightened Says:

    ZeroHedge made a lot more sense after I read 28 Sherman’s post, “Is ZeroHedge a Putin Asset?”.


    Posted on February 11th, 2015 at 6:35 am Reply | Quote
  • vxxc2014 Says:

    Admin is right, ZH does believe in reality.

    Everyone else believes in Zeitgeist indexes that the non greedy side of brain is quite telling the truth of this is purely another central bank inflated bubble.

    But you can’t argue with “returns” …right?

    Sociopaths running a ponzi aren’t capable of long term views, they’re living day to day.


    Posted on February 11th, 2015 at 10:34 am Reply | Quote
  • vxxc2014 Says:

    Look at the Chart.

    Most of the $691T is in Interest Rate Contracts. $563T of the $691T.

    This is your day to day REPO existence…

    Let’s not criticize the commons about bad choices…at some point shame belongs upon the doers of foul deeds.


    Posted on February 11th, 2015 at 10:42 am Reply | Quote
  • vxxc2014 Says:


    This $563T in Interest rate contracts is you know day to day REPO [overnite payday loans].
    80% of Fortune 500 are deep into that day2day REPO life my niggaz Financing day to day operations.

    This is my point about zeroize debt. Because you can’t just cherry pick who gets zero and who doesn’t. Only a complete wipeout prevents total systems cascading failure. Not just the hated commons of Walmart but the blessed Optimati and Chosen Intellectually superior Fortune 500.

    Not to mention in real world governance you cannot favor some over others to such outrageous excess and not expect an explosion from the unfavored.


    Lucian Reply:

    But muh shekels


    Posted on February 11th, 2015 at 10:47 am Reply | Quote
  • This Week in Reaction (2015/02/13) | The Reactivity Place Says:

    […] SoBL thinks Moar Quantitative Easing is coming in Groundwork for New QE. The global race to the bottom, featuring everyone except Switzerland, has not been going well for the US Federal Reserve. Nick Land takes note here. […]

    Posted on February 14th, 2015 at 8:03 pm Reply | Quote

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