Friday , 29 September 2023

Perpetual Debt Provides NO Free Lunch! (+2K Views)

For a couple of years the world’s central banks fooled the public into believing that perpetual debt debt-mountain-cartoonwas a good way to rejuvenate the markets but, alas, there will be no free lunch. Having a system addicted to perpetual debt is NOT a solution as the following 9 indicators clearly suggest. Again, nothing comes for free in this world.

By  The original article* was posted under the title Market indicators suggesting a correction is coming: On Black Tuesday Shiller PE Ratio was at 30. Today it is at 26.2 and volatility is back in a big way.

1. oil has crashed rather dramatically…[resulting in] plenty of supply with moderating demand.  Then you have OPEC maintaining output to flush out high cost producers and gain market share.  Of course this hit is going to reflect in oil producing countries like Russia, Canada, and Venezuela.


2.  over half of recent college graduates are underemployed;

college grads

3. the Baltic Dry Index, a good measure of shipping goods, has collapsed…and what this is signifying to us is that the demand to ship goods is low thus pushing prices lower.  The last time we saw a crash like this we ended up with the Great Recession.

baltic dry index

4. stock markets are soaring based on inflated values.  The S&P 500 is overvalued by 60% looking at historical price-to-earnings ratios [and] looking at price-to-earnings…[conveys] how much someone is willing to pay to get a dollar back.  The Shiller PE Ratio [see below] was at 30 on Black Tuesday; today it is at 26.2 with the historical average being closer to 16. More importantly, we need to realize that many companies are using debt to leverage their balance sheets.  Other companies have cut wages and benefits to increase the bottom line for a few at the expense of the many. In essence that is what we are looking at with the PE ratio and right now it is looking frothy:

snp 5005.  Greece is reigniting further issues with the Euro;

6.  Russia is on the brink of recession;

7.  half of Americans live paycheck to paycheck;

8. inflation is alive and well only, if you bother to look;

9. volatility is back in a big way in the global markets. The S&P 500 has gone up 200 percent since 2009.  A correction is bound to happen and the amount of volatility hitting the system currently is bound to expose some cracks.

Does any of the above sound like a stable market?  Having a system addicted to perpetual debt is not a solution.  It is merely a temporary measure to allow the financial wizards to siphon off real production into their hands. Again, nothing comes for free in this world.

[The above article is presented by  Lorimer Wilson, editor of and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]

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