Wow, That Was a Horrible Decade … President Barack Obama began his 2015 State of the Union address last week with these words: "We are fifteen years into this new century. Fifteen years that dawned with terror touching our shores; that unfolded with a new generation fighting two long and costly wars; that saw a vicious recession spread across our nation and the world. It has been, and still is, a hard time for many. But tonight, we turn the page." – Bloomberg editorial
Dominant Social Theme: Thank goodness the first decade is behind us. Things will get better now.
Free-Market Analysis: We find this analysis questionable, indeed. Our favorite Bloomberg columnist, Noah Smith, has decided that the first 10 years of the century were hell, but apparently the five thereafter registered significant improvements.
In other words, things are getting better and better. Tell that to the stock market that recently dropped some 600 points.
Since we believe that there are powerful forces intent on pushing the market higher, we're not yet convinced that this is the end of the faux-bull market that has been running since late 2009.
Please remember that we have not yet shed this latest golden bull, which began in 2001 or so. In other words, what took about 10 years to turn from paper to gold and back in the 1970s has now taken about 15 years – with no end in sight.
This is because central bankers have resolutely interfered with the cycle at every point. Starting in 2009, bankers around the world and presumably coordinated by the BIS have poured some US$50 trillion in world markets.
This has made it impossible for investors to determine what facilities and sectors are bankrupt and which are not. As a result, funding has languished even though money has been printed.
Bear in mind as well that the top bankers have rationed the money they've printed, paying banks to keep it locked up in central bank coffers. As a result, bank balances have been strengthened and the banking sector generally looks healthier. But this is merely a kind of cosmetic enhancement.
Money has trickled gradually into multinational corporations and thence into the stock market, and finally into various asset bubbles. Consumers have begun to bid up the market again, but in order for this mechanism of many moving parts to function properly, the lubrication of currency debasement must be effectively applied.
Hence, the "deflation meme" that justifies further money printing on a regular basis – especially in the EU.
Using this analysis, we can see that policymakers and industrialists are struggling with the same problems now that they were five years ago and five years before that. The system hasn't changed and neither have its difficulties.
Mr. Smith doesn't see it that way.
This might sound like presidential hyperbole. Obviously, every sitting president exaggerates the challenges he faced, in order to make himself look that much more heroic. But in this case, Obama may actually have understated his case.
The U.S. withstood an almost-unprecedented series of shocks in the years from 2000 through 2011. The list of disasters is so extraordinary that it's worth repeating, just for emphasis.
First, there were the economic disasters. In 2000 the tech bubble popped, and in 2008 the housing bubble followed. Each of these asset price crashes represented $6.2 trillion dollars of financial wealth vanishing into thin air. That means each was larger, as a percentage of U.S. gross domestic product, than the stock market crash that touched off the Great Depression. In the space of a decade, we had the two biggest financial crashes in U.S. history.
The recession that followed the 2000 crash wasn't particularly severe. But it was long — a "jobless recovery." And during the entire Bush administration, real median household income never came back to its peak in the late 1990s.
But that recession was a pipsqueak compared with the monster that followed the financial crisis of 2008. The Great Recession was the worst thing to hit our economy since the Great Depression. U.S. GDP fell outright, by 3.9 percent. Household wealth plummeted by about half, and wages nose-dived. Unemployment soared to 10 percent — and by broader measures, much higher than that. An entire generation was scarred. Budget deficits ballooned as the government lost tax revenue even as it struggled to pump money into the flagging economy.
At the same time, of course, rapid growth in developing countries and dwindling supplies of crude oil pushed commodity prices to levels they hadn't touched in decades. Gasoline went from a little more than $1 a gallon at the start of the decade to $4.
In economic terms, the 2000s weren't as bad as the 1930s, but they were worse than anything else in the 20th century, including the much-derided 1970s.
But economic shocks weren't the only ones to hit the U.S. in the Terrible 2000s. The legacy of the terrorist attacks of 9/11 remain to this day, undermining the very basic notion of the U.S. as the "land of the free."
… So although Americans are still worried, and although some of these problems haven't gone away, it's almost astonishing how well the U.S. has done. Osama bin Laden is dead. Al Qaeda is already a brand name instead of an organization. Support for terrorism has dropped like a rock, and the U.S. has recovered some of its lost prestige. The war in Iraq is over. The political extremism of 2011 seems to be fading. Unemployment is back below 6 percent, GDP is growing solidly if not spectacularly, and the budget deficit has returned to normal levels. The stock market is back near record highs.
We've quoted at length to give Mr. Smith a chance to state his case but from top to bottom we disagree with the artificial delineations of his recession-to-recovery analysis.
Statements such as "Osama bin Laden is dead" are questionable indeed given that he had a grave kidney disease in the early 2000s and is reported to have died at least twice before his most recent demise.
As for al Qaeda being a brand name – when was it much more than that? It means "list" in Arabic, apparently, and there is plenty of evidence that the CIA was instrumental in its original organization under bin Laden, who may have been a US intel asset.
Smith believes that the US has "recovered some of its lost prestige" – but this is a questionable assessment as well. Who exactly is evaluating the US's "prestige" and who is deciding on its "recovery"?
He writes: "Finally, the 2000s were a period of remarkable political dysfunction. The contested election of 2000 left many voters with a sour taste in their mouths, more so than any election in the previous century … And all this time, the U.S. was facing down a new, invigorated set of international rivals — the Chinese economic juggernaut, a resurgent Russia and a metastasizing cancer of international Islamist terrorism.
Our view would be that the Russian/Chinese resurgence was a deliberate policy of the Anglo-American elite. It is not obvious to Mr. Smith but it is obvious to us that the prosperity that Europe and the US once shared has been liberally spread abroad and by design.
Seen this way, the trends that this article elucidates did not come to a sudden halt at the end of the century's first decade: No, they are part of a larger continuum designed to create ever more internationalist enterprises in a smaller and smaller – global – world.
The undermining of the US – of the West – proceeds apace, in our view, which is a main reason why we advocate various methodologies for purposes of familial safety and wealth protection.
There is no brighter day today, in our view. The "horrible" first decade that this article analyzes proceeds apace. There are no boundaries, there is no real ascension. Things may seem better for a while but this is an inevitable part of the cyclical system that has been put in place.
The cycle turns, the consolidation continues, the poverty increases and it seems very much by design. That eludes this article's analysis, however. Don't you miss it.