Three Crazy Things We Now Accept As “Normal” For The Economy

By Charles Hugh Smith

How can central banks “retrain” participants while maintaining their extreme policies of stimulus?

Humans habituate very easily to new circumstances, even extreme ones. What we accept as “normal” now may have been considered bizarre, extreme or unstable a few short years ago.

Three economic examples come to mind:

1. Near-zero interest rates. If someone had announced to a room of economists and financial journalists in 2006 that interest rates would be near-zero for the foreseeable future, few would have considered it possible or healthy. Yet now the Federal Reserve and other central banks have kept interest rates/bond yields near-zero for almost nine years.

The Fed has raised rates a mere .75% in three cautious baby-steps, clearly fearful of collapsing the “recovery.”

What would happen if mortgages returned to their previously “normal” level around 7% from the current 4%? What would happen to auto sales if people with average credit had to pay more than 0% or 1% for a auto loan?

Those in charge of setting rates and yields are clearly fearful that “normalized” interest rates would kill the recovery and the stock bubble.

2. Massive money-creation hasn’t generated inflation. In classic economics, massive money-printing (injecting trillions of dollars, yuan, yen and euros into the financial system) would be expected to spark inflation.

As many of us have observed, “official” inflation of less than 2% does not align with “real-world” inflation in big-ticket items such as rent, healthcare and college tuition/fees. A more realistic inflation rate is 7%-8% annually, especially in the higher-cost regions of the US.

But setting that aside, there is a puzzling asymmetry between low official inflation and the unprecedented expansion of money supply, debt and monetary stimulus (credit and liquidity). To date, most of this new money appears to be inflating assets rather than the real world. But can this asymmetry continue for another 9 years?

3. Stock markets are soaring but sales and profits are stagnant. Everyone knows central banks are still pumping billions of dollars per month into the financial system, and this (coupled with central bank purchases of stocks and bonds) has been pushing stocks sharply higher for the past 9 years, with only a few hiccups along the way.

This is pushing valuations out of alignment with traditional metrics of valuing assets such as sales and profits–a process known as “price discovery.” In essence, traders and investors have habituated to central banks driving private-sector markets higher, not because the assets are generating more value or profits. but simply as a function of centralized money creation and asset purchases.

All of these extremes generate mal-investment, diminishing returns and perverse incentives for ramping up unproductive and risky speculation, leverage and debt. Yet the central banks have trapped themselves in this risky trajectory because they’ve pushed the accelerator to the floorboard for 9 years. Any extreme held in place for 9 years has long slipped from “temporary” to permanent.



Participants have now habituated fully to central banks extreme stimulus of financial markets, and in a sense they’ve forgotten how to price assets based on real-world private-sector measures.

How can central banks “retrain” participants while maintaining their extreme policies of stimulus? The only possible answer is: they can’t.

This essay was drawn from Musings Report 2018:1. The Musings Reports are emailed weekly to contributors, subscribers and patrons. Than you for your financial support of my work.

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13 Comments on "Three Crazy Things We Now Accept As “Normal” For The Economy"

  1. So sad that Woodrow Wilson gave up the keys of the unfederal reserve-less bank of the U.S. to the swamp on 12/21/1913.

  2. We are now living in the world’s largest insane asylum. A place in which truth is rejected in favor of the most outrageous lies. Lies that would have been met with disdain, outrage, and retribution meted out to anyone who was so incredibly dishonest as to utter them less than sixty years ago. Real skills, talents, morality, intellect, and honesty are no longer desirable attributes to be cultivated. Indeed today, those who possess and exhibit those traits are looked down upon by an overwhelming majority of our present population, a population indoctrinated into ignorance and what really amounts to functional illiteracy. The traits that were sought after by employers before a time starting about 1970 in job applicants now render the applicant “overqualified”, a term used to make it clear that those being sought for employment more closely resemble a robot than a competent person. Those thus rejected should consider themselves fortunate. Had they been hired, they would quickly find that their supervisor was not selected because of their competence. Generally now, quite the opposite; the most incompetent are promoted. In government, this insanity has been carried to the greatest possible extremes. “Draining the swamp” would not change anything. In a swamp, the scum is found atop the water. Draining the swamp would simply lower the scum to the land that formerly supported the water. We need to find a means to eliminate the scum without introducing a pollutant even worse than the scum that we need to rid ourselves of. Russia, during the Bolshevik Revolution is a prime example of that. It should come as no surprise that the US Federal Reserve Bank and the Rothchild’s Bank of England financed that revolution, enabling the tyranny that followed.

    • Well said. You mention the Bolsheviks, their financiers, and tyranny. The way I see it, there have been only two kinds of institutionalized government on the planet – overtly oppressive and covertly enslaving (aka ‘democratic’). My hypothesis is that both are orchestrated by the same Elite power, and that the oppressive ones serve to convince the sheeple in the enslaved (economically) ones how good they have it so they’ll keep their noses to the blood-money wheel. This has existed from Day One in America, an excellent example being the media-borne Spanish-American War.

      Though things have gotten worse in recent times as you describe, fundamentally nothing has changed. The fundamental insanity of tearing up and poisoning the planet to turn it into things to drive a toxic and suicidal consumer orgy is not a sound, or sane, basis for an economy, but has been sold as the basis of Freedom. It’s nonsense that has taken hold via the exploitation of a human weakness – the routine satisfaction of runaway material lust. But this weakness has arisen out of a fundamental form of insanity I’d call alienation from Nature, or the kind of intimate communion with the natural world that is found in many indigenous cultures. These, you will note, have been systematically corrupted and wiped out by Whitey’s techno-colonization, creating the psycho-atmosphere for Earth liquidation. Note, there is no poverty without Elite money systems and Economics 101 gobbledegook.

      Thus “…the scum that we need to rid ourselves of” recalls for me the “take America back” sentiment that doesn’t see how deep the rabbit hole of Elite manipulation goes. As long as Elite power exists, which arises largely from people’s participation in the banking system/consumer orgy, no institutionalized government is safe from infiltration and eventual corruption. I further suggest that such governments are patriarchal corruptions of intuitive tribal orangization, intended to be further corrupted.

      • You have an insight that is very rarely heard from in this madhouse that we call Western Civilization. The evil inherent today in government is the product of the introduction of an entirely credit based economic system that the Elite (so they’re called) contrived to exploit the human weakness that was reestablished, especially in the United States, by the corruption of public schooling and the corruption of agricultural practices that destroyed the agrarian framework of our society and the close connection of the people to the land. Before the advent of the fiat money system, our monetary system was primarily a barter system. The small farmers, tradesmen, and even doctors and other professionals, and even local governments, bought what they needed and could pay for; even when there was the use of some credit. There was then a much greater connection between the people and the land, their animals, and with each other. The credit system led directly to the loonieness of the roaring twenties and the dust bowl and depression, both world wars, and every war since. It also gave rise to the insanity we call “consumerism”. I’m sure that the present “complexity” of government is clearly intended to enable corruption and that we would be much happier with the simplicity of some of the tribal organizations display.

        • Thanks for response. I strongly agree with all you say, but would add that a ‘special’ purpose for the “corruption of agricultural practices” that led to the destruction of millions of family farms was to drive people into the cities to become factory slaves in the Industrial Revolution, one of the worst things that ever happened here—other than the satanic genociding of Native nations. Same force behind, obviously. Things even got worse agriculturally after WW I, when the good old Rockefellers got the brilliant idea of growing food with poisons, using leftover warfare chemicals (organophosphate petrochemicals) as pesticides on the expanding monoculture operations.

          I’d suggest that the bad thing about the credit system is not so much the credit per se, but what you’re probably implying, the loan interest – usury. That’s the fatal twist put on by the banksters. It’s legalized crime, and the Elite’s death grip on nations and people. The extension is that the banks took over the creation of the money supply in the form of loans to people and business, meaning that US money became non-money as interest-bearing debt. This is in place globally via the central banking system.

          Though the Depression was a consequence of the credit system, it was the direct result of a huge stock manipulation as well. Buying stocks was heavily promoted, and brokers were allowed to make (on-demand) loans to customers. So when everyone was extended, brokers began calling the loans. People tried to sell their stock to pay, deflating value. The market crashed, but this wasn’t the final blow: The Fed shut off the money supply. There were many businesses wanting to go forward, but without any fluidity, they failed. The insiders had their money out of stocks, and came along and cherry-picked the debris in what was one of the largest planned transfers of wealth to that point in history.

          As you no doubt know, agribusiness did the deed in Mexico, driving about 2 million farmers off their land down there, setting off illegal border-crossing on a large scale. Not to miss an opportunity, bigbiz exploited that situation to gain cheap labor under horrendous working conditions. And now we have ‘real Americans’ self-righteously bitching about how this hurts their precious wallets, when the truth is we owe these folks asylum for not controlling our own government in allowing the corporate behavior underlying the problem. I guess complainers figure that these displaced farmers losing their homes and land should just shut up and go live happily ever after in Mexico CIty’s ghettoes.

          I agree also about “so-called Elite.” The full term is ‘global financial elite,’ which puts another spin on it. Or Power Elite, which suggests their behavior. I’d prefer Psychopathic Brotherhood, but that could fit many situations. I like to use the term ‘Illuminati,’ because they see themselves as the Illumined Ones, who have special knowledge withheld from the masses. But folks sometimes get uncomfortable with that term, and also confuse the 18th century Bavarian offshoot with the ancient ones. ‘Official’ history is happy to tell the story of the man who ‘founded’ ‘the’ Illuminati. http://www.nationalgeographic.com/archaeology-and-history/magazine/2016/07-08/profile-adam-weishaupt-illuminati-secret-society/

        • Thanks for response. I strongly agree with all you say, but would add that a ‘special’ purpose for the “corruption of agricultural practices” that led to the destruction of millions of family farms was to drive people into the cities to become factory slaves in the Industrial Revolution, one of the worst things that ever happened here—other than the satanic genociding of Native nations. Same force behind, obviously. Things even got worse agriculturally after WW I, when the good old Rockefellers got the brilliant idea of growing food with poisons, using leftover warfare chemicals (organophosphate petrochemicals) as pesticides on the expanding monoculture operations.

          I’d suggest that the bad thing about the credit system is not so much the credit per se, but what you’re probably implying, the loan interest – usury. That’s the fatal twist put on by the banksters. It’s legalized crime, and the Elite’s death grip on nations and people. The extension is that the banks took over the creation of the money supply in the form of loans to people and business, meaning that US money became non-money as interest-bearing debt. This is in place globally via the central banking system.

          Though the Depression was a consequence of the credit system, it was the direct result of a huge stock manipulation as well. Buying stocks was heavily promoted, and brokers were allowed to make (on-demand) loans to customers. So when everyone was extended, brokers began calling the loans. People tried to sell their stock to pay, deflating value. The market crashed, but this wasn’t the final blow: The Fed shut off the money supply. There were many businesses wanting to go forward, but without any fluidity, they failed. The insiders had their money out of stocks, and came along and cherry-picked the debris in what was one of the largest planned transfers of wealth to that point in history.

          As you no doubt know, agribusiness did the deed in Mexico, driving about 2 million farmers off their land down there, setting off illegal border-crossing on a large scale. Not to miss an opportunity, bigbiz exploited that situation to gain cheap labor under horrendous working conditions. And now we have ‘real Americans’ self-righteously bitching about how this hurts their precious wallets, when the truth is we owe these folks asylum for not controlling our own government in allowing the corporate behavior underlying the problem. I guess complainers figure that these displaced farmers losing their homes and land should just shut up and go live happily ever after in Mexico CIty’s ghettoes.

          I agree also about the “so-called Elite.” The full term is ‘global financial elite,’ which puts another spin on it. Or Power Elite, which suggests their behavior. I’d prefer Psychopathic Brotherhood, but that could fit many situations. I like to use the term ‘Illuminati, because they see themselves as the Illumined Ones, who have special knowledge withheld from the masses. But folks sometimes get uncomfortable with that term, and also confuse the 18th century Bavarian offshoot with the ancient ones. ‘Official’ history is happy to tell the story of the man who ‘founded’ ‘the’ Illuminati. http://www.nationalgeographic.com/archaeology-and-history/magazine/2016/07-08/profile-adam-weishaupt-illuminati-secret-society/

        • It’s been 4 days now that I’ve tried to respond to your initial response. AP seems to be censoring. What you’re not seeing here is a third comment of mine on 3 different articles that are on hold and keep disappearing. They don’t answer queries. I hope it appears. Will keep trying.

          • Richard Olsen | February 15, 2018 at 12:29 pm |

            You are not the only one who has had their comments “disappear”. I did find and read a number of your comments, all of which indicate that you are one of a very few who have by some means escaped the trap that education (sic) has become. I noted in one of your comments a question concerning the connection between the Secretary of Treasury and the IMF. Public Law 94-564 designates the Sec. to be the United States representative to the IMF. Page 8, Section H. R. 13955 specifies that the Sec. not receive any compensation for representing the United States. The Governor of the IMF is a United Nations office. The grand delusion that most of the people I know refuse to believe, in spite of all evidence to the contrary, are living in wiil apparently continue to its inevitable self destruction. It can be truly stated that the love of money, along with the misunderstanding of what it is, is the foundation of all evil.

          • Let’s say, escaped some of conventional education, anyway 🙂 You must have done, as well.

            Thanks for the info. If I recall, that Treasury thread came from someone making conspiracy claims that our Treasury was now the IMF, and citing sections of U.S.C. as evidence or proof. But none existed that I could see.

            We could also say that evil is the foundation of money—as we know it. Those who have orchestrated this mess are even more obsessed with power and control than money. Money is a means to them, not an end. The love of money, or materialistic obsession, is a human character flaw arising from Nature alienation, as noted earlier. Or maybe it’s a chicken/egg thing. The point is, the imbalance has become ’normalized,’ and the drive for profit a noble thing – success. This is then exploited by the controllers to elicit choices/behaviors among the rank and file that advance their control-system Agenda—whether the actors are aware of the big picture or not. In other words, the system itself, that most people want to ‘fix,’ sustain and augment, is what holds up the force behind the observed systemic problems or challenges.

            The ‘Elite’ may be satanic, evil psychopaths, but they’re pretty clever. Government is an anti-tribal corruption, sold (via conditioned belief systems) as an ideal mode of organization, that is then further corrupted. It’s difficult or impossible to stop the latter without stopping the former, but even if you could clean it up, you’d get back only to the original level of corruption. Then there will always be some level of further-corruption as long as Elite power exists, which is drawn from and protected by the system they invented and created, that everyone’s trying to perpetuate because they think it’s necessary or don’t recognize it as the economic slavery it is.

            Because people’s survival is system-dependent, they probably wouldn’t do what’s needed to be set free, even if enough people understood it, which is to disobey/crash the system before the Elite do. Since the credit/usury aspect is the Elite’s death grip, that would suggest one big step – stop paying all interest-bearing debt. Then income taxes. Then reject all wireless tech (and hi-tech in general) which is not only pathogenic but the foundation of the coming technocracy posited by Brzezinski.

            Fundamentally, though, the issue is one of perception – who and what we think we are and what reality is. Science (always catching up to the spiritual tradition) is finally approaching the view intuitively understood for millennia by Yogis, that there is no matter, per se, and that we are holograms of light, existing in Consciousness. Via science, religion, and education, and by throwing chaos at us, the controllers have done all to keep us convinced that we are basically powerless lumps of matter identified by our name, personality, past, occupation, SS number, etc. As opposed to being Universal Mind having an experience that is all those things.

            Maybe we need to consider that we’re so far down the wrong road, not just politically and governmentally, but in our fundamental beliefs and sense of reality, population levels, and techno-addicted way of life, that attempting to rescue government, economics, and finance prior to a remarkable evolution in mass consciousness will be like trying to fix a watch with a pipe wrench. Preventing such an evolution is a primary goal of the psychopaths. What they fear the most is widespread realization that the reality they’ve been selling and nurturing is a mindprison—even when it has appeared to work properly and been entertaining.

          • Richard Olsen | February 16, 2018 at 7:12 pm |

            Actually, the use of various items, such as stone cut to some specific shape, various metal objects, etc., and later what we term “precious metals” came into being as a means to facilitate barter. The objects used had no real use or intrinsic value, (like all of the stuff we are using) but were recognized as being “worth” so much, or so many, of items useful in the sustenance in the communal society where they were recognized. Thus, people who had something to trade could make a deal with someone who had nothing the trader wanted or needed, but had made a trade with a third party while in the same situation as now existed with the party he was currently negotiating with. The evil part of the use of money didn’t rear its ugly head until some evil mind conjured up the concept of credit, and worse still, the idea of charging a fee for furnishing the use of intrinsically worthless items. It’s been all down the slippery hill ever since. Then we threw in government, the natural habitat of scoundrels, and the foxes could prey upon the rabbits at will.

          • Yes. My understanding is that the goldsmiths of the Middle Ages conjured up the idea of credit. First, they operated depositories where people could have their gold held safely. Then came the idea of lending it to others. I think the idea of interest came along at the same time. The next evil step was the invention of paper certificates, whereby they could lend even more gold than they had on hand, which worked as long as everyone didn’t call for all their gold at once. You probably know, this trick is employed today, known as fractional reserve lending. Banks can lend up to ten times what’s on account and charge interest on it. Worse, I think loans become assets of the bank which multiply exponentially the amounts they can lend. Crime on top of crime on top of crime, nice and legal. But it’s why a mass refusal to pay interest-bearing debts would be so powerful a blow to the system. As well as people removing deposits from the big banks and using local credit unions.

  3. These virtually 0% interest rates are a gift to Wall St speculators and financial manipulators. The average person gets little benefit, or benefit certainly not of the magnitude as lenders.

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