The Permanent Recession
Mod Note (Andy): this was originally posted on 6/19/12
I was out to dinner the other night with a few friends. Each of us work in some variation of finance and have had a decent level of professional success in our young careers, on paper at least. I'm in PE, two of my friends are traders, and one is a consultant.
Despite our relatively good fortune, we all noted that we feel like we're living under a dark cloud that will never dissipate. The figurative cloud in question is, of course, the ongoing global recession.
I'm sure we're not alone in this feeling, In fact, I'm positive. The idea of a double-dip, or worse, comes up at just about every all-hands meeting we hold at my firm. Europe is falling apart, the US' fiscal situation isn't any better. There are no real signs that things will ever really improve.
Is this the new normal? Will it get better? Or are we totally screwed? I started to do some digging to see if there was anyone out there who could put all the pieces together for me to give an answer. I think I found someone with an answer.
His name is Chris Martenson and he paints a deeply troubling picture of the future using hard data.
I'm sure a few of your have heard of him before, and I'm sure a few of you have dismissed him. What I'd ask is that people hear his arguments and look at the data objectively and come to their own conclusions.
His thesis revolves around three main themes:
- A debt-based economy with a fiat currency requires perpetual growth
- Peak oil is not a theory but a fact-based reality that will lead to major economic consequences
- We have exploited natural resources to an extent where new resources are more costly to retrieve and less effective than those already depleted
I plan on diving into each of these concepts over the next few weeks and the idea of the permanent recession more generally.
In the meantime, the video below is Chris Martenson giving a summarized overview of his thesis. In it, he lays out each of his arguments and backs them up with user friendly charts and hard data. I recommend monkeys take some time to watch the video and look into the ideas.
Finally, an open question to the group. Do others have the same feeling that things simply won't get better? If you're more optimistic, why? If you agree, what led you to that conclusion? And lastly, what'll you do about it?






Comments
Yes I agree with you 100% as
Yes I agree with you 100% as do many of my contacts that hold very respectable and high positions in the world of finance. This hybrid ponzi scheme world we live in will eventually bust and it's just a matter of when. We all know it is coming despite this ongoing fairytale, mainstream view that nothing bad could ever happen and that all can be fixed. It is very sad and unfortunate that to be a contrarian in this society comes with dangerous consequences like losing your reputation or and potentially a job despite being correct. This world has fucked itself so extremely bad and it seriously frightens me to hear the powers that be either have no clue what they are talking about or deliberately perpetuate this bullshit for personal gains. I should also add that I'm an avid zero hedge reader.
In the same exact spot. Not
In the same exact spot. Not too sure of Martenson (he's one of the Zerohedge guys) - but I'll check him out. Looking forward to more. +1.
I agree with this sentiment!
I agree with this sentiment! Not too long ago (late 90s and 2000ish), college students and everyone else in general were very optimistic. The Dow was exploding. Europe wasn't a problem. The Asian tigers were optimistic and we were optimistic about China, etc. too. People were forgoing b-school and dropping out of college to join or start dot coms. Wall Street couldn't get all of their analysts or associates from the top 10 schools, so they had to do the unthinkable and hire outside of the top 10 because all of the top 10 students wanted to get rich in Silicon Valley. Everyone could get a job. High school kids could buy stocks and multiply their money relatively easily. In 2000, "Boiler Room" came out. It personified how optimistic everyone was. Who needed college when you could get rich with a Series 7? Everyone wanted a piece of the market, unlike now when volumes in equities are dead.
Is there any hope for America?
Im optimistic, things will
Im optimistic, things will get better. Why? Because they always get better. Every recession there is someone that says it will be around forever, every boom there is someone that says it will be forever. But to date, this has never been the case. Plus, alternative energy + technological innovation.
The depression lasted a total
The depression lasted a total of around 14 years (probably 16 to get completely out of it).... I think we could be in for another 5-6 years.
Also read Cowan's book The Great Stagnation. It looks like we might be hitting a wall with a lot of things, and the problem is much of our institutions, society, and culture is based on the notion of infinite growth.
I disagree with this... Even
I disagree with this...
Even if some of the mechanisms which grease the wheel are based on debt and fiat, it doesn't change the fact that we are in a capitalist system. There is a ridiculous amount of money to be made in replacing and making use of certain resources more efficiently.
I think that technological change will continue to prove this theory wrong.
Look at the S&Ps earnings per share progression over 10 years. What can explain figure 1? (http://www.yardeni.com/pub/PEACOCKFEVAL.pdf)
Unless i'm in left field, progress, in absolute terms, is still being made even if valuations got out of whack.
Actually, it took until about
Actually, it took until about 1957 for the market to reach its pre-depression high after the big crash of 1929. It wouldn't surprise me that a similar doldrum-like period existed for us again in terms of the economy and also the earthquakes that are happening around the world that affect us here - namely the eurozone.
CDSs weren't on the scene
CDSs weren't on the scene until the mid-90's....
Straightjacket: I disagree
I disagree with this...
Even if some of the mechanisms which grease the wheel are based on debt and fiat, it doesn't change the fact that we are in a capitalist system. There is a ridiculous amount of money to be made in replacing and making use of certain resources more efficiently.
I think that technological change will continue to prove this theory wrong.
Look at the S&Ps earnings per share progression over 10 years. What can explain figure 1? (http://www.yardeni.com/pub/PEACOCKFEVAL.pdf)
Unless i'm in left field, progress, in absolute terms, is still being made even if valuations got out of whack.
In all seriousness, watch the video when you have a chance, and then dig deeper. I used to be in your court, but I've seen too much information to really believe that. Technological progress is always pointed to as though it's magic. Our economic system combined with increasing scarcity of good, low-cost energy sources is going to take a serious toll (and already is, clearly.)
Again, all I'm saying is that people should not dismiss this with feel-good ideas about technological advancements and efficiencies. I'll go into more later, but I wanted to intro the subject at large first.
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Just look at the financial
Just look at the financial innovation that has come around just these past 10 years, yeah some of them caused the crisis in 2007, but long term they will make the market work better. We have smart phones now!!! In 2002 i was in high school and people were using pagers and people thought that was great... PAGERS!!!! Just imagine what we will have 12 more years from now. Computers just get faster and better. We will find alternative sources of energy. The more expensive oil gets the faster an energy alternative will come around. Either way im long Chevron... :D
You guys keep selling and I will keep buying...
TheKing: Straightjacket: I
I disagree with this...
Even if some of the mechanisms which grease the wheel are based on debt and fiat, it doesn't change the fact that we are in a capitalist system. There is a ridiculous amount of money to be made in replacing and making use of certain resources more efficiently.
I think that technological change will continue to prove this theory wrong.
Look at the S&Ps earnings per share progression over 10 years. What can explain figure 1? (http://www.yardeni.com/pub/PEACOCKFEVAL.pdf)
Unless i'm in left field, progress, in absolute terms, is still being made even if valuations got out of whack.
In all seriousness, watch the video when you have a chance, and then dig deeper. I used to be in your court, but I've seen too much information to really believe that. Technological progress is always pointed to as though it's magic. Our economic system combined with increasing scarcity of good, low-cost energy sources is going to take a serious toll (and already is, clearly.)
Again, all I'm saying is that people should not dismiss this with feel-good ideas about technological advancements and efficiencies. I'll go into more later, but I wanted to intro the subject at large first.
I haven't watched the video, however i do agree with some of your points. I don't think tech progress is a magic bullet.
My feeling is that pessimism is now much more common than optimism since 08. I'm not rooting for the other side, simply saying that we are still making progresses in absolute terms and that things aren't catastrophic. The view seems to be skewed to the extreme.
Now i am very worried about all sorts of social benefits that were poorly designed and explode without any mechanisms to correct for recessions.
very interesting
very interesting video...makes me want to go buy gold and silver and curl up into a ball and cry.
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WallStreetOasis.com: very
very interesting video...makes me want to go buy gold and silver and crawl up in a ball and cry.
Same effect here. Certainly making me very pessimistic about my future in Finance...
I just hope it gets better
I just hope it gets better soon.................................
Peak oil (at some point in
Peak oil (at some point in time) is a fact. Oil - and hydrocarbons in general - are a finite resource.
That said, consider the following: total proved reserves for the U.S. in 1944 were 20 billion bbl; as of 2010, this number stood at 20.7 billion bbl despite the production that occurred over that period. This is primarily due to advances in seismic technology as well a increases in drilling and completion capabilities. Decades ago, people thought it was insane/impossible to produce from source rocks (i.e. shales). Not so much anymore.
Humanity endures based on its ability to adapt. Will all of the oil be gone one day? Sure. Has every major play been discovered? I wouldn't bet on it. The only reason unconventional plays like the Eagle Ford, Bakken, and Marcellus exist is because we have engineered ways to make it happen.
Oil or not, energy is fundamental to modern civilization. I wouldn't bet against our collective ability to figure out solutions.
I'd go even further. It made
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mlamb93: Peak oil (at some
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Amazing find A shitty picture
This is more of a
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This comment from your post
relinquis... Killing the GMAT this December; Over/Under set at: 725 GMATs.
I am less worried about peak
West Coast rainmaker: I am
It's undoubtedly true.. A
Just finished the video
Anybody who thinks logically
"One should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." - Charlie Munger
Even in a very long
Valid points from both the OP
Christ you people. There is
blackrainn: Christ you
OK, I appreciate this thread
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And his research could be
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Great topic. It's topics like
Great post I'll have to check
SlikRick: Great topic. It's
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blackrainn: Christ you
"He chose money over power, a mistake nearly everyone makes. Money is the Mcmansion in Sarasota that starts falling apart after 10 years. Power is the old stone building that stands for centuries. I cannot respect someone who doesn't see the difference."
To add: I am by no means
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TheKing: To add: I am by no
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RagnarDanneskjold: zeropowe
In both Italian and Chinese
Baby you're the perfect shape, baby you're the perfect weight. Treat me like my birthday, I want it this way and I want it that way. It makes a man feel good baby.
R0bin: In both Italian and
miermier: R0bin: In both
Rothyman, I know little about
Baby you're the perfect shape, baby you're the perfect weight. Treat me like my birthday, I want it this way and I want it that way. It makes a man feel good baby.
rothyman: If you can explain
farmerbob: rothyman: If you
yes, i dont think I've seen a
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R0bin: Rothyman, I know
For me the key takeaway is
relinquis... Killing the GMAT this December; Over/Under set at: 725 GMATs.
Relinquis: For me the key