The change in the force ...

Charles Hugh Smith is a long term economist who is respected as one who does serious research regarding all things related to finance and the economy and arrives at conclusions both disturbing and insightful as this nation continues to print money, backed by nothing and created from nothing.

This is more intuitive than quantitative, but my gut feeling is that the economy just stumbled off a cliff. Neither the cliff edge nor the fatal misstep are visible yet; both remain in the shadows of the intangible foundation of the economy: trust, animal spirits, faith in authorities' management, etc.

Since credit expansion is the lifeblood of the global economy, let's look at credit expansion. Courtesy of Market Daily Briefing, here is a chart of total credit in the U.S. and a chart of the percentage increase of credit.

Notice the difference between credit expansion in 1990 - 2008 and the expansion of 2009 - 2017 (in the chart above). Credit expanded by a monumental $40+ trillion in 1990 - 2008 without any monetary easing (QE) or zero-interest rate policy (ZIRP). The expansion of 2009 - 2017 required 8 long years of massive monetary/fiscal stimulus and ZIRP.

This chart of credit change (%) reveal just how lackluster the current expansion of credit has been, despite unprecedented trillions of stimulus pumped into the financial sector.

It gets better.

We have no money ...

When credit stops expanding, the economy stumbles into recession.

Why yours truly feels Smith is right.

Back in the real world, have you noticed a slowing of animal spirits borrowing and spending? Have you tightened up your household budget recently, or witnessed cutbacks in the spending habits of friends and family? Have you noticed retail parking lots aren't very full nowadays, and once-full cafes now have empty tables?

According to the conventional economic statistics, everything's going great:there are millions of job openings, unemployment is near historic lows, GDP is expanding nicely and of course, everyone's favorite signifier of wonderfulness, the stock market, is hovering near all-time highs.

The possibility that the real economy just stumbled off a cliff creates instantcognitive dissonance, as the official narrative is the economy is expanding slowly but surely and everything is nominal: there's plenty of everything, from oil/gas to consumer credit to jobs to student loans.

Nonetheless, I feel a disturbance in the Force: once credit expansion slows or ceases, the economy will roll over into recession, as wages have been stagnant for the past 17 years, and the bottom 95% of households can only spend more if they borrow more.

Read the entire post as things are changing, and not for the better.