The Trends to Watch For in 2014

At the beginning of this year (2013), I identified eight key dynamics that will play out over the next two to three years (2013-2015): 

Trend #1:  Central Planning intervention in stock and bond markets will continue, despite diminishing returns on Central State/Bank intervention

Trend #2:  The omnipotence of the Federal Reserve will suffer a fatal erosion of confidence as recession voids Fed policy and pronouncements of “recovery"

Trend #3:  The Mainstream Media (MSM) will continue to lose credibility as it parrots Central Planners’ perception management

Trend #4:  The failure of what is effectively the “state religion,” Keynesianism, will leave policy makers in the Central State and Bank bereft of policy alternatives

Trend #5:  Economic Stagnation will fuel the rise of Permanent Adolescence

Trend #6:  Income, the foundation of real economic growth and wealth-distribution stability, will continue to stagnate

Trend #7:  Small business—the engine of growth—will continue to decline for structural reasons

Trend #8:  Territorial disputes will continue to be invoked to distract domestic audiences from domestic instability and inequality

I know it may strike some as “cheating” that my forecast is for these trends to be consequential within a three-year window rather than by a specific date, but note these are trends, not events, and trends tend not to matter until suddenly they do. This is the nature of Pareto Distributions, in which trends are inconsequential until they reach a critical mass of 4% of the populace, at which point the “vital few” exert outsized influence on 64% of the populace.

Let’s see how the trends developed in 2013:

Trend #1:  Intervention yielded outstanding returns on corporate profits and stocks, but diminishing returns on employment, household incomes for the bottom 80%, and growth, all of which are historically subpar:

Trend #2:  The Fed’s members are still regarded as heroic demigods who benignly manage the Earth’s economy. When (not if) the stock market rolls over in 2014-15, Fed omnipotence will suffer.

Trend #3:  This one is difficult to track, but anecdotal evidence (declining circulation of many mainstream print media, declining viewership in some cable news channels, etc.) may reflect rising disenchantment with the media’s coverage of key issues.

Trend #4:  I think it is quite clear that the Fed and its posse of experts have no alternatives to ZIRP (zero interest rate policy) and QE (quantitative easing).

Trend #5:  This one is difficult to monitor. If we use the percentage of young people still living at home and the rise of “selfies” (photos taken of oneself), then perhaps a case can be made that this trend is already visible.

Trend #6:  Median household income has edged up, but I suspect this is the result of higher incomes for the top 10% rather than widely distributed gains. Since the top 10% collect 51% of all income, it stands to reason that increases flowing to the top will boost median income even if the bottom 90% sees declines in income:

Trend #7:  The unintended consequences of the Affordable Care Act have yet to fully play out.

Trend #8:  China’s recent invocation of a “defense zone” that includes the Senkaku Islands suggests this trend is definitely in play.


I also listed eight outcomes:

Outcome #1:  The counterfeiting of risk-free assets will continue to be a primary policy of the Status Quo.

Outcome #2:  Risk will continue to be transferred en masse to the public.

Outcome #3:  Democracy in America is officially dysfunctional.

Outcome #4:  Incentives will continue to be structurally perverse, and the rule of law will continue to be bent by individuals, enterprises, and the government.

Outcome #5:  Health care (a.k.a. sick care) will continue to be an enormous drag on the economy as diminishing returns, fraud, complexity, and defensive medicine add costs without equivalent improvements in health.

Outcome #6:  The costs of complying with Obamacare will act as an inflection point in the decline of small business

Outcome #7:  The trend of the Status Quo “solving” perceived problems by adding layers of immense complexity to systems already suffering from marginal returns will continue.

Outcome #8:  The informal cash economy will continue expanding, as those who choose to opt out of the Status Quo and those who must opt out as a survival mechanism do so.

Without going into detail, I think a self-evident case can be made that each of these outcomes is already visible at the end of 2013.

Additional Trends to Watch in 2014

Since the trends listed above are still operant, these eight are additional rather than replacement trends:

Trend #1:  The Number One growth industry in the private sector will increasingly be lobbying the government for favors.  When the State selects the winners and losers throughout the economy, then companies are essentially forced to make their case for special dispensations via campaign contributions and unrelenting lobbying. Elected officials benefit from their centralized powers as the line of corporations anxiously pressing campaign cash on them lengthens in direct proportion to the expansion of State power.

This is the essence of what some call the Corporatocracy that effectively governs the U.S.A. and what I call the Neofeudal Cartel/State system, as the State and its chosen cartels dominate the economy and society in a fashion that can only be described as neofeudal.

Since organic growth from increases in wages and purchasing power are limited to the top 10%, the only sectors that can possibly gain growth from rising sales are Porsche dealerships and other luxury outlets that cater to the top 10%.  But since the number of households adding income is a thin 10 million out of 121 million households, moving more luxury goods offers little growth opportunities for the rest of the economy, which is stagnant at best.

As a result, lobbying the central State for favors is the default “growth industry.”

Trend #2:  The difference between anemic growth and recession will increasingly be semantic. This is another “How many angels can dance on the head of a pin?” debate in which Ivory Tower/State economists parse juiced or manipulated data to conclude the economy is “growing slowly” or slipping into negative growth; i.e., recession.

Experientially, if purchasing power and discretionary income (what’s left after paying taxes, rent, mortgages, food, utilities, etc.) are both declining for 90% of households, the “growth” in inventories, exports, and other factors that feed into gross domestic product (GDP) are not reflecting the economy we actually inhabit.

Trumpeting what amounts to signal noise as “steady growth” is adept perception management (i.e., propaganda), but if it doesn’t include increases in purchasing power and discretionary income for the bottom 90%, it’s a propaganda embarrassment, like the Fed official hyping the declining cost of tablet computers while someone in the audience shouts, I can’t eat an iPad!

Trend #3:  The decline in local government services will accelerate as rising pension/healthcare costs squeeze budgets.  Local governments (city, county, state) have avoided the politically combustible collision of rising pension/healthcare costs and angry taxpayers tired of service cuts by accounting trickery and jacking up fees and taxes. Crunch-time has also been put off by rising home values that pushed property tax revenues higher.

These solutions are running out of rope: Property values have topped out, and accounting trickery hasn’t solved the fiscal impossibility of maintaining services and meeting pension obligations in a stagnant economy. When push comes to shove, services must be cut, either by bankruptcy or by negotiation. Since the likelihood that taxes will drop is zero, taxpayers will get fewer services for their taxes.

Trend #4:  Middle-class income, purchasing power, and discretionary income will all continue to stagnate.  Unless you define “middle class” as those households earning $150,000 and up (9.1% of households)—and if you define the top 9% as “middle” class, your definition has lost all meaning—what’s left of the middle class will see real and discretionary income continue to stagnate. The causes of this decline in labor’s share of the economy are structural and cannot be remedied by lowering interest rates to zero or jacking up the stock market: Zero-interest rates have deprived households of income, and few in the bottom 90% own enough stock to affect their wealth. (Source: The Distribution of Household Income and the Middle Class)

Trend #5:  Junk fees will continue to replace legitimate taxes.  Fearful of blowback from ever-rising taxes, local governments have turned to junk fees as the preferred method of “revenue enhancement.”  These include sharply higher fees for recreation, parking tickets, permits, etc., and a multitude of add-ons to property taxes and other existing tax structures. Local authorities are counting on the taxpayers to sigh but do nothing as long as the fee increases are small enough to avoid triggering political resistance.

In our small California town, the city has raised the fees for trash pickup by more than 100% in recent years—ironically, their reason is that recycling (which they encourage) has reduced the amount of trash being collected.  This sort of nonsensical rationalization for radically higher fees will join the usual justifications; i.e., We can no longer fill potholes and pave streets unless we raise your taxes.

How did they manage to perform these basic services 10 or 20 years ago with much smaller budgets? The answer: See Trend #3, skyrocketing pension and healthcare costs.

Trend #6:  The African oil exporting nations will move from the back burner to the front ranks of geopolitical flashpoints, joining the South China Sea, the Mid-East, and North Korea. I recently discussed The Scramble for Africa's Oil and the “resource curse” that is fueling the potential for conflict over Africa’s untapped oil wealth:

Trend #7:  Americans will continue to passively accept the rise of the Police/National Security State. This may eventually change, but for the next few years the existing motivations for passive acceptance of increasing centralization of power will continue to hold sway.

The first is complicity: The 49% of all Americans—156 million out of 317 million—who receive direct transfers/benefits from the Federal government see little reason to rock the boat or put their cash from the government at risk.  (Source)

The second reason is a rational fear of State power: fear of getting tear-gassed and arrested should you join a protest, for example, and a generalized fear of putting whatever you still have at risk by confronting a government given to secrecy and retribution against whistleblowers, protesters, etc.

Trend #8:  The Federal government will quietly absorb the rising losses from defaulting student loans rather than reveal the bankruptcy of the entire Higher Education/Student Loan Cartel.  There are myriad ways to quash the recognition that the Higher Education/Student Loan Cartel is failing to provide useful education while it burdens younger generations with $1+ trillion in high-interest debt: quietly forgive some defaulted loans, stop enforcing collection of defaulted loans, etc.  The Federal government doesn’t want to call attention to its management of this powder keg, as widespread recognition that the system is broken will unleash calls for a general debt amnesty that will blow the big-debt-for-worthless-degrees system wide apart.

In Part II: Outcomes to Bet On in 2014, we’ll forecast the most likely consequences of these trends. With such understanding comes the opportunity to position ourselves in front of them for protection and/or profit.

Click here to access Part II of this report (free executive summary; enrollment required for full access).

This is a companion discussion topic for the original entry at

Very nice overview of trends, Charles.

No need to be apologetic, I feel like, as in 2013, we are watching the snow accumulate on the cornice of a building.

Will we be able to detect the tiny tremors before the collapse?  Maybe.

Or, to extend the metaphor, we could do what I think you and Chris and Adam have been promoting- have the conversation, make a rational plan and take the snow off in a controlled way:

From the interesting side angle department, did you know that snow forms collapsible cornices all by itself?

Best of wishes and prosperity for your families and all PPers in 2014!


About Trend #3, the decline of trust in mainstream media (MSM) as its perception management techniques become laid bare for the cheap propaganda efforts they mainly are…when even Conan is mocking you, you have trouble.
Or, more accurately, puts together a piece that lets the MSM mock itself.

Note that the stations represented are not from a single network…somebody is writing national copy.  I wonder who?

Thanks for the post Chris! Having cut the umbilical cable from my TV some years back I tend to miss the occasional comedy gems that appear on late night. 
This is certainly something to consider as we move into the new year. 2014 may be a better year or it may not…I'm hoping for the former, but I suggest to all that you open your eyes going forward and evaluate your surroundings for yourself.

Wishing a Happy New Year, health and prosperity to all in the PP family!

make…it…stop!!  :^(

The chart below shows that each of the last seven recessions has been preceded by the ten-year minus three-month yield spread going negative. The whole article by Matthew Kerkhofffrom which the chart was taken is here. This inversion certainly seems to be sufficient warning of impending recession. If it is also a necessary condition, one wonders when and how the FED might lose control of short-term interest rates.


[quote=Stan Robertson]… each of the last seven recessions has been preceded by the ten-year minus three-month yield spread going negative. This inversion certainly seems to be sufficient warning of impending recession. If it is also a necessary condition, one wonders when and how the FED might lose control of short-term interest rates.
Mauldin and Tepper cover this in Code Red.  They go on to state "Central banks are not only distorting the level of government yields, they're distorting the shape of the yield curve."  The ten-year minus three-month yield spread going negative is no longer the predictor it once was.

[quote=Nate][quote=Stan Robertson]
… each of the last seven recessions has been preceded by the ten-year minus three-month yield spread going negative. This inversion certainly seems to be sufficient warning of impending recession. If it is also a necessary condition, one wonders when and how the FED might lose control of short-term interest rates.
Mauldin and Tepper cover this in Code Red.  They go on to state "Central banks are not only distorting the level of government yields, they're distorting the shape of the yield curve."  The ten-year minus three-month yield spread going negative is no longer the predictor it once was.
I quite agree that whatever historical signaling utility that the yield curve had cannot be trusted at this point.
The Fed, et al., have distorted it so badly, who knows what it means anymore?

I advise any young adult to concentrate on Agriculture. The Limits to Growth report says that we will be forced to divert money (resources) from industry to agriculture in order to feed ourselves on badly degraded soils (and climate, my add).
Anything that enhances soils will be in high demand. Study Mycelia, young person.

Thank you, everyone, for adding to the discussion–the snow on rooftops analogy is a perfect example of systemic fragility increasing, sight unseen.  Good points on the yield curve–now that it can be manipulated, forecasting correlations have been disrupted (on purpose, no doubt). Ditto a host of other previously valid correlations…
The timing of Conan's grilling of the MSM couldn't have been sweeter–

A focus on ag is always timely. Let's start measuring "wealth" by the pleasure gained from one's garden/orchard…


Google "retail association" and I bet one of the top hits is the culprit.  "It's OK to buy things for yourself this holiday season.  Go ahead.  Your friendly anchor person says there is no need to feel guilty."

your essay today was a nice supplement to my reading of Survival + primer.  (Good golly man, where do you find the time to generate all of this well articulated material?)  I was particularly struck by your observation in Survival + of the small, but growing numbers of people who 'get it' that are rejecting the status quo to set a new example of how we can change for the better.   Seems like a few of those might be members of this PP community!

Keep up the inspiring work.

There a series positive trends as well which mirror the collapse of the "conventional" economy.  About a third of American households now participate in some way in growing their own food.  About 1 in 7 of those grow organically.  TV viewing is in sharp decline along with conventional news print media.  Understanding of global climate change continues to increase.  GMO legislation is starting to gain a foot hold.  The escalation of the war in Syria was stopped.  Consumer demand for organically grown food continues to increase leaps and bounds.  Demand for alternative energy sources continues to grow, PV panels production has grown 40% per year since the year 2000.  Transition town movement now has 146 town/cities that have official initiatives in the US, there are 470 initiatives world wide. A couple of national chains that used to account for over half of teen clothes sales are now down to the 10% range of market share.  Permaculture, which used to a real fringe phenomenon is now entering University curricula.  Demand and interest in the Passive House low energy or net zero energy houses is booming.  Interest and participation is sites like this are growing leaps and bounds. Just to name a few items off the cuff.
Predicting the decline of the existing paradigm is a little like shooting fish in a barrel.  I know that there are those who believe that we are all dead anyway, I'll still go down fighting, standing up with my boots on.  When will we reach that 100th monkey, is it already to late? If I may be so bold, I would love to see a discussion that embraces the yin and the yang and an interplay between to the two.  I think propaganda from Corporatocracy will continue to the end, even when society has shifted beneath them.  When do we start to reach a cultural typing point, how virulent will the reaction be from the PTB and what forms will it take.  We are starting to see the counter attacks step up, the misinformation is getting more subtle and sophisticated.  It is fascinating to watch. Has anybody noticed similar trends?  In front of the Keiser Report there are now adds from Exxon Mobile, etc. etc.  What is next?d

With great appreciation, and inspired by the piece above, I am enjoying "Survival+" this fine New Years day.  

  1.   Do you feel that the Global War on Terror is part of Illusion (or simulacrum narrative) building process?

For background for other readers, quoting from chapter 2:

A truthful accounting would reveal that the entire status quo system benefits the rentier- financial Plutocracy and the high-caste class of State employees and corporate technocrats at the expense of the rest of us .....

Maintaining this illusion is the key to maintaining the Plutocracy and the State's share of the national income. This explains why the Plutocracy and the State (two sides of one coin) are obsessed with creating simulacrum structures and narratives designed to lull the citizenry into the comforting illusion that they are the beneficiaries of:

-- democracy (when 98% of incumbents win re-election, can that be authentic democracy?)  -- a free press (when a handful of corporations own the vast majority of the print/broadcast/radio/web media and the State manipulates statistics without media challenge, can that be an authentic "free press"?) ..... 
Do you view the Global War on Terror as one of these simulacrum narratives?  I would love to hear your understanding of this.   When you are ready to share them.
  1.  You refer to the Plutocracy/State as self-organizing group but not a formal or semi-formal conspiracy.  (And this may well turn out to be correct.)  Quoting again:
Thus in describing a Plutocracy I am not positing a semi-formal conspiracy but simply a financial elite which controls some 2/3 of the productive wealth of the U.S. .... people with similar self-interests naturally band together in self-organizing networks and groups to protect those interests, and since information is power then the inner workings of various self-organizing groups are confidential as part of that self-protection.
Several actions show significant coordination implying organization.  Two examples readily come to mind:

A.  The above posted video from Conan where multiple "independent" "news" stations say the same words,

B.  The duration and breadth of the (formerly) secret NSA data gathering process.  (The first reports I heard of were from San Francisco in 2002 (or 2003?) at the AT&T routing station where an employee reported seeing a splitter on the main truck.)  This implies that over a decade ago the program had already been in development for a long time by the early 2000s.

Does the Plutocracy have a planning committee?  A long term strategy division?  How you you envision these coordinated and long term programs emerging from a loosely organized Plutocracy/State?

Thank you for your thoughts.



Treebeard,Here's an example of what you describe:

They way I see it is as a homogenized blend of four main ingredients
Conspiracy (Plan) 20%

Cock-up (50%)

Cluelessness  ("Wha' ??")  (10+ %) &

Circumstances. Overpopulation, resource depletion pollution etc.

How I envy the Clueless group.

In much knowledge is there much sorrow, and much sorrow in much knowledge


Read the rest of the sayings- it will raise the hair on the back of your head.


In sorrow there is also great beauty, it is there that we plumb the depths of what it means to be truly human.  It is there that we connect with all things, do not envy the ignorant.

About a third of American households now participate in some way in growing their own food.  About 1 in 7 of those grow organically.
Would that that were true, treebeard. According to the National Gardening Association in 2012, the year they have the most recent statistics, only 41 million Americans are growing ant of their own food at home. With a population of 350 million, that's less than 12 percent of us. Granted, 20 percent of them are first-time gardeners (same source) and so it's trending up, but nowhere near the one third you quote.

I agree sadly with #7 of the '14 predictions, but around the world people have stood up and fought against impossible odds - as they are currently.   Game theory says 5 percent of a group can decide for the group…I think about that and an image from the history channel program showing of hundreds of Jews being led to their death by just four nazi soldiers with weapons.  The PP site is about resilience mostly to me, and I think that dovetails nicely with this article from Brandon Smith. 

I like touchy topics that get addressed with class.  I read this piece and feel reassured and spooked about the consequences, as well as the very fact that every ISP address on this site is being tracked.  I think Brandon Smith would be a great guest for a multi-part podcast.  I know some don't care for him here (shocker), but his point is real, relevant, and tangible - especially how the premise hinges on PP topics of resiliency.   Even hints and references around PP about this topic are made, inferred, referenced, etc., why not just take it 'head on'?  Please read it and post your thoughts.  Also wondering, if Chris or Adam or other are reading this, what is your take on this "Liberty Movement"?

[quote=treemagnet]…I think about that and an image from the history channel program showing of hundreds of Jews being led to their death by just four nazi soldiers with weapons. 
I think about that image often. Amazing that a group of people can get so beaten down that they will not take a stand even knowing the fate that awaits them. It is human nature, yet there are so many that think "it can't happen here" even when the obvious parallels are drawn. We are being set up for the same sorts of control, little by little.
I don't disagree with a word from your link. The example of the Finns in the Winter War needs to be thrown up to everyone that says that our Leviathan could never be taken on. The numbers quoted there are an example of what determined people with nothing left to lose can do.