RETAIL - April Surprised Most Investors who were looking for a stronger reading!

APRIL RETAIL SALES

Easter’s shift almost always aggravates monthly retail sales comparisons. The bizarre weather patterns in much of the U.S. aggravated demand and penalized store traffic, making prognosticating April retail sales a humbling, if not futile, exercise.

April’s advance monthly retail sales (excluding autos) registered a flat month- over-month comparison, surprising most investors who were looking for a stronger reading, especially in light of last week’s April same store sales results at numerous retailers.

Solid April sales momentum was reported at shops as varied as old navy, up 18 percent, to the 8 percent gain registered at victoria’s Secret and a 5 percent gain at Costco (excluding gas sales). l brands and gap both lifted first quarter guidance.

For much of this recovery consumers have improved their balance sheets and shopped with intent, benefitting one category to the neglect of another. Recent strength in housing meant apparel suffered. Industry consolidation improved sales results at individual.

According to the April consumer survey conducted by the n ational Retail Federation, of more than 6,000 adults surveyed, 49 percent say the current state of the U.S. economy is causing them to generally spend less, while 39 percent shop sales more often, 28 percent report spending less on apparel and 21 per cent say they are cutting back on small luxuries such as high end cosmetics and trips to coffee shops. with income growth static consumers are scrupulous with their discretionary purchases.

April probably benefitted from the late Easter and a more engaged consumer. But before we call for a sustained uptick in middle class purchasing we need to see the supports to purchasing – income growth and employment – gain traction. For now, the best call is a bifurcated retail shopping environment, with value retailers, such as TJ Maxx and o ld navy, gaining share from moderate department stores, and luxury names, such as Ralph lauren, Prada and Michael k or s, faring well with global demand.

RETAIL - Q1 Retail & Food (Ex-Auto) - Non Seasonally Adjusted

Taken from: About That -Strong- March Retail Sales -Bounce-- Good Thing Summer's Coming! 04-16-14 David Stockman via Contra Corner blog

RETAIL - April Retail Sales

No Unharsh Weather Rebound: Retail Sales Miss Across The Board 05-13-14 Zero Hedge

Having been revised up to a 1.5% growth for March (the most since March 2010), retail sales crumbled across the board in April as the promise of un-harsh weather rebounds evaporated into the reality of a one-off pent-up demand pop. All sub-series of retail sales missed expectations with Ex-Auto/Gas actually dropping 0.1%. The broad weakness was led by furniture (-0.6%) and electronics stores (-2.3%).

The broadest measure of retail sales missed...

and ex-autos/gas saw a drop of 0.1% and its 2nd biggest miss in over a year...

The breakdown: after sliding 1.6% in March, electronics and appliances stores tumbled -2.3% in April. Adding insult to housing contraction injury, furniture and home furnishings stores saw a -0.6% drop in April also, while miscellaneous store sales tumbled by 2.3%.

As for the retail sales control group, yup: that is a negative print from March.

CREDIT - Asian Marginal Utility

How The Debt Trap Swallowed Asia In Three Charts 05-14-14 Zero Hedge

When it comes to the topic of the marginal utility of debt, or how much GDP does a dollar of debt buy (an example of which can be seen here), most people are aware that the developed world is facing ruin: with debt across the west already at record, nosebleed levels, and with GDP growth slowing down (due to capital misallocation, thank you Fed, demographic and productivity reasons), it is only a matter of time before itdoesn't matter how many trillions in debt a given treasury will issue (and a given central bank will monetize) - the credit impulse will simply not translate into incremental economic growth.

But did those same people also know that Asia is almost as bad if not worse as the west when it comes to the marginal utility of debt, or as the FT calls, it credit intensity.

Here, in three simple charts, is a visual summary of Asia's debt trap:

Asian economies have experienced a surge in credit intensity – a measure of the borrowing required to generate a unit of growth

Rising consumer and corporate debt – some infrastructure and construction-related – has helped growth at a time of weak exports

The low cost of credit has helped growth, delaying structural reforms in countries including China, India and Indonesia

Some further thoughts from the FT:

While much has been written about China’s debt addiction, the experience is far from unique within Asia. Credit levels have risen sharply since 2008 in Hong Kong, Singapore, Thailand and Malaysia, while already high levels of household debt in South Korea and Taiwan have tracked even higher.

During times of accelerating growth, that might not be a cause for concern. But now much of Asia is faltering. Credit intensity – the amount of borrowing needed to generate a unit of output – has surged, while productivity growth has tumbled. The debt train appears to be fast running out of track just as the world prepares for higher interest rates.

“There’s no problem in having the debt to GDP growth go up. It doesn’t have to collapse necessarily as long as you can turn around productivity growth,” says Fred Neumann, Asian economist at HSBC. “The big problem Asia faces is to implement structural reforms that are politically unpalatable before a crisis actually occurs.”

Reforms or not, all of the above is well-known to Zero Hedge readers who first, before anyone else, saw what in our opinion is perhaps the most important, and most underappreciated chart of the New Normal (one which has since been used by everyone from the WSJ to FT to NYT to Fitch): the comparison of bank asset growth in China vs the US.

One doesn't need fancy formulas or long paragraphs to explain that a situation in which $1 trillion in credit creation per month leads to ever smaller GDP growth is absolutely unsustainable, and it won't matter if and when the Politburo decides the time for a hard landing has come, as very soon the decision will be made for it.

PATTERNS - Economic Cycles

If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Devastating For The US 05-14-14 Michael Snyder of The Economic Collapse blog,

Does the economy move in predictable waves, cycles or patterns?  There are many economists that believe that it does, and if their projections are correct, the rest of this decade is going to be pure hell for the United States.  Many mainstream economists want nothing to do with economic cycle theorists, but it should be noted that economic cycle theories have enabled some analysts to correctly predict the timing of recessions, stock market peaks and stock market crashes over the past couple of decades.  Of course none of the theories discussed below is perfect, but it is very interesting to note that all of them seem to indicate that the U.S. economy is about to enter a major downturn.  So will the period of 2015 to 2020 turn out to be pure hell for the United States?  We will just have to wait and see.

One of the most prominent economic cycle theories is known as "the Kondratieff wave".  It was developed by a Russian economist named Nikolai Kondratiev, and as Wikipedia has noted, his economic theories got him into so much trouble with the Russian government that he was eventually executed because of them...

The Soviet economist Nikolai Kondratiev (also written Kondratieff) was the first to bring these observations to international attention in his book The Major Economic Cycles (1925) alongside other works written in the same decade. Two Dutch economists, Jacob van Gelderen and Samuel de Wolff, had previously argued for the existence of 50 to 60 year cycles in 1913. However, the work of de Wolff and van Gelderen has only recently been translated from Dutch to reach a wider audience.

Kondratiev's ideas were not supported by the Soviet government. Subsequently he was sent to the gulag and was executed in 1938.

In 1939, Joseph Schumpeter suggested naming the cycles "Kondratieff waves" in his honor.

In recent years, there has been a resurgence of interest in the Kondratieff wave.  The following is an excerpt from an article by Christopher Quigley that discussed how this theory works...

Kondratiev's analysis described how international capitalism had gone through many such "great depressions" and as such were a normal part of the international mercantile credit system. The long term business cycles that he identified through meticulous research are now called "Kondratieff" cycles or "K" waves.

The K wave is a 60 year cycle (+/- a year or so) with internal phases that are sometimes characterized as seasons: spring, summer, autumn and winter:

• Spring phase: a new factor of production, good economic times, rising inflation
• Summer: hubristic 'peak' war followed by societal doubts and double digit inflation
• Autumn: the financial fix of inflation leads to a credit boom which creates a false plateau of prosperity that ends in a speculative bubble
• Winter: excess capacity worked off by massive debt repudiation, commodity deflation & economic depression. A 'trough' war breaks psychology of doom.

Increasingly economic academia has come to realize the brilliant insight of Nikolai Kondratiev and accordingly there have been many reports, articles, theses and books written on the subject of this "cyclical" phenomenon. An influential essay, written by Professor W. Thompson of Indiana University, has indicated that K waves have influenced world technological development since the 900's. His thesis states that "modern" economic development commenced in 930AD in the Sung province of China and he propounds that since this date there have been 18 K waves lasting on average 60 years.

So what does the Kondratieff wave theory suggest is coming next for us?

Well, according to work done by Professor W. Thompson of Indiana University, we are heading into an economic depression that should last until about the year 2020...

Based on Professor Thompson's analysis long K cycles have nearly a thousand years of supporting evidence. If we accept the fact that most winters in K cycles last 20 years (as outlined in the chart above) this would indicate that we are about halfway through the Kondratieff winter that commenced in the year 2000. Thus in all probability we will be moving from a "recession" to a "depression" phase in the cycle about the year 2013 and it should last until approximately 2017-2020.

But of course the Kondratieff wave is far from the only economic cycle theory that indicates that we are heading for an economic depression.

The economic cycle theories of author Harry Dent also predict that we are on the verge of massive economic problems.  He mainly focuses on demographics, and the fact that our population is rapidly getting older is a major issue for him.  The following is an excerpt from a Business Insider article that summarizes the major points that Dent makes in his new book...

• Young people cause inflation because they "cost everything and produce nothing." But young people eventually "begin to pay off when they enter the workforce and become productive new workers (supply) and higher-spending consumers (demand)."
• Unfortunately, the U.S. reached its demographic "peak spending" from 2003-2007 and is headed for the "demographic cliff." Germany, England, Switzerland are all headed there too. Then China will be the first emerging market to fall off the cliff, albeit in a few decades. The world is getting older.
• The U.S. stock market will crash. "Our best long-term and intermediate cycles suggest another slowdown and stock crash accelerating between very early 2014 and early 2015, and possibly lasting well into 2015 or even 2016. The worst economic trends due to demographics will hit between 2014 and 2019. The U.S. economy is likely to suffer a minor or major crash by early 2015 and another between late 2017 and late 2019 or early 2020 at the latest."
• "The everyday consumer never came out of the last recession." The rich are the ones feeling great and spending money, as asset prices (not wages) are aided by monetary stimulus.
• The U.S. and Europe are headed in the same direction as Japan, a country still in a "coma economy precisely because it never let its debt bubble deleverage," Dent argues. "The only way we will not follow in Japan's footsteps is if the Federal Reserve stops printing new money."
• "The reality is stark, when dyers start to outweigh buyers, the market changes." It all comes down to an aging population, Dent writes. "Fewer spenders, borrowers, and investors will be around to participate in the next boom."
• The U.S. has a crazy amount of debt and "economists and politicians have acted like we can just wave a magic wand of endless monetary injections and bailouts and get over what they see as a short-term crisis." But the problem, Dent says, is long-term and structural — demographics.
• Businesses can "dominate the years to come" by focusing on cash and cash flow, being "lean and mean," deferring major capital expenditures, selling nonstrategic real estate, and firing weak employees now.
• The big four challenges in the years ahead will be 1) private and public debt 2) health care and retirement entitlements 3) authoritarian governance around the globe and 4) environmental pollution that threatens the global economy.

According to Dent, "You need to prepare for that crisis, which will occur between 2014 and 2023, with the worst likely starting in 2014 and continuing off and on into late 2019."

So just like the Kondratieff wave, Dent's work indicates that we are going to experience a major economic crisis by the end of this decade.

Another economic cycle theory that people are paying more attention to these days is the relationship between sun spot cycles and the stock market.  It turns out that market peaks often line up very closely with peaks in sun spot activity.  This is a theory that was first popularized by an English economist named William Stanley Jevons.

Sun spot activity appears to have peaked in early 2014 and is projected to decline for the rest of the decade.  If historical trends hold up, that is a very troubling sign for the stock market.

And of course there are many, many other economic cycle theories that seem to indicate that trouble is ahead for the United States as well.  The following is a summary of some of them from an article by GE Christenson and Taki Tsaklanos...

Charles Nenner Research (source)
Stocks should peak in mid-2013 and fall until about 2020. Similarly, bonds should peak in the summer of 2013 and fall thereafter for 20 years. He bases his conclusions entirely on cycle research. He expects the Dow to fall to around 5,000 by 2018 – 2020.

Kress Cycles (Clif Droke) (source)
The major 120 year cycle plus all minor cycles trend down into late 2014. The stock market should decline hard into late 2014.

Elliott Wave (Robert Prechter) (source)
He believes that the stock market has peaked and has entered a generational bear-market. He anticipates a crash low in the market around 2016 – 2017.

Market Energy Waves (source)
He sees a 36 year cycle in stock markets that is peaking in mid-2013 and will cycle down for 2013 – 2016. “… the controlling energy wave is scheduled to flip back to negative on July 19 of this year.” Equity markets should drop 25 – 50%.

Armstrong Economics (source)
His economic confidence model projects a peak in confidence in August 2013, a bottom in September 2014, and another peak in October 2015. The decline into January 2020 should be severe. He expects a world-wide crash and contraction in economies from 2015 – 2020.

Cycles per Charles Hugh Smith (source)
He discusses four long-term cycles that bottom in the 2010 – 2020 period. They are: Credit expansion/contraction cycle, Price inflation/wage cycle, Generational cycle, and Peak oil extraction cycle.

So does history repeat itself?

Well, it should be disconcerting to a lot of people that 2014 is turning out to be eerily similar to 2007.  But we never learned the lessons that we should have learned from the last major economic crisis, and most Americans are way too apathetic to notice that we are making many of the very same mistakes all over again.

And in recent months there have been a whole host of indications that the next major economic downturn is just around the corner.  For example, just this week we learned that manufacturing job openings have declined for four months in a row.  For many more indicators like this, please see my previous article entitled "17 Facts To Show To Anyone That Believes That The U.S. Economy Is Just Fine".

Let's hope that all of the economic cycle theories discussed above are wrong this time, but we would be quite foolish to ignore their warnings.

Everything indicates that a great economic storm is rapidly approaching, and we should use this time of relative calm to get prepared while we still can.

ANALTICS - Sentiment

RISK ON-OFF - Excessive Risk from all Historic Measures

John P. Hussman, Ph.D.

We continue to view the present market environment as among the most dangerous instances in history.

Reliable valuation measures for the median stock are actually more extreme today than in 2000. On a capitalization-weighted basis, valuations are beyond every pre-bubble point in history except for a few months in 1929.

VALUATION METRICS

Much of what investors believe about the “effectiveness” of QE is purely psychological. Except for short-term Treasury bills, there is no reliable or mechanistic relationship that links the size of the monetary base to the price of financial assets or the real activity of the economy

.

RISK ON-OFF - Precious Metals Will Point the Way

from: Salient Partners' Epsilon Theory via ZH

1M implied volatility on the VIX fell to an all-time low. Generally speaking, this means that options on short-term market volatility increasing have never been cheaper.

How is this possible, you ask, with outright war simmering in Eastern Ukraine and China flexing its muscles in the South China Sea? 

1. Because Mario Draghi is "signaling" that he's going to launch a European version of QE.
2. Because the Narrative of Central Bank Omnipotence has never been stronger, and for markets this is the only thing that matters.
3. Because we continue to live in the new Goldilocks environment, where mediocre growth is not so weak as to plunge us into recession but not so strong as to take central banks out of play. If the news gets a lot better the market will go down, and if the news gets a lot worse the market will go down. 

But what I call the ENTROPIC ENDING: A market-positive gray slog where global growth is more-or-less permanently crippled by the very monetary policies that prevent global growth from collapsing (WHICH can go on for a looooooong time).

..... and how to tell when this starts to change...

How can you know if this narrative starts to waver or shift? If and when gold starts to work.

This is what gold means in the modern age... not a store of value or some sort of protection against geopolitical instability... but an insurance policy against massive central bank error and loss of control.

RISK-ON/OFF - Breadth is Warning

The S&P 500 is cap-weighted, which means larger companies like Apple and ExxonMobil have a much larger impact on how the index moves. High cap stocks influence the averages more thus can mask internal weakness.

The average S&P 1500 stock is down by more than 12% from their recent 52-week highs. The average stocks in the Russell 2000 and Nasdaq Composite are down by more than 20%, which means you can say they are in bear markets.

Historically, this sort of divergence does not bode well for the longevity of a market’s upward inertia. The current breadth reading is very unhealthy. Not only are new highs diminishing but many stocks are making new lows. This breadth divergence is a major concern.

This isn't necessarily a screaming sell signal. However the powerful message of “there is something wrong” should not go unnoticed".

"There is no FREEDOM without NOISE -

and no STABILITY without VOLATILITY."

When The Real Cost is Hidden, Making Good Decisions Is Impossible 05-13-14 Charles Hugh-Smith of OfTwoMinds blog

When good decisions are no longer possible, bad decisions are inevitable.

FLOWS - Liquidity, Credit & Debt

What Drives Capitalist Growth? 05-15-14 Richard Duncan

I would like to ask my readers to think about our economic system and how it creates economic growth. I believe this will be useful in understanding the impediments that will have to be overcome in the years immediately ahead if economic growth is going to continue.

Over the last 250 years, Capitalism has transformed the world. One way or another (some would say “by hook or by crook”) it has found a way to make profits grow and capital accumulate. Decade after decade, capitalist economies have grown by developing new production techniques, opening new markets (by force if necessary), finding new sources of cheap labor or, if need be, by demanding and receiving government support.

Many prerequisites must be in place for capitalism to take hold and to begin generating economic growth. There must be societal acceptance of such a system. There must be a sufficient supply of raw materials, including labor. Property rights must be secure. And there must be entrepreneurial talent. But the precondition that I want to draw attention to today is Effective Demand.

Here’s a definition of Effective Demand: “Wants, needs and desires backed up by the ability to pay.” And I have put “backed up by the ability to pay” in bold because that, of course, is the limiting factor. There may be no limit to human wants, needs and desires, but there clearly are limits to the ability to pay for them.

For capitalism to produce economic growth, investments must generate profits; and at least part of those profits must be saved and reinvested as new “capital”. One way for businesses to become more profitable is to reduce the wages they pay to their employees. Beginning in the 1980s most large US manufacturing companies began to push down the amount they paid to their employees by moving their factories to low wage countries like China and Mexico.

The problem with this strategy is that if all companies reduce the wages of their employees, then no one would have enough income to buy the products that the companies make, in which case profits will fall. In other words, there would be insufficient “Effective Demand” to allow the economy to generate profits and growth.

Between 1990 to 2008, this problem of insufficient Effective Demand in the United States (and in many other developed economies) was overcome by increasing the amount of credit ordinary people were allowed to borrow. Credit as a ratio of GDP grew from 220% in 1990 to 370% in 2008. With greater access to credit, Americans were able to continue spending more every year even though wages for most people ceased going up. Credit provided the Effective Demand that allowed the economy to grow.

That came to an end in 2008 when millions of Americans could no longer afford to continue paying the interest on all of their debt. When they defaulted they were cut off from additional credit. That caused Effective Demand to contract. And the contraction of Effective Demand threw the United States and the world into the worst economic slump since the Great Depression.

At that point, the government had to step in to prevent economic collapse. The US government and other governments around the world greatly increased the amount of money they borrowed and spent, thereby becoming the next source of Effective Demand. Part of the money governments borrowed came from the world’s central banks, which created trillions of dollars worth of fiat money over the past six year. That fiat money was one more source of Effective Demand. And, as a result of the increase in government debt and fiat money creation enough Effective Demand was generated so that our economic system was able to keep generating more profits and accumulating more capital and economic growth.

Where will the Effective Demand come from next? The governments of most of the developed economies are rapidly reducing the size of their budget deficits. The US budget deficit, for instance, is less than half the size it was at the peak of the crisis. Moreover, the US central bank, is winding down its Quantitative Easing program of fiat money creation, which is scheduled to end in November this year.

So, where will the next source of Effective Demand come from? As I look around the world, I can’t see any new source. Without increasing Effective Demand, profits and capital will begin to shrink and the global economic crisis will resume.

Capitalism, or whatever you wish to call our economic system, has been extremely resourceful in developing new sources of Effective Demand decade after decade. So, it will be very interesting to see how it responds to the approaching shortfall that now seems to threaten it. Let’s watch and see what happens. My bet is that Quantitative Easing won’t end this year. I expect the Fed will be forced to continue providing the Effective Demand that has been fueling economic growth in recent years. There does not seem to be any other alternative source.

SOCIAL UNREST -INEQUALITY & A BROKEN SOCIAL CONTRACT

Capitalism is Dying 05-12-14 Paul Farrell - MarketWatch

Quiz. One question. Your answer will tell who you are, deep within, your moral conscience. And why America has lost its moral compass, but doesn’t know it’s lost, nor why. And that’s an economy killer.

Yes, just one answer tells all. Ask yourself, who said: “The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our morals.”

No, it’s not who you think. But your answer will reveal why America lost its moral compass. And why capitalism is dying.

Was it some extreme leftist? Karl Marx? Pope Francis? Obama? Maybe a hard-right conservative criticizing progressives: Ayn Rand? Paul Ryan? Billionaire Koch Bros.? An academic: Thomas Piketty, Jared Diamond. Economist Joseph Stiglitz? Nouriel Roubini? Maybe an entertainer: Bono, Springsteen, Jay-Z?

But before you continue, take a look deep into your soul. You are the cause, the problem, the missing piece.

Seriously, consider this possibility: If you don’t know why America’s moral conscience is declining, if you disagree, if you’re just guessing ... then from a purely, psychological neuroscience, behavioral economics perspective, your answer is irrational, a blind gut reaction coming from deep inside, anchored in old ideas, in preconceived biases, political ideologies, religious beliefs and mental constructs that you did not even chose but rather were unconsciously planted on your brain by outside forces, without your even being aware it was happening, or making any conscious rational decision.

So ask again: Who said that America’s obsession with admiring and worshiping the rich and the powerful, while dismissing the poor is the reason for our moral corruption?

It wasn’t Pope Francis. But close. The pope actually put it like this: “The worship of the ancient golden calf has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose ... While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few.”

Outsiders often see what we refuse to see, what we deny. Francis looked into our collective soul, saw how capitalism is destroying our moral compass, why America is dying. He saw “a new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules ... has a thirst for power and possessions that knows no limits ... tends to devour everything which stands in the way of increased profits ... whatever is fragile, like the environment, is defenseless before the interests of a deified market.”

No, the pope isn’t the answer to your quiz question, won’t reveal the secret reason America lost its moral compass, a loss killing the great American Dream ... from within.

Another possible guess: Thomas Piketty? Does the answer come from his new book, “Capital in the Twentieth-First Century?” Actually is an obvious answer. Why? In today’s accelerated news cycle, Americans are being overwhelmed by the left-right media wars for reader eyeballs. Lately we’ve been overdosed with Piketty-mania. He’s the world’s newest, biggest celeb rock-star economist to come along since Karl Marx and Adam Smith. And a bit wonky.

Yes, Piketty made a neo-Marxist attack on capitalism, an attack that has conservatives everywhere in total panic mode. So here’s everything you need to know about Piketty’s attack on capitalism and its inherent tendency to widen the world’s inequality gap:

“When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first,” said Piketty, “capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.”

So go back to the quiz question: If neither Piketty nor Pope Francis, nor someone on the extreme left or hard-right said it ... then who said: “The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.”

Answer: Adam Smith, the father, creator, patron saint of American capitalism. Yes, Adam Smith, in his “The Theory of Moral Sentiments.” (Yes folks, if you looked closely you noticed we really did substitute the word “morals” for “moral sentiments” in our original Adam Smith quote above. That was necessary. It might have made it a bit too easy, more obvious. But maybe not; chances are most investors haven’t read either of Adam Smith’s classic let alone Piketty’s.)

Moreover, conservatives hate having their patriot saint turn on them. While progressives lack the guts to attack.

But the answer is Adam Smith. He predicted the self-destruction coming, the worship of materialism, the neglect of the poor. Yes, over two centuries ago Adam Smith, the patriot saint of capitalism, warned Americans capitalists would eventually lose their moral compass, sabotage their American Dream and self-destruct the economy.

If you did make the mistake of guessing it was Piketty rather than Marx, Pope Francis or some progressive, that’s understandable. True, it’s an obvious giveaway that you’re a conservative and didn’t have time to read all 696 pages of Piketty’s “Capital.” And in the process were distracted by the intense, overwhelming Piketty media-mania, instead just took a shortcut, reading all the shorter reviews by trusted right-wing bloggers, news anchors and editorialists.

Anyway, thanks to intense hard-right attacks on Piketty, Marx is definitely back in mainstream economics again. Probably for a long time. Even rock-star economist Nouriel Roubini is on record admitting that “Karl Marx had it right. At some point, capitalism can destroy itself. You cannot keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption. That’s why it’s a self-destructive process.” Why capitalism is killing America.

Unfortunately, this awareness that Adam Smith’s ideal of capitalism is being ignored by today’s conservatives is proof why Piketty’s forecast for this century is certain to come true.

In short, the trend is guaranteed to get worse, not better. America, democracy, capitalism and the global economy are heading for disastrous collapse. An elite group of just 85 of the wealthiest billionaires already have more wealth than the 3.5 billion poorest half of the world population.

And since Piketty’s trend forecast is accelerating, those 85 billionaires will get richer. Also, remember the recent Credit Suisse Global Wealth Report: Its prediction that by 2100 the world will have 11 trillionaire families. Yes folks, American capitalism has lost its moral compass ... and is dying.