Uh oh – here we go again. Do you remember the subprime mortgage meltdown during the last financial crisis? Well, now a similar thing is happening with auto loans. The auto industry has been doing better than many other areas of the economy in recent years, but this “mini-boom” was fueled in large part by customers with subprime credit. According to Equifax, an astounding 23.5 percent of all new auto loans were made to subprime borrowers in 2015. At this point, there is a total of somewhere around $200 billion in subprime auto loans floating around out there, and many of these loans have been “repackaged” and sold to investors. I know – all of this sounds a little too close for comfort to what happened with subprime mortgages the last time around. We never seem to learn from our mistakes, and a lot of investors are going to end up paying the price.
Everything would be fine if the number of subprime borrowers not making their payments was extremely low. And that was true for a while, but now delinquency rates and default rates are rising to levels that we haven’t seen since the last recession. The following comes from Time Magazine…
People, especially those with shaky credit, are having a tougher time than usual making their car payments.
According to Bloomberg, almost 5% of subprime car loans that were bundled into securities and sold to investors are delinquent, and the default rate is even higher than that. (Depending on who’s counting, delinquency is up to three or four months behind in payments; default is what happens after that). At just over 12% in January, the default rate jumped one entire percentage point in just a month. Both delinquency and default rates are now the highest they’ve been since 2010, when the ripple effects of the recession still weighed heavily on many Americans’ finances.
The chart below was posted by David Stockman, and it shows how the delinquency rate for subprime borrowers has hit the highest level since 2009. In fact, we are not too far away from totally smashing through the previous highs that were set during the last crisis…
It is quite foolish to try to sell expensive cars to people with bad credit. This is especially true now that the economy is slowing down significantly in many areas. But people are greedy and they are going to do what they are going to do.
The most disturbing thing to me is that many of these loans are being “repackaged” and sold off to investors as “solid investments”. The following description of what has been happening comes from Wolf Richter…
The business of “repackaging” these loans, including subprime and deep-subprime loans, into asset backed securities has also been booming. These ABS are structured with different tranches, so that the highest tranches – the last ones to absorb any losses – can be stamped with high credit ratings and offloaded to bond mutual funds designed for retail investors.
Deep-subprime borrowers are high-risk. Typically they have credit scores below 550. To make it worth everyone’s while, they get stuffed into loans often with interest rates above 20%. To make payments even remotely possible at these rates, terms are often stretched to 84 months. Borrowers are typically upside down in their vehicle: the negative equity of their trade-in, along with title, taxes, and license fees, and a hefty dealer profit are rolled into the loan. When the lender repossesses the vehicle, losses add up in a hurry.
It almost makes you want to tear your hair out.
This is exactly the kind of thing that caused so much chaos with subprime mortgages.
When will we ever learn?
Meanwhile, we continue to get even more numbers that indicate that a substantial economic slowdown has already begun…
We just got the clearest sign yet that something is wrong with the US economy.
Markit Economics’ monthly flash services purchasing manager’s index, a preliminary reading on the sector, fell into contraction for the first time in over two years.
The tentative February index was reported Wednesday at 49.8.
Statistic after statistic is telling us that a new recession is already here. And of course some would argue that the last recession never actually ended. According to John Williams of shadowstats.com, the U.S. economy has continually been in contraction mode since 2005.
If we do not learn from history, we are doomed to repeat it. All over the world, “non-performing loans” are starting to become a major problem, and already some financial institutions are starting to get tighter with credit.
As credit conditions tighten up, this is going to cause economic activity to slow down even more. And as economic activity slows down, it is going to become even harder for ordinary people to make their debt payments.
Deflationary forces are on the rise, and most global central banks are just about out of ammunition at this point.
Everyone knew that the global debt bubble could not keep expanding much faster than the overall rate of economic growth forever.
It was only a matter of time until the bubble burst.
Now we can see signs of crisis popping up all around us, and things are only going to get worse in the months ahead…
We just learned that the homeownership rate in the United States has fallen to the lowest level in 19 years. But of course this is not a new trend. As you will see in this article, the homeownership rate in the United States has been in a continual decline for more than 7 years. Obviously this is not a sign of a healthy economy. Traditionally, homeownership has been one of the key indicators that you belong to the middle class. When people define “the American Dream”, it is usually one of the first things mentioned. So if the percentage of Americans that own a home has been steadily going down for 7 years in a row, what does that tell us about the health of the middle class in this country?
The chart that you are about to view is clear evidence that we are in the midst of a long-term economic decline. It shows what has happened to the homeownership rate in the U.S. since the year 2000, and as you can see it has been collapsing since the peak of the housing market back in 2007. Does this look like a housing recovery to you?…
So many people get caught up in what is happening on Wall Street, but this is the “real economy” that affects people on a day to day basis.
Most Americans just want to be able to buy a home and provide a solid middle class living for their families.
The fact that the percentage of people that are able to achieve this “American Dream” is falling rapidly is very troubling.
There are some that blame this stunning decline in the homeownership rate on the Millennials.
And without a doubt, they are a significant part of the story. They are moving back home with their parents at record rates, and many that are striking out on their own are renting apartments in the big cities.
This is one area where the decline of marriage in America is really hitting the economy. Back in 1968, well over 50 percent of Americans in the 18 to 31-year-old age bracket were already married and living on their own. Today, that number is below 25 percent.
But that is not all there is to this story.
In fact, the homeownership rate for Americans in the 35 to 44-year-old age bracket has been falling even faster than it has for Millennials…
In the first quarter of 2008, nearly 67% of people aged 35-44 owned homes. Now the number is barely above 59%. The percentage of people under 35 owning homes only fell five percentage points, to 36% from 41%.
So why is this happening?
Well, it is fairly simple actually.
In order to buy homes, people need to have good jobs. And at this point, the percentage of Americans that are employed is still about where it was during the depths of the last recession.
In addition, wages in the United States have stagnated and the quality of our jobs continues to go down. As I wrote about the other day, half of all American workers make less than $28,031 a year. Needless to say, if you make less than $28,031 a year, you are going to have a really hard time getting approved for a home loan or making mortgage payments.
Things have been changing for a long time in this country, and not for the better. Our economic problems have taken decades to develop, and the underlying causes of these problems is still not being addressed.
Meanwhile, middle class families continue to suffer. One very surprising new survey discovered that more than half of all Americans now consider themselves to be “lower-middle class or working class with low economic security”. While Wall Street has been celebrating in recent years, economic pessimism has become deeply ingrained on Main Street…
Optimism may be harder to come by these days. More than half of Americans surveyed in a Harris poll released Tuesday identified themselves as being lower-middle class or working class with low economic security. And 75 percent said they’re being held back financially by roadblocks like the cost of housing (24 percent), health care (21 percent) and credit-card debt (20 percent).
And that’s not the kicker.
“The most disappointing aspect is that 45 percent think they’ll never get their finances back to where they were before the financial crisis,” said Ken Rees, CEO of the Elevate credit service company, which commissioned the survey. “And a third are losing sleep over it.”
The only “recovery” that we have experienced since the last recession has been a temporary recovery on Wall Street.
For the rest of the country, our long-term economic decline has continued.
When I was growing up, my father was serving in the U.S. Navy and we lived in a fairly typical middle class neighborhood. Everyone that I went to school with lived in a nice home and I never heard of any parent struggling to find work. Of course life was not perfect, but it seemed to me like living a middle class lifestyle was “normal” for most people.
How times have changed since then.
Today, it seems like we are all part of a giant reality show where people are constantly being removed from the middle class and everyone is wondering who will be next.
So what do you think?
Is there hope for the middle class, or are the economic problems that we are facing just beginning?
Please feel free to share your opinion by posting a comment below…
Did you know that a major event just happened in the financial markets that we have not seen since the financial crisis of 2008? If you rely on the mainstream media for your news, you probably didn’t even hear about it. Just prior to the last stock market crash, a massive amount of money was pulled out of junk bonds. Now it is happening again. In fact, as you will read about below, the market for high yield bonds just experienced “a 6-sigma event”. But this is not the only indication that the U.S. economy could be on the verge of very hard times. Retail sales are extremely disappointing, mortgage applications are at a 14 year low and growing geopolitical storms around the world have investors spooked. For a long time now, we have been enjoying a period of relative economic stability even though our underlying economic fundamentals continue to get even worse. Unfortunately, there are now a bunch of signs that this period of relative stability is about to end. The following are 14 reasons why the U.S. economy’s bubble of false prosperity may be about to burst…
#1 The U.S. junk bond market just experienced “a 6-sigma event” earlier this month. In other words, it is an event that is only supposed to have a chance of 1 in 500 million of happening. Billions of dollars are being pulled out of junk bonds right now, and that has some analysts wondering if a financial crash is right around the corner.
#2 The last time that we saw a junk bond rout of this magnitude was back during the financial crash of 2008. In fact, as the Telegraph recently explained, bonds usually crash before stocks do…
The credit market usually leads the equity market during turning points, as happened when credit markets cracked first in 2008.
Will the same thing happen this time around?
#3 Retail sales have missed expectations for three months in a row and we just had the worst reading since January.
#4 Things have gotten so bad that even Wal-Mart is really struggling. Same-store sales at Wal-Mart have declined for five quarters in a row and the outlook for the future is not particularly promising.
#5 The four week moving average for mortgage applications just hit a 14 year low. It is now even lower than it was during the worst moments of the financial crisis of 2008.
#6 The tech industry is supposed to be booming, but mass layoffs in the tech industry are actually 68 percent ahead of last year’s pace.
#7 According to the Federal Reserve, 40 percent of all households in the United States are currently showing signs of financial stress.
#8 The U.S. homeownership rate has fallen to the lowest level since 1995.
#9 According to one survey, 76 percent of Americans do not have enough money saved to cover six months of expenses.
#10 Rumblings of a stock market correction have become so loud that even the mainstream media is reporting on it. For example, just check out this CNN headline from earlier this month: “Is a correction near? Wall Street on edge“.
#11 The civil war in Iraq is spiraling out of control, and Barack Obama has just announced that he is going to send 130 troops to the country in a “humanitarian” capacity. Iraq is the 7th largest oil producing nation on the entire planet, and if the flow of oil is disrupted that could have serious consequences.
#12 As a result of the conflict in Ukraine, the United States, Canada and the European Union have slapped sanctions on Russia. In return, Russia has slapped sanctions on them. Will this slowdown in global trade significantly harm the U.S. economy?
#13 The three day cease-fire between Hamas and Israel is about to end, and Hamas officials are saying that they are preparing for a “long battle“. If a resolution is not found soon, we could potentially see a full-blown regional war erupt in the Middle East.
#14 The number of Ebola deaths continues to grow at an exponential rate, and if the virus starts spreading inside the United States it has the potential to pretty much shut down our entire economy.
Meanwhile, things look even more dire in much of the rest of the globe.
For example, the economic slowdown has gotten so bad in some nations over in Europe that they are actually experiencing deflation…
Portugal has crashed into deep deflation and Italy’s inflation rate has fallen to zero as the eurozone flirts with recession, automatically pushing these countries further towards a debt compound spiral.
The slide comes amid signs of a deepening slowdown in the eurozone core, with even Germany flirting with possible recession. Germany’s ZEW index of investor confidence plunged from 27.1 to 8.6 in July, the sharpest fall since June 2012, during the European sovereign debt crisis. “The European Central Bank has to act now,” said Andrew Roberts, credit chief at RBS.
And in Japan, GDP just contracted at a 6.8 percent annual rate during the second quarter…
Japan’s economy suffered its worst contraction since 2011 in the second quarter as consumer spending on big items slumped in the wake of a sales tax rise.
Gross domestic product shrunk by an annualized 6.8% in the three months ended June, Japan’s Cabinet Office said Wednesday. The result was actually better than the 7% contraction expected by economists.
On a quarterly basis, Japan’s GDP dropped by 1.7% as business and housing investment declined. Japan’s economy last suffered a hit of this magnitude after the 2011 tsunami and nuclear disaster.
There is no way that this bubble of false prosperity was going to last forever. It was never real to begin with. It was just based on a pyramid of debt and false promises. In fact, the condition of the global financial system is now far worse than it was just prior to the financial crisis of 2008.
Sadly, most people do not understand these things. Most people just assume that our leaders have fixed whatever caused the problems last time. And when the next crisis arrives, they will be totally blindsided by it.
According to stunning new numbers just released by the federal government, nine of the top ten most commonly held jobs in the United States pay an average wage of less than $35,000 a year. When you break that down, that means that most of these workers are making less than $3,000 a month before taxes. And once you consider how we are being taxed into oblivion, things become even more frightening. Can you pay a mortgage and support a family on just a couple grand a month? Of course not. In the old days, a single income would enable a family to live a very comfortable middle class lifestyle in most cases. But now those days are long gone. In 2014, both parents are expected to work, and in many cases both of them have to get multiple jobs just in order to break even at the end of the month. The decline in the quality of our jobs is a huge reason for the implosion of the middle class in this country. You can’t have a middle class without middle class jobs, and we have witnessed a multi-decade decline in middle class jobs in the United States. As long as this trend continues, the middle class is going to continue to shrink.
The following is a list of the most commonly held jobs in America according to the federal government. As you can see, 9 of the top 10 most commonly held occupations pay an average wage of less than $35,000 a year…
- Retail salespersons, 4.48 million workers earning $25,370
- Cashiers 3.34 million workers earning $20,420
- Food prep and serving staff, 3.02 million workers earning $18,880
- General office clerk, 2.83 million working earning $29,990
- Registered nurses, 2.66 million workers earning $68,910
- Waiters and waitresses, 2.40 million workers earning $20,880
- Customer service representatives, 2.39 million workers earning $33,370
- Laborers, and freight and material movers, 2.28 million workers earning $26,690
- Secretaries and admins (not legal or medical), 2.16 million workers earning $34,000
- Janitors and cleaners (not maids), 2.10 million workers earning, $25,140
Overall, an astounding 59 percent of all American workers bring home less than $35,000 a year in wages.
So if you are going to make more than $35,000 this year, you are solidly in the upper half.
But that doesn’t mean that you will always be there.
More Americans are falling out of the middle class with each passing day.
Just consider the case of a 47-year-old woman named Kristina Feldotte. Together with her husband, they used to make about $80,000 a year. But since she lost her job three years ago, their combined income has fallen to about $36,000 a year…
Three years ago, Kristina Feldotte, 47, and her husband earned a combined $80,000. She considered herself solidly middle class. The couple and their four children regularly vacationed at a lake near their home in Saginaw, Michigan.
But in August 2012, Feldotte was laid off from her job as a special education teacher. She’s since managed to find only part-time teaching work. Though her husband still works as a truck salesman, their income has sunk by more than half to $36,000.
“Now we’re on the upper end of lower class,” Feldotte said.
There is a common assumption out there that if you “have a job” that you must be doing “okay”.
But that is not even close to the truth.
The reality of the matter is that you can even have two or three jobs and still be living in poverty. In fact, you can even be working for the government or the military and still need food stamps…
Since the start of the Recession, the dollar amount of food stamps used at military commissaries, special stores that can be used by active-duty, retired, and some veterans of the armed forces has quadrupled, hitting $103 million last year. Food banks around the country have also reported a rise in the number of military families they serve, numbers that swelled during the Recession and haven’t, or have barely, abated.
There are so many people that are really hurting out there.
Today, someone wrote to me about one of my recent articles about food price increases and told me about how produce prices were going through the roof in that particular area. This individual wondered how ordinary families were going to be able to survive in this environment.
That is a very good question.
I don’t know how they are going to survive.
In some cases, the suffering that is going on behind closed doors is far greater than any of us would ever imagine.
And often, it is children that suffer the most…
A Texas couple kept their bruised, malnourished 5-year-old son in a diaper and locked in a closet of their Spring home, police said in a horrifying case of abuse.
The tiny, blond-haired boy was severely underweight, his shoulder blades, ribs and vertebrae showing through his skin, when officers found him late last week.
You can see some photos of that poor little boy right here.
I hope that those abusive parents are put away for a very long time.
Sadly, there are lots of kids that are really suffering right now. There are more than a million homeless schoolchildren in America, and there are countless numbers that will go to bed hungry tonight.
But if you live in wealthy enclaves on the east or west coasts, all of this may sound truly bizarre to you. Where you live, you may look around and not see any poverty at all. That is because America has become increasingly segregated by wealth. Some are even calling this the “skyboxification of America”…
The richest Americans—the much-talked about 1 percent—are a cloistered class. As the Nobel Prize-winning economist Joseph Stiglitz scathingly put it, they “have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live.” The Harvard political philosopher Michael Sandel has similarly lamented the “skyboxification” of American life, in which “people of affluence and people of modest means lead increasingly separate lives.”
The substantial and growing gap between the rich and everyone else is increasingly inscribed on our geography. There have always been affluent neighborhoods, gated enclaves, and fabled bastions of wealth like Greenwich, Connecticut; Grosse Pointe, Michigan; Potomac, Maryland; and Beverly Hills, California. But America’s bankers, lawyers, and doctors didn’t always live so far apart from teachers, accountants, and small business owners, who themselves weren’t always so segregated from the poorest, most struggling Americans.
Nobody should talk about an “economic recovery” until the middle class starts growing again.
Even as the stock market has soared to unprecedented heights over the past year, the decline of middle class America has continued unabated.
And most Americans know deep inside that something is deeply broken. For example, a recent CNBC All-America Economic Survey found that over 80 percent of all Americans consider the economy to be “fair” or “poor”.
Yes, for the moment things are going quite well for the top 10 percent of the nation, but that won’t last long either. None of the problems that caused the last great financial crisis have been fixed. In fact, they have gotten even worse. We are steamrolling toward another great financial crisis and our leaders are absolutely clueless.
When the next crisis strikes, the economic suffering in this nation is going to get even worse.
As bad as things are now, they are not even worth comparing to what is coming.
So I hope that you are getting prepared. Time is running out.
The unelected central planners at the Federal Reserve have decided that the time has come to slightly taper the amount of quantitative easing that it has been doing. On Wednesday, the Fed announced that monthly purchases of U.S. Treasury bonds will be reduced from $45 billion to $40 billion, and monthly purchases of mortgage-backed securities will be reduced from $35 billion to $30 billion. When this news came out, it sent shockwaves through financial markets all over the planet. But the truth is that not that much has really changed. The Federal Reserve will still be recklessly creating gigantic mountains of new money out of thin air and massively intervening in the financial marketplace. It will just be slightly less than before. However, this very well could represent a very important psychological turning point for investors. It is a signal that “the party is starting to end” and that the great bull market of the past four years is drawing to a close. So what is all of this going to mean for average Americans? The following are 8 ways that “the taper” is going to affect you and your family…
1. Interest Rates Are Going To Go Up
Following the announcement on Wednesday, the yield on 10 year U.S. Treasuries went up to 2.89% and even CNBC admitted that the taper is a “bad omen for bonds“. Thousands of other interest rates in our economy are directly affected by the 10 year rate, and so if that number climbs above 3 percent and stays there, that is going to be a sign that a significant slowdown of economic activity is ahead.
2. Home Sales Are Likely Going To Go Down
Mortgage rates are heavily influenced by the yield on 10 year U.S. Treasuries. Because the yield on 10 year U.S. Treasuries is now substantially higher than it was earlier this year, mortgage rates have also gone up. That is one of the reasons why the number of mortgage applications just hit a new 13 year low. And now if rates go even higher that is going to tighten things up even more. If your job is related to the housing industry in any way, you should be extremely concerned about what is coming in 2014.
3. Your Stocks Are Going To Go Down
Yes, I know that stocks skyrocketed today. The Dow closed at a new all-time record high, and I can’t really provide any rational explanation for why that happened. When the announcement was originally made, stocks initially sold off. But then they rebounded in a huge way and the Dow ended up close to 300 points.
A few months ago, when Fed Chairman Ben Bernanke just hinted that a taper might be coming soon, stocks fell like a rock. I have a feeling that the Fed orchestrated things this time around to make sure that the stock market would have a positive reaction to their news. But of course I absolutely cannot prove this at all. I hope someday we learn the truth about what actually happened on Wednesday afternoon. I have a feeling that there was some direct intervention in the markets shortly after the announcement was made and then the momentum algorithms took over from there.
In any event, what we do know is that when QE1 ended stocks fell dramatically and the same thing happened when QE2 ended. If you doubt this, just check out this chart.
Of course QE3 is not being ended, but this tapering sends a signal to investors that the days of “easy money” are over and that we have reached the peak of the market.
And if you are at the peak of the market, what is the logical thing to do?
Sell, sell, sell.
But in order to sell, you are going to need to have buyers.
And who is going to want to buy stocks when there is no upside left?
4. The Money In Your Bank Account Is Constantly Being Devalued
When a new dollar is created, the value of each existing dollar that you hold goes down. And thanks to the Federal Reserve, the pace of money creation in this country has gone exponential in recent years. Just check out what has been happening to M1. It has nearly doubled since the financial crisis of 2008…
The Federal Reserve has been behaving like the Weimar Republic, and this tapering does not change that very much. Even with this tapering, the Fed is still going to be creating money out of thin air at an absolutely insane rate.
And for those that insist that what the Federal Reserve is doing is “working”, it is important to remember that the crazy money printing that the Weimar Republic did worked for them for a little while too before ending in complete and utter disaster.
5. Quantitative Easing Has Been Causing The Cost Of Living To Rise
The Federal Reserve insists that we are in a time of “low inflation”, but anyone that goes to the grocery store or that pays bills on a regular basis knows what a lie that is. The truth is that if the inflation rate was still calculated the same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.
Most of the new money created by quantitative easing has ended up in the hands of the very wealthy, and it is in the things that the very wealthy buy that we are seeing the most inflation. As one CNBC article recently stated, we are seeing absolutely rampant inflation in “stocks and bonds and art and Ferraris and farmland“.
6. Quantitative Easing Did Not Reduce Unemployment And Tapering Won’t Either
The Federal Reserve actually first began engaging in quantitative easing back in late 2008. As you can see from the chart below, the percentage of Americans that are actually working is lower today than it was back then…
The mainstream media continues to insist that quantitative easing was all about “stimulating the economy” and that it is now okay to cut back on quantitative easing because “unemployment has gone down”. Hopefully you can see that what the mainstream media has been telling you has been a massive lie. According to the government’s own numbers, the percentage of Americans with a job has stayed at a remarkably depressed level since the end of 2010. Anyone that tries to tell you that we have had an “employment recovery” is either very ignorant or is flat out lying to you.
7. The Rest Of The World Is Going To Continue To Lose Faith In Our Financial System
Everyone else around the world has been watching the Federal Reserve recklessly create hundreds of billions of dollars out of thin air and use it to monetize staggering amounts of government debt. They have been warning us to stop doing this, but the Fed has been slow to listen.
The greatest damage that quantitative easing has been causing to our economy does not involve the short-term effects that most people focus on. Rather, the greatest damage that quantitative easing has been causing to our economy is the fact that it is destroying worldwide faith in the U.S. dollar and in U.S. debt.
Right now, far more U.S. dollars are used outside the country than inside the country. The rest of the world uses U.S. dollars to trade with one another, and major exporting nations stockpile massive amounts of our dollars and our debt.
We desperately need the rest of the world to keep playing our game, because we have become very dependent on getting super cheap exports from them and we have become very dependent on them lending us trillions of our own dollars back to us.
If the rest of the world decides to move away from the U.S. dollar and U.S. debt because of the incredibly reckless behavior of the Federal Reserve, we are going to be in a massive amount of trouble. Our current economic prosperity greatly depends upon everyone else using our dollars as the reserve currency of the world and lending trillions of dollars back to us at ultra-low interest rates.
And there are signs that this is already starting to happen. In fact, China recently announced that they are going to quit stockpiling more U.S. dollars. This is one of the reasons why the Fed felt forced to do something on Wednesday.
But what the Fed did was not nearly enough. It is still going to be creating $75 billion out of thin air every single month, and the rest of the world is going to continue to lose more faith in our system the longer this continues.
8. The Economy As A Whole Is Going To Continue To Get Even Worse
Despite more than four years of unprecedented money printing by the Federal Reserve, the overall U.S. economy has continued to decline. If you doubt this, please see my previous article entitled “37 Reasons Why ‘The Economic Recovery Of 2013′ Is A Giant Lie“.
And no matter what the Fed does now, our decline will continue. The tragic downfall of small cities such as Salisbury, North Carolina are perfect examples of what is happening to our country as a whole…
During the three-year period ending in 2009, Salisbury’s poverty rate of 16% was about 3% higher than the national rate. In the following three-year period between 2010 and 2012, the city’s poverty rate was approaching 30%. Salisbury has traditionally relied heavily on the manufacturing sector, particularly textiles and fabrics. In recent decades, however, manufacturing activity has declined significantly and continues to do so. Between 2010 and 2012, manufacturing jobs in Salisbury — as a percent of the workforce — shrank from 15.5% to 8.3%.
But the truth is that you don’t have to travel far to see evidence of our economic demise for yourself. All you have to do is to go down to the local shopping mall. Sears has experienced sales declines for 27 quarters in a row, and at this point Sears is a dead man walking. The following is from a recent article by Wolf Richter…
The market share of Sears – including K-Mart – has dropped to 2% in 2013 from 2.9% in 2005. Sales have declined for years. The company lost money in fiscal 2012 and 2013. Unless a miracle happens, and they don’t happen very often in retail, it will lose a ton in fiscal 2014, ending in January: for the first three quarters, it’s $1 billion in the hole.
Despite that glorious track record, and no discernible turnaround, the junk-rated company has had no trouble hoodwinking lenders into handing it a $1 billion loan that matures in 2018, to pay off an older loan that would have matured two years earlier.
And J.C. Penney is suffering a similar fate. According to Richter, the company has lost a staggering 1.6 billion dollars over the course of the last year…
Then there’s J.C. Penney. Sales plunged 27% over the last three years. It lost over $1.6 billion over the last four quarters. It installed a revolving door for CEOs. It desperately needed to raise capital; it was bleeding cash, and its suppliers and landlords had already bitten their fingernails to the quick. So the latest new CEO, namely its former old CEO Myron Ullman, set out to extract more money from the system, borrowing $1.75 billion and raising $785 million in a stock sale at the end of September that became infamous the day he pulled it off.
So don’t believe the hype.
The economy is getting worse, not better.
Quantitative easing did not “rescue the economy”, but it sure has made our long-term problems a whole lot worse.
And this “tapering” is not a sign of better things to come. Rather, it is a sign that the bubble of false prosperity that we have been enjoying for the past few years is beginning to end.
Some of the most respected prognosticators in the financial world are warning that what is coming in 2014 and beyond is going to shake America to the core. Many of the quotes that you are about to read are from individuals that actually predicted the subprime mortgage meltdown and the financial crisis of 2008 ahead of time. So they have a track record of being right. Does that guarantee that they will be right about what is coming in 2014? Of course not. In fact, as you will see below, not all of them agree about exactly what is coming next. But without a doubt, all of their forecasts are quite ominous. The following are quotes from Harry Dent, Marc Faber, Gerald Celente, Mike Maloney, Jim Rogers and nine other respected economic experts about what they believe is coming in 2014 and beyond…
–Harry Dent, author of The Great Depression Ahead: “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.”
–Marc Faber, editor and publisher of the Gloom, Boom & Doom Report: “You have to say that we are again in a massive financial bubble in bonds, in equities, in [other] asset prices that have gone up dramatically.”
–Gerald Celente: “Any self-respecting adult that hears McConnell, Reid, Boehner, Ryan, one after another, and buys this baloney… they deserve what they get.
And as for the international scene… the whole thing is collapsing.
That’s our forecast.
We are saying that by the second quarter of 2014, we expect the bottom to fall out… or something to divert our attention as it falls out.”
–Mike Maloney, host of Hidden Secrets of Money: “I think the crash of 2008 was just a speed bump on the way to the main event… the consequences are gonna be horrific… the rest of the decade will bring us the greatest financial calamity in history.”
–Jim Rogers: “You saw what happened in 2008-2009, which was worse than the previous economic setback because the debt was so much higher. Well now the debt is staggeringly much higher, and so the next economic problem, whenever it happens and whatever causes it, is going to be worse than in the past, because we have these unbelievable levels of debt, and unbelievable levels of money printing all over the world. Be worried and get prepared. Now it [a collapse] may not happen until 2016 or something, I have no idea when it’s going to happen, but when it comes, be careful.”
–Lindsey Williams: “There is going to be a global currency reset.”
–CLSA’s Russell Napier: “We are on the eve of a deflationary shock which will likely reduce equity valuations from very high to very low levels.”
–Oaktree Capital’s Howard Marks: “Certainly risk tolerance has been increasing of late; high returns on risky assets have encouraged more of the same; and the markets are becoming more heated. The bottom line varies from sector to sector, but I have no doubt that markets are riskier than at any other time since the depths of the crisis in late 2008 (for credit) or early 2009 (for equities), and they are becoming more so.”
–Financial editor Jeff Berwick: “If they allow interest rates to rise, it will effectively make the U.S. government bankrupt and insolvent, and it would make the U.S. government collapse. . . . They are preparing for a major societal collapse. It is obvious and it will happen, and it will be very scary and very dangerous.”
–Michael Pento, founder of Pento Portfolio Strategies: “Disappointingly, it is much more probable that the government has brought us out of the Great Recession, only to set us up for the Greater Depression, which lies just on the other side of interest rate normalization.”
–Boston University Economics Professor Laurence Kotlikoff: “Eventually somebody recognizes this and starts dumping the bonds, and interest rates go up, and inflation takes off, and were off to the races.”
–Mexican Billionaire Hugo Salinas Price: “I think we are going to see a series of bankruptcies. I think the rise in interest rates is the fatal sign which is going to ignite a derivatives crisis. This is going to bring down the derivatives system (and the financial system).
There are (over) one quadrillion dollars of derivatives and most of them are related to interest rates. The spiking of interest rates in the United States may set that off. What is going to happen in the world is eventually we are going to come to a moment where there is going to be massive bankruptcies around the globe.”
–Robert Shiller, one of the winners of the 2013 Nobel prize for economics: “I’m not sounding the alarm yet. But in many countries the stock price levels are high, and in many real estate markets prices have risen sharply…that could end badly.”
–David Stockman, former Director of the Office of Management and Budget under President Ronald Reagan: “We have a massive bubble everywhere, from Japan, to China, Europe, to the UK. As a result of this, I think world financial markets are extremely dangerous, unstable, and subject to serious trouble and dislocation in the future.”
And certainly there are already signs that the U.S. economy is slowing down as we head into the final weeks of 2013. For example, on Thursday we learned that the number of initial claims for unemployment benefits increased by 68,000 last week to a disturbingly high total of 368,000. That was the largest increase that we have seen in more than a year.
In addition, as I wrote about the other day, rail traffic is way down right now. In fact, for the week ending November 30th, U.S. rail traffic was down 16.3 percent from the same week one year earlier. That is a very important indicator that economic activity is getting slower.
And we continue to get more evidence that the middle class is being steadily eroded and that poverty in America is rapidly growing. For example, a survey that was just released found that requests for food assistance and the level of homelessness have both risen significantly in major U.S. cities over the past year…
A survey of 25 American cities, including many of the nation’s largest, showed yearly increases in food aid and homelessness.
The cities, located throughout 18 states, saw requests for emergency food aid rise by an average of seven percent compared with the previous period a year earlier, according to the US Conference of Mayors study, published Wednesday.
All but four cities reported an increase in demand for assistance between the period of September 2012 through August 2013.
Unfortunately, if the economic experts quoted above are correct, this is just the beginning of our problems.
The next wave of the economic collapse is rapidly approaching, and things are going to get much worse than this.
So what do you think?
Which of the individuals quoted above do you think are right on the money and which ones do you think are way off base?
Please feel free to share what you think by posting a comment below…