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Why Donald Trump Needs The Next Recession To Start As Quickly As Possible

Donald Trump Accepts The Nomination - Public DomainA new recession is coming, and Donald Trump needs it to begin sooner rather than later.  As I explained last week, most American voters tend to care about their pocketbooks more than anything else.  If the next recession were to officially start during the first quarter of 2017, it would be very easy for Trump to blame it on Obama, and then he could portray himself as the one that pulled the U.S. economy out of recession in time for the 2020 election.  But if the next recession does not begin until 2018 or 2019, everybody is going to blame it on Trump even if it is not his fault.  In politics, who gets the blame for whatever goes wrong is often the most important thing, and if Trump wants to avoid blame for the next recession he needs for it to start as quickly as possible.

For most of 2016, the mainstream media was warning that a new recession was probably coming no matter who won the election.  For one example, just check out this Bloomberg article.

And for once, the mainstream media was precisely correct.  Barack Obama left us with an enormous economic mess, and it would take an economic miracle of unprecedented proportions to keep the U.S. economy from going into a recession at this point.

During the Obama years, the U.S. went on a debt binge unlike anything we have ever seen before.

The U.S. national debt almost doubled.  During Obama’s time in the White House, it increased from 10.6 trillion dollars to nearly 20 trillion dollars, and that means that over 9 trillion dollars of future consumption was brought into the present.  That incredible boost to spending would have shot U.S. economic growth into the stratosphere during normal times, but because we were struggling so much all we got out of it was eight years of economic stagnation.

In fact, Barack Obama was the only president in modern American history never to have a single year when the U.S. economy grew by at least 3 percent, and he had two terms to try to accomplish that goal.

And remember, Obama also had the benefit of doctored economic numbers.  John Williams of shadowstats.com tracks what the figures would look like if honest numbers were being used, and according to his calculations the U.S. economy has actually continually been in a recession since 2005.

In addition to government debt, other forms of debt are way out of control as well.  The total amount of consumer debt in the United States has now hit 12 trillion dollars, and corporate debt has approximately doubled since the last recession.

When levels of debt grow much, much faster than the overall economy, it is inevitable that a crash will come.

If you look back throughout history, I don’t know if you can find a single example where debt has grown this quickly and a crash has not happened afterwards.

By some miracle if we are able to avoid a major economic downturn this time, we will literally be defying the laws of economics.

The employment crisis also threatens to get a lot worse in the months ahead.  The mainstream media keeps trying to tell us that we are almost at “full employment”, but the truth is that more than 100 million Americans do not have a job right now.

Yes, there are a few areas of the country where jobs appear to be plentiful, but there are many more areas where they are not.

For example, you will never, ever be able to convince 23-year-old Tyler Moore that the job market is good

Tyler Moore’s late-December drive to Louisville, Ky., was one of desperation. He was headed four hours west on Interstate 64 to interview for a job. Even if he landed the position, filling his gas tank had left him with $8 to his name. He would have to sleep at a friend’s place until he could earn enough to pay rent.

The 23-year-old had run out of options. He’d applied for dozens of jobs within an hour and a half of his hometown of Lovely, once a coal-mining stronghold. Instead of opportunities, he had found waiting lists.

“Minimum-wage jobs, fast-food restaurants, Wal-Mart, anything like that, a lot of them has already been took,” he says in an Appalachian drawl, explaining that the backlog just to interview was as long as a year. “There are no jobs.”

If the U.S. economy is in “good shape”, then why can’t people like Moore find a job?

Yes, there is a tremendous amount of optimism in the financial markets right now and the stock market has been soaring.

But the exact same things were true in 2007, and we remember how that turned out.

There is no possible way that the S&P 500 can continue to generate an 18% annual return without corresponding economic growth.  The following comes from David Stockman

Altogether the S&P 500 now stands at 3.4X its post-crisis low, having generated an 18% annual return (including dividends) for nearly eight years running.

To be sure, in an honest free market that very fact would be a flashing red light, warning that exceptionally high gains over an extended period necessitate a regression to the mean in the period ahead.

A lot of people get caught up in trying to predict exactly when the stock market will crash, but what everybody should be able to agree on is that it will crash.

There is no possible way that stocks can stay at such ridiculously overpriced levels indefinitely.

Throughout history, stocks have always moved back in the direction of the long-term averages, and this time will be no exception.

And just like last time, the beginning of a new recession will likely be accompanied by a major financial correction.

In recent articles, I have been highlighting some of the reasons why it appears that a new recession is imminent…

-Federal tax receipts have gone negative for the first time since the last recession.

-Job growth at S&P 500 companies has gone negative for the very first time since the last recession.

-The U.S. trade deficit in 2016 was the largest in four years.

-Lending standards have tightened up for medium and large sized firms for six quarters in a row.

-Lending standard are also tightening up for consumers.

-We just saw the largest percentage decline in average weekly hours since the recession of 2008.

-Gross private domestic investment is down.

-Consumer bankruptcies are rising.

-Commercial bankruptcies are rising.

All of this is not necessarily bad news for Trump.

A horrible recession started during the early years of Ronald Reagan’s presidency, but the U.S. economy turned around later in his first term and that momentum helped propel him to an easy victory in 1984.

Similarly, Trump could actually take advantage of the coming economic downturn as long as he is able to pin all of the blame for it on the previous administration.

If there is one thing that is true about U.S. voters, it is the fact that they tend to care about their own economic well-being more than anything else.

If you doubt this, just check out the results of a recent Fox News poll

The latest Fox News Poll also asks, what defines the American Dream today? At the top, according to the national survey released Wednesday, is “retiring comfortably.” Some 88 percent feel that is extremely or very important to realizing the dream.

Next, 76 percent say “having a successful career” is important. That’s followed by “raising a family” (74 percent) and “making a valuable contribution” to their community (74 percent).

“Owning a home” is seen as a big part of achieving the dream for nearly 7 in 10 (69 percent). About 6 in 10 say “graduating college” (61 percent) and “being better off” than their parents (57 percent).

To most Americans, being “successful in life” comes down to how much money they have.

That should not be true, but it is.

And this is ultimately what Trump will be judged on.

If the economy is improving by 2020, voters will tend to evaluate him favorably.  But if the economy is faltering during the next election season, it will be more difficult for him to get a second term.

So what Trump and all those that support Trump should want is for the coming recession to begin and end as quickly as possible.

However, there is also the possibility that the next recession may be a particularly bad one.  Because we are in the midst of the biggest debt bubble in human history, any major downturn could ultimately spiral completely out of control.  In other words, we may be facing the kind of crisis from which we never quite recover.

One expert that is warning about such a scenario is legendary investor Jim Rogers

…get prepared because we’re going to have the worst economic problems we’ve had in your lifetime or my lifetime and when that happens a lot of people are going to disappear.

In 2008 Bear Stearns disappeared, Bear Stearns had been around over 90 years. Lehman Brothers disappeared. Lehman Brothers had been around over 150 years. A long, long time, a long glorious history they’ve been through wars, depression, civil war they’ve been through everything and yet they disappear.

So the next time around it’s going to be worse than anything we’ve seen and a lot of institutions, people, companies even countries, certainly governments and maybe even countries are going to disappear. I hope you get very worried.

when you start having bear markets as you I’m sure well know one bad thing happens and another bad thing happens and these things snowball just like in bull markets good news comes out then more good news comes out the next thing you know you’re five or six or seven years into a bull market.

Well bear markets do the same thing and so we have a lot of bad news on the horizon. I haven’t even gotten to war. I haven’t even gotten to trade war or anything like that but you know things do go wrong.

If it is as bad as Rogers is suggesting, it wouldn’t be too long before conditions in America would begin to resemble those portrayed in my novel.

Let’s hope that does not turn out to be the case.

Let’s hope that the next recession begins and ends as quickly as possible and that the U.S. economy is on a solid upswing by 2020.

And if you are a Trump supporter, don’t be too dismayed if the U.S. economy takes a major downturn in 2017.  As I discussed above, it could actually be just the thing that Trump needs to set the stage for another election victory in 2020.

Recession 2017? Things Are Happening That Usually Never Happen Unless A New Recession Is Beginning

New Crisis - Public DomainIs the U.S. economy about to get slammed by a major recession?  According to Gallup, U.S. economic confidence has soared to the highest level ever recorded, but meanwhile a whole host of key economic indicators are absolutely screaming that a new recession is beginning.  And if the U.S. economy does officially enter recession territory in 2017, it certainly won’t be a shock, because the truth is that we are well overdue for one.  Donald Trump has inherited quite an economic mess from Barack Obama, and it was probably inevitable that we were headed for a significant economic downturn no matter who won the election.

One of the key indicators to watch is average weekly hours.  When the economy shifts into recession mode, employers tend to start cutting back hours, and that is happening right now.  In fact, as Graham Summers has pointed out, we just witnessed the largest percentage decline in average weekly hours since the recession of 2008…

Average Weekly Hours

In addition to the decline in hours, Summers has suggested that there are a number of other reasons to believe that a new recession is here…

The fact is that the GDP growth of 4%-5% is not just around the corner. The US most likely slid into recession in the last three months. GDP growth collapsed in 4Q16, with a large portion of the “growth” coming from accounting gimmicks.

Consider the following:

  • Tax receipts indicate the US is in recession.
  • Gross private domestic investment indicates were are in a recession.
  • Retailers are showing that the US consumer is tapped out (see AMZN’s recent miss).
  • UPS, another economic bellweather, dramatically lowered 2017 forecasts.

To me, even more alarming is the tightening of lending standards.  In our debt-based economy, the flow of credit is absolutely critical to economic growth, and when credit starts to get tight that almost always leads to a recession.

So the fact that lending standards have now tightened for medium and large sized firms for six quarters in a row is very bad news.  The following comes from Business Insider

“Although modest over the past couple of quarters, it is still worth noting that this is now the sixth quarter in succession that standards have tightened for large and medium sized firms,” Deutsche Bank economist Jim Reid wrote in a research note to clients.

“This usually only happens in recessions.”

Reid is 100 percent correct on this point.  This is precisely the kind of thing that we would expect to see if a new recession was beginning, and if this trend continues it is hard to imagine that the U.S. economy will be able to continue to grow.

And it is interesting to note that job growth at S&P 500 companies has gone negative for the first time since the last recession, and so large firms are definitely starting to feel the pressure.

Simultaneously, lending standards are also tightening up for consumers

“The most notable tightening in standards though was in consumer loans,” the Fed said. “During the quarter, banks reported an 8.3% net tightening in credit standards for credit cards and 11.6% net tightening for auto loans.”

US consumer spending accounts for more than two-thirds of economic activity and is thus a key driver of growth in the world’s largest economy.

Those numbers for credit cards and auto loans are major red flags.

It is very simple.  Tighter credit means less economic activity which means slower economic growth.  The U.S. economy grew at a dismal 1.9 percent annual rate during the 4th quarter of 2016, and it would be absolutely no surprise if we end up with a negative number for the first quarter of 2017.

One of the big reasons why lending standards are tightening is because bankruptcies are rising.

As I reported the other day, consumer bankruptcies just rose on a year-over-year basis in back to back months for the first time in almost seven years.  Commercial bankruptcies had already been rising on a year-over-year basis throughout 2016, and so the fact that consumer bankruptcies have now joined the party is a very bad sign.

And we have also just learned that real median household income declined in 2016

Its official! The spectacular Obama/Fed “recovery” produced no increase in real medin household income in 2016 (the last year of Obama’s reign of [economic] error). In fact, real median annual household income in December 2016 ($57,827) was 0.9 percent lower than in December 2015 ($58,356).

Yes, I understand that there is a tremendous amount of optimism out there right now because of Donald Trump.

But the truth is that it is literally going to take some sort of an economic miracle to avoid a recession.

And if a recession is going to happen anyway, the Trump administration should want it to occur as quickly as possible.

You see, if a recession starts a year from now, it will be much more difficult for Trump to blame it on Obama.  But if a recession starts right now, he will definitely be able to argue that it happened because of the mess that he inherited from the last administration.

In addition, the sooner the next recession ends the sooner the next recovery can begin.  If a recession is still going on during the 2020 campaign, that would be really bad for Trump, but if a recovery is well underway by then that would be really good for his chances.

If you doubt this, just go back and look at the 1984 campaign.  After a very difficult recession, the U.S. economy bounced back strongly and Ronald Reagan was able to ride that momentum to an easy victory.

So this may sound very strange to many of you, but the truth is that if a new recession is coming Trump supporters should want it to happen as rapidly as possible.

Unfortunately, once a new recession begins it may not play out like recessions normally do.  The U.S. government is 20 trillion dollars in debt, we are in the midst of one of the biggest stock market bubbles in history, and our planet is becoming more unstable with each passing day.  So even though Trump is in the White House and Obama is gone, let there be no doubt that a catastrophic economic crisis could literally erupt at any moment.  I continue to encourage my readers to do all that they can to get prepared, because those that are prepared in advance will have the best chance of successfully getting through what is coming.

Unfortunately, a lot of people out there seem to believe that all of our problems have somehow evaporated just because Donald Trump is now living in the White House.

That is simply not true, and we all need to be praying for guidance and wisdom for Trump and his team as they prepare to deal with the great challenges that are ahead for our nation.

2 Things That Are Happening Right Now That Have Never Happened Outside Of A Recession

Question Dollar - Public DomainIf we are not heading into a recession, why does our economy continue to act as if that is precisely what is happening?  As you will see below, we learned this week that factory orders have declined year over year for six months in a row.  That is something that has never happened outside of a time of recession.  We have also seen new orders for consumer goods fall dramatically.  In fact, the only time we have seen a more dramatic decline in that number was during the last recession.  And when you add these two items to what I have written about previously, the overall economic picture becomes even more disturbing.  Corporate profits have fallen for two quarters in a row, our exports fell by 7.6 percent during the first quarter of 2015, and U.S. GDP contracted by 0.7 percent during Q1.  Even though Barack Obama and the mainstream media are willingly ignoring them, the truth is that these numbers are absolutely screaming that we are going into a new recession.

Sometimes, a picture is worth more than a thousand words, and I believe that is certainly the case with the chart that I have posted below.  It comes from Zero Hedge, and it shows that factory orders have declined year over year for six months in a row.  The only times when this has ever happened before have been when the U.S. economy has been in recession…

 

Factory Orders 2015

When we look at new orders for consumer goods, we see a similar thing happening.  This next chart comes from Charles Hugh Smith, and it really doesn’t need much explanation…

New Orders For Consumer Goods - Charles Hugh Smith

Here is another chart from Charles Hugh Smith.  This one shows the percentage change in new orders for consumer goods on a year over year basis…

New Orders For Consumer Goods 2 - Charles Hugh Smith

These charts that I just shared with you are rather compelling.  How anyone can see them and still believe that we are in an “economic recovery” is beyond me.

When the economy starts to turn, there are certain things that we look for.  As I have written about over and over on my website, so many of the exact same patterns that we have seen emerge just prior to previous economic downturns are happening again right now.

Yes, the stock market is still sitting pretty for the moment.  But almost everyone can see that it is massively overvalued and could start tanking at any time.  And when the market does start crashing it is just going to cause our economic problems to accelerate even more.

Sadly, most Americans are totally oblivious to all of this.

Most Americans just continue to do the same things that they have always done.  That includes going into ridiculous amounts of debt.  For instance, this week we learned that the percentage of auto loans that are being stretched out for periods of greater than 6 years is at an all-time high

The average new car loan has reached a record 67 months, reports Experian, the Ireland-based information-services company. The percentage of loans with terms of 73 to 84 months also reached a new high of 29.5% in the first quarter of 2015, up from 24.9% a year earlier.

Long-term used-vehicle loans also broke records with loan terms of 73 to 84 months reaching 16% in the first quarter 2015, up from 12.94% — also the highest on record.

But you know what?

Even though most Americans are being exceedingly foolish and are living paycheck to paycheck, that still isn’t good enough for the boys and girls on Wall Street.

Just consider the following excerpt from a recent Wall Street Journal piece entitled “A Letter To Stingy American Consumers”…

Do you know the American economy is counting on you? We can’t count on the rest of the world to spend money on our stuff. The rest of the world is in an even worse mood than you are. You should feel lucky you’re not a Greek consumer. And China, well they’re truly struggling there just to reach the very modest goal of 7% growth.

The Federal Reserve is counting on you too. Fed officials want to start raising the cost of your borrowing because they worry they’ve been giving you a free ride for too long with zero interest rates. We listen to Fed officials all of the time here at The Wall Street Journal, and they just can’t figure you out.

Please let us know the problem. You can reach us at any of the emails below.

Sincerely,

The Wall Street Journal’s Central Bank Team

-By Jon Hilsenrath

They just want all of us to keep borrowing and spending our way into oblivion.  But of course when things do fall apart and millions of Americans can’t pay their debts, they will be there to foreclose on our homes and repossess our vehicles without any hesitation.

And when the next major economic downturn does strike, don’t expect the rest of the planet to feel sorry for us.  We like to think that the rest of the world looks up to us, but the exact opposite is actually true.  At this point, much of the globe is pointing fingers at us and mocking us.  Just consider the following excerpt from an article that appeared in Pravda

The land of illusion; the land of entertainment producing songs and movies to warp reality. People pretending to be something they are not. Likewise, Washington DC has people who pretend to represent the people’s interests. Pretending to bring hope and a change for the better. Pretending to bring unity and peace among all races. Lying through their teeth and laughing like clowns behind closed doors. Setting up a consumer based economy forcing the once mighty middle class to shrink and work at customer service jobs. “Ya want fries with that?

It would be easy to dismiss that paragraph as “Russian propaganda”, but the cold, hard reality of the matter is that there is nothing in that quote that is not true.

They are mocking us, and they are dead on.  We are the land of illusion.  We do have a shrinking middle class.  And we are definitely addicted to entertainment.  If you doubt this, just check out what one study recently found

If you weren’t reading this article, you would probably be scanning something else on the internet, watching TV, or maybe—just maybe—reading a newspaper or magazine. In short, you would be consuming media.

On average, people spend more than 490 minutes of their day with some sort of media, according to a new report by ZenithOptimedia. Television remains dominant, accounting for three hours of daily consumption—an hour more than the internet, in second place.

Other studies have actually discovered that the amount of time that Americans spend connected to media is even greater.  This is something that I discussed in a previous article entitled “How Much Time Do Americans Spend Plugged Into The Matrix Every Day?

For the moment, the mainstream media is assuring everyone that everything is going to be just fine and that they should go out and spend lots and lots of money.

But instead of spending your money on frivolous things like boats, electronic toys and expensive vacations, I believe that now is the time to get prepared for the great economic crisis which is currently starting to unfold.

Right now, I know that most people don’t actually believe that life in America is about to dramatically change.

So many of the things that people (including myself) have been warning about for so long are about to happen.  Our politicians and national leaders have turned a deaf ear to all of the warnings and have continued to conduct business as usual.  Soon, the error of their ways will be apparent to all.

We are heading into the greatest economic crisis in U.S. history, and there is going to be no coming back to the false, debt-fueled “prosperity” that we are enjoying today.

 

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