The Psychological Bubble That Has Been Propping Up The U.S. Economy Is Starting To Implode

Optimism can be a very powerful thing.  For a long time Americans believed that things would get better, and that caused them to take action to make things better, and that actually resulted in things moving in a positive direction.  But now things have abruptly shifted.  In late 2018, an increasing number of Americans believe that an economic downturn is coming, and they are taking actions consistent with that belief.  As a result, they are actually helping to produce the result that they fear.  And without a doubt, any rational person should be able to see that signs that the U.S. economy is slowing down are all around us.  So it isn’t as if those that are preparing for the worst are being irrational.  It is just that when large numbers of people all start to move in the same direction, it has a very powerful effect.  We witnessed this in the stock market in recent years when people just kept buying stocks even though they were massively overvalued.  The collective belief that there was money to be made in the stock market became a self-fulfilling prophecy which pushed stock prices up to absurd heights.  But now that process is beginning to reverse as well, and ultimately the unwinding of that bubble will be quite painful.

Over the past couple of years the dominant economic narrative that the mainstream media was pushing was that the U.S. economy was “booming”, and this encouraged businesses to expand and consumers to go out and spend money.

But now the dominant economic narrative has changed, and businesses are starting to take actions that are consistent with the new narrative.  In the retail industry, if executives truly believed we would see an economic boom in the years ahead they would be expanding, but instead stores are being closed at a record pace

Mall and shopping center owners across the U.S. are preparing to be hit by more store closures, following a brutal year that included department store chains like Bon-Ton and Sears going bankrupt, Toys R Us liquidating and even Walmart shutting dozens of its club stores.

Now, a slew of specialty retailers like Gap and L Brands are getting serious about downsizing, which will leave more vacant storefronts within malls until landlords are able to replace tenants.

As a result of these store closings, large numbers of workers will be without jobs, vendors will not be receiving orders and mall owners will be without tenants.

In other words, economic activity will slow down.

Another sector where there has been a major psychological shift is in the real estate industry.  Home prices have been falling all over the nation, and this includes markets that were once extremely hot such as San Francisco

In San Francisco, the number of homes with a price cut in October nearly doubled, to 238 from 124 last October, according to data from Realtor.com.

That’s nothing compared to Santa Clara County, where the number of price cuts rose to 818 last month, more than six times last year’s number. Santa Clara County had been one of the nation’s hottest markets this year, and the Bay Area’s price appreciation leader until September.

“Clearly, there is a market shift,” said Rich Bennett, a Zephyr agent in San Francisco.

If homeowners believed that this dip was just temporary and that home prices would start surging again next year as the U.S. economy thrives, it would be quite foolish of them to slash their prices like this.

In some cases, home prices are being reduced by hundreds of thousands of dollars.  Why throw all of that money away if the market is going to bounce back shortly?

Over in the auto industry, there has also been a noticeable psychological shift.

If the U.S. economy was going to be doing extremely well in the years ahead, the major automakers should all be gearing up for record sales.

But instead, General Motors just shut a bunch of factories and laid off 14,000 workers, and Morgan Stanley analyst Adam Jonas is projecting that Ford will soon be laying off large numbers of employees

“We estimate a large portion of Ford’s restructuring actions will be focused on Ford Europe, a business we currently value at negative $7 billion,” Jonas wrote. “But we also expect a significant restructuring effort in North America, involving significant numbers of both salaried and hourly UAW and CAW workers.”

Ford’s 70,000 salaried employees have been told they face unspecified job losses by the middle of next year as the automaker works through an “organizational redesign” aimed at creating a white-collar workforce “designed for speed,” according to Karen Hampton, a spokeswoman.

“These actions will come largely outside of North America,” Hampton said of Ford’s restructuring. “All of this work is ongoing and publishing a job-reduction figure at this point would be pure speculation.”

Shifting gears, let’s talk about agriculture.

If farmers believed that the trade war was just temporary and that things would soon swing back in their favor, many of them would keep trying to hold on for as long as they possibly could.

But instead, farm bankruptcies are absolutely surging

A total of 84 farms in the upper Midwest filed for bankruptcy between July 2017 and June 2018, according to the Minneapolis Star Tribune. That’s more than double the number of Chapter 12 filings during the same period in 2013 and 2014 in Wisconsin, Minnesota, North Dakota, South Dakota, and Montana, reported Vox.

Farms that produce corn, soybeans, milk, and beef were all suffering due to low global demand and low prices before the trade war, according to economists, but president Trump’s trade war is making the problem even worse by exacerbating the weaknesses in the American economy. China has retaliated against the tariffs by slapping billions of dollars worth of tariffs on United States agriculture exports in response to Trump’s tariffs on Chinese products. Other countries, including Canada, have also added duties to US agriculture products in response to Trump’s tariffs on all imported steel and aluminum.

Most Americans want to have hope, but when they look at our economic situation all they see is a very bleak future.

And in some parts of the nation, there still hasn’t been any sort of a “recovery” from the last recession.  For example, a recent Bloomberg article took a hard look at what conditions are currently like in eastern Kentucky…

Tiffany Hensley’s drive home takes her through some picturesque scenery, and an ugly economy.

“The first thing you see when you get down here is beauty,” says Hensley, midway through her shift at a diner in the rolling hills of eastern Kentucky. “But then you get to looking around. It’s real rough.’’

Of course eastern Kentucky is far from alone.  Yes, coastal cities such as San Francisco and New York have prospered in recent years, but rural communities all across America have been deeply suffering.

And now economic conditions are deteriorating once again nationally, and things are about to get a whole lot tougher for everyone.

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

Why Is The Media Warning A Recession Is Expected “By The End Of 2020” That Will Be “Worse Than The Great Depression”?

The mood of the mainstream media is really starting to shift dramatically.  At one time they seemed determined to convince all of us that happy days were here again for the U.S. economy, but now some mainstream news outlets are openly warning that the next recession will be “worse than the Great Depression”.  Do they really believe that this is true, or is there some other purpose behind their bold headlines?  Of course it isn’t exactly difficult to predict that another recession is coming, because the U.S. economy has experienced recession after recession ever since the Federal Reserve was first established in 1913.  But the phrase “worse than the Great Depression” implies that what we will soon be facing will be the worst economic downturn in all of U.S. history.  That is a very bold statement to make, and it should not be done lightly.

That is why I have been absolutely astounded by some of the mainstream headlines that I have been seeing lately.  For example, the following comes from a New York Post article entitled “Next crash will be ‘worse than the Great Depression’: experts”

“We think the major economies are on the cusp of this turning into the worst recession we have seen in 10 years,” said Murray Gunn, head of global research at Elliott Wave International.

And in a note, he added: “Should the [US] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue.”

And here is an excerpt from an article posted on MSN entitled “Experts warn the next recession will be ‘worse than the Great Depression’ and predict it will hit US within two years as $247 trillion global debt outdoes 2008”

The next recession could put the 2008 financial crash to shame if two experts’ predictions about the worldwide debt of $247 trillion are correct.

Expected to hit the United States within the next two years, the impact has been compared to the severe worldwide economic crisis which started 1929 and last until 1939.

It is particularly interesting that the author of the last article chose to use the phrase “within the next two years”.

That strongly implies that the U.S. economy will have plunged into the next recession before the next presidential election takes place.

Other mainstream outlets are using similar language.  For example, the following comes from a Bloomberg article entitled “Two-thirds of U.S. business economists see recession by end of 2020”

Two-thirds of business economists in the U.S. expect a recession to begin by the end of 2020, while a plurality of respondents say trade policy is the greatest risk to the expansion, according to a new survey.

About 10 percent see the next contraction starting in 2019, 56 percent say 2020 and 33 percent said 2021 or later, according to the Aug. 28-Sept. 17 poll of 51 forecasters issued by the National Association for Business Economics on Monday.

Those are stunning numbers.

If they are correct, and I have no reason to doubt them, that means that 66 percent of mainstream economists believe that the next recession will strike in either 2019 or 2020.

Of course those that follow my work on a regular basis already know that there are a multitude of signs that indicate that the U.S. economy is already slowing down.

I wanted to share another one of those signs with you today.  For years, the real estate market in Manhattan was red hot, but now we just witnessed “the fourth straight quarter of double-digit declines”

Total real estate sales in Manhattan fell 11 percent in the third quarter compared with a year ago, marking the fourth straight quarter of double-digit declines, according to new data from Douglas Elliman Real Estate and Miller Samuel Real Estate Appraisers & Consultants. It was also the first time since the financial crisis that resales of existing apartments fell for four straight quarters.

Prices fell, inventory jumped and discounts were higher and more common. Real estate brokers say the Manhattan real estate market is suffering from an oversupply of luxury units, a decline in foreign buyers and changes in the tax law that make it more expensive to own property in high-tax states.

At this point, the housing market in New York City has become “a buyer’s market”, and there are no signs that things are going to turn around any time soon…

“Offers 20 percent and 25 percent below asking prices began to flow in, a phenomenon last seen in 2009,” wrote Warburg Realty founder and CEO Frederick W. Peters in the report, which surveys real estate conditions around the city.

Warburg’s report dovetails with separate data showing a definitive cooling in New York’s housing market. The number of homes for sale in the city recently hit a record, according to StreetEasy data, amid fewer sales transactions. Meanwhile, September’s report from real estate firm MNS showed Manhattan apartment rental prices — the most expensive in the city — on the decline.

Of course this is not just happening in New York City.  Home sellers all over the nation are slashing their prices at the fastest rate that we have seen in at least eight years.

In order for people to be able to afford to buy expensive homes, they need good jobs, and more good jobs just keep getting shipped out of the country.

For example, Verizon just announced that they will be shipping thousands of information technology jobs to India

Earlier this week, Verizon confirmed that it offered a voluntary severance package (VSP) to about 44,000 employees and that it will transfer over 2,500 IT staff – some rumors suggest the figure to be closer to 5,000 employees – to India-based Infosys as part of a $700 million outsourcing deal.

The layoffs and transfers will impact more than 30% of Verizon’s 153,100-employee workforce – as of the end of June – and are part of a 4-year plan to save the largest U.S. wireless carrier $10 billion by 2021.

If you get angry when you read such stories, that is good, because they should make you angry.

The middle class in America is being systematically eviscerated, and the U.S. economy is steadily being hollowed out.

And now the mainstream media is boldly pronouncing that the next recession will arrive within the next two years, and many are suggesting that it will be even more painful than the last one…

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

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