The biggest bank in the western world has just come out and declared that the global economy is “already in a recession”. According to British banking giant HSBC, global trade is down 8.4 percent so far this year, and global GDP expressed in U.S. dollars is down 3.4 percent. So those that are waiting for the next worldwide economic recession to begin can stop waiting. It is officially here. As you will see below, money is fleeing emerging markets at a blistering pace, major global banks are stuck with huge loans that will never be repaid, and it looks like a very significant worldwide credit crunch has begun. Just a few days ago, I explained that the IMF, the UN, the BIS And Citibank were all warning that a major economic crisis could be imminent. They aren’t just making this stuff up out of thin air, but most Americans still seem to believe that everything is going to be just fine. The level of blind faith in the system that most people are demonstrating right now is absolutely astounding.
The numbers say that the global economy has not been in this bad shape since the devastating recession that shook the world in 2008 and 2009. According to HSBC, “we are already in a dollar recession”…
Global trade is also declining at an alarming pace. According to the latest data available in June the year on year change is -8.4%. To find periods of equivalent declines we only really find recessionary periods. This is an interesting point. On one metric we are already in a recession. As can be seen in Chart 3 on the following page, global GDP expressed in US dollars is already negative to the tune of USD 1,37trn or -3.4%. That is, we are already in a dollar recession.
Here is the chart that Zero Hedge posted along with the quote above. As you can see, the only time global GDP expressed in U.S. dollars has fallen faster in recent years was during the horrible recession of seven years ago…
But there are still a whole lot of incredibly clueless people running around out there claiming that “nothing is happening” even though more signs of trouble are erupting all around us every single day.
Now act three is beginning, but in countries much less able to devise measures to stop financial contagion and whose banks are more precarious. For global finance next flooded the so-called emerging market economies (EMEs), countries such as Turkey, Brazil, Malaysia, China, all riding high on sky-high commodity prices as the China boom, itself fuelled by wild lending, seemed never-ending. China manufactured more cement from 2010-13 than the US had produced over the entire 20th century. It could not last and so it is proving.
China’s banks are, in effect, bust: few of the vast loans they have made can ever be repaid, so they cannot now lend at the rate needed to sustain China’s once super-high but illusory growth rates. China’s real growth is now below that of the Mao years: the economic crisis will spawn a crisis of legitimacy for the deeply corrupt communist party. Commodity prices have crashed.
Money is flooding out of the EMEs, leaving overborrowed companies, indebted households and stricken banks, but EMEs do not have institutions such as the Federal Reserve or European Central Bank to knock up rescue packages. Yet these nations now account for more than half of global GDP. Small wonder the IMF is worried.
It is one thing for The Economic Collapse Blog to warn that “the world economic order is collapsing”, but this is one of the biggest newspapers in the UK.
Emerging markets aren’t just suffering through another market rout—it’s a third wave of the global financial crisis, Goldman Sachs said.
“Increased uncertainty about the fallout from weaker emerging market economies, lower commodity prices and potentially higher U.S. interest rates are raising fresh concerns about the sustainability of asset price rises, marking a new wave in the Global Financial Crisis,” Goldman said in a note dated last week.
The emerging market wave, coinciding with the collapse in commodity prices, follows the U.S. stage, which marked the fallout from the housing crash, and the European stage, when the U.S. crisis spread to the continent’s sovereign debt, the bank said.
You know that it is late in the game when Goldman Sachs starts sounding exactly like The Economic Collapse Blog. I have been warning about a “series of waves” for years.
When will people wake up?
What is it going to take?
The crisis is happening right now.
Of course many Americans will refuse to acknowledge what is going on until the Dow Jones Industrial Average collapses by several thousand more points. And that is coming. But let us all hope that day is delayed for as long as possible, because all of our lives will become much crazier once that happens.
And the truth is that many Americans do understand that bad times are on the horizon. Just check out the following numbers that were recently reported by CNBC…
The CNBC All-America Economic Survey finds views on the current state of the economy about stable, with 23 percent saying it is good or excellent and 42 percent judging it as fair. About a third say the economy is poor, up 3 points from the June survey.
But the percentage of Americans who believe the economy will get worse rose 6 points to 32 percent, the highest level since the government shutdown in 2013. And just 22 percent believe the economy will get better, 2 points lower than June and the lowest level since 2008, when the nation was gripped by recession.
If you want to believe that everything is going to be just fine somehow, then go ahead and believe that.
All I can do is present the facts. For months I have been warning about this financial crisis, and now it is playing out as a slow-motion train wreck right in front of our eyes.
We are moving into a period of time during which events are going to start to move much more rapidly, and life as we know it is about to change in a major way for all of us.
Hopefully you have already been preparing for what is about to come.
Most nations in South America are either already experiencing an economic recession or are right on the verge of one. In general, South American economies are very heavily dependent on exports, and right now they are being absolutely shredded by the twin blades of a commodity price collapse and a skyrocketing U.S. dollar. During the boom times in South America, governments and businesses loaded up on tremendous amounts of debt. Since much of that debt was denominated in U.S. dollars, South American borrowers are now finding that it takes much more of their own local currencies to service and pay back those debts. At the same time, there is much less demand for commodities being produced by South American nations in the international marketplace. As a result, South America is heading into a full-blown financial crisis which will cause years of pain for the entire continent.
If you know your financial history, then you know that we have seen this exact same scenario play out before in various parts of the world. The following comes from a recent CNN article…
The dollar’s gains should make history nerds shake in their boots. Its rally in the early 1980s helped trigger Latin America’s debt crisis. Fifteen years later, the greenback surged quickly again, causing Southeast Asian economies, such as Thailand, to collapse after a run on the banks ensued.
In particular, what is going on right now is so similar to what took place back in the early 1980s. At that time, Latin American governments were swimming in debt, the U.S. dollar was surging and commodity prices were falling. The conditions were perfect for a debt crisis in Latin America, and that is precisely what happened…
When the world economy went into recession in the 1970s and 80s, and oil prices skyrocketed, it created a breaking point for most countries in the region. Developing countries also found themselves in a desperate liquidity crunch. Petroleum exporting countries – flush with cash after the oil price increases of 1973-74 – invested their money with international banks, which ‘recycled’ a major portion of the capital as loans to Latin American governments. The sharp increase in oil prices caused many countries to search out more loans to cover the high prices, and even oil producing countries wanted to use the opportunity to develop further. These oil producers believed that the high prices would remain and would allow them to pay off their additional debt.
As interest rates increased in the United States of America and in Europe in 1979, debt payments also increased, making it harder for borrowing countries to pay back their debts. Deterioration in the exchange rate with the US dollar meant that Latin American governments ended up owing tremendous quantities of their national currencies, as well as losing purchasing power. The contraction of world trade in 1981 caused the prices of primary resources (Latin America’s largest export) to fall.
Sadly, the same mistakes have been repeated once again. In recent years South American nations have loaded up on vast amounts of debt, and now that commodity prices are tanking and the U.S. dollar is surging, all of that debt is creating tremendous headaches.
For instance, just consider what is happening in Brazil…
Brazil’s real plummeted to a 12-year low of 3.34 to the dollar, reflecting the country’s heavy reliance on exports of iron ore and other raw materials to China.
The devaluation tightens the noose on Brazilian companies saddled with $188bn in dollar debt taken out during the glory days of the commodity boom. The oil group Petrobras alone raised $52bn on the US bond markets.
Today, Brazil has the 7th largest economy on the entire planet.
So a major financial crisis in Brazil would be extremely significant.
And that is precisely what is starting to happen. It is being projected that Brazilian government debt will soon be reduced to junk status, Brazilian stocks have already entered “correction territory“, and economic forecasters say that the Brazilian economy is heading into its worst recession in at least 25 years…
Brazil needs to brace itself for some very tough times. Brazilian banks are currently forecasting another economic contraction for the South American country in 2016, marking the first time that Brazil’s economy has shrunk in two consecutive years since the Great Depression.
Last Friday, economist Nelson Teixeira of Switzerland-based financial services holding company Credit Suisse released a revision of his already dour forecast for the Brazilian GDP, moving this year’s numbers from -1.8 percent to -2.4 percent.
The IMF is also projecting that 2015 will be a year of recession for the second largest economy in South America (Argentina) and the third largest economy in South America (Venezuela).
And actually Venezuela is in the deepest trouble of all. According to a recent Bloomberg article, it appears to be inevitable that there will be a debt default by the Venezuelan government in the very near future…
Harvard University Professor Ricardo Hausmann last year questioned Venezuela’s decision to keep paying bondholders as the country sank deeper into crisis and suggested it stop honoring the debt.
Now, he’s saying Venezuela will have no choice but to default next year.
Hausmann’s comments come as a deepening collapse in oil prices and a shortage of dollars stoke concern Venezuela is fast running out of money to stay current on debt. The country’s bonds plunged last year after Hausmann, who served as Venezuelan planning minister after Hugo Chavez’s failed 1992 coup, raised the specter of default, saying he found “no moral grounds” for the government to pay debt at a time when Venezuelans were facing shortages of everything from basic medicine to toilet paper.
The inflation rate in Venezuela today is an astounding 68.5 percent, and the country is plunging into full-blown economic collapse. The following comes from Zero Hedge…
As we recently warned, the hyperinflationary collapse in Venezuela is reaching its terminal phase. With inflation soaring at least 65%, murder rates the 2nd highest in the world, and chronic food (and toilet paper shortages), the following disturbing clip shows what is rapidly becoming major social unrest in the Maduro’s socialist paradise… and perhaps more importantly, Venezuela shows us what the end game for every fiat money system looks like (and perhaps Janet and her colleagues should remember that).
Here is the video that was mentioned in the excerpt above. As you watch this, please keep in mind that the United States is on the exact same path that Venezuela has gone down…
Economic chaos is beginning to erupt all over the planet, and the depression that we are entering into will truly be global in scope.
For the moment, many in the United States still believe that what is going on in the rest of the world will not affect us. But the truth is that we are also right on the verge of a major financial crisis, and it is going to be even worse than what we experienced back in 2008.
So what do you think about what is going on down in South America?
Please feel free to add to the discussion by posting a comment below…
If 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…
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…
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…
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.
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.
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.
On Friday, the federal government announced that the U.S. economy contracted at a 0.7 percent annual rate during the first quarter of 2015. This unexpected shrinking of the economy is being primarily blamed on “harsh” weather during the first three months of this year and on the strengthening of the U.S. dollar. Most economists are confident that U.S. GDP will rebound back into positive territory when the numbers for the second quarter come out, but if that does not happen we will officially meet the government’s criteria for being in another “recession”. To make sure that the numbers for Q2 will look “acceptable”, the Bureau of Economic Analysis is about to change the way that it calculates GDP again. They are just going to keep “seasonally adjusting” the numbers until they get what they want. At this point, the government numbers are so full of “assumptions” and “estimates” that they don’t really bear much resemblance to reality anyway. In fact, John Williams of shadowstats.com has calculated that if the government was actually using honest numbers that they would show that we have continually been in a recession since 2005. That is why I am referring to this as a “recession within a recession”. Most people can look around and see that economic conditions for most Americans are not good, and now they are about to get even worse.
For quite a while I have been warning that another economic downturn was coming. Well, now we have official confirmation from the Obama administration that it is happening. The following is an excerpt from the statement that the Bureau of Economic Analysis released on Friday…
Real gross domestic product — the value of the production of goods and services in the United
States, adjusted for price changes — decreased at an annual rate of 0.7 percent in the first quarter of
2015, according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth
quarter, real GDP increased 2.2 percent.
The GDP estimate released today is based on more complete source data than were available for
the “advance” estimate issued last month. In the advance estimate, real GDP increased 0.2 percent.
With the second estimate for the first quarter, imports increased more and private inventory investment
increased less than previously estimated (for more information, see “Revisions” on page 3).
The decrease in real GDP in the first quarter primarily reflected negative contributions from
exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from personal consumption expenditures (PCE), private inventory investment, and residential fixed investment.
And actually, Q1 GDP would have been far worse if not for a very large inventory buildup. Without that inventory buildup, Q1 GDP would have been in the neighborhood of negative three percent according to Zero Hedge. Despite the happy face that most analysts are putting on these numbers, the truth is that they reveal some deeply troubling trends.
One of the things that is driving this current downturn is the fact that our trade balance continues to get even worse. In other words, the gap between how much we buy from the rest of the world and how much we sell to the rest of the world is growing.
During the first quarter, imports surged by 5.6 percent. That means that we are buying more from the rest of the planet than we did before.
Unfortunately, during the first quarter of this year exports dropped by a staggering 7.6 percent. That means that the amount of stuff that we are selling to the rest of the planet is falling precipitously.
When our trade deficit expands, we lose jobs, businesses and economic infrastructure at an even faster pace. This is why I write about trade issues so much. Our economy is being absolutely eviscerated, and the Obama administration is pushing another giant trade deal which will greatly accelerate this process.
We are committing national economic suicide by running colossal trade deficits year after year. But instead of addressing our problems, our “leaders” just continue to conduct business as usual.
And to make themselves look good, they just keep manipulating the numbers until they seem “reasonable”. As I mentioned above, the negative number for Q1 is causing a lot of consternation in Washington, so now the Bureau of Economic Analysis is going to modify the way that GDP is calculated once again. The following comes from Bloomberg…
The way some parts of U.S. gross domestic product are calculated are about to change in the wake of the debate over persistently depressed first-quarter growth.
In a blog post published Friday, the Bureau of Economic Analysis listed a series of alterations it will make in seasonally adjusting data used to calculate economic growth. The changes will be implemented with the release of the initial second-quarter GDP estimate on July 30, the BEA said.
Although the agency adjusts its figures for seasonal variations, growth in any given first quarter still tends to be weaker than in the remaining three, economists have found, a sign there may be some bias in the data. It’s a phenomenon economists call “residual seasonality.”
Why can’t they just give us honest numbers?
Meanwhile, we also learned on Friday that corporate profits declined again during the first quarter of 2015. This was the second quarter in a row that we have seen this happen. The following comes from CNS News…
The BEA report also released data on corporate profits, which showed a decrease from the previous quarter. ‘Profits from current production decreased $125.5 billion in the first quarter, compared with a decrease of $30.4 billion in the fourth,’ BEA said.
Can you guess the last time that corporate profits declined for two quarters in a row?
It was in 2008.
So many of the exact same red flags that popped up seven years ago are popping up once again.
I know that I must sound like a broken record, but right now there are more signals that another major economic downturn is approaching than there has been at any other time since I started The Economic Collapse Blog in 2009.
Hopefully this summer will be relatively quiet, but I fully expect for events to start accelerating significantly during the second half of this year.
So if you have things that you need to get done before the next crisis arrives, you better hurry up, because time is quickly running out.
If the U.S. economy really is improving, then why are big U.S. retailers permanently shutting down thousands of stores? The “retail apocalypse” that I have written about so frequently appears to be accelerating. As you will see below, major U.S. retailers have announced that they are closing more than 6,000 locations, but economic conditions in this country are still fairly stable. So if this is happening already, what are things going to look like once the next recession strikes? For a long time, I have been pointing to 2015 as a major “turning point” for the U.S. economy, and I still feel that way. And since I started The Economic Collapse Blog at the end of 2009, I have never seen as many indications that we are headed into another major economic downturn as I do right now. If retailers are closing this many stores already, what are our malls and shopping centers going to look like a few years from now?
The list below comes from information compiled by About.com, but I have only included major retailers that have announced plans to close at least 10 stores. Most of these closures will take place this year, but in some instances the closures are scheduled to be phased in over a number of years. As you can see, the number of stores that are being permanently shut down is absolutely staggering…
180 Abercrombie & Fitch (by 2015)
75 Aeropostale (through January 2015)
150 American Eagle Outfitters (through 2017)
223 Barnes & Noble (through 2023)
265 Body Central / Body Shop
66 Bottom Dollar Food
25 Build-A-Bear (through 2015)
32 C. Wonder
120 Chico’s (through 2017)
200 Children’s Place (through 2017)
17 Christopher & Banks
70 Coach (fiscal 2015)
70 Coco’s /Carrows
300 Deb Shops
340 Dollar Tree/Family Dollar
39 Einstein Bros. Bagels
50 Express (through 2015)
31 Frederick’s of Hollywood
50 Fresh & Easy Grocey Stores
65 Future Shop (Best Buy Canada)
54 Golf Galaxy (by 2016)
50 Guess (through 2015)
127 Jones New York Outlet
10 Just Baked
28 Kate Spade Saturday & Jack Spade
400 Office Depot/Office Max (by 2016)
63 Pep Boys (“in the coming years”)
100 Pier One (by 2017)
20 Pick ’n Save (by 2017)
1,784 Radio Shack
13 Ruby Tuesday
10 SpartanNash Grocery Stores
55 Staples (2015)
133 Target, Canada (bankruptcy)
31 Tiger Direct
200 Walgreens (by 2017)
10 West Marine
338 Wet Seal
80 Wolverine World Wide (2015 – Stride Rite & Keds)
So why is this happening?
Without a doubt, Internet retailing is taking a huge toll on brick and mortar stores, and this is a trend that is not going to end any time soon.
What we find is that over the past 6 months we had a tremendous drop in true discretionary consumer spending. Within the overall downtrend we do see a bit of a rally in February but quite ominously that rally failed and the bottom absolutely fell out. Again the importance is it confirms the fundamental theory that consumer spending is showing the initial signs of a severe pull back. A worrying signal to be certain as we would expect this pull back to begin impacting other areas of consumer spending. The reason is that American consumers typically do not voluntarily pull back like that on spending but do so because they have run out of credit. And if credit is running thin it will surely be felt in all spending.
The truth is that middle class U.S. consumers are tapped out. Most families are just scraping by financially from month to month. For most Americans, there simply is not a whole lot of extra money left over to go shopping with these days.
In fact, at this point approximately one out of every four Americans spend at least half of their incomes just on rent…
More than one in four Americans are spending at least half of their family income on rent – leaving little money left to purchase groceries, buy clothing or put gas in the car, new figures have revealed.
A staggering 11.25 million households consume 50 percent or more of their income on housing and utilities, according to an analysis of Census data by nonprofit firm, Enterprise Community Partners.
And 1.8 million of these households spend at least 70 percent of their paychecks on rent.
The surging cost of rental housing has affected a rising number of families since the Great Recession hit in 2007. Officials define housing costs in excess of 30 percent of income as burdensome.
For decades, the U.S. economy was powered by a free spending middle class that had plenty of discretionary income to throw around. But now that the middle class is being systematically destroyed, that paradigm is changing. Americans families simply do not have the same resources that they once did, and that spells big trouble for retailers.
As you read this article, the United States still has more retail space per person than any other nation on the planet. But as stores close by the thousands, “space available” signs are going to be popping up everywhere. This is especially going to be true in poor and lower middle class neighborhoods. Especially after what we just witnessed in Baltimore, many retailers are not going to hesitate to shut down underperforming locations in impoverished areas.
And remember, the next major economic crisis has not even arrived yet. Once it does, the business environment in this country is going to change dramatically, and a few years from now America is going to look far different than it does right now.
If U.S. economic growth falls any lower, we are officially going to be in recession territory. On Wednesday, we learned that U.S. GDP grew at a 0.2 percent annual rate in the first quarter of 2015. That was much lower than all of the “experts” were projecting. And of course there are all sorts of questions whether the GDP numbers the government feeds us are legitimate anyway. According to John Williams of shadowstats.com, if honest numbers were used they would show that U.S. GDP growth has been continuously negative since 2005. But even if we consider the number that the government has given us to be the “real” number, it still shows that the U.S. economy has stalled out. It is almost as if we have hit a “turning point”, and there are many out there (including myself) that believe that the next major economic downturn is dead ahead. As you will see in this article, a whole bunch of things are happening right now that we would expect to see if a recession was beginning. The following are 16 signs that the economy has stalled out and the next economic downturn is here…
The gross domestic product grew between January and March at an annualized rate of 0.2 percent, the U.S. Commerce Department said, adding to the picture of an economy braking sharply after accelerating for much of last year. The pace fell well shy of the 1 percent mark anticipated by analysts and marked the weakest quarter in a year.
#2 If you strip a very unusual inventory buildup out of the GDP number, U.S. GDP would have actually fallen at a -2.5 percent annual rate during the first quarter…
The only good news: the massive inventory build, the largest since 2010, boosted GDP by nearly 3.0%. Without this epic stockpiling of non-farm inventory which will have to be liquidated at some point (and at a very low price) Q1 GDP would have been -2.5%.
#3 Our trade deficit with the rest of the planet is absolutely killing our economic growth. According to the Reality Chek Blog, U.S. economic growth would have been a total of 8 percent higher since the end of the last recession if we actually had balanced trade with other nations…
As of the new first quarter figures, the worsening of the trade deficit has reduced the cumulative real growth of the U.S. economy by 7.99 percent since the current recovery began in the second quarter of 2009.
#4 According to numbers that were just released by the Bureau of Labor Statistics, in one out of every five American familiesnobody has a job. So how in the world can the “unemployment rate” be sitting at “5.5 percent” when everyone is unemployed in 20 percent of all families in the United States? It doesn’t make any sense.
#5 The rate of homeownership in the United States has just hit a brand new 25 year low. How can anyone claim that the middle class is “healthy” when the percentage of Americans that own a home is the lowest that it has been in more than two decades?
#6 Back in 2013, 31 percent of all Americans said that they did not anticipate buying a home “for the foreseeable future”. Just two years later, that number has risen to 41 percent.
#7 The student loan bubble is clearly bursting. According to Bloomberg, only 37 percent of all student loan borrowers are actually up to date on their payments and reducing their balances…
With borrowers increasingly struggling to repay their student loans, Moody’s Investors Service is warning it may take investors longer than promised to get their money back. The credit grader said this month it may lower rankings on $3 billion of top-rated debt as investors face the threat of slowing principal payments or even receiving no interest.
The concern underscores the fallout from a record $1.2 trillion in U.S. student loans that’s spreading to everything from the housing market and consumer spending to taxpayers. As a sluggish economic recovery forces borrowers to miss payments or tap relief programs, only 37 percent are current and reducing their balances, according to a Federal Reserve Bank of New York presentation this month.
#8 Procter & Gamble has announced that it will be cutting up to 6,000 more jobs from their payroll. Why would they be doing this if the economy is “getting better”?
#16 As the U.S. economy begins to head into another downturn, most Americans are completely unprepared for it. In fact, one recent survey discovered that 62 percent of all Americans are currently living paycheck to paycheck.
Don’t let this next recession take you by surprise.
Back in 2008 and 2009, millions of Americans suddenly lost their jobs or businesses because of the sharp economic downturn. Because most of them were living paycheck to paycheck, all of a sudden a whole lot of Americans could not make their mortgage payments and foreclosures surged to unprecedented heights. Millions of families that thought they were operating on a solid foundation saw their middle class lifestyles evaporate in just a matter of a few months.
That is why it is so vital to prepare yourself financially, mentally, emotionally, physically and spiritually for the great storm that is coming ahead of time. Over the past couple of years, I have been working on a new book entitled “Get Prepared Now” which talks about how to make these preparations. On Wednesday, it was finally released to the public. I hope that you will check it out.
The past few years have been a period of relative stability for the U.S. economy. A lot of people have been lulled into a false sense of security during that time. These people have become convinced that our problems have been fixed. But they haven’t been fixed at all. In fact, our problems are far, far worse than they were just prior to the last financial crisis.
When the next great financial crisis strikes, we are going to see a spike in the suicide rate just like we did during the last one. Millions will be blindsided by what is coming and will give in to depression and despair. But that doesn’t have to happen to you. It is empowering to know what is coming and to understand why it is coming. It is empowering to get prepared in advance for turbulent times. It is empowering to have a plan for the years ahead.
Even though I write about all of the horrible things that are coming to this country every day, I live my life with no fear, and that is what I want for all of you as well.
Do you want to know who will be giving in to fear and panic when things start to go really crazy?
It will be the people that had no idea what was coming and made no preparations whatsoever.
Yes, the times ahead are going to be extremely challenging, but they can also be the best times of your life.
It is all going to come down to how you respond to a world that is going completely insane.
When an economic crisis is coming, there are usually certain indicators that appear in advance. For example, commodity prices usually start to plunge before a recession begins. And as you can see from the Bloomberg Commodity Index which you can find right here, this has already been happening. In addition, I have previously written about how the U.S. dollar went on a great run just before the financial collapse of 2008. This is something that has also been happening over the past few months. Some people would have you believe that nobody can anticipate the next great economic downturn and that to try to do so is just an exercise in “guesswork”. But that is not the case at all. We can look back over history and see patterns that keep repeating. And a lot of the exact same patterns that happened just before previous stock market crashes are happening again right now.
For example, let’s talk about the price of oil. There are only two times in history when the price of oil has fallen by more than 50 dollars in a six month time period. One was just before the financial crisis in 2008, and the other has just happened…
As a result of crashing oil prices, we are witnessing oil rigs shut down in the United States at a blistering pace. In fact, almost half of all oil rigs in the U.S. have already shut down. The following commentary and chart come from Wolf Richter…
In the latest week, drillers idled another 41 oil rigs, according to Baker Hughes. Only 825 rigs were still active, down 48.7% from October. In the 23 weeks since, drillers have idled 784 oil rigs, the steepest, deepest cliff-dive in the history of the data:
We are looking at a full-blown fracking bust, and this bust is already having a dramatic impact on the economies of states that are heavily dependent on the energy industry.
The crash in oil prices is hammering the Texas economy.
The latest manufacturing outlook index from the Dallas Fed plunged again in March, to -17.4 from -11.2 in February, indicating deteriorating business conditions in the state.
But this pain is going to be felt far beyond Texas. In recent years, Wall Street banks have made a massive amount of money packaging up energy industry loans, bonds, etc. and selling them off to investors.
If that sounds similar to the kind of behavior that preceded the subprime mortgage meltdown, that is because it is.
Now those loans, bonds, etc. are going bad as the fracking bust intensifies, and whoever is left holding all of this worthless paper at the end of the day is going to lose an extraordinary amount of money. Here is more from Wolf Richter…
It suited Wall Street just fine: according to Dealogic, banks extracted $31 billion in fees from the US oil and gas industry and its investors over the past five years by handling IPOs, spin-offs, “leveraged-loan” transactions, the sale of bonds and junk bonds, and M&A.
That’s $6 billion in fees per year! Over the last four years, these banks made over $4 billion in fees on just “leveraged loans.” These loans to over-indebted, junk-rated companies soared from about $40 billion in 2009 to $210 billion in 2014 before it came to a screeching halt.
For Wall Street it doesn’t matter what happens to these junk bonds and leveraged loans after they’ve been moved on to mutual funds where they can decompose sight-unseen. And it doesn’t matter to Wall Street what happens to leverage loans after they’ve been repackaged into highly rated Collateralized Loan Obligations that are then sold to others.
At the same time, we are also witnessing a slowdown in global trade. This usually happens when economic conditions are about to turn sour, and that is why it is so alarming that the total volume of global trade in January was down 1.4 percent from December. According to Tyler Durden of Zero Hedge, that was the largest drop since 2011…
Presenting the latest data from the CPB Netherlands Bureau for Economic Policy Analysis, according to which in January world trade by volume dropped by a whopping 1.4% from December: the biggest drop since 2011!
We are seeing some troubling signs in the U.S. as well.
I shared the following chart in a previous article, but it bears repeating. It comes from Charles Hugh Smith, and it shows that new orders for consumer goods are falling at a rate not seen since the last recession…
Well, what about the stock market? It was up more than 200 points on Monday. Isn’t that good news?
Yes, but the euphoria on Wall Street will not last for long.
When corporate earnings per share either start flattening out or start to decline, that is a huge red flag. We saw this just prior to the stock market crash of 2008, and it is happening again right now. The following commentary and chart come from Phoenix Capital Research…
Take a look at the below chart showing current stock levels and changes in forward Earnings Per Share (EPS). Note, in particular how divergences between EPS and stocks tend to play out (hint look at 2007-2008).
We all know what came next.
And guess what?
According to CNBC, a lot of the “smart money” is pulling their money out of the stock market right now while the getting is good…
Recent market volatility has sent stock market investors rushing for the exits and into cash.
Outflows from equity-based funds in 2015 have reached their highest level since 2009, thanks to a seesaw market that has come under pressure from weak economic data, a stronger dollar and the the prospect of monetary tightening.
Funds that invest in stocks have seen $44 billion in outflows, or redemptions, year to date, according to Bank of America Merrill Lynch. Equity funds have seen outflows in five of the last six weeks, including $6.1 billion in just the last week.
It doesn’t matter if you are a millionaire “on paper” today.
What matters is if the money is going to be there when you really need it.
At the moment, a whole lot of people have been lulled into a false sense of complacency by the soaring stock market and by the bubble of false economic stability that we have been enjoying.
But under the surface, there is a whole lot of turmoil going on.
Those that are looking for the signs are going to see the next crisis approaching well in advance.
Those that are not are going to get absolutely blindsided by what is coming.