This wasn’t supposed to happen. The price of oil was supposed to start going back up, and this would have brought much needed relief to economically-depressed areas of North America that are heavily dependent on the energy industry. Instead, the price of oil is crashing again, and that is really bad news for a U.S. economy that is already mired in the worst “recovery” since 1949. On Monday, U.S. oil was down almost four percent, and for a brief time it actually fell below 40 dollars a barrel. Overall, the price of oil has fallen a staggering 21 percent since June 8th. In less than two months, the “oil rally” that so many were pinning their hopes on has been totally wiped out, and if the price of oil continues to stay this low it is going to have very seriously implications for our economy moving forward.
One of the big reasons why the price of oil has been declining is because the OPEC nations continue to pump oil at very high levels. The following comes from CNBC…
Production in July by the Organization of the Petroleum Exporting Countries likely rose to its highest in recent history, a Reuters survey found on Friday, as Iraq pumped more and Nigeria squeezed out additional crude exports despite militant attacks on oil installations.
Top OPEC exporter Saudi Arabia also kept output close to a record high, the survey found, as it met seasonally higher domestic demand and focused on maintaining market share instead of trimming supply to boost prices.
These countries don’t know if or when the price of oil will eventually rebound, but what they do know is that they desperately need cash in order to keep their sputtering economies going. Many of these nations are already experiencing significant economic downturns, and substantially reducing oil revenues at this time would definitely not help things.
Here in North America, oil production costs tend to be higher, and so when the price of oil crashes we tend to see companies shut down rigs. But when rigs get shut down, that means that good paying jobs are lost.
And even though there was hope that energy companies would add jobs as the price of oil started rebounding during the second quarter, it turned out that the job losses just kept on coming…
Energy companies continued to cut thousands of jobs during the second quarter, even though many chief executives are now voicing optimism that the oil market crash is ending and a rebound in drilling is afoot.
Although the heads of Halliburton Co. , Schlumberger Ltd. and other major firms forecast higher crude prices and a return to U.S. shale fields when discussing earnings this week, those companies and others disclosed another 15,000 industry layoffs.
Personally, I have quite a few members of my own extended family that live in areas that are heavily dependent on the energy industry, and three of them have lost their jobs so far this year.
And these are precisely the sort of good paying middle class jobs that we cannot afford to lose. In order to having a thriving middle class, you need lots of middle class jobs. Unfortunately, those kinds of jobs are going away, and the middle class in the United States is systematically dying.
If the price of oil keeps going lower, that will mean even more jobs losses for the energy industry, and that will be very bad news for the U.S. economy.
In addition, many of these energy companies are getting into very serious debt problems. Delinquency rates on corporate debt are already the highest that they have been since the last recession as firms struggle to pay their bills. Of course some of them have already gone belly up, and this has pushed default rates on corporate debt to the highest level since the last financial crisis.
At a price of 40 dollars a barrel, most oil companies in the United States are not profitable in the long-term. The longer the price of oil stays down in this neighborhood, the more energy companies we will see go bankrupt. At this point it is just a waiting game.
Also, it is important to keep in mind that Wall Street is very heavily exposed to the energy industry. Just as subprime mortgages brought down quite a few financial institutions back in 2008, so this time around it is inevitable that the oil crash will claim a fair number of victims as well.
As the global economy has slowed down, the demand for oil has decreased. And at this point, even the U.S. economy appears to be seriously slowing down. U.S. GDP only grew at about a one percent rate for the first half of 2016, and the rate of homeownership in this country just hit the lowest level ever recorded.
In the mainstream financial media, there is a lot of hopeful talk about a potential turnaround for the energy industry, but most of that talk appears to be just wishful thinking.
To me, about the only thing that could push the price of oil back to where U.S. oil companies need it to be in the short-term would be a major war in the Middle East. And of course that is definitely always a possibility considering who is running things in Washington. But absent that, it is hard to see the price of oil getting back to 70 or 80 dollars a barrel any time soon.
So that means that we are likely to see more job losses, more debt delinquencies and debt defaults, and more financial institutions getting into trouble due to their reckless exposure to the energy industry.
You are about to see undeniable evidence that the U.S. economy has been slowing down for quite some time. And it is vital that we focus on the facts, because all over the Internet you are going to find lots and lots of people that have opinions about what is going on with the economy. And of course the mainstream media is always trying to spin things to make Barack Obama and Hillary Clinton look good, because those that work in the mainstream media are far more liberal than the American population as a whole. It is true that I also have my own opinions, but as an attorney I learned that opinions are not any good unless you have facts to back them up. So please allow me a few moments to share with you evidence that clearly demonstrates that we have already entered a major economic slowdown. The following are 15 facts about the imploding U.S. economy that the mainstream media doesn’t want you to see…
1. Industrial production has now declined for nine months in a row. We have never seen this happen outside of a recession in all of U.S. history.
2. U.S. commercial bankruptcies have risen on a year over year basis for seven months in a row and are now up 51 percent since September.
3. The delinquency rate on commercial and industrial loans has been rising since January 2015.
4. Total business sales in the United States have been steadily dropping since the middle of 2014. No, I did not say 2015. Total business sales have been in decline for nearly two years now, and we just found out that they dropped again…
Total business sales in the US did in April what they’ve been doing since July 2014: they dropped: -2.9% from a year ago, to $1.28 trillion (not adjusted for seasonal differences and price changes), the Censuses Bureau reported on Tuesday. That’s where sales had been in April 2013!
15. The number of temporary workers in the United States peaked and started falling precipitously before the recession of 2001 even started. The exact same thing happened just prior to the beginning of the 2008 recession. So would it surprise you to learn that the number of temporary workers in the United States peaked in December and has fallen dramatically since then?
Earlier today, we learned that two of our biggest corporations will be laying off even more workers. Bank of America, which is holding more of our money than any other bank in the country, has announced that it is going to be cutting about 8,000 more workers…
Bank of America is expected to reduce staffing in its consumer banking division by as many as 8,000 more jobs.
The nation’s largest retail bank by deposits has already reduced the staffing in its consumer division from more than 100,000 in 2009 to about 68,400 as of the end of the first quarter of 2016, said Thong Nguyen, Bank of America’s president of retail banking and co-head of consumer banking at the Morgan Stanley Financials Conference Tuesday.
Walmart is going to cut some back-office accounting jobs at about 500 stores in a bid to become more efficient.
The job cuts will occur mostly at stores mostly in the West and involve accounting and invoicing workers, says spokesman Kory Lundberg. Instead, bookkeeping functions will be switched to Walmart’s home office in Bentonville, Ark. Cash at the stores will be counted by machine.
Day after day we are hearing about more layoffs like this. So why would this be happening if the U.S. economy truly was in “recovery mode”?
Even with how manipulated the GDP numbers are these days, Barack Obama is on course to be the only president in all of U.S. history to never have a single year when the economy grew by at least 3 percent. The truth is that our economy has been stuck in the mud ever since the end of the last recession, and now a major new downturn has clearly already begun.
Foreign investors sold a record amount of U.S. Treasury bonds and notes for the month of April, according to U.S. Treasury Department data on Wednesday, as investors priced in a few more rate increases by the Federal Reserve this year.
Foreigners sold $74.6 billion in U.S. Treasury debt in the month, after purchases of $23.6 billion in March. April’s outflow was the largest since the U.S. Treasury Department started recording Treasury debt transactions in January 1978.
Absent a major “black swan event” of some sort, we won’t see that happening in the United States for at least a while yet, but without a doubt we are steamrolling toward a major economic depression.
Unfortunately for all of us, there isn’t anything that any of our politicians are going to be able to do to stop it.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
Even the government is admitting that the U.S. economy is slowing down. On Thursday, we learned that U.S. GDP grew at just a 0.5 percent annual rate during the first quarter of 2016. This was lower than analysts were anticipating, and it marks the third time in a row that the GDP number has declined compared to the previous quarter. In other words, GDP growth has been declining for close to a year now, and this lines up perfectly with what I have been saying about how the second half of last year was a turning point that plunged us into the early chapters of a brand new economic crisis. And as you will see below, the official GDP number is highly manipulated, and the way that it is calculated has been changed numerous times over the years. So the bad number that is being reported by the government is actually the best case scenario.
Of course many of the “experts” being quoted by the mainstream media are saying that this is just a temporary blip and that good times for the U.S. economy are right around the corner. For instance, check out this quote from Reuters…
“The economy essentially stalled in the first quarter, but that doesn’t mean it is faltering,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “Some of the restraints to growth are dissipating. Growth is likely to accelerate going forward.”
We have been told this same story for years, but the “acceleration” has never materialized. In fact, Barack Obama is poised to become the only president in U.S. history to never have a single year when the economy grew by more than 3 percent during his presidency.
That is a statistic that is hard to believe, but it is true.
In addition, Louis Woodhill has pointed out that the average rate of U.S. economic growth during the Obama years will be the fourth worst in recorded history…
Assuming 2.67% RGDP growth for 2016, Obama will leave office having produced an average of 1.55% growth. This would place his presidency fourth from the bottom of the list of 39*, above only those of Herbert Hoover (-5.65%), Andrew Johnson (-0.70%) and Theodore Roosevelt (1.41%)
So does anyone out there still believe that there has been an “Obama recovery”?
We also need to add another layer to our analysis. By now, everyone should realize that the official GDP number is highly manipulated, and the way that GDP is calculated has been changed many, many times over the years.
The latest example of this was revealed earlier this week when the Bureau of Economic Analysis (BEA) announced new methods of calculating Gross Domestic Product (GDP) that will immediately make the economy “bigger’ than it used to be. The changes focus heavily on how money spent on research and development (R&D) and the production of “intangible” assets like movies, music, and television programs will be accounted for. Declaring such expenditures to be “investments” will immediately increase U.S. GDP by about three percent. Such an upgrade would immediately increase the theoretic size of the U.S economy and may well lead to the perception of faster growth. In reality these smoke and mirror alterations are no different from changes made to the inflation and unemployment yardsticks that for years have convinced Americans that the economy is better than it actually is.
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.
One of the changes that was made last year was intended to artificially boost GDP growth numbers for the first quarter of each year.
So without that artificial boost, what would the real number for the first quarter of 2016 look like?
John Williams of shadowstats.com tracks what the official government numbers would be if honest numbers were actually being used, and according to him U.S. GDP growth has been continuously negative since 2005.
But we certainly can’t have the press report those sorts of things. If that were the case, then everyone would be talking about the “economic depression” that never seems to end.
Unfortunately, the truth is that we are in the midst of a long-term economic decline, and we can see evidence of this all around us. For example, on Thursday we also learned that the rate of homeownership in the United States has fallen once again, and it is now hovering just 0.1 percent above the lowest level ever recorded in American history…
After gains in the second half of 2015, the homeownership rate fell to just 63.6 percent, seasonally adjusted, in the first quarter of this year, according to the U.S. Census Bureau. Homeownership hit a high of 69.4 percent in 2004, during one of the biggest housing booms in history. That was also when mortgage lending was arguably at its loosest level in history. The homeownership rate is now just one-tenth of 1 basis point higher than its all-time low in the second quarter of 2015.
For many more numbers that show that the U.S. economy has continued to decline, please see the following articles that I authored earlier this month…
Now that U.S. GDP growth has been steadily dropping for three quarters in a row, hopefully people will wake up and begin to realize what is happening.
We are entering very hard times, so now is not the time to go out and buy fancy new toys or to go into lots of debt.
Rather, this is a time to tighten our belts, batten down the hatches and prepare for rough seas ahead.
Sadly, most people continue to have blind faith that our politicians and the central bankers will be able to perform some kind of miracle to save us from what is coming.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
Those that were hoping for an “economic renaissance” in the United States got some more bad news this week. It turns out that the U.S. economy is in significantly worse shape than the experts were projecting. Retail sales unexpectedly declined in March, total business sales have fallen again, and the inventory to sales ratio has hit the highest level since the last financial crisis. When you add these three classic recession signals to the 19 troubling numbers about the U.S. economy that I wrote about last week, it paints a very disturbing picture. Virtually all of the signs that we would expect to pop up during the early chapters of a major economic crisis have now appeared, and yet most Americans still appear to be clueless about what is happening.
Even I was surprised when the government reported that retail sales had actually fallen in March. Consumer spending is a very large part of our economy, and so if consumer spending is slowing down already that certainly does not bode well for the rest of 2016. The following comes from highly respected author Jim Quinn…
The Ivy League educated “expert” economists expected March retail sales to increase by 0.1%. They only missed by $6 billion, as retail sales FELL by 0.3%. They have fallen for three straight months. At least gasoline sales were strong, as prices have risen 22% since mid-February. That should do wonders for the finances of American households. If you exclude gasoline sales, retail sales fell by 0.4%. As the chart below reveals, the year over year change in retail sales has been at or near recessionary levels for most of 2015, and into 2016.
You can view the chart that he was referring to right here. In addition to a decline in retail sales, total business sales have also been falling, and this is another classic recession signal. The following comes from Wolf Richter…
Total business sales fell again in February, the Commerce Department reported today. They include sales by manufacturers, retailers, and wholesalers of all sizes across the US economy. This measure is far broader than the aggregate sales by publicly traded companies, which too have been falling.
At $1.284 trillion in February, total business sales were down an estimated 0.4% from January, adjusted for seasonal and trading-day differences but not for price changes. And they were down 1.4% from the already beaten-down levels of February last year. They’re back where they’d first been in November 2012!
Yes, the stock market has been on quite a run for the past several weeks, but that temporary rebound is not based on the economic fundamentals.
The truth is that the real economy is definitely starting to slow down substantially. If you want to break it down very simply, less stuff is being bought and sold and shipped around the country, and that tells us far more about what is coming in the months ahead than the temporary ups and downs of stock prices.
Another huge red flag is the fact that the inventory to sales ratio in the U.S. has hit the highest level that we have seen since the last financial crisis…
The crucial inventory-to-sales ratio, which tracks how long unsold inventory sits around in relationship to sales, is now at a mind-bending 1.41. That’s the level the ratio spiked to in November 2008, after the Lehman bankruptcy in September had put the freeze on the economy.
Inventories represent prior sales by suppliers. When companies try to reduce their inventories, they cut their orders. Suppliers see these orders as sales. As their sales slump, suppliers adjust by cutting their own orders, thus causing the sales slump to propagate up the supply chain. They all react by cutting their expenses. And if it lasts, they’ll cut jobs. Inventory corrections have a nasty impact on the overall economy.
Because sales have slowed down, inventories are starting to pile up to alarmingly high levels. And when companies see that business is slowing down, they start to let people go.
Somehow, most of the talking heads on television don’t seem too alarmed by this.
But ordinary Americans are beginning to become alarmed about what is happening. In fact, the percentage of Americans that believe that the U.S. economy is “getting worse” is now the highest it has been since last August…
One of the more glaring examples of how strong pessimism has become is Gallup’s U.S. Economic Confidence Index. The measure gauges the difference between respondents who say the economy is improving or declining. The most recent results are not good.
Fully 59 percent say the economy is “getting worse” against just 37 percent who say it is “getting better.” That gap of 22 percentage points is the worst since August, according to Gallup, which polled 3,542 adults.
Personally, I thought that we would be a little further down the road by now, but without a doubt a new economic downturn has begun in America.
It’s funny – yesterday I took time out to write an article about the horrible suffering that ISIS sex slaves are enduring, and a few of my critics took that as a sign that there must not be enough bad economic news to write about.
Well, the truth is that this isn’t the case at all. The global economic meltdown is steaming along, even if it is moving just a little bit slower than many of us had originally anticipated. We are moving in the exact direction that myself and many others had warned about, and the rest of 2016 is looking quite ominous for the global economy.
So hopefully everyone (including the critics) is using whatever time we have left wisely. Because I definitely wish the very best for everyone during the exceedingly hard times that are coming.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
Those that run food banks all over America say that demand for their services just continues to explode. It always amazes me that there are still people out there that insist that an “economic collapse” is not happening. From their air-conditioned homes in their cushy suburban neighborhoods they mock the idea that the U.S. economy is crumbling. But if they would just go down and visit the local food banks in their areas, they would see how much people are hurting. According to Feeding America spokesman Ross Fraser, 46 million Americans got food from a food bank at least one time during 2014. Because the demand has become so overwhelming, some food banks are cutting back on the number of days they operate and the amount of food that is given to each family. As you will see below, many impoverished Americans are lining up at food banks as early as 6:30 in the morning just so that they can be sure to get something before the food runs out. And yet there are still many people out there that have the audacity to say that everything is just fine in America. Shame on them for ignoring the pain of millions upon millions of their fellow citizens.
Poverty in America is getting worse, not better. And no amount of spin from Barack Obama or his apologists can change that fact.
This year, it is being projected that food banks in the United States will give away an all-time record 4 billion pounds of food.
Over the past decade, that number has more than doubled.
Food banks across the country are seeing a rising demand for free groceries despite the growing economy, leading some charities to reduce the amount of food they offer each family.
Those in need are starting to realize what is going on, so they are getting to the food banks earlier and earlier. For example, one food bank in New Mexico is now getting long lines of people every single day starting at 6:30 in the morning…
“We get lines of people every day, starting at 6:30 in the morning,” said Sheila Moore, who oversees food distribution at The Storehouse, the largest pantry in Albuquerque, New Mexico, and one where food distribution has climbed 15 percent in the past year.
Does that sound like an “economic recovery” to you?
Just because your family doesn’t have to stand in line for food does not mean that everything is okay in America.
The same thing that is happening in New Mexico is also happening in Ohio. Needy people are standing in line at the crack of dawn so that they can be sure to get something “before the food runs out”…
Lisa Hamler-Fugitt, executive director of the Ohio Association of Food Banks, who has been working in food charities since the 1980s, said that when earlier economic downturns ended, food demand declined, but not this time.
“People keep coming earlier and earlier, they’re standing in line, hoping they get there before the food runs out,” Hamler-Fugitt said.
So how bad will things be when millions more Americans lose their jobs and millions more Americans lose their homes?
Rising poverty is also reflected in the number of Americans on food stamps. The following graph was posted by the Economic Policy Journal, and it shows how food stamp use has absolutely exploded in the five most populated states…
I don’t see an “economic recovery” in that graph, do you?
Instead, what it shows is that the number of Americans on food stamps continued to rise for years even after the recession ended.
Sadly, things are only going to get worse from here. Eventually, the kinds of things that we are seeing happen in places such as Venezuela will be coming here as well. At this point, young mothers in Venezuela are sleeping outside of empty supermarkets at night in a desperate attempt to get something for their families when morning arrives…
As dawn breaks over the scorching Venezuelan city of Maracaibo, smugglers, young mothers and a handful of kids stir outside a supermarket where they spent the night, hoping to be first in line for scarce rice, milk or whatever may be available.
Some of the people in line are half-asleep on flattened cardboard boxes, others are drinking coffee.
Most Americans cannot identify with this level of suffering, but it is coming to our country someday too. Here is more from Reuters…
“I can’t get milk for my child. What are we going to do?” said Leida Silva, 54, breaking into tears outside the Latino supermarket in northern Maracaibo where she arrived at 3 a.m. on a recent day.
In case you are wondering, that is not a sign of progress.
Just because you might live in a comfortable neighborhood that does not give you the right to look down on those that are suffering.
And when you add increasing racial tensions to the mix, it becomes easier to understand why there is so much anger and frustration in our urban areas. According to Business Insider, the percentage of Americans that consider race relations to be in good shape in this nation has dropped precipitously…
Over the last two years there has been a 23% drop in the number of Americans who see relations between blacks and whites as “very good” or “somewhat good.”
Today, only 47% of Americans see black-white relations positively, according to a Gallup poll, the lowest it has been in the last 14 years.
The poll also showed that blacks see the relations more positively (51%) than whites (45%), but both percentages experienced sharp declines in the last two years.
All of the ingredients are there for civil unrest to erupt in cities all over the United States.
When the next major economic downturn happens, anger and frustration are going to flare to extremely dangerous levels. At this point, it will not take much to set things off.
Desperate people do desperate things, and desperation is rising even now in this country.
So how did things get so bad?
Stupid decisions lead to stupid results, and very soon we will start to pay a very great price for decades of incredibly stupid decisions.
Is this the end of the last great run for the U.S. stock market? Are we witnessing classic “peaking behavior” that is similar to what occurred just before other major stock market crashes? Throughout 2014 and for the early stages of 2015, stocks have been on quite a tear. Even though the overall U.S. economy continues to be deeply troubled, we have seen the Dow, the S&P 500 and the Nasdaq set record after record. But no bull market lasts forever – particularly one that has no relation to economic reality whatsoever. This false bubble of financial prosperity has been enjoyable, and even I wish that it could last much longer. But there comes a time when we all must face reality, and the cold, hard facts are telling us that this party is about to end. The following are 7 signs that a stock market peak is happening right now…
#1 Just before a stock market crash, price/earnings ratios tend to spike, and that is precisely what we are witnessing. The following commentary and chart come from Lance Roberts…
The chart below shows Dr. Robert Shiller’s cyclically adjusted P/E ratio. The problem is that current valuations only appear cheap when compared to the peak in 2000. In order to put valuations into perspective, I have capped P/E’s at 30x trailing earnings. The dashed orange line measures 23x earnings which has been the level where secular bull markets have previously ended. I have noted the peak valuations in periods that have exceeded that 30x earnings.
At 27.85x current earning the markets are currently at valuation levels where previous bull markets have ended rather than continued. Furthermore, the markets have exceeded the pre-financial crisis peak of 27.65x earnings. If earnings continue to deteriorate, market valuations could rise rapidly even if prices remain stagnant.
#2 The average bull market lasts for approximately 3.8 years. The current bull market has already lasted for six years.
#4 Usually before a stock market crash we see a divergence between the relative strength index and the stock market itself. This happened prior to the bursting of the dotcom bubble, it happened prior to the crash of 2008, and it is happening again right now…
The first technical warning sign that we should heed is marked by a significant divergence between the relative strength index (RSI) and the market itself. This is noted by a declining pattern of lower highs in the RSI as stocks continue to make higher highs, a sign that the market is “topping out”. In the late ‘90s this divergence persisted for many years as the tech bubble reached epic valuation levels. In 2007 this divergence lasted over a much shorter period (6 months) before the market finally peaked and succumbed to massive selling. With last month’s strong rally to new records, we now have a confirmed divergence between the long-term relative strength index and the market’s price action.
#5 In the past, peaks in margin debt have been very closely associated with stock market peaks. The following chart comes from Doug Short, and I included it in a previous article…
#6 As I have discussed previously, we usually witness a spike in 10 year Treasury yields just about the time that the stock market is peaking right before a crash.
Well, according to Business Insider, we just saw the largest 5 week rate rally in two decades…
Lots of guys and gals went home this past weekend thinking about the implications of the recent rise in the 10-year Treasury bond’s yield.
Chris Kimble notes it was the biggest 5-week rate rally in twenty years!
A momentum indicator dubbed the Coppock Guide, which serves as “a barometer of the market’s emotional state,” has also peaked, Stack says. The indicator, which, “tracks the ebb and flow of equity markets from one psychological extreme to another,” is also flashing a warning flag.
The Coppock Guide’s chart pattern is flashing a “double top,” which suggests that “psychological excesses are present” and that “secondary momentum has peaked” in this bull market, according to Stack.
“All of this is just another reason for concern about an impending bear market on the not-too-distant horizon,” Stack writes.
So if we are to see a stock market crash soon, when will it happen?
Well, the truth is that nobody knows for certain.
It could happen this week, or it could be six months from now.
In fact, a whole lot of people are starting to point to the second half of 2015 as a danger zone. For example, just consider the words of David Morgan…
“Momentum is one indicator and the money supply. Also, when I made my forecast, there is a big seasonality, and part of it is strict analytical detail and part of it is being in this market for 40 years. I got a pretty good idea of what is going on out there and the feedback I get. . . . I’m in Europe, I’m in Asia, I’m in South America, I’m in Mexico, I’m in Canada; and so, I get a global feel, if you will, for what people are really thinking and really dealing with. It’s like a barometer reading, and I feel there are more and more tensions all the time and less and less solutions. It’s a fundamental take on how fed up people are on a global basis. Based on that, it seems to me as I said in the January issue of the Morgan Report, September is going to be the point where people have had it.”
Time will tell if Morgan was right.
But without a doubt, lots of economic warning signs are starting to pop up.
One that is particularly troubling is the decline in new orders for consumer goods. This is something that Charles Hugh-Smith pointed out in one of his recent articles…
The financial news is astonishingly rosy: record trade surpluses in China, positive surprises in Europe, the best run of new jobs added to the U.S. economy since the go-go 1990s, and the gift that keeps on giving to consumers everywhere, low oil prices.
So if everything is so fantastic, why are new orders cratering?New orders are a snapshot of future demand, as opposed to current retail sales or orders that have been delivered.
Posted below is a chart that he included with his recent article. As you can see, the only time things have been worse in recent decades was during the depths of the last financial crisis…
To me, it very much appears that time is running out for this bubble of false prosperity that we have been living in.
But what do you think? Please feel free to contribute to the discussion by posting a comment below…
Is the petrodollar monopoly about to be shattered? When U.S. politicians started slapping economic sanctions on Russia, they probably never even imagined that there might be serious consequences for the United States. But now the Russian media is reporting that the Russian Ministry of Finance is getting ready to pull the trigger on a “de-dollarization” plan. For decades, virtually all oil and natural gas around the world has been bought and sold for U.S. dollars. As I will explain below, this has been a massive advantage for the U.S. economy. In recent years, there have been rumblings by nations such as Russia and China about the need to change to a new system, but nobody has really had a big reason to upset the status quo. However, that has now changed. The struggle over Ukraine has caused Russia to completely reevaluate the financial relationship that it has with the United States. If it starts trading a lot of oil and natural gas for currencies other than the U.S. dollar, that will be a massive blow for the petrodollar, and it could end up dramatically changing the global economic landscape.
The fact that the Russian government has held a meeting to discuss “getting rid of the US dollar in Russian export operations” should be front page news on every mainstream news website in the United States. That is how big this is. But instead, we have heard nothing from the big mainstream news networks about this so far. Instead, we have only heard about this from Russian news sources such as the Voice of Russia…
Russian press reports that the country’s Ministry of Finance is ready to greenlight a plan to radically increase the role of the Russian ruble in export operations while reducing the share of dollar-denominated transactions. Governmental sources believe that the Russian banking sector is “ready to handle the increased number of ruble-denominated transactions”.
According to the Prime news agency, on April 24th the government organized a special meeting dedicated to finding a solution for getting rid of the US dollar in Russian export operations. Top level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia.
The “de-dollarization meeting” was chaired by First Deputy Prime Minister of the Russian Federation Igor Shuvalov, proving that Moscow is very serious in its intention to stop using the dollar.
So will Russia go through with this?
After all, this wouldn’t just be a slap in the face. This would essentially be like slamming an economic fist into our nose.
You see, Russia is not just a small player when it comes to trading oil and natural gas. The truth is that Russia is the largest exporter of natural gas and the second largest exporter of oil in the world.
If Russia starts asking for payment in currencies other than the U.S. dollar, that will essentially end the monopoly of the petrodollar.
In order to do this, Russia will need trading partners willing to go along. In the article quoted above, the Voice of Russia listed Iran and China as two nations that would potentially be willing to make the switch…
Of course, the success of Moscow’s campaign to switch its trading to rubles or other regional currencies will depend on the willingness of its trading partners to get rid of the dollar. Sources cited by Politonline.ru mentioned two countries who would be willing to support Russia: Iran and China. Given that Vladimir Putin will visit Beijing on May 20, it can be speculated that the gas and oil contracts that are going to be signed between Russia and China will be denominated in rubles and yuan, not dollars.
And the reality of the matter is that China has seemed ready to move away from the U.S. dollar for quite some time. In a previous article, I included a quote from a French news source that discussed how China’s official news agency has even called for a “new international reserve currency… to replace the dominant US dollar”…
For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback’s role as the default global reserve unit.
But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China’s official Xinhua news agency called for a “de-Americanised” world.
It also urged the creation of a “new international reserve currency… to replace the dominant US dollar”.
Well, it creates a tremendous amount of demand for the U.S. dollar all over the globe. Since everyone has needed it to trade with one another, that has created an endless global appetite for the currency. That has kept the value of the dollar artificially high, and it has enabled us to import trillions of dollars of super cheap products from other countries. If other nations stopped using the dollar to trade with one another, the value of the dollar would plummet dramatically and we would have to pay much, much more for the trinkets that we buy at the dollar store and Wal-Mart.
In addition, since the U.S. dollar is essentially the de facto global currency, this has also increased demand for our debt. Major exporting nations such as China and Saudi Arabia end up with giant piles of our dollars. Instead of just letting them sit there and do nothing, those nations often reinvest their dollars into securities that can rapidly be changed back into dollars if needed. One of the most popular ways to do this has been to invest those dollars in U.S. Treasuries. This has driven down interest rates on U.S. debt over the years and has enabled the U.S. government to borrow trillions upon trillions of dollars for next to nothing.
But if the rest of the world starts moving away from the U.S. dollar, all of this could change.
In order for our current standard of living to continue, it is absolutely imperative that everyone else around the globe continues to use our currency.
So if Russia really does pull the trigger on a “de-dollarization” strategy, that would be huge – especially if the rest of the planet started following their lead.
If the U.S. economy is getting better, then why are major retail chains closing thousands of stores? If we truly are in an “economic recovery”, then why do sales figures continue to go down for large retailers all over the country? Without a doubt, the rise of Internet retailing giants such as Amazon.com have had a huge impact. Today, there are millions of Americans that actually prefer to shop online. Personally, when I published my novel I made it solely available on Amazon. But Internet shopping alone does not account for the great retail apocalypse that we are witnessing. In fact, some retail experts estimate that the Internet has accounted for only about 20 percent of the decline that we are seeing. Most of the rest of it can be accounted for by the slow, steady death of the middle class U.S. consumer. Median household income has declined for five years in a row, but all of our bills just keep going up. That means that the amount of disposable income that average Americans have continues to shrink, and that is really bad news for retailers.
And sadly, this is just the beginning. Retail experts are projecting that the pace of store closings will actually accelerate over the course of the next decade.
So as you read this list below, please take note that things will soon get even worse.
The following are 20 facts about the great U.S. retail apocalypse that will blow your mind…
#1 As you read this article, approximately a billion square feet of retail space is sitting vacant in the United States.
#17 A home appliance chain known as “American TV” in the Midwest is going to be shutting down all 11 stores.
#18 Even Wal-Mart is struggling right now. Just check out what one very prominent Wal-Mart executive recently admitted…
David Cheesewright, CEO of Walmart International was speaking at the same presentation, and he pointed out that Walmart would try to protect its market share in the US – where the company had just issued an earnings warning. But most of the growth would have to come from its units outside the US. I mean, via these share buybacks?
Alas, outside the US too, economies were limping along at best, and consumers were struggling and the operating environment was tough. “We’re seeing economies under stress pretty much everywhere we operate,” Cheesewright admitted.
Within 15 to 20 years, retail consultant Howard Davidowitz expects as many as half of America’s shopping malls to fail. He predicts that only upscale shopping centers with anchors like Saks Fifth Avenue and Neiman Marcus will survive.
So is there any hope that things will turn around?
Well, if the U.S. economy started producing large numbers of good paying middle class jobs there would definitely be cause for optimism.
Unfortunately, that is just not happening.
On Friday, we were told that the U.S. economy added 175,000 jobs during the month of February.
That sounds pretty good until you realize that it takes almost that many jobs each month just to keep up with population growth.
And according to CNS News, the number of unemployed Americans actually grew faster than the number of employed Americans in February…
The number of unemployed individuals 16 years and over increased by 223,000 in February, according to the Bureau of Labor Statistics (BLS).
In February, there were 10,459,000 unemployed individuals age 16 and over, which was up 223,000 from January, when there were 10,236,000 unemployed individuals.
Meanwhile, the labor force participation rate continues to sit at a 35 year low, and a staggering 70 percent of all Americans not in the labor force are below the age of 55.
That is outrageous.
And things look particularly depressing when you look at the labor force participation rate for men by themselves.
The truth is that there simply are not enough jobs for everyone anymore.
The chart posted below shows how the percentage of working age Americans that actually have a job has changed since the turn of the millennium. As you can see, the employment-population ratio declined precipitously during the last recession, and it has stayed below 59 percent since late 2009…
If we were going to have a “recovery”, we should have had one by now.
Since there are not enough jobs, what is happening is that more highly educated workers are taking the jobs that were once occupied by less educated workers and bumping them out of the labor force entirely. The following is an excerpt from a recent Bloomberg article…
Recent college graduates are ending up in more low-wage and part-time positions as it’s become harder to find education-level appropriate jobs, according to a January study by the Federal Reserve Bank of New York.
The share of Americans ages 22 to 27 with at least a bachelor’s degree in jobs that don’t require that level of education was 44 percent in 2012, up from 34 percent in 2001, the study found.
Due to the fact that there are not enough middle class jobs to go around, the middle class has been steadily shrinking.
In 2008, 53 percent of all Americans considered themselves to be “middle class”. Today, only 44 percent of all Americans consider themselves to be “middle class”.
That is a pretty significant shift in just six years, don’t you think?
Despite what the politicians and the mainstream media are telling you, the truth is that something is fundamentally wrong with our economy.
On a gut level, most people realize this.
According to one recent survey, only 35 percent of all Americans say that they are better off financially than they were a year ago. And according to a recent NBC News/Wall Street Journal poll, only 28 percent of all Americans believe that this country is moving in the right direction.
The frightening thing is that this is about as good as things are going to get. The next great wave of the economic collapse is approaching, and when it strikes the plight of the middle class is going to get a whole lot worse.
Is the U.S. economy steamrolling toward another recession? Will 2014 turn out to be a major “turning point” when we look back on it? Before we get to the evidence, it is important to note that there are many economists that believe that the United States never actually got out of the last recession. For example, data compiled by John Williams of shadowstats.com show that the U.S. economy has continually been in recession since 2005. So if anyone out there would like to argue that America is experiencing a recession right now, I certainly would not have a problem with that. In fact, that would fit with the daily reality of tens of millions of Americans that are deeply suffering in this harsh economic environment. But no matter whether we are in a “recession” at the moment or not, there are an increasing number of indications that we are rapidly plunging into another major economic slowdown. The following are the top 12 signs that the U.S. economy is heading toward another recession…
#1 We recently learned that the number of new mortgage applications in the United States had fallen to the lowest level that we have seen in nearly 20 years.
“The Affordable Care Act is creating significant financial uncertainty to health care organizations,” said a survey respondent from the health care and social assistance industry.
“With little warning, the negative impact on revenue has been unprecedented.”
#5 Trading revenue at the “too big to fail” banks on Wall Street is way down…
Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) are bracing investors for a fourth straight drop in first-quarter trading, a period of the year when the largest investment banks typically earn the most from that business.
Citigroup finance chief John Gerspach said yesterday his firm expects trading revenue to drop by a “high mid-teens” percentage, less than a week after JPMorgan Chief Executive Officer Jamie Dimon said revenue from equities and fixed income was down about 15 percent. If trading at the nine largest firms slumps that much, it would extend the slide from 2010’s first quarter to 36 percent.
#6 One of the “too big to fail” banks, JPMorgan, is planning to fire “thousands” more workers.
#8 The U.S. economy actually lost 2.87 million jobs during the month of January according to the unadjusted numbers. Over the past decade, the only time the U.S. economy has lost more jobs during the month of January was in 2009 at the peak of the last recession.
#9 In January, real disposable income in the U.S. experienced the largest year over year decline that we have seen since 1974.
#10 Only 35 percent of all Americans say that they are better off financially than they were a year ago.
#12 The economic data show that virtually all of the largest economies on the planet are slowing down right now. The following is from a recent Zero Hedge article…
The last 3 weeks have seen the macro fundamentals of the G-10 major economies collapse at the fastest pace in almost 4 years and almost the biggest slump since Lehman. Despite a plethora of data showing that ‘weather’ is not to blame, US strategists, ‘economists’, and asset-gatherers are sticking to the meme that this is all because of the cold on the east coast of the US (and that means wondrous pent-up demand to come). However, as the New York Times reports, for the earth, it was the 4th warmest January on record.
Meanwhile, things in Ukraine continue to become even more tense, and the Russian government continues to debate how it will respond if the U.S. does end up deciding to hit Russia with economic sanctions.
According to one Russian news source, the Russian parliament is actually considering the confiscation of the property and assets of U.S. businesses in Russia if the U.S. decides to go ahead with economic sanctions against Russia…
The upper house of Russia’s parliament is mulling measures allowing property and assets of European and US companies to be confiscated in the event of sanctions being adopted against Russia over its threatened military intervention in Ukraine.
We are talking about banks, retail chains, mining operations, etc.
U.S. companies have billions invested in Russia, and all of that could be gone in an instant.
So let us certainly hope that economic war between the United States and Russia is averted. Our economy is hurting enough as it is.
But no matter how things with this crisis in Ukraine play out, it looks like hard times are ahead for the U.S. economy.
Unfortunately, most Americans never learned the lessons that they should have learned back in 2008.
They just assume that the federal government and the Federal Reserve have fixed our problems and have everything under control, so they are not preparing for the next great crisis.
In the end, tens of millions of Americans will be absolutely devastated when they get absolutely blindsided by what is coming.