The Economy

U.S. Steel Plants Are Going Idle, But The Fed Continues To Perpetuate The Myth That Everything Is Just Fine

June 19, 2019 by Michael

Even though there is a tremendous amount of evidence to the contrary, the Federal Reserve continues to insist that the U.S. economy is in good shape. On Wednesday, Federal Reserve Chair Jerome Powell told the nation that “the economy has performed relatively well” in 2019 and he insisted that “the baseline outlook is a good one.” Of course he didn’t say anything about our collapsing manufacturing numbers, the worst global trade numbers since the last recession or the “bloodbath” in the U.S. trucking industry. Powell did concede that “the risk of less favorable outcomes has risen”, but other than vague statements like that he really didn’t acknowledge our growing economic problems at all. Considering the fact that Powell has more power over the U.S. economy than anyone else in the entire country, this should deeply concern all of us. To me, Powell’s performance on Wednesday was quite reminiscent of the moment in 2008 when Fed Chair Ben Bernanke told us that the Federal Reserve was not “currently forecasting a recession” after a recession had already begun.

As I have been documenting for weeks, evidence that another major economic downturn has already started can be clearly seen all around us.

For example, we got some very alarming news from the steel industry on Wednesday. When the Trump administration slapped a 25 percent tariff on steel imports last year, that was supposed to greatly help the U.S. steel industry. But instead, a dramatic drop in demand due to this new economic downturn is forcing steel companies to take dramatic measures. According to CNN, U.S. Steel just announced that it will be shutting down a blast furnace in Gary, Indiana and another one that is located just outside of Detroit…

Pain has returned to the US steel industry despite the tariffs put on imported steel last year that were designed to help.

Late Tuesday US Steel announced it will idle two of the blast furnaces where it makes steel, one in its flagship mill in Gary, Indiana, near Chicago, the other in Ecorse, Michigan, near Detroit. The idled furnaces will cut production by about 200,000 tons of steel or more a month, the company said.

“We will resume blast furnace production at one or both idled blast furnaces when market conditions improve,” said the company.

But when will market conditions improve?

In 2020?

After this new economic downturn is over?

Never?

Of course U.S. Steel is not the only steel producer that is hurting right now. In fact, Nucor and Steel Dynamics have both cut profit forecasts…

US Steel’s action follows similar warnings Monday from Nucor, the nation’s largest steelmaker, and Steel Dynamics. Both are now forecasting lower profits. Nucor pointed to weaker demand from the US auto industry.

Sadly, the truth is that major industry after major industry is deeply suffering at this moment…

-Our ongoing “retail apocalypse” is absolutely brutalizing the retail industry, and we are on pace to have the worst year for store closings in our entire history.

-Auto industry sales have been absolutely abysmal, and auto loan delinquencies have shot up to alarmingly high levels.

-The agriculture industry is going to have the worst year it has seen in at least several decades.

-Our 800 billion dollar trucking industry is already in the midst of a “bloodbath”.

-The real estate industry is poised for the worst downturn that we have seen since the subprime mortgage meltdown during the last financial crisis.

-The manufacturing industry has not seen numbers this bad since the last recession, and things are rapidly getting worse.

But yeah, let’s tell the American people that the economy is “booming” and see if they will buy it.

Really?

Let’s get real. The U.S. economy is mired in the worst slump in a decade, and economic conditions continue to deteriorate rapidly. The Federal Reserve could have given us a short-term boost by cutting interest rates on Wednesday, but they decided not to do that…

A divided Federal Reserve held the line on interest rates Wednesday and indicated formally that no cuts are coming in 2019. The decision came amid divisions over what is ahead and still leaves open the possibility that policy loosening could happen before the end of the year depending on how conditions unfold.

The central bank predicts one or two rate cuts in its set of economic predictions, but not until 2020. Despite cautious wording in the post-meeting statement Wednesday, markets are still betting the Fed cuts, as soon as July.

Perhaps they want to save their very limited ammunition for when the recession officially starts, and I can understand that.

But this latest move by the Fed is definitely not going to please President Trump, and it will likely prompt more speculation that Trump would like to demote Powell…

The action sets up a possible confrontation between Fed Chairman Jerome Powell and President Donald Trump, who has been pressuring the Fed to cut rates. Just Tuesday, Trump said “let’s see what he does” at the Fed meeting when asked if he still wants to demote Powell.

At the post-statement news conference, Powell was asked about his future as chairman. “I think the law is clear that I have a four year term, and I fully intend to serve it,” he said.

Trump needs the U.S. economy to be as strong as possible as he heads into an election year.

The stronger the U.S. economy is, the more likely it is that he will be re-elected.

And actually the Federal Reserve may be doing Trump a favor by trying to perpetuate the myth that everything is just fine. Because if the Fed had cut rates on Wednesday, it would have essentially been an admission that a new recession is on our doorstep. As John P. Hussman has aptly pointed out, almost every initial rate cut in history “has been associated with an oncoming or ongoing recession”…

With the exception of 1967 and 1996, every initial Fed rate cut has been associated with an oncoming or ongoing recession. Be careful what you wish for.

So for now, the Fed seems to have adopted a “fake it until you make it” approach, and sometimes that can work.

Unfortunately, I don’t think it is going to work this time. And meanwhile millions upon millions of Americans have been lulled into a false sense of security, and they are not getting prepared for the exceedingly hard times that are coming.

One of my readers recently left a comment in which he stated that what we are facing “is not a drill”, and I believe that he is quite correct.

We haven’t seen economic conditions anything like this since the last recession, and the outlook is getting worse with each passing day.

About the author: Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The End and Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.

They Are Calling This A “Bloodbath” For The $800 Billion Trucking Industry As U.S. Economic Activity Dramatically Declines

June 18, 2019June 18, 2019 by Michael

The U.S. trucking industry has not experienced a downturn of this magnitude since the last financial crisis, and this is one of the clearest signs yet that the U.S. economy is steamrolling into a severe economic downturn. When economic activity is increasing, the trucking industry sees rising demand for their services and freight rates tend to go up. That is precisely what we witnessed in 2018, and truckers were hoping for more of the same in 2019. But when economic activity is on the decline, the trucking industry sees decreasing demand for their services and freight rates tend to go down. Unfortunately, the numbers that the U.S. trucking industry is reporting right now are absolutely abysmal. Freight rates have now fallen for six months in a row on a year-over-year basis, and according to Business Insider during the month of May loads on the spot market fell “by a chilling 62.6%” compared to last year…

This year has been rocky for the $800 billion trucking industry.

After a raucous 2018, 2019 has seen retailers and manufacturers moving less, according to the Cass Freight Index. Freight rates have dipped year-over-year for six months straight. Loads on the spot market, in which retailers and manufacturers buy trucking capacity as they need it rather than through a contract, have fallen by a chilling 62.6% in May year-over-year.

The spot market is where we see the marginal changes in demand most clearly, and what this is telling us is that we are already in a transportation recession.

Of course that is almost certainly putting it too nicely. According to one owner-operator, what we are witnessing right now is nothing short of a “bloodbath”…

The earnings of big and small players alike are getting hit as factory activity continues to decline. The Lexington, Kentucky-based owner-operator Chad Boblett said some truck drivers are seeing a “bloodbath.”

There has been a spate of trucking companies declaring bankruptcy this year, too. The largest was New England Motor Freight, which was No. 19 in its trucking segment. Falcon Transport also shut down this year, abruptly laying off some 550 employees in April.

If demand does not start rebounding really soon, we are going to see many more trucking companies go bankrupt.

And of course it isn’t just trucking companies that are licking their wounds right now. All modes of transportation are down compared to last year, and that is a clear indication that big trouble is ahead for the U.S. economy. According to Wolf Richter, the Cass Freight Index just suffered it’s largest drop “since November 2009″…

Freight shipment volume in the US dropped 6.0% in May compared to May last year, the sixth month in a row of year-over-year declines, and the sharpest year-over-year drop since November 2009, according to the Cass Freight Index for Shipments.

The index tracks shipments of goods for consumer and industrial sectors across all modes of transportation – truck, rail, air, and barge.

What a difference one year can make.

Last year at this time we were in the midst of a trucking boom, and as a result orders for heavy trucks surged to record highs…

In late 2017 and through summer of 2018, freight rates had been driven up by a capacity crunch in the trucking industry, and a panic amid shippers – such as big retailers or industrial companies that need to get their merchandise across the country – that trucking companies won’t be able to keep up with demand.

To meet that demand, truckers went on a buying binge, ordering a record number of Class-8 trucks that now have entered service.

But now that the trucking boom has turned into a trucking bust, we are watching orders for heavy trucks absolutely collapse.

In fact, according to Zero Hedge the number of new orders for heavy trucks in May was down a whopping 70 percent compared to a year ago…

Preliminary North America Class 8 net order data from ACT Research shows that the industry booked just 10,800 units in May, down 27% sequentially, but also lower by an astonishing 70% year-over-year. YTD orders are down 64% compared to the first five months of 2018.

This would not be happening if we had a “booming” economy.

Last year, the Cass Freight Index was showing robust increases month after month because economic activity was definitely rising.

But now the Cass Freight Index has fallen on a year-over-year basis for six months in a row because U.S. economy activity is dropping.

As I noted yesterday, nobody should be attempting to claim that the U.S. economy is in good shape at this point. All of the numbers are definitely pointing in the other direction.

So what does all of this mean for average U.S. consumers?

What it means is that we should all be getting ready to go through another brutal economic downturn. I personally know some people that have already lost their jobs, and a lot more job losses are coming. It doesn’t matter if you have worked your tail off for years and have been the most loyal employee in America. When it comes time for heads to roll, it won’t be the corporate executives with the fat paychecks that are let go.

Someday soon you may be called into the manager’s office without any warning whatsoever and be escorted out of the building 15 minutes later.

That is literally how fast it can happen.

When things started to go bad in 2008, the economic dominoes began to fall very quickly.

We should probably expect a similar scenario this time around.

The “next economic downturn” is already here, and the months ahead promise to be quite “interesting” indeed.

Evidence That The U.S. Economy Could Be Plunging Into A Very Deep Recession Is Rapidly Mounting

June 17, 2019June 17, 2019 by Michael

Not since 2008 have we seen so much bad economic data come rolling in all at the same time. Even without a war with Iran, which by the way is looking increasingly likely with each passing day, it definitely appears that the U.S. economy is steamrolling toward recession territory. The employment numbers for last month were abysmal, global trade has collapsed to the lowest level that we have seen since the last recession, and manufacturing numbers just keep getting worse and worse. In fact, the New York Fed’s Empire State manufacturing index just suffered the worst one month decline in history…

The New York Fed’s Empire State business conditions index took a sharp turn for the worse in June, falling into negative territory for the first time in more than two years.

The Empire State manufacturing index plummeted 26.4 points to negative 8.6 in June, the New York Fed said Monday. That’s a record decline. Economists had expected a reading of positive 10, according to a survey by Econoday.

Not even during the last recession did we witness a plunge of that magnitude.

And other measures of U.S. manufacturing activity are also “sinking steadily”…

And it’s not the only indicator showing a turn for the worse: Others, including the Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey, have also been sinking steadily.

When you step back and look at the big picture, it becomes quite clear what is happening.

At this point, it is simply not possible for anyone to credibly claim that the U.S. economy is still in good shape. All of the numbers are pointing in the same direction, and Morgan Stanley’s chief US equity strategist Michael Wilson made this point exceedingly well on Monday…

Decelerations and disappointments are mounting:

Cass Freight Index

Retailer earnings

Durable goods orders

Capital spending

PMIs

May payrolls

Semiconductor inventories

Oil demand

Restaurant performance indices…

and our own Morgan Stanley Business Conditions Index (MSBCI). Looking at the MSBCI in particular, the headline metric showed the biggest one-month drop in its history going back to 2002 and very close to its lowest absolute reading since December 2008.

This index has a tight relationship with ISM new orders and analyst earnings revisions breadth. Our analysis shows downside risk to ISM new orders (25% y/y), S&P earnings revisions breadth (6-13%) and the S&P 500 y/y (8%) if historical links hold.

For much more on the collapse of the MSBCI, please see my previous article entitled “Morgan Stanley’s Business Conditions Index Just Suffered The Biggest One Month Decline In History”.

Many analysts are pointing out that our economic problems really seemed to start accelerating once trade negotiations with China completely broke down, and this is true.

If the U.S. and China could find a way to reach a trade agreement, that would be a tremendous short-term boost to the economy at a time when we desperately need it.

But that isn’t going to happen unless President Trump completely caves in. Because at this point the Chinese are extremely angry, and they are definitely in no mood to compromise. In fact, one Chinese editorial that was recently published boldly declared that they are ready “to fight it out till the end”…

“China will not be afraid of any threats or pressure the United States is making that may escalate economic and trade frictions. China has no choice, nor escape route, and will just have to fight it out till the end,” the Qiushi commentary said. “No one, no force should underestimate and belittle the steel will of the Chinese people and its strength and tenacity to fight a war.”

When Americans are deeply suffering during the next recession, will they be willing to “fight it out till the end” like the Chinese are?

And if a trade war with China wasn’t enough, now we also have a trade war with India to deal with. In fact, India just hit U.S. exports with a wave of very large tariffs…

India just increased tariffs on US exports, dealing another blow to fragile global trade.

The tariffs on several US products will go into effect on June 16, India’s Finance Ministry said in a statement Saturday. The goods targeted include American apples — which will be hit with a 70% tariff — as well as almonds, lentils and several chemical products.

Of course these tariffs were in retaliation for the tariffs that we hit India with after Trump kicked them out of a preferential trade program…

The two countries exchange goods and services worth about $142 billion a year, but the relationship has soured in recent weeks after the Trump administration ended India’s participation in a preferential trade program earlier this month. The program exempted Indian goods worth more than $6 billion from US import duties in 2018.

We were certainly heading for a recession even without these trade conflicts, but without a doubt they have made things substantially worse.

And now is definitely not a good time for a recession, because much of the country is completely and utterly unprepared for any sort of an economic downturn. The following comes from an opinion piece authored by William Spriggs…

One oft-cited statistic points to just how unstable the finances of most Americans are: nearly 40 percent of households could not withstand an unexpected expenditure of $400 — the cost of just one medical bill or car repair.

The most unnerving point to keep in mind is that we are even less prepared for a sudden slowing of the economy than we were before the Great Recession of 2008.

During the relatively stable economic times of the past few years, Americans should have been preparing instead of partying.

But instead, most Americans bought into the myth that our massively bloated debt-fueled standard of living could be perpetuated indefinitely.

So now a crisis is coming which many believe is going to be even worse than what we experienced in 2008, and most of us are going to be completely blindsided by it.

Morgan Stanley’s Business Conditions Index Just Suffered The Biggest One Month Decline In History

June 13, 2019June 13, 2019 by Michael

We continue to get more indications that U.S. economic conditions are going to deteriorate rapidly during the second half of this year. Yesterday, I reported on a brand new survey which found that 69 percent of U.S. CFOs believe that a recession is coming “by the end of 2020”, and today we learned that Morgan Stanley’s Business Conditions Index has fallen dramatically. In fact, according to CNBC the sudden drop in the index was “the largest one-month decline on record”…

A reading of the economy from Morgan Stanley is signaling “June gloom.”

Morgan Stanley’s Business Conditions Index, which captures turning points in the economy, fell by 32 points in June, to a level of 13 from a level of 45 in May. This drop is the largest one-month decline on record and the lowest level since December 2008 during the financial crisis, according to the firm.

At this point, I really don’t see how anyone can possibly claim that the U.S. economy is doing well. We also just learned that U.S. unemployment claims have now risen for three weeks in a row, and the trade war is clearly beginning to take an immense toll on the economy.

This week, Walmart, Costco and hundreds of other companies jointly sent President Trump a letter that essentially begged him to end this trade war with China. The following comes from CNN…

More than 600 companies and industry trade associations — including Walmart, Costco, Target, Gap, Levi Strauss and Foot Locker — wrote to the White House urging Trump to remove levies on China and end the ongoing trade war.

“We know firsthand that the additional tariffs will have a significant, negative, and long-term impact on American businesses, farmers, families, and the US economy,” the companies said in the letter. “An escalated trade war is not in the country’s best interest, and both sides will lose.”

Of course this is exactly what I have been telling my readers for a long time.

There aren’t going to be any winners in this trade war, and anyone that suggests that there will be is just being delusional.

If there had been a quick resolution to the trade war, large corporations could have perhaps swallowed the increased costs that they are facing. But since it appears that this trade war will be with us for the foreseeable future, big companies are going to be forced to pass those costs on to consumers, and some top executives are openly admitting this…

“At the end of the day, prices will go up on things,” Costco (COST) chief financial officer Richard Galanti told analysts last month. Dollar General (DG) Chief Financial Officer John Garratt also said the company’s low-income shopping base “will be facing higher prices as 2019 progresses.”

If prices go up but our paychecks stay the same, that means that our standard of living is going to go down.

And as I noted yesterday, it is being projected that U.S. corporate earnings will be way down in the second quarter, so the big corporations are definitely suffering as well.

Meanwhile, China is warning of substantial damage to their economy too, and the Chinese Ministry of Commerce just told the press that this trade war could lead to a global recession…

Chinese Ministry of Commerce spokesman Gao Deng told a Beijing press conference on Thursday that “there will be no winner in the trade war, which could cause a recession in the United States and global economies.”

The ministry did not disclose US investment growth in China for the month of May alone, but the plunge seems to have coincided with the collapse of trade talks between Beijing and Washington.

Of course we were almost certainly heading toward a global recession anyway, but the trade war is definitely accelerating our problems.

At this point, global trade has already collapsed to levels not seen since the depths of the last recession. Manufacturing numbers are plunging all over the world, and we just got some brand new numbers from the U.K. that are extremely alarming…

Production output in the UK dropped by 2.7% in April from March, and GDP fell by 0.4% in just one month, according to the latest figures by the Office of National Statistics. The manufacturing sector provided the largest contribution to the downturn, with the manufacturing index plunging 3.9% in April, from March, its biggest monthly fall since June 2002.

June 2002 was 17 years ago.

Not even during the last recession did we witness a monthly decline of that magnitude.

The speed at which the global economy is now deteriorating is breathtaking, and the crisis that so many thought had passed us by could actually be right on the doorstep.

And of course most Americans are completely and utterly unprepared for any sort of an economic crisis. Today, 59 percent of us are living paycheck to paycheck, and a survey that was just released discovered that the financial situation of most Americans has not improved since 2007…

Bankrate surveyed 2,740 adults across the country. Of those surveyed, 2,315 were older than 18 when the recession started.

Among people who were adults before the recession hit, 33 percent said their financial situation is “about the same” as it was before 2007, while 23 percent said their situation is worse.

When you add those two numbers together, you get a total of 56 percent of all Americans that say that their financial situation is either “worse” or “about the same” as it was just before the last recession hit.

That isn’t good, and now another major downturn is here.

But of course most Americans assume that everything is going to be just fine. For most of us, the pain of the last recession is a fading distant memory, and things have been relatively stable for an extended period of time.

So for the moment, most of the population is not too alarmed about what is coming.

Unfortunately, that will soon change in a major way.

“The Skid Is Everywhere”, And We Just Received More Confirmation That The Worst Is Yet To Come

June 7, 2019 by Michael

All over America, large portions of our major cities are being transformed into stomach-churning cesspools of squalor. Thousands of tens cities are popping up from coast to coast as the homeless population explodes, even the New York Times admits that we are facing “the worst drug crisis in American history”, there were more than 28,000 official complaints about human feces in the streets of San Francisco last year alone, and millions of rats are currently overrunning the city of Los Angeles. And yet the authorities continue to insist that the economy is in good shape and that everything is going to be just fine.

Perhaps everything may seem “just fine” if you live in a heavily sanitized wealthy suburban neighborhood and you only get your news from heavily sanitized corporate media sources, but in the real world things are getting really bad.

The other day, LZ Granderson authored an editorial in which he described what life is like in Los Angeles right at this moment…

LA spent nearly $620 million in tax dollars last year to address the issue, and yet the number of homeless people increased by 16%, reaching nearly 60,000 people.

As a Los Angeles resident, I am among those who wonder what the mayor’s office is doing. When I lived downtown it was virtually impossible to walk a full block in any direction without seeing a homeless person. In Silver Lake where I live now, there are tent cities. On my drive to work I see people living underneath the highway overpasses. It’s no longer Skid Row here. The skid is everywhere.

Of course that phrase, “the skid is everywhere”, could also apply to San Francisco, Portland, Seattle, Denver, Minneapolis, Chicago, Detroit, St. Louis, Memphis, Cleveland, Baltimore, Philadelphia and countless other U.S. cities.

But without a doubt, L.A. is particularly disgusting at this point. In fact, last weekend a columnist for the Los Angeles Times admitted that “Los Angeles has become a giant trash receptacle”…

A swath of Los Angeles has devolved into a wasteland with rats scurrying among piles of decaying garbage and squalid tent cities, according to a series of stomach-churning photos that the Los Angeles Times says depict the “collapse of a city that’s lost control.”

“The city of Los Angeles has become a giant trash receptacle,” columnist Steve Lopez complained on Sunday.

We are seeing this happen at a time when we are being told that the U.S. economy is still relatively stable.

And I will concede that point. Right now, the U.S. economy is a whole lot more stable than it will be in the months ahead.

So if things are this bad already in our major cities, what are those cities going to look like once we get deep into the next economic downturn?

On Friday, the Labor Department reported that 75,000 jobs were added to the U.S. economy in May. That number is consistent with the extremely disappointing figure that ADP reported a few days earlier, and it is well below the number of jobs that we need just to keep up with population growth each month.

Prior to this latest report, there were already more working age Americans without a job than at any point during the last recession, and now things just got even worse.

But the government conveniently categorizes the vast majority of working age Americans without a job as “not in the labor force”, and so officially the unemployment rate is “very low” right now.

What a joke.

The truth is that the middle class has been steadily shrinking for an extended period of time, and all of the numbers that have been rolling in seem to indicate that an economic slowdown has begun.

For instance, when economic activity is expanding demand for key industrial resources such as copper, zinc and lumber increases and prices tend to go up.

But when economic activity is contracting, demand for those key industrial resources diminishes and prices tend to go down.

And right now we are seeing prices for copper, zinc and lumber decline precipitiously…

Copper prices have fallen 6% in just the past month while zinc is down 8.5%. Copper and zinc are big components for many industrial and technology companies. People pay so much attention to copper as a barometer that traders jokingly call it Dr. Copper, as if it has a PhD in economics.

Lumber prices are falling as well, plunging about 10% in the past month. That could be viewed as a sign that the housing market — particularly new home construction — is weakening.

If you were looking for some exceedingly clear indications of where the U.S. economy is heading in the near future, you just got them.

But most Americans will continue to live in denial until the very end. And even though 59 percent of the population is living paycheck to paycheck, people continue to rack up debt as if there was no tomorrow.

In fact, we just learned that the average size of a new vehicle loan in the U.S. just hit a brand new record high…

People buying a new vehicle are borrowing more and paying more each month for their auto loan.

Experian, which tracks millions of auto loans each month, said the average amount borrowed to buy a new vehicle hit a record $32,187 in the first quarter. The average used-vehicle loan also hit a record, $20,137.

People ask me all the time about how they can prepare for the next economic downturn, and one of the key pieces of advice that I always give is to not take on more debt.

Right now everyone should be building up their financial cushions, because what is coming is not a joke.

Unfortunately, most Americans are still completely in denial about what is happening, and they will find themselves ill-prepared to handle the very harsh economic environment that is ahead.

This Wasn’t Supposed To Happen: U.S. Employment Growth Just Plunged To The Lowest Level In 9 Years

June 5, 2019 by Michael

If the U.S. economy was heading into a recession, we would expect to see a slowdown in the employment numbers, and that is precisely what is happening. According to payroll processing firm ADP, the U.S. economy only added 27,000 new jobs in May, and that is way below the number that is needed just to keep up with population growth. Of course some in the mainstream media are attempting to put a positive spin on this, but there really is no denying that this is a truly awful number. In fact, we have not seen a number this bad in more than 9 years…

Job creation skidded to a near-halt in May in another sign that the U.S. economic momentum is slowing.

Companies added just 27,000 new positions during the month, according to a report Wednesday from payroll processing firm ADP and Moody’s Analytics that was well below Dow Jones estimates of 173,000.

The reading was the worst since around the time the economic expansion began and the jobs market bottomed in March 2010 with a loss of 113,000.

9 years is a very long time, but this terrible employment number is perfectly consistent with all of the other horrible economic numbers that have been rolling in lately.

Time after time in recent weeks I have been using phrases such as “since the last recession” to describe what we are witnessing. The U.S. economy has not been in such rough shape in nearly a decade, and things just keep getting worse.

So how did Wall Street respond to the latest employment news?

Actually, stock prices surged, because investors are super excited about the prospect that the Federal Reserve could soon lower interest rates…

Stocks added to strong week-to-date performance on Wednesday as investors grew even more confident that the Federal Reserve will lower interest rates this year to reignite an economy wounded by trade battles.

The Dow Jones Industrial Average rose 207.39 points to 25,539.57, while the S&P 500 advanced 0.8% to 2,826.15. The Nasdaq Composite closed 0.6% higher at 7,575.48.

Pushing interest rates all the way to the floor certainly helped the stock market recover after the last recession, but this time around there is a major twist.

The U.S. is currently engaged in a major trade war with China, and the normal tools that the Fed utilizes may not be powerful enough to overcome the negative effects of such a conflict.

And to make things worse, now the U.S. is also starting a trade war with Mexico. On Wednesday, President Trump made it clear that “not nearly enough” progress had been achieved during negotiations with Mexican officials…

President Donald Trump said “not nearly enough” progress was made in talks with Mexico to mitigate the flow of undocumented migrants and illegal drugs, raising the likelihood that the U.S. will follow through with tariffs next week.

So tariffs will be slapped on Mexican goods starting on Monday, and President Trump seems quite excited about this…

“If no agreement is reached, Tariffs at the 5% level will begin on Monday, with monthly increases as per schedule,” Trump tweeted Wednesday. “The higher the Tariffs go, the higher the number of companies that will move back to the USA!”

Of course the Mexicans will almost certainly retaliate, and both countries will start seeing higher prices and significant job losses.

In fact, one study has concluded that the U.S. economy could lose more than 400,000 jobs as a result of these tariffs on Mexico. The following comes from CNN…

If the 5% US tariff on all goods from Mexico takes effect and is maintained, more than 400,000 jobs in the United States could be lost, an analysis released this week found.

The tariffs on Mexico, set to go in effect on Monday, would cost Texas alone more than 117,000 jobs, according to the analysis by The Perryman Group, an economic consulting firm. Texas is Mexico’s largest export market, making the two economies closely intertwined.

And the truth is that those numbers could actually be on the low side.

According to Marc Thiessen, a trade war with Mexico would literally put millions of U.S. jobs at risk…

Indeed, Mexican tariffs could be even more devastating for Americans than those imposed on China. Deutsche Bank estimates the tariffs could raise the average price of automobiles sold in the United States by $1,300. Indeed, U.S. and Mexican auto-supply chains are so deeply integrated that many parts cross the border multiple times before they end up in a finished vehicle — which means they would be hit by tariffs multiple times, compounding costs. Ten million U.S. workers’ jobs depend on this supply chain; tariffs would put those jobs at risk, including those of the “forgotten Americans” in the industrial Midwest whose jobs Trump vowed to protect.

We shall see what happens, but the outlook for the U.S. economy for the rest of this year is not good at all, and beyond that things look exceedingly grim.

Hopefully I am wrong, but it certainly appears that a major economic downturn is developing just in time for the 2020 presidential election.

There is one more thing that I would like to mention before I wrap up this article. This week, a Russian news source reported that Russia and China “will sign an agreement” regarding the use of their own national currencies in bilateral trade with one another…

Russia and China will sign an agreement on possible payments in national currencies. A decree of the Russian government on signing of a relevant agreement with the Chinese side was released on the official portal of legal information on Wednesday.

According to the draft decree approved through that government document, “settlements and payments for goods, service and direct investments between economic entities of the Russian Federation and the People’s Republic of China are made in accordance with the international practice and the legislation of the sides’ states with the use of foreign currency, the Russian currency (rubles) and the Chinese currency (yuan).”

In other words, they are dumping the dollar in favor of their own national currencies when trading with each other. This is a direct threat to the international dominance of the U.S. dollar, and other countries have been discussing similar moves.

For decades, the U.S. dollar has essentially been a global currency. More dollars are actually used outside of the United States than within this country, and most Americans don’t realize that.

This has given us some enormous advantages in the global marketplace, and it could be just a matter of time before those advantages begin to disappear.

Things that used to take months or years to happen are now happening in a matter of days. The pace of change is really picking up, and right now the momentum of events is heading in a direction that is definitely not favorable to the United States.

Goodbye Middle Class: The Percentage Of Wealth Owned By The Top 10% Just Got Even BIGGER

June 4, 2019June 4, 2019 by Michael

The middle class in America is being systematically eviscerated, and it is getting worse with each passing year. As you will see below, one new study has found that 10 percent of Americans now own 70 percent of all the wealth. Once upon a time, the United States had the largest and most vibrant middle class in the history of the world, but pretty soon we are just going to have the ultra-wealthy and everyone else. Our system has been designed to funnel as much wealth as possible to the very top of the financial pyramid, and that means that most of the rest of us are deeply struggling. And when you are just barely getting by from month to month, all it takes is one bad break to knock you completely out of the middle class and into poverty.

I have been chronicling the demise of the middle class for many years, but I didn’t know that the numbers had gotten this bad. According to a study that was recently conducted by the Federal Reserve, the percentage of wealth controlled by the top 10 percent of U.S. households has shot up from 60 percent in 1989 to 70 percent today…

Deutsche Bank’s Torsten Sløk says that the distribution of household wealth in America has become even more disproportionate over the past decade, with the richest 10% of U.S. households representing 70% of all U.S. wealth in 2018, compared with 60% in 1989, according to a recent study by researchers at the Federal Reserve.

The study finds that the share of wealth among the richest 1% increased to 32% from 23% over the same period.

The ironic thing is that the Federal Reserve has actually done much to cause this high concentration of wealth among the elite. In response to the last financial crisis, the Federal Reserve pumped unprecedented amounts of money into the financial system, and this has created the greatest stock market bubble in our history…

The Dow Jones Industrial Average DJIA, +2.06% has climbed nearly 300% since its closing low in March 2009, the S&P 500 index SPX, +2.14% has climbed 325%, while the Nasdaq Composite Index COMP, +2.65% has soared 535% over the same period.

Meanwhile, wages have stagnated for ordinary Americans. According to the Social Security Administration, the median yearly wage in the United States is currently just $30,533. In other words, 50 percent of all American workers make at least that much per year, and 50 percent of all American workers make that much or less per year.

$30,533 a year breaks down to approximately $2,500 per month, and you simply can’t support a middle class lifestyle for a typical American family on $2,500 a month.

Meanwhile, the cost of living for middle class families has exploded higher over the past few decades…

Everyday expenses continue to rise, and as the shadow inflation increases, it also threatens to wipe out the middle class – what’s left of it anyway. In fact, middle-class life is now 30% more expensive than it was 20 years ago, according to a separate report by CNBC. The cost of things such as college, housing, and child care has risen precipitously: Tuition at public universities doubled between 1996 and 2016 and housing prices in popular cities have quadrupled, Alissa Quart, author and executive director of the Economic Hardship Reporting Project, tells CNBC Make It.

As the cost of living has risen faster than our incomes have, more Americans have been squeezed out of the middle class with each passing month.

As a result, an increasing number of Americans have become financially dependent on the government, and our rapidly expanding welfare state is a big reason why the federal government is now 22 trillion dollars in debt.

Of course many Americans are no longer able to make it at all, and the ranks of the homeless are swelling all over the nation. In fact, we just got some brand new numbers about the growth of homelessness in the Los Angeles area that are absolutely eye-popping…

The number of homeless people counted across Los Angeles County jumped 12% over the past year to nearly 59,000, with more young and old residents and families on the streets, officials said Tuesday.

The majority of the homeless were found within the city of Los Angeles, which saw a 16% increase to 36,300, the Los Angeles Homeless Services Authority said in presenting January’s annual count to the county Board of Supervisors.

Yes, it is true that we have a record number of millionaires on the west coast in 2019, but meanwhile our major west coast cities are being transformed into rotting, decaying nightmares right in front of our eyes.

During a recent interview with Laura Ingraham, Dr. Drew Pinsky admitted that there is “a complete breakdown of the basic needs of civilization in Los Angeles right now”…

“We have a complete breakdown of the basic needs of civilization in Los Angeles right now,” Pinsky told host Laura Ingraham. “We have the three prongs of airborne disease, tuberculosis is exploding, (and) rodent-borne. We are one of the only cities in the country that doesn’t have a rodent control program, and sanitation has broken down.”

Pinsky’s comments followed news that Los Angeles police officer had contracted typhoid fever, a rare and life-threatening illness that fewer than 350 Americans contract each year.

Los Angeles had a typhus outbreak last summer and will likely have another this summer, Pinsky said. Meanwhile, bubonic plague – a pandemic that killed tens of millions of people during the 14th century – is “likely” already present in Los Angeles, Pinsky added.

Despite all of our great wealth and despite all of our advanced technology, this is what life is like in our second largest city right now.

And if things are degenerating this badly during stable times, what are things going to look like once our society plunges into chaos?

Ultimately, the American Dream is about being self-sufficient. Most people want to be able to work hard and provide a nice life for their families, but that is becoming harder and harder to do.

No matter which political party has been in power in Washington, the middle class has continued to shrink and more wealth and power has become concentrated in the hands of the elite.

Now we stand on the precipice of the next major economic downturn, and many are deeply concerned about what that is going to mean for the future of our society.

Economic Chaos Erupts! – Global Manufacturing Plunges, The Trade War Expands And The Nasdaq Enters Correction Territory

June 3, 2019 by Michael

The global economic slowdown is really starting to accelerate. Just within the past few days, we have gotten more really awful global manufacturing numbers, the trade war has expanded to more nations, and the Nasdaq has officially entered correction territory. We have not witnessed this sort of global economic environment since the Great Recession, and if the economic chaos continues to escalate it won’t take too much to spark a brand new financial crisis. Of course the global financial system is far more vulnerable than it was back in 2008, and so if we stay on the path that we are currently on we could be facing a nightmare scenario very rapidly.

Let’s talk about the manufacturing numbers first. The numbers coming out of Germany are already at a crisis level, and manufacturing is also now contracting in Japan, South Korea and China as well.

Overall, global manufacturing as a whole has now fallen into contraction territory for the first time in seven years…

Global manufacturing was the weakest since 2012 last month, a victim of mounting trade tensions and further reason to worry that the world economy is weakening.

With softness in Germany, Japan, the U.K. — as well as the lowest U.S. result in a decade — IHS Markit’s global Purchasing Managers Index fell to 49.8 in May, below the 50 level that divides expansion from contraction.

The reports underscore the growing threat posed by the escalating U.S.-China trade war, and they coincided with a fresh warning from Wall Street about recession risks.

The reason why so many people are freaking out about these numbers is because this is exactly what we would expect to see if we were entering a global recession.

Meanwhile, global financial markets are looking increasingly shaky. On Monday, the Nasdaq fell another 120 points and it has now officially entered correction territory…

Stocks ended mostly lower Monday, June’s first day of trading, amid reports that the U.S. government is planning to target a host of big tech companies with antitrust and business practice probes. Shares of Alphabet, Amazon, Facebook and Apple all weighed on the market during Monday’s session.

The Nasdaq dropped 1.6% to enter correction territory, closing more than 10% below its record high set in late April.

The term “correction territory” might not mean a lot to many of you, so let me put what is happening in terms you may understand.

On Monday alone, America’s most prominent tech stocks lost approximately 150 billion dollars in value. It looks like the Trump administration is getting ready to go to war with the big tech companies, and that is really, really bad news for tech investors. The following comes from Breitbart…

The Masters of the Universe got hit hard by investors on Monday. Like $150 billion hard.

Shares of the top tech giants fell sharply on Monday after reports that U.S. antitrust regulators had divided up oversight of the sector, with the Department of Justice assuming responsibility for Alphabet and Apple and the Federal Trade Commission taking on Facebook and Amazon. This triggered fears that the government could mount challenges to the business models of the companies.

Shares of Alphabet dived 6.1 percent on Monday after the Wall Street Journal reported that the Justice Department is in the early stage of preparing an antitrust probe of the company. Reuters reported that the Department of Justice is also looking into Apple’s business for possible antitrust violations.

Speaking of war, our trade conflict with China continues to escalate. The mainstream media hasn’t been talking much about it, but apparently the Chinese have decided to put purchases of U.S. soybeans “on hold” until a trade agreement is reached…

China, the world’s largest soybean buyer, has put purchases of American supplies on hold after the trade war between Washington and Beijing escalated, according to people familiar with the matter.

State-grain buyers haven’t received any further orders to continue with the so-called goodwill buying and don’t expect that to happen given the lack of agreement in trade negotiations, said the people, who asked not to be named because the information is private.

U.S. soybean farmers have been sitting on unprecedented amounts of soybeans in hopes that an end to the trade war would raise prices.

But instead, demand for U.S. soybeans is going to go through the floor, and this could potentially force thousands of soybean farmers into bankruptcy.

And in addition to our trade war with China, the Trump administration has apparently decided that now is a good time to start a trade war with Mexico…

From produce to cars, a wide variety of Mexican goods could become more expensive if Trump follows through on his threat to hit Mexican imports with tariffs that soon could climb to 25%. Trump wants to pressure Mexico into doing more to halt the flow of Central American migrants to the U.S. via the Mexican border.

The tariffs, set to begin June 10, would gradually climb to 25% on Oct. 1 if Mexico doesn’t take steps “to dramatically reduce or eliminate” the number of migrants, Trump said Thursday. Such a strategy would hurt American shoppers, the economy and stocks, experts say, just as U.S. growth is slowing and the threat of more tariffs on Chinese imports looms larger.

At least in this case the U.S. and Mexico are still talking, and so perhaps some kind of resolution can be reached.

On top of everything else, the Trump administration has also just decided to add India to the trade war as well…

Mr. Trump on Friday said India would be removed from the U.S.’s privileged-trading program called the Generalized System of Preferences on Wednesday. Under the decadeslong program meant for some developing economies, the U.S. had allowed India to avoid tariffs on certain exports to the U.S. in the interest of promoting tighter trade ties and development.

India, the U.S.’s ninth-largest trading partner, is a top beneficiary of the GSP program. Mr. Trump’s move will add tariffs of as much as 7% on Indian exports of goods like chemicals, auto parts and tableware to the U.S., which in 2018 accounted for more than 11%, or $6.3 billion, of India’s total exports of goods valued at $54.4 billion, according to the Congressional Research Service, a research agency for the U.S. Congress.

A global trade war is going to be incredibly painful for everyone, and this is all happening at a time when the global economy was already starting to slow down substantially.

Here in the United States, a lot of businesses are really starting to notice a big decline in economic activity. Here is just one example that was published on Zero Hedge earlier today…

Down here, in Texas, I am seeing a big drop in economic activity over the last 6 months. Our healthcare businesses’ volume over this period is at 629, down from 770, year-on-year, almost a 20% decline, and the worst six month decline in our 15 year history. We have been pulling out all of the stops for business development, cutting overhead, and running all the QC traps to determine if it is something within our business, within our local market, within our industry, or having to do with the economy in general.

In this period, we have seen seven competitors go out of business in our city. We have recently confirmed similar experiences with colleagues in Kentucky, Colorado, and elsewhere in Texas. One of them asked me, “If this is not temporary, what would the strategy be?” My response was, “Hunker in the bunker and wait for everyone else to die.”

This is what we have all been preparing for, and things are going to get progressively tougher in the months ahead.

Unfortunately, most Americans are completely and totally clueless about what is ahead. Today, 59 percent of all Americans are living paycheck to paycheck, and the truth is that the vast majority of us are entirely unprepared to go through another recession.

And of course many believe that what we are facing is going to be much worse than just a “recession”. A perfect storm is rapidly coming together, and the chaos that we have seen so far is nothing compared to what is rapidly approaching.

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