Economic Fundamentals

The Trump Administration Is Warning That The U.S. Economy May Not Grow At All During The First Quarter Of 2019

January 23, 2019January 23, 2019 by Michael

This government shutdown is really starting to take a toll on the U.S. economy. On Wednesday, the chair of the White House Council of Economic Advisers made an absolutely stunning admission. We all knew that the global economy was slowing down, and we all knew that U.S. economic activity was beginning to sputter, but up until this week the Trump administration had always insisted that we are not heading for a recession. Well, all of that changed on Wednesday when Kevin Hassett publicly admitted that we could end up with zero GDP growth during the first quarter of 2019…

A top economic adviser to President Donald Trump told CNN on Wednesday that the US economy may show no growth in the first quarter if the federal government shutdown lasts much longer.

White House Council of Economic Advisers Chairman Kevin Hassett said in an interview with CNN’s Poppy Harlow that he was not overly worried about the long-term effects of a government shutdown. But after Harlow asked him if the United States could wind up with zero GDP growth this quarter, he conceded that it was possible. “We could, yes,” he said.

With much of the government currently closed, and with no end to the shutdown in sight, it is inevitable that the economic numbers for the first quarter are not going to look as good as they could have been.

But if this shutdown lasts for the entire quarter, that could easily push us into an economic contraction, and that would send shockwaves all over the planet.

And at this point there is definitely a possibility that this shutdown could go on for a couple more months. Neither side intends to give in, and things are starting to get very personal. On Wednesday, Nancy Pelosi made it exceedingly clear that she will not allow President Trump to deliver the State of the Union address at the U.S. Capitol until the shutdown ends under any circumstances…

House Speaker Nancy Pelosi dug in Wednesday on her call to delay the State of the Union address even after President Trump vowed to proceed with the speech next week, sending a curt letter making clear she will not allow the event to take place during the government shutdown.

Reacting to Pelosi’s letter, Trump told reporters at the White House “we’ll do something in the alternative,” suggesting a speech of some kind will still happen next week.

This truly is unprecedented.

Donald Trump is the very first president in all of U.S. history to be “disinvited” from delivering the State of the Union address.

And the hundreds of thousands of federal workers that are not receiving paychecks right now are really starting to get restless. A lot of them have been living paycheck to paycheck, and so missing a couple of paychecks is a really, really big deal to those people. As Marketwatch recently noted, some of them are actually “turning to food banks to feed their families”…

Within just a few weeks into the government shutdown, people are struggling to cope. We hear stories about people turning to food banks to feed their families. We hear stories about people who are in dire straits because they can’t get loans. We hear stories about people who can’t pay their mortgages. That’s not even one month into the shutdown.

If something this minor can cause such widespread pain and suffering, what would we see if a real crisis actually hit this nation?

Of course the truth is that most Americans are simply not prepared to handle much of anything, and this is a point that Mac Slavo made quite well in one of his most recent articles…

Almost 60% of Americans have less than $1000 in savings for a rainy day fund or an immediate emergency. It’s been ten years since the Great Recession left many Americans jobless with no money, and it appears most have learned nothing. The government shutdown serves as a painful warning and preview for what will happen once unemployment rises from 50-year lows. Americans are far too dependent on others, including the government, for their survival.

For now, many that are struggling financially due to this shutdown are trying to bridge the gap by going into more debt.

And if the shutdown doesn’t last too much longer, that might work for a lot of people.

But it is very dangerous to go into too much debt, and a large portion of the country has already crossed that line. For example, one recent survey discovered that approximately a third of all Americans are “afraid they’ll max out their credit card when making a large purchase”…

Despite the dangers of high-interest loans, more consumers are testing the limits of plastic.

To that point, more than 1 in 3 people —or 86 million Americans — said they’re afraid they’ll max out their credit card when making a large purchase, according to a new WalletHub credit cards survey. (Most of those polled considered a large purchase as anything over $100.)

The only easy way out of this government shutdown would be for one of the two sides to completely fold, and that would be politically disastrous for whoever decides to do that.

The battle lines have been drawn, and this political game of chicken is going to go on until somebody blinks.

And if nobody blinks for a couple more months, the economic consequences of this government shutdown are likely to be quite severe.

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 all over the nation. 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.

Stocks Plunge, Consumer Pessimism Grows And U.S. Home Sales Just Hit Their Lowest Level In 3 Years

January 22, 2019January 22, 2019 by Michael

It appears to be more likely than ever that the U.S. economy is heading for a recession. On Tuesday, the Dow Jones Industrial Average was down 301 points as investors were rattled by several very important pieces of news. Back in 2008, home sales began to fall precipitously just prior to the financial crisis in the second half of that year, and now it is happening again. Of course home sales are always going up and down, but the numbers that we are seeing now are definitely very unusual. According to the National Association of Realtors, existing home sales just hit their lowest level in 3 years…

U.S. home sales tumbled to their lowest level in three years last month and house price increases slowed sharply, suggesting a further loss of momentum in the housing market.

The National Association of Realtors said on Tuesday existing home sales declined 6.4 percent to a seasonally adjusted annual rate of 4.99 million units last month — the lowest level since November 2015.

And when you compare December 2018 to December 2017, the numbers look even worse. According to Wolf Richter, last month existing home sales were down 10.3 percent on a year over year basis…

Sales of “existing homes” — including single-family houses, townhouses, condos, and co-ops — in December, plunged 10.3% from a year earlier, to a seasonally adjusted annual rate (SAAR) of 4.99 million homes, according to the National Association of Realtors this morning. This was the biggest year-over-year drop since May 2011, during the throes of Housing Bust 1

Those are absolutely horrible numbers, but thanks to high interest rates they aren’t going to get much better any time soon. Just like a decade ago, this is going to be a very tough time to be in the real estate industry.

During the “boom years”, the west was the hottest region for real estate in the entire nation, but now it is leading the way down. And last month was just abysmal, with sales falling 15 percent in that portion of the country…

Northeast: -6.8%, to an annual rate of 690,000.
Midwest: -10.5%, to an annual rate of 1.19 million.
South: -5.4%, to an annual rate of 2.09 million.
West: -15.0%, to an annual rate of 1.02 million.

Unfortunately, these are exactly the kinds of numbers that we would expect to see if the U.S. economy was heading into a recession.

Investors were also rattled on Tuesday by news that trade talks between the U.S. and China seem to be breaking down…

Stocks fell to their lows of the day after the Financial Times reported the U.S. canceled a trade meeting with Chinese officials. CNBC later confirmed the report through a source. White House economic advisor Larry Kudlow denied the reports, saying the meetings are not canceled, giving stocks a boost into the close. China and the U.S. are trying to strike a permanent trade deal with the U.S. Both countries have been in a trade war since last year, slapping tariffs on billions of dollars worth of their goods.

We’ll see what happens, but the Chinese appear to be dragging their feet, and it does not look like there will be a major trade agreement between the two sides any time soon.

And when you throw in the fact that we are in the midst of the longest government shutdown in all of U.S. history, it becomes exceedingly clear that the elements for a “perfect storm” are definitely coming together.

In fact, Peter Schiff is entirely convinced that the coming recession is already “a done deal”…

“And they think simply because the Federal Reserve is no longer hiking rates that they no longer have to worry about the Fed pushing the economy into a recession. Well, it’s too late for that. The rate hikes of the past have already guaranteed that the economy is headed for recession. It doesn’t matter whether they continue to raise rates in the future. The recession is a done deal. It’s just now you have that calm between the storm while investors are still clueless and haven’t yet connected those, what should be, very obvious dots.“

When the next recession comes, you will know who to blame. Every time the Federal Reserve has engaged in a rate hiking program since World War II, it has always ended in either a recession or a stock market crash. The Fed is the reason why the U.S. economy has been on a roller coaster ride for decades, and now we are steamrolling directly toward the “bust” portion of this cycle. If we ever want to end this madness, we need to abolish the Fed, and that means that we need to send people to Congress that are willing to take action on these things.

Sadly, it is probably going to take a major collapse before abolishing the Fed becomes a big political issue again. Economic issues have been on the back burner for a while, but that may be about to change, because pessimism about the economy is growing. According to Gallup, the percentage of Americans that believe economic conditions are worsening has risen by 12 points over the past two months…

Americans are not feeling very confident about the economy these days.

Almost half (48%) of Americans say economic conditions are worsening, up from 45% in December and 36% in November, according to a recent poll by Gallup, a Washington, D.C.-based research and consulting firm.

This is more evidence of the national psychological shift that I have been talking about. People are starting to realize what is happening, and they are becoming deeply concerned about what the future holds.

Well, the truth is that things are going to get a lot tougher. But instead of getting down in the dumps about it, we need to prepare for what is ahead, and we need to be ready to implement some positive solutions in the aftermath of the coming crisis.

Much Worse Than Expected: Experts Shocked As New Home Sales Plunge 8.9 Percent

November 28, 2018November 28, 2018 by Michael

The U.S. economy is definitely deviating from the script, and we just got more evidence that “Housing Bubble 2” is bursting. Experts were expecting that new home sales in the U.S. would rise in October, but instead they plunged 8.9 percent. That number is far worse than anyone was projecting, and many in the real estate industry are really starting to freak out. And to be honest, things look like they are going to get even worse in 2019. One survey found that the percentage of Americans that plan to buy a home over the next 12 months has fallen by about half during the past year. Mortgage rates have steadily risen as the Federal Reserve has been hiking interest rates, and at this point most average Americans have been completely priced out of the market. Home prices are going to have to come way down from where they are right now, and just as we witnessed in 2008, rapidly falling home prices can put an extraordinary amount of stress on the financial system.

It is hard for me to put into words just how bad this latest number is. Even though I write about our growing economic problems on a daily basis, even I didn’t expect to see a number anywhere near this bad. Sometimes a really bad number from one part of the U.S. can drag down the overall number, but that wasn’t the case this time. According to Reuters, there were “sharp declines in all four regions”…

Sales of new U.S. single-family homes tumbled to a more than 2-1/2-year low in October amid sharp declines in all four regions, further evidence that higher mortgage rates were hurting the housing market.

The Commerce Department said on Wednesday new home sales dropped 8.9 percent to a seasonally adjusted annual rate of 544,000 units last month. That was the lowest level since March 2016. The percent drop was the biggest since December 2017.

But of course it isn’t as if this latest report is coming out of nowhere. The truth is that new home sales have fallen in four of the last six months, and so a very clear trend is now developing.

Sadly, most mainstream economists still don’t seem to be understanding what is happening. According to Reuters, the consensus estimate was that we would see new home sales rise 3.7 percent in October, and so an 8.9 percent plunge came as a real shock.

New home sales have now missed expectations for seven months in a row, and the similarities to 2008 are starting to become undeniable.

Sales of previously owned homes have been falling as well. In fact, in October we witnessed the largest drop for previously owned home sales in four years…

Sales of previously owned U.S. homes posted their largest annual decline since 2014 in October, as the housing market continues to sputter due to higher mortgage rates that are reducing home affordability.

If you want to blame someone for this mess, blame the Federal Reserve.

They created a “boom” in the housing market by pushing interest rates all the way to the floor during the Obama years, and now they are creating a “bust” by aggressively jacking up interest rates at a pace that our economy simply cannot handle.

If we had allowed the free market to be setting interest rates all this time, we would not be on such a roller coaster ride.

Just like during “Housing Bubble 1”, millions of Americans have been buying houses that they cannot afford, and that could mean another massive wave of mortgage defaults as this new economic downturn intensifies. At this point, the debt to income ratio for mortgages insured by the FHA is at an all-time record high…

One worrying indicator: The average debt-to-income ratio for mortgages insured by the Federal Housing Administration, which makes up about 22% of the housing market, is now at its highest level ever.

This is yet another indication that we are even more vulnerable than we were just prior to the subprime mortgage meltdown during the last financial crisis.

Let me try to shed some light on what is coming next. Even if economic conditions remained stable, housing prices would need to start falling dramatically in order to attract buyers. In fact, we are already starting to see this happen in southern California and other markets that were once extremely “hot”. As housing prices fall, millions of Americans will suddenly find themselves “underwater” on their mortgages. In other words, they will owe more on their homes than their homes are worth. During the last recession, many “underwater” homeowners ultimately decided to walk away rather than continue to service ridiculously bloated mortgages.

But the truth is that economic conditions are not likely to remain stable. In fact, many are projecting that the approaching downturn will be even worse than 2008.

In such a scenario, millions of Americans will lose their jobs, and that means that millions of Americans will suddenly not be able to make their mortgage payments. As a result, mortgage defaults will skyrocket and home prices will drop like a rock. Just like last time around, there could be people that wake up one day and realize that they owe two or three times as much money on their mortgages as their homes are currently worth, and the stampede of people walking away from “underwater” mortgages could become an avalanche.

Needless to say, millions of mortgages suddenly going bad is a scenario that our financial system is not equipped to handle. What happened in 2008 was absolutely catastrophic for our large financial institutions, and what is coming is going to be even worse.

Of course the big financial institutions will want the federal government to bail them out, but there may not be much of an appetite for more corporate bailouts this time around.

And considering the fact that we are already 22 trillion dollars in debt, we can’t exactly afford to be throwing money around.

The Federal Reserve has set the stage for a giant mess, and it is going to shake the housing industry to the core.

We should have learned from the mistakes that we made in 2008, but we didn’t, and so now we are going to pay a very great price for our negligence.

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

In California, Home Sales Are Plunging Like It Is 2008 All Over Again

November 1, 2018November 1, 2018 by Michael

What goes up must eventually come down. For years, the California housing market was on the cutting edge of “Housing Bubble 2” as we witnessed home prices in the state soar to absolutely absurd levels. In fact, it got so bad that a burned down house in Silicon Valley sold for $900,000 earlier this year, and a condemned home in Fremont sold for $1.2 million. But now things have changed in a major way. The hottest real estate markets in the entire country led the way down during the collapse of “Housing Bubble 1”, and now it looks like the same thing is going to be true for the sequel.

According to CNBC, the number of new and existing homes sold in southern California was down 18 percent in September compared to a year ago…

The number of new and existing houses and condominiums sold during the month plummeted nearly 18 percent compared with September 2017, according to CoreLogic. That was the slowest September pace since 2007, when the national housing and mortgage crisis was hitting.

Sales have been falling on an annual basis for much of this year, but this was the biggest annual drop for any month in almost eight years. It was also more than twice the annual drop seen in August.

Those numbers are staggering.

And it is interesting to note that sales of new homes are being hit even harder than sales of existing homes…

Sales of newly built homes are suffering more than sales of existing homes, likely because fewer are being built compared with historical production levels. Newly built homes also come at a price premium. Sales of newly built homes were 47 percent below the September average dating back to 1988, while sales of existing homes were 22 percent below their long-term average.

At one time, San Diego County was a blazing hot real estate market, but now the market has turned completely around.

In fact, the county just registered the fewest number of home sales in a month since the last financial crisis…

A combination of rapid mortgage rate increases and decreased affordability, San Diego County home sales collapsed 17.5% to the lowest level in 11 years last month, in the first meaningful sign that one of the country’s hottest real estate markets could be at a turning point, real estate tracker CoreLogic reported Tuesday.

In September, 2,942 homes were sold in the county, down from 3,568 sales last year. This was the lowest number of sales for the month since the start of the financial crisis when 2,152 sold in September 2007.

And it can be argued that things are plunging even more rapidly in northern California.

In the San Francisco Bay area, sales of new and existing homes were down 19 percent in September on a year over year basis…

Home sales in the San Francisco Bay area have been falling for months, but in September buyers pulled back in an even bigger way.

Sales of both new and existing homes plunged nearly 19 percent compared with September 2017, according to CoreLogic. It marked the slowest September sales pace since 2007 and twice the annual drop seen in August.

If a new real estate crisis is really happening, these are precisely the kinds of numbers that we would expect to see. If you still need some more convincing, here are even more distressing numbers from the California real estate market that Mish Shedlock recently shared…

The California housing market posted its largest year-over-year sales decline since March 2014 and remained below the 400,000-level sales benchmark for the second consecutive month in September, indicating that the market is slowing as many potential buyers put their homeownership plans on hold.
Existing, single-family home sales totaled 382,550 in September on a seasonally adjusted annualized rate, down 4.3 percent from August and down 12.4 percent from September 2017.
September’s statewide median home price was $578,850, down 2.9 percent from August but up 4.2 percent from September 2017.
Statewide active listings rose for the sixth consecutive month, increasing 20.4 percent from the previous year.
Inventory reached the highest level in 31 months, with the Unsold Inventory Index reaching 4.2 months in September.
September year-to-date sales were down 3.3 percent.

Of course a similar thing is happening on the east coast as well. At this point, things have cooled off so much in New York City that it is being called “a buyer’s market”…

New York City’s pricey real estate has become a “buyers market,” new data suggests, characterized by lowball offers and a rise in the number of properties staying on the market for longer.

The latest figures from Warburg Realty show that among higher-priced homes, New York City is in the throes of a “major shift” that reflects a cooling market, the likes of which hasn’t been seen in almost a decade.

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

In the final analysis, it is no mystery how we got to this point.

During the Obama era, the Federal Reserve pushed interest rates all the way to the floor for years, and this caused “Housing Bubble 2” to become even larger than the original housing bubble.

Now the Federal Reserve has been aggressively raising interest rates, and this is now busting the bubble that they created in the first place.

So if you want to blame someone for this mess, blame the Federal Reserve. The Federal Reserve has created huge “booms” and “busts” ever since it was created in 1913, and hopefully the American people will be outraged enough following this next “bust” to start calling for real change.

I have been calling for the abolition of the Federal Reserve for years, and there are many others out there that also want to return to a free market financial system.

History has shown that free markets work exceedingly well once you take the shackles off, and as a nation we desperately need to return to the values and principles that this nation was founded upon.

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Evidence The Housing Bubble Is Bursting?: “Home Sellers Are Slashing Prices At The Highest Rate In At Least Eight Years”

September 21, 2018September 21, 2018 by Michael

The housing market indicated that a crisis was coming in 2008. Is the same thing happening once again in 2018? For several years, the housing market has been one of the bright spots for the U.S. economy. Home prices, especially in the hottest markets on the east and west coasts, had been soaring. But now that has completely changed, and home sellers are cutting prices at a pace that we have not seen since the last recession. In case you are wondering, this is definitely a major red flag for the economy. According to CNBC, home sellers are “slashing prices at the highest rate in at least eight years”…

After three years of soaring home prices, the heat is coming off the U.S. housing market. Home sellers are slashing prices at the highest rate in at least eight years, especially in the West, where the price gains were hottest.

It is quite interesting that prices are being cut fastest in the markets that were once the hottest, because that is exactly what happened during the subprime mortgage meltdown in 2008 too.

In a previous article, I documented the fact that experts were warning that “the U.S. housing market looks headed for its worst slowdown in years”, but even I was stunned by how bad these new numbers are.

According to Redfin, more than one out of every four homes for sale in America had a price drop within the most recent four week period…

In the four weeks ended Sept. 16, more than one-quarter of the homes listed for sale had a price drop, according to Redfin, a real estate brokerage. That is the highest level since the company began tracking the metric in 2010. Redfin defines a price drop as a reduction in the list price of more than 1 percent and less than 50 percent.

That is absolutely crazy.

I have never even heard of a number anywhere close to that in a 30 day period.

Of course the reason why prices are being dropped is because homes are not selling. The supply of homes available for sale is shooting up, and that is good news for buyers but really bad news for sellers.

It could be argued that home prices needed to come down because they had gotten ridiculously high in recent months, and I don’t think that there are too many people that would argue with that.

But is this just an “adjustment”, or is this the beginning of another crisis for the housing market?

Just like a decade ago, millions of American families have really stretched themselves financially to get into homes that they really can’t afford. If a new economic downturn results in large numbers of Americans losing their jobs, we are once again going to see mortgage defaults rise to stunning heights.

We live at a time when the middle class is shrinking and most families are barely making it from month to month. The cost of living is steadily rising, but paychecks are not, and that is resulting in a huge middle class squeeze. I really like how my good friend MN Gordon made this point in his most recent article…

The general burden of the American worker is the daily task of squaring the difference between the booming economy reported by the government bureaus and the dreary economy reported in their biweekly paychecks. There is sound reason to believe that this task, this burden of the American worker, has been reduced to some sort of practical joke. An exhausting game of chase the wild goose.

How is it that the economy’s been growing for nearly a decade straight, but the average worker’s seen no meaningful increase in their income? Have workers really been sprinting in place this entire time? How did they end up in this ridiculous situation?

The fact is, for the American worker, America’s brand of a centrally planned economy doesn’t pay. The dual impediments of fake money and regulatory madness apply exactions which cannot be overcome. There are claims to the fruits of one’s labors long before they’ve been earned.

The economy, in other words, has been rigged. The value that workers produce flows to Washington and Wall Street, where it’s siphoned off and misallocated to the cadre of officials, cronies, and big bankers. What’s left is spent to merely keep the lights on, the car running, and food upon the table.

And unfortunately, things are likely to only go downhill from here.

The trade war is really starting to take a toll on the global economy, and it continues to escalate. Back during the Great Depression we faced a similar scenario, and we would be wise to learn from history. In a recent post, Robert Wenzel shared a quote from Dr. Benjamin M. Anderson that was pulled from his book entitled “Economics and the Public Welfare: A Financial and Economic History of the United States, 1914-1946”…

[T]here came another folly of government intervention in 1930 transcending all the rest in significance. In a world staggering under a load of international debt which could be carried only if countries under pressure could produce goods and export them to their creditors, we, the great creditor nation of the world, with tariffs already far too high, raised our tariffs again. The Hawley-Smoot Tariff Act of June 1930 was the crowning folly of the who period from 1920 to 1933….

Protectionism ran wild all over the world. Markets were cut off. Trade lines were narrowed. Unemployment in the export industries all over the world grew with great rapidity, and the prices of export commodities, notably farm commodities in the United States, dropped with ominous rapidity….

The dangers of this measure were so well understood in financial circles that, up to the very last, the New York financial district retained hope the President Hoover would veto the tariff bill. But late on Sunday, June 15, it was announced that he would sign the bill. This was headline news Monday morning. The stock market broke twelve points in the New York Time averages that day and the industrials broke nearly twenty points. The market, not the President, was right.

Even though the stock market has been booming, everything else appears to indicate that the U.S. economy is slowing down.

If home prices continue to fall precipitously, that is going to put even more pressure on the system, and it won’t be too long before we reach a breaking point.

Housing Crash 2.0? Experts Warn That ‘The U.S. Housing Market Looks Headed For Its Worst Slowdown In Years’

July 29, 2018 by Michael

Is the United States heading for another absolutely devastating housing crash? It has been 10 years since the last one, and so many of the exact same signs that immediately preceded the last one are starting to appear once again. Back in 2007, home prices were absolutely soaring and it seemed like the party would never end. But interest rates went up, home sales slowed down substantially, and eventually prices began to crash. Millions upon millions of Americans were suddenly “underwater” in their homes just as a crippling recession hit the economy, and we plunged into a foreclosure crisis unlike anything that we had ever seen before. Well, now the cycle is happening again. Home prices surged to unprecedented heights in 2017, and this was especially true in the hottest markets on the east and west coasts. But now interest rates are going up and home sales are starting to slow down substantially. We certainly aren’t too far away from the next crash and another horrible foreclosure crisis, and many experts are beginning to sound the alarm.

For example, the following very alarming numbers come from a recent Bloomberg article entitled “The U.S. Housing Market Looks Headed for Its Worst Slowdown in Years”…

Existing-home sales dropped in June for a third straight month. Purchases of new homes are at their slowest pace in eight months. Inventory, which plunged for years, has begun to grow again as buyers move to the sidelines, sapping the fuel for surging home values. Prices for existing homes climbed 6.4 percent in May, the smallest year-over-year gain since early 2017, and have gained the least over three months since 2012, according to the Federal Housing Finance Agency.

Those are definitely troubling figures, but perhaps even more disturbing is the fact that mortgage applications are way down right now…

Mortgage applications to purchase both new and existing homes have been falling steadily, and mortgage rates are rising again. Single-family home construction also fell and was lower than June 2017.

Of course economic numbers always go up and down, and just because we have had a few bad months does not necessarily mean that disaster is looming.

But when you step back and take a broader perspective on the housing market, it really does start to feel like early 2008 all over again.

In fact, Nobel Prize-winning author Robert Shiller says that this “could be the very beginning of a turning point”…

“This could be the very beginning of a turning point,” said Robert Shiller, a Nobel Prize-winning economist who is famed for warning of the dot-com and housing bubbles, in an interview.

Just like last time, the slowdown is being felt the most in the markets that were once the hottest. In southern California, home sales just fell to the lowest level in four years…

Southern California home sales hit the brakes in June, falling to the lowest reading for the month in four years. Sales of both new and existing houses and condominiums dropped 11.8 percent year over year, as prices shot up to a record high, according to CoreLogic. The report covers Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties.

And as I explained in a previous article, much of this drop is being fueled by a record decline in foreigners buying U.S. homes.

Meanwhile, red flags are popping up on the east coast as well. New York foreclosure actions have skyrocketed to an 11 year high, and many analysts expect them to go much higher.

If you follow my economics website on a regular basis, then you already know that I have been warning about a downturn in the housing market for months. As the Federal Reserve has raised interest rates, it was only a matter of time before the housing market really cooled off. And if the Federal Reserve keeps raising rates, we are going to see home prices collapse, another massive foreclosure crisis, and enormous stress on our largest financial institutions.

This is one of the reasons why we must abolish the Federal Reserve. By allowing a panel of central planners to determine our interest rates, it is inevitable that artificial “booms” and “busts” are created.

Yes, there are always “booms” and “busts” in a free market economy as well, but they would not be as severe.

In recent months, central banks all over the world have been tightening, and other global real estate markets are really starting to feel the pain as well. For instance, home prices are really cooling off in Canada, and it appears that they are on the precipice of a full-blown market crash.

When a new recession didn’t hit in 2015 or 2016, a lot of Americans assumed that the threat had passed. But just because a threat is delayed does not mean that it has been diminished. In fact, the coming recession is probably going to be substantially worse than it would have been in 2015 or 2016 because of the central bank manipulation that delayed it until this time.

And the signs are all around us. An indicator that tracks the vehicle buying plans of Americans just plunged to the lowest level in five years, and even USA Today is running articles with titles such as “Are you ready for the next recession? How to prepare now for a potential downturn”.

Yes, we just got good GDP data for the second quarter, but virtually everyone agrees that the number for the third quarter will be significantly lower. And it would be foolish to ignore all of the harbingers that are emerging on an almost daily basis now. Just recently, I explained that the U.S. economy has fallen into recession every single time that the yield curve has inverted since World War II, and now it is about to happen again. We live at a time when there is great turmoil at home and abroad, and the elements for a “perfect storm” are definitely coming together.

It is only a matter of time before the next recession begins, and it looks like it could be a really, really bad one.

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

Undeniable Evidence That The Real Economy Is Already In Recession Mode

May 16, 2016May 16, 2016 by Michael

You are about to see a chart that is undeniable evidence that we have already entered a major economic slowdown. In the “real economy”, stuff is bought and sold and shipped around the country by trucks, railroads and planes. When more stuff is being bought and sold and shipped around the country, the “real economy” is growing, and when less stuff is being bought and sold and shipped around the country, the “real economy” is shrinking. I know that might sound really basic, but I want everyone to be on the same page as we proceed in this article. Just because stock prices are artificially high right now does not mean that the U.S. economy is in good shape. In fact, there was a stock rally at this exact time of the year in 2008 even though the underlying economic fundamentals were rapidly deteriorating. We all remember what happened later that year, so we should not exactly be rejoicing that precisely the same pattern that we witnessed in 2008 is happening again right in front of our eyes.

During the month of April, the Cass Transportation Index was down 4.9 percent on a year over year basis. What this means is that a lot less stuff was bought and sold and shipped around the country in April 2016 when compared to April 2015. The following comes from Wolf Richter…

Freight shipments by truck and rail in the US fell 4.9% in April from the beaten-down levels of April 2015, according to the Cass Transportation Index, released on Friday. It was the worst April since 2010, which followed the worst March since 2010. In fact, shipment volume over the four months this year was the worst since 2010.

This is no longer statistical “noise” that can easily be brushed off.

Of course this was not just a one month fluke. The reality is that we have now seen the Cass Shipping Index decline on a year over year basis for 14 consecutive months. Here is more commentary and a chart from Wolf Richter…

The Cass Freight Index is not seasonally adjusted. Hence the strong seasonal patterns in the chart. Note the beaten-down first four months of 2016 (red line):

This is undeniable evidence that the “real economy” has been slowing down for more than a year. In 2007-2008 we saw a similar thing happen, but the Federal Reserve and most of the “experts” boldly assured us that there was not going to be a recession.

Of course then we immediately proceeded to plunge into the worst economic downturn since the Great Depression of the 1930s.

Traditionally, railroad activity has been a key indicator of where the U.S. economy is heading next. Just a few days ago, I wrote about how U.S. rail traffic was down more than 11 percent from a year ago during the month of April, and I included a photo that showed 292 Union Pacific engines sitting in the middle of the Arizona desert doing absolutely nothing.

Well, just yesterday one of my readers sent me a photograph of a news article from North Dakota about how a similar thing is happening up there. Hundreds of rail workers are being laid off, and engines are just sitting idle on the tracks because there is literally nothing for them to do…

Intuitively, does it seem like this should be happening in a “healthy” economy?

Of course not.

The reason why this is happening is because businesses have been selling less stuff. Total business sales have now been declining for almost two years, and they are now close to 15 percent lower than they were in late 2014.

Because sales are way down, unsold inventories are really starting to pile up. The inventory to sales ratio is now close to the level it was at during the worst moments of the last recession, and many analysts expect it to continue to keep going up.

Why can’t people understand what is happening? So far this year, job cut announcements are up 24 percent and the number of commercial bankruptcies is shooting through the roof. Signs that we are in the early chapters of a new economic downturn are all around us, and yet denial is everywhere.

For instance, just consider this excerpt from a CNBC article entitled “This key recession signal is broken“…

Treasury yields are behaving as if they are signaling a recession, but strategists say this time it’s more likely a sign of something else.

The market has been buzzing about the flattening yield curve, or the fact that yields on longer duration Treasurys are getting closer to yields on shorter duration securities.

In the case of 10-year notes and two-year notes, that spread was the flattest Friday than it has been on a closing basis since late 2007. The yield curve had turned negative in 2006 and stayed there for months in 2007 before turning higher ahead of the Great Recession. The spread was at 95 at Friday’s curve but widened Monday to more than 96.

Treasury yields are very, very clearly telling us that a new recession is here, but because the “experts” don’t want to believe it they are telling us that the signal is “broken”.

For many Americans, all that seems to matter is that the stock market has recovered from the horrible crashes last August and earlier this year. But in the end, I am convinced that those crashes will simply be regarded as “foreshocks” of a much greater crash in our not too distant future.

But if you don’t want to believe me, perhaps you will listen to Goldman Sachs. They just came out with six reasons why stocks are about to tumble.

Or perhaps you will believe Bank of America. They just came out with nine reasons why a big stock market decline is on the horizon.

To me, one of the big developments has been the fact that stock buybacks are really starting to dry up. In fact, announced stock buybacks have declined 38 percent so far this year…

After snapping up trillions of dollars of their own stock in a five-year shopping binge that dwarfed every other buyer, U.S. companies from Apple Inc. to IBM Corp. just put on the brakes. Announced repurchases dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show. “If the only meaningful source of demand in the market is companies buying their own shares back, then what happens if that goes away?” asked Brad McMillan, CIO of Commonwealth “We should be concerned.”

Stock buybacks have been one of the key factors keeping stock prices at artificially inflated levels even though underlying economic conditions have been deteriorating. Now that stock buybacks are drying up, it is going to be difficult for stocks to stay disconnected from economic reality.

A lot of people have been asking me recently when the next crisis is going to arrive.

I always tell them that it is already here.

Just like in early 2008, economic conditions are rapidly deteriorating, but the stock market has not gotten the memo quite yet.

And just like in 2008, when the financial markets do finally start catching up with reality it will likely happen very quickly.

So don’t take your eyes off of the deteriorating economic fundamentals, because it is inevitable that the financial markets will follow eventually.

19 Facts That Prove Things In America Are Worse Than They Were Six Months Ago

April 4, 2016April 4, 2016 by Michael

Has the U.S. economy gotten better over the past six months or has it gotten worse? In this article, you will find solid proof that the U.S. economy has continued to get worse over the past six months. Unfortunately, most people seem to think that since the stock market has rebounded significantly in recent weeks that everything must be okay, but of course that is not true at all. If you look at a chart of the Dow, a very ominous head and shoulders pattern is forming, and all of the economic fundamentals are screaming that big trouble is ahead. When Donald Trump told the Washington Post that we are heading for a “very massive recession“, he wasn’t just making stuff up. We are already seeing lots of things happen that never take place outside of a recession, and the U.S. economy has already been sliding downhill fairly rapidly over the past several months. With all that being said, the following are 19 facts that prove things in America are worse than they were six months ago…

#1 U.S. factory orders have now declined on a year over year basis for 16 months in a row. As Zero Hedge has noted, in the post-World War II era this has never happened outside of a recession…

In 60 years, the US economy has not suffered a 16-month continuous YoY drop in Factory orders without being in recession. Moments ago the Department of Commerce confirmed that this is precisely what the US economy did, when factory orders not only dropped for the 16th consecutive month Y/Y, after declining 1.7% from last month

#2 Factory orders have now reached the lowest level that we have seen since the summer of 2011.

#3 It is being projected that corporate earnings will be down 8.5 percent for the first quarter of 2016 compared to one year ago. This will be the fourth quarter in a row that we have seen year over year declines, and the last time that happened was during the last recession.

#4 Total business sales have fallen 5 percent since the peak in mid-2014.

#5 S&P 500 earnings have now fallen a total of 18.5 percent from their peak in late 2014.

#6 Corporate debt defaults have soared to the highest level that we have seen since 2009.

#7 The average rating on U.S. corporate debt has fallen to “BB”, which is lower than it has been at any point since the last financial crisis.

#8 The U.S. oil rig count just hit a 41 year low.

#9 51 oil and gas drillers in North America have filed for bankruptcy since the beginning of last year, and according to CNN we could be on the verge of seeing the biggest one yet…

Shale oil driller SandRidge Energy (SD) warned there was “substantial doubt” it would survive the oil downturn. The Oklahoma City company said this week it is exploring a potential Chapter 11 bankruptcy filing.

Based on its $3.6 billion of debt, SandRidge would be the biggest North American oil-focused company to go bust during the current downturn, according to a CNNMoney analysis of stats compiled by law firm Haynes and Boone.

#10 According to Challenger, Gray & Christmas, job cut announcements by major firms in the United States were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015.

#11 Consumers in the United States accumulated more new credit card debt during the 4th quarter of 2015 than they did during the entire years of 2009, 2010 and 2011 combined.

#12 Existing home sales in the U.S. were down 7.1 percent during the month of February, and this was the biggest decline that we have witnessed in six years.

#13 Subprime auto loan delinquencies have hit their highest level since the last recession.

#14 The Restaurant Performance Index in the U.S. recently dropped to the lowest level that we have seen since 2008.

#15 Major retailers all over the country are shutting down hundreds of stores as the “retail apocalypse” accelerates.

#16 If you take the number of working age Americans that are officially unemployed (8.1 million) and add that number to the number of working age Americans that are considered to be “not in the labor force” (93.9 million), that gives us a grand total of 102 million working age Americans that do not have a job right now

#17 Since peaking during the 3rd quarter of 2014, U.S. exports of goods and services have been steadily declining. This is something that we never see outside of a recession…

#18 The cost of everything related to medical care just continues to skyrocket even though our wages are stagnating. According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year, and yet the cost of medical care just hit a brand new all-time high…

#19 Our government debt continues to spiral out of control. At this point it is sitting at a staggering total of $19,218,516,838,306.52, but when Barack Obama first entered the White House it was only 10.6 trillion dollars. That means that our government has been stealing an average of more than 100 million dollars an hour from future generations of Americans every single hour of every single day since Barack Obama was inaugurated…

How in the world can anyone look at those numbers and suggest that everything is okay?

I simply do not understand how that could be possible.

Part of the problem is that Americans have been trained to be irrationally optimistic. It is fine to have an optimistic outlook on life, but when it causes you to throw logic and reason out the window that is not good.

For example, you can be “optimistic” about your ability to fly all you want, but if you step off a 10 story building you are going to take a very hard fall to the ground.

Similarly, you can ignore all of the facts and pretend that our economic prosperity is sustainable all you want, but it won’t change the fundamental laws of economics.

On a personal note, I would like to thank everyone that has helped make my new book the #1 new release in Christian eschatology on Amazon.com. I understand that a lot of my secular readers are not going to understand my fascination with Bible prophecy, and that is okay. I felt that I needed to write this book to address some very serious errors that are being taught in churches all over America today, and I also wanted to inspire believers to face the great hardships and persecution that are coming.

Just because very difficult times are approaching does not mean that it will be time to run and hide. My wife and I always live our lives with no fear, and when things get crazy we believe that it will be an opportunity to do even more good. We believe that the greatest chapters of our lives are still ahead of us, and we want people to understand why they can look forward to the future even though great darkness is rising all around us.

So yes, I definitely carry a message of warning.

But I also bring a message of hope.

As we look toward the future, there is much to be concerned about, but there are also things happening that are worth getting extremely excited about.

It is when times are the darkest that the light is needed the most, and very soon light will be greatly, greatly needed in the United States of America.

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