The Next Great Depression

New Vehicle Sales “Collapse” And Pending Home Sales “Plunge” As America’s Economic Slowdown Accelerates

In late 2018, the bad economic news just keeps rolling in.  At a time when consumer confidence is absolutely soaring, the underlying economic numbers are clearly telling us that enormous problems are right around the corner.  Of course this is usually what happens just before a major economic downturn.  Most people in the general population feel like the party can go on for quite a while longer, but meanwhile the warning signs just keep becoming more and more obvious.  I have been hearing from people that truly believe that the economy is “strong”, but if the U.S. economy really was in good shape would new vehicle sales be “collapsing”?…

According to the latest estimates released by Edmunds, new vehicle sales for September are expected to collapse both on a monthly basis and year-over-year basis. The company predicted that 1,392,434 new cars and trucks will be sold in the U.S. in September, which makes for a estimated seasonally adjusted annual rate (SAAR) of 17 million. This will be a 5.4% decrease from last month and an 8.3% drop from September of last year.

Those are absolutely terrible numbers.

And this news comes after all of the major automakers had already revised earnings guidance lower.  The following comes from Zero Hedge…

The drop in sales capped another rough month for the auto industry during which Detroit’s carmakers all revised their earnings guidance lower and Ford embarked on a five-year restructuring plan. Earlier this week, we reported that Ford’s CEO claimed that President Trump’s auto tariffs had cost the company $1 billion in profits.

Sadly, this may just be the very beginning of the auto industry’s troubles.

It is now being projected that if this trade war with China continues, U.S. automakers could see total sales fall “by 2 million vehicles per year”…

Retaliation by China to tariffs already in place have made some American auto exports uncompetitive, and could collapse US auto sales by 2 million vehicles per year, resulting in the loss of up to 715,000 American jobs and a devastating hit of as much as $62 billion to the US GDP.

As per NBC News, the Center for Automotive Research (CAR) warns that the auto industry could receive a devastating blow if Section 232 declares foreign-made cars and car parts a threat to national security.

Kristin Dziczek, a vice president and senior economist at CAR, said if Section 232 is enacted, it could trigger a “downward cycle” in the auto industry – not seen since the last great recession.

And needless to say, the thousands of companies that do business with those large automakers would also lose sales and jobs.

Once these downturns get rolling, the domino effect can be absolutely devastating.

On Thursday, we also learned that pending home sales “plunged in August”…

Pending home sales plunged in August, dropping 1.8% MoM (almost four times worse than expected) to its lowest since Oct 2014 (and fell 2.5% YoY) – the fourth month of annual declines in a row…

If the U.S. economy truly is “strong”, then why have we seen four monthly declines in a row?

And it isn’t just one part of the nation that is experiencing a downturn.  According to Bloomberg, all four major regions of the country showed a decline…

As Bloomberg notes, the decline, which was broad-based across all four regions, shows that higher mortgage rates, rising prices and a shortage of affordable homes continue to squeeze buyers. Existing-home sales in August matched the lowest in more than two years, while revisions to new-home sales showed a slower market than thought, according to previously released figures.

Homes are not selling like they once were.  There is a reason why one out of every four home sellers in America slashed their prices in August.  Demand is way down, and that strongly indicates that an economic slowdown is here.

When it looks like the economy is headed for a major downturn, a lot of people go out and stock up on gold, and it turns out that is precisely what global central banks have been doing…

Central banks have emerged as some of the biggest buyers of gold this year, buying a total of 264 metric tons this year to reach the highest level in six years, according to analysts at Macquarie.

Of course the Federal Reserve and other central banks are trying to assure us that everything is going to be okay, but meanwhile their actions are telling us a different story.

Much of the world is already in the midst of a crippling economic crisis, and every indicator seems to be pointing to the fact that the U.S. is headed down the same path.

Even without any extenuating circumstances, the truth is that we are way overdue for a recession.  But when you throw in political chaos, exploding debt levels, an emerging market currency crisis and a trade war between the two largest economies on the entire planet, you definitely have a recipe for a perfect storm.

If you do not believe that this trade war is a big deal, you should consider the words of former Reagan administration official David Stockman…

Folks, it’s not a “skirmish”. On the scale of trade warfare we are now at DEFCON 2.

At this very moment, the US is taxing $250 billion of Chinese imports or nearly half the total flow; and China is taxing $110 billion of its imports from the US or 85% of the flow.

And it’s soon going full monte. The Donald has repeatedly threatened to tariff the remaining $267 billion of Chinese imports if Beijing retaliates against his $200 billion, but, self-evidently, they already have.

The U.S. economy has found a way to muddle through for the past couple of years, and we should all hope that the economy can find a way to navigate through these current problems.

But the storm clouds are growing more ominous with each passing day, and at some point time will run out.

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

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Why Are So Many People Talking About The Potential For A Stock Market Crash In October?

It is that time of the year again.  Every year, people start talking about a possible stock market crash in October, because everyone remembers the historic crashes that took place in October 1987 and October 2008.  Could we witness a similar stock market crash in October 2018?  Without a doubt, the market is primed for another crash.  Stock valuations have been in crazytown territory for a very long time, and financial chaos has already begun to erupt in emerging markets all over the globe.  When the stock market does collapse, it won’t exactly be a surprise.  And a lot of people out there are pointing to October for historical reasons.  I did not know this, but it turns out that the month with the most market volatility since the Dow was first established has been the month of October…

The difference is quite significant, as judged by a measure of volatility known as the standard deviation: For all Octobers since 1896, when the Dow Jones Industrial Average was created, the standard deviation of the Dow’s daily changes has been 1.44%. That compares to 1.05% for all months other than October.

Like me, you are probably tempted to think that the reason why October’s number is so high is because of what happened in 1987 and 2008.

But even if you pull out those two months, October is still the most volatile…

You might think that this difference is caused by a few outliers, such as the 1987 crash (which, of course, occurred in October) or 2008 (the Dow suffered several thousand-point plunges that month as it reacted to the snowballing financial crisis). But you would be wrong: The standard deviation of daily Dow changes is much higher in October than other months even if we eliminate 1987 and 2008 from the sample.

Once we get to Thanksgiving, the market tends to get sleepy, and it usually doesn’t wake up again until the new year begins.

So if something big is going to happen in the market in 2018, it is probably going to happen in the coming weeks.

And it is inevitable that something big will happen at some point.  As Jesse Colombo has pointed out, stocks are more overvalued right now than they were just before the great stock market crash of 1929…

In a bubble, the stock market becomes overpriced relative to its underlying fundamentals such as earnings, revenues, assets, book value, etc. The current bubble cycle is no different: the U.S. stock market is as overvalued as it was at major generational peaks. According to the cyclically-adjusted price-to-earnings ratio (a smoothed price-to-earnings ratio), the U.S. stock market is more overvalued than it was in 1929, right before the stock market crash and Great Depression

It is becoming increasingly obvious what we are heading for, and a growing chorus of market experts are issuing ominous declarations about this market.

For example, David Tice is warning that “we’re getting closer to a meltdown scenario”…

According to investor David Tice, who made a name for himself in running the Prudent Bear Fund before selling it to Federated Investors in 2008, the current market is dangerous. Tice was quoted as saying he’s “nervous” because “we’re getting closer to a meltdown scenario.”

And John Hussman ultimately expects “two-thirds of market capitalization” to vanish…

I am aware of no plausible conditions under which current extremes are likely to work out well for investors. There are a few possibilities that could involve a smaller loss than the two-thirds of market capitalization that I expect to vanish, as the run-of-the-mill, baseline expectation for the S&P 500 over the completion of this cycle. Yet it’s worth recognizing that the completion of every market cycle in history has taken the most reliable valuation measures we identify (those best correlated with actual subsequent S&P 500 market returns) to less than half of current levels.

Could you imagine the chaos that would be unleashed if the stock market went down by two-thirds?

That would make what happened in 2008 look like a Sunday picnic.

And there are a lot of parallels between what happened in 2008 and what is happening today.  For example, the housing market is slowing down dramatically just like it did a decade ago.  The following comes from a Bloomberg article that I came across earlier today entitled “Builders Slump as U.S. Housing Market Shifts to the Slow Lane”…

The housing market is stalling, and homebuilder stocks are feeling the pain.

The S&P Supercomposite Homebuilding Index is down 21 percent year-to-date, on track for the biggest annual drop since 2008, when it fell 32 percent. That’s even with tax cuts, unemployment near the lowest since 1969 and a real-estate developer in the White House. What gives?

Just a few days ago, I wrote an entire article about the fact that home sellers are cutting prices at the fastest rate that we have seen in eight years.  The housing market is clearly telling us that a big time economic slowdown is coming, but most people are not listening.

Switching gears, we have also recently learned that it looks like Ford Motor Company will soon be laying off lots of workers…

Ford Motor employees are warily awaiting details of CEO Jim Hackett’s promised “fitness” plan and the serious possibility of significant job losses as the company faces pressure to improve its operations.

The company has warned of $11 billion in restructuring costs over three to five years, which could mean thousands of worker buyouts, according to analysts.

Why would they be doing that if the economy really was in “good shape”?

And let us not forget about the ongoing woes of the retail industry.  Recently, I was astounded to learn that a whopping 20 percent of all retail space in Manhattan is currently vacant…

“When you walk the streets, you see vacancies on every block in all five boroughs, rich or poor areas — even on Madison Avenue, where you used to have to fight to get space,” said Faith Hope Consolo, head of retail leasing for Douglas Elliman Real Estate, who said the increase in storefront vacancies in New York City had created “the most challenging retail landscape in my 25 years in real estate.”

A survey conducted by Douglas Elliman found that about 20 percent of all retail space in Manhattan is currently vacant, she said, compared with roughly 7 percent in 2016.

New York City is one of the few areas around the country that has actually been prospering.

If things are that bad there already, what does that say about the outlook for the rest of the nation?

The truth is that the economy is not nearly as good as you are being told, and things could literally start breaking loose at any moment.

Unfortunately, as a society we have not learned very much from history, and most Americans seem to think that this bubble of artificial prosperity is going to last indefinitely.

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.

Destroying America: It Is Being Projected That The U.S. National Debt Will Hit 99 Trillion Dollars By 2048

Temporary prosperity that is created by exploding levels of debt is not actually prosperity at all.  At this moment, the U.S. government is 21.4 trillion dollars in debt, and we have been adding an average of more than a trillion dollars a year to that debt since 2009.  And if we stay on the path that we are currently on, the trajectory of our debt will soon accelerate dramatically.  In fact, as you will see below, the Congressional Budget Office is now projecting that the U.S. national debt will reach 99 trillion dollars by 2048 if nothing changes.  Congressional Budget Office projections always tend to be overly optimistic, and so the reality will probably be much worse than that.  Of course we will never actually see the day when our national debt reaches 99 trillion dollars.  Our government (and our entire society along with it) will collapse long before we ever get to that point.  In our endless greed, we are literally destroying America, and emergency action must be taken immediately if we are to survive.

Debt always makes things seem better in the short-term, and it is always destructive in the long-term.

When we go into debt as a nation, we are literally stealing from the bright future that our children and our grandchildren were supposed to have.  Through the first 11 months of this fiscal year, the official U.S. budget deficit was $895,000,000,000, which means that we continue to steal more than 100 million dollars from future generations of Americans every single hour of every single day.

And it is important to remember that not all additions to the national debt are included in the official budget deficit.  One year ago, our national debt was sitting at 20.1 trillion dollars, and that means that we have added an astounding 1.3 trillion dollars to the debt over the past 12 months.

This is complete and utter insanity, and it must stop now.

Let me try to put this into perspective.  Not too long ago, Venezuela was once one of the wealthiest countries in South America.  These days, many Americans like to laugh at them, but we are on the exact same path that Venezuela has gone down.  Eventually, the day comes when there is not enough of someone else’s money to spend, and suffocating levels of debt make the option of printing giant mountains of money too tempting to resist.  At that point it is just a matter of time before the currency is destroyed and society devolves into chaos.

If current Congressional Budget Office projections area anywhere close to accurate, America’s date with destiny is rapidly approaching.  The following comes from CBS News…

Under the new baseline incorporating recent changes in law, the national debt reaches $99 trillion in 2048 — equivalent to 152 percent of GDP.

And the CBO is also projecting that our yearly budget deficit will go from one trillion dollars today to 6 trillion dollars by 2048…

The federal budget deficit is expected to break through a trillion dollars in 2020 and never look back, reaching $2 trillion in 2032 and $6 trillion in 2048.

But like I said, we will never actually get there, because our society will collapse by then.

So we only have a limited amount of time to save America, and the clock is ticking.

At this point, the total amount of U.S. government debt held by the public has already surpassed all household debt…

Debt held by the public will top $127,000 per household by the end of the year, according to JPMorgan. Personal debt per household will average about $126,000.

“This is an astonishing statistic,” said David Kelly, chief global strategist at JPMorgan Funds. “Americans have a lot of debt. I always feel nervous signing a mortgage or a car loan. I think, can I afford all this debt? Then you realize the government is busy borrowing even more money on your behalf.”

I wish that I could get more people to understand just how serious this is.

Do you know what the inflation rate will be in Venezuela this year?

The IMF is projecting that it will be more than a million percent.

Chaos is everywhere, crime is out of control and people are starving, and yet we refuse to learn from what has happened to them.

We just keep spending and spending, and we think that we have found the key to prosperity.

But what we have really found is an accelerated path to economic hell.

And it isn’t just the U.S. that is in deep trouble.  The entire globe has been on a massive debt binge, and it is only a matter of time before this gigantic debt bubble implodes.  The following comes from an excellent piece by Larry Elliott…

The BIS says in its latest annual report that there are already material risks to financial stability. “In some respects, the risks mirror the unbalanced post-crisis recovery and its excessive reliance on monetary policy. Where financial vulnerabilities exist, they have been building up, in their usual gradual and persistent way. More generally, financial markets are overstretched … and we have seen a continuous rise in the global stock of debt, private plus public, in relation to GDP. This has extended a trend that goes back to well before the crisis and that has coincided with a long-term decline in interest rates.”

Behind the dry official language, the message is clear. A recovery that is based around high and rising levels of debt is really no recovery at all. The world economy is, in all material respects, the same as it was in the run-up to the 2008 crisis. The necessary reforms to a flawed model have not taken place, which is why the BIS warning should not be ignored.

On a personal level, have you ever gotten into debt trouble?

At first, it was a lot of fun enjoying all of the new things that all of that debt bought, but the pain afterwards greatly outweighed the initial temporary prosperity.

The same principle is going to also apply on a global scale.  The U.S. government is now more than 20 trillion dollars in debt, and the entire globe is now more than 250 trillion dollars in debt, and a day of reckoning is coming.  The following comes from David Stockman…

And it’s that $20 trillion, built up over the last two decades, that has basically distorted everything – falsified prices, repressed interest rates, caused an explosion of debt. Twenty years ago there was $40 trillion of debt in the world today there is $250 trillion worth of debt in the world. The leverage of the world has gone from 1.3 times which is stable…to 3.3 times, which basically means the world has created a huge temporary prosperity by burying itself in debt.

It would take an unprecedented effort to turn things around, but right now hardly anyone seems concerned about bringing all of this debt under control.

So we continue to roll on toward our date with financial disaster, and most people are completely oblivious to what is about to happen to us.

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.

The 11th Hour: 8 Examples Of Mainstream Media Sources Warning Us Of Imminent Economic Disaster

Are we on the verge of another great financial crisis, a devastating recession and a horrific implosion of the global debt bubble?  On my website I have been relentlessly warning my readers about the inevitable consequences of our very foolish actions, but now the mainstream media is beginning to sound just like The Economic Collapse Blog.  The coming crisis is so close now that a lot of them are starting to see it, and of course economic disaster is already a reality for much of the rest of the planet.  For years, the mainstream media told us that things would get better, and in a lot of ways we did see some improvement.  But now the tone of the mainstream media has become quite ominous, and that is definitely not a positive sign.  The following are 8 examples of mainstream media sources warning us of imminent economic disaster…

#1 Forbes: “Disaster Is Inevitable When America’s Stock Market Bubble Bursts”…

As shown in this report, the U.S. stock market is currently trading at extremely precarious levels and it won’t take much to topple the whole house of cards. Once again, the Federal Reserve, which was responsible for creating the disastrous Dot-com bubble and housing bubble, has inflated yet another extremely dangerous bubble in its attempt to force the economy to grow after the Great Recession. History has proven time and time again that market meddling by central banks leads to massive market distortions and eventual crises. As a society, we have not learned the lessons that we were supposed to learn from 1999 and 2008, therefore we are doomed to repeat them.

The purpose of this report is to warn society of the path that we are on and the risks that we are facing.

#2 CNBC: “Tech stock sell-off could be just beginning if trade war with China worsens”…

Congressional scrutiny of social media companies and fears of new regulation pummeled their stocks, but other tech names could also soon be vulnerable to a new round of selling pressure if President Donald Trump goes through with new tariffs on Chinese goods.

#3 Bloomberg: “Emerging-market rout is longest since 2008 as confidence cracks”…

For stocks, it’s 222 days. For currencies, 155 days. For local government bonds, 240 days.

This year’s rout in emerging markets has lasted so long that it’s taken even the most ardent bears by surprise. Not one of the seven biggest selloffs since the financial crisis — including the so-called taper tantrum — inflicted such pain for so long on the developing world.

#4 CNN: “Emerging Markets Look Sick. Will They Infect Wall Street?”…

Chinese stocks are is in a bear market. Turkey’s currency has collapsed. South Africa has stumbled into a recession. Not even an IMF bailout has stemmed the bleeding in Argentina.

The storm rocking emerging markets has its origins in Washington. Vulnerable currencies plunged as the US Federal Reserve steadily raised interest rates. And President Donald Trump’s trade crackdown added gasoline to the fire.

The trouble could spread, infecting other emerging markets or even Wall Street.

#5 The Motley Fool: “6 signs the next recession might be closer than we realize”…

To be perfectly clear, trying to predict when recessions will occur is pure guesswork. Top market analysts have called for pullbacks in the market, unsuccessfully, in pretty much every year since the Great Recession ended. But the economic cycle doesn’t lie: recessions are inevitable. And in my estimation, we’re probably closer to the next recession than you realize.

How can I be so certain? Well, I can’t. Remember, I just noted there’s virtually no certainty when it comes to predicting when recessions will occur. There are, however, six warning signs that suggest a recession could be, in relative terms, around the corner.

#6 Forbes: “U.S. Household Wealth Is Experiencing An Unsustainable Bubble”…

Since the dark days of the Great Recession in 2009, America has experienced one of the most powerful household wealth booms in its history. Household wealth has ballooned by approximately $46 trillion or 83% to an all-time high of $100.8 trillion. While most people welcome and applaud a wealth boom like this, my research shows that it is actually another dangerous bubble that is similar to the U.S. housing bubble of the mid-2000s. In this piece, I will explain why America’s wealth boom is artificial and heading for a devastating bust.

#7 Savannah Now: “Global debt soars, along with fears of crisis ahead”…

“We were supposed to correct a debt bubble,” said David Rosenberg, chief economist at Gluskin Sheff, a wealth-management firm. “What we did instead was create more debt.”

#8 CNBC: “The emerging market crisis is back. And this time it’s serious”…

But markets are feeling a sense of deja vu. Blame it on a stronger dollar, escalating tensions since President Donald Trump came to power, worries over a full-fledged trade war with China or rising interest rates in the U.S., this time around the crisis seems to have entered a new phase.

The damage is far more widespread. The crisis has engulfed countries across the globe — from economies in South America, to Turkey, South Africa and some of the bigger economies in Asia, such as India and China. A number of these countries are seeing their currency fall to record levels, high inflation and unemployment, and in some cases, escalating tensions with the United States.

I don’t think that we have seen such ominous declarations from the mainstream media since the last global financial crisis in 2008.

And the mainstream media is not alone.  Yesterday, I discussed the fact that tech executives on the west coast are setting up luxury survival bunkers in New Zealand in order to prepare for what is ahead.

They all know what is coming, and they also know that it is approaching very rapidly.

This chapter in American history is not going to end well.  On some level, all of us understand this.  Storm clouds have been building on the horizon for quite some time and the warning signs are all around us.

Our day of reckoning may have been delayed, but it was not canceled.  America has a date with destiny, and it is going to be exceedingly painful.

This article originally appeared on The Economic Collapse Blog.  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.

Major Currencies All Over The World Are In “Complete Meltdown” As The $63 Trillion EM Debt Bubble Implodes

The wait for the next global financial crisis is over.  Major currencies all over the planet are in a “death spiral”, many global stock markets are crashing, and economic activity is beginning to decline at a stunning rate in quite a few nations.  Over the past 16 years, the emerging market debt bubble has grown from 9 trillion dollars to 63 trillion dollars.  Yes, you read that correctly.  Now that emerging market debt bubble is imploding, and as a result emerging market currencies all over the globe are in “complete meltdown”.  In fact, at least 20 different currencies have fallen by double-digit percentages against the U.S. dollar so far in 2018, and nobody is quite sure what is going to happen next.

You may be tempted to think that this must be a good thing for the United States since the value of the U.S. dollar has been rising, but it is not.

During the “boom years”, trillions of dollars were borrowed by emerging market economies, and a high percentage of those loans were denominated in U.S. dollars.  Now that their currencies are crashing, it is going to take much more local currency to service those U.S.-denominated debts, and a whole lot of them are going to start going bad.

That means that many financial institutions here in the United States and over in Europe are going to end up holding enormous piles of bad debt, and the losses could potentially be astronomical.

The dominoes are starting to fall, and even the mainstream media is admitting that what we are facing is really bad.  For example, the following comes from a CNBC article entitled “The emerging market crisis is back. And this time it’s serious”…

The crisis has engulfed countries across the globe — from economies in South America, to Turkey, South Africa and some of the bigger economies in Asia, such as India and China. A number of these countries are seeing their currency fall to record levels, high inflation and unemployment, and in some cases, escalating tensions with the United States.

When I say that the world has been on the greatest debt binge in human history since the last financial crisis, I am not exaggerating one bit.

The emerging market debt bubble is now three times larger than it was in 2007, and it is seven times larger than it was in 2002.  Here is more from CNBC…

Emerging markets are also heavily plagued by debt and a stronger dollar makes it tougher for them to pay this debt. The latest data from the Institute of International Finance shows that debt in emerging markets including China increased from $9 trillion in 2002 to $21 trillion in 2007 and finally to $63 trillion in 2017.

Of course this bubble was going to burst.

Anyone with half a brain should have been able to see that.

Now we have a full-blown crisis on our hands, and nobody seems to have any idea how to solve it.

As Charles Hugh Smith has observed, emerging market currencies all over the globe “are in complete meltdown”…

As the chart below illustrates, a great many currencies around the world are in complete meltdown. This is not normal. Nations that over-borrow, over-spend and print too much of their currency to generate an illusion of solvency eventually experience a currency crisis as investors and traders lose faith in the currency as a store of value, i.e. the faith that it will have the same (or more) purchasing power in a month that it has today.

This is the chart that Charles Hugh Smith referenced in that quote…

I am not sure that I even have the words to describe financial carnage of that magnitude.

Since the financial markets are not crashing here in the United States yet, most Americans do not really seem to be concerned about this crisis at this point.  But that is a mistake.  This meltdown has started with the weaker nations, but ultimately what we are witnessing is an “unraveling” of the entire global financial system…

The fact that so many currencies are melting down at the same time is telling us the global financial system is unraveling, and unraveling fast. This is a symptom of a fatal disease. Currencies reflect all sorts of financial information; they’re akin to taking an economy’s pulse: trade balances, debt levels, interest rates, central bank policies, fiscal policies, and so on.

The global financial system is inter-connected, but this is not a viable excuse for the meltdown. The general explanation floating around is that currency weakness is like the flu: one currency gets it, and then it spreads to other weak currencies.

This diagnosis is misleading. What’s actually happening is the unprecedented global bubble of debt and assets of the past decade is popping, and it’s laying waste to the most indebted, over-leveraged and mismanaged nations first, either via stock market declines or meltdowns in currencies.

Earlier today, we learned that the South African economy has officially plunged into a new recession.  This crisis is spreading very quickly, and the United States won’t be immune from what is happening.  This is a point that Charles Hugh Smith made very well as he wrapped up his most recent article…

The illusion that the U.S. is immune to the unraveling of debt and asset valuations won’t last. When the defaults start piling up, so will the losses, and when asset bubbles pop, incomes and spending decline. Although few seem to notice, almost half the profits of the S&P 500 corporations are earned overseas.

The belief that U.S. markets are somehow disconnected from global markets and immune to the repricing of risk, debt, assets and currencies is magical thinking.

I am entirely convinced that we have reached a major turning point.

For several years it has seemed like things have been getting “better”, but it was largely an illusion.  Our ridiculously high standard of living was financed by the greatest debt binge in the history of the world, and it was inevitable that a day of reckoning would arrive.

Now that day of reckoning is knocking on the door, and our society is completely and utterly unprepared for what is going to happen next.

This article originally appeared on The Economic Collapse Blog.  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.

If You Read Between The Lines, Global Economic Leaders Are Telling Us Exactly What Is Coming

Sometimes, a strongly-worded denial is the most damning evidence of all that something is seriously wrong.  And when things start to really get crazy, “the spin” is often the exact opposite of the truth.  In recent days we have seen a lot of troubling headlines and a lot of chaos in the global financial marketplace, but authorities continue to assure us that everything is going to be just fine.  Of course we witnessed precisely the same thing just prior to the great financial crisis of 2008.  Federal Reserve Chair Ben Bernanke insisted that a recession was not coming, and we proceeded to plunge into the worst economic downturn since the Great Depression.  Is our society experiencing a similar state of denial about what is ahead of us here in 2018?

Let me give you a few examples of some recent things that global economic leaders have said, and what they really meant…

–Tesla Motors CEO Elon Musk: “We are definitely not going bankrupt.”

Translation: “We are definitely going bankrupt.”

Tesla is a company that is supposedly worth 51 billion dollars, but the reality is that they are going to zero.  They have been bleeding massive amounts of cash for years, and now a day of reckoning has finally arrived.  A severe liquidity crunch has forced the company to delay payments or to ask for enormous discounts from suppliers, and many of those suppliers are now concerned that Tesla is on the verge of collapse…

Specifically, a recent survey sent privately by a well-regarded automotive supplier association to top executives, and seen by the WS , found that 18 of 22 respondents believe that Tesla is now a financial risk to their companies.

Meanwhile, confirming last month’s report that Tesla is increasingly relying on net working capital, and specifically accounts payable to window dress its liquidity, several suppliers said Tesla has tried to stretch out payments or asked for significant cash back. And in some cases, public records show, small suppliers over the past several months have claimed they failed to get paid for services supplied to Tesla.

–Shark Tank billionaire Mark Cuban: “I’ve got a whole lot of cash on the sidelines.”

Translation: “I believe that the stock market is about to crash.”

Mark Cuban is not stupid.  Like Warren Buffett, he is sitting on giant piles of cash as he waits for stock valuations to return to their long-term averages.  And when “something happens”, Cuban insists that he is “ready, willing and able” to make some bold moves…

Billionaire entrepreneur Mark Cuban told CNBC on Monday that he’s holding much more cash than he normally does because he’s concerned about the stock market and U.S debt levels.

“I’m down to maybe four dividend-owning stocks, two shorts, and Amazon and Netflix. I’ve got a whole lot of cash on the sidelines,” Cuban said on “Fast Money Halftime Report.” “[I’m] ready, willing and able if something happens” to invest.

–Deutsche Bank: We need our employees to “take every opportunity to restrict non-essential travel” in order to cut costs.

Translation: We are on the verge of collapse, and we have got to save every single penny that we can right now.

If you follow my work on a regular basis, you already know that I have been extremely hard on Deutsche Bank.  The biggest bank in Europe is teetering on the brink, and this latest move is more evidence that their days are numbered…

Forget the days of traveling first class to meet clients: Deutsche Bank, which following major management upheaval in the past year, is telling its employees to take the bus whenever possible.

In the latest indignity to befall the bank’s employees, in a memo sent by Deutsche Bank CFO James von Moltke, the biggest European bank – if certainly not by market cap – urged employees to “take every opportunity to restrict non-essential travel” until the end of the year adding that “with your help, we will meet our cost-reduction targets.”

–Italian Cabinet Undersecretary Giancarlo Giorgetti: “I hope that the quantitative easing program will go forward.”

Translation: If the ECB does not buy our bonds, the Italian financial system is toast.

Italy will almost certainly be the fulcrum of the next European financial crisis, and the truth is that the EU will not have enough money to bail Italy out once it collapses.

So the Italians desperately need the ECB to continue buying their bonds, and the new Italian government seems to understand this very well…

Italian Cabinet Undersecretary Giancarlo Giorgetti said he hopes the European Central Bank’s quantitative easing program will be extended to help protect the country from financial speculators.

Italy also needs to be credible to help shield itself, Giorgetti said in an interview with newspaper Il Messaggero. After the Genoa bridge disaster, the country may boost its extra spending request to the European Union, he said.

Signs of trouble continue to erupt in the United States as well.  The trade war is taking a huge toll on businesses of all sizes, and sometimes it is rural America that is being hurt the most.

For instance, the looming closure of the Element Electronics factory in Winnsboro, South Carolina would be absolutely crippling for that community…

TVs at the plant are made out of components that are imported from China, and the tariffs make assembling the TVs here a losing proposition, the company has said. The company is fighting for a waiver but is bracing for shutdown.

Winnsboro is the seat of Fairfield County, where a third of the population lives in poverty. Unemployment among its nearly 23,000 residents is second highest in the state, and, despite periodic rebounds, the population has fallen steadily over the past century.

“This is going to be a ghost town,” Winnsboro resident Herbert Workman said.

In this day and age, we are trained to be optimistic, and that can be a good thing.

But there comes a point when blind optimism causes us to lose touch with reality, and many believe that we have already crossed that threshold.

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.

10 Numbers That Prove That America’s Current Financial Condition Is A Horror Show

America’s long-term “balance sheet numbers” just continue to get progressively worse.  Unfortunately, since the stock market has been soaring and the GDP numbers look okay, most Americans assume that the U.S. economy is doing just fine.  But the stock market was soaring and the GDP numbers looked okay just prior to the great financial crisis of 2008 as well, and we saw how that turned out.  The truth is that GDP is not the best measure for the health of the economy.  Judging the U.S. economy by GDP is basically like measuring the financial health of an individual by how much money he or she spends, and I will attempt to illustrate that in this article.

If I went out right now and got a whole bunch of new credit cards and started spending money like there was no tomorrow, would that mean that my financial condition had improved?

No, in fact it would mean that my long-term financial condition just got a whole lot worse.

GDP is a measurement of how much economic activity is happening in our society, and it is basically an indication of how much money is changing hands.

But just because more money is changing hands does not mean that things are going well.  What really matters is what is happening to assets and liabilities.  In other words, is wealth being built or is more debt just being accumulated?

Sadly, there are only a handful of bright spots in our economy.  A couple of very large tech companies such as Apple are accumulating wealth, but just about everywhere else you look debt is growing at an unprecedented pace.  Household debt has never been higher, corporate debt has doubled since the last financial crisis, state and local government debt is at record highs, and the U.S. national debt is wildly out of control.

If I went out tomorrow and spent $20,000 with a bunch of new credit cards, I could claim that my “personal GDP” was soaring because I was spending a lot more money then before.  But my boasting would be pointless because in reality I would just be putting my family in an extremely precarious financial position.

Economic growth that is produced by continually increasing amounts of debt is not a positive thing.  I wish that more people understood this very basic concept.  The following are 10 numbers that prove that America’s current financial condition is a horror show…

#1 U.S. consumer credit just hit another all-time record high.  In the second quarter of 2008, total consumer credit reached a grand total of 2.63 trillion dollars, and now ten years later that number has soared to 3.87 trillion dollars.  That is an increase of 48 percent in just one decade.

#2 Student loan debt has surpassed 1.5 trillion dollars for the first time ever.  Over the last 8 years, the total amount of student loan debt has shot up 79 percent in the United States.

#3 According to the Federal Reserve, the credit card default rate in the U.S. has risen for 7 quarters in a row.

#4 One recent survey found that 42 percent of American consumers paid their credit card bill late “at least once in the last year”, and 24 percent of Americans consumers paid their credit card bills late “more than once in the last year”.

#5 Real wage growth in the United States just declined by the most that we have seen in 6 years.

#6 According to one recent study, the “rate of people 65 and older filing for bankruptcy is three times what it was in 1991”.

#7 We are in the midst of the greatest “retail apocalypse” in American history.  At this point, 57 major retailers have announced store closings so far in 2018.

#8 The size of the official U.S. budget deficit is up 21 percent under President Trump.

#9 It is being projected that interest on the national debt will surpass half a trillion dollars for the first time ever this year.

#10 Goldman Sachs is projecting that the yearly U.S. budget deficit will surpass 2 trillion dollars by 2028.

And I haven’t even talked about unfunded liabilities.  Those are essentially future commitments that we have made that we don’t have the money for at the moment.

According to Professor Larry Kotlikoff, our unfunded liabilities are well in excess of 200 trillion dollars right now.

If individuals, corporations, state and local governments and the federal government all stopped going into more debt, we would plunge into the greatest economic depression in U.S. history immediately.

The system is deeply, deeply broken, and the only way that we can keep this debt bubble going is go keep accumulating even more debt.

Anyone out there that believes that the U.S. economy has been “fixed” is completely deceived.  NOTHING has been fixed.  Instead, our long-term financial imbalances are getting worse at an escalating pace.

Unfortunately, the attitude of the general public is so similar to what it was just prior to the great financial crisis of 2008.  Most people seem to assume that just because we have not experienced great consequences for our very foolish decisions up to this point that no great consequences are coming.

And many also assume that since control of the White House has switched parties that somehow things must magically be better as well.

Of course the truth is that the only way that our long-term problems are ever going to be fixed is if we start addressing the issues that caused those long-term problems in the first place, and that simply is not happening.

As I have traveled extensively over the course of the past year, I discovered that most Americans do not want to make fundamental changes to the system, because they are under the illusion that the current system is working just fine.  So it will probably take another major crisis before most people are ready to consider fundamental changes, and when it finally arrives we will need to be ready to educate the public.

The system that we have today is not fundamentally sound at all.  We desperately need to return to the values and principles that this nation was founded upon, but until things start getting really, really bad it is highly unlikely that the American people will be ready to embrace those changes.

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.

According To The “Buffett Indicator”, The Stock Market Is More Primed For A Crash Than It Has Ever Been Before

Warren Buffett’s favorite indicator is telling us that stocks are more overvalued right now than they have ever been before in American history.  That doesn’t mean that a stock market crash is imminent.  In fact, this indicator has been in the “danger zone” for quite some time.  But what it does tell us is that stock valuations are more bloated than we have ever seen and that a stock market crash would make perfect sense.  So precisely what is the “Buffett Indicator”?  Well, it is actually very simple to calculate.  You just take the total market value of all stocks and divide it by the gross domestic product.  When that ratio is more than 100 percent, stocks are generally considered to be overvalued, and when that ratio is under 100 percent stocks are generally considered to be undervalued.  The following comes from MSN…

That being said, the Buffett Indicator, while it’s not a flawless indicator, does tend to peak during hot stock markets and bottom during weak markets. And as a general rule, if the indicator falls below 80%-90% or so, it has historically signaled that stocks are cheap. On the other hand, levels significantly higher than 100% can indicate stocks are expensive.

For context, the Buffett indicator peaked at about 145% right before the dot-com bubble burst and reached nearly 110% before the financial crisis.

So where are we today?

Right now we are at almost 149 percent, which is the highest level ever recorded…

Where does the Buffett Indicator stand now? It may surprise you to learn that, at nearly 149%, the total market cap to GDP ratio has never been higher. It’s even higher than the 145% peak we saw during the dot-com bubble.

In recent days we have seen a “tech bloodbath”, but that was nothing compared to what is eventually coming.  Ultimately, the stock market would need to fall by at least one-third in order for prices to be properly balanced again.

And it appears that Warren Buffett is taking his own advice.  His company is currently sitting on more than 100 billion dollars in cash…

Having said that, it does seem like Buffett himself is paying attention and agrees that the market is generally expensive. After all, the lack of attractive investment opportunities has resulted in Berkshire Hathaway accumulating nearly $110 billion of cash and equivalents on its balance sheet. Plus, Buffett has specifically cited valuation when discussing the absence of major acquisitions lately.

Warren Buffett didn’t become one of the wealthiest men in America by being stupid.  He knows that valuations are absurd right now, and he is waiting to strike until valuations are not so absurd.

And he knows that another recession is inevitably coming.  I wrote about some of the trouble signs yesterday, and more trouble signs seem to pop up on a daily basis now.

Earlier today, CNN published an article entitled “Two recession warning signs are here”…

Home sales have declined in four of the past five months as housing prices have grown — but paychecks have remained stagnant. Many people can’t afford to buy homes, and those who can are taking on a lot of debt to get into them.

I feel really bad for those that purchased a home in recent months, because those poor people are getting in right at the top of the bubble.  The housing bubble is about to burst in a major way, and there will be a tremendous amount of pain afterwards.

And we received more bad news about the housing market on Wednesday.  According to Redfin, housing demand plunged 9.6 percent in June…

The long list of housing headwinds is finally taking its toll on potential buyers. Housing demand fell 9.6 percent in June, compared with June 2017, according to a monthly index from Redfin. That is the largest decline since April 2016.

CNN’s second “warning sign” is the fact that the yield curve is about to invert…

The Federal Reserve, which is finishing up its two-day meeting Wednesday, is expected to raise its target rate two more times this year. Higher rates have boosted short-term US Treasury bond rates. But the longer-term bond rates haven’t risen along with the shorter-term rates, because investors are growing wary about the economy over the long haul.

With two more interest rate hikes planned, the Fed could boost short-term rates higher than long-term ones, inverting the so-called yield curve. An inverted yield curve has preceded every recession in modern history.

If you don’t understand the yield curve or you just want a deeper examination of this issue, please see my previous article entitled “Beware – The Last 7 Times The Yield Curve Inverted The U.S. Economy Was Hit By A Recession”.

In recent weeks, there has been renewed interest in my economics website as people begin to wake up and understand that a major economic crisis is looming.  Of course the truth is that we are way, way overdue for a stock market crash and another recession.  The only thing that is surprising is that it took us so long to get here.

Sadly, most people are still very much asleep.  Average Americans spend most of their waking hours staring at either a television or a computer screen, and the big media companies control almost all of the media that we are so voraciously consuming.  Instead of thinking for themselves, most people simply regurgitate what they have been fed by the media giants, and we are never going to turn things around if we continue to allow “the matrix” to tell us what to think.

The Buffett Indicator is very simple, but it is also very accurate.  If you want to do well in the stock market, you want to buy low and sell high, and right now we are in absurdly high territory.  Stock valuations always return to their long-term averages eventually, and many believe that the coming stock market crash is going to arrive sooner rather than later.

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

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