Thursday, December 20, 2018

Warning Flags Flags For Economy

These 8 Red Flags Warn Us We're Speeding Toward An Economic Collapse Right Now

This isn’t exactly an article loaded with Christmas cheer, but there’s a very good reason that my family has strictly limited our holiday splurges this year. It’s because all the signs right now seem to indicate the US is hurtling toward an economic collapse.

It’s inevitable, of course. Our economy has been artificially propped up for decades, since abandoning the gold standard. We’re $21 trillion dollars in debt, an unfathomable number. The fact that other countries still lend us money boggles the mind. If the United States was a person with such a high ratio of debt that we aren’t paying off, we wouldn’t even be able to buy a car with one of those 25% interest loans, that’s how bad our credit would be.
Not only that, but there are some parties who seem to want to see the economy go belly up for their own greedy and nefarious purposes.
Here are the red flags that have me concerned about an imminent economic collapse.

The stock market is crashing.

Right now, the market is on track for a month that is equivalent to the crash of 1929, when the Great Depression began.  Both the Dow Jones Industrial Average and the S&P 500 are down by 8% during a month that is usually really good. 
The ferocity of this stock market crash is stunning many of the experts, and many investors are beginning to panic.  Back in early October, the Dow hit an all-time high of 26,951.81, but on Monday it closed at just 23,592.98.  That means that the Dow has now plunged more than 3,300 points from the peak of the market, and many believe that this stock crash is just getting started. (source)

Dr. Ron Paul told CNBC (and they actually published it!) that we’re headed for a depression in the next 12 months.
The stock market bears close watching over the next couple of weeks, for sure. To learn more about surviving a market crash, go read this article. To learn how to protect your money even if you don’t invest in the market, read this article.

“Once this volatility shows that we’re not going to resume the bull market, then people are going to rush for the exits,” Paul said Thursday on CNBC’s “Futures Now. ” The relentlessly bearish former congressman added that “It could be worse than 1929.”

During that year, the stock market began hemorrhaging, falling almost 90 percent and sending the U.S. economy into a tailspin.

Paul, a well-known Libertarian, has been warning Wall Street a massive market plunge is inevitable for years. He’s currently projecting a 50 percent decline from current levels as his base case, citing the ongoing U.S.-China trade war as a growing risk factor.

The treasury futures market isn’t looking good either

An enlightening article by Jeffrey Snider of Alhambra Investment Partners explains why we need to be watching the Treasury futures market. Here are the highlights:

The Treasury futures market sort of runs the place, but it isn’t always a straightforward process from which to drive analysis.
What we do know is that December has been a total disaster.In the stock market, of all places, the S&P 500 entered the month on an upswing. The initial liquidation that began like WTI after October 3 by the last stretches of November seemed to be under control. The index had rallied back almost to 2800 by December 3.

It’s now down almost 10% in just a few weeks, more importantly setting a new low for the year (lower lows). While that has surprised many, the Treasury futures market issued up what might have been the biggest warning yet the last week in November…

The amount of corporate, personal, and national debt is mind-blowing.

Brandon Smith explained it well in a must-read article on Alt-Market. Here’s an excerpt that perfectly sums up our situation.

The national debt is closing in on $22 trillion, with over $1 trillion a year currently being added for the American taxpayer.
Corporate debt is at historic highs not seen since 2008, with S&P Global reporting over $6.3 trillion in total debts and the largest companies holding only $2.1 trillion in cash as a hedge.
U.S. household debt currently stands at around $13.3 trillion, which is $618 billion higher than the last peak back in 2008, during the credit crisis.
U.S. credit card debt surpassed $1 trillion for the first time in 2018, the highest single year amount since 2007 (once again, we see that debt levels are spiking beyond the lines crossed just before the crash of 2008).
One would think that with so much lending and creation of consumer debt, we would see a massive expansion in home and auto markets. And for a time, we did. The problem was that most home purchases were being undertaken by major corporations like Blackrock, as they devoured distressed mortgages by the thousands and then turned those homes into rentals. In the auto market, there was a large spike in buying driven by lending, but this lending was accomplished through ARM-style car loans, the same kind of loans with lax standards that helped cause the mortgage crisis in 2008.
Today, both in the housing market and the auto market, a crash is indeed taking place as the Fed raises interest rates and makes holding these loans ever more expensive.
Pending home sales have tumbled to a four-year low, as one in four homes on the market is now forced to lower prices. Debt is becoming expensive, and therefore demand is slumping.

Is the Fed trying to crash the market?

The Federal Reserve has decided not to come to the rescue this time.  All of the economic numbers tell us that the economy is slowing down, and on Wednesday Fed Chair Jerome Powell even admitted that economic conditions are “softening”, but the Federal Reserve raised interest rates anyway.  As one top economist put it, raising rates as we head into an economic downturn is “economic malpractice”.  They know that higher rates will slow down the economy even more, but it isn’t as if the Fed was divided on this move.  In fact, it was a unanimous vote to raise rates.  They clearly have an agenda, and that agenda is definitely not about helping the American people.
Could it be possible that they actually want a stock market crash?
Some are suggesting that the reason why the vote was unanimous was because they wanted to send a “strong signal” to President Trump.  He has been extremely critical of the Federal Reserve in recent weeks, and this could be a way for the Fed to show Trump who is really in charge. (source)

Other things to watch

Chicago is probably going to default on pensions because to make it right, each person – not household – person – in Chicago would have to pony up $140,000. (source)
Almost half of the people in the United States struggle to pay for basics like food and rent. And if something throws a monkey wrench in their budget, they could quickly become homeless. Most folks are much closer to that point than we imagine.
While employment numbers look respectable, the number most people aren’t looking at is underemployment. This is when a person is unable to work as much as they’d like to. (source) Many overqualified people are working part-time at fast food restaurants and grocery stores – and taking more than one low-paying job – just to make ends meet. Now, there’s no shame in hard work, but when it takes multiple jobs to survive, we’ve definitely reached a point where our cost of living has risen beyond a reasonable point. As well, due to government policies requiring that employers pony up expensive healthcare for full-time employees, they simply can’t afford it, so they keep hours low.
Other countries are ditching the dollar. Both China and Japan have been quietly reducing treasury holdings and purchases. (source) They see what’s coming, although many people here appear to be blind to it.
When you put all these things together, it certainly paints an ugly picture, doesn’t it?

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