I’ve been watching the indicators for the US and global economies pretty closely for the last several years. Last month I issued an updated “economic warning” because I felt that we could be close to a serious problem. My original economic warning was in June. I feel that that another economic warning is necessary. Let me explain…
Do I think the economy could collapse overnight? Yes, but probably won’t. However, it is safe to note that the overall economic indicators have been showing the US has been in a steady decline for some time now, over 15 years. The collapse of 2007/2008 was a deep recession that we still haven’t climbed out of. Nevertheless, there are far more serious indicators that are showing we continue to fall off the financial cliff.
But let me back up to the answer where I said, “yes” to the question of the economy collapsing overnight but probably won’t.
There is no, absolutely zero, historical precedence of any overnight collapse of the US economy. And history is a pretty good predictor of the future. I am not saying it won’t happen, but odds are that it won’t happen overnight. But that doesn’t mean everything is fine and dandy. Just the opposite actually. We are in a continuing economic death spiral in the US.
Here are the most recent indicators that as a country we are falling apart economically:
1. China’s stock market is melting down. It is falling apart at the seams. Despite Chinese government intervention of massive cash influx, removing half of all stocks from the market, and stopping short-selling, their stock market is in a freefall of epic proportions. And like it or not, our two economies are tied together closely. You can’t expect the biggest economy in the world to meltdown and it not affect us. The latest China stock market collapse was 8.5% in a single day, and that was Monday (7/27/2015). If that happened to the US market, it would be a 1,000-point drop and it would start a worldwide panic. The Chinese market is pushing global investor’s panic button even as we speak.
2. China has been dumping gold into the commodities market. In one day last week, China dumped 5 tons of gold into the market worth approximately $200,000,000. The overall dollar amount is relatively small in the larger scheme of things. However, the important aspect of this is a little more subtle…no country dumps 5 tons of gold into the market unless they have to. Moreover, a country the size of China…who comes up with the idea that they “have to” dump that much gold and for what reason? That is the bigger issue, and it is the bigger threat to the bigger picture.
3. US home ownership is at an all-time record low. Home price growth has stalled. The only demographic driving home prices higher are high-end homes in large, popular markets. The weakest demographic is the first-time homebuyer. The same demographic is also suffering the most from crushing student loan debt, and a much higher unemployment rate than the older homebuyers. Again, the first-time buyer demographic is also suffering the most from the widest income disparity.
4. US consumer spending has stalled. Historically the US consumer has been called upon to boost economic growth. That has not happened since 2007/2008 and especially lately. It was just released that the Consumer Confidence index has taken a serious downturn.
5. Historical data for key predictors of consumerism and the general business climate in the United States shows the following:
- Consumer Confidence Index down 37% since 2000.
- Consumer Sentiment Index down 14% since 2000.
- NFIB Small Business Optimism Index down 35% since 2000.
You now have three very valid indexes clearly pointing out that Americans are not optimistic about America’s economic future. These indicators have all trended in the same direction for 15 years. That clearly shows a valid and reliable pattern. Unfortunately, all US economic data supports those indexes. The US stock market could be pointed to as a bright spot in the economy. However, the only reason that the stock market is performing well is the Federal Reserve has poured hundreds of billions of dollars into the markets. And every cent of that money was borrowed by the US gov’t putting the country deeper and deeper into debt.
6. US job growth is non-existent…still. The previous jobs report showed a low first-time unemployment claims number. However, the same report released information admitting that the number they were stating was not accurate. They admitted that the “model” they are using to estimate unemployment is seasonally adjusted for huge layoffs by car manufacturers in the summertime. But those manufacturers no longer layoff their workers like they use to. So the jobless claim numbers were artificially made to look unrealistically better. Besides, remember, these jobless claim numbers are not real numbers, they are government guessitmates based on a very limited pool of phone surveys. Here are some additional facts:
- Overall the jobs created since 2007 have been mostly part-time and low income jobs.
- The jobs lost have been mostly middle-income, skilled jobs.
- The jobs lost equals the jobs created.
- The number of illegal aliens coming into the country during this time period roughly equals the number of jobs created during the same time period.
- The labor force participation is the worst its been in 50+ years.
7. Personal and family income growth is non-existent. There simply isn’t any income growth. To the contrary, there is a decades long historical decline in actual income growth.
8. Government spending and national debt continue to grow exponentially. There is absolutely no desire by our politicians to curb government spending. There is no economic model that shows that the government can ever pay off the national debt or meet annual budgetary spending. The Federal Reserve, a private banking corporation in-charge of the US economy, simply prints more money for the government to borrow to keep paying bills. At some point it will break.
9. Greece defaulted in 2015. They still haven’t reached an agreement for their debt restructuring.
10. Economies of Spain, Portugal and Italy are struggling to stay afloat and appear to be heading down the same path as Greece.
11. Venezuela is expected to default in 2016.
12. Puerto Rico is teetering economically.
13. India’s currency is getting slammed and continues to weaken.
14. Russia’s rubble continues to weaken. Russia continues to expand its military influence in Eastern Europe.
15. Brazil’s economy continues to shrink. Its currency is weakening to inflationary levels. There is no notable prospect on the horizon that Brazil’s economy will strengthen.
16. The US stock market has not increased in value since early November 2014. The market has fallen noticeably since early January 2015. The market is down significantly since mid-July of this year.
17. The price of oil is down 60% since August 2014. Oil dropped 27% just since June 9 of this year. Why is the price of oil an important economic indicator? Oil provides fuel that powers manufacturing plants that make consumables, mines and processes the metals that go into consumables and provides the fuel to the trucking industry that moves all those commercial and consumer goods around the country. When the demand for that fuel drops, it is based on three things; 1) supply, 2) demand, 3) political stability. The supply of oil has remained the same for a long time. The political stability of the world currently is unchanged for the most part. That leaves “demand.” When companies expect poor or worsening economic conditions the demand for fuel drops, driving the price of oil lower. That reflects the 60% drop in the price of oil in the last year, especially lately.
18. The price of copper is down 40% since February 2011 and shows no indication of recovering. Why is the price of copper an important economic indicator? Because copper is used in the manufacturing of commercial and consumer electronics and commercial and residential construction. If the demand for copper is down, the price of copper falls. If demand is down, then businesses don’t see the need for electronics and don’t expect commercial and residential construction to pick up.
As you can see, there is a long list of significant economic indicators demonstrating that there is a problem in the national and global economies.
All the major indicators point to the fact that there are serious economic issues in the world today, all of which are affecting the economy of the United States. It is only a matter of time until they begin to become unmanageable and the people lose confidence. When that happens…then it all comes crashing down quickly.
But a close friend of mine made an interesting comment the other night when we were talking. He said, “It will all come crashing down when they are ready for it to.”
What an interesting comment. A statement that I really can’t disagree with.
- Economic Warning (6/8/2015)
- Economic Warning – Part #2 (update, please read) 7/8/2015
- Economic Warning – Part #2 >>>> Urgent Update <<<<
- Silver & Gold…Really?
- WARNING – Special Edition (5/29/2015) : Part #1
- Get Home Bag
- Get Out of Dodge – Bug Out Bag
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