SitRep – 6/3/2017 (Economic Alert!)

I don’t like what I am seeing…at all!

Since the election of Trump many people have been sickeningly euphoric about the economy. Some have claimed job growth is skyrocketing, stock market is reaching all-time highs, jobs are coming back to the US, industry is growing, etc., etc…ad nauseam. These people are delusional, sycophants, blind, stupid, or trying to be part of some weird disconnected political or cultural movement. Whatever their motivation or reasoning…they are wrong…dead wrong.

Job Growth –

Let’s take April 2017 job’s report:

  • 211,000 jobs added. Not bad by the sounds of it.
  • 62,000 of those jobs are in the extreme low-end of the job market…retail, leisure and hospitality.
  • 17,000 jobs went to the government that sucks money out of the economy vs. contributing.
  • Nearly 40% of the jobs created either were low-paying or economy hurting jobs.

But how does April 2017 compare to April 2016:

  • April 2016 added 160,000 jobs vs. April 2017 of 211,000 jobs…that’s a 50k increase in new jobs.

Sound pretty good?

Let’s look at reality now…

Year-To-Date job cuts are 122,389 for 2017. Last year job cuts for the same time period was only 65,742. That means we’ve lost nearly double the jobs this year vs. last year in April.

So let’s revisit the April 2017 jobs report…a 50k increase in new jobs vs April 2016. Now, hold that thought for a minute.

We are losing almost double the jobs in 2017 vs. 2016. In real terms we are suffering nearly a 100% increase in job cuts and barely a 30% increase in new jobs. The reality is…we are losing economic ground in 2017…BIG TIME!

We are on-pace to suffer approximately 200,000 job cuts in 2017, possibly more. Even at 200k jobs lost, that will be some of the worst job cut statistics since the Great Recession!!!

Throw that on top of the mall-closing report. Remember I have been warning about retail problems. A new report out says that 25% of all malls will be closed within five years. Who doubts that? Malls are a dying breed just like the old video rental stores.

Here are the questions that need to be asked in light of those mall closings”

  • Where will those low-end retail workers get jobs?
  • How much money is lost from the loss of income from store workers?
  • How much money is lost to the local economy from the removal of those stores?
  • How much do commercial property values go down as a result of a massive amount of retail space now dumped on the local real-estate markets?

Are store closings really that bad?

For 2017 over 8,600 stores are expected to close. Not only is that the highest in 17 years…it is almost 45% worse than the Great Recession!!

Look folks…don’t be fooled, don’t be blind, don’t be part of the problem…be informed!!!  Look at the reality of the economy…it sucks! Any way you look at it things are bad and it is getting worse. You can think Trump is doing a great job for the economy but let the facts, the actual real numbers and statistics speak for themselves. And it ain’t good by a long shot!

Why should “retail” problems worry you? Historically the only spending that drives our economy up is…consumer spending (i.e. retail). If we are losing retail jobs and closing stores and retail spending is down…well, you do the math.

Further Evidence –

Let’s talk jobs for May 2017…There were only 138,000 jobs added last month, May 2017. The expectation was 185,000…that is 34% few jobs created than was expected. That is terrible!

Now consider the 2017 job cuts. There were (averaged) 24,000 jobs cut in May. That means there was only a net job growth of 114,000 jobs created in May 2017. That is unreal bad…extremely bad!

Let me make this very, VERY real for you…it takes approximately a net increase of jobs each month to keep up with population growth minus those leaving the job market. That number varies a little each month but averages about 105,000 new jobs required each month just to keep up with population growth minus people leaving the workforce.

So bottom line…in May 2017 we saw a net increase of only 9,000 jobs!  Would you call that a booming economic report? How about just a good economic report? I call it a catastrophic economic report!

Let’s go back to the April 2017 job numbers that were touted as “proof” that the economy was roaring.

  •   211,000 jobs created
  • -105,000 jobs required to stay even with population growth
  • –  24,500 actual job cuts

81,500 actual net job increase…a far cry from the 211,000 figure that the government originally threw out there as “proof” of a major economic boom taking place. But, don’t forget that 62,000 of those jobs were retail, leisure and hospitality jobs…most of which are seasonal jobs for summer travel and vacations. Oh, and now let us not forget that 14,000 jobs went to growing the government itself.

That leaves a grand total of 5,500 new jobs for real people in the private sector. How’s that for “proof” of an economic boom!

Debt Bomb –

For the first time this morning I heard our national debt crisis referred to as a “debt bomb”. Wow! I knew that $20,000,000,000,000 (20trillion) was a lot of debt. I know it is bad for our country. I know that it is sinking us…but “bomb”??? Well, I guess I didn’t understand just how bad it really is.

As I was doing my research for this SitRep I found that Peter Schiff used the term in January 2017. As I crunched the numbers I now understand why Schiff was right to sound the bomb alarm when he did.

Our national debt, money actually owed, is $20,000,000,000,000. Our current average interest rate on that amount is approximately 2.16%. That means each year we spend about $440,000,000,000 ($440billion) just in debt interest. For every .1% (1/10th of 1%) that the interest rate increases, that is another $21,000,000,000 ($21billion) in annual interest payments.

So let’s imagine the interest rate increasing by a single percentage point to 3.16%. That means we are now paying nearly $650,000,000,000 ($650billion) in annual interest payments and NOT REDUCING the debt by a single dollar.

So when does the interest payment become too much for the government to afford?

More Debt Bomb –

The chart above should be very disturbing. Here is what it shows:

  1. Overall private debt is back at 2008 Great Recession levels.
  2. Private debt is less secured than it was at 2008 Great Recession levels.
  3. Overall private debt is rising at alarming rate, biggest increase in a decade.

Here’s the next whammy!

  • Home buying has slowed WAY down, and far fewer people have a mortgage.
  • Auto loan debt has increased substantially and is way a head of 2008 levels.
  • Credit card debt is just about the same as 2008 levels.
  • Student loan debt is twice what it was at 2008 levels.
  • All other debt is about the same as 2008 levels.

Conclusion: Private debt (folks like you and me) is at the same levels as 2008. However, that debt is far less secured…by a huge amount vs. 2008.

When Great Recession #2 hits…what happens in addition to losing a family home?

What happens to all that auto debt? What happens to all of that student loan debt?

A hidden nugget of knowledge hidden away in there…The US population is far less financially stable now that just before the 2008 Great Recession. Let’s go over a couple more 2008 Great Recession figures:

  • Americans lost nearly $20trillion dollars in real-term wealth.
  • The federal government spent over $23trillion in government handout programs.

That is $43trillion in losses and government spending in the Great Recession of 2008. That is $14,300 for every man, woman, and child in the United States! To pay that massive loss:

  • Americans lost trillions in the stock market.
  • Americans lost trillions in home foreclosures.
  • The US Government borrowed and gave away trillions in money it borrowed.

What happens this time?

  • Americans own far less stocks and mutual funds.
  • Americans own far fewer homes.

What’s left?

From 2008 to 2015 the national debt doubled. Almost 100% of that was paying for the 2008 Great Recession.

When Great Recession #2 hits we are looking at the national debt once again doubling to “bailout” American citizens. And that my friend means out debt servicing costs doubles…at a minimum.

1988 in Review –

In 1988 the total national debt was $2.6trillion and the interest paid on that paid was $214billion. That tells you we were paying 8.2% interest on the national debt. If that was the case today (debt vs. interest rate) we would be paying $1.6trillion just for the interest payment on our national debt…nearly FOUR times what we are actually paying today. That $1.6trillion represents 50% of all federal government revenues for last year!!!!

So now how do you think we survive as a country, as a society, and a Constitutional Republic when the actual scope of our debt finally comes to the forefront?

Magic Breaking Point –

For the first time I have been able to actually calculate a true TEOTWAWKI breaking point. It is an actual economic “end-of-the-world” mile post.

The magic national debt interest rate (i.e. 10-year T-Bill) number that crashes the economy is 5% – 7%. At that point the annual interest owed exceeds the government’s financial ability to pay that interest and meet other obligations such as national defense and entitlements.

But, there is also another magic number…total debt service costs. We are currently at about $430billion per year in debt servicing costs. When that number reaches approximately $850billion it will be just as bad as a 4.1% debt interest rate. Meaning this, if we have another Great Recession and the government spends its way out again…the economy crashes.

Here is the problem that will manifest itself when that time comes. We have two Constitutional requirements when it comes to US federal government payments; 1) Civil War Union Army pensions, 2) debt interest. The Union Army pension issue is resolved. But, what about #2?

The federal government has obligated itself to pay for certain programs, namely entitlements and national defense. So, let’s ask the questions when money gets tight as I outlined…

  1. Does the federal government pay debt interest as per Constitutional obligation?
  2. Does the federal government continue to pay people their entitlement checks?
  3. Does the federal government continue to pay for national defense?

What happens if the answer to any of those three questions is “no”?

So what is the answer you came up with?

I can think of only one answer that doesn’t involve a “no” to all of the above. The scheme is called “inflating”. It is where the federal government simply creates money out of thin air at an almost unheard of pace to pay the debt interest, and maybe some of the debt itself, along with all its other obligations.

The problem is…that scheme has never, ever worked in the history of the world. It has always failed. And when it has failed it has always ushered in a dictatorship…an authoritarian state.

Any why an “authoritarian state”? Because the people rebel against the ruling class and rich elites that caused the problem. And a strong man comes along and crushes the unruly populace in favor of the ruling class and rich elites.

And is there anything that would make you think it would be any different with the good ole USA?

What I Will Do –
  • At 5% debt serving rate (10-year T-Bill) or $800billion debt service –
    • I will 100% in cash & precious metals (no CDs, no bonds, etc.)
    • Zero debt.
    • Living full-time at my BOL.
    • All preps 100%.
  • At 4.5% debt serving rate (10-year T-Bill) or $700billion debt service –
    • All preps 100%.
  • At 4% debt serving rate (10-year T-Bill) or $600billion debt service-
    • I will cash in all my IRAs, 402Ks, etc.
    • I will have a fuel supply for my vehicles and never below 3/4 tank of gas.
  • At 3.5% debt serving rate (10-year T-Bill) or $500billion debt service –
    • My minimum food & seed storage goals 100% complete.
    • Keep a minimum of six months cash on hand.
    • BOL property self-sustaining.

I am sure I will add more to the list as time goes on, but this is the basic minimums I intend to have completed.

Summary –

It is coming at us…like a freaking freight train.

  1. US government debt is worse than it was in 2008 by a factor of 2.
  2. US private debt is worse than it was in 2008.
  3. Job cuts have doubled in the last year.
  4. Home ownership is down significantly.
  5. Retail/consumer spending is taking a big hit.

Then there is the political war taking place in Washington. Make your own conclusion on that outcome.

That freight train is headed right for us!

And no, Trump and Congress are not going to be able to slow it down, let alone stop it. Trump, nor Congress, is proposing anything, not a single thing, that actually reduces the national debt or slows the national spending. Granted, they are moving the money to different priorities. But, what good does that do us if we still sink the country?

What I am asking you to do is this:

  • Do not be fooled!
  • Do not be blinded!
  • Do not be pacified!
  • Do not panic!
  • Do not allow politicians to control you!
  • Do not allow the rich elites to control you!
  • Take control of your own life.
  • Take control of your own finances and spend your money where it will do the most good for your family.
  • Stay awake and be prepared to move quickly.
  • Grow closer to God.
  • Learn to be a better servant to others.


If you would like to ask me a question concerning this SitRep…or any other subject, simply submit it via the form below.

 

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4 thoughts on “SitRep – 6/3/2017 (Economic Alert!)

  1. I was interrupted in reading this post…another great one from A.H. Trimble.

    I’m glad I got back to it today, else I would have missed the most important section: “What I Will Do” provide extremely cogent and on-target personal guidelines for preparing against and managing future economic shocks. Essentially, Trimble has identified personal “trip wires” for actions to survive the expected financial turmoil.

    THIS IS EXTREMELY VALUABLE!!!

    I repeat the section here (I apologize that the original formatting is lost)::
    “What I Will Do –

    At 5% debt serving rate (10-year T-Bill) or $800billion debt service –
    — I will 100% in cash & precious metals (no CDs, no bonds, etc.)
    — Zero debt.
    — Living full-time at my BOL.
    — All preps 100%.
    At 4.5% debt serving rate (10-year T-Bill) or $700billion debt service –
    — All preps 100%.
    At 4% debt serving rate (10-year T-Bill) or $600billion debt service-
    — I will cash in all my IRAs, 402Ks, etc.
    — I will have a fuel supply for my vehicles and never below 3/4 tank of gas.
    At 3.5% debt serving rate (10-year T-Bill) or $500billion debt service –
    — My minimum food & seed storage goals 100% complete.
    — Keep a minimum of six months cash on hand.
    — BOL property self-sustaining.
    I am sure I will add more to the list as time goes on, but this is the basic minimums I intend to have completed.”

    Are these the absolute 100% correct trip wires for what actually will happen, in the event? Probably not; no one’s ever been a financial collapse of quite this breadth and depth, and predicting the exact mile posts are naturally obtuse.

    But, this is the ABSOLUTE BEST whack at this problem that I’ve ever read.

    Pay less attention to those that opine endlessly about how the great financial crash is coming–and more attention to solid advice such as this, for negotiating the resulting chaos.

    RJ

    Like

  2. Good post, and I agree, that light at the end of the tunnel is an oncoming freight train.
    Good advice too about having all your preparations as squared away as possible sooner rather than later.

    Here are a few more statistics:

    Dollar General Accounts For 80% Of All New Store Openings In The US (Tyler Durden)
    https://www.theburningplatform.com/2017/05/27/dollar-general-accounts-for-80-of-all-new-store-openings-in-the-us/
    What does that say about the consumer spending power of the population? Nothing good.

    Federal Unfunded Liabilities Exceed $127 Trillion (Forbes 2014)
    https://www.forbes.com/sites/realspin/2014/01/17/you-think-the-deficit-is-bad-federal-unfunded-liabilities-exceed-127-trillion/#711ec46c9bf8
    The estimates run to as much as 200 trillion dollars. The GDP of the entire world is 60 trillion/year.

    “The derivatives market is, in a word, gigantic, often estimated at more that $1.2 quadrillion”.
    (Investopedia 2015)
    http://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp
    1.2 quadrillion! That’s 1,200 trillion!
    It was 600 trillion in 2007-8.

    Like

  3. When you say keep a minimum of six months cash on hand do you mean in the bank or at home in paper bills? Naive person here. And six months. Does that mean if you have a household income of $80,000 you have $40,000 cash in bills or in the bank? Not trying to sound ignorant, but I never really know what it means when people say this.

    Thanks, Jennifer

    Liked by 1 person

    • Jennifer, Great question!!!! I should have been more clear. I meant to say have 6 months worth of household expenses on hand. And that money comes from your disposable income. And that money needs to be in cash. I will begin taking my money out of banks (credit union actually) when the debt servicing rate hits about 4 – 4.5% or the actual debt service amount approaches $700billion. Does that help? AH PS: Feel free to ask any other question you might have. You can use the “comments” or use the eForm on the page.

      Like

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