While everyone, at least the talking heads, are gushing over the economy and claiming it is the best and fastest recovery in history…I have a different take.
First off…inflation! It is virtually now out of control and getting worse, and will get worse. And there is an interesting phenomenon occurring…credit card debt is increasing at the same time. Yup, most Americans are using credit cards to keep up with inflation price increases. And another interesting tidbit…while personal income is rising slightly, it is being entirely eaten up by inflation. And lastly, something you already know…the price of essentials is far outpacing stated inflation figures. And the price on essentials will get worse…unless the government gets involved.
Jobs…ouch! While recent job numbers look promising, a person only needs to look below the surface. One of the main reasons that new unemployment claim numbers are down is the large number of folks leaving the workforce…permanently. And existing claim numbers being down due to folks who have stopped looking for work. Yes, there are a large number of job openings, so ask yourself this…Why aren’t people taking those jobs? The US “quit rate” as of September is 3%! Some job sectors are experiencing nearly a 7% quite rate. That translates into over 20,000,000 people left their jobs between May and September of this year…20 million!!! And FYI…that 3% quit rate is a historic record number. While true that most of those folks who quit their jobs find new ones, there is a “cost” to that movement. As the previous employer now works to back-fill the vacant position they incur employee acquisition cost, training costs, etc. And those costs go to the bottom line of the employer…which gets passed on to the consumer. Yup, higher prices of everything!
Supply Chain…not getting better. Movement of shipping containers (TEUs) is actually down since last month. Meaning, it is taking even longer to move TEUs off the ships and out of the ports. Talking with my contacts along the supply chain…things are actually getting worse moving products from China to the US shelves. And there is no definitive time-frame for that to change.
Federal Reserve…damn them! The Fed chair is talking that they will more quickly taper their propping up of the stock markets, interest rates, and the economy in jeopardy. As Powell was making those hints, then statement, the markets took a hit…a pretty good hit…about 5-6% as of today. Fortunately the market (S&P500) is up about 24% for the year.
National debt…sucks! I won’t plow that row again since I have gone into significant detail over the last few years on this subject. What I want to touch on…the concept that inflation is good for the national debt. The theory is that the more inflation we have means the smaller the national debt is because those debt dollars are worth less. Forget it!!! There is no common sense to that theory. The debt is the debt is the debt. It is not going away…ever! There is no intention on anyone’s part to ever pay off that debt. At some point they will simply stop tracking it, or at least greatly diminish any mention of it. In the old days the “market” would drive/set interest rates which in turn would control the interest rate that the federal government would pay on US Treasury Notes. The higher the rate would go, the more the US government would pay, in the form of interest, on those notes. Now the Federal Reserve essentially completely controls interest rates on those same notes, and the market in general. This period of inflation will have little effect, positive or negative, on the national debt.
Government spending…out of control! The US government spending is completely out of control, no bounds, no controls, no hope. It is clear that the US government is committed to destroying the US dollar…and in the process, destroying the US economy. It is no longer a conspiracy theory, it is a clear intentional path, easily seen by anyone who wishes to look. The current US government debt stands at nearly $30,000,000,000,000 (30 trillion)!!! That is 130% of US GDP (2020)! That is extremely dangerous territory.
Personal debt…exploding. I mentioned earlier how most families are dealing with runaway inflation…acquiring more and more credit card debt. In August alone US consumer debt went up $29,000,000,000! And increase of more than double that from the month before. The trend is now a monthly increase that is DOUBLE that of the historic average! And every $ of personal debt increase destabilizes the US economy more and more. The next number is a staggering, almost unbelievable, number…and that should scare the hell out of you. The total US consumer debt now stands at over $25,000,000,000,000 (25 trillion)!!! That is 120% of US GDP (2020)! That is exceptionally dangerous territory.
Corporate debt…nightmare! Last year US companies took on historic record of debt, now over 130% of GDP. As revenues rebounded in 2021 that % fell slightly. However, latest reports show a reverse of that trend, increased corporate debt with the onset of Omicron and inflation fears. And there is a very disturbing trend…investors are jumping out of corporate bond debt at an alarming rate.
Debt Summary…Personal, corporate, and us government debt now stands at 345% of GDP!! If three things don’t exist that means BIG trouble; 1) good economic growth numbers, 2) strong institutions and independent central bank & policies, 3) level interest rates on debt. And looking at those numbers…we have falling economic growth rate numbers in 2021 Q3, stagnant numbers for 2020 Q4 – 2021 Q2. While the US is perceived as having strong institutions, there is growing skepticism in that perception. And the US central bank (Federal Reserve) is not independent and is working solely at the behest of, and the benefit of, the US federal government. The most worrisome indicator…the 10-year US note interest rate has risen 60% (50 basis points) in 2021! So we have the two factual numbers, economic growth rate & interest rate, looking very, very bad. And the third, more subjective, indicator up for grabs…well, it doesn’t bode well at all for the US debt outlook. And as goes the debt, so goes the economy.
Bottom line…The US economic is more fragile than it has ever been…EVER! In practical terms that means the economy will keep functioning as it is now…until it doesn’t. In plain terms…the economy could crash at any time…it simply needs a single very minor push in that direction.
Do what? Do the same things I’ve been telling you about for years:
- Have your preps ready.
- Hedge your bet and have a nice IRA, 401k, etc. tucked away to take advantage of any stock market gains. We enjoy an S&P500 index mutual fund that has been amazing for us over the last 10 years and up 24% this year.
- A little precious metals is never a bad idea, and never more that 10% of total portfolio.
- Little to no consumer debt.
- Mortgage free if at all possible.
- Ability to grow at least some of your food.
- Ability to be at least somewhat independent of utility companies (new item)
- Etc, etc, etc…
I want to state again in perfectly clear terms:
- The economy’s appearance is good.
- The numbers below the surface show the economy is fragile…very, VERY fragile.
- The chance of a sudden crash has never been higher.
- I have no idea when the crash might occur. No one does.
- I am not sure of what will cause the crash when it does occur.
I will tell you these two things with absolute certainty:
- If you don’t prepare for the crash…it will crush you and your family.
- You still have time to prepare…if you don’t delay.
Finally, some personal advice from me…STOP listening to the extremists!!! There all kinds of folks out there shouting this and that trying to sound like they have it all figured out. Some predict “when”, others predict “how”…and some just spew some of the craziest crap you can imagine. Stop listening to the crazies!!! Chad & Lori Daybell are sad examples of the crazies out there. They tapped into the prepper market and the religious market and the dreams/vision market…and more. Stop listening to and getting caught up in that “crazy” group! You will not benefit from the lunatics and their weirdness or their predictions of this or that. Stick with reality, stick with common sense, stick with your righteous religious leaders, stick with sanity…leave the crazy crap for the crazies.
Do what you know is right! Serve your family and others!
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Absolutely spot on! I’ve followed you for a while and I agree we are on shaky ground, I just finished listening to NY prepper he is being a fear monger. He was all up in the nuclear drill that happened recently (maybe today). The way he was going on was like war will break out sooner rather than later. There is no need for this kind of excitement. If you are prepared you will not fear. I’m sitting within 5 miles of Red Stone arsenal. Should a missile attack come our way I will be vaporized. For me and many others a nuclear attack will send us to the other side. The Economy is going to collapse no matter what happens. we need to be ready for thar collapse. Places like Dallas Fort Worth, Houston, Chicago, Los Angeles, San Diego, Seattle, Washington DC, The North of Virgina, Mobile, several places in Florida, and others will be nuclear targets. Economically we are on borrowed time. The end of the American empire is at its close. How will Americans react to not being “top dog” anymore?
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Jack, You absolutely nailed it in so many ways. Brilliant observations! AH