shtfusa

Are you Prepared?

Recession 2017? Things Are Happening That Usually Never Happen Unless A New Recession Is Beginning February 8, 2017

New Crisis - Public DomainIs the U.S. economy about to get slammed by a major recession?  According to Gallup, U.S. economic confidence has soared to the highest level ever recorded, but meanwhile a whole host of key economic indicators are absolutely screaming that a new recession is beginning.  And if the U.S. economy does officially enter recession territory in 2017, it certainly won’t be a shock, because the truth is that we are well overdue for one.  Donald Trump has inherited quite an economic mess from Barack Obama, and it was probably inevitable that we were headed for a significant economic downturn no matter who won the election.

One of the key indicators to watch is average weekly hours.  When the economy shifts into recession mode, employers tend to start cutting back hours, and that is happening right now.  In fact, as Graham Summers has pointed out, we just witnessed the largest percentage decline in average weekly hours since the recession of 2008…

Average Weekly Hours

In addition to the decline in hours, Summers has suggested that there are a number of other reasons to believe that a new recession is here…

The fact is that the GDP growth of 4%-5% is not just around the corner. The US most likely slid into recession in the last three months. GDP growth collapsed in 4Q16, with a large portion of the “growth” coming from accounting gimmicks.

Consider the following:

  • Tax receipts indicate the US is in recession.
  • Gross private domestic investment indicates were are in a recession.
  • Retailers are showing that the US consumer is tapped out (see AMZN’s recent miss).
  • UPS, another economic bellweather, dramatically lowered 2017 forecasts.

To me, even more alarming is the tightening of lending standards.  In our debt-based economy, the flow of credit is absolutely critical to economic growth, and when credit starts to get tight that almost always leads to a recession.

So the fact that lending standards have now tightened for medium and large sized firms for six quarters in a row is very bad news.  The following comes from Business Insider

“Although modest over the past couple of quarters, it is still worth noting that this is now the sixth quarter in succession that standards have tightened for large and medium sized firms,” Deutsche Bank economist Jim Reid wrote in a research note to clients.

“This usually only happens in recessions.”

Reid is 100 percent correct on this point.  This is precisely the kind of thing that we would expect to see if a new recession was beginning, and if this trend continues it is hard to imagine that the U.S. economy will be able to continue to grow.

And it is interesting to note that job growth at S&P 500 companies has gone negative for the first time since the last recession, and so large firms are definitely starting to feel the pressure.

Simultaneously, lending standards are also tightening up for consumers

“The most notable tightening in standards though was in consumer loans,” the Fed said. “During the quarter, banks reported an 8.3% net tightening in credit standards for credit cards and 11.6% net tightening for auto loans.”

US consumer spending accounts for more than two-thirds of economic activity and is thus a key driver of growth in the world’s largest economy.

Those numbers for credit cards and auto loans are major red flags.

It is very simple.  Tighter credit means less economic activity which means slower economic growth.  The U.S. economy grew at a dismal 1.9 percent annual rate during the 4th quarter of 2016, and it would be absolutely no surprise if we end up with a negative number for the first quarter of 2017.

One of the big reasons why lending standards are tightening is because bankruptcies are rising.

As I reported the other day, consumer bankruptcies just rose on a year-over-year basis in back to back months for the first time in almost seven years.  Commercial bankruptcies had already been rising on a year-over-year basis throughout 2016, and so the fact that consumer bankruptcies have now joined the party is a very bad sign.

And we have also just learned that real median household income declined in 2016

Its official! The spectacular Obama/Fed “recovery” produced no increase in real medin household income in 2016 (the last year of Obama’s reign of [economic] error). In fact, real median annual household income in December 2016 ($57,827) was 0.9 percent lower than in December 2015 ($58,356).

Yes, I understand that there is a tremendous amount of optimism out there right now because of Donald Trump.

But the truth is that it is literally going to take some sort of an economic miracle to avoid a recession.

And if a recession is going to happen anyway, the Trump administration should want it to occur as quickly as possible.

You see, if a recession starts a year from now, it will be much more difficult for Trump to blame it on Obama.  But if a recession starts right now, he will definitely be able to argue that it happened because of the mess that he inherited from the last administration.

In addition, the sooner the next recession ends the sooner the next recovery can begin.  If a recession is still going on during the 2020 campaign, that would be really bad for Trump, but if a recovery is well underway by then that would be really good for his chances.

If you doubt this, just go back and look at the 1984 campaign.  After a very difficult recession, the U.S. economy bounced back strongly and Ronald Reagan was able to ride that momentum to an easy victory.

So this may sound very strange to many of you, but the truth is that if a new recession is coming Trump supporters should want it to happen as rapidly as possible.

Unfortunately, once a new recession begins it may not play out like recessions normally do.  The U.S. government is 20 trillion dollars in debt, we are in the midst of one of the biggest stock market bubbles in history, and our planet is becoming more unstable with each passing day.  So even though Trump is in the White House and Obama is gone, let there be no doubt that a catastrophic economic crisis could literally erupt at any moment.  I continue to encourage my readers to do all that they can to get prepared, because those that are prepared in advance will have the best chance of successfully getting through what is coming.

Unfortunately, a lot of people out there seem to believe that all of our problems have somehow evaporated just because Donald Trump is now living in the White House.

That is simply not true, and we all need to be praying for guidance and wisdom for Trump and his team as they prepare to deal with the great challenges that are ahead for our nation.

Comments Off on Recession 2017? Things Are Happening That Usually Never Happen Unless A New Recession Is Beginning

Tis The Season For Credit Card Debt: This Christmas Americans Will Spend An Average Of 422 Dollars Per Child December 19, 2016

christmas-gifts-public-domainFor many Americans, the quality of Christmas is determined by the quality of the presents.  This is especially true for our children, and some of them literally spend months anticipating their haul on Christmas morning.  I know that when I was growing up Christmas was all about the presents.  Yes, adults would give lip service to the other elements of Christmas, but all of the other holiday activities could have faded away and it still would have been Christmas as long as presents were under that tree on the morning of December 25th.  Perhaps things are different in your family, but it is undeniable that for our society as a whole gifts are the central feature of the holiday season.

And that is why so many parents feel such immense pressure to spend a tremendous amount of money on gifts for their children each year.  Of course this pressure that they feel is constantly being reinforced by television ads and big Hollywood movies that continuously hammer home what a “good Christmas” should look like.

Once again in 2016, parents will spend far more money than they should because they want to make their children happy.  According to a brand new survey from T. Rowe Price, parents in the United States will spend an average of 422 dollars per child this holiday season…

More than half of parents report they aim to get everything on their kids’ wish lists this year, spending an average of $422 per child, according to a new survey from T. Rowe Price.

To me, that seems like a ridiculous amount of money to spend on a single child, but this is apparently what people are doing.

But can most families really afford to be spending so wildly?

Of course not.  As I have detailed previously, 69 percent of all Americans have less than $1,000 in savings.  That means that about two-thirds of the country is essentially living paycheck to paycheck.

So all of this reckless spending brings with it a lot of additional financial pressure.  But because we are a “buy now, pay later” society, we do it anyway.  We are willing to mortgage a little bit of the future in order to have a nice Christmas now.

Another new survey has found that close to half the country feels “pressure to spend more than they can afford during the holiday season”

The SunTrust Banks, Inc. (NYSE: STI) annual Holiday Financial Confidence survey reveals that 43 percent of Americans feel pressure to spend more than they can afford during the holiday season. Pressure to overspend is up four percent since the survey was first conducted in 2014 by Harris Poll, but down slightly from a high of 46 percent last year.

Ultimately, much of this spending ends up going on credit cards, and credit card debt is one of the most insidious forms of debt.

And the truth is that credit card debt was already surging nationally even before we got to the holiday season

But at least one indicator suggests that much of the US is actually struggling financially: Americans are piling on credit card debt at record levels that we haven’t seen since the financial crisis.

Households added $21.9 billion in credit card debt in the third quarter — the largest increase for that period since 2007 — bringing the amount of outstanding credit card debt to $927.1 billion, according to the latest study from WalletHub.

Debt takes future consumption and brings it into the present, but there is a price to be paid for doing that.

Because we have to pay interest on that debt, we always have to pay back more money than we originally borrowed.  And because interest rates on credit cards are so high, paying back credit card debt can be particularly painful.

According to Business Insider, the average American household currently owes nearly $8,000 to the credit card companies, and it is being suggested that this is a sign that the economy is much weaker than we have been led to believe…

The fact that the average household with debt now owes $7,941 to credit card companies, according to WalletHub, suggests that America’s putative economic strength might be a mirage — that the economy may in fact be a lot weaker than all the happy indicators are leading people to believe.

“I think it is a cause of concern because it says consumers are struggling despite the low unemployment figures,” says Lucia Dunn, an economics professor at Ohio State University. “I think the rise in debt arises from weakness in the economy. People whose incomes have dropped may be trying to maintain an older level of consumption by just charging everything.”

And guess what?

The Federal Reserve just raised interest rates, and so that means that paying off credit card debt will be even more painful for Americans in 2017 than it was in 2016.

Could it be possible that we have lost our way?

Could it be possible that we need to entirely rethink our approach to “the holiday season”?

According to an old NBC News story, one survey discovered that 45 percent of all Americans would prefer to skip Christmas altogether because of all the financial pressure…

Some 45 percent of those polled said the holiday season brings so much financial pressure, they would prefer to skip it altogether. Almost half said their level of stress related to holiday expenses is high or extremely high.

That’s probably because nearly the same amount — some 45 percent — say they do not expect to have enough money set aside to cover holiday expenses.

As a society, we need to learn that things will never make us happy.

Life is not about accumulating toys.  Rather, we were created to love and to be loved.

If you want to live a great life, learn how to be a person of great love.  Unfortunately, most people never seem to learn that lesson.

A couple of months ago, I reported that the total amount of household debt in the United States had reached a grand total of 12.3 trillion dollars.

If you break that number down, it comes to approximately $38,557 for every man, woman and child in the entire country.

In addition to that, we must also remember that corporate debt has approximately doubled while Barack Obama has been in the White House, state and local government debt is completely out of control, and the U.S. national debt is now sitting just under 20 trillion dollars.

Our greed is absolutely killing us, but we can’t stop.

So we will continue to party until eventually somebody comes along and turns out the lights.

Comments Off on Tis The Season For Credit Card Debt: This Christmas Americans Will Spend An Average Of 422 Dollars Per Child

After Raising Rates Once During The Obama Years, The Fed Promises Constant Rate Hikes During The Trump Era December 14, 2016

janet-yellen-public-domainNow that Donald Trump has won the election, the Federal Reserve has decided now would be a great time to start raising interest rates and slowing down the economy.  Over the past several decades, the U.S. economy has always slowed down whenever interest rates have been raised significantly, and on Wednesday the Federal Open Market Committee unanimously voted to raise rates by a quarter point.  Stocks immediately started falling, and by the end of the session it was their worst day since October 11th.

The funny thing is that the Federal Reserve could have been raising rates all throughout 2016, but they held off because they didn’t want to hurt Hillary Clinton’s chances of winning the election.

And during Barack Obama’s eight years, there has only been one rate increase the entire time up until this point.

But now that Donald Trump is headed for the White House, the Federal Reserve has decided that now would be a wonderful time to raise interest rates.  In addition to the rate hike on Wednesday, the Fed also announced that it is anticipating that rates will be raised three more times each year through the end of 2019

Fed policymakers are also forecasting three rate increases in 2017, up from two in September, and maintained their projection of three hikes each in 2018 and 2019, according to median estimates. They predict the fed funds rate will be 1.4% at the end of 2017, 2.1% at the end of 2018 and 2.9% at the end of 2019, up from forecasts of 1.1%, 1.9% and 2.6%, respectively, in September. Its long-run rate is expected to be 3%, up slightly from 2.9% previously. The Fed reiterated rate increases will be “gradual.”

So Barack Obama got to enjoy the benefit of having interest rates slammed to the floor throughout his presidency, and now Donald Trump is going to have to fight against the economic drag that constant interest rate hikes will cause.

How is that fair?

As rates rise, ordinary Americans are going to find that mortgage payments are going to go up, car payments are going to go up and credit card bills are going to become much more painful.  The following comes from CNN

Higher interest rates affect millions of Americans, especially if you have a credit card or savings account, or want to buy a home or a car. American savers have earned next to nothing at the bank for years. Now they could be a step closer to earning a little more interest on savings account deposits, even though one rate hike won’t change things overnight.

Rates on car loans and mortgages are also likely to be affected. Those are much more closely tied to the interest on a 10-year U.S. Treasury bond, which has risen rapidly since the election. With a Fed hike coming at a time when interest on the 10-year note is also rising, that won’t help borrowers.

The higher interest rates go, the more painful it will be for the economy.

If you recall, rising rates helped precipitate the financial crisis of 2008.  When interest rates rose it slammed people with adjustable rate mortgages, and suddenly Americans could not afford to buy homes at the same pace they were before.  We have already been watching the early stages of another housing crash start to erupt all over the nation, and rising rates will certainly not help matters.

But why does the Federal Reserve set our interest rates anyway?

We are supposed to be a free market capitalist economy.  So why not let the free market set interest rates?

Many Americans are expecting an economic miracle out of Trump, but the truth is that the Federal Reserve has far more power over the economy than anyone else does.  Trump can try to reduce taxes and tinker with regulations, but the Fed could end up destroying his entire economic program by constantly raising interest rates.

Of course we don’t actually need economic central planners.  The greatest era for economic growth in all of U.S. history came when there was no central bank, and in my article entitled “Why Donald Trump Must Shut Down The Federal Reserve And Start Issuing Debt-Free Money” I explained that Donald Trump must completely overhaul how our system works if he wants any chance of making the U.S. economy great again.

One way that Trump can start exerting influence over the Fed is by nominating the right people to the Federal Open Market Committee.  According to CNN, it looks like Trump will have the opportunity to appoint four people to that committee within his first 18 months…

Two spots on the Fed’s committee are currently open for Trump to nominate. Looking ahead, Fed Chair Janet Yellen’s term ends in January 2018, while Vice Chair Stanley Fischer is up for re-nomination in June 2018.

Within the first 18 months of his presidency, Trump could reappoint four of the 12 people on the Fed’s powerful committee — an unusual amount of influence for any president.

By endlessly manipulating the economy, the Fed has played a major role in creating economic booms and busts.  Since the Fed was created in 1913, there have been 18 distinct recessions or depressions, and now the Fed is setting the stage for another one.

And anyone that tries to claim that the Fed is not political is only fooling themselves.  Everyone knew that they were not going to raise rates during the months leading up to the election, and it was quite clear that this was going to benefit Hillary Clinton.

But now that Donald Trump has won the election, the Fed all of a sudden has decided that the time is perfect to begin a program of consistently raising rates.

If I was Donald Trump, I would be looking to shut down the Federal Reserve as quickly as I could.  The essential functions that the Fed performs could be performed by the Treasury Department, and we would be much better off if the free market determined interest rates instead of some bureaucrats.

Unfortunately, most Americans have come to accept that it is “normal” to have a bunch of unelected, unaccountable central planners running our economic system, and so it is unlikely that we will see any major changes before our economy plunges into yet another Fed-created crisis.

Comments Off on After Raising Rates Once During The Obama Years, The Fed Promises Constant Rate Hikes During The Trump Era