The United States economy, for the most part, has been riding high since the economic collapse. Due to the policies of the Federal Reserve, the stock market has reached record highs, the labor market hovers around a five percent unemployment rate and the real estate market has returned to normal.
Simply put: thanks to artificially low interest rates and immense money printing, the boom is on!
Like every other boom, however, it eventually leads to a bust and wreaks havoc on the citizenry. And with the excessive stimulus provide by the U.S. central bank and governments across the country, the bust is going to be unlike anything we have ever seen. The national debt is $20 trillion, the American people are already taxed to death, inflation is on the verge of exploding and the bond market is in a bubble.
The boom cannot persist. A recession is coming. And, no, it will not be Donald Trump’s fault. It is the years of ballooning balance sheets, debt-fueled consumption, kicking the can down the road and Keynesian economics that will produce a financial crisis that will be far worse than what the world experienced in 2008 and 2009.
In fact, even though we are in the year 2017, it is actually 2006 all over again. This means that there are numerous signs all over the economy that a recession is on the cusp of coming to fruition. Soon, the whole world will sing a passage from Giuseppe Verdi’s “La Traviata”: “Farewell past, happy dreams of days gone by. The roses in my cheeks already are faded.”
Just remember: this bubble isn’t different, despite all of the claims made by the talking heads at CNBC.
Here are 17 signs that a recession is coming:
- Auto loan delinquency rates have surged to their highest levels since 2008, according to a study by the Federal Reserve Bank of New York.
- An April 2016 study found that nearly half of Americans are living paycheck to paycheck; a lot of other studies have pegged that number even higher.
- House flipping accounted for 6.1 percent of home sales in the U.S. last year. This is the highest share of the housing market since 2006, when the rate was 7.1 percent of sales.
- The New York Federal Reserve reported in August 2016 that subprime borrowers – those with a credit score under 660 – are getting new $1,000 credit cards at an alarming rate.
“Nearly half of all card closures in 2010 and 2011 belonged to borrowers with credit scores of 660 and below, although they comprise only 33 percent of card borrowers. Reversing the sharp net decline in the number of credit cards during 2008-10, in recent years, the level of new card issuance to this group has been strong and is now approaching pre-recession levels,” the Fed stated.
- Federal Housing Administration (FHA) mortgage delinquencies jumped in the fourth quarter of 2016 for the first time since 2006. The seasonally adjusted FHA delinquency rate spiked to 9.02 percent, up from 8.3 percent in the previous quarter.
- The Fed’s money supply growth has moderated since hitting a 46-month high of 11.2 percent in October. The growth in U.S. dollars year-over-year fell to 10.3 percent in November and 8.8 percent in December. This is important because a decline in money supply growth usually leads to a recession.
- Student loan debt has surpassed $1.3 trillion, and is the second largest category of debt behind mortgages.
- According to a study by the John D. and Catherine T. MacArthur Foundation, more than half (52 percent) of Americans can’t afford their homes.
- In July 2016, banks, credit unions and alternative elders had an approval rate for small business loans of just 23.1 percent.
- The number of U.S. bankruptcy filings by consumers rose 5.4 percent in January to 52,421.
- As of the fourth quarter of 2016, the U.S has had five consecutive quarters of corporate profits falling, despite stock markets soaring to all-time highs.
- A recent report from the Congressional Budget Office (CBO) found that budget deficits will be on the rise again over the next few years, something that it has warned about since 2013.
- Despite this statistic being a contentious one, it should be considered. The labor force participation rate now stands at a rate of 62.8 percent, close to a record-low in 38 years.
- Reports suggest that median income is declining and that a growing number of Americans are relying on the government for assistance.
- When a bubble is on the verge of collapsing, you see this: 71% of IPO companies were unprofitable in 2014.
- A majority of U.S. households do not have $500 in an emergency fund.
- The numbers suggest that a growing number of small businesses are not investing in capital equipment.
Just because the Dow Jones and the S&P 500 are reaching all-time highs every day, it doesn’t mean that the United States economy is 100 percent sound. The U.S. economy has been, even as slow as it has been, recovering but that has been fueled by easy money policies over at the Eccles Building. The economy can’t expand forever, and a recession is inevitable.
All of the signs are there, and with each passing day it seems like we’re in 2006 all over again. But it is worse today than it has ever been: governments are more indebted than before, the bond market is in bubble territory, the central bank has an astronomical balance sheet and the Fed has no other alternative but to raise interest rates in order to combat ballooning inflation.
The Fed has already conceded that it needs $4 trillion to fight off the next recession. It can’t do this unless it prints more. When you factor in the U.S. president enraging the likes of China, it is only a matter of time until nations start dumping Treasuries. In other words, inflation will play a massive role in the next recession.
It is rather unfortunate that all of the blame will be put on Trump, an easy scapegoat for the left and the mainstream media, instead of where it fully belongs: the Fed.
In the end, it is time to get ready for a recession and start preparing for the worst. It’s going to happen. It is only a matter of time until the next recession occurs.