Another day, another sign—or five—that the illness is probably terminal.
The mainstream financial press seems to be overlooking these signs, or at the very least lazy in not connecting the dots. Sort of like a doctor not commenting on a patient’s obesity, chain-smoking, addiction to chili-slathered bacon triple cheeseburgers, and the fact that the dude downs a 12 pack of Miller High Life and Redbull every day.
No worries about that grapefruit-sized tumor in your lungs. Probably benign. You’re healthy as a horse! Giddyup!
Forgive me, but we yet again must address the signs of underlying rot in the US economy. I cannot tell you how many stories I’ve read in recent months crowing about America’s economic vibrancy.
The commentators seem not to understand the concept of “growth-by-debt” and how it comes back to f-up your life. If I went out and borrowed $10 million, I’d be living a helluva a grand and showy life here in Portugal. My family and friends would think, “Daaaaamn! That Jeffo’s got it going on! Homie’s livin’ large—rollin’ in the dough. Wish I had his life!”
Of course, the story of Jeffo’s large life is entirely different behind the curtain. I’m not living large. I’m leveraged to the hilt and just praying the duct tape doesn’t give way, sending the whole house of toothpicks and spittle tumbling to the ground.
Outwardly, I’m the biggest cat in the ‘hood and everyone’s impressed.
Inwardly, I’m a financial basket case and a helluva mess.
That’s America’s economy.
Puts on a good face. Impresses the world and the commentators who only pay attention to the façade and care not about the rotting structure holding that façade up.
Some new examples of the underlying rot:
- Corporate bankruptcies are surging, up 88% in the last 12 months through April, and at their highest levels since the pandemic.
Those numbers are expected to worsen because businesses are struggling with inflation, rising wages, slowing consumer demand, and high interest rates that have made borrowing painfully expensive.
- The unemployment rate has ticked up to 4%.
That’s not outwardly horrible. But the economy has lost a million full-time workers in the last year, lots of the jobs people are finding are low-wage service-sectors jobs, and jobs in the low-wage corners of healthcare.
Moreover, new reports show that the reported employment are as total BS—a government whitewash to make America’s economy seem stronger than it really is. That’s not me blowing smoke. That’s the Philly Federal Reserve Bank, which pulled apart Bureau of Labor Statistics data and showed the the 1.6% annualized job growth in Q4 2023 was actually about 0.3% – a difference or more than 500,000 jobs. And the Philly Fed notes that Q4’s overstatement was not a one-off event.
- The Small Business Optimistic Index should probably change it’s name to the Pessimism Index.
The latest headline from May notes that the Small Business Uncertainty Index, a subset of the Optimism Index, “Reaches Highest Level Since 2020.” For the 29th month in a row, the index, now at 90.5, is well below its historic average of 98.
In other words: Pessmism and uncertainty about America’s economic future abound.
- Hiring ain’t looking too bullish.
Challenger, Gray & Christmas, a global outplacement firm, reported in May that hiring in the US has fallen to its lowest year-to-date total (January to May) since 2014. Meanwhile, the number of job cuts over the same period is the third-highest since 2009.
Where the cuts are coming from says a lot about where the US economy is losing strength: technology; automotive, energy, aerospace/defense; entertainment/leisure, retail, apparel; media & news.
A lot of those are the jobs that afford America’s much-vaunted middle-class lifestyle.
- Consumer sentiment is depressing.
That index from the University of Michigan spent the period of 2014 to COVID in the 80 to 100 range. Today, it’s in the mid-60s and heading down. Consumer expectations are heading down as well.
Like I said, the media and the talking-head econo-types in the financial media make it sound like America’s economy is the envy of the world and the Big Engine That Could and Will Never Stop.
But the numbers that actually mean something say that’s simply not the case.
Or maybe I’m wrong.
Maybe America really is the economic beast all her cheerleaders claim her to be.
I just find that hard to fathom because the underlying data suggests anything but.
I was a financial and investment writer back in the `90s at The Wall Street Journal. I know what economic vibrancy feels like. I lived it. I reported on it daily. I was writing about the Dot-Com boom in the late `90. I was writing about the real estate boom in the early aughts.
What I’ve felt over last many years is nothing like that.
The “growth” America demonstrates today feels… manufactured. Not real.
It’s fueled and funded and leveraged on a vast mountain of debt, not real productivity.
I know too many people who feel disconnected from this economy. Who are losing ground in this economy. Who feel displaced by this economy. Who are angry, disappointed, and resigned to the fact that the middle-class life they knew—that once was their birthright—no longer feels like the life they’re living.
That is not the sign of a healthy economy.
Tells me that a narrow band of wealth is driving the economy, and their wealth is so great that they have an outsized impact in certain areas.
But there’s a wider band of not-wealthy who are flundering in this economy, not succeeding at keeping their head above water, which explains why consumer debt is at record levels approaching $18 trillion and why the Federal Reserve noted in a May report that “In the first quarter of 2024, credit card and auto loan transition rates into serious delinquency continued to rise across all age groups. An increasing number of borrowers missed credit card payments, revealing worsening financial distress among some households.”
Does any that say, “America’s economy is the 800 pound gorilla of the world?”
Or does it say, “America’s economy is the 98-pound weakling on the beach pretending he’s Arnold Schwarzenegger?”
I’ll leave you to answer that question.
But you know where I stand. And you know exactly why I own gold, silver, bitcoin, and Swiss francs.
A reckoning is coming…