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I Have Some Bad News About the Economy


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2022 Oct 15, 5:36am   14,315 views  302 comments

by Patrick   ➕follow (61)   💰tip   ignore  

https://www.hennessysview.com/p/i-have-some-bad-news-about-the-economy?publication_id=572577&post_id=78488561&isFreemail=true


Accounts are widely out of balance

How bad, you might be asking yourself, will the economy get? We’re about to find out.




The orange line is US wealth. The blue line is US GDP. The gap is the amount of wealth American households and non-profits must surrender. You see, these two lines must move in lockstep. They do over time. When they get out of sync, something will put them back into sync.

The gap is debt.

Accounts must be settled. It’s called “a reckoning.” And the reckoning is here knocking on the door.

To put this gap into historical perspective, here’s an extended view of the same data with Dr. Hunt’s markups.




From 1951 to about 1997—the year the Monica Lewinsky story broke and Howe and Strauss published The Fourth Turning—the two lines moved in lockstep. Then Alan Greenspan decided to tinker, to grow wealth without growing GDP and without kicking off inflation. ...

What that gap represents is one of two things:

Money stolen from other people (other economies).

Money stolen from future generations of Americans.

How We Borrow from the Future
A few years ago, in the 1990s, we heard a lot of stories parents going to jail for identify theft perpetrated against their own children. About 1990, the government required babies to have a Social Security Number before they left the hospital. (I remember because it happened between our second and third children.)

Some shiftless parents soon realized they could apply for credit using their kids’ SSNs. They could default, and the creditor could do nothing. You can’t collect from a six-week-old infant.

This, of course, constituted credit fraud, so the parents who did this (and there were many) went to jail. (Not sure what happened to their kids who were left with no parents and lousy FICO score, but that’s not the point.)

The point is, all of us have been doing what those parents do only legally. The government allows us to run up our kids’ and grand kids’ debt as long as we do it with the government’s approved identity-theft programs.

So we did.

If you look at that chart, about 1/3 of our household and non-profit wealth is stolen from other generations or other countries. And we have to pay it back. Now. Or soon. ...

How We Borrow from the World
Some months ago, I wrote a series of posts about the US dollar (USD) as the world’s reserve currency and the petrodollar. (Here and here.) To summarize, almost all international debt is settled with USD regardless of the two local currencies involved. Britain settles its debts with Costa Rica in USD, etc. This includes the oil markets. Saudi Arabia, in turn, buys US treasuries (national debt) as a store of value for its copious oil profits. This allows the US run up massive debt knowing there’s always a market for our bonds.

Until there’s not.

Have you notice that Saudi Arbia is drifting out of the US orbit?

I wrote it about in those earlier posts, but the most certain sign of the Kingdom’s pending divorce with from Uncle Sam happened this week. Saudi Arabia disclosed that Joe Biden tried to strong-arm the Saudis into delaying OPEC+ oil production cuts until after the November elections. In diplomatic worlds, this was a slap in the face insult to the US and, particularly, to the Biden regime.

Rumors say Biden threatened to cut military sales to the Saudis if the OPEC+ cuts were announced before the elections. Not only did OPEC+ announce the cuts on its timetable, the Kingdom told the world about Biden’s threat (without disclosing the exact terms or names). Among “partners,” such public humiliation is a sign of pending breakup.

In return, the State Department and Joe Biden announced they would reevaluate the US’s strategic arrangements with Saudi Arabia after the election. That should be interesting.

What it means is that the US might not have as eager a buyer for debt as we’ve grown accustomed to. And that means the price of US treasuries will decline. Less demand means lower prices. When the price of bond goes down, the interest goes up. ...

I’m not saying the Saudis are about to stop taking our checks—I’m saying the for the first time since the Nixon administration, they’re acting like they might. Which means the are going to demand a bigger discount—the difference between the face value of the bond and sale price. That discount is the interest, and the bigger the discount, the less cash we have to spend tomorrow.

That’s one way to close that gap. You reduce the amount of cash you get in return for a future promise to pay. The amount you owe stays the same, but the amount you get now gets smaller.

How Our Kids Get Their Money Back
Remember the two ways we built that gap between wealth and GDP? That’s the first way. The holder of US treasuries want to cash their bonds, and they don’t want to buy new ones.

The gap begins to shrink, and that shrinking is mostly in household wealth.

The second way is intergenerational theft. So how do our kids and grandkids force their accounts settled?

Have you heard about the labor participation rate? Have you heard about the labor shortage?

An odd thing about the jobs numbers in recent months. While the number of “new jobs,” also known as “new hires,” has been strong, the number of people working has been going down, down, down. Why is that? ...

The kids aren’t taking our post-dated checks, either. They’re simply not participating in the US economy—at least, not in the official US economy. They siphoning of that excess household wealth NOW, in the present. They are not working in ways that grows the blue line (GDP). They’re shrinking the gap by lowering the orange line (wealth).

Wonder where inflation is coming from? We’re spending the excess household wealth without increasing the products and services available to buy with it. Inflation is how future generations close that gap. They spend your excess wealth without producing. And it’s happening right before our eyes. ...

In truth, we will only lose our ill-gotten gains.

While, we didn’t personally rob from the kids and foreigners, we were participants in a rigged game—a game that’s getting unrigged in a hurry. We enjoyed the spoils of the petrodollar and zero interest rates.

This account-settling process is called a reckoning, which sound harsh because it is.

https://www.epsilontheory.com/hollow-men-hollow-markets-hollow-world-2/

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173   stereotomy   2024 Aug 5, 6:28am  

GNL says

How do insurance companies get fucked by higher rates?

Insurance companies have to arbitrage risk. If an insurance company buys a 15% 30-year bond, and rates decline over the ensuing decades, then that bond is the gift that keeps on giving with 15% risk free and massive increase in the value of the bond to boot. The insurance company, if it bought a shitload of these bonds, doesn't have to do shit to earn money - it's like having a hurricane at your back. All this easy, risk-free money made the ins co's lazy, fat, and bloated.

When all an insurance company can only buy 2% bonds and rate keep going up, the values of those bonds craters. They no longer have adequate capital. Insurance companies are savagely trying to cut costs and automate.
175   AD   2024 Aug 7, 4:39pm  

Harris is lucky a lot of this bad news did not start no later than January 2024. She may be able to cross the finish line this November while convincing enough voters that the economy is doing well.

From the Daily Mail :

"Big Lots is closing up to 315 stores across multiple states as it suffers from growing financial woes.

The discount homeware chain has identified scores of locations across states such as Connecticut, Massachusetts, Michigan, New Hampshire and Vermont which are due to close.

The Columbus, Ohio-based chain has not published a full list of closures - which will mean it loses of a quarter of its 1,392 store footprint".
176   DOGEWontAmountToShit   2024 Aug 7, 5:21pm  

When Home Depot and Lowes start closing, that should be a huge enough SHTFing signal to even the most retarded Housing Experts of PatNet.
177   GNL   2024 Aug 7, 6:54pm  

Aren't rates about to come down?
178   DOGEWontAmountToShit   2024 Aug 7, 7:02pm  

GNL says

Aren't rates about to come down?


The Housing Experts of PatNet kept insisting first that they wouldn't go up and some insist they will go down.

Fed has to wait until after the election to change rates (up or down) now.
179   AD   2024 Aug 7, 7:15pm  

Bankrate website shows 6.5% as average 30 year mortgage rate (conventional). From what I've observed for last 30 years, this means the VA rate for 30 year mortgage is around 6%.

I expect interest rates have peaked so the only direction is for them to go down, until the next cycle.
180   AD   2024 Aug 8, 10:30am  

https://finance.yahoo.com/news/initial-jobless-claims-fall-more-than-forecast-easing-some-fears-about-us-labor-market-123712630.html

" the number of continuing applications for unemployment benefits hit its highest level since November 2021, with 1.875 million claims filed in the week ending July 27, up 6,000 from the week prior."

"That report showed the US economy tallied its second-lowest monthly job additions since 2020 while the unemployment rate rose to 4.3%, its highest level in nearly three years."
181   RWSGFY   2024 Aug 8, 11:18pm  

4.3% is still full employment, isn't it? The threshold is something like 4.6%, iirc. (Too lazy to search).
182   AmericanKulak   2024 Aug 8, 11:24pm  

DemocratsAreTotallyFucked says


When Home Depot and Lowes start closing, that should be a huge enough SHTFing signal to even the most retarded Housing Experts of PatNet.

The copium is that there are 100 Million Chinese Millionaires and Millennial DINK Dog-Parents waiting for 5% mortgages to return so they can buy 3/2 1400 sq ft 50 year old houses in the burbs of Phoenix, Las Vegas, and Orlando for $450k.

Or that 50M homeowners from among 72M Babyboomers aren't a decade away from half of them going to assisted living, nursing homes, or Greenlawn Cemetary and most aren't going right on the market because people don't want to move from their jobs in Quincy, MA to Sunburn, AZ or Burning Rock, NV

"C'mon honey, let's leave our $150k combined income in Harrisburg, PA and move to Greenwater, FL so we can make 40% less and live in the 55 Community! Since we inherited they can't refuse us and Fluffpuss and Snoggles! I can't wait for Furbaby to take a big shit in the shuffleboard area"
183   AD   2024 Aug 9, 10:15am  

Disney CEO and Amazon CEO both stated during their recent earnings call about the slowing economy impacting their bottomline. And now read this, as the promoters are blaming the weather.

Of course they would as its a left-wing organization that promotes and organizes Burning Man, so they'll read the same narrative as the mainstream media as far as not mentioning the weak economy.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

By Sam Mondros
Published Aug. 08, 2024 • 4:53pm
Burning Man, the annual desert bacchanal that last year became a mud-soaked quagmire, has released a last-minute pool of around 3,000 tickets in response to sagging sales. Attendance has faltered post-pandemic due to extreme weather events, from heatwaves to flooding, which last Labor Day Weekend sent many burners, including comedian Chris Rock and DJ Diplo, fleeing from the Nevada desert.

https://sfstandard.com/2024/08/08/burning-man-tickets-rain-heat-weather/
184   Eric Holder   2024 Aug 9, 11:13am  

The last BM was a shitshow of epic proportions, so they are not entirely wrong. But I do think layoffs in the Goolag and Fuckbook made bigger impact on the ticket sales than weather.
185   AD   2024 Aug 9, 12:46pm  

Just heard on Bloomberg TV about layoff announcements at Cisco Systems and Stellantis truck factory (formerly Chrysler-Dodge)

Everytime I hear about bad news in the economy, equates to the mainstream media propping up and "remaking" Kamala Harris to get her to the finish line this November until enough voters realize the economy has soured
186   RWSGFY   2024 Aug 9, 3:45pm  

Cisco and Chrysler have been half-dead for a long time. Add Intel to the list.
187   AD   2024 Aug 9, 5:33pm  

RWSGFY says

Cisco and Chrysler have been half-dead for a long time. Add Intel to the list.


Yes, they are not what they were in the late 1990s. How about GE and IBM ?

Disney lost its bet on Woke movies.

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188   AmericanKulak   2024 Aug 9, 9:00pm  

Stellantis getting creamed. Dealers are overstuffed with expensive SUVs and Trucks.

Over $80k for a Wagoneer, $55k for a Minivan. And this isn't California, either, but the Carolinas.

https://www.youtube.com/watch?v=wzIawLwsKmA

It's not just Dodge, Jeep, Ram. It's also GM and Chevy. New Trucks START at $70k

https://www.youtube.com/watch?v=M9FWFiSbeGA
189   Misc   2024 Aug 9, 9:28pm  

Funny thing is...with all the outsourcing ... do the auto makers even have enough employees in the US to even make the numbers come close for a bailout???

Maybe we let Mexico bail them out.
190   AD   2024 Aug 9, 9:35pm  

Misc says

Funny thing is...with all the outsourcing ... do the auto makers even have enough employees in the US to even make the numbers come close for a bailout???

Maybe we let Mexico bail them out.


Just more reason to move more Ford, General Motors, and Stellantis jobs from the USA to northern Mexico. Might as well as euthanize the United Auto Workers with it being at such a low percentage of total manufacturing jobs in the USA.

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WASHINGTON, March 29, 2024 (Reuters) - Membership in the United Auto Workers union fell 3.3% in 2023 to 370,000, its lowest level since 2009, according to a report filed on Friday with the U.S. Labor Department.

UAW membership is down from 397,000 at the end of 2020 and from its 1970 high of 1.5 million members. It fell to 355,000 in 2009 during the Great Recession and the U.S. auto sector restructuring.

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192   Blue   2024 Aug 11, 12:53pm  

AD says

.

Dell laying off workers as well :-/

https://www.businessinsider.com/dell-workers-layoffs-reaction-ai-restructuring-jobs-tech-2024-8

.

Two Dell employees in human resources told BI that layoffs would bring the workforce to under 100,000 people. Given the company had just under 120,000 full-time employees, according to internal data seen by BI in May, tens of thousands of staff are being let go.
193   AD   2024 Aug 11, 1:03pm  

.

Fisker (maker of $40,000 to $70,000 electric vehicles) in bankruptcy woes.

https://www.businessinsider.com/fisker-owners-describe-chaos-to-keep-cars-running-after-bankruptcy-2024-7

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194   AD   2024 Aug 11, 2:03pm  

.

Mish at MishTalk.com has shown at least 50% of jobs growth is healthcare, government and education.

All 3 are essentially government jobs as K-12 public schools are the primary jobs creator in the education sector, and healthcare is primarily funded by Medicaid, Medicare, subsidized Affordable Care Act, and Tricare.

This article discusses healthcare jobs growth, which is due to demographics as baby boomers are now putting more demand on health care. What happens in 10 to 15 years as far as healthcare industry job growth ?

https://www.cnn.com/2024/08/10/economy/americas-top-job/index.html

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195   GNL   2024 Aug 11, 2:47pm  

Any guess what IT will look like in 10-15 years?

I got a quote of $5,000 from an overseas tech company for an app that will automatically draw a floor plan using Lidar technology found in iPhones. I can’t imagine what it would cost if I had to hire a US based company.
198   AD   2024 Aug 12, 9:20pm  

Yeah the 15,000 Chinese rich citizens are mainly going to Singapore, and some go to Canada and USA.

https://www.forbes.com/sites/miltonezrati/2024/07/03/high-net-worth-people-are-leaving-china/

Most of the Indian rich citizens go to UAE.

https://www.business-standard.com/finance/personal-finance/4-300-millionaires-likely-o-move-out-of-india-in-2024-uae-top-destination-124062000168_1.html

What is surprising is the United Kingdom is losing that many rich citizens (consider % of population compared to the same statistic with China and India). I wonder if this has to do with the unrest in England and also Labor Party taking over.

I guess most of the United Kingdom rich citizens end up in Miami Beach and South Florida.
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199   AD   2024 Aug 12, 10:21pm  

.

"If you've been investing in the stock market for a while, there's a good chance you've benefited from rising stock values in recent years. But if you're among the significant number of Americans who don't own stocks directly or through retirement accounts or investment funds — 42% of US households as of 2022, the Fed's Survey of Consumer Finances found — this hasn't helped your finances. "
.

Americans who locked in a job, a home, and stocks are thriving. Everyone else missed out on their ticket to wealth.
https://www.msn.com/en-us/money/markets/ar-AA1oElS6

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

"I got mine."
-Glenn Frey ( https://www.youtube.com/watch?v=68bIkP2zWkQ )

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200   DOGEWontAmountToShit   2024 Aug 12, 10:28pm  

AD says


I guess most of the United Kingdom rich citizens end up in Miami Beach and South Florida.


Probably other Commonwealth countries. New Zealand in particular.

Commonwealth citizens get easy residency visas with other Commonwealth nations.
201   AD   2024 Aug 12, 10:49pm  

DemocratsAreTotallyFucked says

Commonwealth nations.


Yeah like Barbados and Bahamas
https://en.wikipedia.org/wiki/Member_states_of_the_Commonwealth_of_Nations#Current_member_states

or British Overseas Territories like Bermuda and British Virgin Islands

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202   AD   2024 Aug 13, 12:01am  

.

Industrial production is a monthly index of real output for all facilities located in the U.S. in manufacturing, mining, and electric and gas industries

It steadily increased from 1920 to 2007, and now it is only about 3% above the average level in 2007 :-(

https://fred.stlouisfed.org/series/INDPRO

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203   DOGEWontAmountToShit   2024 Aug 13, 11:18am  

DemocratsAreTotallyFucked says







On average, households on £50k per year in the U.K. consume more in public services than they pay in taxes.

What would be needed to make up for the tax shortfall of the £500k earner would be additional workers in the top four deciles.

The fact that 60% of U.K. households have more spent on them by government than they pay may explain why most vote for statist policies.

https://x.com/petermiyoung/status/1823419793053245547
204   GNL   2024 Aug 13, 12:55pm  

DemocratsAreTotallyFucked says

DemocratsAreTotallyFucked says








On average, households on £50k per year in the U.K. consume more in public services than they pay in taxes.

What would be needed to make up for the tax shortfall of the £500k earner would be additional workers in the top four deciles.

The fact that 60% of U.K. households have more spent on them by government than they pay may explain why most vote for statist policies.

https://x.com/petermiyoung/status/1823419793053245547

This shouldn't be surprising AT ALL. Get used to it getting worse. You cannot have a society where a small group makes all the money and expect anything different.
206   GNL   2024 Aug 14, 12:47pm  

Canada, Australia, Italy and the UAE? No thank you.
208   AD   2024 Aug 19, 10:35pm  

https://www.marketwatch.com/story/u-s-leading-indicators-index-falls-in-july-but-is-not-signaling-recession-51612145

The numbers: The leading index for the economy fell 0.6% in July, the fifth straight monthly decline, the Conference Board said Monday.

Economists polled by the Wall Street Journal had forecast a 0.4% decline.

The leading index is a gauge designed to show turning points in the economy, but has not worked well in the post-pandemic environment.

The index had fallen for two straight years before briefly turning positive in February.


209   AD   2024 Aug 19, 10:40pm  

As far as the above article and graph about Leading Economic Index (LEI) ,

" When the LEI rises, it suggests an expansion of economic activity in the upcoming months. Conversely, a decrease in the LEI predicts a contraction or slowing down of the economy. For investors, the LEI can guide investment strategies. "

So the economy has been cooling since late 2021. Not sure why the S&P 500 is above its late 2021 level after accounting for inflation.

Need a good 15% correction of the S&P 500 just before early voting starts in October to wipe out the inflation-adjusted or real gains of the S&P 500 since February 2021.

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210   DOGEWontAmountToShit   2024 Aug 20, 12:17pm  

1 million jobs 'disappeared'.


211   AD   2024 Aug 20, 1:35pm  

DemocratsAreTotallyFucked says

1 million jobs 'disappeared'.





I been posting on MishTalk that they will adjust these economic stats being cooked by the bureaucratic state after the election.

Was it not timely how gas prices went up after the November 2022 midterm election ? The Biden Admin released the strategic reserves in 2022 to help the Democrats because they knew they could not win on abortion alone.

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