I looked at Zero hedge on Thursday morning. One headline was” Despite Record Low Sentiment, US Retail Sales See Strongest Annual Gain in 8 Months”. While this sounds like a bullish datapoint (as I am sure those “in charge” want it to be), it is actually a slap in our faces.

While the financial game shows tout “strong” consumer spending, a look under the hood provides a FAR different story.

According to Bloomberg, the main drivers of our spending were gas stations (shocking huh?) and non-store retailers. The biggest drags were autos, auto parts, and clothing. (Discretionary items)

In looking at the Bloomberg information that tells me that spending continues to increase because of rising costs- not because of optimism in the future. The U of Michigan Sentiment Index confirms that thesis. The only growth in manufacturing is taking place in defense contractors. The US Census Bureau reported that non-defense manufacturing CONTRACTED 1.2% in March (sixth contraction in 7 months) while defense manufacturing was up 18% month over month and 80% year over year.

While defense spending enriches a few it is costing us (me and you) a fortune.

All of the economic numbers- even though they are massaged to look FAR better than reality- point to the fact that we are in the initial stages of stagflation (Cratering economic activity and rapidly rising prices).

My research tells me that this situation is likely to get FAR worse before it gets better. Keep these things in mind:

· According to Armstrong Economics, Americans are carrying $1.3 TRILLION in credit card debt. The average interest rate is over 20%. Who on earth would carry that type of debt unless it was impossible to pay it off? Mr. Armstrong also noted that people are not using these cards for luxuries but are using them to survive. Add this to $1.7 TRILLION in auto loans, $12 TRILLION in mortgage debt, Trillions more in student and personal debt, and a million layoffs taking place in 2025. It may be worse in 2026. With 64% of people living paycheck to paycheck, it is no surprise that defaults, foreclosures, and repossessions are rising quickly. This is a clear indication that many are struggling to keep their lifestyles while the cost of goods continues to rise. Keep in mind that debt is nothing more than an encumbrance on your future earnings.

· The cost of basic necessities rising could be the final nail in the coffin for businesses that count on discretionary spending. Most are aware that the cost of gas has exploded. What many may not know is that the USA is sending 53 MILLION BARRELS PER DAY out of our strategic reserves to foreign countries. It has been estimated that, if we keep up the current pace, we will have NO RESERVES in 4 months. Congress has approved diluting our gas with ethanol which will impair our miles per gallon- supposedly permanently. This is just one more sign that this is not temporary or transitory but will likely be an ongoing problem. Wholesale inflation is already flashing red signs. Those costs will ultimately be passed on to you and me if the companies experiencing these cost increases want to stay in business. If not, supply shortages could cause more damage than higher prices.

· While many believe the government will bail them out, keep in mind the government has to take from one to give to another- NOTHING is free. Money “printing” gives this illusion until you get to the point where we are at today and the numbers say we are in DEEP trouble. The nearly $40 TRILLION in admitted debt is not the real story. The real story is the $40 TRILLION along with the $130 TRILLION in unfunded liabilities, along with “OFF THE BOOKS” spending like wars, etc. along with over $2 TRILLION in new debt anticipated for fiscal year 2026. Numbers do not lie. These debts could NEVER be paid off without the dollar losing most of its perceived value. (Add a few ZEROS). What will our lifestyle look like if that happens?

· Not only are farmers looking at MASSIVE cost increases for energy and fertilizer but also 64% of the USA is in some sort of drought. The USDA has projected the smallest wheat harvest since 1965. Keep in mind that we have over a million more people to feed today. Corn is the crop that needs the most fertilizer to grow so many farmers may resort to crops that need less- like soybeans. Add to that the increased demand from ethanol and what may happen to the price of corn? These are all feeds for cattle and livestock. Not a pretty picture.

There appears to be no logical path for prices of necessities to fall overall but a severe recession will dampen the price rises by decreasing demand. That does not mean prices will not rise- just maybe not as quickly as the economy continues to contract. Keep in mind that “things” do not change- it is the loss of purchasing power that causes PRICES to rise even if VALUE is unchanged.

For those that count on a government that is clearly incompetent when it comes to economics, keep this in mind. Those being “helped” today include 186,000 DEAD PEOPLE collecting SNAP benefits. 355,000 people collecting SNAP benefits from MULTIPLE STATES. (JD Vance). So, we are not just spending like there is no tomorrow but are trying to find out where tens of billions are actually going. (Probably EXTREMELY conservative number).

History has shown hundreds of times that price controls lead to scarcity but do not be surprised if our president does not announce that before the midterms. History shows that 100% of the time when a country is in our economic shape the only question is WHEN we will have a crisis.

Ernest Hemingway may have said it best:

“The first panacea for a mismanaged nation is inflation of the currency; second is war. Both bring temporary prosperity; both bring permanent ruin. Both are the refuge of political and economic opportunists.” Sound familiar?

Do you have assets outside of the US dollar? Does it make sense to you that it may be a prudent move to diversify into hard assets and maybe other currencies?

This is no joke and there is precious little time left in my opinion.

Be Prepared!

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