While many people my age remember what it was like to be young, many of us would like to be young again in most cases. I think that many of us would like to know then what we know now. It has probably been like this throughout history. We remember how things used to be and wish we could go back to simpler times.
Personally, while I wish we could go back to a simpler and happier time, I am rather glad that I am not just starting out now like I was (too many) years ago.
It appears that young people today have the deck stacked against them whether it be our schools which seem to be failing an entire generation, colleges who are, in many cases, offering worthless degrees, corporate America where all of the income is hoarded at the top and there is no loyalty on anyone’s part anymore, to the confiscatory costs associated with the “American Dream” of owning a home.
If this weren’t already enough, the cost of all goods are rising. Even the cost of owning a car is becoming prohibitive for many.
It is not only the young who have a problem right now but anyone on a fixed income.
While the financial game shows and mainstream media do their best to give us the illusion that “all is well” there are many signs that allow us to connect the dots and realize that a financial cliff is rapidly approaching.
Some ominous signs:
- Credit card debt is over $1 TRILLION. Average interest on that debt is 22% (Usury?) I can’t believe that there is a person on the planet who would carry any debt at 22% unless they had to.
- Defaults are surging in auto loans, commercial real estate loans, and bankruptcies are soaring.
- Homelessness is growing exponentially as housing is becoming more and more unaffordable. It certainly doesn’t help when those starting out are competing with huge companies like Blackrock and Blackstone among others for their first home. As these companies buy up properties, they are also raising rents and can do so because so many can’t afford to buy.
- The Federal budget deficit for fiscal 2023 was projected to be $1 Trillion last year. Since tax receipts are falling and spending (to pretend we are growing and solvent) is skyrocketing the actual deficit is $2 Trillion and that doesn’t include off-budget items (wars, etc.) or unfunded liabilities. According to the Epoch Times tax receipts are down $400 BILLION (or 13%) from a year ago. In the meantime, they also report that just in the last 4 years our illustrious “leaders” have added $80,000.00 of debt for each American household.
- Banks are in trouble for a myriad of reasons, but the main one is rising interest rates. While many of their assets are tied up long-term, depositors are fleeing bank accounts to get better rates elsewhere or to pay bills that they have to dig into savings to cover. This leads to the banks having to cash in longer dated bonds to pay off current debts so that Unreported losses become realized losses immediately. There are also FAR fewer loans being made and deposits have also dried up. Many banks are also holding on to loans that are unlikely to be repaid so many are having to vastly increase their loss reserves. Many of the major banks also have derivative exposure that could be a disaster not only for them but the entire global economy if there was to be a problem there. According to US Bank locations the top three American banks have derivative exposure of $193 TRILLION and the top 5 have over $229 TRILLION. Just a small percentage loss could cause major damage. Think of the counterparty risk if just one of these institutions were to become insolvent.
- The price of oil is moving up again as America has only a few weeks of strategic reserves left (lowest level of all time) and the BRICS nations appear to be taking control of that market. It is not just transportation costs that have an economic impact but most of the goods that we consume have some component of oil attached. The fact that oil has risen from $70.00 per barrel to $90.00 per barrel in a few weeks is a big deal. The latest inflation numbers released on 9-13 show inflation is rising again- at the highest rate in 14 months. I expect that trend to continue.
- According to the Warren Buffett indicator (Equity valuation to GDP) “markets” are overvalued by 68%. If this were not ominous enough keep in mind that government spending (34% of GDP which is debt creation) is included in GDP. If we include this calculation the overvaluation is FAR greater.
For anyone who thinks that the Fed (or any central bank) has magical powers keep in mind that they can’t just say rates are lower. They have to conjure up cash out of nowhere and buy bonds to increase the price and reduce the yield. This, in itself, is inflationary. I don’t believe that the calvary is coming to the rescue anytime soon unless there is a MAJOR black swan event. Of course, with our dire financial situation that can’t be ruled out.
For anyone who thinks I am being “negative” just get a look at the USDebtclock.org and notice the $229 TRILLION in national debt and unfunded liabilities. Look at the fact that the only metric that is contracting is income (tax receipts) while spending is increasing massively. Then look at the fact that in a population of 335 million people only 128.3 million actually have a job. In addition, 85.7 million people are on Medicaid which means they have NO ASSETS. 42.3 Million people are on food stamps.
If anyone wonders why our younger generation may be a little less optimistic than we were when we were young, we may want to realize that when we were young the opportunities seemed endless. Today, those at the top have put barriers to entry that stifles any meaningful competition. Those who are writing checks are getting benefits at the expense of all the rest of us. The malaise- in my opinion- is caused by crony capitalism with a LARGE dose of monetary madness which is destroying the purchasing power of our once proud US dollar. It is likely that its demise- while well underway will be picking up even more steam shortly. Just a few more reasons why I don’t trust most debt-based assets and would rather OWN real assets rather than someone else’s promise to repay.
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