Amazon asked me to take a survey today. I like Amazon. We use their AWS platform. We follow the leader in re-investing our profits back into ourselves, just like Amazon. I realize they are only #4 of the “Super Companies”, but not a back act to follow. In the survey, which proved to be ridiculous, I learned that 25% of American households are behind on their mortgages. Owning and operating a debt collection form, this was of interest to me, and combined with other statistics that I have gleaned:
1. Mortgage debt and Auto finance debt are considerably down since the presidential election. Since no one that I know, (other than my father in law) buys a car for cash, and absolutely no one a home, considerable lower borrowings in homes and cards means, less sales. Less sales means layoffs. Layoffs are not good for the economy.
2. We have been engaged in the longest bull market in history. The Dow is at record levels, and has sustained growth despite the Federal Reserve’s attempt to stop the markets from expanding. The Fed is powerless in a free market system.
3. Every first term president since the beginning of the 20th century has faced a recession in their first term of office. Nice welcome mat for President Trump.
4. Household debt exceeds levels of debt that were attained just prior to the last “Great Recession.”
When you boil all these non political facts together, it becomes a recipe for recession. Problem is, I believe it will be far worse than the last one, and what will we call this meltdown.
The reason that it will be worse is we fixed nothing. We bailed out the Big 8. AIG somehow slipped in under the wire and became essential. GM actually paid the money back; however, we have done nothing to reduce debt. We have let even more jobs go everywhere else, and our president, in his single attempt to save jobs, lost the battle and Carrier is closing the plant and moving the 300 plus jobs to Mexico. Hey, at least he tried.
Point is, national debt as of the moment I write this is just shy of 20 Trillion dollars. When President Obama took the oath, the debt was just over 11 Trillion. In the ten years since the Great Recession of 2007, we have doubled our debt. The student loan debt went form 640 Billion to 1.2 Trillion in the same period. And worse, the outlook for job creation for our children is bleaker than ever.
At the outset of the Last recession, Former Fed Chairman, Paul Volker claimed that austerity was the only answer. Raise interest rates, tighten the belt, payoff the debt. Instead, we made interest rates 0.00%. We have borrowed more money as a country, and as individual households than ever before. The worse part of the news is that the institutional investors are fleeing the markets. This was in an article two weeks ago in the New York Post. Usually and very right wing rag, this article was bland of any one side or the other. It was factual. The big boys are out and the markets attracted more small investors than ever before. The way our system works, in order for someone to make money, someone has to lose money.
In the movie “The Money Pit”, Walter, played by Tom Hanks is contemplating the purchase of what is obviously a deal too good to be true. He questions his real estate agent, who says, “Walter, you get to take advantage of someone else’s misery”
The markets are going to crash. The question is when.
