This article is follow-up to previous articles concerning cycles that have been identified and discussed over the previous two decades. Specifically, it is the continuation of work that began in 1999 and is meant to supplement previous statements and projections. For more information on those cycles, CLICK HERE.
I write this because I have been asked to help make sense of the numerous articles being posted from the mainstream that touch on some of what I have been attempting to warn people about for decades. My hope is that with understanding, you will be equipped to make better decisions regarding your personal situation. The big question posed is “Should we be getting nervous?” The short answer is “Yes, you should!” Regardless, it doesn’t mean panic. Just pay attention and navigate accordingly.
Keep in mind that what appears to be unfolding is not something that hasn’t happened before. Remember that it appears to be cyclical in nature. As such, we should remember that we are here and that means that what comes next is likely survivable. Simply understanding what is happening can go a long way towards preparedness and seeing it through to the other side.
The Coming Storm
Let me first remind everyone that “Economic Upheaval” is really just “A change in the way the world does business”. However, from a logical perspective, it is important to note that big changes usually come on the cusp of something terrible like a crash because of exposed weaknesses. Ultimately, what we are looking at here is a “perfect storm” of economic trash – and THAT… we have.
Ironically, the day after I wrote the first draft (and the previous paragraph), an article was posted on Yahoo News that I feel compelled to share because it directly validates the previous statements. In it, they reported that Christine Lagarde, the Managing Director of the International Monetary Fund, said that “four clouds” were undermining the global economy and warned that a “storm” might strike.
Specifically, she pointed to risks posed by rising borrowing costs within a context of “heavy debt” racked up by governments, firms and households. Yes… debt is a bad. It makes sense and I’m going to share some of what that looks like herein. She went on to say that “When there are too many clouds, it takes one lightning (bolt) to start the storm.” I couldn’t agree more. Let’s talk about it.
The Picture Becomes Clearer
Recently, the Seattle Times wrote an article titled “Wealth concentration near ‘levels last seen during the Roaring Twenties,’ study finds”. In it, they stated that “400 Americans own more of the country’s riches than the 150 million adults in the bottom 60 percent of the wealth distribution, who saw their share of the nation’s wealth fall from 5.7 percent in 1987 to 2.1 percent in 2014, according to the World Inequality Database.”
That’s a mighty big clue. This is especially true considering that during the last cycle, the Roaring Twenties led right into the Great Depression. Does this mean that we are heading for another Great Depression? Not necessarily… but it is something that we need to keep an eye on considering that there really is no clear-cut marker of what a depression is. It reminds me of the old joke, “a recession is when your neighbor loses their job – and a depression is when you lose yours.” I also think it’s important to remember that a recession is two consecutive quarters of shrinking economic output and a depression is a “prolonged and pronounced recession”.
Here’s the thing, I don’t think policy makers learned a single thing from the 2008 debacle. As promised, 2018 was a beast when it comes to housing. We saw significant housing declines. According to Business Insider, “The US housing market took a dark turn in 2018, as home buying fell off a cliff and mortgage lenders saw a steep decline in applications, originations, and profits.” This should be alarming because as UBS made abundantly clear, housing declines have foreshadowed nine of the past 11 post-war US recessions.
Now let’s add in a few other factors…
- A record 7,000 U.S. stores closed in 2017, 5,524 closed in 2018 and so far, U.S. retailers have already announced 1,674 store closures for 2019. I would like to point out that openings are indeed happening as well. It’s not all doom and gloom here. However, and just keeping it real, the closures are FAR outpacing openings.
- According to NerdWallet’s annual analysis of U.S. household debt, the average U.S. household with credit card debt has an estimated $6,929 in revolving balances, or balances carried from one month to the next. That’s up 5% from the previous review and we are now at $420.22 billion in debt as of late 2018.
- Student loan borrowers in the U.S. owe a total of $1.5 trillion and delinquencies or defaults are currently at 10.7% and rising.
- The U.S. National Debt is about to hit $22 trillion and we appear to be on track to increase this now by $1 trillion a year.
These are all important points especially when you consider Lagarde’s warnings. I want you to understand that debt does not equal prosperity. It means that people don’t have expendable income. It means that purchases are reduced. It means that budgets are tighter. It means that 40 percent of U.S. adults don’t have enough savings to cover a $400 emergency and it means that nearly half of all American families do not have any retirement savings which also means that we have a more government intervention on the way. Factor in things like inflation and increases taxes and you have a very big problem.
So if you’ve ever wondered why or how socialist ideas of redistribution could become so popular, here is your answer. The perception that crony-capitalism is the same thing as free-market capitalism is a dangerous one. And this narrative is often pushed by liberal and socialist leaning government employees that have the attention of your children each and every day. That’s a bad omen.
It boils down to this. When individuals and their friends and family are struggling, it’s MUCH easier to believe that capitalism has failed them than it is to believe that it can free them. When someone steps up and promises that their problems will go away if they simply embrace redistribution, the ignorant masses tend to accept the deal. Keep in mind that most just don’t understand the level of manipulation going on.
But that’s both a problem and clue for us. We need to keep in mind that socialism seems to rise when economic conditions directly and dramatically impact the lives of the working class. This fits perfectly with the cycles because we actually saw this leading into the last two cycles. Specifically, we saw this during the Industrial Revolution and during the Depression.
The last cycle seems to stump some people though, so let me help clarify. First, we cannot look at this from a “U.S. Only” perspective. If we look at history holistically for a moment, we can then appreciate that both Hitler and Mussolini (both socialists) gained their rise through economic and social hardships and then turned their governments into fascist organizations. This story has happened over and over again throughout the world.
Second, I speculate that the reason socialism didn’t gain a stronger foothold in the United States during the last cycle is likely due the imagery of the Nazi’s (the National-Socialist German Workers’ Party). That imagery and narrative probably helped keep it from becoming as mainstream as it likely would have been otherwise. This is to say that socialists were correctly viewed as fascists (and vice versa) and as far as many American’s were concerned, these were REALLY bad guys and being associated with them would not go over well.
Back to the future – I think it’s important to understand that our economic hardships are likely going to get harder in the near future. This would also mean that socialism is about to make its grand entrance into our lives. Of course, we should remember the history lesson (and cautionary tale) that tells us that socialism will be voted in but it will require rifles to take away – that is to say if you’ve kept yours.
Anyway, the point is that a change in the way the world does business is definitely about to happen and it’s likely going to hurt the average worker. How or what that ultimately looks like… I don’t quite know yet. In a lot of ways though, that depends on people like you. Your decisions and support of various causes will help shape what is to come. For example, that’s why I pulled my money out of the bank and placed it into a credit union. It’s not a huge shift but it was a principled one all the same. There is a difference.
The Coming Recession
Yes, a recession is likely on the way. What goes up, must come down. At an economic forum that I attended just a few weeks ago, it was made clear that a recession is likely going to happen if it is not already underway. The lead economist from a local University made a solid case that there really wasn’t going to be much of a choice in it. However, the severity of it seemed to be in debate.
He stated that late 2019 or early 2020 was his best guess as to when we could expect to see it for what it was. He was unsure about how long it might last. However, he expressed that different areas of the United States (and world) would be impacted differently and that how people navigate it could greatly impact the outcome. Will it spiral into something terrible? Let’s see what the banks are planning for.
Remember Quantitative Easing (QE)? I hope so because it impacts your life. Essentially, it’s the introduction of new money into the money supply by a central bank. Think of this as a supply and demand paradox. Flooding the market with more cash does get money into the hands of people who need it. However, it also raises the prices of the financial assets that you can buy, it damages the dollar, it can potentially force the dollar to lose it’s dominance in the world, it reduces your buying power, causes inflation (the hidden tax), creates issues globally, causes bubbles and so on. I’m not a fan.
Well, the banks are talking about keeping QE indefinitely. The San Fran Fed President Mary Daly said that “US central bankers are currently debating whether it should confine its controversial tool of bond buying to purely emergency situations or if it should turn to that tool more regularly.” Not cool!
The question we need to ask ourselves is “Why in the hell would they do that?” The answer is a complicated one but it becomes a little easier to see when you realize that all of this isn’t about “you” – it’s about “them“. They don’t really care about your problems and you are being lied to.
Let me help paint a picture for you by saying that perhaps things are simply not as peachy as some have tried to make it seem. Understand that a big part of economic health comes with “belief“. The mere belief that things are going okay, keeps you buying. The message is being contorted to make you believe. This is why you see so much effort into telling you that things are good when you can simply look at your bank statements to see otherwise. For more on this, you might want to watch “The Century of the Self” and “End of the Road: How Money Became Worthless“.
Anyway, the other side of this coin comes down to the fundamentals. The system must be sound – and it’s not. The current system has been set up in a such as a way that every purchase or transaction essentially robs you via nickel and dime. This has been going on for far too long and now the powers are scraping the bottom of the barrel because you don’t have much left. So what comes next?
Former Fed Chair Janet Yellen says the Fed’s next move could be a rate cut. Duh! Unfortunately, everyone is so distracted with the pony show being presented to us that we are missing something very big. I hope you really pay attention to this.
Banks reduced interest rates to zero (or close to zero) during the last global financial crisis in the effort to boost growth. This was great for a minute. However, that also meant that people where not really making money on investments or deposits.
So think about how banks make money. They will earn interest from your deposits, interest from lending your money out to other customers and for fees and so on. But when rates are low (or zero), it becomes harder for them to make money. Which means you won’t see much of a return either.
Look at this setup though. Rates were cut for economic hardship. Yellen is now talking about cutting rates again. Why? Because of economic hardships. Why weren’t you told?
You’re not being shown the truth of the matter so this may sound a little off. After all, it’s economic victory after victory as far as the news is concerned – even when they are trying to say it’s not attributed to Trump (which by the way, is deliberate divisiveness and distraction). Use Occam’s Razor though. Why would they need to be preparing to cut rates again? The answer might be as simple as “because things are not as they seem“.
Now, considering how low rates already are, to what level could the banks possibly cut interest rates to? The answer is an unsettling one. Negative Rates! This is where instead of getting a modest return for basically lending money to your bank via deposit, now you will be forced to pay your bank for the privilege of allowing of them to make money off of your deposits. Also, not cool!
It seems far-fetched but the truth is that central banks are already discussing it and figuring out ways to sell it. This is not to say it’s “right“, because it’s not. Our Founders made it quite clear what they thought of banking institutions and our Founders look like geniuses right about now because of their words and actions. Regardless, the powers that be are already getting people used to the idea.
In fact, a San Francisco Fed paper recently said that a benchmark rate of negative 0.25% may have been the optimal setting to “help us recover” from the last crisis. A crisis that policy makers arguably started with their greed. Let me take this moment and quickly point out that “us” does not include “you”.
It gets worse though. Your response to all of this might be something along the lines of “Forget that… I’ll just keep my cash out of the bank.” Well, they have already thought of that and are working to remedy it. In fact, the IMF is already talking about the importance of issuing electronic money instead of paper money because electronic money can’t be stuffed under any mattress in an effort to avoid negative interest rates. You’ve been warned.
Essentially, they know that “The existence of cash prevents central banks from cutting interest rates much below zero.” Their big idea seems to be forcing compliance of negative rates by going paper-less. They will likely sell this as a benefit to you and it will likely be coupled with socialist agenda and law but make no mistake, this is a very bad sign of things to come if the economy doesn’t rebound and if we don’t clean up the mess we have created in regard to the ever-expanding government and nanny-state. Also keep in mind that while physical cash could potentially save you from the negative interest rates, only gold and silver can protect your actual buying power. Again, our Founders were pretty smart guys (ref: Article 1 Sec 10).
I know it sucks and I know it’s not the best news but you are likely going to have some decisions to make in regard to your finances. Granted, I know that not everyone agrees with my assessments. That’s fine too. I just want you to think about all of this in broader terms.
The Global Conflict
Since I’m commenting on the cycles, I suppose I should go ahead and provide a few updates concerning the conflict side of it. Again, these are just updates and should be regarded as supplemental to the various works provided in previous years. I’m not going to explain their place as I feel I have done an adequate job in previous posts and books.
I think it’s amusing at the number of people who have scoffed at several of the ideas I have provided surrounding this potential conflict but recent weeks have provided plenty of validation. So pay attention and look back at some of my previous work if you’re confused. Below are just some of the articles that I’ve reviewed in recent days (to give you an idea of what is brewing).
And of course we should be concerned. Economic hardships create tensions and tensions can lead to war. Don’t get caught up in the 1-on-1 stuff either. This one will not be that simple.
- In a National Threat Assessment 2019 report released last Tuesday demonstrated that Russia is consistently building up its military capabilities in Kaliningrad.
- Russia continues its military buildup in the arctic and this is beginning to worry many regional powers. Heather Conley, a Europe program director at the Center for Strategic and International Studies calls the moves “Cold War-esque.”
- Russia has GPS jamming capabilities and NATO members are worried about Russia’s ability and willingness to project its power.
- The U.S. Army continues to struggle to match Russia’s military build-up in Europe and is now considered “out-gunned” by the Russians.
- U.S. Africa Command, Gen. Thomas Waldhauser, told lawmakers last Thursday that Russia seems to have its sights set on areas that could give them an edge over U.S. allies.
- The Defense Intelligence Agency’s first public report on Chinese military capability reflects mounting concern within the U.S. government that the United States is not moving quickly enough to respond to Beijing’s rapid military rise or its efforts to dominate American allies in the Pacific.
- China just tested the world’s most powerful naval gun and it will be war-ready in less than 5 years.
- China is likely pulling ahead in certain technologies.
- China and Russia have kept Venezuela afloat by lending billions.
- Venezuela’s self-proclaimed acting president Juan Guaido is floating the possibility of authorizing United States intervention to help force current President Nicolas Maduro from power.
- Russia has placed 400 military contractors in Venezuela to protect Maduro.
- Venezuela is preparing for the possibility of a U.S. invasion – but then again, Trump hasn’t taken military intervention off the table either.
- Chief of Staff of the Iranian Armed Forces Major General Mohammad Bagheri announced on Sunday that Iran would change its defense strategy to “offensive” to defend its national interests.
- The group of 30 writers, historians and Nobel laureates declared in a manifesto published in several newspapers, including the Guardian, that Europe as an idea was “coming apart before our eyes”.
- U.N. monitors have said that North Korea is working to ensure its nuclear and ballistic missile capabilities cannot be destroyed by military strikes.
- The Trump administration announced Friday that it would suspend its obligations under a decades old Cold War arms control pact with Russia on Saturday, citing Moscow’s violations of the treaty.
- RED FLAG laws are becoming more and more popular for liberal law makers. In fact, “extreme risk protection order” bills are sweeping the nation with at least nine states that now have such emergency firearm confiscation laws in place. This should be a concern considering the liberal/socialist rise that will increase with continued economic hardship. (Cause and Effect).
It’s been a few days since I wrote this article and there are already a slew of updates that I could provide. Let me just drop a few to further demonstrate the points provided herein.
- USATODAY – National debt tops $22 trillion for the first time as experts warn of ripple effects
- StudyFinds – Doctor: Most Americans “just one serious illness away from bankruptcy.”
- Free Beacon – Netanyahu: Meetings in Warsaw With Arab Leaders to Combat Iran
- The Hill – Americans continue their march to low-tax states
- CNBC – A record number of Americans are 90 days behind on their car payments
- CNN – Top US admiral in Middle East warns of growing Iranian threat
- CNS – Feds Collect Record Individual Income Taxes in Calendar 2018–as Debt Climbed
- Yahoo – Worst retail sales drop in 9 years is ‘every bit as bad as it looks’
- USATODAY – Are more store closings coming? Firm forecasts ‘No light at the end of the tunnel’
- Wall Street Journal – Venezuela’s Maduro Shows No Sign of Leaving. Now What?
- Bloomberg –
- U.S. Student Debt in ‘Serious Delinquency’ Tops $166 Billion