JPMorgan’s chief market strategist Marko Kolanovic is forecasting a 20% nosedive in the S&P 500, a storm brewed by the tumultuous winds of skyrocketing interest rates.
As the White House continues to tout the alleged achievements of Bidenomics, a growing amount of data indicates that a gigantic economic crisis could be right around the corner. But 1 foretelling example: US consumers who borrowed money to buy a new car are on the hook for record loan payments, with 20% owing at least$1K/mo, as surging interest rates combine with costly inventory to make vehicles less affordable.
During the height of the coronavirus, governments unnecessarily shutdown the economy and spent vast amounts of money to keep the economy, financial system and stock market afloat. Trillions of dollars in additional government spending occurred, all of which was financed with debt and money printing. The never-before-seen levels of money creation were fueled by policies set by the Federal Reserve, which encouraged Congress to spend more money and kept interest rates extremely low, despite warnings from economists about the threat of future inflation. biden and left-wing/democrats opted to keep government expenditures significantly higher than they had been prior to the pandemic. The decision to continue high levels of government spending, coupled with the Fed’s choice to keep interest rates low and the fallout from the crisis in Ukraine, caused inflation to soar to levels not experienced in over 40yrs. Prices for nearly all consumer items skyrocketed.
In an effort to fix its mistakes and curb out-of-control inflation, the Fed started dramatically increasing interest rates in 2022, a policy that has continued thus far in 2023. Meanwhile, the biden regime and Congress have unnecessarily kept government spending much higher than pre-covid levels.
The result of these policies is that most consumer goods and services, as well as rent and housing prices, remain much higher than they were before the China virus started. However, the money supply – the amount of cash, checking deposits and bank savings accounts – has substantially decreased. That means even though prices are still going up, the amount of money available is continuing to drop, putting an unprecedented strain on Americans.
M2 money supply growth rate has been negative for the past 3 quarters, meaning the amount of money available is shrinking rapidly. In the past 110 years, the only other time Americans have seen the money supply drop this sharply was in the early 1930s, during the height of the Great Depression.
There is a significant difference this time around, however. In the 1930s, when the money supply annual rate turned negative, prices dropped as well. Now, however, prices are still going up despite the collapse in the money supply. To the extent we're seeing it, this has never occurred before. Increasingly, more people are using savings and going into debt to cover basic expenses, like food, utilities and housing.
Survey data from the Federal Reserve shows the bottom 80% of income earners, representing the vast majority of Americans, now have less in real household savings than they did prior to the China virus. And savings for top income earners will likely fall below pre-2020 levels within the next 12 months. Americans’ credit card debt topped $1 trillion for the 1st time.
Higher prices, more government spending and debt, and lower levels of household savings – that’s what Bidenomics actually looks like. The U.S. economy is walking on thin ice. If prices and inflation don’t come down soon, something that can only occur if Congress and the White House reduce spending, then the U.S. is soon going to find itself in yet another massive economic crisis.
Our current national debt, standing at a colossal $33 TRILLION(1). That's the equivalent to the economies of China, Japan, Germany, India, and the United Kingdom, combined. In 2023, the government shelled out a staggering $663 billion to service this debt. The Congressional Budget Office predicts that by 2051, surpass even Social Security as the largest share of the federal budget. This is an existential threat of greater immediacy and severity than any other we face. It hinders our capacity to tackle all other concerns. Our present investment in energy alternatives not only worsens our debt dilemma but also gives rise to fresh challenges. It escalates short-term energy costs and, by transitioning away from conventional sources, jeopardizes the resilience of our energy grid in the long run. At that point, we might find ourselves financially incapable of addressing this issue.
We are teetering on the edge of financial collapse, a vital point poorly represented in our shallow political debates. The common refrain, "we are passing on a bill to our children and grandchildren," is overly simplistic and fails to highlight the significant danger of this situation. Higher interest rates, like we see today, make it harder to pay for the essentials, such as critical infrastructure, national defense, and entitlement programs. This forces the government to borrow more and more. It's a vicious cycle. Then one day the music stops. How will the government meet its obligations then? By reaching deeper into your pockets, which will already be empty.
The left-wing slant of our political environment is not conducive to ward off financial ruin, since the refuse to do what’s necessary.
1st, we need to implement responsible fiscal policies to control the growth of national debt. This means significantly reducing budget deficits, boosting federal revenue, cutting waste, and prioritizing spending on essential programs. In other words: stop unnecessary expenditures. Fiscal discipline is required.
2nd, we need to restructure entitlement programs. While crucial for the well-being of many Americans, they contribute significantly to the problem. Finding ways to make these programs more cost-effective and sustainable, as well as adding work requirements where possible, is essential. Often referred to as the third rail of American politics, politicians are going to have to find the guts to deal with these programs.
3rd, we need to stimulate economic growth. One way to boost economic growth is to reduce government regulation. Congress should pass the REINS Act to ensure a fair review of any regulation with an economic impact of more than $100 million. This would end the reign of unelected bureaucrats who impose costly regulations on businesses and individuals.
4th, it is essential to educate and mobilize the public. When more people understand the real impact of our national debt, they can put more pressure on their elected representatives to do the right thing, and at minimum, stop making the problem worse.
History teaches us that change does not always come from the top. Forcing our leaders to take action, even if incremental, is a step in the right direction.
1. Our future obligations increase that to over $100TRILLION.