WARNING SIGNS ABOUND FOR U.S. ECONOMY

in economy •  last year

Contributed by Harley Schlanger, LaRouchePAC, SGT Report:

In the build-up to the G20 summit in Hamburg, there was much happy talk coming from Trans-Atlantic government officials, Central bankers and the media about the arrival of the long-awaited “economic recovery.” From Brussels, European Central Bank (ECB) chairman Mario Draghi sounded cautiously optimistic, telling European Union leaders on June 23 that the EU is experiencing economic growth and an “improving business climate”, while ECB Executive Board member Peter Praet was much less constrained. In a meeting of bankers in Paris on July 6, he declared that the recovery “has gathered some further momentum recently,” and that there is a “solid upswing” becoming an “increasingly solid cyclical recovery.”

One might ask if the two of them consider the unresolved Greek debt crisis, and the bailouts of Spanish and Italian banks, in violation of new EU banking rules, evidence of a “solid upswing”!

As for the United States, Federal Reserve Chairman Janet Yellen was even more upbeat, after the major U.S. banks passed the most recent “stress test.” In an exchange with London School of Economics Professor Lord Nicholas Stern, Yellen said the U.S. banking system is now “very much stronger” due to Fed supervision and higher capital levels. In fact, she added, another banking crisis is unlikely “in our lifetimes.” When asked if she thinks stock valuations are too high, Yellen replied that “by some standard metrics, asset valuations look high,” but then hedged, saying “there’s no certainty about that.” Her explanation sounded eerily reminiscent of former Fed Chair Alan Greenspan, who publicly announced he saw no evidence of “irrational exuberance” as investors sent tech stocks soaring in the late 1990s, before the dot-com stock bubble proved him wrong, by crashing in 2000.

Yet, for all this “good news” from the U.S., there are warning signs that all is not well. Yellen’s vice chair, Stanley Fischer injected a note of concern, saying the “increase in prices of risky assets (that is, corporate stocks and bonds, including junk debt — HS)…points to a notable uptick in risk appetites,” adding that continued high valuations in the face of low earnings “is also a cause for concern.” He concluded by stating that the corporate sector — the stock valuations of which are at record levels — is “notably leveraged”. This is a strange, understated way of looking at the $14 trillion of non-financial corporate debt, much of which will never be collected, which has surpassed the amount of mortgage-backed securities debt which crashed the market in 2008, when that debt reached $11 trillion.

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THE FRAUD OF THE STRESS TESTS

The belief that the stress tests demonstrated the security of the banking system, as touted by Yellen, has come under fire, ironically by the Wall Street-loving New York Times. In a July 3 editorial, the editors write, “It’s entirely possible that the system is more fragile than the Fed’s stress tests indicate. By the Fed’s calculations, capital held by the nation’s eight largest banks was nearly 14% of assets, weighted by risk, at the end of 2016.” However, the editorial points out that, using international accounting rules instead of American rules, the capital reserve is only 6.3%.

The difference between the two accounting systems “is largely attributable to regulator’s differing assessment of the risks posed by derivatives, the complex instruments that blew up in the financial crisis and that still are a major part of the holdings of the big American banks.”

In other words, by not dealing with the threat posed by derivatives, by restoring Glass Steagall regulations to force the banks to either write down, or write off their derivative obligations, this ticking time bomb remains a real threat within the banking system.

RELATED: RESTORE Glass-Steagall - What's At Stake

Further, Fischer’s warning, that there has been “a notable uptick in risk appetites”, means that the need of banks and investors for profit is forcing them to bet on more risky financial instruments. If this approach to investment is funded largely by leverage, as Fischer states, it means that once the bubble pops, the collapse will be more catastrophic, wiping out pension funds and individual retirement funds of millions of Americans — just as in 2008.

As to those who point to the “health” of the stock market, which some analysts have said is “defying all models” by continuing to appreciate, the reality is that the unprecedented expansion of corporate debt, fueled by low-interest lending from banks, is largely responsible, as companies are borrowing money to buy their own stock. Fischer obliquely referred to this when he expressed concern for stock appreciation in the face of low corporate earnings. The total valuation of the Dow Jones average, a standard measure of the health of the stock market, has nearly tripled since its low in 2008, going from 8,046 to 21,349 as of June 30 — while corporate profits during that period have been for the most part low or stagnant.

NO UPSWING IN THE REAL ECONOMY

The standard narrative of the “Obama recovery” which is repeated (mostly by Wall Street-controlled Democrats) is that between 10 and 12 million jobs were created during his years in office. Yet the majority of those were temporary, part-time and low-wage. In 2000, there were 19.6 million employed in the manufacturing sector. Today the figure is approximately 12.5 million. For those employed, wages have remained stagnant, while the labor participation rate is near historic lows, with only 62.9% of potential members of the work force employed, meaning almost 95 million are not working.

The hype about Obama’s recovery is unmasked by looking at some figures on poverty in America. According to the 2014 Census, 14.5% of Americans live in poverty, over 45 million people. As of the end of 2014, the number of children living in families near or below the poverty line is 31 million, a staggering 44% of all children in the U.S. From 2008 to 2014, the years of the “Obama recovery”, that percentage grew by 18%.

To survive, those with access to credit are building a significant debt bubble. Average household debt in January 2017 is $132,529, with total consumer debt growing to $12.58 trillion, compared to $12.37 trillion in 2007. The average household pays over $1,300 per year in interest on credit cards, while unpaid average credit card balances grew from $4,400 in 2015 to $5,551 in 2016. And delinquencies are up: the Federal Reserve reports that 7.1% of all credit card balances are more than 90 days late; for paying back student loans, which now total over $1.2 trillion, 11% are 90 days late; and for auto loans, almost 5% are 90 days late, as repossessions are up, and overall car sales are dropping. Over the last two months, General Motors, whose federal bailout after the 2008 Crash was hailed as an example of decisive political intervention, has announced cutbacks in the workforce and partial shutdowns in plants.

As more people need help, the austerity-minded Republicans in Congress are chopping away at Medicaid, which provides health care for poor children, and threatening other programs which provide food aid, funding for education, etc. With the federal budget under attack, states are not able to step in to help. When the Fiscal Year 2018 budget began July 1, there were 9 states which had no budget, due to significant revenue shortfalls, including the once-wealthy state of Connecticut, and formerly industrial states, including Illinois, Wisconsin and New Jersey. Though some of the states subsequently passed budgets, with significant budget cuts, Illinois hovers on the verge of bankruptcy, with the State Controller saying “derailment is imminent.”

What this partial picture underscores is that decisive action must be taken at once, to prevent a total breakdown of the United States. President Trump won his election in part by pointing to the fraud of the Obama “recovery”, and putting forward major initiatives, which reflected to some degree the policies promoted by Lyndon LaRouche in his Four Basic Laws, including restoring Glass Steagall, launching major infrastructure investments, and an emphasis on reviving NASA as a science driver. As these initiatives have stalled, in part due to the efforts of opponents of these policies to remove Trump from office, the situation for the average American has worsened.

If Trump wishes to succeed, he must now put the full weight of his presidency behind passing LaRouche’s Four Laws, as the central feature of his anti-Wall Street plan, to revive the U.S. economy.

image credit: occupy.com

A New Era for the United States: LaRouche's Four Laws


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Trump must act now and allow the collapse of the old system and bring in the new. (think about it if you were Trump, his ego and legacy will be the restoring of the USA) this must happen sooner rather then later.
Be ready my steemian friends a crash is imminent!

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LaRouche’s Four Laws:

1st law "Re-enact the Glass Steagall law."

2nd law "create National Banking"

3rd law "Credit for higher EFD"

4th law "Fusion crash-program"

The Economy must collapse

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Get your bitcoin and altcoins while yee can!!!!!!!!!! I am :)

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Don't forget food, access to clean water, and the means to defend yourself too.

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Yes, a good thing to have is many water filters also!

I got my guns and some storeable food and water and water filters. Good to go for a few months at the least. Slowly building up a supply though!

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And physical silver, heirloom seeds and bullets. A sense of humor will also be needed because ones mental outlook and ability to carry will be good as gold.

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Yes, we don't have long to get bitcoin and others.

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Keep dreaming! You are wishing on a longshot. The market will remain irrational longer than you can remain solvent. Every 50% you lose by shorting the market, you will have to earn 100% just to break back to even! Plus, factor in decay and contango with everyday resetting and tracking errors and you are a falling knife

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You will see @unscammable
I am up 600% this year, soon 6000%

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I believe that you are up money. But, how exactly? What vehicles did you invest in to bring you the winnings?

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How you doing @unscammable, trading penny stocks have made me quite a bit.

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I have been short indexes for six years straight. I was a rookie investor and started reading the news and every twenty articles I read everyday claimed the market was about to plummet. So, I got smart and learned how to short the market. Every day since, for the last six years, I have read twenty articles claiming the market crash is imminent. I have NEVER in 2,200 days reading a total of 49,000 articles read an article that claimed that the market would do well. For some reason, I just kept believing that if I could wait long enough, one of the 49,000 articles would be right. That is when I started learning of contango, decay, tracking errors, and standard deviation. After that is when I learned that even if the market corrected and went down 90%, I could no longer break even because I have been shorting for six years. I actually hate Trump because they are using him as the king pawn to promote fear now. I thought if Trump was elected, everybody would think he was a smart, rich business man and the news would say the market is about to go up TONS! That is why I held my shorts, because I thought that is what would happen. But, instead, the media started saying everybody hates Trump and his businesses are bankrupt. Meanwhile, in the next page, they were still saying the market was going to crash over again for the 49,000th time. This is getting out of hand and crazy. Trump is the only one that admits the fake news, but he is part of the conspiracy to drive markets higher. Nobody feels sorry for me. Plus, nobody will admit I am right, and millions of articles are still released everyday claiming the market will crash. How can they keep printing this nonsense when they are already to far in the hole to break even?

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Greetings @unscammable, sorry to hear the shorting has not done well for you.
Timing is everything, but with manipulation/Regulation they/the bankers can do anything.
Patience is my advise by Spring time the collapse will have happened and can make us rich.
I like Putin and the BRICS.

The outpouring of support, resteems and upvotes means the world to us, thank you.

I don't worry, the gov.t always saves banks.

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@cryptopie got you a $0.01 @minnowbooster upgoat, nice!
@cryptopie got you a $0.01 @minnowbooster upgoat, nice! (Image: pixabay.com)


Want a boost? Click here to read more!

Trump talks a big game, and plays the part, but what has really changed since he got in office (other than immigration)? I don't know what to think of him exactly, but if he's so great at being a billionaire maybe he outta try and make our country a little richer and not so poor.. .anybody with me on this??

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he is the President not the King , his powers are limited and the stagnation in but the house and the senate or what is dragging us down, they are all a bunch of bums and will do anything to make Trump as ineffective as possible, he is a challenge to their power because until now we thought that only politicians can solve our problems(now that is some funny distubing shit) and if he is even marginally successful more americans might open their eyes and understand that the politicians in this country are the problem not the solution.

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Have you looked at a chart of the stock market lately? I am not saying that Trump is the reason for the recent mega-rally we have witnessed since he was elected. I believe the mega-rally we are inside is mostly due to the global economy rapidly improving and moving into the best economy the entire world has ever witnessed. The stock market is up 20.37%. That is a substantial move upward and might be considered one of the best bull run's of the last 100 years. Unfortunately, this move cannot be credited to Trump's election win. The reason that it can't be credited is because if you look at EEM (emerging market ETF) will you find that that basket has gone upward 23.41%! If you ask me, the entire globe is entering a massive inflationary bull run and it has nothing to do with us americans. It has to do with the global economy ramp spiking out of the last recession.

Muchísimas gracias por la información. Te invito a pasar por mi página. Un abrazo!

Keep your fiat money for toilet paper. The just in time delivery system might run a little slow with the next market meltdown.

You have the president the congress the Supreme Court
Fox News what is holding you back guys
6 month since the victory of trump and no results

That's why crypto is about to enter a BOOM

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I really hope so man, but this bear market is scaring me a bit lol

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Don't fret brother! The current bear market is going to weed out the ones who don't truly believe in the technology. We all knew we were in a bubble but even considering how prices across the board were, I don't think it's really even started yet. Changing the y-axis of the bitcoin charts to log scale you see a couple bumps. One was in the 2013 boom and I think another was in 2014. This "bubble" didn't even register. We're gonna go exponential soon better tighten your seat belts!

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I agree man, I am in crypto for the long term anyways so this does not scare me too much

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It's a buying opportunity. Just make sure you are invested in coins that are solid and not going anywhere.

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And like silver it is on SALE!!!

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Having both PM's and crypto is wise.

i just started laughing seeing the dollar bill...nice post. Thanks for sharing this

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The dollar bill was eye candy to reel you in to the fraudulent print. This article is nothing more than doom and gloom. This analysis is so perfectly incorrect it could be released by ZeroHedge. ZeroHedge is the worst business blog on the earth.

btc and steem to the moon!

Yes, we must increase productivity! The four laws are not enough. We have to eliminate the government and trade deficits. Let's let the President and his team deal with the government deficits, but it's up to you and me to close the trade deficit fam.

I believe the trade deficit and the dependency on the Federal Reserve Notes are the two largest threats to the security and future of this nation. Let's do something about it!

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I bet the deficit will rise to the limit
In October trump needs the votes of the democrats ore the government will shut down that's gonna be fun

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The democrats need to give careful consideration when using the threat of forcing a government shut down. It may have the opposite effect that they hope for.

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But the trump voters don't need the gov anyway
And the republicans did it too

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Even if the government shut down and the market crashed, which is a long shot in itself, the downside of the crash could never go down to where it was before Trump was elected. The market would have to crash 20% just to equal out to where it was in November when Trump was elected. Plus, doomsayers like this author have been predicting a crash since 2009 when they called for a double dip recession. The market would have to lose 80% just to break the doom and gloom camps even.

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So you saying there will be no problem with the economy that's what you mean
Now I am confused

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How, on a day like today where the market goes up 1% like butter, could somebody question the economy? I don't understand, how you are confused. Have you seen house prices? Have you seen the stock market index prices? Have you seen your insurance bill lately? There definitely is no problem with the US economy. The US economy is made up of those entities which are doing so well. We had a problem with the economy in 2008 for 14 months or so, when housing prices were affordable. When stocks were affordable. When insurance was semi-affordable. Now, we are in the best economy the world has ever seen. Pick a side, low prices and less jobs, or more jobs and higher prices? We can't have it both ways. Thing is, there is nothing to stop the inflation that QE kick-started. The only thing that could stop the inflation train is nuclear war or a mass extinction virus. This train is rolling baby! There is no way to get back the money that the 1% made since 2009. They have all the money and they are keeping it. Thus, we are on the path to Venezuela. We might have a chance to level out, because we always have in the past, but we sure don't have a chance to get back to where prices were in 2008 because the inflation is way to extended.

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The best action individuals can take is to get out of all personal debt. Starve the credit beast to death.

Interesting post. Not looking forward to more upheaval.

Like Celente would say in a rage "HERE'S YOUR STRESS RIGHT HERE !!!" LOL

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Celente is one of the worst trend forecasters in the business. He is dead wrong, consistently! All you have to do is Google his predictions and match them to a chart to see he is a fraud.

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he he what I like about Celente is his italian anger lol "heeeey maccheronsss...a little salsa ala manzon and some peperon cazzon" lol

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I love the guy to be honest. He makes some good points, politically. But, he also costs people a lot of money with his terrible calls. It isn't fair that people are blatantly lied to

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oh! Am sorry, didn't know that ... I never had money so I just listened :D...he is selling a journal so always take what he says with a pinch of salt on the political side though he got it good i believe...to those who lost money because of him I say may God remedy you with much success and wealth
cheers!! :))

The Fed's J'Yellz is gonna tiptoe out ever so gingerly in a parachute so golden it will blind the world - just watch . . . and thennnnnnn...B00M PoW...

LMAN.GIF

good post!

Didn't know you are on Steemit. Instant follow :)

FIAT funny money to the depths of the Earth!

everything is manipulated

great post. upvoted

Just buy a bunch of OTM puts on the S&P and go into a deep coma, fool proof get rich quick plan, you can't go wrong!

Good analysis, but I would argue the "LaRouche Four Laws" plan doesn't go far enough in the time we have left before irrevocable economic derailment. Case in point: The latest jobs numbers were touted in a positive spin, until you see that government hires vs manufacturing hires were 35-to-ONE. We cannot "fix" this country's economy by expanding government and its payrolls. Socialism DOES NOT WORK.

Hi, the president also has to face the challenges on its own party with the obstructionism and the burocracy (deep state) of the government. Great post!!!

iv been into financial markets since 2006. In 2014, i came across alt media on youtube and blogs. started following them. I lost tons of money recently shorting the markets in the name of shemitah, meltdown etc. and many more opportunities to make money (i made some in cryptos though, got out at peak) with all due respect, one should not trust alt media 100% if you interested in making money. some also show technical charts etc. showing market collapse etc. everyone in this game is here to make money. In the name of economic collapse, many are making more money then they are making in actual trading and investments. We need to really ask these guys to show us the reality of their investments, like physical gold, bank balance that they are converting all their dollars to gold and crypto, and are not keepin any dollars on them, except for regular expenses in cash. at the end the markets are making new highs, and im still not seeing the involvement of retailers to the leve that it was on 2008.

the salary class are investing a bit in mutual funds, SIP, etc, but the investments are just 10 to 20% of the salary. Not morethan that. the businessmen are trying to expand or just remain stuk to their own business, investing a few percentage in bonds and mutual funds. in 2008, i remember even a small time icecream man was involved in stock market.

Im thinking of a more WW3 type scenario due to which there will be an economic collapse. The countries are playing a very dangerous game, where life of people will be involved and not money. Everyone know about the dollar value, everyone knows they are printing dollars out of thin air.

Current situation will even get worst when quatar & south korea will be attacked. its going to be chaos. next 10years will be more for survival then money, if it really happens, as these two countries can trigger china, russia, india and nato into war.

So dont trust mainstream media nor alt media. both are looking for more watchers and subscribers. iv got burnt following both, use your own brains and do your own research.

Man people need to realize that now is not the time to sit and wait. We need to take action for ourselves and rebuild for ourselves

First, Thanks, your reports are always inciteful and complete.

The Real Economy shows inflation, price increases, bankrupt brick-and-mortar stores, bankrupt mom-and-pop stores, and low-wage, temporary jobs.

I expected the "Stress Tests" were questionable and likely just lies.
I can't believe anything from Yellen.

A Great article about the true economy and what's really in the balance of this country and the world.
With so much Fake news, propaganda about the government and Or leaders.
They can't even join together anymore, how the hell do they expect this country to pull together?
This country is in deep danger, and they are out to destroy the very foundation and freedoms you think you have.
They talk about helping the poor, but they are putting the poor out of work.
Here is an article that shows the result, as we all expected would be, to raise minimum wage to 15.00.
http://www.foxnews.com/politics/2017/07/11/businesses-warn-price-hikes-staff-cuts-as-minimum-wage-increases-kick-in.html

Good article, Well written.

We have a lot of issue in our economy, and it is about time we fixed them. We have a broken bone, and we are afraid to set it because it will hurt, but if we don't we could lose the limb or worse.

Once things "crash" , people will be scared, but we will be fine. The food will still be grown, people will still need things, and we will recover. It might take a long time, but in the end, we will be so much better off.

The system will implode....not if, but when. Be prepared - land, silver, gold, crypto, seeds....and popcorn....and watch it all crumble.

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Well then, butter, too! Lots of butter.

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This comment deserves to be on ZeroHedge. :(

Every market you look at is fully distorted and doesn't represent the reality due to central banks ability to issue unlimited debt. We need accountability and crypto might just be an answer to unbalanced markets.

WOW! You were completely wrong with this warning. Bad timing. Not only were you wrong about the U.S. economy (QQQ going up 1.1% today,) but you were wrong about EEM (going up a staggering 1.95% in one day.) Terrible timing!

Hi Sean, just wanted to let you know I mentioned you in good light in my latest steemit post :) https://steemit.com/documentary/@mikeparker/making-a-documentary-in-2017

Everyone should go to the bank and withdraw all your money. That should trigger a #Reset. Do it now before the rest of the sheeple, before the banks limit your withdrawal to $60 just like in Greece..

Follow and up-vote i will do the same for you