Today's Wall Street Journal had an article by our Treasury Secretary, Janet Yellen. Her message was that Biden's economy is back and strong. Does she know what she is talking about? I would suggest the complete OPPOSITE. Our American economy is on the VERGE of collapse and this is likely to happen in the next few months (maybe sooner). What are the issues:
1. Our real estate industry has slowed to a crawl. The doubling of interest rates (these past six months) has made housing 'unaffordable' for nearly everyone. House prices are coming down in many areas. This will continue into 2023. Some 30% of our economy is connected to real estate. As real estate goes so goes the economy. Yellen does not seem to comprehend the housing situation!
2. Commercial real estate 'values' are declining (now). Office buildings have excessive vacancy rates in most cities. This means 'values' are declining as Cap Rates increase. Operating expenses are going up and up and net operating income is going down. This trend will continue into 2023 and beyond. Deflation in the real estate industry will create overall deflation later in 2023. I've seen this game before!
3. Car prices are now declining. Demand is drying up as interest rates increase. This could start a trend where all car and truck prices start to decline. Defaults and delinquencies will then increase. Our Fed is causing this situation and I think the 'straw which broke the camel's back' happened yesterday. Mr. Powell increased interest rates further and this is now causing events to change rapidly.
4. Energy prices could be volatile going forward. The Keystone pipeline is shut down and the supply of oil is declining. If this trend continues we could witness much higher oil prices in 2023. But as demand for goods/services start to decline this also could allow oil prices to remain stable of even go down in 2023. The factors are uncertain as supply is currently going down and demand is also going down. Watch the price of crude as it could be hugely volatile going forward.
5. Food prices have been going up along with restaurant prices. Will this continue into 2023? This is possible. We could have deflation in housing and durables even while we have inflation within the food and energy markets. All this is leading to a crisis at some point. Our Fed and our politicians could be dealing with a collapsing economy in early 2023. Janet Yellen may need to rethink her positive prognosis.
6. The war situation is also very unsettling for our markets. Will the Ukraine war end soon? This seems unlikely given all the money being given Ukraine by our politicians. Zelenskyy wants more money and more weapons (indefinitely). He thinks he can retake all the territory which Russia now controls. This mindset must lead to escalation at some point. Russia (under Putin) is unlikely to back off given their security needs. This war situation is detrimental to progress for our world as a whole. What we need now is NEGOTIATION.
7. The trends for 2023 are not positive IMO. Our economy is on needles and the trends are not positive going forward. We live with digital money and imaginary values. This situation must eventually lead to a total collapse. The volatility reveals the ephemeral nature of our economy. One word from Powell can plunge the stock market and/or cause it to explode upward. Nothing makes sense today. Logic does not help. All the digital markets are decoupling from reality IMO. When will the crash happen?
8. Our world system is heading for some type of calamity. War, digital money, lies and more lies by our politicians, prophecy, human nature, all play into this end game scenario. 2022 was a volatile year. I expect more in 2023. Wish I could give you positive strokes, but the markets do not allow this mentality. Our system is the problem and eventually we will need a NEW MODEL for our planet. That is my sense!
Conclusion: It is impossible to predict precisely when the BIG crash of a lifetime will happen. My sense is that it will be SOON (but I can not predict this with certainty). Economics is key to change in our political system. When people have money in their pockets they ignore reality. When their pockets are empty emotions change quickly.
The LAST great economic downturn was some 90+ years ago. This Great Depression of 1929 was the last time that economic events crashed for the world system. Are we scheduled for another Great Depression? My sense is absolutely. It must happen as our DEBT is much beyond repayment. Debt has allowed us to continue to 'kick the can down the road'. This mindset must eventually END!
The end game, however, is arriving for our worldwide DEBT economy. You can witness the numbers here: www.usdebtclock.org. The numbers are up and up and the trend creates instability over time. I expect the end game to arrive in 2023. I might be wrong (as I have been previously) but I must continue to predict this END given the numbers. Central Bank manipulations have DELAYED the end game. Can this continue forever? Personally, I don't think so! Watch the above website for clues to this END GAME!
Have a great day! I am: Donald B. Swenson, Economist/Philosopher, donaldswenson.blogspot.com. Also, http://kingdomecon.wordpress.com.
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