The American economy will determine what happens in the global economy as America controls the general direction globally with their spending and debt policies. America represents some 25% of global spending (as of today). The new Debt Ceiling situation (now in progress) is basically history and this issue was voted on yesterday (in the House). I expect this new government policy (now in the Senate for approval) will become law by next week at the latest. Biden and McCarthy have agreed on the details and our House has approved the new policy. So let's think about the implications of this new situation as America's policies affect our economy and the world economy after implementation.
1. Government spending will slow as this new policy is implemented. Government spending is some 38% of overall spending. Our current GDP is some $26.4 trillion and the government represents nearly $10 trillion of this amount (National, State, Local).
2. Private spending will also slow (decline) going forward and this will change our general economy in a few weeks/months. As I write, private spending is slowing. Interest rates have slowed down borrowing. Debt levels are excessive but slowing (overall). In general, our economy is slowing rapidly and this will become evident in a few weeks.
What is the BIG PICTURE that I see developing for the next few months and years? First of all let's review some big picture items:
1. As I write, government spending is some $6.2 trillion (total) and growing slowly. Spending will increase some but the rate of growth is slowing (given the new Congressional bill soon to be implemented). Government revenue is currently some $4.7 trillion and this number is also slowing in the rate of revenue growth. The current deficit is some $1.5 trillion and this will grow over the next year. My sense is that our gross government deficit will be around $2 trillion by election time, 2024. This means that our National DEBT will be higher (the current debt limit was $31.4 trillion) and I assume this number may increase to $33 or $34 trillion by election time, 2024. Nothing meaningful was solved with the Debt Ceiling issue that was agreed by Biden/McCarthy. It will not solve our economic issues.
2. When I review our National, State, and Local government spending, I envision a slow down in the numbers. The rate of increase is slowing. We could even witness these numbers declining as our general economy tanks further (later this year). As I write, the Local governments are showing a decline in overall revenue. This reveals a slowing economy (generally).
3. As I write, the general tax revenue (collections) are actually declining (this is ominous). Also, our monetary base is declining...as is our M2 money supply. Our Fed is also allowing their balance sheet to decline gradually from the current $8.4 trillion level. This shows that overall liquidity within our economy is declining. All this has a lag time before it affects the general economy. The lag is now mostly over!
4. As I write, commercial and residential real estate is slowing rapidly and vacancies within our commercial real estate sector are increasing (average vacancy rates near 20% in many cities). Overall, real estate is starting to crash and this will continue into the end of 2023 and 2024. As real estate goes so goes our general economy (eventually). I have seen this monetary game before (many times).
5. Interest rates have increased some 5% this past year (overall) due to Fed policies. This is now producing the slow down in our economy and this will help to create our RECESSION later in 2023 (say August). There is no possibility of renewed prosperity given the numbers now developing. Inflation plus a decline in overall liquidity in our markets will produce the coming RECESSION. The lag time is soon over and the current numbers reveal the trend in motion.
6. Consumers will soon recognize our slowing situation and then the BIG recession will arrive (say August). This Recession will grow in degree and this will produce an economic depression in 2024 (say by election time). Election time is in November, 2024. The candidates (some 15 by summer) should have much to expound upon by mid 2024. Our economy should be in the tank by then. It's all happening rapidly and the numbers show the trend that is developing. You can witness some of this here: www.usdebtclock.org.
7. America's economy consists of government spending and consumer spending. Both are starting to decline as I write. Even America's Trade Deficit is now declining. This shows that consumer spending is starting to slow. Nothing happens immediately as consumers will increase their DEBT to maintain spending (to a degree). But with the current trends developing the coming Recession is easy to predict. As America goes so goes the global economy. Europe, Asia, Africa, and Latin America will also show declines later in 2023 -24.
Conclusions: Start to prepare for a slowing economy which will develop into a crashing economy later in 2023. The precise dates are unknown as our Fed may pivot and attempt to reverse the trends (but my sense is that this is unlikely as I write). I think the game of ASSET BUBBLES is essentially over for now.
Our Stock Markets will discern what is happening and then these markets will turn SOUTH quickly. My estimate is that the trends will be rather obvious by August of 2023. I discern the trends as of today being valid going forward. After some 50 years of observing our economy, I can discern that a major change in the CYCLE is developing. Watch the various stock indices as they will reveal these facts in a few weeks or months. As I write the indices are the following:
Dow: 33,079 (heading up)
S&P 500: 4218 (heading up)
NASDAQ: 13,091 (heading up)
It appears that our PPT (plunge protection team) is at work pumping up the indices as of now. We live with manipulated markets and general sentiment is manipulated by our Authorities who act behind closed doors. All is computer driven and algo's can manipulate these markets. This may work to some extent for a season, but the BIG PICTURE will eventually determine the outcome. That is my viewpoint. Think for yourself!
I am: Donald B. Swenson, Economist/Philosopher, donaldswenson.blogspot.com.
http://kingdomecon.wordpress.com
No comments:
Post a Comment