The Psychological Bubble That Has Been Propping Up The U.S. Economy Is Starting To Implode
Dec 4, 2018 09:01:31 #
Michael Snyder
Economic Collapse
December 4, 2018
Optimism can be a very powerful thing.
For a long time Americans believed that things would get better, and that caused them to take action to make things better, and that actually resulted in things moving in a positive direction. But now things have abruptly shifted. In late 2018, an increasing number of Americans believe that an economic downturn is coming, and they are taking actions consistent with that belief. As a result, they are actually helping to produce the result that they fear. And without a doubt, any rational person should be able to see that signs that the U.S. economy is slowing down are all around us. So it isn’t as if those that are preparing for the worst are being irrational. It is just that when large numbers of people all start to move in the same direction, it has a very powerful effect. We witnessed this in the stock market in recent years when people just kept buying stocks even though they were massively overvalued. The collective belief that there was money to be made in the stock market became a self-fulfilling prophecy which pushed stock prices up to absurd heights. But now that process is beginning to reverse as well, and ultimately the unwinding of that bubble will be quite painful.
Over the past couple of years the dominant economic narrative that the mainstream media was pushing was that the U.S. economy was “booming”, and this encouraged businesses to expand and consumers to go out and spend money.
But now the dominant economic narrative has changed, and businesses are starting to take actions that are consistent with the new narrative. In the retail industry, if executives truly believed we would see an economic boom in the years ahead they would be expanding, but instead stores are being closed at a record pace…
Mall and shopping center owners across the U.S. are preparing to be hit by more store closures, following a brutal year that included department store chains like Bon-Ton and Sears going bankrupt, Toys R Us liquidating and even Walmart shutting dozens of its club stores.
Now, a slew of specialty retailers like Gap and L Brands are getting serious about downsizing, which will leave more vacant storefronts within malls until landlords are able to replace tenants.
As a result of these store closings, large numbers of workers will be without jobs, vendors will not be receiving orders and mall owners will be without tenants.
In other words, economic activity will slow down.
Another sector where there has been a major psychological shift is in the real estate industry. Home prices have been falling all over the nation, and this includes markets that were once extremely hot such as San Francisco…
In San Francisco, the number of homes with a price cut in October nearly doubled, to 238 from 124 last October, according to data from Realtor.com.
That’s nothing compared to Santa Clara County, where the number of price cuts rose to 818 last month, more than six times last year’s number. Santa Clara County had been one of the nation’s hottest markets this year, and the Bay Area’s price appreciation leader until September.
“Clearly, there is a market shift,” said Rich Bennett, a Zephyr agent in San Francisco.
If homeowners believed that this dip was just temporary and that home prices would start surging again next year as the U.S. economy thrives, it would be quite foolish of them to slash their prices like this.
In some cases, home prices are being reduced by hundreds of thousands of dollars. Why throw all of that money away if the market is going to bounce back shortly?
Over in the auto industry, there has also been a noticeable psychological shift.
If the U.S. economy was going to be doing extremely well in the years ahead, the major automakers should all be gearing up for record sales.
But instead, General Motors just shut a bunch of factories and laid off 14,000 workers, and Morgan Stanley analyst Adam Jonas is projecting that Ford will soon be laying off large numbers of employees…
“We estimate a large portion of Ford’s restructuring actions will be focused on Ford Europe, a business we currently value at negative $7 billion,” Jonas wrote. “But we also expect a significant restructuring effort in North America, involving significant numbers of both salaried and hourly UAW and CAW workers.”
Ford’s 70,000 salaried employees have been told they face unspecified job losses by the middle of next year as the automaker works through an “organizational redesign” aimed at creating a white-collar workforce “designed for speed,” according to Karen Hampton, a spokeswoman.
“These actions will come largely outside of North America,” Hampton said of Ford’s restructuring. “All of this work is ongoing and publishing a job-reduction figure at this point would be pure speculation.”
Shifting gears, let’s talk about agriculture.
If farmers believed that the trade war was just temporary and that things would soon swing back in their favor, many of them would keep trying to hold on for as long as they possibly could.
But instead, farm bankruptcies are absolutely surging…
A total of 84 farms in the upper Midwest filed for bankruptcy between July 2017 and June 2018, according to the Minneapolis Star Tribune. That’s more than double the number of Chapter 12 filings during the same period in 2013 and 2014 in Wisconsin, Minnesota, North Dakota, South Dakota, and Montana, reported Vox.
Farms that produce corn, soybeans, milk, and beef were all suffering due to low global demand and low prices before the trade war, according to economists, but president Trump’s trade war is making the problem even worse by exacerbating the weaknesses in the American economy. China has retaliated against the tariffs by slapping billions of dollars worth of tariffs on United States agriculture exports in response to Trump’s tariffs on Chinese products. Other countries, including Canada, have also added duties to US agriculture products in response to Trump’s tariffs on all imported steel and aluminum.
Most Americans want to have hope, but when they look at our economic situation all they see is a very bleak future.
And in some parts of the nation, there still hasn’t been any sort of a “recovery” from the last recession. For example, a recent Bloomberg article took a hard look at what conditions are currently like in eastern Kentucky…
Tiffany Hensley’s drive home takes her through some picturesque scenery, and an ugly economy.
“The first thing you see when you get down here is beauty,” says Hensley, midway through her shift at a diner in the rolling hills of eastern Kentucky. “But then you get to looking around. It’s real rough.’’
Of course eastern Kentucky is far from alone. Yes, coastal cities such as San Francisco and New York have prospered in recent years, but rural communities all across America have been deeply suffering.
And now economic conditions are deteriorating once again nationally, and things are about to get a whole lot tougher for everyone.
Economic Collapse
December 4, 2018
Optimism can be a very powerful thing.
For a long time Americans believed that things would get better, and that caused them to take action to make things better, and that actually resulted in things moving in a positive direction. But now things have abruptly shifted. In late 2018, an increasing number of Americans believe that an economic downturn is coming, and they are taking actions consistent with that belief. As a result, they are actually helping to produce the result that they fear. And without a doubt, any rational person should be able to see that signs that the U.S. economy is slowing down are all around us. So it isn’t as if those that are preparing for the worst are being irrational. It is just that when large numbers of people all start to move in the same direction, it has a very powerful effect. We witnessed this in the stock market in recent years when people just kept buying stocks even though they were massively overvalued. The collective belief that there was money to be made in the stock market became a self-fulfilling prophecy which pushed stock prices up to absurd heights. But now that process is beginning to reverse as well, and ultimately the unwinding of that bubble will be quite painful.
Over the past couple of years the dominant economic narrative that the mainstream media was pushing was that the U.S. economy was “booming”, and this encouraged businesses to expand and consumers to go out and spend money.
But now the dominant economic narrative has changed, and businesses are starting to take actions that are consistent with the new narrative. In the retail industry, if executives truly believed we would see an economic boom in the years ahead they would be expanding, but instead stores are being closed at a record pace…
Mall and shopping center owners across the U.S. are preparing to be hit by more store closures, following a brutal year that included department store chains like Bon-Ton and Sears going bankrupt, Toys R Us liquidating and even Walmart shutting dozens of its club stores.
Now, a slew of specialty retailers like Gap and L Brands are getting serious about downsizing, which will leave more vacant storefronts within malls until landlords are able to replace tenants.
As a result of these store closings, large numbers of workers will be without jobs, vendors will not be receiving orders and mall owners will be without tenants.
In other words, economic activity will slow down.
Another sector where there has been a major psychological shift is in the real estate industry. Home prices have been falling all over the nation, and this includes markets that were once extremely hot such as San Francisco…
In San Francisco, the number of homes with a price cut in October nearly doubled, to 238 from 124 last October, according to data from Realtor.com.
That’s nothing compared to Santa Clara County, where the number of price cuts rose to 818 last month, more than six times last year’s number. Santa Clara County had been one of the nation’s hottest markets this year, and the Bay Area’s price appreciation leader until September.
“Clearly, there is a market shift,” said Rich Bennett, a Zephyr agent in San Francisco.
If homeowners believed that this dip was just temporary and that home prices would start surging again next year as the U.S. economy thrives, it would be quite foolish of them to slash their prices like this.
In some cases, home prices are being reduced by hundreds of thousands of dollars. Why throw all of that money away if the market is going to bounce back shortly?
Over in the auto industry, there has also been a noticeable psychological shift.
If the U.S. economy was going to be doing extremely well in the years ahead, the major automakers should all be gearing up for record sales.
But instead, General Motors just shut a bunch of factories and laid off 14,000 workers, and Morgan Stanley analyst Adam Jonas is projecting that Ford will soon be laying off large numbers of employees…
“We estimate a large portion of Ford’s restructuring actions will be focused on Ford Europe, a business we currently value at negative $7 billion,” Jonas wrote. “But we also expect a significant restructuring effort in North America, involving significant numbers of both salaried and hourly UAW and CAW workers.”
Ford’s 70,000 salaried employees have been told they face unspecified job losses by the middle of next year as the automaker works through an “organizational redesign” aimed at creating a white-collar workforce “designed for speed,” according to Karen Hampton, a spokeswoman.
“These actions will come largely outside of North America,” Hampton said of Ford’s restructuring. “All of this work is ongoing and publishing a job-reduction figure at this point would be pure speculation.”
Shifting gears, let’s talk about agriculture.
If farmers believed that the trade war was just temporary and that things would soon swing back in their favor, many of them would keep trying to hold on for as long as they possibly could.
But instead, farm bankruptcies are absolutely surging…
A total of 84 farms in the upper Midwest filed for bankruptcy between July 2017 and June 2018, according to the Minneapolis Star Tribune. That’s more than double the number of Chapter 12 filings during the same period in 2013 and 2014 in Wisconsin, Minnesota, North Dakota, South Dakota, and Montana, reported Vox.
Farms that produce corn, soybeans, milk, and beef were all suffering due to low global demand and low prices before the trade war, according to economists, but president Trump’s trade war is making the problem even worse by exacerbating the weaknesses in the American economy. China has retaliated against the tariffs by slapping billions of dollars worth of tariffs on United States agriculture exports in response to Trump’s tariffs on Chinese products. Other countries, including Canada, have also added duties to US agriculture products in response to Trump’s tariffs on all imported steel and aluminum.
Most Americans want to have hope, but when they look at our economic situation all they see is a very bleak future.
And in some parts of the nation, there still hasn’t been any sort of a “recovery” from the last recession. For example, a recent Bloomberg article took a hard look at what conditions are currently like in eastern Kentucky…
Tiffany Hensley’s drive home takes her through some picturesque scenery, and an ugly economy.
“The first thing you see when you get down here is beauty,” says Hensley, midway through her shift at a diner in the rolling hills of eastern Kentucky. “But then you get to looking around. It’s real rough.’’
Of course eastern Kentucky is far from alone. Yes, coastal cities such as San Francisco and New York have prospered in recent years, but rural communities all across America have been deeply suffering.
And now economic conditions are deteriorating once again nationally, and things are about to get a whole lot tougher for everyone.
Dec 4, 2018 09:10:48 #
buffalo wrote:
Michael Snyder br Economic Collapse br December 4,... (show quote)
A bleak forecast in spite of the 3.5 GDP..
Will say not unexpected.. Progressive g*******t have tried everything to get Trump out of office but his successes have interferred.. Now they bring in a false f**g on income and jobs to tumble the numbers they couldn’t change..
I hope this is wrong but suspect it is the next level... Lord help us all...
Dec 4, 2018 09:29:22 #
lindajoy wrote:
, A bleak forecast in spite of the 3.5 GDP..
Will say not unexpected.. Progressive g*******t have tried everything to get Trump out of office but his successes have interferred.. Now they bring in a false f**g on income and jobs to tumble the numbers they couldn’t change..
I hope this is wrong but suspect it is the next level... Lord help us all...
Will say not unexpected.. Progressive g*******t have tried everything to get Trump out of office but his successes have interferred.. Now they bring in a false f**g on income and jobs to tumble the numbers they couldn’t change..
I hope this is wrong but suspect it is the next level... Lord help us all...
Can't deny what is happening to Ford and GM. I know that on-line sales are hurting brick and mortar stores. But Sears and Kmart filing for bankruptcy is real. Lowe's is closing 51 stores in US and Canada. Lowe's also announced that it’s shutting down all 99 of the Orchard Supply Hardware stores that it owns. Mattress Firm has filed for Chapter 11 bankruptcy and plans to close up to 700 stores as part of its restructuring. Mall retailer Brookstone announced on August 2 that it has filed for bankruptcy protection amid sagging sales and will close 102 stores. Fresh Market recently announced that it plans to close 15 stores in Georgia, Illinois, Indiana, Kentucky, North Carolina, New Hampshire, Tennessee, Virginia and Wisconsin. Chipotle Mexican Grill is closing up to 65 underperforming restaurants this year. Toys "R" Us will be closing ALL 735 stores by June 29th of 2019. Starbuscks is closing 150 stores in 2019. Subway plans to close 500 of its U.S. sandwich shops this year. The Bon-Ton Stores Inc., a department store chain, announced in mid-April that it’s going out of business. Vitamin retailer GNC is shutting down about 200 stores in 2018. Abercrombie & Fitch isn’t finished shrinking its retail footprint. The teen apparel company said it plans to close about 60 stores in the U.S. during the fiscal year as leases expire. Foot Locker is shutting down 110 stores in 2018. Gap Inc. plans to close 200 Gap and Banana Republic locations over the next three years.
Then the domino effect of those stores closing in malls will cause malls to lay off workers and suppliers will be hurt...on and on...
What the r****d stock market does has no affect on these closing and massive layoffs as it is not the real economy, nor does it reflect it.
Dec 4, 2018 09:53:40 #
buffalo wrote:
, br br Can't deny what is happening to Ford and... (show quote)
I don't disagree other than stocks was only a part of the equation... These closures you speak of here is caution driven and with their actions they bolster the caution which drives the market and stocks shift yet again..
The domino effect is staggering nor was I aware of all these stores you speak of here.. Scary, buffalo..!!!
Dec 4, 2018 10:04:23 #
lindajoy wrote:
I don't disagree other than stocks was only a part of the equation... These closures you speak of here is caution driven and with their actions they bolster the caution which drives the market and stocks shift yet again..
The domino effect is staggering nor was I aware of all these stores you speak of here.. Scary, buffalo..!!!
The domino effect is staggering nor was I aware of all these stores you speak of here.. Scary, buffalo..!!!
That wasn't even a complete list. Gotta go cook my 89 year old Dad his breakfast and see what else he needs.
MERRY CHRISTMAS!
Dec 4, 2018 10:27:10 #
buffalo wrote:
Michael Snyder br Economic Collapse br December 4,... (show quote)
>>>
Oh don’t some of us out here in the daily trenches know this all too well.
I’ve been saying it since 2016, there is no real recovery and now all the chickens are coming home to roost rotten eggs.
Trump controls nothing and needs to remove the Federal Reserve policy shaping.
TrickTrappedTrump, what will he do next ?
Dec 4, 2018 13:41:56 #
Sicilianthing wrote:
>>>
Oh don’t some of us out here in the daily trenches know this all too well.
I’ve been saying it since 2016, there is no real recovery and now all the chickens are coming home to roost rotten eggs.
Trump controls nothing and needs to remove the Federal Reserve policy shaping.
TrickTrappedTrump, what will he do next ?
Oh don’t some of us out here in the daily trenches know this all too well.
I’ve been saying it since 2016, there is no real recovery and now all the chickens are coming home to roost rotten eggs.
Trump controls nothing and needs to remove the Federal Reserve policy shaping.
TrickTrappedTrump, what will he do next ?
Jeff Kearnes of Blomberg says that 2/3 of business economist are predicting or expecting a recession by the end of 2020.It will hit consumers hardest in the form of runaway consumer debt fueled by higher interest rates and higher oil prices.
High consumer debt, as well as high corporate debt, caused by ultra-low interest rates fueled by actions of the federal reserve since the "great recession". Tightening monetary conditions, especially rising interest rates will cause the consumer and corporate debt bubbles to burst.
Credit card debt and auto loan delinquency rates are already rising. Debt-led growth of consumer spending has been steadily inflating a debt balloon, powered by radical income ine******y, is going to become the next bust. Because for the vast majority of consumers wages are NOT going up.
Dec 4, 2018 17:36:47 #
buffalo wrote:
Jeff Kearnes of Blomberg says that 2/3 of business... (show quote)
The new consumer debt thing that is pumping the debt bubble is the zero interest credit cards, balance t***sfers. We used a zero debt one to pay for a trip to England, it was paid back before interest started. I don't know how many people get caught with them paying interest on high balances, but I'll bet it's a lot. My wife freaks out about paying interest and pays off cards every month.
I've been worried that a very relaxed set of qualifying standards and equity levels for refinance and second mortgages could encourage a lot of people to borrow at higher rates to hang on, which is what fueled the bubble leading up to 2007/08.
We are in for a rough ride with the economy, I tell my friends to get money out of the stock market, pay any penalties, and get back in after it "adjusts".
Dec 4, 2018 18:05:59 #
nwtk2007
Loc: Texas
buffalo wrote:
, br br Can't deny what is happening to Ford and... (show quote)
For every store that folds another will take it's place. Obama should NEVER have bailed out GM and Crysler. I dkon't think Ford is suffering as much and Ford didn't accept bailout money.
Sears and K-mart have been fading for many years now; way over ten. They cannot compete and have not adapted to changing markets. Don't forget, though, Sears IS Allstate. Toys R US, GNC, Abercrombies, Footlocker and Gap are victims of internet shopping. 150 Starbucks stores is a drop in the Bucket for them and if they'd pull their heads out and stop being such l*****t/PC i***ts, they'd continue to do fine. They are also expensive!! Chipoltle SUCKS! Mattress Firm has been run into the ground by poor management and bad product.
Lets face it, it's a dog eat dog world out there and most of these guys are wearing Milkbone underwear!
Dec 4, 2018 18:22:20 #
nwtk2007 wrote:
For every store that folds another will take it's ... (show quote)
I saw an article (didn't read it) that Ford is also in financial trouble.
It is the JOBS that are going to be lost while wages will remain stagnant for the most part.
Rising inflation and rising interest rates will hurt the average consumer and demand will dry up and delinquencies will rise. The next "recession" will prove that the economy is consumer driven and not supply side "trickle down bulls**t" driven by the wealthy investing tax cuts and mega-corporations using tax cuts for stock buy backs.
Dec 4, 2018 22:38:34 #
buffalo wrote:
Jeff Kearnes of Blomberg says that 2/3 of business... (show quote)
>>>
The DepressionRecession I now call the Compression started really in 2016 around Fall... nothing really happened in 2017 and now 2018 was also a big flop... the economy is fragmented
There is no real recovery in the major sectors...
The FED publishes fraud figures by the Collection Agency methodologies designed to paint a certain narrative.
We’ve uncovered the Bulls**t.
The only reason we did not totally collapse is because of the bailouts and QE
Now watch what happens next.
Dec 4, 2018 22:40:58 #
nwtk2007 wrote:
For every store that folds another will take it's ... (show quote)
>>>
This is the last Great American Holiday for all these Benchmark Stores, watch what happens after they do the math in Jan, Feb, Mar closeouts...
The Great American Retail Apocolypse will accelerate, Thousands of stores will close in 2019 and Malls too...
Hold on Tight guys it’s going to be a really bad ride.
It’s all Baked in from bad policy from 5, 10, 15 and even 20 to 25+ years ago.
GAME OVER !
Dec 5, 2018 13:02:38 #
nwtk2007
Loc: Texas
Sicilianthing wrote:
>>>
This is the last Great American Holiday for all these Benchmark Stores, watch what happens after they do the math in Jan, Feb, Mar closeouts...
The Great American Retail Apocolypse will accelerate, Thousands of stores will close in 2019 and Malls too...
Hold on Tight guys it’s going to be a really bad ride.
It’s all Baked in from bad policy from 5, 10, 15 and even 20 to 25+ years ago.
GAME OVER !
This is the last Great American Holiday for all these Benchmark Stores, watch what happens after they do the math in Jan, Feb, Mar closeouts...
The Great American Retail Apocolypse will accelerate, Thousands of stores will close in 2019 and Malls too...
Hold on Tight guys it’s going to be a really bad ride.
It’s all Baked in from bad policy from 5, 10, 15 and even 20 to 25+ years ago.
GAME OVER !
Maybe. Maybe not.
Dec 5, 2018 13:03:59 #
nwtk2007
Loc: Texas
buffalo wrote:
I saw an article (didn't read it) that Ford is als... (show quote)
All car manufacturers decline this time of year. Cars don't fit under a tree.
Dec 5, 2018 13:16:28 #
lindajoy wrote:
A bleak forecast in spite of the 3.5 GDP..
Will say not unexpected.. Progressive g*******t have tried everything to get Trump out of office but his successes have interferred.. Now they bring in a false f**g on income and jobs to tumble the numbers they couldn’t change..
I hope this is wrong but suspect it is the next level... Lord help us all...
Will say not unexpected.. Progressive g*******t have tried everything to get Trump out of office but his successes have interferred.. Now they bring in a false f**g on income and jobs to tumble the numbers they couldn’t change..
I hope this is wrong but suspect it is the next level... Lord help us all...
Trump's successes are not what's making it hard to get him out of office, he has had pure interference and obstruction by the GOP that refuses to do the job of oversight. Basically Trump has screwed everything he touches up, his "picks" are blowing up the agencies they are running. The lord and his chosen ones are to blame here
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