Red, White & Screwed - Countdown to Recession (Part I)

The US has had 13 recessions since the end of World War II, one every 5.75 years on average. It has been 10.75 years since the Sub-Prime Crisis recession ended. Let’s face it, it’s gonna take more than a President Covfefe to stop history repeating itself. The current health of the stock market is artificial and it will crash soon. A recession is inevitable.

First off, the recession is already half here. The common definition of a recession is “2 consecutive quarters of negative GDP growth”. The First Quarter Of 2020 Had -4.8% GPD growth, the second quarter of 2020 will not have positive GDP growth because the economy was frail and now it's broken. Many parts of it were holding on by a thread that got severed as a dodgy infrastructure was struck by the pandemic and the anemic response of an Anti-Vaxxer president.

Middle-Class Purchasing Power Has Shrunk

The annual sales of homes indicate the financial health of the citizenry to move from rent to mortgage payment and start generating equity, not just lower the homeless count. In 2008, annual household purchases plummeted to 4.12 million, by 2016 they reached 5.45 million. In 2019 they have gone down to 5.34 million. This is not due to the population shrinking, this is due to the middle-class purchasing power shrinking. This means Joe 6-pack has fewer savings to get through this crisis, so the masses are not going to come out of quarantine and shop the US out of recession.

With reduced home equity to borrow against to pay the bills, how about borrowing against the car? Nice try, too bad the Auto Lending industry has spent the last decade turning the meager asset of a car into a toxic debt for the buyer and the nation. The auto lenders now finance the purchase of cars, repossessing 2 million of them each year them when payments lapse and collateralized the car loan debt into the same financial vehicles that created the sub-prime crisis. This is what happens when no banker goes to jail for tanking the global economy.

So the middle class has few home or car assets to rely on to survive the crisis. Any cash reserves to ensure rat cookbooks are not a #1 best seller? As of 2017, there were 14,348 Pay Day Lenders in the US. That number reached 23,000 lenders in 2018. For comparison, in 2019 there were only 13,837 McDonalds locations in the US. A healthy economy does not have almost twice the demand for predatory lending than for a Big Mac.

with an unemployment rate of 14.7%, a bulk of the payday lender’s customers will default on their debt all at once, which will very likely cause this industry to default as well, and good riddance to those vampires.

The Stock Market Razzle-Dazzle

“But April was their best month for US stocks since 1987!” says the 1%, adjusting their monocle at the scandal of it all. Yes, 1987 was a great year, Black Monday, the Dow Jones dropped 508 points, the single biggest plummet since the crash of 29. Also, the top 1% in the US has greater wealth than the bottom 90%. Let’s not consider their squeals of glee at the stock market’s marvelous cleavage to be indicative of the financial health of the proletariat. The rich have money to risk on stocks, the rest have to make ends meet.

But as we poke at the cleavage of the economy Trump is so happy to flash every time he molests a camera, we find that they are fake, sagging, and stretch marks. Even if the stock market was indicative of financial health, it’s artificially propped by the US government and It can’t last. The US government fired 6 trillion USD at this problem to try and stabilize the market while no one can work. They can’t keep printing money forever, and someone will have to pick up the check. Can it be put on the credit card of the US debt?

The US Debt Bubble

The world has a debt of their own to invest in now, and Lindsay Graham suggested the US should default on 1 trillion USD of debt held by China, so good luck finding interested parties. The US debt is just not the investment it used to be.

It seems that America’s credit obsession could be catching up with them as the US debt is considered the mother of all bubbles, liable to burst if earning don't improve. The US has the 11th highest Debt-to-GDP ratio in the world, surpassed by such economic powerhouses as Lebanon, Congo, and Mozambique, doing just a little better than Jamaica and Cyprus. With an unemployment rate of 14.7% the projected deficit of 4 trillion, the US debt bubble might burst. Even if a Unicorn gave every American a vaccine tomorrow the unemployment rate would not go back to 3.5%, so even divine intervention is not stopping this recession.