Lux Lucet

“Trump touts ‘strongest economy in the world’ after disappointing jobs report,” ran a recent headline that managed to capture both the official line of the Trump administration and the contrasting reality portrayed by many recent underlying economic data points.

The February 2019 jobs report, released in early March, was expected to show a gain of 190,000 jobs, but instead reflected a gain of only 20,000. That’s a big miss in anybody’s book.

Now one could argue that President Trump’s statement is not negated by the disappointing jobs report. The US could indeed have the strongest economy in the world – depending on how one defines “strong” – and still do a face plant when it comes to the production of new jobs. All that is required for these two ideas to be true at the same time is for the rest of the world to be in a bigger mess than the US.

It is the contention, however, of this author that, in spite of all the talk of a booming economy coming from the Administration and from various sources on Wall Street and in the media, the US economy is not doing well and, in fact, is very likely headed into recession. It may actually be in recession as of this writing. Below are thirteen reasons why this author thinks so.

#1 The yield curve inversion in the US Treasury market: As was widely reported in the financial press on 3/22/19, a significant portion of the US Treasury yield curve has inverted, a rare occurrence which many market observers will tell you is the surest predictor of an oncoming recession.

#2 An unexpected falloff in US manufacturing output: Economists has expected a rise in US manufacturing output in February 2019, but the data that came out in the middle of March, not only did not show a rise in output, but actually reflected a sharp decline.

#3 A 50 year record decline in the Dow Jones Transportation Average: According to Investopedia, The Dow Jones Transportation Average (DJTA) is a “price-weighted average of 20 transportation stocks traded in the United States.” But more than just a weighted-average of transportation stocks, noted investment writer Richard Russell and many others consider the DJTA to be a bell-weather index for the overall state of the economy. The idea being that, if the economy is doing well, this will be reflected strong numbers in the transportation industry, which moves products around. Strong industrial and consumer demand means more shipping, hence strong numbers from the companies in the DJTA. But according to MarketWatch, this index just declined for the most consecutive trading days in about 50 years.

#4 Record auto loan delinquency: In February, the Washington Post reported a record 7 million Americans were 3 months behind on their car payments.

#5 Record student loan debt:
As Bloomberg reported in December, outstanding student loan debt hit a record $1.465 Trillion late last year. This comes at a time when, as the Wall Street Journal reports, some 43% of college grads are underemployed in their first job.

#6 The Federal Reserve’s abrupt policy reversal: After years of near-zero interest rates and a bloated balance sheet, the Fed set out on a program of raising rates and normalizing its bond holdings. This was to serve as proof that the economy had recovered from the 2008 crisis. But the Fed had barely gotten started when it was forced to quickly change course. The massive selloff in the stock market in December, halted only by the intervention of the Plunge Protection Team, has spooked the Fed to the point where it has called off any further rate hikes and has called an early end to its balance sheet normalization program. Speaking of the March 20 announcement by the Fed that it was changing course, Ron Paul said he thought the day would “go down in monetary history” and compared it to August 15, 1971 when President Nixon effectively ended the last remnant of the gold standard. Not only is the Fed ending its balance sheet reduction, there is now talk of another round of Quantitative Easing (QE), which is just an academic euphemism for counterfeiting.

#7 New home sales fall off a cliff:
New home sales in January saw a seasonally adjusted 6.9% decline from December.

#8 Inflation and unemployment are probably worse than reported: It’s generally not known that the government has revised its method for calculating both unemployment and inflation over the past several decades with the effect that both measures are underreported compared to the past. For example, the official numbers put unemployment at less than 5%, but John Williams of ShadowStats – Williams purports to use the pre-1994 government unemployment methodology – calculates unemployment at over 20%, where it has been for the past 10 years. The same discrepancy exists between official inflation numbers and those calculated by Williams. Official inflation is around 2% annually, but using the government’s own 1980 method for calculating inflation Williams puts it at closer to 9%, Even if Williams were off by 50%, his numbers would still paint a disastrous picture of the economy. In fact, if we were to use Williams’ inflation numbers since the financial crisis to compute Gross Domestic Product instead of the official inflation numbers, it is entirely possible that we would find the economy has been in recession since 2008.

#9 Record corporate debt: In December, the Wall Street Journal reported that corporate debt is at or near record levels. The article notes that “U.S. corporate debt has climbed to roughly 46% of gross domestic product, the highest on record, according to data from the Federal Reserve and Commerce Department.”

#10 Record federal deficits: UPI reports that the US federal government set a record monthly deficit in February 2019, racking up an astonishing $234 billion in spending in excess of tax receipts. That this could happen at a time when the economy is supposedly booming is extraordinary. Keynesian theory says that governments are supposed to deficit spend when the economy is in recession and run a surplus when the economy is growing. If the federal government is setting deficit records when times are good, what’s that say about what will happen to the deficits once we hit recession? Deficits of this sort imply massively higher interest rates and massively higher inflation.

#11 Record federal debt: In February, NPR reported that the official US debt hit $22 trillion for the first time ever. It’s important to understand the difference between the debt and the deficit. The deficit is the yearly shortfall. The debt is the sum of all the prior deficits. Mind you, the $22 trillion is the official number. Many observers put it many multiples higher.

#12 Americans have more credit card debt than ever before:
Bloomberg reports that Americans ended the year with a record $870 billion in credit card debt.

#13 The retirement crisis: Most of us have been told we can expect a long and rich retirement filled with world travel and luxuries. In truth, only a very small percentage of the population is on track for anything like this. Many major public pension funds, saddled as they are with overly generous promises to current retirees and unrealistic rate of investment return assumptions, are either insolvent or on the brink of insolvency. For example, Martin Armstrong reports that CalPERS (the California Public Employees Retirement System), the nation’s largest pension fund, is “in a state of very serious insolvency.” And it’s not just pension plans that are in trouble. According to this CNBC article, “As a group, Americans have shockingly little saved for retirement.” It goes on to report that 21% of Americans have no retirement savings at all, while a third have less than $5,000. The average American has a retirement savings totaling $84,821 compared to the recommended $1 million needed to supplement Social Security. And, of course, this assumes that Social Security will be around when current workers go to retire, which is by no means a guarantee.

Dave Kranzler, one of the best financial analysts I know of, sums up the state of the US economy in these words, “The economy is over-leveraged with debt at every level to an extreme and the Fed knows it. Economic activity is beginning to head off of a cliff. The Fed knows that too. The Fed has access to much more in-depth, thorough and accurate data than is made available to the public. While it’s not obvious from its public posture, the Fed knows the system is in trouble. The Fed’s abrupt policy reversal is an act of admission. I would say the odds that the Fed starts printing money again before the end of 2019 is better than 50/50 now. The ‘smartest’ money is moving quickly into cash. Corporate insiders are unloading shares at a record pace. It’s better to look stupid now than to be one (sic) a bagholder later.”

What do we say to these things?

Well, is everyone ready to fall on his sword now? I hope not, for it’s not my intention to drive anyone to despair. Rather it is the aim of this post, and all the other posts, on this blog, to educate, especially those who are of the household of faith. If there is any group of people in this world who deserves to hear the truth about the economy, it’s the people of God. So much of what we hear in the mainstream press are lies designed to confuse you and keep you from taking effective action to protect your financial interests and those of your family.

We’re told massive debt is normal and even desirable, that gold and silver are useless pet rocks, and that the Fed and Wall Street have everything under control.

The truth is that we have an overleveraged financial system built on a fraudulent fiat currency – the dollar – which is being relentlessly, and intentionally devalued, not for your benefit, but for the benefit of powerful financial and governmental interests.

There is much written in the Bible about the importance of being prepared. Noah was history’s ultimate prepper, but he is not the only example in Scripture of someone taking action to preserve his life. God warned Joseph in a dream about the coming famine, and Pharaoh heeded the warnings and took steps to preserve Egypt. In the Olivet discourse, Jesus warned his hearers to flee Jerusalem when the saw the city surrounded by armies. Those who heeded his words received their lives as a prize. In Proverbs we read “A prudent man foresees evil and hides himself, but the simple pass on and are punished.” Doubtless, one could add to these examples.

In the opinion of this author, there is no avoiding a major economic calamity in the next few years. And if Christians are to take effective action to preserve themselves and their loved ones, or perhaps even position themselves to help others, they need to have a realistic understanding of the magnitude of the financial crisis looming before us. Had God not warned Noah of his intention to destroy the Earth with water, both he and his family would have been carried away with all the rest. Had God not given understanding to Joseph to know the meaning of Pharaoh’s dreams, the Egyptians would have starved.

As Christians, we have reason for hope. For Christ promised his followers that those who seek first the kingdom of God and his righteousness will have the things they need in this world. We may not have everything we want, but the Lord has promised to provide for us. There is a great deal of financial wisdom in the Word of God. Let us listen to that, and not the lies of the world that constantly tell us we can get something for nothing, that debt doesn’t matter, and that government, not God himself, is the provider of all things good.