Some say another collapse is soon to come, others praise the approaching uptrend of commerce and opportunity, but the truth .. is about the situation we’re already in.
The United States Federal Reserve sets monetary policy for the nation. They have had interest rates at 0% for many years. The Fed has also been dumping a ton of cash into the markets to create liquidity – but why?
When an economy is struggling, some economists believe that the best remedy is to create a credit-friendly economy. Within limits, credit creates opportunity and the interest creates profits. Those profits create more money and the cycle perpetuates – or so the fable goes.
What happens when no one can take on any more credit? What happens when 0% isn’t low enough? What happens when liquidity can’t propel an economy and another recession is due? Welcome to 2015 – and the federal reserve has nothing left to give.
It is possible that we are about to experience the depression that the Obama recession was intended to prevent.
What proof is there that such a calamity may strike? Well, there is financial news that the MSM doesn’t share with you:
- Business Inventories Push Sales-Ratio Into Recessionary Environment
- Consumer Comfort Plunges As Buying Climate Crashes
- Kmart’s sales fall off gigantic cliff
- Dow loses gains for the year
There are more.. but Americans are being fed a steady diet of “everything’s getting better” to create a “happy place” so that U.S. citizens will take out more debt and buy more stuff – WHY???
If the American consumer shuts down – down goes the world. Without Americans buying semi-broken Chinese furniture and accessories from Wal-Mart – the Chinese would suffer.
If U.S. consumers no longer needed Levi jeans made in Mexico or fruit from Central America – those nations would suffer.
Trade deals we have negotiated and some under negotiation now seek to even the playing field – for those other nations. American will be lowered to the norm and they will be raised towards it. Bad for us, good for them.
It’s all about leveling the playing field – for them. At some point, isn’t access to the American market worth a premium?
What Obama and some before him have failed to understand is that America must negotiate trade from strength because we are strong. Once we stop acting that way, we will be as weak as nations we bargain with.
Before long, the U.S.A will be just as weak as those she bargains with – and now, the central bankers have no tools left to fix it.
Most would agree with the bullet points you listed and I am among them. Let’s look for a second to the age group that the majority of advertising is directed to…25-35 y.o….Today they are considered to represent the ‘most likely to spend’ group. (least likely to stop and think more than a few years ahead) I generally refer to them as the ‘instant gratification’ or I want it now) consumers. Dangerously low interest rates equaled only by low/no down payments are like catnip to the alley cat…They buy homes and cars their parents only dreamed about at their age….They do not understand ‘balloon payments’ and compounded and fixed interest rates…meaning ‘a whole bunch of repos’. A Phoenix Realtor said that about 60% of repo listings are from first time buyers.
Your absolutely correct….if this field gets any more level, we will, indeed, forfeit the game. We need to exchange appeasement for leadership…and keep our play book to ourselves.
Thanks Jan, good points on the younger consumers.