I’ve been writing about the coming economic crash for a long time.
As much as WAR Street “experts” (proven to be less accurate than a cat playing with a toy to pick stocks) will have you believe otherwise, we are now standing at the edge and going over.
For years, the stock market has been propped up by two factors- The creation of currency by multiple governments using low to 0% interest loans which were then used to buy stocks, propping up and even increasing stock prices. And the buying back of stocks by corporations to achieve the same purpose. Large investors have been on board with this. Small investors have been closed out as stock prices increased.
What has changed?
1- Numerous countries have now slowed or even stopped the creation of new currency. Even the US has slowed currency creation in an attempt to maintain the value of the falling dollar.
2- While the Federal reserve has allowed interest rates to increase very slowly, this month they announced an increase to the primary credit rate to 2.5%. That was effective 14 June 2018, which was the first day we saw the stock market begin to retract in a 6 day slide. And today is not over yet as I write this.
3- While the tax bill has offset the increasing interest rates seen so far, a genuine increase will bring that to a complete halt.
4- In the same time frame, major external investors have slowed investments in US business and stocks to a fraction. China decreased US investment by as much as 92%. Many people credit the recent trade war with China but the fact is, this has been taking place since January. So they may decrease their investments further or cease US investments completely.
None of this is saying the recent trade wars have not made things worse. They definitely have. But they are neither the sole cause for what has been building for decades.
What should we expect from here?
Expect to see stocks declining in a gradual stair step manner for a time. This will happen as corporations and investors use their cash reserves to buy even more stocks. Small drop, they will buy cautiously. Large drop, they will become more aggressive, forcing stocks to rise slightly. The purpose of this is to keep funds and smaller investors from becoming spooked and selling off large amounts.
This can only continue for a limited time. Consumer purchasing is flat or down. Meaning profits from purchases are flat or down. This will incite rounds of closures and layoffs in an attempt to maintain profit levels. Which decreases the number of consumers, continuing the downward trend.
To make matters worse, the federal and state governments are reducing funding for social support programs such as food stamps, welfare, Social Security, Medicare and Medicaid. Just the announcement of such reductions has an immediate effect as anyone who has money to conserve will freeze spending as much as possible. So you have a consumer market contraction.
It doesn’t end there. Keep in mind that even 0% interest loans are LOANS which must be paid back.
Eventually cash reserves will become depleted. When that happens, that is when we go over the cliff. Corporations that hold stocks in other corporations will begin to sell off investments as confidence is lost. Large investors will follow immediately, wanting to cash in stocks at the top of the market and prevent cash loss.
All of this may happen within weeks, even days. The final drop will happen within hours.
I cannot wait to hear WAR Street advertising “experts” try and spin this while politicians try to blame Russia and China. Mark my words, that’s what will happen.
What is the goal here? Who gets hurt? Who gets paid?
The ultimate goal in all of this is the final consolidation of wealth and power into the hands of a few. There are many now at “the top” who believe they have wealth, power and influence. Yet as stocks decrease in value and they are forced to sell, larger buyers will continue buying as stocks drop. Sell as they rise slightly, gaining the remaining pennies from the coffers. Meanwhile the common person on the street will be left with no savings, no retirement account, no job, no income from any source.
Am I overstating this? Perhaps. Then again, I have been accurate so far.
As currency creation slows and ceases, the only path to greater wealth and power is by wresting what remains from the hands of others. Eventually any illusion of the capitalist model of profit ceases to exist when all wealth has been accounted for and horded by a very few who then use those resources to wage war on each other.
Why point fingers at other countries? For now, mere distraction. As long as you keep blaming immigrants, Russia, China or whomever else, you pay no attention to what they are doing. For most of the populace, this has been highly effective as they listen exclusively to the media owned by the same oligarchs at the top. Later, when people are desperate enough, it will remain a distraction and diversion plus offer some means of survival as they are offered positions with the military or military contractors for an income. This is already happening NOW. How many thousands work in industries building, shipping, guiding weapons to destroy any country that poses an economic threat to the oligarchy? Do these people ever give a thought to the civilians at the receiving ends of those weapons? What do they tell themselves? “It’s a job.”
If other countries are a threat to our oil supply, why are we exporting oil?
Of course, we can blame someone like China for not buying our goods or for increasing tariffs which destroy entire industries here. How much more will it take before the blame becomes a call to take up arms to destroy and steal the resources from China?
People who are desperate enough will take any job at any wage and any conditions. Proof of concept- We have lately raged against the establishment of concentration camps for immigrant children. Have we raged against the people who WORK in those camps? Those people are your neighbors. What do they often tell you and themselves? “It’s a job.”
One of the greatest ironies is how those jobs are paid for. With tax dollars. Much obtained by stripping away the current and future resources which hold our society together.
But go ahead. Blame Russia. Blame China. Blame immigrants. By no means should you stand up and look in the mirror. By no means should you pull your savings out of your stock portfolio before the crash comes.
Welcome to the edge. Enjoy the ride down.