Economy On The Edge
Here’s the U.S. economic situation for Monday, March 14. Markets have been careening around, especially following the invasion of Ukraine. But our bigger challenges are already baked in.
These summary statements are my simplified take on recent data.
After that, I follow with detail and documentation, in case you want to investigate further.
Here we go…
Economic Conditions Summary
RECESSION?
The 10 Year/2 Year Treasury spread is down to 0.25.
If it goes negative, expect a recession within the next year.
- Stock markets are falling
- NASDAQ is in a Bear Market
- Bitcoin cut in half
INFLATION
7.9% inflation and climbing fast.
Home prices are up 31% in two years.
After record cash injections,
the money supply is out of control.
If the Fed can’t control money, then it can’t control inflation.
SHORTAGES
These are a problem, right now…
- Energy, especially oil and gas. Also, all petroleum based products.
- Any tech with microchips or batteries.
And I would guess this will become obvious by late summer or early fall…
- Food (especially regarding fertilizer and grain shortages)
DEBT
$ 30 trillion – U.S. National Debt
$168 trillion – U.S. Unfunded Liabilities
SHRINKING RESERVES
Oil reserves will be cut in half.
Do we even have gold reserves?
EMPLOYMENT
Nonfarm payroll was up 678,000 in February.
Unemployment rate is 3.8%
And Now, The Details
Still with me? Everything that follows expands on what I just showed you.
Some of it includes new information.
Most of it has links to my sources.
Yield Spread
10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity (T10Y2Y)
0.25 spread on March 11, 2022
(When this goes negative, it anticipates a recession within the next year.)
Equities
U.S. stocks continue to fall from their highs. Lower highs, lower lows.
NASDAQ is in a Bear Market, more than 20% off its NOV 22 high.
Crypto
Bitcoin is in its own Bear Market down almost half…
$69,000 on NOV 9, 7p
$37,793 on MAR 13, 8p
Inflation
Consumer Price Index Summary (March 10, 2022)
The all items index rose 7.9 percent for the 12 months ending February.
The 12-month increase has been steadily rising and is now the largest since the period ending January 1982.
GDP Price Index +7.1% for Q4, 2021
(Percent Change from Preceding Quarter)
Personal Consumption Expenditures Price Index up 6.1% for JAN, 2022
(Change from Same Month, One Year Ago)
Real Estate
The Case-Shiller Home Price Index is up 31% in two years.
DEC, 2019 – 212.29400
DEC, 2021 – 278.62900
Black Rock is coordinating with the government to eliminate private property.
(You’ll own nothing, and you’ll like it.)
It’s quite a story.
US Debt Clock
$ 30 trillion – US National Debt
$168 trillion – US Unfunded Liabilities
Reservations About Reserves – The Fed
Federal Reserve
The humor: It isn’t Federal, and it isn’t a Reserve.
The serious part: It has never been audited.
Gold Reserves
The number of people who have actually seen gold in the U.S. Reserves is about the same number as have seen dead aliens at Wright Patterson Air Force Base.
The promise is, we do have gold. You just can’t see it, because, well, security.
The list of skeptical countries looking to repatriate their gold is now joined by states.
Texas is the first, looking to pull 650 million ounces out of the Federal Reserve.
Oil Reserves – (Who Needs Reserves?)
The U.S. Strategic Petroleum Reserve (SPR) was established in the 1970s to alleviate the effects of unexpected oil supply reductions.
Current authorized storage capacity – 714 million barrels
Highest inventory – 726.6 million barrels on December 27, 2009.
…SPR inventories could decline from 618 million barrels (as of October 1, 2021) to about 314 million barrels by the start of the 2032 fiscal year, the lowest level since March 1983.
…draw down 87.6 million barrels of crude oil in fiscal years (FY) 2028 through 2031.
March 1, 2022 – President Biden Commits 30 Million Barrels of Crude
Employment
Employment Situation Summary (March 4, 2022)
Total nonfarm payroll employment rose by 678,000 in February.
The unemployment rate edged down to 3.8 percent
In the week ending March 5, the advance figure for seasonally adjusted
initial unemployment claims was
227,000, an increase of 11,000 from the previous week’s revised level.
Personal income increased less than 0.1 percent at a monthly rate.
Consumer spending increased 2.1 percent, in January.
Recruiter’s View
I don’t think the American public is going to appreciate what’s coming.
Companies that can supply…
- Oil and gas
- Metals
- Ag products
…might do very well.
-TD