This article was originally published by Brandon Smith at Alt-Market.com
This article was originally published at Birch Gold Group
As I predicted just after the 2016 presidential election, a sordid theater of blame has exploded over the state of the U.S. economy, with fingers pointing everywhere except (in most cases) at the true culprits behind the crash. Some people point to the current administration and its pursuit of a trade war. Others point to the Federal Reserve, with its adverse interest rate hikes into economic weakness and its balance sheet cuts.
Some blame the Democrats for doubling the national debt under the Obama Administration and creating massive trade and budget deficits. And others look towards Republicans for not yet stemming the continually increasing national debt and deficits.
In today’s economic landscape, the debt issue is absolutely critical. While it is often brought up in regards to our fiscal uncertainty, it is rarely explored deeply enough.
I believe that economic crisis events are engineered deliberately by the financial elite in order to create advantageous conditions for themselves. To understand why, it is important to know the root of their power.
Without extreme debt conditions, economic downturns cannot be created (or at least sustained for long periods of time). According to the amount of debt weighing down a system, banking institutions can predict the outcomes of certain actions and also influence certain end results. For example, if the Fed was interested in conjuring a debt based bubble, a classic strategy would be to set interest rates artificially low for far too long. Conversely, raising interest rates into economic weakness is a strategy that can be employed in order to collapse a bubble. This is what launched the Great Depression, it is what ignited the crash of 2008, and it is what’s going on today.
The massive debt burden makes recovery difficult, if not impossible, and thus the system becomes increasingly dependent on the banking elites to resolve the problem.
Debt is the fuel that keeps the centralization machine running. I am not talking about standard lending, though this can be a factor. What I’m talking about is debt created through policy; debt that’s created in an instant through the use of subversive and arbitrary measures, like central bank balance sheet initiatives or interest rates. And, debt that’s created through collusion between central banks, international banks, ratings agencies, and government using the removal of regulations, or the implementation of unfair regulatory standards.
Debt is a drug. The banks have known this for quite some time and have exploited the opiate of easy money to leverage entire nations and cultures into servitude or self-destruction. To illustrate this point, let’s look at the debt numbers today.
The national debt is closing in on $22 trillion, with over $1 trillion a year currently being added for the American taxpayer.
Corporate debt is at historic highs not seen since 2008, with S&P Global reporting over $6.3 trillion in total debts and the largest companies holding only $2.1 trillion in cash as a hedge.
U.S. household debt currently stands at around $13.3 trillion, which is $618 billion higher than the last peak back in 2008, during the credit crisis.
U.S. credit card debt surpassed $1 trillion for the first time in 2018, the highest single year amount since 2007 (once again, we see that debt levels are spiking beyond the lines crossed just before the crash of 2008).
So how can this debt be exploited to engineer an economic crisis? Let’s start with household and consumer debt.
One would think that with so much lending and creation of consumer debt, we would see a massive expansion in home and auto markets. And for a time, we did. The problem was that most home purchases were being undertaken by major corporations like Blackrock, as they devoured distressed mortgages by the thousands and then turned those homes into rentals. In the auto market, there was a large spike in buying driven by lending, but this lending was accomplished through ARM-style car loans, the same kind of loans with lax standards that helped cause the mortgage crisis in 2008.
Today, both in the housing market and the auto market, a crash is indeed taking place as the Fed raises interest rates and makes holding these loans ever more expensive.
Pending home sales have tumbled to a four-year low, as one in four homes on the market is now forced to lower prices. Debt is becoming expensive, and therefore demand is slumping.
Overall U.S. auto sales began a precipitous decline this September, which has continued through November, mostly due to higher interest rates.
It is clear that an economic crash, which some are merely calling a bear market, is indicated in the swift decline in housing and autos, two of the most vital consumer sectors.
But what about corporate debt? Let’s use GE, GM and Ford as litmus tests.
GE is currently in the red for over $115 billion. And this doesn’t include its pension promises to employees, which amount to over $100 billion. Given that only $71 billion has been earmarked to cover the payments, any rate hikes from the Fed constitute a millstone on the necks of GE. The likely result will be continued layoffs. Last December, GE announced 12,000 jobs to be cut through 2018, and it is likely cuts will continue into 2019.
GM, with long term debt of $102 billion (as of September) and cash holdings of around $35 billion, is now cutting over 14,000 jobs and shutting down multiple factories in the U.S. This is due, in part, to a combination of interest rate hikes and tariffs. However, the true point of fracture is because of the expansive debt that GM is responsible for. Without such debt, neither rate hikes nor Trump’s tariffs would have as intense an effect on these corporations.
Ford, not to be outdone by GM, is set to announce up to 25,000 job cuts, though the bulk of them may be implemented in Europe. Ford has called this report by Morgan Stanley “premature”, but we saw many similar “non-denial-denials” of these kinds of info leaks during the crash of 2008, and most of them ended up being true. Ford saw its debt rating downgraded by Moody’s earlier this year to one step above junk. With current liabilities of around $100 billion and only $25 billion in cash holdings, Ford is yet another company of the verge of crumbling due to huge liabilities it cannot afford to pay more interest on.
We can see the stress that the Fed is able to place on corporations by looking at their stock buyback expenditures over the past few years. Until recently, it was the Fed’s low interest rates, overnight loans, and balance sheet purchases that allowed companies to buy back their own stocks and thereby artificially prop up the markets. In fact, one could argue that without stock buybacks, the bull rally that started in 2009 would have died out a long time ago and we would have returned to crash conditions much sooner.
Well, this is exactly what is happening today. Stock buybacks in the last half of 2018 are dwindling as the Fed tightens policy and interest rates draw ever closer to the designated “neutral rate” of inflation. All it took as a measly 2% increase in interest to create a crisis, but with the level of debt choking the system, this should not be surprising to anyone.
By lowering interest rates to near zero, what the Fed did was create a culture of irresponsible risk, and I believe they did this knowingly. Even Donald Trump has tied himself to the performance of the stock market and embraced the debt addiction, arguing for the Fed to stop or reduce interest rate hikes to keep the debt party going. Though, with Trump’s White House crawling with international banking agents and think-tank ghouls there might be far more than meets the eye as Trump anchors himself to the performance of the Dow.
The Fed is not going to stop. Why would they? They have created the perfect bubble. A bubble that encompasses not only corporate debt, consumer debt, and stock markets, but also bond markets and the U.S. dollar itself. If the goal is a move to centralize power, then the banking elites have the perfect crisis weapon in their hands, and they barely need to lift a finger (or raise rates) to trigger the event.
As noted earlier, it is not only stock investors that are dependent on Fed interest rates, but also the U.S. government, as treasury debt becomes less desirable for foreign buyers. The higher the potential interest barrier for the US, the higher the cost, and the less faith foreign buyers have in our ability cover our liabilities while the Fed is still tightening.
Both China and Japan have been quietly reducing treasury holdings and purchases. Failing bond auctions have been cited as a trigger for spikes in Treasury yields since the beginning of 2018. Again, even U.S. debt and the dollar are embroiled in the “everything bubble”.
Debt in itself is not necessarily just a tool to gain more wealth; it is also a tool to change and mold societies through financial leverage and disaster. To understand who is creating any fiscal downturn, and to understand who benefits from economic crisis, one only needs to consider who controls the debt.
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As globalization facilitated the export of traditional wealth creating value adding manufacturing debt fueled consumption with fiat currency became the driving force replacement. If this debt never occurred a significant economic decline would have been immediately forthcoming as factories closed. This would have immediately educated the body politic and their vote would have had an impact when it still mattered before the evisceration was complete. The debt was intentional to hide the magnitude of the decline. Now after 20 years the masses are just starting to understand the how and why their life is a far cry from the previous generation who might have been great but boy they were trustingly dumb.
I guess I can sum up by saying that, “Our economic decline is at the core of our historic debt”.
Debt ??? The Globalists have racked up American debt funding their Agenda: $500 billion a year for ILLEGALS according to a harvard economist; $400 billion a year for China; $160 billion a year for the EU, $125 billion a year for Mexico; $25 billion a year for Canada; 75% of the cost of NATO.
Yet the LSM claims that “Americans are living beyond their means.” Another lie propagated by the Globalists to avoid SS payments and decent health care costs for Americans.
Storm the Bastille !!! Hang the MFKRS !!! 🙂
Kevin2, absolutely spot on! We were flooded with cheap credit/debt to hide the fact that we were being hollowed out/de-industrialized.
When the collapse comes we will wake up to being an impoverished 3rd World Nation (except for an aging infrastructure). What I mean is that the only difference will be that we have indoor plumbing and electricity.
I hope people know that there will be no more recessions, only Hyper-inflationary Depressions. So when you hear a Recession is likely within 2 years, know what they mean is a Depression/Collapse is expected within 2 years.
This intentional deception could only be accomplished with central banking / Federal Reserve having the power to create currency and set interest rates divorced from supply and demand.
I am very surprised we have not blown to pieces yet but it is coming soon, very soon people – get ready! Interest rates go up & they won’t even be able to make the minimum interest payments, average citizens and the incompetent, clown Gov’t as well.
The interest rate the treasury pays is a joke!
I just bought a Tbill that pays 2.4%.
The Credit union pays 0.5%.
Inflation is easily 4% here.
Invest in tangible assets!
Try being a mob loan shark instead. They get about 55% interest.
The existing bank establishment is (((the mob))).
I am curious as to whether the credit card debt reflects those who pay off their cards each month. Some of those numbers are large.
I have no personal debt.
All debt attributed to me is caused by Democrats
and is purely political.
Since all this wealth is purely paper,
it is not real, so let it fail.
You really don’t think Facebook is worth billions
in income, they don’t make anything!
GM should have failed years ago as they want
too much money for crap! Have you ever wondered why
as soon as you drive a new car off the lot , it
decreases in value 25%?
The whole system is not a matter of fake money,
it is a matter of not pricing a “thing” at the cost
of production, but pricing it at the price of Politics
in a particular area of political influence.
That is not capitalism. Capitalism is very inhumane
and cold hearted. Much like reality and life.
But it WORKS!
I hope the whole system depresses to where it really belongs.
History shows that only Capitalism works, Socialism is suicide, Communism is murder.
john stiner, I’m stealing this; “Socialism is suicide, Communism is murder”.
It is a matter of fake money.
On whut grounds do you deny this?
Shortly after the first of the year I expect to have another old truck for cash from a private owner. I don’t have the LUXURY of getting something financed due to my low income level. Just pay the whole cash price right up front and be done with it. No extra bill to worry about. It seems like financing is for RICH people.
Most think communism is atheist goose steppers not understanding that central control of the economy is its cornerstone with the remaining being largely symptomatic. We were at one time by stealth, now by leaps and bounds under this central control is done by money divorced from value. Interest rates were under capitalism were governed by the result of supply and demand self correcting too little or too much spending v saving, stopping massive swings in its incipient stages. We now have some as of yet undefined system that is a fascist / communist / capitalist hybrid having elements of all three and like too many cooks spoiling the soup, problems created that are larger than problems solved.
Whut we have is market communism. Another word for this is fascism.
Kevin2, I think you’re onto something. A HYBRID of several economic/political approaches seems to answer many of my questions. CRONY CAPITALISM, SOCIALIST HEALTHCARE, half the population of non-taxpayers VOTING to increase the taxes on those that pay – yeah, that sounds like a HYBRID to me.
I just read this article: https://www.zerohedge.com/news/2018-12-10/october-meltdown-was-bear-stearns-next-comes-lehman
and the conclusions are the same.
The Rothschilds are at the core of our money.
The Rothschilds own PG&E (Pacific Gas and Electric)
PG&E has set up a huge tent in Paradise.
Tesla died under some mysterious circumstances. Tesla was supported by the Rothschilds through the American J P Morgan, a Rothschilds’ frontman. Tesla had built a machine to give the world free electricity by plugging into the electric magnetic field with this machine which was burned up.
Like most geniuses, Tesla has been portrayed as being a nutcase, and died broke while his work has made Rothschilds rich and “powerful” beyond his wildest dreams.
Debt is akin to oxygen or lifeblood, assuming that loans are vital to business.
Debt is a fairly new concept in the history of America.
In the 1700s and 1800s you had to pay cash for a house. Henry Ford finally arraigned financing and “buying on time” and other industries followed suit.
It was not until the 1970s and 80s that credit cards started being used.
JS, debt is for rich people. Never been allowed to play that game so I don’t care.
the title needs revision,
“Historic THEFT & FRAUD is at the core of our economic decline”
On the evening of September 10th, 2001.. donald rumsfeld announced that the pentagon somehow managed to “LOSE” $2.3 TRILLION dollars. Then on September 11th, 2001,.. The alleged attack of the taliban on the world trade center happened and no one ever mentioned the missing $2.3 TRILLION AGAIN,.. allegedly planes were crashed into the world trade center, the pentagon and some field, allegedly resulting in the “collapse?” of the twin towers, destruction of an CONVENIENT UNOCCUPIED PART OF THE LARGEST OFFICE BUILDING IN THE WORLD, THE PENTAGON, AND AFTER ALL THAT, SOMEHOW BUILDING 7 caught a cold from the alleged collapse of the twin towers and magically managed to implode upon itself, WHICH MAGICALLY AND MYSTERIOUSLY WAS REPORTED FALLING BY THE BBC 20 MINUTES BEFORE IT ACTUALLY COLLAPSED. ‘move along, don’t think about it.. just go back into your coma of apathy or you’ll start asking pertinent questions that make people in government terrified!
Then a few LAST YEAR, Mark Skidmore, a Professor of Economics at Michigan State University. discovered that the pentagon has lost a further $21 TRILLION DOLLARS.. WHICH MAGICALLY AND OH SO COINCIDENTALLY THE AMOUNT OF THE NATIONAL DEBT!
BUT DON’T THINK ABOUT IT OR YOU’LL WONDER WTF IS REALLY GOING ON!
Once Upon A Time, they actually tried hard to deceive the public; I assume they were worried about being caught. It appears that having done so much for so long W/O being caught they now just superficially cover their tracks. The public has a collective Stockholm Syndrome. The power of government, namely the US government is from the citizenry perspective, omnipotent. That becoming a dark force is just too frightening to contemplate. Insouciance prevails as the defense mechanism; In effect forgetaboutit.
I haven’t any debt. Credit inflates prices. I used to attend auction sales to buy at a bargain. Then The auction folks started taking credit cards as payment. Cash was no longer king. Years ago I attempted to buy some acreage that ajoined so land I already own. The old couple wanted too much for me to afford. But that what it was appraised at and they wanted that price. So its been on the market at a big price for 10 years. Now the guy has died and has been gone a couple of years. Last month the widow came by wanting to sell. I made my cash offer and stated it will be good until Thanksgiving. And The widow took the bird in the hand and sold us that land.
I attended a house auction. MLS originally listed the house at $42,000. Most people stop bidding at $30,000. Some dip shit bought it for $44,500.00.
I was kind enough to tell that person that he over paid and could have bought it cheaper when it was listed for sale at the regular price. I could see the blood draining from his face. That is what he gets for not doing his homework.
Our money id debt.
Get rid of debt and you get rid of money.
And don’t suggest going to gold, because with a balance of trade deficit trade takes away the gold in short order.
Leaving debt as the only remaining option if we are to have money.
Most people don’t understand that the world’s whole monetary supply is debt loaned into existence with compound usury attached. Compound usury is an exponential function(Rule of 72). Debt must continue to grow at all costs or the system collapses.
Like you said, paying off the debt destroys the money. The bankers are NOT trying to collapse the system. They are trying to kick the can down the road as far as they can. It is their bread and butter. The plates need to keep spinning.
The real kicker is, that big ol’ gubmint debt never gets paid down.
Never, ever, ever, ever. With emphasis on never.