Economists: All the financial bubbles in the U.S. economy are ready to bust

... : What’s Coming In 2015 – Dollar Breaking Bubble Ready To Burst

U.S. President Donald Trump’s election and a subsequent boost in market activity have many former economic doomsters feeling rosy about the nation’s financial future. But serious observers remain concerned that the temporary turnaround will only make the impending economic doomsday more painful.

Michael Snyder over at Economic Collapse Blog warned his readers this week: “[A]nyone that tries to tell you that the U.S. economy is in good shape is simply not being honest with you.”

Given the name of his publication, you may be tempted to write off the author’s warning as a symptom of perpetual pessimism; but you’d do so at your own peril.

Sure, we may currently have a president who describes today’s economic trends as “terrific” and “great,” even as signs of a prosperous future just around the corner… But the economic reality is that President Trump is faced with the impossible task of keeping afloat a ship that’s already struck a global financial iceberg.

Something about rearranging deck chairs comes to mind…

As Snyder points out, the latest projections from the nation’s top financial analysts—the guys in charge of making sure top banksters know when to strap on those golden parachutes— aren’t very reassuring.

There are, for instance, the financial analysts at Morgan Stanley who are currently screaming about a massive subprime auto lending bubble that’s ready to explode.

Over the next several years, they predict that used auto prices in the U.S. could crash by as much as 50 percent. That means that millions of Americans already upside down in auto loans they couldn’t afford will be paying hundreds, even thousands, of dollars each month for vehicles with resale values inching toward scrap price.

And the beginnings of that crash are already making headlines.

The Fiscal Times discussed the “warning signs” of the “deep subprime” auto collapse in a piece late last month:

Many auto loans, including those considered subprime, are securitized and sold to investors. But Morgan Stanley recently reported that the share of auto securities tied to “deep subprime” loans – those given to borrowers with a FICO credit score below 550 — has risen from 5.1 percent in 2010 to 32.5 percent today. It said defaults on those bonds have risen significantly in the past five years.

Almost a quarter of the more than $1.1 trillion in U.S. auto loan debt is owed by subprime borrowers, and delinquency rates have hit their highest point in seven years.

Alone, the auto loan bubble isn’t all that concerning— unless, of course, you are one of millions of Americans employed by industries dependent on new car sales to stay afloat. If you’re thinking that means just the big American automakers which have already been bailed out, you’re missing a far bigger picture. A massive decrease in used auto valuation means hundreds of thousands of jobs in light industry, involving the manufacture of everything from door handles to exhaust components far from the plants where finished vehicles roll off the assembly line, are at risk. Add to that jobs in banking, insurance and, yes, new auto sales, and the threat to the middle class begins to make more sense.

But the auto blow-up represents only a small portion of a broader economic emergency few are talking about.

Bloomberg, late last month, pondered how a looming pension crisis isn’t getting round-the-clock coverage from market watchers as “unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007.”

The answer, according to the outlet:

As was the case with the subprime crisis, the writing appears to be on the wall. And yet calamity has yet to strike. How so? Call it the triumvirate of conspirators – the actuaries, accountants and their accomplices in office. Throw in the law of big numbers, very big numbers, and you get to a disaster in a seemingly permanent state of making.

In other words, the problem and the consequences of not taking it seriously are simply too massive for most to fathom. So it’s being ignored. Bloomberg even goes on to admit that the number crunchers in charge of warning us about the coming pension catastrophe, at least where government retirement accounts are concerned, are fudging the figures to keep “cities and potentially states” from buckling under the weight of unfunded retirement obligations. The panic-inducing reality, according to the financial news provider, is that pensions are unfunded to the tune of more than $6 trillion.

That’s a pretty scary thought, considering that by 2030 around 26 percent of the U.S. population will depend on retirement accounts for basic necessities like food and shelter.

Meanwhile, a growing number of Americans are walking through another financial minefield littered with massive student loans.

In the past 14 years, U.S. student loan debt has increased five-fold. Americans currently owe somewhere around $1.3 trillion for higher-education financing. Worryingly, many of those borrowers are college dropouts working low-paying jobs. Others are graduates having trouble finding work in their chosen field.

Tying all of this together is a misplaced confidence among mainstream investors encouraged by the Trump administration’s promise to make investments in America pay off big time.

Wall Street is taking on debt… big time.

As reported by USA Today:

The latest data from the New York Stock Exchange show margin debt, or cash borrowed to buy shares, hit a record $528.2 billion in February, up from its prior high of $513.3 billion in January.

Borrowing money to buy stocks is a sign that investors remain optimistic the market will continue to rise. Like any form of leverage, such as a home flipper buying a house with, say, a 30% down payment in hopes of fixing it up and selling it at a higher price, there’s risk in loading up on stock after taking out a loan to fund the purchase.

Current trends of borrow-happy investing, unfortunately, look much like they did prior to the dot com bust in 2000 and the housing market crash that occurred in 2007.

What’s most worrisome about where we find ourselves now, is how thoroughly the coming economic storm will affect all segments of the U.S. population.

If everything goes at once, it won’t just be greedy bankers who pushed bad loans, or foolish buyers who made McMansions a status symbol losing everything. Boomers will get clobbered by pension defaults… anyone with a car payment will feel auto finance unraveling… millennial debt-to-job ratios will eliminate any hope of a stable future for much of the middle class… and investors lucky enough to be both working and making a living today will re-learn what paycheck-to-paycheck feels like.

Why paper over such a massive financial crisis? Among contrarians, there’s a popular belief that Trump is about to become the face of a financial fraud years in the making. The endgame, by their reckoning, is a globalist restructuring of U.S. economic policy that can only be brought on by total collapse and universal desperation.  And it would make sense. For now, many Americans who were previously extremely concerned about the economy feel relieved by rhetoric from the new administration. After all, it’s a new era of real hope for anyone disgusted by the massive financial irresponsibility of the previous administration. Unfortunately, viewing Obama as a boogeyman and Trump as the purveyor of economic rebirth in America is as naïve as it is shortsighted. The bubbles continue to grow…

For the globalists who say they loathe Trump, who better to sit at the helm as disaster strikes than a “political outsider.” If all goes as planned, the populist revolt blamed on Trump’s political rise would become a thing of the past. Years from now, Trump’s tenure would be talked about as a failed experiment and Americans would extol the new economy that saved us all.

Whether Trump is a willing participant or an unwitting scapegoat doesn’t much matter. It’s simply important to remember that before he became president, Trump was known as one of the world’s greatest salesmen. If you think about it, it was a whole bunch of other really convincing salesmen who got us into this mess.


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