Another Cataclysmic Error Threatens To Plunge The U.S. Economy Into A Bottomless Abyss Of Pain And Suffering – Michael Snyder

Posted: 15 Jun 2022 03:18 PM PDT

I can’t believe that they actually did it.  Even though it is painfully obvious that the U.S. economy is slowing down dramatically and that we are heading into an excruciating repeat of the housing crash of 2008, the Federal Reserve decided to go ahead with the largest interest rate hike in 28 years anyway.  History has shown us that raising rates just as an economy is entering a recession is an exceedingly foolish move, and many of us have been pleading with the Fed not to do it.  But of course if the Fed actually listened to people like us, we would not be facing such a dire crisis in the first place.

Essentially, the Fed just killed any hopes of avoiding a recession.  The rate hike that was announced on Wednesday was the largest that we have seen since 1994

The Fed raised its key short-term interest rates by three-quarters of a percentage point Wednesday – its largest hike since 1994 – to a range of 1.5% to 1.75. It also downgraded its economic forecast.

And it signaled that more big moves may be coming. Fed officials forecast the federal funds rate will end 2022 at a range of 3.25% to 3.5% and next year at close to 4%, according to their median estimate.

Fed Chair Jerome Powell insists that substantially raising rates will tame inflation.

That worked in the early 1980s, but I am skeptical that the same playbook will work again for a couple of reasons.

First of all, in the early 1980s the U.S. was one trillion dollars in debt.  Today, we are 30 trillion dollars in debt.  Our politicians have been on the greatest borrowing and spending binge in the history of the world during the last couple of years, and hiking interest rates cannot erase the trillions upon trillions of new dollars that have entered the economy.

In addition, the Federal Reserve has pumped trillions of dollars that they created out of thin air into the system in recent years.  Hiking interest rates is not a “magic bullet” that can erase that colossal mistake either.

But the Fed feels like it has been forced to do something to address the current crisis, because prices continue to spiral out of control.

For example, the average price of a gallon of gasoline in the United States hit a new record high for the 18th day in a row on Wednesday…

Gas prices on Wednesday reached a record high for the eighteenth consecutive day.

The national average price of gas reached $5.039, according to GasBuddy. On Tuesday, gas prices were around $5.02 per gallon.

And survey after survey has shown that the American people are rapidly losing faith in the Federal Reserve…

Even more concerning are new signs that families have lost faith in the Fed’s policies. Consumer sentiment in June sank to a low not seen since the 1980 recession, according to a University of Michigan survey. Similarly, a poll by The Washington Post and George Mason University’s Schar School of Policy and Government found that most Americans expect inflation to worsen and are adjusting their spending habits, a mind-set that can make the surge in prices even worse.

So I can understand why Powell and his minions felt a need to raise rates.

But you simply can’t raise rates as the economy enters a recession.  That is suicidal.

At this point, even the Fed’s own numbers show that the economy is really slowing down…

After a week of rampant jawboning to adjust the market’s expectation for The Fed’s actions later today (after last Friday’s unexpected resurgence in CPI), the continued erosion in economic data (most notably retail sales this morning) has prompted The Atlanta Fed to slash its forecast for Q2 GDP growth from +0.9% to 0.0%, meaning the US is now right on the verge of a technical recession (after Q1’s contraction).

If U.S. GDP goes negative again in the second quarter, then we are already officially in a recession right now.

And what the Fed just did is going to make it much worse, because it is about to become a lot more expensive to borrow money…

Every time the Fed raises rates, it becomes more expensive to borrow. That means higher interest costs for mortgages, home equity lines of credit, credit cards, student debt and car loans. Business loans will also get pricier, for businesses large and small.

The most tangible way this is playing out is with mortgages, where rate hikes have already driven up rates and slowed down sales activity.

In particular, higher rates are going to absolutely eviscerate the housing market.  In fact, yesterday I discussed the fact that another housing crash has already begun.  Right now there is a tremendous amount of panic out there as those that work in the industry come to grips with what is now taking place.

Mortgage broker here. These rates are insane and making a HUGE impact on people’s ability to buy. Even well-qualified borrowers are getting priced out before eyes. $800/month higher than avg on 1/1 based on $450K loan amount.

— Morgan Faricy (@MorganFaricy) June 14, 2022

A year ago, the housing market in the U.S. was red hot, but now the environment has completely changed.

Compared to the same period a year ago, total mortgage application volume was down a whopping 52.7 percent last week…

Total mortgage application volume was 52.7% lower last week than the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. Sharply rising interest rates are decimating refinance volume, and those rates, along with sky-high home prices and a shortage of houses for sale, are hitting demand from potential buyers.

In 2008, the Federal Reserve played a major role in bursting the most epic housing bubble in the history of our country.

Now it is happening again, only this time the housing bubble is even larger than the one that imploded over a decade ago.

Most Americans may not realize it, but this is truly a very sad day for the United States.

An immensely painful economic crisis has essentially been guaranteed, and beyond that we are going to see things happen that once would have been unthinkable.

But things didn’t have to turn out this way.

If we would have made better decisions, we could have had much different results.

Unfortunately, the Fed has come up with an endless series of colossal errors in recent years, and this latest error is one of the biggest of them all.

***It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.***

About the Author: My name is Michael and my brand new book entitled “7 Year Apocalypse” is now available on Amazon.com.  In addition to my new book I have written five other books that are available on Amazon.com including  “Lost Prophecies Of The Future Of America”“The Beginning Of The End”“Get Prepared Now”, and “Living A Life That Really Matters”. (#CommissionsEarned)  When you purchase any of these books you help to support the work that I am doing, and one way that you can really help is by sending digital copies as gifts through Amazon to family and friends.  Time is short, and I need help getting these warnings into the hands of as many people as possible.  I have published thousands of articles on The Economic Collapse BlogEnd Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe.  I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article.  The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions.  I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.  These are such troubled times, and people need hope.  John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.”  If you have not already done so, I strongly urge you to ask Jesus to be your Lord and Savior today.

The post Another Cataclysmic Error Threatens To Plunge The U.S. Economy Into A Bottomless Abyss Of Pain And Suffering appeared first on The Economic Collapse.

Remember 2008? Another Terrifying Housing Crash Is Now In Progress

Posted: 14 Jun 2022 05:56 PM PDT

It is often said that those that refuse to learn from history are doomed to repeat it.  More than a decade ago, the Federal Reserve created the most epic housing bubble in American history and everyone was happy until 2008 came along.  The economy slowed down, home prices crashed and the ensuing chaos on Wall Street spawned an endless series of movies, television specials and documentaries.  But instead of learning our lessons, we did it again.  The Federal Reserve created an even larger housing bubble, and I have been relentlessly warning that it would inevitably burst.  Now home sales have fallen for six months in a row and prices are crashing again.  In fact, in some parts of the country we have already seen prices plunge by as much as 20 percent

Property prices have fallen by up to 20 percent across parts of the US as buyers shun the market amid ‘Bidenflation’ and spiking interest rates.

Asking prices have plummeted by up to $400,000 in wealthy areas while poorer neighborhoods have seen house values nosedive by as much as $115,000.

Do you remember last time around when millions of homeowners ended up “underwater” on their mortgages?

If we continue on this current trajectory, it is going to happen again.

Last year at this time, the housing market was extremely hot, but now a new report from Redfin is telling us that things have dramatically changed

A May study by Redfin found that about 19 percent of sellers dropped the prices on their homes in a four week period between April and May. The outlet said that the report indicated an end to the country’s pandemic-era housing boom.

Their report found that Google searches for ‘homes for sale’ were down 13 percent from the same time last year.

It also found that requests for home tours were down 12 percent, and that mortgage applications dropped 16 percent from a year prior.

And the higher mortgage rates go, the worse things are going to get.

Unfortunately, mortgage rates are spiking at a rate that is absolutely breathtaking this month

Mortgage rates jumped sharply this week, as fears of a potentially more aggressive rate hike from the Federal Reserve upset financial markets.

The average rate on the popular 30-year fixed mortgage rose 10 basis points to 6.28% Tuesday, according to Mortgage News Daily. That followed a 33 basis point jump Monday. The rate was 5.55% one week ago.

The last time we saw mortgage rates this high was during the last housing crash.

Unfortunately, they are only going to go higher because the Federal Reserve wants interest rates throughout our economy to rise in order to fight inflation.

But as I have warned repeatedly in recent months, a high rate environment is going to absolutely eviscerate the housing market.  Already, higher rates have had a colossal impact on home affordability…

Higher home prices and rates have crushed home affordability.

For instance, on a $400,000 home, with a 20% down payment, the monthly mortgage payment went from $1,399 at the start of January to $1,976 today, a difference of $577. That does not include homeowners insurance nor property taxes.

It also does not include the fact that the home is about 20% more expensive than it was a year ago.

Vast multitudes of potential home buyers will be forced out of the market until home prices comes down dramatically.

If you are one of those people, you could try to rent a place while you wait, but apartment rents are 15 percent higher than they were a year ago…

A new report from Redfin shows that nationally listed rents for available apartments rose 15% from a year ago. And the median listed rent for an available apartment rose above $2,000 a month for the first time.

Rents are up more than 30% in Austin, Seattle, and Cincinnati. In Los Angeles the median asking rent is $3,400. Even in formerly affordable cities such as Nashville it’s now $2,140, up 32% from last year.

I am so thankful that Redfin gives us these numbers, but it turns out that Redfin is in deep trouble too.

In fact, Redfin just announced that they will be laying off 8 percent of their workers…

Real estate firms Redfin and Compass are laying off workers, as mortgage rates rise sharply and home sales drop.

In filings with the Securities and Exchange Commission, Compass announced a 10% cut to its workforce, and Redfin announced an 8% cut.

Shares of both companies fell Tuesday. Redfin’s stock touched a new 52-week low.

So many of the exact same things that we witnessed back in 2008 are happening again.

The economy is slowing down.

Big corporations are starting to lay off workers.

Home prices are starting to collapse.

And there is a tremendous amount of pessimism about what is ahead.  In fact, one new survey has found that small business owners are “feeling their gloomiest in nearly five decades”

Small business owners in America are feeling their gloomiest in nearly five decades, a survey released Tuesday morning showed.

The National Federation of Independent Business (NFIB) said its gauge of businesses expecting better business conditions over the next six months fell to the worst reading in the 48-year history of the survey.

When things got really bad in 2008 and 2009, the Federal Reserve responded by pushing interest rates all the way to the floor, and that certainly helped.

But now the Federal Reserve doesn’t have that option.

In fact, the Federal Reserve seems quite determined to dramatically raise rates in a desperate attempt to fight the inflation monster that they had a major role in helping to create.

And the higher that rates go, the worse things will get for the housing market and for the economy as a whole.

If we would have learned some lessons from the last crisis, all of this could have been avoided.  But instead we are now moving into a future which is going to be extraordinarily painful.

At this point, the Federal Reserve is stuck between a rock and a hard place.

If they don’t raise rates, inflation will continue to spiral out of control.

But if they do raise rates, they will crush the housing market and make the coming recession far worse.

For years, they assured all of us that they had everything under control and that they knew exactly what they were doing.

Now everyone can see the truth, but unfortunately it is too late to reverse course.

***It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.***

About the Author: My name is Michael and my brand new book entitled “7 Year Apocalypse” is now available on Amazon.com.  In addition to my new book I have written five other books that are available on Amazon.com including  “Lost Prophecies Of The Future Of America”“The Beginning Of The End”“Get Prepared Now”, and “Living A Life That Really Matters”. (#CommissionsEarned)  When you purchase any of these books you help to support the work that I am doing, and one way that you can really help is by sending digital copies as gifts through Amazon to family and friends.  Time is short, and I need help getting these warnings into the hands of as many people as possible.  I have published thousands of articles on The Economic Collapse BlogEnd Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe.  I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article.  The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions.  I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.  These are such troubled times, and people need hope.  John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.”  If you have not already done so, I strongly urge you to ask Jesus to be your Lord and Savior today.

The post Remember 2008? Another Terrifying Housing Crash Is Now In Progress appeared first on The Economic Collapse.

A Nightmare On Wall Street

Posted: 13 Jun 2022 06:38 PM PDT

This is bad.  This is really, really bad.  Investors loved the ride up, but now the Federal Reserve is helping to destroy the bubble that it once so eagerly created, and trillions of dollars in paper wealth is being wiped out in the process.  Unfortunately, our system is not really designed to handle this sort of carnage.  So many in the financial world live right on the edge, and when things go really, really bad the dominoes can start falling at a pace that is absolutely breathtaking.  We witnessed this back in 2008, and it could soon happen again.

On Friday, the Dow Jones Industrial Average fell 880 points, and many were deeply concerned about what Monday would bring.

Well, the pessimists turned out to be correct, because the Dow plunged another 876 points on Monday.

Overall, the Dow is now down approximately 17 percent from its record high, and so it has almost reached bear market territory.

Of course the S&P 500 is already there

The S&P 500 fell 3.88% to 3,749.63, marking its lowest level since March 2021 and bringing its losses from its January record to more than 21%. The benchmark closed in bear market territory (down more than 20% from its high) after trading there briefly on an intraday basis about three weeks ago. Some on Wall Street say it’s not an official bear market until the index closes there and that’s what happened on Monday. The last time stocks were in a bear market was in March 2020 at the onset of the pandemic.

Needless to say, the Nasdaq has them both beat.  Tech stocks were on the cutting edge on the way up, and now they are on the bleeding edge on the way down.  The Nasdaq dropped another 4.68% on Monday, and at this point it has already dropped over 33 percent from the all-time high.

Just think about that.  A third of the value of the Nasdaq has already been obliterated.

Wow.

As I write this article, investors are extremely concerned that the Fed could raise rates by 75 basis points on Wednesday…

Major averages hit their lows of the session in the final 30 minutes after a Wall Street Journal report suggested the Fed would consider raising rates by 0.75% on Wednesday, more than the half-point increase currently expected.

And Fox Business is reporting that some traders believe that we could actually see a 100 basis point increase in July….

While market consensus is for a half-point interest rate hike at the Fed’s policy-setting meeting this week, the odds for a larger increase next month are surging, with a potential 75-basis point or 100-basis point jump on the table in July. About 16% of traders are penciling in a 100-basis point jump next month, compared to 53% forecasting a 75-basis point increase, according to the CME Group’s FedWatch tool, which tracks trading.

Of course the Fed should not be raising rates at all.

The U.S. economy is clearly heading into a very painful recession, and you don’t raise rates as a recession is starting.

Unfortunately, Fed officials feel like their hands are tied because inflation is completely out of control.  Last week we learned that the consumer price index has risen to 8.6 percent, and we were told that was the highest that it has been since December 1981.

But if the inflation rate was still calculated the way that it was back in 1980, it would actually be well over 15 percent at this point.

So the Fed is going to bring down the hammer, and that is going to continue to roil financial markets.

And right now cryptocurrencies are being hit harder than anything else.

In fact, the price of Bitcoin plunged 15 percent in just 24 hours…

Bitcoin, the world’s most valuable cryptocurrency, has lost 15% in the last 24 hours — putting it about 66% below its all-time high in November last year, when it traded around $69,000, according to data from Coinbase. Bitcoin fell below $24,000 Monday, sending the crypto to its lowest level since December 2020.

Ether, the second-most-valuable digital coin, plunged 17%, and has now lost about 75% of its value since November.

At the peak, just about every Bitcoin investor was in the green.

But as I have warned my readers over and over again, you only make money in the financial markets if you get out in time.

There was quite a bit of panic among crypto investors after the Celsius Network announced that it was being forced to temporarily pause “withdrawals, swaps and transfers”

Celsius Network Ltd., one of the biggest lenders in crypto and a key player in the world of decentralized finance, said late Sunday that it was pausing withdrawals, swaps and transfers following weeks of speculation over its ability to make good on the outsize returns it offered on certain of its products, including yields as high as 17%. The move effectively halted a platform with registered entities across the globe and billions of dollars worth of digital coins under management, accelerating a selloff in the broader market that was already in progress on concern over prospects for tightening monetary policy ahead of a Federal Reserve meeting this week.

We should watch some of these big players in the cryptocurrency industry very carefully.

In the end, I have a feeling that some people that thought that they were “crypto millionaires” will actually walk away with nothing or next to nothing.

Of course it isn’t just crypto investors that are going to get eviscerated.

In recent years our financial markets have been transformed into the biggest casino in the history of the world.

And a lot of investors had become convinced that the Federal Reserve had decided to permanently rig the game in their favor.

Now the rug is being pulled out from under them, and the losses are piling up fast.

Hopefully the markets will stabilize after the Fed decision comes out.

But the outlook for the months ahead is terrible, and my regular readers already know what I believe is coming beyond that.

It took years to get to the top of the rollercoaster, but the ride down will go much, much faster.

***It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.***

About the Author: My name is Michael and my brand new book entitled “7 Year Apocalypse” is now available on Amazon.com.  In addition to my new book I have written five other books that are available on Amazon.com including  “Lost Prophecies Of The Future Of America”“The Beginning Of The End”“Get Prepared Now”, and “Living A Life That Really Matters”. (#CommissionsEarned)  When you purchase any of these books you help to support the work that I am doing, and one way that you can really help is by sending digital copies as gifts through Amazon to family and friends.  Time is short, and I need help getting these warnings into the hands of as many people as possible.  I have published thousands of articles on The Economic Collapse BlogEnd Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe.  I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article.  The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions.  I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.  These are such troubled times, and people need hope.  John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.”  If you have not already done so, I strongly urge you to ask Jesus to be your Lord and Savior today.

The post A Nightmare On Wall Street appeared first on The Economic Collapse.

Steve Martin

STEVE & LAURIE MARTIN - LOVE FOR HIS PEOPLE FOUNDERS My good wife Laurie and I (married 45 years), founded Love For His People Ministry in 2010. This work gives love and support to our friends in Israel and other nations with friendship and humanitarian aid. Through social media, Steve's messages, and our Ahava Adventures trips to Israel, it is a growing, effective organization. Steve has also authored and published 36 books. We live in the Charlotte, NC area and have four adult children, spouses, and eight grandkids. Ahava and shalom with blessings on ye head!

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