National media outlets would undoubtedly love for most Americans to believe that the talk of supply chain shortages and recession is outdated, with most of the issues subsiding last year.
As Americans have grown accustomed to modified supermarket shelf displays, steadily rising prices for everyday items, and their 401K losing tens of thousands of dollars per quarter, they have adapted to the ‘new normal’ of emptying wallets and ending summer vacations. But this is merely the beginning of an extensive problem.
China is poised to become this century’s emerging hegemon. From cultural confidence to its latent domination of the world’s manufacturing, the country that smug Neocons laughed at in the 1980s is wheeling and dealing on the path to global supremacy. Russia, and more broadly BRICS, is winning the financial war and have been for a while.
How did it come to this?
Russian President Vladimir Putin’s recent diagnosis of the West’s problems was more accurate than anything you will hear from our own leaders:
“Surging inflation in product and commodity markets had become a fact of life long before the events of this year. The world has been driven into this situation, little by little, by many years of irresponsible macroeconomic policies pursued by the G7 countries, including uncontrolled emission and accumulation of unsecured debt…
“Because they could not or would not devise any other recipes, the governments of the leading Western economies simply accelerated their money-printing machines. Such a simple way to make up for unprecedented budget deficits…
“The rising prices, accelerating inflation, shortages of food and fuel, petrol, and problems in the energy sector are the result of system-wide errors the current US administration and European bureaucracy have made in their economic policies.”
Economic regulations, monopolistic capitalism, the death of the single wage earner in the family, and the haphazard handling of America’s hard-fought position are a few things to point out. This has resulted in widespread unemployment and the strangulation of blue-collar Americans. Over the past few decades, middle America has witnessed its towns wither as jobs left, hoping they would return while watching new low-wage workers pouring in.
Sign of a Great Recession?
More than half of all US companies are planning to lay off employees as they brace for an economic downturn.
According to a recent report, a poll of 700 executives and board members across the US found that over half have already enacted hiring freezes, rescinded job offers, and plan to start laying people off.
Over the past month, technology companies have laid off tens of thousands of employees. And the rate at which these companies are laying people off continues to rise.
According to the New York Times, approximately 10,000 people in corporate and technology at Amazon jobs will be laid off, in what could be the most significant job cut in the history of the company.
Amazon is just one of many. A growing list of tech companies has announced sizeable layoffs in recent months.
Amid the talk of layoffs, Amazon founder Jeff Bezos recently warned a US recession is looming and advised consumers and businesses to stockpile cash in case there’s a devastating downturn.
According to Business Insider, in a recent interview, Bezos referred to the layoffs as a sign of things to come.
“The economy does not look great right now,” Amazon‘s billionaire founder and executive said during the interview. “Things are slowing down, you’re seeing layoffs in many, many sectors of the economy,” he continued. “The probabilities say if we’re not in a recession right now, we’re likely to be in one very soon.”
Bezos recommended that American households delay big-ticket purchases and suggested small-business owners hold off on investments in new equipment and build their cash reserves instead.
A recent forecast by Bloomberg stated that the chance of a recession in the US within the next year is a certainty. The latest recession probability models by Bloomberg economists showed the recession probability across all timeframes hit 100%, up from 65% for the comparable period in the previous update. A separate survey of 42 economists predicts the probability of a recession over the next 12 months now stands at 60%, up from 50% a month earlier.
A Manufacturing Realignment
From clothing makers to consumer electronics, companies are reassessing their sources of raw materials, parts, and factory assembly. Countries in Southeast Asia and Latin America are becoming key go-to places in the global supply chain as businesses shift away from China post-pandemic.
Businesses, however, face several hurdles during this manufacturing evolution. One business owner told the Wall Street Journal that in Latin America, “there’s not the embedded infrastructure to produce that grade of material at a very low cost. A part of the evolution of nearshoring and regional sourcing has to be looking at the inputs and the availability of raw materials to support that.”
Although 70% of CEOs are reported to be planning to move manufacturing to Mexico, only 17% have already done so, according to a recent Kearney study of American manufacturing executives.
Covid-19 regulations hit America hard. Draconian lockdowns shut half of America’s small businesses down for good and exacerbated the fleeing of American companies to offshore locations. Inflation continues to rise, threatening to collapse companies that are vitally critical to the health of the nation and its people.
Siemens, Danaher Corporation, and Roche are companies most Americans aren’t familiar with, and when said together, they sound like a law firm. These companies are some of the biggest and most powerful leaders in the healthcare industry. Roche and Siemens in particular, have been instrumental in many breakthroughs in the health and science industries since the 1800s.
These companies are international but mostly make their sales in China. Sometimes half to upwards of 80% of their sales are found there, and while this provided a temporary boon, since 2021, it has been their bane. Inflation has made the exchange rate unpayable for their customers, and profits will be absolutely nothing if it continues.
These industry staples will begin massive layoffs and, worse, could go under in a short period. On November 8th, many Danaher Corporation insiders sold a decent stake in the company, some 11 million dollars worth of stock. The signs are telling, share prices are falling, and those that know are getting out while they can.
What does this mean for the average citizen? Along with the price of food, fuel, and basic goods skyrocketing, the price of healthcare may rise exponentially as well. Exorbitant prices might become the norm, and the American taxpayer will continue to slide further into financial oblivion. Cancer shows no signs of being cured; its probability rises as the Baby Boomer and GenX generations age. Buckling under all of this will be the healthcare industry, raising the chances of it becoming more like its heavily inept counterpart in Canada.
There is a bright side to this realignment, however. As the trend of manufacturing moving from China to Central and South America stays in fashion, this change could act as a stabilizing force to Mexico’s economy. If economies in central and south America become stronger, this could potentially reduce the appeal of immigrating north, reducing the flow of immigration into the US which has recently hit record highs.
The Housing Crash is Here
Top investors have warned that the deflating tech bubble is far from over, and according to a study by the fed, remote workers drove over 60% of the recent housing price surge. Many of those remote workers were employed by tech companies. This could only add to the problems that the US housing market is facing already.
Experts warn that prices could fall by 20 percent or more in the next year, and properties in some areas of the country are overvalued by as much as 72 percent. After a year of reassuring consumers that there wouldn’t be a housing market crash, the consensus on Wall Street is now that the current housing market will experience the biggest home price decline since the Great Depression.
Similar to what China has done recently to slow inflation, the Fed is attempting to raise interest rates in order to slowly deflate the massive bubble that has expanded over the past two years. The Fed was probably a bit late in its decision to do this, but it really didn’t matter what the Fed did, the bubble was going to pop.
US home loan costs continue to soar as the average 30-year fixed mortgage rate pushed north of 6.5% last month for the first time since 2008. This month, the average interest rate for 30-year fixed-rate mortgages on houses that cost $647,200 or less increased to 7.14% for loans with less than a 20% down payment.
Reports also show more borrowers are turning to risky adjustable-rate mortgages, which carry lower initial rates in exchange for possible higher payments in the future. The average rate on a five-year adjustable went from 5.14% to 5.30%.
Adjustable-rate mortgages or ARMs have surged to a 14-year high. They currently make up about 15% of all home loans, compared to just 3% at the beginning of this year.
Adjustable-rate loans largely disappeared after helping to trigger the 2008 collapse of the housing market, leaving millions with mortgages they couldn’t afford. But over the past few months, surging mortgage rates have led to a comeback of some of the riskiest mortgage loans, driving concerns that some buyers are once again signing on for more risk than they can handle financially.
“ARMs are definitely becoming more and more popular,” Trey Reed, a loan officer for Intercoastal Mortgage in Fairfax, Virginia told NBC News. “In the last 90 days, we’re seeing probably a quarter to a third of all loans are ARMs. They’re an option that’s getting considered more than half the time.”
Amid the highest contract cancellations for homes in more than a decade, homes staying on the market longer, and price cuts already underway, Homebuilder sentiment has fallen to the lowest level in a decade. Builders continue to struggle with higher costs for labor and materials and lower demand from homebuyers.
Additionally, 37% of home builders cut prices in November, up from 26% in September. The average price cut is about half of what builders offered during the housing crash in 2008.
Economists say that improved lending practices and tight housing supply won’t be enough to prevent the ongoing home price correction.
Nearly 8,700 people in the financial services sector lost jobs from January through April, mostly in mortgage banking, as rising rates for home loans have torpedoed demand for refinances and purchases.
In the early summer of this year, when home buying usually ticks up, layoffs hit two of the biggest names in real estate. First, Redfin announced new layoffs, then Compass, one of the nation’s largest residential brokerages, announced it’s cutting 10% of its workforce.
In June, the real estate company Redfin announced that it will lay off about 8% of its staff amid a downturn in the housing market. Redfin CEO Glenn Kelman announced the layoffs in a letter to employees that was later posted on the company’s website.
By November the Seattle-based real-estate giant announced more bad news as they closed their home-flipping unit, and laid off 13% of the workforce.
Up until July 31 of last year, there was a nationwide moratorium on all foreclosure and eviction proceedings. This means that if homeowners experiencing financial trouble were opting for the forbearance plan, banks would not proceed with foreclosure initiations or foreclosure sales during that period.
Many homeowners were able to dig themselves out of the hole that they were in, but many did not.
January 2022 saw a massive jump in the number of foreclosure starts. The database management company, ATTOM Data Solutions, recently showed 23,204 foreclosure filings, a 700% year-over-year increase, according to Black Knight.
Today’s foreclosure starts, while much higher than recent past, are still below pre-pandemic levels, but serious mortgage delinquencies are up 55% over pre-pandemic levels. While there were approximately 400,000 serious delinquencies remaining before the pandemic, today there are roughly 640,000, the data shows.
According to a recent report from ZeroHedge, the typical 30-year fixed-rate mortgage is around $2,514, which is up from $1,692 a year ago.
Homes are more likely to sit on the market for a few weeks, and price cuts on listings are doubling, tripling, and quadrupling compared to this time last year. Real Estate companies are reporting that competition for existing inventory is in a steep decline, and sellers are dropping their list price at the highest share on record over the past couple of months.
All of this has made homebuyer sentiment implode to the lowest level in the history of the country.
Only time will tell what the future holds, but the pathway of America’s economy is dark. Layoffs will continue to rise. High-paying manufacturing jobs will be rarer than gold. Regardless of these companies’ current exterior confidence, their profits will continue to dip until they are forced to sell or seek safer shores abroad. Unless there is a major turnaround, an obliteration of the past several decades worth of disastrous policies, the future of manufacturing will be bleak. The blight of inflation will spread, and all will feel its consequences.
Billionaires are Preparing
Multiple billionaires are now predicting an oncoming recession in the U.S. economy before the end of next year.
According to a survey of 400 leaders of large US companies, around 90% are predicting a big recession in the next 12 months. The survey also found that only 34% of these CEOs think the recession will be mild and short.
According to a report from the Daily Mail, a surging number of super-wealthy Americans are buying so-called ‘golden passports’ which grant them citizenship to New Zealand, Portugal, and other ‘safe’ countries over fears of coming chaos in their home country.
Along with fears of another pandemic and worries over an economic collapse, the billionaires say they are also afraid of civil unrest from a divided nation that only seems to be getting worse every day.
Portugal and New Zealand are among the countries offering the ‘golden passport’ system. One type of visa asks for about $6.5 million in investments over three years and applicants have to stay in the country for 88 days over that timespan. Another type of visa asks for about $2 million in investments over four years and requires applicants to stay in the country for 438 days over four years.
New Zealand golden passport holders include PayPal co-founder Peter Thiel, who’s worth an estimated $5 billion.
According to reports, soaring food, energy, and shelter inflation, as well as the predicted economic collapse, have led to what could be a new era of civil unrest worldwide. Pockets of unrest have already been observed in Sri Lanka, Peru, Kenya, Ecuador, Iran, and Europe.
Additionally, UN Secretary-General António Guterres stated recently that he believes that it is likely that there will be “multiple famines” in 2023. Rockefeller Foundation President Rajiv also warned that a “massive, immediate food crisis” is nearing, and the UN said in the summer that the world is “marching towards starvation” with an increased likelihood of civil unrest and political violence.
A UK-based risk consulting and intelligence firm recently published an updated version of the Civil Unrest Index covering seven years of data. The report showed that the past quarter saw the most countries ever move higher in civil unrest risks since the index was created.
“Although there have been several high-profile and large-scale protests during the first half of 2022, the worst is undoubtedly yet to come,” the firm warned.