Top trends forecaster in the world says consumer debt just hit $17 trillion for the first time but it gets worse…
A Global Freak Show
May 17 (King World News) – Gerald Celente: It’s a global economic freak show. Add up the numbers.
Take a trip to Argentina. With inflation running at over 100 percent and its peso down 23 percent against the U.S. dollar, Argentina’s central banksters raised its key interest rate yesterday by six percentage points to 97 percent.
Go over to Italy and visit one of the most highly-indebted countries in the world. With a debt to GDP ratio of 144 percent, yesterday the Bank of Italy reported that the country’s public debt spiked above $3 trillion.
It’s happy inflation days in Israel. Yesterday its Central Bureau of Statistics reported that the nation’s Consumer Price Index rose nearly twice as high as the forecast, up 0.8 percent in April.
Over in China, the economic news perspective has been that following nearly three years of fighting the COVID War the nation’s economy is strongly bouncing back.
Economists polled by Reuters had forecast that China’s industrial production would spike 10.9 percent in April.
Wrong. Today China announced that its industrial production for April rose just 5.6 year-on-year. And while higher than the 3.9 percent increase in March, when compared to a year earlier when manufacturing was locked down, the increase is minimal, thus signaling that the socio-economic damage of the COVID War is long and deep…
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Further illustrating the contraction, China’s purchasing managers’ index fell to 49.5 in April (numbers below 50 signal contraction). This is the first contraction in three months.
Buying fewer products from overseas, as we had noted in last week’s Trends Journal, Chinese imports fell 7.9 percent in April compared to April 2022 when China was locked down fighting the COVID War.
Indeed, with over 20 percent of 16 and 24-year-olds unemployed, more people have less money to spend.
What is being felt on Main Street has also hit equities in China. As noted by CNBC, Chinese stocks have pared most of the gains seen this year. The Shenzhen Component was down 4.67 percent quarter-to-date and up only 1.48 percent year-to-date, notching a 9.5 percent drop from its peak in early February.
Debt Land
In America, once the Land of Opportunity, the “news” making the business news is that consumer debt of the plantation workers of Slavelandia hit a new high in the first quarter of this year, spiking past $17 trillion.
On the credit card front, total debt hit nearly $1 trillion at the start of 2023, according to the Federal Reserve Bank of New York. As a result of inflation and a rise in the cost of living, they note that “This is the first time in 20 years we are not seeing a decrease” since credit card balances start to fall at the start of the year as people start paying down their debt that the racked up during the holiday shopping season.
TransUnion reported today that credit card balances (of the plantation workers of Slavelandia) spiked some 20 percent from a year ago, with the average balance up to $5,733 during that time. They noted that “As inflation rose to near 40-year-high levels, many consumers have used credit to help manage their budgets, leading to record- or near-record high balances.”
And it is showing in the bottom line as retail sales, which account for some 70 percent of America’s GDP, slumped in April when accounting for inflation. The U.S. Commerce Department reported today that retail sales rose just 0.4 percent… far below the Dow Jones estimate of a 0.8 percent increase. On an annual basis they increased just 1.6 percent which is way below the 4.9 percent Consumer Price Index.
While the retail sales numbers are weak and illustrate how the plantation workers of Slavelandia are struggling, The Street cheered the lousy results since, as CNBC reported, “it was the first positive reading since January and followed a 0.7 percent decline in March.”…
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TREND FORECAST:
This is not rocket science. Cheap money, like the countless trillions of money backed by nothing and printed on nothing that governments plowed into economies and the central banksters record low interest rates when they launched the COVID War back in January 2020 in celebration of the Chinese Lunar New Year, The Year of the Rat, artificially propped up GDP’s and equities.
Simply, the higher interest rates rise, the deeper economies and equities will fall. And as we have noted, on the economic side, it takes several months before the high interest rates impact consumers and economic growth… and that time is now.
On the equity side, since the game is rigged by the “Bigs,” while consumers on Main Street are feeling economic pain, it does not always hit Wall Street. As we have noted since last November, the S&P 500 has spiked over 16 percent following 40 U.S. midterm elections. And since then, a few of the “Big” tech with a combined market value of nearly $5 trillion, have pushed the S&P up nearly 8 percent this year.
Guessing Game
The guess on The Street, according to Bankrate is that The Street does not “…see the Fed lifting rates anymore from here. Officials are seen standing pat on rates at the June and July meetings, according to CME Group’s FedWatch tool. An even bigger curveball from what Fed officials are expecting, traders also see 75 basis points worth of cuts by the end of the year, the tool also shows.”
But the Feds are singing a different tune. Yesterday, Atlanta Federal Reserve President Raphael Bostic told CNBC that he sees more rate hikes coming rather than cuts by year’s end. From the Fed side, they won’t start cutting interest rates until next year, and when they do, they’ll slash them just 75 basis points.
As we have long forecast, the Feds keep cutting interest rates in the run-up to the Presidential Reality Show® and they will do it again … whether at year’s end or the beginning of 2024 is a guess, but rate cuts will come.
However, should they pause between now and then; America will be hit by Dragflation: economic growth will decline and inflation will remain far above their 2 percent range. Yet, Cleveland Fed President Loretta Mester is still selling the line that considering the “long-run costs” of inflation the Federal Reserve is committed to bringing inflation down to its 2 percent target… a purely fictitious number that they invented in 2012.
As for equities, minus a wild card, such as ramped up wars, spiking oil prices, the S&P will stay on-trend…
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FEARS LOOM OVER INFLATION AND DEBT CEILING
The big topics on The Street were the decline in manufacturing activity in New York and the debt ceiling.
The May 2023 Empire State Manufacturing Survey found that business activity in New York fell 43 points to -31.8, which is a level not seen since the Great Recession.
Raphael Bostic, the Atlanta Federal Reserve Bank president, said yesterday that he thinks the Fed should hold interest rates at their current rate of 5 to 5.25 percent, a 15-year high. The official inflation reading in the U.S. is 4.2 percent.
Bostic told Bloomberg that there’s evidence that interest rate hikes are working to cool the economy, but, if pressed between lowering interest rates and increasing them, he would choose the latter.
“Right now, if you had to tip the scales if the next move was going to be an increase or a cut, it’s pretty heavily weighted to the increase for me, at the current moment,” he said.
TRENDPOST:
There is a clear disconnect between Wall Street and Main Street and Americans are suffering.
The New York Federal Reserve reported yesterday that consumer debt in the U.S., for the first time, surpassed $17 trillion after an increase of nearly $150 billion, or 0.9 percent during the January-to-March period, CNBC reported.
Delinquency is also up. The report showed 4.57 percent of credit cards transitioned to what is called serious delinquency last quarter, up from 3.04 percent in Q1 of 2022.
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