U.S. Economy Collapse in 2016? It’s Possible.
A U.S. economic collapse in 2016? Is it possible that the world’s biggest economy will face its biggest challenge next year? While most talking heads on Wall Street think the U.S. is heading in the right direction, the fact of the matter is, there are more than enough indicators to suggest the U.S. economy will come under serious pressure in 2016.
The U.S. economy is rock solid! Or so the commission-dependent brokers, analysts, and fund managers will tell you. They would have told you the same thing back in 2007 and 2008… just before the Great Recession and the stock market crash.
But then reality set in. Only a few months later, the world was on the verge of economic collapse. Despite the warning signs, we’re hearing the same kind of misguided optimism today. The pillars supporting the U.S. economy are more fragile than they were before the Great Recession.
Despite being in the midst of a so-called recovery, the global economy is still appears to be in a recession, American workers aren’t benefitting from the long-in-the-tooth bull market, underemployment remains high, inflation is much higher than the U.S. government’s official tally, a third of Americans have no emergency savings, and most worry more about their finances than anything else.
This is all after trillions of dollars and years of meddling from the Federal Reserve and other central banks around the world. As a result, the U.S. could experience an economic collapse in 2016.
Interestingly, according to a recent survey, 2018 is the year most economists believe the next downturn will hit the U.S. If not 2018, 2020 is the next date on the calendar before the U.S. economy falters. I think they’re both wrong. (Source: Bloomberg.com, last accessed September 22, 2015.)
Sign #1: Government Statistics Hiding U.S. Economic Collapse
If inflation is under wraps, it doesn’t really matter if wages are stagnant. But this simply isn’t the case. And the official U.S. numbers are seriously misleading.
According to government statistics, inflation was held to just 0.6% during the first seven months of 2015. Unfortunately, that data disregards the most basic items that everyone uses, including food and energy costs. (Source: Bureau of Labor Statistics, September 22, 2015.)
Alternative non-government measures of inflation tell a completely different story. The Chapwood Index is an alternative inflation indicator that looks at the unadjusted costs and price fluctuation of the top 500 items that Americans spend their money on in the 50 largest cities in the country. (Source: chapwoodindex.com, last accessed September 22, 2015.)
The index looks at the fluctuations in the cost of items such as Advil, Starbucks coffee, insurance, gasoline, tolls, fast food restaurants, toothpaste, oil changes, car washes, cable TV and Internet service, cellphone service, dry cleaning, movie tickets, cosmetics, gym memberships, home repairs, piano lessons, laundry detergent, light bulbs, school supplies, parking meters, pet food, and People magazine.
For example, in 2014, the CPI rose 0.8%. But according to the Chapwood Index, major cities like New York, Los Angeles, Chicago, San Diego, and Boston saw inflation for the trailing 12 months (through to June of this year) run over 10%.
In San Jose, the Chapwood Index registered a 13.7% rise in the cost of living. Even Colorado Springs—the city with the lowest increase of 6.6%—was still 5.8% higher than the official CPI figure.
If you happen to work in Boston or San Jose and got a 0.8% raise in 2014, it wasn’t nearly enough to cover the increase in your day-to-day expenses. No matter what the official government data tells you.
But inflation means more than just higher prices at the grocery store. Nominal Gross Domestic Product (GDP) is deflated by the measure of inflation being used to calculate real GDP and real GDP growth. Therefore, for a given nominal GDP growth rate, underestimating inflation over time would result in overestimating real GDP growth over time.
If this is true, a U.S. economic collapse may have already begun.
Sign #2: Real Wages Falling for Average Americans
Roughly 70% of U.S. gross domestic product (GDP) comes from consumer spending. The operative word there being consumer. So you can’t really predict what the U.S. economy is going to do unless you see how the average American is doing.
It isn’t pretty.
In spite of the highly touted unemployment rate, the underemployment rate (those working part time who want full-time work, and those who have stopped searching but want a job) remains above 10%. (Source: bls.gov, September last accessed 22, 2015.)
On top of that, most U.S. workers have not seen any improvement in their wages. In fact, when you factor in inflation since the recession apparently ended in 2009, wages have declined for most workers. (Source: nelp.org, last accessed September 22, 2015.)
I enter as evidence: between 2009 and 2015, 20% of people in the lowest-paid occupations saw their wages decline an average of 5.7%. Those included people working in retail, food preparation, personal care aids, cleaners, and home health aide. Specifically, for restaurant cooks, the decline was 9.8%; food prep workers 7.7%; and for home health aides, 6.2%.
For all U.S. workers, the purchasing power of their average income declined by four percent; meaning, the cost of living in the United States outpaced any increase in pay. This suggests that millions of Americans have little to no economic security.
It’s not as if this is news to anyone. Even the Federal Reserve has said stagnating wages is proof the U.S economy has not fully recovered. And this will negatively impact the overall economy. If real wages fall, consumers cannot make ends meet—let alone help economy growth through spending.
Only loans and credit card is keeping households afloat. If consumers are forced to rein in spending, a global recession in 2016 is almost inevitable.
Sign #3: Millions of Americans Have Little to No Money
Not only are Americans making less and having to spend more, they also have little to no money set aside for emergencies.
According to one report, roughly one third (34%) of American adults do not have any emergency savings. That means 72 million Americans have no safety net in case they lose their job, have unexpected expenses, or can’t afford the rising cost of living expenses. (Source: neighborworks.org, last accessed September 22, 2015.)
Almost half (47%) said their savings would cover their living expenses for 90 days or less. Add it up, and 81% of Americans are either at a breaking point or just 90 days away from it.
According to financial experts, those who make decent money and know how to budget their money, say Americans should set aside 15% of their gross income in case of emergencies, in addition to retirement and other goals. But it seems that few have been able to follow that sage advice.
It seems as if Americans are worse off than before the Great Recession.
Not surprisingly, Americans worry more about money on a daily basis than anything else, including their health. In another survey, one in five Americans fears living paycheck-to-paycheck for the rest of their lives—with almost as many people worried about being in debt forever! That translates into never being able to retire. (Source: marketwatch.com, last accessed September 22, 2015.)
But at least they have ultra-low interest rates to rely on!
Sign #4: U.S. Interest Rate Hike Could Cripple America
The Federal Reserve’s fund rate has been coming down for more than 30 years. That means virtually everyone with a mortgage, loan, or credit card debt, is used to the low interest rate environment. But that’s about to change.
Most expect the Federal Reserve to raise interest rates later this year. If so, it will be the first time it has raised interest rates in nine years. And with nowhere else to go but up, it will put an end to free, cheap money.
Admittedly, the world needs normal interest rates. The artificially low rates brought in by the Federal Reserve through quantitative easing have devastated returns on investment. On the other hand, rising interest rates could cripple those Americans who already have trouble making ends meet. That includes anyone with large amounts of debt, including student loans.
We could be swimming in debt in the not-too-distant future. And by “we” I mean the entire planet. The Bank for International Settlements (BIS) warned that the world has taken on so much debt that a rate hike led by the Fed could send the whole planet into a debt crisis.
The BIS warned that market instability, in particular in China, is a sign that the debt build-up is coming back to haunt the markets. And it could do so for a long time. The total accumulated debt is higher now than it was before the start of the U.S. economic collapse in 2008.
Since then, the world has taken on an additional $57.0 trillion in debt. As of the end of 2014, the planet owed $199 trillion on a world economy worth about $80.0 trillion annually. China, the world’s second-largest economy, has quadrupled its debt since the last financial crisis. (Source: mckinsey.com, last accessed September 22, 2015.)
Sign #5: Global Economy Anemic
U.S. economic growth has not exactly been steamrolling the competition. And it’s been consistently underwhelming. Before the Great Recession, in 2006, the U.S. reported GDP growth of 2.7%. Those were the good old days. In 2007, GDP was 1.8%. In 2008 it was -0.3%; and in 2009 it was -2.8%. (Source: worldbank.org, last accessed September 22, 2015.)
Fast forward to 2012 and the country’s GDP came in at 2.3%, 2.2% in 2013, and 2.4% in 2014. While second-quarter 2015 GDP expanded at a solid 3.7% annualized rate, the overall GDP of the country has not been stellar. Especially when you consider that we are the world’s largest economy.
China expects its GDP to grow at seven percent this year. Relative to the United States, that’s pretty extraordinary. But for China, it represents the worst performance in more than 20 years.
With the two largest economies in the world limping along, the rest of the major global economies cannot be doing any better. And they’re not. The eurozone isn’t out of the water by any stretch. Germany continues to plug ahead. But France, Italy, and Greece are economic millstones. This has left the entire continent on the brink of recession.
Japan’s economy shrank 1.6% in the second quarter and is a mess. It’s hard to decide if the country is in recovery mode or not. Over the last 14 quarters, Japan has posted seven uneven quarters of growth and seven quarters of contraction. (Source:wsj.com, last accessed September 22, 2015.)
Then we have Canada. The country is in a technical recession after its GDP fell -0.5% in the second quarter after slipping -0.8% in the first quarter. Not a big deal, you say? Janet Yellen said recently that while China was an issue, Canada’s economic slowdown was one of the reasons why the U.S. economy is too weak to raise interest rates. She described Canada as “an important trading partner of ours that has been negatively affected by declining commodity prices, declining energy prices.”
While China is a big trading partner with the U.S., Canada is actually the number one export market, accounting for 19% of all exports. That’s more than double China’s seven percent share.
On top of that, Canada’s resource-heavy dollar has been in freefall, down 12% against the U.S. dollar since the beginning of the year. The Chinese yuan, on the other hand, is down just three percent.
Sign #6: U.S Companies Increasingly Relying on Foreign Sales
All of this could mean a U.S. economic collapse in 2016. A weak global economy will put added pressure not just on the global stock markets but also U.S. exchanges. Remember, stock exchanges are only as strong as the stocks that go into making them up.
And with the global economy anemic, no one major economy can carry the country to prosperity. The average American certainly can’t. With interest rates at zero, there isn’t much central banks can do to kick-start the economy. Interest rates have been artificially low since the last recession. Where can you go from here?
A study by the BIS found that much of the global financial system is anchored to U.S. borrowing rates. On average, a 100 point move in U.S. rates results in a 43 point move for emerging markets and open developed economies. A rise in interest rates could shock emerging economies and stagnant developed ones.
Why should we care? For S&P 500 companies, the percentage of sales from foreign countries has increased after five years of stagnation. The percentage of S&P 500 sales coming from outside the U.S. was 47.82% in 2014, up from 46.29 in 2013 and 46% for each of the previous four years. (Source: spindices.com, last accessed September 22, 2015.)
The U.S. is not an economic island. It’s relying more and more on sales from outside the country. But it isn’t working. At least as far as earnings and sales go.
Earnings growth for the third quarter of 2015 is projected to decline -4.4%. That’s much higher than the forecasted decline of just one percent at the start third quarter. If this data holds true, this will mark the first back-to-back quarter of earnings declines since 2009. (Source: Factset.com, last accessed September 22, 2015)
As for revenues, third-quarter sales are projected to fall -2.9%. This is also higher than the estimated year-over-year revenue decline of -2.5% at the beginning of the quarter. If this comes to fruition, it will mark the first time the index has seen three consecutive quarters of year-over-year revenue declines since the first quarter of 2009.
Sign #7: Nosebleed Valuations Could Lead to Stock Market Crash in 2016
Despite the seesaw that stocks have been riding in 2015, investors remain overly optimistic. Approximately 33.3% of investors are bullish on the stock market for the next six months. Just 29.1% are bearish and an astonishing 37.6% are somehow neutral. Investor sentiment is at its most bullish since April. (Source: aaii.com, last accessed September 22, 2015.)
Despite weak manufacturing data coming out from the U.S., a weak outlook on the global economy, and nothing really positive being announced since Black Monday, investors are still exceptionally optimistic.
Two key indicators back this up.
According to the Case Shiller CAPE P/E Ratio, the S&P 500 is overvalued by around 62%. Over the last 10 years, that average CAPE ratio has been 15. Today, it’s sitting at 24.34. What that means is, for every $1.00 of earnings a company makes, investors are willing to pay $24.34. To put that into context, the only times the ratio was higher were in 1929, 2000, and 2007. All three instances were followed by a collapse. (Source: Yale University, last accessed September 22, 2015.)
The market cap to GDP ratio compares the total price of all publicly traded companies to GDP. Warren Buffett calls it the single best measure of where valuations stand at any given moment. Who would argue with that? There is obviously a correlation between the country’s economic output and the earnings of its companies. As a result, stocks and their valuations should bear some relationship to the benefits of investing or not investing.
A reading of 100% suggests U.S. stocks are fairly valued. The higher the ratio over 100%, the more overvalued the stock market. It currently sits at 117.3. The Warren Buffett Indicator has only been higher once since 1950. In 1999 it came in at 153.6%. It was only at 108% before the housing bubble burst in 2008.
Eventually stocks and their valuations will run in step. But for that to happen, the stock market needs to experience a significant correction. What could that look like? The S&P 500 is currently at 1,938; Shiller thinks it should be closer to 1,300. That suggests a drop of roughly 33%. Shiller also thinks the DOW, which is at 16,280, should be closer to 11,000; a 32.5% correction. (Source: nytimes.com, last accessed September 22, 2015.)
Those kinds of corrections could seriously undermine the U.S. and global stock markets. Rising interest rates could also hammer the average American and negatively impact foreign markets.
The fact of the matter is that the U.S. economy is not doing nearly as well as we’re being led to believe. And the global economy is no better off. Crash. Recession. Economic collapse. However you want to say it, 2016 is not shaping up to be a good year for the U.S. economy.
First Soros… Now Jim Rogers Predicts Trillion-Dollar ‘Biblical’ Crash
NOTE:Posting this, a little old, but things have got much worse. These TPTB's- billionaires toss humanity a bone once in a while, listen, it is a code, they must first tell what they are going to do. Not always the case, what happen to 911, investigative journalism, and many sites, NO ONE GUESSED That one, it is simple to understand once awake, it was the needed catalyst to start to bring in the NWO, as we have seen since, before 911. OKC it was Clinton.
Progressive socialism, been at work esp after Alice baileys founding the demonic UN. It has been allowed by God, it was held back, but the hedge is down
Will we see an economic collapse in 2016, I still say YES, it what I feel the lord said, if by NOV end life as we know it in the USA is not bad, historic issues I will say sorry Dec 1, and thank God for extra time. I still see 2016. WE shall see?
Last year, we were the first financial site to explain how the Shemitah seven-year cycle would have an important and disastrous effect on the markets. The Shemitah ended in the third quarter of last year and just as we predicted, it was the worst quarter in worldwide stock markets since the last Shemitah in 2008.
Since then we have been the leader in explaining further Shemitah trends embedded in the once-every-49-year, Jubilee Year. The Jubilee Year ends on October 2nd of this year, and we expect even worse events to occur as October approaches.
Now, famous investor, Jim Rogers, has just released a new warning saying the same. He is even using biblical references to warn of a financial tsunami that could take place either this year or next. He has just said, “A $68 trillion ‘Biblical’ collapse is poised to wipe out millions of Americans.”
Rogers co-founded the Quantum Fund with George Soros in the early 1970s. The fund generated returns of 4,200 percent over 10 years and made fortunes for both men. Soros and Rogers, having worked together for so long, probably both have access to information the regular person doesn’t. Soros recently was in the news for shorting the stock market and making gold his largest held asset and predicting an impending crisis.
Now, just this week, Jim Rogers has said the same and was quite outspoken about how it was written in the Bible. He referred to a biblical quote from the Book of Joshua: “You are under a curse now. You will always be servants. You will be woodcutters and water carriers for the house of my God.”
Jim Rogers Coming Economic Collapse Could Destroy More than 68 trillion 2 - The Dollar Vigilante
The amount of people predicting an imminent collapse is getting larger and larger! Especially considering that it was less than a year ago that we were almost alone in talking about it. Carl Icahn, Stanley Druckenmiller and Soros himself, to name a few have now come to similar conclusions. Each of these individuals has placed significant funds in gold and gold-related securities. Soros has gone so far as to actively short the stock market. Their messages are similar to Rogers who sees economic turmoil descending that will actually bankrupt whole nations.
Rogers believes the situation is much worse than 2008, when major economies had dollar resources in reserve. Those countries like China and Japan have spent down much of their reserves. Thus, it won’t just be the US or Europe that suffers from the next wave of market insolvency: This time the entire world is going to be relatively helpless. There are not going to be patches of prosperity as in 2008.
He predicts that the UK will “collapse” while countries like Italy will face bankruptcy. He has pointed out that stock market breadth began to contract in the middle of 2014 and hasn’t ceased. This calls for the only remedy that Wall Street knows: additional money printing.
But right now the Fed is trying to move in the opposite direction, toward tightening. What central bank officials see as “recovery,” however, is merely the result of artificial money printing and debt expansion. The looming disaster that is about to hit is imminent because in the US “recoveries” don’t last more than seven years at the outside.
Rogers’ perception that the upcoming catastrophe has a historical/Biblical element reminds us of statements by a top executive for the International Bank for Settlements, William White. We quoted him HERE, as follows:
“The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians. The next task awaiting the global authorities is how to manage debt write-offs – and therefore a massive reordering of winners and losers in society – without setting off a political storm …”
Rogers has stated that $68 trillion could be wiped off the Earth and we would tend to agree. This is the End Of The Monetary System As We Know It (TEOTMSAWKI). It will result in life as we know it changing forever.
And, it’s all been planned. If you haven’t seen our video exposing the elite Jubilee strategy to completely reorder the world, perhaps as soon as this coming October you should see it immediately. You can see it HERE.
There is probably not much more time to prepare. Given what is now being predicted by billionaires and investment gurus alike, if you aren’t ready now it may soon be too late.
We’ve already made massive gains for subscribers by seeing things ahead of the crowd. We’ll likely make even bigger ones in the future. That’s important because we’re going to need all the resources we can get when things get really bad. Surviving a biblical collapse is not going to be easy for anyone. There is no road map for something like this.
But, we’ve been ahead of the curve in figuring out what is coming. We’ve been ahead of the curve in coming up with innovative ideas, information and solutions to help you protect yourself and your family. You can get access to all our resources, information and advice by subscribing to The Dollar Vigilante newsletter (click here for more).
I’ve been called crazy more than anyone I’ve ever known, or even heard about.
I was called crazy for saying the internet would revolutionize the world in 1993, before most even knew what it was. I was called crazy for quitting my job at a bank to start an internet company in 1994 that rose to a high of $240 million. I was called crazy for saying the US housing market would collapse in 2005. I was called crazy for starting The Dollar Vigilante in 2010 predicting a US dollar and worldwide fiat currency collapse within a decade (now the fastest growing financial newsletter in the world). I was called crazy for saying bitcoin would change how money operates when it was $3 in 2011 (currently at $450).
I was called crazy last summer when I said we are incredibly close to outright collapse of a scope never before seen.
Now, George Soros, Jim Rogers, Stanley Druckenmiller, Carl Icahn and the BIS’ William White are just as crazy as me.
By Dollar Vigilant, Lost link.
Bible-Christian response to this and the days coming
Hab 3:16 When I heard, my belly trembled; my lips quivered at the voice: rottenness entered into my bones, and I trembled in myself, that I might rest in the day of trouble: when he cometh up unto the people, he will invade them with his troops.
Hab 3:17 Although the fig tree shall not blossom, neither shall fruit be in the vines; the labour of the olive shall fail, and the fields shall yield no meat; the flock shall be cut off from the fold, and there shall be no herd in the stalls:
Hab 3:18 Yet I will rejoice in the LORD, I will joy in the God of my salvation.
Hab 3:19 The LORD God is my strength, and he will make my feet like hinds' feet, and he will make me to walk upon mine high places. To the chief singer on my stringed instruments.