WARNING πŸ‘‰ The US Dollar Is On The Verge of Collapse -Economic Fallout Has Begun - financialanalysis

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Wednesday, February 12, 2020

WARNING πŸ‘‰ The US Dollar Is On The Verge of Collapse -Economic Fallout Has Begun

Growing U.S. National Debt Could Cause Economic & Social Crisis.Rising U.S. National Debt Could Lead to Dire Consequences
Mark my words: the U.S. national debt is going to create a lot of troubles in years ahead. If it’s not controlled now, there could be dire consequences.
You see, long-term debt is bad. If anyone tells you otherwise, don’t listen to them. You can’t expect good results if there’s a lot of debt and it’s increasing. It’s that simple.At the time of this writing, the national debt stands at $23.2 trillion.And it has been growing at a very rapid pace.
In the beginning of 2008, the U.S. national debt was $9.2 trillion. So, in matter of 12 years or so, the debt has increased 152%. In nominal terms, the U.S. is hands down the most indebted nation in the world.
Sadly, it doesn’t look like the debt figure will come down anytime soon.
Step back a little.
How does the national debt grow? It all starts with the U.S. government incurring a budget deficit (it spends more than it receives in taxes and fees). Then the government has to borrow to pay for its expenses (and pay interest). The more the U.S. government borrows, the higher the U.S. national debt becomes.
Over the past decade or so, the U.S. government has been spending without remorse.
Just recently, even when the U.S. economy was doing fine, the U.S. government was running a budget deficit of close to $1.0 trillion. In 2020, we could see another budget deficit of $1.0 trillion.
Here’s the worst part; there’s no balanced budget in sight.
So, the U.S. national debt could be much worse in the coming years. It could even soar to $30.0–$35.0 trillion (if not more) by the end of this decade.
The Problem
In the short term, rising national debt isn’t really an issue. But know this, in the long term, immense national debt leads to severe consequences.
Now, you really have to ask this question: who’s on hook for this debt, and how will the U.S. government ever pay it off? The national debt figures we see are not imaginary numbers. The debt needs to be paid at some point down the road.
Dear reader, this is where the problem comes. American citizens are on the hook for this massive U.S. national debt.
Imagine this: if lenders to the U.S. government all of a sudden come out and say, “Give us our money back,” what do you think the U.S. government will have to do?
The government could be forced to increase taxes and fees on all sorts of things. Plus, it would have to cut a lot of programs that the government currently provides, such as social security, Medicare, food stamps, etc.
For average Americans, this could be devastating. They are already struggling. New taxes and cuts to essential services could really hurt their well-being.
I will end with this: the higher the U.S. national debt goes, the odds of an economic and social crisis increase exponentially.Soaring Inflation Ahead for the U.S. Economy? Here’s Why It Could Happen.Inflation Tamed for Now, But Could Be Much Higher in Coming Years
High inflation could be ahead for the U.S. economy. If this happens, it won’t end well for consumers or investors.
Before going into any details, let’s get some basics out of the way.Inflation is when the general level of prices in an economy increases. You could also call it diminishing purchasing power or a decline in the value of money.
The Federal Reserve targets inflation in the range of two to three percent per year. What’s considered high inflation for the U.S. economy? Five percent or higher.
At the moment, if you listen to mainstream economists, none of them expect inflation to soar, and the official figures say inflation is under control.
In the first 11 months of 2019, the consumer price index (CPI), an official measure of inflation in the U.S. economy, increased 2.2%.Skyrocketing Money Supply to Trigger High Inflation
Now, digging in to the details…
In the short term, inflation in the U.S. economy may not be an issue. In fact, it wouldn’t be shocking to see it a dip a little in the near term.
But, in the long term, inflation could become a major problem.
You see, there are a few causes of inflation. One of the biggest ones is when there’s too much money in the supply. This is simple economics: as more money is added to the supply, each dollar becomes worth less. This causes inflation.
In the U.S., sadly, the money supply continues to increase. What’s more troubling is that the money supply is increasing faster than the pace of U.S. economic growth.
Look at the chart below, which plots the money supply in the United States:At the beginning of 2010, the total money supply in the U.S. was around $9.5 trillion. At the end of 2019, it was almost $17.2 trillion.
Simple math here: the money supply grew by almost 80% over the decade.
In this time frame, the gross domestic product (GDP) of the U.S. economy grew from $14.7 trillion to $21.5 trillion (to the third quarter of 2019). This is an increase of 46%. Why Surging Inflation Matters
Dear reader, it would make sense if the money supply was growing at the same pace as the economy. But it has been much quicker.
I believe this could be a problem over the long term.
As there’s more money in the supply, it essentially means we have monetary inflation. And this could eventually make its way to the prices of the goods that we all consume.
Never forget this: if prices start to jump, it will be American consumers who suffer the most. Their wages aren’t increasing, so higher inflation could really hurt their buying power.
For investors, soaring inflation could really eat up their investment returns. One could even call it an extra tax on investment.If Recession Happens in 2020 for the U.S., Negative Interest Rates Could Become RealityThe Next Recession Brewing in 2020? It’s Possible
You really have to wonder if 2020 could be the year when the U.S. economy falls into a recession.
Why? Because the economic data has been taking a turn and it says the outlook seems gruesome.If you listen to the mainstream media and pay attention to just the headline data like gross domestic product (GDP), you could have a completely different take on the U.S. economy. At this point, you could be thinking that growth, rather than a recession, is ahead.
You must dig into the details, however. Look at the data below the surface.
U.S. Manufacturing Sector Says Recession Likely Ahead
Look at the manufacturing sector of the U.S. economy, for instance. It could be considered a leading indicator of recession or growth.
If manufacturers are operating in full gear, it’s a sign that things are improving.
If we see the opposite, a lot of trouble could be ahead. In fact, it wouldn’t be wrong to say that, if manufacturing activity in the U.S. drops, it could be an indicator that the economy is in a recession or fast approaching it.
With that said, look at the chart below. It plots the year-over-year change in new orders of durable goods at manufacturers in the U.S. economy.This is a troubling chart, and it’s very unlikely that you will see it often. Mind you, durable goods are products that last for long time—things like appliances and furniture.
In August 2018, new orders for durable goods were growing in the double digits.
Now the situation is completely different. In November 2019, new orders for durable goods at manufacturers declined 3.4%. Since April 2019, on year-over-year basis, these orders have declined every month except July.
Why the Next Recession Could Be a Problem
Dear reader, this is all too scary.
I am watching the manufacturing activity in the U.S. economy and it’s concerning. I ask if it is hinting at a recession for the U.S. economy or if the economy is in a recession already.
Here’s why I am really worried.
You see, recessions are part of the business cycle. Every economy goes through recessions and growth; it’s normal. For the U.S. economy though, the next economic slowdown could be very critical.
We already have low interest rates, something that the Federal Reserve uses to manage the economy. Between 2015 and 2018, the Fed tried to raise rates, but it sent shocks to the economy. I am worried about what will happen in the next slowdown. How low could the Fed take interest rates in order to fight the slowdown?
I worry that the next recession could trigger the Federal Reserve to implement a negative interest rate policy (NIRP) and print a lot more money than it did in the previous recession.
We won’t even need a financial crisis like the one we had back in 2008–2009 for the Fed to take extreme measures.
Let me end with this: NIRP and printing more money would be a major problem. Negative interest rates and printing money reduces the buying power of Americans and causes bigger problems in the long term.

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