Why USA Present Economic Decline Effects Us All?
5 Shocking Charts
posted by Zerohedge
IPM Group comment - If you listen to government sponsored media outlets you would probably be under the mistaken assumption that the world economy is recovering, led strongly by the USA who are presently reporting buoyant and expanding growth prospects. I am afraid that assumption is simply very misguided indeed.
So why is the USA economic performance so important to you and me ? Quite simply the world growth picture is contracting quickly, while driven to the cliff edge by an explosion in debt growth.
We are experiencing 5.8% yearly compound growth rates in world debt since 2008, see report here. But in fact this underestimates the debt picture, we have to take into account what is being pumped into our system at the moment from the QE largesse of the ECB (European Central Bank), China’s credit largesse on the back of their rapidly slowing economy and not forgetting the fact that major western corporations issued a record amount of debt in Q1 2015 alone.
World debt is growing expontially against a backdrop of contracting economic performance, rising unemployment and contracting world trade numbers which empowers the deflationary forces we are presently feeling the effects from, this will completely cripple the world's ability to service this debt mountain.
With contracting world growth and the US economy faltering at nearly every measure of economic data you care to look at, we are heading into a debt crisis instigated by the worst sovereign debt crisis in modern history.
Capital flows into precious metals as a wealth preservation vehicle from this economic disaster will be immense once this crisis is recognized for what it is, overwhelming physical supplies.
Diversification at this time has never been so important !
While global equity markets hover near record-er highs, global GDP growth expectations have erased their February dead cat bounce hopes and tumbled back towards cycle lows. This is all confirmed by the latest data from Goldman Sachs whose Global Leading Indicator remains mired in "contraction" for the 4th month in a row...
A month ago, when looking at the latest Factory Orders numbers, we noticed something very disturbing: the annual rate of increase, or rather decrease, in factory orders dropped to -2.3%. The last two time this happened was in 2008, just after the failure of Lehman, and in 2001, just as the US was again entering a recession. In fact, if there is one reliable, false-negative proof indicator of key recessionary inflection points in the US economy, it is the annual change in Factory Orders.
Unfortunately for the econo-bulls, and the Fed's rate-hike prospects, moments ago the latest Factory Orders number came out, and it was not good.
Amusingly, on the surface it was actually a beat, rising by 0.2%, relative to the -0.4% expected. However, if one actually looks at the underlying number, February was still a miss, because the January print was revised substantially lower, from $470Bn to $467.5Bn, which means the 0.2% increase was really a 0.4% decline relative to the pre-revised number.
What worse, however, is when one looks at the Factory Orders series on an annual basis. It is here that the sequential fudges become irrelevant, and here where it becomes obvious that, all else equal, the US is already in a recession.
So much for yet another "above consensus" recovery, and what's worse it is, well, about to get even worse, because while the Fed keeps banging some illusory drum that slack in the economy is almost non-existent, the reality is that in March the number of people who dropped out of the labor force rose by yet another 277K, up 2.1 million in the past year, and has reached a record 93.175 million. Indicatively, this means that the labor force participation rate dropped once more, from 62.8% to 62.7%, a level seen back in February 1978, even as the BLS reported that the entire labor force actually declined for the second consecutive month, down almost 100K in March to 156,906.
USA Imports collapse most since lehman demise
Anyone scratching their head how it is possible that in an environment of a soaring dollar the US trade balance just tumbled, and printed its smallest monthly deficit since 2009, here is the answer: in January, US imports (with the delta entirely in the goods, not services, column) plunged from $232 billion to $222 billion, a whopping $10.2 billion or 4.4% drop, and the biggest monthly decline in US imports since the peak of the financial crisis in the aftermath of the Lehman collapse.
The irony: since exports also dropped but did not plunge quite as rapidly, this disturbing number will actually be a boost to US Q1 GDP, which as reported recently, is now tracking at 0.0% with the Atlanta Fed.
And now time for a question: with US and Chinese imports both plunging, just who is Europe "exporting" all of those surplus goods and services to?
This long-term weakening of the economy is the direct result of financialization and the Federal Reserve's policy of propping up impaired debt with more debt and constantly bringing demand forward with zero interest rates.
The U.S. economy is slowing to stall speed--the point when gravity overcomes the lift provided by central bank free money. This deceleration is evident in a number of indicators such as gross domestic product (GDP), which is now at 0% according to the Federal Reserve Bank of Atlanta's GDPNow model.
New orders for consumer goods has fallen off a cliff, eerily repeating the freefall of the Great Recession in 2008:
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