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The Great Global Financial System Unwind, 2.0

The US consumer is indebted! Truly indebted, to the point that most of the income derived from their labor goes to pay lender fees and interest, not support their families (a version of this deck is freely available at Veritaseum Research. We need to go through this exercise to dispel and debunk he malarkey I’ve heard in the financial press that once the COVID-19 infections tamp down we will be back to bubble’s as usual. That will NOT happen. We (in the US, EU and China and greater Asia) were running on borrowed time. COVID-19 was simply the pin prick that popped the bubble that no one wanted to admit central banks were blowing.

Let’s take this by the numbers, shall we?

As can be seen above, a single head of a 4 member household earning the US median wage has no chance of meeting his/her family’s needs, and often resorts to high priced debt (i.e. credit cards) to fill the deficit, which simple exacerbates the problem over time.

When considering a two-wage earner family (i.e. husband and wife), the situation is really not much better.

True inflation (that is the inflation in the prices that real people pay for the real things that they really consume – energy, food, clothing, housing, etc.) has actually been rampant. It easily outpaces earnings growth. When the cost of living life surpasses your earnings, what do you do to fill the deficit? You borrow! As should be obvious, this is not sustainable!

What does that borrowing look like?

For those of you who thought that 2007 represented the biggest bubble in the US since the Great Depression, you haven’t been paying attention.

That bubble is still being blown and is getting bigger as well.

Meanwhile, even when things looked like they were doing well and the stock market was reaching all-time highs, delinquencies were increasing – and this was during so-called good times…

Now, there’s a lot more to this debt story than meets the eye, but we have limited time and space, so let’s get straight to the point…

These numbers were put together last month, before the global economic shutdown, thus you can consider them all highly optimistic!

Yes, the Ye

Yes, the economy started slumping, debt per capita started increasing, and defaults started increasing -BEFORE the border closings, store closings and quarantines. Don’t drink the Kool-Aid!

Despite this squeeze, rates for credit card users have been increasing (putting more pressure on borrowers) despite the fact that US interest rates have been on a steady decline (more profit for lenders).

Okay, now…. Tell me if you have seen this movie before.

And it is steadily getting worse…