Epic Economist
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Aug 5, 2024
Today morning, Japan’s Nikkei recorded its worst stock market crash, losing 4,451.28 points from the previous day's closing amid panic selling triggered by fears of a possible U.S. recession and the yen's strength. For a long time, there was a lot of denial about the direction that the U.S. economy was heading. The Biden administration and the mainstream media just kept insisting that everything was just fine even though everyone could clearly see that it wasn’t. But now reality is setting in. Last week we got some numbers that Wall Street really didn’t like, and a massive temper tantrum ensued. The stock market crash that we witnessed on Friday was quite breathtaking, and it became much worse this week. Yes, this is really happening.
On Friday, many were surprised when the employment numbers were much worse than anticipated. But the only reason why the official figure showed an addition of 114,000 jobs last month is because the birth/death model added 246,000 jobs to the final number. In any event, even if we take the government’s report at face value, the Sahm Rule has still been officially triggered. What is Sam Rule? It is an indicator that is used to provide an early recession signal. The rule stipulates that a recession is likely when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low.
Even though this indicator has successfully predicted every single recession since 1970, Fed Chair Jerome Powell insists that it may not be correct this time around. Unfortunately, it appears to be inevitable that the unemployment rate will go even higher because large companies all over America continue to shed workers. Businesses from coast to coast have fallen on hard times, and business bankruptcy filings have risen by more than 40 percent during the past 12 monthsnand have now reached a number not seen since the second quarter of 2020, at the peak of lockdowns.
American households are following along, with total bankruptcy filings up 16.2 percent in the past year, including 132,710 new filings in the second quarter of 2024 alone. The last time business bankruptcy filings were this high was during the lockdowns in the early days of the pandemic.
But we don’t have any lockdowns to blame the current wave of bankruptcies on. Right now, our banks are sitting on gigantic mountains of commercial real estate loans that have gone bad.
For many of those banks, it is just a matter of time before they go belly up.
But don’t just take my word for it. Recently, a number of prominent experts have been warning that a tsunami of bank failures is on the way.
Yes, this is really happening. A tremendous amount of financial chaos is in our future, and most people are going to be completely blindsided by it.
There is one thing that the Federal Reserve could do to mitigate the damage.
We are being told that the Fed “might” give us a rate cut in September.
That isn’t going to do the job.
We need help now, because the economic collapse are already starting to erupt all around us.
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