Read the Beforeitsnews.com story here. Advertise at Before It's News here.

By CoyotePrime (Reporter)
Contributor profile | More stories

Story Views
Now:
Last hour:
Last 24 hours:
Total:

Daring Huge Debt for Their Jaunty Jalopies

Wednesday, October 16, 2019 17:25

% of readers think this story is Fact. Add your two cents.

“Daring Huge Debt for Their Jaunty Jalopies”

by David Stockman

“As it turns out, we don’t “all” have to pay our debts. Only some of us do.”

– David Graeber, “Debt: The First 5,000 Years”

“The most detailed picture of the American consumer reveals there’s more “dropping” going on right now than “shopping.” That’s problematic. Here’s why. Four of the five core sectors that comprise gross domestic product (GDP) have already thrown in the towel. Housing investment and business capex are flatlining. Net exports are heading south. And the government sector’s bleeding red ink.

That leaves personal consumption expenditures (PCE) – 70% of GDP – to keep growth alive. Well, the most recent report shows that real spending grew by just 2.27% from August 2018 through August 2019. The vaunted American Consumer is stalling. And this trend’s been forming since real spending growth peaked at 4.5% back in February 2015. So, what’s going to stop this aging “recovery” from totally rolling over? The answer, of course, is nothing.

Neither the Federal Reserve nor any other authority – we’ve seen the “MAGA” cure; that sugar high wore off long ago – can save the U.S. economy from what’s coming. Indeed, neither “ZIRP” nor “QE” righted what went wrong in 2008. Easier money and debt monetization have proven to be mere palliatives. And they actually aggravate the ongoing metastasis below the surface.

The problem is that the longer “stimulus” is applied, the more unsustainable it becomes. It’s debt on top of debt. It’s speculation on top of speculation. It’s malinvestment on top of malinvestment. Imperial Washington doesn’t get it. Wall Street doesn’t care.

“Stimulus” – like alcoholism – is a progressive disease that leaves the body economic ever more vulnerable to external shocks, “Black Swans,” and “Great Disruptors.” The heart of the matter is deep and sustained interest-rate repression. This practice – the essence of monetary central planning – means prior excesses are never purged. They become the rotten foundation for new layers of debt, speculation, and malinvestment.

And, so, when all five sectors of GDP flatline month No. 124 of an already historically weak expansion cycle, you can be sure the economy is ill. Mistakes fostered by more than 10 years artificially cheap debt and the desperate scramble for yield among investment managers eventually overwhelm capitalism’s inherent forward momentum.

The Wall Street Journal captured the phenomenon in a recent story headlined, “The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Their Cars.” The authors note that since 2009 the average transaction price of new autos has risen from $30,000 to $40,000, or by 33%. That compares to just a 25% gain in average hourly earnings. Such a shortfall would materially squeeze auto affordability in an honest finance market.

What happened instead is that auto-loan maturities were substantially lengthened, and buyers purchased ever-more expensive vehicles at a constant share of wages. This, folks, is what’s commonly referred to as “kicking the can down the road.”

That’s not the extent of the impairment. Because 80% of households must now plunge deep into debt with loans so large and burdensome that they destroy the borrowers’ equity, the auto sales business has been transformed as well. Dealers now make more money from financing cars than they do from selling them. According to data and analytics firm J.D. Power, so far in 2019, dealerships made an average of $982 per new vehicle on finance and insurance versus $381 on the actual sale. A decade earlier, financing brought in $516 per car, and the sale made dealers $837.

Where all this cheap debt comes from is not hard to find. The Fed’s ultra-low rates functioned as a rolling bailout for the entire auto industry. And fund managers desperate for yield lined up around the block and back for securitized auto loans. Last year, investors bought a record $107 billion of bonds backed by cars, causing total outstandings to rise to $264 billion. That’s up from just $100 billion in 2009.

The securitized portion of the Auto Debtberg is only the tip of the thing. Overall, auto debt outstanding now totals $1.3 trillion, up from $740 billion in the immediate aftermath of the Global Financial Crisis/Great Recession. Where it leads on an aggregate basis is to a debt-encumbered dead-end.

Total U.S. light-vehicle sales plateaued at about 17 million units annualized in late 2006, early 2007. They plunged to as low as 10 million during the Great Recession. They fought their way back to the 17 million level by May 2014. And they’ve pretty much flatlined around that level ever since.

But not so the Auto Debtberg… By May 2014, auto debt outstanding was already 20% higher than it was in January 2007. It’s just kept climbing, reaching 150% of its 2007 level in the second quarter of 2019. For the last five years, auto sales have flatlined even as auto debt has continued to soar. It took a 50% increase in auto debt outstanding simply to get annual sales back to the 17 million mark set 12 years ago in January 2007.

When the next recession inexorably arrives, far more auto-borrowers will be underwater and unable to pay when their jobs or incomes dry up. But the amount of auto paper in harm’s way will be 50% larger. That’s “stimulus” at work.”

- http://deepstatedeclassified.com/

Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2019/10/daring-huge-debt-for-their-jaunty.html

Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!

Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST

Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser! Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover - Reduces Smart Meter radiation by 96%! (See Video).

Comments

Online:
Visits:	1,603,284,578
Stories:	8,149,599