Economic PLUNGE: Consumers Are TANKING, Treasury Borrowing Erupts, Yen Collapse Zero Hope

Economic PLUNGE: Consumers Are TANKING, Treasury Borrowing Erupts, Yen Collapse Zero Hope

all right guys so let’s talk about the economy today so everyone is breeding a side of relief that the FED isn’t going to hike rates further andure enough the markets red but is that what we should really be cheering about the real concern is this limbo where inflation refuses to come down and the FED simply can’t cut rates power keeps rate cards on the table but leaves timing less certain what investors are cheering is the fact power s hikes are unlikely but digging to the meeting we’ll see that even he doesn’t know what to do he can’t guarantee will’ll get a single card by December this year I can just say that when we get that confidence that rate cards will be in scope but I don’t know exactly when that will be he also didn’t mention if rate Cuts would happen this year which is highly ominous and this lease rate still at 5.5% this isn’t good for our leverage economy the big problem now is the signals power is getting inflation is strong and the drivers are still alive and well the whole point of Po’s higher for longer is demand destruction he needs to see spending come down meaningfully but that simply isn’t the case the inflation progress has effectively stalled in q1 looking at the PC price index which is the cost pressures on us consumers it is looking very horrible it has rebounded up to 2.7% today if we strip away energy and food it’s even worse 2.8% which is another rise from the the previous month and this is what happens when you have endless government spending and Rising Energy prices from two endless Wars all this is feeding the inflation fires is making the cost of everything go up now one statistic the FED watches closely is the labor cost how much it takes to hire someone in today’s economy and what we are seeing isn’t encouraging at all labor cost have accelerated the most in the year we are back at a 12mon high of 1.2% this quarter and this tells the fact that people are earning more money a wage growth is robust Rising labor costs also aren’t good for companies longterm it is a signal that hiring is getting more expensive and the knee Jer reaction is to pass the cost down to Consumers so we are still getting this endless inflation feedback loop that’s pushing prices higher and higher people still have money to spend in the economy but dig a little deeper and you realize things aren’t that Rosy the unit labor costs have jumped by an insane 4.7% this is horrible for companies and this means to produce one unit of output the cost is now almost 5% more and who do you think will pay for it the consumer people like you and me we are going to get clobber again when the unit labor cost Rises it collapses productivity we can see this big drop down to 0.3% companies are no longer productive because of inflation to hire workers they have to pay more but the output is either the same G or dropping this isn’t great for the underlying economic situation when the cost of Labor goes too high relative to Output there will be a rebalancing sooner or later and that just means job losses down the road but how can output rise when the FED is holding rates at 5.5% is the chicken and egg Problem by keeping borrowing cost High you are slowing down the economy you are taking money out of the system and the longer you do this the more money leaves the real economy the fact know this and they starting to reverse their QT power is going to slow the pace of their balance sheet reduction in June the selloff will drop from $60 billion a month to just 25 billion for nearly two years now the FED has been selling off the Holdings of us bonds to the market he has gone from nearly $9 trillion down to just 7.4 trillion they are removing liquidity from the economy to slow inflation down but the fact they are slowing this shows cracks in the system are forming we can forget about going back to the levels before the 2020 stimulus money it simply can’t happen without an implosion when monetary conditions get tighter people on the street they get welled you’re going to see their mortgage rates and personal loans stay high at the same time because of government spending prices are heing up as well and this RIS havoc on their budget and when there are ton of uncertainty people simply don’t want to spend if you see chaos ahead you’re going to do a lot of cutbacks us consumer confidence has collapsed in a very big way he has dropped all the way down to the lowest level since July 2022 this is the third month of decreases showing households are afraid of spending if you ask people why the answer is crystal clear the labor market doesn’t look good and by extension the entire economy is looking really nasty biomics isn’t working the share of people expecting more jobs in 6 months have collapsed down to 11.7% the lowest since 2011 expectations for higher incomes have also dropped the share of people expecting more jobs in six months have collapsed down to 11.7% the lowest since 2011 expectations for high incomes have also dropped and this could come as a blind spot for us companies they are always the last to react because they have to keep optimistic they have people on the payroll and they don’t really want to let them go in a survey almost 80% of Business Leaders believe the US economy is strong but just ask the on the street only 40% believe the narrative that’s less than half this big disconnect signals a storm is coming consumer spending could Creator the longer the FED stays higher for longer and this obviously isn’t good for the US the economy is driven by domestic consumption if our consumer Society decides to stop spending everything literally everything grinds to Halt 68% of the US economy is powered by consumer spending and if the Outlook continues to darken households will cut their expenditure and it could be game over now granted many other countries are powered by local consumption as well China’s GDP is powered by domestic consumption to even bigger degree it accounts for 82% of their economy but retail sales there are still going up by 7.2% at least double versus the US and that’s because prices are stable in Beijing and in some cases they actually coming down and that allows people on Main Street to keep spending and keep the economy afloat but in the US it’s the exact opposite prices are going up there’s high oil prices the rising cost of Labor and high input costs as well all this makes consumer goods more expensive and let’s not forget the US tariffs on Imports as well that only makes things worse but the biggest hit we facing the US economy is endless government spending and we have said before how government spending is inefficient is borrowing a dollar to generate 50 cents of growth the federal deficit in 2023 was 6.3% of GDP and that’s according to the CBO so the government borrowed 1.7 trillion to Goose up the economy however real GDP grew by only 2.5% in the same year it’s evident that deficit spending isn’t efficient and there’s a lot of wastage it’s not complex math here a lot of that money is flowing into the hands of the privilege and certain industries the problem now is that borrowing and spending from the top isn’t going to the end in fact we now have word from the US Treasury that’s going to get far worse Janet Yellen has announced that she has to borrow more money this quarter to run the US economy she’s going to issue over $40 billion worth of bonds more to raise money for Biden’s government and that’s a 25% increase from the previous prediction of 200 billion and this is what happens when you are funding endless Wars while trying to battle China’s economy all at the same time you have to give money to Ukraine while subsidizing your industries to compete with Beijing you create a very big fiscal disaster and all this adds stress to the system itself it destabilizes the banks mortgage payers and businesses in the real economy they will be competing with the US Treasury for Capital and investment money and here’s how serious things are going to gate for the current quarter plus the July to September period a total of $1.09 trillion will be borrowed and for all we know q3’s borrowing likely will get revised higher as well it’s important to understand the consequences of this the money is being Borrowed by the government and spent in the real economy is not sitting in some bank or in a vault it is circulating around and this is countering the fed’s monetary policy of higher interest rates it essentially locks power in a stagflation trap it can’t lower rates because deficit spending is making inflation sticky neither can he hike because it will cause the debt crisis to get worse and even implode the banks and this is why we are staying higher for longer now what’s funny is that the US Treasury knows the economy is suffering under the weight of this endless borrowing and that’s why Yellen is starting a buyback program of their bonds beginning May 29th she’s buying back US debt as part of a liquidity Support Program she’s afraid there’s not enough money circulating in the real economy but it’s not going to matter as long as the government keeps bowing money Mone and rates stay high money is still going to leave the system it will hide in government bonds the only way to end this Doom Loop is to reduce fiscal spending which also means embracing a recession and is Joe Biden really ready for that but let’s end this with Japan’s currency crisis now this is a perfect example of how excessive debt can trap an entire economy Japan’s currency the Yen has been collapsing as a result of money flowing to us bonds and the rising dollar the yen is being dumped and the bank of Japan’s latest intervention has failed they spent around $23 billion to pop up the Yen and that means selling the dollar Holdings and buying up their local currency from the market and this is their second intervention and the results are very clear the latest intervention saw the Yen Rise by 3% against the dollar but almost immediately it depreciated once again it gave away almost half of the gains and this is the big problem with interventions it won’t last for long because the fun fals are against the Yen every time the FED refuses to cut rates it just hammers away again and again at a currency further looking at the previous intervention at the 160 levels it’s clear that it didn’t last for long it Rose to the5 level before sluming back down to8 against the dollar now don’t get me wrong the BJ has no choice but to intervene if they just let the Yen going to freef fall this will be an economic and political disaster so the only solution left is for the FED funds to come down meaningfully enough to bre the interest rate Gap but we know it won’t happen because Jerome power is still fighting inflation back home in the United States and this situation is important because a collapsing currency makes a country poorer well it’s true that the weaker Yen helps exports consumers in Japan are getting hammered when your currency weakens important inflation Rises so prices in Japan goes up a ton of things especially energy are important into the country and this causes people to spend less and hot money to survive the Japanese consumer is getting hollowed out economists predict much household spending to Fall by 2.4% and if that happens this will be the 13th straight month of spending Decline and this removes export demand for countries around the world including the us as well so a currency crisis in Japan does have Global consequences for demand it drags all their Imports down it’s not just the Yen falling heart many other currencies especially in Asia they are all suffering and this is the problem with higher interest rates it hurts the world economy which boomerangs back on the US itself no matter how big America is it is still connected to the global economy to global trade exports from the US are already dropping in March this year us Goods exports fell by almost 3% the world is importing less from America because the dollar is stronger and everyone else is going gr is that really a win for America when companies in the US export less they earn less as well and this inter affects workers as well so wage increases just won’t keep up with inflation it’s not a surprise that Imports into the US fell by 1.6% as well the US consumer is buying less from the world because they are going broke too so overall trade has come down this fire is consuming us all and the situation won’t get any better until inflation drops allowing the FED to finally slash rates down and once again I need to keep saying this I need to keep hammering the table on this the only way for that to happen quickly is for government spending to stop however this will mean a global recession for everyone but let me know what you think can the FED ever cut rates this year and will the US government stop borrowing money let me know in the comments below stay safe be sure to smash the like button and subscribe as we navigate through this crazy times

The Fed has committed not to hike rates further, but they can’t commit to rate cuts either! The US economy is stuck in a limbo of higher for longer which is very risky. Meanwhile, the US Treasury is about to borrow even more money for government spending. This is only making the inflation crisis worse. It is also collapsing the value of currencies like the Yen, and not even a currency intervention can save it. Here’s what you must know!

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✅ Timestamps & Chapters:
0:00 No Hikes BUT No Cuts Either
3:13 US Consumers Are Tanking Hard
6:48 Treasury Borrowing Explodes Higher
9:43 The Japanese Yen Is Finished
12:04 US Economy Will Get Hit

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