The Imminent Economic Downfall: 10 Alarming Indicators

In the late 1990s, I assisted a young couple in purchasing a home in San Ramon, CA, for $330,000. By 2007, that same house was mortgaged for over $800,000, a startling reflection of an economy that was headed for disaster—a disaster that fully manifested in the 2008 recession. This situation exemplifies how the economy was artificially inflated, and it’s a pattern that’s resurfacing today.

Economist David Rosenberg, once shunned at Merrill Lynch for predicting a severe recession, became a hero after the 2008 economic collapse validated his forecasts. Today, Rosenberg is once again sounding the alarm, citing bad data and policies as reasons why the Federal Reserve may be forced to scramble and cut rates soon.

Our current economy mirrors the artificial inflation seen in the early 2000s, but this time, it’s not just about housing. It’s about unprecedented government spending during peacetime, and the consequences are bound to be dire.

1. Flawed Employment Data: Both David Rosenberg and Danielle DiMartino Booth have repeatedly criticized the government's employment data as being inaccurate. More comprehensive surveys suggest that job losses and layoffs are far more prevalent than reported.
2. "Buy Now, Pay Later" Surge: The increasing reliance on "buy now, pay later" plans signals financial stress among consumers. Many are beginning to miss payments, a concerning trend that could have far-reaching implications.
3. Rising Credit Card Debt: Credit card borrowing and defaults have reached levels not seen since 2008. This borrowing has been a crucial factor in sustaining the economy in recent years, but it's unsustainable.
4. Declining Savings Rates: Economist Lacy Hunt has pointed out that declining savings rates are always a precursor to recessions. America's savings rates are plummeting at an unprecedented rate.
5. Inverted Yield Curve: The 3-month T-Bill yield has been higher than the 10-month Treasury yield for over 500 days, a scenario not seen since 1929 and 2008, both years that led to significant economic downturns.
6. Shrinking M2 Money Supply: Stephen Hanke, a renowned economist, has noted a record decrease in M2 money supply levels, a clear indicator of an impending recession.
7. Commercial Real Estate Crisis: The commercial real estate sector is facing a double blow—empty buildings due to remote work and skyrocketing interest rates. Landlords are struggling to refinance debt in this challenging environment.
8. Crashing Japanese Yen: The weakening of the Japanese Yen, despite government intervention, poses a significant risk to the global economy, particularly if Japan's economy falters.
9. Stimulus Exhaustion: The COVID-era stimulus that propped up consumers and businesses is drying up, leaving a void that could precipitate a severe economic downturn.
10. Banking Crisis: The banking sector, the economy's lifeblood, is under threat. Billionaire real estate investors predict "weekly bank failures," underscoring the fragility of the financial system.

Bonus Concern: Warren Buffett’s Bearish Outlook: When Warren Buffett, typically optimistic about the American economy, turns bearish, it’s a sign that something is seriously wrong.

The evidence is overwhelming: we are headed for a severe recession. The economy is in a precarious state, with indicators pointing to an impending crash. The only question that remains is how long the Federal Reserve and the government can delay the inevitable.