Originally published in September 2016.
The next recession will hit sometime during the next twelve months, most likely by June of 2017, give or take a month or two. It will be worse than the last one, and the impacts of it will last longer than the Great Recession of 2007-2009. The effects of that recession are still being felt. Median household income, for example, is still below what it was in 2007. That is one of the reasons why the next recession will be worse than the last.
99 percent of all US income growth from 2009 to 2014 went to the top 1 percent. They invest their money in the bond, stock and political markets. This does not create demand for goods and services. It destroys that demand by using financial and political leverage to export US jobs to low wage countries.
So all of this means that roughly 23 to 36 percent of all income produced in the United States has been stolen by the 1 percent, depending on whose figures you’re using. This inequality is destroying the demand for goods and services. Back in 1980, the 1 percent were able to steal only 8 percent of all US income. That’s why job and wage growth was much greater then than now.
Nowadays, the 99 percent earn roughly 62 to 77 percent of all income, down from 92 percent in 1980. This means demand for goods and services will be weak, much weaker, in fact, during the next recession than might be imagined.
The current economic expansion is the weakest in modern US history because of that lack of demand. It’s also been illegally contrived.
The big banks withheld 3.4 million homes from the market by 2011. This is a violation of a variety of US laws, and is called a conspiracy in restraint of trade. As you can tell from the graph above, demand for home mortgages have been historically low compared to the last housing bubble, yet prices continue to bounce up because that 3.4 million homes represented more than 50 percent of the entire available housing stock, according to Bloomberg news. Click the following link for the Bloomberg report $382B Shadow Inventory Weighs on U.S. Housing-Bloomberg News.
This has driven home builders to construct more homes in the USA, and panicked people into purchasing overpriced homes that the banks illegally benefit from. This illegal housing bubble is what has powered this economy forward, and also to its doom.
The above suggests a few ominous things.
- The big banks can’t take many more houses off the market during and after the next recession, leaving them unable to create another housing bubble sufficient to power the next economic expansion forward.
- Earning 63 to 78 percent of total US income will not allow the 99 percent sufficient financial strength to power the US out of the recession.
- Instead, people who have borrowed against the rising value of their homes and used credit cards to sustain their standard of living will be trying to dig out of their debt.
- The value of housing will drop, as it always has done during recessions. This time the drop could be 30 to 50 percent in many areas. Maybe 60 percent.
- Deflation, caused by a lack of demand, will likely happen.
- Expect negative interest rates.
- The stock markets will fall more than they did last time. Expect major stock indices like the S&P 500 and the Dow to plummet 50 to 90 percent.
- The Federal Reserve will bail out the big banks and rich investors to the tune of tens of trillions of dollars, like during the last recession. But the Fed won’t bail out the 99 percent.
- The government must bail out the rich, or the 99 percent, but it can’t bail out both. The politicians will chose to bail out the rich, just like last time.
- Unemployment will be in double figures at some point, and perhaps for a long time.
- A political revolution will likely be forced into place at some point to replace the current corrupt government, and the corrupt politicians of the Republican and Democratic Parties.
As a final note, it should be pointed out that very few news sources have reported the housing conspiracy. No politician of note has mentioned it to my knowledge. This suggests something ominous, and this is only a suggestion.
It is possible the CEOs of the big banks gathered together, either in person or electronically, with Republican Party, Democratic Party and Federal Reserve officials, to conspire to engineer this housing bubble in order to power this historically weak economic expansion, and to make certain they wouldn’t face federal charges in doing so.
Now this is just a suspicion, so don’t get all heated up. But since the government has made it a point not to do enforce US laws against drug money laundering and other criminal activities on the part of the bankers, it might also be reasonable to assume this housing bubble has been created with a nod and a wink from the politically powerful.
When this recession begins, there will be virtually nothing to power us out of it except a political revolution of some kind. We’ll need a new FDR. Are you listening Senator Warren?
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