/biz/ - Business & Finance

As a result of debt growing faster than our underlying economy, America’s debt as a percent of GDP soared from just over 150% in the early-1980s to approximately 350% in recent years. This higher debt burden is the reason why our economy simply cannot handle interest rates as high as they were before 2008.

Particularly worrisome is the fact that U.S. federal debt is at a record of over 100% of the GDP (vs. 62% before the Great Recession), which will make it a much greater challenge to keep the economy afloat in the coming recession:

As the Fed Funds rate chart below shows, the interest rate threshold necessary to trigger recessions (recessions are designated by the gray bars) keeps falling as our debt burden increases:

Though many optimists are quick to point out that the benchmark Fed Funds rate was only increased from 0% to 2.5% during the current tightening cycle, the reality is that the current tightening cycle is even more aggressive than the past several cycles when the Fed Funds rate is adjusted for quantitative easing(this is known as the shadow Fed Funds rate – learn more). According to this methodology, interest rates have increased by the equivalent of 5.41% in the current cycle versus just 3.62% before the 2001 recession and 4.26% before the Great Recession of 2007 to 2009:

The 10-year U.S. Treasury note yield also confirms the message given by the Fed Funds rate: the U.S. economy has become increasingly sensitive to higher interest rates:

As I explained last week, the probability of a U.S. recession in the next twelve months may be as high as 64%:

The rapidly-approaching recession poses a serious risk to the extremely inflated U.S. stock market, which is up 300% since its 2009 low. The U.S. stock market is experiencing an unsustainable bubble due to the aggressive actions of the Fed

$1000 EOY

Ok I'm persuaded so how do I profit from this

Based analysis. You ppl need to learn

>>14362534
Go all in on btc and gold. Maybe keep a little to short FAGMARTS

>>14362534
Short stocks then buy at the bottom. Also buy up property post crash.

>>14362213
cancel the debt, fuck the bankers

>>14362213
US is in a unique position allowing it to export inflation since Bretton Woods. This why it can carry such heavy debt loads without hyperinflation. Of course it will all fall apart eventually, it's a mathematical certainty, unless there's a sudden surge of real sustained economic growth that continually expands.

However, the Dollars' unique position of being the world reserve currency and the US de facto controlling the world banking system ensures it will be the last to fail. We can already see this as EMs are struggling with inflation while others are running negative interest rates and various "liquidity injections" which have failed to create growth. They have no more ammo to stimulate growth on the next deflationary event aka recession. US has some room to cut interest rates but it's only 250 basis points and they still have holding from QEs that they couldn't liquidate because it was causing market crashes.

My educated guess is the next recession will cause a depression to most of the world while US not being able to export inflation will be stuck in stagflation.

Bitcoin is the saving grace to escape this stupid ponzi like "economic" system.

>>14362271
>They couldn't even take it to the 1993 lows.
Ehh, I'm not so sure about that. There's only a 50/50 chance of that causing a recession. The fed is full of dovish pussies.

>>14363019
Let’s not forget about boomers retiring and pulling from their retirement funds. Read somewhere the other day that the average US investor has ~70% of their investment in equities. When the market crashes it crashes hard

>>14362898
>All debt gets canceled
>Suddenly all money in savings and checking accounts evaporate because they're technically debt that banks owe to their customers.
>Banks and credit card companies suddenly become unable to help people buy things.
>The economy grinds to a screeching halt
>Shipping companies can't afford to move food from farms into cities
>Martial law gets declared
Nice suggestion dumbass. This scenario is only mildly acceptable for the gold bugs and crypto fags.

>>14362213
This is simply because of the government allowing people to get mortgages for free.

Before 2008, you could lie about your income and get a loan. Mortgages were guaranteed by Fannie, Freddie, and Ginnie.

After 2008, you could get a loan with 0-5% down because Fannie, Freddie, and Ginnie loosened down payment requirements and the Fed kept rates at near zero for years.

So banks and people took advantage of this, and pushed debt levels through the roof. When the mortgage market falls, the Fed will have to bail out the GSEs. When things normalize, that small house in San Jose won't be worth $6 million if you have to pay 20% down and interest rates are 5-7%, maybe $2 million at best.

>>14362898
The bankers don't own the debt, the American public does.

>>14363019

Dollar currency reserve?
Not Anymore, China selling it for gold.

Every country is trying to minimize the risk.
US will be abandon even by their allies (UK is operating the Yuan-gold in Beijing).

Time to exile to Mexico comrades

>>14363019
>They have no more ammo to stimulate growth on the next deflationary event aka recession
They'll just use deeply negative rates. The negative rates you've seen thus far are child's play.
See https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/

>>14363141
>Read somewhere the other day that the average US investor has ~70% of their investment in equities
This may be true, but that metric isn't particularly relevant. The people who are close to retirement age tend to have a fuckton of bonds. The figure you're citing is most likely heavily skewed by young people with tiny portfolios.

>>14363392
just IMAGINE believing this. Weeew.

>>14363434
why flee when you can just stay in the united states of neo-china?

There is not going to be any magical collapse, simply shifts.

Your fantasies are just that fantasies.

>>14363456
>https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/
paying to use banks LMAOOO. bitcoin is unironically going to win.

>>14363461
Bankers collect the origination fees and the bad debt goes on the GSEs balance sheets. At any time the government can take over the GSEs to bail them out, which is what will likely happen.

The government already owns Ginnie Mae, so the road is already paved to take over Freddie Mac and Fannie Mae when shit hits the fan.

In the end the taxpayers/bondholders will pay.

What will happen is a combination of the following. A bailout from Congress, Fed purchasing even more mortgage backed securities so the hamster wheel of mortgages can continue (this will screw treasury holders into negative real yields, because of the effects on money supply), and a takeover/rework of how the GSEs actually work.

Last time it was the banks that were a problem in the mortgage market, now since they have regulated into place, the rest of the risk has just been transferred to the GSEs. They never solved the root of the problem, because they needed to keep the racket alive to support the mortgage market (which is the largest part of the economy for the average person).

There will be a reckoning, and the US taxpayer and US bondholders will both PAY. Remember, the boomers run the country and control all the real estate, they will do anything to support prices.

>>14363468
Yes,

read
>>14363567

>>14362898
You don’t understand retard, all money in the system is debt. Do you want to cancel money too?

>>14363622
>Do you want to cancel money too?

Do you even realize how many sacks of shit would say yes to that statement?

>>14363495
who pays the fee to move bitcoin?

never trust someone who posts two broken y-axes on the same chart

>>14362213
That's how the petrodollar works, anon. Deficit spending is by design, and we make Saudi Arabia buy all the debt. Once the baby boomers die things will rearrange. There are more millenials than GenX, so the Millenials will be able to fund Gen X (who are paying for the boomers) and pay down the deficit. We're fine for at least 50 years. If Saudi Arabia causes a problem with the debt, we will invade them and cancel the debt.

seek medication

>>14363988
The real problem is what the rest of the world has to worry about:
>Shale tech changed everything.
>the U.S. is recently oil independent
>the U.S. doesn't need foreign trade. At all.
>the U.S. has been subsidizing a global trade network for 70 years that it no longer needs.
>every other country relies on said U.S. trade network to survive.
>The U.S. is renegotiating foreign trade deals, with the mindset that no one can offer us anything we need.
>an abrasive asshole from New York is handling the negotiations for us.

Good luck rest of world. We're pretty fucking cozy, and nobody cares about the "debt" we "owe" to Saudi Arabia. It's actually starting to get really fucking cozy.

>>14363318
So we are actually winning whatever we do, shorting the market, buying btc

>>14364111
Really? Because you are going to NIRP and then $7T of overseas money is going to come flooding back. Theres your inflation

>>14362213
I'll just add this

>>14362213
Also this. Dunno if they're connected, but the timing seems interesting.

>>14362213
Takes money to make money, as they say.

>>14364111
>>the U.S. doesn't need foreign trade. At all.
Really? Then how do you explain the $3.1 trillion dollars of imports we had last year? Where do we manufacture our electronics? Where do we mine our rare earth metals?

Plot twist. The crash will contained one more year. Trump didnt cause the crash but he knows he will take the blame. If he quits the election, its like admitting he caused it. He cant ve re elected yet he cant quit either. Republicans know this. The only chance of saving face is murdering Trump. Trump will be assassinated. And then the blame will be put on the murder. He will allow it. Its a suicide to save the country

>>14364378
Fuck foreign aid. Tired of having to be cucked by jews because of “muh economy”. Let it all crash so we can finally create a white ethnostate where we have our own economic system free from parasitism. We were able to live in the past on our own land without foreign shit and we can now.

>>14364378
We prefer economies of scale if it benefits us, but we don't need it. We can do without. We can make Iphones in America if we have to, and we have plenty of gold. We can grow enough food to feed our population, we can provide enough electricity to keep our grids running.

There are about 5 other countries in the world that can say the same. Everyone else is dependent on trade to feed the people and keep the lights on. America is in better shape than ever , relatively speaking.

>>14364879
>our own land
lmao

>>14362213
A return to HARD MONEY will cause extreme pain at first, byt eventually wash away the mal investment and debased currencies, ushering mankind into a new golden age

>>14364378
>rare earth metals
>>14365529
>we have plenty of gold
Gold isn't a rare earth metal dumbass. I'm talking about metals like Neodymium. They're absolutely critical for electric motors, fiber optics, LCD displays, catalysts for petroleum refining, and a bunch of other industrial uses. China damn near has a monopoly (81% of the total world supply as of 2017). It isn't even possible to mine them in the US.

>>14363770
whoever moves bitcoin pays a fee of threefiddy
I'm not fucking joking
https://www.blockchain.com/btc/tx/c1fe535009b2ba2170b76eebed30753f3039d3ec3f77c70ddfcd71c08d2ce167

>>14363988
>>14364111
Checked... And good analysis.

>>14365859
>It isn't even possible to mine them in the US.
why naut

>>14363019
>implying US debt export helps the US

For your position to be true, every other country, including those who are poor as dirt as well as upstarts, would have to be altruistically propping up the US. It is far, far more likely that the obverse is true: that other countries purchase US debt in order to muscle American companies out of its home market.

>>14362213
This is good for bitcoin

>>14364111
Nice copium amerilard

>>14363368
I'm in real estate.
I have people that are literally putting 0.5% down on homes.
.5%
You read that correctly.
1500 down on a 300,000 house
thats sustainable.

God bless OP

>>14363392
The bankers own the printers
Imagine not being all in in Bitcoin right now

>>14363019
BItcoin is great but it's also too volatile to be used by many people who already are living on the margins, Reserve Protocol (RSR) is a stablecoin that is designed to work in countries with hyperinflation. Could this be the saving grace for US infaltion rate?

>>14366237
because china has cheap electricity and better mining rigs