5 Signs the Economic Apocalypse is Here
You may have been hearing whispers of another recession in the financial news. Unfortunately, people don't seem to really start talking, much less worrying, about economic calamity until it's thoroughly set in.
Just remember how ready you were for 2008...
Today, the signs of future trouble are already noticeable — in some cases, unavoidable.
Here are just five — of many — that you need to keep your eye on if you want to be ready for whatever's around the corner.
The Student Loan Bubble
According to a recent article from Bloomberg Business, just 37% of all student loan debtors are making their payments according to contractual obligation:
With borrowers increasingly struggling to repay their student loans, Moody’s Investors Service is warning it may take investors longer than promised to get their money back. The credit grader said this month it may lower rankings on $3 billion of top-rated debt as investors face the threat of slowing principal payments or even receiving no interest.
The concern underscores the fallout from a record $1.2 trillion in U.S. student loans that’s spreading to everything from the housing market and consumer spending to taxpayers. As a sluggish economic recovery forces borrowers to miss payments or tap relief programs, only 37 percent are current and reducing their balances, according to a Federal Reserve Bank of New York presentation this month.
It's no mistake that a problem of this magnitude has become a major platform for presidential hopefuls as we head towards the 2016 election cycle.
But the problem may be even deeper and more profound than the next presidency, as it could change the higher education landscape in this nation once and for all. Once a crucial component of the American Dream, student debt is now clearly more like a nightmare.
Unemployment vs. Real Unemployment
This has been one of the most salient points of contention between the righties and the lefties, with one side claiming that unemployment rates are now back down to pre-recession levels, while the other insists that unemployment figures are skewed by lower-than-ever participation rates.
The truth may be worse than either side sees, however. A report by the Bureau of Labor Statistics, released last year, stated that in 19.9% of American families — accounting for just over 16 million households — nobody has a job.
That year, the percent of families in which no one had a job was 18.8 percent. The percentage hit an all-time high of 20.2 percent in 2011. It held steady at 20 percent in 2012 and 2013. In 2014, it declined to 19.9 percent.
And yet half of the country insists that unemployment is at a healthy 5.5%. Is this political subterfuge?
Most likely, but numbers like these point not at a coming recession, but at the fact that we never recovered from the previous one.
McDonald's Not Doing So Great?
The world's biggest fast-food brand, with more than 32,000 stores worldwide, is planning on cutting 700 of those locations during the course of 2015.
Seems like a small detail, right? Only it's not. McDonald's (NYSE: MCD) is such a ubiquitous and consistent provider of cheap food the world over that it is a pretty substantive economic metric.
The company plans to kill off locations in China, where sales are down almost 5% for the first quarter of 2015, as well as in Japan, where last year's food safety panic has yet to pass.
This marks a two-year-long decline for the biggest name in fast food, culminating in an 11% decrease in revenue and a 30% drop in profit in the first three months of this year.
Higher-end brands such as Chipotle have been rising on this ebbing tide, but the two remain incomparable as barometers of global consumer spending.
Copper Prices Tumble
Copper is at historic lows today, trading at $2.33 a pound as I write this — about where it was back in 2008, when the financial crisis was just starting to set in.
But lots of things are low today, so why does copper matter so much?
The reason is simple and all around you. Copper remains the key component in basic infrastructural elements such as wiring, communication lines, and plumbing.
Today, however, even the black market for the metal has fallen to near non-existence. Even China — a nation that consumes 40% of the world's copper supply in its steady, seemingly relentless drive towards modernization — is starting to lose interest.
Demand there peaked last December and has been steadily spiraling since then.
Lack of interest in key industrial raw materials such as this points to an existing stagnation of growth. For developed nations, this may matter less, but for rapidly emerging economies — economies that are expected to create vast volumes of global consumer demand in the coming decades — this is an ominous sign indeed.
Demand for Residential Real Estate Continues to Tumble
Two years ago, 31% of Americans claimed that they were not in the market for a home, nor did they anticipate being in such a situation for the foreseeable future.
That figure alone says a lot about how Americans have changed their perceptions of the American Dream, and of middle-class life in general.
But it gets worse...
Since that Gallup survey was conducted, the number of Americans in the same situation has grown dramatically.
Today, that figure stands at 41% already, on top of the lowest home ownership rates seen in more than 20 years.
Compare this with the peak of the real estate market — when average housing prices well exceeded today's — and it paints a grim picture.
People are less willing to take a chance on a home as an asset and as an investment. The result cascades right through the housing and construction industry and affects the very core of American consumer economics.
And yes, as usual, it comes back to personal finances.
“The No. 1 issue in the housing market right now is wages,” said Jay Morelock, an economist with FTN Financial in New York. “For the housing recovery to be sustainable in the long run, we have to see wages increase at a faster pace.”
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Tip of the Iceberg
Not to make matters worse, but these are just a few of the many recent and not-so-recent red flags we've seen appearing lately.
The U.S. economy is also underperforming, growing at a meager 0.2% annual rate as of this May.
Export growth is now into negative territory — something else we haven't seen since the onset of the Great Recession.
Retail sales are dropping rapidly, but if you think it's all because of online shopping, you can forget about that because factory orders are also down and accelerating.
And let's not forget about oil, the lifeblood of global industry. Trading at six-year lows, this lack of demand for our most popular and most essential energy source signals that things in general are slowing down — even as the global population heads steadily into the vertical stage of an exponential curve.
Fortune favors the bold,
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