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Nexus X Humectress
Market sentiment has gotten much more bullish since when I wrote No Collapse is the Real Dystopia in June. This summer saw a major bull market, or rather bear market rally, with the Dow reaching its longest winning streak since the 1980s. The “top economists” did a total U-turn and no longer expect a recession this or next year. The recent bullish sentiment feels similar to 2021, when covid was easing and there was a surge in stimulus. This wave of bullishness continues, despite stocks dipping after Fitch downgraded the US credit rating.
The current bullish propaganda is identical to that before the 2008 crash. For instance, Tyler Cowen’s recent Bloomberg op-ed, The US Economy Is Great. Stop Worrying About It, is much like Brian Wesbury’s 2008 WSJ op-ed, “The Economy is Fine (Really) . A recent CNN Business article, the case for a soft landing, is much like a CNN Money article, making the strong case for market optimism in 2008. In January of 2008, Fed chair, Bernanke, proclaimed that the Fed is not forecasting a recession. The main arguments that bulls make for their soft landing thesis are that unemployment is still low, inflation has gone down, GDP growth, and high stock prices, despite countless signs of economic peril.
While foolish economic optimism is expected from clowns like CNBC’s, Jim Cramer, who was notorious for saying don’t be silly on Bear Stearns before the crash of 08, even respected financial figures who are more bearish, like Mohamed El-Erian, were recently shilling an impressive economic recovery. An example of blatant propaganda from bulls, is a Bloomberg interview with Blackrock’s Rick Rieder, in which Rieder dismissed that the Yield Curve has been wrong at flagging many recessions, agreeing with “Economist” Ed Yardini, who said that “the yield curve is different this time because we have a “Nirvana Scenario.” This is blatantly false, as the Yield Curve has accurately predicted every single recession, and was only slightly off once in the 60s. It is notable that Yardini was saying the same about the Yield Curve back in April of 2008. The Yield Curve has inverted the most since the early 80s recession.
1 Year Treasury Yield
Source: Northman Trader via @StockCharts.com
Blackrock’s Rieder also dismissed that rising interest rates will have a major negative impact on the economy, only focusing on those with fixed mortgage rates while ignoring that medium house payment are up 19% from 2022, the most expensive ever, and 30 year mortgages are at the highest rates since 2000. Rising interest rates, which are at the highest level in 22 years, coincide unprecedented levels of debt, with credit card balances at 20 year highs and US adults having more credit card debt than total savings. Also delinquency rates on credit card loans from small lenders are at a high of 7.1%, above the last peak of 6.0% in 2008, a rapid rise from 3.8% in 2020. When interest rates were near 0, corporations took on loads of debt, that they will face a reckoning on when they are forced to refinance at higher rates. Total US debt, including government, business, and personal debt has reached a whopping $100 trillion.
Source: Kobeissi Letter via Federal Reserve
Attack the System
Categories: Economics/Class Relations
