Last week ended with key Wall Street indices going into negative territory. On Monday, the Dow Jones continues to sink, while the S&P 500 and Nasdaq Composite are trying (rather unsuccessfully) to recover their fall.
More and more signals are coming in that the economic and financial problems in the US are becoming almost intractable. The head of the New York FDIC said that bank failure rates for mortgages and auto loans in the US have reached an all-time high.
For mortgages, the failure rate reached 20.7 per cent, more than double the level of 2019, a pre-pandemic year that is often used as a baseline for comparison. The DXY dollar index goes into negative territory, losing 0.2% and cutting its YTD gains to a modest 5%.
Inflation is eating away at Americans’ wealth. Three out of four U.S. residents who earn less than $50,000 a year can’t keep up with their mortgage payments or rent payments.
It’s curious how the new poor in the US are coping with their personal financial crisis. Nearly one in four are borrowing from friends, selling off their personal belongings, and regularly refusing to eat out. More than 11 per cent of credit cards have seen delinquencies rise past 90 days, the highest since 2012.
Globally, gold started the week with a surge of 1.85%, coming out sharply from its recent downward correction. Investors are coming back to reality.
Inflation is not going to go down in the US. Gasoline inventories for this year are at their lowest level in five years. That means higher prices at petrol stations and higher prices for most consumer goods ahead.
Donald Trump and Ilon Musk are discussing possible tax cuts and budget spending. Americans are waiting for a “miracle”, which, however, no one has a recipe for. The growing interest on the national debt is already comparable to what the US spends on social security. And there will only be more payments going forward.
It is possible, of course, to cut Pentagon spending and stop building up US military bases around the world. But here Trump will face a very difficult battle with lobbyists from the Pentagon, which could turn out to be anything for the US president.
Black Swan TG-Channel