Proverbs 22:10 – “Cast out the scorner, and contention shall go out; yea, strife and reproach shall cease”

 

America’s Credit Line Just Got Cancelled

For years, financial experts have warned about the coming day of when America’s credit line could get cancelled.

The U.S. economy runs on credit. When America’s credit engine sputters, so does the economy.

And right now, we’re majorly overdrawn.

 

 

Banks are tightening lending standards for consumer loans.

With that being said, this is proof that we are headed for an economic recession.

The percent of U.S. banks reporting an increased willingness to make new consumer loans has plunged deep into negative territory.

 

 

Banks are wary of making new loans right now because consumer defaults are on the rise.

For instance, J.P. Morgan reserved $2.3 billion for potential loan losses in Q4, a 49% increase from the prior quarter.

Over the past year, inflation has eroded incomes.

The consumer savings rate has plummeted to a record low of just 2.2%.

 

 

Conclusion

People turned to plastic, racking up a record $930 billion in total credit card debt, up by nearly $200 billion since 2020.

This source of spending is now drying up. I’d take  BRIC’s debt over U.S. debt.

Fewer loans and fewer credit cards means less spending. Corporate America is feeling the pinch.

 

 

This includes rising default rates, tightening credit, and deteriorating corporate earnings.

The only question now is whether Jerome Powell will accept the short-term economic pain of a recession to stamp out inflation for good.

All things being equal, we’d rather deal with a sharp, one-time recession than another ten lost years of inflation.

 

 

Investors need to focus on building a portfolio that can withstand a range of potential outcomes.

And get broad exposure to commodities, and energy in particular.

Raising rates kills jobs. Loss of jobs does not improve supply lines. It merely impoverishes more Americans, lowers govt. tax revenues, reducing public spending on infrastructure. While America decays into third-world status.

This coming recession isn’t due to consumer spending falling off the cliff. It’s due to the century-long central bank’s stripping of our middle-class population’s wealth.