10 Signs the Economy is in deep Trouble

Economists tell you that one factor does not mean the economy is in trouble. But how about 10? Below I have compiled 10 ominous signs that the economy is in deep trouble.

1. Banks are collapsing at levels not seen since the 2008 crisis.

We have had in the past couple of months the 2nd and 3rd largest banking collapses in US history behind Bear Stearn’s collapse in 2008. For more details, you can see a further break down I wrote here: Banking Collapse Tsunami could eclipse 2008 Crisis. I covered the numbers in 2008 and compared it to today.

To make matters worse, the Federal Reserve recently warned that more than 700 banks face significant safety and soundness risk due to massive unrealized losses on their balance sheets.

People are paying attention and are concerned. A recent Gallop poll shows half of Americans worry their money is not safe in banks. This will only increase the odds that further bank runs and bank collapses will occur.

2. The money supply has decreased the largest amount since the Great Depression

Source

The lead up to the Great Depression, the money supply fell by 12 percent, today we are seeing a 10.2% drop. This drop is the largest amount since the lead up to the Great Depression. The reason we are not in complete collapse is the money supply also grew in the past 3 years not seen ever in U.S. history.

Source

The US economy still has large excesses created during the COVID era. This is partly why we are not yet seeing a sizable slowdown in the labor market. But with all the other factors listed here, we are in for a serious rough ride.

3. Inflation is still high despite the decrease in Money Supply

Despite the 2nd largest decline in the money supply in US history, inflation is still persisting. Unlike the Great Depression, the decrease in the money supply led to an inflation free fall.

Source: MacroTrends.net

This time is different and means the FED will likely continue to keep interest rates higher thus fueling the increasing credit crunch and ongoing bank collapses. Higher interest rates decrease the cash available for businesses and regular people to pay off loans. It also decreases the available cash needed to buy goods in the general economy reducing revenues for most business, but even more so for businesses selling goods not considered basic needs.

4. Silver prices are soaring and are positioned to continue to rise

Silver prices soared during the 2008 crisis. People were worried that the full collapse was coming. But the global bankers were able to “kick the can down the road” until later, maybe until today.

The two charts below give you some great insight. The first one shows how American Silver Eagles have been soaring and shows the spot price from the end of 2013 to today, 5-14-2023.

Analysts have stated that the U.S. Mint has had difficulty maintaining its supply of blanks as it competes with growing overseas demand. This is why American Eagles are increasing more than generic silver coins.

The next chart shows the price of silver at it’s peak after the 2008 crisis. People were pulling out of the economy en masse. Then, when people realized the global bankers had managed to stall the collapse, silver prices came back down although still settled higher.

If 2008 is an indication of where silver prices will go, imagine where prices will ultimately land.

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5. Credit Crunch

The credit crunch happens when there is a significant tightening of lending standards among banks. The recent surge of bank collapses caused by an increase of bad existing loans fueled by a weaker overall economy fueled by higher interest rates, is causing banks to shore up their balance sheets. This means new loans are harder to get and more costly.

Many economists, including Bank of America strategists, are warning that this could lead to over 1 trillion worth of corporate debt defaults.

Last 20 years Bank Prime Loan Rates

With growing interest rates, loans are harder to come by and existing loans with floating rates (not set with a fixed rate loan) become impossible to pay for cash strapped businesses and homeowners. This will fuel even more collapses, foreclosures and bankruptcies going forward.

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