Central Banks Have a $13 Trillion Problem

By Bill Bonner

Paycheck to Paycheck

GUALFIN, ARGENTINA – The Dow was down 118 points on Wednesday. It should have been down a lot more. Of course, markets know more than we do. And maybe this market knows something that makes sense of these high prices. What we see are reasons to sell, not reasons to buy.

DJIA daily (incl. Thursday)… it was just taking a rest – click to enlarge.

Nearly half of all American families live “paycheck to paycheck,” say researchers. Without borrowing, 46% couldn’t raise $400 to cover an emergency. This is at least part of the reason why retail sales dropped for the second month in a row in March. Despite seven years of economic “recovery,” millions of Americans don’t have much money.

According to Census Bureau figures, 110 million Americans receive benefits from means-tested federal programs – food stamps, disability, and the like. And according to the Bureau of Labor Statistics, about 125 million Americans have full-time work (with another roughly 112 million without jobs).

That means there are only 125 million people in full-time jobs supporting the whole kit and caboodle of the U.S. economy, with a total population of 323 million. At that rate, each full-time worker supports about 2.6 people… including almost one person receiving money from the feds.

They are also supporting a government debt of $20 trillion and private debt of another $40 trillion or so. That puts the debt-to-full-time-worker ratio at $480,000. The average salary for a full-time worker is just $48,000. At a modest 5% interest, his share of the debt cost would set him back $24,000 each year.

He’d have only the remaining $24,000 to support (1) his own family… and (2) all the malingerers, cronies, and zombies who are drawing government benefits. Obviously, those numbers don’t work. But they explain much of the weakness in the U.S. economy.

The feds’ cheap credit keeps moving money (mostly in the form of asset price increases) to the wealthiest ZIP codes… while the average person’s budget gets tighter and tighter.

It’s not just better to be rich, it’s double-plus-better! – click to enlarge.

Crisis Level

Foot traffic in chain restaurants is dropping, too. It’s down 3.4% from last month year over year. And all across the country, retail stores are closing their doors and shuttering their windows as though a hurricane were coming. And maybe it is…

Household debt is once again at more than $14 trillion – the level that set off the crisis of 2008–’09. At that level, consumers have a hard time spending. Despite these warnings, the Fed is still patting itself on the back. Bloomberg:

The economy continued to grow across the U.S. at a modest-to-moderate pace in recent weeks as a tight labor market helped broaden wage gains, though consumer spending was mixed, a Federal Reserve survey showed Wednesday.

Not only that, it is still talking about undoing the damage it has done over the past eight years, hoping to get down from its debt-mountain perch without breaking …read more

Source:: Acting Man

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