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June 20, 2022
President Donald Trump, while meeting with a group of military leaders in the White House in 2017, cryptically warned of “the calm before the storm.” When asked by reporters what he meant he simply replied, “You’ll find out.”
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There has been much speculation as to what “storm” Trump was referring to, ranging from overturning a fraudulent election to devolution. While his comments from five years ago remain inscrutable, today a real storm is on the horizon, plain to any American consumer. This storm is economic, perhaps a hurricane, as JPMorgan Chase CEO Jamie Dimon described it, the likes of which may be terrifying and life-changing to those caught in the maelstrom.
YouTube screen grab
Before I am accused of hyperbole, several financial gurus have likened current economic conditions to a storm, as I chronicled in a recent article. An SMU professor agrees, “We’re seeing these massive dark clouds on the horizon.” A coming storm is an apt description.
Was the Trump presidency, with $2 gas, low unemployment and inflation, peace and prosperity, the calm before the current economic storm? Did Trump know what lay ahead, teasing out a prediction? Regardless of what President Trump was alluding to, an economic storm is definitely coming, not just on the horizon but already taking its toll on hard-working Americans.
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Inflation is at 8.6 percent, the official government number for the CPI. This is based on a basket of goods and depending on what is measured and how it is weighted, may misrepresent the inflation rate facing consumers on a daily basis. For example, the Truflation Dashboard reports inflation at 13.2 percent, with food costs up 26.5 percent.
The producer price index rose 10.8 percent in May, foretelling higher consumer prices soon reaching store shelves. Small business optimism fell to a new 48 year low. Pessimistic business owners will not be hiring new employees or expanding their businesses. Many may close up shop instead.
Anyone visiting a gas station sees the price over $5.00 a gallon, more than twice what it was a few years ago. As most goods and services require transportation costs, meaning fuel, expect to see this price increase passed along to consumers through higher prices.
The stock market is down bigly from the Trump days and is now officially in a bear market, meaning markets are down 20 percent or more from their most recent all-time high. Despite the unemployment rate hovering at 3.6 percent, this represents only those actively seeking employment, not those who have given up looking for work.
The labor force participation rate, a better measure of who is working and who is not, dropped to 62.3 percent, the lowest level since the mid-1970s, excluding the months during the COVID shutdowns. What are President Biden and his economic wizards doing to alleviate this?
Inflation is too much money chasing too few goods, a remnant of irresponsible government policy and leadership going back decades. This was exacerbated by copious COVID relief money, paying Americans to stay home and not work or produce. As COVID is waning, the Biden administration, rather than taking its foot off the stimulus accelerator, is continuing to create money and spend like a drunken sailor.
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Boneheaded energy policy, reversing Trump era energy independence, has restricted energy production to the point that we are begging the Saudis for oil. Higher energy costs mean inflation and less production as it costs more to work and produce goods and services.
To combat inflation, the Fed must raise interest rates, ideally to above the inflation rate, in order to break the cycle of easy money chasing scarce goods. Last week the Fed hiked its benchmark interest rate by 0.75 percentage point, the largest increase since 1994. This translates to higher borrowing costs for home mortgages, business loans, and credit card balances, throwing cold water on the economy. Mortgage rates have topped 6 percent, the highest since 2008, which will chill the housing market and hurt borrowers who have adjustable rate mortgages.
As the economy slows, we inch closer to a recession. One more quarter of negative GDP places us in a recession, hitting the trifecta along with a bear market and runaway inflation. Is this what Biden and his handlers meant by “Build Back Better”?
Speaking of Biden, his “approval rating fell to 39 percent in its third straight weekly decline, approaching the lowest level of his presidency, according to a Reuters/Ipsos opinion poll.” Rasmussen Reports confirms, showing Biden at about 40 percent approval, almost 10 points lower than Trump at similar points in their presidencies. Despite the hot air emanating from the White House, Americans recognize the coming economic storm.
Consumer sentiment plunged to the lowest level ever measured by the University of Michigan since 1952. Biden’s disapproval of his job on inflation is 71 percent, topping Jimmy Carter’s 66 percent disapproval in 1978. President Biden has “never been more optimistic” about the economy, but perhaps he is the only one. His recent fall off his bicycle is a metaphor for his presidency.
Some Americans are calling it quits, “California exodus continues, now to Mexico to escape high prices, rising crime rates.” Imagine finding drug cartel and crime-infested Mexico preferable to California.
What if the Fed rate hike is too little too late? Will there be additional interest rate increases, further increasing the cost of borrowing and producing, worsening the overall economy? As the CPI rises, government benefit programs indexed to the CPI will also pay out more money. Where does the government get this additional money aside from simply printing it, worsening the inflation they are trying to fight?
What happens when consumers stop purchasing non-necessities since they have little money left over after purchasing food and fuel? What does that mean for the rest of the economy, from travel and leisure to nonessential consumer goods?
The axiom of stopping digging when in a hole is not something the Biden administration is capable of understanding. Where does this go? Economist Herbert Stein wisely observed, “If something cannot go on forever, it will stop.” That includes the U.S. economy and assumed prosperity that virtually all Americans have become accustomed to.
Internet entrepreneur Kim Dot Com recently posted a Twitter thread about the world being on the brink of a major economic collapse, not because of Putin or Russia, but because America and much of the first world has been spending money they don’t have. Is that the coming storm? Is it already here?
What are those in charge doing about it? Investigating January 6, promoting drag queens in elementary school classrooms, and trying to neuter the Second Amendment, making it difficult for the American people to defend the rest of the Constitution and Bill of Rights. None of these will help the economy.
Where are Republicans? Are they pushing back and offering a new pathway out of this economic storm? Or they busy cozying up to Democrats and the corporate media, trying to gut the Second Amendment? Where are the warriors when we need them?
Was this the storm Trump was referring to? Whether it was an economic storm or not, buckle up as the American house of cards is wobbly and may collapse in the months ahead.
Brian C. Joondeph, M.D., is a physician and writer. Follow me on Twitter @retinaldoctor. And on Truth Social @BrianJoondeph.
Image: YouTube screen shot
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