The Collapse of the US Consumer

Looking at the SPX one might assume the US economy is thriving, but when the rose-glasses of “all time highs” are removed, the macro image that becomes evident when closely inspecting elements of the real economy, is far less optimistic. With the potential to fall even further (1), US treasury yields fell to all time lows, prompting a tidal-wave of new bond issuance which slid the government even deeper into the debt-pit (2). Budget deficits have hit record highs (3), and one of America’s remaining primary exports, Boeing, is seen eagerly awaiting customers, yet running out of storage space as those customers never come (4).

The lockdowns have wreaked havoc on an already fragile American economy and its effects are felt countrywide (5). With nearly 50% of working-age Americans out of work (6), it follows that rent and mortgage payments would suffer (7), and with the lockdowns being nowhere near over (8), it becomes clear that the hoped-for v-shaped recovery (9), is little more than wishful thinking (10).

Some would call for more government hand-outs (11) and debt-relief (12), which sounds peachy on the surface, but has the potential to exacerbate the problem further (13).

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References

1. 3 Reasons Treasury Rates Can Still Hit 0%: Part III

2. Treasury Announces Record $112BN Quarterly Debt Sale, Unveils Tsunami Of New Bond Issuance

3. Budget Deficit Hits Record As U.S. Spends 100% More Than It Collects YTD

4. Boeing Is Running Out Of Space To Park Its Newly-Built 787 Dreamliners Which Nobody Wants To Buy

5. Nearly A Third Of Americans Had Unpaid Housing Bills In August

6. Close To Half Of All Working Age Adults In The United States Do Not Have A Job Right Now

7. Delinquent FHA Mortgages Soar By Record 60% To All Time High, As Homeowner Budgets Implode

8. “Lockdown 2.0”: This New Wave Of Lockdowns Will Ensure The U.S. Remains In An Economic Depression...

9. Alphabet Soup: Understanding the Shape of a COVID-19 Recession

10. Recovery Has Reversed: What Goldman's Real-Time Indicators Reveal About The State Of The US Economy

11. A Quarter Of All Personal Income In The US Now Comes From The Government

12. Mnuchin Suggests US Should Forgive "Small" PPP Loans Of $150,000 Or Less

13. Tytler Cycle & Why More Government Help Leads To Less - RIA