Authored by Sven Henrich via NorthmanTrader.com,
The current government shutdown (the longest in history) comes with a hidden revelation: Millions of Americans are financially unprepared for the next economic downturn. Worse, they are highly vulnerable with few protections.
10 years after the financial crisis the economic recovery has left millions behind with little to no savings and the government shutdown serves as a preview for what will happen once unemployment rises.
Within just a few weeks into the government shutdown people are struggling to cope. We hear of stories of people turning to food banks to feed their families during the shutdown. We hear stories of people who are in dire straights because they can’t get loans and of people who can’t pay their mortgages as payments come due. That’s not even a month into the shutdown.
Why do a few weeks of no pay turn into a crisis for many families? Simple: Nearly 80% of Americans live paycheck to paycheck. That’s a problem when you have little to no savings. In fact it’s akin to playing financial Russian roulette.
And the problem is terrifyingly pervasive. According to a recent GoBankingRates surveyonly 21% of Americans have more than $10,000 in savings with nearly 60% having less than $1,000 in savings:
This savings free game of complacency works as long as people have a steady paycheck coming in and as long as rates stay low. But they are not staying low even though the Fed may stay patient again this year as they have proclaimed in recent days.
As a matter of fact the cost of carrying debt, especially the revolving credit card type have exploded higher since the Fed started slowing raising rates. Think I’m exaggerating? How about this: Interest rates on credit cards by commercial banks are now as high as they were in 2000:
How far can families go if one or two income earners lose their jobs? With nearly 60% of Americans having less than $1,000 in savings and the next 15% having less than $5,000 I submit: Not very far.
The current unemployment rate is at decades long lows. That’s the good news and as long as it stays this low the open wound of economic vulnerability of millions of Americans can stay at bay.
But here’s the problem: Every economic cycle ends despite the rosy attestations of those that wish to keep confidence high. There is zero history that suggests that extreme low unemployment can be maintained for an extended period of time:
Indeed it is precisely at the end of an economic cycle that low unemployment rates tend to reverse rather suddenly.
And when they do recessions soon follow and generally tend to produce unemployment rates between 6%-10%. The data shows most Americans will be in dire straights during the next recession.
The current government shutdown exposes this vulnerability. Fortunately for those currently affected by the shutdown they have back pay to look forward to when the shutdown ends. The future unemployed will not have any such certainty and with little to no savings to fall back on they are playing with fire betting on the 2nd longest expansion to continue indefinitely.
America has added record debt over the past 10 years while financing its recovery with low rates, yet all this spending has done little for the wealth of the general population, rather most are left woefully unprepared for when the recovery ends.
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This shutdown has made how little savings everyone has, very apparent. Federal workers can’t afford to miss one paycheck? No savings at all? very sad.
Not sad. Stupid on their part. The number one thing is to live below your means. Depend on no one but yourself to take care of your own butt. I have no sympathy for most. Yes, there are some who are in dire straits because of circumstances beyond their control. But that is way the heck below 80%.
A government worker or the young hip socialist democrat millennials, they all believe that the government will provide for them, so they do very little to nothing for themselves as far as saving or planing.
Look at the rising star, alexandria ocasio-cortez, she is dumb beyond stupid, but she’s striking a cord with millennials who are equally dumb beyond stupid. We’ve heard of her plan to raise taxes on the wealthy to 80% to fund a green new deal and millennials cheered.
They will go ape shit bonkers during this next downturn when she announces a plan to raise taxes on those who make more or has saved more, in the name of fairness. Shit is about to get real.
government shutdown serves as a preview for what will happen once unemployment rises.
Surprising. Nothing will happen when unemployment rises.
This is but a small taste of what is coming. The coming cascade of credit collapse will make this seem like a walk in the park. The FED will undoubtedly flood the market with dollars and credit but with the interest rate less than 3% they don’t have a deep enough bench to turn the tide. Fourth turnings are a bitch.
“With nearly 60% of Americans…”
I dislike when someone says Americans in a way like this. What demographic, exactly, are they talking about? Are they including college students and 2 year olds?
I think the government shutdown is a great thing. The longer it goes on the better.
Just think if a private sector walkout were to go in effect for 2 days. The se.lves would be empty and riots would ensue. If enough of us accepted the reality that we are in a civil war already, a walkout could produce a short realatively bloodless revolution.
For those who can’t figure out , from the governments perspective of what the low hanging fruit is, I will.
It’s going to end Medicare. The social security tax is much higher for the same expenditure and it will be kept. So, the ruling class will end Medicare and drain whatever savings the decrepit old Deplorables have left.
It will be up to children to nurse their parents to save money on health insurance. The consolidation into one household will reduce the property tax burden to that effect.
Unemployment is as low as they want you to believe. It’s a completely rigged false accounting trick to arrive at the current figures. Truth is 1/3rd of the working nation is unemployed. Like so many other economic statistics are, “There are lies, damn lies and there are statistics”.
Why does CNBC, etc., never talk about the ‘labor participation rate’ ?????
Living up to your full income potential is and has always been a financial recipe for disaster . People employed by government agencies have been for the most part insulated from the real economic downturn stagnent wages and skyrocketing health insurance along with the dismantling of the industrial economic engine tax base from the former middle class working taxpayers sitting idle or grossly underemployeed , 100 MILLON people at last count has been papered over by borrowing to the moon ! This borrowing puts a $50,000. A year paycheck in the bank account for many who without landing on that government worker gravey train could not handle the lunch rush at a fast food stop .
As for low unemployment , figures lie and piers figure ! Count underemployment and what illegals syphon of our economic structure , over $116 billon per year at last count and you see a different picture of American working people and a $15 bucks per hour job .
As for a government shut down if agencies of government were staffed paid and benefited like private sector employees earning under $60k per year and having to cover a huge portion of benefits from health to pensions my bet our government would not be in a budget crisis .
But what do I know I have just had a front row seat witnessing this bull shit for 40 plus years . The game is rigged and I care about government employees about as much as they gave a flying Fuck about steel workers , auto workers and so on . Not once did I ever hear a government employee union announce we need to strike till the tax base from the working people that support us is restored and protected . What I did hear is we were overpaid and could not compete . OK if working Americans were overpaid then so is any government employee now , school teacher , police , fire name it your all over paid if you wish to account for a constitutional assurance of equal protection under the law . Where can I go to collect my back pay for hours missed on the job due to lack of funding by the company ??
Some f’ing long sentences there. Very good points.
Run on sorry DB been pretty sick lately and been bouncing in & out of hospital care. Need Bourbon to clear the fog but am restricted for a 3 week period .
BoatGuy(n?) always has some excellent points to make. He just forgets his periods.
BG has periods! Perish the thought! Send some panty liners quick!
“People employed by government agencies have been for the most part insulated from the real economic downturn”. Amen and amen. Exactly how much sympathy did John & Joan Normie receive from Gubbermint Employees, after the engineered 2008 mortgage/bank crisis? Zero! Nada! They lost their homes, their pets, sometimes their kids………..but Michelle-my-Belle could still chow down on her favorite lobster. To keep this missing paycheck in perspective, some Gubbermint Employees also qualify for government subsidies because their check isn’t enough to cover rent and all of their expenses. Yeah, your tax dollars pay their salary, and then you give them WIC, EBT, SNAP, and a myraid of other goodies. This whole SHXX Show needs to be over and done with.
You have to have two wage earners if you want to keep up with the Jones. I do some work for some of the professionals(Dr.s + lawyers) around here and I have been told by them that they refinance their house whenever they can and they lease their cars. Me, my wife just told me I dress like a hobo and that I wear that as a badge of honor. You bet ur a$$ sweetie. I have not worked since Nov. 10. I have 4 teens still at home and Christmas has come and gone. Think about that! My wife stays home to school our kids and I pay for that too! All my properties and vehicles are paid for, my fridge is full, my freezer is full, my pantry is full, my paddock and gun cabinet are full and I have enough cold weather wear to last decades. I do this all on my own without gov handouts because welfare is for losers and the fact that I don’t need help, I am help. So the next time someone sees me in my 79 Subaru and laughs from their never to be paid for set of wheels, yea, I will feel real bad for them. NOT!
I will laugh at you from inside of my 1989 Chevy S-10 pickup truck.
Dumb beyond stupid , I like that ! Anyway the main problem and at the root of all this evil is the Central Banking Scam as well Fractional reserve Scam. Put them together and you have the biggest counterfeiting machine on the face of this earth. Then add the taxes stolen from Americans by that private collection agency called the IRS and you finally end up with Godzillions of poor people who will not / do not know where to get their next meal. I see little hope of anything changing until this government takes back control of the money and then issues it debt free and interest free. Unfortunately that will only happen after economic ruin. Then a strong man like Hitler will have to take over and kill a lot of people to enforce this new banking system. After Hitler took over in 1939 Germany went from failure to an economic / military super power by 1940. Just 7 years Germany was a power that threatened the whole world with its economic development. Think about that.
Oh and they did it without any Gold or Silver or ” Credit ” from other countries. Now you know the real reason Hitler has been so slander by the World media which is controlled by the biggest fucking parasites of all …the Jew. Let all this sink in before you call me racist . All of the information is a Google search away for anyone who is willing to have their eyes opened.
I guess that the Germans plundering other countries thing slipped your mind.
Damn, that’s impressive! Mine’s a ’96
This is a revelation? When the FED steals 90% of the earning power of any generation and they live from one windfall to the next, is it any wonder? All one needs to do is to look at which group of asshats are in control of the FED and it isn’t anyone in gooberment.