Economic Despair Is Rapidly Spreading As The Cost Of Living Rises To Extremely Oppressive Levels
This new economic downturn is starting to bite, and we are starting to see signs of severe pain all over the nation.
In fact, unless you are independently wealthy, you are likely feeling pain too. The cost of living has risen to extreme oppressive levels, and this has happened at a time when close to two-thirds of the country was already living paycheck to paycheck. As a result, many Americans are having their finances stretched to the breaking point, and millions of them are reaching out for help. For example, on Saturday morning the line of people waiting for assistance at one of Boston’s largest food pantries “stretched the length of two football fields”…
The line outside Boston’s American Red Cross Food Pantry on a recent Saturday morning stretched the length of two football fields. The number of people filing into the red-brick industrial-zone warehouse on some days now exceeds the worst periods of the pandemic economic crisis and in April it had the second highest monthly traffic since it opened in 1982, according to David Andre, the director.
In recent months, food stamp benefits have been reduced to pre-pandemic levels, and that has made things even more challenging for those near the bottom of the economic food chain.
But it isn’t just those that are unemployed or that are on government assistance that are hurting. At one food bank in Colorado, “military families, teachers, nurses and even dual-income couples” are now coming for help…
Nathan Springer, a retired army colonel who is president and chief executive officer of the Colorado Springs-based Care and Share Food Bank, said his organization is seeing more requests for groceries from military families, teachers, nurses and even dual-income couples following the cut in assistance. “We’ve seen young full-time employees who are for the first time facing hard decisions: Are we going to buy food or pay our utility bills?” Springer said.
We witnessed this kind of suffering in 2008 and 2009, but at that time food prices were at least relatively stable.
Here in 2023, food prices have already surged to absurd levels, and they continue to go higher at a very alarming pace…
In the first quarter alone, global foodmaker Nestlé SA reported raising prices in North America 12.4% compared to last year. Unilever Plc raised prices 13.4% globally in its food division.
No matter what the Federal Reserve does, I believe that food prices are going to keep rising.
And that is not going to be good for any of us.
In a recent tweet, I think that Mike Cernovich summed up what a lot of Americans are feeling right now…
I’ll give you example. I took my kids to a causal eating place. Ordered meals. Saw the amount due. And was PISSED. I can afford it that’s not the issue. It’s like we are being bled everywhere. If you’re struggling, this sentiment is amplified by helplessness, which leads to rage.
Can you identify with that?
I sure can.
I remember the days when you could go out to eat and feed an entire family for just ten bucks.
Needless to say, those days are long gone.
The days are also gone when the average family could afford to purchase a new vehicle every few years.
At this point, millions upon millions of us keep patching up our old vehicles because new vehicles have become just too expensive…
Juan David Ramirez knows that his 2012 Nissan Juke SL is on its last legs. But buying a new car in the Orlando area these days reminds him of car buying in his home country in Colombia, where only the wealthy can afford new cars. Ramirez, 33, and his wife Angelica Castro-Calle really want a new, small SUV with a little space for camping and paddleboarding gear. But despite good jobs in finance and business contracting, the couple’s monthly loan payment would run around $700 for the $35,000 models they are looking at, before dealer markups. So they plan to patch up the Nissan, which is paid off.
Actually, a lot of people would argue that if he has a vehicle that is from 2012 he is still living the high life, because many Americans are driving around in vehicles that are far older than that.
Of course there were a lot of very unwise people that went out and purchased vehicles that they could not afford over the past couple of years, and now subprime auto loan delinquencies are spiking…
The duo pointed to 60-plus day delinquencies hitting 9% in March for borrowers with credit scores of 550 and below when looking at subprime auto loans packaged into asset-backed securities, or bond deals. That’s up from a rate of about 7% in March 2019 before the COVID crisis. They also studied evaporated savings of the lowest income borrowers since mid-2021 peak levels, and anticipate a greater share of all U.S. consumers will “run out of excess savings,” in the months to come, leaving them vulnerable to missing payments and delinquencies. Perhaps more alarming, the 1-month constant default rate for subprime auto bonds, or asset-backed securities, already was nearing 12% (see chart), on a path toward the 16% peak seen in the wake of the global financial crisis.
Just like in 2008 and 2009, we are going to see a huge wave of mortgage delinquencies, auto loan delinquencies, and credit card delinquencies in the months ahead.
Meanwhile, banks are getting into financial trouble all over the nation and so they are starting to get really tight with their money.
In fact, the Fed’s most recent quarterly Senior Loan Officer Opinion survey shows that a credit crunch for businesses is already here…
Forty-two percent of banks said they somewhat tightened lending standards for large and midsize companies over the past three months, according to the Fed’s Senior Loan Officer Opinion Survey. And 45% said they somewhat toughened lending criteria for small firms.
And lending standards have also been rapidly getting tighter for consumers…
Banks also toughened lending standards for consumer, auto and credit card loans, according to the survey. Credit card balances have reached a record level and delinquency rates have edged higher as low- and middle-income households grapple with high inflation.
As I have been warning my readers, lending standards have only just begun to tighten.
The latest SLOOS report confirms this. According to the report, U.S. banks are “expecting to tighten standards across all loan categories” throughout the rest of this year…
“Banks reported expecting to tighten standards across all loan categories,” the report said. “Banks most frequently cited an expected deterioration in the credit quality of their loan portfolios and in customers’ collateral values, a reduction in risk tolerance, and concerns about bank funding costs, bank liquidity position, and deposit outflows as reasons for expecting to tighten lending standards over the rest of 2023.”
What does this mean?
It means that things are going to get substantially worse than they are right now.
So the lines at the food banks are going to get even longer.
And a lot more people are going to lose their jobs.
And more businesses are going to fail.
If you remember what 2008 and 2009 were like, that will give you some idea.
We’ve got a long, hard road ahead of us, and our leaders seem to have absolutely no idea how to get us out of this mess.