RV/GCR Financial Roundup for October 11th 2023
On October 11, 2023
The latest financial news report provides a brief analysis of several concerning indicators in the current economic landscape.
Key Economic Facts this week to date:
- Default rate on credit card loans from small lenders: 7.51%
- Bank credit contraction: Witnessed one of the sharpest declines since 1974
- More than 50% of domestic banks tightening lending standards
- Contraction in savings as a percentage of national income
- Excess savings from 2020 depleted
- Credit card debt surpassing $1 trillion
- Auto loan interest rates at highest levels since 2008
- Auto loan serious delinquency rates at 2008 levels
- August PPI inflation revised up from 1.6% to 2.0%
- August Core PPI inflation revised up from 2.2% to 2.5%My Commentary
These indicators shed light on the growing challenges faced by consumers, businesses, and the overall financial system.
When viewed through the lens of the fiat currency debt system, these developments offer further evidence of the logical conclusion of this system.
The report highlights the increasing burden of consumer debt, with default rates on credit card loans reaching levels surpassing previous economic crises.
Coupled with a contraction in bank credit and tightened lending standards, businesses are finding it harder to access the necessary funds for growth and investment.
Additionally, a decline in savings as a percentage of national income and the depletion of excess savings further contribute to the mounting financial pressures faced by individuals and the overall economy.
Furthermore, the report draws attention to the troubling trends in the auto loan market, with interest rates and delinquency rates reaching levels comparable to the 2008 Financial Crisis.
These developments, combined with upward revisions in producer price inflation and the potential challenges faced by the Federal Reserve, paint a concerning picture for the future.
Taken together, these indicators provide further evidence of the inherent flaws and vulnerabilities of the fiat currency debt system.
This system, based on the creation of money as debt and the reliance on credit, has facilitated economic growth but has also led to unsustainable levels of debt and a fragile financial ecosystem.
The report underscores the logical conclusion of this system, as the mounting pressures on consumers, businesses, and the overall economy may ultimately culminate in an economic reset and a revaluation of currencies.
Today’s Financial Summary
1. Consumer Debt Burden
The current scenario indicates that consumers are borrowing beyond their means, as reflected by the sharp spike in default rates on credit card loans.
This level of default rate surpasses previous periods of economic distress, such as the Dot Com bubble, Financial Crisis, and the COVID-19 pandemic.
With credit card interest rates remaining high, consumers will continue to face financial pressure, potentially exacerbating the overall economic situation.
2. Contraction in Bank Credit
The decline in bank credit, which has reached levels comparable to the Financial Crisis, suggests a worrisome trend.
This contraction has historically preceded credit events and economic downturns.
The current rate of decline indicates that a credit event may be imminent, further signaling a potential economic crisis.
3. Restricted Business Lending
More than 50% of domestic banks tightening lending standards at a time when interest rates are already high is a concerning development.
Previous instances of such tightening have consistently led to recessions, making the current situation no exception.
This restricted access to credit for businesses may contribute to an economic downturn.
4. Decline in Savings
The contraction in savings as a percentage of national income, a scenario that has occurred only three times in the past 75 years, is a troubling sign.
Previous contractions coincided with the 2008 Financial Crisis and the 2020 Pandemic, indicating potential economic hardships.
A high-interest rate and high-debt environment pose significant challenges for consumers, pointing towards an impending economic downturn.
5. Depletion of Excess Savings
The depletion of excess savings from 2020, coupled with increasing credit card debt and high-interest rates, puts consumers in a precarious situation.
A personal savings rate as low as 3.9% has not been seen since October 2008, suggesting potential financial distress for individuals.
The combination of these factors may soon lead to consumer-related challenges garnering attention and impacting the broader economy.
6. Auto Loan Troubles
Rising auto loan interest rates, reaching levels not seen since 2008, coupled with a surge in serious delinquency rates, indicate an alarming trend.
The average interest rate on new car loans has nearly doubled in just over a year, resulting in record-high monthly payments for consumers.
As interest rates continue to rise, it is anticipated that auto loan delinquency rates will follow suit, further straining the economy.
7. Inflation Concerns
Recent revisions in August PPI inflation data, with upward revisions in both PPI inflation and Core PPI inflation, are significant indicators.
These revisions hold importance in the coming months, as they highlight potential inflationary pressures.
The Federal Reserve will likely closely monitor these upward data revisions, as they may become a major topic of concern for the central bank.
Overall, the cumulative impact of these factors suggests an increasingly challenging economic environment. The high levels of consumer debt, contraction in bank credit, restricted business lending, decline in savings, depletion of excess savings, auto loan troubles, and inflation concerns all contribute to a scenario that aligns with the approaching RV/GCR narrative. These indicators warrant careful attention as they may serve as precursors to an economic reset and currency revaluation.
Definitions of Terms in this Article (for non-financial readers)
Bank credit refers to the amount of money that banks provide to borrowers, including individuals, businesses, and other financial institutions. It represents the loans and credit extended by banks to fulfill the funding needs of borrowers.
When individuals or businesses require capital to finance their activities, they approach banks for loans. Banks, being financial intermediaries, have the ability to create credit by accepting deposits from customers and then lending out a portion of those deposits to borrowers. This credit creation process is crucial for stimulating economic growth and facilitating the functioning of various sectors.
Bank credit can take various forms, such as personal loans, mortgages, business loans, credit cards, and lines of credit. These loans may have different terms, interest rates, and repayment schedules, depending on the specific needs of the borrowers and the risk assessment conducted by the bank.
The availability and accessibility of bank credit play a vital role in driving economic activity. When banks are willing to extend credit to businesses, it enables them to invest in expansion, purchase equipment, hire employees, and innovate. Similarly, individuals rely on bank credit for financing major purchases like homes and automobiles or to cover unexpected expenses.
The level of bank credit in an economy is influenced by various factors, including monetary policy set by central banks, interest rates, economic conditions, and regulatory requirements. Changes in bank credit can have significant implications for economic growth, as an expansion of credit can stimulate spending and investment, while a contraction can restrict borrowing and dampen economic activity.
Monitoring bank credit trends is important for understanding the health of the financial system and the overall economy. Sudden contractions in bank credit, as seen during periods like the 2008 Financial Crisis, can lead to liquidity shortages, financial instability, and economic downturns. On the other hand, excessive credit expansion can create asset bubbles and financial imbalances, potentially leading to crises. Therefore, the management and regulation of bank credit are crucial for maintaining stability within the financial system.
PPI, or Producer Price Index, is an economic indicator that measures the average change over time in the prices received by producers for their goods and services. It provides insight into the cost pressures faced by producers at various stages of the production process.
Unlike the Consumer Price Index (CPI), which measures changes in prices from the perspective of consumers, the PPI focuses on the prices received by producers. It tracks price movements for a wide range of products, including raw materials, intermediate goods, and finished goods.
The PPI is calculated by collecting price data from producers and measuring the percentage change in prices compared to a base period. It takes into account both domestically produced goods and imported goods. The index is often expressed as a percentage change from the previous period or as an annualized rate of change.
The PPI is a valuable tool for economists, policymakers, and businesses as it provides insights into inflationary pressures within the economy. Rising PPI indicates that producers are facing higher input costs, such as raw materials or labor, which can potentially lead to higher prices for consumers down the line. Conversely, a decline in PPI suggests reduced cost pressures, which may eventually translate into lower consumer prices.
By monitoring PPI trends, policymakers can assess the overall health of the economy, identify potential inflationary or deflationary pressures, and make informed decisions regarding monetary policy. Businesses also rely on PPI data to analyze cost trends, adjust pricing strategies, and assess their competitiveness in the market.
It’s important to note that the PPI serves as an early indicator of inflationary pressures and is often used in conjunction with other economic indicators to form a comprehensive understanding of price movements and economic trends.
Overall, the PPI provides valuable information about the pricing dynamics within the production sector of an economy and helps stakeholders make informed decisions based on the observed trends in producer prices.
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