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Jun 24, 2022
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America is getting poorer

On June 16, the US Federal Reserve (Fed) issued a zero growth forecast for the second quarter. Since there was a drop in GDP in the first quarter, a real recession was officially recorded in the world’s largest economy.

A recession is a phase of the economic cycle when the economy falls and slows down. A recession is said to be when GDP has been declining for two quarters. During a recession, household incomes fall, prices rise, companies go bankrupt en masse, unemployment rises, social tensions rise, etc.

Against the backdrop of the Fed’s forecast, US stock markets collapsed. If this collapse were instantaneous, then the situation would not be so deplorable. But the “utilization” of the market capitalization of American corporations has been going on since December last year, and during this time it has sank by $13 trillion.

Worst of all is the NASDAQ market, which has lost a third of its value (three thousand high-tech companies). Losses are impressive: Netflix – -70%, Paypal – -60%, Facebook* – -48%, NVIDIA – -44%, Tesla – -43%, Bitcoin – -38%, Amazon – -36%, Apple – -25 %, Google – -24%, Microsoft – -23%. The cryptocurrency market has fallen from three trillion to less than a trillion. Such a rapid fall in stock indices heralds a deepening recession in the economy, which is well understood by millions of Americans who have been accustomed to starting their day reading stock reports since childhood.

Therefore, consumer expectations in the US are steadily falling. US citizens do not believe that their financial situation will get better; on the contrary, they believe in the worst. “Consumer sentiment [в США] down 14% from May, continuing the last year’s downward trend and hitting the lowest level on record, comparable to the bottom reached in the middle of the 1980 recession. All components of the sentiment index have fallen this month, with the sharpest decline in business terms for the year ahead down 24% from May. Consumers’ assessments of their personal financial situation have deteriorated by about 20%,” according to a study from the University of Michigan.

US households are rapidly getting poorer. In the second quarter of 2022, the biggest collapse in household net worth is predicted in American history. Unexpectedly, consumer spending fell by 0.3% in May compared to 2021. Taking into account inflation of 8.3% in May, this gives a drop in real sales by 8.6%. “Due to the recent collapse in stock prices, US households have lost at least $20 trillion of net worth simply because financial assets (as opposed to tangible assets such as real estate) make up the vast majority of US household balance sheets (at least for the top 10%; the bottom 50% have almost no assets, but have a lot of liabilities, i.e. debt),” writes Bloomberg.

Americans, rich and poor, have lost $20 trillion during the Biden presidency. What they feel at the same time and what they expect is hard to say. Hardly anything good. “Part of the reason Biden hasn’t gone berserk over this record collapse in US household net worth is that so far, the richest Americans have borne the brunt, and American billionaire fortunes have fallen by $800 billion since their peak on the back of sharp losses in stocks, cryptocurrencies and other financial assets,” Bloomberg analysts scoff.

But this is just the beginning, and “rising interest rates are starting to rock the housing market, where middle- and working-class families own most of their wealth.” There is nothing to say about inflation. It most disturbs and oppresses America. “Obviously, inflation is unacceptably high,” US Treasury Secretary Janet Yellen said on an ABC television program. “It’s important to recognize that the United States is certainly not the only advanced economy suffering from high inflation,” Yellen said. “We see it in the UK, we see it in France, Germany, Italy, and the reasons for this are global, not local.” I also found how to console the Americans.

The growing global crisis is indeed affecting the entire planet. The world’s largest corporate insurer, Allianz Global Corporate & Specialty (AGCS), has issued a warning about the impending sharp increase in protests, civil unrest and strikes. “Civil unrest is increasingly a greater threat to many companies than terrorism,” the statement said.

In America, this prediction has already begun to come true. Railway unions are promising to stage a nationwide strike. They complained about life for a long time, they were not heard. A strike could paralyze the entire US rail network. Given the current difficulties with logistics, this will further aggravate the shortage of goods and raise inflation. Approximately 28 percent of all goods in the US are delivered by rail.

By the way, against the backdrop of no less, but in some ways greater economic problems in the UK, the British railway workers also announced a general strike. 40 thousand people take part in it. About half of the railway lines will be closed. The United Kingdom has not seen such strikes for the past forty years. The British economy is also falling for the third month.

The global crisis is only getting worse. In Russia, this is not felt. Although, of course, he will not bypass us either. However, we will still observe the world apocalypse somewhat from the outside. We will not gloat – we are not gloating, but remember the proverb: do not dig a hole for another, you yourself will fall into it. This crisis in the West began not because of the Russian NWO in Ukraine, but long before it. And not even because of Russia’s responses to Western sanctions. But it must be admitted that it began at the right time.

Vladimir Prokhvatilov

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