We are now 1 year into the economic crisis: The Phoenix Great Depression

Here's a Bloomberg news report from September 17, 2019 talking about some banking thing called the Repo Market.  I'm a geek on this stuff, and I didn't know what the Repo Market really was.  Here's a short video explaining the Repo Market.  But this seizing up of the little known (to average people) Repo Market was the real start of the depression (yes, it's technically a depression now) we're in.  Most people paid little attention.  But the Federal Reserve (of New York) had to rush in and create $50 billion+ in one day, to keep the banking system from crashing.  Then it had to create more money shortly after, and it became an ongoing bailout, day after day, week after week, flying under most people's radar.  Then, the virus hit our shores, which became the bad news the stock market couldn't ignore, and then came February/March stock market crash, followed by the business shutdown, which is when everyone realized there were serious issues in the U.S. (and world, economy). 

  "The Phoenix Great Depression" is the name I gave to this economic crisis, which I've been blogging about for three years.  I have been watching some ultra-long term trends and cycles play out, and could tell in late 2017-2018, that "the next recession" was really going to be a serious one, and possibly a long, full blown, depression or great depression.  I coined the term, "The Phoenix Great Recession" in my old, personal blog, (Steve Emig: The White Bear)  in October 2019.  Nobody was ready to hear the word "depression" yet.  Most people still aren't. 

Basically, The Repo Market functions kind of like a pawn shop for banks.  A bank needs a few million bucks to make its quotas for the night's books.  So it sells something of value to another bank, usually U.S. treasury bills/bonds/notes.  The borrowing bank gets the money to cover its short term needs, and it buys back the T-bills (or whatever) the next day, or maybe two days later, and pays the lending bank interest.  "Repo" stands for re-purchase, not repossession.

What happened last September is that some banks (probably part of the "shadow banking system"), looked so sketchy, that nobody wanted to lend to them, so they charged much higher interest than normal.  That seized up this overnight market, and freaked out Big Banking insiders, and The Fed came to the rescue.  The Repo Market played a big role in keeping Lehman Brothers alive back in 2008, before if finally became insolvent and closed up, the turning point in the 2007-2009 Great Recession.  So this time around, The Fed started bailing the system out, and it's been bailing the system out ever since.  The money they've created out of nowhere, and "injected" into the banking system is the money that's driven the rise in stocks and real estate since last year.  The markets aren't rising because of solid, fundamental reasons, there's just a ton of money for banks to gamble with right now.  The Fed can't keep doing what they're doing forever, without completely devaluing the dollar until it  loses all value.  Right now the whole system is being propped up, and nobody knows a good way out of this mess.  So that's where we are a year into this economic crisis. 

It's Labor Day weekend 2020: So what IS the REAL unemployment rate?

While the stock markets began to correct a bit, from their insane highs last Friday, "good news" came out.  The U.S. unemployment rate dropped to 8.4%.  So what does that mean?  Most people think that means 91.6% of American adults have a job, right?  Actually, no, that's not even close to true.  

The 8.4% number is considered the "official" unemployment rate by Washington and the major media, it's the red line is this chart above.  The reason is because it's the lowest rate, and it looks the best in TV and web reports.  That 8.4% number is the U-3 number, for August 2020, from the U.S. Bureau of Labor Statistics (BLS).  The problem with the U-3 unemployment number is that is doesn't include a lot of people who are not working, in fact doesn't include most of the people who are not working.  In any "normal" time, unemployment at 8.4% would be catastrophic, economists want to see real unemployment at about 3% to 4%.  So this U-3 more than number is double that.  That's bad, horrible, in fact, in "normal times."  But in a year when close to 50 million lost their jobs in a few months, most of them"temporarily" lost, 8.4% is LESS BAD, than the 15% a couple of months ago.  The problem is, the U-3 number doesn't count about 3/4 of the U.S. adults who are actually not working.

There's another unemployment number, the U-6 number, and it's just as official as the U-3 number, and it's also put out by the BLS, that's the U-6 unemployment rate.   The U-6 number dropped to 14.24% for August 2020, and that's the gray line above.  What's the difference?  The U-3 number basically counts people with traditional jobs who applied for unemployment insurance, that's all.  The U-6 number takes that, and adds in people who are forced to work part time, because they can't find full time work, and people who have been discouraged from looking for work in immediate future, they don't think they can find any job soon.  So this U-6 number, makes more sense, it's every bit as official as the U-3 number, and it tells us that over 14% of working people in the U.S. aren't working right now.  

So what's that scary blue line above, that figures U.S. unemployment at 27 to 28%?  That's the number by this website, shadowstats.com, and it takes the U-6 number, and adds in the "long term discouraged" workers, those are American adults of working age, who simply have completely given up looking for work altogether.  They either don't think they can ever find a job again, or they have some way to survive without working.  

The total American "workforce," is just under164 million people, out of the total 328 million (+/-) Americans.  The shadow stats number is the closest to actually showing us how many of the people in the "workforce" are not working right now.  So if we figure 27% of the "workforce" isn't working right now, that's 44.5 million American adults NOT working, out of 164 million.  If you go through all the actual Bureau of Labor Statistics numbers, you'll find that well over 44.5 million American adults are NOT working right now.  Here, dig through the numbers yourself.  Here's the official stats for August 2020.  If you look at the "participation rate" on this chart for August 2020,it says 61.7%.  That means 38.3% of the "American workforce" isn't working right now.  Some of those are housewives who take care of the kids, or dads doing that job, and some others who don't work a job or business.  So the shadowstats number, roughly 27%, is the closest to  a "people who should be able to find work, but can't" number, which is what the unemployment number is supposed to be.

This number doesn't include gig workers, and microbusinesses (1 person business), and small businesses that have lost a lot of their income, but are technically working.  So even the 27% number doesn't really give us a good look at how bad of a hit the economic crash (which started with the Repo market in Sept. 2019) AND the Covid-19 shutdown, have hit real world working (and potentially working) Americans.  

There's a large group, 7 million + men, and a growing number of women, American adults, who don't even try to find work.  This group seems to be living largely on YOUR tax dollars, permanently, getting government checks, from Social Security Disability and other sources.  The only person who has looked into this growing group is Nicolas Eberstadt, in his book, Men Without Work.  This is a big part of the long term unemployed, and pretty much no one is studying this major American issue right now.  And we really need to.  Here's a short news clip on his work (February 2017), and here's a full speech by Nicolas Eberstadt, explaining this issue in detail, from 2017.

106 MILLION loan payments skipped recently

In this Forbes column, we hear that 106 million different loans have not been paid on time, in the last two months.  Not $106 million dollars, but different loans.  The information comes from Trans Union, one of the big credit rating agencies. 

For the last 12 years, spurred by The Fed's artificially low interest rates, most of the U.S. (and much of the world's) economy has been fueled by debt.  In everyday terms, American businesses, the U.S. government, and most consumers, have been living on their "credit cards" for more than a decade.  Now they (we) can't make their payments in many, many cases.  A huge chunk of those loans are not being paid back, due to the shaky financial system and the Covid-19 sparked downturn and business shutdown.  So what happens to a world propped up by debt when the debt stops getting paid back?  A collapse of some sort is inevitable, unfortunately.  Tick.  Tick. Tick...