Teetering On The Brink: US, Global Economies Reeling From Virus, Lockdowns; Bank Earnings Next Week

It didn't have to be this way. Apparently, imploding the US and global economy was part of somebody's plan, though nobody is exactly sure whose.

Expressing discontent and lacking in funds are millions of US consumers, who cut their borrowing by $18 billion in May, according to the Federal Reserve, that bastion of freedom and fairness in all economic activity.

May marked the third consecutive month of reduced borrowing by consumers, coinciding with the outbreak of the coronavirus and the imposition of lockdowns and stay-at-home orders throughout the world and in most US states. After falling 4.5% in March borrowing cratered by 20.1% in April, the largest one-month percentage decline since 1945.

Credit card use fell $24.3 billion in May following April's record $58.2 billion collapse, a result of the purposeful downsizing of the US economy. With stores closed, businesses shut down and many without jobs, borrowing money to pay for mundane items was pretty much out of the question. Spending on vacations, dining out, just about any travel-related expense was off the board for most US consumers. Most people were forced to stay home or very close to it. Those with kids out of school were spending more time reacquainting themselves than luxuriating in the outside world.

On top of the virus-related issues comes the rationalization that many folks were simply shut out of credit card use. Banks closed or limited a massive number of credit card accounts during the corona-crisis, a trend that's more than likely to accelerate as layoffs and furloughs morph into permanent job losses.

The US economy is collapsing, and with it the currency. If credit continues to be slashed, the Fed is going to get mighty upset about it and probably demand that banks open the spigots to allow more lending to people who are broke or nearly bankrupt. Because of the CARES Act, which pumped some trillions of dollars into the US economy, the full effect of the corona-lockdowns and incredible unemployment have yet to be felt, but that's coming. Enhanced unemployment benefits via the act are due to run dry by the end of July. Unless congress agrees to put up another round of checks to Americans and extend enhanced unemployment, there's going to be some monstrous pain in the body politic.

Because of these projections, perhaps the image of who exactly wanted the economy to implode becomes a little clearer. It's one with the face of Nancy Pelosi, the torso of congressman Jerrold Nadler, the attitude of Mitch McConnell, overall a grotesque figure with a multiple of purposes, getting rid of President Trump chief among them.

To think that elected officials wouldn't lie about the virus, their political leanings, the state of the union, their personal fortunes is to be overtly naive. Politicians wake up in the morning lying about everything and go to bed doing the same. None of them can be trusted to do anything they say they will do, especially with elections less than four months hence, as is currently the condition.

With the latest media-driven barrage of corona-fear, politicians are looking to renew or at least revamp business shutdowns and limit the movements of people, effectively shrinking the economy a little bit more in the run-up to election day because it's all about getting elected, or, as is the case of most of the most heinous among them, re-elected.

Politicians have a high degree of control over the people in America, and it's probably worse in other countries. US politicians have been flexing their unconstitutional muscles for months now, but what's coming from them over the next few months could be even more startling, mind-bending, and autocratic.

As it is already, the economy is a basket case, and the miscreants in DC have plans to make the November elections the most confusing and confounding ever, with mail-in balloting in many states already in the works, ramping up the fear of close contact at polling places has taken on new and alarming anti-democratic dimensions.

With America on the brink of wholesale economic collapse, the rhetoric and spasmodic jerking will intensify next week as the nation's biggest banking interests report second quarter revenue and earnings. If there any doubt that the banks will show up with very distressing news in the coming week, one has to look past credit card use and consider the lost revenue from forbearances on everything from car loans to credit cards to home mortgages that the banks have tossed out to consumers in light of the coronavirus circus. Millions of Americans were not paying on loans, cards, mortgages and other bills over the past three months and that's got to show up on the balance sheets of Bank of America, JP Morgan Chase, Citigroup, and Wells Fargo.

The panic caused by bank numbers in the toilet should be magnificent. Under normal circumstances, the revealing of massive loan loss reserves alone would cause a stock market crash, but these are not normal circumstances. The Fed will be there to protect investors, supposedly, averting a downswing similar to what occurred in March.

Or will they? If the narrative is supposed to be frightening to everybody involved, wouldn't a market crash based on actual business lost by banks and a threat to the entire financial system be in order?

First clues have already been revealed with this week's trading. While the NASDAQ is having another banner week (up more than 3% through Thursday) stocks are marginally lower for the week, led by the Dow Jones Transportation Index. If Friday doesn't end positive for stocks, the carnage coming from bank earnings next week might prove to be a bit unsettling.

At the Close, Thursday, July 9, 2020:
Dow: 25,706.09, -361.19 (-1.39%)
NASDAQ: 10,547.75, +55.25 (+0.53%)
S&P 500: 3,152.05, -17.89 (-0.56%)
NYSE: 11,928.63, -157.76 (-1.31%)