A Wall Street Firm is Warning of an Imminent COLLAPSE

[Music]

well hey everyone me Kevin here in this

video we've got to talk about what Jeff

is concerned about for a dead Le

recession jobs L recession and an

explosion in debt in the United States

causing even the US government to

potentially be well having to print

money in order to pay its debts off uh

this post here is inspired by jeffes

which we broke down some of the aspects

of what we're going to talk about here

on ec.com as I always like to and uh

what I want to start with is right here

on eack I want to start with this chart

so what this chart here is uh is it

shows us the lack of private sector

hiring that we're starting to get in

various different jobs reports including

June September October and this chart

doesn't even yet show December but

December's private sector hiring the

exception of leisure and Hospitality was

also exceptionally low Leisure

Hospitality did did have a rebound

though in December once we show that

number uh however the point is a lot of

the foundation of these job gains uh in

fact just the health care social

assistance and government sector sectors

are a lot larger than what we've

previously seen this is very common of a

late cycle economy that could

potentially be trending towards a

recession so people fear that once this

segment is done acquiring jobs there's

really little left to prop up the

economy uh in terms of hiring and as

we've talked about before jobs are would

keep the economy going I think the most

practical way to think about this is

always look if you're in an expensive

area like LA or San Diego or Manhattan

why is housing so expensive why is rent

so expensive was because there's job

availability people are there who have

the incomes to be able to afford those

payments so that creates more demand

which when you have more demand in like

an island what is it a peninsula

Manhattan that's got to be an island I

don't know whatever it is um you have a

limited supply of housing same is true

in areas like California uh in other

parts of the United States but the point

is once you start getting a

self-fulfilling Vortex of unemployment

going where companies start laying off

and you have a lack of hiring that's all

of a sudden when you very quickly get

Negative year-over-year comps at not

only revenues for companies but also us

output combination

of services and goods produced and sold

remember the consumer makes up about 70

to 72% of the economy depending on the

year we actually take that measurement

but look at another concern so something

that at the end of this post on Jeff

that I didn't like seeing at all was

look at this US federal government

annualized net interest payments as a

percentage of government receipts okay

so we have to understand this a little

bit this is government receipts are

basically the tax revenues that the

government takes in now there isn't a

perfect proxy for this but what we can

do is we could take uh the St Louis fed

chart on federal government net interest

payments as a percentage of GDP and

we'll see a somewhat similar increase

here in a moment but there's something

special about what this chart isn't

showing us but first let's consider the

risks of this the risks of this chart

are that at some point the US government

may just because we're spending so much

money on not only things we've committed

to like Social Security and Medicare but

we have lower tax revenues as people

make less money companies make less

money and eventually with higher

interest rates we keep refinancing lower

interest rate treasury bills and notes

into higher interest rate ones the

amount of money we're spending on

interest goes up to the point where we

have to print money just to be able to

pay our interest Jeffrey says we are not

far away from that point now I want to

know what's the implication of that what

does that mean when our debt payments go

so high well there are a few initial

things that we think of of course we

think about the potential collapse of

the US dollar and the collapse of uh uh

trust in the American currency which

then eventually turns into uh this

potential inflationary disaster where

you turn into like a Venezuela right

where when people don't trust your

currency anymore what happens people

dump your currency and people don't want

to accept your currency anymore they

start using maybe a currency like gold

or maybe something that could be more

functional than gold quite frankly a

cryptocurrency and so maybe a lot of

people speculate that's why you have

Folks at the uh SEC potentially like

Gary gendler saying what do we need a

digital cryptocurrency for we already

have a digital dollar and perhaps that's

also why you see people like Jamie

Diamond over at JP Morgan suggesting hey

if I were the government I would kill

cryptocurrencies interesting there is

quite literally an interest in

preserving the US dollar and the

existing system because it presently

does enable us to print money to pay the

interest on the debt that we printed to

pay for the things that we can't afford

to pay for and the sort of system kind

of keeps cycling so the question is

until it becomes a problem is it a

problem well what I wanted to do as a

proxy for this is look at the uh St

Louis Fred uh Federal Reserve this is

their like Educational Department but

anyway I like this chart this I thought

was very interesting so this is the

federal government's current

expenditures interest payments divided

by GDP now note this is the interest

payments divided by GDP rather than

government uh uh um how should I say

revenues uh however they they tend to

correlate because obviously as GDP goes

up there there is more generally more

tax revenue for the government unless

they're substantially lowering taxes

right so assuming taxes are equal this

should be a roughly equal proxy but what

I wanted to do is look at this chart

compared to the jeffre chart and you'll

see something really interesting in the

jeffre chart they cut their chart off

here in

1994 uh and so I thought hm interesting

that was a previous High why did they

cut off in 1994 to kind of show that we

were about to Barrel past 1994 well I

think the reason is when you actually

extend the chart further back all the

way back to 1947 their argument becomes

less desirable because 1994 sits about

here we actually had two prior Peaks we

had a peak over here in 8485 and 9091

during the uh early 90s recession so we

had these two peaks here now keep in

mind their chart goes up a little higher

to around here and that's because

they're

annualizing uh the latest data on the

right here they're basically taking the

last six months and multiplying it by

two for example and that's going to

exacerbate how high this line looks fine

those are two little adjustments that I

actually think are kind of a big deal

for understanding mostly because now

what I want to do is I want to see well

what did the stock market do during this

environment over here between the 80s

and '90s what happened well take a look

at this here's 82 the end of sort of the

Paul vulker hikes and over here is the

'90s recession and and if you draw a

line between 92 and or sorry 82 let's

say and 92 you can basically see it's

you know volatile but kind of straight

up almost dare I say like a Nike SW oh

not that again by the way side note I'm

really excited that I was able to

actually like Spike my hair again that's

kind of cool a b remember you can see my

research over at ec.com totally for free

including my tank on coinbase I got to

make a video on that one I haven't done

that yet but yeah yeah I did some

numbers over there on coinbase so check

that out so okay so but bottom line on

this this debt crisis I want to be

exceptionally clear the amount of

spending our government does is

unsustainable and there are ways you can

solve it the best case scenario way to

solve it is the economy explodes with

growth and we keep maintaining jobs

that's why in my opinion it is

exceptionally critical that the Federal

Reserve wake up to the fact that we're

starting to weaken the jobs Market a lot

and we've talked about this quite a bit

as well we talked about this yesterday

on the channel it's very important that

we heed the warnings the early warnings

of breaking the jobs Market because if

we don't we overtip now I think the FED

is aware of this and I think trome

Powell's flip in December which is

basically the opposite flip from

December of two years before that is

indicative of him being aware of this

because again if we can keep jobs and

potentially lower low rates to where we

get real jobs growth again like private

sector jobs growth again then the

economy can

actually strengthen when the economy

strengthens then all of a sudden what

happens well our interest payments as a

percentage of GDP go down we start

refinancing at lower rates anyway so

that line goes down anyway and the

outstanding debt burden that we have

becomes smaller anyway so the best case

scenario across all angles is that the

Federal Reserve does everything in its

power to encourage a prosperous economy

and they will do exactly that unless of

course inflation rears its ugly head

which we think is unlikely but that's

obviously the biggest bear argument

that's the Achilles heal to everything

because they would rather put us through

a recession than have inflation and they

would rather not put us through a

recession to save jobs if inflation is

low hopefully that makes sense

so what does this mean bottom line out

of everything well bottom line out of

everything I maintain that as long as

inflation is gone the Federal Reserve is

going straight back to money printing

because ironically going back to money

Printing and actually increasing the

amount of debts will help lower interest

rates strengthen the economy lead to

more jobs growth and yes the debt number

will increase in size over time but the

basically unsustainability of government

debts will just continue to be okay

until it's not and when it's not you

have to solve it through kind of what

like the European countries during the

Eurozone debt crisis had experience in

2013 remember uh austerity fiscal

austerity uh they basically stopped

collecting trash and Athens just as an

extreme example uh they cut service

substantially cut J it's a it's a

miserable time that's a deflationary

recessionary miserable period of time

austerity sucks the road sucks nobody

fixes graffiti and ambulance police

response times plummet road conditions

uh tatter up it actually becomes harder

to operate businesses and a strong

economy uh in in those times so uh again

your choices are spend less it's not

likely okay not likely because Democrats

will spend more and Republicans won't

undo that because undoing that amounts

to a tax increase

so ironically the best thing that we

have is the founding fathers making it

hard to pass legislation in the first

place that's the best thing yet so

cutting spending unlikely it needs to be

done but it's unlikely uh two economy

grows uh or three uh and then you have

more revenues to kind of pay it down

right so spend less make more uh or you

just inflate it away okay so this is the

hardest one for folks to understand but

it's the reason why we have a 2%

inflation

Target if you make I don't know $50,000

a year and you have $11,000 of debt

you have debt to the tune of you know

150th or 2% of your income right let's

say your income 10x to $500,000 a year

well that same $1,000 in debt that you

have is now just a 20 bip you know 1if

of 1% of your actual income so that's

why if you have debt one of the most

glorious things to do is make more money

of course that's easier said than done

but if you have a money printer it's not

that

hard it's crazy and I know what people

hear this is like Kevin this is this is

all crazy

Ponzi yes but just know the rules of the

game and play the game in the meantime

now it's raining instead of snowing all

right I actually kind of prefer the snow

anyway thanks so much for watching we'll

see you in the next one goodbye