Is the US economy dysfunctional?

US debt to GDP

US equities continue their steep decline.

We have been warning of as much as a 20% decline from current levels. We do this not because we want it to happen, but it is important for investors to be aware of just how high the stakes are here.

The US is clearly stumbling, and the high Jobs Openings numbers are not reflective of a healthy economy.

They scream dysfunction. In fact, this is perhaps the best way to describe the US economy at the moment. Not that this would be popular among Americans, but there is something really going on here.

The whole notion of a return to a new normal that would more closely represent a Nirvana economic outcome had become pervasive through the Great Covid Rally. Driven as it was by quantitative easing and near zero interest rates. This period brought on great wealth creation. Everything went up. Even crypto. Now though, we are in a more ‘reality bites’ economic period and asset price correction.

People seemed to forget that the US economy was not looking that great before Covid. Getting carried away with the idea that free money from the Federal Reserve would power endless wealth for everyone for years to come.

It was all an artificially generated wealth creation period paid for by taxpayers themselves borrowing from their children. This was never going to end well.

On the day, US stocks again struggled to make any real headway to the upside at all, and ended lower. We have already seen a significant fall and the dominant risk must be viewed as being very much to the downside.

The ‘new risk is 20% choir’ is growing, as more fund managers and traders begin to see through the veil of hype to an economy with high job openings, super inflation, slowing manufacturing and services, flat retail sales, and a Federal Reserve Chairman who is happy if the economy is hurt by his rate hikes. Continuing massive fiscal and trade deficits.

If that is not dysfunctional, I do not know what is.

The USA just partied hard on debt. Did no one expect a hangover?

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