There is a reason why I am watching the banks so carefully. The banks are the beating heart of our economic system, and so if they get into big trouble we will all feel the pain. That is precisely what happened in 2008, and that is precisely what is happening again right now. In recent months there have been endless banking “glitches”, banks have been shutting down hundreds of branches and laying off thousands of workers, and lenders are getting really tight with their money because they are sitting on hundreds of billions of dollars of unrealized losses. And just in time for Thanksgiving, three of our “too big to fail” banks have had their ratings downgraded by Moody’s Investors Service…
Moody’s Investors Service cut its rating outlook to negative from stable on Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., but the stocks rallied Tuesday on the heels of tame inflation data.
The big news networks really haven’t talked much about this.
Why is that?
To me, this is a really big deal.
When push comes to shove, the “too big to fail” banks will be looking to the federal government to bail them out, but the financial position of the federal government just continues to get weaker and weaker…
Analyst Peter E. Nerby of Moody’s said that the worsening outlook on bank debt was due to “the potentially weaker capacity of the government of the United States of America (Aaa negative) to support the U.S.’s systemically important banks.”
In particular, JPMorgan’s downgrade was partially because the bank runs a “complex” capital markets business that may post “substantial” risks to its creditors.
For now, most Americans still seem to have faith in the stability of the banking system.
And that is good news.
But problem signs continue to erupt all around us.
In fact, Wells Fargo just permanently shut down 13 branches in a single week…
Six banks filed to close almost 40 branches last week leaving millions of Americans without access to vital financial services, with Wells Fargo alone axing 13 locations.
Wells Fargo has been a leader in the closure of branches around the country, having closed 160 in the first half of the year, according to data from S&P Global Market Intelligence.
When financial institutions get into trouble, they start getting really right with their money.
And according to a report that was just released by the Federal Reserve, the rate of credit rejection has risen substantially over the past year…
Reported rejection rates among applicants increased by 2.1 percentage points to 20.1% in 2023 from 18.0% in 2022, well above its 2019 level of 17.6%.
I fully expect that number to go even higher in 2024.
An excruciating credit crunch has begun, and that means that we are heading into a very tough economic environment.
Just look at what is already happening to home sales.
Today, we learned that existing home sales in the United States have fallen to the lowest level since 2010…
Existing home sales tumbled 4.1% last month to a seasonally adjusted annual rate of 3.79 million units, the lowest level since August 2010 when the sales were declining following the expiration of a government tax credit for homebuyers.
That is horrible!
And Zero Hedge has pointed out that on a year over year basis existing home sales are now down a total of 14.6 percent…
With housing affordability at its lowest since at least the early 1980s, (and homebuilder sentiment slumping as mortgage rates rose), it’s no surprise that analysts expected existing home sales in October to tumble 1.5% MoM.
Sales actually fell 4.1% MoM (far worse than expected and down for the 20th time in the last 23 months) with September’s 2.0% MoM decline revised even lower to -2.2% MoM. That decline left existing home sales down 14.6% YoY…
This feels so much like 2008.
And just like the Great Recession, consumers are starting to pull back on their spending on a widespread basis…
Shoppers will be splurging less this holiday than in past years, major retailers say.
Best Buy, Lowe’s and Kohl’s all reported sales declines during their most recent quarter Tuesday and are forecasting holiday sales to drop from a year ago.
“Consumer demand has been even more uneven and difficult to predict,” Best Buy CEO Corie Barry said in a statement, noting that the company “prepared for a customer who is very deal-focused.”
Earlier this week, I wrote an entire article about the severe troubles that U.S. consumers are experiencing right now.
The cost of living has been rising much faster than paychecks have, and as a result U.S. consumers just don’t have a lot of discretionary income to spend.
The mainstream media continues to insist that the U.S. economy is doing just fine, but survey after survey has shown that most Americans are extremely displeased with how things are going economically.
The bottom 80 percent of income earners has gotten poorer over the past several years, and now our economic problems are accelerating.
But as bad as things are now, the truth is that they will get even worse in 2024 and beyond.
The shaking of our banks will intensify during the months to come, and that is going to put an incredible amount of stress on the entire system.
Unfortunately, our system is simply not able to handle much stress at all at this point…
Michael’s new book entitled “Chaos” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.
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