U.S. Economy's Bubble Of False Prosperity May Be About To Burst

14 Reasons Why The U.S. Economy's Bubble Of False Prosperity May Be
About To Burst
A major event just happened

by Michael Snyder | Economic Collapse | August 14, 2014
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Did you know that a major event just happened in the financial markets
that we have not seen since the financial crisis of 2008?  If you rely
on the mainstream media for your news, you probably didn't even hear
about it.  Just prior to the last stock market crash, a massive amount
of money was pulled out of junk bonds.  Now it is happening again.  In
fact, as you will read about below, the market for high yield bonds
just experienced "a 6-sigma event".  But this is not the only
indication that the U.S. economy could be on the verge of very hard
times.  Retail sales are extremely disappointing, mortgage
applications are at a 14 year low and growing geopolitical storms
around the world have investors spooked.  For a long time now, we have
been enjoying a period of relative economic stability even though our
underlying economic fundamentals continue to get even worse.
Unfortunately, there are now a bunch of signs that this period of
relative stability is about to end.  The following are 14 reasons why
the U.S. economy's bubble of false prosperity may be about to burst...

#1 The U.S. junk bond market just experienced "a 6-sigma event"
earlier this month.  In other words, it is an event that is only
supposed to have a chance of 1 in 500 million of happening.  Billions
of dollars are being pulled out of junk bonds right now, and that has
some analysts wondering if a financial crash is right around the
corner.

#2 The last time that we saw a junk bond rout of this magnitude was
back during the financial crash of 2008.  In fact, as the Telegraph
recently explained, bonds usually crash before stocks do...

   The credit market usually leads the equity market during turning
points, as happened when credit markets cracked first in 2008.

Will the same thing happen this time around?

#3 Retail sales have missed expectations for three months in a row and
we just had the worst reading since January.

#4 Things have gotten so bad that even Wal-Mart is really struggling.
Same-store sales at Wal-Mart have declined for five quarters in a row
and the outlook for the future is not particularly promising.

#5 The four week moving average for mortgage applications just hit a
14 year low.  It is now even lower than it was during the worst
moments of the financial crisis of 2008.

#6 The tech industry is supposed to be booming, but mass layoffs in
the tech industry are actually 68 percent ahead of last year's pace.

#7 According to the Federal Reserve, 40 percent of all households in
the United States are currently showing signs of financial stress.

#8 The U.S. homeownership rate has fallen to the lowest level since 1995.

#9 According to one survey, 76 percent of Americans do not have enough
money saved to cover six months of expenses.

#10 Rumblings of a stock market correction have become so loud that
even the mainstream media is reporting on it.  For example, just check
out this CNN headline from earlier this month: "Is a correction near?
Wall Street on edge".

#11 The civil war in Iraq is spiraling out of control, and Barack
Obama has just announced that he is going to send 130 troops to the
country in a "humanitarian" capacity.  Iraq is the 7th largest oil
producing nation on the entire planet, and if the flow of oil is
disrupted that could have serious consequences.

#12 As a result of the conflict in Ukraine, the United States, Canada
and the European Union have slapped sanctions on Russia.  In return,
Russia has slapped sanctions on them.  Will this slowdown in global
trade significantly harm the U.S. economy?

#13 The three day cease-fire between Hamas and Israel is about to end,
and Hamas officials are saying that they are preparing for a "long
battle".  If a resolution is not found soon, we could potentially see
a full-blown regional war erupt in the Middle East.

#14 The number of Ebola deaths continues to grow at an exponential
rate, and if the virus starts spreading inside the United States it
has the potential to pretty much shut down our entire economy.

Meanwhile, things look even more dire in much of the rest of the globe.

For example, the economic slowdown has gotten so bad in some nations
over in Europe that they are actually experiencing deflation...

   Portugal has crashed into deep deflation and Italy's inflation
rate has fallen to zero as the eurozone flirts with recession,
automatically pushing these countries further towards a debt compound
spiral.

   The slide comes amid signs of a deepening slowdown in the eurozone
core, with even Germany flirting with possible recession. Germany's
ZEW index of investor confidence plunged from 27.1 to 8.6 in July, the
sharpest fall since June 2012, during the European sovereign debt
crisis. "The European Central Bank has to act now," said Andrew
Roberts, credit chief at RBS.

And in Japan, GDP just contracted at a 6.8 percent annual rate during
the second quarter...

   Japan's economy suffered its worst contraction since 2011 in the
second quarter as consumer spending on big items slumped in the wake
of a sales tax rise.

   Gross domestic product shrunk by an annualized 6.8% in the three
months ended June, Japan's Cabinet Office said Wednesday. The result
was actually better than the 7% contraction expected by economists.

   On a quarterly basis, Japan's GDP dropped by 1.7% as business and
housing investment declined. Japan's economy last suffered a hit of
this magnitude after the 2011 tsunami and nuclear disaster.

There is no way that this bubble of false prosperity was going to last
forever.  It was never real to begin with.  It was just based on a
pyramid of debt and false promises.  In fact, the condition of the
global financial system is now far worse than it was just prior to the
financial crisis of 2008.

Sadly, most people do not understand these things.  Most people just
assume that our leaders have fixed whatever caused the problems last
time.  And when the next crisis arrives, they will be totally
blindsided by it.