ENCOURAGING ANGELS: The Real Reason Why Increased Consumer Spending is a Horrible Thing

By Stan Szymanski

According to a recent Reuters article ‘Rise in U.S. consumer spending beats expectations; wage inflation slows’ Christopher Rupkey, chief economist at FWDBONDS in New York states:

‘…”Americans may say they are worried about inflation, but they are still out shopping, which keeps the economy growing for another quarter,” said Rupkey, “There can be no chance that inflation pressures will subside in the near term from slowing demand.”

I regularly watch Bloomberg and with one of the talking heads yesterday, I saw the same inability to actually take the kind of news that Rupkey shared above to its logical end in order to make sense of things for the average person.

If wage inflation is slowing and consumer spending is increasing then the consumer is literally ‘burning the candle at both ends’ in order to make those same ends meet in their household.

When the candle simultaneously burns on both ends and then meets in the middle there is nothing left and the lights go out. This advancing truth has been evidenced by looking at the U.S. household savings rate.

In ‘Saving it for later? Not anymore. High inflation eats away at Americans’ rainy-day funds’, Jeffery Bartash (Dow Jones via Marketwatch and Morningstar) relays that the U.S. savings rate was three times higher in 2021. The rate is now the lowest it has been in 14 years. 14 years puts us back to the financial crisis of 2008 but if I dared to say that the US is in a financial crisis now I might be called a ‘conspiracy theorist’. I would rather be called a ‘conspiracy realist’ if you please.

In 2008 when the government/Fed bailed out the big banks/brokerages the thing is that the money went to the banks, not the common person. And so we had plenty of inflation since 2008, but until 2020 that inflation was by and large confined to the bond and equity markets as the money that went to the banks (even if they were well capitalized and didn’t need the money) was used to drive the S & P 500 from approx. 666 (not a coincidence, I’m sure) in 2008 to well over 4500 more recently; an increase in the area of 700%. Obviously the Federal Reserve and Wall Street were doing all this for the good of the common person (turn sarcasm off now…).

Only when the government gave the people the money in the form of the ‘Covid stimulus’ in 2020 (printed by the Fed) did the fires of inflation get lit under the assets and households of the regular ‘Joe’ and ‘Josette’.

Now those flames of inflation are consuming the savings of Americans (and the citizens of other money printing nations around the world).

In 2022 many money managers  publicly stated that the U.S. consumer keeps the economy going and has up until now been a headwind to the Fed in any considered slowdown of rate hikes of the Fed Funds rate.

As recent as late July 2022…’The American consumer is still strong despite roaring inflation and will pose a challenge to the Federal Reserve’s mission to tamp down inflation, Bank of America CEO Brian Moynihan told CNBC’s Jim Cramer on Wednesday. (CNBC 7/27/22).

Of course you know by now that the Fed increased the Fed Funds rate last Wednesday by 75 basis points (3/4 of 1%). So the consumer is still spending. Just yesterday I saw that ‘US Consumer Credit Soars (+8.1%) To Pay For Bidenflation (+8.2%) As Personal Savings Craters -59.3% YoY’. This article confirms the above information that personal savings are only a 1/3 of what they were a year ago and dwindling fast.

How do we know that savings are dwindling quickly? Because people are now increasingly using their credit cards to buy groceries. In ‘Heating off, buying food with credit cards and staying in – the impact of rising prices’ we see that in England…’More than a quarter of people have started using their credit cards to buy food and a fifth have borrowed money to adjust to rising prices this year.’…Since U.S. Consumer credit is up 8.1% how much different is it in America? In my estimation, not much.

So in going back to the Reuters story that I began this writing with (Rise in U.S. consumer spending beats expectations; wage inflation slows), we see that consumer spending ‘beat expectations’. It is now self evident that as opposed to the Fed and the Wall Street money managers who portray it as a good thing, we can now see that rising consumer spending is clearly a horrible thing.

Why is rising consumer spending a horrible thing?

It is horrible because the consumer is forced to draw down their life savings down to the skin on their fingernails. It is horrible because the consumer has to borrow from their credit cards just to buy groceries! These are not ‘qualities’ to be bragged about by mutual fund managers. No. These are symptoms of a great financial sickness and malaise that is oozing out of the festering sores of a diseased economy.

Any rise in wages is not keeping up with the increases that the consumer must address to just keep their house and pay their monthly credit card payment, let alone maintain their previous standard of living.

The truth is that the real inflation number is 16.5% according to John Williams at ShadowStats. The truth is that the real unemployment rate is over 24% as per Mr. Williams. He shared this info recently in an interview by Greg Hunter. These are the real reasons that consumer spending is beating expectations. These are the real reasons that U.S. Consumer Credit is soaring and people are increasing the use of credit cards to buy groceries.

The real reasons behind why the consumer is increasing their spending is the cracking foundation of our economy due to the inflationary money printing schemes of central bankers. The expression of how out of control the money printing has been is the need of the Fed to try to reign it in through the dampening effect of an ever increasing Fed Funds rate. An ever increasing Fed Funds rate crushes the liquidity of the consumer while the central bank is free to keep printing almost worthless money to stoke the fire to keep the economy going. The problem is that when the fire (inflation) burns hot enough it will not only heat things up but actually consume everything it touches.

The consumer, their savings, their liquidity and their way of life is in the process of being destroyed in a consuming immolation of Hyper-Keynesian economic idol worship.

The decisions that you make now are the only things that, at this point, might help you. The areas of food, water (and a way to filter it and collect it), shelter (you do have a country cousin, don’t you?), energy and protection is what, if it were me (this is not advice), one might consider concentrating on while you still can.

If you have savings, precious metals have out-survived every fiat currency in history and are real money. This is not financial advice. Consider investigating physical PM’s.

As you continue spending what you have and what you can still borrow (I am not advocating this), please remember the small cadre of men and women with the ink on their hands from running the printing presses overtime who willingly did this to their own people.

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Stan Szymanski (or Encouraging Angels) is not a medical doctor. This is not medical advice. In all matters pertaining to the health and care of a human being consult a medical doctor. This is not legal, financial or personal advice. Consult appropriate professionals in those fields for that type of advice.