The Economy is Rigged: How the Government and the Fed are Lying to You
The latest data on new home sales in the US should be a wake-up call for anyone who still believes that the economy is recovering from the pandemic. While the headlines may tout a 10.7% increase in May, a closer look reveals that this is nothing but a mirage.
Housing: Smoke and Mirrors
First of all, the previous month’s sales were revised down significantly, from 683,000 to 656,000 units. This means that the actual increase in May was much smaller than reported. Secondly, the new home sales data is notoriously volatile and subject to large revisions. The margin of error for the monthly change is plus or minus 14.5%, which means that the true change could be anywhere from -3.8% to 25.2%. Thirdly, the new home sales data only accounts for a small share of the housing market, about 10%. The majority of home sales are existing homes, which have been facing a severe shortage of inventory and soaring prices.
Stimulate the Masses
The truth is that the housing market is not a reflection of the real economy, but rather a symptom of the artificial stimulus that has been pumped into the system by the government and the Federal Reserve. The unprecedented fiscal and monetary support that was unleashed in response to the pandemic has created a massive distortion in asset prices, especially in real estate and stocks. The ultra-low interest rates and the trillions of dollars of bond-buying by the Fed have made borrowing cheap and easy, while also pushing investors to seek higher returns in riskier assets.
Burst of the Bubble
The result is a bubble that is bound to burst sooner or later. The Fed cannot keep printing money forever without causing inflation and devaluing the dollar. The government cannot keep spending money it does not have without raising taxes or hitting the debt ceiling. The debt ceiling, by the way, is another looming crisis that is being ignored by the mainstream media and politicians. The US government has been operating under a temporary suspension of the debt limit since August 2022, but that suspension expires on July 31. If Congress does not raise or suspend the debt limit again by then, the Treasury will run out of cash and face default on its obligations.
You Have Been Fooled
This is not a hypothetical scenario. It has happened before, in 2011 and 2013, when partisan gridlock over spending and taxes pushed the US to the brink of default and triggered credit rating downgrades and market turmoil. This time, however, the stakes are much higher. The US debt has ballooned to over $28 trillion, more than 100% of GDP. The pandemic has exposed the fragility and unsustainability of the US fiscal position. The debt ceiling talks are not a serious attempt to address this problem, but rather a political theater and a psychological operation to distract people from the fact that the US government is bankrupt and needs to stop raising the debt ceiling.
The bottom line is that the economy is rigged. The government and the Fed are lying to you about the recovery and the stability of the system. They are creating an illusion of prosperity and growth that is based on debt and money printing. They are setting us up for a crash that will wipe out millions of jobs, savings, and pensions. Don’t be fooled by their propaganda. Prepare yourself for what’s coming.
