The U.S. economy in early 2025 is showing signs of unprecedented weakness, with government spending creating vulnerabilities that have pushed the Federal Reserve toward slashing interest rates. These rate cuts have inflated asset prices, setting up what many might call a speculative bubble waiting to pop.
The drop in total revolving credit is a strong signal that consumers are either unable or unwilling to take on additional debt, which in places like Plano, TX, is evident in the real estate market. Here, there’s an unexpected surplus of unsold homes as the year begins, with new spring listings yet to enter the market. With mortgage rates above 7% and mortgage applications at their lowest in 30 years, the housing market is on the brink of a storm.
Economic indicators like the January Empire State Manufacturing Index, which just came in at -12.6, starkly contrast with optimistic forecasts of +1, indicating not just a slowdown but a contraction in manufacturing. This, alongside other economic metrics, suggests the country could be facing stagflation – stagnant economic growth with high inflation rates.
The myth of a housing shortage is dispelled by the fact that the U.S. has never had more housing units per capita. This surplus, combined with low interest rates during a demographic downturn, fueled a speculative mania rather than a genuine demand increase.
Food prices are yet another indicator of economic distress. With wholesale prices for beef and eggs on an upward trajectory, consumer prices are poised to follow suit, exacerbating the cost of living. This trend is starkly visible in long-term charts of live cattle prices, which clearly show inflation is not under control, challenging the narrative of economic recovery under the current administration.
The Biden legacy, as some are framing it, seems to be one of making basic sustenance increasingly out of reach for many Americans, as inflation continues to reaccelerate.
Sources:
https://x.com/texasrunnerDFW/status/1879208133320691813
https://x.com/VladTheInflator/status/1879564075119870427
https://x.com/FinanceLancelot/status/1879569835342074313
https://x.com/PeterSchiff/status/1879548533260583307
https://x.com/VladTheInflator/status/1879550978174877915
https://x.com/RealEJAntoni/status/1879564375398510643
https://x.com/TheBubbleBubble/status/1879530114943209549
https://x.com/unusual_whales/status/1879538278745153696
https://x.com/VladTheInflator/status/1879587002946879700
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