There is a web site called The Economic Collapse. I enjoy reading it. It provides some good data. However, the author can’t think straight. It asks this question at the top of its website, “Are You Prepared For The Coming Economic Collapse And The Next Great Depression?” The idea of “Economic Collapse” definitely sells. First, let me define an economic collapse. This is the situation in Venezuela right now. The author implies that something of this magnitude is going to happen here in the USA. I argue that nothing of the sort will happen in the USA any time soon. The USA still has a robust free market. Yes there is government intervention in the economy. Yes the Federal Reserve creates bubbles. In spite of all of this, each generation gets richer. The website was created in late 2009. It has been calling for an economic collapse for 10 years. You would think after being wrong for 10 years people would ignore it. The creation of this website marked the bottom of the economic cycle. The longest bull market in history followed.
The latest article (surprise, surprise) states that the USA economy is about to fall apart. It has proof of this. It provides 18 really big numbers. I will comment on a few.
#1 Farm loan delinquencies just hit the highest level that we have seen in 9 years.
Food prices are in the gutter. In real terms, they are probably at a generational low. This is more of a symptom of a struggling industry.
#2 We just learned that U.S. exports declined by 4 billion dollars during the month of December.
Trade deficits are meaningless. See below.
#3 J.C. Penney just announced that they will be closing another 24 stores.
This is the free market at work. Online retail stores like Amazon are putting them out of business. I hate going to the store. It takes to much time. 90% of my shopping is done online.
#4 Victoria’s Secret has just announced plans to close 53 stores.
see point #3.
#5 On Thursday, Gap announced that it will be closing 230 stores over the next two years.
See point #3.
#6 Payless ShoeSource has declared bankruptcy and is closing all 2,100 stores.
See point #3.
#7 Tesla is also closing all of their physical sales locations and will now only sell vehicles online.
See point #3.
#9 The Baltic Dry Index has dropped to the lowest level in more than two years.
The Baltic dry index is volatile. Look at it over the past 10 years. It goes up and it goes down. Additionally, the index is subject to change about how it is calculated. The author gives no reason about why he believes this drop is any different than all the other drops over the past 10 years. Nor does he provide any insightful analysis about why it dropped. There is a common tendency in the social science fields, like economics, to have a “measurement”. Fredrick Hayek wrote the following in “The Counter Revolution of Science”.
The blind transfer of the striving for quantitative measurements to a field in which the specific conditions are not present which give it its basic importance in the nature sciences, is the result of an entirely unfounded prejudiced. It is probably responsible for the worst aberrations and absurdities produced by scientism in the social sciences. It not only leads frequently to the selection for study of the most irrelevant aspects of the phenomenon because they happen to be measurable, but also “measurements” and assignment of numerical values which are absolutely meaningless. What a distinguished philosopher recently wrote about psychology is at least equally true of the social sciences, namely, that it is only too easy “to rush off to measure something without considering what it is we are measuring, or what measurement means.”
I am not convinced the Baltic dry index measures anything worth measuring. This fact onto itself probably tells us something about the shipping industry, but nothing about the general economy.
#11 We just witnessed the largest decline in the Philly Fed Business Index in more than 7 years.
This is the same as point #9
#12 In January, sales of existing homes fell 8.9 percent from a year earlier. That was the third month in a row that we have seen a decline of at least 8 percent. This is an absolutely catastrophic trend for the real estate industry.
The housing market is overheated and due for a decline. This has been detailed at this site.
#13 U.S. housing starts were down 11.2 percent in December compared to the previous month.
See point #12.
#14 Compared to a year earlier, home sales in southern California were down 17 percent in January.
California housing market is a bubble. It has been detailed on this site.
#15 In December, home sales in Sacramento County fell a whopping 22.5 percent compared to a year earlier.
See point #14.
#16 Pending home sales in the United States have now fallen on a year over year basis for 13 months in a row.
See point #12.
#17 More than 166 billion dollars in student loan debt is now “seriously delinquent”. That is an all-time record.
A bunch of fools took out a large amount of debt to get useless degrees. So what? Other delinquencies are down trending and are at a decade low. See here.
#18 More than 7 million Americans are behind on their auto loan payments. That is also a new all-time record, and it is far higher than anything that we witnessed during the last recession.
See point #17.
Facts, per se, are useless. All that matters is the philosophy of the person looking at them. I could have easily posted 18 numbers that show a recession is not imminent. This is an example of an author who looks at data with no working philosophy of the business cycle.