Why The U.S. Economy Has Not Collapsed Yet
In a Nutshell
The U.S. economy teeters on collapse due to a $3 trillion private credit market imploding with mass withdrawals from funds like Blackstone's $82B credit fund, forcing gates and stock plunges in firms like BlackRock and Apollo; surging oil prices above $100/barrel from Iran war disruptions historically precede recessions; and a $2T annual deficit with $38T debt, where entitlements plus interest consume 100% of revenues amid AI-driven white-collar job losses. Leverage amplifies risks—a mere 5% loan defaults triggered 2008—potentially sparking a deleveraging chain reaction. A speculative fix: revalue U.S. gold reserves from $42/oz to $5,000+ market price for $1.3T balance sheet boost and oil stabilization via gold-backed purchases.
These notes were generated by AI and may contain inaccuracies.
Thanks to the Warren Ron, the United States economy and investment markets are on the verge of deleveraging. If you have a 401k, this is important. Private credit markets involve companies managing retirement money. Private credit is private loans to privately owned companies, privately owned real estate, and privately owned infrastructure. Most people go to banks for loans, but banks are regulated with rules on risk. Over the last 20 years, a shadow banking system emerged: private credit markets. Companies like Blackstone, Apollo, and Blue Owl lend to companies using money from pension funds, insurance companies, and everyday retirement investors with 401ks. They lend at higher interest rates with almost no oversight and little transparency.
Well, sticking with financials, private credit exposed names also with big losses. Black Rockck and Jeffrey seeing the biggest drops. Black Rockck falling after it limited redemptions in a private credit fund due to a surge in outflows.
JP Morgan CEO Jaime Diamond issued a warning on the earnings call Tuesday. He said, quote, "I probably shouldn't say this, but when you see one cockroach, there are probably more."
The private credit market grew from nothing to $3 trillion in about 10 years. Returns looked good during cheap money and low interest rates, so money piled into these funds, including pension systems and retirement portfolios. These aren't bank accounts; money is locked in long-term illiquid contracts. When investors want out, funds can't sell quickly. Blackstone, the world's biggest alternative asset manager, had record withdrawals from its $82 billion credit fund. Redemption requests were so high Blackstone used its own money and employees' personal money to cover the gap. Blue Owl stopped redemptions on one retail fund. BlackRock limited withdrawals. Investors are told they can't have it all at once. Stocks of Blue Owl, KKR, Blackstone, Ares, Apollo, Carlyle are collapsing.
Oil prices exploded due to war in Iran, disrupting global supply chains: oil, gas, fertilizers, metals, petrochemicals. Exploding oil prices have preceded major recessions throughout history. Government runs $2 trillion deficit yearly; national debt at $38 trillion, projected to $58 trillion in 10 years if unchanged. Jobs market slowing: 92,000 jobs lost in February, huge downward revisions on past reports.
The US lost 92,000 jobs in February. Some economists had been predicting a gain of 60,000 jobs. The unemployment rate rose slightly to 4.4%.
Markets might be up or down, but US economy shows cracks.
Hi, my name is Andre Jick. This video shows evidence of wrong direction potentially leading to recession and market correction, not predicting one. The debt-based system runs on leverage: most people borrowed to live. One domino starts chain reaction, like 2008. Less than 5% of mortgage loans went bad: subprime loans were 13% of mortgages, 25% of those went bad, totaling 4.1-5%, triggering global collapse. Not comparing to 2008 subprime; showing how little it takes in leveraged economy. Current worries: oil prices, AI/tech on jobs. Robots not taking all jobs yet; Luke Crowman says 6-8% unemployment enough. Example: house bought for $500,000, $50,000 down, $450,000 borrowed (10:1 leverage). 10% drop wipes 100% equity. Every layer leveraged: homeowners, banks, private credit funds, insurance companies, government ($38 trillion debt). Tower of playing cards; few displaced industries/jobs could trigger chain.
White-collar jobs susceptible to AI: office administration, business and finance, computers and math, education. Real data shows declines in finance/insurance jobs, information sector, professional/business services. Leads to tighter lending, falling asset prices, market volatility, uncertainty.
When leverage unwinds, lower unnecessary exposure. Cover basics like password managers/VPNs, but gap in personal info sold by data brokers (name, address, phone, relatives). DeleteMe helps. Speaker used since April 2024; removed dozens from over 50 brokers automatically. joindeleteme.com/andre20 for 20% off new US plans.
Oil price increases precede almost every major recession. Green line: oil above long-term trend precedes recessions (gray bars). Threshold now $70-75 (chart shows $104). Above $100 worse.
- 1973 oil embargo: prices quadrupled, recession.
- 1979 Iranian revolution: doubled, recession.
- 1990 Gulf War: spiked, recession.
- 2000: doubled, recession.
- 2007: $60 to $147/barrel, worst recession since Great Depression.
War in Iran closed Strait of Hormuz (20% world oil). Strategic Petroleum Reserve (SPR) used up. Oil is input cost for food, manufacturing, shipping, transportation. Rising oil squeezes businesses, they cut costs/people.
Fed trapped: past recessions, Fed cut rates with falling oil allowing QE without inflation. Now oil rising/volatile; printing worsens inflation.
Benjamin Cowan analogy: Fed dual mandate - defend inflation (keep low), defend jobs (low unemployment). Normally cut rates for recession. Now inflation elevated, oil volatile ($100+ then to $80s). Cutting risks inflation return. Can fight one, not both: checkmate/recession.
War in Iran: projected 4-6 weeks, but skepticism.
I'm confident that our troops will be successful, and I think it'll go relatively quickly. It could last, you know, 6 days, 6 weeks. I doubt six months. You can say four weeks, but it could be six, it could be eight, it could be three. We expect to last about four to six weeks. Right from the beginning, we projected four to 5 weeks, but uh we have capability to go far longer than that.
Printing now has worse consequences. Government revenue $5.2 trillion taxes, spends $7 trillion ($2 trillion deficit added to debt). 70% to entitlements (Social Security, Medicare, Medicaid) - can't cut without contracting economy. Interest on debt: 30 cents/dollar, growing to $2.1 trillion by 2036 (CBO). Defense 20%. Total 120% of revenue before roads/schools/parks. Everything else borrowed. Entitlements + interest = 100% federal receipts. Falling revenues (oil/AI displacing white-collar taxpayers) means printing needed for obligations.
Private credit $3 trillion: small businesses, real estate, companies rely on it. Loans due at high rates, credit drying up → layoffs, spending drop, revenues fall.
Possible: negative rates, QE. Interesting theory: revalue gold to recolateralize/buy down debt, enable changes without blowup.
The US might revalue its gold to a much higher price and then use it as an escape valve to stabilize the price of oil.
US holds 8,000 tons gold, valued at $42/ounce officially (since 1973 Nixon era), worth $11 billion on balance sheet. Market $5,000+/ounce. Mark-to-market: $1.3 trillion. Could revalue higher. Not enough for $38 trillion debt, but boost.
Gold can't have a fiscal problem. Gold cannot have a gigantic budget deficit. gold cannot have the a um a war.
Gold competes with bonds; suppressed to fund wars/deficits.
Historical precedents:
- 1934 Great Depression: FDR Executive Order 6102, gold turned in at $20/ounce, repriced to $35 (70% increase), balance sheet boost no borrow/tax.
- 1972: Nixon $35 to $38.
- 1973: Nixon $42.22; frozen 50+ years while market to $5,000+.
Second use: stabilize oil. Petro-dollar: OPEC prices oil in dollars, parks in Treasuries, US guarantees dollar strength/protection. Offer gold at high price instead. E.g., buy oil at $50/barrel paid in gold at $10,000/ounce → more purchasing power than $100/barrel dollars. Resupply SPR, lower oil/inflation, Fed room, no printed money/inflation spike.
1973 post-embargo, Europe planned gold revalue to pay OPEC; US blocked for petro-dollar. Now possible. Could apply to Bitcoin maybe. Interesting theory.
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