What is happening in Los Angeles is a human tragedy. It is also a glaring indictment of poor governance and dismal lack of preparedness despite the absurd claims that this disaster has anything whatsoever to do with "climate change".
Listening to the hysterical attempts by media to somehow spin this as anything other than a complete leadership breakdown of legendary incompetence is disgusting. Will the years of mismanagement ever be accounted for? Including leaving an area prone to fires with enough dry brush to fry the whole place or leaving water reservoir's empty despite record-breaking rains?
No one has even resigned. Incredible.
America's economy has been neglected in a very similar way. There is so much dry tinder right now in our economy that if (when) it goes, it's going to make LA look like a campfire.
Take a look at this chart if you want to see what I mean:
The gap in he chart lines you're seeing is the dry brush waiting for a spark. I strongly doubt the red line is coming down soon so the blue line (charge-off's) needs to rise rather dramatically to bring back equilibrium.
This didn't have to happen.
Just like in LA, there was plenty of time and opportunity to correct the path we're on. We did not need to have ZIRP (zero interest rate policy) for 10 years:
This misguided policy hurt retired Americans and working families most. It helped Wall Street extend & pretend for another decade though!
The problem America has now is that the economy is about to flame out but all the hydrants are empty. There's nowhere to hide from the oncoming heat since the same thing is happening in the entire western monetary system. No amount of new printed money (which is just more debt) will put out these flames.
Already, the rate cuts which were supposed to give us relief aren't working; the 10-year is over 4.7% and mortgages are almost 8% - I wrote about this last year, the Fed doesn't determine where interest rates are, the market does.
I find this chart incredible (I used the ‘edit graph’ function to get this): Commercial Bank Interest Rate on Credit Card Plans, All Accounts minus the Federal Funds Effective Rate (as of November 2024, the latest Fred data.)
LendingTree tells me the average rate at this moment is 24.26%.
Lately I've had a few of you ask me why anyone would borrow money for their business if things are this bad? There's no way to know how these things will play out over time and business owners can't sit around waiting or allow fear of unknown consequences to paralyze them. Both opportunities and challenges happen without warning and rarely on an ideal time-line that dovetails nicely with our own plans. Therefore, it's always a good idea to have powder dry and access to OPM (debt) at optimal terms. The short term capital market has been quite resilient and rates haven't really changes that much in 5 years; how many other things can you say that about??
Here are some links I've been following that can help you get a better understanding of what's happening right now.
"What the housing market faces are mortgage rates that have reverted back to the old normal range of around 7%, the lowest demand for existing homes since 1995 amid rapidly rising active listings, and aggressive competition from homebuilders that have built up the largest inventory for sale of completed single-family houses since 2009, and they’re trying to sell those houses by cutting prices and throwing incentives at them, including mortgage-rate buydowns."
