It looks like subprime auto loans — you know, the loans that have kept automakers on a growth binge for years now — are now defaulting at rates not seen since the worst of the financial crisis.
According to S&P Global Ratings, nearly 5 percent of subprime borrowers are behind more than 60 days on their loans. The rate in January 2010 was slightly above 4 percent.
Apparently after the subprime mortgage meltdown housing lenders were forced to make sure that the borrowers could actually repay their debt (what a concept!). But that same mandate doesn’t apply to auto loans.
Oddly enough, this bit of bad news comes on the heels of supposedly great economic news…news that is so positive that the Federal Reserve is raising interest rates again. In the statement, the Fed said this was the last one for a while and was backing off because it wanted to make sure the workers getting back on their feet had plenty of room to get into this awesome economy.
The thing is, if interest rates are low — and they’re lower now even for subprime than they will be before long — and we already have record low unemployment (if we take the government at its word, of course), what do these default figures tell us?
The tell us that things aren’t as they appear. That this recovery is still in second gear at best and the numbers we’re seeing from the government are as worthless as they have been for many years. (NORM ‘n’ AL Note: Our emphasis.)
And in the face of all this bullish news is the fact that Fannie Mae has maintained its U.S. growth forecast of 2 percent for 2017.
The producer price index was just released for February and it was up significantly, mostly because energy prices rose. But those prices have gone down now and are likely to fall rather than rise in the intermediate term.
So, that puts us in an environment where the poorest consumers are running out of money, the economy is likely to flounder at 2 percent GDP, energy prices are dropping, and interest rates are rising.
So, we’re going to have to figure out how to get through this without getting scalped by the big players and the propaganda from Washington and Wall Street.
Ronald Reagan said it best: Trust but verify.
What we’re seeing now is we’re still being sold on the feelings of a Trump presidency, not the economic consequences of actual policies. It usually takes a new president about 6-12 months to chart his own path and get rid of the lingering effects of the previous administration. (Except the previous administration was so ridiculously inept and corrupt that we may never fully recover from it for another decade or two.)
The budget that was just released will be argued and negotiated through the summer. So will an Obamacare replacement. The federal government’s fiscal year runs from October to October.
That means all this hype and all these headlines are just that. They have nothing to do with making the sausage — we’re simply being promised that this sausage is the best sausage we’ve ever had. Given the 535 clowns/sausage makers on Capitol Hill who represent us, we can seriously doubt that.
Same sausage, new package.
[From an article by G. S. Early published on PERSONAL LIBERTY.com]
As always, posted for your edification and enlightenment by
NORM ‘n’ AL, Minneapolis