Financial, Economic and Social Mood Update (May 1, 2025)
The estimate for federal government layoffs from January 20 to February 28, 2025 = 331,780, for March 2025 = 280,000, for April 2025 and then US Army active duty reduction in force (RIF) = 90,000 = 701,780 job cuts thus far. The pace of these cuts has slowed markedly during the month of April as they represent 27 percent of the full-time equivalent federal staff as of January 19, 2025. Certain agencies with very intensive “retail customer” contact such as the US Post Office and the Social Security Administration should not be cut at all as they are so critical to so many people.
About 75 percent of the federal budget is classified as “non-discretionary.” Such items include interest on the federal debt, social security, Medicare, Medicaid and other “entitlement” programs such as disability, worker’s compensation, SNAP (“food stamps”), WIC and TANF. The rest of the budget must come under scrutiny for massive reductions given the dire state of the finances of the USA – there is absolutely no room for “increase” in any other area.
The current goal to cut the national defense budget by 40 percent in five (5) years is absolutely necessary and this should be increased to 50, 60, 70, 80 or even 90 percent to be cut. America is broke and the American empire is falling – this is fact above any political party affiliation or preference. All historical empires have risen and fallen and the USA is no exception. At the end of the day, every empire should fall – they harm the interests of weaker and smaller peoples, cultures, ethnicities, races and countries worldwide (New world, Old world, Northern Hemisphere and Southern Hemisphere alike) and have done so for thousands of years of recorded human history. One can say that the American empire commenced with the first “permanent” European settlement in Jamestown, Virginia in 1607 and that this self-described (often religious, more often than not “Christian Manifest Destiny”) continued until all of the Native American nations were obliterated and then the American empire continued to cross the entire Pacific Ocean and to subjugate Latin America and the Caribbean. After the fall of the British Empire following the end of World War Two (upon which “the sun never set”) the American empire picked up the baton and continued to act as the world’s “policeman” until the present day. This must end.
The total cumulative number of Illegal immigrants deported or incarcerated thus far (during the last year of the former Biden-Harris Administration plus the 4 months of the Trump-Vance Administration = 525,000 individuals. Budget cuts coming from the USA have reduced illegal immigration worldwide as so many non-governmental and non-American entities (Churches included in particular the Roman Catholic Church led from the Vatican) were receiving printed American money – this gravy train of printed money must end as well.
There is nothing wrong with immigration and legal immigration worldwide is good, necessary and normal – this should have nothing to do with race, ethnicity, national origin or culture. Illegal immigration and the desire to displace, replace or “cleanse” populations is not good and must forever end. Another point to remember is that the source countries for immigrants are often losing so many of their own people because most countries on earth have had their economies deliberately ruined – this must stop as well. People everywhere need to be able to survive, thrive and prosper in peace wherever they are. This is yet another reason why every single war must forever end.
The US tariff policy has the supposed goal of returning manufacturing employment to the USA and to hopefully “replace” the income tax. The latter goal is simply not feasible. The most optimistic estimates have the tariffs comprising no more than 12 percent of current federal expenditures and in reality the number is in low single digits. The first goal is admirable (not merely for the USA but for all countries which have lost manufacturing jobs over the past decades) but it is far easier said than done. Resurrecting 90,000 factories closed in the USA over the last have century would be horrendously expensive. On top of this, factory workers will have to be both trained and paid. Wages in the countries to which factories have relocated are far lower than in the USA or other high-income countries. Simply put, corporate managers will not do this on such a massive scale due to reasons of basic economics and profitability. At the end of the day every single tariff or import / export duty worldwide should be eliminated forever.
Going back to what I said with respect to basic income “entitlement programs” the lower social classes worldwide do not pay much tax because they do not have the financial resources to do so. Furthermore, eliminating or cutting these benefits would lead to social unrest (riots in the streets) – not a good thing. People in the middle of the social structure (circa 25 percent of the population at most) are already being squeezed with both work and paying taxes.
People in the top tier who basically own the corporations of the world need to contribute more especially via the corporations they own – many of these entities paying little to no tax today. On top of this is the issue of so-called “nonprofit” organizations such as churches, organized religions, hospitals, charities and the like. These organizations need to start paying taxes as well as so many of them have such massive financial resources which until this time have been enjoying a free ride at the expense of everyone else.
So many people worldwide are or remain “indigent” because real asset prices are too high and because their real incomes are too low – they have too little purchasing power (the cost of living is too high). Asset prices are severely inflated and must come back down to earth. The asset market crash from January 2000 to October 2002 saw nominal prices drop by 41 percent. The market recovered to reach a new high but crashed again from October 2007 to March 2009 by an even more severe 63 percent. Prices once again recovered to reach a record nominal high by December 2024.
I believe that the employment market peaked no later than sometime in 2023 – in other words the entire world entered a deflationary depression sometime from 2022 to 2023 although most people were not aware of it. During the historical “Great Depression” the asset market lost 89 percent of its nominal value from October 1929 to July 1932. Nominal asset prices and even consumer prices such as monthly rental income did not recover their October 1929 levels until November 1954 – more than 9 years after end of World War Two.
This sounds bad but if we are to find a silver lining therein it would be that the crash in prices allowed many more people to eventually make their financial and economic ends meet. Only 22 percent of people today are “homeowners” and the majority of these are only so due to quasi-public “affordable housing” programs in more expensive jurisdictions. Interest rates are NOT the problem – high prices are the problem. If asset prices were to drop say 50 percent then hopefully 44 percent of people could afford to become homeowners. If asset prices were to crash by 75 percent then perhaps 88 percent of people will become homeowners. If asset prices collapse by 87.5 percent then more than 90 or 95 percent of people could become more financially independent than they are today. This is basically what transpired during the high growth period from 1945 to 1980.
Remember that debt (a bond) is an asset for someone who owns the bond. When asset prices collapse bond prices will drop. When bond prices drop then interest rates will rise – bond prices and interest rates have a zero sum inverse relationship. Furthermore, Central Banks do not control the direction of interest rates – they merely follow what the bond market does. Due to this reality it makes no sense to remove the Chairman of the Central Bank. And I suppose we can all thank the late Paul Volcker (1927-2019) for what he did from 1979 to 1987. Temporal inflation was nipped in the bud. Bank time deposits reached a peak of 22 percent interest in January 1981 and the brand new retail IRA deposits (then $2,000 per year) paid us from 40 to 50 percent interest from December 31, 1980 to April 15, 1981 (income tax day) – these were promotional “teaser” interest rates run by commercial banks and by former “Savings and Loan Associations” back in the day.
These are the hard realities of the world in which we live. We need to get our “house in order” if the future is ever going to look better than it does today.
