Financial, Economic and Social Mood Update (June 1, 2025)
The tariffs on retail consumer goods from Mainland China for sale on Amazon have added 17.46 percent to the total purchase price compared to the end of March 2025 before any tariffs were in place. The tariffs were a sky-high 70 percent for a few weeks in April and May before the “agreement” with China. It looks like goods from Europe (the European Union) may now be subject to very high 50 percent tariffs – they have been postponed only until early July 2025 pending talks and negotiations.
The bond markets tell us that interest rates will rise largely because the US federal budget deficit continues to rise into the stratosphere as it has done for the past quarter century. Even the “balanced budget” of 25 years ago was not really balanced – it merely “removed” the major entitlement programs such as Social Security and Medicare from the official calculation which is not an honest representation of the truth. The last true “balanced budget” would take us back more than 50 years in time. In any case, we are in one hell of mess.
The geopolitical shenanigans of the American empire over the past years, decades and even centuries have finally motivated most of the rest of the world to move away from using the US Dollar as the primary means of monetary trade and from using the currency as the primary reserve currency just as the British Pound Sterling lost its status toward the end of World War Two with Bretton Woods in July 1944. The rest of the world led by the BRICS, the SCO (Shanghai Cooperation Organisation) and the Chinese BRI (Belt Road Initiative) are already well underway in abandoning the American Dollar. They represent about 86 percent of humanity. The European Union (EU) is of course a much smaller global player but they will likely follow suit. The parts of the world “solidly committed” to the US Dollar comprise no more than 5 percent of the entire global population.
Back to the real property market – rental income is finally falling in a noticeable way but these prices are still far too high. Real estate prices are indeed coming down in very major markets in the USA such as Florida, Texas and beyond (largely in the overly inflated Sunbelt) as was as in Asian countries which have been fueling the sky high prices in US states such as Hawaii and California.
Nicholas Gerli of Reventure Consulting on his YouTube channel does an absolutely excellent job of analyzing the US housing market and of the economy in general. He points out that there is now a bona-fide demographic decline in 15 out of 50 US states (more deaths than births). Globally we have finally reached zero or negative human population growth. The latest statistics I have seen imply that fertility rates are now below that necessary for basic replacement in every single country on earth. Regardless, human demographics are in a “natural” collapse for the first time in recorded history – more deaths than births not primarily due to something like plague or war. The economic ramifications of this fact are and will be nothing less than massive. This demographic collapse will come upon the emerging deflationary depression and should make it even more pronounced that it was in 1929. As mentioned last month asset prices crashed by 89 percent from 1929 to 1932 and nominal asset and service price values did not recover until 1954 – a span of 25 years or one-quarter century. This time around it should be even more severe. I expect prices to collapse at least until the year 2030 and the overall loss should reach a cumulative 98 to 99 percent of the bubble highs before the world starts to rebuild something much better from the ground up.
Collapsing human demographics mean that the demand for everything (with no exceptions – both goods and services) will fall to the ground. Nicholas Gerli recently pointed to the sales of brand new RVs (recreational vehicles) and SUVs (sport utility vehicles and off-road vehicles) collapsing from 50 to 60 percent – and we are still in the beginning stages of the collapse. Ditto with far fewer children in states such as Florida where deaths exceed births. This translates to far fewer children in the school systems of cities and counties, which means that far fewer teachers and other employees are needed compared to before – this translates into falling employment.
Collapsing demand for goods and services means that many governments will go bankrupt due to collapsing tax revenue (already happening in Mainland China on the local government level). It also means that many businesses will not survive. Businesses which do succeed will likely have to seek growth not out of overall economic growth (because there will be none) but out of the “hide” of their direct competitors who are not as lean and mean and tough as they are.
Here is more unpleasant news but necessary for all of us to hear and face: I have no doubt that all homeowners reading this blog have already seen their insurance rates skyrocket – say triple what we were paying before the Covid-19 pandemic in 2020. Things are now so bad that many large and well-known insurance companies are literally pulling out of major property markets – in other words, homeowners will even find it challenging to get insurance in the first place. And it they do get it, it will extremely expensive (and NOT cover the entire market value of the property). Toxic insurance markets losing insurance providers include Florida (AAA, Farmers, Bankers, Lexington), Texas (Farmers, Nationwide, Liberty Mutual, Progressive), California (Nationwide, Kemper, Merastar, Unitrin, Allstate, State Farm), Colorado, Connecticut (Allstate, Aetna, UPC, Narragansett Bay, Kemper and National Grange), New Mexico (Kemper), all coastal areas in the Pacific, Atlantic and Gulf of Mexico (Cincinnati Financial), Arkansas (Allstate), Louisiana, Minnesota, Oklahoma (Allstate), South Carolina (Allstate), South Dakota, Washington, Arizona (Allstate), Idaho (Allstate), Kansas (Allstate), Maine (Allstate), Michigan (Allstate), Montana (Allstate), North Carolina (Allstate), Oregon (Allstate), and Rhode Island (Allstate). High-end properties in the multi-million Dollar range of cost basis are now covered for a mere 50 percent of their replacement value and annual premiums in general (for all types of real property regardless of cost basis) are now averaging 0.33 percent of fair market value. Prices in “toxic” markets such as the “poster child” insurance markets in Florida and Texas are much, much higher.