"At the beginning of the credit destruction cycle"

 

That's where Ed Dowd says we are.

Former Wall Street money manager and financial analyst Ed Dowd of PhinanceTechnologies.com warned in September we were at the “Beginning of Panic Rate Cut Cycle.”  Since that prediction, the Fed has cut interest rates three times.  Looks like Dowd called it correctly.

So, when does the panic kick in?  Dowd says, “The panic kicks in when there is some sort of banking wobble or stock market wobble, which is in the process of setting up.  Private credit is the first to show problems.  We had Tricolor Holdings (subprime auto lending bankruptcy) go poof.  We had First Brands (bankruptcy) go poof.  This is all private credit.  We have had other lenders like PrimaLend (bankruptcy) starting to go poof.  Private credit is just like subprime.  It not a very big part of the Jenga credit chain, but it’s enough to start a daisy chain of knock-on effects.  So, this is where we are, at the beginning of the credit destruction cycle.  We are seeing consumer credit card delinquencies nearing all-time highs, auto loan delinquencies and, next up, we will be seeing mortgage delinquencies.  People stop paying their credit cards first, then their auto loans and stop paying on their homes last.  As the layoffs accelerate, and we are already seeing more high-profile layoffs at Amazon, UPS and you name it, once those begin, we will be seeing higher delinquency rates.”

Dowd sees much lower prices for homes.  Dowd says, “There is a distinct problem between homes for sale and homes sold, meaning there are a lot of people wanting to sell their homes and not a lot of people buying them.  The inventory continues to grow. . .. The only way this clears is through price.  The price of homes is going lower.  We had an overbuild in multi-family housing because of the illegal immigrants.  Those deals are going sour and rolling over.  Rents are coming down. . .. It’s all slowly going the wrong way, and it will become a mainstream topic in 2026.”

In past interviews, Dowd points out there was massive fraud in the Biden Administration, especially in unemployment figures.  That, too, will all be revealed.  This is why Dowd pointed out last year that President Trump “Inherited a Turd of an Economy.”

. . .

There is much more in the 45-minute interview.

There's more at the link, and in the full video interview, which I highly recommend making time to watch at the above link, if possible.

(If you'd like to know more about the private credit market, which is at the root of many of the issues discussed above, see David Bahnsen's article "Private Credit Fault Lines" in the November 28 edition of "Thoughts From The Frontline".)

The thing is, it's not just private credit and consumer debt that are the problems, and the reasons why the "credit destruction cycle" is under way.  They're a microcosm of the national debt problem in many countries around the globe, including the USA.  Almost everyone, from individuals to households to corporations to bureaucrats to politicians, has been spending money that we don't have, behaving like drunken sailors with little or no financial discipline or sense of responsibility.  Credit has, to a large extent, replaced income in order to finance buying what we need or want.  John Mauldin points out:

In the early 2000s we were on the way to actually reducing or at least stabilizing this debt growth. The post-Cold War “peace dividend” and higher tax revenue from the 1990s tech boom, along with some small but helpful fiscal reforms, had us on the right path. But in short order we strayed from that path and fell off the cliff.

Let’s also note this is a bipartisan problem. In the period shown here, we had both Republican and Democratic presidents. Both parties controlled the House and Senate at various times. Both parties had “trifecta” periods of full control when they could have forced change. Neither did so.

The reason neither did so, in my view, is they are responding to voters and donors who, even if they say the right words about “fiscal responsibility,” don’t really want fiscal responsibility. They want their share of the action, whether it be defense contracts, welfare benefits, agricultural subsidies, free healthcare, loan guarantees or whatever. There is no significant constituency for actually making the kind of changes that would alter our debt trajectory. Just a few old curmudgeons like me.

Unfortunately, this won’t stop the changes from coming. They will come. They’ll cause a lot of pain we could have avoided. Then eventually, we’ll come out better on the other side. But getting there will be tough.

Again, more at the link.

I'm seeing very troubling echoes of the months before the last financial crisis in 2008.  In particular, I'm looking at how many banks are over-extended in supplying credit to the markets and to private credit entities.  Remember what happened after 2008?  Some countries and banks in Europe were forced to rehypothecate customer deposits in order to remain financially viable - in other words, they confiscated part of the deposits of many customers in order to pay off their bad debts.  They called it a "haircut" or a "capital levy" or any of a number of names, but the end result was the same - a lot of depositors lost a lot of money.  The best-known example is probably Cyprus, about which we wrote at the time, but it was far from alone.

Right now, I'm looking at the private credit sector and wondering how far we are from a repeat performance.  In fact, I'm wondering how much I should pull out of our savings account (which we built up to pay for medical expenses, as discussed at greater length a few months ago) and keep handy in cash, just in case . . . If banks close down for a few days or weeks, or limit withdrawals, or if a "levy" by whatever name is taken out of our deposits, it'll be useful to have enough cash on hand to keep going.

YMMV, of course.  We're told that the age of miracles has not yet passed - but I'm not sure our financial markets are miracle fodder, if you follow me.

Peter

Life and death in a social media age

 

Speaking as one who's had to deliver many sermons at funerals, I couldn't help laughing at Stephan Pastis' modernization (?) of the field.  Click the image to be taken to a larger version of the cartoon at the 'Pearls Before Swine' Web page.

Given the number of people I see with their heads buried in their cellphones, despite everything else going on around them (including their kids running amok!), this rings eerily true . . . I wonder if any pastor has looked down from his pulpit and found most of his congregation doing that?  I've heard of some churches putting the lyrics to hymns on their Web sites, so worshippers can follow on their phones and sing along during the service, but I've always felt that merely encouraged further slavish concentration on electronic devices rather than God.  Does that make me a spiritual Luddite?

Peter

I did not know this

 

I was fascinated to read an account of the development of the term "bulldozer" and the machine known by that name.  The thing is, in our politically-correct society, I found it hard to believe the article's explanation of where, when and how the word originated.  Here's an excerpt.

According to an 1881 obituary in a Louisiana newspaper, the word “bulldozer” was coined by a German immigrant named Louis Albert Wagner, who later committed suicide by taking a hefty dose of opium dissolved in alcohol. Little else is recorded about Wagner, but his term became a viral sensation in late 1800s America, going from street slang to dictionary entry in just one year. It likely originated from a shortening of “bullwhip,” the braided tool used to intimidate and control cattle, combined with “dose,” as in quantity, with a “z” thrown in for good measure. To bulldoze was to unleash a dose of coercive violence.

If, like gods, we aspire to create machines in our own image, then it’s fitting that the original bulldozers were humans. Leading up to the corrupted U.S. election of 1876, as the Southern states were being reconstructed following the Civil War, terrorist gangs of predominantly white Democrats roamed about, threatening or attacking Black men who they thought might vote for the Republican Party. The men were the bulldozers, and the acts they carried out were bulldozing.

. . .

“The good people have been cowed down, brow-beaten, insidiously threatened, forced to silence or worse, the countenancing of outrages, blackmailed and their contributions made the lever for future extortions, their tongues muzzled, their hands tied, their steps dogged, their business jeopardized and themselves living in continual fear of offending the ‘bulldozers,’” read an article in the New Orleans Republican in June. By the following year, the association of “bulldozer” with rampant voter suppression during the election made it a common term across the U.S. for any use of brutal force to intimidate or coerce a person into doing what the aggressor desired.

It’s hard to trace when the word first became a label for machines. For decades, it floated around the language tree, resting a while on branches where some instance of terrific violence needed a novel and evocative label. A handful of arms manufacturers marketed various “bulldozer” and “bulldog” pistols in these years. As the 19th century came to a close, it popped up in a Kentucky newspaper as a term for a towboat used to smash through heavy ice and in an Illinois court case to describe a manufacturing machine that had ripped off a worker’s left arm.

The bulldozer we know today took shape in the first quarter of the 20th century. In 1917, the Russell Grader Manufacturing Company advertised a bulldozer in their catalog: a huge metal blade pulled by mules that could cut into the earth and flatten the land. Other manufacturers like Holt, Caterpillar and R. G. LeTourneau were working on similar devices, technological descendants of scraping tools developed in the American West and associated with Mormon farmers. In time, animals were replaced with tractors (on wheels or continuous tracks) powered first by steam, then gasoline and eventually diesel. The word, which at first referred only to the blade itself, started to mean the entire machine, one that was unrivaled in its ability to rip, shift and level earth.

There's more at the link.  It makes very interesting reading.  A tip o' the hat to Ted Gioia for including it in his list of the best online articles of 2025.

I decided to investigate further.  One of the meanings of the word "bulldozer" given in the Collins English Dictionary is "a person who intimidates or coerces".  Until I read the article above, I'd never heard the word used to mean that - but then, I learned to speak English-English (actually, colonial-English) rather than American-English, so it's not surprising I'd never heard of the historical American roots of the word.

Wikipedia (hardly a trustworthy source, I know) does not list that meaning under its disambiguation entry for "Bulldozer".  However, its sister site Wiktionary does list it:

3.  (historical, chiefly in the plural) A member of a self-identified group of white US Southerners who colluded to influence outcomes of post-Reconstruction elections by intimidating, coercing and bullying black voters and legislators, including burning down houses and churches, flogging and murdering opponents.

4.  (by extension) A bully; an overbearing individual.

Again, more at the link.

So, unlikely though it sounded to me, I guess the article is accurate.  I learned something new today.

Peter

Catching a Russian spy through her... cat???

 

This illustrates how many ways our online history can be used to track us - or, in this case, track a Russian spy.  A tip o' the hat to Larry Lambert for mentioning this video clip on his blog.

I wonder what her Russian bosses had to say about that?  And did they take out their frustrations on the cat?  A longer clip about the investigation is due soon, and I'll be looking for it on the author's YouTube channel.  It should be a fascinating detective story.

Peter

Memes that made me laugh 290

 

Gathered from around the Internet over the past week.  Click any image for a larger view.

Sunday morning music

 

Our Australian correspondent, Andrew, sent me the link to this delightful adaptation of the Bee Gees' disco trendsetter "Stayin' Alive", from the 1977 movie "Saturday Night Fever".  (To hear what the original sounded like, click here.)

Intrigued, I looked up Jonasquin's YouTube channel to see what other songs they'd covered in Renaissance and Baroque idiom.  There are several, like these two.

I don't think a Renaissance audience would approve, but I enjoyed them!  Thanks, Andrew, for a musical treat.

Peter

Putting the dollar into perspective

 

We've published charts several times in the past, detailing how the buying power of the US dollar has declined over the course of the past hundred years or so.  Visual Capitalist has just published the newest such graphic, which I recommend to you - it's worth viewing, and thinking about.

What struck me was this inset showing the buying power of the dollar in terms of candy and other consumables, over the years.  I've snipped it as a screenshot to make it easier to read.

Now that's a graphic illustration of what our money is currently (not) worth!

Peter

Spicing up your (Regency) love life

 

I had to laugh at a review of a new book, "The Regency Guide to Seduction: Love Advice for Modern Heroines", by Lady Bennet-Down (an obvious nom de plume, but also witty).

The review says that the book "reveals how to introduce a soupçon of Regency romance into your search for a happily ever after".  Some highlights:

Here, in extracts from the book, the fictional author Lady Bennet-Down gives her tips on how to tackle the most modern of problems with all the grace of Austen heroines Emma Woodhouse, Elizabeth Bennet and Elinor Dashwood.

First impressions

We’ve been chatting on the apps, and things were going well, but they’ve just sent me a d--k pic. What’s my next move?

The proper response depends on your sensibilities. Has this impromptu artwork left you thoroughly appalled? Perhaps a light quip or a sharp rebuke is in order. For example, “Thank you for that kind reminder to pick up some baby carrots.” Or how about a tactful silence?

Don’t be drawn into judgement too quickly

The time it takes to sip one sherry is not nearly enough to fully know a person or their suitability as a partner.

Dance like no one’s watching

If dancing isn’t your strength, remember: enthusiasm (and a shot of tequila) goes a long way.

There's much more at the link.  Entertaining stuff, particularly if you know your Regency period.

Peter