社区

BREAKING: Auto-loan DEFAULTS are increasing - warning for the global economy 🚨 The CFO of one of the world’s largest car manufacturers Ford Motor Company has just made a short comment with BIG implications. Why is this important? Auto loans are already the third largest consumer credit market in the United States at over ~$1.4 trillion outstanding, double the amount from 10 years ago. This is particularly bad news for auto manufacturers with high amounts of auto-loans outstanding. Let’s walk this particular example through: Recessionary Consumer Confidence + Record Fuel Prices + 40-year high Inflation —> Auto-loan delinquencies —> Lower Auto-demand —> Lower Manufacturing Output —> Corporate Lay-offs —> Higher Unemployment —> Lower Economic Activity —> Recession This could be said about student loans, credit cards, mortgages, junk-rated companies - the list goes on. The economy is SUPER leveraged and simply cannot handle higher rates. Powell tonight can either (using example above which can be applied across): 1) Increase rates by 75bps increasing the severity of the above in the form of higher loan payments and more delinquencies 2) Raise by less or slow rate hikes and allow run-away inflation to further erode disposable incomes and thus economic activity (70% of GDP) The Fed is stuck: crash the economy or try to tame inflation and crash the economy. Over to you, Jerome Powell.