During his State of the Union address, Obama asserted that anyone portraying the American economy as bad was “peddling fiction“.

Perhaps he can explain why our stock market was outperforming expectations . . . in terms of how much it dropped?

The Dow Jones Industrial Average dropped almost 400 points Friday, falling below 16,000, as oil prices sank below $30 a barrel.

The index fell to 15,988 at the closing bell, down more than 390, or 2.39%.

“Oil is the root cause of today,” said Dan Farley, regional investment strategist at the Private Client Reserve at U.S. Bank. “People are uncertain, and when they’re uncertain they’re scared.”

Because our economy is tied to the global market, it is worth noting that the Royal Bank of Scotland just issued a dire warning to its investors that can be summed up in two words: “Sell everything”.

RBS urged investors to sell everything amid warnings that oil prices could fall to the lowest level in 17 years which may spark a meltdown as severe as the 2008 financial crisis.

The bank told investors stock markets could fall 20 per cent this year as it urged them to sell with a stark warning, saying: ‘In a crowded hall, exit doors are small. Risks are high.’

. . . .  Analysts warned of a ‘cataclysmic year’ ahead for investors and the global economy, BP said it would have to slash 4,000 posts around the world including 600 in the North Sea.

These developments align with a recent CNBC analysis that we are posed for a recession that will be even worse than the one in 2008:

…[A] recession has occurred in the U.S. about every five years, on average, since the end of WWII; and it has been seven years since the last one — we are overdue.

Most importantly, the average market drop during the peak to trough of the last 6 recessions has been 37 percent. That would take the S&P 500 down to 1,300; if this next recession were to be just of the average variety.

But this one will be worse.

A major contributor for this imminent recession is the fallout from a faltering Chinese economy. The megalomaniac communist government has increased debt 28 times since the year 2000. Taking that total north of 300 percent of GDP in a very short period of time for the primary purpose of building a massive unproductive fixed asset bubble that adds little to GDP.

Given that the recovery from 2008 has been the weakest on record, these developments are troubling.

Real GDP Growth


During his State of the Union address, Obama peddled more disturbing fiction than G.R.R. Martin. The best analysis concerning the American economy might actually be summarized by this famous line from Martin’s Game of Thrones.

[Featured Image – from Fox News Channel video].


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