Why The U.S. Economy Has Not Collapsed Yet

So, thanks to the Warren Ron, it looks like the United States economy and the investment markets are on the verge of deleveraging. If you have a 401k, this might be really important. There's something happening right now which involves the companies that are maybe managing your retirement money.

It's called private credit markets. >> What private credit is just in its [music] simplest form is private loans to privately owned companies, privately owned real estate, [music] and privately owned infrastructure. You see, when most people need a loan, they go to the bank.

Well, banks are regulated. There's rules about how much risk they can take. But over the last 20 years or so, there sort of been what economists [music] call a shadow version of the banking system.

They're called private credit markets. Companies like Blackstone, Apollo, and Blue Owl that started lending money to companies. Hold on.

Where do they get the money from? They got it from pension funds, insurance companies, and everyday retirement investors with 401ks. And with that money, they then lent it out at higher interest rates with almost no oversight and very little transparency.

>> Well, sticking with financials, private credit exposed names also with big losses. Black Rockck and Jeffrey seeing the biggest drops. Black Rockck falling after it limited redemptions in a private credit fund due to a surge in outflows.

So, how concerned should investors be about the credit market? Now, this private credit market has grown from basically nothing to 3 trillion in about 10 years. And because the returns looked really good during the era of cheap money and low interest rates, a lot of money piled into these funds, including the kinds of funds that could sit inside pension systems and parts of retirement portfolios.

>> JP Morgan CEO Jaime Diamond issued a warning on the earnings call Tuesday. He said, quote, "I probably shouldn't say this, but when you see one cockroach, there are probably more. " >> Now, there's a big problem because these aren't like bank accounts where you can withdraw the money whenever you want.

These loans are locked up in long-term illquid contracts. So, for example, when investors get nervous and want their money out like they're trying to do right now, the funds can't just sell everything just to pay someone really fast. For example, Blackstone, the world's biggest alternative asset manager, just had a record amount of withdrawals from its $82 billion credit fund.

Redemption requests were so high that Blackstone had to use its own money and its own employees personal money just to cover the gap. There's a company called Blue Owl, which completely stopped redemptions on one of its retail funds. Black Rockck was starting to limit withdrawals as well.

basically means investors are asking for their money back and they're told sorry you can't have it all at once. And here's what's happened to the stocks of some of these companies. Blue Owl, KKR, Blackstone, Aries, Apollo, Carile, these are some of the biggest financial institutions on Earth and their stock prices are kind of collapsing now.

All of this is sort of just one crack in the system. There's also the price of oil which thanks to the war in Iran has been exploding. Um, for one, you've disrupted global supply chains.

This is not just a disruption oil. It's gas, it's fertilizers, it's metals, it's petrochemicals, the list goes on and on. And throughout history, exploding oil prices have almost always come before a major recession.

There's also the $38 trillion spending problem. The government's running a $2 trillion deficit every single year, and they're projecting that if nothing changes, and nothing is changing, the national debt will get to 58 trillion within the next 10 years. The jobs market is also starting to significantly slow down with 92,000 jobs lost in February, and there's been huge downward revisions on past reports.

>> The US lost 92,000 jobs in February. Some economists had been predicting a gain of 60,000 jobs. The unemployment rate rose slightly to 4.

4%. >> So maybe everything is fine. Markets might be up today, maybe they're down.

Nobody knows what's going to happen. But so far, the US economy is starting to show cracks in a lot of places. And today, I want to show you some of those places and explain what it could mean for your investments.

And I'll share with you a really interesting theory about what the US government might do to fix all of it. So, with that said, let's get into it. Hi, my name is Andre Jick.

Hope you're doing well. Come for the finance and stay for the economy. Now, I just want to say that this video is not trying to predict a recession or a market crash.

Instead, I want to show you some really interesting pieces of evidence that seems like we're going in the wrong direction, which eventually could lead us into a recession and maybe a market correction. So, let me start with the first piece of evidence, which is sort of like the foundation for understanding everything in this video. The reason why the system is so sensitive is because the whole debt based system that we live in runs on this idea of leverage.

Leverage just means most people have borrowed money to live the life they live. And the reason this is really important is because it only takes one domino to start a chain reaction. And the best example of this was 2008.

I remember living through it and it felt like everyone was losing their house and a lot of people did. But what really blew my mind is I learned that out of all the mortgage loans in the United States, it was less than 5% that actually went bad. Wait, what?

Like it felt like the whole country was defaulting, but it wasn't. It was just a small piece of a niche corner of the housing market, mostly subprime loans, which were themselves only about 13% of all mortgages, of which only about 25% went bad. [snorts] So in total, just 4 1.

5% triggered the collapse. That was enough to collapse the whole global financial system. That's the domino effect.

Now, I'm not comparing today to 2008 subprime loans. I'm just giving you an example of how little it takes to delever an economy that is so connected and so leveraged. The worry right now is not subprime loans.

The worry right now is what oil prices might do to markets and what AI and technology might do to jobs. Now, I want to be clear. We're not at the point where robots are about to take everybody's jobs just yet.

But what most people don't understand is that it doesn't have to be everybody's jobs. It just has to be enough jobs, which according to Luke Crowman is an unemployment rate of between 6 to 8%. Now, we're not there yet, but if that happens and enough jobs are displaced, that could start that chain reaction of deleveraging.

And here's an example. Let's say you bought a house for $500,000 and you put $50,000 down. You borrowed the other $450, which means you are leveraged 10 to1.

But if your house drops in value by just 10%, that wipes out 100% of your equity. That's what leverage does. It amplifies when it's working, but it also does the same in reverse.

Now, zoom out and apply all of that to the whole economy. And here's what it looks like. The homeowner is leveraged, right?

They have mortgages. Most people in America do. But it's not just homeowners.

It's also the banks that gave you the mortgage that is leveraged because even the banks borrow money to lend it to us. The private credit fund that's holding the packages of those loans is also leveraged. The insurance company that invested in that private credit fund is leveraged.

And the government that's sitting above all of this is the most leveraged one of all to $38 trillion. So every layer of the US debt base system is borrowed against the layer below it. Kind of like a tower of playing cards.

It might only take just a couple of industries and jobs to be displaced, which kicks off that chain reaction. Okay, but who am I talking about? Who is going to get displaced?

Well, that would be the white collar jobs. Here's an interesting chart that was floating around online about which jobs are susceptible to AI. jobs in office administration, business and finance, computers and math, and education.

Now, I actually think this chart was created using AI, so it it's not 100% factual, but it looks like we're starting to see this even in the real economic data as well. We're seeing huge declines in finance and insurance jobs, in the information sector, in the professional and business services, and all this leads to what? tighter lending, falling asset prices, volatility in the market, and uncertainty because we just don't know what's going to happen.

Now, here's evidence number two of things sort of not going in the right direction. But first, a quick side note before we keep going because this fits really well into everything we're talking about. Because when leverage is coming out of the system, the smartest thing to do is usually not something dramatic.

Instead, it's just lowering unnecessary exposure. Now, most people already cover the basics like password managers and VPNs, but there's a big gap most people don't think about, which is your personal information that gets sold through data brokers. And this includes things like your name, home address, phone number, and even relatives.

And that's what Delete Me helps with. Now, since I'm on YouTube, my information gets sold a lot. And that's why I've personally been a member since April 2024, and they've looked at thousands of listings and found that over 50 brokers have been selling my info.

Thankfully, Delete Me has removed dozens of them automatically, and it runs in the background, so I don't have to do anything. If you want 2026 to be smarter and safer, it takes about 5 minutes to set up, I'll leave a link down below, or you can go to joindeleteme. com/andre20 to get 20% off for new subscribers for all US consumer plans.

Thank you to LeeMe for sponsoring this segment. And now, let's get back to it. So, throughout modern history, there's been one indicator that's shown up before almost every major recession.

And that indicator has been an increase to the price of oil. Here's a chart that you can see for reference. The green line tracks the price of oil, which shows up anytime the price goes up above the long-term trend line.

It then has preceded aka happened before a recession, which are all the gray vertical bars. Now, this chart shows $104, but today that threshold is probably closer to maybe $70 to $75. Certainly above $100 it gets worse and worse, right?

That's the sweet spot for the US is between $70 to $75. If it goes above that really quickly, then that's bad news. So, for example, 1973 oil embargo, prices quadrupled, recession followed.

1979 Iranian revolution, oil prices doubled, recession followed. 1990, Gulf War, oil spiked, recession followed. 2000 oil doubled, recession followed.

2007, oil went from 60 to $147 a barrel, the worst recession since the Great Depression followed every single time. And right now, thanks to the war in Iran and the closure of the straight of Hormuz through which 20% of the world's oil goes through, oil prices are going up again. Now, Trump says we could use the strategic petroleum reserve, the SPR, which is normally used as a buffer in times like this.

but it's already been used up, which means the US economy is much more sensitive to oil prices right now. Now, if you're wondering, well, hold on. Why is oil a useful thing to use as a recession indicator?

It's useful because it's what economists call an input cost for basically everything. Food, manufacturing, shipping, transportation. When oil goes up, the cost of making and moving stuff goes up as well.

And when that happens, businesses get squeezed. So what do they have to do? They have to cut costs.

They cut people, right? But what makes this time particularly dangerous compared to every other time is this chart. It shows that when oil went up and there was a recession, the Federal Reserve had room to fight back.

They had room to cut interest rates. But right now, the Fed is kind of trapped. What does that mean?

So the blue line is the Fed's balance sheet. Every time it goes up, that's the Fed printing money, doing QE. Now look at the red line.

That's oil prices. Notice how every single time the Fed fired up the money printer, oil was cheap or falling. Oil collapsing gave the Fed room.

they could print without triggering inflation because energy costs were low. Right now though, oil is going up. It's extremely volatile, which means the Fed has less covered to do that.

If they print money now, oil makes inflation worse. Now, if this is confusing, think of think of this as a game of chess. This is a Benjamin Cowan analogy.

The Federal Reserve has to defend two things, right? The Fed calls it their dual mandate. Job one, defend inflation.

and keep it low. Job two, keep unemployment low. So, defend jobs and defend the price of things.

Normally, when a recession happens and people lose jobs, the Fed cuts interest rates. So, then cheap money flows into the economy, businesses can borrow, they can hire again, and unemployment can stay low. So, if check defend with lowering rates, but right now, inflation is somewhat elevated according to the Fed.

And oil is extremely volatile right now. It went up over $100 a barrel and then Trump said the war is over. Right?

So it went back down to the 80s. If the war lasts longer than expected, it could easily go over $100 again. It's trending that way right now.

Which means if the Fed cuts rates to fight a potential recession, inflation could come back thanks to oil going up. So unemployment and inflation, the Fed can only fight one at a time. If not, that's checkmate, aka recession.

Now, we're not there yet, but we'll see what happens to oil prices, which right now is tied to the fate of the war in Iran, which we're told is going to last couple weeks, maybe a couple months, but not more, which personally I don't believe. >> I'm confident that our troops will be successful, and I think it'll go relatively quickly. >> It could last, you know, 6 days, 6 weeks.

I doubt six months. >> You can say four weeks, but it could be six, it could be eight, it could be three. >> We expect to last about four to six weeks.

>> Right from the beginning, we projected four to 5 weeks, but uh we have capability to go far longer than that. >> This brings me to evidence number three, which is not that they can't print. It's that printing now comes with much worse consequences than any other time in history.

Now, I'm sure you've heard it a million times by now, but I want to put into perspective just how bad our spending problem is. Every year, the government takes in about 5. 2 trillion in tax revenue.

That's income taxes, corporate taxes, payroll taxes, all the taxes we all hate paying, right? 5. 2 trillion is what the government makes and then it spends 7 trillion.

So, before we even talk about paying down the debt, the government's already spending almost 2 trillion more than it makes every single year. That is called the deficit and it's that gap that gets added to the debt. But let's take a look at where that 5.

2 trillion actually goes, right? Where does that money go? So roughly 70% of every dollar the government collects goes straight to what's called entitlements.

What's that? That is social security, Medicare, and Medicaid. That is money owed to baby boomers who paid into the system their whole lives and are now collecting.

And you can't just cut that because the moment you do, those people stop spending. The economy contracts and tax revenues will fall even more. In the end, you'll actually end up with a bigger deficit.

So 70% of that money has to be paid to them. Then there's the interest on that debt. That's already eating another 30 cents of every dollar that comes in.

That number is growing faster and faster though because as old debt gets refinanced at higher interest rates, the cost keeps going up. In fact, the Congressional Budget Office thinks that just the interest payments will be roughly 2. 1 trillion by 2036.

So, we have entitlements in interest payments. Hold on, we're not done. There's also defense, which is another 20%.

Can't cut that. And those three things alone, 70 + 30 plus 20, that is 120% spent before the government funds anything most people can actually benefit from like roads and schools and national parks, right? Kind of crazy to think about.

Everything else the government does is funded completely on borrowed money every single year. and just the interest on the debt plus entitlements is already 100% of total federal receipts. So the money we pay to seniors and the interest on that debt, those two items alone are almost equal to everything the government makes in taxes.

Which also means if tax revenues fall even a little, maybe because of recession triggered by rising oil prices thanks to the war or because AI, right, the white collar workers who pay most of the income taxes get displaced. The government literally would not be able to cover its basic obligations without printing more money. And this is before anything potentially gets worse, which it could.

That private credit market we talked about, that's a $3 trillion system. A huge chunk of the American economy, like small businesses and real estate developers and companies, they've been running on loans from those private credit funds like Blackstone and Apollo and Blue Owl. And those loans are coming due in a time when interest rates are high and investors want their money back, which they're not getting.

And when that credit dries up, businesses can't refinance. So they start cutting costs. They start laying people off.

Consumer spending drops, tax revenues fall. And when that happens, the whole system gets really stressed. Okay.

So then the ultimate question is what is the solution? What can the government do to get us out of this mess? And there is some good news.

Maybe someday we'll get negative interest rates, right? Force liquidity and force the banks to lend money. Maybe some version of quantitative easing again.

But here's what I think is the most interesting theory that I came across. This might happen. The theory goes like this.

If you revalue gold enough to basically recolateralize or buy down effectively buy down your debt so that you have low debt levels, then you can make dramatic more dramatic changes to the economic system and its connections without running the risk of blowing up the financial system. Right? >> The US might revalue its gold to a much higher price and then use it as an escape valve to stabilize the price of oil.

I said a lot there. What What does that mean? So, right now, the US government officially holds 8,000 tons of gold.

Allegedly, that gold is sitting on the government's balance sheet. But the crazy part is that that gold is valued at only $42 an ounce right now. That is the official price.

It has not been updated since 1973, aka the Nixon era. Now, hold on. Why would the government want to suppress the price of its own gold?

It's because gold competes with bonds. We know this because pay attention to what Scott Bessant says at the end of this little segment. There's one thing you cannot do with gold that you can do with bonds.

>> Gold can't have a fiscal problem. Gold cannot have a gigantic budget deficit. gold cannot have the a um a war.

>> So, we can't use gold because gold can't be used to fund more wars because we can't print more of it. So, every time gold goes up, it's basically the market's way of saying we trust this shiny rock more than we trust your government, which tells the world don't buy treasuries. Don't hold them.

Hold gold instead. Right? That is a bad thing for a country that needs the entire world to keep buying its debt.

That is why the price of the US government's holdings of gold is locked at $42 an ounce. However, the price of gold in the real world is not $42 an ounce. Today, it's trading at over $5,000 per ounce.

So, this theory says the Treasury could just repric it. It's called marktomarket. That means overnight that pile of US government gold from being worth about 11 billion on paper to being worth somewhere closer to 1.

3 trillion. So we could just create over a trillion dollar in real assets with basically an accounting trick. It's a magic trick.

Now 1. 3 trillion in the grand scheme of things, it's not a lot of money. It's not going to pay off the national debt, but it doesn't need to.

They could also hypothetically revalue the gold at a much, much higher price than the market. Nothing stops them from doing that. Now, if that sounds crazy, you're right.

But the US government has done this before three other times. The first time was 1934 during the Great Depression. FDR needed money because the economy was collapsing.

The government was basically broke. So he issued executive order 6102. You had to turn in your gold to the government at the official rate of $20 an ounce.

And then once the government got everyone's gold, they just repriced it overnight to $35 an ounce, a 70% increase. The Treasury's balance sheet got an instant boost without borrowing a single dollar and without raising any taxes. The second time was 1972.

Nixon repriced gold from $35 to $38 an ounce. And the third time was in 1973. Nixon again bumped it to $42.

22 and then nothing. Crickets for over 50 years. The price has been stuck just frozen at $42.

22 while the market price of gold went from $42 to a,000 to 2,000 to 3,000 to now over $5,000 per ounce. So this has been done three other times in US history by two presidents and each time it was used as an emergency to shore up the government's balance sheet when there was no other good options. But hold on, there is a second reason why the US might want to repric its gold.

Gold could also be used as an escape valve to bring down and stabilize the price of oil. Hold on. How?

So, think about why oil producers like Saudi Arabia and OPEC sell their oil in dollars in the first place. It's because of the deal that goes back to the 1970s. You price your oil in dollars.

You park your profits in US Treasury bonds and we guarantee the dollar stays strong so you don't get ripped off and we protect you. That's the petro dollar system. But what if instead of paying these oil producers and dollars and treasury bonds which are losing in value and less and less countries want them, what if you said, "We'll give you gold.

" And [snorts] not just any gold, right? Gold at a much higher price. Right now, oil is getting much more expensive.

It's maybe going to wreck the global economy potentially. But what if the US said to someone like Saudi Arabia, "Hey, we'll buy your oil at $50 a barrel, but we'll pay you in gold valued at $10,000 an ounce. " Right?

At those ratios, they're actually getting more purchasing power per barrel than they are today at say $100, right? They might take that deal. Maybe the US does this temporarily to resupply its strategic petroleum reserves.

Oil prices could come down. Inflation comes down and the Fed gets room to breathe, right? The recession risk drops because oil is stable.

The US pays for it, not with printed money, but with gold it already owns repriced much higher without spiking inflation. If that sounds crazy to you, this is also not a new idea. Back in 1973, right after the Arab oil embargo, European countries were planning to do this to revalue their gold reserves and then use that gold to pay off their bills with OPEC.

The US blocked it, right? They needed oil to be priced in dollars to build the petro dollar system and to spread freedom. But now the US could end up suffering this oil driven inflation with no other good options.

This is a possible option and has been done before. Now, could some of this apply to Bitcoin? Maybe.

Is it guaranteed to happen? Not necessarily, but it's a possibility, and I think it's a very interesting theory. I'd love to hear your theories and your comments down in the comment section below.

As always, I hope you have a wonderful rest of your day. Smash the like button, subscribe if you haven't already. I'd love to see you back here next week.

I'll see you soon. Bye-bye.