All

After a stellar 3Y auction and a solid, but tailing 10Y auction, moments ago the Treasury held the week's final refunding auction when it sold $25 billion in 30Y bonds in yet another stellar auction.

The high yield of 4.635% was fractionally below last month's 4.671% (and well below the cycle high of 4.837%in October 2023); it also stopped through the When Issued 4.642% by 0.7bps, following last month's modest tail, and was the 5th stopping through auction in the past 6.

The bid to cover rose to 2.409% from 2.367%, and also above the six-auction average of 2.38%.

The internals were solid with Indirects awarded 64.9%, up from 64.4% but below the recent average of 66.8%. And with Directs awarded 19.8%, Dealers were left holding 15.4% of the final auction.

Overall, this was a very strong close to refunding week, and the market clearly approved with yields sliding to session lows in kneejerk reaction to the solid demand for the ultra-long dated paper.

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Former President Donald Trump on Thursday confirmed that his lawyers asked a New York state appellate court to issue a ruling on a judge’s gag order that prohibits him from speaking about certain individuals connected to his ongoing trial.

Former President Donald Trump speaks to the press as he arrives for his trial for allegedly covering up hush money payments linked to extramarital affairs, at Manhattan Criminal Court in New York City, on April 30, 2024. (Justin Lane/AFP)

His team filed a motion on Wednesday, which has been sealed and is inaccessible, according to the court docket. The Manhattan district attorney’s office filed a response to the motion, but it was also sealed.

While speaking with reporters outside the courthouse on Thursday morning, President Trump confirmed the move. Anonymously sourced reports published Wednesday said that it was a motion to expedite the ruling.

“I just want to let you know that we’ve just filed a major motion in the appellate division concerning the absolutely unconstitutional gag order, where I’m essentially not allowed to talk to you about anything meaningful that’s going on in the case. And many good things are going on with the case. It shouldn’t have been filed,” he said.

During his comments to reporters, he did not go into specifics about the motion.

The former president is under a gag order that prohibits him from making public statements about potential witnesses, court staff, prosecutors’ staff, or family members. Judge Juan Merchan, who issued the order and later expanded it, ruled that President Trump violated his directive 10 times before threatening to jail the former president if he makes future comments that he believes violate that

Previously, the New York Court of Appeals rejected the former president’s bid to pause the trial while he battles the gag order. They also rejected an attempt to pause the enforcement of the order, which was issued in March after prosecutors requested it.

His lawyers have argued that the gag order violates the former president’s First Amendment right to free speech, noting that he is currently the leading Republican presidential candidate.

But earlier this week, Judge Merchan fined the former president for a 10th time for an April remark that he made to a media outlet about the Manhattan jury pool, which he said was “95 percent” Democratic. The judge then said that a $1,000 fine isn’t enough and that he might have to jail the former president, although he did not go into specifics about how that would look like.

“Your continued willful violations of this court’s orders threaten to interfere with the … administration of justice,” Judge Merchan said before issuing a warning about possible jail time.

The former president, in response, criticized the judge and wrote on Truth Social that he is now not allowed to respond publicly to “lies and false statements” made about him during the New York trial. It came after witness Stormy Daniels made salacious allegations about President Trump during her first trial appearance, which President Trump has denied.

According to emails reviewed by The Epoch Times, the Trump campaign also used the judge’s threat as a means to fundraise for his presidential campaign. “The liberal judge in New York just threatened to THROW ME IN JAIL,” read one of the emails, adding that they want him “in HANDCUFFS.”

During his remarks to reporters on Thursday, the former president also quoted multiple legal analysts’ commentary on the case to say that it should never have been brought against him. Those analysts, which President Trump read aloud from a piece of paper, stated prosecutors revived the case after more than seven years in a politicized attempt to harm his 2024 reelection campaign.

“‘I’ve been doing this for 60 years, and I don’t understand what crime he’s been charged with. Nobody understands this. I just don’t get the crime. There’s no evidence of any crime whatsoever. This is a sham,’” President Trump said, quoting retired Harvard professor Alan Dershowitz.

The trial is expected to last another two weeks. On Thursday, Ms. Daniels, whose real name is Stephanie Clifford, again took the witness stand and was grilled by defense attorneys about whether she was using her allegations against President Trump to make money for herself and bolster her name recognition.

President Trump is charged with 34 counts of falsifying business records to cover up his former lawyer Michael Cohen’s $130,000 payment to Ms. Daniels for her silence ahead of the 2016 election about the alleged encounter. President Trump has pleaded not guilty and denies Ms. Daniels’ claims.

The case is seen by some as the least consequential of the four criminal prosecutions President Trump faces. But the chances of the other three, going to trial before the election are growing more distant. He has pleaded not guilty in all the cases.

The former president’s cases in Georgia and Washington were paused by the respective judges overseeing them. Meanwhile, in a major legal win, a Florida federal judge suspended his classified documents case indefinitely after prosecutors revealed that the contents of an evidence box were inexplicably rearranged.

Reuters contributed to this report.

By Michael Every of Rabobank

Yesterday saw the Riksbank in Sweden cut rates by 25bp to 3.75% for the first time since 2016 (as Brazil cut 25bp to 10.50% as expected, yet the BoJ opened the door to another tiny June hike). Rate cuts, and a month before the ECB is expected to do the same! As Bloomberg put it, “their choice signals that the domestic situation, with subsiding inflation and a sputtering economy, takes precedence over any concern that moving ahead of bigger peers will lead to another bout of korona weakening that in turn would fuel import prices.” Or that cutting rates doesn’t see speculation and inflation return locally; and/or that the global backdrop doesn’t suddenly do anything (additionally) nasty that would complicate the inflation environment for everyone.

On that latter note, the headlines speak to a dynamic that risks exactly that kind of development, if not immediately then over time.

First, ‘Biden warns Israel he will halt US weapon supplies if it invades Rafah’. The US president doesn’t mean just the $260m of munitions already on hold despite Congressional approval, but most offensive weapons, even if defensive systems such as iron dome interceptors will still flow.

There are few topics less well understood and more passionately championed on both sides that the current conflict between Israel and Hamas, but these points hopefully underline why this US action has a key geopolitical, and potential market, impact.

• The US is trying to dictate Israel’s policy, but far too belatedly to please the anti-Israel crowd.
• It removes the only pressure-point left to force Hamas to release the remaining Israeli hostages which it holds (including dual US citizens), displeasing the pro-Israel crowd.
• This as a huge political win for Hamas. It leaves Israel with only the recent Hamas-penned deal that would see it hold hostages for longer, retake control of Gaza, and gain the release of high-profile Palestinian prisoners into the West Bank. That latter action would crush the popular standing of the Palestinian Authority, leading to a Hamasification that would undermine both US/Western hopes for Arab states helping rebuild Gaza under a reformed Palestinian Authority and a two-state solution.
• This US “offense things bad, defensive things good” strategy is a mirror image of what they have tried and failed with vs. Russia (re: Ukraine) and Iran (re: Israel), among others, so far.
• Saudi Arabia will be wondering if a defense alliance with the US is worth it when their future actions might be proscribed by a White House National Security Advisor who a week before 7 October proudly claimed that the Middle East was “the quietest it has been in years.” Other allies in other regions, from Europe to Asia, may also start to wonder how reliable the US is when push really comes to shove.   
• Israel, seeing this as existential, could ignore the US, creating a rupture between key allies. Or it could pivot to attack Hezbollah in Lebanon, which would be a far more destructive, destabilising conflict: and any US refusal to supply ammunition for that would be a true geopolitical earthquake that would embolden all forces pushing back on the US and its allies further.

In market terms, this doesn’t mean anything for energy prices immediately: indeed, some may wrongly take it as a “de-escalation” signal. However, the underlying pressure on the geopolitical tectonic plates has increased enormously, and the risks of a fresh eruption of some kind --with an inflationary impact of various potential forms (i.e., look at the Houthis)-- has increased in tandem.

Second, the IMF’s Gopinath this week stated: “Consider a world divided into three blocs: a U.S. leaning bloc, a China leaning bloc, and a bloc of nonaligned countries.” Which is of course exactly what we did years ago, when almost nobody else in markets was talking about it seriously. While she stresses that “connector countries” like Mexico and Vietnam are key ‘middlemen’ between the US and China, she notes we are seeing signs of real embryonic geopolitical and geoeconomic rupture.

The currency composition of cross-border payments for US-leaning countries is unchanged, but for those China-leaning the CNY share has more than doubled, from around 4% to 8% - and this is not only Russia, but a broader upstream trade commodity finance shift I have flagged before. She notes China’s shift from SWIFT to its own CIPS; central banks’ increased gold purchases for FX reserves; and flags the potential risks of trade fragmentation like Brexit on steroids, financial fragmentation that will see capital flows shift, and even that “the global payment system could become fragmented along geopolitical lines with the emergence of new payment platforms with limited or no interoperability.” Which is what happened in the 1930s, as well as in the Cold War, and which I have flagged as a risk repeatedly for years – and I have stressed that the dollar still wins even in a fractured world order where we all lose.

In a mild scenario, the IMF thinks this could reduce world GDP by 0.2%; in an extreme scenario, losses could be 7%; and low-income countries could experience 4 times the GDP loss of other countries in the event of fragmentation of commodity markets into two blocs. Most of the losses would be due to trade restrictions of agricultural commodities, raising concerns about food security in poorer countries: you think cocoa is volatile now? Again, we did this geopolitical work on agri commodity flows years ago.

Fragmentation of trade in minerals for the green transition would also make the already vastly expensive energy transition even more costly, as these minerals are geographically concentrated and not easily substituted. Again, this is a point made here before.

Understandably, the IMF asks, “So, what can we do to prevent this?” Yet the answer is: “The ideal solution would be to preserve and strengthen the multilateral rules-based global trading system and the international monetary system… and making more progress on dealing with subsidies and national security trade restrictions and developing international rules and norms on… industrial polices… But given where we are today, the ideal may be difficult to achieve.”

So, all the IMF can offer is “to keep open the lines of communication and stay engaged,” and “work together on areas of common interest,” which means little, and “limit harmful unilateral policy actions, including industrial policies” – which are about to expand massively, even in Europe.

Third, US presidential candidate RFK, Junior says that he has a dead worm in his brain and, “I have cognitive problems, clearly. I have short-term memory loss, and I have longer-term memory loss that affects me.” But not to worry, because you have the alternative choice of Joe Biden. Or of Donald Trump.

That all says, “disinflation and rate cuts”, right? So, surely, it’s time to risk doing just that?

In this visualization, Visual Capitalist's Pallavi Rao shows Pew Research’s findings on what bothers Americans the most about the tax system.

This data was collected after surveying more than 5,000 American adults between the period of March 27-April 2, 2023.

The survey was weighted to be representative of the U.S. adult population. Visit Pew Research’s methodology page for more details.

Americans Want More Taxes for Some

Six in every 10 Americans feel that both corporations and the wealthy don’t pay their 'fair share' in federal taxes.

Their sentiments are not entirely unfounded.

Note: No answer responses are not shown, thus percentages may not sum to 100.

A 2021 ProPublica investigation found some of the wealthiest Americans - also the wealthiest people in the world - did not pay a single penny in federal income taxes in some years.

A significant part of why this is possible is how taxes are collected depending on the source. Since much of the top 1% grow their wealth in equity and property, they are not subject to taxes until they make an actual transaction.

As this Brookings Institution article explains: most Americans make money through their wages, and wages are subject to heavier taxation than capital income.

Thus, the tax share of America’s highest-income households is often lower than America’s middle-income households.

Finally, Pew Research noted that their findings were essentially unchanged since 2021.

Authored by Simon White, Bloomberg macro strategist,

It’s time once more to increase vigilance for a US recession.

Soft, survey data is starting to deteriorate, while hard data is already fragile. Expectations of a downturn are currently low, but they could quickly swing higher.

Stocks – which experience their worst drawdowns in recessions – are not priced for such an outcome, while yields are biased lower in the coming months.

S curves are nature’s approximation of a binary on-off switch. They pop up in all sorts of places, from neurons in the brain to the progression of diseases, and from population growth to the adoption of new technologies. They also describe how recessions evolve.

Economies are typically believed to develop in a linear fashion, from a non-recessionary to a recessionary state. But instead they do so in a highly non-linear way, with recessions often happening abruptly. Downturns have either a low risk of occurring in the next 3-4 months, or a high risk, but rarely anything in between – much like the shape of an S as depicted below.

That is why most standard recession models don’t make a lot of sense, as they assume recession risk can evolve smoothly. But it is essentially meaningless to talk of the likelihood of a recession rising from, say, 45% to 50%, when we acknowledge their regime-shift nature.

Just now we are at the bottom-left hand side of the S, with a low risk of an imminent recession. But the data has evolved in the last few weeks to suggest we could soon move to the right and on to the steep upward section of the curve – meaning the probability could quickly climb much higher. If so that would make a recession more likely than not over the next 3-4 months.

Stocks are expecting a soft or no landing. They are currently behaving in a way consistent with the Fed’s first rate cut — the most likely move if it changes rates this year — occurring in the absence of a recession. However, rate cuts that happen when there is a slump have historically led to a much worse outcome for equities — both before and after the recession — than currently priced (white line in chart below).

Six months ago I wrote that a US recession was unlikely through most of 2024. That could still end up being the case, but if we are shifting along the S curve, then investors should be prepared for an environment that could quickly look more recessionary, even if an actual downturn doesn’t arrive for another six months. Remember: stocks sell off before the onset of a recession, and even longer before the NBER finally announces the economy is in one.

The upgrading of recession risk has been prompted by the weakening in soft data in recent weeks, coinciding with hard data that remains fragile.

The manufacturing ISM is one of the single-most important data points for the economic and stock outlook.

The headline survey dropped below 50 in April. It is led by the new orders-to-inventory ratio, which is turning lower and slipped below the important level of one, where orders are expected to be just enough to match inventory.

It was the rise in this ratio, along with other indicators, that fed the view last year that the US was likely to avoid a recession for a while yet.

Yet as much as it’s unhelpful to be a perma-bear and constantly expect a recession, it also doesn’t make sense to assume there will be no recession at all. As I have described, one can only have a reasonably accurate view on a downturn occurring over the next 3-4 months, and that view by its nature is likely to change abruptly, not smoothly.

Adding to the difficulty in forecasting recessions, the goods and services economies have fallen out of sync in this cycle. Normally the goods sector leads the rest of the economy into a downturn, which is why so many traditional recession indicators over-emphasized the risk of one last year. But at some point, the economy is likely to resynchronize.

Why it’s particularly important to be more vigilant now is that services might also be notably slowing, as flagged by the services ISM also slipping below 50 in April; it has only done so twice before outside of a recession.

The usual caveats apply. The ISM is quite volatile, and the PMI services survey is still above 50, even though it is also turning lower. But this drop in important soft-data points comes at a time when hard data is showing signs of fragility too.

Recessions occur when both hard and soft data are contracting at the same time. Using the inputs to the Conference Board’s Leading Index, growth in leading hard-data has been turning higher, but is still contracting, while leading soft-data is close to slipping into the contraction zone. That would be ominous for recession risk.

Revisions will also be key to monitor. Typically data sees its biggest revisions before and after the occurrence of a recession. Data can be revised lower very quickly which is why recessions can happen faster in revised time than in real time.

What does all this mean practically for investors?

It leaves stocks more vulnerable. As the chart below shows, even though equities see a sharp drawdown after a recession begins (which, remember, we don’t know when that is until after the fact when the NBER announces it), they begin selling off beforehand. Moving to the right of the S curve means more volatile stock prices with a bias lower, even if it does not ultimately mean a full recession-like decline and an end to the bull market.

It also means bond yields are more likely to see some retrenchment in the coming months. But with elevated inflation in the background, bonds are primed to not rally as much as in non-inflationary recessions (see chart below). Moreover, yields are still structurally biased higher due to waning interest in owning USTs at current prices, and an inundation of supply.

Investing is about gauging forward probabilities. The probability of a near-term recession is currently low, but in a month’s time it could be much higher. That would be a lot of new information asset prices would have to quickly digest. A more nimble investment stance is advised at this trickier part of the cycle.

Billionaire Barry Sternlicht, Founder, Chairman and CEO of Starwood Capital Group has issued an ominous warning about America's regional banks, which he says will fail at a rate of 'one or two' per week.

Speaking with CNBC on Tuesday, Sternlicht says he thinks that primary real estate lenders - community and regional banks - are about to get whacked.

"You're going to see a regional bank fail every day, or not — every week, maybe two a week," he said, adding that Fed Chair Jerome Powell's ongoing rate hikes will continue to have consequences for the real estate sector.

"He's got a hard task with a blunt tool, and the consequence is the real estate markets are taking it on the chin because rates rose so fast. We could have handled this, but we couldn't handle it this fast," he said. "The 1.9 trillion of real estate loans, that's a fragile animal right now."

Watch:

As Schiff Gold notes, the fed must cut to avoid a banking crisis.

Most at-risk firms are smaller banks representing assets under $10 billion, with a handful of larger regional ones. Some might be able to avoid closing by halting expansion plans or offering fewer services. Others might save themselves by merging with larger banks. But with inflation too high for the Fed to cut now, “higher for longer” interest rate policy is looking increasingly likely, and banks with high exposure to troubled commercial real estate are at particular risk of starting a domino effect of small collapses that lead to bigger ones and bleed into becoming a real estate crisis.

...

In all its hubris, the Fed is stuck between preventing a banking crisis and preventing inflation from getting even more out of control. It needs higher rates to reduce inflation, but crucial sectors of the economy that are heavily dependent on lending can’t survive in a higher-rate environment, even if they don’t appear insolvent at first glance.

There are more than 4,000 regional and community banks throughout the United States, however just one - Republic First Bank - has shuttered since the start of 2024, after the FDIC seized $4 billion in deposits and $6 billion in assets last month.

Read more here, here, here, and most detailed here.

Meanwhile, UK fund manager, former MEP, and previously Nigel Farage's economic spokesman Godfrey Bloom has issued a similar warning to Stenlicht, telling former UK parliamentary candidate Jim Ferguson on his podcast that the banks are insolvent.

"We are entering a new dark age," says Bloom, who recommends that people "take your money out of the banks."

Watch:

Exclusive Alert Breaking: "British Banks are all on the brink of collapse" Godfrey Bloom.

Banks in America are collapsing at the rate of one a month.

"we are entering a new dark age"

Godfrey Bloom ,Author, Fund manager, Former MEP and former British Army Major with the 4th… pic.twitter.com/KEk6nmGYtp

Yesterday we discussed the latest consumer credit data, which revealed that the amount of credit card debt across the US has hit a new record high of $1.337 trillion (even though it appears to have finally hit a brick wall, barely rising in March by the smallest amount since the covid crash), even as the savings rate has tumbled to an all time low.

To be sure, credit card debt is just a small portion (~6%) of the total household debt stack: as the next chart from the latest NY Fed consumer credit report shows, the bulk, or 70%, of US household debt is in the form of mortgages, followed by student loans, auto loans, credit card debt, home equity credit and various other forms. Altogether, the total is a massive $17.5 trillion in total household debt.

But staggering as the mountain of household debt may be, at least we know how huge the problem is; after all the data is public. What is far more dangerous - because we have no clue about its size - is what Bloomberg calls "Phantom Debt", and we have repeatedly called Buy Now, Pay Later debt. How much of that kind of debt is out there is largely a guess.

Let's back up: the topic of Buy Now, Pay Later, or installment debt, is hardly new: we have covered it extensively in the past year, as this selection of articles reveals:

• "Buy Now, Pay Later" Mania Sends Americans Deeper Into 'Black Hole' Of Debt: April 2023
• Consumers Use 'Buy-Now, Pay-Later' Option To Fund Record Black Friday Purchases: Nov, 2023
• BIS Reveals 'Buy Now, Pay Later' Use Is Soaring Among Working Poor Youngsters: Dec 2023
• Self-Checkout Kiosks At 4,500 Walmarts Now Offer 'Buy Now, Pay Later' Loans For Basic Items: Dec 2023
• Many Are Addicted To "Buy Now, Pay Later" Plans, It's A Big Trap: Feb 2024

But while it is easy to ensnare young, incomeless Americans into the net of installment debt where they will rot as the next generation of debt slaves for the rest of their lives, there is an even more sinister side to this extremely popular form of debt which allows consumers to split purchases into smaller installments: as Bloomberg reports in a lengthy expose on installment debt, the major companies that provide these so called “pay in four” products, such as Affirm Holdings, Klarna Bank and Block’s Afterpay, don’t report those loans to credit agencies. That's why Buy Now/Pay Later credit has earned a far more ominous nickname:

It's hard enough for central bankers and Wall Street traders to make sense of the post-pandemic economy with the data available to them. At Wells Fargo & Co., senior economist Tim Quinlan is particularly spooked by the “phantom debt” that he can't see.

Which is not to say that we have no idea how much "phantom debt" is out there: according to the report, it is projected to reach almost $700 billion globally by 2028, and yet, time and again, the companies that issue it have resisted calls for greater disclosure, even as the market has grown each year since at least 2020. That, as Bloomberg accurately warns, is masking a complete picture of the financial health of American households, which is crucial for everyone from global central banks to US regional lenders and multinational businesses.

In fact, the recent explosion in installment debt may explain why the US consumer remains so resilient even when most conventional economic metrics suggest consumers should be struggling: "Consumer spending in the world’s largest economy has been so resilient in the face of stubbornly high inflation that economists and traders have had to repeatedly rip up their forecasts for slowing growth and interest-rate cuts."

Still, cracks are starting to form. First it was Americans falling behind on auto loans. Then credit-card delinquency rates reached the highest since at least 2012, with the share of debts 30, 60 and 90 days late all on the upswing.

And now, there are also signs that consumers are struggling to afford their BNPL debt, too. A recent survey conducted for Bloomberg News by Harris Poll found that 43% of those who owe money to BNPL services said they were behind on payments, while 28% said they were delinquent on other debt because of spending on the platforms.

For Quinlan, a major concern is that economic experts are being “lulled into complacency about where consumers are.”

“People need to be more awake to the risk of BNPL,” he said in an interview.

Well, those who care, are awake - we have written dozens of articles on the danger it poses; the problem is that those who are enabled by this latest mountain of debt - such as the Biden administration which can claim a victory for Bidenomics because the economy is so "strong", phantom debt be damned - are actively motivated to ignore it.

So why is this latest debt bubble called a "phantom"?

Well, BNPL is a black box largely because of a longstanding blame game among BNPL providers and the three major credit bureaus: TransUnion, Experian and Equifax. The BNPL companies don’t provide data on their installment loans that are split into four payments, which were used by online shoppers to spend an estimated $19.2 billion in the first quarter, according to Adobe Analytics, up 12.3% compared with the same period last year.

The BNPL giants say credit agencies can’t handle their information — and that releasing it could harm customers’ credit scores, which are key to securing mortgages and other loans. The big three bureaus say they're ready, while two of the major credit scoring firms, VantageScore Solutions and Fair Isaac Corp. (FICO), say they're equipped to test how the products will affect their figures. Meanwhile, regulation is looming over the industry, but this stalemate has left the status quo mostly in place.

In other words, not only do we not know just how big the BNPL problem is, it is actively masked by credit agencies which can't accurately calculate the FICO score of tens of millions of Americans, and as a result their credit capacity is artificially boosted with far more debt than they can handle... and that's why the US consumer has been so "strong" in recent years, defying all conventional credit metrics.

The good news is that despite the tacit pushback of the administration, there has been some signs of progress. Apple earlier this year became the first major BNPL provider to furnish transaction and payment data to Experian. As of now, it provides a snapshot of consumers’ overall debt load from Apple Pay Later transactions, but the information won’t be used for consumer credit scores. In separate statements to Bloomberg, Klarna, Affirm and Block said they want assurance that consumers’ credit scores and their data would be protected before reporting customer information. Representatives for TransUnion, Experian and Equifax said they’ve updated their structures and the data would be secure.

Still, the lack of transparency has researchers at the Federal Reserve Bank of New York, which publishes a comprehensive quarterly report on the $17.5 trillion in US household debt, convinced they’re missing some of what’s happening in the economy.

“They’ve reached a certain scale that they could impact economists’ assumptions about their economic outlooks," said Simon Khalaf, Chief Executive Officer of Marqeta Inc., a firm that helps BNPL providers process their payments.

Meanwhile, the pernicious effects of BNPL credit are piling up: the Harris Poll survey conducted last month, provides some crucial clues about how Americans use BNPL. For one, splitting payments into smaller chunks encourages more spending, obviously.

More than half of respondents who use BNPL said it allowed them to purchase more than they could afford, while nearly a quarter agreed with the statement that their BNPL spending was “out of control.” Harris also found that 23% of users said they couldn’t afford the majority of what they bought without splitting payments, while more than a third turned to the services after maxing out credit cards.

The findings also show that the spending, which for more than a third of users has exceeded $1,000, isn’t entirely on big-ticket items. Almost half of those using BNPL say they've started, or have considered, using it to pay bills or buy essential items, including groceries.

Translation: Americans are no longer even charging everyday purchases they traditionally used cash and savings to pay for; now they are using installment plans to pay for bread!

It's not just the lower classes that are abusing BNPL credit: while whatever small pockets of consumer distress have emerged so far in the US, have been chalked up to a bifurcated economy where working class Americans struggle to make ends meet, the survey found that middle-class households are relying on BNPL, too. The shocking punchline: about 42% of those with household income of more than $100,000 report being behind or delinquent on BNPL payments!

“BNPL essentially lets people dig a deeper and deeper hole of credit, which will be harder and harder to climb out of,” said Ed deHaan, a professor of accounting at Stanford Graduate School of Business, adding that it happens “more easily when there’s no transparency.”

Of course, installment debt is nothing new: the option to pay in installments using short-term loans has been around for a ong time, but it exploded in popularity during the pandemic, especially with younger, digitally savvy consumers who gravitated to the services as an alternative to credit cards. The pioneering BNPL companies, including Afterpay, Klarna and Affirm, launched with trendy retailers, partnered with social media influencers and became a common option on apps and online checkouts.

BNPL offers quick credit approvals and lets consumers pay in installments. The first is usually due right away, and the others are often collected once every two weeks for the popular “pay in four” loans. There’s typically no interest or fees, as long as payments are made on time. Like credit card companies, BNPL firms make money on fees from merchants — and some have steep penalties for missed payments.

While normally larger banks would avoid this kind of "new and much more dangerous subprime", this time is different: the rapid adoption of the products has enticed major financial institutions to offer the option to split payments, even as regulators warn them of the risks. That includes PayPal, U.S. Bancorp and Citizens Financial. Even big banks like Citigroup and JPMorgan have similar capabilities on their credit cards.

The industry has branded itself a financial equalizer. They argue that “soft-credit checks” — when a lender runs a consumer’s credit history without affecting their score — expand credit access to those underserved by traditional lenders, while zero-interest provides a better deal than many cards.

Affirm said its customers have an average outstanding balance of $641, while Afterpay and Klarna put the figure at $250 and $150, respectively. Unfortunately, there is no way to check these numbers. And while the average credit card balance was $6,501 in the third quarter of 2023, according to Experian data, the BNPL balances mean that most Americans can't even afford a weekly outing to their grocery store without putting it on an installment plan, a truly terrifying scenario.

Critics naturally argue that BNPL is particularly attractive to the financially vulnerable. The Consumer Financial Protection Bureau has flagged risks to consumers, including surprise late fees and “hidden interest” — or when BNPL purchases are made with credit cards charging high interest rates. The CFPB has also expressed concern about “loan stacking,” when individuals take out several BNPL loans at once with different providers, which is most of them.

Some BNPL services, including Afterpay and Klarna, require borrowers to agree to “mandatory autopayment,” meaning the companies can automatically charge the credit card or bank account on file when a payment is due. Those who link the latter are potentially vulnerable to overdraft fees.

Meanwhile, as rates remains sky high, even Wall Street's perpetually cheerful analysts are wondering where is all the consumption coming from?

Robust consumer spending and low unemployment rates have many economists convinced the US consumer remains strong, making Wall Street bullish on the economy. But lately, stubbornly persistent inflation has dialed back expectations for imminent interest-rate relief.

That’s set to ramp up pressure on households that are already stretched thin by higher prices for everything from gas and food to rent and apparel. As of the end of December, almost 3.5% of credit-card balances were at least 30 days past due, according to the Philadelphia Fed, the most since the data began in 2012. Nominal card balances also set a new high.

For those who are falling behind, BNPL offers what appears to be a no-brainer decision: space out payments... at least until this last credit buffer fills up and bankruptcy is the only possible outcome.

That was the thinking of Hayden Waschak, a 23-year-old in Pittsburgh. Even though he said it felt “dystopian” to use  BNPL to pay for food, he began using Klarna in February to spread out payments on a grocery delivery app. It helped his finances — at first. After he lost his job as a documents processing specialist at University of Pittsburgh Medical Center in March, he relied more heavily on the service. And without any income, he became delinquent on payments and started racking up late charges. He eventually paid off the nearly $200 balance, but he said his credit score dropped.

“Unexpected life events caused me to lose income,” Waschak said. “I ended up paying more than if I had paid for it all at once.”

Meanwhile, the fact that BNPL balances do not count against your credit rating, means users get little upside when it comes to their credit — paying on time won’t help them build up their score. On the other hand, the downside is still there for falling behind: not only can they get charged late fees, but delinquent BNPL loans can be turned over to debt collectors.

The latter is what Fabrizio Lopez said happened to him. He used Affirm to split up a $500 online payment for used-car parts in 2019. The Long Island-based mechanic, who doesn’t have a traditional credit card, said that while he received the items a week later, he never got a bill. That is, until debt collection letters started pouring in from across the US.

Lopez said he primarily relied on cash before that purchase, so the unpaid loan stands out on his credit profile. Now 30, he worries that a the BNPL purchase has created “invisible barriers” to the financial system.

“They hook you with the idea of no interest rates,” he said. “I thought that I would be able to build my credit if I paid it back — I was so wrong.”

He is not the only one who is "so wrong": just as wrong are all those Panglossian economists at the Fed and Wall Street who believe that the US economy is growing at what the Atlanta Fed today laughably "calculated" was a 4.2% GDP, even as the DOE found that the most accurate indicator of overall economic strength, diesel demand, was the lowest since covid, an glaring paradox... yet glaring to all except those who refuse to see just how rotten the core of the US economy has become, and will be "absolutely shocked" when the next credit crisis destroys tens of millions of Americans drowning in what is now best known as "phantom debt."

Authored by Katabella Roberts via The Epoch Times,

The House of Representatives voted on Wednesday to pass a measure that would add a citizenship question to the next U.S. census, as part of the latest efforts by conservatives to “protect America’s democracy and electoral integrity.”

The legislation, known as the “Equal Representation Act,” was led by Rep. Chuck Edwards, (R-N.C.), who spoke on the floor Wednesday regarding the need to ensure only American citizens are counted when apportioning congressional seats and Electoral College votes.

It passed in a vote of 206-202 along party lines.

The measure would direct the Census Bureau to add a question to the once-a-decade census asking whether or not the respondent is a citizen of the United States. It asks that only citizens be considered when determining how many lawmakers each state gets in the House of Representatives, as well as how many Electoral College votes each of the 50 states receives.

The measure creates new reporting requirements for data gathered from the citizenship question, noting that “the citizenship makeup of the population in the United States is a basic data point that should be available to U.S. policymakers, and the decennial census questionnaire is the best way to obtain such detailed information on citizenship status.”

The next decennial census is set to take place in 2030.

“Though commonsense dictates that only citizens should be counted for apportionment purposes, illegal aliens have nonetheless recently been counted toward the final tallies that determine how many House seats each state is allocated and the number of electoral votes it will wield in presidential elections,” Mr. Edwards said in remarks on the floor on Wednesday.

“And since the illegal alien population is not evenly distributed throughout the nation, American citizens in some states are losing representation in Congress to illegal aliens in other states, ” he added.

‘Alarming Undermining of American Democracy’

Mr. Edwards cited a 2019 study by the Center for Immigration Studies, which estimated that illegal immigrants and non-citizens, who have not naturalized and do not have the right to vote, impact the distribution of 26 seats in the House.

The lawmaker said his bill would “finally address this alarming undermining of American democracy” while helping to ensure electoral integrity.

“Enacting this legislation into law is vitally important to ensuring that the American people receive fair representation in Congress and that they, and only they, determine the outcomes of presidential elections,” Mr. Edwards said.

Conservatives welcomed the measure on Wednesday. House Speaker Mike Johnson (R-La.) said in a statement after the vote, “We should not reward states and cities that violate federal immigration laws and maintain sanctuary policies with increased Congressional representation.”

House Committee on Oversight and Accountability Chairman James Comer (R-Ky.) applauded Wednesday’s passage of the Equal Representation Act while criticizing the Biden administration’s “open border policies” which he said have “created the worst border crisis in American history, impacting every American.”

“In the midst of a crisis that is setting records for illegal border crossings, Congress is today taking steps to proactively protect a fair electoral process,” Mr. Comer said in a statement.

Mr. Comer said the new bill “adds a simple citizenship question to the decennial census questionnaire to ensure accurate information, and provides that only citizens are counted for apportionment of seats in the House of Representatives and Electoral College votes.”

“American citizens’ federal representation should be determined by American citizens only,” the Republican added.

President Joe Biden speaks to guests during an event at Gateway Technical College’s iMet Center in Sturtevant, Wis., on May 8, 2024. (Scott Olson/Getty Images)

White House ‘Strongly Opposes’ Bill

However, civil rights groups, Democrats, and the White House quickly criticized the bill–which is unlikely to pass the Democratic-controlled Senate–with many questioning its legality under U.S. law.

The Constitution states that representatives will “be apportioned among the several States according to their respective numbers, counting the whole number of persons in each state.”

In a statement of administration policy published on Monday, the Biden administration said it “strongly opposes H.R. 7109 [the Equal Representation Act]” which would “preclude the Department of Commerce’s Census Bureau from performing its constitutionally mandated responsibility to count the number of persons in the United States in the decennial census.”

The measure would also increase the cost of conducting the census and make it more difficult to obtain accurate data, the administration said.

“It would also violate the Fourteenth Amendment of the Constitution, which requires that the number of seats in the House of Representatives ‘be apportioned among the several States according to their respective numbers, counting the whole number of persons in each State,’” the administration added.

This is not the first time Republicans have attempted to add the citizenship question to the census. Commerce Secretary Wilbur Ross tried to do so during the 2020 Census under President Donald Trump.

That attempt was subsequently blocked by the Supreme Court.

Israeli leaders are furious after the evening prior CNN published an interview with President Biden wherein he laid out that the US will withhold all offensive weapons from Israel if it moves forward with a full-scale invasion of Rafah.

In a message to both Israel's "enemies and best friends" - clearly a reference to Washington - Defense Minister Yoav Gallant on Thursday vowed that Israel "will achieve [its] goals in the north and south."

"I say from here to Israel’s enemies and its best friends: The State of Israel cannot be subdued — not the IDF, not the Defense Ministry, not the defense establishment, not the State of Israel. We will stand, we will achieve our goals, we will hit Hamas, we will destroy Hezbollah, and we will bring security," Gallant said.

"Whatever the cost, we will ensure the existence of the State of Israel and remember well the directive we signed just a week ago during the Holocaust Remembrance Day ceremony, the words ‘Never Again.’ For me, it’s not just a directive, it’s a work plan. This is how the defense establishment will work and this is how the IDF will work," he added.

"We have no choice, we have no other country. We will do whatever is necessary, and I repeat – whatever is necessary, in order to defend the citizens of Israel, to remove the evil threats against us, and to stand up to those who attempt to destroy us."

Prime Minister Benjamin Netanyahu also responded, but just as with Gallant he has not named Biden or the United States directly...

In what looks like a response to Biden's remarks about halting military aid if Israel goes into Rafah Netanyahu shares this video of his speech from several days ago in which he says Israel will stand alone if it needs to https://t.co/ZwHj2bNi3M

But others were more blunt and direct, claiming that Biden with this move is 'helping Hamas':

Finance Minister Bezalel Smotrich stated bluntly that the strong American opposition would only reinvigorate Israel’s drive to eliminate Hamas.

“We must continue this war until victory, despite, and to a certain extent precisely because of, the opposition of the administration Biden and the stopping of arms shipments,” he said in a statement. “We simply have no other choice that does not endanger our existence and security.”

National Security Minister Itamar Ben Gvir, a firebrand who leads the far-right Otzma Yehudit party, tweeted simply that “Hamas [loves] Biden.”

Here's what the hardline and hawkish national security minister tweeted out:

Hamas ❤️Biden

Former President Donald Trump agreed, writing in a statement that Biden withholding defense deliveries is tantamount to siding with the terrorists.

Part of his message also included the words "Biden is weak, corrupt, and leading the world straight into World War III. Remember - this war in Israel, just like the war in Ukraine, would have NEVER started if I was in the White House. But very soon, we will be back, and once again demanding PEACE THROUGH STRENGTH!"

The Rafah mission appears to still be on, and Israel's message of defiance in response to Biden let that be known. Meanwhile Israel's Walla News is reporting that the Hamas delegation has now left Cairo and that there has been no ceasefire breakthrough, with both sides once again blaming the other for rejecting a deal.

Israel has previously warned that Israel would give Hamas one week to accept the latest deal on the table (and that warning was issued last week), or else the military would go into Rafah. The refugee-packed southern city of the Gaza Strip has in the last hours been getting hammered by airstrikes, as tens of thousands of civilians scramble to get out.

Biden had said controversially in the CNN interview which angered the Israelis, "I’ve made it clear to Bibi (Prime Minister Benjamin Netanyahu) and the war cabinet: They’re not going to get our support if they go [into] these population centers."

"Civilians have been killed in Gaza as a consequence of those bombs and other ways in which they go after population centers," Biden said. "I made it clear that if they go into Rafah — they haven’t gone in Rafah yet — if they go into Rafah, I’m not supplying the weapons that have been used historically to deal with Rafah, to deal with the cities — that deal with that problem."

"We’re going to continue to make sure Israel is secure in terms of Iron Dome and their ability to respond to attacks that came out of the Middle East recently," Biden continued before spelling out: "But it’s, it’s just wrong. We’re not going to — we’re not going to supply the weapons and artillery shells."

Biden is now getting pushback at home too, with Congressional leaders demanding answers as to why Washington's close Mideast ally is being threatened with the withholding of vital US defense aid...

BREAKING: Speaker Johnson and Senate minority leader McConnell send a letter to President Biden expressing alarm about the decision to pause a weapons shipment to Israel and ask for clarification by the end of the week pic.twitter.com/OLd7agcEf1

"This news flies in the face of assurances provided regarding the timely delivery of security assistance to Israel," House Speaker Mike Johnson (R-La.) and Senate Minority Leader Mitch McConnell (R-Ky.) wrote Biden in a letter issued Wednesday.

"The American public deserves to understand the nature, timing, and scope of these reviews," they wrote, and added that "daylight between the United States and Israel at this dangerous time risks emboldening Israel's enemies and undermining the trust that other allies and partners have in the United States."