“Big money will be made.”
The remark was made by President Donald J. Trump on Truth Social following the ceasefire deal with Iran.
Who will make the big money is unclear. But it sounds good, nonetheless.
With the announcement of the two-week reprieve in bomb dropping and missile strikes, and the supposed resumption of shipping through the Strait of Hormuz, the price of oil promptly dropped over 16 percent. By Wednesday morning both WTI and Brent crude were below $95 per barrel.
Perhaps two weeks will turn into a permanent ceasefire with Iran. As far as the greater Middle East is concerned, it’s unlikely. Israel was quick to clarify that the ceasefire with Iran does not include Lebanon. The war campaign in Beirut continues.
Back home in the USA, we’re witnessing a slow-motion economic train wreck. The promise of a low inflation strong growth economy remains elusive. Consumer prices are rising at an accelerated pace, while the jobs market is much weaker than advertised.
To fill the gap between rising prices and stagnating wages, consumers have loaded themselves up with massive amounts of credit card debt. According to the latest consumer debt data from the Federal Reserve Bank of New York, Americans’ total credit card balance, as of the fourth quarter of 2025, is $1.28 trillion. That’s up from $1.23 trillion in Q3 2025 and is the highest balance since the New York Fed began tracking in 1999.
Real gross domestic product (GDP) increased at an annual rate of 0.7 percent in Q4 2025. This, for all practical purposes, is a flatlining economy. And this was before the U.S. and Israel attacked Iran.
Living on Borrowed Time
The Strait of Hormuz may have been partially reopened – for now. But significant damage has already been done. Surging costs of energy and transport are trickling down into every household essential, further eroding the middle class’s remaining purchasing power. High debt levels in the face of rising prices can only persist for so long before the economy breaks down.
The prospect of a recession, both in the USA and globally, is appearing to be highly likely. In fact, we may already be in one.
If you want to know how the economy is really doing, don’t look at the stock market. Look at the credit card statements of consumers across the country.
For years, the American consumer has been the undisputed growth engine of the global economy. Even when prices started skyrocketing in 2021 and 2022, they kept spending. But the dirty little secret – the one that everyone knows about, but no one talks about – is that consumers weren’t spending money they actually had. They were spending on credit, which must be paid back to the bank with interest.
As noted above, total credit card balances have hit $1.28 trillion. While the top 10 percent of income earners are doing fine, the average worker is increasingly leaning on credit cards just to cover the gap between their paycheck and the price of eggs.
Yet credit card interest rates are at all-time highs, nearly 21 percent. That’s about double the rate that was charged 10 years ago.
These loan shark interest rates have a dramatic impact on consumer budgets. Borrowing to cover the cost of an unexpected $500 car repair can quickly turn into a $1,000 expense by the time it’s all paid off.
And what about the consumer debt that goes unreported?
Phantom Debt
What’s important to recognize is that the $1.28 trillion in credit card balances reported by the New York Fed understates consumer debt levels. That’s because of the phantom debt of buy now, pay later (BNPL) debt.
These short-term, point-of-sale financing options allow consumers to purchase goods immediately and pay for them in interest-free installments, typically over a few weeks or months. Often referred to as pay-in-four plans, split payments, or interest-free installment loans, BNPL services like Klarna, Affirm, and Afterpay require only a small down payment, usually 25 percent, with the remainder paid in automatic installments.
Since these short-term loans often bypass traditional credit reporting until they go into default, no one knows the full picture of how underwater the average shopper is. When people need four installments to pay for a pair of sneakers or a bag of groceries, something is going seriously wrong.
The lack of reporting masks a burgeoning instability in the American middle class. Because these micro-loans are easily accessible and deceptively interest-free, they encourage a lifestyle of leveraged consumption that traditional credit reporting fails to capture.
Consumers end up stacking multiple BNPL obligations simultaneously. This creates a compounding debt cycle that remains invisible to the banks as it expands. When the accommodation of credit lines is finally exhausted, the ripple effect moves swiftly from individual households to the broader market.
As the debt ceiling is reached for more and more individual households, spending stops. And since 70 percent of the U.S. economy is driven by consumer spending, when consumers stop buying, the engine stalls.
The resulting effect could lead to an unexpected contraction since the breadth and depth of the consumer credit picture is invisible. The overall picture is also obscured by the job market mirage…
Job Market Mirage
Politicians love to point at the unemployment rate. The fact that the unemployment rate, as of March 2026, is just 4.3 percent, supports an argument for a strong economy. But many of the jobs that are available to the average worker do not pay a wage that can cover the average rent and essential living expenses.
Good-paying career positions are few and far between. As these jobs disappear, the jobs being added back are often in the low paying service sector. Jobs like hospitality, retail, and gig work. These aren’t the kind of roles that allow you to buy a home, start a family, or save for a rainy day. They are treading water jobs.
Over the last decade, prices for essentials – housing, insurance, and healthcare – have reset at a much higher level. Wages, on the other hand, have failed to keep up. When the cost of living outpaces the value of labor, you eventually get a recession.
As more people realize that working 50 hours a week still leaves them broke, they stop being slaves to the grind. This is evidenced by the sliding labor force participation rate. As of March 2026, it’s at 61.9 percent. This has been on a downward trend for several decades and is well below pre-covid levels.
The declining labor force participation rate creates a hollowed-out middle class that is forced to rely on predatory credit to make ends meet. When the math of daily survival no longer adds up, the social contract begins to fray. We are witnessing a quiet exodus from the traditional workforce that no policy can mask, as the working class can no longer afford to work.
The bizarre thing about a recession is that you don’t officially know you’re in one until you’re six months deep. It’s like a slow-motion train wreck. By the time you feel the impact, the locomotive has long since jumped the tracks.
[Editor’s note: Get a free copy of an important special report called, “Cash Machine – Why You Should Own this Mineral Royalty with a 12% Yield,” when you join the Economic Prism mailing list today. If you want a special trial deal to check out MN Gordon’s Wealth Prism Letter, you can grab that here.]
Sincerely,
MN Gordon
for Economic Prism
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