Are you waiting for the next major wave of the global economic collapse to strike? Well, you might want to start paying attention again. Three of the ten largest economies on the planet have already fallen into recession, and there are very serious warning signs coming from several other global economic powerhouses. Things are already so bad that British Prime Minister David Cameron is comparing the current state of affairs to the horrific financial crisis of 2008. In an article for the Guardian that was published on Monday, he delivered the following sobering warning: “Six years on from the financial crash that brought the world to its knees, red warning lights are once again flashing on the dashboard of the global economy.” For the leader of the nation with the 6th largest economy in the world to make such a statement is more than a little bit concerning.
So why is Cameron freaking out?
Well, just consider what is going on in Japan. The economy of Japan is the 3rd largest on the entire planet, and it is a total basket case at this point. Many believe that the Japanese will be on the leading edge of the next great global economic crisis, and that is why it is so alarming that Japan has just dipped into recession again for the fourth time in six years…
Japan’s economy unexpectedly fell into recession in the third quarter, a painful slump that called into question efforts by Prime Minister Shinzo Abe to pull the country out of nearly two decades of deflation.
The second consecutive quarterly decline in gross domestic product could upend Japan’s political landscape. Mr. Abe is considering dissolving Parliament and calling fresh elections, people close to him say, and Monday’s economic report is seen as critical to his decision, which is widely expected to come this week.
Of course Japan is far from alone.
Brazil has the 7th largest economy on the globe, and it has already been in recession for quite a few months.
And the problems that the national oil company is currently experiencing certainly are not helping matters…
In the past five days, 23 powerful Brazilians have been arrested, with even more warrants still outstanding.
The country’s stock market has become a whipsaw, and its currency, the real, has hit a nine-year low.
All of this is due to a far-reaching corruption scandal at one massive company, Petrobras.
In the last month the company’s stock has fallen by 35%.
The 9th largest economy in the world, Italy, has also fallen into recession…
Italian GDP dropped another 0.1% in the third quarter, as expected.
That’s following a 0.2% drop in Q2 and another 0.1% decline in Q1, capping nine months of recession for Europe’s third-largest economy.
Like Japan, there is no easy way out for Italy. A rapidly aging population coupled with a debt to GDP ratio of more than 132 percent is a toxic combination. Italy needs to find a way to be productive once again, and that does not happen overnight.
Meanwhile, much of the rest of Europe is currently mired in depression-like conditions. The official unemployment numbers in some of the larger nations on the continent are absolutely eye-popping. The following list of unemployment figures comes from one of my previous articles…
Are you starting to get the picture?
The world is facing some real economic problems.
Another traditionally strong economic power that is suddenly dealing with adversity is Israel.
In fact, the economy of Israel is shrinking for the first time since 2009…
Israel’s economy contracted for the first time in more than five years in the third quarter, as growth was hit by the effects of a war with Islamist militants in Gaza.
Gross domestic product fell 0.4 percent in the July-September period, the Central Bureau of Statistics said on Sunday. It was the first quarterly decline since a 0.2 percent drop in the first three months of 2009, at the outset of the global financial crisis.
And needless to say, U.S. economic sanctions have hit Russia pretty hard.
The rouble has been plummeting like a rock, and the Russian government is preparing for a “catastrophic” decline in oil prices…
President Vladimir Putin said Russia’s economy, battered by sanctions and a collapsing currency, faces a potential “catastrophic” slump in oil prices.
Such a scenario is “entirely possible, and we admit it,” Putin told the state-run Tass news service before attending this weekend’s Group of 20 summit in Brisbane, Australia, according to a transcript e-mailed by the Kremlin today. Russia’s reserves, at more than $400 billion, would allow the country to weather such a turn of events, he said.
Crude prices have fallen by almost a third this year, undercutting the economy in Russia, the world’s largest energy exporter.
It is being reported that Russian President Vladimir Putin has been hoarding gold in anticipation of a full-blown global economic war.
I think that will end up being a very wise decision on his part.
Despite all of this global chaos, things are still pretty stable in the United States for the moment. The stock market keeps setting new all-time highs and much of the country is preparing for an orgy of Christmas shopping.
Unfortunately, the number of children that won’t even have a roof to sleep under this holiday season just continues to grow.
A stunning report that was just released by the National Center on Family Homelessness says that the number of homeless children in America has soared to an astounding 2.5 million.
That means that approximately one out of every 30 children in the United States is homeless.
Let that number sink in for a moment as you read more about this new report from the Washington Post…
The number of homeless children in the United States has surged in recent years to an all-time high, amounting to one child in every 30, according to a comprehensive state-by-state report that blames the nation’s high poverty rate, the lack of affordable housing and the effects of pervasive domestic violence.
Titled “America’s Youngest Outcasts,” the report being issued Monday by the National Center on Family Homelessness calculates that nearly 2.5 million American children were homeless at some point in 2013. The number is based on the Education Department’s latest count of 1.3 million homeless children in public schools, supplemented by estimates of homeless preschool children not counted by the agency.
The problem is particularly severe in California, which has about one-eighth of the U.S. population but accounts for more than one-fifth of the homeless children, totaling nearly 527,000.
This is why I get so fired up about the destruction of the middle class. A healthy economy would mean more wealth for most people. But instead, most Americans just continue to see a decline in the standard of living.
And remember, the next major wave of the economic collapse has not even hit us yet. When it does, the suffering of the poor and the middle class is going to get much worse.
Unfortunately, there are already signs that the U.S. economy is starting to slow down too. In fact, the latest manufacturing numbers were not good at all…
The Federal Reserve’s new industrial production data for October show that, on a monthly basis, real U.S. manufacturing output has fallen on net since July, marking its worst three-month production stretch since March-June, 2011. Largely responsible is the automotive sector’s sudden transformation from a manufacturing growth leader into a serious growth laggard, with combined real vehicles and parts production enduring its worst three-month stretch since late 2008 to early 2009.
A lot of very smart people are forecasting economic disaster for next year.
Hopefully they are all wrong, but I have a feeling that they are going to be right.
The parallels between the false prosperity of 2007 and the false prosperity of 2014 are rather striking. If we go back and look at the numbers in the fall of 2007, we find that the Dow set an all-time high in October, margin debt on Wall Street had spiked to record levels, the unemployment rate was below 5 percent and Americans were getting ready to spend a record amount of money that Christmas season. But then the very next year the worst economic crisis since the Great Depression shook the entire planet and everyone wondered why most people never saw it coming. Well, now a similar pattern is unfolding right before our eyes. The Dow and the S&P 500 both hit record highs on Monday, margin debt on Wall Street is hovering near record levels, the unemployment rate has ticked down a little bit and Americans are getting ready to spend more than 600 billion dollars this Christmas season. The truth is that the economy seems pretty stable for the moment, and most people cannot even imagine that an economic collapse is coming. So why are so many really smart people forecasting economic disaster in the near future?
For example, just consider what the Jerome Levy Forecasting Center is saying. This is an organization with a tremendous economic forecasting record that goes all the way back to the Great Depression. In fact, it predicted ahead of time the financial trouble and the recession that would happen in 2008. Well, now this company is forecasting that there is a 65 percent chance that there will be a global recession by the end of next year…
In 1929, a businessman and economist by the name of Jerome Levy didn’t like what he saw in his analysis of corporate profits. He sold his stocks before the October crash.
Almost eight decades later, the consultancy company that bears his name declared “the next recession will be caused by the deflating housing bubble.” By February 2007, it predicted problems in the subprime-mortgage market would spread “to virtually all financial markets.” In October 2007, it saw imminent recession — the slump began two months later.
The Jerome Levy Forecasting Center, based in Mount Kisco, New York, and run by Jerome’s grandson David, is again more worried than its peers. Its half-dozen analysts attach a 65 percent probability of a worldwide recession forcing a contraction in the U.S. by the end of next year.
Could they be wrong?
It’s certainly possible.
But I wouldn’t bet against them.
John Hussman is another expert that is warning of financial disaster on the horizon. He believes that we are experiencing a massive stock market bubble right now and that stocks are approximately double the value that they should be…
If you look at corporate profits and especially corporate profit margins, they’re one of the most cyclical and mean-reverting series in economics. Right now, we have corporate profits that are close to about 11% of GDP, but if you look at that series you will find that corporate profits as a share of GDP have always dropped back to about 5.5% or below in every single economic cycle including recent decades, including not only the financial crisis but 2002 and every other economic cycle we have been in.
Right now stocks as a multiple of last year’s expected earnings may look only modestly over valued or modestly richly valued. Really if you look at the measures of valuation that are most correlated to the returns that stocks deliver over time say over seven years or over the next 10 years the S&P 500 in our estimation is about double the level of valuation that would give investors a normal rate of return.
Could you imagine the chaos that would ensue if stocks really did drop by 50 percent?
Well, Hussman says that this is precisely what must happen in order for stock prices to return to historical norms…
Right now, like I say, we are looking at stocks that have been pressed to long-term expected returns that are really dismal. But more important than that, in every market cycle that we’ve seen with the mild exception of 2002, we’ve seen stocks price revert back to normal rates of return. In order to get to that point from here, we would have to have equities drop by about half.
If that does happen, it will make the crisis of 2008 look like a Sunday picnic.
Meanwhile, other very prominent thinkers are also warning that an economic nightmare is rapidly approaching.
Economic cycle theorist Martin Armstrong foresees major economic problems in 2015 which will ultimately lead to “civil unrest” in 2016…
It looks more and more like a serious political uprising will erupt by 2016 once the economy turns down. That is the magic ingredient. Turn the economy down and you get civil unrest and revolution.
And of course there are a whole lot of other economic cycle theorists that are forecasting that we are about to experience a massive economic downturn as well. For much more on this, please see this article and this article.
What is truly frightening is that we have never even come close to recovering from the last economic crisis. One poll that was taken just prior to the recent election found that only 28 percent of Americans said that their families were doing better financially. In addition, here are some more survey numbers about how Americans are feeling about the economy…
According to voter exit polls conducted by CNN, 78% said they are worried about the economy, with 69% saying that, in their view, economic conditions are not good. 65% responded that the country is on the wrong track vs. only 31% who believed that it is headed in the right direction.
Even though we are repeating so many of the same patterns that we experienced back in 2007, we are doing so with a fundamentally weaker economy. The last crisis did a tremendous amount of permanent damage to us. For an extensive look at this, please see my previous article entitled “12 Charts That Show The Permanent Damage That Has Been Done To The U.S. Economy“.
And there are lots of signs that much of the planet is already entering another major economic slowdown. In a recent article, Brandon Smith summarized some of these. He says that we are currently witnessing “the last gasp of the global economy“…
Global exports, and thus consumer demand, are plunging. Germany, the only pillar left to prop up the failing European Union, has experienced a severe decline in exports not seen since 2009.
China, the largest exporter and importer in the world, and Chinese companies, have been caught in a number of instances using fraudulent invoices to artificially inflate their own export numbers, in some cases reporting 50% more exported goods than had actually existed.
China’s manufacturing has also declined for the past five months, exposing the nature of its inflated export stats and indicating a global slowdown.
The Baltic Dry Index, a measure of global shipping rates for raw goods, and thus a measure of demand for shipping, continues to drag along near historic lows.
The U.S. consumer (the only economic asset the U.S. has besides the dollar’s world reserve status), has seen declines in spending as well as wages.
In the meantime, long term jobless Americans continue to fall off welfare rolls by the millions, making unemployment numbers look good, but the overall future picture look terrible as participation rates dissolve into the ether of government statistics.
How is such poverty being hidden? Foodstamps. Plain and simple. Nearly 50 million Americans now subsist on food stamp programs today, and this number shows no signs of dropping. In states like Illinois, two people sign up for food assistance for every citizen that happens to find a job.
From time to time, I get accused of “spreading fear” and of being obsessed with “doom and gloom”.
But that is not the case at all.
I actually want our economy to stay stable for as long as possible. Many Americans don’t realize this, but even the poorest of us live in luxury compared to much of the rest of the world. It would be wonderful if we could all live out our lives in peace and quiet and safety.
Unfortunately, it is simply not going to happen.
And it does not take an expert to see what is coming.
Anyone with half a brain should be able to see the economic disaster that is approaching.
There is hope in understanding what is happening and there is hope in getting prepared. Millions of Americans that are willingly blind to our problems are going to have their lives absolutely destroyed when they get blindsided by the coming crisis. So please use this brief period of relative stability to get prepared and to warn others.
Once this false bubble of hope runs out, all of our lives are going to dramatically change.
Thanks to the Federal Reserve, the middle class is slowly being suffocated by rising food prices. Every single dollar in your wallet is constantly becoming less valuable because of the inflation the Fed systematically creates. And if you try to build wealth by saving money and earning interest on it, you still lose because thanks to the Federal Reserve’s near zero interest rate policies banks pay next to nothing on savings accounts. The Federal Reserve wants you to either spend your money or to put it in the giant casino that we call the stock market. But when Americans spend their paychecks they are finding that they don’t stretch as far as they once did. The cost of living continues to rise at a much faster pace than wages are rising, and this is especially true when it comes to the price of food.
Someone that I know wrote to me today and let me know that she had to shut down the food pantry that she had been running for the poor for so many years. It isn’t that she didn’t want to help the poor anymore. It was that she just couldn’t deal with the rising food prices any longer. Now she is just doing the best that she can to survive herself.
Perhaps you have also noticed that food prices have gotten pretty crazy lately. In particular, meat prices have become absolutely obscene. For example, the average price of ground beef has risen to a new record high of over $4.09 a pound. Over the past twelve months, that works out to a whopping 17 percent increase…
The average price for a pound of ground beef climbed to another record high–$4.096 per pound–in the United States in September, according to data released today by the Bureau of Labor Statistics (BLS).
In August, according to BLS, the average price for a pound of all types of ground beef topped $4 for the first time–hitting $4.013. In September, the average price jumped .083 cents, an increase of 2.1 percent in one month.
A year ago, in September 2013, the average price for a pound of ground beef was $3.502 per pound. Since then, it has climbed 59.4 cents–or about 17 percent in one year.
The “intellectuals” over at the Federal Reserve insist that “a little bit of inflation” is good for an economy, but the truth is that inflation slowly robs us of our buying power.
In a previous article, I shared a chart that showed how food inflation has risen dramatically since the year 2000. For this article, I wanted to show how food inflation has risen since the 1970s. As you can see, the rise in food prices has been absolutely relentless for more than 40 years…
If our paychecks were going up at the same rate or even faster that would be okay.
But they aren’t.
In fact, CNN is reporting that our paychecks have fallen back to 1995 levels…
Americans also don’t feel any better off. While more people may have jobs, they aren’t bringing home fatter paychecks. Wages and income have remained stagnant for years, making it tough for folks even though inflation is low. Median household income, which stood at $51,939 last year, is back to 1995 levels.
Consumers expect a median income boost of 1.1% over the next year, Curtin said. But that won’t keep up with their inflation expectations of 2.8%.
“American households, on average, are still struggling with their living standards slowly eroding,” he said.
This is one of the primary reasons why the middle class is disappearing in America.
The purchasing power of our dollars is continually diminishing.
And this could be just the beginning. Right now, severe drought is affecting some of the most important agricultural areas around the globe. Most people are aware of the nightmarish drought in California, but did you know that things in Brazil are even worse? Brazil is one of the most important food exporters in the world, and so they definitely need our prayers.
In addition, a “black swan event” such as a worldwide explosion of the Ebola pandemic could quickly drive food prices into the stratosphere.
Just this week, we learned that food prices in the Ebola-stricken regions of Liberia, Guinea and Sierra Leone have already risen by an average of 24 percent…
Infection rates in the food-producing zones of Kenema and Kailahun in Sierra Leone, Lofa and Bong County in Liberia and GuDeckDedou in Guinea are among the highest in the region. Hundreds of farmers have died.
The three governments quarantined districts and restricted movements to contain the virus’ spread. But those measures also disrupted markets and led to food scarcity and panic buying, further pushing up prices, WFP and the Food and Agriculture Organization have said.
“Prices have risen by an average of 24 percent,” said WFP spokeswoman Elisabeth Byrs, adding an assessment of major markets showed the price of basic commodities was rising in Guinea, Liberia and Sierra Leone and in neighboring Senegal.
If you have been storing up food, I think that you will be very happy with your decision in the long run.
Without a doubt, food prices are only going to be going up from here.
But the Federal Reserve continues to insist that inflation is under control.
One of the ways that they make the “official numbers” look good is by playing accounting games. They regularly change the way that inflation is calculated in order keep everyone calm.
You don’t have to take my word for it. Posted below is an excerpt from an article by Mike Bryan, a vice president and senior economist in the Atlanta Fed’s research department…
The Economist retells a conversation with Stephen Roach, who in the 1970s worked for the Federal Reserve under Chairman Arthur Burns. Roach remembers that when oil prices surged around 1973, Burns asked Federal Reserve Board economists to strip those prices out of the CPI “to get a less distorted measure. When food prices then rose sharply, they stripped those out too—followed by used cars, children’s toys, jewellery, housing and so on, until around half of the CPI basket was excluded because it was supposedly ‘distorted'” by forces outside the control of the central bank. The story goes on to say that, at least in part because of these actions, the Fed failed to spot the breadth of the inflationary threat of the 1970s.
I have a similar story. I remember a morning in 1991 at a meeting of the Federal Reserve Bank of Cleveland’s board of directors. I was welcomed to the lectern with, “Now it’s time to see what Mike is going to throw out of the CPI this month.” It was an uncomfortable moment for me that had a lasting influence. It was my motivation for constructing the Cleveland Fed’s median CPI.
I am a reasonably skilled reader of a monthly CPI release. And since I approached each monthly report with a pretty clear idea of what the actual rate of inflation was, it was always pretty easy for me to look across the items in the CPI market basket and identify any offending—or “distorted”—price change. Stripping these items from the price statistic revealed the truth—and confirmed that I was right all along about the actual rate of inflation.
It is all a game to them.
It is all about getting to the “right number” to release to the public.
But anyone that goes to the grocery store knows what has been happening to food prices.
The next time you get to the checkout register and you feel tempted to ask the cashier what organ you should donate to pay for your groceries, please keep in mind that it is not the fault of the cashier.
Instead, there is one entity that you should blame.
Blame the Federal Reserve – their policies are slowly pushing the middle class into oblivion.
Barack Obama and the Federal Reserve are lying to you. The “economic recovery” that we all keep hearing about is mostly just a mirage. The percentage of Americans that are employed has barely budged since the depths of the last recession, the labor force participation rate is at a 36 year low, the overall rate of homeownership is the lowest that it has been in nearly 20 years and approximately 49 percent of all Americans are financially dependent on the government at this point. In a recent article, I shared 12 charts that clearly demonstrate the permanent damage that has been done to our economy over the last decade. The response to that article was very strong. Many people were quite upset to learn that they were not being told the truth by our politicians and by the mainstream media. Sadly, the vast majority of Americans still have absolutely no idea what is being done to our economy. For those out there that still believe that we are doing “just fine”, here are 19 more facts about the messed up state of the U.S. economy…
#1 After accounting for inflation, median household income in the United States is 8 percent lower than it was when the last recession started in 2007.
#2 The number of part-time workers in America has increased by 54 percent since the last recession began in December 2007. Meanwhile, the number of full-time jobs has dropped by more than a million over that same time period.
#3 More than 7 million Americans that are currently working part-time jobs would actually like to have full-time jobs.
#4 The jobs gained during this “recovery” pay an average of 23 percent less than the jobs that were lost during the last recession.
#5 The number of unemployed workers that have completely given up looking for work is twice as high now as it was when the last recession began in December 2007.
#6 When the last recession began, about 17 percent of all unemployed workers had been out of work for six months or longer. Today, that number sits at just above 34 percent.
#7 Due to a lack of decent jobs, half of all college graduates are still relying on their parents financially when they are two years out of school.
#8 According to a new method of calculating poverty devised by the U.S. Census Bureau, the state of California currently has a poverty rate of 23.4 percent.
#9 According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.
#10 In 2007, the average household in the top 5 percent had 16.5 times as much wealth as the average household overall. But now the average household in the top 5 percent has 24 times as much wealth as the average household overall.
#11 In an absolutely stunning development, the rate of small business ownership in the United States has plunged to an all-time low.
#12 Subprime loans now make up 31 percent of all auto loans in America. Didn’t that end up really badly when the housing industry tried the same thing?
#13 The average cost of producing a barrel of shale oil in the United States is approximately 85 dollars. Now that the price of oil is starting to slip under that number, the “shale boom” in America could turn into a bust very rapidly.
#14 On a purchasing power basis, China now actually has a larger economy than the United States does.
#15 It is hard to believe, but there are 49 million people that are dealing with food insecurity in America today.
#16 There are six banks in the United States that pretty much everyone agrees fit into the “too big to fail” category. Five of them have more than 40 trillion dollars of exposure to derivatives.
#17 The 113 top earning employees at the Federal Reserve headquarters in Washington D.C. make an average of $246,506 a year. It turns out that ruining the U.S. economy is a very lucrative profession.
#18 We are told that the federal deficit is under control, but the truth is that the U.S. national debt increased by more than a trillion dollars during fiscal year 2014.
#19 An astounding 40 million dollars has been spent just on vacations for Barack Obama and his family. Perhaps he figures that if we are going down as a nation anyway, he might as well enjoy the ride.
If our economy truly was “recovering”, there would be lots of good paying middle class jobs available.
But that is not the case at all.
I know so many people in their prime working years that spend day after day searching for a job. Most of them never seem to get anywhere. It isn’t because they don’t have anything to offer. It is just that the labor market is absolutely saturated with qualified job seekers.
For example, USA Today recently shared the story of 42-year-old Alex Gomez…
“I’ve had to seriously downgrade my living situation,” said Alex Gomez, a 42-year-old with a master’s degree in entrepreneurship. Gomez lost his last full-time job in 2009 and has been looking for work since a short-term contract position ended in 2012.
Gomez’s home was foreclosed on, so the Tampa resident lives with three roommates in a college neighborhood. He drained his 401(k) trying to save his house, and he has around $150,000 in student loans. His mother is tapping her 401(k) to pay his rent. Gomez subsists on that and about $200 a month in food stamps.
“I have been applying and looking for pretty much anything at this stage,” he said. Although he’s looking for work in engineering or data management, “I applied to a supermarket as a deli clerk because I used to be a deli clerk as a teenager,” he said. He was told he was overqualified and turned down.
Does Alex Gomez have gifts and abilities to share with our society?
Of course he does.
So why can’t he find a job?
It is because we have a broken economy.
We are in the midst of a long-term economic decline and the system simply does not work properly anymore.
And thanks to decades of very foolish decisions, this is only the start of our problems.
Things are only going to get worse from here.
Most people that discuss the “economic collapse” focus on what is coming in the future. And without a doubt, we are on the verge of some incredibly hard times. But what often gets neglected is the immense permanent damage that has been done to the U.S. economy by the long-term economic collapse that we are already experiencing. In this article I am going to share with you 12 economic charts that show that we are in much, much worse shape than we were five or ten years ago. The long-term problems that are eating away at the foundations of our economy like cancer have not been fixed. In fact, many of them continue to get even worse year after year. But because unprecedented levels of government debt and reckless money printing by the Federal Reserve have bought us a very short window of relative stability, most Americans don’t seem too concerned about our long-term problems. They seem to have faith that our “leaders” will be able to find a way to muddle through whatever challenges are ahead. Hopefully this article will be a wake up call. The last major wave of the economic collapse did a colossal amount of damage to our economic foundations, and now the next major wave of the economic collapse is rapidly approaching.
The mainstream media is constantly telling us about the “employment recovery” that is happening in the United States, but the truth is that it is just an illusion. As the chart below demonstrates, just prior to the last recession about 63 percent of all working age Americans had a job. During the last wave of the economic collapse, that number dropped to below 59 percent and stayed there for a very long time. In the past few months we have finally seen the employment-population ratio tick back up to 59 percent, but we are still far, far below where we used to be. To call the tiny little bump at the end of this chart a “recovery” is really an insult to our intelligence…
#2 The Labor Force Participation Rate
The percentage of Americans that are either employed or currently looking for a job started to fall during the last recession and it has not stopped falling since then. The labor force participation rate has now fallen to a 36 year low, and this is a sign of a very, very sick economy…
#3 The Inactivity Rate For Men In Their Prime Years
Some blame the decline in the labor force participation rate on the aging of our population. But it isn’t just elderly people that are dropping out of the labor force. In fact, the inactivity rate for men in their prime working years (25 to 54) continues to rise and is now at the highest level that has ever been recorded…
#4 Manufacturing Employees
Once upon a time in America, anyone that was reliable and willing to work hard could easily find a manufacturing job somewhere. But we have stood by and allowed millions upon millions of good paying manufacturing jobs to be shipped out of the country, and now many of our formerly great manufacturing cities have been transformed into ghost towns. Over the past few years, there has been a slight “recovery”, but we are still well below where we were at just previous to the last recession…
#5 Our Current Account Balance
As a nation, we buy far more from the rest of the world than they buy from us. In other words, we perpetually consume far more wealth than we produce. This is a recipe for national economic suicide. Our current account balance soared to obscene levels just prior to the last recession, and now we have almost gotten back to those levels…
#6 Existing Home Sales
Our economy has never fully recovered from the housing crash of 2007-2008. As you can see from the chart below, the number of existing home sales is still far below the level that we hit back in 2006. At this point we are just getting back to the level we were at in 2000, but our population today is far larger than it was back then…
#7 New Home Sales
Things are even more dramatic when you look at new home sales. This is an industry that have been absolutely emasculated. The number of new home sales in the United States is just a little more than half of what it was back in 2000, and it isn’t even worth comparing to what we experienced during the peak of 2006.
#8 The Monetary Base
In a desperate attempt to get the economy going again, the Federal Reserve has been wildly printing money. It has been so reckless that it is hard to put it into words. When I look at this chart, the phrase “Weimar Republic” comes to mind…
#9 Food Inflation
Thankfully, much of the money that the Federal Reserve has been injecting into the system has not made it into the real economy. But enough of it has gotten into the system to force food prices significantly higher. For example, my wife went to the store today and paid just a shade under 10 bucks for just four pieces of chicken. And as you can see from the chart below, food prices have been steadily going up in America for a very long time…
#10 The Velocity Of Money
One of the reasons why we have not seen even more inflation is because the velocity of money is extraordinarily low. In general, when an economy is healthy money tends to flow through the system rapidly. People are buying and selling and money changes hands frequently. But when an economy is sick, money tends to stagnate. And that is exactly what is happening in the United States right now. In fact, at this point the velocity of the M2 money stock has dropped to the lowest level ever recorded…
#11 The National Debt
As our economic fundamentals have deteriorated, our politicians have attempted to prop up our standard of living by borrowing from the future. The U.S. national debt is on pace to approximately double during the Obama years, and it increased by more than a trillion dollars in fiscal year 2014 alone. Despite assurances that “the deficit is under control”, the federal government borrows about a trillion dollars a year to fund new spending in addition to borrowing about 7 trillion dollars to pay off old debt that is coming due. What we are doing to future generations of Americans is absolutely criminal, and it is just a matter of time before this Ponzi scheme totally collapses…
#12 Total Debt
Of course it is not just the federal government that is gorging on debt. When you add up all forms of debt in our society (government, business, consumer, etc.) it comes to a grand total of more than 57 trillion dollars. This total has more than doubled since the year 2000…
If you know anyone that believes that we are in good economic shape, just show them these charts.
The numbers do not lie. Our economy is sick and it is getting sicker by the day.
And of course the next major financial crisis could strike at any time. U.S. stocks just experienced their worst week in three years, and if cases of Ebola start popping up around the country the fear that would cause could collapse our economy all by itself.
The debt-fueled prosperity that we are enjoying today is not real. We are living on the fumes of our past, and every single day our long-term problems get even worse.
Anyone with half a brain should be able to see what is coming.
Sadly, most Americans will continue to deny the truth until it is far too late.
The U.S. economy has had six full years to bounce back since the financial collapse of 2008, and it simply has not happened. Median household income has declined substantially since then, total household wealth for middle class families is way down, the percentage of the population that is employed is still about where it was at the end of the last recession, and the number of Americans that are dependent on the government has absolutely exploded. Even those that claim that the economy is “recovering” admit that we are not even close to where we used to be economically. Many hope that someday we will eventually get back to that level, but the truth is that this is about as good as things are ever going to get for the middle class. And we should enjoy this period of relative stability while we still can, because when the next great financial crisis strikes things are going to fall apart very rapidly.
The U.S. Census Bureau has just released some brand new numbers, and they are quite sobering. For example, after accounting for inflation median household income in the United States has declined a total of 8 percent from where it was back in 2007.
That means that middle class families have significantly less purchasing power than they did just prior to the last major financial crisis.
And one research firm is projecting that it is going to take until 2019 for median household income to return to the level that we witnessed in 2007…
For everybody wondering why the economic recovery feels like a recession, here’s the answer: We’re still at least five years away from regaining everything lost during the 2007-2009 downturn.
Forecasting firm IHS Global Insight predicts that real median household income — perhaps the best proxy for middle-class living standards — won’t reach the prior peak from 2007 until 2019. Since the numbers are adjusted for inflation, that means the typical family will wait 12 years until their purchasing power is as strong as it was before the recession. That would be the longest period of stagnation, by far, since the Great Depression of the 1930s.
Of course that projection assumes that the economy will continue to “recover”, which is a very questionable assumption at best.
Meanwhile, total household wealth has been declining for middle class families as well.
According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.
That is a pretty substantial drop. But you never hear our politicians (especially the Democrats) bring up numbers like that because they want us to feel good about things.
So why is all of this happening?
The biggest reason why the middle class is struggling so much is the lack of good jobs.
As the chart posted below demonstrates, the percentage of the working age population that is actually employed is still way, way below where it was prior to the last recession…
The “employment recovery” (the tiny little bump at the end of the chart) has been so miniscule that it is hardly even worth mentioning.
At the moment, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the U.S. population each month.
And a lot of the workers that have lost jobs since the start of the last recession have never been able to find a new one.
According to a brand new survey conducted by Rutgers University, more than 20 percent of all workers that have been laid off in the past five years still have not found a new job.
Meanwhile, the control freak bureaucrats that run this country continue to kill off small businesses.
In recent years we have seen large numbers of small businesses fail, and at this point the rate of small business ownership in the United States is at an all-time low.
As a result of everything that you have just read, the middle class is shrinking and dependence on the government is soaring.
Today, there are 49 million Americans that are dealing with food insecurity, and Americans received more than 2 trillion dollars in benefits from the federal government last year alone.
For many more statistics just like this, please see my previous article entitled “30 stats to show to anyone that does not believe the middle class is being destroyed“.
Without a doubt, things are not that good for the middle class in America these days.
Unfortunately, the next great wave of financial trouble is rapidly approaching, and once it strikes things are going to get substantially worse for the middle class.
Yes, the stock market set record high after record high this summer. But what we have observed is classic bubble behavior. So many of the exact same patterns that occurred just prior to previous stock market crashes are happening once again.
And it is interesting to note that September 22nd has marked important market peaks at various times throughout history…
For traders, September 22 is one of those days with a notorious history. UBS’s Art Cashin notes that September 22 marked various market highs in 1873, 1929, 1980, and even as recent as 2008.
Could the coming months be the beginning of the next major stock market decline?
Small-cap stocks are already starting to show signs of real weakness. In fact, the Russell 2000 just hit a “death cross” for the first time in more than 2 years…
The Russell 2000 has been diverging from the broader market over the last several weeks, and now technicians point out it has flashed a bearish signal. For the first time in more than two years, the small-cap index has hit a so-called death cross.
A death cross occurs when a nearer-term 50-day moving average falls below a longer-term, 200-day moving average. Technicians argue that a death cross can be a bearish sign.
None of us knows what the market is going to do tomorrow, but a lot of the “smart money” is getting out of the market right now while the getting is good.
So where is the “smart money” putting their assets?
In a previous article, I discussed how sales of gold bars to wealthy clients is way up so far this year.
And CNBC has just reported that the ultra-wealthy “are holding mountains of cash” right now…
Billionaires are holding mountains of cash, offering the latest sign that the ultra-wealthy are nervous about putting more money into today’s markets.
According to the new Billionaire Census from Wealth-X and UBS, the world’s billionaires are holding an average of $600 million in cash each—greater than the gross domestic product of Dominica.
Why are they doing this?
Are they concerned about the potential of a market crash?
And if we do see another market crash like we witnessed back in 2008, what is that going to mean for the rest of us?
2008 certainly did not destroy our economy.
But it did cause an immense amount of damage that we have never recovered from.
Now the next wave is approaching, and most people don’t even see it coming.
The idea that the Obama administration has the budget deficit under control is a complete and total lie. According to the U.S. Treasury, the federal government has officially run a deficit of 589 billion dollars for the first 11 months of fiscal year 2014. But this number is just for public consumption and it relies on accounting tricks which massively understate how much debt is actually being accumulated. If you want to know what the real budget deficit is, all you have to do is go to a U.S. Treasury website which calculates the U.S. national debt to the penny. On September 30th, 2013 the U.S. national debt was sitting at $16,738,183,526,697.32. As I write this, the U.S. national debt is sitting at $17,742,108,970,073.37. That means that the U.S. national debt has actually grown by more than a trillion dollars in less than 12 months. We continue to wildly run up debt as if there is no tomorrow, and by doing so we are destroying the future of this nation.
The chart that I have posted below shows the exponential growth of the U.S. national debt over the past several decades. Anyone that would characterize this as “under control” is lying to you…
This is the greatest government debt bubble in the history of the world, but very few people seem to have any desire to do anything about this anymore. We are literally gorging on debt, and most Americans seem to think that it is just fine and dandy.
Perhaps that it is because we have never really experienced any serious consequences for going into so much debt yet.
But when it comes to running up debt, a day of reckoning always comes eventually.
Just ask Greece.
And the absolutely insane spending policies of this administration and this Congress are hastening the day when our day of reckoning will arrive.
Consider the following facts…
-The U.S. national debt has increased by more than 7 trillion dollars since Barack Obama has been in the White House. By the time Obama’s second term is over, we will have accumulated about as much new debt under his leadership than we did under all of the other U.S. presidents in all of U.S. history combined.
-The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first established in 1913.
-If the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.
-Right now, the United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.
-In August, the average rate of interest on the government’s marketable debt was 2.028 percent. In January 2000, the average rate of interest on the government’s marketable debt was 6.620 percent. If we got back to that level today, we would be paying well over a trillion dollars a year just in interest on the national debt.
-At this point the U.S. government has accumulated more than 200 trillion dollars of unfunded liabilities that will need to be paid in future years. In other words, we have made more than 200 trillion dollars worth of promises that we do not have money for yet.
Thomas Jefferson once said that “the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
What we are doing to future generations is absolutely unconscionable. We are stealing trillions upon trillions of dollars from our children and our grandchildren, and we are willingly consigning them to a lifetime of debt slavery.
I have said this before, but it bears repeating. If future generations get the chance, they will look back and curse us for what we have done to them.
And shame on anyone that would dare to suggest that we should continue to run up more debt that future generations will be expected to repay.
But government debt is far from the only massive debt bubble that we are dealing with as a country.
40 years ago, the total amount of debt in our nation (all government debt plus all business debt plus all individual debt) was sitting at a grand total of about 2.3 trillion dollars.
Today, that total has grown to 59.4 trillion dollars.
As the chart posted below shows, our total debt bubble is now more than 25 times larger than it was just 40 years ago…
If you were to take all forms of debt in our country and divide it up equally to each person, the average family of four would owe approximately $735,000.
This is not anywhere close to being sustainable, but most Americans don’t seem to care. They just continue to recklessly run up even more debt.
However, there are signs that we are starting to hit a wall with all of this debt.
For example, an astounding 35 percent of all Americans have debts that are so overdue that they have been referred to collection agencies.
Our nation has become an ocean of red ink from sea to shining sea, and the only way to keep the bubble from bursting is for the total amount of debt to continue to grow much faster than the overall economy is growing.
Obviously this cannot happen indefinitely, and when this house of cards comes crashing down it is going to be absolutely horrific. For much more on all of this please see my previous article entitled “The United States Of Debt: Total Debt In America Hits A New Record High Of Nearly 60 Trillion Dollars“.
The big question is how long our “bubble economy” can keep going before it finally collapses.
It has gotten to the point where even some of the biggest banks in the world are admitting that what we have been doing is completely and totally unsustainable. Just consider the following excerpt from a recent article by Joshua Krause…
Recently, strategists for Deutsche Bank released a startling study in regards to government debt. They decided to investigate whether or not the bond market is currently in a bubble. What they found was, unlike previous eras, the past 20 years has seen no lag between economic booms and busts:
It has long been our view that over the last couple of decades the global economy has rolled from bubble to bubble with excesses never fully being allowed to unravel. Instead aggressive policy responses have encouraged them to roll into new bubbles.
This has arguably kept the modern financial system as we know it a going concern. Clearly there have always been bubbles formed through history but has there been a period like the last 20 years where the bursting of one bubble has consistently led directly to the formation of the next?
Essentially, our current system has been dying a very slow death. It’s running out of steam.
Sadly, most Americans have no idea that we are living in a giant debt-fueled bubble that has a limited lifespan.
Most Americans just assume that since the politicians tell them that everything is going to be okay that they don’t need to be concerned about any of this.
But every single day our debts get even larger and our long-term financial problems get even worse.
Someday this bubble is going to burst and then all hell will break loose.
It is just a matter of time.
According to the Federal Reserve, the percentage of American families that own a small business is at the lowest level that has ever been recorded. In a report that was just released entitled “Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances“, the Federal Reserve revealed that small business ownership in America “fell substantially” between 2010 and 2013. Even in the midst of this so-called “economic recovery”, small business ownership in America has now fallen to an all-time low. If the economy truly was healthy, this would not be happening. And it isn’t as if Americans are flooding the labor market either. As I detailed yesterday, the labor force participation rate in this country is at a 36 year low. That would not be happening if the economy was actually healthy either. The truth is that the middle class in America is dying, and this new report from the Federal Reserve is more evidence of this very harsh reality.
In order to build wealth, middle class Americans either need to have their own businesses or they need good jobs. Sadly, the percentage of Americans that own a business continues to decline steadily. In the report that I mentioned above, the Federal Reserve says that the proportion of U.S. families that have an ownership interest in a small business fell from 13.3 percent in 2010 to a brand new all-time low of 11.7 percent in 2013.
This is one of the factors that is increasing the gap between the extremely wealthy and the rest of us in this country. And of course another of the major factors is the steady decline in good paying jobs.
The U.S. Competitiveness Project at Harvard Business School is chaired by professors Michael E. Porter and Jan W. Rivkin. It just released a new report entitled “An Economy Doing Half Its Job”, and it addressed the fact that the middle class is deeply struggling even though many large U.S. corporations have been thriving. The following is an excerpt from an article in the Boston Globe about this report…
In a statement, Porter added: “Shortsighted executives may be satisfied with an American economy where firms operating here are winning without lifting US living standards. But leaders with longer perspectives understand that companies can’t thrive for long while their workers and their communities struggle.”
Unfortunately, this is not likely to change any time soon. In fact, that same report discovered that Harvard Business School alumni foresee “falling pay and fewer openings for full-time jobs” for American workers in the years ahead…
U.S. workers face a dim future, with stagnant or falling pay and fewer openings for full-time jobs.
That’s the picture that emerges from a survey of Harvard Business School alumni.
More than 40 percent of the respondents foresee lower pay and benefits for workers. Roughly half favor outsourcing work over hiring staffers. A growing share prefer part-time employees. Nearly half would rather invest in new technology than hire or retain workers.
The Obama administration continues to tell us that the unemployment rate is “going down” and that the economy is recovering, but that does not match the reality of what most Americans are experiencing on a day to day basis.
As David Stockman recently so aptly put it, outside of health and education the U.S. economy has not produced a single job since mid-2000 even though our population has grown greatly since that time…
In a few deft seconds, a “no jobs” nobody who apparently doesn’t actually have one himself, essentially explained the contents of the chart below to his silenced CNBC hosts. Over the course of 170 “jobs Fridays” since mid-2000, the latter have apparently never noticed the single most stunning fact embedded in the monthly BLS report. Namely, that outside of health and education there has not been one net new job created in the American economy since July 2000! Yes, not a single new job—as in none, nein, nichts, nada, zip!
In addition, most of the new jobs that are being “added to the economy” each month are part-time jobs. Right now, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the population each month.
What this means is that the middle class is shrinking.
We are witnessing an increasing concentration of wealth among the ultra-wealthy, and most of the rest of us are getting poorer. As a recent CNN article detailed, the Federal Reserve has also discovered that the gap between the rich and the poor in America is larger than the Fed has ever recorded before…
In its Study of Consumer Finances, released every three years, the Fed found that the wealthiest 3% of American households controlled 54.4% of the nation’s wealth in 2013, a slight increase from its last survey in 2010. It’s also substantially higher from the 44.8% they held in 1989, showing how quickly the income divide has been growing over the past decade or so.
At the same time, the share of wealth held by the bottom 90% fell to 24.7% in 2013. That’s compared to 33.2% in 1989.
How close does the share of wealth for the bottom 90 percent have to go before we admit that we have a major problem on our hands?
Is there anyone out there that would be okay with it hitting zero percent?
One of the big reasons why the wealthy have been doing so well is because the stock market has been soaring. The money printing policies of the Federal Reserve have sent stock prices to unprecedented heights. This has overwhelmingly benefited the extremely wealthy…
According to recent data from the Federal Reserve, America has the lowest level of stock ownership in 18 years. Yet stock ownership for the wealthy is at a new high—and that has accounted for most of their good fortune compared to the rest of America.
In fact, the Fed says that the wealthiest top 10 percent of all Americans now own 81 percent of all stocks…
Stock ownership is even more concentrated when it comes to share of total stock holdings. In 2010, the latest period available, the top 10 percent of Americans by net worth held 81 percent of all directly held or indirectly held stocks, according to Edward N. Wolff, an economics professor at New York University who specializes in inequality and Federal Reserve data.
Wolff said that share—which has not been released yet for 2013—has probably gone even higher than 81 percent since 2010.
Since the last financial crisis, the Federal Reserve has been very good to the elite.
But most of the rest of us have had a really hard time.
Until more Americans start getting good jobs and building small businesses, things are not going to turn around for the middle class.
But the policies being pursued by our politicians continue to kill good jobs and continue to kill small businesses, so I wouldn’t expect significant changes any time soon.