New DVDs By Michael Snyder
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 You better get ready, because there are a whole host of signs that economic trouble is on the horizon. U.S. economic growth slipped into negative territory during the fourth quarter of 2012. That was the first time that has happened in more than three years. Several important measures of manufacturing activity have also contracted in recent weeks, and consumer confidence is way down. There is a tremendous amount of economic pessimism in the air right now, and Americans are pulling enormous amounts of money out of our banks and they are buying up precious metals at unprecedented rates. Meanwhile, our “leaders” seem very confused about what is happening. For example, Senate Majority Leader Harry Reid continues to insist that we are “in a recovery“, and some other Democrats are calling the latest GDP numbers “the best-looking contraction in U.S. GDP you’ll ever see“. On the other hand, the Federal Reserve says that economic growth has “paused” in recent months, and therefore a continuation of their latest quantitative easing scheme is necessary. Well, no matter how hard any of them try to spin the numbers, there is no way that they are going to get them to look good. Despite four years of outrageous “stimulus” spending by the federal government, despite four years of record low interest rates, and despite four years of unprecedented money printing by the Federal Reserve, the U.S. economy continues to perform miserably. Later this year the federal government will probably finally acknowledge that we have entered another recession, even though the truth is that if the federal government used honest numbers they would indicate that we are already in one. In any event, nobody should have ever expected that our debt-fueled prosperity would last forever. When the debt bubble that we have been living in completely bursts, a “recession” will be the least of our worries.
Hopefully this little stretch of false economic hope that we have been living in will last for a little while longer. I don’t think that too many people are very eager to repeat the horrible economic pain that we experienced back in 2008 and 2009. Unfortunately, we never fully recovered from that last downturn and now the incredibly foolish decisions that our “leaders” continue to make have made another major economic downturn inevitable.
Personally, I would very much prefer for 2013 to be a year of peace and prosperity for America. But at this point there appears to be a great deal of downward momentum for the economy.
The following are 15 signs that you better get prepared for the Obama recession of 2013…
#1 The mainstream media was absolutely shocked when it was announced that U.S. GDP actually contracted at an annual rate of 0.1 percent during the fourth quarter of 2012. This was the first contraction that the official numbers have shown in more than three years. But of course the truth is that the official numbers always make things appear better than they really are. According to John Williams of shadowstats.com, U.S. GDP growth has actually been continuously negative all the way back to 2005 once you account “for distortions in government inflation usage and methodological changes that have resulted in a built-in upside bias to official reporting.”
#2 For the entire year of 2012, official U.S. GDP growth was only about 1.5%. According to Art Cashin, every time economic growth has fallen that low (below 2 percent annually) the U.S. economy has always ended up going into a recession.
#3 According to the Conference Board, consumer confidence in the United States has hit its lowest level in more than a year.
#4 For the week ending January 26th, initial claims for unemployment rose to 368,000. In future weeks, watch to see if it goes above 400,000. If we hit that level, that will be a sign of real trouble for the economy.
#5 During the first full week of January, an astounding $114 billion was pulled out of U.S. banks. That is the largest amount that we have seen moved out of U.S. banks in one week since 2001.
#6 The U.S. Mint was on pace to sell more silver eagles during the first month of 2013 than it did during the entire year of 2007. Why is so much silver being sold all of a sudden?
#7 The payroll tax hike that went into effect in January has reduced the paychecks of average American workers by about $100 a month.
#8 Several important measures of manufacturing activity along the east coast missed expectations by a huge margin in January. The following summary is from a recent Zero Hedge article…
So much for the latest “recovery.” While everyone continued to forget that in the New Normal markets do not reflect the underlying economy in the least, and that the all time highs in the Russell 2000 should indicate that the US economy has never been better, things in reality took a deep dive for the worse, at least according to the Empire State Fed, the Philly Fed, and now the Richmond Fed, all of which missed expectations by a huge margin, and are now deep in contraction territory. Moments ago, the Richmond Fed reported that the Manufacturing Index imploded from a 9 in November, 5 in December and missed expectations of a 5 print at -12: this was the biggest miss to expectations since September 2009.
#9 An astounding 33 percent of all “subprime student loans” are at least 90 days past due. Back in 2007, that number was only at 24 percent. Could this be evidence that the student loan debt bubble is beginning to burst?
#10 Time Inc. has just announced that it will be eliminating hundreds of jobs.
#11 Blockbuster recently announced that they are closing hundreds of stores and eliminating about 3,000 jobs.
#12 Toy maker Hasbro has announced that the size of their workforce will be reduced by about 10 percent.
#13 According to a new Pew Research study that was just released, one out of every seven adults in the United States is financially supporting their kids and their parents at the same time. Pew Research is calling it “the Sandwich Generation”.
#14 According to one recent Gallup poll, 65 percent of all Americans believe that 2013 will be a year of “economic difficulty“, and 50 percent of all Americans believe that the “best days” of America are now behind us.
#15 According to a different Gallup poll, Americans are now more pessimistic about where the U.S. economy will be five years from now than Gallup has ever recorded before.
So what is Barack Obama doing about all of this?
Not much.
Actually, he is shutting down his much ballyhooed “Council on Jobs and Competitiveness”. It last convened more than a year ago on Jan. 17th, 2012, and apparently Obama does not feel that it is needed any longer.
Of course we all know that it was just a political stunt to begin with.
Sadly, the truth is that both parties have been leading us down a road toward economic oblivion. The past four years under Obama have been absolutely nightmarish, and even though the Republicans have been in control of the House for the last couple of years they have done very little to even slow him down.
For much more on the decline of the economy over the past four years, please see this article: “37 Statistics Which Show How Four Years Of Obama Have Wrecked The U.S. Economy“.
Yes, I tend to criticize Obama’s economic policies a lot, and rightfully so, but neither political party is willing to tell the American people the truth.
40 years ago, the total amount of debt in the U.S. economic system was less than 2 trillion dollars.
Today, the total amount of debt in the U.S. economic system has grown to more than 55 trillion dollars.
It hasn’t mattered which party has occupied the White House or which party has been in control of Congress. The debt bubble that we have been living in has just continued to grow.
And all bubbles eventually pop.
The mainstream media is endlessly obsessed with the little fights that the Republicans and the Democrats are having, but they never talk about the bigger picture.
The prosperity that we are enjoying today is the result of the biggest debt binge in the history of the world.
We have stolen a giant mountain of money from our children and our grandchildren and we have destroyed their futures.
People can debate about whether the next “recession” has already started or not, but the truth is that what we are experiencing now is nothing compared to what is coming.
In the end, we will pay a great price for our decades of foolishness.
The U.S. economy is going to completely collapse, and the last few years have only been the very beginning of that process.
 If you want to frighten Baby Boomers, just show them the list of statistics in this article. The United States is headed for a retirement crisis of unprecedented magnitude, and we are woefully unprepared for it. At this point, more than 10,000 Baby Boomers are reaching the age of 65 every single day, and this will continue to happen for almost the next 20 years. The number of senior citizens in America is projected to more than double during the first half of this century, and some absolutely enormous financial promises have been made to them. So will we be able to keep those promises to the hordes of American workers that are rapidly approaching retirement? Of course not. State and local governments are facing trillions in unfunded pension liabilities. Medicare is facing a 38 trillion dollar shortfall over the next 75 years. The Social Security system is facing a 134 trillion dollar shortfall over the next 75 years. Meanwhile, nearly half of all American workers have less than $10,000 saved for retirement. The truth is that I was being incredibly kind when I said earlier that we are “woefully unprepared” for what is coming. The biggest retirement crisis in history is rapidly approaching, and a lot of the promises that were made to the Baby Boomers are going to get broken.
The following are 35 incredibly shocking statistics that will scare just about any Baby Boomer…
1. Right now, there are somewhere around 40 million senior citizens in the United States. By 2050 that number is projected to skyrocket to 89 million.
2. According to one recent poll, 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.
3. 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.
4. One survey that covered all American workers found that 46 percent of them have less than $10,000 saved for retirement.
5. According to a survey conducted by the Employee Benefit Research Institute, “60 percent of American workers said the total value of their savings and investments is less than $25,000″.
6. A Pew Research survey found that half of all Baby Boomers say that their household financial situations have deteriorated over the past year.
7. 67 percent of all American workers believe that they “are a little or a lot behind schedule on saving for retirement”.
8. Today, one out of every six elderly Americans lives below the federal poverty line.
9. More elderly Americans than ever are finding that they must continue working once they reach their retirement years. Between 1985 and 2010, the percentage of Americans in the 65 to 69-year-old age bracket that were still working increased from 18 percent to 32 percent.
10. Back in 1991, half of all American workers planned to retire before they reached the age of 65. Today, that number has declined to 23 percent.
11. According to one recent survey, 70 percent of all American workers expect to continue working once they are “retired”.
12. According to a poll conducted by AARP, 40 percent of all Baby Boomers plan to work “until they drop”.
13. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.
14. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do. The following is from a recent CNBC article…
New research from the AARP also shows that those ages 50 and over are carrying higher balances on their credit cards — $8,278 in 2012 compared to $6,258 for the under-50 population.
15. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States. Back in 2001, they only accounted for 12 percent of all bankruptcies.
16. Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.
17. What is causing most of these bankruptcies among the elderly? The number one cause is medical bills. According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.
18. In 1945, there were 42 workers for every retiree receiving Social Security benefits. Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.
19. Millions of elderly Americans these days are finding it very difficult to survive on just a Social Security check. The truth is that most Social Security checks simply are not that large. The following comes directly from the Social Security Administration website…
The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012. This amount changes monthly based upon the total amount of all benefits paid and the total number of people receiving benefits.
Could you live on about 300 dollars a week?
20. Social Security benefits are not going to stretch as far in future years. The following is from an article on the AARP website…
Social Security benefits won’t go as far, either. In 2002, benefits replaced 39 percent of the average retirees salary, and that will decline to 28 percent in 2030, when the youngest boomers reach full retirement age, according to the Center for Retirement Research at Boston College.
21. In the United States today, more than 61 million Americans receive some form of Social Security benefits. By 2035, that number is projected to soar to a whopping 91 million.
22. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
23. As I wrote about in a previous article, the number of Americans on Medicare is expected to grow from 50.7 million in 2012 to 73.2 million in 2025.
24. Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for each and every household in the United States.
25. Today, only 10 percent of private companies in the U.S. provide guaranteed lifelong pensions for their employees.
26. Verizon’s pension plan is underfunded by 3.4 billion dollars.
27. In California, the Orange County Employees Retirement System is estimated to have a 10 billion dollar unfunded pension liability.
28. The state of Illinois has accumulated unfunded pension liabilities of more than 77 billion dollars.
29. Pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have 325 billion dollars in combined unfunded pension liabilities.
30. According to Northwestern University Professor John Rauh, the latest estimate of the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.
31. In 2010, 28 percent of all American workers with a 401(k) had taken money out of it at some point.
32. Back in 2004, American workers were taking about 30 billion dollars in early withdrawals out of their 401(k) accounts every single year. Right now, American workers are pulling about 70 billion dollars in early withdrawals out of their 401(k) accounts every single year.
33. Today, 49 percent of all American workers are not covered by an employment-based pension plan at all.
34. According to a recent survey conducted by Americans for Secure Retirement, 88 percent of all Americans are worried about “maintaining a comfortable standard of living in retirement”.
35. A study conducted by Boston College’s Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.
So what is the solution? Well, one influential organization of business executives says that the solution is to make Americans wait longer for retirement. The following is from a recent CBS News article…
An influential group of business CEOs is pushing a plan to gradually increase the full retirement age to 70 for both Social Security and Medicare and to partially privatize the health insurance program for older Americans.
The Business Roundtable’s plan would protect those 55 and older from cuts but younger workers would face significant changes. The plan unveiled Wednesday would result in smaller annual benefit increases for all Social Security recipients. Initial benefits for wealthy retirees would also be smaller.
But considering the fact that there aren’t nearly enough jobs for all Americans already, perhaps that is not such a great idea. If we expect Americans to work longer, then we are going to need our economy to start producing a lot more good jobs than it is producing right now.
Of course the status quo is not going to work either. There is no way that we are going to be able to meet the financial obligations that are coming due.
The federal government, our state governments and our local governments are already drowning in debt and we are already spending far more money than we bring in each year. How in the world are we going to make ends meet as our obligations to retirees absolutely skyrocket in the years ahead?
That is something to think about.
So what do you think? Do you believe that there is a solution to our retirement crisis? Do you think that we can actually keep all of the promises that we have made to the Baby Boomers? Please feel free to post a comment with your thoughts below…
 Do you believe that economic trouble is coming in 2013? If so, you have a lot of company. According to a brand new Gallup poll that was just released, 65 percent of Americans believe that 2013 will be a year of “economic difficulty” while only 33 percent of Americans believe that 2013 will be a year of “economic prosperity”. Gallup has been asking this question for a lot of years, and the percentage of Americans that are anticipating economic difficulty in the year ahead has not been this high since the early 1980s. And without a doubt, there are a whole lot of reasons to be deeply concerned about the economy as we head into the new year. But it isn’t just 2013 that Americans are pessimistic about. According to the new Gallup poll, 50 percent of all Americans believe that the best days of America are behind us, and only 47 percent of all Americans believe that the best days of America are ahead of us. Those are very sobering numbers. Half the country believes that it is only downhill from here for the United States. Unfortunately, they are exactly right. Things are rapidly going to get worse for our economy and for our nation as a whole. We are going to start reaping the consequences of decades of very foolish decisions, and the pain is going to be immense.
Gallup asked some other very interesting questions as well. The following are some of the other results from the poll…
-68 percent of Americans believe that 2013 will be a year of rising crime rates.
-57 percent of Americans believe that 2013 will be a year in which American power will decline in the world.
-82 percent of Americans believe that 2013 will be a year in which taxes in the United States will rise.
So why are so many people so pessimistic as we enter 2013?
That is a good question. I think that a lot of people are starting to wake up and are realizing the gigantic problems that are staring the U.S. right in the face.
Even our friends over in Europe can see what is happening to us. We are like a former athletic champion that is now clearly on the wrong side of “middle age” and is exhibiting obvious signs of decline. We still like to think of ourselves as “the champ”, but the truth is that we are fat, lazy, broken down and bankrupt. The following is a brief excerpt from an article that appeared in a major UK news source the other day…
The rest of the world — dangerously reliant on a buoyant U.S. — should note one thing above all: the fundamentals of America’s economy are, frankly, terrible, and its international dominance is not nearly as assured as it once was.
Its economic culture has started to change since President Obama entered the White House four years ago this month.
America more closely resembles Europe in living beyond its means and in the President’s determination to build a massive welfare state.
The mainstream media and most of our politicians endlessly proclaim that things are about to turn around and that a “recovery” is on the way, but that is not even close to the truth.
Fortunately, a few of our politicians realize what is really happening and are willing to talk about it. Unfortunately, not enough people are listening to them.
For example, Ron Paul has a really good grasp on how destructive the U.S. national debt is and how we are literally destroying the bright future that our children and our grandchildren should have had. The following is what he posted on his Facebook page the other day about the “fiscal cliff deal” that just got pushed through Congress…
We Are Already Over the Fiscal Cliff
2 January 2013
Despite claims that the Administration and Congress saved America from the fiscal cliff with an early morning vote today, the fact is that government spending has already pushed Americans over the cliff. Only serious reductions in federal spending will stop the cliff dive from ending in a crash landing, yet the events of this past month show that most elected officials remain committed to expanding the welfare-warfare state.
While there was much hand-wringing over the “draconian” cuts that would be imposed by sequestration, in fact sequestration does not cut spending at all. Under the sequestration plan, government spending will increase by 1.6 trillion over the next eight years. Congress calls this a cut because without sequestration spending will increase by 1.7 trillion over the same time frame. Either way it is an increase in spending.
Yet even these minuscule cuts in the “projected rate of spending” were too much for Washington politicians to bear. The last minute “deal” was the worst of both worlds: higher taxes on nearly all Americans now and a promise to revisit these modest reductions in spending growth two months down the road. We were here before, when in 2011 Republicans demanded these automatic modest decreases in government growth down the road in exchange for a massive increase in the debt ceiling. As the time drew closer, both parties clamored to avoid even these modest moves.
Make no mistake: the spending addiction is a bipartisan problem. It is generally believed that one party refuses to accept any reductions in military spending while the other party refuses to accept any serious reductions in domestic welfare programs. In fact, both parties support increases in both military and domestic welfare spending. The two parties may disagree on some details of what kind of military or domestic welfare spending they favor, but they do agree that they both need to increase. This is what is called “bipartisanship” in Washington.
While the media played up the drama of the down-to-the-wire negotiations, there was never any real chance that a deal would not be worked out. It was just drama. That is how Washington operates. As it happened, a small handful of Congressional and Administration leaders gathered in the dark of the night behind closed doors to hammer out a deal that would be shoved down the throats of Members whose constituents had been told repeatedly that the world would end if this miniscule decrease in the rate of government spending was allowed to go through.
While many on both sides express satisfaction that this deal only increases taxes on the “rich,” most Americans will see more of their paycheck going to Washington because of the deal. The Tax Policy Center has estimated that 77 percent of Americans would see higher taxes because of the elimination of the payroll tax cut.
The arguments against the automatic “cuts” in military spending were particularly dishonest. Hawks on both sides warned of doom and gloom if, as the plan called for, the defense budget would have returned to 2007 levels of spending! Does anybody really believe that our defense spending was woefully inadequate just five years ago? And since 2007 we have been told that the wars in Iraq and Afghanistan are winding down. According to the Congressional Budget Office, over the next eight years military spending would increase 20 percent without the sequester and would increase 18 percent with the sequester. And this is what is called a dangerous reduction in defense spending?
Ironically, some of the members who are most vocal against tax increases and in favor of cuts to domestic spending are the biggest opponents of cutting a penny from the Pentagon budget. Over and over we were told of the hundreds of thousands of jobs that would be lost should military spending be returned to 2007 levels. Is it really healthy to think of our defense budget as a jobs program? Many of these allegedly free-market members sound more Keynesian than Paul Krugman when they praise the economic “stimulus” created by militarism.
As Chris Preble of the Cato Institute wrote recently, “It’s easy to focus exclusively on the companies and individuals hurt by the cuts and forget that the taxed wealth that funded them is being employed elsewhere.”
While Congress ultimately bears responsibility for deficit spending, we must never forget that the Federal Reserve is the chief enabler of deficit spending. Without a central bank eager to monetize the debt, Congress would be unable to fund the welfare-warfare state without imposing unacceptable levels of taxation on the American people. Of course, the Federal Reserve’s policies do impose an “inflation” tax on the American people; however, since this tax is hidden Congress does not fear the same public backlash it would experience if it directly raised income taxes.
I have little hope that a majority of Congress and the President will change their ways and support real spending reductions unless forced to by an economic crisis or by a change in people’s attitudes toward government. Fortunately, increasing numbers of Americans are awakening to the dangers posed by the growth of the welfare-warfare state. Hopefully this movement will continue to grow and force the politicians to reverse course before government spending, taxing, and inflation destroys our economy entirely.
It was good that Ron Paul placed blame on both political parties and on the Federal Reserve for our debt problems.
The Federal Reserve is not often talked about much when it comes to assigning blame for the debt, but it truly is one of the primary reasons why our debt is so enormous today. The Federal Reserve system was designed to be a perpetual government debt machine, and it has accomplished that task very well.
When the Federal Reserve was first created, the total U.S. national debt was less than 3 billion dollars.
That is about as much as we add to the U.S. national debt every single day at this point.
And since Ben Bernanke took the reigns at the Fed, our debt problems have greatly accelerated.
The U.S. national debt has more than doubled from a little over $8 trillion to more than $16.4 trillion since Ben Bernanke became chairman of the Federal Reserve in 2006.
But disaster has not struck yet, so most Americans think that everything must be okay.
Well, if you want to ignore all of the evidence of our impending economic demise, go ahead and do that. Go on lots of expensive vacations, run up your credit cards, buy a new boat and party like its 1999. Enjoy every minute of our debt-fueled prosperity while you still can. You only live once, right?
But if you are wise, you will try to understand what is coming and you will make preparations so that you and your family will be able to withstand the storm that is coming. Here are some basic steps that I suggest…
-Use this time of relative prosperity to work hard and make money while you still can. You want to store up your finances during the good times to help you get through the lean times.
-Get out of debt. You don’t want massive amounts of debt weighing you down when things get really hard.
-Get more independent of the world system. Start a side business in the evenings and the weekends. Learn how to grow your own food. Get your house off of the grid if possible. Anything you can do to become more independent and more self-sufficient is good.
-Store food and other essential supplies. Right now we take for granted that the supermarkets and the big box stores will always be packed with mountains of quality goods at affordable prices. That may not always be the case. You want to be prepared for whatever may happen.
For even more tips, please see my previous article entitled “How To Prepare For The Difficult Years Ahead“.
All bubbles eventually burst.
Our national debt bubble will eventually burst.
The derivatives bubble will eventually burst.
The consumer debt bubble will eventually burst.
When those bubbles burst, will you be ready?
I hope and pray that you will.
 Will this be the last normal holiday season that Americans ever experience? To many Americans, such a notion would be absolutely inconceivable. After all, in the affluent areas of the country restaurants and malls are absolutely packed. Beautiful holiday decorations are seemingly everywhere this time of the year and children all over the United States are breathlessly awaiting the arrival of Santa Claus. Even though poverty is exploding to unprecedented levels, most families will still have mountains of presents under their Christmas trees. Of course a whole lot of those presents were purchased with credit cards, but people don’t like to talk about that. It kind of spoils the illusion. Sadly, the truth is that our entire economy is a giant illusion. The extreme prosperity that we have been enjoying has been fueled by debt, and any future prosperity that we will experience is completely dependent on our ability to go into even more debt. The total amount of debt in our economy is almost 10 times larger than it was just 30 years ago, but we don’t like to think about that too much. Most Americans are way too busy living the good life to be bothered with “doom and gloom”. Well, get ready to say goodbye to normal. As history has shown us, no financial bubble lasts forever, and time is rapidly running out for us.
You know that the hour is late when even mainstream news sources start publishing articles with titles such as this: “Will 2013 Mark the Beginning of American Decline?”
That article appeared on Bloomberg.com the other day, and it was written by Simon Johnson, a former chief economist at the International Monetary Fund. He is convinced that a day of reckoning is coming for U.S. government finances, and he seems resigned to the fact that we will not be ready when that day arrives…
“Sooner or later, it will be America’s turn to fall out of favor with investors and to see its own interest rates rise. It is hard to know when that day will come, or precisely what pressures the country will face.
Let me only venture one forecast: We will not be ready.”
Other analysts are far more pessimistic. For example, the following is what Gerald Celente said about the “bond bubble” during a recent interview with King World News…
Eric King: “Gerald, I wanted to take a look at this upcoming issue you have coming out. (In here it says,) ‘Bonds Away! The bond bomb is ready to explode … threatening to make the real estate and dot-com bubbles, and even the Great Recession, look like market corrections.’ Can you talk about that?”
Celente: “Yes. This piece is being penned by Dr. Paul Craig Roberts, the former Assistant Treasury Secretary under Ronald Reagan. And he is convinced that the bond bubble is about to burst. This cannot continue to go on the way it is. Everyone knows that the whole game is rigged, and so is this….”
“The whole game is rigged. It’s ready to go down, and Dr. Paul Craig Roberts believes it’s ‘Bonds Away’ in 2013 as the bond bubble explodes and brings about a financial disaster even worse than the Great Depression.”
Eric King: “He’s saying here it’s a road to financial collapse that we are going to head down when this thing bursts.”
Celente: “It is. Because the whole world is being propped up by these phony bonds and it’s going to collapse. It has to happen. Interest rates are going to start going up, and when they do the bond bubble explodes. You cannot keep interest rates at zero for this amount of time and expect anything other than disaster to follow.”
For much more on all this, you can listen to another excellent interview with Gerald Celente right here.
Our politicians just assume that we will be able to borrow trillions upon trillions of dollars far into the future at super low interest rates, but that is a very dangerous assumption.
As I noted the other day, the average rate of interest on U.S. government debt was 2.534 percent at the end of November. If that number just rose to where it was about a decade earlier we would be in a massive amount of trouble.
Back in the year 2000, the average rate of interest on U.S. government debt was 6.638 percent. If we were at that level today, the U.S. government would be paying out more than a trillion dollars a year just in interest on the national debt.
But our politicians just keep borrowing and spending as if we could do this forever.
From the time that George Washington was inaugurated (1789) to the time that George W. Bush was inaugurated (2001), the U.S. government accumulated about 5.7 trillion dollars of debt.
During the first four years of the Obama administration, the U.S. government accumulated about 5.7 trillion dollars of debt.
How can anyone support this kind of insanity?
You can see an excellent video demonstrating the vastness of our national debt right here. In the end, all of this debt will absolutely destroy the U.S. dollar, our economic system and the bright futures that our children and our grandchildren were supposed to have.
As if all of that was not enough to be concerned about, there is also the threat that Wall Street could implode at any time. Most Americans have no idea that Wall Street has been transformed into the largest casino in the history of the world. The “too big to fail” banks are the ringleaders, and the derivatives bubble hangs over our financial system like a “sword of Damocles” that could fall at virtually any moment.
Everything will remain fine as long as the spiral of derivatives that our bankers have constructed remains perfectly balanced. But if something happens and it becomes unbalanced and starts to collapse, the consequences could be unlike anything we have ever seen before.
A recent Zero Hedge article entitled “1000x Systemic Leverage: $600 Trillion In Gross Derivatives ‘Backed’ By $600 Billion In Collateral” detailed how there is barely any collateral backing up the hundreds of trillions of dollars of derivatives that are out there…
But a bigger question is what is the actual collateral backing this gargantuan market which is about 10 times greater than the world’s combined GDP, because as the “derivative” name implies all this exposure is backed on some dedicated, real assets, somewhere. Luckily, the IMF recently released a discussion note titled “Shadow Banking: Economics and Policy” where quietly hidden in one of the appendices it answers precisely this critical question. The bottom line: $600 trillion in gross notional derivatives backed by a tiny $600 billion in real assets: a whopping 0.1% margin requirement! Surely nothing can possibly go wrong with this amount of unprecedented 1000x systemic leverage.
Our entire economy has become a giant pyramid of debt, risk and leverage. At some point there is going to be a giant crash. When that happens, people are going to become very desperate.
When people become very desperate, they often accept “solutions” that they were not willing to consider previously.
We need to learn some lessons from history. This is exactly the kind of thing that happened back in the 1930s.
For example, an elderly woman named Kitty Werthmann is telling audiences what life was like in Austria back in the late 1930s…
“In 1938, Austria was in deep Depression. Nearly one-third of our workforce was unemployed. We had 25 percent inflation and 25 percent bank loan interest rates.”
“Farmers and business people were declaring bankruptcy daily. Young people were going from house to house begging for food. Not that they didn’t want to work; there simply weren’t any jobs.”
The Austrian people were really hurting and they were desperate for answers. When Hitler came to them with “solutions”, they were ready to embrace him with open arms…
“We looked to our neighbor on the north, Germany, where Hitler had been in power since 1933.” she recalls. “We had been told that they didn’t have unemployment or crime, and they had a high standard of living.”
“Nothing was ever said about persecution of any group – Jewish or otherwise. We were led to believe that everyone in Germany was happy. We wanted the same way of life in Austria. We were promised that a vote for Hitler would mean the end of unemployment and help for the family. Hitler also said that businesses would be assisted, and farmers would get their farms back.””Ninety-eight percent of the population voted to annex Austria to Germany and have Hitler for our ruler.”
“We were overjoyed,” remembers Kitty, “and for three days we danced in the streets and had candlelight parades. The new government opened up big field kitchens and everyone was fed.”
Sadly, America is already starting to go down the same path in many ways. If you doubt this, you can read the rest of her account right here.
Right now, things are still relatively good in America. Yes, there are a whole host of economic numbers that look really bad, but what we are experiencing right now is nothing compared to the horrific economic pain that is coming.
When our economy finally crashes, nobody is going to be able to press a button and restore things to how they were previously. We will be told that we have to “adjust” and consider “new solutions” to our “new challenges”. Someday we will look back on the good life that we were enjoying in 2010, 2011 and 2012 and wish that we could go back to those days.
So enjoy the relative peacefulness and prosperity of these times while you still can. A horrific economic collapse is on the way, and once it strikes none of our lives will ever be the same.
 How can the mainstream media claim that the U.S. economy is “improving” when it is painfully obvious to anyone with a brain that the middle class is being absolutely eviscerated? According to numbers that were just released, the number of Americans on food stamps rose by more than 600,000 in a single month to an all-time record high of 47.7 million. Youth unemployment in the U.S. is at a post-World War II high and large companies have announced the elimination of more than 100,000 jobs since Barack Obama won the election. Consumer debt just hit a new record high and the federal government is accumulating debt at a much faster pace than it was at this time last year. So where is the evidence that the economy is getting better? The mainstream media says that the decline of the unemployment rate to “7.7 percent” is evidence that things are improving, but I showed how fraudulent that number is yesterday. The percentage of working age Americans with a job today is exactly where it was back in September 2009 in the midst of the last major economic crisis. The mainstream media is desperate for any shred of evidence that it can use to make people feel good and show that the Obama administration has our economy on the right track, and so they jump on any number that even looks remotely promising and they ignore mountains of evidence to the contrary. They don’t seem to care that poverty is absolutely exploding and that the number of Americans on food stamps has risen by nearly 50 percent while Obama has been in the White House. They don’t seem to care that the U.S. share of global GDP has fallen from 31.8 percent in 2001 to 21.6 percent in 2011. They don’t seem to care that more good paying jobs are being shipped overseas with each passing day. They don’t seem to care that formerly great U.S. cities that were once the envy of the entire globe are now crime-infested hellholes. All they seem to care about is putting out news that makes people feel warm and fuzzy and making sure that Obama looks good. Unfortunately, the truth is that the U.S. economy is steadily getting worse, and 2013 is not looking very promising at all right now. Hopefully at some point the mainstream media will take a break from coverage of the royal pregnancy and the latest celebrity scandals to report on the real problems that we are facing right now.
The following are 15 signs that the economy is rapidly getting worse as we head into 2013…
#1 According to numbers that were just released, the number of Americans on food stamps has risen to a new all-time record of 47.71 million. That is a huge increase of more than 600,000 over the previous reading of 47.10 million. After about a year of slow growth, it looks like the number of Americans on food stamps is starting to skyrocket once again. Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, about one out of every 6.5 Americans is on food stamps.
#2 Youth unemployment in the United States is now at the highest level that we have seen since World War II.
#3 According to Gallup, unemployment in the United States shot up very sharply during the month of November.
#4 It looks like the unemployment numbers are likely to get even worse. Since the election, dozens of large companies have announced major layoffs. Overall, large companies have announced the elimination of more than 100,000 jobs since November 6th.
#5 According to the Wall Street Journal, of the 40 biggest publicly traded corporate spenders, half of them plan to reduce capital expenditures over the coming months.
#6 Small business owners all over America are declaring that Obamacare is going to force them to start replacing full-time workers with part-time workers during 2013.
#7 One recent survey discovered that 40 percent of all Americans have $500 or less in savings.
#8 A different recent survey found that 28 percent of all Americans do not have a single penny saved for emergencies.
#9 62 percent of middle class Americans say that they have had to reduce household spending over the past year.
#10 Many Americans are trying to make ends meet for their families by going into more debt. Consumer borrowing hit another brand new record high in October. It looks like the American people have not learned from their past mistakes and have decided to roll up consumer debt at a faster pace than ever before.
#11 Median household income in America has fallen for four consecutive years. Overall, it has declined by over $4000 during that time span.
#12 Wall Street bankers are expecting “the worst bonus season” since 2008. Not a lot of people are going to shed tears over this one, but this is a sign that there is trouble in the financial world.
#13 Food banks all over America are reporting that more needy families than ever before are showing up to get food.
#14 As I wrote about yesterday, the federal government has run a deficit of $292 billion dollars during the first two months of fiscal 2013. That figure is $57 billion higher than it was during the same period last year. Government debt continues to soar wildly out of control and at some point all of that debt is absolutely going to crush us.
#15 I have written previously about how the once great city of Detroit has become a symbol of the downfall of the U.S. economy. Well, now the state of Michigan is laying the groundwork for a “managed bankruptcy” of Detroit. Sadly, many other large U.S. cities will likely follow suit over the next couple of years.
We should truly mourn for what is happening to Detroit. At one time, it was one of the most beautiful cities on earth. But now it is on the cutting edge of America’s economic decline. You can see some amazing before and after pictures of an abandoned Detroit school right here. Sadly, what is happening to Detroit will soon be happening to the rest of the country.
A similar thing is happening over in Europe. Greece is on the cutting edge of Europe’s economic decline, and people over there are becoming very desperate. The following is an excerpt from a Financial Post article about how the Greek middle class is turning to crime as the depression in that nation gets even worse…
In the once stable neighborhood of Kordelio, the unemployed and drug users gather in the parks, scaring away mothers and children, and crimes like chain snatching are on the rise. Many long-time residents have left, moving abroad or to their families’ villages, leaving behind empty houses, said Evangelia Rombou, 58, who has lived in Kordelio for 22 years.
But it is not just Greece that is grappling with these kinds of issues. Now even countries that had been thought to be “stable” are experiencing significant problems. For example, a massive crime wave has broken out in France. The crime wave in France is being blamed on “austerity”, but the government of France still spends far more than it brings in.
So how bad would things get in France if the French government actually did go to a balanced budget?
And how bad would things get in the United States if the federal government was not stealing more than 100 million dollars an hour from our children and our grandchildren?
Even in the midst of our debt-fueled prosperity we are starting to see glimpses of how desperate people will become when our country is someday forced to live within its means. For example, the following is from a report about an incident that happened in Columbus, Ohio the other day…
Columbus Police sprayed Mace on several people in a crowd that had gathered to sign up for a list to get subsidized housing at a northwest Columbus apartment complex.
Police said the crowd started to gather Friday night for the Saturday morning event at The Heritage apartment complex on Gatewood Road near Sunbury Road in northeast Columbus.
Authorities said that its highest number, the crowd reached 2,000 people.
Our entire economy is a giant mirage. Our prosperity has been purchased by stealing from the future. A few people have been warning that we have completely destroyed our future in the process, but both major political parties just continue to do it and the mainstream media just continues to cheer them on.
At some point this con game will end and this economic mirage will disappear. When that happens, millions of people all over this country are going to become very angry and very desperate.
I hope that you have a plan for what you will do when that happens.
 By recklessly printing, borrowing and spending money, our authorities are absolutely shredding confidence in the U.S. dollar. The rest of the world is watching this nonsense, and at some point they are going to give up on the U.S. dollar and throw their hands up in the air. When that happens, it is going to be absolutely catastrophic for the U.S. economy. Right now, we export a lot of our inflation. Each year, we buy far more from the rest of the world than they buy from us, and so the rest of the world ends up with giant piles of U.S. dollars. This works out pretty well for them, because the U.S. dollar is the primary reserve currency of the world and is used in international trade far more than any other currency is. Back in 1999, the percentage of foreign exchange reserves in U.S. dollars peaked at 71 percent, and since then it has slid back to 62.2 percent. But that is still an overwhelming amount. We can print, borrow and spend like crazy because the rest of the world is there to soak up our excess dollars because they need them to trade with one another. But what will happen someday if the rest of the world decides to reject the U.S. dollar? At that point we would see a tsunami of U.S. dollars come flooding back to this country. Just take a moment and think of the worst superstorm that you can possibly imagine, and then replace every drop of rain with a dollar bill. The giant currency superstorm that will eventually hit this nation will be far worse than that.
Most Americans don’t realize that there are far more dollars in use in the rest of the world than in the United States itself. The following is from a scholarly article by Linda Goldberg…
The dollar is a major form of cash currency around the world. The majority of dollar banknotes are estimated to be held outside the US. More than 70% of hundred-dollar notes and nearly 60% of twenty- and fifty-dollar notes are held abroad, while two-thirds of all US banknotes have been in circulation outside the country since 1990
For decades we have been exporting gigantic quantities of our currency.
So what would happen if that process suddenly reversed and massive piles of dollars started coming back into the country?
It is frightening to think about.
Well, I guess the key is to get the rest of the world to continue to have confidence in the U.S. dollar so that will never happen, right?
Unfortunately, there are lots of signs that the rest of the world is accelerating their move away from the U.S. dollar.
For example, it was recently announced that the BRICS countries are developing their own version of the World Bank…
The BRICS (Brazil, Russia, India, China and South Africa) bloc has begun planning its own development bank and a new bailout fund which would be created by pooling together an estimated $240 billion in foreign exchange reserves, according to diplomatic sources. To get a sense of how significant the proposed fund would be, the fund would be larger than the combined Gross Domestic Product (GDP) of about 150 countries, according to Russia and India Report.
And as I noted in a previous article, over the past few years there have been a whole host of new international currency agreements that encourage the use of national currencies over the U.S. dollar. The following are just a few examples…
1. China and Germany (See Here)
2. China and Russia (See Here)
3. China and Brazil (See Here)
4. China and Australia (See Here)
5. China and Japan (See Here)
6. India and Japan (See Here)
7. Iran and Russia (See Here)
8. China and Chile (See Here)
9. China and the United Arab Emirates (See Here)
10. China, Brazil, Russia, India and South Africa (See Here)
Will this movement soon become a stampede away from the U.S. dollar?
That is a very important question.
But you don’t hear anything about this in the U.S. media and our politicians are not talking about this at all.
Meanwhile, our “leaders” seem to be doing everything that they can to destroy confidence in the U.S. dollar. The Federal Reserve is printing money like there is no tomorrow, and the federal government continues to run up trillion dollar deficits year after year.
They do not seem to understand that they are systematically destroying the U.S. financial system.
Other world leaders get it. For example, Russian President Vladimir Putin once said the following…
“Unreasonable expansion of the budget deficit, accumulation of the national debt – are as destructive as an adventurous stock market game.
During the time of the Soviet Union the role of the state in economy was made absolute, which eventually lead to the total non-competitiveness of the economy. That lesson cost us very dearly. I am sure no one would want history to repeat itself.”
Wow.
Why can’t most of our politicians see how destructive debt is?
What the federal government continues to do is absolutely insane. The national debt increased by more than 24 billion dollars on the day after Thanksgiving this year. But utter disaster has not struck yet, and most Americans are not really that concerned about the debt. So things just keep rolling along.
And of course our national debt of $16,309,738,056,362.44 is nothing when compared to the future liabilities that our federal government is facing. Just check out what a recent article in the Wall Street Journal had to say about all this…
The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.
Other economists paint an even gloomier picture. According to economist Niall Ferguson, the U.S. government is facing future unfunded liabilities of 238 trillion dollars.
So where are we going to get all that money?
Well, why don’t we just print more money than ever before so that the U.S. government can borrow and spend more money than ever before?
Don’t laugh. That is actually what some of the top economists in the country are actually recommending.
The most famous economic journalist in the entire country, Paul Krugman of the New York Times, is boldly proclaiming that the solution to all of our problems is to print, borrow and spend a lot more money. He insists that there is no reason to fear that the giant mountain of debt that we are accumulating will someday collapse the system…
For we have our own currency — and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can’t run out of money. After all, it can print the stuff. So there’s almost no risk that America will default on its debt — I’d say no risk at all if it weren’t for the possibility that Republicans would once again try to hold the nation hostage over the debt ceiling.
But if the U.S. government prints money to pay its bills, won’t that lead to inflation? No, not if the economy is still depressed.
Now, it’s true that investors might start to expect higher inflation some years down the road. They might also push down the value of the dollar. Both of these things, however, would actually help rather than hurt the U.S. economy right now: expected inflation would discourage corporations and families from sitting on cash, while a weaker dollar would make our exports more competitive.
Of course what he is prescribing is complete and utter madness.
At some point this con game is going to collapse and the rest of the world is going to say a big, fat, resounding “NO” to the U.S. dollar.
Why should they continue to use a currency that is becoming extremely unstable and that is constantly being manipulated?
And when the rest of the world rejects the U.S. dollar, the value of the dollar will drop like a rock because there will be far less global demand for it.
In addition, if the rest of the world is not using the U.S. dollar for trade any longer, other nations will cease to soak up our excess currency and huge mountains of our currency that are floating around out there will start flooding back to our shores.
At that point we will be looking at inflation unlike anything we have ever seen before. The era of cheap imports will be over and we will pay far more for everything from oil to the foreign-made plastic trinkets that we buy at Wal-Mart.
Most Americans don’t even know what a “reserve currency” is, but when the U.S. dollar loses reserve currency status it is going to unleash a nightmare that most economists cannot even imagine.
So enjoy this holiday season while you can. There are still lots and lots of cheap imports filling the shelves of our stores.
Once the coming giant currency superstorm strikes, we will dearly wish for the good old days of 2012.
Yes, the U.S. dollar is alive and ticking for now. But at the pace that our authorities are abusing it, I would not say that things are looking good for a long and healthy lifespan.
 With everything else that is going on in the world, a lot of people have failed to notice that we are seeing some of the worst economic numbers that we have seen in more than a year. For example, it was announced on Thursday that initial claims for unemployment benefits have hit their highest level in a year and a half. Hopefully this is just a temporary blip in the data, because initial unemployment claims tend to have a very strong correlation with the overall performance of the economy. We also continue to see poverty statistics rise. According to government statistics released earlier this month, the number of Americans living in poverty and the number of Americans on food stamps are both at all-time record highs. Meanwhile, the Dow and the S&P 500 are both down more than 5 percent since the election and the U.S. government rolled up 22 billion dollars more debt in October 2012 than it did in October 2011. The unfortunate truth is that things are not getting better. The U.S. economy continues to become weaker and more unstable, and there are a whole lot of reasons to be very pessimistic about our economic situation as we move into the winter months.
Let’s take a closer look at some of the troubling economic numbers that have been released in recent days…
Initial Claims For Unemployment Benefits
The optimism that many analysts had about jobs is rapidly dissipating. Over the past few weeks there has been a huge wave of companies announcing layoffs. Just check out this article and this article.
But now we are actually seeing a significant rise in the number of American workers applying for unemployment benefits. Initial claims for unemployment benefits soared to 439,000 for the week ending November 10th. This is the highest level that we have seen in more than a year. The last time initial claims were this high was April 2011. It is interesting to note that the largest numbers of new unemployment claims came from the swing states of Ohio and Pennsylvania.
Record Food Stamp Numbers
In dozens of articles I have carefully documented the steady rise of poverty in America and the steady decline of the middle class.
Even though our politicians insist that we are in the middle of an “economic recovery”, the number of Americans dependent on the government for their very survival just continues to keep going up.
A few days ago, the latest food stamp numbers were released. It turns out that the number of Americans on food stamps increased by 420,947 from July to August. That was the largest one month increase that we have seen in a year. At this point, an all-time record 47.1 million Americans are enrolled in the food stamp program. What would that look like if all of those people had to actually stand outside in bread lines like in the old days?
Stunning Stock Market Declines
A few days ago, I wrote about how many wealthy Americans are dumping stocks and other financial assets in anticipation of the looming “fiscal cliff”.
Well, if things get much worse we may soon have a “market crash” on our hands.
The Dow and the S&P 500 are both down by more than 5 percent since the election and many are wondering if things are about to get a whole lot worse.
Shares of Apple are down by 25 percent since late September. Some analysts are actually using the term “panic selling” to describe what is happening to the stock.
Slowing Economic Activity
All over America there are indications that economic activity is starting to slow down. Is Superstorm Sandy responsible for this, or are there other factors at work?
According to the Federal Reserve Bank of New York, economic activity appears to be contracting in areas that were hit particularly hard by Superstorm Sandy…
The Federal Reserve Bank of New York’s general economic index was minus 5.2 this month after minus 6.2 in October. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut.
Things appear to be slowing down in the mid-Atlantic region as well. According to CNBC, manufacturing activity in the mid-Atlantic region has contracted much faster than analysts were projecting…
The Philadelphia Federal Reserve Bank said its business activity index slumped to -10.7 from 5.7 the month before. The fall was much steeper than economists’ expectations for slippage to a reading of 2.0, according to a Reuters poll.
Any reading above zero indicates expansion in the region’s manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey, and Delaware.
New Poverty Numbers
More American families are falling out of the middle class every single day.
New numbers that were just released by the U.S. Census Bureau show that the number of Americans living in poverty rose to a new all-time record of 49.7 million last year.
Once upon a time, people would have laughed at you if you suggested that someday 50 million Americans would be living in poverty.
But here we are.
Soaring Government Debt
Anyone that follows my columns on a regular basis knows that government debt is one of my major pet peeves.
Well, despite all of the “budget deals” that have been made between the Republicans and the Democrats, the amount of debt that we are accumulating just continues to balloon in size.
The federal budget deficit for October 2012 was 120 billion dollars. That was a huge increase over the October 2011 federal budget deficit of 98 billion dollars.
How long can we possibly continue to do this?
Things In Europe Are Getting Worse Too
In case you had not noticed, the economic situation in Europe continues to unravel as well. The eurozone is officially in a recession once again, and unemployment in the eurozone is at an all-time record high. Violent protests and rioting happen on an almost daily basis over in Europe now. The largest economy on the planet continues to implode right in front of our eyes, and this is another factor that will continue to drag down the U.S. economy.
So is there anyone out there that actually still believes that things are “getting better”?
The brief period of economic stability that we have been experiencing is rapidly coming to an end. The “recovery” turned out to be extremely disappointing, and now the next major downturn is almost here.
 When it comes to explaining the problems with our economy, one of the hardest things to do is to get people to understand that we are living in an economic fantasy world that is completely and totally unsustainable. As a nation we consume far more than we produce, we spend far more than we bring in, our debt is growing much faster than our GDP is, our entitlement programs are growing at an exponential rate, our retirement system is a Ponzi scheme and the Federal Reserve is printing money as if there is no tomorrow in a desperate attempt to paper over all of our problems. But we have all grown so accustomed to the debt-fueled prosperity that we have been enjoying for so many decades that it actually feels “real” to most of us. Unfortunately, history has shown us that it is simply not possible to grow your debt faster than your economy indefinitely. At some point your consumption will drop back to a level more equal to your production. Sometimes that adjustment can be gradual, but other times it can be extremely painful. In our case, we have been living way above our means for so long that it would take a major economic miracle just to keep our adjustment to an “exceedingly painful” level. We are living in the largest debt-fueled prosperity bubble in the history of the world, and our unsustainable economy is going to crash and burn at some point. Hopefully it will be later rather than sooner, but a crash is most definitely coming.
The following are some of the reasons why the bubble economy that we are living in right now is unsustainable….
The Trade Deficit
Most Americans do not really understand what a “trade deficit” is, but it is at the very core of our economic problems.
Basically, we buy far more stuff from the rest of the world than they buy from us. We send them huge piles of our money, and they send us oil that we burn in our cars and cheap plastic products that we end up throwing away. We keep doing this month after month after month, and this is systematically making us poorer as a nation.
In 2012, it is being projected that our trade deficit will fall somewhere between 500 billion and 600 billion dollars.
At this point, the United States has a trade imbalance that is more than 7 times larger than any other nation on earth has.
Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.
Instead of going out of the country, those 8 trillion dollars could have gone to U.S. businesses and U.S. workers. In turn, taxes would have been paid on those 8 trillion dollars and our debt problems would not be nearly as dramatic today.
But we didn’t do that.
We chose to allow tens of thousands of businesses, millions of jobs and trillions of dollars of our national wealth to leave the country.
Stupid move, eh?
But both political parties have been endlessly pushing the “free trade” agenda. They have both promised that it would bring us tremendous prosperity.
Well, just take a look at our formerly great manufacturing cities today. Do they look prosperous to you?
It turns out that Ross Perot was right when he warned about the “giant sucking sound” that would happen if NAFTA was implemented.
When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars. By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.
That didn’t work out so well, did it?
What about opening up trade with China?
Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little “m”) for the entire year.
In 2011, our trade deficit with China was 295.4 billion dollars. That was the largest trade deficit that one nation has had with another nation in the history of the world.
Our trade with China is tremendously unbalanced. Today, U.S. consumers spend approximately 4 dollars on goods and services from China for every one dollar that Chinese consumers spend on goods and services from the United States.
This is a huge reason why shiny new factories are going up all over China, and our blue collar cities are turning into rotting war zones filled with unemployed people.
If you can believe it, the United States has actually lost more than 56,000 manufacturing facilities since 2001.
Until we fix the trade deficit we are going to continue bleeding factories, jobs and national wealth at an astounding pace.
The National Debt
It is being projected that U.S. GDP will grow at a rate of about 2.2 percent this year.
The problem is that our federal budget deficit will be somewhere around 7 percent of GDP this year.
With each passing day we are losing ground. No other nation on earth has been able to run up debt like this indefinitely, and neither will we.
Does this chart look like a healthy situation to you?….
Sadly, all of this government debt is just about the only thing holding up our economy at this point. Since Barack Obama has been in the White House, the U.S. national debt has increased by about 5.5 trillion dollars. Of course the Obama administration has spent a lot of that money on incredibly stupid stuff, but it still gets into the pockets of average Americans that in turn spend it on food, gas, mortgage payments, etc.
If we could go back in time and suck that 5.5 trillion dollars of extra spending out of the economy we would be in a horrible economic depression right now.
But that does not mean that borrowing and spending all of that money was the right thing to do. We have stolen it from our children and our grandchildren and we are going to stick them with the bill.
That is highly immoral and it is a national disgrace.
Yet we continue to do it because we can’t help ourselves. We are ruining the future of this nation in order to make the present more pleasant for ourselves.
As I noted yesterday, the U.S. national debt jumped more on the very first day of fiscal year 2013 than it did from 1776 to 1941 combined.
We are completely addicted to debt and we can’t stop. We know that we are destroying the future of the United States but we have absolutely no self-discipline.
By the end of Barack Obama’s first term, the U.S. government will have accumulated more debt during those four years than it did from the time that George Washington took office to the time that George W. Bush took office.
But most Americans seem fine with that.
Most Americans don’t even really know why this is happening, and most don’t really seem too concerned about finding out. They just want the good times to continue to roll.
Sadly, the truth is that our financial system is designed to create government debt. It is one of the primary purposes of the Federal Reserve system.
At this point, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was first created.
So I guess you could say that the Federal Reserve is doing a good job of what it was designed to do.
And until we change the system things are going to continue to get worse until the entire system collapses.
Boston University economist Laurence Kotlikoff is warning that we are basically facing financial armageddon if something is not done. Kotlikoff speaks of a “fiscal gap” which he defines as “the present value difference between projected future spending and revenue”. His calculations have led him to the conclusion that the United States is facing a fiscal gap of 222 trillion dollars in the years ahead.
Where in the world are we going to get an extra 222 trillion dollars?
Entitlements
Every society needs a safety net, but we are rapidly getting to the point where there are going to be more Americans on the safety net than there are Americans supporting it.
Back in 1983, less than 30 percent of all Americans lived in a home where at least one person received financial assistance from the federal government.
Today, that number is up to an all-time record of 49 percent.
Many people don’t believe me when I tell them that more than 100 million Americans are enrolled in at least one welfare program run by the federal government right now, and that does not even count Social Security or Medicare.
But it is actually true.
Overall, there are nearly 80 different “means-tested welfare programs” that the federal government is currently running.
But of course the biggest financial burdens are Medicaid, Medicare and Social Security. All three are on course to become completely and totally unsustainable.
For example, the number of Americans on Medicaid soared from 34 million in 2000 to 54 million in 2011, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
Ouch.
Well, what about Medicare?
Sadly, Medicare is even more frightening.
As I wrote recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
How in the world can we afford that?
At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for each and every household in the United States.
Are you ready to contribute your share?
Social Security is in really bad shape as well.
At the moment, approximately 56 million Americans are collecting Social Security benefits.
By 2035, that number is projected to soar to a whopping 91 million.
Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
Where are we going to get that money?
Total Debt
Of course the national debt is not out only debt problem. All over the country there are state and local governments that are on the verge of insolvency. Corporations and financial institutions are leveraged like crazy. And of course consumers have absolutely gorged on debt over the past several decades.
As a result, we are drowning in debt from sea to shining sea.
The good news is that our GDP is more than 12 times larger than it was 40 years ago.
The bad news is that the total amount of debt in our country is more than 30 times larger than it was 40 years ago….
Obviously this is something that cannot go on forever.
We simply cannot keep accumulating debt much faster than our economy is growing.
Nobody knows exactly when the “adjustment” is coming, but it most definitely will arrive at some point.
Money Printing
The Federal Reserve has attempted to monetize many of our economic problems by printing gigantic mountains of money in recent years.
The Federal Reserve is at the very heart of our economic problems, but most Americans don’t realize this. It was the Federal Reserve that created the conditions for the housing bubble, and it was the Federal Reserve that badly mismanaged the response when that bubble burst. The Federal Reserve decides how much money will be printed and what our interest rates will be. The Federal Reserve lends out trillions of dollars to the banks that they like, and other banks they let die. The Federal Reserve picks winners and losers in our economy, and most of the time that means good things for the big Wall Street banks and bad things for the rest of us.
In a desperate attempt to keep our unsustainable financial system from collapsing, the Federal Reserve has decided to start printing unprecedented amounts of money. Just look at what this has done to the monetary base….
And QE3 really hasn’t even started to kick in yet.
So how bad will that chart look after QE3 has been adding another 40 billion dollars a month to the financial system for a while?
You know, the Weimar Republic was absolutely convinced that they were doing the right thing by printing lots of money too.
But in the end that didn’t work out very well for them at all….
So should we really be celebrating the fact that the Federal Reserve is going down the same path that the Weimar Republic did?
Demonocracy has released a great new graphic that does a wonderful job of illustrating just how huge the amounts of money involved in QE3 are going to be. If you have not seen it yet, you can view the graphic right here.
The rest of the world is watching the games that we are playing with our currency. Right now we think that we are getting away with it, but what we are doing is not sustainable. At some point the rest of the world will totally lose confidence in the U.S. dollar, and when that happens the U.S. dollar could easily lose its status as the primary reserve currency of the world.
If that were to happen the coming shift in our standard of living would happen much more rapidly.
Please share this article with as many people as you can. We need to wake people up and get them to understand how incredibly vulnerable our financial system really is. We are on a path that is unsustainable any way that you want to look at it, and if something dramatic is not done our economy is going to experience an unprecedented collapse.
So what happens if nothing is done and everything crashes all around us?
Well, I hope that you are prepared because it isn’t going to be pretty.
 Did you know that median household income in the United States is lower today than it was when the last recession supposedly ended? If we are in the middle of an “economic recovery”, how can this possibly be happening? Stunning new statistics compiled by Sentier Research show that the U.S. economy is not nearly as healthy as we have been led to believe. According to the study that Sentier Research has just released, median household income in the United States was sitting at $55,470 back in January 2000. In December 2007, when the recession began, it was sitting at $54,916. In June 2009, when the recession supposedly ended, it was sitting at $53,508. Today, it is sitting at $50,964. This is a long-term trend that is definitely going in the wrong direction. The fact that median household income in the U.S. is now 4.8 percent lower than it was when the last recession ended is incredibly disturbing, especially since all of the things that we buy on a regular basis just keep going up in price. Food, gas, electricity, car insurance and health insurance all cost a whole lot more today than they did back in the year 2000, and yet median household income has dropped 8.1 percent since that time. So what does all of this mean? It means that American families ARE getting poorer.
Yes, the stock market has been soaring, corporate profits have set all-time records in recent years and the big Wall Street banks that were showered with bailout money are absolutely thriving.
But there has been no economic recovery on “Main Street”.
According to the Sentier Research report mentioned above, incomes have been declining in all geographic regions of the country and in all sectors of the economy….
-Median household income for the self-employed has fallen 9.4 percent since June 2009.
-Median household income for private sector employees has fallen 4.5 percent since June 2009.
-Median household income for government workers has fallen 3.5 percent since June 2009.
-Median household income for Americans living in the West has fallen 8.5 percent since June 2009.
-Median household income for Americans living in the Northeast has fallen 4.9 percent since June 2009.
-Median household income for Americans living in the South has also fallen 4.9 percent since June 2009.
-Median household income for Americans living in the Midwest has fallen 1.1 percent since June 2009.
Remember, the recession supposedly ended in June 2009.
Since that time we have supposedly been in a “recovery”.
So if it has seemed to you that American families have been getting poorer it has not just been your imagination.
In a previous article, I detailed 84 statistics that prove that the middle class in America is being systematically destroyed. If you have not read it yet, I encourage you to go check it out. At this point it is absolutely undeniable that the middle class in America is declining. The following are just a couple of the numbers from my recent article….
1. According to the Pew Research Center, 61 percent of all Americans were “middle income” back in 1971. Today, only 51 percent of all Americans are.
2. The Pew Research Center has also found that 85 percent of middle class Americans say that it is harder to maintain a middle class standard of living today compared with 10 years ago.
3. 62 percent of middle class Americans say that they have had to reduce household spending over the past year.
4. The average net worth of a middle class family in America was $129,582 in 2001. By 2010 that figure had dropped to $93,150.
5. According to the Federal Reserve, the median net worth of all families in the United States declined “from $126,400 in 2007 to $77,300 in 2010“.
You can find 79 more statistics just like this right here.
At the same time that our incomes are going down, the cost of living just continues to rise steadily.
Thanks Ben Bernanke.
American families are being increasingly stretched financially, and if major changes are not made this is going to get even worse in the years ahead.
Another thing that we aren’t being told on the nightly news is that the percentage of working age Americans that have jobs is lower today than when the last recession ended.
So let’s summarize….
-A smaller percentage of Americans have jobs today compared to June 2009.
-Median household income has declined by 4.8 percent since June 2009.
-American families are far less wealthy than they were just a few years ago.
Are we sure that we are in an economic recovery?
Just look at what is happening to our cities.
The rest of the world once looked at Detroit in awe.
Now it is a global joke.
You can see some incredible photographs of the devastation in Detroit right here.
This kind of thing is happening on the east coast as well. I have written many times about how horrible life has become in places such as Camden, New Jersey.
Well, now the entire Camden police force is being disbanded, and the policing of the city is going to be turned over to the county.
We are a mess, and it is time to admit that.
Sadly, most Americans simply have no idea how close our economic system really is to total system failure.
Only 24.6 percent of the jobs in this country are “good jobs” at this point, the velocity of money in our economy has plunged to a post-World War II low, unemployment is rampant, more than half of all Americans are at least partially financially dependent on the government and our national debt is crossing the 16 trillion dollar mark.
We don’t need someone to come in and “tweak” the economy.
We need radical reconstructive surgery.
But most Americans do not understand this.
Most Americans do not seem to grasp these things until economic hardship touches them personally.
After all, if you still have a good job and the mainstream media is telling you that everything is going to be okay it is really easy to pretend that we aren’t heading for an economic disaster of unimaginable proportions.
A massive problem that we are facing right now is something known as “normalcy bias”. This is how Wikipedia defines “normalcy bias”….
The normalcy bias, or normality bias, refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring and its possible effects. This often results in situations where people fail to adequately prepare for a disaster, and on a larger scale, the failure of governments to include the populace in its disaster preparations. The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred then it never will occur. It also results in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before. People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.
Doesn’t that sound exactly like the vast majority of Americans right now?
Most Americans just assume that since we have always recovered from every other economic downturn in the past that we will always be able to easily handle whatever the future throws at us.
If only that was true.
We are heading into a time that will be unlike anything any of us have ever experienced before, and many people that have blind faith in the system are going to be absolutely devastated when this coming crisis blindsides them.
Our economy has been collapsing, it is continuing to collapse, and the collapse is going to accelerate dramatically in the coming years.
You can have blind faith in the system, or you can get prepared for what is coming.
The choice is up to you.
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