The Beginning Of The End
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One Out Of Every Ten U.S. Banks Is Now On The FDIC’s Problem List – Do You Know If Your Bank Is Safe?

Do you know if your bank will be there next month?  For a growing number of Americans, that is becoming a very real question.  The Wall Street Journal is reporting that 775 banks (approximately ten percent of all U.S. banks) are now on the Federal Deposit Insurance Corporation's list of "problem" banks.  This year we have already seen more than six dozen banks fail, and the frightening thing is that we are seeing a rapid acceleration in bank failures even though we are supposedly in a "recovery" right now.  So what happens if the economy takes a bad turn and hundreds of these banks that are barely surviving start failing?

Right now an increasing number of Americans are not paying their loans, and this is shredding the balance sheets of small and medium size banks all over the United States.  In fact, during the first quarter of 2010, the total number of loans that are at least three months past due increased for the 16th consecutive quarter.

16 consecutive quarters?

Once is a coincidence.

Twice is a trend.

Sixteen times in a row is a total nightmare.

Is there anyone out there that is still convinced that the economy is getting better?

If so, perhaps this will convince you otherwise....

There were 252 banks on the FDIC's "problem list" at the end of 2008.

There were 702 banks on the FDIC's "problem list" at the end of 2009.

Now there are 775 banks of the FDIC's "problem list".

Are you starting to see a trend?

Federal regulators have already closed 73 banks in 2010, more than double the number shut down at this time last year.

The truth is that the U.S. banking system is coming apart like a 20 dollar suit.

So is the FDIC worried?

No, they insist that they have plenty of money to cover all of the banks that are going to fail.

After all, the FDIC's deposit insurance fund now has negative 20.7 billion dollars in it, which represents a slight improvement from the end of 2009.

Yes, you read that correctly.

Negative 20.7 billion dollars.

That should be enough to cover the hundreds of banks that are in the process of failing, right?

Well, if not, the FDIC can just run out and ask the U.S. government for a big, juicy bailout.

After all, can't the U.S. government borrow an endless amount of money with absolutely no consequences?

Well, no.

Debt always catches up with you sooner or later.

In fact, the IMF is warning that that the gross public debt of the United States will hit 97 percent of GDP in 2011 and 110 percent of GDP in 2015.

Meanwhile, the U.S. financial system continues to shrink even after the unprecedented amount of "stimulus money" that the U.S. government has been shoveling into the economy.

The M3 money supply is now contracting at a frightening pace.

In fact, the current rate of monetary contraction now matches the average rate of monetary contraction the U.S. experienced between 1929 and 1933.

But don't worry.

We aren't going into a Depression.

Everything is going to be just fine.

Just look deep into Obama's eyes and keep repeating the word "change" to yourself over and over.

According to a report in The Telegraph, the M3 money supply declined from $14.2 trillion to $13.9 trillion in the first quarter of 2010.

That represents an annual rate of contraction of 9.6 percent.

In case you were wondering, that is a lot.

Not only that, but the assets of institutional money market funds declined at a 37 percent annual rate.

That was the sharpest drop ever.

Yes, it is time for the alarm bells to start going off.

The Telegraph recently quoted Professor Tim Congdon from International Monetary Research as saying the following about the deep problems that the U.S. is facing....

"The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly."

If banks continue to cut their lending, the M3 is going to continue to shrink.

But as noted above, Americans are increasingly getting behind on their loans, so why should banks loan money to a bunch of deadbeats?

Right now U.S. banks are increasingly tightening their lending standards, and this is making it much tougher to get a loan.

In fact, in 2009 the biggest U.S. banks posted their sharpest decline in lending since 1942.

But there is only one problem.

The U.S. economy is completely and totally dependent on credit.

Without easy credit, the entire U.S. economic machine is going to slowly grind to a halt.

So what do you do?

The reality is that we have one gigantic financial mess on our hands, and in many ways it is starting to look like the 1930s all over again.

But perhaps someone out there has a way to get us out of this nightmare.  Please feel free to leave a comment with your thoughts, opinions or solutions....

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  • Jimmy in Las Vegas

    The US government should provide long term low interest loans to qualified people. For instance, if I could get a loan for say $200,000 at ZERO interest for 40 years or 50 years I could consolidate all my debt including my mortgage. My available disposable income would immediately rise which would allow me to start spending lots of money and would get the whole American machine going again. Is this a reasonable solution? Are there enough people with good enough credit scores to make a difference?

  • http://economiccollapse Dang

    Will DA! thats only because of all the mergers of the banks and there is not that many left.

  • Something Wicked This Way Comes

    But Mike, this can’t be! I listen to Joe Kernan and Larry Kudlow everyday. MSNBC. They get people on the show to tell us stupid investors what to buy and that the market is going to go up and everything is going to be beautiful and hunky dory.

    If the Fed government took the losses and realized them, of Fannie and Freddie, which they refuse to do- our debt to GDP is in the 140% range. I won’t even mention SS and medicare.

    We are flat busted. Bankrupt. Kaput. I wouldn’t invest Obama’s money in this market. Let alone my mother’s. Anyone contributing to a 401k- based on some projection that the market will go up or that inflation and taxes are going down (even in the next ten years) is a moron. Get as liquid as you can- get out of debt NOW.

  • Grumpy

    I have the utmost confidence that the (mal)administration in Washington and the Lame-Stream Media will continue their sleight-of-hand shows to keep the masses distracted from the grave problems facing the country and its financial system until it’s far too late for most people to properly prepare for the inevitable.

    Unfortunately for them, many of the sheep are finally coming to the realization that they’re being sheared, in preparation for the proverbial slaughterhouse. We can only hope that there are enough waking sheep that the damage can be mitigated to a survivable level, since there is little likelihood of avoiding the looming financial collapse. As to whether or not it leads to a complete societal collapse… well, hope for the best and prepare for the worst.

  • Jim Marable

    Buy physical Gold and Silver while you still can.

  • vinnya

    Fire all the public workers, end the Fed, start manufacturing everything over here again, dont import anything, dont buy something you dont have the money for, end the wars, let the banks fail, elect an entire new government and hire public workers where no one makes more the 45k a year, no pensions, let everyone save for their own retirement, no more outsourcing. The list can go on and on! None of this will ever happen, prepare for a total collapse. Its almost here!

  • Baja Joes

    Now that you’ve advised us of what will happen
    how about some advice on what to do to help ourselves?
    Not financial advice but what you might do.

  • http://www.thunderdrake.com/blog/ Aury (Thunderdrake)

    When you abuse out-sourcing, you lose your local manufacturing base. When you abuse the fractional reserve system, you lose the value of your money. When you bail out incompetent companies, they stay incompetent.

    Since so much gold has been concentrated in fewer hands, the only real solution I can think of is a new debt free and sovereign fiat money.

    But more important, absolute reform of the banking system.

    Of course, since banks are all about hungry profiteering, even a full reserve system can be brought down through abuse. Just not as badly as fractional reserve.

  • tyler

    This website has had some must read articles lately. Your doing a great job of trying to wake up the sheeple.

    • Michael

      Thanks Tyler – I am doing my best.

  • ParLay

    Jim – One of my strategies has been in to invest in known Gold and Silver Deposits (Mining Claims). The trick is to find GOOD CLAIMS and not junk being pushed by a snake oil claims person on the internet which requires a lot of book research plus local knowledge. Most people don’t realize the Rocky Mountains were mined extensively during the Great Depression and kept a lot of people out of the food lines. Yes, this is a WELL KEPT SECRET!

    The way I view this is if gold hits $2,500 or $3,000 ounce or higher all bets are off.

  • robind1st

    Good article, as usual.

    If folks educated themselves, worked, saved 20% of gross, paid their bills, lived within their means and minded their community health, we wouldn’t be in the mess in which we find ourselves. We’ve been our own worst enemy for the past 35 years.

    I don’t think the Am. economy will come to a screeching halt. I suspect it will just change, devolve into a much less complex, local system.

  • Dean

    To Jimmy in LasVegas: That won’t help Jimmy.

    If the gov did this they would do it by taking money from other people by decree (this is where govt gets all its money) and giving it to you at zero interest and then you and the other lucky ones would go on spending. Spending doesn’t create prosperity, production does. Spending is the result, not the driver of prosperity. Work must always precede spending. Once any spender spends more than he produces he’s financially ill and can get better or worse based on where he goes from there: more work less spending, or more spending less work.

  • Michael Hanscom

    Unfortunately, right now, the only prescription for increasing demand is in the form of Govt spending and specifically, they should extend unemployment to the truly long term who are now being ignored. Hoover tried to balkance the budget in a depression and the result was Hoovervilles. Right now, 1.5 million have exhausted their benefits at an avg of $300.00 per wk. Every dollar spent on unemployment results in $1.60 in GDP because it is spent immediately. I dont have the answer for the banking crisis but I know failure to keep govt spending rolling will huirt the banks further with defaults, foreclosures, etc and business will suffer due to lack of spending. This is classic Keynesian economics and without it, we are heading for bigger problems.

  • Michael Hanscom

    How do yopu propose increasing productivity without spending? Businesses will not produce more without demand. Spending is what is neccesary to increase demand and production which adds to employment. Demand has to come first.If you donbt need 20 people, you wont hire 20 people until demand for services increases! That much I am sure about.

  • DontWorryItsAlmostOver

    The banks holding on to more money is the way it should have been before. They shouldn’t have made so many stupid, greedy loans in the first place. Also, the reserve requirement should be higher than it was before anyway. We have enough money made up out of thin air floating out there already.

  • MrReality

    This is the first time I have been on this site and am impressed with the articles.

    The financial collapse of the US as well as the rest of the world is an orchestrated effort to bring an end to sovereign governments and usher in the NWO. We appear to now be at a tipping point in this country and the rest of the world, where the debt accumulated by governments at the hands of criminal central banks is having its desired effect of bringing about economic collapse.

    Civil unrest around the world is increasing as populations wake up and realize what has been taking place for the last 50 to 100 years. It is only a matter of time before we here in the US begin to experience similar events. I have been reading recently that foreign troops (German, Chinese, Russian, etc.) are here on our soil, waiting for the signal to quell citizen uprisings due to the imminent economic collapse in our country.

    There are hundreds of FEMA concentration camps scattered around the country that are in states of readiness when the time comes to take in dissenters and others fighting against the tyranny of evil forces that are beyond the comprehension of most humans. Folks, everything that is happening in our world is happening for a reason, and not good reasons by our standards. There are evil forces which have gained control of every power center of our world, whose main goal is to destroy mankind for their own wicked desires.

    I realize this might not be the right place to bring religion into the discussion, but the fact is becoming more relevant everyday that what is taking place on Earth to its people is not just coincidence or the work of out of control men. There are too many facts, which if you begin to connect the correct dots, you will begin to see who the players are and their planned mission.

    Can this all be stopped? I doubt it by mere mortal humans of good conscience. The best I think we can hope for is divine intervention at the right time. As I said, this might not be the right venue for this type of discussion, but believe me, I think if you do some research on the topic of the Black Pope, you will have a better understanding of where evil begins in our world.

    A good YouTube site to visit is http://www.theforerunnerchronicles.com. There are a couple of multipart videos which provide some shocking information that is must see for all who truly seek the truth!

    Prey for humanity, that we will all eventually be free of this evil. I think our struggles will continue for a long time to come, so be strong and believe that the human race has the power to survive this evilness.

  • dan dunn

    go broke: austrians say
    or slowly inflate, loose purchasing power.
    see: 19 nations, 30+ US states insolvent.”

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