The Beginning Of The End
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Say Goodbye To The Good Life

Say Goodbye To The Good Life - The U.S. Capitol With A Babylonian Holiday Tree In The ForegroundWill 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.

Santa Claus - A Symbol Of Our Materialism

Will Toledo, Ohio Be The First Major American City To Be Owned By China?

It has been said that there are two ways to conquer and enslave a nation.  One way is by using the sword, and the other is by using debt.  Fortunately, America is not in danger of being conquered by the sword right now, but America is being conquered by debt.  The borrower is the servant of the lender, and today we owe China more than a trillion dollars.  By running a gigantic trade deficit with us, China has been able to become incredibly wealthy.  We have begged them to lend us back some of the money that we have sent them and this has made them even wealthier.  Now China is gobbling up U.S. real estate and U.S. assets at an astounding pace.  In fact, some cities are in danger of becoming completely dominated by Chinese ownership.  One of those cities is Toledo, Ohio.  In many “rust belt” areas, real estate can be had for a song, and the Chinese are taking full advantage of this.  America was once the wealthiest nation on earth, but now we are drowning in debt and we are being sold off in chunks to the highest bidder.  Is this the legacy that we are going to leave for future generations?

According to a recent Fortune article, Chinese investors have been very busy purchasing distressed commercial real estate in Toledo lately….

In March 2011, Chinese investors paid $2.15 million cash for a restaurant complex on the Maumee River in Toledo, Ohio. Soon they put down another $3.8 million on 69 acres of newly decontaminated land in the city’s Marina District, promising to invest $200 million in a new residential-commercial development. That September, another Chinese firm spent $3 million for an aging hotel across a nearby bridge with a view of the minor league ballpark.

Toledo is being promoted to Chinese investors as a “5-star logistics region“.  From Toledo it is very easy to get to Chicago, Detroit, Cleveland, Pittsburgh, Columbus and Indianapolis.

With a population of 287,000, Toledo is only the fourth largest city in Ohio, but it lies at the junction of two important highways — I-75 and I-80/90. “My vision is to make Toledo a true international city,” Toledo’s Mayor Mike Bell told the Toledo Blade.

For some reason the Chinese seem to be very interested in that area of the country.  Last month, I wrote about how one Chinese group plans to develop a 200 acre “China city” just 40 minutes away from Toledo….

A Chinese group known as “Sino-Michigan Properties LLC” has bought up 200 acres of land near the town of Milan, Michigan.  Their plan is to construct a “China City” with artificial lakes, a Chinese cultural center and hundreds of housing units for Chinese citizens.  Essentially, it would be a little slice of communist China dropped right into the heartland of America.  This “China City” would be located about 40 minutes from both Detroit and Toledo, and it would be marketed to Chinese business people that want to start businesses in the United States.

But it is not just the rust belt that is being bought up by the Chinese.  A recent Forbes article documented several of the huge real estate deals that the Chinese are doing in New York right now….

According to a recent report in the New York Times, investors from China are “snapping up luxury apartments” and are planning to spend hundreds of millions of dollars on commercial and residential projects like Atlantic Yards in Brooklyn. Chinese companies also have signed major leases at the Empire State Building and at 1 World Trade Center, the report said.

In addition to real estate, the Chinese are also buying up businesses and natural resources all over the United States.

For example, the Dalian Wanda Group recently bought U.S. movie theater chain AMC Entertainment for 2.6 billion dollars.

Also, the Obama administration has been allowing companies owned by the Chinese government to gobble up U.S. oil and gas deposits worth billions of dollars.

On top of all that, the Federal Reserve recently announced that it will now allow Chinese banks to start buying up American banks.

So how in the world did we come to be so completely and totally dominated by China?

Well, the key to all of this is the trade deficit.

Most Americans can’t even tell you what a trade deficit is, but it is at the very heart of our economic problems.

Basically, we buy far, far more from other countries than they buy from us.

Most Americans don’t realize this, but the truth is that the United States has a trade imbalance that is more than 5 times larger than any other nation on earth has.

Overall, the U.S. has run a trade deficit of more than 8 trillion dollars with the rest of the globe since 1975.

If you go into a Wal-Mart of a dollar store today and you start looking at product labels, you will notice that hundreds of products say “made in China” and very few of them say that they were made in this country.

Every single month, China sends us gigantic mountains of plastic crap to sell in our stores and we send them gigantic mountains of our money.

The U.S. trade deficit with China during 2011 was $295.4 billion.  That was the largest trade deficit that one country has had with another country in the history of the planet.

Sadly, so far our trade deficit with China in 2012 is about 12 percent larger than it was last year.

So things are getting even worse.

To get an idea of how far things have come, let us take a look back at the 1980s for a moment.

Back in 1985, the U.S. trade deficit with China was only 6 million dollars for the entire year.

All of this imbalanced trade is absolutely killing us.

Today, the United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

So why doesn’t China buy more stuff from us?

Well, there are a whole lot of reasons.  One of the main reasons is that they slap huge tariffs on many American-made goods.

For example, according to the New York Times a Jeep Grand Cherokee that costs $27,490 in the United States costs about $85,000 in China thanks to all the tariffs.

So why do we allow China to keep doing this to us?

That is a very good question.

Meanwhile, China is continually getting wealthier and we are continually getting poorer.

All of the money that is leaving this country and going to China could be going to U.S. businesses and U.S. workers instead.  In turn, those businesses and workers would pay taxes on that money to support the government.

Instead, we have to go beg China to lend us the money that we just sent to them.

At this point, China now holds approximately 1.17 trillion dollars of U.S. government debt.

None of this ever had to happen.

But it did happen because we were stupid.

Now China has mountains of money to literally buy us up.

But China is not the only country that we have an imbalanced trading relationship with.

For example, the new “free trade agreement” between the United States and South Korea that Barack Obama has been touting went into full effect on March 15, 2012.

So how has that “free trade agreement” turned out so far?  The following is from a recent article by Pat Buchanan….

The U.S. trade deficit with Korea tripled in one month. Imports from South Korea jumped 15 percent to $5.5 billion in April, while U.S. exports to South Korea fell 12 percent to $3.7 billion. Suddenly, the U.S. trade deficit with Seoul surged to an annual rate of $22 billion.

Shades of NAFTA. When it passed in 1993, we had a $1.6 billion trade surplus with Mexico. By 2010, our trade deficit with Mexico had reached $61.6 billion.

Ouch.

The truth is that these free trade agreements are not fair and balanced.

U.S. workers end up competing for jobs with workers in countries where it is legal to pay slave labor wages.  And other countries often have far fewer rules and regulations to follow as well.  In his recent article, Buchanan described why all Americans should be economic nationalists….

Global free trade means U.S. workers compete with Asian and Latin American workers whose wages are a fraction of our own and whose benefits may be nonexistent. Global free trade means U.S factories that relocate to Indonesia or India need not observe U.S. laws on health, safety, pollution or paying a minimum wage.

Global free trade means that companies that move factories outside the United States can send their products back to the United States free of charge and undercut businessmen who retain their American workers and live within American laws.

Free trade makes suckers and fools out of patriots.

Unfortunately, both major political parties in the United States are absolutely married to the one world economic agenda that the elite are pushing.

So we will continue to bleed wealth, businesses and jobs at an astounding pace.

You can get a really good idea of the horrific manufacturing job losses in the United States over the past 40 years by checking out this map right here.

Overall, the United States has lost a total of more than 56,000 manufacturing facilities since 2001.

According to the Economic Policy Institute, since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone.

There seems to be absolutely no concern with protecting American jobs these days.

If you can believe it, Chinese corporations are even building our bridges.  The following is a brief excerpt from a recent ABC News article….

In New York there is a $400 million renovation project on the Alexander Hamilton Bridge.

In California, there is a $7.2 billion project to rebuild the Bay Bridge connecting San Francisco and Oakland.

In Alaska, there is a proposal for a $190 million bridge project.

These projects sound like steps in the right direction, but much of the work is going to Chinese government-owned firms.

“When we subsidize jobs in China, we’re not creating any wealth in the United States,” said Scott Paul, executive director for the Alliance for American Manufacturing.

Americans need to start understanding that our trade deficit is causing us to lose massive numbers of businesses and jobs and that this is making us poorer as a nation.

As I wrote about the other day, the median net worth of families in the United States declined “from $126,400 in 2007 to $77,300 in 2010” according to the Federal Reserve.

Even if you take away the effect of the housing collapse, household net worth still declined by 25 percent between 2005 and 2010.

A lot of that decline in wealth was due to the recent recession, but the point I am trying to make is that we are getting poorer as a nation.

A decade ago, the United States was ranked number one in average wealth per adult.  By 2010, the United States had fallen to seventh.

And when you factor in our debts, we are a complete and total mess.  U.S. consumers are more than 11 trillion dollars in debt and the federal government is nearly 16 trillion dollars in debt.

We are getting deeper in debt at the same time that our ability to service that debt is declining.

The reality is that our economy is completely falling apart and it no longer produces enough jobs for everyone.

In fact, it isn’t even close.

Right now there are about 3.7 workers that are “officially” unemployed for every single job opening.

So what we are doing right now is clearly not working.

We need to fundamentally change direction as a nation.

Unfortunately, that is not going to happen any time soon.

So where do we go from here?

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