Will rapidly rising interest rates rip through the U.S. financial system like a giant lawnmower blade? Yes, the U.S. economy survived much higher interest rates in the past, but at that time there were not hundreds of trillions of dollars worth of interest rate derivatives hanging over our financial system like a Sword of Damocles. This is something that I have been talking about for quite some time, and now a Mexican billionaire has come forward with a similar warning. Hugo Salinas Price was the founder of the Elektra retail chain down in Mexico, and he is extremely concerned that rising interest rates could burst the derivatives bubble and cause “massive bankruptcies around the globe”. Of course there are a whole lot of people out there that would be quite glad to see the “too big to fail” banks go bankrupt, but the truth is that if they go down our entire economy will go down with them. Our situation is similar to a patient with a very advanced stage of cancer. You can try to kill the cancer with drugs, but you will almost certainly kill the patient at the same time. Well, that is essentially what our relationship with the big banks is like. Our entire economic system is based on credit, and just like we saw back in 2008, if the big banks start failing credit freezes up and suddenly nobody can get any money for anything. When the next great credit crunch comes, every important number in our economy will rapidly start getting much worse.
The big banks are going to play a starring role in the next financial crash just like they did in the last one. Only this next crash may be quite a bit worse. Just check out what billionaire Hugo Salinas Price told King World News recently…
I think we are going to see a series of bankruptcies. I think the rise in interest rates is the fatal sign which is going to ignite a derivatives crisis. This is going to bring down the derivatives system (and the financial system).
There are (over) one quadrillion dollars of derivatives and most of them are related to interest rates. The spiking of interest rates in the United States may set that off. What is going to happen in the world is eventually we are going to come to a moment where there is going to be massive bankruptcies around the globe.
What is going to be left after the dust settles is gold, and some people are going to have it and some people are not. Then the problem is going to be to hold on to what you’ve got because it’s not going to be a very pleasant world.
Right now, there are about 441 trillion dollars of interest rate derivatives sitting out there. If interest rates stay about where they are right now and they don’t go much higher, we will be fine. But if they start going much higher, all bets will be off and we could see financial carnage on a scale that we have never seen before.
And at the moment the big banks have got to behave themselves because the government is investigating allegations that they have been cheating pension funds and other investors out of millions of dollars by manipulating the trading of interest rate derivatives. The following is from an article that the Telegraph posted on Friday…
The Commodity Futures Trading Commission (CFTC) is probing 15 banks over allegations that they instructed brokers to carry out trades that would move ISDAfix, the leading benchmark rate for interest rate swaps.
Pension funds and companies who invest in interest rate derivatives often deal with banks to insure against big movements in the ISDAfix rate or to speculate on changes to interest rate swaps
ISDAfix is published each morning after banks submit bids for swaps via Icap, the inter-dealer broker, in a number of currencies. The CFTC has been investigating suggestions that the banks deliberately moved the rate in order to profit on these deals.
Given the hundreds of trillions of dollars worth of interest rate derivatives trades that occur annually, even the slightest manipulation can have a substantial effect. The CFTC, which started to investigate ISDAfix after last summer’s Libor scandal has now been handed emails and phone call recordings that show the rate was deliberately moved, according to Bloomberg.
Essentially they got their hands caught in the cookie jar and so they have got to play it straight (at least for now).
Meanwhile, it looks like the Fed may not be able to keep long-term interest rates down for much longer.
The Federal Reserve has been using quantitative easing to try to keep long-term interest rates low, but now some officials over at the Fed are becoming extremely alarmed about how bloated the Fed balance sheet has become. For example, the following was recently written by the head of the Dallas Fed, Richard Fisher…
This later program is referred to as quantitative easing, or QE, by the public and as large-scale asset purchases, or LSAPs, internally at the Fed. As a result of LSAPs conducted over three stages of QE, the Fed’s System Open Market Account now holds $2 trillion of Treasury securities and $1.3 trillion of agency and mortgage-backed securities (MBS). Since last fall, when we initiated the third stage of QE, we have regularly been purchasing $45 billion a month of Treasuries and $40 billion a month in MBS, meanwhile reinvesting the proceeds from the paydowns of our mortgage-based investments. The result is that our balance sheet has ballooned to more than $3.5 trillion. That’s $3.5 trillion, or $11,300 for every man, woman and child residing in the United States.
Fisher has compared the current Fed balance sheet to a “Gordian Knot”, and he hopes that the Fed will be able to unwind this knot without creating “market havoc”…
The point is: We own a significant slice of these critical markets. This is, indeed, something of a Gordian Knot.
Those of you familiar with the Gordian legend know there were two versions to it: One holds that Alexander the Great simply dispatched with the problem by slicing the intractable knot in half with his sword; the other posits that Alexander pulled the knot out of its pole pin, exposed the two ends of the cord and proceeded to untie it. According to the myth, the oracles then divined that he would go on to conquer the world.
There is no Alexander to simply slice the complex knot that we have created with our rounds of QE. Instead, when the right time comes, we must carefully remove the program’s pole pin and gingerly unwind it so as not to prompt market havoc. For starters though, we need to stop building upon the knot. For this reason, I have advocated that we socialize the idea of the inevitability of our dialing back and eventually ending our LSAPs. In June, I argued for the Chairman to signal this possibility at his last press conference and at last week’s meeting suggested that we should gird our loins to make our first move this fall. We shall see if that recommendation obtains with the majority of the Committee.
But of course it should be obvious to everyone that the Fed is not going to be able to reduce the size of its balance sheet without causing huge distress in the financial markets. A few weeks ago, just the suggestion that the Fed may eventually begin to slow down the pace of quantitative easing caused the markets to throw an epic temper tantrum.
Unfortunately, the Fed may not be able to keep control of long-term interest rates even if they continue quantitative easing indefinitely. Over the past several weeks long-term interest rates have been rising steadily, and the yield on 10 year U.S. Treasuries crept a bit higher on Monday.
At this point, many on Wall Street are convinced that the bull market for bonds is over and that rates will eventually go much, much higher than they are right now no matter what the Fed does. The following is an excerpt from a recent CNBC article…
The Federal Reserve will lose control of interest rates as the “great rotation” out of bonds into equities takes off in full force, according to one market watcher, who sees U.S. 10-year Treasury yields hitting 5-6 percent in the next 18-24 months.
“It is our opinion that interest rates have begun their assent, that the Fed will eventually lose control of interest rates. The yield curve will first steepen and then will shift, moving rates significantly higher,” said Mike Crofton, President and CEO, Philadelphia Trust Company told CNBC on Wednesday.
Hugo Salinas Price is exactly right – the derivatives bubble is the number one threat that our financial system is facing, and it could potentially bring down a whole bunch of our big banks.
But for the moment, Wall Street is still in a euphoric mood. The Dow is near a record high and many investors are hoping that this rally will last for the rest of the year.
Unfortunately, I wouldn’t count on that happening. The truth is that the stock market has become completely divorced from economic reality.
Since March 2009, the size of the U.S. economy has grown by approximately $1.3 trillion, but stock market wealth has grown by an astounding $12 trillion.
And the stock market has just kept on rising even though GDP growth forecasts have been steadily falling.
It doesn’t make any sense.
But Obama, Bernanke and the wizards on Wall Street assure us that there is no end to the party in sight.
Believe them at your own peril.
The people at the controls are completely and totally clueless and we are rapidly careening toward disaster.
Perhaps we should do what one little town in Minnesota did and put a 4-year-old kid in charge.
That kid certainly could not be much worse than our current leadership, don’t you think?
A new set of regulations that most people have never even heard of that was developed by an immensely powerful central banking organization that most people do not even know exists is going to have a dramatic effect on the global financial system over the next several years. The new set of regulations is known as “Basel III”, and it was developed by the Bank for International Settlements. The Bank for International Settlements has been called “the central bank for central banks”, and it is headquartered in Basel, Switzerland. 58 major central banks (including the Federal Reserve) belong to the Bank for International Settlements, and the decisions made in Basel often have more of an impact on the direction of the global economy than anything the president of the United States or the U.S. Congress are doing. All you have to do is to look back at the last financial crisis to see an example of this. Basel II and Basel 2.5 played a major role in precipitating the subprime mortgage meltdown. Now a new set of regulations known as “Basel III” are being rolled out. The implementation of these new regulations is beginning this year, and they will be completely phased in by 2019. These new regulations dramatically increase capital requirements and significantly restrict the use of leverage. Those certainly sound like good goals, the problem is that the entire global financial system is based on credit at this point, and these new regulations are going to substantially reduce the flow of credit. The only way that the giant debt bubble that we are all living in can continue to persist is if it continues to expand. By restricting the flow of credit, these new regulations threaten to burst the debt bubble and bring down the entire global economy.
Not that the current global financial system is sustainable by any means. Anyone with half a brain can see that the global financial system is a pyramid scheme that is destined to collapse. But Basel III may cause it to collapse faster than it might otherwise have.
So precisely what is Basel III? The following is a definition from the official website of the Bank for International Settlements…
“Basel III” is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:
improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source
improve risk management and governance
strengthen banks’ transparency and disclosures.
All of that looks good at first glance. But when you start looking into the details you start realizing what it is going to mean for the global financial system. Banks are going to be required to have higher reserve ratios and use less leverage. Banks are going to have to be more careful with their money, which is a good thing, but it is also going to mean that credit will not flow as freely. Unfortunately, the only way for a debt bubble to survive is if it keeps expanding. Anything that restricts the flow of easy money threatens to bring a debt bubble to an end.
These new regulations are going to be phased in between 2013 and 2019. You can see a chart which shows the implementation schedule for the Basel III regulations right here.
So why is bringing the debt bubble to an end a bad thing?
Well, because it will cause the false prosperity that we have been enjoying to disappear, and that will be an exceedingly painful adjustment.
Sadly, most people have no idea what is happening. Most people have never even heard of “Basel III” or “the Bank for International Settlements”. Most people just assume that the people they voted into office know what they are doing and have everything under control.
Unfortunately, that is not the case at all. The truth is that an unelected, unaccountable body of central bankers is making decisions which deeply affect us all, and there is not much that we can do about it.
This unelected, unaccountable body of central bankers played a major role in bringing about the last financial crisis. The following is a brief excerpt from a recent article posted on Before It’s News…
If you have any questions about the power of these Basel Banking Regulations you can also see the effects that Basel II and 2.5, mark to market accounting, had on the Housing Markets in the United States of America in 2008. There were many causes for that housing bubble, then housing crisis, but Basel II and 2.5 was most assuredly the pin that popped the housing bubble that led to the financial crisis of 2008-09.
But do most people know about this?
Of course not. Most people want to blame the Republicans or the Democrats or Bush or Obama, and they have no idea about the financial strings that are being pulled at the highest levels.
An immensely powerful international organization that most people have never even heard of secretly controls the money supply of the entire globe. It is called the Bank for International Settlements, and it is the central bank of central banks. It is located in Basel, Switzerland, but it also has branches in Hong Kong and Mexico City. It is essentially an unelected, unaccountable central bank of the world that has complete immunity from taxation and from national laws. Even Wikipedia admits that “it is not accountable to any single national government.” The Bank for International Settlements was used to launder money for the Nazis during World War II, but these days the main purpose of the BIS is to guide and direct the centrally-planned global financial system. Today, 58 global central banks belong to the BIS, and it has far more power over how the U.S. economy (or any other economy for that matter) will perform over the course of the next year than any politician does. Every two months, the central bankers of the world gather in Basel for another “Global Economy Meeting”. During those meetings, decisions are made which affect every man, woman and child on the planet, and yet none of us have any say in what goes on. The Bank for International Settlements is an organization that was founded by the global elite and it operates for the benefit of the global elite, and it is intended to be one of the key cornerstones of the emerging one world economic system.
Even though most people have never even heard of the BIS, the truth is that the global elite have had big plans for it for a very long time. In another article I included a quote from a book that Georgetown University history professor Carroll Quigley wrote many years ago entitled “Tragedy & Hope”…
[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.
Today we have such a system, and most of the public does not even know that it exists.
And when the next great financial crisis strikes, there will probably be very little ever said about the Bank for International Settlements in the mainstream media.
But right now the BIS is helping set the stage for the great credit crunch that is coming.
Get prepared while you still can, because time is running out.
When you get into too much debt, eventually really bad things start to happen. This is a very painful lesson that southern Europe is learning right now, and it is a lesson that the United States will soon learn as well. It simply is not possible to live way beyond your means forever. You can do it for a while though, and politicians in the U.S. and in Europe keep trying to kick the can down the road and extend the party, but the truth is that debt is a very cruel master and at some point it inevitably catches up with you. And when it catches up with you, the results can be absolutely devastating. Greece, Italy, Spain and Portugal all tried to just slow down the rate at which their government debts were increasing, and look at what happened to their economies. In each case, GDP is shrinking, unemployment is skyrocketing, credit is freezing up and manufacturing is declining. And you know what? None of those countries has even gotten close to a balanced budget yet. They are all still going into even more debt. Just imagine what would happen if they actually tried to only spend the money that they brought in?
I have always said that the next wave of the economic collapse would start in Europe and that is exactly what is happening. So keep watching Europe. What is happening to them will eventually happen to us.
The following are 17 signs that a full-blown economic depression is raging in southern Europe…
#1 The Italian economy is in the midst of a horrifying “credit crunch” that is causing thousands of companies to go bankrupt…
Confindustria, the business federation, said 29pc of Italian firms cannot meet “operational expenses” and are starved of liquidity. A “third phase of the credit crunch” is underway that matches the shocks in 2008-2009 and again in 2011.
In a research report the group said the economy was caught in a “vicious circle” where banks are too frightened to lend, driving more companies over the edge. A thousand are going bankrupt every day.
#2 During the 4th quarter of 2012, the unemployment rate in Greece was 26.4 percent. That was 2.6 percent higher than the third quarter of 2012, and it was 5.7 percent higher than the fourth quarter of 2011.
#3 During the 4th quarter of 2012, the youth unemployment rate in Greece was 57.8 percent.
#4 The unemployment rate in Spain has reached 26 percent.
Data from Italy’s national statistics institute ISTAT showed that the country’s economy shrank by 0.9pc in the fourth quarter of last year and gross domestic product was down a revised 2.8pc year-on-year.
#10 The Greek economy is contracting even faster than the Italian economy is…
Greece also sank further into recession during the fourth quarter of 2012, with figures on Monday showing the economy contracted by 5.7pc year-on-year.
#12 Manufacturing activity is declining just about everywhere in Europe except for Germany…
Research group Markit said its index of activity in UK manufacturing – where 50 is the cut off between growth and decline – sank from 50.5 in January to 47.9 in February. It left Britain on the brink of a third recession in five years after the economy shrank by 0.3 per cent in the final quarter of 2012.
Chris Williamson, chief economist at Markit, said: ‘This represents a major setback to hopes that the UK economy can return to growth in the first quarter and avoid a triple-dip recession.’
The eurozone manufacturing index also read 47.9. Germany scored 50.3 but Spain hit 46.8, Italy 45.8 and France 43.9.
#13 The percentage of bad loans in Italian banks has risen to 12.2 percent. Back in 2007, that number was sitting at just 4.5 percent.
#14 Bank deposits experienced significant declines all over Europe during the month of January.
#15 Private bond default rates are soaring all over southern Europe…
S&P said the default rate for Italian non-investment grade bonds jumped to 9.5pc last year from 5.7pc in 2012 as local banks shut off funding. It was even worse in Spain, doubling to 14.3pc.
The default rate in France rocketed from 0.8pc to 8.7pc, the latest in a blizzard of bad news from the country as the delayed effects of tax rises, fiscal tightening, and the strong euro do their worst.
#16 Lars Feld, a key economic adviser to German Chancellor Angela Merkel, recently said the following…
“The sustainability of Italian public finances is in jeopardy. The euro crisis will therefore return shortly with a vengeance.”
#17 Things have gotten so bad in Greece that the Greek government plans to sell off 28 state-owned buildings – including the main police headquarters in Athens.
One of the few politicians in Europe that actually understands what is happening in Europe is Nigel Farage. A video of one of his recent rants is posted below. Farage believes that “the Eurozone has been a complete economic disaster” and that the worst is yet to come…
Most people believe that the eurozone has been “saved”, but that is not even close to the truth.
In fact, it becomes more likely that we will see the eurozone break up with each passing day.
So who would leave first?
Well, recently there have been rumblings among some German politicians that Greece should be the first to leave. The following is from a recent Reuters article…
Greece remains the biggest risk for the euro zone despite a calming of its economic and political crisis and may still have to leave the common currency, a senior conservative ally of German Chancellor Angela Merkel said.
But there is also a chance that Germany could eventually be the first nation that decides to leave the euro. In fact, a new political party is forming in Germany that is committed to getting Germany out of the euro. The following is a brief excerpt from a recent article by Ambrose Evans-Pritchard…
A new party led by economists, jurists, and Christian Democrat rebels will kick off this week, calling for the break-up of monetary union before it can do any more damage.
“An end to this euro,” is the first line on the webpage of Alternative für Deutschland (AfD). “The introduction of the euro has proved to be a fatal mistake, that threatens the welfare of us all. The old parties are used up. They stubbornly refuse to admit their mistakes.”
They propose German withdrawl from EMU and return to the D-Mark, or a breakaway currency with the Dutch, Austrians, Finns, and like-minded nations. The French are not among them. The borders run along the ancient line of cleavage dividing Latins from Germanic tribes.
However this all plays out, the reality is that things are about to get much more interesting in Europe.
No debt bubble lasts forever. The Europeans are finding that out right now, and the U.S. won’t be too far behind.
But for the moment, most Americans assume that everything is going to be okay because the Dow keeps setting new all-time record highs.
Well, enjoy this little bubble of debt-fueled false prosperity while you can, because it won’t last for long.
A massive wake up call is coming, and it will be exceedingly painful for those that are not ready for it.
How can anyone not see that the U.S. economy is collapsing all around us? It just astounds me when people try to tell me that “everything is just fine” and that “things are getting better” in America. Are there people out there that are really that blind? If you want to see the economic collapse, just open up your eyes and look around you. By almost every economic and financial measure, the U.S. economy has been steadily declining for many years. But most Americans are so tied into “the matrix” that they can only understand the cheerful propaganda that is endlessly being spoon-fed to them by the mainstream media. As I have said so many times, the economic collapse is not a single event. The economic collapse has been happening, it is is happening right now, and it will continue to happen. Yes, there will be times when our decline will be punctuated by moments of great crisis, but that will be the exception rather than the rule. A lot of people that write about “the economic collapse” hype it up as if it will be some huge “event” that will happen very rapidly and then once it is all over we will rebuild. Unfortunately, that is not how the real world works. We are living in the greatest debt bubble in the history of the world, and once it completely bursts there will be no going back to how things were before. Right now, we are living in a “credit card economy”. As long as we can keep borrowing more money, most people think that things are just fine. But anyone that has lived on credit cards knows that eventually there comes a point when the game is over, and we are rapidly approaching that point as a nation.
Have you ever been there? Have you ever desperately hoped that you could just get one more credit card or one more loan so that you could keep things going?
At first, living on credit can be a lot of fun. You can live a much higher standard of living than you otherwise would be able to.
But inevitably a day of reckoning comes.
If the federal government and the American people were forced at this moment to live within their means, the U.S. economy would immediately plunge into a depression.
That is a 100% rock solid guarantee.
But our politicians and the mainstream media continue to perpetuate the fiction that we can live in this credit card economic fantasy land indefinitely.
And most Americans could not care less about the future. As long as “things are good” today, they don’t really think much about what the future will hold.
As a result of our very foolish short-term thinking, we have now run up a national debt of 16.4 trillion dollars. It is the largest debt in the history of the world, and it has gotten more than 23 times larger since Jimmy Carter first entered the White House.
The chart that you see below is a recipe for national financial suicide…
Of course things have accelerated over the past four years. Since Barack Obama entered the White House, the U.S. government has run a budget deficit of well over a trillion dollars every single year, and we have stolen more than 100 million dollars from our children and our grandchildren every single hour of every single day.
It is the biggest theft of all time. What we are doing to our children and our grandchildren is beyond criminal.
And now our debt is at a level that most economists would consider terminal. When Barack Obama first entered the White House, the U.S. debt to GDP ratio was under 70 percent. Today, it is up to 103 percent.
We are officially in “the danger zone”.
If things really were “getting better” in America, we would not need to borrow so much money.
Our politicians are stealing from the future in order to make the present look better. During Obama’s first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.
That is utter insanity!
If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.
So what is the solution?
Get ready to laugh.
The most prominent economic journalist in the entire country, Paul Krugman of the New York Times, recently suggested the following in an article that he wrote entitled “Kick That Can“…
Realistically, we’re not going to resolve our long-run fiscal issues any time soon, which is O.K. — not ideal, but nothing terrible will happen if we don’t fix everything this year. Meanwhile, we face the imminent threat of severe economic damage from short-term spending cuts.
So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do.
You mean that we might actually do damage to the debt-fueled economic fantasy world that we are living in if we stopped stealing so much money from future generations?
Oh the humanity!
It is horrifying to think that all that one of the “top economic minds” in America can come up with is to “kick the can” down the road some more.
Unfortunately, neither Paul Krugman nor most of the American people understand that our financial system is actually designed to create government debt.
The bankers that helped create the Federal Reserve intended to permanently enslave the U.S. government to a perpetually expanding spiral of debt, and their plans worked.
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 why don’t the American people understand what the Federal Reserve system is doing to us?
It is because most of them are still plugged into the matrix. A Zero Hedge article that I came across today put it beautifully…
US society in a nutshell: Chris Dorner has been around for a week and has 222 million results on Google; the Federal Reserve has been around for one hundred years and has 187 million results.
If nothing is done about our exploding debt, it is only a matter of time before we reach financial oblivion.
According to Boston University economist Laurence Kotlikoff, the U.S. government is facing a “present value difference between projected future spending and revenue” of 222 trillion dollars in the years ahead.
So how in the world are we going to come up with an extra 222 trillion dollars?
But it is not just the U.S. government that is drowning in debt.
Just check out this chart which shows the astounding growth of state and local government debt in recent years…
All over the United States there are state and local governments that are on the verge of bankruptcy. Just check out what is going on in Detroit. The only way that most of our state and local governments can keep going at this point is to also “kick the can” down the road some more.
And of course most of the rest of us are drowning in debt as well.
40 years ago, the total amount of debt in the U.S. economic system (government + business + consumer) was less than 2 trillion dollars.
The good news is that U.S. GDP is now more than 12 times larger than it was 40 years ago.
The bad news is that the total amount of debt in our financial system is now more than 30 times larger than it was 40 years ago…
At the same time that we are going into so much debt, our ability to produce wealth continues to decline.
According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001. That number dropped to 21.6 percent in 2011. That is not just a decline – that is a nightmarish freefall. Just check out the chart in this article.
We are becoming less competitive as a nation with each passing year. In fact, the U.S. has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.
Most Americans don’t understand this, but the United States buys far more from the rest of the world than they buy from us each year. In 2012, we had a trade deficit of more than 500 billion dollars with the rest of the world.
That means that more than 500 billion dollars that could have gone to U.S. workers and U.S. businesses went out of the country instead.
So how does our country survive if hundreds of billions of dollars more is flowing out of the country than is flowing into it?
Well, to make up the shortfall we go to the countries that we sent our money to and we beg them to lend it back to us. If that doesn’t work, we just print and borrow even more money.
Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.
That is 8 trillion dollars that could have saved U.S. businesses, paid the salaries of U.S. workers and that would have helped fund government.
But instead, our foolish policies have greatly enriched China and the oil barons of the Middle East.
Sadly, politicians from both political parties continue to boldly support the one world economic agenda of the global elite.
Just consider how destructive many of these “free trade” deals have been to our economy…
When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars.
Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little “m”) for the entire year.
In 2012, our trade deficit with China was 315 billion dollars. That was the largest trade deficit that one nation has had with another nation in the history of the world.
In particular, our trade with China is extremely 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.
But isn’t getting cheap stuff from China good?
No, because it costs us good paying jobs.
According to the Economic Policy Institute, the United States is losing half a million jobs to China every single year.
Overall, more than 56,000 manufacturing facilities in the United States have been shut down since 2001. During 2010, manufacturing facilities in the United States were shutting down at a rate of 23 per day. How can anyone say that “things are getting better” when our economic infrastructure is being absolutely gutted?
The truth is that there are never going to be enough jobs in America ever again, because millions of our jobs are being sent overseas and millions of our jobs are being lost to technology.
You won’t hear this on the news, but the percentage of the civilian labor force in the United States that is employed has been steadily declining every single year since 2006.
Younger workers have been hit particularly hard. In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent. Today, the unemployment rate for that same age group is about 13 percent.
If you are under the age of 30 and you aren’t living with your parents, there is a really good chance that you are living in poverty. If you can believe it, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
Our economy has been steadily bleeding huge numbers of middle class jobs, and many of those jobs have been replaced by low paying jobs in recent years.
According to one study, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.
And at this point, an astounding 53 percent of all American workers make less than $30,000 a year.
But for most families this economic decline has been a total nightmare. Median household income in America has fallen for four consecutive years. Overall, it has declined by over $4000 during that time span.
Sometimes people forget how good things were about a decade ago. About three times as many new homes were sold in the United States in 2005 as were sold in 2012.
But we like to live in denial.
In fact, a lot of families are trying to keep up their standards of living by going into tremendous amounts of debt.
Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned. By 2007, that figure had soared to $1.48.
Fake it until you make it, right?
But how much debt can our system possibly handle?
Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
Total credit card debt in the United States is now more than 8 times larger than it was just 30 years ago.
We are a nation that is completely addicted to debt, but as the financial crisis of 2008 demonstrated, all of that debt can have horrific consequences.
As the economy has slowed in recent years, the Federal Reserve has decided that “the solution” is to recklessly print money in an attempt to get the debt spiral cranked up again.
Have they gone overboard? You be the judge…
And of course this won’t have any affect on the value of the money that you have been saving up all these years right?
Wrong.
Every single dollar that you own is continually losing value…
Overall, the value of the U.S. dollar has declined by more than 96 percent since the Federal Reserve was first created.
As the cost of living continues to go up and wages continue to go down, millions of American families have fallen out of the middle class and into poverty.
If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.
But “things are getting better”, right?
Incredibly, more than a million public school students in the United States are homeless. This is the first time that has ever happened in our history.
But “things are getting better”, right?
There are now 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.
But “things are getting better”, right?
In 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 55.1 percent are covered by employment-based health insurance.
But “things are getting better”, right?
Today, more Americans than ever have found themselves forced to turn to the federal government for help.
Overall, the federal government runs nearly 80 different “means-tested welfare programs”, and at this point more than 100 million Americans are enrolled in at least one of them.
According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government. Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.
So is it a good sign or a bad sign that the percentage of Americans that are financially dependent on the federal government is at an all-time high?
And in future years the number of Americans that are receiving benefits from the federal government is projected to absolutely skyrocket.
Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
If you take a look at Medicare, things are very more sobering.
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.
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 every single household in the United States.
Are you ready to contribute your share?
Social Security is a complete and total nightmare as well.
Right now, there are approximately 56 million Americans collecting Social Security benefits.
By 2035, that number is projected to soar to an astounding 91 million.
Oh, but don’t worry because “things are getting better”, right?
I honestly do not know how anyone can look at the numbers above and come to the conclusion that the economy is in good shape.
We have accumulated the largest mountain of debt in the history of the world, our economic infrastructure is being gutted, we are bleeding good jobs, government dependence is at an all-time high and we are getting poorer as a nation with each passing day.
But other than that, everything is rainbows and lollipops, right?
If you want to see the economic collapse, just open up your eyes.
And if dramatic changes are not made quickly, things are going to get much, much worse from here.
Please share this article with as many people as possible. Time is quickly running out and there are a whole lot of people out there that we need to wake up while we still can.
What would you do if all the lights went out and they never came back on? That is a question that the new NBC series “Revolution” asks, but most people have no idea that a similar thing could happen in real life at any moment. A single gigantic electromagnetic pulse over the central United States could potentially fry most of the electronics from coast to coast if it was powerful enough. This could occur in a couple of different ways. If a powerful nuclear weapon was exploded at a high enough altitude, it could produce an electromagnetic pulse powerful enough to knock out electronics all over the country. Alternatively, a massive solar storm could potentially cause a similar phenomenon to happen just about anywhere on the planet without much warning. Of course not all EMP events are created equal. An electromagnetic pulse can range from a minor inconvenience to a civilization-killing event. It just depends on how powerful it is. But in the worst case scenario, we could be facing a situation where our electrical grids have been fried, there is no heat for our homes, our computers don’t work, the Internet does not work, our cell phones do not work, there are no more banking records, nobody can use credit cards anymore, hospitals are unable to function, nobody can pump gas, and supermarkets cannot operate because there is no power and no refrigeration. Basically, we would witness the complete and total collapse of the economy. According to a government commission that looked into these things, approximately two-thirds of the U.S. population would die from starvation, disease and societal chaos within one year of a massive EMP attack. It would be a disaster unlike anything we have ever seen before in U.S. history.
Most Americans are totally clueless about what an EMP attack could do to this nation, but the threat is very real. There was even a congressional commission that studied the potential effects of an EMP attack on the United States for eight years…
The US Congress in 2000 established the Congressional Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack. In 2004, the committee produced a 70-page executive summary on the EMP threat, and it issued a final report on the matter in 2008. According to the report, “several potential adversaries have or can acquire the capability to attack the United States with a high-altitude nuclear weapon-generated electromagnetic pulse (EMP). A determined adversary can achieve an EMP attack capability without having a high level of sophistication.”
Dr. William Graham was the chairman of that commission, and he says that an EMP attack could knock the United States back into the 1800s in just a single moment…
An EMP attack “could not only take down power grids, which are fragile anyway in this country, and telecommunications networks, and financial networks, and traffic controls and many other things, but in addition, there is a very close interrelationship among those national infrastructure capabilities,” Graham says.
“So, for example, we need telecommunications to re-establish the power network, and we need the power network to keep telecommunications going for more than a few hours. And we need the financial network to continue to operate to maintain the economy, we need the transportation system, roads, street lights, control systems, to operate just to get people to the failed power, telecommunication and other systems,” he adds.
Life after an EMP attack “would probably be something that you might imagine life to be like around the late 1800s but with several times the population we had in those days, and without the ability of the country to support and sustain all those people,” Graham says. “They wouldn’t have power. Food supplies would be greatly taken out by the lack of transportation, telecommunication, power for refrigeration and so on.”
Unfortunately, very few of us are equipped to survive in such an environment. We have become incredibly dependent on technology, and most Americans would have no idea how to do something as simple as growing their own food. Most people would be in a very serious amount of trouble in a very short period of time.
An article by Mac Slavo detailed some of the things that we could expect in the aftermath of a massive electromagnetic pulse…
The first 24 – 48 hours after such an occurrence will lead to confusion among the general population as traditional news acquisition sources like television, radio and cell phone networks will be non-functional.
Within a matter of days, once people realize the power might not be coming back on and grocery store shelves start emptying, the entire system will begin to delve into chaos.
Within 30 days a mass die off will have begun as food supplies dwindle, looters and gangs turn to violent extremes, medicine can’t be restocked and water pump stations fail.
And actually, high altitude nuclear explosions and solar storms are not the only things that could produce sizable EMP bursts.
For example, the U.S. military has developed “a directed electromagnetic pulse gun” that can take out all electronics within a limited area. This kind of weapon can be fired from a plane, a cruise missile or even a drone. The following is from a recent WND article…
A pre-programmed cruise missile not too different from a drone has been proven to be capable of blasting out an EMP-type microwave that was able to destroy personal computers and electrical systems inside a building over which it was flying.
The U.S. Air Force and its contractor Boeing have created the High-powered Microwave Advanced Missile Project, or CHAMP, which was just tested over a Utah desert.
Other nations such as Russia and China are busy developing similar weapons. The ability to instantly take out the electronics of the enemy would be a very powerful advantage.
Even North Korea has been working on this kind of technology. According to Newsmax, it is believed that they may have tested a “Super-EMP” weapon back in 2009…
North Korea’s last round of tests, conducted in May 2009, appear to have included a “super-EMP” weapon, capable of emitting enough gamma rays to disable the electric power grid across most of the lower 48 states
As this technology becomes more widespread, it will soon be accessible to just about everyone. You don’t actually need a nuclear weapon to set off a massive electromagnetic pulse. A non-nuclear pulse generator can do the same thing. If you set one off next to a power station you could potentially take out the electrical grid for an entire region.
Terrorist groups and lone wolf crazies could even use portable radio frequency weapons to do a tremendous amount of electromagnetic damage over a more limited area. The following is from a recent article by F. Michael Maloof…
Such an individual with a penchant for electronics can pull together components from a Radio Shack or electronic store – even order the components off of selected Internet websites – and fashion a radio frequency, or RF, weapon.
As microprocessors become smaller but more sophisticated, they are even more susceptible to an RF pulse. The high power microwave from an RF weapon produces a short, very high power pulse, said to be billions of watts in a nanosecond, or billionths of a second.
This so-called burst of electromagnetic waves in the gigahertz microwave frequency band can melt electrical circuitry and damage integrated circuits, causing them to fail.
Constructing a radio frequency weapon is not that difficult. In fact, you can find instructions for how to build them on the Internet.
People need to realize that we live in a world where technology is absolutely exploding and we are dealing with threats that previous generations never even dreamed of. As the world becomes increasingly unstable, it is inevitable that these kinds of weapons will be used.
It is only a matter of time.
What will life look like after an EMP weapon is used?
That is something to think about.
And we also need to keep watching the sun. It could produce a massive electromagnetic pulse at literally any moment. As I have written about previously, scientists tell us that it is only a matter of time before we are hit with a technology-crippling solar super storm.
Most people don’t even realize that the massive solar storm of 1859 fried telegraph machines all over Europe and North America. If such a storm hit us today, the damage would potentially be in the trillions of dollars. The following is from a recent New York Times article…
A powerful solar (or “geomagnetic”) storm has the potential to simultaneously damage multiple transformers in the electricity grid and perhaps even bring down large sections of it, affecting upwards of a hundred million people in the United States for many months, if not years.
These huge transformers are expensive and difficult to replace, and not many are stockpiled in the United States for an emergency. In the worst case, the impact would be devastating: An outage could cost a few trillion dollars, with full recovery taking years. Not only would parts of the grid be compromised, but telephone networks, undersea cables, satellites and railroads also would be affected.
A 2008 National Academy of Sciences study warned that “because of the interconnectedness of critical infrastructures in modern society,” the “collateral effects of a longer-term outage” would likely include “disruption of the transportation, communication, banking and finance systems, and government services; the breakdown of the distribution of potable water owing to pump failure; and the loss of perishable foods and medications because of lack of refrigeration.”
By the way, 2013 is the peak of the current solar cycle. So we are moving into a time period when conditions will be very favorable for solar storms.
Let us hope that we are never hit with a massive electromagnetic pulse that is strong enough to take out all of our electronics.
But if it did happen, and all the lights went out for good, what would you do?
Please feel free to share your thoughts by leaving a comment below…
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.
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.
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.
When financial markets in the United States crash, so does the U.S. economy. Just remember what happened back in 2008. The financial markets crashed, the credit markets froze up, and suddenly the economy went into cardiac arrest. Well, there are very few things that could cause the financial markets to crash harder or farther than a derivatives panic. Sadly, most Americans don’t even understand what derivatives are. Unlike stocks and bonds, a derivative is not an investment in anything real. Rather, a derivative is a legal bet on the future value or performance of something else. Just like you can go to Las Vegas and bet on who will win the football games this weekend, bankers on Wall Street make trillions of dollars of bets about how interest rates will perform in the future and about what credit instruments are likely to default. Wall Street has been transformed into a gigantic casino where people are betting on just about anything that you can imagine. This works fine as long as there are not any wild swings in the economy and risk is managed with strict discipline, but as we have seen, there have been times when derivatives have caused massive problems in recent years. For example, do you know why the largest insurance company in the world, AIG, crashed back in 2008 and required a government bailout? It was because of derivatives. Bad derivatives trades also caused the failure of MF Global, and the 6 billion dollar loss that JPMorgan Chase recently suffered because of derivatives made headlines all over the globe. But all of those incidents were just warm up acts for the coming derivatives panic that will destroy global financial markets. The largest casino in the history of the world is going to go “bust” and the economic fallout from the financial crash that will happen as a result will be absolutely horrific.
There is a reason why Warren Buffett once referred to derivatives as “financial weapons of mass destruction”. Nobody really knows the total value of all the derivatives that are floating around out there, but estimates place the notional value of the global derivatives market anywhere from 600 trillion dollars all the way up to 1.5 quadrillion dollars.
Keep in mind that global GDP is somewhere around 70 trillion dollars for an entire year. So we are talking about an amount of money that is absolutely mind blowing.
So who is buying and selling all of these derivatives?
Well, would it surprise you to learn that it is mostly the biggest banks?
According to the federal government, four very large U.S. banks “represent 93% of the total banking industry notional amounts and 81% of industry net current credit exposure.”
These four banks have an overwhelming share of the derivatives market in the United States. You might not be very fond of “the too big to fail banks“, but keep in mind that if a derivatives crisis were to cause them to crash and burn it would almost certainly cause the entire U.S. economy to crash and burn. Just remember what we saw back in 2008. What is coming is going to be even worse.
It would have been really nice if we had not allowed these banks to get so large and if we had not allowed them to make trillions of dollars of reckless bets. But we stood aside and let it happen. Now these banks are so important to our economic system that their destruction would also destroy the U.S. economy. It is kind of like when cancer becomes so advanced that killing the cancer would also kill the patient. That is essentially the situation that we are facing with these banks.
It would be hard to overstate the recklessness of these banks. The numbers that you are about to see are absolutely jaw-dropping. According to the Comptroller of the Currency, four of the largest U.S. banks are walking a tightrope of risk, leverage and debt when it comes to derivatives. Just check out how exposed they are…
JPMorgan Chase
Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)
Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)
Citibank
Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)
Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)
Bank Of America
Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)
Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)
Goldman Sachs
Total Assets: $114,693,000,000 (a bit more than 114 billion dollars – yes, you read that correctly)
Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)
That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 362 times greater than their total assets.
To get a better idea of the massive amounts of money that we are talking about, just check out this excellent infographic.
How in the world could we let this happen?
And what is our financial system going to look like when this pyramid of risk comes falling down?
Our politicians put in a few new rules for derivatives, but as usual they only made things even worse.
According to Nasdaq.com, beginning next year new regulations will require derivatives traders to put up trillions of dollars to satisfy new margin requirements.
Swaps that will be allowed to remain outside clearinghouses when new rules take effect in 2013 will require traders to post $1.7 trillion to $10.2 trillion in margin, according to a report by an industry group.
The analysis from the International Swaps and Derivatives Association, using data sent in anonymously by banks, says the trillions of dollars in cash or securities will be needed in the form of so-called “initial margin.” Margin is the collateral that traders need to put up to back their positions, and initial margin is money backing trades on day one, as opposed to variation margin posted over the life of a trade as it fluctuates in value.
So where in the world will all of this money come from?
Total U.S. GDP was just a shade over 15 trillion dollars last year.
Could these rules cause a sudden mass exodus that would destabilize the marketplace?
Let’s hope not.
But things are definitely changing. According to Reuters, some of the big banks are actually urging their clients to avoid new U.S. rules by funneling trades through the overseas divisions of their banks…
Wall Street banks are looking to help offshore clients sidestep new U.S. rules designed to safeguard the world’s $640 trillion over-the-counter derivatives market, taking advantage of an exemption that risks undermining U.S. regulators’ efforts.
U.S. banks such as Morgan Stanley (MS.N) and Goldman Sachs (GS.N) have been explaining to their foreign customers that they can for now avoid the new rules, due to take effect next month, by routing trades via the banks’ overseas units, according to industry sources and presentation materials obtained by Reuters.
Unfortunately, no matter how banks respond to the new rules, it isn’t going to prevent the coming derivatives panic. At some point the music is going to stop and some big financial players are going to be completely and totally exposed.
When that happens, it might not be just the big banks that lose money. Just take a look at what happened with MF Global.
MF Global has confessed that it “diverted money” from customer accounts that were supposed to be segregated. A lot of customers may never get back any of the money that they invested with those crooks. The following comes from a Huffington Post article about the MF Global debacle, and it might just be a preview of what other investors will go through in the future when a derivatives crash destroys the firms that they had their money parked with…
Last week when customers asked for excess cash from their accounts, MF Global stalled. According to a commodity fund manager I spoke with, MF Global’s first stall tactic was to claim it lost wire transfer instructions. Then instead of sending an overnight check, it sent the money snail mail, including checks for hundreds of thousands of dollars. The checks bounced. After the checks bounced, the amounts were still debited from customer accounts and no one at MF Global could or would reverse the check entries. The manager has had to intervene to get MF Global to correct this.
How would you respond if your investment account suddenly went to “zero” because the firm you were investing with “diverted” customer funds for company use and now you have no way of recovering your money?
On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.
The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.
According to the article, the following large banks are represented at these meetings: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.
When the casino finally goes “bust”, you will know who to blame.
Without a doubt, a derivatives panic is coming.
It will cause the financial markets to crash.
Several of the “too big to fail” banks will likely crash and burn and require bailouts.
As a result of all this, credit markets will become paralyzed by fear and freeze up.
Once again, we will see the U.S. economy go into cardiac arrest, only this time it will not be so easy to fix.
Do you agree with this analysis, or do you find it overly pessimistic? Please feel free to post a comment with your thoughts below…
Every single year, millions of young adults head off to colleges and universities all over America full of hopes and dreams. But what most of those fresh-faced youngsters do not realize is that by taking on student loan debt they are signing up for a life of debt slavery. Student loan debt has become a trillion dollar bubble which has shattered the financial lives of tens of millions of young college graduates. When you are just starting out and you are not making a lot of money, having to make payments on tens of thousands of dollars of student loan debt can be absolutely crippling. The total amount of student loan debt in the United States has now surpassed the total amount of credit card debt, and student loan debt is much harder to get rid of. Many young people view college as a “five year party“, but when the party is over millions of those young people basically end up as modern day serfs as they struggle to pay off all of the debt that they have accumulated during their party years. Bankruptcy laws have been changed to make it incredibly difficult to get rid of student loan debt, so once you have it you are basically faced with two choices: either you are going to pay it or you are going to die with it.
But we don’t warn kids about this before they go to school. We just endlessly preach to them that they need a college degree in order to get a “good job”, and that after they graduate they will easily be able to pay off their student loans with the “good job” that they will certainly be able to find.
Sadly, tens of millions of young Americans have left college in recent years only to find out that they were lied to all along.
As I have written about previously, college has become a giant money making scam and the victims of the scam are our young people.
Back in 1952, a full year of tuition at Harvard was only $600.
At every turn our young people are being ripped off.
For example, the cost of college textbooks has tripled over the past decade.
Has it suddenly become a lot more expensive to print books?
Of course not.
The truth is that an entire industry saw an opportunity to gouge students and they went for it.
The amount of money being spent on higher education in this country is absolutely outrageous. One father down in Texas says that he will end up spending about 1.5 million dollars on college expenses for his five daughters before it is all said and done.
Unfortunately, most young adults in America don’t have wealthy fathers so they have to take out large student loans to pay for their educations.
Average student loan debt at graduation is estimated to be about $28,720 right now.
That is a crazy figure and it has absolutely soared in recent years. In fact, student loan debt in America has grown by 511 percent since 1999.
And student loan debt will follow you wherever you go.
If you do not pay your loans when you graduate, you could end up having your wages, your tax refunds and even your Social Security benefits garnished.
In addition, your account could be turned over to the debt collectors and they can be absolutely brutal.
The student loan debt bubble is the best thing to happen to debt collectors in ages. The following is what one professional who works in the industry said in a recent article that he wrote for a debt collection industry publication….
As I wandered around the crowd of NYU students at their rally protesting student debt at the end of February, I couldn’t believe the accumulated wealth they represented – for our industry.
It was lip-smacking.
At my right, to graphically display how she was debt-burdened, was a girl wearing a t-shirt emblazoned with the fine sum of $90,000, another with $65,000, a third with $20,000 and over there a really attractive $120,000 was printed on another shirt. Guys were shouldering their share, with t-shirts of $20,000, $15,000, $27,000, $33,000 and $75,000.
There is no way that our young people can afford to take on those kinds of debt loads, and that is one reason why student loan delinquency rates continue to surge.
In fact, the student loan default rate in the United States has nearly doubled since 2005.
Today, one out of every six Americans that owes money on a student loan is in default.
One out of every six.
And it is going to get a whole lot worse.
At this point there are about 5.9 million Americans that are at least 12 months behind on their student loan payments.
So could the bursting of the student loan bubble do tremendous damage to our financial system?
Don’t worry – Federal Reserve Chairman Ben Bernanke is promising that the student loan debt bubble won’t cause a crisis.
And you can trust him, right?
For those living with the burden of unpaid student loan debt, life can be really tough. Some try to avoid the debt collectors, but it is easier said than done. The following is from a recent article in the New York Times….
Hiding from the government is not easy.
“I keep changing my phone number,” said Amanda Cordeiro, 29, from Clermont, Fla., who dropped out of college in 2010 and has fielded as many as seven calls a day from debt collectors trying to recover her $55,000 in overdue loans. “In a year, this is probably my fourth phone number.”
Unlike private lenders, the federal government has extraordinary tools for collection that it has extended to the collection firms. Ms. Cordeiro has already had two tax refunds seized, and other debtors have had their paychecks or Social Security payments garnisheed.
The biggest problem, of course, is that there are not nearly enough jobs for the hordes of college graduates that our system produces each year.
During 2011, 53 percent of all Americans with a bachelor’s degree under the age of 25 were either unemployed or underemployed.
So without a good job, how are those young people supposed to service their student loans?
Once upon a time, a college degree was a guaranteed ticket to the middle class.
Sadly, those days are long gone. Today, millions upon millions of college graduates have taken jobs that do not even require a college education. The following is from a recent CNBC article….
In the last year, they were more likely to be employed as waiters, waitresses, bartenders and food-service helpers than as engineers, physicists, chemists and mathematicians combined (100,000 versus 90,000). There were more working in office-related jobs such as receptionist or payroll clerk than in all computer professional jobs (163,000 versus 100,000). More also were employed as cashiers, retail clerks and customer representatives than engineers (125,000 versus 80,000).
You probably know young people who have experienced the “wake up call” that comes as a result of entering the “real world” in this horrible economic environment.
It is not easy out there.
And this can be extremely disappointing for parents as well. How would you feel if your daughter got very high grades all of the way through college and ended up working as a waitress because she couldn’t find anything else?
Even those that pursue advanced degrees are having an extremely challenging time finding work in this economy.
For example, a Business Insider article from a while back profiled a law school graduate named Erin that is actually on food stamps….
She remains on food stamps so her social life suffers. She can’t afford a car, so she has to rely on the bus to get around Austin, Texas, where she lives. And currently unable to pay back her growing pile of law school debt, Gilmer says she wonders if she will ever be able to pay it back.
“That has been really hard for me,” she says. “I have absolutely no credit anymore. I haven’t been able to pay loans. It’s scary, and it’s a hard thing to think you’re a lawyer but you’re impoverished. People don’t understand that most lawyers actually aren’t making the big money.”
And the really sad thing is that the quality of the education that our young people are receiving is very poor. I spent eight years attending U.S. universities, and most parents would be absolutely shocked at how little our college students are actually learning.
Going to college really has become a ticket to party for four or five or six years with a little bit of “education” thrown in.
But our society has put a very high value on those little pieces of paper called “diplomas” so we all continue to play along with the charade.
Some college students are finding other “creative” ways to pay for their educations other than going into tremendous amounts of debt. For example, an increasing number of young women are seeking out “sugar daddies” who will “sponsor” their educations. The following is from a Huffington Post article about this disturbing trend….
On a Sunday morning in late May, Taylor left her Harlem apartment and boarded a train for Greenwich, Conn. She planned on spending the day with a man she had met online, but not in person.
Taylor, a 22-year-old student at Hunter College, had confided in her roommate about the trip and they agreed to swap text messages during the day to make sure she was safe.
Once in Greenwich, a man who appeared significantly older than his advertised age of 42 greeted Taylor at the train station and then drove her to the largest house she had ever seen. He changed into his swimming trunks, she put on a skimpy bathing suit, and then, by the side of his pool, she rubbed sunscreen into the folds of his sagging back — bracing herself to endure an afternoon of sex with someone she suspected was actually about 30 years her senior.
Of course that young woman will probably deeply regret doing that later on in her life.
Once graduation comes, millions upon millions of our young people are discovering that it is really hard to be financially independent if you are drowning in student loan debt and you can’t find a good job.
So what are they doing?
They are moving back in with Mom and Dad.
One poll discovered that 29 percent of all Americans in the 25 to 34 year old age bracket are still living with their parents.
Ouch.
So what do you think about all of this? Please feel free to post a comment with your thoughts below….
Are we rapidly approaching a moment of reckoning for the global financial system? August is likely to be a relatively slow month as most of Europe is on vacation, but after that we will be moving into a “danger zone” where just about anything could happen. Historically, a financial crisis has been more likely to happen in the fall than during any other time, and this fall is shaping up to be a doozy. Much of the focus of the financial world is on whether or not the euro is going to break up, but even if the authorities in Europe are able to keep the euro together we are still facing massive problems. Countries such as Greece and Spain are already experiencing depression-like conditions, and much of the rest of the globe is sliding into recession. Unemployment has already risen to record levels in some parts of Europe, major banks all over Europe are teetering on the brink of insolvency, and the flow of credit is freezing up all over the planet. If things take a really bad turn, this crisis could become much worse than the financial crisis of 2008 very quickly.
All over the world people are starting to write about the possibility of a major economic crisis starting this fall.
For example, a recent article in the International Business Times discussed how some economists around the globe are fearing the worst for the coming months….
The consensus? The world economy has entered a final countdown with three months left, and investors should pencil in a collapse in either August or September.
Citing a theory he has been espousing since 2010 that predicts “a future lack of policy flexibility from the monetary and fiscal side,” Jim Reid, a strategist at Deutsche Bank, wrote a note Tuesday that gloated “it feels like Europe has proved us right.”
“The U.S. has the ability to disprove the universal nature of our theory,” Reid wrote, but “if this U.S. cycle is of completely average length as seen using the last 158 years of history (33 cycles), then the next recession should start by the end of August.”
The global financial system is so complex and there are so many thousands of moving parts that it is always difficult to put an exact date on anything. In fact, history is littered with economists that have ended up looking rather foolish by putting a particular date on a prediction.
But without a doubt we are starting to see storm clouds gather for this fall.
The following are 11 more signs that time is quickly running out for the global financial system….
#1 A number of very important events regarding the financial future of Europe are going to happen in the month of September. The following is from a recent Reuters article that detailed many of the key things that are currently slated to occur during that month….
In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.
On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy – or what do if one or both were to topple.
#2 Reuters is reporting that Spanish Economy Minister Luis de Guindos has suggested that Spain may need a 300 billion euro bailout.
#3 Spain continues to slide deeper into recession. The Spanish economy contracted 0.4 percent during the second quarter of 2012 after contracting 0.3 percent during the first quarter.
#4 The unemployment rate in Spain is now up to 24.6 percent.
#5 According to the Wall Street Journal, a new 30 billion euro hole has been discovered in the financial rescue plan for Greece.
#6 Morgan Stanley is projecting that the unemployment rate in Greece will exceed 25 percent in 2013.
#7 It is now being projected that the Greek economy will shrink by a total of 7 percent during 2012.
#8 German Finance Minister Wolfgang Schäuble says that the rest of Europe will not be making any more concessions for Greece.
#9 The UK economy has now plunged into a deep recession. During the second quarter of 2012 alone, the UK economy contracted by 0.7 percent.
#10 The Dallas Fed index of general business activity fell dramatically to -13.2 in July. This was a huge surprise and it is yet another indication that the U.S. economy is rapidly heading into a recession.
#11 As I have written about previously, a banking crisis is more likely to happen in the fall than at any other time during the year. The global financial system will enter a “danger zone” starting in September, and none of us need to be reminded that the crashes of 1929, 1987 and 2008 all happened during the second half of the year.
So is there any hope on the horizon?
European leaders have tried short-term solution after short-term solution and none of them have worked.
Now countries all over Europe are sliding into depression and the authorities in Europe seem to be all out of answers. The following is what one eurozone diplomat said recently….
“For two years we’ve been pumping up the life raft, taking decisions that fill it with just enough air to keep it afloat even though it has a leak,” the diplomat said. “But now the leak has got so big that we can’t pump air into the raft quickly enough to keep it afloat.”
The boat is filling up with water faster than they can bail it out.
So what is the solution?
Well, some of the top names in economics on both sides of the Atlantic are urging authorities to keep the debt bubble pumped up by printing lots and lots more money.
Needless to say, I will be advocating 1933 monetary stimulus à l’outrance, or trillions of asset purchases through old fashioned open-market operations through the quantity of money effect (NOT INTEREST RATE ‘CREDITISM’) to avert deflation – and continue doing so until nominal GDP is restored to its trend line, at which point the stimulus can be withdrawn again.
But is more money and more debt really the solution to anything?
In the United States, M2 recent surpassed the 10 trillion dollar mark for the first time ever. It has increased in size by more than 5 times over the past 30 years.
Unfortunately, our debt has been growing much faster than GDP has over that time period.
Our problem is not that there is not enough money floating around.
Our problem is that there is way, way too much debt.
But this is how things always go with fiat currencies.
There is always the temptation to print more.
That is one of the big reasons why every single fiat currency in history has eventually collapsed.
Printing more money will not solve our problems. It will just cause our problems to take a different form.
In the end, nothing that the authorities can do will be able to avert the crisis that is coming.
A lot of people are starting to realize this, and that is one reason why we are seeing so much economic pessimism right now.
For example, according to a new Rasmussen poll only 14 percent of all Americans believe that children in America today will be “better off” than their parents.
That is an absolutely stunning figure, but it just shows us where we are at.
Our economy has been in decline for a long time, and now we are rapidly approaching another major downturn.
You better buckle up, because this downturn is not going to be pleasant at all.
Will rapidly rising interest rates rip through the U.S. financial system like a giant lawnmower blade? Yes, the U.S. economy survived much higher interest rates in the past, but at that time there were not hundreds of trillions of dollars worth of interest rate derivatives hanging over our financial system like a Sword of Damocles. This is something that I have been talking about for quite some time, and now a Mexican billionaire has come forward with a similar warning. Hugo Salinas Price was the founder of the Elektra retail chain down in Mexico, and he is extremely concerned that rising interest rates could burst the derivatives bubble and cause “massive bankruptcies around the globe”. Of course there are a whole lot of people out there that would be quite glad to see the “too big to fail” banks go bankrupt, but the truth is that if they go down our entire economy will go down with them. Our situation is similar to a patient with a very advanced stage of cancer. You can try to kill the cancer with drugs, but you will almost certainly kill the patient at the same time. Well, that is essentially what our relationship with the big banks is like. Our entire economic system is based on credit, and just like we saw back in 2008, if the big banks start failing credit freezes up and suddenly nobody can get any money for anything. When the next great credit crunch comes, every important number in our economy will rapidly start getting much worse.
Show This To Anyone That Believes That “Things Are Getting Better” In America
Have you ever been there? Have you ever desperately hoped that you could just get one more credit card or one more loan so that you could keep things going?
At first, living on credit can be a lot of fun. You can live a much higher standard of living than you otherwise would be able to.
But inevitably a day of reckoning comes.
If the federal government and the American people were forced at this moment to live within their means, the U.S. economy would immediately plunge into a depression.
That is a 100% rock solid guarantee.
But our politicians and the mainstream media continue to perpetuate the fiction that we can live in this credit card economic fantasy land indefinitely.
And most Americans could not care less about the future. As long as “things are good” today, they don’t really think much about what the future will hold.
As a result of our very foolish short-term thinking, we have now run up a national debt of 16.4 trillion dollars. It is the largest debt in the history of the world, and it has gotten more than 23 times larger since Jimmy Carter first entered the White House.
The chart that you see below is a recipe for national financial suicide…
Of course things have accelerated over the past four years. Since Barack Obama entered the White House, the U.S. government has run a budget deficit of well over a trillion dollars every single year, and we have stolen more than 100 million dollars from our children and our grandchildren every single hour of every single day.
It is the biggest theft of all time. What we are doing to our children and our grandchildren is beyond criminal.
And now our debt is at a level that most economists would consider terminal. When Barack Obama first entered the White House, the U.S. debt to GDP ratio was under 70 percent. Today, it is up to 103 percent.
We are officially in “the danger zone”.
If things really were “getting better” in America, we would not need to borrow so much money.
Our politicians are stealing from the future in order to make the present look better. During Obama’s first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.
That is utter insanity!
If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.
So what is the solution?
Get ready to laugh.
The most prominent economic journalist in the entire country, Paul Krugman of the New York Times, recently suggested the following in an article that he wrote entitled “Kick That Can“…
You mean that we might actually do damage to the debt-fueled economic fantasy world that we are living in if we stopped stealing so much money from future generations?
Oh the humanity!
It is horrifying to think that all that one of the “top economic minds” in America can come up with is to “kick the can” down the road some more.
Unfortunately, neither Paul Krugman nor most of the American people understand that our financial system is actually designed to create government debt.
The bankers that helped create the Federal Reserve intended to permanently enslave the U.S. government to a perpetually expanding spiral of debt, and their plans worked.
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 why don’t the American people understand what the Federal Reserve system is doing to us?
It is because most of them are still plugged into the matrix. A Zero Hedge article that I came across today put it beautifully…
If nothing is done about our exploding debt, it is only a matter of time before we reach financial oblivion.
According to Boston University economist Laurence Kotlikoff, the U.S. government is facing a “present value difference between projected future spending and revenue” of 222 trillion dollars in the years ahead.
So how in the world are we going to come up with an extra 222 trillion dollars?
But it is not just the U.S. government that is drowning in debt.
Just check out this chart which shows the astounding growth of state and local government debt in recent years…
All over the United States there are state and local governments that are on the verge of bankruptcy. Just check out what is going on in Detroit. The only way that most of our state and local governments can keep going at this point is to also “kick the can” down the road some more.
And of course most of the rest of us are drowning in debt as well.
40 years ago, the total amount of debt in the U.S. economic system (government + business + consumer) 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.
Can anyone say bubble?
The good news is that U.S. GDP is now more than 12 times larger than it was 40 years ago.
The bad news is that the total amount of debt in our financial system is now more than 30 times larger than it was 40 years ago…
At the same time that we are going into so much debt, our ability to produce wealth continues to decline.
According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001. That number dropped to 21.6 percent in 2011. That is not just a decline – that is a nightmarish freefall. Just check out the chart in this article.
We are becoming less competitive as a nation with each passing year. In fact, the U.S. has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.
Most Americans don’t understand this, but the United States buys far more from the rest of the world than they buy from us each year. In 2012, we had a trade deficit of more than 500 billion dollars with the rest of the world.
That means that more than 500 billion dollars that could have gone to U.S. workers and U.S. businesses went out of the country instead.
So how does our country survive if hundreds of billions of dollars more is flowing out of the country than is flowing into it?
Well, to make up the shortfall we go to the countries that we sent our money to and we beg them to lend it back to us. If that doesn’t work, we just print and borrow even more money.
Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.
That is 8 trillion dollars that could have saved U.S. businesses, paid the salaries of U.S. workers and that would have helped fund government.
But instead, our foolish policies have greatly enriched China and the oil barons of the Middle East.
Sadly, politicians from both political parties continue to boldly support the one world economic agenda of the global elite.
Just consider how destructive many of these “free trade” deals have been to our economy…
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.
Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little “m”) for the entire year.
In 2012, our trade deficit with China was 315 billion dollars. That was the largest trade deficit that one nation has had with another nation in the history of the world.
In particular, our trade with China is extremely 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.
But isn’t getting cheap stuff from China good?
No, because it costs us good paying jobs.
According to the Economic Policy Institute, the United States is losing half a million jobs to China every single year.
Overall, more than 56,000 manufacturing facilities in the United States have been shut down since 2001. During 2010, manufacturing facilities in the United States were shutting down at a rate of 23 per day. How can anyone say that “things are getting better” when our economic infrastructure is being absolutely gutted?
The truth is that there are never going to be enough jobs in America ever again, because millions of our jobs are being sent overseas and millions of our jobs are being lost to technology.
You won’t hear this on the news, but the percentage of the civilian labor force in the United States that is employed has been steadily declining every single year since 2006.
Younger workers have been hit particularly hard. In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent. Today, the unemployment rate for that same age group is about 13 percent.
If you are under the age of 30 and you aren’t living with your parents, there is a really good chance that you are living in poverty. If you can believe it, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
Our economy has been steadily bleeding huge numbers of middle class jobs, and many of those jobs have been replaced by low paying jobs in recent years.
According to one study, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.
And at this point, an astounding 53 percent of all American workers make less than $30,000 a year.
Oh, but “things are getting better”, right?
Maybe if you live on Wall Street or if you are an employee of the federal government.
But for most families this economic decline has been a total nightmare. Median household income in America has fallen for four consecutive years. Overall, it has declined by over $4000 during that time span.
Sometimes people forget how good things were about a decade ago. About three times as many new homes were sold in the United States in 2005 as were sold in 2012.
But we like to live in denial.
In fact, a lot of families are trying to keep up their standards of living by going into tremendous amounts of debt.
Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned. By 2007, that figure had soared to $1.48.
Fake it until you make it, right?
But how much debt can our system possibly handle?
Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
Total credit card debt in the United States is now more than 8 times larger than it was just 30 years ago.
We are a nation that is completely addicted to debt, but as the financial crisis of 2008 demonstrated, all of that debt can have horrific consequences.
As the economy has slowed in recent years, the Federal Reserve has decided that “the solution” is to recklessly print money in an attempt to get the debt spiral cranked up again.
Have they gone overboard? You be the judge…
And of course this won’t have any affect on the value of the money that you have been saving up all these years right?
Wrong.
Every single dollar that you own is continually losing value…
Overall, the value of the U.S. dollar has declined by more than 96 percent since the Federal Reserve was first created.
As the cost of living continues to go up and wages continue to go down, millions of American families have fallen out of the middle class and into poverty.
If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.
But “things are getting better”, right?
Incredibly, more than a million public school students in the United States are homeless. This is the first time that has ever happened in our history.
But “things are getting better”, right?
There are now 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.
But “things are getting better”, right?
In 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 55.1 percent are covered by employment-based health insurance.
But “things are getting better”, right?
Today, more Americans than ever have found themselves forced to turn to the federal government for help.
Overall, the federal government runs nearly 80 different “means-tested welfare programs”, and at this point more than 100 million Americans are enrolled in at least one of them.
According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government. Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.
So is it a good sign or a bad sign that the percentage of Americans that are financially dependent on the federal government is at an all-time high?
And in future years the number of Americans that are receiving benefits from the federal government is projected to absolutely skyrocket.
Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
If you take a look at Medicare, things are very more sobering.
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.
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 every single household in the United States.
Are you ready to contribute your share?
Social Security is a complete and total nightmare as well.
Right now, there are approximately 56 million Americans collecting Social Security benefits.
By 2035, that number is projected to soar to an astounding 91 million.
Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
Oh, but don’t worry because “things are getting better”, right?
I honestly do not know how anyone can look at the numbers above and come to the conclusion that the economy is in good shape.
We have accumulated the largest mountain of debt in the history of the world, our economic infrastructure is being gutted, we are bleeding good jobs, government dependence is at an all-time high and we are getting poorer as a nation with each passing day.
But other than that, everything is rainbows and lollipops, right?
If you want to see the economic collapse, just open up your eyes.
And if dramatic changes are not made quickly, things are going to get much, much worse from here.
Please share this article with as many people as possible. Time is quickly running out and there are a whole lot of people out there that we need to wake up while we still can.