New DVDs By Michael Snyder
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 Have you ever wondered how the big banks make such enormous mountains of money? Well, the truth is that much of it is made by gambling recklessly. If they win on their bets, they become fabulously wealthy. If they lose on their bets, they know that the government will come in and arrange for the banks to be bailed out because they are “too big to fail”. Either they will be bailed out by the government using our tax dollars, or as we just witnessed in Cyprus, they will be allowed to “recapitalize” themselves by stealing money directly from our bank accounts. So if they win, they win big. If they lose, someone else will come in and clean up the mess. This creates a tremendous incentive for the bankers to “go for it”, because there is simply not enough pain in this equation for those that are taking the risks. If the big Wall Street banks had been allowed to collapse back in 2008, that would have caused a massive change of behavior on Wall Street. But instead, the big banks are still recklessly gambling with our money as if the last financial crisis never even happened. In the end, the reckless behavior of these big banks is going to cause the entire global financial system to collapse.
Have you noticed how most news reports about Cyprus don’t even get into the reasons why the big banks in Cyprus collapsed?
Well, the truth is that they collapsed because they were making incredibly reckless bets with the money that had been entrusted to them. In a recent article, Ron Paul explained how the situation played out once the bets started to go bad…
The dramatic recent events in Cyprus have highlighted the fundamental weakness in the European banking system and the extreme fragility of fractional reserve banking. Cypriot banks invested heavily in Greek sovereign debt, and last summer’s Greek debt restructuring resulted in losses equivalent to more than 25 percent of Cyprus’ GDP. These banks then took their bad investments to the government, demanding a bailout from an already beleaguered Cypriot treasury. The government of Cyprus then turned to the European Union (EU) for a bailout.
If those bets had turned out to be profitable, the bankers would have kept all of the profits. But those bets turned out to be big losers, and private bank accounts in Cyprus are now being raided to pay the bill. Unfortunately, as Ron Paul noted, what just happened in Cyprus is already being touted as a “template” for future bank bailouts all over the globe…
The elites in the EU and IMF failed to learn their lesson from the popular backlash to these tax proposals, and have openly talked about using Cyprus as a template for future bank bailouts. This raises the prospect of raids on bank accounts, pension funds, and any investments the government can get its hands on. In other words, no one’s money is safe in any financial institution in Europe. Bank runs are now a certainty in future crises, as the people realize that they do not really own the money in their accounts. How long before bureaucrat and banker try that here?
Unfortunately, all of this is the predictable result of a fiat paper money system combined with fractional reserve banking. When governments and banks collude to monopolize the monetary system so that they can create money out of thin air, the result is a business cycle that wreaks havoc on the economy. Pyramiding more and more loans on top of a tiny base of money will create an economic house of cards just waiting to collapse. The situation in Cyprus should be both a lesson and a warning to the United States.
This is an example of what can happen when the dominoes start to fall. The banks of Cyprus failed because Greek debt went bad. And the Greeks were using derivatives to try to hide the true scope of their debt problems. The following is what Jim Sinclair recently told King World News…
When people say that the Cypriot banks lost because of being in Greek debt, what was one of the Greeks’ greatest sins? They used over-the-counter derivatives in order to hide the real condition of their balance sheet.
Depositor money, brokerage money, and clearing house money have been tangled up in the mountain of derivatives as the banks have used this cash to speculate in an attempt to make huge bonuses for bank executives.
As I have written about so many times, the global quadrillion dollar derivatives bubble is one of the greatest threats that the global financial system is facing. As Sinclair explained to King World News, when this derivatives bubble bursts and the losses start soaring, the big banks are going to want to raid private bank accounts just like the banks in Cyprus were able to…
What do you think happens when Buffett reports that he made $10 billion in derivatives? Somebody else lost $10 billion and it was most likely one financial institution. There is no question that what we are seeing right now is not isolated to Cyprus. It has happened everywhere, but is has been camouflaged by making the depositors and the banks whole. What Cyprus will reveal is that losses do not stop with the bank’s capital. Losses roar right through bank capital and take depositors’ money.
This could have all been avoided if we had allowed the big Wall Street banks to collapse back in 2008. Reckless behavior would have been greatly punished and banks would have chosen to do business differently in the future.
David Stockman, the former director of the Office of Management and Budget under President Ronald Reagan, says that because we bailed out the big banks it was a signal to them that they could go back and freely engage in the same kind of reckless behavior that they were involved in previously…
Essentially there was a cleansing run on the wholesale funding market in the canyons of Wall Street going on. It would have worked its will, just like JP Morgan allowed it to happen in 1907 when we did not have the Fed getting in the way. Because they stopped it in its tracks after the AIG bailout and then all the alphabet soup of different lines that the Fed threw out, and then the enactment of TARP, the last two investment banks standing were rescued, Goldman and Morgan [Stanley], and they should not have been. As a result of being rescued and having the cleansing liquidation of rotten balance sheets stopped, within a few weeks and certainly months they were back to the same old games, such that Goldman Sachs got $10 billion dollars for the fiscal year that started three months later after that check went out, which was October 2008. For the fiscal 2009 year, Goldman Sachs generated what I call a $29 billion surplus – $13 billion of net income after tax, and on top of that $16 billion of salaries and bonuses, 95% of it which was bonuses.
Therefore, the idea that they were on death’s door does not stack up. Even if they had been, it would not make any difference to the health of the financial system. These firms are supposed to come and go, and if people make really bad bets, if they have a trillion dollar balance sheet with six, seven, eight hundred billion dollars worth of hot-money short-term funding, then they ought to take their just reward, because it would create lessons, it would create discipline. So all the new firms that would have been formed out of the remnants of Goldman Sachs where everybody lost their stock values – which for most of these partners is tens of millions, hundreds of millions – when they formed a new firm, I doubt whether they would have gone back to the old game. What happened was the Fed stopped everything in its tracks, kept Goldman Sachs intact, the reckless Goldman Sachs and the reckless Morgan Stanley, everyone quickly recovered their stock value and the game continues. This is one of the evils that comes from this kind of deep intervention in the capital and money markets.
The lessons that we were supposed to learn from the crisis of 2008 have not been learned.
Instead, the lure of huge returns and big bonuses has caused a return to the exact same behavior that caused the crisis of 2008 in the first place. The following is one example of this phenomenon from a recent article by Wolf Richter…
The craziness on Wall Street, the reckless for-the-moment-only behavior that led to the Financial Crisis, is back.
This time it’s Citigroup that is once again concocting “synthetic” securities, like those that had wreaked havoc five years ago. And once again, it’s using them to shuffle off risks through the filters of Wall Street to people who might never know.
What bubbled to the surface is that Citigroup is selling synthetic securities that yield 13% to 15% annually—synthetic because they’re based on credit derivatives. Apparently, Citi has a bunch of shipping loans on its books, and it’s trying to protect itself against default. In return for succulent interest payments, investors will take on some of the risks of these loans.
Yes, the Dow hit another new all-time high today. But the derivatives bubble that hangs over the global economy like a sword of Damocles could burst at literally any moment. When it does, the damage is going to be incalculable.
In a previous article entitled “Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers“, I noted a couple of statistics that show why derivatives are such an enormous problem…
–$212,525,587,000,000 – According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
–$600,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.
When the derivatives bubble finally bursts, where are we going to get the trillions upon trillions of dollars that will be needed to “fix” things this time?
And sadly, the reality is that we are quickly running out of time.
It is important to keep watching Europe. As I noted the other day, the European banking system as a whole is leveraged about 26 to 1 at this point. When Lehman Brothers finally collapsed, it was leveraged about 30 to 1.
And the economic crisis over in Europe just continues to get worse. It was announced on Tuesday that the unemployment rate in the eurozone is at an all-time record high of 12 percent, and the latest manufacturing numbers show that manufacturing activity over in Europe is in the process of collapsing.
So don’t be fooled by the fact that the Dow keeps setting new all-time record highs. This bubble of false hope will be very short-lived.
The unfortunate truth is that the global financial system is a complete and total mess, and at this point a collapse appears to be inevitable.
 The politicians of the western world are coming after your bank accounts. In fact, Cyprus-style “bail-ins” are actually proposed in the new Canadian government budget. When I first heard about this I was quite skeptical, so I went and looked it up for myself. And guess what? It is right there in black and white on pages 144 and 145 of “Economic Action Plan 2013″ which the Harper government has already submitted to the House of Commons. This new budget actually proposes “to implement a ‘bail-in’ regime for systemically important banks” in Canada. “Economic Action Plan 2013″ was submitted on March 21st, which means that this “bail-in regime” was likely being planned long before the crisis in Cyprus ever erupted. So exactly what in the world is going on here? In addition, as you will see below, it is being reported that the European Parliament will soon be voting on a law which would require that large banks be “bailed in” when they fail. In other words, that new law would make Cyprus-style bank account confiscation the law of the land for the entire EU. I can’t even begin to describe how serious all of this is. From now on, when major banks fail they are going to bail them out by grabbing the money that is in your bank accounts. This is going to absolutely shatter faith in the banking system and it is actually going to make it far more likely that we will see major bank failures all over the western world.
What you are about to see absolutely amazed me when I first saw it. The Canadian government is actually proposing that what just happened in Cyprus should be used as a blueprint for future bank failures up in Canada.
The following comes from pages 144 and 145 of “Economic Action Plan 2013″ which you can find right here. Apparently the goal is to find a way to rescue “systemically important banks” without the use of taxpayer funds…
Canada’s large banks are a source of strength for the Canadian economy. Our large banks have become increasingly successful in international markets, creating jobs at home.
The Government also recognizes the need to manage the risks associated with systemically important banks — those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.
So if taxpayer funds will not be used to bail out the banks, how will it be done? Well, the Canadian government is actually proposing that a “bail-in” regime be implemented…
The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.
So if the banks take extreme risks with their money and lose, “certain bank liabilities” (i.e. deposits) will rapidly be converted into “regulatory capital” and the banks will be saved.
In other words, the banks will just be allowed to grab money directly out of your bank accounts to recapitalize themselves.
That may sound completely and utterly insane to us, but this is how things will now be done all over the western world.
Sometimes a “bail-in” can be done by just converting unsecured debt into equity, but as we just saw in Cyprus, often when there is a major bank failure a lot more money is required to “fix the banks” than can possibly be raised by converting unsecured debt into equity. That is when it becomes very tempting to dip into uninsured back accounts.
In fact, some European politicians are openly admitting as much. According to RT, the European Parliament will soon be voting on a new law which will make Cyprus-style bank account confiscation a permanent part of the solution when major banks fail throughout the EU…
A senior lawmaker told Reuters the Cyprus model may not be an isolated case, and is perhaps a future template in dealing with troubled European banks.
The new template is now likely to turn into a full-scale EU law, letting taxpayers off the hook in case a bail-out is needed, but imposing major losses on bigger savers on a permanent basis.
“You need to be able to do the bail-in as well with deposits,” said Gunnar Hokmark, member of European Parliament, who is leading negotiations with EU countries to finalize a law for winding up problem banks, Reuters reported.
“Deposits below 100,000 euros are protected … deposits above 100,000 euros are not protected and shall be treated as part of the capital that can be bailed in,” Hokmark told Reuters, adding that he was confident a majority of his peers in the parliament backed the idea.
The European Commission has written the draft of the law, which now awaits approval from eurozone member states and the parliament on whether and when it can be implemented. It’s been reported, the law is planned to take effect in the beginning of 2015.
Are you starting to understand?
The other day when I said that “The Global Elite Are Very Clearly Telling Us That They Plan To Raid Our Bank Accounts“, I was not exaggerating.
And for those in Cyprus with deposits of over 100,000 euros, the news just keeps getting worse and worse.
When the crisis first erupted, they were told that 10 percent of all deposits over 100,000 euros would be confiscated.
Then a few days later they were told that it would be 40 percent.
Now, according to the Washington Post, those with deposits over 100,000 euros at the second largest bank in Cyprus may lose as much as 80 percent of those deposits…
A deal was finally reached in Brussels with other euro countries and the International Monetary Fund early Monday. The country’s second-largest bank, Laiki, is to be split up, with its healthy assets being absorbed into the Bank of Cyprus. Savers with more 100,000 euros ($129,000) in either Bank of Cyprus and Laiki will face big losses. At Laiki, those could reach as much as 80 percent of amounts above the 100,000 insured limit; those at Bank of Cyprus are expected to be much lower.
Sadly, the truth is that those people will be lucky to ever see any of that money ever again.
How would you feel if someone came along and wiped out your life savings so that banks that took incredibly reckless risks could be bailed out?
Needless to say, a lot of people in Cyprus are very, very angry right now. The following reactions from outraged depositors in Cyprus are from Sky News…
“They have stolen our money,” Milton Loucas told Sky News.
“I have been working for 60 years. I am 80 years old. I cannot work again for my living – they have cut the lot.
“Our money, our social insurance – they have cut them. How are we going to live?”
Another Cypriot, Stelios, came out of the bank empty handed.
“I tried to get my February wages and they gave me a piece of paper only,” he said.
“I have two children in the army and they asked for money – I don’t have money to give them.
“The Government didn’t pay anybody. My old parents didn’t get their pension.”
A lot of people have just had their entire lives turned upside down.
But there were some people that were told ahead of the crisis and were able to get their money out in time.
According to the BBC, foreigners pulled a whopping 18 percent of their money out of Cyprus banks during the month of February alone…
Information from the Central Bank of Cyprus released on Thursday showed that foreign depositors had already withdrawn 18% of their cash from the nation’s banks during February, before the current crisis hit home.
So how did they know to pull their money out and who told them?
In addition, branches of the two largest banks in Cyprus were kept open in Moscow and London even after all of the banks in Cyprus itself were shut down. So wealthy Russians and wealthy Brits have been able to take all of their money out of those banks while the people of Cyprus have been unable to. It is hard to even find the words to describe how unfair that is. The following is from a recent article by Mark J. Grant…
So let us then turn back to Cyprus and see why the Russians are not quite so upset as they were at the beginning of the crisis. The answer to this question is Uniastrum bank which is headquartered in Moscow. Eighty percent (80%) is owned by the Bank of Cyprus. After the crisis began and right up until the capital controls were implemented the bank was open for business with no restrictions upon withdrawals. So the crisis began, was all over the Press and the Russian depositors walked into the local bank and withdrew their money from Uniastrum, the Bank of Cyprus, or had it wired in from the other local Cyprus banks and it was then withdrawn. Problem solved!
At the same time Laiki bank and the Bank of Cyprus had operating branches in London. There were no restrictions there either so people could walk into those banks and withdraw their money as well. No restrictions at all right up until the time of the Capital Controls. In the meantime, in Cyprus, people and institutions could not get at their money so the Russians and many British took out their money, closed their accounts while the people in Cyprus were left high and dry.
The wealthy always seem to come out ahead somehow, don’t they?
Meanwhile, those in Cyprus with deposits under 100,000 euros are now dealing with some very stringent capital controls. In other words, there are some very tight restrictions on what they can do with their money. For example, the maximum daily cash withdrawal has been set at 300 euros. The following are some of the other restrictions that are in force right now…
As well as the daily withdrawal limit, Cypriots may not cash cheques.
Payments and/or transfers outside Cyprus via debit and or credit cards are allowed up to 5,000 euros per person per month.
Transactions of 5,000-200,000 euros will be reviewed by a specially established committee, with applications for those over 200,000 euros needing individual approval.
Travellers leaving the country will only be allowed to take 1,000 euros with them.
When the next great wave of the economic collapse strikes, capital controls and bank account confiscation will suddenly become “normal” all over the world.
So get prepared while you still can.
One thing that you can do is make sure that you don’t have all of your eggs in one basket. The following is what Jim Rogers recently told CNBC…
“I, for one, am making sure I don’t have too much money in any one specific bank account anywhere in the world, because now there is a precedent,” he said. “The IMF has said ‘sure, loot the bank accounts’ the EU has said ‘loot the bank accounts’ so you can be sure that other countries when problems come, are going to say, ‘well, it’s condoned by the EU, it’s condoned by the IMF, so let’s do it too.'”
The more places that you have your money, the more difficult it will be for “the powers that be” to loot it.
The global elite are fundamentally changing the game. From now on, no bank account on earth will ever be able to be considered “100% safe” again. This is going to create an atmosphere of fear and panic, and no financial system can operate normally when you destroy the confidence that people have in it.
Confidence is a funny thing – it can take decades to build, but it can be destroyed in a single moment.
None of us will ever be able to have confidence in our bank accounts again, and I fear that the next wave of the economic collapse may be closer than I had first anticipated.
 Cyprus lawmakers may have rejected the bank account tax, but the truth is that the financial crisis in Cyprus is just getting started. Right now, the two largest banks in Cyprus are dangerously close to a meltdown. If they fail, depositors could end up losing virtually all of their money. You see, the banking system of Cyprus absolutely dwarfs the GDP of that small island nation. Cyprus is known all over the world as a major offshore tax haven, and wealthy Russians and wealthy Europeans have been pouring massive amounts of money into the banking system over the last several decades. Yes, those bank deposits are supposed to be insured, but the truth is that there is no way that the government of Cyprus could ever come up with enough money to cover the massive losses that we are potentially looking at. This is a case where the banking system of a nation has gotten so large that the national government is absolutely powerless to stop a collapse from happening. If those banks fail, depositors may end up getting 50 percent of their money or they may end up getting nothing. We just don’t know how bad the damage is yet. And considering the fact that many of the largest corporations and many of the wealthiest individuals in Europe have huge mountains of cash stashed in Cyprus, the fallout from a banking collapse could potentially be absolutely catastrophic.
So Cyprus needs to come up with some money from somewhere in order to keep that from happening.
Basically, there are three options at this point…
1) Even though the bank account confiscation tax was voted down today, there is talk that it could come back in another form. This is really the only place inside of Cyprus where enough money can be raised to bail out the banks.
2) Cyprus could go back and beg the IMF and the EU for money, but the IMF and the EU have already said that they want depositors to share in the pain.
3) Cyprus could get the money that they need from the Russians. This will be discussed in more detail later.
A lot of people will see the headlines proclaiming that Cyprus has voted against the wealth tax and think that everything is going to be okay now, but that is very far from the truth.
The reality is that this is only the first move in a very complicated chess game. The problems for Cyprus are only just the beginning…
“This is not the end of the process, but instead kicks off a further round of negotiation with Moscow and Berlin,” JPMorgan economist Alex White wrote in a research note. “The Cypriot authorities wanted to conduct the vote so that they could reaffirm the extent of their difficulties to the Europeans.”
When the banks of Cyprus reopen in a few days, there is going to be a stampede of people trying to pull their money out of the banks.
In fact, this was starting to happen even before the “bank holiday” was declared. According to The Sun, bank insiders were tipping people off about what was going to happen in the days leading up to the crisis…
But Russian oligarchs and big investors emptied accounts in the days beforehand, prompting claims they were tipped off by bank insiders. A source told The Sun: “It leaked out. Bankers warned their best clients. Government officials warned their friends and relatives.
“Billions disappeared from accounts in days, most from accounts held by Russians.”
And according to David Zervos, we could see billions more euros withdrawn from banks in Cyprus once they reopen. There will be mass panic as depositors scramble to reclaim their money before it can be taxed…
The die is cast. There is no going back for the Cypriots or the Eurozone leaders. As soon as the banks open in Cyprus there will be billions in withdrawals. The question of course is – “where will the money come from?”. Well, if the parliament votes YES, then the Euros will have to come from the Eurosystem. But there is a glitch. The Cypriots have already borrowed 10b euro via the ELA and Target2. How can Mario just wire over 20 billion more (less the 10 to 15 percent haircut) for the Russians, and another 20 to 30 billion for the wealthy Greeks. What collateral will an economy with 20b in GDP post to get this cash? Unless Mario violates every collateral rule at the ECB, the Cypriot financial system will collapse even with a YES vote. Its a wonderful life – Cyprus style.
It may not even matter what Cyprus eventually decides to do about a “wealth tax”. The bank run that is about to happen may be enough to bring down the banks of Cyprus all by itself.
And of course people all over southern Europe are watching developments in Cyprus very closely. As former British Chancellor of the Exchequer Alistair Darling recently noted, if depositors in southern Europe start getting nervous that their bank accounts will be targeted too, they will be likely to start pulling money out of the banks very rapidly…
“They have actually now said to people ‘We will come after your deposits, no matter how small your savings are’ and that seems to me to make it more likely that, if you are a saver in Spain or in Italy, for example, and you have just the sniff of the EU or the IMF coming your way, you will take your money out and you will get a run on the bank”
Cyprus could actually get out of this mess by turning to Russia, but the United States and Europe really do not want to see Russia gain so much control over that very strategic island nation.
So why would Russia get involved? Well, it has been estimated that Russians have approximately $31 billion stashed in banks in Cyprus. It is the favorite offshore banking destination for the Russian oligarchs. Dennis Gartman recently detailed why the tiny island nation is so appealing to the Russians…
Cyprus has been their own private Switzerland for many years. Legal and non-legal Russian cash has swamped the banking system in Cyprus since the early 90’s. The beauty of the island; the ease of admission too and exit from the island via boat or plane; the secrecy of the banking laws; the warm Mediterranean climate and the ease of which Cypriot authorities could be bribed and bought all worked to make Cyprus the center of Russian capital flight.
And right now the Russians are not happy at all that their money is being threatened.
In particular, the Russian mafia launders a lot of money in Cyprus. The Russian mafia is not about to let anyone steal their money, and they have an international reputation for being absolutely brutal. In the end, pressure from the mafia may have been one of the primary reasons why many Cyprus lawmakers voted against the bank account tax. As Dennis Gartman astutely noted, by voting against the wealth tax they may have literally been saving their own lives…
“One could only laugh as such a comment; of course Cyprus was complacent about laundering. To think otherwise was and is naïve. Ah, but now you’ve stolen Russia money… or soon shall depending upon the vote in the Cypriot parliament… and that is dangerous… very. One does not steal Russian mafia money and get away with it. There are fewer statements of fact that are more certain, more factual, more unyielding than this statement. Russian Mafia figures do not take well to being stolen from, and they take even less well to be made fools of. We see no reason to mince words at this point: People will be hurt over this decision; some shall be killed.”
And the Russians definitely do not want to see the banking system of Cyprus collapse. In fact, proposals have been made that would provide the money necessary to keep it afloat. But of course that money would not come cheaply.
Some of the proposals that Russia has put forward were summarized by the Daily Mail…
But in a move that has raised eyebrows, the Russian energy giant Gazprom offered Cyprus a plan in which the company will undertake the restructuring of the country’s banks in exchange for exploration rights for natural gas on the island.
Representatives of the Russian company submitted the proposal to the office of Cypriot President Nicos Anastasiades on Sunday evening.
It is also rumoured that the Kremlin is privately offering to help bail out Cyprus in exchange for the right to use a naval base in the Greek part of the island.
In addition, as I wrote about yesterday, some Russian investors have stepped forward and have offered to buy majority stakes in the two largest banks in Cyprus.
So why hasn’t Cyprus accepted help from Russia yet? Well, it is a geopolitical thing. Cyprus is a part of the EU, and European officials do not want Russia to become the dominant influence in Cyprus.
But if the IMF and the EU are not going to step up and help Cyprus, the Russian offers will become more tempting with each passing day.
Meanwhile, the attempted attack on bank accounts in Cyprus is making people nervous all over Europe. For example, the following is what German economist Peter Bofinger had to say about what the situation in Cyprus is doing to confidence in the European financial system…
Making small-scale savers pay is extremely dangerous. It will shake the trust of depositors across the Continent. Europe’s citizens now have to fear for their money.
And if you don’t think that this could ever happen anywhere else, you are just being delusional.
In fact, it is already happening. In fact, the Finance Minister of New Zealand is now proposing that depositors in his nation should be required to “take a haircut” if any banks in his nation fail…
The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.
Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.
“Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman.
“The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank.
“Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.”
But surely there will never be any major banking problems in the United States, right?
Well, large numbers of Chase customers that logged into their accounts on Monday discovered that a “computer glitch” had reset all of their account balances to zero…
Chase bank experienced a problem Monday that had customers scrambling to figure out where their money went.
JP Morgan Chase said it hadn’t been hacked but was having a problem “related to an internal issue” as customers found their accounts showing zero balances.
Some customers shared their frustration on Twitter and showed screen shots of zero balances.
How would you feel if you suddenly discovered that you had no money in the bank?
Most Americans just assume that their money will always be there because their bank accounts are “guaranteed” by deposit insurance and by the full faith and credit of the federal government.
But that is exactly what the people of Cyprus thought too, and look how that turned out.
It would be hard to overstate how dangerous the situation in Cyprus is. Yes, their nation is very small but their banking system is absolutely huge.
If the banking system of Cyprus fails, it could be a “Lehman Brothers moment” for all of Europe. At this point, the entire European banking system is leveraged 26 to 1, and once European banks start to fail they could start falling like dominoes.
There is also a very strong possibility that Cyprus could be forced to leave the euro, and if that happens everyone will be wondering who will be next to leave the common currency.
So don’t think for a second that the crisis in Cyprus is over. The banking meltdown is just getting started, and the consequences could end up being far more dramatic than any of us could possibly imagine.
 The mainstream media is absolutely giddy that the U.S. unemployment rate has hit a “four-year low” of 7.7 percent. But is unemployment in the United States actually going down? After all, you would think that it should be. The Obama administration has “borrowed” more than 6 trillion dollars from future generations of Americans, interest rates have been pushed to all-time lows, and the Federal Reserve has been wildly printing more money in a desperate attempt to “stimulate” the economy. So have those efforts been successful? Well, according to the mainstream media, the U.S. unemployment rate is falling steadily. Headlines all over the nation boldly declared that “236,000 jobs” were added to the economy in February, but what they didn’t tell you was that the number of Americans “not in the labor force” rose by 296,000. And that is how they are getting the unemployment rate to go down – by pretending that huge numbers of unemployed Americans don’t want jobs. Sadly, as you will see below, the truth is that the percentage of working age Americans that have a job is just 0.1% higher than it was exactly three years ago. And we have not even come close to getting back to where we were before the last economic crisis. For example, more than 146 million Americans were employed back in 2007. But today, only 142.2 million Americans have a job even though our population has grown steadily since then. So where in the world is this “economic recovery” that they keep talking about?
At this point, the “unemployment rate” has become so meaningless that it really isn’t even worth paying much attention to. If you really want to know what the employment picture looks like in the United States, you need to look at the employment-population ratio.
As Wikipedia tells us, many economists consider the employment-population ratio to be far superior to other measurements of employment…
The Organization for Economic Co-operation and Development defines the employment rate as the employment-to-population ratio. The employment-population ratio is many American economist’s favorite gauge of the American jobs picture. According to Paul Ashworth, chief North American economist for Capital Economics, “The employment population ratio is the best measure of labor market conditions.” This is a statistical ratio that measures the proportion of the country’s working-age population (ages 15 to 64 in most OECD countries) that is employed. This includes people that have stopped looking for work.
A chart of the employment-population ratio in the United States over the past several years is posted below…
As you can see, the percentage of Americans with a job fell from about 63 percent to below 59 percent during the last economic crisis. Since that time, it has not risen back above 59 percent. This is the first time in the post-World War II era that we have not seen the employment rate bounce back following a recession. At this point, the employment-population ratio has been below 59 percent for 42 months in a row.
Yes, we should be thankful that things have stabilized, but as you can see there has been no recovery. The percentage of Americans with a job is essentially exactly where it was three years ago. Despite the trillions of dollars that the U.S. government has borrowed, and despite the reckless money printing that the Federal Reserve has been doing, the employment situation in the U.S. has not turned around.
Data for the employment-population ratio from the beginning of 2008 is posted below…
2008-01-01 62.9
2008-02-01 62.8
2008-03-01 62.7
2008-04-01 62.7
2008-05-01 62.5
2008-06-01 62.4
2008-07-01 62.2
2008-08-01 62.0
2008-09-01 61.9
2008-10-01 61.7
2008-11-01 61.4
2008-12-01 61.0
2009-01-01 60.6
2009-02-01 60.3
2009-03-01 59.9
2009-04-01 59.8
2009-05-01 59.6
2009-06-01 59.4
2009-07-01 59.3
2009-08-01 59.1
2009-09-01 58.7
2009-10-01 58.5
2009-11-01 58.6
2009-12-01 58.3
2010-01-01 58.5
2010-02-01 58.5
2010-03-01 58.5
2010-04-01 58.7
2010-05-01 58.6
2010-06-01 58.5
2010-07-01 58.5
2010-08-01 58.5
2010-09-01 58.5
2010-10-01 58.3
2010-11-01 58.2
2010-12-01 58.3
2011-01-01 58.3
2011-02-01 58.4
2011-03-01 58.4
2011-04-01 58.4
2011-05-01 58.4
2011-06-01 58.2
2011-07-01 58.2
2011-08-01 58.3
2011-09-01 58.4
2011-10-01 58.4
2011-11-01 58.5
2011-12-01 58.6
2012-01-01 58.5
2012-02-01 58.6
2012-03-01 58.5
2012-04-01 58.5
2012-05-01 58.6
2012-06-01 58.6
2012-07-01 58.5
2012-08-01 58.4
2012-09-01 58.7
2012-10-01 58.7
2012-11-01 58.7
2012-12-01 58.6
2013-01-01 58.6
2013-02-01 58.6
So is there anyone out there that still wants to insist that the employment picture in the United States is getting significantly better?
Anyone that wants to claim that “unemployment is going down” should at least wait until the unemployment-population ratio gets back up to 59 percent. Otherwise they just look foolish.
Yes, the Dow is at an all-time high right now. But a bubble is always the biggest right before it bursts.
Most Americans understand that the Dow has been pumped up with all of the funny money that the Fed has been printing. Most Americans understand that the stock market really does not accurately reflect the health of the U.S. economy as a whole.
Just consider these numbers…
-The number of homeless people sleeping in homeless shelters in New York City has increased by 19 percent over the past year.
-The number of Americans on food stamps has risen from 32 million to 47 million while Barack Obama has been in the White House.
-According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income” at this point.
-Median household income in the United States has fallen for four consecutive years.
No, the truth is that everything is most definitely not fine.
If everything is fine, then why did the Federal Reserve inject another 100 billion dollars into foreign banks during the last full week of February?
The U.S. government and the Federal Reserve are desperately trying to prop up the entire global economy. Unfortunately, the global financial system has been built on a foundation of sand and the tide is coming in.
Back in 2008, a derivatives crisis was one of the primary causes of the worst financial panic since the Great Depression.
So did we learn our lesson?
No, the boys on Wall Street are back at it again as a recent article by Jim Armitage described…
Historically, stock markets, being driven by humans, have tended to have a similar length memory of catastrophes, before making the same dumb mistakes again.
But it hasn’t even been five years since derivatives (on that occasion based on daft mortgages) blew up the world, and yet these exotic creatures have already returned. With a vengeance.
Research from Thomson Reuters declared that banks were creating more derivatives known as asset-backed securities than at any time since before the Lehman Brothers crash. Of those, 22 percent were made up of – and forgive me the alphabet soup here – CDOs and CLOs. The very type of derivatives that exploded last time. At this stage last year, only 6 percent fell into those categories.
In other words, banks are creating more of the riskiest types of the riskiest products.
At some point, we will have another derivatives crisis even worse than the last one.
When that happens, financial markets all over the globe will crash, economic activity will grind to a standstill and unemployment will go skyrocketing once again.
But as you saw above, we have never even come close to recovering from the last crisis.
So you can believe the mind-numbing propaganda that the mainstream media is trying to feed you if you want. Unfortunately, the reality of the matter is that we have not recovered from the last major economic crisis, and another one is rapidly approaching.
I hope that you are getting ready.
 Reckless money printing by Federal Reserve Chairman Ben Bernanke has pumped up the Dow to a brand new all-time high. So what comes next? Will the Dow go even higher? Hopefully it will. In fact, it would be great if the Dow was able to hit 15,000 before it finally came crashing down. That would give all of us some more time to prepare for the nightmarish economic crisis that is rapidly approaching. As you will see below, the U.S. economy is in far, far worse shape than it was the last time the Dow reached a record high back in 2007. In addition, all of the long-term trends that are ripping our economy to shreds just continue to get even worse and our debt just continues to explode. Unfortunately, the Dow has become completely divorced from economic reality in recent years because of Fed manipulation. All of this funny money that the Federal Reserve has been cranking out has made the wealthy even wealthier, but this bubble will not last for too much longer. What goes up must come down. And remember, a bubble is always biggest right before it bursts.
Fortunately, it looks like an increasing number of people out there are starting to recognize that the primary reason why stocks have been going up is because of the Fed. Just check out this excerpt from a recent article by the USA Today editorial board…
The Federal Reserve’s purchases have driven interest rates to near zero. This has stimulated the economy but not without cost. Savers, particularly older ones trying to live on income from their investments, are starved for safe options. They’ve been forced into stocks, which is one reason the market has been acting as if it’s on steroids. Further, with borrowing costs low, Congress and the White House have less incentive to rein in the national debt. Rock-bottom interest rates have also distorted markets.
The best indication that the Fed’s bond-buying purchases are pushing stocks up artificially is that investors run for cover whenever there is a hint that the Fed might change course, as happened recently. On Monday, billionaire superinvestor Berkshire Hathaway CEO Warren Buffett told CNBC that markets are on a “hair trigger” waiting for signs of change from the Fed. The market is “hooked on the drug” of easy money, Dallas Fed President Richard Fisher told Reuters.
Fisher’s comparison of Fed policies to a drug is apt. Markets might not like the idea of the drug being withdrawn now, when the Fed holds a portfolio of $3 trillion. But the withdrawal symptoms will be a lot worse once the portfolio grows to $4 trillion, or more.
Those sentiments were echoed by Gordon Charlop, a trader at Rosenblatt Securities, during a recent appearance on CNBC…
“The Wizard of the Fed, Ben [Bernanke], has done a great job propping up the market, but the question is how does the wizard move the pin from the balloon without blowing the whole thing up?” said Charlop. “This is getting out of balance and he’s got to figure out a way to justify the levels that we’ve gotten to and draw back on some of the stimulus.”
Of course, in the end, the bursting of this bubble is going to be very messy.
The Fed has dramatically distorted the market in an attempt to make things look good, but now the financial markets are completely and totally addicted to easy money. Is there any chance that the Fed will be able to take away that easy money without causing disaster?
There are only a few ways that this current scenario can play out. The following is what Stanley Druckenmiller recently told CNBC…
“I don’t know when it’s going to end, but my guess is, it’s going to end very badly; and it’s going to end very badly because, again, when you get the biggest price in the world, interest rates, being manipulated you get a misallocation of resources and this is going to end in one of two ways – with a malinvestment bust which we got in ’07-’08 (we didn’t get inflation). We got a malinvestment bust because of the bubble that was created in housing. Or it could end with just monetizing the debt and off we go in inflation. So that’s a very binary outcome – they’re both bad.”
What the Fed has done to the money supply in recent years has been absolutely unprecedented. Just check out how our money supply has skyrocketed since the last financial crisis…
So what happens when the amount of money in an economy rises rapidly?
Well, if I remember Econ 101 correctly, that would mean that prices should go up.
And that is exactly what has happened. And since most of the money that the Fed has created has gone into the financial system first, it should not be a surprise that we have seen a bubble in financial assets.
In a previous article that I wrote last September, I warned that QE3 would cause stocks to go up…
So what have the previous rounds of quantitative easing accomplished? Well, they have driven up the prices of financial assets. Those that own stocks have done very well the past couple of years. So who owns stocks? The wealthy do. In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans. Those that have invested in commodities have also done very nicely in recent years. We have seen gold, silver, oil and agricultural commodities all do very well. But that also means that average Americans are paying more for basic necessities such as food and gasoline. So the first two rounds of quantitative easing made the wealthy even wealthier while causing living standards to fall for all the rest of us. Is there any reason to believe that QE3 will be any different?
Of course not.
So will stocks continue to go up indefinitely?
No way.
As I have also written about previously, the money printing that the Fed is doing right now is not nearly enough to stop the mammoth derivatives crisis that is coming.
A derivatives crisis was one of the primary reasons for the financial crash of 2008, but most Americans still have no idea what derivatives are.
They can be very complex, but I think that it is easiest just to think of them as side bets.
When someone buys a derivative, they are not buying anything real. They are simply betting that something will or will not happen.
For example, if you bet $100 that the Chicago Cubs will win the World Series this year, would you be “investing” in anything real?
Of course not.
Well, it is the same with most derivatives.
Today, Wall Street has become the biggest casino in the entire world and trillions of dollars of very reckless bets have been made.
In fact, most Americans would be absolutely shocked to learn how exposed to derivatives some of our largest financial institutions are. The following is an excerpt from one of my previous articles entitled “The Coming Derivatives Panic That Will Destroy Global Financial Markets“…
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.
When the derivatives crash happens, there won’t be enough money in the entire world to fix it.
So enjoy this little stock market bubble while you can.
It will end soon enough.
And of course stocks should not be this high in the first place. The underlying economic fundamentals do not justify these kinds of stock prices whatsoever.
A recent CNN article noted that the last time the Dow hit a record high that unemployment in the U.S. was much lower…
Consider this. When the Dow hit its now old record high back in October 2007, the economy was still in good shape — although it was just a few months away from the beginning of the Great Recession.
The unemployment rate in October 2007 was 4.7%. In January of this year, the unemployment rate was 7.9%.
And that same article also pointed out that GDP growth and housing prices were also much stronger back in 2007…
Gross domestic product grew 3% in the third quarter of 2007. Revised figures from the government last week showed that GDP in the fourth quarter of 2012 rose a scant 0.1%. But I guess that’s good news considering the first estimate showed a 0.1% decline.
And despite all the hoopla about the steady recovery in the housing market over the past year, real estate is still in a bear market. The most recent level of the S&P Case-Shiller 20-City Home Price Index, one of the most widely watched gauges of the health of housing, is still 24% below where it was in October 2007.
We have never even come close to recovering from the last economic crisis. Most Americans seem to have forgotten how good things were back then, but a recent Zero Hedge article included some more points of comparison between October 2007 and today…
- Dow Jones Industrial Average: Then 14164.5; Now 14164.5
- Regular Gas Price: Then $2.75; Now $3.73
- GDP Growth: Then +2.5%; Now +1.6%
- Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
- Americans On Food Stamps: Then 26.9 million; Now 47.69 million
- Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
- US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
- US Deficit (LTM): Then $97 billion; Now $975.6 billion
- Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
- US Household Debt: Then $13.5 trillion; Now 12.87 trillion
- Labor Force Particpation Rate: Then 65.8%; Now 63.6%
- Consumer Confidence: Then 99.5; Now 69.6
And of course anyone that reads my site regularly knows that the U.S. economy has been in a state of persistent decline over the past several years.
Just consider the following data points…
-The percentage of the civilian labor force in the United States that is actually employed has been steadily declining every single year since 2006.
-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.
-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.
-Median household income in America has fallen for four consecutive years. Overall, it has declined by more than $4000 during that time span.
-At this point, an astounding 53 percent of all American workers make less than $30,000 a year.
That is the other side of the Fed’s insidious money printing. Incomes in the United States are going down, but the cost of living is skyrocketing. This is squeezing millions of Americans out of the middle class…
When Debbie Bruister buys a gallon of milk at her local Kroger supermarket, she pays $3.69, up 70 cents from what she paid last year.
Getting to the store costs more, too. Gas in Corinth, Miss., her hometown, costs $3.51 a gallon now, compared to less than three bucks in 2012. That really hurts, considering her husband’s 112-mile daily round-trip commute to his job as a pharmacist.
Perhaps you can identify with this. Perhaps your paychecks are about the same as they used to be back in 2007 but the cost of living has gone up dramatically since then.
I wish I could tell you that things were going to get better, but unfortunately there are all kinds of indications that things are about to get even worse for the U.S. economy. If you doubt this, just read this article and this article.
Yes, the Dow is at an all-time high. But do you want to know what else has hit an all-time high up in New York?
Homelessness.
The following is from a recent report in the New York Times…
An average of more than 50,000 people slept each night in New York City’s homeless shelters for the first time in January, a record that underscores an unsettling national trend: a rising number of families without permanent housing.
And apparently families and children have been hit particularly hard over the past year…
More than 21,000 children—an unprecedented 1% of the city’s youth—slept each night in a city shelter in January, an increase of 22% in the past year, the report said, while homeless families now spend more than a year in a shelter, on average, for the first time since 1987. In January, an average of 11,984 homeless families slept in shelters each night, a rise of 18% from a year earlier.
Of course New York is far from alone. There has been a surge in homelessness all over the United States. In fact, at this point more than a million public school students in the United States are homeless. This is the first time that has ever happened in U.S. history.
But the Dow just hit a record high so we should all be wildly happy, right?
Hopefully we can get more Americans to understand that the “prosperity” that we are enjoying right now is just an illusion. It isn’t real. It is a bubble created by reckless money printing by the Fed and reckless borrowing by the U.S. government. If you can believe it, the U.S. government borrowed another 253 billion dollars during the month of February alone.
The Fed and the U.S. government will continue to engage in this kind of reckless behavior until the bubble eventually bursts.
So what should all the rest of us do?
We should be feverishly preparing for the hard times that are coming. As Daisy Luther recently wrote about, one of the most important things to do is to create an emergency fund. Instead of going out and blowing your money on the latest toys and gadgets, set some money aside so that you will have something to live on if the economy crashes and you suddenly lose your income.
Just remember what happened back in 2008. Millions of Americans suddenly lost their jobs, and because many of them had no financial reserves, a lot of Americans suddenly could not pay their mortgages and they lost their homes.
So put some money away in a place where it will be safe – and that does not mean the stock market.
Jim Cramer of CNBC and a lot of the other talking heads on the financial news channels are trying to encourage ordinary Americans to jump into “the bull market” right now and make some money, and many people will take their advice.
But the truth is that a bubble is always biggest right before it bursts.
This bubble is awfully big right now, and I don’t know how much larger it can possibly get.
 The world is rapidly running out of clean water. Some of the largest lakes and rivers on the globe are being depleted at a very frightening pace, and many of the most important underground aquifers that we depend on to irrigate our crops will soon be gone. At this point, approximately 40 percent of the entire population of the planet has little or no access to clean water, and it is being projected that by 2025 two-thirds of humanity will live in “water-stressed” areas. But most Americans are not too concerned about all of this because they assume that North America has more fresh water than anyone else does. And actually they would be right about that, but the truth is that even North America is rapidly running out of water and it is going to change all of our lives. Today, the most important underground water source in America, the Ogallala Aquifer, is rapidly running dry. The most important lake in the western United States, Lake Mead, is rapidly running dry. The most important river in the western United States, the Colorado River, is rapidly running dry. Putting our heads in the sand and pretending that we are not on the verge of an absolutely horrific water crisis is not going to make it go away. Without water, you cannot grow crops, you cannot raise livestock and you cannot support modern cities. As this global water crisis gets worse, it is going to affect every single man, woman and child on the planet. I encourage you to keep reading and learn more.
The U.S. intelligence community understands what is happening. According to one shocking government report that was released last year, the global need for water will exceed the global supply of water by 40 percent by the year 2030…
This sobering message emerges from the first U.S. Intelligence Community Assessment of Global Water Security. The document predicts that by 2030 humanity’s “annual global water requirements” will exceed “current sustainable water supplies” by forty percent.
Oh, but our scientists will find a solution to our problems long before then, won’t they?
But what if they don’t?
Most Americans tend to think of a “water crisis” as something that happens in very dry places such as Africa or the Middle East, but the truth is that almost the entire western half of the United States is historically a very dry place. The western U.S. has been hit very hard by drought in recent years, and many communities are on the verge of having to make some very hard decisions. For example, just look at what is happening to Lake Mead. Scientists are projecting that Lake Mead has a 50 percent chance of running dry by the year 2025. If that happens, it will mean the end of Las Vegas as we know it. But the problems will not be limited just to Las Vegas. The truth is that if Lake Mead runs dry, it will be a major disaster for that entire region of the country. This was explained in a recent article by Alex Daley…
Way before people run out of drinking water, something else happens: When Lake Mead falls below 1,050 feet, the Hoover Dam’s turbines shut down – less than four years from now, if the current trend holds – and in Vegas the lights start going out.
Ominously, these water woes are not confined to Las Vegas. Under contracts signed by President Obama in December 2011, Nevada gets only 23.37% of the electricity generated by the Hoover Dam. The other top recipients: Metropolitan Water District of Southern California (28.53%); state of Arizona (18.95%); city of Los Angeles (15.42%); and Southern California Edison (5.54%).
You can always build more power plants, but you can’t build more rivers, and the mighty Colorado carries the lifeblood of the Southwest. It services the water needs of an area the size of France, in which live 40 million people. In its natural state, the river poured 15.7 million acre-feet of water into the Gulf of California each year. Today, twelve years of drought have reduced the flow to about 12 million acre-feet, and human demand siphons off every bit of it; at its mouth, the riverbed is nothing but dust.
Nor is the decline in the water supply important only to the citizens of Las Vegas, Phoenix, and Los Angeles. It’s critical to the whole country. The Colorado is the sole source of water for southeastern California’s Imperial Valley, which has been made into one of the most productive agricultural areas in the US despite receiving an average of three inches of rain per year.
Are you starting to get an idea of just how serious this all is?
But it is not just our lakes and our rivers that are going dry.
We are also depleting our groundwater at a very frightening pace as a recent Science Daily article discussed…
Three results of the new study are particularly striking: First, during the most recent drought in California’s Central Valley, from 2006 to 2009, farmers in the south depleted enough groundwater to fill the nation’s largest human-made reservoir, Lake Mead near Las Vegas — a level of groundwater depletion that is unsustainable at current recharge rates.
Second, a third of the groundwater depletion in the High Plains occurs in just 4% of the land area. And third, the researchers project that if current trends continue some parts of the southern High Plains that currently support irrigated agriculture, mostly in the Texas Panhandle and western Kansas, will be unable to do so within a few decades.
In the United States we have massive underground aquifers that have allowed our nation to be the breadbasket of the world. But once the water from those aquifers is gone, it is gone for good. That is why what is happening to the Ogallala Aquifer is so alarming. The Ogallala Aquifer is one of the largest sources of fresh water in the world, and U.S. farmers use water from it to irrigate more than 15 million acres of crops each year. The Ogallala Aquifer covers more than 100,000 square miles and it sits underneath the states of Texas, New Mexico, Oklahoma, Colorado, Kansas, Nebraska, Wyoming and South Dakota. Most Americans have never even heard of it, but it is absolutely crucial to our way of life. Sadly, it is being drained at a rate that is almost unimaginable.
The following are some facts about the Ogallala Aquifer and the growing water crisis that we are facing in the United States. A number of these facts were taken from one of my previous articles. I think that you will agree that many of these facts are quite alarming…
1. The Ogallala Aquifer is being drained at a rate of approximately 800 gallons per minute.
2. According to the U.S. Geological Survey, “a volume equivalent to two-thirds of the water in Lake Erie” has been permanently drained from the Ogallala Aquifer since 1940.
3. Decades ago, the Ogallala Aquifer had an average depth of approximately 240 feet, but today the average depth is just 80 feet. In some areas of Texas, the water is gone completely.
4. Scientists are warning that nothing can be done to stop the depletion of the Ogallala Aquifer. The ominous words of David Brauer of the Ogallala Research Service should alarm us all…
“Our goal now is to engineer a soft landing. That’s all we can do.”
5. According to a recent National Geographic article, the average depletion rate of the Ogallala Aquifer is picking up speed….
Even more worrisome, the draining of the High Plains water account has picked up speed. The average annual depletion rate between 2000 and 2007 was more than twice that during the previous fifty years. The depletion is most severe in the southern portion of the aquifer, especially in Texas, where the water table beneath sizeable areas has dropped 100-150 feet; in smaller pockets, it has dropped more than 150 feet.
6. According to the U.S. National Academy of Sciences, the U.S. interior west is now the driest that it has been in 500 years.
7. Wildfires have burned millions of acres of vegetation in the central part of the United States in recent years. For example, wildfires burned an astounding 3.6 million acres in the state of Texas alone during 2011. This helps set the stage for huge dust storms in the future.
8. Unfortunately, scientists tell us that it would be normal for extremely dry conditions to persist in parts of western North America for decades. The following is from an article in the Vancouver Sun…
But University of Regina paleoclimatologist Jeannine-Marie St. Jacques says that decade-long drought is nowhere near as bad as it can get.
St. Jacques and her colleagues have been studying tree ring data and, at the American Association for the Advancement of Science conference in Vancouver over the weekend, she explained the reality of droughts.
“What we’re seeing in the climate records is these megadroughts, and they don’t last a decade—they last 20 years, 30 years, maybe 60 years, and they’ll be semi-continental in expanse,” she told the Regina Leader-Post by phone from Vancouver.
“So it’s like what we saw in the Dirty Thirties, but imagine the Dirty Thirties going on for 30 years. That’s what scares those of us who are in the community studying this data pool.”
9. Experts tell us that U.S. water bills are likely to soar in the coming years. It is being projected that repairing and expanding our decaying drinking water infrastructure will cost more than one trillion dollars over the next 25 years, and as a result our water bills will likely approximately triple over that time period.
10. Right now, the United States uses approximately 148 trillion gallons of fresh water a year, and there is no way that is sustainable in the long run.
11. According to a U.S. government report, 36 states are already facing water shortages or will be facing water shortages within the next few years.
12. Lake Mead supplies about 85 percent of the water to Las Vegas, and since 1998 the level of water in Lake Mead has dropped by about 5.6 trillion gallons.
13. It has been estimated that the state of California only has a 20 year supply of fresh water left.
14. It has been estimated that the state of New Mexico only has a 10 year supply of fresh water left.
15. Approximately 40 percent of all rivers in the United States and approximately 46 percent of all lakes in the United States have become so polluted that they are are no longer fit for human use.
The 1,450 mile long Colorado River is a good example of what we have done to our precious water supplies. It is probably the most important body of water in the southwestern United States, and it is rapidly dying.
The following is an excerpt from an outstanding article by Jonathan Waterman about how the once mighty Colorado River is rapidly drying up…
Fifty miles from the sea, 1.5 miles south of the Mexican border, I saw a river evaporate into a scum of phosphates and discarded water bottles. This dirty water sent me home with feet so badly infected that I couldn’t walk for a week. And a delta once renowned for its wildlife and wetlands is now all but part of the surrounding and parched Sonoran Desert. According to Mexican scientists whom I met with, the river has not flowed to the sea since 1998. If the Endangered Species Act had any teeth in Mexico, we might have a chance to save the giant sea bass (totoaba), clams, the Sea of Cortez shrimp fishery that depends upon freshwater returns, and dozens of bird species.
So let this stand as an open invitation to the former Secretary of the Interior and all water buffalos who insist upon telling us that there is no scarcity of water here or in the Mexican Delta. Leave the sprinklered green lawns outside the Aspen conferences, come with me, and I’ll show you a Colorado River running dry from its headwaters to the sea. It is polluted and compromised by industry and agriculture. It is overallocated, drought stricken, and soon to suffer greatly from population growth. If other leaders in our administration continue the whitewash, the scarcity of knowledge and lack of conservation measures will cripple a western civilization built upon water.
But of course North America is in far better shape when it comes to fresh water than the rest of the world is.
In fact, in many areas of the world today water has already become the most important issue.
The following are some incredible facts about the global water crisis that is getting even worse with each passing day…
1. Total global water use has quadrupled over the past 100 years, and it is now increasing faster than it ever has been before.
2. Today, there are 1.6 billion people that live in areas of the globe that are considered to be “water-stressed”, and it is being projected that two-thirds of the entire population of the globe will be experiencing “water-stressed” conditions by the year 2025.
3. According to USAID, one-third of the people on earth will be facing “severe” or “chronic” water shortages by the year 2025.
4. Once upon a time, the Aral Sea was the 4th largest freshwater lake in the entire world. At this point, it less than 10 percent the size that it used to be, and it is being projected that it will dry up completely by the year 2020.
5. If you can believe it, the flow of water along the Jordan River is down to only 2 percent of its historic rate.
6. It is being projected that the demand for water in China will exceed the supply by 25 percent by the year 2030.
7. According to the United Nations, the world is going to need at least 30 percent more fresh water by the year 2030.
8. Sadly, it is estimated that approximately 40 percent of the children living in Africa and India have had their growth stunted due to unclean water and malnutrition.
9. Of the 60 million people added to the cities of the world each year, the vast majority of them live in deeply impoverished areas that have no sanitation facilities whatsoever.
10. It has been estimated that 75 percent of all surface water in India has been heavily contaminated by human or agricultural waste.
11. Sadly, according to one UN study on sanitation, far more people in India have access to a cell phone than to a toilet.
12. Every 8 seconds, somewhere in the world a child dies from drinking dirty water.
13. Due to a lack of water, Saudi Arabia has given up on trying to grow wheat and will be 100 percent dependent on wheat imports by the year 2016.
14. Each year in northern China, the water table drops by an average of about one meter due to severe drought and overpumping, and the size of the desert increases by an area equivalent to the state of Rhode Island.
15. In China, 80 percent of the major rivers have become so horribly polluted that they do not support any aquatic life at all at this point.
So is there any hope that the coming global water crisis can be averted?
If not, what can we do to prepare?
Please feel free to post a comment with your thoughts below…
 Are we running out of time? For the last several years, we have been living in a false bubble of hope that has been fueled by massive amounts of debt and bailout money. This illusion of economic stability has convinced most people that the great economic crisis of 2008 was just an “aberration” and that now things are back to normal. Unfortunately, that is not the case at all. The truth is that the financial crash of 2008 was just the first wave of our economic troubles. We have not even come close to recovering from that wave, and the next wave of the economic collapse is rapidly approaching. Our economy is like a giant sand castle that has been built on a foundation of debt and toilet paper currency. As each wave of the crisis hits us, the solutions that our leaders will present to us will involve even more debt and even more money printing. And each time, those “solutions” will only make our problems even worse. Right now, events are unfolding in Europe and in the United States that are pushing us toward the next major crisis moment. I sincerely hope that we have some more time before the next crisis overwhelms us, but as you will see, time is rapidly running out.
The following are 12 things that just happened that show the next wave of the economic collapse is almost here…
#1 According to TrimTab’s CEO Charles Biderman, corporate insider purchases of stock have hit an all-time low, and the ratio of corporate insider selling to corporate insider buying has now reached an astounding 50 to 1….
While retail is being told to buy-buy-buy, Biderman exclaims that “insiders at U.S. companies have bought the least amount of shares in any one month,” and that the ratio of insider selling to buying is now 50-to-1 – a monthly record.
#2 On Friday we learned that personal income in the United States experienced its largest one month decline in 20 years…
Personal income decreased by $505.5 billion in January, or 3.6%, compared to December (on a seasonally adjusted and annualized basis). That’s the most dramatic decline since January 1993, according to the Commerce Department.
#3 In a stunning move, Michigan Governor Rick Snyder says that he will appoint an emergency financial manager to take care of Detroit’s financial affairs…
Snyder, 54, took a step he avoided a year ago, empowering an emergency financial manager who can sweep aside union contracts, sell municipal assets, restructure services and reorder finances. He announced the move yesterday at a public meeting in Detroit.
If this does not work, Detroit will almost certainly have to declare bankruptcy. If that happens, it will be the largest municipal bankruptcy in U.S. history.
#4 On Friday it was announced that the unemployment rate in Italy had risen to 11.7 percent. That was a huge jump from 11.3 percent the previous month, and Italy now has the highest unemployment rate that it has experienced in 21 years.
#5 The youth unemployment rate in Italy has risen to a new all-time record high of 38.7 percent.
#6 On Friday it was announced that the unemployment rate in the eurozone as a whole had just hit a brand new record high of 11.9 percent.
#7 On Friday it was announced that the unemployment rate in Greece has now reached 27 percent, and it is being projected that it will reach 30 percent by the end of the year.
#8 The youth unemployment rate in Greece is now an almost unbelievable 59.4 percent.
#9 On Saturday, hundreds of thousands of protesters filled the streets of Lisbon and other Portuguese cities to protest the austerity measures that are being imposed upon them. It was reportedly the largest protest in the history of Portugal.
#10 According to Goldman Sachs, bank deposits declined all over Europe during the month of January.
#11 Over the weekend, the deputy governor of China’s central bank declared that China is prepared for a “currency war“…
A top Chinese banker said Beijing is “fully prepared” for a currency war as he urged the world to abide by a consensus reached by the G20 to avert confrontation, state media reported on Saturday.
Yi Gang, deputy governor of China’s central bank, issued the call after G20 finance ministers last month moved to calm fears of a looming war on the currency markets at a meeting in Moscow.
Those fears have largely been fuelled by the recent steep decline in the Japanese yen, which critics have accused Tokyo of manipulating to give its manufacturers a competitive edge in key export markets over Asian rivals.
#12 Italy is an economic basket case at this point, and the political gridlock in Italy is certainly not helping matters. Former comedian Beppe Grillo’s party could potentially tip the balance of power one way or the other in Italy, and over the weekend he made some comments that are really shaking things up over in Europe. For one thing, he is suggesting that Italy should hold a referendum on the euro…
“I am a strong advocate of Europe. I am in favor of an online referendum on the euro,” Beppe Grillo told Bild am Sonntag.
Such a vote would not be legally binding in Italy, where referendums can only be used to repeal laws or parts of laws, but would carry political weight. Grillo has said in the past that membership of the euro should be up to the Italian people.
In addition, Grillo is also suggesting that Italy’s debt has gotten so large that renegotiation is the only option…
In an interview with a German magazine published on Saturday, Mr Grillo said that “if conditions do not change” Italy “will want” to leave the euro and return to its former national currency.
The 64-year-old comic-turned-political activist also said Italy needs to renegotiate its €2 trillion debt.
At 127 per cent of gross domestic product (GDP), it is the highest in the euro zone after Greece.
“Right now we are being crushed, not by the euro, but by our debt. When the interest payments reach €100 billion a year, we’re dead. There’s no alternative,” he told Focus, a weekly news magazine.
He said Italy was in such dire economic straits that “in six months, we will no longer be able to pay pensions and the wages of public employees.”
And of course government debt has taken center stage in the United States as well.
The sequester cuts have now gone into effect, and they will definitely have an effect on the U.S. economy. Of course that effect will not be nearly as dramatic as many Democrats are suggesting, but without a doubt those cuts will cause the U.S. economy to slow down a bit.
And of course the U.S. economy has already been showing plenty of signs of slowing down lately. If you doubt this, please see my previous article entitled “Consumer Spending Drought: 16 Signs That The Middle Class Is Running Out Of Money“.
So what comes next?
Well, everyone should keep watching Europe very closely, and it will also be important to keep an eye on Wall Street. There are a whole bunch of indications that the stock market is at or near a peak. For example, just check out what one prominent stock market analyst recently had to say…
“Every reliable technical tool is warning of major peaking action,” said Walter Zimmerman, the senior technical analyst at United-ICAP. “This includes sentiment, momentum, classical chart patterns, and Elliott wave analysis.
“Most of the rally in the stock market since 2009 can be chalked up to the Federal Reserve’s attempt to create a ‘wealth effect’ through higher stock market prices. This only exacerbates the downside risk. Why? The stock market no is longer a lead indicator for the economy. It is instead reflecting Fed manipulation. Pushing the stock market higher while the real economy languishes has resulted in another bubble.
“The next leg down will not be a partial correction of the advance since the 2009 lows. It will be another major financial crisis. The worst is yet to come.”
Sadly, most people will continue to deny that anything is wrong until it is far too late.
Many areas of Europe are already experiencing economic depression, and it is only a matter of time before the U.S. follows suit.
Time is running out, and I hope that you are getting ready.
So what do you think?
How much time do you believe that we have left before the next wave of the economic collapse strikes?
Please feel free to post a comment with your thoughts below…
 If we can’t even cut federal spending by 2.4 percent without much of the country throwing an absolute hissy fit, then what hope does America have? All of this whining and crying about the sequester is absolutely disgraceful. The truth is that even if the sequester goes into effect, the U.S. government will still take in more money than ever before in 2013 and it will still spend more money than ever before in 2013. So it is a bit disingenuous to call what is about to happen “a spending cut”, but for the sake of argument let’s concede that point. Even if the budget really was being “cut” by 85 billion dollars, that only would only amount to a “cut” of 2.4 percent to federal spending. It would barely make a dent in the federal budget deficit for 2013. The U.S. government would still accumulate about as much new debt in fiscal year 2013 as it did in all the years from the inauguration of George Washington to the inauguration of Ronald Reagan combined. Our debt to GDP ratio would continue to soar. The sequester cuts would essentially only be a minor bump on the road to financial oblivion. But if you listen to Barack Obama and his allies, they would have you believe that we are facing a great national crisis because of these impending cuts. They would have you believe that hundreds of thousands of people will lose their jobs and that many government agencies will no longer be able to operate effectively. They would have you believe that “granny won’t get her lunch” and “roofs blown off by Hurricane Sandy won’t get repaired”. Well, if all of that is true, then what in the world would our country look like if we actually cut a trillion dollars from the federal budget this year and started living within our means?
Have you ever known people that are already hundreds of thousands of dollars in debt and yet go out and regularly blow thousands more dollars on wild shopping sprees?
Such debt addicts may be very proud of their new homes, their new cars, their new clothes and all of their fancy electronic gadgets, but it was all purchased with debt. When a “day of reckoning” finally arrives, many debt addicts lose absolutely everything and end up in the street.
That is what America is like today.
Our politicians like to show off all of the stuff that our government is spending money on, but the truth is that we are spending gigantic mountains of money that we simply do not have. We are literally stealing from our kids and our grandkids so that we can continue to enjoy a massively inflated standard of living that we have not earned.
But we can’t stop ourselves. Americans are absolutely addicted to big government. They want a gigantic government that sends out free money to more than 100 million Americans every month, but they absolutely do not want to pay for it. They would rather steal money from their children and their grandchildren to pay for it.
This has got to stop, because we are literally destroying the future of this country.
If Americans really want a massively bloated government that takes care of everyone from the cradle to the grave then they should pay for it.
If Americans don’t want to pay for it, then they should reduce the size of the government to a level where they are willing to pay for it.
But stealing money from future generations of Americans to pay our bills is absolutely disgraceful.
As I talked about in a previous article, we are stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day.
Is there anyone out there that is willing to stand up and defend that kind of theft?
But the vast majority of Americans don’t want to do anything to stop it, because they don’t want to harm “the economy” (i.e. our ridiculously bloated standard of living).
Will the sequester cuts hurt the economy a bit?
Of course.
Government spending cuts always hurt the economy.
If we raised taxes to help pay the bills that the federal government has been racking up, would that hurt the economy?
Of course.
Tax increases always hurt the economy.
But if we continue on the path that we are today, America is doomed.
The U.S. national debt is the biggest single debt in the history of the world. It is now more than 16.6 trillion dollars, and it has gotten more than 23 times larger since Jimmy Carter first entered the White House.
If our politicians suddenly decided to go to a balanced budget today, our debt-fueled “bubble economy” would disappear and we would immediately plunge into a deep economic depression.
Do the American people have the character to be able to handle that kind of an “adjustment” to our standard of living?
Of course not.
That is why so many of our politicians are scared to death of doing anything about the debt.
And even these small sequester “cuts” are freaking everyone out. Many of our politicians and many in the mainstream media are openly declaring that “the sky is falling”. Just check out the following short excerpt from a recent New York Times article…
The owner of a Missouri smokehouse that makes beef jerky is worried about a slowdown in food safety inspections. A Montana school district is drawing up a list of teachers who could face layoffs. Officials at an Arizona border station fear that lines to cross the border could lengthen. And if Olympic National Park in Washington cannot hire enough workers to plow backcountry trails, they may stay closed until the snow melts in July.
But that is nothing compared to what others are saying. CNN is declaring that if the sequester cuts happen, “granny won’t get her lunch” and “roofs blown off by Hurricane Sandy won’t get repaired”.
And check out these ominous warnings from Barack Obama about what will happen if the sequester cuts go into effect…
“Emergency responders like the ones who are here today — their ability to help communities respond to and recover from disasters will be degraded. Border Patrol agents will see their hours reduced. FBI agents will be furloughed. Federal prosecutors will have to close cases and let criminals go. Air traffic controllers and airport security will see cutbacks, which means more delays at airports across the country. Thousands of teachers and educators will be laid off. Tens of thousands of parents will have to scramble to find childcare for their kids. Hundreds of thousands of Americans will lose access to primary care and preventive care like flu vaccinations and cancer screenings.”
The Obama administration has even decided to release hundreds of illegal immigrants in anticipation of the cuts…
Immigration and Customs Enforcement officials have released “several hundred” immigrants from deportation centers across the country, saying the move is an effort to cut costs ahead of budget cuts due to hit later this week.
Announcing the news Tuesday, ICE officials said that the immigrants were released under supervision and continue to face deportation. After reviewing hundreds of cases, those released were considered low-risk and “noncriminal,” officials said.
The claims about the sequester cuts just seem to get more ridiculous with each passing day. Homeland Security Secretary Janet Napolitano is warning that the cuts will make the U.S. more vulnerable to terrorist attacks, and Obama recently decided not to send an aircraft carrier to the Persian Gulf because of “budget concerns“.
Apparently he sees no problem with using the U.S. military to score political points.
And Federal Reserve Chairman Ben Bernanke says that the budget cuts will result in “less actual deficit reduction in the short run”.
Really?
How stupid do they think we all are?
Yes, the sequester cuts will have an impact on the economy, but they won’t cause the sky to fall.
The following is what the CBO says the economic impact of the cuts is likely to be…
The Congressional Budget Office estimates the cuts will cost 750,000 jobs and hit growth by 0.6 percentage points, assuming the cuts remain in effect for the remainder of the fiscal year. Some economists expect a slightly bigger impact.
Remember, these are actually very small cuts.
In fact, according to U.S. Representative Lynn Jenkins, the U.S. government will actually be spending more money in 2013 than it did in 2012 even if the sequester cuts go into effect…
“There’s a fact that says we are going to take in more money this fiscal year than we have ever taken in before,” Jenkins said. “The budget this year, we will spend more money this year than we spent last year even if the sequester goes into effect. We will spend more money even if the sequester goes into effect.”
So why is everyone whining and crying over such a very small amount of money?
If you want to get upset about something, why not get upset about things that are increasing our debt by trillions of dollars?
For example, according to a Government Accountability Office report that was just released, Obamacare is going to cause the federal debt to rise by $6.2 trillion.
Why aren’t more people getting upset over that?
Sadly, it is because America is a debt addict. Most Americans don’t really care much when federal spending skyrockets out of control, but if anyone tries to slow down the spending a little bit they throw hissy fits.
And please don’t tell me that “the big government Republicans” are much better than “the big government Democrats” on budget issues. The Republicans have caved in and have gone along with all of this wild spending every single time.
On March 27th, they will have another opportunity to do something. That is when the current continuing resolution expires.
At that time, the Republicans could refuse to pass anything but a balanced budget.
Or they could at least refuse to pass anything except a budget that would cut the federal budget deficit in half.
But they won’t do anything once again. They will cave in and go along with the status quo because they are cowards.
So we will continue to rip off future generations to fuel our current bloated standard of living.
Thomas Jefferson understood that government borrowing is theft from future generations. He once made the following statement….
And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
Shame on you Democrats.
Shame on you Republicans.
Shame on you America.
You are destroying the future of America for your own selfish reasons.
If future generations get the chance, they will look back on what you did to them and they will curse you for it.
For much more on our exploding national debt, please see the following article: “55 Facts About The Debt And U.S. Government Finances That Every American Voter Should Know“.
Not that living within our means would be easy.
Like I said, it would mean a deep economic depression, and it would also likely mean a tremendous amount of societal chaos.
Even now, while we are still living in the boom times, things are really starting to get crazy out there. Just check out what is going on in Oakland…
Oakland’s crime problems have gotten so bad that some people aren’t even bothering to call the cops anymore; instead, they’re trying to solve and prevent crimes themselves.
KPIX 5 cameras caught up with a half dozen neighbors in East Oakland’s Arcadia Park neighborhood Monday as they walked the streets on the lookout for crime. The vigilance has never seemed more necessary than now; 25 homes in the neighborhood have been burglarized over the last two months alone.
In a neighborhood that has started to feel like the wild west, people have even started posting “wanted” signs.
“You have to walk around in your house with a gun to feel safe here,” said Alaska Tarvins of the Arcadia Park Board of Directors.
If this is how bad things are now, how bad will they be when a day of reckoning for our economy arrives?
And a day of reckoning is coming.
Our politicians can try to keep kicking the can down the road for as long as they can, but eventually time will run out. Just take a look at what is happening in Greece and Spain. Meanwhile, all of this can kicking is just making the eventual crisis even worse.
We can borrow our way to prosperity for a while, but in the end there is always a very bitter price to pay for doing so.
I would love to tell you that there is a chance that all of this will be turned around, but the truth is that all of this whining and crying about the sequester shows that America is doomed.
I hope that you are getting ready.
 Is the U.S. economy about to experience a major downturn? Unfortunately, there are a whole bunch of signs that economic activity in the United States is really slowing down right now. Freight volumes and freight expenditures are way down, consumer confidence has declined sharply, major retail chains all over America are closing hundreds of stores, and the “sequester” threatens to give the American people their first significant opportunity to experience what “austerity” tastes like. Gas prices are going up rapidly, corporate insiders are dumping massive amounts of stock and there are high profile corporate bankruptcies in the news almost every single day now. In many ways, what we are going through right now feels very similar to 2008 before the crash happened. Back then the warning signs of economic trouble were very obvious, but our politicians and the mainstream media insisted that everything was just fine, and the stock market was very much detached from reality. When the stock market did finally catch up with reality, it happened very, very rapidly. Sadly, most people do not appear to have learned any lessons from the crisis of 2008. Americans continue to rack up staggering amounts of debt, and Wall Street is more reckless than ever. As a society, we seem to have concluded that 2008 was just a temporary malfunction rather than an indication that our entire system was fundamentally flawed. In the end, we will pay a great price for our overconfidence and our recklessness.
So what will the rest of 2013 bring?
Hopefully the economy will remain stable for as long as possible, but right now things do not look particularly promising.
The following are 20 signs that the U.S. economy is heading for big trouble in the months ahead…
#1 Freight shipment volumes have hit their lowest level in two years, and freight expenditures have gone negative for the first time since the last recession.
#2 The average price of a gallon of gasoline has risen by more than 50 cents over the past two months. This is making things tougher on our economy, because nearly every form of economic activity involves moving people or goods around.
#3 Reader’s Digest, once one of the most popular magazines in the world, has filed for bankruptcy.
#4 Atlantic City’s newest casino, Revel, has just filed for bankruptcy. It had been hoped that Revel would help lead a turnaround for Atlantic City.
#5 A state-appointed review board has determined that there is “no satisfactory plan” to solve Detroit’s financial emergency, and many believe that bankruptcy is imminent. If Detroit does declare bankruptcy, it will be the largest municipal bankruptcy in U.S. history.
#6 David Gallagher, the CEO of Town Sports International, recently said that his company is struggling right now because consumers simply do not have as much disposable income anymore…
“As we moved into January membership trends were tracking to expectations in the first half of the month, but fell off track and did not meet our expectations in the second half of the month. We believe the driver of this was the rapid decline in consumer sentiment that has been reported and is connected to the reduction in net pay consumers earn given the changes in tax rates that went into effect in January.“
#7 According to the Conference Board, consumer confidence in the U.S. has hit its lowest level in more than a year.
#8 Sales of the Apple iPhone have been slower than projected, and as a result Chinese manufacturing giant FoxConn has instituted a hiring freeze. The following is from a CNET report that was posted on Wednesday…
The Financial Times noted that it was the first time since a 2009 downturn that the company opted to halt hiring in all of its facilities across the country. The publication talked to multiple recruiters.
The actions taken by Foxconn fuel the concern over the perceived weakened demand for the iPhone 5 and slumping sentiment around Apple in general, with production activity a leading indicator of interest in the product.
#9 In 2012, global cell phone sales posted their first decline since the end of the last recession.
#10 We appear to be in the midst of a “retail apocalypse“. It is being projected that Sears, J.C. Penney, Best Buy and RadioShack will also close hundreds of stores by the end of 2013.
#11 An internal memo authored by a Wal-Mart executive that was recently leaked to the press said that February sales were a “total disaster” and that the beginning of February was the “worst start to a month I have seen in my ~7 years with the company.”
#12 If Congress does not do anything and “sequestration” goes into effect on March 1st, the Pentagon says that approximately 800,000 civilian employees will be facing mandatory furloughs.
#13 Barack Obama is admitting that the “sequester” could have a crippling impact on the U.S. economy. The following is from a recent CNBC article…
Obama cautioned that if the $85 billion in immediate cuts — known as the sequester — occur, the full range of government would feel the effects. Among those he listed: furloughed FBI agents, reductions in spending for communities to pay police and fire personnel and teachers, and decreased ability to respond to threats around the world.
He said the consequences would be felt across the economy.
“People will lose their jobs,” he said. “The unemployment rate might tick up again.”
#14 If the “sequester” is allowed to go into effect, the CBO is projecting that it will cause U.S. GDP growth to go down by at least 0.6 percent and that it will “reduce job growth by 750,000 jobs“.
#15 According to a recent Gallup survey, 65 percent of all Americans believe that 2013 will be a year of “economic difficulty“, and 50 percent of all Americans believe that the “best days” of America are now in the past.
#16 U.S. GDP actually contracted at an annual rate of 0.1 percent during the fourth quarter of 2012. This was the first GDP contraction that the official numbers have shown in more than three years.
#17 For the entire year of 2012, U.S. GDP growth was only about 1.5 percent. According to Art Cashin, every time GDP growth has fallen this low for an entire year, the U.S. economy has always ended up going into a recession.
#18 The global economy overall is really starting to slow down…
The world’s richest countries saw their economies contract for the first time in almost four years during the final three months of 2012, the Organisation for Economic Co-operation and Development said.
The Paris-based thinktank said gross domestic product across its 34 member states fell by 0.2% – breaking a period of rising activity stretching back to a 2.3% slump in output in the first quarter of 2009.
All the major economies of the OECD – the US, Japan, Germany, France, Italy and the UK – have already reported falls in output at the end of 2012, with the thinktank noting that the steepest declines had been seen in the European Union, where GDP fell by 0.5%. Canada is the only member of the G7 currently on course to register an increase in national output.
#19 Corporate insiders are dumping enormous amounts of stock right now. Do they know something that we don’t?
#20 Even some of the biggest names on Wall Street are warning that we are heading for an economic collapse. For example, Seth Klarman, one of the most respected investors on Wall Street, said in his year-end letter that the collapse of the U.S. financial system could happen at any time…
“Investing today may well be harder than it has been at any time in our three decades of existence,” writes Seth Klarman in his year-end letter. The Fed’s “relentless interventions and manipulations” have left few purchase targets for Baupost, he laments. “(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors.”
So what do you think is going to happen to the U.S. economy in the months ahead?
Please feel free to express your opinion by leaving a comment below…
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30 Facts About The Coming Water Crisis That Will Change The Lives Of Every Person On The Planet
The U.S. intelligence community understands what is happening. According to one shocking government report that was released last year, the global need for water will exceed the global supply of water by 40 percent by the year 2030…
Oh, but our scientists will find a solution to our problems long before then, won’t they?
But what if they don’t?
Most Americans tend to think of a “water crisis” as something that happens in very dry places such as Africa or the Middle East, but the truth is that almost the entire western half of the United States is historically a very dry place. The western U.S. has been hit very hard by drought in recent years, and many communities are on the verge of having to make some very hard decisions. For example, just look at what is happening to Lake Mead. Scientists are projecting that Lake Mead has a 50 percent chance of running dry by the year 2025. If that happens, it will mean the end of Las Vegas as we know it. But the problems will not be limited just to Las Vegas. The truth is that if Lake Mead runs dry, it will be a major disaster for that entire region of the country. This was explained in a recent article by Alex Daley…
Are you starting to get an idea of just how serious this all is?
But it is not just our lakes and our rivers that are going dry.
We are also depleting our groundwater at a very frightening pace as a recent Science Daily article discussed…
In the United States we have massive underground aquifers that have allowed our nation to be the breadbasket of the world. But once the water from those aquifers is gone, it is gone for good. That is why what is happening to the Ogallala Aquifer is so alarming. The Ogallala Aquifer is one of the largest sources of fresh water in the world, and U.S. farmers use water from it to irrigate more than 15 million acres of crops each year. The Ogallala Aquifer covers more than 100,000 square miles and it sits underneath the states of Texas, New Mexico, Oklahoma, Colorado, Kansas, Nebraska, Wyoming and South Dakota. Most Americans have never even heard of it, but it is absolutely crucial to our way of life. Sadly, it is being drained at a rate that is almost unimaginable.
The following are some facts about the Ogallala Aquifer and the growing water crisis that we are facing in the United States. A number of these facts were taken from one of my previous articles. I think that you will agree that many of these facts are quite alarming…
1. The Ogallala Aquifer is being drained at a rate of approximately 800 gallons per minute.
2. According to the U.S. Geological Survey, “a volume equivalent to two-thirds of the water in Lake Erie” has been permanently drained from the Ogallala Aquifer since 1940.
3. Decades ago, the Ogallala Aquifer had an average depth of approximately 240 feet, but today the average depth is just 80 feet. In some areas of Texas, the water is gone completely.
4. Scientists are warning that nothing can be done to stop the depletion of the Ogallala Aquifer. The ominous words of David Brauer of the Ogallala Research Service should alarm us all…
5. According to a recent National Geographic article, the average depletion rate of the Ogallala Aquifer is picking up speed….
6. According to the U.S. National Academy of Sciences, the U.S. interior west is now the driest that it has been in 500 years.
7. Wildfires have burned millions of acres of vegetation in the central part of the United States in recent years. For example, wildfires burned an astounding 3.6 million acres in the state of Texas alone during 2011. This helps set the stage for huge dust storms in the future.
8. Unfortunately, scientists tell us that it would be normal for extremely dry conditions to persist in parts of western North America for decades. The following is from an article in the Vancouver Sun…
9. Experts tell us that U.S. water bills are likely to soar in the coming years. It is being projected that repairing and expanding our decaying drinking water infrastructure will cost more than one trillion dollars over the next 25 years, and as a result our water bills will likely approximately triple over that time period.
10. Right now, the United States uses approximately 148 trillion gallons of fresh water a year, and there is no way that is sustainable in the long run.
11. According to a U.S. government report, 36 states are already facing water shortages or will be facing water shortages within the next few years.
12. Lake Mead supplies about 85 percent of the water to Las Vegas, and since 1998 the level of water in Lake Mead has dropped by about 5.6 trillion gallons.
13. It has been estimated that the state of California only has a 20 year supply of fresh water left.
14. It has been estimated that the state of New Mexico only has a 10 year supply of fresh water left.
15. Approximately 40 percent of all rivers in the United States and approximately 46 percent of all lakes in the United States have become so polluted that they are are no longer fit for human use.
The 1,450 mile long Colorado River is a good example of what we have done to our precious water supplies. It is probably the most important body of water in the southwestern United States, and it is rapidly dying.
The following is an excerpt from an outstanding article by Jonathan Waterman about how the once mighty Colorado River is rapidly drying up…
But of course North America is in far better shape when it comes to fresh water than the rest of the world is.
In fact, in many areas of the world today water has already become the most important issue.
The following are some incredible facts about the global water crisis that is getting even worse with each passing day…
1. Total global water use has quadrupled over the past 100 years, and it is now increasing faster than it ever has been before.
2. Today, there are 1.6 billion people that live in areas of the globe that are considered to be “water-stressed”, and it is being projected that two-thirds of the entire population of the globe will be experiencing “water-stressed” conditions by the year 2025.
3. According to USAID, one-third of the people on earth will be facing “severe” or “chronic” water shortages by the year 2025.
4. Once upon a time, the Aral Sea was the 4th largest freshwater lake in the entire world. At this point, it less than 10 percent the size that it used to be, and it is being projected that it will dry up completely by the year 2020.
5. If you can believe it, the flow of water along the Jordan River is down to only 2 percent of its historic rate.
6. It is being projected that the demand for water in China will exceed the supply by 25 percent by the year 2030.
7. According to the United Nations, the world is going to need at least 30 percent more fresh water by the year 2030.
8. Sadly, it is estimated that approximately 40 percent of the children living in Africa and India have had their growth stunted due to unclean water and malnutrition.
9. Of the 60 million people added to the cities of the world each year, the vast majority of them live in deeply impoverished areas that have no sanitation facilities whatsoever.
10. It has been estimated that 75 percent of all surface water in India has been heavily contaminated by human or agricultural waste.
11. Sadly, according to one UN study on sanitation, far more people in India have access to a cell phone than to a toilet.
12. Every 8 seconds, somewhere in the world a child dies from drinking dirty water.
13. Due to a lack of water, Saudi Arabia has given up on trying to grow wheat and will be 100 percent dependent on wheat imports by the year 2016.
14. Each year in northern China, the water table drops by an average of about one meter due to severe drought and overpumping, and the size of the desert increases by an area equivalent to the state of Rhode Island.
15. In China, 80 percent of the major rivers have become so horribly polluted that they do not support any aquatic life at all at this point.
So is there any hope that the coming global water crisis can be averted?
If not, what can we do to prepare?
Please feel free to post a comment with your thoughts below…