The death of the dollar is coming, and it will probably be China that pulls the trigger. What you are about to read is understood by only a very small fraction of all Americans. Right now, the U.S. dollar is the de facto reserve currency of the planet. Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars. More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it. As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world. Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.
As I mentioned above, nations all over the globe use U.S. dollars to trade with one another. This has created tremendous demand for U.S. dollars and has kept the value of the dollar up. It also means that Americans can import things that they need much more inexpensively than they otherwise would be able to.
The largest exporting nations such as Saudi Arabia (oil) and China (cheap plastic trinkets at Wal-Mart) end up with massive piles of U.S. dollars…
Instead of just sitting on all of that cash, these exporting nations often reinvest much of that cash into low risk securities that can be rapidly turned back into dollars if necessary. For a very long time, U.S. Treasury bonds have been considered to be the perfect way to do this. This has created tremendous demand for U.S. government debt and has helped keep interest rates super low. So every year, massive amounts of money that gets sent out of the country ends up being loaned back to the U.S. Treasury at super low interest rates…
And it has been a very good thing for the U.S. economy that the federal government has been able to borrow money so cheaply, because the interest rate on 10 year U.S. Treasuries affects thousands upon thousands of other interest rates throughout our financial system. For example, as the rate on 10 year U.S. Treasuries has risen in recent months, so have the rates on U.S. home mortgages.
Our entire way of life in the United States depends upon this game continuing. We must have the rest of the world use our currency and loan it back to us at ultra low interest rates. At this point we have painted ourselves into a corner by accumulating so much debt. We simply cannot afford to have rates rise significantly.
For example, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has been much higher than that at various times in the past), we would be paying more than a trillion dollars a year just in interest on the national debt.
But it wouldn’t be just the federal government that would suffer. Just consider what higher rates would do to the real estate market.
About a year ago, the rate on 30 year mortgages was sitting at 3.31 percent. The monthly payment on a 30 year, $300,000 mortgage at that rate is $1315.52.
If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage would be $2201.29.
Does 8 percent sound crazy to you?
It shouldn’t. 8 percent was considered to be normal back in the year 2000.
Are you starting to get the picture?
We need other countries to use our dollars and buy our debt so that we can have super low interest rates and so that we can afford to buy lots of cheap stuff from them.
Unfortunately, the truly bizarre behavior of the Federal Reserve and the U.S. government over the past several years is causing the rest of the world to lose faith in our currency. In particular, China is leading the call for a “de-Americanized” world. The following is from a recent article posted on the website of France 24…
For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback’s role as the default global reserve unit.
But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China’s official Xinhua news agency called for a “de-Americanised” world.
It also urged the creation of a “new international reserve currency… to replace the dominant US dollar”.
So why should the rest of the planet listen to China?
Well, China now accounts for more global trade than anyone else does, including the United States.
China is also now the number one importer of oil in the world.
At this point, China is even importing more oil from Saudi Arabia than the United States is.
China now has an enormous amount of economic power globally, and the Chinese want the rest of the planet to start using less U.S. dollars and to start using more of their own currency. The following is from a recent article in the Vancouver Sun…
Three years after China allowed the yuan to start trading in Hong Kong’s offshore market, banks and investors around the world are positioning themselves to get involved in what Nomura Holdings Inc. calls the biggest revolution in the $5.3 trillion currency market since the creation of the euro in 1999.
And over the past few years we have seen the global use of the yuan rise dramatically…
International use of the yuan is increasing as the world’s second-largest economy opens up its capital markets. In the first nine months of this year, about 17 percent of China’s global trade was settled in the currency, compared with less than one percent in 2009, according to Deutsche Bank AG.
Of course the U.S. dollar is still king for now, but thanks to a whole host of recent international currency agreements this status is slipping. For example, China just recently signed a major currency agreement with the European Central Bank…
The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
“It’s a way of promoting European and Chinese trade, but not doing it with the U.S. dollar,” said Brooks. “It’s a bit like cutting out the middleman, all of a sudden there’s potentially no U.S. dollar risk.”
And as I have written about previously, we have seen a bunch of other similar agreements being signed all over the planet in recent years…
1. China and Germany (See Here)
2. China and Russia (See Here)
3. China and Brazil (See Here)
4. China and Australia (See Here)
5. China and Japan (See Here)
6. India and Japan (See Here)
7. Iran and Russia (See Here)
8. China and Chile (See Here)
9. China and the United Arab Emirates (See Here)
10. China, Brazil, Russia, India and South Africa (See Here)
But do you hear about any of this on the mainstream news?
Of course not.
They would rather focus on the latest celebrity scandal.
Right now, the global move away from the U.S. dollar is slow but steady.
At some point, some trigger event will likely cause it to become a stampede.
When that happens, demand for U.S. dollars and U.S. debt will disintegrate and interest rates will absolutely skyrocket.
And if interest rates skyrocket that will throw the entire U.S. financial system into chaos. At the moment, there are about 441 trillion dollars worth of interest rate derivatives sitting out there. It is a financial time bomb unlike anything the world has ever seen before.
There are four “too big to fail” banks in the United States that each have more than 40 trillion dollars worth of total exposure to derivatives. The largest chunk of those derivatives is made up of interest rate derivatives. In case you were wondering , those four banks are JPMorgan Chase, Citibank, Bank of America and Goldman Sachs.
A huge upward surge in interest rates would absolutely devastate those banks and cause a financial crisis that would make 2008 look like a Sunday picnic.
Right now, the leader in global trade seems content to use U.S. dollars for most of their international transactions. China also seems content to hold more than a trillion dollars of U.S. government debt.
If that suddenly changes someday, the consequences for the U.S. economy will be absolutely catastrophic and every single American will feel the pain.
The standard of living that all of us are enjoying today depends largely upon China. They can bring down the hammer at any moment and they know it.
You can see it coming, can’t you? The yield on 10 year U.S. Treasuries is skyrocketing, the S&P 500 has been down for 9 of the last 11 trading days and troubling economic news is pouring in from all over the planet. The much anticipated “financial correction” is rapidly approaching, and investors are starting to race for the exits. We have not seen so many financial trouble signs all come together at one time like this since just prior to the last major financial crisis. It is almost as if a “perfect storm” is brewing, and a lot of the “smart money” has already gotten out of stocks and bonds. Could it be possible that we are heading toward another nightmarish financial crisis? Could we see a repeat of 2008 or potentially even something worse? Of course a lot of people believe that we will never see another major financial crisis like we experienced in 2008 ever again. A lot of people think that this type of “doom and gloom” talk is foolish. It is those kinds of people that did not see the last financial crash coming and that are choosing not to prepare for the next one even though the warning signs are exceedingly clear. Let us hope for the best, but let us also prepare for the worst, and right now things do not look good at all. The following are 18 signs that global financial markets are entering a horrifying death spiral…
#1 The yield on 10 year U.S. Treasuries has risen for 5 of the past 6 days, and it briefly touched the 2.90% level on Monday.
#2 Rapidly rising interest rates are spooking investors and causing them to pull money out of bonds at a very rapid pace…
Investors have yanked nearly $20 billion from bond mutual funds and exchange traded funds so far in August. That’s the fourth highest pullback ever, according to TrimTabs data. In June, investors took out $69.1 billion — the highest on record.
#3 The sell-off of U.S. Treasuries is being led by foreigners. In particular, China and Japan have been particularly aggressive in selling off bonds…
China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus, with data showing they accounted for almost all of a record $40.8 billion of net foreign selling of Treasuries.
The sales were part of $66.9 billion of net sales by foreigners of long-term U.S. securities in June, a fifth straight month of outflows and the largest since August 2007, U.S. Treasury Department data showed on Thursday.
China, the largest foreign creditor, reduced its Treasury holdings to $1.2758 trillion, and Japan trimmed its holdings for a third straight month to $1.0834 trillion. Combined, they accounted for about $40 billion in net Treasury outflows.
#4 Thanks to rapidly rising bond yields, some of the largest exchange-traded bond funds are getting absolutely hammered right now…
• The $18 billion iShares iBoxx $ Investment Grade Corporate Bond fund (ticker: LQD) has fallen 7.94% since May 2, according to S&P Capital IQ. That’s including reinvested interest from the fund’s bond holdings.
• The 3.7 billion iShares Barclays 20+ Year Treasury Bond (TLT) has plunged 15.9% the same period. Longer-term bonds typically get hit harder when rates rise than shorter-term bonds. For example, the iShares Barclays 3-7 Year Treasury Bond fund (IEI) has fallen 3.2% since May 2.
• PowerShares Emerging Markets Sovereign Debt (PCY), which invests in government bonds issued in developing countries, has fallen 12.7%. The fund has $1.8 billion in assets.
#5 In recent weeks we have witnessed the largest cluster of Hindenburg Omens that we have seen since prior to the last financial crisis.
#6 George Soros has bet a tremendous amount of money that the S&P 500 is going to be heading down.
#7 At this point, the S&P 500 has fallen for 9 out of the last 11 trading days.
#8 Margin debt has spiked to extremely dangerous levels. This is a pattern that we also saw just before the last financial crash and just before the dotcom bubble burst…
The exuberant mood comes as margin debt on Wall Street hovers near $377bn, just below its all-time high and well above peaks before the dotcom crash and the Lehman crisis.
“Investors have rarely been more levered than today,” said Deutsche Bank, warning that the spike in margin debt is a “red flag” and should be watched closely.
#9 The growth rate of new commercial bank loans and leases is now the slowest that it has been since the end of the last financial crisis.
#10 According to a shocking new report, Fannie Mae and Freddie Mac are masking “billions of dollars” in losses. Will they need to be bailed out again just like they were during the last financial crisis?
#11 Wal-Mart reported very disappointing sales numbers for the second quarter. Sales at stores open at least a year were down 0.3%. This is a continuation of a trend that has been building for years.
#12 U.S. consumer bankruptcies just experienced their largest quarterly increase in three years.
#13 The velocity of money in the United States has hit another stunning new low.
#14 The massive civil unrest in Egypt threatens to disrupt the steady flow of oil out of the Middle East…
After last week’s bloody crackdown by the Egyptian army, fears of a disruption of oil supplies to the West have boosted the oil price. Brent crude prices were propelled to a four-month high of $111.23 on Thursday. If the turmoil gets worse – or unrest spreads to other countries – the risk premium currently factored into the price of crude is likely to increase further.
#15 European stocks just experienced their biggest decline in six weeks.
#16 The Japanese national debt recently crossed the quadrillion yen mark, and many are expecting the Japanese financial system to start melting down at any time.
#17 In Indonesia, the stock market is “cratering“.
#18 In India, the yield on their 10 year government bonds has skyrocketed from 7.1 percent in May to 9.25 percent now.
As the coming months unfold, keep a close eye on the “too big to fail” banks both in Europe and in the United States. When the next great financial crisis strikes, they will play a starring role once again. They have been incredibly reckless, and as James Rickards told Greg Hunter during an interview the other day, we are in much worse shape to deal with a major banking crisis than we were back in 2008…
What’s going to cause the next crisis? Rickards says, “The problem in 2008 was too-big-to-fail banks. Well, those banks are now bigger. Their derivative books are bigger. In other words, everything that was wrong in 2008 is worse today.” Rickards goes on to warn, “The last time, in 2008 when the crisis started, the Fed’s balance sheet was $800 billion. Today, the Fed’s balance sheet is $3.3 trillion and increasing at $1 trillion a year.” Rickards contends, “You’re going to have a banking crisis worse than the last one because the banking system is bigger without the resources because the Fed is tapped out.” As far as the Fed ending the money printing, Rickards predicts, “My view is they won’t. The economy is fundamentally weak. We have 50 million on food stamps, 24 million unemployed and 11 million on disability, and all these numbers are going up.”
We never even came close to recovering from the last financial crisis and the last recession.
Now the next major wave of the economic collapse is coming up quickly.
I hope that you are taking this time to prepare for the approaching storm, because it is going to be very painful.
What is America going to look like when the middle class is dead? Once upon a time, the United States has the largest and most vibrant middle class in the history of the world. When I was growing up, it seemed like almost everyone was “middle class” and it was very rare to hear of someone that was out of work. Of course life wasn’t perfect, but most families owned a home, most families had more than one vehicle, and most families could afford nice vacations and save for retirement at the same time. Sadly, things have dramatically changed in America since that time. There just aren’t as many “middle class jobs” as there used to be. In fact, just six years ago there were about six million more full-time jobs in our economy than there are right now. Those jobs are being replaced by part-time jobs and temp jobs. The number one employer in America today is Wal-Mart and the number two employer in America today is a temp agency (Kelly Services). But you can’t support a family on those kinds of jobs. We live at a time when incomes are going down but the cost of living just keeps going up. As a result, the middle class in America is being absolutely shredded and the ranks of the poor are steadily growing. The following are 44 facts about the death of the middle class that every American should know…
1. According to one recent survey, “four out of five U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives”.
2. The growth rate of real disposable personal income is the lowest that it has been in decades.
3. Median household income (adjusted for inflation) has fallen by 7.8 percent since the year 2000.
4. According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.
5. The home ownership rate in the United States is the lowest that it has been in 18 years.
6. It is more expensive to rent a home in America than ever before. In fact, median asking rent for vacant rental units just hit a brand new all-time record high.
7. According to one recent survey, 76 percent of all Americans are living paycheck to paycheck.
8. The U.S. economy actually lost 240,000 full-time jobs last month, and the number of full-time workers in the United States is now about 6 million below the old record that was set back in 2007.
9. The largest employer in the United States right now is Wal-Mart. The second largest employer in the United States right now is a temp agency (Kelly Services).
10. One out of every ten jobs in the United States is now filled through a temp agency.
11. According to the Social Security Administration, 40 percent of all workers in the United States make less than $20,000 a year.
12. The ratio of wages and salaries to GDP is near an all-time record low.
13. The U.S. economy continues to trade good paying jobs for low paying jobs. 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.
14. Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.
15. At this point, one out of every four American workers has a job that pays $10 an hour or less.
16. According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 declined by 27 percent after you account for inflation.
17. In the year 2000, about 17 million Americans were employed in manufacturing. Today, only about 12 million Americans are employed in manufacturing.
18. The United States has lost more than 56,000 manufacturing facilities since 2001.
19. The average number of hours worked per employed person per year has fallen by about 100 since the year 2000.
20. Back in the year 2000, more than 64 percent of all working age Americans had a job. Today, only 58.7 percent of all working age Americans have a job.
21. When you total up all working age Americans that do not have a job, it comes to more than 100 million.
22. The average duration of unemployment in the United States is nearly three times as long as it was back in the year 2000.
23. The percentage of Americans that are self-employed has steadily declined over the past decade and is now at an all-time low.
24. Right now there are 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.
25. In 1989, the debt to income ratio of the average American family was about 58 percent. Today it is up to 154 percent.
26. Total U.S. household debt grew from just 1.4 trillion dollars in 1980 to a whopping 13.7 trillion dollars in 2007. This played a huge role in the financial crisis of 2008, and the problem still has not been solved.
27. The total amount of student loan debt in the United States recently surpassed the one trillion dollar mark.
28. Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
29. Back in the year 2000, the mortgage delinquency rate was about 2 percent. Today, it is nearly 10 percent.
30. Consumer debt in the United States has risen by a whopping 1700% since 1971, and 46% of all Americans carry a credit card balance from month to month.
31. In 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 55.1 percent are covered by employment-based health insurance.
32. One study discovered that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt, and according to a report published in The American Journal of Medicine medical bills are a major factor in more than 60 percent of all personal bankruptcies in the United States.
33. Each year, the average American must work 107 days just to make enough money to pay local, state and federal taxes.
34. Today, approximately 46.2 million Americans are living in poverty.
35. The number of Americans living in poverty has increased by more than 15 million since the year 2000.
36. Families that have a head of household under the age of 30 have a poverty rate of 37 percent.
37. At this point, approximately 25 million American adults are living with their parents.
38. In the year 2000, there were only 17 million Americans on food stamps. Today, there are more than 47 million Americans on food stamps.
39. Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, about one out of every 6.5 Americans is on food stamps.
40. Right now, the number of Americans on food stamps exceeds the entire population of the nation of Spain.
41. According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”
42. 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 our history. That number has risen by 57 percent since the 2006-2007 school year.
43. According to U.S. Census data, 57 percent of all American children live in a home that is either considered to be “poor” or “low income”.
44. In the year 2000, the ratio of social welfare benefits to salaries and wages was approximately 21 percent. Today, the ratio of social welfare benefits to salaries and wages is approximately 35 percent.
And not only is the middle class being systematically destroyed right now, we are also destroying the bright economic future that our children and our grandchildren were supposed to have by accumulating gigantic mountains of debt in their names. The following is from a recent article by Bill Bonner…
Today, the U.S. lumbers into the future with total debt equal to about 350% of GDP. In Britain and Japan, the total is over 500%. Debt, remember, is the homage that the future pays to the past. It has to be carried, serviced… and paid. It has to be reckoned with… one way or another.
And the cost of carrying debt is going up! Over the last few weeks, interest rates have moved up by about 15% — an astounding increase for the sluggish debt market. How long will it be before long-term borrowing rates are back to “normal”?
At 5% interest, a debt that measures 3.5 times your revenue will cost about one-sixth of your income. Before taxes. After tax, you will have to work about one day a week to keep up with it (to say nothing of paying it off!).
That’s a heavy burden. It is especially disagreeable when someone else ran up the debt. Then you are a debt slave. That is the situation of young people today. They must face their parents’ debt. Even serfs in the Dark Ages had it better. They had to work only one day out of 10 for their lords and masters.
We were handed the keys to the greatest economic machine in the history of the planet and we wrecked it.
As young people realize that their futures have been destroyed, many of them are going to totally lose hope and give in to despair.
And desperate people do desperate things. As our economy continues to crumble, we are going to see crime greatly increase as people do what they feel they need to do in order to survive. In fact, we are already starting to see this happen. Just this week, CNBC reported on the raging epidemic of copper theft that we are seeing all over the nation right now…
Copper is such a hot commodity that thieves are going after the metal anywhere they can find it: an electrical power station in Wichita, Kan., or half a dozen middle-class homes in Morris Township, N.J. Even on a Utah highway construction site, crooks managed to abscond with six miles of copper wire.
Those are just a handful of recent targets across the U.S. in the $1 billion business of copper theft.
“There’s no question the theft has gotten much, much worse,” said Mike Adelizzi, president of the American Supply Association, a nonprofit group representing distributors and suppliers in the plumbing, heating, cooling and industrial pipe industries.
The United States once had the greatest middle class in the history of the world, but now it it dying.
This is causing a tremendous amount of anger and frustration to build in this nation, and when the next major wave of the economic collapse strikes, a lot of that anger and frustration will likely be unleashed.
The American people don’t understand that these problems have taken decades to develop. They just want someone to fix things. They just want things to go back to the way that they used to be.
Unfortunately, the great economic storm that is coming is not going to be averted.
Get ready while you still can. Time is running out.
It is so sad to watch one of America’s greatest cities die a horrible death. Once upon a time, the city of Detroit was a teeming metropolis of 1.8 million people and it had the highest per capita income in the United States. Now it is a rotting, decaying hellhole of about 700,000 people that the rest of the world makes jokes about. On Thursday, we learned that the decision had been made for the city of Detroit to formally file for Chapter 9 bankruptcy. It was going to be the largest municipal bankruptcy in the history of the United States by far, but on Friday it was stopped at least temporarily by an Ingham County judge. She ruled that Detroit’s bankruptcy filing violates the Michigan Constitution because it would result in reduced pension payments for retired workers. She also stated that Detroit’s bankruptcy filing was “also not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy“, and she ordered that a copy of her judgment be sent to Barack Obama. How “honoring the president” has anything to do with the bankruptcy of Detroit is a bit of a mystery, but what that judge has done is ensured that there will be months of legal wrangling ahead over Detroit’s money woes. It will be very interesting to see how all of this plays out. But one thing is for sure – the city of Detroit is flat broke. One of the greatest cities in the history of the world is just a shell of its former self. The following are 25 facts about the fall of Detroit that will leave you shaking your head…
1) At this point, the city of Detroit owes money to more than 100,000 creditors.
2) Detroit is facing $20 billion in debt and unfunded liabilities. That breaks down to more than $25,000 per resident.
3) Back in 1960, the city of Detroit actually had the highest per-capita income in the entire nation.
4) In 1950, there were about 296,000 manufacturing jobs in Detroit. Today, there are less than 27,000.
5) Between December 2000 and December 2010, 48 percent of the manufacturing jobs in the state of Michigan were lost.
6) There are lots of houses available for sale in Detroit right now for $500 or less.
7) At this point, there are approximately 78,000 abandoned homes in the city.
8) About one-third of Detroit’s 140 square miles is either vacant or derelict.
9) An astounding 47 percent of the residents of the city of Detroit are functionally illiterate.
10) Less than half of the residents of Detroit over the age of 16 are working at this point.
11) If you can believe it, 60 percent of all children in the city of Detroit are living in poverty.
12) Detroit was once the fourth-largest city in the United States, but over the past 60 years the population of Detroit has fallen by 63 percent.
13) The city of Detroit is now very heavily dependent on the tax revenue it pulls in from the casinos in the city. Right now, Detroit is bringing in about 11 million dollars a month in tax revenue from the casinos.
14) There are 70 “Superfund” hazardous waste sites in Detroit.
15) 40 percent of the street lights do not work.
16) Only about a third of the ambulances are running.
17) Some ambulances in the city of Detroit have been used for so long that they have more than 250,000 miles on them.
18) Two-thirds of the parks in the city of Detroit have been permanently closed down since 2008.
19) The size of the police force in Detroit has been cut by about 40 percent over the past decade.
20) When you call the police in Detroit, it takes them an average of 58 minutes to respond.
21) Due to budget cutbacks, most police stations in Detroit are now closed to the public for 16 hours a day.
22) The violent crime rate in Detroit is five times higher than the national average.
23) The murder rate in Detroit is 11 times higher than it is in New York City.
24) Today, police solve less than 10 percent of the crimes that are committed in Detroit.
25) Crime has gotten so bad in Detroit that even the police are telling people to “enter Detroit at your own risk“.
It is easy to point fingers and mock Detroit, but the truth is that the rest of America is going down the exact same path that Detroit has gone down.
Detroit just got there first.
All over this country, there are hundreds of state and local governments that are also on the verge of financial ruin…
“Everyone will say, ‘Oh well, it’s Detroit. I thought it was already in bankruptcy,’ ” said Michigan State University economist Eric Scorsone. “But Detroit is not unique. It’s the same in Chicago and New York and San Diego and San Jose. It’s a lot of major cities in this country. They may not be as extreme as Detroit, but a lot of them face the same problems.”
A while back, Meredith Whitney was highly criticized for predicting that there would be a huge wave of municipal defaults in this country. When it didn’t happen, the critics let her have it mercilessly.
But Meredith Whitney was not wrong.
She was just early.
Detroit is only just the beginning. When the next major financial crisis strikes, we are going to see a wave of municipal bankruptcies unlike anything we have ever seen before.
And of course the biggest debt problem of all in this country is the U.S. government. We are going to pay a great price for piling up nearly 17 trillion dollars of debt and over 200 trillion dollars of unfunded liabilities.
All over the nation, our economic infrastructure is being gutted, debt levels are exploding and poverty is spreading. We are consuming far more wealth than we are producing, and our share of global GDP has been declining dramatically.
We have been living way above our means for so long that we think it is “normal”, but an extremely painful “adjustment” is coming and most Americans are not going to know how to handle it.
So don’t laugh at Detroit. The economic pain that Detroit is experiencing will be coming to your area of the country soon enough.
The middle class American worker is in danger of becoming an endangered species. The politicians are not telling you the truth, and the mainstream media is certainly not telling you the truth, but the reality is that there is nothing but bad news on the horizon for workers in the United States. In the old days, when the big corporations that dominate our society did well, that also meant good things for American workers since those corporations would need more of us to work for them. But in the emerging one world economic system that our economy is being merged into, those corporations have other choices now. For instance, the big corporations can now choose to limit the number of “expensive” American workers that they employ by shipping millions of jobs to the other side of the world. And from their perspective, it makes perfect sense. They can make much bigger profits by hiring people on the other side of the planet to work for them for less than a dollar an hour. If they can get good production out of those people, then why should they hire Americans for ten to twenty times as much, plus have to give those Americans health insurance and other benefits? Another major factor in the slow, agonizing death of the American worker is technology. We live during a period when technology is advancing at a pace that is almost unimaginable at the same time that it is steadily becoming cheaper and cheaper. That means that it is going to become easier and easier for companies to replace workers with robots and computers. As I have written about previously, it is being projected that our economy will lose millions of jobs to technology in the coming years. Yes, some of us will still be needed to help build the robots and the computers, but not all of us will. And of course the overall general weakness of the economy is not helping matters either. The American people inherited the greatest economic machine in the history of the world, and we have wrecked it. Decades of very foolish decisions have resulted in the period of steady economic decline that we are experiencing now.
America is simply not the economic powerhouse that it once was. Back in 2001, the U.S. economy accounted for 31.8 percent of global GDP. By 2011, the U.S. economy only accounted for 21.6 percent of global GDP. That is a collapse any way that you want to look at it.
Today, American workers are living in an economy that is rapidly declining, and their jobs are steadily being stolen by robots, computers and foreign workers that live in countries where it is legal to pay slave labor wages. Politicians from both political parties refuse to do anything to stop the bleeding because they think that the status quo is working just great.
So don’t expect things to get better any time soon.
The following are 10 amazing charts that demonstrate the slow, agonizing death of the American worker…
#1 Wages And Salaries As A Percentage Of GDP
As you can see, wages as a percentage of GDP are hovering near an all-time record low. That means that American workers are bringing home a smaller share of the economic pie than ever before.
#2 Average Annual Hours Worked Per Employed Person In The United States
We are an economy that is rapidly trading good paying full-time jobs for low paying part-time jobs. The decline in average annual hours worked that we have witnessed represents the equivalent of losing millions of jobs. There has been an explosion of “the working poor” in the United States, and this trend is probably only going to accelerate in the years to come.
#3 Manufacturing Employment
As you can see, there are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then. The United States has lost more than 56,000 manufacturing facilities since 2001, and yet our politicians stand around and do nothing about it.
#4 Employment-Population Ratio
This is one of my favorite charts. It shows that there has been absolutely no employment recovery at all since the end of the last recession. The percentage of working age Americans that have a job has stayed under 59 percent for 44 months in a row. How much worse will things get when the next major economic downturn strikes?
#5 Labor Force Participation Rate
This is how the Obama administration is getting the “unemployment rate” to magically go down. They are pretending that millions upon millions of Americans simply do not want to work anymore. As you will notice, the decline of the labor force participation rate has accelerated greatly since Barack Obama entered the White House.
#6 Duration Of Unemployment
The average amount of time that it takes an unemployed worker to find a new job has declined slightly, but it is still far above normal historical levels. It is a crying shame that it takes the average unemployed worker two-thirds of a year to find a new job, but this is the new economic reality that we are all living in.
#7 Delinquency Rate On Residential Mortgages
Since there are not enough jobs for all of us, and since our wages are not rising as rapidly as the cost of living is, a whole bunch of us are falling behind on our mortgages. As you can see, the mortgage delinquency rate has only dropped slightly and is still way, way above typical levels.
#8 New Homes Sold
American workers also don’t have enough money to go out and buy new homes either. Yes, new home sales have rebounded slightly this year, but we are nowhere near where we used to be.
#9 Consumer Credit
Millions of American families continue to resort to going into debt in a desperate attempt to make ends meet. After a slight interruption during the last recession, consumer credit once again is growing at a frightening pace.
#10 Self-Employment At A Record Low
Since there aren’t enough jobs for everyone, why aren’t more Americans trying to start their own businesses? Well, the reality of the matter is that the government has made it exceedingly difficult to start your own business today. Taxes, rules, regulations and red tape are choking the life out of millions of small businesses in the United States. As a result, the percentage of self-employed Americans is at a record low.
As all of these long-term trends continue, the middle class will continue to shrink, poverty in America will continue to explode and government dependence will continue to rise.
The numbers don’t lie. Today, the number of Americans on Social Security Disability now exceeds the entire population of Greece, and the number of Americans on food stamps now exceeds the entire population of Spain.
We are in the midst of a horrifying economic collapse, and the next major wave of that collapse is rapidly approaching.
Are you ready?