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Business Debt Delinquencies Are Now Higher Than When Lehman Brothers Collapsed In 2008

Insolvent - Public DomainYou are about to see more very clear evidence that a new economic crisis has already begun.  During economic recoveries, business debt delinquencies generally fall, and during times of economic recession business debt delinquencies generally rise.  In fact, you will see below that business debt delinquencies shot up dramatically just prior to the last two recessions, and the exact same thing is happening again right now.  In 2008, business debt delinquencies increased at a very frightening pace just before Lehman Brothers collapsed, and this was a very clear sign that big trouble was ahead.  Unfortunately for us, in 2016 business debt delinquencies have already shot up above the level they were sitting at just before the collapse of Lehman Brothers, and every time debt delinquencies have ever gotten this high the U.S. economy has always fallen into recession.

In article after article, I have shown that key indicators for the U.S. economy started falling in either late 2014 or at some point during 2015.  Well, business debt delinquencies are another example of this phenomenon.  According to Wolf Richter, business debt delinquencies have shot up an astounding 137 percent since the fourth quarter of 2014…

Delinquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail.

Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion.

And we never see this kind of rise unless the U.S. economy is heading into a recession.  Here is more from Wolf Richter

Note how, in this chart by the Board of Governors of the Fed, delinquencies of C&I loans start rising before recessions (shaded areas). I added the red marks to point out where we stand in relationship to the Lehman moment:

Delinquencies-commercial-industrial-loans-2016-q1

Business loan delinquencies are a leading indicator of big economic trouble.

To me, this couldn’t be any clearer.

Just like the U.S. government and just like U.S. consumers, U.S. businesses are absolutely drowning in debt.

In fact, a report that was just released found that debt at U.S. companies has been growing at a pace that is 50 times faster than the rate that cash has been growing.

Just imagine what it would mean for your family if your debt was growing 50 times faster than your bank account.  Needless to say, this is an extremely troubling development

Well, American companies may just have a mountain’s worth of problems, according to a new report from Andrew Chang and David Tesher of S&P Global Ratings.

“At the same time, the imbalance between cash and debt outstanding we reported on last year has gotten even worse: Debt outstanding increased 50x that of cash in 2015,” wrote Chang and Tesher.

“Total debt rose by roughly $850 billion to $6.6 trillion last year, dwarfing the 1% cash growth ($17 billion).”

And the really bad news is that banks all across the country are starting to tighten credit to businesses.

In other words, they are beginning to become much more reluctant to loan money to businesses because debts are going bad at such an alarming rate.

When the flow of credit to the business community starts to slow down, it is inevitable that the overall economy slows down as well.  It is just basic economics.  So the deterioration of the U.S. economy that we have witnessed so far is just the beginning of a process that is going to take quite a while to play out.

And let us not forget that most of the rest of the world is already is much worse shape than we are.  Most global financial markets are officially in bear market territory right now, and some nations are already experiencing full-blown economic depression.

Now that the early chapters of the “next crisis” are here, most American families find themselves ill-equipped to deal with another major downturn.  In fact, USA Today is reporting that approximately two-thirds of the country is currently living paycheck to paycheck…

Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll, a signal that despite years after the Great Recession, Americans’ finances remain precarious as ever.

These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.

What are these people going to do when they lose their jobs or their businesses go under?

If you have any doubt that the U.S. economy is already in recession mode, just look at this chart over and over.

For months, I have been warning that the same patterns that immediately preceded previous recessions were happening once again, and this rise in debt delinquencies is another striking example of this phenomenon.

This stuff isn’t complicated.  Anyone that is willing to be honest with themselves should be able to see it.  As a society, we have been making very, very bad decisions for a very, very long period of time, and what we are watching unfold right now are the inevitable consequences of those decisions.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

Rail Traffic Depression: 292 Union Pacific Engines Are Sitting In The Arizona Desert Doing Nothing

Union Pacific Engines - Google EarthWe continue to get more evidence that the U.S. economy has entered a major downturn.  Just last week, I wrote about how U.S. GDP growth numbers have been declining for three quarters in a row, and previously I wrote about how corporate defaults have surged to their highest level since the last financial crisis.  Well, now we are getting some very depressing numbers from the rail industry.  As you will see below, U.S. rail traffic was down more than 11 percent from a year ago in April.  That is an absolutely catastrophic number, and the U.S. rail industry is feeling an enormous amount of pain right now.  This also tells us that “the real economy” is really slowing down, because less stuff is being shipped by rail all over the nation.

One of the economic commentators that I have really come to respect is Wolf Richter of WolfStreet.com.  He has a really sharp eye for what is really going on in the economy and in the financial world, and I find myself quoting him more and more as time goes by.  If you have not checked out his site yet, I very much encourage you to do so.

On Wednesday, he posted a very alarming article about what is happening to our rail industry.  The kinds of numbers that we have been seeing recently are the kinds of numbers that we would expect if an economic depression was starting.  The following is an excerpt from that article

Total US rail traffic in April plunged 11.8% from a year ago, the Association of American Railroads reported today. Carloads of bulk commodities such as coal, oil, grains, and chemicals plummeted 16.1% to 944,339 units.

The coal industry is in a horrible condition and cannot compete with US natural gas at current prices. Coal-fired power plants are being retired. Demand for steam coal is plunging. Major US coal miners – even the largest one – are now bankrupt. So in April, carloads of coal plummeted 40% from the already beaten-down levels a year ago.

Because rail traffic is down so dramatically, many operators have large numbers of engines that are just sitting around collecting dust.  In his article, Wolf Richter shared photographs from Google Earth that show some of the 292 Union Pacific engines that are sitting in the middle of the Arizona desert doing absolutely nothing.  The following is one of those photographs…

Union Pacific Engines - Google Earth

As Wolf Richter pointed out, it costs a lot of money for these engines to just sit there doing nothing…

These engines are expensive pieces of equipment. When they just sit there, not pulling trains, they become “overcapacity,” and they get very expensive. Then there are engineers and other personnel who suddenly become unproductive. Some of them have already been laid off or are getting laid off.

All over the world, similar numbers are coming in.  For example, the Baltic Dry Index fell 30 more points on Wednesday after falling 21 on Tuesday.  Global trade is really, really slowing down during the early portion of 2016.  What this means on a practical level is that a lot less stuff is being bought, sold and shipped around the planet.

It is becoming increasingly difficult for authorities to deny that a new global recession has begun, and at this moment we are only in the very early chapters of this new crisis.

Another thing that I watch very closely is the velocity of money.  When an economy is healthy, people feel pretty good about things and money tends to circulate fairly rapidly.  For example, I may buy something from you, then you may buy something from someone else, etc.

But when times get tough, people tend to hold on to their money more tightly, and that is why the velocity of money goes down when recessions hit.  In the chart below, the shaded areas represent recessions, and you can see that the velocity of money has declined during every single recession in the post-World War II era…

M2 Velocity Of Money

During the last recession, the velocity of money declined precipitously, and that makes perfect sense.  But then a funny thing happened.  There was a slight bump up once the recession was over, but then it turned down again and it has kept going down ever since.

In fact, the velocity of money has now dropped to an all-time low.  The velocity of M2 just recently dipped below 1.5 for the first time ever.

This is not a sign of an “economic recovery”.  What this tells us is that our economy is very, very sick.

And we can see evidence of this sickness all around us.  For instance, the Los Angeles Times is reporting that homelessness in Los Angeles increased by 11 percent last year, and this marked the fourth year in a row that homelessness in the city has increased…

Homelessness rose 11% in the city of Los Angeles and 5.7% in the county last year despite an intensive federal push that slashed the county ranks of homeless veterans by nearly a third, according to a report released Wednesday.

The increase marks the fourth consecutive year of rising homelessness in L.A., as local officials struggle to identify funding for billion-dollar plans they approved to solve the nation’s most intractable homeless problem.

Let us also not forget that about half the country is basically flat broke at this point.

Just recently, the Federal Reserve found that 47 percent of all Americans could not pay an unexpected $400 emergency room bill without selling something or borrowing the money from somewhere.

With numbers such as these being reported, how in the world can anyone possibly claim that the U.S. economy is in good shape?

It boggles the mind, and yet there are people out there that would actually have you believe that everything is just fine.

The current occupant of the White House is one of them.

With each passing month, the real economy is getting even worse.  We may not have slipped into a full-blown economic depression just yet, but it is coming.

For now, let us be thankful for whatever remains of our debt-fueled prosperity, because we don’t deserve the massively inflated standard of living that we have been enjoying.

We have been consuming far more than we produce for decades, but it won’t last for much longer.  And when those days are gone for good, we will mourn them bitterly.

The U.S. Economy Officially Joins The Global Economic Slowdown – 1st Quarter GDP Comes In At 0.5%

Slow Down - Public DomainEven the government is admitting that the U.S. economy is slowing down.  On Thursday, we learned that U.S. GDP grew at just a 0.5 percent annual rate during the first quarter of 2016.  This was lower than analysts were anticipating, and it marks the third time in a row that the GDP number has declined compared to the previous quarter.  In other words, GDP growth has been declining for close to a year now, and this lines up perfectly with what I have been saying about how the second half of last year was a turning point that plunged us into the early chapters of a brand new economic crisis.  And as you will see below, the official GDP number is highly manipulated, and the way that it is calculated has been changed numerous times over the years.  So the bad number that is being reported by the government is actually the best case scenario.

Of course many of the “experts” being quoted by the mainstream media are saying that this is just a temporary blip and that good times for the U.S. economy are right around the corner.  For instance, check out this quote from Reuters

“The economy essentially stalled in the first quarter, but that doesn’t mean it is faltering,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “Some of the restraints to growth are dissipating. Growth is likely to accelerate going forward.”

We have been told this same story for years, but the “acceleration” has never materialized.  In fact, Barack Obama is poised to become the only president in U.S. history to never have a single year when the economy grew by more than 3 percent during his presidency.

That is a statistic that is hard to believe, but it is true.

In addition, Louis Woodhill has pointed out that the average rate of U.S. economic growth during the Obama years will be the fourth worst in recorded history…

Assuming 2.67% RGDP growth for 2016, Obama will leave office having produced an average of 1.55% growth. This would place his presidency fourth from the bottom of the list of 39*, above only those of Herbert Hoover (-5.65%), Andrew Johnson (-0.70%) and Theodore Roosevelt (1.41%)

So does anyone out there still believe that there has been an “Obama recovery”?

We also need to add another layer to our analysis.  By now, everyone should realize that the official GDP number is highly manipulated, and the way that GDP is calculated has been changed many, many times over the years.

For example, here is Peter Schiff commenting on changes that were made in 2013

The latest example of this was revealed earlier this week when the Bureau of Economic Analysis (BEA) announced new methods of calculating Gross Domestic Product (GDP) that will immediately make the economy “bigger’ than it used to be. The changes focus heavily on how money spent on research and development (R&D) and the production of “intangible” assets like movies, music, and television programs will be accounted for. Declaring such expenditures to be “investments” will immediately increase U.S. GDP by about three percent. Such an upgrade would immediately increase the theoretic size of the U.S economy and may well lead to the perception of faster growth. In reality these smoke and mirror alterations are no different from changes made to the inflation and unemployment yardsticks that for years have convinced Americans that the economy is better than it actually is.

And the following originally comes from a Bloomberg article which discussed changes that were made in 2015

The way some parts of U.S. gross domestic product are calculated are about to change in the wake of the debate over persistently depressed first-quarter growth.

In a blog post published Friday, the Bureau of Economic Analysis listed a series of alterations it will make in seasonally adjusting data used to calculate economic growth. The changes will be implemented with the release of the initial second-quarter GDP estimate on July 30, the BEA said.

One of the changes that was made last year was intended to artificially boost GDP growth numbers for the first quarter of each year.

So without that artificial boost, what would the real number for the first quarter of 2016 look like?

John Williams of shadowstats.com tracks what the official government numbers would be if honest numbers were actually being used, and according to him U.S. GDP growth has been continuously negative since 2005.

But we certainly can’t have the press report those sorts of things.  If that were the case, then everyone would be talking about the “economic depression” that never seems to end.

Unfortunately, the truth is that we are in the midst of a long-term economic decline, and we can see evidence of this all around us.  For example, on Thursday we also learned that the rate of homeownership in the United States has fallen once again, and it is now hovering just 0.1 percent above the lowest level ever recorded in American history…

After gains in the second half of 2015, the homeownership rate fell to just 63.6 percent, seasonally adjusted, in the first quarter of this year, according to the U.S. Census Bureau. Homeownership hit a high of 69.4 percent in 2004, during one of the biggest housing booms in history. That was also when mortgage lending was arguably at its loosest level in history. The homeownership rate is now just one-tenth of 1 basis point higher than its all-time low in the second quarter of 2015.

For many more numbers that show that the U.S. economy has continued to decline, please see the following articles that I authored earlier this month…

#1 “Economy In Decline: Apple Reports Massive Revenue Decline As iPhone Sales Plummet Dramatically

#2 “In 1 Out Of Every 5 American Families, Nobody Has A Job

#3 “Stories Of Despair From The Forgotten People That The U.S. Economy Has Left Behind

#4 “47 Percent Of Americans Cannot Even Come Up With $400 To Cover An Emergency Room Visit

#5 “Corporations Are Defaulting On Their Debts Like It’s 2008 All Over Again

Now that U.S. GDP growth has been steadily dropping for three quarters in a row, hopefully people will wake up and begin to realize what is happening.

We are entering very hard times, so now is not the time to go out and buy fancy new toys or to go into lots of debt.

Rather, this is a time to tighten our belts, batten down the hatches and prepare for rough seas ahead.

Sadly, most people continue to have blind faith that our politicians and the central bankers will be able to perform some kind of miracle to save us from what is coming.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

In 1 Out Of Every 5 American Families, Nobody Has A Job

Family Silhouette - Public Domain 2If nobody is working in one out of every five U.S. families, then how in the world can the unemployment rate be close to 5 percent as the Obama administration keeps insisting? The truth, of course, is that the U.S. economy is in far worse condition than we are being told. Last week, I discussed the fact that the Federal Reserve has found that 47 percent of all Americans would not be able to come up with $400 for an unexpected visit to the emergency room without borrowing it or selling something. But Barack Obama and his minions never bring up that number. Nor do they ever bring up the fact that 20 percent of all families in America are completely unemployed. The following comes directly from the Bureau of Labor Statistics

In 2015, the share of families with an employed member was 80.3 percent, up by 0.2 percentage point from 2014. The likelihood of having an employed family member rose in 2015 for Black families (from 76.4 percent to 77.7 percent) and for Hispanic families (from 85.9 percent to 86.4 percent). The likelihood for White and Asian families showed little or no change (80.1 percent and 88.6 percent, respectively).

For purposes of this study, families “are classified either as married-couple families or as families maintained by women or men without spouses present” and they include households without children as well as children under the age of 18.

Digging into the numbers, we find that there were a total of 81,410,000 families in America during the 2015 calendar year.

Of that total, 16,060,000 families did not have a single member employed.

So that means that in 19.7 percent of all families in the United States, nobody has a job.

And of course there are lots more families that are “partially employed”. In other words, maybe the wife has a job but the husband does not.

So based on these numbers, it would appear to me that the true rate of unemployment in this country is vastly higher than 5 percent, and John Williams of shadowstats.com agrees with me. According to his calculations, the broadest measure of unemployment in the U.S. would actually be sitting at 22.9 percent if honest numbers were being used.

But let’s not just focus on where we are.

Let’s take a look at where we are going.

According to Challenger, Gray & Christmas, job cut announcements by big companies in the United States were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015, and it appears that the job losses are going to continue to mount as we roll into the second quarter. For instance, late last week Intel announced that it is going to be laying off 12,000 workers

As it navigates its path into the future, Intel, the 47-year-old corporation best known for making microprocessor chips that power personal computers, has announced significant changes to its business.

On Tuesday, Intel’s CEO Brian Krzanich said in a letter to employees that the company over the next year will cut its 107,300-person global workforce by 12,000 people, or 11 percent.

Those are good middle class jobs, and they are exactly the kind of jobs that we cannot afford to be losing.

Meanwhile, the “retail apocalypse” appears to be accelerating once again.

Bloomberg is reporting that teen clothing chain Aeropostale is preparing to file for bankruptcy.  Aeropostale currently operates more than 800 stores across the nation, and it is unclear if any of them will be able to stay open as this process plays out. But of course it isn’t just Aeropostale that has gone bankrupt lately. Here are a few more examples of major retailers that have recently filed for bankruptcy

April 16, 2016: Vestis Retail Group, the operator of sporting goods retailers Eastern Mountain Sports (camping, hiking, skiing, adventure sports), Bob’s Stores (family clothing and shoes), and Sport Chalet (general sporting goods), filed for Chapter 11 bankruptcy. It will close all 56 stores and stop online sales.

In the filing, it blamed the going-out-of-business sales at “certain Sports Authority locations,” plus the weather, which had been too warm, and trouble with switching to a new software platform. It’s owned by private equity firm Versa Capital Management LLC.

April 7, 2016: Pacific Sunwear of California, clothing retailer with nearly 600 stores and derailed ambitions of skate-and-surf cool, filed for Chapter 11 bankruptcy. PE firm Golden Gate Capital, a lender to the company, agreed to convert over 65% of its loan into equity of the reorganized company and add another $20 million in financing. Wells Fargo agreed to provide $100 million of debtor-in-possession financing.

March 2, 2016: Sports Authority filed for Chapter 11 bankruptcy. It said it would close 140 of its 450 stores, including all stores in Texas.

Just because the stock market has been doing well in recent weeks does not mean that the crisis has passed.

In fact, many experts believe that the crisis of 2016 is just getting started.  Albert Edwards of Societe Generale is one of them

But what I do know is when in the last few weeks I have heard that Janet Yellen sees no bubble in the US, when Ben Bernanke hones and restates his helicopter money speech, and when Mario Draghi says that the ECB’s policy of printing money and negative interest rates was working, I feel utterly depressed (I could also quote similar nonsense from Japan, the UK and China). I have not one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result. The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!

All over the world, the underlying economic fundamentals continue to deteriorate. Here in the U.S., retail sales have been extremely disappointing, total business sales have been steadily falling, corporate revenues and corporate profits continue to plunge, and corporate debt defaults have soared to their highest level since the last financial crisis.

All of these numbers are screaming that a major economic downturn is here, and with each passing week things look even more ominous for the second half of 2016.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

47 Percent Of Americans Cannot Even Come Up With $400 To Cover An Emergency Room Visit

One Dollar Bill - Public DomainIf you had to make a sudden visit to the emergency room, would you have enough money to pay for it without selling something or borrowing the funds from somewhere?  Most Americans may not realize this, but this is something that the Federal Reserve has actually been tracking for several years now.  And according to the Fed, an astounding 47 percent of all Americans could not come up with $400 to pay for an emergency room visit without borrowing it or selling something.  Various surveys that I have talked about in the past have found that more than 60 percent of all Americans are living to paycheck to paycheck, but I didn’t realize that things were quite this bad for about half the country.  If you can’t even come up with $400 for an unexpected emergency room visit, then you are just surviving from month to month by the skin of your teeth.  Unfortunately, about half of us are currently in that situation.

Earlier today someone pointed me toward an excellent article in The Atlantic that discussed this, and I have to admit that The Atlantic is one of the last remaining bastions of old school excellence in journalism that you will find in the mainstream media.  Of course I don’t see eye to eye with them on a lot of things philosophically, but there are some really hard working journalists over there.

The article where I found the 47 percent figure comes from The Atlantic, and it is entitled “The Secret Shame of Middle-Class Americans“.  It was authored by Neal Gabler, and he says that he can identify with the 47 percent of Americans that don’t have $400 for an unexpected emergency room visit because he is one of them

I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5—literally—while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs. I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn’t know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil.

To me, this is yet more evidence that the middle class in America is dying.

Last year, it was reported that middle class Americans make up a minority of the population for the very first time in our history.

But back in 1971, 61 percent of all Americans lived in middle class households.

So what happened?

Well, the big corporations started shipping millions of good paying manufacturing jobs overseas.  Millions of other good paying jobs were replaced by technology, and the competition for the good jobs that remained became extremely intense.

During the good times, the U.S. economy still created new jobs, but most of those jobs were low paying service jobs.

At this point, a majority of American workers have jobs that would be considered low paying.  In fact, 51 percent of all American workers make less than $30,000 a year according to the Social Security Administration.

And once you account for inflation, the truth is that our incomes have been going down for years.  According to a study that was released by Pew Charitable Trusts, median household income in the United States decreased by 13 percent between 2004 and 2014.

That isn’t “progress” any way that you slice it.

If you go all the way back to 1970, the middle class took home approximately 62 percent of all income in the United States.

Today, that number has fallen to just 43 percent.

So the fact that 47 percent of Americans can’t even pay for an unexpected emergency room visit is not exactly a surprise.  To be honest, a whole host of other surveys have come up with similar numbers.  Here is more from Neal Gabler

A 2014 Bankrate survey, echoing the Fed’s data, found that only 38 percent of Americans would cover a $1,000 emergency-room visit or $500 car repair with money they’d saved. Two reports published last year by the Pew Charitable Trusts found, respectively, that 55 percent of households didn’t have enough liquid savings to replace a month’s worth of lost income, and that of the 56 percent of people who said they’d worried about their finances in the previous year, 71 percent were concerned about having enough money to cover everyday expenses.

What all of these numbers tell us is that the middle class is disappearing.  I tend to compare it to a game of really bizarre musical chairs.  With each passing month more chairs are being pulled out of the circle, and those members of the middle class that haven’t fallen into poverty yet are just hoping that a chair will still be there for them when the music stops.

Even during the “Obama recovery”, we have seen poverty in America absolutely explode.  In fact, some brand new numbers just came out that are quite startling.  The following comes from another author for The Atlantic named Gillian B. White

Recently, the Brookings Institution published a report looking at the same idea but giving it a different name. The paper, builds on research from the British economist William Beveridge, who in 1942 proposed five types of poverty: squalor, ignorance, want, idleness, and disease. In modern terms, these could be defined as poverty related to housing, education, income, employment, and healthcare, respectively. Analyzing the 2014 American Community Survey, the paper’s co-authors, Richard Reeves, Edward Rodrigue, and Elizabeth Kneebone, found that half of Americans experience at least one of these types of poverty, and around 25 percent suffer from at least two.

To underscore this point, let me just run five quick facts about the growth of poverty in this country by you…

The number of Americans that are living in concentrated areas of high poverty has doubled since the year 2000.

In 2007, about one out of every eight children in America was on food stamps. Today, that number is one out of every five.

46 million Americans use food banks each year, and lines start forming at some U.S. food banks as early as 6:30 in the morning because people want to get something before the food supplies run out.

The number of homeless children in the U.S. has increased by 60 percent over the past six years.

According to Poverty USA, 1.6 million American children slept in a homeless shelter or some other form of emergency housing last year.

That last number really gets me every time.

How can “the wealthiest and most powerful nation on the planet” have more than a million homeless children?

This is one of the reasons why I hammer on our ongoing economic collapse over and over and over.  It is affecting real families with real children that have real hopes and real dreams.

This is not the way our country is supposed to work.

It is supposed to be “the land of opportunity”.

It is supposed to be a place where anyone can live “the American Dream”.

But instead it has become an economic wasteland where the largest and most prosperous middle class in the history of the world is being systematically eviscerated.

So no, the U.S. economy is not doing “just fine” – anyone that tries to tell you that lie is simply peddling fiction.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

Corporations Are Defaulting On Their Debts Like It’s 2008 All Over Again

Corporate Debt Defaults - Public DomainThe Dow closed above 18,000 on Monday for the first time since July.  Isn’t that great news?  I truly wish that it was.  If the Dow actually reflected economic reality, I could stop writing about “economic collapse” and start blogging about cats or football.  Unfortunately, the stock market and the economy are moving in two completely different directions right now.  Even as stock prices soar, big corporations are defaulting on their debts at a level that we have not seen since the last financial crisis.  In fact, this wave of debt defaults have become so dramatic that even USA Today is reporting on it

Get ready to step over some landmines, investors. The number of companies defaulting on their debt is hitting levels not seen since the financial crisis, and it’s not just a problem for bondholders.

So far this year, 46 companies have defaulted on their debt, the highest level since 2009, according to S&P Ratings Services. Five companies defaulted this week, based on the latest data available from S&P Ratings Services. That includes New Jersey-based specialty chemical company Vertellus Specialties and Ohio-based iron ore producer Cliffs Natural. Of the world’s defaults this year, 37 are of companies based in the U.S.

Meanwhile, coal producer Peabody Energy (BTU) and surfwear seller Pacific Sunwear (PSUN) this week filed plans for bankruptcy protection. Shares of Peabody have dropped 97% over the past year to $2 a share and Pacific Sunwear stock is off 98% to 4 cents a share.

A lot of big companies in this country have fallen on hard times, and it looks like bankruptcy attorneys are going to be absolutely swamped with work for the foreseeable future.

So why are stock prices soaring right now?  After all, it doesn’t seem to make any sense whatsoever.

And it isn’t just a few bad apples that we are talking about.  All across the spectrum, corporate revenues and corporate earnings are down.  At this point, earnings for companies on the S&P 500 have plunged a total of 18.5 percent from their peak in late 2014, and it is being projected that corporate earnings overall will be down 8.5 percent for the first quarter of 2016 compared to one year ago.

As earnings decline, a lot of big companies are getting into trouble with debt, and we have already seen a very large number of corporate debt downgrades.  In recent interviews, I have been bringing up the fact that the average rating on U.S. corporate debt has now fallen to “BB”, which is already lower than it was at any point during the last financial crisis.

A lot of people don’t seem to believe me when I share that fact, but it is absolutely true.

One of the big reasons why corporate debt is being downgraded is because a lot of these big companies have been going into enormous amounts of debt in order to buy back their own stock.  The following comes from Wolf Richter

Downgrades ascribed to “shareholder compensation,” as Moody’s calls share buybacks and dividends, have been soaring, according to John Lonski, Chief Economist at Moody’s Capital Markets Research. The moving 12-month sum of Moody’s credit rating downgrades of US companies, jumped from 32 in March 2015, to 48 in December 2015, and to 61 in March 2016, nearly doubling within a year.

The last time the number of downgrades attributed to financial engineering reached 61 was in early 2007. It would hit its peak of 79 in mid- 2007, a few months before the beginning of the Great Recession in Q4 2007. At the time, stocks were on the verge of commencing their epic crash.

When corporations go into the market and buy back their own stock, they are slowly cannibalizing themselves.  But we have seen these stock buybacks soar to record levels for a couple of reasons.  Number one, big investors want to see stock prices go up, and so big investors tend to really like these stock buybacks and will generally support corporate executives that wish to engage in doing this.  Number two, if you are a greedy corporate executive that is heavily compensated by stock options, you very much want to see the stock price go up as well.

So the name of the game is greed, and stock buybacks have been fueling much of the rise in U.S. stock prices that we have been seeing recently.

However, the truth is that nothing in the financial world lasts forever, and this irrational bubble will ultimately come to an end as well.

Earlier today, I am across an article that included a comment from Michael Hartnett of Bank of America Merrill Lynch.  He believes that there are a lot of parallels between what is happening today and the period of time that immediately preceded the bursting of the dotcom bubble

Back then, as could be the case today, a bull market & a US-led economic recovery was rudely interrupted by a crisis in Emerging Markets. The crisis threatened to hurt Main Street via Wall Street (the Nasdaq fell 33% between Jul-Oct 1998, when [Long-Term Capital Management] went under). Policy makers panicked and monetary policy was eased (with hindsight unnecessarily). Fresh liquidity combined with apocalyptic investor sentiment very quickly morphed into a violent but narrow equity bull market/bubble in 1998/99, one which ultimately took valuations & interest rates sharply higher to levels that eventually caused a “pop”.

Like Hartnett, I definitely believe that a major “pop” is on the way, although I would like for it to be delayed for as long as possible.

Someday we will look back on these times with utter amazement.  It has been absolutely incredible how the financial markets have been able to defy economic reality for so long.

But they can’t do it forever, and according to a brand new CNN survey Americans are becoming increasingly pessimistic about where the real economy is heading…

In a new CNNMoney/E*Trade survey of Americans who have at least $10,000 in an online trading account, over half (52%) gave the U.S. economy as a “C” grade. Another 15% rated the economy a “D” or “F.”

This gloom persists despite the fact that the stock market is on the upswing again. The Dow topped 18,000 Monday for the first time since July 2015.

If some Americans think that the U.S. economy deserves a “D” or an “F” grade right now, just wait until they see what is in our immediate future.

Personally, I give our economy an “A” for being able to maintain our unsustainable debt-fueled standard of living for as long as it has.  Somehow we have managed to consume far more than we produce for decades, and the largest debt bubble in the history of the planet just keeps getting bigger and bigger and bigger.

Of course we are very much living on borrowed time at this point, but I truly hope that the bubble economy can keep going for at least a little while longer, because nobody should want to see what is coming afterwards.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

Robert Kiyosaki And Harry Dent Warn That Financial Armageddon Is Imminent

Alarm Clock Globe - Public DomainFinancial experts Robert Kiyosaki and Harry Dent are both warning that the next major economic crash is in our very near future.  Dent is projecting that the Dow will fall to “5,500 to 6,000 by late 2017″, and Kiyosaki actually originally projected that a great crash was coming in 2016 all the way back in 2002.  Of course we don’t exactly have to wait for things to get bad.  The truth is that things are not really very good at the moment by any stretch of the imagination.  Approximately one-third of all Americans don’t make enough money to even cover the basic necessities, 23 percent of adults in their prime working years are not employed, and corporate debt defaults have exploded to the highest level that we have seen since the last financial crisis.  But if Kiyosaki and Dent are correct, economic conditions in this country will soon get much, much worse than this.

During a recent interview, Harry Dent really went out on a limb by staking his entire reputation on a prediction that we would experience “the biggest global bubble burst in history” within the next four years…

There will be… and I will stake my entire reputation on this… we are going to see the biggest global bubble burst in history in the next four years…

There’s only one way out of this bubble and that is for it to burst… all this stuff is going to reset back to where it should be without all this endless debt, endless printed money, stimulus and zero interest rate policy.

And of course he is far from alone.  Without a doubt, we are currently in the terminal phases of the greatest financial bubble the world has ever known, and it is exceedingly difficult to see any way that it will not end very, very badly.

Ultimately, Dent believes that we could see U.S. stocks lose two-thirds of their value by late next year

The Dow, I’m projecting, will hit 5,500 to 6,000 by late 2017… just in the next year and a half or so. 

That’ll be most of the damage… then it will rally and there’ll be some aftershocks into 2020… my four cycles point down into early 2020 and then they start one after the other to turn up… I think the worst will be over by 2020, but the worst of that will be by the end of 2017.

If that does happen, it will be a far worse crash than what we experienced back in 2008, and the economic consequences will be absolutely terrifying.

Another highly respected financial expert that is making similar claims is Robert Kiyosaki.  My wife is a big fan of his books, and I have always held him in high regard.

But what I didn’t realize is that he had actually predicted that there would be a major financial crash all the way back in 2002

Fourteen years ago, the author of a series of popular personal-finance books predicted that 2016 would bring about the worst market crash in history, damaging the financial dreams of millions of baby boomers just as they started to depend on that money to fund retirement.

Broader U.S. stock markets are recovering from the worst 10-day start to a year on record. But Robert Kiyosaki — who made that 2016 forecast in the 2002 book “Rich Dad’s Prophecy” — says the meltdown is under way, and there’s little investors can do but buy gold or silver and hope the Federal Reserve slows the slide.

I agree with Kiyosaki that one way that investors can shield their wealth is by getting gold and silver.  In a recent article, I explained exactly why I believe that silver in particular is ridiculously undervalued right now.

Kiyosaki also believes that the coming crash could be delayed a bit if the Federal Reserve decided to embark on another round of quantitative easing.  But even if that happens, Kiyosaki is absolutely convinced that eventually “it’s all going to come down”

Kiyosaki told MarketWatch that the combination of demographics and global economic weakness makes the next crash inevitable — but the Fed could stave it off with another round of quantitative easing, which might stimulate the economy.

The Fed turned more dovish at its March meeting, with the central bank penciling in fewer interest-rate hikes this year than were previously part of its implied framework. The Fed signaled those hikes would happen more slowly than had been anticipated earlier, owing to a weak global economic environment and a volatile stock market.

“The big question [whether] we do ‘QE4,’” said Kiyosaki. “If we do, the stock market will come roaring back, but it’s not rocket science. If we stop printing money, it crashes; if we print money, it goes up. But, eventually, it’s all going to come down.”

Another voice that I have come to respect is Jim Rickards.  He is not quite as apocalyptic as Kiyosaki or Dent, but without a doubt he is deeply concerned about where the global economy is headed…

Global growth is slowing both because of weakness in developed economies like Europe and Japan, and weakness in some of the emerging markets champions such as China, Brazil and Russia. The limits of monetary policy have been reached.

The evidence is now clear that negative interest rates don’t stimulate spending; they are only good for devaluation in the ongoing currency wars. World trade is shrinking; a rare phenomenon usually associated with recession or depression.

And he is exactly right.  The economic downturn that we are witnessing is truly global in scope.  Brazil has plunged into an economic depression, the Italian banking system is in the process of completely melting down, and Japan has implemented negative interest rates in a desperate attempt to keep their Ponzi scheme going but it really isn’t working.  In fact, Japanese industrial production just crashed by the most that we have seen since the tsunami of 2011.

Here in the United States, investors are generally feeling pretty good right now because stocks have rebounded substantially in recent weeks.  However, Rickards is warning that this rebound is very temporary

Stocks are clearly in a bubble. The stock market is ignoring the strong dollar, which in turn hurts exports and devalues overseas earnings. It is also ignoring declining corporate earnings, imminent defaults in the energy sector, and declining global growth in general.

Never mind. As long as money is cheap and leverage is plentiful, there’s no reason not to bid up stock prices, and wait for the greater fool to bid them up some more.

There is so much that we could learn from all these three men.

Sadly, just like we saw in 2008, most Americans are ignoring the warnings.

The mainstream media has conditioned the public to trust them, and right now the mainstream media is insisting that everything is going to be just fine.

So will everything be just fine as the months roll along?

We will just have to wait and see…

Depressing Survey Results Show How Extremely Stupid America Has Become

No Thinking - Public DomainTen years ago, a major Hollywood film entitled “Idiocracy” was released, and it was an excellent metaphor for what would happen to America over the course of the next decade.  In the movie, an “average American” wakes up 500 years in the future only to discover that he is the most intelligent person by far in the “dumbed down” society that he suddenly finds himself in.  Sadly, I truly believe that if people of average intellect from the 1950s and 1960s were transported to 2016, they would likely be considered mental giants compared to the rest of us.  We have a country where criminals are being paid $1000 a month not to shoot people, and the highest paid public employee in more than half the states is a football coach.  Hardly anyone takes time to read a book anymore, and yet the average American spends 302 minutes a day watching television.  75 percent of our young adults cannot find Israel on a map of the Middle East, but they sure know how to find smut on the Internet.  It may be hard to believe, but there are more than 4 million adult websites on the Internet today, and they get more traffic than Netflix, Amazon and Twitter combined.

What in the world has happened to us?  How is it possible that we have become so stupid?  According to a brand new report that was recently released, almost 10 percent of our college graduates believe that Judge Judy is on the Supreme Court…

The American Council of Trustees and Alumni publishes occasional reports on what college students know.

Nearly 10 percent of the college graduates surveyed thought Judith Sheindlin, TV’s “Judge Judy,” is a member of the U.S. Supreme Court. Less than 20 percent of the college graduates knew the effect of the Emancipation Proclamation. More than a quarter of the college graduates did not know Franklin D. Roosevelt was president during World War II; one-third did not know he was the president who spearheaded the New Deal.

It can be tempting to laugh at numbers like these until you realize that survey after survey has come up with similar results.

Just consider what Newsweek found a few years ago…

When NEWSWEEK recently asked 1,000 U.S. citizens to take America’s official citizenship test, 29 percent couldn’t name the vice president. Seventy-three percent couldn’t correctly say why we fought the Cold War. Forty-four percent were unable to define the Bill of Rights. And 6 percent couldn’t even circle Independence Day on a calendar.

Even worse were the extremely depressing results of a study conducted a few years ago by Common Core…

*Only 43 percent of all U.S. high school students knew that the Civil War was fought some time between 1850 and 1900.

*More than a quarter of all U.S. high school students thought that Christopher Columbus made his famous voyage across the Atlantic Ocean after the year 1750.

*Approximately a third of all U.S. high school students did not know that the Bill of Rights guarantees freedom of speech and freedom of religion.

*Only 60 percent of all U.S. students knew that World War I was fought some time between 1900 and 1950.

Of course survey results can be skewed, and much hinges on how the questions are asked.

However, even studies that are scientifically conducted confirm how stupid America has become.  In fact, a report from the Educational Testing Service found that Americans are falling way behind much of the rest of the industrialized world.  The following comes from CBS News

Americans born after 1980 are lagging their peers in countries ranging from Australia to Estonia, according to a new report from researchers at the Educational Testing Service (ETS). The study looked at scores for literacy and numeracy from a test called the Program for the International Assessment of Adult Competencies, which tested the abilities of people in 22 countries.

The results are sobering, with dire implications for America. It hints that students may be falling behind not only in their early educational years but at the college level. Even though more Americans between the ages of 20 to 34 are achieving higher levels of education, they’re still falling behind their cohorts in other countries. In Japan, Finland and the Netherlands, young adults with only a high school degree scored on par with American Millennials holding four-year college degrees, the report said.

Out of 22 countries that were part of the study, the Educational Testing Service found that Americans were dead last in tech proficiency, dead last in numeracy and only two countries performed worse than us when it came to literacy proficiency

Half of American Millennials score below the minimum standard of literacy proficiency. Only two countries scored worse by that measure: Italy (60 percent) and Spain (59 percent). The results were even worse for numeracy, with almost two-thirds of American Millennials failing to meet the minimum standard for understanding and working with numbers. That placed U.S. Millennials dead last for numeracy among the study’s 22 developed countries.

So why has this happened?

Why have we become such an extremely stupid nation?

Well, at least a portion of the blame must be directed at our system of education.  The following is an excerpt from an article written by reporter Mark Morford.  In this article, he shared how one of his friends which had served for a very long time as a high school teacher in Oakland, California was considering moving out of the country when he retired due to the relentless “dumb-ification of the American brain”

It’s gotten so bad that, as my friend nears retirement, he says he is very seriously considering moving out of the country so as to escape what he sees will be the surefire collapse of functioning American society in the next handful of years due to the absolutely irrefutable destruction, the shocking — and nearly hopeless — dumb-ification of the American brain. It is just that bad.

Now, you may think he’s merely a curmudgeon, a tired old teacher who stopped caring long ago. Not true. Teaching is his life. He says he loves his students, loves education and learning and watching young minds awaken. Problem is, he is seeing much less of it.

And of course things don’t get much better when it comes to our college students.  In a previous article, I shared some statistics from USA Today about the rapidly declining state of college education in the United States…

-“After two years in college, 45% of students showed no significant gains in learning; after four years, 36% showed little change.”

-“Students also spent 50% less time studying compared with students a few decades ago”

-“35% of students report spending five or fewer hours per week studying alone.”

-“50% said they never took a class in a typical semester where they wrote more than 20 pages”

-“32% never took a course in a typical semester where they read more than 40 pages per week.”

I spent eight years studying at some of the finest public universities in the country, and I can tell you from personal experience that even our most challenging college courses have been pathetically dumbed down.

And at our “less than finest” public universities, the level of education can be something of a bad joke.  In another previous article, I shared some examples of actual courses that have been taught at U.S. universities in recent years…

-“What If Harry Potter Is Real?

-“Lady Gaga and the Sociology of Fame

-“Philosophy And Star Trek

-“Learning From YouTube

-“How To Watch Television

Could you imagine getting actual college credit for a course entitled “What If Harry Potter Is Real?”

This is why many of our college graduates can barely put two sentences together.  They aren’t being challenged, and the quality of the education most of them are receiving is incredibly poor.

But even though they aren’t being challenged, students are taking longer to get through college than ever.  Federal statistics reveal that only 36 percent of all full-time students receive a bachelor’s degree within four years, and only 77 percent of all full-time students have earned a bachelor’s degree by the end of six years.

Of course our system of education is not entirely to blame.  The truth is that young Americans spend far more time consuming media than they do hitting the books, and what passes for “entertainment” these days is rapidly turning their brains to mush.

According to a report put out by Nielsen, this is how much time the average American spends consuming media on various devices each day…

Watching live television: 4 hours, 32 minutes

Watching time-shifted television: 30 minutes

Listening to the radio: 2 hours, 44 minutes

Using a smartphone: 1 hour, 33 minutes

Using Internet on a computer: 1 hour, 6 minutes

When you add it all up, the average American spends more than 10 hours a day plugged into some form of media.

And if you allow anyone to pump “programming” into your mind for 10 hours a day, it is going to have a dramatic impact.

In the end, I truly believe that we all greatly underestimate the influence that the mainstream media has on all of us.  We willingly plug into “the Matrix” for endless hours, but then somehow we still expect “to think for ourselves”.

There are very few of us that can say that we have not been exposed to thousands upon thousands of hours of conditioning.  And all of that garbage can make it very, very difficult to think clearly.

It is not because of a lack of input that we have become so stupid as a society.  The big problem is what we are putting into our minds.

If we continue to put garbage in, we are going to continue to get garbage out, and that is the cold, hard reality of the matter.

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