Has there ever been a major holiday more focused on materialism than the modern American Christmas? This year, Americans are planning to spend an average of 830 dollars on Christmas gifts, which represents a jump of 110 dollars over the average of 720 dollars last year. But have our incomes gone up accordingly? Of course not. In fact, real median household income in the United States has been experiencing a steady long-term decline. So in order to fund all of our Christmas spending, we have got to go into even more debt. We love to pull out our credit cards and spend money that we do not have on lots of cheap, useless stuff made on the other side of the world by workers making slave labor wages. We do the same thing year after year, and most of us have grown accustomed to the endless cycle of growing debt. In fact, one Pew survey found that approximately 70 percent of all Americans believe that “debt is a necessity in their lives”. But then we have to work our fingers to the bone to try to make the payments on all of that debt, not realizing that debt systematically impoverishes us. It may be hard to believe, but if you have a single dollar in your pocket and no debt, you have a greater net worth than 25 percent of all Americans. I know that sounds crazy, but it is true.
Overall, when you add up all forms of debt (consumer, business, local government, state government and federal government), Americans are more than 60 trillion dollars in debt.
Let that sink in for a bit.
40 years ago, that number was sitting at about 3 trillion dollars.
We have been on the greatest debt binge in the history of the world. Even though we were “the wealthiest, most prosperous nation on the entire planet”, we always had to have more. We just kept on borrowing and borrowing and borrowing from the future until we completely destroyed it.
And we still haven’t learned anything. Instead, this Christmas season we will be partying like it’s 2007…
Americans are planning on celebrating Christmas like it’s 2007.
Income peaked one year ago for many of the counties that are a part of the shale boom. This includes much of North and South Dakota, as well as parts of Texas, Nebraska, and Oklahoma. Income in Washington, D.C. and neighboring Arlington County also peaked then.
In 1999, a total of 1,623 counties had their households reach peak income. The majority of these counties are in the Midwest and Southeast.
The most southern part of California and parts of New England both peaked around 25 years ago.
Many states along the Rocky Mountains such as Wyoming and Montana had counties that peaked roughly 35 years ago.
Household income peaked in upstate New York, the northern tip of California, and southern Nevada at the same time that humans were first landing on the moon in 1969.
But you won’t hear this reported on the mainstream news, will you?
They want us to think that happy days are here again.
The following chart comes from the Federal Reserve, and it shows that real median household income in the United States has been trending down since 1999…
Americans should be having smaller Christmases instead of bigger ones, but that doesn’t fit the image of who we still think that we are.
-38 percent of all American workers made less than $20,000 last year.
-51 percent of all American workers made less than $30,000 last year.
-62 percent of all American workers made less than $40,000 last year.
-71 percent of all American workers made less than $50,000 last year.
Without a doubt, most American families should not be spending hundreds of dollars a year on Christmas gifts.
At these income levels, most American families are just barely surviving.
But once again this year, millions upon millions of Americans will flock to the malls and big box stores in a desperate attempt to make themselves happy.
Sadly, those efforts will be in vain. In fact, in a previous article I highlighted the fact that Christmas is the unhappiest season of the year. The suicide rate spikes to the highest level of the year during “the holidays”, and 45 percent of all Americans report that they dread the Christmas season. The following is an excerpt from a Psychology Today article…
We are told that Christmas, for Christians, should be the happiest time of year, an opportunity to be joyful and grateful with family, friends and colleagues. Yet, according to the National Institute of Health, Christmas is the time of year that people experience the highest incidence of depression. Hospitals and police forces report the highest incidences of suicide and attempted suicide. Psychiatrists, psychologists and other mental health professionals report a significant increase in patients complaining about depression. One North American survey reported that 45% of respondents dreaded the festive season.
In recent years, an increasing number of Americans have given up the tradition of Christmas gifts entirely, and many of them that I know seem quite happy to have done so.
Of course most people are still quite satisfied with the status quo, and there are many that will get very angry with you if you dare to suggest that the way that Americans celebrate Christmas has gotten way out of hand.
But shouldn’t it alarm us that for most Americans the biggest holiday of the year is all about the “stuff” they are going to buy, the “stuff” they are going to give and the “stuff” they are going to get?
As a society, we are obsessed with things, but those things are never going to make us happy.
Perhaps we should all take some time to reflect on the traditions that we choose to participate in and what they really mean to us during this “holiday season”…
Why won’t the American people listen to the warnings? David Stockman was a member of the U.S. House of Representatives from 1977 to 1981, and he served as the Director of the Office of Management and Budget under President Ronald Reagan from 1981 to 1985. These days, he is running a website called “Contra Corner” which I highly recommend that you check out. Stockman believes that a global “debt super-cycle” that has been building for decades is now bursting, and he is convinced that the consequences for the U.S. and for the rest of the planet will be absolutely catastrophic. His findings are very consistent with what I have been writing about on The Economic Collapse Blog, and if Stockman is correct the times ahead of us are going to be exceedingly painful.
But right now, most people don’t seem to be in the mood to listen to these types of warnings. Even though there is a mountain of evidence that the global economy has already plunged into recession, U.S. stocks had a great month in October, and so most Americans seem to think that the crisis has passed.
Of course the truth is that the stock market is not an accurate barometer of the economy and it never has been. Back in 2008, almost everything else started to go downhill before stocks did, and the same thing is happening once again. In a recent article, Stockman explained that stocks are surging to absolutely ridiculous levels even though corporate earnings are actually way down…
At this point, 75% of S&P 500 companies have reported Q3 results, and earnings are coming in at $93.80 per share on an LTM basis. That happens to be 7.4% below the peak $106 per share reported last September, and means that the market today is valuing these shrinking profits at a spritely 22.49X PE ratio.
And, yes, there is a reason for two-digit precision. It seems that in the 4th quarter of 2007 LTM earnings came in at 22.19Xthe S&P 500 index price. We know what happened next!
Why do so many refuse to see the parallels?
This crisis is unfolding so similarly to 2008, and yet most of the “experts” are willingly blind.
Much of the stock buying that has been happening in 2015 has been fueled by stock buybacks and by M&A (merger and acquisitions). Many firms have even been going into debt to buy back their own stocks, but now sources of financing are starting to dry up. This year we have already seen the most corporate debt downgrades since 2009, and big financial institutions are now becoming much more hesitant to loan giant stacks of cash to these large corporations at super low interest rates.
So it is very, very difficult to see how the equity markets are going to move much higher than they are right now.
Meanwhile, the global economy is starting to unravel right in front of our eyes. In his recent piece, Stockman discussed some of these data points…
In the last two days we posted the latest data on two crucial markers of global economic direction——-export shipments from Korea and export orders coming into the high performance machinery factories of Germany.
In a word, they were abysmal, and smoking gun evidence that the suzerains of Beijing have not stopped the implosion in China, and that their latest paddy wagon forays—–arresting the head of China’s third largest bank and hand-cuffing several hedge fund managers including the purported “Warren Buffett” of China—-are signs not of stabilization, but sheer desperation.
So it is not surprising that Korea’s October exports—–the first such data from anywhere in the world—were down by a whopping 16% from last year, and have now been down for 10 straight months. Needless to say, China is the number one destination for Korean exports.
Likewise, German export orders plummeted by 18% in September, and this was no one month blip.
A.P. Moeller-Maersk A/S is scaling back capacity and cutting jobs in the world’s largest shipping line to adapt to a drop in demand.
The Danish company, which last month lowered its profit forecast for 2015 citing a gloomier outlook for the global shipping market, will shed 4,000 jobs in its Maersk Line unit as part of a program to “simplify the organization,” it said in an e-mailed statement on Wednesday.
Standard Chartered Plc became the third European bank in less than two weeks to announce sweeping job cuts, bringing the total planned reductions to more than 30,000, or almost one in seven positions.
The London-based firm said Tuesday it will eliminate 15,000 jobs, or 17 percent of its workforce, as soaring bad loans in emerging markets hurt earnings. Deutsche Bank AG, based in Frankfurt, last week announced plans for 11,000 job cuts, while Credit Suisse Group AG said it would trim as many as 5,600 employees.
And if things are so great in the United States, why is Target suddenly closing stores?
The truth, of course, is that things are not great. Global GDP expressed in U.S. dollars is down 3.4 percent so far this year, and total global trade has plummeted 8.4 percent.
We have entered a major global economic slowdown, and like usual, equity markets will be the last to get the memo.
But when they finally do react, that is likely going to greatly accelerate our problems. Just like we saw in 2008, when there is fear and panic in the financial markets that tends to cause the flow of credit to freeze up. And that is something that we simply cannot afford, because the flow of credit has become the lifeblood of the global economy.
So no, “the crisis” is not “over”.
Rather, the truth is that “the crisis” is just beginning, and it will soon be making front page headlines all over the planet.
Would you pay $400,000 for a single helmet? Of course you wouldn’t – but that is precisely what the U.S. government is doing. Just the helmet for the pilot of the new F-35 Lightning II is going to cost taxpayers nearly half a million dollars. And since we are going to need 2,400 of those helmets, the total bill is going to end up approaching a billion dollars. But what is a billion dollars between friends, eh?
Sadly, our military has a very long history of wasting money like this. Back in the 1980s, the “six hundred dollar toilet seat” became quite famous. Average Americans were absolutely outraged that the government was wasting so much of our hard-earned money, and promises were made that things would change. Here is more on what transpired back then from Wikipedia…
Beginning in 1981, President Ronald Reagan began an expansion in the size and capabilities of the United States armed forces, which entailed major new expenditures on weapons procurement. By the mid-1980s, this spending became a scandal when the Project On Government Oversight reported that the Pentagon had vastly overpaid for a wide variety of items, most notoriously paying $435 for a hammer, $600 for a toilet seat, and $7,000 for a coffee pot.
But of course things haven’t changed, have they?
Instead, they have gotten even worse.
I have no idea how a single helmet could be worth $400,000.
And the pilots flying the aircraft will be wearing the most advanced and most expensive helmet ever.
The helmet will give pilots quicker access to the information they need to see and has special cameras to “see” through the bottom of the plane. But it will cost an estimated $400,000 per helmet — more than four times as much as the Air Force paid for head wear for other aircraft such as the F-16.
Is that why the helmet is so expensive?
It can help the pilot see through the bottom of the plane?
If you just go down to your local Ford dealer they will be glad to show you lots of new trucks that can “see behind them”, and the best truck on the lot only costs about $50,000.
Or better yet, if F-35 pilots really want to see what is going on underneath them they should just slap a window on the bottom of the plane.
Of course I am just being facetious, but I think that you get the point.
We all work really hard for our money, and it is quite disheartening to watch the government waste it so flippantly.
And this week the Republicans in Congress have agreed to suspend the debt ceiling for the rest of the time that Barack Obama is in the White House. In one of his final acts as House Speaker, John Boehner has given Barack Obama a wonderful parting gift…
Outgoing House Speaker John Boehner presented his newly forged budget deal to his Republican colleagues at a private meeting this morning, outlining his plan to avert another government shutdown and raise the debt ceiling as a parting gift to his successor.
The deal would increase federal spending by $80 billion over two years and raise the federal borrowing limit through 2017. The 144-page bill, which was released Monday shortly before midnight, was welcomed by Democrats who have been pushing for budget negotiations all year.
Thank you John Boehner for selling us all down the river time after time. You have done a great disservice to our nation.
This new budget agreement is actually going to significantly increase spending. Here are some more of the details from the New York Times…
For this fiscal year alone, the deal would add $50 billion in spending, divided equally between defense and domestic programs, as well as $16 billion for emergency war spending, half for the military, half for the State Department. Together, that represents an increase of $66 billion in the spending limits for 2016, not far off the $70 billion increase Mr. Obama requested in his budget.
Personally, I can’t wait to see how much of that 16 billion dollars is for lethal military aid for Ukraine. Many of you that have been following this closely know exactly what I am talking about.
Of course this budget deal still must be approved by Congress, but that is just a formality at this point. Many “conservatives” in Congress are voicing displeasure with this deal, but is anyone listening? The following comes from Business Insider…
“This budget deal is a betrayal of all the fiscally conservative promises Republicans made in the last election. It is emblematic of why working-class Americans are angry with congressional Republicans,” said prominent right-leaning economist Stephen Moore, in a statement released by the conservative group FreedomWorks.
The Tea Party is supposed to be standing against the tax and spend agenda of the Democrats and the establishment Republicans, but enthusiasm for the Tea Party seems to be subsiding. In fact, according to Gallup support for the Tea Party has hit an all-time low of 17 percent.
So we will just continue to witness business as usual in D.C. until disaster strikes. At this point it is expected that somewhere around 100 Republicans in the House will support this deal, and with all of the Democrats on board that should be enough to get it to pass.
Since Boehner reached his first “budget deal” with Barack Obama back in 2011, the U.S. national debt has increased by $3,970,023,503,348.07. It is a betrayal of a magnitude that is difficult to put into words.
Overall, the federal government has been stealing 100 million dollars from future generations of Americans every single hour of every single day since Barack Obama first entered the White House.
When I tell most people that, I can tell that they don’t really believe me, and truthfully that statistic does sound completely and utterly ridiculous.
But it is true.
When you multiply 100,000,000 by 24 by 365 you get 876,000,000,000. And if you multiply that number by 7 (the number of years that Obama has “served” so far rounding up), you get 6.132 trillion.
Well, according to CNSNews.com the U.S. national debt has risen by more than seven and a half trillion dollars since Barack Obama was first inaugurated…
Since Obama took office, the total debt of the federal government has already increased by $7,525,761,885,381.30—rising from $10,626,877,048,913.08 on Jan. 20, 2009 to $18,152,638,934,294.38 on Oct. 23, 2015.
When you break that number down, the amount of new debt added under Obama comes to $64,134.73 per household…
The $7,525,761,885,381.30 that the total debt has increased so far during the Obama presidency equals $64,134.73 for each of the 117,343,000 households that were in the United States as of June.
What our politicians are attempting to do now is to keep borrowing money and extending the game for as long as they possibly can.
If that sounds like a really bad plan to you, that is because it is a really bad plan.
What our leaders have done to future generations of Americans is beyond criminal. But the American people have come to accept this as “normal”, and only a very small percentage of us are still complaining about it.
So the jokers in Washington will just keep on doing what they are doing until it all comes tumbling down all around them. By then, it will be far too late to do anything about it.
You can stop waiting for a global financial crisis to happen. The truth is that one is happening right now. All over the world, stock markets are already crashing. Most of these stock market crashes are occurring in nations that are known as “emerging markets”. In recent years, developing countries in Asia, South America and Africa loaded up on lots of cheap loans that were denominated in U.S. dollars. But now that the U.S. dollar has been surging, those borrowers are finding that it takes much more of their own local currencies to service those loans. At the same time, prices are crashing for many of the commodities that those countries export. The exact same kind of double whammy caused the Latin American debt crisis of the 1980s and the Asian financial crisis of the 1990s.
As you read this article, almost every single stock market in the world is down significantly from a record high that was set either earlier this year or late in 2014. But even though stocks have been sliding in the western world, they haven’t completely collapsed just yet.
In much of the developing world, it is a very different story. Emerging market currencies are crashing hard, recessions are starting, and equity prices are getting absolutely hammered.
Posted below is a list that I put together of 23 nations around the world where stock market crashes are already happening. To see the stock market chart for each country, just click the link…
When the banking crisis crippled global markets seven years ago, central bankers stepped in as lenders of last resort. Profligate private-sector loans were moved on to the public-sector balance sheet and vast money-printing gave the global economy room to heal.
Time is now rapidly running out. From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.
I encourage you to read the rest of that excellent article right here. It contains lots of charts and graphs, and it discusses many of the exact same things that I have been hammering on for months.
Others are sounding the alarm about an imminent global financial crash as well. For example, just consider what Egon von Greyerz recently told King World News…
Eric, I fear that this coming September – October all hell will break loose in the world economy and markets. A lot of factors point to that, both fundamental and technical indicators and this indicates that we could have a number of shocks this autumn.
Sadly, most investors will hold stocks, bonds and property and will see any decline in value as an opportunity. It will be a long time and a very big fall before they realize that the system will not help them this time because the central bankers have run out of ammunition to save the global financial system one more time. Yes, we will see more massive money printing, but it will just make things worse. And at some stage, which could be quite soon, real fear will set in, a fear of a magnitude the world has not experienced before.
Hmm – there is another example of someone talking about September. It is funny how often that month keeps coming up.
And of course most of the major stock market crashes in U.S. history have been in the fall. Just go back and take a look at what happened in 1929, 1987, 2001 and 2008.
The “smart money” has been pulling their money out of stocks for quite a while now, and at this point a lot of others have hopped on the bandwagon. The following comes from CNBC…
The flight of investor money from U.S. stocks has turned into a stampede.
In fact, the $78.7 billion leaving domestic equity-focused funds has been worse in 2015 than it was even during the financial crisis years, when the S&P 500 tumbled some 60 percent, according to data released Friday by Morningstar. The total is the highest since 1993.
Domestic equity funds surrendered $20.4 billion in July alone and have seen $158.6 billion in redemptions over the past 12 months. Even a strong flow of money into passively managed exchange-traded funds has been unable to offset the stream to the exit among retail investors, who generally focus more on mutual funds than ETFs.
A global financial crisis has already begun.
So those that were claiming that one would not happen in 2015 are already wrong.
Over the coming months we will find out how bad it will ultimately be.
Sometimes I get criticized for talking about these things. There are a few people out there that don’t like all of the “doom and gloom” that I discuss on my website. Apparently it is a bad thing to talk about the things that really matter and we should all just be “keeping up with the Kardashians” instead.
I consider myself just to be another watchman on the wall. From our spots on the wall, watchmen such as myself all over the nation are sounding the alarm about what we clearly see coming.
If we saw what was coming and we did not warn the people, their blood would be on our hands. But if we do warn the people, then we have done our duty.
Every day I just do the best that I can with what I have been given. And there are many others just like me that are doing exactly the same thing.
Those that do not like the warning message are going to feel really stupid when things start falling apart all around them and they finally realize how wrong they truly were.
The list of nations around the globe that have collapsing economies just continues to grow. In recent weeks I have written about the ongoing saga in Greece, the stock market crash in China, the debt crisis in Puerto Rico and the economic meltdown in South America. But there are more economic flashpoints that I have not even addressed yet. For example, did you know that a full-blown economic collapse is happening in Iraq right now? And did you know that the economy of Ukraine is contracting rapidly and that it cannot pay its debts? Back in 2008, the financial crisis was primarily centered on the United States, but this time around it is turning out to be a truly global phenomenon.
When the U.S. “liberated” Iraq, the future for that nation was supposed to be incredibly bright. But instead, things have just gone from bad to worse. This has especially been true since we pulled our troops out and allowed ISIS to run buck wild. At this point unemployment in Iraq is at Great Depression levels, the economy is steadily contracting and government debt is spiraling wildly out of control…
But Iraq’s oil industry, and the government’s budget, is being squeezed by low oil prices. As a result, the nation’s finances are being hit hard: the market price is now half that needed to break even, expanding the budget deficit, forecast to return to balance until the rise of IS, to a projected 9% of GDP.
In the past, Iraq’s leaders approved budgets without seriously taking into account a drop in the price of oil. Now the severe revenue shortfall is forcing leaders to cut back on new investments. Russia’s Lukoil, Royal Dutch Shell, and Italy’s ENI are also cutting back, eyeing neighbouring Iran’s pending economic opening as a safer investment.
Despite improving its finances after the US troop withdrawal, the drop in oil prices and the rising costs of battling IS have pushed Iraq’s economy into a state of near-crisis. According to the IMF, the nation’s GDP shrankby 2.7% in 2014 and unemployment is estimated to be over 25%.
Things are even worse in another nation that was recently “liberated”. The new U.S.-friendly government in Ukraine was supposed to make things much better for average Ukrainians, but instead the economy is absolutely imploding…
The country’s GDP contracted by 6.8 percent last year, and is forecast to shrink by another 9 percent this year — a total loss of roughly 16 percent over two years.
Just like in much of southern Europe, the banks are absolutely overloaded with bad loans and the entire banking system is on the verge of total collapse. The following comes from a CNN article that was posted earlier this year…
Ukraine’s banking sector is one of the weakest parts of the economy. The key interest rates are the highest in 15 years, and experts estimate bad loans make up between one third and one half of all banking assets.
Over 40 banks have been declared bankrupt since the war began, with the country’s fourth largest lender, Delta Bank, going under earlier this week.
Just recently, the government of Ukraine declared that it could not pay its debts. We didn’t hear much about this in the United States, because the Obama administration wants us to believe that their policies over there are a success. But the truth is that Ukraine now needs a “debt restructuring deal” similar to what Greece has received in the past…
Progress between Ukraine and its creditors on a $19 billion restructuring may be losing momentum as a proposed high-level meeting was canceled amid further disagreements over terms.
Ukraine’s $2.6 billion of 2017 notes fell the most in a month after a person familiar with negotiations said a new offer put forward by Ukraine this week would be unacceptable to bondholders. Later on Wednesday, Ukraine’s Finance Ministry said that a Franklin Templeton-led creditor group should prepare an improved offer for meetings next week.
Speaking of Greece, things just continue to unravel over there. Earlier this week we witnessed the greatest one day stock market crash in Greek history, and there was more financial carnage on Wednesday. The following comes from the Economic Policy Journal…
For a second straight day, following the reopening of the Greek stock market, there were heavy losses in Greek banking stocks, with shares across the sector once again falling by about 30 percent, the bottom of their daily limit.
Bank of Piraeus and National Bank of Greece fell the most, falling by the daily limit of 30 percent t. Alpha Bank was 29.7 percent lower and Eurobank Ergasias lost 29.6 percent.
At this point you would have to be blind to not see what is happening.
A financial crisis is not just imminent – one is already starting to erupt all over the planet.
And none of us can say that we weren’t warned. In a recent piece, Bill Holter included a long list of ominous financial warnings that were issued over the past two years by either the IMF or the Bank for International Settlements…
Overall, there are currently 24 nations that are dealing with a major financial crisis right now, and there are another 14 nations that are right on the verge of one.
But even though a global financial crisis is already unfolding right in front of our eyes, there are people that come to my website every day and leave comments telling me that everything is going to be just fine.
So what do you think?
What do you believe the rest of this year will bring?
Please feel free to share your thoughts by posting a comment below…
Are you ready for what is coming in August? All over America, economic, political and social tensions are building, and the next 30 days could turn out to be pivotal. In July, we saw things start to turn. As you will read about below, a major six year trendline for the S&P 500 was finally broken this month, Chinese stocks crashed, commodities crashed, and debt problems started erupting all over the planet. I fully expect that this next month (August) will be a month of transition as we enter an extremely chaotic time in the fall and winter. Things are unfolding in textbook fashion for another major global financial crisis in the months ahead, and yet most people refuse to see what is happening. In their blind optimism, they want to believe that things will somehow be different this time. Well, the coming months will definitely reveal who was right and who was wrong. The following are 11 red flag events that just happened as we enter the pivotal month of August 2015…
#1 Puerto Rico is going to default on a 58 million dollar debt payment that is due on Saturday. Even though this has serious implications for the U.S. financial system, Barack Obama has said that there will be no bailout for “America’s Greece”.
#2 As James Bailey has pointed out, the most important trendline for the S&P 500 has finally been broken after holding up for six years. This is a critical technical signal that will likely motivate a significant number of investors to sell off their holdings in the weeks ahead.
#3 The IMF is indicating that it will not take part in the new Greek debt deal. As a result, the whole thing may completely fall apart…
Leaked minutes of the fund’s latest board meeting, which took place on Wednesday, showed staff “cannot reach agreement at this stage” on whether to take part in the new €86bn (£60bn) bailout for Greece. The document said there were doubts over the capacity of the Athens Government to implement economic reforms, as well as the over the sustainability of the country’s sovereign debt pile, which is now projected to hit 200 percent of GDP.
The German Chancellor, Angela Merkel, only sanctioned a new Greek deal earlier this month on the condition that the IMF takes part.
#4 Italy is going down the exact same path as Greece, but Italy is going to be a much larger problem for Europe because it has a far, far larger economy. This week, we learned that youth unemployment in Italy has reached a 38-year high of 44 percent, and Italy’s debt to GDP ratio has now hit 135 percent.
#5 The Canadian economy has officially entered a new recession. This is something that was not supposed to happen.
#6 The price of oil plummeted close to 20 percent during the month of July. It was the worst month for the price of oil that we have seen since October 2008, which just happened to be during the height of the last financial crisis.
#9 For the month of July, the Shanghai Composite Index was down 13.4 percent. Despite unprecedented government intervention to prop up the market, it was the worst month for Chinese stocks since October 2009.
#10 A major red flag that a recession in the United States is fast approaching is the fact that Exxon Mobile just announced their worst earnings for a single quarter since 2009. Compared to the same time period one year ago, Exxon Mobile’s earnings were down 51 percent.
#11 Chevron is another oil giant that has seen earnings plunge. In the second quarter of this year, Chevron’s earnings were down an eye-popping 90 percent from a year ago.
To a certain extent, I can understand why most Americans are not alarmed about the months ahead. The relative stability of the past several years has lulled most of us into a false sense of security, and the mainstream media is assuring everyone that everything is going to be just fine and that brighter days are ahead. At this point, many believe that it is patently absurd to suggest that we could see an economic collapse in 2015. But of course even though the signs were glaringly apparent, very few of us anticipated the financial crisis of 2008 either.
A few weeks ago, I authored a piece entitled “The Last Days Of ‘Normal Life’ In America“, and I stand by every single word of that article. I truly believe that the era of debt-fueled prosperity that we have been enjoying for so long is coming to an end, and our standard of living will never again get back to this level.
Just yesterday, I had the chance to go over and stock up on some emergency supplies at a dollar store. It always astounds me what you can still buy for a dollar. The combined cost of raw materials, manufacturing, packaging, shipping and retailing most of these items shouldn’t be less than a dollar, but thanks to having the reserve currency of the world we are still able to go to these big box stores and fill up our carts with lots and lots of extremely inexpensive merchandise.
Unfortunately, this massively inflated standard of living is going to come crashing to a halt. This next financial crisis is going to destroy the system that is currently producing such comfortable lifestyles for the vast majority of us, and that will be an extremely painful experience.
So enjoy this summer for as long as it lasts. Even though August threatens to be pivotal, it is going to be nothing compared to what will follow.
Most nations in South America are either already experiencing an economic recession or are right on the verge of one. In general, South American economies are very heavily dependent on exports, and right now they are being absolutely shredded by the twin blades of a commodity price collapse and a skyrocketing U.S. dollar. During the boom times in South America, governments and businesses loaded up on tremendous amounts of debt. Since much of that debt was denominated in U.S. dollars, South American borrowers are now finding that it takes much more of their own local currencies to service and pay back those debts. At the same time, there is much less demand for commodities being produced by South American nations in the international marketplace. As a result, South America is heading into a full-blown financial crisis which will cause years of pain for the entire continent.
If you know your financial history, then you know that we have seen this exact same scenario play out before in various parts of the world. The following comes from a recent CNN article…
The dollar’s gains should make history nerds shake in their boots. Its rally in the early 1980s helped trigger Latin America’s debt crisis. Fifteen years later, the greenback surged quickly again, causing Southeast Asian economies, such as Thailand, to collapse after a run on the banks ensued.
In particular, what is going on right now is so similar to what took place back in the early 1980s. At that time, Latin American governments were swimming in debt, the U.S. dollar was surging and commodity prices were falling. The conditions were perfect for a debt crisis in Latin America, and that is precisely what happened…
When the world economy went into recession in the 1970s and 80s, and oil prices skyrocketed, it created a breaking point for most countries in the region. Developing countries also found themselves in a desperate liquidity crunch. Petroleum exporting countries – flush with cash after the oil price increases of 1973-74 – invested their money with international banks, which ‘recycled’ a major portion of the capital as loans to Latin American governments. The sharp increase in oil prices caused many countries to search out more loans to cover the high prices, and even oil producing countries wanted to use the opportunity to develop further. These oil producers believed that the high prices would remain and would allow them to pay off their additional debt.
As interest rates increased in the United States of America and in Europe in 1979, debt payments also increased, making it harder for borrowing countries to pay back their debts. Deterioration in the exchange rate with the US dollar meant that Latin American governments ended up owing tremendous quantities of their national currencies, as well as losing purchasing power. The contraction of world trade in 1981 caused the prices of primary resources (Latin America’s largest export) to fall.
Sadly, the same mistakes have been repeated once again. In recent years South American nations have loaded up on vast amounts of debt, and now that commodity prices are tanking and the U.S. dollar is surging, all of that debt is creating tremendous headaches.
For instance, just consider what is happening in Brazil…
Brazil’s real plummeted to a 12-year low of 3.34 to the dollar, reflecting the country’s heavy reliance on exports of iron ore and other raw materials to China.
The devaluation tightens the noose on Brazilian companies saddled with $188bn in dollar debt taken out during the glory days of the commodity boom. The oil group Petrobras alone raised $52bn on the US bond markets.
Today, Brazil has the 7th largest economy on the entire planet.
So a major financial crisis in Brazil would be extremely significant.
And that is precisely what is starting to happen. It is being projected that Brazilian government debt will soon be reduced to junk status, Brazilian stocks have already entered “correction territory“, and economic forecasters say that the Brazilian economy is heading into its worst recession in at least 25 years…
Brazil needs to brace itself for some very tough times. Brazilian banks are currently forecasting another economic contraction for the South American country in 2016, marking the first time that Brazil’s economy has shrunk in two consecutive years since the Great Depression.
Last Friday, economist Nelson Teixeira of Switzerland-based financial services holding company Credit Suisse released a revision of his already dour forecast for the Brazilian GDP, moving this year’s numbers from -1.8 percent to -2.4 percent.
The IMF is also projecting that 2015 will be a year of recession for the second largest economy in South America (Argentina) and the third largest economy in South America (Venezuela).
And actually Venezuela is in the deepest trouble of all. According to a recent Bloomberg article, it appears to be inevitable that there will be a debt default by the Venezuelan government in the very near future…
Harvard University Professor Ricardo Hausmann last year questioned Venezuela’s decision to keep paying bondholders as the country sank deeper into crisis and suggested it stop honoring the debt.
Now, he’s saying Venezuela will have no choice but to default next year.
Hausmann’s comments come as a deepening collapse in oil prices and a shortage of dollars stoke concern Venezuela is fast running out of money to stay current on debt. The country’s bonds plunged last year after Hausmann, who served as Venezuelan planning minister after Hugo Chavez’s failed 1992 coup, raised the specter of default, saying he found “no moral grounds” for the government to pay debt at a time when Venezuelans were facing shortages of everything from basic medicine to toilet paper.
The inflation rate in Venezuela today is an astounding 68.5 percent, and the country is plunging into full-blown economic collapse. The following comes from Zero Hedge…
As we recently warned, the hyperinflationary collapse in Venezuela is reaching its terminal phase. With inflation soaring at least 65%, murder rates the 2nd highest in the world, and chronic food (and toilet paper shortages), the following disturbing clip shows what is rapidly becoming major social unrest in the Maduro’s socialist paradise… and perhaps more importantly, Venezuela shows us what the end game for every fiat money system looks like (and perhaps Janet and her colleagues should remember that).
Here is the video that was mentioned in the excerpt above. As you watch this, please keep in mind that the United States is on the exact same path that Venezuela has gone down…
Economic chaos is beginning to erupt all over the planet, and the depression that we are entering into will truly be global in scope.
For the moment, many in the United States still believe that what is going on in the rest of the world will not affect us. But the truth is that we are also right on the verge of a major financial crisis, and it is going to be even worse than what we experienced back in 2008.
So what do you think about what is going on down in South America?
Please feel free to add to the discussion by posting a comment below…