The Beginning Of The End
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Bubbles, Bubbles Everywhere

Financial Bubbles - Public DomainIs there any doubt that we are living in a bubble economy?  At this moment in the United States we are simultaneously experiencing a stock market bubble, a government debt bubble, a corporate bond bubble, a bubble in San Francisco real estate, a farmland bubble, a derivatives bubble and a student loan debt bubble.  And of course similar things could be said about most of the rest of the planet as well.  In fact, the total amount of government debt around the world has risen by about 40 percent just since the last recession.  But it is never sustainable when asset prices and debt levels increase much faster than the overall level of economic growth.  History has shown us that all financial bubbles eventually burst.  And when these current financial bubbles in America burst, the pain is going to be absolutely enormous.

You know that things are getting perilous when even the New York Times starts pointing out financial bubbles everywhere.  The following is a short excerpt from a recent NotQuant article

The New York Times points out that just about everything on Earth is expensive by historical standards.   And then asks the seemingly obvious question:  Does that make it a bubble?

Welcome to the Everything Boom — and, quite possibly, the Everything Bubble. Around the world, nearly every asset class is expensive by historical standards. Stocks and bonds; emerging markets and advanced economies; urban office towers and Iowa farmland; you name it, and it is trading at prices that are high by historical standards relative to fundamentals. The inverse of that is relatively low returns for investors.

Quite possibly?”  We’re not sure what definition of the word “bubble” they’re using.   But in our book when the price of literally everything blasts upwards, obliterating the previous ceilings of historical benchmarks, it’s a pretty good indication that you’re in a bubble.

Of course when most people think of financial bubbles the very first thing they think of is the stock market.  And without a doubt we are in a stock market bubble right now.  The Dow has risen more than 10,000 points since the depths of the last recession.  And it is nearly 3,000 points higher than it was at the peak of the last stock market bubble in 2007 when our economy was far stronger than it is now…

Dow Jones Industrial Average 2014

But of course these stock prices do not reflect economic reality in any way whatsoever.  Our economy has not even come close to recovering to the level it was at prior to the last financial crisis, and yet thanks to massive Federal Reserve money printing stock prices have soared to unprecedented heights.

At some point a massive correction is coming.  No stock market bubble lasts forever.  For a whole bunch of technical reasons why serious market turmoil is on the horizon, please see a recent Forbes article entitled “These 23 Charts Prove That Stocks Are Heading For A Devastating Crash“.

The bubbles in the financial markets have become so glaring that even the central bankers are starting to warn us about them.  For example, just consider what the Bank for International Settlements is saying

The Bank for International Settlements has warned that “euphoric” financial markets have become detached from the reality of a lingering post-crisis malaise, as it called for governments to ditch policies that risk stoking unsustainable asset booms.

While the global economy is struggling to escape the shadow of the crisis of 2007-09, capital markets are “extraordinarily buoyant”, the Basel-based bank said, in part because of the ultra-low monetary policy being pursued around the world. Leading central banks should not fall into the trap of raising rates “too slowly and too late”, the BIS said, calling for policy makers to halt the steady rise in debt burdens around the world and embark on reforms to boost productivity.

In its annual report, the BIS also warned of the risks brewing in emerging markets, setting out early warning indicators of possible banking crises in a number of jurisdictions, including most notably China.

“Particularly for countries in the late stages of financial booms, the trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on,” it said.

Sadly, just like in 2007, most people are choosing not to listen to these warnings.

Another very troubling bubble that is brewing is the massive bubble of consumer credit in the United States.  According to the Wall Street Journal, consumer credit in the United States increased at a 7.4 percent annual rate in May…

The Federal Reserve reported Tuesday that consumer credit—consumer loans excluding real estate debt—in May increased at an annual rate of 7.4% to a record $3.195 trillion. Most of that gain came from a 9.3% increase in nonrevolving credit, the bulk of which is accounted for by auto and student loans. Revolving credit, which is primarily credit-card debt, expanded at a more muted 2.5% rate after jumping 12.3% in May.

That might be okay if our paychecks were increasing at a 7.4% annual rate, but that is not the case at all.  In fact, median household income in America has gone down for five years in a row.  As the quality of our jobs goes down the drain, our paychecks are shrinking even as our bills go up.  This is putting an incredible amount of stress on tens of millions of American families.

And when you look at the overall debt bubble in this country, things become even more frightening.

In a previous article, I shared a chart which shows the incredible growth of total debt in the United States.  Over the past 40 years, it has gone from about 2.2 trillion dollars to nearly 60 trillion dollars

Total Debt

 

Is this sustainable?

Of course not.

None of these financial bubbles are.

It is not a question of “if” they will burst.  It is only a question of “when”.

And some believe that we are rapidly approaching that point.  In fact, Marc Faber believes that we are seeing signs that it may be starting to happen already…

It’s the question investors everywhere are wrestling with: Are asset prices in a bubble, or do they simply reflect the fact that the global economy is growing once again?

For Marc Faber, editor of the Gloom, Boom & Doom Report, the answer is clear. In fact, he says the bubble may already be bursting.

“I think it’s a colossal bubble in all asset prices, and eventually it will burst, and maybe it has begun to burst already,” Faber said Tuesday on CNBC’s ‘Futures Now‘ as the S&P 500 lost ground for the second-straight session.

So what do you think?

How much time do you believe that we have before these bubbles start to burst?

Please feel free to share your thoughts by posting a comment below…

83 Numbers From 2013 That Are Almost Too Crazy To Believe

83 SignsDuring 2013, America continued to steadily march down a self-destructive path toward oblivion.  As a society, our debt levels are completely and totally out of control.  Our financial system has been transformed into the largest casino on the entire planet and our big banks are behaving even more recklessly than they did just before the last financial crisis.  We continue to see thousands of businesses and millions of jobs get shipped out of the United States, and the middle class is being absolutely eviscerated.  Due to the lack of decent jobs, poverty is absolutely exploding.  Government dependence is at an all-time high and crime is rising.  Evidence of social and moral decay is seemingly everywhere, and our government appears to be going insane.  If we are going to have any hope of solving these problems, the American people need to take a long, hard look in the mirror and finally admit how bad things have actually become.  If we all just blindly have faith that “everything is going to be okay”, the consequences of decades of incredibly foolish decisions are going to absolutely blindside us and we will be absolutely devastated by the great crisis that is rapidly approaching.  The United States is in a massive amount of trouble, and it is time that we all started facing the truth.  The following are 83 numbers from 2013 that are almost too crazy to believe…

#1 Most people that hear this statistic do not believe that it is actually true, but right now an all-time record 102 million working age Americans do not have a job.  That number has risen by about 27 million since the year 2000.

#2 Because of the lack of jobs, poverty is spreading like wildfire in the United States.  According to the most recent numbers from the U.S. Census Bureau, an all-time record 49.2 percent of all Americans are receiving benefits from at least one government program each month.

#3 As society breaks down, the government feels a greater need than ever before to watch, monitor and track the population.  For example, every single day the NSA intercepts and permanently stores close to 2 billion emails and phone calls in addition to a whole host of other data.

#4 The Bank for International Settlements says that total public and private debt levels around the globe are now 30 percent higher than they were back during the financial crisis of 2008.

#5 According to a recent World Bank report, private domestic debt in China has grown from 9 trillion dollars in 2008 to 23 trillion dollars today.

#6 In 1985, there were more than 18,000 banks in the United States.  Today, there are only 6,891 left.

#7 The six largest banks in the United States (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley) have collectively gotten 37 percent larger over the past five years.

#8 The U.S. banking system has 14.4 trillion dollars in total assets.  The six largest banks now account for 67 percent of those assets and all of the other banks account for only 33 percent of those assets.

#9 JPMorgan Chase is roughly the size of the entire British economy.

#10 The five largest banks now account for 42 percent of all loans in the United States.

#11 Right now, four of the “too big to fail” banks each have total exposure to derivatives that is well in excess of 40 trillion dollars.

#12 The total exposure that Goldman Sachs has to derivatives contracts is more than 381 times greater than their total assets.

#13 According to the Bank for International Settlements, the global financial system has a total of 441 trillion dollars worth of exposure to interest rate derivatives.

#14 Through the end of November, approximately 365,000 Americans had signed up for Obamacare but approximately 4 million Americans had already lost their current health insurance policies because of Obamacare.

#15 It is being projected that up to 100 million more Americans could have their health insurance policies canceled by the time Obamacare is fully rolled out.

#16 At this point, 82.4 million Americans live in a home where at least one person is enrolled in the Medicaid program.

#17 It is has been estimated that Obamacare will add 21 million more Americans to the Medicaid rolls.

#18 It is being projected that health insurance premiums for healthy 30-year-old men will rise by an average of 260 percent under Obamacare.

#19 One couple down in Texas received a letter from their health insurance company that informed them that they were being hit with a 539 percent rate increase because of Obamacare.

#20 Back in 1999, 64.1 percent of all Americans were covered by employment-based health insurance.  Today, only 54.9 percent of all Americans are covered by employment-based health insurance.

#21 The U.S. government has spent an astounding 3.7 trillion dollars on welfare programs over the past five years.

#22 Incredibly, 74 percent of all the wealth in the United States is owned by the wealthiest 10 percent of all Americans.

#23 According to Consumer Reports, the number of children in the United States taking antipsychotic drugs has nearly tripled over the past 15 years.

#24 The marriage rate in the United States has fallen to an all-time low.  Right now it is sitting at a yearly rate of just 6.8 marriages per 1000 people.

#25 According to a shocking new study, the average American that turned 65 this year will receive $327,500 more in federal benefits than they paid in taxes over the course of their lifetimes.

#26 In just one week in December, a combined total of more than 2000 new cold temperature and snowfall records were set in the United States.

#27 According to the U.S. Census Bureau, median household income in the United States has fallen for five years in a row.

#28 The rate of homeownership in the United States has fallen for eight years in a row.

#29 Only 47 percent of all adults in America have a full-time job at this point.

#30 The unemployment rate in the eurozone recently hit a new all-time high of 12.2 percent.

#31 If you assume that the labor force participation rate in the U.S. is at the long-term average, the unemployment rate in the United States would actually be 11.5 percent instead of 7 percent.

#32 In November 2000, 64.3 percent of all working age Americans had a job.  When Barack Obama first entered the White House, 60.6 percent of all working age Americans had a job.  Today, only 58.6 percent of all working age Americans have a job.

#33 There are 1,148,000 fewer Americans working today than there was in November 2006.  Meanwhile, our population has grown by more than 16 million people during that time frame.

#34 Only 19 percent of all Americans believe that the job market is better than it was a year ago.

#35 Just 14 percent of all Americans believe that the stock market will rise next year.

#36 According to CNBC, Pinterest is currently valued at more than 3 billion dollars even though it has never earned a profit.

#37 Twitter is a seven-year-old company that has never made a profit.  It actually lost 64.6 million dollars last quarter.  But according to the financial markets it is currently worth about 22 billion dollars.

#38 Right now, Facebook is trading at a valuation that is equivalent to approximately 100 years of earnings, and it is currently supposedly worth about 115 billion dollars.

#39 Total consumer credit has risen by a whopping 22 percent over the past three years.

#40 Student loans are up by an astounding 61 percent over the past three years.

#41 At this moment, there are 6 million Americans in the 16 to 24-year-old age group that are neither in school or working.

#42 The “inactivity rate” for men in their prime working years (25 to 54) has just hit a brand new all-time record high.

#43 It is hard to believe, but in America today one out of every ten jobs is now filled by a temp agency.

#44 Middle-wage jobs accounted for 60 percent of the jobs lost during the last recession, but they have accounted for only 22 percent of the jobs created since then.

#45 According to the Social Security Administration, 40 percent of all U.S. workers make less than $20,000 a year.

#46 Approximately one out of every four part-time workers in America is living below the poverty line.

#47 After accounting for inflation, 40 percent of all U.S. workers are making less than what a full-time minimum wage worker made back in 1968.

#48 When Barack Obama took office, the average duration of unemployment in this country was 19.8 weeks.  Today, it is 37.2 weeks.

#49 Investors pulled an astounding 72 billion dollars out of bond mutual funds in 2013.  It was the worst year for bond funds ever.

#50 Small business is rapidly dying in America.  At this point, only about 7 percent of all non-farm workers in the United States are self-employed.  That is an all-time record low.

#51 The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

#52 Once January 1st hits, it will officially be illegal to manufacture or import traditional incandescent light bulbs in the United States.  It is being projected that millions of Americans will attempt to stock up on the old light bulbs before they are totally gone from store shelves.

#53 The Japanese government has estimated that approximately 300 tons of highly radioactive water is being released into the Pacific Ocean from the destroyed Fukushima nuclear facility every single day.

#54 Back in 1967, the U.S. military had more than 31,000 strategic nuclear warheads.  That number is already being cut down to 1,550, and now Barack Obama wants to reduce it to only about 1,000.

#55 As you read this, 60 percent of all children in Detroit are living in poverty and there are approximately 78,000 abandoned homes in the city.

#56 Wal-Mart recently opened up two new stores in Washington D.C., and more than 23,000 people applied for just 600 positions.  That means that only about 2.6 percent of the applicants were ultimately hired.  In comparison, Harvard offers admission to 6.1 percent of their applicants.

#57 At this point, almost half of all public school students in America come from low income homes.

#58 Tragically, there are 1.2 million students that attend public schools in the United States that are homeless.  That number has risen by 72 percent since the start of the last recession.

#59 According to a Gallup poll that was recently released, 20.0 percent of all Americans did not have enough money to buy food that they or their families needed at some point over the past year.  That is just under the all-time record of 20.4 percent that was set back in November 2008.

#60 The number of Americans on food stamps has grown from 17 million in the year 2000 to more than 47 million today.

#61 Right now, one out of every five households in the United States is on food stamps.

#62 The U.S. economy loses approximately 9,000 jobs for every 1 billion dollars of goods that are imported from overseas.

#63 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, less than 65 percent of all men in the United States have jobs.

#64 According to one survey, approximately 75 percent of all American women do not have any interest in dating unemployed men.

#65 China exports 4 billion pounds of food to the United States every year.

#66 Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.

#67 The number of Americans on Social Security Disability now exceeds the entire population of Greece, and the number of Americans on food stamps now exceeds the entire population of Spain.

#68 It is being projected that the number of Americans on Social Security will rise from 57 million today to more than 100 million in 25 years.

#69 Back in 1970, the total amount of debt in the United States (government debt + business debt + consumer debt, etc.) was less than 2 trillion dollars.  Today it is over 56 trillion dollars.

#70 Back on September 30th, 2012 our national debt was sitting at a total of 16.1 trillion dollars.  Today, it is up to 17.2 trillion dollars.

#71 The U.S. government “rolled over” more than 7.5 trillion dollars of existing debt in fiscal 2013.

#72 If the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.

#73 When Barack Obama was first elected, the U.S. debt to GDP ratio was under 70 percent.  Today, it is up to 101 percent.

#74 The U.S. national debt is on pace to more than double during the eight years of the Obama administration.  In other words, under Barack Obama the U.S. government will accumulate more debt than it did under all of the other presidents in U.S. history combined.

#75 The federal government is borrowing (stealing) roughly 100 million dollars from our children and our grandchildren every single hour of every single day.

#76 At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

#77 Japan now has a debt to GDP ratio of more than 211 percent.

#78 As of December 5th, 83 volcanic eruptions had been recorded around the planet so far this year.  That is a new all-time record high.

#79 53 percent of all Americans do not have a 3 day supply of nonperishable food and water in their homes.

#80 Violent crime in the United States was up 15 percent last year.

#81 According to a very surprising survey that was recently conducted, 68 percent of all Americans believe that the country is currently on the wrong track.

#82 Back in 1972, 46 percent of all Americans believed that “most people can be trusted”.  Today, only 32 percent of all Americans believe that “most people can be trusted”.

#83 According to a recent Pew Research survey, only 19 percent of all Americans trust the government.   Back in 1958, 73 percent of all Americans trusted the government.

So do you have any numbers from 2013 that you would add to this list?  If so, please feel free to share them by posting a comment below…

Debt Levels Are Skyrocketing To Extremely Dangerous Levels – How Long Can This Possibly Keep Going?

SkyrocketingNever before has the world faced such a serious debt crisis.  Yes, in the past there have certainly been nations that have gotten into trouble with debt, but we have never had a situation where virtually all of the major powers around the globe were all drowning in debt at the same time.  And what makes this crisis even more unprecedented is that everyone on the planet is using fiat currency that is backed up by nothing.  It is all just a bunch of paper and data points that people have faith in.  Right now, confidence in this system is being shaken as debt levels skyrocket to extremely dangerous levels.  Many are openly wondering how much longer this can possibly go on.

Just consider what is going on over in Europe right now.  Even the countries that have supposedly “tried austerity” continue to rack up debt at a mind blowing pace.  New numbers that have just been released show that government debt to GDP ratios for some of the most financially troubled nations in Europe are absolutely soaring

  • Euroarea: 92.2%, up from 88.2% a year ago
  • Greece: 160.5%, up from 136.5% a year ago
  • Italy: 130.3%; up from 123.8% a year ago
  • Portugal: 127.2%, up from 112.3% a year ago
  • Ireland: 125.1%, up from 106.8% a year ago
  • Spain: 88.2%, up from 73.0% a year ago
  • Netherlands: 72.0%, up from 66.7% a year ago

Meanwhile, the debt to GDP ratio in Japan is now well past the 200% mark and continues to march upward with no apparent end in sight.  The following is from a recent MSN article

In Japan, the good news is that the nation’s budget for the fiscal year, which started on April 1, will see the government raise a higher percentage of spending from tax revenue than at any other time in the past four years. The bad news is that the government will still cover 46.3% of its spending from borrowing. The Organisation for Economic Cooperation and Development estimates that Japan’s budget deficit for 2013 amounted to 10.3% of gross domestic product.

In China, the big problem is the absolutely stunning growth of private domestic debt.  According to a recent World Bank report, the total amount of credit in China has risen from 9 trillion dollars in 2008 to 23 trillion dollars today.

That increase is roughly equivalent to the entire U.S. commercial banking system.

According to financial journalist Ambrose Evans-Pritchard, the ratio of private domestic debt to GDP in China is now wildly out of control…

The 160pc debt ratio for China is based on a conservative measure of credit. Fitch says it is 200pc if you count all offshore vehicles, trusts, letters of credit etc.

This morning China Securities Journal – an arm of the regulators – said it may really be 221pc.

Well, what about the United States?

As I noted the other day, our ratio of federal government debt to GDP has shot up like a rocket since 2008…

National Debt As A Percentage Of GDP

At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.  It is a giant mess, and yet our politicians continue to recklessly spend more money.

And of course state and local governments all over the nation are drowning in debt too.  The bankruptcy of Detroit is forcing people to come to grips with how bad things really are.  Sadly, as Meredith Whitney explained the other day, there are going to be a lot more municipal bankruptcies coming down the pipeline…

As jarring as the reality may be to accept, Detroit’s decision last week to declare bankruptcy should not be regarded as a one-off in the US municipal market – which is what the bond-peddlers are now telling their clients. The aftershocks of the largest municipal bankruptcy in US history will be staggering, and Detroit will set important precedents.

Municipal bankruptcies have historically been rare for a number of reasons – including the states’ determination to preserve their credit ratings, their access to cheap funding and the stigma of bankruptcy. But, these days, things are very different in the world of municipal finance.

At the root of the problem is the incentive system that elected officials used to face. For decades, across the US, local leaders ran up tabs for future taxpayers; they promised pensions and other benefits for public employees that have strong legal protection. That has been a great source of patronage for elected officials: they can promise all sorts of future perks to loyal supporters (state and local workers) with very little accountability on the delivery of those promises.

And of course the overall debt level in the United States continues to grow much, much faster than our overall economy is growing.

The greatest debt bubble in the history of the planet is still expanding.

How long will it be before it bursts?

That is a very good question.  For now, our “leaders” appear to just be trying to keep the party going for as long as possible.  They know that if they suddenly change course hard times will hit almost immediately.  For example, just check out what Federal Reserve Chairman Ben Bernanke told Congress last week

With the economy still facing risks, especially from government spending cuts, Bernanke told a congressional panel on Wednesday the Fed is still planning to trim its quantitative easing stimulus, if growth continues at a steady pace.

But expectations that the Fed was poised to start tightening monetary policy, which have sent interest rates jumping and sparked turmoil in global markets, were unwarranted, he stressed.

“I don’t think the Fed can get interest rates up very much, because the economy is weak, inflation rates are low,” Bernanke told the House Financial Services Committee.

“If we were to tighten policy, the economy would tank.”

Nobody wants the economy to “tank”, but the truth is that the more debt that we run up, the larger our long-term economic problems become.

And a growing percentage of Americans realize that something has seriously gone wrong.  According to a recent Pew Research survey, 44% of all Americans believe that an economic recovery is still “a long way off“.

Unfortunately, the reality of the matter is that we are already living in the “economic recovery”.

This is about as good as it is going to get.

The truth is that the real storm has not even hit yet.  When the debt bubble finally bursts, we are going to see economic chaos in this country unlike anything that we have ever experienced before.

I hope that you are getting ready.

Money Is A Form Of Social Control And Most Americans Are Debt Slaves

Money Is A Form Of Social Control And Most Americans Are Debt Slaves - Photo by Serge Melki from Indianapolis, USAIs America really “the land of the free”?  Most people think of money as simply a medium of exchange that makes economic transactions more convenient, but the truth is that it is much more than that.  Money is also a form of social control.  Just think about it.  What did you do this morning?  Well, if you are like most Americans, you either got up and went to work (to make money) or to school (to learn the skills that you will need to make money).  We spend a great deal of our lives pursuing the almighty dollar, and there are literally millions of laws, rules and regulations about how we earn our money, about how we spend our money and about how much of our money the government gets to take from us.  Not that money is a bad thing in itself.  Without money, it would be really hard to have a modern society.  Unfortunately, our money is based on debt, and debt levels in the United States have exploded to absolutely unprecedented levels in recent years.  The borrower is the servant of the lender, and if you are like most Americans, nearly every major purchase that you make in your life is going to involve debt.  Do you want to get a college education so that you can get a “good job”?  You are told to get a student loan.  Do you want a car?  You are encouraged to get an auto loan and to stretch out the payments for as long as possible.  Do you want a home?  You are probably going to end up with a big fat mortgage.  And of course I could go on and on and on.  The cold, hard truth of the matter is that most Americans are debt slaves.  Most of us spend our entire lives trapped in an endless cycle of debt that we never escape until we die, and meanwhile our years of hard labor are greatly enriching those that own our debts.

Have you ever found yourself wondering why you can never seem to get ahead financially no matter how hard you work?

Well, it is probably because you have gotten yourself enslaved to debt.

Just consider the following example about credit card debt from a former Goldman Sachs banker

On the debt side of things, how much does your credit card company earn if you carry just an average of a $5,000 credit card balance, paying, say, 22% annual interest rate (compounding monthly) for the next 10 years?

In your mind you owe a balance of only $5,000, which is not a huge amount, especially for someone gainfully employed.  After all, $5,000 is just a quick Disney trip, or a moderately priced ski-trip, or that week in Hawaii.  You think to yourself, “how bad could it be?”

The answer, including the cost of monthly compounding, is $44,235, or about 9 times what it appears to cost you at face value.

But a large percentage of Americans never pay off their credit cards at all.  They make small payments each month, but then they just keep on adding to their balances.

In the end, that is financial suicide.

If you carry an “average balance” on your credit cards each month, and those credit cards have an “average” interest rate, you could end up paying millions of dollars to the credit card companies by the end of your life…

Let’s say you are an average American household, and you carry an average balance of $15,956 in credit card debt.

Also, as an average American household, let’s assume you pay an average current rate of 12.83%.

Finally, let’s assume you carry this average balance for 40 years, between ages 25 and 65.  How much did your credit card company make off of you and your extreme averageness?

Answer: $2,629,618.64

Sadly, approximately 46% of all Americans carry a credit card balance from month to month.

How stupid can we be as a nation?

When you become enslaved to the credit card companies, your toil and sweat makes them much wealthier.  It is a form of slavery that does not require anyone pointing a gun at you.

But we never seem to learn.  Incredibly, 43 percent of all American families spend more than they earn each year.

As the chart below demonstrates, consumer credit actually declined for a short while during the last recession, but now it has turned around and the growth of consumer credit is on the same trajectory as it was before the last economic crisis…

Consumer Debt

Today, the total amount of consumer credit in the United States is 15 times larger than it was 40 years ago.

And every major “milestone” in our lives typically involves even more debt.

-The total amount of student loan debt in the United States recently passed a trillion dollars, and approximately two-thirds of all college students graduate with student loan debt at this point.

-Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago, and mortgage debt as a percentage of GDP has more than tripled since 1955.

-Car loans just keep getting longer and longer, and approximately 70 percent of all car purchases in the United States now involve an auto loan.

-Want to get married?  That average cost of a wedding is now $26,989 which is probably going to mean even more debt unless you have wealthy parents.

-Do you have a serious medical problem?  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.

Are you starting to understand why approximately half of all Americans die broke?

And I have not even begun to talk about our collective debts yet.

Government debt is a collective form of debt.  You may not have voted for any of the politicians that have been racking up debt in your name, but part of it still belongs to you.

Since the year 2000, state and local government debt has more than doubled.  These are collective debts for which we are all responsible…

State And Local Government Debt

And of course the biggest collective debt of all is the U.S. national debt.

In a previous article, I discussed how the national debt has exploded out of control in recent years.  If you can believe it, the U.S. debt to GDP ratio has increased from 66.6 percent to 103 percent since 2007, and the U.S. government accumulated more new debt during Barack Obama’s first term than it did under the first 42 U.S. presidents combined.

When you break things down by household, the numbers look even more frightening.

During Barack Obama’s first four years in the White House, the amount of new debt accumulated by the federal government breaks down to approximately $50,521 for every single household in the United States.

And as I have mentioned previously, if you started paying off just the new debt that the federal government has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.

Well, you might argue, none of that debt will ever be paid off in our lifetimes.

And you would be right.

But what we are doing is consigning our children, our grandchildren and all future generations of Americans to a lifetime of debt slavery.

How nice of us, eh?

Over the past 10 years, the U.S. national debt has grown by an average of 9.3 percent per year, but the overall U.S. economy has only grown by an average of just 1.8 percent per year.

How do we expect to continue doing this?

Fortunately, more Americans are starting to wake up to how foolish all of this is.

For example, the following is what Home Depot Founder Kenneth Langone told CNBC on Tuesday…

“The fundamentals haven’t changed … And we don’t know when the storm is going to hit,” he predicted. “It has to happen.If you look at our debt to GDP, eventually you reach a point where there’s no turning back.”

He used an analogy to make his point. “If you had one meal left, and you had your grandchild with you, would you eat if or give it to your grandchild?”

He said all people would say “give it to my grandchild.”

But pursuing the president’s vision, he argued, “[Is] eating the grandchildren’s breakfast, lunch and dinner right now. And the [grandchildren] haven’t been born yet.”

What we are doing to our children and our grandchildren is beyond criminal.  We are selling away their futures in order to make our lives more pleasant.

Right now, we are stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day.

So where is the outrage over this theft?

Sadly, most Americans don’t even realize that all of this is by design.  When the Federal Reserve system was created back in 1913, it was designed to get the U.S. government trapped in an endless spiral of debt.

And it worked.  Today, the U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created.

Our society has become addicted to debt, and that means that we have become addicted to slavery.

We are not the “land of the free”.  The truth is that we are now the “land of the servants”.

Over the past 40 years, the total amount of debt owed in the United States (government, business, consumer, etc.) has grown from less than 2 trillion dollars to more than 55 trillion dollars

Total Credit Market Debt Owed

So who benefits from all of this?

I talked about this in a previous article.  The ultra-wealthy and the international bankers make enormous profits by lending money to all the rest of us.

According to a stunning report that was released last summer, the global elite have up to 32 trillion dollars stashed away in offshore tax havens around the globe.

How did they get so much money?

The borrower is the servant of the lender.  They have gotten rich at our expense.

But most people live their entire lives without ever understanding how the game is being played.

Today, most Americans see that the Dow is back above 14,000 and they hear the mainstream media telling them that happy days are here again and so they just believe that things are going to turn out okay somehow.

And it certainly does not help that most people seem to let others do their thinking for them.  In fact, about 23% of all Americans can’t even read at this point.

So is there any hope for us?

Please feel free to post a comment with your opinion below…

Money - Photo by selbstfotografiert

Poverty In America: A Special Report

America is getting poorer.  The U.S. government has just released a bunch of new statistics about poverty in America, and once again this year the news is not good.  According to a special report from the U.S. Census Bureau, 46.2 million Americans are now living in poverty.  The number of those living in poverty in America has grown by 2.6 million in just the last 12 months, and that is the largest increase that we have ever seen since the U.S. government began calculating poverty figures back in 1959.  Not only that, median household income has also fallen once again.  In case you are keeping track, that makes three years in a row.  According to the U.S. Census Bureau, median household income in the United States dropped 2.3% in 2010 after accounting for inflation.  Overall, median household income in the United States has declined by a total of 6.8% once you account for inflation since December 2007.  So should we be excited that our incomes are going down and that a record number of Americans slipped into poverty last year?  Should we be thrilled that the economic pie is shrinking and that our debt levels are exploding?  All of those that claimed that the U.S. economy was recovering and that everything was going to be just fine have some explaining to do.

Back in the year 2000, 11.3% of all Americans were living in poverty.  Today, 15.1% of all Americans are living in poverty.  The last time the poverty level was this high was back in 1993.

However, it is important to keep in mind that the government definition of poverty rises based on the rate of inflation.  If inflation was still calculated the way that it was 30 or 40 years ago, the poverty line would be much, much higher and millions more Americans would be considered to be living in poverty.

So why is poverty in America exploding?  Who is getting hurt the most?  How is America being changed by this?  What is the future going to look like if we remain on the current path?

Let’s take a closer look at poverty in America….

The Shrinking Number Of Jobs

Unemployment is rampant and the number of good jobs continues to shrink.  Once upon a time in America, if you really wanted a job you could go out and get one.  Today, competition for even the lowest paying jobs has become absolutely brutal.  There simply are not enough chairs at the “economic table”, and not being able to get a good job is pushing large numbers of Americans into poverty…..

*There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million people to the population since then.

*Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job.  In July, only 81.2 percent of men in that age group had a job.

*If you gathered together all of the unemployed people in the United States, they would constitute the 68th largest country in the world.

*According to John Williams of shadowstats.com, if you factored in all of the short-term discouraged workers, all of the long-term discouraged workers and all of those working part-time because they cannot find full-time employment, the real unemployment rate right now would be approximately 23 percent.

*If you have been unemployed for at least one year, there is a 91 percent chance that you will not find a new job within the next month.

The Working Poor

The number of low income jobs is rising while the number of high income jobs is falling.  This has created a situation where the number of “the working poor” in America is absolutely skyrocketing.  Millions of Americans are working as hard as they can and yet they still cannot afford to lead a middle class lifestyle.

*Since the year 2000, we have lost approximately 10% of our middle class jobs.  In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.

*Back in 1980, less than 30% of all jobs in the United States were low income jobs.  Today, more than 40% of all jobs in the United States are low income jobs.

*Between 1969 and 2009, the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation.

*According to a report released in February from the National Employment Law Project, higher wage industries are accounting for 40 percent of the job losses in America but only 14 percent of the job growth.  Lower wage industries are accounting for just 23 percent of the job losses but 49 percent of the job growth.

*Half of all American workers now earn $505 or less per week.

*Last year, 19.7% of all U.S. working adults had jobs that would not have been enough to push a family of four over the poverty line even if they had worked full-time hours for the entire year.

*The number of Americans that are going to food pantries and soup kitchens has increased by 46% since 2006.

Unprecedented Dependence On The Government

Because they cannot get good jobs that will enable them to support themselves and their families, millions of Americans that used to be hard working contributors to society are now dependent on government handouts.  Nearly every single measure of government dependence is at a record high, and there are no signs that things are going to turn around any time soon.

*One out of every six Americans is now enrolled in at least one government anti-poverty program.

*Nearly 10 million Americans now receive unemployment benefits.  That number is almost four times larger than it was back in 2007.

*More than 45 million Americans are now on food stamps.  The number of Americans on food stamps has increased 74% since 2007.

*Approximately one-third of the entire population of Alabama is now on food stamps.

*More than 50 million Americans are now on Medicaid.

*Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, approximately one out of every 6 Americans is on Medicaid.

*In 1980, just 11.7% of all personal income came from government transfer payments.  Today, 18.4% of all personal income comes from government transfer payments.

The Suffocating Cost Of Health Care

Millions of American families are being financially crippled by health care costs.  The U.S. health care system is deeply, deeply broken and Obamacare is going to make things even worse.  Health care is one of the top reasons why American families get pushed into poverty.  Most of us are just one major illness or disease from becoming financially wrecked.  Just ask anyone that has gone through it.  The health insurance companies do not care about you and they will try to wiggle out of their obligations at the time when you need them the most.  If you talk to people that have been through bankruptcy, most of them will tell you that medical bills were at least partially responsible.

*In America today, there are 49.9 million Americans that do not have any health insurance.  One single medical bill could easily wipe out the finances of most of those people.

*Only 56 percent of Americans are currently covered by employer-provided health insurance.

*According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

*According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980.  Today they account for approximately 16.3%.

More Children Living In Poverty

The United States has a child poverty rate that is more than twice as high as many European nations.  We like to think that we have “the greatest economy on earth”, but the reality is that we have one of the highest child poverty rates and it increased once again last year.

*The poverty rate for children living in the United States increased to 22% in 2010.  That means that tonight more than one out of every five U.S. children is living in poverty.

*The poverty rate for U.S. adults is only 13.7%.

*Households that are led by a single mother have a 31.6% poverty rate.

*Today, one out of every four American children is on food stamps.

*It is being projected that approximately 50 percent of all U.S. children will be on food stamps at some point in their lives before they reach the age of 18.

*There are 314 counties in the United States where at least 30% of the children are facing food insecurity.

*More than 20 million U.S. children rely on school meal programs to keep from going hungry.

*It is estimated that up to half a million children may currently be homeless in the United States.

The Plight Of The Elderly

The elderly are also falling into poverty in staggering numbers.  They may not be out protesting in the streets, but that does not mean that they are not deeply, deeply suffering.

*One out of every six elderly Americans now lives below the federal poverty line.

*Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

*The Baby Boomers have only just begun to retire, and already our social programs for seniors are starting to fall apart.  In 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers.  According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

Squeezed By Inflation

Rising inflation is squeezing the budgets of average American families like never before.  Federal Reserve Chairman Ben Bernanke claims that inflation is still low, but either he is delusional or he has not been to a supermarket lately.

Personally, I do a lot of grocery shopping at a number of different stores, and without a doubt prices are absolutely soaring.  Many of the new “sale prices” are exactly what the old “regular prices” were just a few weeks ago.

Some companies have tried to hide these price increases by shrinking package sizes.  But there is no hiding the pain on the old wallet once you fill up your cart with what you need to feed your family.

*Over the past year, the global price of food has risen by 37 percent and this has pushed approximately 44 million more people around the world into poverty.

*U.S. consumers will spend approximately $491 billion on gas this year.  That is going to be a brand new all-time record.

*Right now, the average price of a gallon of gasoline in the United States is $3.649.  That is 94 cents higher than 12 months earlier and it is a brand new record for this time of the year.

A Smaller Share Of The Pie

The size of the “economic pie” in America is shrinking, and the share of the pie for those that are poor is shrinking a lot faster than the share of the pie for those that are wealthy.

*According to the Washington Post, the average yearly income of the bottom 90 percent of all U.S. income earners is now just $31,244.

*When you look at the ratio of employee compensation to GDP, it is now the lowest that is has been in about 50 years.

*At this point, the poorest 50% of all Americans now control just 2.5% of all of the wealth in this country.

*Big corporations are even recognizing the change that is happening to America. Just consider the following example from a recent article in the Huffington Post….

Manufacturers like Procter & Gamble, the household-goods giant responsible for everything from Charmin and Old Spice to Tide, are concentrating their efforts on luxury and bargain items, putting less emphasis on products aimed at the middle class, the Wall Street Journal reports.

Conclusion

America is fundamentally changing.  We were a nation that had the largest middle class in the history of the globe, but now we are becoming a nation that is deeply divided between the haves and the have nots.

Perhaps you are still doing fine.  But don’t think that economic disaster cannot strike you.  Every single day, thousands more Americans will lose their jobs or will discover a major health problem.  Every single day, thousands more Americans will lose their homes or will be forced to take a pay cut.

If you still have a warm, comfortable home to sleep in, you should be thankful.  Poverty is a very sneaky enemy and it can strike at any time.  If you are not careful, you might be the next American to end up sleeping in your car or living in a tent city.

It is easy to disregard a couple of statistics, but can you really ignore the vast amount of evidence presented above?

It is undeniable that America is getting poorer.  Poverty is spreading and hopelessness and despair are rising.  There is a reason why the economy is the number one political issue right now.  Millions upon millions of Americans are in deep pain and they want some solutions.

Unfortunately, it appears quite unlikely that either major political party is going to offer any real solutions any time soon.  So things are going to keep getting worse and worse and worse.

Should we just keep doing the same things that we have been doing over and over and over and yet keep expecting different results?

What we are doing right now is not working.  We are in the midst of a long-term economic decline.  Both major political parties have been fundamentally wrong about the economy.  It is time to admit that.

If we continue on this path, poverty in America is going to continue to get a lot worse.  Millions of families will be torn apart and millions of lives will be destroyed.

America please wake up.

Time is running out.

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