New DVDs By Michael Snyder
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 For a moment, imagine that there is a privately-owned organization in the United States that can create U.S. dollars out of thin air whenever it wants and can loan that money to whoever it wants to. Imagine that this organization is able to act with the full power of the U.S. government behind it, but that nobody in the organization is ever elected by the American people, and that for all practical purposes the organization is not accountable to the president or to Congress. Imagine that the organization is able to make trillions of dollars of secret loans to banks, to foreign governments and even to their close friends without ever having to face a comprehensive audit. Does that sound preposterous? Well, such an organization actually exists. It is called the Federal Reserve, and today we found out that once again the Fed is going to be taking huge piles of your money and loaning it to commercial banks in Europe. The Congress cannot overrule this decision. Neither can Barack Obama. Because it has so much power, many refer to the Federal Reserve as “the fourth branch of government”, but unlike the other three branches of government, there are basically no significant “checks and balances” on the Federal Reserve. If you don’t like the fact that the Federal Reserve is racing in to help big foreign banks survive the European debt crisis that is just too bad. The Federal Reserve pretty much gets to do whatever it wants to do, and the folks over at the Fed simply do not care whether you like that or not.
So what in the world just happened today? The following is how an article on CNBC explained it….
Just ahead of the Wall Street open Thursday, the European Central Bank, along with the U.S. Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank announced they would offer three-month dollar loans to Europe’s commercial banks, easing dollar funding constraints.
It must be nice to do whatever you want without having to get the approval of anyone else.
What do you think Barack Obama would give for such power right about now?
The Federal Reserve and other major central banks around the world decided that lending big European banks gigantic piles of dollars would be a good idea, so they are just doing it.
No debate, no votes and no democracy – they just tell us how things are going to be and that is that.
It is a bit ironic that all of this happened on the third anniversary of the collapse of Lehman Brothers. It is almost as if the central bankers of the world are trying to send some sort of a message.
So how much money is going to be loaned out?
Well, according to an article in The Daily Mail, big European banks are going to be able to borrow an “unlimited” amount of money….
The deal announced yesterday means banks will be able to borrow ‘any amount’ of money in three separate auctions in October, November and December. Banks will have to put up collateral, or security, to tap the emergency funds.
Wow – I wish someone would offer to lend me an “unlimited” amount of money.
But of course this really is not going to solve anything in the long run. You can’t solve a raging debt problem with more debt.
Yes, it will help the big European banks with their short-term liquidity problems, but it will do nothing to fix the long-term structural problems that are tearing Europe to pieces.
Win Thin, a senior currency strategist at Brown Brothers Harriman, said essentially the same thing to CNBC today….
“They’re taking care of the symptoms, but the underlying illness is still out there. On the margin, it’s positive. Until Greece defaults and we clear this whole thing up, they’re still treading water”
So, no, the financial problems of Europe have not been solved.
Just think of this latest move as a temporary band-aid.
So why get upset about it?
Well, what all of this shows is just how arrogant the Federal Reserve is.
The Federal Reserve gets to throw around trillions of dollars without any accountability to the American people.
As I have written about previously, the Federal Reserve made $16.1 trillion in secret loans to their friends during the last financial crisis.
This was revealed in a GAO report, and members of Congress such as Ron Paul and Bernie Sanders tried to get people to pay attention to this. The following is a statement about this report that was taken from the official website of Senator Sanders….
“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world”
So how much of that money went overseas? Well, it turns out that approximately $3.08 trillion of that money was loaned to big banks and major financial institutions in Europe and Asia.
Barack Obama can’t lend trillions of dollars to foreign banks.
So why does the Federal Reserve get to do it?
Sadly, most Americans know very little about the Federal Reserve. In the United States today, most Americans graduate from high school without ever learning much of anything about the Fed.
But if you really want to understand what is going on with our economy, it is absolutely critical that you understand the Federal Reserve.
The following are some more reasons why you should be upset about what the Federal Reserve has been doing….
*The Federal Reserve is a perpetual debt machine. Today, the U.S. national debt is 4700 times larger than it was when the Federal Reserve was created back in 1913.
*The Federal Reserve has recently been actually paying banks not to make loans. Right now banks can park money at the Federal Reserve and make risk-free income without having to make loans to the American people.
*Current Federal Reserve Chairman Ben Bernanke has a track record of failure that is legendary, and yet George W. Bush and Barack Obama both backed him 100%.
*The Federal Reserve system is designed to create inflation. The truth is that the United States has only had a persistent, ongoing problem with inflation since the Federal Reserve was created back in 1913.
*Since 2008, what the Federal Reserve has been doing to our money supply has been absolutely insane. Eventually this is going to have very serious consequences for us.
*The U.S. government has handed over the task of “centrally planning” our economy to the Federal Reserve. The Fed decides what the target rate of inflation should be, what the target rate of unemployment should be, what interest rates are going to be and what the size of the money supply is going to be. This is quite similar to the “central planning” that goes on in communist nations, but very few people in our government seem upset by this.
*The Federal Reserve picks “winners” and “losers” in the financial system. For example, when the last financial crisis hit, the Fed bent over backwards to help out the big Wall Street banks, but hordes of small banks were left out in the cold.
*As mentioned above, the Federal Reserve has become way, way too powerful. The Fed is able to do a lot of things that the three branches of government are simply not able to do. Fortunately, there are a few of our leaders that are alarmed by this. For example, Ron Paul once told MSNBC that he believes that the Federal Reserve is now more powerful than Congress…..
“The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don’t even have any transparency of this. They’re more powerful than the Congress.”
As long as we continue to use a debt-based currency that is controlled by a privately-owned central bank, we are going to continue to have permanent inflation and government debt that expands at an exponential pace.
The “central planning” done by the Federal Reserve has created bubble after bubble after bubble. Our dollars is on the verge of dying and our financial system is about to collapse.
The Federal Reserve system simply does not work.
Hopefully we can start sending more politicians to Washington D.C. that will be willing to stand up to the Federal Reserve.
But for now, the Federal Reserve is going to keep running around doing whatever it wants to do whether we like it or not.
 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.
 Are we on the verge of a massive financial collapse in Europe? Rumors of an imminent default by Greece are flying around all over the place and Greek government officials are openly admitting that they are running out of money. Without more bailout funds it is absolutely certain that Greece will soon default on their debts. But German officials are threatening to hold up more bailout payments until the Greeks “do what they agreed to do”. The attitude in Germany is that the Greeks must now pay the price for going into so much debt. Officials in the Greek government are becoming frustrated because the more austerity measures they implement, the more their economy shrinks. As the economy shrinks, so do tax payments and the budget deficit gets even larger. Meanwhile, hordes of very angry Greek citizens are violently protesting in the streets. If Germany allows Greece to default, that is going to start financial dominoes tumbling around the globe and it is going to be a signal to the financial markets that there is a very real possibility that Portugal, Italy and Spain will be allowed to default as well. Needless to say, all hell would break loose at that point.
So why is Greece so important?
Well, there are two reasons why Greece is so important.
Number one, major banks all over Europe are heavily invested in Greek debt. Since many of those banks are also very highly leveraged, if they are forced to take huge losses on Greek debt it could wipe many of them out.
Secondly, if Greece defaults, it tells the markets that Portugal, Italy and Spain would likely not be rescued either. It would suddenly become much, much more expensive for those countries to borrow money, which would make their already huge debt problems far worse.
If Italy or Spain were to go down, it would wipe out major banks all over the globe.
Recently, Paul Krugman of the New York Times summarized the scale of the problem the world financial system is now facing….
Financial turmoil in Europe is no longer a problem of small, peripheral economies like Greece. What’s under way right now is a full-scale market run on the much larger economies of Spain and Italy. At this point countries in crisis account for about a third of the euro area’s G.D.P., so the common European currency itself is under existential threat.
Most Americans don’t spend a lot of time thinking about the financial condition of Europe.
But they should.
Right now, the U.S. economy is really struggling to stay out of another recession. If Europe has a financial meltdown, there is no way that the United States is going to be able to avoid another huge economic downturn.
If you think that things are bad now, just wait. After the next major financial crisis what we are going through right now is going to look like a Sunday picnic.
The following are 20 signs of imminent financial collapse in Europe….
#1 The yield on 2 year Greek bonds is now over 60 percent. The yield on 1 year Greek bonds is now over 110 percent. Basically, world financial markets now fully expect that Greece will default.
#2 European bank stocks are getting absolutely killed once again today. We have seen this happen time after time in the last few weeks. What we are now witnessing is a clear trend. Just like back in 2008, major banking stocks are leading the way down the financial toilet.
#3 The German government is now making preparations to bail out major German banks when Greece defaults. Reportedly, the German government is telling banks and financial institutions to be prepared for a 50 percent “haircut” on Greek debt obligations.
#4 With thousands upon thousands of angry citizens protesting in the streets, the Greek government seems hesitant to fully implement the austerity measures that are being required of them. But if Greece does not do what they are being told to do, Germany may withhold further aid. German Finance Minister Wolfgang Schaeuble says that Greece is now “on a knife’s edge“.
#5 Germany is increasingly taking a hard line with Greece, and the Greeks are feeling very pushed around by the Germans at this point. Ambrose Evans-Pritchard made this point very eloquently in a recent article for the Telegraph….
Germany’s EU commissioner Günther Oettinger said Europe should send blue helmets to take control of Greek tax collection and liquidate state assets. They had better be well armed. The headlines in the Greek press have been “Unconditional Capitulation”, and “Terrorization of Greeks”, and even “Fourth Reich”.
#6 Everyone knows that Greece simply cannot last much longer without continued bailouts. John Mauldin explained why this is so in a recent article….
It is elementary school arithmetic. The Greek debt-to-GDP is currently at 140%. It will be close to 180% by year’s end (assuming someone gives them the money). The deficit is north of 15%. They simply cannot afford to make the interest payments. True market (not Eurozone-subsidized) interest rates on Greek short-term debt are close to 100%, as I read the press. Their long-term debt simply cannot be refinanced without Eurozone bailouts.
#7 The austerity measures that have already been implemented are causing the Greek economy to shrink rapidly. Greek Finance Minister Evangelos Venizelos has announced that the Greek government is now projecting that the economy will shrink by 5.3% in 2011.
#8 Greek Deputy Finance Minister Filippos Sachinidis says that Greece only has enough cash to continue operating until next month.
#9 Major banks in the U.S., in Japan and in Europe have a tremendous amount of exposure to Greek debt. If they are forced to take major losses on Greek debt, quite a few major banks that are very highly leveraged could suddenly be in danger of being wiped out.
#10 If Greece goes down, Portugal could very well be next. Ambrose Evans-Pritchard of the Telegraph explains it this way….
Yet to push Greece over the edge risks instant contagion to Portugal, which has higher levels of total debt, and an equally bad current account deficit near 9pc of GDP, and is just as unable to comply with Germany’s austerity dictates in the long run. From there the chain-reaction into EMU’s soft-core would be fast and furious.
#11 The yield on 2 year Portuguese bonds is now over 15 percent. A year ago the yield on those bonds was about 4 percent.
#12 Portugal, Ireland and Italy now also have debt to GDP ratios that are well above 100%.
#13 Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3 trillion euros combined.
#14 Major banks in the “healthy” areas of Europe could soon see their credit ratings downgraded. For example, there are persistent rumors that Moody’s is about to downgrade the credit ratings of several major French banks.
#15 Most major European banks are leveraged to the hilt and are massively exposed to sovereign debt. Before it fell in 2008, Lehman Brothers was leveraged 31 to 1. Today, major German banks are leveraged 32 to 1, and those banks are currently holding a massive amount of European sovereign debt.
#16 The ECB is not going to be able to buy up debt from troubled eurozone members indefinitely. The European Central Bank is already holding somewhere in the neighborhood of 444 billion euros of debt from the governments of Greece, Italy, Portugal, Ireland and Spain. On Friday, Jurgen Stark of Germany resigned from the European Central Bank in protest over these reckless bond purchases.
#17 According to London-based think tank Open Europe, the European Central Bank is now massively overleveraged….
“Should the ECB see its assets fall by just 4.23pc in value . . . its entire capital base would be wiped out.”
#18 The recent decision issued by the German Constitutional Court seems to have ruled out the establishment of any “permanent” bailout mechanism for the eurozone. Just consider the following language from the decision….
“No permanent treaty mechanisms shall be established that leads to liability for the decisions of other states, especially if they entail incalculable consequences”
#19 Economist Nouriel Roubini is warning that without “massive stimulus” by the governments of the western world we are going to see a major financial collapse and we will find ourselves plunging into a depression….
“In the short term, we need to do massive stimulus; otherwise, there’s going to be another Great Depression”
#20 German Economy Minister Philipp Roesler is warning that “an orderly default” for Greece is not “off the table“….
”To stabilize the euro, we must not take anything off the table in the short run. That includes, as a worst-case scenario, an orderly default for Greece if the necessary instruments for it are available.”
Right now, Greece is caught in a death spiral. The more austerity measures they implement, the more their economy slows down. The more their economy slows down, the more their tax revenues go down. The more their tax revenues go down, the worse their debt problems become.
Greece could end up leaving the euro, but that would make their economic problems far, far worse and it would be very damaging to the rest of the eurozone as well.
Quite a few politicians in Europe are touting a “United States of Europe” as the ultimate solution to these problems, but right now the citizens of the eurozone are overwhelming against deeper economic integration.
Plus, giving the EU even more power would mean an even greater loss of national sovereignty for the people of Europe.
That would not be a good thing.
So what we are stuck with right now is the status quo. But the current state of affairs cannot last much longer. Germany is getting sick and tired of giving out bailouts and nations such as Greece are getting sick and tired of the austerity measures that are being forced upon them.
At some point, something is going to snap. When that happens, world financial markets are going to respond with a mixture of panic and fear. Credit markets will freeze up because nobody will be able to tell who is stable and who is about to collapse. Dominoes will start to fall and quite a few major financial institutions will be wiped out. Governments around the world will have to figure out who they want to bail out and who they don’t want to bail out.
It will be a giant mess.
For decades, the governments of the western world have been warned that they were getting into way too much debt.
For decades, the major banks and the big financial institutions were warned that they were becoming way too leveraged and were taking far too many risks.
Well, nobody listened.
So now we get to watch a global financial nightmare play out in slow motion.
Grab some popcorn and get ready. It is going to be quite a show.
 So that was what we have been waiting for? That was what all the hype was about? With a little over a year until the next election, that was the “best shot” that Obama has for fixing the unemployment crisis in this country? The Obama Jobs Plan (also now known as “the American Jobs Act”) is going to cost $447 billion and it is going to do next to nothing to create more jobs. Many Americans were hoping for something bold and new from Obama, but instead what they got was a bad joke. When Obama stated that there is “nothing radical in this bill”, he was not kidding. Instead of addressing the fundamental issues that are causing job loss, Obama wants us to spend half a trillion dollars on measures that will only create a very small number of jobs. Sadly, much of what Obama is proposing actually consists of huge bribes to middle class voters. Obama is trying to keep his own job, and he appears willing to pile up even more debt in order to make that happen.
During his speech to the nation, Obama instructed Congress to either “pass this jobs bill” or to “pass it right away” 16 different times. Obama obviously feels very strongly about his jobs plan.
But will it work? Let’s take a few moments to break it down. The following are 10 reasons why the Obama jobs plan is a bad joke….
#1 The payroll tax cuts are going to cost more than anything else in the plan, but they will do very little to create jobs.
Just take a look at what is happening right now. Have the current payroll tax cuts done much? No, the unemployment rate is still over 9 percent.
Yes, the new payroll tax cuts would be deeper and they would put some more money into the pockets of American workers.
But if American workers go out and spend it on stuff made in China, how does that create more jobs for American workers?
Businesses would certainly welcome the fact that their payroll taxes would be cut, but it probably will not entice many of them to hire more people.
Why?
Because they know that the tax cut would only be temporary. After just a handful of months the payroll tax would go right back to where it was before.
Businesses are not often moved by temporary tax cuts. If you want tax cuts to really move business, then you need to make them permanent.
So does that mean that I am against these payroll tax cuts?
Absolutely not. I very much hope that payroll taxes get cut. I am all in favor of the government taking as little money from me as possible.
Look, if the federal government is going to destroy our financial system anyway, I would much rather keep as much of my own money in my own pockets as possible.
So yes, I am all in favor of payroll tax cuts.
But no, those cuts are not going to do much to create jobs. If payroll tax cuts were going to create a lot more jobs we would already see it happening.
However, if this is passed it will be a great bribe to voters because millions of Americans will see their paychecks go up and when that happens they will think of Obama.
#2 Obama’s plan to extend unemployment assistance is going to cost about $49 billion but it is not going to do much to create any jobs.
Back in 2009, Congress first authorized an extension of unemployment benefits to a maximum of 99 weeks. Five times since then Congress has reauthorized this extension.
So has this made a huge difference in the number of unemployed?
Of course not. If it was going to make a huge difference it would have done so already.
Yes, these extended benefits are easing the suffering of those that are out of work, and yes they are giving them a little extra money to spend, but let’s not pretend that extending unemployment benefits is going to create a whole bunch of new jobs.
#3 Obama is proposing $50 billion in “immediate” infrastructure spending and $10 billion for a new infrastructure bank that will be dedicated to raising private capital to finance infrastructure projects around the country.
Hopefully this will work out a whole lot better than the “shovel ready” jobs that Obama promised previously.
Yes, infrastructure all over this country is rapidly falling apart. Yes, it is a legitimate function of government to invest in public infrastructure.
But no, this is not going to create a ton of new jobs. It will create a few jobs, but it will also add to our rapidly growing national debt.
#4 According to the fact sheet on the jobs plan released by the Obama administration, direct financial aid to state governments will prevent up to 280,000 teacher layoffs, and it will also help states retain more police and firefighters.
Essentially, this is a “backdoor bailout” for the states. Yes, it will be a good thing if teachers, police and firefighters are able to keep their jobs. However, preventing job losses is not the same as creating new jobs. So this may help reduce the bleeding a little bit, but it is not going to turn the overall employment situation around.
#5 There are a bunch of other minor things in Obama’s proposal such as “modernizing” public schools and helping more Americans refinance their mortgages, but it is not entirely clear how those things will help create a lot more jobs.
Meanwhile, there are a whole lot of things that the Obama jobs plan does not do….
#6 The Obama jobs plan does next to nothing to prevent jobs from being shipped out of the country.
As I wrote about the other day, right now the way the system is designed makes it highly profitable to send American jobs overseas….
*It is legal to pay slave labor wages in many of these other countries. After all, why pay an American worker 10 or 20 times as much as a worker on the other side of the globe?
*In many of these other countries you do not have to provide any health care for workers.
*In many of these other countries there are virtually no environmental controls to worry about.
*In many of these other countries there are virtually no labor standards to worry about.
*In many of these other countries you only have to deal with a fraction of the “red tape” that you have to deal with in the United States.
Obama is doing absolutely nothing to address these imbalances.
#7 The Obama jobs plan does nothing about the unfair trade practices that are absolutely killing America on the global economic stage.
As I wrote about the other day, other nations are manipulating currency rates, they are openly stealing technology from our companies, they allow their workers to be paid slave labor wages and they put up huge barriers to goods and services from the United States and we let them get away with it. Our trade policies are absolutely insane, and the way that the new “global economy” is structured guarantees that U.S. businesses are going to be operating at a huge disadvantage. The following are just a few more of the reasons why foreign firms have a huge advantage over U.S. companies….
*Many foreign nations deeply and directly subsidize national industries and the U.S. government lets them get away with it. That puts our industries at a vast disadvantage.
*The United States has the highest corporate tax rate in the world. That puts our corporations at a vast disadvantage.
*Many foreign nations do not require businesses to provide health care for their employees. That puts our businesses at a vast disadvantage.
*Many foreign nations impose very little regulation on businesses. That puts businesses in the United States at a vast disadvantage. In the U.S., we have some of the most restrictive regulations in the world.
In 2011 we are going to end up with a trade deficit that is probably going to be well in excess of half a trillion dollars. According to one estimate, if the trade deficit was totally eliminated it would create 8.4 million new jobs inside the United States.
So why isn’t Barack Obama proposing to do something about all of this?
#8 The Obama jobs plan does nothing about the gigantic mountains of ridiculous regulations that are absolutely killing small business in this country. According to the Heritage Foundation, 75 new major regulations that have cost U.S. businesses more than 40 billion dollars have been passed since Barack Obama first took office.
The Federal Register (which contains all federal regulations) just keeps exploding in size. Last year alone, 81,405 new pages were published in the Federal Register.
Right now there is a good chance that you are breaking dozens of federal regulations without even knowing it.
All of this regulation is crushing our businesses and is making us much less competitive in the global marketplace.
Yes, there will always be a need for common sense regulations on business activity. But what we have right now is an absolute madhouse.
#9 The Obama jobs plan does nothing about the negative effects of Obamacare. Obamacare is going to absolutely slaughter U.S. businesses. Look, when most other nations do not burden their businesses with providing health care and we force our businesses to comply with the nightmare that Obamacare represents, who do you think has the advantage?
The other day, I noted some of the effects that Obamacare is already having on the U.S. business community….
According to a recent report from the National Federation of Independent Business, one out of every eight small businesses in the United States have either already had or expect to have the health insurance plans for their employees terminated by the health insurance companies because of Obamacare. Another recent survey of mid-size and large businesses found that nearly ten percent of them plan to stop offering health insurance coverage to workers once Obamacare insurance exchanges begin in 2014, and another 20 percent are not sure if they will continue to offer coverage or not. Our health care system is deeply broken and the ones that keep getting the short end of the stick are average Americans.
If Obama was serious about putting Americans back to work, he would do something about Obamacare.
But he is not going to do that, is he?
#10 The Obama jobs plan makes our national debt worse. Yes, Obama insists that his plan will be “100%” paid for, but he has not told us how it will be paid for.
Exactly where in the world is he going to get an extra half a trillion dollars next year?
Obama probably intends to propose some tax increases that he knows that the Republicans would never, ever agree to.
So, no, Obama’s proposals will not be paid for.
The U.S. national debt has increased by more than 4 trillion dollars since Barack Obama took office. It is currently increasing by more than 2 million dollars per minute.
We cannot afford to pile huge amounts of additional debt on to the backs of our children and our grandchildren. What we have already done to them is deeply, deeply criminal.
In the end, some of Obama’s proposals will probably get passed, none of them will be paid for, our debt will get even bigger, and the fundamental reasons for our job losses will remain unaddressed.
So hopefully you can understand why I consider the Obama jobs plan to be a really bad joke.
Tonight, millions of Americans will be sleeping in seedy motels, in their cars or in tent cities.
Just check out these pictures from New Jersey. Can you believe that some hard working Americans actually have to live like that?
We had the greatest economy that the world has ever seen.
Things did not have to turn out this way.
But they did.
Now Obama has come up with a “plan” that will not fix any of our fundamental problems but that will get us into a whole lot more debt.
Please excuse me if I am less than thrilled.
 The financial crisis in Europe has become so severe that it has put the future of the euro, and indeed the future of the EU itself, in doubt. If the financial system in Europe collapses, it is going to plunge the entire globe into chaos. The EU has a larger economy and a larger population than the United States does. The EU also has more Fortune 500 companies that the United States does. If the financial system in Europe breaks down, we are all doomed. An economic collapse in Europe would unleash a financial tsunami that would sweep across the globe. As I wrote about yesterday, the nightmarish sovereign debt crisis in Europe could potentially bring about the end of the euro. The future of the monetary union in Europe is being questioned all over the continent. Without massive bailouts, there are at least 5 or 6 nations in Europe that will likely soon default. The political will for continued bailouts is rapidly failing in northern Europe, so something needs to be done quickly to avert disaster. Unfortunately, as anyone that has ever lived in Europe knows, things tend to move very, very slowly in Europe.
If the bailouts end and Europe is not able to come up with another plan before then, mass chaos is going to unleashed. Most major European banks are massively exposed to European sovereign debt, and most of them are also very, very highly leveraged. If we see nations such as Greece, Portugal and Italy start to default, we could have quite a few major European banks go down in rapid succession. That could be the “tipping point” that sets off mass financial panic around the globe.
Of course the governments of Europe would probably step in to bail out many of those banks, but when the U.S. did something similar back in 2008 that didn’t prevent the world from plunging into a horrible worldwide recession.
Right now, the way that the monetary union is structured in Europe simply does not work. Countries that are deep in debt have no flexibility in dealing with those debts, and citizens of wealthy countries such as Germany are becoming deeply resentful that they must keep shoveling money into the financial black holes of southern Europe.
These bailouts cannot go on indefinitely. Political and financial authorities all over Europe know this and they also know that Europe is rapidly heading toward a day of reckoning.
The quotes that you are about to read are absolutely shocking. In Europe they openly admit that the financial system is dying, that the euro is in danger of not surviving and that the EU does not work in its present form.
The following are 20 quotes from European leaders that prove that they know that the financial system in Europe is doomed….
#1 Polish finance minister Jacek Rostowski: “European elites, including German elites, must decide if they want the euro to survive – even at a high price – or not. If not, we should prepare for a controlled dismantling of the currency zone.”
#2 Stephane Deo, Paul Donovan, and Larry Hatheway of Swiss banking giant UBS: “Under the current structure and with the current membership, the euro does not work. Either the current structure will have to change, or the current membership will have to change.”
#3 EU President Herman Van Rompuy: “The euro has never had the infrastructure that it requires.”
#4 German President Christian Wulff: “I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence”
#5 Deutsche Bank CEO Josef Ackerman: “It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels.”
#6 ECB President Jean-Claude Trichet: “We are experiencing very demanding times”
#7 International Monetary Fund Managing Director Christine Lagarde: “Developments this summer have indicated we are in a dangerous new phase”
#8 Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag’s Deputy President: “We must consider whether it would not be better for the currency union and for Greece itself to go for debt restructuring and an exit from the euro”
#9 Alastair Newton, a strategist for Nomura Securities in London: “We believe that we are just about to enter a critical period for the eurozone and that the threat of some sort of break-up between now and year-end is greater than it has been at any time since the start of the crisis”
#10 Former German Chancellor Gerhard Schroeder: “The current crisis makes it relentlessly clear that we cannot have a common currency zone without a common fiscal, economic and social policy”
#11 Bank of England Governor Mervyn King: “Dealing with a banking crisis was difficult enough, but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there’s no backstop.”
#12 George Soros: “We are on the verge of an economic collapse which starts, let’s say, in Greece. The financial system remains extremely vulnerable.”
#13 German Chancellor Angela Merkel: “The current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957.”
#14 Stephane Deo, Paul Donovan, and Larry Hatheway of Swiss banking giant UBS: “Member states would be economically better off if they had never joined. European monetary union was generally mis-sold to the population of the Europe.”
#15 Professor Giacomo Vaciago of Milan’s Catholic University: “It’s clear that the euro has virtually failed over the last ten years, even if you are not supposed to say that.”
#16 EU President Herman Van Rompuy: “We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union.”
#17 German Chancellor Angela Merkel: “If the euro fails, then Europe fails.”
#18 Deutsche Bank CEO Josef Ackerman: “All this reminds one of the autumn of 2008″
#19 International Monetary Fund Managing Director Christine Lagarde: “There has been a clear crisis of confidence that has seriously aggravated the situation. Measures need to be taken to ensure that this vicious circle is broken”
#20 German Chancellor Angela Merkel: “The euro is in danger … If we don’t deal with this danger, then the consequences for us in Europe are incalculable.”
Most of the individuals quoted above desperately want to save the euro. They are not going to go down without a fight. The overwhelming consensus among the political and financial elite in Europe is that increased European integration in Europe is the answer.
For example, EU President Herman Van Rompuy is very clear about what he believes the final result of this crisis will be….
“This crisis in the euro zone will strengthen European integration. That is my firm belief.”
Many of the elite in Europe are now openly talking about the need for a “United States of Europe”. Just consider what former German chancellor Gerhard Schroeder recently had to say….
“From the European Commission, we should make a government which would be supervised by the European Parliament. And that means the United States of Europe.”
But as mentioned above, things in Europe tend to move very, very slowly. The debt crisis in Europe is rapidly coming to a breaking point, and it is very doubtful that Europe will be able to move fast enough to head it off.
What we may actually see is at least a partial collapse of the euro and a massive financial crisis in Europe first, and then much deeper European integration being sold by authorities in Europe as “the solution” to the crisis.
This would be yet another example of the classic problem/reaction/solution paradigm.
The “problem” would be a horrible financial crisis and economic downturn in Europe.
The “reaction” would be a cry from the European public for someone to “fix” things and return things back to “normal”.
The “solution” would be a “United States of Europe” with much deeper economic and political integration which is something that many among the political and financial elite of Europe have wanted for a long, long time.
Right now, the people of Europe are very much opposed to deeper economic and political integration. For example, 76 percent of Germans says that they have little or no faith in the euro and one recent poll found that German voters are against the introduction of “Eurobonds” by about a 5 to 1 margin.
It looks like it may take a major crisis in order to get the people of Europe to change their minds.
Unfortunately, it looks like that may be exactly what is going to happen.
 The future of the euro is hanging by a thread at the moment. The massive debt problems of nations such as Greece, Italy and Portugal are dragging down the rest of the Europe, and the political will in northern Europe to continue to bail out these debt-ridden countries is rapidly failing. Could the end of the euro actually be in sight? The euro was really a very interesting experiment. Never before had we seen a situation where monetary union was tried without political and fiscal union along with it on such a large scale. The euro worked fairly well for a while as long as everyone was paying their debts. But now Greece has collapsed financially, and several other countries in the eurozone (including Italy) are on the way. Right now the only thing holding back a complete financial disaster in Europe are the massive bailouts that the wealthier nations such as Germany have been financing. But now a wave of anti-bailout sentiment is sweeping Germany and the future of any European bailouts is in doubt. So what does that mean for the euro? It appears that there are two choices. Either we will see much deeper fiscal and political integration in Europe (which does not seem likely at this point), or we will see the end of the euro.
That status quo cannot last much longer. The citizens of wealthy nations such as Germany are becoming very resentful that gigantic piles of their money are being poured into financial black holes such as Greece. In fact, it is rapidly getting to the point where we could actually see rioting in the streets of German cities over all of this.
All of this instability is creating a tremendous amount of fear in world financial markets. Nobody is sure if Greece is going to default or not.
Without more bailout money, Greece will most certainly default. If anyone does not think that one domino cannot set off a massive chain reaction, just remember what happened back in 2008.
Bear Stearns and Lehman Brothers set off a chain reaction that was felt in every corner of the globe. All of a sudden credit markets froze up because nobody was sure who had significant exposure to bad mortgages.
Today, the entire world financial system runs on debt, so when there is a credit crunch it can have absolutely devastating economic consequences. The financial crisis of 2008 helped plunge the world into the greatest recession that the globe had seen since the 1930s.
In the old days, nations such as Greece that got into too much debt would just fire up the printing presses and cover over their problems with devalued currency.
Well, those nations that are using the euro simply cannot do that. The government of Greece cannot simply zap a whole bunch of euros into existence in order to solve their problems.
Right now, major European banks are holding massive amounts of debt from various European governments on their balance sheets. Most of these European banks are also very highly leveraged. Even a moderate drop in the value of those debt holdings could wipe out a number of these banks.
The head of the IMF, Christine Lagarde, recently told Der Spiegel the following….
“There has been a clear crisis of confidence that has seriously aggravated the situation. Measures need to be taken to ensure that this vicious circle is broken”
Unfortunately, what Lagarde said was right. You see, the financial system in Europe is a “confidence game” and a “crisis of confidence” is all that it would take to bring it down because it does not have a solid foundation.
Just like the U.S. financial system, the financial system in Europe is a mountain of debt, leverage and risk. If the winds start blowing the wrong direction, the entire thing could very easily come tumbling down.
Over the past couple of weeks, the outlook in Europe has become decidedly negative. For example, one senior IMF economist is now actually projecting that Greece will experience a “hard default” at some point in the coming months….
I expect a hard default definitely before March, maybe this year
If Greece defaults, that would mean that the bailouts have failed. That would also mean that several other nations in Europe would be in danger of defaulting soon as well.
The consequences of a wave of defaults in Europe would be absolutely staggering. As mentioned above, major banks in Europe are deeply exposed to sovereign debt.
Regarding this issue, Deutsche Bank Chief Executive Josef Ackermann recently made the following stunning admission….
“It’s stating the obvious that many European banks would not survive having to revalue sovereign debt held on the banking book at market levels.”
Yes, you read that correctly.
There are quite a few major European banks that are in imminent danger of collapse.
Even though there hasn’t been any sovereign defaults yet, we are already starting to see massive financial devastation in Europe. Just check out some of the financial carnage from Monday….
*The stock market in Germany was down more than 5%.
*The stock markets in France and Italy were down more than 4%.
*Royal Bank of Scotland was down more than 12%.
*Deutsche Bank was down more than 6%.
*Societe Generale was down more than 8%.
*Italy’s UniCredit was down more than 7%.
*Barclays was down more than 6%
*Credit Suisse was down more than 4%.
*The yield on 2 year Greek bonds was up to 50.38%.
*The yield on 1 year Greek bonds was up to 82.14%. A year ago it was under 10%.
Just like in 2008, banking stocks are leading the decline. We have another major financial crisis on our hands and there is no solution in sight.
As the financial world becomes increasingly unstable, investors are flocking to gold. In case you have not noticed, gold is up over $1900 an ounce again.
So what comes next?
Well, on Wednesday Germany’s constitutional court is scheduled to announce its verdict on the legality of the latest bailout package for Greece. The court is expected to rule that the bailout package is legal, but if they don’t that would be really bad news for the euro.
However, whatever the court rules, the reality is that the turbulent political atmosphere inside Germany is probably a much bigger issue as far as the future of the euro is concerned.
Right now, Germans are overwhelmingly opposed to more bailouts. German Chancellor Angela Merkel’s political party just suffered a resounding defeat in local elections in Germany, and many within her own coalition are withdrawing support for any more bailouts.
This is going to make it very difficult to save the euro. At this point, Germans have very little faith in the currency.
Just check out what Bob Chapman of the International Forecaster recently wrote about the current atmosphere in Germany….
76% of Germans say they have little or no faith in the euro, up from 71% two months ago. This is what we have been stating for ten years. Long-term 69% to 71% have never wanted the euro. The poll is not at all surprising. The Germany people are saying we have put up with the euro and euro zone for long enough – we want out now.
Germans are also very much against even deeper European economic integration. For example, recent polling found that German voters are against the introduction of “Eurobonds” by about a 5 to 1 margin.
But Germans are not the only ones that are tired of the euro. The countries of southern Europe have come to view the euro as a “straightjacket” that keeps them from having the financial flexibility that they need to deal with their debts.
Many people living in southern Europe consider the euro to be a financial instrument that allows nations such as Germany to have way too much power over them. Just check out what Professor Giacomo Vaciago of Milan’s Catholic University recently had to say….
“It’s clear that the euro has virtually failed over the last ten years, even if you are not supposed to say that. We pretended to be Germans, but it was an illusion”
But if the bailouts fall apart and the euro collapses, we are going to see nations such as Greece fall into total financial collapse.
Just how desperate have things become in Greece? Just consider the following excerpt from a recent article by Puru Saxena….
In Greece, government debt now represents almost 160% of GDP and the average yield on Greek debt is around 15%. Thus, if Greece’s debt is rolled over without restructuring, its interest costs alone will amount to approximately 24% of GDP. In other words, if debt pardoning does not occur, nearly a quarter of Greece’s economic output will be gobbled up by interest repayments!
Without help, there is no way that Greece is going to be able to avoid a default.
Sadly, Greece is far from the only major financial problem in Europe. Portugal, Ireland and Italy also have debt to GDP ratios that are well above 100%.
As mentioned earlier, this is a massive problem for the financial system of Europe, because nearly all of the major European banks are leveraged to the hilt and they are massively exposed to government debt.
If you don’t think that this is a problem, just remember what happened back in 2008.
Back then, Lehman Brothers was leveraged 31 to 1. When things turned bad, Lehman was wiped out very rapidly.
Today, major German banks are leveraged 32 to 1, and those banks are currently holding a massive amount of European sovereign debt.
Overall, the entire global banking system has a total of 2 trillion dollars of exposure to Greek, Irish, Portuguese, Spanish and Italian debt.
If European countries start defaulting, the dominoes are going to start falling and things will get really messy really quickly.
There are two things that could keep defaults from happening.
Number one, Germany and the other wealthy nations in the eurozone could just suck it up and decide to pour endless bailouts into nations such as Greece and Italy.
Number two, the nations of the eurozone could opt for much deeper economic and political integration. That would mean a massive loss of sovereignty, but it would save the euro, at least for a little while.
Right now, the political will for either of those two choices is simply not there. That does not mean that the political elite of Europe will not try to ram through some sort of a plan, but the reality is that Germans are already so upset about what has been going on that they are about ready to riot in the streets.
Yes, the end of the euro is a real possibility.
If the euro does collapse, it would likely cause a financial panic that would make 2008 look like a Sunday picnic.
So what do all of you think about the future of the euro? Please feel free to leave a comment with your thoughts below….
 If you still have a good job, you certainly have something to celebrate on Labor Day 2011. So far you have survived the decline of the U.S. economy. But your day may be coming soon. This weekend, there will be millions of Americans that will not be doing any celebrating. They are not enjoying a break from their jobs because they don’t have any jobs. In fact, it seems kind of heartless for the rest of us to be celebrating while so many of our countrymen are destitute. What are we celebrating on Labor Day 2011? The lack of jobs in America? At this point, the U.S. economy closely resembles a gigantic game of musical chairs. Every time the music stops, even more good jobs are pulled out of the game and even more workers are added. Once upon a time, if you really wanted a job in America you could get one. But now the competition for even the most basic jobs is absolutely brutal. If you gathered together all of the unemployed people in the United States, they would constitute the 68th largest country in the world. It would be a nation larger than Greece. All of those unemployed people are not going to be taking trips with their families this holiday weekend. Instead, most of them are going to be trying to figure out what to do with their shattered lives.
With the economy in such a mess, you would think that someone out there would be suggesting that Labor Day 2011 should really be a day of mourning. This economic downturn has shredded the lives of millions of American families.
Is there any other crisis in recent years that has had more of an impact on a national level?
On Friday, the U.S. Bureau of Labor Statistics reported that no new jobs were created during the month of August and that the official unemployment rate remained steady at 9.1 percent.
Wait, aren’t we supposed to be in the middle of an economic recovery?
Actually, we need at least 125,000 new jobs or so each month just to keep up with the growth of the U.S. population. So it seems odd that the economy would add zero jobs but the unemployment rate would not increase.
But that is what the government is saying.
In any event, things don’t look good. According to the U.S. Bureau of Labor Statistics, the civilian employment-population ratio was at 58.2 percent last month. This is an incredibly low figure.
In a recent article, John Mauldin explained what would have to happen to return the employment-population ratio to where it was in the year 2000….
The US has roughly the same number of jobs today as it had in 2000, but the population is well over 30,000,000 larger. To get to a civilian employment-to-population ratio equal to that in 2000, we would have to gain some 18 MILLION jobs.
Does anyone have an extra 18 million jobs laying around somewhere? The following is a chart showing what has happened to the employment-population ratio over the last several decades….
What makes this chart even more startling is that the number of women in the workforce was constantly rising for most of the time period reflected in this chart. So when you take that into account our current situation is far worse.
For example, back in 1969 95 percent of all men between the ages of 25 and 54 had a job. Pretty much any man in his prime working years that wanted a job could get a job.
In July, only 81.2 percent of men in that age group had a job.
But that is only part of the story. Another significant trend has been how flat wages have been. Average hourly earnings fell 0.1% in August. Meanwhile, the prices in the stores continue to go up.
In this column, I write a lot about how the middle class is being destroyed in this country. When you look at the ratio of employee compensation to GDP, it is now the lowest that is has been in about 50 years. In other words, U.S. workers are taking home a smaller share of the pie than at any other time in modern U.S. history.
But at this point those that still actually do have jobs consider themselves to be the lucky ones.
Tonight, there will be millions of desperate unemployed Americans that will blankly stare at their televisions as they try to figure out how their dreams got flushed down the toilet.
Remember how I mentioned at the beginning of the article that unemployed Americans would constitute a country larger than Greece? Well, 42 percent of all of those unemployed Americans have been out of a job for 27 weeks or longer.
What would you do if you lost your job and you were unemployed for half a year?
Would you be able to survive?
In America today, the longer that you are unemployed, the harder it is for you to get another job. 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.
Out of sheer desperation, many Americans have taken jobs that they never even dreamed that they would take.
Only 47 percent of the U.S. workforce is “fully employed” at this point. Right now there are hordes of Americans that are waiting tables, flipping burgers or stocking shelves at Wal-Mart because that is all that they can find right now.
Sadly, this is all part of a long-term trend.
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.
This middle class is being pummeled out of existence, and most Americans don’t even understand what is happening.
It certainly does not help that both the Republicans and the Democrats have stood by as millions upon millions of our jobs have been shipped out of the country.
It also certainly does not help that both the Republicans and the Democrats have stood by as millions upon millions of illegal immigrants have taken jobs away from American citizens.
It also certainly does not help that both the Republicans and the Democrats have stood by as U.S. businesses have been absolutely crushed by mountains of nightmarish regulations and have been taxed into oblivion.
The decade that just ended was the worst decade for job growth in America since the Great Depression. In fact, even though thirty million people were added to the U.S. population during the decade, there was essentially zero job growth.
Sadly, things look like they are going to continue to get even worse. For example, the United States Postal Service is in such trouble that it is asking Congress to allow it to lay off 120,000 workers. Overall, the Postal Service wants to eliminate 220,000 positions by 2015.
So is this big speech that Obama is going to give on Thursday going to solve anything?
Of course not.
The reality is that if Obama or any of his advisors had any grand ideas for fixing our situation they would have implemented them by now.
And what is the big deal in making us wait until Thursday to hear these “new ideas”? Why not just tell us now?
Sadly, the truth is that everything that our politicians do now is about setting themselves up for the 2012 election.
Most likely, Obama is just going to take a bunch of tired ideas that do not work and “spin” them into a grand new plan.
Millions of Americans will actually buy into it.
But it is not as if establishment Republican candidates have anything to offer either.
You know, if Obama wanted to do something substantial, one place to start would be to order the Federal Reserve to stop paying banks not to make loans to individual and small businesses.
But just like all of our other weak-minded recent presidents, Barack Obama is not going to confront the Federal Reserve.
In fact, everything that Obama actually does “for the economy” only seems to make things worse.
As I have outlined before, we know exactly why our economy is losing jobs and we know things that we could start doing right now to reverse the long-term trends that are absolutely killing us.
But Barack Obama is not talking about real solutions and neither are the establishment Republican candidates.
So things are going to continue to get worse. The number of Americans on food stamps has increased 74% since 2007. Every month we have been setting a new record. The middle class is going to continue to disappear as the number of good jobs continues to decrease.
So, no, there are not too many reasons to celebrate on Labor Day 2011. Our economy is dying and millions upon millions of our fellow citizens are deeply suffering.
Urgent action is required in order to prevent our situation from rapidly getting worse, but right now the vast majority of our politicians are asleep at the switch.
So instead of celebrating this Labor Day, why don’t you say a prayer for America instead?
We really could use it.
 Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse. On August 16th, a 54 page report authored by Goldman strategist Alan Brazil was distributed to institutional clients. The general public was not intended to see this report. Fortunately, some folks over at the Wall Street Journal got their hands on a copy and they have filled us in on some of the details. It turns out that Goldman Sachs secretly believes that an economic collapse is coming, and they have some very interesting ideas about how to make money in the turbulent financial environment that we will soon be entering. In the report, Brazil says that the U.S. debt problem cannot be solved with more debt, that the European sovereign debt crisis is going to get even worse and that there are large numbers of financial institutions in Europe that are on the verge of collapse. If this is what people at the highest levels of the financial world are talking about, perhaps we should all start paying attention.
There is a tremendous amount of fear in the global financial community right now. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on.
According to the Wall Street Journal, Brazil believes that “as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China’s growth may not be sustainable.”
Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe.
For example, this following excerpt from the report sounds like it could have come straight from The Economic Collapse Blog….
“Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”
Remember, this statement was not written by some guy on the Internet. A top Goldman Sachs analyst put it into a report for institutional investors.
The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse.
But in any environment Goldman Sachs thinks that it can make money. The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe….
- Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world)
- Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off
This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately.
For example, prior to the financial crisis of 2008, Goldman Sachs was putting together mortgage-backed securities that they knew were garbage and marketing them to investors as AAA-rated investments. On top of that, Goldman then often privately bet against those exact same securities.
The CEO of Goldman Sachs has even acknowledged that the investment bank engaged in “improper” behavior during 2006 and 2007.
For much more on the history of all this, please see this article: “How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps“.
So will Goldman Sachs ever get into serious trouble for any of this?
No, of course not.
Yeah, they will get a slap on the wrist from time to time, but the reality is that the top levels of the federal government are absolutely littered with ex-employees of Goldman Sachs. Goldman is one of the “too big to fail” banks and they are going to continue to do pretty much whatever they feel like doing.
Sadly, the power of the “too big to fail” banks just continues to grow. At this point, the “big six” U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America’s gross national product.
Goldman Sachs was the second biggest donor to Barack Obama’s campaign in 2008, so don’t expect Obama to do anything about any of this.
We have a financial system that is deeply, deeply corrupt and all of that corruption is a big reason why things are falling apart.
Sadly, the 54 page report mentioned above is right – we really are facing a global debt meltdown and we really are heading for an economic collapse.
You aren’t going to hear the truth from the mainstream media or from our politicians because “keeping people calm” is much more of a priority to them than telling the truth is.
The debt crisis in the United States is unsustainable and the debt crisis in Europe is unsustainable. Right now we are in the calm before the storm, and nobody knows exactly when the storm is going to strike.
But let there be no doubt – it is coming.
The amazing prosperity that we have enjoyed for the last several decades has largely been a debt-fueled illusion. It was a great party while it lasted, but now it is coming to an end and the aftermath of the coming crash is going to be absolutely horrific.
Keep watch and get prepared. We don’t know exactly when the collapse is going to happen, but it is definitely on the way and now even Goldman Sachs is admitting that.
 Most of the worst financial panics in history have happened in the fall. Just recall what happened in 1929, 1987 and 2008. Well, September 2011 is about to begin and there are all kinds of signs that the financial world is about to hit the big red panic button. Wave after wave of bad economic news has come out of the United States recently, and Europe is embroiled in an absolutely unprecedented debt crisis. At this point there is a very real possibility that the euro may not even survive. So what is causing all of this? Well, over the last couple of decades a gigantic debt bubble has fueled a tremendous amount of “fake prosperity” in the western world. But for a debt bubble to keep going, the total amount of debt has to keep expanding at an ever increasing pace. Unfortunately for the global economy, sources of credit are starting to dry up. That is why you hear terms like “credit crisis” and “credit crunch” thrown around so much these days. Without enough credit to feed the monster, the debt bubble is going to burst. At this point, virtually the entire global economy runs on credit, so when this debt bubble bursts things could get really, really messy.
Nations and financial institutions would never get into debt trouble if they could always borrow as much money as they wanted at extremely low interest rates. But what has happened is that lending sources are balking at continuing to lend cheap money to nations and financial institutions that are already up to their eyeballs in debt.
For example, the yield on 2 year Greek bonds is now over 40 percent. Investors don’t trust the Greek government and they are demanding a huge return in order to lend them more money.
Throughout the financial world right now there is a lot of fear. Lending conditions have gotten very tight. Financial institutions are not eager to lend money to each other or to anyone else. This “credit crunch” is going to slow down the economy. Just remember what happened back in 2008. When easy credit stops flowing, the dominoes can start falling very quickly.
Sadly, this is a cycle that can feed into itself. When credit is tight, the economy slows down and more businesses fail. That causes financial institutions to want to tighten up things even more in order to avoid the “bad credit risks”. Less economic activity means less tax revenue for governments. Less tax revenue means larger budget deficits and increased borrowing by governments. But when government debt gets really high that can cause huge economic problems like we are witnessing in Greece right now. The cycle of tighter credit and a slowing economy can go on and on and on.
I spend a lot of time talking about problems with the U.S. economy, but the truth is that the rest of the world is dealing with massive problems as well right now. As bad as things are in the U.S., the reality is that Europe looks like it may be “ground zero” for the next great financial crisis.
At this point the EU essentially has three choices. It can choose much deeper economic integration (which would mean a huge loss of sovereignty), it can choose to keep the status quo going for as long as possible by providing the PIIGS with gigantic bailouts, or it can choose to end of the euro and return to individual national currencies.
Any of those choices would be very messy. At this point there is not much political will for much deeper economic integration, so the last two alternatives appear increasingly likely.
In any event, global financial markets are paralyzed by fear right now. Nobody knows what is going to happen next, but many now fear that whatever does come next will not be good.
The following are 25 signs that the financial world is about to hit the big red panic button….
#1 According to a new study just released by Merrill Lynch, the U.S. economy has an 80% chance of going into another recession.
#2 Will Bank of America be the next Lehman Brothers? Shares of Bank of America have fallen more than 40% over the past couple of months. Even though Warren Buffet recently stepped in with 5 billion dollars, the reality is that the problems for Bank of America are far from over. In fact, one analyst is projecting that Bank of America is going to need to raise 40 or 50 billion dollars in new capital.
#3 European bank stocks have gotten absolutely hammered in recent weeks.
#4 So far, major international banks have announced layoffs of more than 60,000 workers, and more layoff announcements are expected this fall. A recent article in the New York Times detailed some of the carnage….
A new wave of layoffs is emblematic of this shift as nearly every major bank undertakes a cost-cutting initiative, some with names like Project Compass. UBS has announced 3,500 layoffs, 5 percent of its staff, and Citigroup is quietly cutting dozens of traders. Bank of America could cut as many as 10,000 jobs, or 3.5 percent of its work force. ABN Amro, Barclays, Bank of New York Mellon, Credit Suisse, Goldman Sachs, HSBC, Lloyds, State Street and Wells Fargo have in recent months all announced plans to cut jobs — tens of thousands all told.
#5 Credit markets are really drying up. Do you remember what happened in 2008 when that happened? Many are now warning that we are getting very close to a repeat of that.
#6 The Conference Board has announced that the U.S. Consumer Confidence Index fell from 59.2 in July to 44.5 in August. That is the lowest reading that we have seen since the last recession ended.
#7 The University of Michigan Consumer Sentiment Index has fallen by almost 20 points over the last three months. This index is now the lowest it has been in 30 years.
#8 The Philadelphia Fed’s latest survey of regional manufacturing activity was absolutely nightmarish….
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009
#9 According to Bloomberg, since World War II almost every time that the year over year change in real GDP has fallen below 2% the U.S. economy has fallen into a recession….
Since 1948, every time the four-quarter change has fallen below 2 percent, the economy has entered a recession. It’s hard to argue against an indicator with such a long history of accuracy.
#10 Economic sentiment is falling in Europe as well. The following is from a recent Reuters article….
A monthly European Commission survey showed economic sentiment in the 17 countries using the euro, a good indication of future economic activity, fell to 98.3 in August from a revised 103 in July with optimism declining in all sectors.
#11 The yield on 2 year Greek bonds is now an astronomical 42.47%.
#12 As I wrote about recently, the European Central Bank has stepped into the marketplace and is buying up huge amounts of sovereign debt from troubled nations such as Greece, Portugal, Spain and Italy. As a result, the ECB is also massively overleveraged at this point.
#13 Most of the major banks in Europe are also leveraged to the hilt and have tremendous exposure to European sovereign debt.
#14 Political wrangling in Europe is threatening to unravel the Greek bailout package. In a recent article, Satyajit Das described what has been going on behind the scenes in the EU….
The sticking point is a demand for collateral for the second bailout package. Finland demanded and got Euro 500 million in cash as security against their Euro 1,400 million share of the second bailout package. Hearing of the ill-advised side deal between Greece and Finland, Austria, the Netherlands and Slovakia also are now demanding collateral, arguing that their banks were less exposed to Greece than their counterparts in Germany and France entitling them to special treatment. At least, one German parliamentarian has also asked the logical question, why Germany is not receiving similar collateral.
#15 German Chancellor Angela Merkel is trying to hold the Greek bailout deal together, but a wave of anti-bailout “hysteria” is sweeping Germany, and now according to Ambrose Evans-Pritchard it looks like Merkel may not have enough votes to approve the latest bailout package….
German media reported that the latest tally of votes in the Bundestag shows that 23 members from Mrs Merkel’s own coalition plan to vote against the package, including twelve of the 44 members of Bavaria’s Social Christians (CSU). This may force the Chancellor to rely on opposition votes, risking a government collapse.
#16 Polish finance minister Jacek Rostowski is warning that the status quo in Europe will lead to “collapse“. According to Rostowski, if the EU does not choose the path of much deeper economic integration the eurozone simply is not going to survive much longer….
“The choice is: much deeper macroeconomic integration in the eurozone or its collapse. There is no third way.”
#17 German voters are against the introduction of “Eurobonds” by about a 5 to 1 margin, so deeper economic integration in Europe does not look real promising at this point.
#18 If something goes wrong with the Greek bailout, Greece is financially doomed. Just consider the following excerpt from a recent article by Puru Saxena….
In Greece, government debt now represents almost 160% of GDP and the average yield on Greek debt is around 15%. Thus, if Greece’s debt is rolled over without restructuring, its interest costs alone will amount to approximately 24% of GDP. In other words, if debt pardoning does not occur, nearly a quarter of Greece’s economic output will be gobbled up by interest repayments!
#19 The global banking system has a total of 2 trillion dollars of exposure to Greek, Irish, Portuguese, Spanish and Italian debt. Considering how much the global banking system is leveraged, this amount of exposure could end up wiping out a lot of major financial institutions.
#20 The head of the IMF, Christine Largarde, recently warned that European banks are in need of “urgent recapitalization“.
#21 Once the European crisis unravels, things could move very rapidly downhill. In a recent article, John Mauldin put it this way….
It is only a matter of time until Europe has a true crisis, which will happen faster – BANG! – than any of us can now imagine. Think Lehman on steroids. The U.S. gave Europe our subprime woes. Europe gets to repay the favor with an even more severe banking crisis that, given that the U.S. is at best at stall speed, will tip us into a long and serious recession. Stay tuned.
#22 The U.S. housing market is still a complete and total mess. According to a recently released report, U.S. home prices fell 5.9% in the second quarter compared to a year earlier. That was the biggest decline that we have seen since 2009. But even with lower prices very few people are buying. According to the National Association of Realtors, sales of previously owned homes dropped 3.5 percent during July. That was the third decline in the last four months. Sales of previously owned homes are even lagging behind last year’s pathetic pace.
#23 According to John Lohman, the decline in U.S. economic data over the past three months has been absolutely unprecedented.
#24 Morgan Stanley now says that the U.S. and Europe are “hovering dangerously close to a recession” and that there is a good chance we could enter one at some point in the next 6 to 12 months.
#25 Minneapolis Fed President Narayana Kocherlakota says that he is so alarmed about the state of the economy that he may drop his opposition to more monetary easing. Could more quantitative easing by the Federal Reserve soon be on the way?
Things have not looked this bad for global financial markets since 2008. Unless someone rides in on a white horse with trillions of dollars (or euros) of easy credit, it looks like we are headed for a massive credit crunch.
What we witnessed back in 2008 was absolutely horrifying. Very few people want to see a repeat of that. But as things in the U.S. and Europe continue to unravel, it appears increasingly likely that the next wave of the financial crisis could hit us sooner rather than later.
None of the fundamental problems that caused the crisis of 2008 have been fixed. The world financial system is still one gigantic mountain of debt, leverage and risk.
Authorities around the globe will certainly do all they can to keep things stable, but in the end it is inevitable that the house of cards is going to come crashing down.
Let us hope for the best, but let us also prepare for the worst.
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