What in the world is happening over in Europe? Well, it is actually quite simple. We are witnessing the slow motion collapse of the euro and of the European financial system. At this point, many analysts are convinced that a full-blown financial implosion in Europe has become inevitable. Ireland, Spain, Portugal, Italy, France and Belgium are all drowning in an ocean of unsustainable debt. Meanwhile, Germany and the few other “healthy” members of the EU continue to try to keep all of the balls in the air by bailing everyone out. But can Germany keep bailing the rest of the EU out indefinitely? Are the German people going to continue to be willing to hand out gigantic sacks of cash to fix the problems of other EU nations? The Irish were just bailed out, but their problems are far from over. There are rumors that Greece will soon need another bailout. Spain, Portugal, Italy and France have all entered crisis territory. At the same time, there are a whole host of nations in eastern Europe that are also on the verge of financial collapse. So is there any hope that a major sovereign debt crisis can be averted at this point?
One would like to think that there is always hope, but each month things just seem to keep getting worse. Confidence in European government debt continues to plummet. The yield on 10-year Irish bonds is up to 8.97%. The yield on 10-year Greek bonds is up to an astounding 12.01%. The cost of insuring French debt hit a new record high on December 20th.
Bond ratings all over Europe are being slashed or are being threatened with being slashed. For example, Moody’s Investors Service recently cut Ireland’s bond rating by five levels. Now there is talk that Spain, Belgium and even France could soon all have their debt significantly downgraded as well.
But if the borrowing costs for these troubled nations keep going up, that is just going to add to their financial problems and swell their budget deficits. In turn, larger budget deficits will cause investors to lose even more confidence.
So how far are we away from a major crisis point?
Professor Willem Buiter, the chief economist at Citibank, is warning that quite a few EU nations could financially collapse in the next few months if they are not quickly bailed out….
“The market is not going to wait until March for the EU authorities to get their act together. We could have several sovereign states and banks going under. They are being far too casual.”
Many analysts are even calling for some of these troubled nations to stop using the euro for a while so that they can recover. In fact, Andrew Bosomworth, the head of portfolio management for Pimco in Europe says that Greece, Ireland and Portugal must all quit the euro at least for a little while if they expect to survive….
“Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments.”
Sadly, most Americans don’t realize just how bad the situation in Europe is becoming. This is truly a historic crisis that is unfolding.
German Chancellor Angela Merkel declared earlier this year that this is the biggest financial crisis that the EU has ever faced….
“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.”
So what is the answer?
Well, many are speculating that the EU could actually break up over this whole thing, but another possibility is that we could eventually see much greater integration.
In fact, for the first time the idea that “euro bonds” could be issued is gaining some traction. This would spread the risk of European government debt throughout the European Union. At this point, Andrew Bosomworth says that things have gotten so bad that it now seems inevitable that we will soon see the creation of euro bonds….
“Whether now or later, there is no way around a euro bond.”
“I don’t want to scare anyone but I am considering investing in barbed wire and guns, things are not looking good and rates are heading higher.”
So why should Americans care about all this?
Well, what is happening to these troubled European states is eventually going to happen to us.
If rates on U.S. government debt eventually hit 8 or 12 percent it will literally be financial armageddon in this country. The U.S. government has piled up the biggest mountain of debt in the history of the world, and if we continue piling up debt at the pace that we are, then it will only be a matter of time before the IMF is demanding that we implement our own “austerity measures”.
As I have written about previously, there are already numerous indications that confidence in U.S. Treasuries is dying. If that happens, we could literally see interest costs on the national debt double or even triple.
But it is not just the U.S. government that is in trouble. A bloodbath in the municipal bond market has already started. Hundreds of state and local governments across the United States are on the verge of bankruptcy.
So don’t laugh at what is going on in Ireland or Greece. The next victims could be financially troubled states such as California and Illinois.
In the history of global finance, we have never faced a sovereign debt crisis like we are seeing now. All over the globe governments are being suffocated by absolutely crushing debt loads. Once a couple of dominoes fall, it is going to be really hard to keep the rest of the dominoes from falling.
This is the biggest crisis that the euro has ever faced. At some point Germany will either be unwilling or unable to continuing rescuing the rest of the EU countries from the unsustainable mountains of debt that they have accumulated. When that moment arrives, it is going to throw world financial markets into turmoil.
But this is what happens when we allow long-term debt bubbles to be created. Eventually they always burst.
So keep your eye on the euro, because if a financial collapse does happen in Europe it is going to have a dramatic impact on the United States as well.
In the United States, it is not just the federal government that has a horrific debt problem. Today, state and local governments across America are collectively deeper in debt than they ever have been before. In fact, state and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP. Once upon a time, municipal bonds (used to fund such things as roads, sewer systems and government buildings) were viewed as incredibly safe investments. They were considered to have virtually no risk. But now all of that has changed. Many analysts are now openly speaking of the possibility of a municipal bond market crash in 2011. The truth is that dozens upon dozens of city and county governments are teetering on the brink of bankruptcy. Even the debt of some of our biggest state governments, such as Illinois and California, is essentially considered to be “junk” at this point. There are literally hundreds of governmental financial implosions happening in slow motion from coast to coast, and up to this point not a lot of people in the mainstream media have been talking about it.
Fortunately, a recent report on 60 Minutes has brought these issues to light. If you have not seen it yet, do yourself a favor and click on the video below and spend a few minutes watching it. It is absolutely stunning.
In the piece, one of the people that 60 Minutes interviewed was Meredith Whitney – one of the most respected financial analysts in the United States. According to Whitney, the municipal bond crisis that we are facing is a massive threat to our financial system….
“It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States and certainly the largest threat to the U.S. economy.”
State and local governments across the United States are facing a complete and total financial nightmare. The 60 Minutes report posted below does a pretty good job of describing the problem but it doesn’t even pretend to come up with any solutions….
Unlike the federal government, state and local governments cannot just ask the Federal Reserve to print up endless amounts of cash. If state and local governments want to spend more than they bring in, they must borrow it from investors.
If the municipal bond market crashes, and investors around the world are no longer willing to hand over gigantic sacks of cash to state and local governments in the United States, then the game is over. Either state and local governments will have to raise taxes or they will have to start spending within their means.
Most Americans have no idea what this would mean. For decade after decade, state and local governments throughout the nation have been living way, way, way above their means. If the debt cycle gets cut off, it is going to mean that many local communities around the nation will start degenerating into rotting hellholes nearly overnight.
We are already seeing this happen in places such as Detroit, Michigan and Camden, New Jersey but if the municipal bond market totally collapses we are quickly going to have dozens of Detroits and Camdens from coast to coast.
Let’s take a closer look at some of the state and local governments that are in some of the biggest trouble….
California
California is facing a 19 billion dollar budget deficit next year, and incoming governor Jerry Brown is scrambling to find billions more to cut from the California state budget. At this point, investors are becoming increasingly wary about loaning any more money to the state. The following quote from Brown about the desperate condition of California state finances is not going to do much to inspire confidence in California’s financial situation around the globe….
“We’ve been living in fantasy land. It is much worse than I thought. I’m shocked.”
Unfortunately, the economic situation in California continues to degenerate. For example, 24.3 percent of the residents of El Centro, California are now unemployed. In fact, the number of people unemployed in the state of California is approximately equivalent to the populations of Nevada, New Hampshire and Vermont combined.
The housing market in the state is also a major drag on the economy there. For instance, the average home in Merced, California has declined in value by 63 percent over the past four years.
The state of California is swamped with so much debt that there literally appears to be no way out.
Arizona
The state government of Arizona is so incredibly starved for cash that it actually sold off the state capitol building, the state supreme court building and the legislative chambers. Now they are leasing those buildings back from the investors that they sold them to.
Arizona also recently announced that it has decided to stop paying for many types of organ transplants for people enrolled in its Medicaid program.
Illinois
Illinois is widely regarded to be in the worst financial condition of all the U.S. states. At this point, Illinois has approximately $5 billion in outstanding bills that have not been paid.
According to 60 Minutes, the state of Illinois is six months behind on bill payments. 60 Minutes correspondent Steve Croft asked Illinois state Comptroller Dan Hynes how many people and organizations are waiting to be paid by the state, and this is how Hynes responded….
“It’s fair to say that there are tens of thousands if not hundreds of thousands of people waiting to be paid by the state.”
The University of Illinois alone is owed 400 million dollars. There are approximately two thousand not-for-profit organizations that are collectively owed a billion dollars by the Illinois state government.
New Jersey
The New Jersey state budget has been slashed by 26 percent, a billion dollars have been cut from education and thousands of teachers have been laid off.
But even with all of those cuts, New Jersey is still facing a $10 billion budget deficit next year, and the state has $46 billion in unfunded pension liabilities and $65 billion in unfunded health care liabilities that it is somehow going to have to address in the future.
Detroit
Detroit Mayor Dave Bing has come up with a new way to save money. He wants to cut 20 percent of Detroit off from essential social services such as road repairs, police patrols, functioning street lights and garbage collection.
Miami
One Miami commissioner declared earlier this year that bankruptcy may be the city’s only financial hope.
Philadelphia, Baltimore and Sacramento
Major cities such as Philadelphia, Baltimore and Sacramento have instituted “rolling brownouts” in which various city fire stations are shut down on a rotating basis.
Camden
The second most dangerous city in the United States – Camden, New Jersey – is about to lay off about half its police in a desperate attempt to save money.
Oakland
Oakland, California Police Chief Anthony Batts has announced that due to severe budget cuts there are a number of crimes that his department will simply not be able to respond to any longer. The crimes that the Oakland police will no longer be responding to include grand theft, burglary, car wrecks, identity theft and vandalism.
America used to be viewed as the land of great economic progress, but that is no longer the case. Sadly, all over the United States there are signs that we are actually going backwards as a country.
All over the nation, asphalt roads are actually being ground up and are being replaced with gravel because it is cheaper to maintain. The state of South Dakota has transformed over 100 miles of asphalt road into gravel over the past year, and 38 out of the 83 counties in the state of Michigan have transformed at least some of their asphalt roads into gravel roads.
Just think about that – we are actually going back to gravel roads.
What’s next?
But this is what is going to happen all over America if dozens of state and local governments start defaulting and the municipal bond market crashes.
In fact, don’t look now, but there are signs that a “bloodbath” in the municipal bond market has already begun. The months of November and December have been incredibly rocky for municipal bonds.
The days when U.S. states and cities could borrow seemingly endless amounts of incredibly cheap money are officially over.
So where are state and local governments going to get the money that they need?
Well, they are going to come and try to get it from you of course. Over the past two years, 36 of the 50 U.S. states have jacked up taxes or fees.
Many local governments are trying to raise funds any way that they can. For example, from now on if you are caught jaywalking in Los Angeles you will be slapped with a $191 fine.
This kind of thing is happening all over America. Police departments are being turned into revenue raising operations. Police are so busy writing tickets that they barely have any time to investigate actual crimes anymore.
But it simply is not going to be enough. State and local governments across the U.S. are facing financial holes of legendary proportions.
The 60 Minutes report above stated that the combined unfunded pension and health care liabilities of the 50 states is $1 trillion. Unfortunately, that is an estimate that is probably way too conservative. In fact, two prominent university professors have calculated that the combined unfunded pension liability for all 50 U.S. states is approximately 3.2 trillion dollars.
So if the municipal bond market does crash will the federal government step in and bail everyone out?
Well, this upcoming spring the $160 billion in federal “stimulus money” runs out. At that point there will likely be a huge cry for even more “stimulus money” for state and local governments.
Unfortunately, as I wrote about yesterday, the federal government is also flat broke and swimming in an ocean of endless red ink. Congress could potentially step in and try to bail all the state and local governments out, but in the end it is the American people who are going to have to pay the bill.
We are on the verge of a horrific economic collapse which is going to change life in this country as we know it forever. All of this debt is absolutely going to swamp us. Our politicians can keep trying to kick the can down the road for as long as they can, but eventually the financial nightmare that so many of us have been dreading is going to overtake us.
You are not going to believe some of the things that the U.S. government is spending money on. According to a shocking new report, U.S. taxpayer money is being spent to study World of Warcraft, to study how Americans find love on the Internet, and to study the behavior of male prostitutes in Vietnam. Not only that, but money from the federal government is also being used to renovate a pizzeria in Iowa and to help a library in Tennessee host video game parties. These are just some of the examples in a new report on government waste from Senator Tom Coburn entitled “Wastebook 2010“. Even as tens of millions of American families find themselves suffering through the worst economic downturn in modern history, the U.S. government continues to spend money on some of the craziest and most frivolous things imaginable. Every single year articles are written and news stories are done about the horrific government waste that is taking place and yet every single year it just keeps getting worse. So just what in the world is going on here?
It almost seems as though Congress actually enjoys inventing new ways to waste U.S. taxpayer money. It seems nearly inconceivable that anyone could keep a straight face while trying to justify spending money on many of the things in the list below.
At a time when the U.S. national debt is closing in on 14 trillion dollars, government waste just seems more out of control than ever. The following are 20 of the craziest things that the U.S. government is spending money on….
#1 A total of $3 million has been granted to researchers at the University of California at Irvine so that they can play video games such as World of Warcraft. The goal of this “video game research” is reportedly to study how “emerging forms of communication, including multiplayer computer games and online virtual worlds such as World of Warcraft and Second Life can help organizations collaborate and compete more effectively in the global marketplace.”
#2 The U.S. Department of Agriculture gave the University of New Hampshire $700,000 this year to study methane gas emissions from dairy cows.
#3$615,000 was given to the University of California at Santa Cruz to digitize photos, T-shirts and concert tickets belonging to the Grateful Dead.
#4 A professor at Stanford University received $239,100 to study how Americans use the Internet to find love. So far one of the key findings of this “research” is that the Internet is a safer and more discreet way to find same-sex partners.
#5 The National Science Foundation spent $216,000 to study whether or not politicians “gain or lose support by taking ambiguous positions.”
#6 The National Institutes of Health spent approximately $442,340 to study the behavior of male prostitutes in Vietnam.
#7 Approximately $1 million of U.S. taxpayer money was used to create poetry for the Little Rock, New Orleans, Milwaukee and Chicago zoos. The goal of the “poetry” is to help raise awareness on environmental issues.
#8 The U.S. Department of Veterans Affairs spent $175 million during 2010 to maintain hundreds of buildings that it does not even use. This includes a pink, octagonal monkey house in the city of Dayton, Ohio.
#9$1.8 million of U.S. taxpayer dollars went for a “museum of neon signs” in Las Vegas, Nevada.
#10$35 million was reportedly paid out by Medicare to 118 “phantom” medical clinics that never even existed. Apparently these “phantom” medical clinics were established by a network of criminal gangs as a way to defraud the U.S. government.
#11 The Conservation Commission of Monkton, Vermont got $150,000 from the federal government to construct a “critter crossing”. Thanks to U.S. government money, the lives of “thousands” of migrating salamanders are now being saved.
#12 In California, one park received $440,000 in federal funds to perform “green energy upgrades” on a building that has not been used for a decade.
#13$440,955 was spent this past year on an office for former Speaker of the House Dennis Hastert that he rarely even visits.
#14 One Tennessee library was given $5,000 in federal funds to host a series of video game parties.
#15 The U.S. Census Bureau spent $2.5 million on a television commercial during the Super Bowl that was so poorly produced that virtually nobody understood what is was trying to say.
#16 A professor at Dartmouth University received $137,530 to create a “recession-themed” video game entitled “Layoff”.
#17 The National Science Foundation gave the Minnesota Zoo over $600,000 so that they could develop an online video game called “Wolfquest”.
#18 A pizzeria in Iowa was given $60,000 to renovate the pizzeria’s facade and give it a more “inviting feel”.
#19 The U.S. Department of Agriculture gave one enterprising group of farmers $30,000 to develop a tourist-friendly database of farms that host guests for overnight “haycations”. This one sounds like something that Dwight Schrute would have dreamed up.
#20 Almost unbelievably, the National Institutes of Health was given $800,000 in “stimulus funds” to study the impact of a “genital-washing program” on men in South Africa.
In light of all this, is it any wonder why the approval rating of Congress recently hit another new record low?
According to the most recent Gallup poll, only 13 percent of Americans approve of the job that Congress is doing.
Just think about that – only 13 percent!
Our politicians seem very confused about why there is so much anger in the country today. Well, there are certainly a lot of reasons for it, including the fact that the U.S. economy is on the verge of collapse, but it certainly doesn’t help that our government is basically flushing our tax dollars down the toilet and spending them on some of the most wasteful things imaginable.
It would be bad enough if the federal government was swimming in money, but the truth is that all of this waste is being committed at a time when the U.S. government is nearing bankruptcy.
Over the last 30 years, the U.S. national debt has gotten 13 times larger. We have accumulated the largest debt in the history of the world and there is no end in sight.
In fact, we are rapidly running out of people to borrow money from. According to the Wall Street Journal, in order to repay maturing bonds and finance the exploding budget deficit, the U.S. government will have to borrow 4.2 trillion dollars in 2011.
Eventually the rest of the world is going to lose confidence in the ability of the U.S. government to repay all of this debt. Once confidence in U.S. Treasuries is totally gone, and there are already signs this is starting to happen, the game will be over and the U.S. financial system will collapse.
But the U.S. Congress just continues to act like it is “business as usual” and the wasteful spending just continues to get worse. Someday historians will look back and think that we must have been a nation full of idiots and morons.
For decades our politicians have been spending us into oblivion, yet we keep sending the vast majority of them back to Washington D.C. every time an election rolls around and the mainstream media keeps assuring us that our “respected leaders” know exactly what they are doing and that everything is going to be okay somehow.
It is almost as if some sort of collective insanity has overtaken most Americans. The path we are on inevitably leads to national bankruptcy and the destruction of our financial system, but only a small percentage of the population seems to care.
Well, in the end we will reap what we have sown. Unfortunately, the economic pain that is coming is going to be devastating for all of us – including those of us who are awake and are trying desperately to change things.
What in the world are they thinking over at the Federal Reserve? The privately-owned central bank that runs the U.S. economy is now forcing local banks to remove every shred of Christian faith from their establishments. When Federal Reserve examiners recently visited a local bank in Perkins, Oklahoma they demanded that the bank take down a “Bible verse of the day” and crosses that were displayed on the teller’s counter. In addition, the agents from the Federal Reserve forced all bank personnel to remove buttons that said “Merry Christmas, God With Us”. The bank was also ordered to remove a “Bible verse of the day” from the bank’s website. According to Federal Reserve officials, all visible expressions of Christian faith by bank officials are now banned in all banks across the United States.
Now, before people start screaming “separation of church and state”, please keep in mind that the “state” is not involved here. The local bank in Perkins is a privately-owned financial institution. The owners of that bank should be able to express themselves however they want.
In addition, it is important to note that it was not an agency of the federal government or a federal court that ordered this private local bank to remove all traces of Christianity.
The truth is that the Federal Reserve is not part of the U.S. government. In fact, the Federal Reserve is about as “federal” as Federal Express is.
You doubt this?
Well, perhaps you will believe what the Federal Reserve is publicly saying about itself.
In defending itself against a Bloomberg request for information under the Freedom of Information Act, the Federal Reserve objected by declaring that it was “not an agency” of the U.S. government and therefore it was not subject to the Freedom of Information Act.
In the video posted below, former Federal Reserve Chairman Alan Greenspan makes it very clear that the Federal Reserve is above the law and need not answer to anyone in the federal government….
So where in the world does the Federal Reserve get the idea that they have the authority to tell a private bank that they cannot display a Bible verse of the day and that their employees cannot wear Christmas buttons?
No matter what you think about the faith of the owners of the local bank in Perkins, the truth is that we should all be concerned about the kind of precedent that this sets for free speech.
According to Federal Reserve officials, any visible expression of Christianity by a private bank may cause someone from another religion to be offended and feel as though they may be discriminated against by that bank. Therefore any expression of Christianity is “an appearance of discrimination” and thus must be banned.
Okay, so if any expression of Christianity is “an appearance of discrimination”, will federal officials soon use all of the federal “anti-discrimination laws” already on the books to ban all expressions of Christianity in all private businesses throughout the United States?
Once again, it is absolutely crucial to note that the local bank in Perkins is not a government building. Federal Reserve agents are telling private business owners how they can express themselves as they run their privately-owned business on private property.
The following is a local news report about this very disturbing incident….
Does anyone still believe that we have “freedom of speech” in the United States?
It is almost as if all forms of Christian expression are now regarded as something horribly dirty by our public officials.
Even if you are an atheist, this should deeply concern you as well. When freedom of speech is taken from some of us, it is only a matter of time until it is taken from the rest of us as well.
And since when does the Federal Reserve have any authority to tell any private citizen what they can or cannot say?
This is just another example of how the Federal Reserve has gotten completely and totally out of control. The Fed has become an unaccountable monster that is just running around doing just about anything that it wants to do.
It is for some very good reasons that many members of Congress are starting to publicly speak out against the Federal Reserve. Just recently it came out that the Federal Reserve has been handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe. The American people have completely lost control over the financial system, and as long as the Federal Reserve remains in control that is going to continue to be the case.
But now, not only is the Federal Reserve at the core of the rapidly developing financial nightmare that is enveloping this nation, they are also attempting to tell private bank owners what they can and cannot say inside their own private businesses.
No matter what your faith is or even if you have no faith, you should be objecting to this. If the Federal Reserve is allowed to get away with this, it will be just a matter of time before U.S. government agencies come along and start ordering all private businesses to remove all traces of Christianity because they are “discriminatory” and they might offend someone.
The freedoms and liberties that previous generations fought and died to defend are being stripped away from us. If you plan to say something about it before they are all gone, now would be a good time to start.
Oil prices are starting to spin out of control once again. In London, Brent North Sea crude for delivery in February hit 91.89 dollars a barrel on Friday. New York crude moved above 88 dollars a barrel on Friday. Many analysts believe that 100 dollar oil is a virtual certainty now. In fact, many economists are convinced that oil is going to start moving well beyond the 100 dollar mark. So what happened the last time oil went well above 100 dollars a barrel? Oh, that’s right, we had a major financial crisis. Not that subprime mortgages, rampant corruption on Wall Street and out of control debt didn’t play major roles in precipitating the financial crisis as well, but the truth is that most economists have not given the price of oil the proper credit for the role that it played in almost crashing the world economy. In July 2008, the price of oil hit a record high of over $147 a barrel. A couple months later all hell broke loose on world financial markets. The truth is that having the price of oil that high created horrific imbalances in the global economy. Fortunately the price of oil took a huge nosedive after hitting that record high, and it can be argued that lower oil prices helped stabilize the world economy. So now that oil prices are on a relentless march upward again, what can we expect this time?
Well, what we can expect is more economic trouble. The truth is that oil is the “blood” of our economy. Without oil nothing moves and virtually no economic activity would take place. Our entire economic system is based on the ability to cheaply and efficiently move people and products. An increase in the price of oil puts inflationary pressure on virtually everything else in our society. Without cheap oil, the entire game changes.
The chart below shows what the price of oil has done since 1950 (although it doesn’t include the most recent data). With the price of oil marching towards 100 dollars a barrel again, many people are wondering what this is going to mean for the U.S. economic “recovery”….
Just think about it. What is it going to do to U.S. households when they have to start spending four, five or even six dollars on a gallon of gas?
What is it going to do to our trucking and shipping costs?
What is it going to do to the price of food? According to the U.S. Bureau of Labor Statistics, food inflation in the United States was already 1 1/2 times higher than the overall rate of inflation during the past year. But that is nothing compared to what is coming.
During 2010, the price of just about every major agricultural commodity has shot up dramatically. These price increases are just starting to filter down to the consumer level. So what is going to happen if oil shoots up to 100, 120 or even 150 dollars a barrel?
Demand for oil is only going to continue to increase. Do you know who the number one consumer of energy on the globe is today? For about a hundred years it was the United States, but now it is China. Other emerging markets are starting to gobble up oil at a voracious pace as well.
Not that the price of oil isn’t highly manipulated. Of course it is. The truth is that the price of oil should not be nearly as high as it currently is. Unfortunately, you and I have very little say on the matter.
If the price of oil keep going higher, it is really going to start having a dramatic impact on global economic activity at some point. Meanwhile, oil producers and the big global oil companies will pull in record profits, and radical “environmentalists” will love it because people will be forced to start using less oil.
When it comes to oil, there are a lot of “agendas” out there, and unfortunately it looks like the pendulum is swinging back towards those who have “agendas” that favor a very high price for oil.
So what does that mean for all of us?
It is going to mean higher prices at the pump, higher prices at the supermarket and higher prices for almost everything else that we buy.
If the price of oil causes a significant slowdown in economic activity, it could also mean that a whole bunch of us may lose our jobs.
The ratio of corporate insider stock selling to corporate insider stock buying is at the highest it has been in nearly four years. This is so similar to what happened just prior to the last financial crisis. The corporate insiders are seeing the writing on the wall and they are flocking for the exits.
Many savvy investors are getting out of paper and are looking for hard assets to put their money in. For example, China is buying gold like there is no tomorrow. The Chinese seem to sense that something is coming. But of course they are not alone. All over the world top economists are warning that we are flirting with disaster.
On Friday, Moody’s slashed Ireland’s credit rating by five notches to Baa1, and is warning that even more downgrades may follow.
Just think about that for a moment.
Moody’s didn’t just downgrade Irish debt a little – what Moody’s basically did was take out a big wooden mallet and pummel it into oblivion.
Irish debt is now considered little more than garbage in world financial markets now. Unfortunately, Greece, Spain, Portugal, Italy, Belgium and a bunch of other European nations are also headed down the same road.
The truth is that the euro is much closer to a major collapse than most Americans would ever dream.
The world financial system is teetering on the brink of another major financial crisis, and rising oil prices certainly are not going to help that.
If the price of oil breaks the 100 dollar mark, it will be time to become seriously alarmed.
If the price of oil breaks the 150 dollar mark in 2011 it will be time to push the panic button.
Let’s hope that the price of oil stabilizes for a while, but unfortunately that is probably not going to happen.
The truth is that the economic outlook for 2011 is bleak at best, especially if the price of oil continues to skyrocket.
The financial collapse that so many of us have been anticipating is seemingly closer then ever. Over the past several weeks, there have been a host of ominous signs for the U.S. economy. Yields on U.S. Treasuries have moved up rapidly and Moody’s is publicly warning that it may have to cut the rating on U.S. government debt soon. Mortgage rates are also moving up aggressively. The euro and the U.S. dollar both look incredibly shaky. Jobs continue to be shipped out of the United States at a blistering pace as our politicians stand by and do nothing. Confidence in U.S. government debt around the globe continues to decline. State and local governments that are drowning in debt across the United States are savagely cutting back on even essential social services and are coming up with increasingly “creative” ways of getting more money out of all of us. Meanwhile, tremor after tremor continues to strike the world financial system. So does this mean that we have almost reached a tipping point? Is the world on the verge of a major financial collapse?
Let’s hope not, but with each passing week the financial news just seems to get eve worse. Not only is U.S. government debt spinning wildly toward a breaking point, but many U.S. states (such as California) are in such horrific financial condition that they are beginning to resemble banana republics.
But it is not just the United States that is in trouble. Nightmarish debt problems in Greece, Spain, Portugal, Ireland, Italy, Belgium and several other European nations threaten to crash the euro at any time. In fact, many economists are now openly debating which will collapse first – the euro or the U.S. dollar.
Sadly, this is the inevitable result of constructing a global financial system on debt. All debt bubbles eventually collapse. Currently we are living in the biggest debt bubble in the history of the world, and when this one bursts it is going to be a disaster of truly historic proportions.
So will we reach a tipping point soon? Well, the following are 25 signs that the financial collapse is rapidly getting closer….
#1 The official U.S. unemployment rate has not been beneath 9 percent since April 2009.
#2 According to the U.S. Census Bureau, there are currently 6.3 million vacant homes in the United States that are either for sale or for rent.
#3 It is being projected that the U.S. trade deficit with China could hit 270 billion dollars for the entire year of 2010.
#4 Back in 2000, 7.2 percent of blue collar workers were either unemployed or underemployed. Today that figure is up to 19.5 percent.
#5 The Chinese government has accumulated approximately $2.65 trillion in total foreign exchange reserves. They have drained this wealth from the economies of other nations (such as the United States) and instead of reinvesting all of it they are just sitting on much of it. This is creating tremendous imbalances in the global economy.
#6 Since the year 2000, we have lost 10% of our middle class jobs. In the year 2000 there were approximately 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.
#7 The United States now employs about the same number of people in manufacturing as it did back in 1940. Considering the fact that we had 132 million people living in this country in 1940 and that we have well over 300 million people living in this country today, that is a very sobering statistic.
#9 The average rate on a 30 year fixed rate mortgage soared 11 basis points just this past week. As mortgage rates continue to push higher it is going to make it even more difficult for American families to afford homes.
#10 22.5 percent of all residential mortgages in the United States were in negative equity as of the end of the third quarter of 2010.
#11 The U.S. monetary base has more than doubled since the beginning of the most recent recession.
#13 Incoming governor Jerry Brown is scrambling to find $29 billion more to cut from the California state budget. The following quote from Brown about the desperate condition of California state finances is not going to do much to inspire confidence in California’s financial situation around the globe….
“We’ve been living in fantasy land. It is much worse than I thought. I’m shocked.”
#1424.3 percent of the residents of El Centro, California are currently unemployed.
#15 The average home in Merced, California has declined in value by 63 percent over the past four years.
#16 Detroit Mayor Dave Bing has come up with a new way to save money. He wants to cut 20 percent of Detroit off from essential social services such as road repairs, police patrols, functioning street lights and garbage collection.
#17 The second most dangerous city in the United States – Camden, New Jersey – is about to lay off about half its police in a desperate attempt to save money.
#18 In 2010, 55 percent of Americans between the ages of 60 and 64 were in the labor market. Ten years ago, that number was just 47 percent. More older Americans than ever find that they have to keep working just to survive.
#19 Back in 1998, the United States had 25 percent of the world’s high-tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.
#22 The United States had been the leading consumer of energy on the globe for about 100 years, but this past summer China took over the number one spot.
#23 According to an absolutely stunning new poll, 40 percent of all U.S. doctors plan to bail out of the profession over the next three years.
#24 As 2007 began, there were just over 1 million Americans that had been unemployed for half a year or longer. Today, there are over 6 million Americans that have been unemployed for half a year or longer.
#25 All over the United States, local governments have begun instituting “police response fees”. For example, New York Mayor Michael Bloomberg has come up with a plan under which a fee of $365 would be charged if police are called to respond to an automobile accident where no injuries are involved. If there are injuries as a result of the crash that is going to cost extra.
I hope that you enjoy the cheap foreign-made plastic trinkets that you will be exchanging with your family and friends this holiday season, because they are literally destroying the U.S. economy. As part of the new “one world economy” that both Democrats and Republicans insist is so good for us, millions of good paying middle class jobs have been shipped out of America. Do you need a job? Are you wondering where all the good jobs went? Well, the next time you are out just walk into a store and start looking at the product labels. Most of the things that are sold in our stores are now made out of the country. So if you need a good paying job to support your family that is just too bad – you have been merged into a global labor pool where you must compete for jobs with people on the other side of the globe willing to work for less than a tenth of what you usually make. Welcome to the “one world economy” where big global corporations make a fortune exploiting slave labor on the other side of the world while “overly expensive American workers” get dumped out on the street.
Are you in favor of a redistribution of wealth? Most of the time when the phrase “redistribution of wealth” is brought up, conservatives and libertarians visibly cringe – as they should. But did you know that right now the greatest redistribution of wealth in the history of the world is taking place and our politicians are doing nothing about it?
For a moment, imagine a giant map of the world. On that giant map, put a huge pile of money on the United States, and also put a huge pile of money on China and on the OPEC nations. Now imagine a big hand coming along once a month that takes tens of billions of dollars out of the U.S. pile and puts it into the piles of China and the OPEC nations.
As this continues month after month after month, what is eventually going to happen?
The U.S. pile of money is going to get far smaller and the other piles of money are going to get much, much larger.
And that is exactly what is happening in our world today.
Back in 1985, the U.S. trade deficit with China was 6 million dollars for the entire year – not really anything to worry about it.
Well, let’s fast forward to 2010. For the month of August alone, the trade deficit with China was more than 28 billion (that’s billion with a “b”) dollars.
In other words, the U.S. trade deficit with China in August was more than 4,600 times larger than the U.S. trade deficit with China was for the entire year of 1985.
My, how the world has changed in 25 years.
Oh, but doesn’t China “invest” some of that money they are getting from us back into our country?
Well yeah, our top officials regularly go over there to beg them to lend us more money. Now we owe China close to a trillion dollars. We also owe the major oil exporting nations of the Middle East massive amounts of money.
Is this a good idea? Let us keep in mind the ancient principle that the borrower always ends up the servant of the lender.
Is it wise for the United States to become enslaved to China and to the oil exporters of the Middle East?
Is that any way to run an economy? Is that any way to run a country?
All over the United States factories are closing down. If you go to shopping centers in many areas of America you would think that the hottest new store was called “Space Available”.
Since the year 2000, we have lost 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.
What kind of progress is that?
“But oh”, the supporters of the one world economy will declare, “the cheap goods, the cheap goods!”
Yes, I hope you enjoy paying ten percent less for your plastic trinkets. But you will also support American workers one way or another. Either you will provide them with good paying jobs, or you will pay for their food stamps and their unemployment checks.
One out of every six Americans is now enrolled in a federal anti-poverty program. As 2007 began, 26 million Americans were on food stamps, but now 42 million Americans are on food stamps and that number keeps rising every single month.
Can anyone out there please explain how the “one world economy” is supposed to be good for us when 42 million Americans cannot even feed themselves?
Allowing our country to be deindustrialized just so that we can consume more cheap goods from China is like tearing down pieces of your house to keep your fire going. In the end, you won’t have much of a house left.
Whatever your opinion of Donald Trump is, this next video is worth watching. Trump certainly should not run for president, but as a savvy businessman he definitely understands what China is doing to us….
It is time for the American people to wake up.
We are being taken advantage of.
The one world economy is going to keep destroying the U.S. middle class. There is no way that American workers can compete with slave labor on the other side of the globe. It is impossible.
In fact, just about every kind of job imaginable is being shipped to places where labor is cheaper. Even engineering and computer programming jobs are being offshored and outsourced.
The United States is even being slaughtered in high-tech industries. Back in 1998, the United States had 25 percent of the world’s high-tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.
According to one recent study, China could become the global leader in patent filings by next year.
The United States has become a bloated, slovenly nation that consumes massive amounts of wealth but that produces relatively little.
With each passing year, we make fewer things inside the United States….
*The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.
*As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time that less than 12 million Americans were employed in manufacturing was in 1941.
*Manufacturing employment in the U.S. computer industry is actually lower in 2010 than it was in 1975.
Oh, but won’t “getting more education” solve all of our problems and get the American people back to work?
No.
The truth is that tens of millions of Americans have a “higher education” that is not doing them any good today.
In his article entitled “The Great College-Degree Scam“, Richard Vedder explains that a large percentage of U.S. college graduates are working in jobs that have not historically required college degrees….
Here it is: approximately 60 percent of the increase in the number of college graduates from 1992 to 2008 worked in jobs that the BLS considers relatively low skilled—occupations where many participants have only high school diplomas and often even less.
Ouch.
Later on in his article, Vedder notes that the number of college graduates that are waiting tables or that are working as cashiers is absolutely exploding….
In 1992 119,000 waiters and waitresses were college degree holders. By 2008, this number had more than doubled to 318,000. While the total number of waiters and waitresses grew by about 1 million during this period, 20% of all new jobs in this occupation were filled by college graduates. Take cashiers as well. While 132,000 cashiers possessed college degrees in 1992, by 2008, 365,000 cashiers were college graduates. As with waiters and waitresses, 20% of new cashiers since 1992 are college graduates.
So do you still think that the “one world economy” is a great idea?
Well, you might want to practice the following two phrases….
#1 “Would you like fries with that?”
#2 “Welcome to Wal-Mart!”
Our economy is turning into a low-wage service economy because we don’t make much of anything in the United States anymore.
So if you need a good job, I am afraid that the joke is on you.
The good jobs are being shipped out of the United States as part of the new one world economy, and millions of unemployed Americans have been left to fight over the low paying service jobs that remain.
So if you are flipping burgers or stocking shelves for a big multinational retail chain, perhaps you should consider yourself to be fortunate. At least you still have a job. There are millions of desperate, hungry-eyed Americans that would take your job in a second.
And you know what? Things are only going to get worse.
In the United States today, we are all being constantly bombarded by chemicals, poisons and toxins. Virtually everything that we eat or drink makes us less healthy. The vast majority of Americans gladly consume aspartame, fluoride, BPA, genetically-modified food, pesticides, high fructose corn syrup, pharmaceutical drugs and toxic vaccines without any concern that those substances may ruin their health. But the truth is that we are getting sicker and sicker and sicker as a nation. According to one recent report, the United States has dropped to 49th place in the world in overall life expectancy. Diseases such as cancer, heart disease and diabetes are absolutely exploding. So how in the world are we supposed to have a healthy and vibrant economy when virtually everything that we eat and drink is constantly making us sick?
Recently, my wife (who has always been extremely healthy) developed some alarming breathing problems. She did not appear to suffer from any known medical condition, so we were completely puzzled.
Finally, we started examining what we were eating and drinking. It turns out that she was putting some cream in her coffee that contained something known as “Polysorbate 80″. Polysorbate 80 is found in a vast array of dairy products and is even used in many vaccines. According to Drugs.com, “difficulty breathing” is indeed one of the known side effects of Polysorbate 80. Once my wife cut the Polysorbate 80 out of her diet, the breathing difficulties subsided. The following is how she describes what she went through….
Prior to my recent problems, I had never been in a situation were I felt as though there was very limited air available. When the breathing problems would flare up, I would take in deep breath after deep breath but I just couldn’t get any oxygen. My body tried to cope by constantly yawning which forced air into my lungs. Some days it wouldn’t be so bad, but on other days it was really frightening. My breathing was extremely labored at times. I constantly had to yawn throughout the day in order to catch a satisfying breath. One day my breathing was really labored – I was constantly gasping for deep breaths, but I wasn’t getting enough oxygen. I was about to cry. I felt as though I had dived to the bottom of a deep pool and I was almost out of air. My body was in a constant state of panic. I felt so tired and I was worried that I may collapse at any time. We got into the car, and I was almost ready to pass out. We had the windows rolled down to give me the feeling of lots of oxygen, but I felt like I couldn’t take any in. Fortunately that episode eventually subsided, but there were many days when I was in agony. You cannot imagine how horrible it is to gasp for breath and never seem to get enough. Several incidents really scared me. What was even more frightening was that I had no idea at the time what was causing all this.
Thankfully my wife is doing much better now, but there are thousands and thousands of others across the United States that are experiencing similar breathing problems and nobody has any answers for them.
So what are some of the other side effects of Polysorbate 80?
Well, Drugs.com says that the following are “common” side effects….
Constipation; cough; diarrhea; dizziness; headache; muscle, joint, back, or stomach pain; nausea or vomiting; pain, swelling, irritation, redness, or bruising at the injection site; unusual tiredness or weakness.
In addition, Drugs.com says that the following are severe side effects of Polysorbate 80 that an individual should seek immediate medical attention for….
Severe allergic reactions (rash; hives; itching; difficulty breathing; tightness in the chest; swelling of the mouth, face, lips, or tongue); blurred vision or vision changes; chest pain; confusion; fainting; fast or irregular heartbeat; flu-like symptoms (fever, chills, sore throat); one-sided weakness; pale skin color; redness, tenderness, or swelling of the calf; seizures; severe diarrhea, dizziness, headache, stomach pain, or vomiting; severe or persistent tiredness or weakness; slurred speech; sudden pain or numbness of an arm or leg; sudden shortness of breath; sudden trouble walking or loss of balance; swelling of the arms or legs; vision or speech problems; weight gain.
Remember, this is in countless dairy products all across the United States. Most Americans are absolutely clueless that they are pouring Polysorbate 80 into their coffee or that it is in the ice cream that they are eating.
Another major threat to our health is something called bisphenol-A (BPA). BPA is one of the most widely used chemicals in the entire world. If you eat canned food or you drink bottled water you most likely have BPA in your home and you don’t even know it.
According to Natural News, BPA is not only in virtually every American home, but it has also been linked to some very serious health problems….
It is used to harden plastic in everything from infant and water bottles to mobile phone and computer casings, and also to make linings for cans of food, beverages and infant formula. Yet a growing body of research has implicated the chemical as an endocrine (hormone) disruptor that can lead to cancer, birth defects, behavioral problems and other diseases.
Shouldn’t someone be doing something about this?
Of course.
But the truth is that the big corporations that are pushing these chemicals are much more powerful than those who are trying to watch out for our health.
In fact, authorities all over the United States are putting one very toxic chemical into our water on purpose.
It is called fluoride, and it is being put into our water supposedly because it is good for our teeth. What Americans are not being told is that fluoride is actually a highly toxic sedative and is causing a whole host of very serious health problems.
Even small amounts of fluoride consumed from tap water can damage your bones, teeth, brain, disrupt your thyroid function, lower IQ and/or cause cancer, according to evidence revealed in a groundbreaking 2006 National Research Council (NRC) fluoride report produced by a panel of experts who reviewed hundreds of published fluoride studies.
The Natural Health and Longevity Resource Center has published a list of ten of the most significant health dangers that the scientific research has shown that fluoride causes…..
1. Fluoride exposure disrupts the synthesis of collagen and leads to the breakdown of collagen in bone, tendon, muscle, skin, cartilage, lungs, kidney and trachea.
2. Fluoride stimulates granule formation and oxygen consumption in white blood cells, but inhibits these processes when the white blood cell is challenged by a foreign agent in the blood.
3. Fluoride depletes the energy reserves and the ability of white blood cells to properly destroy foreign agents by the process of phagocytosis. As little as 0.2 ppm fluoride stimulates superoxide production in resting white blood cells, virtually abolishing phagocytosis. Even micro-molar amounts of fluoride, below 1 ppm, may seriously depress the ability of white blood cells to destroy pathogenic agents.
4. Fluoride confuses the immune system and causes it to attack the body’s own tissues, and increases the tumor growth rate in cancer prone individuals.
5. Fluoride inhibits antibody formation in the blood.
6. Fluoride depresses thyroid activity.
7. Fluorides have a disruptive effect on various tissues in the body.
8. Fluoride promotes development of bone cancer.
9. Fluorides cause premature aging of the human body.
10. Fluoride ingestion from mouth rinses and dentifrices in children is extremely hazardous to biological development, life span and general health.
But perhaps even more dangerous is the sweetener known as aspartame. Today, aspartame is an ingredient in literally thousands of different food and drink products. In fact, it is often marketed in “health products” such as diet sodas.
According to an article on Mercola.com, aspartame is one of the most toxic substances being added to our foods….
Aspartame accounts for over 75 percent of the adverse reactions to food additives reported to the FDA. Many of these reactions are very serious including seizures and death. A few of the 90 different documented symptoms listed in the report as being caused by aspartame include: Headaches/migraines, dizziness, seizures, nausea, numbness, muscle spasms, weight gain, rashes, depression, fatigue, irritability, tachycardia, insomnia, vision problems, hearing loss, heart palpitations, breathing difficulties, anxiety attacks, slurred speech, loss of taste, tinnitus, vertigo, memory loss, and joint pain.
According to researchers and physicians studying the adverse effects of aspartame, the following chronic illnesses can be triggered or worsened by ingesting of aspartame: Brain tumors, multiple sclerosis, epilepsy, chronic fatigue syndrome, parkinson’s disease, alzheimer’s, mental retardation, lymphoma, birth defects, fibromyalgia, and diabetes.
Eye
blindness in one or both eyes
decreased vision and/or other eye problems such as: blurring, bright flashes, squiggly lines, tunnel vision, decreased night vision
pain in one or both eyes
decreased tears
trouble with contact lenses
bulging eyes
Ear
tinnitus – ringing or buzzing sound
severe intolerance of noise
marked hearing impairment
Neurologic
epileptic seizures
headaches, migraines and (some severe)
dizziness, unsteadiness, both
confusion, memory loss, both
severe drowsiness and sleepiness
paresthesia or numbness of the limbs
severe slurring of speech
severe hyperactivity and restless legs
atypical facial pain
severe tremors
Psychological/Psychiatric
severe depression
irritability
aggression
anxiety
personality changes
insomnia
phobias
Chest
palpitations, tachycardia
shortness of breath
recent high blood pressure
Gastrointestinal
nausea
diarrhea, sometimes with blood in stools
abdominal pain
pain when swallowing
Skin and Allergies
itching without a rash
lip and mouth reactions
hives
aggravated respiratory allergies such as asthma
Endocrine and Metabolic
loss of control of diabetes
menstrual changes
marked thinning or loss of hair
marked weight loss
gradual weight gain
aggravated low blood sugar (hypoglycemia)
severe PMS
Other
frequency of voiding and burning during urination
excessive thirst, fluid retention, leg swelling, and bloating
increased susceptibility to infection
Additional Symptoms of Aspartame Toxicity include the most critical symptoms of all
death
irreversible brain damage
birth defects, including mental retardation
peptic ulcers
aspartame addiction and increased craving for sweets
hyperactivity in children
severe depression
aggressive behavior
suicidal tendencies
Aspartame may trigger, mimic, or cause the following illnesses:
Chronic Fatigue Syndrome
Epstein-Barr
Post-Polio Syndrome
Lyme Disease
Grave’s Disease
Meniere’s Disease
Alzheimer’s Disease
ALS
Epilepsy
Multiple Sclerosis (MS)
EMS
Hypothyroidism
Mercury sensitivity from Amalgam fillings
Fibromyalgia
Lupus
non-Hodgkins
Lymphoma
Attention Deficit Disorder (ADD)
Sadly, there are thousands more toxins and chemicals that are being put into what we eat and what we drink. The next time you go to the supermarket, just pick up a few products and start reading the labels. You may find yourself incredibly shocked by what you find.
Does it seem like people all around you are constantly getting sick? Well, the truth is that we have created an incredibly toxic environment for ourselves. Diseases such as cancer, heart disease and diabetes have skyrocketed in recent years. We like to think of ourselves as being so “advanced”, but the truth is that we are constantly becoming less healthy as a nation.
It is hard to imagine any prosperous economy that is full of sick and dying people. But if we don’t stop constantly poisoning ourselves by what we eat and by what we drink our national health is going to continue to fall apart.
Just like in almost every other category, America is in a deep state of decline. We like to think that we should be telling everyone else in the world how they should be doing things, but the truth is that our own nation is a complete and total mess.
If your own health is not what it should be, you might want to take another look at what you are eating and what you are drinking. A small change can make a big difference.
Selling government debt is a gigantic confidence game. For decades, investors all over the globe have gobbled up massive amounts of U.S. debt at incredibly low interest rates because they believed that it was a certainly that they would be paid back and be able to make a little bit of profit on top of it. Unfortunately, things have changed. Confidence is U.S. Treasuries is dying, and if confidence in U.S. government debt completely collapses at some point we could literally be looking at financial Armageddon. Why is that so? Well, when the world totally loses faith in U.S. Treasuries, interest rates on U.S. Treasuries will have to keep going up until enough investors are found to buy them. But much higher interest rates will mean much higher interest on the national debt and thus much higher federal budget deficits. That will erode confidence in U.S. Treasuries even further. In the end, a vicious cycle of eroding confidence and higher interest rates could ultimately lead to hyperinflation as the U.S. government and the Federal Reserve flood the system with endless amounts of paper money to try to keep the system solvent.
Faith in U.S. Treasury bonds is absolutely critical if the world financial system is going to continue to operate in a stable manner. In the post-World War 2 era, U.S. Treasuries have been largely viewed as the absolutely safest investment out there. So if there comes a point when the market for U.S. Treasuries completely collapses, it is going to cause unprecedented financial chaos. The worldwide derivatives market, which is already highly unstable, would almost certainly implode. Credit markets all over the globe would seize up. Global trade would quickly grind to a standstill.
This isn’t going to happen overnight (hopefully). Rather, the loss of confidence in U.S. Treasuries is something that is likely to take months or even years to play out. But once that confidence is gone, it is not something that will be able to be rebuilt easily.
Think of it this way – once you drive a car off a cliff, is it easy to reconstruct it?
Of course not.
Well, that is where we are headed with U.S. Treasuries.
The Federal Reserve is flooding the system with new dollars, Barack Obama and the U.S. Congress seem poised to pass a new tax deal which does not include corresponding spending cuts which will cause U.S. government budget deficits to become even more bloated, and there is a tremendous lack of faith both in U.S. political leaders and in the Federal Reserve at this point.
The rest of the world is losing faith that the U.S. government is going to be able to handle all of the debt that it has accumulated. We may be approaching a “tipping point” soon.
The following are 10 signs that confidence in U.S. Treasuries is dying….
#1 The financial community is extremely concerned that the tax deal that Barack Obama is pushing is going to dramatically increase U.S. government budget deficits over the next two years. On Monday, Moody’s warned that if Barack Obama’s tax deal with the Republicans becomes law, it will increase the likelihood that Moody’s could soon be forced to slash the rating of U.S. government debt.
#2 Already there are signs that some bond investors are looking for the exits. Last week, U.S. Treasuries suffered their largest two day sell-off since the collapse of Lehman Brothers back in September 2008.
#3 The yield on 10-year Treasury bonds set a six-month high on Monday before pulling back a bit. Most analysts believe that Treasury yields are going to push significantly higher in coming weeks.
#4 This trend of rising yields has been going on for a while. In fact, yields on 10-year Treasury bonds have been steadily rising since October 7th.
#5 Even before the recent tax deal was announced there were already troubling signs regarding the growth of U.S. government debt. The U.S. government budget deficit rose to $150.4 billion in November, which was the largest November budget deficit ever recorded.
#6 It is not just the new tax deal that has investors around the globe spooked. The truth is that the rest of the globe reacted very negatively to the new round of quantitative easing that the Federal Reserve announced back in November. The Federal Reserve is flooding the system with liquidity and the rest of the world is not amused.
#7 The American people have less faith in the Federal Reserve and in the financial system than at any other point in recent memory. For example, a new Bloomberg National Poll has found that a majority of Americans now want the Federal Reserve to either be held more accountable or to be abolished entirely.
#8 Investors all over the globe are starting to wake up and realize that America’s debt problem is unsolvable. David Bloom, the currency chief at HSBC, raised eyebrows when he recently stated that “if yields are rising because people think America’s fiscal situation is unsustainable, then its Armaggedon.”
#9 There is also a growing feeling among investors that the Federal Reserve simply does not care about the danger of inflation, and this is making bondholders very nervous. Stephen Lewis of Monument Securities recently put it this way….
“There is a feeling that the Fed doesn’t care about inflation – in fact, wants more of it – and that is certainly not in the interest of bondholders.“
#10 Over the next 12 months, the U.S. government is going to be rolling over trillions of dollars in debt along with all of the new borrowing that it is going to be doing. In fact, the U.S. government is somehow going to have to find a way to finance debt that is equivalent to 27.8 percent of GDP in 2011.
For years our politicians have told us that “deficits don’t matter”, but the truth is that they do matter. The national debt of the United States is now the biggest debt in the history of the world by far, and yet most Americans do not seem to grasp the absolute financial horror that we are facing as a nation.
In the end, debt is always painful. It can be a lot of fun to run out and buy a beautiful new house, a couple of brand new cars and to run your credit cards up to the max, but eventually it catches up with you. Well, the same thing is now happening to us on a national level.
We are getting to the point where eventually we are not even going to be able to service the debt that we have already piled up. Once that happens we can either declare national bankruptcy or we can try to hyperinflate our way out of trouble.
Meanwhile, the once great U.S. economic machine is dying as well. The only reason we have been able to survive with all of this debt as long as we have is because of how powerful our economy has been.
The mighty economic machine which is supposed to provide funds to pay off all of this debt is being dismantled right in front of our eyes.
There was no way in the world that U.S. government debt was going to be sustainable even if our economy remained vibrant and healthy. The sad truth is that U.S. government debt is approximately 13 times larger than it was just 30 years ago.
But now that the “real economy” is dying a savage death there is simply no hope that this thing is ever going to turn around. The only thing left to do is to take bets on when the implosion is going to happen.
All of this “great tax cut debate” nonsense going on in Washington D.C. right now is just a bunch of incompetent politicians running around rearranging the deck chairs on the Titanic. Perhaps these tax cuts will provide enough of a short-term economic boost to get many of them re-elected in 2012. Meanwhile, our long-term economic problems continue to get a lot worse.
It has become quite obvious that Barack Obama is completely clueless about the economy, and what is even sadder is that the “highly educated” Chairman of the Federal Reserve, Ben Bernanke, seems almost equally as clueless.
Unfortunately, Americans have become so dumbed-down that they don’t even realize that their leaders are incompetent. In fact, as sad as it is to say, most Americans you will meet on the street probably cannot even tell you what U.S. Treasuries are.
Let us hope and pray that investors around the globe continue to have at least some confidence in U.S. Treasuries for at least a little while longer. When “financial Armageddon” finally does happen, it isn’t going to be pleasant for any of us.
So enjoy these happy economic times while you still have them, because at some point things are going to get a whole lot worse.
In the United States, it is not just the federal government that has a horrific debt problem. Today, state and local governments across America are collectively deeper in debt than they ever have been before. In fact, state and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP. Once upon a time, municipal bonds (used to fund such things as roads, sewer systems and government buildings) were viewed as incredibly safe investments. They were considered to have virtually no risk. But now all of that has changed. Many analysts are now openly speaking of the possibility of a municipal bond market crash in 2011. The truth is that dozens upon dozens of city and county governments are teetering on the brink of bankruptcy. Even the debt of some of our biggest state governments, such as Illinois and California, is essentially considered to be “junk” at this point. There are literally hundreds of governmental financial implosions happening in slow motion from coast to coast, and up to this point not a lot of people in the mainstream media have been talking about it.
Has The Financial Collapse Of Europe Now Become Inevitable?
One would like to think that there is always hope, but each month things just seem to keep getting worse. Confidence in European government debt continues to plummet. The yield on 10-year Irish bonds is up to 8.97%. The yield on 10-year Greek bonds is up to an astounding 12.01%. The cost of insuring French debt hit a new record high on December 20th.
Bond ratings all over Europe are being slashed or are being threatened with being slashed. For example, Moody’s Investors Service recently cut Ireland’s bond rating by five levels. Now there is talk that Spain, Belgium and even France could soon all have their debt significantly downgraded as well.
But if the borrowing costs for these troubled nations keep going up, that is just going to add to their financial problems and swell their budget deficits. In turn, larger budget deficits will cause investors to lose even more confidence.
So how far are we away from a major crisis point?
Professor Willem Buiter, the chief economist at Citibank, is warning that quite a few EU nations could financially collapse in the next few months if they are not quickly bailed out….
Many analysts are even calling for some of these troubled nations to stop using the euro for a while so that they can recover. In fact, Andrew Bosomworth, the head of portfolio management for Pimco in Europe says that Greece, Ireland and Portugal must all quit the euro at least for a little while if they expect to survive….
Sadly, most Americans don’t realize just how bad the situation in Europe is becoming. This is truly a historic crisis that is unfolding.
German Chancellor Angela Merkel declared earlier this year that this is the biggest financial crisis that the EU has ever faced….
So what is the answer?
Well, many are speculating that the EU could actually break up over this whole thing, but another possibility is that we could eventually see much greater integration.
In fact, for the first time the idea that “euro bonds” could be issued is gaining some traction. This would spread the risk of European government debt throughout the European Union. At this point, Andrew Bosomworth says that things have gotten so bad that it now seems inevitable that we will soon see the creation of euro bonds….
So just how bad are things going to get in Europe? Well, earlier this year Anthony Fry, the senior managing director at Evercore Partners had the following to say about the emerging bond crisis in Europe….
So why should Americans care about all this?
Well, what is happening to these troubled European states is eventually going to happen to us.
If rates on U.S. government debt eventually hit 8 or 12 percent it will literally be financial armageddon in this country. The U.S. government has piled up the biggest mountain of debt in the history of the world, and if we continue piling up debt at the pace that we are, then it will only be a matter of time before the IMF is demanding that we implement our own “austerity measures”.
As I have written about previously, there are already numerous indications that confidence in U.S. Treasuries is dying. If that happens, we could literally see interest costs on the national debt double or even triple.
But it is not just the U.S. government that is in trouble. A bloodbath in the municipal bond market has already started. Hundreds of state and local governments across the United States are on the verge of bankruptcy.
So don’t laugh at what is going on in Ireland or Greece. The next victims could be financially troubled states such as California and Illinois.
In the history of global finance, we have never faced a sovereign debt crisis like we are seeing now. All over the globe governments are being suffocated by absolutely crushing debt loads. Once a couple of dominoes fall, it is going to be really hard to keep the rest of the dominoes from falling.
This is the biggest crisis that the euro has ever faced. At some point Germany will either be unwilling or unable to continuing rescuing the rest of the EU countries from the unsustainable mountains of debt that they have accumulated. When that moment arrives, it is going to throw world financial markets into turmoil.
But this is what happens when we allow long-term debt bubbles to be created. Eventually they always burst.
So keep your eye on the euro, because if a financial collapse does happen in Europe it is going to have a dramatic impact on the United States as well.