Losing Faith (In The U.S. Economy)

Are the American people losing faith in the U.S. economy?  The statistics that you are about to read might surprise you.  Not everyone believes that the U.S. economy is dying (there are still millions out there that will swallow anything that the mainstream media tells them), but the reality is that there is a growing chunk of the population that has completely lost faith in our leaders and in our economic system.  A brand new Gallup poll has found that the number of Americans that believe that we are in a “depression” is actually larger than the number of Americans that believe that the economy is “growing”.  That is absolutely shocking because according to official government figures, the U.S. economy is growing right now and virtually nobody in the mainstream media or the government has used the term “depression” to describe the economic downturn that we went through recently.  In fact, according to Gallup a total of 55% of the American people believe that we are either in a recession or a depression right now.  This is clear evidence that the American people are losing faith in U.S. government economic statistics and instead they are basing their opinions on what they see in their own communities.  Despite the pablum about an “economic recovery” constantly being spewed by Ben Bernanke and Barack Obama, faith in our economic system continues to decline.  The truth is that the American people are not stupid.  They can see what is happening to the economy.

Back when I was a teenager, one day I walked over to the local McDonald’s and filled out an application and was immediately hired.

But that is not how it works today.

Recently, McDonald’s made headlines when they held a National Hiring Day.  Some commentators pointed to that event as evidence that the economy was recovering.

Well, you know what?  McDonald’s ended up receiving approximately one million applications.

So how many of those people did McDonald’s hire?

They hired about 62,000 people.

That means that somewhere around 938,000 eager job applicants were turned away.

Just think about that.

Only about 6.2 percent of those that applied for a job at McDonald’s were accepted.

As Joe Weisenthal of Business Insider recently pointed out, that means that Harvard now has a higher acceptance rate than McDonald’s does.

Harvard accepts about 7% of those that apply to go to school there.

Who ever thought we would see the day when a higher percentage of applicants get accepted into Harvard than get hired at McDonald’s?

Sadly, the number of jobs continues to shrink.  The competition for good jobs has become absolutely crazy.

Only 66.8% of American men had a job last year.  That was the lowest level that has ever been recorded in all of U.S. history.

So why is this happening?  Well, there are a lot of reasons, but as I have written about previously, the fact that millions of our jobs are being shipped overseas is a huge factor.

Without good jobs, an increasing number of Americans are being forced to turn to government assistance in order to survive.

Today, more than 44 million Americans are on food stamps.  In addition, government transfer payments now make up 18 percent of all personal income in the United States.

That is frightening.

Things have gotten so bad that now even Wal-Mart is warning that their customers are running out of money.

A large percentage of Wal-Mart customers are just surviving month to month and Wal-Mart has been noticing a huge drop off in sales towards the end of the month when their customers run out of cash.  The following is what the CEO of Wal-Mart had to say about this phenomenon recently….

“Purchases are really dropping off by the end of the month even more than last year.”

People are starting to get desperate.  When economic times get tough, crime tends to increase.  Sadly, as a report in USA Today recently noted, thefts of gasoline are increasing all over the nation.

We never had this kind of a problem back when a gallon of gas only was about a dollar a gallon.

Do you remember those days?

They weren’t that long ago.

Now it takes some people over a hundred dollars to fill up their gas tanks.

Our leaders keep promising that they know what is happening and that they are going to fix things, but most Americans are not buying it.  Many Americans are completely losing faith in the system altogether.

Our economic decline has been one of the things that has fueled the growth of the prepper movement.  Millions of Americans have decided that they want to start becoming independent of the system.  One recent article described what some residents of Colorado are doing to prepare, but the truth is that this phenomenon is happening all over the nation….

A Black Forest resident has erected a geodesic dome on her 5-acre spread to grow vegetables, keeps horses for emergency transportation, in case she can’t get gasoline for her car, and plans to acquire chickens and goats as food sources.

A husband and wife who have a cabin on 100 acres of secluded land in Park County have weaned their property from the electric grid, acquired a three-year food supply and taken other measures to become self-sufficient.

Of course the mainstream media loves to portray preppers as “crazies”, but as the U.S. economy continues to die it would be a bit crazy not to prepare.

No job is completely safe today.  Millions of Americans that assumed that their “good jobs” would always be there have had their lives shattered over the past couple of years.

There is nothing wrong with trying to become more self-sufficient.

Everyone should be thinking about either starting up a business or developing alternative sources of income.  Yes, it can be exhausting to work on a side business during evening and weekends, but the time for loafing is over.  Those that are going to make it through the times ahead are those that are going to be willing to work really hard.

People need to start thinking about becoming less dependent on “the system” however they can.  One way to insulate yourself against rising food prices is to learn how to grow your own food.

Even if you only have a very small amount of room you can still grow your own food.  For example, there is one family that is actually producing 6000 pounds of produce on just 1/10th of an acre right in the middle of Pasadena, California.

Just because we have lost some of the basic skills that previous generations possessed doesn’t mean that we can’t get them back.  Back during World War II, “victory gardens” enabled Americans to grow 40 percent of all the vegetables that they needed.  Those gardens greatly contributed to the war effort and helped Americans get through some very difficult times.

There are a lot of preppers out there that are totally out of debt, that own their own land, that are entirely off the electrical grid and that grow most of their own food.  Many Americans would look at such people as “crazies” but those preppers will be in a much better position than most people when the economy totally collapses.

Don’t wait until it is too late to prepare.  Millions of Americans are completely losing faith in our economic system.  People are smart.  They can see that we are living in the biggest debt bubble in the history of the world.  They can see that the guts of our economic infrastructure are being ripped out and shredded.  They can see that the number of people living in poverty continues to increase year after year.  They can see the the number of good jobs continues to decrease year after year.

When you see a horrible storm coming the rational thing to do is to prepare.  Just think about all of those tornadoes that ravaged the southeast U.S. the other day.  Most of the people directly in the path of those tornadoes did whatever they could to survive when they realized the twisters were about to hit.

Well, a horrific economic storm is coming.  Every American will be affected by this economic storm at least to some extent.  We all need to prepare while we still can.

American Hellholes

The U.S. economy is dying and we are heading for the next Great Depression.  The talking heads in the mainstream media love to spin the economic numbers around and around and they love to make it sound like the economy is improving, but the truth is that it doesn’t take a genius to see what is happening to the U.S. economic system.  All over the nation many of our greatest cities are being slowly but surely transformed into post-apocalyptic wastelands.  All over the mid-Atlantic, all along the Gulf coast, all throughout the “rust belt” and all over the entire state of California cities that once had incredibly vibrant economies are being turned into rotting, post-industrial hellholes. In many U.S. cities, the “real” rate of unemployment is over 30 percent. There are some communities that will start depressing you almost the moment that you drive into them. It is almost as if all of the hope has been sucked right out of those communities.  If you live in one of those American hellholes you know what I am talking about.  Sadly, it is not just a few cities that are becoming hellholes.  This is happening in the east, in the west, in the north and in the south.  America is literally being transformed right in front of our eyes.

If you still live in an area of the United States that is prosperous, do not mock the cities that you are about to read about.  The cold, hard reality of the matter is that economic decline and economic despair are spreading rapidly and they will come to your area soon enough.  Right now we are still talking about “American hellholes”, but if the long-term economic trends that are destroying this nation are not turned around eventually we will just be talking about one gigantic “American hellhole”.  In the end, no area of the country will completely escape the economic hell that is coming.

Let’s take a closer look at what is currently happening in some of the worst areas of the country….

Detroit, Michigan

In the city of Detroit today, there are over 33,000 abandoned houses, 70 schools are being permanently closed down, the mayor wants to bulldoze one-fourth of the city and you can literally buy a house for one dollar in the worst areas.

During the boom days of the 1950s, Detroit was a teeming metropolis of approximately 2 million people, but today the current population is less than half that.  The city of Detroit, once a shining example of middle class America, is now a rotting cesspool of economic decline and it actually saw its population decline by 25 percent during the decade that recently ended.  According to the U.S. Census Bureau, Detroit lost a resident every 22 minutes between the years of 2000 and 2010.

So why are people leaving Detroit so rapidly?

There simply are no jobs.

At the height of the economic downturn, the mayor of Detroit admitted that while the “official” unemployment rate in Detroit was about 27 percent, the “real” unemployment rate in his city was actually somewhere around 50 percent.

Since there are not enough jobs, that also means that not enough tax money is coming in.  Detroit is essentially insolvent at this point.

Detroit officials are trying to implement some austerity measures in a desperate attempt to get city finances under control.

For example, the state of Michigan recently granted approval to a plan that would shut down nearly half of the public schools in Detroit.  Under the plan, 70 schools will be closed and 72 will continue operating.

It has been estimated that the remaining public schools will have class sizes of up to 60 students.

Detroit Mayor Dave Bing also wants to cut off 20 percent of the entire city from police and trash services in order to save money.

Essentially that would mean abandoning 20 percent of the city of Detroit to the gangs and to the homeless.

The mayor of Detroit has also discussed a plan in which authorities would bulldoze one-fourth of the city in order to save money on services.

So with all of this going on, is Detroit a pleasant place to live at this point?

No way.

Today, Detroit is considered to be the third most violent city in the United States.

In fact, crime has gotten so bad and the citizens are so frustrated by the lack of police assistance that they have resorted to forming their own organizations to fight back.  One group, known as “Detroit 300”, was formed after a 90-year-old woman on Detroit’s northwest side was brutally raped in August.

If you want to see what the future of America looks like, just take a few hours and go driving through Detroit some time.  But please only do this during the day.  Do not do this at night.  Detroit is not a safe place anymore, and you cannot count on the police to help you in a timely manner.

Detroit was once one of the greatest cities in the world.

But today it is an absolute hellhole.

Camden, New Jersey

So is there any place in America that is worse than Detroit?

Well, many would nominate Camden, New Jersey.

Many years ago, Camden was actually thriving and prosperous.  But today the city of Camden is known as “the second most dangerous city in America”.

In a recent article entitled “City of Ruins“, Chris Hedges did an amazing job of documenting the horrific decline of Camden.  Hedges estimates that the real rate of unemployment in Camden is somewhere around 30 to 40 percent, and he makes it sound like nobody in their right mind would want to live there now….

Camden is where those discarded as human refuse are dumped, along with the physical refuse of postindustrial America. A sprawling sewage treatment plant on forty acres of riverfront land processes 58 million gallons of wastewater a day for Camden County. The stench of sewage lingers in the streets. There is a huge trash-burning plant that releases noxious clouds, a prison, a massive cement plant and mountains of scrap metal feeding into a giant shredder. The city is scarred with several thousand decaying abandoned row houses; the skeletal remains of windowless brick factories and gutted gas stations; overgrown vacant lots filled with garbage and old tires; neglected, weed-filled cemeteries; and boarded-up store fronts.

Gangs have stepped into the gaping void left by industry.  In Camden today, drugs and prostitution are two of the only viable businesses left – especially for those who cannot find employment anywhere else.  The following is how Hedges describes the current state of affairs….

There are perhaps a hundred open-air drug markets, most run by gangs like the Bloods, the Latin Kings, Los Nietos and MS-13. Knots of young men in black leather jackets and baggy sweatshirts sell weed and crack to clients, many of whom drive in from the suburbs. The drug trade is one of the city’s few thriving businesses. A weapon, police say, is never more than a few feet away, usually stashed behind a trash can, in the grass or on a porch.

But before we all start judging Camden for being such a horrible place to live, it is important to realize that this is happening in communities from coast to coast.  All over the United States industries are leaving and deep social decay is setting in.

Even the criminals in Camden are struggling.  Things have gotten so bad in Camden, New Jersey that not even the drug dealers are spending their money anymore.

So where are the police?

Unfortunately, there is very little money for police.  Authorities in Camden recently decided to lay off half of the city police force.

So now the gangs and the drug dealers have more room to operate.

Sadly, this is not just happening in Camden.  It is happening all over New Jersey.

Of 315 municipalities the New Jersey State Police union recently surveyed, more than half indicated that they were planning to lay off police officers.

So why doesn’t the state government step in and help out?

Well, the state of New Jersey is in such bad shape that they still are facing a $10 billion budget deficit for this year even after cutting a billion dollars from the education budget and laying off thousands of teachers.

New Jersey also has $46 billion in unfunded pension liabilities and $65 billion in unfunded health care liabilities.  Nobody is quite sure how New Jersey is even going to come close to meeting those obligations.

Meanwhile, cities like Camden are rotting a little bit more every single day.

New Orleans, Louisiana

New Orleans had a struggling economy even before Hurricane Katrina struck back in 2005.  But that event changed everything.  It is now almost 6 years later and virtually the entire region is still a disaster zone.

New Orleans permanently lost 29% of its population after Hurricane Katrina.  There are many areas of New Orleans that still look as if they have just been bombed.

21.5 percent of all houses in New Orleans, Louisiana are currently standing vacant.  Many of those homes will never be inhabited again.

What made things even worse for New Orleans (and for residents all along the Gulf coast) was the horrific BP oil spill last year.  The mainstream news does not talk about the oil spill much anymore, but those living in the area have to deal with the effects every single day.

Some of the industries in the Gulf region were really starting to recover from Hurricane Katrina but the BP oil spill put a stop to that.

Before the oil spill, Louisiana produced more fish and seafood than anywhere in the United States except for Alaska.  But now the seafood industry has been absolutely devastated.  It has been estimated that the cost of the BP oil spill to the fishing industry in Louisiana alone could top 3 billion dollars.

Some local shrimpers in the region are projecting that it will be about seven years before they can set to sea again.

New Orleans keeps trying to bounce back from all of these disasters, but times are tough down there.

Today, New Orleans is the 13th most violent city in America.  That is actually an improvement.  Before Katrina New Orleans had even more violent crime.

The truth is that other areas along the Gulf coast are doing a lot worse than New Orleans is doing.  A ton of big corporate money has flowed into New Orleans.  Officials are trying to clean up the city and make it a huge tourist destination once again.

But in the surrounding areas things are not looking so bright.  There are areas along the coasts of Louisiana, Mississippi, Alabama and the panhandle of Florida that are some of the most depressing places in the nation.

It is almost as if there are hundreds of thousands of people that time forgot.  In some rural areas along the Gulf coast the poverty is absolutely mind blowing.  There are very few jobs and there is very little hope.  Meanwhile, large numbers of people in the region continue to get sick from the toxic dispersants used to clean up the oil spill.

Let us hope that we don’t see another major disaster in the Gulf of Mexico any time soon.  As it is, it is going to take decades for that region to fully recover.  There are a lot of really good people that live down there, and they deserve our prayers.

Vallejo, California (And Virtually The Rest Of The State Of California)

Almost the entire state of California is an economic disaster zone. Austerity measures are being implemented in city after city as tax revenues have nosedived.

The following is an excerpt from a recent New York Times article that describes the brutal austerity that has been implemented in Vallejo, California….

Vallejo is still in bankruptcy. The police force has shrunk from 153 officers to 92. Calls for any but the most serious crimes go unanswered. Residents who complain about prostitutes or vandals are told to fill out a form. Three of the city’s firehouses were closed. Last summer, a fire ravaged a house in one of the city’s better neighborhoods; one of the firetrucks came from another town, 15 miles away. Is this America’s future?

Sadly, that is what the future of America is going to look like.  Public services are being slashed all over the nation due to budget crunches.

Unless there is a major jobs recovery, the situation in California is going to continue to degenerate.  The truth is that the state of California needs millions and millions of new jobs just to get back to “normal”.  For example, near the end of last year it was reported that 24.3 percent of the residents of El Centro, California were unemployed.  Not only that, as of the end of last year the number of people unemployed in the state of California was approximately equivalent to the entire populations of Nevada, New Hampshire and Vermont combined.

Businesses are closing in California at an astounding pace.  At one point last year it was reported that in the area around Sacramento, California there was one closed business for every six that were still open.

As a result of all of this, home prices in many areas of California have completely fallen off a cliff.  For example, the average home in Merced, California has declined in value by 63 percent over the past four years.

California also had more foreclosure filings that any other U.S. state in 2010.  The 546,669 total foreclosure filings during the year means that over 4 percent of all the housing units in the state of California received a foreclosure filing at some point during 2010.

Sadly, things don’t look like they are going to turn around in California any time soon.  Forbes recently compiled a list entitled “Cities Where The Economy May Get Worse“.

Six of the top seven spots were held by cities in California.

California is becoming a very frightening place.  When you combine high unemployment with unchecked illegal immigration what you get is rampant poverty.

20 percent of the residents of Los Angeles County are now receiving public aid of one form or another.

In particular, the number of children that are considered to be in need of public assistance is truly scary.

Incredibly, 60 percent of all the students attending California public schools now qualify for free or reduced-price school lunches.

Poverty and illegal immigration have also caused a tremendous health care crisis in the state.  The hordes of illegal aliens taking advantage of “free” medical care at hospital emergency rooms have caused dozens of hospitals across the state of California to completely shut down.  As a result, the state of California now ranks dead last out of all 50 states in the number of emergency rooms per million people.

The bozos in Sacramento keep passing hundreds of new laws in an attempt to “fix” the state, but the truth is that for the poorest residents of the state all of those new laws don’t make a shred of difference.

The following is how Victor Davis Hansen describes what he saw during his recent tour of the “forgotten areas of central California”….

Many of the rural trailer-house compounds I saw appear to the naked eye no different from what I have seen in the Third World . There is a Caribbean look to the junked cars, electric wires crisscrossing between various outbuildings, plastic tarps substituting for replacement shingles, lean-tos cobbled together as auxiliary housing, pit bulls unleashed, and geese, goats, and chickens roaming around the yards. The public hears about all sorts of tough California regulations that stymie business – rigid zoning laws, strict building codes, constant inspections – but apparently none of that applies out here.

Hansen also says that he observed that people in these areas are doing whatever they can to get by….

At crossroads, peddlers in a counter-California economy sell almost anything. Here is what I noticed at an intersection on the west side last week: shovels, rakes, hoes, gas pumps, lawnmowers, edgers, blowers, jackets, gloves, and caps. The merchandise was all new. I doubt whether in high-tax California sales taxes or income taxes were paid on any of these stop-and-go transactions.

In two supermarkets 50 miles apart, I was the only one in line who did not pay with a social-service plastic card (gone are the days when “food stamps” were embarrassing bulky coupons).

Are you frightened yet?

You know what they say – “as goes California, so goes the nation”.

What is happening in California now is eventually going to come to your area.

Right now California is also having a huge problem with gangs.  Gang violence in America is getting totally out of control.  According to authorities, there are now over 1 million members of criminal gangs operating inside the country, and those gangs are responsible for up to 80% of the violent crimes committed in the U.S. each year.

But instead of ramping up to fight crime and fight illegal immigration, police forces all over California are being cut back.

For example, because of extreme budget cuts and police layoffs, Oakland, California Police Chief Anthony Batts has announced that there are a number of crimes that his department simply will no longer respond to due to a lack of resources.  The following is a partial list of the crimes that police officers in Oakland will no longer be responding to….

  • burglary
  • theft
  • embezzlement
  • grand theft
  • grand theft: dog
  • identity theft
  • false information to peace officer
  • required to register as sex or arson offender
  • dump waste or offensive matter
  • loud music
  • possess forged notes
  • pass fictitious check
  • obtain money by false voucher
  • fraudulent use of access cards
  • stolen license plate
  • embezzlement by an employee
  • extortion
  • attempted extortion
  • false personification of other
  • injure telephone/power line
  • interfere with power line
  • unauthorized cable tv connection
  • vandalism

Not that Oakland wasn’t already a mess before all this, but now how long do you think it will be before total chaos and anarchy reigns on the streets of Oakland?

Today, Oakland is considered the 5th most violent city in the United States.

Will it soon become the most violent?

But Oakland is not the only major California city that is facing these kinds of issues.

Things have gotten so bad in Stockton, California that the police union put up a billboard with the following message: “Welcome to the 2nd most dangerous city in California. Stop laying off cops.”

Already the police force in Stockton has been stripped down to almost nothing.

A while back, the Stockton Police Department dropped this bombshell….

“We absolutely do not have any narcotics officers, narcotics sergeants working any kind of investigative narcotics type cases at this point in time.”

Do you think drug dealers will be flocking to Stockton after they hear that?

California was once the envy of the world.

Now it is becoming one gigantic hellhole.

During one recent 23 year period, the state of California built 23 prisons but just one university.

So is there any hope for California?

No, unfortunately there is not.

In another article, I wrote about some of the reasons why millions of people have been leaving California for good….

Meanwhile, the standard of living in California is going right into the toilet.  Housing values are plummeting.  Unemployment has risen above 20 percent in many areas of the state.  Crime and gang activity is on the rise even as police budgets are being hacked to the bone.  The health care system is an absolute disaster.  At this point California has the fewest emergency rooms per million people out of all 50 states.   While all of this has been going on, the state legislature in Sacramento has been very busy passing hundreds of new laws that are mostly about promoting one radical agenda or another.  The state government has become so radically anti-business that it is a wonder that any businesses have remained in the state.  It seems like the moving vans never stop as an endless parade of businesses and families leave California as quickly as they can.

But this is not just a “California thing”.  The truth is that what is happening in California, in Detroit, in Camden and in hundreds of other communities is also going to happen where you live.

The U.S. economy is slowly dying. Only 66.8% of American men had a job last year.  That was the lowest level that has ever been recorded in U.S. history.

People are getting desperate.  There are ten percent fewer middle class jobs than there were a decade ago and the competition for good jobs has become insane.  More than 44 million Americans are now on food stamps and that number grows every single month.  Millions more American families fall into poverty every single year.

It is time to face the truth about what is happening to America.  Our economy is not growing and becoming stronger.  Rather, the cold, hard reality of the matter is that our economy is very sick and it is dying.  The seemingly boundless prosperity that we have enjoyed for decade after decade is coming to an end.  Our communities are being transformed into absolute hellholes.

Those that are telling you that the U.S. economy will soon be better than ever are lying to you.  The U.S. economy is going to go down and it is going to go down hard.

You better get ready.

19 Reasons Why The Federal Reserve Is At The Heart Of Our Economic Problems

Most Americans do not understand what the Federal Reserve is or why it is at the heart of our economic problems.  When Americans get into discussions about the economy, most of them still blame either the Democrats or the Republicans for inflation, for the housing crash, for our rampant unemployment and for the national debt.  But the truth is that the institution with the most power over our economic system is the Federal Reserve.  So exactly what is the Federal Reserve?  Most people would say that it is an agency of the federal government.  But that is absolutely not true.  In fact, the Federal Reserve itself has argued in court that it is not an agency of the federal government.  Rather, the Federal Reserve is a privately-owned banking cartel that has been given a perpetual monopoly over our monetary system by the U.S. Congress.  This privately-owned central bank has been destroying the value of the U.S. dollar for decades, it has run our economy into the ground and it has driven the U.S. government to the brink of bankruptcy.  The Federal Reserve operates in great secrecy, it has never been subjected to a comprehensive audit and it is not accountable to the American people.  Yet the decisions that the Federal Reserve makes have a dramatic impact on the lives of every single American citizen.

If you really want to understand what is causing our economic problems, it is absolutely crucial that you understand exactly what the Federal Reserve system is and how it is systematically destroying our economy.  Once you understand the truth about the Federal Reserve, you will view economic issues a whole lot differently.

The following are 19 reasons why the Federal Reserve is at the very heart of our economic problems….

#1 The Federal Reserve system is a debt-based financial system.

The way our system is designed, normally no money comes into existence without more debt being created.

But this creates a huge problem, because when a new dollar is created, the interest owed to the banking system on that dollar is not also created at the same time.

Therefore, the amount money that is created is not equal to the larger amount of debt that is also created.

This is a Ponzi scheme that is designed to drain wealth from the American people and transfer it to the banking system.

Today, the amount of debt in our economic system is far, far, far greater than the total amount of money.

The only way to keep the game going is to create even more money which creates even more debt.

#2 The Federal Reserve and the bankers have a monopoly on the creation of this debt-based money.

In the United States today, the only people that can create money are the bankers.

You cannot create money.

You would go to jail if you tried.

Even the U.S. government cannot create money.

Although the U.S. Constitution specifically gives Congress the power to create money, the U.S. Congress has given that power to the Federal Reserve and to the banking system.

This gives them an enormous amount of power.

So how does money creation actually work?

Most Americans don’t understand this.

As I have written about previously, the way our system is designed is that all money is supposed to originally come into existence as government debt….

When the government wants more money, the U.S. government swaps U.S. Treasury bonds for “Federal Reserve notes”, thus creating more government debt.  Usually the money isn’t even printed up – most of the time it is just electronically credited to the government.  The Federal Reserve creates these “Federal Reserve notes” out of thin air.  These Federal Reserve notes are backed by nothing and have no intrinsic value of their own.

The Federal Reserve then sells these U.S. Treasury bonds to investors, other nations (such as China) or sometimes they “sell” them back to themselves.  In fact, the Federal Reserve has been gobbling up a whole lot of U.S. Treasuries lately.  Some refer to this as “monetizing the debt”, but that is not quite an accurate statement.

When the Federal Reserve creates money this way, it does not also create the money to pay the interest on the debt that has been created.  Eventually this puts pressure on the U.S. government to borrow even more money to keep the game going.  So what this creates is a spiral where the U.S. government must keep borrowing increasingly larger amounts of money, where the money supply is endlessly expanding and where the value of the U.S. dollar is destined to continue going down forever.

Once “Federal Reserve Notes” are in circulation, there is another way that money is created.

It is called “fractional reserve lending”.

Once you or I deposit money into a bank, the bank is only required to keep a very small amount of it actually in the bank.  The rest of it the bank can loan out to others (at interest of course).  This process can be repeated over and over and over, creating more money and an even larger amount of debt.

But the important part to take away from all this is that normally money is only created when debt is created, and the amount of debt to be paid back is always larger than the amount of money created.

This entire system is designed to drain our wealth and to put it into the hands of the bankers.

#3 The power of money creation and debt creation is in the hands of private individuals – not the government.

The Federal Reserve claims that it is an “entity within the government, having both public purposes and private aspects.”

That sounds so reasonable, but the truth is that the Federal Reserve is a legalized banking cartel that is privately-owned.

In fact, the Federal Reserve is about as “federal” as Federal Express is.

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.  It is kind of funny how Fed officials are always talking about how important their “independence” is, but whenever anyone starts criticizing them for being private they start stressing their ties with the government.

So who owns the Federal Reserve?

As the Federal Reserve’s own website describes, it is the member banks that own it….

The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations–possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

In particular, as we will see below, the banks of the New York Federal Reserve have the most influence over the system.

So who owns the member banks?

Well, when you trace the ownership of the member banks to the very top you find that the international banking elite are very strongly represented.

#4 The Federal Reserve itself is not much of a profit-making institution.  Rather, it is a tool that enables others to make obscene amounts of money.

There are many that think of the Federal Reserve as an evil profit-making machine.  But the truth is that the Fed doesn’t make that much money.  Rather, the system was set up so that others could make an obscene amount of money from U.S. government debt.

Many of those opposed to the Federal Reserve point to the record $80.9 billion in profits that the Federal Reserve made last year as evidence that they are robbing the American people blind.  But then those defending the Federal Reserve will point out that the Fed returned $78.4 billion to the U.S. Treasury.

In the end, those numbers are not nearly as important as the hundreds of billions of dollars in interest that are made off of U.S. government debt each year.

If the U.S. government had been issuing debt-free money all this time, the U.S. government would likely not be spending one penny on interest payments.  Instead, the U.S. government spent over 413 billion dollars on interest on the national debt during fiscal 2010.  This is money that belonged to U.S. taxpayers that was transferred to the U.S. government which in turn was transferred to wealthy international bankers and other foreign governments.

This is where the magic of the Federal Reserve system is.  It is in getting the U.S. government enslaved to debt and using that debt to transfer hundreds of billions of dollars of our wealth into the hands of others.

As interest rates go up, this phenomenon is going to become even more brutal.  Right now it is being projected that the U.S. government will be paying 900 billion dollars just in interest on the national debt by the year 2019.

As you fill out your tax return this year, just keep in mind that vast quantities of our money is going to pay interest on debt that the U.S. government never needed to become enslaved to.

There are some very happy people out there that are becoming fabulously wealthy at our expense.

What a system, eh?

#5 The Federal Reserve is a perpetual debt machine.

As mentioned above, the U.S. government is enslaved to debt.

So how did it get enslaved?

Well, instead of printing up and spending the money that it needs, the U.S. government borrows it through the Federal Reserve system at interest.

In fact, as noted above, the U.S. government cannot create a single new dollar without borrowing it.

But each new dollar that the U.S. government borrows creates more than a dollar of new debt.

As a result, the government eventually has to collect more in taxes than what it has borrowed.

This phenomenon creates an endless debt spiral.

And is that not what we have in the United States today?  In fact, you see this in almost every nation on earth where a similar central banking system has been established.

Did you know that the U.S. national debt is more than 5,000 times larger than it was 100 years ago?

That’s right – back in 1910, prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.

The only way that the U.S. government can inject more money into the economy is by going into more debt.  But when new government debt is created, the amount of money to pay the interest on that debt is not also created.  In this way, it was intended by the international bankers that U.S. government debt would expand indefinitely and the U.S. money supply would also expand indefinitely.  In the process, the international bankers would become insanely wealthy by lending money to the U.S. government.

However, things did not have to turn out this way.

If the Federal Reserve had never been created, and the U.S. government had been issuing debt-free currency all this time, it is entirely conceivable that we would have absolutely no federal government debt at this point.

Unfortunately, we are now trapped in a debt-based system.

The U.S. national debt simply cannot ever be paid off.  U.S. government debt has been mathematically designed to expand forever.  It is a trap from which there is no escape.

Sadly, we have now gotten to a terminal phase of the debt spiral.  The Congressional Budget Office is projecting that U.S. government debt held by the public will reach a staggering 716 percent of GDP by the year 2080.  Remember when I used the term “debt spiral” earlier?  This is what a debt spiral looks like….

#6 The Federal Reserve system is designed to cause inflation.

As U.S. government debt expands at an exponential pace, it inevitably causes inflation.

Most Americans believe that inflation is a fact of life, but the truth is that the United States has only had a major, ongoing problem with inflation since the Federal Reserve was created back in 1913.

Sadly, the U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created.

If the Federal Reserve did not exist, it is theoretically conceivable that we could have an economy with little to no inflation.  Of course that would greatly depend on the discipline of our government officials (which is not very great at this point), but the sad truth is that our current system is always going to produce inflation.  In fact, the Federal Reserve system was originally designed to be inflationary.  Just check out the inflation chart posted below.  The U.S. never had massive problems with inflation before the Fed was created, but now it is just wildly out of control….

#7 The Federal Reserve has decided to play bizarre games with our money supply.

In a desperate attempt to revive the dying U.S. economy, the Federal Reserve has resorted to chucking gigantic quantities of cash into the financial system.

Remember how earlier I explained that normally whenever new money is created that more debt is created?

Well, lately the Fed has been resorting to a trick called “quantitative easing”.  What “quantitative easing” means is that the Federal Reserve zaps massive amounts of money into existence out of thin air and starts spending it on anything that it wants to buy.  Lately, this has primarily been done to buy up U.S. government debt.

But isn’t that “monetizing the debt”?

Of course it is, and it is a blatant Ponzi scheme.

However, what is even more alarming is what this is doing to our money supply.

Just look at what has happened to our monetary base since about mid-2008….

Does anyone in their right mind believe that this is not going to cause horrible inflation?

Right now most of the new cash is tied up in the financial system, but once it gets out into the regular economy watch out!

#8 The Federal Reserve is undemocratic.

In a previous article, I asked the following question:

“So what makes the central economic planning that the Federal Reserve does different from the central economic planning that communist China does?”

In both cases, a bunch of unelected elitists run the economy and make important economic decisions for the rest of us.

So what really is the difference?

#9 The Federal Reserve runs the U.S. economy.

Most Americans want to blame Obama or Bush or the U.S. Congress for the state of the economy.

But the truth is that it is the Federal Reserve that sets interest rates, it is the Federal Reserve that determines the money supply, it is the Federal Reserve that sets the “target rate” of inflation, it is the Federal Reserve that determines if unemployment is too high or too low and it is the Federal Reserve that watches over all of our banks.

Yes, Obama, Bush and the U.S. Congress all have things to answer for as well.

But none of them have the direct power over the economy that the Federal Reserve does.

#10 The Federal Reserve favors the big banks.

Not all financial institutions are treated equally by the Fed.

The truth is that the big banks (particularly those on Wall Street) are treated with great favor by the Federal Reserve.

If the Federal Reserve did not exist, the big Wall Street banks would not have such an overwhelming advantage.  Most Americans simply have no idea that over the last several years the Federal Reserve has been giving gigantic piles of nearly interest-free money to the big Wall Street banks which they turned right around and started lending to the federal government at a much higher rate of return.  I don’t know about you, but if I was allowed to do that I could make a whole bunch of money very quickly.  In fact, it has come out that the Federal Reserve made over $9 trillion in overnight loans to major banks, large financial institutions and other “friends” during the financial crisis of 2008 and 2009.

Wouldn’t you like to be able to zap trillions of dollars into existence and loan it out to your friends at very favorable terms?

Sadly, most of the “help” from the Federal Reserve always seems to go to the big boys.

When “small enough to fail” banks need assistance, they are usually told to go sell themselves to one of the big banks.

#11 The worse the debt problems caused by the Federal Reserve become, the more money the IRS needs to collect from the rest of us.

If the U.S. government could issue debt-free money, it is conceivable that we would not even need the IRS.  You doubt this?  Well, the truth is that the United States did just fine for well over a hundred years without a national income tax.  But about the same time the Federal Reserve was created a national income tax was instituted as well.  The whole idea was that the wealth of the American people would be transferred to the U.S. government by force and then transferred into the hands of the ultra-wealthy in the form of interest payments.

If the Federal Reserve was shut down, it is entirely possible that we would be able to shut down the IRS as well.

But the only way that the current system works is if massive amounts of wealth continue to be drained from the American people.

#12 The Federal Reserve creates artificial financial bubbles.

When you look back over the last several decades, you will find financial bubble after financial bubble.

So who created all of those bubbles?

It was the Federal Reserve.

The ridiculous policies of Greenspan and Bernanke have wrought disaster after disaster and yet most of our politicians still will not even consider major changes to the Federal Reserve.

#13 The Federal Reserve is anti-free market.

In a true free market system, the marketplace would determine what interest rates are.

In a true free market system, the marketplace would determine which financial institutions survive.

In a true free market system, artificial financial bubbles would be far less likely.

But we don’t have a true free market system.

#14 The Federal Reserve tells the rest of the our banks what to do.

Most Americans don’t understand just how much power the Federal Reserve actually has over our local banks.

For example, just last year Federal Reserve officials walked into one bank in Oklahoma and demanded that they take down all the Bible verses and all the Christmas buttons that the bank had been displaying.

#15 The people currently running the Federal Reserve pretty much have no idea what they are doing.

In case anyone has not noticed, Federal Reserve Chairman Ben Bernanke has a very long track record of incompetence.  Nearly every major judgment that he has made since taking over that position has been dead wrong.

If one of us could go down the street and appoint the manager of the local Dairy Queen as the Chairman of the Federal Reserve, it is very doubtful that person would do a worse job than Bernanke has done.

#16 Even though the Federal Reserve has such extraordinary power over the financial system, the American people are not permitted to examine their books.

The Federal Reserve claims that they are regularly audited, but when some members of Congress attempted to push through a true comprehensive audit of the Fed last year Federal Reserve officials threw a hissy fit.

The truth is that the Federal Reserve has never undergone a true comprehensive audit since it was created back in 1913.

Whenever the subject of an audit comes up, Bernanke and others at the Fed keep repeating the mantra of how important “the independence of the Federal Reserve” is.

Sadly, Ron Paul’s proposal to audit the Federal Reserve last year, which had previously been co-sponsored by 320 members of the U.S. House of Representatives, ultimately failed by a vote of 229-198.

Instead, a very, very limited examination of Fed transactions that occurred during the recent financial crisis was approved.

So what did that limited examination reveal?

Well, the Federal Reserve was forced to reveal the details of 21,000 transactions stretching from December 2007 to July 2010 that combined were worth trillions of dollars.  It turns out that the Federal Reserve was just handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe.

Many members of Congress were absolutely stunned by these revelations.

So what would a more comprehensive audit reveal?

#17 The Federal Reserve has way too much power.

If the Federal Reserve did not exist, we would not have an unelected, unaccountable “fourth branch of government” running around that has gotten completely and totally out of control.  Even some members of Congress are now openly complaining about how much power the Fed has.  For example, Ron Paul told MSNBC last year 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.”

#18 The Federal Reserve is dominated by Wall Street and the New York banks.

The New York representative is the only permanent member of the Federal Open Market Committee, while other regional banks rotate in 2 and 3 year intervals.  The former head of the New York Fed, Timothy Geithner, is now U.S. Treasury Secretary.  The truth is that the Federal Reserve Bank of New York has always been the most important of the regional Fed banks by far, and in turn the Federal Reserve Bank of New York has always been dominated by Wall Street and the major New York banks.

The cold, hard reality of the matter is that the Federal Reserve is just another one of the tools that the Wall Street banking elite use to dominate all the rest of us.

#19 The Federal Reserve has brought us to the brink of economic collapse.

If the Federal Reserve had never been created, the American people would not be so enslaved to debt.  At the very core of our economic problems is debt.  American consumers are swamped with debt, state and local governments are facing horrific debt problems from coast to coast and the federal government has piled up the biggest mountain of debt in the history of the world.

We are living in an absolutely massive debt bubble, and when it bursts the world is going to experience financial chaos like it has never seen before.

Things did not have to turn out this way.  We did not have to adopt a debt-based financial system.  We did not have to allow the bankers to enslave us with debt.

But that is what happened.

Sadly, most Americans and the vast majority of our politicians are still clueless about these issues.

In 1922, Henry Ford wrote the following….

“The people must be helped to think naturally about money. They must be told what it is, and what makes it money, and what are the possible tricks of the present system which put nations and peoples under control of the few.”

Hopefully this article will help people understand our debt-based financial system a little bit better.

Until we fundamentally change our system, many of the economic and financial problems we are currently experiencing will never go away.

Thankfully, it does appear that some Americans are waking up.

According to a recent Bloomberg National Poll, the number of Americans that would like to see the Federal Reserve held more accountable or even completely abolished is increasing….

Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.

Those are very exciting numbers.

Hopefully we can awaken many more Americans to the dangers of a debt-based economy.

In the book of Proverbs, it tells us the following….

The rich ruleth over the poor, and the borrower is servant to the lender.

Well, by allowing ourselves to become enslaved to debt, we have become the servants of the international banking system.

Not only that, we have also sold our children and our grandchildren into perpetual debt slavery.

Thomas Jefferson tried to warn us about this.

He believed that when the government borrows money in one generation which must be paid back by future generations it is equivalent to stealing….

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

In fact, Thomas Jefferson said that if he could add one more amendment to the U.S. Constitution it would be a ban on all government borrowing….

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.

Where would we be today if we had listened to Thomas Jefferson?

The amount of government debt that we have racked up is a great evil.  We have stolen the future away from our children and our grandchildren.  We have put them in a position where they will spend the rest of their lives paying off our debts to the bankers.

We owe it to future generations to fix the problems that we have created.

That is why so many of us believe that it is time for the U.S. Congress to shut down the Federal Reserve.  Our current financial system is a complete and utter failure and we need to start over.

Mob Robbers And Rampant Looting: Is This The Future Of America?

Have you ever heard of mob robberies?  What happens is that dozens of young people storm a store at the same time, take whatever they want, and then storm out as powerless store clerks watch helplessly.  Most of the time these “mob robbers” end up getting caught, but unfortunately “group crime” is a trend that is rising.  Is it a sign of the times that large groups of people are starting to recklessly invade retail establishments?  Is this the future of America?  As I have written about so frequently, the U.S. middle class is being destroyed by this economy and large numbers of our young people are losing hope.  Frustration and anger are rising from coast to coast and millions of Americans are losing faith in the system.  The thin veneer of civilization which we all take for granted is already starting to disappear.  So what is going to happen when the economy collapses?  As our economic system fails, mob robberies and rampant looting are only going to become more common.  Let us hope that the economy can hold together for at least a couple more years, because once society falls apart things are going to get really, really ugly in our major cities.

Are you prepared for what America is going to look like during the next Great Depression?  It isn’t going to be pretty.  Over the past couple of decades we have gotten hints of what America is going to look like when society breaks down, and those hints have been very frightening.

This first video is a news report about the mob robberies that have taken place in Minnesota recently.  What would you do if you were a store clerk in this situation….

Unfortunately, these mob robberies are not just an anomaly.  The American people really do seem to be losing it.  Over the past couple of years, some almost unbelievable brawls have been breaking out in restaurants and in retail establishments all over the nation.

In addition, who could forget the wild mob scenes that erupted at stores all over America during the most recent Black Friday holiday sales?

Of course we all remember what happened during the aftermath of Hurricane Katrina.  All along the Gulf Coast looting was rampant.  Sadly, people were even openly looting stores in front of television news cameras….

This third video contains a compilation of footage from all over the United States over the past few decades.  Is this what America is going to look like when the economy breaks down and people are going wild in the streets?….

But don’t think that Americans only act this way in the big cities.  The truth is that human decency is breaking down everywhere.  This was perfectly illustrated by a recently reported case of horrific child abuse in Oklahoma.

According to CNN, a 9-year-old girl, an 11-year-old boy and a 15-year-old boy were actually forced to eat pet food and had suffered burns all over their bodies due to the nightmarish abuse that they had received from the couple that adopted them.

The 15-year-old boy in this case told authorities that at one point he was forced to live in a plastic dog carrier for two months and that all three of the children have had their tongues burned with a hot spoon by their “parents”.

The following is how CNN described some of the abuse that these children were subjected to….

Authorities said the Kluths are accused of burning the children with hot spoons, choking them and locking them “in the storm shelter behind the residence for long periods of time with only chairs to sit in and plastic buckets for bathroom use. It was also alleged that the Kluths deprived the children of meals for punishment and fed them cat food and dog food,” according to a statement from authorities.

Can you imagine?

As Americans, we like to think of ourselves as “good people”, but is that really true?

In the United States today, the percentage of the population that is in prison is more than ten times higher than it is in Japan.

Part of that is because the U.S. is rapidly becoming a “Big Brother” police state, but we also have to admit that the American people don’t seem to be made of the same “stuff” that they used to.

Something has gone dramatically wrong.

We have lost our way.

Is this country going to be able to handle another Great Depression?

Right now more than 43 million Americans are on food stamps.  This is helping keep the population under control.  But what is going to happen when the price of food goes up 50 percent and all of these millions of people can’t even feed themselves anymore?

That is a frightening thing to think about.

Most Americans have never known hard times.  Most Americans cannot even imagine what deep economic suffering is like.

When the U.S. economy does completely unravel, it is going to blindside most of the population.  Many Americans will go completely crazy when they finally realize that the “good times” are gone and are never coming back.

What we are seeing in Wisconsin right now is only a very small foretaste of the kinds of economic protests that we will see in the future.  There are tens of millions of Americans that are just not going to quietly accept that their affluence is gone permanently.

Unfortunately, the time to start saying something was years ago.  Our economy is being gutted right in front of our eyes and yet most Americans just keep on voting for the globalist politicians that continue to ship our factories, our jobs and our prosperity overseas.

Believe it or not, cities like Detroit, Michigan were once the envy of the world.

In 2011, the rest of the world laughs at Detroit.  It has become a global joke.

And you know what?

Hundreds of other communities across the United States are being slowly but surely transformed into new Detroits.

Today, there are many towns across the United States where you can almost reach out and feel the despair.  It is almost as if someone has sucked all of the hope right out of the atmosphere.

People are getting desperate.  As the economy crumbles crime is only going to increase.  In fact, many of our biggest cities have large areas where residents simply do not ever want to venture outside after the sun goes down.  Life is getting crazier in America with each passing year.

The America that so many of us so fondly remember is being rapidly destroyed.

So what do you all think?  Are mob robbers and rampant looting the future of America?  Are people going to go crazy when the economy collapses or are Americans going to be able to handle it fairly well?  Please feel free to leave a comment with your opinion below….

5 Dollar Gas? Get Ready To Pay An Arm And A Leg For Gasoline

One of the quickest ways to bring down the U.S. economy would be to dramatically increase the price of oil. Oil is the lifeblood of our economic system. Without it, our entire economy would come to a grinding halt. Almost every type of economic activity in this country depends on oil, and even a small rise in the price of oil can have a dramatic impact on economic growth.  That is why so many economists are incredibly alarmed about what is happening in the Middle East right now.  The revolution in Libya caused the price of WTI crude to soar more than 7 dollars on Tuesday alone.  It closed at $93.57 on Tuesday and Brent crude actually hit $108.57 a barrel before settling back to $105.78 at the end of the day.  Some analysts are warning that we could even see 5 dollar gas in the United States by the end of the year if rioting spreads to other oil producing nations such as Saudi Arabia.  With the Middle East in such a state of chaos right now it is hard to know exactly what is going to happen, but almost everyone agrees that if oil prices continue to rise at a rapid pace over the next several months it is going to have a devastating impact on economic growth all over the globe.

Right now the eyes of the world are on Libya.  Libya is the 17th largest oil producer on the globe and it has the biggest proven oil reserves on the continent of Africa.

Libya only produces 2 percent of the oil in the world, but with global supplies so tight at the moment even a minor production disruption can have a dramatic impact on the price of oil.

Before this crisis, Libya was producing approximately 1.6 million barrels of oil per day.  Now the rest of the world is wondering what may happen if revolution spreads to other major oil producing nations such as Kuwait (2.5 million barrels of oil per day) or Saudi Arabia.

Saudi Arabia produces 8.4 million barrels of oil a day.  It produces more oil than anyone else in OPEC.

If revolution strikes in Saudi Arabia and a major production disruption happens it could be catastrophic for the global economy.

David Rosenberg, the chief economist at Gluskin Sheff & Associates, is warning that if there is major civil unrest in Saudi Arabia we could end up seeing oil go up to $200 a barrel….

“If Libya can spark a $10-a-barrel response, imagine what a similar uprising in Saudi Arabia could unleash. Do the math: we’d be talking about $200 oil.”

200 dollar oil?

Don’t laugh – it could happen.

In fact, if it does happen the global economy would probably go into cardiac arrest.

The truth is that if the flow of oil from Saudi Arabia gets disrupted there is not enough spare capacity from the rest of the globe to make up for it.

Paul Horsnell, the head of oil research at Barclays Capital, recently said that the world does not currently have enough spare capacity to be able to guarantee that an oil “price shock” will not happen….

“The world has only 4.5m barrels-per-day (bpd) of spare capacity, which is not comfortable.”

Horsnell also said that even in the midst of potential supply problems, the global demand for oil continues to grow at a very robust pace….

“In just two years, the world has grown so fast as to consume additional volume equal to the output of Iraq and Kuwait combined.”

For now, Saudi officials are saying all the right things.  They say that there will be no revolution in Saudi Arabia and that there are not going to be any supply problems.

For example, Saudi Arabian Oil Minister Ali al-Naimi recently announced that the rest of the world should not worry because his country is definitely going to be able to make up for any shortage in the global supply of oil….

“What I would like you to convey to the market: right now there is absolutely no shortage of supply.”

But what happens if revolution comes to Saudi Arabia?

Suddenly the whole game would change.

But even with a peaceful Saudi Arabia the price of gasoline in the United States is already rising to alarming levels.

The average price of gasoline in the United States reached $3.14 a gallon last week.  This closely mirrors what happened back in 2008.  Three years ago at this time the average price of gasoline was right around $3.13 a gallon.

Let’s certainly hope that we don’t see a repeat of what happened to oil prices back in mid-2008.  The price of oil reached an all-time record of $147 a barrel and gas prices in the United States absolutely skyrocketed.

So how high will the price of gas in the U.S. go in 2011?

We haven’t even come close to 4 dollar gas yet, but a large number of analysts believe that it is coming this summer.

Is there even a possibility that we could see 5 dollar gas in America at some point in the next couple of years?

Well, there are some in the oil industry that are convinced that it could actually happen.  Just consider the following quotes….

Darin Newsom, senior analyst at energy tracker DTN….

“If this thing escalates and there’s a good chance that there’d be a shift in supplies, $5 gas isn’t out of the question.”

Peter Beutel, president of energy adviser Cameron Hanover….

“If you are looking at the disruption of movement and production in countries such as Saudi Arabia and the UAE, you’re easily talking $5 gas.”

John Hofmeister, the former president of Shell Oil, on his belief that we could see 5 dollar gas by 2012….

“I’m predicting actually the worst outcome over the next two years which takes us to 2012 with higher gasoline prices.”

So why is everyone so concerned about gas prices?

Well, because it affects the price of almost everything else in the economy.

David Wyss, the chief economist at Standard & Poor’s, says that every extra dollar that is spent on gasoline is a dollar that will not be spent somewhere else….

“The money that you spend filling up your car is money you don’t have to spend at the shopping mall.”

Not only that, but when gasoline costs more it has a negative effect on economic growth.  Almost all economic activities involve the use of oil in one form or another.  When the price of oil starts getting really high it motivates people to start cutting back on many of those activities.

The truth is that our whole economic system is based on the ability to use massive amounts of very cheap oil.  Now that the price of oil is rapidly rising again, many economists are becoming very alarmed.

Nobuo Tanaka, the Executive Director of the International Energy Agency, recently told CNBC that his organization is extremely concerned about what high oil prices could do to the global economy….

“That is our concern, regardless of the margins of disruption, if the $100 per barrel of oil is continued in 2011, the burden of oil to the global economy is as bad as 2008.”

So what was so bad about 2008?  Well, the price of oil soared to $147 a barrel in mid-2008 and this was a huge factor in the financial collapse that happened a few months later.  Now oil prices are returning to levels that we have not seen since 2008….

So if the price of oil breaks the all-time record this year will we see another global financial crisis?

It is hard to say.  But what almost everyone agrees on is that it will not be good for the global economy at all.

In addition, a higher price for oil will also have a huge impact on the trade deficit.  Because oil prices were at such a high level back in 2008, oil imports actually made up almost 50 percent of the U.S. trade deficit that year.

In 2010, the U.S. trade deficit was just a whisker under $500 billion.  If the price of oil gets up to 140 or 150 dollars a barrel we could easily see the U.S. trade deficit explode to 700 or 800 billion dollars in 2011.

That would be really, really bad for the U.S. economy.

So where are oil prices going next?

Well, if you could predict that with 100 percent certainty you could make a whole lot of money.  Nobody knows for sure.

But almost everyone believes that the price of oil is going to go up.  In fact, a lot number of investors have been making some very large bets that the price of oil is going to go up very significantly this year.

Recently, large numbers of investors have been betting that the price of oil will rise to $125 a barrel by May.  Shockingly, some investors have even been betting that the price of oil will rise to $250 a barrel by next December.

Let us hope that the price of oil does not rise that rapidly, but as the past couple of months have demonstrated, the world is becoming a very unstable place.   Just about anything is possible at this point.

If the price of oil rises significantly above $100 a barrel and it stays there for an extended period of time, it is going to be absolutely devastating for the U.S. economy.

So what do you all think is going to happen to the price of oil in 2011?  Please feel free to leave a comment with your thoughts below….

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