The U.S. financial system is like a junkie that needs continually increasing amounts of “junk” to get the same “buzz”. So what is the U.S. financial system addicted to? It is addicted to money and debt. For many years, whenever the Federal Reserve would lower interest rates or the U.S government would borrow and spend more money, the U.S. economy would respond positively. But just like with any other kind of artificial stimulation, over time it has taken greater and greater amounts of debt and cheap money to get a response from our economic system. So yes, the fact that the official unemployment rate went down 0.1% last month is good news, but considering the massive amount of spending that the U.S. government is doing and considering the gigantic quantity of money that the Federal Reserve is injecting into the financial system, the truth is that the unemployment rate should be falling much faster than that. So don’t be fooled by the good economic numbers and don’t be fooled by the financial “sugar rush”. The U.S. government and the Federal Reserve have been pulling out all the stops to stimulate the economy, and the fact that all of their efforts are barely moving the unemployment rate at all is an indication of just how far our economic situation has degenerated.
Many in the mainstream media were extremely excited when the U.S. Bureau of Labor Statistics announced that the U.S. unemployment rate declined to 8.8% in March. U.S. stocks soared as investors enthusiastically welcomed the news. But should we all really be jumping up and down over this?
The truth is that some other measures show that the unemployment situation in the United States is becoming worse.
According to Gallup, the number of Americans that are either unemployed or working part-time but desiring full-time work actually rose from 19.8 percent in February to 20.3 percent in March.
So let us not get too excited about the employment situation. Yes, unemployment is not spinning wildly out of control at the moment and that is good news.
However, when you look at the larger picture things look rather grim.
What the U.S. government and the Federal Reserve have been doing is that they have been mortgaging our future big time for short-term economic gain.
This year alone, the U.S. government is going to run an all-time record budget deficit of approximately 1.6 trillion dollars. By borrowing 1.6 trillion dollars that we do not have and spending it into the system, it does stimulate the economy.
There are some members of Congress that would like to implement substantial budget cuts, but most members of Congress fear doing too much budget cutting right now because it would “harm the economy”.
And you know what? They are right – budget cuts would harm our economy in the short-term.
But continuing to pile up all of this debt is setting the stage for an absolute economic nightmare in the mid to long term.
We have lived far, far beyond our means for decades, and most of our politicians are acting like this can go forever.
But tell me, does anyone out there actually believe that we can keep expanding the national debt like this indefinitely?….
Yes, government spending does stimulate the economy. The Keynesians are right about that.
However, by accumulating a national debt that is spinning wildly out of control, we have completely destroyed the economic future of this nation.
The Federal Reserve has been very busy trying to stimulate the U.S. economy as well.
Over the past couple of years, the Fed has been injecting massive amounts of money into the financial system. The theory is that the financial system will loan this money out to the American people and that will stimulate the economy and create more jobs.
Well, that may very well be true to a certain extent in the short-term, but as I wrote about yesterday, in the long-term this is going to create a substantial amount of inflation.
The chart posted below cannot be emphasized enough. It shows how the Fed has dramatically increased the size of the adjusted monetary base since mid-2008….
Yes, all of this new money will stimulate economic activity, but it is completely and totally ludicrous for Ben Bernanke to attempt to deny that this is also going to cause significant inflation.
So when taking a look at the economic numbers, it is absolutely critical to keep in mind that our “authorities” have pushed all the chips to the middle of the table in an all-out attempt to stimulate the economy in the short-term.
The small economic “sugar rush” that we are experiencing right now is all we have gotten out of it so far.
Sadly, this is about the best that the U.S. economy is going to do from now on. Things really are not going to get much better than this.
Yes, unemployment numbers might come down a little more, but pretty soon inflation is going to really kick in and that is going to have a really negative impact on tens of millions of Americans.
First of all, when inflation really starts taking off it is going to be absolutely devastating for those on fixed incomes. Many of them will be completely wiped out.
Secondly, those that do have jobs are going to find that their incomes are not nearly keeping up with inflation.
In fact, we are seeing this starting to happen already.
So did what we are paying for food and gas only go up 2.1% in 2010?
Of course not.
So are things getting better so far in 2011?
No.
One of the depressing things about the new numbers released by U.S. Bureau of Labor Statistics was that wages for U.S. workers did not increase in March.
According to the BLS, the average U.S. worker earned $22.87 an hour during the month of March, which is exactly the same number we saw in February.
So inflation is going up and wages are staying flat.
That means that American family budgets are going to be squeezed even more.
In addition, the numbers from the BLS show that it is still incredibly difficult to get a job. In fact, the average length of unemployment in the U.S. is now an all-time record 39 weeks.
According to USA Today, median CEO pay soared 27 percent during 2010. For the year, median CEO pay was a stunning $9.0 million.
Wouldn’t you like to be making 9 million dollars a year?
According a recent report by CNN, the 25 highest-paid hedge fund managers in the United States combined to bring in an astounding $22.07 billion in income during 2010.
Wouldn’t you like to get just a small piece of that?
All of the measures that the government and the Federal Reserve are using to stimulate the economy are causing tremendous distortions in our financial system.
Wall Street is absolutely swimming in cash right now. There are some people that are making obscene amounts of money.
But ultimately the party is going to end for all of us.
It has been incredibly foolish for the government and the Fed to go “all in” in a desperate attempt to boost short-term economic numbers.
Our long-term economic future is completely gone. Our financial system is heading for a horrible collapse. It is not a matter of “if” it will happen, but rather “when” it will happen.
Most Americans believe that we still live in a capitalist system and that free markets primarily determine the growth and development of our economy. But is that really the case? No, sadly it is not. The truth is that the U.S. Federal Reserve does a tremendous amount of central economic planning. So what makes the central economic planning that the Federal Reserve does different from the central economic planning that communist China does? Yes, in China it is the government that does the central planning and in the United States it is a private central bank that does the central planning, but other than that are there any huge differences? And if our economy is centrally planned, then how can we continue to claim that we still have a free market capitalist system?
Certainly China goes into greater detail in their economic planning, but that does not mean that the economic planning that the Federal Reserve and the U.S. government do is not similar.
After all, free markets do not set interest rates in this country – the Federal Reserve does.
The Federal Reserve also determines what the money supply will be.
The Federal Reserve is the one that decides if inflation is too high or too low.
The Federal Reserve is the one that decides if unemployment is too high or too low.
In addition, the Federal Reserve has a tremendous amount of regulatory power over U.S. banks and the entire financial system. Most Americans simply do not realize how much power the Federal Reserve has over our banks. Just last year Federal Reserve officials walked into one bank in Oklahoma and demanded that they take down all the Bible verses and the Christmas buttons that the bank had been displaying.
Like the communist Chinese, the Federal Reserve is not elected and it is essentially accountable to nobody.
Like the communist Chinese, the Federal Reserve also picks winners and losers. You see, not all financial institutions are treated equally by the Fed. For example, some have access to the Fed’s discount window and others do not.
How is that fair?
Certainly the Federal Reserve does not do all of the central economic planning in this country. The U.S. government loves to get involved in economic planning as well. For example, the U.S. government has decided that there are certain types of light bulbs that we are allowed to buy and certain types of light bulbs that we are no longer going to be allowed to buy. It doesn’t matter that the new light bulbs are far more dangerous to children or that most of us would still like to have the choice to buy the old light bulbs.
But getting back to the Federal Reserve, how “democratic” or how “capitalist” is it to have 12 unelected people sitting around a table deciding the economic direction of this country?
The truth is that we live in a system that simply does not trust free markets and that believes that our economy needs to be “managed”.
It is a fundamental tenant of American capitalism that central planning of economies doesn’t work in the long term, whether in Soviet Union historically or in China today. But I often wonder: How is the Fed’s Board of Governors – the proverbial 12 guys in a room – any different than the 24 guys in a room who make up the Chinese politburo?
Is Katsenelson not right about this?
How in the world is the Fed’s Board of Governors all that much different from the Chinese Politburo?
In both cases, a group of unelected elitists makes the major economic decisions for all the rest of us.
That certainly does not sound like “capitalism” to me.
Would the free markets really produce worse results for our economy than the Federal Reserve does?
Would America ever have gone through the Great Depression if the Federal Reserve had not been created in 1913?
Would we have experienced the financial crash of 2008 if the policies of Greenspan and Bernanke had not created tremendous bubbles in the financial system?
Would the U.S. dollar have lost over 95 percent of its value since 1913 if the Federal Reserve was not around to constantly inflate our currency?
Would the U.S. government have the largest debt in the history of the world if we were not using the debt-based monetary system imposed upon us by the elite international bankers?
Now that the total debt of the U.S. government is $14,228,193,126,138.72, it is getting really hard to deny that the federal government is drowning in debt.
“If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when.”
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.
But defenders of the Federal Reserve tell us that if not for the brilliant people over at the Fed, America would be an economic basket case by now.
Oh really?
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 wrong. If one of us could go down the street and appoint the manager of our local Dairy Queen as the Chairman of the Federal Reserve, it is very doubtful that person could do a worse job than Bernanke has done.
Unfortunately, most Americans do not understand this. Most Americans are still convinced that “the greatest economy on earth” will just keep roaring along forever. Most Americans are spending and partying as if everything is going to be just fine.
Sadly, as Richard Daughty recently pointed out, most Americans will not wake up and realize just how bad our economic problems really are until it is too late….
In fact, to use an analogy, the economy is like a group of overpaid people, milking the government for every dollar and benefit they can get, on a chartered airplane that has been certified as “unsafe,” where one minute everybody is having fun, drunk as skunks, laughing and telling dirty jokes, and the next minute the plane is plunging out of the sky, out of fuel, one wing is in flames, the engines are dead, the entire electrical system is kaput, and, worst of all, the beverage cart is completely empty of cold beer and those little bottles of different kinds of tasty liquors. Uh-oh!
Most Americans have become so “dumbed down” that they still won’t even understand what is happening even after the economy has collapsed. Newsweek recently found that 63 percent of Americans do not know how many justices are on the Supreme Court and 29 percent of Americans cannot even name the current Vice-President.
America today is rapidly degenerating in many of the same ways that the Roman Empire once did. Tens of millions of Americans are lazy, slothful and absolutely addicted to entertainment. It is frightening to see just how many Americans did not show any empathy during the recent crisis in Japan or when we started launching missiles on Libya. The following mini-documentary that was recently posted on YouTube does a beautiful job of making this point….
So is there any hope for America?
Let us hope that people wake up, because there are going to be even more economic disasters coming our way. Right now a large percentage of the American people don’t even know enough to realize what the real problems are, much less what the solutions may be.
When most Americans talk about economics, they instantly start blaming “Obama” or “Bush” and a lot of them never even bring up the Federal Reserve.
But it is the Federal Reserve that has the most power over our economy.
If Americans want to blame someone in Washington D.C. for the economic mess that we are in, the number one culprit is the Federal Reserve.
Yes, Obama, Bush and virtually every member of Congress has played a role in our economic nightmare as well. But it is the Federal Reserve that is actually “managing” our economy.
We would have been much better off if we had allowed free markets to “manage” our economy all this time, but very few Americans actually seem to still believe in free markets anymore.
2011 has already been the most memorable year in ages and we haven’t even reached April yet. Revolutions have swept the Middle East, an unprecedented earthquake and tsunami have hit Japan, civil war has erupted in Libya, the price of oil has been soaring and the entire globe is teetering on the brink of economic collapse. It seems like almost everything that can be shaken is being shaken. Unfortunately, it does not appear that things are going to settle down any time soon. The Japanese economy has been dealt a critical blow, the European sovereign debt crisis could flare up again at any moment and the U.S. economy could potentially plunge into another recession by the end of the year. The global economy and world financial markets were really struggling to recover even when things were relatively stable. If all of this global instability gets even worse it could literally rip world financial markets apart.
Yes, things really are that bad. The mainstream media has been really busy downplaying the economic impact of the disaster in Japan and the chaos in the Middle East, but the truth is that these events have huge implications for the global economy. Today our world is more interconnected than ever, so economic pain in one area of the planet is going to have a significant effect on other areas of the globe.
The following are 10 economic disasters which could potentially rip world financial markets to shreds….
#1 War In Libya
Do you think that the “international community” would be intervening in Libya if they did not have a lot of oil? If you actually believe that, you might want to review the last few decades of African history. Millions upon millions of Africans have been slaughtered by incredibly repressive regimes and the “international community” did next to nothing about it.
But Libya is different.
Libya is the largest producer of oil in Africa.
Apparently the revolution in Libya was not going the way it was supposed to, so the U.S. and Europe are stepping in.
Moammar Gadhafi is vowing that this will be a “long war”, but the truth is that his forces don’t stand a chance against NATO.
Initially we were told that NATO would just be setting up a “no fly zone”, but there have already been reports of Libyan tank columns being assaulted and there has even been an air strike on Moammar Gadhafi’s personal compound in Tripoli.
So since when did a “no fly zone” include an attempt to kill a foreign head of state?
Let there be no mistake – the moment that the first Tomahawk cruise missiles were launched the United States declared war on Libya.
Already the Arab League, India, China and Russia have all objected to how this operation is being carried out and they are alarmed about the reports of civilian casualties.
Tensions around the globe are rising once again, and that is not a good thing for the world economy.
On a side note, does anyone recall anyone in the Obama administration even stopping for a moment to consider whether or not they should consult the U.S. Congress before starting another war?
The U.S. Constitution specifically requires the approval of the Congress before we go to war.
But very few people seem to care too much about what the U.S. Constitution says these days.
In any event, the flow of oil out of Libya is likely to be reduced for an extended period of time now, and that is not going to be good for a deeply struggling global economy.
#2 Revolutions In The Middle East
Protests just seem to keep spreading to more countries in the Middle East. On Friday, five Syrian protesters were killed by government forces in the city of Daraa. Subsequently, over the weekend thousands of protesters reportedly stormed government buildings in that city and set them on fire.
Things in the region just seem to get wilder and wilder.
Even in countries where the revolutions are supposed to be “over” there is still a lot of chaos.
Have you seen what has been going on in Egypt lately?
The truth is that all of North Africa and nearly the entire Middle East is aflame with revolutionary fervor.
About the only place where revolution has not broken out is in Saudi Arabia. Of course it probably helps that the United States and Europe don’t really want a revolution in Saudi Arabia and the Saudis have a brutally effective secret police force.
In any event, as long as the chaos in the Middle East continues the price of oil is likely to remain very high, and that is not good news for the world economy.
#3 The Japanese Earthquake And Tsunami
Japan is the third largest economy in the world. When a major disaster happens in that nation it has global implications.
The tsunami that just hit Japan was absolutely unprecedented. Vast stretches of Japan have been more thoroughly destroyed than if they had been bombed by a foreign military power. It really was a nation changing event.
The Japanese economy is going to be crippled for an extended period of time. But it is not just Japan’s economy that has been deeply affected by this tragedy.
A shortage of Japanese-built electronic parts will force GM to close a plant in Zaragoza, Spain, on Monday and cancel shifts at a factory in Eisenach, Germany, on Monday and Tuesday, the company said Friday.
Not only that, GM has also suspended all “nonessential” spending globally as it evaluates the impact of this crisis.
The truth is that there are a whole host of industries that rely on parts from Japan. Supply chains all over the world are going to have to be changed as a result of this crisis. There are going to be some shortages of certain classes of products.
Japan is a nation that imports and exports tremendous quantities of goods. At least for a while both imports and exports will be significantly down, and that is not good news for a world economy that was already having a really hard time recovering from the recent economic downturn.
#4 The Japan Nuclear Crisis
Even if the worst case scenario does not play out, the reality is that the crisis at the Fukushima Dai-ichi nuclear plant is going to have a long lasting impact on the global economy.
Already, nuclear power projects all over the world are being rethought. The nuclear power industry was really starting to gain some momentum in many areas of the globe, but now that has totally changed.
But of much greater concern is the potential effect that all of this radiation will have on the Japanese people. Radiation from the disaster at the Fukushima Dai-ichi nuclear plant is now showing up in food and tap water in Japan as an article on the website of USA Today recently described….
The government halted shipments of spinach from one area and raw milk from another near the nuclear plant after tests found iodine exceeded safety limits. But the contamination spread to spinach in three other prefectures and to more vegetables — canola and chrysanthemum greens. Tokyo’s tap water, where iodine turned up Friday, now has cesium.
Hopefully the authorities in Japan will be able to get this situation under control before Tokyo is affected too much. The truth is that Tokyo is one of the most economically important cities on the planet.
But right now there is a lot of uncertainty surrounding Tokyo. For example, one very large German real estate fund says that their holdings in Tokyo are now “impossible to value” and they have suspended all customer withdrawals from the fund.
Once again, let us hope that a worst case scenario does not happen. But if we do get to the point where most of the population had to be evacuated from Tokyo for an extended period of time it would be absolutely devastating for the global economy.
#5 The Price Of Oil
Most people believe that the U.S. dollar is the currency of the world, but really it is oil. Without oil, the global economy that we have constructed simply could not function.
That is why it was so alarming when the price of oil went above $100 a barrel earlier this year for the first time since 2008. Virtually everyone agrees that if the price of oil stays high for an extended period of time it will have a highly negative impact on the world economy.
In particular, the U.S. economy is highly, highly dependent on cheap oil. This country is really spread out and we transport goods and services over vast distances. That is why the following facts are so alarming….
*The average price of a gallon of gasoline in the United States is now 75 cents higher than it was a year ago.
*In San Francisco, California, the average price of a gallon of gasoline is now $3.97.
*According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier.
*According to the U.S. Energy Department, the average U.S. household will spend approximately $700 more on gasoline in 2011 than it did during 2010.
#6 Food Inflation
Many people believe that the rapidly rising price of food has been a major factor in sparking the revolutions that we have seen in Africa and the Middle East. When people cannot feed themselves or their families they tend to lose it.
According to the United Nations, the global price of food hit a new all-time high earlier this year, and the UN is expecting the price of food to continue to go up throughout the rest of this year. Food supplies were already tight around the globe and this is certainly not going to help things.
The price of food has also been going up rapidly inside the United States. Last month the price of food in the United States rose at the fastest rate in 36 years.
American families are really starting to feel their budgets stretched. According to the U.S. Labor Department, the cost of living in the United States hit a brand new all-time record high in the month of February.
What this means is that U.S. families are going to have less discretionary income to spend at the stores and that is bad news for the world economy.
#7 The European Sovereign Debt Crisis
Several European governments have had their debt downgraded in the past several months. Portugal, Spain, Greece and Ireland are all in big time trouble. Several other European nations are not far behind them.
Right now Germany seems content to bail the “weak sisters” in Europe out, but if that changes at some point it is going to be an absolute nightmare for world financial markets.
#8 The Dying U.S. Dollar
Right now there is a lot of anxiety about the U.S. dollar. Prior to the tsunami, Japan was one of the primary purchasers of U.S. government debt. In fact, Japan was the second-largest foreign buyer of U.S. Treasuries last year.
But now as Japan rebuilds from this nightmare it is not going to have capital to invest overseas. Someone else is going to have to step in and buy up all of the debt that the Japanese were buying.
So if Japan is not buying U.S. Treasuries and bond funds such as PIMCO are not buying U.S. Treasuries, then who is going to be buying them?
The U.S. government needs to borrow trillions of dollars this year alone to roll over existing debt and to finance new debt. All of that borrowing has got to come from somewhere.
#9 The U.S. Housing Market
The U.S. housing market could potentially be on the verge of another major crisis. Just consider the following facts….
*In February, U.S. housing starts experienced their largest decline in 27 years.
*Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.
*Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months. Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.
*In September 2008, 33 percent of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure. Today that number has risen to 48 percent.
#10 The Derivatives Bubble
Most Americans do not even understand what derivatives are, but the truth is that they are one of the biggest threats to our financial system. Some experts estimate that the worldwide derivatives bubble is somewhere in the neighborhood of a quadrillion dollars. This bubble could burst at any time. Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn’t stop. Today, most money on Wall Street is not made by investing in good business ideas. Rather, most money on Wall Street is now made by making shrewd bets. Unfortunately, at some point the casino is going to come crashing down and the game will be over.
Most people simply do not realize how fragile the global economy is at this point.
The financial crash of 2008 was a devastating blow. The next wave of the economic crisis could be even worse.
So what will the rest of 2011 bring?
Well, nobody knows for sure, but a lot of experts are not optimistic.
“A sharp slowing in global GDP in the second half of the year cannot be ruled out.”
Let us hope that the world economy can hold together and that we can get through the rest of 2011 okay. The last thing we need is a repeat of 2008. The world could use some peace and some time to recover.
But unfortunately, we live in a world that is becoming increasingly unstable. With the way that the world has been lately, perhaps we should all just start to expect the unexpected.
But world financial markets do not respond well to instability and unpredictability. In fact, investors tend to start fleeing to safety at the first signs of danger these days.
Most Americans simply have no idea how vulnerable the world financial system is at this point. Nothing really got “fixed” after 2008. If anything, global financial markets are even more fragile than they were back then.
So what do all of you think about the state of the global economy? Please feel free to leave a comment with your opinion below….
The economic collapse of Japan has begun. The extent of the devastation is now becoming clear and many are now projecting that this will be the most expensive natural disaster in modern human history. The tsunami that struck Japan on March 11th swept up to 6 miles inland, destroying virtually everything in the way. Countless thousands were killed and entire communities were totally wiped out. So how does a nation that is already drowning in debt replace dozens of cities and towns that have suddenly been destroyed? Many in the mainstream media are claiming that the economy of Japan will bounce right back from this, but they are wrong. The tsunami decimated thousands of square miles. The loss of homes, cars, businesses and personal wealth is almost unimaginable. It is going to take many years to rebuild the roads, bridges, rail systems, ports, power lines and water systems that were lost. There are going to be a significant number of Japanese insurance companies and financial institutions that are going to be totally wiped out as a result of this great tragedy. Of course in the days ahead the Japanese people will band together and work hard to rebuild the nation, but the truth is that it is impossible to “bounce right back” from such a massive loss of wealth, assets and infrastructure.
Just think about what happened after Hurricane Katrina. Did the economy of New Orleans bounce right back? No, there are some areas of New Orleans today that still look like war zones.
Well, this disaster is much worse.
The truth is that this is going to be one of the defining moments in the history of Japan. Hundreds of miles along the coast of Japan have been absolutely devastated. Authorities are finding it difficult to even get food and water into some areas at this point.
Even before this great tragedy Japan was one of the nations that was on the verge of a national economic collapse. Their economy had been in the doldrums for over a decade and their national debt was well over 200 percent of GDP. Now the Japanese economy has experienced a shock from which it may never truly recover.
The Bank of Japan is already flooding the Japanese economy with new yen, and so we may indeed see some impressive “economic growth” statistics at the end of the year. But just because lots more yen are being passed around does not mean that the Japanese economy is in better shape.
The truth is that a tsunami of yen is not going to undo the damage that the tsunami of water did. A massive amount of Japanese wealth was wiped out by this disaster. An economy that was already teetering on the brink is now very likely going to plunge into oblivion.
It is fine to be optimistic, but the cold, hard reality of the situation is that this is a knockout blow for the Japanese economy. The extent of the devastation is just too great. This truly is a complete and total nightmare.
The following are 14 reasons why the economic collapse of Japan has now begun….
#1 The Bank of Japan has announced that they have decided to flood the Japanese economy with 15 trillion yen. That is the equivalent of roughly $183 billion dollars. This is going to provide needed liquidity in the short-term, but it is also going to set Japan on a highly inflationary course.
#2 Japan’s Nikkei 225 stock average declined by more than 6 percent on Monday. As the full extent of the damage becomes apparent more declines are likely.
#3 Oil refineries all over Japan have been severely damaged or destroyed. For example, six refineries that combine to process 31 percent of the oil for Japan have been totally shut down at least for now.
#4 The damage to roads, bridges, ports and rail systems is estimated to be in the billions of dollars. The damage done to power lines and water systems is almost unimaginable. It is going to take many years to rebuild the infrastructure of Japan.
#5 Right now the flow of goods and services in many areas of northern Japan has been reduced to a crawl, and this is likely to remain the case for quite some time.
#6 Many cities and towns along the east coast of Japan have essentially been completely destroyed.
#7 Japan’s nuclear industry is essentially dead in the water at this point. Even if there is not a full-blown nuclear meltdown, the events that have transpired already have frightened people enough to cause a massive public outcry against nuclear power in Japan.
#8 Japan is going to need even more oil and natural gas in the long run to replace lost nuclear energy production. Prior to this crisis, Japan derived 29 percent of its electricity from nuclear power.
#9 Japan is the second largest foreign holder of U.S. government debt, but that is about to change. Japan currently has about $882 billion in U.S. Treasury bonds and they are going to have to liquidate much of that in order to fund the rebuilding of their nation.
#10 Many factories in Japan are closing down at least temporarily. For example, Nissan has shut down four factories and Sony has shut down six factories.
#12 A substantial number of Japanese financial institutions and insurance companies are absolutely going to be devastated by this nightmare.
#13 Japan’s budget deficit was already 9 percent of GDP even before this tragedy. Now they are going to have to borrow lots more money to fund the rebuilding effort.
#14 Japan’s national debt was already well over 200 percent of GDP even before this tragedy. How much farther into the danger zone can they possibly go?
Sadly, as the economy of Japan goes down it is going to have a huge affect on the rest of the world as well. For example, Japan is no longer going to be able to buy up huge amounts of U.S. Treasuries. So who is going to pick up the slack? Will our government officials beg China to lend us even more money? Will the Federal Reserve just “buy” even more of our government debt?
Right now there are more questions than there are answers, but what is clear is that the Japanese economy has just been dealt an incapacitating blow. Hopefully this tragedy will bring out the best in the Japanese people, but no matter how resilient they are, the truth is that this is something that no nation would be able to bounce back from quickly.
Let us hope that the economic damage from this tragedy will be contained and will not spread to the rest of the world. The global economy is already in enough trouble, and hopefully this tragedy will not cause a cascade of economic failures to sweep the globe.
The price of oil is shaping up to be the number one economic story of 2011, and right now the eyes of the investing world are closely watching the developing situation in Saudi Arabia. All of the other recent Middle East revolutions have been organized on the Internet, and now all over Facebook and Twitter there are calls for a “Day of Rage” in Saudi Arabia on March 11. The Saudi monarchy is attempting to head off any protests by promising to give $37 billion in “benefits” to the people and by publicly proclaiming that all political demonstrations are specifically banned. In addition, the Saudi government is stationing thousands of security forces at various potential “hot spots” around the country. So far similar measures have not done much to quell unrest in other nations in the Middle East, but Saudi Arabia will be a true test of the revolutionary fervor that is sweeping the region. The Saudis have a long history of brutally repressing their own people. They simply do not mess around. So a revolution in Saudi Arabia will not be nearly as “easy” as it was in Tunisia, Egypt or Libya. However, if a revolution does sweep across Saudi Arabia, it is going to send the price of oil into unprecedented territory. Saudi Arabia is the number one exporter of oil in the world, and if their oil fields get shut down even for a little while it is going to have a dramatic effect on the global economy. With the world already on the verge of a major sovereign debt crisis, the last thing it needs is for the price of oil to start soaring into the stratosphere.
Right now the investing world is not sure what to think about all of this, and financial markets do not like uncertainty. One piece of really bad news could send markets all over the globe crashing down.
Speculation in oil futures is absolutely rampant. A recent report on CNN noted the following….
The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it.
In particular, the number of investors that are betting that a revolution in Saudi Arabia is going to send the price of oil up to $200 a barrel has exploded in recent days.
$200 a barrel?
Are people actually betting that is going to happen?
The all-time record is only $147 a barrel. Just a few months ago it was absolutely unthinkable to most economists that we could potentially see $200 oil in 2011.
But it would be a mistake to assume that a full-blown revolution is guaranteed to break out in Saudi Arabia. Remember, this is a nation that has a very, very long history of denying even the most basic freedoms to the people.
For example, in Saudi Arabia the practice of any religion other than Islam is strictly forbidden. By law, citizens of Saudi Arabia are not permitted to change religion. Even foreign visitors are forbidden to openly practice any other religion. It is a whole different world. You cannot go to the store and buy a Bible in Saudi Arabia. In fact, if you try to pass out Bibles in Saudi Arabia you will be thrown into prison.
So if you plan of being a revolutionary in Saudi Arabia you had better put your big boy pants on, because the Saudis play hardball.
Much of the rest of the globe is desperately hoping that a revolution does not happen in Saudi Arabia because the global economic situation is precarious at best.
In Europe, if the price of oil causes a significant economic slowdown right now it could have global implications. Moody’s Investors Service just slashed Greece’s debt rating three levels all the way down to B1. But Greece is far from alone. Several European governments are finding it much more expensive to finance their debts these days. We are right on the edge of a major European sovereign debt crisis and the chaos in the Middle East could potentially be just the thing to spark a panic.
The United States could feel a rise in the price of oil even more than Europe because the U.S. economy is so spread out and it is so dependent on products from overseas.
Did you know that in 1960 only 8 percent of the things Americans bought were made overseas but that today 60 percent of the things Americans buy are made overseas?
It’s true.
So what would happen if the cost of transporting all of those products suddenly doubled? All of the products we buy must be transported somehow, and a rise in transportation costs will be passed on to U.S. consumers.
But the truth is that the pain is already here. Already, millions of American families are starting to feel some very real financial pain from the chaos in the Middle East.
From February 18th to March 4th, the average price of gasoline in the United States rose 33 cents. That was the biggest two week increase ever recorded.
Ouch.
The rise in the price of oil has some broader economic implications as well.
The more the price of oil goes up the bigger our trade deficit is going become. As the trade deficit gets bigger, that means that more money is going out of the country and less money is going to support American businesses and American workers. When American workers lose jobs, that means that they aren’t producing wealth anymore and they aren’t paying taxes anymore. Instead, they become a drain on the system as they start receiving government handouts.
When millions of Americans go from being productive, taxpaying workers to unemployed welfare cases it causes our federal budget deficit to become even larger.
Most Americans do not understand how connected our trade deficit and our federal budget deficit really are. One feeds right into the other.
Unfortunately, the Federal Reserve seems to think that the solution to any economic problem these days is to print more money.
One of the reasons why the price of oil and other commodities has been going up over the last six months is because of all of this reckless money printing.
Now Lockhart is saying that because of the oil price increases they may have to do more money printing?
How bizarre is that?
Unfortunately, several other top Fed officials have dropped hints about a possible “QE3” lately. It just seems like the insanity never stops.
Let us hope that the Fed does not go there because the U.S. dollar is falling apart fast enough already.
In any event, the rest of 2011 is certainly going to be very interesting to watch.
Even if a revolution does not happen in Saudi Arabia, the price of oil will most likely continue to slowly move higher just as it has been doing for months.
But if a full-blown revolution does happen in Saudi Arabia, it could literally change the global economy almost overnight. The entire world financial system would be thrown into a state of chaos.
Oil is the lifeblood of the world economy. Without a continuous supply of very inexpensive oil, life as we know it would dramatically change. Most of us just assumed that we would always live in a world where we would always have an endless supply of very cheap oil.
Well, the times they are a changing.
You had better buckle up because it is going to be a bumpy ride.
It is not just the United States that is headed for an economic collapse. The truth is that the entire world is heading for a massive economic meltdown and the people of earth need to be warned about the coming economic disaster that is going to sweep the globe. The current world financial system is based on debt, and there are alarming signs that the gigantic global debt bubble is getting ready to burst. In addition, global prices for the key resources that the major economies of the planet depend on are rising very rapidly. Despite all of our advanced technology, the truth is that human civilization simply cannot function without oil and food. But now the price of oil and the price of food are both increasing dramatically. So how is the current global economy supposed to keep functioning properly if it soon costs much more to ship products between continents? How are the billions of people that are just barely surviving today supposed to feed themselves if the price of food goes up another 30 or 40 percent? For decades, most of the major economies around the globe have been able to take for granted that massive amounts of cheap oil and massive amounts of cheap food will always be there. So what happens when that paradigm changes?
At last check, the price of U.S. crude was over 104 dollars a barrel and the price of Brent crude was over 115 dollars a barrel. Many analysts fear that if the crisis in Libya escalates or if the chaos in the Middle East spreads that we could see the all-time record of 147 dollars a barrel broken by the end of the year. That would be absolutely disastrous for the global economy.
But it isn’t just the chaos in the Middle East that is driving oil prices. The truth is that oil prices have been moving upwards for months. The recent revolutions in the Middle East have only accelerated the trend.
Let’s just hope that the “day of rage” being called for in Saudi Arabia later this month does not turn into a full-blown revolution like we have seen in other Middle Eastern countries. The Saudis keep a pretty tight grip on their people, but at this point anything is possible. A true revolution in Saudi Arabia would send oil prices into unprecedented territory very quickly.
But even without all of the trouble in the Middle East the world was already heading for an oil crunch. The global demand for oil is rising at a very vigorous pace. For example, last year Chinese demand for oil increased by almost 1 million barrels per day. That is absolutely staggering. The Chinese are now buying more new cars every year than Americans are, and so Chinese demand for oil is only going to continue to increase.
Much could be done to increase the global supply of oil, but so far our politicians and the major oil company executives are sitting on their hands. They seem to like the increasing oil prices.
So for now it looks like oil prices will continue to rise and this is going to result in much higher prices at the gas pump.
Already, ABC News is reporting that regular unleaded gasoline is going for $5.29 a gallon at one gas station in Orlando, Florida.
The U.S. economy in particular is vulnerable to rising oil prices because our entire economic system is designed around cheap gasoline. If the price of gas goes up to 5 or 6 dollars a gallon and it stays there it is going to have a catastrophic effect on the U.S. economy.
Just remember what happened back in 2008. The price of oil hit an all-time high of $147 a barrel and then a few months later the entire financial system had a major meltdown.
Well, as the price of oil rises it is going to create a whole lot of imbalances in the global financial system once again.
This is definitely a situation that we should all be watching.
But it is not just the price of oil that could cause a global economic disaster.
The global price of food could potentially be even more concerning. As you read this, there are about 3 billion people around the globe that live on the equivalent of 2 dollars a day or less. Those people cannot afford for food prices to go up much.
But global food prices are rising. According to the United Nations, the global price of food has risen for 8 consecutive months. Last month, the global price of food set a brand new all-time record high. Many are starting to fear that we could actually be in the early stages of a major global food crisis.
The price of just about every major agricultural commodity has been absolutely soaring during the past year….
*The price of corn has doubled over the last six months.
*The commodity price of orange juice has doubled since 2009.
*The price of sugar is the highest it has been in 30 years.
Unfortunately, the production of food in most countries around the world is very highly dependent on oil, so as oil goes up in price this is going to make the food crisis even worse.
Hold on to your hats folks.
Also, as I have written about previously, the world is facing some very serious problems when it comes to water. Due to the greed of the global elite, there is not nearly enough fresh water to go around. The following are some very disturbing facts about the global water situation….
*According to USAID, one-third of all humans will face severe or chronic water shortages by the year 2025.
*Of the 60 million people added to the world’s cities every year, the vast majority of them live in impoverished slums and shanty-towns with no sanitation facilities whatsoever.
*In northern China, the water table is dropping one meter per year due to overpumping.
These days, one of the trendy things to do is to call water “the oil of the 21st century”, but unfortunately that is not a completely inaccurate statement. Fresh, clean water is something that we all need, but right now world supplies are getting tight.
Our politicians and the global elite could be doing something about this if they really wanted to, but right now they seem perfectly fine with what is happening.
On top of everything else, the sovereign debt crisis is worse than it has ever been before.
All of the major global central banks have been feverishly printing money in an attempt to “paper over” this crisis, but it is not going to work.
Most Americans don’t realize it, but right now the continent of Europe is a financial basket case. Greece and Ireland would have imploded already if they had not been bailed out, and now Portugal is on the verge of collapse. The interest rate on Portugal’s 10-year notes has now been above 7% for about 3 weeks, and most analysts believe that it is only a matter of time before they are forced to accept a bailout.
Sadly, if the entire global economy experiences a slowdown because of rising oil prices, we could see half a dozen European nations default on their debts if they are not bailed out.
For now the Germans seem fine with bailing out the weak sisters that are all around them, but that isn’t going to last forever.
A day or reckoning is coming for Europe, and when it arrives the reverberations are going to be felt all across the face of the earth. The euro is on very shaky ground already, and whether or not it can survive the coming crisis is an open question.
Of course there are some very serious concerns about Asia as well. The national debt of Japan is now well over 200% of GDP and nobody seems to have a solution for their problems. Up to this point, Japan has been able to borrow massive amounts of money at extremely low interest rates from their own people, but that isn’t going to last forever either.
As I have written about so many times before, the biggest debt problem of all is the United States. Barack Obama is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars. It is expected that the total U.S. national debt will surpass the 15 trillion dollar mark by the end of the fiscal year.
Shouldn’t we have some sort of celebration when that happens?
15 trillion dollars is quite an achievement.
Most Americans cannot even conceive of a debt that large. If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
But the United States is not alone. The truth is that wherever you look, there is a sea of red ink covering the planet.
The current global financial system is entirely based on debt. If the total amount of debt does not continually expand, the system will crash. If somehow a way was found to keep this system going perpetually (which is impossible), the size of global debt would keep on increasing infinitely.
Now the World Economic Forum says that we need to grow the total amount of debt by another 100 trillion dollars over the next ten years to “support” the anticipated amount of “economic growth” around the world that they expect to see.
The entire global financial system is a gigantic Ponzi scheme. It is designed to keep everyone enslaved to perpetual debt. If at some point the debt spiral gets interrupted in some significant way, we are going to witness an economic disaster that is going to make what happened in 2008 look like a Sunday picnic.
The more research that one does on the current global economic situation, the more clear it becomes that we are absolutely doomed.
When Barack Obama, the Federal Reserve and the mainstream media tell us that we are in the middle of an economic recovery, is that supposed to be some kind of sick joke? According to newly released numbers, over 44 million Americans are now on food stamps. That is a new all-time record and that number is 13.1% higher than it was just one year ago. So how many Americans have to go on food stamps before we can all finally agree that the U.S. economy is dying? 50 million? 60 million? All of us? The food stamp program is the modern equivalent of the old bread lines. More than one out of every seven Americans now depends on the federal government for food. Oh, but haven’t you heard? The economy is showing dramatic improvement. Corporate profits are up. The stock market is soaring. Happy days are here again.
It just seems inconceivable that anyone can claim that the economy is improving when the number of Americans on food stamps continues to set a brand new record every single month. But the food stamp program is not the only indicator that the economy is still having massive problems. The following are 10 more reasons why the U.S. economy is simply not getting any better….
#1 Some recent statistics actually indicate that the number of unemployed Americans is still going up. According to Gallup, unemployment in the United States rose to 10.3% at the end of February. That is the highest number Gallup has reported since early last year.
#2 The housing industry is still a complete and total disaster. In fact, new home sales in the U.S. in January were 11.2% lower than they were in December. Not only that, the number of new home sales in January was 18.6% lower than the number of new home sales in January 2010. That is not a sign of improvement.
#3 There wouldn’t even be much of a housing industry at all at this point if it was not for the U.S. government. Right now the U.S. government is either writing or guaranteeing well over 90 percent of all mortgages in the United States. So what would the housing market look like in 2011 if the government was not in the picture?
#4 In 2010, more than a million U.S. families lost their homes to foreclosure for the first time ever, and that number is expected to go even higher in 2011.
#5 Due to rampant economic decay and record numbers of foreclosures there are areas in most of our major cities that now look like “war zones”. For example, the Huffington Post is reporting that there are now approximately 15,000 vacant buildings in the city of Chicago and there are approximately 60,000 vacant houses and apartments in the city of Las Vegas.
#6 According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier. This represented 8.5% of median monthly income. So what is going to happen when gas prices go even higher? Sadly, the average price of gasoline in the U.S. has risen another 4 cents since yesterday and it is likely to go much higher from here.
#7 The U.S. trade deficit continues to grow. The trade deficit was about 33 percent larger in 2010 than it was in 2009, and the 2011 trade deficit is expected to be even bigger.
#8 The CredAbility Consumer Distress Index, which measures the average financial condition of U.S. households, declined in every single quarter in 2010.
#9 The number of Americans that have become so discouraged that they have given up searching for work completely now stands at an all-time high.
#10 The U.S. national debt is growing faster than ever. The Obama administration is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars. It is hard to even imagine how much money that is. If you went out today and started spending one dollar every single second, it would take you over 31,000 years to spend one trillion dollars. Long ago the U.S. government should have been getting these deficits under control, but instead they are just getting even larger.
So in light of the statistics above, can anyone really claim that we are in the middle of an economic recovery?
The truth is that there is no sign that any of the long-term trends that are destroying the U.S. economy are even slowing down.
Millions of jobs continue to be shipped overseas.
The U.S. dollar continues to be devalued.
The federal government continues to go into more debt.
State and local governments continue to go into more debt.
Our trade deficit continues to grow.
Our cities continue to be transformed into wastelands as they are being systematically deindustrialized.
The number of Americans that are dependent on the government continues to soar.
The U.S. middle class continues to shrink.
I know that I harp on these themes over and over, but it is vitally important that everyone understands that the mainstream media is lying to us.
The U.S. economy is dying a very painful death and there is no hope on the horizon.
Things are not going to be getting better. Well, they may get a bit better for the boys down on Wall Street, but for the rest of us our standards of living are going to continue to decline.
The best days for the U.S. economy are already behind us. What lies ahead is a whole lot of pain.
We are going to pay the price for decades of corruption and incompetence.
An economic collapse is coming and you had better get ready.
Did anyone out there anticipate that 2011 would be such a wild year? The year is barely over two months old and we have already seen multiple civil wars erupt, rumors of more wars all over the mainstream media (potentially even including the United States), riots and revolutions breaking out all over the globe, oil prices soaring into the stratosphere and chaos on global financial markets. So why is all of this happening? Is all of this one big coincidence or is there a reason why we are witnessing such global chaos right now? Is it just coincidence that revolutions have broken out in over a dozen countries in the Middle East all at the same time? Is it just a coincidence that global prices for oil, food and precious metals are all skyrocketing? Is it just a coincidence that world financial markets suddenly seem more vulnerable than at any time since 2008? Looking at what is going on in the world right now, it is very tempting to use the phrase “a perfect storm” to describe it. Unfortunately, this “perfect storm” is very likely to plunge the global economy into yet another financial collapse if it continues to get even worse.
After decades of relative stability, the Middle East has erupted in chaos in 2011. In the post-World War 2 era, we have never seen a time when there have been so many major internal revolutions all at once. All of these simultaneous revolutions are driving the price of oil rapidly upwards.
The price of West Texas crude is now over $102 a barrel and the price of Brent crude is now over $116 a barrel and if the chaos in the Middle East continues those numbers are likely to go a lot higher.
Meanwhile, gold has set a new all-time record this week and the price of silver is absolutely exploding.
In fact, just about every kind of “hard asset” that you can possibly name is going up in price. Investors don’t like all of this instability and they are looking for safe places to put their money.
Unfortunately, the global situation looks like it may become even more heated.
The calls for military action against Libya are rapidly reaching a crescendo.
The U.S. Senate has unanimously passed a resolution calling for the UN Security Council to impose a no-fly zone over Libya, and many members of Congress are openly declaring that the U.S. and NATO should take unilateral action no matter what the UN ultimately decides.
But implementing a no-fly zone is not a simple thing. It is not just a matter of telling Libya not to fly their planes. Rather, imposing a no-fly zone over Libya would constitute a major military operation.
“Let’s just call a spade a spade. A no-fly zone begins with an attack on Libya to destroy the air defenses … and then you can fly planes around the country and not worry about our guys being shot down.”
You would have to remove the air defense capability in order to establish the no-fly zone so it – no illusions here, it would be a military operation.
Essentially, imposing a no-fly zone over Libya would be an act of war.
Most of our representatives in Washington D.C. seem to be quite ready to go to war in Libya, but it is another story entirely when it comes to the American people. A recent Rasmussen poll found that a whopping 67 percent of Americans do not want the U.S. to get more involved in the unrest going on in Arab countries and only 17 percent of Americans do want the U.S. to get more directly involved.
But the American people don’t get to decide whether we go to war or not. Our leaders in Washington D.C. do. The USS Enterprise and other major warships are on their way to Libya, and U.S. forces throughout the Mediterranean are on high alert.
So could the U.S. really get involved in another war in the Middle East?
Well, if the U.S. and NATO choose to get involved they will do it without the approval of the rest of the world.
On Wednesday, the Arab League issued a statement which specifically rejected “any foreign interference within Libya on behalf of the opposition”.
Not only that, but any military action by the UN will most likely be blocked by both China and Russia.
“If someone in Washington is seeking a blitzkrieg in Libya, it is a serious mistake because any use of military force outside the NATO responsibility zone will be considered a violation of international law.”
But Libya is far from the only crisis point in the Middle East.
In fact, a much larger problem may be brewing in Saudi Arabia.
On Facebook, a “Day of Rage” is being hyped for March 11th. Other dates being promoted for “revolution” in Saudi Arabia include March 20th and March 21st.
But if Saudi Arabia sees the same kind of chaos that we have seen in other countries in the Middle East there is no telling how high the price of oil could go.
Could we see $125 oil?
Could we see $150 oil?
Could we see $200 oil?
Saudi Arabia exports more oil than anyone else in the world, so if their oil production gets interrupted it is going to have a dramatic impact on the global economy.
For decades, the entire globe has been blessed with very cheap oil and this has resulted in a massive economic boom.
But times are changing.
The economic situation over in Europe is already deteriorating and any additional bad news could plunge that entire continent into a major crisis. A recently released report from Ernst & Young is warning that if oil goes up to 150 dollars a barrel and it stays there, “at least” one eurozone country will default and the entire eurozone will be plunged back into recession.
A much higher price for oil would obviously not be good for the U.S. economy either. Do you remember what happened back in 2008? The price of oil hit a record high in June and then the entire financial system came unglued just a few months later.
But if we see a repeat of 2008 it may be a lot worse this time because the global financial system is now more unstable than ever.
The truth is that the entire world is still trying to recover from the last financial crisis. The Federal Reserve is pumping massive quantities of dollars into the U.S. economy in an attempt to stimulate it back to life, but so far it is not working too well.
The rest of the world does not appreciate all of this “money printing” and the inflation that this is causing is beginning to create massive imbalances on global financial markets.
The world is starting to lose faith in the U.S. dollar. Right now, approximately 85% of all foreign-exchange transactions in the world involve the U.S. dollar. Not only that, 60% of all the currency reserves in the world are in U.S. dollars. With the U.S. dollar rapidly becoming less stable, many are now wondering if it should continue to be used as the reserve currency of the world.
The truth is that if the U.S. dollar falls, it is going to create a tremendous amount of financial chaos in almost every nation on the globe.
Unfortunately, as I have written about so many times previously, the U.S. economy is dying. The U.S. government is absolutely drowning in debt, and leaders all over the planet are calling for the establishment of a new global reserve currency.
The days of the United States being the “economic engine of the planet” are rapidly coming to an end.
The U.S. economy is not ever going to fully “recover”. In fact, the U.S. economy is basically “running on empty” at this point as Gerald Celente recently noted during an interview on RT television….
The entire U.S. economy was designed to operate on massive amounts of very cheap oil. Americans do more driving than anyone else in the world. Many of us are so lazy that we won’t even walk to a store if it is on the other side of the parking lot.
If oil hits record levels in 2011, it is going to be a massive shock to the U.S. economic system. Any hopes for an “economic recovery” will be completely dashed.
In fact, if one wanted to “take down” the U.S. economy, driving up the price of oil would be a perfect way to do it.
And if one wanted to drive up the price of oil, a perfect way to do that would be to create all kinds of chaos in the Middle East.
So is all of this craziness that we are seeing in 2011 just a big coincidence or is there a reason why all of this is happening?
Please feel free to leave a comment with your opinion on the matter below….
From now on, whenever you hear the term “the global economy” you should immediately equate it with the destruction of the U.S. middle class. Over the past several decades, the American economy has been slowly but surely merged into the emerging one world economic system. Unfortunately for the middle class, much of the rest of the world does not have the same minimum wage laws and worker protections that we do. Therefore, the massive global corporations that now dominate our economy are able to pay workers in other countries slave labor wages and import the products that they make into the United States to compete with products made by “expensive” American workers. This has resulted in a mass exodus of manufacturing facilities and jobs from the United States.
But without good, high paying jobs the U.S. middle class cannot continue to be the U.S middle class. The only thing that the vast majority of Americans have to offer in the economic marketplace is their labor. Sadly, that labor has now been dramatically devalued. American workers now must directly compete for jobs with millions upon millions of workers on the other side of the world that toil away for 15 hours a day at slave labor wages. This is causing jobs to leave the United States at an almost unbelievable rate, and it is putting tremendous downward pressure on the wages of millions of jobs that are still in the United States.
So when you hear terms such as “globalization” and “the global economy”, it is important to keep in mind that those are code words for the emerging one world economic system that is systematically wiping out the U.S. middle class.
A one world labor pool means that the standard of living for the U.S. middle class will continue falling toward the standard of living in the third world.
We keep hearing about how the U.S. economy is being transformed from a “manufacturing economy” into a “service economy”. But “service jobs” are generally much lower paying than “manufacturing jobs”. The number of good paying “middle class jobs” in the United States is rapidly decreasing. So how can the U.S. middle class survive in such an environment?
What makes things even worse for manufacturers in the United States is that other nations often impose a “value-added tax” of 20 percent or more on U.S. goods entering their shores and yet most of the time we do not reciprocate with similar taxes.
But whenever someone mentions how incredibly unfair and unbalanced our trade agreements with other nations are, they are immediately labeled as a “protectionist”.
Well, someone should be looking out for U.S. interests when it comes to trade, because the current state of the global economy is ripping the U.S. middle class to shreds.
Right now, the United States consumes far more wealth than it produces. This nation buys much, much more from the rest of the world than they buy from us. This is called a “trade deficit”, and it is one of the most important economic statistics. The U.S. runs a massive trade deficit every single year, and it is wiping out our national wealth, it is destroying our surviving industries and it is absolutely shredding middle class America.
We cannot allow tens of thousands of factories to continue to leave the United States. We cannot allow millions of jobs to continue to be “outsourced” and “offshored”. We cannot allow tens of billions of dollars of our national wealth to continue to be transferred into foreign hands every single month.
The truth is that the global economy is bad for America. The following are 23 facts which prove that globalism is pushing the standard of living of the middle class down to third world levels….
#1 From December 2000 to December 2010, the U.S. ran a total trade deficit of 6.1 trillion dollars.
#3 The U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.
#4 The U.S. economy is rapidly trading high wage jobs for low wage jobs. According to a new report from the National Employment Law Project, higher wage industries accounted for 40 percent of the job losses over the past 12 months but only 14 percent of the job growth. Lower wage industries accounted for just 23 percent of the job losses over the past 12 months and a whopping 49 percent of the job growth.
#5Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.
#6 In Germany, exports account for approximately 40 percent of GDP. In China, exports account for approximately 30 percent of GDP. In the United States, exports account for approximately 13 percent of GDP.
#7 Do you remember when the United States was the dominant manufacturer of automobiles and trucks on the globe? Well, in 2010 the U.S. ran a trade deficit in automobiles, trucks and parts of $110 billion.
#8 In 2010, South Korea exported 12 times as many automobiles, trucks and parts to us as we exported to them.
#9 The U.S. economy now has 10 percent fewer “middle class jobs” than it did just ten years ago.
#10 The United States currently has 7.7 millionfewer payroll jobs than it did back in December 2007.
#11 Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs.
#12 In 2002, the United States had a trade deficit in “advanced technology products” of $16 billion with the rest of the world. In 2010, that number skyrocketed to $82 billion.
#13 The United States now spends more than 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.
#14 In China, working conditions are so bad that large numbers of “employees” regularly try to commit suicide. One major employer, Foxconn, has even gone so far as to install “anti-suicide nets” in an attempt to keep their employees from jumping off of their buildings.
#15 Wages for workers in China are incredibly low. For example, one facility in the city of Longhua that makes iPods employs approximately 200,000 workers. These workers put in endless 15-hour days but they only make about $50 per month.
#16 In Bangladesh, manufacturing workers toil in absolutely horrific conditions and make an average of about $38 per month.
#17 In Vietnam, teenage workers often work seven days a week for as little as 6 cents an hour making promotional Disney toys for McDonald’s.
#18 Since 2001, over 42,000 manufacturing facilities in the United States have been closed.
#19 Half of all American workers now earn $505 or less per week.
#20 In the United States today, 6.2 million Americans have been out of work for 6 months of longer.
#218.4 million Americans are currently working part-time jobs for “economic reasons”. These jobs are mostly very low paying service jobs.
#22 When you adjust wages for inflation, middle class workers in the United States make less money today than they did back in 1971.
#23 According to Willem Buiter, the chief economist at Citigroup, China will be the largest economy in the world by the year 2020, and India will surpass China by the year 2050.
Those that promote “free trade” can never explain how the U.S. middle class is going to continue to have plenty of jobs in the new global economy.
By merging our labor pool with the rest of the world, we have also merged our standard of living with the rest of the world. High unemployment is rapidly becoming “the new normal” in America, and wages are going to continue to decline in many, many industries.
Already, there are quite a few formerly great U.S. cities (such as Detroit) that are beginning to resemble third world hellholes. If something is not done about our massive trade imbalance, even more cities are going to follow Detroit into oblivion.
Unfortunately, most of our politicians continue to insist that globalism is good for our society. They continue to insist that we should not be worried that jobs formerly done by middle class American workers are now being done by slave laborers on the other side of the globe. They continue to insist that having 43 million Americans on food stamps is a temporary thing and that soon our economy will be better than ever.
Well, it is time to stop listening to the politicians that are promoting “the global economy”. They are lying to us.
Globalism is great for nations such as China and it is helping multinational corporations make huge profits, but for the U.S. middle class it is an economic death sentence.
If you want an America where there are less jobs, where more Americans are on food stamps and other anti-poverty programs and where our cities continue to be transformed into deindustrialized hellholes, then you should strongly support the emerging global economy.
But if you care about the standard of living of the U.S. middle class and you want for there to be some kind of viable economic future for your children and your grandchildren then you had better start caring about these issues and doing something about them.
Most Americans believe that we still live in a capitalist system and that free markets primarily determine the growth and development of our economy. But is that really the case? No, sadly it is not. The truth is that the U.S. Federal Reserve does a tremendous amount of central economic planning. So what makes the central economic planning that the Federal Reserve does different from the central economic planning that communist China does? Yes, in China it is the government that does the central planning and in the United States it is a private central bank that does the central planning, but other than that are there any huge differences? And if our economy is centrally planned, then how can we continue to claim that we still have a free market capitalist system?
Good Economic Numbers? Don’t Be Fooled By The Financial Sugar High
Many in the mainstream media were extremely excited when the U.S. Bureau of Labor Statistics announced that the U.S. unemployment rate declined to 8.8% in March. U.S. stocks soared as investors enthusiastically welcomed the news. But should we all really be jumping up and down over this?
The truth is that some other measures show that the unemployment situation in the United States is becoming worse.
According to Gallup, the number of Americans that are either unemployed or working part-time but desiring full-time work actually rose from 19.8 percent in February to 20.3 percent in March.
So let us not get too excited about the employment situation. Yes, unemployment is not spinning wildly out of control at the moment and that is good news.
However, when you look at the larger picture things look rather grim.
What the U.S. government and the Federal Reserve have been doing is that they have been mortgaging our future big time for short-term economic gain.
This year alone, the U.S. government is going to run an all-time record budget deficit of approximately 1.6 trillion dollars. By borrowing 1.6 trillion dollars that we do not have and spending it into the system, it does stimulate the economy.
There are some members of Congress that would like to implement substantial budget cuts, but most members of Congress fear doing too much budget cutting right now because it would “harm the economy”.
And you know what? They are right – budget cuts would harm our economy in the short-term.
But continuing to pile up all of this debt is setting the stage for an absolute economic nightmare in the mid to long term.
We have lived far, far beyond our means for decades, and most of our politicians are acting like this can go forever.
But tell me, does anyone out there actually believe that we can keep expanding the national debt like this indefinitely?….
Yes, government spending does stimulate the economy. The Keynesians are right about that.
However, by accumulating a national debt that is spinning wildly out of control, we have completely destroyed the economic future of this nation.
The Federal Reserve has been very busy trying to stimulate the U.S. economy as well.
Over the past couple of years, the Fed has been injecting massive amounts of money into the financial system. The theory is that the financial system will loan this money out to the American people and that will stimulate the economy and create more jobs.
Well, that may very well be true to a certain extent in the short-term, but as I wrote about yesterday, in the long-term this is going to create a substantial amount of inflation.
The chart posted below cannot be emphasized enough. It shows how the Fed has dramatically increased the size of the adjusted monetary base since mid-2008….
Yes, all of this new money will stimulate economic activity, but it is completely and totally ludicrous for Ben Bernanke to attempt to deny that this is also going to cause significant inflation.
So when taking a look at the economic numbers, it is absolutely critical to keep in mind that our “authorities” have pushed all the chips to the middle of the table in an all-out attempt to stimulate the economy in the short-term.
The small economic “sugar rush” that we are experiencing right now is all we have gotten out of it so far.
Sadly, this is about the best that the U.S. economy is going to do from now on. Things really are not going to get much better than this.
Yes, unemployment numbers might come down a little more, but pretty soon inflation is going to really kick in and that is going to have a really negative impact on tens of millions of Americans.
First of all, when inflation really starts taking off it is going to be absolutely devastating for those on fixed incomes. Many of them will be completely wiped out.
Secondly, those that do have jobs are going to find that their incomes are not nearly keeping up with inflation.
In fact, we are seeing this starting to happen already.
According to the Bureau of Labor Statistics, U.S. workers in the private sector only saw their pay increase by 2.1% during 2010.
So did what we are paying for food and gas only go up 2.1% in 2010?
Of course not.
So are things getting better so far in 2011?
No.
One of the depressing things about the new numbers released by U.S. Bureau of Labor Statistics was that wages for U.S. workers did not increase in March.
According to the BLS, the average U.S. worker earned $22.87 an hour during the month of March, which is exactly the same number we saw in February.
So inflation is going up and wages are staying flat.
That means that American family budgets are going to be squeezed even more.
In addition, the numbers from the BLS show that it is still incredibly difficult to get a job. In fact, the average length of unemployment in the U.S. is now an all-time record 39 weeks.
So is anyone doing well right now?
Well, yes – as I have written about previously, those at the very top of the food chain are doing quite well these days.
According to USA Today, median CEO pay soared 27 percent during 2010. For the year, median CEO pay was a stunning $9.0 million.
Wouldn’t you like to be making 9 million dollars a year?
According a recent report by CNN, the 25 highest-paid hedge fund managers in the United States combined to bring in an astounding $22.07 billion in income during 2010.
Wouldn’t you like to get just a small piece of that?
All of the measures that the government and the Federal Reserve are using to stimulate the economy are causing tremendous distortions in our financial system.
Wall Street is absolutely swimming in cash right now. There are some people that are making obscene amounts of money.
But ultimately the party is going to end for all of us.
It has been incredibly foolish for the government and the Fed to go “all in” in a desperate attempt to boost short-term economic numbers.
Our long-term economic future is completely gone. Our financial system is heading for a horrible collapse. It is not a matter of “if” it will happen, but rather “when” it will happen.
You better buckle up and get ready.