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 If you still have a job and you can put food on the table and you still have a warm house to come home to, then you should consider yourself to be very fortunate. The truth is that every single month hundreds of thousands more Americans fall out of the middle class and into poverty. The statistics that you are about to read are incredibly sobering. Household incomes are down from coast to coast. Enrollment in government anti-poverty programs sets new records month after month after month. Home ownership is down, personal bankruptcies are way up and there are not nearly enough jobs to go around. Meanwhile, the price of basics such as food and health care continue to skyrocket. Don’t be fooled by a rising stock market or by record bonuses on Wall Street. The U.S. economy is not getting better. After World War II, the great American economic machine built the largest and most vigorous middle class in the history of the world, but now America’s middle class is disintegrating at a blinding pace.
Most of those who write about the plight of the American middle class believe that things can be turned around and that the middle class will eventually be stronger than it ever has been. But unfortunately, that is just not the case. As a society, we have lived far, far beyond our means for decades. Now the bills are coming due and none of our leaders seem to know what to do.
Meanwhile, the U.S. economy is being rapidly assimilated into the emerging one world economy. Middle class American workers now find themselves in direct competition for jobs with the cheapest labor on the other side of the globe. Of course many multinational corporations have taken advantage of this by moving factories and jobs to countries like China where blue collar workers make about a dollar an hour. This has helped raise the standard of living for workers in those nations by a nominal amount, but it has been absolutely devastating for the standard of living of America’s middle class.
So what does all of this mean?
It means that the U.S. economy is headed for collapse and middle class Americans are in for some really, really hard times.
The following are 27 signs that the standard of living for America’s middle class is dropping like a rock….
#1 Household spending for the middle fifth of all U.S. income earners was down 3.5% in 2009. That was the steepest one year decline since records began being kept back in 1984.
#2 Median household income in the United States fell from $51,726 in 2008 to $50,221 in 2009.
#3 According to one new report, in 2009 residents of New York state experienced their first full-year decline in income in more than 70 years.
#4 Of the 52 largest metro areas in the United States, only the city of San Antonio did not see a decline in median household income in 2009.
#5 Home ownership in the United States declined for the third year in a row in 2009.
#6 In 2009, approximately 4 million Americans fell out of the middle class and now live below the federal poverty line.
#7 The number of Americans enrolled in the food stamp program has set a new all-time record for 20 consecutive months.
#8 In July (the last month for which data is available), 41.8 million Americans were on food stamps.
#9 The number of Americans in the food stamp program skyrocketed more than 55 percent between December 2007 and July 2010.
#10 In 2009, more than 48 million Americans were enrolled in the Medicaid program.
#11 One out of every six Americans is now enrolled in at least one anti-poverty program run by the U.S. government.
#12 According to one recent study, approximately 21 percent of all children in the United States are living below the poverty line in 2010.
#13 According to the Cato Institute, anti-poverty spending by the U.S. government has increased 89 percent over the past decade.
#14 The cost of health care increased a staggering 9.6% for all U.S. households from 2007 to 2009.
#15 It turns out that only the top 5 percent of all U.S. households have earned enough additional income to match the rise in housing costs since 1975.
#16 35 percent of all U.S. households now live on $35,000 or less.
#17 New York state Comptroller Thomas DiNapoli says that Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
#18 According to a poll taken in 2009, 61 percent of Americans “always or usually” live paycheck to paycheck. That was up substantially from 49 percent in 2008 and 43 percent in 2007.
#19 Today, 28% of all American households have at least one member that is searching for a full-time job.
#20 Nearly 10 million Americans now receive unemployment insurance, which is almost four times as many that were receiving it back in 2007.
#21 A recent Pew Research survey found that 55 percent of the U.S. labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the recession began.
#22 In 2009, 43.6 million Americans were living in poverty. Sadly, the number of Americans living in poverty has increased for three consecutive years, and the 43.6 million poor Americans in 2009 was the highest number that the U.S. Census Bureau has ever recorded in 51 years of record-keeping.
#23 A staggering 25 percent of all American adults now have a credit score below 599.
#24 It is estimated that nearly a third of all Americans cannot qualify for a mortgage because of low credit scores.
#25 For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all American households put together.
#26 Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a stunning 32 percent increase over 2008.
#27 According to a new report by the U.S. Census Bureau, the bottom fifth of all U.S. income earners brought in just 3.4 percent of all income in 2009 while the top fifth brought in a whopping 49.4 percent of all income.
So is there any hope that things will turn around soon?
No, not really.
At this point, even some of the top economic authorities in the nation are admitting that we are headed for very difficult times.
Goldman Sachs recently announced that the U.S. economy is likely to be either “fairly bad” or “very bad” over the next 6 to 9 months.
Not only that, but Federal Reserve Chairman Ben Bernanke now says that the U.S. economy is in a situation that is dire and “unsustainable”.
Not that Goldman Sachs or Fed Chairman Ben Bernanke should be trusted when it comes to the economy.
When it comes to the problems we are facing, the truth can be found in the long-term trends. If you have not done so already, please read “11 Long-Term Trends That Are Absolutely Destroying The U.S. Economy“. It will open your eyes to the true horrors that our economy is now facing.
But statistics alone do not tell the real story.
Sometimes what gets lost in the endless economic statistics is the very real pain of the millions of Americans who are trying to live through this. The following story from the Unemployed Friends website is from a woman named Leetah who is desperately hoping to be able to get through this upcoming winter….
The place I live in right now has no jobs and no places to live. My fiance, Lloyd, and I have been looking for anything but he lost his job from McDonald’s and the factories (the only jobs to make a living off of) consider him an insurance liability. I can’t get hired to a factory because of I was fired from our major factory for attendance (I had to miss 3 days of work because I was sick). So we are moving to the Edmond/OKC region where we are hoping to find a job and a place with running water and heating. We’ve spent the last few years without heat and running water and so having a place with water and heat would be heaven.
Winter is coming up fast and I am so afraid. Last winter we almost died from the cold and now the thought of cold makes my throat close up and my heart pound. But it isn’t just ourselves we are looking out for, we have our dog too. Our wonderful APBT Maggie who is 2-years-old and has been with us since she was 5-months-old. She’s our baby girl and we can’t lose her. We almost lost her to the cold too and it scared me so much. We are going to be living in our car soon with our dog.
I am hoping to be able to keep our food stamps in the new city so we can still eat. I have already applied for ten+ jobs and nothing yet but I am keeping my hopes up. Hopefully it will get easier to find a job once we get there. Then we just have to save up and then we can afford an apartment. Now finding an apartment with my awesome dog is another story.
Please say a prayer for those who are out of work and on the verge of being forced out on the street.
You never know, you might be next.
 Are you ready for a currency war? Well, buckle up, because things are about to get interesting. This week Japan fired what is perhaps the opening salvo in a new round of currency wars by publicly intervening in the foreign exchange market for the first time since 2004. Japan’s bold 12 billion dollar move to push down the value of the yen made headlines all over the world. Japan’s economy is highly dependent on exports and the Japanese government was becoming increasingly alarmed by the recent surge in the value of the yen. A stronger yen makes Japanese exports more expensive for other nations and thus would harm Japanese industry. But Japan is not the only nation that is ready to go to battle over currency rates. The governments of the U.S. and China continue to exchange increasingly heated rhetoric regarding currency policy. In Europe, there is growing sentiment that the euro needs to be devalued in order to help European exports become more competitive. In addition, exporters all over the world are already loudly complaining about the possibility that the Federal Reserve is about to unleash another round of quantitative easing. Virtually all major exporting nations want the value of the U.S. dollar to remain high so that they can keep flooding us with lots of cheap goods. The sad reality is that our current system of globalized trade rewards exporting nations that have weak currencies, and many nations have now shown that they are willing to take the gloves off to make certain that their national currencies do not appreciate in value by too much.
Some nations have been involved in open currency manipulation for some time now. For example, Singapore is well known for intervening in the foreign exchange market in order to benefit exporters. Also, the Swiss National Bank experienced losses equivalent to about 15 billion dollars trying to stop the rapid rise of the Swiss franc earlier this year.
But as we race toward the end of 2010, currency manipulation is becoming a major issue on the world stage.
Rumors that the Federal Reserve is considering a substantial new round of quantitative easing is already causing many major exporting nations around the world to howl in outrage.
Why?
Well, quantitative easing by the Federal Reserve could put substantial downward pressure on the value of the dollar and that would make exports significantly more expensive in the United States. The reality is that even a relatively small change in the value of the U.S. dollar can have a major impact on exporters.
But what could really set off a massive currency war is the ongoing dispute between the U.S. and China.
For years, China has kept the value of their currency artificially low. Even though China has made a few small moves toward a more free-floating currency policy, at this point China’s currency is still pretty much pegged to the U.S. dollar. It is estimated that the Chinese government is keeping China’s currency at a value about 40 percent lower than what it should be. This is essentially a de facto subsidy to China’s exporters.
This has enabled China to flood the United States with cheap goods and it is killing entire industries in the United States. Americans have loved rushing out to Wal-Mart to get super low prices on all kinds of stuff, but in the process we have slowly but surely been shipping our manufacturing base and our standard of living over to China.
In recent years both the Bush administration and the Obama administration have been whining about this currency manipulation by China, but both administrations have stopped short of taking any real action.
But are there now signs that the Obama administration is going to get serious and start a currency war?
Well, last week Barack Obama did send the head of his national council of economic advisers, Larry Summers, to Beijing to discuss currency issues.
But what can we do other than whine at this point?
Are we willing to start a trade war?
Considering the fact that China holds nearly a trillion dollars worth of U.S. Treasuries, that probably would not go so well for us.
Even though China’s currency manipulation is absolutely raping the U.S. economy, China has so much leverage over us at this point that it isn’t even funny.
For example, China has almost a complete and total monopoly on rare earth elements. If China totally cut off the supply of rare earth elements, we would have no hybrid car batteries, flat screen televisions, cell phones or iPods. Not only that, but rare earth elements are used by the U.S. military in radar systems, missile-guidance systems, satellites and aircraft electronics.
But something has to be done. Essentially we are caught between a rock and a hard place.
Today, the United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States.
Last month, the monthly trade deficit with China was approximately 26 billion dollars. For the year, the trade deficit with China will be somewhere in the neighborhood of 300 billion dollars or so. The transfer of wealth to China that represents is absolutely mind blowing.
The U.S. economy is getting poorer and the Chinese economy is getting richer each and every month.
We are in decline and China is on the rise. In fact, one prominent economist is projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.
This would not have ever happened if we had not put up with China’s open and blatant currency manipulation all this time.
But now they have us over a barrel and standing up to China would be incredibly painful for the U.S. economy in the short-term.
So will we actually see a currency war break out soon?
Well, it seems almost a certainly that countries throughout the world will continue to manipulate their currencies in order to gain a competitive advantage, but if you are waiting for the Obama administration to truly stand up to China you are probably going to be waiting for a very, very long time.
 Most Americans don’t really care about the economic minutiae that many of us who study the U.S. economy love to pour over. When it comes to the economy, the typical American citizen just wants to be able to get a good job, make a decent living and put bread on the table for the family. For generations, this arrangement has worked out quite well. The U.S. economy has provided large numbers of middle class jobs and the American people have worked hard and have helped this nation prosper like no other. But now people are starting to notice that something has shifted. Millions of people are looking around and are realizing that the jobs that are supposed to be there are not there anymore. The American people are still working hard (and in many cases harder than ever) but all of that hard work is producing fewer and fewer rewards. Often politicians will placate voters by telling them that they are working harder and harder for less and less. That tends to ring true with voters because that is a very accurate description of what so many of them are actually experiencing, but what the politicians don’t tell us is that they are the ones to blame for the situation that we are in. As millions of jobs become obsolete because of technology and millions of other jobs are shipped overseas, our politicians tell us over and over that we can “compete” with anyone and that if we will just go out and get some more education we can make it happen. But those of us who are extremely over-educated know what a fraud that line is. The truth is that there are not nearly enough jobs for all of us no matter how “educated” we are. This is creating a lot of anger and frustration, and now even the IMF is warning that we could see “an explosion of social unrest” if high unemployment persists.
But what can be done? You can’t force large corporations to hire people. The reality is that there are a couple of huge factors that have brought us to this point. First of all, advanced technology means that big corporations need fewer people to do the same amount of work now. Secondly, the globalization of our economy means that U.S. workers have now been merged into a global labor pool where they are in direct competition with workers who are more than happy to make less than a dollar an hour on the other side of the world.
This all means that the labor of American workers is less valuable to global corporations than it ever has been before. Advanced technology and computers have enabled corporations to operate leaner and meaner. If they do need some old-fashioned muscle for certain tasks they can always run out and set up a facility in some third world nation where they can pay people close to slave labor wages and where they don’t have to worry much about taxes, regulations, unions, health benefits or pension plans.
What did you think was going to happen when the United States entered into all of these “free trade” agreements with nations around the world that did not have minimum wage laws?
U.S. corporations are not in existence to provide the American people with jobs. They are in existence to make money. If they can make more money by shipping jobs overseas, then that is exactly what they are going to do.
According to Tax Notes, between 1999 and 2008 employment at the foreign affiliates of U.S. parent companies skyrocketed 30 percent to 10.1 million. During that same time period, U.S. employment at American multinational corporations declined 8 percent to 21.1 million.
Are you starting to see the picture?
Global corporations based in the U.S. have been creating lots of jobs – just not in the United States.
In fact, things only seem to be accelerating.
In 2008 alone, U.S. employment at American multinational corporations fell by 445,500.
In the old days, you could give tax breaks to U.S. firms and that would spur them to do more business and to hire more workers. But today, if U.S. multinationals decide they wish to expand they will just go hire more third world workers and pocket the rest of the profits for themselves.
The reality is that we are facing a very disturbing long-term trend in the United States. Today, over half of all unemployed workers in the United States have been out of work for over six months. In fact, the duration of unemployment in the United States has spiked up to the highest level it has been at since World War II.
This has created a growing subclass of people in the United States who feel that the system has failed them. The anger and the frustration in the country is rising every day. You can almost feel it.
In fact, the IMF is warning that we are at risk of “an explosion of social unrest” due to this unemployment crisis.
The head of the IMF, Dominique Strauss-Kahn, recently made the following statement at an Oslo jobs summit with the International Labour Federation….
“The labour market is in dire straits. The Great Recession has left behind a waste land of unemployment.”
So exactly what is going to turn that around?
Are millions of jobs going to suddenly hop up and return home from overseas?
Is the U.S. government going to suddenly eliminate a whole raft of taxes and regulations and are U.S. workers going to suddenly become much cheaper?
Is the U.S. trade deficit crisis suddenly going to reverse and turn into huge trade surpluses for the United States?
Of course none of those things is going to happen.
America is going to continue to bleed jobs, wages inside the United States are going to continue to be forced down and the standard of living for most Americans is going to continue to deteriorate.
Plus, if the American people don’t have good jobs, they can’t buy homes. In fact, a growing number of Americans are finding out that they can’t even afford the homes they are in right now. CNBC is reporting that the nation’s banks repossessed a record number of homes in August.
But for many Americans, a foreclosure is just the beginning of their problems. People are falling out of the middle class at an alarming rate. Approximately 45 million Americans were living in poverty during 2009. That is an absolutely astounding figure.
The American people are getting mad and faith in the economy is plummeting. According to Gallup, confidence in the economy is way down compared to to the same period last year.
So what is going to happen when (not if) things get even worse?
Well, some investors are already anticipating rough times ahead and are flocking to commodities. The price of gold soared to a record intra-day high of $1,276.50 an ounce on Tuesday, and the price of gold and other commodities will probably continue to climb as economies around the world continue to destabilize.
These are very, very difficult times that we are moving into. There are not going to be nearly enough jobs for everyone. People you know are going to be unemployed. People you know are going to lose their homes. People you know might even end up living on the streets.
Just hope that you don’t end up being one of them.
 In 2010, education has been so “dumbed down” in America that most Americans don’t even know what the WTO is, and even fewer understand why the WTO is important. The truth is that the World Trade Organization is essentially a global government for world trade. It is a “contract” that severely restricts the ability of member nations to direct their own economies and set their own trade policies. The United Nations is perhaps the only international organization that has more power than the WTO. It was created on January 1st, 1995 as a replacement for GATT (the General Agreement on Tariffs and Trade). Today, 153 nations representing more than 97% of total world trade are members of the WTO. It has been largely responsible for the explosion in world trade that we have witnessed over the past several decades. In fact, world trade is now over 15 times larger than it was 50 years ago. But is this a good thing?
No, it is not.
The following are 10 reasons why the World Trade Organization is bad for America…..
1 – The WTO is not accountable to the American people or to any other voters around the globe. It is a sprawling bureaucracy that wields an almost unbelievable amount of power that is completely unchecked by democratic processes. The American people could try to elect a large number of politicians who are in favor of pulling the United States out of the WTO, but considering the fact that both major political parties are very much pro-WTO at this point, that is simply not going to happen.
2 – The WTO acts as the legislature, the executive and the judiciary in matters of world trade. The WTO has the authority to impose punishments on member nations, and it has not been shy about exercising this authority. In essence, the WTO is the judge, the jury and the executioner and if anyone does not like this it is too bad for them.
3 – Many of the WTO regulations were authored word for word by the big global predator corporations that now dominate the world economy. It is an open secret that the WTO is dominated by international bankers, large international corporations and the most developed nations. Whenever new negotiations are conducted, it almost always seems as though it is the “sharks” that end up winning in the end.
4 – Any nation that attempts to protect itself against the negative effects of globalism and free trade is quickly reprimanded by the WTO. In essence, the WTO is the enforcement arm for the powerful interests who are determined to merge us all into a one world economy.
5 – The WTO allows countries to sue each other. This has been primarily used by the wealthy countries to push around the smaller, less developed nations.
6 – The WTO allows global corporations to sue countries. Forget about sovereign immunity in matters governed by the WTO. Under the WTO, the monolithic corporations who benefit the most from free trade can easily push around the smallest and least developed nations.
7 – The WTO is widening the gap between rich and poor. Under the globalized system of free trade we are all living under, all wealth is slowly but surely being transferred into the hands of the very wealthy while the rest of us are left standing around trying to figure out how the game was rigged.
8 – The WTO forces the United States to open its doors to unsafe products. For example, the United States had been very concerned about the safety of Chinese poultry products. But the WTO ruled in China’s favor and now the U.S. must allow China to import massive amounts of unsanitary chicken.
9 – Under the WTO, labor has become a global commodity. Now American workers have been put in direct competition with the cheapest labor in the world. Millions of American workers have lost their jobs and factories are closing across the United States at a staggering pace.
10 – The American people are deeply upset about the state of the economy, but they don’t even understand what is going on. According to a new CNN/Opinion Research Corporation survey, 81% of Americans rate the U.S. economy as “poor”. Americans continue to get angrier and angrier about the economy and they want someone to “fix” it. But what they don’t understand is that under the new global system that we are being merged into, it is intended that the standard of living for the poorer nations will go up while our standard of living goes down. In the end, there is supposed to be “equality” all over the world.
But what kind of equality will that be?
If current trends hold up, the top 1% of all income earners will become fabulously wealthy, while the remainder of us will work our lives away for their giant global corporations for near slave labor wages.
A reader of my column named Joe recently left a comment that does a good job of summarizing the kind of world that we are heading into….
I still remember the 60 Minutes program that showed an old company in Massachusetts that made winter jackets and pants. The old timer who owned the company was a wonderful character. He worked hard all his life, made excellent clothes, and treated all his employee’s like his family. Dan Rather followed him throughout the mill as he interacted with each employee, the old man knew every job because he probably had to do them all at one time. This man had integrity, a hard work ethic, honesty, and every other leadership quality. His employees loved him and respected him.
Fast forward to today and we have companies like Nike and Gap who entrap their young girl employees with a scam ad in a newspaper about a job. Then they are caged into a factory with barbed wire and security guards and have to work for .35 cents per hour. The girls have to pay “rent” for a bunk bed and a little food, a debt they can never repay for their freedom. And we buy their clothes at Wal-Mart.
Where did we go off the tracks? How did we go so wrong?
The truth is that the giant global predator corporations are going to continue to use the WTO (and other globalist organizations such as the IMF and the World Bank) to rig the game in their favor and to push us all into one global market and into one global labor pool.
The WTO is not good for the U.S. economy and it never will be.
But the vast majority of our politicians are 100 percent behind this system which is designed to deindustrialize the United States, ship our jobs overseas and substantially lower our standard of living.
Will the American people wake up and realize what is going on?
No, “Dancing with the Stars” has just announced their new cast, American Idol is looking for some new judges and football season is starting, so the American people are going to have their hands full for a while.
 There are very few things that the top politicians in both political parties agree on these days, but one of the things that that they do agree on is that free trade with China is a good thing. George W. Bush, Dick Cheney, John McCain, Barack Obama, Nancy Pelosi and Harry Reid have all fully supported our trade relationship with China. In this day and age, virtually anyone who even dares to question how fair our “free trade” is with China is immediately labeled as a “protectionist” and is dismissed as a loon. But when you sit down and really analyze it, there are a whole lot of very good reasons why both conservatives and liberals should be fundamentally against our unfair trade relationship with China. But you won’t hear these reasons being talked about on CNN, MSNBC or Fox News. You won’t hear many members of Congress get up and give speeches about how trade with China is bleeding our economy dry. Both major political parties have completely and totally bought into “the benefits” of globalism and free trade and there isn’t even much of a national debate about our trade policies anymore.
But there should be a national debate. Unfortunately, most conservatives are just going to accept whatever their leaders tell them to believe. Conservatives have been convinced that to be against unfair trade is to be “anti-business” and no conservative ever wants to be anti-business.
Similarly, most liberals blindly follow whatever Obama, Pelosi and Reid tell them to believe. Millions of hard working Democrat voters have lost their jobs due to our nightmarish trade relationship with China, but they are still convinced that Obama is their savior and that they must not ever say anything that he does is wrong.
Well, I have a message to members of both political parties….
WAKE UP! YOU HAVE BEEN LIED TO!
If you are truly a conservative, there is no way that you should ever support our trade relationship with China.
If you are truly a liberal, there is no way that you should ever support our trade relationship with China.
Globalism has allowed the big global corporations that dominate our economy to make huge amounts of money, but it has also forced American workers into one gigantic global labor pool.
Are you willing to work 12 hours a day for less than $2.00 an hour in sweatshop conditions?
Well, that is your new competition.
The top 1 percent of all Americans is using globalism to make huge profits, but the standard of living for the rest of us is slowly but surely being forced down toward the rest of the world.
Is that what you really want?
If after reading the reasons below you can still consider yourself a good “conservative” or a good “liberal” and still support our current trade relationship with China please leave a comment to this article. I would love to hear your reasoning.
10 Reasons Why Conservatives Should Be Against Unfair Trade With China
1 – Conservatives are supposed to be all about creating jobs. But millions upon millions of good paying middle class jobs have been shipped off to China and they are never coming back.
2 – Once upon a time, conservatives were opposed to communism. But our trade relationship with China has enabled the largest communist economy in the world to go from third world status to superpower status. China is now the second largest economy in the world, and that would have never happened without our cooperation.
3 – Conservatives are supposed to be concerned about national security. But thanks to the massive amount of money they have made from us, the Chinese have been able to dramatically upgrade and modernize their military. At the top levels of the Chinese government, most officials still believe in the ultimate worldwide triumph of communism, and now thanks to us they have a world class military with which to advance that agenda.
4 – China has a very strict one-child policy which should be absolutely abhorrent to any true conservative.
5 – China uses mobile abortion vans to help enforce the one-child policy. How any social conservative can justify trade with China after learning this is a total mystery.
6 – If Republicans actually started fighting to protect American jobs from going overseas they could win the “angry working class vote” and take both houses of Congress and the White House in 2012.
7 – Conservatives don’t like when other countries try to take advantage of the American people. Yet China is taking advantage of the American people by keeping their currency artificially low and most conservatives are strangely quiet about this. This currency manipulation has put large numbers of U.S. small businesses at a huge competitive disadvantage and has forced many of them to shut down. Essentially, this currency manipulation has enabled China to get us down on the mat and continually beat the stuffing out of us. Meanwhile, our politicians stand by and do nothing.
8 – Our trade deficit with China has enabled them to accumulate about a trillion dollars of our debt. This gives them tremendous leverage over us and is a very serious threat to our economy and to our national security.
9 – Conservatives are traditionally very protective of national sovereignty and state sovereignty. But a global economy governed by the G20, the WTO, the IMF and the World Bank is a giant step toward world government and a giant step away from national sovereignty and state sovereignty.
10 – The giant trade deficit that the United States runs is making us poorer as a nation each and every month. Each year, somewhere around half a trillion dollars of our national wealth gets transferred out of the United States. Much of that gets transferred to China. The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States. The transfer of wealth that this represents is absolutely mind blowing. China is literally bleeding us dry.
10 Reasons Why Liberals Should Be Against Unfair Trade With China
1 – Liberals are supposed to defend unions, yet our trade relationship with China has done more to hurt unions than anything else and most liberal politicians don’t seem to care. Globalism has put the average American worker in direct competition with the cheapest labor in the world. Unemployment is going to continue to increase unless something is done to stop the offshoring and outsourcing of our jobs.
2 – Liberals are supposed to care about the environment. But our trade relationship with China means that thousands of factories and businesses leave our shores and end up in China where the environmental regulations are not nearly as strict. In fact, China has become a complete and total environmental nightmare at this point. If liberals truly cared about the environment they would want to keep factories and businesses here.
3 – Our trade relationship with China (and with the rest of the world) has caused the income inequality gap in America to explode. The top 1% of all Americans have done very well in this environment while the rest of us suffer. For much more on this phenomenon, please see my recent article entitled “Winners And Losers“.
4 – Dangerous products from China are pouring into the United States. Liberals should be horrified that so many of our products are now made outside the United States far from the watchful eyes of our regulatory agencies. Over the past couple of years, there has been headline after headline about dangerous products made in China. The following is just one example of this: 10 Babies Die Mysteriously At Fort Bragg: Toxic Drywall From China Used In Base Homes The Culprit?
5 – In a global economy, every piece of legislation that Democrats intend to help American workers with ends up backfiring. For example, a rise in the minimum wage or a law increasing worker benefits causes American workers to become even more expensive and gives corporations even more incentive to move jobs overseas.
6 – “Free Trade” has been the most destructive in the inner cities where Democrats have traditionally gotten a tremendous amount of support. Shiny new factories are going up all over China while at the same time formerly great manufacturing cities such as Detroit have degenerated into rotting war zones. This is not good for liberals.
7 – Democrats won’t get elected if there are no jobs. Each month, more jobs leave the United States for China and the growing number of long-term unemployed workers in the U.S. is not going to be inclined to keep the same politicians in office if this continues. If liberal politicians value their jobs they should start protecting the jobs of average Americans.
8 – Free trade with China threatens to ruin our social safety net. It is a good thing to help those in need, but there comes a point where too many people jump on to the net and it breaks down. Already, one out of every six Americans is enrolled in at least one anti-poverty program. Over 40 million Americans are on food stamps. These are not good numbers for liberals.
9 – True liberals should be absolutely horrified by the exploitation of labor in China. In China, millions of people work in horrific conditions for what is essentially slave labor pay. The fact that big global corporations are getting rich from this should make the stomach of every liberal turn.
10 – The giant trade deficit that the United States runs is making us poorer as a nation each and every month. Each year, somewhere around half a trillion dollars of our national wealth gets transferred out of the United States. Much of that gets transferred to China. The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States. The transfer of wealth that this represents is absolutely mind blowing. China is literally bleeding us dry.
Liberals and conservatives should both be able to agree that it is not a good thing for millions of American jobs to leave the United States and go to China.
Liberals and conservatives should both be able to agree that it is not a good thing that billions of dollars in wealth gets transferred from the United States to China every single month.
But will our leaders wake up and start pursuing a more logical approach to China?
Don’t count on it.
 Don’t worry everybody. Federal Reserve Chairman “Helicopter Ben” Bernanke says that the U.S. economy is going to be just fine, and that if it does slip up somehow the Federal Reserve is ready to rush in to the rescue. That was essentially Bernanke’s message to an annual gathering of central bankers in Jackson Hole, Wyoming on Friday. Bernanke insisted that even though the Federal Reserve has already cut interest rates to historic lows it still has plenty of tools that could be used to stimulate the U.S. economy if necessary. Well, considering Bernanke’s track record, the “don’t worry, be happy” mantra is just not going to cut it this time. After all, if Bernanke and his team were such intellectual powerhouses the “surprise” financial crisis of 2007 and 2008 would not have caught them with their pants down. The truth is that just before the “greatest financial crisis since the Great Depression” Bernanke was telling everyone that the economy was just fine. So are we going to let him fool us again?
But Bernanke insists that this time is different. This time the Federal Reserve really has got a handle on things. During his remarks at Jackson Hole, Bernanke said that the Fed will adopt “unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”
Unconventional measures?
Could that be a thinly veiled way of saying that Helicopter Ben and his pals will do as much “quantitative easing” as they feel is necessary to keep the economy moving forward?
Unfortunately, most Americans have absolutely no idea what quantitative easing is.
Basically, when quantitative easing takes place the Federal Reserve creates money “ex nihilo” (out of thin air) and uses that money to buy stuff like U.S. government bonds and mortgage-backed securities. By pumping money into the economy like this, the hope is that banks will start lending more and people and businesses will have more money to spend.
As far back as 2002, Bernanke has been openly advocating “easy money” policies as a way to stimulate the U.S. economy out of troubled times….
“The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”
Now, before we go on and discuss some of the problems with quantitative easing, it must be noted that the statement by Bernanke above is absolutely rife with errors.
It is absolutely frightening that someone like Bernanke has more power over the U.S. economy than any member of Congress or even the president of the United States.
First of all, the U.S. government does not issue our dollars. They are issued by the Federal Reserve.
Just pull out a dollar bill right now. It says “Federal Reserve Note” on it right at the top.
Secondly, the U.S. government cannot produce as many dollars as it wants. Whenever it wants more U.S. dollars it has to give U.S. Treasuries to the Federal Reserve in exchange.
If the U.S. government could produce as many dollars as it wants, it could just print up $13 trillion and pay off the national debt tomorrow.
But under the current system, it cannot do that. The Federal Reserve controls the currency, and the truth is that the Federal Reserve is a private central bank that is about as “federal” as Federal Express is.
Thirdly, there is always a cost for producing more dollars. We’ll talk about inflation in a moment, but first it must be noted that any time “the printing presses are fired up” the U.S. government goes into more debt, and every time the U.S. government goes into more debt, more interest must be paid on that new debt.
So there is a very high cost involved in the creation of more dollars.
In addition, every time a new U.S. dollar is created, every other U.S. dollar becomes a little bit less valuable. Essentially, the more dollars there are in existence, the less purchasing power each dollar is going to have. This phenomenon can be masked or delayed for a while, but inflation will always triumph in the end when the money supply is constantly expanded.
The U.S. dollar has lost over 95 percent of its value since the Federal Reserve was created in 1913. This has not been a mistake. The Federal Reserve system is designed to slowly but surely inflate the U.S. dollar. What they do want to avoid, however, is doing it too quickly.
And this is exactly what is in danger of happening in the years ahead. As the U.S. money supply dramatically expands in response to the exploding U.S. national debt we are eventually going to be dealing with some very, very serious inflation.
Right now, the Bush and Obama administrations have been getting the United States into so much debt that there aren’t enough buyers in the world to absorb it all (at least at the current super low interest rates on U.S. government debt). So, instead of raising interest rates to a point where U.S. debt would be suitably attractive to investors, the Federal Reserve is stepping in and is “buying” (once again with money created out of thin air) all the excess U.S. Treasuries that don’t sell. This is essentially a Ponzi scheme and it keeps interest rates on U.S. Treasuries artificially low.
In addition, the Federal Reserve has been handing gigantic sacks of cash to very large banks and financial institutions such as Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup at almost zero percent interest and those big banks and financial institutions have been turning around and investing a large percentage of that cash in U.S. Treasuries. This has created a gigantic U.S. Treasury carry trade bubble, and it has enabled many of these giant financial monsters to make massive piles of essentially risk-free cash. This is another Ponzi scheme.
But these Ponzi schemes are not sustainable and they cannot last forever. Right now Bernanke and his cohorts have been able to finance trillions in U.S. government debt and still keep interest rates on U.S. Treasuries and inflation very, very low. At some point, their juggling act will come to an end and we will have a gigantic mess on our hands.
But for right now, Bernanke seems quite please with himself. The following is how Bernanke concluded his speech at Jackson Hole….
As I said at the beginning, we have come a long way, but there is still some way to travel. Together with other economic policymakers and the private sector, the Federal Reserve remains committed to playing its part to help the U.S. economy return to sustained, noninflationary growth.
In Bernanke’s fantasy world, the U.S. economy is going to roar back to life and will soon be stronger than it ever has been.
But don’t you believe him.
The truth is that every single month the U.S. economy is seeing large numbers of jobs leave the country.
The truth is that thanks to our exploding trade deficit, the U.S. economy is poorer at the end of every single month than it was at the beginning.
The truth is that every single month the U.S. government (along with the vast majority of state and local governments) gets even deeper into debt.
The United States economy is not on the road to prosperity.
The United States economy gets poorer and deeper in debt every single month and is slowing bleeding to death.
Ben Bernanke can run around all he wants and try to convince us that “the sky isn’t falling”, but at some point the American people are going to wake up and simply not believe him anymore.
 If you can still put a roof over your head and food on the table for your family, you should consider yourself to be very fortunate. There are millions of Americans out there right now that are really, really suffering. The cold, hard reality of it is that there aren’t even close to enough jobs out there for everyone right now. It is almost as if we are all caught in a really bizarre game of musical chairs where the losers get stripped of their tickets to the middle class. What this horrible economy is doing to the dignity of millions of middle class Americans is incredibly saddening. There are a lot of very highly educated and very hard working Americans who cannot seem to get jobs no matter what they do and now find themselves doing whatever they can just to survive. It can be really hard to keep your dignity when you played by all the rules and you worked as hard as you could all your life and now you find yourself a half step away from being homeless. Those of us who are still doing okay should never look down on those who are struggling in this economy, because the truth is that any of us could be next.
If you really want to read some horror stories about what long-term unemployment is doing to some people in America, you should go spend an hour or two over at Unemployed-Friends some time. It is a great forum with a lot of great resources for the unemployed, but it also contains dozens and dozens and dozens of heartbreaking stories from middle class Americans who have had their lives shattered by this economic downturn.
The following is a typical story on Unemployed-Friends. It is from a 48 year old Air Force veteran who has lost everything and is now sleeping in his vehicle. It turns out that Scott48’s job was shipped off to India and now he has been out of work for over two years….
“I am a 48 year old USAF Vet. I got my house in 1996 with the help of the VA. In 2009 the company I worked for went out of buisness(gone to India) I then became a 99er. I notified Wells Fargo that I lost my job and they said they would work with me, the next mortgage statement I got they conveniently increased my mortgage! With what I got from UE was enough for the house but I had to cut out the luxury of food, gas, utillities, insurance, entertainment and alcohol. That was it for me, so the forecloser ball was in motion. I had to give my dog to my cousin so he would get fed, I took everything I owened to the auction( execpt tools, clothes, pictures, tech manuals and my Saxophone) and sold it. I went to a half-way house the VA recomended for a week and it was joke, so my cousin said I could stay with her. After 4 months she diecided that I wasnt looking hard enough and kicked me out, and Ive applied for everything except selling myself. This summer I was staying in an abandoned house due to forecloser and the real estate company has now put it on the market, and I am now on the street sleeping in my vehicle or a friend here and there. Keeping clean is going to be a challenge cuz the Flying J truck stops charge $10 for a shower, rip-off. What a country!”
The truth is that this economy is driving many Americans to the brink of desperation. Even recent college graduates are becoming desperate enough to actually consider suicide. The following story is from an Unemployed-Friends user known as 08pacollegegrad….
“I could just take any job like working at fast food places, but I hear people who try can’t even get hired there. I went to Wendy’s for lunch the other day and I thought of picking up an application…but the slot where they keep the applications was completely empty. That should say it all. Plus, I feel like if I take just any job…I will be set back further and never be able to gain experience in my chosen fields.
I follow up on job applications, but employers ignore me for the most part when I try to contact them. I sent five follow up e-mails last week and got no responses. I contacted an employer expressing my interest in working for them, but all they gave me is the link to their online application system that I have never gotten a job from.
I am thinking of applying for more internships (I have already done two), but I don’t want employers to think why I am applying for an internship when I should have had a full fledged job by now.
I have almost killed myself over my situaion and am taking anti-depressants right now. I see a psychiatrist every 4-6 weeks, but I still have days where I feel so empty. I am sick of sitting at home searching for jobs and praying for a response that never comes.”
Many Americans spend day after day after day looking for a job that never comes. The sense of hopelessness that can build after doing this for a few years is almost indescribable. The following is another incredibly sad story from an Unemployed-Friends user known as feuxdejoie….
“I lost my job in June 2008, my husband was working but sentenced to prison for 4 years, for DUI, no accidents or injuries. I had been using my unemployment to pay bills but my last check came June 12, 2010. I’m alone and scared. The city that I live in has the highest unemployment in the State, Illinois. Our children are grown and I sit alone all day searching for jobs. My husband can only call once a month because of the outrageous rates for telephone calls. I’m at the end of my rope and don’t know where to turn if they don’t pass a tier V for unemployment or open up some jobs.
I turned 50 in April and had worked all of my life, starting at age 14 with a work permit! My employer stated to me that they needed someone bilingual and terminated me even after I told them that I would take classes to learn. I signed up for college and began classes in January then unemployment told me that I wasn’t elgible for unemployment while attending school.”
There are millions of Americans who believe that their lives are over because they can’t get decent jobs. When you lose your job, your home, your car, your health insurance and then finally your unemployment insurance runs out, it is easy to lose all hope as an Unemployed-Friends user named Ember has done….
“so i feel pretty much hopeless. been unemployed since July 2008. in over two years i haven’t even been called for an interview. tired of looking and applying for jobs outside of my field that require experience i don’t have. it’s all for naught. i have two bachelor of science degrees. my BS degrees, cuz that’s what they’re worth. since losing my job i’ve gotten divorced. lost my house. lost my health insurance. totalled my car and sustained chronic back pain. and moved in with my mom. and did i mention, when all this started i was a new mom, just back from maternity leave? so (now) i’m raising a toddler on my own, with no income. my unemployment insurance ran out a few weeks ago. i don’t even know what to do now. i just want to disappear. i’m tired of trying. i’m tired of being a burden on everyone. if i didn’t have the responsibility to take care of my child i wouldn’t be around anymore.”
This final example is from an Unemployed-Friends user identified as Faith1028. Be warned that this one will shake you to your core if you have any sensitivity at all. As you read this, keep in mind that this kind of thing is literally happening to millions of Americans these days….
“HI, y’all! This is my story. I’m from Chicago.
I lost my job 11.06.09 – I did my best to remain positive & confident that I would get a job by the end of November.
December 2009 – Still no job. I’m getting food stamps (LINK card) & Unemployment Benefits. Not much money at all, but I’m surviving. Thanks to all this stress, my stomach has been burning and/or been painful daily for all December. I puked my guts out on the 26th.
January 2010 – My stomach is still hurting every day. I had to close out my savings account. I haven’t told my slumlord or my fellow tenants that I lost my job; I go on pretending I’m still going to work everyday. Unfortunately on the 26th, I got my eviction notice. I called the office to ask why. The response was “I don’t know.” I became hysterical. I’ve no job, no money, no family/friends to help. (I have many *relatives*, but no *family*.) I truly believed my only alternative was suicide. I wanted to say good-bye to my brother (my only sibling), but we haven’t spoken to each other for over 4 years; I no longer have his address/phone number. I found him on Facebook. I didn’t bring up my situation because I felt he wouldn’t care. We exchanged a few messages and that was it. I haven’t heard from him since. Good riddance.
February 2010 – Someone found a family that I can stay with for only $250/month! My own room! They turned out to be aquaintances of mine. Vegetarian, too! At least I have a place to stay. I’d rather live alone, but, hey, I’m desperate! — And I’m not too crazy about the bedbugs. OW!
June/July 2010 – Thanks to daily/nightly use of citrine crystals since 30 May, I have no more stomach problems!
Thanks to weekly use of a natural (green!) pesticide from PlusNaturalEnzymes.com, I no longer have a problem with bedbugs! However…
Mid-June, my Unemployment Benefits ran out. Of course, I’m still looking for a job! What am I supposed to do – put a gun to someone’s head and force them to hire me? As of this date, I have $12 left to my name; $0 in my chequeing account. I recently reapplied for and am now receiving food stamps. Before I got my food stamps back, I’ve eaten whatever (Vegetarian!) food I can get, even stuff I’m allergic to. As a result, I’ve become sick: cold-like symptoms, pain in lower intestines…and a rash over my arms, legs, & neck. Oh, does it itch! At least my food allergies are not life-threatening.
Needless to say, my depression has gotten worse.
I am really trying hard to remain positive — and alive.
But why? Is it really all worth it?
I haven’t paid July’s rent, and the people I’m staying with are getting very *impatient*; I fear I’ll be evicted again! The money is coming! It’s not my bloody fault!
Someone on Twitter sent me a link to this site. I know I’m not the only one suffering; some folks have already committed suicide. I don’t want to die, but I don’t want to be homeless, either. I am so bloody scared.
Just give me money that my tax dollars paid for!
–Or better yet: GIVE ME A BLASTED JOB!!”
The really sad thing is that there are countless other stories just like these being posted all over the Internet all the time.
People are hurting.
People are losing hope.
So how did we get here?
Well, it turns out that the “haves” have figured out that they really don’t need the “have nots” after all. Incredible advances in technology have increasingly enabled employers to replace humans with machines and computers. In addition, as we have detailed previously, millions upon millions of middle class American jobs are being shipped off to China and to dozens of third world nations where workers are more than happy to work for less than a tenth of what an American worker would make.
All of those jobs that have been lost to technology and that have been sent overseas are not going to come back. The hordes of long-term unemployed that we are seeing now is just the beginning. It is going to get a lot worse.
So the next time you hear a hard luck story from an unemployed American, don’t look down on that person.
You might be next.
 For middle class Americans, the new global economy has provided mountains of cheap products made in China, India and dozens of other nations, but it has also killed the goose that laid the golden egg. Millions of American workers have been discovering that the price for all of those inexpensive foreign-made goodies is their jobs. Now we have so many long-term unemployed workers in the United States that we are inventing new terms (such as “the 99ers”) to describe them. Unemployment is on the rise again (we’ll get to the figures in a minute) and everyone seems perplexed at the continuing inability of the “greatest economy in the world” to provide jobs for everyone. But the truth is that this has been coming for a long time. The debt-fueled prosperity of the past couple of decades allowed us to live far beyond our means and provide very high levels of employment for a while, but now economic reality is setting in. The millions of middle class jobs that have been shipped overseas are never coming back. Unfortunately, the existence of a large class of chronically unemployed Americans that are struggling just to survive is going to quickly become “the new normal”.
This week the U.S. Labor Deparment announced that for the week ending August 14th, new applications for unemployment insurance benefits reached the half-million mark. That was the first time since last November that the psychologically important 500,000 threshold had been hit. Most economists had predicted that unemployment claims would actually decline, but instead they experienced their fourth increase in the past five weeks.
But the increase in new applications for unemployment benefits is only part of the story. It is not such a bad thing to be unemployed if you can find another job in a couple of weeks or a couple of months. But in 2010, there are millions of Americans that cannot seem to find a job no matter what they do month after month after month.
In fact, the number of Americans that have exhausted their state unemployment benefits and that are collecting long-term federal unemployment benefits has increased 60 percent over the past year. The following is how a recent article on CNBC recently described the situation….
“Claimants under the Emergency Unemployment Compensation provision—who have exhausted their state benefits—surged 260,105 to 4,753,456 for the week ended July 31 (the data lags the weekly claims by two weeks). While that represents a weekly increase of 0.5 percent, the total is 60.5 percent higher than the 2009 figure of 2,961,457.”
So what will the figure be at this time next year?
6 million?
7 million?
And what happens if the U.S. Congress finally decides to cut off the long-term unemployment benefits at some point?
The truth is that things are getting really frightening out there.
“There’s a red flag being waved right now that says ‘Danger,’” Bloomberg quoted Mark Vitner, a senior economist at Wells Fargo Securities LLC as saying recently. “Growth is going to slow in the second half and we might face something a little more ominous than that.”
The reality is that there are not nearly enough jobs out there for everyone. According to one recent survey, 28% of U.S. households have at least one member that is looking for a full-time job.
Just think about that.
Almost 30 percent of all U.S. homes have someone who is looking for a full-time job.
That is not just a problem.
That is a national crisis.
But it is not just those who are unemployed who are suffering. The reality is that this economic downturn has hurt most of us in one way or another. A recent Pew Research survey found that 55 percent of the U.S. labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the recession began.
Millions of Americans are putting up with increased workloads, pay decreases and benefit cuts right now because the alternative is joining the hordes of jobless Americans that are fighting tooth and nail over the few jobs that are actually available.
Once you lose your job in this economy there is no telling when you are going to be able to get another one. In America today, the average time needed to find a job has risen to a record 35.2 weeks.
Could you imagine being unemployed for 35 weeks?
The truth is that in 2010, it is employers that have all the power and all the leverage.
In fact, when you really analyze it, it is a wonder that companies are hiring new workers at all. It is a massive pain in the rear end to hire a new worker in America today. The thousands upon thousands of regulations that must be complied with, the big pile of forms that need to be filled out and the elaborate bookkeeping that must be maintained make hiring someone a major headache. One top of that, tax contributions, benefit packages and health insurance premiums make each worker a very expensive proposition.
There is a reason why so many companies are trying to squeeze more out of the employees that they already have or are only hiring temporary employees right now.
But the biggest reason why there is such a lack of jobs is because millions upon millions of good jobs have been shipped overseas. Globalism and “free trade” have put middle class American workers into a situation where they are in direct competition for jobs against the cheapest labor in the world.
Why in the world should U.S. companies hire American workers when they can hire very willing workers on the other side of the world who will do the same job for less than one-tenth the cost?
Those who once warned us about “the great sucking sound” that globalism would create were right, and the truth is that the U.S. has already been bleeding good jobs for years. According to one analysis, the United States has lost 10.5 million jobs since 2007, and the truth is that unless something is done things are going to get even worse.
But what can get lost in all of these statistics is the very real pain that so many millions of Americans are now experiencing.
Losing a job and watching everything that you have worked for crumble can be extremely soul crushing. In fact, this economy is pushing some Americans completely over the edge.
The following is an excerpt from an actual letter to U.S. Representative Anthony Weiner….
“My dad, S, killed himself March 16, 2009 because he ran out of money and could not find work. My whole family had been devastated by the economy. He was 61 years old and could not take it anymore. He could not figure out how to keep the electric on, buy food, or keep a roof over his head. A day before his electric was to be shut off, and 2 weeks away from eviction, my dad took the hardest walk of his life. He left a note on the dining room table for my sister and I. His suicide letter said ‘I love you. I had to do this. I ran out of money. I wish you both luck in your lives’. He left the door unlocked with the door key left in the lock. He carefully laid out two suits for us to pick from to bury him in.”
Could you imagine if that was your father?
As the economy continues to deteriorate, many more Americans are going to be pushed to the edge of despair.
Life is not about paying our bills or about the things that we own, but there is no denying the pain that comes when you run completely out of money and you feel totally helpless.
But nobody should ever give up. There is always hope. Things can always be turned around.
Unfortunately, we have entered a time when there are always going to be a large number of unemployed Americans because there are just not nearly enough jobs to go around.
Anyone who thought that we could merge American workers into a massive global labor pool and still be able to maintain our middle class lifestyles was living in fantasy land.
No, the truth is that globalism has killed the goose that laid the golden egg and now tens of millions of Americans are going to pay the price.
 Today there is a horrific derivatives bubble that threatens to destroy not only the U.S. economy but the entire world financial system as well, but unfortunately the vast majority of people do not understand it. When you say the word “derivatives” to most Americans, they have no idea what you are talking about. In fact, even most members of the U.S. Congress don’t really seem to understand them. But you don’t have to get into all the technicalities to understand the bigger picture. Basically, derivatives are financial instruments whose value depends upon or is derived from the price of something else. A derivative has no underlying value of its own. It is essentially a side bet. Originally, derivatives were mostly used to hedge risk and to offset the possibility of taking losses. But today it has gone way, way beyond that. Today the world financial system has become a gigantic casino where insanely large bets are made on anything and everything that you can possibly imagine.
The derivatives market is almost entirely unregulated and in recent years it has ballooned to such enormous proportions that it is almost hard to believe. Today, the worldwide derivatives market is approximately 20 times the size of the entire global economy.
Because derivatives are so unregulated, nobody knows for certain exactly what the total value of all the derivatives worldwide is, but low estimates put it around 600 trillion dollars and high estimates put it at around 1.5 quadrillion dollars.
Do you know how large one quadrillion is?
Counting at one dollar per second, it would take 32 million years to count to one quadrillion.
If you want to attempt it, you might want to get started right now.
To put that in perspective, the gross domestic product of the United States is only about 14 trillion dollars.
In fact, the total market cap of all major global stock markets is only about 30 trillion dollars.
So when you are talking about 1.5 quadrillion dollars, you are talking about an amount of money that is almost inconceivable.
So what is going to happen when this insanely large derivatives bubble pops?
Well, the truth is that the danger that we face from derivatives is so great that Warren Buffet has called them “financial weapons of mass destruction”.
Unfortunately, he is not exaggerating.
It would be hard to understate the financial devastation that we could potentially be facing.
A number of years back, French President Jacques Chirac referred to derivatives as “financial AIDS”.
The reality is that when this bubble pops there won’t be enough money in the entire world to fix it.
But ignorance is bliss, and most people simply do not understand these complex financial instruments enough to be worried about them.
Unfortunately, just because most of us do not understand the danger does not mean that the danger has been eliminated.
In a recent column, Dr. Jerome Corsi of WorldNetDaily noted that even many institutional investors have gotten sucked into investing in derivatives without even understanding the incredible risk they were facing….
A key problem with derivatives is that in the attempt to reduce costs or prevent losses, institutional investors typically accepted complex risks that carried little-understood liabilities widely disproportionate to any potential savings the derivatives contract may have initially obtained.
The hedge-fund and derivatives markets are so highly complex and technical that even many top economists and investment-banking professionals don’t fully understand them.
Moreover, both the hedge-fund and the derivatives markets are almost totally unregulated, either by the U.S. government or by any other government worldwide.
Most Americans don’t realize it, but derivatives played a major role in the financial crisis of 2007 and 2008.
Do you remember how AIG was constantly in the news for a while there?
Well, they weren’t in financial trouble because they had written a bunch of bad insurance policies.
What had happened is that a subsidiary of AIG had lost more than $18 billion on Credit Default Swaps (derivatives) it had written, and additional losses from derivatives were on the way which could have caused the complete collapse of the insurance giant.
So the U.S. government stepped in and bailed them out – all at U.S. taxpayer expense of course.
But the AIG incident was actually quite small compared to what could be coming. The derivatives market has become so monolithic that even a relatively minor imbalance in the global economy could set off a chain reaction that would have devastating consequences.
In his recent article on derivatives, Webster Tarpley described the central role that derivatives now play in our financial system….
Far from being some arcane or marginal activity, financial derivatives have come to represent the principal business of the financier oligarchy in Wall Street, the City of London, Frankfurt, and other money centers. A concerted effort has been made by politicians and the news media to hide and camouflage the central role played by derivative speculation in the economic disasters of recent years. Journalists and public relations types have done everything possible to avoid even mentioning derivatives, coining phrases like “toxic assets,” “exotic instruments,” and – most notably – “troubled assets,” as in Troubled Assets Relief Program or TARP, aka the monstrous $800 billion bailout of Wall Street speculators which was enacted in October 2008 with the support of Bush, Henry Paulson, John McCain, Sarah Palin, and the Obama Democrats.
But wasn’t the financial reform law that Congress just passed supposed to fix all this?
Well, the truth is that you simply cannot “fix” a 1.5 quadrillion dollar problem, but yes, the financial reform law was supposed to put some new restrictions on derivatives.
And initially, there were some somewhat significant reforms contained in the bill. But after the vast horde of Wall Street lobbyists in Washington got done doing their thing, the derivatives reforms were almost completely and totally neutered.
So the rampant casino gambling continues and everybody on Wall Street is happy.
For now.
One day some event will happen which will cause a sudden shift in world financial markets and trillions of dollars of losses in derivatives will create a tsunami that will bring the entire house of cards down.
All of the money in the world will not be enough to bail out the financial system when that day arrives.
The truth is that we should have never allowed world financial markets to become a giant casino.
But we did.
Soon enough we will all pay the price, and when that disastrous day comes, most Americans will still not understand what is happening.
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