There are two very different Americas today. In one, the stock market is soaring, high end homes are selling briskly, big banks and hedge funds are rolling in money as if the last financial crisis never even happened, and life is really, really good. In the other America, good jobs are incredibly scarce, incomes are declining, and poverty is skyrocketing to levels that we have never seen before. The gap between the wealthy and the poor in America is getting wider with each passing day. In fact, it is my contention that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does. If you have never seen Downton Abbey, you really should. It is one of the most extraordinary shows to appear on television in years. It is a drama set in the UK which follows the lives of the aristocratic Crawley family and their servants throughout the early part of the 20th Century. It can be a bit jarring to watch servants wait on their masters hand and foot and refer to them by such titles as “Lord” and “Lady”, but the truth is that in many ways there is more inequality today than there was back then. As far as people living in the worst areas of cities such as Detroit and Cleveland are concerned, the socialites that live on Fifth Avenue in New York City or in multi-million dollar homes out in the Hamptons might as well be from another planet. If you have lots of money, America is still a really great place to live. If you barely have any money, America can be really cold and cruel. Sadly, our politicians continue to pursue policies that make things even better for those working for the establishment in places such as Washington D.C. and Manhattan, and worse for all the rest of us. This has especially been true over the course of the past four years. If nothing is done, the gaping chasm between the rich and the poor will continue to get even worse, and in the end that will have some really severe consequences for our society.
There is not much help on the horizon for the poor or the middle class in America, and that should be distressing for all of us.
But things in the wealthy parts of America are going absolutely wonderfully right now. Let’s take a few moments and contrast what life is like in the two Americas right now…
In the “good America”, stocks are absolutely soaring. In fact, the S&P 500 closed above 1,500 on Friday for the very first time in more than five years.
In the “bad America”, poverty statistics just continue to get worse. According to a newly released report, 60 percent of all children in the city of Detroit are living in poverty.
In the “good America”, hedge funds are rolling in the profits. The Dow just had its best January since January of 1994, and many analysts are projecting that 2013 will be a banner year for the markets.
In the “bad America”, median household income has fallen for four years in a row, and millions of families are really struggling to find a way to pay the bills each month.
In the “good America”, expensive homes are selling at a pace that we have not seen in years. Just check out what is happening in the Hamptons. According to the National Association of Realtors, sales of homes worth at least a million dollars were 51 percent higher in November 2012 than they were in November 2011.
In the “bad America”, there are hordes of young adults that cannot find jobs and cannot take care of themselves. Shockingly, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
In the “good America”, the “too big to fail” banks are partying like it was 2005 again. For example, revenues at Goldman Sachs increased by about 30 percent in 2012 and Goldman stock has soared by more than 40 percent over the past 12 months.
In the “bad America”, poverty is exploding and government dependence has become a way of life. If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.
In the “good America”, those working for the establishment will do just about anything to make a buck. For instance, Goldman Sachs made 400 million dollars driving up food prices in 2012 while hundreds of millions around the world existed on the edge of starvation.
In the “bad America”, millions of families are wondering how they will make it until next month. If you can believe it, more than a million public school students in the United States are homeless. This is the first time that has ever happened in our history.
In the “good America”, everyone has a good ride. In fact, sales of luxury German-made vehicles set new all-time records in 2012.
In the “bad America”, those that have lost everything are shunned and ostracized. In fact, many communities all over America are actually making feeding the homeless illegal.
The fact that there is poverty in America should not alarm you. Every country in the world has poverty. What should alarm you is how rapidly it is growing. Even though the Obama administration tells us that we are in an “economic recovery”, things just continue to get worse. The wealthy elitists in Washington D.C. and New York City may be doing wonderfully, but the truth is that the middle class continues to shrink and just about every poverty statistic that you can think of continues to rise.
-According to the Economic Policy Institute, the wealthiest one percent of all Americans households on average have 288 times the amount of wealth that the average middle class American family does.
-According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.
-The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.
-At this point, the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.
-The United States now ranks 93rd in the world in income inequality.
-The average CEO now makes approximately 350 times as much as the average American worker makes.
-Today, corporate profits as a percentage of U.S. GDP are at an all-time high, but wages as a percentage of U.S. GDP are near an all-time low.
Sometimes, when the “good America” and the “bad America” collide, the results are quite humorous.
For example, a 23-year-old homeless Brazilian man and his friends recently decided to “move in” to a 7,522 square foot house down in Florida that is valued at $2.1 million. The following is from a recent article in the Orlando Sentinel…
Bank of America has filed to evict nine squatters from a $2.5-million mansion in a posh Boca Raton neighborhood.
In a filing in Palm Beach County court that names 23-year-old Andre De Palma Barbosa and eight other unknown people, the bank claims rightful ownership of the home – despite Barbosa’s attempt to stake his claim on the foreclosed waterside property by using an obscure Florida real estate law.
Barbosa has been invoking a state law called “adverse possession,” which allows someone to move into a property and claim the title – if they can stay there seven years.
A signed copy of that note is also posted in the home’s front window.
Yeah, they will be able to get him and his friends out of there eventually, but in future years I fear that the conflicts between the rich and the poor will not be so nice.
Already, a very ominous “Robin Hood mentality” is building among the poor in this country. Many wealthy people don’t even realize that it is happening. But someday when desperate “flash mobs” are roaming through their neighborhoods looking to do a little “creative redistribution”, then they will get it.
Our society is starting to come apart at the seams, and there is an incredible amount of tension between the rich and the poor. This is unfortunate, but instead of calming things down many of our politicians are actually exploiting this tension.
When our economy crashes, the class warfare of today may actually turn into real war in the streets. Desperate people do desperate things, and when people are hungry and they can’t feed their families, many of them will not be afraid to go over to the wealthy neighborhoods and take what they want.
A lot of people don’t want to see them, but dark clouds are building. According to a recent Gallup poll, Americans are more negative about where America will be five years from now than they have ever been before. Most people know that we are on the edge of something really bad, even if they can’t really explain it.
It is time to get ready for what is coming. Even though the stock market is soaring right now, that could change at any moment. All of the long-term economic and societal trends are pointing to some really bad things in the years ahead, and sticking our heads in the sand and pretending that everything is going to be okay somehow is not going to help.
So what do you think about all of this?
Do you think that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does?
Please feel free to post a comment with your thoughts below…
The economic implosion of Europe is accelerating. Even while the mainstream media continues to proclaim that the financial crisis in Europe has been “averted”, the economic statistics that are coming out of Europe just continue to get worse. Manufacturing activity in Europe has been contracting month after month, the unemployment rate in the eurozone has hit yet another brand new record high, and the official unemployment rates in both Greece and Spain are now much higher than the peak unemployment rate in the United States during the Great Depression of the 1930s. The economic situation in Europe is far worse than it was a year ago, and it is going to continue to get worse as austerity continues to take a huge toll on the economies of the eurozone. It would be hard to understate how bad things have gotten – particularly in southern Europe. The truth is that most of southern Europe is experiencing a full-blown economic depression right now. Sadly, most Americans are paying very little attention to what is going on across the Atlantic. But they should be watching, because this is what happens when nations accumulate too much debt. The United States has the biggest debt burden of all, and eventually what is happening over in Spain, France, Italy, Portugal and Greece is going to happen over here as well.
The following are 20 facts about the collapse of Europe that everyone should know…
#110 Months: Manufacturing activity in both France and Germany has contracted for 10 months in a row.
#211.8 Percent: The unemployment rate in the eurozone has now risen to 11.8 percent – a brand new all-time high.
#317 Months: In November, Italy experienced the sharpest decline in retail sales that it had experienced in 17 months.
#420 Months: Manufacturing activity in Spain has contracted for 20 months in a row.
#520 Percent: It is estimated that bad loans now make up approximately 20 percent of all domestic loans in the Greek banking system at this point.
#622 Percent: A whopping 22 percent of the entire population of Ireland lives in jobless households.
#726 Percent: The unemployment rate in Greece is now 26 percent. A year ago it was only 18.9 percent.
#826.6 Percent: The unemployment rate in Spain has risen to an astounding 26.6 percent.
#927.0 Percent: The unemployment rate for workers under the age of 25 in Cyprus. Back in 2008, this number was well below 10 percent.
#1028 Percent: Sales of French-made vehicles in November were down 28 percent compared to a year earlier.
#1136 Percent: Today, the poverty rate in Greece is 36 percent. Back in 2009 it was only about 20 percent.
#1237.1 Percent: The unemployment rate for workers under the age of 25 in Italy – a brand new all-time high.
#1344 Percent: An astounding 44 percent of the entire population of Bulgaria is facing “severe material deprivation”.
#1456.5 Percent: The unemployment rate for workers under the age of 25 in Spain – a brand new all-time high.
#1557.6 Percent: The unemployment rate for workers under the age of 25 in Greece – a brand new all-time high.
#1660 Percent: Citigroup is projecting that there is a 60 percent probability that Greece will leave the eurozone within the next 12 to 18 months.
#1770 Percent: It has been reported that some homes in Spain are being sold at a 70% discount from where they were at during the peak of the housing bubble back in 2006. At this point there are approximately 2 million unsold homes in Spain.
#18200 Percent: The debt to GDP ratio in Greece is rapidly approaching 200 percent.
#191997: According to the Committee of French Automobile Producers, 2012 was the worst year for the French automobile industry since 1997.
#202 Million: Back in 2005, the French auto industry produced about 3.5 million vehicles. In 2012, that number dropped to about 2 million vehicles.
One thing that these shocking numbers cannot convey is the tremendous amount of pain that many average Europeans are living through on a daily basis at this point. To get a peek into what life is like in Greece these days, check out this short excerpt from a recent Bloomberg article…
Anastasia Karagaitanaki, 57, is a former model and cafe owner in Thessaloniki, Greece. After losing her business to the financial crisis, she now sleeps on a daybed next to the refrigerator in her mother’s kitchen and depends on charity for food and insulin for her diabetes.
“I feel like my life has slipped through my hands,” said Karagaitanaki, whose brother also shares the one-bedroom apartment. “I feel like I’m dead.”
For thousands of Greeks like Karagaitanaki, the fabric of middle-class life is unraveling. Teachers, salaries slashed by a third, are stealing electricity. Families in once-stable neighborhoods are afraid to leave their homes because of rising street crime.
All over Europe, people that have lost all hope are actually setting themselves on fire in a desperate attempt to draw attention. Millions of formerly middle class Europeans have lost everything and are becoming increasingly desperate. Suicide and crime are skyrocketing all over southern Europe and massive street riots are erupting on a regular basis.
Unfortunately, this is just the beginning. Things are going to get even worse for Europe.
Meanwhile, those of us living in the United States smugly look down our noses at Europe because we are still living in a false bubble of debt-fueled prosperity.
But eventually we will feel the sting of austerity as well. The recent fiscal cliff deal was an indication of that. Taxes are going up and government spending is at least going to slow down. It won’t be too long before the effects of that are felt in the economy.
And of course the reality of the situation is that the U.S. economy really did not perform very well at all during 2012 when you take a look at the numbers. The cold, hard truth is that the U.S. economy has been declining for a very long time, and there are a whole bunch of reasons to expect that our decline will accelerate even further in 2013.
So if you are an American, don’t laugh at what is happening over in Europe at the moment. We are headed down the exact same path that they have gone, and we are going to experience the same kind of suffering that they are going through right now.
Use these last few “bubble months” to prepare for what is ahead. At some point this “hope bubble” will disappear and then the time for preparation will be over.
Are you willing to bet against three of the wealthiest men in the entire world? Jacob Rothschild recently bet approximately 200 million dollars that the euro will go down. Billionaire hedge fund manager John Paulson made somewhere around 20 billion dollars betting against the U.S. housing market during the last financial crisis, and now he has made huge bets that the euro will go down and that the price of gold will go up. And as I wrote about in my last article, George Soros put approximately 130 million more dollars into gold last quarter. So will the euro plummet like a rock? Will the price of gold absolutely soar? Well, if a massive financial disaster does occur both of those two things are likely to happen. The European economy is becoming more unstable with each passing day, and investors all over the globe are looking for safe places to put their money. The mainstream media keeps telling us that everything is going to be okay, but the global elite are sending us a much, much different message by their actions. Certainly Rothschild, Paulson and Soros know about things happening in the financial world that the rest of us don’t. The fact that they are all behaving in a consistent manner right now should be alarming for all of us.
Let’s start with Jacob Rothschild. Apparently he believes that the euro is headed for quite a tumble. The following is from a recent CNBC article….
You know the euro is in deep water when a doyen of the banking industry, Lord Jacob Rothschild takes a £130 million ($200 million) bet against it.
Okay, but the euro has already been falling dramatically. In mid-2011, the EUR/USD was above the 1.40 mark, and right now it is at about 1.23.
Does it really have that much more that it can fall?
If the eurozone ends up breaking apart it sure does.
If there is a Greek default, or if Germany leaves the euro, or if a new currency comes along to replace the euro those currently betting against it will end up looking like geniuses.
Another big name in the financial world that is betting against the euro right now is John Paulson. The following is from a recent Der Spiegel article….
One of these warriors is John Paulson. The hedge fund manager once made billions by betting on a collapse of the American real estate market. Not surprisingly, the financial world sat up and took notice when Paulson, who is now widely despised in America as a crisis profiteer, announced in the spring that he would bet on a collapse of the euro.
And as I noted in my last article, Paulson has also been putting billions of dollars into gold.
So just what are Rothschild and Paulson anticipating?
Could we be on the verge of a massive financial collapse in Europe?
According to the Der Spiegel article mentioned above, a lot of investors seem to be preparing for such a possibility right now….
Banks, companies and investors are preparing themselves for a collapse of the euro. Cross-border bank lending is falling, asset managers are shunning Europe and money is flowing into German real estate and bonds. The euro remains stable against the dollar because America has debt problems too. But unlike the euro, the dollar’s structure isn’t in doubt.
The financial world is starting to wake up to the fact that the globe is absolutely drowning in debt and it is not really good to be holding fiat currencies when a debt crisis erupts.
When men like John Paulson and George Soros start pouring huge amounts of money into gold, it is time to start becoming alarmed about the state of the global financial system.
The amount of money that these men are investing in gold is staggering….
There was also news last week in an SEC filing that both George Soros and John Paulson had increased their investment in SPDR Gold Trust, the world’s largest publicly traded physical gold exchange traded fund (ETF).
Mr Soros upped his stake in the ETF to 884,400 shares from 319,550 and Mr Paulson bought 4.53m shares, bringing his stake to 21.3m.
At the current price of about $156 a share, these are new investments of about $88m of Mr Soros’ cash and more than $700m from Mr Paulson’s funds. These are significant positions.
And the central banks of the world are certainly buying gold at an unprecedented rate as well. According to the World Gold Council, the central banks of the world added 157.5 metric tons of gold last quarter. That was the biggest move into gold by the central banks of the globe that we have seen in modern financial history.
But that might just be the beginning.
According to a recent Marketwatch article, there are persistent rumors that China has plans to buy thousands of metric tons of gold….
Within the gold market, there is unconfirmed speculation that China plans to buy up to at least 5,000 to 6,000 metric tons of gold and that it will start to buy during this year, according to Kevin Kerr, president of Kerr Trading International.
If China buys this much gold, that would exceed annual, global production of gold, he said. “We do not have enough gold for China to buy that much, and it will take China time to purchase this amount of gold.”
So what comes next?
Nobody is quite sure.
Another major financial crisis could erupt in Europe at any moment.
A major war in the Middle East could start literally at any time.
Others believe that the action could start even sooner than that.
The truth is that even though we have not seen a “Lehman Brothers moment” yet, things in Europe just continue to get progressively worse. The following is from a recent article by Mark E. Grant….
Whether you turn your attention to Greece, Spain, Italy, Portugal or even Ireland; it is getting worse. Nowhere on the Continent are things improving and even in France and Germany the financial strains are beginning to show. It is not a question of Euro-bear or Euro-bull; it is just the numbers as they come rolling out month after month.
There is a growing realization in Europe that the euro simply does not work. Italy is absolutely drowning in debt, the Spanish economy has basically descended into a depression, and Greece has been experiencing depression-like conditions for years at this point.
The euro is doomed. The only question is who is going to blink first.
Nobody wants to be the first to leave the euro. There are rumblings that it could actually be Finland that leaves the euro first, and that would please Germany just fine because they don’t want to look like the bad guys in all of this.
But that doesn’t mean that Germany won’t eventually pull the trigger if nobody else does. The German public is sick and tired of bailing out the weak sisters of southern Europe, and at this point it looks like it would take perpetual bailouts just to keep the euro together.
And recently there have been lots of little signs that Germany is starting to move slowly toward the exit doors.
In fact, I found it quite interesting that a giant euro sculpture was recently removed from the Frankfurt International Airport….
A massive € sculpture (identical to the one in front of the European Central Bank) was dismantled and removed from the Frankfurt International Airport in Germany Thursday.
The official explanation is ‘the plastic parts are getting weak after 11 years and the terminal needed the space‘.
Does € sculpture’s removal from the Frankfurt Airport indicate Germany is preparing for a surprise return to the Deutsche Mark?
Sure that might just be a coincidence, but it also could be a harbinger of things to come.
Sadly, most average people living in North America and Europe have absolutely no idea what is coming. Most of them just want to be able to get up in the morning and go to work and pay the bills and take care of their families.
Unfortunately, millions upon millions of those hard working individuals are in for a very rude awakening.
A lot of people are about to have their current lifestyles totally turned upside down.
But it doesn’t have to be all bad.
In fact, I found it very interesting to read about how some young people are responding to the depression in Greece….
In the spring of 2010, just as the Greek government was embarking on some of its harshest austerity measures, 29-year-old Apostolos Sianos packed in his well-paid job as a website designer, gave up his Athens apartment and walked away from modern civilisation.
In the foothills of Mount Telaithrion on the Greek island of Evia, Mr Sianos and three other like-minded Athenians set up an eco-community.
The idea was to live in an entirely sustainable way, free from the ties of money and cut off from the national electricity grid.
The group sleeps communally in yurts they have built themselves, they grow their own food and exchange the surplus in the nearest village for any necessities they cannot produce.
I think there is a lesson to be learned there.
When the system fails, it is going to be important to be able to live independently of the system.
If you can believe it, 77 percent of all Americans live paycheck to paycheck at least some of the time.
If another major economic crisis comes along, many of those people are going to be totally wiped out.
And there are already signs that the U.S. economy is basically on life support at this point.
Just look at the velocity of money.
In an economy that is growing and healthy, money tends to circulate very, very quickly.
But when an economy is sick, money tends to circulate very slowly.
And that is exactly what is happening right now. In fact, the velocity of money is currently at the lowest level in modern U.S. history….
For much more discussion on this, please check out this article.
This is exactly what happened back in the 1930s. The velocity of money absolutely plummeted. When people are scared, credit is tight and times are hard, money does not exchange hands as rapidly.
But this is just the beginning.
What we are experiencing right now is rip-roaring prosperity compared to what is coming.
Jacob Rothschild, John Paulson and George Soros are preparing themselves for the tremendous chaos that is coming.
When someone in the mainstream media goes out on a limb to tell the truth, then the rest of us should go out of our way to applaud that effort. Reporter Ben Swann of Fox 19 in Cincinnati is one of the few local television reporters in the United States that consistently tackles the tough issues. As you can see from his “Reality Check” archives, he regularly does reports on the Federal Reserve, the emerging police state, the loss of our freedoms and liberties, the advance of globalism, the economic collapse, political corruption, etc. etc. That is one reason why his YouTube channel is rapidly approaching a million views. In his most recent Reality Check, Ben Swann asked this question: “Is auditing the Federal Reserve really necessary?” In just four minutes, Swann covered the creation of the Federal Reserve, where money comes from, the 16 trillion dollars in secret loans given out by the Fed during the last financial crisis, and why an audit of the Fed is so important. It really was extraordinary to watch a local mainstream news reporter tell the truth about these things. We could definitely use about 1000 more reporters just like him.
The video of Ben Swann’s recent Reality Check is posted below. If you have not seen it yet, it is definitely worth the 4 minutes that it takes to watch it….
What in the world would this country look like if we had hundreds of other real journalists such as Ben Swann that were willing to tackle these kinds of issues head on?
Certainly nobody is perfect, but when a reporter like Swann is willing to go out on a limb and attack the Fed we need to applaud his efforts.
The mainstream media is supposed to hold those in positions of power accountable.
But most in the mainstream media treat the Federal Reserve with kid gloves. It is incredibly rare to hear any real criticism of the Fed by mainstream reporters.
If the mainstream media was actually doing their job, then perhaps we could get some answers to some questions that have gone unanswered for a very long time.
For example, Zero Hedge has published a “smoking gun” that proves that the Federal Reserve was heavily involved in manipulating the price of gold long after the gold standard was abandoned. If you have not read that piece yet, you can find it right here.
I would love to know to what extent this is still going on today, and why nobody ever asks Federal Reserve Chairman Ben Bernanke about this.
Another mystery that I would like to see addressed is the trillions of dollars of “off balance sheet transactions” that are unaccounted for at the Federal Reserve. This was brought up once during a Congressional hearing, but nobody seemed to have any answers. Video from this hearing is posted below….
As you can see from the video, nobody in the federal government seems to have any idea what is really going on over at the Fed.
But the Fed has more power over our economy and over our financial system than anyone else does.
Isn’t it about time that the American people got some answers?
The Federal Reserve is at the very heart of our debt-based financial system that was created by the big Wall Street banks and for the benefit of the big Wall Street banks.
The Federal Reserve (and virtually every other central bank in the world) is not accountable to the people. The Federal Reserve has created a perpetual debt bubble that is designed to systematically transfer the wealth of the American people to the banks. In this system, the total amount of money and the total amount of debt is designed to continually expand.
Since the Federal Reserve was created, the value of the U.S. dollar has declined by well over 95 percent and the U.S. national debt has gotten more than 5000 times larger.
But nobody seems to want to hold the Federal Reserve accountable for any of this.
If the Federal Reserve is supposed to prevent shocks to our economy, then why have there been 10 different economic recessions since 1950 and why are we about to enter another one?
Why did Barack Obama nominate Ben Bernanke for a second term as head of the Federal Reserve when Bernanke has a track record of failure that makes the Chicago Cubs look like a roaring success?
Why is the U.S. national debt more than 5000 times larger than it was when the Federal Reserve was created in 1913?
Why were the Federal Reserve and the personal income tax both pushed through Congress in the same year in 1913?
Why does the Federal Reserve argue that it is “not an agency” of the federal government in court?
Why do all 187 nations that belong to the IMF have a central bank?
Most Americans are pinning their hopes for an “economic turnaround” on the upcoming election in November.
But the truth is that until something is done about the Federal Reserve it isn’t going to matter very much who is in the White House.
As I wrote about yesterday, the total amount of all debt in America has grown from about 2 trillion dollars to nearly 55 trillion dollars over the past 40 years.
Yes, we should blame the American people for being really stupid about debt, but we also need to keep in mind that this is exactly what the debt-based Federal Reserve system was designed to do.
We have been enslaved by design and most Americans do not even realize what has happened.
Let us encourage reporters like Ben Swann to keep speaking out about the Federal Reserve, and the rest of us need to keep speaking out about the Fed too.
Are we rapidly approaching a moment of reckoning for the global financial system? August is likely to be a relatively slow month as most of Europe is on vacation, but after that we will be moving into a “danger zone” where just about anything could happen. Historically, a financial crisis has been more likely to happen in the fall than during any other time, and this fall is shaping up to be a doozy. Much of the focus of the financial world is on whether or not the euro is going to break up, but even if the authorities in Europe are able to keep the euro together we are still facing massive problems. Countries such as Greece and Spain are already experiencing depression-like conditions, and much of the rest of the globe is sliding into recession. Unemployment has already risen to record levels in some parts of Europe, major banks all over Europe are teetering on the brink of insolvency, and the flow of credit is freezing up all over the planet. If things take a really bad turn, this crisis could become much worse than the financial crisis of 2008 very quickly.
All over the world people are starting to write about the possibility of a major economic crisis starting this fall.
For example, a recent article in the International Business Times discussed how some economists around the globe are fearing the worst for the coming months….
The consensus? The world economy has entered a final countdown with three months left, and investors should pencil in a collapse in either August or September.
Citing a theory he has been espousing since 2010 that predicts “a future lack of policy flexibility from the monetary and fiscal side,” Jim Reid, a strategist at Deutsche Bank, wrote a note Tuesday that gloated “it feels like Europe has proved us right.”
“The U.S. has the ability to disprove the universal nature of our theory,” Reid wrote, but “if this U.S. cycle is of completely average length as seen using the last 158 years of history (33 cycles), then the next recession should start by the end of August.”
The global financial system is so complex and there are so many thousands of moving parts that it is always difficult to put an exact date on anything. In fact, history is littered with economists that have ended up looking rather foolish by putting a particular date on a prediction.
But without a doubt we are starting to see storm clouds gather for this fall.
The following are 11 more signs that time is quickly running out for the global financial system….
#1 A number of very important events regarding the financial future of Europe are going to happen in the month of September. The following is from a recent Reuters article that detailed many of the key things that are currently slated to occur during that month….
In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.
On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy – or what do if one or both were to topple.
#2 Reuters is reporting that Spanish Economy Minister Luis de Guindos has suggested that Spain may need a 300 billion euro bailout.
#3 Spain continues to slide deeper into recession. The Spanish economy contracted 0.4 percent during the second quarter of 2012 after contracting 0.3 percent during the first quarter.
#4 The unemployment rate in Spain is now up to 24.6 percent.
#5 According to the Wall Street Journal, a new 30 billion euro hole has been discovered in the financial rescue plan for Greece.
#6 Morgan Stanley is projecting that the unemployment rate in Greece will exceed 25 percent in 2013.
#7 It is now being projected that the Greek economy will shrink by a total of 7 percent during 2012.
#8 German Finance Minister Wolfgang Schäuble says that the rest of Europe will not be making any more concessions for Greece.
#9 The UK economy has now plunged into a deep recession. During the second quarter of 2012 alone, the UK economy contracted by 0.7 percent.
#10 The Dallas Fed index of general business activity fell dramatically to -13.2 in July. This was a huge surprise and it is yet another indication that the U.S. economy is rapidly heading into a recession.
#11 As I have written about previously, a banking crisis is more likely to happen in the fall than at any other time during the year. The global financial system will enter a “danger zone” starting in September, and none of us need to be reminded that the crashes of 1929, 1987 and 2008 all happened during the second half of the year.
So is there any hope on the horizon?
European leaders have tried short-term solution after short-term solution and none of them have worked.
Now countries all over Europe are sliding into depression and the authorities in Europe seem to be all out of answers. The following is what one eurozone diplomat said recently….
“For two years we’ve been pumping up the life raft, taking decisions that fill it with just enough air to keep it afloat even though it has a leak,” the diplomat said. “But now the leak has got so big that we can’t pump air into the raft quickly enough to keep it afloat.”
The boat is filling up with water faster than they can bail it out.
So what is the solution?
Well, some of the top names in economics on both sides of the Atlantic are urging authorities to keep the debt bubble pumped up by printing lots and lots more money.
Needless to say, I will be advocating 1933 monetary stimulus à l’outrance, or trillions of asset purchases through old fashioned open-market operations through the quantity of money effect (NOT INTEREST RATE ‘CREDITISM’) to avert deflation – and continue doing so until nominal GDP is restored to its trend line, at which point the stimulus can be withdrawn again.
But is more money and more debt really the solution to anything?
In the United States, M2 recent surpassed the 10 trillion dollar mark for the first time ever. It has increased in size by more than 5 times over the past 30 years.
Unfortunately, our debt has been growing much faster than GDP has over that time period.
Our problem is not that there is not enough money floating around.
Our problem is that there is way, way too much debt.
But this is how things always go with fiat currencies.
There is always the temptation to print more.
That is one of the big reasons why every single fiat currency in history has eventually collapsed.
Printing more money will not solve our problems. It will just cause our problems to take a different form.
In the end, nothing that the authorities can do will be able to avert the crisis that is coming.
A lot of people are starting to realize this, and that is one reason why we are seeing so much economic pessimism right now.
For example, according to a new Rasmussen poll only 14 percent of all Americans believe that children in America today will be “better off” than their parents.
That is an absolutely stunning figure, but it just shows us where we are at.
Our economy has been in decline for a long time, and now we are rapidly approaching another major downturn.
You better buckle up, because this downturn is not going to be pleasant at all.
Has Europe finally been saved this time? Has this latest “breakthrough” solved the European debt crisis? Of course not, and you should know better by now. European leaders have held 18 summits since the beginning of the debt crisis. After most of the preceding summits, global financial markets responded with joy because European leaders had reached “a deal” which would supposedly solve the crisis. But a few weeks after each summit it would become clear that nothing had been solved and that the financial crisis had actually gotten even worse than before. How many times do they expect us to fall for the same sorry routine? Nothing in Europe has been solved. You can’t solve a debt problem with more debt. European leaders are just kicking the can down the road. More debt will relieve some of the short-term pressure, but in a few weeks it will be apparent that the underlying problems in Europe continue to grow. Unfortunately, there is not an unlimited amount of EU bailout money, so once all of these “financial bullets” have been fired European leaders are going to find that kicking the can down the road will not be so easy anymore. The truth is that the financial crisis in Europe has not been cancelled – it has just been put off for a few weeks or a few months.
Do you solve the problems of a credit card addict by giving that person another credit card? Of course not. You may delay the short-term financial problems of the credit card addict by giving that person another credit card, but in the process you make the long-term problems even worse.
Well, that is essentially what is happening in Europe. European governments and the European financial system have become ridiculously dependent on debt. By giving European debt junkies another “hit” or two it may relieve a bit of short-term suffering but it doesn’t solve anything.
Just think about it.
Did the first bailout package solve the problems in Greece?
No.
Did the second bailout package solve the problems in Greece?
No.
Today, the Greek financial system is a complete and total mess, and Greek politicians are saying that a third bailout package may be necessary.
Many are claiming that Italy and Spain have been “saved” by this new deal, but that is a joke.
Yes, the ability to inject bailout funds directly into troubled banks is going to keep some of them going for a little while. But the deal also calls for a new governing body to be established that will supervise those banks. Will that governing body be established in time to even provide the short-term help that is needed?
Yes, spending bailout funds to buy up Spanish debt and Italian debt will artificially suppress bond yields for a time.
We have seen this before.
But what happened?
After the bond buying program was over, bond yields started spiking again.
So do the Europeans plan to suppress bond yields forever?
Of course not. There is not enough bailout money to do that.
Brutal austerity + toxic levels of government debt + rising bond yields + a lack of confidence in the financial system + banks that are massively overleveraged + a massive credit crunch = A financial implosion of historic proportions
Have any of those elements been removed?
No.
Bond yields will be suppressed for a period of time, but that will not last forever, and all of the other underlying issues are still there.
Meanwhile, the rest of Europe continues to follow the Greek economy into economic depression.
The Spanish economy shrunk again in the second quarter of 2012, and austerity in that nation has barely even begun.
As a recent CNBC article detailed, the big spending cuts are still coming….
The conservatives, who inherited from the outgoing Socialists one of the euro zone’s highest public deficits, at 8.9 percent of GDP in 2011, have said they will shrink the shortfall to 5.3 percent this year and 3 percent in 2013.
Austerity has absolutely shredded the Greek economy, and we are starting to see that same pattern be repeated all over Europe.
When you spend far more money than you bring in for decades, eventually you have to go through a very painful adjustment. What is going on in Greece should be a lesson for all of us. Debt allows you to live above your means, but the consequences of going into way too much debt can be absolutely horrific.
More debt can delay the consequences of a debt problem but it cannot solve a debt problem. The following is what Jim Rogers told CNBC on Friday….
“Just because now you have a way to get them (the banks) to borrow even more money, this is not solving the problem, this is making the problem worse,” Rogers said on Friday.
“People need to stop spending money they don’t have. The solution to too much debt is not more debt. All this little agreement does is give them (banks) a chance to have even more debt for a while longer,” he added.
But if you just went by the headlines in most of the newspapers around the world you would think that European leaders had discovered the cure for cancer or something.
Sadly, the truth is that they are simply choosing to fire off a few of the “financial bullets” that they still have left as a recent Washington Post article described….
The European bailout funds don’t have unlimited resources. If they throw $125 billion at Spain’s banks and another couple hundred billion toward Italy, pretty soon they’ll be running low. The only entity with unlimited euros is the European Central Bank. And right now, there’s no talk of using the ECB to provide bailouts. Which means that this latest move might have just forestalled the crisis, rather than ending it permanently.
So what comes next?
Bruce Krasting believes that the “half-life of this bailout will be measured in weeks”. The following is his summary of what he sees coming next in Europe….
If I’m right, after a few weeks things turn south again in the capital markets. Then what?
– More LTRO. No – there is no more collateral. All of the swill loans have already been hocked.
– Cut ECB % rate. Doesn’t matter. It won’t change conditions in Italian or Spanish funding markets one bit.
– A spending plan of <1% of GDP. That won’t put a dent in the recession that is building.
– Brussels buys more sovereign bonds to avoid a catastrophe of Italian 10-year exceeding 7% (capitulation). Sorry. There are “wise men” in Germany who will simply not allow this to happen in the scale that is required.
– The ECB goes Defcon 1 and launches a E2T QE program. No – same answer as above.
– Merkel does a 180 and embraces Euro bonds. No chance in hell.
–The US or China are going to start buying EU bonds? Lunacy – not happening.
-The IMF will come to the rescue? No way – the IMF does not have the resources to solve anyone’s problems.
In other words, kicking the can down the road is going to get quite a bit harder after the current “sugar high” wears off.
Europe is still headed for the greatest financial crisis since the Great Depression (at least) and European leaders seem powerless to stop it.
Of course the United States is also facing a crisis of too much debt and a great day of reckoning is on the way for this country as well.
So yes, the global economy is still heading for collapse and there is still a multitude of reasons to be extremely concerned about the second half of 2012.
What is your opinion about all of this?
Do you think that European leaders will be able to keep kicking the can down the road?
Please feel free to post a comment with your opinion below….
What is the second half of 2012 going to bring? Are things going to get even worse than they are right now? Unfortunately, that appears more likely with each passing day. I will admit that I am extremely concerned about the second half of 2012. Historically, a financial crisis is much more likely to begin in the fall than during any other season of the year. Just think about it. The stock market crash of 1929 happened in the fall. “Black Monday” happened on October 19th, 1987. The financial crisis of 2008 started in the fall. There just seems to be something about the fall that brings out the worst in the financial markets. But of course there is not a stock market crash every year. So are there specific reasons why we should be extremely concerned about what is coming this year? Yes, there are. The ingredients for a “perfect storm” are slowly coming together, and in the months ahead we could very well see the next wave of the economic collapse strike. Sadly, we have never even come close to recovering from the last recession, and this next crisis might end up being even more painful than the last one.
The following are 17 reasons to be extremely concerned about the second half of 2012….
#1 Historical Trends
A recent IMF research paper by Luc Laeven and Fabián Valencia showed that a banking crisis is far more likely to start in September than in any other month. The following chart is from their report….
So what will this September bring?
#2 JP Morgan
Do you remember back in May when JP Morgan announced that it would be taking a 2 billion dollar trading loss on some derivatives trades gone bad? Well, the New York Times is now reporting that the real figure could reach 9 billion dollars, but nobody really knows for sure. At some point is JP Morgan going to need a bailout? If so, what is that going to do to the U.S. financial system?
#3 Derivatives
Last week, Moody’s downgraded the credit ratings of 15 major global banks. As a result, a number of them have been required to post billions of dollars in additional collateral against derivatives exposures….
Citigroup’s two-notch long-term rating downgrade from A3 to Baa2 could have led to US$500m in additional liquidity and funding demands due to derivative triggers and exchange margin requirements, according to the bank’s 10Q regulatory filing at the end of the first quarter.
Morgan Stanley – which Moody’s downgraded from A2 to Baa1 – said a two-notch downgrade from both Moody’s and Standard and Poor’s could spur an additional US$6.8bn of collateral requirements in its latest 10Q. The bank did not break down its potential collateral calls under a scenario where only Moody’s downgraded the bank below the Single A threshold.
Royal Bank of Scotland estimated it may have to post £9bn of collateral as a result of the one-notch Moody’s downgrade to Baa1 in a statement on June 21, but did not detail how much of this additional requirement was driven by margin for swaps exposures.
The worldwide derivatives market is starting to show some cracks, and at some point this is going to become a major disaster.
Remember, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. When this bubble completely bursts it is going to be impossible to fix.
#4 LEAP/E2020 Warning
LEAP/E2020 has issued a red alert for the global financial system for this fall. They are warning that the “second half of 2012″ will represent a “major inflection point” for the global economic system….
The shock of the autumn 2008 will seem like a small summer storm compared to what will affect planet in several months.
In fact LEAP/E2020 has never seen the chronological convergence of such a series of explosive and so fundamental factors (economy, finances, geopolitical…) since 2006, the start of its work on the global systemic crisis. Logically, in our modest attempt to regularly publish a “crisis weather forecast”, we must therefore give our readers a “Red Alert” because the upcoming events which are readying themselves to shake the world system next September/ October belong to this category.
#5 Increasing Pessimism
One recent survey of corporate executives found that only 20 percent of them expect the global economy to improve over the next 12 months and 48 percent of them expect the global economy to get worse over the next 12 months.
#6 Spain
The Spanish financial system is basically a total nightmare at this point. Moody’s recently downgraded Spanish debt to one level above junk status, and earlier this week Moody’s downgraded the credit ratings of 28 major Spanish banks.
According to CNBC, Spain’s short-term borrowing costs are now about three times higher than they were just one month ago….
Spain’s short-term borrowing costs nearly tripled at auction on Tuesday, underlining the country’s precarious finances as it struggles against recession and juggles with a debt crisis among its newly downgraded banks.
The yield paid on a 3-month bill was 2.362 percent, up from just 0.846 percent a month ago. For six-month paper, it leapt to 3.237 percent from 1.737 percent in May.
Needless to say, this is very, very bad news.
#7 Italy
The situation in Italy continues to deteriorate and many analysts believe that it could be one of the next dominoes to fall. The following is from a recent Businessweek article….
The euro zone’s third-biggest economy is seen as the next domino at risk of toppling after the European Union’s June 9 deal to lend Spain $125 billion in bank bailout funds. Yields on Italy’s 10-year government bonds reached 6.2 percent on June 13, up from just 4.8 percent in March. By pushing up Italy’s borrowing costs out of fear of default, investors are making a default more likely.
A recent Fortune article detailed some of the economic fundamentals that have so many economists deeply concerned about the Italian economy right now….
The main glaring risk threats that could propel Italy down the path to become Europe’s next domino is the size of country’s outstanding debt (at €1.9 trillion or 120% of GDP); the mountain of debt it has to roll over in the next 12 months (nearly €400 billion); and the market’s cracking credibility around Prime Minister Mario Monti’s ability to reduce the country’s fiscal footprint and spur growth.
Further, fear around Italy’s creditworthiness, which has recently been expressed by near cycle highs in sovereign CDS spreads and government yields on the 10-year bond, follow some rather glaring negative fundamentals over recent quarters and years: declining GDP over the last three consecutive quarters; a rising unemployment rate (especially among its youth); deterioration in labor market competitiveness; and increased competition for export goods to its key trading partners.
#8 Greece
I have written extensively about the financial nightmare that is unfolding in Greece. Unemployment has soared past the 20 percent mark, youth unemployment is above 50 percent, the Greek economy has contracted by close to 25 percent over the past four years and now Greek politicians are saying that a third bailout package may be necessary.
#9 Cyprus
The tiny island nation of Cyprus has become the fifth member of the eurozone to formally request a bailout. This is yet another sign that the eurozone is rapidly falling apart.
#10 Germany
German Chancellor Angela Merkel continues to promote an austerity path for Europe and she continues to maintain her very firm position against any kind of eurozone debt sharing….
Merkel, speaking to a conference in Berlin today as Spain announced it would formally seek aid for its banks, dismissed “euro bonds, euro bills and European deposit insurance with joint liability and much more” as “economically wrong and counterproductive,” saying that they ran against the German constitution.
“It’s not a bold prediction to say that in Brussels most eyes — all eyes — will be on Germany yet again,” Merkel said. “I say quite openly: when I think of the summit on Thursday I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”
In fact, Merkel says that there will be no eurobonds “as long as I live“. This means that there will be no “quick fix” for the problems that are unfolding in Europe.
#11 Bank Runs
Every single day, hundreds of millions of dollars is being pulled out of banks in southern Europe. Much of that money is being transferred to banks in northern Europe.
In a previous article I included an extremely alarming quote from a CNBC article about the unfolding banking crisis in Europe….
Financial advisers and private bankers whose clients have accounts too large to be covered by a Europe-wide guarantee on deposits up to 100,000 euros ($125,000), are reporting a “bank run by wire transfer” that has picked up during May.
Much of this money has headed north to banks in London, Frankfurt and Geneva, financial advisers say.
“It’s been an ongoing process but it certainly picked up pace a couple of weeks ago We believe there is a continuous 2-3 year bank run by wire transfer,” said Lorne Baring, managing director at B Capital, a Geneva-based pan European wealth management firm.
How long can these bank runs continue before banking systems start to collapse?
#12 Preparations For The Collapse Of The Eurozone
As I have written about previously, the smart money has already written off southern Europe. All over the continent major financial institutions are preparing for the worst. For example, just check out what Visa Europe is doing….
Visa Europe is holding weekly meetings to discuss scenarios in the event the euro zone collapses, joining other companies that are preparing for a potential breakup of the currency bloc.
Chief Commercial Officer Steve Perry said Tuesday that management at the U.K.-based credit-card company meets weekly to explore various possible outcomes, including a total collapse of the euro zone.
#13 Global Lending Is Slowing Down
All over the globe the flow of credit is beginning to freeze up. In fact, the Bank for International Settlements says that worldwide lending is contracting at the fastest pace since the financial crisis of 2008.
#14 Sophisticated Cyber Attacks On Banks
It is being reported that “very sophisticated” hackers have successfully raided dozens of banks in Europe. So far, it is being estimated that they have stolen 60 million euros….
Sixty million euro has been stolen from bank accounts in a massive cyber bank raid after fraudsters raided dozens of financial institutions around the world.
According to a joint report by software security firm McAfee and Guardian Analytics, more than 60 firms have suffered from what it has called an “insider level of understanding”.
What happens someday if we wake up and all the money in the banks is gone?
#15 U.S. Municipal Bankruptcies
All over the United States there are cities and towns on the verge of financial disaster. This week Stockton, California became the largest U.S. city to ever declare bankruptcy, but the reality is that this is only just the beginning of the municipal debt crisis….
Stockton, California, said it will file for bankruptcy after talks with bondholders and labor unions failed, making the agricultural center the biggest U.S. city to seek court protection from creditors.
“The city is fiscally insolvent and must seek Chapter 9 bankruptcy protection,” Stockton said in a statement released yesterday after its council voted 6-1 to adopt a spending plan for operating under bankruptcy protection.
#16 The Obamacare Decision
The U.S. economy is already a complete and total mess, and now the Obamacare decision is going to throw a huge wet blanket on it. All over America, small business owners are saying that they are going to have to let some workers go because they cannot afford to keep them all under Obamacare. It would be hard to imagine a more job killing law than Obamacare, and now that the Supreme Court decision has finally been announced we are going to see many businesses making some really hard decisions.
#17 The U.S. Election
It is being reported that Barack Obama is putting together an army of “thousands of lawyers” to deal with any disputes that arise over voting procedures or results. It certainly looks like this upcoming election is going to be extremely close, and there is the potential that we could end up facing another Bush v. Gore scenario where the fate of the presidency is determined in court. This campaign season is likely to be exceptionally nasty, and I fear what may happen if there is not a decisive winner on election day. The possibility of significant civil unrest is certainly there.
We definitely live in “interesting” times.
Personally, I am deeply concerned about the September, October, November time frame.
“It’s A Depression For Millions And Millions Of Americans”
And what Biden said was right for once. Millions of Americans are out of work right now and millions of Americans have fallen out of the middle class in recent years. If you have lost everything, it does feel like you are living through a depression.
When people lose everything, they tend to get desperate. And desperate people do desperate things – especially when they are angry.
A whole host of recent opinion polls have shown that anger and frustration in the United States are rising to unprecedented levels. The ingredients are certainly there for an explosion. Someone just needs to come along and light the fuse. We truly do live in frightening times.
Let us hope for the best, but let us also prepare for the worst.
Many people hype “the coming economic collapse” as if it is some kind of big summer Hollywood blockbuster. Many people out there write about it as if it is something that will happen in a single day or over a few weeks and that it will suddenly change how the entire world functions. But that is not how the financial world works. The financial world is like a game of chess – very slow and methodical. Yes, there are times when things happen very quickly (like back in 2008), but even that crisis played out over a number of months. Sadly, most Americans are not used to thinking in terms of months or years. These days, most Americans have the attention span of a goldfish and most Americans have been trained to expect instant gratification. They are simply not accustomed to being patient and to wait for things. Well, despite what you may have read, the economic collapse is not going to be a single event. It is going to play out over quite a few years. In some ways we are experiencing an economic collapse right now. When the next major financial crisis occurs, many will be calling that “an economic collapse”. But if you really want to grasp what is happening to us, you need to think long-term. We are heading for a complete and total nightmare, but it is going to take some time to get to the end of the story.
Yes, there will certainly be times of great chaos. The financial crisis of 2008 was one of those moments.
But the financial crisis of 2008 did not completely destroy us.
Neither will the next crisis.
I think it is helpful to think of what is happening to us as a series of waves.
When you build a beautiful sand castle on the beach, the first wave that comes in does not totally destroy it.
Rather, the first wave weakens the castle and it is destroyed by subsequent waves.
Well, that is what is happening to us.
The financial crisis of 2008 was a wave.
The epicenter of the next great financial crisis will be in Europe and that will be another wave.
For many, the next financial crisis will feel like “the end of the world” but it won’t be.
There will be waves after that one that will be even worse.
Yes, the waves are going to start coming more rapidly and will start becoming more intense.
In that way, they will kind of be like birth pains.
But these problems did not build up overnight and they are not going to disappear overnight either.
A lot of people that write about the coming economic collapse seem to suggest that we should just let it happen so that the “recovery” can begin.
It took decades for American consumers to build up the greatest consumer debt bubble in the history of the world.
It took decades to gut the economic infrastructure of the United States and ship millions of our jobs overseas.
These problems are going to plague us for a very long time.
Sadly, a lot of people out there seem to wish for an economic apocalypse. They seem to think that if the global financial system crashes that the government is going to disappear and we are going to start fighting with each other using sharp pointed sticks.
Well, it simply is not going to happen.
The U.S. government is not going to help you survive when things hit the fan, but it is not going to disappear either.
In fact, the federal government will probably try to grab more power than ever in an attempt to “restore order”.
The governments of Europe are not going to disappear either. In fact, in the long run Europe is probably going to end up more “federalized” than ever even if the euro breaks up in the short run.
A lot of people out there seem to think that when the old system collapses that it will give them an opportunity to help put in a new system.
Sorry, but that is not going to happen either.
The powers that be are going to have their own ideas about what needs to happen.
They never like to let a good crisis go to waste, and they will certainly try to use every crisis to shape the world even more in their own image.
The coming economic collapse is going to play out over a number of years and it is going to be absolutely horrible.
Billions of people will deeply suffer because of it.
It will be unlike anything any of us have ever seen.
Personally, I believe that it will eventually be much worse than the Great Depression of the 1930s.
The United States is going to get hit particularly hard. The United States is going to lose its position as the leading economic power on the globe and the U.S. dollar is going to lose its position as the default reserve currency of the world.
If you thought that the unemployment crisis during the last recession was bad, just wait until you see what is coming.
We are heading for a complete and total unemployment nightmare in the United States. Unemployment is eventually going to soar well up into the double digits.
The U.S. government will try a wide variety of measures to try to “fix” things, and some will likely have some limited success.
But the debt-fueled prosperity that we are all enjoying now is going to come to an end.
There are going to be riots in our major cities, crime and looting will be absolutely rampant and it will seem like society is coming apart at the seams.
The U.S. government will likely respond by becoming more authoritarian than ever, and that will truly be frightening.
But all of this is going to play out over time.
Right now, things are not as good as they were five years ago.
A couple of years from now, things will be even worse. Many of us will look back and wish that we could return to the “good old days” of 2011 and 2012.
We are on a decline that is not going to stop. There will be little false bubbles of hope like we are in now, but they won’t last long.
But just because the economy is falling apart does not mean that your life is over. Many that are busy preparing right now will be greatly blessed even in the middle of all the chaos.
And it is when things are the darkest that the greatest lights are needed.
Make the decision right now to be a light during the times ahead.
You can choose to let the times that are coming destroy you, or you can choose to make them the greatest adventure of your life.
The Federal Reserve says that everything is going to be okay. The Fed says that unemployment is going to go down, inflation is going to remain low and economic growth is going to steadily increase. Do you believe them this time? As you will see later in this article, Federal Reserve Chairman Ben Bernanke has been dead wrong about the economy over and over again. But the mainstream media and many Americans still seem to have a lot of faith in the Federal Reserve. It doesn’t seem to matter that Bernanke and other Fed officials have been telling the American people lies for years. As I always say, most people believe what they want to believe, and many people seem to want to have blind faith in the Federal Reserve even when logic and reason would dictate otherwise. The truth is that things are not going to be getting much better than they are right now. When the next wave of the financial crisis hits, the U.S. economy is going to fall back into recession, financial markets are going to crash and unemployment is going to absolutely skyrocket. But you will never hear any of that from the Federal Reserve.
The following are 5 new lies that the Federal Reserve is telling the American people. After each lie I have posted what The Economic Collapse Blog thinks is actually going to happen….
#1 The Federal Reserve says that the labor market has improved and that unemployment is going to decline significantly over the next few years.
The following is a quote from the FOMC press release that was released on Wednesday….
Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated.
The Federal Reserve is projecting that the unemployment rate will fall within the range of 7.8 percent and 8.0 percent by the end of 2012.
The Federal Reserve is also projecting that the unemployment rate will fall within the range of 6.7 percent and 7.4 percent by the end of 2014.
The Economic Collapse Blog says that the labor market has not improved. In March 2010, 58.5 percent of all working age Americans had a job. Exactly two years later in March 2012, 58.5 percent of all working age Americans had a job. If the labor market was improving, the percentage of working age Americans with a job should have gone up.
The Economic Collapse Blog also says that while there is a chance the official unemployment rate may go down slightly in the short-term, the truth is that it is going to go up into double digits once the next wave of the financial crisis hits us.
#2 The Federal Reserve says that that U.S. economy is going to experience solid GDP growth over the next couple of years.
In fact, the Federal Reserve is projecting that U.S. GDP will be rising at an annual rate that falls between 3.1 percent and 3.6 percent by the end of 2014.
The Economic Collapse Blog says that a great economic cataclysm is coming….
“When the European banking system crashes (and it will) it is going to reverberate around the globe. The epicenter of the next great financial crisis is going to be in Europe, and it is getting closer with each passing day.”
#3 The Federal Reserve says that we can expect low inflation for an extended period of time.
The Federal Reserve is officially projecting that the annual rate of inflation will not be higher than 2.0 percent by the end of 2012. Federal Reserve Chairman Ben Bernanke reinforced this projection during his press conference on Wednesday….
“But we expect that to pass through the system, and assuming no new shocks in the oil sector, inflation ought to moderate to about 2 percent later this year.”
The Economic Collapse Blog says that the Fed is being tremendously dishonest and that if inflation was measured the exact same way that it was measured back in 1980, the annual rate of inflation would be more than 10 percent right now.
The truth is that most middle class families know that we do not have low inflation right now. This is hammered home millions of times a day when average Americans visit the gas station or the grocery store.
At the beginning of the next recession inflation will likely subside, but that will only be because economic activity will be slowing down dramatically.
#4 The Federal Reserve says that it has built up a 30 year reputation for keeping inflation low.
Ben Bernanke actually had the gall to make the following claim during his press conference on Wednesday….
“We, the Federal Reserve, have spent 30 years building up credibility for low and stable inflation, which has proved extremely valuable in that we’ve been able to take strong accommodative actions in the last four, five years to support the economy.”
Oh really?
The Economic Collapse Blog says that the Federal Reserve has nearly a 100 year reputation for destroying the value of the U.S. dollar. Even using the Fed’s doctored numbers, the value of the U.S. dollar has declined by more than 95 percent since 1913.
To get a really good idea of just how much the dollar has been destroyed by the Fed over the years, just check out this chart.
#5 Federal Reserve Chairman Ben Bernanke says that we should trust him because the Federal Reserve stands ready to do whatever is necessary to support the U.S. economy.
“If appropriate… we remain entirely prepared to take additional action”
The Economic Collapse Blog says that Federal Reserve Chairman Ben Bernanke is doing a great disservice by not warning the American people about the tremendous crisis that is coming. In a recent article I stated that this next crisis will blindside most Americans just like the last one did….
“Sadly, just like back in 2008, most people will never even see this next crisis coming.”
So who should you trust – the Federal Reserve or all of the half-crazed bloggers out there that are warning about the “serious doom” that is coming.
Well, come back to this article in a year or two and compare how accurate the predictions were.
In the end, time will tell who is telling lies and who is not.
If we do not learn from history, we are doomed to repeat it.
For example, let’s take a quick look at Ben Bernanke’s track record over the past several years.
#1 (July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”
#2 (October 20, 2005) “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”
#3 (November 15, 2005) “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”
#4 (February 15, 2006) “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
#5 (February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”
#6 (March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”
#7 (May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”
#8 (January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”
#9 (June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”
But don’t worry, Ben Bernanke insists that he knows exactly what is going on this time.
So do you believe him?
A lot of Americans don’t. In fact, an “economic collapse” is the number one catastrophic event that Americans worry about according to one recent survey.
The central planners over at the Federal Reserve are not going to solve our economic problems.
The truth is that the Fed is at the very heart of our economic problems.
We have been living in the greatest debt bubble in the history of the world and that debt bubble has been facilitated by the Fed.
Over the past three decades, the total amount of debt in America has increased by about 50 trillion dollars. By stealing from future generations, we have been able to live like kings and queens, but there is going to be a great price to pay for our foolishness.
Ben Bernanke and the other folks running the Federal Reserve are just going to keep insisting that everything is going to be okay for as long as they possibly can. They are going to tell you that they know exactly how to fix things and that the economy will be back on track very soon.
There are two very different Americas today. In one, the stock market is soaring, high end homes are selling briskly, big banks and hedge funds are rolling in money as if the last financial crisis never even happened, and life is really, really good. In the other America, good jobs are incredibly scarce, incomes are declining, and poverty is skyrocketing to levels that we have never seen before. The gap between the wealthy and the poor in America is getting wider with each passing day. In fact, it is my contention that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does. If you have never seen Downton Abbey, you really should. It is one of the most extraordinary shows to appear on television in years. It is a drama set in the UK which follows the lives of the aristocratic Crawley family and their servants throughout the early part of the 20th Century. It can be a bit jarring to watch servants wait on their masters hand and foot and refer to them by such titles as “Lord” and “Lady”, but the truth is that in many ways there is more inequality today than there was back then. As far as people living in the worst areas of cities such as Detroit and Cleveland are concerned, the socialites that live on Fifth Avenue in New York City or in multi-million dollar homes out in the Hamptons might as well be from another planet. If you have lots of money, America is still a really great place to live. If you barely have any money, America can be really cold and cruel. Sadly, our politicians continue to pursue policies that make things even better for those working for the establishment in places such as Washington D.C. and Manhattan, and worse for all the rest of us. This has especially been true over the course of the past four years. If nothing is done, the gaping chasm between the rich and the poor will continue to get even worse, and in the end that will have some really severe consequences for our society.
17 Reasons To Be EXTREMELY Concerned About The Second Half Of 2012
The following are 17 reasons to be extremely concerned about the second half of 2012….
#1 Historical Trends
A recent IMF research paper by Luc Laeven and Fabián Valencia showed that a banking crisis is far more likely to start in September than in any other month. The following chart is from their report….
So what will this September bring?
#2 JP Morgan
Do you remember back in May when JP Morgan announced that it would be taking a 2 billion dollar trading loss on some derivatives trades gone bad? Well, the New York Times is now reporting that the real figure could reach 9 billion dollars, but nobody really knows for sure. At some point is JP Morgan going to need a bailout? If so, what is that going to do to the U.S. financial system?
#3 Derivatives
Last week, Moody’s downgraded the credit ratings of 15 major global banks. As a result, a number of them have been required to post billions of dollars in additional collateral against derivatives exposures….
The worldwide derivatives market is starting to show some cracks, and at some point this is going to become a major disaster.
Remember, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. When this bubble completely bursts it is going to be impossible to fix.
#4 LEAP/E2020 Warning
LEAP/E2020 has issued a red alert for the global financial system for this fall. They are warning that the “second half of 2012″ will represent a “major inflection point” for the global economic system….
#5 Increasing Pessimism
One recent survey of corporate executives found that only 20 percent of them expect the global economy to improve over the next 12 months and 48 percent of them expect the global economy to get worse over the next 12 months.
#6 Spain
The Spanish financial system is basically a total nightmare at this point. Moody’s recently downgraded Spanish debt to one level above junk status, and earlier this week Moody’s downgraded the credit ratings of 28 major Spanish banks.
According to CNBC, Spain’s short-term borrowing costs are now about three times higher than they were just one month ago….
Needless to say, this is very, very bad news.
#7 Italy
The situation in Italy continues to deteriorate and many analysts believe that it could be one of the next dominoes to fall. The following is from a recent Businessweek article….
A recent Fortune article detailed some of the economic fundamentals that have so many economists deeply concerned about the Italian economy right now….
#8 Greece
I have written extensively about the financial nightmare that is unfolding in Greece. Unemployment has soared past the 20 percent mark, youth unemployment is above 50 percent, the Greek economy has contracted by close to 25 percent over the past four years and now Greek politicians are saying that a third bailout package may be necessary.
#9 Cyprus
The tiny island nation of Cyprus has become the fifth member of the eurozone to formally request a bailout. This is yet another sign that the eurozone is rapidly falling apart.
#10 Germany
German Chancellor Angela Merkel continues to promote an austerity path for Europe and she continues to maintain her very firm position against any kind of eurozone debt sharing….
In fact, Merkel says that there will be no eurobonds “as long as I live“. This means that there will be no “quick fix” for the problems that are unfolding in Europe.
#11 Bank Runs
Every single day, hundreds of millions of dollars is being pulled out of banks in southern Europe. Much of that money is being transferred to banks in northern Europe.
In a previous article I included an extremely alarming quote from a CNBC article about the unfolding banking crisis in Europe….
How long can these bank runs continue before banking systems start to collapse?
#12 Preparations For The Collapse Of The Eurozone
As I have written about previously, the smart money has already written off southern Europe. All over the continent major financial institutions are preparing for the worst. For example, just check out what Visa Europe is doing….
#13 Global Lending Is Slowing Down
All over the globe the flow of credit is beginning to freeze up. In fact, the Bank for International Settlements says that worldwide lending is contracting at the fastest pace since the financial crisis of 2008.
#14 Sophisticated Cyber Attacks On Banks
It is being reported that “very sophisticated” hackers have successfully raided dozens of banks in Europe. So far, it is being estimated that they have stolen 60 million euros….
What happens someday if we wake up and all the money in the banks is gone?
#15 U.S. Municipal Bankruptcies
All over the United States there are cities and towns on the verge of financial disaster. This week Stockton, California became the largest U.S. city to ever declare bankruptcy, but the reality is that this is only just the beginning of the municipal debt crisis….
#16 The Obamacare Decision
The U.S. economy is already a complete and total mess, and now the Obamacare decision is going to throw a huge wet blanket on it. All over America, small business owners are saying that they are going to have to let some workers go because they cannot afford to keep them all under Obamacare. It would be hard to imagine a more job killing law than Obamacare, and now that the Supreme Court decision has finally been announced we are going to see many businesses making some really hard decisions.
#17 The U.S. Election
It is being reported that Barack Obama is putting together an army of “thousands of lawyers” to deal with any disputes that arise over voting procedures or results. It certainly looks like this upcoming election is going to be extremely close, and there is the potential that we could end up facing another Bush v. Gore scenario where the fate of the presidency is determined in court. This campaign season is likely to be exceptionally nasty, and I fear what may happen if there is not a decisive winner on election day. The possibility of significant civil unrest is certainly there.
We definitely live in “interesting” times.
Personally, I am deeply concerned about the September, October, November time frame.
The other day, Joe Biden delivered a speech in which he made the following statement….
“It’s A Depression For Millions And Millions Of Americans”
And what Biden said was right for once. Millions of Americans are out of work right now and millions of Americans have fallen out of the middle class in recent years. If you have lost everything, it does feel like you are living through a depression.
When people lose everything, they tend to get desperate. And desperate people do desperate things – especially when they are angry.
A whole host of recent opinion polls have shown that anger and frustration in the United States are rising to unprecedented levels. The ingredients are certainly there for an explosion. Someone just needs to come along and light the fuse. We truly do live in frightening times.
Let us hope for the best, but let us also prepare for the worst.