Barack Obama has destroyed the future of America in order to improve his chances of winning the next election. Under Obama, 5.3 trillion dollars has been ruthlessly stolen from our children and our grandchildren. That money has been used to pump up the debt-fueled false prosperity that we have been experiencing. When the U.S. government borrows money that it does not have from someone else (such as China) and spends that money into the economy it is going to make our economic numbers look better. Even if the government spends that money on incredibly stupid things, it still gets into the hands of average Americans who in turn spend that money on food, gas, clothes, etc. If we were to go back and take that extra 5.3 trillion dollars out of the U.S. economy, I guarantee you that we would be in a rip-roaring depression right now. We would look a lot like Greece at this point. For several years Greece has been raising taxes and cutting government spending in an attempt to balance the budget and these austerity measures have resulted in an unemployment rate of over 23 percent and an economy that has contracted by close to 25 percent. Most Americans don’t want to go through pain like that so they are okay with continuing to financially rape our children and our grandchildren. Just imagine how you would feel if your parents died tomorrow and you found out that they had left you with a million dollar debt that you were legally obligated to pay off. How would you feel, knowing that you had just been sold into debt slavery for the rest of your life? Well, that is how our children and our grandchildren are going to feel. We are destroying the greatest economic machine the world has ever seen, we are accumulating the biggest mountain of debt in the history of the planet, and the coming economic collapse that we have caused is going to wipe out the promising future that our children and our grandchildren were supposed to have. If they get the chance, future generations of Americans will curse us bitterly and will spit on our graves. What we are doing to our children and our grandchildren is the kind of stuff that horror movies are made of. You should be ashamed of yourself America.
The federal budget deficit for 2012 will be larger than the entire U.S. national debt was 30 years ago. In 1982 Ronald Reagan was in the White House and the U.S. national debt was considered to be a tremendous national crisis. But somehow we have allowed our national debt to grow from about a trillion dollars back then to approximately $16,000,000,000,000 today.
By the end of Obama’s first term, the U.S. national debt will have grown more than it did from the time that George Washington became president to the time that George W. Bush became president.
That is hard to believe.
Obama is going to outdo all the presidents from George Washington through Bill Clinton in just one term.
At this point, the U.S. national debt is more than 22 times larger than it was when Jimmy Carter became president.
This has allowed us to enjoy a standard of living far beyond what we deserved to. We have stolen from the future to make the present more pleasant.
But hardly anybody wants the party to end. Especially not our Congress critters – they are living like kings and queens at our expense. Our “representatives” in Washington D.C. love to give speeches about being “financially responsible”, but most of them never take any serious action about the debt because the way things are working now has been incredibly good to them.
And the truth is that both political parties have been responsible. In 2010, Republicans took control of the House of Representatives with a clear mandate to get government spending under control. Not a single penny of government money can be spent without their permission. But since they took control, the U.S. national debt has increased by another 1.8 trillion dollars.
At this point, this current Congress (controlled by both Republicans and Democrats) has added more to the national debt than the first 97 Congresses combined.
We expect this kind of nonsense from the Democrats, but the Republicans are supposed to know better.
Of course our entire financial system is designed to permanently entrap our federal government in an endless spiral of debt, but neither political party ever talks about that.
Sadly, the U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created.
But we never hear about the link between the Federal Reserve and our national debt from either political party or on the mainstream news.
So most Americans do not even realize that our system is designed to create government debt.
It is absolutely disgusting.
We say that we care about our kids, and yet we are passing down a $16,000,000,000,000 debt to them.
Talk about child abuse.
Most people have a really hard time grasping how much money 16 trillion dollars actually is.
If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
And it would take you more than half a million years to spend 16 trillion dollars.
This is a debt that is impossible to pay back. Just look at how it has exploded over the past 40 years….
In a previous article I discussed the distressing rate at which our debt is growing….
It took more than 200 years for the U.S. national debt to reach 1 trillion dollars. In 1986, the U.S. national debt reached 2 trillion dollars. In 1992, the U.S. national debt reached 4 trillion dollars. In 2005, the U.S. national debt doubled again and reached 8 trillion dollars. Now the U.S. national debt is about to cross the 16 trillion dollar mark. How long can this kind of exponential growth go on?
If we can’t even slow down the growth of our debt, how do we ever expect to repay a single penny?
The sad truth is that we aren’t ever going to start paying down our debt. We have gotten to the point where if we take our foot off the debt accelerator we plunge directly into a depression and the entire system collapses. It is like a really sick version of the movie “Speed”.
Where is Keanu Reeves when you need him?
Since Barack Obama entered the White House, he has approved a whole host of measures that have been good for the economy in the short-term. TARP, the stimulus packages, the auto industry bailout and the payroll tax cut are just a few examples.
Barack Obama has wanted to do everything he possibly can to stimulate the economy in the short-term so that he can win again in 2012.
But what about the future?
Barack Obama could not care less about the future. He is just like so many of our other politicians. He is blinded by selfish ambition.
Since Barack Obama became president, the U.S. national debt has increased by an average of more than $64,000 per taxpayer.
Are you willing to write a check for your share?
Oh, let’s just pass this horrific debt on to our children, right?
The path that we are on as a nation cannot go on too much longer. The truth is that we are headed for financial oblivion.
A recently revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.
Of course we will never get to the point. Our financial system will collapse long before then.
Sadly, the United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain does.
So why are we not like Greece or Spain yet?
Well, it is because we are still able to borrow huge piles of money very, very cheaply.
But at some point that will come to an end, and when it does the consequences are going to be nightmarish.
Historically, the interest rate on 10 year U.S. Treasuries has averaged 6.68 percent. If the average rate of interest on U.S. debt rose to that level today, we would be paying more than a trillion dollars a year just in interest on the national debt.
And when you consider our future unfunded liabilities things get even more frightening.
According to Boston University economist Laurence Kotlikoff, the “fiscal gap” is “the present value difference between projected future spending and revenue”. His calculations have led him to the conclusion that the United States is facing a fiscal gap of 222 trillion dollars.
And this gap is rising at a breathtaking pace.
The following is an excerpt from a recent article co-authored by Kotlikoff….
In 2007, the first year the CBO produced the Alternative Fiscal Scenario, the gap, by our reckoning, stood at $175 trillion. By 2009, when the CBO began reporting the AFS annually, the gap was $184 trillion. In 2010, it was $202 trillion, followed by $211 trillion in 2011 and $222 trillion in 2012.
But if we interrupt this debt cycle we immediately go into a depression.
We are a debt addict that will die without more debt.
Meanwhile, our national ability to produce wealth is going down the toilet.
All over the country businesses are shutting down, factories are being closed and millions of jobs are being sent overseas.
As I wrote about the other day, American families are steadily getting poorer. The middle class is shrinking and the tax base is shriveling up.
Many Americans end up flat broke at the end of their lives these days. In fact, one study found that nearly half of all retirees end up with $10,000 or less when they die.
So where is all of the money for servicing this gigantic national debt going to come from?
Even if Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
So what is the solution?
If we keep spending money like this we are doomed, but if we stop spending money like this we are doomed.
And debt is not just a problem that the federal government is facing.
Posted below is a chart that shows the growth of all forms of debt in the United States over the past several decades. 40 years ago, there was less than 2 trillion dollars of total debt owed in the United States. Now there is nearly 55 trillion dollars of debt owed. This generation has destroyed the future and has set the stage for an unprecedented economic collapse. Shame on you America….
All over America the corn is dying. If drought conditions persist in the middle part of the country, wheat and soybeans will be next. Weeks of intense heat combined with extraordinarily dry conditions have brought many U.S. corn farmers to the brink of total disaster. If there is not significant rainfall soon, many farmers will be financially ruined. This period of time is particularly important for corn because this is when pollination is supposed to happen. But the unprecedented heat and the extremely dry conditions are playing havoc with that process. With each passing day things get even worse. We have seen the price of a bushel of corn soar 41 percent since June 14th. That is an astounding rise. You may not eat much corn directly, but it is important to realize that corn or corn syrup is just about in everything these days. Just look at your food labels. In the United States today, approximately 75 percent of all processed foods contain corn. So a huge rise in the price of corn is going to be felt all over the supermarket. Corn is also widely used to feed livestock, and if this crisis continues we are going to see a significant rise in meat and dairy prices as well. Food prices in America have already been rising at a steady pace, and so this is definitely not welcome news.
The weather conditions in the middle part of the country during the last couple of months have been highly unusual. The following is from a recent article in the Los Angeles Times….
It’s not that the Midwest hasn’t been extremely hot before, and it’s not that it hasn’t been incredibly dry.
But it’s unusual for a vast swath of the Midwest to be so very hot and so very dry for so very long — particularly this early in the summer.
The current heat wave — which is spurring comparisons to the catastrophic heat of 1936 — is “out of whack,” meteorologist Jim Keeney said Friday in an interview with the Los Angeles Times.
Corn crops typically pollinate and mature in June and early July. That is why this time of the year is so vitally important for corn. We have reached a make it or break it moment.
The following is how an Accuweather.com report described what is happening right now….
Either heat or drought can stress the stalks, but both can basically shut down the pollination process. When this happens few, small or no ears of corn form.
According to AccuWeather.com Agricultural Meteorologists, you can’t raise a corn crop with less than an inch of rain over six weeks, combined with 100-degree and higher temperatures. However, these conditions have taken place in much of the southern corn belt through the week of July 4, 2012.
If pollination does not happen, corn farmers might as well give up.
Just check out what agricultural economist Chris Hurt said the other day….
“Pollination problems just can’t be overcome, even if the weather turns. There’s no turning back. There’s just failure.”
At this point, half of all corn in the state of Indiana is already in poor shape.
With each passing day, the condition of the corn gets even worse.
As a recent article in the Chicago Tribune detailed, many farmers feel completely helpless at the moment….
Dave Kestel, who farms about 1,300 acres in Manhattan about 40 miles southwest of Chicago, said he feels helpless.
“Every day you get out there and it’s the same heat and cloudless sky,” he said. “You see your corn just withering out there, knowing you can’t do anything about it.”
The United States is suffering from a severe lack of rain. Just look at the chart posted below. According to the U.S. Drought Monitor, most of the country is experiencing drought conditions right now….
These drought conditions have also played a major role in the huge number of wildfires that we have seen lately.
There are a few northern states that are not feeling the drought right now, but otherwise the rest of the country is extremely dry.
So what does all of this mean for you and I?
A recent article by Holly Deyo summarized why we should all be praying for rain….
Since 75% of grocery store products use corn as a key ingredient, expect food prices to skyrocket. Corn is also a staple in many fast foods. Corn is in ethanol and the main food source or chickens. In addition to this, maize is in many things that aren’t obvious like adhesives, aluminum, aspirin, clothing starch, cosmetics, cough syrup, dry cell batteries, envelopes, fiberglass insulation, gelatin capsules, ink, insecticides, paint, penicillin, powders, rugs and carpets, stamps, talcum, toothpaste, wallpaper, and vitamins. That’s just for starters…
This is a huge heads up for you to purchase corn-using products NOW before these conditions reflect in grocery goods. It will be a narrow window of opportunity.
These thoughts are being echoed by many agricultural economists as well. According to Businessweek, the outlook for U.S. food prices is bleak….
“When people look at rising prices for hamburger, butter, eggs and other protein sources from higher corn costs, that’s when more money ends up in the food basket,” said Minneapolis- based Michael Swanson, a senior agricultural economist at Wells Fargo & Co., the biggest U.S. farm lender. “We were hoping for a break, and we aren’t going to get it.”
Unfortunately, the fact that the corn is dying all over America is not just a problem for the United States.
As Businessweek also recently noted, the fate of U.S. corn affects the entire globe….
When rain doesn’t fall in Iowa, it’s not just Des Moines that starts fretting. Food buyers from Addis Ababa to Beijing all are touched by the fate of the corn crop in the U.S., the world’s breadbasket in an era when crop shortages mean riots.
This year they have reason to be concerned. Stockpiles of corn in the U.S. tumbled 48 percent between March and June, the biggest drop since 1996, the U.S. Department of Agriculture said last week. And that was before drought hit the Midwest.
The United States is the world’s biggest exporter of corn by far, and if there is a massive corn crop failure in America it is going to be felt to the four corners of the earth.
Just check out what Abdolreza Abbassian, a senior economist with the U.N. Food & Agriculture Organization, said the other day….
“Everyone watches the U.S. because they can rely on it. Without it, the world would starve.”
Back in February, I wrote an article that suggested that we could see dust bowl conditions return to the middle part of this country in the years ahead.
A lot of people were skeptical of that article.
Not quite as many people are skeptical today.
The following is from a recent article posted on MSNBC entitled “Fears of new Dust Bowl as heat, drought shrivel corn in Midwest“….
Crop insurance agents and agricultural economists are watching closely, a few comparing the situation with the devastating drought of 1988, when corn yields shriveled significantly, while some farmers have begun alluding, unhappily, to the Dust Bowl of the 1930s. Far more is at stake in the coming pivotal days: with the brief, delicate phase of pollination imminent in many states, miles and miles of corn will rise or fall on whether rain soon appears and temperatures moderate.
As I wrote about last week, if the weather does not turn around soon the implications are going to be staggering.
Even if we got some significant rainfall at this point a tremendous amount of damage has already been done according to the Washington Post….
Jay Armstrong, owner and operator of Armstong Farms in Kansas, flew his small plane over a portion of the affected area and landed with the impression that the potential damage is far worse than is commonly understood.
“At this time of year, when you look down in a place like Indiana or Illinois, you should see just lush green fields,” Armstrong said. “I saw bare soil. I just thought to myself, the market has no idea what’s coming.”
So is there significant rain in the forecast?
Unfortunately, the answer is no.
The National Weather Service says that the corn belt will experience “above-normal temperatures” and “below-normal rainfall” over the next week.
At this point it does not look like there will be any significant rainfall for the foreseeable future….
“We got a break in the temperatures over the weekend but no rain of significance is in sight for next seven days,” said Jim Keeney, a meteorologist for the National Weather Service the US central region based in Kansas City, Missouri.
Needless to say, that is really bad news.
Right now we just have more heat and more dryness to look forward to. The skies are like iron and the earth is like brass. We like to think that we have conquered nature, but at moments such as these we see that is not true at all.
A couple of weeks ago I wrote an article about all of the reasons why we should be concerned about the second half of 2012. In that article I did not even mention drought and crop failures. Sometimes major problems have a way of piling on top of themselves.
The U.S. economy is already in bad enough shape without adding major crop failures to the mix. This is something that we just don’t need right now.
But it looks like we are going to have to deal with it. Unless there is a major change in the weather, food prices are going to go up even more and large numbers of farmers and ranchers are going to be absolutely devastated.
Let us all pray for rain. We desperately need it.
The way that we tax people in the United States is fundamentally broken and should be completely discarded. The U.S. tax code is absolutely riddled with loopholes that allow the super rich to legally avoid taxes while many of the rest of us are being taxed into oblivion. In our system of taxation, middle class families that work hard and try to play by the rules are deeply penalized while those that are willing to abuse the system make out like bandits. There is something fundamentally wrong with a system that enables wealthy politicians such as Barack Obama and Mitt Romney to pay a smaller percentage of their incomes in taxes than millions of middle class families. Mitt Romney has millions of dollars parked down in the Cayman Islands and in other tax havens. He does this to avoid taxes. Unfortunately, most Americans do not have the resources to funnel money through offshore tax havens. Most Americans just automatically have their paychecks shredded by taxes and then try to live on whatever is left over. Most Americans are just trying to survive financially from one month to the next. But the super rich have options. Thanks to technology, they can live almost anywhere they want and they can run their companies and manage their investments from anywhere in the world. The truth is that the wealthier you are the easier it is to avoid taxes. But even as the ultra-wealthy do their best to avoid taxes, many of them still feel free to demand that the rest of us be taxed more.
So what are some of the ways that the super rich avoid taxes?
Well, let’s start with those that are just “somewhat wealthy”. Many millionaires still want or need to be U.S. citizens, so they are subject to the U.S. tax code. Fortunately for them, their tax lawyers know of thousands of loopholes that have been designed to help the rich avoid taxes.
The following is from a recent article by Jen Talley….
Some of the richest people in the country pay the least, relatively speaking, in taxes. How is this possible? Answer: Through the clever manipulation of the U.S. tax code’s loopholes. And it works: as income rises, effective tax rates rise as well, but only up to a point. IRS data shows that the effective income tax rate flattens out at just over 24 percent for those making over a million dollars. As income exceeds $1.5 million, the rate begins to decline; those with incomes above $10 million pay an average income tax rate of around 19 percent. So, how do they do it?
You could write an entire series of books on the technical details of how this gets done. Trust me, I studied tax law when I was in law school.
If you are interested in digging into some of the technical details of tax avoidance, a recent Businessweek article detailed 10 ways that the wealthy use our current tax code to avoid paying billions of dollars in taxes. It is an article worth reading if you have the time.
Sadly, tax avoidance by the wealthy is not just something that happens in the United States. The truth is that the exact same kind of thing happens in the UK as well.
There is not an easy fix to this problem. Our politicians have had decades to try to come up with a fair tax system and they have completely failed. The wealthy are always several steps ahead of them.
But federal taxes are not the only taxes that can be avoided. The vast difference in state tax rates creates another opportunity.
One advantage that wealthy Americans have is that they are far more mobile than most other Americans are. So if they don’t like the tax system in one state they can simply pick up and move to another state.
According to the Tax Foundation, 3.4 million Americans left New York state between 2000 and 2010.
So where did they go?
The following is from a recent CNS News article….
Where are they escaping to? The Tax Foundation found that more than 600,000 New York residents moved to Florida over the decade – opting perhaps for the Sunshine State’s more lenient tax system – taking nearly $20 billion in adjusted growth income with them.
There is no state income tax in Florida. So moving from New York to Florida can end up saving you a bundle.
The same kind of migration is happening out west as well. According to that same CNS article, hundreds of thousands of people have been moving from California (a high tax state) to Texas (no state income tax)….
Between 2000 and 2010, the most recent data available, 551,914 people left California for Texas, taking $14.3 billion in income. Texas has no state income tax or estate tax.
A total of 48,877 people moved to Texas from California between 2009 and 2010 alone, totaling $1.2 billion in income. Another 28,088 from California relocated to Nevada and 30,663 to Arizona, a loss of $699.1 million and $707.8 million in income respectively.
Not that anyone really needs much of an excuse to move away from California. It is rapidly decaying right in front of our eyes.
But a lot of families do not have the same options that wealthy people do. Unfortunately, most average Americans are tied to their jobs and it would be much more difficult for them to pick up and move across the country. In this economy it can be economic suicide to give up a good job.
The reality is that most of us simply do not have the resources to play the same kinds of games that the wealthy play.
Sadly, even our most prominent politicians avoid taxes.
Just look at Massachusetts Senator John Kerry. He has avoided approximately $500,000 in taxes by docking his yacht in Rhode Island rather than in Massachusetts.
Yet Kerry sure does love to call for more taxes on the rest of us, doesn’t he?
Now let’s talk about the “super rich” and the “ultra-wealthy”. For many people that are worth billions of dollars, tax avoidance has become an art from.
Facebook co-founder Eduardo Saverin made national headlines recently when he gave up his U.S. citizenship, but the truth is that his case is small potatoes compared to the global elite and the shadow banking system that supports them.
According to the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks.
That amount is more than the GDP of the United States for an entire year.
So what do I mean by “offshore banks”? I defined the term in a previous article….
Well, the term originally developed because the banks on the Channel Islands were “offshore” from the United Kingdom. Most “offshore banks” are still located on islands today. The Cayman Islands, Bermuda, the Bahamas, and the Isle of Man are examples of this. Other “offshore banking centers” such as Monaco are actually not “offshore” at all, but the term applies to them anyway.
Traditionally, these offshore banking centers have been very attractive to both criminals and to the global elite because they would not tell anyone (including governments) about the money that anyone had parked there.
It has been reported that 80 percent of all international banking transactions involve offshore banks. A whopping 1.4 trillion dollars is being held in offshore banks in the Cayman Islands alone.
An article that appeared in the Guardian estimated that a third of all the wealth on the entire planet is being kept in offshore banks. One of the primary reasons for this is tax avoidance.
A lot of wealthy individuals never even visit these tax havens and yet reap the benefits anyway. The truth is that tax avoidance has become way too easy. The following example is from a recent Politico article….
A plausible scenario plays out like this: I hire an accountant. Doing her job, my accountant tells me that if I sign a few legal documents and route my money through a small Caribbean island, I could keep more of my paycheck and pay a lower tax rate. I may have earned my money in the United States, but legally I can claim that it was, in fact, earned in a tax haven.
Are you disgusted yet?
You should be.
But even though they avoid taxes like the plague, many of these elitists have the gall to call for higher taxes on all the rest of us.
For example, let’s review what the managing director of the IMF, Christine Lagarde, said in a recent interview….
“Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.”
Even more than she thinks about all those now struggling to survive without jobs or public services? “I think of them equally. And I think they should also help themselves collectively.” How? “By all paying their tax. Yeah.”
It sounds as if she’s essentially saying to the Greeks and others in Europe, you’ve had a nice time and now it’s payback time.
“That’s right.” She nods calmly. “Yeah.”
And what about their children, who can’t conceivably be held responsible? “Well, hey, parents are responsible, right? So parents have to pay their tax.”
Well, it turns out that she doesn’t pay any income taxes at all on her own income….
The IMF chief Christine Lagarde was accused of hypocrisy yesterday after it emerged that she pays no income tax – just days after blaming the Greeks for causing their financial peril by dodging their own bills.
The managing director of the International Monetary Fund is paid a salary of $467,940 (£298,675), automatically increased every year according to inflation. On top of that she receives an allowance of $83,760 – payable without “justification” – and additional expenses for entertainment, making her total package worth more than the amount received by US President Barack Obama according to reports last night.
Her “diplomatic status” allows her to escape all income taxes.
So perhaps she should pay her “fair share” before pointing the finger at anyone else.
But she is not the only one being hypocritical.
The super rich claim that they should pay lower taxes on investment income for the good of our “capitalist system”, but when their banks are about to go under they are more than happy to have those losses be socialized.
As I wrote about yesterday, the stage is already set for another massive round of bailouts when the next great financial crisis strikes. Once again our taxes will pay for the mistakes of the ultra-wealthy.
The truth is that our system is fundamentally broken.
We need to abolish the income tax and shut down the IRS.
Those two steps alone would do wonders for our economic system.
We also need to shut down the Federal Reserve and break up the too big to fail banks.
Unfortunately, the vast majority of our politicians are not even willing to consider any of those solutions.
So our fundamentally broken system will continue to chug along.
It really is sad.
Which lifestyle choice produces better results – being a hard working American or being a government parasite? Actually, when you look at the cold, hard numbers they may just surprise you. In America today, we deeply penalize hard work and we greatly reward government dependence. If you live in a very liberal area of the country and you know how to game the system, it is entirely possible to live a comfortable existence without ever working too much at all. In fact, there are some Americans that have been living off of “government benefits” for decades. Many of these people actually plan their lives around doing exactly what they need to do to qualify for as many benefits as possible. America is rapidly turning into a European-style socialist welfare state and it is destroying our nation socially and financially. Ever since the “war on poverty” began our debt has absolutely exploded and yet now there are more poor people in this country than ever before. Obviously something is not working.
Now don’t get me wrong. I deeply believe in having compassion for those that are going through tough times and having a safety net for those that cannot take care of themselves. We should not have a single person in this nation going without food or sleeping in the streets.
But in America today it is absolutely ridiculous how many people are climbing aboard the “safety net”. At this point, an astounding 49 percent of all Americans live in a home that receives some form of government benefits.
So who pays for all of this?
The people that drag themselves out of bed and go to work each day pay for it all.
For a few moments, let’s examine how the lifestyle of a typical hard working American compares to the lifestyle of a government parasite.
In America today, the median yearly household income is somewhere around $50,000. About half of all American households make more than that and about half of all American households make less than that. When you break it down, it comes to about $4000 a month.
So how far does $4000 go in America today?
Unfortunately, it doesn’t go very far at all.
First of all, a hard working American family will need some place to live. Unfortunately, the vast majority of the decent jobs are near the big cities, and it is more expensive to live near the big cities. Let’s assume that an average family of four will spend about $1000 a month on rent or on a mortgage payment.
The government parasite, on the other hand, has a whole host of federal, state and local housing programs to take advantage of. During the recent economic downturn, more Americans than ever have been turning to the government for help with housing costs. For example, federal housing assistance outlays increased by a whopping 42 percent between 2006 and 2010.
Once you have a place to live, you have to provide power and heat for it. For the average hard working American, this is going to probably average about $300 a month, although this can vary greatly depending on where you live.
For the government parasite, there are once again a whole host of government programs to help with this. For example, LIHEAP (Low Income Home Energy Assistance Program) assists low income households in paying their home heating bills.
Most average hard working Americans are also going to need phone and Internet service. Let’s assume that the hard working family of four in our example is extremely thrifty and only spends $100 a month for these services.
For the government parasite, cell phone service is not a problem. As I have written about previously, those that “qualify” can receive a free cell phone and free cell phone minutes every single month from the federal government. In addition, in some areas of the nation low income families can qualify for deeply subsidized home Internet service.
In order to earn money, our hard working family is going to need to get to work. In most households, both parents have decided to work these days so both of them will need cars. Let’s assume that the family is very thrifty and that both cars were purchased used and that the car payments only total about $400 a month.
The hard working family will also need auto insurance for the two vehicles. Let’s assume that both parents have a great driving record and that they only pay a total of about $100 a month for car insurance.
The cars will also need to be filled up with gasoline. The average U. S. household spent $4155 on gasoline during 2011, but let’s assume that our family is very, very careful and that they only spend about $300 on gas each month.
So what about the government parasite? Well, the government parasite does not need to go to work, so this expense can potentially be eliminated entirely. But since most other things are paid for by the government or are deeply subsidized, in many instances government parasites are actually able to afford very nice vehicles.
In addition, a new bill (The Low-Income Gasoline Assistance Program Act) has been introduced in Congress that would give “qualifying” households money to help pay for gasoline….
Low-Income Gasoline Assistance Program Act – Directs the Secretary of Health and Human Services to make grants to states to establish emergency assistance programs to pay eligible households for the purchase of gasoline.
A hard working American family is also going to need health insurance. Well, we all know how expensive health insurance has become. In fact, health insurance costs have risen by 23 percent since Barack Obama became president. But let’s assume that our hard working family has somehow been able to find an amazing deal where they only pay $500 a month for health insurance for a family of four.
For the government parasite, health insurance is not needed. If there is an emergency, the government parasite can just go get free medical care at any emergency room.
And of course there is always Medicaid. Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
So what about food?
Everyone has to eat, right?
Well, the hard working family in our example is faced with an environment where food prices are constantly rising but paychecks are not keeping up. Let’s assume that the hard working family in our example clips coupons and cuts corners any way that it can and only spends about $50 for each member of the family on food and supplies each week. That comes to a total of $800 a month for the entire family.
So what about the government parasite?
Government parasites need to eat too.
Well, that is where food stamps come in. Right now, there are more than 46 million Americans on food stamps. Since Barack Obama became president, the number of Americans on food stamps has increased by 14 million. Food stamps have become so popular that rappers are even making rap videos about using food stamp cards.
Okay, so after all of this where do we stand?
Well, the average hard working family so far has spent $3500 out of the $4000 that they have to spend for the month.
We still need to find money for clothing, for paying off credit card debt, for paying off student loan debt, for dining out, for entertainment, for medications, for pets, for hobbies, for life insurance, for vacations, for car repairs and maintenance, for child care, for gifts and for retirement savings.
There is actually no money left at all because we have forgotten one of the biggest expenses of all.
When you total up all federal, state and property taxes, our average hard working family is going to pay at least $1000 a month in taxes.
So that puts our average hard working family in the hole every single month.
Meanwhile, the government parasite does not pay any taxes because he or she does not earn enough money to be taxed.
Are you starting to get the picture?
In many ways, life can be so much easier when you are constantly taking from the government instead of constantly giving to the government.
New Jersey Governor Chris Christie recently put it this way….
“We’ll have a bunch of people sitting on a couch waiting for their next government check”
Once again, I am not dumping on those that have been through all kinds of nightmares because of this economy. As I have written about so frequently, the U.S. economy is simply not producing enough jobs for everyone anymore, and this is creating major problems.
Just about everyone needs a helping hand at some point, and we should always be compassionate to those that are in need.
However, there is also a growing number of Americans that are content to simply give up and live off of the government, and that is fundamentally wrong.
It is not the job of the U.S. government to take care of you from the cradle to the grave. What the U.S. government is supposed to do is to make sure that we have a well functioning economy that operates in an environment where hard working individuals and small businesses can thrive, and sadly the U.S. government has failed miserably in that regard.
We desperately need the U.S. economy to be fixed, but I wouldn’t hold my breath waiting for that to happen.
As economic conditions get even worse in this country, millions more Americans are going to turn to the government for assistance and at some point the safety net is going to break.
What is our country going to look like when that happens?
For a long time, most analysts have believed that if someone was going to leave the euro, it would be a weak nation such as Greece or Portugal. But the truth is that financially troubled nations such as Greece and Portugal don’t want to leave the euro. The leaders of those nations understand that if they leave the euro their economies will totally collapse and nobody will be there to bail them out. And at this point there really is not a formal mechanism which would enable other members of the eurozone to kick financially troubled nations such as Greece or Portugal out of the euro. But there is one possibility that is becoming increasingly likely that could actually cause the break up of the euro. Germany could leave the euro. Yes, it might actually happen. Germany is faced with a very difficult problem right now. It is looking at a future where it will be essentially forced to bail out most of the rest of the nations in the eurozone for many years to come, and those bailouts will be extremely expensive. Meanwhile, the mood in much of the rest of Europe is becoming decidedly anti-German. In Greece, Angela Merkel and the German government are being openly portrayed as Nazis. Financially troubled nations such as Greece want German bailout money, but they are getting sick and tired of the requirements that Germany is imposing upon them in order to get that money. Increasingly, other nations in Europe are simply ignoring what Germany is asking them to do or are openly defying Germany. In the end, Germany will need to decide whether it is worth it to continue to pour billions upon billions of euros into countries that don’t appreciate it and that are not doing what Germany has asked them to do.
German Chancellor Angela Merkel’s Christian Democratic Union party recently approved a resolution that would allow a country to leave the euro without leaving the European Union.
Many thought that the resolution was aimed at countries like Greece or Portugal, but the truth is that this resolution may be setting the stage for a German exit from the euro.
The following is an excerpt from that resolution….
“Should a member [of the euro zone] be unable or unwilling to permanently obey the rules connected to the common currency he will be able to voluntarily–according to the rules of the Lisbon Treaty for leaving the European Union–leave the euro zone without leaving the European Union. He would receive the same status as those member states that do not have the euro.”
So was that paragraph written for Greece?
Or was it written for Germany?
That is a very interesting question.
What is clear is that the status quo cannot last much longer.
Voters in Germany are definitely not in the mood to give any more bailout money to other nations in Europe, but if Germany is going to continue to stay in the eurozone many more bailouts will be required in the coming years.
Meanwhile, Germany is rapidly losing control over the rest of the eurozone….
*Greece has implemented some of the austerity measures that have been required of it, but many others have not been implemented. In a few weeks there will be a national election, and parties that are opposed to the austerity measures are surging in the polls. It is likely that the new government will be much less friendly toward Germany.
*The Spanish government is already defying the budgetary requirements that the EU is trying to impose upon it. Spain is definitely going to miss the debt targets mandated by the EU, and the Spanish government has absolutely no plans of making more reductions to government spending.
*The upcoming election in France could be absolutely crucial. Nicolas Sarkozy is not doing well in the polls and the new French government could totally wreck the recent fiscal agreement that the members of the eurozone recently agreed to.
The following is how Graham Summers recently summarized the current situation in France….
We should also take Schäuble’s statements in the context of Angela Merkel’s recent backing of Nicolas Sarkozy’s re-election campaign in France against hardened socialist François Hollande, who wants to engage in a rampant socialist mission to lower France’s retirement age, cut tax breaks to the wealthy, and break the recent new EU fiscal requirements Germany convinced 17 members of the EU to agree to.
Obviously Germany has been trying very hard to keep the eurozone together. But the German government also believes that if it is going to be bailing everyone out that it should also be able to set the rules.
So what happens if the rest of Europe tells Germany to stick their rules where the sun doesn’t shine?
Well, Germany would be forced to make a very difficult decision, and Germany appears to making plans for that eventuality.
For example, Germany recently reinstated its Special Financial Market Stabilization Funds. This money would be used to bail out German banks in the event of a break up of the euro. The following is from a recent article by Graham Summers….
In short, Germany has given the SoFFIN:
- €400 billion to be used as guarantees for German banks.
- €80 billion to be used for the recapitalization of German banks
- Legislation that would permit German banks to dump their euro-zone government bonds if needed.
That is correct. Any German bank, if it so chooses, will have the option to dump its EU sovereign bonds into the SoFFIN during a Crisis.
In simple terms, Germany has put a €480 billion firewall around its banks. It can literally pull out of the Euro any time it wants to.
If the rest of Europe continues to defy Germany, then at some point Germany may decide to simply pick up the ball and go home.
Germany is the strongest economy in the eurozone by far, and if Germany were to pull out the euro would absolutely collapse. Whatever currency Germany decided to issue would be extremely valuable. Such an event would actually have some tremendous side benefits for Germany.
Right now, the German national debt is denominated in euros.
If Germany left the euro, the value of euros would plummet and would likely keep declining as the rest of the eurozone fell apart financially and Germany would be able to pay back its debt in rapidly appreciating “marks” or whatever other currency it decided to issue.
All other debts in Germany would also be denominated in euros and would also be repaid with a much stronger currency.
Are you starting to get the picture?
Yes, Germany would likely have to bail out German banks if it left the euro, but leaving the euro could also prove to be a tremendous windfall for Germany.
If Germany chooses to say in the euro, it is going to be faced with extremely expensive bailouts of other countries for as far as the eye can see.
The following is from a New York Times article….
Bernard Connolly, a persistent critic of Europe, estimates it would cost Germany, as the main surplus-generating country in the euro area, about 7 percent of its annual gross domestic product over several years to transfer sufficient funds to bail out Europe’s debt-burdened countries, including France.
That amount, he has argued, would far surpass the huge reparations bill foisted upon Germany by the victorious powers after World War I, the final payment of which Germany made in 2010.
If Germany leaves the euro, that does not mean that the dream of a single currency is dead. Germany could just let the rest of the eurozone collapse and then invite them to join the new German currency eventually after all the carnage is over.
At that point, Germany would have all the leverage and Germany would be able to dictate all the rules.
What is clear is that the status quo in Europe is becoming extremely unacceptable in Germany. The Germans do not intend to give endless bailouts to other nations that do not appreciate them and that do not intend to follow the rules.
At some point Germany may actually decide to walk, and there are lots of whispers that Germany has been steadily preparing for that day.
For example, there are persistent rumors that Germany has ordered printing plates for the printing of new German marks. Philippa Malmgren, a former economic adviser to President George W. Bush, says that she believes that this is already happening….
“I think they have already got the printing machines going and are bringing out the old deutschmarks they have left over from when the euro was introduced.”
Increasingly, it really is looking as if Germany is actually preparing to leave the euro.
If Germany did leave the euro, the consequences for the rest of Europe would be catastrophic.
The euro would rapidly drop to all-time lows.
The global financial system would be thrown in chaos.
Countries such as Greece would lose their major source of bailout money and would be forced to default.
The recession in Europe would likely deepen into a devastating economic depression.
So there would be a lot of downside.
But Germany would fare much better than most of the rest of Europe, and in the end Germany would be left holding most of the cards.
Keep a close eye on the upcoming European elections and the evolving political situation in Europe.
If things don’t go well for Germany, at some point Germany may just get fed up and walk away from the euro.
Stranger things have happened.
Once upon a time, anyone that was relatively competent and willing to work hard could go out and easily get a job that would enable that person to financially support a family. Unfortunately, that is simply no longer true anymore. Well paying “middle income jobs” are being rapidly replaced with “low income jobs” and part-time jobs. As the economy crumbles, it is becoming increasingly difficult for the typical American worker to survive from month to month. The number of companies that provide benefits such as health insurance has fallen steadily over the past ten years, and paychecks have not been keeping up with the rising prices of food and gas. Average American families are seeing their budgets squeezed like never before, and many of them are going into huge amounts of debt in order to make up the difference. Sadly, this is a problem that has developed over an extended period of time and that is not going to be reversed overnight. Over the past four decades, the ratio of wages and salaries to GDP in America has fallen dramatically. The typical American worker is not as valued as much as he or she used to be, and if current trends continue even more of us will be working part-time jobs or “low income jobs” in the years ahead.
In America today there is a great deal of focus on the unemployed, but there are also millions upon millions of Americans that are working part-time jobs because that is all that they can find.
It can be absolutely soul crushing to go all the way through school getting good grades, spend a ton of money on an education, and then work for 8 bucks an hour doing meaningless work for some predator corporation that simply does not care about how talented you are.
Today, an astounding 48 percent of all Americans are considered to be either “low income” or are living in poverty.
According to the New York Times, approximately 100 million Americans are either living in poverty or in “the fretful zone just above it”.
A lot of those people actually do have jobs. Unfortunately, a part-time job that pays 8 or 9 dollars an hour just will not get you anywhere close to getting over the poverty line.
This is not the way that the U.S. economy used to work. Back in the old days, good paying jobs that would allow you to live “the American Dream” were plentiful.
But now millions upon millions of Americans are scrambling for anything that they can get. According to a recent survey conducted by Gallup, the percentage of Americans that are working part-time jobs but that would like full-time jobs is now higher than it has been at any other time in the last two years.
In this economy, a good paying full-time job is incredibly precious. If you still have one, you should consider yourself to be very fortunate.
Check out the following chart. It is a chart that shows the level of wages and salaries as a percentage of GDP in the United States since the late 1940s. As you can see, the slice of the pie being taken home by American workers has been dropping like a rock since about 1970….
Is that a clear trend or what?
And it is going to continue year after year as long as we continue to pursue the same foolish economic policies.
As our politicians continue to allow millions of American jobs to be shipped overseas, competition for the jobs that remain inside this country is becoming extremely intense.
Back in 1967, 97 percent of all U.S. men with a high school degree between the ages of 30 and 50 had jobs. Today, that figure is down to 76 percent.
As you read this, there are hordes of hard working American workers sitting at home staring at their televisions as they wonder why nobody will hire them.
Right now, if you gathered together all of the unemployed people in the United States, they would constitute the 68th largest country in the world.
That is absolutely insane.
But even if you do have a job that does not mean that you are in good shape. The percentage of “low income jobs” just continues to climb. Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.
Many Americans work as hard as they can and still find that they must turn to the government for financial assistance. According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.
And that number is just going to keep climbing unless we change what we are doing as a nation.
Perhaps you are working a “low income job” right now. Most of us have worked a job like that at least once in our lives. Hopefully you will find the following list amusing. Yes, I have exaggerated a few things slightly, but I think you will get the point.
The following are 20 signs you might be a typical American worker….
#1 If you are working three jobs and you still don’t have enough money at the end of the month, you might be a typical American worker.
#2 If your job involves asking the question “Would you like fries with that?”, you might be a typical American worker.
#3 If you shop at the dollar store because Wal-Mart is too expensive, you might be a typical American worker.
#4 If your job requires you to wear a smock, a brightly colored polo shirt or lots of “flair”, you might be a typical American worker.
#5 If people are constantly asking you where the restroom is while you are at work, you might be a typical American worker.
#6 If your employer hires extra part-time workers in order to avoid giving anyone full-time hours, you might be a typical American worker.
#7 If you are required to watch a mindless “training video” after being hired, you might be a typical American worker.
#8 If the company you work for is owned by someone on the other side of the world, you might be a typical American worker.
#9 If a trained seal could do your job and you feel like your expensive education is going to waste, you might be at typical American worker.
#10 If you don’t have any health insurance at all, you might be a typical American worker. Only about 25 percent of all part-time workers in the United States receive employee benefits such as health insurance or paid sick leave.
#11 If your car is older than your kids are, you might be a typical American worker.
#12 If you can’t afford to buy the things that you are selling to the public, you might be a typical American worker.
#13 If the balances on your credit cards are larger than your bank accounts are, you might be a typical American worker.
#14 If going to Burger King is your idea of “fine dining”, then you might be a typical American worker.
#15 If it costs more to fill up your car with gas than you will make at your job today, you might be a typical American worker. The price of gasoline has increased by 83 percent since Barack Obama first took office, and the average cost of a gallon of gas in the United States is now up to $3.52.
#16 If you eat your cereal with a fork so that you can save milk, you might be a typical American worker.
#17 If your electricity bill keeps going up but your paycheck never does, you might be a typical American worker.
#18 If it feels like you are losing an organ every time you pay for health insurance each month, you might be a typical American worker.
#19 If you feel like your employer is constantly tempted to replace you with someone younger and cheaper, then you might be a typical American worker.
#20 If you are so poor that you cannot even afford to pay attention, you might be a typical American worker.
Unfortunately, a lot more Americans are going to be forced into working these kinds of jobs if current trends continue.
Since the year 2000, we have lost 10% of our middle class jobs even though our population has increased by more than 30 million since then. In the year 2000 there were about 72 million middle class jobs in the United States, but today there are only about 65 million middle class jobs.
The lack of good jobs in America has some very real consequences. In particular, our young adults are really feeling the pain of not being able to find quality employment.
According to a recent poll conducted by Generation Opportunity, huge numbers of Americans in the 18 to 29 year old age bracket are delaying major life decisions due to the poor economy….
-44% are delaying buying a home
-28% are delaying saving for retirement
-27% are delaying paying off student loans or other debt
-27% are delaying going back to school or getting more education
-23% are delaying starting a family
-18% are delaying getting married
All of those things take a lot of money, and if you simply don’t have the money it makes things really tough.
Sadly, the economy is about to get even worse.
As I have written about previously, what is going on in Greece right now is a warning sign for the rest of the world, and we are on the precipice of another major global financial crisis.
There are an increasing number of voices in the financial world that believe that we are going to see a Greek default in March. So will this actually happen? I certainly don’t know. But what some folks are currently saying about the situation sure does make for interesting reading.
In the old days, you could graduate from college, get a good job, work for the same company for 30 years, save up for retirement and count on a comfortable life in your old age.
That paradigm is now totally shattered. The entire global economic system is in a state of chaos and things change faster today than they ever have before.
If you have a job today, it may be gone tomorrow.
The financial institution or insurance company that you are working with today may be out of business by next month.
We live in a world that is becoming increasingly unstable. That is why it is imperative to try to become more self-sufficient and less dependent on the system.
It is tough to plan in such an environment, but one thing is for sure – tough times are coming and things are not going to get any easier than they are now.
In the United States today, unemployment among those age 18 to age 34 is at epidemic levels and the number of young adults that are now living at home with Mom and Dad is at an all-time high. So why are so many of our young adults jobless? Why are record numbers of them unable or unwilling to move out on their own? Well, there are quite a few factors at work. Number one, our education system has completely and totally failed them. As I have written about previously, our education system is a joke and most high school graduates these days are simply not prepared to function at even a very basic level in our society. In addition, college education in the United States has become a giant money making scam that leaves scores of college graduates absolutely drowning in debt. Many young adults end up moving back in with Mom and Dad because they are drowning in so much debt that there are no other options. Thirdly, the number of good jobs continues to decline and this is hitting younger Americans the hardest. Millions of young people enter the workforce excited about the future only to find that there are hordes of applicants for the very limited number of decent jobs that are actually available. So all of this is creating an environment where more young adults are financially dependent on their parents that ever before in modern American history.
Since the start of the recession, the percentage of young adults in America that are employed has dropped like a rock. In 2007, the employment rate for Americans between the ages of 18 and 24 was 62.4 percent. Today, it is down to 54.3 percent.
Yes, there are certainly many out there that are lazy, but the truth is that most of them would like to work if they could. It is just that it is much harder to find a job these days.
And it isn’t just young people that think that the job market has gotten tougher. According to one recent survey, 82 percent of all Americans believe that it is harder for young adults to find jobs today than it was for their parents to find jobs.
But if they cannot get jobs, then young adults cannot financially support themselves. So more of them than ever are heading back home to live with Mom and Dad.
In the year 2000, 8.3 percent of all American women between the ages of 25 and 34 were living at home with their parents. Today, that figure is up to 9.7 percent.
In the year 2000, 12.9 percent of all American men between the ages of 25 and 34 were living at home with their parents. Today, that figure is up to an astounding 18.6 percent.
Take a moment and let those statistics sink in.
Nearly one out of every five American men from age 25 to age 34 are living at home with Mommy and Daddy.
When you look at Americans age 18 to age 24, it is even worse. Among Americans age 18 to age 24, 50 percent of all women and 59 percent of all men still live with their parents.
Those are very frightening numbers.
Part of this has to do with a fundamental cultural shift. An increasing number of parents these days expect that they will have to take care of their own children beyond the age of 22. The following is from a recent article by Pew Research….
When asked in a 1993 survey what age children should be financially independent from their parents, 80% of parents said children have to be self-reliant by age 22. In the current survey, only 67% of parents say children have to be financially independent by age 22—a drop of 13 percentage points.
But what accounts for the tremendous gender disparity that we see in the figures above?
Well, one major factor is that young women are now far more likely to pursue a college education than young men are. According to an article in the New York Times, women now account for approximately 57 percent of all enrollments at U.S. colleges and universities.
The less education you have, the more likely you are to be unemployed in America today. So that is certainly a significant factor.
But many that have gone on to college are also moving back home. When you are a young adult with no job and no prospects and you are swamped with tens of thousands of dollars of student loan debt, it can be incredibly difficult to be financially independent.
After adjusting for inflation, U.S. college students are now borrowing about twice as much money as they did a decade ago. Many students that go on to graduate school end up with more than $100,000 in total student loan debt.
Sadly, those degrees often do not pay off. In fact, in America today one-third of all college graduates end up taking jobs that don’t even require college degrees.
So what does all of this mean?
It means that there are millions upon millions of angry, disillusioned and frustrated young adults out there today. A recent USA Today article told the story of 32-year-old Dennis Hansen….
After a year without work, Hansen, 32, was hired to monitor Lake Michigan and Lake Superior water for the state and federal governments over two summers. He also had short stints as a census worker and as an extra post office hand during one holiday crush.
It hasn’t been enough: Hansen says he has a $13,000 credit card debt and that’s just for basics — his $600 monthly mortgage, heat and food.
“It’s definitely a roller coaster,” Hansen says, with the ups coming when he’s done well in a job interview and the downs when there’s a rejection: “That’s when I’m frustrated, angry and wondering why I went to college for 10 years.”
If the economy was humming along on all cylinders, it would be easy to blame our young adults for being too lazy.
But these days most young adults have to scramble like crazy just to get a really low paying job. Large numbers of very talented young adults are waiting tables, flipping burgers or stocking shelves at Wal-Mart.
And this reality is reflected in the overall economic statistics. Since the year 2000, incomes for U.S. households led by someone between the ages of 25 and 34 have fallen by about 12 percent after you adjust for inflation.
The “wealth gap” between younger Americans and older Americans is also growing and recently hit a new all-time high. U.S. households led by someone 65 years of age or older are now 47 times wealthier than U.S. households led by someone 35 years of age or younger.
But this is not good for our society. When there is civil unrest, it is not those 65 and older that take to the streets.
We desperately need our economy to get healthy again so that our young adults can get good jobs, get married, set up households, raise families and be productive members of society.
Instead, the percentage of young adults that have jobs is near an all-time low, the percentage of young adults living with their parents is at an all-time high, the proportion of adults in the United States that are married is at an all-time low and we have hordes of angry, frustrated young adults with plenty of time on their hands.
You don’t have to be a genius to see trouble on the horizon.
What is going to happen when the next major financial crisis comes and the economy gets significantly worse than it is now?
In the end, we are going to reap what we have sown. We have fundamentally failed our young adults, and those failures are going to produce some very bitter fruit.
The people out there that believe that the U.S. economy is experiencing a permanent recovery and that very bright days are ahead for us should have their heads examined. Unfortunately, what we are going through right now is simply just a period of “hopetimism” between two financial crashes. Things may seem relatively stable right now, but it won’t last long. The truth is that the financial crisis of 2008 was just a warm up act for the economic horror show that is coming. Nothing really got fixed after the crash of 2008. We are living in the biggest debt bubble in the history of the world, and it has gotten even bigger since then. The “too big to fail” banks are larger now than they have ever been. Americans continue to run up credit card balances like there is no tomorrow. Tens of thousands of manufacturing facilities and millions of jobs continue to leave the country. We continue to consume far more than we produce and we continue to become poorer as a nation. None of the problems that caused the crisis of 2008 have been solved and we are even weaker financially than we were back then. So why in the world are so many people so optimistic about the economy right now?
Just take a look at the chart posted below. It shows the growth of total debt in the United States. During the financial crisis of 2008 there was a little “hiccup”, but the truth is that not much deleveraging really took place at all. And since the recession “ended”, total credit market debt has gone on to even greater heights….
So what does this mean for the future?
Well, if a small “hiccup” in the debt bubble caused so much chaos back in 2008, what is going to happen when this debt bubble finally bursts?
That is something to think about.
Sadly, most Americans seem oblivious to all of this.
If you go out to malls in the wealthy areas of America today, people are charging up a storm. In all, Americans charged a whopping 2.5 trillion dollars on their credit cards during 2011. Way too many people have already forgotten the lessons that we all learned back in 2008.
Of course some Americans pay off their credit cards every month, but way too many Americans are not doing that. Today, Americans are carrying 793 billion dollars in revolving credit balances.
And student loan debt is an even bigger bubble than credit card debt is. As I have written about previously, total student loan debt in America is rapidly approaching a trillion dollars.
So it looks like U.S. consumers have not learned to stay away from debt.
That is not good.
Well, what about the banks?
Has the financial system learned any lessons since 2008?
No, not really.
Sadly, the “too big to fail” banks are now even bigger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011. If they were to fail today, they would be even more of a threat to our financial system than they were back in 2008.
And our major banks continue to be very highly leveraged. In fact, major banks all over the world are absolutely swamped with debt.
The following statistics come from Zero Hedge….
The U.S. banking system is leveraged 13 to 1.
The Japanese banking system is leveraged 23 to 1.
The French banking system is leveraged 26 to 1.
The German banking system is leveraged 32 to 1.
These are insane levels of leverage, and they are just inviting another major financial crisis.
Do you all remember Lehman Brothers? The fact that they were leveraged so highly is what did them in back in 2008. When the value of their holdings declined by just a little bit they were totally wiped out.
Well, during this next financial crisis large financial institutions are going to be wiped out all over the world. Major banks all over the globe are going to be crying out for more bailouts when things take a turn against them.
They are making the exact same mistakes that they made before, and they are going to be expecting more government handouts when things go bad.
Will we ever learn?
So obviously the banking system has not learned any lessons.
What about the federal government?
Well, if you follow my blog regularly, you know that I love to write about how horrific U.S. government debt is.
Unfortunately, over the past four years things have gotten so much worse.
Back in 2008, the U.S. national debt crossed the 10 trillion dollar mark.
Just recently, it crossed the 15 trillion dollar mark.
So now we are in a much weaker position financially to respond to another major financial crisis.
Just check out the chart posted below. This is a recipe for national financial suicide….
During fiscal 2011, the Obama administration stole close to 150 million dollars from our children and our grandchildren every single hour.
At the moment, the legacy of debt that we are passing on to future generations is sitting a grand total of $15,351,406,294,640.49.
But keep in mind that it is going up every single hour.
Meanwhile, our ability to service that debt is declining. We are rapidly getting poorer as a nation.
During 2011, the amount of money that left the United States exceeded the amount of money that entered the United States by more than a half a trillion dollars.
This gap is called a trade deficit, and it is absolutely ripping our economy to shreds.
For a moment, imagine Uncle Sam standing next to a giant pile of money on a map of the United States. Then imagine a half a trillion dollars being taken out of that pile every single year.
So why haven’t we totally run out of money yet?
Well, it is because we borrow those dollars back. In order to maintain our false standard of living, our federal government, our state governments and our local governments have to go out and beg the rest of the world to lend us our dollars back.
Sadly, our government schools have “dumbed-down” the population so much that most of them don’t even know what a “trade deficit” is anymore.
Meanwhile, our economic infrastructure is being gutted like a fish.
Look, I know that I go over this point over and over and over, but it is absolutely imperative that we all understand this.
The half a trillion dollars a year that leaves this country every year could have gone to support businesses and jobs inside the United States.
But instead it is going to support businesses and jobs on the other side of the world.
The consequences of this are absolutely devastating.
According to U.S. Representative Betty Sutton, an average of 23 manufacturing facilities a day closed down in the United States during 2010. Overall, more than 56,000 manufacturing facilities in the United States have shut down since 2001.
Even many so-called “American companies” have been bought up by the rest of the world. The following comes from a recent article posted on Economy In Crisis….
RCA is now a French company, Zenith is a Korean company. Frigidaire is a Swedish company. IBM’s Personal Computer Division—with its 500 patents—is now a Chinese company. Westinghouse Nuclear Energy’s major shareholder is Toshiba—a Japanese Company. Lucent Technologies, a former research division of AT&T, along with all the patents acquired from the beginning of the phone system, is now a French company. In 2008, Brazilian-Belgian brewing company InBev purchased the iconic American brewer Anheuser-Busch, makers of Budweiser. With the sale of these manufacturing companies, the future profit and technologies all belong to foreign entities.
We once had the greatest economic machine in the history of the world.
Now it is being dismantled and bought up by foreigners.
When America’s economic infrastructure declines, that means that there are less jobs available for all of us.
As I wrote about the other day, the employment situation in this country is not getting better and we have never even come close to recovering from the recession that started back in 2008.
During 2008 and 2009, the U.S. economy lost millions of jobs. Since the beginning of 2010, the percentage of the U.S. population that has had a job has remained very stable….
Normally, when a recession ends the percentage of Americans that have a job bounces back pretty dramatically.
So considering the fact that the employment situation has never recovered from the last financial crisis, what is going to happen when the next financial crisis hits?
And most of the jobs that have been “created” during this so-called “recovery” have been low income jobs. In fact, if you look closely at the employment numbers that were released last Friday, you will find that the vast majority of the “new jobs” were part-time jobs.
But you cannot pay a mortgage and support a family on a part-time job.
Sadly, the truth is that median household income in America has been steadily dropping over the past several years. Tens of millions of American families are deeply struggling and more Americans than ever are falling into poverty.
Back in the year 2000, about one out of every nine Americans was living in poverty. Today, about one out of every seven Americans is living in poverty.
All of this is causing a great deal of anxiety in America today. Large numbers of Americans know that something has fundamentally changed, even if they don’t understand the specifics. That is one reason why sites such as this one have become so popular. People want some answers.
And once people get some answers about what is really happening, they tend to want to prepare for the hard times that are coming.
In a few days, a new series on National Geographic entitled “Doomsday Preppers” premieres. The mainstream media is starting to take notice of the growing “prepper” movement in America today. It is estimated that there are at least 2 million “preppers” in the United States at this point. Of course people are “prepping” for a whole host of reasons, but the number one concern among most groups of preppers is the economy.
As the economy crumbles, more Americans than ever have decided that it is not a good thing to be 100% dependent on the system.
Back in 2008 and 2009, millions of Americans suddenly lost their jobs. Because they did not have any finances stored up, large numbers of them also lost their homes. Many went from being solidly middle class to being out on the street in a matter of months.
That doesn’t have to happen to you. Instead of blowing your money on frivolous things, do what you can to set something aside for the difficult times that are on the horizon.
A lot of those “in the know” are quietly making their own preparations. For example, legendary film director James Cameron (Avatar, Titanic and Terminator) has purchased more than 2600 acres of farmland in New Zealand and he is getting out of the U.S. for good apparently.
Unfortunately, most of us do not have the resources for something like that. But what most of us can do is we can change our priorities and start focusing on the things that will help us survive the hard times that are coming.
So are you ready?