Are much lower oil prices good news for the U.S. economy? Only if you like collapsing capital expenditures, rising unemployment and a potential financial implosion on Wall Street. Yes, lower gasoline prices are good news for the middle class. I certainly would rather pay two dollars for a gallon of gas than four dollars. But in order to have money to fill up your vehicle you have got to have an income first. And since the last recession, the energy sector has been the number one creator of good jobs in the U.S. economy by far. Barack Obama loves to stand up and take credit for the fact that the employment picture in this country has been improving slightly, but without the energy industry boom, unemployment would be through the roof. And now that the “energy boom” is rapidly becoming an “energy bust”, what will happen to the struggling U.S. economy as we head into 2015?
At the start of this article I mentioned that much lower oil prices would result in “collapsing capital expenditures”.
If you do not know what a “capital expenditure” is, the following is a definition that comes from Investopedia…
“Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory.”
Needless to say, this kind of spending is very good for an economy. It builds infrastructure, it creates jobs and it is an investment in the future.
In recent years, energy companies have been pouring massive amounts of money into capital expenditures. In fact, the energy sector currently accounts for about a third of all capital expenditures in the United States according to Deutsche Bank…
US private investment spending is usually ~15% of US GDP or $2.8trn now. This investment consists of $1.6trn spent annually on equipment and software, $700bn on non-residential construction and a bit over $500bn on residential. Equipment and software is 35% technology and communications, 25-30% is industrial equipment for energy, utilities and agriculture, 15% is transportation equipment, with remaining 20-25% related to other industries or intangibles. Non-residential construction is 20% oil and gas producing structures and 30% is energy related in total. We estimate global investment spending is 20% of S&P EPS or 12% from US. The Energy sector is responsible for a third of S&P 500 capex.
These companies make these investments because they believe that there are big profits to be made.
Unfortunately, when the price of oil crashes those investments become unprofitable and capital expenditures start getting slashed almost immediately.
For example, the budget for 2015 at ConocoPhillips has already been reduced by 20 percent…
ConocoPhillips is one of the bigger shale players. And its decision to slash its budget for next year by 20% is raising eyebrows. The company said the new target reflects lower spending on major projects as well as “unconventional plays.” Despite the expectation that others will follow, it doesn’t mean U.S. shale oil production is dead. Just don’t expect a surge in spending like in recent years.
And Reuters is reporting that the number of new well permits for the industry as a whole plunged by an astounding 40 percent during the month of November…
Plunging oil prices sparked a drop of almost 40 percent in new well permits issued across the United States in November, in a sudden pause in the growth of the U.S. shale oil and gas boom that started around 2007.
Data provided exclusively to Reuters on Tuesday by industry data firm Drilling Info Inc showed 4,520 new well permits were approved last month, down from 7,227 in October.
If the price of oil stays this low or continues dropping, this is just the beginning.
Meanwhile, the flow of good jobs that this industry has been producing is also likely to start drying up.
According to the Perryman Group, the energy sector currently supports 9.3 million permanent jobs in this country…
According to a new study, investments in oil and gas exploration and production generate substantial economic gains, as well as other benefits such as increased energy independence. The Perryman Group estimates that the industry as a whole generates an economic stimulus of almost $1.2 trillion in gross product each year, as well as more than 9.3 million permanent jobs across the nation.
The ripple effects are everywhere. If you think about the role of oil in your life, it is not only the primary source of many of our fuels, but is also critical to our lubricants, chemicals, synthetic fibers, pharmaceuticals, plastics, and many other items we come into contact with every day. The industry supports almost 1.3 million jobs in manufacturing alone and is responsible for almost $1.2 trillion in annual gross domestic product. If you think about the law, accounting, and engineering firms that serve the industry, the pipe, drilling equipment, and other manufactured goods that it requires, and the large payrolls and their effects on consumer spending, you will begin to get a picture of the enormity of the industry.
And these are good paying jobs. They aren’t eight dollar part-time jobs down at your local big box retailer. These are jobs that comfortably support middle class families. These are precisely the kinds of jobs that we cannot afford to lose.
In recent years, there has been a noticeable economic difference between areas of the country where energy is being produced and where energy is not being produced.
Since December 2007, a total of 1.36 million jobs have been gained in shale oil states.
Meanwhile, a total of 424,000 jobs have been lost in non-shale oil states.
So what happens now that the shale oil boom is turning into a bust?
That is a very good question.
Even more ominous is what an oil price collapse could mean for our financial system.
The last time the price of oil declined by more than 40 dollars in less than six months, there was a financial meltdown on Wall Street and we experienced the deepest recession that we have seen since the days of the Great Depression.
And now many fear that this collapse in the price of oil could trigger another financial panic.
According to Citigroup, the energy sector now accounts for 17 percent of the high yield bond market.
J.P. Morgan says that it is actually 18 percent.
In any event, the reality of the matter is that the health of these “junk bonds” is absolutely critical to our financial system. And according to Deutsche Bank, if these bonds start defaulting it could “trigger a broader high-yield market default cycle”…
Based on recent stress tests of subprime borrowers in the energy sector in the US produced by Deutsche Bank, should the price of US crude fall by a further 20pc to $60 per barrel, it could result in up to a 30pc default rate among B and CCC rated high-yield US borrowers in the industry. West Texas Intermediate crude is currently trading at multi-year lows of around $75 per barrel, down from $107 per barrel in June.
“A shock of that magnitude could be sufficient to trigger a broader high-yield market default cycle, if materialized,” warn Deutsche strategists Oleg Melentyev and Daniel Sorid in their report.
If the price of oil stays at this level or continues to go down, it is inevitable that we will start to see some of these junk bonds go bad.
In fact, one Motley Fool article recently stated that one industry analyst believes that up to 40 percent of all energy junk bonds could eventually go into default…
The junk bonds, or noninvestment-rated bonds, of energy companies are also beginning to see heavy selling as investors start to worry that drillers could one day default on these bonds. Those defaults could get so bad, according to one analyst, that up to 40% of all energy junk bonds go into default over the next few years if oil prices don’t recover.
That would be a total nightmare for Wall Street.
And of course bond defaults would only be part of the equation. As I wrote about the other day, a crash in junk bonds is almost always followed by a significant stock market correction.
In addition, plunging oil prices could end up absolutely destroying the banks that are holding enormous amounts of energy derivatives. This is something that I recently covered in this article and this article.
As you read this, there are five “too big to fail” banks that each have more than 40 trillion dollars in exposure to derivatives. Of course only a small fraction of that total exposure is made up of energy derivatives, but a small fraction of 40 trillion dollars is still a massive amount of money.
These derivatives trades are largely unregulated, and even Forbes admits that they are likely to be at the heart of the coming financial collapse…
No one understands the derivative risk positions of the Too Big To Fail Banks, JP Morgan Chase, Citigroup, Bank of America, Goldman Sachs or Morgan Stanley. There is presently no way to measure the risks involved in the leverage, quantity of collateral, or stability of counter-parties for these major institutions. To me personally they are big black holes capable of potential wrack and ruin. Without access to confidential internal data about these risky derivative positions the regulators cannot react in a timely and measured fashion to block the threat to financial stability, according to a National Bureau of Economic Research study.
So do we have any hope?
Yes, if oil prices start going back up, much of what you just read about can be averted.
Unfortunately, that does not seem likely any time soon. Even though U.S. energy companies are cutting back on capital expenditures, most of them are still actually projecting an increase in production for 2015. Here is one example from Bloomberg…
Continental, the biggest holder of drilling rights in the Bakken, last month said 2015 output will grow between 23 percent and 29 percent even after shelving plans to allocate more money to exploration.
Higher levels of production will just drive the price of oil even lower.
At this point, Morgan Stanley is saying that the price of oil could plummet as low as $43 a barrel next year.
If that happens, it would be absolutely catastrophic to the most important industry in the United States.
In turn, that would be absolutely catastrophic for the economy as a whole.
So don’t let anyone tell you that much lower oil prices are “good” for the economy.
That is just a bunch of nonsense.
Is the U.S. economy about to experience a major downturn? Unfortunately, there are a whole bunch of signs that economic activity in the United States is really slowing down right now. Freight volumes and freight expenditures are way down, consumer confidence has declined sharply, major retail chains all over America are closing hundreds of stores, and the “sequester” threatens to give the American people their first significant opportunity to experience what “austerity” tastes like. Gas prices are going up rapidly, corporate insiders are dumping massive amounts of stock and there are high profile corporate bankruptcies in the news almost every single day now. In many ways, what we are going through right now feels very similar to 2008 before the crash happened. Back then the warning signs of economic trouble were very obvious, but our politicians and the mainstream media insisted that everything was just fine, and the stock market was very much detached from reality. When the stock market did finally catch up with reality, it happened very, very rapidly. Sadly, most people do not appear to have learned any lessons from the crisis of 2008. Americans continue to rack up staggering amounts of debt, and Wall Street is more reckless than ever. As a society, we seem to have concluded that 2008 was just a temporary malfunction rather than an indication that our entire system was fundamentally flawed. In the end, we will pay a great price for our overconfidence and our recklessness.
So what will the rest of 2013 bring?
Hopefully the economy will remain stable for as long as possible, but right now things do not look particularly promising.
The following are 20 signs that the U.S. economy is heading for big trouble in the months ahead…
#1 Freight shipment volumes have hit their lowest level in two years, and freight expenditures have gone negative for the first time since the last recession.
#2 The average price of a gallon of gasoline has risen by more than 50 cents over the past two months. This is making things tougher on our economy, because nearly every form of economic activity involves moving people or goods around.
#3 Reader’s Digest, once one of the most popular magazines in the world, has filed for bankruptcy.
#4 Atlantic City’s newest casino, Revel, has just filed for bankruptcy. It had been hoped that Revel would help lead a turnaround for Atlantic City.
#5 A state-appointed review board has determined that there is “no satisfactory plan” to solve Detroit’s financial emergency, and many believe that bankruptcy is imminent. If Detroit does declare bankruptcy, it will be the largest municipal bankruptcy in U.S. history.
#6 David Gallagher, the CEO of Town Sports International, recently said that his company is struggling right now because consumers simply do not have as much disposable income anymore…
“As we moved into January membership trends were tracking to expectations in the first half of the month, but fell off track and did not meet our expectations in the second half of the month. We believe the driver of this was the rapid decline in consumer sentiment that has been reported and is connected to the reduction in net pay consumers earn given the changes in tax rates that went into effect in January.“
#7 According to the Conference Board, consumer confidence in the U.S. has hit its lowest level in more than a year.
#8 Sales of the Apple iPhone have been slower than projected, and as a result Chinese manufacturing giant FoxConn has instituted a hiring freeze. The following is from a CNET report that was posted on Wednesday…
The Financial Times noted that it was the first time since a 2009 downturn that the company opted to halt hiring in all of its facilities across the country. The publication talked to multiple recruiters.
The actions taken by Foxconn fuel the concern over the perceived weakened demand for the iPhone 5 and slumping sentiment around Apple in general, with production activity a leading indicator of interest in the product.
#9 In 2012, global cell phone sales posted their first decline since the end of the last recession.
#10 We appear to be in the midst of a “retail apocalypse“. It is being projected that Sears, J.C. Penney, Best Buy and RadioShack will also close hundreds of stores by the end of 2013.
#11 An internal memo authored by a Wal-Mart executive that was recently leaked to the press said that February sales were a “total disaster” and that the beginning of February was the “worst start to a month I have seen in my ~7 years with the company.”
#12 If Congress does not do anything and “sequestration” goes into effect on March 1st, the Pentagon says that approximately 800,000 civilian employees will be facing mandatory furloughs.
#13 Barack Obama is admitting that the “sequester” could have a crippling impact on the U.S. economy. The following is from a recent CNBC article…
Obama cautioned that if the $85 billion in immediate cuts — known as the sequester — occur, the full range of government would feel the effects. Among those he listed: furloughed FBI agents, reductions in spending for communities to pay police and fire personnel and teachers, and decreased ability to respond to threats around the world.
He said the consequences would be felt across the economy.
“People will lose their jobs,” he said. “The unemployment rate might tick up again.”
#14 If the “sequester” is allowed to go into effect, the CBO is projecting that it will cause U.S. GDP growth to go down by at least 0.6 percent and that it will “reduce job growth by 750,000 jobs“.
#15 According to a recent Gallup survey, 65 percent of all Americans believe that 2013 will be a year of “economic difficulty“, and 50 percent of all Americans believe that the “best days” of America are now in the past.
#16 U.S. GDP actually contracted at an annual rate of 0.1 percent during the fourth quarter of 2012. This was the first GDP contraction that the official numbers have shown in more than three years.
#17 For the entire year of 2012, U.S. GDP growth was only about 1.5 percent. According to Art Cashin, every time GDP growth has fallen this low for an entire year, the U.S. economy has always ended up going into a recession.
#18 The global economy overall is really starting to slow down…
The world’s richest countries saw their economies contract for the first time in almost four years during the final three months of 2012, the Organisation for Economic Co-operation and Development said.
The Paris-based thinktank said gross domestic product across its 34 member states fell by 0.2% – breaking a period of rising activity stretching back to a 2.3% slump in output in the first quarter of 2009.
All the major economies of the OECD – the US, Japan, Germany, France, Italy and the UK – have already reported falls in output at the end of 2012, with the thinktank noting that the steepest declines had been seen in the European Union, where GDP fell by 0.5%. Canada is the only member of the G7 currently on course to register an increase in national output.
#19 Corporate insiders are dumping enormous amounts of stock right now. Do they know something that we don’t?
#20 Even some of the biggest names on Wall Street are warning that we are heading for an economic collapse. For example, Seth Klarman, one of the most respected investors on Wall Street, said in his year-end letter that the collapse of the U.S. financial system could happen at any time…
“Investing today may well be harder than it has been at any time in our three decades of existence,” writes Seth Klarman in his year-end letter. The Fed’s “relentless interventions and manipulations” have left few purchase targets for Baupost, he laments. “(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors.”
So what do you think is going to happen to the U.S. economy in the months ahead?
Please feel free to express your opinion by leaving a comment below…
Does it cost you hundreds of dollars just to get to work each month? If it does, you are certainly not alone. There are millions of other Americans in the exact same boat. In recent years, the price of gas in the United States has gotten so outrageous that it has played a major factor in where millions of American families have decided to live and in what kind of vehicles they have decided to purchase. Many Americans that have very long commutes to work end up spending thousands of dollars on gas a year. So when the price of gas starts going up to record levels, people like that really start to feel it. But the price of gas doesn’t just affect those that drive a lot. The truth is that the price of gas impacts each and every one of us. Almost everything that we buy has to be transported, and when the price of gasoline goes up the cost of shipping goods also rises. The U.S. economy has been structured around cheap oil. It was assumed that we would always be able to transport massive quantities of goods over vast distances very inexpensively. Once that paradigm totally breaks down, we are going to be in a huge amount of trouble. For the moment, the big concern is the stress that higher gas prices are going to put on the budgets of ordinary American families. Unfortunately, almost everyone agrees that in the short-term the price of gas is going to go even higher.
When you are on a really tight budget and you are already spending several hundred dollars on gas each month, you certainly do not want to hear that gas prices are going to increase even more.
A lot of Americans are moving or are getting different vehicles just because of these outrageous gas prices. The following comes from a recent Mercury News article….
Katherine Zak, of South San Jose, is searching for an apartment near her new job at Facebook in Palo Alto, partly to cut down the cost of driving. Jeff Benson, of Raymond in the Sierra foothills, typically drives 60,000 to 70,000 miles a year and has traded in his 19 mpg Ford Taurus for a Fusion that gets 33 mpg. And David Thomas says his commute from San Jose to San Francisco is getting so expensive that he and his fiancee are hunting for a house near a BART station in the San Mateo-San Bruno area to shorten his commute and lower his $400-a-month gas bill.
The price of gas is going even higher even though energy consumption is sharply declining in the United States. Just check out the charts in this article by Charles Hugh Smith. Americans are using less gasoline and less energy and yet the price of gas continues to go up.
That is not a good sign.
Certainly any decrease that we are seeing in the U.S. is being more than offset by rising demand in places such as China and India. As emerging economies all over the globe continue to develop this is going to continue to put pressure on gas prices.
So just how bad are gas prices in the U.S. right now?
Just consider the following facts….
-The average price of a gallon of gasoline in the United States is now $3.53.
-The average price of a gallon of gasoline is already higher than $3.70 in Connecticut, Washington D.C. and New York.
-In California, the average price of a gallon of gasoline is $3.96 and there are quite a few cities where it is now above 4 dollars.
-In mid-January 2009, the average price of a gallon of gasoline in the United States was just $1.85.
-The average price of a gallon of gasoline in the United States has risen 25 cents since the beginning of 2012.
-Never before in U.S. history has the price of gasoline been this high so early in the year.
-The Oil Price Information Service is projecting that the price of gas could reach an average of $4.25 a gallon by the end of April.
-The price of oil just keeps going up. The price for West Texas Intermediate is about 19 percent higher than it was one year ago.
-The price of gasoline is also reaching record highs in many areas of Europe as well. For example, the price of diesel fuel in the UK recently set a brand new record.
-In 2011, U.S. households spent a whopping 8.4% of their incomes on gasoline. That percentage has approximately doubled over the past ten years.
But the price of gas is not the only thing making driving much more expensive these days.
All over the country, our politicians have been putting up toll booths. Most of the time these toll booths are going up on roads that have already been paid for.
After paying an outrageous amount for gas and after paying the outrageous tolls on many of these toll roads, many Americans wonder if it is even worth it to get up in the morning and go to work.
Unfortunately, a couple of new bills in Congress right now would reportedly allow even more highways to be made into toll roads.
It is almost as if they want to force us all to stop driving our cars.
America used to be the land of the open road, but that era is rapidly coming to an end.
Another thing that could put upward pressure on the price of gas is the situation in the Middle East.
Iran has already stopped selling oil to companies in the UK and France, and there is the potential that war could erupt in the Middle East at any time.
If war does erupt, or if commercial traffic through the Strait of Hormuz was interrupted for even a brief time, that would send the global price of oil through the roof.
Approximately 20 percent of all oil sold in the world passes through the Strait of Hormuz. If the flow of oil was halted, that would change the global economy almost overnight.
So is there any good news?
Well, there is one thing that would likely bring down the price of gas substantially.
A global recession.
Remember what happened back in 2008.
Just like we are seeing right now, the price of gas really spiked early in that year.
Eventually, the price of oil hit an all-time record of $147 a barrel in mid-2008.
But then the financial crisis struck and the price of oil fell like a rock as you can see from the chart below….
So could that happen again?
There are a ton of other parallels between 2008 and 2012.
In both years, we saw global shipping start to slow down dramatically.
In both years, the U.S. was getting ready to hold a presidential election.
In both years, many economists were warning that a great financial crisis was about to strike.
Back in 2008, the epicenter of the financial crisis was on Wall Street.
This time, the epicenter of the financial crisis will probably be in Europe.
Keep your eye on Europe. A disorderly default by Greece (and potentially even an exit from the eurozone) is looking increasingly likely.
But the problems in Europe are not going to end with Greece. The entire eurozone is going to be greatly shaken by the time this thing is over.
So yes, if we see another major global recession that will be great news for the price of gas, but it will be really bad news for the millions of people that lose their jobs and their homes.
Unfortunately, we live at a time when the world is becoming extremely unstable. The great era of peace and prosperity that we have been enjoying is coming to an end. The global financial system is going to experience a tremendous amount of chaos in the years ahead and that is something we will all need to prepare for.
For now, the price of gas is a major concern for millions upon millions of American families.
Someday, however, we will wish desperately that we could go back to these days.
The price of oil has been hovering around 80 dollars a barrel for quite some time now, but get ready, because it is going to move significantly higher. Oil prices have already risen about 9 percent over the past month, and many believe that this could very well be the start of a new trend. Lawrence Eagles, a top analyst at JP Morgan, recently made headlines across the globe when he stated that oil could hit 100 dollars a barrel “much sooner than we expect”. Not only that, but a number of top OPEC officials are also publicly discussing the possibility of 100 dollar oil. But just because a few people are talking about it does not mean that it is going to happen. So are there any other reasons why we should anticipate a significant increase in the price of oil?
Well, yes there is.
*The Decline Of The U.S. Dollar
Since August 27th, the U.S. dollar has declined approximately 4.8% against the currencies of major U.S. trading partners. Unfortunately, there seems to be every indication that the dollar is going to continue to decline. As the U.S. dollar continues to display weakness, just about everything priced in dollars (including oil) is going to continue to rise.
*The Threat Of Quantitative Easing By The Federal Reserve
For weeks, top Federal Reserve officials have been making public statements about the need for more quantitative easing. If the Fed does initiate a significant program of quantitative easing in the coming months, that is going to put even more downward pressure on the U.S. dollar and even more upward pressure on the price of oil.
*Other Commodities Have Been Skyrocketing
Over recent weeks, the prices of a wide array of key commodities have been absolutely skyrocketing. As I noted in a previous article, not only has the price of gold been setting records, the truth is that almost every major commodity has been spiking. In a recent column entitled “An Inflationary Cocktail In The Making“, Richard Benson noted some of the commodity price increases that he has been tracking this year….
-Agricultural Raw Materials: 24%
-Industrial Inputs Index: 25%
-Metals Price Index: 26%
-Palm Oil: 26%
-Iron Ore: 103%
The increase in the price of oil is just part of a larger trend of soaring commodity prices. As long as this trend in commodity prices continues it is unlikely that the price of oil will go down.
*The Strikes In France
The austerity strikes in France have interrupted the flow of gasoline in that country. Once the strikes are over there will be an increase in demand as inventories are restocked.
*Increased Demand From China And Other Emerging Nations
Most analysts are forecasting that the demand for oil in China and other emerging nations will continue to grow at an impressive pace. This growing demand will also cause upward pressure on the price of oil.
*The Potential Of War In The Middle East
As always, war could break out in the Middle East at any time. A minor conflict in the Middle East would likely push the price of oil over 100 dollars a barrel very quickly. A major conflict would likely push it over 200 dollars or even beyond. War is very, very difficult to predict, but it does seem quite likely that some kind of conflict will break out in the Middle East at some point over the next several years.
So how soon will oil reach the 100 dollar mark?
That is very hard to say.
But even now, Americans are already having to dig deeper into their wallets at the gas pump.
For the two week period ending October 22nd, the average price of gasoline in the United States increased 5.23 cents to $2.82 a gallon.
As the price of oil continues to rise significantly over the long-term, it is going to have an impact on thousands of other prices. Virtually all products must be transported, and an increase in the price of oil will cause those transportation costs to go up.
So an increase in the price of oil would be really bad news.
If we do see 100 dollar oil, that will be a huge challenge for the U.S. economy.
If we end up seeing 150 dollar oil (especially for an extended period of time) it will be an absolute nightmare for the U.S. economy.
So where do you think the price of oil is going? Feel free to leave a comment with your opinion….
Gas prices are on the rise again. In many areas of the U.S. gas prices are already hovering around $3.00 a gallon. In fact there are some areas where people are paying as much as $3.50 a gallon, and many experts are predicting that gasoline could hit $4.00 a gallon by the end of 2010. If this nonsense keeps up, how in the world is the average American family supposed to make ends meet? Not only is filling up our tanks going to cost a lot more, but the price of gasoline factors into so many other things. The U.S. economy just cannot handle a major increase in transportation costs at this point. These increasing gasoline prices come at a time when U.S. consumers are already stretched to the max.
But it isn’t just gasoline prices that are going up. The price of food is really starting to rise as well. Rising demand and reduced supply drove supermarket prices for 16 basic foods up 6.2% in the first quarter of 2010.
Now, for those Americans who are independently wealthy, a large increase in gasoline and food prices might not mean much.
But for the rest of us who are trying to get our incomes to stretch as far as possible each month, it means a whole lot.
In fact, a record number of working Americans are finding that their paychecks are just not making it and are turning to government assistance programs such as food stamps just to make it.
According to the U.S. Department of Agriculture, approximately 39.4 million Americans, a new all-time record, received food stamps in January. This was up 22% from a year earlier. In fact, the number of Americans on food stamps has hit all-time records for 14 consecutive months.
New all-time records for 14 months in a row?
How in the world can anyone claim that the U.S. economy is in good shape?
And it is just not people who are out of work or who are lazy who are applying for food stamps. The truth is that a lot of hard working Americans who are doing everything they can to better themselves find themselves out of alternatives these days.
Some of those hard working Americans are readers of this site. One of them recently left a comment that is very timely….
There are people on food stamps now, that you would never think they were. For example myself, I just went on food stamps last month. I am not a welfare mom, unemployed or declaring bankruptcy, I am educated and working as hard as I can to make ends meet.
I hold a Masters degree, and a part time job. I make minimum wage and if I were scheduled 40 hours a week my pay would just cover my expenses. Problem is, with retail the number of hours changes from week to week, and it hasn’t been near 40 since Christmas. Luckily I planned ahead and put money aside if I couldn’t find a job right out of school, or if I found one and lost it with today’s economy. I have been able to cover the bills my paycheck doesn’t, but the thing is, my savings has gotten low to that.
I honestly really didn’t want to go on food stamps, I just can’t find another job. Let that be a full time position, or even another part time one. I’m applying to everything I’m qualified for, remotely qualified for, and even over qualified for. But there really are that few of jobs out there.
I haven’t really told anyone I’m on food stamps, a good portion of my old friends are still in school and don’t understand why I can’t find a “real” job. Luckily at my new job there’s a whole store of people who know exactly what I’m going through and would never think of judging me for how much I make or where I live.
There are other people too. Once at work a mother with three kids came in, she had never used food stamps before and had no idea what to do at the register. She almost came to tears trying to explain she really didn’t want to use them, but her husband lost his job, and all that was left for the family was her part time job, and she was so ashamed they had them.
People really have no idea how many of their neighbors are on food stamps.
Millions of Americans have done everything that the system has told them to do, and now the system is letting them down.
Because the system is failing.
The middle class is slowly being squeezed out of existence, and the years ahead are going to be very painful.
Already, it is getting extremely hard to live a middle class lifestyle.
If you haven’t read “It’s Impossible to Get By In the US” by Graham Summers of Phoenix Capital Research, you really need to. In his article, Summers analyzes the expenses of a typical family making the median U.S. household income of $50,300 (he was using 2008 figures). According to Summers, if a family making that much did everything right financially, they would maybe have a couple hundred bucks at the end of the month for discretionary spending. But if they overpaid for their house or had any consumer debt then according to his calculations the typical American family would be operating in the red.
The truth is that the day is fast approaching when it will not be possible for the average American family to make it from month to month.
Even now record numbers of American families are failing financially.
In March 2010, there were 158,000 bankruptcy filings. That was up 19% from March 2009’s number, and it was also up 35% from February 2010’s number.
Things are getting scary out there.
But if all of that wasn’t bad enough, now state and local governments across the United States are either implementing or are considering substantial tax increases. State and local governments all over the U.S. are facing unprecedented shortfalls, and they are looking for new sources of revenue. But you just can’t get blood out of a stone. Unfortunately, they are likely to keep finding ways to impose new taxes on us anyway.
So is there any good news?
No, not really.
The United States is heading for a complete economic collapse and everyone is going to feel the pain one way or another.
Just make sure that you and your family are as prepared as possible for the years ahead.
“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”