Did you know that almost 70 percent of the U.S. population is essentially living paycheck to paycheck? As you will see below, a brand new survey has found that 69 percent of all Americans have less than $1,000 in savings. Of course one of the primary reasons for this is that most of us are absolutely drowning in debt. In fact, the total amount of household debt in the United States now exceeds 12 trillion dollars. So many Americans are so busy just trying to pay off their existing debts that they can’t even think about saving anything for the future. If economic conditions remain relatively stable, the fact that so many of us are living on the edge probably won’t kill us. But the moment the economy plunges into another 2008-style crisis (or worse), we could be facing a situation where two-thirds of the country is in imminent danger of running out of cash.
If you are living paycheck to paycheck, you live under the constant threat of your life being totally turned upside down if that paycheck ever goes away. During the last crisis, millions of Americans lost their jobs very rapidly, and because so many of them were living paycheck to paycheck all of a sudden large numbers of people couldn’t pay their mortgages. As a result, multitudes of American families went through the extremely painful process of foreclosure.
Unfortunately, it appears that we have not learned anything from the last go around. According to the brand new survey that I mentioned above, 69 percent of all Americans have less than $1,000 in savings…
Last year, GoBankingRates surveyed more than 5,000 Americans only to uncover that 62% of them had less than $1,000 in savings. Last month GoBankingRates again posed the question to Americans of how much they had in their savings account, only this time it asked 7,052 people. The result? Nearly seven in 10 Americans (69%) had less than $1,000 in their savings account.
Breaking the survey data down a bit further, we find that 34% of Americans don’t have a dime in their savings account, while another 35% have less than $1,000. Of the remaining survey-takers, 11% have between $1,000 and $4,999, 4% have between $5,000 and $9,999, and 15% have more than $10,000.
Perhaps the most alarming fact from this survey is that 62 percent of all Americans had less than $1,000 in savings last year. So that means that this number has gotten 7 percent worse over the last 12 months.
How did that happen? I thought the mainstream media was telling us that the economy was getting better…
Look, if you don’t have an emergency fund you are in danger of losing everything. This is a point that I have been making over and over again for years, and in an article about this new survey USA Today made this point very strongly as well…
This data is particularly worrisome since the recommendation is for Americans to have six months in expenses saved in case of an emergency, such as a large medical expense, car repair bill, or losing your job. Without this emergency fund to fall back on, millions of Americans could be risking financial disaster.
As the publisher of The Economic Collapse Blog, people are constantly asking me what they should do to get prepared for what is coming.
The number one thing that I always suggest is to build up an emergency fund.
In a chaotic situation it is always hard to anticipate accurately what is going to happen, but without a doubt we are all going to need to continue to pay our bills and to buy things for our families during the next crisis.
Yes, someday the U.S. dollar will become rather worthless, but until that happens you are going to need to continue to put a roof over the heads of your family and to put food on the table.
And you are going to need money to do those things.
Some time ago, the Federal Reserve also found that a large percentage of Americans are living on the edge of financial disaster. They discovered that 47 percent of all Americans could not even come up with $400 to pay for an unexpected emergency room visit without borrowing the money or selling something that they own.
If you can’t even come up with $400 you are really hurting, but that is the status of about half the country these days.
We are continually being told that the economy is strong, but that is simply not the truth.
In fact, it turns out that the period from 2005 to 2015 was the worst period for per capita real GDP growth in modern American history. The following comes from Zero Hedge…
- Growth was unusually strong in the 1960s and early 1970s. In every year from 1966 through 1973, per-capita income was up between 30 percent and 40 percent from a decade earlier. Thus, it’s not surprising that many Americans recall this as a great period for the nation’s economy.
- In every year from 1984 to 2007 — a period that economists call the Great Moderation, because of the way both growth and interest rates stabilized — per-person income was up between 20 percent and 30 percent from a decade earlier. That’s ample reason for Americans to view this as a good period for the economy.
- Cumulative per-person growth from 2005 to 2015 was lower than in any prior decade in the sample. That certainly helps explain why many Americans are unhappy with the nation’s recent economic performance.
And as I repeat over and over, Barack Obama is on track to be the one and only president in all of American history to never have a single year when the economy grew by at least 3 percent, and he has had eight years to try to accomplish that feat.
Why doesn’t Donald Trump ever bring up that amazing fact? I would think that he could get a lot of mileage out of that number.
At this point, nobody can deny that the middle class is shrinking. 61 percent of all Americans lived in middle class households in 1971, but now the middle class makes up a minority of the population for the very first time in our history.
Back in 1970, the middle class brought home approximately 62 percent of all income, but today that figure has plummeted to just 43 percent.
Those that are still doing well often dismiss those that are struggling by barking out such phrases as “get a job”, but the truth is that getting a good job is not so easy these days.
The most recent statistics show that there are 7.9 million Americans that are considered to be officially unemployed. When you add that number to the 94.1 million working age Americans that are considered to be “not in the labor force”, you get a grand total of 102 million working age Americans that do not have a job right now.
And just because you do have a job does not mean that everything is okay. As I have discussed previously, 51 percent of all U.S. workers make less than $30,000 a year according to the Social Security Administration.
Everywhere you look things seem to be getting worse and not better. Not too long ago I documented the explosion of tent cities all over the country as poverty continues to rise, and I discussed how one study found that some young women in our impoverished inner cities are so desperate that they are actually trading sex for food.
Sadly, it isn’t just a few hard cases that we are talking about. Even in areas of the country that are supposed to be “doing well” we are seeing record-setting poverty numbers. For example, it was recently reported that the number of New Yorkers sleeping in homeless shelters just set a brand new all-time high, and the number of New York families permanently living in homeless shelters is up 60 percent over the past five years.
If things are this bad during an “economic recovery”, what are they going to look like once the economy really starts imploding?
And considering the fact that almost 70 percent of the population has virtually no savings, could our nation handle an extended economic downturn that may be even worse than what we experienced in 2008 and 2009?
As a nation we truly are living on the edge, and it isn’t going to take very much at all to push us into oblivion.
If you believe that the U.S. economy is heading in the right direction, you really need to read this article. As we look toward the second half of 2014, there are economic red flags all over the place. Industrial production is down. Home sales are way down. Retail stores are closing at the fastest pace since the collapse of Lehman Brothers. U.S. household debt is up substantially, and in 20 percent of all U.S. families everyone is unemployed. In so many ways, what we are witnessing right now is so similar to what we experienced during the build up to the last great financial crisis. We are making so many of the very same mistakes that we made the last time, and yet our “leaders” seem completely oblivious to what is happening. But the warning signs are very clear. All you have to do is open your eyes and look at them. The following are 27 huge red flags for the U.S. economy…
#1 Despite endless assurances from the Obama administration that we are in an “economic recovery”, the number one concern for U.S. voters is “Unemployment/Jobs” according to a recent Gallup survey.
#2 Historically, sales for construction equipment manufacturer Caterpillar have been a pretty good indicator of where the global economy is heading next. Unfortunately, sales were down 13 percent last month and have now experienced year over year declines for 17 months in a row.
#3 During the first quarter of 2014, profits at office supply giant Staples fell by 43.5 percent.
#4 Foot traffic at Wal-Mart stores fell by 1.4 percent during the first quarter of 2014. Analysts seem puzzled as to why Wal-Mart is “underperforming“. Perhaps it is because the U.S. middle class is being steadily destroyed and U.S. consumers are tapped out at this point.
#5 It is being projected that Sears will soon close hundreds more stores and will eventually go out of business altogether…
The company said this week that it may sell its 51% stake in Sears Canada, which operates nearly 20% of the company’s stores worldwide. It has quietly closed nearly 100 U.S. stores in the last year. Next week, it’s expected to announce dismal fiscal first quarter results and possibly yet more store closings.
“They have too many stores and they’re losing a lot of money, burning cash,” said John Kernan, an analyst with Cowen.
Kernan expects the company to close 500 of its 1,980 U.S. stores in a few years and, ultimately, to go out of business.
“The lights are going off at Sears and Kmart,” he said. “There are tumbleweeds blowing through the parking lots at Kmart. They’re basically completely irrelevant.”
The “retail apocalypse” just continues to roll on, but the mainstream media is treating this like it is not really a big deal.
#6 The labor force participation rate for Americans from the age of 25 to the age of 29 has fallen to an all-time record low.
#7 According to official government numbers, everyone is unemployed in 20 percent of all American families.
#8 As families struggle to pay their bills, many of them are increasingly turning to debt in order to make ends meet. Earlier this month we learned that total U.S. household debt has increased for three quarters in a row. And as I noted in one recent article, total consumer credit in the United States has increased by 22 percent over the past three years, and 56 percent of all Americans have “subprime credit” at this point.
#9 Interest rates on student loans are scheduled to increase substantially on July 1st…
As of July 1, federal student loan rates will edge up. Rates overall will be up 0.8% compared to current rates.
Federal Stafford Loans for undergraduate students will be 4.66% — up from 3.86%. Federal Stafford Loans for graduate students will be 6.21% — up from 5.41%.
Federal Grad PLUS and Federal Parent PLUS Loans will be at 7.21% — up from 6.41%.
This is going to put even more pressure on the growing student loan debt bubble.
#10 U.S. industrial production fell by 0.6 percent in April. This should not be happening if the economy truly was “recovering”.
#11 Manufacturing job openings in the United States have declined for four months in a row.
#12 Existing home sales have fallen for seven of the last eight months and seem to be repeating a pattern that we witnessed back in 2007 prior to the last financial crash.
#13 In the real estate bubble market of Phoenix, sales in April were down 12 percent year over year, and active inventory was up 49 percent year over year. In other words, there are tons of homes on the market, but sales are going down.
#14 The homeownership rate in the United States has dropped to the lowest level in 19 years.
#15 Trading revenue at big banks all over the western world is way down…
Late Friday, it was JPMorgan who said trading revenues will be down 20 percent this quarter. Now Barclays says trading revenues in the first three months were down 41 percent. The company cited “challenging trading conditions resulting in subdued client activity.” Like JPMorgan, Barclays also warned they were seeing no improvement in trading in the second quarter.
#16 Jan Loeys, JPMorgan’s head of global asset allocation, is warning that the Federal Reserve is creating a huge financial bubble which could “push us into a credit crisis“…
Where do we go from here? To this analyst, still very subdued economic growth, both at the US and global level, implies continued easy monetary policy. The risk is that bond yields rise no faster than the forwards. Financial overheating (asset inflation) proceeds much faster than economic overheating (CPI inflation). Before CPI inflation has a chance to emerge, and before monetary policy is truly above neutral, a financial bubble will have popped up somewhere and will have corrected, pushing the economy down. That is what has happened in the past 25 years. The behavior of central banks gives us no confidence that this time will be different: Central banks talk about financial instability, but appear to define this mostly in term of bank leverage. Each successive boom and bust is always in another place. A bubble can emerge without leverage. It is not possible to project exactly where this boom and bust cycle will take place as knowing where it will be would induce evasive actions that should prevent it from occurring. One possible ending, among many, is that ultra-easy rates having induced credit markets to grow much faster than equity markets, combines with reduced market making by banks (many of whom have become like brokers) to create a liquidity crisis when the Fed starts the first set of rate hikes. This could then be bad enough to close primary markets, and thus push us into a credit crisis.
#17 Peter Boockvar, the chief market analyst at the Lindsey Group, is warning that the U.S. stock market could experience a 20 percent decline once quantitative easing completely ends.
#18 A lot of other big names are telling CNBC that they expect a significant stock market “correction” very soon as well…
A bevy of high-profile names have warned lately that the market is on the doorstep of a major move lower. From long-term market bulls such as Piper Jaffray to short-term traders such as Dennis Gartman, expectations are high that the major averages are poised for a big dip, with calls varying from 10 percent or so all the way up to 25 percent.
#19 The number of Americans enrolled in the Social Security disability program exceeds the entire population of the nation of Greece and has just hit another brand new record high.
#20 Poverty continues to grow all over the country, and right now there are 49 million Americans that are dealing with food insecurity.
#21 According to Pew Charitable Trusts, tax revenue in 26 U.S. states is still lower than it was back in 2008 even though tax rates have gone up in many areas since then.
#22 Barack Obama is doing his best to keep his promise to destroy the U.S. coal industry…
The EPA is about to impose a new regulation that will reduce carbon emissions from existing power plants starting June 2 and will become permanent in 2015. The new regulation, according to Politico, is the “most dramatic anti-pollution regulation in a generation.” Because the new regulation will further cripple the coal industry, as coal-burning plants will be severely affected, American power will become more dependent on natural gas, solar and wind.
#23 Climatologists are now saying that the state of Texas is going through the worst period of drought that it has experienced in 500 years.
#24 It is being reported that “dozens of Texas communities” are less than 90 days away from being completely out of water.
#25 It is being projected that the drought in California will cost the agricultural industry 1.7 billion dollars and that approximately 14,500 agricultural workers will lose their jobs.
#26 Due in part to the drought, the price of meat rose at the fastest pace in more than 10 years last month.
#27 According to recent surveys, only about a quarter of all Americans believe that the country is heading in the right direction.
What is the biggest economic problem that the United States is facing? Very simply, our biggest problem is that we have way too much debt. Over the past 30 years, household debt, corporate debt and government debt have all grown much faster than our GDP has. But no nation on earth has ever been able to expand debt much faster than national output indefinitely. All debt bubbles eventually burst. Right now, we are living in the greatest debt bubble in the history of the world. All of this debt has fueled a “false prosperity” which has enabled many Americans to live like kings and queens. But no nation (or household) can pile on more debt forever. At some point the weight of the debt becomes just too great. It is amazing that the United States has been able to pile up as much debt as it has. Over the years, many authors have predicted that U.S. government finances would collapse long before the U.S. national debt ever got to this level. So the mountain of debt that we have accumulated is quite an “achievement” if you want to look at it that way. But the clock is ticking on this debt bubble and when it collapses we will say “bye bye” to our vastly inflated standard of living and we will discover that we have destroyed the economy for all future generations of Americans.
Sometimes a picture is worth a thousand words. When most Americans think of the “debt problem” in this country, they think of the debt of the federal government.
But that is not the only debt bubble that we are facing.
Thirty years ago, household debt in the United States was approaching the 2 trillion dollar mark. Today, it is sitting at about 13 trillion dollars….
We have been trained to pay for everything with debt.
We pay for our homes with debt, and mortgage debt as a percentage of GDP has more than tripled since 1955.
We pay for our cars with debt, and at this point about 70 percent of all auto purchases in the United States involve an auto loan.
We pay for higher education with debt, and the total amount of student loan debt in America recently surpassed the one trillion dollar mark.
Wherever we go we pay with plastic.
If you want a heated cat bed and a cute little cat sweater for your little kitty just put it on your Visa or Mastercard.
Amazingly, consumer debt in America has risen by a whopping 1700% since 1971, and if you can believe it, 46% of all Americans carry a credit card balance from month to month.
We are absolutely addicted to debt and we do not know how to stop.
State And Local Government Debt
Our state and local governments are also addicted to debt.
30 years ago, state and local government debt was approaching the 400 million dollar mark. Today, state and local government debt is hovering around the 3 trillion dollar mark….
In the United States today, we don’t just have one “government debt problem” – the truth is that we have hundreds of them. All over the country, state and local governments are facing bankruptcy because of too much debt.
For example, according to Fox News the city of Stockton, California is right on the verge of declaring bankruptcy. In fact, an announcement could come as early as this week….
Stockton, Calif., is set to declare bankruptcy as early as this week, according to local officials, a move that would make it one of the largest U.S. cities ever to file for reorganization.
On Monday, a state-required mediation with creditors to find a fiscal solution is scheduled to expire. Stockton’s City Council is then slated to meet Tuesday to decide whether to adopt a budget for operating in bankruptcy, a move widely considered the last step before the city formally submits a Chapter 9 petition to federal bankruptcy court.
Federal Government Debt
Of course the biggest offender of all is the federal government. 30 years ago, Ronald Reagan was running around proclaiming what a nightmare it was that the U.S. national debt was reaching the one trillion dollar mark.
Well, now we are about to blast through the 16 trillion dollar mark with no end in sight….
Running up debt at a much faster rate than our GDP is rising is a recipe for national financial suicide. Our politicians continue to steal about 150 million dollars an hour from future generations and everybody just acts like this is perfectly normal.
We are going down the same path that Greece, Portugal, Italy, Ireland and Spain have gone.
In fact, we already have more government debt per capita than all of those nations do.
Both political parties have been doing this to us, and it just keeps getting worse and worse.
Incredibly, the national debt has grown more under Obama in less than 4 years than it did under George W. Bush during his entire 8 year term.
Since Barack Obama entered the White House, we have accumulated more than five trillion dollars of additional debt.
We are on the road to national financial oblivion, and most Americans don’t seem to care.
Debt From Sea To Shining Sea
Now let’s add up all the debt in the country. When you total up all household debt, business debt and government debt, it comes to more than 300% of our GDP….
In fact, if current trends continue we will hit 400% of GDP before too long.
As you can see from the chart, there was a little “hiccup” during the last recession, but now the debt bubble is growing again.
So how high can it go before the entire system collapses?
Total credit market debt owed is roughly 10 times larger than it was about 30 years ago.
How in the world did we accumulate 10 times more debt in just 30 years?
If we do that again in the next 30 years, our total debt will be more than 500 trillion dollars in the 2040s.
Unfortunately, that is the way that debt spirals work. They either have to keep expanding or they collapse.
So will the U.S. debt spiral continue to expand?
Or will we soon see a collapse?
Sadly, this exact same thing is happening all over the world. The government debt to GDP ratio in Japan (the third largest economy in the world) blew past the 200% mark quite a while ago, and almost every country in the EU is absolutely drowning in debt.
The world has never faced anything quite like this. There is way, way too much debt in the world, but the only way we can continue to enjoy this level of prosperity under the current system is to pile up a lot more debt.
The western world is like a debt addict in a deep state of denial. Some debt addicts end up with dozens of credit card accounts. They will keep opening more accounts as long as someone will let them. Most debt addicts actually believe that they will be able to get out of the hole at some point, but most never do.
Most Americans still believe that we are experiencing “temporary” economic problems that will eventually go away. Most Americans still believe that even greater prosperity is still ahead.
Sadly, what the mainstream media and the two major political parties are telling them is a bunch of lies.
We have enjoyed the greatest prosperity that we will ever see in the United States, and when the debt bubble bursts there is going to be an immense amount of pain.
That is a very painful truth, but it is better to come to grips with it now than be blindsided by it later.
How do you decide whether you are wealthy or not? Do you determine that by how much money you spend at the stores? Of course not. You can tell if you are wealthy or not by comparing your assets (the money in your bank account, equity in your home, etc.) to your liabilities (your mortgage, credit card debt, student loan debt, etc.). Well, a lot of Americans seem to believe that just because a lot of money is circulating in our economy that it must mean that we are a wealthy nation. But that is simply not true. To tell whether or not America is a wealthy nation, you need to look at the balance sheet numbers. And when you look at the balance sheet numbers, a very sobering story emerges. Over the past three decades, government debt, business debt and household debt have absolutely exploded, but our assets have not. That means that we are getting poorer as a nation. Hopefully the shocking charts and statistics in this article will help a lot of Americans to wake up. Yes, we once were the wealthiest nation on earth, but today America is no longer a wealthy nation.
We live during a time when U.S. households are becoming poorer. This week the Federal Reserve announced that the total net worth of U.S. households declined by 4.1 percent in the 3rd quarter of 2011 alone.
That is a staggering decline. The total net worth of U.S. households plummeted by $2.2 trillion during those three months. When you break that down, it comes to approximately $7,800 for every single U.S. citizen.
But this is not the first time we have seen a huge decline in U.S. household wealth in recent years.
A recent article posted on CNN detailed the stunning drop in U.S. household wealth that we saw from 2007 to 2009….
Household wealth plunged $16.3 trillion in the two years from early 2007 to the first quarter of 2009, and has slowly been climbing since then. But with the drop in the third quarter of this year, households find their net worth still $9.4 trillion, or 14%, below the high they hit in early 2007, before the bursting of the housing bubble.
So right now the total net worth of U.S. households is $9.4 trillion below what it was back in 2007.
That certainly is not good news.
But not only is the total net worth of U.S. households going down, our incomes are going down as well.
Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.
Not that incomes were rising very quickly prior to that time either.
Between 1979 and 2007, income growth for the bottom 90 percent of all U.S. income earners was only about 5 percent for that entire time period.
Meanwhile, household debt was absolutely skyrocketing. Take a look at the following chart which shows what total U.S. household debt has done over the last three decades….
So income growth has been pretty much flat over the past three decades but household debt has been rising at an exponential pace for most of that time.
Yes, there has been a little bit of deleveraging during this economic downturn, but there are now signs that the deleveraging is rapidly coming to an end.
According to a recent CNN article, credit card use in the United States is experiencing a major upswing once again….
Purchases made with credit cards rose 8.2% in the first quarter of 2011, 9% in the second quarter and 10.6% in the third quarter, according to First Data.
That is not good news.
The truth is that U.S. households owe way, way too much money already. According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.
We are up to our eyeballs in debt, and our incomes are not keeping up.
In addition, we have seen massive amounts of home equity wiped out in recent years.
An unusual thing has happened during this economic downturn. For the first time in U.S. history, the banks have more equity in our homes than we do. If you do not believe this, just check out this chart.
The truth is that the American people are not becoming wealthier. They are becoming poorer.
And a shocking number of Americans are falling into poverty. In 2010, 2.6 million more Americans fell into poverty, which set a new all-time record for a single year.
But this is not a new thing. This is a trend that we have seen building for many years. Back in the year 2000, 11.3% of all Americans were living in poverty. Today, 15.1% of all Americans are living in poverty.
So obviously U.S. households are not doing well.
But what about the government?
The U.S. national debt is completely and totally out of control. Right now it is sitting at $15,046,397,725,405.16. That means that it is nearly 15 times higher than it was just 30 years ago. Just check out this almost unbelievable chart….
So is our ability to pay these debts 15 times greater than it was back then?
Of course not.
Our liabilities are exploding at an out of control rate but our assets are not.
Whether you are a running a family or running a government, that is a recipe for financial disaster.
The U.S. government has been running budget deficits of over a trillion dollars for several years now, and there is no sign that these trillion dollar deficits are going to stop any time soon.
So how much money is a trillion dollars?
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.
Yet somehow the U.S. government has accumulated a debt that is well over 15 trillion dollars.
The Bush administration was a nightmare when it came to running up debt, but they have definitely been outclassed by the Obama administration….
*During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.
*The U.S. national debt has been increasing by an average of more than 4 billion dollars per day since the beginning of the Obama administration.
*Since Barack Obama was sworn in, the share of the national debt per household has increased by $35,835.
And most U.S. government spending does not do a thing to build real wealth for this country. For example, the total compensation that the federal government workforce brought in during 2010 is estimated to be about 447 billion dollars.
So did federal workers create 447 billion dollars of real wealth last year?
Of course not.
The truth is that our bloated federal government is a massive drain on our society.
But the federal government is not the only one with a debt problem.
State and local governments all over America are also drowning in debt. In fact, state and local government debt in America is now sitting at an all-time high of 22 percent of U.S. GDP.
The following chart from the Federal Reserve combines government debt, business debt and consumer debt. As you can see, America is swimming in an ocean of more than 50 trillion dollars of debt….
To get an idea of how bad that is, just look at where total debt was at back in 1970 or 1980.
Over the last three decades we have seen an orgy of debt that has been absolutely unprecedented.
Meanwhile, we are bleeding national wealth at a staggering rate.
Every single month, tens of billions of dollars more goes out of this country than comes into it.
In fact, it is being projected that the U.S. trade deficit for 2011 will be 558.2 billion dollars.
This represents a transfer of wealth that is so vast that it is almost impossible to believe.
Our dependence on foreign oil is greatly contributing to this. It is being projected that for the first time ever, the OPEC nations are going to bring in over a trillion dollars from exporting oil this year. Their biggest customer is the United States.
When we send hundreds of billions of dollars overseas, that is hundreds of billions of dollars that does not go into the pockets of American business owners or American workers.
The United States has had a negative trade balance every single year since 1976, and since that time the United States has run a total trade deficit of more than 7.5 trillion dollars with the rest of the world.
For a moment, imagine a giant map of the world. Then imagine a pile of 7.5 trillion dollars sitting on the United States of America.
That looks pretty good, eh?
Well, then start taking big chunks of that money and start exchanging it for oil and for cheap plastic products until the entire pile is gone.
Are you starting to understand?
We burn up the foreign oil in our cars and most of the cheap plastic products end up being discarded fairly quickly.
But our loss of national wealth is permanent.
Meanwhile, we are facing national financial obligations in the years ahead that are absolutely nightmarish.
According to Boston University Professor Laurence J. Kotlikoff, the U.S. government is facing a “fiscal gap” of $211 trillion in the decades ahead. The following comes from an article that Kotlikoff wrote for CNN earlier this year….
The government’s total indebtedness — its fiscal gap — now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations — including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt — and all projected future taxes.
If you went out and liquidated all of the assets owned by all American citizens, all U.S. businesses and all levels of government in America, it would only cover about a third of that bill.
Are you starting to get the picture?
America is no longer a wealthy nation.
We are like that family down the street that is always throwing around tons of money but that is always on the verge of bankruptcy.
So when they tell you that the economy “grew” by 1 or 2 percent, please don’t think that means that America is becoming wealthier.
The truth is that our debts are growing at a far, far faster rate than our assets are.
That means that we are getting poorer.
Is there anyone out there that disagrees with that?
Any economy that constantly consumes far more wealth than it produces is eventually going to be in for a very hard fall. Many point to relatively stable GDP numbers as evidence that the U.S. economy is doing okay, but the truth is that we have had to borrow increasingly massive amounts of money to keep GDP numbers up at that level. The U.S. government is going to run an all-time record deficit of about 1.65 trillion dollars this year and average household debt in the United States has now reached a level of 136% of average household income. But borrowing endless amounts of money and consuming massive amounts of wealth with that borrowed money is a road that leads to economic oblivion. The only way to have a healthy economy in the long run is to create wealth. But how can America create wealth if our industrial base is being absolutely destroyed? According to Forbes, the United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001. Hundreds of formerly thriving industries in the United States are being totally wiped out. China uses every trick in the book to win trade battles. They deeply subsidize their domestic industries, they openly steal technology, they blatantly manipulate currency rates and they allow their citizens to be paid slave labor wages. So yes, the products coming from China are cheaper, but in the process tens of thousands of factories in the U.S. are shutting down, millions of jobs are being lost and the ability of America to create wealth is being compromised.
In 2010, the U.S. trade deficit was just a whisker under $500 billion. Much of that trade deficit was with China.
During 2010, we spent $365 billion on goods from China while they only spent $92 billion on goods from us.
Does a 4 to 1 ratio sound like a “fair and balanced” trade relationship to anyone out there?
Our trade deficit with China in 2010 was the largest trade deficit that one country has ever had with another country in the history of the world.
In fact, the U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.
Needless to say, that is not a good trend.
Our industrial base and our ability to create wealth is being wiped out so rapidly that it has now become a very serious threat to our national security.
According to Forbes, there is only one steel plant inside the United States that is still capable of producing steel of high enough quality to meet the needs of the U.S. military, and even that plant has been bought by a European company.
Meanwhile, China produced 11 times as much steel as America did last year.
Not only that, China is now the number one supplier of components that are critical to the operation of U.S. defense systems.
How in the world did we let that happen?
So what happens if we have a conflict with China someday?
But of more immediate concern is the loss of jobs that the destruction of our industrial base is causing.
For example, the Ivex Packaging Paper plant in Joliet, Illinois just announced that it is shutting down for good after 97 years in business. 79 good jobs will be lost. Meanwhile, China has become the number one producer of paper products in the entire world.
But China is not just wiping the floor with us when it comes to things like steel and paper.
The truth is that China has now become the world’s largest exporter of high technology products. Back in 1998, the United States had 25 percent of the world’s high tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.
So how is China doing it? Well, as noted above, they are pulling every trick that they can think of.
Most Americans think that we have “free trade” with nations such as China. That is a complete and total lie and anyone that believes that we have “free trade” with China does not know what they are talking about.
China subsidizes their domestic industries to such an extreme extent that many global industries no longer even come close to resembling “free markets” as a recent story in Forbes noted….
According to a story in the January 20, 2009 New York Times, government subsidies so thoroughly disrupted pricing in the global market for antibiotics that many western producers had to either move facilities to Asia or exit the business entirely. The reason this might matter to intelligence analysts is that the last U.S. source of key ingredients for antibiotics — a Bristol-Myers Squibb plant in East Syracuse, New York — has now closed, leaving the U.S. dependent on foreign sources in a future conflict.
Our politicians and our business leaders have pursued economic policies that are so self-destructive that it defies explanation.
How in the world could anyone be so stupid?
Since 2001, over 42,000 U.S. factories have closed down for good. Millions of jobs have been lost. The ability of the once great American economic machine to create wealth has been neutered.
The business environment in America is completely and totally pathetic at this point. The number of small businesses that are being created is also way, way down.
According to the U.S. Census Bureau, only 403,765 small businesses were created in the 12 months that ended in March 2009. That was down 17.3% from the previous year, and it was the smallest number of small businesses created since records began being kept in 1977.
The truth is that the U.S. economy is dying.
We continue to consume about the same amount of wealth that we always have, but our net worth is declining.
According to the Federal Reserve, more than two-thirds of Americans have seen their net worth decline during this economic downturn. In fact, the Fed says that between 2007 and 2009, the wealth of the average American family declined by 23%.
So if it seems like your family and everyone around you is getting poorer, that is because it really is happening.
We really are becoming poorer as a nation.
We can see evidence of this all around us. Just consider a few of the examples that have been in the news in recent days….
*One school district in the Chicago area is laying off 363 teachers.
*The U.S. Postal Service is offering $20,000 buyouts to thousands of workers as they attempt to slash 7,500 good paying jobs.
*The city of Detroit, once a shining example of middle class America, is now a rotting cesspool of economic decline and it saw its population decline by 25 percent over the decade that recently ended.
Americans are not feeling the full impact of America’s industrial decline yet because we have been filling the gap in wealth creation with massive amounts of debt.
In the years since 1975, the United States had run a total trade deficit of 7.5 trillion dollars with the rest of the world. That 7.5 trillion dollars could have gone to support U.S. businesses and U.S. workers, but instead it left the country and went into the hands of foreigners that do not pay taxes.
Therefore, the U.S. government, state governments and our local governments have had to borrow massive amounts of money to make up the difference.
Most people do not realize it, but the destruction of America’s industrial base has played a very significant role in the government debt crisis we are facing today.
In addition, the millions upon millions of workers that have lost their jobs as America’s industrial base has been destroyed are now a drain on the system. Instead of creating wealth and being involved in economically productive activity, millions of American workers are now totally dependent on the U.S. government for survival.
Do you think that it is just some sort of accident that we have 44 million Americans on food stamps?
Don’t you think that a large percentage of those people would actually like to have good jobs that would enable them to sufficiently feed their families?
If we continue on the path that we are currently on we are not going to have much of an economy left.
Not that all trade is bad. Certainly not. For example, trade with Canada is generally a very good thing.
However, the horribly unbalanced and unfair trade relationships that we have with nations such as China are ripping our industrial base apart. Our politicians have not been telling us the truth about what the “global economy” will mean for American workers. Most U.S. workers never realized that globalism would mean that they would be competing for jobs with workers willing to work for one-tenth the pay on the other side of the globe.
Those people that believe that we can indefinitely maintain an economy where we consume far more wealth than we create are completely and totally delusional.
Until the American people wake up and start demanding change from our politicians on these issues, 50,000 (or more) manufacturing jobs will continue to fly out the doors every single month and even more Americans will become dependent on government welfare.
Is that what you want?