The “McDonald’s Budget”: Laughably Unrealistic But Also Deeply Tragic

The McDonald's BudgetCan you support a family on $2,000 a month?  Recently, McDonald’s and Visa teamed up to launch a website that is intended to help employees of McDonald’s manage their money.  The aspect of the website that is getting a tremendous amount of national attention is the “McDonald’s Budget” which is a sample monthly budget which is designed to help workers plan their spending.  You can see a copy of it for yourself right here.  This budget is laughably unrealistic, but it is also deeply tragic, because there are tens of millions of American workers that are actually trying to raise families on this kind of an income.

The first thing that you will notice about the McDonald’s Budget is that it expects workers to have two jobs.  It is an open admission that working at McDonald’s is not enough to survive.  So this budget assumes that the worker will take on a second job which will pay nearly as much as the first one does.  Assuming that both jobs pay about the minimum wage, the budget will require about 70 to 80 hours of work every week.

People can put in those kind of hours for a time, but after a while your body starts to break down.  I have been there, and I have known many others that have been there.

But let’s assume that the hypothetical worker that this budget is for can work that many hours indefinitely.  The budget assumes a yearly income of about $24,000 after taxes, and that would make it a fairly typical budget for a typical working class American.

In the United States today, 47 percent of all U.S. workers make less than $25,000 a year before taxes.  So millions upon millions of U.S. workers are trying to make ends meet each month on very limited incomes.

Does the “McDonald’s Budget” provide any solutions for those workers?

Well, this budget allocates $0 for food, so if you plan on following this budget you might want to anticipate fasting a lot each month.

This budget also allocates $0 for gasoline.  So either you will have to ride a bicycle or walk everywhere you go.

This budget does not allocate any money for clothing either.  If you really need something to wear, perhaps you can take some cash from the “monthly spending money” category and go down to the local thrift store and get something.

In addition, this budget has no money for water, no money for child care and you might as well forget about saving for retirement.  But if you work yourself 70 to 80 hours a week, you probably won’t even make it to retirement age anyway.

So what are some of the things that actually are in the budget?

Well, it allocates $20 a month for health insurance.

Wow – where can I sign up for that health insurance plan?

As the Washington Post noted, nobody is going to be able to get health insurance that cheaply…

Low-income individuals receive assistance from Medicaid, but an after-tax income of $24,720 would put Medicaid out of reach in most states. The same point will likely apply to the subsidies offered by Obamacare: An individual with an income of $17,000 in California will be able to get a basic health insurance plan at no cost, but an individual making $28,000 will have to pay at least $137 per month.

So even a young, healthy person will have to pay $100 or more for an individual health insurance policy in most circumstances. Perhaps McDonalds is tacitly admitting that many low-income workers, including McDonalds employees, can’t afford health insurance and simply make do without it.

The original version of the budget also assumed that the worker would spend zero dollars a month on “heating”.

Perhaps McDonald’s just expects their workers to freeze all winter.

The new version of the budget now allocates $50 a month for heating.  Perhaps that may work for the state of Florida, but anyone that lives in a northern state knows that it takes a whole lot more than that just to heat up your home to a level that is barely livable during the winter.

This budget is absolutely crazy.  But perhaps even more patronizing then the budget itself is the following statement that is made on the website: “You can have almost anything you want as long as you plan ahead and save for it.”

Oh really?

Do they expect anyone to actually fall for that line?

Don’t get me wrong.  Working at McDonald’s is great for some people.  I worked there myself when I was in high school.  But the vast majority of adult Americans need jobs that will enable them to take care of their families.  And those kinds of jobs are rapidly disappearing.

Last month, the U.S. economy lost 240,000 full-time jobs.  We are about 6 million full-time jobs below the all-time record that was set back in 2007.  For much more on this, please see my previous article entitled: “The Decline Of Breadwinner Jobs Has Resulted In The Longest Bread Lines In American History“.

Today, one out of every four American workers has a job that pays $10 an hour or less.  A lot of very talented people are cutting hair, flipping burgers or working for temp agencies.  Those people should be doing something that takes advantage of their skills and abilities, but the U.S. economy is not producing enough of those kinds of jobs anymore.

Unfortunately, this is only just the beginning.  The next major wave of the economic collapse is rapidly approaching, and when it strikes unemployment in this country is going to get much worse.

So don’t put all of your faith in the system, because the system is failing.  Even if you do have a good job right now, you could lose it at any moment.

Whatever you can do to become more independent of the system is a good thing.  For example, starting up a side business is a wonderful thing.  It takes a tremendous amount of effort, but nobody can fire you if you are the boss.

So what do you think of the “McDonald’s Budget”?  Please feel free to share your opinion by posting a comment below…

McDonald's

America The Fallen: 24 Signs That Our Once Proud Cities Are Turning Into Poverty-Stricken Hellholes

Hellholes - Photo by LyzadangerWhat is happening to you America?  Once upon a time, the United States was a place where free enterprise thrived and the greatest cities that the world had ever seen sprouted up from coast to coast.  Good jobs were plentiful and a manufacturing boom helped fuel the rise of the largest and most vibrant middle class in the history of the planet.  Cities such as Detroit, Chicago, Milwaukee, Cleveland, Philadelphia and Baltimore were all teeming with economic activity and the rest of the globe looked on our economic miracle with a mixture of wonder and envy.  But now look at us.  Our once proud cities are being transformed into poverty-stricken hellholes.  Did you know that the city of Detroit once actually had the highest per-capita income in the United States?  Looking at Detroit today, it is hard to imagine that it was once one of the most prosperous cities in the world.  In fact, as you will read about later in this article, tourists now travel to Detroit from all over the globe just to see the ruins of Detroit.  Sadly, the exact same thing that is happening to Detroit is happening to cities all over America.  Detroit is just ahead of the curve.  We are in the midst of a long-term economic collapse that is eating away at us like cancer, and things are going to get a lot worse than this.  So if you still live in a prosperous area of the country, don’t laugh at what is happening to others.  What is happening to them will be coming to your area soon enough.

The following are 24 signs that our once proud cities are turning into poverty-stricken hellholes…

#1 According to the New York Times, there are now approximately 70,000 abandoned buildings in Detroit.

#2 At this point, approximately one-third of Detroit’s 140 square miles is either vacant or derelict.

#3 Back during the housing bubble, an acre of land in downtown Phoenix, Arizona sold for about $90 a square foot.  Today, an acre in downtown Phoenix sells for about $9 a square foot.

#4 The city of Chicago is so strapped for cash that it is planning to close 54 public schools.  It is being estimated that Chicago schools will run a budget deficit of about a billion dollars in 2013.

#5 The city of Baltimore is already facing unfunded liabilities of more than 3.2 billion dollars, but the city government continues to pile up more debt as if it was going out of style.

#6 Today, the murder rate in East St. Louis is 17 times higher than the national average.

#7 According to USA Today, the “share of jobs located in or near a downtown declined in 91 of the nation’s 100 largest metropolitan areas” between 2000 and 2010.

#8 Between December 2000 and December 2010, 48 percent of the manufacturing jobs in the state of Michigan were lost.

#9 There are more than 85,000 streetlights in Detroit, but thieves have stripped so much copper wiring out of the lights that more than half of them are not working.

#10 The unemployment rate in El Centro, California is 24.2 percent, and the unemployment rate in Yuma, Arizona is an astounding 25.6 percent.

#11 It has been estimated that there are more than 1,000 homeless people living in the massive network of flood tunnels under the city of Las Vegas.

#12 Violent crime in the city of Oakland increased by 23 percent during 2012.

#13 If you can believe it, more than 11,000 homes, cars and businesses were burglarized in Oakland during 2012.  That breaks down to approximately 33 burglaries a day.

#14 As I have written about previously, there are only about 200 police officers assigned to Chicago’s Gang Enforcement Unit to handle the estimated 100,000 gang members living in the city.

#15 The number of murders in Chicago last year was roughly equivalent to the number of murders in the entire country of Japan during 2012.

#16 The murder rate in Flint, Michigan is higher than the murder rate in Baghdad.

#17 If New Orleans was considered to be a separate nation, it would have the 2nd highest murder rate on the entire planet.

#18 According to the Justice Department’s National Drug Intelligence Center,  Mexican drug cartels were actively operating in 50 different U.S. cities in 2006.  By 2010, that number had skyrocketed to 1,286.

#19 Back in 2007, the number of New York City residents on food stamps was about 1 million.  It is now being projected that the number of New York City residents on food stamps will pass the 2 million mark this summer.

#20 The number of homeless people sleeping in the homeless shelters of New York City has increased by a whopping 19 percent over the past year.

#21 As I noted yesterday, approximately one out of every three children in the United States currently lives in a home without a father.

#22 In Miami, 45 percent of the children are living in poverty.

#23 In Cleveland, more than 50 percent of the children are living in poverty.

#24 According to a recently released report, 60 percent of all children in the city of Detroit are living in poverty.

As I mentioned at the top of this article, the decline of the city of Detroit has become so famous that it has actually become a tourist attraction.  The following is a short excerpt from an article in the New York Times

But in Detroit, the tours go on, in an unofficial capacity. One afternoon at the ruins of the 3.5-million-square-foot Packard Plant, I ran into a family from Paris. The daughter said she read about the building in Lonely Planet; her father had a camcorder hanging around his neck. Another time, while conducting my own tour for a guest, a group of German college students drove up. When queried as to the appeal of Detroit, one of them gleefully exclaimed, “I came to see the end of the world!”

For much more on the shocking decline of one of America’s greatest cities, please see my previous article entitled “Bankrupt, Decaying And Nearly Dead: 24 Facts About The City Of Detroit That Will Shock You“.

So are there any areas of the country that are still thriving?

Well, yes, there are a few.  In particular, those areas that are sitting on top of energy resources tend to be doing quite well for now.

One example is Texas.  In recent years people have been absolutely flocking to the state.  There are lots of energy jobs, the cost of living is low and there is no state income tax.

But overall, things are really tough out there.  Over the past decade America has lost millions of good jobs to offshoring, advancements in technology and a declining economy.

Last year, the United States had a trade deficit with the rest of the world of more than half a trillion dollars.  Overall, the U.S. has run a trade deficit with the rest of the world of more than 8 trillion dollars since 1975.

All of that money could have gone to U.S. businesses and U.S. workers.  In turn, taxes would have been paid on all of that income which could have helped keep our cities great.

But instead, our politicians have stood idly by as we have lost tens of thousands of businesses and millions of jobs.  If you can believe it, more than 56,000 manufacturing facilities have closed down permanently in the United States since 2001.

We have allowed our economic infrastructure to be absolutely gutted, and so we should not be surprised that our once proud cities are turning into poverty-stricken hellholes.

And this is just the beginning.  The next wave of the economic collapse is rapidly approaching, and when it strikes unemployment in this country will eventually rise to a level that is more than double what it is now.

When that happens, I wouldn’t want to be anywhere near our rotting, decaying cities.

Railroad In Milwaukee

100 Years Old And Still Killing Us: America Was Much Better Off Before The Income Tax

100 Years Old And Still Killing UsDid you know that the greatest period of economic growth in American history was during a time when there was absolutely no federal income tax?  Between the end of the Civil War and 1913, there was an explosion of economic activity in the United States unlike anything ever seen before or since.  Unfortunately, a federal income tax was instituted in 1913, and this year it turned 100 years old.  But there was no fanfare, was there?  There was no celebration because the federal income tax is universally hated.  Sadly, most Americans just assume that there is no other option to an income tax.  Most Americans just assume that it has always been with us and that it will always be with us.  This year, the American people will shell out approximately $4.22 trillion in state and federal income taxes.  That amount is equivalent to approximately 29.4 percent of all income that Americans will bring in this year, and that does not even take into account the dozens of other taxes that Americans pay each year.  At this point, the U.S. tax code is about 13 miles long, and those that are honest and pay their taxes every year are being absolutely shredded by this system.  But wouldn’t the federal government go broke if we didn’t have a federal income tax?  No, actually the truth is that the federal government did just fine before there was an income tax.  In fact, the U.S. national debt has gotten more than 5000 times larger since the federal income tax and the Federal Reserve were created by Congress back in 1913.  As I have written about previously, the Federal Reserve system was actually designed to trap the United States in a debt spiral from which it could never possibly escape, and the federal income tax was needed to greatly expand the size of the federal government and to soak the American people of the funds necessary to service that debt.  But it doesn’t have to be this way.  America was once much better off before the income tax and the Federal Reserve were created, and we could easily go to such a system again.

What we desperately need to do is to teach the American people a little history lesson.  The truth is that the greatest period of economic growth in U.S. history was between the Civil War and 1913 when there was no federal income tax at all.  The following is from Wikipedia

The Gilded Age saw the greatest period of economic growth in American history. After the short-lived panic of 1873, the economy recovered with the advent of hard money policies and industrialization. From 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita, despite the panic of 1873.  The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8%, while the GDP was also doubled.

Sadly, most Americans cannot even conceive of an economy like that.  Most Americans cannot even imagine having a nation without a massively bloated federal government and without an unelected central bank centrally planning our financial system.

But you know what?

It worked.  In fact, it worked fantastically well.

The period between the Civil War and 1913 propelled the United States to greatness.  Just check out all of the good things that Wikipedia says happened for the U.S. economy during those years…

The rapid economic development following the Civil War laid the groundwork for the modern U.S. industrial economy. By 1890, the USA leaped ahead of Britain for first place in manufacturing output.

An explosion of new discoveries and inventions took place, a process called the “Second Industrial Revolution.” Railroads greatly expanded the mileage and built stronger tracks and bridges that handled heavier cars and locomotives, carrying far more goods and people at lower rates. Refrigeration railroad cars came into use. The telephone, phonograph, typewriter and electric light were invented. By the dawn of the 20th century, cars had begun to replace horse-drawn carriages.

Parallel to these achievements was the development of the nation’s industrial infrastructure. Coal was found in abundance in the Appalachian Mountains from Pennsylvania south to Kentucky. Oil was discovered in western Pennsylvania; it was mainly used for lubricants and for kerosene for lamps. Large iron ore mines opened in the Lake Superior region of the upper Midwest. Steel mills thrived in places where these coal and iron ore could be brought together to produce steel. Large copper and silver mines opened, followed by lead mines and cement factories.

In 1913 Henry Ford introduced the assembly line, a step in the process that became known as mass-production.

But if we didn’t have an income tax, how did we fund the government?  Well, we mostly did it with tariffs and excise taxes.  The following is from a recent article by Thomas R. Eddlem

Prior to ratification of the 16th (income tax) Amendment in February 1913, the federal government managed its few constitutional responsibilities without an income tax, except during the Civil War period. During peacetime, it did so largely — or even entirely — on import taxes called “tariffs.” Congress could afford to run the federal government on tariffs alone because federal responsibilities did not include welfare programs, agricultural subsidies, or social insurance programs like Social Security or Medicare. After the Civil War, tariff revenues sometimes suffered under a protectionist policy ushered in by the Republican Party that supplemented federal income via excises on alcohol, tobacco, and inheritances. But before the war, the need for tariff revenue to finance the federal government generally kept the tariff at reasonable levels. During wartime throughout early American history, the Founding Fathers were able to raise additional revenue employing a different method of direct taxation authorized by the U.S. Constitution prior to the 16th Amendment. These alternative taxing methods gave the young American nation embarrassing peacetime budget surpluses that several times came close to paying off the national debt.

So why didn’t we stick with that system?

Well, early in the 20th century the “progressives” and the social planners started to take control in Washington.

And one of the things that “progressives” and social planners love is an income tax.  In fact, the second plank of the Communist Manifesto is a “heavy progressive or graduated income tax”.

Of course they promised us that income tax rates would always remain low.  And at first they were quite low.  The following is from an article by Adam Young

The presidential election of 1912 was contested between three advocates of an income tax. The winner, Woodrow Wilson, after the ratification of the Sixteenth Amendment, called a special session of Congress in April 1913, which proceeded to pass an income tax of 1% on incomes above $3,000 and applied surcharges between 2% and 7% on income from $20,000 to $500,000.

But once the “progressives” and the social planners get their feet in the door, they always want more.

And we have seen how things have worked out.  Today, the American people are being taxed into oblivion.

In a previous article entitled “Show This To Anyone That Believes That Taxes Are Too Low“, I listed dozens of other taxes that the American people pay each year in addition to federal and state income taxes…

#1 Building Permit Taxes

#2 Capital Gains Taxes

#3 Cigarette Taxes

#4 Court Fines (indirect taxes)

#5 Dog License Taxes

#6 Drivers License Fees (another form of taxation)

#7 Federal Unemployment Taxes

#8 Fishing License Taxes

#9 Food License Taxes

#10 Gasoline Taxes

#11 Gift Taxes

#12 Hunting License Taxes

#13 Inheritance Taxes

#14 Inventory Taxes

#15 IRS Interest Charges (tax on top of tax)

#16 IRS Penalties (tax on top of tax)

#17 Liquor Taxes

#18 Luxury Taxes

#19 Marriage License Taxes

#20 Medicare Taxes

#21 Medicare Tax Surcharge On High Earning Americans Under Obamacare

#22 Obamacare Individual Mandate Excise Tax (if you don’t buy “qualifying” health insurance under Obamacare you will have to pay an additional tax)

#23 Obamacare Surtax On Investment Income (a new 3.8% surtax on investment income that goes into effect next year)

#24 Property Taxes

#25 Recreational Vehicle Taxes

#26 Toll Booth Taxes

#27 Sales Taxes

#28 Self-Employment Taxes

#29 School Taxes

#30 Septic Permit Taxes

#31 Service Charge Taxes

#32 Social Security Taxes

#33 State Unemployment Taxes (SUTA)

#34 Tanning Tax (a new Obamacare tax on tanning services)

#35 Telephone Federal Excise Taxes

#36 Telephone Federal Universal Service Fee Taxes

#37 Telephone Minimum Usage Surcharge Taxes

#38 Telephone State And Local Taxes

#39 Tire Taxes

#40 Tolls (another form of taxation)

#41 Traffic Fines (indirect taxation)

#42 Utility Taxes

#43 Vehicle Registration Taxes

#44 Workers Compensation Taxes

Yet even with all of these taxes, our local governments, our state governments and our federal government are all absolutely drowning in debt.

In another previous article entitled “24 Outrageous Facts About Taxes In The United States That Will Blow Your Mind“, I listed a number of reasons why our federal income tax system has become a complete and utter abomination that can never be fixed…

1 – The U.S. tax code is now 3.8 million words long.  If you took all of William Shakespeare’s works and collected them together, the entire collection would only be about 900,000 words long.

2 – According to the National Taxpayers Union, U.S. taxpayers spend more than 7.6 billion hours complying with federal tax requirements.  Imagine what our society would look like if all that time was spent on more economically profitable activities.

3 – 75 years ago, the instructions for Form 1040 were two pages long.  Today, they are 189 pages long.

4 – There have been 4,428 changes to the tax code over the last decade.  It is incredibly costly to change tax software, tax manuals and tax instruction booklets for all of those changes.

5 – According to the National Taxpayers Union, the IRS currently has 1,999 different publications, forms, and instruction sheets that you can download from the IRS website.

6 – Our tax system has become so complicated that it is almost impossible to file your taxes correctly.  For example, back in 1998 Money Magazine had 46 different tax professionals complete a tax return for a hypothetical household.  All 46 of them came up with a different result.

7 – In 2009, PC World had five of the most popular tax preparation software websites prepare a tax return for a hypothetical household.  All five of them came up with a different result.

8 – The IRS spends $2.45 for every $100 that it collects in taxes.

9 – According to The Tax Foundation, the average American has to work until April 17th just to pay federal, state, and local taxes.  Back in 1900, “Tax Freedom Day” came on January 22nd.

10 – When the U.S. government first implemented a personal income tax back in 1913, the vast majority of the population paid a rate of just 1 percent, and the highest marginal tax rate was just 7 percent.

11 – Residents of New Jersey pay $1.64 in taxes for every $1.00 of federal spending that they get back.

12 – The United States is the only nation on the planet that tries to tax citizens on what they earn in foreign countries.

13 – According to Forbes, the 400 highest earning Americans pay an average federal income tax rate of just 18 percent.

14 – Warren Buffett had an effective tax rate of just 17.4 percent for 2010.

15 – The top 20 percent of all income earners in the United States pay approximately 86 percent of all federal income taxes.

16 – Sadly, as Bill Whittle has shown, you could take every single penny that every American earns above $250,000 and it would only fund about 38 percent of the federal budget.

17 – The United States has the highest corporate tax rate in the world (35 percent).  In Ireland, the corporate tax rate is only 12.5 percent.  This is causing thousands of corporations to move operations out of the United States and into other countries.

18 – Some tax havens are doing a booming business in setting up sham headquarters for U.S. corporations.  For example, the city of Zug, Switzerland only has a population of 26,000 people but it is the headquarters for 30,000 companies.

19 – In 1950, corporate taxes accounted for about 30 percent of all federal revenue.  In 2012, corporate taxes will account for less than 7 percent of all federal revenue.

The wealthy have become absolute masters at avoiding taxes, and the poor are not able to pay much.

So who always gets squeezed?

The middle class does.

No matter what our politicians promise us, the hammer is always brought down on the middle class.

And now, according to The Huffington Post, the IRS says that it can even read our old emails without a warrant to make sure that we are paying all of the taxes that we should be…

The IRS apparently interprets that authority very broadly, the documents show: as long as you’ve stored your email in a cloud service like Google Mail, and as long as those emails haven’t been deleted after a few months, the agency thinks it doesn’t need a warrant to read them.

The idea of IRS agents poking through your email account might sound at the very least creepy, and maybe unconstitutional. But the IRS does have a legal leg to stand on: the Electronic Communications Privacy Act of 1986 allows government agencies to in many cases obtain emails older than 180 days without a warrant.

That’s why an internal 2009 IRS document claimed that “the government may obtain the contents of electronic communication that has been in storage for more than 180 days” without a warrant.

It should be noted that the IRS is claiming that it does not use emails “to target” specific taxpayers, but notice that they are not promising not to use old emails against taxpayers once they are officially being audited or investigated…

“Contrary to some suggestions, the IRS does not use emails to target taxpayers. Any suggestion to the contrary is wrong.”

In any event, the truth is that we have one of the most complicated and one of the most intrusive tax systems in the history of the world.

Don’t the American people deserve better?

What do you think?

Should America go back to a system where there is no income tax and no Federal Reserve?

Please feel free to share what you think by leaving a comment below…

America Is Broke

Corporatism: A System Of Control Designed By The Monopoly Men Of The Global Elite

Corporatism: A System Of Control Designed By The Monopoly Men Of The Global EliteThe Dow is at a record high and so are corporate profits – so why does it feel like most of the country is deeply suffering right now?  Real household income is the lowest that it has been in a decade, poverty is absolutely soaring, 47 million Americans are on food stamps and the middle class is being systematically destroyed.  How can big corporations be doing so well while most American families are having such a hard time?  Isn’t their wealth supposed to “trickle down” to the rest of us?  Unfortunately, that is not how the real world works.  Today, most big corporations are trying to minimize the number of “expensive” American workers on their payrolls as much as they can.  If the big corporation that is employing you can figure out a way to replace you with a worker in China or with a robot, it will probably do it.  Corporations are in existence to maximize wealth for their shareholders, and most of the time the largest corporations are dominated by the monopoly men of the global elite.  Over the decades, the politicians that have their campaigns funded by these monopoly men have rigged the game so that the big corporations are able to easily dominate everything.  But this was never what those that founded this country intended.  America was supposed to be a place where the power of collectivist institutions would be greatly limited, and individuals and small businesses would be free to compete in a capitalist system that would reward anyone that had a good idea and that was willing to work hard.  But today, our economy is completely and totally dominated by a massively bloated federal government and by absolutely gigantic predator corporations that are greatly favored by our massively bloated federal government.  Our founders tried to warn us about the dangers of allowing government, banks and corporations to accumulate too much power, but we didn’t listen.  Now they dominate everything, and the rest of us are fighting for table scraps.

In early America, most states had strict laws governing the size and scope of corporations.  Individuals and small businesses thrived in such an environment, and the United States experienced a period of explosive economic growth.  We showed the rest of the world that capitalism really works, and we eventually built the largest middle class that the world had ever seen.

But now we have replaced capitalism with something that I like to call “corporatism”.  In many ways, it shares a lot of characteristics with communism, and that is why nations such as communist China have embraced it so readily.  Under “corporatism”, monolithic predator corporations run around sucking up as much wealth and economic power as they possibly can.  Most individuals and small businesses cannot compete and end up getting absorbed by the corporations.  These mammoth collectivist institutions are in private hands rather than in government hands (as would be the case under a pure form of communism), but the results are pretty much the same either way.  A tiny elite at the top gets almost all of the economic rewards.

There are some out there that would suggest that the answer to our problems is to move more in the direction of “socialism”, but to be honest that wouldn’t be the solution to anything.  It would just change how the table scraps that the rest of us are getting are distributed.

If we truly wanted a return to prosperity, we need to dramatically shift the rules of the game so that they are tilted back in favor of individuals and small businesses.  A much more pure form of capitalism would mean more wealth, less poverty and a more equitable distribution of the economic rewards in this country.

But it will never happen.  Most of our politicians are married to the big corporations and the wealthy elitists that fund their campaigns.  And most Americans are so uneducated that they believe that what we actually have today is “capitalism” and that the only alternative is to go “to the left” toward socialism.

Very few people out there are suggesting that we need to greatly reduce the power of the federal government and greatly reduce the power of the big corporations, but that is exactly what we need to do.  We need to give individuals and small businesses room to breathe once again.

With each passing year, things get even worse.  In fact, the founder of Subway Restaurants recently said that the environment for small businesses is so toxic in America today that he never would have been able to start Subway if he had to do it today.

For much more on how small business is being strangled to death in the United States, please see my previous article entitled “We Are Witnessing The Death Of Small Business In America“.

What I want to do now is to discuss some of the results that “corporatism” is producing in America.

First of all, we continue to see incomes go down even though we live in an inflationary economy.

As Time Magazine recently reported, personal incomes took a huge nosedive during the month of January…

Data released by the Commerce Department last week showed that personal income fell 3.6% in January, the biggest decline in 20 years. The drop was even bigger when taxes and inflation are taken into account. Real personal disposable income fell by 4%, the biggest monthly drop in half a century.

But this is part of a longer term trend.  Median household income in the U.S. has declined for four consecutive years, and it is now significantly lower than it was all the way back in 2001

Real median US household income — that’s “real,” as in “adjusted for inflation” — was $50,054 in 2011, the most recent data available from the US Census Bureau. That’s 8% lower than the 2007 peak of $54,489.

Meanwhile, big corporations are absolutely raking in the cash.  The following is from a recent New York Times article

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

Today, corporate profits as a percentage of U.S. GDP are at an all-time high, but wages as a percentage of U.S. GDP are near an all-time low.

Just check out the following chart.  Corporate profits have absolutely exploded over the past decade…

Corporate Profits After Tax

Meanwhile, wages as a percentage of GDP continue to fall rapidly…

Wages And Salaries As A Percentage Of GDP

Most of the jobs being created in America today are “low wage” jobs.  Tens of millions of Americans are working as hard as they can only to find that they can barely put food on the table and provide a roof over the heads of their children.  The ranks of the “working poor” are exploding and the middle class continues to shrink.

Many of you that are reading this article are members of the working poor.  You know what it is like to stare up at your ceiling at night wondering how you are going to pay the bills next month.

Today, most Americans are living very close to the edge financially.  A recent article by NBC News staff writer Allison Linn shared some of their stories.  The following is one example…

Crystal Dupont knows what it’s like to try to live on the federal minimum wage.

Dupont has no health insurance, so she hasn’t seen a doctor in two years. She’s behind on her car payments and has taken out pawn shop and payday loans to cover other monthly expenses. She eats beans and oatmeal when her food budget gets low.

When she got her tax refund recently, she used the money to get ahead on her light bill.

“I try to live within my means, but sometimes you just can’t,” said Dupont, 25. The Houston resident works 30 to 40 hours a week taking customer service calls, earning between $7.25 and $8 an hour. That came to about $15,000 last year.

It’s a wage she’s lived on for a while now, but just barely.

Sadly, the number of Americans that are “just barely” surviving continues to grow.

But if corporate profits are soaring to unprecedented heights, then who is getting all of those rewards?

The monopoly men of the global elite are.

Just check out the following video which does a great job of illustrating how corporatism has systematically funneled all of the economic rewards in our system to the very top…

Once again, I want to make it very clear that I am not advocating socialism as the answer in any way, shape or form.  Socialism takes away the incentive to create wealth and it almost always results in almost all of the economic rewards going to a very tiny elite anyway.

As I said earlier, what we need is a return to a much more pure form of capitalism, but this is so foreign to the way that most people think that most people will not be able to grasp this.

It certainly would be possible to greatly reduce the power of the federal government and greatly reduce the power of the big corporations at the same time, but this is so “outside the box” for most people that they cannot even conceive of doing such a thing.

We need to create an environment where individuals and small businesses can thrive once again.  But instead, most of us are content to continue “playing the game” and getting enslaved in even more debt.

For example, according to CNBC, auto loans just continue to get larger and continue to get stretched out for longer periods of time…

American car buyers, attracted by new models and cheap financing, are taking out bigger auto loans and stretching out the terms of those loans to a new record length.

New analysis from Experian Automotive shows the average new car loan in the fourth quarter of last year was $26,691 and stretched out over an average of 65 months. The length of the average loan is one month longer than the previous record set in the third quarter of last year.

What will they think of next?

Will we eventually have auto loans that get paid off over 10 years?

By the way, that is another way that the monopoly men of the global elite get all of our money.  They enslave us to debt, and we spend year after year of our lives slaving away to make them even wealthier.

They are very smart.  There is a reason why they have 32 TRILLION dollars stashed away in offshore tax havens.  They know how to play the game, and they are very happy that most of the rest of us are asleep.

Fortunately, it appears that an increasing number of Americans are waking up.

For example, I wanted to share with you all an excerpt from a comment that one of my readers left on one of my recent articles

In the past year, I’ve been slowly but surely waking up to the nonsense happening around me. There’s so many things I need to simply get off my chest, so excuse the length of this post. Recently in the past two years, I’ve gotten married and have been medically discharged from the Marines after being injured in Afghanistan. Being 23 years old and married, my goal is secure a secure a future for my family, but with the way things are going, I’m not exactly sure how much of a future we’re going to have in 50 years. I can’t explain it, but I’ve felt this need to change my attitude and motivations lately.

I started by turning off the garbage music, television and other mindless entertainment that seems to plague my generation. It was easier than it looked – I don’t miss most of it really. The next order of business was to educate myself on world news, so that’s what I did. Every day, like clockwork, I check all major mainstream news feeds (NBC, Fox, Abc, CNN, Reuters, BBC, etc.) as well as not-so-mainstream news sites – yours being one of them. It’s incredible how fast our world changes and the manner in which it changes. The local 10 o’clock doesn’t show anything but local news, sports, weather, lottery #’s and whatever else they decide to throw in. It’s a night and day difference once you start to actually research and see what’s happening all over the world. Look at the number of comments about a news story on the economy and then look at a celebrity story on the “news”….People are so blind, it truly amazes me. My friends, family and classmates at college seem to be under a spell of some sort. They’re distracted – and it’s contagious. Nobody I know gives a damn about global affairs/economics. They’re more interested in the newest iPhone, cars, shows, movies, and just about anything else you can think of. I’m not saying there’s anything wrong with these things, but my friends/family/peers are CONSUMED by these distractions. When the election was taking place in 2012, every Tom, Dick and Harry on Facebook had an opinion and rant. After the circus ended however, everyone simply went back to posting about parties, kittens, Farmville etc. It’s a huge joke. For me, it’s little terrifying and exciting to see history unfolding in front of our eyes. This country of ours is going through big changes now that will most certainly affect our future, so I strive to adapt and prepare myself and my family. I’m looking at buying my first home this summer. Right now I live in an apartment right outside Philly and spend more money on rent than most pay for a mortgage. I need a house with a little land to raise chickens, grow fruits/vegetables, store canned food – and to be as independent from the system as I can. For my job, I wanted a skill/trade that people would always need, so I picked the funeral business. On the side, I work in construction and have been learning everything there is to know about building with my own two hands. I feel as though these old forgotten skills are going to be handy in a short while.

Hopefully we can get a lot more people to wake up and start breaking out of “the matrix” of control that is all around us.

Right now, the system is designed to continually funnel more money and more power to the very top of the pyramid.  The global elite are becoming more dominant with each passing day.  Unless something dramatic happens, at some point the American people will become so powerless that they won’t be able to do anything about it even if they wanted to.

The idea of a very tiny elite completely dominating all the rest of us goes against everything that America is supposed to stand for.  In the end, it will result in absolute tyranny if it is not stopped.

Who Runs The World - Solid Proof That A Core Group Of Wealthy Elitists Are Pulling The Strings

Retail Apocalypse: Why Are Major Retail Chains All Over America Collapsing?

Why Are Major Retail Chains All Over America Collapsing? -  Photo by Gars129If the economy is improving, then why are many of the largest retail chains in America closing hundreds of stores?  When I was growing up, Sears, J.C. Penney, Best Buy and RadioShack were all considered to be unstoppable retail powerhouses.  But now it is being projected that all of them will close hundreds of stores before the end of 2013.  Even Wal-Mart is running into problems.  A recent internal Wal-Mart memo that was leaked to Bloomberg described February sales as a “total disaster”.  So why is this happening?  Why are major retail chains all over America collapsing?  Is the “retail apocalypse” upon us?  Well, the truth is that this is just another sign that the U.S. economy is falling apart right in front of our eyes.  Incomes are declining, taxes are going up, government dependence is at an all-time high, and according to the Bureau of Labor Statistics the percentage of the U.S. labor force that is employed has been steadily falling since 2006.  The top 10% of all income earners in the U.S. are still doing very well, but most U.S. consumers are either flat broke or are drowning in debt.  The large disposable incomes that the big retail chains have depended upon in the past simply are not there anymore.  So retail chains all over the United States are now closing up unprofitable stores.  This is especially true in low income areas.

When you step back and take a look at the bigger picture, the rapid decline of some of our largest retail chains really is stunning.

It is happening already in some areas, but soon half empty malls and boarded up storefronts will litter the landscapes of cities all over America.

Just check out some of these store closing numbers for 2013.  These numbers are from a recent Yahoo Finance article

Best Buy

Forecast store closings: 200 to 250

Sears Holding Corp.

Forecast store closings: Kmart 175 to 225, Sears 100 to 125

J.C. Penney

Forecast store closings: 300 to 350

Office Depot

Forecast store closings: 125 to 150

Barnes & Noble

Forecast store closings: 190 to 240, per company comments

Gamestop

Forecast store closings: 500 to 600

OfficeMax

Forecast store closings: 150 to 175

RadioShack

Forecast store closings: 450 to 550

The RadioShack in a nearby town just closed up where I live.  This is all happening so fast that it is hard to believe.

But the truth is that those store closings are not the entire story.  When you dig deeper you find a lot more retailers that are in trouble.

For example, Blockbuster recently announced that this year they will be closing about 300 stores and eliminating about 3,000 jobs.

Toy manufacturer Hasbro recently announced that they will be reducing the size of their workforce by about 10 percent.

Even Wal-Mart is going through a tough stretch right now.  According to documents that were leaked to Bloomberg, Wal-Mart is having an absolutely disastrous February…

Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.

“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”

So what in the world is going on here?

The mainstream media continues to proclaim that we are experiencing a robust “economic recovery”, but at the same time there are a whole host of indications that things are continually getting worse.

Even global cell phone sales actually declined slightly in 2012.  That was the first time that has happened since the last recession.

Perhaps it is time that we faced the truth.  The middle class is shrinking, incomes are declining and there are not nearly as many jobs as there used to be.

Mort Zuckerman pointed this out in a recent article in the Wall Street Journal

The U.S. labor market, which peaked in November 2007 when there were 139,143,000 jobs, now encompasses only 132,705,000 workers, a drop of 6.4 million jobs from the peak. The only work that has increased is part-time, and that is because it allows employers to reduce costs through a diminished benefit package or none at all.

So how can the mainstream media be talking about how “good” things are if we still have 6.4 million fewer jobs than we had back in November 2007?

And sadly, things may soon be getting a lot worse.  If Congress does not do anything about the “sequester”, millions of federal workers may shortly be facing some very painful furloughs according to CNN

Federal workers could start facing furloughs as early as April, according to federal agencies trying to prepare for the worst.

Unless Congress steps in, some $85 billion in massive spending reductions will hit the federal government, doling out furloughs to much of the nation’s 2.1 million federal workforce, experts say.

If you still live in an area of the country where the stores and the restaurants are booming, you should be very thankful because that is not the reality for most of the country.

I often write about the stunning economic decline of major cities such as Detroit, but there are huge sections of rural America that are in even worse shape than Detroit in many ways.

For example, many Indian reservations all over America have been shamefully neglected by the federal government and have become hotbeds for crime, drugs and poverty.

Business Insider recently profiled the Wind River Indian reservation in western Wyoming.  The following is a brief excerpt from that outstanding article

The Wind River Indian Reservation is not an easy place to get to, but I had to see it for myself.

Thirty-five-hundred square miles of prairie and mountains in western Wyoming, the reservation is home to bitter ancestral enemies: the Eastern Shoshone and Northern Arapaho tribes.

Even among reservations, it’s renowned for brutal crime, widespread drug use, and legal dumping of toxic waste.

You can see some amazing photos of the Wind River Indian reservation right here.

It is hard to believe that there are places like that in America, but the truth is that conditions like that are spreading to more U.S. communities with each passing day.

We are a nation that is in an advanced state of decline.  But as long as the financial markets are okay, our leaders don’t seem too concerned about the suffering that everyone else is going through.

In fact, former Federal Reserve Chairman Alan Greenspan essentially admitted as much during a recent interview with CNBC.  The following is how a Zero Hedge article summarized that interview…

Starting at around 1:50, Greenspan states the odds of sequester occurring are very high – in fact, the playdough-faced ex-Chair-head notes, “I find it very difficult to find a scenario in which [the sequester] doesn’t happen” But when asked how this will affect the economy, Awkward Alan is unusually clearly spoken – “the issue is how does it affect the stock market.”

While not so many of our leaders have taken the path to direct truthiness, Greenspan somewhat shocks a Botox’d and babbling Bartiromo when he admits “the stock market is the key player in the game of economic growth.”

Bartiromo shifts uncomfortably in her seat, strokes her imaginary beard and stares blankly as Greenspan explains that while the sequester will have a real effect on the real economy, “if the stock market can hold up through this, then the effect will be rather minor.”

Do you see?

As long as the stock market is moving higher they think that everything is just fine and dandy.

And the Obama administration?

They continue to pursue the same policies that got us into this mess.

Their idea of “economic reform” is to threaten to sue businesses that do not hire ex-convicts.

And of course now that Obama has been re-elected he is putting a tremendous amount of effort into “stimulating the economy”.

For example, he spent this weekend golfing in Florida, and the Obamas recently spent about 20 million taxpayer dollars vacationing in Hawaii.

Meanwhile, the U.S. economy is getting worse with each passing day.

If you doubt that economic conditions are getting worse, please read this article: “Show This To Anyone That Believes That ‘Things Are Getting Better’ In America“.

When you look at the cold, hard numbers, it is undeniable what is happening to America.

And our leaders are not doing anything to fix our problems.  In fact, most of the time they are just making things worse.

So buckle up and get prepared.  We are in for very bumpy ride, and this is only just the beginning.

Store Closed Until Further Notice - Photo by Gryllida

Bankrupt, Decaying And Nearly Dead: 24 Facts About The City Of Detroit That Will Shock You

Bankrupt, Decaying And Nearly Dead: 24 Facts About The City Of Detroit That Will Shock You - Photo by Angelique DuLongIf you want to know what the future of America is going to be like, just look at the city of Detroit.  Once upon a time it was a symbol of everything that America was doing right, but today it has been transformed into a rotting, decaying, post-apocalyptic hellhole.  Detroit was once the fourth-largest city in the United States, and in 1960 Detroit had the highest per-capita income in the entire nation.  It was the greatest manufacturing city the world had ever seen, and the rest of the globe looked at Detroit with a sense of awe and wonder.  But now the city of Detroit has become a bad joke to the rest of the world.  Unemployment is rampant, 60 percent of the children are living in poverty and the city government is on the verge of bankruptcy.  They say that Detroit is just a matter of “weeks or months” away from running out of cash, and when Detroit does declare bankruptcy it will be the largest municipal bankruptcy in the history of the United States.  But don’t look down on Detroit, because the truth is that Detroit is really a metaphor for what is happening to America as a whole.  In the United States today, our manufacturing infrastructure has been gutted, poverty is absolutely exploding and we are rapidly approaching national bankruptcy.  Detroit may have gotten there first, but the rest of the country will follow soon enough.

Back during the boom years, Detroit was known for making great cars.  Today, it is known for scenes of desolation and decay.  It is full of vandalized homes, abandoned schools and empty factories.  The following description of what Detroit looks like at this point is from an article by Barry Yeoman

It’s hard to describe the city’s physical landscape without producing what Detroiters call “ruin porn.” Brick houses with bays and turrets sit windowless or boarded up. Whole blocks, even clusters of blocks, have been bulldozed. Retail strips have been reduced to a dollar store here, a storefront church there, and a whole lot of plywood in between. Not a single chain supermarket remains.

So what caused the downfall of one of the greatest cities on earth?

Well, here is a hint…

Between December 2000 and December 2010, 48 percent of the manufacturing jobs in Michigan were lost.

When you are a manufacturing area, and you lose half of your manufacturing jobs over the course of a single decade, of course things are going to get really, really bad.

So just how bad have things gotten in Detroit?

The following are 24 facts about the city of Detroit that will shock you…

#1 Detroit was once the fourth-largest city in the United States, and it was once home to close to 2 million people.  But over the last several decades people have been fleeing in droves.  According to the 2010 census, only 713,000 people now live in Detroit, and city officials admit that the population has probably slipped under 700,000 at this point.

#2 The population of Detroit has declined by about 25 percent over the past decade.  The last time the population of Detroit was this low was all the way back in 1910.

#3 Today, Detroit is only the 18th-largest city in America.  It is now smaller than Austin, Texas and Charlotte, North Carolina.

#4 Back in 1960, the city of Detroit had the highest per-capita income in the United States.

#5 Today, the unemployment rate in Detroit is more than 18 percent, which is more than twice as high as the nation as a whole.

#6 According to a report that was just recently released, approximately 60 percent of all children in Detroit live in poverty.

#7 Approximately one-third of Detroit’s 140 square miles are either vacant or derelict.

#8 The city government of Detroit has closed dozens of schools and has decided to cut off public services to the “heavily blighted areas“.

#9 According to one estimate, there are 33,500 empty houses and 91,000 vacant residential lots in the city of Detroit today.

#10 The median price of a home in Detroit is just $9,000, and there are some areas of Detroit where you can still buy a house for $100.

#11 There are more than 85,000 streetlights in Detroit, but thieves have stripped so much copper wiring out of the lights that more than half of them are not working.

#12 Mayor Bing has announced a plan to reduce the number of streetlights in the city of Detroit to just 46,000.

#13 According to one very shocking report, 47 percent of all people living in the city of Detroit are functionally illiterate at this point..

#14 The murder rate in Detroit is 11 times higher than it is in New York City.

#15 There were 377 homicides in Detroit in 2011.  In 2012, that number rose to 411.

#16 Justifiable homicide in Detroit rose by an astounding 79 percent during 2011.

#17 In one recent year, the rate of self-defense killings in the city of Detroit was 2200% above the national average.

#18 Ten years ago, there were approximately 5,000 police officers in the city of Detroit.  Today, there are only about 2,500 and another 100 are scheduled to be eliminated from the force soon.

#19 Due to budget cutbacks, most police stations in Detroit are now closed to the public for 16 hours a day.

#20 Crime has gotten so bad in Detroit that even the police are are telling people to “enter Detroit at your own risk“.

#21 At one point, 100 bus drivers in Detroit refused to drive their routes because they were afraid of being attacked out on the streets in broad daylight.  The head of the bus drivers union, Henry Gaffney, said that the drivers were literally “scared for their lives“….

“Our drivers are scared, they’re scared for their lives. This has been an ongoing situation about security. I think yesterday kind of just topped it off, when one of my drivers was beat up by some teenagers down in the middle of Rosa Parks and it took the police almost 30 minutes to get there, in downtown Detroit,” said Gaffney.

#22 There have been reports that gangs of young men with AK-47s have been terrorizing gas stations all over Detroit.

#23 Detroit was once known for making some of the greatest cars in the world.  Now, it is known around the world as a dumping ground for the dead

From the street, the two decomposing bodies were nearly invisible, concealed in an overgrown lot alongside worn-out car tires and a moldy sofa. The teenagers had been shot, stripped to their underwear and left on a deserted block.

They were just the latest victims of foul play whose remains went undiscovered for days after being hidden deep inside Detroit’s vast urban wilderness — a crumbling wasteland rarely visited by outsiders and infrequently patrolled by police.

#24 Detroit’s public schools are an absolute nightmare.  The following is from one of my readers that actually attended one of the “best” public schools in Detroit…

The school was a new seven story building just a couple of years old. The bathrooms would often lack toilet paper & soap beyond the second floor (the main floor), the bathroom sinks would often not work. The water fountains on north side of the building on from the third floor & up did not work. The elevators would constantly break down. I even got stuck on the elevator before. I almost tripped down a half a flight of stairs because the elastic seal (it was the metal bar at the front of a treader of I don’t know the name of it.) the stairs was not properly installed.

Students would often have sex on the stairs & throughout the school. Parents actually called the school many times & reported kids having sex on the stairs because all of them had glass windows 270 degrees.

Even over in Europe they write stories about the dramatic decline of Detroit.  For example, the following is how one British reporter described his visit to Detroit

Much of Detroit is horribly dangerous for its own residents, who in many cases only stay because they have nowhere else to go. Property crime is double the American average, violent crime triple. The isolated, peeling homes, the flooded roads, the clunky, rusted old cars and the neglected front yards amid trees and groin-high grassland make you think you are in rural Alabama, not in one of the greatest industrial cities that ever existed.

For those that want to read even more about the horrifying downfall of Detroit, there are some amazing charts that graphically show the decline of Detroit right here.

So what is the solution?

How can we fix Detroit?

Well, why don’t we just build a monorail!  Of course that sounds ridiculous, but the federal government has actually committed $25 million to construct “a streetcar line” that nobody really wants and that very few people would probably actually use.  Perhaps they could be excused for wasting so much money on a bad idea if there had not already been 24 failed attempts to develop a successful public transit system in Detroit over the past four decades.

Well, why don’t we just build a bunch of theme parks instead?  After all, tourists would just flock to Detroit, right?

It has been suggested that Detroit would be ideal for an “automotive theme park”, and there is actually one group of investors that wants to turn some of the worst areas of Detroit into a “zombie theme park”.

What will they think of next?

Actually, a much better idea would have been to not allow millions of our good paying manufacturing jobs to be shipped to the other side of the world, but it is too late for that at this point.

But once again, please do not look down on the city of Detroit.  Instead, let the city of Detroit serve as a warning for the rest of us.

The truth is that the entire U.S. economy is in an advanced state of decline…

-The percentage of the civilian labor force in the United States that is employed has been steadily declining every single year since 2006.

-An astounding 53 percent of all American workers make less than $30,000 a year.

-Amazingly, there are hundreds of thousands of Americans with either Master’s degrees or Ph.D.s that are enrolled in the food stamp program at this point.

We are a nation that consumes far more wealth than we produce, we are a nation that is constantly bleeding jobs, businesses and wealth, and we are a nation that is going deeper into debt with each passing day.

Yes, Detroit may have gone over the edge into economic oblivion first, but the rest of the nation is steamrolling down the exact same path that Detroit has gone.

Is it too late for us to change direction?

Please feel free to share your thoughts on that question by leaving a comment below…

Detroit - Photo by Albert duce

Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is Soaring

Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is SoaringYou can thank the reckless money printing that the Federal Reserve has been doing for the incredible bull market that we have seen in recent months.  When the Federal Reserve does more “quantitative easing”, it is the financial markets that benefit the most.  The Dow and the S&P 500 have both hit levels not seen since 2007 this month, and many analysts are projecting that 2013 will be a banner year for stocks.  But is a rising stock market really a sign that the overall economy is rapidly improving as many are suggesting?  Of course not.  Just because the Federal Reserve has inflated another false stock market bubble with a bunch of funny money does not mean that the U.S. economy is in great shape.  In fact, the truth is that things just keep getting worse for average Americans.  The percentage of working age Americans with a job has fallen from 60.6% to 58.6% while Barack Obama has been president, 40 percent of all American workers are making $20,000 a year or less, median household income has declined for four years in a row, and poverty in the United States is absolutely exploding.  So quantitative easing has definitely not made things better for the middle class.  But all of the money printing that the Fed has been doing has worked out wonderfully for Wall Street.  Profits are soaring at Goldman Sachs and luxury estates in the Hamptons are selling briskly.  Unfortunately, this is how things work in America these days.  Our “leaders” seem far more concerned with the welfare of Wall Street than they do about the welfare of the American people.  When things get rocky, their first priority always seems to be to do whatever it takes to pump up the financial markets.

When QE3 was announced, it was heralded as the grand solution to all of our economic problems.  But the truth is that those running things knew exactly what it would do.  Quantitative easing always pumps up the financial markets, and that overwhelmingly benefits those that are wealthy.  In fact, a while back a CNBC article discussed a very interesting study from the Bank of England which showed a clear correlation between quantitative easing and rising stock prices…

It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.

Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.

Many said the BOE’s easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that  “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”

So should we be surprised that stocks are now the highest that they have been in more than 5 years?

Of course not.

And who benefits from this?

The wealthy do.  In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.

Unfortunately, all of this reckless money printing has a very negative impact on all the rest of us.  When the Fed floods the financial system with money, that causes inflation.  That means that the cost of living has gone up even though your paycheck may not have.

If you go to the supermarket frequently, you know exactly what I am talking about.  The new “sale prices” are what the old “regular prices” used to be.  They keep shrinking many of the package sizes in order to try to hide the inflation, but I don’t think many people are fooled.  Our food dollars are not stretching nearly as far as they used to, and we can blame the Federal Reserve for that.

For much more on rising prices in America, please see this article: “Somebody Should Start The ‘Stuff Costs Too Much’ Party“.

Sadly, this is what the Federal Reserve does.  The system was designed to create inflation.  Before the Federal Reserve came into existence, the United States never had an ongoing problem with inflation.  But since the Fed was created, the United States has endured constant inflation.  In fact, we have come to accept it as “normal”.  Just check out the amazing chart in the video posted below

The chart in that video kind of reminds me of a chart that I shared in a previous article

Hyperinflation Weimar Republic

Not that I expect the United States to enter a period of hyperinflation in the near future.

Actually, despite all of the reckless money printing that the Fed has been doing, I expect that at some point we are going to see another wave of panic hit the financial markets like we saw back in 2008.  The false stock market bubble will burst, major banks will fail and the financial system will implode.  It could unfold something like this…

1 – A derivatives panic hits the “too big to fail” banks.

2 – Financial markets all over the globe crash.

3 – The credit markets freeze up.

4 – Economic activity in the United States starts to grind to a halt.

5 – Unemployment rises above 20 percent and mortgage defaults soar to unprecedented levels.

6 – Tax revenues fall dramatically and austerity measures are implemented by the federal government, state governments and local governments.

7 – The rest of the globe rapidly loses confidence in the U.S. financial system and begins to dump U.S. debt and U.S. dollars.

I write about derivatives a lot, because they are one of the greatest threats that the global financial system is facing.  In fact, right now a derivatives scandal is threatening to take down the oldest bank in the world

Banca Monte dei Paschi di Siena, the world’s oldest bank, was making loans when Michelangelo and Leonardo da Vinci were young men and before Columbus sailed to the New World. The bank survived the Italian War, which saw Siena’s surrender to Spain in 1555, the Napoleonic campaign, the Second World War and assorted bouts of plague and poverty.

But MPS may not survive the twin threats of a gruesomely expensive takeover gone bad and a derivatives scandal that may result in legal action against the bank’s former executives. After five centuries of independence, MPS may have to be nationalized as its losses soar and its value sinks.

So when you hear the word “derivatives” in the news, pay close attention.  The bankers have turned our financial system into a giant casino, and at some point the entire house of cards is going to come crashing down.

In response to the coming financial crisis, I believe that our “leaders” will eventually resort to money printing unlike anything we have ever seen before in a desperate attempt to resuscitate the system.  When that happens, I believe that we will see the kind of rampant inflation that so many people have been warning about.

So what do you think about all of this?

Do you believe that Federal Reserve money printing is the real reason why the stock market is soaring?

Please feel free to post a comment with your thoughts below…

How Much Money Will They Print?

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