What is life going to look like as our precious water resources become increasingly strained and the western half of the United States becomes bone dry? Scientists tell us that the 20th century was the wettest century in the western half of the country in 1000 years, and now things appear to be reverting to their normal historical patterns. But we have built teeming cities in the desert such as Phoenix and Las Vegas that support millions of people. Cities all over the Southwest continue to grow even as the Colorado River, Lake Mead and the High Plains Aquifer system run dry. So what are we going to do when there isn’t enough water to irrigate our crops or run through our water systems? Already we are seeing some ominous signs that Dust Bowl conditions are starting to return to the region. In the past couple of years we have seen giant dust storms known as “haboobs” roll through Phoenix, and 6 of the 10 worst years for wildfires ever recorded in the United States have all come since the year 2000. In fact, according to the Los Angeles Times, “the average number of fires larger than 1,000 acres in a year has nearly quadrupled in Arizona and Idaho and has doubled in every other Western state” since the 1970s. But scientists are warning that they expect the western United States to become much drier than it is now. What will the western half of the country look like once that happens?
A recent National Geographic article contained the following chilling statement…
The wet 20th century, the wettest of the past millennium, the century when Americans built an incredible civilization in the desert, is over.
Much of the western half of the country has historically been a desolate wasteland. We were very blessed to enjoy very wet conditions for most of the last century, but now that era appears to be over.
To compensate, we are putting a tremendous burden on our fresh water resources. In particular, the Colorado River is becoming increasingly strained. Without the Colorado River, many of our largest cities simply would not be able to function. The following is from a recent Stratfor article…
The Colorado River provides water for irrigation of roughly 15 percent of the crops in the United States, including vegetables, fruits, cotton, alfalfa and hay. It also provides municipal water supplies for large cities, such as Phoenix, Tucson, Los Angeles, San Diego and Las Vegas, accounting for more than half of the water supply in many of these areas.
In particular, water levels in Lake Mead (which supplies most of the water for Las Vegas) have fallen dramatically over the past decade or so. The following is an excerpt from an article posted on Smithsonian.com…
And boaters still roar across Nevada and Arizona’s Lake Mead, 110 miles long and formed by the Hoover Dam. But at the lake’s edge they can see lines in the rock walls, distinct as bathtub rings, showing the water level far lower than it once was—some 130 feet lower, as it happens, since 2000. Water resource officials say some of the reservoirs fed by the river will never be full again.
Today, Lake Mead supplies approximately 85 percent of the water that Las Vegas uses, and since 1998 the water level in Lake Mead has dropped by about 5.6 trillion gallons.
So what happens if Lake Mead continues to dry up?
Well, the truth is that it would be a major disaster…
Way before people run out of drinking water, something else happens: When Lake Mead falls below 1,050 feet, the Hoover Dam’s turbines shut down – less than four years from now, if the current trend holds – and in Vegas the lights start going out.
Ominously, these water woes are not confined to Las Vegas. Under contracts signed by President Obama in December 2011, Nevada gets only 23.37% of the electricity generated by the Hoover Dam. The other top recipients: Metropolitan Water District of Southern California (28.53%); state of Arizona (18.95%); city of Los Angeles (15.42%); and Southern California Edison (5.54%).
You can always build more power plants, but you can’t build more rivers, and the mighty Colorado carries the lifeblood of the Southwest. It services the water needs of an area the size of France, in which live 40 million people. In its natural state, the river poured 15.7 million acre-feet of water into the Gulf of California each year. Today, twelve years of drought have reduced the flow to about 12 million acre-feet, and human demand siphons off every bit of it; at its mouth, the riverbed is nothing but dust.
Nor is the decline in the water supply important only to the citizens of Las Vegas, Phoenix, and Los Angeles. It’s critical to the whole country. The Colorado is the sole source of water for southeastern California’s Imperial Valley, which has been made into one of the most productive agricultural areas in the US despite receiving an average of three inches of rain per year.
You hardly ever hear about this on the news, but the reality is that this is a slow-motion train wreck happening right in front of our eyes.
Today, the once mighty Colorado River runs dry about 50 miles north of the sea. The following is an excerpt from an excellent article by Jonathan Waterman about what he found when he went to investigate this…
Fifty miles from the sea, 1.5 miles south of the Mexican border, I saw a river evaporate into a scum of phosphates and discarded water bottles. This dirty water sent me home with feet so badly infected that I couldn’t walk for a week. And a delta once renowned for its wildlife and wetlands is now all but part of the surrounding and parched Sonoran Desert. According to Mexican scientists whom I met with, the river has not flowed to the sea since 1998. If the Endangered Species Act had any teeth in Mexico, we might have a chance to save the giant sea bass (totoaba), clams, the Sea of Cortez shrimp fishery that depends upon freshwater returns, and dozens of bird species.
So let this stand as an open invitation to the former Secretary of the Interior and all water buffalos who insist upon telling us that there is no scarcity of water here or in the Mexican Delta. Leave the sprinklered green lawns outside the Aspen conferences, come with me, and I’ll show you a Colorado River running dry from its headwaters to the sea. It is polluted and compromised by industry and agriculture. It is overallocated, drought stricken, and soon to suffer greatly from population growth. If other leaders in our administration continue the whitewash, the scarcity of knowledge and lack of conservation measures will cripple a western civilization built upon water.
Further east, the major problem is the drying up of our underground water resources.
In the state of Kansas today, many farmers that used to be able to pump plenty of water to irrigate their crops are discovering that the water underneath their land is now gone. The following is an excerpt from a recent article in the New York Times…
Vast stretches of Texas farmland lying over the aquifer no longer support irrigation. In west-central Kansas, up to a fifth of the irrigated farmland along a 100-mile swath of the aquifer has already gone dry. In many other places, there no longer is enough water to supply farmers’ peak needs during Kansas’ scorching summers.
And when the groundwater runs out, it is gone for good. Refilling the aquifer would require hundreds, if not thousands, of years of rains.
So what is going to happen to “the breadbasket of the world” as this underground water continues to dry up?
Most Americans have never even heard of the Ogallala Aquifer, but it is one of our most important natural resources. It is one of the largest sources of fresh water on the entire planet, and farmers use water from the Ogallala Aquifer to irrigate more than 15 million acres of crops each year. It covers more than 100,000 square miles and it sits underneath the states of Texas, New Mexico, Oklahoma, Colorado, Kansas, Nebraska, Wyoming and South Dakota.
Unfortunately, today it is being drained dry at a staggering rate. The following are a few statistics about this from one of my previous articles…
1. The Ogallala Aquifer is being drained at a rate of approximately 800 gallons per minute.
2. According to the U.S. Geological Survey, “a volume equivalent to two-thirds of the water in Lake Erie” has been permanently drained from the Ogallala Aquifer since 1940.
3. Decades ago, the Ogallala Aquifer had an average depth of approximately 240 feet, but today the average depth is just 80 feet. In some areas of Texas, the water is gone completely.
So exactly what do we plan to do once the water is gone?
We won’t be able to grow as many crops and we will not be able to support such large cities in the Southwest.
If we have a few more summers of severe drought that are anything like last summer, we are going to be staring a major emergency in the face very rapidly.
If you live in the western half of the country, you might want to start making plans for the future, because our politicians sure are not.
Did you know that there are thousands upon thousands of homeless people that are living underground beneath the streets of major U.S. cities? It is happening in Las Vegas, it is happening in New York City and it is even happening in Kansas City. As the economy crumbles, poverty in the United States is absolutely exploding and so is homelessness. In addition to the thousands of “tunnel people” living under the streets of America, there are also thousands that are living in tent cities, there are tens of thousands that are living in their vehicles and there are more than a million public school children that do not have a home to go back to at night. The federal government tells us that the recession “is over” and that “things are getting better”, and yet poverty and homelessness in this country continue to rise with no end in sight. So what in the world are things going to look like when the next economic crisis hits?
When I heard that there were homeless people living in a network of underground tunnels beneath the streets of Kansas City, I was absolutely stunned. I have relatives that live in that area. I never thought of Kansas City as one of the more troubled cities in the United States.
But according to the Daily Mail, police recently discovered a network of tunnels under the city that people had been living in…
Below the streets of Kansas City, there are deep underground tunnels where a group of vagrant homeless people lived in camps.
These so-called homeless camps have now been uncovered by the Kansas City Police, who then evicted the residents because of the unsafe environment.
Authorities said these people were living in squalor, with piles of garbage and dirty diapers left around wooded areas.
The saddest part is the fact that authorities found dirty diapers in the areas near these tunnels. That must mean that babies were being raised in that kind of an environment.
Unfortunately, this kind of thing is happening all over the nation. In recent years, the tunnel people of Las Vegas have received quite a bit of publicity all over the world. It has been estimated that more than 1,000 people live in the massive network of flood tunnels under the city…
Deep beneath Vegas’s glittering lights lies a sinister labyrinth inhabited by poisonous spiders and a man nicknamed The Troll who wields an iron bar.
But astonishingly, the 200 miles of flood tunnels are also home to 1,000 people who eke out a living in the strip’s dark underbelly.
Some, like Steven and his girlfriend Kathryn, have furnished their home with considerable care – their 400sq ft ‘bungalow’ boasts a double bed, a wardrobe and even a bookshelf.
Could you imagine living like that? Sadly, for an increasing number of Americans a “normal lifestyle” is no longer an option. Either they have to go to the homeless shelters or they have to try to eke out an existence on their own any way that they can.
In New York City, authorities are constantly trying to root out the people that live in the tunnels under the city and yet they never seem to be able to find them all. The following is from a New York Post article about the “Mole People” that live underneath New York City…
The homeless people who live down here are called Mole People. They do not, as many believe, exist in a separate, organized underground society. It’s more of a solitary existence and loose-knit community of secretive, hard-luck individuals.
The New York Post followed one homeless man known as “John Travolta” on a tour through the underground world. What they discovered was a world that is very much different from what most New Yorkers experience…
In the tunnels, their world is one of malt liquor, tight spaces, schizophrenic neighbors, hunger and spells of heat and cold. Travolta and the others eat fairly well, living on a regimented schedule of restaurant leftovers, dumped each night at different times around the neighborhood above his foreboding home.
Even as the Dow hits record high after record high, poverty in New York City continues to rise at a very frightening pace. Incredibly, 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.
In many of our major cities, the homeless shelters are already at maximum capacity and are absolutely packed night after night. Large numbers of homeless people are often left to fend for themselves.
That is one reason why we have seen the rise of so many tent cities.
Yes, the tent cities are still there, they just aren’t getting as much attention these days because they do not fit in with the “economic recovery” narrative that the mainstream media is currently pushing.
In fact, many of the tent cities are larger than ever. For example, you can check out a Reuters video about a growing tent city in New Jersey that was posted on YouTube at the end of March right here. A lot of these tent cities have now become permanent fixtures, and unfortunately they will probably become much larger when the next major economic crisis strikes.
But perhaps the saddest part of all of this is the massive number of children that are suffering night after night.
For the first time ever, more than a million public school children in the United States are homeless. That number has risen by 57 percent since the 2006-2007 school year.
So if things are really “getting better”, then why in the world do we have more than a million public school children without homes?
These days a lot of families that have lost their homes have ended up living in their vehicles. The following is an excerpt from a 60 Minutes interview with one family that is living in their truck…
This is the home of the Metzger family. Arielle,15. Her brother Austin, 13. Their mother died when they were very young. Their dad, Tom, is a carpenter. And, he’s been looking for work ever since Florida’s construction industry collapsed. When foreclosure took their house, he bought the truck on Craigslist with his last thousand dollars. Tom’s a little camera shy – thought we ought to talk to the kids – and it didn’t take long to see why.
Pelley: How long have you been living in this truck?
Arielle Metzger: About five months.
Pelley: What’s that like?
Arielle Metzger: It’s an adventure.
Austin Metzger: That’s how we see it.
Pelley: When kids at school ask you where you live, what do you tell ‘em?
Austin Metzger: When they see the truck they ask me if I live in it, and when I hesitate they kinda realize. And they say they won’t tell anybody.
Arielle Metzger: Yeah it’s not really that much an embarrassment. I mean, it’s only life. You do what you need to do, right?
But after watching a news report or reading something on the Internet about these people we rapidly forget about them because they are not a part of “our world”.
Another place where a lot of poor people end up is in prison. In a previous article, I detailed how the prison population in the United States has been booming in recent years. If you can believe it, the United States now has approximately 25 percent of the entire global prison population even though it only has about 5 percent of the total global population.
And these days it is not just violent criminals that get thrown into prison. If you lose your job and get behind on your bills, you could be thrown into prison as well. The following is from a recent CBS News article…
Roughly a third of U.S. states today jail people for not paying off their debts, from court-related fines and fees to credit card and car loans, according to the American Civil Liberties Union. Such practices contravene a 1983 United States Supreme Court ruling that they violate the Constitutions’s Equal Protection Clause.
Some states apply “poverty penalties,” such as late fees, payment plan fees and interest, when people are unable to pay all their debts at once. Alabama charges a 30 percent collection fee, for instance, while Florida allows private debt collectors to add a 40 percent surcharge on the original debt. Some Florida counties also use so-called collection courts, where debtors can be jailed but have no right to a public defender. In North Carolina, people are charged for using a public defender, so poor defendants who can’t afford such costs may be forced to forgo legal counsel.
The high rates of unemployment and government fiscal shortfalls that followed the housing crash have increased the use of debtors’ prisons, as states look for ways to replenish their coffers. Said Chettiar, “It’s like drawing blood from a stone. States are trying to increase their revenue on the backs of the poor.”
If you are poor, the United States can be an incredibly cold and cruel place. Mercy and compassion are in very short supply.
The middle class continues to shrink and poverty continues to grow with each passing year. According to the U.S. Census Bureau, approximately one out of every six Americans is now living in poverty. And if you throw in those that are considered to be “near poverty”, that number becomes much larger. According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income”.
For many more facts about the rapid increase of poverty in this country, please see my previous article entitled “21 Statistics About The Explosive Growth Of Poverty In America That Everyone Should Know“.
But even as poverty grows, it seems like the hearts of those that still do have money are getting colder. Just check out what happened recently at a grocery store that was in the process of closing down in Augusta, Georgia…
Residents filled the parking lot with bags and baskets hoping to get some of the baby food, canned goods, noodles and other non-perishables. But a local church never came to pick up the food, as the storeowner prior to the eviction said they had arranged. By the time the people showed up for the food, what was left inside the premises—as with any eviction—came into the ownership of the property holder, SunTrust Bank.
The bank ordered the food to be loaded into dumpsters and hauled to a landfill instead of distributed. The people that gathered had to be restrained by police as they saw perfectly good food destroyed. Local Sheriff Richard Roundtree told the news “a potential for a riot was extremely high.”
Can you imagine watching that happen?
But of course handouts and charity are only temporary solutions. What the poor in this country really need are jobs, and unfortunately there has not been a jobs recovery in the United States since the recession ended.
In fact, the employment crisis looks like it is starting to take another turn for the worse. The number of layoffs in the month of March was 30 percent higher than the same time a year ago.
Meanwhile, small businesses are indicating that hiring is about to slow down significantly. According to a recent survey by the National Federation of Independent Businesses, small businesses in the United States are extremely pessimistic right now. The following is what Goldman Sachs had to say about this survey…
Components of the survey were consistent with the decline in headline optimism, as the net percent of respondents planning to hire fell to 0% (from +4%), those expecting higher sales fell to -4% (from +1%), and those reporting that it is a good time to expand ticked down to +4% (from +5%). The net percent of respondents expecting the economy to improve was unchanged at -28%, a very depressed level. However, on the positive side, +25% of respondents plan increased capital spending [ZH: With Alcoa CapEx spending at a 2 year low]. Small business owners continue to place poor sales, taxes, and red tape at the top of their list of business problems, as they have for the past several years.
So why aren’t our politicians doing anything to fix this?
For example, why in the world don’t they stop millions of our jobs from being sent out of the country?
Well, the truth is that they don’t think we have a problem. In fact, U.S. Senator Ron Johnson recently said that U.S. trade deficits “don’t matter”.
He apparently does not seem alarmed that more than 56,000 manufacturing facilities have been shut down in the United States since 2001.
And since the last election, the White House has seemed to have gone into permanent party mode.
On Tuesday, another extravagant party will be held at the White House. It is being called “In Performance at the White House: Memphis Soul”, and it is going to include some of the biggest names in the music industry…
As the White House has previously announced, Justin Timberlake (who will be making his White House debut), Al Green, Ben Harper, Queen Latifah, Cyndi Lauper, Joshua Ledet, Sam Moore, Charlie Musselwhite, Mavis Staples, and others will be performing at the exclusive event.
And so who will be paying for all of this?
You and I will be. Even as the Obamas cry about all of the other “spending cuts” that are happening, they continue to blow millions of taxpayer dollars on wildly extravagant parties and vacations.
Overall, U.S. taxpayers will spend well over a billion dollars on the Obamas this year.
I wonder what the tunnel people that live under the streets of America think about that.
When financial markets in the United States crash, so does the U.S. economy. Just remember what happened back in 2008. The financial markets crashed, the credit markets froze up, and suddenly the economy went into cardiac arrest. Well, there are very few things that could cause the financial markets to crash harder or farther than a derivatives panic. Sadly, most Americans don’t even understand what derivatives are. Unlike stocks and bonds, a derivative is not an investment in anything real. Rather, a derivative is a legal bet on the future value or performance of something else. Just like you can go to Las Vegas and bet on who will win the football games this weekend, bankers on Wall Street make trillions of dollars of bets about how interest rates will perform in the future and about what credit instruments are likely to default. Wall Street has been transformed into a gigantic casino where people are betting on just about anything that you can imagine. This works fine as long as there are not any wild swings in the economy and risk is managed with strict discipline, but as we have seen, there have been times when derivatives have caused massive problems in recent years. For example, do you know why the largest insurance company in the world, AIG, crashed back in 2008 and required a government bailout? It was because of derivatives. Bad derivatives trades also caused the failure of MF Global, and the 6 billion dollar loss that JPMorgan Chase recently suffered because of derivatives made headlines all over the globe. But all of those incidents were just warm up acts for the coming derivatives panic that will destroy global financial markets. The largest casino in the history of the world is going to go “bust” and the economic fallout from the financial crash that will happen as a result will be absolutely horrific.
There is a reason why Warren Buffett once referred to derivatives as “financial weapons of mass destruction”. Nobody really knows the total value of all the derivatives that are floating around out there, but estimates place the notional value of the global derivatives market anywhere from 600 trillion dollars all the way up to 1.5 quadrillion dollars.
Keep in mind that global GDP is somewhere around 70 trillion dollars for an entire year. So we are talking about an amount of money that is absolutely mind blowing.
So who is buying and selling all of these derivatives?
Well, would it surprise you to learn that it is mostly the biggest banks?
According to the federal government, four very large U.S. banks “represent 93% of the total banking industry notional amounts and 81% of industry net current credit exposure.”
These four banks have an overwhelming share of the derivatives market in the United States. You might not be very fond of “the too big to fail banks“, but keep in mind that if a derivatives crisis were to cause them to crash and burn it would almost certainly cause the entire U.S. economy to crash and burn. Just remember what we saw back in 2008. What is coming is going to be even worse.
It would have been really nice if we had not allowed these banks to get so large and if we had not allowed them to make trillions of dollars of reckless bets. But we stood aside and let it happen. Now these banks are so important to our economic system that their destruction would also destroy the U.S. economy. It is kind of like when cancer becomes so advanced that killing the cancer would also kill the patient. That is essentially the situation that we are facing with these banks.
It would be hard to overstate the recklessness of these banks. The numbers that you are about to see are absolutely jaw-dropping. According to the Comptroller of the Currency, four of the largest U.S. banks are walking a tightrope of risk, leverage and debt when it comes to derivatives. Just check out how exposed they are…
Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)
Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)
Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)
Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)
Bank Of America
Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)
Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)
Total Assets: $114,693,000,000 (a bit more than 114 billion dollars – yes, you read that correctly)
Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)
That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 362 times greater than their total assets.
To get a better idea of the massive amounts of money that we are talking about, just check out this excellent infographic.
How in the world could we let this happen?
And what is our financial system going to look like when this pyramid of risk comes falling down?
Our politicians put in a few new rules for derivatives, but as usual they only made things even worse.
According to Nasdaq.com, beginning next year new regulations will require derivatives traders to put up trillions of dollars to satisfy new margin requirements.
Swaps that will be allowed to remain outside clearinghouses when new rules take effect in 2013 will require traders to post $1.7 trillion to $10.2 trillion in margin, according to a report by an industry group.
The analysis from the International Swaps and Derivatives Association, using data sent in anonymously by banks, says the trillions of dollars in cash or securities will be needed in the form of so-called “initial margin.” Margin is the collateral that traders need to put up to back their positions, and initial margin is money backing trades on day one, as opposed to variation margin posted over the life of a trade as it fluctuates in value.
So where in the world will all of this money come from?
Total U.S. GDP was just a shade over 15 trillion dollars last year.
Could these rules cause a sudden mass exodus that would destabilize the marketplace?
Let’s hope not.
But things are definitely changing. According to Reuters, some of the big banks are actually urging their clients to avoid new U.S. rules by funneling trades through the overseas divisions of their banks…
Wall Street banks are looking to help offshore clients sidestep new U.S. rules designed to safeguard the world’s $640 trillion over-the-counter derivatives market, taking advantage of an exemption that risks undermining U.S. regulators’ efforts.
U.S. banks such as Morgan Stanley (MS.N) and Goldman Sachs (GS.N) have been explaining to their foreign customers that they can for now avoid the new rules, due to take effect next month, by routing trades via the banks’ overseas units, according to industry sources and presentation materials obtained by Reuters.
Unfortunately, no matter how banks respond to the new rules, it isn’t going to prevent the coming derivatives panic. At some point the music is going to stop and some big financial players are going to be completely and totally exposed.
When that happens, it might not be just the big banks that lose money. Just take a look at what happened with MF Global.
MF Global has confessed that it “diverted money” from customer accounts that were supposed to be segregated. A lot of customers may never get back any of the money that they invested with those crooks. The following comes from a Huffington Post article about the MF Global debacle, and it might just be a preview of what other investors will go through in the future when a derivatives crash destroys the firms that they had their money parked with…
Last week when customers asked for excess cash from their accounts, MF Global stalled. According to a commodity fund manager I spoke with, MF Global’s first stall tactic was to claim it lost wire transfer instructions. Then instead of sending an overnight check, it sent the money snail mail, including checks for hundreds of thousands of dollars. The checks bounced. After the checks bounced, the amounts were still debited from customer accounts and no one at MF Global could or would reverse the check entries. The manager has had to intervene to get MF Global to correct this.
How would you respond if your investment account suddenly went to “zero” because the firm you were investing with “diverted” customer funds for company use and now you have no way of recovering your money?
Keep an eye on the large Wall Street banks. In a previous article, I quoted a New York Times article entitled “A Secretive Banking Elite Rules Trading in Derivatives” which described how these banks dominate the trading of derivatives…
On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.
The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.
According to the article, the following large banks are represented at these meetings: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.
When the casino finally goes “bust”, you will know who to blame.
Without a doubt, a derivatives panic is coming.
It will cause the financial markets to crash.
Several of the “too big to fail” banks will likely crash and burn and require bailouts.
As a result of all this, credit markets will become paralyzed by fear and freeze up.
Once again, we will see the U.S. economy go into cardiac arrest, only this time it will not be so easy to fix.
Do you agree with this analysis, or do you find it overly pessimistic? Please feel free to post a comment with your thoughts below…
There are quite a few U.S. cities that are complete and utter economic disaster zones in 2010 (Detroit for example), but there is something about the demise of Las Vegas that is absolutely stunning. In recent decades, Las Vegas has become a symbol for the over-the-top affluence and decadence of America. But now it is a microcosm of the economic nightmare that has gripped the entire nation. When the subprime mortgage crisis stuck, no major U.S. city was more devastated than Las Vegas. When the recession went from bad to worse, Americans decided that they really didn’t need to gamble so much and casino revenues plummeted. Suddenly unemployment started to increase dramatically in Vegas and even today it continues to soar. Like so many other cities that are highly dependent on tourism and entertainment, Las Vegas has gone from boom to bust. Local officials are hoping that the worst will soon be over, but the truth is that the worst is yet to come. As the U.S. economy continues to unravel, average Americans will be spending what little money they do have to put a roof over their heads and to feed their families. The truth is that the glory days of Las Vegas are over and they are not coming back.
Already, the number of unemployed in Las Vegas is reaching unprecedented levels. Unemployment rates for the state of Nevada and for the city of Las Vegas both set new records during the month of April. In Las Vegas the unemployment rate in April was 14.2%. For the entire state the unemployment rate was 13.7%.
Of course those are just the “official” numbers. We all know that the “real” unemployment numbers are much higher.
For example, the “official” unemployment figure is about 14 percent in the state of Michigan right now. But if you actually believe that 86 percent of able-bodied workers in the state of Michigan are employed, then perhaps you would be interested in an offer to purchase the Golden Gate Bridge as well.
Elliott Parker, an economist at the University of Nevada, Reno says that the record-setting unemployment numbers in Nevada are just part of a larger trend….
“Nevada has been losing jobs since March 2008, and we are continuing to do so.”
But where the state of Nevada and the city of Las Vegas have really been hammered is in the housing industry.
It is estimated that a whopping 65 percent of all homes in the state of Nevada are underwater.
Let that sink in for a bit.
65 percent of all home owners with a mortgage in the state of Nevada owe more than their homes are worth.
Talk about an implosion.
Nationally, the number of homes that are “underwater” is about 24 percent. That is an all-time record for the entire nation, but it doesn’t come anywhere close to the nightmare that is unfolding in Nevada and in Las Vegas.
And the number of foreclosures taking place in Nevada is absolutely breathtaking.
According to RealtyTrac, Nevada is still ranked number one for foreclosure filings. In fact, one out of every 79 Nevada homes received a foreclosure filing in the month of May alone.
Nevada’s foreclosure rate is now five times the national average.
By just about any measure, the economy of Nevada is a complete and total disaster.
A reader recently sent an email describing the economic horror that is unfolding in Las Vegas. No matter what you may think about the city, the truth is that it is sad to see any great U.S. city fall to pieces like this….
“Las Vegas is a goner. The homeless population is out of control. The real estate is far worse than I have seen in the media (no surprise there). The towers of condos are ninety five percent vacant with zero activity. The streets and parks are in decline. Local governments are busy making cuts and fighting unions. When I ride the streets they are deserted, a big change from 2006. The major casino companies have all but moved the casinos out of Nevada. Rooms and restaurants have been closing for years, even while they finished the new projects. The entire town is a skeleton staff providing substandard service and decaying properties. I still work for one of the majors which is in bankruptcy. When the next wave hits there is nowhere to cut. It will be a game of dominoes with the Wynn properties the only ones left standing. I see the ninety nine cent breakfast making a comeback. The bullet train a day late and a few billion dollars short.”
So is there any hope for Las Vegas?
Well, if the U.S. economy gets back up off of the operating table and roars back to life there is little doubt that millions of Americans would once again soon be flying there to gamble away their discretionary income.
But the truth is that any “revival” that is going to happen in Vegas is going to be very short-lived.
The U.S. economy as a whole is caught in a death spiral, and we are about to see a repeat of the housing crash that devastated Las Vegas so badly the first time around.
No, there really isn’t any way that the death of Las Vegas can be avoided. Just like the U.S. economy as a whole, it is inevitably doomed. The numbers don’t lie.
The grand total of all government, corporate and consumer debt in the United States is now equal to 360 percent of GDP. That is a far greater level than the U.S. ever approached during the Great Depression.
The entire U.S. economy is a house of cards built on a gigantic pile of debt and paper money, and it is only a matter of time until it all comes crashing down.
But of course that isn’t stopping the U.S. government from spending even more money and getting us all into even more debt.
According to a recent Treasury Department report to Congress, the U.S. national debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015.
But as many of you who have experienced this on a personal level know, getting into continually increasing amounts of debt never ends well.
So do any of you have a tale to tell about the city where you live? Do you find yourself caught in the middle of an economic nightmare? Feel free to leave a comment telling us what is happening in your area of the United States….
A number of readers have chimed in with some very insightful comments. A sampling is below….
I lived here in Vegas from 1998-2006 and moved back at the beginning of 2010. I worked in Corporate Finance for one of the largest casino operators up until I retired.
The article is spot on. Compared to its heyday in 2005-2006, Las Vegas today is an economic disaster zone. The condo I sold in 2006 for $172,500 now goes for $48,900 – a 72% haircut.
It’s not getting any better. Real estate prices are resuming their descent, now that the $8,000 homebuyer tax bribe is gone.
The so-called economic recovery is for wealthy people only. Everyday people just keep getting the shaft. Obama is just another Republican with a ‘D’ after his name.
I’m glad I was smart enough to rent a place instead of buying one. I’m getting the hell out of this hellhole when my lease is up at year-end.
I am born and raised Vegas. When I say I was raised in Vegas I don’t mean a casino. I mean the middle of the dessert 30 miles north from the strip with the lizards and tumbleweeds. Vegas and I have a love hate relationship. I have seen this the growth in this town blow up in my face and now it is imploding just like an old worn out casino. It has been a crazy ride but due to the economy I will most likely be leaving Las Vegas soon. Growing up in this town has been interesting and leaving it will be bittersweet.
I lived in vegas in 2006 and have been back to visit many times. I was there recently for the first time after the economy imploded in late 2008—That town is a shell of it’s former self.
On any given night there are half the people on the strip that there used to be. The service even in the 5-star hotels has declined. You can see the lack of morale, sucked from the faces of the wokrers.
I loved this town in its hay day. Right now, it’s pretty sad.
Vegas was, and is, easy to understand. I’m in the musical equipment business– audio– and we go to Trade Shows.
These are held all over the world, but let’s contrast just two places, Los Angeles and Vegas:
If you go to Los Angeles, you will visit with the worlds best engineering talent, and a solidly-grounded people that are there to PRODUCE something OF VALUE. You have small manufacturers, Farm and Ranch people, Oil people, the film industry and plenty of unspoiled, honest, clean-living young people who work hard, and then play hard. Many are Surfers, etc., and are a breath of Fresh Air.
In short, a business convention or trade show in this city is a TREAT.
Now, let’s look at Las Vegas. Everything that’s big there is built around money manipulation and power. No one gives a damn about anybody else. Got a brilliant idea? One that Los Angelinos would want to encourage you to develop and succeed at? NOT in Vegas! Any Casino in town handles more money than that in a microsecond. Besides– who are YOU? YOU don’t matter. Vegas gets all the big shows and all the big stuff– so YOU DON’T COUNT.
Want to hold a convention in a DECENT CITY– say L.A., or Denver? SORRY– Vegas will move right in– bribe the show principals and it WILL be held in Vegas. Look at what happened to the National Finals Rodeo– Oklahoma City was GREAT, but VEGAS has STOLEN it.
Vegas deserves the worst that can happen to it– GOOD RIDDANCE!
LV was built by losers. I’ve lived in & near LV since ‘89, watched it grow cancerously, and now the tumor is shrinking… good riddance indeed to a grand delusion. This city is not electrified by the dam — it is fed with coal-generated power from Moapa. Fake Lake Mead is dying too ( and the city is fed by one old pipeline that can break down at any time … There is no primary industry here, just gambling and military — everyone here (except me, of course ) is living the Big Lie. The place is a death trap… stay away!
I recently went back to visit my old neighborhood (moved out of vegas and sold my house in summer of ‘08) and talked with a few of my neighbors. Apparently its so bad they dont even park their cars on the streets anymore because “these damn people siphon gas out of your gas tank”. No lie. And this is a nice gated neighborhood in Henderson….