Did you know that a major event just happened in the financial markets that we have not seen since the financial crisis of 2008? If you rely on the mainstream media for your news, you probably didn’t even hear about it. Just prior to the last stock market crash, a massive amount of money was pulled out of junk bonds. Now it is happening again. In fact, as you will read about below, the market for high yield bonds just experienced “a 6-sigma event”. But this is not the only indication that the U.S. economy could be on the verge of very hard times. Retail sales are extremely disappointing, mortgage applications are at a 14 year low and growing geopolitical storms around the world have investors spooked. For a long time now, we have been enjoying a period of relative economic stability even though our underlying economic fundamentals continue to get even worse. Unfortunately, there are now a bunch of signs that this period of relative stability is about to end. The following are 14 reasons why the U.S. economy’s bubble of false prosperity may be about to burst…
#1 The U.S. junk bond market just experienced “a 6-sigma event” earlier this month. In other words, it is an event that is only supposed to have a chance of 1 in 500 million of happening. Billions of dollars are being pulled out of junk bonds right now, and that has some analysts wondering if a financial crash is right around the corner.
#2 The last time that we saw a junk bond rout of this magnitude was back during the financial crash of 2008. In fact, as the Telegraph recently explained, bonds usually crash before stocks do…
The credit market usually leads the equity market during turning points, as happened when credit markets cracked first in 2008.
Will the same thing happen this time around?
#3 Retail sales have missed expectations for three months in a row and we just had the worst reading since January.
#4 Things have gotten so bad that even Wal-Mart is really struggling. Same-store sales at Wal-Mart have declined for five quarters in a row and the outlook for the future is not particularly promising.
#5 The four week moving average for mortgage applications just hit a 14 year low. It is now even lower than it was during the worst moments of the financial crisis of 2008.
#6 The tech industry is supposed to be booming, but mass layoffs in the tech industry are actually 68 percent ahead of last year’s pace.
#7 According to the Federal Reserve, 40 percent of all households in the United States are currently showing signs of financial stress.
#8 The U.S. homeownership rate has fallen to the lowest level since 1995.
#9 According to one survey, 76 percent of Americans do not have enough money saved to cover six months of expenses.
#10 Rumblings of a stock market correction have become so loud that even the mainstream media is reporting on it. For example, just check out this CNN headline from earlier this month: “Is a correction near? Wall Street on edge“.
#11 The civil war in Iraq is spiraling out of control, and Barack Obama has just announced that he is going to send 130 troops to the country in a “humanitarian” capacity. Iraq is the 7th largest oil producing nation on the entire planet, and if the flow of oil is disrupted that could have serious consequences.
#12 As a result of the conflict in Ukraine, the United States, Canada and the European Union have slapped sanctions on Russia. In return, Russia has slapped sanctions on them. Will this slowdown in global trade significantly harm the U.S. economy?
#13 The three day cease-fire between Hamas and Israel is about to end, and Hamas officials are saying that they are preparing for a “long battle“. If a resolution is not found soon, we could potentially see a full-blown regional war erupt in the Middle East.
#14 The number of Ebola deaths continues to grow at an exponential rate, and if the virus starts spreading inside the United States it has the potential to pretty much shut down our entire economy.
Meanwhile, things look even more dire in much of the rest of the globe.
For example, the economic slowdown has gotten so bad in some nations over in Europe that they are actually experiencing deflation…
Portugal has crashed into deep deflation and Italy’s inflation rate has fallen to zero as the eurozone flirts with recession, automatically pushing these countries further towards a debt compound spiral.
The slide comes amid signs of a deepening slowdown in the eurozone core, with even Germany flirting with possible recession. Germany’s ZEW index of investor confidence plunged from 27.1 to 8.6 in July, the sharpest fall since June 2012, during the European sovereign debt crisis. “The European Central Bank has to act now,” said Andrew Roberts, credit chief at RBS.
And in Japan, GDP just contracted at a 6.8 percent annual rate during the second quarter…
Japan’s economy suffered its worst contraction since 2011 in the second quarter as consumer spending on big items slumped in the wake of a sales tax rise.
Gross domestic product shrunk by an annualized 6.8% in the three months ended June, Japan’s Cabinet Office said Wednesday. The result was actually better than the 7% contraction expected by economists.
On a quarterly basis, Japan’s GDP dropped by 1.7% as business and housing investment declined. Japan’s economy last suffered a hit of this magnitude after the 2011 tsunami and nuclear disaster.
There is no way that this bubble of false prosperity was going to last forever. It was never real to begin with. It was just based on a pyramid of debt and false promises. In fact, the condition of the global financial system is now far worse than it was just prior to the financial crisis of 2008.
Sadly, most people do not understand these things. Most people just assume that our leaders have fixed whatever caused the problems last time. And when the next crisis arrives, they will be totally blindsided by it.
In general, over the last several decades the world has experienced an unprecedented era of peace and prosperity. The opening up of relations with China and the “end of the Cold War” resulted in an extended period of cooperation between east and west that was truly unique in the annals of history. But now things are shifting. The civil war in Ukraine and the crash of MH17 have created an enormous amount of tension between the United States and Russia, and many analysts believe that relations between the two superpowers are now even worse than they were during the end of the Cold War era. In addition, the indictment of five PLA officers for cyber espionage and sharp disagreements over China’s territorial claims in the South China Sea (among other issues) have caused U.S. relations with China to dip to their lowest point since at least 1989. So could the emerging division between the east and the west ultimately plunge us into a period of global chaos? And what would that mean for the world economy?
For as long as most Americans can remember, the U.S. dollar and the U.S. financial system have been overwhelmingly dominant. But now the powers of the east appear to be determined to break this monopoly. Four of the BRICS nations (China, Russia, India and Brazil) are on the list of the top ten biggest economies on the planet, and they are starting to make moves to become much less dependent on the U.S.-centered financial system of the western world. For example, just last week the BRICS nations established two new institutions which are intended to be alternatives to the World Bank and the IMF…
So in their summit, from July 14 to 16, the five BRICS announced two major initiatives aimed squarely at increasing their power in global finance. They announced the launch of the New Development Bank, headquartered in Shanghai, that will offer financing for development projects in the emerging world. The bank will act as an alternative to the Washington, D.C.—based World Bank. The BRICS also formed what they’re calling a Contingent Reserve Arrangement, a series of currency agreements which can be utilized to help them smooth over financial imbalances with the rest of the world. That’s something the IMF does now.
Clearly, the idea is to create institutions and processes to supplement — and perhaps eventually supplant — the functions of those managed by U.S. and Europe. And they would be resources that they could control on their own, without the annoying conditions that the World Bank and the IMF always slap on their loans and assistance.
This comes at a time when both China and Russia are seeking to emphasize their own currencies and move away from using the U.S. dollar so much.
Even in the western media, it is being admitted that China’s yuan is “a growing force in global finance“, and according to CNBC the use of Chinese currency in international trade is growing very rapidly…
Of the German companies profiled, 23 percent are using the renminbi to settle trades, up from 9 percent last year, while usage in Hong Kong rose to 58 percent from 50 percent and to 17 percent from 9 percent in the U.S.
Usage of the renminbi among French companies – a new addition to this year’s list – was high at 26 percent.
And of course Russia has been actively pursuing a “de-dollarization strategy” for months now. Each new round of economic sanctions pushes Russia even further in the direction of independence from the U.S. dollar, and Gazprom has been working hard to get large customers to switch from paying for natural gas in dollars to paying for natural gas in euros and other currencies. For much more on this, please see my previous article entitled “Russia Is Doing It – Russia Is Actually Abandoning The Dollar“.
At this point, it seems clear that Russia plans to permanently decouple from the U.S. economy and the U.S. financial system. Just today we learned that Vladimir Putin plans to make Russia less dependent on U.S. companies such as IBM and Microsoft, and any future rounds of sanctions are likely to cause even more damage to U.S. firms that do business in Russia.
But potentially much more troubling for the U.S. economy is the startling deterioration in the relationship between the Obama administration and China. Some analysts are even describing this as “a tipping point”…
One day, the United States indicts five PLA officers for cybercrimes; the next, the United States claims victory in WTO disputes over car tariffs and rare earth minerals. All this is happening while the United States promises enduring support for Asian allies, and it has moved openly to challenge the legitimacy of Chinese territorial claims in the South China Sea. Meanwhile, China is busy creating facts on the ground and water. Last month, a $1 billion Chinese oil rig set up operations in territorial waters claimed by Vietnam. In the East China Sea, Chinese SU-27 fighter jets have come within 100 feet of Japanese surveillance aircraft.
This was all capped at the recent Shangri-La Asian Security dialogue in Singapore (Asia’s annual defense-ministers meeting): Defense Secretary Chuck Hagel bluntly described China’s behavior as “destabilizing, unilateral actions.” The PLA deputy chief of staff, Lt. Gen. Wang Guanzhong, accused the United States of “hegemonism.”
The mood has soured, more than the usual ups and downs of big-power relationships. The question now is not whether a “new type of relationship” is in the offing, but rather, whether U.S.-Chinese relations have reached a tipping point.
Most Americans could not care less about what China is doing in the South China Sea, but to the Chinese this is a very, very big deal. In fact, China just sent a surveillance vessel to Hawaii as a bit of payback for what they regard as U.S. “provocations” in the region.
In the old days, China would have probably never have done such a thing. But China is gaining confidence as the gap between the U.S. military and the Chinese military rapidly closes…
Away from the Chinese military’s expanding capabilities in cyberspace and electronic warfare, Beijing is growing the size and reach of its naval fleet, advancing its air force and testing a host of new missiles, the Pentagon said Thursday.
An annual report to Congress on China’s evolving military capability concluded that the modernization was being driven in part by growing territorial disputes in the East and South China seas, as well as by Beijing’s desire to expand its presence and influence abroad.
In fact, the Chinese military has grown so powerful that we are now seeing headlines such as this one in The Week: “China thinks it can defeat America in battle”.
And the Russian military has made tremendous strides as well. Putin has been working hard to modernize the Russian nuclear arsenal, the Russians now have a “fifth generation” fighter jet that is supposedly far superior to the F-22 Raptor, and they have nuclear submarines that are so incredibly quiet that the U.S. Navy refers to them as “black holes“.
If Russia and China stay united, they are more than capable of providing a counterbalance to U.S. power around the globe.
But even if military conflict is not in our immediate future, the breakdown in relations between east and west could still have a dramatic impact on the global economy.
Over the years, the U.S. and China have developed a highly symbiotic relationship that fuels a tremendous amount of economic activity all over the planet. Each year, we buy hundreds of billions of dollars of products from the Chinese. Just imagine what our stores would look like if we took everything that was “made in China” out of them. And after we send them giant piles of our money, we beg the Chinese to lend it back to us at ultra-low interest rates. This arrangement has allowed China to become extremely wealthy and it has allowed Americans to enjoy a massively inflated standard of living fueled by ever increasing amounts of debt.
So what happens if this relationship starts breaking down?
Without a doubt, it could potentially lead to global chaos.
So keep a close eye on this emerging division between the east and the west. It could end up being far more important than most Americans would ever dare to imagine.
Everything is going to be just great. Haven’t you heard? The stock market is at an all-time high, Federal Reserve Chairman Ben Bernanke says that inflation is incredibly low, and the official unemployment rate has been steadily declining since early in Barack Obama’s first term. Of course I am being facetious, but this is the kind of talk about the economy that you will hear if you tune in to the mainstream media. They would have us believe that those running things know exactly what they are doing and that very bright days are ahead for America. And it would be wonderful if that was actually true. Unfortunately, as I made exceedingly clear yesterday, the U.S. economy has already been in continual decline for the past decade. Any honest person that looks at those numbers has to admit that our economy is not even close to where it used to be. But could it be possible that we are making a comeback? Could it be possible that Obama and Bernanke really do know what they are doing and that their decisions have put us on the path to prosperity? Could it be possible that everything is going to be just fine?
Sadly, what we are experiencing right now is a “mini-hope bubble” that has been produced by an unprecedented debt binge by the federal government and by unprecedented money printing by the Federal Reserve. Once this “sugar high” wears off, it will be glaringly apparent that by “kicking the can down the road” Bernanke and Obama have made our long-term problems even worse.
Unfortunately, most Americans don’t understand these things.
Most Americans just let their televisions do their thinking for them, and right now their televisions are telling them that everything is going to be fine.
But is that really the case?
Everything is fine, but the city of Detroit has just filed for Chapter 9 bankruptcy. It will be the largest municipal bankruptcy in U.S. history…
Detroit filed for the largest municipal bankruptcy in U.S. history Thursday after steep population and tax base declines sent it tumbling toward insolvency.
The filing by a state-appointed emergency manager means that if the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.
Wait a minute, didn’t Barack Obama say that he “refused to let Detroit go bankrupt” less than a year ago?
Everything is fine, but continuing claims for unemployment benefits just spiked to the highest level since early 2009.
Everything is fine, but in the month of June spending at restaurants fell by the most that we have seen since February 2008.
Everything is fine, but Google’s earnings for the second quarter came in way below expectations.
Everything is fine, but Microsoft’s earnings for the second quarter came in way below expectations.
Everything is fine, but chip maker Intel has reported revenue declines for four quarters in a row.
Everything is fine, but the number of housing starts in June was the lowest that we have seen in almost a year.
Everything is fine, but the number of mortgage applications has dropped 45 percent since May.
Everything is fine, but the homeownership rate in America is now at its lowest level in nearly 18 years.
Everything is fine, but the United States is losing half a million jobs to China every single year.
Everything is fine, but the U.S. economy actually lost 240,000 full-time jobs last month.
Everything is fine, but the number of full-time workers in the United States is now nearly 6 million below the old record that was set back in 2007.
Everything is fine, but 40 percent of all U.S. workers make less than $20,000 a year at this point.
Everything is fine, but robots are starting to take over fast food jobs. If working class Americans someday won’t even be able to work at McDonald’s, what will they do to earn money in the years ahead as the jobs disappear?
Everything is fine, but the average price of a gallon of regular gasoline has now reached $3.66.
Everything is fine, but the number of Americans on food stamps has increased by almost 50 percent while Obama has been in the White House.
Everything is fine, but the U.S. government is going to borrow about 4 trillion dollars in fiscal 2013.
Everything is fine, but worldwide business confidence has fallen to the lowest level since the last recession.
Everything is fine, but the Chairman of the Joint Chiefs of Staff just told Congress that Obama is considering using the U.S. military to intervene in the conflict in Syria.
Unfortunately, the cold, hard reality of the matter is that everything is not fine.
As a nation, we consume far more wealth that we produce.
As a nation, we buy far more stuff from the rest of the world than they buy from us.
As a nation, our debt is growing at a much faster pace than our economy is.
As a nation, our share of global GDP has been dropping like a rock over the past decade.
Our economic infrastructure is being systematically gutted, Wall Street has been transformed into a gigantic casino and poverty in the United States continues to explode even in the midst of this so-called “economic recovery”.
How in the world can the mainstream media get away with telling the American people that everything is just fine?
The economic fundamentals are absolutely screaming that massive trouble is on the horizon. Hopefully people are getting ready, because a whole lot of pain is on the way for this country.
They didn’t see it coming last time either. Back in 2007, President Bush, Federal Reserve Chairman Ben Bernanke and just about every prominent voice in the financial world were all predicting that we would experience tremendous economic prosperity well into the future. In fact, as late as January 2008 Bernanke boldly declared that “the Federal Reserve is not currently forecasting a recession.” At the time, only the “doom and gloomers” were warning that everything was about to fall apart. And of course we all know what happened. But just a few short years later, history seems to be repeating itself. Barack Obama, Federal Reserve Chairman Ben Bernanke and almost every prominent voice in the financial world are all promising that the U.S. “economic recovery” is going to continue even though Europe is coming apart like a 20 dollar suit. But the economic fundamentals tell a different story. Our national debt is more than $6,000,000,000,000 larger than it was back in 2008, the number of Americans on food stamps just hit another brand new all-time record, and the bankers up on Wall Street are selling gigantic mountains of the exact same kind of toxic derivatives that caused so much trouble the last time around. But all of our “leaders” swear that everything is going to be okay. You can believe them if you want, but denial is not just a river in Egypt, and another crash is inevitably coming.
Sadly, many Americans are not even going to see the crash coming because they still have faith in the “experts”. They haven’t figured out that the “experts” really do not know what they are doing.
The blind are leading the blind, and in the end the results are going to be absolutely tragic.
The following are 10 hilarious examples of how clueless our leaders are about the economy…
#1 When I first came across the following chart the other day, it made me chuckle. It is a chart that supposedly tells us the “probability” of a recession, and it was taken from the website of the Federal Reserve Bank of St. Louis. According to the chart, right now there is a 0.16% chance of a recession…
#2 Federal Reserve Chairman Ben Bernanke has also been proclaiming his belief that the U.S. economy will continue to grow. The following is an excerpt from his recent remarks to Congress…
The pause in real GDP growth last quarter does not appear to reflect a stalling-out of the recovery. Rather, economic activity was temporarily restrained by weather-related disruptions and by transitory declines in a few volatile categories of spending, even as demand by U.S. households and businesses continued to expand. Available information suggests that economic growth has picked up again this year.
And Bernanke also insists that the labor market is “improving”…
Consistent with the moderate pace of economic growth, conditions in the labor market have been improving gradually.
Of course the labor market is not actually improving. I showed this using the Fed’s own numbers the other day.
And you can put stock in Bernanke’s forecasting ability if you like, but considering his track record of failure in the past, that might not be too wise. Just check out what he was saying before the last financial crisis: “30 Ben Bernanke Quotes That Are So Stupid That You Won’t Know Whether To Laugh Or Cry“.
#3 Although Bernanke has such a nightmarish track record of failure, Warren Buffett still has faith in him. In fact, Buffett loves all of the money printing that Bernanke has been doing…
The U.S. economy might be “dead in the water” without the stimulus provided by the Federal Reserve under Chairman Ben Bernanke, according to Warren Buffett, CEO of Berkshire Hathaway.
“I think very cheap money makes things happen, it makes asset values higher. When asset values are higher, people do have a greater propensity to spend,” Buffett told CNBC.
“I think Bernanke has sort of carried the load himself during this period.”
If Buffett thinks the wild money printing that the Fed has been doing is so wonderful, then he probably would have absolutely loved living in the Weimar Republic.
#4 Barack Obama continues to insist that we do not have a debt crisis, but that we will not be able to balance the budget any time in the foreseeable future either.
Even though the national debt has grown by more than 6 trillion dollars under his leadership and our debt to GDP ratio is now well over 100%, Obama does not believe that it is a significant problem…
“We don’t have an immediate crisis in terms of debt”
And Obama certainly does not plan to even come close to balancing the budget during his second term. In fact, he openly admits that we won’t see a balanced budget at any point within the next decade…
“We’re not gonna balance the budget in 10 years”
Sadly, the truth is that the U.S. will never have a balanced budget ever again under our current system, but most of our politicians are not willing to go that far and admit that sad fact to the American people just yet.
#5 But of course it would certainly help if the U.S. government would stop wasting so much money. For example, did you know that the federal government is helping dead people get free cell phones? The following is from a recent article in the New York Post…
Dead people don’t need cell phones.
That’s the message Rep. Tim Griffin of Arkansas wants to send Congress, after he says a controversial government-backed program that helps provide phones to low-income Americans ended up sending mobiles to the dead relatives of his constituents. Griffin has introduced a bill that targets the phone hand-out program, which has ballooned into a fiscal headache for the government.
And of course a lot of living people are abusing the free cell phone program as well. Rep. Griffin says that he has heard of some people getting as many as 10 free cell phones from the government…
“I’ve also gotten calls from people who say their employees were bragging about having 10 phones.”
#6 Meanwhile, the most prominent economic journalist in the United States, Paul Krugman of the New York Times, continues to insist that it is a good thing for the government to be running up so much debt…
First of all… that trillion-dollar deficit is overwhelmingly the result of a depressed economy. And when the economy’s depressed it’s good to run a deficit. You don’t want the government to try and balance its budget right now.
Krugman is also operating under the delusion that the federal government “can’t run out of cash”, that it can just print money whenever it wants and that printing giant piles of money would not hurt anything.
The United States is a country that has its own currency–can’t run out of cash because we print the money. If you even try to think what would happen–suppose that investors get down on the United States. Even so, that would weaken the dollar, not send interest rates soaring, and that would be good. That would help our exports
It is frightening that the top economic journalist in America has such little understanding of how our system actually works. I would encourage Krugman to read a couple of my previous articles so that he won’t be so ignorant in the future…
-“Where Does Money Come From? The Giant Federal Reserve Scam That Most Americans Do Not Understand”
-“10 Things That Every American Should Know About The Federal Reserve”
#7 Many Americans have wondered why the federal government never seems to go after the big Wall Street banks. Well, now we know why. The other day, the Attorney General of the United States admitted that the federal government is very hesitant to prosecute anyone from the big banks because of what it might do to the global economy…
“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy”
So I guess we now live in a world where there is a different set of rules for the big banks, eh?
Most of us already knew that this was the case, but it is quite chilling to hear the Attorney General of the United States publicly admit this.
#8 Many of the big Wall Street banks are absolutely giddy that the Dow keeps setting new all-time highs, and many of them are projecting wonderful things ahead for the U.S. economy. For example, here is one forecast from Morgan Stanley’s Vincent Reinhart …
“In the Morgan Stanley forecast for the US, the trajectory of economic activity marks an inflection point midway through 2013. The severe financial crisis of 2008-09 necessitated significant downward adjustments by the private sector to the levels of aggregate demand and efficient supply. As the event recedes further into history, however, the drag on growth from these ongoing level adjustments plays out.
In our forecast, the expansion of real GDP steps up to around 2-3/4 percent in the second half of this year and beyond.”
#9 Vice-President Joe Biden is pushing economic optimism to ridiculous levels. Apparently he believes that most Americans are “no longer worried” that a major economic crisis is coming…
But all kidding aside, I think the American people have moved — Democrats, Republicans, independents. They know that the possibilities for this country are immense. They’re no longer traumatized by what was a traumatizing event, the great collapse in 2008. They’re no longer worried, I think, about our economy being overwhelmed either by Europe writ large, the EU, or China somehow swallowing up every bit of innovation that exists in the world. They’re no longer, I think, worried about our economy being overwhelmed beyond our shores.
And I don’t think they’re any more — there’s no — there’s very little doubt in any circles out there about America’s ability to be in position to lead the world in the 21st century, not only in terms of our foreign policy, our incredible defense establishment, but economically.
#10 Right now, many in the financial world are projecting that this will be a year to remember for the stock market. During a recent interview with Fox Business, Wharton School of Business Finance Professor Jeremy Siegel declared that the Dow will cross the 16,000 mark by the end of this year…
“I think by the end of this year, we’ll be in the 16,000 to 17,000 range.”
Of course it is true that other analysts have a much different view of things. Many of them are absolutely amazed that the U.S. economy has become so disconnected from economic reality. For example, just check out what Steve Russell and Hamish Baillie, fund managers at the Ruffer Investment Company, recently had to say…
“If this was explained to a recently arrived Martian he would no doubt be puzzled – US unemployment has almost doubled since 2007, GDP [gross domestic product] growth is a third lower and debt as a percentage of GDP is within a whisker of doubling. The market is forward looking but this is extreme”
So who is right and who is wrong?
Time will tell.
Fortunately, it appears that the American people are getting fed up with the constant stream of lies that they have been told.
According to a new Pew Research survey, just 26 percent of all Americans trust the government to do the right thing.
So what about you?
Do you trust what the government and the “experts” are telling you?
Do you trust them to do the right thing?
Feel free to post a comment with your thoughts below…
Do you believe that economic trouble is coming in 2013? If so, you have a lot of company. According to a brand new Gallup poll that was just released, 65 percent of Americans believe that 2013 will be a year of “economic difficulty” while only 33 percent of Americans believe that 2013 will be a year of “economic prosperity”. Gallup has been asking this question for a lot of years, and the percentage of Americans that are anticipating economic difficulty in the year ahead has not been this high since the early 1980s. And without a doubt, there are a whole lot of reasons to be deeply concerned about the economy as we head into the new year. But it isn’t just 2013 that Americans are pessimistic about. According to the new Gallup poll, 50 percent of all Americans believe that the best days of America are behind us, and only 47 percent of all Americans believe that the best days of America are ahead of us. Those are very sobering numbers. Half the country believes that it is only downhill from here for the United States. Unfortunately, they are exactly right. Things are rapidly going to get worse for our economy and for our nation as a whole. We are going to start reaping the consequences of decades of very foolish decisions, and the pain is going to be immense.
Gallup asked some other very interesting questions as well. The following are some of the other results from the poll…
-68 percent of Americans believe that 2013 will be a year of rising crime rates.
-57 percent of Americans believe that 2013 will be a year in which American power will decline in the world.
-82 percent of Americans believe that 2013 will be a year in which taxes in the United States will rise.
So why are so many people so pessimistic as we enter 2013?
That is a good question. I think that a lot of people are starting to wake up and are realizing the gigantic problems that are staring the U.S. right in the face.
Even our friends over in Europe can see what is happening to us. We are like a former athletic champion that is now clearly on the wrong side of “middle age” and is exhibiting obvious signs of decline. We still like to think of ourselves as “the champ”, but the truth is that we are fat, lazy, broken down and bankrupt. The following is a brief excerpt from an article that appeared in a major UK news source the other day…
The rest of the world — dangerously reliant on a buoyant U.S. — should note one thing above all: the fundamentals of America’s economy are, frankly, terrible, and its international dominance is not nearly as assured as it once was.
Its economic culture has started to change since President Obama entered the White House four years ago this month.
America more closely resembles Europe in living beyond its means and in the President’s determination to build a massive welfare state.
The mainstream media and most of our politicians endlessly proclaim that things are about to turn around and that a “recovery” is on the way, but that is not even close to the truth.
Fortunately, a few of our politicians realize what is really happening and are willing to talk about it. Unfortunately, not enough people are listening to them.
For example, Ron Paul has a really good grasp on how destructive the U.S. national debt is and how we are literally destroying the bright future that our children and our grandchildren should have had. The following is what he posted on his Facebook page the other day about the “fiscal cliff deal” that just got pushed through Congress…
We Are Already Over the Fiscal Cliff
2 January 2013
Despite claims that the Administration and Congress saved America from the fiscal cliff with an early morning vote today, the fact is that government spending has already pushed Americans over the cliff. Only serious reductions in federal spending will stop the cliff dive from ending in a crash landing, yet the events of this past month show that most elected officials remain committed to expanding the welfare-warfare state.
While there was much hand-wringing over the “draconian” cuts that would be imposed by sequestration, in fact sequestration does not cut spending at all. Under the sequestration plan, government spending will increase by 1.6 trillion over the next eight years. Congress calls this a cut because without sequestration spending will increase by 1.7 trillion over the same time frame. Either way it is an increase in spending.
Yet even these minuscule cuts in the “projected rate of spending” were too much for Washington politicians to bear. The last minute “deal” was the worst of both worlds: higher taxes on nearly all Americans now and a promise to revisit these modest reductions in spending growth two months down the road. We were here before, when in 2011 Republicans demanded these automatic modest decreases in government growth down the road in exchange for a massive increase in the debt ceiling. As the time drew closer, both parties clamored to avoid even these modest moves.
Make no mistake: the spending addiction is a bipartisan problem. It is generally believed that one party refuses to accept any reductions in military spending while the other party refuses to accept any serious reductions in domestic welfare programs. In fact, both parties support increases in both military and domestic welfare spending. The two parties may disagree on some details of what kind of military or domestic welfare spending they favor, but they do agree that they both need to increase. This is what is called “bipartisanship” in Washington.
While the media played up the drama of the down-to-the-wire negotiations, there was never any real chance that a deal would not be worked out. It was just drama. That is how Washington operates. As it happened, a small handful of Congressional and Administration leaders gathered in the dark of the night behind closed doors to hammer out a deal that would be shoved down the throats of Members whose constituents had been told repeatedly that the world would end if this miniscule decrease in the rate of government spending was allowed to go through.
While many on both sides express satisfaction that this deal only increases taxes on the “rich,” most Americans will see more of their paycheck going to Washington because of the deal. The Tax Policy Center has estimated that 77 percent of Americans would see higher taxes because of the elimination of the payroll tax cut.
The arguments against the automatic “cuts” in military spending were particularly dishonest. Hawks on both sides warned of doom and gloom if, as the plan called for, the defense budget would have returned to 2007 levels of spending! Does anybody really believe that our defense spending was woefully inadequate just five years ago? And since 2007 we have been told that the wars in Iraq and Afghanistan are winding down. According to the Congressional Budget Office, over the next eight years military spending would increase 20 percent without the sequester and would increase 18 percent with the sequester. And this is what is called a dangerous reduction in defense spending?
Ironically, some of the members who are most vocal against tax increases and in favor of cuts to domestic spending are the biggest opponents of cutting a penny from the Pentagon budget. Over and over we were told of the hundreds of thousands of jobs that would be lost should military spending be returned to 2007 levels. Is it really healthy to think of our defense budget as a jobs program? Many of these allegedly free-market members sound more Keynesian than Paul Krugman when they praise the economic “stimulus” created by militarism.
As Chris Preble of the Cato Institute wrote recently, “It’s easy to focus exclusively on the companies and individuals hurt by the cuts and forget that the taxed wealth that funded them is being employed elsewhere.”
While Congress ultimately bears responsibility for deficit spending, we must never forget that the Federal Reserve is the chief enabler of deficit spending. Without a central bank eager to monetize the debt, Congress would be unable to fund the welfare-warfare state without imposing unacceptable levels of taxation on the American people. Of course, the Federal Reserve’s policies do impose an “inflation” tax on the American people; however, since this tax is hidden Congress does not fear the same public backlash it would experience if it directly raised income taxes.
I have little hope that a majority of Congress and the President will change their ways and support real spending reductions unless forced to by an economic crisis or by a change in people’s attitudes toward government. Fortunately, increasing numbers of Americans are awakening to the dangers posed by the growth of the welfare-warfare state. Hopefully this movement will continue to grow and force the politicians to reverse course before government spending, taxing, and inflation destroys our economy entirely.
It was good that Ron Paul placed blame on both political parties and on the Federal Reserve for our debt problems.
The Federal Reserve is not often talked about much when it comes to assigning blame for the debt, but it truly is one of the primary reasons why our debt is so enormous today. The Federal Reserve system was designed to be a perpetual government debt machine, and it has accomplished that task very well.
When the Federal Reserve was first created, the total U.S. national debt was less than 3 billion dollars.
That is about as much as we add to the U.S. national debt every single day at this point.
And since Ben Bernanke took the reigns at the Fed, our debt problems have greatly accelerated.
The U.S. national debt has more than doubled from a little over $8 trillion to more than $16.4 trillion since Ben Bernanke became chairman of the Federal Reserve in 2006.
But disaster has not struck yet, so most Americans think that everything must be okay.
Well, if you want to ignore all of the evidence of our impending economic demise, go ahead and do that. Go on lots of expensive vacations, run up your credit cards, buy a new boat and party like its 1999. Enjoy every minute of our debt-fueled prosperity while you still can. You only live once, right?
But if you are wise, you will try to understand what is coming and you will make preparations so that you and your family will be able to withstand the storm that is coming. Here are some basic steps that I suggest…
-Use this time of relative prosperity to work hard and make money while you still can. You want to store up your finances during the good times to help you get through the lean times.
-Get out of debt. You don’t want massive amounts of debt weighing you down when things get really hard.
-Get more independent of the world system. Start a side business in the evenings and the weekends. Learn how to grow your own food. Get your house off of the grid if possible. Anything you can do to become more independent and more self-sufficient is good.
-Store food and other essential supplies. Right now we take for granted that the supermarkets and the big box stores will always be packed with mountains of quality goods at affordable prices. That may not always be the case. You want to be prepared for whatever may happen.
For even more tips, please see my previous article entitled “How To Prepare For The Difficult Years Ahead“.
All bubbles eventually burst.
Our national debt bubble will eventually burst.
The derivatives bubble will eventually burst.
The consumer debt bubble will eventually burst.
When those bubbles burst, will you be ready?
I hope and pray that you will.