Are you ready for a wild 2013? It should be a very interesting year. When the calendar flips over each January, lots of people make lots of lists. They make lists of “resolutions”, but most people never follow through on them. They make lists of “predictions”, but most of those predictions always seem to end up failing. Well, I have decided to put out my own list of predictions for 2013. I openly admit that I won’t get all of these predictions right, and that is okay. Hopefully I will at least be more accurate than most of the other armchair prognosticators out there. It is important to look ahead and try to get a handle on what is coming, because I believe that the rest of this decade is going to be extraordinarily chaotic for the U.S. economy. The false bubble of debt-fueled prosperity that we are enjoying right now is not going to last much longer. When it comes to an end, the “adjustment” is going to be extremely painful. Those that understand what is happening and have prepared for it will have the best chance of surviving what is about to hit us. I honestly don’t know what everybody else is going to do. Many of the people that don’t see the coming collapse approaching will be totally blindsided by it and will totally give in to despair when they realize what has happened. But there is no excuse for not seeing what is coming – the signs are everywhere.
So with that being said, the following are 50 bold predictions for 2013…
#1 There will be a major fight between the Republicans and the Democrats over raising the debt ceiling. This will be one of the stories that dominates news headlines in the months of February and March.
#2 Most of the new “revenue” that will be raised by tax increases in 2013 will come out of the pockets of the middle class.
#3 No matter what “fiscal deals” the Democrats and the Republicans make in 2013, the federal budget deficit will still end up being greater than a trillion dollars for the fifth consecutive year.
#4 The credit rating of the U.S. government will be downgraded again in 2013.
#5 The Federal Reserve, along with major central banks all over the globe, will continue to wildly print money.
#6 There will be more criticism of the Federal Reserve in 2013 than at any other time since it was created back in 1913.
#7 The term “currency war” will be used by the media more in 2013 than it was in 2012.
#8 The movement away from the U.S. dollar as the primary reserve currency of the world will pick up momentum. This will especially be true in Asia.
#9 The economic depressions in Greece and Spain will get even worse and unemployment in the eurozone will go even higher in 2013.
#10 A financial crisis in Europe will cause officials to grasp for “radical solutions” that will surprise many analysts.
#11 The unemployment rate in the United States will be higher by the end of 2013 than it is now.
#12 The percentage of working age Americans with a job will fall below 58 percent by the end of the year.
#13 At least one “too big to fail” bank will fail in the United States by the end of 2013.
#14 By the end of the year, more people than ever will understand what “derivatives” are, and that will be because they have caused major problems in the financial world.
#15 We will see the beginnings of another major housing crisis before the end of 2013 and foreclosure activity will start rising once again.
#16 We will see another new wave of “tent cities” start to go up in communities around the nation before the end of the year.
#17 There will be another major drought in the United States this upcoming summer and there will be widespread crop failures once again.
#18 The massive dust storms that we have seen roll through cities like Phoenix in recent years will become even larger and even more intense.
#19 Traffic along the Mississippi River will be significantly interrupted at some point during 2013. This will be a very negative thing for the economy.
#20 Food prices will soar in 2013. This will especially be true for meat products.
#21 In some of the poorer areas of the globe, major food riots will break out. Governments will have trouble containing the civil unrest.
#22 There will be more genetically-modified foods in our supermarkets than ever before, and more Americans than ever will reject them and will seek out alternatives.
#23 The average price of a gallon of gasoline in 2012 was about $3.60. The average price of a gallon of gasoline in 2013 will be lower than that. Yes, you read that correctly.
#24 The number of vehicle miles driven in the United States will continue to decline in 2013.
#25 The Dow will end 2013 significantly lower than it is right now.
#26 When the final statistics for 2013 are compiled, U.S. share of global GDP will be less than 20 percent for the first time in modern history. Back in the year 2001, our share of global GDP was 31.8 percent.
#27 The U.S. Postal Service will continue to experience massive financial difficulties and will lay off personnel.
#28 As violence in our public schools becomes increasingly worse, more Americans families than ever will decide to home school their children.
#29 The Obama administration and Democrats in Congress will make an all-out attempt to pass gun control measures in 2013. When their efforts on the legislative front are stalled somewhat by Republicans in the House, Obama will use his executive powers to further his gun control agenda.
#30 One of the cities with the strongest gun laws in the nation, Chicago, had 532 murders in 2012 and it is now considered to be one of the most dangerous cities on the planet. By the end of 2013, the murder total in Chicago will be above 600.
#31 There will be an increasing amount of tension between state governments and the federal government. The issue of “states rights” will move front and center at various points in 2013.
#32 CNN will continue to sink to horrifying new lows. Piers Morgan will end up leaving the network before the end of the year.
#33 The number of Americans on food stamps will surpass 50 million for the first time ever at some point during 2013.
#34 The U.S. trade deficit with China in 2013 will be well over 300 billion dollars.
#35 The phrase “made in China” will increasingly be viewed as a reason not to buy a product as Americans become more educated about the millions of good jobs that we have lost to China over the past decade.
#36 We will see increasing cooperation between the governments of the United States, Canada and Mexico and border restrictions will be loosened.
#37 There will continue to be a mass exodus of families and businesses out of the state of California. The favorite destination will continue to be Texas, but Texas residents will become increasingly resentful of all of these new transplants.
#38 There will be some truly jaw-dropping examples of violence by parents against their own children in 2013. Many of these stories will make headlines all over the nation.
#39 The percentage of Americans that are obese will continue to rise and will set another new all-time record in 2013.
#40 There will be more war in the Middle East in 2013. But it will only set the stage for even more war in the Middle East in 2014 and 2015.
#41 U.S. troops will be deployed in more countries than ever before in 2013.
#42 Volcanic eruptions and major earthquakes along the Ring of Fire will make headlines all over the globe in 2013.
#43 Giant sinkholes will continue to appear all over the United States and all over the globe, and scientists will continue to struggle to find an explanation for why it is happening.
#44 The peak of the solar cycle in 2013 will cause significant problems for satellite communications.
#45 The U.S. government will put more resources into the surveillance of the American people than ever before, but most Americans won’t mind all of this surveillance because they have become convinced that it is important to give up some of our liberties for more “security”.
#46 Our infrastructure (roads, bridges, tunnels, airports, sewers, electrical grids, etc.) will be in worse shape by the end of 2013 than it is now.
#47 The percentage of “two parent households” in the United States will continue to decline.
#48 “Political correctness” will reach ridiculous new heights during 2013, and more Americans than ever will start to rebel against it.
#49 There will be more anger at the wealthy in 2013 than at any other time in modern history.
#50 There will be some shocking political scandals in Washington D.C. in 2013. We will see some high profile resignations by the end of the year.
Once again, please keep in mind that I do not expect to be 100% correct about all of these things. I am just trying to put all of the pieces of the puzzle together just like everyone else is.
But I do hope to have a better track record than most of the other people putting out lists of predictions at the beginning of this year. So save this list and let’s revisit it at the end of the year.
Do you have any bold predictions of your own for 2013? Please feel free to share them by posting a comment below…
Will this be the last normal holiday season that Americans ever experience? To many Americans, such a notion would be absolutely inconceivable. After all, in the affluent areas of the country restaurants and malls are absolutely packed. Beautiful holiday decorations are seemingly everywhere this time of the year and children all over the United States are breathlessly awaiting the arrival of Santa Claus. Even though poverty is exploding to unprecedented levels, most families will still have mountains of presents under their Christmas trees. Of course a whole lot of those presents were purchased with credit cards, but people don’t like to talk about that. It kind of spoils the illusion. Sadly, the truth is that our entire economy is a giant illusion. The extreme prosperity that we have been enjoying has been fueled by debt, and any future prosperity that we will experience is completely dependent on our ability to go into even more debt. The total amount of debt in our economy is almost 10 times larger than it was just 30 years ago, but we don’t like to think about that too much. Most Americans are way too busy living the good life to be bothered with “doom and gloom”. Well, get ready to say goodbye to normal. As history has shown us, no financial bubble lasts forever, and time is rapidly running out for us.
You know that the hour is late when even mainstream news sources start publishing articles with titles such as this: “Will 2013 Mark the Beginning of American Decline?”
That article appeared on Bloomberg.com the other day, and it was written by Simon Johnson, a former chief economist at the International Monetary Fund. He is convinced that a day of reckoning is coming for U.S. government finances, and he seems resigned to the fact that we will not be ready when that day arrives…
“Sooner or later, it will be America’s turn to fall out of favor with investors and to see its own interest rates rise. It is hard to know when that day will come, or precisely what pressures the country will face.
Let me only venture one forecast: We will not be ready.”
Other analysts are far more pessimistic. For example, the following is what Gerald Celente said about the “bond bubble” during a recent interview with King World News…
Eric King: “Gerald, I wanted to take a look at this upcoming issue you have coming out. (In here it says,) ‘Bonds Away! The bond bomb is ready to explode … threatening to make the real estate and dot-com bubbles, and even the Great Recession, look like market corrections.’ Can you talk about that?”
Celente: “Yes. This piece is being penned by Dr. Paul Craig Roberts, the former Assistant Treasury Secretary under Ronald Reagan. And he is convinced that the bond bubble is about to burst. This cannot continue to go on the way it is. Everyone knows that the whole game is rigged, and so is this….”
“The whole game is rigged. It’s ready to go down, and Dr. Paul Craig Roberts believes it’s ‘Bonds Away’ in 2013 as the bond bubble explodes and brings about a financial disaster even worse than the Great Depression.”
Eric King: “He’s saying here it’s a road to financial collapse that we are going to head down when this thing bursts.”
Celente: “It is. Because the whole world is being propped up by these phony bonds and it’s going to collapse. It has to happen. Interest rates are going to start going up, and when they do the bond bubble explodes. You cannot keep interest rates at zero for this amount of time and expect anything other than disaster to follow.”
For much more on all this, you can listen to another excellent interview with Gerald Celente right here.
Our politicians just assume that we will be able to borrow trillions upon trillions of dollars far into the future at super low interest rates, but that is a very dangerous assumption.
As I noted the other day, the average rate of interest on U.S. government debt was 2.534 percent at the end of November. If that number just rose to where it was about a decade earlier we would be in a massive amount of trouble.
Back in the year 2000, the average rate of interest on U.S. government debt was 6.638 percent. If we were at that level today, the U.S. government would be paying out more than a trillion dollars a year just in interest on the national debt.
But our politicians just keep borrowing and spending as if we could do this forever.
From the time that George Washington was inaugurated (1789) to the time that George W. Bush was inaugurated (2001), the U.S. government accumulated about 5.7 trillion dollars of debt.
During the first four years of the Obama administration, the U.S. government accumulated about 5.7 trillion dollars of debt.
How can anyone support this kind of insanity?
You can see an excellent video demonstrating the vastness of our national debt right here. In the end, all of this debt will absolutely destroy the U.S. dollar, our economic system and the bright futures that our children and our grandchildren were supposed to have.
As if all of that was not enough to be concerned about, there is also the threat that Wall Street could implode at any time. Most Americans have no idea that Wall Street has been transformed into the largest casino in the history of the world. The “too big to fail” banks are the ringleaders, and the derivatives bubble hangs over our financial system like a “sword of Damocles” that could fall at virtually any moment.
Everything will remain fine as long as the spiral of derivatives that our bankers have constructed remains perfectly balanced. But if something happens and it becomes unbalanced and starts to collapse, the consequences could be unlike anything we have ever seen before.
A recent Zero Hedge article entitled “1000x Systemic Leverage: $600 Trillion In Gross Derivatives ‘Backed’ By $600 Billion In Collateral” detailed how there is barely any collateral backing up the hundreds of trillions of dollars of derivatives that are out there…
But a bigger question is what is the actual collateral backing this gargantuan market which is about 10 times greater than the world’s combined GDP, because as the “derivative” name implies all this exposure is backed on some dedicated, real assets, somewhere. Luckily, the IMF recently released a discussion note titled “Shadow Banking: Economics and Policy” where quietly hidden in one of the appendices it answers precisely this critical question. The bottom line: $600 trillion in gross notional derivatives backed by a tiny $600 billion in real assets: a whopping 0.1% margin requirement! Surely nothing can possibly go wrong with this amount of unprecedented 1000x systemic leverage.
Our entire economy has become a giant pyramid of debt, risk and leverage. At some point there is going to be a giant crash. When that happens, people are going to become very desperate.
When people become very desperate, they often accept “solutions” that they were not willing to consider previously.
We need to learn some lessons from history. This is exactly the kind of thing that happened back in the 1930s.
For example, an elderly woman named Kitty Werthmann is telling audiences what life was like in Austria back in the late 1930s…
“In 1938, Austria was in deep Depression. Nearly one-third of our workforce was unemployed. We had 25 percent inflation and 25 percent bank loan interest rates.”
“Farmers and business people were declaring bankruptcy daily. Young people were going from house to house begging for food. Not that they didn’t want to work; there simply weren’t any jobs.”
The Austrian people were really hurting and they were desperate for answers. When Hitler came to them with “solutions”, they were ready to embrace him with open arms…
“We looked to our neighbor on the north, Germany, where Hitler had been in power since 1933.” she recalls. “We had been told that they didn’t have unemployment or crime, and they had a high standard of living.”
“Nothing was ever said about persecution of any group – Jewish or otherwise. We were led to believe that everyone in Germany was happy. We wanted the same way of life in Austria. We were promised that a vote for Hitler would mean the end of unemployment and help for the family. Hitler also said that businesses would be assisted, and farmers would get their farms back.””Ninety-eight percent of the population voted to annex Austria to Germany and have Hitler for our ruler.”
“We were overjoyed,” remembers Kitty, “and for three days we danced in the streets and had candlelight parades. The new government opened up big field kitchens and everyone was fed.”
Sadly, America is already starting to go down the same path in many ways. If you doubt this, you can read the rest of her account right here.
Right now, things are still relatively good in America. Yes, there are a whole host of economic numbers that look really bad, but what we are experiencing right now is nothing compared to the horrific economic pain that is coming.
When our economy finally crashes, nobody is going to be able to press a button and restore things to how they were previously. We will be told that we have to “adjust” and consider “new solutions” to our “new challenges”. Someday we will look back on the good life that we were enjoying in 2010, 2011 and 2012 and wish that we could go back to those days.
So enjoy the relative peacefulness and prosperity of these times while you still can. A horrific economic collapse is on the way, and once it strikes none of our lives will ever be the same.
What a year 2012 has been! The mainstream media continues to tell us what a “great job” the Obama administration and the Federal Reserve are doing of managing the economy, but meanwhile things just continue to get even worse for the poor and the middle class. It is imperative that we educate the American people about the true condition of our economy and about why all of this is happening. If nothing is done, our debt problems will continue to get worse, millions of jobs will continue to leave the country, small businesses will continue to be suffocated, the middle class will continue to collapse, and poverty in the United States will continue to explode. Just “tweaking” things slightly is not going to fix our economy. We need a fundamental change in direction. Right now we are living in a bubble of debt-fueled false prosperity that allows us to continue to consume far more wealth than we produce, but when that bubble bursts we are going to experience the most painful economic “adjustment” that America has ever gone through. We need to be able to explain to our fellow Americans what is coming, why it is coming and what needs to be done. Hopefully the crazy economic numbers that I have included in this article will be shocking enough to wake some people up.
The end of the year is a time when people tend to gather with family and friends more than they do during the rest of the year. Hopefully many of you will use the list below as a tool to help start some conversations about the coming economic collapse with your loved ones. Sadly, most Americans still tend to doubt that we are heading into economic oblivion. So if you have someone among your family and friends that believes that everything is going to be “just fine”, just show them these numbers. They are a good summary of the problems that the U.S. economy is currently facing.
The following are 50 economic numbers from 2012 that are almost too crazy to believe…
#1 In December 2008, 31.6 million Americans were on food stamps. Today, a new all-time record of 47.7 million Americans are on food stamps. That number has increased by more than 50 percent over the past four years, and yet the mainstream media still has the gall to insist that “things are getting better”.
#2 Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, about one out of every 6.5 Americans is on food stamps.
#3 According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”
#4 According to one recent survey, 55 percent of all Americans have received money from a safety net program run by the federal government at some point in their lives.
#5 For the first time ever, more than a million public school students in the United States are homeless. That number has risen by 57 percent since the 2006-2007 school year.
#6 Median household income in the U.S. has fallen for four consecutive years. Overall, it has declined by over $4000 during that time span.
#7 Families that have a head of household under the age of 30 have a poverty rate of 37 percent.
#8 The percentage of working age Americans with a job has been under 59 percent for 39 months in a row.
#9 In September 2009, during the depths of the last economic crisis, 58.7 percent of all working age Americans were employed. In November 2012, 58.7 percent of all working age Americans were employed. It is more then 3 years later, and we are in the exact same place.
#10 When you total up all working age Americans that do not have a job in America today, it comes to more than 100 million.
#11 According to one recent survey, 55 percent of all small business owners in America “say they would not start a business today given what they know now and in the current environment.”
#12 The number of jobs at new small businesses continues to decline. According to economist Tim Kane, the following is how the decline in the number of startup jobs per 1000 Americans breaks down by presidential administration…
Bush Sr.: 11.3
Bush Jr.: 10.8
#13 The U.S. share of global GDP has fallen from 31.8 percent in 2001 to 21.6 percent in 2011.
#14 The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.
#15 There are four major U.S. banks that each have more than 40 trillion dollars of exposure to derivatives.
#16 In 2000, there were more than 17 million Americans working in manufacturing, but now there are less than 12 million.
#17 According to the Pew Research Center, 61 percent of all Americans were “middle income” back in 1971. Today, only 51 percent of all Americans are.
#18 The Pew Research Center has also found that 85 percent of all middle class Americans say that it is harder to maintain a middle class standard of living today than it was 10 years ago.
#19 62 percent of all middle class Americans say that they have had to reduce household spending over the past year.
#20 Right now, approximately 48 percent of all Americans are either considered to be “low income” or are living in poverty.
#21 Approximately 57 percent of all children in the United States are living in homes that are either considered to be either “low income” or impoverished.
#22 According to one survey, 77 percent of all Americans are now living paycheck to paycheck at least part of the time.
#23 Back in 1950, more than 80 percent of all men in the United States had jobs. Today, less than 65 percent of all men in the United States have jobs.
#24 The average amount of time that an unemployed worker stays out of work in the United States is 40 weeks.
#25 If you can believe it, approximately one out of every four American workers makes 10 dollars an hour or less.
#26 According to the U.S. Census Bureau, an all-time record 49 percent of all Americans live in a home where at least one person receives financial assistance from the federal government. Back in 1983, that number was less than 30 percent.
#27 Right now, more than 100 million Americans are enrolled in at least one welfare program run by the federal government. And that does not even count Social Security or Medicare. Overall, there are almost 80 different “means-tested welfare programs” that the federal government is currently running.
#28 When you account for all government transfer payments and all forms of government employment, more than half of all Americans are now at least partially financially dependent on the government.
#29 Barack Obama has been president for less than four years, and during that time the number of Americans “not in the labor force” has increased by nearly 8.5 million. Something seems really “off” about that number, because during the entire decade of the 1980s the number of Americans “not in the labor force” only rose by about 2.5 million.
#30 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.
#31 According to USA Today, many Americans have actually seen their water bills triple over the past 12 years.
#32 There are now 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.
#33 Right now, approximately 25 million American adults are living with their parents.
#34 As the economy has slowed down, so has the number of marriages. According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married. Back in 1960, 72 percent of all U.S. adults were married.
#35 At this point, only 24.6 percent of all jobs in the United States are good jobs.
#36 In 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 55.1 percent are covered by employment-based health insurance.
#37 Recently it was announced that total student loan debt in the United States has passed the one trillion dollar mark.
#38 If you can believe it, one out of every seven Americans has at least 10 credit cards.
#39 One survey of business executives has ranked California as the worst state in America to do business for 8 years in a row.
#40 In the city of Detroit today, more than 50 percent of all children are living in poverty, and close to 50 percent of all adults are functionally illiterate.
#41 It is being projected that half of all American children will be on food stamps at least once before they turn 18 years of age.
#42 More than three times as many new homes were sold in the United States in 2005 as will be sold in 2012.
#43 If you can believe it, 53 percent of all Americans with a bachelor’s degree under the age of 25 were either unemployed or underemployed last year.
#44 The U.S. economy continues to trade good paying jobs for low paying jobs. 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.
#45 Our trade deficit with China in 2011 was $295.5 billion. That was the largest trade deficit that one country has had with another country in the history of the planet.
#46 The United States has lost an average of approximately 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001.
#47 According to the Economic Policy Institute, America is losing half a million jobs to China every single year.
#48 The U.S. tax code is now more than 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.
#49 According to the IMF, the global elite are holding a total of 18 trillion dollars in offshore banking havens such as the Cayman Islands.
#50 The value of the U.S. dollar has declined by more than 96 percent since the Federal Reserve was first created.
#51 2012 was the third year in a row that the yield for corn has declined in the United States.
#52 Experts are telling us that global food reserves have reached their lowest level in almost 40 years.
#53 One recent survey discovered that 40 percent of all Americans have $500 or less in savings.
#54 If you can believe it, one recent survey found that 28 percent of all Americans do not have a single penny saved for emergencies.
#55 Medical costs related to obesity in the United States are estimated to be approximately $147 billion a year.
#56 Corporate profits as a percentage of GDP are at an all-time high. Meanwhile, wages as a percentage of GDP are near an all-time low.
#57 Today, the wealthiest 1 percent of all Americans own more wealth than the bottom 95 percent combined.
#58 The wealthiest 400 families in the United States have about as much wealth as the bottom 50 percent of all Americans combined.
#59 The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.
#60 At this point, the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.
#61 Nearly 500,000 federal employees now make at least $100,000 a year.
#62 In 2006, only 12 percent of all federal workers made $100,000 or more per year. Now, approximately 22 percent of all federal workers do.
#63 If you can believe it, there are 77,000 federal workers that make more than the governors of their own states do.
#64 Nearly 15,000 retired federal workers are collecting federal pensions for life worth at least $100,000 annually. The list includes such names as Newt Gingrich, Bob Dole, Trent Lott, Dick Gephardt and Dick Cheney.
#65 U.S. taxpayers spend more than 20 times as much on the Obamas as British taxpayers spend on the royal family.
#66 Family homelessness in the Washington D.C. region (one of the wealthiest regions in the entire country) has risen 23 percent since the last recession began.
#67 If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.
#68 During fiscal year 2012, 62 percent of the federal budget was spent on entitlements.
#69 Back in 1965, only one out of every 50 Americans was on Medicaid. Today, approximately one out of every 6 Americans is on Medicaid.
#70 It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
#71 Medicare is also growing by leaps and bounds. As I wrote about recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
#72 Thanks to our foolish politicians (including Obama), Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for each and every household in the United States.
#73 Amazingly, the U.S. national debt is now up to 16.3 trillion dollars. When Barack Obama first took office the national debt was just 10.6 trillion dollars.
#74 During the first four years of the Obama administration, the U.S. government accumulated about as much debt as it did from the time that George Washington took office to the time that George W. Bush took office.
#75 Today, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was originally created back in 1913.
Please share this article with as many people as you can. Time is running out, and we need to wake up as many people as possible.
Barack Obama and John Boehner both seem absolutely determined to drive U.S. government finances off a cliff. The mainstream media would have you believe that there are vast ideological differences between the two of them and that they are bitter enemies, but that is simply not the case. Both of them say that tax increases are “necessary”, but they disagree over the details. Both are seeking about a trillion dollars of spending cuts and about a trillion dollars of new “revenue”, but they don’t see eye to eye on how to get there. But overall, they are both definitely playing in the same ballpark. And those numbers certainly do sound impressive until you realize that they are talking about a time span of ten years. Personally, I would love to see federal spending cut by a trillion dollars this year. But that will never happen. A trillion dollars over the course of a decade breaks down to about 100 billion dollars per year. That still sounds like a lot of money until you put it up next to the trillion dollar deficits that we have been running for four years in a row. Even if somehow those spending cuts turned out to be real (which they aren’t), they would still only put a very small dent in our yearly budget deficits. Obama and Boehner both want to continue to have a gigantic federal government that showers people with government money, and both of them want to continue to pass much of the burden for paying for this gigantic government on to future generations. And both of them want to continue to steal more than 100 million dollars an hour from our children and our grandchildren in order to maintain the false bubble of debt-fueled prosperity that we are enjoying right now. This is incredibly foolish and they are leading us down a path that will lead to national ruin.
Sadly, even the pathetically small “budget cut” and “new revenue” figures that they are floating around turn out to be quite hollow when you inspect them more closely.
For example, the “new revenue” figures that both Obama and Boehner are talking about rely on extremely unrealistic assumptions about U.S. economic growth. In order to meet their revenue projections, the U.S. economy would need to grow significantly faster than it is right now and we would need to get through the entire decade without having a single recession.
What do you think the chance of that happening is?
But that is the way that things work in Washington D.C. – our politicians function in a world where it is assumed that everything will work out just perfectly in the future.
For example, if the figures put out at the beginning of the Bush administration were to be believed, we should be absolutely swimming in government surpluses by now.
That didn’t work out too well, did it?
The “spending cuts” are even more illusory.
Obama is projecting that we will save 130 billion dollars by manipulating the way that inflation is calculated for annual increases in Social Security benefits.
But our politicians are already pretending that there is hardly any inflation when any rational person can see that prices are soaring.
So can they really manipulate the numbers to make them look even smaller?
By doing so, they would be cheating elderly Americans out of 130 billion dollars. But I guess this is more convenient for our politicians than going after real government waste.
Obama also plans to save $290 billion by having lower interest payments on U.S. government debt.
Try not to laugh.
The average rate of interest on U.S. government debt was 2.534 percent at the end of November. That is ridiculously low. The only place it is going to go in future years is up.
Back in the year 2000, the average rate of interest on U.S. government debt was 6.638 percent. If the average rate of interest on U.S. government debt rose back to that level, we would be paying out more than a trillion dollars a year just in interest on the national debt.
So Obama’s projection that we are going to save 290 billion dollars over the next ten years by forcing interest rates on U.S. government debt even lower is insanely optimistic. Only a delusional person would make such an assumption.
And most of the savings from the “projected spending cuts” that Obama and Boehner are proposing would not happen until later in the decade.
After all, they don’t want to “hurt the economy” right now.
In fact, Obama is actually proposing that we should increase spending by $80 billion this year so that we can encourage economic activity.
So don’t let anyone fool you with any nonsense about how Obama and Boehner are working on a plan that would get U.S. government finances in order.
No matter how their “negotiations” turn out, we will continue to run trillion dollars deficits year after year with no end in sight.
If Americans want a monstrous federal government that passes out government checks like candy, then they should pay for it. Personally, I think that taxes are already way, way too high and that the government already brings in more than enough money.
If Americans don’t want to pay much higher taxes, then they should tell the government to quit spending money that we don’t have.
But all of this trying to have it both ways has got to stop. We are destroying the future for our children and our grandchildren. We have already run up 16 trillion dollars in debt and we can’t even seem to slow down our reckless debt binge. If they get the chance, someday future generations will curse us for what we did to them.
The funny thing is that John Boehner was supposed to be a “conservative” that was going to do something about all of this debt. But since John Boehner has been Speaker of the House, the U.S. House of Representatives has approved legislation that has increased the size of our national debt by approximately $18,944 per household.
Meanwhile, our economy continues to unravel, good jobs are becoming even more scarce, and poverty continues to explode.
For example, did you know that there are now more than one million homeless students in America? Sadly, it’s true…
The number of homeless students in America topped one million for the first time last year as a result of the economic recession, a number that has risen 57 percent since 2007.
The US Department of Education found that of these 1,065,794 children, many lived in abandoned homes, cheap hotels, stations, church basements and hospitals. Some spent their time sleeping over at the houses of various friends whenever they could. Others fell victim to drugs and sexual abuse, in some cases trading sexual acts for food, clothing and shelter or selling illegal drugs.
Even in the midst of our debt-fueled prosperity, the number of Americans that are dependent on the government just continues to rise.
According to one recent survey, 55 percent of all Americans have received money from a safety net program run by the federal government at some point in their lives.
So how bad will things get when we eventually quit borrowing so much money and we start living within our means?
Nobody is looking forward to that day. Certainly not our politicians. They don’t want to be blamed for all of the painful adjustments that will happen once the party ends.
So they just keep borrowing and spending. But at some point the music will stop and the house of cards will come crashing down.
It won’t happen this week or this month, but it will happen soon enough.
I hope that you are ready.
Did you see the huge crowds of protesters that flooded the Michigan Capitol on Tuesday? They were there to protest two bills there were being considered by the state legislature that would limit the power of unions in the state. Michigan lawmakers approved the bills and this absolutely infuriated the protesters. There is a lot of passion on both sides of this debate, but I am afraid that both sides in this debate are missing the bigger picture. If we keep shipping millions of our jobs to China, there isn’t going to be work for anyone no matter how much power unions have or don’t have. During the month of October, the U.S. trade deficit increased to 42.2 billion dollars. Our trade with China accounted for most of that deficit. Our trade deficit with China in October increased to a new all-time one month record of 29.5 billion dollars. Nearly 30 billion dollars that could have gone to U.S. businesses and U.S. workers went to China instead. Since 1975, a total of about 8 trillion dollars that could have gone to U.S. businesses and U.S. workers went to the rest of the world instead. Shiny new factories are going up all over China, and meanwhile our once great manufacturing cities are degenerating into desolate wastelands. So what is going to happen when all of the good paying manufacturing jobs are gone? Are we all going to fight bitterly over whether we should unionize the low paying jobs that remain at places such as Wal-Mart and McDonalds? Such an approach is not going to bring back prosperity to America. We desperately need to start building things and start creating real wealth inside this country once again. We desperately need to stop sending tens of thousands of businesses, millions of jobs and trillions of dollars of our national wealth out of the country. Unfortunately, I don’t see anyone out there holding protests about our trade deficit. Nobody really seems to care, so our economy will continue to bleed good jobs and the middle class will continue to be destroyed.
The funny thing is that the workers that are out there protesting these union bills actually voted for the politicians that are killing their jobs. Both parties are married to the one world economic system and the “free trade” agenda, and Barack Obama has been one of the worst offenders. He has been pushing for more “free trade agreements” throughout the past four years, and yet union workers continue to support him enthusiastically.
How foolish can they possibly be?
Yeah, let’s merge American workers into a global labor pool with workers in third world countries on the other side of the globe that work in absolutely nightmarish conditions for as little as 45 dollars a month. That sounds like a great idea, doesn’t it?
Oh, but you don’t want to work for 45 dollars a month?
You don’t even want to work for 450 dollars a month?
Well, then the big corporations that fund politicians like Obama will just take your jobs and send them halfway around the planet.
Do you think that your unions will save your jobs?
Michigan already has the highest rate of union membership in the Midwest.
It also has the highest rate of unemployment in the Midwest.
Over the past couple of decades, thousands of businesses in Michigan have either closed down or moved facilities overseas.
Did the unions prevent any of that?
If union bosses really wanted to do some good, they would be organizing protests against our incredibly foolish trade policies.
But instead, they tell their members to vote for politicians like Obama and then they run out to the stores and fill their carts with huge piles of products that were made in China.
Union workers need to wake up to one fundamental economic fact – in a one world economic system, the big corporations simply do not need you. They can make their products in lots of other countries where it is legal to pay slave labor wages.
But instead of getting upset about what is really killing their jobs, union workers in Michigan are screaming mad about a couple of new laws that will take some power away from the unions.
That is kind of like being obsessed with a broken fingernail when your leg has just been sawed off and you are gushing blood all over the floor.
Oh, but union workers did put on a good show up in Michigan. The following is how a Bloomberg article described the protests…
Officials spent days gearing up for crowds brought out by the legislature’s sudden action last week to give initial approval to three anti-dues bills, which exclude police and firefighters. At least one helicopter buzzed overhead today, and mounted police surveyed the protesters. Signs reading “Don’t hurt working families” dotted lawns.
The crowd numbered more than 10,000, according to State Police Inspector Gene Adamczyk, with more buses still arriving. The Capitol was closed when it reached its capacity of 2,000.
The anger surrounding these protests was almost palpable. One state representative even declared that “there will be blood”.
Meanwhile, many of those same protesters will buy toys for their kids that were made in China with wrapping paper that was made in China and they will put them under a Christmas tree that was made in China.
Merging our economy with the economy of communist China was one of the stupidest economic moves that we could have ever made. They are systematically taking our wealth, and then we have to go over there and beg them to lend money back to us.
Pretty soon the Chinese economy will dwarf ours. According to the National Intelligence Council, the GDP of Asia will have surpassed the GDP of North America and the GDP of all of Europe combined by 2030.
But if we had never opened up trade with communist China none of this would have ever happened.
Why won’t American workers get upset about this stuff?
Do you really want your standard of living to decline to the level of a Chinese factory worker?
You can see some photos of what life is like for workers in China’s toy factories right here. This is what the future holds for American workers unless something is done.
For much more on how our trade policies are absolutely gutting our economy, please see the statistics in this article: “55 Reasons Why You Should Buy Products That Are Made In America This Holiday Season“.
But no, the big unions will never dare oppose Obama. They love him far too much to do that.
Meanwhile, we continue to bleed good jobs. Large companies have announced the elimination of more than 100,000 jobs since November 6th, and it looks like 2013 is going to be a very difficult year for American workers.
If you are an American worker, you need to ask yourself why anyone would want to hire you in this kind of economic environment. You are 10 to 20 times more expensive than workers on the other side of the globe. In addition, our politicians just keep piling more rules, regulations and taxes on to the backs of the employers in this country. It is more difficult than ever to make a profit from the labor of an American worker.
Honestly, I understand why most small businesses don’t want to hire anyone in this economic environment. It just doesn’t make sense. For much more on this, please see this excellent article by Charles Hugh-Smith.
And there are signs that things are going to get even worse. For example, the NFIB Small Business Outlook survey dropped like a rock during November. That is a very bad sign for hiring.
And another ominous sign for the economy was that the latest trade report showed that imports and exports are both declining. That is usually a signal that a recession is coming. Exports fell faster than imports did, and that is the reason why the trade deficit grew. If imports and exports both fall again next month, it will be time to become extremely concerned. When imports and exports both decline, that is a sign of slowing economic activity.
The United States will always need to trade with other nations, but we need to do it in a way that is balanced and that protects American workers. Right now there is a one way conveyor belt taking businesses, jobs and money out of this country. If we don’t do something about our mammoth trade deficit, we will have no chance of reversing the steady decline of the U.S. economy.
Hopefully we can get the American people to wake up and realize this. Instead, most of the comments at the end of this article will probably be about the pros and cons of unions. That will be yet another sign that most people still don’t get these issues.
The United States is clearly in an advanced state of decline. Many people around the world (and even inside America) rejoice at this, but not me. I mourn for the country that I was born in and that I still love. Yes, the United States has never been perfect, but the Republic that our Founding Fathers started truly has been a light to the rest of the world in a lot of ways over the centuries. Unfortunately, our foundations are badly rotting and our nation is collapsing all around us. Many Americans like to think that the United States is greater today than it has ever been before, but the truth is that America is like a patient that has stage 4 cancer that has spread to almost every area of the body. Our nation is being destroyed in thousands of different ways, and more distressing news emerges with each passing day. This article will mainly focus on the economic decline of America, but much could also be said about our social, political, moral and spiritual decline as well. We are simply not the same country that we used to be. Americans are proud, selfish, greedy, arrogant, ungrateful, treacherous and completely addicted to entertainment and pleasure. Our country is literally falling apart all around us, but most Americans are so plugged into entertainment that they can’t even be bothered to notice what is happening. Most Americans seem to assume that we will always have endless prosperity just because of who we are, but unfortunately that simply is not true. We inherited the greatest economic machine the world has ever seen and we have wrecked it, and now a very painful day of reckoning is approaching. But most people will not understand until it is too late.
The following are 34 signs that America is in decline…
#1 According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001. That number dropped to 21.6 percent in 2011. That is not just a decline – that is a freefall. Just check out the chart in this article.
#2 According to The Economist, the United States was the best place in the world to be born into back in 1988. Today, the United States is only tied for 16th place.
#3 The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.
#4 According to the Wall Street Journal, of the 40 biggest publicly traded corporate spenders, half of them plan to reduce capital expenditures in coming months.
#5 More than three times as many new homes were sold in the United States in 2005 as will be sold in 2012.
#6 America once had the greatest manufacturing cities on the face of the earth. Now many of our formerly great manufacturing cities have degenerated into festering hellholes. For example, the city of Detroit is on the verge of financial collapse, and one state lawmaker is now saying that “dissolving Detroit” should be looked at as an option.
#7 In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent. Today, the unemployment rate for that same age group is about 13 percent.
#8 Back in 1950, more than 80 percent of all men in the United States had jobs. Today, less than 65 percent of all men in the United States have jobs.
#9 If you can believe it, approximately one out of every four American workers makes 10 dollars an hour or less.
#10 Sadly, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.
#11 Median household income in America has fallen for four consecutive years. Overall, it has declined by over $4000 during that time span.
#12 The U.S. trade deficit with China during 2011 was 28 times larger than it was back in 1990.
#13 Incredibly, more than 56,000 manufacturing facilities in the United States have been shut down since 2001. During 2010, manufacturing facilities were shutting down at the rate of 23 per day. How can anyone say that “things are getting better” when our economic infrastructure is being absolutely gutted?
#14 Back in early 2005, the average price of a gallon of gasoline was less than 2 dollars a gallon. During 2012, the average price of a gallon of gasoline has been $3.63.
#15 In 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 55.1 percent are covered by employment-based health insurance.
#16 As I have written about previously, 61 percent of all Americans were “middle income” back in 1971 according to the Pew Research Center. Today, only 51 percent of all Americans are “middle income”.
#17 There are now 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.
#18 According to the U.S. Census Bureau, the poverty rate for children living in the United States is about 22 percent.
#19 Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned. By 2007, that figure had soared to $1.48.
#20 Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
#21 Total credit card debt in the United States is now more than 8 times larger than it was just 30 years ago.
#22 The value of the U.S. dollar has declined by more than 96 percent since the Federal Reserve was first created.
#23 According to one survey, 29 percent of all Americans in the 25 to 34 year old age bracket are still living with their parents.
#24 Back in 1950, 78 percent of all households in the United States contained a married couple. Today, that number has declined to 48 percent.
#25 According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government. Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.
#26 In 1980, government transfer payments accounted for just 11.7 percent of all income. Today, government transfer payments account for more than 18 percent of all income.
#27 In November 2008, 30.8 million Americans were on food stamps. Today, 47.1 million Americans are on food stamps.
#28 Right now, one out of every four American children is on food stamps.
#29 As I wrote about the other day, according to one calculation the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”
#30 Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
#31 In 2001, the U.S. national debt was less than 6 trillion dollars. Today, it is over 16 trillion dollars and it is increasing by more than 100 million dollars every single hour.
#32 The U.S. national debt is now more than 23 times larger than it was when Jimmy Carter became president.
#33 According to a PBS report from earlier this year, U.S. households that make $13,000 or less per year spend 9 percent of their incomes on lottery tickets. Could that possibly be accurate? Are people really that foolish?
#34 As the U.S. economy has declined, the American people have been downing more antidepressants and other prescription drugs than ever before. In fact, the American people spent 60 billion dollars more on prescription drugs in 2010 than they did in 2005.
So what are our “leaders” doing about all of this?
They just continue to insist that everything is “just fine”.
Sadly, the truth is that they live in a world that is very different from most of the rest of us.
Barack Obama is getting ready to take a 20 day vacation to Hawaii.
When was the last time you got to take a 20 day vacation?
And most of our “leaders” have no idea what it is like to struggle from month to month on a paycheck.
Overall, more than half of the members of Congress are millionaires. We are led by wealthy men who are serving the interests of other wealthy men.
But the problem with our system is not limited to the president and the members of Congress. The truth is that the political system in America has become a colossal beast that just continues to grow no matter who is in power. The political establishment of both parties is totally dependent on this beast, and they will continue to feed it and serve it because it has been very good to them. The following is from an outstanding article by Steve McCann…
The Republican and Democratic political establishments are made up of the following:
1) many current and nearly all retired national office holders whose livelihood and narcissistic demands depends upon fealty to Party and access to government largesse;
2) the majority of the media elite, including pundits, editors, writers and television news personalities based in Washington and New York whose proximity to power and access is vital to their continued standard of living;
3) academia, numerous think-tanks, so-called non-government organizations, and lobbyists who fasten onto those in the administration and Congress for employment, grants, favorable legislation and ego-gratification;
4) the reliable deep pocket political contributors and political consultants whose future is irrevocably tied to the political machinery of the Party; and
5) the crony capitalists, i.e. leaders of the corporate and financial community as well as unions whose entities are dependent on or subject to government oversight and/or benevolence .
Do you think that there is any chance that this insidious system will be uprooted any time soon?
Of course not.
We will continue on the same path that we are on right now and America will continue to decline.
Many will rejoice as America falls, but I will not.
I will mourn for a mighty Republic that has fallen and for a dream that has been lost.
The fiscal cliff is coming! Run for the hills! There have been endless stories in the mainstream media about the “fiscal cliff” that our country is facing if the Democrats and the Republicans can’t come to some sort of an agreement. If there is no agreement, taxes will go up and government spending will be reduced by a very small amount. And yes, that would likely push the U.S. economy into another recession, although there are many that would argue that we are already in a recession right now. In any event, there is a tremendous amount of distress out there about the fact that something might interrupt the debt-fueled prosperity that we have all been enjoying. You can almost hear them now: “No! Please don’t cut government spending! Please don’t raise taxes! Please keep stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day so that we can continue this economic illusion that feels so very good.” The American people want the government to give everything to everybody, but they definitely do not want to pay for it. They want a big government that showers them with government checks and government benefits, but they don’t want to cough up the ridiculous amount of money that it would take to fund such a government. So we just keep ripping off our kids and our grandkids. What we are doing to future generations is not just immoral, it is criminal. If they get the chance, someday they will look back and curse us for destroying their futures and destroying their country. So why do we continue to do this to them? Because we are greedy and selfish and we are absolutely desperate to maintain the massively overinflated standard of living that we have been enjoying. We have lived way above our means for so long that we don’t even know what “normal” is supposed to be anymore.
But nobody can spend far more money than they bring in forever. At some point an adjustment comes, and our adjustment is going to be exceedingly painful.
Right now, the overwhelming consensus in the United States seems to be that we should put off any economic pain for as long as possible. The American people don’t want significant cuts to government spending and they don’t want taxes to be raised to pay for the spending that we are already doing.
But if the Republicans and the Democrats don’t agree to a deal soon, we are going to see taxes raised substantially and government spending cut by a little bit. A recent CBS News article did a good job of describing exactly what this “fiscal cliff” that we are facing actually is…
There are two parts to the so-called fiscal cliff. The first is the scheduled expiration of the tax cuts enacted in 2001 and 2003 under President George W. Bush, the payroll tax holiday enacted under President Obama, and a host of other tax breaks. The second is $1.2 trillion in automatic spending cuts to defense and domestic programs that are looming due to a 2011 deal that resulted from House Republicans’ reluctance to raise the debt limit.
Now, it’s true that if lawmakers fail to work out any sort of deal, there will be severe long-term consequences for the economy: According to the Tax Policy Center, going off the “cliff” would affect 88 percent of U.S. taxpayers, with their taxes rising by an average of $3,500 a year. Many economists, as well as the nonpartisan Congressional Budget Office, say the combination of spending cuts and tax hikes that are set to take effect would tip the economy into a new recession.
Please keep in mind that the “$1.2 trillion in automatic spending cuts” is not for a single year. When you break it down, the cuts to spending would be somewhere around 100 billion dollars a year. And a lot of those “cuts” are actually spending increases that would be cancelled. So those spending cuts would not really put much of a dent in our yearly budget deficits at all.
The tax increases would be more significant. Middle class families would be paying thousands of dollars more per year in taxes. These tax increases would raise some more revenue for the federal government, but they would also do significant damage to the economy in the short-term.
Do you know what they call a combination of government spending cuts and tax increases over in Europe?
They call it “austerity”.
Nations like Greece and Spain have tried this. They cut spending and raised taxes in an attempt to reduce government budget deficits. What happens is that the spending cuts and the tax increases cause a significant economic slowdown and this causes tax revenues to come in much lower than projected. So then more spending cuts and tax hikes are necessary in order to try to get closer to balancing the budget. But then tax revenues fall even more.
In the end, both Greece and Spain still have large budget deficits and yet the economies of both nations are suffering through depression-like conditions. The unemployment rate in both nations is now over 25 percent. Just check out this chart right here to see how nightmarish austerity has been for the economies of both Greece and Spain.
So that is why everybody is freaking out about the fiscal cliff. They don’t want to go down the same road of austerity. They want to keep living in an economic fantasy land where we can borrow our way to “prosperity”.
But it is all a lie. The lines at the Apple stores, the crazed consumers on Black Friday, the restaurants teeming full with people and the government that thinks that it can take care of everyone from the cradle to the grave and yet keep taxes low. It is all a giant lie.
And no, please do not think that I am in favor of raising taxes. I most definitely am not. I believe that the government brings in more than enough money already.
Personally, I believe that we could have a system that completely eliminates income taxes and that funds the government through tariffs and various other forms of taxation. It was good enough for the Founding Fathers and it should be good enough for us. But that is a subject for another article.
Our current system has allowed us to live way beyond our means for an extended period of time, but it is only a matter of time until it all comes crashing down.
In fact, the game is already over. We have already destroyed the future. At this point it is only a matter of how long we can keep kicking the can down the road and putting off the pain.
Sadly, what we have done on a national level is simply a reflection of our “buy now, pay later” society. We have become a nation that is constantly willing to sacrifice the future in order to make the present more pleasant.
Just check out this video. We have become addicted to a prosperity that we cannot possibly pay for. But as long as someone will keep lending us the money we will continue to enjoy it.
As I have mentioned previously, the government has spent about 11 dollars for every 7 dollars of revenue that it has actually brought in while Barack Obama has been president.
We print, borrow and spend without giving any thought to what we are doing to the future of this country. We are shredding confidence in our currency and we are wrecking the greatest economic machine that the world has ever seen.
And all of our politicians and all of our “leaders” prance about as if they are the smartest generation of Americans ever, and they think that they are an “example” for the rest of the world, but if our Founding Fathers were around today they would be absolutely horrified about what they have done to the country that they built.
If you think that the economy is bad now, you just wait.
We are still in the “economic fantasy land” phase where we are enjoying a massively inflated standard of living constructed on a mountain of borrowed fiat currency. Our economy is being held up by trillions of borrowed dollars, and all of that money makes the U.S. economy appear to be far more prosperous than it actually should be.
When we have to start living closer to what our real standard of living should be things are going to get really bad.
Most Americans simply don’t understand that if the federal government went to a balanced budget tomorrow it would instantly plunge the U.S. economy into a depression.
Just look at Greece and Spain. The same thing is going to happen to us one way or another.
So enjoy this false prosperity while you still can. This is about as good as things are going to get, and from here on out it is downhill for America.
When it comes to explaining the problems with our economy, one of the hardest things to do is to get people to understand that we are living in an economic fantasy world that is completely and totally unsustainable. As a nation we consume far more than we produce, we spend far more than we bring in, our debt is growing much faster than our GDP is, our entitlement programs are growing at an exponential rate, our retirement system is a Ponzi scheme and the Federal Reserve is printing money as if there is no tomorrow in a desperate attempt to paper over all of our problems. But we have all grown so accustomed to the debt-fueled prosperity that we have been enjoying for so many decades that it actually feels “real” to most of us. Unfortunately, history has shown us that it is simply not possible to grow your debt faster than your economy indefinitely. At some point your consumption will drop back to a level more equal to your production. Sometimes that adjustment can be gradual, but other times it can be extremely painful. In our case, we have been living way above our means for so long that it would take a major economic miracle just to keep our adjustment to an “exceedingly painful” level. We are living in the largest debt-fueled prosperity bubble in the history of the world, and our unsustainable economy is going to crash and burn at some point. Hopefully it will be later rather than sooner, but a crash is most definitely coming.
The following are some of the reasons why the bubble economy that we are living in right now is unsustainable….
The Trade Deficit
Most Americans do not really understand what a “trade deficit” is, but it is at the very core of our economic problems.
Basically, we buy far more stuff from the rest of the world than they buy from us. We send them huge piles of our money, and they send us oil that we burn in our cars and cheap plastic products that we end up throwing away. We keep doing this month after month after month, and this is systematically making us poorer as a nation.
In 2012, it is being projected that our trade deficit will fall somewhere between 500 billion and 600 billion dollars.
At this point, the United States has a trade imbalance that is more than 7 times larger than any other nation on earth has.
Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.
Instead of going out of the country, those 8 trillion dollars could have gone to U.S. businesses and U.S. workers. In turn, taxes would have been paid on those 8 trillion dollars and our debt problems would not be nearly as dramatic today.
But we didn’t do that.
We chose to allow tens of thousands of businesses, millions of jobs and trillions of dollars of our national wealth to leave the country.
Stupid move, eh?
But both political parties have been endlessly pushing the “free trade” agenda. They have both promised that it would bring us tremendous prosperity.
Well, just take a look at our formerly great manufacturing cities today. Do they look prosperous to you?
It turns out that Ross Perot was right when he warned about the “giant sucking sound” that would happen if NAFTA was implemented.
When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars. By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.
That didn’t work out so well, did it?
What about opening up trade with China?
Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little “m”) for the entire year.
In 2011, our trade deficit with China was 295.4 billion dollars. That was the largest trade deficit that one nation has had with another nation in the history of the world.
Our trade with China is tremendously unbalanced. Today, U.S. consumers spend approximately 4 dollars on goods and services from China for every one dollar that Chinese consumers spend on goods and services from the United States.
This is a huge reason why shiny new factories are going up all over China, and our blue collar cities are turning into rotting war zones filled with unemployed people.
If you can believe it, the United States has actually lost more than 56,000 manufacturing facilities since 2001.
Until we fix the trade deficit we are going to continue bleeding factories, jobs and national wealth at an astounding pace.
The National Debt
It is being projected that U.S. GDP will grow at a rate of about 2.2 percent this year.
The problem is that our federal budget deficit will be somewhere around 7 percent of GDP this year.
With each passing day we are losing ground. No other nation on earth has been able to run up debt like this indefinitely, and neither will we.
Does this chart look like a healthy situation to you?….
Sadly, all of this government debt is just about the only thing holding up our economy at this point. Since Barack Obama has been in the White House, the U.S. national debt has increased by about 5.5 trillion dollars. Of course the Obama administration has spent a lot of that money on incredibly stupid stuff, but it still gets into the pockets of average Americans that in turn spend it on food, gas, mortgage payments, etc.
If we could go back in time and suck that 5.5 trillion dollars of extra spending out of the economy we would be in a horrible economic depression right now.
But that does not mean that borrowing and spending all of that money was the right thing to do. We have stolen it from our children and our grandchildren and we are going to stick them with the bill.
That is highly immoral and it is a national disgrace.
Yet we continue to do it because we can’t help ourselves. We are ruining the future of this nation in order to make the present more pleasant for ourselves.
As I noted yesterday, the U.S. national debt jumped more on the very first day of fiscal year 2013 than it did from 1776 to 1941 combined.
We are completely addicted to debt and we can’t stop. We know that we are destroying the future of the United States but we have absolutely no self-discipline.
By the end of Barack Obama’s first term, the U.S. government will have accumulated more debt during those four years than it did from the time that George Washington took office to the time that George W. Bush took office.
But most Americans seem fine with that.
Most Americans don’t even really know why this is happening, and most don’t really seem too concerned about finding out. They just want the good times to continue to roll.
Sadly, the truth is that our financial system is designed to create government debt. It is one of the primary purposes of the Federal Reserve system.
At this point, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was first created.
So I guess you could say that the Federal Reserve is doing a good job of what it was designed to do.
And until we change the system things are going to continue to get worse until the entire system collapses.
Boston University economist Laurence Kotlikoff is warning that we are basically facing financial armageddon if something is not done. Kotlikoff speaks of a “fiscal gap” which he defines as “the present value difference between projected future spending and revenue”. His calculations have led him to the conclusion that the United States is facing a fiscal gap of 222 trillion dollars in the years ahead.
Where in the world are we going to get an extra 222 trillion dollars?
Every society needs a safety net, but we are rapidly getting to the point where there are going to be more Americans on the safety net than there are Americans supporting it.
Back in 1983, less than 30 percent of all Americans lived in a home where at least one person received financial assistance from the federal government.
Today, that number is up to an all-time record of 49 percent.
Many people don’t believe me when I tell them that more than 100 million Americans are enrolled in at least one welfare program run by the federal government right now, and that does not even count Social Security or Medicare.
But it is actually true.
Overall, there are nearly 80 different “means-tested welfare programs” that the federal government is currently running.
But of course the biggest financial burdens are Medicaid, Medicare and Social Security. All three are on course to become completely and totally unsustainable.
For example, the number of Americans on Medicaid soared from 34 million in 2000 to 54 million in 2011, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
Well, what about Medicare?
Sadly, Medicare is even more frightening.
As I wrote recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
How in the world can we afford that?
At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for each and every household in the United States.
Are you ready to contribute your share?
Social Security is in really bad shape as well.
At the moment, approximately 56 million Americans are collecting Social Security benefits.
By 2035, that number is projected to soar to a whopping 91 million.
Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
Where are we going to get that money?
Of course the national debt is not out only debt problem. All over the country there are state and local governments that are on the verge of insolvency. Corporations and financial institutions are leveraged like crazy. And of course consumers have absolutely gorged on debt over the past several decades.
As a result, we are drowning in debt from sea to shining sea.
The good news is that our GDP is more than 12 times larger than it was 40 years ago.
The bad news is that the total amount of debt in our country is more than 30 times larger than it was 40 years ago….
Obviously this is something that cannot go on forever.
We simply cannot keep accumulating debt much faster than our economy is growing.
Nobody knows exactly when the “adjustment” is coming, but it most definitely will arrive at some point.
The Federal Reserve has attempted to monetize many of our economic problems by printing gigantic mountains of money in recent years.
The Federal Reserve is at the very heart of our economic problems, but most Americans don’t realize this. It was the Federal Reserve that created the conditions for the housing bubble, and it was the Federal Reserve that badly mismanaged the response when that bubble burst. The Federal Reserve decides how much money will be printed and what our interest rates will be. The Federal Reserve lends out trillions of dollars to the banks that they like, and other banks they let die. The Federal Reserve picks winners and losers in our economy, and most of the time that means good things for the big Wall Street banks and bad things for the rest of us.
In a desperate attempt to keep our unsustainable financial system from collapsing, the Federal Reserve has decided to start printing unprecedented amounts of money. Just look at what this has done to the monetary base….
And QE3 really hasn’t even started to kick in yet.
So how bad will that chart look after QE3 has been adding another 40 billion dollars a month to the financial system for a while?
You know, the Weimar Republic was absolutely convinced that they were doing the right thing by printing lots of money too.
But in the end that didn’t work out very well for them at all….
So should we really be celebrating the fact that the Federal Reserve is going down the same path that the Weimar Republic did?
Demonocracy has released a great new graphic that does a wonderful job of illustrating just how huge the amounts of money involved in QE3 are going to be. If you have not seen it yet, you can view the graphic right here.
The rest of the world is watching the games that we are playing with our currency. Right now we think that we are getting away with it, but what we are doing is not sustainable. At some point the rest of the world will totally lose confidence in the U.S. dollar, and when that happens the U.S. dollar could easily lose its status as the primary reserve currency of the world.
If that were to happen the coming shift in our standard of living would happen much more rapidly.
Please share this article with as many people as you can. We need to wake people up and get them to understand how incredibly vulnerable our financial system really is. We are on a path that is unsustainable any way that you want to look at it, and if something dramatic is not done our economy is going to experience an unprecedented collapse.
So what happens if nothing is done and everything crashes all around us?
Well, I hope that you are prepared because it isn’t going to be pretty.