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50 Percent Of American Workers Make Less Than 28,031 Dollars A Year

Real Median Household Income 2014The Social Security Administration has just released wage statistics for 2013, and the numbers are startling.  Last year, 50 percent of all American workers made less than $28,031, and 39 percent of all American workers made less than $20,000.  If you worked a full-time job at $10 an hour all year long with two weeks off, you would make $20,000.  So the fact that 39 percent of all workers made less than that amount is rather telling.  This is more evidence of the declining quality of the jobs in this country.  In many homes in America today, both parents are working multiple jobs in a desperate attempt to make ends meet. Our paychecks are stagnant while the cost of living just continues to soar.  And the jobs that are being added to the economy pay a lot less than the jobs lost in the last recession.  In fact, it has been estimated that the jobs that have been created since the last recession pay an average of 23 percent less than the jobs that were lost.  We are witnessing the slow-motion destruction of the middle class, and very few of our leaders seem to care.

The “average” yearly wage in America last year was just $43,041.  But after accounting for inflation, that was actually worse than the year before

American paychecks shrank last year, just-released data show, further eroding the public’s purchasing power, which is so vital to economic growth.

Average pay for 2013 was $43,041 — down $79 from the previous year when measured in 2013 dollars. Worse, average pay fell $508 below the 2007 level, my analysis of the new Social Security Administration data shows.

Flat or declining average pay is a major reason so many Americans feel that the Great Recession never ended for them. A severe job shortage compounds that misery not just for workers but also for businesses trying to profit from selling goods and services.

Average pay declined in 59 of the 60 levels of worker pay the government reports each October.

And please keep in mind that “average pay” is really skewed by the millionaires and billionaires at the top end of the spectrum.

Median pay in 2013 was just $28,031.02.  That means that 50 percent of American workers made less than that number, and 50 percent of American workers made more than that number.

Here are some more numbers from the report that the Social Security Administration just released…

-39 percent of American workers made less than $20,000 last year.

-52 percent of American workers made less than $30,000 last year.

-63 percent of American workers made less than $40,000 last year.

-72 percent of American workers made less than $50,000 last year.

I don’t know about you, but those numbers are deeply troubling to me.

It has been estimated that it takes approximately $50,000 a year to support a middle class lifestyle for a family of four, and so the fact that 72 percent of all workers make less than that amount shows how difficult it is for families that try to get by with just a single breadwinner.

The way that our economy is structured now, both parents usually have to work as hard as they can just to pay the bills.

But there was one group of Americans that did see their incomes actually increase last year.

Those making over 50 million dollars had their pay increase by an average of $12.8 million in 2013.

For everyone else, the news was not good.

And of course this is a trend that has been going on for a long time.

Posted below is a chart that comes from the Federal Reserve.  It shows how real median household income in the United States has declined since the year 2000…

Real Median Household Income 2014

Meanwhile, the cost of living has continued to rise at a steady pace.

Needless to say, this is putting a tremendous squeeze on the middle class.  With each passing day, more Americans are losing their spots in the middle class and this has pushed government dependence to an all-time high.  According to the U.S. Census Bureau, 49 percent of all Americans now live in a home that receives money from the government each month.  This is completely and totally unsustainable, but our long-term economic problems just keep getting worse.

Our politicians have stood by as millions upon millions of good paying jobs have been shipped out of the country.  Millions of other middle class jobs have been lost to technology.  This has resulted in intense competition for the middle class jobs that remain.

And at this point we are even losing lots of lower paying retail jobs.  For example, it is being reported that Sears plans to close 110 more stores and lay off more than 6,000 workers.  Sears says that the report “isn’t accurate”, but it isn’t denying that stores will be closed either…

In an email to USA Today, Sears spokesman Howard Riefs said the store count and closures “isn’t accurate,” but did not provide store closures or layoff numbers.

“As we stated in our (second quarter earnings report), we disclosed that we would be closing unprofitable stores as leases expire and in some cases will accelerate closings when it is economically prudent. And that we would consider closing additional stores during the remainder of the year,” Riefs said. “Make no mistake, we believe the store will continue to play an integral role in our transformation, however, if a store is not generating a profit, it is straightforward that the store should be considered for closure.”

No matter how many stores Sears does end up closing over the next few months, the truth is that our economy is a complete and total mess at this point.

Our politicians and the mainstream media are trying to put a happy face on everything, but the cold, hard numbers prove that we are not anywhere close to where we were prior to the last recession.

Because it is so difficult to find a good job in America today, I often recommend to people that they should consider starting their own businesses.

But thanks to the bureaucratic control freaks in the Obama administration and in our state governments, small business ownership in America today is at an all-time low.  It is almost as if they don’t want the “little guy” to win.  Every avenue of prosperity for the middle class is under assault, and there does not appear to be much hope that this will change any time soon.

And the truly frightening thing is that this is about as good as things are going to get for the middle class.  We are rapidly approaching the next major wave of our long-term economic decline, but that is a topic for a future article.

This Is About As Good As Things Are Going To Get For The Middle Class – And It’s Not That Good

Depressed - Public DomainThe U.S. economy has had six full years to bounce back since the financial collapse of 2008, and it simply has not happened.  Median household income has declined substantially since then, total household wealth for middle class families is way down, the percentage of the population that is employed is still about where it was at the end of the last recession, and the number of Americans that are dependent on the government has absolutely exploded.  Even those that claim that the economy is “recovering” admit that we are not even close to where we used to be economically.  Many hope that someday we will eventually get back to that level, but the truth is that this is about as good as things are ever going to get for the middle class.  And we should enjoy this period of relative stability while we still can, because when the next great financial crisis strikes things are going to fall apart very rapidly.

The U.S. Census Bureau has just released some brand new numbers, and they are quite sobering.  For example, after accounting for inflation median household income in the United States has declined a total of 8 percent from where it was back in 2007.

That means that middle class families have significantly less purchasing power than they did just prior to the last major financial crisis.

And one research firm is projecting that it is going to take until 2019 for median household income to return to the level that we witnessed in 2007…

For everybody wondering why the economic recovery feels like a recession, here’s the answer: We’re still at least five years away from regaining everything lost during the 2007-2009 downturn.

Forecasting firm IHS Global Insight predicts that real median household income — perhaps the best proxy for middle-class living standards — won’t reach the prior peak from 2007 until 2019. Since the numbers are adjusted for inflation, that means the typical family will wait 12 years until their purchasing power is as strong as it was before the recession. That would be the longest period of stagnation, by far, since the Great Depression of the 1930s.

Of course that projection assumes that the economy will continue to “recover”, which is a very questionable assumption at best.

Meanwhile, total household wealth has been declining for middle class families as well.

According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.

That is a pretty substantial drop.  But you never hear our politicians (especially the Democrats) bring up numbers like that because they want us to feel good about things.

So why is all of this happening?

The biggest reason why the middle class is struggling so much is the lack of good jobs.

As the chart posted below demonstrates, the percentage of the working age population that is actually employed is still way, way below where it was prior to the last recession…

Employment Population Ratio

The “employment recovery” (the tiny little bump at the end of the chart) has been so miniscule that it is hardly even worth mentioning.

At the moment, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the U.S. population each month.

And a lot of the workers that have lost jobs since the start of the last recession have never been able to find a new one.

According to a brand new survey conducted by Rutgers University, more than 20 percent of all workers that have been laid off in the past five years still have not found a new job.

Meanwhile, the control freak bureaucrats that run this country continue to kill off small businesses.

In recent years we have seen large numbers of small businesses fail, and at this point the rate of small business ownership in the United States is at an all-time low.

As a result of everything that you have just read, the middle class is shrinking and dependence on the government is soaring.

Today, there are 49 million Americans that are dealing with food insecurity, and Americans received more than 2 trillion dollars in benefits from the federal government last year alone.

For many more statistics just like this, please see my previous article entitled “30 stats to show to anyone that does not believe the middle class is being destroyed“.

Without a doubt, things are not that good for the middle class in America these days.

Unfortunately, the next great wave of financial trouble is rapidly approaching, and once it strikes things are going to get substantially worse for the middle class.

Yes, the stock market set record high after record high this summer.  But what we have observed is classic bubble behavior.  So many of the exact same patterns that occurred just prior to previous stock market crashes are happening once again.

And it is interesting to note that September 22nd has marked important market peaks at various times throughout history…

For traders, September 22 is one of those days with a notorious history. UBS’s Art Cashin notes that September 22 marked various market highs in 1873, 1929, 1980, and even as recent as 2008.

Could the coming months be the beginning of the next major stock market decline?

Small-cap stocks are already starting to show signs of real weakness.  In fact, the Russell 2000 just hit a “death cross” for the first time in more than 2 years

The Russell 2000 has been diverging from the broader market over the last several weeks, and now technicians point out it has flashed a bearish signal. For the first time in more than two years, the small-cap index has hit a so-called death cross.

A death cross occurs when a nearer-term 50-day moving average falls below a longer-term, 200-day moving average. Technicians argue that a death cross can be a bearish sign.

None of us knows what the market is going to do tomorrow, but a lot of the “smart money” is getting out of the market right now while the getting is good.

So where is the “smart money” putting their assets?

In a previous article, I discussed how sales of gold bars to wealthy clients is way up so far this year.

And CNBC has just reported that the ultra-wealthy “are holding mountains of cash” right now…

Billionaires are holding mountains of cash, offering the latest sign that the ultra-wealthy are nervous about putting more money into today’s markets.

According to the new Billionaire Census from Wealth-X and UBS, the world’s billionaires are holding an average of $600 million in cash each—greater than the gross domestic product of Dominica.

Why are they doing this?

Are they concerned about the potential of a market crash?

And if we do see another market crash like we witnessed back in 2008, what is that going to mean for the rest of us?

2008 certainly did not destroy our economy.

But it did cause an immense amount of damage that we have never recovered from.

Now the next wave is approaching, and most people don’t even see it coming.

Economists: The U.S. Economy Shrank In Q1, But Better Days Are Just Around The Corner

Smiley Face - Photo by FlyingtigersiteDuring the first three months of this year, the U.S. economy contracted at a 1 percent annual rate.  Despite this, mainstream economists flooded the mainstream media with assurances that much better days are just around the corner on Thursday.  In fact, many of them boldly predicted that U.S. GDP would grow at a 3 or 4 percent annual rate in the second quarter.  None of them seem the least bit concerned that another major recession is rapidly approaching.  Instead, they just blamed the bad number for the first quarter on a “severe winter“, and the financial markets responded to the GDP news quite cheerfully.  In fact, the S&P 500 soared to another brand new record high.  No matter how bad the numbers get, almost everyone in the financial world seems quite optimistic.  But is there actually good reason to have such optimism?

As Zero Hedge has pointed out, if it wasn’t for dramatically increased healthcare spending due to the implementation of Obamacare, U.S. GDP would have actually dropped at a 2 percent annual rate during the first quarter of 2014.

That would have been an absolutely disastrous number.

But within a very short time of the revised U.S. GDP number being released, the mainstream media was inundated with positive stories about the news.

For example, CNN published a story entitled “U.S. economy shrinks, but it’s not a big deal” and CNBC released a survey of nine prominent economists that showed that their consensus forecast for the second quarter of 2014 is GDP growth at a 3.74 percent annual rate.

It just seems like almost everyone wants to forget about what happened during the first quarter and wants to look ahead to a great number for quarter two.

Joseph Lavorgna, the chief U.S. economist at Deutsche Bank, is boldly forecasting a 4 percent growth rate for the second quarter.  So is Jim O’Sullivan.  In fact, it is hard to find any “expert” in the mainstream media that does not expect rip-roaring economic growth this quarter.

For example, just check out these quotes…

-Stuart Hoffman, the chief economist for PNC Bank: “The first quarter was disappointing, but rather than view that as an omen of a recession or the first of a down leg in the economy, I see the seeds of a big bounce back in spring.”

-Paul Ashworth of Capital Economics: “For those worried about a recession, it’s worth remembering that employment increased by nearly 300,000 in April.”

-The Bank of Tokyo’s Chris Rupkey: “2Q growth seen at nearly 4%… Weak 1Q is stone cold dead as an indicator of where the economy is headed.”

-Jan Hatzius of Goldman Sachs: “Because of weaker inventory investment in Q1, we increased our Q2 GDP tracking estimate by two-tenths to 3.9%.”

-Dun & Bradstreet Credibility Corp. CEO Jeffrey Stibel: “Using an alternative model for projecting job growth, we see an entirely different scenario, one in which the U.S. unemployment rate will fall below 5 percent by no later than the middle of next year.”

Hopefully they are right.

Hopefully we are not heading into another recession.

But as I discussed in an article earlier this week, evidence continues to mount that another recession has already begun for much of the country.

And there was another number that was released today that seems to confirm this.  According to CNBC, there was a 6 percent drop in exports in the first quarter of 2014 when compared to the first quarter of 2013…

The U.S. economic reversal was led by a 6 percent drop in exports year over year, until recently hailed as a key driver of the U.S. recovery, and which had risen 9.5 percent in the last three months of 2013.

The slackening of trade has spread to the developing world, where emerging economies are seeing less demand from the U.S., Europe and China for raw materials and other exports.

We saw a similar decline happen in mid-2008 as the U.S. economy plunged into recession.

And Bloomberg’s Consumer Comfort index has fallen to the lowest level that we have seen in six months.  U.S. consumers are increasingly tapped out, and the ongoing “retail apocalypse” is evidence of that fact.

A declining middle class simply cannot support the massive retail infrastructure that America has developed.  As the middle class has fallen to pieces, it was just a matter of time before big trouble started erupting for the retail industry.  This is something that David Stockman recently wrote about…

It does not take much analysis to see that these bell ringers do not represent sustainable prosperity unfolding across the land. For example, around 1990 real median income was $56k per household and now, 25 years later, its just $51k—-meaning that main street living standards have plunged by about 9% during the last quarter century. But what has not dropped is the opportunity for Americans to drop shopping: square footage per capita during the same period more than doubled, rising from 19 square feet per capita at the earlier date to 47 at present.

This complete contradiction—declining real living standards and soaring investment in retail space—did not occur due to some embedded irrational impulse in America to speculate in real estate, or because capitalism has an inherent tendency to go off the deep-end. The fact that in equally “prosperous” Germany today there is only 12 square feet of retail space per capita is an obvious tip-off, and this is not a teutonic aberration. America’s prize-winning number of 47 square feet of retail space per capita is 3-8X higher than anywhere else in the developed world!

Without middle class jobs, you can’t have a middle class.  That is why our employment crisis is at the very heart of our economic problems.  Even using the government’s highly manipulated unemployment figures, there are still quite a few cities out there that have official unemployment rates in the double digits

The unemployment rate in Yuma, Ariz., is 23.8%. In El Centro, Calif., it is 21.6%. El Centro sits in an area of California in which unemployment in many metro areas is double the national average. In Merced the figure is 14.3%, in Yuba City the figure is 14.5%, in Hanford it is 13.1% and in Visalia it is 13.4%. In several metros close to these, the figure is above 10%. Most of them are inland from San Francisco and the area just south of it, which also happens to be among the nation’s most drought-plagued regions. This means jobs recovery is highly unlikely.

But of course the truth is that if the government actually used honest numbers, the unemployment rate for the entire nation would be in double digits.

And as I like to remind people, according to the government’s own numbers approximately 20 percent of the families in the entire nation do not have a single member that is employed.

So how is it possible that the “unemployment rate” is just a little above 6 percent?

It is a giant sham.

But that is what they want.

They want us feeling good and thinking that everything is going to be okay.

Unfortunately, they used the same approach back in 2007 and 2008, and we all remember how that turned out.

17 Facts To Show To Anyone That Believes That The U.S. Economy Is Just Fine

17No, the economy is most definitely not “recovering”.  Despite what you may hear from the politicians and from the mainstream media, the truth is that the U.S. economy is in far worse shape than it was prior to the last recession.  In fact, we are still pretty much where we were at when the last recession finally ended.  When the financial crisis of 2008 struck, it took us down to a much lower level economically.  Thankfully, things have at least stabilized at this much lower level.  For example, the percentage of working age Americans that are employed has stayed remarkably flat for the past four years.  We should be grateful that things have not continued to get even worse.  It is almost as if someone has hit the “pause button” on the U.S. economy.  But things are definitely not getting better, and there are a whole host of signs that this bubble of false stability will soon come to an end and that our economic decline will accelerate once again.  The following are 17 facts to show to anyone that believes that the U.S. economy is just fine…

#1 The homeownership rate in the United States has dropped to the lowest level in 19 years.

#2 Consumer spending for durable goods has dropped by 3.23 percent since November.  This is a clear sign that an economic slowdown is ahead.

#3 Major retailers are closing stores at the fastest pace that we have seen since the collapse of Lehman Brothers.

#4 According to the Bureau of Labor Statistics, 20 percent of all families in the United States do not have a single member that is employed.  That means that one out of every five families in the entire country is completely unemployed.

#5 There are 1.3 million fewer jobs in the U.S. economy than when the last recession began in December 2007.  Meanwhile, our population has continued to grow steadily since that time.

#6 According to a new report from the National Employment Law Project, the quality of the jobs that have been “created” since the end of the last recession does not match the quality of the jobs lost during the last recession…

  • Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.
  • Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.
  • Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.

#7 After adjusting for inflation, men who work full-time in America today make less money than men who worked full-time in America 40 years ago.

#8 It is hard to believe, but 62 percent of all Americans make $20 or less an hour at this point.

#9 Nine of the top ten occupations in the U.S. pay an average wage of less than $35,000 a year.

#10 The middle class in Canada now makes more money than the middle class in the United States does.

#11 According to one recent study, 40 percent of all Americans could not come up with $2000 right now even if there was a major emergency.

#12 Less than one out of every four Americans has enough money put away to cover six months of expenses if there was a job loss or major emergency.

#13 An astounding 56 percent of all Americans have subprime credit in 2014.

#14 As I wrote about the other day, there are now 49 million Americans that are dealing with food insecurity.

#15 Ten years ago, the number of women in the U.S. that had jobs outnumbered the number of women in the U.S. on food stamps by more than a 2 to 1 margin.  But now the number of women in the U.S. on food stamps actually exceeds the number of women that have jobs.

#16 69 percent of the federal budget is spent either on entitlements or on welfare programs.

#17 The number of Americans receiving benefits from the federal government each month exceeds the number of full-time workers in the private sector by more than 60 million.

Taken individually, those numbers are quite remarkable.

Taken collectively, they are absolutely breathtaking.

Yes, things have been improving for the wealthy for the last several years.  The stock market has soared to new record highs and real estate prices in the Hamptons have skyrocketed to unprecedented heights.

But that is not the real economy.  In the real economy, the middle class is being squeezed out of existence.  The quality of our jobs is declining and prices just keep rising.  This reality was reflected quite well in a comment that one of my readers left on one of my recent articles

It is getting worse each passing month. The food bank I help out, has barely squeaked by the last 3 months. Donors are having to pull back, to take care of their own families. Wages down, prices up, simple math tells you we can not hold out much longer. Things are going up so fast, you have to adopt a new way of thinking. Example I just had to put new tires on my truck. Normally I would have tried to get by to next winter. But with the way prices are moving, I decide to get them while I could still afford them. It is the same way with food. I see nothing that will stop the upward trend for quite a while. So if you have a little money, and the space, buy it while you can afford it. And never forget, there will be some people worse off than you. Help them if you can.

And the false stock bubble that the wealthy are enjoying right now will not last that much longer.  It is an artificial bubble that has been pumped up by unprecedented money printing by the Federal Reserve, and like all bubbles that the Fed creates, it will eventually burst.

None of the long-term trends that are systematically destroying our economy have been addressed, and none of our major economic problems have been fixed.  In fact, as I showed in this recent article, we are actually in far worse shape than we were just prior to the last major financial crisis.

Let us hope that this current bubble of false stability lasts for as long as possible.

That is what I am hoping for.

But let us not be deceived into thinking that it is permanent.

It will soon burst, and then the real pain will begin.

Epidemic Of Hunger: New Report Says 49 Million Americans Are Dealing With Food Insecurity

Crying Girl - Photo by D Sharon PruittIf the economy really is “getting better”, then why are nearly 50 million Americans dealing with food insecurity?  In 1854, Henry David Thoreau observed that “the mass of men lead lives of quiet desperation”.  The same could be said of our time.  In America today, most people are quietly scratching and clawing their way from month to month.  Nine of the top ten occupations in the U.S. pay an average wage of less than $35,000 a year, but those that actually are working are better off than the millions upon millions of Americans that can’t find jobs.  The level of employment in this nation has remained fairly level since the end of the last recession, and median household income has gone down for five years in a row.  Meanwhile, our bills just keep going up and the cost of food is starting to rise at a very frightening pace.  Family budgets are being squeezed tighter and tighter, and more families are falling out of the middle class every single day.  In fact, a new report by Feeding America (which operates the largest network of food banks in the country) says that 49 million Americans are “food insecure” at this point.  Approximately 16 million of them are children.  It is a silent epidemic of hunger that those living in the wealthy areas of the country don’t hear much about.  But it is very real.

The mainstream media and our politicians continue to insist that “things are getting better”, and that may be true for Wall Street, but the man who was in charge of the new Feeding America report says that the level of suffering for the tens of millions of Americans that are food insecure has not changed

Nothing is getting better,” said Craig Gundersen, lead researcher of the report, “Map the Meal Gap 2014,” and an expert in food insecurity and food aid programs.

Let’s stop talking about the end of the Great Recession until we can make sure that we get food insecurity rates down to a more reasonable level,” he added. “We’re still in the throes of the Great Recession, from my perspective.”

In fact, a different report seems to indicate that hunger in America is actually getting worse

Children’s HealthWatch, a network of doctors and public health researchers who collect data on children up to 4 years old, says 29% of the households they track were at risk of hunger last year, compared with 25% the year before.

If someone tries to tell you that “the economy is getting better”, that person is probably living in a wealthy neighborhood.  Because those that live in poor neighborhoods would not describe what is going around them as an “improvement”.

In particular, many minority neighborhoods are really dealing with extremely high levels of food insecurity right now.  The following comes from a recent NBC News article

“Minorities are facing serious hunger issues. Ninety-three percent of counties with a majority African-American population fall within the top 10 percent of food-insecure counties, while 60 percent of majority American Indian counties fall in that category”

But if you don’t live in one of those areas and you don’t know anyone that is facing food insecurity, it can be difficult to grasp just how much people are actually suffering out there right now.

For example, consider the story of a young mother named Tianna Gaines Turner

Tianna Gaines Turner can’t remember the last time she went to bed without worrying about how she was going to feed her three children.

She can’t remember the last time she woke up and wasn’t worried about how she and her husband would make enough in their part-time jobs to buy groceries and pay utilities on their apartment in a working-class section of Philadelphia.

And she can’t remember the last time she felt confident she and her husband wouldn’t have to skip meals so their children could eat.

Have you ever been in a position where you had to skip meals just so that other family members could have something to eat?

I haven’t, so it is hard for me to imagine having to do such a thing.  But there are millions of parents that are faced with these kinds of hard choices every day.

Things can be particularly hard if you are a single parent.  Just consider the story of Jamie Grimes

After Jaime Grimes found out in January that her monthly food stamps would be cut again, this time by $40, the single mother of four broke down into sobs — then she took action.

The former high school teacher made a plan to stretch her family’s meager food stores even further. She used oatmeal and ground beans as filler in meatloaf and tacos. She watered down juice and low-fat milk to make it last longer. And she limited herself to one meal a day so her kids — ages 3, 4, 13, and 16 — would have enough to eat.

I have such admiration for working single mothers.  Many of them work more than one job just so that they can provide for their children.  It can be absolutely frustrating to work as hard as you possibly can and still not have enough money to pay the bills at the end of the month.

Those that believe that the economy has gotten “back to normal” just need to look at the number of women that have been forced to turn to government assistance.  As I mentioned the other day, a decade ago the number of American women that had jobs outnumbered the number of American women on food stamps by more than a 2 to 1 margin. But now the number of American women on food stamps actually exceeds the number of American women that have jobs.

The truth is that we are nowhere close to where we used to be.  The last major economic downturn permanently damaged the middle class, and now the next major economic downturn is rapidly approaching.

Right now, there are nearly 50 million Americans that are facing food insecurity.  When the next economic crisis strikes, that number is going to go much higher.

There is going to be a great need for love and compassion in this country during the hard times that are coming.  Instead of just cursing the darkness, I hope that you will choose to be a light to those that desperately need it.

Exactly Like 7 Years Ago? 2014 Is Turning Out To Be Eerily Similar To 2007

Bubble - Photo by Jeff KubinaThe similarities between 2007 and 2014 continue to pile up.  As you are about to see, U.S. home sales fell dramatically throughout 2007 even as the mainstream media, our politicians and Federal Reserve Chairman Ben Bernanke promised us that everything was going to be just fine and that we definitely were not going to experience a recession.  Of course we remember precisely what followed.  It was the worst economic crisis since the days of the Great Depression.  And you know what they say – if we do not learn from history we are doomed to repeat it.  Just like seven years ago, the stock market has soared to all-time high after all-time high.  Just like seven years ago, the authorities are telling us that there is nothing to worry about.  Unfortunately, just like seven years ago, a housing bubble is imploding and another great economic crisis is rapidly approaching.

Posted below is a chart of existing home sales in the United States during 2007.  As you can see, existing home sales declined precipitously throughout the year…

Existing Home Sales 2007

Now look at this chart which shows what has happened to existing home sales in the United States in recent months.  If you compare the two charts, you will see that the numbers are eerily similar…

Existing Home Sales Today

New home sales are also following a similar pattern.  In fact, we just learned that new home sales have collapsed to an 8 month low

Sales of new single-family homes dropped sharply last month as severe winter weather and higher mortgage rates continued to slow the housing recovery.

New home sales fell 14.5% to a seasonally adjusted annual rate of 385,000, down from February’s revised pace of 449,000, the Census Bureau said.

Once again, this is so similar to what we witnessed back in 2007.  The following is a chart that shows how new home sales declined dramatically throughout that year…

New Home Sales 2007

And this chart shows what has happened to new homes sales during the past several months.  Sadly, we have never even gotten close to returning to the level that we were at back in 2007.  But even the modest “recovery” that we have experienced is now quickly unraveling…

New Home Sales Today

If history does repeat, then what we are witnessing right now is a very troubling sign for the months to come.  As you can see from this chart, new home sales usually start going down before a recession begins.

And don’t expect these housing numbers to rebound any time soon.  The demand for mortgages has dropped through the floor.  Just check out the following excerpt from a recent article by Michael Lombardi

One of the key indicators I follow in respect to the state of the housing market is mortgage originations. This data gives me an idea about demand for homes, as rising demand for mortgages means more people are buying homes. And as demand increases, prices should be increasing.

But the opposite is happening…

In the first quarter of 2014, mortgage originations at Citigroup Inc. (NYSE/C) declined 71% from the same period a year ago. The bank issued $5.2 billion in mortgages in the first quarter of 2014, compared to $8.3 billion in the previous quarter and $18.0 billion in the first quarter of 2013. (Source: Citigroup Inc. web site, last accessed April 14, 2014.)

Total mortgage origination volume at JPMorgan Chase & Co. (NYSE/JPM) declined by 68% in the first quarter of 2014 from the same period a year ago. At JPMorgan, in the first quarter of 2014, $17.0 billion worth of mortgages were issued, compared to $52.7 billion in the same period a year ago. (Source: JPMorgan Chase & Co. web site, last accessed April 14, 2014.)

It is almost as if we are watching a replay of 2007 all over again, and yet nobody is talking about this.

Everyone wants to believe that this time will be different.

The human capacity for self-delusion is absolutely amazing.

There are a lot of other similarities between 2007 and today as well.

Just the other day, I noted that retail stores are closing in the United States at the fastest pace that we have seen since the collapse of Lehman Brothers.

Back in 2007, we saw margin debt on Wall Street spike dramatically and help fuel a remarkable run in the stock market.  Just check out the chart in this article.  But that spike in margin debt also made the eventual stock market collapse much worse than it had to be.

And just like 2007, consumer credit is totally out of control.  As I noted in one recent article, during the fourth quarter of 2013 we witnessed the biggest increase in consumer debt in the U.S. that we have seen since 2007.  Total consumer credit in the U.S. has risen by 22 percent over the past three years, and 56 percent of all Americans have “subprime credit” at this point.

Are you starting to get the picture?  It is only 7 years later, and the same things that happened just prior to the last great financial crisis are happening again.  Only this time we are in much worse shape to handle an economic meltdown.  The following is a brief excerpt from my recent article entitled “We Are In FAR Worse Shape Than We Were Just Prior To The Last Great Financial Crisis“…

None of the problems that caused the last financial crisis have been fixed.  In fact, they have all gotten worse.  The total amount of debt in the world has grown by more than 40 percent since 2007, the too big to fail banks have gotten 37 percent larger, and the colossal derivatives bubble has spiraled so far out of control that the only thing left to do is to watch the spectacular crash landing that is inevitably coming.

You can read the rest of that article right here.

For a long time, I have been convinced that this two year time period is going to represent a major “turning point” for America.

Right now, 2014 is turning out to be eerily similar to 2007.

Will 2015 turn out to be a repeat of 2008?

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

The Top 12 Signs That The U.S. Economy Is Heading Toward Another Recession

12 SignsIs the U.S. economy steamrolling toward another recession?  Will 2014 turn out to be a major “turning point” when we look back on it?  Before we get to the evidence, it is important to note that there are many economists that believe that the United States never actually got out of the last recession.  For example, data compiled by John Williams of shadowstats.com show that the U.S. economy has continually been in recession since 2005.  So if anyone out there would like to argue that America is experiencing a recession right now, I certainly would not have a problem with that.  In fact, that would fit with the daily reality of tens of millions of Americans that are deeply suffering in this harsh economic environment.  But no matter whether we are in a “recession” at the moment or not, there are an increasing number of indications that we are rapidly plunging into another major economic slowdown.  The following are the top 12 signs that the U.S. economy is heading toward another recession…

#1 We recently learned that the number of new mortgage applications in the United States had fallen to the lowest level that we have seen in nearly 20 years.

#2 Radio Shack has announced that it is going to close more than 1,000 stores.  This is just another sign that we are in the midst of a “retail apocalypse“.

#3 The ISM Services index just fell to its lowest level in 4 years, and ISM Services Employment just experienced its largest decline since the collapse of Lehman Brothers.

#4 Obamacare is really starting to hammer the U.S. health care industry

The Affordable Care Act is creating significant financial uncertainty to health care organizations,” said a survey respondent from the health care and social assistance industry.

“With little warning, the negative impact on revenue has been unprecedented.”

#5 Trading revenue at the “too big to fail” banks on Wall Street is way down

Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) are bracing investors for a fourth straight drop in first-quarter trading, a period of the year when the largest investment banks typically earn the most from that business.

Citigroup finance chief John Gerspach said yesterday his firm expects trading revenue to drop by a “high mid-teens” percentage, less than a week after JPMorgan Chief Executive Officer Jamie Dimon said revenue from equities and fixed income was down about 15 percent. If trading at the nine largest firms slumps that much, it would extend the slide from 2010’s first quarter to 36 percent.

#6 One of the “too big to fail” banks, JPMorgan, is planning to fire “thousands” more workers.

#7 Moody’s has downgraded the credit rating of the city of Chicago again.  Now it is just three notches above junk status.

#8 The U.S. economy actually lost 2.87 million jobs during the month of January according to the unadjusted numbers.  Over the past decade, the only time the U.S. economy has lost more jobs during the month of January was in 2009 at the peak of the last recession.

#9 In January, real disposable income in the U.S. experienced the largest year over year decline that we have seen since 1974.

#10 Only 35 percent of all Americans say that they are better off financially than they were a year ago.

#11 Global retail sales for machinery giant Caterpillar have fallen for 14 months in a row.

#12 The economic data show that virtually all of the largest economies on the planet are slowing down right now.  The following is from a recent Zero Hedge article

The last 3 weeks have seen the macro fundamentals of the G-10 major economies collapse at the fastest pace in almost 4 years and almost the biggest slump since Lehman. Despite a plethora of data showing that ‘weather’ is not to blame, US strategists, ‘economists’, and asset-gatherers are sticking to the meme that this is all because of the cold on the east coast of the US (and that means wondrous pent-up demand to come). However, as the New York Times reports, for the earth, it was the 4th warmest January on record.

For much more on how the rest of the global economy is also slowing down, please see my recent article entitled “20 Signs That The Global Economic Crisis Is Starting To Catch Fire“.

Meanwhile, things in Ukraine continue to become even more tense, and the Russian government continues to debate how it will respond if the U.S. does end up deciding to hit Russia with economic sanctions.

According to one Russian news source, the Russian parliament is actually considering the confiscation of the property and assets of U.S. businesses in Russia if the U.S. decides to go ahead with economic sanctions against Russia…

The upper house of Russia’s parliament is mulling measures allowing property and assets of European and US companies to be confiscated in the event of sanctions being adopted against Russia over its threatened military intervention in Ukraine.

We are talking about banks, retail chains, mining operations, etc.

U.S. companies have billions invested in Russia, and all of that could be gone in an instant.

So let us certainly hope that economic war between the United States and Russia is averted.  Our economy is hurting enough as it is.

But no matter how things with this crisis in Ukraine play out, it looks like hard times are ahead for the U.S. economy.

Unfortunately, most Americans never learned the lessons that they should have learned back in 2008.

They just assume that the federal government and the Federal Reserve have fixed our problems and have everything under control, so they are not preparing for the next great crisis.

In the end, tens of millions of Americans will be absolutely devastated when they get absolutely blindsided by what is coming.

Time Is Running Out

Employment Recovery? 1,600 Workers Apply For Just 36 Jobs At An Ice Cream Plant In Maryland

Ice Cream - Photo by ElinorDThe stock market may be soaring to unprecedented heights, but things just continue to get even tougher for the middle class.  In this economic environment, there is intense competition for virtually all kinds of jobs.  For example, more than 1,600 applications were recently submitted for just 36 jobs at an ice cream plant in Hagerstown, Maryland.  That means that those applying have about a 2 percent chance of being hired.  About 98 percent of the applicants will be turned away.  That is how tough things are in many areas of the country today.  It is now more than five years after the great financial crash of 2008, and the level of employment in the United States is still almost exactly where it was at during the worst moments of the last recession.  And this is just the beginning.  The next major financial crash is rapidly approaching, and once it strikes our employment crisis is going to get much, much worse.

Working at an ice cream plant does not pay very well.  But at least it beats flipping burgers or stocking shelves at Wal-Mart.  And in this economy, there is no shortage of desperate workers that are willing to take just about any job that they can find.  The following is how a Breitbart article described the flood of applications that were received for just 36 positions at an ice cream plant owned by Shenandoah Family Farms in Hagerstown, Maryland…

Thanks to persistent unemployment and low availability of low-skill jobs, Shenandoah Family Farms’ ice cream plant in Hagerstown, Maryland has received over 1,600 applicants for a grand total of 36 jobs. Many of those applicants are former workers at the Good Humor plant that was bought by Shenandoah Family Farms. “You’d think that after 20-some-years working someplace at least somebody would think you area a good person, that you’d show up on time every day, and that would be worth something,” Luther Brooks, a 50-year-old former worker at the plant told the Washington Post. “I can’t get nothing. I’ve tried.”

Anyone that believes that the economic crisis is “over” is just being delusional.  It may be “over” for the boys and girls that work on Wall Street, but even their good times are only temporary.

Of course most Americans are not fooled by the propaganda being put out by the mainstream media.  According to a recent CNN poll, 70 percent of all Americans believe that “the economy is generally in poor shape”.

And according to another survey, the economy is still the #1 concern for American voters by a good margin and unemployment is still the #2 concern for American voters by a good margin.

In other words, “It’s the economy, stupid!

The American people can see that mid-wage jobs are disappearing and that the middle class is being systematically eviscerated.  The following is a short excerpt from a recent Business Insider article

A startling number of middle-class jobs may be headed toward extinction.

More than any other job class, mid-level positions have struggled to recover from the recession, and only a quarter of jobs created in the past three years are categorized as mid-wage. There are high-skilled professional jobs that require college degrees and low-skilled service jobs for less educated workers, but the middle is getting squeezed.

As mid-wage jobs disappear, they are being replaced by low wage jobs.  As I mentioned yesterday, one recent study found that about 60 percent of the jobs that have been “created” since the end of the last recession pay $13.83 or less an hour.

And this is just the beginning of the decline of the middle class.  Another great financial crisis is rapidly approaching, and once it arrives things are going to get much worse than they are right now.

A number of very prominent experts believe that this next great financial crisis could begin in 2014.  For example, in a recent article entitled “Top Ten Trends 2014: A Year of Extremes“, Gerald Celente warned that “an economic shock wave” could hit the United States by the middle of the year.  Here are some excerpts from that article…

-“In 33 years of forecasting trends, the Trends Research Institute has never seen a new year that will witness severe economic hardship and social unrest on one hand, and deep philosophic enlightenment and personal enrichment on the other. A series of dynamic socioeconomic and transformative geopolitical trend points are aligning in 2014 to ring in the worst and best of times.”

-“Such unforeseeable factors aside, we forecast that around March, or by the end of the second quarter of 2014, an economic shock wave will rattle the world equity markets.”

-“Nearly half of the requests for emergency assistance to stave off hunger or homelessness comes from people with full-time jobs. As government safety nets are pulled out from under them – as they will continue to be for the foreseeable future – the citizens of Slavelandia will have no recourse but action.”

You can read the rest of that article right here.

And according to the Wall Street Journal, United-ICAP chief market technician Walter Zimmerman in convinced that 2014 will mark the beginning of a massive stock market decline.  In fact, he believes that over the next couple of years it could fall by more than 70 percent…

In what may be the bearish call to end all bearish calls, one technician believes 2014 will be the year of “major reversals,” with the Dow Jones Industrial Average expected to start a two-year decline that could eventually take it down more than 70% to below 5000.

If his forecast is correct, it will make what happened in 2008 look like a Sunday picnic…

“Based on our longer-term time cycles the present stock market rally must be considered the bubble to end all bubbles,” Mr. Zimmerman wrote in a note to clients.

He doesn’t believe the Dow Industrials will hit a long-term cycle low until 2016, somewhere in the 5770 to 4650 range. The Dow hasn’t seen those levels, which are 65% to 72% below current prices, since late-1995 to mid-1996.

So what do you think the rest of 2014 will bring?

Please feel free to share your thoughts by posting a comment below…

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