Bernanke Says That Any Criticism Of The Federal Reserve Is Based On “Misconceptions”

Federal Reserve Chairman Ben Bernanke is taking his show on the road in at attempt to help Americans feel better about the Federal Reserve.  During a visit to the Fort Bliss headquarters of the Army’s 1st Armored Division this week, Bernanke held a town hall meeting during which he took questions from some of the soldiers.  Bernanke tried to sound as compassionate as possible as he assured the soldiers that the Federal Reserve is looking out for the American people and is doing everything that it can to help create jobs.  At one point, Bernanke even made the following statement: “For a lot of people, I know, it doesn’t feel like the recession ever ended.”  That probably helped a lot of people feel better.  A few probably even had a good cry.  But what Bernanke did not explain to the troops is that the Federal Reserve is very much responsible for the fact that unemployment is rampant, for the fact that the U.S. dollar is rapidly being devalued and for the fact that we have accumulated the largest national debt in the history of the world.

Ben Bernanke keeps insisting that the Federal Reserve has two main jobs (fighting inflation and keeping unemployment low) and that it is working incredibly hard to accomplish that dual mandate.  During his visit with the soldiers he told them that the Fed is very determined to create more jobs for the American people….

“We at the Federal Reserve have been focusing intently on supporting job creation.”

Well, if we are to judge the Federal Reserve by how well it has accomplished its “dual mandate”, then the Federal Reserve has been an abysmal failure.

Since the Federal Reserve was created, the U.S. dollar has lost well over 95 percent of its value to inflation.

Is that something Bernanke should be proud of?

Of course not.

Okay, so the Fed has failed when it comes to keeping inflation under control.

What about jobs?

Well, the first decade of this century was the worst decade for job creation that the United States has seen since the Great Depression.

The sad truth is that a total of zero jobs were created last decade.  The following is a quote from a recent article in Washington Monthly….

“If any single number captures the state of the American economy over the last decade, it is zero. That was the net gain in jobs between 1999 and 2009—nada, nil, zip. By painful contrast, from the 1940s through the 1990s, recessions came and went, but no decade ended without at least a 20 percent increase in the number of jobs.”

So what kind of a grade should we give the Federal Reserve for the job that it has done?

How about a big fat F?

The Federal Reserve has been a failure of epic proportions.  It greatly contributed to the Great Depression (even Bernanke admits this), it created the conditions for the financial bubbles that greatly contributed to the financial crisis of 2008, and it has brought us to the verge of yet another gigantic financial crisis.

But Ben Bernanke believes that all of us that are criticizing the Fed are just ignorant.  He thinks that we just don’t understand the Fed properly.  During a recent question and answer session, Bernanke stated the following….

“I think that the concerns about the Fed are based on misconceptions”

Oh, if only the rest of us understood how the Fed works and how they really care about the American people.  Then everything would be okay.

Not.

During that same session, Bernanke insisted that the Federal Reserve only has the purest motives….

“Our motives are strictly to do what is in the best interest of the broad public and I believe that our efforts to stabilize the financial system, which were ultimately proved successful, were very much in the interest of the broad public”

According to Bernanke, those that work at the Fed are unselfish guardians of our monetary system who are fighting for truth, justice and the American way of life.

Okay, perhaps I am exaggerating just a bit, but you get the point.

Bernanke is trying very hard to convince all of us that the Federal Reserve is just misunderstood and that we should just trust what the “experts” are doing.

So what will the plan be if the financial crisis in Europe blows up?

Well, during his visit to Fort Bliss one of the soldiers actually asked him about that.  The following is his answer….

“Although the Fed would obviously do all that we could to maintain stability and to keep monetary policy as easy as necessary to try to minimize the damage, I don’t think we would be able to escape the consequences of a blow-up in Europe”

Oh, he would keep monetary policy “as easy as necessary”.

Isn’t that lovely – I bet that will be great for the value of the U.S. dollar.

Bernanke also told the soldiers that he believes that happy days are ahead for the U.S. economy….

“I do believe we will return to a healthier growth rate. I don’t see any reason why we couldn’t”

So we should just trust Bernanke, right?

He has never been wrong before, right?

Well, let’s check the record….

In 2005, Bernanke said that we shouldn’t worry because housing prices had never declined on a nationwide basis before and he said that he believed that the U.S. would continue to experience close to “full employment”….

“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

In 2005, Bernanke also said that he believed that derivatives were perfectly safe and posed no danger to financial markets….

“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”

In 2006, Bernanke said that housing prices would probably keep rising….

“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

In 2007, Bernanke insisted that there was not a problem with subprime mortgages….

“At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

In 2008, Bernanke said that a recession was not coming….

“The Federal Reserve is not currently forecasting a recession.”

A few months before Fannie Mae and Freddie Mac collapsed, Bernanke insisted that they were totally secure….

“The GSEs are adequately capitalized. They are in no danger of failing.”

For many more examples that demonstrate the absolutely nightmarish track record of Federal Reserve Chairman Ben Bernanke, please see the following articles….

*”Say What? 30 Ben Bernanke Quotes That Are So Stupid That You Won’t Know Whether To Laugh Or Cry

*”Is Ben Bernanke A Liar, A Lunatic Or Is He Just Completely And Totally Incompetent?

But after being wrong over and over and over, Barack Obama still nominated Ben Bernanke for another term as Chairman of the Fed.

It is hard to put how stupid that was into words.

Look, if someone wrecked your car again and again would you keep handing that person your keys?

It just doesn’t make any sense.

Bernanke made another statement during his visit with the troops this week that was really bizarre….

“The Federal Reserve is not perfect … but at this point, if you look around the world, you see no alternative”

He has got to be kidding, right?

Of course there are no other alternatives for us to look at!  Only a handful of nations on earth do not have a central bank at this point.  Iran, North Korea and a handful of others don’t have a central bank dominated by the international banking community but basically everyone else does.

Just because nearly every nation on earth has a central bank does not mean that there are not alternatives to the Federal Reserve system.  I detailed a plan the other day that would transition us away from the Federal Reserve system.

It most certainly can be done.

But right now, most of our politicians are standing up for a system that allows private central bankers to spend trillions of dollars bailing out their friends while the rest of us suffer.

The other day, an article by U.S. Senator Bernie Sanders appeared in the Huffington Post that detailed what was learned during a very limited audit of transactions conducted by the Federal Reserve during the recent financial crisis.

According to Senator Sanders, the Federal Reserve made 16 trillion dollars in secret loans to big corporations, Wall Street banks, foreign nations and wealthy individuals during the financial crisis….

“…we learned that the Federal Reserve provided a jaw-dropping $16 trillion in total financial assistance to every major financial institution in the country as well as a number of corporations, wealthy individuals and central banks throughout the world.”

Senator Sanders also says that the audit revealed that many of those running the Fed are from the same institutions that the Fed has been bailing out….

“The GAO also revealed that many of the people who serve as directors of the 12 Federal Reserve Banks come from the exact same financial institutions that the Fed is in charge of regulating. Further, the GAO found that at least 18 current and former Fed board members were affiliated with banks and companies that received emergency loans from the Federal Reserve during the financial crisis.”

Wait – isn’t there a huge conflict of interest problem there?

Of course there is.

But neither major political party is making a stink about it.

Sadly, Senator Sanders says that the audit found that there was “instance after instance” where individuals used their positions at the Fed to benefit their own firms….

“The GAO has detailed instance after instance of top executives of corporations and financial institutions using their influence as Federal Reserve directors to financially benefit their firms, and, in at least one instance, themselves.”

Wow – you would think that this scandal would have been reported on the front page of every major newspaper from coast to coast.

But that didn’t happen.

In fact, both major political parties continue to insist that there is nothing wrong with the Federal Reserve and that the Fed is doing a wonderful job.

It really is sickening.

Look, we need to educate the American people about the Federal Reserve and we need to make control over our currency a major issue in the 2012 campaign.

The American people should demand that the issuing of all United States currency be immediately returned to Congress as the U.S. Constitution requires.

The American people should demand that no more debt-based Federal Reserve Notes be issued and that from now on only debt-free United States money be issued.

The Federal Reserve has a track record of nearly 100 years of failure.

It is time for it to be shut down.

The choice, America, is up to you.

Depressed As A Nation? 80 Percent Of Americans Believe That We Are In A Recession Right Now

According to a brand new Gallup poll, 80 percent of Americans believe that we are in a recession right now.  Of course the government insists that the recession ended quite some time ago, but apparently the message is not sinking in.  Not only that, most Americans also do not believe that things are going to get better any time soon.  According to the Gallup poll, 61 percent of Americans believe that the economy will be the same as it is right now or will be even worse one year from now.  Two years ago, only 35 percent of Americans felt that way.  Talk about pessimism!  So are we depressed as a nation?  Have too many people been reading the Economic Collapse Blog?  How do we account for such strange numbers?

Certainly there are some areas of the country that are still doing quite well.  If you live in an area that is closely tied to the federal government (Washington D.C.), the big Wall Street banks (New York) or corporate America (Silicon Valley, etc.), then you can go out on the weekends and find packed restaurants and mall parking lots that are overflowing.

But most of the rest of the country is really hurting.

Tonight, there are millions upon millions of Americans that won’t sleep well at all because they are trying to figure out how to get back on their feet.  It can be really tough to keep going when you have been searching for work for years and still nobody will hire you.  If you have a family, it is easy to feel like a failure when you have to look your spouse and your children in the eyes day after day knowing that they are depending on you.

If you have never been through it, then you should not mock those that are depressed because they cannot find work.  Losing a good job and not being able to find another one can be an absolutely soul-crushing experience.

So why do 80 percent of Americans believe that we are in a recession right now?

Well, it is because that is what it feels like for most people.

For example, a reader identified as Carol recently shared the following with us….

My unemployment ends the end of December, yes, I will be one of the 99′ers, one that did not sit at home and eat potato chips, drink soda and watch TV. I have no health insurance, I support myself and cannot afford it. I was diagnosed with rheumatoid arthritis last fall. Not to mention, degenerative disc disease, and osteoporosis. But I have continued to pursue work and regain employment, despite my health. I have no other choice but to fight and PRAY!

It amazes me at the stupidity of the general population, who still have their heads in the sand. The majority have no idea what is actually going on in our country on the political or economic side.

What would you do if you found out you were sick, you had no job, no health insurance and you were rapidly running out of money?

Please pray for those that are out of work.  You never know when it will be you that needs some assistance.

For those that still believe that the economy is doing “great”, let’s review some of the cold, hard facts….

*46.2 million Americans were living in poverty in 2010.

*The number of Americans living in poverty increased by 2.6 million last year.  That was the largest increase since the U.S. government began keeping statistics on this back in 1959.

*14 million Americans are officially unemployed.

*6 million Americans have been unemployed for at least half a year.

*8.8 million Americans are working part-time because they cannot find full-time jobs.

*Only 63.5 percent of all men in the United States had a job during the month of July.

*Zero jobs were created in the United States during the month of August.

*Median household income has fallen for three years in a row.

*49.9 million Americans do not have any health insurance at all.

*The percentage of Americans covered by employer-based health plans has fallen for 11 years in a row.

*More than 45 million Americans (a new all-time record) are on food stamps.

If you are still doing really well, be thankful for that.  Don’t use the fact that you are on top of the hill as an opportunity to look down on others.

Unfortunately, as I talked about in a recent article, the U.S. economy continues to get even worse.

It certainly does not help that we continue to see millions of jobs shipped overseas.  Neither the Democrats nor the Republicans are proposing anything that will stop the bleeding.

A lot of very skilled Americans are being put out of work by all of this offshoring.  For example, a reader identified as GlennA recently shared the following with us….

Yes, lurking in the shadows, that’s been me. A professional man with a master’s degree in a technical who has not worked at a full-time job with benefits since mid 2009. Spent my last 2 years with the company offshoring to India all my team’s work. I hear through the grapevine that quality there has gone completely off a cliff, but profits are OK.

Have had only sporadic benefitless contract work ever since, and am now down to my last few bucks.

All of the horrible natural disasters that we have experienced this year are not helping things either.  As I have written about previously, in many ways this has been the worst year for natural disasters in modern U.S. history.

In a recent article for Newsday, Jennifer Wheary described the impact these horrible natural disasters have had on many areas of the country that were already facing tough economic times….

But after decades of disappearing jobs, declining wages and increasing expenses, this is no longer the case. As a result, people across New York, New Jersey, Pennsylvania, Massachusetts, Vermont, Maryland, the Carolinas, Texas and elsewhere lack the savings needed to weather these unexpected economic shocks. Well before the spate of recent bad weather, or the recent recession, millions of middle- and working-class families were already under water.

Right now, even the vast majority of American families that still do have jobs are barely scraping by.  At this point, “financial security” is just a far off dream for most Americans.

So what are our leaders doing about this?

Well, as I have written about previously, the Obama jobs plan is a complete joke.  It is really quite sad if that was his best shot.  His plan would spend a lot of money, but just like the last “stimulus plan”, it would not create many jobs at all.

The Federal Reserve has decided that it better jump into action again.  The Federal Reserve has just announced that it is going to sell $400 billion of its short-term U.S. Treasuries and will use that money to buy $400 billion of long-term U.S. Treasuries.  The Fed is hoping that this will lower interest rates on mortgages and home loans and will help to spur the economy.

So will this fix our economic problems?  No, it will have even less of an impact than QE2 did.  But the Fed wants to at least appear as if it is trying to do something.

The Federal Reserve has also pledged an “unlimited” amount of dollars to help bail out big European banks in October, November and December.

It is quite frustrating that virtually nobody in the mainstream media seems upset that the Federal Reserve is going to be showering European banks with cheap loans.  Apparently they must all think that this is a wonderful idea, or perhaps they are just too preoccupied with talking about “The X Factor”.

In any event, it does look like the global financial system may need some propping up very soon.  Yesterday, I shared 21 signs that the financial world is on the verge of a nervous breakdown.

Well, here are a couple more….

Right now, corporate insiders are selling 7 dollars of stock for every 1 dollar of stock that they are buying.

That is a very troubling sign.

Another troubling sign is that Moody’s has just downgraded the credit ratings of Citigroup, Wells Fargo, and Bank of America.

The last time we saw so much financial chaos was back in 2008.

We all remember what happened back then.

At this point, things are still so bad that 80 percent of Americans believe that we are still in a recession.

So what are things going to look like if there is another major financial crash in the coming months?

Will we soon see millions more Americans going dumpster diving as they hunt for something to eat?

Will we see even more tent cities start popping up all over the nation?

Will we see even more elderly people freeze in their own homes because they can’t afford to heat them?

Already, more than one out of every five children in the United States is living in poverty.

How much worse can things get?

Unfortunately, they can get a lot worse.

If you think that Americans are depressed now, just wait and see what happens after the next financial crisis.

This country is going to become unglued in a major way.

Buckle up and hold on tight because it is going to be a bumpy ride.

Bad News

The bad news about the economy just keeps rolling in.  If this is an economic recovery, what in the world is the next “recession” going to look like?  Today there was another huge truckload of bad economic news.  The stock market had another 400 point “correction”, applications for unemployment benefits are up again, inflation is higher than expected, home sales have dropped again and Europe is coming apart at the seams.  The financial markets have been in such a state of chaos recently that days like today don’t even seem “unusual” anymore.  But we should all be alarmed at what is happening.  We haven’t seen anything quite like this since the darkest days of 2008 and 2009.  If more bad news keeps pouring in, we may soon have a very real panic on our hands.

I would have thought that my article yesterday, “20 Signs That The World Could Be Headed For An Economic Apocalypse In 2012“, would have contained enough bad economic news to last for a while.  But today there was another huge bumper crop of depressing numbers.

Are you ready for the carnage?

*The Dow fell 419 points today.  That was a 3.7% drop.  The S&P 500 shot down 4.5% and the Nasdaq plummeted by a whopping 5.2%.

*European bank stocks got absolutely hammered.

*The number of Americans applying for unemployment benefits jumped back above 400,000 last week.

*The recent inflation numbers have really taken analysts by surprise.  The consumer price index rose at a 6.0% annual rate during the month of July. As I mentioned yesterday, the producer price index in the U.S. has increased at an annual rate of at least 7.0% for the last three months in a row.

So now we have high unemployment and high inflation.  Oh goody!  All of this stagflation is almost enough to make one nostalgic for the 1970s.

*The housing market is getting even worse.  According to the National Association of Realtors, sales of previously owned homes dropped 3.5 percent during July.  That was the third decline in the last four months.  Sales of previously owned homes are even lagging behind last year’s pathetic pace. Mortgage rates are now the lowest they have been since the 1950s, but there are very few interested buyers in the marketplace.

*The Philadelphia Fed’s latest survey of regional manufacturing activity was absolutely nightmarish….

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009

*Morgan Stanley now says that the U.S. and Europe are “hovering dangerously close to a recession” and that there is a good chance we could enter one at some point in the next 6 to 12 months.

All of this bad news is sending the price of gold through the roof.  The price of gold soared to a brand new all-time high of $1,829.70 an ounce on Thursday morning.  So far, the price of gold is up almost 30 percent in 2011.

Meanwhile, millions of average American families are deeply suffering and are desperately hoping that things won’t get even worse.  Everywhere you turn, there is a tremendous amount of stress in the air.

According to the New York Times, 25 million Americans “could not find full-time jobs last month”.

As the economy crumbles, good paying full-time jobs are becoming increasingly scarce.  People are hurting and they are looking for leadership.

Well, Barack Obama is running around the country promising that he will unveil some “solutions” very shortly.

So what are those solutions going to include?  Well, the plans are still in the development stage, but the Obama administration is reportedly considering the following….

-The creation of a new government agency that will be dedicated to job creation.  This will entail more government spending and more government paper pushers, but it will probably not do much to create good paying full-time jobs.

-Pushing even more free trade agreements through Congress.  That way even more of our good jobs can be shipped to countries on the other side of the globe where paying slave wages to workers is still legal.

-A “reverse boot camp” that will train military veterans for civilian jobs.  That sounds like a good idea, but we already have millions and millions of highly trained Americans that can’t get jobs.

-An extension of the payroll tax cut for at least another year.  That will put more money into the pockets of U.S. workers, but it will also mean less revenue for the federal government.  The existing payroll tax cut has not exactly resulted in a “jobs boom”, but removing that tax cut is certainly not going to help the economy either.

-An extension of long-term unemployment benefits.  Yes, that will help the unemployed survive and will give them some money to spend into the economy, but it will not create many jobs for them.  Plus it will put the government into even more debt.

-The creation of an infrastructure bank.  Like most of the proposals above, this will entail even more government spending.  I know that a “shovel-ready” joke is called for about now, but I can’t think of one at the moment.

The ironic thing is that Barack Obama is riding around on his multistate “jobs tour” in a $1.2 million bus that was made in Canada.

You just can’t make this stuff up.

Things have gotten so bad out there that even Wal-Mart is suffering now.  Sales at Wal-Mart stores that have been open for at least a year have fallen for nine quarters in a row.

Not that anyone should have much sympathy for Wal-Mart, but it is a sign of just how bad things are getting out there.

So is there much hope for the future?  Well, considering the fact that only 32 percent of 15-year-olds in the United States are proficient in math, things don’t look good.

Our education system is a joke, tens of thousands of factories have already closed, more are closing every day, millions of jobs have been shipped overseas and most of our politicians are either incompetent or corrupt (or both).

So you would think that with all of our problems, authorities would be focused on the big issues.

But no, time after time they just keep picking on average Americans.

For example, a woman that lives in the Salem, Oregon area that is fighting terminal bone cancer tried to raise some money for her medical bills by holding a few garage sales on the weekends.

Well, the authorities in Salem got wind of this and now they are shutting her down.

This is absolutely unbelievable.  A video news report about this incident is posted below….

Massive fraud and corruption at the big banks caused a worldwide financial crisis in 2008 and yet not a single Wall Street executive has gone to prison because of it.

Yet a cancer-stricken lady tries to hold a few yard sales to pay her bills and authorities come down on her like a ton of bricks.

Does that seem fair to you?

Our world is getting crazier every day.  The bad news is going to keep pouring in.  Global financial markets are being held together with chicken wire and duct tape.  At some point the pyramid of corruption and con games is going to come crashing down.

If you still have faith in the system, you are not very wise.  We are heading for an economic collapse that will be absolutely unprecedented, and you need to be getting prepared.

The Stock Market Crash Of 2011?

How far does the stock market have to go down before we officially call it a crash?  The Dow is now down more than 2,000 points in just the last 14 trading days.  So can we now call this “The Stock Market Crash of 2011”?  Today the Dow was down 519 points.  Yesterday, an announcement by the Federal Reserve indicating that the Fed would keep interest rates near zero until mid-2013 helped the Dow surge more than 400 points, but all of those gains were wiped out today.  It turns out that the Federal Reserve was only able to stabilize the financial markets for a single day.  Fears about the European sovereign debt crisis and the crumbling U.S. economy continue to dominate the marketplace.  With each passing day, things are looking more and more like 2008 all over again.  So what is going to happen if “The Stock Market Crash of 2011” pushes the U.S. economy into “The Recession of 2012”?

Just like in 2008, bank stocks are being hit the hardest.  That was true once again today.  Bank of America was down more than 10 percent, Citigroup was down more than 10 percent, Morgan Stanley was down more than 9 percent and JPMorgan Chase was down more than 5 percent.

Bank of America stock is down almost 50 percent so far this year.  Overall, the S&P financial sector is down more than 23 percent in 2011 so far.

How soon will it be before we start hearing of the need for more bailouts?  After all, the “too big to fail” banks are even bigger now than they were in 2008.

All of this panic is causing the price of gold to reach unprecedented heights.  Today, gold was over $1800 at one point.  If the current panic continues for an extended period of time, there is no telling how high the price of gold may go.

In the United States, much of the focus has been on the fact that the U.S. government has lost its AAA credit rating, but the truth is that the European sovereign debt crisis is probably the biggest cause of the instability in world financial markets right now.

The European Central Bank has decided to start purchasing Italian and Spanish debt, and there have been rumors that French debt could be hit with a downgrade.  Europe is a total financial basket case right now and unless dramatic action is taken things are going to get progressively worse.

Of course the U.S. is also certainly contributing greatly to this crisis.  The federal government is on track to have a budget deficit that is over a trillion dollars for the third year in a row.  The U.S national debt is a horrific nightmare, but our politicians keep putting off budget cuts.

The debt ceiling deal that was just reached basically does next to nothing to cut the budget before the next election.  Unless the “Super Congress” does something dramatic, the only “budget cuts” we will see before the 2012 election will be 25 billion dollars in “savings” from spending increases that will be cancelled.

The modest spending cuts scheduled to go into effect beginning in 2013 will probably never materialize.  Whenever the time comes to actually significantly cut the budget, our politicians always want to put it off for another time.

But in the end, debt is always going to have its day.  Our politicians can try to kick the can down the road all they want, but eventually a day of reckoning is going to come.

In fact, if the U.S. and Europe had not piled up so much debt, we would not be facing all of the problems we are dealing with now.

Things could have been so much different.

But here we are.

The truth is that this debt crisis is just beginning.  There is no magic potion that is going to make all of this debt suddenly disappear.

Most Americans have no idea how much financial pain is coming.  We have been living way beyond our means for decades, and now we are going to start paying for it.

Now that long-term U.S. government debt has been downgraded, huge numbers of other securities are also going to be affected.  In fact, according to a recent Bloomberg article, S&P has already been very busy slashing the ratings on hordes of municipal bonds….

Standard & Poor’s lowered the AAA ratings of thousands of municipal bonds tied to the federal government, including housing securities and debt backed by leases, following its Aug. 5 downgrade of the U.S.

That is the thing about financial markets – once the dominoes start to fall, the ripple effects can be felt for a long, long time.

So if this stock market crash gets even worse, will the Federal Reserve respond with even stronger measures?

They have already basically promised to keep interest rates near zero for the next two years.  So what else can the Fed do?

Well, many now believe that there is a very good chance that we could see another round of quantitative easing.

Not that more quantitative easing is going to help much of anything.  Rather than helping the economy, the last round of quantitative easing just pushed commodity prices through the roof.  But the Fed is unlikely to just sit there and do nothing while financial markets struggle.

But it is not just the financial markets that are having a difficult time right now.  Bad news is coming in from all over the economy.  The possibility that we could soon slip into another major recession is growing by the day.

Unfortunately, our economy is so weak already that a new recession would probably hurt even more than the last recession did.

Mark Zandi, the chief economist at Moody’s Analytics, says that if we have another recession it “won’t feel like a new recession. It would likely feel like a depression.

But the American people are in no mood for more economic pain.  Every recent poll shows that Americans are already fed up.

For example, a brand new Reuters/Ipsos poll found that 73 percent of the American people believe that the country is “on the wrong track”.

So let’s certainly hope that the current stock market crash does not set off another major global recession.  We certainly do not need things to get significantly worse than they are right now.

But whether it hits now or later, the truth is that a whole lot of economic pain is on the way.  The U.S. and Europe have been making really, really bad decisions for decades, and we are not going to be able to escape the consequences of those decisions.

The global financial system is one huge mountain of leverage, risk and debt.  A collapse is inevitable.

When you build a house of cards on a foundation of sand, you should not be surprised when it comes crashing down.

The next wave of the economic collapse is coming, and those that are wise will get prepared.

 

 

Economic Recovery?

If this is supposed to be an “economic recovery” it sure is pathetic.  In fact, as you will read below, the numbers tell us that this is the worst economic recovery that the American economy has ever seen.  If what we had experienced was a “normal” recession and a “normal” recovery, then jobs, economic growth and home values would have come roaring back by now.  But they haven’t.  The Federal Reserve injected unprecedented amounts of new money into the system and the federal government went into unprecedented amounts of new debt, but all of that effort has not accomplished much.  It did buy us a little bit of time and a period of relative economic stability, but now there are all kinds of signs that we are about to go into another recession (or something even worse).  So is it really honest for Ben Bernanke and Barack Obama to be using the term “economic recovery” to describe what is happening?

The truth is that what is really taking place is that the long-term economic decline of the United States is beginning to accelerate.

But most Americans simply don’t understand what is going on.

The mainstream media teaches us to blame our politicians for the economy.  One recent survey found that 44 percent of the American people believe that the U.S. economy is “worse than when Obama was inaugurated”.

Yes, Barack Obama is a horrible president.  But the economic downfall of this nation is not all his fault.  George W. Bush was a horrible president too.  So was Bill Clinton.  Congress has been corrupt and incompetent for decades.

Of course the institution that is most responsible for our economic problems is the Federal Reserve.  Thankfully, more Americans than ever are starting to realize this.

But if you listen to Ben Bernanke and Barack Obama, you would think that a great “economic recovery” has begun.  They would have us believe that they know exactly what our problems are and that they know exactly how to get us out of this mess.

Unfortunately, what we have experienced is not much of an “economic recovery” at all.  According to the Wall Street Journal, this is the worst “recovery” from a recession that the U.S. economy has ever seen….

On economic growth, real GDP has risen 0.8% over the 13 quarters since the recession began, compared to an average increase of 9.9% in past recoveries. From the beginning of the recession to April 2011, real personal income has grown just .9% compared to 9.4% for the same period in previous post 1960 recessions.

So what is really going on?

Sadly, what we are experiencing right now is a brief period of stability in the middle of a downward spiral toward economic oblivion.

The CEO of Pimco, Mohamed El-Erian, says that it should now be obvious to everyone that all of the efforts of the U.S. government and the Federal Reserve to stimulate the economy simply have not been enough to solve the structural economic challenges that we are facing….

“It’s clear that the stimulus-induced recovery hasn’t overcome the structural challenges to large-scale job creation.”

The U.S. economy is not producing enough jobs.  Today, there are 25 million Americans that are either unemployed or underemployed.

But the inability to create jobs is not a new phenomenon for the U.S. economy.  The truth is that between 2000 and 2007, the U.S. economy had its poorest stretch of job creation since the Great Depression.

However, since 2007 the employment situation in this country has gotten a lot worse.  Take a minute and watch the stunning video posted below.  It shows how rampant unemployment swept across this country between 2007 and 2011….

Our politicians promised us that globalization would be great for the U.S. economy.

Well, it was great for the big corporations to be able to pay slave labor wages to workers on the other side of the globe, but things have not worked out so well for workers in this country.

Millions of our jobs have been lost.  Millions more jobs are being lost.  Yet our politicians do nothing to stop the bleeding.

Things have gotten so bad that even the top of the food chain is shipping jobs overseas.

Just consider this recent headline which appeared in Business Insider: “Goldman Sachs Is Firing Employees In The US So It Can Hire 1,000 In Singapore

If even jobs at Goldman Sachs are being sent out of the country, are any of our jobs safe?

Many Americans would love to start a business instead of having to work for someone else, but the economic environment has become incredibly toxic for small businesses in the United States.

The rate of new business creation in the United States has been declining steadily since the 1980s.  Our politicians are literally choking the entrepreneurial spirit to death in this country.

Today, more Americans than ever are dependent on the government.  In fact, it has gotten to the point where the U.S. economy itself is highly dependent on the government.

So what is going to happen when the government is not handing out so many goodies?

The era of rampant spending in Washington D.C. seems to be coming to an end, at least for now.  The U.S. national debt has become so outrageous that many members of Congress are finally determined to start making some cuts.

While it is true that cutting government spending is long overdue, most Americans don’t realize that cutting government spending will also mean that “the economic sugar high” that we have been experiencing will start to wear off.

If we try to live within our means, that is going to cause a lot of economic pain, and the American people are not too good about making sacrifices these days.

Look, whoever is elected in 2012 is going to be in for a rough ride.  Some very difficult economic times are ahead, and whoever is elected in 2012 is going to get blamed.  By 2016, the president is probably going to be the most hated person in America.

But the truth is that these economic problems have been building for decades.

We didn’t get here by accident, and our economic problems are not going to be solved overnight.

In fact, many financial analysts are warning that they are about to get a lot worse.

For example, David Rosenberg of Gluskin Sheff says that there is a 99 percent chance that the U.S. will fall into another recession by the end of 2012.

As the economy continues to crumble, U.S. cities will become increasingly hostile places in which to live.

According to a recent Rasmussen Reports national telephone survey, 41 percent of Americans say that crime has increased where they live over the past year and only 6 percent of Americans say that crime has decreased where they live over the past year.

But just wait until the economy really collapses – that is when all hell will break loose.

In a recent article entitled “Is The Economy Improving?“, I quoted statistic after statistic that showed that the U.S. economy is actually continuing to decline.

The American people are starting to lose patience.  In fact, people all over the country are starting to get more than a little crazy.  For example, there is a now a national “epidemic” of people robbing pharmacies in order to get a hold of painkillers.

Pharmacists all over the country are being robbed at gunpoint.  Some prescription painkillers will reportedly sell for as much as 80 dollars a pill on the street.  As a recent article in the Washington Post noted, things are getting really dangerous out there for pharmacists….

“It’s an epidemic,” said Michael Fox, a pharmacist on New York’s Staten Island who has been stuck up twice in the last year. “These people are depraved. They’ll kill you.”

Armed robberies at pharmacies rose 81 percent between 2006 and 2010, from 380 to 686, the U.S. Drug Enforcement Administration says. The number of pills stolen went from 706,000 to 1.3 million. Thieves are overwhelmingly taking oxycodone painkillers like OxyContin or Roxicodone, or hydrocodone-based painkillers like Vicodin and Norco. Both narcotics are highly addictive.

But this is what our country is turning into.

We are a nation of addicts.

Our national addiction to debt and our national addiction to greed have brought us to the brink of economic disaster.

If you are waiting for an “economic recovery”, you should stop waiting.

This is about as good as things are going to get.

From here on out, things are just going to keep going downhill.

Most Americans are going to be absolutely blindsided by the economic collapse that is coming.

But that doesn’t have to be you.

You still have some time to get prepared.

Losing Faith (In The U.S. Economy)

Are the American people losing faith in the U.S. economy?  The statistics that you are about to read might surprise you.  Not everyone believes that the U.S. economy is dying (there are still millions out there that will swallow anything that the mainstream media tells them), but the reality is that there is a growing chunk of the population that has completely lost faith in our leaders and in our economic system.  A brand new Gallup poll has found that the number of Americans that believe that we are in a “depression” is actually larger than the number of Americans that believe that the economy is “growing”.  That is absolutely shocking because according to official government figures, the U.S. economy is growing right now and virtually nobody in the mainstream media or the government has used the term “depression” to describe the economic downturn that we went through recently.  In fact, according to Gallup a total of 55% of the American people believe that we are either in a recession or a depression right now.  This is clear evidence that the American people are losing faith in U.S. government economic statistics and instead they are basing their opinions on what they see in their own communities.  Despite the pablum about an “economic recovery” constantly being spewed by Ben Bernanke and Barack Obama, faith in our economic system continues to decline.  The truth is that the American people are not stupid.  They can see what is happening to the economy.

Back when I was a teenager, one day I walked over to the local McDonald’s and filled out an application and was immediately hired.

But that is not how it works today.

Recently, McDonald’s made headlines when they held a National Hiring Day.  Some commentators pointed to that event as evidence that the economy was recovering.

Well, you know what?  McDonald’s ended up receiving approximately one million applications.

So how many of those people did McDonald’s hire?

They hired about 62,000 people.

That means that somewhere around 938,000 eager job applicants were turned away.

Just think about that.

Only about 6.2 percent of those that applied for a job at McDonald’s were accepted.

As Joe Weisenthal of Business Insider recently pointed out, that means that Harvard now has a higher acceptance rate than McDonald’s does.

Harvard accepts about 7% of those that apply to go to school there.

Who ever thought we would see the day when a higher percentage of applicants get accepted into Harvard than get hired at McDonald’s?

Sadly, the number of jobs continues to shrink.  The competition for good jobs has become absolutely crazy.

Only 66.8% of American men had a job last year.  That was the lowest level that has ever been recorded in all of U.S. history.

So why is this happening?  Well, there are a lot of reasons, but as I have written about previously, the fact that millions of our jobs are being shipped overseas is a huge factor.

Without good jobs, an increasing number of Americans are being forced to turn to government assistance in order to survive.

Today, more than 44 million Americans are on food stamps.  In addition, government transfer payments now make up 18 percent of all personal income in the United States.

That is frightening.

Things have gotten so bad that now even Wal-Mart is warning that their customers are running out of money.

A large percentage of Wal-Mart customers are just surviving month to month and Wal-Mart has been noticing a huge drop off in sales towards the end of the month when their customers run out of cash.  The following is what the CEO of Wal-Mart had to say about this phenomenon recently….

“Purchases are really dropping off by the end of the month even more than last year.”

People are starting to get desperate.  When economic times get tough, crime tends to increase.  Sadly, as a report in USA Today recently noted, thefts of gasoline are increasing all over the nation.

We never had this kind of a problem back when a gallon of gas only was about a dollar a gallon.

Do you remember those days?

They weren’t that long ago.

Now it takes some people over a hundred dollars to fill up their gas tanks.

Our leaders keep promising that they know what is happening and that they are going to fix things, but most Americans are not buying it.  Many Americans are completely losing faith in the system altogether.

Our economic decline has been one of the things that has fueled the growth of the prepper movement.  Millions of Americans have decided that they want to start becoming independent of the system.  One recent article described what some residents of Colorado are doing to prepare, but the truth is that this phenomenon is happening all over the nation….

A Black Forest resident has erected a geodesic dome on her 5-acre spread to grow vegetables, keeps horses for emergency transportation, in case she can’t get gasoline for her car, and plans to acquire chickens and goats as food sources.

A husband and wife who have a cabin on 100 acres of secluded land in Park County have weaned their property from the electric grid, acquired a three-year food supply and taken other measures to become self-sufficient.

Of course the mainstream media loves to portray preppers as “crazies”, but as the U.S. economy continues to die it would be a bit crazy not to prepare.

No job is completely safe today.  Millions of Americans that assumed that their “good jobs” would always be there have had their lives shattered over the past couple of years.

There is nothing wrong with trying to become more self-sufficient.

Everyone should be thinking about either starting up a business or developing alternative sources of income.  Yes, it can be exhausting to work on a side business during evening and weekends, but the time for loafing is over.  Those that are going to make it through the times ahead are those that are going to be willing to work really hard.

People need to start thinking about becoming less dependent on “the system” however they can.  One way to insulate yourself against rising food prices is to learn how to grow your own food.

Even if you only have a very small amount of room you can still grow your own food.  For example, there is one family that is actually producing 6000 pounds of produce on just 1/10th of an acre right in the middle of Pasadena, California.

Just because we have lost some of the basic skills that previous generations possessed doesn’t mean that we can’t get them back.  Back during World War II, “victory gardens” enabled Americans to grow 40 percent of all the vegetables that they needed.  Those gardens greatly contributed to the war effort and helped Americans get through some very difficult times.

There are a lot of preppers out there that are totally out of debt, that own their own land, that are entirely off the electrical grid and that grow most of their own food.  Many Americans would look at such people as “crazies” but those preppers will be in a much better position than most people when the economy totally collapses.

Don’t wait until it is too late to prepare.  Millions of Americans are completely losing faith in our economic system.  People are smart.  They can see that we are living in the biggest debt bubble in the history of the world.  They can see that the guts of our economic infrastructure are being ripped out and shredded.  They can see that the number of people living in poverty continues to increase year after year.  They can see the the number of good jobs continues to decrease year after year.

When you see a horrible storm coming the rational thing to do is to prepare.  Just think about all of those tornadoes that ravaged the southeast U.S. the other day.  Most of the people directly in the path of those tornadoes did whatever they could to survive when they realized the twisters were about to hit.

Well, a horrific economic storm is coming.  Every American will be affected by this economic storm at least to some extent.  We all need to prepare while we still can.

Shaken: 10 Economic Disasters Which Threaten To Rip World Financial Markets To Shreds

2011 has already been the most memorable year in ages and we haven’t even reached April yet.  Revolutions have swept the Middle East, an unprecedented earthquake and tsunami have hit Japan, civil war has erupted in Libya, the price of oil has been soaring and the entire globe is teetering on the brink of economic collapse.  It seems like almost everything that can be shaken is being shaken.  Unfortunately, it does not appear that things are going to settle down any time soon.  The Japanese economy has been dealt a critical blow, the European sovereign debt crisis could flare up again at any moment and the U.S. economy could potentially plunge into another recession by the end of the year.  The global economy and world financial markets were really struggling to recover even when things were relatively stable.  If all of this global instability gets even worse it could literally rip world financial markets apart.

Yes, things really are that bad.  The mainstream media has been really busy downplaying the economic impact of the disaster in Japan and the chaos in the Middle East, but the truth is that these events have huge implications for the global economy.  Today our world is more interconnected than ever, so economic pain in one area of the planet is going to have a significant effect on other areas of the globe.

The following are 10 economic disasters which could potentially rip world financial markets to shreds….

#1 War In Libya

Do you think that the “international community” would be intervening in Libya if they did not have a lot of oil?  If you actually believe that, you might want to review the last few decades of African history.  Millions upon millions of Africans have been slaughtered by incredibly repressive regimes and the “international community” did next to nothing about it.

But Libya is different.

Libya is the largest producer of oil in Africa.

Apparently the revolution in Libya was not going the way it was supposed to, so the U.S. and Europe are stepping in.

Moammar Gadhafi is vowing that this will be a “long war”, but the truth is that his forces don’t stand a chance against NATO.

Initially we were told that NATO would just be setting up a “no fly zone”, but there have already been reports of Libyan tank columns being assaulted and there has even been an air strike on Moammar Gadhafi’s personal compound in Tripoli.

So since when did a “no fly zone” include an attempt to kill a foreign head of state?

Let there be no mistake – the moment that the first Tomahawk cruise missiles were launched the United States declared war on Libya.

Already the Arab League, India, China and Russia have all objected to how this operation is being carried out and they are alarmed about the reports of civilian casualties.

Tensions around the globe are rising once again, and that is not a good thing for the world economy.

On a side note, does anyone recall anyone in the Obama administration even stopping for a moment to consider whether or not they should consult the U.S. Congress before starting another war?

The U.S. Constitution specifically requires the approval of the Congress before we go to war.

But very few people seem to care too much about what the U.S. Constitution says these days.

In any event, the flow of oil out of Libya is likely to be reduced for an extended period of time now, and that is not going to be good for a deeply struggling global economy.

#2 Revolutions In The Middle East

Protests just seem to keep spreading to more countries in the Middle East.  On Friday, five Syrian protesters were killed by government forces in the city of Daraa.  Subsequently, over the weekend thousands of protesters reportedly stormed government buildings in that city and set them on fire.

Things in the region just seem to get wilder and wilder.

Even in countries where the revolutions are supposed to be “over” there is still a lot of chaos.

Have you seen what has been going on in Egypt lately?

The truth is that all of North Africa and nearly the entire Middle East is aflame with revolutionary fervor.

About the only place where revolution has not broken out is in Saudi Arabia.  Of course it probably helps that the United States and Europe don’t really want a revolution in Saudi Arabia and the Saudis have a brutally effective secret police force.

In any event, as long as the chaos in the Middle East continues the price of oil is likely to remain very high, and that is not good news for the world economy.

#3 The Japanese Earthquake And Tsunami

Japan is the third largest economy in the world.  When a major disaster happens in that nation it has global implications.

The tsunami that just hit Japan was absolutely unprecedented.  Vast stretches of Japan have been more thoroughly destroyed than if they had been bombed by a foreign military power.  It really was a nation changing event.

The Japanese economy is going to be crippled for an extended period of time.  But it is not just Japan’s economy that has been deeply affected by this tragedy.

According to the Wall Street Journal, the recent disaster in Japan has caused supply chain disruptions all over the globe….

A shortage of Japanese-built electronic parts will force GM to close a plant in Zaragoza, Spain, on Monday and cancel shifts at a factory in Eisenach, Germany, on Monday and Tuesday, the company said Friday.

Not only that, GM has also suspended all “nonessential” spending globally as it evaluates the impact of this crisis.

The truth is that there are a whole host of industries that rely on parts from Japan.  Supply chains all over the world are going to have to be changed as a result of this crisis.  There are going to be some shortages of certain classes of products.

Japan is a nation that imports and exports tremendous quantities of goods.  At least for a while both imports and exports will be significantly down, and that is not good news for a world economy that was already having a really hard time recovering from the recent economic downturn.

#4 The Japan Nuclear Crisis

Even if the worst case scenario does not play out, the reality is that the crisis at the Fukushima Dai-ichi nuclear plant is going to have a long lasting impact on the global economy.

Already, nuclear power projects all over the world are being rethought.  The nuclear power industry was really starting to gain some momentum in many areas of the globe, but now that has totally changed.

But of much greater concern is the potential effect that all of this radiation will have on the Japanese people.  Radiation from the disaster at the Fukushima Dai-ichi nuclear plant is now showing up in food and tap water in Japan as an article on the website of USA Today recently described….

The government halted shipments of spinach from one area and raw milk from another near the nuclear plant after tests found iodine exceeded safety limits. But the contamination spread to spinach in three other prefectures and to more vegetables — canola and chrysanthemum greens. Tokyo’s tap water, where iodine turned up Friday, now has cesium.

Hopefully the authorities in Japan will be able to get this situation under control before Tokyo is affected too much.  The truth is that Tokyo is one of the most economically important cities on the planet.

But right now there is a lot of uncertainty surrounding Tokyo.  For example, one very large German real estate fund says that their holdings in Tokyo are now “impossible to value” and they have suspended all customer withdrawals from the fund.

Once again, let us hope that a worst case scenario does not happen.  But if we do get to the point where most of the population had to be evacuated from Tokyo for an extended period of time it would be absolutely devastating for the global economy.

#5 The Price Of Oil

Most people believe that the U.S. dollar is the currency of the world, but really it is oil.  Without oil, the global economy that we have constructed simply could not function.

That is why it was so alarming when the price of oil went above $100 a barrel earlier this year for the first time since 2008.  Virtually everyone agrees that if the price of oil stays high for an extended period of time it will have a highly negative impact on the world economy.

In particular, the U.S. economy is highly, highly dependent on cheap oil.  This country is really spread out and we transport goods and services over vast distances.  That is why the following facts are so alarming….

*The average price of a gallon of gasoline in the United States is now 75 cents higher than it was a year ago.

*In San Francisco, California, the average price of a gallon of gasoline is now $3.97.

*According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier.

*According to the U.S. Energy Department, the average U.S. household will spend approximately $700 more on gasoline in 2011 than it did during 2010.

#6 Food Inflation

Many people believe that the rapidly rising price of food has been a major factor in sparking the revolutions that we have seen in Africa and the Middle East.  When people cannot feed themselves or their families they tend to lose it.

According to the United Nations, the global price of food hit a new all-time high earlier this year, and the UN is expecting the price of food to continue to go up throughout the rest of this year.  Food supplies were already tight around the globe and this is certainly not going to help things.

The price of food has also been going up rapidly inside the United States.  Last month the price of food in the United States rose at the fastest rate in 36 years.

American families are really starting to feel their budgets stretched.  According to the U.S. Labor Department, the cost of living in the United States hit a brand new all-time record high in the month of February.

What this means is that U.S. families are going to have less discretionary income to spend at the stores and that is bad news for the world economy.

#7 The European Sovereign Debt Crisis

Several European governments have had their debt downgraded in the past several months.  Portugal, Spain, Greece and Ireland are all in big time trouble.  Several other European nations are not far behind them.

Right now Germany seems content to bail the “weak sisters” in Europe out, but if that changes at some point it is going to be an absolute nightmare for world financial markets.

#8 The Dying U.S. Dollar

Right now there is a lot of anxiety about the U.S. dollar.  Prior to the tsunami, Japan was one of the primary purchasers of U.S. government debt.  In fact, Japan was the second-largest foreign buyer of U.S. Treasuries last year.

But now as Japan rebuilds from this nightmare it is not going to have capital to invest overseas.  Someone else is going to have to step in and buy up all of the debt that the Japanese were buying.

Not only that, but big bond funds such as PIMCO have announced that they are stepping away from U.S. Treasuries at least for now.

So if Japan is not buying U.S. Treasuries and bond funds such as PIMCO are not buying U.S. Treasuries, then who is going to be buying them?

The U.S. government needs to borrow trillions of dollars this year alone to roll over existing debt and to finance new debt.  All of that borrowing has got to come from somewhere.

#9 The U.S. Housing Market

The U.S. housing market could potentially be on the verge of another major crisis.  Just consider the following facts….

*In February, U.S. housing starts experienced their largest decline in 27 years.

*Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.

*Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months.  Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.

*In September 2008, 33 percent of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure.  Today that number has risen to 48 percent.

#10 The Derivatives Bubble

Most Americans do not even understand what derivatives are, but the truth is that they are one of the biggest threats to our financial system.  Some experts estimate that the worldwide derivatives bubble is somewhere in the neighborhood of a quadrillion dollars.  This bubble could burst at any time.  Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn’t stop.  Today, most money on Wall Street is not made by investing in good business ideas.  Rather, most money on Wall Street is now made by making shrewd bets.  Unfortunately, at some point the casino is going to come crashing down and the game will be over.

Most people simply do not realize how fragile the global economy is at this point.

The financial crash of 2008 was a devastating blow.  The next wave of the economic crisis could be even worse.

So what will the rest of 2011 bring?

Well, nobody knows for sure, but a lot of experts are not optimistic.

David Rosenberg, the chief economist at Gluskin Sheff and Associates, is warning that the second half of the year could be very rough for the global economy….

“A sharp slowing in global GDP in the second half of the year cannot be ruled out.”

Let us hope that the world economy can hold together and that we can get through the rest of 2011 okay.  The last thing we need is a repeat of 2008.  The world could use some peace and some time to recover.

But unfortunately, we live in a world that is becoming increasingly unstable.  With the way that the world has been lately, perhaps we should all just start to expect the unexpected.

But world financial markets do not respond well to instability and unpredictability.  In fact, investors tend to start fleeing to safety at the first signs of danger these days.

Most Americans simply have no idea how vulnerable the world financial system is at this point.  Nothing really got “fixed” after 2008.  If anything, global financial markets are even more fragile than they were back then.

So what do all of you think about the state of the global economy?  Please feel free to leave a comment with your opinion below….

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