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Guess What Happened The Last Time The Chinese Stock Market Crashed Like This?

Question Button - Public DomainThe second largest stock market in the entire world is collapsing right in front of our eyes.  Since hitting a peak in June, the most important Chinese stock market index has plummeted by well over 20 percent, and more than 3 trillion dollars of “paper wealth” has been wiped out.  Of course the Shanghai Composite Index is still way above the level it was sitting at exactly one year ago, but what is so disturbing about this current crash is that it is so similar to what we witnessed just prior to the great financial crisis of 2008 in the United States.  From October 2006 to October 2007, the Shanghai Composite Index more than tripled in value.  It was the greatest stock market surge in Chinese history.  But after hitting a peak, it began to fall dramatically.  From October 2007 to October 2008, the Shanghai Composite Index absolutely crashed.  In the end, more than two-thirds of all wealth in the market was completely wiped out.  You can see all of this on a chart that you can find right here.  What makes this so important to U.S. investors is the fact that Chinese stocks started crashing well before U.S. stocks started crashing during the last financial crisis, and now it is happening again.  Is this yet another sign that a U.S. stock market crash is imminent?

Over the past several months, I have been trying to hammer home the comparisons between what we are experiencing right now and the lead up to the U.S. financial crisis in the second half of 2008.  Today, I want to share with you an excerpt from a New York Times article that was published in April 2008.  At that time, the Chinese stock market crash was already well underway, but U.S. stocks were still in great shape…

The Shanghai composite index has plunged 45 percent from its high, reached last October. The first quarter of this year, which ended Monday with a huge sell-off, was the worst ever for the market.

Suddenly, millions of small investors who were crowding into brokerage houses, spending the entire day there playing cards, trading stocks, eating noodles and cheering on the markets with other day traders and retirees, are feeling depressed and angry.

This sounds almost exactly like what is happening in China right now.  First we witnessed a ridiculous Chinese stock market bubble form, and now we are watching a nightmarish sell off take place.  This next excerpt is from a Reuters article that was just published…

Shanghai’s benchmark share index crashed below 4,000 points for the first time since April – a key support level that analysts said had been seen as a line in the sand that Beijing had to defend, below which more conservative investors would start ejecting from their leveraged positions, widening the rout.

Chinese markets, which had risen as much as 110 percent from November to a peak in June, have collapsed at an incredibly rapid pace in since June 12, losing more than 20 percent in jaw-dropping volatility as money surges in and out of the market.

That drop has wiped out nearly $3 trillion in market capitalization, more than the GDP of Brazil.

Did you catch that last part?

The amount of wealth that has been wiped out during this Chinese stock market crash is already greater than the entire yearly GDP of Brazil.

To me, that is absolutely incredible.

And now that the global financial system is more interconnected than ever, what goes on over in China has a greater impact on the rest of the globe than ever before.  Today, China has the largest economy on the planet on a purchasing power basis, and the Chinese stock market “is the second largest in the world in terms of market capitalization”

Just as in 1929, flighty retail investors make up the bulk of China’s stock market and, just as in 1929 in the U.S., they have heavily margined their accounts. The Financial Times puts the number of retail investors in the Chinese stock market at 80 to 90 percent of the total market. Retail investors, unlike sophisticated institutional investors, are prone to panic selling, which explains the wild intraday swings in the Shanghai Composite over the past week.

Last night, the Shanghai Composite broke a key technical support level, closing below 4,000 at 3,912.77. The index is now down 24 percent since it peaked earlier this month and has wiped out more than $2.4 trillion in value. China’s stock market is the second largest in the world in terms of market capitalization, with the U.S. ranking number one.

Making world markets even more worried about the situation in China, its regulators are showing a similar brand of leadership as Mario Draghi. After previously pledging to trim back risky margin lending, they have now done a complete flip flop and are permitting individual brokerage firms to avoid selling out accounts that miss margin calls by setting their own guidelines on the amount of collateral needed.

I know that a lot of Americans don’t really care about what happens over in Asia, but when the second largest stock market in the entire world crashes, it is a very big deal.

The great financial crisis of 2015 has now begun, and it is just going to get much, much worse.  On Thursday, Ron Paul declared that “the day of reckoning is at hand“, and I agree with him.

So what comes next?

The following is what Phoenix Capital Research is anticipating…

By the time it’s all over, I expect:

1)   Numerous emerging market countries to default and most emerging market stocks to lose 50% of their value.

2)   The Euro to break below parity before the Eurozone is broken up (eventually some new version of the Euro to be introduced and remain below parity with the US Dollar).

3)   Japan to have defaulted and very likely enter hyperinflation.

4)   US stocks to lose at least 50% of their value and possibly fall as far as 400 on the S&P 500.

5)   Numerous “bail-ins” in which deposits are frozen and used to prop up insolvent banks.

I tend to agree with most of that. I don’t agree that the euro is going to go away, but I do agree that the eurozone is going to break up and be reconstituted in a new form eventually.  And yes, we are going to see tremendous inflation all over the world down the road, but I wouldn’t say that it is imminent in Japan or anywhere else.  But overall, I think that is a pretty good list.

So what do you think is coming?  Please feel free to join the discussion by posting a comment below…

19 Signs That American Families Are Being Economically Destroyed

19 - Public DomainThe systematic destruction of the American way of life is happening all around us, and yet most people have no idea what is happening.  Once upon a time in America, if you were responsible and hard working you could get a good paying job that could support a middle class lifestyle for an entire family even if you only had a high school education.  Things weren’t perfect, but generally almost everyone in the entire country was able to take care of themselves without government assistance.  We worked hard, we played hard, and our seemingly boundless prosperity was the envy of the entire planet.  But over the past several decades things have completely changed.  We consumed far more wealth than we produced, we shipped millions of good paying jobs overseas, we piled up the biggest mountain of debt in the history of the world, and we kept electing politicians that had absolutely no concern for the long-term future of this nation whatsoever.  So now good jobs are in very short supply, we are drowning in an ocean of red ink, the middle class is rapidly shrinking and dependence on the government is at an all-time high.  Even as we stand at the precipice of the next great economic crisis, we continue to make the same mistakes.  In the end, all of us are going to pay a very great price for decades of incredibly foolish decisions.  Of course a tremendous amount of damage has already been done.  The numbers that I am about to share with you are staggering.  The following are 19 signs that American families are being economically destroyed…

#1 The poorest 40 percent of all Americans now spend more than 50 percent of their incomes just on food and housing.

#2 For those Americans that don’t own a home, 50 percent of them spend more than a third of their incomes just on rent.

#3 The price of school lunches has risen to the 3 dollar mark at many public schools across the nation.

#4 McDonald’s “Dollar Menu & More” now includes items that cost as much as 5 dollars.

#5 The price of ground beef has doubled since 2009.

#6 In 1986, child care expenses for families with employed mothers used up 6.3 percent of all income.  Today, that figure is up to 7.2 percent.

#7 Incomes fell for the bottom 80 percent of all income earners in the United States during the 12 months leading up to June 2014.

#8 At this point, more than 50 percent of all American workers bring home less than $30,000 a year in wages.

#9 After adjusting for inflation, median household income has fallen by nearly $5,000 since 2007.

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

#11 47 percent of all Americans do not put a single penny out of their paychecks into savings.

#12 One survey found that 62 percent of all Americans are currently living paycheck to paycheck.

#13 According to the U.S. Department of Education, 33 percent of all Americans with student loans are currently behind on their student loan debt repayments.

#14 According to one recent report, 43 million Americans currently have unpaid medical debt on their credit reports.

#15 The rate of homeownership in the U.S. has been declining for seven years in a row, and it is now the lowest that it has been in 20 years.

#16 For each of the past six years, more businesses have closed in the United States than have opened.  Prior to 2008, this had never happened before in all of U.S. history.

#17 According to the Census Bureau, 65 percent of all children in the United States are living in a home that receives some form of aid from the federal government.

#18 If you have no debt at all, and you also have 10 dollars in your wallet, that you are wealthier than 25 percent of all Americans.

#19 On top of everything else, the average American must work from January 1st to April 24th just to pay all federal, state and local taxes.

All of us know people that once were doing quite well but that are now just struggling to get by from month to month.

Perhaps this has happened to you.

If you have ever been in that position, you probably remember what it feels like to have people look down on you.  Unfortunately, in our society the value that we place on individuals has a tremendous amount to do with how much money they have.

So if you don’t have much money, there are a lot of people out there that will treat you like dirt.  The following excerpt comes from a Washington Post article entitled “The poor are treated like criminals everywhere, even at the grocery store“…

Want to see a look of pure hatred? Pull out an EBT card at the grocery store.

Now that my kids are grown and gone, my Social Security check is enough to keep me from qualifying for government food benefits. But I remember well when we did qualify for a monthly EBT deposit, a whopping $22 — and that was before Congress cut SNAP benefits in November 2013. Like 70 percent of people receiving SNAP benefits, I couldn’t feed my family on that amount. But I remember the comments from middle-class people, the assumptions about me and my disability and what the poor should and shouldn’t be spending money on.

Have you ever seen this?

Have you ever experienced this yourself?

These days, most people on food stamps are not in that situation because they want to be.  Rather, they are victims of our long-term economic collapse.

And this is just the beginning.  When the next major economic crisis strikes, the suffering in this country is going to go to unprecedented levels.

As we enter that time, we are going to need a whole lot more love and compassion than we are exhibiting right now.

As a nation, we have made decades of incredibly bad decisions.  As a result, we are experiencing bad consequences which are going to become increasingly more severe.

The numbers that I just shared with you are not good.  But over the next several years they are going to get a whole lot worse.

Everything that can be shaken will be shaken, and life in America is about to change in a major way.

 

The Economy Of The Largest Superpower On The Planet Is Collapsing Right Now

Globe Earth World - Public DomainHow do you fix a superpower with exploding levels of debt, that has a rapidly aging population, that consumes far more wealth than it produces, and that has scores of zombie banks that could collapse at any moment.  You might think that I am talking about the United States, but I am actually talking about Europe.  You see, the truth is that the European Union has a larger population than the United States does, it has a larger economy than the United States does, and it has a much larger banking system than the United States does.  Most of the time I write about the horrible economic problems that the U.S. is facing, but without a doubt economic conditions in Europe are even worse at the moment.  In fact, there are many (including the Washington Post) that are calling what is happening in Europe a full-blown “depression”.  Sadly, this is probably only just the beginning.  In the months to come things in Europe are likely to get much worse.

First of all, let’s take a look at unemployment.  If the U.S. was using honest numbers, the official unemployment rate would probably be somewhere close to 10 percent.  But in many nations in Europe, the official unemployment rate is already above the ten percent mark…

France: 10.2%

Poland: 11.5%

Italy: 12.6%

Portugal: 13.1%

Spain: 23.6%

Greece: 26.4%

The official unemployment rate for the eurozone as a whole is currently 11.5 percent.  The lack of good jobs is causing the middle class to shrink all over Europe, and more people than ever are becoming dependent on government assistance.  European nations are well known for their generous welfare programs, but all of this spending is causing  debt to GDP ratios to absolutely explode…

Spain: 92.1%

France: 92.2%

Belgium: 101.5%

Portugal: 129.0%

Italy: 132.6%

Greece: 174.9%

At the same time, the value of the euro has been steadily declining over the last six months.  This is significantly reducing the purchasing power that European families have…

Dollar Euro Exchange Rate

Many believe that the euro will ultimately go much lower than this.  Nations such as Greece and Spain are already experiencing deflation, and the inflation rates in Germany and France are both currently below one percent.  If the European Central Bank starts injecting lots of fresh euros into the system to combat this perceived problem, that will lift the level of inflation but it will also further erode the value of the euro.

In the long run, it would not be a surprise to see the U.S. dollar at parity with the euro.

When it happens, remember where you heard it.

The Europeans are scared to death of a deflationary depression, but that is precisely where the long-term economic trends are taking them right now.  The following is from a recent Forbes article

Market consensus believes that the eurozone is edging toward that moment when the scourge of deflation actually becomes a crippling reality. Eurozone data is constantly reminding investors that the region’s economy is barely limping along, as companies slash selling prices in a vain attempt to improve sales in the face of a weakening economy and evaporating new orders. Corporate deflationary reactions like this only hurt a company’s bottom line by squeezing profit margins even further. The obvious knock-on effect will limit resources for hiring and investing, which in turn only dampens any chances of an economic rebound, again putting the region into a bigger hole.

In a desperate attempt to avoid widespread deflation in Europe, the ECB will inevitably take action at some point.

It may not happen immediately, but when it does it will be yet another salvo in the emerging global currency war.

Speaking of currencies, it is being reported that Russia is actually considering legislation that will ban the circulation of the U.S. dollar in that nation.  The following is from an article that was posted on Infowars

Russia may ban the circulation of the United States dollar.

The State Duma has already been submitted a relevant bill banning and terminating the circulation of USD in Russia, APA’s Moscow correspondent reports.

If the bill is approved, Russian citizens will have to close their dollar accounts in Russian banks within a year and exchange their dollars in cash to Russian ruble or other countries’ currencies.

Otherwise their accounts will be frozen and cash dollars levied by police, customs, tax, border, and migration services confiscated.

That is not good news for the U.S. dollar at all.

Expect wild shifts in the foreign exchange markets in the months and years to come.  Turbulent times are ahead for the dollar, the euro and the yen.

Getting back to Europe, let us hope that things stabilize over there – at least for a while.

But that might not happen.  In fact, things could take a turn for the worse at any moment.

Most people don’t realize this, but European banks are even shakier than U.S. banks, and that is saying a lot.

For example, the largest bank in the strongest economy in Europe is Deutsche Bank.  At this point, Deutsche Bank has approximately 75 trillion dollars worth of exposure to derivatives.  That amount of money is about 20 times the size of German GDP, and it is more exposure than any U.S. bank has.

And Deutsche Bank is far from alone.  All over Europe there are zombie banks that are essentially insolvent.  Many of them are being propped up by their governments.  Those governments know that if those banks failed that it would make their economic problems even worse.

Just like in the United States, most economic activity in Europe is fueled by debt.  So those banks are needed to provide mortgages, loans and credit cards to average citizens and businesses.  Unfortunately, bad debt levels and business failures continue to shoot up all over Europe.

The system is breaking down, and nobody is quite sure what is going to happen next.

So keep an eye on Europe.  In particular, keep an eye on Italy.  I have a feeling that big economic news is about to start coming out of Italy, and it won’t be good.

In 2014, we have been experiencing “the calm before the storm”.

But 2015 is right around the corner, and it promises to be extremely “interesting”.

National Economic Suicide: The U.S. Trade Deficit With China Just Hit A New Record High

Economics - Public DomainDid you know that we buy nearly five times as much stuff from the Chinese as they buy from us?  According to government numbers that were just released, we imported 44.9 billion dollars worth of stuff from China in September but we only exported 9.3 billion dollars worth of stuff to them.  And this is not happening because our economy is so much larger than China’s.  In fact, the IMF says that China now has the largest economy on the entire planet on a purchasing power basis.  No, the truth is that this is happening because our economy is broken.  Every month, we consume far more wealth than we produce.  Because the outflow of money is far greater than the inflow, we have to go to major exporting nations and beg them to lend our dollars back to us so that we can pay our bills.  Meanwhile, the quality of the jobs in this country continues to go down and our formerly great manufacturing cities are rotting and decaying.  We are committing national economic suicide, and most Americans don’t seem to care.

Barack Obama is constantly hyping a “manufacturing resurgence” in America, but the numbers don’t lie.  In September, our manufactured goods trade deficit with the rest of the world soared to a new all-time record high of 69.16 billion dollars.  For the year, we are nearly 12 percent ahead of last year’s record pace.

When we buy far more things than we sell, we get poorer as a nation.

How do you think that we ever got into a position of owing China more than a trillion dollars?

We just kept buying far more from them than they bought from us, and their money just kept piling up.  Now it has gotten to the point where our politicians literally beg them to lend our money back to us.  They are the head and we are the tail.

And we did this to ourselves.

Once upon a time, the United States was the greatest manufacturing powerhouse that the world had ever seen.  But now China manufactures more stuff than us and China also accounts for more total global trade (imports plus exports) than us.

This should never have happened.  Several decades ago, the Chinese economy was a complete joke.  But decades of incredibly foolish decisions by our politicians have resulted in the loss of tens of thousands of manufacturing facilities, millions of good paying jobs and the destruction of vast stretches of our economic infrastructure.

During the same time frame, gleaming new manufacturing facilities have gone up all over China.

China is literally wiping the floor with us on the global economic stage and most Americans don’t even understand what is happening.  Here is more on the trade deficit numbers that were just released from the RealityChek Blog

>The China goods deficit of $35.56 billion blew past the old mark of $30.86 billion, set in July, by 15.23 percent. The new deficit also represented a 17.77 percent increase over the August level of $30.20 billion.

>U.S. goods exports to the still strongly growing Chinese economy fell on month in September from $9.63 billion to $9.33 billion (3.12 percent). U.S. merchandise imports from China jumped by 12.70 percent over August levels, from $39.83 billion to $44.89 billion – itself an all-time high.

>The U.S. goods deficit with China this year is now so far running 5.62 percent ahead of 2014’s record pace.

>The longstanding U.S. manufacturing trade shortfall shot up from $59.10 billion in August to $69.16 billion in September. This 17.02 percent jump resulted in a beat of the old record of $67.33 billion, also set in July, by 2.72 percent.

And it isn’t just cheap plastic trinkets that China is selling to us.

In fact, their number one export to us is computer equipment.

Meanwhile, one of our main exports to them is “scrap and trash”.

For much more on how China is absolutely dominating us, please see my previous article entitled “Not Just The Largest Economy – Here Are 26 Other Ways China Has Surpassed America“.

Sadly, there are a couple of factors that will probably make our trade deficit with the rest of the world even worse in the months ahead.

Number one, the currency war that I wrote about earlier this week will probably push the U.S. dollar even higher against the yen and the euro.

You might think that a rising dollar sounds good, but the truth is that it will make our exports less competitive in the global marketplace.

Nations such as Japan devalue their currencies so that they can sell more stuff to us.  But that hurts our own domestic industries.  And when our own domestic industries suffer, that means less jobs for American workers.

Secondly, the collapse in the price of oil could have very serious implications for the shale oil industry.

In recent years, the shale oil revolution has caused local economic booms in states such as Texas and North Dakota.  But shale oil tends to be quite expensive to extract.  As I write this, the price of U.S. oil has fallen to about 77 dollars a barrel.  If it stays at that level or keeps going down, shale oil production in the United States will slow down dramatically.

In other words, a lot of these shale oil “boom towns” could go “bust” very rapidly.

If that happens, the amount of oil that we import will rise substantially and that will add to our overall trade deficit.

But of course the biggest factor fueling our trade deficit is that the vast majority of Americans simply do not care that we are committing national economic suicide.

When we buy products made in America, we support American businesses and American workers.

When we buy products made overseas, we hurt American businesses, we kill American jobs and we make ourselves poorer as a nation.

Of course there is nothing wrong with buying a foreign-made product once in a while.  But this holiday season, most people will fill their shopping carts to the brim with foreign-made goods without even thinking twice about it.

The next time that you go into a huge retail establishment such as Wal-Mart, start picking up products and look to see where they were made.

I think that you will be shocked at how few of them are actually made inside the United States.

When are Americans going to get sick and tired of making China wealthier at our expense?

We are willing participants in the destruction of the U.S. economy, and yet only a small minority of people seem to care.

What is it going to take for people to finally wake up?

30 stats to show to anyone that does not believe the middle class is being destroyed

Abandoned House - Photo by Flickr User baldeaglebluffThe 30 statistics that you are about to read prove beyond a shadow of a doubt that the middle class in America is being systematically destroyed.  Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a staggering pace.  Yes, the stock market has soared to unprecedented heights this year and there are a few isolated areas of the country that are doing rather well for the moment.  But overall, the long-term trends that are eviscerating the middle class just continue to accelerate.  Over the past decade or so, the percentage of Americans that are working has gone way down, the quality of our jobs has plummeted dramatically and the wealth of the typical American household has fallen precipitously.  Meanwhile, we have watched median household income decline for five years in a row, we have watched the rate of homeownership in this country decline for eight years in a row and dependence on the government is at an all-time high.  Being a part of the middle class in the United States at this point can be compared to playing a game of musical chairs.  We can all see chairs being removed from the game, and we are all desperate to continue to have a chair every time the music stops playing.  The next time the music stops, will it be your chair that gets removed?

And in this economy, you don’t even have to lose your job to fall out of the middle class.  Our paychecks are remaining very stable while the cost of almost everything that we spend money on consistently (food, gas, health insurance, etc.) is going up rapidly.  Bloomberg calls this “the no-raises recovery”…

Call it the no-raises recovery: Five years of economic expansion have done almost nothing to boost paychecks for typical American workers while the rich have gotten richer.

Meager improvements since 2009 have barely kept up with a similarly tepid pace of inflation, raising the real value of compensation per hour by only 0.5 percent. That marks the weakest growth since World War II, with increases averaging 9.2 percent at a similar point in past expansions, according to Bureau of Labor Statistics data compiled by Bloomberg.

There are so many families out there that are struggling right now.  So many husbands and wives find themselves constantly fighting with one another about money, and they don’t even understand that what is happening to them is the result of long-term economic trends that are the result of decades of incredibly foolish decisions.  Without middle class jobs, we cannot have a middle class.  And those are precisely the jobs that have been destroyed during the Clinton, Bush and Obama years.  Without enough good jobs to go around, we have seen the middle class steadily shrink and the ranks of the poor grow rapidly.

The following are 30 stats to show to anyone that does not believe the middle class is being destroyed…

1. In 2007, the average household in the top 5 percent had 16.5 times as much wealth as the average household overall.  But now the average household in the top 5 percent has 24 times as much wealth as the average household overall.

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

3. One out of every seven Americans rely on food banks at this point.

4. One out of every four military families needs help putting enough food on the table.

5. 79 percent of the people that use food banks purchase “inexpensive, unhealthy food just to have enough to feed their families”.

6. One out of every three adults in the United States has an unpaid debt that is “in collections“.

7. Only 48 percent of all Americans can immediately come up with $400 in emergency cash without borrowing it or selling something.

8. The price of food continues to rise much faster than the paychecks of most middle class families.  For example, the average price of ground beef has just hit a brand new all-time record high of $3.884 a pound.

9. According to one recent study, 40 percent of all households in the United States are experiencing financial stress right now.

10. The overall homeownership rate has fallen to the lowest level since 1995.

11. The homeownership rate for Americans under the age of 35 is at an all-time low.

12. According to one recent survey, 52 percent of all Americans cannot even afford the house that they are living in right now.

13. The average age of vehicles on America’s roads has hit an all-time high of 11.4 years.

14. Last year, one out of every four auto loans in the United States was made to someone with subprime credit.

15. Amazingly, one out of every six men in their prime working years (25 to 54) do not have a job at this point.

16. One recent study found that 47 percent of unemployed Americans have “completely given up” looking for a job.

17. 36 percent of Americans do not have a single penny saved for retirement.

18. According to one survey, 76 percent of all Americans are living paycheck to paycheck.

19. More than half of all working Americans make less than $30,000 a year in wages.

20. Only four of the twenty fastest growing occupations in America require a Bachelor’s degree or better.

21.  In America today, one out of every ten jobs is filled by a temp agency.

22. Due to a lack of decent jobs, half of all college graduates are still relying on their parents financially when they are two years out of school.

23. Median household income in the United States is about 7 percent lower than it was in the year 2000 after adjusting for inflation.

24. Approximately one out of every four part-time workers in America is living below the poverty line.

25. It is hard to believe, but more than one out of every five children in the United States is living in poverty in 2014.

26. According to one study, there are 49 million Americans that are dealing with food insecurity.

27. 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.

28. If the middle class was actually thriving, we wouldn’t have more than a million public school children that are homeless.

29. If you can believe it, Americans received more than 2 trillion dollars in benefits from the federal government last year alone.

30. In terms of median wealth per adult, the United States is now in just 19th place in the world.

Greed Is Good? Where Will America’s Sick Obsession With Wealth And Money End?

Greed - Photo by J. Solana from Madrid, SpainEverywhere you look, Americans appear to be extremely obsessed with wealth and money.  These days, networks such as CNN endlessly run “news stories” with titles such as “Best cars for the super rich“.  We have television shows where people proudly show off how wealthy they are, and it seems like Hollywood is putting out an endless parade of movies that glorify the lifestyles of the elite.  We have hordes of motivational speakers and “life coaches” that will teach you how to be “more successful” in life, and every small movement in the stock market is carefully monitored by the mainstream news media.  Even in the world of faith, we have an entire class of ministers known as “prosperity preachers”, and many of those ministers wear that label quite proudly.  Yes, those that grew up in the 1980s may have been the “greed is good” generation, but the truth is that they didn’t have anything on us.  As a society we love money, and we are not ashamed to admit it.  In fact, there are times we absolutely revel in it.  For example, Time Magazine published an article this year entitled “Science Proves It: Greed Is Good” and hardly anyone even raised an eyebrow.  But where will America’s sick obsession with wealth and money end?  Could it end up destroying us?

I got the idea for this article when I was browsing through CNN’s website.  The following are eight “news stories” about wealth that were featured on CNN just on Thursday alone…

#1 “The richest Americans in history

#2 “How much do you need to be happy?

#3 “Where are the super rich?

#4 “From broke to billionaire

#5 “Homes: What $25 million buys around the world

#6 “Best cars for the super rich

#7 “America’s homes are bigger than ever

#8 “Mega yacht with a movie theater

This is what passes for news these days?

It has been said that we tend to talk about the things that we are obsessed with.

And CNN is clearly obsessed with wealth.

Not that there is anything wrong with having money.

If none of us had any money, we would all be homeless and starving.  So the truth is that money can be very useful.  But when it becomes an idol, that is when it becomes a problem.

And because we have taught entire generations of Americans that becoming wealthy is one of the primary goals in life, it is creating a tremendous amount of envy, jealousy, frustration and anger among those that have not been able to become wealthy.

In recent years, the level of bitterness and resentment that the rest of the nation has toward the very wealthy has risen to an unprecedented level.  It has become exceedingly apparent that the system is designed to funnel wealth to the very top of the food chain, and many of those at the bottom of the food chain are starting to become extremely upset about this.

Since the last financial crisis, almost all of the income gains have gone to the top one percent of all income earners.  The following comes from a recent Huffington Post article

Economic statistics show that incomes for the top 1 percent of U.S. households soared 31 percent from 2009 through 2012, after adjusting for inflation, yet inched up an average of 0.4 percent for those making less. Many economists are sounding alarms that the income gap, greater now than at any time since the Depression, is hurting the economy by limiting growth in consumer spending.

And income inequality has become such a hot topic that it has even produced a New York Times bestseller by a French economist named Thomas Piketty.  This is what CBS News recently had to say about his book…

His book has landed on that debate like a bomb. Piketty’s thesis: that the rate of return on capital, such as real estate, dividends and other financial assets, is racing away from the rate of growth required to maintain a healthy economy. If that trend continues for an extended period of time — if wealth becomes ever more concentrated in the hands of a few — then inequality is likely to get worse, says Piketty, 43, who started his academic career as an assistant professor at the Massachusetts Institute of Technology and who now teaches at the Paris School of Economics.

Another reason “Capital” has caught the public’s attention is that inequality is evident in what are by now a host of familiar symptoms. Stagnant pay, except among the super-rich. Soaring health care and education costs. The diminished expectations commonly found in young, especially those lacking college degrees, and old alike, as retirement becomes something to endure rather than to enjoy.

It would be foolish to deny that the gap between the rich and the poor is growing.  Even as the stock market reaches unprecedented heights, the middle class is dying and one out of every five children in America is living in poverty.

On a global scale, the wealthiest one percent now have 65 times more wealth than the entire poorest half of the global population does.

That is an astounding figure.

Most people don’t realize this, but the ultra-wealthy have approximately 32 trillion dollars (that we know about) stashed in offshore banks around the planet.  That amount of money would almost be about enough to pay off the entire U.S. national debt and buy every good and service produced in the United States for an entire year.

Meanwhile, the poorest half of the world’s population only owns about 1 percent of all global wealth, and about a billion people throughout the world go to bed hungry every night.

If greed was going to save the world, it would have done it by now.  At this point, the wealthy have accumulated more wealth than they ever have before.  For example, according to Zero Hedge the total amount of wealth in the U.S. has just hit a brand new record high…

Earlier today the Fed released its latest Flow of Funds report, which showed that in the first quarter household net worth rose from last quarter’s $80.3 trillion to a new record high of $81.8 trillion, driven by a $1.5 trillion increase in total assets while household liabilities were virtually unchanged in the quarter. And since the Fed is onboarding all the liabilities why should households bother with debt: that’s what the central bank balance sheet is for.

As for the proceeds, they go to the mega rich: of the $81.8 trillion in net worth, 70.4% of the total amount or $67.2 trillion, was in financial assets: the higest it has ever been courtesy of just one person: Ben Bernanke, and to a far lesser extent Janet Yellen who however is tasked with picking up Bernanke’s pieces.

But of course most people who are rich are only rich on paper.

As noted above, 67.2 trillion dollars of the total of 81.8 trillion dollars of wealth in this nation is made up of financial assets.

So what happens if there is a major financial crisis (such as the derivatives bubble bursting) which causes the total amount of financial wealth in the United States to drop by 50% or more?

What would such an event do to our country?

We are so obsessed with wealth and money that it is truly frightening to think about how we would react as a society if it was taken away.

But this current financial bubble will not last forever.

At some point it will come to an end.

When it does, will our society throw a massive temper tantrum?

Shocking Facts About The Deindustrialization Of America That Everyone Should Know

Abandoned Packard Automobile Factory - Photo by Albert DuceHow long can America continue to burn up wealth?  How long can this nation continue to consume far more wealth than it produces?  The trade deficit is one of the biggest reasons for the steady decline of the U.S. economy, but many Americans don’t even understand what it is.  Basically, we are buying far more stuff from the rest of the world than they are buying from us.  That means that far more money is constantly leaving the country than is coming into the country.  In order to keep the game going, we have to go to the people that we bought all of that stuff from and ask them to lend our money back to us.  Or lately, we just have the Federal Reserve create new money out of thin air.  This is called “quantitative easing”.  Our current debt-fueled lifestyle is dependent on this cycle continuing.  In order to live like we do, we must consume far more wealth than we produce.  If someday we are forced to only live on the wealth that we create, it will require a massive adjustment in our standard of living.  We have become great at consuming wealth but not so great at creating it.  But as a result of running gigantic trade deficits year after year, we have lost tens of thousands of businesses, millions upon millions of jobs, and America is being deindustrialized at a staggering pace.

Most Americans won’t even notice, but the latest monthly trade deficit increased to 42.3 billion dollars

The U.S. trade deficit climbed to the highest level in five months in February as demand for American exports fell while imports increased slightly.

The deficit increased to $42.3 billion, which was 7.7% above the January imbalance of $39.3 billion, the Commerce Department reported Thursday.

When the trade deficit increases, it means that even more wealth, even more jobs and even more businesses have left the United States.

In essence, we have gotten poorer as a nation.

Have you ever wondered how China has gotten so wealthy?

Just a few decades ago, they were basically a joke economically.

So how in the world did they get so powerful?

Well, one of the primary ways that they did it was by selling us far more stuff than we sold to them.  If we had refused to do business with communist China, they never would have become what they have become today.  It was our decisions that allowed China to become an economic powerhouse.

Last year, we sold 122 billion dollars of stuff to China.

That sounds like a lot until you learn that China sold 440 billion dollars of stuff to us.

We fill up our shopping carts with lots of cheap plastic trinkets that are “made in China”, and they pile up gigantic mountains of our money which we beg them to lend back to us so that we can pay our bills.

Who is winning that game and who is losing that game?

Below, I have posted our yearly trade deficits with China since 1990.  Let’s see if you can spot the trend…

1990: 10 billion dollars

1991: 12 billion dollars

1992: 18 billion dollars

1993: 22 billion dollars

1994: 29 billion dollars

1995: 33 billion dollars

1996: 39 billion dollars

1997: 49 billion dollars

1998: 56 billion dollars

1999: 68 billion dollars

2000: 83 billion dollars

2001: 83 billion dollars

2002: 103 billion dollars

2003: 124 billion dollars

2004: 162 billion dollars

2005: 202 billion dollars

2006: 234 billion dollars

2007: 258 billion dollars

2008: 268 billion dollars

2009: 226 billion dollars

2010: 273 billion dollars

2011: 295 billion dollars

2012: 315 billion dollars

2013: 318 billion dollars

Yikes!

It has been estimated that the U.S. economy loses approximately 9,000 jobs for every 1 billion dollars of goods that are imported from overseas, and according to the Economic Policy Institute, America is losing about half a million jobs to China every single year.

Considering the high level of unemployment that we now have in this country, can we really afford to be doing that?

Overall, the United States has accumulated a total trade deficit with the rest of the world of more than 8 trillion dollars since 1975.

As a result, we have lost tens of thousands of businesses, millions of jobs and our economic infrastructure has been absolutely gutted.

Just look at what has happened to manufacturing jobs in America.  Back in the 1980s, more than 20 percent of the jobs in the United States were manufacturing jobs.  Today, only about 9 percent of the jobs in the United States are manufacturing jobs.

And we have fewer Americans working in manufacturing today than we did in 1950 even though our population has more than doubled since then…

Manufacturing Employment

Many people find this statistic hard to believe, but the United States has lost a total of more than 56,000 manufacturing facilities since 2001.

Millions of good paying jobs have been lost.

As a result, the middle class is shriveling up, and at this point 9 out of the top 10 occupations in America pay less than $35,000 a year.

For a long time, U.S. consumers attempted to keep up their middle class lifestyles by going into constantly increasing amounts of debt, but now it is becoming increasingly apparent that middle class consumers are tapped out.

In response, major retailers are closing thousands of stores in poor and middle class neighborhoods all over the country.  You can see some amazing photos of America’s abandoned shopping malls right here.

If we could start reducing the size of our trade deficit, that would go a long way toward getting the United States back on the right economic path.

Unfortunately, Barack Obama has been negotiating a treaty in secret which is going to send the deindustrialization of America into overdrive.  The Trans-Pacific Partnership is being called the “NAFTA of the Pacific”, and it is going to result in millions more good jobs being sent to the other side of the planet where it is legal to pay slave labor wages.

According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades if current trends continue.

So what will this country look like when we lose tens of millions more jobs than we already have?

U.S. workers are being merged into a giant global labor pool where they must compete directly for jobs with people making less than a dollar an hour with no benefits.

Obama tells us that globalization is good for us and that Americans need to be ready to adjust to a “level playing field”.

The quality of our jobs has already been declining for decades, and if we continue down this path the quality of our jobs is going to get a whole lot worse and our economic infrastructure will continue to be absolutely gutted.

At one time, the city of Detroit was the greatest manufacturing city on the entire planet and it had the highest per capita income in the United States.  But today, it is a rotting, decaying hellhole that the rest of the world laughs at.

In the end, the rest of the nation is going to suffer the same fate as Detroit unless Americans are willing to stand up and fight for their economy while they still can.

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