If you want to live the high life, you don’t have to become a rap star, a professional athlete or a Wall Street banker. All it really takes is winning an election. Right now, more than half of all the members of Congress are millionaires, and most of them leave “public service” far wealthier than when they entered it. Since most of them have so much money, you would think that they would be willing to do a little “belt-tightening” for the sake of the American people. After all, things are supposedly “extremely tight” in Washington D.C. right now. In fact, just the other day Nancy Pelosi insisted that there were “no more cuts to make” to the federal budget. But even as they claim that things are so tough right now, our politicians continue to live the high life at the expense of U.S. taxpayers. The statistics that I am about to share with you are very disturbing. Please share them with everyone that you know. The American people deserve the truth.
According to the Weekly Standard, an absolutely insane amount of money is being spent on the “hair care needs” of U.S. Senators…
Senate Hair Care Services has cost taxpayers about $5.25 million over 15 years. They foot the bill of more than $40,000 for the shoeshine attendant last fiscal year. Six barbers took in more than $40,000 each, including nearly $80,000 for the head barber.
Keep in mind that there are only 100 U.S. Senators, and many of them don’t have much hair left at this point.
But hair care is just the tip of the iceberg. The following are 21 other ways that our politicians are living the high life at your expense…
#1 According to Roll Call’s annual survey of Congressional wealth, the super wealthy in Congress just continue to get much wealthier even though they are supposedly dedicating their lives to “public service”…
Rep. Michael McCaul (R-Texas) is the richest Member of Congress for the second year in a row, reporting a vast fortune that in 2011 had a minimum net worth surpassing $300 million for the first time.
McCaul is followed by Sen. John Kerry (D-Mass.), who reported a minimum net worth of $198.65 million, and Rep. Darrell Issa (R-Calif.), who reported a minimum net worth of $140.55 million. The two lawmakers swapped places since last year’s list.
The lawmakers who round out the top five, Sens. Mark Warner (D-Va.) and Jay Rockefeller (D-W.Va.), also flipped positions from 2010 to 2011, with Warner’s reported minimum worth rising about $9 million to $85.81 million and Rockefeller’s minimum worth rising slightly to $83.08 million.
#2 Amazingly, the 50th most wealthy member of Congress has a net worth of 6.14 million dollars.
#3 At this point, more than half of those “serving the American people” in Congress are millionaires.
#4 In one recent year, an average of $4,005,900 of U.S. taxpayer money was spent on “personal” and “office” expenses per U.S. Senator.
#5 Once they leave Washington, former members of Congress continue to collect huge checks for the rest of their lives…
In 2011, 280 former lawmakers who retired under a former government pension system received average annual pensions of $70,620, according to a Congressional Research Service report. They averaged around 20 years of service. At the same time, another 215 retirees (elected in 1984 or later with an average of 15 years of service) received average annual checks of roughly $40,000 a year.
#6 Speaker of the House John Boehner would bring home a yearly pension of close to $85,000 if he left Congress when his current term ends in 2014.
#7 At this point, quite a few former lawmakers are collecting federal pensions for life worth at least $100,000 annually. That list includes such notable names as Newt Gingrich, Bob Dole, Trent Lott, Dick Gephardt and Dick Cheney.
#8 The U.S. government is spending approximately 3.6 million dollars a year to support the lavish lifestyles of former presidents such as George W. Bush and Bill Clinton.
#9 Nearly 500,000 federal employees now make at least $100,000 a year.
#10 During one recent year, the average federal employee in the Washington D.C. area received total compensation worth more than $126,000.
#11 During one recent year, compensation for federal employees came to a grand total of approximately 447 billion dollars.
#12 If you can believe it, there are 77,000 federal workers that make more than the governors of their own states do.
#13 When Joe Biden and his staff took a trip to London, the hotel bill cost U.S. taxpayers $459,388.65.
#14 Joe Biden and his staff also stopped in Paris for one night. The hotel bill for that one night came to $585,000.50.
#15 When Biden and his staff visited Moscow for two days in 2011, the total hotel bill came to $665,445.00.
#16 During 2012, the salaries of Barack Obama’s three climate change advisers combined came to a grand total of more than $370,000.
#17 Overall, 139 different White House staffers were making at least $100,000 during 2012, and there were 20 staffers that made the maximum of $172,200.
#18 It is estimated that the trip that the Obamas took to Africa cost U.S. taxpayers about 100 million dollars.
#19 The Obamas only have one dog named “Bo”, but the White House “dog handler” reportedly makes $102,000 per year and sometimes he is even flown to where the Obamas are vacationing so that he can take care of the dog.
#20 There is always at least one projectionist at the White House 24 hours a day just in case there is someone that wants to watch a movie. Apparently turning on a DVD player is too much to ask.
#21 In one recent year, more than 1.4 billion dollars was spent on the Obamas. Meanwhile, British taxpayers only spent about 58 million dollars on the entire royal family.
So who pays for all of this extravagance?
The American people do of course.
Unfortunately, what most of our politicians fail to understand is that most families are struggling tremendously right now.
This week, Yahoo featured the story of a 77-year-old former executive that is now flipping burgers and serving drinks to make ends meet. He says that he now earns in a week what he once earned in a single hour, but he is thankful to have a job in this economic environment…
It seems like another life. At the height of his corporate career, Tom Palome was pulling in a salary in the low six-figures and flying first class on business trips to Europe.
Today, the 77-year-old former vice president of marketing for Oral-B juggles two part-time jobs: one as a $10-an-hour food demonstrator at Sam’s Club, the other flipping burgers and serving drinks at a golf club grill for slightly more than minimum wage.
While Palome worked hard his entire career, paid off his mortgage and put his kids through college, like most Americans he didn’t save enough for retirement. Even many affluent baby boomers who are approaching the end of their careers haven’t come close to saving the 10 to 20 times their annual working income that investment experts say they’ll need to maintain their standard of living in old age.
So many Americans are barely making it from month to month at this point. Most people work very, very hard for their money, and it is very discouraging to see our politicians waste our hard-earned tax dollars so frivolously.
Fortunately, there are signs that the American people are starting to get fed up with all of this. According to a stunning new Gallup survey, more Americans than ever before (60 percent) believe that the federal government has too much power.
So what do you think?
Do you think that the government is too big and too wasteful?
Please feel free to share what you think by posting a comment below…
The percentage of Americans that are economically independent has dropped to a stunningly low level. In order to be economically independent, you have got to be able to take care of yourself without any assistance from anyone else. Unless you are independently wealthy, that means that you either have your own business or you have a full-time job. Unfortunately, as you will see below, the percentage of Americans that are self-employed is at an all-time record low and the percentage of Americans with a full-time job has declined to a level not seen in about 30 years. As a result, more Americans than ever find themselves forced to turn to the government for assistance. When you add it all up, about half of all Americans get money from the government each month these days. And yes, there will always be poor people that cannot take care of themselves that need help, but when you have more than half of the population dependent on the government that is a major problem. You see, the truth is that our independence is systematically being taken away from us and we are steadily being made serfs of the state. And once you become a serf of the state, it is very hard to resist anything the government is doing in a meaningful way. After all, the money that you are getting from the government is enabling you to survive. In essence, your allegiance has been at least partially purchased and you may not even realize it.
Of course this is not how the United States was supposed to operate. We were never intended to be a collectivist nation. Rather, we were intended to be a country where liberty and freedom thrived and where most people would be able to independently take care of themselves.
Unfortunately, it is becoming increasingly difficult to be economically independent in America today. One reason for this is that the environment for small businesses in this country is the most toxic that it has ever been before. The federal government, our state governments and even our local governments are constantly coming up with new ways to oppress small business.
And just this week we learned that the IRS is specifically targeting small business owners and sending them threatening letters.
Yes, you read that correctly. Despite all of the trouble that the IRS is currently in, they are still choosing to specifically go after small businesses with both barrels. As a recent Forbes article explained, the IRS plans to send threatening letters to 20,000 small businesses all over the country…
The tax agency is doing some targeting of its own, fingering at least 20,000 small businesses. And that number will grow. The scrutiny on this group and in this way is a little frightening. Small business people across America are receiving IRS notices. More will be coming. The IRS gathers data from many third parties—including credit card companies—to see if you picked up every nickel of income.
This is absolutely disgusting, but it is just another example of how small business is being eradicated in the United States. As I mentioned in a previous article, the percentage of Americans that are self-employed has dropped to a record low…
Well, at least we can achieve economic independence by getting a full-time job, right?
Sadly, that is becoming increasingly difficult to do as well.
The chart below was created by Chartist Friend from Pittsburgh, and it shows that the percentage of working age Americans with a full-time job dropped sharply to 47 percent during the last recession and it has stayed about that level ever since. The yellow line is the line in the chart which demonstrates this…
As you can see, we briefly touched that level in the 1970s and again briefly in the 1980s, but it is important to remember that the percentage of women that chose to seek employment was much lower back then. When you take that into account, the current level of full-time employment in this country looks even worse.
The quality of jobs in this country has been steadily falling for quite some time, and we are rapidly transitioning to an economy where part-time employment will be much more prominent.
But you can’t support a family or be economically independent on a part-time income. In fact, most of those that try to make it on a part-time income find that they must turn to the government for help.
And right now, a higher percentage of Americans are economically dependent on the government than ever before. The following is from a recent article by Charles Hugh-Smith…
Why? Because half of us are getting a direct check, benefit or payment from the state. Over 61 million people get a check from Social Security, over 50 million draw Medicare benefits, another 50 million get Medicaid benefits, 47 million receive SNAP food stamp benefits, 22 million people work directly for the state on all levels, millions more work for government contractors that are effectively proxies of the state, millions more receive Federally funded extended unemployment, retirement checks, Section 8 housing benefits, and so on.
Orwell underestimated the power of complicity. Once a citizen receives a direct payment from the state, the state has purchased their complicity, for no matter how much that citizen may complain privately about the state, he or she will never risk the payment/benefit by resisting the state in a politically meaningful way.
Once you get a check from the state, you begin loving your servitude. The collusion of the state and its central bank is truly a thing of authoritarian beauty: the central bank (the Federal Reserve) creates money out of thin air and buys government bonds with the new money. The state can thus borrow unlimited sums at low rates of interest, and continue to send tens of millions of individual payments out to buy the passivity and complicity of its citizens.
So what is the solution?
Of course the solution would be for our economy to produce more small businesses and more full-time jobs so that more people could achieve economic independence.
Sadly, right now our system is steadily killing full-time jobs and small businesses, and there does not appear to be any hope for a major turnaround any time soon.
At this point, the number of Americans that are financially dependent on the government is absolutely staggering, and it gets worse with each passing year. Just consider the following statistics which come from one of my previous articles entitled “21 Facts About Rising Government Dependence In America That Will Blow Your Mind“…
1. Back in 1960, the ratio of social welfare benefits to salaries and wages was approximately 10 percent. In the year 2000, the ratio of social welfare benefits to salaries and wages was approximately 21 percent. Today, the ratio of social welfare benefits to salaries and wages is approximately 35 percent.
2. According to the U.S. Census Bureau, 49 percent of all Americans live in a home that gets direct monetary benefits from the federal government. Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.
3. Overall, more than 70 percent of all federal spending goes to “dependence-creating programs”.
4. According to the Survey of Income and Program Participation conducted by the U.S. Census, well over 100 million Americans are enrolled in at least one welfare program run by the federal government. Sadly, that figure does not even include Social Security or Medicare.
5. Today, the federal government runs about 80 different “means-tested welfare programs”, and almost all of those programs have experienced substantial growth in recent years.
6. The number of Americans on Social Security disability now exceeds the entire population of the state of Virginia.
7. If the number of Americans on Social Security disability were gathered into a separate state, it would be the 8th largest state in the country.
8. In 1968, there were 51 full-time workers for every American on disability. Today, there are just 13 full-time workers for every American on disability.
9. Right now, there are approximately 56 million Americans collecting Social Security benefits. By 2035, that number is projected to soar to an astounding 91 million.
10. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
11. The number of Americans on food stamps has grown from 17 million in the year 2000 to more than 47 million today.
12. Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, about one out of every 6.5 Americans is on food stamps.
13. Today, the number of Americans on food stamps exceeds the entire population of the nation of Spain.
14. According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”
15. According to a report from the Center for Immigration Studies, 43 percent of all immigrants that have been in the United States for at least 20 years are still on welfare.
16. Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
17. As I wrote about recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
18. At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for every single household in the United States.
19. Back in 1990, the federal government accounted for just 32 percent of all health care spending in America. It is being projected that the federal government will account for more than 50 percent of all health care spending in the United States very soon.
20. The amount of money that the federal government gives directly to the American people has increased by 32 percent since Barack Obama entered the White House.
21. When you total it all up, American households are now receiving more money directly from the federal government than they are paying to the government in taxes.
Once again, there is certainly nothing wrong with helping the poor, and there will always be people that need a helping hand.
But what we have in America today is far beyond that. What we have in America today is a situation where economic independence is being systematically eradicated and the government is increasingly being expected to provide our daily bread and to take care of all of us from the cradle to the grave.
And once you are dependent on the system, at least part of you is going to become resistant to anyone or anything that threatens to bring meaningful change to the system because your survival depends on the system.
Or could I be wrong about this?
What do you think?
Please feel free to share your opinion by posting a comment below…
Broke nations are bailing out other broke nations with borrowed money. Round and round we go – where we stop nobody knows. As of April, 41 different countries had active financial “arrangements” with the IMF. Sometimes they are called “bailouts” and sometimes they are called other things, but in every single case they involve loans. And most of the time, these loans come with very stringent conditions. It is a form of “global governance” that most people don’t even know about. For decades, the IMF has been able to use money as a way to force developing nations to do what it wants them to do. But up until fairly recently, this had mostly only been done with poor nations. But now an increasing number of wealthy nations are turning to the IMF for help. We have already seen Greece, Portugal, Ireland and Cyprus receive bailouts which were partly funded by the IMF, Spain has received a bailout for its banking sector, and as I noted yesterday, it is being projected that Italy will need a major bailout within six months. How long can this go on before the entire system collapses?
Well, that would depend on how much money the lender has.
And so where does the IMF get their money?
The IMF gets their money from a bunch of nations that are absolutely drowning in debt themselves.
The IMF is funded by “wealthy” nations that dominate the global economy. The following is how Wikipedia describes the IMF’s quota system…
The IMF’s quota system was created to raise funds for loans. Each IMF member country is assigned a quota, or contribution, that reflects the country’s relative size in the global economy. Each member’s quota also determines its relative voting power. Thus, financial contributions from member governments are linked to voting power in the organization.
These are the five largest contributors to IMF funding…
United States – 16.75%
Japan – 6.23%
Germany – 5.81%
France – 4.29%
UK – 4.29%
But those countries are in trouble themselves. The U.S. has a debt to GDP ratio of over 100%. Japan has a debt to GDP ratio of over 200%.
The truth is that these countries are funding the IMF with borrowed money.
So what happens when the contributors run out of money and can’t contribute anymore?
All over the globe, an increasing number of countries are reaching out to the IMF for help. For example, on Thursday we learned that Pakistan is getting a new bailout from the IMF…
Pakistan and the International Monetary Fund have reached an initial agreement on a bailout of at least $5.3 billion.
Pakistani Finance Minister Muhammad Ishaq Dar and IMF mission chief Jeffrey Franks announced the agreement at a press conference Thursday.
And the new government in Egypt is hoping that the revolution that just occurred will not stop the flow of IMF funds…
In recent months, a handful of neighboring countries such as Qatar have been keeping Egypt’s economy afloat by loaning the country’s central bank cash. That has bought Morsi government time to delay implementing the politically-sensitive measures the IMF has sought as a precondition before it gives Cairo a $4.8 billion credit line. In particular, the IMF had said that Egypt must raise taxes and begin phasing out fuel subsidies.
It’s not the only cash at stake. Other international donors have vowed another $9.7 billion for the country once the IMF program is in place. Roughly $1.55 billion in bilateral aid from Washington could also be held up: under U.S. law, the administration can’t loan money to countries where the military is involved in an unconstitutional change in government.
But what often happens with these bailouts is that the “conditions” that are imposed prove extremely difficult to meet. For example, Greece has not implemented all of the “reforms” that they were ordered to implement, and so the flow of future funds may be threatened…
As Greece looks set to miss a key reform deadline set by international lenders, which could jeopardize further financial aid, a Greek government minister said it wasn’t Greece’s fault that it couldn’t live up to the demands of a flawed bailout program.
“There are failures [by Greece],but you assume that the program that has been effectively imposed on us is perfect, which is far from the case,” Nikos Dendias, minister of Public Order and Citizen Protection, told CNBC on Thursday.
His comments come after Greek finance ministry officials said on Wednesday that Greece would not meet targets on reforming its public sector by the deadline set by international lenders, putting further financial aid in jeopardy.
Once a nation gets hooked on bailout money from the IMF or from other international sources, it can be very hard to get off of it. But that is what these globalist organizations like – they want to be able to use money as a form of control.
As we saw with Greece, sometimes a nation will need bailout after bailout. And it appears that is also going to be the case with Portugal. The Portuguese government is on the verge of collapsing and their financial situation is being described as “very fragile”…
Portugal had been held up as an example of a bailout country doing all the right things to get its economy back in shape. That reputation is now harder to sustain and even before this latest crisis, the International Monetary Fund reported last month that Lisbon’s debt position was “very fragile”.
Coming soon after the near-collapse of the Greek government, which has been given until Monday to show it can meet the demands of its own EU-IMF bailout, the euro zone may be on the brink of falling back into full-on crisis.
Right now, Portuguese bond yields are absolutely soaring and the Portuguese economy is rapidly heading into depression.
Portugal is going to desperately need the assistance of the IMF.
But what happens when the nations that primarily fund the IMF start failing themselves?
The U.S. is a complete and total financial disaster and so is Japan. Much of Europe is already experiencing a full-blown economic depression and even China is showing signs of trouble.
So if the “wealthy” nations fail, who is going to be there to help the “poor” nations?
Did you know that you are involved in the most massive Ponzi scheme that has ever existed? To illustrate my point, allow me to tell you a little story. Once upon a time, there was a man named Sam. When he was younger, he had been a very principled young man that had worked incredibly hard and that had built a large number of tremendously successful businesses. He became fabulously wealthy and he accumulated far more gold than anyone else on the planet. But when he started to get a little older he forgot the values of his youth. He started making really bad decisions and some of his relatives started to take advantage of him. One particularly devious relative was a nephew named Fred. One day Fred approached his uncle Sam with a scheme that his friends the bankers had come up with. What happened next would change the course of Sam’s life forever.
Even though Sam was the wealthiest man in the world by far, Fred convinced Sam that he could have an even higher standard of living by going into a little bit of debt. In exchange for IOUs issued by his uncle Sam, Fred would give him paper notes that he printed off on his printing press. Since the paper notes would be backed by the gold that Sam was holding, everyone would consider them to be valuable. Sam could take those paper notes and spend them on whatever his heart desired. Uncle Sam started to do this, and he started to become addicted to all of the nice things that those paper notes would buy him.
Fred took the IOUs that he received from his uncle and he auctioned them off to the bankers. But there was a problem. The IOUs issued by Uncle Sam had to be paid back with interest. When the time came to pay back the IOUs, Uncle Sam could not afford to pay back the debts, pay the interest on those debts, and buy all of the nice things that he wanted. So Uncle Sam issued even more IOUs than before so that he could get enough notes to pay off his debts. As time rolled on, this pattern just kept on repeating. Uncle Sam repeatedly paid off his old debts by taking out even larger new debts.
Meanwhile, since the notes that Uncle Sam was using were backed by gold, everyone else in the world decided to start using them to trade with one another. This was greatly beneficial to Uncle Sam, because the rest of the world was glad to send him oil, home electronics, plastic trinkets and anything else that Uncle Sam wanted in exchange for his gold-backed notes.
Eventually, however, the rest of the world started to suspect that the number of gold-backed notes that Uncle Sam was issuing far exceeded the amount of gold that Uncle Sam actually had. So the rest of the world started to trade in their notes for gold.
And by that time Uncle Sam definitely did not have enough gold to back up his notes. Realizing that the scheme was starting to collapse, one day Uncle Sam announced that his notes would no longer be backed by gold. But he insisted that the rest of the world should continue using his notes because he was the wealthiest man on the planet and everyone should just trust him.
And the rest of the world did continue to trust him, although it wasn’t the same as before.
As Uncle Sam got greedier and greedier, he started to issue IOUs and spend notes at a rate that nobody ever dreamed possible. The great businesses that Uncle Sam had built when he was younger were starting to decline, and Uncle Sam started buying far more stuff from the rest of the world than they bought from him. The rest of the world was still glad to take Uncle Sam’s notes because they used them to trade with one another, but they started accumulating far more notes than they actually needed.
Not sure exactly what to do with mountains of these notes, the rest of the world started to loan them back to Uncle Sam. It eventually got to the point where Uncle Sam owed the rest of the world trillions of these notes. Even though the notes were losing value at a rate of close to 10 percent a year, Uncle Sam somehow convinced the rest of the world to loan him notes at an average rate of interest of less than 3 percent a year.
One day Uncle Sam woke up and realized that the amount of debt that he owed was now more than 5000 times larger than it was when Fred had first approached him with this ill-fated scheme. Uncle Sam now owed more than 16 trillion notes to his creditors, and Uncle Sam had already made future financial commitments of 202 trillion notes that he would never be able to pay. Meanwhile, the notes that Fred had been printing up for Uncle Sam were now worth less than 5 percent of their original value. Uncle Sam was becoming concerned because some of his other relatives were warning that this whole scheme was about to collapse.
Sadly, Uncle Sam did not listen to them. Uncle Sam knew that if he admitted how fraudulent the financial scheme was, the rest of the world would quit sending him all of the things that he needed in exchange for his notes and they would quit lending his notes back to him at super low interest rates.
And if the rest of the world lost confidence in his notes and quit using them, Uncle Sam knew that his standard of living would go way, way down. That was something that Uncle Sam could not bear to have happen.
When a financial crisis almost caused the scheme to crash in 2008, a desperate Uncle Sam went to Fred and asked for help. In response, Fred started printing up far more notes than ever before and started directly buying up large amounts of IOUs from Uncle Sam with the notes that he was creating out of thin air. Fred hoped that the rest of the world would not notice what he was doing.
It seemed to work for a little while, but then an even worse financial crisis came along. Once again, Uncle Sam started issuing massive amounts of new IOUs and Fred started printing up giant mountains of new notes to try to fix things, but their desperate attempts to keep the system going were to no avail. The rest of the world started to realize that they had been sucked into a massive Ponzi scheme, and they lost confidence in the notes that Uncle Sam was using. Suddenly nobody wanted to lend notes to Uncle Sam at super low interest rates anymore, and people started asking for far more notes in exchange for the things that Uncle Sam wanted.
Uncle Sam’s standard of living dropped dramatically. Since he could no longer flood the world with his notes, Uncle Sam could not continue to consume far, far more wealth than he produced. Uncle Sam sunk into a deep depression as he watched the scheme fall apart all around him.
Uncle Sam had once been the wealthiest man on the entire planet, but now he was a broke, tired old man that was absolutely drowning in debt. Unfortunately, once he was down on his luck the rest of the world did not have any compassion for him. In fact, much of the rest of the world celebrated the downfall of Uncle Sam.
All of this could have been avoided if Uncle Sam had never agreed to Fred’s crazy scheme. And once Uncle Sam made the decision to stop backing his notes with gold, it was only a matter of time before the scheme was going to collapse.
Does this little story sound crazy to you? It shouldn’t. The truth is that you are involved in such a scheme right now. In case you haven’t figured it out, “Uncle Sam” is the United States, the “notes” are U.S. dollars, and “Fred” is the Federal Reserve.
Please share this story with as many people as you can. Our country is headed for complete and total financial disaster, and we need to get people educated about this while there is still time.
If the economy is getting better, then why does poverty in America continue to grow so rapidly? Yes, the stock market has been hitting all-time highs recently, but also the number of Americans living in poverty has now reached a level not seen since the 1960s. Yes, corporate profits are at levels never seen before, but so is the number of Americans on food stamps. Yes, housing prices have started to rebound a little bit (especially in wealthy areas), but there are also more than a million public school students in America that are homeless. That is the first time that has ever happened in U.S. history. So should we measure our economic progress by the false stock market bubble that has been inflated by Ben Bernanke’s reckless money printing, or should we measure our economic progress by how the poor and the middle class are doing? Because if we look at how average Americans are doing these days, then there is not much to be excited about. In fact, poverty continues to experience explosive growth in the United States and the middle class continues to shrink. Sadly, the truth is that things are not getting better for most Americans. With each passing year the level of economic suffering in this country continues to go up, and we haven’t even reached the next major wave of the economic collapse yet. When that strikes, the level of economic pain in this nation is going to be off the charts.
The following are 21 statistics about the explosive growth of poverty in America that everyone should know…
1 – According to the U.S. Census Bureau, approximately one out of every six Americans is now living in poverty. The number of Americans living in poverty is now at a level not seen since the 1960s.
2 – When you add in the number of low income Americans it is even more sobering. According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income”.
3 – Today, approximately 20 percent of all children in the United States are living in poverty. Incredibly, a higher percentage of children is living in poverty in America today than was the case back in 1975.
4 – It may be hard to believe, but approximately 57 percent of all children in the United States are currently living in homes that are either considered to be either “low income” or impoverished.
5 – Poverty is the worst in our inner cities. At this point, 29.2 percent of all African-American households with children are dealing with food insecurity.
6 – According to a recently released report, 60 percent of all children in the city of Detroit are living in poverty.
7 – The number of children living on $2.00 a day or less in the United States has grown to 2.8 million. That number has increased by 130 percent since 1996.
8 – For the first time ever, more than a million public school students in the United States are homeless. That number has risen by 57 percent since the 2006-2007 school year.
9 – Family homelessness in the Washington D.C. region (one of the wealthiest regions in the entire country) has risen 23 percent since the last recession began.
10 – One university study estimates that child poverty costs the U.S. economy 500 billion dollars each year.
11 – At this point, approximately one out of every three children in the U.S. lives in a home without a father.
12 – Families that have a head of household under the age of 30 have a poverty rate of 37 percent.
13 – Today, there are approximately 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.
14 – About 40 percent of all unemployed workers in America have been out of work for at least half a year.
15 – At this point, one out of every four American workers has a job that pays $10 an hour or less.
16 – There has been an explosion in the number of “working poor” Americans in recent years. Today, about one out of every four workers in the United States brings home wages that are at or below the poverty level.
17 – Right now, more than 100 million Americans are enrolled in at least one welfare program run by the federal government. And that does not even include Social Security or Medicare.
18 – An all-time record 47.79 million Americans are now on food stamps. Back when Barack Obama first took office, that number was only sitting at about 32 million.
19 – The number of Americans on food stamps now exceeds the entire population of Spain.
20 – According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”
21 – Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, close to one out of every six Americans is on food stamps. Even more shocking is the fact that more than one out of every four children in the United States is enrolled in the food stamp program.
Unfortunately, all of these problems are a result of our long-term economic decline. In a recent article for the New York Times, David Stockman, the former director of the Office of Management and Budget under President Ronald Reagan, did a brilliant job of describing how things have degenerated over the last decade…
Since the S&P 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually. Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.
For the last couple of years, the U.S. economy has experienced a bubble of false hope that has been produced by unprecedented amounts of government debt and unprecedented money printing by the Federal Reserve.
Unfortunately, that bubble of false hope is not going to last much longer. In fact, we are already seeing signs that it is getting ready to burst.
For example, initial claims for unemployment benefits shot up to 385,000 for the week ending March 30th.
That is perilously close to the 400,000 “danger level” that I keep warning about. Once we cross the 400,000 level and stay there, it will be time to go into crisis mode.
In the years ahead, it is going to become increasingly difficult to find a job. Just the other day I saw an article about an advertisement for a recent job opening at a McDonald’s in Massachusetts that required applicants to have “one to two years experience and a bachelor’s degree“.
If you need a bachelor’s degree for a job at McDonald’s, then what in the world are blue collar workers going to do when the competition for jobs becomes really intense once the economy experiences another major downturn?
Do not be fooled by the fact that the Dow has been setting new all-time highs. The truth is that we are in the midst of a long-term economic decline, and things are going to get a lot worse. If you know someone that is not convinced of this yet, just share the following article with them: “Show This To Anyone That Believes That ‘Things Are Getting Better’ In America“.
So what are all of you seeing in your own areas?
Are you seeing signs that poverty is getting worse?
Please feel free to post a comment with your thoughts below…
What would you do if you woke up one day and discovered that the banksters had “legally” stolen about 80 percent of your life savings? Most people seem to assume that most of the depositors that are getting ripped off in Cyprus are “Russian oligarchs” or “wealthy European tycoons”, but the truth is that they are only just part of the story. As you will see below, there are small businesses and aging retirees that have been absolutely devastated by the wealth confiscation that has taken place in Cyprus. Many businesses can no longer meet their payrolls or pay their bills because their funds have been frozen, and many retirees have seen retirement plans that they have been working toward for decades absolutely destroyed in a matter of days. Sometimes it can be hard to identify with events that are happening on the other side of the globe, but I want you to try to put yourself into their shoes for a few minutes. How would you feel if something like this happened to you?
For example, just consider the case of one 65-year-old retiree that has had his life savings totally wiped out by the “wealth tax” in Cyprus. His very sad story was recently featured by the Sydney Morning Herald…
”Very bad, very, very bad,” says 65-year-old John Demetriou, rubbing tears from his lined face with thick fingers. ”I lost all my money.”
John now lives in the picturesque fishing village of Liopetri on Cyprus’ south coast. But for 35 years he lived at Bondi Junction and worked days, nights and weekends in Sydney markets selling jewellery and imitation jewellery.
He had left Cyprus in the early 1970s at the height of its war with Turkey, taking his wife and young children to safety in Australia. He built a life from nothing and, gradually, a substantial nest egg. He retired to Cyprus in 2007 with about $1 million, his life savings.
He planned to spend it on his grandchildren – some of whom live in Cyprus – putting them through university and setting them up. There would be medical bills; he has a heart condition. The interest was paying for a comfortable retirement, and trips back to Australia. He also toyed with the idea of buying a boat.
He wanted to leave any big purchases a few years, to be sure this was where he would spend his retirement. There was no hurry. But now it is all gone.
”If I made the decision to stay, I was going to build a house,” John says. ”Unfortunately I didn’t make the decision yet.
”I went to sleep Friday as a rich man. I woke up a poor man.”
You can read the rest of the article right here.
How would you feel if you suddenly lost almost everything that you have been working for your entire life?
And many small and mid-size businesses have been ruined by the bank account confiscation that has taken place in Cyprus.
The following is a bank account statement that was originally posted on a Bitcoin forum that has gone absolutely viral all over the Internet. One medium size IT business has lost a staggering amount of money because of the “bail-in” that is happening in Cyprus…
The following is what the poster of this screenshot had to say about what this is going to do to his business…
Over 700k of expropriated money will be used to repay country’s debt. Probably we will get back about 20% of this amount in 6-7 years.
I’m not Russian oligarch, but just European medium size IT business. Thousands of other companies around Cyprus have the same situation.
The business is definitely ruined, all Cypriot workers to be fired.
We are moving to small Caribbean country where authorities have more respect to people’s assets. Also we are thinking about using Bitcoin to pay wages and for payments between our partners.
Special thanks to:
– Jeroen Dijsselbloem
– Angela Merkel
– Manuel Barroso
– the rest of officials of “European Comission”
With each passing day, things just continue to get worse for those with deposits of over 100,000 euros in Cyprus. A few hours ago, a Reuters story entitled “Big depositors in Cyprus to lose far more than feared” declared that the initial estimates of the losses by big depositors in Cyprus were much too low.
And of course the truth is that those that have had their deposits frozen will be very fortunate to ever see any of that money ever again.
But just a few weeks ago, the Central Bank of Cyprus was swearing that nothing like this could ever possibly happen. Just check out the following memo from the Central Bank of Cyprus dated “11 February 2013″ that was recently posted on Zero Hedge…
Sadly, the truth is that the politicians will lie to you all the way up until the very day that they confiscate your money.
You can believe our “leaders” when they swear that nothing like this will ever happen in the United States, in Canada or in other European nations if you want.
But I don’t believe them.
In fact, as an outstanding article by Ellen Brown recently detailed, the concept of a “bail-in” for “systemically important financial institutions” has been in the works for a long time…
Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.
If you do not believe that what just happened in Cyprus could happen in the United States, you need to read the rest of her article. The following is an extended excerpt from that article…
Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash. Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.” The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.
The 15-page FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.” It begins by explaining that the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability.” Evidently anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite, the authors state:
An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock]. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.
No exception is indicated for “insured deposits” in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. The FDIC is an insurance company funded by premiums paid by private banks. The directive is called a “resolution process,” defined elsewhere as a plan that “would be triggered in the event of the failure of an insurer . . . .” The only mention of “insured deposits” is in connection with existing UK legislation, which the FDIC-BOE directive goes on to say is inadequate, implying that it needs to be modified or overridden.
You can find the rest of her excellent article right here. I would encourage everyone to especially pay attention to what she has to say about derivatives.
Sadly, what is happening in Cyprus right now is just the continuation of a trend. In recent years, governments all over the world have turned to the confiscation of private wealth in order to solve their financial problems. The following examples are from a recent article posted on Deviant Investor…
October 2008 – Argentina’s leftist government, facing a gigantic revenue shortfall, proposes to nationalize all private pensions so as to meet national debt payments and avoid its second default in the decade.
November 2010 – Headline – Hungary Gives Its Citizens an Ultimatum: Move Your Private Pension Fund Assets to the State or Permanently Lose Your Pension – This is an effective nationalization of all pensions.
November 2010 – Ireland elects to appropriate ten billion euros from its National Pension Reserve Fund to help fund an eighty-five billion euro rescue package for its besieged banks. Ireland also moves to consider a regulatory move that compels some private Irish pension funds to hold more Irish government debt, thereby providing the state with a captive investor base but hugely raising the risk for savers.
December 2010 – France agrees to transfer twenty billion euros worth of assets belonging to its Fonds de Reserve pour les Retraites (FRR), the funded portion of its retirement system, to help pay off recurring social benefits costs. No pensioners are consulted.
April 2012 – Argentina announces that its Economy Ministry has taken an emergency loan from the national pension fund in the amount of $4.3 billion. No pensioners were consulted.
June 2012 – Treasury Secretary Timothy Geithner unilaterally appropriates $45 billion from US federal pension funds to help tide over US deficits for the remainder of fiscal year 2011.
January 2013 – Treasury Secretary Geithner again announces that the government has begun borrowing from the federal employees pension fund to keep operating without passing the approaching “fiscal cliff” debt limit. The move effectively creates $156 billion in borrowing authority from federal pension funds.
March 2013 – Open Bank Resolution finance minister, Bill English, is proposing a Cyprus style solution for potential New Zealand bank failures. The reserve bank is in the final stages of establishing a rescue scheme which will put all bank depositors on the hook for bailing out their banks. Depositors will overnight have their savings shaved by the amount needed to keep distressed banks afloat.
Can you see the pattern?
As I wrote about the other day, no bank account, no pension fund, no retirement account and no stock portfolio will be able to be considered 100% safe ever again.
And once the global derivatives casino melts down, there are going to be a lot of major banks that are going to need to be “bailed in”.
When that day arrives, they are going to try to come after your money.
So don’t leave your entire life savings sitting in a single bank – especially not one of the banks that has a tremendous amount of exposure to derivatives.
Hopefully we can get more people to wake up and realize what is happening. We are moving into a time of great financial instability, and what worked in the past is not going to work in the future.
Be smart and get prepared while you still can.
Time is running out.
Cyprus lawmakers may have rejected the bank account tax, but the truth is that the financial crisis in Cyprus is just getting started. Right now, the two largest banks in Cyprus are dangerously close to a meltdown. If they fail, depositors could end up losing virtually all of their money. You see, the banking system of Cyprus absolutely dwarfs the GDP of that small island nation. Cyprus is known all over the world as a major offshore tax haven, and wealthy Russians and wealthy Europeans have been pouring massive amounts of money into the banking system over the last several decades. Yes, those bank deposits are supposed to be insured, but the truth is that there is no way that the government of Cyprus could ever come up with enough money to cover the massive losses that we are potentially looking at. This is a case where the banking system of a nation has gotten so large that the national government is absolutely powerless to stop a collapse from happening. If those banks fail, depositors may end up getting 50 percent of their money or they may end up getting nothing. We just don’t know how bad the damage is yet. And considering the fact that many of the largest corporations and many of the wealthiest individuals in Europe have huge mountains of cash stashed in Cyprus, the fallout from a banking collapse could potentially be absolutely catastrophic.
So Cyprus needs to come up with some money from somewhere in order to keep that from happening.
Basically, there are three options at this point…
1) Even though the bank account confiscation tax was voted down today, there is talk that it could come back in another form. This is really the only place inside of Cyprus where enough money can be raised to bail out the banks.
2) Cyprus could go back and beg the IMF and the EU for money, but the IMF and the EU have already said that they want depositors to share in the pain.
3) Cyprus could get the money that they need from the Russians. This will be discussed in more detail later.
A lot of people will see the headlines proclaiming that Cyprus has voted against the wealth tax and think that everything is going to be okay now, but that is very far from the truth.
The reality is that this is only the first move in a very complicated chess game. The problems for Cyprus are only just the beginning…
“This is not the end of the process, but instead kicks off a further round of negotiation with Moscow and Berlin,” JPMorgan economist Alex White wrote in a research note. “The Cypriot authorities wanted to conduct the vote so that they could reaffirm the extent of their difficulties to the Europeans.”
When the banks of Cyprus reopen in a few days, there is going to be a stampede of people trying to pull their money out of the banks.
In fact, this was starting to happen even before the “bank holiday” was declared. According to The Sun, bank insiders were tipping people off about what was going to happen in the days leading up to the crisis…
But Russian oligarchs and big investors emptied accounts in the days beforehand, prompting claims they were tipped off by bank insiders. A source told The Sun: “It leaked out. Bankers warned their best clients. Government officials warned their friends and relatives.
“Billions disappeared from accounts in days, most from accounts held by Russians.”
And according to David Zervos, we could see billions more euros withdrawn from banks in Cyprus once they reopen. There will be mass panic as depositors scramble to reclaim their money before it can be taxed…
The die is cast. There is no going back for the Cypriots or the Eurozone leaders. As soon as the banks open in Cyprus there will be billions in withdrawals. The question of course is – “where will the money come from?”. Well, if the parliament votes YES, then the Euros will have to come from the Eurosystem. But there is a glitch. The Cypriots have already borrowed 10b euro via the ELA and Target2. How can Mario just wire over 20 billion more (less the 10 to 15 percent haircut) for the Russians, and another 20 to 30 billion for the wealthy Greeks. What collateral will an economy with 20b in GDP post to get this cash? Unless Mario violates every collateral rule at the ECB, the Cypriot financial system will collapse even with a YES vote. Its a wonderful life – Cyprus style.
It may not even matter what Cyprus eventually decides to do about a “wealth tax”. The bank run that is about to happen may be enough to bring down the banks of Cyprus all by itself.
And of course people all over southern Europe are watching developments in Cyprus very closely. As former British Chancellor of the Exchequer Alistair Darling recently noted, if depositors in southern Europe start getting nervous that their bank accounts will be targeted too, they will be likely to start pulling money out of the banks very rapidly…
“They have actually now said to people ‘We will come after your deposits, no matter how small your savings are’ and that seems to me to make it more likely that, if you are a saver in Spain or in Italy, for example, and you have just the sniff of the EU or the IMF coming your way, you will take your money out and you will get a run on the bank”
Cyprus could actually get out of this mess by turning to Russia, but the United States and Europe really do not want to see Russia gain so much control over that very strategic island nation.
So why would Russia get involved? Well, it has been estimated that Russians have approximately $31 billion stashed in banks in Cyprus. It is the favorite offshore banking destination for the Russian oligarchs. Dennis Gartman recently detailed why the tiny island nation is so appealing to the Russians…
Cyprus has been their own private Switzerland for many years. Legal and non-legal Russian cash has swamped the banking system in Cyprus since the early 90’s. The beauty of the island; the ease of admission too and exit from the island via boat or plane; the secrecy of the banking laws; the warm Mediterranean climate and the ease of which Cypriot authorities could be bribed and bought all worked to make Cyprus the center of Russian capital flight.
And right now the Russians are not happy at all that their money is being threatened.
In particular, the Russian mafia launders a lot of money in Cyprus. The Russian mafia is not about to let anyone steal their money, and they have an international reputation for being absolutely brutal. In the end, pressure from the mafia may have been one of the primary reasons why many Cyprus lawmakers voted against the bank account tax. As Dennis Gartman astutely noted, by voting against the wealth tax they may have literally been saving their own lives…
“One could only laugh as such a comment; of course Cyprus was complacent about laundering. To think otherwise was and is naïve. Ah, but now you’ve stolen Russia money… or soon shall depending upon the vote in the Cypriot parliament… and that is dangerous… very. One does not steal Russian mafia money and get away with it. There are fewer statements of fact that are more certain, more factual, more unyielding than this statement. Russian Mafia figures do not take well to being stolen from, and they take even less well to be made fools of. We see no reason to mince words at this point: People will be hurt over this decision; some shall be killed.”
And the Russians definitely do not want to see the banking system of Cyprus collapse. In fact, proposals have been made that would provide the money necessary to keep it afloat. But of course that money would not come cheaply.
Some of the proposals that Russia has put forward were summarized by the Daily Mail…
But in a move that has raised eyebrows, the Russian energy giant Gazprom offered Cyprus a plan in which the company will undertake the restructuring of the country’s banks in exchange for exploration rights for natural gas on the island.
Representatives of the Russian company submitted the proposal to the office of Cypriot President Nicos Anastasiades on Sunday evening.
It is also rumoured that the Kremlin is privately offering to help bail out Cyprus in exchange for the right to use a naval base in the Greek part of the island.
In addition, as I wrote about yesterday, some Russian investors have stepped forward and have offered to buy majority stakes in the two largest banks in Cyprus.
So why hasn’t Cyprus accepted help from Russia yet? Well, it is a geopolitical thing. Cyprus is a part of the EU, and European officials do not want Russia to become the dominant influence in Cyprus.
But if the IMF and the EU are not going to step up and help Cyprus, the Russian offers will become more tempting with each passing day.
Meanwhile, the attempted attack on bank accounts in Cyprus is making people nervous all over Europe. For example, the following is what German economist Peter Bofinger had to say about what the situation in Cyprus is doing to confidence in the European financial system…
Making small-scale savers pay is extremely dangerous. It will shake the trust of depositors across the Continent. Europe’s citizens now have to fear for their money.
And if you don’t think that this could ever happen anywhere else, you are just being delusional.
In fact, it is already happening. In fact, the Finance Minister of New Zealand is now proposing that depositors in his nation should be required to “take a haircut” if any banks in his nation fail…
The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.
Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.
“Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman.
“The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank.
“Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.”
But surely there will never be any major banking problems in the United States, right?
Well, large numbers of Chase customers that logged into their accounts on Monday discovered that a “computer glitch” had reset all of their account balances to zero…
Chase bank experienced a problem Monday that had customers scrambling to figure out where their money went.
JP Morgan Chase said it hadn’t been hacked but was having a problem “related to an internal issue” as customers found their accounts showing zero balances.
Some customers shared their frustration on Twitter and showed screen shots of zero balances.
How would you feel if you suddenly discovered that you had no money in the bank?
Most Americans just assume that their money will always be there because their bank accounts are “guaranteed” by deposit insurance and by the full faith and credit of the federal government.
But that is exactly what the people of Cyprus thought too, and look how that turned out.
It would be hard to overstate how dangerous the situation in Cyprus is. Yes, their nation is very small but their banking system is absolutely huge.
If the banking system of Cyprus fails, it could be a “Lehman Brothers moment” for all of Europe. At this point, the entire European banking system is leveraged 26 to 1, and once European banks start to fail they could start falling like dominoes.
There is also a very strong possibility that Cyprus could be forced to leave the euro, and if that happens everyone will be wondering who will be next to leave the common currency.
So don’t think for a second that the crisis in Cyprus is over. The banking meltdown is just getting started, and the consequences could end up being far more dramatic than any of us could possibly imagine.
Reckless money printing by Federal Reserve Chairman Ben Bernanke has pumped up the Dow to a brand new all-time high. So what comes next? Will the Dow go even higher? Hopefully it will. In fact, it would be great if the Dow was able to hit 15,000 before it finally came crashing down. That would give all of us some more time to prepare for the nightmarish economic crisis that is rapidly approaching. As you will see below, the U.S. economy is in far, far worse shape than it was the last time the Dow reached a record high back in 2007. In addition, all of the long-term trends that are ripping our economy to shreds just continue to get even worse and our debt just continues to explode. Unfortunately, the Dow has become completely divorced from economic reality in recent years because of Fed manipulation. All of this funny money that the Federal Reserve has been cranking out has made the wealthy even wealthier, but this bubble will not last for too much longer. What goes up must come down. And remember, a bubble is always biggest right before it bursts.
Fortunately, it looks like an increasing number of people out there are starting to recognize that the primary reason why stocks have been going up is because of the Fed. Just check out this excerpt from a recent article by the USA Today editorial board…
The Federal Reserve’s purchases have driven interest rates to near zero. This has stimulated the economy but not without cost. Savers, particularly older ones trying to live on income from their investments, are starved for safe options. They’ve been forced into stocks, which is one reason the market has been acting as if it’s on steroids. Further, with borrowing costs low, Congress and the White House have less incentive to rein in the national debt. Rock-bottom interest rates have also distorted markets.
The best indication that the Fed’s bond-buying purchases are pushing stocks up artificially is that investors run for cover whenever there is a hint that the Fed might change course, as happened recently. On Monday, billionaire superinvestor Berkshire Hathaway CEO Warren Buffett told CNBC that markets are on a “hair trigger” waiting for signs of change from the Fed. The market is “hooked on the drug” of easy money, Dallas Fed President Richard Fisher told Reuters.
Fisher’s comparison of Fed policies to a drug is apt. Markets might not like the idea of the drug being withdrawn now, when the Fed holds a portfolio of $3 trillion. But the withdrawal symptoms will be a lot worse once the portfolio grows to $4 trillion, or more.
Those sentiments were echoed by Gordon Charlop, a trader at Rosenblatt Securities, during a recent appearance on CNBC…
“The Wizard of the Fed, Ben [Bernanke], has done a great job propping up the market, but the question is how does the wizard move the pin from the balloon without blowing the whole thing up?” said Charlop. “This is getting out of balance and he’s got to figure out a way to justify the levels that we’ve gotten to and draw back on some of the stimulus.”
Of course, in the end, the bursting of this bubble is going to be very messy.
The Fed has dramatically distorted the market in an attempt to make things look good, but now the financial markets are completely and totally addicted to easy money. Is there any chance that the Fed will be able to take away that easy money without causing disaster?
There are only a few ways that this current scenario can play out. The following is what Stanley Druckenmiller recently told CNBC…
“I don’t know when it’s going to end, but my guess is, it’s going to end very badly; and it’s going to end very badly because, again, when you get the biggest price in the world, interest rates, being manipulated you get a misallocation of resources and this is going to end in one of two ways – with a malinvestment bust which we got in ’07-’08 (we didn’t get inflation). We got a malinvestment bust because of the bubble that was created in housing. Or it could end with just monetizing the debt and off we go in inflation. So that’s a very binary outcome – they’re both bad.”
What the Fed has done to the money supply in recent years has been absolutely unprecedented. Just check out how our money supply has skyrocketed since the last financial crisis…
So what happens when the amount of money in an economy rises rapidly?
Well, if I remember Econ 101 correctly, that would mean that prices should go up.
And that is exactly what has happened. And since most of the money that the Fed has created has gone into the financial system first, it should not be a surprise that we have seen a bubble in financial assets.
In a previous article that I wrote last September, I warned that QE3 would cause stocks to go up…
So what have the previous rounds of quantitative easing accomplished? Well, they have driven up the prices of financial assets. Those that own stocks have done very well the past couple of years. So who owns stocks? The wealthy do. In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans. Those that have invested in commodities have also done very nicely in recent years. We have seen gold, silver, oil and agricultural commodities all do very well. But that also means that average Americans are paying more for basic necessities such as food and gasoline. So the first two rounds of quantitative easing made the wealthy even wealthier while causing living standards to fall for all the rest of us. Is there any reason to believe that QE3 will be any different?
Of course not.
So will stocks continue to go up indefinitely?
As I have also written about previously, the money printing that the Fed is doing right now is not nearly enough to stop the mammoth derivatives crisis that is coming.
A derivatives crisis was one of the primary reasons for the financial crash of 2008, but most Americans still have no idea what derivatives are.
They can be very complex, but I think that it is easiest just to think of them as side bets.
When someone buys a derivative, they are not buying anything real. They are simply betting that something will or will not happen.
For example, if you bet $100 that the Chicago Cubs will win the World Series this year, would you be “investing” in anything real?
Of course not.
Well, it is the same with most derivatives.
Today, Wall Street has become the biggest casino in the entire world and trillions of dollars of very reckless bets have been made.
In fact, most Americans would be absolutely shocked to learn how exposed to derivatives some of our largest financial institutions are. The following is an excerpt from one of my previous articles entitled “The Coming Derivatives Panic That Will Destroy Global Financial Markets“…
It would be hard to overstate the recklessness of these banks. The numbers that you are about to see are absolutely jaw-dropping. According to the Comptroller of the Currency, four of the largest U.S. banks are walking a tightrope of risk, leverage and debt when it comes to derivatives. Just check out how exposed they are…
Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)
Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)
Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)
Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)
Bank Of America
Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)
Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)
Total Assets: $114,693,000,000 (a bit more than 114 billion dollars – yes, you read that correctly)
Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)
That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 362 times greater than their total assets.
When the derivatives crash happens, there won’t be enough money in the entire world to fix it.
So enjoy this little stock market bubble while you can.
It will end soon enough.
And of course stocks should not be this high in the first place. The underlying economic fundamentals do not justify these kinds of stock prices whatsoever.
A recent CNN article noted that the last time the Dow hit a record high that unemployment in the U.S. was much lower…
Consider this. When the Dow hit its now old record high back in October 2007, the economy was still in good shape — although it was just a few months away from the beginning of the Great Recession.
The unemployment rate in October 2007 was 4.7%. In January of this year, the unemployment rate was 7.9%.
And that same article also pointed out that GDP growth and housing prices were also much stronger back in 2007…
Gross domestic product grew 3% in the third quarter of 2007. Revised figures from the government last week showed that GDP in the fourth quarter of 2012 rose a scant 0.1%. But I guess that’s good news considering the first estimate showed a 0.1% decline.
And despite all the hoopla about the steady recovery in the housing market over the past year, real estate is still in a bear market. The most recent level of the S&P Case-Shiller 20-City Home Price Index, one of the most widely watched gauges of the health of housing, is still 24% below where it was in October 2007.
We have never even come close to recovering from the last economic crisis. Most Americans seem to have forgotten how good things were back then, but a recent Zero Hedge article included some more points of comparison between October 2007 and today…
- Dow Jones Industrial Average: Then 14164.5; Now 14164.5
- Regular Gas Price: Then $2.75; Now $3.73
- GDP Growth: Then +2.5%; Now +1.6%
- Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
- Americans On Food Stamps: Then 26.9 million; Now 47.69 million
- Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
- US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
- US Deficit (LTM): Then $97 billion; Now $975.6 billion
- Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
- US Household Debt: Then $13.5 trillion; Now 12.87 trillion
- Labor Force Particpation Rate: Then 65.8%; Now 63.6%
- Consumer Confidence: Then 99.5; Now 69.6
And of course anyone that reads my site regularly knows that the U.S. economy has been in a state of persistent decline over the past several years.
Just consider the following data points…
-The percentage of the civilian labor force in the United States that is actually employed has been steadily declining every single year since 2006.
-In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent. Today, the unemployment rate for that same age group is about 13 percent.
-According to one study, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.
-Median household income in America has fallen for four consecutive years. Overall, it has declined by more than $4000 during that time span.
-At this point, an astounding 53 percent of all American workers make less than $30,000 a year.
That is the other side of the Fed’s insidious money printing. Incomes in the United States are going down, but the cost of living is skyrocketing. This is squeezing millions of Americans out of the middle class…
When Debbie Bruister buys a gallon of milk at her local Kroger supermarket, she pays $3.69, up 70 cents from what she paid last year.
Getting to the store costs more, too. Gas in Corinth, Miss., her hometown, costs $3.51 a gallon now, compared to less than three bucks in 2012. That really hurts, considering her husband’s 112-mile daily round-trip commute to his job as a pharmacist.
Perhaps you can identify with this. Perhaps your paychecks are about the same as they used to be back in 2007 but the cost of living has gone up dramatically since then.
I wish I could tell you that things were going to get better, but unfortunately there are all kinds of indications that things are about to get even worse for the U.S. economy. If you doubt this, just read this article and this article.
Yes, the Dow is at an all-time high. But do you want to know what else has hit an all-time high up in New York?
The following is from a recent report in the New York Times…
An average of more than 50,000 people slept each night in New York City’s homeless shelters for the first time in January, a record that underscores an unsettling national trend: a rising number of families without permanent housing.
And apparently families and children have been hit particularly hard over the past year…
More than 21,000 children—an unprecedented 1% of the city’s youth—slept each night in a city shelter in January, an increase of 22% in the past year, the report said, while homeless families now spend more than a year in a shelter, on average, for the first time since 1987. In January, an average of 11,984 homeless families slept in shelters each night, a rise of 18% from a year earlier.
Of course New York is far from alone. There has been a surge in homelessness all over the United States. In fact, at this point more than a million public school students in the United States are homeless. This is the first time that has ever happened in U.S. history.
But the Dow just hit a record high so we should all be wildly happy, right?
Hopefully we can get more Americans to understand that the “prosperity” that we are enjoying right now is just an illusion. It isn’t real. It is a bubble created by reckless money printing by the Fed and reckless borrowing by the U.S. government. If you can believe it, the U.S. government borrowed another 253 billion dollars during the month of February alone.
The Fed and the U.S. government will continue to engage in this kind of reckless behavior until the bubble eventually bursts.
So what should all the rest of us do?
We should be feverishly preparing for the hard times that are coming. As Daisy Luther recently wrote about, one of the most important things to do is to create an emergency fund. Instead of going out and blowing your money on the latest toys and gadgets, set some money aside so that you will have something to live on if the economy crashes and you suddenly lose your income.
Just remember what happened back in 2008. Millions of Americans suddenly lost their jobs, and because many of them had no financial reserves, a lot of Americans suddenly could not pay their mortgages and they lost their homes.
So put some money away in a place where it will be safe – and that does not mean the stock market.
Jim Cramer of CNBC and a lot of the other talking heads on the financial news channels are trying to encourage ordinary Americans to jump into “the bull market” right now and make some money, and many people will take their advice.
But the truth is that a bubble is always biggest right before it bursts.
This bubble is awfully big right now, and I don’t know how much larger it can possibly get.
The federal income tax is a bad joke and it needs to be abolished. All over the nation, hard working American families are being absolutely crushed by oppressive levels of taxation, and our politicians are constantly coming up with new ways to extract money from all of us every single year. Meanwhile, many ultra-wealthy Americans and many of the most profitable corporations in the country pay little to nothing in taxes. In fact, as you will see below, there are dozens of very prominent corporations that make billions of dollars in profits and yet don’t pay a dime in taxes. Tax avoidance has become a multi-billion dollar industry in the United States. Those that have the resources to “play the game” use shell companies, offshore tax havens and the thousands of loopholes in our tax code to minimize their tax burdens as much as possible. Meanwhile, the rest of us get absolutely hammered. This is fundamentally unfair. The federal income tax system is irreversibly broken at this point, and it is time to abolish it. If you think that the federal income tax system can be “fixed”, then you probably have never studied it. Our tax code is nearly 4 million words long and it is absolutely riddled with thousands of loopholes that favor big corporations and the ultra-wealthy. We should come up with a better, fairer way to fund the government. The United States once prospered greatly without a federal income tax, and it could do so again.
Many people simply do not believe that it is possible for corporations inside the United States to make billions of dollars in profits each year and not pay a dime in income taxes.
Well, according to a report put out by Public Campaign, that is exactly what is happening. Posted below are numbers that come directly from their report. 30 large corporations are listed, and 29 of them had a tax burden for 2008 through 2010 that was less than zero even though they all made enormous profits. And all 30 of them spent more on lobbying than they did on taxes.
The numbers that you are about to see are for 2008, 2009 and 2010 combined. For “taxes paid”, please note that for 29 of the corporations a negative number is given. That means that the net tax liability for 2008 through 2010 was actually less than zero.
After seeing these numbers, is there anyone out there that is still willing to claim that our tax system is “fair”?…
U.S. Profits: $10,460,000,000
Taxes Paid: ‐$4,737,000,000
U.S. Profits: $4,855,000,000
Taxes Paid: ‐$1,027,000,000
U.S. Profits: $32,518,000,000
Taxes Paid: ‐$951,000,000
U.S. Profits: $49,370,000,000
Taxes Paid: ‐$681,000,000
American Electric Power
U.S. Profits: $5,899,000,000
Taxes Paid: ‐$545,000,000
U.S. Profits: $882,000,000
Taxes Paid: ‐$508,000,000
U.S. Profits: $1,666,000,000
Taxes Paid: ‐$305,000,000
U.S. Profits: $1,931,000,000
Taxes Paid: ‐$284,000,000
U.S. Profits: $1,385,000,000
Taxes Paid: ‐$227,000,000
U.S. Profits: $5,475,000,000
Taxes Paid: ‐$216,000,000
U.S. Profits: $9,735,000,000
Taxes Paid: ‐$178,000,000
U.S. Profits: $6,403,000,000
Taxes Paid: ‐$139,000,000
U.S. Profits: $4,263,000,000
Taxes Paid: ‐$127,000,000
U.S. Profits: $365,000,000
Taxes Paid: ‐$112,000,000
Integrys Energy Group
U.S. Profits: $818,000,000
Taxes Paid: ‐$92,000,000
U.S. Profits: $1,725,000,000
Taxes Paid: ‐$85,000,000
U.S. Profits: $2,124,000,000
Taxes Paid: ‐$72,000,000
U.S. Profits: $926,000,000
Taxes Paid: ‐$66,000,000
U.S. Profits: $415,000,000
Taxes Paid: ‐$48,000,000
U.S. Profits: $627,000,000
Taxes Paid: ‐$46,000,000
U.S. Profits: $4,105,000,000
Taxes Paid: ‐$41,000,000
U.S. Profits: $4,903,000,000
Taxes Paid: ‐$34,000,000
U.S. Profits: $1,292,000,000
Taxes Paid: ‐$29,000,000
U.S. Profits: $286,000,000
Taxes Paid: ‐$26,000,000
U.S. Profits: $896,000,000
Taxes Paid: ‐$18,000,000
U.S. Profits: $2,551,000,000
Taxes Paid: ‐$17,000,000
U.S. Profits: $571,000,000
Taxes Paid: ‐$15,000,000
U.S. Profits: $1,020,000,000
Taxes Paid: ‐$9,000,000
U.S. Profits: $1,977,000,000
Taxes Paid: ‐$4,000,000
U.S. Profits: $4,247,000,000
Taxes Paid: $37,000,000 (a rate of less than 1%)
U.S. Profits: $163,691,000,000
Taxes Paid: ‐$10,602,000,000
Just look at that combined total again.
Those 30 companies had combined profits of more than 163 billion dollars during those three years, and yet the combined net tax liability of those companies was negative 10.6 billion dollars.
I wish I could make my taxes look like that.
Another company that is making headlines because of their taxes these days is Facebook.
It turns out that Facebook made more than a billion dollars in 2012 but did not pay a single dime in federal or state income taxes. The following is from a report that was just released by Citizens for Tax Justice…
Earlier this month, the Facebook Inc. released its first “10-K” annual financial report since going public last year. Hidden in the report’s footnotes is an amazing admission: despite $1.1 billion in U.S. profits in 2012, Facebook did not pay even a dime in federal and state income taxes.
Instead, Facebook says it will receive net tax refunds totaling $429 million.
According to Businessweek, Facebook has an additional 2 billion dollars in tax credits that it will be able to use in future years…
Facebook says that it anticipates reducing its tax liability in the future by an additional $2.17 billion by using further net operating loss carry-forwards that it has banked.
And of course when it comes to abusing the tax system, the big Wall Street banks are some of the worst offenders. The following is an excerpt from a report put out by the office of U.S. Senator Bernie Sanders…
Here are just a few examples of how the corporations and Wall Street banks these CEOs work for have significantly harmed our economy and the federal budget:
1. Bank of America CEO Brian Moynihan
Number of Offshore Tax Havens in 2010? 371.
In 2010, Bank of America operated 371 subsidiaries incorporated in offshore tax havens. 204 of these subsidiaries are incorporated in the Cayman Islands, which has a corporate tax rate of 0%.
Amount of federal income taxes Bank of America would have owed if offshore tax havens were eliminated? $2.5 billion.
Bank of America has stashed $18.5 billion in offshore tax havens to avoid paying U.S. income taxes. Bank of America would owe an estimated $2.5 billion in federal income taxes if its use of offshore tax avoidance was eliminated.
Amount of federal income taxes paid in 2010? Zero. $1.9 billion tax refund.
Bank of America received a $1.9 billion tax refund from the IRS in 2010, even though it made $4.4 billion in profits.
Taxpayer Bailout from the Federal Reserve and the Treasury Department? Over $1.3 trillion.
During the financial crisis, Bank of America received a total of more than $1.3 trillion in virtually zero interest loans from the Federal Reserve and a $45 billion bailout from the Treasury Department.
2. JP Morgan Chase CEO James Dimon
Number of Offshore Tax Havens in 2010? 83.
In 2010, JP Morgan Chase operated 83 subsidiaries incorporated in offshore tax havens.
Amount of federal income taxes JP Morgan Chase would have owed if offshore tax havens were eliminated? $4.9 billion
JP Morgan Chase has stashed $21.8 billion in offshore tax haven countries to avoid payng income taxes. If this practice was outlawed, it would have paid $4.9 billion in federal income taxes.
Taxpayer Bailout from the Federal Reserve and the Treasury Department? $416 billion
During the financial crisis, JP Morgan Chase received a total of more than $391 billion in virtually zero interest loans from the Federal Reserve and a $25 billion bailout from the Treasury Department, while Jamie DImon served as a director of the New York Federal Reserve.
3. Goldman Sachs CEO Lloyd Blankfein
Amount of federal income taxes paid in 2008? Zero. $278 million tax refund.
In 2008, Goldman Sachs received a $278 million refund from the IRS, even though it earned a profit of $2.3 billion that year.
Number of offshore tax havens in 2010? 39.
In 2010, Goldman Sachs operated 39 subsidiaries in offshore tax haven countries.
Amount of federal income taxes Goldman Sachs would have owed if offshore tax havens were eliminated? $3.32 billion.
Goldman Sachs has stashed $20.63 billion in offshore tax haven countries to avoid paying income taxes. If this practice was outlawed, it would have paid $3.32 billion in federal income taxes.
Taxpayer Bailout from the Federal Reserve and the Treasury Department? $824 billion.
During the financial crisis, Goldman Sachs received a total of $814 billion in virtually zero interest loans from the Federal Reserve and a $10 billion bailout from the Treasury Department.
Are you starting to get the picture?
The big banks and the big corporations make billions, but they pay nothing or next to nothing.
The rest of us bust our rear ends to try to get ahead, and we get gouged by dozens of different taxes.
Over time, the percentage of the overall tax burden shouldered by corporations has gotten smaller and smaller.
Back in 1950, corporate taxes accounted for about 30 percent of all federal revenue. In 2012, corporate taxes accounted for less than 7 percent of all federal revenue.
These days, large corporations have become absolute masters at avoiding taxes. In fact, there are many international tax havens that are doing a booming business in setting up sham headquarters for U.S. corporations. For example, the city of Zug, Switzerland only has a population of 26,000 people but it is the headquarters for 30,000 companies.
But corporations are not the only ones doing this kind of thing.
The ultra-wealthy have also mastered the art of legally not paying taxes.
As I mentioned in a previous article, it has been reported that the global elite have up to 32 TRILLION dollars stashed in offshore banks around the globe.
With that amount of money, you could pay off the entire U.S. national debt and still have enough money left over to buy every product and service produced in the United States during an entire year.
It is time to admit that our tax system is broken.
Congress has had decades to fix it, and yet the abuses just keep getting worse.
What we are doing is not working.
We need to abolish the income tax.
If you are still not convinced that the federal income tax is an abomination and that we need to abolish it, here are some more shocking facts about our tax system from one of my previous articles about taxes…
1 – The U.S. tax code is now 3.8 million words long. If you took all of William Shakespeare’s works and collected them together, the entire collection would only be about 900,000 words long.
2 – According to the National Taxpayers Union, U.S. taxpayers spend more than 7.6 billion hours complying with federal tax requirements. Imagine what our society would look like if all that time was spent on more economically profitable activities.
3 – 75 years ago, the instructions for Form 1040 were two pages long. Today, they are 189 pages long.
4 – There have been 4,428 changes to the tax code over the last decade. It is incredibly costly to change tax software, tax manuals and tax instruction booklets for all of those changes.
5 – According to the National Taxpayers Union, the IRS currently has 1,999 different publications, forms, and instruction sheets that you can download from the IRS website.
6 – Our tax system has become so complicated that it is almost impossible to file your taxes correctly. For example, back in 1998 Money Magazine had 46 different tax professionals complete a tax return for a hypothetical household. All 46 of them came up with a different result.
7 – In 2009, PC World had five of the most popular tax preparation software websites prepare a tax return for a hypothetical household. All five of them came up with a different result.
8 – The IRS spends $2.45 for every $100 that it collects in taxes.
9 – According to The Tax Foundation, the average American has to work until April 17th just to pay federal, state, and local taxes. Back in 1900, “Tax Freedom Day” came on January 22nd.
10 – When the U.S. government first implemented a personal income tax back in 1913, the vast majority of the population paid a rate of just 1 percent, and the highest marginal tax rate was just 7 percent.
11 – Residents of New Jersey pay $1.64 in taxes for every $1.00 of federal spending that they get back.
12 – The United States is the only nation on the planet that tries to tax citizens on what they earn in foreign countries.
13 – According to Forbes, the 400 highest earning Americans pay an average federal income tax rate of just 18 percent.
14 – Warren Buffett had an effective tax rate of just 17.4 percent for 2010.
15 – The top 20 percent of all income earners in the United States pay approximately 86 percent of all federal income taxes.
16 – Sadly, as Bill Whittle has shown, you could take every single penny that every American earns above $250,000 and it would only fund about 38 percent of the federal budget.
Please share this article with as many people as you can. We have now entered a time of the year when tens of millions of Americans will be filling out their tax returns, and the pain of going through that process will make people even more receptive than normal to the truth about how broken our system is.
So what do you think?
Do you think that it is fair for the ultra-wealthy and hugely profitable corporations to get away with paying zero taxes while you get hammered?
Do you believe that it is time to abolish the income tax?
Please feel free to post a comment with your thoughts below…