Banksters

103 U.S. Banks Have Collapsed So Far In 2010 – Do You Know If Your Bank Will Survive?

Have you ever noticed how almost all U.S. bank closings are now announced over the weekend?  It is almost as if someone wants to keep the increasing number of bank closures out of the news cycle as much as possible.  The Obama administration continues to use phrases like “green shoots” and “economic recovery”, but the truth is that the U.S. banking system is in the middle of a meltdown.  On Friday, federal regulators shut down 7 more banks.  That means that the total number of U.S. bank failures has reached 103 for 2010 so far.  Last year (which was a really bad year for bank closings), we did not break 100 until October.  Of course federal officials promise that “the worst is almost over”, but can we really trust anything that they tell us at this point?

When it comes to the health of the U.S. banking system, the statistical trends certainly do not look promising. 

At the end of 2008, there were 252 U.S. banks on the FDIC’s problem list.

At the end of 2009, there were 702 U.S. banks on the FDIC’s problem list.

About halfway through 2010, FDIC Chairman Sheila Bair said that 775 banks (approximately 10% of all U.S. banks) were on the problem list.

Does anyone else notice a trend developing?

It is time for everyone in the financial world to admit that the U.S. banking system is dying.

Do you know if your bank if on the problem list?

You might want to go check.

Not that your money is going to suddenly disappear.

Even if your local bank fails, the FDIC will guarantee your bank account, right?

Yes, it will.

But the FDIC is far from healthy at this point.

The FDIC is backing approximately 8,000 U.S. banks that have a total of about $13 trillion in assets with a deposit insurance fund that is pretty close to empty.

Well, actually “empty” is not quite the right word.

It was recently reported that the FDIC’s deposit insurance fund is sitting at negative 20.7 billion dollars.

And the FDIC estimates that the seven bank failures on Friday will reduce the fund by another $431 million.

Ouch.

The truth is that the FDIC is rapidly turning into a gigantic financial black hole.

The red ink just seems to be endless.

The FDIC now estimates that their funds will experience a $60 billion reduction due to additional bank closings between now and 2014.

And to be honest, that figure is way too optimistic.

So who is going to bail the FDIC out?

The same source that bails everyone out.

The U.S. taxpayers.

But isn’t that bad?

Yes, all of these bailouts are going to cause the U.S. national debt to continue to explode, but what else can we do?

Are we just going to shut down the FDIC?

That wouldn’t go over too well with anyone.

No, the truth is that this is the system that we have built.

All the crap flows downhill and ultimately ends up in the laps of U.S. taxpayers.

The bad news is that it looks like large numbers of banks are going to continue to fail.

You see, right now the American people are simply not doing a very good job of paying their bills.

During the first quarter of 2010, the total number of loans at U.S. banks that were at least three months past due increased for the 16th consecutive quarter.

Just think about that for a moment.

Would you consider 16 in a row to be a trend?

In an economic system built on credit, it is absolutely imperative that most people pay their debts or the whole thing will come crashing down very quickly.

And right now it is undeniable that things are unraveling at a staggering pace.

So who is benefiting from all this?

Well, there is one segment of the banking industry that is actually performing quite nicely in the midst of all of this chaos.

Many of the largest banks in the U.S. have been reporting very large profits as they gobble up larger and larger shares of the U.S. banking market.

In a previous article entitled “Are We About To Witness The Greatest Banking Consolidation In U.S. History?”, we noted the rapidly growing power of America’s megabanks….

Back in 2000, the “Big Four” U.S. banks – Citigroup, JPMorgan Chase, Bank of America and Wells Fargo – held approximately 22 percent of all deposits in FDIC-insured institutions.  As of June 30th of last year that figure was up to 39 percent.

The Founding Fathers of this country warned us of the danger of big banks getting too much power, but we have not listened to their warnings.

Now we have monolithic global banks that are so immense in size that we seem almost powerless to control them.

In fact, the six biggest banks in the United States (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to 60 percent of America’s gross national product.

The truth is that these sharks aren’t shedding any tears when your local banks die off.

Why?

Because they know that many of the customers from the banks that have died will soon come their way.

The reality is that all of the legislation and regulations implemented during the past 30 or 40 years have rigged the game massively in favor of the big global banks.

So dozens upon dozens of smaller banks are going to continue to die and the megabanks are going to continue to eat up increasingly larger portions of market share.

So if you still have money in a small local bank, enjoy it while you can.

From now on, the small bank in America is an endangered species.

Credit Crunch 2010

Over the past several decades, one of the primary engines of U.S. economic prosperity has been a constantly expanding debt spiral.  As long as the U.S. government, state governments, businesses and American consumers could all continue to borrow increasingly large amounts of money, the economy was going to continue to grow and “the greatest party on earth” could continue.  But many of us knew that if anything ever came along and significantly interrupted that debt spiral, it could cause a credit crunch even more severe than we saw at the beginning of the Great Depression back in the 1930s.  You see, back in the “roaring 20s”, American businesses and consumers had leveraged themselves like never before.  Debt soared to record levels and when the credit spigot was suddenly turned off the whole thing came crashing down and it took an entire decade and a world war to recover.  Well, today things are frighteningly similar.  Over the past 30 years we have piled up unprecedented mountains of debt.  In fact, today our entire economic system is based on debt.  So what would a credit crunch do to an economy based on debt?  Well, it would absolutely devastate it of course.  So are we facing a credit crunch in 2010?  Yes.  Consumer credit in the United States has already contracted during 15 of the past 16 months, and there is every indication that things are about to get even worse.

The truth is that once a deflationary cycle starts, it tends to feed on itself.  People quit spending money, banks quit making loans and everyone starts hoarding cash.

And right now there is a lot of fear out there.  According to one major indicator, consumer sentiment declined in early July to its lowest in 11 months.

U.S. consumers are starting to pay down debt and are holding on to their money.  Others can’t spend more money because they are out of work or are completely tapped out.

But without more spending, the U.S. economy won’t get revved up again.  And if the U.S. economy does not get going soon, there are going to be more foreclosures, more bankruptcies and even more jobs lost.

In a recent article for The Telegraph, Ambrose Evans-Pritchard set out some of the statistics that show that the U.S. economy is in really, really bad shape right now….

The US workforce has shrunk by a 1m over the past two months as discouraged jobless give up the hunt. Retail sales have fallen for the past two months. New homes sales crashed to 300,000 in May after tax credits ran out, the lowest since records began in 1963. Mortgage applications have fallen by 42pc to 13-year low since April. Paul Dales at Capital Economics said the “shadow inventory” of unsold properties has risen to 7.8m. “The double dip in housing has begun,” he said.

It seems like almost everyone is using the words “double dip” these days.

It is almost as if it was already a foregone conclusion.

But the truth is that this would have just been one long economic decline if the U.S. government (and many of the other governments around the globe) had not pumped so much “stimulus” into their economies over the past several years.

Now that governments around the world are pulling back and are beginning to implement austerity measures, the “sugar rush” of the stimulus money is wearing off and the original economic decline is resuming.

All that the trillions in “stimulus” did was to give the world economy a temporary boost and get us into a whole lot more debt.

In his recent article entitled “The U.S. Is On The Edge Of A Growing Deflationary Sinkhole”, Lorimer Wilson did a really good job of detailing how all of this debt has gotten us into a complete and total mess….

Capitalism cannot function unless its constantly compounding debt is serviced and/or paid down. Today, the U.S., the world’s largest debtor, can no longer pay what it owes except by rolling its debt forward and borrowing more [in] what the late economist Hyman Minsky called ponzi-financing, financing common in the final stages of mature capital systems.

The amount of outstanding U.S. debt, according to Martin D. Weiss, www.moneyandmarkets.com, has now reached levels that can never be paid off. The United States government and its agencies have, by far,
– the largest pile-up of interest-bearing debts ($15.6 trillion),
– the largest accumulation of unsecured obligations (over $60 trillion),
– the largest yearly deficit ($1.6 trillion), and
– the greatest indebtedness to the rest of the world ($4.8 trillion).

The truth is that the United States is in the early stages of a truly historic financial implosion.

Earlier this year, all of the focus was on the European sovereign debt crisis, but now all eyes are turning back to the U.S. once again.  David Bloom, currency chief at HSBC, recently remarked that world financial markets are extremely concerned about the state of the U.S. economy right now….

“We’re in a world of rotating sovereign crises. The market seems to become obsessed with one idea at a time, then violently swings towards another. People thought the euro would break-up. Now we’re moving into a new phase because we’re hearing alarm bells of a US double dip.”

Without direct intervention from the U.S. government, the U.S. financial system is headed for a world of hurt.

The truth is that the credit markets are freezing up, and without efficiently operating credit markets, the economic system we have constructed simply will not work.

The following information comes courtesy of the Consumer Metrics Institute.  If you have never visited their site, you should, because it is packed full of excellent data.  In their most recent report, they do a good job of detailing the astounding credit contraction that we have been witnessing….

During the past week there has been a flurry of Federal Reserve reports and commentary concerning the levels of credit in the current economy. The two most notable were:

► On July 8th they reported that the level of seasonally adjusted outstanding U.S. Consumer Credit (their G.19 report) decreased during May by $9.1 billion, representing an annualized rate of credit contraction of 4.5%. Although even this change is above the average for the preceding twelve months, it is much smaller than a quiet revision to the previously published April U.S. Consumer Credit figure — which is now reported to have decreased by $14.9 billion (a 7.3% annualized contraction rate).

The Federal Reserve fails to put these numbers into perspective:

1) Consumer credit has contracted during 15 of the past 16 reported months, and it is down a record total $148 billion over that time span.

2) The $14.9 billion in credit ‘lost’ during just April is the second highest monthly amount in history, second only to the $23.4 billion ‘lost’ during November, 2009.

3) And the nearly 6% cumulative reduction in consumer credit over the past 16 months is the largest (on a percentage basis) for any 16 month span since September 1944 — when FDR was still in the White House and people were buying War Bonds instead of tightly rationed consumer goods.

► On July 12th Federal Reserve Chairman Ben Bernanke noted that small businesses were not getting the loans that they need to create new jobs. The Federal Reserve’s own data reports that lending to small businesses dropped to below $670 billion in Q1 2010, down about $40 billion (5.6%) from two years ago.

The New York Times reported Mr. Bernanke wondered: “How much of this reduction has been driven by weaker demand for loans from small businesses, how much by a deterioration in the financial condition of small businesses during the economic downturn, and how much by restricted credit availability? No doubt all three factors have played a role.”

Small businesses, which account for over 60% of gross job creation, are not – for whatever reason – tapping into the credit necessary to create those jobs.

If you know anything about economics, the excerpt that you just read should be chilling you to your bones right about now.

Without loans, businesses can’t start or expand, consumers cannot buy homes or vehicles and retail spending will be in the toilet.

But, as a recent USA Today article pointed out, part of the problem is that so many Americans now have very, very low credit scores….

Figures provided by FICO show that 25.5% of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.

As I recently pointed out on The American Dream blog, historically only about 15 percent of Americans have had credit scores that low.

So can the U.S. economy fully recover if the number of Americans that are a bad credit risk has nearly doubled?

That is a very good question.

As I noted in a previous article, the truth is that the retail sector is already a huge mess, and if we don’t get the American people pulling out their credit cards soon this holiday season may not be very jolly at all….

Vacancies and lease rates at U.S. shopping centers continued to get even worse during the second quarter of 2010.  In fact, in some of the most depressed areas of the United States, many malls and shopping centers could end up looking like ghost towns by the time Christmas rolls around.

So this is the point where Barack Obama comes riding in on his white horse and rescues the U.S. economy, right?

Well, at this point Obama has joined with the other G20 leaders in pledging to get government spending under control.

So right now there are not any plans for new stimulus packages.

But as the U.S. economy starts sinking into a deflationary depression, the temptation to pump up the economy with even more government spending will become too great.

This will especially be true the closer to the election of 2012 that we get.  By the time election season rolls around, Obama will likely be much more willing to pile up even more debt for a short-term economic boost.

So yes, we are headed for a complete and total economic nightmare, but exactly how it all plays out is going to depend a lot on what Barack Obama, the Federal Reserve, other world leaders and other central banks decide to do.

For the moment, we are heading for an absolutely brutal credit crunch, and if something is not done quickly, it is going to dramatically slow down the world economy.

I would like to encourage all of my readers to check out the great deals that Nitro-Pak is offering on emergency food products….

I would also like to encourage all of my readers to check out the great deals that Nitro-Pak is offering on water filters….

One Out Of Every Ten U.S. Banks Is Now On The FDIC’s Problem List – Do You Know If Your Bank Is Safe?

Do you know if your bank will be there next month?  For a growing number of Americans, that is becoming a very real question.  The Wall Street Journal is reporting that 775 banks (approximately ten percent of all U.S. banks) are now on the Federal Deposit Insurance Corporation’s list of “problem” banks.  This year we have already seen more than six dozen banks fail, and the frightening thing is that we are seeing a rapid acceleration in bank failures even though we are supposedly in a “recovery” right now.  So what happens if the economy takes a bad turn and hundreds of these banks that are barely surviving start failing?

Right now an increasing number of Americans are not paying their loans, and this is shredding the balance sheets of small and medium size banks all over the United States.  In fact, during the first quarter of 2010, the total number of loans that are at least three months past due increased for the 16th consecutive quarter.

16 consecutive quarters?

Once is a coincidence.

Twice is a trend.

Sixteen times in a row is a total nightmare.

Is there anyone out there that is still convinced that the economy is getting better?

If so, perhaps this will convince you otherwise….

There were 252 banks on the FDIC’s “problem list” at the end of 2008.

There were 702 banks on the FDIC’s “problem list” at the end of 2009.

Now there are 775 banks of the FDIC’s “problem list”.

Are you starting to see a trend?

Federal regulators have already closed 73 banks in 2010, more than double the number shut down at this time last year.

The truth is that the U.S. banking system is coming apart like a 20 dollar suit.

So is the FDIC worried?

No, they insist that they have plenty of money to cover all of the banks that are going to fail.

After all, the FDIC’s deposit insurance fund now has negative 20.7 billion dollars in it, which represents a slight improvement from the end of 2009.

Yes, you read that correctly.

Negative 20.7 billion dollars.

That should be enough to cover the hundreds of banks that are in the process of failing, right?

Well, if not, the FDIC can just run out and ask the U.S. government for a big, juicy bailout.

After all, can’t the U.S. government borrow an endless amount of money with absolutely no consequences?

Well, no.

Debt always catches up with you sooner or later.

In fact, the IMF is warning that that the gross public debt of the United States will hit 97 percent of GDP in 2011 and 110 percent of GDP in 2015.

Meanwhile, the U.S. financial system continues to shrink even after the unprecedented amount of “stimulus money” that the U.S. government has been shoveling into the economy.

The M3 money supply is now contracting at a frightening pace.

In fact, the current rate of monetary contraction now matches the average rate of monetary contraction the U.S. experienced between 1929 and 1933.

But don’t worry.

We aren’t going into a Depression.

Everything is going to be just fine.

Just look deep into Obama’s eyes and keep repeating the word “change” to yourself over and over.

According to a report in The Telegraph, the M3 money supply declined from $14.2 trillion to $13.9 trillion in the first quarter of 2010.

That represents an annual rate of contraction of 9.6 percent.

In case you were wondering, that is a lot.

Not only that, but the assets of institutional money market funds declined at a 37 percent annual rate.

That was the sharpest drop ever.

Yes, it is time for the alarm bells to start going off.

The Telegraph recently quoted Professor Tim Congdon from International Monetary Research as saying the following about the deep problems that the U.S. is facing….

“The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly.”

If banks continue to cut their lending, the M3 is going to continue to shrink.

But as noted above, Americans are increasingly getting behind on their loans, so why should banks loan money to a bunch of deadbeats?

Right now U.S. banks are increasingly tightening their lending standards, and this is making it much tougher to get a loan.

In fact, in 2009 the biggest U.S. banks posted their sharpest decline in lending since 1942.

But there is only one problem.

The U.S. economy is completely and totally dependent on credit.

Without easy credit, the entire U.S. economic machine is going to slowly grind to a halt.

So what do you do?

The reality is that we have one gigantic financial mess on our hands, and in many ways it is starting to look like the 1930s all over again.

But perhaps someone out there has a way to get us out of this nightmare.  Please feel free to leave a comment with your thoughts, opinions or solutions….

The Number One Tool Of Financial Enslavement

Today there is a great awakening going on across the United States and all around the world.  Tens of millions of people are becoming aware of the growing tyranny of the global financial elite.  Yet millions of those same people willingly enslave themselves to those very same financial powers.  So how is this happening?  It is called debt.  The financial powers of the world use it to enslave individuals, corporations and governments.  For thousands of years humanity has been taught the proverb that “the borrower is the servant of the lender”, and yet today hundreds of millions of people around the globe willingly have run out and have made themselves servants of the money powers.  You see, when you borrow money from a financial institution, you not only have to pay that money back, but you also have to pay a significant amount of interest.  In fact, often the interest ends up being much more than the principal of the loan.  Thus the borrower ends up devoting a great deal of his or her labor to earning money for the lender.  Certainly there are times when it is necessary to borrow money.  But what Americans have been doing over the last 30 years goes far beyond “necessary” borrowing.  In fact, the massive debt binge of the last three decades has been nothing short of a huge percentage of the American population entering into willing financial enslavement.

Do you think that is an exaggeration?  Just consider the chart below.  The word “insanity” does not even begin to describe the growth of household credit in the United States over the last 30 years….

So why is debt so bad?

Well, there are a lot of reasons.  Debt strips you of your freedom and slowly drains you of your wealth.  It puts the fruits of your labor into the pockets of others.

Getting others enslaved by debt is how the most powerful financial institutions in the world got so dominant.  It is one of the most profitable ways of making money ever invented.

What many people don’t realize is just how much interest they end up paying on some of their debts.

For example, if you go to mortgagecalculator.org, you can calculate the amount of interest that you will pay over the life of your home mortgage.  According to that calculator, someone with a $250,000 mortgage at an interest rate of 6.5% over 30 years will end up paying over $300,000 in interest before it is all paid off.    

So when those 30 years are over, you have bought a house for yourself and you have also bought a house for the bankers.

But there are many forms of credit that are far worse than mortgage debt.

So what are they?

Just look in your wallet.

Do you have a credit card in there?

If so, and if you carry a balance each month, then you are “feeding the monster” and you have financially enslaved yourself.

But you are far from alone.

According to the United States Census Bureau, there are approximately 1.5 billion credit cards in use in the United States.

In fact, 78 percent of American households had at least one credit card at the end of 2008.

So it is a rare person who does not have at least one credit card.

But not only do the vast majority of us have credit cards, we are using them at unprecedented rates.

At the end of 2008, the total credit card debt piled up by American consumers was more than 972 billion dollars.  That is an amount that is greater than the GDP of the world’s 122 poorest nations combined.

So why is credit card debt bad?

Well, because it can drain your wealth faster than almost any other method ever created.

For example, according to the credit card repayment calculator, if you owe $6000 on a credit card with a 20 percent interest rate and only pay the minimum payment each time, it will take you 54 years to pay off that credit card.

During those 54 years you will pay $26,168 in interest rate charges in addition to the $6000 in principal that you are required to pay back.

That is before you include any fees or penalties you might accumulate along the way.

Are you starting to get the picture?

Do you really want to repay over $30,000 for a $6,000 purchase?

Of course not.

So what should you do?

Stop feeding the monster.

They are getting insanely wealthy off of your financial enslavement.

It is time to get out of debt.

One of the most common financial questions that people ask today is what they should do with their money.

Well, the answer to that question is a lot more obvious than people may think.

After purchasing all of the food and supplies that are needed for the hard times that are coming, people need to get out of debt.

There are very, very few investments that will add to your wealth faster than debt is draining it.

So don’t let your money sit there and earn a couple of percentage points if you are carrying any debt that you can easily pay off.

Paying off debt will reduce your living expenses and will give you much more flexibility.  It will also put you in a much better position to weather the very difficult financial times that are coming.

When you get into more debt, you are playing the game that the Federal Reserve, JPMorgan Chase, Morgan Stanley, Citigroup, Bank of America and Goldman Sachs want you to play.  There are always going to be financial predators that are ready to drain your wealth.

But you don’t have to play that game.  Work to get yourself free.  You will be glad that you did.

Are We About To Witness The Greatest Banking Consolidation In U.S. History?

As the number of bank failures in the United States continues to accelerate, many analysts are warning that we could soon see unprecedented changes in the U.S. banking industry.  In fact, there are some economists that are warning that we could be about to witness the greatest banking consolidation in U.S. history.  As dozens of small and medium size banks have failed, the megabanks have systematically been gobbling up larger and larger slices of market share.  In fact, if current trends continue, it doesn’t take much imagination to foresee a future where the entire U.S. banking industry has been consolidated down to between 5 and 10 “superbanks”.  So would that be so bad?  Well, yes it would.  It would represent a massive shift in financial power away from the American people to big, global corporate banks.  But if you happen to be a fan of big, global corporate banks perhaps you will really love what is about to happen to the U.S. banking industry.

On Friday, federal regulators seized Pinehurst Bank, which brought the total number of U.S. banks closed this year to 73.  At this point in 2009, only 36 banks had failed.

That means that the number of bank failures has doubled compared to the same time period a year ago.

Is that a good trend?

Well, it is a good trend if you are one of the megabanks that is gobbling up the remnants of these banks that were “small enough to fail”.

And the sad thing is that we are likely to see dozens and dozens more small and medium size banks fail in the coming months.

The FDIC recently announced that the number of banks on its “problem list” climbed to 702 at the end of 2009.  That is extremely alarming considering the fact that only 552 banks were on the problem list at the end of September 2009 and only 252 banks that were on the problem list at the end of 2008.

In fact, the FDIC is expecting so many banks to fail that they are opening up new offices just to handle all the expected failures.  The FDIC has opened a massive 100,000 square foot satellite office near Chicago that will house up to 500 temporary staffers and contractors to manage receiverships and liquidate assets from what they are expecting will be a gigantic wave of failed Midwest banks.  Not only that, but the FDIC has also opened similar offices in Irvine, California and Jacksonville, Florida.

But can the FDIC realistically handle all of these bank failures?

No.

The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke.

So if the FDIC completely runs out of money, where will all the necessary funds come from?

From U.S. taxpayers of course.

It seems that we are the ultimate bailout machine.

Meanwhile, the biggest U.S. banks are hoarding cash in preparation for hard times.  In fact, the biggest banks in the United States cut their collective small business lending balance by another 1 billion dollars in November 2009.  That drop was the seventh monthly decline in a row.

The truth is that in 2009, the biggest U.S. banks posted their sharpest decline in lending since 1942.

So what were they doing with their money?

Well, thanks to the Federal Reserve, the megabanks were using the U.S. Treasury carry trade to make huge gobs of cash.  In fact, the little game that they are playing with U.S. Treasuries is working so well that four of the biggest U.S. banks (Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup) had a “perfect quarter” with zero days of trading losses during the first quarter of 2010.

The truth is that the game is rigged to benefit the largest financial institutions, and they are slowly but surely gobbling up the entire U.S. banking market.

Back in 2000, the “Big Four” U.S. banks – Citigroup, JPMorgan Chase, Bank of America and Wells Fargo – held approximately 22 percent of all deposits in FDIC-insured institutions.  As of June 30th of last year that figure was up to 39 percent.

The Founding Fathers of this country warned us of the danger of big banks getting too much power, but we have not listened to their warnings.

Now we have monolithic global banks that are so immense in size that we seem almost powerless to control them.

In fact, the six biggest banks in the United States (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to 60 percent of America’s gross national product.

And there is every indication that they are only going to get bigger and more dominant – especially if there is a major economic downturn ahead.

Unfortunately, that is what a number of respected economists are forecasting.

For example, Bob Chapman of the International Forecaster recently warned his readers that things could get really, really bad by the end of 2010….

It should interest you to know that my Intel source inside the Fed says absolutely no later than November the banking system should implode. Presently 75% of banks have problems and that the top 5 banks will take over all the others in a general nationalization. There is tremendous fear and uneasiness in the banking world.

Now, let us hope that Bob Chapman’s source is wrong.  Certainly the U.S. banking system is in a state of complete and total chaos, but hopefully we can make it into 2011 without a complete implosion of the banking industry.

However, Bob Chapman has been in the industry for decades and he would not have put out a warning like this without good reason.  Let us just pray that what this source is warning of does not actually come to pass.

But Bob Chapman is not the only one warning of difficult times ahead.

CNBC recently quoted Brian Kelly, the founder of Kanundrum Capital, as saying that the chances of a global depression breaking out have increased dramatically in recent days….

“Two weeks ago I would give the global depression scenario a one percent chance, but the chances have increased to 10 percent today.”

In fact, world famous economist Nouriel Roubini is absolutely convinced that there is a good deal of economic trouble ahead of us….

“We are still in the middle of this crisis and there is more trouble ahead of us, even if there is a recovery. During the great depression the economy contracted between 1929 and 1933, there was the beginning of a recovery, but then a second recession from 1937 to 1939. If you don’t address the issues, you risk having a double-dip recession and one which is at least as severe as the first one.”

So will the end of 2010 be a very difficult time for the U.S. economy?

Only time will tell.

But what does seem certain is that small and medium size banks will continue to fail in large numbers, and the big dominant banks will continue to gobble up market share.

We are witnessing a dramatic consolidation of the U.S. banking industry, and the only question seems to be how fast it is all going to play out.

25 Questions To Ask Anyone Who Is Delusional Enough To Believe That This Economic Recovery Is Real

If you listen to the mainstream media long enough, you just might be tempted to believe that the United States has emerged from the recession and is now in the middle of a full-fledged economic recovery.  In fact, according to Obama administration officials, the great American economic machine has roared back to life, stronger and more vibrant than ever before.  But is that really the case?  Of course not.  You would have to be delusional to believe that.  What did happen was that all of the stimulus packages and government spending and new debt that Obama and the U.S. Congress pumped into the economy bought us a little bit of time.  But they have also made our long-term economic problems far worse.  The reality is that the U.S. cannot keep supporting an economy on an ocean of red ink forever.  At some point the charade is going to come crashing down. 

And GDP is not a really good measure of the economic health of a nation.  For example, if you would have looked at the growth of GDP in the Weimar republic in the early 1930s, you may have been tempted to think that the German economy was really thriving.  German citizens were spending increasingly massive amounts of money.  But of course that money was becoming increasingly worthless at the same time as hyperinflation spiralled out of control.

Well, today the purchasing power of our dollar is rapidly eroding as the price of food and other necessities continues to increase.  So just because Americans are spending a little bit more money than before really doesn’t mean much of anything.  As you will see below, there are a whole bunch of other signs that the U.S. economy is in very, very serious trouble. 

Any “recovery” that the U.S. economy is experiencing is illusory and will be quite temporary.  The entire financial system of the United States is falling apart, and the powers that be can try to patch it up and prop it up for a while, but in the end this thing is going to come crashing down.

But as obvious as that may seem to most of us, there are still quite a few people out there that are absolutely convinced that the U.S. economy will fully recover and will soon be stronger than ever.

So the following are 25 questions to ask anyone who is delusional enough to believe that this economic recovery is real….  

#1) In what universe is an economy with 39.68 million Americans on food stamps considered to be a healthy, recovering economy?  In fact, the U.S. Department of Agriculture forecasts that enrollment in the food stamp program will exceed 43 million Americans in 2011.  Is a rapidly increasing number of Americans on food stamps a good sign or a bad sign for the economy?

#2) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March.  This was an increase of almost 19 percent from February, and it was the highest monthly total since RealtyTrac began issuing its report back in January 2005.  So can you please explain again how the U.S. real estate market is getting better?

#3) The Mortgage Bankers Association just announced that more than 10 percent of U.S. homeowners with a mortgage had missed at least one payment in the January-March period.  That was a record high and up from 9.1 percent a year ago.  Do you think that is an indication that the U.S. housing market is recovering?

#4) How can the U.S. real estate market be considered healthy when, for the first time in modern history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together?

#5) With the U.S. Congress planning to quadruple oil taxes, what do you think that is going to do to the price of gasoline in the United States and how do you think that will affect the U.S. economy?

#6) Do you think that it is a good sign that Arnold Schwarzenegger, the governor of the state of California, says that “terrible cuts” are urgently needed in order to avoid a complete financial disaster in his state?

#7) But it just isn’t California that is in trouble.  Dozens of U.S. states are in such bad financial shape that they are getting ready for their biggest budget cuts in decades.  What do you think all of those budget cuts will do to the economy?

#8) In March, the U.S. trade deficit widened to its highest level since December 2008.  Month after month after month we buy much more from the rest of the world than they buy from us.  Wealth is draining out of the United States at an unprecedented rate.  So is the fact that the gigantic U.S. trade deficit is actually getting bigger a good sign or a bad sign for the U.S. economy?

#9) Considering the fact that the U.S. government is projected to have a 1.6 trillion dollar deficit in 2010, and considering the fact that if you went out and spent one dollar every single second it would take you more than 31,000 years to spend a trillion dollars, how can anyone in their right mind claim that the U.S. economy is getting healthier when we are getting into so much debt?

#10) The U.S. Treasury Department recently announced that the U.S. government suffered a wider-than-expected budget deficit of 82.69 billion dollars in April.  So is the fact that the red ink of the U.S. government is actually worse than projected a good sign or a bad sign?

#11) According to one new report, the U.S. national debt will reach 100 percent of GDP by the year 2015.  So is that a sign of economic recovery or of economic disaster?

#12) Monstrous amounts of oil continue to gush freely into the Gulf of Mexico, and analysts are already projecting that the seafood and tourism industries along the Gulf coast will be devastated for decades by this unprecedented environmental disaster.  In light of those facts, how in the world can anyone project that the U.S. economy will soon be stronger than ever?

#13) The FDIC’s list of problem banks recently hit a 17-year high.  Do you think that an increasing number of small banks failing is a good sign or a bad sign for the U.S. economy?

#14) The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke.  So what do you think will happen if a significant number of small banks do start failing?

#15) Existing home sales in the United States jumped 7.6 percent in April.  That is the good news.  The bad news is that this increase only happened because the deadline to take advantage of the temporary home buyer tax credit (government bribe) was looming.  So now that there is no more tax credit for home buyers, what will that do to home sales? 

#16) Both Fannie Mae and Freddie Mac recently told the U.S. government that they are going to need even more bailout money.  So what does it say about the U.S. economy when the two “pillars” of the U.S. mortgage industry are government-backed financial black holes that the U.S. government has to relentlessly pour money into?

#17) 43 percent of Americans have less than $10,000 saved for retirement.  Tens of millions of Americans find themselves just one lawsuit, one really bad traffic accident or one very serious illness away from financial ruin.  With so many Americans living on the edge, how can you say that the economy is healthy?

#18) The mayor of Detroit says that the real unemployment rate in his city is somewhere around 50 percent.  So can the U.S. really be experiencing an economic recovery when so many are still unemployed in one of America’s biggest cities?

#19) Gallup’s measure of underemployment hit 20.0% on March 15th.  That was up from 19.7% two weeks earlier and 19.5% at the start of the year.  Do you think that is a good trend or a bad trend?

#20) One new poll shows that 76 percent of Americans believe that the U.S. economy is still in a recession.  So are the vast majority of Americans just stupid or could we still actually be in a recession?

#21) The bottom 40 percent of those living in the United States now collectively own less than 1 percent of the nation’s wealth.  So is Barack Obama’s mantra that “what is good for Wall Street is good for Main Street” actually true?

#22) Richard Russell, the famous author of the Dow Theory Letters, says that Americans should sell anything they can sell in order to get liquid because of the economic trouble that is coming.  Do you think that Richard Russell is delusional or could he possibly have a point?

#23) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010.  In fact, that was almost twice the level of a year earlier.  Does that look like a good trend to you?

#24) In March, the price of fresh and dried vegetables in the United States soared 49.3% – the most in 16 years.  Is it a sign of a healthy economy when food prices are increasing so dramatically?

#25) 1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008.  Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005.  So shouldn’t we at least wait until the number of Americans filing for bankruptcy is not setting new all-time records before we even dare whisper the words “economic recovery”?

The Unbelievably Rampant Corruption On Wall Street

In order for a financial system to be able to function properly, it is absolutely essential that the general population has faith in it.  After all, who is going to want to invest in the stock market or entrust their money to big financial institutions if there is not at least the perception of honesty and fairness in the financial marketplace?  For decades, the American people did have faith in Wall Street.  But now that faith is being shattered by a string of recent revelations.  It seems as though the rampant corruption on Wall Street is seeping up almost everywhere now.  In fact, some of the things that have come out recently have been absolutely jaw-dropping.  The truth is that the corruption on Wall Street is much deeper and much more systemic than most of us ever dared to imagine.  As the general public digests these recent scandals, it is going to result in a tremendous loss of faith in the U.S. financial system.  Once faith in a financial system is lost, it can take years or even decades to get back.  So how is the U.S. financial system supposed to work properly when large numbers of people simply do not believe in it anymore?

Just consider some of the recent revelations of Wall Street corruption that have come out recently….

*Bloomberg is reporting that a massive network of big banks and financial institutions have been involved in blatant bid-rigging fraud that cost taxpayers across the U.S. billions of dollars.  The U.S. Justice Department is charging that financial advisers to municipalities colluded with Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Wachovia and 11 other banks in a conspiracy to rig bids on municipal financial instruments.  Apparently what was going on was that it was decided in advance who would win the auctions of guaranteed investment contracts, which public entities purchase with the proceeds from municipal bond sales, and then other intentionally losing bids were submitted in order to make the process look competitive.  The U.S. Justice Department claims that this fraud has been industry-wide and has been going on for years.  In fact, at least four financial professionals have already pleaded guilty in this case.

*An industry insider has come forward with “smoking gun” evidence that some of the biggest banks have been openly and blatantly manipulating the price of gold and silver.  For a time it looked like the federal government was just going to ignore all of this fraud, but after substantial public uproar some action is indeed being taken.  In fact, it has been reported that federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals markets.

*Goldman Sachs is getting most of the press about fraud in the mortgage-backed securities market these days.  Of course Goldman is strenuously denying that it “bet against its clients” when it changed its position in the housing market in 2007.  But we all know the truth at this point.  The truth is that Goldman Sachs clearly bet against its clients and was involved in a whole lot of things that were even worse than that.  Many did not think the U.S. government would dare go after Goldman, but that is what we are starting to see.  U.S. federal prosecutors have opened a criminal investigation into whether Goldman Sachs or its employees committed securities fraud in connection with its trading of mortgage-backed securities, and it will be very interesting to see if anything comes of that investigation.

*But not everyone is being held accountable for their actions.  The guy who helped bring down AIG is going to get off scott-free and is going to be able to keep the millions in profits that he made in the process.

*Entire U.S. cities have been victims of this rampant Wall Street fraud.  In fact, it is now being alleged that the biggest banks on Wall Street are ripping off some of the largest American cities with the same kind of predatory deals that brought down the financial system in Greece.

*The really sad thing is that fraud is very, very lucrative.  Executives at many of the big banks that received large amounts of money during the Wall Street bailouts are being lavished with record bonuses as millions of other average Americans continue to suffer economically.  Even the CEOs of bailed-out regional banks are getting big raises.  It must be really nice to be them.

So does all of this make you more likely or less likely to invest in the stock market?

Do you think that the American people can see all of this and still believe that the financial system is “fair” and “honest”?

The truth is that Wall Street is full of rip-off artists and fraudsters who don’t even try to hide their greed anymore.

It is as if a thousand junior Gordon Gekkos have been unleashed and they are all trying to be masters of the universe at any cost.

But what they are doing is ripping the heart out of the U.S. financial system.

If people lose faith in the system the system will ultimately fail.

A financial system that allows open fraud and manipulation is operating on borrowed time.

So will the rampant corruption on Wall Street now be cleaned up?

Only time will tell.

But one thing is for certain.

The American people will be watching.

SILVER MART

 

Another Way That The Federal Reserve Makes Massive Gobs Of Money For The Big Banks

When most people discuss how the Federal Reserve benefits the big banks, they usually only focus on the ways that the Federal Reserve directly brings in income.  But there is so much more to it than that.  The truth is that the Federal Reserve is used in a whole variety of ways to indirectly assist the big banks in making huge gobs of money.  One of the ways this is currently being accomplished is through the U.S. Treasury carry trade.

So how does this carry trade work?

Well, it basically has three steps and it works something like this….

#1) Mr. Big Bank goes over to the Federal Reserve and says, “Hey Mr. Federal Reserve – please loan me a big bag of cash for next to nothing.”  Of course, the Federal Reserve is more than happy to loan it to him.

#2) Mr. Big Bank then invests the same big bag of cash into U.S. Tresuries which have a much higher interest rate than what Mr. Big Bank just borrowed at.  To give  you an idea, 10-year U.S. Treasuries are earning around 3 and a half percent right now.

#3) Mr. Big Bank sits back and enjoys the huge amount of risk-free cash which comes pouring in.

This little three step procedure helped enable four of the biggest U.S. banks (Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup) to have a “perfect quarter” during the first quarter of 2010.  What that means is that these four banks had zero days of trading losses in the first quarter.

Wouldn’t you like to have a perfect batting average?

Don’t you wish you could pitch a perfect game every time?

Well, it certainly helps when you are being subsidized by the Federal Reserve as Bloomberg recently explained….

The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter.

Doesn’t it just seem like whenever we turn around the Federal Reserve is doing something new to “help out” the big banks?

This is just getting ridiculous.

Remember all of that talk about how the U.S. government had to help out Wall Street so that they could help out Main Street?

Well, a ton of money did get injected into the banking system.

In fact, the Federal Reserve pumped hundreds upon hundreds of billions of dollars into the banking system since the beginning of the financial crisis.  This has caused the U.S. monetary base to explode….

So did the big banks use all of that money to help out Main Street?

No.

In fact, business lending by the big banks has been falling precipitously.

So what have the big banks been doing with all of that money?

Buying U.S. government debt of course….

So instead of making loans to American businesses who desperately needed it, most of this new money has gone to pump up yet another bubble.  This time the bubble is in U.S. Treasuries.  Asia Times recently described how this trillion-dollar carry trade in U.S. government securities is setting up a very dangerous situation….

Remarkably, the most aggressive buyers of US government debt during the past several months have been global banks domiciled in London and the Cayman Islands. They borrow at 20 basis points (a fifth of a percentage point) and buy Treasury securities paying 1% to 3%, depending on maturity.

This is the famous “carry trade”, by which banks or hedge funds borrow short-term at a very low rate and lend medium- or long-term at a higher rate. This works as long as short-term rates remain extremely low. The moment that borrowing costs begin to rise, the trillion-dollar carry trade in US government securities will collapse.

But as long as the gravy train of the U.S. Treasury carry trade continues, why should the big banks make risky loans to American businesses and consumers when increasing numbers of them are turning out to be deadbeats anyway?

That is a good question.

Meanwhile, we have this sick situation where the Federal Reserve subsidizes the big banks and enables them to buy up a big chunk of the debt the U.S. government is constantly churning out.

Our national banking resources are increasingly being turned away from building up our once great system of free enterprise, and instead are being devoted to servicing the never ending spiral of government debt and funny money that we have created.

But a bunch of folks down on Wall Street are getting exceedingly rich from this little game, so they certainly aren’t going to complain about it.  And as long as the vast majority of Americans continue to stay in the dark about all of this, the bouncing ball will just continue to keep rolling.

+ More