The Economy

Will America’s Prosperity Be Completely Wiped Out By Our Growing Debt?

The federal government is now 20.4 trillion dollars in debt, and most Americans don’t seem to care that the economic prosperity that we are enjoying today could be completely destroyed by our exploding national debt.  Over the past decade, the national debt has been growing at a rate of more than 100 million dollars an hour, and this is a debt that all of us owe.  When you break it down, each American citizen’s share of the debt is more than $60,000, and so if you have a family of five your share is more than $300,000.  And when you throw in more than 6 trillion dollars of corporate debt and nearly 13 trillion dollars of consumer debt, it is not inaccurate to say that we are facing a crisis of unprecedented magnitude.

Debt cannot grow much faster than GDP indefinitely.  At some point the bubble bursts, and when it does the pain that the middle class is going to experience is going to be off the charts.  Back in 2015, the middle class in the U.S. became a minority of the population for the first time ever.  Never before in our history has the middle class accounted for less than 50 percent of the population, and all over the country formerly middle class families are under a great deal of stress as they attempt to make ends meet.  The following comes from an absolutely outstanding piece that was just put out by Charles Hugh Smith…

If you talk to young people struggling to make ends meet and raise children, or read articles about retirees who can’t afford to retire, you can’t help but detect the fading scent of prosperity.

It has steadily been lost to stagnation, under-reported inflation and soaring inequality, a substitution of illusion for reality bolstered by the systemic corruption of authentic measures of prosperity and well-being.

In other words, the American-Dream idea that life should get easier and more prosperous as the natural course of progress is still embedded in our collective memory, even though the collective reality has changed.

The reality that most of us are facing today is a reality where many are working two or three jobs just to make it from month to month.

The reality that most of us are facing today is a reality where debts never seem to get repaid and credit card balances just continue to grow.

The reality that most of us are facing today is a reality where we work day after day just to pay the bills, and yet we never seem to get anywhere financially.

The truth is that most people out there are deeply struggling.  The Washington Post says that the “middle class” encompasses anyone that makes between $35,000 and $122,500 a year, but very few of us are near the top end of that scale…

It’s also situation specific. “The more people in a family, the more money they typically need to live a comfortable middle-class lifestyle,” writes the Post. Likewise, the more expensive your area, the more you need to make to qualify. Overall, “America’s middle-class ranges from $35,000 to $122,500 in annual income, according to The Post’s calculation” approved by the Pew Research Center.

“The bottom line is: $100,000 is on the middle-class spectrum, but barely: 75 percent of U.S. households make less than that,” writes the Post.

In a previous article, I noted that the bottom 90 percent of income earners in the U.S. brought home more than 60 percent of the nation’s income back in the early 1970s, but last year that number fell to just 49.7 percent.

The middle class is shrinking year after year, and the really bad news is that it appears that this decline may soon accelerate.  In fact, one major European investment bank is warning that the U.S. economy will “slow down substantially” in 2018.

But we can’t afford any slow down at all.  As it is, there is no possible way that we are going to be able to deal with our exploding debts at the rate the economy is growing right now.  According to Boston University professor Larry Kotlikoff, we are facing a “fiscal gap” of 210 trillion dollars over the next 75 years…

We have all these unofficial debts that are massive compared to the official debt. We’re focused just on the official debt, so we’re trying to balance the wrong books…

If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $210 trillion. That’s the fiscal gap. That’s our true indebtedness.

Where in the world is all of that money going to come from?

Are you willing to pay much higher taxes?

Are you willing to see government programs slashed to a degree that we have never seen before in U.S. history?

If your answer to both of those questions is no, then what would you do to solve the fiscal nightmare that we are facing?

According to Brian Maher, author Robert Benchley once sat down to write an article about this fiscal mess, and what he came up with sums up the situation perfectly…

Benchley sat at his typewriter one day to tackle a vexing subject.

He opened his piece with “The”… when the full weight of his burden collapsed upon his shoulders.

He abandoned his typewriter in frustration.

He returned shortly thereafter and resumed the task anew…

With only “The” to work with… Benchley immediately knocked out the article, presented here in its entirety:

“The hell with it.”

Unfortunately, we can’t afford to say that.

Our exploding debt is a crisis that we must tackle, and the first step is to understand that our current financial system was literally designed to create as much debt as possible.  Once we abolish the Federal Reserve, our endless debt spiral will end, but until we do our debt problems are only going to continue to grow until the system completely implodes in upon itself.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Globalists Are Systematically Destroying America’s Middle Class

When people are dependent on the government they are much easier to control.  We are often told that we are not “compassionate” when we object to the endless expansion of government social programs, but that is not how the debate should be framed.  In America today, well over 100 million people receive money from the federal government each month, and the number of Americans that are truly financially independent is continually shrinking.  In fact, only 25 percent of all Americans have more than $10,000 in savings right now according to one survey.  If we eventually get to the point where virtually all of us are dependent on the government for our continued existence, that would give the globalists a very powerful tool of control.  In the end, they want as many of us dependent on the government as possible, because those that are dependent on the government are a lot less likely to fight against their agenda.

Back in 1992, the bottom 90 percent of American income earners brought in more than 60 percent of the country’s income.  But last year that figure slipped to just 49.7 percent.  The wealth of our society is increasingly being concentrated at the very top, and the middle class is steadily being eroded.  Surveys have found that somewhere around two-thirds of the country is living paycheck to paycheck at least part of the time, and so living on the edge has become a way of life for most Americans.

Earlier today, I came across a Business Insider article that was bemoaning the fact that the U.S. economy seems to be rather directionless at this point…

  • We do not have a real plan for health care, and costs continue to gobble up American wages.
  • We do not have a plan for dealing with globalization and economic change, but that change continues to shape our economy.
  • We don’t have a plan to update our decrepit infrastructure.
  • The one plan we did have — the Federal Reserve’s post-financial crisis program — is about to be unwound, marking the end of the last clear, executable plan to bolster America’s economy.

Ultimately, the truth is that we don’t actually need some sort of “central plan” for our economy.  We are supposed to be a free market system that is not guided and directed by central planners, but many Americans don’t even understand the benefits of free market capitalism anymore.

However, that Business Insider article did make a great point about globalization.   Most people don’t realize that our economy is slowly but surely being integrated into a global economic system.   This is really bad for American workers, because now they are being merged into a global labor pool in which they must compete directly for jobs with workers in other countries where it is legal to pay slave labor wages.

Even down in Mexico, many autoworkers are only making $2.25 an hour…

Most of the workers at the new Audi factory in the state of Puebla, inaugurated in 2016 and assembling the Audi Q4 SUV, which carries a sticker price in the US of over $40,000 for base versions, make $2.25 an hour, according to the Union.

Volkswagen, which owns Audi, started building Beetles in Puebla in 1967 and has since created a vast manufacturing empire in Mexico, with vehicles built for consumers in Mexico, the US, Canada, and Latin American markets.

Volkswagen, Ford, GM, or any of the global automakers, which can manufacture just about anywhere in the world, always search for cheap labor to maximize the bottom line.

Would you want to work for $2.25 an hour?

Over time, millions of good paying jobs have been leaving high wage countries and have been going to low wage countries.  The United States has lost more than 70,000 manufacturing facilities since China joined the WTO, and this is one of the biggest factors that has eroded the middle class.

In a desperate attempt to maintain our standard of living, we have gone into increasing amounts of debt.  Of course our federal government is now 20 trillion dollars in debt, but on an individual level we are doing the same thing.  Today, American consumers are over 12 trillion dollars in debt, and it gets worse with each passing day.

The borrower is the servant of the lender, and most Americans have become debt slaves at this point.  This is something that Paul Craig Roberts commented on recently…

Americans carry on by accumulating debt and becoming debt slaves. Many can only make the minimum payment on their credit card and thus accumulate debt. The Federal Reserve’s policy has exploded the prices of financial assets. The result is that the bulk of the population lacks discretionary income, and those with financial assets are wealthy until values adjust to reality.

As an economist I cannot identify in history any economy whose affairs have been so badly managed and prospects so severely damaged as the economy of the United States of America. In the short/intermediate run policies that damage the prospects for the American work force benefit what is called the One Percent as jobs offshoring reduces corporate costs and financialization transfers remaining discretionary income in interest and fees to the financial sector. But as consumer discretionary incomes disappear and debt burdens rise, aggregate demand falters, and there is nothing left to drive the economy.

This debt-based system continuously funnels wealth toward the very top of the pyramid, because it is the people at the very top that hold all of the debts.

Each year it gets worse, and most Americans would be absolutely stunned to hear that the top one percent now control 38.6 percent of all wealth in the United States…

The richest 1% of families controlled a record-high 38.6% of the country’s wealth in 2016, according to a Federal Reserve report published on Wednesday.

That’s nearly twice as much as the bottom 90%, which has seen its slice of the pie continue to shrink.

The bottom 90% of families now hold just 22.8% of the wealth, down from about one-third in 1989 when the Fed started tracking this measure.

So how do we fix this?

Well, the truth is that we need to go back to a non-debt based system that does not funnel all of the wealth to the very top of the pyramid.  Unfortunately, most Americans don’t even realize that our current debt-based system is fundamentally flawed, and it will probably take an unprecedented crisis in order to wake people up enough to take action.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

Will there be a major stock market crash before the end of 2017?  To many of us, it seems like we have been waiting for this ridiculous stock market bubble to burst for a very long time.  The experts have been warning us over and over again that stocks cannot keep going up like this indefinitely, and yet this market has seemed absolutely determined to defy the laws of economics.  But most people don’t remember that we went through a similar thing before the financial crisis of 2008 as well.  I recently spoke to an investor that shorted the market three years ahead of that crash.  In the end his long-term analysis was right on the money, but his timing was just a bit off, and the same thing will be true with many of the experts this time around.

On Monday, I was quite stunned to learn what Brad McMillan had just said about the market.  He is considered to be one of the brightest minds in the financial world, and he told CNBC that stocks would need to fall “somewhere between 30 and 40 percent just to get to fair value”…

Brad McMillan — who counsels independent financial advisors representing $114 billion in assets under management — told CNBC on Monday that the stock market is way overvalued.

“The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards,” said McMillan, chief investment officer at Massachusetts-based Commonwealth Financial Network.

McMillan’s analysis is very similar to mine.  For a long time I have been warning that valuations would need to decline by at least 40 or 50 percent just to get back to the long-term averages.

And stock valuations always return to the long-term averages eventually.  Only this time the bubble has been artificially inflated so greatly that a return to the long-term averages will be absolutely catastrophic for our system.

Meanwhile, trouble signs for the real economy continue to erupt.  As noted in the headline, it appears that Toys R Us is on the brink of bankruptcy…

Toys R Us has hired restructuring lawyers at Kirkland & Ellis to help address looming $400 million in debt due in 2018, CNBC had previously reported, noting that bankruptcy was one potential outcome.

Kirkland declined to comment.

Earlier Monday, Reorg Research, a news service focused on bankruptcy and distressed debt, reported Toys R Us could file for bankruptcy as soon as Monday.

This is yet another sign that 2017 is going to be the worst year for retail store closings in U.S. history.  I don’t know how anyone can look at what is happening to the retail industry (or the auto industry for that matter) and argue that the U.S. economy is in good shape.

But most Americans seem to base their opinions on how the economy is doing by how well the stock market is performing, and thanks to relentless central bank intervention, stock prices have just kept going up and up and up.

In so many ways, what we are watching today is a replay of the dotcom bubble of the late 1990s, and this is something that McMillan also commented on during his discussion with CNBC…

Part of McMillan’s thesis is rooted in his belief that the lofty levels of the so-called FANG stocks — Facebook, Amazon, Netflix and Google-parent Alphabet — seem reminiscent of the dot-com bubble in the late 1990s.

“I’ve been saying for about the past year, this year looks a lot like 1999 to me,” McMillan said on “Squawk Box.” “If you look at the underlying economics [and] if look at the stock market, the similarities are remarkable.”

I am amazed that so many big names continue to issue extremely ominous warnings about the financial markets, and yet most Americans seem completely unconcerned.

It is almost as if 2008 never happened.  None of our long-term problems were fixed after that crisis, and the current bubble that we are facing is far larger than the bubble that burst back then.

I don’t know why more people can’t see these things.  It has gotten to a point where “even Goldman Sachs is getting worried”…

The stock market bubble is now so massive that even Goldman Sachs is getting worried.

Let’s be clear here: Wall Street does best and makes the most money when stocks are roaring higher. So in order for a major Wall Street firm like Goldman to start openly worrying about whether or not the markets are going to crash, there has to be truly MASSIVE trouble brewing.

On that note, Goldman’s Bear Market indicator just hit levels that triggered JUST BEFORE THE LAST TWO MARKET CRASHES.

When things fall apart this time, it is going to be even worse than what we went through in 2008.  In the aftermath, we are going to need people that understand that we need to fundamentally redesign how our system works, and that is something that I hope to help with.  We cannot base our financial system on a pyramid of debt, and we cannot allow Wall Street to operate like a giant casino.  Our entire economy has essentially become a colossal Ponzi scheme, and it is inevitable that it is going to come horribly crashing down at some point.

But for now, the blind continue to lead the blind, and most Americans are not going to wake up until we have gone over the edge.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Middle Class Is Being Destroyed: Now Only 25 Percent Of All Americans Have $10,000 Or More In Savings

We just got more evidence that the middle class is being systematically eviscerated.  According to a GOBankingRates survey that was just released, more than half the country has less than $1,000 in savings.  So in the event of a major economic disaster of some kind, over 50 percent of the nation is going to be completely out of cash almost immediately.  For years I have been writing about the steady decline of the middle class in the United States, but I still get astounded by numbers such as these.  According to this new survey, only 25 percent of all Americans have $10,000 or more in savings at this point…

$0 saved: 39 percent
Less than $1,000 saved: 18 percent
$1,000 to $4,999 saved: 12 percent
$5,000 to $9,999 saved: 6 percent
$10,000 or more saved: 25 percent

Other surveys have come up with similar results.  One discovered that about two-thirds of the country is living paycheck to paycheck, and another which was conducted by the Federal Reserve found that 44 percent of all U.S. adults do not even have enough money “to cover an unexpected $400 expense”.

Most of us have grown accustomed to barely scraping by from month to month.  But that is not what being “middle class” is supposed to be about.  If you are in the “middle class” you should be making more than you are spending and building long-term wealth.

But just like our federal government, most of us are spending money like there is no tomorrow.  If we don’t have quite enough money for what we want to do, we just borrow more.  Right now, U.S. consumers are more than 12 trillion dollars in debt, and it is impossible to build any real wealth when you are constantly drowning in red ink.

We are willingly enslaving ourselves, but most people were never even taught about the dangers of going into too much debt.

Another major factor in the decline of the middle class is the fact that we have been shipping millions of good paying jobs overseas.  We have lost more than 70,000 manufacturing facilities since China joined the WTO, and we have been replacing good paying manufacturing jobs with low paying service jobs.

Without enough good paying jobs, our middle class has been steadily shrinking.  In 2015, the middle class became a minority of the population in the United States for the first time ever recorded.

If you go back to the early 1970s, the middle class was well over 60 percent of the population, but now that number is hovering in the high 40s.

And things continue to get even worse.  For example, NBC News recently reported that the number of Americans that can’t afford to be living in their own homes has more than doubled since 2001…

Over 38 million American households can’t afford their housing, an increase of 146 percent in the past 16 years, according to a recent Harvard housing report.

Under federal guidelines, households that spend more than 30 percent of their income on housing costs are considered “cost burdened” and will have difficulty affording basic necessities like food, clothing, transportation and medical care.

But the number of Americans struggling with their housing costs has risen from almost 16 million in 2001 to 38 million in 2015, according to the Census data crunched in the report. That’s more than double.

If we want to turn things around for the middle class, we need more entrepreneurs and more small businesses.

Small businesses have traditionally been the primary engine for job growth in this country.  But instead of encouraging small businesses to start and grow, the federal government has been absolutely killing small businesses with red tape and high taxes.

If I win my election, I am going to do all that I can to fight for entrepreneurs and small businesses.  Today, the percentage of Americans that work for themselves is close to a record low, and we desperately need to get that turned around.

So I I go to Congress, one of the first things I plan to do is to push for the elimination of the “self-employment tax”.

If you are an entrepreneur, then you already know how painful that particular tax can be.

We have got to get this economy growing again.  Barack Obama was the only president in our entire history never to have a single year when the U.S. economy grew by at least 3 percent, and overall we have not had a year when our economy grew by at least 3 percent in over a decade.

And as I noted earlier this week, “our economy has still only grown at an average rate of just 1.33 percent a year over the last 10 years.”

Is that acceptable to you?

I hope not, because it sure is not acceptable to me.

What we have been doing is simply not working.  In fact, if we were not propping up the economy with the greatest debt binge in human history, we would be a in a rip-roaring economic depression right now.

If we want America to once again become the greatest economic machine on the planet, we need to do the things that made us great in the first place.  We need an extremely limited federal government that stays out of the way of business, and we need to once again embrace the principles of free market capitalism.

Free markets work tremendously well if you allow them to do so.

But if we continue to march down the road toward big government socialism, we will get what we deserve, and it won’t be pretty.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Our Disneyland Economy

Disneyland is known as a place “where dreams come true” and where every story always has a happy ending.  But there is going to be no happy ending for the U.S. economy.  Wishful thinking has resulted in one of the greatest stock market rallies in history in recent months, but like all childhood fantasies, it won’t last.  The real economy continues to deteriorate, and we can see this even right outside of the gates of Disneyland.  Every night growing numbers of homeless people sleep on the pavement just steps away from “the happiest place on Earth”.  It can be fun to “play make believe” for a while, but eventually reality always catches up with us.

Without a doubt, the stock market has been on a tremendous run.  Since Donald Trump’s stunning election victory in November, the market has been setting record high after record high, and it is now up a total of 17 percent…

The Dow Jones Industrial Average recorded its 23rd all time high of 2017 yesterday closing at 21,532.  There have been a total of 120 days where the markets have closed since President Trump’s inauguration on January 20th.  The ‘DOW’ has closed at all time highs 23 of those days for nearly 20% or one-fifth of the days the market has been open.  The market is up 9% since the inauguration. 

Since the election on November 8th the DOW has closed at record highs an amazing 40 times!   Nearly one-fourth or 24% of the 168 days the markets have closed have been record highs since the November 8th election.  The market is up 17% since the election!

If this surge was supported by hard economic data, that would be something to greatly celebrate, but that has not been the case at all.

Instead, stock prices have become completely disconnected from economic reality, and now we are facing one of the greatest stock bubbles of all time.  As Graham Summers has pointed out, stocks are now trading at price to sales ratios that we haven’t seen since the very height of the dotcom bubble…

Earnings, cash flow, and book value are all financial data points that can be massaged via a variety of gimmicks. As a result of this, valuing stocks based on Price to Earnings, Price to Cash Flow, and Price to Book Value can often lead to inaccurate valuations.

Sales on the other hand are all but impossible to gimmick. Either money came in the door, or it didn’t And, if a company is caught faking its sales numbers, someone is going to jail.

So the fact that stocks are now trading at a P/S ratio that matches the Tech Bubble (the single largest stock bubble in history) tells us that we’re truly trading at astronomical levels: levels associated with staggering levels of excess.

There is no possible way that this is sustainable, and just like before the 2008 crisis a whole host of experts are warning that disaster is imminent.  One of them is John Mauldin…

Looking with fresh eyes at the economic numbers and central bankers’ statements convinced me that we will soon be in deep trouble. I now feel that it’s highly likely we will face a major financial crisis, if not later this year, then by the end of 2018 at the latest. Just a few months ago, I thought we could avoid a crisis and muddle through. Now I think we’re past that point. The key decision-makers have (1) done nothing, (2) done the wrong thing, or (3) done the right thing too late.

Having realized this, I’m adjusting my research efforts. I believe a major crisis is coming. The questions now are, how severe will it be, and how will we get through it?

And even though the stock market has been surging deeper and deeper into bubble territory in recent months, the middle class has continued to shrink and poverty has continued to grow all over the country.  In fact, because so many homeless people have been sleeping at bus shelters across from Disneyland lately authorities decided to completely remove the benches that they had been sleeping on…

The vanishing benches were Anaheim’s response to complaints about the homeless population around Disneyland. Public work crews removed 20 benches from bus shelters after callers alerted City Hall to reports of vagrants drinking, defecating or smoking pot in the neighborhood near the amusement park’s entrance, officials said.

The situation is part of a larger struggle by Orange County to deal with a rising homeless population. A survey last year placed the number of those without shelter at 15,300 people, compared with 12,700 two years earlier.

But simply removing benches will not make the problem go away.

Homelessness has been growing so rapidly in Los Angeles that the the L.A. City Council actually asked Governor Jerry Brown to formally declare a state of emergency.

And in New York City, street homelessness is up 39 percent over the past year.

This is where the real economy is heading, but a rising stock market makes for much happier headlines.

Many major cities around the nation are passing laws to essentially make it illegal to be homeless.  Forcing homeless people to go somewhere else may mask the problem for a while, but it certainly doesn’t do anything to solve it.  In my new book entitled “Living A Life That Really Matters”, I talk about how real love is not just about loving those that are just like us.  Rather, real love is about caring for people no matter what they look like and no matter what they are going through.

Unfortunately, the economic suffering that we are seeing right now is just the beginning.

Just like in 2008, the major financial crisis that is coming is going to greatly accelerate our economic problems.  And just like last time, millions of people are going to lose their jobs, and millions of people are going to lose their homes.

Homelessness is already worse in many parts of the nation that it was during the depths of the last recession, and what we are going to see during the next economic downturn is going to be absolutely unprecedented.

So don’t look down on those that need a helping hand, because in the not too distant future you may find yourself needing some help.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

69 Percent Of Americans Do Not Have An Adequate Emergency Fund

Do you have an emergency fund?  If you even have one penny in emergency savings, you are already ahead of about one-fourth of the country.  I write about this stuff all the time, but it always astounds me how many Americans are literally living on the edge financially.  Back in 2008 when the economy tanked and millions of people lost their jobs, large numbers of Americans suddenly couldn’t pay their bills because they were living paycheck to paycheck.  Now the stage is set for it to happen again.  Another major recession is going to happen at some point, and when it does millions of people are going to get blindsided by it.

Despite all of our emphasis on education, we never seem to teach our young people how to handle money.  But this is one of the most basic skills that everyone needs.  Personally, I went through high school, college and law school without ever being taught about the dangers of going into debt or the importance of saving money.

If you are ever going to build any wealth, you have got to spend less than you earn.  That is just basic common sense.  Unfortunately, nearly one out of every four Americans does not have even a single penny in emergency savings…

Bankrate’s newly released June Financial Security Index survey indicates that 24 percent of Americans have not saved any money at all for their emergency funds.

This is despite experts recommending that people strive for a savings cushion equivalent to the amount needed to cover three to six months’ worth of expenses.

For years, I have been telling my readers that at a minimum they need to have an emergency fund that can cover at least six months of expenses.  It is great to have more than that, but everyone should strive to have at least a six month cushion.

Unfortunately, that same Bankrate survey found that only 31 percent of Americans actually have such a cushion…

The June survey also found that 31 percent of Americans have what Bankrate considers an ‘adequate’ savings cushion — six or more months’ worth of money to pay expenses — which means that nearly two-thirds of the country isn’t saving enough money.

That means that a whopping 69 percent of all Americans do not have an adequate emergency fund.

So what is going to happen if another great crisis arrives and millions of people suddenly lose their jobs?

Just like last time, mortgage defaults will start soaring and countless numbers of families will lose their homes.

If you do not have anything to fall back on, you can lose your spot in the middle class really fast.  And in the case of a truly catastrophic national crisis, trying to operate without any money at all is going to be exceedingly challenging.

Just recently, the Federal Reserve conducted a survey that discovered that 44 percent of all Americans do not even have enough money “to cover an unexpected $400 expense”.

That is almost half the country.

And a different survey by CareerBuilder found that 75 percent of all Americans have lived paycheck to paycheck “at least some of the time”.

Unfortunately, in a desperate attempt to make ends meet many of us continue to pile up more and more debt.  According to Moneyish, Americans have now accumulated more than a trillion dollars of credit card debt, more than a trillion dollars of student loan debt, and more than a trillion dollars of auto loan debt.

We’ve racked up $1 trillion in credit card debt — and that’s just a fraction of what we owe. That’s according to data released this year from the Federal Reserve, which found that U.S. consumers owe $1.0004 trillion on their cards, up 6.2% from a year ago; this is the highest amount owed since January 2009. What’s more, this isn’t the only consumer debt to top $1 trillion. We now also owe more than $1 trillion for our cars, and for our student loans, the data showed.

Overall, U.S. consumers are now more than 12 trillion dollars in debt.

We often criticize the federal government for being nearly 20 trillion dollars in debt.  And that criticism is definitely valid.  What we are doing to future generations of Americans is beyond criminal.

But are we not doing something similar to ourselves?

When you divide the total amount of consumer debt by the size of the U.S. population, it breaks down to roughly $40,000 for every man, woman and child in our country.

When someone lends you money, you have to pay back more than you originally borrow.  And in the case of high interest debt, you can end up paying back several times what you originally borrowed.

If you carry a balance from month to month on a high interest credit card, it is absolutely crippling you financially.  But many Americans don’t understand this.  Instead, they just keep sending off the “minimum payment” every month because that is the easiest thing to do.

If you ever want to achieve financial freedom, you have got to get rid of your toxic debts.  There are some forms of low interest debt, such as mortgage debt, that are not going to financially cripple you.  But anything with a high rate of interest you will want to pay off as soon as possible.

And everyone needs a financial cushion.  Unless you can guarantee that your life is always going to go super smoothly and you are never going to have any problems, you need an emergency fund to fall back on.

Yes, you may need to make some sacrifices in order to make that happen.  Nobody ever said that it would be easy.  But just about everyone has somewhere that a little “belt tightening” can be done, and in the long-term it will be worth it.

When you don’t have to constantly worry about how you are going to pay the bills next month, it will help you sleep a lot easier at night.  Many of us have put a lot of unnecessary stress on ourselves by spending money that we didn’t have for things that we really didn’t need.

And now is the time to get your financial house in order, because it appears that another major economic downturn is not too far away.

The Worst Financial Nightmare In Illinois History Erupts As State Comptroller Declares ‘We Are In Massive Crisis Mode’

Margaret Thatcher once said that the big problem with socialist governments is that “they always run out of other people’s money”, and unfortunately we are witnessing this play out in a major way in the state of Illinois right now.  At this point, the Illinois state government has more than 15 billion dollars of unpaid bills.  Yes, you read that correctly.  They are already 15 billion dollars behind on their bills, and they are on pace to take in 6 billion dollars less than they are scheduled to spend in 2017.  It is the worst financial crisis in the history of Illinois, and State Comptroller Susana Mendoza sounds like she is about ready to tear her hair out in frustration…

“I don’t know what part of ‘We are in massive crisis mode’ the General Assembly and the governor don’t understand. This is not a false alarm,” said Mendoza, a Chicago Democrat. “The magic tricks run out after a while, and that’s where we’re at.”

It’s a new low, even for a state that’s seen its financial situation grow increasingly desperate amid a standoff between the Democrat-led Legislature and Republican Gov. Bruce Rauner. Illinois already has $15 billion in overdue bills and the lowest credit rating of any state, and some ratings agencies have warned they will downgrade the rating to “junk” if there’s no budget before the next fiscal year begins July 1.

Would you continue to do work for the Illinois state government if you knew that they were this far behind on their bills and that it is doubtful that you would be paid any time in the foreseeable future?

Of course the answer to that question is quite obvious.  As contractual relationships break down, social services are starting to suffer, and there is not much hope that things will take a turn for the better any time soon.

At this point things have gotten so bad that the Illinois Department of Transportation is planning to cease all roadwork starting on July 1st, and even the Powerball lottery is threatening to cut all ties with the state…

As reported previously, the state Transportation Department said it would stop roadwork by July 1 if Illinois entered its third consecutive fiscal year without a budget – the longest such stretch of any US state – while the Powerball lottery said it may be forced to dump Illinois over its lack of budget. For now, state workers have continued to receive pay because of court orders, but school districts, colleges and medical and social service providers are under increasing strain.

So what has caused this unprecedented crisis?

At the core, the problem is political.  A tense standoff between a Republican governor and a Democratic legislature has resulted in the state going 700 days without a budget…

On May 31, Illinois will have gone 700 days without a budget, an unprecedented political failure. Also on May 31, if a budget is not passed, it could mean that the state could go until 2019—an unimaginable idea, except that senators have already imagined it.

How does a state, led by a successful businessman as governor, a brilliant political strategist in the House, and a consummate dealmaker in the Senate, end up in this kind of political disorganization? Bad political errors led to bad political incentives, and as the problem worsened, so did the political risk of solutions—and what politicians had to ask of their constituents.

This is another example of how deeply divided we are as a nation right now.  Democrats hate Republicans and Republicans hate Democrats, and it is getting to the point where the two parties cannot work together on even the most basic things.

In the end, the state of Illinois is either going to have to cut spending dramatically, raise taxes substantially or some combination of both.  And since the Democrats have very large majorities in both chambers of the state legislature, I wouldn’t count on spending being cut that much.

This is the thing with big government – it always has a tendency to get even bigger.  And the bigger government gets, the more of our money and the more of our freedom it takes away.

That is why I am a huge advocate of dramatically shrinking the size of government on the federal, state and local levels.  Like Rand Paul has often said, I want a government so small that I can barely see it.

When you let government get out of control, what you end up with is a ravenous beast that has an endless appetite for more of your money.  In Illinois, the money is all gone and the beast is desperately hungry for more.

Sadly, what is happening in Illinois is just the tip of the iceberg.  If stock prices start declining from these massively inflated levels, state pension funds all over America are going to be in crisis mode very rapidly.  And a new recession would greatly accelerate the financial problems of a whole bunch of states that are already dealing with huge budget shortfalls.

Unfortunately, experts all over the country are warning that the next major downturn is coming very quickly.  For example, just consider what Bernard Arnault just told CNBC…

A financial crisis could be just around the corner, according to the chief executive of LVMH, who has described the global economic outlook as “scary”.

“For the economic climate, the present situation is…mid-term scary,” Bernard Arnault told CNBC Thursday.

“I don’t think we will be able to globally avoid a crisis when I see the interest rates so low, when I see the amounts of money flowing into the world, when I see the stock prices which are much too high, I think a bubble is building and this bubble, one day, will explode.”

There is always a price to pay for going into too much debt.

A financial day of reckoning can be delayed for a while, but eventually bad financial decisions are going to catch up with you.  The state of Illinois is learning this lesson in a very harsh manner right now, and the country as a whole is on the exact same path as Illinois.

I am often criticized for endlessly warning about America’s coming day of reckoning, but you can’t pile up the biggest mountain of debt in the history of the world without paying a price.

Just like the state of Illinois, we will pay for decades of exceedingly foolish decisions, and unfortunately this is going to cause severe economic pain throughout our entire society.

2017 Is Going To Be The Worst Retail Apocalypse In U.S. History – More Than 300 Retailers Have Already Filed For Bankruptcy

Not even during the worst parts of the last recession did things ever get this bad for the U.S. retail industry.  As you will see in this article, more than 300 retailers have already filed for bankruptcy in 2017, and it is being projected that a staggering 8,640 stores will close in America by the end of this calendar year.  That would shatter the old record by more than 20 percent.  Sadly, our ongoing retail apocalypse appears to only be in the early chapters.  One report recently estimated that up to 25 percent of all shopping malls in the country could shut down by 2022 due to the current woes of the retail industry.  And if the new financial crisis that is already hitting Europe starts spreading over here, the numbers that I just shared with you could ultimately turn out to be a whole lot worse.

I knew that a lot of retailers were filing for bankruptcy, but I had no idea that the grand total for this year was already in the hundreds.  According to CNN, the number of retail bankruptcies is now up 31 percent compared to the same time period last year…

Bankruptcies continue to pile up in the retail industry.

More than 300 retailers have filed for bankruptcy so far this year, according to data from BankruptcyData.com. That’s up 31% from the same time last year. Most of those filings were for small companies — the proverbial Mom & Pop store with a single location. But there are also plenty of household names on the list.

Yes, the growth of online retailers such as Amazon is fueling some of this, but the Internet has been around for several decades now.

So why are retail store closings and retail bankruptcies surging so dramatically all of a sudden?

Just a few days ago, another major victim of the retail apocalypse made headlines all over the nation when it filed for bankruptcy.  At one time Gymboree was absolutely thriving, but now it is in a desperate fight to survive…

Children’s clothing chain Gymboree has filed for bankruptcy protection, aiming to slash its debts and close hundreds of stores amid crushing pressure on retailers.

Gymboree said it plans to remain in business but will close 375 to 450 of its 1,281 stores in filing for a Chapter 11 bankruptcy reorganization. Gymboree employs more than 11,000 people, including 10,500 hourly workers.

And in recent weeks other major retailers that were once very prosperous have also been forced to close stores and lay off staff…

This hemorrhaging of retail jobs comes on the heels of last week’s mass layoffs at Hudson Bay Company, where employees from Saks Fifth Avenue and Lord & Taylor were among the 2,000 people laid off. The news of HBC layoffs came on the same day that Ascena, the parent company of brands like Ann Taylor, Lane Bryant, and Dress Barn, told investors it will be closing up to 650 stores (although it did not specify which brands will be affected just yet). Only two weeks ago, affordable luxury brand Michael Kors announced it too would close 125 stores to combat brand overexposure and plummeting sales.

In a lot of ways this reminds me of 2007.  The stock market was still performing very well, but the real economy was starting to come apart at the seams.

And without a doubt, the real economy is really hurting right now.  According to Business Insider, Moody’s is warning that 22 more major retailers may be forced to declare bankruptcy in the very near future…

Twenty-two retailers in Moody’s portfolio are in serious financial trouble that could lead to bankruptcy, according to a Moody’s note published on Wednesday. That’s 16% of the 148 companies in the financial firm’s retail group — eclipsing the level of seriously distressed retail companies that Moody’s reported during the Great Recession.

You can find the full list right here.  If this many major retailers are “distressed” now, what are things going to look like once the financial markets start crashing?

As thousands of stores close down all across the United States, this is going to put an incredible amount of stress on shopping mall owners.  In order to meet their financial obligations, those mall owners need tenants, but now the number of potential tenants is shrinking rapidly.

I have talked about dead malls before, but apparently what we have seen so far is nothing compared to what is coming.  The following comes from CNN…

Store closings and even dead malls are nothing new, but things might be about to get a whole lot worse.

Between 20% and 25% of American malls will close within five years, according to a new report out this week from Credit Suisse. That kind of plunge would be unprecedented in the nation’s history.

I can’t even imagine what this country is going to look like if a quarter of our shopping malls shut down within the next five years.  Already, there are some parts of the U.S. that look like a third world nation.

And what is this going to do to employment?  Today, the retail industry employs millions upon millions of Americans, and those jobs could start disappearing very rapidly…

The retail sales associate is one of the most popular jobs in the country, with roughly 4.5 million Americans filling the occupation. In May, the US Bureau of Labor Statistics released data that found that 7.5 million retail jobs might be replaced by technology. The World Economic Forum predicts 30 to 50 percent of retail jobs will be gone once struggling companies like Gymboree fully hop on the digital train. MarketWatch found that over the last year, the department store space bled 29,900 jobs, while general merchandising stores cut 15,700 positions. At this rate, one Florida columnist put it soberingly, “Half of all US retail jobs could vanish. Just as ATMs replaced many bank tellers, automated check-out stations are supplanting retail clerks.”

At this moment, the number of working age Americans that do not have a job is hovering near a record high.  So being able to at least get a job in the retail industry has been a real lifeline for many Americans, and now that lifeline may be in grave danger.

For those running our big corporations, losing these kinds of jobs is not a big deal.  In fact, many corporate executives would be quite happy to replace all of their U.S. employees with technology or with foreign workers.

But if the middle class is going to survive, we need an economy that produces good paying jobs.  Unfortunately, even poor paying retail jobs are starting to disappear now, and the future of the middle class is looking bleaker than it ever has before.

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