Debts

Drowning In Debt: 35 Percent Of All Americans Have Debt That Is At Least 180 Days Past Due

October 14, 2016October 14, 2016 by Michael

More than a third of all Americans can’t pay their debts. I don’t know about you, but to me that is a shocking figure. As you will see below, 35 percent of the people living in this country have debt in collections. When a debt is in collections, it is at least 180 days past due. And this is happening during the “economic recovery” that the mainstream media keeps touting, although the truth is that Barack Obama is going to be the only president in United States history to never have a single year when the economy grew by at least 3 percent. But at least things are fairly stable for the moment, and if this many Americans are having trouble paying their bills right now, what are things going to look like when the economy becomes extremely unstable once again.

The 35 percent figure is a nugget that I discovered in a CNN article about Detroit that I was reading earlier today…

And the city’s troubles have left a mark on the financial stability of its residents in a big way, according to a new report from the Urban Institute.

About 66% of residents have debt in collections — meaning more than 180 days past due — at a median amount of $1,847. Across the U.S., 35% of Americans have debt in collections.

It is hard to believe that 66 percent of the residents of one of our largest cities could have debt in collections, but without a doubt the city of Detroit is a complete and utter economic wasteland at this point.

But to me, the 35 percent figure for the nation as a whole is a much greater concern.

And much of the debt that is in collections is credit card debt.

In the immediate aftermath of the last financial crisis, many Americans started getting out of debt, and that was a very good thing.

Unfortunately, that trend has completely reversed itself over the past few years, and now credit card balances are rising at a pace that is quite alarming…

Using data from the U.S. Census Bureau and the Federal Reserve, ValuePenguin found that the average credit card debt for households that carry a balance is a shocking $16,048 — a figure that has risen by 10% over the past three years. At the average variable credit card interest rate of 16.1%, this translates to nearly $2,600 in credit card interest alone. And many credit cards have interest rates much higher than the average.

Even scarier, consider that based on the average interest rate and a minimum payment of 1.5% of the balance, it would take nearly 14 years for the typical indebted household to pay off its existing credit card debt, at a staggering cost of more than $40,200. Keep in mind that this assumes no additional credit card debt is added to the tab along the way.

Those that have been there know exactly how it feels to be drowning in credit card debt.

You know, they don’t teach you about credit cards in high school or in college. At least they didn’t in my day. So once I got out into the “real world” and discovered the joy of instantly getting whatever I wanted with a credit card, I didn’t understand how painful it would be to pay that money back someday.

If you have credit card balances that are out of control, they can keep you up late into the night. The worry and the fear can eat away at you like a cancer, and many people play a game of moving balances from one card to another in a desperate attempt to stay afloat.

Fortunately I learned my hard lessons at an early enough age to get things turned around. Now I warn others about the danger of credit card debt through my writing, and my hope is that the things that I share on my websites are doing some good for others that may be struggling financially.

When you are deep in debt, it is exceedingly difficult to build up any wealth of your own. This is one of the primary reasons why 69 percent of all Americans have less than $1,000 in savings today.

In essence, more than two-thirds of the country is living paycheck to paycheck, and that is a recipe for disaster when the next major economic downturn in the U.S. strikes.

Overall, household debt in America has now reached a grand total of 12.3 trillion dollars. When you break that down, it comes to $38,557 for every man, woman and child in the entire nation.

So for a family of five, your share of that total would be $192,785.

And remember, that is just household debt. That total does not include any form of business debt or any form of government debt.

We truly are a “buy now, pay later” society. We were the wealthiest and most prosperous nation on the entire planet, and previous generations handed us the keys to the greatest economic machine in world history, but that wasn’t good enough for us.

We always had to have more, more, more – and now we have accumulated more debt than any society in the history of the globe.

It is inevitable that this giant debt bubble is going to burst. Anyone with an ounce of common sense can see that.

What we experienced in 2008 was just a preview of the hard times that are coming. The next recession is going to be even worse, and most economists are convinced that it will happen within the next four years no matter who is elected president in November. The following comes from the Wall Street Journal via the Calculated Risk blog…

Economists in The Wall Street Journal’s latest monthly survey of economists put the odds of the next downturn happening within the next four years at nearly 60%.

Just like the last time around, millions of those that are “living on the edge” financially will fall out of the middle class and into poverty when they lose their jobs.

Hopefully most of you that have been reading my work for an extended period of time have already been getting out of debt and have been building up a financial cushion.

Sadly, most of the country continues to act as if they are living in a pre-2008 world, and the economic wake up call that is coming is going to be incredibly painful for those that thought they could get away with being exceedingly reckless financially.

The Total Amount Of Debt In The World Just Hit A Record $152,000,000,000,000 (152 Trillion)

October 11, 2016October 11, 2016 by Michael

If anyone ever asks you how much debt there is in the world, now you will know the answer. According to the IMF, the total amount of debt around the globe has now hit a staggering 152 trillion dollars. That is an amount of money that is almost unimaginable, and the IMF says that it is equivalent to 225 percent of global GDP. It is the biggest debt bubble in the history of the planet, and it is rising at an extremely alarming pace. Experts all over the world agree that when this debt bubble finally bursts, it is going to create an economic crisis on a scale that humanity has never seen before.

When I first saw this number I was absolutely astounded at how reckless we all have become, and I was also amazed that there was hardly anything about this announcement in the mainstream media in the United States. The following excerpt comes from a story in a major British news source…

The International Monetary Fund has urged governments to take action to tackle a record $152tn debt mountain before it triggers a fresh global financial and economic crisis.

Warning that debt levels were not just high but rising, the IMF said it was vital to intervene early in order to mitigate the risks of a repeat of the damaging events that began with the collapse of the US sub-prime housing bubble almost a decade ago.

It said that new research in its half-yearly fiscal monitor covering 113 countries had shown that debt was currently 225% of global GDP, with the private sector responsible for two-thirds of the total.

Right now the mainstream media in the United States is so obsessed with Trump and Clinton that almost every other important story is pushed to the side, but it boggles my mind how this cannot be major front page news.

When we borrow money, consumption is transferred from the future to the present. For example, if you put a 70 inch television on your credit card today, the quality of your lifestyle will immediately go up, but you won’t have that money to spend at some point in the future. In fact, you are ultimately going to pay back significantly more money than you originally spent for the television.

So when we go into debt, we are literally destroying the future one dollar at a time.

On a national scale, what we are doing to our children, our grandchildren and all future generations of Americans is beyond criminal. Thomas Jefferson and other founding fathers warned that government debt was simply thievery from future generations, and they were exactly right. If future generations get the chance, they will look back and curse us for what we have done to them.

Earlier today I looked up our national debt, and it is currently sitting at $19,688,773,606,117.54. That means that Barack Obama has officially become “the 9 trillion dollar man”.

When Barack Obama entered the White House, the U.S. government was 10.6 trillion dollars in debt, and now we are 19.6 trillion dollars in debt, and there is a very good chance that we could hit 20 trillion dollars by the time he leaves the White House on January 20th, 2017.

In a just society, the politicians that have done this to future generations of Americans would be going to jail, but instead we put them up on pedestals.

It is truly hard to grasp how much money “a trillion dollars” represents.

For instance, if you were alive when Jesus Christ was born, and you had spent a million dollars every single day since that time, you still would not have spent a trillion dollars by now.

Since Barack Obama entered the White House, we have been stealing more than 100 million dollars from future generations of Americans every single hour of every single day, and as Obama’s second term draws to a close the pace of that theft is accelerating according to Simon Black…

In fact, for the 2016 fiscal year that ends in just ten more days, the US government’s debt growth of $1.36 trillion is on track to be the third biggest annual increase ever.

The only two years in all of US history that posted higher US debt growth were 2010 and 2011– the peak of the financial crisis.

Even more acutely, last month the US federal debt grew by $151.5 billion.

Not counting the financial crisis, and a few anomalous months following a debt ceiling reset, August 2016 was the single biggest expansion of US debt EVER.

How could we do this?

And I know that I have pointed the finger at Barack Obama a lot in this article, but the truth is that Republicans are highly to blame as well.

The Tea Party revolution of 2010 gave the Republicans control of the House of Representatives, and since that time they have also gained control of the Senate. Without Republican approval, Barack Obama would not be able to spend a single penny. The American people were counting on the Republicans to put a lid on the wild spending of Barack Obama and the Democrats, and the Republicans in Congress have completely failed.

Nobody wants to end the party. Because without a doubt, cutting back on our wild borrowing and spending would seriously damage the economy in the present, and nobody wants to be responsible for that.

So now the only thing to do is to keep the party going for as long as possible until it ends in a horrible, fiery crash.

Overall, the total amount of debt in the United States is now roughly equivalent to 350 percent of U.S. GDP, and a day of reckoning is rapidly approaching. Just consider what Charles Schwab’s chief investment strategist, Liz Ann Sonders, recently told Business Insider…

Sonders noted that total debt — public, private, nonfinancial, and financial — had become 350% of gross domestic product, and that is already causing problems for the economy.

“The question I get all the time is: When are we going to hit the wall? When are we going to hit the debt wall?” Sonders said. “I think we hit the debt wall in ’08, which unleashed a big round one of what I think will be a rolling set of crises — and not just in the US but globally.“

And I very much agree with her.

We definitely “hit a wall” in 2008, but it was just “round one” of our problems.

The coming rounds are going to be even more painful, but most Americans don’t understand this.

Most Americans seem to believe that our debt-fueled standard of living can be sustained indefinitely and that there is nothing to be concerned about.

Unfortunately, the laws of economics cannot be defied forever, and eventually the American people are going to experience economic and financial pain on a scale that we have never seen before in our entire history.

Deutsche Bank Collapse: The Most Important Bank In Europe Is Facing A Major ‘Liquidity Event’

September 30, 2016September 30, 2016 by Michael

The largest and most important bank in the largest and most important economy in Europe is imploding right in front of our eyes. Deutsche Bank is the 11th biggest bank on the entire planet, and due to the enormous exposure to derivatives that it has, it has been called “the world’s most dangerous bank“. Over the past year, I have repeatedly warned that Deutsche Bank is heading for disaster and is a likely candidate to be “the next Lehman Brothers”. If you would like to review, you can do so here, here and here. On September 16th, the Wall Street Journal reported that the U.S. Department of Justice wanted 14 billion dollars from Deutsche Bank to settle a case related to the mis-handling of mortgage-backed securities during the last financial crisis. As a result of that announcement, confidence in the bank has been greatly shaken, the stock price has fallen to record lows, and analysts are warning that Deutsche Bank may be facing a “liquidity event” unlike anything that we have seen since the collapse of Lehman Brothers back in 2008.

At one point on Friday, Deutsche Bank stock fell below the 10 euro mark for the first time ever before bouncing back a bit. A completely unverified rumor that was spreading on Twitter that claimed that Deutsche Bank would settle with the Department of Justice for only 5.4 billion dollars was the reason for the bounce.

But the size of the fine is not really the issue now. Shares of Deutsche Bank have fallen by more than half so far in 2016, and this latest episode seems to have been the final straw for the deeply troubled financial institution. Old sources of liquidity are being cut off, and nobody wants to be the idiot that offers Deutsche Bank a new source of liquidity at this point.

As a result, Deutsche Bank is potentially facing a “liquidity event” on a scale that we have not seen since the financial crisis of 2008. The following comes from Zero Hedge…

It is not solvency, or the lack of capital – a vague, synthetic, and usually quite arbitrary concept, determined by regulators – that kills a bank; it is – as Dick Fuld will tell anyone who bothers to listen – the loss of (access to) liquidity: cold, hard, fungible (something Jon Corzine knew all too well when he commingled and was caught) cash, that pushes a bank into its grave, usually quite rapidly: recall that it took Lehman just a few days for its stock to plunge from the high double digits to zero.

It is also liquidity, or rather concerns about it, that sent Deutsche Bank stock crashing to new all time lows earlier today: after all, the investing world already knew for nearly two weeks that its capitalization is insufficient. As we reported earlier this week, it was a report by Citigroup, among many other, that found how badly undercapitalized the German lender is, noting that DB’s “leverage ratio, at 3.4%, looks even worse relative to the 4.5% company target by 2018” and calculated that while he only models €2.9bn in litigation charges over 2H16-2017 – far less than the $14 billion settlement figure proposed by the DOJ – and includes a successful disposal of a 70% stake in Postbank at end-2017 for 0.4x book he still only reaches a CET 1 ratio of 11.6% by end-2018, meaning the bank would have a Tier 1 capital €3bn shortfall to the company target of 12.5%, and a leverage ratio of 3.9%, resulting in an €8bn shortfall to the target of 4.5%.

The more the stock price drops, the faster other financial institutions, investors and regular banking clients are going to want to pull their money out of Deutsche Bank. And every time there is news about people pulling money out of the bank, that is just going to drive the stock price even lower.

In other words, Deutsche Bank may be entering a death spiral that may be impossible to stop without a government bailout, and the German government has already stated that there will be no bailout for Deutsche Bank.

Banking customers have a total of approximately 566 billion euros deposited with the bank, and even if a small fraction of those clients start demanding their money back it is going to cause a major, major crunch.

Deutsche Bank CEO John Cryan attempted to calm nerves on Friday by releasing a memo to employees that blamed “speculators” for the decline in the stock price…

Instead of doing what many have correctly suggested he should be doing, namely focusing on ways to raise more capital for the undercapitalized Deutsche Bank in order to stem the slow (at first) liquidity leak, first thing this morning CEO John Cryan issued another morale-boosting note to employees of Deustche Bank who have been watching their stock price crash to another record low, dipping under €10 in early trading for the first time ever. In the memo the embattled CEO worryingly did what Dick Fuld and other chief executives did when they felt the situation slipping out of control, namely blaming evil “rumor-spreading” shorts, saying “our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price. … Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.”

Just as important, Cryan confirms the Bloomberg report that “a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns.” As we explained last night, the concerns are very much justified if they spread to the biggest risk-factor for the German bank: its depositors, which collectively hold over €550 billion in liquidity-providing instruments.

If you would like to ready the full memo, you can do so right here.

One of the reasons why Deutsche Bank is considered to be so systemically “dangerous” is because it has 42 trillion euros worth of exposure to derivatives. That is an amount of money that is 14 times larger than the GDP of the entire nation of Germany.

Some firms that were derivatives clients of the bank have already gotten spooked and have moved their business to other institutions. It was this report from Bloomberg that really helped drive down the stock price of Deutsche Bank earlier this week…

The funds, a small subset of the more than 800 clients in the bank’s hedge fund business, have shifted part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’s $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person with knowledge of the situation who declined to be identified talking about confidential client matters.

“The issue here is now one of confidence,” said Chris Wheeler, a financial analyst with Atlantic Equities LLP in London.

So what comes next?

Monday is a banking holiday for Germany, so we may not see anything major happen until Tuesday.

An announcement of a major reduction in the Department of Justice fine may buy Deutsche Bank some time, but any reprieve would likely only be temporary.

What appears to be more likely is the scenario that Jeffrey Gundlach is suggesting…

But Jeffrey Gundlach, chief executive of DoubleLine Capital, said investors betting that Berlin would not rescue Deutsche could find themselves nursing big losses.

‘The market is going to push down Deutsche Bank until there is some recognition of support. They will get assistance, if need be,’ said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine.

It will be very interesting to see how desperate things become before the German government finally gives in to the pressure.

The complete and total collapse of Deutsche Bank would be an event many times more significant for the global financial system than the collapse of Lehman Brothers was. Global leaders simply cannot afford for such a thing to happen, but without serious intervention it appears that is precisely where we are heading.

Personally, I don’t know exactly what will happen next, but it will be fascinating to watch.

26 Incredible Facts About The Economy That Every American Should Know For The Trump-Clinton Debate

September 26, 2016September 25, 2016 by Michael

Are you ready for the most anticipated presidential debate in decades? It is being projected that Monday’s debate between Donald Trump and Hillary Clinton could potentially break the all-time record of 80 million viewers that watched Ronald Reagan and Jimmy Carter debate back in 1980. Many Americans probably hope to see some personal fireworks between the two nominees, but the two candidates have both expressed a desire to focus on substantive issues. There will likely be quite a few questions about the economy, and without a doubt this is an area where Trump and Clinton have some very sharp differences. The mainstream media would have us believe that the U.S. economy is in pretty good shape, and if that was true that would seem to favor Clinton. But is it actually true? The following are 26 incredible facts about the economy that every American should know for the Trump-Clinton debate…

#1 When Barack Obama entered the White House, the U.S. government was 10.6 trillion dollars in debt. Today, the U.S. government is 19.5 trillion dollars in debt, and Obama still has several months to go until the end of his second term. That means that an average of more than 1.1 trillion dollars a year will be added to the national debt during his presidency. We are stealing a tremendous amount of consumption from the future to make the economy look much, much better than it otherwise would be, and we are systematically destroying the future in the process.

#2 As Obama prepares to leave office, the rate at which we are adding to the national debt is actually increasing. During the fiscal year that is just ending, the U.S. government has added another 1.36 trillion dollars to the national debt.

#3 It isn’t just the federal government that is on a massive debt binge. Total U.S. corporate debt has nearly doubled since the end of 2007.

#4 Default rates on U.S. corporate debt are the highest that they have been since the last financial crisis.

#5 Corporate profits have fallen for five quarters in a row, and it is being projected that it will be six in a row once the final numbers for the third quarter come in.

#6 During the month of August, commercial bankruptcy filings were up 29 percent compared to the same period a year ago.

#7 The rate of new business formation in the United States dropped dramatically during the last recession and has hovered at that new lower level ever since.

#8 The Wall Street Journal says that this is the weakest “economic recovery” since 1949.

#9 Barack Obama is on track to be the only president in all of U.S. history to never have a single year when the U.S. economy grew by at least 3 percent.

#10 In August, the Cass Freight Index dipped to the lowest level that we have seen for that month since 2010. What this means is that the total amount of stuff being shipped around the country by air, by rail and by truck is really dropping, and this is a clear sign that real economic activity is slowing down in a major way.

#11 Capital expenditure growth has turned negative, and history has shown that this is almost always followed by a new recession.

#12 The percentage of Americans with a full-time job has been sitting at about 48 percent since 2010. You have to go back to 1983 to find a time when full-time employment in this country was so low.

#13 The labor force participation rate peaked back in 1997 and has been steadily falling ever since.

#14 The “inactivity rate” for men in their prime working years is actually higher today than it was during the last recession.

#15 The United States has lost more than five million manufacturing jobs since the year 2000 even though our population has become much larger over that time frame.

#16 If you can believe it, the total number of government employees now outnumbers the total number of manufacturing employees in the United States by almost 10 million.

#17 One study found that median incomes have fallen in more than 80 percent of the major metropolitan areas in this country since the year 2000.

#18 According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year.

#19 The rate of homeownership in the U.S. has fallen every single year while Barack Obama has been in the White House.

#20 Approximately one out of every five young adults are currently living with their parents.

#21 The auto loan debt bubble recently surpassed the one trillion dollar mark for the first time ever.

#22 Auto loan delinquencies are at the highest level that we have seen since the last recession.

#23 In 1971, 61 percent of all Americans were considered to be “middle class”, but now middle class Americans have actually become a minority in this nation.

#24 One recent survey discovered that 62 percent of all Americans have less than $1,000 in savings.

#25 According to the Federal Reserve, 47 percent of all Americans could not even pay an unexpected $400 emergency room bill without borrowing the money from somewhere or selling something.

#26 The number of New Yorkers sleeping in homeless shelters just set a brand new record high, and the number of families permanently living in homeless shelters is up a whopping 60 percent over the past five years.

Despite all of the facts that you just read, the truth is that there is one particular group of people that have been doing quite well during the Obama years. I really like how Charles Hugh Smith made this point in one of his recent articles…

The top 5% of households that dominate government, Corporate America, finance, the Deep State and the media have been doing extraordinarily well during the past eight years of stock market bubble (oops, I mean boom) and “recovery,” and so they report that the economy is doing splendidly because they’ve done splendidly.

By recklessly creating money out of thin air and pumping it into the financial markets, the Federal Reserve has greatly enriched the elite, but they have also dramatically increased the gap between the very wealthy and the rest of us. Since he has been in the White House during this time, Barack Obama has gotten the credit for this temporary stock market bubble, and most of the elite love Obama anyway.

But in the process the stage has been set for the greatest economic and financial implosion in U.S. history, and the pain that is coming is going to affect every man, woman and child in this country.

During the debate, Trump and Clinton will talk a lot about tinkering with tax rates and regulations, but those measures are essentially going to be meaningless when compared to the massive economic tsunami that is coming. The next president is going to inherit the biggest economic problems that this nation has ever faced, and it is going to take a miracle of Biblical proportions to turn the U.S. economy in the right direction.

Living In A Van Down By The River – Time To Face The True State Of The Middle Class In America

September 21, 2016September 21, 2016 by Michael

Do you remember the old Saturday Night Live sketches in which comedian Chris Farley portrayed a motivational speaker that lived in a van down by the river? Unfortunately, this is becoming a reality for way too many Americans. As the middle class has shrunk and the cost of living has increased, a lot of people have decided to quite literally “live on the road”. Whether it is a car, a truck, a van, a bus or an RV, an increasing number of Americans are using their vehicles as their homes. Just recently, someone that I know took a trip down the west coast of the United States and stayed at a number of campgrounds along the way. What she discovered was that a lot of people were actually living at these campgrounds. Of course there are some that actually prefer that lifestyle, but many others are doing it out of necessity.

Earlier this week, Circa.com posted a story about “the van life”. One of the individuals that they featured was a recent graduate of the University of Southern California named Stephen Hutchins. Without much of an income at the moment, he decided that the best way to cut expenses was to live in his van…

“The main expenses are insurance for the van, which is like $60 a month,” said Hutchins. “Then, I have a storage unit for like $60.”

That puts his monthly rent at $120. The van cost him just $125 at an auction.

Living in a van is certainly not the most comfortable way to go, and many of you are probably wondering how he performs basic tasks such as cooking and bathing. Well, it turns out that he makes extensive use of public facilities…

He showers at the gym, cooks on a portable stove on a sidewalk (he stores his butane at his friends’ place nearby) and uses wifi at nearby coffeeshops.

For a while such a lifestyle may seem like “an adventure”, but after a while it will start to get really old. And not a lot of women are going to be excited about dating a man that lives in a van, and you certainly wouldn’t want to raise a family in a vehicle.

Sadly, just like during the last economic crisis many Americans are getting to the point where staying in their homes may not be an option. Just check out the following excerpt from a recent New York Post article entitled “The terrifying signs of a looming housing crisis“…

The number of New Yorkers applying for emergency grants to stay in their homes is skyrocketing — as the number of people staying in homeless shelters reached an all-time high last weekend, records show.

There were 82,306 applications for one-time emergency grants to prevent evictions in fiscal 2016, up 26 percent from 65,138 requests the previous year, according to the Mayor’s Management Report.

I put a couple of phrases in that quote in bold because I really wanted you to notice a couple of things.

First of all, it is very alarming to hear that the number of New Yorkers staying in homeless shelters “reached an all-time high” last weekend. I thought that we were supposed to be in an “economic recovery”, but apparently things in New York are rapidly getting worse.

Secondly, the fact that applications for emergency grants are up 26 percent compared to last year is another indication of how rough things are right now for average families in New York. We all remember what happened when millions of families lost their homes to foreclosure across the nation during the last financial crisis, and nobody should want to see a repeat of that any time soon.

During this election season, Barack Obama and Hillary Clinton would like all of us to believe that the economy is doing just fine, but that is not true at all. Even using the doctored numbers that the government gives us, Barack Obama is solidly on track to be the only president in all of U.S. history to never have a single year of 3 percent GDP growth, and he has had two terms to try to do that.

Gallup CEO Jim Clifton is also quite skeptical of this “economic recovery”, and he recently authored an article on this subject that is receiving a tremendous amount of attention. The following is how that article begins…

I’ve been reading a lot about a “recovering” economy. It was even trumpeted on Page 1 of The New York Times and Financial Times last week.

I don’t think it’s true.

The percentage of Americans who say they are in the middle or upper-middle class has fallen 10 percentage points, from a 61% average between 2000 and 2008 to 51% today.

Other surveys have found that it is even worse than that.

For example, a Pew Research Center study from the end of last year discovered that the middle class in America has now actually become a minority in this country.

Here are some other numbers that Clifton included in his article…

According to the U.S. Bureau of Labor Statistics, the percentage of the total U.S. adult population that has a full-time job has been hovering around 48% since 2010 — this is the lowest full-time employment level since 1983.
The number of publicly listed companies trading on U.S. exchanges has been cut almost in half in the past 20 years — from about 7,300 to 3,700. Because firms can’t grow organically — that is, build more business from new and existing customers — they give up and pay high prices to acquire their competitors, thus drastically shrinking the number of U.S. public companies. This seriously contributes to the massive loss of U.S. middle-class jobs.
New business startups are at historical lows. Americans have stopped starting businesses. And the businesses that do start are growing at historically slow rates.

Once upon a time, America was the land of opportunity.

We were the place where anything was possible and where entrepreneurship was greatly encouraged.

But today we strangle small businesses to death with rules, regulations, red tape and taxes.

If we want a stronger middle class, we need to create a much better environment for the creation of small businesses. Small business ownership often lifts individuals into the middle class, and small businesses have traditionally been the primary engine for the growth of good jobs in this country.

If the middle class continues to shrink, poverty will continue to rise. Previously I have written about how the number of homeless children in the United States has shot up by 60 percent since the last economic crisis, and Poverty USA claims that a staggering 1.6 million children slept either in a homeless shelter or in some other form of emergency housing during 2015.

If you will be sleeping in a warm bed in a comfortable home tonight, you should be thankful. An increasing number of Americans are sleeping in tent cities, in their vehicles or on the streets. These hurting people deserve our love, our compassion and our prayers.

The Bank For International Settlements Warns That A Major Debt Meltdown In China Is Imminent

September 19, 2016September 19, 2016 by Michael

The pinnacle of the global financial system is warning that conditions are right for a “full-blown banking crisis” in China. Since the last financial crisis, there has been a credit boom in China that is really unprecedented in world history. At this point the total value of all outstanding loans in China has hit a grand total of more than 28 trillion dollars. That is essentially equivalent to the commercial banking systems of the United States and Japan combined. While it is true that government debt is under control in China, corporate debt is now 171 percent of GDP, and it is only a matter of time before that debt bubble horribly bursts. The situation in China has already grown so dire that the Bank for International Settlements is sounding the alarm…

A key gauge of credit vulnerability is now three times over the danger threshold and has continued to deteriorate, despite pledges by Chinese premier Li Keqiang to wean the economy off debt-driven growth before it is too late.

The Bank for International Settlements warned in its quarterly report that China’s “credit to GDP gap” has reached 30.1, the highest to date and in a different league altogether from any other major country tracked by the institution. It is also significantly higher than the scores in East Asia’s speculative boom on 1997 or in the US subprime bubble before the Lehman crisis.

Studies of earlier banking crises around the world over the last sixty years suggest that any score above ten requires careful monitoring.

If you are not familiar with the Bank for International Settlements, just think of it as the capstone of the worldwide financial pyramid. It wields enormous global power, and yet it is accountable to nobody. The following is a summary of how the Bank for International Settlements works that comes from one of my previous articles entitled “Who Controls The Money? An Unelected, Unaccountable Central Bank Of The World Secretly Does“…

An immensely powerful international organization that most people have never even heard of secretly controls the money supply of the entire globe. It is called the Bank for International Settlements, and it is the central bank of central banks. It is located in Basel, Switzerland, but it also has branches in Hong Kong and Mexico City. It is essentially an unelected, unaccountable central bank of the world that has complete immunity from taxation and from national laws. Even Wikipedia admits that “it is not accountable to any single national government.” The Bank for International Settlements was used to launder money for the Nazis during World War II, but these days the main purpose of the BIS is to guide and direct the centrally-planned global financial system. Today, 58 global central banks belong to the BIS, and it has far more power over how the U.S. economy (or any other economy for that matter) will perform over the course of the next year than any politician does. Every two months, the central bankers of the world gather in Basel for another “Global Economy Meeting”. During those meetings, decisions are made which affect every man, woman and child on the planet, and yet none of us have any say in what goes on. The Bank for International Settlements is an organization that was founded by the global elite and it operates for the benefit of the global elite, and it is intended to be one of the key cornerstones of the emerging one world economic system.

Normally the Bank for International Settlements is not prone to making extremely bold pronouncements, and so this warning about China seems a bit out of character.

Is something going on behind the scenes that we don’t know about?

Without a doubt, the global financial system is shakier and more vulnerable than most people would dare to imagine. Global central banks have been on the greatest money creation spree in recorded history, and interest rates have been pushed to ridiculously low levels.

If you can believe it, approximately 10 trillion dollars worth of bonds are trading at negative interest rates right now. This is completely and utterly irrational, and when this giant bond bubble finally explodes it is going to create a crisis unlike anything the world has ever seen before.

Just recently, Michael Pento of Pento Portfolio Strategies commented on this bubble…

He said the current financial conditions are “the most dangerous markets i have ever witnessed in my entire life – and i’ve been investing for over 25 years… The membrane has been stretched so wide and so tight that its about to burst.”

Pento believes that once the bond crash happens, it will trigger a cataclysmic wave of crashes throughout the entire global financial system…

Mr Pento has now warned that when policymakers signal they are set to stop buying, which will stop bond prices rising, there is going to be a devastating crash – not just in bond markets but across all investment assets.

He said: “When the bond market breaks, when that bubble bursts, it will wipe out every asset, everything will collapse together… I mean diamonds, sports cars, mutual funds, municipal bonds, fixed income, reits, collateralised loan obligations, stocks, bonds – even commodities – will collapse in tandem along with the bond bubble burst.”

Many had been anticipating that we would have already seen a major financial crash in 2016, but so far things have been pretty stable, and this has lulled many into a false sense of complacency.

But it is important to remember that we have seen corporate earnings fall for five quarters in a row, and it is expected to be six when the final numbers for the third quarter come in.

Never before in history have we had a stretch like this without major economic and financial consequences. The following comes from a recent Fortune article which referred to an earlier piece authored by Jim Bianco…

None of this, however, is apparent from how stock market indexes have been moving lately, which unlike the charts above have been going up and to the right. “Since 1947, every time profits fell this much, or for this long, a recession was either underway or about to begin,” writes Bianco. “The only exception was the middle of 1986 to early 1987.”

If you remember, there was a pretty important event that happened in 1987: A massive stock market crash that sapped close to 30% of the S&P 500’s value in just five days.

It is only a matter of time before this earnings recession takes a major bite out of Wall Street.

Stock prices can stay at irrationally high levels for quite a while, but history has shown that every bubble bursts eventually.

And when this bubble bursts, it is going to make 2008 look like a walk in the park.

More Jobs Shipped Out Of The Country: Ford Moves All Small Car Production To Mexico

September 14, 2016September 14, 2016 by Michael

What is going to happen when America finally doesn’t have any manufacturing jobs left at all? On Wednesday, we learned that Ford Motor Company is shifting all small car production to Mexico. Of course the primary goal for this move is to save a little bit of money. This hits me personally, because my grandfather once worked for Ford. He was loyal to Ford all his life, and he always criticized other members of the family when they bought a vehicle that was not American-made. When I was young I didn’t understand why making vehicles in America is so important, but I sure do now. By shipping jobs overseas, we are destroying jobs, we are destroying small businesses and we are destroying our tax base. If we want to be a wealthy nation, we have got to make things here, and hopefully we can get the American people to start to understand this.

In 1914, Henry Ford decided to start paying his workers $5.00 a day, which was more than double the average wage for auto workers at the time.

One of the reasons why he did this was because he felt that his workers should be able to afford to buy the vehicles that they were making. This is what he wrote in 1926…

“The owner, the employees, and the buying public are all one and the same, and unless an industry can so manage itself as to keep wages high and prices low it destroys itself, for otherwise it limits the number of its customers. One’s own employees ought to be one’s own best customers.”

These days Ford is going in the complete opposite direction. Pretty soon, Ford won’t be making any more small vehicles in the United States at all…

Ford is shifting all North American small-car production from the U.S. to Mexico, CEO Mark Fields told investors today in Dearborn, even though its plans to invest in Mexico have become a lightning rod for controversy in this year’s presidential election.

“Over the next two to three years, we will have migrated all of our small-car production to Mexico and out of the United States,” Fields said.

Could Ford keep jobs in America?

Of course they could. During the second quarter of 2016, Ford reported a net income of 2,000,000,000 dollars.

But if they move production to Mexico they can boost that profit just a little bit higher.

Shame on them.

Needless to say, Donald Trump is quite upset about this move by Ford. This was his response…

“We shouldn’t allow it to happen. They’ll make their cars, they’ll employ thousands of people, not from this country and they’ll sell their car across the border,” Trump said. “When we send our jobs out of Michigan, we’re also sending our tax base.”

And he is exactly right about all of this. We can’t afford to lose more good paying jobs, we can’t afford for the middle class to shrink any more than it already has, and we certainly can’t afford our tax base to continue to deteriorate.

We may think that we can live on borrowed money indefinitely, but that is going to catch up with us in a major way at some point.

Sadly, Ford is not the only auto company doing this. Just like Ross Perot once predicted, there is a giant sucking sound as good paying auto jobs leave the United States and head to Mexico…

Ford isn’t alone. Fiat Chrysler Automobiles said earlier this year it will end production of all cars in the U.S. by the end of this year as it discontinues production of the Dodge Dart in Belvidere, Ill. and the Chrysler 200 in Sterling Heights, Michigan.

In recent years, automakers that include General Motors, Honda, Hyundai, Nissan, Mazda, Toyota and Volkswagen have all announced plans to either expand existing plants or build new ones in Mexico.

The bad news for American workers won’t end once all of our manufacturing jobs are gone.

Today there are millions of Americans that make their living by driving, but the revolution in self-driving vehicles threatens to make large numbers of those jobs obsolete.

Ford, General Motors, Tesla, Google, Apple and a whole host of other big corporations have been feverishly working on this technology, and many of the tests have gone very well so far.

Once this technology starts being rolled out on a widespread basis, the job losses could be absolutely staggering. Just consider the following numbers which come from Wolf Richter…

1.8 million heavy-truck and tractor-trailer long-haul drivers in 2014, expected to grow 4% a year (BLS), with a median pay of $40,260 in 2015. At this growth rate, there will be 1.94 million long-haul drivers by the end of this year.
1.33 million delivery truck drivers in 2014, expected to grow 4% a year (BLS), with a median pay of $27,800 in 2015. They’re picking up and/or delivering packages and small shipments within the city or region, driving a vehicle of 26,000 pounds or less, usually between a distribution center and businesses or households. At this growth rate, there will be 1.44 million drivers by the end of this year.
233,700 taxi drivers and chauffeurs in 2014, growing at 13% annually (BLS). They earned a median pay of $23,510 in 2015. One in five worked part time. This doesn’t – or doesn’t fully – reflect the “rideshare” drivers working for Uber, Lyft, and the like.
“Over 500,000” rideshare drivers are estimated to ply the trade in the US. It’s a high-growth sector: the number of Uber drivers in the US doubled in 2015 from the prior year to 327,000. Half of them worked 15 hours or less per week.

In order to have a thriving middle class, we have got to have middle class jobs.

Unfortunately, big corporations have become absolutely obsessed with finding ways to eliminate expensive American workers by sending jobs overseas or by replacing them with technology altogether.

The elite will always need people to cut their hair and wait on them at restaurants, but those aren’t the kinds of jobs that can support middle class families.

As I noted yesterday, for the first time ever the middle class in America has become a minority and poverty is on the rise all over the nation. The long-term trends that are eviscerating the middle class are accelerating, and there doesn’t appear to be any quick fix which will turn things around dramatically any time soon.

So the middle class is going to get smaller and smaller and smaller, and that has dramatic implications for the future of this country.

The One Trillion Dollar Consumer Auto Loan Bubble Is Beginning To Burst

September 6, 2016September 6, 2016 by Michael

Do you remember the subprime mortgage meltdown from the last financial crisis? Well, this time around we are facing a subprime auto loan meltdown. In recent years, auto lenders have become more and more aggressive, and they have been increasingly willing to lend money to people that should not be borrowing money to buy a new vehicle under any circumstances. Just like with subprime mortgages, this strategy seemed to pay off at first, but now economic reality is beginning to be felt in a major way. Delinquency rates are up by double digit percentages, and major auto lenders are bracing for hundreds of millions of dollars of losses. We are a nation that is absolutely drowning in debt, and we are most definitely going to reap what we have sown.

The size of this market is larger than you may imagine. Earlier this year, the auto loan bubble surpassed the one trillion dollar mark for the first time ever…

Americans are borrowing more than ever for new and used vehicles, and 30- and 60-day delinquency rates rose in the second quarter, according to the automotive arm of one of the nation’s largest credit bureaus.

The total balance of all outstanding auto loans reached $1.027 trillion between April 1 and June 30, the second consecutive quarter that it surpassed the $1-trillion mark, reports Experian Automotive.

The average size of an auto loan is also at a record high. At $29,880, it is now just a shade under $30,000.

In order to try to help people afford the payments, auto lenders are now stretching loans out for six or even seven years. At this point it is almost like getting a mortgage.

But even with those stretched out loans, the average monthly auto loan payment is now up to a record 499 dollars.

That is the average loan size. To me, this is absolutely infuriating, because only a very small percentage of wealthy Americans are able to afford a $499 monthly payment on a single vehicle.

Many middle class American families are only bringing in three or four thousand dollars a month (before taxes). How in the world do they think that they can afford a five hundred dollar monthly auto loan payment on just one vehicle?

Just like with subprime mortgages, people are being taken advantage of severely, and the end result is going to be catastrophic for the U.S. financial system.

Already, auto loan delinquencies are rising to very frightening levels. In July, 60 day subprime loan delinquencies were up 13 percent on a month-over-month basis and were up 17 percent compared to the same month last year.

Prime delinquencies were up 12 percent on a month-over-month basis and were up 21 percent compared to the same month last year.

We have a huge crisis on our hands, and major auto lenders are setting aside massive amounts of cash in order to try to cover these losses. The following comes from USA Today…

In a quarterly filing with the Securities and Exchange Commission, Ford reported in the first half of this year it allowed $449 million for credit losses, a 34% increase from the first half of 2015.

General Motors reported in a similar filing that it set aside $864 million for credit losses in that same period of 2016, up 14% from a year earlier.

Meanwhile, other big corporations are also alarmed about the economic health of average U.S. consumers. Just check out what Dollar General CEO Todd Vasos had to say about this just the other day…

I know that when we look at globally the overall U.S. population, it seems like things are getting better. But when you really start breaking it down and you look at that core consumer that we serve on the lower economic scale that’s out there, that demographic, things have not gotten any better for her, and arguably, they’re worse. And they’re worse, because rents are accelerating, healthcare is accelerating on her at a very, very rapid clip.

The stock market may seem to be saying that everything is fine (for the moment), but the hard economic numbers are telling a completely different story. What we are experiencing right now looks so similar to 2008, and this includes big institutions just dropping dead seemingly out of the blue. On Tuesday, we learned that ITT Technical Institute is immediately shutting down and permanently closing all locations. This is from a Los Angeles Times report…

The company that operates the for-profit chain, one of the country’s largest, announced that it was permanently closing all its campuses nationwide. It blamed the shutdown on the recent move by the U.S. Education Department to ban ITT from enrolling new students who use federal financial aid.

“Two quarters ago there were rumors about the school having problems, but they told us that anyone who was already a student would be allowed to finish,” said Wiggins, who works as the assistant manager for a family-run auto parts business and went to ITT to open new opportunities.

“Am I angry?” he said. “I’m like angry times 10 million.”

As a result of this shutdown, 35,000 students are suddenly left out in the cold and approximately 8,000 employees have lost their jobs.

This is what happens during a major economic downturn. Large institutions that may have been struggling under the surface for quite a while suddenly give up and drop a bomb on those that were depending on them. In the months ahead, there will be a lot more examples of this.

Already, some of the biggest corporate names in America have been laying off thousands of workers in 2016. Mass layoffs are usually an early warning sign that big trouble is ahead, so keep a close eye on those companies.

The pace of the economic decline has been a bit slower than many (including myself) originally anticipated, but without a doubt it has continued.

And it is undeniable that the stage is set for a crisis that will absolutely dwarf 2008. Our national debt has nearly doubled since the beginning of the last crisis, corporate debt has doubled, student loan debt has crossed the trillion dollar mark, auto loan debt has crossed the trillion dollar mark, and total household debt has crossed the 12 trillion dollar mark.

We are living in the greatest debt bubble in world history, and there are signs that this giant bubble is now starting to burst. And when it does, the pain is going to be greater than most people would dare to imagine.

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