Debts

The Coming Economic Hell For American Families

Tens of millions of American families are about to go through economic hell and most of them don’t even realize it. Most Americans don’t spend a whole lot of time thinking about things like “monetary policy” or “economic cycles”.  The vast majority of people just want to be able to get up in the morning, go to work and provide for their families.  Most Americans realize that things seem “harder” these days, but most of them also have faith that things will eventually get better.  Unfortunately, things aren’t going to get any better.  The number of good jobs continues to decline, the number of Americans losing their homes continues to go up, people are having a much more difficult time paying their bills and our federal government is drowning in debt.  Sadly, this is only just the beginning.

Since the financial collapse of 2008, the Federal Reserve and the U.S. government have taken unprecedented steps to stimulate the economy.  But even with all of those efforts, we are still living in an economic wasteland.

So what is going to happen when the next wave of the economic crisis hits?

During one recent interview, Peter Schiff made the following statement….

If you look at the economic relapse that’s going on right now, look at Friday’s abysmal job numbers, look at the housing numbers, understand that all of this is taking place with record monetary and fiscal stimulus. What happens if we remove those supports?

At the end of June, the Federal Reserve’s quantitative easing program is slated to end.  The U.S. Congress and state legislatures from coast to coast are talking about budget cuts.  The amount of borrowing and spending that has been going on is clearly unsustainable, but will the U.S. economy start shrinking again once the current “financial sugar high” has worn off?

Already, all sorts of bad economic news has been coming out and all kinds of economic indicators are turning south.  The American people are becoming increasingly restless.  One new poll has found that 59 percent of the American people disapprove of Barack Obama’s handling of the economy (which is a new high).  According to another recent poll, 63% of Americans say that they feel “not good” or “bad” about how the U.S. economy is performing.

If most Americans had good jobs, could afford their mortgages and could pay their bills, the economy would not be such a big issue.

Unfortunately, times are really tough for American families right now and they are about to get a lot tougher.

*Jobs*

The official unemployment rate just went up to 9.1 percent, but that figure only tells part of the picture.

There are some areas of the country where it seems nearly impossible to find a decent job.  Millions of Americans have fallen into depression as they find themselves unable to provide for their families.

According to CBS News, 45.1 percent of all unemployed Americans have been out of work for at least six months.  That is a higher percentage than at any point during the Great Depression.

Just two years ago, the number of “long-term unemployed” in the United States was only 2.6 million.  Today, that number is up to 6.2 million.

Can you imagine being out of work for 6 months or more?

How would you survive?

Just look at the chart below.  What we are going through now is really unprecedented.  The average duration of unemployment in this country is now close to 40 weeks….

So will things get any better soon?  Well, there were only about 3 million job openings in the United States during the month of April.  Normally there should be about 4.5 million job openings.  The economy is slowing down once again.  Good jobs are going to become even more rare.

There are millions of other Americans that are “underemployed”.  All over the United States you will find hard working Americans that are flipping burgers or working in retail stores because that is all they can get right now.

Most temp jobs and most part-time jobs don’t pay enough to be able to provide for a family.  But there are not nearly enough full-time jobs for everyone.

Sadly, the number of “middle class jobs” is about 10 percent lower than a decade ago.  There are simply less tickets to the “good life” than there used to be.

*Homes*

But without good jobs, the American people cannot afford to buy homes.

Without good jobs, the American people cannot even afford the homes that they are in now.

U.S. home prices have fallen 33 percent since the peak of the housing bubble.  That is more than they fell during the Great Depression.

This decline in housing prices has caused a lot of problems.

28 percent of all homes with a mortgage in the United States are in negative equity at this point.  There are millions of American families that are now paying on mortgages that are for far more than their homes are worth.

Millions of American families literally feel trapped in their homes.  They can’t afford to sell their homes, and if they simply walk away nobody will approve them for new home loans for many years to come.

Many Americans are sticking it out and are staying in their homes until they simply can’t pay for them anymore.

As the number of good jobs continues to decline, the number of Americans that are losing their homes continues to rise.

For the first time ever, more than a million U.S. families lost their homes to foreclosure in a single year during 2010.

If the economy slows down once again and millions more Americans lose their jobs this problem is going to get a lot worse.

*Bills*

Even if they aren’t losing their homes yet, millions of other Americans families are finding it increasingly difficult to pay the bills.

Wages have been very flat over the past few years and yet the cost of most of the basics just seems to keep going up and up.

According to Brent Meyer, a senior economic analyst at the Federal Reserve Bank of Cleveland, the cost of food and the cost of energy have risen at an annualized rate of 17 percent over the past six months.

Have your wages gone up by 17 percent over the past six months?

As 2009 began, the average price of a gallon of gasoline in the United States was $1.83.  Today it is $3.77.

American families are finding that their paychecks are going a lot less farther than they used to, but Ben Bernanke keeps insisting that we have very little inflation in 2011.

Most Americans don’t care much about economic statistics – they just want to be able to do basic things like take their children to the doctor.

According to one recent survey, 26 percent of Americans have put off doctor visits because of the economy.

Sadly, soon a lot more American families will not be able to afford to go to the doctor.

According to one recent survey, 30 percent of all U.S. employers will “definitely or probably” quit offering employer-sponsored health coverage once Obamacare is fully implemented in 2014.

As the economic situation has unraveled, an increasing number of people are being forced to turn to the federal government for assistance.

One out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government.

Some of the hardest hit members of our society have been our children.  Today, one out of every four American children is on food stamps.

Back in the old days, a large percentage of American families were self-sufficient, but that is no longer the case.

Back in 1850, approximately 50 percent of all Americans worked on farms.

Today, less than 2 percent of Americans do.

So these days when American families can’t feed themselves what do they do?

They turn to the federal government of course.

At the moment, approximately 44 million Americans are on food stamps.

But our federal government cannot afford to spend money like this forever.

According to a recent USA Today analysis, the U.S. federal government took on $5.3 trillion in new financial obligations during 2010.  USA Today says that the U.S. government now has $61.6 trillion in financial obligations that have not been paid for yet.

Wow!

Who is going to end up paying that bill?

So with so much bad news, are our leaders alarmed?

Not really.

According to Federal Reserve Chairman Ben Bernanke, “growth seems likely to pick up somewhat in the second half of the year.”

Yeah, we’ll see how that prediction works out.

Others are not so sure that everything is going to turn out okay.

Recently, James Carville warned that we could literally see rioting in the streets if the economic situation does not turn around soon.  Just check out the last part of the video below….

The truth is that America is in decline.  Just like with all of the great empires of the past, our empire is starting to crumble too.

A recent article in the Guardian touched on some of the reasons for America’s decline….

The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.

The economic news is only part of the puzzle.  This country has rejected the ancient wisdom that was passed down to us and we have rejected the principles of our founding fathers.

We have piled up the biggest mountain of debt in the history of the world and yet somehow we expected that everything would turn out okay.

Well, everything is not going to turn out okay.

All of this debt is going to come down on us like a ton of bricks and the U.S. economy is going to continue to fall apart.  Millions of American families are going to lose their jobs and their homes.

Economic hell is coming.

You better get ready.

The Greek Debt Crisis Escalates: Is Greece Threatening To Leave The Euro?

Is the Greek debt crisis about to explode out of control?  According to Der Spiegel, the government of Greece is considering leaving the Euro and reestablishing its own currency.  If that happened, it would throw global financial markets into chaos and it might mean the end of the euro as a pan-European currency.  But the Greek government has to do something about all of these debts.  At this point Greece is literally drowning in debt.  The yield on 10-year Greek bonds has now reached an astounding 15.51%.  There is no way that is sustainable even for the short-term.  Greece is rapidly going bankrupt.  Even with absolutely brutal austerity measures in place, the debt just continues to explode.  There are protests against the government almost daily and Greece is in a state of chaos.  Unfortunately, because Greece is part of the euro they can’t just start printing lots of money as a way to get out of this crisis.  Now there are persistent rumors that Greece really is thinking about leaving the euro, and that could potentially mean big trouble for the world financial system.

It was a new article in Der Spiegel that brought these rumors to the forefront again.  Der Spiegel says that it possesses secret Greek government documents that discuss plans to leave the euro.  Der Spiegel also claims that a secret crisis meeting was held in Luxembourg on Friday night to discuss this crisis.

The following is a brief excerpt from the Der Spiegel article that caused the financial community in Europe to be in such an uproar today….

“The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government’s actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area’s finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.”

So was there such a meeting in Luxembourg on Friday night?

Well, it turns out that there was a meeting of a small group of European finance ministers.  But according to German government spokesman Steffen Seibert, this meeting was planned well in advance and had nothing to do with Greece leaving the euro….

“There is a meeting of some finance ministers that has long been planned. Greece exiting the Eurozone is not on the agenda of that meeting, and it has never been.”

So is Greece actually thinking about leaving the euro?  All over Europe this notion is being denied.

Perhaps the strongest denial was issued by the Greek Finance Ministry….

“The report on an imminent Greek exit from the eurozone, as well as being untrue, has been written with incomprehensible levity despite the fact that this has been repeatedly denied by the Greek government, and the governments of other EU member states.”

What was probably being discussed at this meeting of European finance ministers is a restructuring of Greek debt.  This is something that Germany has apparently wanted for quite some time according to a recent article posted on Business Insider….

For weeks, German officials have been hinting that they want a Greek restructuring to happen. German economic advisor Lars Feld recently said that the restructuring should happen “sooner than later.” He’s previously also said “restructuring is the only road to take.”

So what would a restructuring of this debt look like?  A recent article on CNBC gives us some clues….

More importantly, tonight’s finance ministers meeting might lay the groundwork for “extending the maturities” on those loans — giving Athens a little more oxygen until it probably ends up restructuring its $470 billion existing debt by either extending maturities or exchanging Greek bonds, at a discount, for EU-guaranteed bonds, Brady Bond-style from the 1980s.

What Germany does not want is for Greece to even think about leaving the euro.  According to the article on Der Spiegel, German Finance Minister Wolfgang Schäuble is ready to play hardball with the Greeks.  Der Spiegel says that a report has been prepared that would lay out for the Greeks the severe consequences of leaving the euro….

“It would lead to a considerable devaluation of the new (Greek) domestic currency against the euro,” the paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble’s staff have calculated that Greece’s national deficit would rise to 200 percent of gross domestic product after such a devaluation. “A debt restructuring would be inevitable,” his experts warn in the paper. In other words: Greece would go bankrupt.

Greece is really in a tough position.  They are going to go bankrupt if they stay with the euro and they are going to go bankrupt if they leave the euro.

Meanwhile, the anti-government protests continue.  The Greek people are not happy.  The Greek economy is coming apart like a 20 dollar suit.  Greece could end up being the spark that sets off a massive financial panic in Europe.

As I have written about previously, the European debt crisis is on the verge of spinning wildly out of control.  It is not just Greece that is facing a horrific debt crisis.  The financial problems in Europe literally span the entire continent.

A lot of Americans are obsessed with the death of the U.S. dollar, but the truth is that there is a strong possibility that the euro could end up collapsing before the dollar does.

Keep an eye on Europe.  The European debt crisis could plunge the entire global financial system into chaos at any time.  Things are not nearly as stable as they seem.

Shut It Down?

If the U.S. government were to shut down for a while, would that really be such a bad thing?  Right now everyone in the mainstream media is freaking out as if the world is going to end, but the truth is that there have been government shutdowns before.  The apocalypse is not going to happen if there is another shutdown.  If Congress could find a way to get our troops and our border patrol agents paid, then what would be so bad about the government taking a “vacation” for a while?  After all, when was the last time that either the Republicans or the Democrats did anything that was actually good for America?  It has not mattered which political party has been in power – over the past couple of decades our “representatives” in Washington D.C. have passed an endless parade of bad laws and have gotten us into the biggest mountain of debt in the history of the world.  They literally seem unable to do anything right.  So would it really be so bad if a government shutdown slows them down for a while?  If our politicians are going to act like a bunch of idiots, why not let them shut it down?

Think of it this way – if you could eliminate all of the laws passed under George W. Bush and Barack Obama would you do it?

I think that most Americans would.

Almost every single law that has been passed over the past couple of decades has been bad for America.

But many Americans seem to be going into a panic at the thought that the “almighty government” might not be operating for a few days.

Many Americans seem to have bought into the lie that the federal government is the most important institution in our country.

But this is never what our founding fathers intended.  Our founding fathers intended for the federal government to be very limited.  Unfortunately, we have turned our backs on the principles of our founding fathers.

So exactly what is this fight between the Republicans and the Democrats all about?  Why have we been brought to the brink of a government shutdown?

We keep hearing that it is all about cutting the budget.  In fact, House Speaker John Boehner says that his party is “damn serious about it”.

But that is a joke.  The federal budget deficit for this year is going to be approximately $1.6 trillion dollars.  The Republicans were asking for just $61 billion in budget cuts (3.8% of the budget deficit) and there are rumors that Republican and Democratic negotiators have agreed to a figure of $38 billion in budget cuts.

$38 billion?

Is this why the Tea Party was sent to Washington?

$38 billion would just be 2.4 percent of the $1.6 trillion dollar deficit.

Wow, that is really wielding the budget cutting axe!

Look, the U.S. government cannot spend a single penny from now on without Republicans going along with it.

The Republicans control the House of Representatives.  Barack Obama and the Senate will not have a single dime to spend unless they can get the House to go along with it.

If the Democrats want money to implement Obamacare then they have to get the Republicans to go along with it.

If the Democrats want to give money to the EPA to implement Obama’s “green agenda” then they have to get the Republicans to go along with it.

In fact, pretty much whatever the Democrats want to do, they have to get the Republicans to agree to fund it.

So if you don’t like what Obama and the Democrats are doing, don’t just blame them.

Blame the Republicans as well.

Both parties are deeply corrupt and both parties have gotten us to the point we are at.

Sadly, it looks like any deal that the Republicans and the Democrats are going to agree to is going to include virtually everything that the Democrats want.

It is going to include full funding for Obamacare.

It is going to include full funding for Planned Parenthood.

It is going to include full funding for NPR.

It is going to include full funding for the EPA.

So what are the Republicans going to get?

$38 billion in spending cuts?

Is that supposed to be a “deal”?

The truth is that Boehner is a joke and he is not serious about cutting the federal budget.

But if we don’t start seriously cutting the federal budget we are heading for complete and total disaster.

David Stockman, who served as budget director under Ronald Reagan, says that if Congress is not serious about getting our financial house in order that a government shutdown could be precisely the kind of wake up call that we need….

If the Smithsonian, the Parks Service and the Cherry Blossom Festival get delayed or canceled, it’s the wakeup call that we really needed. The fools inside the Beltway are borrowing $100 billion month in and month out, and there’s nobody left in the world buying except the central banks—the Fed and the people’s printing press of China. There’s no way that’s sustainable or viable. It’s simply building up pressure in the monetary system that’s going to blow sky-high.

Look, the United States is heading straight for financial armageddon.  This is a crisis of historic proportions.  In a previous article on U.S. government finances, I detailed some absolutely horrifying statistics about the debt crisis that the U.S. government is facing….

*If you divide the national debt up equally among all U.S. households, each one owes a staggering $125,475.18.

*The federal government has borrowed 29,660 more dollars per household since Barack Obama signed the economic stimulus law two years ago.

*During Barack Obama’s first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.

*In the new budget that the Obama administration has proposed, the U.S. government would spend 3.7 trillion dollars in 2012 and by 2021 the U.S. government would be spending a whopping 5.6 trillion dollars per year.

*The U.S. government currently has to borrow approximately 41 cents of every single dollar that it spends.

*The total compensation that the federal government workforce earned last year came to a grand total of approximately 447 billion dollars.

*The U.S. national debt is currently rising by well over 4 billion dollars every single day.

*The U.S. government is borrowing over 2 million more dollars every single minute.

*The U.S. national debt is over 14 times larger than it was just 30 years ago.

*Unfunded liabilities for entitlement programs such as Social Security and Medicare are estimated to be well over $100 trillion, and nobody in the U.S. government seems to have any idea how we are actually even going to come close to meeting all of those obligations.

*If you were alive when Jesus was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.  But this year alone the U.S. government is going to go about 1.6 trillion dollars more into debt.

*If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

But even if the Republicans got every single thing that they have been demanding it would make essentially no difference as far as our national debt crisis is concerned.  It would basically be like spitting into Niagara Falls.

So which political party has the correct position in this battle?

Neither of them.  In fact, both political parties are a joke.  They are both acting like a bunch of idiots just like they have been for decades.

So let them shut it down.  The truth is that the number one threat to our liberties and freedoms right now is our own federal government.

In a recent article, J.B. Williams talked about why he thinks that it would be a really good idea to shut the government down….

I say, shut it down! The federal government has done as much to harm the union of states as it has ever done to improve freedom and liberty in America. We will be better off without a federal government, with each state able to fund and govern itself better than the Fed ever could.

Extreme threats demand extreme measures, and nothing threatens the future freedom and prosperity of the United States more than our own federal government. Enemies beyond, we can deal with. It’s the enemy within which threatens us most today. It’s time to shut it down and reset.

Just think about a few of the ways that our own federal government violates our liberties and freedoms every single day….

*If you want to get on an airplane in America today, you must either go through one of the incredibly intrusive full body scanners that are going into all U.S. airports and let airport security goons gawk at your exposed body, or you must allow airport security goons to feel you up using the new “enhanced pat down” techniques they are being instructed to employ.

*Thanks to the Patriot Act, if you are identified as a “terrorist”, you suddenly lose all of your constitutional rights.  We are told that detaining American citizens indefinitely and subjecting them to “enhanced interrogation” techniques will keep us all safer.

*The federal government controls our lives so tightly that now they even tell us what kinds of light bulbs we are allowed to buy.

*Barack Obama has been pushing a plan that would create a national database that will store the DNA of all individuals who have been arrested, even if they end up not being convicted of a crime.

*Just about anything can be used against you in court these days.  In one of the very first military commissions held under the Obama administration, a U.S. military judge ruled that confessions obtained by threatening the subject with rape are admissible in court.

*The federal government listens to our cell phones whenever they want and they require that all cell phone companies must be able to pinpoint the locations of all of their customers to within 100 meters.

*According to FBI Director Robert Mueller, “homegrown terrorists” represent just as much of a threat to American national security as al-Qaeda does.

*In Washington D.C., if you do not submit to “random bag checks” while riding the Metro there is a good chance that you could receive a follow-up visit by the FBI or by the Department of Homeland Security.

*If you make food “incorrectly” there is a good chance that you will get raided by the federal government.  In fact, the feds raided an Amish farmer at 5 AM in the morning because they claimed that he was was engaged in the interstate sale of raw milk in violation of federal law.

So in light of how extreme our federal government has become, is there anyone out there that still thinks it would be a “crisis” if the government was to shut down for a while?

If our government is going to take away our liberties and freedoms instead of protecting them, then why would it be a bad thing if it shut down for a short time?

It might just get some of the control freaks off our backs for a while.

Yes, we do need to make sure our military men and women are paid.  We also need to make sure that our border patrol agents are paid.  But if Congress could actually get that accomplished it wouldn’t be too bad at all if the government were to shut down for an extended period of time.

So what do all the rest of you think?  Feel free to leave a comment with your opinion about the possibility of a government shutdown below….

Debt Problem: Who In The World Is Going To Buy The Billions Of Dollars Of Debt The U.S. Government Is Constantly Pumping Out Now?

Is the U.S. government on the verge of a massive debt problem?  For years, the U.S. government has been able to borrow all the money that it has wanted to at extremely low interest rates.  But now many of the lending sources that the U.S. government has been depending on are drying up.  Even before this recent crisis in Japan, a number of big players were moving away from U.S. Treasuries and the U.S. Federal Reserve was having to step in to pick up the slack.  But now this debt crunch is about to get a whole lot worse.  For years, many had feared that it would be China that would start dumping U.S. government debt, but now it turns out that Japan is going to be the real problem.  Right now, Japan is the second largest foreign holder of U.S. government debt.  Japan currently holds about $882 billion in U.S. Treasury bonds and they are likely going to have to liquidate much of that in order to fund the rebuilding of their nation.  So needless to say they won’t be accumulating any more U.S. government debt.  But the U.S. government still needs to borrow a trillion and a half dollars from someone every single year.  So where in the world are they going to get it?

This is called a debt problem.  Have you ever gotten to the point where you are in debt up to your eyeballs and nobody wants to lend you any more money?

Well, the U.S. government is rapidly reaching that point.

Even before the crisis in Japan, several of the big boys had starting moving away from U.S. government debt.

PIMCO, the biggest bond fund on the entire globe, recently acknowledged that they are dumping all of their U.S. Treasuries.

So if foreign nations like Japan are not gobbling up U.S. government debt and big bond funds like PIMCO are not buying any of it, then who in the world is going to be purchasing the massive amounts of debt that the U.S. government is constantly pumping out?

Well, many of you already know that answer.

The Federal Reserve is going to step in of course.  The Federal Reserve knows that if the U.S. government cannot borrow gigantic quantities of money at super low interest rates it will go broke.  So the Federal Reserve is just going to keep buying up most new U.S. government debt.  It is just that simple.

But isn’t that a Ponzi scheme?

Of course it is.  Let’s not mince words here.  It is a total scam.

And it is a scam that cannot go on indefinitely.

The truth is that the Ponzi Scheme of the U.S. Treasury issuing bonds and the Federal Reserve buying them up cannot last forever as PIMCO’s Bill Gross noted in his March newsletter….

“Basically, the recent game plan is as simple as the Ohio State Buckeyes’ “three yards and a cloud of dust” in the 1960s. When applied to the Treasury market it translates to this: The Treasury issues bonds and the Fed buys them. What could be simpler, and who’s to worry? This Sammy Scheme as I’ve described it in recent Outlooks is as foolproof as Ponzi and Madoff until… until… well, until it isn’t.”

Gross also noted in his recent newsletter that the Federal Reserve is currently buying up about 70 percent of all new U.S. government debt.

So now that Japan is out of the picture, how high will that figure go now?

80 percent?

90 percent?

Over the past several weeks there has been all kinds of speculation about whether “quantitative easing” will be extended past June or not.

Well, whether they call it “quantitative easing” or not, the truth is that the Federal Reserve is going to have to continue to “buy” most new U.S. government debt or the system will crash.

We have gotten to the point where the U.S. federal government cannot continue to function without Federal Reserve monetization of the debt.

This is a sign that we are rapidly approaching the financial endgame.

So why doesn’t the U.S. government just stop spending so much stinking money and stop getting us all into so much debt?

Well, because there isn’t enough political will in Washington D.C. to do any real budget cuts, and if our politicians did balance the budget at this point it would crash the economy.

Just the other day, the U.S. House of Representatives passed a continuing resolution to fund the federal government that would cut 6 billion dollars from U.S. government spending.

On that exact same day, the official U.S. national debt figure rose by 72 billion dollars.

Now the debt normally does not go up that much on a typical day.  But what this example does show is the losing battle that our politicians are fighting.

On Wednesday, U.S. Treasury Secretary Timothy Geithner warned a House of Representatives appropriations subcommittee that they should not even think about not raising the debt ceiling….

“Congress has to do it. There’s no alternative.”

The truth is that the U.S. government has to keep going into more debt.  Under the current system the alternative would be to collapse the economy.

But the debt that we have already piled on to the backs of future generations is absolutely criminal.

How mad do you think future generations are going to be with us for heaping 14 trillion dollars of debt on to their shoulders?

Talk about a debt problem!

But this is what we get for allowing a private central bank to run our financial system.  This debt-based system was designed to fail from its very inception.

The man supposedly “in charge” over at the Federal Reserve, Ben Bernanke, has a track of record of incompetence that is absolutely staggering.  It is a mystery why our representatives in Washington D.C. are not howling for his resignation.

Instead, most of our politicians continue to express blind faith in our current financial system and they continue to insist that everything is going to be okay.

Well, everything is not going to be okay.  The Obama administration is projecting that the federal budget deficit for this fiscal year will be an all-time record 1.65 trillion dollars.

Of course they are also trying to convince us that budget deficits will go down in future years, but by now we should all know not to trust the rosy future projections of government officials.

After all, it was only a few short years ago that Bush administration officials were promising that we would be swimming in huge budget surpluses by now.

The truth is that the government has been lying about all of this for a long time.  For now, the Federal Reserve is just going to keep monetizing U.S. government debt for as long as it can.

This Ponzi scheme will keep on working and working and working until someday it simply doesn’t anymore.

When that day arrives, the U.S. government debt problem is going to unleash hell on world financial markets.

14 Reasons Why The Economic Collapse Of Japan Has Begun

The economic collapse of Japan has begun.  The extent of the devastation is now becoming clear and many are now projecting that this will be the most expensive natural disaster in modern human history.  The tsunami that struck Japan on March 11th swept up to 6 miles inland, destroying virtually everything in the way.  Countless thousands were killed and entire communities were totally wiped out.  So how does a nation that is already drowning in debt replace dozens of cities and towns that have suddenly been destroyed?  Many in the mainstream media are claiming that the economy of Japan will bounce right back from this, but they are wrong.  The tsunami decimated thousands of square miles.  The loss of homes, cars, businesses and personal wealth is almost unimaginable.  It is going to take many years to rebuild the roads, bridges, rail systems, ports, power lines and water systems that were lost.  There are going to be a significant number of Japanese insurance companies and financial institutions that are going to be totally wiped out as a result of this great tragedy.  Of course in the days ahead the Japanese people will band together and work hard to rebuild the nation, but the truth is that it is impossible to “bounce right back” from such a massive loss of wealth, assets and infrastructure.

Just think about what happened after Hurricane Katrina.  Did the economy of New Orleans bounce right back?  No, there are some areas of New Orleans today that still look like war zones.

Well, this disaster is much worse.

The truth is that this is going to be one of the defining moments in the history of Japan.  Hundreds of miles along the coast of Japan have been absolutely devastated.  Authorities are finding it difficult to even get food and water into some areas at this point.

Even before this great tragedy Japan was one of the nations that was on the verge of a national economic collapse.  Their economy had been in the doldrums for over a decade and their national debt was well over 200 percent of GDP.  Now the Japanese economy has experienced a shock from which it may never truly recover.

The Bank of Japan is already flooding the Japanese economy with new yen, and so we may indeed see some impressive “economic growth” statistics at the end of the year.  But just because lots more yen are being passed around does not mean that the Japanese economy is in better shape.

The truth is that a tsunami of yen is not going to undo the damage that the tsunami of water did.  A massive amount of Japanese wealth was wiped out by this disaster.  An economy that was already teetering on the brink is now very likely going to plunge into oblivion.

It is fine to be optimistic, but the cold, hard reality of the situation is that this is a knockout blow for the Japanese economy.  The extent of the devastation is just too great.  This truly is a complete and total nightmare.

The following are 14 reasons why the economic collapse of Japan has now begun….

#1 The Bank of Japan has announced that they have decided to flood the Japanese economy with 15 trillion yen.  That is the equivalent of roughly $183 billion dollars.  This is going to provide needed liquidity in the short-term, but it is also going to set Japan on a highly inflationary course.

#2 Japan’s Nikkei 225 stock average declined by more than 6 percent on Monday.  As the full extent of the damage becomes apparent more declines are likely.

#3 Oil refineries all over Japan have been severely damaged or destroyed.  For example, six refineries that combine to process 31 percent of the oil for Japan have been totally shut down at least for now.

#4 The damage to roads, bridges, ports and rail systems is estimated to be in the billions of dollars.  The damage done to power lines and water systems is almost unimaginable.  It is going to take many years to rebuild the infrastructure of Japan.

#5 Right now the flow of goods and services in many areas of northern Japan has been reduced to a crawl, and this is likely to remain the case for quite some time.

#6 Many cities and towns along the east coast of Japan have essentially been completely destroyed.

#7 Japan’s nuclear industry is essentially dead in the water at this point.  Even if there is not a full-blown nuclear meltdown, the events that have transpired already have frightened people enough to cause a massive public outcry against nuclear power in Japan.

#8 Japan is going to need even more oil and natural gas in the long run to replace lost nuclear energy production.  Prior to this crisis, Japan derived 29 percent of its electricity from nuclear power.

#9 Japan is the second largest foreign holder of U.S. government debt, but that is about to change.  Japan currently has about $882 billion in U.S. Treasury bonds and they are going to have to liquidate much of that in order to fund the rebuilding of their nation.

#10 Many factories in Japan are closing down at least temporarily.  For example, Nissan has shut down four factories and Sony has shut down six factories.

#11 Toyota has shut down all production at its factories in Japan until at least March 16th.

#12 A substantial number of Japanese financial institutions and insurance companies are absolutely going to be devastated by this nightmare.

#13 Japan’s budget deficit was already 9 percent of GDP even before this tragedy.  Now they are going to have to borrow lots more money to fund the rebuilding effort.

#14 Japan’s national debt was already well over 200 percent of GDP even before this tragedy.  How much farther into the danger zone can they possibly go?

Sadly, as the economy of Japan goes down it is going to have a huge affect on the rest of the world as well.  For example, Japan is no longer going to be able to buy up huge amounts of U.S. Treasuries.  So who is going to pick up the slack?  Will our government officials beg China to lend us even more money?  Will the Federal Reserve just “buy” even more of our government debt?

Right now there are more questions than there are answers, but what is clear is that the Japanese economy has just been dealt an incapacitating blow.  Hopefully this tragedy will bring out the best in the Japanese people, but no matter how resilient they are, the truth is that this is something that no nation would be able to bounce back from quickly.

Let us hope that the economic damage from this tragedy will be contained and will not spread to the rest of the world.  The global economy is already in enough trouble, and hopefully this tragedy will not cause a cascade of economic failures to sweep the globe.

Has The Tsunami In Japan Destroyed The Japanese Economy?

The entire world is in a state of mourning today as details regarding the horrific damage caused by the massive tsunami in Japan continue to trickle in.  The magnitude 8.9 earthquake that caused the tsunami was the largest earthquake that Japan has ever experienced in modern times.  Waves as high as 30 feet swept over northern Japan.  The tsunami waters reached as far as 6 miles inland, and authorities have already recovered hundreds of dead bodies.  Those of us that have seen footage of this disaster on television will never forget it.  But this nightmare is not over yet.  There have been dozens of aftershocks, and many of them have been quite large.  In fact, there have been 19 earthquakes of at least magnitude 6.0 in the area over the last 24 hours.  So what is this disaster going to do to the 3rd largest economy in the world?  Japan already had a national debt that was well over 200 percent of GDP.  Could this be the “tipping point” that pushes the Japanese economy over the edge and into oblivion?

It is hard to assess the full scope of the damage to Japan at this point, but virtually everyone agrees that much of northern Japan is a complete and total disaster area at this point.  Many towns have essentially been destroyed.  Some are estimating that the economic damage from this disaster will be in the hundreds of billions of dollars.  Others believe that the final total will be in the trillions of dollars.

Fortunately, major cities such as Tokyo came through this event relatively unscathed and most of the major manufacturing facilities are not in the areas that were most directly affected by the earthquake and the tsunami.

But let there be no doubt, this was a nation-changing event.  Japan will never quite be the same again.

Also, it isn’t just Japan that will be affected by this.  The truth is that economic ripples from this event will be felt all over the world.

An economist from High Frequency Economics, Carl Weinberg, told AFP the following about the economic consequences of this disaster….

“There is no way to assess even the direct damage to Japan’s economy or to the global economy. This is a sad day for Japan, and economic aftershocks could affect the whole world’s economy.”

It is literally going to take months to figure out exactly how much damage has been done.  Let us just hope that we don’t see any more major earthquakes in the area.

The Japanese are a very resilient people and the Bank of Japan is already vowing that it will be doing whatever is necessary to ensure the stability of the financial markets.  The Bank of Japan has announced that it is going to provide as much liquidity as necessary to keep the Japanese economy functioning normally.

But the truth is that the Bank of Japan has already been printing money like crazy….

Is a tsunami of new yen really going to solve the economic damage that has been done by the earthquake and the tsunami?

Of course not.

The truth is that the economy of Japan was already deeply struggling before this disaster.

The national debt of Japan is now well over 200% of GDP and there seems to be no doubt that they will need to borrow massive amounts of money to deal with the aftermath of this crisis.

Up until now the Japanese government has been able to borrow money at ultra-low interest rates of around 1.30 percent for 10-year bonds, drawing on a huge pool of savings from its own citizens.

But in light of what has just happened, will the citizens of Japan still have enough resources to continue to fund the rampant spending of the Japanese government?

At this point, it is estimated that this gigantic mountain of debt breaks down to 7.5 million yen for every single citizen of Japan.

Politicians in Japan have been pledging for years to do something about all of this debt, but nobody has been able to make much progress.

Even before this disaster, the major credit rating agencies were warning that they may have to downgrade Japanese government debt.  The earthquake and the tsunami are certainly not going to make the Japanese even more credit-worthy.

Hideo Kumano, the chief economist at Dai-ichi Life Research Institute, has said that a “tipping point” will come when world financial markets finally recognize that the government of Japan simply cannot afford to service its debt any longer….

“It’s hard to predict when the bond market might collapse, but it would happen when the market judges that Japan’s ability to finance its debt is not sustainable anymore.”

Is the massive tsunami that just hit Japan such a tipping point?

Other countries such as Greece and Ireland would have already collapsed if it had not been for the massive international bailouts that they received.

So who is going to bail Japan out?

This could potentially be one of the greatest economic disasters that the world has seen since World War 2.

With the world already on the verge of a major financial collapse, this is the last thing that world financial markets needed.

In fact, much of the rest of the world had been hoping that an influx of capital from Japan would help to stabilize things.

For example, Japanese insurance companies had recently announced that they were planning on buying up lots of European sovereign debt, but now obviously those plans are on hold.  As a result of this disaster, Japanese insurance companies will be forced to sell off assets like crazy in order to pay settlements.  But as Zero Hedge is correctly pointing out, without Japanese financial institutions stepping in to soak up Eurozone bonds this is going to make the European sovereign debt crisis even worse.

But right now the focus in on the devastation in Japan.  At the moment it is unclear how much of the economic infrastructure of Japan has survived.

For example, as USA Today is reporting, some factories cannot even be reached by phone at this point….

Toyota’s phone calls to its plants in affected areas were not being answered, said Shiori Hashimoto, a spokeswoman in Tokyo. The Toyota City-based carmaker began production at a new plant in Miyagi this year that makes Yaris compact cars and has capacity to make 120,000 vehicles a year.

What is clear is that the cost of recovering and rebuilding after this disaster is going to put extraordinary financial stress on the Japanese government.

Julian Jessop of Capital Economics certainly does not sound optimistic about what this is going to mean for the Japanese economy….

“Japan’s economic recovery has lost momentum and a large part of the reconstruction costs will add to the government’s significant debt burden.”

Hopefully the full extent of the damage is not as bad as many are now fearing.

But the truth is that this is a huge, huge event for a world economy that was already on the verge of collapse.

May our thoughts and our prayers be with the Japanese people at this time.

This is truly one of the biggest disasters that any of us have ever seen, and Japan will never be the same again.

Sheeple: Government Handouts = 35 Percent Of U.S. Wages But For Michael Moore That Is Not Nearly Enough

The ratio of government handouts to wages and salaries in the United States is now at an all-time high.  According to TrimTabs Investment Research, government handouts have reached a level that is equivalent to 35 percent of all wages and salaries in the United States.  Considering the fact that this figure was only 21 percent back in the year 2000 and only 10 percent back in 1960 that is very frightening.  The sad truth is that today the American people are more dependent on direct government payments than they ever have been before.  What this does is that it takes formerly independent Americans and transforms them into “sheeple” and pets of the government.  Today we have tens of millions of Americans that eagerly await the crumbs that the federal government tosses them each month.  This is one reason why our national debt is exploding, but our politicians like this system because it enables them to buy votes.  Meanwhile, the federal government and the international corporations that dominate our economy have rigged the game so that power and money are becoming increasingly centralized in their hands.  As a result of the system that the “big boys” have developed, millions of small businesses across the country are being absolutely crushed, the standard of living of the middle class is gradually being destroyed and more American families slip into poverty ever single day.  What we need to do is to dramatically reduce the power of both the federal government and the big corporations so that small businesses and individuals can thrive once again, but instead “activists” such as Michael Moore are out there demanding even more taxes and even more government handouts.

Not that a “safety net” is a bad thing.  We simply are not going to allow tens of millions of Americans to starve out in our streets.  However, it has gotten to the point where the majority of American families are now dependent on the U.S. government in one form or another and that is very, very wrong.

More government handouts are never a long-term solution to anything.  Handouts do not give people dignity.  Handouts do not teach people to be independent.  Handouts do not enable people to live the “American Dream”.  Handouts are not the path to prosperity.

What the American people need are jobs and an environment where small businesses can thrive.  But instead, the federal government has allowed the big global corporations to ship millions of our jobs out of the country and the federal government continues to burden our small businesses with an endless array of new taxes and regulations.

Who is successful in America today?

It is the big boys.  Everyone else is being crushed.

This is what the founding fathers tried to warn us about.  They did not want the federal government to have much power at all, and they were deeply suspicious of large corporations.

But we have turned our backs on the principles of the founding fathers.

We should be figuring out how to get back to the America that our founding fathers originally tried to create, but instead all of the attention is being given to “activists” such as Michael Moore who are calling for even more taxes and even more government handouts.  The following video is of Michael Moore giving a speech to protesters in Madison, Wisconsin on March 5th, 2011.  His speech was entitled “America Is Not Broke”….

Yes, the “little guy” is being absolutely crushed in America today.  But for people like Michael Moore the solution is always to tax the middle class more and to pass out even more government handouts.

That isn’t going to solve anything.  Most of the ultra-wealthy have turned avoiding taxes into an art form.  A third of all the wealth in the world is now held in “offshore banks“.  Many of our largest corporations don’t pay a dime in federal taxes even as they pass out multi-million dollar bonuses to their executives.

Raising taxes in most definitely not the answer.  Those that have mastered the art of avoiding taxes will continue to do so no matter how high you raise them.

The truth is that we need to shut down the IRS and scrap the current tax system entirely.  It simply does not work.

What we need to do is to get the federal government and the big corporations under control and transfer the power back to the American people.

That is what our founding fathers intended.  They intended for the common man to be empowered  to start businesses, create wealth and pursue happiness.

But instead tens of millions of Americans have become addicted to government handouts.  When large numbers of people give up and willingly become wards of the government that is not good for society.

Unfortunately, more Americans today are dependent on the U.S. government than ever before.  Just consider the following statistics….

-According to TrimTabs Investment Research, social welfare benefits in the United States have risen by $514 billion over the past two years alone.

-As 2007 began, only about 26 million Americans were on food stamps, but today over 44 million Americans are now on food stamps.

-Over 50 million Americans are now on Medicaid.

-Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, one out of every 6 American is on Medicaid.

–53 million Americans received $703 billion in Social Security benefits in 2010.

-Right now the U.S. government is either writing or guaranteeing well over 90 percent of all mortgages in the United States.

-It is being projected that extended unemployment benefits will cost the federal government $34 billion over the next two years.

-30 U.S. states have borrowed a total of $41.5 billion from the federal government just so that they could continue paying out unemployment benefits during the recession.

-Entitlement programs such as Social Security and Medicare now account for 58% of all U.S. government spending.

But what else should we expect?  The federal government has been using a sledgehammer to endlessly pound away on the capacity of small businesses and individuals to create wealth and jobs and opportunities.  The business atmosphere in the United States is now so toxic that it is amazing that any small businesses have survived.

Most Americans find themselves with no other way to make a living other than to work for someone else.  But the big global corporations have discovered that they can make much larger profits by getting rid of American workers and by shipping our jobs overseas and our politicians are allowing them to get away with it.

The truth is that both political parties don’t have the answers.  Neither party seems to have any clue about how to stop millions of jobs from leaving the United States and neither party seems to have any clue about how to create a business environment inside the United States where individuals and small businesses can actually thrive.

How much longer will it be before we all finally admit that we are experiencing total system failure in this country?  Should we all just quit trying and sit on our couches waiting for the next government handout?  The truth is that there aren’t nearly enough jobs for all Americans anyway.

The middle class is dying and the establishment has us all fighting with each other.  The left and the right are busy fighting about taxes and budget cuts while the ultra-wealthy continue to enjoy massive profits and incredibly low taxes in the globalized economic system that we have allowed our politicians to create.

Yes, there are tens of millions of Americans that are deeply suffering right now and they need to be helped.

But government handouts are never a long-term solution to anything.  What we need to do is to massively reduce the power of the federal government, massively reduce the power of the big corporations and stop businesses and jobs from being shipped out of the country.  We also need to create an environment in the United States that is very favorable to small businesses.  That would give our country a chance to start creating good jobs again.

But instead, we continue to allow our politicians to destroy our economy.  We actually have 10 percent fewer middle class jobs in this country than we did just ten years ago.  The middle class is being systematically destroyed.  All of the wealth and all of the power are slowly being transferred into the hands of big government and the big corporations.

The vast majority of the rest of us are being transformed from strong, independent, prosperous Americans into dehumanized sheeple that can’t wait for the next government check to come in.

Does anyone out there actually believe that this is what our founding fathers originally intended?

Will The Day Of Rage In Saudi Arabia On March 11 Send The Price Of Oil Into Unprecedented Territory?

The price of oil is shaping up to be the number one economic story of 2011, and right now the eyes of the investing world are closely watching the developing situation in Saudi Arabia.  All of the other recent Middle East revolutions have been organized on the Internet, and now all over Facebook and Twitter there are calls for a “Day of Rage” in Saudi Arabia on March 11.  The Saudi monarchy is attempting to head off any protests by promising to give $37 billion in “benefits” to the people and by publicly proclaiming that all political demonstrations are specifically banned.  In addition, the Saudi government is stationing thousands of security forces at various potential “hot spots” around the country.  So far similar measures have not done much to quell unrest in other nations in the Middle East, but Saudi Arabia will be a true test of the revolutionary fervor that is sweeping the region.  The Saudis have a long history of brutally repressing their own people.  They simply do not mess around.  So a revolution in Saudi Arabia will not be nearly as “easy” as it was in Tunisia, Egypt or Libya.  However, if a revolution does sweep across Saudi Arabia, it is going to send the price of oil into unprecedented territory.  Saudi Arabia is the number one exporter of oil in the world, and if their oil fields get shut down even for a little while it is going to have a dramatic effect on the global economy.  With the world already on the verge of a major sovereign debt crisis, the last thing it needs is for the price of oil to start soaring into the stratosphere.

Right now the investing world is not sure what to think about all of this, and financial markets do not like uncertainty.  One piece of really bad news could send markets all over the globe crashing down.

Speculation in oil futures is absolutely rampant.  A recent report on CNN noted the following….

The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it.

In particular, the number of investors that are betting that a revolution in Saudi Arabia is going to send the price of oil up to $200 a barrel has exploded in recent days.

$200 a barrel?

Are people actually betting that is going to happen?

The all-time record is only $147 a barrel.  Just a few months ago it was absolutely unthinkable to most economists that we could potentially see $200 oil in 2011.

But it would be a mistake to assume that a full-blown revolution is guaranteed to break out in Saudi Arabia.  Remember, this is a nation that has a very, very long history of denying even the most basic freedoms to the people.

For example, in Saudi Arabia the practice of any religion other than Islam is strictly forbidden.  By law, citizens of Saudi Arabia are not permitted to change religion.  Even foreign visitors are forbidden to openly practice any other religion.  It is a whole different world.  You cannot go to the store and buy a Bible in Saudi Arabia.  In fact, if you try to pass out Bibles in Saudi Arabia you will be thrown into prison.

Beheadings and other brutal public executions still happen in Saudi Arabia to this day.

So if you plan of being a revolutionary in Saudi Arabia you had better put your big boy pants on, because the Saudis play hardball.

Much of the rest of the globe is desperately hoping that a revolution does not happen in Saudi Arabia because the global economic situation is precarious at best.

In Europe, if the price of oil causes a significant economic slowdown right now it could have global implications.  Moody’s Investors Service just slashed Greece’s debt rating three levels all the way down to B1.  But Greece is far from alone.  Several European governments are finding it much more expensive to finance their debts these days.  We are right on the edge of a major European sovereign debt crisis and the chaos in the Middle East could potentially be just the thing to spark a panic.

The United States could feel a rise in the price of oil even more than Europe because the U.S. economy is so spread out and it is so dependent on products from overseas.

Did you know that in 1960 only 8 percent of the things Americans bought were made overseas but that today 60 percent of the things Americans buy are made overseas?

It’s true.

So what would happen if the cost of transporting all of those products suddenly doubled?  All of the products we buy must be transported somehow, and a rise in transportation costs will be passed on to U.S. consumers.

But the truth is that the pain is already here.  Already, millions of American families are starting to feel some very real financial pain from the chaos in the Middle East.

From February 18th to March 4th, the average price of gasoline in the United States rose 33 cents.  That was the biggest two week increase ever recorded.

Ouch.

The rise in the price of oil has some broader economic implications as well.

The more the price of oil goes up the bigger our trade deficit is going become.  As the trade deficit gets bigger, that means that more money is going out of the country and less money is going to support American businesses and American workers.  When American workers lose jobs, that means that they aren’t producing wealth anymore and they aren’t paying taxes anymore.  Instead, they become a drain on the system as they start receiving government handouts.

When millions of Americans go from being productive, taxpaying workers to unemployed welfare cases it causes our federal budget deficit to become even larger.

Most Americans do not understand how connected our trade deficit and our federal budget deficit really are.  One feeds right into the other.

Unfortunately, the Federal Reserve seems to think that the solution to any economic problem these days is to print more money.

According to Atlanta Fed President Dennis Lockhart, if the price of oil goes up high enough, it could force the Federal Reserve to do even more quantitative easing.

Really?

One of the reasons why the price of oil and other commodities has been going up over the last six months is because of all of this reckless money printing.

Now Lockhart is saying that because of the oil price increases they may have to do more money printing?

How bizarre is that?

Unfortunately, several other top Fed officials have dropped hints about a possible “QE3” lately.  It just seems like the insanity never stops.

Let us hope that the Fed does not go there because the U.S. dollar is falling apart fast enough already.

In any event, the rest of 2011 is certainly going to be very interesting to watch.

Even if a revolution does not happen in Saudi Arabia, the price of oil will most likely continue to slowly move higher just as it has been doing for months.

But if a full-blown revolution does happen in Saudi Arabia, it could literally change the global economy almost overnight.  The entire world financial system would be thrown into a state of chaos.

Oil is the lifeblood of the world economy.  Without a continuous supply of very inexpensive oil, life as we know it would dramatically change.  Most of us just assumed that we would always live in a world where we would always have an endless supply of very cheap oil.

Well, the times they are a changing.

You had better buckle up because it is going to be a bumpy ride.

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