Depression

In Debt Up To Our Eyeballs

The entire financial system of the western world is designed to be a debt spiral.  The total amount of money and and the total amount of debt are supposed to continually expand.  Today, we are in debt up to our eyeballs and it seems like nearly everyone is talking about “deleveraging” and reducing government debt.  But in a world where the entire financial system is based on debt, is there any way for massive deleveraging to take place without plunging us all into a horrific worldwide depression?  The governments of the western world have had a lot of fun spending money as if there was no tomorrow, but now tomorrow has arrived and all of that debt is rapidly catching up with us.  Politicians in Europe and in the United States are running around trying to come up with a “plan”, but there is no “plan” that is going to fix the current debt-based system.  Over the next few years we are going to reap what we have sown.

For fiscal year 2011, the U.S. federal government had a budget deficit of nearly 1.3 trillion dollars.  That was the third year in a row that our budget deficit has topped a trillion dollars.

Sadly, most Americans simply have no idea how much money a trillion dollars is.

Perhaps an illustration or two would help.

If on the day when Jesus was born you began spending one million dollars every single day, you still would not have spent one trillion dollars by now.

That is how large a trillion dollars is.

If you went out today and started spending one dollar every single second, it would take you over 31,000 years to spend one trillion dollars.

Some people have suggested that we could solve our problems by taxing the rich.

Well, if Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.

No, the truth is that what we have is a spending problem.

The U.S. federal government is spending way, way too much money.  Total U.S. government debt will soon cross the 15 trillion dollar mark.

Should we do something to celebrate such a monumental national achievement?

It really takes a special effort to borrow 15 trillion dollars.

We have accumulated the largest mountain of debt in the history of the world, and yet our government continues to add to our debt at a blistering pace.

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.

Unfortunately, we are not paying it off right now.  Instead, we are adding even more to it.

Back in the early 1980s, Ronald Reagan declared the national debt to be a national crisis.

Well, today our national debt is more than 14 times larger than it was when Reagan took office.

Something has gone horribly, horribly wrong.

Right now, spending by the federal government accounts for about 24 percent of GDP.  Back in 2001, it accounted for just 18 percent.

Spending is going in the wrong direction.

And most government spending goes into the pockets of individual Americans.

59 percent of all Americans now receive money from the federal government in one form or another.

We have got tens of millions of Americans that are completely and totally addicted to getting money from the federal government.

But wasn’t the Tea Party supposed to do something about all of this crazy government spending?

Unfortunately, the Tea Party has failed in this area.  In the mainstream media there is talk of “austerity” by the federal government, but the truth is that spending by the federal government has increased by about 5 percent so far this year.

We are hurtling toward a “debt wall” and the brakes don’t seem to work.

Europe is in a massive amount of debt trouble as well.  In fact, a financial meltdown is probably going to happen in Europe before it happens in the United States.

Greece, Portugal, Ireland and Italy all have debt to GDP ratios that are well above 100%.  Spain is in a massive amount of trouble as well.

Right now, Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3 trillion euros combined.

Greece is on the verge of a default of one form or another, and Italy and Portugal look like they will not be far behind.

As the financial world braces for a Greek default, the yields on Greek bonds are going absolutely crazy.  The yield on 2 year Greek bonds is now over 70 percent.  The yield on 1 year Greek bonds is now over 170 percent.

Sadly, it looks like Portuguese bonds are starting to go down the same path.  The yield on 2 year Portuguese bonds is now over 17 percent.  A year ago the yield on those bonds was about 4 percent.

European banks are also drowning in an ocean of debt.

According to renowned financial journalist Ambrose Evans-Pritchard, banks in Europe need to reduce the amount of lending on their books by about 7 trillion dollars in order to get down to safe levels….

Europe’s banks face a $7 trillion lending contraction to bring their balance sheets in line with the US and Japan, threatening to trap the region in a credit crunch and chronic depression for a decade.

But can that be done safely?

Can that be done without plunging Europe into a financial nightmare?

Ambrose Evans-Pritchard is skeptical….

The risk is “Japanisation” without the benefits of Japan: without a single government, or a trade super-surplus, or 1pc debt costs, or unique social cohesion.

Already the financial crisis in Europe has pushed unemployment to frightening levels.  So what will happen if you add massive deleveraging to the equation?  Ambrose Evans-Pritchard is very concerned about what might happen in some of the most troubled nations….

Even today, the jobless rate for youth is near 10pc in Japan. It is already 46pc in Spain, 43pc in Greece, 32pc in Ireland, and 27pc in Italy. We will discover over time what yet more debt deleveraging will do to these societies.

Major European banks not only have too many loans on their books – they have also borrowed way, way too much money themselves.

The truth is that most major European banks are leveraged to the hilt and are massively exposed to sovereign debt.  Before it fell in 2008, Lehman Brothers was leveraged 31 to 1.  Today, major German banks are leveraged 32 to 1, and those banks are currently holding a massive amount of European sovereign debt.

What all of this means is that we are on the verge of some really bad stuff.

The governments of the world are up to their eyeballs in debt.  According to the Economist, the governments of the world combined are more than 40 trillion dollars in debt.  But that total only counts government debt held by the public and it does not include any future obligations (such as Social Security, etc.) owed by national governments.

It would be hard to overstate how much of a crisis this is.

But just like with the subprime mortgage meltdown of a few years ago, a number of very savvy investors and economists can see what is coming.

For example, Texas investor Kyle Bass made millions and millions of dollars betting against subprime mortgages, and now he is warning that we are facing a crisis much greater than that.

Bass believes that the European debt crisis is soon going to explode.  In particular, he has been putting his money into investments that will pay off big if Greek debt collapses.

But that is not all Bass has been up to.  He has been stockpiling gold, guns and nickels (20 million nickels to be exact).

Bass appears to be well prepared for the coming economic collapse.  The following is how one writer described his visit to the 40,000 square foot “fort” owned by Bass….

“We hopped into his Hummer, decorated with bumper stickers (God Bless Our Troops, Especially Our Snipers) and customized to maximize the amount of fun its owner could have in it: for instance, he could press a button and, James Bond–like, coat the road behind him in giant tacks. We roared out into the Texas hill country, where, with the fortune he’d made off the subprime crisis, Kyle Bass had purchased what amounted to a fort: a forty-thousand-square-foot ranch house on thousands of acres in the middle of nowhere, with its own water supply, and an arsenal of automatic weapons and sniper rifles and small explosives to equip a battalion.”

If only the rest of us were so well prepared, eh?

So if this is the kind of thing that the “financial experts” are doing, then what is the message for us?

A great storm is coming, and most Americans are going to be totally unprepared for it.

Not that things are not really, really bad already.

According to Shadow Government Statistics, the “real” rate of unemployment in the United States is creeping up toward 25 percent.

So what is going to happen if a worldwide depression hits?

Things could get very, very interesting over the next few years.

A significant percentage of Americans have already lost faith in the system.  According to a new Gallup poll, 44 percent of all Americans say that our economic system is “unfair” to them on a personal level.

But sadly, most Americans don’t really understand the mechanics of our financial system.

They don’t understand what actually makes it unfair.

That is why we need to work so hard to educate the American people about the Federal Reserve.  The Federal Reserve system is at the very heart of our financial system, and it was designed to get the U.S. government perpetually enslaved to debt.

At this point, the U.S. national debt is 4700 times larger than it was when the Federal Reserve was created back in 1913.

It looks like the creators of the Federal Reserve achieved their goal.

Posted below is a cartoon that was published one year before the creation of the Federal Reserve.  The intent of this cartoon was to criticize the “Aldrich plan” which was a precursor to the plan to create the Federal Reserve.

As you can see below, the creator of this cartoon had a good idea of what would happen if the plan put forward by Rhode Island Senator Nelson Aldrich was adopted.

Today, the Federal Reserve totally dominates our financial system just like this cartoon once warned would happen if we allowed a central bank to control our money….

Too Big To Fail?: 10 Banks Own 77 Percent Of All U.S. Banking Assets

Back during the financial crisis of 2008, the American people were told that the largest banks in the United States were “too big to fail” and that was why it was necessary for the federal government to step in and bail them out.  The idea was that if several of our biggest banks collapsed at the same time the financial system would not be strong enough to keep things going and economic activity all across America would simply come to a standstill.  Congress was told that if the “too big to fail” banks did not receive bailouts that there would be chaos in the streets and this country would plunge into another Great Depression.  Since that time, however, essentially no efforts have been made to decentralize the U.S. banking system.  Instead, the “too big to fail” banks just keep getting larger and larger and larger.  Back in 2002, the top 10 banks controlled 55 percent of all U.S. banking assets.  Today, the top 10 banks control 77 percent of all U.S. banking assets.  Unfortunately, these giant banks are also colossal mountains of risk, debt and leverage.  They are incredibly unstable and they could start coming apart again at any time.  None of the major problems that caused the crash of 2008 have been fixed.  In fact, the U.S. banking system is more centralized and more vulnerable today than it ever has been before.

It really is difficult for ordinary Americans to get a handle on just how large these financial institutions are.  For example, the “big six” U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America’s gross national product.

These huge banks are giant financial vacuum cleaners.  Over the past couple of decades we have witnessed a financial consolidation in this country that is absolutely unprecedented.

This trend accelerated during the recent financial crisis.  While the big boys were receiving massive bailouts, the hundreds of small banks that were failing were either allowed to collapse or they were told that they should find a big bank that was willing to buy them.

As a group, Citigroup, JPMorgan Chase, Bank of America and Wells Fargo held approximately 22 percent of all banking deposits in FDIC-insured institutions back in 2000.

By the middle of 2009 that figure was up to 39 percent.

That is not just a trend – that is a landslide.

Sadly, smaller banks continue to fail in large numbers and the big banks just keep growing and getting more power.

Today, there are more than 1,000 U.S. banks that are on the “unofficial list” of problem banking institutions.

In the absence of fundamental changes, the consolidation of the banking industry is going to continue.

Meanwhile, the “too big to fail” banks are flush with cash and they are getting serious about expanding.  The Federal Reserve has been extremely good to the big boys and they are eager to grow.

For example, Citigroup is becoming extremely aggressive about expanding….

Citigroup has been hiring dozens of investment bankers, dialing up advertising and drawing up plans to add several hundred branches worldwide, including more than 200 in major cities across the United States.

Hopefully the big banks will start lending again.  The whole idea behind the bailouts and all of the “quantitative easing” that the Federal Reserve did was to get money into the hands of the big banks so that they would lend it out to ordinary Americans and get the economy rolling again.

Well, a funny thing happened.  The big banks just sat on a lot of that money.

In particular, what they did was they deposited much of it at the Fed and drew interest on it.

Since 2008, excess reserves parked at the Fed have grown by nearly 1.7 trillion dollars.  Just check out the chart posted below….

The American people were promised that TARP and all of the other bailouts would enable the big banks to lend out lots of money which would help get the economy going for ordinary Americans again.

Well, it turns out that in 2009 (the first full year after Congress passed the bailout legislation) U.S. banks posted their sharpest decline in lending since 1942.

Lending has never fully recovered since the crash of 2008.  The big financial institutions like Goldman Sachs, Morgan Stanley and JPMorgan Chase have been able to get all the cash that they need, but they have not passed that generosity along to ordinary Americans.

In fact, the biggest U.S. banks have actually reduced small business lending by about 50 percent since the crash of 2008.

That doesn’t sound like what we were promised.

These “too big to fail” banks have been able to borrow gigantic amounts of money from the Fed for next to nothing and yet they still refuse to let credit flow to local communities.  Instead, the big banks have found other purposes for all of the super cheap money that they have been getting from the Fed as Ellen Brown recently explained….

It can be very profitable indeed for the big Wall Street banks, but the purpose of the near-zero interest rates was supposed to be to get banks to lend again. Instead, they are, indeed, paying “outrageous bonuses to their top executives;” using the money to engage in the same sort of unregulated speculation that nearly brought down the economy in 2008; buying up smaller banks; or investing this virtually interest-free money in risk-free government bonds, on which taxpayers are paying 2.5 percent interest (more for longer-term securities).

What makes things even worse is that these big banks often pay next to nothing in taxes.

For example, between 2008 and 2010, Wells Fargo made a total profit of 49.37 billion dollars.

Over that same time period, their tax bill was negative 681 million dollars.

Do you understand what that means?  Over that 3 year time period, Wells Fargo actually got 681 million dollars back from the U.S. government.

Isn’t that just peachy?

Meanwhile, the big financial giants have not learned their lessons and they continue to do business pretty much as they did it prior to 2008.

The big banks continue to roll up massive amounts of risk, debt and leverage.

Today, Wall Street has become one giant financial casino.  More money is made on Wall Street by making side bets (commonly referred to as “derivatives“) than on the investments themselves.

If the bets pay off for the big financial institutions, mind blowing profits can be made.  But if the bets go against the big financial institutions (as we saw in 2008), firms can collapse almost overnight.

In fact, it was derivatives that almost brought down AIG.  The biggest insurance company in the world almost folded in 2008 because of a whole bunch of really bad bets.

The danger from derivatives is so great that Warren Buffet once called them “financial weapons of mass destruction”.  It has been estimated that the notional value of the worldwide derivatives market is somewhere in the neighborhood of a quadrillion dollars.

The largest banks have tens of trillions of dollars of exposure to derivatives.  When the next great financial collapse happens, derivatives will almost certainly be at the center of it once again.  These side bets do not create anything real for the economy – they just make and lose huge amounts of money.  We never know when the next great derivatives crisis will strike.  Derivatives are essentially like a “sword of Damocles” that perpetually hangs over the U.S. financial system.

When I start talking about derivatives I get a lot of people in the financial community mad at me.  On Wall Street today you can bet on just about anything you can imagine.  Almost everyone in the financial world has gotten so used to making wild bets that they couldn’t even imagine a world without them.  If anyone even tried to put significant limits on futures, options and swaps it would cause Wall Street to throw a hissy fit.

But someday the dominoes are going to start to fall and the house of cards is going to come crashing down.  It is an open secret that our financial system is fundamentally unsound.  Even a lot of people working on Wall Street will admit that.  It is just that people are so busy making such big piles of money that nobody wants the party to stop.

It is only a matter of time until some of these big banks get into a huge amount of trouble again.  When that happens, we might really find out whether they are “too big to fail” or whether we could get along just fine without them.

48 Percent Of Americans Believe Another Great Depression Is Likely In The Next 12 Months – 19 Reasons Why They Are Not Completely Crazy

Do you believe that the U.S. economy is steamrolling toward a depression?  If so, you are not alone.  According to a recent CNN poll, 48 percent of Americans believe that “another Great Depression” is likely within the next 12 months.  Americans have been waiting for almost three years for a “recovery” to materialize, but instead there are all kinds of signs that the economy is about to get worse yet again.  Inflation is rising but wages are not.  There are millions of Americans that would do just about anything to get a decent job.  The “misery index” is the highest it has been in almost 30 years.  All of the recent polls show that the American people are more pessimistic about the economy than at any other time in recent memory.  World financial markets are incredibly unstable right now and many analysts are expecting a repeat of 2008 (or worse).  Meanwhile, our state and local governments are drowning in debt, the federal government is drowning in debt and governments all over Europe are drowning in debt.  No, it is not crazy for 48 percent of Americans to believe that we are about to go into another Great Depression.

Just think about that statistic for a moment.  Nearly half of the country expects the economy to fall to pieces at some point over the next year.

So do I agree with them?

Yes, I certainly believe that an economic collapse is coming.  But that doesn’t mean that it will necessarily happen within the next year.  The United States is in the midst of a long-term economic decline, and the next big financial crisis could potentially happen in 2011 or 2012.

But it might not.

There are so many variables and it is so hard to predict with certainty the exact timing of how things will play out.

However, it is true that incredibly painful economic times are coming.  Our long-term economic future looks unbelievably bleak.

So anyone that believes that we are headed for another depression is certainly not crazy.  The following are 19 reasons why it is perfectly rational to be pessimistic about the U.S. economy right now….

#1 Today, 25 million Americans are either unemployed or underemployed.  6 million of those have been out of work for at least 6 months.  The average duration of unemployment in the U.S. is now close to 40 weeks.

#2 The unofficial misery index, which is calculated by combining unemployment and inflation, is now at a 28 year high.

#3 Sadly, if unemployment and inflation were calculated the same way that they were back in the 1970s, the misery index would actually be much, much higher.  According to John Williams of Shadow Government Statistics, the current “real” rate of inflation is approximately 11.2% instead of the 3.6% figure that the U.S. government wants us to believe.

#4 Greece is on the verge of complete and total financial collapse.  The yield on two year Greek bonds is up to 28 percent.  The European Central Bank and the German government have been fighting over what to do to solve the Greek crisis.  The truth is that without a bailout the Greek government will default.  If Greece defaults, it would be a huge nightmare for world financial markets.

#5 Neil MacKinnon, an analyst at VTB Capital, is warning that a Greek implosion could set off a 2008-style financial crisis….

“The risk of a ‘Lehman moment’ for the eurozone is increasing”

#6 Spain is also potentially a major problem.  The Spanish economy is more than twice the size of the Greek, Irish and Portuguese economies combined.  Over the past 12 months, the yield on 10 year Spanish bonds has been rising steadily, and many believe that Spain could be the tipping point that pushes the sovereign debt crisis in Europe over the edge.

#7 State and local governments all over the United States are cutting their budgets and are implementing brutal austerity measures.  For example, one small town in Alabama has actually decided that they are simply going to stop paying pension benefits to their retirees.  In other areas, teachers and police officers are being fired in massive numbers. UBS Investment Research is projecting that state and local governments in the U.S. will combine to slash a whopping 450,000 jobs by the end of next year.

#8 The middle class in the United States is being systematically ripped to shreds.  The poorest 50% of all Americans collectively own just 2.5% of all the wealth in the United States at this point.

#9 It is never a good sign when even the big Wall Street banks start laying off workers.  CNBC is reporting that Goldman Sachs, Morgan Stanley and many other big firms on Wall Street are planning some large staff reductions in the months ahead.  That is a very bad sign for the economy.

#10 Things have gotten so bad that some mainstream media outlets are actually encouraging Americans to go out and start racking up credit card debt once again.  For example, one recent USA Today article was actually entitled “More credit card debt might be good for the economy“.  Of course the big banks are ready to suck the lifeblood out of anyone that does slip up on making their credit card payments.  One major bank has announced that a single late payment could result in a penalty rate as high as 29.99%.

#11 According to the Bureau of Labor Statistics, the share of national income being taken home by American workers is at a post-war low and is rapidly declining.

#12 Reuters is reporting that many of Wall Street’s biggest banks plan to cut their use of U.S. Treasuries starting in August.  China has already been dumping short-term U.S. debt.  But if most of the big players abandon the market, who is going to buy up the massive amounts of debt that the U.S. government needs to issue?

#13 Dean Baker of the Center for Economic and Policy Research apparently believes that we are already in a depression….

“At some point, the pain of high unemployment may lead to some new thinking in Washington – but until that time, welcome to the second Great Depression”

#14 The U.S. banking system could plunge into disaster at any moment.  The FDIC is backing up 7 trillion dollars in deposits with an insurance fund that barely has anything in it.

#15 It seems like almost everyone is talking about the next financial collapse.  Renowned investor Jim Rogers recently said the  following….

“I would expect to see some serious problems in the foreseeable future….By 2011, 2012, 2013, 2013, I don’t know when, we’re going to have an economic slowdown again.”

#16 Legendary hedge fund manager Mark Mobius is bracing for the worst.  Just consider the following quote from Mobius that recently appeared in Forbes magazine….

There is definitely going to be another financial crisis around the corner,” says hedge fund legend Mark Mobius, “because we haven’t solved any of the things that caused the previous crisis.”

#17 Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period.  It is clearly unsustainable for our debt to be growing so much faster than our economy is.

#18 Peter Yastrow, a market strategist for Yastrow Origer, recently told CNBC the following….

“Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything,” Yastrow said. “We’re on the verge of a great, great depression. The [Federal Reserve] knows it.”

#19 The American people are extremely pessimistic about the economy right now.  According to one recent poll, 56 percent of Americans have lost sleep due to the economy and about three-quarters of Americans believe that the nation is on the wrong track.

The nation is in a very sour mood right now, and this is causing even many in the mainstream media to ask some very hard questions.

For example, Jack Cafferty recently asked the following question to viewers on CNN….

“What are the chances the U.S. economy could eventually trigger violence in our country?”

You can view the video of Cafferty asking this question right here or you can just watch it below….

Sadly, we are already starting to see violence erupt all over North America.

Yesterday I highlighted the horrifying violence that we saw in Vancouver this week.

In previous articles I have discussed the insanity that has been going on in major U.S. cities such as Chicago.

Now even the mainstream media is being forced to report on the surge in violence.

A recent USA Today article described some of the most recent mob robberies that have been happening in Chicago….

A Chicago Tribune report tells of a 68-year-old man from Washington State who was set upon while he was smoking a cigar on a bench when youths surrounded him, attacked him and reportedly stole a phone and iPad. The report says a 42-year-old Japanese tourist also was beaten and robbed on a bicycle path by the lakefront. The paper says seven were arrested, but that the group participating in the felonies was estimated at 15 to 20 people strong. One 20something suburbanite told Chicago’s WGN TV that he was hit so hard in the head with a baseball that it knocked his motorcycle helmet off. he managed to fight his way out of trouble and hail police, he said.

When people don’t have hope, they get desperate.

There are millions of other Americans that are suffering through this economy quietly.

There are so many people out there that have worked hard and have followed all the rules and yet now find themselves struggling just to survive.

For example, a reader named Carolyn recently left a comment in which she shared her story with my readers….

My husband lost his long-term job in 2009 due to budget cuts. Don’t worry, I said. I’m still working, and we have a year of our salary in savings. You’re smart, you’re educated, you’re a hard worker. You’ll find a job soon.

Two months later, my long-term job was sent to India.

I still wasn’t worried. I’m smart, I’m educated, and I’m a smart worker.

A year and a half later, I haven’t found new career yet. I’m 50. No one is going to hire me. I am working – at a Home Depot. At a 79% pay cut from my prior position. But it doesn’t pay for anything. My husband found a new position in his field – at a 62% pay cut from his prior position.

We lived off unemployment and our savings, until both ran out. We put our house and investment property on the market the day after I lost my job.

We haven’t had one offer.

We just had our Chapter 7 bankruptcy discharged. Our foreclosure is still pending. No word yet when that will be done.

To add insult to injury, we owe Federal income taxes on the penalties we used to make withdrawals from our 401(k)’s to live off. My husband took a job in another state, and we were SHOCKED to learn that we owed NEW YORK STATE taxes on the income he earned in Mississippi – to New York state! Apparently there is some loophole that if you are a property owner in New York, but earn income in another state, you have to pay New York state income taxes on out of state earned income.

We’ve been told once our foreclosure is finalized, we may owe taxes on that as well.

What happened to our country?

It is so sad to see what is happening to America.

Things are so hard out there for so many millions of American families right now.

But the truth is that things are much better at the moment than they will be in a few years.

So what is America going to look like when there is no doubt that the economy has collapsed and people have no hope at all?

Losing Faith (In The U.S. Economy)

Are the American people losing faith in the U.S. economy?  The statistics that you are about to read might surprise you.  Not everyone believes that the U.S. economy is dying (there are still millions out there that will swallow anything that the mainstream media tells them), but the reality is that there is a growing chunk of the population that has completely lost faith in our leaders and in our economic system.  A brand new Gallup poll has found that the number of Americans that believe that we are in a “depression” is actually larger than the number of Americans that believe that the economy is “growing”.  That is absolutely shocking because according to official government figures, the U.S. economy is growing right now and virtually nobody in the mainstream media or the government has used the term “depression” to describe the economic downturn that we went through recently.  In fact, according to Gallup a total of 55% of the American people believe that we are either in a recession or a depression right now.  This is clear evidence that the American people are losing faith in U.S. government economic statistics and instead they are basing their opinions on what they see in their own communities.  Despite the pablum about an “economic recovery” constantly being spewed by Ben Bernanke and Barack Obama, faith in our economic system continues to decline.  The truth is that the American people are not stupid.  They can see what is happening to the economy.

Back when I was a teenager, one day I walked over to the local McDonald’s and filled out an application and was immediately hired.

But that is not how it works today.

Recently, McDonald’s made headlines when they held a National Hiring Day.  Some commentators pointed to that event as evidence that the economy was recovering.

Well, you know what?  McDonald’s ended up receiving approximately one million applications.

So how many of those people did McDonald’s hire?

They hired about 62,000 people.

That means that somewhere around 938,000 eager job applicants were turned away.

Just think about that.

Only about 6.2 percent of those that applied for a job at McDonald’s were accepted.

As Joe Weisenthal of Business Insider recently pointed out, that means that Harvard now has a higher acceptance rate than McDonald’s does.

Harvard accepts about 7% of those that apply to go to school there.

Who ever thought we would see the day when a higher percentage of applicants get accepted into Harvard than get hired at McDonald’s?

Sadly, the number of jobs continues to shrink.  The competition for good jobs has become absolutely crazy.

Only 66.8% of American men had a job last year.  That was the lowest level that has ever been recorded in all of U.S. history.

So why is this happening?  Well, there are a lot of reasons, but as I have written about previously, the fact that millions of our jobs are being shipped overseas is a huge factor.

Without good jobs, an increasing number of Americans are being forced to turn to government assistance in order to survive.

Today, more than 44 million Americans are on food stamps.  In addition, government transfer payments now make up 18 percent of all personal income in the United States.

That is frightening.

Things have gotten so bad that now even Wal-Mart is warning that their customers are running out of money.

A large percentage of Wal-Mart customers are just surviving month to month and Wal-Mart has been noticing a huge drop off in sales towards the end of the month when their customers run out of cash.  The following is what the CEO of Wal-Mart had to say about this phenomenon recently….

“Purchases are really dropping off by the end of the month even more than last year.”

People are starting to get desperate.  When economic times get tough, crime tends to increase.  Sadly, as a report in USA Today recently noted, thefts of gasoline are increasing all over the nation.

We never had this kind of a problem back when a gallon of gas only was about a dollar a gallon.

Do you remember those days?

They weren’t that long ago.

Now it takes some people over a hundred dollars to fill up their gas tanks.

Our leaders keep promising that they know what is happening and that they are going to fix things, but most Americans are not buying it.  Many Americans are completely losing faith in the system altogether.

Our economic decline has been one of the things that has fueled the growth of the prepper movement.  Millions of Americans have decided that they want to start becoming independent of the system.  One recent article described what some residents of Colorado are doing to prepare, but the truth is that this phenomenon is happening all over the nation….

A Black Forest resident has erected a geodesic dome on her 5-acre spread to grow vegetables, keeps horses for emergency transportation, in case she can’t get gasoline for her car, and plans to acquire chickens and goats as food sources.

A husband and wife who have a cabin on 100 acres of secluded land in Park County have weaned their property from the electric grid, acquired a three-year food supply and taken other measures to become self-sufficient.

Of course the mainstream media loves to portray preppers as “crazies”, but as the U.S. economy continues to die it would be a bit crazy not to prepare.

No job is completely safe today.  Millions of Americans that assumed that their “good jobs” would always be there have had their lives shattered over the past couple of years.

There is nothing wrong with trying to become more self-sufficient.

Everyone should be thinking about either starting up a business or developing alternative sources of income.  Yes, it can be exhausting to work on a side business during evening and weekends, but the time for loafing is over.  Those that are going to make it through the times ahead are those that are going to be willing to work really hard.

People need to start thinking about becoming less dependent on “the system” however they can.  One way to insulate yourself against rising food prices is to learn how to grow your own food.

Even if you only have a very small amount of room you can still grow your own food.  For example, there is one family that is actually producing 6000 pounds of produce on just 1/10th of an acre right in the middle of Pasadena, California.

Just because we have lost some of the basic skills that previous generations possessed doesn’t mean that we can’t get them back.  Back during World War II, “victory gardens” enabled Americans to grow 40 percent of all the vegetables that they needed.  Those gardens greatly contributed to the war effort and helped Americans get through some very difficult times.

There are a lot of preppers out there that are totally out of debt, that own their own land, that are entirely off the electrical grid and that grow most of their own food.  Many Americans would look at such people as “crazies” but those preppers will be in a much better position than most people when the economy totally collapses.

Don’t wait until it is too late to prepare.  Millions of Americans are completely losing faith in our economic system.  People are smart.  They can see that we are living in the biggest debt bubble in the history of the world.  They can see that the guts of our economic infrastructure are being ripped out and shredded.  They can see that the number of people living in poverty continues to increase year after year.  They can see the the number of good jobs continues to decrease year after year.

When you see a horrible storm coming the rational thing to do is to prepare.  Just think about all of those tornadoes that ravaged the southeast U.S. the other day.  Most of the people directly in the path of those tornadoes did whatever they could to survive when they realized the twisters were about to hit.

Well, a horrific economic storm is coming.  Every American will be affected by this economic storm at least to some extent.  We all need to prepare while we still can.

American Hellholes

The U.S. economy is dying and we are heading for the next Great Depression.  The talking heads in the mainstream media love to spin the economic numbers around and around and they love to make it sound like the economy is improving, but the truth is that it doesn’t take a genius to see what is happening to the U.S. economic system.  All over the nation many of our greatest cities are being slowly but surely transformed into post-apocalyptic wastelands.  All over the mid-Atlantic, all along the Gulf coast, all throughout the “rust belt” and all over the entire state of California cities that once had incredibly vibrant economies are being turned into rotting, post-industrial hellholes. In many U.S. cities, the “real” rate of unemployment is over 30 percent. There are some communities that will start depressing you almost the moment that you drive into them. It is almost as if all of the hope has been sucked right out of those communities.  If you live in one of those American hellholes you know what I am talking about.  Sadly, it is not just a few cities that are becoming hellholes.  This is happening in the east, in the west, in the north and in the south.  America is literally being transformed right in front of our eyes.

If you still live in an area of the United States that is prosperous, do not mock the cities that you are about to read about.  The cold, hard reality of the matter is that economic decline and economic despair are spreading rapidly and they will come to your area soon enough.  Right now we are still talking about “American hellholes”, but if the long-term economic trends that are destroying this nation are not turned around eventually we will just be talking about one gigantic “American hellhole”.  In the end, no area of the country will completely escape the economic hell that is coming.

Let’s take a closer look at what is currently happening in some of the worst areas of the country….

Detroit, Michigan

In the city of Detroit today, there are over 33,000 abandoned houses, 70 schools are being permanently closed down, the mayor wants to bulldoze one-fourth of the city and you can literally buy a house for one dollar in the worst areas.

During the boom days of the 1950s, Detroit was a teeming metropolis of approximately 2 million people, but today the current population is less than half that.  The city of Detroit, once a shining example of middle class America, is now a rotting cesspool of economic decline and it actually saw its population decline by 25 percent during the decade that recently ended.  According to the U.S. Census Bureau, Detroit lost a resident every 22 minutes between the years of 2000 and 2010.

So why are people leaving Detroit so rapidly?

There simply are no jobs.

At the height of the economic downturn, the mayor of Detroit admitted that while the “official” unemployment rate in Detroit was about 27 percent, the “real” unemployment rate in his city was actually somewhere around 50 percent.

Since there are not enough jobs, that also means that not enough tax money is coming in.  Detroit is essentially insolvent at this point.

Detroit officials are trying to implement some austerity measures in a desperate attempt to get city finances under control.

For example, the state of Michigan recently granted approval to a plan that would shut down nearly half of the public schools in Detroit.  Under the plan, 70 schools will be closed and 72 will continue operating.

It has been estimated that the remaining public schools will have class sizes of up to 60 students.

Detroit Mayor Dave Bing also wants to cut off 20 percent of the entire city from police and trash services in order to save money.

Essentially that would mean abandoning 20 percent of the city of Detroit to the gangs and to the homeless.

The mayor of Detroit has also discussed a plan in which authorities would bulldoze one-fourth of the city in order to save money on services.

So with all of this going on, is Detroit a pleasant place to live at this point?

No way.

Today, Detroit is considered to be the third most violent city in the United States.

In fact, crime has gotten so bad and the citizens are so frustrated by the lack of police assistance that they have resorted to forming their own organizations to fight back.  One group, known as “Detroit 300”, was formed after a 90-year-old woman on Detroit’s northwest side was brutally raped in August.

If you want to see what the future of America looks like, just take a few hours and go driving through Detroit some time.  But please only do this during the day.  Do not do this at night.  Detroit is not a safe place anymore, and you cannot count on the police to help you in a timely manner.

Detroit was once one of the greatest cities in the world.

But today it is an absolute hellhole.

Camden, New Jersey

So is there any place in America that is worse than Detroit?

Well, many would nominate Camden, New Jersey.

Many years ago, Camden was actually thriving and prosperous.  But today the city of Camden is known as “the second most dangerous city in America”.

In a recent article entitled “City of Ruins“, Chris Hedges did an amazing job of documenting the horrific decline of Camden.  Hedges estimates that the real rate of unemployment in Camden is somewhere around 30 to 40 percent, and he makes it sound like nobody in their right mind would want to live there now….

Camden is where those discarded as human refuse are dumped, along with the physical refuse of postindustrial America. A sprawling sewage treatment plant on forty acres of riverfront land processes 58 million gallons of wastewater a day for Camden County. The stench of sewage lingers in the streets. There is a huge trash-burning plant that releases noxious clouds, a prison, a massive cement plant and mountains of scrap metal feeding into a giant shredder. The city is scarred with several thousand decaying abandoned row houses; the skeletal remains of windowless brick factories and gutted gas stations; overgrown vacant lots filled with garbage and old tires; neglected, weed-filled cemeteries; and boarded-up store fronts.

Gangs have stepped into the gaping void left by industry.  In Camden today, drugs and prostitution are two of the only viable businesses left – especially for those who cannot find employment anywhere else.  The following is how Hedges describes the current state of affairs….

There are perhaps a hundred open-air drug markets, most run by gangs like the Bloods, the Latin Kings, Los Nietos and MS-13. Knots of young men in black leather jackets and baggy sweatshirts sell weed and crack to clients, many of whom drive in from the suburbs. The drug trade is one of the city’s few thriving businesses. A weapon, police say, is never more than a few feet away, usually stashed behind a trash can, in the grass or on a porch.

But before we all start judging Camden for being such a horrible place to live, it is important to realize that this is happening in communities from coast to coast.  All over the United States industries are leaving and deep social decay is setting in.

Even the criminals in Camden are struggling.  Things have gotten so bad in Camden, New Jersey that not even the drug dealers are spending their money anymore.

So where are the police?

Unfortunately, there is very little money for police.  Authorities in Camden recently decided to lay off half of the city police force.

So now the gangs and the drug dealers have more room to operate.

Sadly, this is not just happening in Camden.  It is happening all over New Jersey.

Of 315 municipalities the New Jersey State Police union recently surveyed, more than half indicated that they were planning to lay off police officers.

So why doesn’t the state government step in and help out?

Well, the state of New Jersey is in such bad shape that they still are facing a $10 billion budget deficit for this year even after cutting a billion dollars from the education budget and laying off thousands of teachers.

New Jersey also has $46 billion in unfunded pension liabilities and $65 billion in unfunded health care liabilities.  Nobody is quite sure how New Jersey is even going to come close to meeting those obligations.

Meanwhile, cities like Camden are rotting a little bit more every single day.

New Orleans, Louisiana

New Orleans had a struggling economy even before Hurricane Katrina struck back in 2005.  But that event changed everything.  It is now almost 6 years later and virtually the entire region is still a disaster zone.

New Orleans permanently lost 29% of its population after Hurricane Katrina.  There are many areas of New Orleans that still look as if they have just been bombed.

21.5 percent of all houses in New Orleans, Louisiana are currently standing vacant.  Many of those homes will never be inhabited again.

What made things even worse for New Orleans (and for residents all along the Gulf coast) was the horrific BP oil spill last year.  The mainstream news does not talk about the oil spill much anymore, but those living in the area have to deal with the effects every single day.

Some of the industries in the Gulf region were really starting to recover from Hurricane Katrina but the BP oil spill put a stop to that.

Before the oil spill, Louisiana produced more fish and seafood than anywhere in the United States except for Alaska.  But now the seafood industry has been absolutely devastated.  It has been estimated that the cost of the BP oil spill to the fishing industry in Louisiana alone could top 3 billion dollars.

Some local shrimpers in the region are projecting that it will be about seven years before they can set to sea again.

New Orleans keeps trying to bounce back from all of these disasters, but times are tough down there.

Today, New Orleans is the 13th most violent city in America.  That is actually an improvement.  Before Katrina New Orleans had even more violent crime.

The truth is that other areas along the Gulf coast are doing a lot worse than New Orleans is doing.  A ton of big corporate money has flowed into New Orleans.  Officials are trying to clean up the city and make it a huge tourist destination once again.

But in the surrounding areas things are not looking so bright.  There are areas along the coasts of Louisiana, Mississippi, Alabama and the panhandle of Florida that are some of the most depressing places in the nation.

It is almost as if there are hundreds of thousands of people that time forgot.  In some rural areas along the Gulf coast the poverty is absolutely mind blowing.  There are very few jobs and there is very little hope.  Meanwhile, large numbers of people in the region continue to get sick from the toxic dispersants used to clean up the oil spill.

Let us hope that we don’t see another major disaster in the Gulf of Mexico any time soon.  As it is, it is going to take decades for that region to fully recover.  There are a lot of really good people that live down there, and they deserve our prayers.

Vallejo, California (And Virtually The Rest Of The State Of California)

Almost the entire state of California is an economic disaster zone. Austerity measures are being implemented in city after city as tax revenues have nosedived.

The following is an excerpt from a recent New York Times article that describes the brutal austerity that has been implemented in Vallejo, California….

Vallejo is still in bankruptcy. The police force has shrunk from 153 officers to 92. Calls for any but the most serious crimes go unanswered. Residents who complain about prostitutes or vandals are told to fill out a form. Three of the city’s firehouses were closed. Last summer, a fire ravaged a house in one of the city’s better neighborhoods; one of the firetrucks came from another town, 15 miles away. Is this America’s future?

Sadly, that is what the future of America is going to look like.  Public services are being slashed all over the nation due to budget crunches.

Unless there is a major jobs recovery, the situation in California is going to continue to degenerate.  The truth is that the state of California needs millions and millions of new jobs just to get back to “normal”.  For example, near the end of last year it was reported that 24.3 percent of the residents of El Centro, California were unemployed.  Not only that, as of the end of last year the number of people unemployed in the state of California was approximately equivalent to the entire populations of Nevada, New Hampshire and Vermont combined.

Businesses are closing in California at an astounding pace.  At one point last year it was reported that in the area around Sacramento, California there was one closed business for every six that were still open.

As a result of all of this, home prices in many areas of California have completely fallen off a cliff.  For example, the average home in Merced, California has declined in value by 63 percent over the past four years.

California also had more foreclosure filings that any other U.S. state in 2010.  The 546,669 total foreclosure filings during the year means that over 4 percent of all the housing units in the state of California received a foreclosure filing at some point during 2010.

Sadly, things don’t look like they are going to turn around in California any time soon.  Forbes recently compiled a list entitled “Cities Where The Economy May Get Worse“.

Six of the top seven spots were held by cities in California.

California is becoming a very frightening place.  When you combine high unemployment with unchecked illegal immigration what you get is rampant poverty.

20 percent of the residents of Los Angeles County are now receiving public aid of one form or another.

In particular, the number of children that are considered to be in need of public assistance is truly scary.

Incredibly, 60 percent of all the students attending California public schools now qualify for free or reduced-price school lunches.

Poverty and illegal immigration have also caused a tremendous health care crisis in the state.  The hordes of illegal aliens taking advantage of “free” medical care at hospital emergency rooms have caused dozens of hospitals across the state of California to completely shut down.  As a result, the state of California now ranks dead last out of all 50 states in the number of emergency rooms per million people.

The bozos in Sacramento keep passing hundreds of new laws in an attempt to “fix” the state, but the truth is that for the poorest residents of the state all of those new laws don’t make a shred of difference.

The following is how Victor Davis Hansen describes what he saw during his recent tour of the “forgotten areas of central California”….

Many of the rural trailer-house compounds I saw appear to the naked eye no different from what I have seen in the Third World . There is a Caribbean look to the junked cars, electric wires crisscrossing between various outbuildings, plastic tarps substituting for replacement shingles, lean-tos cobbled together as auxiliary housing, pit bulls unleashed, and geese, goats, and chickens roaming around the yards. The public hears about all sorts of tough California regulations that stymie business – rigid zoning laws, strict building codes, constant inspections – but apparently none of that applies out here.

Hansen also says that he observed that people in these areas are doing whatever they can to get by….

At crossroads, peddlers in a counter-California economy sell almost anything. Here is what I noticed at an intersection on the west side last week: shovels, rakes, hoes, gas pumps, lawnmowers, edgers, blowers, jackets, gloves, and caps. The merchandise was all new. I doubt whether in high-tax California sales taxes or income taxes were paid on any of these stop-and-go transactions.

In two supermarkets 50 miles apart, I was the only one in line who did not pay with a social-service plastic card (gone are the days when “food stamps” were embarrassing bulky coupons).

Are you frightened yet?

You know what they say – “as goes California, so goes the nation”.

What is happening in California now is eventually going to come to your area.

Right now California is also having a huge problem with gangs.  Gang violence in America is getting totally out of control.  According to authorities, there are now over 1 million members of criminal gangs operating inside the country, and those gangs are responsible for up to 80% of the violent crimes committed in the U.S. each year.

But instead of ramping up to fight crime and fight illegal immigration, police forces all over California are being cut back.

For example, because of extreme budget cuts and police layoffs, Oakland, California Police Chief Anthony Batts has announced that there are a number of crimes that his department simply will no longer respond to due to a lack of resources.  The following is a partial list of the crimes that police officers in Oakland will no longer be responding to….

  • burglary
  • theft
  • embezzlement
  • grand theft
  • grand theft: dog
  • identity theft
  • false information to peace officer
  • required to register as sex or arson offender
  • dump waste or offensive matter
  • loud music
  • possess forged notes
  • pass fictitious check
  • obtain money by false voucher
  • fraudulent use of access cards
  • stolen license plate
  • embezzlement by an employee
  • extortion
  • attempted extortion
  • false personification of other
  • injure telephone/power line
  • interfere with power line
  • unauthorized cable tv connection
  • vandalism

Not that Oakland wasn’t already a mess before all this, but now how long do you think it will be before total chaos and anarchy reigns on the streets of Oakland?

Today, Oakland is considered the 5th most violent city in the United States.

Will it soon become the most violent?

But Oakland is not the only major California city that is facing these kinds of issues.

Things have gotten so bad in Stockton, California that the police union put up a billboard with the following message: “Welcome to the 2nd most dangerous city in California. Stop laying off cops.”

Already the police force in Stockton has been stripped down to almost nothing.

A while back, the Stockton Police Department dropped this bombshell….

“We absolutely do not have any narcotics officers, narcotics sergeants working any kind of investigative narcotics type cases at this point in time.”

Do you think drug dealers will be flocking to Stockton after they hear that?

California was once the envy of the world.

Now it is becoming one gigantic hellhole.

During one recent 23 year period, the state of California built 23 prisons but just one university.

So is there any hope for California?

No, unfortunately there is not.

In another article, I wrote about some of the reasons why millions of people have been leaving California for good….

Meanwhile, the standard of living in California is going right into the toilet.  Housing values are plummeting.  Unemployment has risen above 20 percent in many areas of the state.  Crime and gang activity is on the rise even as police budgets are being hacked to the bone.  The health care system is an absolute disaster.  At this point California has the fewest emergency rooms per million people out of all 50 states.   While all of this has been going on, the state legislature in Sacramento has been very busy passing hundreds of new laws that are mostly about promoting one radical agenda or another.  The state government has become so radically anti-business that it is a wonder that any businesses have remained in the state.  It seems like the moving vans never stop as an endless parade of businesses and families leave California as quickly as they can.

But this is not just a “California thing”.  The truth is that what is happening in California, in Detroit, in Camden and in hundreds of other communities is also going to happen where you live.

The U.S. economy is slowly dying. Only 66.8% of American men had a job last year.  That was the lowest level that has ever been recorded in U.S. history.

People are getting desperate.  There are ten percent fewer middle class jobs than there were a decade ago and the competition for good jobs has become insane.  More than 44 million Americans are now on food stamps and that number grows every single month.  Millions more American families fall into poverty every single year.

It is time to face the truth about what is happening to America.  Our economy is not growing and becoming stronger.  Rather, the cold, hard reality of the matter is that our economy is very sick and it is dying.  The seemingly boundless prosperity that we have enjoyed for decade after decade is coming to an end.  Our communities are being transformed into absolute hellholes.

Those that are telling you that the U.S. economy will soon be better than ever are lying to you.  The U.S. economy is going to go down and it is going to go down hard.

You better get ready.

10 Practical Steps That You Can Take To Insulate Yourself (At Least Somewhat) From The Coming Economic Collapse

Most Americans are still operating under the delusion that this “recession” will end and that the “good times” will return soon, but a growing minority of Americans are starting to realize that things are fundamentally changing and that they better start preparing for what is ahead. These “preppers” come from all over the political spectrum and from every age group.  More than at any other time in modern history, the American people lack faith in the U.S. economic system.  In dozens of previous columns, I have detailed the horrific economic problems that we are now facing in excruciating detail.  Many readers have started to complain that all I do is “scare” people and that I don’t provide any practical solutions.  Well, not everyone can move to Montana and start a llama farm, but hopefully this article will give people some practical steps that they can take to insulate themselves (at least to an extent) from the coming economic collapse.

But before I get into what people need to do, let’s take a minute to understand just how bad things are getting out there.  The economic numbers in the headlines go up and down and it can all be very confusing to most Americans.

However, there are two long-term trends that are very clear and that anyone can understand….

#1) The United States is getting poorer and is bleeding jobs every single month.

#2) The United States is getting into more debt every single month.

When you mention the trade deficit, most Americans roll their eyes and stop listening.  But that is a huge mistake, because the trade deficit is absolutely central to our problems.

Every single month, Americans buy far, far more from the rest of the world than they buy from us.  Every single month tens of billions of dollars more goes out of the country than comes into it.

That means that every single month the United States is getting poorer.

The excess goods and services that we buy from the rest of the world get “consumed” and the rest of the world ends up with more money than when they started.

Each year, hundreds of billions of dollars leave the United States and don’t return.  The transfer of wealth that this represents is astounding.

But not only are we bleeding wealth, we are also bleeding jobs every single month.

The millions of jobs that the U.S. economy is losing to China, India and dozens of third world nations are not going to come back.  Middle class Americans have been placed in direct competition for jobs with workers on the other side of the world who are more than happy to work for little more than slave labor wages.  Until this changes the U.S. economy is going to continue to hemorrhage jobs.

The U.S. government has helped to mask much of this economic bleeding by unprecedented amounts of government spending and debt, but now the U.S. national debt exceeds 13 trillion dollars and is getting worse every single month.  Not only that, but state and local governments all over America are getting into ridiculous amounts of debt.

So, what we have got is a country that gets poorer every single month and loses jobs to other countries every single month and that has accumulated the biggest mountain of debt in the history of the world which also gets worse every single month.

Needless to say, this cannot last indefinitely.  Eventually the whole thing is just going to collapse like a house of cards.

So what can we each individually do to somewhat insulate ourselves from the economic problems that are coming?….

1 – Get Out Of Debt: The old saying, “the borrower is the servant of the lender”, is so incredibly true.  The key to insulating yourself from an economic meltdown is to become as independent as possible, and as long as you are in debt, you simply are not independent.  You don’t want a horde of creditors chasing after you when things really start to get bad out there.

2 – Find New Sources Of Income: In 2010, there simply is not such a thing as job security.  If you are dependent on a job (“just over broke”) for 100% of your income, you are in a very bad position.  There are thousands of different ways to make extra money.  What you don’t want to do is to have all of your eggs in one basket.  One day when the economy melts down and you are out of a job are you going to be destitute or are you going to be okay?

3 – Reduce Your Expenses: Many Americans have left the rat race and have found ways to live on half or even on a quarter of what they were making previously.  It is possible – if you are willing to reduce your expenses.  In the future times are going to be tougher, so learn to start living with less today.

4 – Learn To Grow Your Own Food: Today the vast majority of Americans are completely dependent on being able to run down to the supermarket or to the local Wal-Mart to buy food.  But what happens when the U.S. dollar declines dramatically in value and it costs ten bucks to buy a loaf of bread?  If you learn to grow your own food (even if is just a small garden) you will be insulating yourself against rising food prices.  Storing up freeze dried food can also be a great way to prepare for what is coming.

5 – Make Sure You Have A Reliable Water Supply: Water shortages are popping up all over the globe.  Water is quickly becoming one of the “hottest” commodities out there.  Even in the United States, water shortages have been making headline news recently.  As we move into the future, it will be imperative for you and your family to have a reliable source of water.  Some Americans have learned to collect rainwater and many others are using advanced technology such as atmospheric water generators to provide water for their families.  But whatever you do, make sure that you are not caught without a decent source of water in the years ahead.

6 – Buy Land: This is a tough one, because prices are still quite high.  However, as we have written previously, home prices are going to be declining over the coming months, and eventually there are going to be some really great deals out there.  The truth is that you don’t want to wait too long either, because once Helicopter Ben Bernanke’s inflationary policies totally tank the value of the U.S. dollar, the price of everything (including land) is going to go sky high.  If you are able to buy land when prices are low, that is going to insulate you a great deal from the rising housing costs that will occur when the U.S dollar does totally go into the tank.

7 – Get Off The Grid: An increasing number of Americans are going “off the grid”.  Essentially what that means is that they are attempting to operate independently of the utility companies.  In particular, going “off the grid” will enable you to insulate yourself from the rapidly rising energy prices that we are going to see in the future.  If you are able to produce energy for your own home, you won’t be freaking out like your neighbors are when electricity prices triple someday.

8 – Store Non-Perishable Supplies: Non-perishable supplies are one investment that is sure to go up in value.  Not that you would resell them.  You store up non-perishable supplies because you are going to need them someday.  So why not stock up on the things that you are going to need now before they double or triple in price in the future?  Your money is not ever going to stretch any farther than it does right now.

9 – Develop Stronger Relationships: Americans have become very insular creatures.  We act like we don’t need anyone or anything.  But the truth is that as the economy melts down we are going to need each other.  It is those that are developing strong relationships with family and friends right now that will be able to depend on them when times get hard.

10 – Get Educated And Stay Flexible: When times are stable, it is not that important to be informed because things pretty much stay the same.  However, when things are rapidly changing it is imperative to get educated and to stay informed so that you will know what to do.  The times ahead are going to require us all to be very flexible, and it is those who are willing to adapt that will do the best when things get tough.

Do you have any additional tips that you would like to share with us?  If so, please feel free to share them in the comments below….


The Depression Of 2011? 23 Economic Warning Signs From Financial Authorities All Over The Globe

Could the world economy be headed for a depression in 2011?  As inconceivable as that may seem to a lot of people, the truth is that top economists and governmental authorities all over the globe say that the economic warning signs are there and that we need to start paying attention to them.  The two primary ingredients for a depression are debt and fear, and the reality is that we have both of them in abundance in the financial world today.  In response to the global financial meltdown of 2007 and 2008, governments around the world spent unprecedented amounts of money and got into a ton of debt.  All of that spending did help bail out the global banking system, but now that an increasing number of governments around the world are in need of bailouts themselves, what is going to happen?  We have already seen the fear that is generated when one small little nation like Greece even hints at defaulting.  When it becomes apparent that quite a few governments around the globe cannot handle their debt burdens, what kind of shockwave is that going to send through financial markets?

The truth is that we are facing the greatest sovereign debt crisis in modern history.  There is no way out of this financial mess that does not include a significant amount of economic pain.

When you add mountains of debt to paralyzing fear to strict austerity measures, what do you get?

What you get is deflationary pressure and financial markets that seize up.

Some of the top financial authorities in the world are warning us that unless something substantial is done, that is exactly what we are going to be seeing as 2010 turns into 2011.

Of course some governments around the world could try to put these economic problems off for a while by printing and borrowing even more money, but we all know by now that only makes the long-term problems even worse.

For now, however, it seems as though most governments are opting for the austerity measures that the IMF seems determined to cram down the throats of everyone.

So what will austerity measures mean for the global economy?

Think “stimulus” in reverse.

Yes, things are going to get messy.

It looks like there is going to be a great deal of economic fear and a great deal of economic pain in 2011 and the years beyond that.

So are we headed for “the depression of 2011”?

Well, let’s hear what some of the top financial experts in the world have to say….

#1) Economist Nouriel Roubini:

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

#2) Bank of England Governor Mervyn King:

“Dealing with a banking crisis was difficult enough, but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there’s no backstop.”

#3) German Chancellor Angela Merkel:

“The current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957.”

#4) Paul Donovan, the Senior Economist at UBS:

“Now people are questioning if the euro will even exist in three years.”

#5) Michael Pento, Chief Economist at Delta Global Advisors:

“The crisis in Greece is going to spread to Spain and it’s going to be very difficult to deal with. They are bailing out debt with more debt and it isn’t sustainable. It’s a wonderful scenario for gold.”

#6) LEAP/E2020:

“LEAP/E2020 believes that the global systemic crisis will experience a new tipping point from Spring 2010. Indeed, at that time, the public finances of the major Western countries are going to become unmanageable, as it will simultaneously become clear that new support measures for the economy are needed because of the failure of the various stimuli in 2009, and that the size of budget deficits preclude any significant new expenditures.”

#7) Telegraph Columnist Edmund Conway:

“Whatever yardstick you care to choose – share-price moves, the rates at which banks lend to each other, measures of volatility – we are now in a similar position to 2008.”

#8) Peter Morici, an Economics Professor at the University of Maryland:

“The next financial tsunami is emerging and will ripple to America.”

#9) Bob Chapman of the International Forecaster:

“The green shoots of recovery have now turned into poison ivy. The abyss has again been filled with more debt and more fiat currency. In the process the Fed and now the ECB have lost all credibility.”

#10) Telegraph Columnist Ambrose Evans-Pritchard:

“The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.”

#11) Professor Tim Congdon from International Monetary Research:

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

#12) Reuters Columnist Iliana Jonas:

“The default rate for commercial mortgages held by banks in the first quarter hit its highest level since at least 1992 and is expected to surpass that by year-end and peak in 2011, according to a study by Real Capital Analytics.”

#13) Paul Krugman, a Nobel Prize-winning Economist:

“It’s not hard to see Japan-style deflation emerging if the economy stays weak.”

#14) Stan Humphries, Chief Economist for Zillow.com:

“Anyone expecting a robust rebound in the housing market … will be sorely disappointed.”

#15) Fox News:

“As the national debt clock ticked past the ignominious $13 trillion mark overnight, Congress pressed to pass a host of supplemental spending bills.”

#16) Bloomberg:

“The U.S. government’s Aaa bond rating will come under pressure in the future unless additional measures are taken to reduce projected record budget deficits, according to Moody’s Investors Service Inc.”

#17) Peter Schiff:

“When creditors ultimately decide to curtail loans to America, U.S. interest rates will finally spike, and we will be confronted with even more difficult choices than those now facing Greece. Given the short maturity of our national debt, a jump in short-term rates would either result in default or massive austerity. If we choose neither, and opt to print money instead, the run-a-way inflation that will ensue will produce an even greater austerity than the one our leaders lacked the courage to impose. Those who believe rates will never rise as long as the Fed remains accommodative, or that inflation will not flare up as long as unemployment remains high, are just as foolish as those who assured us that the mortgage market was sound because national real estate prices could never fall.”

#18) The National League of Cities:

“City budget shortfalls will become more severe over the next two years as tax collections catch up with economic conditions.  These will inevitably result in new rounds of layoffs, service cuts, and canceled projects and contracts.”

#19) Dan Domenech, Executive Director of the American Association of School Administrators:

“Faced with continued budgetary constraints, school leaders across the nation are forced to consider an unprecedented level of layoffs that would negatively impact economic recovery and deal a devastating blow to public education.”

#20) Mike Whitney:

“Without another boost of stimulus, the economy will lapse back into recession sometime by the end of 2010.”

#21) Kevin Giddis, Managing Director of Fixed Income at Morgan Keegan:

“There is big money making big bets that at a minimum we we’ll have a recession if not a depression that could last for years.”

#22) John P. Hussman, Ph.D.:

“In my estimation, there is still close to an 80% probability (Bayes’ Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we’ve observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle.”

#23) Richard Russell, the Famous Author of the Dow Theory Letters:

“Do your friends a favor. Tell them to “batten down the hatches” because there’s a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don’t need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country. They’ll retort, “How the dickens does Russell know — who told him?” Tell them the stock market told him.”

“Things Are Never Going To Get THAT Bad”

Our recent article, “20 Things You Will Need To Survive When The Economy Collapses And The Next Great Depression Begins“, has drawn some intense criticism from those who believe that the U.S. economy is so strong that it could never completely and totally collapse.  In fact, this blog is being accused of officially going off the deep end.  Why?  It’s not because we are pointing out that the economy is bad.  After all, according to a recent Pew Research national poll, 88 percent of Americans rate national economic conditions as only fair or poor.  No, rather it is because we are projecting the eventual complete and total collapse of the U.S. economy.  There still seems to be a belief among a large number of Americans “that things are never going to get THAT bad”.  But they are going to get that bad.  It’s just that most people do not realize it yet.

But while times are still good (and what we are experiencing now is rip-roaring prosperity compared to what is coming), large numbers of people are going to continue to live in denial.  In fact, those who try to warn people about what is coming are going to be accused of “fear-mongering”.  One recent commenter even accused us of totally going off the deep end like many of the Y2K alarmists did….

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“Ok – you’ve officially fallen off the deep end. This blog went from legitimate economic concerns to grand fear mongering. This is the same as Y2K all over again. I have friends who still have bunkers and thousands of dollars of expired canned food and you’re suggesting they go do it again…”

—-

First of all, it was completely and totally obvious that Y2K was going to be a non-event to anyone with a bit of common sense.  There was simply no way that a “computer glitch” that was foreseeable years ahead of time was going to cause the collapse of society.

What is happening with the U.S. economy now is completely different.  We have built an entire economic system on ever-increasing amounts of debt and paper money, and anyone with half a brain should be able to see that such a system is not sustainable in the long-term.  The collapse of the economy is inevitable due to the way that it was constructed.

As for having “thousands of dollars of expired canned food”, that would not be a problem if you rotated the food that you have stored.  You eat the old stuff first and you replace it with new food that you have purchased.

But the commenter above was not the only one to accuse us of trying to scare people….

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“How does the economic collapse lead to a complete halt to all economic activity? More people may be poorer, but they will still have some money to motivate others to produce for a market. The natural disaster scenario seems more plausible for this type of warning. More and more foreclosures don’t. This posting is a bit much for me, seems just some much scaremongering.”

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The commenter is right about one thing – a few bad economic statistics are not enough to run out and start preparing for the collapse of society.  After all, the American economy has always recovered no matter what happened before.  If we made it through the Great Depression, we can make it through this, right?

Well, the truth is that there are some fundamental differences between what is happening now and what happened during the Great Depression.

During the Great Depression, most Americans were not up to their eyeballs in credit card debt, car payments, student loans and mortgage debt.

During the Great Depression, most Americans either owned their land or had a great deal of equity in their land.  As we wrote about recently, today that is not the case.  Equity as a percentage of home value in the United States has been hitting all-time record lows.

During the Great Depression, most Americans were not dependent on giant corporations to feed and supply us.  Back then, the majority of Americans knew how to live off the land and grew at least some of their own food.  Today that is most definitely not the case.

During the Great Depression, America still had the greatest manufacturing base in the entire world.  Today we have “offshored” our once great manufacturing base, and we have become a fat, spoiled society that consumes everything in sight but manufactures very little.

During the Great Depression, America did not have a colossal trade deficit.  Today we have got the biggest trade deficit in the history of the world.

During the Great Depression, the wealth of Americans was not being sucked dry by dozens of different kinds of taxes.  Today we are being taxed in so many various ways that many Americans actually end up spending over half their incomes just in taxes.

During the Great Depression, the U.S. government had debt, but it was not threatening to collapse the entire global economy.  Today the U.S. government has piled up the biggest mountain of debt in the history of the world.

During the Great Depression, derivatives were not even an issue.  Today, we have created a derivatives bubble that is now well beyond a quadrillion dollars.

Just think about that.

Over 1,000,000,000,000,000 dollars.

Counting at one dollar per second, it would take 32 million years to count to one quadrillion.

In fact, renowned investor Warren Buffett has warned that derivatives are “financial weapons of mass destruction” that could bring down the entire world economic system.

And he is right.

When derivatives collapse, there is not enough money in the world to fix the mess that will be created.  All of the governments in the world working together would not be able to print money fast enough to even make a dent in the colossal wave of red ink that would be created.

The truth is that the U.S. economy (and the world economy for that matter) is teetering on top of a giant pyramid of debt and paper that is on the verge of coming down like a house of cards.

But if you do not want to believe this blog, perhaps you will listen to some of the top financial experts in the world who are also warning that a complete and total economic collapse is coming.

For example, Gerald Celente, the CEO of Trends Research Institute, is forecasting that we are going to see a devastating economic collapse by the year 2012.  It would be easy to dismiss him, except for the fact that he has a sterling track record of forecasts going back 3 decades, and he has appeared on almost all of the major news networks who have no problem relying on him as a source.  What Celente says is on the way for America is absolutely bone chilling….

But if you don’t want to listen to Celente, perhaps you will listen to Peter Schiff, the president of Euro Pacific Capital.  He accurately predicted the recent financial crisis, and he is also forecasting that a depression is on the way.  Schiff is convinced that we need to allow the current “Ponzi economy” to collapse so that something more substantial can arise from the ashes….

Jim Rogers is another financial expert that is forecasting a major economic collapse.  Jim Rogers was a co-founder of the Quantum Fund, and is a college professor, author, economic commentator, and creator of the Rogers International Commodities Index.  He says that civil unrest is on the way and that now is a good time to take up farming if you want to make it through what is coming….

The truth is that the vast majority of Americans have no idea just how vulnerable the U.S. economic system is.  A new Gallup poll has found that 44 percent of Americans believe that they could barely go a month before experiencing severe economic hardship if they lost their jobs.

How long could you go if you suddenly lost your job?

Right now the U.S. economy is being kept afloat by unprecedented U.S. government intervention and spending, but we all know that the U.S. government cannot keep spending money like it is water forever without very serious economic consequences.  To give you an idea of how desperate things have become, just check out the following graphic about the U.S. national debt that was featured in the Chicago Tribune….

Anyone who believes that such a tidal wave of red ink is sustainable please raise your hand.

The truth is that the U.S. economy is caught in a death spiral.

Already there are some areas of the United States that are literally dying.

For those who do not believe this fact, the following is a challenge for you….

Head down to Detroit and buy one of those houses that are on sale for less than a thousand dollars (in fact there have even been reports of some houses selling for a single dollar in Detroit), and try to live there for a month.

You will quickly learn what it is like to live in an area that is literally dying economically.

When people are hungry and they can’t get jobs they get desperate.

So far this year in Detroit, car thefts are up 83%, robberies are up 50%, burglaries are up 20% and property destruction is up 42%.

What is happening in Detroit is a preview of what is soon going to happen all over America.

So doubt it all you want, but all the doubting in the world is not going to stop what is coming.  The U.S. economy is dying so you better start getting ready.

The Prep Room

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