Economic

The Economic Depression In Greece Deepens As Tsipras Prepares To Deliver ‘The Great No’

June 17, 2015 by Michael

As Greece plunges even deeper into economic chaos, Greek Prime Minister Alexis Tsipras says that his government is prepared to respond to the demands of the EU and the IMF with “the great no” and that his party will accept responsibility for whatever consequences follow. Despite years of intervention from the rest of Europe, Greece is a bigger economic mess today than ever. Greek GDP has shrunk by 26 percent since 2008, the national debt to GDP ratio in Greece is up to a staggering 175 percent, and the unemployment rate is up above 25 percent. Greek stocks are crashing and Greek bond yields are shooting into the stratosphere. Meanwhile, the banking system is essentially on life support at this point. 400 million euros were pulled out of Greek banks on Monday alone. No matter what happens in the coming days, many believe that it is now only a matter of time before capital controls like we saw in Cyprus are imposed.

Over the past several months, there have been endless high level meetings over in Europe regarding this Greek crisis, but none of them have fixed anything. And even Jeroen Dijsselbloem admits that the odds of anything being accomplished during the meeting of eurozone finance ministers on Thursday is “very small”…

Some officials believe Thursday’s meeting of eurozone finance ministers will be perhaps the last chance to stop Greece sliding into default and towards leaving the euro.

However the president of the so-called Eurogroup, Jeroen Dijsselbloem, said the chance of an accord was “very small”.

And it is certainly not just Dijsselbloem that feels this way. At this point pretty much everyone is resigned to the fact that there is not going to be a deal any time soon. The following comes from Reuters…

“People are getting anxious on both sides. Athens expects Brussels to move. And Brussels expects Athens to move. And it’s stuck,” said a senior EU diplomat, who declined to be named.

“It’s very dangerous, and we may have an accident.”

EU officials insist that it is Greece that needs to back down, but the Greeks have no intention of backing down. Just consider the words of Greek Prime Minister Alexis Tsipras. He says that he is not afraid to deliver “the great no” to the rest of Europe…

Greek Prime Minister Alexis Tsipras said he’s ready to assume responsibility for the consequences of rejecting an unfair deal with creditors.

In a sign that he’s being taken at his word, officials from the Netherlands, Portugal and Germany said they were bracing for a breakdown in talks that could roil the currency bloc.

With a viable solution “the Greek government recently elected by the Greek people will bear the cost of carrying through,” Tsipras told reporters in Athens on Wednesday. Without one, “we will assume the responsibility to say ‘the great no’ to a continuation of the catastrophic policies.”

To me, that sounds like a man that is not going to back down. And to call it “the great no” is not an exaggeration at all. I think that he realizes that this “great no” will unleash financial chaos all over Europe.

For Greece, the consequences would likely be catastrophic. At least that is what the Bank of Greece thinks…

Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union. A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring.

All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership. From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South.

And no matter how confident the Germans appear to be right now, the truth is that a Greek debt default would be a complete and total nightmare for the rest of Europe as well. The euro would drop like a rock, stocks would crash all over Europe and bond yields would go crazy. And that is just for starters.

So we desperately need to see a deal. But with each passing day that seems less and less likely.

In fact, a Greek parliament committee on public debt just released a new report containing their preliminary findings. This report is not legally binding, but it does show the mood of the Greek parliament, and what this report says is absolutely stunning. It concluded that the Greek government is under absolutely no obligation to repay its debts. Just check out the following excerpt from the report…

All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.

In other words, what this report is saying is that the Greek government should never pay back any of this debt. That certainly is not going to sit well with the officials from the EU and the IMF.

And what happens if other financially troubled nations in the eurozone decide that their debts are “illegal” and “odious” as well?

Globally, there are more than 76 trillion dollars worth of bonds floating around out there, and the yields on those bonds are based on the assumption that they will always be paid off. If nations such as Greece start defaulting, that will throw the entire global financial system into a state of tremendous chaos.

Of course the Greek financial system is already in a state of tremendous chaos. At this point, many believe that it is just a matter of time before capital controls are imposed. This is something that I have warned about in the past. The following description of what capital controls in Greece may look like comes from Bloomberg…

No one knows the specifics for Greece, but here’s what happened in Cyprus: ATM withdrawals were capped at 300 euros a person per day. Transfers of more than 5,000 euros abroad were subject to approval by a special committee. Companies needed documents for each payment order, with approvals for over 200,000 euros determined by available liquidity. Parents couldn’t send children that were studying abroad more than 5,000 euros a quarter. Cypriots traveling abroad could carry no more than 1,000 euros with them. Termination of fixed-term deposits was prohibited, while payments with credit and debit cards were capped at 5,000 euros. Checks couldn’t be cashed.

Since most Greeks do not want to have their money trapped in the banks, they have been pulling out cash and hiding it at home at a record breaking pace. This is precisely what we would expect to see when a nation is on the verge of total financial collapse…

“Everybody’s doing it,” said Joanna Christofosaki, in front of a Eurobank cash dispenser in the leafy Athens neighbourhood of Kolonaki. “Our friends have all done it. Nobody wants their money to be worthless tomorrow. Nobody wants to be unable to get at it.”

A researcher in the archaeology department at the Academy of Athens, Christofosaki said she knew plenty of people who had “€10,000 somewhere at home” and plenty of others who chose to keep their stash at the office. Was she among them? “If I was, I certainly wouldn’t tell you.”

As I wrote about yesterday, I believe that this is the beginning of the next great European financial crisis.

Eventually, it will spread all over the planet.

Unfortunately, even though global debt levels have never been higher and the signs of the coming financial implosion are all around us, most people have been lulled into a false sense of security.

Most people just assume that everything is going to turn out okay somehow.

The second half of this year is going to be much different from the first half, but most people will not be convinced until everything starts completely falling apart.

By then, it may be far too late to do anything about it.

2 Things That Are Happening Right Now That Have Never Happened Outside Of A Recession

June 2, 2015June 2, 2015 by Michael

If we are not heading into a recession, why does our economy continue to act as if that is precisely what is happening? As you will see below, we learned this week that factory orders have declined year over year for six months in a row. That is something that has never happened outside of a time of recession. We have also seen new orders for consumer goods fall dramatically. In fact, the only time we have seen a more dramatic decline in that number was during the last recession. And when you add these two items to what I have written about previously, the overall economic picture becomes even more disturbing. Corporate profits have fallen for two quarters in a row, our exports fell by 7.6 percent during the first quarter of 2015, and U.S. GDP contracted by 0.7 percent during Q1. Even though Barack Obama and the mainstream media are willingly ignoring them, the truth is that these numbers are absolutely screaming that we are going into a new recession.

Sometimes, a picture is worth more than a thousand words, and I believe that is certainly the case with the chart that I have posted below. It comes from Zero Hedge, and it shows that factory orders have declined year over year for six months in a row. The only times when this has ever happened before have been when the U.S. economy has been in recession…

When we look at new orders for consumer goods, we see a similar thing happening. This next chart comes from Charles Hugh Smith, and it really doesn’t need much explanation…

Here is another chart from Charles Hugh Smith. This one shows the percentage change in new orders for consumer goods on a year over year basis…

These charts that I just shared with you are rather compelling. How anyone can see them and still believe that we are in an “economic recovery” is beyond me.

When the economy starts to turn, there are certain things that we look for. As I have written about over and over on my website, so many of the exact same patterns that we have seen emerge just prior to previous economic downturns are happening again right now.

Yes, the stock market is still sitting pretty for the moment. But almost everyone can see that it is massively overvalued and could start tanking at any time. And when the market does start crashing it is just going to cause our economic problems to accelerate even more.

Sadly, most Americans are totally oblivious to all of this.

Most Americans just continue to do the same things that they have always done. That includes going into ridiculous amounts of debt. For instance, this week we learned that the percentage of auto loans that are being stretched out for periods of greater than 6 years is at an all-time high…

The average new car loan has reached a record 67 months, reports Experian, the Ireland-based information-services company. The percentage of loans with terms of 73 to 84 months also reached a new high of 29.5% in the first quarter of 2015, up from 24.9% a year earlier.

Long-term used-vehicle loans also broke records with loan terms of 73 to 84 months reaching 16% in the first quarter 2015, up from 12.94% — also the highest on record.

But you know what?

Even though most Americans are being exceedingly foolish and are living paycheck to paycheck, that still isn’t good enough for the boys and girls on Wall Street.

Just consider the following excerpt from a recent Wall Street Journal piece entitled “A Letter To Stingy American Consumers”…

Do you know the American economy is counting on you? We can’t count on the rest of the world to spend money on our stuff. The rest of the world is in an even worse mood than you are. You should feel lucky you’re not a Greek consumer. And China, well they’re truly struggling there just to reach the very modest goal of 7% growth.

The Federal Reserve is counting on you too. Fed officials want to start raising the cost of your borrowing because they worry they’ve been giving you a free ride for too long with zero interest rates. We listen to Fed officials all of the time here at The Wall Street Journal, and they just can’t figure you out.

Please let us know the problem. You can reach us at any of the emails below.

Sincerely,

The Wall Street Journal’s Central Bank Team

-By Jon Hilsenrath

They just want all of us to keep borrowing and spending our way into oblivion. But of course when things do fall apart and millions of Americans can’t pay their debts, they will be there to foreclose on our homes and repossess our vehicles without any hesitation.

And when the next major economic downturn does strike, don’t expect the rest of the planet to feel sorry for us. We like to think that the rest of the world looks up to us, but the exact opposite is actually true. At this point, much of the globe is pointing fingers at us and mocking us. Just consider the following excerpt from an article that appeared in Pravda…

The land of illusion; the land of entertainment producing songs and movies to warp reality. People pretending to be something they are not. Likewise, Washington DC has people who pretend to represent the people’s interests. Pretending to bring hope and a change for the better. Pretending to bring unity and peace among all races. Lying through their teeth and laughing like clowns behind closed doors. Setting up a consumer based economy forcing the once mighty middle class to shrink and work at customer service jobs. “Ya want fries with that?“

It would be easy to dismiss that paragraph as “Russian propaganda”, but the cold, hard reality of the matter is that there is nothing in that quote that is not true.

They are mocking us, and they are dead on. We are the land of illusion. We do have a shrinking middle class. And we are definitely addicted to entertainment. If you doubt this, just check out what one study recently found…

If you weren’t reading this article, you would probably be scanning something else on the internet, watching TV, or maybe—just maybe—reading a newspaper or magazine. In short, you would be consuming media.

On average, people spend more than 490 minutes of their day with some sort of media, according to a new report by ZenithOptimedia. Television remains dominant, accounting for three hours of daily consumption—an hour more than the internet, in second place.

Other studies have actually discovered that the amount of time that Americans spend connected to media is even greater. This is something that I discussed in a previous article entitled “How Much Time Do Americans Spend Plugged Into The Matrix Every Day?”

For the moment, the mainstream media is assuring everyone that everything is going to be just fine and that they should go out and spend lots and lots of money.

But instead of spending your money on frivolous things like boats, electronic toys and expensive vacations, I believe that now is the time to get prepared for the great economic crisis which is currently starting to unfold.

Right now, I know that most people don’t actually believe that life in America is about to dramatically change.

So many of the things that people (including myself) have been warning about for so long are about to happen. Our politicians and national leaders have turned a deaf ear to all of the warnings and have continued to conduct business as usual. Soon, the error of their ways will be apparent to all.

We are heading into the greatest economic crisis in U.S. history, and there is going to be no coming back to the false, debt-fueled “prosperity” that we are enjoying today.

A Recession Within A Recession

May 29, 2015 by Michael

On Friday, the federal government announced that the U.S. economy contracted at a 0.7 percent annual rate during the first quarter of 2015. This unexpected shrinking of the economy is being primarily blamed on “harsh” weather during the first three months of this year and on the strengthening of the U.S. dollar. Most economists are confident that U.S. GDP will rebound back into positive territory when the numbers for the second quarter come out, but if that does not happen we will officially meet the government’s criteria for being in another “recession”. To make sure that the numbers for Q2 will look “acceptable”, the Bureau of Economic Analysis is about to change the way that it calculates GDP again. They are just going to keep “seasonally adjusting” the numbers until they get what they want. At this point, the government numbers are so full of “assumptions” and “estimates” that they don’t really bear much resemblance to reality anyway. In fact, John Williams of shadowstats.com has calculated that if the government was actually using honest numbers that they would show that we have continually been in a recession since 2005. That is why I am referring to this as a “recession within a recession”. Most people can look around and see that economic conditions for most Americans are not good, and now they are about to get even worse.

For quite a while I have been warning that another economic downturn was coming. Well, now we have official confirmation from the Obama administration that it is happening. The following is an excerpt from the statement that the Bureau of Economic Analysis released on Friday…

Real gross domestic product — the value of the production of goods and services in the United
States, adjusted for price changes — decreased at an annual rate of 0.7 percent in the first quarter of
2015, according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth
quarter, real GDP increased 2.2 percent.

The GDP estimate released today is based on more complete source data than were available for
the “advance” estimate issued last month. In the advance estimate, real GDP increased 0.2 percent.
With the second estimate for the first quarter, imports increased more and private inventory investment
increased less than previously estimated (for more information, see “Revisions” on page 3).

The decrease in real GDP in the first quarter primarily reflected negative contributions from
exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from personal consumption expenditures (PCE), private inventory investment, and residential fixed investment.

And actually, Q1 GDP would have been far worse if not for a very large inventory buildup. Without that inventory buildup, Q1 GDP would have been in the neighborhood of negative three percent according to Zero Hedge. Despite the happy face that most analysts are putting on these numbers, the truth is that they reveal some deeply troubling trends.

One of the things that is driving this current downturn is the fact that our trade balance continues to get even worse. In other words, the gap between how much we buy from the rest of the world and how much we sell to the rest of the world is growing.

During the first quarter, imports surged by 5.6 percent. That means that we are buying more from the rest of the planet than we did before.

Unfortunately, during the first quarter of this year exports dropped by a staggering 7.6 percent. That means that the amount of stuff that we are selling to the rest of the planet is falling precipitously.

When our trade deficit expands, we lose jobs, businesses and economic infrastructure at an even faster pace. This is why I write about trade issues so much. Our economy is being absolutely eviscerated, and the Obama administration is pushing another giant trade deal which will greatly accelerate this process.

We are committing national economic suicide by running colossal trade deficits year after year. But instead of addressing our problems, our “leaders” just continue to conduct business as usual.

And to make themselves look good, they just keep manipulating the numbers until they seem “reasonable”. As I mentioned above, the negative number for Q1 is causing a lot of consternation in Washington, so now the Bureau of Economic Analysis is going to modify the way that GDP is calculated once again. The following comes from Bloomberg…

The way some parts of U.S. gross domestic product are calculated are about to change in the wake of the debate over persistently depressed first-quarter growth.

In a blog post published Friday, the Bureau of Economic Analysis listed a series of alterations it will make in seasonally adjusting data used to calculate economic growth. The changes will be implemented with the release of the initial second-quarter GDP estimate on July 30, the BEA said.

Although the agency adjusts its figures for seasonal variations, growth in any given first quarter still tends to be weaker than in the remaining three, economists have found, a sign there may be some bias in the data. It’s a phenomenon economists call “residual seasonality.”

Why can’t they just give us honest numbers?

Meanwhile, we also learned on Friday that corporate profits declined again during the first quarter of 2015. This was the second quarter in a row that we have seen this happen. The following comes from CNS News…

The BEA report also released data on corporate profits, which showed a decrease from the previous quarter. ‘Profits from current production decreased $125.5 billion in the first quarter, compared with a decrease of $30.4 billion in the fourth,’ BEA said.

Can you guess the last time that corporate profits declined for two quarters in a row?

It was in 2008.

So many of the exact same red flags that popped up seven years ago are popping up once again.

I know that I must sound like a broken record, but right now there are more signals that another major economic downturn is approaching than there has been at any other time since I started The Economic Collapse Blog in 2009.

Hopefully this summer will be relatively quiet, but I fully expect for events to start accelerating significantly during the second half of this year.

So if you have things that you need to get done before the next crisis arrives, you better hurry up, because time is quickly running out.

Emergency Powers Give Barack Obama Authority Over Just About Everything During A Major National Crisis

May 27, 2015May 27, 2015 by Michael

Presidents have always exercised emergency powers, but now thanks to dozens of new laws, regulations, court decisions and executive orders, Barack Obama is the most powerful president in all of U.S. history. Of course the U.S. Constitution does not actually give the president any special powers during a time of national emergency, but over time presidents have decided that they should be able to exercise such powers and the courts have generally agreed with them. During World War II and prior to that, these emergency powers were largely uncodified and were primarily used during times of war. But since World War II things have completely changed, and this has particularly been true since 9/11. Over the past decade or so, a whole host of extraordinary powers have specifically been given to the office of the president, and all that it takes to exercise them is a major “national emergency”. So if we do have a full-blown economic collapse, a historic natural disaster, a significant war or a massive pandemic, Barack Obama could use the emergency powers that he has been given to essentially take authority over everything.

There is not a single document or series of documents that contain all of the emergency powers that Barack Obama could potentially wield during a major national emergency. As I mentioned above, these powers come from literally dozens of laws, regulations, court decisions and executive orders. But in this article I will discuss a few important documents. One of these is a presidential directive that was issued during the second term of George W. Bush. It is entitled NATIONAL SECURITY PRESIDENTIAL DIRECTIVE/NSPD – 51/HOMELAND SECURITY PRESIDENTIAL DIRECTIVE/HSPD – 20, and you can take a look at it on the FEMA website right here. This document is primarily concerned with the continuity of our federal government in the event of a catastrophic emergency. So precisely what would constitute a “catastrophic emergency”? The following is how the document defines that term…

“Catastrophic Emergency” means any incident, regardless of location, that results in extraordinary levels of mass casualties, damage, or disruption severely affecting the U.S. population, infrastructure, environment, economy, or government functions;

That sounds quite broad to me. It could apply to all sorts of scenarios.

If we do have such a “catastrophic emergency”, the president essentially becomes a dictator at that point. The document certainly talks about the need to ensure that “constitutional government” continues, but during the course of the emergency there really is not much of a role for the other two branches of government to play. Instead, the “shadow government” takes over under the overall command of the president. The following is a short excerpt from the document…

The President shall lead the activities of the Federal Government for ensuring constitutional government. In order to advise and assist the President in that function, the Assistant to the President for Homeland Security and Counterterrorism (APHS/CT) is hereby designated as the National Continuity Coordinator. The National Continuity Coordinator, in coordination with the Assistant to the President for National Security Affairs (APNSA), without exercising directive authority, shall coordinate the development and implementation of continuity policy for executive departments and agencies. The Continuity Policy Coordination Committee (CPCC), chaired by a Senior Director from the Homeland Security Council staff, designated by the National Continuity Coordinator, shall be the main day-to-day forum for such policy coordination.

Of course the 11 page document that we have on the FEMA website is just the tip of the iceberg when it comes to continuity of government planning. Unfortunately, most of the plans are top secret and are not allowed to be seen by the public. Astonishingly, this even applies to members of Congress. The following comes from Wikipedia…

On July 18, 2007, Rep. Peter DeFazio (D-OR), a member of the U.S. House Committee on Homeland Security, requested the classified and more detailed version of the government’s continuity of government plan in a letter signed by him and the chairperson of the House Homeland Committee, which is supposed to have access to confidential government information. The president refused to provide the information, to the surprise of the congressional committee.

Another document that raises a lot of red flags is an executive order entitled “National Defense Resources Preparedness” that was issued by Barack Obama on March 16th, 2012. This particular executive order updates previous executive orders, and it gives the president extraordinary authority during a time of national emergency. Below, I have posted most of section 201 of that executive order. As you can see, it potentially gives Barack Obama authority over just about everything during a time of national emergency if he feels it is needed for “national defense”…

Sec. 201. Priorities and Allocations Authorities. (a) The authority of the President conferred by section 101 of the Act, 50 U.S.C. App. 2071, to require acceptance and priority performance of contracts or orders (other than contracts of employment) to promote the national defense over performance of any other contracts or orders, and to allocate materials, services, and facilities as deemed necessary or appropriate to promote the national defense, is delegated to the following agency heads:

(1) the Secretary of Agriculture with respect to food resources, food resource facilities, livestock resources, veterinary resources, plant health resources, and the domestic distribution of farm equipment and commercial fertilizer;

(2) the Secretary of Energy with respect to all forms of energy;

(3) the Secretary of Health and Human Services with respect to health resources;

(4) the Secretary of Transportation with respect to all forms of civil transportation;

(5) the Secretary of Defense with respect to water resources; and

(6) the Secretary of Commerce with respect to all other materials, services, and facilities, including construction materials.

(b) The Secretary of each agency delegated authority under subsection (a) of this section (resource departments) shall plan for and issue regulations to prioritize and allocate resources and establish standards and procedures by which the authority shall be used to promote the national defense, under both emergency and non-emergency conditions. Each Secretary shall authorize the heads of other agencies, as appropriate, to place priority ratings on contracts and orders for materials, services, and facilities needed in support of programs approved under section 202 of this order.

A similar executive order regarding national communications was issued on July 6th, 2012.

But the powers that Barack Obama could potentially wield during a time of national emergency are not just limited to what is written down. This may shock many Americans, but it is true. In the past, presidents have used their “emergency powers” to suspend habeas corpus, to place American citizens in internment camps and to seize private property. The following comes from Wikipedia…

A claim of emergency powers was at the center of President Abraham Lincoln’s suspension of habeas corpus without Congressional approval in 1861. Lincoln claimed that the rebellion created an emergency that permitted him the extraordinary power of unilaterally suspending the writ. With Chief Justice Roger Taney sitting as judge, the Federal District Court of Maryland struck down the suspension in Ex Parte Merryman, although Lincoln ignored the order. 17 F. Cas. 144 (1861).

President Franklin Delano Roosevelt similarly invoked emergency powers when he issued an order directing that all Japanese Americans residing on the West Coast be placed into internment camps during World War II. The U.S. Supreme Court upheld this order in Korematsu v. United States. 323 U.S. 214 (1944).

Harry Truman declared the use of emergency powers when he seized private steel mills that failed to produce steel because of a labor strike in 1952. With the Korean War ongoing, Truman asserted that he could not wage war successfully if the economy failed to provide him with the material resources necessary to keep the troops well-equipped. The U.S. Supreme Court, however, refused to accept that argument in Youngstown Sheet & Tube Co. v. Sawyer, voting 6-3 that neither Commander in Chief powers nor any claimed emergency powers gave the President the authority to unilaterally seize private property without Congressional legislation. 343 U.S. 579.

And it is important to keep in mind that Barack Obama now possesses far more power than any of those presidents ever did. All it is going to take for him to exercise those powers is a major national emergency. This is something that Jim Powell discussed in an article for Forbes…

Not long after that, we found ourselves in an open-ended national emergency declared on September 14, 2001 and extended since by both George W. Bush and Barack Obama. This means the president has standby powers from hundreds of statutes that would enable him to re-introduce military conscription, seize private property and in myriad ways establish a government-run economy.

Thankfully, things are still somewhat stable for the moment so Obama does not have a reasonable excuse to use all of the powers that he has been given. But that could change at any time. If we do see a “catastrophic emergency” in the next year or so, there are very few limits on what Barack Obama would be able to do. That includes potentially postponing or suspending the 2016 election so that he can remain in office throughout the course of the national emergency.

We have never seen such a thing happen before, and hopefully we never will. And of course it isn’t just Barack Obama that we need to be concerned about. A future leader of this nation could potentially be even worse than him. It has been exceedingly foolish for us to give a single person so much power in the event of a “catastrophic emergency”, and in the end we may regret this bitterly.

Ultra-Secrecy Surrounds Barack Obama’s New Global Economic Treaty

May 5, 2015 by Michael

Barack Obama is secretly negotiating a global economic treaty which would destroy thousands of American businesses and millions of good paying American jobs. In other words, it would be the final nail in the coffin for America’s economic infrastructure. Obama knows that if the American people actually knew what was in this treaty that they would be screaming mad, so the negotiations are being done in secret. The only people that are allowed to look at the treaty are members of Congress, and even they are being banned from saying anything to the public. American workers are about to be brutally stabbed in the back, and thanks to all of this secrecy and paranoia they won’t even see it coming.

The name of this new treaty is “the Trans-Pacific Partnership”, and it is being touted as perhaps the most important trade agreement in history. But very few people in this country are talking about it, because none of us are allowed to see it. An article that was just released by Politico detailed the extreme secrecy that is surrounding this trade agreement…

If you want to hear the details of the Trans-Pacific Partnership trade deal the Obama administration is hoping to pass, you’ve got to be a member of Congress, and you’ve got to go to classified briefings and leave your staff and cellphone at the door.

If you’re a member who wants to read the text, you’ve got to go to a room in the basement of the Capitol Visitor Center and be handed it one section at a time, watched over as you read, and forced to hand over any notes you make before leaving.

And no matter what, you can’t discuss the details of what you’ve read.

This treaty is going to affect the lives of every man, woman and child living in this nation, and yet it is deemed so “important” that none of us can know what is in it?

Are you sure that we still live in a Republic?

This treaty will cover 40 percent of the global economy, and U.S. officials hope that the EU, China and India will become members eventually as well…

Right now, there are 12 countries that are part of the negotiations: the United States, Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. These nations have a combined population of 792 million people and account for an astounding 40 percent of the global economy. And it is hoped that the EU, China and India will eventually join as well. This is potentially the most dangerous economic treaty of our lifetimes, and yet there is very little political debate about it in this country.

If the EU, China and India did eventually join the treaty, that would essentially make it a trade agreement for the entire planet.

This is a really big deal, and it should be openly debated by the American people. But instead, Barack Obama has chosen to shroud the entire process with as much secrecy as possible. Not only that, he also wants Congress to give him fast track negotiating authority. If Congress does that, they would essentially be saying that they blindly trust Obama to negotiate a good treaty for us. At the end of the process, Congress would be able to vote the treaty up or down, but would not be able to amend it.

That sounds insane, right? Well, if you can believe it, Republicans in the Senate are quite eager to give Barack Obama this authority.

And this is not just an economic treaty. The following is an excerpt from one of my previous articles…

It is basically a gigantic end run around Congress. Thanks to leaks, we have learned that so many of the things that Obama has deeply wanted for years are in this treaty. If adopted, this treaty will fundamentally change our laws regarding Internet freedom, healthcare, copyright and patent protection, food safety, environmental standards, civil liberties and so much more. This treaty includes many of the rules that alarmed Internet activists so much when SOPA was being debated, it would essentially ban all “Buy American” laws, it would give Wall Street banks much more freedom to trade risky derivatives and it would force even more domestic manufacturing offshore.

We can’t consume our way to prosperity, and we can’t borrow and spend our way to prosperity. In order to be prosperous as a nation, we have got to create at least as much wealth as we consume. But instead, we are doing just the opposite. We are consuming wealth like mad even while our economic infrastructure is being absolutely gutted. We have lost thousands of businesses and millions of jobs already, and this new treaty will make things much worse.

And of course eventually even the ultra-cheap labor on the other side of the planet will be replaced. This is something that is already happening in China. Just today there was a news story about a new manufacturing facility in China that will use only robots…

Construction work has begun on the first factory in China’s manufacturing hub of Dongguan to use only robots for production, the official Xinhua news agency reported.

A total of 1,000 robots would be introduced at the factory initially, run by Shenzhen Evenwin Precision Technology Co, with the aim of reducing the current workforce of 1,800 by 90 percent to only about 200, Chen Xingqi, the chairman of the company’s board, was quoted as saying in the report.

The company did not give a figure for the investment in the factory, but said its production capacity could reach a value of 2 billion yuan (US$322 million) annually.

All of this is very bad news for American workers. Whether it is ultra-cheap labor on the other side of the globe or new technology, big corporations are constantly looking for ways to produce things less expensively.

But in order to have a middle class, we have got to have middle class jobs. The middle class in the United States is steadily disappearing, and neither political party seems very concerned about this at all.

Even without this new trade treaty, our trade deficit with the rest of the planet continues to grow even larger. We just learned that the monthly U.S. trade deficit for March rose to $51.4 billion. That was the largest monthly trade deficit since October 2008. If you will remember, in October 2008 we were experiencing the worst financial crisis since the days of the Great Depression.

And if you take oil out of the number, our trade deficit for the month of March would be the worst ever recorded.

Thank you Barack Obama. Your trade policies are really “working”.

Because the trade deficit was much worse than expected, that is going to push the GDP number for the first quarter into negative territory…

Greg Daco of Oxford Economics says he expects the wider than expected trade deficit to prompt the government to revise its estimate of 0.2% growth in U.S. gross domestic product for the first quarter to a 0.5% contraction.

That means that if we have another contraction in the second quarter, we will officially be in a recession.

In fact, we could be in a recession right now (according to the official government definition) and not even know it yet.

One of the biggest reasons why the U.S. economy has been struggling so much in recent years is due to our trade policies. If we had balanced trade with other nations, our cumulative economic growth since mid-2009 would have been nearly 20 percent higher…

Since rising trade balances subtract from economic growth, the increase in this real non-oil goods deficit has now cut cumulative U.S. economic growth after inflation by a stunning 19.49 percent since the recovery technically began in mid-2009.

Are you starting to see why I get so fired up about trade?

But instead of encouraging big corporations to do what is right for the American people, our system greatly rewards companies like Apple that proudly send jobs offshore. The following is an excerpt from an outstanding article by Andrew Zatlin…

Nine years, a trillion dollars in sales, and almost no taxes paid. That’s just the starting point for wondering about Apple’s actual contribution to the US economy.

Apple’s success drags down the US GDP. The behemoth that is Apple sold almost 200M phones last year, none of which were made in the US or used components made here. Instead of exporting $100B in iPhones, the US imported $50B. That $150B swing matters in terms of balance of trade, GDP and jobs. If you wanted to improve the US economy, there’s no better place to start than with Apple and smartphones.

Apple undermines the US manufacturing base. Assembly matters and manufacturing matters more. There was a time when Apple could have assembled phones and tablets in the US, but that would mean spending an extra $5 per phone since that’s approximately the extra labor cost to build that $700 phone here instead of in Vietnam or China. Assembly may not be a competitive, value-add step but it does employ a lot of people.

Unfortunately, it would also cut Apple’s profits by $1B, shrinking the company’s annual net income from $45B to $44B. Apple wouldn’t notice a drop in profits of $1B because it’s not putting its cash to use: Apple has $200B in cash conveniently parked outside of the US, not doing anything. On the other hand, assembling in the US would employ tens of thousands of people.

You can read the rest of that great article right here.

Our trade policies matter. Decades of incredibly foolish decisions have ripped our economic infrastructure to shreds, and we are slowly but steadily committing national economic suicide.

Now, Barack Obama is absolutely determined to deliver the finishing blow, and it is all being done in secret.

When are you going to wake up and start getting angry America?

Major U.S. Retailers Are Closing More Than 6,000 Stores

May 1, 2015 by Michael

If the U.S. economy really is improving, then why are big U.S. retailers permanently shutting down thousands of stores? The “retail apocalypse” that I have written about so frequently appears to be accelerating. As you will see below, major U.S. retailers have announced that they are closing more than 6,000 locations, but economic conditions in this country are still fairly stable. So if this is happening already, what are things going to look like once the next recession strikes? For a long time, I have been pointing to 2015 as a major “turning point” for the U.S. economy, and I still feel that way. And since I started The Economic Collapse Blog at the end of 2009, I have never seen as many indications that we are headed into another major economic downturn as I do right now. If retailers are closing this many stores already, what are our malls and shopping centers going to look like a few years from now?

The list below comes from information compiled by About.com, but I have only included major retailers that have announced plans to close at least 10 stores. Most of these closures will take place this year, but in some instances the closures are scheduled to be phased in over a number of years. As you can see, the number of stores that are being permanently shut down is absolutely staggering…

180 Abercrombie & Fitch (by 2015)

75 Aeropostale (through January 2015)

150 American Eagle Outfitters (through 2017)

223 Barnes & Noble (through 2023)

265 Body Central / Body Shop

66 Bottom Dollar Food

25 Build-A-Bear (through 2015)

32 C. Wonder

21 Cache

120 Chico’s (through 2017)

200 Children’s Place (through 2017)

17 Christopher & Banks

70 Coach (fiscal 2015)

70 Coco’s /Carrows

300 Deb Shops

92 Delia’s

340 Dollar Tree/Family Dollar

39 Einstein Bros. Bagels

50 Express (through 2015)

31 Frederick’s of Hollywood

50 Fresh & Easy Grocey Stores

14 Friendly’s

65 Future Shop (Best Buy Canada)

54 Golf Galaxy (by 2016)

50 Guess (through 2015)

26 Gymboree

40 JCPenney

127 Jones New York Outlet

10 Just Baked

28 Kate Spade Saturday & Jack Spade

14 Macy’s

400 Office Depot/Office Max (by 2016)

63 Pep Boys (“in the coming years”)

100 Pier One (by 2017)

20 Pick ’n Save (by 2017)

1,784 Radio Shack

13 Ruby Tuesday

77 Sears

10 SpartanNash Grocery Stores

55 Staples (2015)

133 Target, Canada (bankruptcy)

31 Tiger Direct

200 Walgreens (by 2017)

10 West Marine

338 Wet Seal

80 Wolverine World Wide (2015 – Stride Rite & Keds)

So why is this happening?

Without a doubt, Internet retailing is taking a huge toll on brick and mortar stores, and this is a trend that is not going to end any time soon.

But as Thad Beversdorf has pointed out, we have also seen a stunning decline in true discretionary consumer spending over the past six months…

What we find is that over the past 6 months we had a tremendous drop in true discretionary consumer spending. Within the overall downtrend we do see a bit of a rally in February but quite ominously that rally failed and the bottom absolutely fell out. Again the importance is it confirms the fundamental theory that consumer spending is showing the initial signs of a severe pull back. A worrying signal to be certain as we would expect this pull back to begin impacting other areas of consumer spending. The reason is that American consumers typically do not voluntarily pull back like that on spending but do so because they have run out of credit. And if credit is running thin it will surely be felt in all spending.

The truth is that middle class U.S. consumers are tapped out. Most families are just scraping by financially from month to month. For most Americans, there simply is not a whole lot of extra money left over to go shopping with these days.

In fact, at this point approximately one out of every four Americans spend at least half of their incomes just on rent…

More than one in four Americans are spending at least half of their family income on rent – leaving little money left to purchase groceries, buy clothing or put gas in the car, new figures have revealed.

A staggering 11.25 million households consume 50 percent or more of their income on housing and utilities, according to an analysis of Census data by nonprofit firm, Enterprise Community Partners.

And 1.8 million of these households spend at least 70 percent of their paychecks on rent.

The surging cost of rental housing has affected a rising number of families since the Great Recession hit in 2007. Officials define housing costs in excess of 30 percent of income as burdensome.

For decades, the U.S. economy was powered by a free spending middle class that had plenty of discretionary income to throw around. But now that the middle class is being systematically destroyed, that paradigm is changing. Americans families simply do not have the same resources that they once did, and that spells big trouble for retailers.

As you read this article, the United States still has more retail space per person than any other nation on the planet. But as stores close by the thousands, “space available” signs are going to be popping up everywhere. This is especially going to be true in poor and lower middle class neighborhoods. Especially after what we just witnessed in Baltimore, many retailers are not going to hesitate to shut down underperforming locations in impoverished areas.

And remember, the next major economic crisis has not even arrived yet. Once it does, the business environment in this country is going to change dramatically, and a few years from now America is going to look far different than it does right now.

Civil Unrest Has Begun In Baltimore And This Is Only Just The Start Of Something MUCH Bigger

April 26, 2015April 26, 2015 by Michael

On Saturday night, the city of Baltimore resembled a warzone as protests over the death of Freddie Gray turned wildly violent. One eyewitness reported watching the streets around him and his friend “turn into madness” as they left a baseball game between the Boston Red Sox and the Baltimore Orioles. Car windows were smashed, stores were robbed, chairs were thrown and large numbers of random bystanders were attacked. One prominent Democrat claims that those committing the violence were “mainly from out of town“, but how would he know that? Today, there are approximately 2.7 million people living in the Baltimore metropolitan area. It is an area that has been known for poverty, crime and drugs for many years, and as racial tensions continue to increase in this country it is a powder keg that could erupt at literally any time. We got a preview of what can happen on Saturday night. If this is how people will act while economic conditions are still relatively stable in this country, what in the world is going to happen when things really start falling apart?

On Saturday, April 11th, I delivered a presentation down in Dallas, Texas in which I warned about the rioting and civil unrest that are soon coming to this nation. On slide number 145 of the presentation, I specifically named the city of Baltimore as one of the cities where this would happen. But I had no idea that the rioting in Baltimore would begin so quickly. And the violence that we saw on Saturday night was at a level that was quite shocking. The following is how the Daily Mail described some of the chaos that ensued…

Local news captured live footage of a man throwing a flaming trash can at the police line.

A group of roughly 100 protesters broke out a window of a department store with a chair they got at a restaurant across the street at The Gallery, a downtown shopping mall.

The same group broke the windows of restaurants including a Subway sandwich shop near Camden Yards, tossing chairs and tables through the glass.

Protesters also engaged with a group of Orioles fans at Slider’s Bar and Grille and began fighting with patrons.

This kind of thing is not supposed to happen in America.

But it is happening. Ferguson set the precedent, and now this is going to spread all over the country.

You can see some excellent photographs of the chaos that happened in Baltimore right here, and in the video posted below several young thugs smash out the front window of a police cruiser as dozens of onlookers cheer them on…

I also want to share with you another video, but I need to warn you about it first. This YouTube video strings together a bunch of clips of some of the worst of the violence, but it also contains some very graphic language. So please don’t let any young children watch this. I felt that it was important to share this because we need to really understand what is happening to our cities. America is changing, and not for the better. This is what social decay looks like…

Are you starting to get the picture?

Things were so bad outside of the stadium where the Baltimore Orioles play that some of the Orioles actually thought about spending the night inside the clubhouse.

One of the things that is being ignored by many in the mainstream media is that fact that one of the key organizers of the Baltimore protests is a former national chairman of the New Black Panther Party named Malik Shabazz. These days, he is the president of an organization known as “Black Lawyers for Justice”, but he is definitely still up to his old tricks. The following is an excerpt from an article about the Baltimore riots in the New York Times…

There, Malik Shabazz, president of Black Lawyers for Justice, a Washington, D.C.-based group that called for the demonstration and advertised it on social media, told the crowd that he would release them in an hour, adding: “Shut it down if you want to! Shut it down!”

Mr. Shabazz said in a later interview that his rhetoric was intended only to encourage civil disobedience — not violence — but added that he was “not surprised” by the scattered angry outbursts because people here “haven’t received justice.”

If you are marching for “justice”, you don’t throw objects at random bystanders, loot stores or attack vehicles that are just driving through the area. But all of those things happened on Saturday night. The following is how an eyewitness described one of the most harrowing attacks…

The crowd of protesters then stopped a blue station wagon carrying a white family as they tried to drive past Pickles, Bullpen and Sliders along a narrow one-way stretch between the bars and the main road. As a horde of them smashed their open and closed fists on the hood of the car—while impeding them by standing in front of them—the driver backed up on the one way pass in a desperate attempt to get out of dodge. Then, stopped on the other side with nowhere to go, protesters ripped open the passenger door of the car and began reaching around inside the vehicle. As hundreds of people looked on, including several police officers who didn’t engage the violent protesters, the white woman in the front seat—middle-aged and a little heavyset with dark hair—was visibly terrified. The group of black men who ripped open the car door suddenly realized they were separated from the larger group of protesters and abandoned their quest to seemingly either carjack the station wagon or rob the people inside in front of hundreds, driving out of the one-way street back onto the main road and presumably out of dodge.

Of course all of this did not just erupt out of a vacuum. Racial tensions on all sides have been stirred up by the mainstream media, by our politicians, and by other prominent national leaders for years. At this point, even pastors are inflaming the tensions…

Activist Jamal Bryant, pastor of Empowerment Temple AME Church, told his congregation Sunday that “somebody is going to have to pay” for Gray’s death, the Associated Press reported.

If “you’re black in America, your life is always under threat,” Bryant said.

Why can’t we all just learn to love one another, forgive one another, and peacefully come up with some solutions that are going to work for all of us?

Sadly, all of this hate and anger is just another sign of the social decay that is eating away at the foundations of our society like a cancer.

And if people are willing to act like this when our economy is still relatively stable and things are still relatively good in this nation, what are they going to do when they don’t have any money in their pockets and they don’t know where their next meal is going to come from?

What we witnessed in Baltimore on Saturday night is just the beginning.

Much worse is coming, and eventually we are going to see tremendous civil unrest and rioting all over this nation.

So what do you think about all of this? Please feel free to share your opinion by posting a comment below…

11 Signs That We Are Entering The Next Phase Of The Global Economic Crisis

April 23, 2015 by Michael

Well, the Nasdaq finally did it. It has climbed all the way back to where it was at the peak of the dotcom bubble. Back in March 2000, the Nasdaq set an all-time record high of 5,048.62. On Thursday, after all these years, that all-time record was finally eclipsed. The Nasdaq closed at 5056.06, and Wall Street greatly rejoiced. So if you invested in the Nasdaq at the peak of the dotcom bubble, you are just finally breaking even 15 years later. Unfortunately, the truth is that stocks have not been soaring because the U.S. economy is fundamentally strong. Just like the last two times, what we are witnessing is an irrational financial bubble. Sometimes these irrational bubbles can last for a surprisingly long time, but in the end they always burst. And even now there are signs of economic trouble bubbling to the surface all around us. The following are 11 signs that we are entering the next phase of the global economic crisis…

#1 It is being projected that half of all fracking companies in the United States will be “dead or sold” by the end of this year.

#2 The rig count just continues to fall as the U.S. oil industry implodes. Incredibly, the number of rigs in operation in the United States has fallen for 19 weeks in a row.

#3 McDonald’s has announced that it will be closing 700 “poor performing” restaurants in 2015. Why would McDonald’s be doing this if the economy was actually getting better?

#4 As I wrote about the other day, we could be right on the verge of a Greek debt default. In fact, we learned on Thursday that the Greek government has been “running on empty” for months…

Greece warned it will go bankrupt next week after failing to stump up enough cash to pay millions of public sector workers and its international debts.

Deputy finance minister Dimitras Mardas set alarm bells ringing yesterday when he declared the country had been ‘running on empty’ since February.

With a debt repayment deadline looming on May 1, Greece faces the deeply damaging prospect of having to snub its own employees to make a €200m payment to the International Monetary Fund.

#5 Coal accounts for approximately 40 percent of all electrical generation on the entire planet. When the price of coal starts to drop, that is a sign that economic activity is slowing down. Just prior to the last financial crisis in 2008, the price of coal shot up dramatically and then crashed really hard. Well, guess what? The price of coal has been crashing again, and it is already lower than it was at any point during the last recession.

#6 The price of iron ore has been crashing as well. It is down 35 percent in the last nine months, and David Stockman believes that this is because of a major deflationary crisis that is brewing in China…

There is no better measure of the true contraction underway in China than the price of iron ore. The Wall Street stock peddlers will tell you not to be troubled by the 70% plunge from the 2012 highs and the 35% drop just in the last nine months. According to them, its all the fault of the big global miners who went overboard opening up massive new iron ore pits and mining infrastructure.

#7 At this point, China accounts for more total global trade than anyone else in the world. That is why it is so alarming that Chinese imports and exports are both absolutely collapsing…

China’s monthly trade data shows exports fell in March from a year ago by 14.6% in yuan terms, compared to expectations for a rise of more than 8%.

Imports meanwhile fell 12.3% in yuan terms compared to forecasts for a fall of more than 11%.

#8 The number of publicly traded companies in the United States that filed for bankruptcy during the first quarter of 2015 was more than double the number that filed for bankruptcy during the first quarter of 2014.

#9 New home sales in the United States just declined at their fastest pace in almost two years.

#10 U.S. manufacturing data has been shockingly weak lately…

On the heels of weak PMIs from Europe and Asia, Markit’s US Manufacturing PMI plunged to 54.2 in April (from 55.7). Against expectations of a rise to 55.6, this is the biggest miss on record. Of course, this is ‘post-weather’ so talking-heads will need to find another excuse as New Orders declined for the first time since Nov 2014.

#11 When priced according to “the average blue-collar hourly wage“, U.S. stocks are the most expensive that they have ever been in history right now. To say that this financial bubble is overdue to burst is a massive understatement.

For a long time, I have been pointing to 2015 as a major “turning point” for the global financial system, and I still feel that way.

But for the first four months of this year, things have been surprisingly quiet – at least on the surface.

So what is going on?

Well, I believe that what we are experiencing right now is the proverbial “calm before the storm”. There is all sorts of turmoil brewing just beneath the surface, but for the moment things seem like they are running along just fine to most people. Unfortunately, this period of quiet is not going to last much longer.

And those that are “in the know” are already moving their money in anticipation of what is coming. For example, consider the words of Snapchat founder and CEO Evan Spiegel…

Fed has created abnormal market conditions by printing money and keeping interest rates low. Investors are looking for growth anywhere they can find it and tech companies are good targets – at these values, however, all tech stocks are expensive – even looking at 5+ years of revenue growth down the road. This means that most value-driven investors have left the market and the remaining 5-10%+ increase in market value will be driven by momentum investors. At some point there won’t be any momentum investors left buying at higher prices, and the market begins to tumble. May be 10-20% correction or something more significant, especially in tech stocks.

It may not happen next week, or even next month, but big financial trouble is coming.

And when it finally arrives, it is going to shock the world, even though anyone with any sense can see the coming crisis approaching from a mile away.

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