Financial Markets

Which Of The Currencies Of The World Is Going To Crash First?

Last year was an absolutely fascinating time for world currency markets.  The yen, the dollar and the euro all took their turns in the spotlight.  Each experienced wild swings at various times, but the overall theme that we saw was that faith in paper currencies is dying.  The biggest reason for this is the horrific sovereign debt crisis that has swept the globe.  The United States, Japan and a whole host of European nations are all drowning in debt.  The U.S. and Japan are both steamrolling toward insolvency, and several European nations would have already defaulted on their debts if they had not been bailed out.  So which of the major currencies of the world is going to crash first?  Will one (or more) of the big currencies fall before the end of 2011?  Once one major currency collapses will the rest start to fall like dominoes?  The truth is that the world has never seen a sovereign debt crisis of this magnitude in all of human history.  Almost the entire globe is drowning in a sea of red ink and it has brought us right to the brink of financial disaster.

So which of the currencies of the world is going to be the first to come crashing down?  Well, let’s take a quick look at the yen, the euro and the dollar….

The Yen

Japan has the 3rd biggest economy in the world, but they are also deeply swamped in debt.  At well over 200%, the Japanese government has the biggest debt to GDP ratio of all of the major industrialized nations.  In fact, it is estimated that this massive pile of Japanese government debt amounts to approximately 7.5 million yen for every person living in the entire nation of Japan.

So why hasn’t Japan defaulted yet?  Well, a big reason is because Japan has one of the highest personal savings rates on the entire globe, and Japanese citizens have been more than happy to gobble up huge amounts of Japanese government debt at very, very low interest rates.

However, Standard & Poor’s has warned that they may have to slash Japan’s credit rating if the debt gets much bigger, and once confidence starts to falter Japan is going to have to start paying higher interest rates.

At some point Japan is going to be facing a financial meltdown, but for the moment they are hanging in there.

The Euro

Several large European nations would have already defaulted on their debts if they had not been bailed out last year.  Greece, Portugal, Ireland, Italy, Belgium and Spain are all on very shaky ground right now.  Several of them have already had their credit ratings slashed.

Bond yields all over Europe have been absolutely soaring in recent months.  It is getting really expensive for many of these nations to take on new debt.  Interest rates on 10-year Greek bonds went from 6 percent up to 13 percent in just a single month at one point in 2010.  In fact, even some of the nations that aren’t in the most danger are even feeling the pain.  For example, the cost of insuring French debt hit a new record high on December 20th.

Right now there are all kinds of rumblings that more European nations are going to need bailouts very soon.  Professor Willem Buiter, the chief economist at Citibank, is warning that quite a few EU nations could financially collapse in the next few months if they are not rapidly bailed out….

“The market is not going to wait until March for the EU authorities to get their act together. We could have several sovereign states and banks going under. They are being far too casual.”

So where is all of this bailout money coming from?  Well, a lot of it is coming from Germany and a significant amount of it is actually coming from the United States.

But will wealthy nations such as Germany be willing to pour hundreds of billions of euros into these financial black holes indefinitely?

Are the Germans going to accept a situation where they are permanently bailing out the “weak sisters” all over the rest of the continent?

Already some prominent politicians in Europe are calling for the European “bailout fund” to be doubled in size to about 2 trillion dollars.  Other analysts believe that it is going to take at least 4 or 5 trillion dollars to properly bail out all of the European nations that need it.

In any event, the truth is that the situation is really, really bad.  If at some point the bailouts stop, the defaults are going to begin.

The Dollar

The United States has the biggest national debt of all.  The 14 trillion dollar threshold has just been crossed, and the national debt is now less than 300 billion dollars away from the 14.294 trillion dollar debt ceiling.  If the U.S. Congress does not raise the debt ceiling, the U.S. government will shortly begin to default on its debts.  Of course everyone fully expects that the U.S. Congress will indeed raise the debt ceiling just like they have every time before.

However, U.S. politicians are not going to be able to keep kicking the can down the road forever.  Today the U.S. national debt is more than 14 times larger than it was just 30 years ago.  Everyone around the world is beginning to realize that this debt is not even close to sustainable.  Investors are beginning to become more hesitant about loaning the United States money.  The Federal Reserve has been forced to step in and “buy” more and more of the debt the U.S. government is issuing.

Yields on U.S. Treasuries have been moving up in recent months and this could eventually become a huge problem.

Why?

Well, the sad truth is that the U.S. government has been increasingly using short-term debt.

At this point, the average maturity of U.S. government bonds has fallen to 4.4 years.  The is the lowest figure of all the major industrialized nations. That means that the U.S. government must constantly roll over massive amounts of debt.

As a point of comparison, UK government debt has an average maturity of approximately 13 years.  That obviously gives them a lot more breathing room.

For the United States, the situation could become incredibly dire if interest rates start to go up.

If interest rates on U.S. government debt reach an average of 7 percent, interest payments on the debt would gobble up approximately 45 percent of the tax revenue that the U.S. government takes in each year.

Yes, at that point the game would be over.

But what the United States has going for it that the European nations do not is that the United States can just have the Federal Reserve keep printing currency.  Unfortunately for the nations involved in the euro, they do not have that option.

That is why an increasing number of analysts believe that it will be the euro that will crash and burn first.

But only time will tell.

There are even many that believe that authorities at the highest level actually want the dollar, euro and yen to fail.

Why?

Well, many of the same individuals and groups that brought us NAFTA, the WTO, the IMF, the OECD and the World Bank believe that it would be absolutely wonderful for humanity if we could all have a single, united global currency.  The “chaos” produced by the fall of our existing global currencies could provide the perfect “opportunity” to provide the grand “solution” that they have been hoping to introduce all along.

All over the world top politicians and financiers have been very open about the fact that a world currency is coming.  In fact, men like George Soros are openly talking about these things.  The United Nations has been publicly calling for the U.S. dollar to be replaced with a new global currency for some time now.  Just this week Chinese President Hu Jintao stated that “the current international currency system is the product of the past.”

So will the American people just sit back and accept it when their dollars are replaced with a new global currency?

Well, sadly, when things go badly most Americans seem to be willing to accept just about anything if it will mean that things will go back to “normal”.  When the global economy falls to pieces, and there already lots of signs that we are on the verge of such a collapse, will the American people be willing to say goodbye to the dollar if politicians from both major political parties tell them that the new global currency is the “answer” to our problems?

Hopefully the American people will wake up and will realize that “globalism” is rapidly wiping away almost everything that it means to be an “American”.  Now even many of our children and teens are primarily identifying themselves as “citizens of the world” rather than “citizens of the United States”.

Even if the U.S. dollar does collapse, it is absolutely imperative that we continue to have our own national currency.  The U.S. Constitution does not make any provision for any sort of “world currency”.  If we allow the globalists to push a truly global currency down our throats it will be another giant step towards the creation of a totalitarian one world system.

So what do you think about all of this?  Please feel free to leave a comment with your thoughts below….

Precious Metals: 10 Things To Know Before Jumping Into Gold And Silver

As the global economy became increasingly unstable during 2010, investors all over the world flocked to precious metals such as gold, silver, copper and platinum.  The price of gold set an all-time record high last year, and gold investors were euphoric.  Many analysts are projecting that prices for gold, silver and other precious metals will continue to soar throughout 2011.  But does that mean that everyone should just suddenly jump into gold and silver?  No, it does not.  Precious metals are not for everyone.  Just like any other kind of investing, it is absolutely crucial that you get educated before you get involved.  Investing in precious metals is very different from other kinds of investments.  There are significant hazards and pitfalls to watch out for.  But if you take the time to do it right, investing in precious metals can be very rewarding, and it can potentially be a great way to protect your wealth against the tremendous inflation that is coming in the years ahead.

The following are ten key things that you should know before jumping into gold and silver….

#1 Precious Metals Markets Are Highly Manipulated

Big financial institutions, and even governments, openly manipulate the precious metals markets.  This is an open secret that you should know if you plant to invest in precious metals.  Those who think that they can jump in and out of gold or silver and make a killing usually end up learning a very painful lesson.  Investing in precious metals should be done for the long-term unless you really, really know what you are doing.

So why is long-term investing safer?  Well, as we have seen over the past few years, the short-term manipulation of gold and silver prices usually gets trumped by the long-term trends in the end.

But that doesn’t mean that gold, silver and other precious metals won’t take some very significant short-term tumbles.

The following “mini-documentary” does an excellent job of examining some of the strange things that we have seen in the precious metals markets recently….

#2 The Long-Term Trends Are Very Favorable For Precious Metals

As the U.S. dollar has declined, gold, silver and other precious metals have been going up, up, up over the past decade.  Investors all over the globe have been flocking to the safety and stability that they provide.

Just check out the following chart which shows how the price of gold has risen dramatically over the past decade.  In fact, this chart is a little out of date.  At one point during 2010, the price of gold exceeded $1400 an ounce.  As you can see, those who have been investing in gold for the long-term have been doing very, very well….

Many analysts are extremely bullish on gold right now.  For example, Peter Schiff believes that the price of gold is going to eventually hit $5000.

So does that mean that what Schiff is saying is actually going to happen?

Nobody can tell you for sure what is going to happen.

But one thing is for sure – we are entering uncharted territory in world financial markets.  At this point, just about anything is possible.

#3 Gold Holds Value Over Long Periods Of Time

In ancient Rome, an ounce of gold would buy you a nice suit.  A hundred years ago, an ounce of gold would buy you a nice suit.  Today, an ounce of gold will buy you a nice suit.

Meanwhile, the U.S. dollar has lost well over 95 percent of its value over the last 100 years.

So which is better to hold on to for the long-term – U.S. dollars or gold?

#4 The Value Of The Dollar Is Going Down

Usually (but not always) when the value of the dollar goes down, the value of gold goes up.  As the U.S. government and the Federal Reserve have been flooding the system with new dollars, investors across the globe have been flocking to precious metals.

At some point in the years ahead we are going to be facing some very, very serious inflation.  When that time arrives, U.S. dollars are not going to be worth a whole lot.  But all of that gold and silver you have stored up still will be.

#5 Physical Gold Is Preferable To Paper Gold

When investing in gold, it is much more preferable to actually take possession of the physical gold than it is to have a piece of paper that says that you have invested in gold.  Someday when the financial system crashes, you may find that your “piece of paper” is not going to do you much good.

#6 Diversification Is Key

When investing in precious metals, it is important to diversify.  This spreads out your risk.  Some investors accumulate as many different precious metals as they can.  Others diversify by getting precious metals from a variety of dealers or by accumulating it in different forms – coins, bars, jewelry, etc.

It is always wise not to put all of your “eggs” in one basket.

#7 Accumulate Different Denominations If You Can

In the future, if you actually need to spend your precious metals you don’t want them all to be of the same denomination if possible.  For example, if you need to buy a little bit of food, you don’t want to only have high value coins.  Variety is a good thing, and accumulating different coin denominations is another way that you can diversify.

#8 You Cannot Eat Precious Metals

Investing in precious metals should be done only after you have gathered together an adequate emergency food supply.  If the global economy completely shatters, having gold and silver is not going to be good enough.  You are going to need lots of food for you and your family.  So be sure to take care of the necessities before you invest in precious metals.

#9 Do Not Advertise That You Are Accumulating Precious Metals

Don’t go around telling everyone that you are storing up precious metals.  That is just going to make you a target.  Investing in precious metals is something to be done quietly.

#10 Get Educated

I cannot stress this point enough.  If you want to invest in precious metals, you need to get educated.  People that do not know what they are doing are at much greater risk of getting burned.  Be smart enough to realize what you do not know.  Don’t be too proud to ask for advice.  Seek out reputable dealers.  If you take the time to do things right, then you will have the best chance for success.

The following video contains some more facts and figures about investing in gold.  I do not know anything about the organization that put this video together, but this video is well produced and it presents a lot of important information about gold in an entertaining manner….

Did The Price Of Oil Help Cause The Financial Crisis Of 2008? Will Surging Oil Prices Soon Spark Another Financial Crisis?

Oil prices are starting to spin out of control once again.  In London, Brent North Sea crude for delivery in February hit 91.89 dollars a barrel on Friday.  New York crude moved above 88 dollars a barrel on Friday.  Many analysts believe that 100 dollar oil is a virtual certainty now.  In fact, many economists are convinced that oil is going to start moving well beyond the 100 dollar mark.  So what happened the last time oil went well above 100 dollars a barrel?  Oh, that’s right, we had a major financial crisis.  Not that subprime mortgages, rampant corruption on Wall Street and out of control debt didn’t play major roles in precipitating the financial crisis as well, but the truth is that most economists have not given the price of oil the proper credit for the role that it played in almost crashing the world economy.  In July 2008, the price of oil hit a record high of over $147 a barrel.  A couple months later all hell broke loose on world financial markets.  The truth is that having the price of oil that high created horrific imbalances in the global economy.  Fortunately the price of oil took a huge nosedive after hitting that record high, and it can be argued that lower oil prices helped stabilize the world economy.  So now that oil prices are on a relentless march upward again, what can we expect this time?

Well, what we can expect is more economic trouble.  The truth is that oil is the “blood” of our economy.  Without oil nothing moves and virtually no economic activity would take place.  Our entire economic system is based on the ability to cheaply and efficiently move people and products.  An increase in the price of oil puts inflationary pressure on virtually everything else in our society.  Without cheap oil, the entire game changes.

The chart below shows what the price of oil has done since 1950 (although it doesn’t include the most recent data).  With the price of oil marching towards 100 dollars a barrel again, many people are wondering what this is going to mean for the U.S. economic “recovery”….


Just think about it.  What is it going to do to U.S. households when they have to start spending four, five or even six dollars on a gallon of gas?

What is it going to do to our trucking and shipping costs?

What is it going to do to the price of food?  According to the U.S. Bureau of Labor Statistics, food inflation in the United States was already 1 1/2 times higher than the overall rate of inflation during the past year.  But that is nothing compared to what is coming.

During 2010, the price of just about every major agricultural commodity has shot up dramatically.  These price increases are just starting to filter down to the consumer level.  So what is going to happen if oil shoots up to 100, 120 or even 150 dollars a barrel?

Demand for oil is only going to continue to increase.  Do you know who the number one consumer of energy on the globe is today?  For about a hundred years it was the United States, but now it is China.  Other emerging markets are starting to gobble up oil at a voracious pace as well.

Not that the price of oil isn’t highly manipulated.  Of course it is.  The truth is that the price of oil should not be nearly as high as it currently is.  Unfortunately, you and I have very little say on the matter.

If the price of oil keep going higher, it is really going to start having a dramatic impact on global economic activity at some point.  Meanwhile, oil producers and the big global oil companies will pull in record profits, and radical “environmentalists” will love it because people will be forced to start using less oil.

When it comes to oil, there are a lot of “agendas” out there, and unfortunately it looks like the pendulum is swinging back towards those who have “agendas” that favor a very high price for oil.

So what does that mean for all of us?

It is going to mean higher prices at the pump, higher prices at the supermarket and higher prices for almost everything else that we buy.

If the price of oil causes a significant slowdown in economic activity, it could also mean that a whole bunch of us may lose our jobs.

In an article that I published yesterday entitled “Tipping Point: 25 Signs That The Coming Financial Collapse Is Now Closer Than Ever“, I didn’t even mention that price of oil.  There are just so many danger signs in the world economy right now that it is easy to overlook some of them.

Yes, it is time to start ringing the alarms.

The ratio of corporate insider stock selling to corporate insider stock buying is at the highest it has been in nearly four years.  This is so similar to what happened just prior to the last financial crisis.  The corporate insiders are seeing the writing on the wall and they are flocking for the exits.

Many savvy investors are getting out of paper and are looking for hard assets to put their money in.  For example, China is buying gold like there is no tomorrow.  The Chinese seem to sense that something is coming.  But of course they are not alone.  All over the world top economists are warning that we are flirting with disaster.

On Friday, Moody’s slashed Ireland’s credit rating by five notches to Baa1, and is warning that even more downgrades may follow.

Just think about that for a moment.

Moody’s didn’t just downgrade Irish debt a little – what Moody’s basically did was take out a big wooden mallet and pummel it into oblivion.

Irish debt is now considered little more than garbage in world financial markets now.  Unfortunately, Greece, Spain, Portugal, Italy, Belgium and a bunch of other European nations are also headed down the same road.

The truth is that the euro is much closer to a major collapse than most Americans would ever dream.

The world financial system is teetering on the brink of another major financial crisis, and rising oil prices certainly are not going to help that.

If the price of oil breaks the 100 dollar mark, it will be time to become seriously alarmed.

If the price of oil breaks the 150 dollar mark in 2011 it will be time to push the panic button.

Let’s hope that the price of oil stabilizes for a while, but unfortunately that is probably not going to happen.

The truth is that the economic outlook for 2011 is bleak at best, especially if the price of oil continues to skyrocket.

20 Statistics That Prove That Global Wealth Is Being Funneled Into The Hands Of The Elite – Leaving Most Of The Rest Of The World Wretchedly Poor

Today global wealth is more highly concentrated in the hands of the elite than it ever has been at any other point in modern history.  Once upon a time, the vast majority of the people in the world knew how to grow their own food, raise their own animals and take care of themselves.  There weren’t many that were fabulously wealthy, but there was a quiet dignity in having land you could call your own or in having a skill that you could turn into a business.  Sadly, over the past several decades an increasingly growing percentage of agricultural land has been gobbled up by big corporations and by corrupt governments.  Hundreds of millions of people have been pushed off their land and into highly concentrated urban areas.  Meanwhile, it has become increasingly difficult to start a business of your own as monolithic global corporations have come to dominate nearly every sector of the world economy.  So more people than ever around the world are forced to work for “the system” just to make a living.  At the same time, those at the very top of the food chain (the elite) have spent decades rigging the system to ensure that increasing amounts of wealth will continue to flow into their pockets.  So now in 2010 we have a global system where a few elitists at the top are insanely wealthy while about half the people living on earth are wretchedly poor.

There are very few nations around the world that have not been almost entirely plundered by the global elite.  When the elite speak of “investing” in poor countries, what they really mean is taking control of the land, water, oil and other natural resources.  In dozens of nations around the world today, big global corporations are stripping fabulous amounts of wealth out of the ground even as the vast majority of the citizens of those nations continue to live in abject poverty.  Meanwhile, the top politicians in those nations are given huge bribes to go along with the plundering.

So what we have in 2010 is a world that is dominated by a very small handful of ultra-wealthy elitists that own an almost unbelievable amount of real assets, a larger group of “middle managers” that run the system for the global elite (and are rewarded very handsomely for doing so), hundreds of millions of people who actually do the work required by the system, and several billion “useless eaters” that the global elite don’t really need and that they don’t really have much use for.

The system was not ever designed to lift up the poor.  Nor was it ever designed to promote “free enterprise” and “competition”.  Rather, the elite intend to funnel all wealth to themselves and to have the rest of us enslaved either to debt or to poverty.

The following are 20 statistics that prove that the wealth of the world is increasingly being funneled into the hands of the global elite, leaving most of the rest of the world wretchedly poor and miserable….

#1 According to the UN Conference on Trade and Development, the number of “least developed countries” has doubled over the past 40 years.

#2 “Least developed countries” spent 9 billion dollars on food imports in 2002.  By 2008, that number had risen to 23 billion dollars.

#3 Average income per person in the poorest countries on the continent of Africa has fallen by one-fourth over the past twenty years.

#4 Bill Gates has a net worth of somewhere in the neighborhood of 50 billion dollars.  That means that there are approximately 140 different nations that have a yearly GDP which is smaller than the amount of money Bill Gates has.

#5 A study by the World Institute for Development Economics Research discovered that the bottom half of the world population owns approximately 1 percent of all global wealth.

#6 Approximately 1 billion people throughout the world go to bed hungry each night.

#7 The wealthiest 2 percent own more than half of all global household assets.

#8 It is estimated that over 80 percent of the world’s population lives in countries where the income gap between the rich and the poor is widening.

#9 Every 3.6 seconds someone starves to death and three-quarters of them are children under the age of 5.

#10 According to Gallup, 33 percent of the people on the globe say that they do not have enough money for food.

#11 As you read this, there are 2.6 billion people around the world that lack basic sanitation.

#12 According to the most recent “Global Wealth Report” by Credit Suisse, the wealthiest 0.5% control over 35% of the wealth of the world.

#13 More than 3 billion people, close to half the world’s population, live on less than 2 dollar a day.

#14 CNN founder Ted Turner is the largest private landowner in the United States.  Today, Turner owns approximately two million acres.  That is an amount greater than the land masses of the states of Delaware and Rhode Island combined.  Turner also advocates restricting U.S. couples to 2 or fewer children to control population growth.

#15 There are 400 million children in the world today that have no access to safe water.

#16 Approximately 28 percent of all children in developing countries are considered to be underweight or have had their growth stunted as a result of malnutrition.

#17 It is estimated that the United States owns approximately 25 percent of the total wealth of the world.

#18 It is estimated that the entire continent of Africa owns approximately 1 percent of the total wealth of the world.

#19 In 2008, approximately 9 million children died before they reached their fifth birthdays.  Approximately a third of all of these deaths was due either directly or indirectly to lack of food.

#20 The most famous banking family in the world, the Rothschilds, has accumulated mountains of wealth while much of the rest of the world has been trapped in poverty.  The following is what Wikipedia has to say about Rothschild family wealth….

It has been argued that during the 19th century, the family possessed by far the largest private fortune in the world, and by far the largest fortune in modern history.

Nobody seems to know exactly how much the Rothschilds are worth today.  They dominate the banking establishments of England, France, Germany, Austria, Switzerland and many other nations.  It was estimated that they were worth billions back in the mid-1800s.  What the total wealth of the family is today is surely an amount that is almost unimaginable, but nobody knows for sure.

Meanwhile, billions of people around the globe are wondering where their next meal is going to come from.

At this point, many readers will want to start arguing about how horrible capitalism is and about how wonderful socialism and communism are.

But capitalism is not the problem and as we have seen countless times over the past several decades, government ownership of business is not the solution to anything.

What we have in the world today is not capitalism.  Rather, it more closely resembles “feudalism” than anything else.  The elite are “monopoly men” who use their unbelievable wealth and power to dominate the rest of us.  In fact, it was John D. Rockefeller who once said that “competition is sin”.

It would be great if we lived in a world where those living in poverty were encouraged to start owning land, to create businesses and to build better lives for themselves.

But instead, things are going the other way.  Wealth is becoming more concentrated in the hands of the elite, and the middle class is starting to be wiped out even in prosperous nations such as the United States.

It turns out that the global elite have decided that they don’t really need so many expensive American “worker bees” after all and they have been moving thousands of factories and millions of jobs overseas.  Meanwhile the American people are so distracted watching Dancing with the Stars, Lady Gaga and their favorite sports teams that they don’t even realize what is going on.

There is no guarantee that America will be prosperous forever.  Today, a record number of Americans are already living in poverty.  Today, a record number of Americans are on food stamps.  The median household income went down last year and it went down the year before that too.

So wake up.  America is being integrated into a world economic system that is dominated and controlled by the insanely wealthy elite.  They don’t care that you have to pay the mortgage or that you intend to send your kids to college.  Mostly what they care about is making as much money for themselves as they can.

Greed is running rampant around the globe, and the world is becoming a very cold place.  Unfortunately, unless something really dramatic happens, the rich are just going to continue to get richer and the poor are just going to continue to get poorer.

The Calm Before The Storm

An eerie calm has descended upon world financial markets as they await perhaps the two most important financial events of the year this week.  On Tuesday, investors will be eagerly awaiting the results of one of the most anticipated midterm elections in U.S. history.  On Wednesday, the Federal Reserve is expected to end months of speculation by formally announcing the details of a new round of quantitative easing.  If either the election or the meeting of the Federal Reserve open market committee delivers a highly unexpected result, it could have a dramatic impact on world financial markets.  In fact, many are looking at this week as a potential turning point for the U.S. economy.  The decisions that are made or not made this week could set us down a road from which the U.S. economy may never recover.

At this point, it looks like the Republicans will take control of the U.S. House of Representatives and will pick up a number of U.S. Senate seats as well.

There are many in the financial world who already consider Barack Obama to be the most “anti-business” president in U.S. history, so a defeat for the Democrats on Tuesday would be greatly welcomed by many on Wall Street.  Barack Obama’s decline in popularity since he was elected has been absolutely stunning.  According to Gallup, Barack Obama had an average approval rating of just 44.7% during the seventh quarter of his presidency, which was a brand new low.  In fact, Obama’s average approval rating has fallen during every single quarter since he took office.  Things have gotten so bad for Obama that one new poll has found that 47% of Democrats now think that Barack Obama should be challenged for the 2012 Democratic presidential nomination. 

However, if the Democrats were able to do surprisingly well on Tuesday, it would not only shock the political pundits, but it would also likely put world financial markets in a very bad mood. 

If the Republicans do very well on Tuesday, it will likely mean that there will be no more extensions for those receiving long-term unemployment benefits.  Some state governments are already anticipating this and are making preparations.  For example, armed security guards are now being posted at all 36 full-service unemployment offices in the state of Indiana.  It is estimated that approximately 2 million Americans will lose their unemployment insurance benefits during this upcoming holiday season if  Congress does not authorize another emergency extension of benefits by the end of November.  If the Republicans do very well on Tuesday, it would make it much more likely that the extension will not happen.

But if millions of unemployed Americans suddenly find themselves without any unemployment checks, that is only going to cause the anger and frustration regarding this economy to grow.

Either way, the unfortunate truth is that this election is not going to change much.

Over the past five elections, incumbents have been re-elected to the U.S. House of Representatives at an average rate of 96 percent.

This time will be a little different of course, but not that much different.  The sad truth is that we are still likely to see about 80 percent of the exact same faces going back to the U.S. Congress for the next session.

However, even if the American people could somehow vote out every single member of Congress, it would still not do much to fundamentally change our economic situation because the U.S. Congress does not run the economy and neither does the President.

Of course both of those institutions can influence the U.S. economy, but it is actually the Federal Reserve that runs the economy.

The Federal Reserve controls the money supply.  The Federal Reserve controls our interest rates.  If the U.S. government wants more money it has to go get it from the Federal Reserve.  It is the Federal Reserve that is tasked with the mandate of keeping unemployment low while also keeping inflation at a “reasonable” level.

But these days, Federal Reserve officials don’t really seem to be that concerned about the dangers of inflation.  In fact, several top Federal Reserve officials have come out in recent weeks and have made public statements not only advocating more quantitative easing, but also suggesting that inflation is not a danger because it is actually “too low” right now.

In fact, there have been some rumblings that many officials at the Fed would actually welcome more inflation because they think that it would somehow stimulate the economy.  In fact, a Federal Reserve paper that was released in September actually floated the idea that a spike in oil prices would be quite good for the U.S. economy.

And these are the people running our economy?

Are we all caught in an episode of The Twilight Zone?

Well, as far as rising oil prices are concerned, the Fed will almost surely get its wish.  As I have written about previously, the price of oil is almost certainly heading to 100 dollars a barrel.

But if the price of oil shoots up, isn’t that going to cause significant inflationary pressure on the prices of thousands of other goods and services?

Of course.

Unfortunately, very few of our leaders seem too concerned about inflation or about protecting the value of the U.S. dollar these days.

In fact, now even the IMF is publicly proclaiming that the U.S. dollar is “overvalued”.

What a mess.

But there is another aspect of a new round of “quantitative easing” that the American people really wouldn’t like if they could actually figure out what is going on.

You see, the truth is that “quantitative easing” is not only just a way to stimulate the economy, it is also a way to give backdoor bailouts to the big banks without having to go through the U.S. Congress.

In a previous article, I described how this works….

1) The big U.S. banks have massive quantities of junk mortgage-backed securities that are worth little to nothing that they desperately want to get rid of.

2) They convince the Federal Reserve (which the big banks are part-owners of) to buy up these “toxic assets” at significantly above market price.

3) The Federal Reserve creates massive amounts of money out of thin air to buy up all of these troubled assets.  The public is told that all of this “quantitative easing” is necessary to stimulate the U.S. economy.

4) The big banks are re-capitalized and have gotten massive amounts of bad mortgage securities off their hands, the Federal Reserve has found a way to pump hundreds of billions (if not trillions) of dollars into the economy, and most of the American people are none the wiser.

Now how do you think the American people would feel about “quantitative easing” if they really understood all this?

But unfortunately, most Americans will be watching the election results on Tuesday night without having even a basic understanding of how our economy is really run.

Already, there are a ton of signs that the U.S. economy is heading in a very bad direction, and dumping a handful of Congress critters out of office might feel good, but it isn’t going to do much to really change our economic problems.

The American people desperately need to be educated about how our financial system really works.  But unfortunately, most Americans will likely not wake up until the whole house of cards comes crashing down.

30 Reasons Why People Should Be Getting Really Nervous About The State Of The U.S. Economy

The mainstream media is full of happy economic news these days.  The S&P 500 has shot up 16 percent since the beginning of July.  Ford Motor Company just reported a profit that jumped nearly 70 percent in the third quarter.  It was Ford’s best third quarter performance ever and it was the 6th quarterly profit in a row for the company.  Other major firms have announced earnings that have far exceeded expectations in recent weeks.  Hooray!  The pundits are proclaiming that the economic collapse is over and that the U.S. economy has won.  It is almost enough to make one tear into a stirring rendition of “Happy Days Are Here Again”.  But perhaps we should take a moment and get a hold of ourselves first.  After all, the underlying economic fundamentals have not changed.  The same long-term trends that were ripping the U.S. financial system apart a month or two ago are still continuing to do so.  Millions upon millions of American families are still deeply suffering.  So exactly what in the world is going on here?  Well, this is what is known as a “sucker’s rally”.  Those on the inside know better than to throw money at this market.  In fact, corporate insiders are now selling off stock so fast you would think it is going out of style.  Meanwhile, hordes of innocent rubes are jumping back into the stock market thinking that it is the perfect time to get in. 

The truth is that these “good times” are only temporary.  Don’t get used to them.  The following are 30 reasons why people should be getting really, really nervous about the state of the U.S. economy…. 

#1 Corporate insiders are selling off stock at a blinding pace and are looking for the exits.  Alan Newman, the editor of the Crosscurrents newsletter, examined a number of the top performing stocks in the market including Google, Apple and Target and found that the ratio of corporate insider stock sold to corporate insider stock purchased over the last six months for those companies was 3,177 to 1.  At the group of firms that Newman looked at, corporate insiders had purchased 38,000 shares of stock over the last six months and yet had sold off over 120 million shares.

#2 Analysts at both Bank of America and Goldman Sachs both believe that the U.S. Federal Reserve is going to initiate a new round of quantitative easing in November.  It does not take a genius to figure out that this is very likely to push up inflation and have very serious consequences for the U.S. dollar.

#3 Economists at Goldman Sachs are projecting that the Fed will have to purchase at least $4 trillion in assets during this next round of quantitative easing to get the U.S. economy moving in a positive direction once again.

#4 In the United States today, there are 5,057 janitors with Ph.D.’s, other doctorates, or professional degrees.

#5 Investors have very little faith in the U.S. dollar (and in paper currencies in general) at this point.  Precious metals are soaring to obscene heights.  The price of gold has increased more than 20 percent in 2010.  The price of silver has skyrocketed about 40 percent this year.  These are not signs that indicate that the U.S. financial system is stable.

#6 Robin Griffiths, a technical strategist at Cazenove Capital, told CNBC on Monday that the U.S. dollar is in danger of becoming “toxic waste”.

#7 In the United States today, 317,000 waiters and waitresses have college degrees.

#8 U.S. lending institutions repossessed an all-time record total of 102,134 homes in the month of September.  That was the first time that home repossessions in the U.S. had ever exceeded the 100,000 mark during a single month.

#9 According to a Standard & Poor’s/Case-Shiller home price report that was released on Tuesday, single family home prices in the United States declined  for a second straight month in August.

#10 In the United States today, over 18,000 parking lot attendants have college degrees.

#11 During the months of August and September, the state of Nevada had an unemployment rate of 14.4 percent, which was the highest in the history of the state.  Not that the rest of the country is doing any better.  The state of California has become a complete and total economic disaster zone, and the city of Detroit, Michigan is literally dying.

#12 The “official” unemployment rate in the United States has been at nine and a half percent or above for 14 consecutive months.

#13 The number of people unemployed in the state of California is approximately equivalent to the populations of Nevada, New Hampshire and Vermont combined.

#14 According to the president of the Federal Reserve Bank of New York, there are approximately 3 million more vacant housing units than usual in the United States.

#15 China has reduced the export quota on rare earth elements for the second half of 2010 by 72%, thus strengthening their position in the world economy even more.  Rare earth elements are absolutely crucial to the manufacture of a vast array of high technology products, and now even more of them will have to be made in China.

#16 In 1985, the U.S. trade deficit with China was 6 million dollars for the entire year.  In the month of August alone, the U.S. trade deficit with China was over 28 billion dollars.

#17 Wheat, corn and other staples are absolutely soaring in price on world markets.  These higher food prices are going to hit U.S. consumers hard.

#18 In 2007, 3 U.S. banks failed.  In 2008, 25 U.S. banks failed.  In 2009, 140 U.S. banks failed.  Last Friday, it was announced that 139 U.S. banks have failed so far this year and it is not even the end of October yet.

#19 Total student loan debt in the United States is climbing at a rate of approximately $2,853.88 per second.

#20 Back in 1980, the United States imported approximately 37 percent of  the oil that we use.  Now we import nearly 60 percent of the oil that we use.

#21 According to an analysis by the Congressional Joint Committee on Taxation, the health care reform legislation that Congress didn’t read but passed into law anyway will generate $409.2 billion in additional taxes on the American people by the year 2019.

#22 Median household income in the U.S. declined from $51,726 in 2008 to $50,221 in 2009.  That was the second yearly decline in a row.

#23 One out of every six Americans is now enrolled in a government anti-poverty program, and yet the number of Americans signing up for food stamps and other social programs just continues to set new all-time records month after month after month.

#24 The number of Americans working part-time jobs “for economic reasons” is now the highest it has been in at least five decades.

#25 American 15-year-olds do not even rank in the top half of all advanced nations when it comes to math or science literacy.

#26 According to a recent poll conducted by CNBC, 92 percent of Americans believe that the performance of the U.S. economy is either “fair” or “poor”.

#27 After analyzing Congressional Budget Office data, Boston University economics professor Laurence J. Kotlikoff came to the conclusion that the U.S. government is now facing a “fiscal gap” of $202 trillion dollars.

#28 A trillion $10 bills, if they were taped end to end, would wrap around the earth more than 380 times.  That amount of money would still not be enough to pay off the U.S. national debt.

#29 According to the U.S. Treasury Department, the U.S. national debt is rapidly closing in on 14 trillion dollars and and will climb to an estimated $19.6 trillion by 2015.

#30 At our current pace, the Congressional Budget Office is projecting that U.S. government public debt will hit 716 percent of GDP by the year 2080.

The U.S. economy is in the midst of a long-term decline.  There are always going to be moments when it seems like things are getting a bit better, but then reality will kick in and the depressing slide will continue.

If you really want to understand what is happening to the U.S. economy, do not become fixated on the short-term numbers.  Instead, always keep an eye on the long-term trends.

The U.S. economy is dying.  We are getting whipped by the rest of the world and we are drowning in a sea of debt.  A little rally in the stock market is not going to do a thing to fix our very deep fundamental economic problems.

100 Dollar Oil Is Coming

The price of oil has been hovering around 80 dollars a barrel for quite some time now, but get ready, because it is going to move significantly higher.  Oil prices have already risen about 9 percent over the past month, and many believe that this could very well be the start of a new trend.  Lawrence Eagles, a top analyst at JP Morgan, recently made headlines across the globe when he stated that oil could hit 100 dollars a barrel “much sooner than we expect”.  Not only that, but a number of top OPEC officials are also publicly discussing the possibility of 100 dollar oil.  But just because a few people are talking about it does not mean that it is going to happen.  So are there any other reasons why we should anticipate a significant increase in the price of oil?

Well, yes there is.

*The Decline Of The U.S. Dollar

Since August 27th, the U.S. dollar has declined approximately 4.8% against the currencies of major U.S. trading partners.  Unfortunately, there seems to be every indication that the dollar is going to continue to decline.  As the U.S. dollar continues to display weakness, just about everything priced in dollars (including oil) is going to continue to rise.

*The Threat Of Quantitative Easing By The Federal Reserve

For weeks, top Federal Reserve officials have been making public statements about the need for more quantitative easing.  If the Fed does initiate a significant program of quantitative easing in the coming months, that is going to put even more downward pressure on the U.S. dollar and even more upward pressure on the price of oil. 

*Other Commodities Have Been Skyrocketing

Over recent weeks, the prices of a wide array of key commodities have been absolutely skyrocketing.  As I noted in a previous article, not only has the price of gold been setting records, the truth is that almost every major commodity has been spiking.  In a recent column entitled “An Inflationary Cocktail In The Making“, Richard Benson noted some of the commodity price increases that he has been tracking this year….

-Agricultural Raw Materials: 24%

-Industrial Inputs Index: 25%

-Metals Price Index: 26%

-Coffee: 45%

-Barley: 32%

-Oranges: 35%

-Beef: 23%

-Pork: 68%

-Salmon: 30%

-Sugar: 24%

-Wool: 20%

-Cotton: 40%

-Palm Oil: 26%

-Hides: 25%

-Rubber: 62%

-Iron Ore: 103%

The increase in the price of oil is just part of a larger trend of soaring commodity prices.  As long as this trend in commodity prices continues it is unlikely that the price of oil will go down.

*The Strikes In France

The austerity strikes in France have interrupted the flow of gasoline in that country.  Once the strikes are over there will be an increase in demand as inventories are restocked.

*Increased Demand From China And Other Emerging Nations

Most analysts are forecasting that the demand for oil in China and other emerging nations will continue to grow at an impressive pace.  This growing demand will also cause upward pressure on the price of oil.

*The Potential Of War In The Middle East

As always, war could break out in the Middle East at any time.  A minor conflict in the Middle East would likely push the price of oil over 100 dollars a barrel very quickly.  A major conflict would likely push it over 200 dollars or even beyond.  War is very, very difficult to predict, but it does seem quite likely that some kind of conflict will break out in the Middle East at some point over the next several years.

So how soon will oil reach the 100 dollar mark?

That is very hard to say. 

But even now, Americans are already having to dig deeper into their wallets at the gas pump.

For the two week period ending October 22nd, the average price of gasoline in the United States increased 5.23 cents to $2.82 a gallon.

As the price of oil continues to rise significantly over the long-term, it is going to have an impact on thousands of other prices.  Virtually all products must be transported, and an increase in the price of oil will cause those transportation costs to go up.

So an increase in the price of oil would be really bad news. 

If we do see 100 dollar oil, that will be a huge challenge for the U.S. economy.

If we end up seeing 150 dollar oil (especially for an extended period of time) it will be an absolute nightmare for the U.S. economy.

So where do you think the price of oil is going?  Feel free to leave a comment with your opinion….

The Biggest Bank Robbery In History? More Quantitative Easing = Backdoor Bailouts For The Big Banks Without Having To Go Through Congress

The U.S. Federal Reserve is getting ready to conduct another gigantic bailout of the big banks, but this time virtually nobody in the mainstream media will use the term “bailout” and the American people are going to get a lot less upset about it.  You see, one lesson that was learned during the last round of bank bailouts was that the American people really, really do not like it when the U.S. Congress votes to give money to the big banks.  So this time, the financial “powers that be” have figured out a way around that.  Instead of going through the massive headache of dealing with the U.S. Congress, the Federal Reserve is simply going to print money and give it directly to the banks.  To be more precise, the Federal Reserve is going to use a procedure known as “quantitative easing” to print money out of thin air in order to purchase large quantities of “troubled assets” (such as mortgage-backed securities) from the biggest U.S. banks at well above market price.  Some are already openly wondering if this next round of quantitative easing is going to be the biggest bank robbery in history.  Most Americans won’t understand these “backdoor bailouts” well enough to get upset about them, but that doesn’t mean that they won’t be just as bad (or even worse) than the last round of bailouts.  In the end, all of the inflation that this new round of quantitative easing is going to cause is going to be a “hidden tax” on all of us.

These new backdoor bailouts are going to work something like this….

1) The big U.S. banks have massive quantities of junk mortgage-backed securities that are worth little to nothing that they desperately want to get rid of.

2) They convince the Federal Reserve (which the big banks are part-owners of) to buy up these “toxic assets” at way above market price.

3) The Federal Reserve creates massive amounts of money out of thin air to buy up all of these troubled assets.  The public is told that all of this “quantitative easing” is necessary to stimulate the U.S. economy.

4) The big banks are re-capitalized and have gotten massive amounts of bad mortgage securities off their hands, the Federal Reserve has found a way to pump hundreds of billions (if not trillions) of dollars into the economy, and most of the American people are none the wiser.

During a recent appearance on MSNBC, Matt Taibbi of Rolling Stone did a great job of explaining how this all works….

http://www.youtube.com/watch?v=uwhMVB0XzPU&feature=player_embedded

But this isn’t the only way that the Federal Reserve forks over massive amounts of cash to the big U.S. banks.  In a previous article, I described how the U.S. Federal Reserve lends huge quantities of nearly interest-free money to big U.S. banks which they turn around and invest in U.S. Treasuries which bring in a return of three percent or so.  In essence, it is a legalized way for the big U.S. banks to make mountains and mountains of free money.

The truth is that the Federal Reserve does whatever it can to ensure that the big U.S. banks stay fat and happy. 

So what about the small banks?  What happens to them?

Well, the vast majority of the small banks are considered “not big enough for bailouts” and they are allowed to die like dogs.

Don’t let anyone ever fool you into thinking that the U.S. banking system has a level playing field.

For weeks, Federal Reserve officials have been coming out and have been dropping hints about how important it is for them to take “action” and implement another round of quantitative easing in order to help stimulate the U.S. economy.

In fact, during his speech on Friday, you could almost hear Ben Bernanke salivating at the thought of printing more money.

But nobody ever really asks who is going to be the first to get their hands on all this money that the Fed is going to pump into the economy.

The answer, of course, is obvious.

It is going to be the big banks – the same banks that are part-owners of the Federal Reserve and that have tremendous influence over Fed policies.

But even though this is all more than a little shady, is it such a bad thing for the rest of us if the Federal Reserve bails out the big banks and brings some much needed stability back to the U.S. financial system?

After all, if “Foreclosure-Gate” could potentially cause a nightmarish financial meltdown, isn’t it better for the Federal Reserve to step in and soak up large amounts of these toxic assets?

Those are legitimate questions.

Certainly the Federal Reserve has the power to step in and smooth over all sorts of short-term problems by papering them with money, but in the end printing more money will just make our long-term problems even worse.

Whenever a new dollar is introduced into the system, every other dollar in existence loses a little bit of value.

When trillions of new dollars get introduced into the system, it has the potential to create an inflationary nightmare. 

Already, a number of top Fed officials are publicly saying that inflation is “too low” and that we need to purposely generate more inflation in order to “stimulate” the U.S. economy.

Yes, that is just as insane as it sounds, but that is what they are actually proposing.

Apparently many top Federal Reserve officials honestly believe that they can pump trillions into the economy, jack up inflation significantly, and little harm will be done.

But even before “QE2” has begun, we are already starting to see all kinds of little bubbles beginning to develop in the financial system.  For example, commodity prices are skyrocketing right now, and that will soon be affecting the price we pay for food at the supermarket.

We are already on the road to serious inflation and the Federal Reserve has not even fired up the money hoses yet.  So what is going to happen after they pump trillions more into the economy?

Printing more money and giving it to the banks is not going to solve our economic problems.  It is just going to make them worse.

But unfortunately, American voters get no say about any of this.  Our national monetary policy is in the hands of an unelected central bank that does pretty much whatever it wants.   

An economic nightmare is coming, and you had better get ready.

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