Money

Shell Game

The entire U.S. financial system has become a gigantic shell game.  While it is still in motion, a shell game can be mesmerizing to watch.  But when it ends the consequences can be painful.  So exactly what is a shell game?  According to Wikipedia, a shell game “is portrayed as a gambling game, but in reality, when a wager for money is made, it is a confidence trick used to perpetrate fraud.”  Sadly, that is exactly what is happening on the global stage today.  The Federal Reserve is like a con artist that is desperately trying to stay one step ahead of everyone else.  The folks at the Fed know that the debt that the U.S. government has accumulated is not sustainable and will eventually collapse.  They also know that the U.S. dollar is eventually going to become essentially worthless.  But for now the Federal Reserve is putting on a grand show and is trying to keep everyone believing that the game is fair and legitimate.

The Federal Reserve’s much ballyhooed “QE2” program has come to an end, and most Americans still don’t even understand what “quantitative easing” is.

Basically, what the Federal Reserve did was zap hundreds of billions of dollars into existence out of thin air and used them to buy U.S. government debt.

It is kind of like if you are playing poker with someone and they reach under the table and pull out a gigantic pile of chips which they add to their own stack.

In the process, the big banks made a ton of money because they are the ones that the Federal Reserve was buying U.S. Treasuries from and the U.S. government was happy because all of the new government debt being issued was getting soaked up by the system.

Of course all of this is one giant Ponzi scheme, but up to this point the Federal Reserve has gotten away with it.

Meanwhile, average Americans were getting the short end of the stick because all of this new money has been causing the price of food and the price of gas to go up.

But now QE2 has come to an end.

So does that mean that  “quantitative easing” is going to be completely over?

No, not really.  The shell game continues.

The Federal Reserve has announced that it is going to continue to purchase U.S. government debt using the proceeds from maturing debt that it already owns.  It is being projected that the Federal Reserve will purchase 300 billion dollars in U.S. government debt over the next 12 months using this method.

This isn’t being called “quantitative easing”, but that is essentially what it is.  In fact, one CNN article is calling it “QE2.5”….

QE2 is just about done. But the Federal Reserve will still be buying massive amounts of long-term Treasuries.

In fact, the Fed’s purchases over the next year will likely be at least $300 billion. That’s half the size of QE2 — even if QE3 never takes place.

But “quantitative easing” is just one example of a shell game run by the Fed.  There have been lots more.

For example, during the financial crisis the Federal Reserve started loaning gigantic amounts of cash to the big banks for next to nothing.

The big banks took a lot of this cash and invested it in U.S. Treasuries.  U.S. Treasuries typically only pay a couple of percentage points, but when you can borrow massive amounts of nearly free money suddenly they become extremely profitable.

Instead of loaning out large amounts of money to all of us to get the economy rolling again, the big banks just parked huge amounts of cash in U.S. Treasuries and watched the risk-free profits come rolling in.

In this way, the Federal Reserve helped big banks make a ton of money and they supported the exploding federal government debt load at the same time.

The chart below shows that the amount of U.S. government securities owned by the banks has increased exponentially since the beginning of the financial crisis.  This is not an accident….

The Federal Reserve does lots of stuff like this.  They know that they will probably never get audited and they know that the American people don’t understand all of this financial stuff, so they get away with it.

But what if something came along and suddenly interrupted the shell games that the Fed is playing?

Well, that is exactly what this debt ceiling debate threatens to do.

If the U.S. defaults, even for a short time, all of the financial shell games and Ponzi schemes are going to be greatly jeopardized.

If Congress does not raise the debt ceiling by August 2nd, the U.S. government will start defaulting, and that would unleash a tremendous amount of chaos.

A recent USA Today article described some of the things that might happen if the government was not able to borrow any more money later this summer….

If Social Security, Medicare, Medicaid, unemployment benefits, payments to defense contractors and interest payments on Treasury bonds were exempt, that would be all the government could afford for the month. No money for troops or veterans. No tax refunds. No food stamps or welfare. No federal salaries or benefits.

In addition, financial markets all over the world would be severely rattled.  If the default only lasted a couple of days it would not be bad, but if the U.S. ended up defaulting on debts for weeks or months it really would be cataclysmic.

The International Monetary Fund warned this week that a failure to raise the debt ceiling by August 2nd would be a “severe shock” to global financial markets.

In this case, the IMF is actually right.  In fact, a “severe shock” would be an understatement.

The managing director of Standard & Poor’s has told Reuters that if the U.S. starts defaulting, the credit rating on U.S. Treasury bonds that are supposed to mature on August 4th will go all the way down from AAA to D….

Chambers, who is also the chairman of S&P’s sovereign ratings committee, told Reuters on Tuesday that U.S. Treasury bills maturing on August 4 would be rated ‘D’ if the government fails to honor them. Unaffected Treasuries would be downgraded as well, but not as sharply, he said.

“If the U.S. government misses a payment, it goes to D,” Chambers said. “That would happen right after August 4, when the bills mature, because they don’t have a grace period.”

A lot of Americans believe that Congress should just refuse to raise the debt ceiling and let the whole system crash.  But the reality is that most Americans simply have no idea how much of a financial disaster that would be for the entire globe.

Yes, the U.S. national debt is completely and totally out of control.  Yes, something must be done about it urgently.

But defaulting on our debts and wrecking global financial markets is not going to solve much of anything.

Sadly, even if we do not default on our debts this year, the reality is that the U.S. government debt bubble is going to collapse one way or another eventually.

The path that we are currently on is not even close to sustainable.

Even as our debt expands exponentially, the U.S. economy is being systematically dismantled and we are becoming poorer as a nation.

As I have written about previously, jobs and businesses are leaving the United States at a staggering rate because of cheap labor overseas and because of ridiculous regulations.  The business environment in this country has become incredibly toxic.

Stanford University’s David Cheriton was instrumental in helping Sergey Brin and Larry Brin develop Google.  Now he is warning that the anti-business policies of Barack Obama and the U.S. Congress are wrecking the economy….

“When you look at, say, Larry and Sergey of Google, they made billions of dollars, but they contributed many more billions of dollars to the US economy. And so we should be empowering these people; we should be cultivating more of the next generation of those types. And yet, I think there’s almost a hostile attitude towards people who have been successful in this country.”

As I wrote about the other day, the rate of new business creation in the United States has been declining steadily since the 1980s.  We won’t have a chance at a real economic recovery until the creation of small businesses is encouraged once again.

But today businesses of all sizes are trying to avoid U.S. taxation.  Right now, the United States has the highest corporate tax rate in the entire world.  Sadly, all businesses have a great deal of incentive to avoid incorporating in the United States.

A recent article in The Wall Street Journal talked about this phenomenon….

As savvy investors and entrepreneurs search for ways to minimize the impact of the U.S. tax system, with its relatively high rates and global reach, they are increasingly incorporating overseas, tax experts say. Some private-equity firms have relocated U.S. companies or divisions to tax-haven countries. U.S. multinational companies have spun off foreign subsidiaries in tax havens. U.S. start-ups are even beginning life offshore.

Large numbers of really good companies are fleeing the United States.

What we are doing is not working.

So what is the answer?

Well, as I have said before, we need to entirely scrap the current tax system and come up with something that works in the 21st century.

But we all know that is not going to happen.

Meanwhile, our economy continues to unravel.  According to the Department of Labor, the unemployment rate rose in 210 metro areas during the month of May, and it only declined in 131 metro areas.

Consumer confidence in this country has hit a seven-month low, and average Americans are becoming increasingly anxious about the state of the economy.

Unfortunately, most of our politicians don’t seem to have any answers and the Federal Reserve is just trying to keep their shell games going.

Every single day the U.S. economy is getting weaker.  Every single day we are going into more debt.  Every single day we get closer to the collapse of the entire system.

Time is running out.

I hope you are making good use of the time you still have left.

50 U.S. Health Care Statistics That Will Absolutely Astonish You

The U.S. health care system has become one gigantic money making scam, and you are about to see the statistics that prove it.  Today, the United States spends more on health care per person than any other country in the world by far.  The health insurance companies and the big pharmaceutical corporations are raking in gigantic mountains of cash and yet the quality of the health care that we receive in return is rather quite poor.  People living in Puerto Rico have a greater life expectancy than we do.  Residents of Cuba have a lower infant mortality rate than we do.  We are the most medicated population on the planet and yet we are also one of the sickest.  If the U.S. health care system was a country, it would have the 6th largest economy on the globe and yet rates of cancer, heart disease and diabetes continue to increase.  The U.S. health care statistics that you are about to read below are absolutely stunning.  For as much money as we shell out for health care, we should have the greatest system in the entire world.  But we don’t.  Something has gone horribly wrong.

As you read this, there are hordes of health bureaucrats and greedy corporate fatcats that are becoming incredibly wealthy while the rest of us go broke trying to pay for our health care.  In the United States today, health care bills cause more bankruptcies than anything else does.  Millions of Americans are afraid to go to the hospital because they know that even a short visit would be a huge financial burden.

Sadly, our politicians in Washington D.C. continue to make the problem worse.  Obamacare was one of the worst pieces of legislation that anyone has ever come up with in the history of the United States.  You could put a thousand monkeys in a room with a thousand typewriters for a thousand years and they wouldn’t come up with anything as bad as Obamacare.  Rather than doing something to address the abuses of the health insurance companies and the pharmaceutical corporations, Obamacare actually gives them more power.  In fact, huge portions of Obamacare are virtually identical to a bill that was written by the health insurance trade association in 2009.  Under Obamacare our health care costs will go up even faster and the quality of our health care will continue to go down.  So please don’t try to tell me that Obamacare is the solution to anything.

The health care system in the United States is so broken that it probably cannot be repaired.  The entire thing needs to be dismantled and completely reinvented.

If you doubt this, just check out the stats that I have compiled below.

As I put together this list of statistics, Business Insider proved to be a very valuable resource.  In addition, I relied heavily on the following articles which I previously authored….

*25 Shocking Facts That Prove That The Entire U.S. Health Care Industry Has Become One Giant Money Making Scam

*18 Ridiculous Statistics About Medical Bills, Medical Debt And The Health Care Industry That Will Make You So Mad You Will Want To Tear Your Hair Out

*The Coming Doctor Shortage

The following are 50 U.S. health care statistics that will absolutely astonish you….

#1 What the United States spent on health care in 2009 was greater than the entire GDP of Great Britain.

#2 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980.  Today they account for approximately 16.3%.

#3 The United States spent 2.47 trillion dollars on health care in 2009.  It is being projected that the U.S. will spend 4.5 trillion dollars on health care in 2019.

#4 One study found that approximately 41 percent of working age Americans either have medical bill problems or are currently paying off medical debt.

#5 According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

#6 Over the past decade, health insurance premiums have risen three times faster than wages have in the United States.

#7 The chairman of Aetna, the third largest health insurance company in the United States, brought in a staggering $68.7 million during 2010. Ron Williams exercised stock options that were worth approximately $50.3 million and he raked in an additional $18.4 million in wages and other forms of compensation.  The funny thing is that he left the company and didn’t even work the whole year.

#8 The top executives at the five largest for-profit health insurance companies in the United States combined to receive nearly $200 million in total compensation for 2009.

#9 Even as the rest of the country struggled with a deep recession, U.S. health insurance companies increased their profits by 56 percent during 2009 alone.

#10 According to a report by Health Care for America Now, America’s five biggest for-profit health insurance companies ended 2009 with a combined profit of $12.2 billion.

#11 In the United States, health insurance administration expenses account for 8 percent of all health care costs.  In Finland, that figure is just 2 percent.

#12 Health insurance rate increases are getting out of control.  According to the Los Angeles Times, Blue Shield of California announced plans earlier this year to raise rates an average of 30% to 35%, and some individual policy holders were slated to see their health insurance premiums rise by up to 59 percent.

#13 According to an article on the Mother Jones website, health insurance premiums for small employers in the U.S. increased 180% between 1999 and 2009.

#14 Since 2003, health insurance companies have shelled out more than $42 million in state-level campaign contributions.

#15 There were more than two dozen pharmaceutical companies that made over a billion dollars in profits each during 2008.

#16 Each year, tens of billions of dollars is spent on pharmaceutical marketing in the United States alone.

#17 Prescription drugs cost about 50% more in the United States than they do in other countries.

#18 Nearly half of all Americans now use prescription drugs on a regular basis according to a CDC report that was recently released. According to the report, approximately one-third of all Americans use two or more pharmaceutical drugs, and more than ten percent of all Americans use five or more drugs on a regular basis.

#19 According to the CDC, approximately three quarters of a million people a year are rushed to emergency rooms in the United States because of adverse reactions to pharmaceutical drugs.

#20 The Food and Drug Administration reported 1,742 prescription drug recalls in 2009, which was a gigantic increase from 426 drug recalls in 2008.

#21 Children in the United States are three times more likely to be prescribed antidepressants than children in Europe are.

#22 The percentage of women taking antidepressants in America is higher than in any other country in the world.

#23 Lawyers are certainly doing their part to contribute to soaring health care costs.  According to one recent study, the medical liability system in the United States added approximately $55.6 billion to the cost of health care in 2008.

#24 According to one doctor interviewed by Fox News, “a gunshot wound to the head, chest or abdomen” will cost $13,000 at his hospital the moment the victim comes in the door, and then there will be significant additional charges depending on how bad the wound is.

#25 Why are c-sections on the rise?  It is because a vaginal delivery costs approximately $5,992, while a c-section costs approximately $8,558.

#26 According to the CIA World Factbook, the United States had a higher infant mortality rate than 45 other nations in 2009.

#27 The infant mortality rate in the United States is nearly three times as high as it is in Singapore.

#28 It is estimated that hospitals overcharge Americans by about 10 billion dollars every single year.

#29 In fact, one trained medical billing advocate says that over 90 percent of all the medical bills that she has audited contain “gross overcharges“.

#30 It is not uncommon for insurance companies to get hospitals to knock their bills down by up to 95 percent, but if you are uninsured or you don’t know how the system works then you are out of luck.

#31 Over the last decade, the number of Americans without health insurance has risen from about 38 million to about 52 million.

#32 People living in the United States are three times more likely to have diabetes than people living in the United Kingdom.

#33 Today, people living in Puerto Rico have a greater life expectancy than people living in the United States do.

#34 According to OECD statistics, Americans are twice as obese as Canadians are.

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

#36 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#37 It is being projected that the federal government will account for more than 50 percent of all health care spending in 2012.

#38 Greece has twice as many hospital beds per person as the United States does.

#39 The state of California now ranks dead last out of all 50 states in the number of emergency rooms per million people.

#40 According to one survey, approximately 1 out of every 4 Californians under the age of 65 has absolutely no health insurance.

#41 According to a PricewaterhouseCoopers report, “inefficient claims processing” costs the U.S. health care system 210 billion dollars every single year.

#42 Today, approximately 40% of all U.S. doctors are age 55 or older.

#43 According to the American Association of Medical Colleges, we were already going to be facing a shortage of more than 150,000 doctors over the next 15 years even before Obamacare was passed.

#44 An IBD/TIPP poll taken back in August 2009 found that 4 out of every 9 American doctors said that they “would consider leaving their practice or taking an early retirement” if Congress passed Obamacare.

#45 According to a survey published in the New England Journal of Medicine, approximately one-third of all practicing physicians in the United States indicated that they may leave the medical profession because of the new health care law.

#46 According to a Merritt Hawkins survey of 2,379 doctors that was conducted in August 2010, 40 percent of all U.S. doctors plan to “retire, seek a nonclinical job in health care, or seek a job or business unrelated to health care” at some point over the next three years.

#47 According to the executive director of Physician Hospitals of America, Obamacare has already forced the cancellation of at least 60 doctor-owned hospitals that were scheduled to open soon.

#48 According to a report released in 2010, Americans spend approximately twice as much as residents of other developed countries do on health care.

#49 If the U.S. health care system was a country, it would be the 6th largest economy in the entire world.

#50 According to numbers released by Deloitte Consulting, a whopping 875,000 Americans were “medical tourists” in 2010.

Will The Banksters And The Corpocracy Eventually Own It All? 29 Statistics About Extreme Income Inequality In America That Will Blow Your Mind

Today, average Americans have less power relative to the monolithic corporate and governmental institutions that dominate our society than at any other point in U.S. history.  Sadly, this is not what our founding fathers ever envisioned.  Our founding fathers established a government “of the people, by the people, for the people”, but what we have today is very far from that ideal.  In America today, wealth and power are very highly concentrated, and if you have neither wealth nor power than most of our politicians really do not have any interest in you.  Over the past several decades, those with huge amounts of money and power have been busy rigging the game so that the rest of the money and power slowly but surely funnels into their hands.  If current trends continue, the banksters and the corpocracy will eventually own it all.  Below you will find 29 statistics about extreme income inequality in America.  Sadly, most of these statistics will be out of date in a year or two because wealth and power will be much more concentrated by that time.

If you are a “Kool-Aid drinking Democrat” you are going to be really upset by this article.  If you are a “Kool-Aid drinking Republican” you are going to be really upset by this article.

Most Republicans have been brainwashed into believing that “capitalism” means cheerleading while the big corporations hoover up money and power.

Most Democrats have no trouble with big corporations either because most establishment Democrats have been brainwashed into believing that large concentrations of power (whether governmental or corporate) are generally good.  Most Democrats just wish that big corporations were a little less greedy and were a little more “socially responsible”.

Today, the big banks, the big corporations and the federal government are all in bed with one another and it is average Americans that always lose out.

Our founding fathers tried to warn us about large concentrations of power.  They attempted to establish a very limited central government, they wanted to keep us free from the tyranny of the big banks and they were very suspicious of large corporations.

In a 2010 article, Rick Ungar noted that corporations were very seriously restricted in the early days of America….

After the nation’s founding, corporations were, as they are today, the result of charters granted by the state. However, unlike today, they were limited in how long they were permitted to exist (typically 20 or 30 years), only permitted to deal in one commodity, they could not own shares in other corporations, and their property holdings were expressly limited to what they needed to accomplish their corporate business goals.

My how things have changed.

“Capitalism” is supposed to be about the empowerment of individuals and families and small businesses.

Instead, today “capitalism” has come to mean something completely different.  Today, the biggest, meanest concentrations of wealth devour everyone else with a big assist from the government.

At this point, average Americans mean next to nothing in the political process.  This point was eloquently made in a recent column by Robert Reich….

The unemployed are politically invisible. They don’t make major campaign donations. They don’t lobby Congress. There’s no National Association of Unemployed People.

Their ranks are filled with women who had been public employees, single mothers, minorities, young people trying to enter the labor force, and middle-aged men who have been out of work for longer than six months. You couldn’t find a collection of people with less political clout.

I would not normally quote Robert Reich, but he made a good point.  If you don’t have an army of lobbyists or any money to give to them then most of our politicians don’t really care what you think or how much you are hurting.

Just think about the amount of power and money that Exxon Mobil or Wal-Mart has compared to the amount of power and money that an average American has.

Our society has veered very far from the egalitarian ideal that our founding fathers once hoped for.

The corporate giants are so powerful that it is next to impossible for small businesses to directly compete with them.

Just try it some time.

Many banks and corporations have become so big that the world literally cannot afford for them to fail.

For example, three U.S. corporations control approximately 90% of the world’s grain trade.

So what happens if those three corporations collapse?

That is something to think about.

But of course average Americans are never “too big to fail”.  The big banks begged and begged for bailouts, but if you are late on your debt payments they will chuck you into prison.

Also, when wealth and power are so highly concentrated, economic rewards flow only to a few.  Corporatism (as opposed to true capitalism) produces a handful of winners and a whole lot of losers.

As I have written about previously, the middle class is being destroyed.  If current trends are allowed to continue long enough we eventually won’t have much of a middle class left at all.

The following are 29 statistics about extreme income inequality in America that will blow your mind….

#1 In the United States today, the richest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

#2 The wealthiest 1% of all Americans now own more than a third of all the wealth in the United States.

#3 The wealthiest 1% of all Americans own over 50% of all the stocks and bonds.

#4 The poorest 50% of all Americans collectively own just 2.5% of all the wealth in the United States.

#5 According to a joint House and Senate report entitled “Income Inequality and the Great Recession“, the top one percent of income earners in the United States brought in a total of 10.0 percent of all income income in 1980, but by the time 2008 had rolled around that figure had skyrocketed to 21.0 percent.

#6 Between 1979 and and 2007, the average household income of the top 1% of all Americans soared from $346,600 to $1.3 million.  During that same time period the average household income for middle class Americans increased only slightly.

#7 According to Harvard Magazine, 66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.

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

#9 According to a new report from the AFL-CIO, the average CEO made 343 times more money than the average American did last year.

#10 The number of “low income jobs” in the U.S. has risen steadily over the past 30 years and they now account for 41 percent of all jobs in the United States.

#11 Since 1979, real median weekly earnings for high school dropouts has declined by 22 percent.

#12 During this economic downturn, employee compensation in the United States has been the lowest that it has been relative to gross domestic product in over 50 years.

#13 Half of all American workers now earn $505 or less per week.

#14 Since the year 2000, we have lost 10% of our middle class jobs.  In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.  Meanwhile, our population has gotten significantly larger.

#15 Ten years ago, the United States was ranked number one in average wealth per adult.  In 2010, the United States fell to seventh.

#16 According to one recent study, approximately 21 percent of all children in the United States were living below the poverty line in 2010. In the UK and in France that figure is well under 10 percent.

#17 Today, one out of every four American children is on food stamps.

#18 It is being projected that approximately 50 percent of all U.S. children will be on food stamps at some point in their lives before they reach the age of 18.

#19 According to Moody’s Analytics, the wealthiest 5% of households in the United States now account for approximately 37% of all consumer spending.

#20 The number of Americans that are going to food pantries and soup kitchens has increased by 46% since 2006.

#21 The U.S. poverty rate is now the third worst among the developed nations tracked by the Organization for Economic Cooperation and Development.

#22 Approximately half of all American workers make $25,000 a year or less.

#23 The wealthiest 1% of the earth’s population controls 39% of the wealth.

#24 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.

#25 One year after the recent financial collapse the top 25 hedge fund managers earned a total of approximately $25 billion.  That breaks down to an average of $1 billion each.

#26 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.

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

#28 The top 0.01% of Americans make an average of $27,342,212.  The bottom 90% make an average of $31,244.

#29 58 percent of the members of Congress are millionaires while only about 1 percent of the general population is made up of millionaires.

So what is the solution?

Well, our liberal friends insist that the solution to all of this inequality is to tax the rich and to distribute the wealth to the poor.

Well, there are three major problems with that.

Number one, when you raise taxes too high you eliminate the incentive to work hard.

Number two, when you make it too easy to depend on government handouts you create an underclass of economic parasites.

Number three, the big corporations and the ultra-wealthy have become masters at avoiding taxation no matter what the rates are.

Before you tax the rich too much, you might want to consider the consequences of doing so.

Why should someone bust his or her rear end to run a business and make a lot of money if the government is just going to come along and take over half of all the money that is made?

Personally, if I ever get into a tax bracket where over half the money I make goes to the government then I simply will not work nearly as hard at that point.

But if that starts happening on a large scale, then you have a significant loss of economic activity which hurts the economy overall.

Already, the top 20 percent of all income earners in the United States pay approximately 86 percent of all federal income taxes.

When the government “steals from the rich” and “gives to the poor”, that also tends to create a large group of people that decides that it is easier to take from the government than it is to work for a living.

In 1980, government transfer payments accounted for just 11.7% of all income.  Today, government transfer payments account for 18.4% of all income.

That is not a good trend.

At this point, U.S. households are now receiving more income from the U.S. government than they are paying to the government in taxes.

That is not even close to sustainable, but nobody wants to give up their “government benefits”.

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

Yes, there will always be those that cannot help themselves and we should always have a “safety net”.

But when you look around it doesn’t take a genius to figure out that things have gotten completely and totally out of control.

Right now, an all-time record 44 million Americans are on food stamps.

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

The U.S. government is even handing out billions of dollars to homeowners that are delinquent on their mortgages.

This is not a formula for long-term economic success.

When people get addicted to government checks they never want to stop.

But this is not what the poor need.

What the poor need are good jobs that pay good wages.  Unfortunately, we keep shipping millions of those jobs overseas.  So now the Chinese economy is thriving and our formerly great manufacturing cities are turning into hellholes.

Handouts do not give people hope, dignity and a future, but jobs can.

Also, as I have written about before, the big corporations and the ultra-wealthy have become masters at avoiding taxes.  There is a reason why approximately a third of all the wealth in the world is held in “offshore” tax havens.

What U.S. corporations are able to get away with is absolutely amazing.

The following figures come directly out of a report by Citizens for Tax Justice.  These are combined figures for the tax years 2008, 2009 and 2010.

During those three years, all of the corporations below made a lot of money.  Yet all of them paid net taxes that were below zero for those three years combined.

How is that possible?  Well, it turns out that instead of paying in taxes to the federal government, they were actually getting money back.

So for these corporations, their rate of taxation was actually below zero.

If you have not seen these before, you are going to have a hard time believing some of these statistics…..

*Honeywell*

Profits: $4.9 billion

Taxes: -$34 million

*Fed Ex*

Profits: $3 billion

Taxes: -$23 million

*Wells Fargo*

Profits: $49.37 billion

Taxes: -$681 million

*Boeing*

Profits: $9.7 billion

Taxes: -$178 million

*Verizon*

Profits: $32.5 billion

Taxes: -$951 million

*Dupont*

Profits: $2.1 billion

Taxes -$72 million

*American Electric Power*

Profits: $5.89 billion

Taxes -$545 million

*General Electric*

Profits: $7.7 billion

Taxes: -$4.7 billion

Are you starting to get the picture?

I wish I could make $7.7 billion, pay no taxes and have the government give me $4.7 billion on top of it.

Our system has become corrupted beyond all recognition.

We need to throw out the current system of taxation and come up with something entirely new.

In fact, the truth is that for most of U.S. history there was not a federal income tax at all.  But that is a story for another day.

If you believe in the U.S. Constitution and in the republic that our founding fathers established, then the very high concentrations of wealth and power in our society today should greatly concern you.  Income inequality is not a “Democrat” or a “Republican” issue.  A vibrant, thriving middle class should be a goal all of us can embrace.

But I have a feeling a whole lot of “Democrats” and a whole lot of “Republicans” were deeply offended by this article.  Feel free to express your opinion by leaving a comment below….

Global Financial Markets Tremble As Bad Economic News Continues To Pour In

As the U.S. economy starts to slow down once again, global financial markets are beginning to tremble.  Over the past couple of weeks, all kinds of bad economic news has been pouring in.  The ADP jobs report was a “disaster”, the housing numbers are dismal, manufacturing has slowed way down and consumer confidence is dropping like a rock.  The Democrats and the Republicans are bickering over the debt ceiling and this is causing a lot of uncertainty as well.  All of this bad news is starting to spook investors.  On Wednesday, the Dow was down 279 points and the NASDAQ was down 65 points. It was the worst day of the year for the Dow, and many are wondering what is going to happen next if we see even more bad economic data.  QE2 is slated to end at the end of the month, and already the bond markets seem to be anticipating QE3.  If the U.S. economy enters another significant downturn during the second half of 2011, it seems quite likely that the Federal Reserve would attempt to do something to stimulate the economy and that would probably mean more money printing.

This article is essentially the second part to an article I wrote yesterday about how we are seeing warnings about the next financial collapse all over the place right now.  Panic is building and a lot of investors are trying to figure out where to put their money.  Suddenly everyone seems a whole lot less optimistic than they were a couple of months ago.

Michael Sheldon, the chief market strategist at RDM Financial, believes that all of the bad economic news we are seeing right now is clear evidence that we are entering an “economic slump”….

“Initially, we just had bad news from the weekly jobless claims data, but now we’re starting to see a broad-based economic slump.”

So what are some of the numbers that have investors so concerned?

Mike Riddell, a fund manager at M&G Investments in London, recently explained to CNBC why he is so alarmed right now….

“US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing.”

The bad economic news just keeps rolling in.  It is almost as if someone has slammed on the economic brakes.

The following are a few more examples of the bad economic numbers that have come out over the past couple of days….

*According to the latest ADP Employment Services report, private employers in the United States only added 38,000 jobs last month.  That number had been expected to be somewhere around 175,000.  This jobs report is being called a “disaster“.

*Manufacturing activity in May was much lower than most economists were projecting.  The following is how CNBC described the newest numbers from ISM….

The Institute for Supply Management (ISM) said its index of national factory activity fell to 53.5 in May from 60.4 the month before. The reading missed economists’ expectations for 57.7.

*Moody’s downgraded Greek debt again on Wednesday, and stated that they believe that there is a 50/50 chance that Greece will default.  This time Moody’s downgraded Greek debt by three levels all the way down to Caa1, and that caused the euro to fall like a rock.

To get an idea of just how imbalanced the European financial system has become at this point, just check out this article.

*Earlier this week it was announced that U.S. home prices have declined 5.1% from a year ago.  Sadly, U.S. home prices have now fallen more than they did during the entire Great Depression.

*As I mentioned yesterday, the consumer confidence index fell from 66 in April to 60.8 in May.

So what is causing all of this?

Well, the truth is that the “sugar high” that the U.S. economy has been enjoying is coming to an end.

QE2 is almost over and the vast majority of the federal “stimulus money” has been spent.  Now the federal government is talking about getting spending under control and we are seeing austerity programs being implemented on the state and local level from coast to coast.

But without massive intervention by the Federal Reserve and by the U.S. government will the U.S. economy be able to stand?

Douglas Borthwick, a managing director with Faros Trading in Stamford, Connecticut is not optimistic….

“The sugar high that has buoyed the U.S. economy over the past six months is wearing out, and there is little in economic growth or foundation to show for it.”

The truth is that the Fed and the U.S. government went all-out in an attempt to keep the economy from falling into a total depression.  The U.S. government has been running budget deficits well in excess of a trillion dollars and the Fed has been printing money like mad.  If these measures are removed, the economic crisis we are experiencing might just get a whole lot worse.

How much worse?

Well, just check out what Peter Yastrow, a market strategist for Yastrow Origer, recently told CNBC….

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

Ben Bernanke and Barack Obama keep talking about the “economic recovery” but most Americans know better.

According to one new poll, 66% of Americans believe that we are still in a recession.

Perhaps this is a sign that the American people are starting to wake up to the new economic realities that we are facing.

The U.S. economy is being ripped apart and shredded.  Thanks to our short-sighted trade policies, the Chinese economy has roared to life while the U.S. economy continues to ship jobs and factories overseas.

But instead of facing up to our economic problems and coming up with some solutions, our nation has been on a horrific debt binge over the last couple of decades in a desperate attempt to maintain our standard of living.

One of the reasons why I pound on the economic news day after day is so that more people will really understand what is going on and will start to wake up.

In fact, if you have a family member of a friend that just doesn’t get it, the following is a great article to share with that person: “50 Things Every American Should Know About The Collapse Of The Economy“.

Look, even Barack Obama says that the present state of affairs is “unsustainable” and that changes have to be made.

But if the U.S. government decided that it was going to go to a balanced budget tomorrow, that would suck approximately a trillion and a half dollars out of the economy.

What do you think would happen if that came to pass?

Of course by going into even more debt we are destroying the economic future of our children and our grandchildren.

We have piled up the biggest mountain of debt in the history of the world and we expect future generations to pay it off.

It is absolutely disgusting what we have done and it is thievery on the highest level.

Everyone knows that we are living in the greatest debt bubble in the history of the world and that at some point it is going to pop.

Perhaps the best we can hope for at this point is for a little bit more time before economic disaster strikes.

Unfortunately, all of the latest economic news seems to be pointing toward another economic slowdown.

Hold on to your seats.

Inflation 2011: Honey – They Shrunk Our Paychecks

Do you ever have the feeling that there are holes in your pockets?  These days our money seems to slip through our hands faster than ever.  The Federal Reserve keeps telling us that the rate of inflation in 2011 is “close to zero”, and this is causing confusion for many Americans because they are making just as much money as they did in previous years but it doesn’t seem to go nearly as far.  So what in the world is going on out there?  Well, sadly, the truth is that we really don’t even know what the government considers “inflation” to be anymore.  The way that the U.S. government calculates inflation has changed an astounding 24 times since 1978.  You see, it is always politically beneficial to have a low inflation rate, so recent administrations have been changing the formula constantly in an attempt to look good.  But these days most Americans know something is up.  All they have to do is stop at a gas station, go shopping for food or open up their bills. The reality is that inflation in 2011 is about as bad as we saw back in the 1970s, it is just that the government is much less honest about it now.

Many years ago Kenny Rogers released a song that contained the following lyrics….

You got to know when to hold em, know when to fold em
Know when to walk away and know when to run
You never count your money when you’re sitting at the table
There’ll be time for counting when the dealer’s done

Well, the U.S. middle class has been dealt a losing hand, but in the game of life you just can’t fold.

Over the past 3 decades, the average household income for the bottom 80 percent of Americans has been remarkably flat.  In fact, over the past several years we have actually seen median household income decline several times. If you do not know about how the U.S. middle class is being ripped to shreds, just read this article.  Without a doubt, America is getting poorer.

Well, not the top 1 percent, but the vast majority of the rest of us sure are.

Meanwhile, prices have started to rise with a vengeance.

According to an article in the Daily Mail, a Memorial Day cookout will cost you 29 percent more this year than it did last year.

That doesn’t sound good.

Will it be 29 percent more expensive again next year?

Perhaps some of us will just have to stop having Memorial Day cookouts because we can’t afford them anymore.

The price of gas is also digging into our paychecks big time.

A gallon of gas costs about a dollar more than it did a year ago, but we can’t avoid buying gas.  All of us have got to get to work and drive to the store.

Sadly, each time the price of gasoline goes up 50 cents it takes about $70 billion out of the U.S. economy (on a yearly basis).

A recent article in USA Today described the kind of impact these high gas prices are having on average American families….

For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal.

Households spent an average of $369 on gas last month. In April 2009, they spent just $201.

But don’t worry, according to Ben Bernanke we barely have any inflation at all in 2011.

Some companies are trying to avoid raising their prices by reducing their package sizes.  A recent article posted on Marketwatch entitled “Inflation diet: same price, less product” explored this phenomenon in detail.  Millions of Americans are going to the supermarket and are finding that many of their favorite products are now 10 or 20 percent smaller and yet they are paying the same price as before.

Another thing that is happening is that product quality is going down.  Have you noticed how things just don’t seem to be made the way that they used to?  This is not a coincidence.

According a recent article on CNBC, retailers are skimping on quality as a way to deal with rising costs….

According to Global Hunter Securities Macro and Consumer Strategist Richard Hastings, retailers have been collaborating with their production contractors for about two years. They are trying to push back on the total volume, cost and weight of every unit.

“Along the way, the consumer barely noticed. By now, everybody knows something is wrong,” said Hastings. “If we had to put a number on it, it’s probably a 7.5% decline in total quality and durability of products compared to a bigger increase in the cost of production per unit made outside of the U.S.”

But no matter how hard companies try to hide it, at some point the American people are going to wake up and they are going to realize that they aren’t getting as much for their money as they were before.

This is why so many people get upset when the Federal Reserve and the U.S. government devalue our money.  Inflation is a “hidden tax” on every single one of us.  When our dollars don’t buy as much stuff, that means that we are all poorer than we were before.

All of this inflation is coming at a time when the economy is really struggling.  Personally, I am seeing all kinds of signals that the economy is really starting to slow down once again.

What is going to make things even worse is all of the government austerity that is going to be implemented over the next couple of years.

Once upon a time, a government job was the safest kind of a job you could have.  Sadly, as a recent Reuters article noted, those days are long gone….

Around 450,000 people who work for U.S. states, counties, cities, towns and villages could get pink slips in fiscal 2012, sharply up from the 300,000 positions shed this year, a report said on Monday.

So should we, as many of our liberal friends insist, tax the rich so that we can pay for all of those government workers?

Well, the truth is that the wealthy are already being taxed into oblivion.  If you doubt this, just read this editorial in The Wall Street Journal: “A 62% Top Tax Rate?”

Most of the “ultra-wealthy” have learned how to avoid most of this taxation by moving their wealth offshore.  In fact, as I have written about previously, it is estimated that a third of all the wealth in the world is now held in “offshore” tax havens.

So why are we seeing so much inflation right now?

Well, I covered that in my previous article entitled “When Faith In U.S. Dollars And U.S. Debt Is Dead The Game Is Over – And That Day Is Closer Than You May Think“.

The Federal Reserve and our politicians in Washington D.C. have been very naughty.  They have been systematically destroying the value of our dollars.

Someday when you are using your money as toilet paper because toilet paper is actually much more valuable than dollars are you will wish that the American people had stood up and insisted on a different path.

Don’t laugh – during the hyperinflation that the Weimar Republic experienced in the 1920s, German citizens were actually burning stacks of money in their furnaces in order to keep their homes warm.

100 years ago, a U.S. dollar had more than 20 times the purchasing power than it has today.

Sadly, we are now in a terminal phase of dollar devaluation.  It is only going to get worse from here.  Someday we will look back and long for the days of “low inflation” that we had back in 2011.

20 Questions To Ask Anyone Foolish Enough To Believe The Economic Crisis Is Over

If you listen to Ben Bernanke, Barack Obama and the mainstream media long enough, and if you didn’t know any better, you might be tempted to think that the economic crisis is long gone and that we are in the midst of a burgeoning economic recovery.  Unfortunately, the truth is that the economic crisis is far from over.  In 2010, more homes were repossessed than ever before, more Americans were on food stamps than ever before and a smaller percentage of American men had jobs than ever before.  The reality is that the United States is an economic basket case and all of these natural disasters certainly are not helping things.  The Federal Reserve has been printing gigantic piles of money and the U.S. government has been borrowing and spending cash at a dizzying pace in an all-out effort to stabilize things.  They have succeeded for the moment, but our long-term economic problems are worse then ever.  We are still in the middle of a full-blown economic crisis and things are about to get even worse.

If you know someone that is foolish enough to believe that the economic crisis is over and that our economic problems are behind us, just ask that person the following questions….

#1 During the 23 months of the “Obama recovery”, an average of about 23,000 jobs a month have been created.  It takes somewhere in the neighborhood of 150,000 jobs a month just to keep up with population growth.  So shouldn’t we hold off a bit before we declare the economic crisis to be over?

#2 During the “recession”, somewhere between 6.3 million and 7.5 million jobs were lost.  During the “Obama recovery”, approximately 535,000 jobs have been added.  When will the rest of the jobs finally come back?

#3 Of the 535,000 jobs that have been created during the “Obama recovery”, only about 35,000 of them are permanent full-time jobs. Today, “low income jobs” account for 41 percent of all jobs in the United States. If our economy is recovering, then why can’t it produce large numbers of good jobs that will enable people to provide for their families?

#4 Agricultural commodities have been absolutely soaring this decade.  The combined price of cotton, wheat, gasoline and hogs is now more than 3 times higher than it was back in 2002.  So how in the world can the Federal Reserve claim that inflation has been at minimal levels all this time?

#5 Back in 2008, banks had a total of 27 billion dollars in excess reserves at the Fed.  Today, banks have a total of approximately 1.5 trillion dollars in excess reserves at the Fed.  So what is going to happen when all of this money eventually hits the economy?….

#6 If the U.S. economy is recovering, then why are shipments by U.S. factories still substantially below 2008 levels?

#7 Why are imports of goods from overseas growing much more rapidly than shipments of goods from U.S. factories?

#8 According to Zillow, the average price of a home in the U.S. is about 8 percent lower than it was a year ago and that it continues to fall about 1 percent a month. During the first quarter of 2011, home values declined at the fastest rate since late 2008. So can we really talk about a “recovery” when the real estate crisis continues to get worse?

#9 According to a shocking new survey, 54 percent of Americans believe that a housing recovery is “unlikely” until at least 2014.  So how is the housing industry supposed to improve if so many people are convinced that it will not?

#10 The latest GDP numbers out of Japan are a complete and total disaster.  During the first quarter GDP declined by a stunning 3.7 percent.  Of course I have been saying for months that the Japanese economy is collapsing, but most mainstream economists were absolutely stunned by the latest figures.  So will the rest of the world be able to avoid slipping into a recession as well?

#11 Next week, Republicans in the House of Representatives are going to allow a vote on raising the debt ceiling.  Everyone knows that this is an opportunity for Republican lawmakers to “look tough” to their constituents (the vast majority of which do not want the debt ceiling raised).  Everyone also knows that eventually the Republicans are almost certainly going to cave on the debt ceiling after minimal concessions by the Democrats.  The truth is that neither “establishment Republicans” nor “establishment Democrats” are actually serious about significantly cutting government debt.  So why do we need all of this political theater?

#12 Why are so many of our once great manufacturing cities being transformed into hellholes?  In the city of Detroit today, there are over 33,000 abandoned houses, 70 schools are being permanently closed down, the mayor wants to bulldoze one-fourth of the city and you can literally buy a house for one dollar in the worst areas.

#13 According to one new survey, about half of all Baby Boomers fear that when they retire they are going to end up living in poverty.  So who is going to take care of them all when the money runs out?

#14 According to the U.S. Bureau of Labor Statistics, an average of about 5 million Americans were being hired every single month during 2006.  Today, an average of about 3.5 million Americans are being hired every single month.  So why are our politicians talking about “economic recovery” instead of “the collapse of the economy” when hiring remains about 50 percent below normal?

#15 Since August, 2 million more Americans have left the labor force.  But the entire period from August to today was supposed to have been a time of economic growth and recovery.  So why are so many Americans giving up on looking for a job?

#16 According to Gallup, 41 percent of Americans believed that the economy was “getting better” at this time last year.  Today, that number is at just 27 percent.  Are Americans losing faith in the U.S. economy?

#17 According to the U.S. Census, the number of children living in poverty has gone up by about 2 million in just the past 2 years, and one out of every four American children is currently on food stamps.  During this same time period, Barack Obama and Ben Bernanke have told us over and over that the U.S. economy has been getting better. So what is the truth?

#18 America has become absolutely addicted to government money. 59 percent of all Americans now receive money from the federal government in one form or another. U.S. households are now receiving more income from the U.S. government than they are paying to the government in taxes. Americans hate having their taxes raised and they hate having their government benefits cut.  So is there any hope that this will ever be turned around before disaster strikes?

#19 The combined debt of the major GSEs (Fannie Mae, Freddie Mac and Sallie Mae) has increased from 3.2 trillion in 2008 to 6.4 trillion in 2011.  How in the world is the U.S. government going to be able to afford to guarantee all of that debt on top of everything else?

#20 If the U.S. national debt (more than 14 trillion dollars) was reduced to a stack of 5 dollar bills, it would reach three quarters of the way to the moon.  The U.S. government borrows about 168 million dollars every single hour.  If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.  So how in the world can our politicians tell us that everything is going to be okay?

Even Ben Stein Is Warning That An Economic Collapse Is Coming

He sure has come a long way since “Ferris Bueller’s Day Off”.  During a recent television segment for CBS, Ben Stein declared that “the tea leaves are ominous” and he warned that an economic collapse may be coming.  In particular, Ben Stein is deeply concerned about inflation.  During his recent appearance on CBS, Stein proclaimed that the Federal Reserve is “just shoving money out the door as fast as it can” and that this could have horrific consequences for the U.S. financial system.  Sadly, Ben Stein is exactly right on this point.  The Federal Reserve has already injected enough money into the financial system to create an inflationary disaster.  Fortunately most of this liquidity is still being held by the banks (this will be further explored below), but once all of that money starts getting released into the financial system it is going to unleash economic chaos.

In the video that you are about to watch, Ben Stein states that “when serious inflation hits, it hits everyone”.

And that is absolutely true.  Inflation is a hidden tax on ever single dollar that each one of us holds.  Nobody can cheat that hidden tax and nobody can escape from it.

You may have noticed that the price of gas is going up.

In fact, just the other day UPI reported that the price of gas at one station in the Washington D.C. area was up to 5 dollars a gallon.

Can it get much worse?

Well, actually yes it can.

Richard Hastings, a strategist at Global Hunter Securities, recently told CNBC that he believes that we could potentially see $6 gas at some point this summer.

Do you think that a lot of American families will rethink their summer vacations if that happens?

You betcha.

Perhaps Americans will just fly instead.

Well, that is rapidly becoming more expensive as well.  Just check out what one recent CNN article had to say about rising airfares….

Late Tuesday, Southwest Airlines raised all of its round-trip fares by $10. Delta (DAL, Fortune 500) initiated this latest round of price increases on Monday, and as of midday Wednesday American Airlines (AMR, Fortune 500), JetBlue (JBLU) and United Airlines (UAL) had matched it.

As Ben Stein also notes in the video below, food prices are soaring as well.  Rampant money printing by the Federal Reserve and serious crop problems all over the globe have created a “perfect storm” for agricultural commodities.  In the video, Stein sounds downright apocalyptic as he describes crop failures around the world….

But now, we are getting serious crop shortfalls in China – an enormously important agricultural producer and consumer. U.S. crop forecasts are also disappointing. There are huge problems in Australia, South America, and Russia. Corn, wheat, rice and other foodstuff prices are just going wild.

And you know what?

Ben Stein is right.

In a recent article about the global food crisis, I detailed some of the agricultural commodity price increases that we have seen….

*According to the World Bank, the global price of food has risen 36% over the past 12 months.

*The commodity price of wheat has approximately doubled since last summer.

*The commodity price of corn has also about doubled since last summer.

*The commodity price of soybeans is up about 50% since last June.

*The commodity price of orange juice has doubled since 2009.

But it isn’t just food and gas that are going up.  We are seeing inflation everywhere.  The value of virtually all “hard assets” is going up.

Investors are running to precious metals such as gold and silver in a desperate attempt to preserve their wealth.  Gold and silver have been absolutely skyrocketing.  The price of gold set another brand new all-time record high this week.  The price of silver hit a 31-year high today.

So why is this happening?

One of the biggest reasons for all of this is that the Federal Reserve has been flooding the system with new money.  In the video below, Ben Stein points to quantitative easing as the primary reason why we are seeing so much inflation….

But most important of all, the Fed is just shoving money out the door as fast as it can, creating piles of cash in banks.

The Federal Reserve had hoped that economic growth would be sparked by all of this new cash, but that is only happening to a minimal degree.

Instead, what Ben Stein believes all of this new money is going to bring about is a situation known as “stagflation”.

Do you remember the 1970s and the “misery index”?

Well, we seem to be headed for a repeat of those days.

In a previous article, I defined stagflation….

Stagflation exists when inflation and unemployment are both at high levels at the same time.

Up to this point, we have had high unemployment but relatively low levels of inflation.

But now we are going to get to enjoy high unemployment and high inflation at the same time.

Oh goody!

Video of Ben Stein’s recent appearance on CBS is posted below.  You can read a transcript of his remarks here.  It is amazing that a mainstream news outlet would allow this much truth to get out….

Look, the reality is that you cannot pump this much money into the financial system without there eventually being very serious consequences.

For decades the Federal Reserve has been systematically debasing the U.S. dollar, but what the Fed has been doing to the money supply over the past couple of years is absolutely unprecedented.  Just check out the chart below….

So why hasn’t all of this new cash caused chaos in the economy already?

Well, because most of it is still trapped in the financial system.  Banks have been reluctant to loan it out.  Instead, they seem content to keep most of it on reserve at the Fed.

But if all of this new money starts leaking out into the economy it is going to drive prices up.  When you have lots more money chasing roughly the same number of goods and services it is inevitable that inflation will result.

Robert Wenzel of EconomicPolicyJournal.com believes that more quantitative easing is not even necessary to turn the U.S. economy into a hyperinflationary nightmare.  In fact, Wenzel says that there are enough excess reserves at the Fed right now to turn us into another Zimbabwe….

With over $1.4 TRILLION in excess reserves, Bernanke never has to resort to QE style monetary operations ever again, to print money. If those excess reserves leak into the system, Bernanke has enough sitting there to make Zimbabwe look like a model of prudent money management. As per usual, Bernanke has most of the media and Fed watchers looking at the wrong card.

Forget about QE3, keep your eye on excess reserves. Excess reserves are funds that are not in the system bidding up prices, but when they enter the system by banks using them to make loans, have the potential to result in a multiple of their size, when they impact the money supply. Because of this potential for multiple size impact, excess reserve entering the economy are considered high-powered money.

We would have never even been in this position if we had never allowed the Federal Reserve to be created and had never gotten 14 trillion dollars in debt.  But now America has a debt problem that can never be solved under the current system.  We are locked into a debt spiral from which there is no escape.

Last year, the U.S. government spent more on interest on the national debt than on the following departments combined….

*The Department of Health and Human Services

*The Department of Energy

*The Department of Veterans Affairs

*The Department of Justice

*The Department of Homeland Security

*The Department of Agriculture

*The Treasury Department

*The Department of Labor

Ouch!

But right now the U.S. is still able to borrow tons of money at super low interest rates.

So what happens if interest rates go up?

It could potentially be catastrophic.

That is why the decision by S&P to downgrade its outlook on U.S. government debt was such a big thing the other day.  The U.S. still has a “AAA” rating, but S&P is warning that the AAA rating is in danger.

So what would it mean if the U.S. lost the AAA rating that it currently holds?

The Washington Post recently described it this way….

A credit rating downgrade for the United States would spell even more financial trouble for the U.S. government, hampering its ability to borrow money as investors demand higher yields to make up for the increased risk. That would cause its national debt to balloon further and increase the need to hike taxes or make even more painful cuts in spending.

But the U.S. government continues to borrow money like there is no tomorrow and Ben Bernanke and his friends at the Fed continue to recklessly print money.

As bad as things may seem for many of you right now, the truth is that what we are experiencing at the moment is a “false bubble of prosperity”.  Things are eventually going to get much, much worse.

Enjoy this time of economic peace and stability while you still can.  Our leaders have absolutely destroyed our economic future and we are going to want to have some good memories to hold on to while we are living through economic hell in the years ahead.

Political Theater: It Turns Out That The Republicans And The Democrats Were Both Lying To Us And That The Real Budget Cut Number Is Far Less Than $38.5 Billion

Guess what?  The Democrats and the Republicans are both lying to us again.  So what else is new?  The truth is that the great “budget crisis” which supposedly took us to the verge of a government shutdown was just a whole bunch of political theater.  Even the Associated Press is declaring that our politicians used “accounting sleight of hand” to reach the $38.5 billion budget cut figure.  Not that $38.5 billion was an impressive number to begin with.  $38.5 billion would just be one percent of the federal budget.  But once you strip away the accounting charades, the real budget cut number is somewhere around 14 billion dollars.  It turns out that the “budget cuts” include money left unspent from previous years, earmarks that were going nowhere, unused census money and programs that Obama was already planning to cut.  The more you examine the “budget deal”, the more it becomes obvious that the Republicans and the Democrats had no intention of doing anything serious about our debt problems.  The U.S. government is still going to run a record-setting budget deficit in 2011 and both the Democrats and the Republicans are to blame.

So should we be surprised that our politicians have been lying to us again?

Of course not.

But if something is not done about our soaring debt it is absolutely going to crash our financial system.

According to the IMF, the U.S. government will have to borrow an amount of money equivalent to 29 percent of GDP this year alone in order to finance its budget deficit and its maturing debt.

That is what you call a crisis.

But neither political party seems the least bit serious about the national debt.

The Republicans are proposing even more tax cuts without saying how they are going to pay for them, and they even tucked an increase in military spending into the “budget cut” deal.

The Democrats don’t seem to want to cut much of anything.  In fact, most Democrats seem to believe that government debt is not much of a crisis at all.

Our politicians love to talk about “cutting the budget”, but nothing ever gets done.  Both parties have been promising us “fiscal responsibility” for decades but both parties have never delivered.

Sadly, the American people have not held our politicians responsible for this.

This latest episode just reveals how much of a joke Washington D.C. has become.  In the 8 days leading up to the “historic” $38.5 billion budget deal, the U.S. national debt increased by $54.1 billion dollars.

Our politicians are standing by and doing nothing while the financial future of this nation is being destroyed right in front of our eyes.  It is now being projected that by the year 2021, interest payments on the national debt will amount to $1.1 trillion dollars a year.

Fortunately, some bloggers out there are starting to wake up to just how pathetic this latest “budget deal” really was.

For instance, Tim Fernholz of the National Journal recently posted the following….

For example, the final cuts in the deal are advertised as $38.5 billion less than was appropriated in 2010, but after removing rescissions, cuts to reserve funds, and reductions in mandatory spending programs, discretionary spending will be reduced only by $14.7 billion.

In fact, some conservative bloggers are becoming absolutely furious with the duplicity of the Republican party.  In a recent article on Business Insider, John Ellis really let John Boehner have it….

It turns out that the budget agreement that all parties were hailing this past weekend as a “great achievement” is in fact a joke.  Any Republican who was elected with even a sliver of Tea Party support is now duty-bound to vote against it on Friday.  Every 2012 Republican presidential hopeful is now duty-bound to demand that it be voted down.

But Boehner is already saying that it is time to “move on” and that he is really going to “get tough” during the next battle.  Boehner is claiming that the “war” over the debt ceiling is going to be about “trillions” instead of “billions”.

The American people are certainly in the mood for something to be done about our debt crisis.  According to a new NBC/WSJ poll, the vast majority of Republicans and the vast majority of independents do not want the debt ceiling raised.  Even Democrats are roughly split on the issue.

John Boehner is promising that the Republicans will not agree to raise the debt ceiling without “serious steps in the right direction”.

So what pathetically low number will cause John Boehner to cave in this time?

Obama is already taking a strong stand on the debt ceiling.  He is demanding that the Republicans send him a “clean bill” and is warning that they must not “play politics” with U.S. government finances.

On Monday, White House press secretary Jay Carney stated that “the consequences of not raising the debt ceiling would be Armageddon-like in terms of the economy.”

You know what?  To a certain degree Carney is right.  If the U.S. government hits the debt ceiling the financial markets will likely go haywire.  That would cause the big boys up on Wall Street to start putting tremendous pressure on Boehner.  There is no way that Boehner would watch chaos unfold on Wall Street and not end up flinching.

Not that Boehner was ever serious about cutting the federal deficit.  He was not serious about it during the Bush years and he is not serious about it now.

This is all just a whole lot of political theater.

Meanwhile, most Americans are not even paying attention to all of the financial fraud being committed by the “fourth branch of government”.

Of course the Federal Reserve is not actually part of the federal government at all.   But they do get to spend trillions and lend trillions without ever having to get the approval of Congress, the president or the American people.

For example, most Americans don’t realize this, but the Federal Reserve has been handing out hundreds of millions of dollars in nearly risk-free loans to their friends and even to the wives of their friends.

Unfortunately, the Federal Reserve is above the law and is not accountable to anyone.  In fact, we can’t even get our politicians to authorize a comprehensive audit of their books.

The truth is that our system is soaked in so much fraud that there is no way that it will ever recover.

We have turned our backs on the principles of our founding fathers and so now we pay the price.

The U.S. national debt is now over 14 times larger than it was 30 years ago and it is currently rising by well over 4 billion dollars every single day.  This debt will destroy our financial system.  We are stealing the future from our children and our grandchildren.

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

So what do all of you think about what is going on in Washington D.C.?  Feel free to leave a comment with your opinion below….

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