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Why New York Times Economist Paul Krugman Is Partly Right But Mostly Wrong

In recent days, New York Times economist Paul Krugman has been doing a whole bunch of interviews in which he has declared that the solution to our economic problems is very easy.  Krugman says that all we need to do to get the global economy going again is for the governments of the world to start spending a lot more money.  Krugman believes that austerity is only going to cause the economies of the industrialized world to slow down even further and therefore he says that it is the wrong approach.  And you know what?  Krugman is partly right about all of this.  The false prosperity that the United States and Europe have been enjoying has been fueled by unprecedented amounts of debt, and in order to maintain that level of false prosperity we are going to need even larger amounts of debt.  But there are several reasons why Krugman is mostly wrong.  First of all, we have not seen any real “austerity” yet.  Even though there have been some significant spending cuts and tax increases over in Europe, the truth is that nearly every European government is still piling up more debt at a frightening pace.  Here in the United States, the federal government continues to spend more than a trillion dollars a year more than it brings in.  If the United States were to go to a balanced federal budget, that would be austerity.  What we have now is wild spending by the federal government beyond anything that John Maynard Keynes ever dreamed of.  Secondly, Krugman focuses all of his attention on making things more comfortable for all of us in the short-term without even mentioning what we might be doing to future generations.  Yes, more government debt would give us a short-term economic boost, but it would also make the long-term financial problems that we are passing on to our children even worse.

It is important to understand that Paul Krugman is a hardcore Keynesian.  He believes that national governments can solve most economic problems simply by spending more money.  His prescription for the U.S. economy in 2012 was summarized in a recent Rolling Stone article….

The basic issue, says Krugman, is a lack of demand. American consumers and businesses, aren’t spending enough, and efforts to get them to open their wallets have gone nowhere. Krugman’s solution: The federal government needs to step in and spend. A lot. On debt relief for struggling homeowners; on infrastructure projects; on aid to states and localities; on safety-net programs. Call it “stimulus” if you like. Call it Keynesian economics, after the great economic thinker (and Krugman idol) John Maynard Keynes, who first championed the idea that government has an essential role in saving the free market from its own excesses.

So is Krugman right?

Would the U.S. economy improve if the federal government borrowed and spent an extra half a trillion dollars this year for example?

Yes, it would.

But it would also get us half a trillion dollars closer to bankruptcy as a nation.

Krugman claims that “austerity” has failed, but the truth is that we have not even seen any real “austerity” yet.

When a government spends more than it brings in, that is not real austerity.

People talk about the “austerity” that we have seen in places such as Greece and Spain, but the truth is that both nations are still piling up huge amounts of new debt.

So let’s not pretend that the western world is serious about austerity.

The goal for most European nations at this point is to get their debts down to “sustainable” levels.

But for economists such as Krugman, this is a very bad idea.  Krugman insists that cutting government spending during a recession is a very stupid thing to do.  The following is from one of his recent articles in the New York Times….

For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the textbooks say they should — by spending more to offset falling private demand — but with fiscal austerity, slashing spending in an effort to balance their budgets.

Critics warned from the beginning that austerity in the face of depression would only make that depression worse. But the “austerians” insisted that the reverse would happen. Why? Confidence! “Confidence-inspiring policies will foster and not hamper economic recovery,” declared Jean-Claude Trichet, the former president of the European Central Bank — a claim echoed by Republicans in Congress here. Or as I put it way back when, the idea was that the confidence fairy would come in and reward policy makers for their fiscal virtue.

Yes, Krugman is correct that government austerity measures will only make a recession worse.

Just look at what has happened in Greece.  Wave after wave of austerity measures has pushed Greece into an economic depression.  If you want to see what austerity has done to the unemployment rate in Greece, just check out this chart.

As other nations across Europe have taken measures to get debt under control, we have seen similar economic results all across the continent.

The overall unemployment rate in the eurozone has hit 10.9 percent which is a new all-time high, and youth unemployment rates throughout Europe are absolutely skyrocketing.

Right now there are already 12 countries in Europe that are officially in a recession, and in many European nations manufacturing activity is slowing down dramatically.

So, yes, austerity is not helping short-term economic conditions in Europe.

But what are the nations of the western world supposed to do?

According to Krugman, they are supposed to run up gigantic amounts of new debt indefinitely.

And that is what the United States is doing right now.  But at some point the clock strikes midnight and all of a sudden you have become the “next Greece”.

U.S. government debt is already rising much, much faster than U.S. GDP is.

Between 2007 and 2010, U.S. GDP grew by only 4.26 percent, but the U.S. national debt soared by 61 percent during that same time period.

Today, the U.S. national debt is equivalent to 101.5 percent of U.S. GDP.

But Paul Krugman does not consider this to be a major problem.

The Obama administration is currently stealing approximately 150 million dollars from our children and our grandchildren every single hour to finance our reckless spending, but for Paul Krugman that is not nearly good enough.

To Krugman, the only thing that is important is what is happening right now.  Apparently the future can be thrown into the toilet as far as he is concerned.

The founder of PIMCO, Bill Gross, told CNBC on Tuesday that the U.S. government is likely to be hit with another credit rating downgrade this year if something is not done about our exploding debt.

The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain does.

But Krugman insists that the solution to our economic problems is even more debt and even more spending.

In a previous article, I detailed how we are doomed if the U.S. government keeps spending money wildly like this and we are doomed if the U.S. governments stops spending money wildly like this.

If we keep running trillion dollar deficits every year, at some point our financial system will collapse, the U.S. dollar will fail, and we will essentially be facing national bankruptcy.

But if the federal government stops borrowing and spending money like this, our debt-fueled prosperity will rapidly disappear, unemployment will shoot well up into double digits, and we will soon have mass rioting in major U.S. cities.

The truth is that we have already been following Paul Krugman’s economic prescription for the nation for decades.  Our 15 trillion dollar party has funded a standard of living unlike anything the world has ever seen, but the party is coming to an end.

The Federal Reserve is trying to keep the party going by buying up huge amounts of government debt.  The Fed actually purchased approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.

It is a shell game that cannot go on for too much longer.

The national debt crisis can be delayed for a while, but at some point the house of cards is going to come crashing down on top of us all.

If Paul Krugman wanted to talk about real solutions he could talk about shutting down the Federal Reserve and he could talk about going to an entirely debt-free currency.

But we all know that is not going to happen, don’t we?

As I have written about before, the Federal Reserve was designed to be a perpetual government debt machine.  The system was designed to have the amount of money and the amount of government debt constantly expand.

And it has been working quite well in that regard.  At this point, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was first created.

But Paul Krugman is not going to talk about the real issues.  Instead, he is just going to keep running around declaring that more government spending and more government debt will solve all of our problems.

It is a very big lie, but millions of people are going to believe it.

Tony Robbins, Ron Paul And Ben Bernanke All Agree: The National Debt Crisis Could Destroy America

Is there one thing that Tony Robbins, Ron Paul and Ben Bernanke can all agree on?  Yes, there actually is.  Recently they have all come forward with warnings that the national debt crisis could destroy America if something is not done.  Unfortunately, our politicians continue to spend us into oblivion as if there will never be any consequences.  When Barack Obama took office, the U.S. national debt was 10.6 trillion dollars.  Today, it is 15.6 trillion dollars and it is rising at the rate of about 150 million dollars an hour.  During the Obama administration so far, the U.S. government has accumulated more debt than it did from 1776 to 1995.  The United States now has a debt to GDP ratio of over 100 percent, and another credit rating agency downgraded U.S. debt earlier this month.  Any talk of a positive economic future is utter nonsense as long as we are bleeding red ink as a nation far faster than we ever have before.  It is absolutely immoral to wreck the financial future of our children and our grandchildren and to leave them with a bill for the greatest mountain of debt in the history of the world, but that is exactly what we are doing.  Unless our current debt-based financial system is thrown out, there are only two ways that this game is going to play out.  One would involve absolutely bitter austerity and deflation unlike anything ever seen before, and the other would involve nightmarish hyperinflation.  Either path would be hellish beyond what most Americans could possibly imagine.

Unfortunately, we are running out of time as a nation.  You know that things are late in the game when the head of the Federal Reserve starts using apocalyptic language to talk about the national debt.  The following is what Federal Reserve Chairman Ben Bernanke told Congress recently….

Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences. Over the longer term, the current trajectory of federal debt threatens to crowd out private capital formation and thus reduce productivity growth. To the extent that increasing debt is financed by borrowing from abroad, a growing share of our future income would be devoted to interest payments on foreign-held federal debt. High levels of debt also impair the ability of policymakers to respond effectively to future economic shocks and other adverse events.

Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy. Although historical experience and economic theory do not indicate the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point.

The sick thing about this is that the Federal Reserve system is actually designed to generate government debt.  The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was created back in 1913.  So it is kind of ironic that the head of the organization that was designed to perpetually generate U.S. government debt is now warning that there is too much of it.

But Ben Bernanke is far from alone in warning about the danger of our exploding national debt.

For example, world famous motivational speaker Tony Robbins is also warning that the national debt crisis could destroy our future.

These days, most people throw around the phrase “a trillion dollars” without ever really grasping what it means.

In the video posted below, Tony Robbins uses a fun illustration to help put in perspective how large a “trillion dollars” really is.

If you had a million seconds to do something, would you consider that to be a long time?

Well, it turns out that a million seconds is only about 12 days.

What about a billion seconds?  Is that a long period of time?

Well, yes, a billion seconds is close to 32 years.  So that is definitely a lot longer than a million seconds.

What about a trillion seconds?

How long do you think that is?

Well, a trillion seconds is about 31,688 years.

So when we talk about how the U.S. government is stealing more than a trillion dollars from future generations every single year, we are talking about an absolutely massive amount of money.

The Tony Robbins video about the national debt crisis posted below has started to go viral all over the Internet.  If you have not seen it yet, I definitely recommend taking a few minutes to watch it….

So why are our politicians not doing anything about the U.S. debt crisis?

Well, it is because most of them value getting elected over and over again above doing what is right for future generations.

For the past four decades, the United States has been enjoying a 15 trillion dollar party.  All of this borrowed money has enabled us to live far, far beyond our means.

If our politicians voted to severely cut spending or to raise taxes dramatically at this point, our economy would suddenly readjust to a more realistic standard of living.  But that would be extremely painful and most Americans voters would be absolutely furious.  They would demand that someone “fix” the economy immediately.  But the truth is that what we have been enjoying all these years has not been real.  It has been bought with trillions of dollars stolen from future generations.  But most of our politicians just want to keep the party rolling as long as humanly possible so that they can keep getting voted back into office.

Fortunately, there are a few politicians that are willing to stand up and tell the truth about our national debt crisis.  For example, in the video posted below Ron Paul scolds the rest of Congress for continuing to vote for debt limit increase after debt limit increase….

Unfortunately, the American people seem to prefer politicians that endlessly lie to them about how bad things really are.

For example, back at the beginning of the Bush administration we were promised that we would be swimming in gigantic surpluses by now.

That didn’t exactly work out, now did it?

Barack Obama promised us that he would cut the size of the federal budget deficit in half by the end of his first term.

Well, guess what?

He lied too.

Things just continue to get worse and worse.

Since 1975, we have added more than 15 trillion dollars to the national debt.  In fact, the U.S. national debt is now more than 22 times larger than it was when Jimmy Carter became president.

A lot of talking heads on television continue to assure us that everything is going to be okay, but the truth is that we are about to experience some absolutely devastating consequences for decades of really bad decisions.

For example, the rest of the world is rapidly losing faith in our currency and the reign of the U.S. dollar as the primary world reserve currency is in serious danger of coming to an end.  When that happens, gasoline, food and just about everything else that you buy is going to be a lot more expensive.

Already, there are very ominous signs that the rest of the world is getting tired of financing our endless spending.  In 2011, the Federal Reserve bought approximately 61 percent of all new government debt issued by the U.S. Treasury Department.  This is not supposed to happen.  The Federal Reserve is not supposed to be monetizing our debt and this is something that Congress should be looking into.

Also, at this time of the year people love to complain about the outrageous amount of taxes that most hard working Americans have to pay, but the truth is that eventually it will likely get a whole lot worse.

Just look at Greece.  Taxes in Greece have been raised to suffocating levels, government spending has been slashed to the bone and yet they are still running up more debt.

That is going to happen in the United States at some point too, especially if our leaders choose the path of austerity and deflation.

You can’t hide from debt forever.

Have you ever run up debt on a credit card?

A lot of us did that when we were young and foolish, and it can be a lot of fun on the way up.

But eventually a day of reckoning comes and it is extremely painful to find yourself drowning in credit card debt.

Well, we are rapidly approaching our credit limit as a nation.

Some hard choices will have to be made, and there will be a lot of pain.

The false prosperity that we are enjoying now is going to disappear.

Now is the time to prepare for the massive economic shift that is coming.  In the coming economic environment, those that are currently living month to month and those that are 100% dependent on the system are going to be in a huge amount of trouble.

Instead of wildly spending money as if the good times will never end like most Americans are, now is the time to get out of debt, to become more self-sufficient and to set aside the money, resources and supplies you will need to weather the storm that is rapidly approaching.

Anyone with half a brain should be able to see that a gigantic economic collapse is coming.

Use the time that you still have left to prepare the best that you can.

The 15 Trillion Dollar Party

If you knew that you could live in luxury for the rest of your life but that by doing so it would absolutely destroy the future for your children, your grandchildren and your great-grandchildren would you do it?  Well, that is exactly what we are doing as a nation.  Over the past several decades, we have stolen 15 trillion dollars from future generations so that we could enjoy a dramatically inflated level of prosperity.  Our 15 trillion dollar party has been a lot of fun, but what we have done to our children and our grandchildren has been beyond criminal.  We ran up the greatest mountain of debt in the history of the planet and we are sticking them with the bill.  Sadly, both political parties have been responsible for the big spending that has been going on.  Both Democrats and Republicans have run up huge budget deficits when in power.  But instead of learning the hard lessons of the past, both political parties continue to vote for even more debt.  They would rather continue to steal trillions of dollars from future generations than have the party end and have to face the consequences.

And the consequences will be dramatic when the party ends.  During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.  That means that the U.S. government spent about 1.3 trillion dollars that it did not have.  It is important to understand that even if the U.S. government spent that 1.3 trillion dollars on really stupid things, that money still got into the pockets of ordinary Americans who then spent it on things like food, gas, housing, etc.  In turn, most of those that received money from providing those goods and services would spend it on other things.

So extra government spending can definitely stimulate the economy.  The problem is that we have been doing it permanently.  Since 1975, we have added more than 15 trillion dollars to the national debt.  This has fueled a false prosperity that was way beyond what we could afford.

If the U.S. government tried to go to a balanced budget now, our standard of living would crash and there would be riots in the streets.  The American people have been enjoying false prosperity for so long that they have lost any notion of what “normal” actually is.

Think of it this way.  If your family makes $40,000 this year and you spend an extra $20,000 on your credit cards, your family would be enjoying a false sense of prosperity.

You could do that year after year as long as the credit card companies keep loaning you more money.

But debt always catches up with you in the end.

It is the same thing with the United States.

We have been running up our national credit card balance and the interest payments have become quite painful.

The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.

That is 454 billion dollars that the people of the United States do not receive anything in return for.

So in order to keep up with interest on the national debt and to enjoy a standard of living that is beyond our means we now have to run deficits that are in excess of a trillion dollars every single year.

And a trillion dollars is a staggering amount of money.

If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

Since Barack Obama was elected, the U.S. government has added about 5 trillion more dollars to the national debt.

That kind of debt is a recipe for national financial suicide.

How are we supposed to explain to our children that we are passing a debt of $15,579,852,946,457.64 down to them?

At this point, the United States government is responsible for more than a third of all the government debt in the entire world.

The 15 trillion dollar party that we have been enjoying has been amazing, but all of that debt is soon going to bring us a tremendous amount of pain.

And there is really no way out under our current financial system.  As our population ages, government budget deficits are projected to spiral wildly out of control in future years.

Already, entitlement programs are starting to cause massive problems.  For example, mandatory federal spending surpassed total federal revenue for the first time ever in fiscal 2011.  That was not supposed to happen until 50 years from now.

If the federal government used GAAP (Generally Accepted Accounting Principles) like all publicly-traded corporations are required to do, the situation would be much worse.

The truth is that the U.S. government never had a “balanced budget” during the end of the Clinton administration.  The federal government was borrowing gigantic amounts of money from the Social Security trust fund to finance regular government operations.  It was a big fraud.  Under GAAP, there would have been huge budget deficits during those years.

And even under the non-GAAP numbers used by the U.S. Treasury Department, the U.S. national debt still increased every single year during the Clinton administration.

So let’s get real.

Our national financial situation has always been much worse than we have been told.

It has been estimated that our current budget deficits would be in the neighborhood of 4 to 5 trillion dollars under GAAP.

And looking down the road a bit, we are facing a tsunami of unfunded liabilities that is absolutely nightmarish.

In other words, we have committed ourselves to tens of trillions of dollars of expenses that we don’t have any money for.

According to Professor Laurence J. Kotlikoff, the U.S. is facing a “fiscal gap” of over 200 trillion dollars in the coming years.  The following is a brief excerpt from a recent article that he did for CNN….

The government’s total indebtedness — its fiscal gap — now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations — including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt — and all projected future taxes.

And it just keeps getting worse.  Recently it was revealed that Obamacare will add 17 trillion dollars more to our long-term unfunded obligations.

Basically what we have done is we have committed future generations to a life of endless debt slavery to pay for our debts and for the financial promises that we have made.

How could we be so stupid?

Of course this entire fraudulent system is going to completely collapse before we get too much farther down the road anyway.  Right now the whole thing is essentially being held together by chicken wire and duct tape.

Most Americans do not realize this, but the Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.

Normally, the Federal Reserve is not supposed to be doing this.

But right now there are not nearly enough buyers of U.S. government debt at the super low interest rates that the U.S. government wants to pay.  A recent Money News article explained that foreigners have been increasingly shying away from U.S. debt….

“In 2009, such foreign purchases of U.S. debt amounted to 6 percent of GDP and has since falled by over eighty percent to a paltry 0.9 percent.”

Instead of interest rates on U.S. Treasuries rising to attract additional investors, the U.S. Federal Reserve has been intervening to make up the difference.

This is essentially “monetizing the debt” and it is something that Ben Bernanke promised that he would never do.

But he is doing it.

If the Federal Reserve was not buying up all this debt, interest rates on U.S. debt would soar and so would U.S. government interest payments.

Yes, this is a giant Ponzi scheme and it cannot last for long.

Of course all of this could have been avoided if our politicians had not been running up such massive amounts of debt all these years.

Some have suggested that our problems could be solved by simply increasing taxes on the wealthy.

Well, the truth is that the top 5 percent of all income earners already pay nearly 50 percent of all federal taxes and soaking them even more will not even come close to solving the federal budget crisis.

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

And as Bill Whittle has shown, you could take every single penny that every American earns above $250,000 and it would only fund about 38 percent of the federal budget.

So taxing the wealthy will certainly not solve all of our problems.

In fact, when you tax the wealthy and the “somewhat wealthy” it slows economic growth in a number of different ways.

Number one, they have less money to spend into the economy.

Number two, they have less money to invest in business activities.

Number three, it gives wealthy individuals and corporations more of an incentive to move out of the United States.  As I have written about previously, the global elite are already hiding about 18 trillion dollars in offshore banks.  The U.S. government keeps trying to tap into all of that offshore wealth, but the elite always seem to be a few steps ahead of the game.

Yes, we should try to close loopholes in the tax system, but the truth is that the root cause of our problem is that the federal government is simply spending way, way too much money.

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

But our politicians always want to put off spending cuts for another day because they know that immediate spending cuts would really hurt the economy.

For example, just check out this recent quote from White House Chief of Staff Jack Lew….

“The time for austerity is not today,” Lew told NBC News “Meet the Press.” “If we were to put in austerity measures right now, it would take the economy in the wrong way.”

Yes, the Obama administration definitely does not want to hurt the economy with an election coming up in a few months.

So when will it be time to seriously cut government spending?

The day never seems to arrive.

But even though the federal government has been pumping more than a trillion extra dollars into the economy every year, the economy has not shown much improvement.  The percentage of working age Americans that have jobs has barely budged for over two years.

Yes, the policies of the Obama administration have stabilized the U.S. economy for the moment, but if he was actually going to tell the truth he would say something like this….

“By mortgaging the future of our children and our grand-children I have stabilized our economic statistics for the short-term.   Unfortunately, I am going to have to continue to financially abuse future generations to keep us from falling into another Great Depression.  Meanwhile, I am making our long-term financial problems far, far worse.  But the most important thing is that I win re-election so that I can continue to be president.  Thank you for being so selfish and so willing to destroy the future of your children.  Vote for me in 2012 and let the party continue!”

Unfortunately, the party is going to come crashing to an end at some point.

Right now, the global financial system is based on the U.S. dollar and on U.S. government debt.

There will come a time when the rest of the world is going to get sick and tired of watching this Ponzi scheme play out and they are going to completely lose faith in the U.S. dollar and in U.S. government debt.  In fact, there are already signs that this is starting to happen.

When faith in our currency and our debt is completely gone, it will be nearly impossible to get back and the game will be over.

The false prosperity that we are experiencing right now is about as good as things are going to get.

Enjoy it while you still can, because when it is gone that will be the end of it.

Both the Democrats and the Republicans have failed us.  They played fast and loose with our future and they never planned for the long-term.

Now we are facing a collapse of unprecedented magnitude that most Americans will never even see coming.

A horrifying economic collapse is coming.

You better get ready for it.

The Obama Nation: Even More Debt And Even More Store Closings

Well, it is time to raise the debt ceiling again.  Right now we are about to hit the current limit of $15.194 trillion and the Obama administration is going to ask that it be raised by another 1.2 trillion dollars.  Unfortunately, Congress has already promised not to stand in the way, and so soon the debt limit will be raised to a staggering $16.394 trillion.  Considering how much debt we have already placed on the backs of future generations, what is another 1.2 trillion dollars?  After all, if we are going to sell our children and our grandchildren into debt slavery, we might as well go all the way, right?  Such is the thinking in “the Obama Nation”.  During “the Obama Nation”, the federal government has already accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.  Of course the Bush administration was nearly as bad at piling up government debt.  Between Bush and Obama (with a big helping hand from the Federal Reserve), they have done a pretty good job of wiping out the financial future of the United States.  If there are future generations of Americans, they will look back and curse those that did this to them.  It is absolutely immoral to steal trillions of dollars from future generations.  Unfortunately, there are very, very few members of Congress that are even objecting to this madness.

Today, more debt just seems to be the answer to everything.  The truth is that debt is not just a government problem.  We are a nation that is addicted to debt.

As of October, total consumer credit in the United States had increased for 12 of the past 13 months.  We simply have not learned the lessons of the past and we are making the same mistakes all over again.

We are living in the greatest debt bubble in the history of the world, and this false prosperity that we are enjoying is simply not sustainable.

But even in the midst of this false prosperity we are seeing a huge number of store closings.

For example, it was just announced that Sears has decided to close between 100 and 120 Sears and Kmart stores.

Once upon a time, Sears was the dominant force in the retail industry, but those days are long gone.  Sears stock has declined more than 45 percent so far this year, and many are wondering how long the company is going to be able to survive.

And there have been other high profile store closings announced during this holiday season as well.  A while back it was announced that all Syms stores and all Filene’s Basement stores will be closing.

Will we all eventually be relegated to shopping only at Wal-Mart?

In the middle of this “economic recovery” that Obama keeps talking about a staggering number of retail stores are closing up shop.  The following is a list of store closings in 2011 that I recently found.  The first number represents the total number of stores being closed for each chain….

405 Blockbuster

633 Borders

200 GameStop

189 Gap

160 f.y.e.

117 Anchor Blue

117 Foot Locker

100 Talbot’s

71 A.J. Wright

69 Metropark

63 Friendly’s

60 Rite Aid

52 Destination Maternity

50 Abercrombie & Fitch

50 Hot Topic

45 Big Lots

45 Family Dollar

43 Select Comfort

43 Sonic Drive-In

35 Denny’s

32 Great Atlantic and Pacific Tea Company, Inc. (SuperFresh, Pathmark Super Market)

30 Ultimate Electronics

28 Dominos

25 Superfresh (Great Atlantic & Pacific Tea Company)

20 Lowe’s

Sadly, it looks like things are going to get even worse next year.  One consulting firm is projecting that there will be more than 5,000 store closings in 2012.

The United States is piling up unprecedented amounts of new debt at a time when our economy is dying and our ability to produce wealth is diminishing.

All over America right now, poverty is absolutely exploding.  Millions of people that never dreamed that they would have to reach out for help now find that they have no other options.  The following comes from a recent article in the Fiscal Times….

For years, the food pantry in Crystal Lake, Ill., a bedroom community 50 miles west of Chicago, has catered to the suburban areas’ poor, homeless and unemployed. But Cate Williams, the head of the pantry, has noticed a striking change in the makeup of the needy in the past year or two. Some families that once pulled down six-figure incomes and drove flashy cars are now turning to the pantry for help. A few of them donated food and money to the pantry before their luck soured, according to Williams.

“People will shyly say to me, ‘You know, I used to give money and food to you guys. Now I need your help,’” Williams told The Fiscal Times last week. “Most of the folks we see now are people who never took a handout before. They were comfortable, able to feed themselves, to keep gas in the car, and keep a nice roof over their head.”

But not everyone will ask for help nicely.  As the economic numbers continue to get worse, desperate Americans will lash out in wild and unpredictable ways.

The following is from a local NBC station down in Texas.  In the days to come, this type of report will become quite common….

A 19-year-old Houston-area man says he was beaten and a friend was slashed in the face as a group of men robbed him of his new pair of expensive Air Jordan shoes.

We will also see more mass protests and more mass riots as the months and years roll along.  This country is going to become increasingly unstable.

Check out this video of a massive brawl that erupted inside Mall of America the other day.  Soon scenes such as this will become so common that they will not even be newsworthy anymore.

In response, many Americans will get sick and tired of waiting for the police to protect them and will take matters into their own hands.

In fact, we are already starting to see this.  For example, just the other day a store clerk down in North Carolina knocked a would-be robber out cold and then forced him to clean up his own blood after he woke up.

There are millions of Americans out there that are not going to put up with a whole lot of nonsense.  When desperate criminals try to rob from their homes or businesses it might not end well for the criminals.

Of course it would be much nicer if the federal government would do some things to actually fix the economy and avoid some the problems that are looming on the horizon.

Ah, but that would interrupt their vacations.  Right now, the U.S. House of Representatives is on vacation until mid-January.

If you can believe it, Congress does not work for most of the year.  Normally they are scheduled to be in session for about a third of all the days on the calendar.

And Obama is certainly taking it easy.  He is enjoying yet another vacation.  As I wrote about yesterday, it has been estimated that the Obama Hawaiian vacation this year will cost somewhere in the neighborhood of 4 million dollars.

Yes, it is tough being the head of the Obama Nation.

Sadly, a lot of Americans still have faith in these jokers.

According to a Gallup poll that was just released, Barack Obama is the most admired man in America by far and Hillary Clinton is the most admired woman in America by far.  If you can believe it, Barack Obama has held the top spot for men for four years in a row, and Hillary Clinton has held the top spot for women for ten years in a row.

When are we going to learn?

Someone once said that insanity is doing the same thing over and over again and expecting different results.

Well, the American people keep sending corrupt politicians such as Bush and Obama to the White House and they keep expecting things to get better.

It just isn’t going to happen.

If we stay on the current path that we are on, there will be a lot more store closings, the economy will continue to crumble and government debt will continue to skyrocket.

Minor changes are not going to cut it.  We need massive changes on a fundamental level.

Unfortunately, neither political party is offering massive changes.  The Republicans and the Democrats just keep offering the same tired solutions and they keep promising that they can “fix things” if we will just send more of them to Washington.

Hopefully the American people will wake up and see through these lies because time is running out.

If A Global Recession Is Not Looming, Then Why Are Bailouts Flying Around As If The End Of The World Is Coming?

I have learned that watching what people do is much more important than listening to what they say.  Back in 2008, financial authorities in the United States insisted that everything was gone to be okay.  But we all know now that was a lie.  Well, right now financial authorities in the U.S. and Europe are once again trying to assure us that everything is under control and that we are not headed for a global recession.  Unfortunately, their actions are telling a very different story.  All over the world, bailouts are flying around as if the end of the world is coming.  Governments and central banks are stepping in with gigantic mountains of money to prop up bond yields, major banks and even stock markets.  What we have seen over the past few months has been absolutely unprecedented.  So why are such desperate measures being taken if everything is going to be just fine?  Unfortunately, debt problems are never solved with more debt, so these bailouts really aren’t solving anything.  We are still headed for a massive amount of financial pain.  It would just be nice if the authorities would quit lying to us and would actually admit how bad things really are.

Today it was announced that the European Central Bank has agreed to make $638 billion in 3 year loans to 523 different banks.  Never before (not even during the last financial crisis) has the ECB loaned so much cheap money to European banks at one time.

This move by the ECB made headlines all over the globe.  CNBC is calling them “ultra-long and ultra-cheap loans“.

European authorities are hoping that European banks will use this money to make loans to businesses and to buy up the debt of troubled European governments.

But as we have seen in the United States, bailout money does not always get spent the way that the authorities intend for it to be spent.

The truth is that the banks could end up just sitting on the money.  That is what happened with a lot of bailout money in the United States during the last financial crisis.

European authorities hope, however, that European banks will take this super cheap money and lend it to European governments at much higher interest rates.

Unfortunately, global financial markets were not terribly impressed with this move by the ECB.  European bond yields actually rose and the euro just kept on falling.

Every few days another major “solution” to the European debt crisis is put out there, but so far nothing has worked.

For example, the European Central Bank has already spent over 274 billion dollars directly buying up European government bonds, and yet bond yields continue to hover in very dangerous territory.

But without ECB intervention, we probably would have already seen a major financial collapse in Europe.

The financial system of Europe is a total mess right now, and everyone is becoming incredibly dependent on the ECB.  The following comes from a recent Reuters article….

One of the key factors certain to have boosted demand is that banks are now more reliant than ever on central bank funds. The ECB said on Monday, in its semi-annual Financial Stability Review, that this dependency could be difficult to cure.

French banks have almost quadrupled their intake of ECB money since June to 150 billion euros, while banks in Italy and Spain are each taking more than 100 billion euros.

At this point, the ECB has the weight of the entire world on its shoulders.  One false move and we could see a huge wave of bank failures and we could be plunged into a major global recession.

But even with all of this unprecedented assistance, we have already seen some big time European banks fail.

Back in Obtober, Dexia was the first major European bank to be bailed out, and the cost of that bailout is going to exceed 100 billion dollars.

The funny thing is that Dexia actually passed the banking stress test that was conducted earlier this year with flying colors.

So what does that say about all of the other major European banks that did not do so well on the stress test?

In addition, it was recently announced that Germany’s second largest bank is going to need a bailout.

The following comes from a Sky News report….

Germany’s second largest bank, Commerzbank, is reportedly in discussions with the German government about a bailout after regulators said it needed to raise more money to cope with a potential default on its loans to governments.

“Intense talks” have been going on for several days, according to sources who spoke to the news agency Reuters.

Even with unprecedented intervention by the ECB, the truth is that the European banking system is rapidly failing.

In Greece, a full-blown run on the banks is happening.  According to a recent Der Spiegel article, funds are being pulled out of Greek banks at a pace that is astounding….

He means that the outflow of funds from Greek bank accounts has been accelerating rapidly. At the start of 2010, savings and time deposits held by private households in Greece totalled €237.7 billion — by the end of 2011, they had fallen by €49 billion. Since then, the decline has been gaining momentum. Savings fell by a further €5.4 billion in September and by an estimated €8.5 billion in October — the biggest monthly outflow of funds since the start of the debt crisis in late 2009.

In all, approximately 20 percent of all deposits in Greek banks have been withdrawn since the start of 2011.

Other European nations are implementing draconian measures in an attempt to protect their banks.  For example, in Italy all cash transactions over 1000 euros have been permanently banned.  People will either have to use checks, debit cards or credit cards for large transactions.  This will “encourage” people to keep more money in the banks, and this will also make it much easier for the Italian government to track transactions and to collect taxes.

But it is not just in the EU where we find unusual steps being taken.

In the UK, the Bank of England is acting like the end of the world is about to happen.  The following comes from a recent article on the This Is Money website….

The deputy governor of the Bank of England today warned the situation surrounding the single currency was ‘worrying’ and that the Bank was making preparations to support British banks, should the eurozone collapse.

A temporary loan facility has been introduced as a precaution, for use in the event of contagion from the eurozone crisis endangering UK institutions, Charlie Bean said in an interview on BBC Radio 4’s World at One.

An article posted on Business Insider a while back says that Switzerland is also preparing for “a euro collapse”….

The Swiss government is preparing for a collapse of the euro, according to Swiss Finance Minister Eveline Widmer-Schlumpf.

She told parliament that a work group was studying the imposition of capital controls and negative interest rates to protect Switzerland from the capital flight that a euro collapse would engender

Frightening stuff.

On the other side of the world, the government of China is also taking action.  In fact, China is actually injecting money into the stock market in order to prop up stock prices.

The following comes from an article in the China Post….

In a movement considered “long overdue” by some analysts, the injection of government money into the tanking stock market to prop up stock prices has been given the green light, government officials announced yesterday.

Vice Premier Chen, the topmost government official charged with the country’s financial stability, however, insisted the fundamentals of the economy and the stock market are sound, expressing his hope for continued optimism among the people.

Of course the Federal Reserve is not going to stand on the sideline while all of this is going on.  In a recent article, I described how the Federal Reserve is helping to bail out European banks….

The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada, the Bank of Japan and the Swiss National Bank have announced a coordinated plan to provide liquidity support to the global financial system.  According to the plan, the Federal Reserve is going to substantially reduce the interest rate that it charges the European Central Bank to borrow dollars.  In turn, that will enable the ECB to lend dollars to European banks at a much cheaper rate.  The hope is that this will alleviate the credit crunch which has gripped the European financial system by the throat.  So where is the Federal Reserve going to get all of these dollars that it will be loaning out at very low interest rates?  You guessed it – the Fed is just going to create them out of thin air.  Our currency is being debased so that Europe can be helped out.

If the global financial system was in good shape, all of these bailouts would not be happening.

These desperate measures are a clear sign that something is up.

The financial authorities of the world are doing their best to keep the system together, but in the end they are not going to be able to prevent the collapse that is coming.

The world is heading for incredibly hard economic times.

So is the end of the world coming?

No.

But to many in the financial world it may feel like it.  The coming global recession is not going to be fun.

We have now reached a point where it has become “normal” for governments and central banks to throw money at one financial crisis after another.

At one time, bailouts were so unusual that they provoked a great deal of outrage.

Today, bailouts have become standard operating procedure.

The bailouts will continue to get larger and larger, and authorities all over the globe will do their very best to keep the house of cards from coming crashing down.

Unfortunately, they will not be successful.

Debt-Free United States Notes Were Once Issued Under JFK And The U.S. Government Still Has The Power To Issue Debt-Free Money

Most Americans have no idea that the U.S. government once issued debt-free money directly into circulation.  America once thrived under a debt-free monetary system, and we can do it again.  The truth is that the United States is a sovereign nation and it does not need to borrow money from anyone.  Back in the days of JFK, Federal Reserve Notes were not the only currency in circulation.  Under JFK (at at various other times), a limited number of debt-free United States Notes were issued by the U.S. Treasury and spent by the U.S. government without any new debt being created.  In fact, each bill said “United States Note” right at the top.  Unfortunately, United States Notes are not being issued today.  If you stop right now and pull a dollar out of your wallet, what does it say right at the top?  It says “Federal Reserve Note”.  Normally, the way our current system works is that whenever more Federal Reserve Notes are created more debt is also created.  This debt-based monetary system is systematically destroying the wealth of this nation.  But it does not have to be this way.  The truth is that the U.S. government still has the power under the U.S. Constitution to issue debt-free money, and we need to educate the American people about this.

Posted below are pictures of the front and the back of a United States Note printed in 1963 while JFK was president….

Notice that there is a red seal instead of a green seal on the front, and it says “United States Note” rather than “Federal Reserve Note”.

According to Wikipedia, United States Notes were issued directly into circulation by the U.S. Treasury and they were first used during the Civil War….

They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.

So why are we using debt-based Federal Reserve Notes today instead of debt-free United States Notes?

It seems rather stupid, doesn’t it?

Well, that is what Thomas Edison thought too.

Thomas Edison was once quoted in the New York Times as saying the following….

That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.

Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.

But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.

Our current debt-based monetary system was devised by greedy bankers that wanted to make huge profits by creating money out of thin air and lending it to the U.S. government at interest.

Sadly, the vast majority of the American people have no idea how money is actually created in this nation.

In a previous article about money and debt, I explained how more government debt is created whenever the U.S. government puts more money into circulation….

When the government wants more money, the U.S. government swaps U.S. Treasury bonds for “Federal Reserve notes”, thus creating more government debt.  Usually the money isn’t even printed up – most of the time it is just electronically credited to the government.  The Federal Reserve creates these “Federal Reserve notes” out of thin air.  These Federal Reserve notes are backed by nothing and have no intrinsic value of their own.

When each new Federal Reserve Note is created, the interest owed by the federal government on that new Federal Reserve Note is not also created at the same time.

So the amount of government debt that is created actually exceeds the amount of money that is created.

Isn’t that a stupid system?

The U.S. Constitution says that the federal government is the one that should actually be issuing our money.

In particular, according to Article I, Section 8 of the U.S. Constitution, it is the U.S. Congress that has been given the responsibility to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.

So why is a private central banking cartel issuing our money?

As is the case with so many other issues, we desperately need to get back to the way the U.S. Constitution says that we should be doing things.

The debt-based Federal Reserve system is literally stealing the future from our children and our grandchildren.

Back in 1910, a couple years prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.

A little over 100 years later, our national debt is now more than 5000 times larger.

So why don’t we just admit that this system simply does not work?

Our current debt-based monetary system also requires very high personal income taxes to pay for it.

In fact, it is no accident that the personal income tax was introduced at about the same time that the Federal Reserve system originally came into existence.

Our children, our grandchildren and many generations after that are facing a lifetime of debt slavery because of us.

As I have written about previously, if the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

Neither the Republicans or the Democrats are proposing any solutions to this problem.  Rather, both parties are only trying to slow down the rate at which we are going into even more debt.

But the truth is that the federal government does not have to go into a single penny of additional debt.

How could this be?

It is not too complicated.

If Congress took back the power over our currency and started issuing debt-free money a lot of our problems could be fixed.

A basic plan would look something like this….

#1) The U.S. Congress votes to take back all of the functions that it has delegated to the Federal Reserve and begins to issue debt-free United States Notes.  These United States Notes would have the exact same value as existing Federal Reserve Notes, and over time all existing Federal Reserve Notes would be taken out of circulation.

#2) The U.S. Congress nationalizes all debt held by the Federal Reserve.  That would instantly reduce the national debt by 1.6 trillion dollars.  In fact, there are a few members of Congress that have already proposed this.

#3) A Constitutional amendment is passed limiting future U.S. government deficits to a reasonable percentage of GDP.  Any future deficits would not be funded by borrowing.  Rather, future deficits would be funded by newly created United States Notes.  Therefore, the federal government would never again accumulate another penny of debt.

And it would be important to inject new money into the economy from time to time.  When existing money is destroyed or when the population grows it is important to inject a certain amount of new money into the system in order to avoid deflation.

#4) The existing national debt would be very slowly paid off with newly created United States Notes.  The U.S. government spent over 454 billion dollars on interest on the national debt during fiscal year 2011, and over time this expense would go to zero.

If the national debt is paid off slowly enough, it would not create too much inflation.  I believe that it could be paid off gradually over 50 years without shocking the economy too much.

There are some that would object to any measure that would ever cause a small amount of inflation, but my contention is that we have created a $15 trillion dollar debt mess for future generations, and it would be absolutely criminal to pass that legacy on to them.

We created this mess, and it is our responsibility to clean it up.

While there is certainly a danger that we would have a limited amount of inflation under a debt-free monetary system such as the one described above, the reality is that we are absolutely guaranteed inflation under the Federal Reserve system.

Most Americans believe that inflation is a fact of life, but the sad truth is that the United States has only had a major, ongoing problem with inflation since the Federal Reserve was created back in 1913.

If you do not believe this, just check out this chart.

Sadly, the U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created.

So, yes, there would be a need for strict monetary discipline under a debt-free monetary system, but it would be hard to do worse than the Federal Reserve has already been doing.

And Congress could always slow down inflation using other methods.  For example, raising the reserve requirements for banks (which should be done anyway) would help keep inflation in check.

If the above proposals were adopted, the end result would be something that we could all live with.  The Federal Reserve system would be abolished, the national debt burden on future generations would be wiped out, the economy would not have to go through a devastating economic collapse that could last a decade or longer, and we could eventually make a fairly smooth transition to “hard money” if we wanted to after the national debt is gone.

Is there any other proposal out there that does all of those things?

There are many out there that would dispute some of the points above, and debate is good.  By engaging in debate, we can hopefully help educate the American people about the nature of money.

The key is to get rid of our current debt-based Federal Reserve Notes and replace them with debt-free United States Notes.

The American people need to understand that it is a lie that the U.S. government “must” borrow money from somebody else.

When the U.S. government borrows money, it slowly transfers wealth from the American people to those that lent it.

At this point, we have created a financial nightmare for future generations that is unlike anything the world has ever seen before.  We owe it to future generations to eliminate the debt problem without destroying the United States economy.  Adopting debt-free money would allow us to do that.

But sadly, neither political party is even talking about debt-free money.  In fact, most of the politicians in both political parties probably do not even know what debt-free money is.

So we need to get the American people educated about these things.  Because if we stay on the course that we are currently on, an economic collapse is inevitable.

The Air Has Been Let Out Of The Balloon

Do you hear that sound?  It is the sound of Europe being hit with a cold dose of financial reality.  The air has been let out of the balloon, and investors all over the world are realizing that absolutely nothing has been solved in Europe.  The solutions being proposed by the politicians in Europe are just going to make things worse.  You don’t solve a sovereign debt crisis by shredding confidence in sovereign debt.  But that is exactly what the “voluntary 50% haircut” has done.  You don’t solve a sovereign debt crisis by pumping up your “bailout fund” with borrowed money from China, Russia and Brazil.  More debt is just going to make things even worse down the road.  You don’t solve a sovereign debt crisis by causing a massive credit crunch.  By giving European banks only until June 2012 to dramatically improve their credit ratios, it is going to force many of them to seriously cut back on lending.  A massive credit crunch would significantly slow down economic activity in Europe and that is about the last thing that the Europeans need right now.  If the deal that was reached last week was the “best shot” that Europe has got, then we are all in for a world of hurt.

On Monday, investors all over the globe began to understand the situation that we are now facing.  The Dow was down 276 points, and the euphoria of late last week had almost entirely dissipated.

But much more important is what is happening to European bonds.

Investors are reacting very negatively to the European debt deal by demanding higher returns on bonds.

Perhaps the most important financial number in the world right now is the yield on 10 year Italian bonds.

The yield on 10 year Italian bonds is up over 6 percent, and the 6 percent mark is a key psychological barrier.  If it stays above this mark or goes even higher, that is going to mean big trouble for Italy.

The Italian government just can’t afford for debt to be this expensive.  The higher the yield on 10 year bonds goes, the worse things are going to be for Italy financially.

Of course it was completely and totally predictable that this would happen as a result of the “voluntary 50% haircut” that is being forced on private Greek bondholders, but the politicians over in Europe decided to go this route anyway.

Major Italian banks also got hammered on Monday.  The following is how a CNN article described the carnage….

Shares of UniCredit, the largest bank in Italy, sunk more than 4% on Friday in Milan and were down nearly another 6% Monday. Intesa, the second-largest Italian bank, slipped 7% Monday, while Mediobanca, Italy’s third-largest financial institution, fell about 4%.

The financial world can handle a financial collapse in Greece.  But a financial collapse in Italy would essentially be the equivalent of financial armageddon for Europe.

That is why Italy is so vitally important.

Another EU nation to watch closely is Portugal.

The yield on 2 year Portuguese bonds is now over 18 percent.  A year ago, the yield on those bonds was about 4 percent.

In many ways, Portugal is in even worse shape than Greece.

A recent article by Ambrose Evans-Pritchard discussed the debt problems that Portugal is faced with.  The following statistic was quite eye-opening for me….

Portugal’s public and private debt will reach 360pc of GDP by next year, far higher than in Greece.

Like Greece, Portugal is essentially insolvent at this point.  Their current financial situation is unsustainable and politicians in Portugal are already suggesting that they should be able to get a “sweet deal” similar to what Greece just got.

You see, the truth is that what this Greek debt deal has done is that it has opened up Pandora’s Box.  Most of the financially troubled nations in Europe are eventually going to want a “deal”, and this uncertainty is going to drive investors crazy.

There is very little positive that can be said about this debt deal.  It has bought Europe a few months perhaps, but that is about it.

As the new week dawned, financial professionals all over the globe were harshly criticizing this deal….

*The CEO of TrimTabs Investment Research, Charles Biderman, says that the big problem with this deal is that the fundamental issues have not been addressed….

“The euphoria about the latest euro zone bailout will fade quickly, as investors realize that the underlying solvency issues have not been addressed”

*Bob Janjuah of Nomura Securities International in London was even harsher….

“This latest round of euro zone shock and awe is, in my view, nothing more than a confidence trick and has possibly even set up an even worse financial outcome.”

In fact, Janjuah says that the debt deal is essentially a “Ponzi scheme”….

This latest bailout relies on the market not calling what I see is a huge “bluff”, because if the market does call it, the bailout simply won’t be credible or even deliverable. It is instead akin to a self-referencing ponzi scheme, and I can’t believe eurozone policymakers have even considered going down this route. After all, we all have recent experience of how such ponzi schemes end, and we all remember how eurozone officials often belittled and berated US policymakers for their role in the US housing/CDO/SIV financial bubble.

*The chief economist at High Frequency Economics, Carl Weinberg, is calling the European debt deal a scheme “of Madoffian proportions“….

“Now they (EU Leaders) are keen to tap into resources that are not their own to fund this crazy scheme of guarantees, leveraged off guarantees to sell bonds and bank shares that no one may want to buy, (in order) to restore value in the banking system destroyed by other bonds that no one wants to own right now. This is a construct of Madoffian proportions”

Even George Soros is criticizing the deal.  George Soros is saying that this European debt deal will help stabilize things for a maximum of three months.

Of course with Soros there is always an agenda and you never know what his motives are.  Perhaps he is honestly concerned about the financial health of Europe, or perhaps he is trying to feed the panic to get Europe to crash even faster.  With Soros you never really know what he is up to.

In any event, the crisis in Europe is already claiming financial casualties in the United States.

MF Global, a securities firm headed up by former New Jersey governor Jon Corzine, has filed for bankruptcy protection.

As a recent CNBC article noted, the firm failed because of bad debts on European sovereign debt….

The bankruptcy protection filing from MF Global — a mid-sized trading firm run by former New Jersey Gov. and Goldman Sachs CEO Jon Corzine — only helped amplify the realization that more difficulties remain. MF Global got into trouble mainly because Corzine made tragically wrong bets on European sovereigns that unraveled when it became clear that bondholders of Greek debt will not be made whole as the nation tries to make its way out of its fiscal morass.

As time goes on, there will be more financial casualties.  The truth is that someone is going to pay the price for the financial foolishness of these countries in Europe.

Politicians in Europe did not want to increase the “bailout fund” with any of their own money, so they are going to go crawling to China, Russia and Brazil and beg those countries to lend them huge amounts of money.

This is incredibly foolish, and it is already fairly clear that China is going to play hardball with Europe.  China has Europe exactly where China wants them, and China will likely demand all sorts of crazy things before they will lend Europe any cash for this bailout fund.

As a recent CNN article noted, Europe is going to be in a lot of trouble if they can’t get money out of China, Russia and Brazil….

The hope is that China and other sovereign wealth fund will invest in new special vehicles that will allow the EFSF to add leverage to increase the amount of funding available.

Without the help of China, Brazil, Russia and others, Europe is back where it started. And it still seems clear that the stronger northern European nations aren’t keen on the idea of a full bailout of their southern siblings.

What a mess.

It is a comedy of errors for the politicians over in Europe.  They can’t seem to get anything right.  In fact, everything that they do seems to make a financial collapse in Europe even more likely.

Keep a close eye on the bond yields over in Europe.  Especially keep a close eye on the yield on 10 year Italian bonds.

A massive financial storm is coming to Europe.

It is going to rock the entire globe.

Now is the time to make certain that your financial house is not built on a foundation of sand.  Get your assets into safe places and keep them safe because the road ahead is going to be quite rocky.

The Obama Jobs Plan: 10 Reasons Why It Is A Bad Joke

So that was what we have been waiting for?  That was what all the hype was about?  With a little over a year until the next election, that was the “best shot” that Obama has for fixing the unemployment crisis in this country?  The Obama Jobs Plan (also now known as “the American Jobs Act”) is going to cost $447 billion and it is going to do next to nothing to create more jobs.  Many Americans were hoping for something bold and new from Obama, but instead what they got was a bad joke.  When Obama stated that there is “nothing radical in this bill”, he was not kidding.  Instead of addressing the fundamental issues that are causing job loss, Obama wants us to spend half a trillion dollars on measures that will only create a very small number of jobs.  Sadly, much of what Obama is proposing actually consists of huge bribes to middle class voters.  Obama is trying to keep his own job, and he appears willing to pile up even more debt in order to make that happen.

During his speech to the nation, Obama instructed Congress to either “pass this jobs bill” or to “pass it right away” 16 different times.  Obama obviously feels very strongly about his jobs plan.

But will it work?  Let’s take a few moments to break it down.  The following are 10 reasons why the Obama jobs plan is a bad joke….

#1 The payroll tax cuts are going to cost more than anything else in the plan, but they will do very little to create jobs.

Just take a look at what is happening right now.  Have the current payroll tax cuts done much?  No, the unemployment rate is still over 9 percent.

Yes, the new payroll tax cuts would be deeper and they would put some more money into the pockets of American workers.

But if American workers go out and spend it on stuff made in China, how does that create more jobs for American workers?

Businesses would certainly welcome the fact that their payroll taxes would be cut, but it probably will not entice many of them to hire more people.

Why?

Because they know that the tax cut would only be temporary.  After just a handful of months the payroll tax would go right back to where it was before.

Businesses are not often moved by temporary tax cuts.  If you want tax cuts to really move business, then you need to make them permanent.

So does that mean that I am against these payroll tax cuts?

Absolutely not.  I very much hope that payroll taxes get cut.  I am all in favor of the government taking as little money from me as possible.

Look, if the federal government is going to destroy our financial system anyway, I would much rather keep as much of my own money in my own pockets as possible.

So yes, I am all in favor of payroll tax cuts.

But no, those cuts are not going to do much to create jobs.  If payroll tax cuts were going to create a lot more jobs we would already see it happening.

However, if this is passed it will be a great bribe to voters because millions of Americans will see their paychecks go up and when that happens they will think of Obama.

#2 Obama’s plan to extend unemployment assistance is going to cost about $49 billion but it is not going to do much to create any jobs.

Back in 2009, Congress first authorized an extension of unemployment benefits to a maximum of 99 weeks.  Five times since then Congress has reauthorized this extension.

So has this made a huge difference in the number of unemployed?

Of course not.  If it was going to make a huge difference it would have done so already.

Yes, these extended benefits are easing the suffering of those that are out of work, and yes they are giving them a little extra money to spend, but let’s not pretend that extending unemployment benefits is going to create a whole bunch of new jobs.

#3 Obama is proposing $50 billion in “immediate” infrastructure spending and $10 billion for a new infrastructure bank that will be dedicated to raising private capital to finance infrastructure projects around the country.

Hopefully this will work out a whole lot better than the “shovel ready” jobs that Obama promised previously.

Yes, infrastructure all over this country is rapidly falling apart.  Yes, it is a legitimate function of government to invest in public infrastructure.

But no, this is not going to create a ton of new jobs.  It will create a few jobs, but it will also add to our rapidly growing national debt.

#4 According to the fact sheet on the jobs plan released by the Obama administration, direct financial aid to state governments will prevent up to 280,000 teacher layoffs, and it will also help states retain more police and firefighters.

Essentially, this is a “backdoor bailout” for the states.  Yes, it will be a good thing if teachers, police and firefighters are able to keep their jobs.  However, preventing job losses is not the same as creating new jobs.  So this may help reduce the bleeding a little bit, but it is not going to turn the overall employment situation around.

#5 There are a bunch of other minor things in Obama’s proposal such as “modernizing” public schools and helping more Americans refinance their mortgages, but it is not entirely clear how those things will help create a lot more jobs.

Meanwhile, there are a whole lot of things that the Obama jobs plan does not do….

#6 The Obama jobs plan does next to nothing to prevent jobs from being shipped out of the country.

As I wrote about the other day, right now the way the system is designed makes it highly profitable to send American jobs overseas….

*It is legal to pay slave labor wages in many of these other countries.  After all, why pay an American worker 10 or 20 times as much as a worker on the other side of the globe?

*In many of these other countries you do not have to provide any health care for workers.

*In many of these other countries there are virtually no environmental controls to worry about.

*In many of these other countries there are virtually no labor standards to worry about.

*In many of these other countries you only have to deal with a fraction of the “red tape” that you have to deal with in the United States.

Obama is doing absolutely nothing to address these imbalances.

#7 The Obama jobs plan does nothing about the unfair trade practices that are absolutely killing America on the global economic stage.

As I wrote about the other day, other nations are manipulating currency rates, they are openly stealing technology from our companies, they allow their workers to be paid slave labor wages and they put up huge barriers to goods and services from the United States and we let them get away with it.  Our trade policies are absolutely insane, and the way that the new “global economy” is structured guarantees that U.S. businesses are going to be operating at a huge disadvantage.  The following are just a few more of the reasons why foreign firms have a huge advantage over U.S. companies….

*Many foreign nations deeply and directly subsidize national industries and the U.S. government lets them get away with it.  That puts our industries at a vast disadvantage.

*The United States has the highest corporate tax rate in the world.  That puts our corporations at a vast disadvantage.

*Many foreign nations do not require businesses to provide health care for their employees.  That puts our businesses at a vast disadvantage.

*Many foreign nations impose very little regulation on businesses.  That puts businesses in the United States at a vast disadvantage.  In the U.S., we have some of the most restrictive regulations in the world.

In 2011 we are going to end up with a trade deficit that is probably going to be well in excess of half a trillion dollars.  According to one estimate, if the trade deficit was totally eliminated it would create 8.4 million new jobs inside the United States.

So why isn’t Barack Obama proposing to do something about all of this?

#8 The Obama jobs plan does nothing about the gigantic mountains of ridiculous regulations that are absolutely killing small business in this country.  According to the Heritage Foundation, 75 new major regulations that have cost U.S. businesses more than 40 billion dollars have been passed since Barack Obama first took office.

The Federal Register (which contains all federal regulations) just keeps exploding in size.  Last year alone, 81,405 new pages were published in the Federal Register.

Right now there is a good chance that you are breaking dozens of federal regulations without even knowing it.

All of this regulation is crushing our businesses and is making us much less competitive in the global marketplace.

Yes, there will always be a need for common sense regulations on business activity.  But what we have right now is an absolute madhouse.

#9 The Obama jobs plan does nothing about the negative effects of Obamacare.  Obamacare is going to absolutely slaughter U.S. businesses.  Look, when most other nations do not burden their businesses with providing health care and we force our businesses to comply with the nightmare that Obamacare represents, who do you think has the advantage?

The other day, I noted some of the effects that Obamacare is already having on the U.S. business community….

According to a recent report from the National Federation of Independent Business, one out of every eight small businesses in the United States have either already had or expect to have the health insurance plans for their employees terminated by the health insurance companies because of Obamacare.  Another recent survey of mid-size and large businesses found that nearly ten percent of them plan to stop offering health insurance coverage to workers once Obamacare insurance exchanges begin in 2014, and another 20 percent are not sure if they will continue to offer coverage or not.  Our health care system is deeply broken and the ones that keep getting the short end of the stick are average Americans.

If Obama was serious about putting Americans back to work, he would do something about Obamacare.

But he is not going to do that, is he?

#10 The Obama jobs plan makes our national debt worse.  Yes, Obama insists that his plan will be “100%” paid for, but he has not told us how it will be paid for.

Exactly where in the world is he going to get an extra half a trillion dollars next year?

Obama probably intends to propose some tax increases that he knows that the Republicans would never, ever agree to.

So, no, Obama’s proposals will not be paid for.

The U.S. national debt has increased by more than 4 trillion dollars since Barack Obama took office.  It is currently increasing by more than 2 million dollars per minute.

We cannot afford to pile huge amounts of additional debt on to the backs of our children and our grandchildren.  What we have already done to them is deeply, deeply criminal.

In the end, some of Obama’s proposals will probably get passed, none of them will be paid for, our debt will get even bigger, and the fundamental reasons for our job losses will remain unaddressed.

So hopefully you can understand why I consider the Obama jobs plan to be a really bad joke.

Tonight, millions of Americans will be sleeping in seedy motels, in their cars or in tent cities.

Just check out these pictures from New Jersey.  Can you believe that some hard working Americans actually have to live like that?

We had the greatest economy that the world has ever seen.

Things did not have to turn out this way.

But they did.

Now Obama has come up with a “plan” that will not fix any of our fundamental problems but that will get us into a whole lot more debt.

Please excuse me if I am less than thrilled.

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