Recession

It Is Not Just Your Imagination – American Families ARE Getting Poorer

Did you know that median household income in the United States is lower today than it was when the last recession supposedly ended?  If we are in the middle of an “economic recovery”, how can this possibly be happening?  Stunning new statistics compiled by Sentier Research show that the U.S. economy is not nearly as healthy as we have been led to believe.  According to the study that Sentier Research has just released, median household income in the United States was sitting at $55,470 back in January 2000.  In December 2007, when the recession began, it was sitting at $54,916.  In June 2009, when the recession supposedly ended, it was sitting at $53,508.  Today, it is sitting at $50,964.  This is a long-term trend that is definitely going in the wrong direction.  The fact that median household income in the U.S. is now 4.8 percent lower than it was when the last recession ended is incredibly disturbing, especially since all of the things that we buy on a regular basis just keep going up in price.  Food, gas, electricity, car insurance and health insurance all cost a whole lot more today than they did back in the year 2000, and yet median household income has dropped 8.1 percent since that time.  So what does all of this mean?  It means that American families ARE getting poorer.

Yes, the stock market has been soaring, corporate profits have set all-time records in recent years and the big Wall Street banks that were showered with bailout money are absolutely thriving.

But there has been no economic recovery on “Main Street”.

According to the Sentier Research report mentioned above, incomes have been declining in all geographic regions of the country and in all sectors of the economy….

-Median household income for the self-employed has fallen 9.4 percent since June 2009.

-Median household income for private sector employees has fallen 4.5 percent since June 2009.

-Median household income for government workers has fallen 3.5 percent since June 2009.

-Median household income for Americans living in the West has fallen 8.5 percent since June 2009.

-Median household income for Americans living in the Northeast has fallen 4.9 percent since June 2009.

-Median household income for Americans living in the South has also fallen 4.9 percent since June 2009.

-Median household income for Americans living in the Midwest has fallen 1.1 percent since June 2009.

Remember, the recession supposedly ended in June 2009.

Since that time we have supposedly been in a “recovery”.

So if it has seemed to you that American families have been getting poorer it has not just been your imagination.

In a previous article, I detailed 84 statistics that prove that the middle class in America is being systematically destroyed.  If you have not read it yet, I encourage you to go check it out.  At this point it is absolutely undeniable that the middle class in America is declining.  The following are just a couple of the numbers from my recent article….

1. According to the Pew Research Center, 61 percent of all Americans were “middle income” back in 1971.  Today, only 51 percent of all Americans are.

2. The Pew Research Center has also found that 85 percent of middle class Americans say that it is harder to maintain a middle class standard of living today compared with 10 years ago.

3. 62 percent of middle class Americans say that they have had to reduce household spending over the past year.

4. The average net worth of a middle class family in America was $129,582 in 2001.  By 2010 that figure had dropped to $93,150.

5. According to the Federal Reserve, the median net worth of all families in the United States declined “from $126,400 in 2007 to $77,300 in 2010“.

You can find 79 more statistics just like this right here.

At the same time that our incomes are going down, the cost of living just continues to rise steadily.

Thanks Ben Bernanke.

American families are being increasingly stretched financially, and if major changes are not made this is going to get even worse in the years ahead.

Another thing that we aren’t being told on the nightly news is that the percentage of working age Americans that have jobs is lower today than when the last recession ended.

So let’s summarize….

-A smaller percentage of Americans have jobs today compared to June 2009.

-Median household income has declined by 4.8 percent since June 2009.

-American families are far less wealthy than they were just a few years ago.

Are we sure that we are in an economic recovery?

Just look at what is happening to our cities.

The rest of the world once looked at Detroit in awe.

Now it is a global joke.

You can see some incredible photographs of the devastation in Detroit right here.

This kind of thing is happening on the east coast as well.  I have written many times about how horrible life has become in places such as Camden, New Jersey.

Well, now the entire Camden police force is being disbanded, and the policing of the city is going to be turned over to the county.

We are a mess, and it is time to admit that.

Sadly, most Americans simply have no idea how close our economic system really is to total system failure.

Only 24.6 percent of the jobs in this country are “good jobs” at this point, the velocity of money in our economy has plunged to a post-World War II low, unemployment is rampant, more than half of all Americans are at least partially financially dependent on the government and our national debt is crossing the 16 trillion dollar mark.

We don’t need someone to come in and “tweak” the economy.

We need radical reconstructive surgery.

But most Americans do not understand this.

Most Americans do not seem to grasp these things until economic hardship touches them personally.

After all, if you still have a good job and the mainstream media is telling you that everything is going to be okay it is really easy to pretend that we aren’t heading for an economic disaster of unimaginable proportions.

A massive problem that we are facing right now is something known as “normalcy bias”. This is how Wikipedia defines “normalcy bias”….

The normalcy bias, or normality bias, refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring and its possible effects. This often results in situations where people fail to adequately prepare for a disaster, and on a larger scale, the failure of governments to include the populace in its disaster preparations. The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred then it never will occur. It also results in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before. People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.

Doesn’t that sound exactly like the vast majority of Americans right now?

Most Americans just assume that since we have always recovered from every other economic downturn in the past that we will always be able to easily handle whatever the future throws at us.

If only that was true.

We are heading into a time that will be unlike anything any of us have ever experienced before, and many people that have blind faith in the system are going to be absolutely devastated when this coming crisis blindsides them.

Our economy has been collapsing, it is continuing to collapse, and the collapse is going to accelerate dramatically in the coming years.

You can have blind faith in the system, or you can get prepared for what is coming.

The choice is up to you.

You Will Not Believe What Some People Are Willing To Do For A Paycheck These Days

It is absolutely amazing what some people will do to make a living in this economy.  Desperate times call for desperate measures, and we have not seen this kind of desperation for jobs in America since the Great Depression of the 1930s.  What some people are willing to put up with just to bring home a paycheck these days will totally shock you.  For example, would you slaughter dogs all day long even though you are really a dog lover?  Would you personally train your replacement from China even though you knew he was about to take your job?  Would you trade sex for a job?  There are people out there actually doing all these things and worse.  Every night in America, millions upon millions of people roll around endlessly in their beds and stare at their ceilings for hours because they can’t sleep.  They are sick to their stomachs because their money is gone and nobody will hire them.  They can’t provide even the basics for their families and they feel worthless.  Unemployment can be absolutely soul crushing and it can suck the life right out of you.  Things were supposed to be better by now, but they aren’t.  The month after Barack Obama took office the unemployment rate broke the 8 percent barrier and it has stayed above it ever since.  But the truth is that the “official” unemployment number greatly understates the real amount of suffering that is going on out there.  In reality, the percentage of working age Americans that have jobs is lower today than when the last recession ended.  There are millions upon millions of Americans that are desperate for some hope, and there is no hope on the horizon.  In fact, things are going to be getting a whole lot worse for the U.S. economy.

I like personal stories because they tell us things that all of the economic statistics in the world never could.

There are millions of Americans that have had their lives totally turned upside down by this economy.  They feel abandoned and worthless, and many of them feel as though life is no longer worth living.

As you read the following stories, try to put yourself in their shoes and try to feel their pain.

Also, try to remember that these kinds of stories are going to multiply in the years ahead as the U.S. economy falls apart all around us.

A 61-Year-Old Woman Begging For A Job

A recent article posted on gawker.com included the story of a 61-year-old woman who has been through hell and back during this economic downturn….

I sent out close to 500 resumes. Most never were even acknowledged and those that were I was told I was over qualified. When you would press them they would fumble but I was sure my age was part of the “over qualified”. The thoughts of wanting life to be over were with me every day. I wanted the horror to stop. Every time I would hear of the unemployment rates I would cry-what about ME.

At one point she was so desperate she took a job where she was making the decision about what dogs to slaughter at an animal shelter.  Approximately 85 percent of the dogs at the shelter ended up being killed, and she was working about 80 hours a week doing this.  The really sad part is that she really loves dogs….

In 2008 I was able to get a job at the local shelter as a dog trainer. That turned into a job as an Operations Manager. Though I was thankful for the job we had a euthanasia rate of nearly 85%. I was the one that would be the decision maker on who lives and dies of over 10,000 animals per year and the toll mentally was hard. Being salary I was working nearly 80 hours a week due to shorthanded staff.

After she was fired for not being aggressive enough in killing off dogs, she started endlessly sending out resumes once again.  Nobody wants to hire her, and she essentially feels like an old lady begging for a job….

Since February I began sending out 3 resumes a day. As the no return answer, over qualified and now I was getting I was out of engineering too long I started to set my sights lower. I have sent in resumes to sit in the booth in gas stations, secretary and so on. Local colleges have said I am qualified to teach there but they have no openings. I am for all purposes the old lady begging for a job.

Personally Training Their Replacements

If you knew that your company was going to tear down your factory and send your job to China, would you personally train your replacement?

That is what a whole bunch of workers in Illinois are doing.

The following is from a recent article that appeared in the Guardian….

The shock of losing a precious job in a town afflicted by high unemployment is always hard. A foundation for a stable family life and secure home instantly disappears, replaced with a future filled with fears over health insurance, missed mortgage payments and the potential for a slip below the breadline.

But for Bonnie Borman – and 170 other men and women in Freeport, Illinois – there is a brutal twist to the torture. Borman, 52, and the other workers of a soon-to-be-shuttered car parts plant are personally training the Chinese workers who will replace them.

It’s a surreal experience, they say. For months they have watched their plant being dismantled and shipped to China, piece by piece, as they show teams of Chinese workers how to do the jobs they have dedicated their lives to.

Can you imagine that?

Would you be willing to do the same thing just to keep the paychecks coming in for as long as possible?

Sadly, both major political parties are obsessed with promoting unrestricted free trade even though millions of American jobs continue to go overseas.

Our top political candidates even argue about which of them love “free trade” more.

It truly is sickening.

Do you remember when U.S. taxpayers bailed out the auto industry?

Well, since the auto industry bailout approximately 70 percent of all GM vehicles have been built outside the United States.

The insanity has gotten to such a level that some Americans simply cannot take it anymore.  Just consider the following example from a recent article by Donald L. Barlett and James B. Steele….

On his last day on the job, Kevin Flanagan, after clearing out a few personal effects and putting them in boxes in the back of his Ford Ranger, left the building where he’d worked for seven years.

He settled into the front seat of his pickup truck on the lower level of the company garage, placed a 12-gauge Remington shotgun to his head, and pulled the trigger. He was 41 years old.

He was a computer programmer. He’d been a programmer his entire working life. Until, that is, his job was shipped overseas. The business of moving traditional U.S. jobs abroad-called “outsourcing”-has been one of this country’s few growth industries. It’s the ultimate short-sighted business promoted by the country’s elite because it means lower wages and fatter profits. As for the American workers eliminated along the way, they are just collateral damage.

It turns out that Kevin’s replacement was a programmer from India that he personally trained.

Trading Sex For A Job

If you were truly desperate, would you trade sex for a job?

I hope not, but that is exactly what some Americans are doing.

The following is a story from a desperate unemployed woman that was posted on gawker.com recently….

I have been very depressed since I lost my job. I go through periods where I spend most of my days in bed, and although I’ve had a few interviews those people don’t even have the decency to let you know the position is filled. Sometimes I’d call for weeks asking for updates only to get the HR persons voicemail, and they’d never return my calls. With no experience I can’t even get a job waiting tables. I apply to every job in the paper and online, whether I’m qualified or not, and have had 7 interviews total, none of which ended with a job offer. Living paycheck to paycheck would be a blessing at this point.

She has become so desperate that she is even willing to trade her body for a paycheck….

The current ‘bright side’ is that I know someone who owns a small retail clothing chain and has offered me a minimum wage job there on the condition that we become ‘close friends’. I think you & I both know what that entails, but at this time in my life it seems like a better alternative than losing the little that I have. I’d have a paycheck equal to what I am getting on unemployment with the opportunity for overtime and advancements, full benefits and a schedule that would allow me to continue schooling.

A Lot More Layoffs Coming Soon

The frightening thing is that a whole lot more layoffs are on the horizon.

Just check out this excerpt from a recent article on thehill.com….

Lockheed Martin and Pratt & Whitney are going forward with plans to issue layoff notices to thousands of employees due to looming defense cuts under sequestration, despite administration claims that such warnings are unnecessary.

So how many jobs will be lost?

Unfortunately, it is being projected that we could be looking at a million jobs lost….

Top industry officials have said publicly that automatic cut under sequestration could lead to the loss of 1 million defense-related jobs.

Industry leaders and their supporters in Congress say those job losses would hit battleground states such as Ohio, Pennsylvania, Virginia and Florida particularly hard.

Like I have written about before, we simply cannot continue to steal more than a trillion dollars from future generations every single year, but when we do make deep cuts to the federal budget the economic pain is going to be immense.

We already have more than 100 million Americans on welfare.

What is this country going to look like if things get even worse?

The good news is that if you do lose your job and your home you might have somewhere to sleep.  New York City is opening up a bunch of new homeless shelters….

New York City has opened nine new shelters in the last two months in efforts to handle the city’s rapidly growing homeless population, officials said.

The city recorded 43,731 homeless people in shelters this week, which is up 18 percent from the 37,143 at the same time last year, The New York Times reported.

So don’t get too down.

If you can’t find a job and you can’t afford a home perhaps you can at least get into one of those shiny new homeless shelters.

Seriously, I don’t actually want anyone reading this to end up in a homeless shelter.

That is why I endlessly urge people to adjust their priorities and to work as hard as they can right now to prepare for the very hard economic times that are coming.

Now is not the time to be going on expensive vacations and now is not the time to be blowing your money on all kinds of stupid stuff.

We are moving into the most difficult times that any of us have ever seen, and if you do nothing to prepare yourself you will be very sorry.

The Sobering Reality Of What Life Is Like In Reno, Nevada

What do you do when the city where you live is dying?  All over the United States formerly great cities are crumbling, but some are definitely in worse shape than others.  One reader recently wrote to me about what she sees happening all around her in Reno, Nevada.  The unemployment rate in Reno is now up to 11.7 percent, which is well above the national average of 8.3 percent.  But that doesn’t tell the whole story.  The recent recession hit Nevada particularly hard and people have been moving out of the state in waves.  In fact, the labor force in Nevada has shrunk by close to 20 percent over the past year as workers have moved elsewhere in search of work.  But even though the labor force is now nearly 20 percent smaller, the unemployment rate is still well above 11 percent.  There simply are not enough jobs in large Nevada cities such as Reno and Las Vegas.  Unfortunately for Reno, it does not have the same kind of big corporate money pouring into it that Las Vegas does.  The good news is that you can buy a house very, very cheaply in Reno because homes were foreclosed on in droves during the housing crash.  Even today, some housing developments that were put up near the end of the boom times look like virtual ghost towns.  The main industry in Reno is “entertainment”, but many of Reno’s strip clubs and gambling establishments have aged so badly at this point that they just look kind of depressing.  I guess that is kind of fitting, because Nevada has the fifth highest suicide rate in the nation, and Reno has been ranked as one of the top 10 depressed cities in the entire country.  As the city has declined, gangs have moved in and the drug trade is flourishing.  Reno has been called the meth capital of America, and crime is on the rise.  Despite being surrounded by tremendous natural beauty, Reno has become a very unpleasant place in which to live.  But what is happening in Reno is also happening in hundreds of other communities across the United States.  Our economy is collapsing and our cities are crumbling right in front of our eyes, and it is only going to get worse from here.

A reader of my site named Heather who has been unemployed since November of last year recently shared the following with me….

I am living in Reno/Sparks Nevada and I feel like it is ground zero for collapse. There are a lot of people who are in denial right now and cannot see the larger picture. I keep also saying we are the canary in the coal mine for the rest of the country.  It is quite depressing driving around seeing empty office buildings with vacancies and retail areas just empty. Went to the stores and retail seems pretty slow also. I am volunteering at ProNet locally and it helps unemployed people finds jobs and skills. It has been depressing there too with very little jobs out there for many people who need one.

She said that I should share what is happening in Reno with my readers.  She wanted people to know what those living in Reno are going through.

You might think that since Reno is so sunny, so warm and surrounded by such natural beauty that it would be one of the happiest places in America.

Unfortunately it turns out that the opposite is true.

Reno is actually a very sad place.

In fact, last year Men’s Health ranked Reno as the ninth saddest city in the United States.

In response to this ranking, one resident of Reno wrote the following….

In light of this disheartening list-making, it is, of course, important for Nevadans to look on the bright side. Rather than allowing these statistics to depress us further, we can consider them a series of challenges that make living in places like Reno and Las Vegas all the more impressive. You don’t just live in Reno. You survive Reno! To dwell in Reno, you must triumph over the odds that are stacked against you—one of the things we’re supposed to do best here.

If we can withstand all of the emotional curveballs thrown at us because we have selected such a turbulent location in which to reside, we can probably survive anything.

As a lifelong Renoite, I am inclined to respond to these lists with defiance. Yeah, things can look pretty grim sometimes when no one can find a job, and there seems to be no way out.

And that is how many Americans are feeling these days.  They are broke, unemployed, depressed and out of options.

How can you pick up and start a new life somewhere else when you have no job and no money?

Sadly, a lot of younger Americans are turning to drugs in an attempt to escape the pain of their daily lives.

One article that I found attempted to find humor in the raging meth epidemic that is happening in Reno….

Reno has been affectionately called the meth capital of the nation. Some foolishly think mass drug usage can ravage a city as swiftly as it can ruin a user’s clear complexion. In all reality, drug addiction is no more than an endearing quirk, certainly not a cause for concern. Babies and adolescents with addiction-addled parents should stop being coddled and learn how to take care of themselves. I’ve been doing my own laundry since I was six months old­ — I’m sure they can do the same. If there is anything disturbing about the meth problem in Reno, it’s that it shows the lack of variety in this town. Why don’t you try some uppers like MDMA? Your teeth will thank me.

Unfortunately, Reno is far from alone.  In the past I have written about how formerly great cities such as Detroit, Cleveland and Baltimore are completely falling apart as well.  This kind of thing is literally happening from coast to coast.

There is a very serious lack of decent jobs in America right now.  At this point only 24.6 percent of all jobs in the United States are good jobs.

This has made it increasingly difficult for Americans to be able to take care of themselves.

If you can believe it, more than 100 million Americans are on welfare at this point.

And that number does not even include the tens of millions of people that are on Social Security and Medicare.

What in the world has happened to us?

These days most Americans work really hard all of their lives but never end up reaching their dreams.

In fact, one recent study found that 46 percent of all Americans die with less than $10,000 worth of financial assets.

Talk about depressing.

But instead of having us focus on how bad the economic numbers are, the Federal Reserve wants to start measuring how “happy” everyone is.  The following is from a recent ABC News article….

Ben Bernanke wants to know if you are happy.

The Federal Reserve chairman said Monday that gauging happiness can be as important for measuring economic progress as determining whether inflation is low or unemployment high. Economics isn’t just about money and material benefits, Bernanke said. It is also about understanding and promoting “the enhancement of well-being.”

So what would you say if the Federal Reserve contacted you and asked if you are happy?

Please feel free to post a comment with your thoughts below….

The Employment Rate In The United States Is Lower Than It Was During The Last Recession

Did you know that a smaller percentage of Americans are working today than when the last recession supposedly ended?  But you won’t hear about this on the mainstream news.  Instead, the mainstream media obsesses over the highly politicized and highly manipulated “unemployment rate”.  The media is buzzing about how “163,000 new jobs” were added in July but the unemployment rate went up to “8.254%“.  Sadly, those numbers are quite misleading.  According to the Bureau of Labor Statistics, in June 142,415,000 people had jobs in the United States. In July, that number declined to 142,220,000. That means that 195,000 fewer Americans were working in July than in June. But somehow that works out to “163,000 new jobs” in July.  I am not exactly sure how they get that math to add up.  Perhaps someone out there can explain it to me.  Personally, I find that the “employment rate” gives a much clearer picture of what is actually going on in the economy.  The employment to population ratio is a measure of the percentage of working age Americans that actually have jobs.  When it goes up that is good.  When it goes down, that is bad.  In July, the employment to population ratio dropped from 58.6 percent to 58.4 percent.  Overall, the percentage of working age Americans that have jobs has now been under 59 percent for 35 months in a row.

The following is a chart of the employment to population ratio in the United States over the past 10 years….

The gray shaded bar in the chart represents the last recession as defined by the Federal Reserve.  As you can see, the percentage of working age Americans with a job dropped sharply from nearly 63 percent at the start of 2008 to a little above 59 percent when the recession ended.

But the “employment rate” kept on dropping even further.

It finally bottomed out at 58.2 percent in December of 2009.

Since that time, it has stayed very steady.  It has not fallen below 58 percent and it has not risen back above 59 percent.

This is very odd, because after ever other recession since World War II this number has always bounced back strongly.

But this has not happened this time.

In essence, it is starting to look like 4 percent of the working age population of the United States has been removed from the workforce permanently.

The good news in all of this is that things have at least not been getting any worse over the last couple of years.  Even though things have been bad, at least we have had a period of relative stability.

The bad news is that the employment rate has not rebounded despite unprecedented borrowing and spending by the federal government and despite reckless money printing by the Federal Reserve.

Considering how desperately the federal government and the Federal Reserve have been trying to stimulate the economy, I truly did expect to see the employment rate bounce back at least a little bit by now.

Unfortunately it has not and now the U.S. economy is rapidly heading for another recession.

But Barack Obama is going to prance around over the next few days and talk about how wonderful it is that the economy created “163,000 new jobs” in July.

What he isn’t going to talk about are the millions of Americans that have been unemployed for so long that they don’t even “count” in the official unemployment numbers anymore.

But those people actually exist and they are really hurting.  Many of them are starting to lose their unemployment benefits and they really do not know what they are going to do.  The following is from a recent USA Today article….

Since abruptly losing her $312 weekly unemployment check in June, Laurie Cullinan has depleted her savings, sought food from the Salvation Army and lit candles to save electricity.

If she can’t find a job this month, the Royal Oak, Mich., resident worries she’ll be evicted from her apartment, an unthinkable prospect for the 52-year-old, who enjoyed a solidly middle-class lifestyle until she lost her office-manager job two years ago.

“What am I going to do if I’m homeless?” says Cullinan, who collected unemployment for 1½ years. “My mind won’t let me comprehend that.”

Could you imagine having to face that?

What would you do if you were about to be tossed out on to the street?

When you add up all of the working age Americans without a job in the United States today, it comes to more than 100 million.

Some people have accused me of lying about that figure, but it is actually true.

There are more than 100 million working age Americans that are not employed right now.

And even if you do have a job that does not mean that you are doing well.  As I wrote about yesterday, only 24.6 percent of all jobs in the United States today are good jobs.

The cost of living continues to rise much faster than wages are.  Many families are having a really hard time just paying for the basics.  The inflated standard of living that we have all enjoyed for so long is starting to disappear.

An increasing number of young people are living with their parents well past the age of 18 because there are not enough good jobs and it is just so hard to make it in this economy.  If you can believe it, 24 percent of all Americans in the 20 to 34 year old age bracket are living at home with their parents at this point.

But we will be seeing a lot more of this as the economy gets even worse.  “Multi-generational households” will become very common, and that is not necessarily a bad thing.  Perhaps this will give some families a chance to do some bonding.

Meanwhile, many of our once great cities continue to rot and decay at a staggering pace.  Today, I saw one report that discussed how the city of Detroit has become a dumping ground for dead bodies.

How sad is that?

Detroit was once the envy of the world and now it is a place where murder victims are dumped.

These are all indications of just how far we have fallen.

But things are going to get a lot worse, so we should actually be thankful for the period of relative stability that we are enjoying right now.

The long-term economic collapse that we are experiencing right now will soon accelerate.  Eventually even the highly manipulated official “unemployment rate” will soar well up into the double digits.

When it does, the anger and frustration that is boiling under the surface in this country is going to explode.

Let us hope for the best, but let us also prepare for the worst.

11 Signs That Time Is Quickly Running Out For The Global Financial System

Are we rapidly approaching a moment of reckoning for the global financial system?  August is likely to be a relatively slow month as most of Europe is on vacation, but after that we will be moving into a “danger zone” where just about anything could happen.  Historically, a financial crisis has been more likely to happen in the fall than during any other time, and this fall is shaping up to be a doozy.  Much of the focus of the financial world is on whether or not the euro is going to break up, but even if the authorities in Europe are able to keep the euro together we are still facing massive problems.  Countries such as Greece and Spain are already experiencing depression-like conditions, and much of the rest of the globe is sliding into recession.  Unemployment has already risen to record levels in some parts of Europe, major banks all over Europe are teetering on the brink of insolvency, and the flow of credit is freezing up all over the planet.  If things take a really bad turn, this crisis could become much worse than the financial crisis of 2008 very quickly.

All over the world people are starting to write about the possibility of a major economic crisis starting this fall.

For example, a recent article in the International Business Times discussed how some economists around the globe are fearing the worst for the coming months….

The consensus? The world economy has entered a final countdown with three months left, and investors should pencil in a collapse in either August or September.

Citing a theory he has been espousing since 2010 that predicts “a future lack of policy flexibility from the monetary and fiscal side,” Jim Reid, a strategist at Deutsche Bank, wrote a note Tuesday that gloated “it feels like Europe has proved us right.”

“The U.S. has the ability to disprove the universal nature of our theory,” Reid wrote, but “if this U.S. cycle is of completely average length as seen using the last 158 years of history (33 cycles), then the next recession should start by the end of August.”

The global financial system is so complex and there are so many thousands of moving parts that it is always difficult to put an exact date on anything.  In fact, history is littered with economists that have ended up looking rather foolish by putting a particular date on a prediction.

But without a doubt we are starting to see storm clouds gather for this fall.

The following are 11 more signs that time is quickly running out for the global financial system….

#1 A number of very important events regarding the financial future of Europe are going to happen in the month of September.  The following is from a recent Reuters article that detailed many of the key things that are currently slated to occur during that month….

In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.

On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy – or what do if one or both were to topple.

#2 Reuters is reporting that Spanish Economy Minister Luis de Guindos has suggested that Spain may need a 300 billion euro bailout.

#3 Spain continues to slide deeper into recession.  The Spanish economy contracted 0.4 percent during the second quarter of 2012 after contracting 0.3 percent during the first quarter.

#4 The unemployment rate in Spain is now up to 24.6 percent.

#5 According to the Wall Street Journal, a new 30 billion euro hole has been discovered in the financial rescue plan for Greece.

#6 Morgan Stanley is projecting that the unemployment rate in Greece will exceed 25 percent in 2013.

#7 It is now being projected that the Greek economy will shrink by a total of 7 percent during 2012.

#8 German Finance Minister Wolfgang Schäuble says that the rest of Europe will not be making any more concessions for Greece.

#9 The UK economy has now plunged into a deep recession.  During the second quarter of 2012 alone, the UK economy contracted by 0.7 percent.

#10 The Dallas Fed index of general business activity fell dramatically to -13.2 in July.  This was a huge surprise and it is yet another indication that the U.S. economy is rapidly heading into a recession.

#11 As I have written about previously, a banking crisis is more likely to happen in the fall than at any other time during the year.  The global financial system will enter a “danger zone” starting in September, and none of us need to be reminded that the crashes of 1929, 1987 and 2008 all happened during the second half of the year.

So is there any hope on the horizon?

European leaders have tried short-term solution after short-term solution and none of them have worked.

Now countries all over Europe are sliding into depression and the authorities in Europe seem to be all out of answers.  The following is what one eurozone diplomat said recently….

“For two years we’ve been pumping up the life raft, taking decisions that fill it with just enough air to keep it afloat even though it has a leak,” the diplomat said. “But now the leak has got so big that we can’t pump air into the raft quickly enough to keep it afloat.”

The boat is filling up with water faster than they can bail it out.

So what is the solution?

Well, some of the top names in economics on both sides of the Atlantic are urging authorities to keep the debt bubble pumped up by printing lots and lots more money.

For example, even though the U.S. government is already running trillion dollar deficits New York Times “economist” Paul Krugman is boldly proclaiming that now is the time to print and borrow even more money.  He is proud to be a Keynesian, and he says that “you should be a Keynesian, too.”

Across the pond, the International Business Editor of the Telegraph, Ambrose Evans-Pritchard, is strongly urging the ECB to print more money….

Needless to say, I will be advocating 1933 monetary stimulus à l’outrance, or trillions of asset purchases through old fashioned open-market operations through the quantity of money effect (NOT INTEREST RATE ‘CREDITISM’) to avert deflation – and continue doing so until nominal GDP is restored to its trend line, at which point the stimulus can be withdrawn again.

But is more money and more debt really the solution to anything?

In the United States, M2 recent surpassed the 10 trillion dollar mark for the first time ever.  It has increased in size by more than 5 times over the past 30 years.

Unfortunately, our debt has been growing much faster than GDP has over that time period.

For example, during the second quarter of 2012 U.S. government debt grew by 274.3 billion dollars but U.S. GDP only grew by 117.6 billion dollars.

Our problem is not that there is not enough money floating around.

Our problem is that there is way, way too much debt.

But this is how things always go with fiat currencies.

There is always the temptation to print more.

That is one of the big reasons why every single fiat currency in history has eventually collapsed.

Printing more money will not solve our problems.  It will just cause our problems to take a different form.

In the end, nothing that the authorities can do will be able to avert the crisis that is coming.

A lot of people are starting to realize this, and that is one reason why we are seeing so much economic pessimism right now.

For example, according to a new Rasmussen poll only 14 percent of all Americans believe that children in America today will be “better off” than their parents.

That is an absolutely stunning figure, but it just shows us where we are at.

Our economy has been in decline for a long time, and now we are rapidly approaching another major downturn.

You better buckle up, because this downturn is not going to be pleasant at all.

17 Reasons Why Those Hoping For A Recession In 2012 Just Got Their Wish

If you were hoping for a recession in 2012, then you are going to be very happy with the numbers you are about to see.  The U.S. economy is heading downhill just in time for the 2012 election.  Retail sales have fallen for three months in a row for the first time since 2008, manufacturing activity is dropping like a rock, sales of new homes are declining again, consumer confidence has moved significantly lower and a depressingly small percentage of businesses anticipate hiring more workers in the coming months.  Even though the Federal Reserve has been wildly pumping money into the financial system and even though the federal government has been injecting gigantic piles of borrowed cash into the economy, we still haven’t seen an economic recovery.  In fact, we appear to be on the verge of yet another major downturn.  In California the other night, Barack Obama told supporters that “we tried our plan — and it worked“, but only those that are still drinking the Obama kool-aid would believe something so preposterous.  The truth is that the U.S. economy has been steadily declining for many years and now we have reached another very painful recession.

And don’t let the second quarter GDP number on Friday fool you.  Analysts are expecting to see GDP growth of about 1.4 percent for the second quarter, but the only reason for our very small amount of “economic growth” is because the economy has been flooded with new dollars.

Let me give you an example.  If I could go out overnight and magically double the bank accounts of every single American, would we all be twice as wealthy?

No, because there would be twice as many dollars now chasing the same amount of goods and services.  The price of those goods and services would soon rise dramatically to reflect this new reality.

With all of those new dollars spinning around in the economy it would look like “economic growth” was going through the roof, but in reality the amount of real economic activity would be about the same.

So whenever we talk about GDP, we need to properly adjust it for inflation.  That means using accurate inflation figures and not the highly manipulated inflation figures that the U.S. government is putting out these days.

And as I noted the other day, after properly adjusting for inflation the U.S. economy has been continually experiencing negative economic growth since about 2005.

So let’s not deceive ourselves.  The U.S. economy has been declining for a long time.

But soon even the GDP number that the government gives us will turn negative.  We will probably see a slightly positive number for the second quarter, and the number will likely go negative either in the third quarter or the fourth quarter.

Economists will debate when this new recession officially “began” just like they do with every recession, but it doesn’t take a genius to figure out what is happening to our economy right now.

The following are 17 reasons why those hoping for a recession in 2012 just got their wish….

1. U.S. retail sales have declined for three months in a row.  This is the first time this has happened since 2008.  Every other time this has happened in U.S. history (except for once) this has signaled that the U.S. economy was either already in a recession or was about to enter one.

2. The Philadelphia Fed index of manufacturing activity contracted for the third month in a row during July.  According to the Financial Post, this is a very bad sign….

Seven out of eight times when the average reading has been that low (-11.8) for that long the U.S. economy has tipped into recession.

3. Manufacturing activity in the mid-Atlantic region has also declined for three months in a row.  In fact, the only time in the past decade when manufacturing activity in the mid-Atlantic has fallen more dramatically was during the last recession.

4. A factory index calculated by the Institute for Supply Management has fallen to its lowest level since June 2009.

5. The Conference Board index of leading economic indicators has fallen for two of the past three months.

6. According to a recent survey conducted by the Conference Board, only 17 percent of CEOs had a positive view of the economy during the second quarter of 2012.  During the first quarter of 2012, 67 percent did.

7. Gallup’s U.S. Economic Confidence Index is now the lowest that it has been since January.

8. Optimism among small business owners has declined in three of the last four months and is now at its lowest level since last October.

9. Believe it or not, the amount of waste being carted around on trains in the United States has an 82 percent correlation with U.S. economic growth.  Unfortunately, right now the number of garbage carloads on trains is falling dramatically.

10. Sales of previously occupied homes dropped by 5.4 percent during June.

11. Sales of new homes declined by 8.4 percent during June.  At this point new home sales are less than a third of what they were during the boom years.

12. An increasing number of Americans are relying on high interest “payday loans” to pay the rent and put food on the table.

13. Far more companies are defaulting on their debts this year than last year.

14. According to the U.S. Labor Department, the unemployment rate fell in 11 states and Washington, D.C. last month, but it rose in 27 states.

15. The unemployment rate in New York City is now back up to 10 percent.  That equals the peak unemployment rate in New York City during the last recession.

16. The teen unemployment rate in Washington D.C. right now is 51.7 percent.

17. A recent survey conducted by the National Association for Business Economics found that only 23 percent of all U.S. companies plan to hire more workers over the next 6 months.  When the same question was asked a few months ago that number was at 39 percent.

All of those are very powerful pieces of evidence that a new recession has started.

But do you want to know one of my favorite indicators that the U.S. economy is sliding into recession?

In a previous article, I noted that Federal Reserve Chairman Ben Bernanke made the following statement to Congress recently: “At this point we don’t see a double dip recession. We see continued moderate growth.”

As I mentioned the other day, Bernanke has a track record of failure that is absolutely embarrassing.  Back on January 10, 2008 Bernanke made the following statement….

“The Federal Reserve is not currently forecasting a recession.”

That turned out to be a great call, didn’t it?

On June 10, 2008 he doubled down on his call that the U.S. economy was going to avoid a recession….

“The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

Just before Fannie Mae and Freddie Mac collapsed Bernanke made this statement….

“The GSEs are adequately capitalized. They are in no danger of failing.”

And there are dozens of other examples just like these.

This is the guy running our economic system.

I am very critical of the Federal Reserve, but there are very good reasons for this.

The Federal Reserve is running our economy into the ground, and we need to pound this into the heads of the American people so that they will wake up and demand change.

Perhaps this next recession will be painful enough to wake people up.

The Wall Street Journal is already even using the “D word” to describe what we are experiencing.  Just today, the Wall Street Journal ran an article that asked this question: “Do Two Recessions Equal One Depression?”

Sadly, this is just the leading edge of what is coming.  By the time 2014 or 2015 rolls around, we are going to look back and long for the “good old days” of 2011 and 2012.

Over the next few years, the unemployment rate is going to skyrocket and poverty in the United States is going to get a whole lot worse.

Now is not the time to goof off.  Now is the time to work really hard to get yourself and your family into the best position that you can for the storm that is coming.

Nothing is going to stop the terrible economic crisis that is coming, but at least we can get prepared for it.

There is hope in being prepared.

Sadly, most people will never even see the next crisis coming until they get blindsided by it.

12 Signs That Spain Is Shifting Gears From Recession To Depression

Where have we seen this before?  Bond yields soar above the 7 percent danger level.  Check.  The stock market crashes to new lows.  Check.  Industrial activity plummets like a rock and the economy contracts.  Check.  The unemployment rate skyrockets to more than 20 percent.  Check.  The bursting of a massive real estate bubble pushes the banking system to the brink of implosion.  Check.  Broke local governments beg the broke national government for bailouts.  Check.  The international community pressures the national government to implement deep austerity measures which will slow down the economy even more and hordes of violent protesters take to the streets.  Check.  All of this happened in Greece, it is happening right now in Spain, and mark my words it will eventually happen in the United States.  Every debt bubble eventually bursts, and right now Spain is experiencing a level of economic pain that very, very few people saw coming.  The recession in Spain is rapidly becoming a full-blown economic depression, and at this point there is no hope and no light at the end of the tunnel.

The bad news for the global economy is that Spain is much larger than Greece.  According to the United Nations, the Greek economy is the 32nd largest economy in the world.  The Spanish economy, on the other hand, is the 4th largest economy in the eurozone and the 12th largest economy on the entire planet.  It is nearly five times the size of the Greek economy.

Financial markets all over the globe are very nervous right now because if the Spanish government ends up asking for a full-blown bailout it could spell the end for the eurozone.  There simply is not enough money to do the same kind of thing for Spain that is being done for Greece.

Of course European officials are going to do their best to keep the eurozone from collapsing, but what they have completely failed to do is to keep these countries from falling into depression.

As I have written about previously, Greece has already been in an economic depression for some time.

I warned that Spain, Italy, Portugal and a bunch of other European nations were going down the exact same path.

Now we are watching a virtual replay of what happened in Greece take place in Spain.

Unfortunately, the global financial system may not be able to handle a complete implosion of the Spanish economy.

The following are 12 signs that Spain is shifting gears from recession to depression….

#1 At one point on Monday, the IBEX stock market index fell to 5,905, which was the lowest level in nearly ten years.  When it hit 5,905 that represented a drop of about 12 percent over just two trading days.  If that happened in the United States, it would be the equivalent of the Dow falling by about 1500 points in 48 hours.

#2 So far this year, the Spanish stock market is down more than 25 percent.  Back in 2008, the IBEX 35 was well over 15,000.  Today it is sitting just above 6,000.

#3 Spain has banned many forms of short selling for 3 months.

#4 The yield on 10 year Spanish bonds is now well above the 7 percent “danger level”.

#5 Thanks to the problems in Spain, the euro continues to fall like a rock.  On Monday it hit a new two year low against the U.S. dollar, and it is near a twelve year low against the Japanese yen.

#6 During the first quarter of 2012, the Spanish economy contracted by 0.3 percent.  During the second quarter of 2012, the Spanish economy contracted by 0.4 percent.

#7 Local governments all over Spain are flat broke and need to be bailed out by the broke national government.  The following is from a recent CNBC article….

Adding to Madrid’s woes, media reports suggested another half a dozen of Spain’s 17 regional authorities, facing an undeclared funding crisis, were ready to follow Valencia in seeking aid from the central government.

#8 The percentage of bad loans on the books of Spanish banks has reached an 18 year high.  European officials have already promised a 100 billion euro bailout for Spain’s troubled banking system, but most analysts agree that 100 billion euros will not be nearly enough.

#9 Spanish industrial output declined for the ninth month in a row in May.

#10 The unemployment rate in Spain is up to an astounding 24.6 percent.  The unemployment rate in Spain is already higher than it was in the United States at the peak of the Great Depression of the 1930s.

#11 The youth unemployment rate in Spain is now over 52 percent.

#12 The Spanish government has just announced a whole bunch of new tax increases and spending cuts which will cause the Spanish economy to slow down even more.  In response to these austerity measures, people are taking to the streets all over Spain.  Last week, 100,000 demonstrators poured into the streets to protest in Madrid alone.

Sadly, the nightmare in Spain is just beginning.

If the yield on 10 year Spanish bonds stays above 7 percent, that is going to be a really bad sign.  According to the Wall Street Journal, the 7 percent level is key as far as investor confidence is concerned….

Monday’s dramatic market moves suggest Spain may be stuck in a spiral that culminates in a bailout from other euro-zone countries.

“The rise in the 10-year yield well beyond 7% carries a very distinct reminder of events in Greece in April 2010, Ireland in October 2010 and Portugal in February 2011,” said analysts at Bank of New York Mellon. “In each case, a decisive move beyond 7% signaled the start of a collapse in investor confidence that, in each case, led to a bailout within weeks,” they added.

So keep an eye on that number in the weeks ahead.

Meanwhile, the Spanish economy continues to get worse with each passing month.

So just how bad are things in Spain right now?

Just check out this excerpt from a recent article by Mark Grant….

Recently two noted Spanish economists were interviewed. One was always an optimist and one was always a pessimist. The optimist droned on and on about how bad things were in Spain, the dire situation with the regional debt, the huge problems overtaking the Spanish banks and the imminent collapse of the Spanish economy. In the end he said that the situation was so bad that the Spanish people were going to have to eat manure. The pessimist was shocked by the comments of his colleague who had never heard him speak in such a manner. When it was the pessimist’s turn to speak he said that he agreed with the optimist with one exception; the manure would soon run out.

That may make you laugh, but for those in Europe going through these horrific economic conditions it is no laughing matter.

On Sunday, Greek Prime Minister Antonis Samaras actually told former U.S. president Bill Clinton that Greece is already in a “Great Depression“.

Like Spain, the unemployment rate in Greece is well above 20 percent and the youth unemployment rate is above 50 percent.

The only reason the Greek financial system has not totally collapsed is because of outside assistance, but now there are indications that the assistance may soon be cut off.

At this point there are persistent rumors that the IMF does not plan to give any more aid money to Greece unless Greece “shapes up”.

Meanwhile, the suffering in Greece just gets worse and worse.

Sadly, most Americans pay very little attention to what is going on in Greece and Spain.

Most Americans just assume that we will always have “the greatest economy on earth” and that we can take prosperity for granted.

Unfortunately, the truth is that the United States already has more government debt per capita than either Greece or Spain does.

Just like Greece and Spain, we are also rapidly traveling down the road to economic oblivion, and depression-like conditions will arrive in this country soon enough.

So enjoy these last months of economic prosperity while you still can.

A whole lot of pain is on the horizon.

17 Reasons To Be EXTREMELY Concerned About The Second Half Of 2012

What is the second half of 2012 going to bring?  Are things going to get even worse than they are right now?  Unfortunately, that appears more likely with each passing day.  I will admit that I am extremely concerned about the second half of 2012.  Historically, a financial crisis is much more likely to begin in the fall than during any other season of the year.  Just think about it.  The stock market crash of 1929 happened in the fall.  “Black Monday” happened on October 19th, 1987.  The financial crisis of 2008 started in the fall.  There just seems to be something about the fall that brings out the worst in the financial markets.  But of course there is not a stock market crash every year.  So are there specific reasons why we should be extremely concerned about what is coming this year?  Yes, there are.  The ingredients for a “perfect storm” are slowly coming together, and in the months ahead we could very well see the next wave of the economic collapse strike.  Sadly, we have never even come close to recovering from the last recession, and this next crisis might end up being even more painful than the last one.

The following are 17 reasons to be extremely concerned about the second half of 2012….

#1 Historical Trends

A recent IMF research paper by Luc Laeven and Fabián Valencia showed that a banking crisis is far more likely to start in September than in any other month.  The following chart is from their report….

So what will this September bring?

#2 JP Morgan

Do you remember back in May when JP Morgan announced that it would be taking a 2 billion dollar trading loss on some derivatives trades gone bad?  Well, the New York Times is now reporting that the real figure could reach 9 billion dollars, but nobody really knows for sure.  At some point is JP Morgan going to need a bailout?  If so, what is that going to do to the U.S. financial system?

#3 Derivatives

Last week, Moody’s downgraded the credit ratings of 15 major global banks.  As a result, a number of them have been required to post billions of dollars in additional collateral against derivatives exposures….

Citigroup’s two-notch long-term rating downgrade from A3 to Baa2 could have led to US$500m in additional liquidity and funding demands due to derivative triggers and exchange margin requirements, according to the bank’s 10Q regulatory filing at the end of the first quarter.

Morgan Stanley – which Moody’s downgraded from A2 to Baa1 – said a two-notch downgrade from both Moody’s and Standard and Poor’s could spur an additional US$6.8bn of collateral requirements in its latest 10Q. The bank did not break down its potential collateral calls under a scenario where only Moody’s downgraded the bank below the Single A threshold.

Royal Bank of Scotland estimated it may have to post £9bn of collateral as a result of the one-notch Moody’s downgrade to Baa1 in a statement on June 21, but did not detail how much of this additional requirement was driven by margin for swaps exposures.

The worldwide derivatives market is starting to show some cracks, and at some point this is going to become a major disaster.

Remember, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives.  When this bubble completely bursts it is going to be impossible to fix.

#4 LEAP/E2020 Warning

LEAP/E2020 has issued a red alert for the global financial system for this fall.  They are warning that the “second half of 2012” will represent a “major inflection point” for the global economic system….

The shock of the autumn 2008 will seem like a small summer storm compared to what will affect planet in several months.

In fact LEAP/E2020 has never seen the chronological convergence of such a series of explosive and so fundamental factors (economy, finances, geopolitical…) since 2006, the start of its work on the global systemic crisis. Logically, in our modest attempt to regularly publish a “crisis weather forecast”, we must therefore give our readers a “Red Alert” because the upcoming events which are readying themselves to shake the world system next September/ October belong to this category.

#5 Increasing Pessimism

One recent survey of corporate executives found that only 20 percent of them expect the global economy to improve over the next 12 months and 48 percent of them expect the global economy to get worse over the next 12 months.

#6 Spain

The Spanish financial system is basically a total nightmare at this point.  Moody’s recently downgraded Spanish debt to one level above junk status, and earlier this week Moody’s downgraded the credit ratings of 28 major Spanish banks.

According to CNBC, Spain’s short-term borrowing costs are now about three times higher than they were just one month ago….

Spain’s short-term borrowing costs nearly tripled at auction on Tuesday, underlining the country’s precarious finances as it struggles against recession and juggles with a debt crisis among its newly downgraded banks.

The yield paid on a 3-month bill was 2.362 percent, up from just 0.846 percent a month ago. For six-month paper, it leapt to 3.237 percent from 1.737 percent in May.

Needless to say, this is very, very bad news.

#7 Italy

The situation in Italy continues to deteriorate and many analysts believe that it could be one of the next dominoes to fall.  The following is from a recent Businessweek article….

The euro zone’s third-biggest economy is seen as the next domino at risk of toppling after the European Union’s June 9 deal to lend Spain $125 billion in bank bailout funds. Yields on Italy’s 10-year government bonds reached 6.2 percent on June 13, up from just 4.8 percent in March. By pushing up Italy’s borrowing costs out of fear of default, investors are making a default more likely. 

A recent Fortune article detailed some of the economic fundamentals that have so many economists deeply concerned about the Italian economy right now….

The main glaring risk threats that could propel Italy down the path to become Europe’s next domino is the size of country’s outstanding debt (at €1.9 trillion or 120% of GDP); the mountain of debt it has to roll over in the next 12 months (nearly €400 billion); and the market’s cracking credibility around Prime Minister Mario Monti’s ability to reduce the country’s fiscal footprint and spur growth.

Further, fear around Italy’s creditworthiness, which has recently been expressed by near cycle highs in sovereign CDS spreads and government yields on the 10-year bond, follow some rather glaring negative fundamentals over recent quarters and years:  declining GDP over the last three consecutive quarters; a rising unemployment rate (especially among its youth); deterioration in labor market competitiveness; and increased competition for export goods to its key trading partners.

#8 Greece

I have written extensively about the financial nightmare that is unfolding in Greece.  Unemployment has soared past the 20 percent mark, youth unemployment is above 50 percent, the Greek economy has contracted by close to 25 percent over the past four years and now Greek politicians are saying that a third bailout package may be necessary.

#9 Cyprus

The tiny island nation of Cyprus has become the fifth member of the eurozone to formally request a bailout.  This is yet another sign that the eurozone is rapidly falling apart.

#10 Germany

German Chancellor Angela Merkel continues to promote an austerity path for Europe and she continues to maintain her very firm position against any kind of eurozone debt sharing….

Merkel, speaking to a conference in Berlin today as Spain announced it would formally seek aid for its banks, dismissed “euro bonds, euro bills and European deposit insurance with joint liability and much more” as “economically wrong and counterproductive,” saying that they ran against the German constitution.

“It’s not a bold prediction to say that in Brussels most eyes — all eyes — will be on Germany yet again,” Merkel said. “I say quite openly: when I think of the summit on Thursday I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”

In fact, Merkel says that there will be no eurobonds “as long as I live“.  This means that there will be no “quick fix” for the problems that are unfolding in Europe.

#11 Bank Runs

Every single day, hundreds of millions of dollars is being pulled out of banks in southern Europe.  Much of that money is being transferred to banks in northern Europe.

In a previous article I included an extremely alarming quote from a CNBC article about the unfolding banking crisis in Europe….

Financial advisers and private bankers whose clients have accounts too large to be covered by a Europe-wide guarantee on deposits up to 100,000 euros ($125,000), are reporting a “bank run by wire transfer” that has picked up during May.

Much of this money has headed north to banks in London, Frankfurt and Geneva, financial advisers say.

“It’s been an ongoing process but it certainly picked up pace a couple of weeks ago We believe there is a continuous 2-3 year bank run by wire transfer,” said Lorne Baring, managing director at B Capital, a Geneva-based pan European wealth management firm.

How long can these bank runs continue before banking systems start to collapse?

#12 Preparations For The Collapse Of The Eurozone

As I have written about previously, the smart money has already written off southern Europe.  All over the continent major financial institutions are preparing for the worst.  For example, just check out what Visa Europe is doing….

Visa Europe is holding weekly meetings to discuss scenarios in the event the euro zone collapses, joining other companies that are preparing for a potential breakup of the currency bloc.

Chief Commercial Officer Steve Perry said Tuesday that management at the U.K.-based credit-card company meets weekly to explore various possible outcomes, including a total collapse of the euro zone.

#13 Global Lending Is Slowing Down

All over the globe the flow of credit is beginning to freeze up.  In fact, the Bank for International Settlements says that worldwide lending is contracting at the fastest pace since the financial crisis of 2008.

#14 Sophisticated Cyber Attacks On Banks

It is being reported that “very sophisticated” hackers have successfully raided dozens of banks in Europe.  So far, it is being estimated that they have stolen 60 million euros….

Sixty million euro has been stolen from bank accounts in a massive cyber bank raid after fraudsters raided dozens of financial institutions around the world.

According to a joint report by software security firm McAfee and Guardian Analytics, more than 60 firms have suffered from what it has called an “insider level of understanding”.

What happens someday if we wake up and all the money in the banks is gone?

#15 U.S. Municipal Bankruptcies

All over the United States there are cities and towns on the verge of financial disaster.  This week Stockton, California became the largest U.S. city to ever declare bankruptcy, but the reality is that this is only just the beginning of the municipal debt crisis….

Stockton, California, said it will file for bankruptcy after talks with bondholders and labor unions failed, making the agricultural center the biggest U.S. city to seek court protection from creditors.

“The city is fiscally insolvent and must seek Chapter 9 bankruptcy protection,” Stockton said in a statement released yesterday after its council voted 6-1 to adopt a spending plan for operating under bankruptcy protection.

#16 The Obamacare Decision

The U.S. economy is already a complete and total mess, and now the Obamacare decision is going to throw a huge wet blanket on it.  All over America, small business owners are saying that they are going to have to let some workers go because they cannot afford to keep them all under Obamacare.  It would be hard to imagine a more job killing law than Obamacare, and now that the Supreme Court decision has finally been announced we are going to see many businesses making some really hard decisions.

#17 The U.S. Election

It is being reported that Barack Obama is putting together an army of “thousands of lawyers” to deal with any disputes that arise over voting procedures or results.  It certainly looks like this upcoming election is going to be extremely close, and there is the potential that we could end up facing another Bush v. Gore scenario where the fate of the presidency is determined in court.  This campaign season is likely to be exceptionally nasty, and I fear what may happen if there is not a decisive winner on election day.  The possibility of significant civil unrest is certainly there.

We definitely live in “interesting” times.

Personally, I am deeply concerned about the September, October, November time frame.

The other day, Joe Biden delivered a speech in which he made the following statement….

“It’s A Depression For Millions And Millions Of Americans”

And what Biden said was right for once.  Millions of Americans are out of work right now and millions of Americans have fallen out of the middle class in recent years.  If you have lost everything, it does feel like you are living through a depression.

When people lose everything, they tend to get desperate.  And desperate people do desperate things – especially when they are angry.

A whole host of recent opinion polls have shown that anger and frustration in the United States are rising to unprecedented levels.  The ingredients are certainly there for an explosion.  Someone just needs to come along and light the fuse.  We truly do live in frightening times.

Let us hope for the best, but let us also prepare for the worst.

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