Stock Market

Currency Crisis! So What Happens If The Dollar And The Euro Both Collapse?

Some analysts are warning that the U.S. dollar is in danger of collapse because of the exploding U.S. government debt, the horrific U.S. trade deficit and the new round of quantitative easing recently announced by the Federal Reserve.  Other analysts are warning the the euro is in danger of collapse because of the very serious sovereign debt crisis that is affecting nations such as Greece, Portugal, Ireland, Italy, Belgium and Spain.  So what happens if the dollar and the euro both collapse?  Well, it would certainly throw the current world financial order into a state of chaos, but what would emerge from the ashes?  Would the nations of the world go back to using dozens of different national currencies or would we see a truly global currency emerge for the very first time?

Up until recently, the idea of a world currency was absolutely unthinkable for most people.  In fact, the notion that all of the major nations around the globe would agree to a single currency still seems far-fetched to most analysts.  However, if enough “chaos” is produced by a concurrent collapse of the U.S. dollar and the euro, would that be enough to get the major powers around the world to agree to a new financial world order?

Let’s hope not, but it is getting hard to deny that we are heading for a major currency crisis, and if the U.S. dollar and/or the euro collapse, the world will certainly never be the same afterwards.

In case you missed it, China and Russia made a very big announcement the other day.

They told the world that instead of using the U.S. dollar to trade with each other, they will now be using their own national currencies.

Most Americans don’t realize it, but that is a very, very big deal.

The fact that the U.S. dollar has been the primary reserve currency of the world for decades has given the United States a tremendous amount of economic power.

But now nations are beginning to lose confidence in the U.S. dollar and they are slowly starting to move away from it.

When the Federal Reserve announced a new round of quantitative easing in early November, it created a huge backlash from other nations.  For decades, many other countries have been heavily investing in dollar-denominated assets, and now they are quite upset that those assets are going to be devalued.

Chinese Finance Vice Minister Zhu Guangyao used very strong language in denouncing the Fed’s new quantitative easing scheme earlier this month….

“As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognize its responsibility to stabilize global markets and did not think about the impact of excessive liquidity on emerging markets.”

German Finance Minister Wolfgang Schäuble was even more blunt.  He has called current Federal Reserve policy “clueless”, and he says that he is absolutely disgusted with the Federal Reserve at this point….

“They have already pumped an endless amount of money into the economy via taking on extremely high public debt and through a Fed policy that has already pumped a lot of money into the economy. The results are horrendous.”

So where is all of this going?

If the Federal Reserve keeps flooding the system with new dollars, the rest of the world could eventually totally reject the U.S. dollar and U.S. Treasuries.

If that day ever arrives, the results would be beyond catastrophic as the following short video from the National Inflation Association demonstrates….

But it is not just the U.S. dollar that is in trouble.

The euro is in danger as well.

Just consider the financial problems that some major European nations are experiencing right now….

*Standard & Poor’s has slashed Ireland’s credit rating two notches to “A”, and is warning that there could be further downgrades.  The Irish budget deficit is projected to reach 32 percent of national output this year.  Ireland’s finances are being called “just one big pyramid scheme”, and they recently accepted a huge European bailout.  Unfortunately for Ireland, this bailout comes with strings.  The Irish government is now being forced to implement an austerity program that is being referred to as “draconian”.

*Analysts are projecting that Portugal is going to need a bailout of at least 50 billion euros.  The government of Portugal has implemented some harsh austerity measures in an attempt to get the red ink under control, and the people are not pleased.  On Wednesday, a massive national strike shut down travel and basic services across the country.

*Things are so bleak in Portugal right now that Foreign Affairs Minister Luis Amado recently stated that his nation “faces a scenario of exit from the euro zone” if a solution is not found for this financial crisis.

*Greece was the first nation to need a European bailout, and now there are rumors that they may need even more assistance.  The statistics agency for the EU, Eurostat, recently revealed that Greece’s budget deficit for 2009 was actually 15.4% of GDP rather than 13.6% of GDP as originally thought.  The Greek national debt is now well over 120 percent of GDP.  The financial problems in Greece never seem to stop.

*Belgium’s debt has reached 100 percent of annual national income, and the cost of insuring that country’s debt has now hit record levels.

*Even Spain is in trouble.  Rates on Spanish 10-year government bonds have risen to frightening heights in recent days, and the official unemployment rate in Spain is hovering around 20 percent.

*In a recent article entitled “A Spanish Bailout Would Test Europe’s Strained Finances“, the New York Times quoted Jordi Galí, the director of the Center for Research in International Economics at Barcelona’s Pompeu Fabra University as saying that rumors that Spain is in financial trouble could end up making it a self-fulfilling prophecy….

“If investors expect Spain to have trouble refinancing its debt, now or somewhere down the road, then Spain will have trouble,” he added. “This is only aggravated by the fact that the reluctance of investors to purchase the country’s public debt leads to an increase in the interest rate it has to pay and thus in the budget deficit and the amount of debt it has to issue.”

So could this sovereign debt crisis actually cause the euro to collapse?

Well, it depends who you ask.

European Financial Stability Fund chief Klaus Regling says that there is “zero” chance that the euro will collapse….

“There is zero danger. It’s inconceivable that the euro would collapse.”

Other European leaders are not so sure about that.

EU President Herman Van Rompuy recently warned that if some of the weaker countries in Europe are forced to abandon the euro it will likely cause a total meltdown of the European Union….

“We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union.”

German Chancellor Angela Merkel is also warning that a failure of the euro could bring down the entire European Union….

“If the euro fails, then Europe fails.”

But is this likely to happen any time soon?

No, probably not, but in 2010 top European officials are actually acknowledging the possibility, and that shows just how serious things have gotten.

So if the U.S. dollar and the euro do collapse, what would happen?

Well, already many world leaders are openly speaking of the need for a true global currency.

After all, they argue, there won’t be any “currency wars” if we are all using the same currency.

In fact, the Institute of International Finance, an organization that represents 420 of the biggest banks and financial institutions on the globe, recently declared that the time has come to adopt a one world currency.

In fact, as I wrote in an article entitled “Bancor: The Name Of The Global Currency That A Shocking IMF Report Is Proposing“, a recent IMF policy paper actually proposed a name for the “global currency” that they believe could be coming….

A paper entitled “Reserve Accumulation and International Monetary Stability” by the Strategy, Policy and Review Department of the IMF recommends that the world adopt a global currency called the “Bancor” and that a global central bank be established to administer that currency. The report is dated April 13, 2010 and a full copy can be read here. Unfortunately this is not hype and it is not a rumor. This is a very serious proposal in an official document from one of the mega-powerful institutions that is actually running the world economy. Anyone who follows the IMF knows that what the IMF wants, the IMF usually gets. So could a global currency known as the “Bancor” be on the horizon? That is now a legitimate question.

So will any of this ever come to fruition?

Well, it would likely take one whale of a crisis to get the countries of the world to agree to such a thing.

However, we do live at a time when the world financial system seems to be perpetually on the edge of chaos.  If at some point the U.S. dollar and the euro totally fall apart perhaps we will see a “new order” arise out of all of that chaos.

But let’s hope not.  Once we give any organization the power to issue a global currency the odds of us ever getting our economic sovereignty back will be greatly reduced.  The internationalists are going to use any crisis as an opportunity to argue for greater centralization of the world financial system, and it will be very important for the American people not to fall for those arguments.

Hopefully the U.S. dollar and the euro can remain stable currencies for at least a little while longer.  Because once they collapse things will never, ever be the same again.

Happy Thanksgiving! Are You Better Off Today Than You Were Four Years Ago?

As you gather around the table with your family this Thanksgiving, ask yourself this question: are you better off today than you were four years ago?  Unfortunately, most Americans are not.  Both political parties have controlled the White House during the last four years – Barack Obama has been in office for nearly two years and before him it was George W. Bush – and yet no matter what politicians we send to Washington D.C. things just seem to keep getting worse.  We buy more than we produce, we spend more than we bring in, we have 18 times as many “problem banks” as we did 4 years ago, the number of Americans on food stamps continues to set a new all-time record every month and we are living in the greatest debt bubble in the history of the world.  But at least the majority of Americans are still prosperous enough to enjoy a happy Thanksgiving inside a warm, comfortable home.  Unfortunately, if things keep going the way they are going, we are going to experience a national economic nightmare that nobody will be thankful for.

If you watch the economic statistics from week to week and month to month, it will seem like sometimes they are getting worse and sometimes they are getting better.  However, once you take a longer-term view of things, exactly what is happening to us starts to come clearly into focus.  The truth is that the United States is in the midst of a long-term economic collapse, and many economic statistics just keep getting worse every single year.

The following are 11 statistics that reveal just how far the U.S. economy has fallen over the past four years….

#1 In November 2006, the “official” U.S. unemployment rate was 4.5 percent.  Today, the “official” U.S. unemployment rate has been at 9.5 percent or greater for more than a year.

#2 At Thanksgiving back in 2006, 26 million Americans were on food stamps.  Today, there are over 42 million Americans on food stamps and that number is climbing rapidly.

#3 According to the U.S. Census Bureau, median household income in the United States fell from $51,726 in 2008 to $50,221 in 2009.  Median household income declined the year before that too.  Meanwhile, prices have continued to rise throughout that period.

#4 At the end of the third quarter in 2006, 47 banks were on the FDIC “problem list”.  At the end of the third quarter in 2010, 860 banks were on the FDIC “problem list”.

#5 California home builders began construction on 1,811 homes during the month of August, which was down 77% from August 2006.

#6 In 2006, new home sales in the United States were near record highs.  In 2010, new home sales in the United States are at record lows as the following graph from Calculated Risk demonstrates….

#7 A recent survey of last year’s college graduates found that 80 percent moved right back home with their parents after graduation.  That was up substantially from 63 percent in 2006.

#8 According to one analysis, the United States has lost a total of 10.5 million jobs since 2007.

#9 In 2006, the Social Security program took in somewhere in the neighborhood of 100 billion more dollars than it paid out.  Of course the U.S. government spent all that money instead of setting it aside.  So now more U.S. retirees than ever are ready to start drawing on Social Security and a “tipping point” is rapidly coming.  Social Security will pay out more in benefits in 2010 than it receives in payroll taxes.  This was not supposed to happen until at least 2015, and the years ahead look very, very grim….

#10 The U.S. government’s debt ceiling has been raised six times since the beginning of 2006.

#11 In 2006, the U.S. national debt was getting close to 9 trillion dollars.  Today, the U.S. national debt is well past 13 trillion dollars and is rapidly closing in on 14 trillion dollars.

So is there much hope for an economic turnaround any time soon?

No, not really.

Even the Federal Reserve, usually one of the biggest cheerleaders for the U.S. economy, is not very optimistic right now.  In fact, the Fed has just announced that they are projecting that unemployment will still be at about 8 percent when the next presidential election arrives in 2012.

Actually, if the official unemployment rate was to get that low by then that would really be something to celebrate.  Many economists fear that unemployment will be even higher than it is now by then.

Several years ago, a very foolish politician (Dick Cheney) famously said that “deficits don’t matter”.  That is kind of like saying that credit card balances don’t matter.  For decades, politicians from both political parties have been running up staggering amounts of government debt as if it would never catch up with us.  For decades, Americans have been addicted to debt and have been buying more than they produce.  We have enjoyed living beyond our means for so long that most of us simply have no idea that there are any consequences for doing so.

Living on debt is fun on the way up, but on the way down the pain can be excruciating.  We are about to experience that on a national level, and it is going to be an absolute nightmare.

Did any of you actually believe that we were just going to go on living way, way, way beyond our means indefinitely?

America has piled up the biggest mountain of debt in the history of the world, and unfortunately we are all going to pay the price for that.

So enjoy your turkey while you can.  In future years we may have a lot less to be thankful for.

Could The Financial Crisis Erupting In Ireland, Portugal, Greece And Spain Lead To The End Of The Euro And The Break Up Of The European Union?

The Irish banking system is melting down right in front of our eyes.  Ireland, Portugal, Greece and Spain are all drowning in debt.  It is becoming extremely expensive for all of those nations to issue new debt.  Officials all over Europe are begging Ireland to accept a bailout.  Portugal has already indicated that they will probably be next in line.  Most economists are now acknowledging that without a new round of bailouts the dominoes could start to fall and we could see a wave of debt defaults by European governments.  All of this is pushing the monetary union in Europe to its limits.  In fact, some of Europe’s top politicians are now publicly warning that this crisis may not only mean the end of the euro, but also the end of the European Union itself.

Yes, things really are that serious in Europe right now.  In order for the euro and the European Union to hold together, two things have got to happen.  Number one, Germany and the other European nations that are in good financial condition have got to agree to keep bailing out nations such as Ireland, Portugal and Greece that are complete economic basket cases.  Number two, the European nations receiving these bailouts have got to convince their citizens to comply with the very harsh austerity measures being imposed upon them by the EU and the IMF.

Those two things should not be taken for granted.  In Germany, many taxpayers are already sick and tired of pouring hundreds of billions of euros into a black hole.  The truth is that the Germans are not going to accept carrying weak sisters like Greece and Portugal on their backs indefinitely.

In addition, we have already seen the kinds of riots that have erupted in Greece over the austerity measures being implemented there.  If there is an overwhelming backlash against austerity in some parts of Europe will some nations actually attempt to leave the EU?

Right now the focus is on Ireland.  The Irish banking system is a basket case at the moment and the Irish government is drowning in red ink.  European Union officials are urging Ireland to request a bailout, but so far Irish Prime Minister Brian Cowen is not taking the bait.  The Irish government does not seem too keen on having even more austerity measures imposed upon it by the EU and the IMF.

According to Nadeem Walayat, the harsh austerity measures that Ireland has endured during this past year have only made Ireland’s financial problems even worse….

The people of Ireland having endured over a year of austerity on the promise that it was all necessary to suffer pain today by cutting public spending so as to reduce the annual budget deficit to sustainable level for economic gains tomorrow. Instead the exact opposite is taking place as the Irish economy contracts due to economic austerity whilst its bankrupt banks are sending the countries debt and liabilities soaring, thus resulting in a far worse budgetary position than where Ireland was before the austerity measures were implemented as the bond markets are waking up to evitable debt default which is sending interest rates demanded to hold Irish debt soaring to new credit crisis highs.

But the big Irish banks are bleeding cash fast.  For example, the Bank of Ireland recently reported “a 10 billion euro outflow of deposits from early August until the end of September.”  Irish banks and the Irish government need help whether they are willing to admit it or not.

But Ireland is not the only one in trouble.  Portugal became the latest European nation to push the panic button when Portuguese Finance Minister Fernando Teixeira dos Santos announced that his country was in such bad financial shape that it might have to seek a bailout package.

Things are so bleak in Portugal right now that Foreign Affairs Minister Luis Amado says that his nation “faces a scenario of exit from the euro zone” if a solution is not found for this financial mess.

On top of all this, word is coming out that Greece is in even worse financial condition than initially believed.  The statistics agency for the EU, Eurostat, revealed on Tuesday that Greece’s deficit for 2009 was actually 15.4% of GDP rather than 13.6% of GDP as originally thought.

The Greek national debt is now well over 120 percent of GDP.  It seems inevitable at this point that Greece will need more bailouts if they are to remain part of the EU.

Spain is also starting to feel the heat.  Spain’s short-term debt financing costs jumped sharply on Tuesday, and officials in Spain are begging the Irish government to accept the bailout they are being offered so that the “contagion” does not spread.

But could a few mid-size countries in Europe really cause the next great global financial crisis?

Yes.

In the UK, veteran Conservative MP Peter Tapsell is warning that a total collapse in Ireland “could pose as great a threat to the world economy as did Lehman Brothers, AIG and Goldman Sachs in September 2008”.

Already we are seeing world financial markets getting rattled by all this news.

Fears regarding what is happening in Ireland, Greece, Spain and Portugal helped push the Dow Jones industrial average down nearly 200 points on Tuesday.

But the real story is that this financial crisis in Europe could potentially cause the break up of the euro and of the European Union.

The truth is that the euro and the European Union are inseparably linked at this point.  In fact, EU President Herman Van Rompuy is warning that if some of the weaker countries in Europe are forced to abandon the euro it will likely cause the total destruction of the European Union….

“We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union.”

German Chancellor Angela Merkel is also warning that a failure of the euro could bring down the entire European Union….

“If the euro fails, then Europe fails.”

But officials in Europe are not going to let the dream of a united Europe slip away easily.  Right now they are working really hard to keep Europe together, and that means some “tough love” has to be imposed on the “weak sisters”.  As these weaker European economies collapse, they are being forced to accept harsh EU mandates in exchange for bailouts.  As Ambrose Evans Pritchard recently pointed out, “forced austerity” is quite similar to serfdom….

Greece is now under an EU protectorate, or the “Memorandum” as they call it. This has prompted pin-prick terrorist attacks against anybody associated with EU rule. Ireland and Portugal are further behind on this road to serfdom, but they are already facing policy dictates from Brussels, but will soon be under formal protectorates as well in any case. Spain has more or less been forced to cut public wages by 5pc to comply with EU demands made in May. All are having to knuckle down to Europe’s agenda of austerity, without the offsetting relief of devaluation and looser monetary policy.

In the end, Europe is going to move in one of two directions.  Either this financial crisis will finally be the thing that breaks up the euro and the European Union, or it will result in a Europe that is ruled even more strongly by EU bureaucrats.

As this crisis unfolds over the next couple of years, the EU is going to try to grab more power and more control.  They are going to ask national governments to give up substantial amounts of power and sovereignty in exchange for bailouts.  So far it is working.

But at some point will one nation say that enough is enough?

Perhaps that one nation could be Ireland.  The citizens of Ireland actually voted “no” on the EU Constitution, but then the EU forced them to vote a second time so that they could “get it right”.

Wouldn’t it be ironic if it is Ireland that ends up lighting the fuse that breaks up the euro and the European Union?  The Irish are a fiercely independent people, and they have a history of resisting tyranny.

In any event, this is going to be an extremely interesting winter across the EU.  If things go badly, the entire global financial system could be plunged into mayhem.  Let us hope that does not happen.

How In The World Did We Get To The Point Where The Federal Reserve Is Printing Money Out Of Thin Air Whenever It Wants?

Ben Bernanke and the rest of the folks over at the Federal Reserve did not just wake up one day and decide that they wanted to start printing hundreds of billions of dollars out of thin air.  The truth is that the economic forces that have brought us to this point have taken decades to develop.  In the post-World War 2 era, when the U.S. economy has fallen into a recession, either the Federal Reserve would lower interest rates or the U.S. government would indulge in even more deficit spending to stimulate the economy.  But now, as you will see below, both of those alternatives have been exhausted.  In addition, we are now rapidly reaching the point where there are simply not enough lenders out there to feed the U.S. government’s voracious appetite for debt.  So now the Federal Reserve is openly printing hundreds of billions of dollars that will enable them to finance U.S. government borrowing, and (they hope) stimulate the U.S. economy at the same time.  Unfortunately, the rest of the world is not amused.  Nations such as China, Japan and many of the oil-exporting nations of the Middle East have accumulated a lot of U.S. dollars and a lot of U.S. Treasuries and they are not pleased that those investments are now being significantly devalued.

So how did we get to this point?  Why is the Federal Reserve printing money out of thin air in a desperate attempt to stimulate the economy?

Well, the Federal Reserve has more or less exhausted all of the other tools that it has traditionally used to help the economy during an economic downturn.  As you can see from the chart below, the Federal Reserve has lowered interest rates during past recessions.  The goal of lowering interest rates is to make it less expensive to borrow money and thus spark more economic activity.  Well, as you can see, the Federal Reserve has no place else to go with interest rates.  Over the past 30 years, rates have consistently been pushed down, down, down and now they are kissing the floor….

Another way that the U.S. economy has been “stimulated” over the past 30 years is through increased government spending.  The theory is that if the government spends more money, that will get more cash into the hands of the people and spark more economic activity.  That was the whole idea behind the “economic stimulus packages” that were pushed through Congress.  However, increased government spending always comes at a very high cost under our current system.  Government debt is now totally out of control.  As you can see below, the U.S. national debt has exploded from about one trillion dollars in 1980 to over 13 trillion dollars today.  Currently, there is very little appetite in Congress for more government spending to stimulate the economy, especially after the results of the November election.

Most Americans don’t realize it, but much of our incredible “prosperity” over the last 30 years has been fueled by the mountains of debt that we have accumulated.  Now U.S. government debt is exploding at an exponential rate….

Sadly, the U.S. government has absolutely no self-control when it comes to spending money.  Our politicians are absolutely addicted to debt.

The truth is that the U.S. government just can’t seem to stop wasting money. One of the most comical news stories of the past few days involved the Recovery Independent Advisory Panel, which is a sub-committee of the larger Recovery Accountability and Transparency board.  This panel will be holding a meeting on November 22nd to discuss how to prevent “fraud, waste, and abuse” of economic stimulus funds.

So where will this meeting be held?

It is going to be held at the ultra-luxurious Ritz Carlton Hotel in Phoenix, Arizona.

Yes, seriously.

You just can’t make this stuff up.

So if the Federal Reserve cannot stimulate the economy through lower interest rates and the U.S. government cannot stimulate the economy by spending even more money, what does that leave us with?

Unfortunately, that leaves us with either doing nothing or with having the Federal Reserve print money out of thin air and shovel it into the economy.

Sadly, even after months of news headlines about quantitative easing, most Americans still do not understand what it is.  The following is a short video that is very humorous but that also does a good job of simply explaining what quantitative easing is and why it is bad for the U.S. economy….

Quantitative Easing Explained

For much more on why quantitative easing is so destructive, please see an article that I previously authored entitled “9 Reasons Why Quantitative Easing Is Bad For The U.S. Economy“.  The truth is that in an all-out effort to give the U.S. economy a short-term boost, the Federal Reserve is putting the entire world financial system in peril.

One group of prominent economists was so alarmed by this new round of quantitative easing that they recently wrote an open letter to Ben Bernanke warning of the dangers that flooding the economy with new money could create.  The following is an excerpt from the text of that open letter which was also posted on the website of the Wall Street Journal…..

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued.  We do not believe such a plan is necessary or advisable under current circumstances.  The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.”  In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

But it isn’t just a few prominent economists that are expressing disapproval for this new round of quantitative easing.  The truth is that almost every major industrialized nation has spoken out against all of this money printing by the Fed.  Meanwhile, Barack Obama continues to publicly defend Ben Bernanke and this new round of quantitative easing at every opportunity.

That is some “change you can believe in”, eh?

Unfortunately, the danger that quantitative easing poses to our financial system is much greater than most Americans realize.

In order for the world financial system to operate smoothly, the rest of the world much have a great deal of faith in the U.S. dollar and in U.S. Treasuries.  Ben Bernanke had promised Congress (and the rest of the globe) that the Federal Reserve would not monetize U.S. government debt and that he was going to keep the U.S. dollar strong.  But now Bernanke has broken his promises once again.  At this point Bernanke has lost a ton of credibility.  Unfortunately, Barack Obama and many of the key members of Congress continue to express unwavering support for him.

The rest of the world can see what is going on.  They are not stupid.  They are not going to keep pouring hundreds of billions into U.S. Treasuries if the Federal Reserve is going to “cheat” whenever economic conditions get a little tough.

If the day arrives when the rest of the globe completely loses faith in the U.S. dollar and in U.S. Treasuries, it is going to create a complete and total financial disaster – especially for the United States.

Suffocated By Red Tape – 12 Ridiculous Regulations That Are Almost Too Bizarre To Believe

Even with all of the massive economic problems that the United States is facing, if the government would just get off our backs most of us would do okay.  In America today, it is rapidly getting to the point where it is nearly impossible to start or to operate a small business.  The federal government, the state governments and local governments are cramming thousands upon thousands of new ridiculous regulations down our throats each year.  It would take a full team of lawyers just to even try to stay informed about all of these new regulations.  Small business in the United States is literally being suffocated by red tape.  We like to think that we live in “the land of the free”, but the truth is that our lives and our businesses are actually tightly constrained by millions of rules and regulations.  Today there is a “license” for just about every business activity.  In fact, in some areas of the country today you need a “degree” and multiple “licenses” before you can even submit an application for permission to start certain businesses.  And if you want to actually hire some people for your business, the paperwork nightmare gets far worse.  It is a wonder that anyone in America is still willing to start a business from scratch and hire employees.  The truth is that the business environment in the United States is now so incredibly toxic that millions of Americans have simply given up and don’t even try to work within the system anymore.

Today, the U.S. government has an “alphabet agency” for just about everything.  The nanny state feels like it has to watch, track and tightly control virtually everything that we do.  The Federal Register is the main source of regulations for U.S. government agencies.  In 1936, the number of pages in the Federal Register was about 2,600.  Today, the Federal Register is over 80,000 pages long.  That is just one example of how bad things have gotten.

But it is not just the federal government that is ramming thousands of ridiculous regulations down our throats.  The truth is that in many cases state and local governments are far worse.  We have become a nation that is run and dominated by bureaucrats.  Yes, there always must be rules in a society, but we have gotten to the point where there are so many millions of rules that the game has become unplayable.

The following are 12 examples of ridiculous regulations that are almost too bizarre to believe….

#1 The state of Louisiana says that monks must be fully licensed as funeral directors and actually convert their monasteries into licensed funeral homes before they will be allowed to sell their handmade wooden caskets.

#2 The city of Philadelphia now requires all bloggers to purchase a $300 business privilege license.  The city even went after one poor woman who had earned only $11 from her blog over the past two years.

#3 In the state of Massachusetts, all children in daycare centers are mandated by state law to brush their teeth after lunch.  In fact, the state even provides the fluoride toothpaste for the children.

#4 If you attempt to give a tour of our nation’s capital without a license, you could be put in prison for 90 days.

#5 A reader named Gene recently shared his regulatory horror story with us….

Started a new business this year in AZ. Paid over $10,000 in fees for permitting, $10,000 in fee for elec hookup, $10,000 in fees for gas hook up and an extra $200 fee per month just for the “privilige” of having gas. Adding up all the fees to start our business, I don’t think we would do it again. We are now just getting to the point that we are making our bills each month, and so we are not taking a paycheck, and don’t anticipate one for at least another year. Our family has been in business for ourselves for decades,and we know what we are doing, but the rising fees caught us off guard. Cities, municipalities, counties and states are raising all fees at astronomical rates to help offset the slump in their real estate income (since banks apparently don’t have to pay real estate taxes)…I’m telling you every business person I know is on their last leg. In a few more years, if things don’t turn out better for the BUSINESS PEOPLE THAT SUPPORT THE GOV, then the last ones standing will go down, and the GOV with it. Not counting the other bubbles that could blow, this one is just common sense. People talk about TAXES. This has nothing to do with taxes, or the blatent disregard for taking my money and giving it to someone else. This is just about the issue of actually getting a business started and keeping a business going. The fees are feeing us all out of business.

#6 Federal agents recently raided an Amish farm at 5 A.M. in the morning because they were selling “unauthorized” raw milk.

#7 In Lake Elmo, Minnesota farmers can be fined $1,000 and put in jail for 90 days for selling pumpkins or Christmas trees that are grown outside city limits.

#8 A U.S. District Court judge slapped a 5oo dollar fine on Massachusetts fisherman Robert J. Eldridge for untangling a giant whale from his nets and setting it free.  So what was his crime?  Well, according to the court, Eldridge was supposed to call state authorities and wait for them do it.

#9 In the state of Texas, it doesn’t matter how much formal interior design education you have – only individuals with government licenses may refer to themselves as “interior designers” or use the term “interior design” to describe their work.

#10 Deeply hidden in the 2,409-page health reform bill passed by Congress was a new regulation that will require U.S. businesses to file millions more 1099s each year.  In fact, it is estimated that the average small business will now have to file 200 additional 1099s every single year.  Talk about a nightmare of red tape!  But don’t try to avoid this rule – it is being reported that the IRS has hired approximately 2,000 new auditors to audit as many of these 1099s as possible.

#11 The city of Milwaukee, Wisconsin makes it incredibly difficult to go out of business.  In order to close down a business, Milwaukee requires you to purchase an expensive license, you must submit a huge pile of paperwork to the city regarding the inventory you wish to sell off, and you must pay a fee based on the length of your “going out of business sale” plus a two dollar charge for every $1,000 worth of inventory that you are attempting to sell off.

#12 The U.S. Food and Drug Administration is projecting that the food service industry will have to spend an additional 14 million hours every single year just to comply with new federal regulations that mandate that all vending machine operators and chain restaurants must label all products that they sell with a calorie count in a location visible to the consumer.

The following short video produced by the Institute for Justice examines some more examples of completely ridiculous regulations across the United States.  The video is very funny, but please keep in mind that all of this red tape is absolutely killing many very real businesses….

So is this what “free enterprise” is supposed to look like?

Over and over again I have written about the dangers of globalization, but no matter what changes are made a lot of companies will still not want to set up shop in the United States until something is done about all of these ridiculous regulations.

As mentioned earlier, the U.S. economy is facing a vast array of incredibly serious problems, but if government would just get off our backs at least we would have a fighting chance.

Instead, it gets worse every single year.  Each new wave of bureaucrats just seems to get worse than the wave before it.  They always seem to think that if they just write more regulations and impose more fees and require more licenses and raise more revenue that they will be able to “fix” things.

But the truth is that they always make things worse.  Our economy is literally being suffocated by red tape.  A “total control grid” is being erected all around us and most Americans are so numb that they don’t even realize that it is happening.

15 Reasons Why Barack Obama’s Debt Commission Is An Exercise In Futility – The U.S. Government Will Never Have A Balanced Budget Ever Again

In a surprise move, the co-chairs of Barack Obama’s national debt commission released their preliminary proposals to the media on Wednesday.  The proposals are actually quite modest – they recommend that nothing be implemented until 2012 because of the weak economy, and their plan would not balance the federal budget until 2037 – but almost as soon as it was released Democrats and Republicans both started screaming bloody murder about how they would not support it.  The truth is that virtually none of our politicians are willing to make the hard choices that would be necessary to get the national debt under control.  Today, the U.S. national debt is rapidly approaching 14 trillion dollars and it is growing at an exponential rate. It is the single largest debt in the history of the world, and it has increased in size for 53 years in a row.  It would be very difficult to understate the true horror of the debt that the U.S. federal government has accumulated.  So what is the solution?  As you will see below, there isn’t one.  In fact, it will be an absolute miracle if our leaders are able to even slow down the rate at which the debt is growing in the years ahead.

The deficit reduction plan put forward by Erskine Bowles, a former White House chief of staff under Bill Clinton, and Alan Simpson, a former Republican Senator from Wyoming does not even have support from the rest of Barack Obama’s national debt commission.  There is no way that either most Democrats or most Republicans in Congress will ever accept it.  But at least the Bowles-Simpson plan is making headlines around the world and has brought the national debt back to the center of the political debate in this country.

In some ways, the Bowles-Simpson plan is a complete and total fantasy.  For example, it assumes that the U.S. economy is going to fully recover and will experience solid growth for many years to come.  That simply is not going to happen.  The prosperity of the last couple of decades has been fueled by the biggest debt bubble in the history of the world, and there is no way that is going to continue.  At some point the U.S. economy is going to fall apart like a house of cards.

But even if the U.S. economy could magically meet the projections contained in the Bowles-Simpson plan, it still contains a whole host of “poison pills” which make it completely and totally unacceptable to both political parties….

*The plan calls for deep cuts to U.S. military spending.  The Republicans will never go for that.

*The plan reduces Social Security benefits to most retirees in future decades.  The Democrats will never go for that.

*The plan raises the Social Security payroll tax cap to $190,000.  The Republicans will never go for that.

*The plan envisions a very slow rise in the retirement age from 67 to 68 by 2050 and finally to 69 by 2075.  The Democrats will never go for that.

*The plan includes a “less generous” annual cost-of-living adjustment for Social Security benefits.  Considering the fact that Social Security benefits are already not going to see an increase this upcoming year, this proposal is likely to upset a large number of seniors.

*The plan calls for the federal tax on gasoline to approximately double by 2015.  The Republicans would never go for that, and if that was ever implemented it would have a very serious negative impact on the economy.

*The plan would eliminate the deductibility of mortgage interest payments.  Millions upon millions of homeowners would be absolutely furious.

*The plan would tax health benefits provided by employers.  That would make millions of people very angry.

*The plan also calls for huge cuts in farm subsidies.  There are a lot less farmers than there used to be, but that would still be extremely unpopular.

But the truth is that hard choices need to be made.  The national debt is spinning wildly out of control.  The U.S. government is essentially bankrupt.

Unfortunately, the majority of the federal budget is made up of entitlement programs.  Entitlement programs are not subject to budget freezes or budget cuts – unless Congress changes the underlying laws.  But any change to major entitlement programs would potentially upset millions of voters.

Not that there are not other areas that could be cut.  Today, the average federal worker earns far more than the average private sector worker.  In fact, wages for federal workers have been escalating at a frightening pace.  In 2005, 7420 federal employees were making $150,000 or more per year.  Today, 82,034 federal employees are making $150,000 or more per year.  That is more than a tenfold increase in just five years.

But any major cuts to federal spending are going to really upset a lot of voters, and our politicians really, really like to get re-elected.  The kinds of cuts that are really needed will never get through the Democrats in Congress and the Republicans in Congress and signed into law by Barack Obama.  There are just way too many things that both major political parties consider to be “untouchable”.

Meanwhile, the U.S. government debt continues to explode.  The debt is already so big, interest on that debt is scheduled to escalate so dramatically, and we have made so many unsustainable promises regarding Social Security and Medicare that it is basically impossible to balance the federal budget at this point.  If serious attempts were actually made to balance the budget in 2011, it would likely create a financial panic, and suddenly sucking over a trillion dollars in federal spending out of the system would crash the economy.

The following are 15 facts that reveal just how obscene the U.S. national debt has become, and why it is now basically impossible to balance the budget of the U.S. government at this point….

#1 On average, the U.S. government accumulates about 4 billion dollars more debt each day.

#2 In just the last 30 years the U.S. government has accumulated 12 trillion dollars more debt.

#3 According to a U.S. Treasury Department report to Congress, the U.S. national debt will climb to an estimated $19.6 trillion by 2015.

#4 The U.S. government has to borrow 41 cents of every dollar that it currently spends.

#5 If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the annual U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion.

#6 The Congressional Budget Office projects that the health care bill recently passed by Congress will add an additional trillion dollars to our debt over the next ten years.

#7 Approximately 57 percent of Barack Obama’s 3.8 trillion dollar budget for 2011 consists of direct payments to individual Americans or is money that is spent on their behalf.  Any attempt to reduce those payments will make a lot of people very angry.

#8 According to the Congressional Budget Office, in 2010 the Social Security system will pay out more in benefits than it receives in payroll taxes.  That was not supposed to happen until at least 2016.

#9 Back in 1950, each retiree’s Social Security benefit was paid for by approximately 16 workers.  Today, each retiree’s Social Security benefit is paid for by approximately 3.3 workers.  By 2025 it is projected that there will be approximately two workers for each retiree.

#10 According to an official U.S. government report, rapidly growing interest costs on the U.S. national debt together with spending on major entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every dollar of federal revenue by the year 2019.  That is before a single penny is spent on anything else.

#11 Right now, interest on the U.S. national debt and spending on entitlement programs like Social Security and Medicare falls somewhere between 10 percent and 15 percent of GDP each year.  By 2080, they are projected to eat up approximately 50 percent of GDP.

#12 The present value of projected scheduled benefits exceeds earmarked revenues for entitlement programs such as Social Security and Medicare by about 46 trillion dollars over the next 75 years.

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

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

#15 Sometimes we forget just how big a trillion dollars is.  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.  The U.S. national debt increased by more than a trillion dollars last year, it will increase by more than a trillion dollars this year and it is being projected to increase by more than a trillion dollars the following year.

We are literally drowning in debt.  We have been living beyond our means for decades, and most Americans do not understand that eventually that is really, really going to start catching up with us.

Already, the United States is fading as an economic power.  According to the Conference Board, China will surpass the United States and will become the biggest economy in the world by the year 2012.

That is just two years away.

So how did we get into such a mess?  Well, it all goes back to the creation of the Federal Reserve in 1913.  The Federal Reserve was created to enslave the United States government in an endlessly growing spiral of debt from which it would never be able to escape.

That is exactly what has happened.  Our money is actually debt-based.  That is why they are called “Federal Reserve notes”.  When the Federal Reserve creates more money for the U.S. government to borrow, it does not also create money for the interest to be paid on that debt.  Eventually the U.S. government is forced to borrow even more money just to keep up with the game.

Today, if you gathered up all of the physical currency from every bank, every business and every individual in the United States, you would not even put much of a dent in the national debt.  That is how bad things have gotten.

A lot of people got elected to Congress by promising to balance the federal budget and by promising to start reducing the U.S. national debt.  But those ships have sailed.  The U.S. government will always have a national debt under the Federal Reserve system, and things have gotten so bad financially for our government that it is now virtually impossible to even balance the budget for a single year.

In the 90s, the Clinton administration and the Republican Congress briefly balanced the federal budget by “borrowing” massive amounts of money from the Social Security surplus.  Using GAAP accounting, the budget was not even close to balanced at that point, but many point to that time as a moment when the U.S. government was at least somewhat fiscally responsible.

Well, the Social Security surplus is gone forever.  Now we have a Social Security deficit which is only going to explode in size in future years.

In addition, the financial condition of the U.S. government has deteriorated enormously over the past 10 years, and things only look worse the further you look into the future.

Meanwhile, the U.S. economy is falling to pieces all around us.  We are experiencing our longest bout of serious long-term unemployment since the Great Depression, 42 million Americans are on food stamps and the United States is being deindustrialized at a pace that is mind blowing.

As America continues to get poorer, the U.S. government is going to really struggle to raise revenue.  But interest payments and financial obligations are projected to escalate wildly.  At this point it is really hard to envision a scenario that does not lead to the eventual financial collapse of the U.S. government.

So do you think that you have a solution to this gigantic mess?  If so, feel free to post it in the comments section below….

Barack Obama: We Must Embrace Globalism And The Emerging One World Economy

Although it received very little coverage in the mainstream media, Barack Obama made some comments about globalism during his speech in Mumbai, India that were very eye-opening.  As he was discussing the new realities of world trade in 2010, Obama warned against “those who see globalization as a threat” and he spoke of the “integrated world” in which we all now live.  But is merging the entire globe into a one world economy, a one world financial system and a one world labor market really the best thing for the American people?

For the past two decades, all U.S. presidents have been heralding the benefits of merging the American economy with the rest of the globe.  George Bush Sr., Bill Clinton, George W. Bush and Barack Obama have all steadfastly supported the emerging one world economy.  These presidents have each used different terms to describe this process such as “globalism”, “globalization”, “an integrated world”, “the global economy” and even “a New World Order”, but they have all meant the same thing.  All of these presidents have sought to integrate the United States even more deeply into the developing one world economic system.

Barack Obama showed very clearly how he feels about globalism when he made the following statement during his speech in Mumbai….

“This will keep America on its toes. America is going to have to compete. There is going to be a tug-of-war within the US between those who see globalization as a threat and those who accept we live in a open integrated world, which has challenges and opportunities.”

This is something that Barack Obama has obviously thought quite a bit about. In fact, during the same speech he warned that those supporting globalization will need to “guard against” those who would seek to put up barriers to the full integration of the economies of the world….

“If the American people feel that trade is just a one-way street where everybody is selling to the enormous US market but we can never sell what we make anywhere else, then the people of the US will start thinking that this is a bad deal for us and it could end up leading to a more protectionist instinct in both parties, not just among Democrats but also Republicans. So, that we have to guard against.”

But in this new “global economy”, aren’t jobs leaving the United States and heading to developing nations at a blinding pace?  Of course, but apparently we are just supposed to shut up and accept this new reality.  In fact, Obama says that persistently high unemployment is “a new normal” that we are all just going to have to get used to.

Virtually all of the proponents of globalism understand that the process of merging the United States into a one world economy will be at least somewhat painful for the American people.  Our wages are going to have to go down and our standards of living are going to have to fall, according to them.

During this period of “adjustment”, a “struggling economy” is just going to have to be tolerated.  In fact, Obama says that the U.S. economy might not be “fixed” for quite some time.  Obama now claims that there is a limit to what the U.S. government can do to help the economy….

“Especially an economy this big, there are limited tools to encourage the kind of job growth that we need.”

But couldn’t Obama and the U.S. Congress pass laws that would discourage the offshoring and outsourcing of our jobs?

Of course.

Couldn’t they cut regulations and taxes and encourage firms to keep factories in the United States?

Of course.

But instead, Obama and the U.S. Congress have just been piling on more taxes and more regulations and have made the business environment in the U.S. so toxic that it is amazing that anyone is willing to stay in this country at this point.

Meanwhile, every single month more of our jobs, more of our factories and more of our wealth gets shipped overseas never to return.

Every day there is more depressing news about the U.S. economy.  For example, it has just been announced that Harley-Davidson has decided to open a shiny new assembly plant in India.  Meanwhile, formerly great American manufacturing cities such as Detroit have turned into rotting hellholes.

The American people are not being told the truth.  The following are 20 reasons why Barack Obama is wrong, wrong, wrong about globalization….

#1 American workers are being merged into a global labor pool where they must directly compete for jobs with workers on the other side of the globe that make less than ten percent of what an average American worker makes.  In such an environment, it is inevitable that jobs are going to flow away from areas where labor is expensive and to areas where labor is cheaper.

#2 Globalization has caused the U.S. trade deficit to absolutely explode.  In 1985, the U.S. trade deficit with China was 6 million dollars for the entire year.  In the month of August alone, the U.S. trade deficit with China was over 28 billion dollars.

#3 Today, the United States spends approximately $3.90 on Chinese goods for every $1 that China spends on goods from the United States.  This represents a massive transfer of wealth from the American people to China.

#4 According to a new study conducted by the Economic Policy Institute, if the U.S. trade deficit with China continues to increase at its current rate, the U.S. economy will lose over half a million jobs this year alone.

#5 The United States has lost approximately 42,400 factories since 2001.

#6 The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

#7 Even high technology industries are leaving America.  Manufacturing employment in the U.S. computer industry is actually lower in 2010 than it was in 1975.

#8 In 1959, manufacturing represented 28 percent of all U.S. economic output.  In 2008, it represented only 11.5 percent.

#9 As of the end of 2009, less than 12 million Americans worked in manufacturing.  The last time that less than 12 million Americans were employed in manufacturing was in 1941.

#10 With so much manufacturing leaving the United States, is it any wonder why people can’t find jobs?  The “official” unemployment rate in the United States has been at nine and a half percent or above for 14 consecutive months.

#11 Today, there are at least 1.5 million “99ers” – those Americans that have completely exhausted all 99 weeks of unemployment benefits and that still do not have jobs.

#12 Our dependence on foreign oil also represents an absolutely shocking transfer of wealth from the American people to the oil exporters of the Middle East.  Back in 1980, the United States imported approximately 37 percent of  the oil that we use.  Now we import nearly 60 percent of the oil that we use.

#13 Energy imports account for about approximately one-fourth of the U.S. trade deficit.

#14 In states such as Mississippi, people spend approximately 6.35 percent of their incomes just on gasoline, according to a recent report by the National Resources Defense Council.

#15 Americans end up paying to support American workers one way or another.  Either they buy American-made products and services that provide jobs for American workers, or they pay to support unemployed American workers on welfare.  Today, over 42 million Americans are on food stamps.  A record number of Americans are receiving long-term unemployment benefits.  One way or another, Americans are going to pay to take care of American workers.

#16 The U.S. trade deficit is running about 40 or 50 billion dollars a month in 2010.  The United States spends 40 to 50 billion more on goods and services from the rest of the world each month than they spend on goods and services from us.  That means that by the end of the year, approximately half a trillion dollars (or more) of our wealth will have left the United States for good.

#17 All of this wealth leaving the United States is having a huge impact on the standard of living of average Americans.  Ten years ago, the United States was ranked number one in average wealth per adult.  In 2010, the United States has fallen to seventh.

#18 It is now just a matter of time until India is going to pass us as an economic power.  In fact, the economy of India is projected to become larger than the U.S. economy by the year 2050.

#19 It is now being projected that China will soon dwarf us as an economic power.  One prominent economist now says that the Chinese economy will be three times larger than the U.S. economy by the year 2040.  According to one recent study, China could become the global leader in patent filings by next year.

#20 China has been accumulating a gigantic mountain of dollars from all of the wealth we have been sending them each month, and they have been lending massive amounts of money back to us.  Over the past few decades, the communist Chinese have been able to accumulate approximately $2.5 trillion in foreign currency reserves, and the U.S. government now owes them close to 900 billion dollars.  We constantly have to send top government officials over there to beg them to continue to lend us money.  This is a direct threat not only to our financial system, but also to our national security.

So, in light of all of those facts, can anyone out there possibly defend Barack Obama’s position that globalization is good and that we should be happy that we are being merged into a one world economy?

Sadly, there are very, very few politicians in either major political party that will even talk about the negative effects of the emerging one world economy.  It is almost as if there is an unspoken consensus that globalism is the future and that it is a good thing for America.

But it is not a good thing for America.  Unless fundamental changes are made, America will continue to bleed wealth, will continue to bleed factories and will continue to bleed jobs.

The American people need to wake up and starting saying “NO” to globalization.  If we continue to vote for politicians that support merging our economy with economies that allow workers to be paid slave labor wages, then we are going to see even more waves of horrific unemployment and we will continue to see the standard of living of middle class Americans diminish.

This is not a drill.  America is being deindustrialized.  The greatest economic machine in the history of the world is being dismantled.

Eventually, all of our cities are going to end up looking just like Detroit if we allow this to continue.

Is that what you want?

Barack Obama And Ben Bernanke Continue To Defend Quantitative Easing, But For The Rest Of The World The Verdict Is In: They Hate It

Even as Barack Obama and Ben Bernanke publicly defend the Federal Reserve’s new $600 billion quantitative easing program, top finance officials around the globe are expressing alarm and outrage.  But what did Obama and Bernanke expect?  “Quantitative easing” is little more than legalized cheating.  For a moment, imagine that the global economy is a giant game of Monopoly.  Essentially what Bernanke has done is that he has just reached under the table and has slipped another $600 billion on to his pile of money, hoping that the rest of the players will not call him out on it.  The rest of the world has heavily invested in the U.S. dollar and in U.S. Treasuries, and this new quantitative easing program is going to devalue all of those holdings.  If the Federal Reserve continues to go down the road of monetizing U.S. government debt, other nations are rapidly going to get spooked and will soon refuse to invest in U.S. dollars and U.S. Treasuries.  When that day arrives, it is going to cause mass panic in the world financial system.

Already, investors across the globe are flocking out of the U.S. dollar and into safe investments such as gold and silver.  On Monday, gold closed at an all-time record high of $1,403.20 an ounce on the New York Mercantile Exchange, and silver closed at a 30-year high of $27.43 an ounce.

Unfortunately, our leaders seem absolutely clueless about what is really going on.  In fact, Barack Obama is very much in Bernanke’s corner.  During his trip to India, Barack Obama made it clear that he very much supports this new round of quantitative easing by the Federal Reserve….

“I will say that the Fed’s mandate, my mandate, is to grow our economy. And that’s not just good for the United States, that’s good for the world as a whole.”

This is the exact opposite of what Barack Obama should be doing.  He should be demanding accountability from Ben Bernanke and the Federal Reserve.  He should be trying to get the U.S. financial system back on some kind of solid footing.

But we all know that is not going to happen.  Obama had no problem renominating Bernanke to another term, and Obama has publicly supported him at every opportunity.

Well, if Obama isn’t going to do it, shouldn’t some of our other representatives in Washington D.C. be calling for the resignation of Bernanke?  After all, how many chances does one guy get?  Bernanke’s record is littered with so much gross incompetence that it makes Wade Phillips of the Dallas Cowboys look like Coach of the Year.  The video posted below shows Bernanke reassuring the public over and over and over between 2005 and 2007 that the U.S. economy was in great shape and that we would continue to experience solid growth….

How long is it going to be until everyone wakes up and starts acknowledging that “the emperor has no clothes” and Bernanke is running the U.S. economy into the ground?

At this point, Bernanke has lost virtually all credibility.  In 2009, he promised the U.S. Congress that the Federal Reserve would not monetize U.S. government debt, but now that is exactly what is happening.

Most of the top finance officials in other countries realize what is going on, and they are really starting to make their displeasure known.  The following are just a few examples of the global outrage that has been expressed about the Fed’s new quantitative easing program over the past few days….

*Xia Bin, an important member of the monetary policy committee of China’s central bank has called the Fed’s new quantitative easing plan “abusive” and is warning that it could set off a global economic meltdown.

*On Monday, Chinese Finance Vice Minister Zhu Guangyao expressed his extreme dismay regarding the Fed’s new quantitative easing scheme….

“As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognize its responsibility to stabilize global markets and did not think about the impact of excessive liquidity on emerging markets.”

*German Finance Minister Wolfgang Schäuble, who has called current Fed policy “clueless”, says that he is absolutely disgusted with the Federal Reserve at this point….

“They have already pumped an endless amount of money into the economy via taking on extremely high public debt and through a Fed policy that has already pumped a lot of money into the economy. The results are horrendous.”

*Luiz Inácio Lula da Silva, the President of Brazil, says that he is incredibly upset about QE2 and that he is going to arrive for the G20 meetings in Seoul ready “to fight”.

*Bloomberg is reporting that at the upcoming G20 meetings, Russian President Dmitry Medvedev is going to “insist” that any future quantitative easing measures be globally coordinated.

*Even some top Fed officials are speaking out publicly against this new round of quantitative easing.  For example, Kansas City Fed President Thomas Hoenig recently made the following statement about the new direction the Fed is taking….

“I worry that by pumping in significant amounts of dollars we then build the inflationary pressures for the future, and we do encourage then an easier credit environment that helped create this problem in the first place.”

The Federal Reserve had better hope that the rest of the world does not get scared off from buying U.S. government debt.  According to the Wall Street Journal, in order to repay maturing bonds and finance the budget deficit, the U.S. government will have to come up with 4.2 trillion dollars over the next year.

If the rest of the world cuts back on buying U.S. Treasuries, the Federal Reserve is going to find itself with a gigantic mountain of debt that it will be forced to monetize.

So what happens someday when China, Japan, Russia and the major oil producers in the Middle East decide that enough is enough and they are not going to buy any more U.S. debt?

Don’t think it can’t happen – these nations are not stupid and if they realize that the U.S. dollar is going to continually keep falling in value there could be a dramatic move away from U.S. debt.

If the rest of the world quits lending massive amounts of money to the U.S. government, our leaders will be faced with three options.  The U.S. government could start trying to operate within a balanced budget (which would crash the economy), interest rates on U.S. government debt could be raised until people would be willing to invest in Treasuries again (which would probably crash U.S. government finances and the economy), or the Federal Reserve could just start monetizing most of the debt on a regular basis (which would likely eventually crash the entire world financial system).

In order for the current world financial system to maintain stability, it is essential for there to be faith in the U.S. dollar and for there to be faith in U.S. Treasuries.  Once faith in them is lost, it will only be a matter of time until the world financial system totally crumbles.

This new round of quantitative easing could be the “tipping point” that opens the door to the eventual complete and total collapse of the U.S. dollar.  Let us hope that the dollar does not completely fail any time soon, but with jokers like Bernanke and Obama running the show, there is not much reason for optimism.

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