The Next Great Depression

Low Inflation? The Price Of Ground Beef Has Risen 17 Percent Over The Past Year

October 22, 2014October 22, 2014 by Michael

Thanks to the Federal Reserve, the middle class is slowly being suffocated by rising food prices. Every single dollar in your wallet is constantly becoming less valuable because of the inflation the Fed systematically creates. And if you try to build wealth by saving money and earning interest on it, you still lose because thanks to the Federal Reserve’s near zero interest rate policies banks pay next to nothing on savings accounts. The Federal Reserve wants you to either spend your money or to put it in the giant casino that we call the stock market. But when Americans spend their paychecks they are finding that they don’t stretch as far as they once did. The cost of living continues to rise at a much faster pace than wages are rising, and this is especially true when it comes to the price of food.

Someone that I know wrote to me today and let me know that she had to shut down the food pantry that she had been running for the poor for so many years. It isn’t that she didn’t want to help the poor anymore. It was that she just couldn’t deal with the rising food prices any longer. Now she is just doing the best that she can to survive herself.

Perhaps you have also noticed that food prices have gotten pretty crazy lately. In particular, meat prices have become absolutely obscene. For example, the average price of ground beef has risen to a new record high of over $4.09 a pound. Over the past twelve months, that works out to a whopping 17 percent increase…

The average price for a pound of ground beef climbed to another record high–$4.096 per pound–in the United States in September, according to data released today by the Bureau of Labor Statistics (BLS).

In August, according to BLS, the average price for a pound of all types of ground beef topped $4 for the first time–hitting $4.013. In September, the average price jumped .083 cents, an increase of 2.1 percent in one month.

A year ago, in September 2013, the average price for a pound of ground beef was $3.502 per pound. Since then, it has climbed 59.4 cents–or about 17 percent in one year.

The “intellectuals” over at the Federal Reserve insist that “a little bit of inflation” is good for an economy, but the truth is that inflation slowly robs us of our buying power.

In a previous article, I shared a chart that showed how food inflation has risen dramatically since the year 2000. For this article, I wanted to show how food inflation has risen since the 1970s. As you can see, the rise in food prices has been absolutely relentless for more than 40 years…

If our paychecks were going up at the same rate or even faster that would be okay.

But they aren’t.

In fact, CNN is reporting that our paychecks have fallen back to 1995 levels…

Americans also don’t feel any better off. While more people may have jobs, they aren’t bringing home fatter paychecks. Wages and income have remained stagnant for years, making it tough for folks even though inflation is low. Median household income, which stood at $51,939 last year, is back to 1995 levels.

Consumers expect a median income boost of 1.1% over the next year, Curtin said. But that won’t keep up with their inflation expectations of 2.8%.

“American households, on average, are still struggling with their living standards slowly eroding,” he said.

This is one of the primary reasons why the middle class is disappearing in America.

The purchasing power of our dollars is continually diminishing.

And this could be just the beginning. Right now, severe drought is affecting some of the most important agricultural areas around the globe. Most people are aware of the nightmarish drought in California, but did you know that things in Brazil are even worse? Brazil is one of the most important food exporters in the world, and so they definitely need our prayers.

In addition, a “black swan event” such as a worldwide explosion of the Ebola pandemic could quickly drive food prices into the stratosphere.

Just this week, we learned that food prices in the Ebola-stricken regions of Liberia, Guinea and Sierra Leone have already risen by an average of 24 percent…

Infection rates in the food-producing zones of Kenema and Kailahun in Sierra Leone, Lofa and Bong County in Liberia and GuDeckDedou in Guinea are among the highest in the region. Hundreds of farmers have died.

The three governments quarantined districts and restricted movements to contain the virus’ spread. But those measures also disrupted markets and led to food scarcity and panic buying, further pushing up prices, WFP and the Food and Agriculture Organization have said.

“Prices have risen by an average of 24 percent,” said WFP spokeswoman Elisabeth Byrs, adding an assessment of major markets showed the price of basic commodities was rising in Guinea, Liberia and Sierra Leone and in neighboring Senegal.

If you have been storing up food, I think that you will be very happy with your decision in the long run.

Without a doubt, food prices are only going to be going up from here.

But the Federal Reserve continues to insist that inflation is under control.

One of the ways that they make the “official numbers” look good is by playing accounting games. They regularly change the way that inflation is calculated in order keep everyone calm.

You don’t have to take my word for it. Posted below is an excerpt from an article by Mike Bryan, a vice president and senior economist in the Atlanta Fed’s research department…

The Economist retells a conversation with Stephen Roach, who in the 1970s worked for the Federal Reserve under Chairman Arthur Burns. Roach remembers that when oil prices surged around 1973, Burns asked Federal Reserve Board economists to strip those prices out of the CPI “to get a less distorted measure. When food prices then rose sharply, they stripped those out too—followed by used cars, children’s toys, jewellery, housing and so on, until around half of the CPI basket was excluded because it was supposedly ‘distorted'” by forces outside the control of the central bank. The story goes on to say that, at least in part because of these actions, the Fed failed to spot the breadth of the inflationary threat of the 1970s.

I have a similar story. I remember a morning in 1991 at a meeting of the Federal Reserve Bank of Cleveland’s board of directors. I was welcomed to the lectern with, “Now it’s time to see what Mike is going to throw out of the CPI this month.” It was an uncomfortable moment for me that had a lasting influence. It was my motivation for constructing the Cleveland Fed’s median CPI.

I am a reasonably skilled reader of a monthly CPI release. And since I approached each monthly report with a pretty clear idea of what the actual rate of inflation was, it was always pretty easy for me to look across the items in the CPI market basket and identify any offending—or “distorted”—price change. Stripping these items from the price statistic revealed the truth—and confirmed that I was right all along about the actual rate of inflation.

It is all a game to them.

It is all about getting to the “right number” to release to the public.

But anyone that goes to the grocery store knows what has been happening to food prices.

The next time you get to the checkout register and you feel tempted to ask the cashier what organ you should donate to pay for your groceries, please keep in mind that it is not the fault of the cashier.

Instead, there is one entity that you should blame.

Blame the Federal Reserve – their policies are slowly pushing the middle class into oblivion.

19 Very Surprising Facts About The Messed Up State Of The U.S. Economy

October 20, 2014 by Michael

Barack Obama and the Federal Reserve are lying to you. The “economic recovery” that we all keep hearing about is mostly just a mirage. The percentage of Americans that are employed has barely budged since the depths of the last recession, the labor force participation rate is at a 36 year low, the overall rate of homeownership is the lowest that it has been in nearly 20 years and approximately 49 percent of all Americans are financially dependent on the government at this point. In a recent article, I shared 12 charts that clearly demonstrate the permanent damage that has been done to our economy over the last decade. The response to that article was very strong. Many people were quite upset to learn that they were not being told the truth by our politicians and by the mainstream media. Sadly, the vast majority of Americans still have absolutely no idea what is being done to our economy. For those out there that still believe that we are doing “just fine”, here are 19 more facts about the messed up state of the U.S. economy…

#1 After accounting for inflation, median household income in the United States is 8 percent lower than it was when the last recession started in 2007.

#2 The number of part-time workers in America has increased by 54 percent since the last recession began in December 2007. Meanwhile, the number of full-time jobs has dropped by more than a million over that same time period.

#3 More than 7 million Americans that are currently working part-time jobs would actually like to have full-time jobs.

#4 The jobs gained during this “recovery” pay an average of 23 percent less than the jobs that were lost during the last recession.

#5 The number of unemployed workers that have completely given up looking for work is twice as high now as it was when the last recession began in December 2007.

#6 When the last recession began, about 17 percent of all unemployed workers had been out of work for six months or longer. Today, that number sits at just above 34 percent.

#7 Due to a lack of decent jobs, half of all college graduates are still relying on their parents financially when they are two years out of school.

#8 According to a new method of calculating poverty devised by the U.S. Census Bureau, the state of California currently has a poverty rate of 23.4 percent.

#9 According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.

#10 In 2007, the average household in the top 5 percent had 16.5 times as much wealth as the average household overall. But now the average household in the top 5 percent has 24 times as much wealth as the average household overall.

#11 In an absolutely stunning development, the rate of small business ownership in the United States has plunged to an all-time low.

#12 Subprime loans now make up 31 percent of all auto loans in America. Didn’t that end up really badly when the housing industry tried the same thing?

#13 The average cost of producing a barrel of shale oil in the United States is approximately 85 dollars. Now that the price of oil is starting to slip under that number, the “shale boom” in America could turn into a bust very rapidly.

#14 On a purchasing power basis, China now actually has a larger economy than the United States does.

#15 It is hard to believe, but there are 49 million people that are dealing with food insecurity in America today.

#16 There are six banks in the United States that pretty much everyone agrees fit into the “too big to fail” category. Five of them have more than 40 trillion dollars of exposure to derivatives.

#17 The 113 top earning employees at the Federal Reserve headquarters in Washington D.C. make an average of $246,506 a year. It turns out that ruining the U.S. economy is a very lucrative profession.

#18 We are told that the federal deficit is under control, but the truth is that the U.S. national debt increased by more than a trillion dollars during fiscal year 2014.

#19 An astounding 40 million dollars has been spent just on vacations for Barack Obama and his family. Perhaps he figures that if we are going down as a nation anyway, he might as well enjoy the ride.

If our economy truly was “recovering”, there would be lots of good paying middle class jobs available.

But that is not the case at all.

I know so many people in their prime working years that spend day after day searching for a job. Most of them never seem to get anywhere. It isn’t because they don’t have anything to offer. It is just that the labor market is absolutely saturated with qualified job seekers.

For example, USA Today recently shared the story of 42-year-old Alex Gomez…

“I’ve had to seriously downgrade my living situation,” said Alex Gomez, a 42-year-old with a master’s degree in entrepreneurship. Gomez lost his last full-time job in 2009 and has been looking for work since a short-term contract position ended in 2012.

Gomez’s home was foreclosed on, so the Tampa resident lives with three roommates in a college neighborhood. He drained his 401(k) trying to save his house, and he has around $150,000 in student loans. His mother is tapping her 401(k) to pay his rent. Gomez subsists on that and about $200 a month in food stamps.

“I have been applying and looking for pretty much anything at this stage,” he said. Although he’s looking for work in engineering or data management, “I applied to a supermarket as a deli clerk because I used to be a deli clerk as a teenager,” he said. He was told he was overqualified and turned down.

Does Alex Gomez have gifts and abilities to share with our society?

Of course he does.

So why can’t he find a job?

It is because we have a broken economy.

We are in the midst of a long-term economic decline and the system simply does not work properly anymore.

And thanks to decades of very foolish decisions, this is only the start of our problems.

Things are only going to get worse from here.

12 Charts That Show The Permanent Damage That Has Been Done To The U.S. Economy

October 13, 2014 by Michael

Most people that discuss the “economic collapse” focus on what is coming in the future. And without a doubt, we are on the verge of some incredibly hard times. But what often gets neglected is the immense permanent damage that has been done to the U.S. economy by the long-term economic collapse that we are already experiencing. In this article I am going to share with you 12 economic charts that show that we are in much, much worse shape than we were five or ten years ago. The long-term problems that are eating away at the foundations of our economy like cancer have not been fixed. In fact, many of them continue to get even worse year after year. But because unprecedented levels of government debt and reckless money printing by the Federal Reserve have bought us a very short window of relative stability, most Americans don’t seem too concerned about our long-term problems. They seem to have faith that our “leaders” will be able to find a way to muddle through whatever challenges are ahead. Hopefully this article will be a wake up call. The last major wave of the economic collapse did a colossal amount of damage to our economic foundations, and now the next major wave of the economic collapse is rapidly approaching.

#1 Employment

The mainstream media is constantly telling us about the “employment recovery” that is happening in the United States, but the truth is that it is just an illusion. As the chart below demonstrates, just prior to the last recession about 63 percent of all working age Americans had a job. During the last wave of the economic collapse, that number dropped to below 59 percent and stayed there for a very long time. In the past few months we have finally seen the employment-population ratio tick back up to 59 percent, but we are still far, far below where we used to be. To call the tiny little bump at the end of this chart a “recovery” is really an insult to our intelligence…

#2 The Labor Force Participation Rate

The percentage of Americans that are either employed or currently looking for a job started to fall during the last recession and it has not stopped falling since then. The labor force participation rate has now fallen to a 36 year low, and this is a sign of a very, very sick economy…

#3 The Inactivity Rate For Men In Their Prime Years

Some blame the decline in the labor force participation rate on the aging of our population. But it isn’t just elderly people that are dropping out of the labor force. In fact, the inactivity rate for men in their prime working years (25 to 54) continues to rise and is now at the highest level that has ever been recorded…

#4 Manufacturing Employees

Once upon a time in America, anyone that was reliable and willing to work hard could easily find a manufacturing job somewhere. But we have stood by and allowed millions upon millions of good paying manufacturing jobs to be shipped out of the country, and now many of our formerly great manufacturing cities have been transformed into ghost towns. Over the past few years, there has been a slight “recovery”, but we are still well below where we were at just previous to the last recession…

#5 Our Current Account Balance

As a nation, we buy far more from the rest of the world than they buy from us. In other words, we perpetually consume far more wealth than we produce. This is a recipe for national economic suicide. Our current account balance soared to obscene levels just prior to the last recession, and now we have almost gotten back to those levels…

#6 Existing Home Sales

Our economy has never fully recovered from the housing crash of 2007-2008. As you can see from the chart below, the number of existing home sales is still far below the level that we hit back in 2006. At this point we are just getting back to the level we were at in 2000, but our population today is far larger than it was back then…

#7 New Home Sales

Things are even more dramatic when you look at new home sales. This is an industry that have been absolutely emasculated. The number of new home sales in the United States is just a little more than half of what it was back in 2000, and it isn’t even worth comparing to what we experienced during the peak of 2006.

#8 The Monetary Base

In a desperate attempt to get the economy going again, the Federal Reserve has been wildly printing money. It has been so reckless that it is hard to put it into words. When I look at this chart, the phrase “Weimar Republic” comes to mind…

#9 Food Inflation

Thankfully, much of the money that the Federal Reserve has been injecting into the system has not made it into the real economy. But enough of it has gotten into the system to force food prices significantly higher. For example, my wife went to the store today and paid just a shade under 10 bucks for just four pieces of chicken. And as you can see from the chart below, food prices have been steadily going up in America for a very long time…

#10 The Velocity Of Money

One of the reasons why we have not seen even more inflation is because the velocity of money is extraordinarily low. In general, when an economy is healthy money tends to flow through the system rapidly. People are buying and selling and money changes hands frequently. But when an economy is sick, money tends to stagnate. And that is exactly what is happening in the United States right now. In fact, at this point the velocity of the M2 money stock has dropped to the lowest level ever recorded…

#11 The National Debt

As our economic fundamentals have deteriorated, our politicians have attempted to prop up our standard of living by borrowing from the future. The U.S. national debt is on pace to approximately double during the Obama years, and it increased by more than a trillion dollars in fiscal year 2014 alone. Despite assurances that “the deficit is under control”, the federal government borrows about a trillion dollars a year to fund new spending in addition to borrowing about 7 trillion dollars to pay off old debt that is coming due. What we are doing to future generations of Americans is absolutely criminal, and it is just a matter of time before this Ponzi scheme totally collapses…

#12 Total Debt

Of course it is not just the federal government that is gorging on debt. When you add up all forms of debt in our society (government, business, consumer, etc.) it comes to a grand total of more than 57 trillion dollars. This total has more than doubled since the year 2000…

If you know anyone that believes that we are in good economic shape, just show them these charts.

The numbers do not lie. Our economy is sick and it is getting sicker by the day.

And of course the next major financial crisis could strike at any time. U.S. stocks just experienced their worst week in three years, and if cases of Ebola start popping up around the country the fear that would cause could collapse our economy all by itself.

The debt-fueled prosperity that we are enjoying today is not real. We are living on the fumes of our past, and every single day our long-term problems get even worse.

Anyone with half a brain should be able to see what is coming.

Sadly, most Americans will continue to deny the truth until it is far too late.

This Is About As Good As Things Are Going To Get For The Middle Class – And It’s Not That Good

September 22, 2014September 22, 2014 by Michael

The U.S. economy has had six full years to bounce back since the financial collapse of 2008, and it simply has not happened. Median household income has declined substantially since then, total household wealth for middle class families is way down, the percentage of the population that is employed is still about where it was at the end of the last recession, and the number of Americans that are dependent on the government has absolutely exploded. Even those that claim that the economy is “recovering” admit that we are not even close to where we used to be economically. Many hope that someday we will eventually get back to that level, but the truth is that this is about as good as things are ever going to get for the middle class. And we should enjoy this period of relative stability while we still can, because when the next great financial crisis strikes things are going to fall apart very rapidly.

The U.S. Census Bureau has just released some brand new numbers, and they are quite sobering. For example, after accounting for inflation median household income in the United States has declined a total of 8 percent from where it was back in 2007.

That means that middle class families have significantly less purchasing power than they did just prior to the last major financial crisis.

And one research firm is projecting that it is going to take until 2019 for median household income to return to the level that we witnessed in 2007…

For everybody wondering why the economic recovery feels like a recession, here’s the answer: We’re still at least five years away from regaining everything lost during the 2007-2009 downturn.

Forecasting firm IHS Global Insight predicts that real median household income — perhaps the best proxy for middle-class living standards — won’t reach the prior peak from 2007 until 2019. Since the numbers are adjusted for inflation, that means the typical family will wait 12 years until their purchasing power is as strong as it was before the recession. That would be the longest period of stagnation, by far, since the Great Depression of the 1930s.

Of course that projection assumes that the economy will continue to “recover”, which is a very questionable assumption at best.

Meanwhile, total household wealth has been declining for middle class families as well.

According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.

That is a pretty substantial drop. But you never hear our politicians (especially the Democrats) bring up numbers like that because they want us to feel good about things.

So why is all of this happening?

The biggest reason why the middle class is struggling so much is the lack of good jobs.

As the chart posted below demonstrates, the percentage of the working age population that is actually employed is still way, way below where it was prior to the last recession…

The “employment recovery” (the tiny little bump at the end of the chart) has been so miniscule that it is hardly even worth mentioning.

At the moment, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the U.S. population each month.

And a lot of the workers that have lost jobs since the start of the last recession have never been able to find a new one.

According to a brand new survey conducted by Rutgers University, more than 20 percent of all workers that have been laid off in the past five years still have not found a new job.

Meanwhile, the control freak bureaucrats that run this country continue to kill off small businesses.

In recent years we have seen large numbers of small businesses fail, and at this point the rate of small business ownership in the United States is at an all-time low.

As a result of everything that you have just read, the middle class is shrinking and dependence on the government is soaring.

Today, there are 49 million Americans that are dealing with food insecurity, and Americans received more than 2 trillion dollars in benefits from the federal government last year alone.

For many more statistics just like this, please see my previous article entitled “30 stats to show to anyone that does not believe the middle class is being destroyed“.

Without a doubt, things are not that good for the middle class in America these days.

Unfortunately, the next great wave of financial trouble is rapidly approaching, and once it strikes things are going to get substantially worse for the middle class.

Yes, the stock market set record high after record high this summer. But what we have observed is classic bubble behavior. So many of the exact same patterns that occurred just prior to previous stock market crashes are happening once again.

And it is interesting to note that September 22nd has marked important market peaks at various times throughout history…

For traders, September 22 is one of those days with a notorious history. UBS’s Art Cashin notes that September 22 marked various market highs in 1873, 1929, 1980, and even as recent as 2008.

Could the coming months be the beginning of the next major stock market decline?

Small-cap stocks are already starting to show signs of real weakness. In fact, the Russell 2000 just hit a “death cross” for the first time in more than 2 years…

The Russell 2000 has been diverging from the broader market over the last several weeks, and now technicians point out it has flashed a bearish signal. For the first time in more than two years, the small-cap index has hit a so-called death cross.

A death cross occurs when a nearer-term 50-day moving average falls below a longer-term, 200-day moving average. Technicians argue that a death cross can be a bearish sign.

None of us knows what the market is going to do tomorrow, but a lot of the “smart money” is getting out of the market right now while the getting is good.

So where is the “smart money” putting their assets?

In a previous article, I discussed how sales of gold bars to wealthy clients is way up so far this year.

And CNBC has just reported that the ultra-wealthy “are holding mountains of cash” right now…

Billionaires are holding mountains of cash, offering the latest sign that the ultra-wealthy are nervous about putting more money into today’s markets.

According to the new Billionaire Census from Wealth-X and UBS, the world’s billionaires are holding an average of $600 million in cash each—greater than the gross domestic product of Dominica.

Why are they doing this?

Are they concerned about the potential of a market crash?

And if we do see another market crash like we witnessed back in 2008, what is that going to mean for the rest of us?

2008 certainly did not destroy our economy.

But it did cause an immense amount of damage that we have never recovered from.

Now the next wave is approaching, and most people don’t even see it coming.

The U.S. National Debt Has Grown By More Than A Trillion Dollars In The Last 12 Months

September 14, 2014September 14, 2014 by Michael

The idea that the Obama administration has the budget deficit under control is a complete and total lie. According to the U.S. Treasury, the federal government has officially run a deficit of 589 billion dollars for the first 11 months of fiscal year 2014. But this number is just for public consumption and it relies on accounting tricks which massively understate how much debt is actually being accumulated. If you want to know what the real budget deficit is, all you have to do is go to a U.S. Treasury website which calculates the U.S. national debt to the penny. On September 30th, 2013 the U.S. national debt was sitting at $16,738,183,526,697.32. As I write this, the U.S. national debt is sitting at $17,742,108,970,073.37. That means that the U.S. national debt has actually grown by more than a trillion dollars in less than 12 months. We continue to wildly run up debt as if there is no tomorrow, and by doing so we are destroying the future of this nation.

The chart that I have posted below shows the exponential growth of the U.S. national debt over the past several decades. Anyone that would characterize this as “under control” is lying to you…

This is the greatest government debt bubble in the history of the world, but very few people seem to have any desire to do anything about this anymore. We are literally gorging on debt, and most Americans seem to think that it is just fine and dandy.

Perhaps that it is because we have never really experienced any serious consequences for going into so much debt yet.

But when it comes to running up debt, a day of reckoning always comes eventually.

Just ask Greece.

And the absolutely insane spending policies of this administration and this Congress are hastening the day when our day of reckoning will arrive.

Consider the following facts…

-The U.S. national debt has increased by more than 7 trillion dollars since Barack Obama has been in the White House. By the time Obama’s second term is over, we will have accumulated about as much new debt under his leadership than we did under all of the other U.S. presidents in all of U.S. history combined.

-The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first established in 1913.

-If the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.

-Right now, the United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

-In August, the average rate of interest on the government’s marketable debt was 2.028 percent. In January 2000, the average rate of interest on the government’s marketable debt was 6.620 percent. If we got back to that level today, we would be paying well over a trillion dollars a year just in interest on the national debt.

-At this point the U.S. government has accumulated more than 200 trillion dollars of unfunded liabilities that will need to be paid in future years. In other words, we have made more than 200 trillion dollars worth of promises that we do not have money for yet.

Thomas Jefferson once said that “the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

What we are doing to future generations is absolutely unconscionable. We are stealing trillions upon trillions of dollars from our children and our grandchildren, and we are willingly consigning them to a lifetime of debt slavery.

I have said this before, but it bears repeating. If future generations get the chance, they will look back and curse us for what we have done to them.

And shame on anyone that would dare to suggest that we should continue to run up more debt that future generations will be expected to repay.

But government debt is far from the only massive debt bubble that we are dealing with as a country.

40 years ago, the total amount of debt in our nation (all government debt plus all business debt plus all individual debt) was sitting at a grand total of about 2.3 trillion dollars.

Today, that total has grown to 59.4 trillion dollars.

As the chart posted below shows, our total debt bubble is now more than 25 times larger than it was just 40 years ago…

If you were to take all forms of debt in our country and divide it up equally to each person, the average family of four would owe approximately $735,000.

This is not anywhere close to being sustainable, but most Americans don’t seem to care. They just continue to recklessly run up even more debt.

However, there are signs that we are starting to hit a wall with all of this debt.

For example, an astounding 35 percent of all Americans have debts that are so overdue that they have been referred to collection agencies.

Our nation has become an ocean of red ink from sea to shining sea, and the only way to keep the bubble from bursting is for the total amount of debt to continue to grow much faster than the overall economy is growing.

Obviously this cannot happen indefinitely, and when this house of cards comes crashing down it is going to be absolutely horrific. For much more on all of this please see my previous article entitled “The United States Of Debt: Total Debt In America Hits A New Record High Of Nearly 60 Trillion Dollars“.

The big question is how long our “bubble economy” can keep going before it finally collapses.

It has gotten to the point where even some of the biggest banks in the world are admitting that what we have been doing is completely and totally unsustainable. Just consider the following excerpt from a recent article by Joshua Krause…

*****

Recently, strategists for Deutsche Bank released a startling study in regards to government debt. They decided to investigate whether or not the bond market is currently in a bubble. What they found was, unlike previous eras, the past 20 years has seen no lag between economic booms and busts:

It has long been our view that over the last couple of decades the global economy has rolled from bubble to bubble with excesses never fully being allowed to unravel. Instead aggressive policy responses have encouraged them to roll into new bubbles.

This has arguably kept the modern financial system as we know it a going concern. Clearly there have always been bubbles formed through history but has there been a period like the last 20 years where the bursting of one bubble has consistently led directly to the formation of the next?

Essentially, our current system has been dying a very slow death. It’s running out of steam.

*****

Sadly, most Americans have no idea that we are living in a giant debt-fueled bubble that has a limited lifespan.

Most Americans just assume that since the politicians tell them that everything is going to be okay that they don’t need to be concerned about any of this.

But every single day our debts get even larger and our long-term financial problems get even worse.

Someday this bubble is going to burst and then all hell will break loose.

It is just a matter of time.

Small Business Ownership In America Is At An All-Time Low

September 8, 2014September 8, 2014 by Michael

According to the Federal Reserve, the percentage of American families that own a small business is at the lowest level that has ever been recorded. In a report that was just released entitled “Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances“, the Federal Reserve revealed that small business ownership in America “fell substantially” between 2010 and 2013. Even in the midst of this so-called “economic recovery”, small business ownership in America has now fallen to an all-time low. If the economy truly was healthy, this would not be happening. And it isn’t as if Americans are flooding the labor market either. As I detailed yesterday, the labor force participation rate in this country is at a 36 year low. That would not be happening if the economy was actually healthy either. The truth is that the middle class in America is dying, and this new report from the Federal Reserve is more evidence of this very harsh reality.

In order to build wealth, middle class Americans either need to have their own businesses or they need good jobs. Sadly, the percentage of Americans that own a business continues to decline steadily. In the report that I mentioned above, the Federal Reserve says that the proportion of U.S. families that have an ownership interest in a small business fell from 13.3 percent in 2010 to a brand new all-time low of 11.7 percent in 2013.

This is one of the factors that is increasing the gap between the extremely wealthy and the rest of us in this country. And of course another of the major factors is the steady decline in good paying jobs.

The U.S. Competitiveness Project at Harvard Business School is chaired by professors Michael E. Porter and Jan W. Rivkin. It just released a new report entitled “An Economy Doing Half Its Job”, and it addressed the fact that the middle class is deeply struggling even though many large U.S. corporations have been thriving. The following is an excerpt from an article in the Boston Globe about this report…

In a statement, Porter added: “Shortsighted executives may be satisfied with an American economy where firms operating here are winning without lifting US living standards. But leaders with longer perspectives understand that companies can’t thrive for long while their workers and their communities struggle.”

Unfortunately, this is not likely to change any time soon. In fact, that same report discovered that Harvard Business School alumni foresee “falling pay and fewer openings for full-time jobs” for American workers in the years ahead…

U.S. workers face a dim future, with stagnant or falling pay and fewer openings for full-time jobs.

That’s the picture that emerges from a survey of Harvard Business School alumni.

More than 40 percent of the respondents foresee lower pay and benefits for workers. Roughly half favor outsourcing work over hiring staffers. A growing share prefer part-time employees. Nearly half would rather invest in new technology than hire or retain workers.

The Obama administration continues to tell us that the unemployment rate is “going down” and that the economy is recovering, but that does not match the reality of what most Americans are experiencing on a day to day basis.

As David Stockman recently so aptly put it, outside of health and education the U.S. economy has not produced a single job since mid-2000 even though our population has grown greatly since that time…

In a few deft seconds, a “no jobs” nobody who apparently doesn’t actually have one himself, essentially explained the contents of the chart below to his silenced CNBC hosts. Over the course of 170 “jobs Fridays” since mid-2000, the latter have apparently never noticed the single most stunning fact embedded in the monthly BLS report. Namely, that outside of health and education there has not been one net new job created in the American economy since July 2000! Yes, not a single new job—as in none, nein, nichts, nada, zip!

In addition, most of the new jobs that are being “added to the economy” each month are part-time jobs. Right now, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the population each month.

What this means is that the middle class is shrinking.

We are witnessing an increasing concentration of wealth among the ultra-wealthy, and most of the rest of us are getting poorer. As a recent CNN article detailed, the Federal Reserve has also discovered that the gap between the rich and the poor in America is larger than the Fed has ever recorded before…

In its Study of Consumer Finances, released every three years, the Fed found that the wealthiest 3% of American households controlled 54.4% of the nation’s wealth in 2013, a slight increase from its last survey in 2010. It’s also substantially higher from the 44.8% they held in 1989, showing how quickly the income divide has been growing over the past decade or so.

At the same time, the share of wealth held by the bottom 90% fell to 24.7% in 2013. That’s compared to 33.2% in 1989.

How close does the share of wealth for the bottom 90 percent have to go before we admit that we have a major problem on our hands?

Is there anyone out there that would be okay with it hitting zero percent?

One of the big reasons why the wealthy have been doing so well is because the stock market has been soaring. The money printing policies of the Federal Reserve have sent stock prices to unprecedented heights. This has overwhelmingly benefited the extremely wealthy…

According to recent data from the Federal Reserve, America has the lowest level of stock ownership in 18 years. Yet stock ownership for the wealthy is at a new high—and that has accounted for most of their good fortune compared to the rest of America.

In fact, the Fed says that the wealthiest top 10 percent of all Americans now own 81 percent of all stocks…

Stock ownership is even more concentrated when it comes to share of total stock holdings. In 2010, the latest period available, the top 10 percent of Americans by net worth held 81 percent of all directly held or indirectly held stocks, according to Edward N. Wolff, an economics professor at New York University who specializes in inequality and Federal Reserve data.

Wolff said that share—which has not been released yet for 2013—has probably gone even higher than 81 percent since 2010.

Since the last financial crisis, the Federal Reserve has been very good to the elite.

But most of the rest of us have had a really hard time.

Until more Americans start getting good jobs and building small businesses, things are not going to turn around for the middle class.

But the policies being pursued by our politicians continue to kill good jobs and continue to kill small businesses, so I wouldn’t expect significant changes any time soon.

Most People Don’t Believe It, But We Are Right On Schedule For The Next Financial Crash

September 4, 2014 by Michael

People have such short memories. Even though we are repeating so many of the same patterns that we witnessed in 2000-2001 and 2007-2008, most people do not think that another financial crash is coming. In fact, with the stock market setting record high after record high lately, I have been taking quite a bit of criticism for my relentless warnings about the coming financial storm. Many of the comments go something like this: “Snyder you are a moron! Nothing you say ever comes true. The stock market is going to keep on rocking and Obama is going to lead this country back to greatness. I hope that you choke on all of your doom and gloom.” Of course these critics never offer any hard evidence that I have been wrong about anything. They just assume that since the stock market has soared to unprecedented heights that all of us “bears” must have been wrong.

But the truth is that what we are observing right now is classic bubble behavior. The stock market crashes of 1929, 1987 and 2008 were all preceded by irrational market rallies in the spring or summer. The financial markets have become completely divorced from economic reality, and such a state of affairs never lasts forever. It is just a matter of time before a correction comes.

But every time there is a bubble, most people end up getting caught up in all of the euphoria. And it is happening again. In fact, CNBC has just reported that bearishness among market newsletter writers is the lowest that it has been since 1987. But of course we all remember what happened back in 1987…

Professional investors haven’t had this little fear about stocks since Ronald Reagan was president.

It was the same year Michael Jackson told us in a song he was “Bad.” The New York Giants won the Super Bowl.

And oh yeah … by the way … the stock market crashed.

As gauged by the weekly Investors Intelligence report, bearishness among market newsletter writers has fallen to 13.3 percent, a level it has not seen since 1987 as the market continues to set new highs despite a seemingly endless call for a long-overdue correction.

People need to understand that just because something has not happened yet does not mean that it is not going to happen.

In this day and age, we have extremely short attention spans and we do not have the patience to wait for much of anything. But the financial world is not a game of checkers. It is a game of chess where things can take an extended period of time to play out.

Those that are mocking those of us that are bearish should consider where we stand financially in comparison to previous crash cycles. For example, the derivatives bubble is 20 percent larger than it was back in 2008, the “too big to fail banks” are 37 percent larger than they were back in 2008 and global debt levels are 40 percent larger than they were back in 2008.

In other words, many of our long-term economic problems are a lot worse than they were just prior to the last major financial meltdown.

But most people pay such little attention to the fundamentals these days. All they can see is that little stock market ticker going up and up and up.

Other analysts with much stronger credentials than I are issuing similar ominous warnings about what is ahead for the financial markets.

For example, Nobel Prize-winning economist Robert Shiller is warning that market valuations are tremendously bloated right now…

Shiller, a Yale University professor who is often cited as one of the most influential people in economics and finance in the world, created a metric that compares stock prices with corporate profits. The metric recently climbed above 25. That level has only been surpassed three times since 1881: 1929, 1999 and 2007.

Steep market tumbles followed each instance, including the bursting of the dotcom bubble in the early 2000s.

But it doesn’t take a genius to see this.

Just look at the chart of the NASDAQ that I have posted below. The “dotcom bubble” in 2000 is really easy to see. So why can’t more people recognize the bubble that is happening now?…

In so many ways this bubble is reminiscent of the “dotcom bubble” of 14 years ago. Consider the following numbers from a recent article by Brett Arends…

When you look at medians, or in other words the typical stock, valuations are higher today than they were at the peak in 1999-2000.

For example, the median stock today is 20 times earnings. In January 2000, it was 16 times.

The median stock today trades at 2.5 times “book” or net asset value. At the start of 2000 it was just 2.2 times.

The median stock today trades for 1.8 times annual per-share revenues. In 2000: just 1.4 times.

What we are experiencing is not normal.

And this is especially true considering the fact that our overall economic performance is tepid at best.

A stock market correction is coming.

But you don’t have to take my word for it. Some of the most prominent names in the financial world are warning about the coming correction. Two of them were recently interviewed by CNBC…

A jolt to international confidence in central banks will lead to a 30 to 60 percent market decline, David Tice, president of Tice Capital and founder of the Prudent Bear Fund, told CNBC’s “Power Lunch.” When this happens, he said, markets will face a “period of extreme turmoil.”

This crash will be precipitated, he said, by a disillusionment with the Federal Reserve’s “confidence game,” which will then see inflation rise, and the Fed scramble to raise rates. At that point, Tice added, “the Fed starts to lose control.”

Another market watcher also called for an impending fall.

The Fed’s low interest rates could bring a “scary” 50-60 percent market correction, said technical analyst Abigail Doolittle.

“Unfortunately, I think it could come on a crash similar to what happened in 2007,” Doolittle, the founder of Peak Theories Research, said on “Squawk Box” a day after the S&P 500 closed above the 2,000 level for the first time ever. “It’s tough to know what the exact catalyst will be. But that’s the very nature of that kind of selloff. They start slowly and then happen very suddenly.”

And as Zero Hedge has pointed out, billionaires such as Sam Zell, George Soros, Stan Druckenmiller and Carl Icahn all seem to be “quietly preparing” for the next crash.

Yes, the next financial crash has taken longer to come to fruition than many had anticipated. But as I have discussed so many times before, this is a very good thing. We should want this period of relative stability to last for as long as possible. The longer that things remain relatively stable, the longer that all of us have to prepare and to position ourselves for the financial chaos that is coming.

At this point, the fact that we are in the midst of a massive financial bubble has become so obvious that even the Bank for International Settlements is publicly talking about it…

Financial markets have been exuberant over the past year, […] dancing mainly to the tune of central bank decisions. Volatility in equity, fixed income and foreign exchange markets has sagged to historical lows. Obviously, market participants are pricing in hardly any risks.

Many have expected me to “change my tune” about the coming collapse because of how well the stock market has been performing.

Well, that simply is not going to happen.

Our economic fundamentals have continued to deteriorate, and our financial system is in far worse shape than it was just prior to the financial crash of 2008.

The truth is that we are right on schedule for the next great financial crash.

You can choose to ignore the warnings if you would like, but ultimately time will reveal who was right and who was wrong.

The Seven Year Cycle Of Economic Crashes That Everyone Is Talking About

September 2, 2014 by Michael

Large numbers of people believe that an economic crash is coming next year based on a seven year cycle of economic crashes that goes all the way back to the Great Depression. What I am about to share with you is very controversial. Some of you will love it, and some of you will think that it is utter rubbish. I will just present this information and let you decide for yourself what you want to think about it. In my previous article entitled “If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell For The United States“, I discussed many of the economic cycle theories that all seem to agree that we are on the verge of a major economic downturn in this country. But there is an economic cycle that I did not mention in that article that a lot of people are talking about right now. And if this cycle holds up once again in 2015, it will be really bad news for the U.S. economy.

Looking back, the most recent financial crisis that we experienced was back in 2008. Lehman Brothers collapsed, the stock market crashed and we were plunged into the worst recession that we have experienced as a nation since the Great Depression. You can see what happened to the Dow Jones Industrial Average on the chart that I have posted below…

Prior to that, the last time that the stock market experienced a major decline of that nature was during the bursting of the dotcom bubble seven years earlier. 2001 was a year of recession for the U.S. economy and of big trouble for stocks.

And oh year, a little event known as “9/11” happened that year.

Seven years before that, in 1994, investors experienced the worst bond market of their lifetimes.

The following is how Reuters recalls the carnage…

The 1994 bond market massacre is remembered with horror by those who lived through it. Yields on 30-year Treasuries jumped some 200 basis points in the first nine months of the year, hammering investors and financial firms, not to mention thrusting Mexico into crisis and bankrupting Orange County.

Going back another seven years brings us to 1987.

Anyone that lived through that era remembers “Black Monday” and the horrible stock market crash very well.

The next major economic crash prior to 1987 was in the early 1980s.

In 1980, the S&L crisis was blooming and everyone was talking about the “stagflation” that we were experiencing under Jimmy Carter. The Federal Reserve raised interest rates dramatically to combat inflation, and this helped precipitate the very deep recession that we experienced early in Ronald Reagan’s first term.

You can read much more about the “early 1980s recession” right here.

Seven years prior to 1980 brings us to 1973. To many young Americans, that year does not have any significance, but older Americans remember the Arab oil embargo and the super long lines at the gas pumps really well.

In addition, a recession began in 1973 which ended up stretching all the way until 1975.

And those that have studied these things say that the pattern keeps going back all the way to the Great Depression. Many correctly point out that the stock market crash which began the Great Depression was in 1929, but actually the worst year for the stock market during the Great Depression was in 1931. And 1931 fits perfectly into the cycle.

So we have this pattern of economic crashes occurring approximately every seven years.

But there is an additional element to this cycle which makes it even more extraordinary.

As Jonathan Cahn has pointed out, this seven year cycle also lines up with the seven year “Shemitah cycle” that we find in the Bible.

For those not familiar with it, during the Shemitah year the people of Israel were commanded to let their land rest for a full year. It was also supposed to be a time of releasing of debts.

But for the most part the people of Israel did not observe the Shemitah year, and in the Bible that is mentioned as one of the reasons why they were exiled to Babylon for seventy years.

The Shemitah year always begins in the fall, and the upcoming Shemitah year is going to start about a month from now.

Will we see things happen during this Shemitah year that are similar to things that we have seen in past Shemitah years?

For example, on September 17th, 2001 we witnessed the greatest one day stock market crash in U.S. history up until that time. It happened on the 29th of Elul on the Jewish calendar, which is the day right before Rosh Hashanah.

That record stood for seven years until the massive stock market crash of September 29, 2008. That date also corresponded with the 29th of Elul on the Jewish Calendar – the day right before Rosh Hashanah.

Will the pattern hold up in 2015?

Well, the 29th of Elul falls on a Sunday in 2015, so the stock market will be closed. But it is very interesting to note that there will be a solar eclipse on that day.

And as Jonathan Cahn recently told WND, similar solar eclipses in the past have preceded major financial disasters…

In 1931, a solar eclipse took place on Sept. 12 – the end of a “Shemitah” year. Eight days later, England abandoned the gold standard, setting off market crashes and bank failures around the world. It also ushered in the greatest monthlong stock market percentage crash in Wall Street history.

In 1987, a solar eclipse took place Sept. 23 – again the end of a “Shemitah” year. Less than 30 days later came “Black Monday” the greatest percentage crash in Wall Street history.

Is Cahn predicting doom and gloom on Sept. 13, 2015? He’s careful to avoid a prediction, saying, “In the past, this ushered in the worst collapses in Wall Street history. What will it bring this time? Again, as before, the phenomenon does not have to manifest at the next convergence. But, at the same time, and again, it is wise to take note.”

So what should we make of all of this?

I am sure that some of you will dismiss this as pure coincidence and speculation.

Others will find it utterly fascinating.

But one thing is for sure – people are going to be talking about this seven year cycle all over the Internet.

When they ask you what you think, what are you going to say?

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