Investing

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.

Will You Be Able To Heat Your Home This Winter? Millions Of American Families Will Not

Will you have a warm house to come home to this winter?  If so, you should consider yourself to be very fortunate. With the United States experiencing the highest levels of long-term unemployment that it has seen since the Great Depression, millions of Americans families are simply out of money.  All across America this winter, families are going to be forced to make some heart breaking decisions.  For many, the choice will come down to either heating their home or putting food on the table.  According to the National Energy Assistance Directors’ Association, more than 10 million U.S. households will not be able to afford to heat their homes this winter without assistance, which would be a new all-time record.  So, if you are in a position to easily heat your home this winter, be very, very thankful.  The number of American families that cannot even afford the basics of life is growing by the day.

As I have written about previously, millions of formerly middle class families have been absolutely ripped apart by this economy.  There simply is not nearly enough jobs for everyone, and those who have been left on the outside looking in are becoming increasingly desperate.

Of course there is federal help available, but it doesn’t go nearly far enough for those who are truly in need.  For example, the Low Income Home Energy Assistance Program (LIHEAP) assists low income households in paying their home heating bills.  However, the truth is that usually only a small fraction of heating costs are covered.  Nationally, the average benefit represents only about 8% of the average winter heating bill.

Last winter, a record number of U.S. households applied for home heating assistance.  In fact, in 17 states application requests were up more than 20% from the year before.  Due to rapidly spreading poverty, the number of Americans filing for heating assistance is expected to increase even more this winter.

If you cannot heat your home, it is a really, really big deal.  In 2009, a 93-year-old man in Bay City, Michigan actually froze to death inside his own home.

These days, many American families are finding that their budgets are stretched beyond the breaking point.  Most Americans take it for granted that they will be able to heat their homes, but for the poor, being able to have enough heat is a great blessing.  Today, the poorest 20 percent of Americans spend more than 50 percent of their after-tax income on food and energy….

So can’t the U.S. federal government just pay for everyone to have heat?

No, they cannot.

The truth is that as millions upon millions of Americans jump on to the “safety net” it is rapidly approaching the breaking point.  For example, 42 million Americans are now enrolled in the food stamp program.  That is a whole lot of hungry mouths to try to feed every month.

Not that feeding hungry people should not be a priority.  It is just that the U.S. government continues to spend way, way more money than it is bringing in and is basically bankrupt at this point.

So what about the states?  Can’t they step in and help?

No, the truth is that most U.S. states are absolute basket cases financially.  A recent article that I wrote about the state of California illustrates this point very well.

Unfortunately, most Americans families are just going to have to scrape by the best that they can.

It is hard to even describe the horrible pain that many Americans are experiencing because of this economy.  The following story from the Unemployed-Friends website is from a woman named Leetah who is desperately hoping that her family will be able to get through this upcoming winter….

The place I live in right now has no jobs and no places to live. My fiance, Lloyd, and I have been looking for anything but he lost his job from McDonald’s and the factories (the only jobs to make a living off of) consider him an insurance liability. I can’t get hired to a factory because of I was fired from our major factory for attendance (I had to miss 3 days of work because I was sick). So we are moving to the Edmond/OKC region where we are hoping to find a job and a place with running water and heating. We’ve spent the last few years without heat and running water and so having a place with water and heat would be heaven.

Winter is coming up fast and I am so afraid. Last winter we almost died from the cold and now the thought of cold makes my throat close up and my heart pound. But it isn’t just ourselves we are looking out for, we have our dog too. Our wonderful APBT Maggie who is 2-years-old and has been with us since she was 5-months-old. She’s our baby girl and we can’t lose her. We almost lost her to the cold too and it scared me so much. We are going to be living in our car soon with our dog.

I am hoping to be able to keep our food stamps in the new city so we can still eat. I have already applied for ten+ jobs and nothing yet but I am keeping my hopes up. Hopefully it will get easier to find a job once we get there. Then we just have to save up and then we can afford an apartment. Now finding an apartment with my awesome dog is another story.

Please say a prayer for those who are hurting this winter.  This economy has pushed millions of Americans to the absolute edge of despair.  Another participant on the Unemployed-Friends forum named Sanskay sounds like the hard reality of her situation has sucked almost all of the life out of her….

I met the love of my life when I was 19, and we moved in together. He had an excellent job and savings (he was several years older than me), and we decided together that I would stay home. When I was 26, he started feeling sick to his stomach a lot. By the time he was diagnosed with colon cancer (at 33!), it had already spread to his liver. We lost everything to medical bills, treatments, and medications. We fought so hard to prolong his life, and we drained his (our) savings accounts to try to cure him. Well, it did not work. He died in agony.

So then I was 26 and a widow and penniless, and I had not worked since college. I moved back in with my parents and decided to go back to school. Everyone told me that the health care fields were all in demand, so I studied to become an ultrasound tech. I excelled in my classes. It took me two years to do all of my prerequisites before I entered the program. By then, the recession had hit, but everyone at the school told me that I would have no problem landing a job as long as I was willing to move. This ended up being all lies. By that point, they knew that they were having trouble placing grads from 2007 and 2008, but that was never mentioned to me. This was a community college with a good reputation, and not some for-profit school, and I believed them.

I graduated last year (2009) and have been looking for employment as an ultrasound tech for over a year now. I have applied to over 400 jobs. I have gained three in-person interviews and seven phone interviews. None of them have amounted to anything. I am still unemployed. There are many per-diem (they’ll call you when they need you, and you have no guaranteed hours) jobs listed, but I cannot move unless I have a full-time job.

It’s awful because they are still funneling people into the program and telling them that as long as they’re willing to move out of state, they will have no trouble finding full-time work. They’re just concerned with keeping the seats full and they don’t care if their new graduates are unable to find work. I feel betrayed.

So now I’m 30 years old and still living in my parents’ basement, as I have been for years now. I feel like such a loser. My parents paid for my community college degree and my registry exams, which are all worthless now. It’s been so long that I have scanned anyone that I don’t remember what to do for some of the exams any longer, not to mention what the pathologies look like.

I haven’t applied to a job in a month. The official unemployment rate in my county is 15.6%, but the “unofficial” unemployment rate (REAL unemployment rate!) is easily double that. There is no work here, and I have no money to move, and no salable skills even if I had the money to move.

I miss my husband terribly. Suicide has definitely crossed my mind many times, but it would literally kill my mother if I did anything rash (she has a heart condition and can’t allow herself to become over-excited or her heart starts beating out of rhythm, which could cause a heart attack). It seems most days that the best years of my life are far behind me and that I have nothing to look forward to anymore.

Hopefully as you read these kinds of stories you feel your heart move.  The truth is that it could be any of us that are next.

In this economy, no jobs is secure.  In this economy, no business is secure.  There is no guarantee that the income that you are enjoying today is going to be there tomorrow.

The U.S. economic system is slowly dying.  There are many that are cheering this downfall, but the cold, hard truth is that tens of millions of us are going to experience horrible economic pain as the economy unravels.

It is not going to be a fun time.  So count your blessings while you still have them.

One Piece Of Moderately Good Economic News And 14 Pieces Of Bad Economic News That Are So Horrifying You Might Not Want To Read Them Standing Up

Today the financial world was buzzing with excitement because there was one moderately good piece of news for the U.S. economy.  U.S. employers added 151,000 jobs during the month of October and the unemployment rate remained unchanged at 9.6%.  This is certainly welcome news, but these days it seems as though there are at least ten pieces of bad economic news for every hopeful economic signal.  So don’t get fooled when the U.S. economy takes one step forward, because it is about to take another dozen or so steps backwards.  We are living in the middle of a nightmarish long-term economic decline that has been building for generations.  The deindustrialization of the United States, the horrific trade deficit caused by globalization and the skyrocketing national debt are problems that have taken decades to develop.  The Federal Reserve has been ripping the guts out of our financial system since 1913.  These are not things that are going to be fixed overnight.  In fact, there are some statistics that just keep getting worse and worse and worse as time goes by.  We are heading straight for a devastating economic collapse and hopefully we can all warn as many people as possible while there is still time.

The more research that you do into our economic situation the more depressing it becomes.  We are in big, big, big trouble.  The following are 14 pieces of bad economic news that are so horrifying you might not want to read them standing up….

#1 More than 42 million Americans were on food stamps during the month of August.  That is a new all-time record, and that number is 17 percent higher than it was one year earlier.  In fact, the number of Americans on food stamps is up more than 58 percent since August 2007.

#2 The number of “persons not in the labor force” in the United States has set another new all-time record.  The United States has not had such an extended bout of mass unemployment since the Great Depression.  The “official” unemployment rate in the United States has been at nine and a half percent or above for 14 consecutive months.

#3 More than 1000 people now live in the 200 miles of flood tunnels that exist under the city of Las Vegas.  Once one of the most prosperous cities in the United States, Las Vegas is now little more than a shiny, glittering corpse that it rapidly decaying.

#4 Poverty is absolutely exploding and it is hitting those who are the most vulnerable the hardest.  According to one recent study, approximately 21 percent of all children in the United States are living below the poverty line in 2010.

#5 In the past 60 days alone, the price of cotton is up 54%, the price of corn is up 29%, the price of soybeans is up 22%, the price of orange juice is up 17%, and the price of sugar is up 51%.

#6 One out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government.

#7 The American Bankruptcy Institute says that there will be about 1.6 million consumer bankruptcies in 2010.  That would represent a huge increase over 2009.

#8 According to one recent survey, 28% of all U.S. households have at least one member that is looking for a full-time job.

#9 The individual U.S. states are mostly flat broke.  For example, it is being reported that the 15 largest U.S. states spent on average over 220% of their tax receipts over the past decade.  Clearly this is not even close to sustainable.

#10 The U.S. government is completely and totally broke.  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.

#11 In an attempt to keep our financial system solvent, the U.S. Federal Reserve has announced plans to create $600 billion out of thin air and pump it into the U.S. economy.  The Fed is calling this “quantitative easing“, but what they should really be calling it is “cheating, debasing and inflating”.

#12 Many of the major trading partners of the United States are expressing deep resentment regarding the new quantitative easing policy announced by the Fed.  Ambrose Evans-Pritchard recently described the growing animosity this way….

Li Deshui from Beijing’s Economic Commission said a string of Asian states share China’s “deep bitterness” over dollar debasement, and are examining ways of teaming up to insulate themselves from the tsunami of US liquidity.

#13 For many analysts, the economic collapse of the United States comes down to cold, hard math.  For example, the former CEO of the tenth largest bank in the United States says that it is a “mathematical certainty” that the U.S. government will eventually go bankrupt.

#14 According to a recent article on CNBC, the financial world is already buzzing about QE3….

“They’re already talking about QE3,” said Dave Rovelli, managing director of US equity trading for Canaccord Adams. “Eventually we’re going to be printing so much money the dollar is going to really go down and everybody’s going to try to deflate their currency against us. I just don’t know how this could end well.”

So is that all the Federal Reserve has left?

Are they just going to keep pouring bags of money into the economy until things get back to “normal”?

Are we going to have “Quantitative Easing 3”, “Quantitative Easing 4”, and “Quantitative Easing 5”?

It has been a long-running joke, but perhaps by the end of this thing Ben Bernanke will literally go up in a helicopter and start shoveling out huge piles of cash over the countryside.

The era of great prosperity that we have all enjoyed for so long is coming to an end.  It would be advisable to use the remaining period of economic stability that we still have to prepare for what is ahead.

These economic problems could have been fixed decades ago if people would have actually listened and would have followed sound economic principles on an individual and on a corporate level, but that did not happen.

Now we are up to our eyeballs in debt and the greatest economic machine in history is rotting all around us.

We are in deep, deep, deep trouble and denying it is not going to make it go away.

Caught In A Lie: Bernanke Promised Congress The Federal Reserve Would Not Monetize The Debt But Now That Is Exactly What Is Happening

On June 3rd, 2009 Federal Reserve Chairman Ben Bernanke promised the U.S. Congress that the Federal Reserve would not monetize the debt of the U.S. government.  On November 3rd, 2010 the Federal Reserve announced a massive quantitative easing plan which will involve the purchase of 600 billion dollars of U.S. Treasury securities by the middle of 2011.  Creating 600 billion dollars out of thin air and using them to buy up U.S. government securities is monetizing the debt.  So Federal Reserve Chairman Ben Bernanke has been caught in a lie.  Will we ever be able to trust a single word that he says ever again?

Monetizing the debt is a desperate act.  It is a signal that we are rapidly reaching the end of the game.  Slamming interest rates all the way to the floor did not revive the U.S. economy.  Hundreds of billions of dollars in extra government spending did not do the trick either.  The U.S. economy is still dying and the U.S. government is now beginning to find it very difficult to locate buyers for all the debt that it is constantly issuing.

So the Fed apparently hopes that this new round of quantitative easing will be a way to finance the exploding U.S. government debt and spark an “economic recovery” at the same time.

But didn’t Bernanke promise that the Fed was not going to do this?

Didn’t he pledge to Congress that the Federal Reserve would not monetize the debt?

Yes, he did.  The following is video footage of Bernanke from June 3rd, 2009 promising that the Federal Reserve would not monetize the debt….

So much for keeping his promises.

But what else can Bernanke do?

The truth is that we are reaching the end of the economic rope and the Federal Reserve has already played all of the other tricks that they have in their bag.

Buying up massive amounts of U.S. government debt and showering the U.S. economy with money is a desperate attempt to keep the shell game going for a few more rounds.

Once upon a time, the U.S. dollar was the strongest currency on the planet.  The rest of the world loved to use it as a reserve currency and they were more than glad to buy up U.S. Treasuries.

But now the mood has changed dramatically.  The rest of the world does not intend to keep lending us well over a trillion dollars each and every year.  The market for dollar-denominated debt is not what it once was.

In fact, Peter Schiff, the CEO of Euro Pacific Capital, believes that the primary reason for this new round of quantitative easing is that the U.S. government is having an increasingly difficult time financing its debts….

At the end of the day, all this deflation talk is a red herring. The true purpose of QE 2 is to disguise the decreasing ability of the Treasury to finance its debts. As global demand for dollar-denominated debt falls, the Fed is looking for an excuse to pick up the slack. By announcing QE 2, it can monetize government debt without the markets perceiving a funding problem.

But the markets are not populated by a bunch of idiots.  They are going to see what is going on.  The Federal Reserve is monetizing the debt.  This is going to make U.S. government debt even less attractive to foreign investors as I wrote about yesterday….

As foreigners begin to balk at all of this nonsense, the U.S. government will either have to start paying higher interest rates on government debt in order to attract enough investors, or the Federal Reserve will just have to drop all pretense and permanently start buying up most of the debt.  Either way, once faith has been lost in U.S. Treasuries the financial world will never, ever be the same.

If there comes a point when China and Japan realize that the game is up, they are going to start bailing out of U.S. Treasuries faster than you can say “panic”.  That could create a crisis of unprecedented proportions.  Of course the Federal Reserve could just keep whipping up increasingly large batches of dollars out of thin air to soak up all the excess debt flooding the market, but that kind of a Ponzi scheme would not work for long, and it would likely set off horrific inflation.

In order for the current world financial system to maintain stability, there must be faith in the U.S. dollar and in U.S. Treasuries.  Once faith in those two pillars is gone, it is inevitable that the whole system will come crashing down.

Most Americans have no idea that the entire global financial system is hanging by a thread.  They have no idea that their futures could be radically altered if things go badly.

We like to think that we live in such a “democratic” society, but the decisions on which our economic future rest are in the hands of a group of unelected, unaccountable central bankers.

The truth is that the Federal Reserve is about as “federal” as Federal Express is.  The Fed is not part of the U.S. government.  If you watch interviews with top Federal Reserve officials, they love to talk about how “independent” they are.  In defending itself against a Bloomberg request for information under the Freedom of Information Act, the Federal Reserve objected by declaring that it was “not an agency” of the U.S. government and therefore it was not subject to the Freedom of Information Act.

The institution that has the most power by far over the U.S. economy does not answer to the American people, and the American people are so “comfortably numb” that they don’t even realize it.

In fact, most Americans do not even know that the Federal Reserve, in association with their buddies on Wall Street, caused the first Great Depression.

But Ben Bernanke does.

At a November 8th, 2002 conference to honor Milton Friedman’s 90th birthday, Bernanke actually confessed that Milton Friedman and Anna J. Schwartz were right when they wrote that the Federal Reserve caused the Great Depression….

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

So does that make you feel better?

Ben Bernanke says that the folks over at the Federal Reserve are very sorry that they caused the Great Depression of the 1930s and they promise not to do it again.

Of course we have already seen how much Ben Bernanke’s promises are worth.

With people like Bernanke in charge, there is not a lot of reason for optimism.

Meanwhile, Bernanke and his fellow central bankers are heading down to Jekyll Island this weekend for a grand celebration.

That’s right.

The Federal Reserve is holding a conference this weekend entitled “A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve” to celebrate the 100 year anniversary of the infamous 1910 Jekyll Island meeting that spawned the draft legislation that would ultimately create the U.S. Federal Reserve.

They will surely be congratulating themselves on doing such a fine job of running the U.S. economy.

Yeah, they are doing a fine job of running it – right off a cliff and into oblivion.

Living Beyond Our Means: 3 Charts That Prove That We Are In The Biggest Debt Bubble In The History Of The World

Do you want to see something truly frightening?  Just check out the 3 charts posted further down in this article.  These charts prove that we are now in the biggest debt bubble in the history of the world.  As Americans have enjoyed an incredibly wonderful standard of living over the past three decades, most of them have believed that it was because we are the wealthiest, most prosperous nation on the planet with economic and financial systems that are second to none.  But that is not even close to accurate.  The reason why we have had an almost unbelievably high standard of living over the past three decades is because we have piled up the biggest mountains of debt in the history of the world.  Once upon a time the United States was the wealthiest country on the planet, but all of that prosperity was not good enough for us.  So we started borrowing and borrowing and borrowing and we have now been living beyond our means for so long that we consider it to be completely normal. 

We have been robbing future generations blind for so long that it doesn’t even seem to bother most people anymore.  We have become accustomed to living in debt.  We go into massive amounts of debt to get an education, we go into massive amounts of debt to buy a home, we go into massive amounts of debt to buy our cars, and we even pile up debt to buy holiday gifts and to purchase groceries.

Just check out the chart posted below.  It shows the total credit market debt owed in the United States.  In other words, it is a measure of what everyone owes (government, businesses and consumers). 

30 years ago, total credit market debt owed was less than 5 trillion dollars.  Today, it is over 50 trillion dollars.  Total credit market debt is now at a level equivalent to about 360 percent of GDP.  This is what has been fueling the great era of “economic prosperity” that we have been experiencing….        

So what is the answer to this problem? 

The truth is that there is not an easy answer under our current system.  The only way that the U.S. economy continues to “grow” is if the debt bubble continues to “expand”. 

If our leaders allowed the debt bubble to “pop” and the U.S. economy went into a deleveraging cycle, it would mean that we would start living far below our means for an extended period of time and it would spawn a deflationary depression that would make the Great Depression look like a Sunday picnic.

Most Americans are in no mood to take that kind of hard medicine.

Do you really think that the American people are going to vote in politicians who tell them that it is time to live below our means and that we are going to have to experience a standard of living far below what our parents experienced in order to pay for all the debt that they racked up?

No, that is clearly a dog that isn’t going to hunt. 

The American people want to hear that better times are ahead.

One way to give the American people “better times”, for the short-term at least, is to crank the debt spiral back up.

By introducing another huge flood of paper money into the economy, the Federal Reserve and the U.S. government are hoping that banks will start lending again and that U.S. consumers will start going into more debt again.  Already, as you can see from the chart below, U.S. household debt has started to sink just a little bit.  But considering the fact that approximately 70 percent of our GDP is generated by U.S. consumer spending, that is not good news for “economic growth” statistics.

Three decades of “economic expansion” have been fueled by consumer debt that has spiralled completely out of control.  Over the past 30 years, total U.S. household debt has gone from less than 2 trillion dollars to almost 14 trillion dollars….

So where did the housing bubble come from?  It came from Americans going into insane amounts of debt that they could not afford.  The truth is that only the top 5 percent of all U.S. households have earned enough additional income to match the rise in housing costs since 1975.

Not only that, but Americans are going into staggering amounts of debt in order to pay for their educations.  Total student loan debt in the United States is climbing at a rate of approximately $2,853.88 per second, and today Americans owe an all-time record of more than $849 billion on student loans, which is actually more than the total amount that Americans owe on their credit cards.

The truth is that American families are stretched thinner financially than they ever have been in the post-World War 2 era.  According to a poll taken last year, 61 percent of Americans “always or usually” live paycheck to paycheck.  That was up significantly from 49 percent in 2008 and 43 percent in 2007.

Many Americans have come to the absolute breaking point.  1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008.

But remember, approximately 70 percent of our GDP is generated by U.S. consumer spending, so without more consumer spending there won’t be more economic growth.

So, instead of Obama and the Federal Reserve encouraging Americans to get out of debt and to save money, they are trying to get the American people to spend even more money and to go into even more debt because they desperately need positive “economic growth” figures. 

The worst offender of all when it comes to debt, of course, is the U.S. federal government.  Over the last 30 years, the U.S. national debt has gone from about 1 trillion dollars to almost 14 trillion dollars….

This is the largest single debt in the history of the world.

So just how big is one trillion dollars?

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. 

Yet somehow the U.S. government has accumulated a debt that is well over 13 trillion dollars.

Unfortunately, it keeps getting worse month after month after month.

According to the U.S. Treasury Department, the U.S. national debt is rapidly closing in on 14 trillion dollars and and will climb to an estimated $19.6 trillion by 2015.

Should we all throw a big party when it crosses the 20 trillion dollar mark?

I can just hear the theme song now….

“I’m going to party like I’m 19.99 trillion in debt!”

But the cold, hard reality is that we are in far, far more trouble than what the official government numbers tell us.

In a recent article, Boston University economics professor Laurence J. Kotlikoff analyzed the financial condition of the U.S. government, and he summarized the horror we are facing by making the following statement….

“Let’s get real. The U.S. is bankrupt.”

After carefully going over Congressional Budget Office data, Kotlikoff came to the conclusion that the U.S. government is now facing a “fiscal gap” of $202 trillion dollars.

Now how in the world did that happen?

Well, it turns out that we have made promises to future generations that we cannot possibly even come close to keeping.

Social Security and Medicare are fiscal nightmares that are far more immense than anything that U.S. government has ever faced before.

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.

That is just 9 years away.

When people speak of the financial situation of the U.S. government being “unsustainable”, they aren’t kidding around.

The truth is that the U.S. government has been running gigantic Ponzi schemes which are about to collapse.

Take the Social Security shell game for example.  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.

So exactly how is that supposed to work?

For much more on the coming Social Security nightmare, please see an article that I posted earlier this year: 22 Statistics About America’s Coming Pension Crisis That Will Make You Lose Sleep At Night.

Sadly, Professor Kotlikoff is not exaggerating in the least when he proclaims that the U.S. government is bankrupt.

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.

Public debt at a level of 100 percent of GDP is supposed to be an absolute nightmare scenario.

Needless to say, the whole thing is going to come crashing down long, long before we ever get to 2080.

We have been living far, far beyond our means for decades, and it has been the greatest party in the history of the world.

But it is time to turn out the lights because the party is over.

The Calm Before The Storm

An eerie calm has descended upon world financial markets as they await perhaps the two most important financial events of the year this week.  On Tuesday, investors will be eagerly awaiting the results of one of the most anticipated midterm elections in U.S. history.  On Wednesday, the Federal Reserve is expected to end months of speculation by formally announcing the details of a new round of quantitative easing.  If either the election or the meeting of the Federal Reserve open market committee delivers a highly unexpected result, it could have a dramatic impact on world financial markets.  In fact, many are looking at this week as a potential turning point for the U.S. economy.  The decisions that are made or not made this week could set us down a road from which the U.S. economy may never recover.

At this point, it looks like the Republicans will take control of the U.S. House of Representatives and will pick up a number of U.S. Senate seats as well.

There are many in the financial world who already consider Barack Obama to be the most “anti-business” president in U.S. history, so a defeat for the Democrats on Tuesday would be greatly welcomed by many on Wall Street.  Barack Obama’s decline in popularity since he was elected has been absolutely stunning.  According to Gallup, Barack Obama had an average approval rating of just 44.7% during the seventh quarter of his presidency, which was a brand new low.  In fact, Obama’s average approval rating has fallen during every single quarter since he took office.  Things have gotten so bad for Obama that one new poll has found that 47% of Democrats now think that Barack Obama should be challenged for the 2012 Democratic presidential nomination. 

However, if the Democrats were able to do surprisingly well on Tuesday, it would not only shock the political pundits, but it would also likely put world financial markets in a very bad mood. 

If the Republicans do very well on Tuesday, it will likely mean that there will be no more extensions for those receiving long-term unemployment benefits.  Some state governments are already anticipating this and are making preparations.  For example, armed security guards are now being posted at all 36 full-service unemployment offices in the state of Indiana.  It is estimated that approximately 2 million Americans will lose their unemployment insurance benefits during this upcoming holiday season if  Congress does not authorize another emergency extension of benefits by the end of November.  If the Republicans do very well on Tuesday, it would make it much more likely that the extension will not happen.

But if millions of unemployed Americans suddenly find themselves without any unemployment checks, that is only going to cause the anger and frustration regarding this economy to grow.

Either way, the unfortunate truth is that this election is not going to change much.

Over the past five elections, incumbents have been re-elected to the U.S. House of Representatives at an average rate of 96 percent.

This time will be a little different of course, but not that much different.  The sad truth is that we are still likely to see about 80 percent of the exact same faces going back to the U.S. Congress for the next session.

However, even if the American people could somehow vote out every single member of Congress, it would still not do much to fundamentally change our economic situation because the U.S. Congress does not run the economy and neither does the President.

Of course both of those institutions can influence the U.S. economy, but it is actually the Federal Reserve that runs the economy.

The Federal Reserve controls the money supply.  The Federal Reserve controls our interest rates.  If the U.S. government wants more money it has to go get it from the Federal Reserve.  It is the Federal Reserve that is tasked with the mandate of keeping unemployment low while also keeping inflation at a “reasonable” level.

But these days, Federal Reserve officials don’t really seem to be that concerned about the dangers of inflation.  In fact, several top Federal Reserve officials have come out in recent weeks and have made public statements not only advocating more quantitative easing, but also suggesting that inflation is not a danger because it is actually “too low” right now.

In fact, there have been some rumblings that many officials at the Fed would actually welcome more inflation because they think that it would somehow stimulate the economy.  In fact, a Federal Reserve paper that was released in September actually floated the idea that a spike in oil prices would be quite good for the U.S. economy.

And these are the people running our economy?

Are we all caught in an episode of The Twilight Zone?

Well, as far as rising oil prices are concerned, the Fed will almost surely get its wish.  As I have written about previously, the price of oil is almost certainly heading to 100 dollars a barrel.

But if the price of oil shoots up, isn’t that going to cause significant inflationary pressure on the prices of thousands of other goods and services?

Of course.

Unfortunately, very few of our leaders seem too concerned about inflation or about protecting the value of the U.S. dollar these days.

In fact, now even the IMF is publicly proclaiming that the U.S. dollar is “overvalued”.

What a mess.

But there is another aspect of a new round of “quantitative easing” that the American people really wouldn’t like if they could actually figure out what is going on.

You see, the truth is that “quantitative easing” is not only just a way to stimulate the economy, it is also a way to give backdoor bailouts to the big banks without having to go through the U.S. Congress.

In a previous article, I described how this works….

1) The big U.S. banks have massive quantities of junk mortgage-backed securities that are worth little to nothing that they desperately want to get rid of.

2) They convince the Federal Reserve (which the big banks are part-owners of) to buy up these “toxic assets” at significantly above market price.

3) The Federal Reserve creates massive amounts of money out of thin air to buy up all of these troubled assets.  The public is told that all of this “quantitative easing” is necessary to stimulate the U.S. economy.

4) The big banks are re-capitalized and have gotten massive amounts of bad mortgage securities off their hands, the Federal Reserve has found a way to pump hundreds of billions (if not trillions) of dollars into the economy, and most of the American people are none the wiser.

Now how do you think the American people would feel about “quantitative easing” if they really understood all this?

But unfortunately, most Americans will be watching the election results on Tuesday night without having even a basic understanding of how our economy is really run.

Already, there are a ton of signs that the U.S. economy is heading in a very bad direction, and dumping a handful of Congress critters out of office might feel good, but it isn’t going to do much to really change our economic problems.

The American people desperately need to be educated about how our financial system really works.  But unfortunately, most Americans will likely not wake up until the whole house of cards comes crashing down.

Why Is Indiana Putting Armed Security Guards Into 36 Unemployment Offices Across The State?

Did you ever think that things in America would get so bad that we would need to put armed guards into our unemployment offices?  Well, that is exactly what is happening in Indiana.  Armed security guards will now be posted at all 36 full-service unemployment offices in the state of Indiana.  So why is this happening now?  Well, Indiana Department of Workforce Development spokesman Marc Lotter says that the agency is bringing in the extra security in anticipation of an upcoming deadline when thousands upon thousands of Indiana residents could have their unemployment benefits cut off.  But it is not just the state of Indiana that could have a problem.  In fact, one recent study found that approximately 2 million Americans will lose their unemployment insurance benefits during this upcoming holiday season unless Congress authorizes another emergency extension of benefits by the end of November.  At this point, however, that is looking less and less likely.

So perhaps all the states will have to start putting armed security guards in their unemployment offices.  The truth is that frustration among unemployed Americans is growing by the day.

Could we soon see economic riots similar to what we have seen in Greece and France?

Let’s hope not.

The following is a video news report about the armed guards that are going into Indiana unemployment offices….

So could things really get out of hand when thousands of unemployed workers in Indiana find out that they aren’t going to get checks any longer?

Indiana Department of Workforce Development spokesman Marc Lotter makes it sound like that is very much on his mind….

“Given the upcoming expiration of the federal extensions and the increased stress on some of the unemployed, we thought added security would provide an extra level of protection for our employees and clients.”

So who is paying for all of this extra security?

The Feds of course.

The additional cost of the new security will be approximately $1 million, and it will be paid for with U.S. government funds designated for the administration of the unemployment system according to Lotter.

This is not a good trend.  As you go through your daily life, just start taking note of the places that now have armed security that did not have armed security five or ten years ago.

Unfortunately, as the U.S. economy goes downhill even further, the amount of security that people feel is “necessary” is likely to go up even more.

So is America going to become an armed camp where the people and institutions with money are protected by armed guards from the hordes of frustrated unemployed workers that can’t feed themselves or their families?

Americans are certainly not in a good mood about the economy.  According to a recent poll conducted by CNBC, 92 percent of Americans believe that the performance of the U.S. economy is either “fair” or “poor”.

The lack of jobs is the main thing that the American people are so mad about.  In fact, it is hard for even highly educated people to find work in 2010.  In America today, 317,000 waiters and waitresses have college degrees. 

People are really hurting and they are getting to the end of their ropes.  Over 41 million Americans are now on food stamps, and one out of every six Americans is enrolled in at least one federal anti-poverty program.  It is getting hard to believe that this is even America anymore.  For many more statistics that reveal the economic horror we are now facing as a nation, please see my previous article entitled “30 Reasons Why People Should Be Getting Really Nervous About The State Of The U.S. Economy“.

But it is not just unemployment that is the problem.  In recent years, millions upon millions of Americans have been forced to take reduced hours or a cut in pay due to the economy.  Millions of others have had to take jobs that barely enable them to survive.  In fact, the number of Americans working part-time jobs “for economic reasons” is now the highest it has been in at least five decades.

So why aren’t there even close to enough jobs for everyone?  Well, there are a number of contributing factors, including the fact that we have been “offshoring” and “outsourcing” millions of our jobs and now it is really starting to catch up with us.  I have discussed this so many times now that I am starting to sound like a broken record.

But instead of fixing the fundamental problems with our economy, the Federal Reserve wants to print yet another gigantic pile of paper money and throw it at the problem.  It is called “quantitative easing“, and it may help smooth things over for a few months, but it is also going to make our long-term problems even worse.

Unfortunately, the Federal Reserve does not really seem concerned about protecting the value of the U.S. dollar at this point.  Not that they ever did, but it would be nice to see Fed officials paying at least some lip service to the dangers of inflation.

Instead, various Fed officials have been publicly making statements about the need for more quantitative easing for weeks.  Right now they seem desperate to put the American people back to work – even if it ends up crashing the value of the dollar.   

But now even the IMF seems supportive of a dollar devaluation.  On Thursday, the IMF actually said that the U.S. dollar is “overvalued” and that adjustments need to be made.

We’ll see what the Fed decides to do next week.  Most analysts believe that they will announce a quantitative easing program of some sort or another.

But what have we come to as a nation when those who control our economy believe that the best solution to our economic problems is to print another big pile of paper money and chuck it into the system?

We’ve got an absolutely gigantic economic mess on our hands, and none of our “leaders” seem to have any idea about how to fix it.

Meanwhile, millions of unemployed Americans are just going to become more and more frustrated – especially when it gets to the point when they aren’t receiving unemployment checks anymore.

5 Dangers To Global Crops That Could Dramatically Reduce The World Food Supply

The world food situation is starting to get very, very tight.  Unprecedented heat and wildfires this summer in Russia and horrific flooding in Pakistan and China have been some of the primary reasons for the rapidly rising food prices we are now seeing around the globe.  In places such as Australia and the African nation of Guinea-Bissau, the big problem for crops has been locusts.  In a world that already does not grow enough food for everyone (thanks to the greed of the elite), any disruption in food production can cause a major, major problem.  Tonight, thousands of people around the world will starve to death.  So what happens if things get even worse?  Many agricultural scientists are now warning that global food production is facing dangers that are absolutely unprecedented.  Crop diseases such as UG99 wheat rust and the “unintended effects” of genetic modification pose challenges that previous generations simply did not have to face.  The outbreak of a real, live global famine looks increasingly possible with each passing year.  So are you and your family prepared if a global famine does strike?

Already, there are huge warning signs on the horizon.  Just check out what agricultural commodities have been doing.  They have been absolutely soaring.      

A recent article on the Forbes website noted a few of the agricultural commodities that have skyrocketed during this year….

Here’s what’s happened to some key farm commodities so far in 2010…

•Corn: Up 63%
•Wheat: Up 84%
•Soybeans: Up 24%
•Sugar: Up 55%

Are you ready to pay 84 percent more for a loaf of bread?

You better get ready – these raw material prices will filter down to U.S. consumers eventually.

So what is going to happen if the world food situation gets even tighter?

Don’t think that it can’t happen.

The following are 5 potential dangers to global crops that could dramatically reduce the world food supply…. 

UG99 Wheat Rust

UG99 is commonly known as “wheat rust” or “stem rust” because it produces reddish-brown flakes on wheat stalks.  The International Maize and Wheat Improvement Center in Mexico believes that approximately 19 percent of the global wheat crop is in imminent danger of being infected with UG99.

Ultimately, it is estimated that about 80 percent of the wheat on the globe is capable of catching the disease.

There is no known cure.

This current strain of wheat rust was discovered in Uganda in 1999 and has spread into areas of Kenya, Sudan, Ethiopia, Yemen and Iran.  It is feared that this crippling disease will spread even farther into south Asia, devastating the fertile growing regions of Afghanistan, Pakistan, India and Bangladesh.

If that happens, you might as well kiss world food stability goodbye.

A recent article in the Financial Times contained an absolutely stunning quote from one prominent agricultural scientist….

“You can talk about crying wolf,” says Ronnie Coffman, director of the Durable Rust Resistance in Wheat project at the University of Cornell in the US, “but it is a wolf”, he asserts, driving across the corn fields of Kansas.

Later on in the same article, Coffman warns that this disease could cause a devastating famine in which literally millions of people would die….

“It can be absolutely devastating if environmental conditions are right,“ he says. “You can count the number of people who could die from this in the millions.”

Mad Soy Disease

Mad Soy disease is spreading at an alarming rate among soy farms down in Brazil.  Previously the disease had been confined to the north part of the country, but now it has been increasingly spreading south.  This disease retards the maturation of infected plants, and it has been causing yield losses of up to 40 percent.  The USDA says that “there are no known effective treatments.”

Verticillium Wilt

Verticillium Wilt is a fungus that prevents lettuce from absorbing water, causing it to quickly grow yellow and eventually wilt.  This dangerous fungus is very hard to get rid of totally because it can stay in the soil for up to seven years.

Today, Verticillium Wilt is spreading all over Monterey County, California.  Considering the fact that Monterey County produces more than 60 percent of the lettuce in the United States, that is very bad news.

Late Blight

In 2009, a disease known as “late blight” attacked potato and tomato plants in the United States with a ferocity never seen before.  According to a press release from Cornell University, late blight had “never occurred this early and this widespread in the U.S.” when it started showing up all over the place early last year.

Late blight begins as ugly brown spots on the stems of potato and tomato plants, and as the spots increase in size, white fungal growth develops until finally a soft rot completely collapses the stem.

This was the disease that was responsible for the Irish potato famine in the 1850s.  A major new outbreak could occur without warning.

Genetic Modification

While it may or may not technically be a disease (depending on how you look at it), genetic modification is having a very serious affect on crops around the globe.

For example, about 10 years ago Chinese farmers began to widely adopt Monsanto’s genetically modified Bt cotton.  Well, researchers have found that since that time, mirid bugs that are resistant to the Bt pesticide have experienced a complete and total population boom.

Today, six provinces in Northern China are experiencing what can only be described as a “mirid bug plague”.  Mirid bugs eat more than 200 different kinds of fruit, vegetables and grains.  Chinese farmers in the region are completely frustrated.

In the United States, a different problem is developing.  The complete and total reliance of so many U.S. farmers on Monsanto’s Roundup herbicide has resulted in several varieties of glyphosate-resistant “superweeds” developing in many areas of the United States. 

The most feared of these “superweeds”, Pigweed, can grow to be seven feet tall and it can literally wreck a combine.  Pigweed has been known to produce up to 10,000 seeds at a time, it is resistant to drought, and it has very diverse genetics.

Superweeds were first spotted in Georgia in 2004, and since then they have spread to South Carolina, North Carolina, Arkansas, Tennessee, Kentucky and Missouri. 

In some areas, superweeds have become so bad that literally tens of thousands of acres of U.S. farmland have actually been abandoned.

But that is what we get for trying to “play God”.

We think that we can just do whatever we want with nature and there will not be any consequences.

One of the most frightening things about genetic modification is that it actually reduces that amount of crop diversity in the world.

For example, if nearly all farmers start using the same “brand” of genetically modified plants that are all virtually identical, it sets up a situation where crop diseases and crop failures can cascade across the planet very easily.

Genetic variety is a very desirable thing, but today our scientists are just doing pretty much whatever they want without really considering the consequences. 

It has been said many times that genetic engineering is similar to “performing heart surgery with a shovel”.

The truth is that we just do not know enough about how our ecosystems work to be messing around with them so dramatically.

Perhaps even more frightening is that once these genetically engineered monstrosities have been released into our environment, it is absolutely impossible to recall them.  They essentially become a permanent part of our ecosystem.

But can we afford to make any serious mistakes at this point?

The truth is that we already live in a world that is not able to feed itself.

Tonight, approximately 1 billion people across the globe will go to bed hungry.  Every 3.6 seconds someone in the world starves to death, and three-fourths of those who starve to death are children under the age of five.

It is currently being projected that global demand for food will more than double over the next 50 years.

So what is going to happen if we start seeing widespread crop failures in the coming years?

The global food supply is not nearly as stable as most people believe.  At some point, it is going to be tested severely.

+ More