The U.S. Economy

The Decline Of Breadwinner Jobs Has Resulted In The Longest Bread Lines In American History

July 9, 2013July 9, 2013 by Michael

As the number of good jobs continues to decline, the number of Americans that cannot take care of themselves without government assistance continues to explode. On Friday, we learned that the U.S. economy added “195,000 jobs” last month. But when you look deeper at the numbers, another story emerges. Last month, the U.S. economy actually lost 240,000 full-time jobs. Overall, the U.S. economy has only added 130,000 full-time jobs in 2013, but it takes about 90,000 full-time jobs a month just to keep up with population growth. So we are losing quite a bit of ground as far as full-time jobs are concerned. Meanwhile, the U.S. economy has added more than 500,000 part-time jobs so far this year. Unfortunately, there are very, very few part-time and temp jobs that can be considered “breadwinner jobs”. Part-time jobs are great for teenagers, university students and elderly people that only want to work a limited number of hours, but what most Americans need are good paying full-time jobs with benefits that will allow them to take care of their families. Unfortunately, those jobs are continually becoming a smaller part of our economy.

As David Stockman has noted, the U.S. economy has only regained 200,000 of the 5.6 million breadwinner jobs that were lost during the last recession…

By September 2012, the S&P 500 was up by 115 percent from its recession lows and had recovered all of its losses from the peak of the second Greenspan bubble. By contrast, only 200,000 of the 5.6 million lost breadwinner jobs had been recovered by that same point in time. To be sure, the Fed’s Wall Street shills breathlessly reported the improved jobs “print” every month, picking and choosing starting and ending points and using continuously revised and seasonally maladjusted data to support that illusion. Yet the fundamentals with respect to breadwinner jobs could not be obfuscated.

This is a big problem. As I wrote about the other day, the quality of jobs in America is falling very fast. Only 47 percent of all adults in the United States have a full-time job at this point, and 53 percent of all American workers make less than $30,000 a year.

Meanwhile, the number of part-time jobs has hit an all-time record high, and the number of temp jobs is absolutely exploding.

Incredibly, the number of temp jobs has increased by more than 50 percent since the end of the recession. Approximately 10 percent of the jobs lost during the last recession were temp jobs, but close to 20 percent of the jobs gained since then have been temp jobs.

We are witnessing a fundamental shift in our economy. Full-time jobs are on the decline. Part-time and temp jobs are on the rise.

In fact, the second largest employer in the United States is now a temp agency. Kelly Services has become the second largest employer in the country after Wal-Mart.

But it is really hard to pay the bills stocking shelves at Wal-Mart or working temp jobs for Kelly Services.

Unfortunately, these days millions of American workers find themselves having to take whatever they can find. We live during a period of chronic unemployment. In fact, according to John Williams of shadowstats.com, unemployment in the United States is now higher than it was at any point during the last recession after you factor in discouraged workers and workers that have taken part-time jobs for economic reasons.

So why don’t more Americans go out and start businesses and create their own jobs?

Unfortunately, thanks to the federal government, state governments and local governments, the environment for small businesses in America today is incredibly toxic. In fact, the percentage of self-employed workers in this country is at an all-time record low.

As a result of everything that I have discussed above, more Americans than ever find that they cannot take care of themselves without government assistance.

I have often written about the fact that the number of Americans on food stamps has skyrocketed in recent years. In the year 2000, there were only 17 million Americans on food stamps. Today, there are more than 47 million Americans on food stamps.

But the number of Americans that are dependent on our “modern day bread lines” is actually far higher than that.

According to a recent CNS News article, a total of 101 million Americans are enrolled in food assistance programs. The following are some of the staggering numbers for some of these programs…

The National School Lunch program provides 32 million students with low-cost or no-cost meals daily; 10.6 million participate in the School Breakfast Program; and 8.9 million receive benefits from the Woman, Infants and Children (WIC) program each month, the latter designed for low-income pregnant, breastfeeding, and postpartum women, as well as children younger than 5 years old.

In addition, 3.3 million children at day care centers receive snacks through the Child and Adult Care Food Program.

There’s also a Special Milk Program for schools and a Summer Food Service Program, through which 2.3 million children received aid in July 2011 during summer vacation.

At farmer’s markets, 864,000 seniors receive benefits to purchase food and 1.9 million women and children use coupons from the program.

Yes, there is some overlap in some of these programs. So the actual number of Americans receiving food assistance is going to be less than 101 million.

But clearly something has gone horribly wrong. Our economy is not producing enough good jobs, and more Americans than ever cannot take care of themselves as a result.

This is not normal. What we are witnessing is the slow-motion collapse of the middle class. The number of Americans that are dependent on the government for their daily bread is so large that it is difficult to comprehend. The following are a few statistics from my recent article entitled “21 Facts About Rising Government Dependence In America That Will Blow Your Mind“…

-Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, about one out of every 6.5 Americans is on food stamps.

-Today, the number of Americans on food stamps exceeds the entire population of the nation of Spain.

-According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”

You can read the rest of that article right here.

So what is the solution?

Well, we need a lot more full-time “breadwinner jobs” that will enable men and women to be able to take care of their families.

Unfortunately, we continue to ship millions of good jobs overseas, and our politicians continue to pursue policies which are making the business environment in this country very toxic.

There is not going to be any easy way to fix all of this. We should have seen a nice bounce in the employment numbers during this so-called “recovery”, but that did not happen. And now the next wave of the economic collapse is rapidly approaching, and the employment crisis in this country is going to become a lot more painful.

Economic Bizarro World: Persistently High Unemployment And Skyrocketing Bond Yields Are Good?

July 5, 2013 by Michael

The mainstream media is heralding today’s “fantastic” employment numbers as evidence that the U.S. economy is steadily recovering. But is that really true? The number of jobs created in June was just a little bit more than what is required to keep up with population growth, and the official unemployment rate remained at 7.6 percent. And if you look deeper in the numbers, they don’t look very good at all. The percentage of low paying part-time jobs in the economy continues to rise, the number of full-time jobs actually decreased and the U-6 unemployment number jumped from 13.8% in May to 14.3% in June. That is a stunning increase. And if the labor participation rate in this country was at the level it was at prior to the last recession, the official unemployment rate would be sitting at 11.1%. But according to the mainstream media, all of this is wonderful news. It is like we are in some sort of economic bizarro world where bad is good and down is up.

When the jobs numbers were released on Friday, Business Insider breathlessly declared that it “was jobs day in America, and America crushed expectations.”

USA Today ran an article on the jobs numbers with the following headline: “First Take: As job gains grow, optimism rises“.

But should we really be celebrating?

Posted below is a chart that shows the percentage of working age Americans with a job since the beginning of the year 2000. This chart does include the jobs numbers that were released on Friday…

Can you see a “recovery” in there somewhere?

Am I missing something?

Let me look again. This time I will squint really hard.

Nope – I still can’t see a recovery.

For three and a half years we have been stuck in a range between 58 percent and 59 percent. We are way, way below where we were before the recession.

So can we please not even begin to use the word “recovery” until we at least get above the 59 percent level?

And most of the jobs that are being created are of very poor quality. As I mentioned above, the figures show that the number of full-time jobs actually decreased last month. And as Zero Hedge pointed out, manufacturing employment has actually declined for four months in a row…

Even as the manufacturing jobs continue to collapse, posting their fourth consecutive monthly drop in June to 11.964 million jobs, minimum wage waiters and bartenders have never been happier. In June Restaurant and Bar employees just hit a new all time high of 10,339,800 workers, increasing by a whopping 51,700 in one month.

Things are pretty good in America right now if you want to flip burgers or wait tables. But if you want a good job that you can support a family with, things are getting even worse.

Meanwhile, bond yields soaring into the stratosphere.

The yield on 10 year U.S. Treasuries absolutely exploded today. It opened at 2.50% and closed at 2.71%. When I saw what had happened I could hardly believe it.

If bond yields continue to climb like this, it is going to cause some massive problems in the financial markets. The following is from an article by John Rubino…

A few things to look for: recalculations of the deficit in light of spiking interest costs, comparisons of US and Japanese yields and speculation about what this means for Japanese rates — followed by dire analyses of Japan’s future borrowing costs — and last but not least, a growing concern for the hundreds of trillions of dollars of interest rate derivatives that now have one counterparty deeply in the red.

Most Americans don’t think too much about bond yields, but if they keep spiking it is going to dramatically affect every man, woman and child in the entire country.

Yesterday, I described some of the consequences that rapidly rising bond yields would have…

And if interest rates on U.S. Treasury bonds start to rise to rational levels, the U.S. government is going to have to pay more to borrow money, state and local governments are going to have to pay more to borrow money, junk bonds will crash, the market for home mortgages will shrivel up and economic activity in this country will slow down substantially.

Plus, as I am fond of reminding everyone, there is a 441 trillion dollar interest rate derivatives time bomb sitting out there that rapidly rising interest rates could set off.

Never before have we had anything like the gigantic derivatives bubble that is hanging over global financial markets like a sword of Damocles.

As interest rates continue to go up, the derivatives bubble could burst at any time. When it does, we are going to see financial carnage unlike anything we have ever seen before.

2008 was just the warm up act. What is coming next is going to be the main event.

But in the economic bizarro world that we are living in, the mainstream media insists that skyrocketing interest rates are nothing to worry about.

Today, USA Today ran a headline that declared the following: “Investors: Don’t panic over bond yield spike“.

And Yahoo actually ran a story entitled “Why higher U.S. yields should cheer investors“. Needless to say, the arguments in that story are not very convincing.

And in that story they even admit that record amounts of money were being pulled out of bond funds in June…

Capital is already flowing out of low-yielding bonds. PIMCO Total Return fund, the world’s largest bond fund, suffered record outflows of $9.6 billion in June, in a second straight month of withdrawals.

Mutual and exchange-traded bond funds lost a record $79.8 billion in June, according to TrimTabs Investment Research.

The rush for the exits in the bond market is threatening to become an avalanche.

I hope that this is not the beginning of a financial panic. I hope that we have more time before the next major wave of the economic collapse strikes.

But I certainly cannot guarantee that things will remain stable. Once fear starts to sweep through financial markets, things can change very, very quickly.

36 Hard Questions About The U.S. Economy That The Mainstream Media Should Be Asking

June 30, 2013 by Michael

If the economy is improving, then why aren’t things getting better for most average Americans? They tell us that the unemployment rate is going down, but the percentage of Americans that are actually working is exactly the same it was three years ago. They tell us that American families are in better financial shape now, but real disposable income is falling rapidly. They tell us that inflation is low, but every time we go shopping at the grocery store the prices just seem to keep going up. They tell us that the economic crisis is over, and yet poverty and government dependence continue to explode to unprecedented heights. There seems to be a disconnect between what the government and the media are telling us and what is actually true. With each passing day the debt of the federal government grows larger, the financial world become even more unstable and more American families fall out of the middle class. The same long-term economic trends that have been eating away at our economy like cancer for decades continue to ruthlessly attack the foundations of our economic system. We are rapidly speeding toward an economic cataclysm, and yet the government and most of the media make it sound like happy days are here again. The American people deserve better than this. The American people deserve the truth. The following are 36 hard questions about the U.S. economy that the mainstream media should be asking…

#1 If the percentage of working age Americans that have a job is exactly the same as it was three years ago, then why is the government telling us that the “unemployment rate” has gone down significantly during that time?

#2 Why are some U.S. companies allowed to exploit disabled workers by paying them as little as 22 cents an hour?

#3 Why are some private prisons allowed to pay their prisoners just a dollar a day to do jobs that other Americans could be doing?

#4 Why is real disposable income in the United States falling at the fastest rate that we have seen since 2008?

#5 Why do 53 percent of all American workers make less than $30,000 a year?

#6 Why are wages as a percentage of GDP at an all-time low?

#7 Why are 76 percent of all Americans living paycheck to paycheck?

#8 Why are so many large corporations issuing negative earnings guidance for this quarter? Does this indicate that the economy is about to experience a significant downturn?

#9 Why is job growth at small businesses at about half the level it was at when the year started?

#10 Why are central banks selling off record amounts of U.S. debt right now?

#11 Why did U.S. mortgage bonds just suffer their biggest quarterly decline in nearly 20 years?

#12 Why did we just witness the largest weekly increase in mortgage rates in 26 years?

#13 Why has the number of mortgage applications fallen by 29 percent over the last eight weeks?

#14 Why has the number of mortgage applications fallen to the lowest level in 19 months?

#15 If the U.S. economy is recovering, why is the mortgage delinquency rate in the United States still nearly 10 percent?

#16 Why did the student loan delinquency rate in the United States just hit a brand new all-time high?

#17 Why is the sale of hundreds of millions of dollars of municipal bonds being postponed?

#18 What are the central banks of the world going to do when the 441 trillion dollar interest rate derivatives bubble starts to burst?

#19 Why is Barack Obama secretly negotiating a new international free trade agreement that will impose very strict Internet copyright rules on all of us, ban all “Buy American” laws, give Wall Street banks much more freedom to trade risky derivatives and force even more domestic manufacturing offshore?

#20 Why don’t our politicians seem to care that the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975?

#21 Why doesn’t the mainstream media talk about how rapidly the U.S. economy is declining relative to the rest of the planet? According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001. That number dropped to 21.6 percent in 2011.

#22 Why is the percentage of self-employed Americans at a record low?

#23 What are we going to do if dust bowl conditions continue to return to the western half of the United States? If the drought continues to get even worse, what will that do to our agriculture?

#24 Why is the IRS spending thousands of taxpayer dollars on kazoos, stove top hats, bathtub toy boats and plush animals?

#25 Why did the NIH spend $253,800 “to study ways to educate Boston’s male prostitutes on safe-sex practices”?

#26 Why do some of the largest charities in America spend less than 5 percent of the money that they bring in on actual charitable work?

#27 Now that EU finance ministers have approved a plan that will allow Cyprus-style wealth confiscation as part of all future bank bailouts in Europe, is it only a matter of time before we see something similar in the United States?

#28 Why does approximately one out of every three children in the United States live in a home without a father?

#29 Why are more than a million public school students in the United States homeless?

#30 Why are so many cities all over the United States passing laws that make it illegal to feed the homeless?

#31 Why is government dependence in the U.S. at an all-time high if the economy is getting better? Back in 1960, the ratio of social welfare benefits to salaries and wages was approximately 10 percent. In the year 2000, the ratio of social welfare benefits to salaries and wages was approximately 21 percent. Today, the ratio of social welfare benefits to salaries and wages is approximately 35 percent.

#32 Why does the number of Americans on food stamps exceed the entire population of the nation of Spain?

#33 The number of Americans on food stamps has grown from 32 million to 47 million while Barack Obama has been occupying the White House. So why is Obama paying recruiters to go out and get even more Americans to join the program?

#34 Today, there are 56 million Americans collecting Social Security benefits. In 2035, there will be 91 million Americans collecting Social Security benefits. Where in the world will we get the money for that?

#35 Why has the value of the U.S. dollar fallen by over 95 percent since the Federal Reserve was created back in 1913?

#36 Why has the size of the U.S. national debt gotten more than 5000 times larger since the Federal Reserve was created back in 1913?

The Financial Markets Freak Out When The Fed Hints That It May Slow Down The Injections

June 19, 2013 by Michael

U.S. financial markets are exhibiting the classic behavior patterns of an addict. Just a hint that the Fed may start slowing down the flow of the “juice” was all that it took to cause the financial markets to throw an epic temper tantrum on Wednesday. In fact, one CNN article stated that the markets “freaked out” when Federal Reserve Chairman Ben Bernanke suggested that the Fed would eventually start tapering the bond buying program if the economy improves. And please note that Bernanke did not announce that the money printing would actually slow down any time soon. He just said that it may be “appropriate to moderate the pace of purchases later this year” if the economy is looking good. For now, the Fed is going to continue wildly printing money and injecting it into the financial markets. So nothing has actually changed yet. But just the suggestion that this round of quantitative easing would eventually end if the economy improves was enough to severely rattle Wall Street on Wednesday. U.S. financial markets have become completely and totally addicted to easy money, and nobody is quite sure what is going to happen when the Fed takes the “smack” away. When that day comes, will the largest bond bubble in the history of the world burst? Will interest rates rise dramatically? Will it throw the U.S. economy into another deep recession?

Judging by what happened on Wednesday, the end of Fed bond buying is not going to go well. Just check out the carnage that we witnessed…

-The Dow dropped by 206 points on Wednesday.

-The yield on 10 year U.S. Treasuries shot up substantially, and it is now the highest that it has been since March 2012.

-On Wednesday we witnessed the largest percentage rise in the yield on 5 year U.S. Treasury bonds ever. It is now the highest that it has been in nearly two years.

-It was announced that mortgage rates are the highest that they have been in more than a year.

-We also learned that the MBS mortgage refinance applications index has fallen by 38 percent over the past six weeks.

If the markets react like this when the Fed doesn’t even do anything, what are they going to do when the Fed actually starts cutting back the monetary injections?

Posted below is an excerpt from the statement that the Fed released on Wednesday. Please note that the Fed is saying that the current quantitative easing program is going to continue at the same pace for right now…

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

So why doesn’t the Federal Reserve just stop these emergency measures right now?

After all, we are supposed to be in the midst of an “economic recovery”, right?

What is Bernanke afraid of?

That is a question that Rick Santelli of CNBC asked on Wednesday. If you have not seen his epic rant yet, you should definitely check it out…

On days like this, it is easy to see who has the most influence over the U.S. economy. The financial world literally hangs on every word that comes out of the mouth of Federal Reserve Chairman Ben Bernanke. The same cannot be said about Barack Obama or anyone else.

The central planners over at the Federal Reserve are at the very heart of what is wrong with our economy and our financial system. If you doubt this, please see this article: “11 Reasons Why The Federal Reserve Should Be Abolished“. Bernanke knows that the actions that the Fed has taken in recent years have grossly distorted our financial system, and he is concerned about what is going to happen when the Fed starts removing those emergency measures.

Unfortunately, we can’t send the U.S. financial system off to rehab at a clinic somewhere. The entire world is going to watch as our financial markets go through withdrawal.

The Fed has purposely inflated a massive financial bubble, and now it is trying to figure out what to do about it. Can the Fed fix this mess without it totally blowing up?

Unfortunately, most severe addictions never end well. In a recent article, Charles Hugh Smith described the predicament that the Fed is currently facing quite eloquently…

One of the enduring analogies of the Federal Reserve’s quantitative easing (QE) program is that the stock market is now addicted to this constant injection of free money. The aptness of this analogy has never been more apparent than now, as the market plummets on the mere rumor that the Fed will cut back its monthly injection of financial smack. (The analogy typically refers to crack cocaine, due to the state of delusional euphoria QE induces in the stock market. But the zombified state of the heroin addict is arguably the more accurate analogy of the U.S. stock market.)

You know the key self-delusion of all addiction: “I can stop any time I want.” This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses.

But Ben, the pusher of QE money, knows his addict–the stock market–will die if the smack is cut back too abruptly. Like all pushers, Ben has his own delusion: that he can actually control the addiction he has nurtured.

You’re dreaming, Ben–your pushing QE has backed you into a corner. The addict (the stock market) is now so dependent and fragile that the slightest decrease in QE smack will send it to the emergency room, and quite possibly the morgue.

We are rapidly approaching a turning point. We have a massively inflated stock market bubble, a massively inflated bond bubble, and a financial system that is absolutely addicted to easy money.

The Fed is desperately hoping that it can find a way to engineer some sort of a soft landing.

The Fed is desperately hoping to avoid a repeat of the financial crisis of 2008.

Federal Reserve Chairman Ben Bernanke insists that he knows how to handle things this time.

Do you believe him?

12 Clear Signals That The U.S. Economy Is About To Really Slow Down

June 5, 2013 by Michael

A lot of things that have not happened since the last recession are starting to happen again. As you read the list below, you will notice that the year “2009” comes up again and again. There is a reason for that. Many of the same patterns that we witnessed during the last major economic downturn are starting to repeat themselves. In fact, many of the things that are happening right now have not happened in quite a few years. For example, manufacturing activity in the U.S. has contracted for the first time in four years. The inventory to sales ratio is the highest that it has been in four years. Average hourly compensation just experienced the largest decline that we have seen in four years. We also just witnessed the largest decline in the number of mortgage applications that we have seen in four years. After everything that Barack Obama, the U.S. Congress and the Federal Reserve have tried to do, there has been no real economic recovery and now the U.S. economy is suddenly behaving as if it is 2009 all over again. A whole host of recent surveys indicate that the American people are starting to feel a bit better about the economy, but the underlying economic numbers tell an entirely different story. The following are 12 clear signals that the U.S. economy is about to really slow down…

#1 The average interest rate on a 30 year mortgage has risen above 4 percent for the first time in more than a year.

#2 The decline in the number of mortgage applications last week was the largest drop that we have seen since June 2009.

#3 Mark Hanson is reporting that “mass layoffs” have occurred at three large mortgage institutions…

This morning I was made aware that three large private mortgage bankers I follow closely for trends in mortgage finance ALL had mass layoffs last Friday and yesterday to the tune of 25% to 50% of their operations staff (intake, processing, underwriting, document drawing, funding, post-closing).

This obviously means that my reports of refi apps being down 65% to 90% in the past 3 weeks are far more accurate than the lagging MBA index, which is likely on its’ way to print multi-year lows in the next month.

#4 It was just announced that average hourly compensation in the United States experienced its largest drop since 2009 during the first quarter of 2013.

#5 As I wrote about the other day, the Institute for Supply Management manufacturing index declined to 49.0 in May. Any reading below 50 indicates contraction. That was the first contraction in manufacturing activity in the U.S. that we have seen since 2009.

#6 The inventory to sales ratio has hit a level not seen since 2009. That means that there is a lot of inventory sitting out there that people are not buying.

#7 According to the Commerce Department, the demand for computers dropped by a stunning 9 percent during the month of April.

#8 As I noted in a previous article, corporate revenues are falling at Wal-Mart, Proctor and Gamble, Starbucks, AT&T, Safeway, American Express and IBM.

#9 Job growth at small businesses is now at about half the level it was at the beginning of the year.

#10 The stock market is starting to understand that all of these numbers indicate that the U.S. economy is really starting to slow down. The Dow was down 216.95 points on Wednesday, and it dropped below 15,000 for the first time since May 6th.

#11 The S&P 500 has now fallen more than 4 percent since May 22nd. Is this the beginning of a market “correction”, or is this something much bigger than that?

#12 Japanese stocks are now down about 17 percent from the peak of May 22nd. Japan has the third largest economy on the planet and it is one of the most important trading partners for the United States. A major financial crisis in Japan would have very serious implications for the U.S. economy.

If we were going to have an “economic recovery”, it should have happened in 2010, 2011 and 2012. Unfortunately, as a recent Los Angeles Times article detailed, an economic recovery never materialized…

Real GDP growth — the value of goods and services produced after adjusting for inflation — is 15.4% below the 3% growth trend of past recoveries, wrote Edward Leamer, director of the UCLA Anderson Forecast. More robust growth will be necessary to bring this recovery in line with previous ones.

“It’s not a recovery,” he wrote. “It’s not even normal growth. It’s bad.”

Now we are rapidly approaching another major economic downturn.

But poverty in America has continued to experience explosive growth since the end of the last recession and dependence on the federal government is already at an all-time high.

How much worse can things get?

Sadly, they are going to get much, much worse.

What the U.S. economy is experiencing right now is not just a cyclical downturn. Rather, we are in the midst of a long-term economic decline that is the result of decades of very foolish decisions by our leaders.

It is imperative that we get the American people educated about what is happening. If people do not understand what is happening, they are not going to get prepared for the hard years that are coming.

If you have a family member or a friend that does not understand the long-term economic collapse that is unfolding all around us, please show them my article entitled “40 Statistics About The Fall Of The U.S. Economy That Are Almost Too Crazy To Believe“. It goes a good job of pointing out many of the reasons why we are heading for complete and total economic disaster.

And the point is not to fill people with fear. Rather, there is a lot of hope in understanding what is happening and in getting prepared. As we have seen over in Europe, those that get blindsided by economic problems often become totally consumed with despair. Suicide rates have soared in economically-troubled nations such as Greece, Spain and Italy.

And the same thing is going to happen in the United States too. In fact, the suicide rate in the United States has already been rising according to the New York Times…

From 1999 to 2010, the suicide rate among Americans ages 35 to 64 rose by nearly 30 percent, to 17.6 deaths per 100,000 people, up from 13.7.

In fact, today more Americans are killed by suicide than by car accidents.

Isn’t that crazy?

Unfortunately, this is only just the beginning. When the system fails, millions of Americans are going to be convinced that their lives are over. A lot of them are going to do some very stupid things. We want to try to prevent as much of that as possible.

Thanks to decades of incredibly foolish decisions by our leaders, an economic collapse is inevitable. This is especially true considering the fact that our leaders in Washington D.C. and elsewhere will not even consider many of the potential solutions which could help start turning our economic problems around.

So since there are no solutions on the horizon, we need to explain to people what is happening and help them to get as prepared as possible.

The years ahead are going to be very hard, but we have a choice as to how we will respond to the challenges in front of us.

We can face those challenges with fear, or we can face them with courage.

Choose wisely.

18 Signs That Massive Economic Problems Are Erupting All Over The Planet

June 2, 2013 by Michael

This is no time to be complacent. Massive economic problems are erupting all over the globe, but most people seem to believe that everything is going to be just fine. In fact, a whole bunch of recent polls and surveys show that the American people are starting to feel much better about how the U.S. economy is performing. Unfortunately, the false prosperity that we are currently enjoying is not going to last much longer. Just look at what is happening in Europe. The eurozone is now in the midst of the longest recession that it has ever experienced. Just look at what is happening over in Asia. Economic growth in India is the lowest that it has been in a decade and the Japanese financial system is beginning to spin wildly out of control. One of the only places on the entire planet where serious economic problems have not already erupted is in the United States, and that is only because we have “kicked the can down the road” by recklessly printing money and by borrowing money at an unprecedented rate. Unfortunately, the “sugar high” produced by those foolish measures is starting to wear off. We are going to experience a massive amount of economic pain along with the rest of the world – it is just a matter of time.

But for the moment, there are a lot of skeptics out there.

For the moment, there are a lot of people that are declaring that the problems of the past have been fixed and that we are heading for incredibly bright economic times ahead.

Unfortunately, those people appear to be purposely ignoring the economic horror that is breaking out all over the globe.

The following are 18 signs that massive economic problems are erupting all over the planet…

#1 The eurozone is now in the midst of its longest recession ever. Economic activity in the eurozone has declined for six quarters in a row.

#2 Italy’s economy has now been contracting for seven quarters in a row.

#3 Industrial production in Italy has fallen for 15 months in a row. It has now fallen to its lowest level in about 25 years.

#4 The number of people that are considered to be “seriously deprived” in Italy has doubled over the past two years.

#5 Consumer confidence in France has just hit a new all-time low.

#6 The number of unemployed workers seeking a job in France has hit a brand new all-time record high. Many unemployed workers in France are utterly frustrated at this point…

“I’ve sent CVs everywhere, I come to the unemployment agency every day, for 3 or 4 hours to look for work as a truck driver and there’s never anything,” said 42-year old Djamel Sami, who has been unemployed for a year, leaving a job agency in Paris.

#7 Unemployment in the eurozone as a whole has just hit a brand new all-time record high of 12.2 percent.

#8 Youth unemployment continues to soar to unprecedented heights in Europe. The following is from an article that was recently posted on the website of the Guardian that detailed how bad things are getting in some of the worst countries…

In Greece, 62.5% of young people are out of work, in Spain it’s 56.4%, then Portugal with 42.5%, and then Italy with 40.5%.

#9 Youth unemployment is being partially blamed for the worst rioting that Sweden has seen in many years. The following is how the Daily Mail described the riots…

Sweden is reeling after a third night of rioting in largely run-down immigrant areas of the capital Stockholm.

In the last 48 hours violence has spread to at least ten suburbs with mobs of youths torching hundreds of cars and clashing with police.

It is Sweden’s worst disorder in years and has shocked the country and provoked a debate on how Sweden is coping with youth unemployment and an influx of immigrants.

#10 An astounding 10 percent of all banking deposits were pulled out of banks in Cyprus during the month of April alone.

#11 Economic growth in India is the slowest that it has been in an entire decade.

#12 Suddenly Australia is experiencing some tremendous economic challenges. The following quotes are from a recent Zero Hedge article…

-“We’re seeing a much sharper contraction in the Australian economy than we’d anticipated four or five months ago”. Coffey MD, John Douglas. The engineering group has seen its shares, which traded above $4 in 2007, hit 10c last week.

-“By 10am, the Fitness First gym in the city is packed full of brokers who’ve had a gutful of sitting at their desk doing nothing – salary cuts are starting and next it will be jobs” Perth broker

-“Oh mate, the funding market is dead. You are now seeing a few deeply discounted rights issues for those that are reaching desperate levels ….. liquidity has completely disappeared” Perth broker

#13 The financial system in Japan is beginning to spin wildly out of control. The Japanese stock market has now declined about 15 percent from the peak, and many believe that the yen will continue to get weaker and that interest rates in Japan will start to rise significantly.

#14 Global cash flow is declining at a rate not seen since the last recession. This indicates that we could be headed for a global credit crunch.

#15 Real wages continue to decline in the United States. Even though we are being told that the U.S. is experiencing an “economy recovery”, real weekly earnings have declined from $297.79 in 2010 to $295.49 in 2011 to $294.83 in 2012. (The preceding calculation is based on 1982-1984 dollars)

#16 Wall Street is buzzing about the fact that “the Hindenburg Omen” appeared at the end of last week. So exactly what is “the Hindenburg Omen”? The following are the criteria that are used to determine whether it has appeared or not…

1. The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.

2. The smaller of these numbers is greater than or equal to 69 (68.772 is 2.2% of 3126). This is not a rule but more like a checksum. This condition is a function of the 2.2% of the total issues.

3. That the NYSE 10 Week moving average is rising.

4. That the McClellan Oscillator ( a market breadth indicator used to evaluate the rate of money entering or leaving the market and interpretively indicate overbought or oversold conditions of the market)is negative on that same day.

5. That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs).

When the Hindenburg Omen makes an appearance, it supposedly means that the U.S. stock market is likely to experience a serious decline within the next 40 days.

#17 As I wrote about the other day, the SentimenTrader Smart/Dumb Money Index is now the lowest that it has been in more than two years. That means that lots of “smart money” has been getting out of the market and lots of “dumb money” has been pouring in.

#18 Margin debt on the New York Stock Exchange has set a new all-time high. The following is from a recent Market Oracle article…

Margin debt—that’s the amount of money borrowed to purchase stocks—on the New York Stock Exchange (NYSE) reached its all-time high in April. Margin debt on the NYSE registered at $384.3 billion as the key stock indices hit new record-highs. (Source: New York Stock Exchange web site, last accessed May 29, 2013.) The highest margin debt ever reached prior to this was in July of 2007, when it stood just above $381.0 billion. At that time, just like today, the key stock indices were near their peaks and “buy now before it’s too late” was the prominent theme of the day

Whenever margin debt spikes like this, a stock market crash almost always follows. If you doubt this, just check out the chart in this article.

Wall Street has had a good couple of years, but it has been a “false prosperity” that has been pumped up by reckless money printing by the Federal Reserve. Just like all of the other stock market bubbles that we have seen in recent years, this one is going to burst too. And as Marc Faber recently pointed out, this bubble has been particularly beneficial to the wealthy…

The Fed has been flooding the system with money. The problem is the money doesn’t flow into the system evenly. It doesn’t increase economic activity and asset prices in concert. Instead, it creates dangerous excesses in countries and asset classes. Money-printing fueled the colossal stock-market bubble of 1999-2000, when the Nasdaq more than doubled, becoming disconnected from economic reality. It fueled the housing bubble, which burst in 2008, and the commodities bubble. Now money is flowing into the high-end asset market – things like stocks, bonds, art, wine, jewelry, and luxury real estate.

Money-printing boosts the economy of the people closest to the money flow. But it doesn’t help the worker in Detroit, or the vast majority of the middle class. It leads to a widening wealth gap. The majority loses, and the minority wins.

The fact that the U.S. stock market has set new all-time record high after new all-time record high in recent months means very little. At this point, the stock market has become completely divorced from economic reality. When this current bubble bursts, the adjustment is going to be very painful. Wall Street will likely whine and complain and ask for more bailouts, but they may find that authorities are not nearly as sympathetic this time.

Much of the rest of the world is already experiencing the next major wave of the economic collapse. Reckless money printing by the Fed and reckless borrowing and spending by the federal government may have delayed the inevitable in the United States for a little while, but those measures have also made our long-term problems even worse.

There was one piece of advice that Ben Bernanke included in his commencement speech to students at Princeton recently that I thought was particularly ironic…

“Don’t be afraid to let the drama play out.”

Will he take his own advice when the next great financial crisis strikes the United States?

That seems very unlikely.

Unfortunately, things are not going to be so easy to fix this next time.

What happened back in 2008 was just a preview.

What is coming next is going to absolutely shock the world.

40 Statistics About The Fall Of The U.S. Economy That Are Almost Too Crazy To Believe

May 26, 2013May 26, 2013 by Michael

If you know someone that actually believes that the U.S. economy is in good shape, just show them the statistics in this article. When you step back and look at the long-term trends, it is undeniable what is happening to us. We are in the midst of a horrifying economic decline that is the result of decades of very bad decisions. 30 years ago, the U.S. national debt was about one trillion dollars. Today, it is almost 17 trillion dollars. 40 years ago, the total amount of debt in the United States was about 2 trillion dollars. Today, it is more than 56 trillion dollars. At the same time that we have been running up all of this debt, our economic infrastructure and our ability to produce wealth has been absolutely gutted. Since 2001, the United States has lost more than 56,000 manufacturing facilities and millions of good jobs have been shipped overseas. Our share of global GDP declined from 31.8 percent in 2001 to 21.6 percent in 2011. The percentage of Americans that are self-employed is at a record low, and the percentage of Americans that are dependent on the government is at a record high. The U.S. economy is a complete and total mess, and it is time that we faced the truth.

The following are 40 statistics about the fall of the U.S. economy that are almost too crazy to believe…

#1 Back in 1980, the U.S. national debt was less than one trillion dollars. Today, it is rapidly approaching 17 trillion dollars…

#2 During Obama’s first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.

#3 The U.S. national debt is now more than 23 times larger than it was when Jimmy Carter became president.

#4 If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.

#5 The federal government is stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day.

#6 Back in 1970, the total amount of debt in the United States (government debt + business debt + consumer debt, etc.) was less than 2 trillion dollars. Today it is over 56 trillion dollars…

#7 According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001. That number dropped to 21.6 percent in 2011.

#8 The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.

#9 According to The Economist, the United States was the best place in the world to be born into back in 1988. Today, the United States is only tied for 16th place.

#10 Incredibly, more than 56,000 manufacturing facilities in the United States have been permanently shut down since 2001.

#11 There are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then.

#12 According to the New York Times, there are now approximately 70,000 abandoned buildings in Detroit.

#13 When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars. By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.

#14 Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little “m”) for the entire year. In 2012, our trade deficit with China was 315 billion dollars. That was the largest trade deficit that one nation has had with another nation in the history of the world.

#15 Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.

#16 According to the Economic Policy Institute, the United States is losing half a million jobs to China every single year.

#17 Back in 1950, more than 80 percent of all men in the United States had jobs. Today, less than 65 percent of all men in the United States have jobs.

#18 At this point, an astounding 53 percent of all American workers make less than $30,000 a year.

#19 Small business is rapidly dying in America. At this point, only about 7 percent of all non-farm workers in the United States are self-employed. That is an all-time record low.

#20 Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned. By 2007, that figure had soared to $1.48.

#21 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

#22 According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.

#23 The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

#24 According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income”.

#25 According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government. Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.

#26 Overall, the federal government runs nearly 80 different “means-tested welfare programs”, and at this point more than 100 million Americans are enrolled in at least one of them.

#27 Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

#28 As I wrote recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.

#29 At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for every single household in the United States.

#30 Right now, there are approximately 56 million Americans collecting Social Security benefits. By 2035, that number is projected to soar to an astounding 91 million.

#31 Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.

#32 Today, the number of Americans on Social Security Disability now exceeds the entire population of Greece, and the number of Americans on food stamps now exceeds the entire population of Spain.

#33 According to a report recently issued by the Pew Research Center, on average Americans over the age of 65 have 47 times as much wealth as Americans under the age of 35.

#34 U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

#35 As I mentioned recently, the homeownership rate in America is now at its lowest level in nearly 18 years.

#36 There are now 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.

#37 45 percent of all children are living in poverty in Miami, more than 50 percent of all children are living in poverty in Cleveland, and about 60 percent of all children are living in poverty in Detroit.

#38 Today, more than a million public school students in the United States are homeless. This is the first time that has ever happened in our history.

#39 When Barack Obama first entered the White House, about 32 million Americans were on food stamps. Now, more than 47 million Americans are on food stamps.

#40 According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”

America’s Bubble Economy Is Going To Become An Economic Black Hole

May 21, 2013 by Michael

What is going to happen when the greatest economic bubble in the history of the world pops? The mainstream media never talks about that. They are much too busy covering the latest dogfights in Washington and what Justin Bieber has been up to. And most Americans seem to think that if the Dow keeps setting new all-time highs that everything must be okay. Sadly, that is not the case at all. Right now, the U.S. economy is exhibiting all of the classic symptoms of a bubble economy. You can see this when you step back and take a longer-term view of things. Over the past decade, we have added more than 10 trillion dollars to the national debt. But most Americans have shown very little concern as the balance on our national credit card has soared from 6 trillion dollars to nearly 17 trillion dollars. Meanwhile, Wall Street has been transformed into the biggest casino on the planet, and much of the new money that the Federal Reserve has been recklessly printing up has gone into stocks. But the Dow does not keep setting new records because the underlying economic fundamentals are good. Rather, the reckless euphoria that we are seeing in the financial markets right now reminds me very much of 1929. Margin debt is absolutely soaring, and every time that happens a crash rapidly follows. But this time when a crash happens it could very well be unlike anything that we have ever seen before. The top 25 U.S. banks have more than 212 trillion dollars of exposure to derivatives combined, and when that house of cards comes crashing down there is no way that anyone will be able to prop it back up. After all, U.S. GDP for an entire year is only a bit more than 15 trillion dollars.

But most Americans are only focused on the short-term because the mainstream media is only focused on the short-term. Things are good this week and things were good last week, so there is nothing to worry about, right?

Unfortunately, economic reality is not going to change even if all of us try to ignore it. Those that are willing to take an honest look at what is coming down the road are very troubled. For example, Bill Gross of PIMCO says that his firm sees “bubbles everywhere”…

We see bubbles everywhere, and that is not to be dramatic and not to suggest they will pop immediately. I just suggested in the bond market with a bubble in treasuries and bubble in narrow credit spreads and high-yield prices, that perhaps there is a significant distortion there. Having said that, it suggests that as long as the FED and Bank of Japan and other Central Banks keep writing checks and do not withdraw, then the bubble can be supported as in blowing bubbles. They are blowing bubbles. When that stops there will be repercussions.

And unfortunately, it is not just the United States that has a bubble economy. In fact, the gigantic financial bubble over in Japan may burst before our own financial bubble does. The following is from a recent article by Graham Summers…

First and foremost, Japan is the second largest bond market in the world. If Japan’s sovereign bonds continue to fall, pushing rates higher, then there has been a tectonic shift in the global financial system. Remember the impact that Greece had on asset prices? Greece’s bond market is less than 3% of Japan’s in size.

For multiple decades, Japanese bonds have been considered “risk free.” As a result of this, investors have been willing to lend money to Japan at extremely low rates. This has allowed Japan’s economy, the second largest in the world, to putter along marginally.

So if Japanese bonds begin to implode, this means that:

1) The second largest bond market in the world is entering a bear market (along with commensurate liquidations and redemptions by institutional investors around the globe).

2) The second largest economy in the world will collapse (along with the impact on global exports).

Both of these are truly epic problems for the financial system.

And of course the entire global financial system is a giant bundle of debt, risk and leverage at this point. We have never seen anything like this in world history. When you step back and take a good, hard look at the numbers, they truly are staggering. The following statistics are from one of my previous articles entitled “Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers“…

–$70,000,000,000,000 – The approximate size of total world GDP.

–$190,000,000,000,000 – The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.

–$212,525,587,000,000 – According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.

–$600,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.

The financial meltdown that happened back in 2008 should have been a wake up call for the nations of the world. They should have corrected the mistakes that happened so that nothing like that would ever happen again. Unfortunately, nothing was fixed. Instead, our politicians and the central bankers became obsessed with reinflating the system. They piled up even more debt, recklessly printed tons of money and kicked the can down the road for a few years. In the process, they made our long-term problems even worse. The following is a recent quote from John Williams of shadowstats.com…

The economic and systemic solvency crises of the last eight years continue. There never was an actual recovery following the economic downturn that began in 2006 and collapsed into 2008 and 2009. What followed was a protracted period of business stagnation that began to turn down anew in second- and third-quarter 2012. The official recovery seen in GDP has been a statistical illusion generated by the use of understated inflation in calculating key economic series (see Public Comment on Inflation). Nonetheless, given the nature of official reporting, the renewed downturn likely will gain recognition as the second-dip in a double- or multiple-dip recession.

What continues to unfold in the systemic and economic crises is just an ongoing part of the 2008 turmoil. All the extraordinary actions and interventions bought a little time, but they did not resolve the various crises. That the crises continue can be seen in deteriorating economic activity and in the panicked actions by the Federal Reserve, where it proactively is monetizing U.S. Treasury debt at a pace suggestive of a Treasury that is unable to borrow otherwise.

And there are already lots of signs that the next economic downturn is rapidly approaching.

For example, corporate revenues are falling at Wal-Mart, Proctor and Gamble, Starbucks, AT&T, Safeway, American Express and IBM.

Would revenues at Wal-Mart be falling if the economy was getting better?

U.S. jobless claims hit a six week high last week. We aren’t in the danger zone yet, but once they hit 400,000 that will be a major red flag.

And even though we are still in the “good times” relatively speaking, the federal government is already talking about tightening welfare programs. In fact, there are proposals in Congress right now to make significant cuts to the food stamp program.

If food stamps and other welfare programs get cut, that is going to make a lot of people very, very angry. And that anger and frustration will get even worse when the next economic downturn strikes and millions of people start losing their jobs and their homes.

What we are witnessing right now is the calm before the storm. Let us hope that it lasts for as long as possible so that we can have more time to prepare.

Unfortunately, this bubble of false hope will not last forever. At some point it will end, and then the pain will begin.

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