48 Percent Of Americans Believe Another Great Depression Is Likely In The Next 12 Months – 19 Reasons Why They Are Not Completely Crazy
Do you believe that the U.S. economy is steamrolling toward a depression? If so, you are not alone. According to a recent CNN poll, 48 percent of Americans believe that “another Great Depression” is likely within the next 12 months. Americans have been waiting for almost three years for a “recovery” to materialize, but instead there are all kinds of signs that the economy is about to get worse yet again. Inflation is rising but wages are not. There are millions of Americans that would do just about anything to get a decent job. The “misery index” is the highest it has been in almost 30 years. All of the recent polls show that the American people are more pessimistic about the economy than at any other time in recent memory. World financial markets are incredibly unstable right now and many analysts are expecting a repeat of 2008 (or worse). Meanwhile, our state and local governments are drowning in debt, the federal government is drowning in debt and governments all over Europe are drowning in debt. No, it is not crazy for 48 percent of Americans to believe that we are about to go into another Great Depression.
Just think about that statistic for a moment. Nearly half of the country expects the economy to fall to pieces at some point over the next year.
So do I agree with them?
Yes, I certainly believe that an economic collapse is coming. But that doesn’t mean that it will necessarily happen within the next year. The United States is in the midst of a long-term economic decline, and the next big financial crisis could potentially happen in 2011 or 2012.
But it might not.
There are so many variables and it is so hard to predict with certainty the exact timing of how things will play out.
However, it is true that incredibly painful economic times are coming. Our long-term economic future looks unbelievably bleak.
So anyone that believes that we are headed for another depression is certainly not crazy. The following are 19 reasons why it is perfectly rational to be pessimistic about the U.S. economy right now….
#1 Today, 25 million Americans are either unemployed or underemployed. 6 million of those have been out of work for at least 6 months. The average duration of unemployment in the U.S. is now close to 40 weeks.
#2 The unofficial misery index, which is calculated by combining unemployment and inflation, is now at a 28 year high.
#3 Sadly, if unemployment and inflation were calculated the same way that they were back in the 1970s, the misery index would actually be much, much higher. According to John Williams of Shadow Government Statistics, the current “real” rate of inflation is approximately 11.2% instead of the 3.6% figure that the U.S. government wants us to believe.
#4 Greece is on the verge of complete and total financial collapse. The yield on two year Greek bonds is up to 28 percent. The European Central Bank and the German government have been fighting over what to do to solve the Greek crisis. The truth is that without a bailout the Greek government will default. If Greece defaults, it would be a huge nightmare for world financial markets.
#5 Neil MacKinnon, an analyst at VTB Capital, is warning that a Greek implosion could set off a 2008-style financial crisis….
“The risk of a ‘Lehman moment’ for the eurozone is increasing”
#6 Spain is also potentially a major problem. The Spanish economy is more than twice the size of the Greek, Irish and Portuguese economies combined. Over the past 12 months, the yield on 10 year Spanish bonds has been rising steadily, and many believe that Spain could be the tipping point that pushes the sovereign debt crisis in Europe over the edge.
#7 State and local governments all over the United States are cutting their budgets and are implementing brutal austerity measures. For example, one small town in Alabama has actually decided that they are simply going to stop paying pension benefits to their retirees. In other areas, teachers and police officers are being fired in massive numbers. UBS Investment Research is projecting that state and local governments in the U.S. will combine to slash a whopping 450,000 jobs by the end of next year.
#8 The middle class in the United States is being systematically ripped to shreds. The poorest 50% of all Americans collectively own just 2.5% of all the wealth in the United States at this point.
#9 It is never a good sign when even the big Wall Street banks start laying off workers. CNBC is reporting that Goldman Sachs, Morgan Stanley and many other big firms on Wall Street are planning some large staff reductions in the months ahead. That is a very bad sign for the economy.
#10 Things have gotten so bad that some mainstream media outlets are actually encouraging Americans to go out and start racking up credit card debt once again. For example, one recent USA Today article was actually entitled “More credit card debt might be good for the economy“. Of course the big banks are ready to suck the lifeblood out of anyone that does slip up on making their credit card payments. One major bank has announced that a single late payment could result in a penalty rate as high as 29.99%.
#11 According to the Bureau of Labor Statistics, the share of national income being taken home by American workers is at a post-war low and is rapidly declining.
#12 Reuters is reporting that many of Wall Street’s biggest banks plan to cut their use of U.S. Treasuries starting in August. China has already been dumping short-term U.S. debt. But if most of the big players abandon the market, who is going to buy up the massive amounts of debt that the U.S. government needs to issue?
#13 Dean Baker of the Center for Economic and Policy Research apparently believes that we are already in a depression….
“At some point, the pain of high unemployment may lead to some new thinking in Washington – but until that time, welcome to the second Great Depression”
#14 The U.S. banking system could plunge into disaster at any moment. The FDIC is backing up 7 trillion dollars in deposits with an insurance fund that barely has anything in it.
#15 It seems like almost everyone is talking about the next financial collapse. Renowned investor Jim Rogers recently said the following….
“I would expect to see some serious problems in the foreseeable future….By 2011, 2012, 2013, 2013, I don’t know when, we’re going to have an economic slowdown again.”
#16 Legendary hedge fund manager Mark Mobius is bracing for the worst. Just consider the following quote from Mobius that recently appeared in Forbes magazine….
There is definitely going to be another financial crisis around the corner,” says hedge fund legend Mark Mobius, “because we haven’t solved any of the things that caused the previous crisis.”
#17 Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period. It is clearly unsustainable for our debt to be growing so much faster than our economy is.
#18 Peter Yastrow, a market strategist for Yastrow Origer, recently told CNBC the following….
“Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything,” Yastrow said. “We’re on the verge of a great, great depression. The [Federal Reserve] knows it.”
#19 The American people are extremely pessimistic about the economy right now. According to one recent poll, 56 percent of Americans have lost sleep due to the economy and about three-quarters of Americans believe that the nation is on the wrong track.
The nation is in a very sour mood right now, and this is causing even many in the mainstream media to ask some very hard questions.
For example, Jack Cafferty recently asked the following question to viewers on CNN….
“What are the chances the U.S. economy could eventually trigger violence in our country?”
You can view the video of Cafferty asking this question right here or you can just watch it below….
Sadly, we are already starting to see violence erupt all over North America.
Yesterday I highlighted the horrifying violence that we saw in Vancouver this week.
In previous articles I have discussed the insanity that has been going on in major U.S. cities such as Chicago.
Now even the mainstream media is being forced to report on the surge in violence.
A recent USA Today article described some of the most recent mob robberies that have been happening in Chicago….
A Chicago Tribune report tells of a 68-year-old man from Washington State who was set upon while he was smoking a cigar on a bench when youths surrounded him, attacked him and reportedly stole a phone and iPad. The report says a 42-year-old Japanese tourist also was beaten and robbed on a bicycle path by the lakefront. The paper says seven were arrested, but that the group participating in the felonies was estimated at 15 to 20 people strong. One 20something suburbanite told Chicago’s WGN TV that he was hit so hard in the head with a baseball that it knocked his motorcycle helmet off. he managed to fight his way out of trouble and hail police, he said.
When people don’t have hope, they get desperate.
There are millions of other Americans that are suffering through this economy quietly.
There are so many people out there that have worked hard and have followed all the rules and yet now find themselves struggling just to survive.
For example, a reader named Carolyn recently left a comment in which she shared her story with my readers….
My husband lost his long-term job in 2009 due to budget cuts. Don’t worry, I said. I’m still working, and we have a year of our salary in savings. You’re smart, you’re educated, you’re a hard worker. You’ll find a job soon.
Two months later, my long-term job was sent to India.
I still wasn’t worried. I’m smart, I’m educated, and I’m a smart worker.
A year and a half later, I haven’t found new career yet. I’m 50. No one is going to hire me. I am working – at a Home Depot. At a 79% pay cut from my prior position. But it doesn’t pay for anything. My husband found a new position in his field – at a 62% pay cut from his prior position.
We lived off unemployment and our savings, until both ran out. We put our house and investment property on the market the day after I lost my job.
We haven’t had one offer.
We just had our Chapter 7 bankruptcy discharged. Our foreclosure is still pending. No word yet when that will be done.
To add insult to injury, we owe Federal income taxes on the penalties we used to make withdrawals from our 401(k)’s to live off. My husband took a job in another state, and we were SHOCKED to learn that we owed NEW YORK STATE taxes on the income he earned in Mississippi – to New York state! Apparently there is some loophole that if you are a property owner in New York, but earn income in another state, you have to pay New York state income taxes on out of state earned income.
We’ve been told once our foreclosure is finalized, we may owe taxes on that as well.
What happened to our country?
It is so sad to see what is happening to America.
Things are so hard out there for so many millions of American families right now.
But the truth is that things are much better at the moment than they will be in a few years.
So what is America going to look like when there is no doubt that the economy has collapsed and people have no hope at all?
The Financial Collapse Of Greece: The Canary In The Coal Mine For The Global Economy?
The rest of the world needs to sit up and take notice of what is going on in Greece right now. This is what can happen when you allow government debt to spiral out of control. Once it becomes clear that you can’t pay your debts, a financial collapse can happen very suddenly and you start losing your sovereignty to those that you must turn to for financial help. So is the financial collapse of Greece the “canary in the coal mine” for the global economy? EU finance ministers have given the Greek government two weeks from Monday to approve another round of brutal austerity measures. If the austerity measures are not approved, Greece will not receive the next bailout installment of 12 billion euros. If that happens, the whole globe better buckle up because it is going to get crazy.
July 3rd is the deadline. Basically the EU has put a gun to the head of the Greek government. Without this bailout money, Greece will default and economic hell will break loose all across the country.
It is important to keep in mind that this is just the first Greek bailout that we are talking about. Last year, the EU and the IMF agreed to provide the Greek government with a 110 billion euro bailout. The current 12 billion euro installment is part of that package.
Sadly, it has become apparent that the first bailout is not going to be nearly enough for Greece. A second bailout, which will be the same size or even larger, is already being discussed. This is going to put the Greek people even more under the heel of the money powers in Europe.
Keep in mind that all of these “bailouts” are just more loans. There is no way that the Greeks are ever going to be able to repay all of this money.
But this is what happens when a nation lets debt get out of control. For years and years it can seem like all of that debt does not have any consequences, but then the day of reckoning comes and it is a complete and total nightmare.
In order to get the next installment of 12 billion euros, European finance ministers are insisting that the Greek Parliament approves a package of austerity measures that will be worth approximately 28 billion euros.
At this point, it is uncertain whether those austerity measures will pass.
However, the pressure on the Greek government to get them pushed through is immense.
These austerity measures include tax increases, budget cuts and a “large-scale privatization program”.
This is often what happens to third world nations that cannot pay their debts. Organizations such as the IMF or the World Bank will come in and insist that they tax their people more, cut back on their spending and sell some of their public assets to big corporations.
As we can see from the wild protests that have been taking place in Greece, a significant percentage of the Greek population is not happy with all of these austerity measures.
Unfortunately, the EU and the IMF are able to put a lot more pressure on the Greek government than the Greek people are.
Greek Prime Minister George Papandreou recently gave the following warning to the Greek people about what could happen if this debt crisis ends badly….
The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks, and the country’s credibility.
Not only would a Greek default be a total disaster for Greece, it would potentially be a total disaster for the entire global financial system.
Sung Won Sohn, an economics professor at California State University, recently made the following statement about the seriousness of the debt crisis in Europe….
“The European debt crisis has the potential to have as big an impact as the subprime mortgage crisis did in the United States”
So will these bailouts solve the problem?
No, giving Greece more loans is only going to kick the can down the road for a little while longer.
The truth is that Greece is bankrupt. Unless huge amounts of Greek debt are forgiven, Greece is going to default sooner or later.
When confidence in the finances of a nation is lost, borrowing costs can go up very quickly. Today, the yield on two year Greek bonds is up to 28.6%.
Anyone that has ever been late on paying their credit cards knows how painful an interest rate like that can be.
So why doesn’t Greece just slash government spending to the bone and get their financial house in order?
Well, it is not that easy. Harsh austerity measures have already been implemented. As a result, unemployment is rampant and there is rioting in the streets.
The truth is that, as an article in The Guardian recently explained, austerity has taken a brutal toll on the Greek economy….
A year of wage and pension cuts, benefit losses and tax increases has taken its toll: almost a quarter of the population now live below the poverty line, unemployment is at a record 16% and, as the economy contracts for a third year, economists estimate that about 100,000 businesses have closed.
As the economy crumbles, Greece has descended into an almost permanent state of civil unrest.
The fact that the EU and the IMF want even more austerity measures has sparked some wild rioting In Greece in recent days. You can see video of the stunning violence going on in Greece right here.
Not all protesters are being violent. Some of them are showing their displeasure in non-violent ways. For example, workers for Greece’s state-owned electric utility are staging 48 hours of rolling strikes that are designed to create blackouts over large areas.
The frightening thing is that Greece is not alone. Ireland has already received a bailout and they are probably going to need another one at some point.
Portugal is a financial basket case and they are probably next in line for a bailout.
The employment situation in Spain is absolutely nightmarish. Spain will probably be able to squeak by without a bailout if the global economy stays stable, but if the dominoes start to fall Spain could be in a massive amount of trouble very quickly.
Not that many people are talking about Italy, but the truth is that Italy has a huge debt problem. On Friday, Moody’s warned that it may downgrade Italy’s Aa2 debt rating at some point within the next 90 days.
Belgium and France also have very substantial debt problems. They probably would not be the first dominoes to fall, but if the “contagion” starts to spread they could certainly have massive problems.
The truth is that Europe’s entire financial system is extremely vulnerable right now. Big banks all over Europe (and especially in Germany) are leveraged to the hilt. All it would take to topple many of them is a stiff breeze.
When Lehman Brothers collapsed, it was leveraged 31 to 1.
Today, German banks are leveraged 32 to 1.
German banks are also holding a massive amount of Greek debt.
That is why there is so much fear that the crisis in Greece could spread across the rest of Europe and start toppling dominoes.
The sovereign debt crisis in Europe did not happen overnight and it is going to be with us for a long, long time even if the global economy remains relatively stable.
At the moment, the best that officials in Europe can seem to come up with is to put off the pain for another day. Pimco’s Mohamed El-Erian told CNBC the following on Monday….
“This problem is not going to go away. It’s going to weigh on markets here and we’re going to see the same set of headlines over and over again. We simply cannot continue to kick the can down the road, because we’re coming to the end of the road in Greece.”
So if Europe starts having major problems will the U.S. step in and help?
Yes, if the crisis in Europe gets worse, the Federal Reserve will probably step in just like they did back in 2008.
But the U.S. is rapidly approaching a day of reckoning like the one that Greece is going through. The U.S. government has piled up the biggest mountain of debt in the history of the world and faith in the U.S. dollar is dying.
The economic crisis in the United States gets worse with each passing year. Yes, the Federal Reserve can print up stacks of money and send it over to Europe, but that isn’t going to solve anything in the long run. The truth is that the U.S. is not even going to be able to keep itself from drowning.
The world financial system is far more vulnerable today than it was back in 2008. The next wave of the financial collapse is going to hit at some point, and when it does it is going to probably be even more painful than the last wave.
Our world is becoming an incredibly unstable place.
You better get ready.
It really is hard to find the words to describe the true horror of the national debt. The U.S. government has been on the greatest debt binge in all of human history, and a day of reckoning is coming that is going to be so painful that it is going to shock America to the core. We have lived so far above our means for so long that none of us really has any concept of what “normal” is like anymore. The United States has enjoyed the greatest party in the history of the world, but now this decades-old party is ending and the bills are coming due. It was Dick Cheney who famously said that “deficits don’t matter”. Well, try telling that to the nation of Greece right about now. The horror that Greece is just beginning to experience is a preview of what is going to happen to us as well. Only when it happens to us it is going to be so much worse, because when we go down we are going to bring the entire global financial system down with us.
What we have done to future generations is beyond sickening. Previous generations entrusted to us the greatest economic machine in the history of the world and we destroyed it. Now we are leaving to our children and our grandchildren an economic future that has been totally wiped out and a national debt of more than 14 trillion dollars that we expect them to repay.
In Washington D.C. these days, there is a lot of talk about the debt ceiling. But whatever the politicians do, it is not going to solve our debt problems. If the debt ceiling does not get raised, we move the financial pain into the present. World financial markets would crash and that would be followed by a devastating economic nightmare.
If we do raise the debt ceiling, that will “kick the can down the road” a little bit farther. However, world financial markets will still crash eventually and our eventual economic nightmare will be even worse.
Well, can’t we just “inflate our way” out of debt?
No, unfortunately things are just not that easy. If we try to inflate our way out of debt, interest rates will likely rise just as quickly as inflation does, and that would be absolutely catastrophic.
Before interest rates even reached 20% we would hit a point where it would take every single dollar taken in by the federal government just to pay the interest on the national debt.
Meanwhile, rapidly rising inflation would devastate the value of all of your bank accounts and every other single financial asset that you own.
So no, inflating our way out of debt is not going to work.
At the moment, the U.S. federal government is able to borrow gigantic quantities of money at super low interest rates.
When that changes, all hell is going to be unleashed.
The following are 41 statistics about the national debt that are almost too crazy to believe….
1 – As of June 20th, the U.S. national debt was $14,344,524,186,068.19.
2 – 30 years ago, the U.S. national debt was approximately 14 times smaller.
3 – It took from the presidency of George Washington to the presidency of Ronald Reagan for the U.S. government to accumulate one trillion dollars of debt.
4 – Since then, we have added more than 13 trillion dollars of additional debt.
5 – The United States government is responsible for more than a third of all the government debt in the entire world.
6 – If you divide up the national debt equally among all U.S. households, each one owes over $125,000.
7 – Mandatory federal spending is going to surpass total federal revenue for the first time ever in this fiscal year. That was not supposed to happen until 50 years from now.
8 – Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period.
9 – The federal government has borrowed 29,660 more dollars per household since Barack Obama signed the economic stimulus law.
10 – During Barack Obama’s first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.
11 – The U.S. national debt is currently rising by well over 4 billion dollars every single day.
12 – The U.S. government is borrowing over 2 million more dollars every single minute.
13 – The U.S. government borrows an average of about 168 million dollars every single hour.
14 – The combined debt of the major GSEs (Fannie Mae, Freddie Mac and Sallie Mae) has increased from 3.2 trillion in 2008 to 6.4 trillion in 2011. Thanks to George W. Bush, Barack Obama and the U.S. Congress, U.S. taxpayers are guaranteeing that debt. This is debt that is not even included in the $14.3 trillion national debt figure.
15 – Some experts estimate that the unfunded liabilities of the U.S. government for programs such as Social Security and Medicare are in the neighborhood of 60 trillion dollars. Other experts claim that the total for federal government unfunded liabilities could be well over $100 trillion. But what almost everyone agrees on is that it is going to be virtually impossible to even come close to meeting all of those obligations.
16 – The U.S. government currently has to borrow approximately 41 cents of every single dollar that it spends.
17 – The total compensation that the federal government workforce earned last year came to a grand total of approximately 447 billion dollars.
18 – The level of government waste in this country is absolutely mind blowing. For example, the Department of Health and Human Services has just announced a brand new $500 million program that will, among other things, seek to solve the problem of 5-year-old children that “can’t sit still” in a kindergarten classroom.
19 – In the past, the U.S. government has spent $2.6 million dollars to study the drinking habits of Chinese prostitutes and $400,000 dollars to pay researchers to cruise bars in Buenos Aires, Argentina to find out why gay men engage in risky sexual behavior when drunk.
20 – The cost for the first week of airstrikes on Libya was 600 million dollars. Keep in mind that the leader of the opposition in Libya has admitted that his forces contain large numbers of the same “al-Qaeda fighters” that were shooting at American troops in Iraq. So we are going broke and we are helping al-Qaeda take power in Libya at the same time.
21 – Just one day of the war in Afghanistan costs more money than it took to build the entire Pentagon.
22 – In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for 18.4% of all income.
23 – 59 percent of all Americans now receive money from the federal government in one form or another.
24 – Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid.
25 – 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.
26 – U.S. households are now actually receiving more money from the U.S. government than they are paying to the government in taxes.
27 – Back in the 1950s, corporate taxes accounted for about 30 percent of all federal revenue. In 2009, corporate taxes accounted for just 6.6 percent.
28 – The U.S. national debt has increased in size for 54 years in a row.
29 – If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion each and every year.
30 – According to a shocking U.S. government report, interest on the national debt and mandatory spending on entitlement programs will absorb approximately 92 cents of every dollar of federal revenue by the year 2019.
31 – A recently revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.
32 – The U.S. government spent over 413 billion dollars on interest on the national debt during fiscal 2010.
33 – Approximately one out of every four dollars that the U.S. government borrows goes to pay the interest on the national debt.
34 – It is now being projected that by the year 2021, interest payments on the national debt will amount to $1.1 trillion dollars a year.
35 – If interest rates move up even slightly, the interest on the national debt is going to be a whole lot worse. A recent article in the Huffington Post laid this out really well….
According to a recent note from the sage of Dallas based Hayman Capital, highly respected Kyle Bass, a move back to 5% (2006 levels) in short term interest rates will increase annual U.S. interest expense by almost $700 billion annually. This is against current U.S. government tax revenues of $2.228 trillion (CBO FY 2011 forecast).
36 – If the U.S. national debt (more than 14 trillion dollars) was reduced to a stack of 5 dollar bills, it would reach three quarters of the way to the moon.
37 – A trillion $10 bills, if they were taped end to end, would wrap around the globe more than 380 times. That amount of money would still not be enough to pay off the U.S. national debt.
38 – If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
39 – If you were alive when Jesus was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now. But this year alone the U.S. government is going to add more than a trillion dollars to the national debt.
40 – If you went out today and started spending one dollar every single second, it would take you over 31,000 years to spend one trillion dollars.
41 – If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
You might be depressed after reading all of those statistics about the national debt, but there is some good news.
If you would like to help address this problem, the federal government is actually taking online donations that will go towards paying off the national debt.
Try not to laugh.
The national debt is a problem that should have been handled 20 or 30 years ago.
But it wasn’t.
So now what we have to look forward to is a very bleak future. Even if we totally scrapped our current monetary system and repudiated the debt, the transition would be “rocky” at best and we would not enjoy anything close to the standard of living that we are enjoying today.
Unfortunately, the vast majority of our politicians in Washington D.C. would never even dream of abandoning the current system. Most of them still totally believe in it.
But this current system is headed for an inevitable collapse. There is no way of getting around it.
Even most of our top politicians are now admitting that our current state of affairs is “unsustainable”. They just don’t have the guts to do anything about it.
A horrific economic collapse is coming.
It is going to change the world.
You better get ready.