15 Economic Statistics That Just Keep Getting Worse
A little over a week ago, U.S. Treasury Secretary Timothy Geithner penned an article for the New York Times entitled “Welcome To The Recovery” in which he touted the great strides that the U.S. economy was making. But with unemployment still dangerously high and with foreclosures and personal bankruptcies continuing to set all-time records, should we really be talking about a “recovery”? The truth is that the numbers don’t lie, and statistic after statistic shows that the economic fundamentals continue to get progressively worse. The U.S. government can continue to try to pump up with economy with more debt, but the reality is that there is not going to be a legitimate “recovery” until consumer spending rebounds. Consumer spending makes up the vast majority of U.S. GDP. But without good jobs, consumers are not going to be able to spend money. Unfortunately, our jobs base continues to be erode as millions upon millions of middle class jobs are shipped over to China, India and dozens of third world nations by the global predator corporations that now dominate the world economy.
The U.S. government cannot create real wealth out of thin air. It can borrow even more money and flood the economy with even more paper currency, but the short-term “buzz” that creates does absolutely nothing to solve our long-term economic problems.
It is the private sector that actually creates wealth. But unfortunately, over the last several decades we have allowed that wealth to become highly concentrated. Now the giant global predator corporations have decided that American workers aren’t really that desirable after all. They are slowly taking away their factories and their offices and they are moving them to where people are willing to work for one-tenth the pay.
So where does that leave middle class American “consumers”?
Well, it leaves us in a world of hurt.
The following are 15 key economic statistics that just keep getting worse and which reveal the horrific economic plight in which we now find ourselves….
1 – The number of Americans who are receiving food stamps rose to a new all-time record of 40.8 million in May. The number of Americans receiving food stamps has set a new all-time record for 18 months in a row. But there is every indication that things are going to get even worse. The U.S. Department of Agriculture projects that the number of Americans on food stamps will increase to 43 million in 2011.
2 – The U.S. economy lost 131,000 more jobs during the month of July. But the truth is that the U.S. economy has been bleeding jobs for a long time. According to one analysis, the United States has lost 10.5 million jobs since 2007. Meanwhile, immigrants (both legal and illegal) continue to pour into this nation in unprecedented numbers.
3 – Americans who are out of work are finding it incredibly difficult to get back into the workforce. In the United States today, the average time needed to find a job has risen to an all-time record of 35.2 weeks.
4 – The U.S. government keeps trying to pump up the economy with debt, and in the process things are getting wildly out of control. According to a U.S. Treasury Department report to Congress, the U.S. national debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015.
5 – The interest on all of this debt is becoming increasingly oppressive. As of July 1st, the U.S. government had spent $355 billion so far in 2010 on interest payments to the holders of the national debt. The total for 2010 should be somewhere in the neighborhood of $700 billion. According to Erskine Bowles, one of the heads of Barack Obama’s national debt commission, the U.S. government will be spending $2 trillion just on interest on the national debt by 2020. Keep in mind that the entire U.S. government budget is less than $4 trillion for the entire year of 2010.
6 – If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the annual U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion.
7 – Social Security will pay out more in benefits in 2010 than it receives in payroll taxes. This was not supposed to happen until at least 2015. In the years ahead, these new “Social Security deficits” are projected to be absolutely catastrophic.
8 – There are simply far too many retirees and not nearly enough workers to support them. Back in 1950 each retiree’s Social Security benefit was paid for by 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.
9 – Wealth continues to become highly concentrated at the top. Since 1973, the average CEO’s salary has increased from 26 times the median income to over 300 times the median income.
10 – According to a poll taken in 2009, 61 percent of Americans “always or usually” live paycheck to paycheck. That was up significantly from 49 percent in 2008 and 43 percent in 2007.
11 – The Mortgage Bankers Association recently announced that more than 10% of all U.S. homeowners with a mortgage had missed at least one mortgage payment during the January to March time period. That was a new all-time record and represented an increase from 9.1 percent a year ago.
12 – A recent survey of last year’s college graduates found that 80 percent moved right back home with their parents after graduation. That was up substantially from 63 percent in 2006.
13 – During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.
14 – The total number of U.S. bank failures passed the 100 mark in July of this year. In 2009, the total number of U.S. bank failures did not pass the century barrier until October.
Any rational observer (and clearly U.S. Treasury Secretary Timothy Geithner does not qualify) can see that the foundations of the U.S. economy are coming apart. The rapidly accumulating mountain of debt that has fueled our “prosperity” is impossible to repay and is going to progressively choke the life out of our economic system. The good jobs that we have allowed to be shipped out of our country are never coming back. Every single day, more wealth flows out of this country than flows into it.
Anyone who claims that things are getting “better” is either ignorant, completely deluded or is purposely lying.
The U.S. economy is not getting “better”.
The U.S. economy is dying.
You should adjust your plans accordingly.
The Horrific Derivatives Bubble That Could One Day Destroy The Entire World Financial System
Today there is a horrific derivatives bubble that threatens to destroy not only the U.S. economy but the entire world financial system as well, but unfortunately the vast majority of people do not understand it. When you say the word “derivatives” to most Americans, they have no idea what you are talking about. In fact, even most members of the U.S. Congress don’t really seem to understand them. But you don’t have to get into all the technicalities to understand the bigger picture. Basically, derivatives are financial instruments whose value depends upon or is derived from the price of something else. A derivative has no underlying value of its own. It is essentially a side bet. Originally, derivatives were mostly used to hedge risk and to offset the possibility of taking losses. But today it has gone way, way beyond that. Today the world financial system has become a gigantic casino where insanely large bets are made on anything and everything that you can possibly imagine.
The derivatives market is almost entirely unregulated and in recent years it has ballooned to such enormous proportions that it is almost hard to believe. Today, the worldwide derivatives market is approximately 20 times the size of the entire global economy.
Because derivatives are so unregulated, nobody knows for certain exactly what the total value of all the derivatives worldwide is, but low estimates put it around 600 trillion dollars and high estimates put it at around 1.5 quadrillion dollars.
Do you know how large one quadrillion is?
Counting at one dollar per second, it would take 32 million years to count to one quadrillion.
If you want to attempt it, you might want to get started right now.
To put that in perspective, the gross domestic product of the United States is only about 14 trillion dollars.
In fact, the total market cap of all major global stock markets is only about 30 trillion dollars.
So when you are talking about 1.5 quadrillion dollars, you are talking about an amount of money that is almost inconceivable.
So what is going to happen when this insanely large derivatives bubble pops?
Well, the truth is that the danger that we face from derivatives is so great that Warren Buffet has called them “financial weapons of mass destruction”.
Unfortunately, he is not exaggerating.
It would be hard to understate the financial devastation that we could potentially be facing.
A number of years back, French President Jacques Chirac referred to derivatives as “financial AIDS”.
The reality is that when this bubble pops there won’t be enough money in the entire world to fix it.
But ignorance is bliss, and most people simply do not understand these complex financial instruments enough to be worried about them.
Unfortunately, just because most of us do not understand the danger does not mean that the danger has been eliminated.
In a recent column, Dr. Jerome Corsi of WorldNetDaily noted that even many institutional investors have gotten sucked into investing in derivatives without even understanding the incredible risk they were facing….
A key problem with derivatives is that in the attempt to reduce costs or prevent losses, institutional investors typically accepted complex risks that carried little-understood liabilities widely disproportionate to any potential savings the derivatives contract may have initially obtained.
The hedge-fund and derivatives markets are so highly complex and technical that even many top economists and investment-banking professionals don’t fully understand them.
Moreover, both the hedge-fund and the derivatives markets are almost totally unregulated, either by the U.S. government or by any other government worldwide.
Most Americans don’t realize it, but derivatives played a major role in the financial crisis of 2007 and 2008.
Do you remember how AIG was constantly in the news for a while there?
Well, they weren’t in financial trouble because they had written a bunch of bad insurance policies.
What had happened is that a subsidiary of AIG had lost more than $18 billion on Credit Default Swaps (derivatives) it had written, and additional losses from derivatives were on the way which could have caused the complete collapse of the insurance giant.
So the U.S. government stepped in and bailed them out – all at U.S. taxpayer expense of course.
But the AIG incident was actually quite small compared to what could be coming. The derivatives market has become so monolithic that even a relatively minor imbalance in the global economy could set off a chain reaction that would have devastating consequences.
In his recent article on derivatives, Webster Tarpley described the central role that derivatives now play in our financial system….
Far from being some arcane or marginal activity, financial derivatives have come to represent the principal business of the financier oligarchy in Wall Street, the City of London, Frankfurt, and other money centers. A concerted effort has been made by politicians and the news media to hide and camouflage the central role played by derivative speculation in the economic disasters of recent years. Journalists and public relations types have done everything possible to avoid even mentioning derivatives, coining phrases like “toxic assets,” “exotic instruments,” and – most notably – “troubled assets,” as in Troubled Assets Relief Program or TARP, aka the monstrous $800 billion bailout of Wall Street speculators which was enacted in October 2008 with the support of Bush, Henry Paulson, John McCain, Sarah Palin, and the Obama Democrats.
But wasn’t the financial reform law that Congress just passed supposed to fix all this?
Well, the truth is that you simply cannot “fix” a 1.5 quadrillion dollar problem, but yes, the financial reform law was supposed to put some new restrictions on derivatives.
And initially, there were some somewhat significant reforms contained in the bill. But after the vast horde of Wall Street lobbyists in Washington got done doing their thing, the derivatives reforms were almost completely and totally neutered.
So the rampant casino gambling continues and everybody on Wall Street is happy.
One day some event will happen which will cause a sudden shift in world financial markets and trillions of dollars of losses in derivatives will create a tsunami that will bring the entire house of cards down.
All of the money in the world will not be enough to bail out the financial system when that day arrives.
The truth is that we should have never allowed world financial markets to become a giant casino.
But we did.
Soon enough we will all pay the price, and when that disastrous day comes, most Americans will still not understand what is happening.
Will Quantitative Easing By The Federal Reserve Unleash Economic Hell?
Prior to the financial crisis of 2007 and 2008, the Federal Reserve could always count on being able to stimulate the U.S. economy with a quick cut to interest rates. But now with interest rates just barely above zero, the Federal Reserve is searching for other ways to pump life into a U.S. economy that is staggering about like a drunken college student. One of the ways that the Federal Reserve can do this is through something called “quantitative easing”. In essence, what happens is that the Federal Reserve creates money out of thin air and starts buying things like U.S. Treasuries, mortgage-backed securities and corporate debt. But many economic analysts are now warning that further rounds of quantitative easing by the Federal Reserve could end up setting off a series of events that could ultimately unleash economic hell. In fact, there are quite a few high profile commentators who now believe that hyperinflation in the United States is absolutely inevitable.
For those not familiar with quantitative easing, Wikipedia has a pretty good definition….
The term quantitative easing (QE) describes a form of monetary policy used by central banks to increase the supply of money in an economy when the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero. A central bank does this by first crediting its own account with money it has created ex nihilo (“out of nothing”). It then purchases financial assets, including government bonds, mortgage-backed securities and corporate bonds, from banks and other financial institutions in a process referred to as open market operations.
But is it really a good idea for a privately-owned central bank to have the power to create money out of nothing and to do whatever it wants with it outside of U.S. government control?
Of course not, but we dealt with those issues in another article.
What we will concern ourselves with in this article are the negative effects that could be unleashed as the Federal Reserve further abuses this power.
Now keep in mind that disasters don’t usually happen overnight. They usually build over time. When the Federal Reserve begins new rounds of quantitative easing, it will take time for the effects to be felt.
And so far, the new quantitative easing measures that the Federal Reserve has implemented have been relatively mild….
*The Federal Reserve has announced that it will “continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature”.
*The Federal Reserve has also announced that it has decided to reinvest principal payments on mortgage holdings into U.S. Treasury securities.
*The Federal Reserve Bank of New York announced on Wednesday that it will purchase $18 billion in U.S. Treasury securities between now and mid-September.
But most analysts are expecting quantitative easing by the Fed to accelerate – especially if the U.S. economy continues to flounder.
So is there a reason we should be concerned about all of this?
Well, yes there is.
Marc Faber, the author of “The Gloom, Boom and Doom Report”, recently warned CNBC that all of this intervention by the Federal Reserve is going to create a “final crisis” that will destroy the U.S. financial system….
“Investors should have listened to me already six months ago when I wrote that the Fed will continue to monetize … they will print and print and print until the final crisis wipes out the whole system.”
In a recent article, Bob Chapman of the International Forecaster described some of the financial gymnastics that our “financial authorities” go through just to keep the current shell game going….
But first, we ignore things like monthly hundred billion plus mathematical discrepancies between the amount of the government’s deficits and the amount of treasury bonds being sold. Then we give the proceeds from the bogus excess treasury sales to foreign countries, foreign central banks and sovereign wealth funds as well as Cayman Island hedge funds so they can do what with it? Why, so they can buy US treasury paper and agency paper, among other things. Yep, we set up the straw men, fund them with counterfeit money illegally created out of thin air beyond what is needed to fund the ever-increasing deficit being created by the drunken sailors running the US government, and we then magically create categories of new mega-buyers in our financial reports to show everyone how our treasury paper is just as “beloved” as in the old days. Why, even the totally bankrupt UK has magically created $180 billion for the express purpose of buying up those treasuries to keep the whole rip-off party going.
What a mess they have created.
Things have gotten so bad that even CNN is publishing articles that openly acknowledge the crisis. In a recent article on CNN entitled “Is This Finally The Economic Collapse?”, Keith R. McCullough warned that the Federal Reserve openly buying large amounts of U.S. government debt is a very dangerous threshold to cross….
Now that the US can’t cut interest rates any lower, the only option left on the table is what the Fed just announced it would start doing — buying Treasury debt. And that could lead the country to the brink of collapse: According to economists Carmen Reinhart & Ken Rogoff, whose views we share, crossing the 90% debt/GDP threshold is the equivalent of crossing the proverbial Rubicon of economic growth. It’s a point from which it’s almost impossible to return.
And that is the crux of the problem – the U.S. government has a debt that is absolutely spiralling out of control. This is a problem that has been building for decades and there simply is no quick fix for it.
But the truth is that it was seen as far back as 1835. In his article for CNN, Keith R. McCullough included a very appropriate quote by Alexis De Tocqueville, the author of Democracy in America….
“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
Today, approximately 57% of the U.S. government budget is spent on direct payments to American citizens or is money that is spent on behalf of individual American citizens.
For decades, the “Congress critters” have been bribing the American people (and each other) with massive payouts and have been getting away with it.
But now we are starting to pay the price.
The truth is that the U.S. government has become an expert on wasting money. Most of the folks populating Congress are so incompetent that they should not even be hired to mop the floors of a Dairy Queen, and yet they control how trillions of our tax dollars are spent.
The end result is that we have a financial mess that is absolutely unprecedented.
The U.S. financial system is doomed. The U.S. government and the Federal Reserve will probably end up trying to save it with a massive flood of paper money, and in the end that will likely result in the collapse of the U.S. dollar and hyperinflation.
But hopefully all of that is still a while away yet. For now, the Obama administration and the Federal Reserve are trying to play a very delicate balancing act and are trying to keep this giant house of cards from collapsing.
As incompetent as they are, let’s hope that they can keep things together for at least a while longer, because when things really fall apart we are all going to be feeling the pain.