Wednesday, April 04, 2012

Financial Crunch! Economic Collapse! (Part 13)

The 15 Trillion Dollar Party
April 1st, 2012
If you knew that you could live in luxury for the rest of your life but that by doing so it would absolutely destroy the future for your children, your grandchildren and your great-grandchildren would you do it? Well, that is exactly what we are doing as a nation. Over the past several decades, we have stolen 15 trillion dollars from future generations so that we could enjoy a dramatically inflated level of prosperity. Our 15 trillion dollar party has been a lot of fun, but what we have done to our children and our grandchildren has been beyond criminal. We ran up the greatest mountain of debt in the history of the planet and we are sticking them with the bill. Sadly, both political parties have been responsible for the big spending that has been going on. Both Democrats and Republicans have run up huge budget deficits when in power. But instead of learning the hard lessons of the past, both political parties continue to vote for even more debt. They would rather continue to steal trillions of dollars from future generations than have the party end and have to face the consequences.
And the consequences will be dramatic when the party ends. During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars. That means that the U.S. government spent about 1.3 trillion dollars that it did not have. It is important to understand that even if the U.S. government spent that 1.3 trillion dollars on really stupid things, that money still got into the pockets of ordinary Americans who then spent it on things like food, gas, housing, etc. In turn, most of those that received money from providing those goods and services would spend it on other things.
So extra government spending can definitely stimulate the economy. The problem is that we have been doing it permanently. Since 1975, we have added more than 15 trillion dollars to the national debt. This has fueled a false prosperity that was way beyond what we could afford.
If the U.S. government tried to go to a balanced budget now, our standard of living would crash and there would be riots in the streets. The American people have been enjoying false prosperity for so long that they have lost any notion of what "normal" actually is.
Think of it this way. If your family makes $40,000 this year and you spend an extra $20,000 on your credit cards, your family would be enjoying a false sense of prosperity.
You could do that year after year as long as the credit card companies keep loaning you more money.
But debt always catches up with you in the end.
It is the same thing with the United States.
We have been running up our national credit card balance and the interest payments have become quite painful.
The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.
That is 454 billion dollars that the people of the United States do not receive anything in return for.
So in order to keep up with interest on the national debt and to enjoy a standard of living that is beyond our means we now have to run deficits that are in excess of a trillion dollars every single year.
And a trillion dollars is a staggering amount of money.
If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
Since Barack Obama was elected, the U.S. government has added about 5 trillion more dollars to the national debt.
That kind of debt is a recipe for national financial suicide.
How are we supposed to explain to our children that we are passing a debt of $15,579,852,946,457.64 down to them?
At this point, the United States government is responsible for more than a third of all the government debt in the entire world.
The 15 trillion dollar party that we have been enjoying has been amazing, but all of that debt is soon going to bring us a tremendous amount of pain.
And there is really no way out under our current financial system. As our population ages, government budget deficits are projected to spiral wildly out of control in future years.
Already, entitlement programs are starting to cause massive problems. For example, mandatory federal spending surpassed total federal revenue for the first time ever in fiscal 2011. That was not supposed to happen until 50 years from now.
If the federal government used GAAP (Generally Accepted Accounting Principles) like all publicly-traded corporations are required to do, the situation would be much worse.
The truth is that the U.S. government never had a "balanced budget" during the end of the Clinton administration. The federal government was borrowing gigantic amounts of money from the Social Security trust fund to finance regular government operations. It was a big fraud. Under GAAP, there would have been huge budget deficits during those years.
And even under the non-GAAP numbers used by the U.S. Treasury Department, the U.S. national debt still increased every single year during the Clinton administration.
So let's get real.
Our national financial situation has always been much worse than we have been told.
It has been estimated that our current budget deficits would be in the neighborhood of 4 to 5 trillion dollars under GAAP.
And looking down the road a bit, we are facing a tsunami of unfunded liabilities that is absolutely nightmarish.
In other words, we have committed ourselves to tens of trillions of dollars of expenses that we don't have any money for.
According to Professor Laurence J. Kotlikoff, the U.S. is facing a "fiscal gap" of over 200 trillion dollars in the coming years. The following is a brief excerpt from a recent article that he did for CNN....
The government's total indebtedness -- its fiscal gap -- now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations -- including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt -- and all projected future taxes.
And it just keeps getting worse. Recently it was revealed that Obamacare will add 17 trillion dollars more to our long-term unfunded obligations.
Basically what we have done is we have committed future generations to a life of endless debt slavery to pay for our debts and for the financial promises that we have made.
How could we be so stupid?
Of course this entire fraudulent system is going to completely collapse before we get too much farther down the road anyway. Right now the whole thing is essentially being held together by chicken wire and duct tape.
Most Americans do not realize this, but the Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.
Normally, the Federal Reserve is not supposed to be doing this.
But right now there are not nearly enough buyers of U.S. government debt at the super low interest rates that the U.S. government wants to pay. A recent Money News article explained that foreigners have been increasingly shying away from U.S. debt....
"In 2009, such foreign purchases of U.S. debt amounted to 6 percent of GDP and has since falled by over eighty percent to a paltry 0.9 percent."
Instead of interest rates on U.S. Treasuries rising to attract additional investors, the U.S. Federal Reserve has been intervening to make up the difference.
This is essentially "monetizing the debt" and it is something that Ben Bernanke promised that he would never do.
But he is doing it.
If the Federal Reserve was not buying up all this debt, interest rates on U.S. debt would soar and so would U.S. government interest payments.
Yes, this is a giant Ponzi scheme and it cannot last for long.
Of course all of this could have been avoided if our politicians had not been running up such massive amounts of debt all these years.
Some have suggested that our problems could be solved by simply increasing taxes on the wealthy.
Well, the truth is that the top 5 percent of all income earners already pay nearly 50 percent of all federal taxes and soaking them even more will not even come close to solving the federal budget crisis.
For example, if Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
And as Bill Whittle has shown, you could take every single penny that every American earns above $250,000 and it would only fund about 38 percent of the federal budget.
So taxing the wealthy will certainly not solve all of our problems.
In fact, when you tax the wealthy and the "somewhat wealthy" it slows economic growth in a number of different ways.
Number one, they have less money to spend into the economy.
Number two, they have less money to invest in business activities.
Number three, it gives wealthy individuals and corporations more of an incentive to move out of the United States. As I have written about previously, the global elite are already hiding about 18 trillion dollars in offshore banks. The U.S. government keeps trying to tap into all of that offshore wealth, but the elite always seem to be a few steps ahead of the game.
Yes, we should try to close loopholes in the tax system, but the truth is that the root cause of our problem is that the federal government is simply spending way, way too much money.
Right now, spending by the federal government accounts for about 24 percent of GDP. Back in 2001, it accounted for just 18 percent.
But our politicians always want to put off spending cuts for another day because they know that immediate spending cuts would really hurt the economy.
For example, just check out this recent quote from White House Chief of Staff Jack Lew....
“The time for austerity is not today,” Lew told NBC News “Meet the Press.” “If we were to put in austerity measures right now, it would take the economy in the wrong way.”
Yes, the Obama administration definitely does not want to hurt the economy with an election coming up in a few months.
So when will it be time to seriously cut government spending?
The day never seems to arrive.
But even though the federal government has been pumping more than a trillion extra dollars into the economy every year, the economy has not shown much improvement. The percentage of working age Americans that have jobs has barely budged for over two years.
Yes, the policies of the Obama administration have stabilized the U.S. economy for the moment, but if he was actually going to tell the truth he would say something like this....
"By mortgaging the future of our children and our grand-children I have stabilized our economic statistics for the short-term. Unfortunately, I am going to have to continue to financially abuse future generations to keep us from falling into another Great Depression. Meanwhile, I am making our long-term financial problems far, far worse. But the most important thing is that I win re-election so that I can continue to be president. Thank you for being so selfish and so willing to destroy the future of your children. Vote for me in 2012 and let the party continue!"
Unfortunately, the party is going to come crashing to an end at some point.
Right now, the global financial system is based on the U.S. dollar and on U.S. government debt.
There will come a time when the rest of the world is going to get sick and tired of watching this Ponzi scheme play out and they are going to completely lose faith in the U.S. dollar and in U.S. government debt. In fact, there are already signs that this is starting to happen.
When faith in our currency and our debt is completely gone, it will be nearly impossible to get back and the game will be over.
The false prosperity that we are experiencing right now is about as good as things are going to get.
Enjoy it while you still can, because when it is gone that will be the end of it.
Both the Democrats and the Republicans have failed us. They played fast and loose with our future and they never planned for the long-term.
Now we are facing a collapse of unprecedented magnitude that most Americans will never even see coming.
A horrifying economic collapse is coming.
You better get ready for it.
Everything Is Going To Be Alright?
March 30th, 2012
Is the U.S. economy going to be okay? Well, if the only source you listened to was the mainstream media, you would be left with the distinct impression that the U.S. economy is heading toward a full recovery and that everything is going to be alright. Unfortunately, that is not the case at all. The United States is rapidly becoming poorer as a nation and less competitive in the global marketplace. At the same time, consumer debt levels are rising, corporate debt levels are rising, state and local government debt levels are rising and the U.S. government is indulging in a debt binge unlike anything the world has ever seen. Considering the insane amount of money the U.S. government has been pumping into the economy, we should have seen a much more robust recovery by now. Instead, the employment statistics have barely moved and government dependence is at an all-time high. That is really sad, because this is as good as "the recovery" is going to get. The next major economic downturn is just around the bend, and in future years millions of us will desperately yearn for the "good old days" of 2012.
Below, I have compiled a list of things that I have entitled "Everything Is Going To Be Alright?"
It is composed in the form of a song, but it really isn't meant to be sung. It is probably actually more of an economic horror poem than it is a song. What I have tried to do is to point out the absurdity of what we are all being told by our politicians and by the media. Hopefully you will enjoy reading it as much as I enjoyed writing it....
Yahoo is going to be laying off thousands of workers starting next work.
Don't worry about a thing - Barack Obama says everything is going to be alright.
Best Buy has just announced plans to close 50 stores.
Don't worry about a thing - JPMorgan Chase CEO Jamie Dimon says everything is going to be alright.
The mayor of Los Angeles has announced that the city will be laying off "a large number of employees".
Don't worry about a thing - Barack Obama says everything is going to be alright.
Baltimore is so broke that it has decided to look into selling off some of the most famous historical landmarks in the city.
Don't worry about a thing - the mainstream media says everything is going to be alright.
The city of Costa Mesa, California is so broke that is has decided to sell off its police helicopters.
Don't worry about a thing - Barack Obama says everything is going to be alright.
The city of Trenton, New Jersey is so broke that it has decided to indefinitely postpone buying more toilet paper for city buildings.
Don't worry about a thing - Joe Biden says everything is going to be alright.
The capital city of Pennsylvania is so broke that it has decided to start skipping debt payments.
Don't worry about a thing - Barack Obama says everything is going to be alright.
The state of Nevada has a 12.3 percent unemployment rate.
Don't worry about a thing - the pretty people on television say everything is going to be alright.
Total student loan debt in America has now passed the 1 trillion dollar mark, and about 270 billion dollars of those loans are at least 30 days delinquent.
Don't worry about a thing - Barack Obama says everything is going to be alright.
The savings rate in the United States has fallen back to pre-financial crisis levels.
Don't worry about a thing - Harry Reid says everything is going to be alright.
Home prices in the United States hit a 10 year low in the month of January. They are now down 34.4 percent from the peak in 2006.
Don't worry about a thing - Barack Obama says everything is going to be alright.
The average price of a gallon of gasoline in the United States is rapidly approaching the $4.00 mark.
Don't worry about a thing - Anderson Cooper says everything is going to be alright.
Median household income in the United States is down 7.8 percent since December 2007 after adjusting for inflation.
Don't worry about a thing - Barack Obama says everything is going to be alright.
When Barack Obama first took office, the number of "long-term unemployed workers" in the United States was approximately 2.6 million. Today, that number is sitting at 5.6 million.
Don't worry about a thing - Nancy Pelosi says everything is going to be alright.
The BRICS countries (Brazil, Russia, India, China and South Africa) are publicly declaring that it is time to move away from the U.S. dollar as the primary reserve currency of the world.
Don't worry about a thing - Barack Obama says everything is going to be alright.
One out of every five Americans will be 65 or older by 2030 and nobody has any idea where all the money is going to come from to pay them the benefits that they have been promised.
Don't worry about a thing - Rachel Maddow says everything is going to be alright.
More Americans are dependent on the government right now than at any other time in all of U.S. history.
Don't worry about a thing - Barack Obama says everything is going to be alright.
The number of Americans on food stamps has increased by 14 million since Barack Obama became president and is sitting at an all-time record high.
Don't worry about a thing - Hillary Clinton says everything is going to be alright.
The U.S. government will add more to the national debt in 2012 than it did from the time that George Washington became president to the time that Ronald Reagan became president.
Don't worry about a thing - Barack Obama says everything is going to be alright.
The U.S. national debt is currently increasing by about 150 million dollars every single hour.
Don't worry about a thing - Federal Reserve Chairman Ben Bernanke says everything is going to be alright.
The Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011. This is a Ponzi scheme that will completely collapse at some point.
Don't worry about a thing - Barack Obama says everything is going to be alright.
So what is your opinion?
Do you believe that everything is going to be alright?
The world is bankrupt - How it will affect you?
Harvey Gordin
January 2012
Despite the disingenuous doublespeak coming out of the Federal Reserve and all the campaign rhetoric, the true state of our economy is in dire circumstances. It is not going to have a 'soft' landing and unemployment is not going to rebound for tens of millions of Americans. Not in 2012 or 2013. Unless the U.S. Congress suddenly awakens from their delusional state that spending us into the stratosphere is the right course to take, you should look out for yourself and your family - now.
Why? Because the toxic "global" economy for one thing is trillions in debt. Because the affected countries are socialist (except Germany), the reforms that should have been undertaken decades ago are too little too late. Greece is DOA and Germans are tired of bailing out the same repeated mistakes. Portugal, Ireland Spain and Italy are the next dominoes in line for major trouble.
Due to the foolish U.S. Congress, one session after another who refuse to abolish the central bank draining the lifeblood of this country, we the people are being bleed dry from foreign financial entanglements that are now rolling across the ocean. The "Fed" is swapping debt like drunk sailors in a bar trading "Matey" stories. Unfortunately, millions of Americans are unaware or don't understand the big picture and how all this will affect everything they've toiled for during a lifetime.
The Congress continues their lunatic spending ways as if there are no consequences to their actions. On January 17, 2012, the U.S. Treasury once again began borrowing from government retirement pension funds to pay for the reckless spending. Robbing Peter to Paul Paul only temporarily holds off the inevitable.
If the House and Senate again vote this week to raise the debt ceiling limit by another $1.2 trillion dollars, it should further reinforce what so many of us already know: Either members of Congress have zero understanding of what all this borrowing is doing or they simply don't care.
That should deeply distress every adult aged American in this country regardless of party affiliation. The actions of a few (Congress), while lining their pockets from insider knowledge, are ruining the lives of millions:
Boomers find 401k plans fall short
"The 401k generation is beginning to retire, and it isn't a pretty sight. The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases. The median household headed by a person aged 60 to 62 with a 401k account has less than one-quarter of what it would need in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research (CRR) at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401k participants appear to have insufficient savings."
Will you be one of the tens of millions of Americans who finds their standard of living at the poverty level by the time you retire? Remember: Paper assets, whether it be the ones in your wallet or your 401(k) or other retirement tools, are not really money in that their only worth is backed by the "faith and credit" of a government that is more than $15 trillion in the hole, not counting the $202 trillion in unpaid mandates for social security, prescription pills and Medicare. Thomas Jefferson said: "Paper is poverty,... it is only the ghost of money, and not money itself."
Astute investors and the wealthy have always owned gold. If you look back at Germany under Hitler, people fled leaving everything behind. To withdraw money from banks would have brought attention to them that could have been fatal. Political and economic collapse are staring at the world and the world is buying gold in ever increasing quantities.
If you've never owned gold, give me or Jay Reichard a call so we can help you to understand the danger of leaving all of your assets in one volatile basket. If you already own gold and/or silver and want to further invest, give us a call today. USA Gold Vault: 602.228.8203
Also See:
Financial Crunch! Economic Collapse!
(Part 1)
31 July 2008
(Part 2)
20 November 2008
(Part 3)
25 January 2009
(Part 4)
17 April 2009
(Part 5)
23 June 2009
(Part 6)
23 August 2009