The people out there that
believe that the U.S. economy is experiencing a permanent recovery and that
very bright days are ahead for us should have their heads examined. Unfortunately,
what we are going through right now is simply just a period of
"hopetimism" between two financial crashes. Things may seem
relatively stable right now, but it won't last long. The truth is that
the financial crisis of 2008 was just a warm up act for the economic horror
show that is coming. Nothing really got fixed after the crash of
2008. We are living in the biggest debt bubble in the history of the
world, and it has gotten even bigger since then. The "too big to fail"
banks are larger now than they have ever been. Americans continue to run
up credit card balances like there is no tomorrow. Tens of thousands of
manufacturing facilities and millions of jobs continue to leave the
country. We continue to consume far more than we produce and we continue
to become poorer as a nation. None of the problems that caused the crisis
of 2008 have been solved and we are even weaker financially than we were back
then. So why in the world are so many people so optimistic about the
economy right now?
Just take a look at the chart
posted below. It shows the growth of total debt in the United
States. During the financial crisis of 2008 there was a little
"hiccup", but the truth is that not much deleveraging really took
place at all. And since the recession "ended", total credit
market debt has gone on to even greater heights....
http://albertpeia.com/Total-Credit-Market-Debt-Owed-440x264.png
So what does this mean for the
future?
Well, if a small
"hiccup" in the debt bubble caused so much chaos back in 2008, what
is going to happen when this debt bubble finally bursts?
That is something to think
about.
Sadly, most Americans seem
oblivious to all of this.
If you go out to malls in the
wealthy areas of America today, people are charging up a storm. In all,
Americans charged a whopping 2.5
trillion dollars on their credit cards during 2011. Way too
many people have already forgotten the lessons that we all learned back in
2008.
Of course some Americans pay
off their credit cards every month, but way too many Americans are not doing
that. In 1980, Americans were carrying 54
million dollars in revolving credit balances. Today, Americans
are carrying 794
million dollars in revolving credit balances.
And student loan debt is an
even bigger bubble than credit card debt is. As I have written about
previously, total student loan debt in America is rapidly approaching a
trillion dollars.
So it looks like U.S.
consumers have not learned to stay away from debt.
That is not good.
Well, what about the banks?
Has the financial system
learned any lessons since 2008?
No, not really.
Sadly, the "too big to
fail" banks are now even bigger than ever. The total assets of the
six largest U.S. banks increased by 39 percent
between September 30, 2006 and September 30, 2011. If they were to fail
today, they would be even more of a threat to our financial system than they
were back in 2008.
And our major banks continue
to be very highly leveraged. In fact, major banks all over the world are
absolutely swamped with debt.
The following statistics come
from Zero Hedge....
The U.S. banking system is
leveraged 13 to 1.
The Japanese banking system is
leveraged 23 to 1.
The French banking system is
leveraged 26 to 1.
The German banking system is
leveraged 32 to 1.
These are insane levels of
leverage, and they are just inviting another major financial crisis.
Do you all remember Lehman
Brothers? The fact that they were leveraged so highly is what did them in
back in 2008. When the value of their holdings declined by just a little
bit they were totally wiped out.
Well, during this next
financial crisis large financial institutions are going to be wiped out all
over the world. Major banks all over the globe are going to be crying out
for more bailouts when things take a turn against them.
They are making the exact same
mistakes that they made before, and they are going to be expecting more
government handouts when things go bad.
Will we ever learn?
So obviously the banking
system has not learned any lessons.
What about the federal
government?
Well, if you follow my blog regularly, you know that I love to
write about how horrific U.S. government debt
is.
Unfortunately, over the past
four years things have gotten so much worse.
Back in 2008, the U.S.
national debt crossed the 10 trillion dollar mark.
Just recently, it crossed the
15 trillion dollar mark.
So now we are in a much weaker
position financially to respond to another major financial crisis.
Just check out the chart
posted below. This is a recipe for national financial suicide....
http://albertpeia.com/Federal-Government-Debt-440x264.png
During fiscal 2011, the Obama
administration stole close to 150 million dollars from our children and our
grandchildren every single hour.
At the moment, the legacy of
debt that we are passing on to future generations is sitting a grand total of
$15,351,406,294,640.49.
But keep in mind that it is
going up every single hour.
Meanwhile, our ability to
service that debt is declining. We are rapidly getting poorer as a
nation.
During 2011, the amount of
money that left the United States exceeded the amount of money that entered the
United States by more than a half a trillion dollars.
This gap is called a trade
deficit, and it is absolutely ripping our economy to shreds.
For a moment, imagine Uncle
Sam standing next to a giant pile of money on a map of the United States.
Then imagine a half a trillion dollars being taken out of that pile every
single year.
So why haven't we totally run
out of money yet?
Well, it is because we borrow
those dollars back. In order to maintain our false standard of living,
our federal government, our state governments and our local governments have to
go out and beg the rest of the world to lend us our dollars back.
Sadly, our government schools
have "dumbed-down" the population so much that most of them don't
even know what a "trade deficit" is anymore.
Meanwhile, our economic
infrastructure is being gutted like a fish.
Look, I know that I go over
this point over and over and over, but it is absolutely imperative that we all
understand this.
The half a trillion dollars a
year that leaves this country every year could have gone to support businesses
and jobs inside the United States.
But instead it is going to
support businesses and jobs on the other side of the world.
The consequences of this are
absolutely devastating.
According to U.S.
Representative Betty Sutton, an average of 23 manufacturing facilities a day closed down
in the United States during 2010. Overall, more than
56,000 manufacturing facilities in the United States have shut down
since 2001.
Even many so-called
"American companies" have been bought up by the rest of the
world. The following comes from a recent article posted on
Economy In Crisis....
RCA is now a French company, Zenith is a Korean company.
Frigidaire is a Swedish company. IBMs Personal Computer Divisionwith its 500 patentsis now a
Chinese company. Westinghouse Nuclear Energys major shareholder is Toshibaa Japanese Company. Lucent Technologies, a former research
division of AT&T, along with all the patents acquired from the beginning of
the phone system, is now a French company. In 2008, Brazilian-Belgian brewing
company InBev purchased the iconic American brewer Anheuser-Busch, makers of
Budweiser. With the sale of these manufacturing companies, the future profit and
technologies all belong to foreign entities.
We once had the greatest economic machine in the history of the
world.
Now it is being dismantled and bought up by foreigners.
When America's economic infrastructure declines, that means that
there are less jobs available for all of us.
As I wrote about the other day, the
employment situation in this country is not getting better and we have never
even come close to recovering from the recession that started back in 2008.
During 2008 and 2009, the U.S. economy lost millions of
jobs. Since the beginning of 2010, the percentage of the U.S. population
that has had a job has remained very stable....
http://albertpeia.com/Employment-Population-Ratio1-440x264.png
Normally, when a recession ends the percentage of Americans that
have a job bounces back pretty dramatically.
So considering the fact that the employment situation has never
recovered from the last financial crisis, what is going to happen when the next
financial crisis hits?
And most of the jobs that have been "created" during
this so-called "recovery" have been low income jobs. In fact,
if you look closely at the employment numbers that were released last Friday,
you will find that the vast majority of the "new jobs" were part-time
jobs.
But you cannot pay a mortgage and support a family on a
part-time job.
Sadly, the truth is that median household income in America has
been steadily
dropping over the past several years. Tens of millions of
American families are deeply struggling and more Americans than ever are
falling into poverty.
Back in the year 2000, about one out of every nine Americans was
living in poverty. Today, about one
out of every seven Americans is living in poverty.
All of this is causing a great deal of anxiety in America
today. Large numbers of Americans know that something has fundamentally
changed, even if they don't understand the specifics. That is one reason
why sites such as this one have become so popular. People want some
answers.
And once people get some answers about what is really happening,
they tend to want to prepare for the hard times that are coming.
In a few days, a new series on National Geographic entitled
"Doomsday
Preppers" premieres. The mainstream media is starting to
take notice of the growing "prepper" movement in America today.
It is estimated that there are at least 2 million "preppers" in the
United States at this point. Of course people are "prepping"
for a whole host of reasons, but the number one concern among most groups of
preppers is the economy.
As the economy crumbles, more Americans than ever have decided
that it is not a good thing to be 100% dependent on the system.
Back in 2008 and 2009, millions of Americans suddenly lost their
jobs. Because they did not have any finances stored up, large numbers of
them also lost their homes. Many went from being solidly middle class to
being out on the street in a matter of months.
That doesn't have to happen to you. Instead of blowing
your money on frivolous things, do what you can to set something aside for the
difficult times that are on the horizon.
A lot of those "in the know" are quietly making their
own preparations. For example, legendary film director James Cameron
(Avatar, Titanic and Terminator) has purchased more than 2600 acres of farmland in New
Zealand and he is getting out of the U.S. for good apparently.
Unfortunately, most of us do not have the resources for
something like that. But what most of us can do is we can change our
priorities and start focusing on the things that will help us survive the hard
times that are coming
