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Archive for June 7th, 2010

U.S. National Debt 2010

So just how big is the U.S. national debt in 2010?  Well, according to the U.S. Treasury Department, on June 1st the U.S. National Debt was $13,050,826,460,886.97.  For those not used to seeing such big numbers, that is over 13 trillion dollars.  To give you an idea of just how much a trillion dollars is, if you had started spending one million dollars every single day when Christ was born, you still would not have spent one trillion dollars by now.  And yet somehow the U.S. government has accumulated a debt of over 13 trillion dollars.  This is a debt that we have callously placed on the backs of future generations of Americans.  Somehow we have the gall to expect our progeny to pay off the biggest mountain of debt in the history of the world.  What we have done to future generations is beyond sickening.

But hey, if you are feeling especially generous today, the federal government is actually taking online donations that will go towards paying off the national debt. 

Yes, it is true.

Please try to resist the urge to laugh.

This request comes from the same government that spent $2.6 million tax dollars to study the drinking habits of Chinese prostitutes and $400,000 tax dollars to pay researchers to cruise six bars in Buenos Aires, Argentina to find out why gay men engage in risky sexual behavior when drunk.

Perhaps they should not hold their breath while waiting for our donations to show up.

Or perhaps they should get their own house in order before expecting donations.

But the truth is that they continue to recklessly spend our money as if they have not learned anything.

This year, it is projected that the U.S. government will issue nearly as much new debt as the rest of the governments of the world combined.

Yes, getting into debt is another thing that we Americans dominate the rest of the world in.

It is estimated that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.

Now remember, when Ronald Reagan took office, the U.S. national debt was only about 1 trillion dollars.

So, from the founding of the United States until Reagan took office we accumulated a total of about 1 trillion dollars in debt.

In just the last 30 years we have accumulated 12 trillion dollars more.

You know, the truth is that it is really, really hard to even spend one trillion dollars.

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.

Hopefully that gives you an idea just how fast the U.S. government is getting us into debt.

And now we are officially in the danger zone.

According to Dr. Jerome Corsi,  the U.S. national debt is now equal to 90 percent of gross domestic product.

Most economists consider a level of 100 percent debt to GDP to be an absolute nightmare scenario.

But things look even worse when you total up all forms of debt in the United States.

The total of all government, corporate and consumer debt in the United States is now equal to 360 percent of GDP.

That is far greater than at any point during the Great Depression.

Yes, we are in a LOT of trouble.

So can we just raise taxes on everybody just a little bit and get rid of this budget deficit?

Well, unfortunately no.

According to the Tax Foundation’s Microsimulation Model, to erase the U.S. budget deficit for 2010, the U.S. Congress would have to multiply the tax rate for every American by 2.4. 

That would mean that the 10 percent tax rate would become 24 percent, the 15 percent tax rate would become 36 percent, and the 35 percent tax rate would have to be 85 percent.

Would you like to pay 85 percent of your income in taxes?

And that would not reduce the national debt one penny - all that would do is eliminate the U.S. budget deficit for this year.

The truth is that it is simply not possible to pay off the national debt.  Most economists realize this and speak of more realistic goals such as getting our debt growth down to a level that is “sustainable”.

But the reality is that we are way beyond being able to get this debt under control.  If the U.S. government cut spending enough to make a real difference it would crush the economy and tax revenue would take a sharp nosedive.  If the U.S. government borrows even more money and increases government spending even more it will help the economy in the short-term, but it will make our long-term problems even worse.

No, the truth is that we have created an economic nightmare from which there simply is no escape under the current system.  The national debt will never be repaid and the never ending spiral of debt and paper money that we have created is doomed to failure.

So what will happen someday when the current economic system does collapse? 

That will be for the American people to decide.  Hopefully they will learn from our mistakes and will return to our constitutional roots and devise a financial system based on solid economic principles.

College Students This Is Your Future: High Unemployment And Student Loan Hell

Hundreds of thousands of college students all over the United States have just graduated and are getting ready for their first taste of the real world.  Unfortunately for them, the real world is not always easy and it is not always fair.  In fact, for large numbers of recent college graduates, the transition to a world of high unemployment, brutal student loan payments and lowered expectations can be extremely sobering.  But the truth is that we have taught these young people to have a completely unrealistic view of the future.  We have told them to take out gigantic student loans without worrying about how they are going to pay them back, we have told them that if they get good grades and do everything “right” that the system will reward them with secure, fulfilling careers, and we have made high school and college so “soft and cushy” that most of these young Americans find that they don’t have the discipline and the work ethic to make it when they actually do get out into society. 

So needless to say, the first six months after graduation can be a complete shock for many college graduates.

In a piece recently published on MSN Money, journalist Joe Queenan described the tough environment that 2010 college graduates are being thrown into as they enter the real world….   

They will enter an economy where roughly 17% of people aged 20 through 24 do not have a job, and where two million college graduates are unemployed. They will enter a world where they will compete tooth and nail for jobs as waitresses, pizza delivery men, file clerks, bouncers, trainee busboys, assistant baristas, interns at bodegas.

But waiting tables, delivering pizzas or greeting customers at the local Wal-Mart is not what most college graduates signed up for when they invested tens of thousands of dollars and four years (if not longer) of their lives in an education. 

Unfortunately, that is where our economy is at today.

“Good jobs” are very few and far between and those freshly graduating from college are finding themselves suddenly thrust into an extremely competitive job market.

According to the Bureau of Labor Statistics, in March the national rate of unemployment in the U.S. was 9.7%, but for Americans younger than 25 years of age it was 18.8%. 

In fact, according to a recent Pew Research Center study, approximately 37% of all Americans between the ages of 18 and 29 have either been unemployed or underemployed at some point during this recession.

But what makes things even worse for college graduates is that so many of them are coming out of school with absolutely crushing student debt loads.

Today, approximately two-thirds of all U.S. college students graduate with student loans.

But it isn’t just that they have student loans.  The loan balances that many of these students are graduating with these days are absolutely obscene.

The Project on Student Debt estimates that 206,000 U.S. college students graduated with more than $40,000 in student loan debt in 2008.  Using 2008 dollars as a baseline, that represents a ninefold increase over the number of students graduating with that amount of debt in 1996.

Most college students don’t think much about all of the debt that they are accumulating while they are in school.

But once they get out, the sudden realization that they have gotten themselves into student loan payments that they cannot possibly handle can be completely demoralizing.

The New York Times recently profiled Cortney Munna – a recent college graduate who has not been able to get a “good job” and who now finds herself in student loan hell.  She recently told the New York Times that she would be more than glad to give back her education if she could just get out of all this debt….

“I don’t want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back.”

In recent years, millions of young college graduates have found that the “great education” that they thought they were getting actually doesn’t get them very far at all in the real world.

In fact, they often find themselves taking jobs where they work right next to other people their age who never even went to college.

So a lot of young college graduates find themselves wishing that they could just “return” their education and get all that money back.

But there is no walking away from student loan debt.

The truth is that federal bankruptcy law makes it nearly impossible to discharge student loan debts.

Basically, once you get into student loan hell there is no escape. 

So now we have hundreds of thousands of college graduates that can’t get good jobs and that have brutal student loan payments that they can’t possibly handle.

No wonder so many of them seem so angry and depressed. 

But the funny thing is that so many that are still in college are so unbelievably optimistic about the future.

Edwin Koc, director of research for the National Association of Colleges and Employers says that those approaching college graduation are an extremely confident bunch….

“Over 90 percent think they have a perfect résumé. The percentage who think they will have a job in hand three months after graduation is now 57 percent. They’re still supremely confident in themselves.”

So have we done a good job of teaching them to have confidence in themselves or have we done them a disservice by allowing so many of them to live in complete denial?

The truth is that the U.S. economy is in the process of collapsing, and we need to prepare our young people for the tough times that are ahead.  Life is going to require an extreme amount of hard work and discipline in the years ahead, and unfortunately those qualities are not in great supply among young Americans right now.

Actually, the “real world” is not going to be getting easier for any of us.  We are all going to require an attitude adjustment if we are going to successfully navigate the difficult times that are coming.  So let’s not be too hard on new college graduates and other young Americans.  The truth is that the vast majority of us are “soft” at least to some degree because of the decadent society in which we live.  Let’s just hope that somehow we can all find enough inner strength to endure the great challenges that are going to confront us in the years ahead.

Bankruptcy filings reflect a weak economy – 9 percent jump in bankruptcy filing in last month of data. Bankruptcy map shows Nevada and South have highest filing rates per capita. $79,000 income and $11 million in debt?

Posted by mybudget360

Bankruptcies are still plaguing this country and show deeper strain in the fabric of the economy.  Average Americans are still very much dealing with the challenges of a deep and profound recession.  Filing for bankruptcy is usually the end of the financial line for many Americans.  Yet in the last month of data for March of 2010 we saw the highest number of bankruptcy filings in the entire fiscal year.  Instead of the rate dropping it has actually increased.  Keep in mind that these filings are coming at a time when bankruptcy laws have become tougher and stricter on most Americans.  Yet there is only so much you can squeeze out of someone who has entered the last stage of their financial options.  This is why even programs that focus on mortgage adjustments don’t help because they don’t drill deep enough into the core of what is happening in our economy.  Without a job or adequate income, most will simply default whether it is in bankruptcy or through foreclosure.

The spike in 2005 below was bankruptcy cases rushing through the system before tougher legislation was enacted:

Source:  U.S. Courts

The number of filings still remains elevated and is a reflection of the structural problems in the economy.  We need to remember that when people file, the vast majority are at a point where they are no longer able to service their debts with their current cash flows.  In other words, they are insolvent.  It is interesting that the large banks reached this point in 2008 yet were able to muster unlimited access to taxpayer money through the U.S. Treasury and Federal Reserve.  Clearly individual Americans don’t have this luxury and must deal with the trappings of a system that is pushing many over the edge.  Many have brought this on but others have paid medical bills with credit cards.  Either way, there are major losses ahead.

Quarterly data may not show the exact changes or turns in the economy.  But if we break down the last fiscal year for bankruptcy filings we see that we end on an extremely high number of filings:

By far the last point was the highest on record.  It is likely that this reflects the courts rushing to close the year with later cases but whatever the reason may be, this spike is not a good sign for the financial health of average Americans.  The problems of bankruptcy are not limited to one part of the region.  Although it would seem that Nevada and the South have larger per capita case filings:

It is clear that bankruptcy hits every part of this country.  If we look at the latest data for May, we find the following:

May 2010 filings (personal filings):            136,142

May 2009 filings (personal filings):            124,838

This is a solid 9 percent increase over the last year.  Keep in mind this latest jump occurred under the notion that the economy is recovering.  It also reflects the unwillingness of banks to work with average Americans even though that is specifically what the bailouts were based on.  What is occurring unfortunately with banks is the hoarding of bailout funds to speculate on Wall Street while letting American families be crushed by their insurmountable debt.  The breathing room they have gotten from the taxpayers is not being given back.

It is a troubling case of do as I say, not as I do.  The bottom line with spikes in bankruptcy filings is that the real economy is still mired in deep systemic problems.  If we have people anxiously waiting for their food assistance debit cards to refill at midnight simply so they can go to Wal-Mart to buy food, this tells us the economy is anything but solid.  Bankruptcy is never the first option and is a long process.

To show you that this can hit everyone even those that appear to be rich a New Jersey “housewife” shows that spending too much can lead many into a precarious financial position:

(NY Post) Spendaholic ‘housewife of NJ’ owes a big-hair-raising $11M

Behind the bankruptcy filing

What the Giudices make a year:

$79,000 (plus $120,000 in “assistance” from family members)

What they owe: $10,853,648.04

Credit Cards
$104,000
including $20,000 to Bloomingdale’s, Neiman Marcus, Nordstrom

$1,280 monthly payment for Cadillac Escalade

Mortgages
$2.6M
for eight mortgages on three homes (two have been handed back to lenders)

$5.8M Joe’s business investments

$85,600 Home repairs

$12,000 Fertility treatments

$2,300 Phone bill

Now run those numbers.  $79,000 annual income and $11 million of debt!  Now I’m sure many other families are nowhere close to this but there are many families out in more high cost of living regions that took on say $1 million in debt with a $40,000 income.  This was easily done during the credit bubble days.  I’m sure the courts are seeing many of these cases as well.  In the end, the fact that bankruptcy filings are this high shows that the economy isn’t exactly on the mend.

Goldman Subpoenaed by FCIC after Sending Billion Pages of “Rubbish” to Panel

The Financial Crisis Inquiry Commission (FCIC) is annoyed at the prospect of wading through billions of pages of “rubbish” that Goldman sent in response to an inquiry.

Here’s the result: Goldman Subpoenaed by FCIC After Panel Says Firm Hindered Probe

Goldman Sachs Group Inc. was subpoenaed by the Financial Crisis Inquiry Commission after panel members said the most profitable firm in Wall Street history engaged in a document “dump” to hinder a probe.

Goldman Sachs sent more than a billion pages of documents, FCIC Vice Chairman Bill Thomas said on a conference call with reporters today.

“We did not ask them to pull up a dump truck to our offices and dump a bunch of rubbish,” said Angelides, 56, who previously served as California’s treasurer. “This has been a very deliberate effort over time to run out the clock.”

Thomas said the panel’s requests to Goldman Sachs go back “several months.” Information the firm turned over didn’t comply with what was asked for and has put FCIC investigators in the position of “searching through the haystack for the needle,” he said.

“We expect them to provide us with the needle,” he said.

Federal prosecutors in New York are also investigating transactions by Goldman Sachs to determine whether to bring charges, people familiar with the matter said April 29. The company hasn’t been accused of criminal misconduct.

Finra Finds “Widespread Use Of High-Speed Algorithmic Trading” Was Likely Cause For Flash Crash

Zerohedge reports Finra Finds “Widespread Use Of High-Speed Algorithmic Trading” Was Likely Cause For Flash Crash

From Reuters: “Regulators probing the mysterious May 6 “flash crash” in the stock market are unlikely to find a single cause, though the widespread use of high-speed algorithmic trading was in general likely behind it, the head of the Financial Industry Regulatory Authority said on Monday. “We won’t stop until we finish the analysis. But I think the answer is there is unlikely to be a single cause,” Finra CEO Rick Ketchum told Reuters on the sidelines of a conference here. “It is much more likely to be a proliferation of algorithmic trading that was all subject to the same triggers and didn’t have the same controls.”

Unfortunately I cannot find any external reference to that quote from Reuters or anywhere else. The only reference I can find trace back to Zero Hedge.

If FINRA has indeed determined that high-speed trading is a problem, and in response kills the practice, it will eat into profits at Goldman.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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