FedUpUSA

Archive for the ‘Insolvency’ Category

We have all been lied to.  For decades, the leaders of both major political parties have promised us that they can fix our current system and that they can get our national debt under control.  As the 2012 election approaches, they are making all kinds of wild promises once again.  Well you know what?  It is all a giant sham.  The United States has gotten into so much debt that there will be no coming back from this.  The current system is irretrievably broken. 30 years ago the U.S. debt was a horrific crisis that was completely and totally out of control.  If we would have dealt with it back then maybe we could have done something about it.  But now it is 15 times larger, and we are adding more than a trillion dollars to the debt every single year.  The facts that you are about to read below should set America on fire with anger.  Please share them with as many people as you can.  What we are doing to our children and our grandchildren is absolutely nightmarish.  Words like “abuse”, “financial rape”, “theft” and “crime” do not even begin to describe what we are doing to future generations.  We were the wealthiest nation on earth, but it wasn’t good enough just to squander all of our own money.  We had to squander the money of our children and our grandchildren as well.  America has been so selfish and so self-centered that it is hard to argue that we don’t deserve what is about to happen to this country.  We have stolen the future of America, and yet we strut around as if we are the smartest generation that ever walked the face of the earth.

All of this prosperity that we see all around us is just an illusion.  It is a false prosperity that has been purchased by the biggest mountain of debt in the history of the world.

Did you know that if you added up all forms of debt in the United States and divided it up equally that every single family in the country would owe more than $683,000?

We are a nation that is absolutely addicted to debt, and the U.S. debt crisis threatens to destroy everything that our forefathers built.

Yes, everything may seem fine for the moment, but what do you think would happen if the federal government suddenly adopted a balanced budget?

1.3 trillion dollars a year would be sucked right out of the economy and we would be looking at an “economic readjustment” that would be mind blowing.

Enjoy this false prosperity while you can, because it is not going to last.

Debt is a very cruel master, and our day of reckoning is almost here.

The following are 34 shocking facts about U.S. debt that should set America on fire with anger….

#1 During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.

#2 When Ronald Reagan took office, the U.S. national debt was less than 1 trillion dollars.  Today, the U.S. national debt is over 15.2 trillion dollars.

#3 During 2011, U.S. debt surpassed 100 percent of GDP for the first time ever.

#4 According to Wikipedia, the monetary base “consists of coins, paper money (both as bank vault cash and as currency circulating in the public), and commercial banks’ reserves with the central bank.”  Currently the U.S. monetary base is sitting somewhere around 2.7 trillion dollars.  So if you went out and gathered all of that money up it would only make a small dent in our national debt.  But afterwards there would be no currency for anyone to use.

#5 The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.

#6 The U.S. government has total assets of 2.7 trillion dollars and has total liabilities of 17.5 trillion dollars.  The liabilities do not even count 4.7 trillion dollars of intragovernmental debt that is currently outstanding.

#7 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

#8 It is being projected that the U.S. national debt will surpass 23 trillion dollarsin 2015.

#9 According to the GAO, the U.S. government is facing 34 trillion dollars in unfunded liabilities for social insurance programs such as Social Security and Medicare.  These are obligations that we have already committed ourselves to but that we do not have any money for.

#10 Others estimate that the unfunded liabilities of the U.S. government now total over 117 trillion dollars.

#11 According to the GAO, the ratio of debt held by the public to GDP is projected to reach 287 percent of GDP by 2086.

#12 Others are much less optimistic.  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.

#13 The United States government is responsible for more than a third of all the government debt in the entire world.

#14 If you divide up the national debt equally among all U.S. taxpayers, each taxpayer would owe approximately $134,685.

#15 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.

#16 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.

#17 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.

#18 When you add up all spending by the federal government, state governments and local governments, it comes to 46.6% of GDP.

#19 Our nation is more addicted to government checks than ever before.  In 1980, government transfer payments accounted for just 11.7% of all income.  Today, government transfer payments account for 18.4% of all income.

#20 U.S. households are now actually receiving more money directly from the U.S. government than they are paying to the government in taxes.

#21 A staggering 48.5% of all Americans live in a household that receives some form of government benefits.  Back in 1983, that number was below 30 percent.

#22 Back in 1965, only one out of every 50 Americans was on Medicaid.  Today,one out of every 6 Americans is on Medicaid.

#23 In 1950, each retiree’s Social Security benefit was paid for by 16U.S. workers.  According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

#24 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#25 Right now, spending by the federal government accounts for about 24 percent of GDP.  Back in 2001, it accounted for just 18 percent.

#26 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.

#27 If you were alive when Christ 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.

#28 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.

#29 A trillion $10 bills, if they were taped end to end, would wrap around the globemore than 380 times.  That amount of money would still not be enough to pay off the U.S. national debt.

#30 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 470,000 years to pay off the national debt.

#31 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.

#32 According to Professor Laurence J. Kotlikoff, the U.S. is facing a “fiscal gap” of over 200 trillion dollars in the future.  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.

#33 If you add up all forms of debt in the United States (government, business and consumer), it comes to more than 56 trillion dollars.  That is more than$683,000 per family.  Unfortunately, the average amount of savings per family in the U.S. is only about $4,735.

#34 The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was created back in 1913.

But do our leaders care about statistics such as these?

No.

In fact, Barack Obama says that we need to raise the debt limit by another 1.2 trillion dollars.

The absurdity of raising the debt limit when we are already in so much debt is beautifully illustrated by the video posted below….

I just thought that video was so well done.

The “huge cuts” that Congress has agreed to are absolutely meaningless when compared to how rapidly our debt is exploding.

Calling those cuts “pocket change” would be an insult to pocket change.

But it is not just U.S. debt that is the problem.  The European debt crisisthreatens to completely unravel in 2012 and Japan actually has the highest debt to GDP ratio in the entire industrialized world.

In 2012, a total of 7,600,000,000,000 dollars of debt must be rolled over by the G-7 nations, Brazil, Russia, India and China.

That doesn’t even count new borrowing.  That number just represents old debts that are coming due that must be refinanced.

Anyone out there that insists that this debt bubble can be fixed under our current system is lying.

A massive amount of financial pain is coming.

It is time for Americans to wake up from their television-induced comas.

It is time for Americans to get very angry.

Your future has been destroyed and the future of your children and grandchildren has been destroyed.

You better take action while you still can.

The Economic Collapse

This video says it all.  Personally, I live in an upper-middle class area, at one time, even considered ‘wealthy.’  I now see precisely what is shown in this video all around me.  On my block alone, there are 3 empty houses, the result of the owners’ job losses and failure to be able to continue to pay on their mortgages.  This was not a ‘subprime’ loan area.  Some of these people weren’t even underwater on their mortgage, they just couldn’t pay ANY mortgage any more.  Some people had been looking for work for more than 2 years and had been trying to get by on various minimum wage jobs.  Most had fallen off unemployment and are now not even counted as part of the statistics.

Anyone still believing we have a 9% unemployment rate needs their head examined.  Many of the jobs that have been lost in the past 5 years are never coming back.  Should we just dispose of these jobless people like we do their statistics?  What is a life worth?  Our government seems to think that bailing out big corporate interests and insolvent banks is a much more worthy endeavor than protecting our GDP and industry.  You see, every bit of debt created in order to provide money for the banks is taking away production (jobs) from the REAL economy.  The REAL economy is not about banks or selling debt to create money – the REAL economy is about people.  People creating something of value.

Our government is not interested in creating anything of value.  It wants to continue to create debt which in turn, is leveraged to create more credit/money for the banks.  This is the unsustainable evil of our monetary system.  Until this system is destroyed, what is shown in this video will spread and grow until it reaches enormous proportions.  Maybe then people will wake up and realize what our government is doing to us.  We are debt slaves.  Maybe we should get off the plantation?

Even though most Americans have become very frustrated with this economy, the reality is that the vast majority of them still have no idea just how bad our economic decline has been or how much trouble we are going to be in if we don’t make dramatic changes immediately.  If we do not educate the American people about how deathly ill the U.S. economy has become, then they will just keep falling for the same old lies that our politicians keep telling them.  Just “tweaking” things here and there is not going to fix this economy.  We truly do need a fundamental change in direction.  America is consuming far more wealth than it is producing and our debt is absolutely exploding.  If we stay on this current path, an economic collapse is inevitable.  Hopefully the crazy economic numbers from 2011 that I have included in this article will be shocking enough to wake some people up.

At this time of the year, a lot of families get together, and in most homes the conversation usually gets around to politics at some point.  Hopefully many of you will use the list below as a tool to help you share the reality of the U.S. economic crisis with your family and friends.  If we all work together, hopefully we can get millions of people to wake up and realize that “business as usual” will result in a national economic apocalypse.

The following are 50 economic numbers from 2011 that are almost too crazy to believe….

#1 A staggering 48 percent of all Americans are either considered to be “low income” or are living in poverty.

#2 Approximately 57 percent of all children in the United States are living in homes that are either considered to be “low income” or impoverished.

#3 If the number of Americans that “wanted jobs” was the same today as it was back in 2007, the “official” unemployment rate put out by the U.S. government would be up to 11 percent.

#4 The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.

#5 One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers.

#6 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.

#7 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.

#8 According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006.  Today, that number has shrunk to 14.5 million.

#9 A Gallup poll from earlier this year found that approximately one out of every five Americans that do have a job consider themselves to be underemployed.

#10 According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.

#11 Back in 1980, less than 30% of all jobs in the United States were low income jobs.  Today, more than 40% of all jobs in the United States are low income jobs.

#12 Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job.  In July, only 81.2 percent of men in that age group had a job.

#13 One recent survey found that one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.

#14 The Federal Reserve recently announced that the total net worth of U.S. households declined by 4.1 percent in the 3rd quarter of 2011 alone.

#15 According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.

#16 As the economy has slowed down, so has the number of marriages.  According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married.  Back in 1960, 72 percent of all U.S. adults were married.

#17 The U.S. Postal Service has lost more than 5 billion dollars over the past year.

#18 In Stockton, California home prices have declined 64 percent from where they were at when the housing market peaked.

#19 Nevada has had the highest foreclosure rate in the nation for 59 months in a row.

#20 If you can believe it, the median price of a home in Detroit is now just $6000.

#21 According to the U.S. Census Bureau, 18 percent of all homes in the state of Florida are sitting vacant.  That figure is 63 percent larger than it was just ten years ago.

#22 New home construction in the United States is on pace to set a brand new all-time record low in 2011.

#23 As I have written about previously, 19 percent of all American men between the ages of 25 and 34 are now living with their parents.

#24 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.

#25 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980.  Today they account for approximately 16.3%.

#26 One study found that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.

#27 If you can believe it, one out of every seven Americans has at least 10 credit cards.

#28 The United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

#29 It is being projected that the U.S. trade deficit for 2011 will be 558.2 billion dollars.

#30 The retirement crisis in the United States just continues to get worse.  According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.

#31 Today, one out of every six elderly Americans lives below the federal poverty line.

#32 According to a study that was just released, CEO pay at America’s biggest companies rose by 36.5% in just one recent 12 month period.

#33 Today, the “too big to fail” banks are larger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

#34 The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.

#35 According to an analysis of Census Bureau data done by the Pew Research Center, the median net worth for households led by someone 65 years of age or older is 47 times greater than the median net worth for households led by someone under the age of 35.

#36 If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.

#37 A higher percentage of Americans is living in extreme poverty (6.7%) than has ever been measured before.

#38 Child homelessness in the United States is now 33 percent higher than it was back in 2007.

#39 Since 2007, the number of children living in poverty in the state of California has increased by 30 percent.

#40 Sadly, child poverty is absolutely exploding all over America.  According to the National Center for Children in Poverty, 36.4% of all children that live in Philadelphia are living in poverty, 40.1% of all children that live in Atlanta are living in poverty, 52.6% of all children that live in Cleveland are living in poverty and 53.6% of all children that live in Detroit are living in poverty.

#41 Today, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.

#42 In 1980, government transfer payments accounted for just 11.7% of all income.  Today, government transfer payments account for more than 18 percent of all income.

#43 A staggering 48.5% of all Americans live in a household that receives some form of government benefits.  Back in 1983, that number was below 30 percent.

#44 Right now, spending by the federal government accounts for about 24 percent of GDP.  Back in 2001, it accounted for just 18 percent.

#45 For fiscal year 2011, the U.S. federal government had a budget deficit of nearly 1.3 trillion dollars.  That was the third year in a row that our budget deficit has topped one trillion dollars.

#46 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 about 15 days.

#47 Amazingly, the U.S. government has now accumulated a total debt of 15 trillion dollars.  When Barack Obama first took office the national debt was just 10.6 trillion dollars.

#48 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.

#49 The U.S. national debt has been increasing by an average of more than 4 billion dollars per day since the beginning of the Obama administration.

#50 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

Of course the heart of our economic problems is the Federal Reserve.  The Federal Reserve is a perpetual debt machine, it has almost completely destroyed the value of the U.S. dollar and it has an absolutely nightmarish track record of incompetence.  If the Federal Reserve system had never been created, the U.S. economy would be in far better shape.  The federal government needs to shut down the Federal Reserve and start issuing currency that is not debt-based.  That would be a very significant step toward restoring prosperity to America.

During 2011 we made a lot of progress in educating the American people about our economic problems, but we still have a long way to go.

Hopefully next year more Americans than ever will wake up, because 2012 is going to represent a huge turning point for this country.

The Economic Collapse

The Federal Reserve has been going back and forth with reporting from Bloomberg regarding the massive bailouts and loans made to the financial sector during the crisis.  What is rather astonishing is the ability to discuss trillions of dollars of loans made to largely irresponsible financial institutions with absolutely no oversight.  Like an angry couple on Maury Povich, only an objective outsider can see how dysfunctional the relationship has become.   All of this happened in the shadows.  What is more astonishing is a large amount of questionable assets that were shifted from bank balance sheets are still sitting comfortably in the balance sheet of the Federal Reserve.  This is not disputed.  Profits at banks are on the rise but it is hard to lose money when you have unlimited access to taxpayer bailouts and the ability to dilute the currency of the nation.  U.S. banks hold $9.7 trillion in deposits with a FDIC Deposit Insurance Fund (DIF) that currently has $7.8 billion.  Do the math on that one.

A glance of U.S. banking data

Here is a nice snapshot of U.S. banking data:

Source:  Bank Tracker

What is the most amazing fact is that over $9.7 trillion in deposits is backed by a measly $7.8 billion.  This is like trying to stop a hurricane with a paper napkin.  Most Americans are earning virtually nothing on their deposits at banks but what other options are available?  Should they enter the highly volatile and opaque stock market?  When a typical savings account is paying close to 0 percent it is hard to digest but the volatility of the stock markets for this entire year have rendered a nearly neutral result.  Even money market accounts have fallen strongly since the recession hit:

“The typical money market account is down over 80 percent since 2006.  It isn’t like inflation has suddenly disappeared or that our debt problems have gone away like dust in the wind.  To the contrary the economy has gotten much more mired in a stagnating funk.”

Banks are back at making profits but it is hard to lose when you have unlimited taxpayer bailouts:

Source:  FDIC

While the Federal Reserve was trying to cast doubt on the results published by Bloomberg, they failed to address the massive amount of “assets” that remain on their balance sheet.

Read the rest at My Budget 360

The Federal Reserve released its Quarterly Report on Household Debt and Credit report this week. Calculated Risk duly reported on the results, which included this text from the Fed.

Aggregate consumer debt fell approximately $60 billion to $11.66  trillion in the third quarter of 2011 according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit.”

The decline in outstanding consumer debt reveals that households  continue to try and deleverage in the wake of a challenging economic  environment and large declines in home values,” said Andrew Haughwout,  vice president in the Research and Statistics Group at the New York Fed. “However, our findings also  provide evidence that consumer credit demand continues to increase, a  positive sign for consumer sentiment.”

Even as “consumers” struggled to get out of debt while also facing a “challenging” economic environment—this is a euphemism for the the economy can’t suck enough—and large declines in home values, credit demand continues to increase according to the Fed, although aggregate debt fell by about $60 billion out a total of $11.66 trillion. That’s $60,000,000,000 out of a total if 11,660,000,000,000, which works out to about 0.5%.

I’ll leave it to you to work out the various contradictions in the Fed’s statement. Hint: is more debt the solution to a debt problem?

But more importantly, did “consumer” debt actually decline? Consider this stink bomb—

Aggregate consumer debt fell slightly in the third quarter. As of  September 30, 2011, total consumer indebtedness was $11.66 trillion, a  reduction of $60 billion (0.6%) below its (revised) June 30, 2011 level.   The 2011Q2 and 2011Q3 totals reflect improvements in our measurement  of student loan balances, which we had previously undercounted … As a result, student  loan and total debt balances for 2011Q2 and 2011Q3 are not directly  comparable to earlier data …

These balances are not directly comparable to earlier data? Oh, yes they are! The first graph below shows 2011Q2, which reflects “undercounted” student loan balances. The second graph shows the new data for 2011Q3, which incorporates those balances.

The 2011Q2 graph from Calculated Risk. Total debt, including “undercounted” student loans, was $11.4 trillion.

The new 2011Q3 graph from Calculated Risk. Total debt, including the revised student loan balance, is now $11.66 trillion.

Using the new accounting, total household debt fell $6 billion relative to the 2nd quarter, the data for which has also been updated in Calculated Risk’s current (second) graph above. But if we compare 2011Q2 in the first chart with the 2011Q3 in the second, we see that total debt has increased by $266 billion when that new student loan data is included.

So the Fed has told us that total household debt decreased, which it did if you don’t take all the data into account, when in fact total household debt has increased. Do they think we’re stupid? I think they do. They certainly think we’re dumber than they are, and let’s face it, Fed economists are pretty thick. And the worst part of this is that nobody, not even Calculated Risk, noted the disparity. Everybody led with headlines like Bloomberg’s Household Debt Falls by 0.6% in Third Quarter. That article noted that there were “improvements” to the Fed’s student loan data.

In short, nobody gives a damn. Or didn’t bother to look at the previous data.

Here’s unorthodox economist Steve Keen talking about why we should forgive all this debt and start all over again. Keen’s views, which I have agreed with in the past, are not bullshit, although let’s face it, when all is said and done, Keen still an economist. That’s always troubling. You’ll note that the BBC interviewer Sarah Montague simply can’t wrap her mind around the idea of forgiving debt (aka. a debt jubilee). Her cognitive density, the impermeability of Sarah’s brain to unconventional thinking, becomes very annoying as the interview goes along.

You see, she has been taught that debt must always be paid back, even if it can’t be paid back, or else there is a moral hazard, although the same criteria apparently do not apply to those who issued the bad debt in the first place. Thus you will find that things really bog down in the middle of this long interview, as Sarah keeps asking the same question over and over again, and Keen struggles to answer it each time.

Decline of the Empire

The global economy is heading for a massive amount of trouble in the months ahead.  Right now we are seeing the beginning of a credit crunch that is shaping up to be very reminiscent of what we saw back in 2008.  Investors and big corporations are pulling huge amounts of money out of European banks and nobody wants to lend to those banks right now.  We could potentially see dozens of “Lehman Brothers moments” in Europe in 2012.  Meanwhile, bond yields on sovereign debt are jumping through the roof all over Europe.  That means that European nations that are already drowning in debt are going to find it much more expensive to continue funding that debt.  It would be a huge understatement to say that there is “financial chaos” in Europe right now.  The European financial system is in so much trouble that it is hard to describe.  The instant that they stop receiving bailout money, Greece is going to default.  Portugal, Italy, Ireland, Spain and quite a few other European nations are also on the verge of massive financial problems.  When the financial dominoes start to fall, the U.S. financial system is going to be dramatically affected as well, because U.S. banks have a huge amount of exposure to European debt.  The other day, I noted that investor Jim Rogers is saying that the coming global financial collapse “is going to be worse” than 2008.  Sadly, it looks like he is right on the money.  We are in a lot of trouble my friends, and things are going to get really, really ugly.

The sad thing is that we never have recovered from the last major financial crisis.  Right now, the U.S. economy is far weaker than it was back in 2007.  So what is going to happen if we get hit with another financial tsunami?  The following is what PIMCO CEO Mohamed El-Erian said recently….

“What’s most terrifying, we are having this discussion about the risk of recession at a time when unemployment is already too high, at a time when a quarter of homeowners are underwater on their mortgages, at a time then the fiscal deficit is at 9 percent and at a time when interest rates are at zero.”

Can things really get much worse than they are now?

Unfortunately, yes they can.

Not that things are not really, really bad right now.

In Los Angeles earlier this week, approximately 10,000 people lined up for free turkey dinners.

So how many people will be lining up for free food when the unemployment rate in the U.S. soars into double digits?

Right now there is so much economic pain in America that it is hard to describe.  According to a recent report from one nonprofit group, 45 percent of all people living in the United States “do not have enough money to cover housing, food, healthcare and other basic expenses”.

If this is where we are at now, how much trouble will we be in as a nation if a financial crisis worse than 2008 hits us in 2012?

The primary cause of the coming financial crisis will almost certainly be the financial meltdown that we are seeing unfold in Europe.

The economic downturn that began in 2008 caused the debt levels of quite a few European nations to soar to unprecedented heights.  It has gotten to the point where the debts of many of those nations are no longer sustainable.

So investors are starting to demand much higher returns for the much greater risk associated with investing in the bonds of those countries.

But that makes it much more expensive for those troubled nations to fund their debts, and that means that their financial troubles get even worse.

Over the past 12 months, what we have seen happen to bond yields over in Europe has been nothing short of amazing.

Just check out this chart of what has been happening to the yield on 2 year Italian bonds over the past 12 months.

And keep in mind that these bond yields have been spiking even while the European Central Bank has been buying up unprecedented mountains of bonds in an attempt to keep bond yields low.

There has been a fundamental loss of faith in the financial system, and it is not just happening in Europe.

Just check out this chart.  As that chart shows, credit default swap spreads all over the globe are absolutely skyrocketing and are now higher than we have seen at any point since the great financial crisis that shook the world during 2008 and 2009.

Panic and fear are everywhere – especially in Europe.  In fact, it looks like a run on the banks has already begun in Europe.

The following comes from a recent article in The Economist….

“We are starting to witness signs that corporates are withdrawing deposits from banks in Spain, Italy, France and Belgium,” an analyst at Citi Group wrote in a recent report. “This is a worrying development.”

Nobody wants to lend money to European banks right now.  There is a feeling that they are all vulnerable and could fail at any time, and this lack of confidence actually makes that possibility even more likely.

The following is a short excerpt from a recent CNBC article….

Money-market funds in the United States have quite dramatically slammed shut their lending windows to European banks. According to the Economist, Fitch estimates U.S. money market funds have withdrawn 42 percent of their money from European banks in general.

And for France that number is even higher — 69 percent. European money-market funds are also getting in on the act.

So what can be done?

Well, in a different CNBC article, Mitchell Goldberg was quoted as saying that even “a bazooka” is not going to be good enough to fix this situation….

“It’s too late for a bazooka,” said Mitchell Goldberg, president of ClientFirst Strategy. “Now we need inter-continental ballistic missiles. This is getting worse very quickly.”

This is kind of like watching a horrific car wreck happen in very slow motion.

The financial system of Europe is dying and everybody can see what is happening but nobody can seem to find a way to fix it.

Not that we are solving our own problems here in the United States.

The vaunted “supercommittee” that was supposed to get a handle on our debt problem was a complete and utter failure.

Barack Obama has shown that he has no clue what to do when it comes to the economy, and Ben Bernanke has been preoccupied with roaming around the country trying to get people to feel more “warm and fuzzy” about the Federal Reserve.

The Federal Reserve actually has more power over our economy than anyone else.  But instead of fixing things they only keep making things even worse.

The only people that the Fed seems to be helping are the banksters.

What you are about to read should really, really upset you.  According to a recent article in the Wall Street Journal, the Federal Reserve has actually been tipping off their upcoming moves to top financial professionals.  In turn, these financial professionals have been using that information to make a lot of money for themselves and for their clients….

Hours after an Aug. 15 meeting with Federal Reserve Chairman Ben Bernanke in his office, Nancy Lazar made a hasty call to investor clients: The Fed was dusting off an obscure 1960s-era strategy known as Operation Twist.

The news pointed to a boom in long-term bonds.

It was a good call. Over the next five weeks, prices on 10-year Treasury bonds soared, offering double-digit returns in an otherwise dismal year.

By the time the Fed announced its $400 billion Operation Twist on Sept. 21, the window for quick profits had all but slammed shut.

Ms. Lazar is among a group of well-connected investors and analysts with access to top Federal Reserve officials who give them a chance at early clues to the central bank’s next policy moves, according to interviews and hundreds of pages of documents obtained by The Wall Street Journal through open records searches.

You just can’t make stuff like this up.  The corruption at the Federal Reserve is totally out of control.  After nearly 100 years of total failure, it is time to shut down the Federal Reserve.

Not that Barack Obama should get a free pass for the role that he has played in this economic downturn.  He inherited a complete mess from Bush and has made it even worse.

Today, millions of business owners are so frustrated with Washington D.C. that they don’t know what to do.

For example, one business owner down in Georgia has posted signs with the following message on all of his company’s trucks….

“New Company Policy: We are not hiring until Obama is gone.”

The business environment in this country becomes more toxic with each passing year, and the federal government has already strangled millions of small businesses out of existence.

In addition, politicians from both parties continue to stand aside as tens of thousands of businesses, millions of jobs and hundreds of billions of dollars of our wealth get shipped out of the country.

During 2010, an average of 23 manufacturing facilities a day were shut down in the United States.  We are committing national economic suicide, and the top politicians in both political parties keep cheering for more.

Well, millions of ordinary Americans can see what is happening and they are preparing for the worst.

The following report comes from an article that was recently posted on the website of the local CBS affiliate in St. Louis….

A chain of three stores that sells survival food and gear reports a jump in sales to people who are getting prepared for the “possible collapse” of society.

“We had to order fifty cases of the meals ready to eat to keep up with the demand in the past three months,” said manager Steve Dorsey at Uncle Sam’s Safari Outfitters Inc. in Webster Groves. “That’s not normal.  Usually we sell 20 to 30 cases in a whole year.”

So are you prepared for the coming collapse?

If you still have a great job and things are still going well for you, then you should definitely be thankful.  Compared to the rest of the world, most of us are incredibly blessed.

But let there be no doubt, the U.S. economy is going to get a lot worse in the years ahead.

Just because you have a job today does not mean that you will have one tomorrow.

Just because you have a nice car and a big home today does not mean that you will have them tomorrow.

We all need to try to become a lot less dependent on “the system”, because “the system” is failing.

A whole lot of trouble is coming.

You better get ready.

The Economic Collapse