2012 is shaping up to be a very tough year for the global economy.  All over the world there are signs that economic activity is significantly slowing down.  Many of these signs are detailed later on in this article.  But most people don’t understand what is happening because they don’t put all of the pieces together.  If you just look at one or two pieces of data, it may not seem that impressive.  But when you examine all of the pieces of evidence that we are on the verge of a devastating global recession all at once, it paints a very frightening picture.  Asia is slowing down, Europe is slowing down and there are lots of trouble signs for the U.S. economy.  It has gotten to a point where the global debt crisis is almost ready to boil over, and nobody is quite sure what is going to happen next.  The last global recession was absolutely nightmarish, and we should all hope that we don’t see another one like that any time soon.  Unfortunately, things do not look good at this point.

The following are 22 signs that we are on the verge of a devastating global recession….

#1 On Thursday it was announced that U.S. jobless claims had soared to a six-week high.

#2 Hostess Brands, the maker of Twinkies and Wonder Bread, has filed for bankruptcy protection.

#3 Sears recently announced that somewhere between 100 and 120 Sears and Kmart stores will be closing, and Sears stock has fallen nearly 60% in just the past year.

#4 Over the past 12 months, dozens of prominent retailers have closed stores all over America, and one consulting firm is projecting that there will be more than 5,000 more store closings in 2012.

#5 Richard Bove, an analyst at Rochdale Securities, is projecting that the global financial industry will lose approximately 150,000 jobs over the next 12 to 18 months.

#6 Investors are pulling money out of the stock market at a rapid pace right now.  In fact, as an article posted on CNBC recently noted, investors pulled more money out of mutual funds than they put into mutual funds for 9 weeks in a row.  Are there some people out there that are quietly repositioning their money for tough times ahead?….

Investors yanked money out of U.S. equity mutual funds for a ninth-consecutive week despite a bullish 2012 outlook from Wall Street and a December rally that’s carried over into the New Year.

#7 There are signs that the Chinese economy is seriously slowing down.  The following comes from a recent article in the Guardian….

Growth had slowed to an annual rate of 1.5% in the second and third quarters of 2011, below the “stall speed” that historically led to recession.

#8 The Bank of Japan says that the economic recovery in that country “has paused“.

#9 Manufacturing activity in the euro zone has fallen for five months in a row.

#10 Germany’s economy actually contracted during the 4th quarter of 2011.  At this point many economists believe that Germany is already experiencing a recession.

#11 According to a recent article by Bloomberg, it is being projected that the French economy is heading into a recession….

The French economy will shrink this quarter and next, suggesting the nation is in a recession as investment and consumer spending stagnate, national statistics office Insee said.

#12 There are a multitude of statistics that indicate that the UK economy is definitely slowing down.

#13 The credit ratings of Italy, Spain, Portugal, France and Austria all just got downgraded.

#14 It is being reported that the Spanish economy contracted during the 4th quarter of 2011.

#15 Bad loans in Spain recently hit a 17-year high and the unemployment rate is at a 15-year high.

#16 According to a recent article in the Telegraph, the Italian government is forecasting that there will be a recession for the Italian economy in 2012….

#17 Italy’s youth unemployment rate has hit the highest level ever.

#18 The unemployment rate in Greece for those under the age of 24 is now at 39 percent.

#19 Greece is already experiencing a full-blown economic depression.  About a third of the country is now living in poverty and extreme medicine shortages are being reported.  Things have gotten so bad that entire families are being ripped apart.  According to the Daily Mail, hundreds of Greek children are being abandoned because the economy has gotten so bad that their parents simply cannot afford to take care of them anymore.  The note that one mother left with her child was absolutely heartbreaking….

One mother, it said, ran away after handing over her two-year-old daughter Natasha.

Four-year-old Anna was found by a teacher clutching a note that read: ‘I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry.’

#20 In Greece, large numbers of people are simply giving up on life.  Sadly, the number of suicides in Greece has increased by 40 percent in just the past year.

#21 In many European countries, the money supply continues to contract rapidly.  The following comes from a recent article in the Telegraph….

Simon Ward from Henderson Global Investors said “narrow” M1 money – which includes cash and overnight deposits, and signals short-term spending plans – shows an alarming split between North and South.

While real M1 deposits are still holding up in the German bloc, the rate of fall over the last six months (annualised) has been 20.7pc in Greece, 16.3pc in Portugal, 11.8pc in Ireland, and 8.1pc in Spain, and 6.7pc in Italy. The pace of decline in Italy has been accelerating, partly due to capital flight. “This rate of contraction is greater than in early 2008 and implies an even deeper recession, both for Italy and the whole periphery,” said Mr Ward.

#22 The major industrialized nations of the world must roll over trillions upon trillions of dollars in debt during 2012.  At a time when credit is becoming much tighter, this is going to be quite a challenge.  The following list compiled by Bloomberg shows the amount of debt that some large nations must roll over in 2012….

Japan: 3,000 billion U.S.: 2,783 billion Italy: 428 billion France: 367 billion Germany: 285 billion Canada: 221 billion Brazil: 169 billion U.K.: 165 billion China: 121 billion India: 57 billion Russia: 13 billion

Keep in mind that those numbers do not include any new borrowing.  Those are just old debts that must be refinanced.

As I mentioned at the top of this article, things do not look good.

The last thing that we need is another devastating global recession.

As I wrote about yesterday, the U.S. economy is in the midst of a nightmarish long-term decline.  The last major global recession helped to significantly accelerate that decline.

So what will happen if this next global recession is worse than the last one?

Sadly, the people that will get hurt the most by another recession will not be the wealthy.

The people that will get hurt the most will be the poor and the middle class.

So what should all of us be doing about this?

We should use the time during this “calm before the storm” to prepare for the hard times that are coming.

As always, let us hope for the best and let us prepare for the worst.

But things certainly do not look promising for the global economy in 2012.

The Economic Collapse

If you think the U.S. economy is bad now, just wait for a few months.  Things are about to become absolutely nightmarish.  None of the long-term economic trends that are hollowing out our economy have been addressed and more bad economic news seems to come out virtually every single day.  Now there is constant talk of the “next recession” in the mainstream media.  But did the last recession ever truly end?  The number of good jobs continues to decline, more stores are closing, incomes continue to go down, credit card debt and student loan debt are soaring, the housing market resembles a corpse, the number of Americans living in poverty continues to rise and government debt is at unprecedented levels.  We are losing blood fast, and almost all of our leaders are either too corrupt or too incompetent to be able to do anything about it.  The U.S. economy really and truly is about to go into the toilet, and if something is not done very quickly we are going to experience a complete and total economic disaster in this nation.

Americans have been promised over and over that this economic downturn is just “temporary” and that things will return to normal soon.  During this upcoming election cycle, the Democrats will swear that they have all the answers and that if we just elect them everything will be okay.  The Republicans will also swear that they have all the answers and that if we just elect them everything will be okay.

Well, both sides are lying.  The economic plans of both major political parties are a joke.  Neither of them can restore economic prosperity to this nation.

Our politicians could delay the coming economic collapse by borrowing gigantic piles of money and pumping all of that cash into the economy.  But stealing from our children and our grandchildren is not exactly sound economic policy.

Yes, the U.S. economy is in bad shape right now, but things are about to get even worse.  The long-term problems that are destroying our economy have not been fixed, and the leaks in our ship are going to continue to grow.

The following are 30 signs that the U.S. economy is about to go into the toilet….

#1 An increasing number of unemployed Americans have become so desperate that they have started to look for work overseas.  For example, the number of Americans that are submitting applications for temporary work visas in Canada has approximately doubled since 2008.  Other Americans are willing to learn foreign languages and travel to the other side of the world if that is what it takes to land a decent job.  Just consider the following quote from a recent USA Today report….

Job placement firms are reporting a surge in American worker interest in booming economies such as Hong Kong, Singapore, China and, increasingly, India. Hunt Partners, an executive search firm, estimates that it’s getting 50% to 100% more unsolicited résumés from Americans looking for Asia-based positions today than before the recession.

#2 When Barack Obama first took office, the official U.S. unemployment rate was 7.6 percent.  Today it is 9.1 percent.

#3 The number of Americans that are concerned that they will lose their jobs continues to hover near record highs.  According to Gallup, 30 percent of all employed Americans are worried that they will soon be laid off.

#4 After three straight years of very high unemployment, you can feel frustration and desperation in the air almost everywhere that you go.  Many unemployed Americans are now at the end of their ropes.  The following is from a testimonial that was recently posted on The Atlantic….

The most difficult part of the job search is:

1. that I don’t live near a factory or outsource outlet in China, India, or Malaysia.

2. trying not to appear desperate for a job when I am, in fact, quite desperate for a job.

3. that I am subject to everyone’s advice on how to get a job, but no real job leads.

4. that I am reminded that having a good job is not an entitlement.

5. that when I become depressed from my job search, I’m told told to cheer up or else give a bad vibe to prospective employers … yet when I become happy through non-search related activities, I am reminded that I should be looking for work

7. that when I confide to friends and family that I have “given up” to pursue more fruitful interests,  it elicits a crushing look of disbelief, disappointment, and disgust

8. waiting for permission to give up.

#5 The percentage of American men that are employed continues to plummet.  In July, only 63.5 percent of all men in the United States had a job.  Since 1948, that number has only been lower one time (63.3 percent in December 2009).

#6 Back in the 1950s, manufacturing accounted for about 28 percent of U.S. GDP.  Last year, it accounted for just 11.7 percent.  Meanwhile, manufacturing now accounts for about 25 percent of GDP in China and they now actually have more factory production each year than we do.  Sadly, Barack Obama is pushing for even more trade agreements that will send millions more of our jobs overseas.

#7 The percentage of Americans that are working low paying jobs continues to relentlessly march upwards.  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.

#8 According to John Williams of shadowstats.com, after you add in all short-term discouraged workers, all long-term discouraged workers and all Americans that are working part-time because they cannot find full-time employment, the real unemployment rate should be approximately 23 percent.

#9 We are starting to see another huge wave of store closings and layoffs.  For example, the parent company of Payless stores has announced that it will be permanently closing 475 stores.  Borders is in the process of closing every single one of its 399 stores.  Also, Bank of America has just announced that it will be closing about 600 branches, and that could result in the loss of about 30,000 good jobs.

#10 Median household income has fallen for three years in a row.

#11 Americans are really starting to rack up consumer debt once again.  According to Time Magazine, U.S. consumers are on pace to collectively add 54 billion dollars in credit card debt in 2011.

#12 Student loan defaults are rising very sharply. Just consider the following excerpt from a recent New York Times article….

The share of federal student loan defaults rose sharply last year, especially at for-profit colleges and universities, where 15 percent of borrowers defaulted in the first two years of repayment, up from 11.6 percent the previous year.

#13 According to a chart in The Economist, whenever the number of newspaper articles in the Financial Times and the Wall Street Journal that mention the word “recession” goes over 1,500 in a particular quarter, the U.S. economy almost always goes into a recession.

#14 The U.S. housing crash just continues to get worse.  The index of home builder sentiment put out by the National Association of Home Builders fell once again during the month of September.  With such a glut of unsold foreclosed homes on the market, it is making things really hard of home builders.  Things have gotten so bad that even the U.S. government now owns nearly a quarter of a million foreclosed homes.  The impact of this housing nightmare on families has been absolutely devastating.  Just check out what a recent Time Magazine article had to say about what has been going on in California….

The impact on children has been brutal: since 2007, 7% of the state’s children have had a foreclosure process started on their homes, the fourth-highest level in the nation, according to a study released this month by the Annie E. Casey Foundation.

#15 Many believe that due to much tighter lending standards, it is now harder to be approved for a mortgage than at any other time since World War II.  This is absolutely crushing the housing market.

#16 Most Americans don’t seem to expect housing prices to recover for an extended period of time.  One recent survey found that 54 percent of Americans believe that there will not be a housing recovery until “2014 or later“.

#17 The combined debt of the largest GSEs (Fannie Mae, Freddie Mac and Sallie Mae) has increased from 3.2 trillion in 2008 to a whopping 6.4 trillion in 2011.  If that debt goes bad, U.S. taxpayers will be left holding the bill.

#18 There are now nearly 50 million Americans that do not have health insurance, and the percentage of Americans covered by employer-based health plans has fallen for 11 years in a row.  Meanwhile, Americans now spend about 3 times as much on health care as they did back in 1990.

#19 The Postal Service has publicly announced that it is “on the verge” of financial collapse.

#20 The number of small businesses continues to fall.  I recently noted this fact on The American Dream Blog….

The number of “self-employed” Americans continues to rapidly shrink.  According 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.  Even though we have 14 million unemployed people in this country and jobs are incredibly difficult to come by, the number of people trying to work for themselves continues to decrease because the environment for small businesses in this country has become so incredibly toxic.

#21 American consumers have become tremendously pessimistic.  According to one recent survey, 61 percent of all Americans believe that they will not return to their “pre-recession” lifestyles until at least 2014.  According to a different recent survey, 39 percent of Americans actually believe that the U.S. economy has now entered a “permanent decline”.

#22 Many U.S. investors certainly seem to believe that trouble is coming.  According to CNN, last month the number of bets against the S&P 500 was the highest that we have seen in about a year.

#23 The number of U.S. households that are “doubling up” continues to grow.  According to the U.S. Census Bureau, the number of combined households has increased by 10.7 percent since 2007.

#24 When Barack Obama moved into the White House, the average price of a gallon of gasoline in the United States was $1.83.  Today it is $3.58.

#25 The number of Americans living in poverty grew by 2.6 million last year.  That was the largest increase since the U.S. government began calculating poverty figures back in 1959.

#26 Back in the year 2000, 11.3% of all Americans were living in poverty.  Today, 15.1% of all Americans are living in poverty.

#27 On Barack Obama’s first day on the job, there were about 32 million Americans on food stamps.  Today, there are more than 45 million Americans on food stamps.

#28 If there is a financial collapse in Europe, that will definitely plunge us into another recession.  Right now, things do not look promising.  At this point, headlines all over the world are proclaiming that Greece is dangerously close to defaulting.

#29 At some point soon, investors all over the globe may decide that it is time to start dumping U.S. government debt.  For example, Chinese officials are now openly talking about the need to “liquidate” their holdings of U.S. Treasuries.

#30 The U.S. national debt continues to explode in size and spiral out of control.  According to Professor Laurence J. Kotlikoff, the U.S. “fiscal gap” increased by about 6 trillion dollars last year.  In fact, Kotlikoff makes a compelling argument that Greece is actually in better shape financially than the United States is.

Do you now understand how much trouble we are in?

The long-term trends that are destroying us continue to get worse.

The United States is steamrolling directly toward an economic collapse.

When this economy hits bottom and splatters all over the place, it is not going to be easy to fix.

The America that we know today is going to be wiped out by a gigantic mountain of debt and by the consequences of decades of really bad decisions.

We were handed the keys to the greatest economic machine in the history of the world and we have wrecked it.

So prepare for really, really hard times ahead.

The era of endless prosperity is ending.

Next comes the pain.

The Economic Collapse

Recent Gallup polls show that Three Years After Crisis, Little Sign of Economic Relief in U.S.

1. There has been no improvement in underemployment (counting part-time workers) from a year ago
2. Job creation has been in a narrow range since October 2010
3. Consumer spending has been stagnant since January 2009
4. Economic confidence is near the lows seen at the depth of the depression

click on any chart for sharper image

Economic Confidence: Back at Recessionary Levels

Americans’ confidence in the U.S. economy is now at its lowest point since February 2009 — near the conclusion of the recession that officially ended in June 2009. Gallup’s Economic Confidence Index was -52 in August, above its financial crisis lows, but much lower than the -21 to -35 range measured from June 2009 to June 2011.

Americans’ current level of economic confidence — which represents their views on the current state and future direction of the nation’s economy — is decidedly negative. Seventy-seven percent said the economy was getting worse in August, the highest — by far — since February 2009, the month in which Congress passed a $787 billion stimulus bill in hopes of lifting the U.S. economy out the depths of the recession.

Job Creation: Improved From 2009-2010 Lows, but Far From Early 2008 Levels

The +13 Job Creation Index for August falls into the +10 to +15 range Gallup has measured since October 2010. The good news is that for nearly a year, Gallup has found consistently higher rates of net new job creation (the difference between hiring and letting go) than it did for the first two years after the global economic collapse. The not-so-good news is that the current rate of job creation is still just half of the +26 score Gallup found when it began tracking this metric in January 2008, when the nation was already technically in a recession.

Currently, 32% of workers say their employer is hiring and 19% say their employer is letting workers go, compared with 40% and 14%, respectively, in January 2008.

Underemployment and Employment: Stuck at Year-Ago Levels

Gallup found 18.5% of workers underemployed, including 9.1% unemployed, in August 2011. These figures are based on Gallup’s measure of employment, which is not seasonally adjusted. Both of the current figures are statistically similar to what they were a year ago, meaning the employment situation in the U.S. is no better now than it was at that time.

Consumer Spending: Nowhere Near 2008 Levels

Americans’ spending has remained essentially stagnant since it fell dramatically in January 2009. Spending in stores, restaurants, gas stations, and online has averaged $66 per day so far in 2011 — similar to the $65 is 2010 and $64 in 2009. This compares with an average of $96 per day in 2008. That year, Americans’ daily spending ranged from $81 to $114 per day in monthly averages. Since 2009, monthly spending averages have ranged between $58 and $75.

No Real Recovery

Clearly there has been no real recovery from the point of view of consumers. There was a financial recovery that is now crumbling, led by bank stocks.

BAC Bank of America

$BKX Banking Index

C Citigroup

Banks Stock fueled the decline in 2008 and have done so this year as well. There was never a recovery in the real economy and now bank stocks signal the financial recovery is over as well.

Mike  “Mish”  Shedlock

Global Economic Analysis

Global Recession, Right Here, Right Now: Japan’s Capital Spending Plummets; Eurozone PMI, UK PMI, US ISM ex-Inventory, China Exports in Contraction

It’s time to stop debating whether or not the US or Europe is headed into recession. The facts show the entire global economy is in recession.

Global Recession Supporting Data-Points

• Euro zone’s manufacturing purchasing managers’ index fell to a two-year low of 49.0 in August, down from a preliminary reading of 49.7. (Business Insider)
• PMI’s contractions in Ireland, France, Italy, Spain and Greece. (Business Insider)
• Germany’s manufacturing PMI slowed to its lowest level since September 2009, slumping to 50.9, well below an initial estimate of 52.0. (Business Insider)
• US Manufacturing ISM ex-inventory Growth in contraction (Mish)
• Japan’s PMI fell at three-month low (Financial Times)
• PMI Readings in Switzerland, Sweden Drop (Financial Times)
• British manufacturing PMI falls 49, a 26-month low, in contraction (MarketWatch)
• Germany private consumption fell for first time since Q4 2009, Manufacturing growth slowest in 23 months (Reuters)
• Japan Capital Spending Plummets 7.8% In Q2, Expectations were 1% Increase (RTT)
• US Construction Declines 3.5% vs. Same period in 2010 (US Census Bureau)
• China exports to US contract, PMI barely above contraction (Reuters)
• Container traffic at Port of Long Beach drops 3.17% smack in face of normal Christmas season ramp-up (Bloomberg)
• Canada GDP unexpectedly declines led by a 2.1% drop in exports(Bloomberg)
• Brazil Unexpectedly cuts interest rates .5% to combat recession.62 of 62 Analysts Miss Call on rate cut (Mish)
• Taiwan’s PMI dropped to 45.2 in August, the lowest reading since January 2009 (Reuters)
• German economy grew just 0.1 percent in the second quarter (Reuters)
• Switzerland, economy grew at its slowest pace since 2009, as a record strong Swiss franc also bites into exports. (Reuters)
• Retail Giant in Australia Warns of Massive Price Deflation and Falling Sales, “Hardest Christmas in Retailer Lives” Coming Up (Mish)
• US Zero Jobs Growth, Unemployment Rate Flat at 9.1%; Charts, Graphs, Details (Mish)

Ten Things to Remember

1. Prior stimulus in the US is dead, having run its full course
2. There is no incentive in the US Congress for more stimulus
3. Austerity measures have yet to hit Italy and France
4. Austerity measures will continue to bite Spain, Greece, Ireland
5. Germany export machine will die without the rest of Europe
6. QE3 will fail much sooner than QE2 as interest rates already extremely accommodating
7. Gold may respond well to competitive currency devaluation schemes
8. The Eurozone is highly likely to breakup although timing is unknown
9. Global equities and commodities are priced for perfection.
10. Perfection is not happening.

Additional Reads

Talk of avoiding recession when the global economy is clearly in one and fundamentals are horrendous is sheer lunacy.

In case you missed them, please consider ….

• US In Recession Right Here, Right Now
• Yes Virginia, U.S. Back in Deflation; Inflation Scare Ends; Hyperinflationists Wrong Twice Over

Mike  “Mish”  Shedlock

Global Economic Analysis

If you listen to Ben Bernanke, Barack Obama and the mainstream media long enough, and if you didn’t know any better, you might be tempted to think that the economic crisis is long gone and that we are in the midst of a burgeoning economic recovery.  Unfortunately, the truth is that the economic crisis is far from over.  In 2010, more homes were repossessed than ever before, more Americans were on food stamps than ever before and a smaller percentage of American men had jobs than ever before.  The reality is that the United States is an economic basket case and all of these natural disasters certainly are not helping things.  The Federal Reserve has been printing gigantic piles of money and the U.S. government has been borrowing and spending cash at a dizzying pace in an all-out effort to stabilize things.  They have succeeded for the moment, but our long-term economic problems are worse then ever.  We are still in the middle of a full-blown economic crisis and things are about to get even worse.

If you know someone that is foolish enough to believe that the economic crisis is over and that our economic problems are behind us, just ask that person the following questions….

#1 During the 23 months of the “Obama recovery”, an average of about 23,000 jobs a month have been created.  It takes somewhere in the neighborhood of 150,000 jobs a month just to keep up with population growth.  So shouldn’t we hold off a bit before we declare the economic crisis to be over?

#2 During the “recession”, somewhere between 6.3 million and 7.5 million jobs were lost.  During the “Obama recovery”, approximately 535,000 jobs have been added.  When will the rest of the jobs finally come back?

#3 Of the 535,000 jobs that have been created during the “Obama recovery”, only about 35,000 of them are permanent full-time jobs. Today, “low income jobs” account for 41 percent of all jobs in the United States. If our economy is recovering, then why can’t it produce large numbers of good jobs that will enable people to provide for their families?

#4 Agricultural commodities have been absolutely soaring this decade.  The combined price of cotton, wheat, gasoline and hogs is now more than 3 times higher than it was back in 2002.  So how in the world can the Federal Reserve claim that inflation has been at minimal levels all this time?

#5 Back in 2008, banks had a total of 27 billion dollars in excess reserves at the Fed.  Today, banks have a total of approximately 1.5 trillion dollars in excess reserves at the Fed.  So what is going to happen when all of this money eventually hits the economy?….

#6 If the U.S. economy is recovering, then why are shipments by U.S. factories still substantially below 2008 levels?

#7 Why are imports of goods from overseas growing much more rapidly than shipments of goods from U.S. factories?

#8 According to Zillow, the average price of a home in the U.S. is about 8 percent lower than it was a year ago and that it continues to fall about 1 percent a month. During the first quarter of 2011, home values declined at the fastest rate since late 2008. So can we really talk about a “recovery” when the real estate crisis continues to get worse?

#9 According to a shocking new survey, 54 percent of Americans believe that a housing recovery is “unlikely” until at least 2014.  So how is the housing industry supposed to improve if so many people are convinced that it will not?

#10 The latest GDP numbers out of Japan are a complete and total disaster.  During the first quarter GDP declined by a stunning 3.7 percent.  Of course I have been saying for months that the Japanese economy is collapsing, but most mainstream economists were absolutely stunned by the latest figures.  So will the rest of the world be able to avoid slipping into a recession as well?

#11 Next week, Republicans in the House of Representatives are going to allow a vote on raising the debt ceiling.  Everyone knows that this is an opportunity for Republican lawmakers to “look tough” to their constituents (the vast majority of which do not want the debt ceiling raised).  Everyone also knows that eventually the Republicans are almost certainly going to cave on the debt ceiling after minimal concessions by the Democrats.  The truth is that neither “establishment Republicans” nor “establishment Democrats” are actually serious about significantly cutting government debt.  So why do we need all of this political theater?

#12 Why are so many of our once great manufacturing cities being transformed into hellholes?  In the city of Detroit today, there are over 33,000 abandoned houses, 70 schools are being permanently closed down, the mayor wants to bulldoze one-fourth of the city and you can literally buy a house for one dollar in the worst areas.

#13 According to one new survey, about half of all Baby Boomers fear that when they retire they are going to end up living in poverty.  So who is going to take care of them all when the money runs out?

#14 According to the U.S. Bureau of Labor Statistics, an average of about 5 million Americans were being hired every single month during 2006.  Today, an average of about 3.5 million Americans are being hired every single month.  So why are our politicians talking about “economic recovery” instead of “the collapse of the economy” when hiring remains about 50 percent below normal?

#15 Since August, 2 million more Americans have left the labor force.  But the entire period from August to today was supposed to have been a time of economic growth and recovery.  So why are so many Americans giving up on looking for a job?

#16 According to Gallup, 41 percent of Americans believed that the economy was “getting better” at this time last year.  Today, that number is at just 27 percent.  Are Americans losing faith in the U.S. economy?

#17 According to the U.S. Census, the number of children living in poverty has gone up by about 2 million in just the past 2 years, and one out of every four American children is currently on food stamps.  During this same time period, Barack Obama and Ben Bernanke have told us over and over that the U.S. economy has been getting better. So what is the truth?

#18 America has become absolutely addicted to government money. 59 percent of all Americans now receive money from the federal government in one form or another. U.S. households are now receiving more income from the U.S. government than they are paying to the government in taxes. Americans hate having their taxes raised and they hate having their government benefits cut.  So is there any hope that this will ever be turned around before disaster strikes?

#19 The combined debt of the major GSEs (Fannie Mae, Freddie Mac and Sallie Mae) has increased from 3.2 trillion in 2008 to 6.4 trillion in 2011.  How in the world is the U.S. government going to be able to afford to guarantee all of that debt on top of everything else?

#20 If the U.S. national debt (more than 14 trillion dollars) was reduced to a stack of 5 dollar bills, it would reach three quarters of the way to the moon.  The U.S. government borrows about 168 million dollars every single hour.  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.  So how in the world can our politicians tell us that everything is going to be okay?

The Economic Collapse

When Barack Obama, the Federal Reserve and the mainstream media tell us that we are in the middle of an economic recovery, is that supposed to be some kind of sick joke?  According to newly released numbers, over 44 million Americans are now on food stamps.  That is a new all-time record and that number is 13.1% higher than it was just one year ago.  So how many Americans have to go on food stamps before we can all finally agree that the U.S. economy is dying?  50 million?  60 million?  All of us?  The food stamp program is the modern equivalent of the old bread lines.  More than one out of every seven Americans now depends on the federal government for food.  Oh, but haven’t you heard?  The economy is showing dramatic improvement.  Corporate profits are up.  The stock market is soaring.  Happy days are here again.

It just seems inconceivable that anyone can claim that the economy is improving when the number of Americans on food stamps continues to set a brand new record every single month.  But the food stamp program is not the only indicator that the economy is still having massive problems.  The following are 10 more reasons why the U.S. economy is simply not getting any better….

#1 Some recent statistics actually indicate that the number of unemployed Americans is still going up.  According to Gallup, unemployment in the United States rose to 10.3% at the end of February.  That is the highest number Gallup has reported since early last year.

#2 The housing industry is still a complete and total disaster.  In fact, new home sales in the U.S. in January were 11.2% lower than they were in December.  Not only that, the number of new home sales in January was 18.6% lower than the number of new home sales in January 2010.  That is not a sign of improvement.

#3 There wouldn’t even be much of a housing industry at all at this point if it was not for the U.S. government.  Right now the U.S. government is either writing or guaranteeing well over 90 percent of all mortgages in the United States.  So what would the housing market look like in 2011 if the government was not in the picture?

#4 In 2010, more than a million U.S. families lost their homes to foreclosure for the first time ever, and that number is expected to go even higher in 2011.

#5 Due to rampant economic decay and record numbers of foreclosures there are areas in most of our major cities that now look like “war zones”.  For example, the Huffington Post is reporting that there are now approximately 15,000 vacant buildings in the city of Chicago and there are approximately 60,000 vacant houses and apartments in the city of Las Vegas.

#6 According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier.  This represented 8.5% of median monthly income.  So what is going to happen when gas prices go even higher?  Sadly, the average price of gasoline in the U.S. has risen another 4 cents since yesterday and it is likely to go much higher from here.

#7 The U.S. trade deficit continues to grow.  The trade deficit was about 33 percent larger in 2010 than it was in 2009, and the 2011 trade deficit is expected to be even bigger.

#8 The CredAbility Consumer Distress Index, which measures the average financial condition of U.S. households, declined in every single quarter in 2010.

#9 The number of Americans that have become so discouraged that they have given up searching for work completely now stands at an all-time high.

#10 The U.S. national debt is growing faster than ever.  The Obama administration is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars.  It is hard to even imagine how much money that is.  If you went out today and started spending one dollar every single second, it would take you over 31,000 years to spend one trillion dollars.  Long ago the U.S. government should have been getting these deficits under control, but instead they are just getting even larger.

So in light of the statistics above, can anyone really claim that we are in the middle of an economic recovery?

The truth is that there is no sign that any of the long-term trends that are destroying the U.S. economy are even slowing down.

Millions of jobs continue to be shipped overseas.

The U.S. dollar continues to be devalued.

The federal government continues to go into more debt.

State and local governments continue to go into more debt.

Our trade deficit continues to grow.

Our cities continue to be transformed into wastelands as they are being systematically deindustrialized.

The number of Americans that are dependent on the government continues to soar.

The U.S. middle class continues to shrink.

I know that I harp on these themes over and over, but it is vitally important that everyone understands that the mainstream media is lying to us.

The U.S. economy is dying a very painful death and there is no hope on the horizon.

Things are not going to be getting better.  Well, they may get a bit better for the boys down on Wall Street, but for the rest of us our standards of living are going to continue to decline.

The best days for the U.S. economy are already behind us.  What lies ahead is a whole lot of pain.

We are going to pay the price for decades of corruption and incompetence.

An economic collapse is coming and you had better get ready.

The Economic Collapse

How in the world can anyone claim that things are getting better?  Sometimes the numbers are so clear that they simply cannot be denied.  According to the U.S. Census Bureau, median household income in the United States fell from $51,726 in 2008 to $50,221 in 2009.  That was the second yearly decline in median household income in a row.  In other words, America is getting poorer.  Just let that statistic above sink in for a little bit.  In 2009, American families had roughly $1,500 less coming in than the year before.  Not that the cost of living has gone down either.  Have you been to the supermarket lately?  Things are getting ridiculous out there.  In fact, middle class American families are being squeezed as never before.  More mothers and fathers are scrambling to find second and third jobs just to pay the mortgage and to keep the lights on and to put food on the table.  This is not a time of prosperity in America.  We are in a state of serious decline and it is time to wake up and admit it.

When you stop and analyze the new Census data, something jumps out at you right away.  You quickly realize that these income declines are not limited to just a few regions of the country – they are literally happening from coast to coast.

The U.S. economy is in deep, deep trouble and the proof is in the numbers.  The following are 12 statistics that reveal just how far the standard of living in America is declining….

1 – According to the Census Bureau, median household income dropped in 34 U.S. states in 2009, and the only state where median household income actually increased was in North Dakota.

2 – The Census Bureau data also revealed that of the 52 largest metro areas in America, only the city of San Antonio did not see a decline in median household income in 2009.

3 – 35 percent of all U.S. households now live on $35,000 or less.

4 – According to the Census Bureau, the percentage of Americans living below the poverty line is the highest it has been in 15 years.

5 – The number of Americans enrolled in the food stamp program passed the 41 million mark for the first time ever in June.

6 – The number of Americans in the food stamp program increased a staggering 55 percent from December 2007 to June 2010.

7 – One out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government.

8 – Nearly 10 million Americans now receive unemployment insurance, which is almost four times as many that were receiving it back in 2007.

9 – In 2009, U.S. consumer spending experienced the biggest decline since 1942.

10 – As millions of young Americans struggled just to survive, marriages fell to a record low in 2009.  Today, only 52% of Americans 18 years or older are married. 

11 – The only group that saw their household income increase in 2009 was those making $180,000 or more.

12- According to the Huffington Post, the gap between the richest and poorest Americans grew in 2009 to its largest margin ever….

The top-earning 20 percent of Americans – those making more than $100,000 each year – received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent made by the bottom 20 percent of earners, those who fell below the poverty line, according to the new figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

Not that it is a bad thing to make money. 

Contrary to what our socialist friends may think, it is actually a very good thing to work hard and make money.

The point is that the game is rigged and the bottom 80 percent of us are being left behind.

The middle class is being systematically destroyed.  At the rate we are going, we will eventually have a very small group of ultra-wealthy Americans and a gigantic mountain of very poor Americans that are barely able to survive.

The answer to this is not a “redistribution of wealth”. 

What middle class Americans actually need are good jobs with good benefits.

You know, the kind of jobs that the U.S. economy used to produce.

For the vast majority of Americans, all they have to offer in the marketplace is their labor.  If they cannot get someone to hire them for a wage that will enable them to take care of their families then they simply cannot make it without government assistance.

But what our leaders have done in the name of “globalism” is that they have essentially merged our economy with the economies of nations such as China where blue collar workers are paid about a dollar an hour to do the same jobs that American workers get paid 15 to 20 dollars an hour to do.

As a result, jobs and factories are fleeing the United States so rapidly it is hard to even describe.  The deindustrialization of America is happening right in front of our eyes, but the American people have become so dumbed down that most of them don’t even seem to have the capacity to understand what is going on. 

Quite a few advocates of “free trade” (which is not “free” or “fair” at all under our current system) have left comments on my columns telling me that the American people better just suck it up because this is how it is now and the world isn’t going back.  These advocates of the globalist system say that the American people just need to toughen up and learn to compete and need to just accept that the standard of living for workers across the globe is going to be equalized and that is all there is to it.

So are you ready to have the same standard of living as a Chinese sweatshop worker who works 12 hours a day for one dollar an hour?

That is where we are headed.

But things did not have to be this way.  We did not have to merge our economy with communist China and allow them to keep their currency devalued 40 percent lower than it should be so that they could dump massive amounts of cheap goods on our shores.  We did not have to elect politicians that believe that “globalism” is the answer to all of our problems.  We did not have to sign on to the WTO, NAFTA and all the other “free trade” agreements that are destroying the American middle class.

Labor is now a global commodity.  American workers are now part of the global labor force.  The bargaining power of the average American worker has dropped through the floor.  Now the monolithic predator corporations that dominate our economy don’t even have to deal with American workers if they don’t want to.

Very few of our politicians admitted that merging us into a one world economy would mean a dramatic decline in the standard of living of middle class Americans.

But that is exactly what is happening.

Meanwhile, the federal government, our state governments and our local governments keep going into massive amounts of new debt in an effort to keep paying the bills. 

There are some state governments, like Illinois, that are basically flat broke.  In fact, Illinois doesn’t even bother to pay many of their bills anymore.

Of course the federal government is the worst offender of them all.  The U.S. national debt is rapidly approaching 14 trillion dollars, and most of us have gotten so accustomed to it that we don’t even talk about it much anymore.

That is how bizarre things have gotten.

As America keeps getting poorer, and as U.S. taxpayers see their incomes continue to decline, how in the world are U.S. government finances going to turn around?

The truth is that our leaders should be in full blown crisis mode in an attempt to fix this thing.  Pieces of the U.S. economy are literally falling off all around us and our leaders are pushing the debt accelerator to the floor as we head toward a giant cliff.

But instead our politicians are prancing about the countryside telling us that everything is going to be just great as long as we cast our votes for them in the fall.

And the mainstream media keeps telling us that the “recession” is over and that soon the U.S. economy will be better than ever.

Is it any wonder that faith in the mainstream media is now at an all-time low?      

According to a new poll just released by Gallup, the number of Americans that have little to no trust in the mass media (57%) is at an all-time high.

A significant percentage of the American people is starting to wake up.

What about you?

Are you awake yet?

The Economic Collapse

According to the NBER, at long last the great recession is officially over. Bloomberg reports Worst U.S. Recession Since 1930s Ended in June 2009.

The longest and deepest U.S. recession since the Great Depression ended in June 2009, lasting 18 months, the National Bureau of Economic Research said.

“The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007,” the Cambridge, Massachusetts-based bureau’s business cycle dating group said today in a statement. “The basis for this decision was the length and strength of the recovery to date.” The committee is the accepted arbiter of when recessions start and end.

“The economy has begun to move forward, albeit at a slow, disappointing pace,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. “It’s a recovery that feels fragile, and still raises questions about the risks to its sustainability.” The odds of the economy falling back into another recession are about 25 percent, Kasman said.

Over 50 and Never Working Again

The New York Times comments on the Fears of Never Working Again

Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group — 7.3 percent — is at a record, more than double what it was at the beginning of the latest recession.

According to a Gallup poll in April, more than a third of people not yet retired plan to work beyond age 65, compared with just 12 percent in 1995.

Older workers who lose their jobs could pose a policy problem if they lose their ability to be self-sufficient. “That’s what we should be worrying about,” said Carl E. Van Horn, professor of public policy and director of the John J. Heldrich Center for Workforce Development at Rutgers University, “what it means to this class of the new unemployables, people who have been cast adrift at a very vulnerable part of their career and their life.”

Older people who lose their jobs take longer to find work. In August, the average time unemployed for those 55 and older was slightly more than 39 weeks, according to the Labor Department, the longest of any age group. That is much worse than in August 1983, also after a deep recession, when someone unemployed in that age group spent an average of 27.5 weeks finding work.

At this year’s pace of an average of 82,000 new jobs a month, it will take at least eight more years to create the 8 million positions lost during the recession. And that does not even allow for population growth.

Assuming it does take 8 more years to create 8 million jobs, of one accounts for population growth, unemployment will be 8% or more all the way to 2020.

Indeed America has Lost One Decade – Another One in Progress Now

Lost Decade Lowlights

• Americans living in poverty rose sharply to 14.3% from 13.2% in 2008
• Poverty level is the highest since 1994
• 43.6 million Americans are living below the official poverty threshold
• Inflation-adjusted income of the median household fell 4.8% between 2000 and 2009
• The number of 25-to-34-year-olds living with their parents rose 8.4% to 5.5 million in 2010 from 2008
• Child poverty rose to 23.8% for kids under six in 2009, compared to 21.3% a year earlier

What America Really Needs

Given the structural problems in the US, there is no strong reason to think this decade will be much better than the last. I talked about those structural problems in Response to Nouriel Roubini regarding “America Needs a Payroll Tax Cut”

Roubini says “America Need a Payroll Tax Cut”.

I say what America needs most right now is an honest appraisal of the sorry economic mess we are in, politicians who will work in genuine bipartisan effort to tackle our numerous structural problems, and willpower from everyone to make short-term sacrifices for the long-term benefit of the country.

To date, all the Fed and Congress have done is bail out the banks and the bondholders (in other words the wealthy), at the expense of the middle class.

Given the problems are numerous and deep, the solutions will undoubtedly require a series of across the board sacrifices. Those sacrifices need to start with public unions, the gigantic military complex, government employees in general (Congress and state legislatures in particular), as well as anyone bailed out or benefiting from the numerous and massive fiscally unsound policies of the Fed and Congress.

So far, we do not even have an admission by the President, by Congress, or by most economists as to what the problems are. Instead everyone wants to “stimulate” something, typically by throwing money at problems.

This is why the problems are unlikely to be fixed, and this is why we are likely to remain in a stagnant economy that produces few jobs for the remainder of the decade.

While the recession is over, it certainly does not feel like it. Moreover, because we fail to address the structural issues, the odds of slipping back into another recession are exceptionally high.

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

Like most politicians, Treasury Secretary Tim Geithner likes to talk out of both sides of his mouth, generally saying contradictory things in sound bites that may sound reasonable at first glance, but look idiotic upon closer inspection.

For example please consider Private sector must drive economy: Geithner

During an interview on NBC’s “Meet the Press,” Geithner also said the government has big plans for reforming Fannie Mae and Freddie Mac, the housing finance giants that now stand behind most of the mortgages in the U.S. after being bailed out by taxpayers during the 2008 financial crisis.

Geithner said Sunday that he doesn’t expect a double-dip recession, citing encouraging signs in the economy. “The most likely thing is you see an economy that gradually strengthens over the next year or two,” he said. Watch Geithner on Meet the Press.

Businesses are still “very cautious” and are trying to get as much productivity from current employees as possible, Geithner explained.

“They are in a very strong financial condition though. I think that’s very promising because there’s a lot of pent-up demand and there’s a lot of capacity still for them to step up and start to invest and hire again,” he added. “The government can help but we need to make this transition now to a recovery led by private investment.”

There’s a “good case” for the government to support small businesses, the unemployed and help states keep teachers in classrooms, but the transition to growth led by the private sector must happen, Geithner said.

Still, he stressed that the current system of housing finance has to change.

“We’re not going to preserve Fannie and Freddie in anything like their current form. We’re going to have to bring fundamental change to that market,” Geithner said.

There’s still a good case for the government preserving some type of guarantee to make sure that people can finance a house even in a very damaging recession, he explained.

“We’re also going to have to take a look at the broad set of policies we put in place to help encourage home ownership and particularly help low income Americans get access to affordable housing,” Geithner said. “We’re going to take a very broad look at how best to do that.”

No Pent Up Demand

For starters Geithner is wrong about pent up demand. The only pent up demand is in the opposite sense Geithner suggests.

Pent Up Demand Reality

• There is pent up demand for baby boomers to save more
• There is pent up demand for baby boomers to downsize
• There is pent up demand for banks to dump shadow housing inventory on the market and that will further suppress housing
• There is pent up demand for anyone with credit card bills to pay them down given outrageous interest rates banks charge for revolving credit vs. what one can make in CDs.

Although those are all necessary, nothing in that list remotely have anything to do with a private sector recovery in the manner Geithner presumes. Indeed, I expect a Expect Second-Half Housing and Durable Goods Crash.

The key reason is consumer spending plans have crashed as noted in Consumption Inflection Point – No One Wants Credit; Consumer Spending Plans Plunge

Thus, in regards to pent up demand Geithner is a fool, is lying, or both.

Geithner Hypocrisy

If that was not bad enough, we have to suffer with Geithner talking out of both sides of his mouth. While I certainly agree that the private sector needs to drive the economy, note his many statements to the contrary.

• “The government can help but we need to make this transition …”.
• “There’s a good case for the government to support small businesses …”
• “There’s still a good case for the government preserving some type of guarantee to make sure that people can finance a house even in a very damaging recession …”

How long is the “transition”?

Geithner does not say, so I will offer a translation: Forever.

Geithner is a clueless Keynesian clown who has no idea how the economy works. Not only do we have to put up with his blatant lies, we have to deal with his hypocritical never-ending government solutions.

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