A 634 Point Stock Market Crash And 8 More Reasons Why You Should Be Deeply Concerned That The U.S. Government Has Lost Its AAA Credit Rating

article from: theeconomiccollapseblog.com


Are you ready for part two of the global financial collapse?  Many now fear that we may be on the verge of a repeat of 2008 after the events of the last several days.  On Friday, Standard & Poor's stripped the U.S. government of its AAA credit rating for the first time in history.  World financial markets had been anticipating a potential downgrade, but that still didn't stop panic from ensuing as this week began.  On Monday, the Dow Jones Industrial Average dropped 634.76 points, which represented a 5.5 percent plunge.  It was the largest one day point decline and the largest one day percentage decline since December 1, 2008.  Overall, stocks have fallen by about 15 percent over the past two weeks.  When Standard & Poor's downgraded long-term U.S. government debt from AAA to AA+, it was just one more indication that faith in the U.S. financial system is faltering.  Previously, U.S. government debt had a AAA rating from S&P continuously since 1941, but now that streak is over.   Nobody is quite sure what comes next.  We truly are in unprecedented territory.  But one thing is for sure - there is a lot of fear in the air right now.


So exactly what caused S&P to downgrade U.S. government debt?

Well, it was the debt ceiling deal that broke the camel's back.

According to S&P, the debt ceiling deal "falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

As I have written about previously, the debt ceiling deal was a complete and total joke, and S&P realized this.

Forget all of the huge figures that the mainstream media has been throwing at you concerning this debt ceiling deal.  The only numbers that matter are for what happens before the next election.

The only way that the current debt ceiling deal will last beyond the 2012 election is if Obama is still president, the Democrats still control the Senate and the Republicans still control the House.  If any of those things change, this deal ceiling deal is dead as soon as the election is over.

Even if all of those things remain the same, there is still a very good chance that we would see dramatic changes to the deal after the next election.

So in evaluating this "deal", the important thing is to look at what is going to happen prior to the 2012 election.

When we examine this "deal" that way, what does it look like?

Well, Barack Obama and the Democrats get the debt ceiling raised by over 2 trillion dollars and will not have to worry about it again until after the 2012 election.

The Republicans get 25 billion dollars in "savings" from spending increases that will be cancelled.

The "Super Congress" that is supposed to be coming up with the second phase of the plan may propose some additional "spending cuts" that would go into effect before the 2012 election, but that seems unlikely.

So in the final analysis, the Democrats won the debt ceiling battle by a landslide.

25 billion dollars is not even 1 percent of the federal budget.  The U.S. national debt continues to spiral wildly out of control, and our politicians could not even cut the budget by one percent.

Somehow our politicians believed that the rest of the world would be convinced that they were serious about cutting the budget, but it turns out that global financial markets are tired of getting fooled.

It has gotten to the point where now even the big credit rating agencies are being forced to do something.

Not that they really have much credibility left.  Everyone still remembers all of those AAA-rated mortgage-backed securities that imploded during the last financial crisis.  The reality is that the big credit rating agencies are a bad joke at this point.

Several smaller credit rating agencies have already significantly slashed the credit rating of the U.S. government.  But a lot of pressure had been put on the "big three" to keep them in line.

But now things have gotten so ridiculous that S&P felt forced to make a move.

Sadly, our politicians are still trying to maintain the charade that everything is okay.  Barack Obama says that financial markets "still believe our credit is AAA and the world's investors agree".

Once again, Barack Obama is dead wrong.

The truth is that the credit rating for the U.S. government should have been slashed significantly a long time ago.  This move by S&P was way, way overdue.

Moody's might be the next one to issue a downgrade.  At the moment, Moody's says that it will not be downgrading U.S. debt for now, but Moody's also says that it has serious doubts about the enforceability of the "budget cuts" in the debt ceiling deal.

This crisis is just beginning.  It is going to play out over time, and it is going to be very messy.

The following are 8 more reasons why you should be deeply concerned that the U.S. government has lost its AAA credit rating....

#1 The U.S. dollar and U.S. government debt are at the very heart of the global financial system.  This credit rating downgrade just doesn't affect the United States - it literally shakes the financial foundations of the entire world.

#2 As the stock market crashes, investors are flocking to U.S. Treasuries right now.  However, once the current panic is over the U.S. could be faced with increased borrowing costs.  The credit rating downgrade is a signal to investors that they should be receiving a higher rate of return for investing in U.S. government debt.  If interest rates on U.S. government debt do end up going up, that is going to make it more expensive for the U.S. government to borrow money.  The higher interest on the national debt goes, the more difficult it is going to become to balance the budget.

#3 We could literally see hundreds of other credit rating downgrades now that long-term U.S. government debt has been downgraded.  For example, S&P has already slashed the credit ratings of Fannie Mae and Freddie Mac from AAA to AA+.  S&P has also already begun to downgrade the credit ratings of states and municipalities.  Nobody is quite sure when we are going to see the dominoes stop falling, and this is not going to be a good thing for the U.S. economy.

#4 10-year U.S. Treasuries are the basis for a whole lot of other interest rates throughout our economy.  If we see the rate for 10-year U.S. Treasuries go up significantly, it will suddenly become a lot more expensive to get a car loan or a home loan.

#5 The current financial panic caused by this downgrade is hitting financial stocks really hard.  The big banks led the decline back in 2008, and it looks like it might be happening again.  Just check out what CNN says happened to financial stocks on Monday....

Financial stocks were among the hardest hit, with Bank of America (BAC, Fortune 500) plunging 20%, and Citigroup (C, Fortune 500) and Morgan Stanley (MS, Fortune 500) dropped roughly 15%.

#6 China is freaking out. China's official news agency says that China "has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets".  If China starts dumping U.S. government debt that would make things a lot worse.

#7 There are already calls for the Federal Reserve to step in and do something.  If the U.S. economy drops into another recession, will we see more quantitative easing?  It seems like we have reached a point where the Fed is constantly in "emergency mode".

#8 The U.S. national debt continues to get worse by the day.  Just check out what economics professor Laurence J. Kotlikoff recently told NPR....

"If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap"

Dick Cheney once said that "deficits don't matter", but the truth is that all of the debt we have been piling up for decades is now catching up with us.

The United States is in such a huge amount of financial trouble that it is hard to put into words.  The days of easy borrowing for the U.S government are starting to come to an end.  We have been living in the greatest debt bubble in the history of the world, and it has fueled a tremendous amount of "prosperity", but now the party is ending.

A whole lot of financial pain is on the horizon. 

Please prepare for the hard times that are coming.

Black Monday? - Economic Collapse A Mathematical Certainty, The Top 5 Places Where Not To Be When It Happens!

The dollar collapse will be the single largest event in human history. This will be the first event that will touch every single living person in the world. All human activity is controlled by money. Our wealth,our work,our food,our government,even our relationships are affected by money.

No money in human history has had as much reach in both breadth and depth as the dollar. It is the de facto world currency. All other currency collapses will pale in comparison to this big one. All other currency crises have been regional and there were other currencies for people to grasp on to.

This collapse will be global and it will bring down not only the dollar but all other fiat currencies,as they are fundamentally no different. The collapse of currencies will lead to the collapse of ALL paper assets. The repercussions to this will have incredible results worldwide.

Full transcript----

 "There is no greater disaster that to underestimate danger. Underestimation can be fatal.

The Dollar Collapse will be the single largest event in human history. This will be the first event that will touch every single living person in the world. All human activity is controlled by money. Our wealth, our work, our food, our government even our relationships are affected by money.

No money in human history has had as much reach, in both breadth and depth as the dollar. It is the defacto world currency. All other currency collapses will pale in comparison to this "big one." All other currency crises have been regional and there have always been other currencies for people to grasp onto. This collapse will be global and it will bring down not only the dollar but all other fiat currencies as they are fundamentally; no different.

The collapse of currencies will lead to the collapse of all paper assets. The repercussions to this will have incredible results worldwide. The dollar is the world's currency. It supports the global economy in setting foreign trade; most importantly the petro-dollar trade. This fuels our corporate vampires and acquires and harvests' the wealth of the world.

The corporate powers suppress real assets like natural resources and labor to provide themselves with massive profits. The fascist statists, collectivist's model provides the money to the economy to fun an ever-increasing federal government. That government then grows larger and larger, enriching its minions, with jobs to control their fellow citizens. Finally to come full circle; the government then controls other nations through the military-industrial complex.

This cycle will be cut when the mathematical and inevitable collapse of the dollar occurs. In order for our debt-based money to function we must increase the DEBT every year in excess of the debt and interest accrued the year before, or we will enter a deflationary death spiral. When Debt is created, money is created. When the debt is paid-off money is destroyed. There is never enough to pay off the debt because there would be not one dollar in existence,

We are at a point where we either default on the debt, willingly or unwillingly or create more money or debt: To keep the cycle moving. The problem is if you understand anything about compounding interest is that we are reaching the hockey-stick-moment (on the graph that is the moment when everything goes vertical); where the more debt that is incurred the more debt that is incurred the less effective it is: And this leads us to hyper-inflation. There are only two actors needed for this hyper-inflation: The lender of last resort, or the FED, and the spender of last resort the government. These two can and will blow up the system.

I believe they will wait until the next crises and the whiff of deflationary depression before they fire up the printing presses. That crisis is coming very soon, at the end of the summer or fall. The money and emergency measures are worn-out. The fact that none of the underlying problems that caused the 2008 crises have been resolved: The only thing that has happened is that instead of corporate problems we now have national problems.

In this movie Greece will play the role of Leman Brothers and the United States will play the role of AIG. The problem is there is no where (left) to kick the can down the road: And there is no world-government to absorb the DEBT- yet. So this leads me to the top five places NOT to be when the dollar collapses.

Number 1, Israel. This Anglo-American beachhead in the Middle-East was first conceived by the most powerful family in the world; the Rothschilds in 1917. The Balfour Declaration said that there will be a Zionist Israel , years before WWII, and the eventual establishment of Israel. Israel has not been a very good neighbor to the Muslim nations: And has always had the world's two biggest bullies on the block at its back. When the dollar collapses the United States will have much too much on its plate, both domestically and internationally to worry about such a non-strategic piece of land. This will leave Israel very weak at a time when tensions will be high. This very thin strip of desert land will not be able to withstand the economic realities of needing to import its food and fuel or the political reality of being surrounded by Muslims.

Number 2, Southern California, the land of fruits and nuts turns into Battlefield Los Angeles . Twenty-million people packed into an area that has no water and thus food is not good to say the least. Throw on top of the huge wealth disparities, and the proximity to a narco-state and this does not bode well. We have seen riots from Rodney King. What will happen when the dollar is destroyed and food and fuel stop coming into this area? People will get desperate and do crazy things especially when a huge proportion of its citizens are on anti-depressants. If food and fuel cannot get in, what about Prozac? At a time when people's worlds are falling apart they lack the ability to deal with this new paradigm. If people come off these drugs too fast they will suffer psychotic breaks and you will thousands of shootings or suicides.

Number 3, England the land of the former Big Brother and the Empire of the worldwide slave and drug trade; will suffer heavily.

The "Stiff upper lip" that the British Elite ingrained in to the sheeple will not work anymore, as the British population explodes. The humans character will sacrifice for a foreign enemy, but not if the enemy has always been the elite. The Anglo-American Empire may pull off another false flag to distract its population but I feel this collapse will happen before they pull it off. This will make all eyes point at the British Elite as being solely responsible for this catastrophe. We have seen massive riots for soccer-matches with Hooligans. What will happen when this island with very little food and fuel gets cut off?

Number 4, New York City ; another large urban area living too high on the dollar-hog. There is little doubt that all of the wealth in New York City , New Jersey , and Connecticut is derived off of Wall Street Wealth. The savings and investments of the whole nation and much of the world flows through this financial capital. As the world wakes up to the massive financial fraud; this will lead to the destruction of capital like we have never seen before (the picture is of NYC in ruins just as Berlin looked after the West bombed it into Oblivion at the end of WWII).This will have tremendous effects upon the regional economy, as people driving in Mercedes suddenly wonder where their next meal is coming from.

Number 5, Washington D.C. The political collapse of the Federal Government will reek havoc on the hugely inflated local economy as more and more states find it necessary to assert their natural control the federal government will suddenly lose power and importance, as the whole world suffers from a global Hurricane Katrina (the city in flames).

The money that they create and spend will become worthless and government minion's pensions will evaporate. Millions that once relied upon the ability to force others to send their money to them, will learn that the real power has always been at the most local level. Massive decentralization will be the answer to 'Globalization Gone Mad. ' Local families and communities will forego spending money and power out of their communities as they will care about their next meal and keeping warm. As Ayn Rand once said: "You can ignore reality, but you cannot ignore the consequences of ignoring reality."

To sum those areas that have lived highest on the hog on the dollar-paradigm will most-likely be the worst places to live, when the dollar collapses. Many of you will see this video with passing interest; but rest
assured this dollar collapse is coming!

It is a mathematical inevitability. We will not be as fortunate to muddle through this collapse, like we did in 2008, when it was a corporate problem." This time around it is a national and a global problem. The global Ponzi-Scheme has run out of gas: As the demographics decline; as cheap abundant oil declines, as hegemonic power declines: This comes at a time when we reach the exponential or collapse-phase of our money.

The irresistible force paradox says; "what happens when an unstoppable force meets an immovable object: We are about to find out, when infinite money hits a very-finite world!

America "Makes The Cut" - So What Happens Next?

article by: Brandon Smith/alt-market.com

Around the world, starting Monday, all eyes are on the markets. The tension is palpable. The uncertainty is ample. And anger is heavy in the air. As predicted, the debt ceiling deal was not only NOT enough to assuage economic fears, it actually exacerbated them, triggering a flight from the Dow, and creating a decisive opportunity for ratings agency S&P to cut the once perfect U.S. credit rating from AAA to AA+.

At Alt-Market, we often talk about points of balance, and how certain moments in history become highly visible indicators of balance lost. If we pay close attention, and know what we are looking for, these moments can be recognized, allowing us time to shield ourselves from the explosion and the resulting financial shrapnel. The past two weeks have culminated into one of these defining events that tell us the tide has fully turned, and something new and dangerous is just over the horizon. The question now is; what should we expect?  

The nature of the credit downgrade situation is not necessarily “unprecedented” in history, but it is surely unprecedented on the scale we see currently in the U.S. It is difficult to predict how exactly the investment world will react. Some consequences, though, are probable, if not inevitable. Let’s examine the events we are likely to see in the coming weeks as well as the coming months, as nations attempt to adjust to America’s final plunge…

1) Ratings Agencies Under Attack

This has already begun. Italian authorities have raided the offices of S&P and Moody’s, apparently perturbed that their credit rating is not under their control. The U.S. is accusing S&P of making "accounting mistakes” and jumping the gun on the American downgrade. The battle between insolvent governments and the ratings agencies from here on will escalate quickly. More offices will be investigated and raided. The mainstream media will try to assert that the downgrades are “not that important”, and that the U.S. will recover quite nicely without a perfect score. Eventually, as the collapse becomes more evident, ratings agencies will fill the role as the go to scapegoat / economic hitman at which all governments will point accusing fingers.

“S&P is gonna’ cut you man! S&P’s a blade-man, man!”

In my view, it’s all theater. First, let’s set aside the recent ratings cuts altogether and look at the facts. The U.S. should have been downgraded years ago, especially after the Federal Reserve decided to begin purchasing U.S. Treasury Bonds in place of dwindling foreign interest and turned to monetizing our debt to the point of rampant inflation. Italy and numerous other EU members should have been downgraded to junk status a long time ago as well. If anything, the ratings agencies over the past few years have been PROTECTING the credit reputations of many countries which in no way deserve it. The recent downgrades are long overdue…

Second, suddenly governments and MSM pundits feel it necessary to point out the large part ratings agencies played in the derivatives bubble and subsequent credit crisis? Please! They were perfectly content with S&P or Moody’s giving fraudulent top ratings for toxic garbage securities, and even defended agency actions after the bubble burst! Now, after they finally start doing their jobs by downgrading bad debt, governments want an investigation?

Third, ratings agencies were not alone in the creation of the derivatives bubble. The private Federal Reserve artificially lowered interest rates and flooded the markets with cheap fiat. International banks used this fast money to create the easy mortgage groundswell and the derivatives poison that was fed it into the system. Ratings agencies went along with the scam and graded the worthless securities as AAA. The federal government and the SEC allowed all of this to take place by purposely ignoring the crime and refusing to apply existing regulations in investigating the fraud.

The Bottom line? You CANNOT create an economic crisis like the one we face today without collusion between big business, government, regulatory bodies, and ratings agencies. The Obama Administration is well aware of this, and the attacks on S&P are nothing more than a show. S&P is not to blame for the downgrade this past weekend. They are ALL to blame.

2) Increased Borrowing Costs

While the mainstream will attempt to downplay the effects of a U.S. downgrade, they cannot deny that our country’s borrowing costs have just gone up. This causes several unfortunate circumstances to develop. Our ability to continue funding our liabilities is now greatly diminished, unless we turn to the Federal Reserve even more in the purchasing of treasury bonds. If investors and central banks can’t get AAA protection for their money in America, they will simply turn to other countries that still retain a top credit rating. The safety of dollars and treasuries already held by other countries will come under question. In response to the S&P downgrade, China, our largest creditor, has openly stated that U.S. securities can no longer be trusted, and that the dollar must be replaced as the world reserve currency. If the dollar does not take an immediate dive starting this week, it certainly will over the course of the Fall season. There are, indeed, many direct consequences in light of a U.S. downgrade. Anyone who says otherwise is living in dreamland.

3) European Union Feeling The Pain

The EU is on a direct interception course with disaster, just as we are, however, being that the U.S. dollar is a widespread world reserve currency, all nations will be affected by our particular downgrade, as opposed to the Greek downgrade, for example, whose effects were minor in comparison.

The European Central Bank has initiated its own TARP measures, and due to the quickening implosion of Spain and Italy, is fully prepared to print fiat Euros in a desperate attempt to control the damage. European reliance on the American consumer has proved fatal. The result is an ever expanding avalanche of fiat on both sides of the Atlantic in an insane race to the bottom between our respective currencies. This development fits perfectly with the IMF plan to introduce Special Drawing Rights (the SDR) as the new global reserve currency, though I’m sure it’s all just a coincidence…

The ECB is also facing serious resistance from Germany, which has been shelling out the largest portion of bailout funds for countries like Greece, Ireland, and Portugal. Germany is tired of playing sugar daddy to the EU, which could conceivably lead to a breakup of the union itself, even with the implementation of fiat injections.

4) Blame Game Overdrive

The blame game is about to get ugly. When economic catastrophe is on the line, civility goes out the window. Who will be the primary target besides ratings agencies? Why fiscal conservatives, of course! Obviously, the Tea Party is full of “terrorists”, and real conservatives are the true culprit behind the collapse because we have this annoying tendency of pointing out that our spending addicted government is dragging us hogtied on a speedboat to Hades.

Please, America, don’t blame the Federal Reserve for feeding the derivatives bubble and destroying our currency. Don’t fret over global banks like Goldman Sachs that deliberately conjured the credit crisis. Don’t attack the government for lending a helping hand to these entities in their quest for complete financial centralization. Instead, shoot the messenger. We love that…

5) Drastic Measures

An announcement by the Fed of yet a third QE stimulus package is a certainty. If the market reaction is especially negative this week, an announcement could even be made before this month is out. I have no doubt, QE3 will be the undoing of this country. Any further devaluation of the dollar will NOT be tolerated by creditor nations who have much to lose if the process of U.S. inflation continues. Treasuries will be dumped. The dollar will be dumped. And, America will have little choice but to hyperinflate to keep up with rising debt burdens.

Those who believe that the U.S. is not expendable in terms of the world economy, and believe that foreign nations will continue pouring money into our coffers because they “have to”, are kidding themselves. We are dealing with an engineered global shift. For central bankers, the U.S. economy is no less expendable than an aging sports car. It can easily be replaced with something newer, shinier, and more compact. Something that will get more girls. The call for “international regulation” of U.S. finances will become the rallying cry of elites across the planet, as well as the largest holders of our exponential debt. The current system will be sacrificed to make way for an IMF controlled body of unaccountable economic overseers.

This is not theory. This is not conjecture. This is reality. The credit downgrade of the U.S. is a concrete trigger point that sets all of the above proceedings in motion.

People will ask for hypotheses on time frames for the events above. I don’t have any, though this week’s market attitudes will be revealing as to the speed that events will take shape. So many interacting factors are present that any specific time predictions on the progress of collapse would be unrealistic. For the short term, watch Federal Reserve activity carefully. Introduction of new QE will be extraordinarily volatile. For the long term, watch wholesale and retail prices of goods, along with treasury auctions and foreign flights from U.S. bonds. One thing is certain, the final half of 2011 will be remembered as a historical turning point for us all.  That said, the trials ahead were never the issue. That which is most important is how we RESPOND in these moments. How we adapt. How we function. How we fight back. Disasters do not make history. We make history. As overwhelming as the currents of such events may feel, in the end, they are subservient to the actions of resolved men. Nothing is fated. The conclusion depends upon us.

Here's The Problem With This Market Crash...

Henry Blodget

businessinsider.com

Well, it's deja' vu all over again.

For anyone who followed the market crashes of 2000-2002 and 2007-2009--especially the crash of 2007-2009--the 512-point drop in the Dow feels awfully familiar.

And as those market crashes reminded us, the downdrafts can last a lot longer and be a lot more severe than most people initially think.


(They can also reverse themselves quickly and unexpectedly, and maybe that's what will happen this time. We can always pray.)

But there are also several very important differences between this market crash and the ones a few years ago:

• The Fed has fired most of its bullets (interest rates are already at zero)
• Our budget deficit is already out of control, and Congress has had it with "stimulus"
• The public has had it with bailouts

That means the government's ability to do anything about this market crash is severely limited.

Yes, we'll almost certainly have a "QE3." And maybe that will prop things up a bit. But it won't fix the fundamental problems clogging the economy, just as QE1 and QE2 didn't permanently fix anything. (The only thing that will fix our economy is debt-reduction, discipline, and time.)

To get a good sense of how hamstrung the government is, you need only look as far back as last week, when Congress was so paralyzed that it almost put the country into default rather than raise the debt ceiling.
And you also need only note that, when the 2000 crash began, the US federal budget was running a surplus, and when the 2007 crash began, the deficit was only $200 billion. Now, the deficit's about $1.4 trillion:

Meanwhile, to get a good sense of how different the Fed's position is now than it was at the start of the last two market crashes, all you have to do is look at the chart below.

In 2000, when the market tanked, the Fed Funds rate was 6.5%. The Fed immediately began cutting rates and eventually took them all the way down to 1%. (Where it left them for far too long, thus helping to inflate the housing bubble.)

In 2007, when the market began to crack, the Fed Funds rate was 5.25%. The Fed immediately began cutting rates and eventually took them all the way down to 0.25%. Where they have been as long as anyone can remember. And where they still are today, just as the market is beginning to crash again.

In short, it IS different this time. And not in a good way.

Gold And Silver: We Were Right – They Were Wrong

by Brandon Smith of Alt Market

Only now, after three years of roller coaster markets, epic debates, and gnashing of teeth, are mainstream financial pundits finally starting to get it. At least some of them, anyway. Precious metals have continued to perform relentlessly since 2008, crushing all naysayer predictions and defying all the musings of so called “experts”, while at the same time maintaining and protecting the investment savings of those people smart enough to jump on the train while prices were at historic lows (historic as in ‘the past 5000 years’).  

Alternative analysts have pleaded with the public to take measures to secure their hard earned wealth by apportioning at least a small amount into physical gold and silver. Some economists, though, were silly enough to overlook this obvious strategy. Who can forget, for instance, Paul Krugman’s hilarious assertion back in 2009 that gold values reflect nothing of the overall market, and that rising gold prices were caused in large part by the devious plans of Glen Beck, and not legitimate demand resulting from oncoming economic collapse:

http://krugman.blogs.nytimes.com/2011/07/19/the-glenn-beck-debeers-connection/

To this day, with gold at $1600 an ounce, Krugman refuses to apologize for his nonsense. To be fair to Krugman, though, his lack of insight on precious metals markets is most likely deliberate, and not due to stupidity, being that he has long been a lapdog of central banks and a rabid supporter of the great Keynesian con. Some MSM economists are simply ignorant, while others are quite aware of the battle between fiat and gold, and have chosen to support the banking elites in their endeavors to dissuade the masses from ever seeking out an alternative to their fraudulent paper. The establishment controlled Washington Post made this clear with its vapid insinuation in 2010 that Ron Paul’s support of a new gold standard is purely motivated by his desire to increase the value of his personal gold holdings, and not because of his concern over the Federal Reserve’s destructive devaluing of the dollar!

http://www.washingtonpost.com/wp-dyn/content/article/2010/06/13/AR2010061304881.html?hpid=topnews

So, if a public figure owns gold and supports the adaptation of precious metals to stave off dollar implosion, he is just trying to “artificially drive up his own profits”. If he supports precious metals but doesn’t own any, then he is “afraid to put his money where his mouth is”. The argument is an erroneous trap, not to mention, completely illogical.

Numerous MSM pundits have continued to call a top for gold and silver markets only to be jolted over and over by further rapid spikes. Frankly, it’s getting a little embarrassing for them. All analysts are wrong sometimes, but these analysts are wrong ALL the time. And, Americans are starting to notice. Who beyond a thin readership of mindless yuppies actually takes Krugman seriously anymore? It’s getting harder and harder to find fans of his brand of snake oil.

Those who instead listened to the alternative media from 2007 on have now tripled the value of their investments, and are likely to double them yet again in the coming months as PM’s and other commodities continue to outperform paper securities and stocks. After enduring so much hardship, criticism, and grief over our positions on gold and silver, it’s about time for us to say “we told you so”. Not to gloat (ok, maybe a little), but to solidify the necessity of metals investment for every American today. Yes, we were right, the skeptics were wrong, and they continue to be wrong. Even now, with gold surpassing the $1600 an ounce mark, and silver edging back towards its $50 per ounce highs, there is still time for those who missed the boat to shield their nest eggs from expanding economic insanity. The fact is, precious metals values are nowhere near their peak. Here are some reasons why…

Debt Ceiling Debate A Final Warning Sign

If average Americans weren’t feeling the heat at the beginning of this year in terms of the economy, they certainly are now. Not long ago, the very idea of a U.S. debt default or credit downgrade was considered by many to be absurd. Today, every financial radio and television show in the country is obsessed with the possibility. Not surprisingly, unprepared subsections of the public (even conservatives) are crying out for a debt ceiling increase, while simultaneously turning up their noses at tax increases, hoping that we can kick the can just a little further down the road of fiscal Armageddon. The delusion that we can coast through this crisis unscathed is still pervasive.

Some common phrases I’ve heard lately: “I just don’t get it! They’re crazy for not compromising! Their political games are going to ruin the country! Why not just raise the ceiling?!”

What these people are lacking is a basic understanding of the bigger picture. Ultimately, this debate is not about raising or freezing the debt ceiling. This debate is not about saving our economy or our global credit standing. This debate is about choosing our method of poison, and nothing more. That is to say, the outcome of the current “political clash” is irrelevant. Our economy was set on the final leg of total destabilization back in 2008, and no amount of spending reform, higher taxes, or austerity measures, are going to change that eventuality.

We have two paths left as far as the mainstream economy is concerned; default leading to dollar devaluation, or, dollar devaluation leading to default. That’s it folks! Smoke em’ if you got em’! This train went careening off a cliff a long time ago.

If the U.S. defaults after August 2^nd, a couple of things will happen. First, our Treasury Bonds will immediately come into question. We may, like Greece, drag out the situation and fool some international investors into thinking the risk will lead to a considerable payout when “everything goes back to normal”. However, those who continued to hold Greek bonds up until that country’s official announcement of default know that holding the debt of a country with disintegrating credit standing is for suckers. Private creditors in Greek debt stand to lose at minimum 21% of their original holdings because of default. What some of us call a “21% haircut”:

http://www.reuters.com/article/2011/07/22/us-greece-iif-idUSTRE76K6VX20110722

With the pervasiveness of U.S. bonds around the globe, a similar default deal could lead to trillions of dollars in losses for holders. This threat will result in the immediate push towards an international treasury dump.

Next, austerity measures WILL be instituted, while taxes WILL be raised considerably, and quickly. The federal government is not going to shut down. They will instead bleed the American people dry of all remaining savings in order to continue functioning, whether through higher charges on licensing and other government controlled paperwork, or through confiscation of pension funds, or by cutting entitlement programs like social security completely.

Finally, the dollar’s world reserve status is most assuredly going to be placed in jeopardy. If a country is unable to sustain its own liabilities, then its currency is going to lose favor. Period. The loss of reserve status carries with it a plethora of very disturbing consequences, foremost being devaluation leading to extreme inflation.

If the debt ceiling is raised yet again, we may prolong the above mentioned problems for a short time, but, there are no guarantees. Ratings agency S&P in a recent statement warned of a U.S. credit downgrade REGARDLESS of whether the ceiling was raised or not, if America’s overall economic situation did not soon improve. The Obama Administration has resorted to harassing (or pretending to harass) S&P over its accurate assessment of the situation, rather than working to solve the dilemma:

http://news.yahoo.com/obama-officials-clash-p-over-downgrade-threats-200358261.html

Ratings company Egan-Jones has already cut America’s credit rating from AAA to AA+:

http://www.bloomberg.com/news/2011-07-18/egan-jones-cuts-u-s-rating-to-aa-on-spending-cut-concern-1-.html

Many countries are moving to distance themselves from the U.S. dollar. China’s bilateral trade agreement with Russia last year completely cuts out the use of the Greenback, and China is also exploring a “barter deal” with Iran, completely removing the need for dollars in the purchase of Iranian oil (which also helps in bypassing U.S. sanctions):

http://uk.reuters.com/article/2011/07/24/china-iran-oil-idUSLDE76N0DJ20110724

So, even with increased spending room, we will still see effects similar to default, not to mention, even more fiat printing by the Fed, higher probability of another QE announcement, and higher inflation all around.

This period of debate over the debt ceiling is liable to be the last clear warning we will receive from government before the collapse moves towards endgame. All of the sordid conundrums listed above are triggers for skyrocketing gold and silver prices, and anyone not holding precious metals now should make changes over the course of the next month.

What has been the reaction of markets to the threat of default? Increased purchasing of precious metals! What has been the reaction of markets to greater spending and Fed inflation? Increased purchasing of precious metals! The advantages of gold and silver are clear…

European TARP?

The MSM blatantly glossed over the EU decision on the latest Greek bailout, as many pundits heralded the plan as decisive action on the part of Europe. But, what was the EU solution to the possibility of Greek default? In the end, their solution was to LET GREECE DEFAULT! Brilliant!

http://blogs.reuters.com/felix-salmon/2011/07/21/greece-defaults/

EU proponents of the plan for Greece are calling the solution a “selective default”, which I suppose, is meant to make it sound less default-ish. However, this is, indeed, a default, and many Greek bondholders are going to lose substantial sums of money as the Greek government decides who they are going to pay back, and who they are going to give the finger. Strangely, this plan also includes the creation of a kind of European Monetary Fund, or a European TARP. This means a broader strategy is being put into motion that involves continuing bailouts and fiat injections of Euros, not just into Greece, but into other countries as well, including Ireland, Portugal, Spain, and even Italy:

http://www.zerohedge.com/article/goldmans-complete-summary-european-council-decisions

Extended printing of Euros means devaluation, and devaluation means greater international interest in gold and silver. The EU Council plan is a blinding flashing neon sign telling us to BUY PRECIOUS METALS, while we still can.

Stock Market Facade Is Over And Inflation Is Here

The “great bull run” over the past two years has been somewhat successful in fooling a certain percentage of Americans into believing all the recovery talk was real. The fundamentals, though, show that this run is entirely fabricated. Besides a static real unemployment rate of around 20%, housing market hellfire, and crushing inflation in commodities, trading volume in stocks is also at a three year low:

http://finance.yahoo.com/news/Wheres-the-volume-Stock-apf-2486403790.html?x=0&sec=topStories&pos=4&asset=&ccode

This means that the overall value of the Dow is being driven by a much smaller pool of investors. A smaller pool of active investors means a more volatile market, with a greater chance of wild swings or inflated values. This lack of stock participation also leads one to question the validity of the bull run as a whole. What, we might ask, has really been holding the markets up for so long, if so few people are feeding the machine?

We must keep in mind that since the credit crisis began the Fed has held interest rates at near zero. That’s almost 3 YEARS of near zero interest rates; far beyond the predictions of many mainstream analysts. The reason? Easy fiat from the Fed is the only thing keeping markets alive. Without it, they would crumble. We hear only of the fiat pumped into the system through bailouts and quantitative easing, but rarely do we hear about all the printing that goes on in-between these public events. The extent of Fed currency creation is made more apparent by the St. Louis Fed’s Adjusted Monetary Base:

According to the Fed publication ‘Monetary Base In An Era Of Financial Change’, the AMBSL is an index measuring the central bank balance sheet, including open market operations, statutory reserve requirements, and foreign exchange market interventions. The index, though, includes only what is reported by the fed, and without an audit, it is impossible to determine its accuracy. In all likelihood, it actually under-reports the amount of fiat being flooded into markets.

Can the Fed prop up the markets forever? No. The volume versus value conflict is too revealing, and I believe we have reached a point at which the weight of negative data is preventing any further significant climbs in the Dow even in the face of manipulation. A kind of critical apex is created; a point at which two forces once balanced meet and derail each other. Stocks, at this time, are very vulnerable, especially when they are supported by a central bank induced fiat framework.

When investors realize that the bull run is fake, not to mention over for a very long time, that dollar devaluation is a certainty, and that bonds are a deathtrap, where will they turn to protect their savings? That’s right…gold and silver. The price potential for metals going into the final half of 2011 is extremely high. Lows can strike abruptly, and they do often under such volatile circumstances, but unlike MSM talking heads, we look well beyond week to week progressions. The long term trend is really what matters, and the long term trend for gold and silver has been impressively positive.

To those who chose not to take my advice over the past three years, or the advice of countless other alternative analysts and economists, I can only say we stand by our record. Our purpose is to help you secure the safety of your buying power as much as possible in these dangerous days. That is all. It is not too late to establish a foundation in precious metals, and it is not too late to accept the reality of our country’s quandary. Warnings, though, are just a small window in time, and they are only useful, so far as they are heeded.

Why Are Food Prices Rising So Fast?

article from: The Economic Collapse Blog

If you do much grocery shopping, you have probably noticed that the cost of food has been rising at a very brisk pace over the past year.  So why are food prices rising so fast?  According to Federal Reserve Chairman Ben Bernanke, inflation is still very low and the economy is improving.  So what is going on here?  When I go to the grocery store these days, there are very few things that I will buy unless they are on sale.  In fact, I have noticed that many of the new "sale prices" are the old regular prices.  Other items have had their packages reduced in size in order to hide the price increases.  But with millions of American families just barely scraping by as it is, what is going to happen if food prices keep rising this rapidly?
The food prices are especially painful if you are trying to eat healthy.  Most of the low price stuff in the grocery stores is garbage.  Eating the "typical American diet" is a highway to cancer, heart disease and diabetes.


But if you try to stick to food that is "healthy" or "organic" you can blow through hundreds of dollars in a heartbeat.  In fact, the reality is that tens of millions of American families have now essentially been priced out of a healthy diet.

Soon there will be millions more American families that will not even be able to afford an unhealthy diet.
Some recent statistics compiled by the Bureau of Labor Statistics are absolutely staggering.  According to a recent CNBC article, over the past year many of the most popular foods in America have absolutely soared in price....

Coffee, for instance, is up 40 percent. Celery is 28 percent higher while butter prices rose 26.4 percent. Rounding out the top five are bacon, at 23.5 percent, and cabbage, at 23.3 percent.

Unfortunately, it looks like the trend of rising food prices is accelerating.  Just look at what the CNBC article says happened in the month of April alone....

Just in April—the most recent month for which data is available—grapes went up nearly 30 percent, cabbage jumped about 17 percent and orange juice surged more than 5 percent.

Meat is becoming more expensive as well.  Since March 2009, livestock prices have risen by 138%.
So when Ben Bernanke tells us that inflation is very low, that really is a lie.  On the stuff that people spend money on every day (like food and gas), prices have gone up dramatically.

Sadly, this is not just a phenomenon that is happening in the United States.  The truth is that the entire planet is rapidly approaching a horrific global food crisis.

Over the past year, the global price of food has risen by 37 percent and this has pushed approximately 44 million more people around the world into poverty.

When food prices rise in the U.S. it may be painful for millions of American families, but around the world a rise in food prices can mean the difference between surviving and not surviving.

That is why it has been so alarming that the global price of wheat has approximately doubled over the past year.

But it is not just wheat that has been soaring.  Check out what a recent Bloomberg article had to say about what has been happening to many key agricultural commodities over the past year....

Corn futures advanced 77 percent in the past 12 months in Chicago trading, a global benchmark, rice gained 39 percent and sugar jumped 64 percent. There will be shortages in corn, wheat, soybeans, coffee and cocoa this year or next, according to Utrecht, Netherlands-based Rabobank Groep. Prices also rose after droughts and floods from Australia to Canada ruined crops last year. European farmers are now contending with their driest growing season in more than three decades.

Even before this recent spike in food prices the world was struggling to get enough food to everybody.  It has been estimated that somewhere in the world someone starves to death every 3.6 seconds, and 75 percent of those are children under the age of five.

So what is going to happen if food prices keep on rising at the current pace?

That is a very good question.

We really are starting to move into unprecedented territory.  Nobody is quite sure what is going to happen next.

So why is all of this happening?

Well, a lot of people are blaming the Federal Reserve.  All of the "quantitative easing" that the Fed has done has flooded the financial markets with money.  All of that money had to go somewhere.  Much of it has pumped up the prices of hard assets such as oil, gold and agricultural commodities.

But it is not just the Fed that is to blame.  The truth is that central banks all over the world have been recklessly printing money.

When the amount of money in an economy goes up, the purchasing value of all existing money goes down.  In the United States, that means that your dollars will not go as far as they did before.

But it is not just monetary policy that is affecting food prices.  In 2010 and 2011 we have seen an unprecedented wave of natural disasters and crazy weather.  This has caused problems with crops all over the globe.

In addition, U.S. economic policies are also playing a role.  At this point, almost a third of all corn grown in the United States is used for fuel.  This is putting a lot of stress on the price of corn.

Also, there are some long-term trends that are not in our favor.  For example, the systematic depletion of the Ogallala Aquifer could eventually turn "America's Breadbasket" back into the "Dust Bowl".  If you have not heard of this problem I would encourage you to do some research on it.

Things are going to get a lot worse, but already America is having a really hard time feeding itself.  According to Feeding America's 2010 hunger study, more than 37 million Americans are now being served by food pantries and soup kitchens.

So is that number unusual?

Yes, it sure is.

The number of Americans that are going to food pantries and soup kitchens has increased by 46% since 2006.

That is not a good trend.

Another stat that I talk a lot about in this column is the number of Americans on food stamps.

Right now, there are 44 million Americans on food stamps.  Nearly half of them are children.

How did we ever get to the point as a nation where more than 20 million children end up on food stamps?

It is estimated that one out of every four American children is currently on food stamps, and it is being projected that approximately 50 percent of all U.S. children will be on food stamps at some point in their lives before they reach the age of 18.

So what is going to happen if the economy gets even worse?

What is going to happen if there really is a major food crisis in this country someday?

Food prices have been going up for decades and they are going to continue to go up.  But the frightening thing is how fast they are increasing now.

As the U.S. middle class continues to be destroyed, the number of Americans that can't afford to buy enough food is going to continue to rise.  Food prices are rising much faster than wages are, and that is not likely to change any time soon.

Food is rapidly becoming one of the most important global economic issues of this decade.  The farther one looks down the road, the bleaker things look for the global food situation.

I hope you are prepared for that.

The Financial Collapse Of Greece: The Canary In The Coal Mine For The Global Economy?

article from: The Economic Collapse Blog

The rest of the world needs to sit up and take notice of what is going on in Greece right now.  This is what can happen when you allow government debt to spiral out of control.  Once it becomes clear that you can't pay your debts, a financial collapse can happen very suddenly and you start losing your sovereignty to those that you must turn to for financial help.  So is the financial collapse of Greece the "canary in the coal mine" for the global economy?  EU finance ministers have given the Greek government two weeks from Monday to approve another round of brutal austerity measures.  If the austerity measures are not approved, Greece will not receive the next bailout installment of 12 billion euros.  If that happens, the whole globe better buckle up because it is going to get crazy.


July 3rd is the deadline.  Basically the EU has put a gun to the head of the Greek government.  Without this bailout money, Greece will default and economic hell will break loose all across the country.

It is important to keep in mind that this is just the first Greek bailout that we are talking about.  Last year, the EU and the IMF agreed to provide the Greek government with a 110 billion euro bailout. The current 12 billion euro installment is part of that package.
Sadly, it has become apparent that the first bailout is not going to be nearly enough for Greece.  A second bailout, which will be the same size or even larger, is already being discussed.  This is going to put the Greek people even more under the heel of the money powers in Europe.

Keep in mind that all of these "bailouts" are just more loans.  There is no way that the Greeks are ever going to be able to repay all of this money.

But this is what happens when a nation lets debt get out of control.  For years and years it can seem like all of that debt does not have any consequences, but then the day of reckoning comes and it is a complete and total nightmare.

In order to get the next installment of 12 billion euros, European finance ministers are insisting that the Greek Parliament approves a package of austerity measures that will be worth approximately 28 billion euros.

At this point, it is uncertain whether those austerity measures will pass.

However, the pressure on the Greek government to get them pushed through is immense.

These austerity measures include tax increases, budget cuts and a "large-scale privatization program".

This is often what happens to third world nations that cannot pay their debts. 

Organizations such as the IMF or the World Bank will come in and insist that they tax their people more, cut back on their spending and sell some of their public assets to big corporations.

As we can see from the wild protests that have been taking place in Greece, a significant percentage of the Greek population is not happy with all of these austerity measures.
Unfortunately, the EU and the IMF are able to put a lot more pressure on the Greek government than the Greek people are.

Greek Prime Minister George Papandreou recently gave the following warning to the Greek people about what could happen if this debt crisis ends badly....

The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks, and the country's credibility.

Not only would a Greek default be a total disaster for Greece, it would potentially be a total disaster for the entire global financial system.

Sung Won Sohn, an economics professor at California State University, recently made the following statement about the seriousness of the debt crisis in Europe....

"The European debt crisis has the potential to have as big an impact as the subprime mortgage crisis did in the United States"

So will these bailouts solve the problem?

No, giving Greece more loans is only going to kick the can down the road for a little while longer.

The truth is that Greece is bankrupt.  Unless huge amounts of Greek debt are forgiven, Greece is going to default sooner or later.

When confidence in the finances of a nation is lost, borrowing costs can go up very quickly.  Today, the yield on two year Greek bonds is up to 28.6%.

Anyone that has ever been late on paying their credit cards knows how painful an interest rate like that can be.

So why doesn't Greece just slash government spending to the bone and get their financial house in order?

Well, it is not that easy.  Harsh austerity measures have already been implemented.  As a result, unemployment is rampant and there is rioting in the streets.

The truth is that, as an article in The Guardian recently explained, austerity has taken a brutal toll on the Greek economy....

A year of wage and pension cuts, benefit losses and tax increases has taken its toll: almost a quarter of the population now live below the poverty line, unemployment is at a record 16% and, as the economy contracts for a third year, economists estimate that about 100,000 businesses have closed.

As the economy crumbles, Greece has descended into an almost permanent state of civil unrest.

The fact that the EU and the IMF want even more austerity measures has sparked some wild rioting In Greece in recent days.  You can see video of the stunning violence going on in Greece right here.

Not all protesters are being violent.  Some of them are showing their displeasure in non-violent ways.  For example, workers for Greece's state-owned electric utility are staging 48 hours of rolling strikes that are designed to create blackouts over large areas.

The frightening thing is that Greece is not alone.  Ireland has already received a bailout and they are probably going to need another one at some point.

Portugal is a financial basket case and they are probably next in line for a bailout.

The employment situation in Spain is absolutely nightmarish.  Spain will probably be able to squeak by without a bailout if the global economy stays stable, but if the dominoes start to fall Spain could be in a massive amount of trouble very quickly.

Not that many people are talking about Italy, but the truth is that Italy has a huge debt problem.  On Friday, Moody's warned that it may downgrade Italy's Aa2 debt rating at some point within the next 90 days.

Belgium and France also have very substantial debt problems.  They probably would not be the first dominoes to fall, but if the "contagion" starts to spread they could certainly have massive problems.

The truth is that Europe's entire financial system is extremely vulnerable right now.  Big banks all over Europe (and especially in Germany) are leveraged to the hilt.  All it would take to topple many of them is a stiff breeze.

When Lehman Brothers collapsed, it was leveraged 31 to 1.

Today, German banks are leveraged 32 to 1.

German banks are also holding a massive amount of Greek debt.

That is why there is so much fear that the crisis in Greece could spread across the rest of Europe and start toppling dominoes.

The sovereign debt crisis in Europe did not happen overnight and it is going to be with us for a long, long time even if the global economy remains relatively stable.

At the moment, the best that officials in Europe can seem to come up with is to put off the pain for another day.  Pimco's Mohamed El-Erian told CNBC the following on Monday....

"This problem is not going to go away. It's going to weigh on markets here and we're going to see the same set of headlines over and over again. We simply cannot continue to kick the can down the road, because we're coming to the end of the road in Greece."

So if Europe starts having major problems will the U.S. step in and help?

Yes, if the crisis in Europe gets worse, the Federal Reserve will probably step in just like they did back in 2008.

But the U.S. is rapidly approaching a day of reckoning like the one that Greece is going through.  The U.S. government has piled up the biggest mountain of debt in the history of the world and faith in the U.S. dollar is dying.

The economic crisis in the United States gets worse with each passing year.  Yes, the Federal Reserve can print up stacks of money and send it over to Europe, but that isn't going to solve anything in the long run.  The truth is that the U.S. is not even going to be able to keep itself from drowning.

The world financial system is far more vulnerable today than it was back in 2008.  The next wave of the financial collapse is going to hit at some point, and when it does it is going to probably be even more painful than the last wave.

Our world is becoming an incredibly unstable place.

You better get ready.

Why the Rich Love High Unemployment

article from: truthout.org

Christina Romer, former member of President Obama's Council of Economic Advisors, accuses the administration of "shamefully ignoring" the unemployed. Paul Krugman echoes her concerns, observing that Washington has lost interest in "the forgotten millions." America's unemployed have been ignored and forgotten, but they are far from superfluous. Over the last two years, out-of-work Americans have played a critical role in helping the richest one percent recover trillions in financial wealth.

Obama's advisers often congratulate themselves for avoiding another Great Depression - an assertion not amenable to serious analysis or debate. A better way to evaluate their claims is to compare the US economy to other rich countries over the last few years.

On the basis of sustaining economic growth, the United States is doing better than nearly all advanced economies. From the first quarter of 2008 to the end of 2010, US gross domestic product (GDP) growth outperformed every G-7 country except Canada.

But when it comes to jobs, US policymakers fall short of their rosy self-evaluations. Despite the second-highest economic growth, Paul Wiseman of the Associated Press (AP) reports: "the U.S. job market remains the group's weakest. U.S. employment bottomed and started growing again a year ago, but there are still 5.4 percent fewer American jobs than in December 2007. That's a much sharper drop than in any other G-7 country." According to an important study by Andrew Sum and Joseph McLaughlin, the US boasted one of the lowest unemployment rates in the rich world before the housing crash - now, it's the highest.[1]

The gap between economic growth and job creation reflects three separate but mutually reinforcing factors: US corporate governance, Obama's economic policies and the deregulation of US labor markets.

Old economic models assume that companies merely react to external changes in demand - lacking independent agency or power. While executives must adapt to falling demand, they retain a fair amount of discretion in how they will respond and who will bear the brunt of the pain. Corporate culture and organization vary from country to country.

In the boardrooms of corporate America, profits aren't everything - they are the only thing. A JPMorgan research report concludes that the current corporate profit recovery is more dependent on falling unit-labor costs than during any previous expansion. At some level, corporate executives are aware that they are lowering workers' living standards, but their decisions are neither coordinated nor intentionally harmful. Call it the "paradox of profitability." Executives are acting in their own and their shareholders' best interest: maximizing profit margins in the face of weak demand by extensive layoffs and pay cuts. But what has been good for every company's income statement has been a disaster for working families and their communities.

Obama's lopsided recovery also reflects lopsided government intervention. Apart from all the talk about jobs, the Obama administration never supported a concrete employment plan. The stimulus provided relief, but it was too small and did not focus on job creation.

The administration's problem is not a question of economics, but a matter of values and priorities. In the first Great Depression, President Roosevelt created an alphabet soup of institutions - the Works Progress Administration (WPA), the Tennessee Valley Authority (TVA) and the Civilian Conservation Corps (CCC) - to directly relieve the unemployment problem, a crisis the private sector was unable and unwilling to solve. In the current crisis, banks were handed bottomless bowls of alphabet soup - the Troubled Asset Relief Program (TARP), the Public-Private Investment Program (PPIP) and the Term Asset-Backed Securities Loan Facility (TALF) - while politicians dithered over extending inadequate unemployment benefits.

The unemployment crisis has its origins in the housing crash, but the prior deregulation of the labor market made the fallout more severe. Like other changes to economic policy in recent decades, the deregulation of the labor market tilts the balance of power in favor of business and against workers. Unlike financial system reform, the deregulation of the labor market is not on President Obama's agenda and has escaped much commentary.

Labor-market deregulation boils down to three things: weak unions, weak worker protection laws and weak overall employment. In addition to protecting wages and benefits, unions also protect jobs. Union contracts prevent management from indiscriminately firing workers and shifting the burden onto remaining employees. After decades of imposed decline, the United States currently has the fourth-lowest private sector union membership in the Organization for Economic Cooperation and Development (OECD).

America's low rate of union membership partly explains why unemployment rose so fast and, - thanks to hectic productivity growth - hiring has been so slow.

Proponents of labor-market flexibility argue that it's easier for the private sector to create jobs when the transactional costs associated with hiring and firing are reduced. Perhaps fortunately, legal protections for American workers cannot get any lower: US labor laws make it the easiest place in the word to fire or replace employees, according to the OECD.

Another consequence of labor-market flexibility has been the shift from full-time jobs to temporary positions. In 2010, 26 percent of all news jobs were temporary - compared with less than 11 percent in the early 1990's recovery and just 7.1 percent in the early 2000's.

The American model of high productivity and low pay has friends in high places. Former Obama adviser and General Motors (GM) car czar Steven Rattner argues that America's unemployment crisis is a sign of strength:

Perversely, the nagging high jobless rate reflects two of the most promising attributes of the American economy: its flexibility and its productivity. Eliminating jobs - with all the wrenching human costs - raises productivity and, thereby, competitiveness.

Unusually, US productivity grew right through the recession; normally, companies can't reduce costs fast enough to keep productivity from falling.

That kind of efficiency is perhaps our most precious economic asset. However tempting it may be, we need to resist tinkering with the labor market. Policy proposals aimed too directly at raising employment may well collaterally end up dragging on productivity.

Rattner comes dangerously close to articulating a full-unemployment policy. He suggests unemployed workers don't merit the same massive government intervention that served GM and the banks so well. When Wall Street was on the ropes, both administrations sensibly argued, "doing nothing is not an option." For the long-term unemployed, doing nothing appears to be Washington's preferred policy.

The unemployment crisis has been a godsend for America's superrich, who own the vast majority of financial assets - stocks, bonds, currency and commodities.

Persistent unemployment and weak unions have changed the American workforce into a buyers' market - job seekers and workers are now "price takers" rather than "price makers." Obama's recovery shares with Reagan's early years the distinction of being the only two post-war expansions where wage concessions have been the rule rather than the exception. The year 2009 marked the slowest wage growth on record, followed by the second slowest in 2010.[2]

America's labor market depression propels asset price appreciation. In the last two years, US corporate profits and share prices rose at the fastest pace in history - and the fastest in the G-7. Considering the source of profits, the soaring stock market appears less a beacon of prosperity than a reliable proxy for America's new misery index. Mark Whitehouse of The Wall Street Journal describes Obama's hamster wheel recovery:

From mid-2009 through the end of 2010, output per hour at U.S. nonfarm businesses rose 5.2% as companies found ways to squeeze more from their existing workers. But the lion's share of that gain went to shareholders in the form of record profits, rather than to workers in the form of raises. Hourly wages, adjusted for inflation, rose only 0.3%, according to the Labor Department. In other words, companies shared only 6% of productivity gains with their workers. That compares to 58% since records began in 1947.

Workers' wages and salaries represent roughly two-thirds of production costs and drive inflation. High inflation is a bondholders' worst enemy because bonds are fixed-income securities. For example, if a bond yields a fixed five percent and inflation is running at four percent, the bond's real return is reduced to one percent. High unemployment constrains labor costs and, thus, also functions as an anchor on inflation and inflation expectations - protecting bondholders' real return and principal. Thanks to the absence of real wage growth and inflation over the last two years, bond funds have attracted record inflows and investors have profited immensely.

The Federal Reserve has played the leading role in sustaining the recovery, but monetary policies work indirectly and disproportionately favor the wealthy. Low interest rates have helped banks recapitalize, allowed businesses and households to refinance debt and provided Wall Street with a tsunami of liquidity - but its impact on employment and wage growth has been negligible.

CNBC's Jim Cramer provides insight into the counterintuitive link between a rotten economy and soaring asset prices: "We are and have been in the longest 'bad news is good news' moment that I have ever come across in my 31 years of trading. That means the bad news keeps producing the low interest rates that make stocks, particularly stocks with decent dividend protection, more attractive than their fixed income alternatives." In other words, the longer Ben Bernanke's policies fail to lower unemployment, the longer Wall Street enjoys a free ride.

Out-of-work Americans deserve more than unemployment checks - they deserve dividends. The rich would never have recovered without them.

1. "The Massive Shedding of Jobs in America." Andrew Sum and Joseph McLaughlin. Challenge, 2010, vol. 53, issue 6, pages 62-76.

2. David Wessel, Wall Street Journal, January 30, 2010. "Wage and Benefit Growth Hits Historic Low"; Chris Farrell, Bloomberg Businessweek, February 5, 2010. " US Wage Growth: The Downward Spiral."

9 Ways That The World Has Gotten Even Crazier In May

article from: theeconomiccollapseblog.com

In case you haven't noticed, the world has gotten even crazier in May. Just when you think that things can't get any more bizarre, events go to a whole new level. Sadly, millions of Americans seem almost completely oblivious to all of the world-altering things that are going on all around us. I recently got back from doing a bit of traveling, and the reality is that most people out there are so busy living their lives and trying to survive from month to month that they don't really have much time to pay attention to what is going on in the world around them. They are too busy working their tails off to make a living, they are too busy stocking up on groceries and foreign-made goods at the big box retail stores and they are too busy cheering for Scotty on American Idol. Unfortunately, what little information about the rest of the world that most Americans actually take in comes from the mainstream media. Most of the time the mainstream media is very adept at lulling the American people to sleep, but things are starting to get so crazy out there that a growing minority of Americans are starting to sit up and take notice.


When I was away on vacation I kept a bit of an eye on the news, but I had no idea just how crazy things were getting until I returned home. These days more seems to happen in a single week than used to happen in an entire month. The globe has become an incredibly unstable place, and you never know what is going to happen next.

The following are 9 ways that the world has gotten even crazier in May....

#1 What in the world is going on with the weather?  All of a sudden "unprecedented tornadoes" are popping up almost every day now.  Did you see what happened in Joplin, Missouri the other day?  There are very few things that will put sheer terror into you like an F5 tornado will.  If you doubt that, just check out this video.

The National Weather Service says that the Joplin tornado was the 8th worst tornado to ever hit the United States.  At least 122 people were killed and at least 750 people were injured.

Sadly, the Joplin tornado is part of a larger trend.  Many are already calling this a "100 year" tornado season.  It seems like a major tornado outbreak somewhere in the U.S. is a nightly occurence now.  For example, just tonight a huge tornado near Oklahoma City killed a couple of people.

In April, there were approximately 600 tornadoes across the country.  That is the most tornadoes that have ever been recorded in a single month inside the United States.  Usually, we only have about 1,200 tornadoes for the entire year.

There is nothing "normal" about these tornado outbreaks.  Something really weird is happening.
In addition, we have just experienced the worst Mississippi River flood ever.  That flood is also being called something that only happens "once in a hundred years".

Why are such horrible natural disasters striking the United States right now?

Can anyone explain why this is happening?

#2 The globe continues to inch ever closer to World War III.  Just consider a few of the headlines we have seen just this week....

*NATO Warplanes in New Bombing Campaign on Tripoli
*Obama's hidden war: US intensifies drone attacks in Pakistan
*US, Pakistan Near Open War; Chinese Ultimatum Warns Washington Against Attack
*Netanyahu's defiance on deal is 'declaration of war'

Sadly, it appears that the appetite for war is growing.  Many had hoped that Barack Obama would be a peacemaker, but that definitely is not the case.

The United States has been at war for so long that the American people have learned to accept it as a normal part of life.  As long as it is something that happens "over there", most Americans don't really seem too concerned about it.

But in the end, what is unfolding in the Middle East will have dramatic consequences for the United States.  Unfortunately, most Americans have become so "dumbed down" that they simply do not understand what is happening.

#3 The news from Japan just continues to get worse and worse.  Now TEPCO is finally admitting that there were at least partial meltdowns at three of the reactors at Fukushima.  Why we are only finding this out now is anyone's guess.

It has been more than 2 months since the tsunami and officials in Japan still do not have Fukushima under control.  Every single day the complex continues to release massive amounts of radioactive material into the environment and the effects of this disaster will be felt for decades to come.

#4 When all of the crazy new security measures went into airports, we were all assured that scanners and "enhanced pat-downs" would never show up in subway stations, bus stations, sporting events and public schools.

Well, sadly the ridiculous security measures that have been implemented at our airports are spreading.  In fact, if you can believe it, a "certified TSA official" was brought in to oversee student searches at the Santa Fe High School prom last weekend.

When TSA officials start showing up at high school proms that should be a major red flag for all of us.  America is becoming a much different place than it used to be.

Do you enjoy living in a prison grid where we are all being constantly watched, tracked and searched?  If not, you better say something now before it is too late.

#5 The U.S. Supreme Court has upheld an order from a three-judge panel in California that mandates the release of approximately 40,000 inmates from California prisons.

Yes, the prisons are so overcrowded that up to 54 prisoners are using a single toilet, but you can't just release thousands upon thousands of criminals on to the streets of California and expect that there will not be major problems.

California Governor Jerry Brown is proposing a "realignment plan" which would shift tens of thousands of prisoners to county jails, but the California legislature so far has not authorized the hundreds of millions of dollars that it is going to take to implement the plan.

Hopefully something can be done, because releasing more than one out of every four California inmates back on to the streets sure does seem like a bad idea to me.

#6 It is looking more likely than ever that the U.S. debt ceiling may not be raised and that we could actually see the U.S. government default on some debt.  The Democrats and the Republicans are fighting like cats and dogs again and there is such a deadlock right now that this could actually happen.

U.S. Representative Barney Frank certainly does not sound optimistic....

"It may be that we’re going to have to see some failure to raise the debt limit and some temporary hiatus in our ability to pay our bills (for lawmakers to act)."

JPMorgan Chase CEO Jamie Dimon is using language that is even more apocalyptic.  Dimon says that a U.S. debt default would "dwarf Lehman Brothers" and that in the event of a default things will take place "that are not going to be pretty".

#7 The U.S. real estate crash continues to get even worse. This week it was announced that U.S. commercial real estate is now down 47 percent from 2007 and has now reached a post-crash low. The following is how an article by Bloomberg described the latest data....

U.S. commercial property prices fell to a post-recession low in March as sales of financially distressed assets weighed on the market, according to Moody’s Investors Service.
The Moody’s/REAL Commercial Property Price Index dropped 4.2 percent from February and is now 47 percent below the peak of October 2007, Moody’s said in a statement today.

But it is not just commercial real estate that is a giant mess.  New home sales also continue to struggle mightily.

In April, the number of new homes sold in the United States tied the lowest level ever recorded for that month.

These latest statistics just underscore the reality that the U.S. housing crash if very far from over.  As I have written about previously, the real estate crisis is absolutely crippling the economy and instead of signs of hope arising, things seem to be getting even worse.  For example, during the first quarter of 2011, home values declined at the fastest rate since late 2008.

So when in the world are things going to finally start turning around?

#8 Most Americans don't realize it, but Europe is closer to a financial meltdown than it ever has been before. Greece is either going to get another bailout or it is going to default.  If you do not understand the kind of chaos this would set off on world financial markets, just read this editorial.

The Greek debt crisis continues to get worse.  At this point, the yield on 10-year Greek bonds has now reached an astounding 16.76%.

But it is not just Greece that is in trouble.  All over Europe there are nations that are on the verge of financial collapse.  In Spain, nearly half of those between the ages of 18 and 25 are unemployed and the economic protests there have reached a frightening level.

Everyone hoped that a bailout or two would be enough to make the European debt crisis go away.  It has now become obvious that is not going to happen.

A financial meltdown in Europe is happening.  The only question is how it is going to play out.
#9 Over the past couple weeks, one of the most talked about people in the world has been Harold Camping.  I have avoided writing about him because there are at least a billion issues that are more important than what Harold Camping is saying.

But this is what the mainstream media loves to do.  They love to find a Christian with a crackpot theory and splash him all over the front page.

Camping has a very limited following and the vast majority of Christians think he is totally and completely wrong.

However, the mainstream media loves to talk about people like Camping because it is a tremendous opportunity for them to mock Christians and Christianity.

Look, anyone that put any stock in any of Camping's predictions is seriously deceived.  In case you didn't know, Camping predicted the date of the rapture before.  On September 6th, 1994, hundreds of Camping's followers gathered at an auditorium in Alameda, California waiting for the rapture.

So now Camping has been wrong two times.

Now Camping is saying that Judgment Day is going to be on October 21st and he says that he has figured out why he was wrong about May 21st.

If you believe that, I have a bridge to sell you.

If you are a Christian, then you know that there are dozens of prophecies that still need to be fulfilled before "the end of the world".  What Camping is proposing is literally impossible according to the Bible.

Of course the mainstream media knows this, but they have no problem turning Camping into a household name while ignoring the thousands upon thousands of Christians around the world that are doing really great things.

But this is the crazy world we live in.  We are all talking about Harold Camping because the big media companies decided that was the way it was going to be.

It is time that all of us wake up and start thinking for ourselves.

Our world is becoming crazier by the minute and the mainstream media is certainly not helping things.  In times like these, it is going to be absolutely vital for all of us to engage our critical thinking skills and to not just blindly accept anything that someone else is trying to tell us.