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Monday, February 21, 2011

An Economy Out of Control

(Prologue) - In the previous article related to the Food Crisis, you noticed the Hockey stick style increases that have taken place over the last couple of years. This is caused by speculation related to the flooding of the financial system with Digital Dollars. These dollars are not filtering through the economy. These dollars are being used by the banks to purchase derivative investments, which have a multiplier effect on commodities.

The following article from "The Economic Collapse" Blog shows charts very similar to those Hockey stick exponential increases in Sugar, Wheat, Coffee, Cotton, and Beef. The Federal Reserve Has created this mess because of Ben Bernanke and Wall Street's obsession with deflation. Instead, we are seeing hyperinflation in the commodity markets. This is the result of cheapened money that is becoming worthless.

The following charts show the level of government spending, the National Debt, the increase of Interest owed on that debt, household debt, the aggregate of all debt, Unemployment and the Duration of Unemployment, the increase in the Cost of Living (CPI) since the Federal Reserves inception, the increase in the Money Supply, and the increase in the Cost of Oil.

In my opinion, we aren't going to see a constant increase in prices. What we will see is a bumping against the Price Point-Demand ceiling. An example was when oil hit $147+ per barrel in September 2008. Consumers could not afford to pay for energy at these inflated prices and so they adapted down and changed their habits. This reduced demand and subsequently the investors in the Oil derivative markets rushed to get out of the collapsing market. Oil fell to $40 per barrel as a result, but we have seen a steady march back up to the current levels around $90.

We will continue to see this type of volatility in all essential commodities. The trend will be upward, because most commodities are priced in U.S. Dollars and those Dollars are losing value due to the expansion of the Money Supply. But their will be price breaking points, because most consumers are hurting. The one thing that is for sure is that markets such as these are not sustainable, because trust is being lost in the marketplace. Most people are at a loss for what to do. People are tired of getting ripped off by the banks. It is completely unrealistic and basically criminal that the banks are paying .5% to 2% on savings accounts and Certificates of Deposit, but it is not the time to put money in the stock market with the fraud that rampantly flows involving issues of transparency, ignorance and lack of enforcement of fiduciary responsibilities of market makers, the exorbitant fees that brokerage houses charge, and the volatility associated with not knowing what the government might do next.

Look at this Chart comparing today to the Depression of the 1930s:

What Is Wrong With The U.S. Economy? Here Are 10 Economic Charts That Will Blow Your Mind - The Economic Collapse (Blog)

The 10 economic charts that you are about to see are completely and totally shocking. If you know anyone that still does not believe that the United States is in the midst of a long-term economic decline, just show them these charts. Sometimes you can quote economic statistics to people until you are blue in the face and it won't do any good, but when those same people see charts and pictures suddenly it all sinks in. What is great about charts is that you can very easily demonstrate what has been happening to the economy over an extended period of time. As you examine the economic charts below, pay special attention to what has been happening to the U.S. economy over the last 30 or 40 years. The truth is that what is wrong with the U.S. economy is not a great mystery. All of the economic problems that we are experiencing now have taken decades to develop. Hopefully the charts in this article will help people realize just how nightmarish our economic problems have become, because until people start realizing how incredibly bad things have gotten they will never be willing to accept the dramatic solutions that are necessary to fix our financial system.

The sad fact of the matter is that we have been living in the biggest debt bubble in the history of the world over the last 40 years. All of this debt has purchased a wonderful standard of living for the vast majority of us, but all of this debt has also destroyed the economic future of our children and our grandchildren. Someday future generations will look back on what we have done in absolute horror.

The 10 economic charts posted below are meant to shock you. Most Americans today need to be shocked before they will be motivated to take action. Please share these charts with as many people as you can. Hopefully we can wake enough people up that something will be done about all of these problems while there is still time.

1 - Government spending is expanding at an exponential rate. As you can see from the chart below, federal spending is almost 18 times higher than it was back in 1970. Now Barack Obama has proposed a budget that would increase U.S. government spending to 5.6 trillion dollars in 2021. Just imagine what the following chart would look like if that happens....

2 - U.S. government debt is absolutely exploding. The U.S. national debt is currently $14,081,561,324,681.83. It is more than 14 times larger than it was back in 1980. Unfortunately, the national debt continues to grow at breathtaking speed. In fact, the Obama administration is projecting that the federal budget deficit for this year will be an all-time record 1.6 trillion dollars. Can we afford to continue to accumulate debt at this rate?....

3 - Unless something changes right now, the outlook for U.S. government finances in future years is downright apocalyptic. The chart posted below is from an official U.S. government report to Congress. As you can see, it is projected that interest on our exploding national debt is absolutely going to spiral out of control if we continue on the path that we are currently on....

4 - Household debt has soared to almost unbelievable levels over the last 30 years. The sad truth is that it is not just the U.S. government that has a massive debt problem. U.S. households have also been accumulating debt at a staggering rate. Total U.S. household debt did not pass the 2 trillion dollar mark until the mid-1980s, but now total U.S. household debt is well over 13 trillion dollars....

5 - The total of all debt (government, business and consumer) in the United States is now well over 50 trillion dollars. For the past couple of years this figure has been hovering around a level that is equivalent to approximately 360 percent of GDP. This is a debt bubble that is absolutely unprecedented in U.S. history....

6 - As tens of thousands of U.S. factories get shut down and as millions of our jobs get shipped overseas, the number of unemployed Americans continues to go up and up and up. As you can see from the chart below, there has been a long-term trend of increasing unemployment in the United States. In fact, there are about 3 and a half times as many unemployed workers in the United States today as there were when 1970 began. These jobs losses are going to continue as long as we allow our corporations to pay slave labor wages to workers on the other side of the globe. All of the major trends in global trade are very bad for the U.S. middle class. For example, the U.S. trade deficit with China for 2010 was 27 times larger than it was back in 1990. How long will our politicians stand by as our nation bleeds jobs?....

7 - The median duration of unemployment in the United States is in unprecedented territory. For most of the post-World War 2 era, when the median duration of unemployment in America reached 10 weeks that was considered a national crisis. Well, today competition for jobs is so intense that the median duration of unemployment is now well over 20 weeks....

8 - Since the Federal Reserve was created in 1913, the value of the U.S. dollar has declined by over 95 percent. One of the reasons given for the existence of the Federal Reserve is that the Fed helps control inflation. But that is a huge lie. The truth is that the United States never had consistently rampant inflation until the Federal Reserve took control. In particular, once the U.S. totally went off the gold standard in the 1970s inflation really started escalating out of control....

9 - Now the Federal Reserve says that the solution to our current economic problems is to print even more money out of thin air. The games that the Federal Reserve is playing with our money supply are simply inexcusable. Just look at what the Federal Reserve has done to the monetary base since the beginning of the recession....

10 - All of this new money is creating tremendous inflation. In particular, the price of oil is now ridiculously high. A high price for oil is very, very bad for the U.S. economy. Our entire economic system is based on being able to use massive quantities of very cheap oil.

Unfortunately, that paradigm is starting to break down and the consequences will be very bitter. Back in mid-2008, the price of oil hit an all-time record of $147 a barrel and subsequently the world financial system imploded a few months later. Well, the price of oil is on the march again and that is very bad news for the U.S. economy....

Needless to say, if the economic trends documented by the charts above continue the U.S. economy will be totally wiped out. The U.S. economy as it currently exists is unsustainable by definition. It is only a matter of time before we slam into an economic brick wall.

We have developed an economy that cannot function without debt, and at this point it seems like almost everyone is drowning in red ink. The federal government is massively overextended, most of our state and local governments are massively overextended, most of our major corporations are massively overextended and the majority of U.S. consumers are massively overextended.

The only way that the game can continue is for the Federal Reserve to print increasingly larger amounts of paper money out of thin air and for everyone in the economic food chain to go into increasingly larger amounts of debt.

But no debt spiral can go on forever. At some point this entire house of cards is going to collapse.

When that happens, there is going to be economic pain that is greater than anything that this country has ever seen before.

Someday we will all desperately wish that we could go back to the "good times" of 2011. A great economic collapse is coming, and all of us had better get ready.


Anonymous said...

This is amazing, lots of people wondering what going on. But the guy from FFT or was talking about this amazingly many moons ago.
he called the stockmarket crash back in 2008 and the economic collapse many years ago. It is intrseting to see what he is saying now. Go check him out.

Brandon said...

Great research. It is a very, very sad truth. One of the larger problems, in my opinion, is that nobody really wants to take responsibility for the problems. It is one thing to create a problem, it is another to blame the problem on someone else.

Until you and I begin to decide that we are no longer going to get into any kind of debt, this trend will continue. And then we will break. And then blame the Democrats. Or the Republicans. Or anyone but ourselves.

Thank you for doing the research to point out the problems. May you and I be a part of the solution.