d.a.n

Is the Dollar Too Big to Fail?

What about the last 5-to-10 years?:
One-Simple-Idea.com/US...
And don't forget that all other currencies have inflation of their own too !

What about the $12.3 Trillion federal debt and $57 Trillion of nation-wide debt?:
One-Simple-Idea.com/De...

What about the continued lack of reforms and the continuance of these abuses?:
One-Simple-Idea.com/Ab...

What about the continued deterioration of economic conditions?:
One-Simple-Idea.com/Ne...

I've always previously been bullish on America, but a person does not need to be clairvoyant and does not need a crystal ball to see that we still have some serious problems which still exist, and are still deteriorating.

With so much debt ($12.3 Trillion federal debt and $57 Trillion of nation-wide debt), the debt pyramid will most likely continue to grow larger (not smaller), and inflation will most likely continue to hammer the currency for many years to come, because that is now the only course of action that will be considered by the U.S. Treasury, Federal Reserve, and the federal government.

And the Federal Reserve's simply closing the currency swap lines with foreign central banks by February 1, 2010 alone won't stop continued inflation, and there are a myriad of other reasons to be very skeptical about any sustained strength of the U.S. Dollar, not to mention any improvement in a number of other economic conditions any time soon (or for many years to come).
Especially with an increasingly FOR-SALE, incompetent, and corrupt government and 85%-to-90% re-election rates for the past decade:
One-Simple-Idea.com/Co...

Another long depression (lasting many years) is not at all far-fetched.

Questioning the recovery of the U.S. Dollar and a number of other deteriorating economic conditions is not mere dooms-day rhetoric, but actually only an observation of the facts.

Is a Gold Correction Imminent?

Massive Debt, inflation, unemployment, and other deteriorating economic conditiojns are driving gold up.

See this scary animation: cohort11.americanobser...

And that unemployment is only based on official numbers.
Here's some unofficial numbers: www.shadowstats.com/al...

Compare those numbers to the purported 23% unemployment in the Great Depression.

Now consider the $57 Trillion nation-wide debt which has grown from 100% of GDP in year 1956 to over 400% of GDP today.

And consider that 90%-to-95% of all money in the U.S. exists as debt, since 90% of new loans to banks from the Federal Reserve is new money created out of thin air.

And lately, it's more than 90% (one-simple-idea.com/De...), based on this Bloomberg report (MAR-2008: www.bloomberg.com/apps...
), and this update (JUL-2009:
www.bloomberg.com/apps... )

Now, look at what all of this debt and inflation is doing to the U.S. currency for almost a decade:
one-simple-idea.com/US...

Now ask yourself: Where will the money come from to merely pay the interest on all of that debt, let alone the principal, when that money does not yet exist?

The only way to keep the pyramid from collapsing is to create more and more and more new money.
But that creates more inflation and debt, which creates more demand for more new money, which creates more inflation and debt.

Eventually, as ALL pyramid schemes finally do, this giant pyramid scheme will collapse.
How can it not collapse?
It's quite possible that the collapse has already started?

What do you think?

Why a Market Crash Doesn’t Matter

High inflation is the danger for the next decade.
$12.1 Trillion national debt (federal) is the highest ever per-capita ($38K per person; 70% higher than the per-capita debt after WWII in year 1945, and 705% higher than in year 1941).
The $57 Trillion Nation-wide debt is the highest ever (up from 100% of GDP in year 1956 to 420% in year 2009).
A 1950 U.S. Dollar is now worth about 10 cents.
90%-to-95% of all U.S. money in existence in the U.S. exists as debt, because money is created as debt at a fractional reserve ratio of 9-to-1 (i.e. 90% of every new loan is new money).
The M3 Money Supply increased from $135 Billion in year 1950 to $11.2 Trillion by year 2005 (and much larger since year 2005).
Unemployment is 10.2% (and probably actually higher).

Of course, some people will still profit from all of this, as they always do.

But you don't need a crystal ball, nor do you need to be clairvoyant to see that the U.S. is on a dangerous path of long-term and painful consequences.

In a voting nation, an educated electorate is paramount.
One way or another, the electorate will receive its education.
At any rate, the voters have the government that they elect, and re-elect, and re-elect, . . . , at least, until repeatedly rewarding failure, and repeatedly rewarding FOR-SALE, incompetent, and corrupt incumbent politicians with re-election finally becomes too painful (such as in year 1933, when unhappy voters ousted a whopping 206 of 531 members of Congress).

10 Reasons to Believe That We're in a Depression

Anyone who thinks things are "just fine" doesn't understand the mathematical nature of a pyramid scheme.
90%-to-95% of all money in the U.S. exists as debt.
The $12 Trillion federal debt is 70% higher per-capita than after WWII.
The $12 Trillion federal debt has never been higher, per-capita.
The $57 Trillion nation-wide debt is up from 100% of GDP in year 1956 to 420% of GDP in 2009.
The pyramid scheme is approaching its end, as all pyramid schemes do.
Get ready for very high inflation, because the only choice the U.S. Treasure, Federal Reserve, and federal government have is to borrow and create more new money from thin air, and that will most certain debauch the currency.
Also, the fiat, funny-money system is not a problem only in the U.S.
It is a world-wide problem, since most nations all started creating too much money from thin air starting around the end of the Great Depression.
Some here may find this depressing, and some may not want to hear it, but unless they can convincingly explain away so many deteriorating economic conditions, to think things are "just fine" is delusional.

10 Reasons to Believe That We're in a Depression

Right. Look at the major economic factors.

Why the Total Federal and Total Nation-wide Debt is Untenable:
----------------------...
The total federal and total non-federal debt is most likely untenable since no one seems able to prove whether the debt is tenable or not. That's certainly not a good sign, but only one of many other reasons listed below. Some people in the federal government and the Federal Reserve probably already suspect (or know) that the debt is untenable, but don’t know what else to do about it, except mostly to create a lot of new money out of thin air. Other nations have already followed that same path and discovered another economic terror: hyperinflation.
The interest alone on only the $12 National Debt is 18% of all federal tax revenues (that is, before federal revenues and GDP started falling in year 2007). The percentage is probably higher now.

The National Debt is $12,105,421,748,449 (20-NOV-2009:11:16AM CST) and growing fast. The Social Security and Medicare systems are pay-as-you-go, with a 78 Million baby-boomer bubble approaching.
As of OCT-2009, the federal National Debt per-capita is $38,000, which is 75% higher than the previous record-high (which was $21,719 in 2008 dollars in year 1945, after World War II).
As of OCT-2009, the federal National Debt per-capita is $38,000, which is 705% higher than the it was near the end of the Great Depression (which was $5,396 in 2008 dollars in year 1941).

The total federal debt, and combined with the total non-federal debt, is crushing the nation (for a total nation-wide debt of $57 Trillion), and has been for decades. And that does not even include the looming $62 Trillion Credit Default Swap/Derivatives bubble, or the future debt of $60+ Trillion in unfunded liabilities for Social Security and Medicare.

There is a limit to the debt (federal and non-federal), and if the current total $57 Trillion nation-wide debt (about 410% of GDP ; using $13.8T for GDP based on year 2007), is not untenable already, it is damn close, and growing it bigger and more untenable does not make any sense; especially not with more borrowing and more new money created out of thin air.

90%-to-95% of all U.S. Dollars in existence in the U.S. already exists as debt. Why? Because new money is created as debt at a 9-to-1 ratio of debt-to-reserves. And today, a LOT of new money is being created without any reserves (to prop up bad banks). Eventually, the percentage of money that exists as debt will become near 100%, at which time the Federal Reserve and federal government may start giving away money. At the moment, they are giving many trillions to banks and corporations at near zero interest. But eventually, they’ll realize that they have to give money to consumers too, since the economy is a 70% domestic consumer driven economy. However, that will most likely cause hyperinflation, because the amount of new money required to service so much nation-wide debt, and keep a 70% domestic consumer driven economy from collapsing will result in the collapse of the pyramid scheme. You will need a wheel barrow full of U.S. currency to merely buy a loaf of bread. It has happened in dozens of other nations and it appears it will happen again in the next few years.

After 52 consecutive years of deficit spending and incessant inflation, there’s a real danger that Congress is a debt junkie which is unable to stop deficit spending. Congress doesn’t get it. Congress just gave itself its 10th raise in 12 years, plus $93,000 per Congress person for petty cash and expenses. Even if the federal government had the discipline to stop deficit spending, it would still take almost $492 Billion per year in interest alone (over $41 Billion per month) at only 4.5% interest, to simply stop the $12 Trillion federal debt from growing ever larger. It would take 222 YEARS at only 2.5% to pay down 33% of the original principal debt ($12 Trillion as of year 2009). Yet, there’s now an estimated $1.7 Trillion deficit for fiscal year 2009.

The $57 Trillion nation-wide debt has steadily grown for over 50 years, and has almost quintupled from 100% of GDP in year 1956 to about 410% of GDP today. It would take over 200 years at only 2.0% interest to pay down only 33% of the $57 Trillion nation-wide debt, if Americans were able to pay back over $1 Trillion per year (about $95 Billion per month), which is the minimum payment required to stop the debt from growing ever larger.

Where will the money come from for the tens of trillions being spent and borrowed when that money does not already exist? Much of it is being created out of thin air.

Americans have been liquidating for the past decade to service debt. Foreign owned assets in the U.S. have almost quadrupled from $6 Trillion in year 1997 to $22 Trillion in year 2007.

This is not a mere recession. It is the result of several decades (since about 1976) of crushing debt that has now become untenable, and more debt will simply become more untenable. Also, GDP has been decreasing since year 2007 (most likely early 2007 or late 2006). And the U.S. Dollar has declined for years against all major international currencies for about a decade. To make matters worse, the federal government's and the Federal Reserve's economic statistics are suspicious. GDP, debt, inflation, and unemployment are not be reported accurately, according to these calculations.

Some people like to claim New Keynesian and other economic models promote deficit spending for our current economic crisis. However, none of those models ever state that the solution to a massive debt-bubble is more massive debt, borrowing, money-printing, and spending. Also, no nation in history that was so ridiculously deep into debt has ever borrowed, money-printed, and spent its way to prosperity. Some people claim that World War II and massive government spending ended the Great Depression, and try to use that as an excuse for more deficit spending in this current debt crisis. What they fail to understand is that the $12 Trillion National Debt per-capita ($36,129) is 66% higher today than the national debt per-capita ($21,719 in 2008 dollars) in year 1945 after World War II. That's not good with both of the Social Security and Medicare systems being pay-as-you-go, with a 78 Million baby-boomer bubble approaching.

The federal government is the largest employer in the nation. More people are employed by the government than all people working in manufacturing (nation-wide). How long can that last? The federal government is sucking up 18% of GDP for about $2.4 Trillion in federal tax revenues, but that is never enough. The projected 2009 deficit is $1.7 Trillion, and deficits are expected/planned for another 10 years? The massive debt pyramid will most likely collapse in less than 10 years. To make matters worse, U.S. trade imbalances are sending trillions of dollars per year out of the U.S. U.S. exports are smaller than Germany ($1.1 Trillion) or China ($1.3 Trillion), and they U.S. is the biggest debtor nation on the planet. Yet, some people still believe the solution to the problem is more credit and borrowing?

With more global competition, decades of a deteriorating manufacturing base, how can the currently falling GDP be grown enough to support a U.S. population of 305 Million which is growing by 5 Million per year?

In late 2006-to-early 2007, GDP measured in any previous year’s inflation adjusted dollars, dipped drastically by an amount larger than any previous amount in the past 100+ years. Also, the federal government was ridiculously reluctant to report declining GDP. It wasn’t until early 2009 that GDP was finally reported to be declining since year 2007.

The Federal Reserve has already spent/allocated $4.2-to-$12.8 Trillion (as of 31-MAR-2009; previously(24-FEB-2009): $3.8-to-$11.6 Trillion; previously(30-NOV-2008): $3.2-to-$8.5 Trillion) to bail-out bad banks and corporations. That much money did not already exist. Most of that money was created out of thin air. Yet we supposedly don’t have a debt problem so severe that we can borrow and create tens of trillions of more new money out of thin air? How will this NOT create inflation? Also, why should the Federal Reserve and member banks be getting low-to-ZERO interest loans to then charge usurious 20%-to-35% interest rates? Hell of a deal, eh? The end result is what we have today, which is similar to what would happen if you played the game of Monopoly in which one person (the banker) could print all the money they wanted. Before long, the bank owns everything, and everyone else is broke or deep in-debt to the bank. Cha-Ching! Also, there are about $12 Trillion foreign-owned U.S. Dollars outside of the U.S. With a deteriorated manufacturing base and growing global competition, and the liquidation that is already occurring, how can that not help cause more inflation? The only reason inflation isn’t much higher now is because there isn’t only a credit problem. There’s a debt-problem in which Americans can’t service more debt. Most Americans are tapped out. The nation-wide debt is $57 Trillion. That’s about $225,000 per person (on average).

One obvious indication of a massive debt problem is 9,000-to-10,000 foreclosures per day. Another root cause was rampant greed in the banks, corporations and federal government, combined with the extraordinary incompetence of Congress, SEC, and the administration, which has resulted in over 3 Million foreclosures in 2008, 2.0 Million in 2007, 1.2 Million in 2006, and 846,000 in 2005. 3+ Million more foreclosures are expected in 2009, and 9 Million more are predicted in the next 3 or 4 years.

Some people say inflation is low, or that we currently have deflation now (as of FEB-2009), that inflation is not a concern at this time, and inflation can be managed later. They don’t know that, and there is no historical precedent for it either. The Federal Reserve will not be able to control hyperinflation, because raising interest rates won’t be enough, and the money supply will be difficult to reduce when 90% of new money is created as debt, and 90%-to-95% of all U.S. dollars in existence already exists as debt. And if the massive debt-bubble is merely grown larger, more people will simply be deeper in debt. We also have not had deflation (i.e. negative inflation) in the past 52 consecutive years. Also, the government’s economic statistics are not credible, because The CPI calculations were modified in year 1983 and 1998 to decrease the weighting on items increasing in price and increase the weighting on items falling in price. Therefore, based on pre-1983 and pre-1998 calculations, inflation is really much higher than what is currently reported.

Even many of those that believe more spending and debt is the cure for our massive debt-problem, still admit that the debt is near untenable already. So why grow it bigger and make the debt more untenable? What economic model or historical precedent supports that course of action, which is completely contrary to most peoples’ idea of common-sense. Since when did the principles of math and the universe suddenly become invalid?

If the federal debt actually is tenable, then why is the federal government predicting/planning more federal deficit spending for another 10 years? Does that sound as if the federal debt is tenable? No. It sounds like it is out of control. Besides, the total $12 Trillion of federal debt is only part of the total $57 Trillion nation-wide debt, and that does not even include an estimated $60 Trillion of unfunded liabilities for Medicare and Social Security, or the $62 Trillion of Credit Default Swap/Derivatives bubble.

Since when in history did any nation so deep into debt (over 410% larger than GDP) ever solve their debt-problem with more borrowing, debt, money-printing and spending? How much debt is too much debt? Total federal debt of $12 Trillion is 80% of GDP and has never large in per-capita. (GDP=$13.86T in year 2007; probably less now with declining GDP, declining tax revenues, and rising unemployment). Also, consider this. The federal government already has to spend much of its $2.4 Trillion in annual revenues on other things (see below). Thus, reducing debt is more difficult. Especially with trillion dollar annual deficits and plans to continue deficit spending for many years to come.

Federal Spending for year 2008:
$700 Billion for Health and Human Services (including $432 Billion for Medicare);
$660 Billion for Social Security;
$640 Billion for Department of Defense;
$100 Billion for Department of Education;
$100 Billion for Department of Agriculture;
$85 Billion for Veteran Affairs;
$75 Billion for Homeland Security;
$56 Billion for Department of Transportation;
$50 Billion for Housing and Urban Development (HUD);
$60 Billion for Office of Personnel Management;
$550 Billion for Treasury Department (including $430 Billion for Interest on the National Debt for year 2008);
______________________...
Total = $3.074 Trillion ($574 Billion over the total tax revenues of $2.5 Trillion in year 2008);
And by the end of fiscal 2008, there was a $1.0 Trillion deficit over the $2.5 Trillion in total federal revenues;
So, where will the money come from to merely pay the interest on so much debt, when that money does not yet exist?


----------------------...


So, for those who do not believe the federal and non-federal debt is untenable:

If the debt is tenable, why do we have 9,000-to-10,000 foreclosures per day?
If the debt is tenable, why is unemployment at a 25 year high (10.2%-to-22% ; 15-to-32 Million unemployed of about 146 Million working people of about a 310 Million U.S. population)?
If the debt is tenable, why are there record bankruptcies?
If the debt is tenable, why are the banks worried about the $62 Trillion Credit Default Swap/Derivatives bubble (note: a few persons made many billion$ gambling on an economic melt-down by buying Credit Default Swaps (CDS); and those practices haven't stopped)?
If the debt is tenable, why has the federal government been deficit spending for over 52 consecutive years?
If the debt is tenable, why can no one provide where any macro economics theory states that any nation so deep into debt can solve it with more debt, borrowing, new money, and spending?
Why did economist Ludwig von Mises state the following about the end-game brought on by reckless expansion of credit (debt):
"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion.
The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved." (source: Mises, Human Action, chapter 20, section 6, page 560)
If the debt is tenable, why have we had 52 consecutive years of incessant inflation?
If the debt is tenable, why has the federal government spent the Social Security and Medicare surpluses, leaving them pay-as-you-go, with a 78 Million baby-boomer bubble approaching?
If the debt is tenable, why is the U.S. swimming in $57 Trillion (about $184,000 per-capita) of nation-wide debt?
If the debt is tenable, why is the U.S. dollar much lower today (as of year 2009), since year 2001, against most major international currencies?
If the debt is tenable, why does 90%-to-95% of all U.S. dollars in existence in the U.S. exist as debt?
If the debt is tenable, why is inflation a concern?
If the debt is tenable, why is year-to-year inflation still rising (2002=1.59%, 2003=2.27%, 2004=2.68%, 2005=3.39%, 2006=3.24%, 2007=2.85%, 2008=3.85%, 2009=??.??)?
If the debt is tenable, why is the $60 Trillion of unfunded liabilities for Social Security and Medicare a concern?
If the debt is tenable, why is a 1950 Dollar now worth only 10 cents ?
If the debt is tenable, why aren't people spending? Maybe it's largely because they are tapped out and already deep into debt, eh?
If the debt is tenable, why is the current $12+ Trillion National Debt the largest National Debt ever in size, and per-capita?
If the debt is tenable, where will the money come from to merely pay the interest ($2.7 Trillion per year at only 4.0%) on $57 Trillion of nation-wide debt, when that money does not exist?
If the debt is tenable, and inflation is not a concern, why not create more money out of thin air?
If the debt is tenable, why can't anyone provide a explanation or excerpt from some economic model that justifies trying to solve massive debt with more debt, money-printing, and spending?
If the debt is tenable, why are 10 more years of deficit spending being predicted?
If the debt is tenable, why did the Federal Reserve have to pump $4.2-to-$12.8 Trillion (as of 31-MAR-2009; previously(24-FEB-2009): $3.8-to-$11.6 Trillion; previously(30-NOV-2008): $3.2-to-$8.5 Trillion) into the banks and corporations?
If the debt is tenable, why was it necessary to save GM, Ford, and Chrysler?
If the debt is tenable, why was it necessary to save AIG over and over ?
If the debt is tenable, why did Ben Bernanke and Henry Paulson appear before Congress to beg for emergency funds?
If the debt is tenable, why was a $850 Billion Rescue BILL necessary in late 2008?
If the debt is tenable, why was a $787 Billion Stimulus BILL necessary in Feb-2009?
If the debt is tenable, why are Americans liquidating, evidenced by foreign-owned assets which have almost quadrupled from $6 Trillion in year 1997 to $22 Trillion in year 2007?
If the debt is tenable, why can no one provide a mathematical rationale that shows how this nation that is so deep into debt can solve it with more debt, borrowing, new money, and spending?
If the debt is tenable, how can all of the above be explained ?
The system, as are all pyramid-schemes, is doomed to collapse, and the collapse can only be delayed by creating more and more new money out of thin air, which eventually destroys the currency and the economy.

Bond Market Expects Inflation to Be Only 1.75%

The federal and non-federal debt is near (if not already) untenable.
The total $11.9 Trillion Federal Debt per-capita is over 60% higher than it was after World War II.
The total current $57 Trillion Nation-Wide has grown from 100% of GDP in year 1956 to over 420% of GDP today.
Gold prices are a clue.
Inflation is being reported at ZERO or less, but it's really much higher.
Inflation calculations were modified in 1983 and 1998 to make inflation look less severe.
ShadowStats.com shows different unemployment, inflation, debt, and other statistics, but they are considered suspect by many.
Yet, more people are unemployed today than were unemployed during the Great Depression.
Many stocks are only looking somewhat better only after laying off millions of workers.
Yet, despite being told inflation is near ZERO, I have not seen the cost of living falling one bit; in fact many costs have been increasing significantly.

At any rate, the voters have the government that they elect, and re-elect, and re-elect, . . . , at least, until repeatedly rewarding failure and these 10 abuses, and repeatedly rewaring incompetent, FOR-SALE, and corrupt incumbent politicians with cu$hy 85%-to-90% re-election rates finally becomes too painful; when enough Americans are bankrupt, jobless, homeless, and hungry?

Interpreting Government Data: Is There Really a Conspiracy Afoot?

market ace is right. Some of the data is definitely skewed.
The inflation calculation were changed once in 1983 and again in 1998 such that weightings were increased for items falling in price, and decreased for items increasing in price. As a result, inflation is really higher than what is reported. Pre-1983 and pre-1998 calculations show much higher inflation. Who really believes inflation today (as of 31-MAR-2009) is really almost ZERO percent?

Also, GDP data is very suspicious, because GDP charted in any inflation adjusted numbers (e.g. 2005 or 1950 dollars: One-Simple-Idea.com/Re...) shows that GDP started falling in late 2006 or early 2007. Yet, it took the federal government over a year to admit it, and then they claimed GDP started falling in late 2007. NOTE: There has never been such a large dip in GDP since year 1900 (if ever).

Also, unemployment numbers fail to accurately report all unemployed or underemployed.

And the Social Security and Medicare surpluses are pay-as-you-go.
There are no surpluses in those systems, which is why the real debt is about $11.2 Trillion (as of 31-MAR-2009). That debt is one of the largest (if not the largest) national debt per-capita ($36,000) ever. Compare that to the national debt per-capita ($22,000 in 2008 dollars) in year 1945 (after World War II), or the national debt per-capita ($5,400 in 2008 dollars) in 1941, neat the end of the Great Depression (see: One-Simple-Idea.com/Na...).

Lastly, there is no doubt that the political parties and politicians lie about reality. The IN-PARTY usually tries to paint a rosy picture, while the OUT-PARTY usually tries to paint a worse-than-reality picture. Each try to do everything to undermine the other, because too many love THEIR party more than their country . . . at least until that eventually becomes too painful due to these 10 abuses: One-Simple-Idea.com/Ab...

And today, there are many questions being ignored about the debt too: One-Simple-Idea.com/De...
Some in government seem to believe the solution to our massive debt problem (mischaracterized as a credit problem; when too much credit for too long is the real problem) can be solved with more borrowing, debt, new money, and spending.

Yet, there is credible evidence and reason to believe that could make a bad situation much worse.
(a) Is there any historical precedent of any nation so deep into debt ever successfully solving a massive debt-bubble with more debt, borrowing, new money, and spending?
(b) Is there any macro economics model that states that a massive debt-bubble can solved with more debt, borrowing, new money, and spending?
(c) Is there any mathematical rationale that demonstrates how any nation so ridiculously deep into debt (much less the biggest debtor nation on the planet) has ever successfully solved a massive debt-bubble with more debt, borrowing, new money, and spending?
(d) If the current debt is untenable, how is growing it bigger going to help? Where will the money come from when 90%-to-95% of all money in existence in the U.S. exists as debt, because money is created as debt at a steep ratio of 9-to-1 of debt-to-reserves (and lately, at even steeper ratios lately: www.bloomberg.com/apps...)?

Anyway, to question authority and those in power is not mere conspiracy theory or false suspicion. It is patriotic. Only sheep accept fact without examining their validity, and examination of the government's data raises a lot of questions: One-Simple-Idea.com/De...

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , . . . , at least until that finally becomes too painful).

True Unemployment Rate Is Not Reflected in Government Numbers

Dozens of economic statistics are worse today than ever, and/or since the Great Depression:
One-Simple-Idea.com/Ne...

Yet, Congress just gave itself its 10th raise in 12 years, and a $93,000 increasein each members petty-cash budget. Cha-Ching.

At any rate, the voters have the <u><b>gove... that the voters elect, and <u>re</u>&... and <u>re</u>&... and <u><b>re&l... , . . . , at least until that finally becomes too <u><b>pain...

The Great Consumer Crash of 2009

beaconPA, Many will tell you not to touch your 401K.
However, you may save money if the interest rates on your Credit Card debt is high. That is, eliminating the Credit Card debt and interest may allow you to start putting money back into your 401K instead of paying it in interest to the Credit Card companies.

I.O.U.S.A.

You know something is seriously wrong when no one can answer the simple question:

QUESTION: Where will the money come from to merely pay the INTERST on $53 Trillion of (one-simple-idea.com/Di...) nation-wide debt , much less the money to reduce the current PRINCIPAL debt of $53 Trillion, when that money does not already exist? Especially when now, (one-simple-idea.com/Di...) 80% of the U.S. population owns only 17% (or less) of all wealth, and 1% owns 40% of all wealth (up by 20% from 20% in year 1976); a wealth disparity gap that has never been worse since the Great Depression.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect (one-simple-idea.com/Co...), . . . , at least until that finally becomes too painful (one-simple-idea.com/Ne...).

But, perhaps enough voters will be less apathetic, complacent, and blindly partisan when enough of the voters are deep in debt (one-simple-idea.com/De...) , jobless (money.cnn.com/2008/06/...) , homeless (one-simple-idea.com/Di...) , and hungry (www.results.org/websit...) as a result of these 10 abuses (one-simple-idea.com/Di...) and these 17 deteriorating economic conditions (one-simple-idea.com/Ne...) ?

The Great Consumer Crash of 2009

______________________...
Think-About-It wrote: Do you by any chance have a job or some other interests that you could spend some time on? Your endless comments and marketing is a bit much.
______________________...
What marketing?
I'm not selling anything, so that comment is false.
My advice for anyone that doesn't want to read it, don't.
Simply don't read it if you don't want to.
Afterall, nobody is forcing you to.
Obviously, some people don't have enough to do, since they can find time to critique the messenger, rather than the message.
Do you have anything of relevance to add to the subject (our economic conditions)?

At any rate, I plan to carry on as usual, and if you don't like it, that's too bad.
Don't read it.
Scroll right past it. If you got one of those nifty wheel-mouses, just spin right past it. Better yet, if you press Ctrl-F and type Report Abuse, which takes you to each successive comment.

Perhaps you could try to answer the question on one else can answer?

QUESTION: Where will the money come from to merely pay the INTEREST on the $53+ Trillion of nation-wide debt, much less the money to pay down the PRINCIPAL and keep it from growing ever larger to nightmare proportions, when that money does not yet exist?

Especially when 80% of the U.S. population owns ONLY 17% of all wealth (a trend that has been worsening fast since year 1976 (One-Simple-Idea.com/Di...)?

At any rate, the voters have the government (one-simple-idea.com/Li...) that the voters elect (one-simple-idea.com/Co...).
one-simple-idea.com/Co... (Pressing Problems...)
one-simple-idea.com/Di... (Root causes...)
one-simple-idea.com/Ne... (Painful consequences)
one-simple-idea.com/So... (Solutions...)

The Great Consumer Crash of 2009

People are only beginning to feel the painful consequences (One-Simple-Idea.com/Ne...) of so much debt.
It could get much worse, since the nation has $53 Trillion (or more) of total nation-wide debt, but 80% of the U.S. population owns only 17% of all wealth, 1% of the population owns 40% of all wealth, and that trend has been worsening since year 1976 due to the perpetuation of these 10 abuses (One-Simple-Idea.com/Di...).

The following have never been worse ever and/or since the Great Depression:

(1) Total $22 Trillion of federal government debt (one-simple-idea.com/Na...) has never been larger, both in size and as a percentage (over 160%) of the $13.86 Trillion GDP (year 2007), when including the $12.8 Trillion (www.socialsecurity.org... and spent from Social Security, leaving it pay-as-you-go, with a 77 million baby boomer bubble approaching (that's 13,175 new recipients per day!).

(2) Total personal household debt nation-wide ($13.88 Trillion) has never been larger, both in size and as a percentage (over 100%) of the $13.86 Trillion GDP.

(3) Total nation-wide debt of $53.2 Trillion (one-simple-idea.com/Di...) has never been larger, both in size and as a percentage of the $13.86 Trillion GDP:

private domestic financial sector debt=$15.8 Trillion;
household debt= $13.88 Trillion;
bus iness debt=$10.16 Trillion;
federal government National Debt=$9,622,190,370,71...
state and local government debt=$2.2 Trillion;
other private sector foreign debt=$1.8 Trillion;
______________________...

Total nation-wide debt = $53.2 Trillion (and that does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 million baby boomer bubble approaching);

If the $12.8 Trillion borrowed and spent from Social Security is included:

Total nation-wide debt = $66.0 Trillion = $53.2 Trillion + $12.8 Trillion = 4.76 times the nation's $13.86 Trillion GDP (year 2007) !
Total federal debt is = $22.2 Trillion = $9.4 Trillion + $12.8 Trillion = 1.60 times the nation's $13.86 Trillion GDP (year 2007) !

QUESTION: Where will the money come from to pay the interest on the $53.2 Trillion of nation-wide debt, much less the money to reduce the principal debt of $53.2 Trillion, when that money does not yet exist?

(4) Real median household incomes (one-simple-idea.com/Di...) have fallen since year 1999, and have actually never been lower since year 1978 when also including the fact that:
(a) there are now more workers per household;
(b) we have more regressive taxation (voters should ask to see the tax curve on gross income; before a myriad of tax loop holes are applied);
(c) and the 40-hour work week is disappearing;
(d) urban sprawl and high fuel costs are hammering the middle-income and lower-income levels;

(5) Illegal immigration has never been worse and more costly, costing American citizens an estimated $70 Billion to $338 Billion annually in net losses (one-simple-idea.com/Bo...). The problem has quadrupled since the amnesty of year 1986. Hundreds of overrun hospitals have closed (60-to-84 in California alone), California is now laying off 20,000 teachers in the public school system. 29% of all people incarcerated in Federal prisons are illegal aliens. The politicians (despicably) capitalize on it in 3 ways:
(a) by pitting American citizens and illegal aliens against each other for profits and to depress wages (Wage_Stagnation + Cheap_Labor = Big_Profits);
(b) by dividing the voters (capitalizing on Americans misplaced compassion for illegal aliens more than their fellow Americans);
(c) and by pandering for votes;

(6) The wealth disparity gap (one-simple-idea.com/Di...) has never been larger since year 1930. The gap started growing larger, and has not stopped growing larger since year 1976.

(7) Taxation has been regressive (one-simple-idea.com/Di...) since year 2000 (or before). We have never had so many different kinds of taxes; many of which are regressive sales taxes. The current tax code is ridiculously complex (by design) with a myriad of tax loop-holes that mostly benefit the wealthy.

(8) Home equities have never been lower (below 50%) since year 1945 (mhutch.blogspot.com/20...).

(9) Home ownership has fallen (money.cnn.com/2006/03/...) since year 2006 for low-income and middle-income groups. A study shows that only 59.6% of working class families owned their homes in 2003, lower than the 62.5% in year 1978. That is, home ownership is rising among the wealthy, while falling for most Americans that are losing wealth, losing equity, losing income, and losing their homes at record levels. Currently, home ownership is in a record plunge, and the 4th quarter of 2007 had the biggest one-year drop (1.1%) since tracking began in year 1965.

(10) Foreclosures are at record levels (one-simple-idea.com/Di...):
JAN-2008: 225,000
JAN-2007: 145,000
JAN-2006: 105,000
JAN-2005: 70,000

(11) Average personal savings rates are negative (since year 2005), and have never been worse since 1933 (one-simple-idea.com/Di...).

(12) Energy vulnerability: oil and energy prices have never been higher (both in nominal price and adjusted for inflation; worse than the spike in year 1981); one-simple-idea.com/US...

(13) Federal government bloat has never been worse, and continues to grow to nightmare proportions. There are now more jobs in government than all manufacturing nation-wide (www.akdart.com/gov1.ht...).

(14) Global competition has never been stronger. Trade deficits have never been larger (see China). Transnational corporations want cheap labor (WageStagnation + CheapLabor = BigProfits). Jobs are leaving the nation in droves; a trend that started in the early 1970s, and also helps to explain why real median household incomes have actually been falling since year 1978. Also, while 5.5% unemployment (money.cnn.com/2008/06/...) doesn't sound bad, the jump from 5.0% to 5.5% (from April-2008 to May-2008) is the largest one-month increase in 22 years (source: U.S. Labor Dept.). Also, one should remember that the population is growing by 5 million per year too. So the number of unemployed is growing larger, even if the percentage isn't.

(15) Medicare (www.ncpa.org/pub/st/st...) has hundreds of billions of unfunded liabilities per year, which are being funded by more borrowing and debt. It is not sustainable; especially with the approaching 77 million baby-boomer bubble. In year 2007, Medicare (16%) and Medicaid (7%) combined were 23% of the $2.7 Trillion federal budget.

Year 2007: $432 Billion (16% of federal budget)
Year 2006: $374 Billion (14% of federal budget)
Year 2005: $333 Billion (13% of federal budget)
Year 2000: $216 Billion (12% of federal budget)
Year 1990: $107 Billion ( 9% of federal budget)
Year 1980: $34 Billion ( 6% of federal budget)
Year 1970: $7 Billion ( 4% of federal budget)

(16) Inflation (one-simple-idea.com/De...) was higher in the mid-to-late 1970s and early 1980s, but we have had positive inflation since year 1956. 3% to 5% inflation doesn't sound bad, but when it is every year, it becomes exponential (i.e. 3% this year is really more than 3% of last year, which is more than 3% the year before, etc., etc., etc.). Thus, a 1950 U.S. Dollar is now worth less than 10 cents (one-simple-idea.com/US...). As of 16-JUL-2008, consumer prices have rose at a rate that has never been faster in the last 26 years. Energy prices have a great deal to do with this.

(17) Other exacerbating problems (one-simple-idea.com/Co...):

(a) 2 wars in Afghanistan and Iraq (cost as of 19-JUL-2008 estimated between $557 Billion and $2+ Trillion); zfacts.com/p/447.html
(b) skyrocketing health care costs (one-simple-idea.com/Di...);
(c) declining quality and rising costs of education (tsp.convio.net/site/Pa...);
(d) election system problems (one-simple-idea.com/Di...);
(e) lawlessness (one-simple-idea.com/Di...);
(f) regressive taxation (voters should always ask to see the tax-curve on gross income; before a myriad of tax loop holes are applied) (one-simple-idea.com/Di...);
(g) violent crime rates are on the rise again, after falling for many years (www.cbsnews.com/storie...);
(j) declining transparency in government (i.e. the U.S.A. Corruption Perception Index has fallen for 10 years) (www.transparency.org/p...);
(i) for the 2nd time in 125 years, the Red Cross is bankrupt (www.washingtonpost.com...);
(j) environment (One-Simple-Idea.com/En...);
(k) the Dow Jones had the worst June since the Great Depression;
(l) government corruption (One-Simple-Idea.com/Li...)

The Great Consumer Crash of 2009

_______________
Frank Rong wrote: This article has 137 comments:
Sean Maher
Aug 14 05:11 AM
My WebsiteGood summary of the deleveraging pain now facing US consumers; I've discussed a structural downshift in US consumption (and necessarily huge rise in infrastructure spend) on my blog many times; while attention is focused on the slumping subprime mortgage market, the biggest risk going forward is in superprime 'McMansion' loans, of $500k-$2m where default rates are climbing fast; the greatest overconsumption/debt accumulation in the boom years has been among the professional middle classes striving to maintain their 'deserved' lifestyle in the face of stagnating salaries and soaring service inflation. As white collar job losses rise, this may cause a whole new wave of foreclosures in upmarket suburbs nationwide. Report abuse
Lemain
Aug 14 06:01 AMExcellent article, well-supported by research and facts. I fear that your optimism that Government will protect the frugal guy is ill-founded. The people at the root of the problem are the wealthiest individuals and corporations whose money is essential for elections. The world has always been a grossly unfair place; a few of us post 1945 have been lucky enough to be protected and have enjoyed a very 'fair' society, relatively. Look at other parts of the world and previous generations to see just how lucky we have been.

The small frugal family needs to take proactive action to protect whatever capital it has. Get out of stocks and (most) bonds. Put at least 50% in precious metals - gold or silver coins. Lay down stocks of long-life staple foods if you can get them at a fair price, well-packaged and continually rotate the stocks (only buy what you like to eat). Make all essential repairs to your property and lay down a stock of spares and tools. Think about where you would get water in a civil emergency and take action. Now is the time to make sure you have a working bicycle; there is a high probability of either rocketing fuel prices or unavailability. Buy a decent book written by Pioneers; tips and methods used by your great-grandparents. They lived off the land before industry started.

Thanks again for sharing your excellent article. Report abuse
buyitcheap
Aug 14 07:08 AMSo what's the recommendation? Short equities? short bonds? After all this sky is falling business, what's your recommendation for making money from it? Report abuse
bigshot
Aug 14 07:28 AMDont know, just dropped on the sight by accident and the negativity annoyed...I suspect that there will be a big run on the market starting in about 8 months that will surprise us all, after that ....how knows?


Report abuse
LogicOverHyp
e
Aug 14 07:33 AMSuperb article. Your conclusion should be pretty obvious to all -- now that the storm is rattling the roof. However, what is different in your article is that your conclusions are based on hard data and not mere conjectures.

I agree with a previous commenter that you are too optimistic about assuming that the Government will not try to shift the losses to those who lived in thrift. Some early signs are ominous: for example, we are handling the foreclosure crisis by trying to prevent foreclosures. We are planning to spend more by means of stimulus packages instead of less. As you mention, this reversal of the capitalist process will only delay the inevitable. I would have liked a better, more elaborate treatment of an investment plan in that scenario. Also, you should include in your article the possible fates of the dollar. Report abuse
redbaron
Aug 14 07:46 AMSome people just don't get it. This guy fills his article with facts, and some apparently can't read and think. That will be to their peril.

Good article, lots of facts, and hence, I can't argue with the conclusion. Report abuse
poorslob
Aug 14 08:01 AMYour artical should be printed in every newspaper . For many Years I have seen the hand writing on the wall but few people around believe that this so called prosperity cannot go on forever . I have never seen so much waste in my life as we have seen over the past two decades .We throw away enough to support another country. Requarding our new economy Paul Volker said "enjoy it while it lasts"Like you said the american consumer will go down kicking and screaming and blaming others for their demise . I like yourself do not have a clue to the final outcome but have noticed that people like fish or herds tend to move together Feed us , entertain us . make us comfortable and the american consumer is satisfied .. Report abuse
bigshot
Aug 14 08:11 AMRedbaron...I have just read some of your posts and can see that you are man of some background.... however if the if the inverters pre 1929 went on facts alone and what they were told by the press at the time it would not have been a good outcome for them?

I will predict a huge run on the stock exchange starting in about 8 months and will let time set who is right. Report abuse
gon4beer
Aug 14 08:19 AMI agree completely and sadly, since I'm in the investment business. Folliowng is a link to a recent article from the Contrary Investor website that suggests that we may be going through a rare and likely to be very painful, generational change. Very scary picture.
contraryinvestor.c... Report abuse
investor88
Aug 14 09:01 AMJames is to be commended for writing another excellent article well supported by research, facts and logical conclusions. Those who read this and take corrective appropriate deleveraging actions will better survive the tough times ahead. Some may read this and conclude it is better to get out of risky assets and just reserve a portion for trading ie well preservation should trump chasing risky gains. Report abuse
Redman
Aug 14 09:14 AMA very good data-based article. But...and this is a very big but (no pun intened..but why not!?)..Americans always fight back..as he said...so why not now? Give us the right tools and the job will get done as it always has!
And, there are always ways to make money in the market...always. Report abuse
neeb??
Aug 14 09:22 AMI just printed off this massive tome to some friends who never gave up their back to the land missives from the 70's(anyone remember them?).
The commentary in this was enough to make a few people up here with me remember their grandparents comments about the Great Depression and how they made it through that. they survived quite well considering the stuff they had to do and , well, let's face it, the party is well and truly over, as it should be...
When one listens to the quiet one can hear the bleats of in the distance... Report abuse
adan
Aug 14 09:39 AM
My Websitetoo big for me to read at once, which i don't mind, am saving to digest in pieces - i appreciate the apparently thorough look - thanks! Report abuse
Blythe
Aug 14 09:51 AM
My WebsiteI disagree with James Quinn's interpertation of what Mohamed El-Erian, the number two man at PIMCO believes. I just finished reading his excellent book, entitled When Markets Collide. He does not "fear a negative feedback loop consuming the country. " Instead, he explains how to invest given the secular changes of the emerging markets increased foreign cash flows and activity. Read this book. It will eliminate any "fear" and help you know how to invest your own portfolio.
I found his discussion of alternative investments of interest. His chapter on improved risk management covered overlays. He discussed that the portfolio “requires a high-frequency monitoring of the betas” to key market risk factors such as equity, interest rate duration, currency and credit risk. When he started the discussion of the factor decomposition of the portfolio, it made me think we all need to consider the overlay strategies in investment and pension funds. Your thoughts? Report abuse
Dr. Jackpot
Aug 14 10:02 AMSome will starve. The fat will finally lose weight. Crime will soar. Nothing can be trusted. Coffe and toilet paper will be way more valuable than gold. Cities will be snarling pit bull arenas. Best to be in the country on 3 acres with fruit trees in a mild climate and no kids to support. Report abuse
notsosmart
Aug 14 10:10 AM
My Websitea really great article.the question is-who could have stopped this? anyone trying would have been called a nut,unpatriotic,anti business, a communist,a socialist,an uneducated moron.i paid off my house 10 yrs early.never fell for a heloc,drive a 17 yr old car& sleep well at night. luckily,i live in a neighborhood where most people live lke i do.of course we now have "conservative socialism" so that people like me have to bail out the wallst scammer crowd. i cant do anything about that.its amazing that the dumb-dumber americans reelect the same crowd(9% approval rating) & expect good leadership.aint going to happen folks.there are people who deny this article.denial just wont make it go away.goldilocks may have to wear old clothes for a while. Report abuse
NewTech
Aug 14 10:17 AM
My Website75 years ago we were in the midst of the Great Depression.
This time it is the "Great Correction". Report abuse
Ace2
Aug 14 10:27 AMExcellent article. Thanks for taking the time and making the effort to produce it. Report abuse
sr9web
Aug 14 10:28 AMDr. Jackpot:

Also nut trees, a large garden and some chickens. A strong fence, some guns (lots of ammo) and several guard dogs. Your own water well, solar power... a house designed to repel small arms fire, with several camoflaged, secure emergency exits. Also 4-wheel drive vehicle, flood survival gear (canoe or small boat), survival gear including 1st-aid kits. Lots of bottled water and 1 dozen extra cots & blankets (when eveyone else sinks, you may want to accomodate a few others). You get the idea. Report abuse
wpdragon
Aug 14 10:35 AMand still there is denial... ain't it just grand? Report abuse
nickgogerty
Aug 14 10:59 AM
My WebsiteThe film IOUSA comes out on Aug 21st. Should be interesting. agorafinancial.com... Report abuse
This game
is so rigged
Aug 14 11:00 AMVery comprehensive. But I think Quinn does not give enough credit to the average indebted American citizen. Why would they save when the government devalues their savings by 3-7% per year? M3 has doubled over the past 10 years - and even if you take out the overly exaggerated GDP, it's still a devaluation of 50%. It doesn't make any sense to save dollars, and the average person doesn't know any other way to keep their earnings.

Can a massive “readjustment” be far off (e.g. the UK in the 1949 and then again in '67)? Report abuse
Octogenarian
Aug 14 11:04 AMThe tax policy discourage savings....after tax, my 4% CD is down to 2.5%. For beginning savers with $10K, you get $20 a month, not even close to cover daily coffee fix or internet fees or cable or cell phone payments or tank of gas or Church box drops... Report abuse
venividivici
Aug 14 11:09 AMMate the market is going up today in the face of a lot of bad news because Cramer and the rest of the cheerleaders keep screaming it's a bottom, it's a bottom, it's a bottom. Denial remains the name of the game. There is no point in getting angry at the stupidity of others. Reality will exact revenge on those who ignore the facts. Just worry about yourself Report abuse
neeb??
Aug 14 11:46 AMvenividivici is right. It all comes down to "Human. All too Human". Report abuse
adan
Aug 14 12:05 PM
My Websitealmost 1/2 way through! - best part for me so far:

"...The debt induced spending that occurred from 2001 until 2007 accounted for virtually all the GDP growth over this time. Without the mortgage equity withdrawal, the U.S. would have had less than 1% average GDP growth for the entire period."

Report abuse
sumosama
Aug 14 12:18 PMGood article.

One quibble...credit card debt is going up, but not at previously seen rates nor is interest paid (NI) going up. Many, granted not all, folks use cards and pay at month end. Plus, as the auto bill, internet, etc expands, credit card usage goes up. Delinquencies and losses certainly are going up, but soon credit card balances will have to be separated into revolving vs paid.
Report abuse
adan
Aug 14 12:34 PM
My Websitefinished! - great recap and links!

Key:
My biggest concern is that our politician leaders and their cronies running our government will continue to try and reverse the normal capitalistic course of recession and expansion. Companies need to fail, housing needs to find its bottom based on supply, demand and price. Those who gambled must be allowed to lose and suffer the consequences. If the government attempts to shift the losses to those who lived lifestyles of thrift, an angry uprising will ensue.

great points:
The elimination of $2 trillion of household debt will lead to the closing of thousands of retail stores, strip malls, restaurants, and bank branches. There should be a lot of vacant buildings available in the next few years, and a few suspicious fires.

Government unemployment figures have begun to skyrocket, while the true unadjusted unemployment figures point to a major recession. If the number of people who have given up looking for a job were included, the official 5.7% unemployment rate would jump to 14%.

thanks james, great job
Report abuse
adan
Aug 14 12:36 PM
My Websitenote: i shoulda added quotes for the key thought above, this is the author's words, well said; reminds me of thomas jefferson in the late 1700's (not exactly of course, but brings him to mind) :

Thomas Jefferson was concise in his early warning to the American nation, "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."

found on: sonic.net/sentinel/nai... (note: not affiliated with this site)
Report abuse
observer08
Aug 14 12:56 PMVery good article, very good comments. What is the solution ? Report abuse
WATCHMAN of
the OC
Aug 14 01:02 PMNot to mention the fact that the jobs created by all the unnecessary strip malls will go away for a very long time. All of the construction trades, all of the suppliers such as glass, tile, roofing, carpet, stucco, lumber, steel, concrete, paint etc...and all of the transportation and manufacturing jobs. Many of these jobs were filled by people who have immigrated (legally?) from south of our border. What will these people do with no safety net and no family structure as support? Plus with all of the divorce and fragmentation of our own communities/family's, people will not have anywhere to turn. So, I fear we will first see people begging at grocery store parking lots, and then grocery bag snatching so they can feed their kids. It will be scary. The America we knew as young children is passing into history. So very sad. Report abuse
Glass
always full
Aug 14 01:26 PMThis is an excellent and well researched article, however it fails to take into account the current 10 trillion dollar national debt and the 48 trillion of unfunded future liabilities that we are facing. The reason the Fed stopped reporting M-3 18 months ago was to keep the impending monterization of debt off the national radar screens and mask the fact that the federal government will accept hyper-inflation rather than an economic downturn. This will eventually result in the collapse of the entire economy and the end of an empire. Report abuse
notsosmart
Aug 14 01:34 PM
My Websitedid the romans know their empire was collapsing?sometimes there are no answers.time is the answer & the events as they happen may be not only not pleasant but violent.the human brain just isnt there yet.yes it is sad. Report abuse
daniela
Aug 14 02:19 PM1.You mentioned: A phenomenon called “expenditure cascade” has occurred in the U.S. according to Cornell Professor Robert Frank. When top earners build large multi-million dollar mansions, they shift the frame of reference for those just below them on the income scale."
People aspire to move up, mimic the life of rich. This is wrong of course, but it is a human nature that will not be stopped. Same thing --keeping up with your neighbors will always be there no matter what economy. People in slums do the same thing! This is true in the whole world, not only in America. But only in America you can make it from nowhere to multimillionaire. Aspiration for wanting more is not a bad thing. It fuels ambition to be the better than others, to make money. create business, etc.
2.If government would not punish our savings by taxing them, we could start saving more. What if government woud provide some incentive for savings? Our economy is based on sales and not savings. I am not sure if anything will change this.

3.I slightly disagree with your post 9/11 assesment of what US should have done. We all remember that. Terrorists wanted to cripple us financially. This is also one of their ongoing strategies. Stock market was rapidly sliding, people were scared home. Donating money did not boost economy.
4.Also I disagree that it was Bush whos objective was: housing for everybody. Bush did not create FHA. This idea stems from this kind of program. I don't know this, but I bet this idea stems from democrats.
If you look closely at retailers--most of them are old, or those who did not pay attention to trends, or overbuild. Retailers are hurting, but these particular retailers--reasons are more complex than just downturn.

Overall I really like your article. It brings clearity to this situation. We will need time to heal. Government actions will be crucial--you are right. This election will be nail biting for so many reasons. America needs experienced leader, not a cheerleader. Report abuse
OldLimey
Aug 14 02:26 PMExcellent article and a fascinating set of comments. From across the pond, it seems as though what has happened is that somewhere along the way the 'American Dream' faded into history and was replaced by the 'American Have Now'. The idea that work, saving and aspiration would lead to a better life was replaced by the idea that instant gratification is a birthright. A nation of producers was encouraged to become a nation of consumers; corporations gained and government facilitated. The social dynamics have been different in the UK, but much the same has been happening here as well. Readjustment to a more sustainable model is going to be painful. The glass is indeed half empty. People have been drinking too much without replenishing it. Report abuse
StockMarketF
unding
Aug 14 02:36 PM
My WebsiteWell said! Most people do not understand or appreciate the magnitude of the current consumer debt ratio. CNBC never talks about these important issues or if they do, they don't for very long and tell you to get bullish. Report abuse
neeb??
Aug 14 03:11 PMWhich just goes to show how the mass media can be a little spotty at times with the information... ....not everyone can osmose data out of thin air,i guess.... Report abuse
OldYank
Aug 14 03:13 PMOldLimey, at least you have better pubs/beer! Always a welcome relief when times get tough. Report abuse
Bull Frog 3
Aug 14 04:20 PMIt must be a sad life to run around in fear all the time awaiting the collapse. People have been predicting the imminent end for decades. We will all be long gone before that happens. Let's look at each chart differently. Chart I and II Household debt ratio at 120% of national income. So what that is not out of line with normal business practices and is actually very conservative. Look at Wal Mart their debt ratio is 345%. Americans have a higher debt ratio because we work more hours and are more productive than the rest of the world. It is that drive to want more that makes us successful. Chart III and IV our savings rate is so low because of inflation. We are making smart decisions to spend and obtain assets at current prices and not allowing our hard earned income to become devalued by inflation and parking it in a bank. Chart V a savings glut in developing countries. That is exactly the problem we do not have - they need to restart their slowing economies by spending and investing that savings. That is the reason for inflation and slowing growth. If they had made better investment and spending decisions commodity driven inflation would come down and growth would pick up. The rest of the charts regarding the lax lending standards etc... are spot on! Luckily there is still a international savings glut to recapitalize the holes in the system. Cash is king right now. Use it wisely to buy assets for 50 cents on the dollar. That is how to become wealthy. Always buy stuff on sale. The good news is there is a sale going on now and better times ahead!!! Report abuse
lexie
Aug 14 04:33 PMI passed this article along to everyone in my outbox! Protection Plunge team doing all they can, so no tea leave reading on my part. Report abuse
Jim Quinn
Aug 14 04:33 PMWal-Mart's debt ratio is 36%. A slight difference from 345%. Good luck buying those assets for 50 cents on the dollar. Report abuse
Dan O'Leary
Aug 14 04:37 PMJames - Another great article. I can't recall who above posted the comment but I too believe that we CAN solve the many of our problems. We just have to get ALL the politicians out of the way! Report abuse
WATCHMAN of
the OC
Aug 14 05:22 PMI would politely ask Bull Frog 3 to think in terms of hard times, not The End of All. There is a difference, as I've outlined below........

THE FUTURE OF FAMILIES IN AMERICA


In this ever changing and increasingly perplexing world, many Americans peer into their future with uncertainty and confusion. I am convinced that a widespread deception is at the core of this confusion. Modern day Americans have been duped and are in dire need of clear teaching and leadership about the times we live in.

We in America have been led to believe that Americans will escape suffering and hard times. Where does this belief come from? To begin with, it evolves from “life as we have always known it.” Our generation has experienced one of the most prosperous eras of any nation in history. As a whole, we don’t have a clue as to what real suffering and difficulties are; we just know the “good life.” Additionally, the popularity of all the “super success books” focusing on easy wealth accumulation, have diverted Americans from observing the events unfolding right before our eyes. We have been fooled into thinking that America guarantees us a soft life because we are # 1. But this deception leaves Americans confused, asking, “Where is the good life?” Why is this happening to me? This isn’t what I’ve been promised!” As a whole, the American people of today have bought into the American Dream & the Gordon Gecko entitlement philosophy, hook, line, and sinker. However, neither history nor reality gives credence to this popular “easy times for life” gospel of today. It is not consistent with current trends, or history itself.

And what does history demonstrate? In 1900, Great Britain ruled the world, fully convinced she would forever retain her supremacy. However, gradually over the next hundred years, her standard of living fell by 50% compared to the rest of the developing world. Meanwhile, due to our nation’s industrial productivity and military might, America’s standard of living surpassed Great Britain, more than tenfold. By 2000, Great Britain and America had merely swapped places as world rulers. Do we really have any reason to believe we will maintain our preeminent position? Or will America, like Great Britain, fall to the wayside and become a far lesser entity in the world? All current indications point to America falling from the top, and falling hard.

It behooves us to contemplate the fast-approaching storm that will soon hit all of America, especially families and the poor. Out of the East, China and India are fast becoming economic superpowers, soon to claim America’s status as world leader (as America once did to Great Britain). China’s GDP (gross domestic production) is currently running at about 12% -15% a year. At this rate, China will add approximately 300-400 million middle class consumers over the next ten years, all with surplus money to spend. This scenario will create enormous upward pressure on commodity prices such as gasoline, wheat, corn, cotton, lumber, steel etc. Furthermore, India is on track to add another 100 million middle class consumers to the planet and on top of that, there are over one hundred smaller, but expanding, economies in nations such as Russia and Brazil with a current GDP of at least 3% - 4%. Collectively, we’re looking at close to one billion consumers poised and ready to purchase our precious commodities. At the same time, globally, we are losing approximately 38,000 acres of arable land a year while adding approximately 100 million people per year. What will the end result be? The “pinch” Americans now feel at the check stand will escalate into an “economic tsunami.” Our nation will suffer hardship never thought possible in America.

To further confuse people, politician after politician, President after President, keeps promising Americans a better future, a future they cannot produce. And Americans, so used to good times, desperately cling to the promises, not wanting to face a life of less that seems to be inevitable.

Now more than ever my fellow Americans, we need to live wisely, build community, save and invest our recourses, and adjust quickly to the global changes of our world.

Report abuse
jlounsbury59
Aug 14 05:30 PM
My WebsiteAn outstanding article and exceptionally good (for the most part) comments. I liken our recent history to musical chairs. In the current situation, though, when the music stopped (for the last time?) we have discovered that many chairs have been removed, not the usual one chair. Continuing the analogy, many will have to stand for a while but they will not die. They will stand, do their best and perhaps be wiser when they find chairs again in the future. Report abuse
xsuddensam
Aug 14 05:54 PMI had a good laugh this morning listening to chief CNBC talkinghead Joe Kernen complaining about another Wall Street Journal article reporting more credit problems on the horizon.

He was distraught because he thought that the financial crises was, for the most part, behind us. These guys on CNBC, including Larry Kudlow and that raving lunatic Jim Cramer, don't have a clue.

Report abuse
surgcare
Aug 14 06:21 PMExcellent article,however I disagree with the premise that it was G Bush who created this problem . When Bush took office the economy was in a recession and the stock market crashed . This is why Greenspan lowered interest rates and Bush cut taxes . Whats forgotten or not realised is that a lot of people lost lots of money from the mantra at that time of "BUY AND HOLD '. This cost americans lots of money ,so they lost confidence in the stock market and put their money in the thing they trusted the the most ,their homes .If you want to blame anyone it should be the democrats who forced banks to loan money to people to buy homes they could not afford ( although they could during the dot com bubble and the huge tax increase by the democrats in 1994 ,which held up as long as there was a stock market boom , but then caused a recession when the the market bubble popped .The current bailout by the democrats will only make this affair worse . As for people like "bigshot " he or she will be the first one "whining " when things go bad ,expecting handouts because he's not prepared . Report abuse
buyitcheaper
Aug 14 08:23 PMReally good comments and article by the author- consider for a minute how little if ANY at all gets into our high school or college/university level curriculum - i.e. How to interpret economic data 101. Our financial IQ is horrifyingly weak. I'd still like to know how he would position a portfolio in light of the data and conclusion. short term treasuries and cash, all things ex-US? Report abuse
neeb??
Aug 14 09:01 PMbuyitcheaper, you hit the nail on the head. I keep harping about the abysmal knowledge of a lot of people about even concepts like househod budgets. I know a lady who with a grade 2 level of understanding of math is mystified when she comes across so many people who either do not know how much they spend on their grocery bills or even know that all that running around in the big gas guzzler to save 2 bucks just cost them 10x that amount..... Report abuse
barnburner
Aug 14 09:18 PMI think Jim Quinn has all his fact correct but still the market is fickeled so who know what will happen to the market.
I take issue with some of the comment thought "But only in America you can make it from nowhere to multimillionaire"
The richest man in the world is a Mexican who was not born rich. I have relatives who live in England who have a life-style as good or better than any Americans I know. This arrogance of Americans in thinking that they are the only ones in the world who can get rich or have a superior life-style is a bit nauseating.
The "American Era" is over, this is the dawn of the "Asian Era" and those who think not will die with the old Era. Unfettered Capitalism has run it's course and the golden goose was slaughtered. Report abuse
Joyful
Alternative
Aug 14 09:40 PM
My WebsiteOne reason people didn't save money is Alan Greenspan's interest rates. There was no sense in tying up your cash in a 2% CD. I took mine out of the bank and put it into stocks with high dividends, but I think a lot of others just spent it.

There has to be a reward to saving beyond patting yourself on the back for being virtuous. Report abuse
The hand
Aug 14 09:56 PM
My WebsiteThe great thing about data is that you are left only with arguing what it means. For sure, we need to sit back for the next six months to see what the horizon looks like. There are many possible senarios even if the USA does not blockade iran - and if it does things will not look good. Report abuse
iThinkBig
Aug 14 11:03 PM
My WebsiteNo doubt. They are still in the denial stage while some plan for the next start of a Bull run in 2013. And that is if we elect decent leadership and have major geopolitical issues (which unfortunately, history tells me we will).


On Aug 14 05:54 PM xsuddensam wrote:

> I had a good laugh this morning listening to chief CNBC talkinghead
> Joe Kernen complaining about another Wall Street Journal article
> reporting more credit problems on the horizon.
>
> He was distraught because he thought that the financial crises was,
> for the most part, behind us. These guys on CNBC, including Larry
> Kudlow and that raving lunatic Jim Cramer, don't have a clue. <br/>
> Report abuse
E Nuff Sed
Aug 15 12:25 AMGive me your entrepreneurs, your rich, Your Gucci clad elites yearning to shop till they drop, The capitalistic pigs and fat cats of your teeming shore.

There is a easy solution to the housing crisis - open the tap for immigration. Any rich foreigner, who does not have a criminal record and can document his earnings, and who can buy a house for cash (no mortgage) should be given a green card.

The problem will not only be solved in no time, but there will be a huge boom in real estate fueled by equity - not debt.

Report abuse
Omitted
Kingdom
Aug 15 07:17 AMTwo of the biggest liars in US history: George W Bush and dimwit US Labor Secretary Elaine Chao. It takes 100K-130K new jobs created per month in the US just to absorb new graduates. These two Republican morons have rarely met that target. Job offshored? It will not come back. The difference goes onto credit cards at usury interest rates. Where's the outrage? Bush should have been impeached for lying after Month 3. Both of their job titles contain the words "OF THE UNITED STATES." My advice: put your bills on Elaine Chao's desk. Bury her desk. Let her have Roger Ailes, Rush Limbaugh, drug addict, and the Swift Boat Veterans for Truth help her open her mail. When she leaves office, send your bills to her via her husband, Mitch McConnell (R-Ky) up for re-election this year. Report abuse
Randy Fay
Aug 15 09:14 AM
My WebsiteLots of facts and charts, but really no MEAT here people. Yes, we are in a credit induced hangover. In some places house prices doubled over 5 years, certainly not everywhere. Right now, for the first time in many years, it is now cheaper to own a home than rent. With the reduction in consumer spending comes what....you guessed it, lower inflation. Report abuse
Chris B
Aug 15 09:50 AMThe long term trends are disturbing. It seems that nowhere is safe, not stocks, not bonds, not cash accounts, not real estate, not commodities or metals (consumption declining), and not foreign stocks. Inflation will soon approach 10% from the current 6%.

I guess I could exchange my dollars for euros, yen, or Aussie dollars and park that money in foreign banks. At least then I could afford to escape if things got really bad and I acted promptly enough.

Instead, I plan to invest in more education - business and a foreign language. Guaranteed high returns and the flexibility to not be trapped in a declining soon-to-be 3rd world country. Report abuse
xsuddensam
Aug 15 10:13 AMSurgcare writes:

"If you want to blame anyone it should be the democrats who forced banks to loan money to people to buy homes they could not afford..."

Since most bankers are Republicans, can you tell me how this works? I thought banks are in the business of making money. Surely, no banker is going to be forced to make fraudulent and stupid loans to people who don't qualify. The incentive for making these loans was simply greed.

As I recall, congress has only been a Democratic majority since January of 2007 (seated) -- less than two years. The bulk of these loans were originated with the blessing of a Republican congress and a Republican white house.
Report abuse
Tim Miles
Aug 15 11:23 AMI think the article is dead on and agree with those who say that politicians in general have been reluctant to tell Americans the truth and to inspire them the way FDR and JFK did to sacrifice for their country. I firmly believe in America's ability to meet challenges and to achieve great things. We all need to understand that the era of cheap oil is over and to wean ourselves away from our addiction. Drilling for more oil is a stupid response to our energy crisis. We also need to be more responsible for our environment and how we live our lives. Europeans tend to be more frugal and energy efficient than Americans, but also appear to lead happy lives. So the future does not have to be grim. Report abuse
gfsound
Aug 15 11:31 AMThis is quite simply the most well documented, best article I have read on SA ever, hands down. Thank you to the author for breaking it down into terms that even most Americans SHOULD be able to understand. Report abuse
d.a.n
Aug 15 12:04 PM
My WebsiteYes, the problem is worse than most people know.
Where will the money come from to merely pay the INTEREST on $53 Trillion of current PRINCIPAL (not future DEBT=PRINCIPAL + INTEREST).

How did we get here?
We got here altogether.
While government is corrupt, voters empowered the corruption by repeatedly rewarding corrupt politicians with perpetual re-election:
one-simple-idea.com/Co...

We got here due to these 10+ abuses over the past 30 years:
one-simple-idea.com/Di...

Now we are only beginning to feel the painful consequences, as evidenced by these 17+ deteriorating economic conditions, which have never been worse ever and/or since the Great Depression:
one-simple-idea.com/Ne...

But, perhaps enough voters will be less apathetic, complacent, and blindly partisan when enough of the voters are deep in debt (one-simple-idea.com/D... , jobless (money.cnn.com/2008/06... , homeless (one-simple-idea.com/D... , and hungry (results.org/websit...) ?

At any rate, the voters have the government (one-simple-idea.com/L... that the voters elect (one-simple-idea.com/C...
one-simple-idea.com/Co... (Pressing Problems...)
one-simple-idea.com/Di... (Root causes...)
one-simple-idea.com/Ne... (Painful consequences)
one-simple-idea.com/So... (Solutions...)
Report abuse
Tip
Aug 15 12:11 PMI couldn't agree more with xsuddensam's response to Surgcare. No bank was "forced" to do anything by democrats or anyone else. To the contrary, it was republican deregulation that led to this mess. Prior regulations enforced reasonable credit criteria. Deregulation removed this enforcement, allowing banks to follow their greed, and resulting in this big mess. Report abuse
Jan Steinman
Aug 15 12:37 PM
My WebsiteThis is a lovely analysis of where we are, but a bit weak about how we got here.

I kept waiting for someone, anyone, to mention energy. Doing a search puts the first mention of that word (thanks, Tim Miles!) in the second-to-last comment.

Let's talk a bit about fundamentals -- REAL fundamentals. Everything we do depends on energy. Some have said that Americans are resilient, creative, inventive, etc., and that we will figure a way out of this, and civilization will soon resume its upward path of infinite growth in a finite world. And yet, there is only so much energy -- and there is evidence that it is on the edge of terminal decline.

Today, even the poorest person supporting a family on a minimum wage income has the support of hundreds of "energy slaves." Pop a slice of bread in the toaster in the morning, and the energy equivalent of FIVE or more human slaves gathers fuel and starts a fire for you. Hop in that beater vehicle to go to your minimum wage job, and the energy of a THOUSAND human slaves push your vehicle down the street.

This will not continue. The gross energy consumption of the US exceeds the energy collected from sunlight of all the plants growing in the US by some 50% or more. We are in the last few decades of consuming the "ancient sunlight" that nature has stored.

So what we are seeing is simply the result of the beginning of energy suffocation of civilization. James Quinn does a brilliant job of analysing the secondary and tertiary effects of the beginning of the energy decline, but totally misses the underlying reason.

Understanding the energy decline is the key to survival.

And yes, the devotees of Adam Smith can be counted on to chorus that rising energy costs will simply enable other technologies and sources of energy. The problem is that cheap energy is a pre-condition for making solar panels, wind turbines, and biofuels. Take away the scaffolding, and the entire platform collapses. Analyse these in terms of energy, rather than dollars, and the future is not so predictable. Adam Smith's "invisible hand" is blind to finite limits.

Imagine you're in a space suit, orbiting earth. The space suit is stuffed with millions and millions of dollars of US paper money. Or what the heck -- call it gold, diamonds, or whatever else you can stuff in there. You have ten minutes of air left. The question is: how much will you have to pay for an additional ten minutes of air? Or even one minute?

To bring that analogy "down to earth" in the immortal words of Kenneth Deffeyes, "The economists all think that if you show up at the cashier's cage with enough currency, God will put more oil in ground." It ain't so.

If this concept is new to you, I encourage you to explore some of the following websites. This is not simply nut-case stuff. It's real, and we're now feeling the first effects of the terminal energy decline.

energybulletin.net
peakoil.org
peakoil.com
dieoff.org Report abuse
d.a.n
Aug 15 01:12 PM
My WebsiteNo doub that rising energy costs and an non-finite source of energy is exacerbating the problem.
One-Simple-Idea.com/US...

You know the saying: "When it rains, it pours".

However, in my opinion, the most significant root causes of most of our problems today are these 10+ abuses:
One-Simple-Idea.com/Di...

. . . which are mostly the cause of these 17+ deteriorating economic conditions:
One-Simple-Idea.com/Ne...

Voters are culpable too, since most voters repeatedly reward bad politicians with perpetual re-election.

But, perhaps enough voters will be less apathetic, complacent, and blindly partisan when enough of the voters are deep in debt (one-simple-idea.com/D... , jobless (money.cnn.com/2008/06... , homeless (one-simple-idea.com/D... , and hungry (results.org/websit...) ?

Perhaps when enough voters are feeling enough pain, they will do what most voters did in year 1933 (3+ years into the Great Depression; too late to avoid the pain of the excesses of the 1920s), when a whopping 206 members of Congress were voted-out of office.
One-Simple-Idea.com/Co...

At any rate, the voters have the government (one-simple-idea.com/L... that the voters elect (one-simple-idea.com/C...
one-simple-idea.com/Co... (Pressing Problems...)
one-simple-idea.com/Di... (Root causes...)
one-simple-idea.com/Ne... (Painful consequences)
one-simple-idea.com/So... (Solutions...)
Report abuse
d.a.n
Aug 15 01:22 PM
My WebsiteThe monetary system is nothing more than a dishonest, usurious, upside-down pyramid-scheme, and all pyramid schemes are doomed to collapse.
One-Simple-Idea.com/De...

Our current nation-wide debt pyramid is now so huge (e.g. over $53 Trillion), it's probably no way to avoid the collapse. All that can be done now is to try to delay the collapse by creating more money out of thin air. But that won't work when most people can no longer carry any more debt.

This is why no one can answer the simple question:
WHERE will the money come from to pay merely the INTEREST on $53 Trillion of nation-wide debt, much less the money to pay down the PRINCIPAL, when that money does not yet exist?

It may take several more years, but the DEBT will continue to grow and grow. The Federal Reserve's only choice is to continue to keep inflation high by creating more money out of thin air. In fact, the government will give away money if necessary (in the form of more stimulus checks).

The writing is on the wall.
Do the math.
$53 Trillion of nation-wide debt is a recipe for economic disaster.
Where will the money come from, when it doesn't already exist?
Especially when 80% of all Americans only own 17% of all wealth?
Report abuse
fatcat
Aug 15 01:34 PMOne thing not mentioned in this article...as much as 40% of families receive public subsistence,welfare,fo... stamps,ssi,etc.Hopefully this would provide a soft landing for these people,many of whom would be the ones that would lean toward civil disobedience.. Report abuse
Midas
Mulligan
Aug 15 02:11 PMWell done. A thorough, well-researched article. I would dispute the author's suggestion, however, that the penurious and prudent will emerge relatively "unscathed." Those ( or perhaps, "we" ) who invest will likely experience a degree of "collateral damage" of a kind, in terms of meandering or lower indexes ( lower equity prices ), resulting from a consumer-led slowdown of undetermined depth and breadth.

"May you live in interesting times," the old Chinese admonition goes. Investors are headed for some interesting times indeed. Report abuse
Wall Street
Free Thinker
Aug 15 02:47 PMCredit, on the scale discussed in this article, is how productivity is measured for large societies. If we get another boost in productivity, perhaps robots that follow us around and do our mundane chores, the credit/debt crisis will disappear, as it did in the late 90s, when the slow down in productivity (from PCs) was given another boost with the Internet (communications). I don't see that technological advance, but that doesn't mean it won't happen. If it doesn't, then yes, as the article excellently points out, everyone will have to adjust to stagnant productivity. But as some commentators have pointed out. America has always been a magnet for the world's greatest talent. That talented people now move to Australia or Canada is what should really worry us. Report abuse
Tim Miles
Aug 15 02:55 PMThanks, Jan Steinman for your comments on energy. I would urge people to read Lester Brown's Plan B: Mobilizing to Save Civilization. It is a well thought out and reasoned book which deals with the coming scarcity of resources that all of us will face in the future and offers ideas on how to handle it. I am more optimistic than some of the bloggers about our chances since I see articles every day on U.S. companies and innovators who have practical solutions to various problems like our energy crisis. The beauty is that they all want to make money and will employ Americans in the industries of the future if politicians make the right decisions about nurturing innovation, improving education and healthcare, and reforming a tax system that favors the wealthy and allows many corporations to avoid paying their fair share (see a recent GAO study that focuses on corporate tax dodgers).

I am not sure that the government is corrupt since I have spent nearly 32 years in it and work alongside highly dedicated and professional public servants. Perhaps certain people in our political system are corrupt, but American voters have a responsibility to do something about it. I have voted in every election since I received the right to vote so I am not to blame. Report abuse
IMV
Aug 15 03:26 PMI am sure those charts does not pass a quality check. Info has been twisted to make a point. The economy will recover by mid 2009. Buy assets NOW!! And join me in the next party..... Report abuse
Romeo R
Aug 15 03:54 PMImpressive article! Well supported data behind all arguments. It should be televised throughout the country to give a dose of enlightenment on US economy to the great nation of ours. Report abuse
Skjellifetti
Aug 15 04:04 PMThe author needs to learn the difference between average and median and when it is appropriate to use one vs the other. When Bill Gates builds a house, the average house price looks way out of reach.

For an alternative take on CC debt, see:

articles.moneycentral.... Report abuse
d.a.n
Aug 15 04:09 PM
My Website_______________...
IMV wrote: The economy will recover by mid 2009. Buy assets NOW!! And join me in the next party.
______________________...
Think so?
Where will the money come from to pay the INTEREST for $53 Trillion of nation-wide debt, much less the money to keep the PRINCIPAL of $53 Trillion from growing ever larger?

And that $53 Trillion of nation-wide debt does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 Million baby-boomer-bubble approaching.

It may take a few more years; perhaps even another decade, but there will be painful consequences for so much debt.

Take of those rose colored glasses.
The U.S. is in serious economic trouble that will be painful for many people for many years.

Sure, blind pessimism is foolish, but so is blind optimism; like an ostrich with it's head stuck in the sand . . . it had better be careful it really isn't a bucket of setting concrete . . . a mishap that perhaps could be avoided if it weren't for the rose-colored glasses.

P.S. David Walker, former U.S. Comptroller has been warning us about the massive debt and exacerbating problems for years.
Watch some of his videos.
It's more serious than many know.
One-Simple-Idea.com/De...

At any rate, here's one simple question.
WHERE will the money come from to pay the INTEREST alone on $53 Trillion of nation-wide debt, much less the money to keep the $53 Trillion PRINCIPAL from growing larger, when that money does not yet exist? Can you say: inflation ?
The Federal Reserve and government are now in a real pickle, and they will be creating massive amounts of money, and giving it away for free (i.e. more stimulus checks) to keep the pyramid from collapsing.

At any rate, the voters have the government (one-simple-idea.com/L... that the voters elect (one-simple-idea.com/C...
one-simple-idea.com/Co... (Pressing Problems...)
one-simple-idea.com/Di... (Root causes...)
one-simple-idea.com/Ne... (Painful consequences)
one-simple-idea.com/So... (Solutions...)
Report abuse
The Baren
Aug 15 05:06 PMThe one topic no one wants to look at or talk about is obviously the topic that eludes us all. Not me. Take a good hard look around you or maybe it is to late to the fact of who built all these houses or are all the parasites gone. Yes, most have moved on already to someplace else. I heard all the jokes about how fast they build. About how if we were to deport them it would destroy the economy. How every man has a right to make a living. If our government did something in the beginning like stopping the ant hill of ILLEGAL CRIMINAL IMMIGRANTS over pouring
into America then who would have built all of these homes? My educated guess leaves me to believe that the normal working man would have built these homes. Less soldiers means smaller army.
Smaller army means less homes. Less homes means better economy. If you think about it these homes built by illegal criminal immigrants were in retrospect illegal operations. Illegal doings have consequences. Thanks to all of our politicians who were to much of a coward to stand up for what is right has now lead us down the very spiral we fall today and tomorrow. Anyone who cannot see the problem
America faces today and in the coming YEARS has something wrong
with there reasoning system. It is a new disease. Something that plagues us all. Denial. GOOD LUCK AMERICA!!!!!!!!!!!! Report abuse
tex97239
Aug 15 05:35 PMExactly what I have been trying to explain to people for the last 20 years.....

You are living a life based on false economic pretenses.

It doesn't really matter that you are no longer able to lease that overpriced luxury car. You wouldn't be able to afford the gasoline to operate it even if you could.

Don't think that just because you were able to borrow your way into high six or seven figure balance sheet, that you are wealthy. Far from it!

In my father's day they called it a DEPRESSION.

These days it is called a correction.

Either way, it is the Middle Class who will suffer the longest and hardest.

Thank you Alan Greenspan, Ronald Reagan, Bill Clinton and G. Bush 1 & 2.

Great work! Report abuse
p-mo
Aug 15 05:39 PMHuh, I can't find this guy's profile on the faculty of Wharton;

wharton.upenn.edu/.../

Hmmmmmm? Report abuse
Donnernv
Aug 15 06:31 PMTim Miles:

You seem to be an intelligent man. But you have quaffed too much of the media Kool-ade.

To wit: GAO says 68% of corporations pay no Federal income taxes.
To wit: The Federal income tax system favors the rich.

The facts...the GAO study also mentions that 50% of corporate earnings passe through the Sub-S and LLC corporations untouched but flows DIRECTLY to the shareholders pro-rata to be taxed on their 1040s instead of the corporations' 1120s. No tax is lost.

The 68% allegedly lost is reduced by the 50% paid by the shareholders directly. The other 18% represents (in the main) corporations that had negative earnings.

Of Federal income taxes, the top 1% of income earners pay 39.4% of all Federal income taxes yet own only 21.2% of all income. The top 10% of all earners pay 70.3% of these taxes with only 46.4% of the income.

Moreover, the bottom 50% of all earners pay 3.07% of the taxes with 12.8% of the income. This favors the rich? I pay 33.4% of my total income for Federal taxes, an amount equal to more than 2000 of the average from the lower 50%.

Do a little fact finding before regurgitating the media myths. Report abuse
p-mo
Aug 15 06:36 PMThis guy is a fraud. He is not the "senior director" of anything. Report abuse
Jim Quinn
Aug 15 07:11 PMHey Bozo-mo

Why don't you try to say something intelligent rather than calling people frauds. I'm not on the faculty. Look in the staff diectory. I guess with your research skills, you aren't a graduate of Wharton.

Details - Public View Close

JAMES G QUINN

Sr. Director of Strategic Planning, Wharton Finance and Planning (Staff)

[e-mail]


Report abuse
jlounsbury59
Aug 15 07:35 PM
My Websitep-mo - - -

Try Googling "James Quinn Wharton". You'll find plenty of professional activities for your "fraud". Next time don't go off half-cocked. Get some facts first. Report abuse
Tesh
Aug 15 09:08 PM
My WebsiteWith all the fuss over usury and the fraudulent economic system, I find it interesting that nobody is calling the investor society to task. The idea of "investing" your way to riches is just as dangerous and fundamentally unsound as fractional reserve lending. All that investing does is flip the debtor/creditor equation; usury is still a drain on capital, regardless of what direction it flows in.
The argument goes something like "screw the other guy more or earlier than he screws you", but bottom line, living on interest (usury) instead of production isn't a solid foundation for an economy. Report abuse
p-mo
Aug 15 10:16 PMMy apologies. By the nature of your article and the description in your bio, it seems that you are representing yourself as Wharton faculty, which apparently you are not.

In fairness to all, could you clarify what your role is at Wharton?

Oh, and to Mr. jlounsbury59, the results you get from your suggested google search do not lead to the author of this article (except for a bunch of reprints of blog entries from the last couple weeks.) Report abuse
Ricard
Aug 16 04:11 AMGreat article - one of the best opinion pieces on the economy I've read, and easily one of the best articles in general I've read in years. This article manages to put all of the bad news I've read about 2001-2007 into one nuclear holocaust, and once packed into such, delivers the promise of the title with a fury that would make those Michael Phelps victory pics look tame.

Favorite comment is from OldLimey - great summary about American consumerism.

My own comments:
1) This article would seem to advocate for what Greenspan recently wailed about - wiping out Fannie and Freddie and starting anew. I'd imagine that would fix at least a large portion of the mortgage mess, although not necessarily the balance sheets of American consumers.

2) Interesting to track the boom/busts of the past 10 years. First, it was in stocks, which have since recovered, even the techs given their P/Es. Then, it migrated to housing, which is nearing a bottom. Now, it is in commodities, which with the dollar's ascent, are fast falling themselves. What's next? Am I missing a market? Or are stocks really ready for another speculative boom cycle? Or should we...

3) Look to other consumers - I will focus on China, although other regions may also have a similar backdrop. The size of its currency reserves, the still pristine savings rate, and the more-than-likely continued, unstoppable growth seem ripe for the flourishing of the Chinese consumer. Such a development would be healthy for the country, as it would be able to self-sustain its economic growth, and become less dependent on exports. In the international arena, it has every reason to pursue such a path to smooth relations with debtor nations. Moreover, with the recent plunge in Chinese equities, incredible deals are ripe for the picking.

Conclusion:
I think if one were to take this article seriously a decent course of action would be to
1) Deleverage, as many others have already commented on
2) Buy puts or sell short Fannie and Freddie
3) Stock up on single-digit P/E developing nation stocks with a similar profile as China.

Be careful of
1) Nations reliant on commodities - WSJ just put out an article citing speculative activity accounting for the majority of the transactions in the oil market - it is easy to imagine other commodity markets, and hence other nations' economies, infected by the same disease
2) US consumer discretionaries without a strong, diversified international portfolio (just don't let an AAPL hit my head)
3) Single-digit P/E US stocks, but ahem, there is no such thing.

Cheers, and happy hunting! Report abuse
Ricard
Aug 16 04:22 AMOops:

When I wrote "Nations reliant on commodities", I meant "Nations reliant on exporting commodities", not importing them. I'm sure Japan would be quite happy (or less unhappy) if commodity prices fell further. Report abuse
THE CLOCK
MAN
Aug 16 05:24 AMWe still have time to make major corrections to the problems that face this nation. We can start by electing a "Statesmen" this time instead of politicians. Americans can still write on the ballot their choice for President of the United States.... Want to really turn this country back to what the Founding Fathers invisioned.... write in RON PAUL, a man who truely loves this country and has the courage to face the problems that confront this nation. Quit throwing you vote away... the Democrats and Republicans are sleeping in the same bed.... God Bless America Report abuse
d.a.n
Aug 16 07:59 AM
My Website_______________...
Donnernv wrote: Moreover, the bottom 50% of all earners pay 3.07% of the taxes with 12.8% of the income. This favors the rich? I pay 33.4% of my total income for Federal taxes, an amount equal to more than 2000 of the average from the lower 50%.

Do a little fact finding before regurgitating the media myths.
______________________...
Funny how those accusing others of perpetuating myths are the very ones doing it.

Your numbers and percentages on income taxes exclude one important fact: those tax rates are on adjusted income; NOT gross income. The current tax system is regressive due to a myriad of tax loop-holes that favor the wealthy.
Not only that, capital gains and dividends are not subject to Social Security and Medicare taxes.
Social Security and Medicare taxes are 15.3% (half from employee, half supposedly from employer, but really comes out of employee's pocket).
Not only that, but Social Security is capped at about $98K, making it even more regressive.
Not only that, capital gains are taxed from 5%-to-15%.

The tax system is regressive and unfair.
The middle-income groups is getting soaked.
Here's the proof:
One-Simple-Idea.com/Di...
Report abuse
Jim Quinn
Aug 16 10:16 AMp-mo

Sorry for reacting angrily to your post. I am responsible for Planning and Budgeting at Wharton. My group supports the faculty in their efforts in research and teaching. Faculty are referred to as faculty. If the title is director or senior director, that means you are staff. Report abuse
The Baren
Aug 16 10:38 AMYes, lets talk about taxing the big business. I do not believe anyone is thinking clearly enough to see who they work for. So lets tax big business
and give the middle class a tax break. Boy that sure sounds good doesn't it. Oh wait, I just lost my job because the evil big business are now paying huge tax increases and in return has to cut back on 2,600 jobs to make up for lost revenue. I really don't think a tax break for middle class is going to help me if I don't have a job. Now instead let us give big business a tax break and a chance to expand with opportunity for new employment instead of laying people off. Wow, new jobs. Like I said before everyone is in denial of what's going on around them. Americans have become such brats that instead of embracing new data for educational purposes such as the article above they would rather spend all there time trying to discredit. Open your eyes America
and realize it is time to think about the big picture and not just yourself.
This effects us all and it's sad to believe that most will not even try to see the existence of this national problem until poverty comes knocking at their door. GOOD LUCK AMERICA!!!!!!!! Report abuse
John
Pseudonym
Aug 16 10:59 AMWhen the history books are written on this subject, this article should be included. Report abuse
Lilguy
Aug 16 11:08 AMGood, if exhausting and depressing, overview of how we got ourselves into the situation we're in.

Maybe even more worrisome are the measures the USG will take to get us out of this mess. The more likely will tend to salve the self-inflicted wounds, but not address their systemic basis (such as the much-ballyhooed tax stimulus package). In the end, if we do not do what is necessary to fix our financial system and our own way of living, we will only add pain for ourselves, our children, and our grandchildren. Report abuse
WEBISKING
Aug 16 11:21 AM
My WebsiteReagan Bush and kennedy all enacted major cuts EVERYTIME after that FEDERAL REVENUES WERE INCREASED. The fact taht Congress overspent all the money does not change that fact. Investment bubbles have been going on since the tulip bulb incident in the16 or 17th century. remember this lne What wise people do in the beginning.Fools do at the end Report abuse
Moses
Aug 16 11:48 AMI agree that eventually the US will fall from grace, but is it this time? I give it a 60-70% chance that it is. There are no guarantees, the US gov't could keep putting it off by issuing more debt. Eventually though we will collapse under so much debt. What happens to all the other countries that own so much of our debt? Report abuse
d.a.n
Aug 16 12:44 PM
My Website_______________...
The Barren wrote: Yes, lets talk about taxing the big business. I do not believe anyone is thinking clearly enough to see who they work for. So lets tax big business
and give the middle class a tax break. Boy that sure sounds good doesn't it. Oh wait, I just lost my job because the evil big business are now paying huge tax increases and in return has to cut back on 2,600 jobs to make up for lost revenue. I really don't think a tax break for middle class is going to help me if I don't have a job
______________________...
You're right.
Taxing corporations is really like yet another regressive sales tax on consumers.
The tax system i

The Great Consumer Crash of 2009

That still does not explain away this trend (One-Simple-Idea.com/Di...).
Sure, some people will still be rich-to-relatively-wel...
That's not the point, but yet another obfuscation.
The point is that the numbers of sufferring are growing, and we probably haven't seen anything yet.
I suspect those trying to trivialize these abuses (one-simple-idea.com/Di...) and resulting consequences (one-simple-idea.com/Ne...) are not in that 40% of Americans who (on average) have ZERO net worth.

And still, no one here has yet answered the QUESTION:
Where will the money come from to merely pay the INTEREST on the $53+ Trillion of nation-wide debt (One-Simple-Idea.com/De...), much less the money to pay down the PRINCIPAL and keep it from growing ever larger to nightmare proportions, when that money does not yet exist?

Especially when 80% of the U.S. population owns ONLY 17% of all wealth (a trend that has been worsening fast since year 1976 (One-Simple-Idea.com/Di...)?

But, perhaps enough voters will be less apathetic, complacent, and blindly partisan when enough of the voters are deep in debt (one-simple-idea.com/De...) , jobless (money.cnn.com/2008/06/...) , homeless (one-simple-idea.com/Di...) , and hungry (www.results.org/websit...) ?

At any rate, the voters have the government that the voters elect (One-Simple-Idea.com/Ma...).
one-simple-idea.com/Co... (Pressing Problems)
one-simple-idea.com/Di... (Root causes and consequences...)
one-simple-idea.com/So... (Solutions...)

The Great Consumer Crash of 2009

_______________
Pack asked: So, what is a person to do to get ready for the end?
_______________

Prepare for a long-term economic decline:
(01) if possible, get out of debt;
(02) if possible, own your own home and pay it off first; down-sizing to a smaller, less expensive home to accomplish that may be a good idea; especially if unemployment sky-rockets; a place to live will be valuable if things get bad; my mother (as a child) lived in a tent for months during the Great Depression, because they didn't own, nor could rent a home;
(03) if you owe $300K, but your house is now only worth $200K, you may want to get out of that mortage now, before you owe the bank more than $100K, as property values fall even lower;
(04) if possible, diversify your investments as much as possible; 10% of your assets in gold/silver (or other metals), or some foreign currencies (e.g. Euros) may be a good idea; also, try to find investments that are more immune to recessions and depressions;
(05) buy some cheap land;
(06) grow a garden; with so much contaminated food, it might be a good idea;
(07) if possible, live close to work; limit commute distance and fuel costs;
(08) put a timer on your electric hot-water heater (it will save $20-to-$40 (or more) per month); eliminate electricity hogs and vampire devices that use electricity even when turned off; get rid of incandescent light bulbs;
(09) a few solar panels and storage batteries might be great if you can't afford to buy electricity; that's enough to run a refrigerator and some LED lighting; if possible, go off the grid and generate all of your own power; don't depend on power companies, because they are likely to get volatile and/or unaffordable; look at what my electric bills (one-simple-idea.com/El... have been doing lately; notice price per KWH). My JUNE-2008 electric bill jumped to a ridiculous $423.16 for only 2176 KiloWatt Hours (averaging 19.95 cents per KWH);
(10) find other ways to reduce electricity usage (e.g. shutters on windows, solar screens for windows, more insulation in attic, radiant barrier on garage door, install a programmable thermostat and set it to run less; shop around for cheaper electricity if it is unregulated, etc.);
(11) if you have a fireplace, get some firewood;
(12) learn a skill or trade that may be marketable in bad times;
(13) learn another language; the only good jobs may only be overseas;
(14) if possible, have some liquid funds somewhere, even if in other currencies;
(15) if possible, stock up on medications; they may be hard to get later;
(16) learn to hunt; already, there is a growing number of people that are already hunting small animals in the parks of San Francisco, and during the 1930s, deer and squirrels were hunted almost to extinction. Learn how to trap, kill, prepare and eat a squirrel now, so you’ll be ahead of the curve. And if you own a piece of cheap land somewhere, you can grow some crops.
(17) install a security system (even if not centrally monitored), and buy a weapon (or two) and ample ammunition; crime rates rise in bad times; that's not meant to make people fearful, but many people already own one or more weapons; my family does;
(18) sell all of your junk now (i.e. on EBay, etc.);
(19) stop unnecessary spending; find cheaper forms of entertainment;
(20) lastly, stop repeatedly rewarding bad politicians with perpetual re-election (one-simple-idea.com/Pr...);

None of these are easy, but they also are going to get any easier either.
The more of those things done in advance, the less painful it will be later.

But, perhaps enough voters will be less apathetic, complacent, and blindly partisan when enough of the voters are deep in debt (one-simple-idea.com/De...) , jobless (money.cnn.com/2008/06/...) , homeless (one-simple-idea.com/Di...) , and hungry (www.results.org/websit...) ?

At any rate, the voters have the government that the voters elect (One-Simple-Idea.com/Ma...).
one-simple-idea.com/Co... (Pressing Problems)
one-simple-idea.com/Di... (Root causes and consequences...)
one-simple-idea.com/So... (Solutions...)