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ECONOMIC ALERT: Federal government twice as bankrupt as Detroit
Detroit declared bankruptcy a few days ago.
I’ve written for years about how Detroit should serve as a stark warning to Americans who believe in liberal social policies, like highly progressive taxes and expensive social safety nets.
These socialist programs don’t cure income inequality. They merely destroy wealth by reducing incentives for building businesses and encouraging dependency. That’s why societies with lots of government spending typically have few civil institutions and a small middle class.
Here’s the message our politicians on both sides of the aisle seem to miss: Fifty years ago, Detroit was one of the largest and wealthiest cities in the world. Nearly 2 million people lived there, and it enjoyed the highest per-capita income in the United States.
Then, in 1960, everything changed.
Liberal Democrats came to power (and have held power since). Their ideas about using the government to build Read more…
True Obama debt bigger than planet’s entire GDP
 President Obama |
As the Obama administration prepares to finance a Fiscal Year 2011 budget deficit expected to top $1.6 trillion, the American public is largely unaware that the true negative net worth of the federal government reached $76.3 trillion last year.
That figure was five times the 2010 gross domestic product of the United States and exceeded the estimated gross domestic product for the world by approximately $14.4 trillion.
According to the U.S. Department of Commerce Bureau of Economic Analysis, U.S. GDP for 2010 was $14.861 trillion. World GDP in 2010, according to the International Monetary Fund, was $61.936 trillion.
“As government obligations continue to spiral out of control and the U.S. government shows no willingness to make the magnitude of spending cuts required to return to fiscal responsible, the U.S. economy is headed to a great collapse coming in the form of a hyper-inflationary great Read more…
The Chinese government started stockpiling food 3 years ago: What has the US government been doing beside spending money we don’t have?
I wrote this three years ago, when the Chinese were reportedly stockpiling food in their cities. The world economic and political situation has worsened. With rising food prices, massive unemployment, union protests and government debt driving states to the brink of shut down and bankruptcy, the situation has worsened–and we owe the Chinese more than ever. ED.
by Monica Davis
Rumor has it that the Chinese government is advising its cities to start stockpiling food and fuel. The government news agency reports that the central government has told the largest cities to stockpile at least two weeks of food, until the world economic turmoil caused by the banking industry’s foreclosure woes slows down. Lots of luck on that.
With China’s exposure in the twitchy American financial markets, it is no wonder that the Chinese are getting nervous. They have a lot at stake in the American economy, as do many foreign investors, past and present.
In a historical analysis of foreign investment in the United States, one writer notes that: Read more…
Detroit Schools’ Cuts Plan Approved
By MATTHEW DOLAN
The state of Michigan approved a plan for Detroit to close about half of its public schools and increase the average size of high-school classrooms to 60 students over the next four years to eliminate a $327 million deficit.
The plan was submitted in January by Robert Bobb, Detroit Public Schools’ emergency financial manager, as a last-ditch scenario if the district couldn’t find new revenue sources, which it hasn’t so far. Final approval came after Mike Flanagan, the state superintendent of public instruction, cleared Mr. Bobb’s initial plan with some new requirements, including that the district not file for bankruptcy protection during Mr. Bobb’s remaining months in office.
The state approved the plan in a Feb. 8 letter, which the Detroit public-schools district released Monday.
Mr. Bobb said the deep cuts were Read more…
United States of Shame…Where does YOUR State Rank?
Middle Class Shrinking; Poverty Class Expanding
No Jobs, No Hope, No Future: 27 Signs That America’s Poverty Class Is Rapidly Becoming Larger Than America’s Middle Class
In the America that most of us grew up in, most Americans considered themselves to be part of the “upper middle class”, the “middle class” or “the lower middle class”. Yes, there have always been poor people and homeless people, but they were thought to be a very small sliver of the population. Well, today all of that is dramatically changing. America’s emerging “poverty class” is exploding in size at the same time that America’s middle class is rapidly disappearing. You won’t hear it on the mainstream news, but the truth is that the United States has lost ten percent of its middle class jobs over the past decade. Only the top 5 percent of income earners in the U.S. has had their incomes increase enough to keep up with the rising cost of living over the past 40 years. The truth is that today there are a whole lot of people aggressively jostling for the small number of good jobs that are actually available and each year millions more Americans are being squeezed out of the middle class. The number of Americans that are financially dependent on the U.S. government continues to set new records month after month. The number of Americans that are participating in the labor force continues to go down. The sad reality is that the “American Dream” that so many Americans used to take for granted is being ripped away from us. If you still believe that the United States is guaranteed to always have a very large, very prosperous middle class then you really need to read the statistics listed below.
If you told most Americans ten years ago that in 2011 over 43 million Americans would be on food stamps hardly anyone would have believed you.
But yet here we are.
The U.S. economy simply is not producing enough good jobs anymore. Most of those that are able to acquire one of these jobs have been able to cling to middle class status, but for millions upon millions of others economic desperation has become “the new normal”.
In fact, more Americans than ever seem to have Read more…
Gold is to China as paper currency is to US
Bill Bonner
We’d still like to see a deep decline in the gold price. Too many people are getting onto gold. Most of them have no idea of what they are doing. Like readers of MONEY magazine, they’re buying the yellow metal as a speculation. Most likely they’re going to lose money. Almost everyone who speculates on gold loses money. Don’t ask us why. It’s just one of those Iron Laws of investing.
Gold goes up for 10 years straight. Speculators notice. They jump on board. And then the train runs off the tracks.
That’s just the way it works.
Besides, remember that this Great Correction is not over yet…not by a long shot. It has barely begun to correct the excesses of the Bubble Era. A quarter of all homeowners are said to be underwater on their mortgages – that still needs to be sorted out. And the whole financial industry – with the collusion of the Fed – is sitting on trillions of dollars’ worth of mortgage backed securities, pretending that they are good credits.
There are still major bankruptcies ahead…and deflation of assets prices. And in all the sturm and drang of it, the price of gold could go down too.
But if you’re acquiring gold, you have some powerful competition. As nations become rich and powerful, they accumulate gold. Those that are getting weak and poor give it up. Here’s The Financial Times with the latest news: Read more…
U.S. Treasury Secretary Admits U.S. Default is Imminent
By James West
Timothy Geithner, U.S. Treasury Secretary, admitted in a letter to congress dated January 6th, that the United States Treasury would be forced to default on its credit obligations without clearance from congress to raise the amount of money tha the treasury is allowed to borrow.
After citing a list of “extraordinary measures” congress has had to resort to int he past to avoid entering a state of defualt, Geithner stated, “Once these steps have been taken, no remaining legal and prudent measures would be available to create additional headroom under the debt limit, and the United States would begin to default on its obligations. The extraordinary measures include, “suspending sales of State and Local Government Series (SLGS) Treasury securities; suspending reinvestment of the Government Securities Investment Fund (G-Fund); suspending reinvestment of the Exchange Stabilization Fund (ESF); and determining that a “debt issuance suspension period” exists, permitting redemption of existing, and suspension of new, investments of the Civil Service Retirement and Disability Fund (CSRDF).
That the United States has already defaulted on its obligations is beyond dispute, at this point, as its the rate at which its debt service obligations is growing exceeds the rate at which the United States GDP could possibly grow, meaning that, without drastic cuts to governmenbt spending, the debt can only continue to grow.
Before our very eyes, the so-called leadership of the world’s largest economy is intentionally bankrupting the country and devaluing its currency in what can only be a precursor to rampant inflation. Since the integrity necessary to manage this problem does not exist within the United States political system, the rest of the world has no choice but to stand by and watch the value of their United States Treasury Bills diminish incrementally on a daily basis. Selling them will only exacerbate the problem, but the question must be asked, how long until the remedy is preferred over the miserable condition?
Geithner goes on to say, in a remarkable baring of the national soul,
However, if Congress were to fail to act, the specific consequences would be as follows:
The Treasury would be forced to default on legal obligations of the United States, causing catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009. Read more…
State bankruptcy bill imminent, Gingrich says
Lisa Lambert
WASHINGTON— Legislation that would allow U.S. states to file for bankruptcy will likely be introduced in Congress within the next month, Newt Gingrich, the former speaker of the House of Representatives and a powerful Republican party figure, told Reuters on Friday.
For months he has championed letting states file for bankruptcy in order to handle their long-term budget problems despite resistance from states and investors in the $2.8 trillion municipal bond market.
“We’re faced with the danger that the states are going to try to show up and say to Washington: You have to give us money,” Gingrich said. “And I think we have to have an alternative that allows us to say no.” Read more…
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