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20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover

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  • 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover

    Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy. Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly. But this time around that is not the case. The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.

    The problem is debt. Collectively, the U.S. government, the state governments, corporate America and American consumers have accumulated the biggest mountain of debt in the history of the world. Our massive debt binge has financed our tremendous growth and prosperity over the last couple of decades, but now the day of reckoning is here.

    And it is going to be painful.

    The following are 20 reasons why the U.S. economy is dying and is simply not going to recover....

    #1) Do you remember that massive wave of subprime mortgages that defaulted in 2007 and 2008 and caused the biggest financial crisis since the Great Depression? Well, the "second wave" of mortgage defaults in on the way and there is simply no way that we are going to be able to avoid it. A huge mountain of mortgages is going to reset starting in 2010, and once those mortgage payments go up there are once again going to be millons of people who simply cannot pay their mortgages. The chart below reveals just how bad the second wave of adjustable rate mortgages is likely to be over the next several years....

    #2) The Federal Housing Administration has announced plans to increase the amount of up-front cash paid by new borrowers and to require higher down payments from those with the poorest credit. The Federal Housing Administration currently backs about 30 percent of all new home loans and about 20 percent of all new home refinancing loans. Tighter standards are going to mean that less people will qualify for loans. Less qualifiers means that there will be less buyers for homes. Less buyers means that home prices are going to drop even more.

    #3) It is getting really hard to find a job in the United States. A total of 6,130,000 U.S. workers had been unemployed for 27 weeks or more in December 2009. That was the most ever since the U.S. government started keeping track of this statistic in 1948. In fact, it is more than double the 2,612,000 U.S. workers who were unemployed for a similar length of time in December 2008. The reality is that once Americans lose their jobs they are increasingly finding it difficult to find new ones. Just check out the chart below....

    #4) In December, there were also 929,000 "discouraged" workers who are not counted as part of the labor force because they have "given up" looking for work. That is the most since the U.S. government first started keeping track of discouraged workers in 1949. Many Americans have simply given up and are now chronically unemployed.

    #5) Some areas of the U.S. are already virtually in a state of depression. The mayor of Detroit estimates that the real unemployment rate in his city is now somewhere around 50 percent.

    #6) For decades, our leaders in Washington pushed us towards "a global economy" and told us it would be so good for us. But there is a flip side. Now workers in the U.S. must compete with workers all over the world, and our greedy corporations are free to pursue the cheapest labor available anywhere on the globe. Millions of jobs have already been shipped out of the United States, and Princeton University economist Alan S. Blinder estimates that 22% to 29% of all current U.S. jobs will be offshorable within two decades. The days when blue collar workers could live the American Dream are gone and they are not going to come back.

    #7) During the 2001 recession, the U.S. economy lost 2% of its jobs and it took four years to get them back. This time around the U.S. economy has lost more than 5% of its jobs and there is no sign that the bleeding of jobs is going to stop any time soon.

    #8) All of this unemployment is putting severe stress on state unemployment funds. At this point, 25 state unemployment insurance funds have gone broke and the Department of Labor estimates that 15 more state unemployment funds will likely go broke within two years and will need massive loans from the federal government just to keep going.

    #9) 37 million Americans now receive food stamps, and the program is expanding at a pace of about 20,000 people a day. The United States of America is very quickly becoming a socialist welfare state.

    #10) The number of Americans who are going broke is staggering. 1.41 million Americans filed for personal bankruptcy in 2009 - a 32 percent increase over 2008.

    #11) For decades, the fact that the U.S. dollar was the reserve currency of the world gave the U.S. financial system an unusual degree of stability. But all of that is changing. Foreign countries are increasingly turning away from the dollar to other currencies. For example, Russia’s central bank announced on Wednesday that it had started buying Canadian dollars in a bid to diversify its foreign exchange reserves.

    #12) The recent economic downturn has left some localities totally bankrupt. For instance, Jefferson County, Alabama is on the brink of what would be the largest government bankruptcy in the history of the United States - surpassing the 1994 filing by Southern California's Orange County.

    #13) The U.S. is facing a pension crisis of unprecedented magnitude. Virtually all pension funds in the United States, both private and public, are massively underfunded. With millions of Baby Boomers getting ready to retire, there is simply no way on earth that all of these obligations can be met. Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management recently calculated the collective unfunded pension liability for all 50 U.S. states for Forbes magazine. So what was the total? 3.2 trillion dollars.

    #14) Social Security and Medicare expenses are wildly out of control. Once again, with millions of Baby Boomers now at retirement age there is simply going to be no way to pay all of these retirees what they are owed.

    #15) So will the U.S. government come to the rescue? The U.S. has allowed the total federal debt to balloon by 50% since 2006 to $12.3 trillion. The chart below is a bit outdated, but it does show the reckless expansion of U.S. government debt over the past several decades. To get an idea of where we are now, just add at least 3 trillion dollars on to the top of the chart....

    #16) So has the U.S. government learned anything from these mistakes? No. In fact, Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $2 trillion to pay its bills, a record increase that would allow the U.S. national debt to reach approximately $14.3 trillion.

    #17) It is going to become even harder for the U.S. government to pay the bills now that tax receipts are falling through the floor. U.S. corporate income tax receipts were down 55% in the year that ended on September 30th, 2009.

    #18) So where will the U.S. government get the money? From the Federal Reserve of course. The Federal Reserve bought approximately 80 percent of all U.S. Treasury securities issued in 2009. In other words, the U.S. government is now being financed by a massive Ponzi scheme.

    #19) The reckless expansion of the money supply by the U.S. government and the Federal Reserve is going to end up destroying the U.S. dollar and the value of the remaining collective net worth of all Americans. The more dollars there are, the less each individual dollar is worth. In essence, inflation is like a hidden tax on each dollar that you own. When they flood the economy with money, the value of the money you have in your bank accounts goes down. The chart below shows the growth of the U.S. money supply. Pay particular attention to the very end of the chart which shows what has been happening lately. What do you think this is going to do to the value of the U.S. dollar?....

    #20) When a nation practices evil, there is no way that it is going to be blessed in the long run. The truth is that we have become a nation that is dripping with corruption and wickedness from the top to the bottom. Unless this fundamentally changes, not even the most perfect economic policies in the world are going to do us any good. In the end, you always reap what you sow. The day of reckoning for the U.S. economy is here and it is not going to be pleasant.
    Economic Black Hole: 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover

    Truth? Complete trash? Partial trash?
    "Only Nixon can go to China." -- Old Vulcan proverb.

  • #2
    mostly trash; the author takes a few data points without context and tends to exaggerate.

    if it was true that the US economy is on the edge of utter failure, then the market would have begun to reflect this information already.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

    Comment


    • #3
      That's my take as well. He focused on the crappy areas like Detroit and hinted it as the shape of things to come. He focused on blue collar workers being the middle class, or unable to stay as middle class in the future. Nevermind that we have shifted away from blue collar jobs long ago and they're pretty much held together by outdated concepts.

      My favorite was #20...we will be punished because we've been wicked...so sayeth the lord.

      I don't mean to make fun of christians but it's a poor argument in economics. It's like...global warming...:P
      "Only Nixon can go to China." -- Old Vulcan proverb.

      Comment


      • #4
        He's right about the mortgages, there is another wave of home foreclosures coming.

        Commercial real estate is completely in the toilet- I know a guy who sells commercial RE and he hasn't had a sale in over a year now. His dad is making his house payments.

        wrt unemployment funds- the State of Oregon more than doubled my unemployment insurance costs in the last 2 years. It went from 1.6% of my gross payroll to 3.8% this year. There are several states allowing 99 weeks of benefits now, and there is talk of bumping that up to 126 weeks. That's almost 2-1/2 years!

        So gunnut, if you are going to eliminate trades, what do you plan to do with your C students? They can't all be bankers...
        "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way." -President Barack Obama 11/25/2008

        Comment


        • #5
          Originally posted by highsea View Post
          So gunnut, if you are going to eliminate trades, what do you plan to do with your C students? They can't all be bankers...
          Not saying all blue collar will disappear. I am saying blue collar as we know it will disappear. The average workers shouldn't make so much money that he can afford a house with a pool, 2 cars in the garage, and an RV, all though "collective bargaining." The market has to take over to award those who has the skill in demand and punish those who don't. We can't all be winners.

          Of course even the losers in the capitalist system will be better off than the average "winner" in a communist/socialist system.

          Those manufacturing jobs that are in demand will stay. Those that are not worth saving will go away.
          "Only Nixon can go to China." -- Old Vulcan proverb.

          Comment


          • #6
            i think we're going to see the US at 8%-9% employment for the next 3-5 years; perhaps a norm of roughly 6-8% in 5-10. we'll also have a higher debt load. this will be true no matter if we go republican or democratic.

            in short, we'll have economic numbers closer to europe than the norm of the last fifteen years, but still with better advantages demopgraphically. we won't see any truly explosive growth until the next "it" field becomes apparent, like computing in the 80s and the internet in the mid-90s.

            ironically, the problem with the US is that we haven't spent enough in the short-run to deal with the recession, and we're spending too much in the long-run without identifying cost controls.
            There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

            Comment


            • #7
              Originally posted by gunnut View Post
              Those manufacturing jobs that are in demand will stay. Those that are not worth saving will go away.
              Well, we've pretty much lost an entire generation of machinists, I can tell you that. I can't find skilled workers to save my life- after 3 years of trying, I've really given up even looking.

              All your medical equipment is made in China these days, it's not just toys and coleman coolers. It's not a matter of what's in demand- anything that can be put in an ocean container will be made overseas.

              As long as US companies can employ overseas slave labor, there's no future in the US for tradesmen. And until you come up with something productive for these people to do, there will be growing discontent, high unemployment, and the higher tax burden it will take to support them.

              This is not a matter of "buggy whips". We need manufactured goods, and we can make them here if we choose to. I'm not talking about obsolete products.

              I'm pretty near the end of my working years, and I keep at it mostly to stay busy. It's not really profitable to manufacture in the US anymore. I certainly don't see the ROI I would get even if all I did was take my money and buy an S&P 500 index fund.

              I'm all for trade, I just want a level playing field. Any new technology we develop has at the most, 5 years in the US before it's shipped overseas. That doesn't give us much time to recoup our investment.
              "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way." -President Barack Obama 11/25/2008

              Comment


              • #8
                Originally posted by highsea View Post
                Well, we've pretty much lost an entire generation of machinists, I can tell you that. I can't find skilled workers to save my life- after 3 years of trying, I've really given up even looking.

                All your medical equipment is made in China these days, it's not just toys and coleman coolers. It's not a matter of what's in demand- anything that can be put in an ocean container will be made overseas.

                As long as US companies can employ overseas slave labor, there's no future in the US for tradesmen. And until you come up with something productive for these people to do, there will be growing discontent, high unemployment, and the higher tax burden it will take to support them.

                This is not a matter of "buggy whips". We need manufactured goods, and we can make them here if we choose to. I'm not talking about obsolete products.

                I'm pretty near the end of my working years, and I keep at it mostly to stay busy. It's not really profitable to manufacture in the US anymore. I certainly don't see the ROI I would get even if all I did was take my money and buy an S&P 500 index fund.

                I'm all for trade, I just want a level playing field. Any new technology we develop has at the most, 5 years in the US before it's shipped overseas. That doesn't give us much time to recoup our investment.
                What you describe is more of government's doing.

                Our government, federal, state, and local, have placed so much burden on our businesses that it's not worth our time any more. The real fix is not tax credit or tax holiday or protectionism. The solution is across the board tax cuts, permanent cuts, not some cockamamie tax credit that expires after 18 months. In addition we need to relax on rules and regulations imposed on businesses.

                I completely understand where you're coming from. My friend works at a small shop manufacturing composites for the government. He has to deal with bureaucrats firsthand and it's just a nightmare.

                We can pay our workers good wages and stay competitive. But our government is stifling our ability to compete. Of course the labor unions don't help. In fact labor unions probably had a hand in many of the weird-ass regulations in the industry.
                "Only Nixon can go to China." -- Old Vulcan proverb.

                Comment


                • #9
                  gunnut,

                  We can pay our workers good wages and stay competitive. But our government is stifling our ability to compete. Of course the labor unions don't help. In fact labor unions probably had a hand in many of the weird-ass regulations in the industry.
                  at best, that would slow the manufacturing bleed-- economies naturally evolve out of manufacturing cycles. tax cuts simply can't compete with super cheap standards of living.

                  notice how manufacturing did not enter a new renaissance even after the reagan tax cuts; or for that matter, how manufacturing was at its golden age in the 1950s-60s despite a 94% tax ceiling.
                  There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

                  Comment


                  • #10
                    Originally posted by astralis View Post
                    gunnut,



                    at best, that would slow the manufacturing bleed-- economies naturally evolve out of manufacturing cycles. tax cuts simply can't compete with super cheap standards of living.

                    notice how manufacturing did not enter a new renaissance even after the reagan tax cuts; or for that matter, how manufacturing was at its golden age in the 1950s-60s despite a 94% tax ceiling.
                    Of course I don't mean return to a manufacturing based economy. But we have to have some. It's bad to manufacture nothing at all. Tax cuts and removing stupid regulations will benefit all businesses, not just manufacturing sector. I believe they will benefit manufacturing more though.
                    "Only Nixon can go to China." -- Old Vulcan proverb.

                    Comment


                    • #11
                      Originally posted by highsea View Post
                      He's right about the mortgages, there is another wave of home foreclosures coming.
                      The wave never stopped, they were merely hidden by new purchases.


                      Astrailis,

                      at best, that would slow the manufacturing bleed-- economies naturally evolve out of manufacturing cycles. tax cuts simply can't compete with super cheap standards of living.
                      Not just tax cuts, but cuts plus superior American productivity, lower labor costs and lower shipping costs to get the product to market.

                      Moving away from employer provided health care plans would save business a bundle of money. For all the bitching about socialism, a national health care system funded by a tax on earnings would remove a huge cost of doing business. It would not be as good as what the rich get now, and it would have bottle necks, but compared to what the current system has done to the economy it might not be a bad trade.

                      Comment


                      • #12
                        zraver,

                        Moving away from employer provided health care plans would save business a bundle of money. For all the bitching about socialism, a national health care system funded by a tax on earnings would remove a huge cost of doing business
                        well, if i were emperor for a day, that wouldn't be a bad idea. i'd put the tax on spending, though. that would simultaneously eliminate the insurance death spiral problem, promote savings, and allow people to feel the impact of their healthcare spending.

                        i'd lower the corporate tax rate to 1%, get rid of the minimum wage, and put tax rates at 10%, 25%, and 30%...then slap on another 5-10% sales tax (on top of the insurance tax).

                        then i'd eliminate all tariffs. eliminate medicare and medicaid, as that's redundant. reform social security so that half the money goes into something like a 401k, and make the payout age rise as age trends go up. i'd want to increase new job training/education, though.

                        i'd probably put half the savings right there into reducing the debt, and creating a massive rainy day fund. for the long-term, raise S&T/education spending to 10-15% of government spending, which is more than made up by the fact that entitlement spending should now be at 15-20% instead of today's 40%...
                        Last edited by astralis; 24 Feb 10,, 05:05.
                        There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

                        Comment


                        • #13
                          Not a big fan of the flat tax, we are already in a gilded age and a flat tax would only make it worse.

                          Comment


                          • #14
                            Originally posted by astralis View Post
                            if it was true that the US economy is on the edge of utter failure, then the market would have begun to reflect this information already.
                            It's so sweet to see someone who still believes in this. What was Bear Stearns stocks price before collapse? What was Bear Stearns credit rating few days before it?

                            Current behavior of markets is absolutely irrational and have more to do with FedReserve money supply then any real world event. For example, try to explain oil price.

                            As for topic... Well, some of those 20 Reasons are wrong (point 18 is pure conspiracy theory) but i fully support point 20 and overall conclusions.

                            Some time ago i found an interesting graph on the net. Shek likes to talk about US manufacturing being all time high in 2007. Here is a closer look:



                            Does it look like late Soviet Union to you? It does for me.
                            Winter is coming.

                            Comment


                            • #15
                              zraver,

                              Not a big fan of the flat tax, we are already in a gilded age and a flat tax would only make it worse.
                              yeah, that's why i don't like the two-pronged proposal of paul ryan.

                              i'd probably slap a 5-10% "overseas contingency/war tax" on the top bracket when we have a major operation going on.
                              There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

                              Comment

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