Do You Know If Your Bank Is Safe?
One Out Of Every Ten U.S. Banks Is Now On The FDIC’s Problem List – Do You Know If Your Bank Is Safe?
Do you know if your bank will be there next month? For a growing number of Americans, that is becoming a very real question. The Wall Street Journal is reporting that 775 banks (approximately ten percent of all U.S. banks) are now on the Federal Deposit Insurance Corporation's list of "problem" banks. This year we have already seen more than six dozen banks fail, and the frightening thing is that we are seeing a rapid acceleration in bank failures even though we are supposedly in a "recovery" right now. So what happens if the economy takes a bad turn and hundreds of these banks that are barely surviving start failing?
Right now an increasing number of Americans are not paying their loans, and this is shredding the balance sheets of small and medium size banks all over the United States. In fact, during the first quarter of 2010, the total number of loans that are at least three months past due increased for the 16th consecutive quarter.
16 consecutive quarters?
Once is a coincidence.
Twice is a trend.
Sixteen times in a row is a total nightmare.
Is there anyone out there that is still convinced that the economy is getting better?
If so, perhaps this will convince you otherwise....
There were 252 banks on the FDIC's "problem list" at the end of 2008.
There were 702 banks on the FDIC's "problem list" at the end of 2009.
Now there are 775 banks of the FDIC's "problem list".
Are you starting to see a trend?
Federal regulators have already closed 73 banks in 2010, more than double the number shut down at this time last year.
The truth is that the U.S. banking system is coming apart like a 20 dollar suit.
So is the FDIC worried?
No, they insist that they have plenty of money to cover all of the banks that are going to fail.
After all, the FDIC's deposit insurance fund now has negative 20.7 billion dollars in it, which represents a slight improvement from the end of 2009.
Yes, you read that correctly.
Negative 20.7 billion dollars.
That should be enough to cover the hundreds of banks that are in the process of failing, right?
Well, if not, the FDIC can just run out and ask the U.S. government for a big, juicy bailout.
After all, can't the U.S. government borrow an endless amount of money with absolutely no consequences?
Well, no.
Debt always catches up with you sooner or later.
In fact, the IMF is warning that that the gross public debt of the United States will hit 97 percent of GDP in 2011 and 110 percent of GDP in 2015.
Meanwhile, the U.S. financial system continues to shrink even after the unprecedented amount of "stimulus money" that the U.S. government has been shoveling into the economy.
The M3 money supply is now contracting at a frightening pace.
In fact, the current rate of monetary contraction now matches the average rate of monetary contraction the U.S. experienced between 1929 and 1933.
But don't worry.
We aren't going into a Depression.
Everything is going to be just fine.
Just look deep into Obama's eyes and keep repeating the word "change" to yourself over and over.
According to a report in The Telegraph, the M3 money supply declined from $14.2 trillion to $13.9 trillion in the first quarter of 2010.
That represents an annual rate of contraction of 9.6 percent.
In case you were wondering, that is a lot.
Not only that, but the assets of institutional money market funds declined at a 37 percent annual rate.
That was the sharpest drop ever.
Yes, it is time for the alarm bells to start going off.
The Telegraph recently quoted Professor Tim Congdon from International Monetary Research as saying the following about the deep problems that the U.S. is facing....
"The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly."
If banks continue to cut their lending, the M3 is going to continue to shrink.
But as noted above, Americans are increasingly getting behind on their loans, so why should banks loan money to a bunch of deadbeats?
Right now U.S. banks are increasingly tightening their lending standards, and this is making it much tougher to get a loan.
In fact, in 2009 the biggest U.S. banks posted their sharpest decline in lending since 1942.
But there is only one problem.
The U.S. economy is completely and totally dependent on credit.
Without easy credit, the entire U.S. economic machine is going to slowly grind to a halt.
So what do you do?
The reality is that we have one gigantic financial mess on our hands, and in many ways it is starting to look like the 1930s all over again.
But perhaps someone out there has a way to get us out of this nightmare. Please feel free to leave a comment with your thoughts, opinions or solutions....
The Dominant Force
The Dominant Force In World Financial Markets In 2010 Is Fear
Extreme volatility is not a sign of health for financial markets. But in 2010 financial markets around the globe are experiencing unprecented volatility. Why? It is because the entire world financial system has been gripped by fear. In today's crazed environment, it seems like just about anything can set off a major panic. In fact, these days politicians have to be extremely careful about what they say about their national finances, because saying the wrong thing can literally send world markets into violent convulsions. For instance, when a senior Hungarian official said that the Hungarian economy was in a "very grave situation" last week it sent world financial markets into a tailspin. Panic was everywhere and everyone was talking about how Hungary could be the "next Greece". Of course on Monday Hungarian officials backed away from that comment and tried to reassure world markets that everything was fine, but the damage had been done.
It was a perfect example of the spirit of irrational fear that has gripped the financial world.
After all, even if Hungary did fall apart financially, it wouldn't plunge the rest of the world into a depression.
And the truth is that Hungary is not really in that bad shape financially. Hungary's budget deficit is about half the size of the Greek budget deficit and Hungary doesn't even use the euro.
But now investors all over the world are constantly scanning the news for the latest piece of information that will send waves of panic through the markets.
In the current environment, fear is what moves the markets.
The reality is that fear is the reason why the euro is plunging at breathtaking speed.
Are many of the economies in Europe truly in really bad shape?
Of course.
However, it could be argued that the economies of the U.S. and Japan are in even worse shape in many ways. Japan's gross public debt has reached 201 percent of GDP and the United States has piled up the biggest mountain of debt in the history of the world.
But because of the extreme fear that has been generated, people are moving out of the euro and into dollars and yen.
In fact, the euro is probably headed even lower.
GFT Forex's Boris Schlossberg believes that the euro could fall down to the 1.16/1.17 range before this current panic is over....
"I think we run the risk of seeing 1.16/1.17 before the next selling phase dies down. The euro is just absolutely hated here. The European rescue package still faces some regional opposition. There were rumors the German high court could rule it was unconstitutional. They don't have a federal mechanism to put it in place, and there's worries that at any point in time, the rescue package could be sabotaged."
But all of this fear and panic is actually good for investors in gold and silver.
Why?
Because during times of fear and panic investors look to move their money into something that is secure, and gold and silver have been secure investments for thousands of years.
So in this environment of fear, gold is absolutely soaring. On Monday, the price of gold climbed 1.9 percent to $1239.30 per ounce. That was the largest one day rise in the price of gold since February 16th.
So how high will gold go?
Well, the truth is that nobody knows.
But if fear and panic continue to grip world financial markets in the months ahead, there is really no telling how high it could go.
In fact, even many mainstream financial analysts are becoming extremely bullish on gold.
As Dan Burrows of Daily Finance recently commented, "you don't have to be a member of the build-a-bunker-in-Montana crowd to believe gold could hit $2,500 in the next couple of years."
But these days no investment is truly safe. One really bad rumor these days can send any stock, any currency or any commodity into a tailspin.
Fear is everywhere. Governments and central banks are intervening in the markets in unprecedented ways, but it is still not enough to keep the markets from flopping around like a dying fish.
So for those who are waiting for the financial markets to get back to "normal", you are likely to be waiting for quite a long time. The world economic situation is not going to be getting any better in the long-term. So if financial markets are flipping out this much even now, just wait and see what happens when things really start falling apart.
College Students This Is Your Future
College Students This Is Your Future: High Unemployment And Student Loan Hell
Hundreds of thousands of college students all over the United States have just graduated and are getting ready for their first taste of the real world. Unfortunately for them, the real world is not always easy and it is not always fair. In fact, for large numbers of recent college graduates, the transition to a world of high unemployment, brutal student loan payments and lowered expectations can be extremely sobering. But the truth is that we have taught these young people to have a completely unrealistic view of the future. We have told them to take out gigantic student loans without worrying about how they are going to pay them back, we have told them that if they get good grades and do everything "right" that the system will reward them with secure, fulfilling careers, and we have made high school and college so "soft and cushy" that most of these young Americans find that they don't have the discipline and the work ethic to make it when they actually do get out into society.
So needless to say, the first six months after graduation can be a complete shock for many college graduates.
In a piece recently published on MSN Money, journalist Joe Queenan described the tough environment that 2010 college graduates are being thrown into as they enter the real world....
They will enter an economy where roughly 17% of people aged 20 through 24 do not have a job, and where two million college graduates are unemployed. They will enter a world where they will compete tooth and nail for jobs as waitresses, pizza delivery men, file clerks, bouncers, trainee busboys, assistant baristas, interns at bodegas.
But waiting tables, delivering pizzas or greeting customers at the local Wal-Mart is not what most college graduates signed up for when they invested tens of thousands of dollars and four years (if not longer) of their lives in an education.
Unfortunately, that is where our economy is at today.
"Good jobs" are very few and far between and those freshly graduating from college are finding themselves suddenly thrust into an extremely competitive job market.
According to the Bureau of Labor Statistics, in March the national rate of unemployment in the U.S. was 9.7%, but for Americans younger than 25 years of age it was 18.8%.
In fact, according to a recent Pew Research Center study, approximately 37% of all Americans between the ages of 18 and 29 have either been unemployed or underemployed at some point during this recession.
But what makes things even worse for college graduates is that so many of them are coming out of school with absolutely crushing student debt loads.
Today, approximately two-thirds of all U.S. college students graduate with student loans.
But it isn't just that they have student loans. The loan balances that many of these students are graduating with these days are absolutely obscene.
The Project on Student Debt estimates that 206,000 U.S. college students graduated with more than $40,000 in student loan debt in 2008. Using 2008 dollars as a baseline, that represents a ninefold increase over the number of students graduating with that amount of debt in 1996.
Most college students don't think much about all of the debt that they are accumulating while they are in school.
But once they get out, the sudden realization that they have gotten themselves into student loan payments that they cannot possibly handle can be completely demoralizing.
The New York Times recently profiled Cortney Munna - a recent college graduate who has not been able to get a "good job" and who now finds herself in student loan hell. She recently told the New York Times that she would be more than glad to give back her education if she could just get out of all this debt....
"I don’t want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back."
In recent years, millions of young college graduates have found that the "great education" that they thought they were getting actually doesn't get them very far at all in the real world.
In fact, they often find themselves taking jobs where they work right next to other people their age who never even went to college.
So a lot of young college graduates find themselves wishing that they could just "return" their education and get all that money back.
But there is no walking away from student loan debt.
The truth is that federal bankruptcy law makes it nearly impossible to discharge student loan debts.
Basically, once you get into student loan hell there is no escape.
So now we have hundreds of thousands of college graduates that can't get good jobs and that have brutal student loan payments that they can't possibly handle.
No wonder so many of them seem so angry and depressed.
But the funny thing is that so many that are still in college are so unbelievably optimistic about the future.
Edwin Koc, director of research for the National Association of Colleges and Employers says that those approaching college graduation are an extremely confident bunch....
"Over 90 percent think they have a perfect résumé. The percentage who think they will have a job in hand three months after graduation is now 57 percent. They’re still supremely confident in themselves."
So have we done a good job of teaching them to have confidence in themselves or have we done them a disservice by allowing so many of them to live in complete denial?
The truth is that the U.S. economy is in the process of collapsing, and we need to prepare our young people for the tough times that are ahead. Life is going to require an extreme amount of hard work and discipline in the years ahead, and unfortunately those qualities are not in great supply among young Americans right now.
Actually, the "real world" is not going to be getting easier for any of us. We are all going to require an attitude adjustment if we are going to successfully navigate the difficult times that are coming. So let's not be too hard on new college graduates and other young Americans. The truth is that the vast majority of us are "soft" at least to some degree because of the decadent society in which we live. Let's just hope that somehow we can all find enough inner strength to endure the great challenges that are going to confront us in the years ahead.
U.S. National Debt 2010
So just how big is the U.S. national debt in 2010? Well, according to the U.S. Treasury Department, on June 1st the U.S. National Debt was $13,050,826,460,886.97. For those not used to seeing such big numbers, that is over 13 trillion dollars. To give you an idea of just how much a trillion dollars is, if you had started spending one million dollars every single day when Christ was born, you still would not have spent one trillion dollars by now. And yet somehow the U.S. government has accumulated a debt of over 13 trillion dollars. This is a debt that we have callously placed on the backs of future generations of Americans. Somehow we have the gall to expect our progeny to pay off the biggest mountain of debt in the history of the world. What we have done to future generations is beyond sickening.
But hey, if you are feeling especially generous today, the federal government is actually taking online donations that will go towards paying off the national debt.
Yes, it is true.
Please try to resist the urge to laugh.
This request comes from the same government that spent $2.6 million tax dollars to study the drinking habits of Chinese prostitutes and $400,000 tax dollars to pay researchers to cruise six bars in Buenos Aires, Argentina to find out why gay men engage in risky sexual behavior when drunk.
Perhaps they should not hold their breath while waiting for our donations to show up.
Or perhaps they should get their own house in order before expecting donations.
But the truth is that they continue to recklessly spend our money as if they have not learned anything.
This year, it is projected that the U.S. government will issue nearly as much new debt as the rest of the governments of the world combined.
Yes, getting into debt is another thing that we Americans dominate the rest of the world in.
It is estimated that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.
Now remember, when Ronald Reagan took office, the U.S. national debt was only about 1 trillion dollars.
So, from the founding of the United States until Reagan took office we accumulated a total of about 1 trillion dollars in debt.
In just the last 30 years we have accumulated 12 trillion dollars more.
You know, the truth is that it is really, really hard to even spend one trillion dollars.
If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
Hopefully that gives you an idea just how fast the U.S. government is getting us into debt.
And now we are officially in the danger zone.
According to Dr. Jerome Corsi, the U.S. national debt is now equal to 90 percent of gross domestic product.
Most economists consider a level of 100 percent debt to GDP to be an absolute nightmare scenario.
But things look even worse when you total up all forms of debt in the United States.
The total of all government, corporate and consumer debt in the United States is now equal to 360 percent of GDP.
That is far greater than at any point during the Great Depression.
Yes, we are in a LOT of trouble.
So can we just raise taxes on everybody just a little bit and get rid of this budget deficit?
Well, unfortunately no.
According to the Tax Foundation’s Microsimulation Model, to erase the U.S. budget deficit for 2010, the U.S. Congress would have to multiply the tax rate for every American by 2.4.
That would mean that the 10 percent tax rate would become 24 percent, the 15 percent tax rate would become 36 percent, and the 35 percent tax rate would have to be 85 percent.
Would you like to pay 85 percent of your income in taxes?
And that would not reduce the national debt one penny - all that would do is eliminate the U.S. budget deficit for this year.
The truth is that it is simply not possible to pay off the national debt. Most economists realize this and speak of more realistic goals such as getting our debt growth down to a level that is "sustainable".
But the reality is that we are way beyond being able to get this debt under control. If the U.S. government cut spending enough to make a real difference it would crush the economy and tax revenue would take a sharp nosedive. If the U.S. government borrows even more money and increases government spending even more it will help the economy in the short-term, but it will make our long-term problems even worse.
No, the truth is that we have created an economic nightmare from which there simply is no escape under the current system. The national debt will never be repaid and the never ending spiral of debt and paper money that we have created is doomed to failure.
So what will happen someday when the current economic system does collapse?
That will be for the American people to decide. Hopefully they will learn from our mistakes and will return to our constitutional roots and devise a financial system based on solid economic principles.
Key Indicators of a New Depression
By Neeraj Chaudhary
With the mainstream media focusing on the country's leveling unemployment rate, improving retail sales, and nascent housing recovery, one might think that the US government has successfully navigated the economy through recession and growth has returned. But I will argue that a look under the proverbial hood reveals a very different picture. I believe the data shows that the US economy is badly damaged, and a modern-day depression has begun. In fact, just as World War I was originally called The Great War (and was retroactively renamed after World War II), Peter Schiff has said that one day the world will refer to the 1929-41 era as Great Depression I, and the current period as Great Depression II.
For starters, look at unemployment. During Great Depression I, unemployment broke 25%. If government statistics are taken at face value, the current unemployment rate is 9.9%, but a closer look reveals that the broadest measure of unemployment is currently at 20% - and rising. So, today's numbers are in the same ballpark as the '30s even though the federal government is using unprecedented measures to keep the economy afloat. Remember, in Great Depression I, FDR never ran a deficit nearly as large as President Obama's. Moreover, the Federal Reserve of the 1930s still had a gold standard with which to contend, while today's Fed has increased the monetary base with impunity. Yet even with all that intervention, unemployment figures still indicate that we have entered depression territory.
What is demoralizing to an unemployed person is not simply being let go, it is being unable to find a new job for an extended period of time. And this is where Great Depression II really rears its ugly head. According to the US federal government's own data, the median duration of unemployment is now over five months -- and rising. This is the highest it's been since the BLS started compiling this statistic in 1965. As workers start to go this long without jobs, they eat into their savings. Eventually -- and especially in a country with a savings rate as low as ours and debt as high as ours -- they run out of cushion and hit the street. Formerly middle-class people have to make decisions never thought possible: do I eat in a shelter or go hungry in my home?
It's no surprise, then, that about 40 million people -- or one out of every eight Americans -- are receiving food stamps in Great Depression II. During the height of Great Depression I, the rate was just one out of thirty-five Americans. Even with the stimulus programs, Great Depression II is actually worse on this measure than Great Depression I -- and the USDA estimates that the program could grow by another 50%. Who will pay for this growing program if everyone is out of work?
Despite tax credits that have created a rush of purchases this spring, housing is in just as bad shape. During Great Depression I, home prices dropped some 15% from their pre-depression peak (achieved in 1925). In Great Depression II, housing is down at least 30% from the pre-depression peak (achieved in 2005), with some markets down more than 50%.
So, many of the people expected to keep making mortgage payments as they eat tuna fish to stay alive will be paying double their home's resale value. This is a tremendous incentive to walk away, with disastrous consequences for the country's social fabric in these trying times. Empty homes breed crime and vandalism, encouraging more to flee in a negative feedback loop. Moreover, the many 'walkaways' may create a class of Americans with ruined credit -- right when many employers have started checking credit scores before hiring.
Even more worrisome, the present drop in home prices is against a backdrop of price inflation. In Great Depression I, our grandparents may have lost value in their home, but everyday goods (milk, diapers, automobiles, etc.) got cheaper at the same time. That made their savings 'cushion' deeper when they needed it most. Today, as home equity (now our main store of savings) declines, prices for consumer goods are rising. It's a tight squeeze indeed.
From jobs to food to the roofs over our heads, the current period of economic turmoil is at least as bad as the First Great Depression, whether or not the financial media wishes to acknowledge it. The main difference is that unlike in the '30s, the US dollar is now the world's fiat reserve currency, so we are able to push our problems overseas for awhile. The plight of the rural Chinese is really our plight -- we are living lavishly on the wealth they create. Were they to quit this dastardly arrangement, the full effects of Great Depression II would be felt in America.
By contrast, in Great Depression I, the US was on the gold standard like everyone else, which forced us to live within our means. This, in turn, made it easier to recognize that the economy was in decline and changes had to be made.
Unfortunately, because of the responses of the Administration and the Federal Reserve, which I believe to be deeply misguided, I remain concerned that Great Depression II could develop into something far more devastating than its predecessor, something that other countries in the world have experienced but was thought impossible in the United States: a hyperinflationary depression. As bad as the current downturn has been, inflation would make it immeasurably worse. It would require an honest accounting of the problems we face today to avert the disaster we see coming tomorrow.
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