Sep 17 2013

A road to unsustainable debt: CBO reports that US is on unsustainable budget course as spending exceeds revenues.

A recent CBO report came out with a rather sobering outlook of our governmental spending habits.  The word “unsustainable” is probably not something you want uttered in a report about meeting a budget.  Yet that has been our recent trajectory when it comes to spending.  The massive financial crisis and subsequent bailouts have resulted in a titled economy favoring a small group of people.  The same engine that led us into this problem is still humming along and the too big to fail have now become the way too big to fail banks.  So unsustainability is the spine fueling the current recovery.  Debt upon debt only works until you reach tipping points.  US households hit that point a few years ago as the housing bubble imploded.  To think that this path of acquiring debt upon debt to pay for expenditures is sustainable is going to cause deeper instability into an already shaky system.

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Sep 14 2013

Pension disaster looms over the horizon: In 1980 60 percent of Americas participated in a pension program. Today it is less than 10 percent and the amount saved for retirement is startling.

Americans are on the verge of a retirement disaster.  As pension plans slowly go extinct Americans are not saving enough for retirement.  The figures point to a looming pension and retirement disaster.  Retirement for most Americans is largely a mirage.  As organizations switched from pensions to 401ks it was expected that most Americans would save money.  This trend started in 1980 and over 30 years have now passed.  We now have enough data to see if this transition has been beneficial to most Americans.  Unfortunately the answer highlights an American population that has not saved enough for retirement.  Most Americans will make Social Security their default retirement plan.  Pension issues also loom as many state governments contend with deep underfunding for retirement benefits.  In the end, there is a disaster looming.

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Sep 12 2013

Modern day financial repression and disinformation: Financialization of America creates incentives for massive income inequality.

America in the last couple of decades has undergone a massive reformation when it comes to the financial system.  The ability to convert everything and anything into a tradable security has been the biggest goal of Wall Street and has captured our entire economy like a starving grizzly bear chowing down on Alaskan salmon.  Even once stale real estate, once thought of as the cornerstone of wealth for most Americans is now a volatile and speculative commodity where large hedge funds dive in and out like bombers for quick profits.  The end result is that more Americans are finding it harder to keep up while most of the wealth aggregates in fewer and fewer hands.  Since the recession ended, most of the new jobs are being added in low wage segments of the economy.  An easy way to boost profits is to slash benefits and cut wages.  Good for the stock market but not necessarily for working Americans.  Sadly, that is the rub of this modern day system.  The stock market is benefitting companies that may not have the best interest of the overall economy at heart.  If that is the case, is this system truly functioning well?

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Sep 10 2013

United States sets another food stamp record: Households on food stamps at new peak and more Americans live in poverty compared to the entire population of Spain.

The gap between rich and poor in the United States continues to grow in-line with food stamp usage.  Many Americans watch in dismay as they view countries like Spain rip its self apart by a massively discontent and unemployed youth movement.  Many probably watch thinking that somehow, our problems can never come close to what is being experienced abroad.  The irony is that we now have more Americans on food stamps than the entire population of Spain.  That is right, more Americans are living food stamp payment to food stamp payment versus the entire population of a county literally suffering in depression.  Yet somehow, the narrative playing out in the economy is all around a booming real estate market (profits to investors) and the peaking stock market (most Americans don’t even own stock) are big windfalls for all.  Yet the gains are being captured by a small portion of the population.  This is how we can reach these seemingly dichotomous situations where poverty rises in the shadow of a booming stock market.

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Sep 6 2013

The day of reckoning for student debt has arrived and the bubble begins to deflate: JP Morgan exits the student debt market. Similar trends occurred with the subprime market in 2007.

The student debt bubble begins its inevitable decline from unparalleled heights.  This week too big to fail bank JP Morgan issued a memorandum that it is exiting the student loan business.  What is interesting in this move is that it is eerily similar to banking moves made back in 2007 as some banks started to back away from the subprime mortgage market.  At that point, it was too late and the most toxic of the toxic loans were already collapsing ushering an era of over 5,000,000 foreclosures with another 2,000,000 likely to happen in the next few years.  Student debt has surpassed the $1 trillion mark and delinquencies in student debt are now the highest of any debt class.  With the announcement by JP Morgan, we are now getting a taste of what is to come.  The day of reckoning for student debt has arrived.

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Sep 3 2013

To taper, or not to taper. Not the question if you are the Fed: Austerity intact while Fed balance sheet continues to expand.

The Federal Reserve has hinted at slowing down its Quantitative Easing machinery but that might face some challenges as the stock market experienced one of its worst months in over a year.  This is not to say that the Fed should respond to the stock market when it sneezes but it makes it more unlikely that the Fed will adhere to its September taper announcement.  Keep in mind that the entire QE strategy on the surface was to provide additional liquidity to US households.  If that was the measure of success, QE has been a royal failure.  As we will shortly see, credit to US households has not expanded in light of unprecedented Fed balance sheet growth.  Money is being deployed but very ineffectually (if you are your regular US consumer).  Funds are being diverted to large financial institutions while the public struggles with credit austerity.

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Aug 31 2013

Why are so many young Americans living at home? Record number of Americans living at home while student debt reaches another record.

While the unemployment rate continues to fall in large part because people are dropping out of the workforce, we reach another record which highlights a difficult economy for young people.  A record number of young Americans now live at home.  It would be one thing if this was being driven by a desire to stay at home but this is not the case.  Economically younger Americans are simply having a tougher time starting their own households.  Combine this with the record amount of student debt largely shouldered by young Americans and it is easy to understand why this trend is occurring.  This living at home trend also helps to explain one of the reasons why homeownership has fallen overall.  This is not a positive trend no matter how people try to spin it.

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