Aug 7 2012

US Dollar already went off a fiscal cliff – what does a falling dollar mean to US families? Masking de-leveraging via debt markets.

People tend to have a short-term memory when it comes to financial panics.  Even when told that the US dollar has lost over 90+ percent of its purchasing power since 1914 when the Federal Reserve was first established, many just assume this is normal.  Inflation is as common as air.  Today’s purchasing power of one dollar is equivalent to 4 cents to put this in perspective.  The Fed is trying to inflate its way out of the massive debt we are facing.  We all know a fiscal cliff is approaching.  We’ve known this for well over a decade.  Yet we continue to spend and witness a slow decline to the purchasing power of the US dollar.  Much of the current economy is fueled by debt markets expanding but a saturation point will be reached.  Breaking points do happen and you need only look at Europe to see what happens when the scales tip.  What does a weaker dollar mean to American families?

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Aug 5 2012

The other side of persistently high unemployment – Underemployment rate shoots up to 15 percent but is actually more problematic because of the civilian employment-population ratio.

Spending time examining the employment report shows continuing trends that appear beyond the headline figures.  The number of Americans unemployed or marginally attached to the work-force increased to 15 percent and appears to be a new staple of our current workforce.  A key data point is the civilian employment-population ratio that shows a continuing drop.  The US is on a multi-decade trend where we have fewer working adults as a share of our overall population.  This is not a positive trend where we have an aging population with less affluent younger workers.  The headline rate is only a brief snapshot in time but the bigger trend of a shrinking middle class is all too prominent.

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Aug 2 2012

A crushing blow to male earnings – From 1969 to 2009 male earnings have fallen by 28 percent. The slow decline of the American middle class.

The contraction of the US middle class continues to roll along.  There are major generational rifts that are hitting the economy.  For example between 1960 and 2009 the number of men working fulltime has fallen from 83 percent to 66 percent.  A large number of people are categorized under “not making formal wages” and this group has tripled from 6 percent to 18 percent.  It is a troubling revelation that provides more insight into the reality that half of Americans make $25,000 or less per year.  It also sheds some light on the massive number of working poor that are also part of the 46 million Americans now receiving food assistance.  The decline in wages is real and the massive impact in net worth is also a big indicator of the crushing blow being experienced by the middle class.

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Jul 31 2012

The engineering of bigger financial bubbles – corporate profits as a percent of GDP at record levels while unemployment is historically high and record number of Americans on transfer payments. Paying interest on excess reserves to banks for our own bailout funds.

The market is perched on the edge of a chair looking out for what the Federal Reserve and European Central Bank have to say.  The almighty Oz is the only game in town.  With the Fed, the expectation is of some sort of additional quantitative easing to prime the economy once again whereas the market is looking for some big sort of action by the ECB to keep the Euro together.  One thing is certain however and that is we are now in a bailout bubble.  The markets are now managed proxy systems of the too big to fail banks.  The system has been very effective in siphoning off wealth from the middle class of many countries and creating massive wealth discrepancies that have not been witnessed since the Great Depression.  Many in the public are woefully uninformed since rarely is this analysis leaked out in the media.  Yet as we go down this road, it is becoming more obvious that to keep this system going, more and more bailouts are required.

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Jul 29 2012

Ph.D. in food stamps – the rise of food stamp usage among those with advanced degrees. Record number of households on food stamps.

t is hard to declare a recovery when a record 22.3 million households are now on food assistance.  The latest data shows that 46.5 million Americans are still relying on SNAP, the food assistance program, to get by each month.  Since this data lags, we see that in May we added 77,000 jobs but added 222,000+ Americans to the food stamp program.  This is not a positive economic calculus.  The recent rallies were all spurred by the utterance of more bailouts with more debt.  Will these promises be enough to give us a positive second half of the year?  Central banks and the government are stepping up in historic fashion just to keep the system from coming apart.  Think about the fact that over 46 million Americans rely on a small check each month just to get food into their household.  Some companies have seized this trend to their advantage.  Some with advanced degrees are turning to food assistance in larger numbers.  Where do we go from here?

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Jul 26 2012

Retirement means having to work in current economy – new survey shows 34 percent of workers in their 60s do not plan on retiring. The hunger for higher yields in a weak stock market.

The chase for yield is causing money to flow into unlikely places in the market.  The low performance market has taken a toll on retirement planning models for millions of Americans nearing retirement age.  Many of the models were built on the assumption that stock market gains would return 7 to 10 percent annual gains year-over-year.  So of course many of the models had extremely generous projections.  This of course applies to those that actually were able to save some money.  Many Americans are unable to save any money.  One out of three Americans has not one dollar set aside for retirement.  Those that have invested in the stock market have seen one of the worst periods ever.  For example, even with the recent rally the S&P 500 is back to a point last seen in 1999.  Over this 13 year window boring CDs outperformed the stock market.  Yet this raises an important question about retirement.  How will millions of Americans retire when they have so little money to their name?

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Jul 23 2012

The hindrance of global debt – Spain accelerating to major bailouts and bond markets react. Eurozone stock markets in major decline.

It is always a sign of desperation to ban short selling.  Trying to put an artificial bottom usually backfires and we are seeing this hit in Spain.  The situation is unsustainable and has taken the headlines away from Greece.  Spain is a much bigger economy and they are deep in a recession with headline unemployment near 25 percent.  Financial and government leaders continually attempt to solve a debt crisis with more debt.  How is the debt going to be serviced with 25 percent of your workforce not working and incomes are being crushed?  Does it even logically make sense to give Spain more loans when they are already unable to service their current debt?  A household in this position is bankrupt and basically needs to restructure their entire balance sheet.  The last thing they need is larger loans but that has been the proposals for the last few years.  The contagion is spreading as now Italy is being caught up in the debt crisis.

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