Dec 21 2010

Las Vegas is to the real estate bubble what Detroit was to the US automobile industry – Empty condo projects, apartments poorly built to face the desert sun, and the collapse of commercial real estate.

If Wall Street is the hub of American finance then Las Vegas was the manifestation of credit dreams going viral.  Las Vegas, the beating heart of Nevada had a tremendous boom with the real estate bubble because it played into the narrative of making it big.  Where else can unknowns strike it big and have their name put up in lights?  With Wall Street feeding the frenzy Las Vegas seemed to be an endless playground of free flowing capital.  During the boom it was hard not to notice the high end Rodeo Drive like stores of Gucci, DKNY, and Prada covering the floors of many casinos.  The stores were full and money seemed to flow like the exhaust of Maserati’s cruising up and down Las Vegas Blvd.  If heaven on Earth for kids is Disneyland Las Vegas was the heaven of debt.  What once seemed as an endless dream has burst into a barren desert nightmare.  Las Vegas once boasting some of the fastest growth rates now has largely led Nevada into having the highest unemployment rate of all states in the country.  If Michigan was the result of the offshoring of American manufacturing and the demise of the US auto industry Nevada is the exclamation mark at the end of the credit bubble era.

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Dec 18 2010

Federal Reserve is the primary tool of the new financial oligarchy – The ultimate banking clearing house with zero oversight from the people still holds over $2 trillion on its balance sheet.

The Federal Reserve system (the Fed for short) is the US central banking system.  The Fed was created in 1913 with the enactment of the Federal Reserve Act.  In the beginning the Fed had limited powers and its mission was limited.  According to the Fed its mission today is to conduct monetary policy, supervise and regulate banking institutions, and maintain stability in the financial system.  If this is the mission of the Fed, it has radically failed and the American people should audit the Fed to see what went wrong.  The problem with the Fed is that it is independent within the government since it does not need to seek legislation for actions.  Yet the authority of the Federal Reserve is derived from the US Congress.  Yet we have recently seen when a push to audit the Fed was issued in Congress a major backlash hit from the Fed and we have yet to conduct a full audit of the Federal Reserve.  The Fed has conducted and put at risk the US currency to protect the banking interests of its member banks.  The unstated mission of the Fed is to protect its banking allies even if it means destroying the economic structure of its host nation so long as wealth is stabilized in the new financial oligarchy.

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Dec 15 2010

The red queen race of debt – US public debt set to pass US annual GDP. The 100 percent GDP to public debt threshold is quickly approaching.

People may not even realize that during the Great Depression, US Federal debt as a percent of GDP did not even reach 40 percent.  Part of this was because the size of government was much smaller in military, public services, and entitlements.  The only time in history that the US as a whole spent more than it produced was during World War II. That is the only time but we are now quickly approaching the 100 percent range of federal debt to GDP as a percentage.  The US Treasury and Federal Reserve are aiming to pull the economy out of the Great Recession by going into further debt.  Think about this for a few minutes.  What led the US into a major financial crisis were banks allowing people to go into too much debt buying homes, cars, and other things they clearly were not able to afford.  While the banks were bailed out courtesy of taxpayers, the central banks are aiming to go deeper into debt just to create additional bubbles.  Bankers are loving this and their profits reflect this change.  Yet as many chastise economies around the world for going too deep into debt it is likely we will hit the 100 percent threshold next year.

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Dec 13 2010

The growing chasm between rich and poor in America – Latest data shows that 500,000 people were added to the food assistance program in one month. 6 million Americans added over the last year. Those that buy diamonds versus those that barely have enough to buy soup.

The shrinking of the American middle class is painful to watch.  Shopping at the grocery store I’ve noticed more and more people with unique debit cards that don’t look like your typical debit or credit card.  These are actually the modern day food stamps and help to take away the stigma of pulling out a pile of paper coupons.  My anecdotal observations are confirmed by the data.  Since September of 2009 we have added a stunning 6,000,000 Americans to the nationwide food assistance program.  In fact, even as some are touting how great things are in the last month we added 521,000 more Americans to the food assistance program.  Let me reiterate, we added half a million Americans to the food assistance program in the latest month of data.  Is this really what we have in mind as a recovery?  The latest data shows 43,000,000 Americans now receive food assistance.  When we chart this data out it is rather startling.

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Dec 10 2010

How much does the average American make in 2010? Examining new data on U.S. household income numbers and high income earners. 100 million Americans make less than $39,999 per year.

Examining the average income for Americans sheds a very troubling light on what has happened to income over a very financially destructive decade.  If we look at the median household income in the U.S. this actually underplays the falling behind of wages because we are looking at households with multiple people working.  Without a doubt the median wage is bolstered by two income families but when we break this out, we realize how challenging things have gotten for most Americans on a very personal level.  You might even be one of these people (the odds are good that you individually make less than $40,000 per year given that 66 percent of individual Americans make this amount or less).  For this article I will be looking at recent income data from the Census, Social Security, and also examine tax receipts for the Federal Government.  What we find is a pooling of money at the top while most Americans have found a smaller paycheck with much less employment security.  One startling fact that I found looking at Social Security information was that 100,000,000+ Americans earn an average of $39,999 or less a year (66 percent of all Americans).  When we break down the cost of daily living and what one would expect out of a middle class lifestyle we get a better understanding of why so many people feel that they are being left behind in a dust cloud of economic verbiage.

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Dec 8 2010

The era of mega banks – The growth of too big to fail. American banking system still backing over $13 trillion in assets with a negative deposit insurance fund. 7,760 banks but 19 banks make up 50 percent of the asset base.

The growth of the too big to fail bank is something that is modern to this era.  In the 1990s there were fewer than 40 institutions that had total assets above $20 billion.  In the late part of the 1980s and 1990s this number was below 20.  The peak was reached in 2005 with 55 institutions having more than $20 billion in total assets.  That number has fallen in recent years because of the crisis yet we have a handful of banks that control most of the nation’s banking assets.  The total U.S. banking system as of today supports over $13 trillion in total assets.  The FDIC insures these deposits with a deposit fund that is negative so it might as well be supported by pure faith.  What makes up most of these assets are residential and commercial real estate loans.  As we have discussed banks have yet to come to terms with the reality that many of these loans are not worth what they claim they are.  First, let us look at the growth of too big to fail.

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Dec 6 2010

Catch 22 economics – The U.S. economy has 7,400,000 less workers than the peak in late 2007 yet nominal GDP is at a record. What does that mean for those without jobs?

The Friday jobs report was significant for a variety of reasons but one key theme is that it shows the true fragility of the state of the economy.  Even though it was a net add of 39,000 jobs we need to remember that the nation needs to add roughly 150,000 jobs per month just to keep pace with population growth.  Many economists agree that an unemployment rate over 8 percent is felt by virtually everyone in the economy.  The average American is facing some of the most dramatic changes to our employment market in over a generation.  While the recession on paper has been over since summer of 2009 most Americans would agree that the economy is still in deep problems.  This is because most Americans would view a recovery with actual job growth.  Yet when we look at the Gross Domestic Product (GDP) or the aggregate production of the U.S. we are back and growing.  This dichotomy raises some troubling questions moving forward.  Do we need as many workers to grow?  GDP tells us that we don’t.

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