Jan 31 2011

Federal Reserve punishing savers in low interest rate environment – Since the 1960s 5-year Treasury Bills average 6.5 percent. Today a high yield money market account will get you 1 percent.

Saving money is usually pushed to the background in a debt induced economy built around spending.  Marketing firms are designed with the intention of parting you from your hard earned dollar.  The housing bubble was a manifestation of a system permeated by easy access to debt and promises to repay current purchases with future dollars.  Even the modest historical down payments of 20 percent were removed to introduce new no money or low money down payments.  It was as if money grew on trees.  Credit cards sit in the wallets of many, right next to cold hard cash.  Although not synonymous, people think of access to debt as if it were access to a permanent piggybank.  Many thought of their home equity as trapped income needing to get out instead of a safety net.  I used to hear so many throw in their home equity line of credit into their net worth equation.  You have to pay debt back!  That somehow escapes many and in this low rate environment, the Federal Reserve is punishing savers to get them off the fence and spend every little penny they got.

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Jan 27 2011

Federal Reserve openly aiming for inflation – The Fed looks for a sequel in punishing the U.S. dollar and hopes to inflate debt and the middle class away.

The Federal Reserve has painted itself into a very narrow and troubling corner for most of working and middle class America.  The massive debt problems on hand have no realistic way of being paid off and the best path in the eyes of the Federal Reserve is to slowly inflate away the currency and debt.  Yet that brings up some troubling dilemmas.  Think of the cost of living adjustments (COLAs) that many on Social Security once received.  Many of these people purchased homes pre-bubble days and many may have their home paid off.  Yet because a large portion of the CPI is based on housing, the CPI has been falling for the last few years stunting growth in COLAs all the while food and other daily use items are surging in cost.  The Federal Reserve has no allegiance to any country and is only concerned with the safety of the biggest banks.  That is their main charter even though they claim to talk about a stable currency for a country.  Let us see how well they are holding to that mission:

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Jan 25 2011

The downsizing of America – Oil production off 1980s peak and manufactures learn creative methods of repackaging inflation.

There is a slow burn going on and it is happening in your wallet and also in the gas tank of your car.  The US Treasury and Federal Reserve have made it their mission to slowly cut the value of each one of those green dollars you have.  Since many Americans are struggling to make the monthly bills, many producers realize that they cannot up the price on regularly bought consumption products.  Places like Target have long learned to add a large section of produce and perishables in their stores since people have shifted from buying wants (HDTVs) to needs (bread and butter).  What is interesting though is how the big jump in commodity prices was hidden for consumer goods.  You may have noticed this merely by your own observation but creative packaging has hidden a large part of this inflation.

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Jan 20 2011

How the financial elite have dismantled the American middle class – top 1 percent share of wealth at levels not seen since the Great Depression. Goldman Sachs offering average bonuses of $430,000 while a record 43,200,000 Americans receive food stamps.

The U.S. economy is now operating like a finely tuned engine bent on dismantling the middle class and protecting the tiny elites in our nation that have learned to manipulate both political parties to their financial benefit.  This did not occur over night but started in the 1970s when the U.S. government and investment banks juiced up the nation with deficit and debt spending.  A single family cannot go into debt for a very long time without consequences but a rising housing market hid much of the inequality developing in our system for a very long time.  It was an illusion of stability.  The top 1 percent in our nation now control 43 percent of all financial wealth.  These are levels not seen since the years before the Great Depression consumed the global economy.  The fact of the matter is the top 1 percent has massively gained in real financial terms because of political maneuvering and selling out the middle class.  Since these people protect their wealth through investment banks and tax breaks politicians have not dared touch these sacred cows or even asking banks to pay for their decades of personal irresponsible lending.  In the end the elite have created a system where the working and middle class are paying for their own demise.

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Jan 17 2011

Financial trends of the new American economy – Higher educated workforce with harder time finding and keeping jobs, median retirement account for Americans at $2,000, global stock market growth, and housing bust covering up inflation in other areas.

The Great Recession is revealing some fundamental challenges in our economy.  One of those challenges revolves around the exceedingly expensive college degree and its ability to translate into employment.  As a percent many more American’s have a bachelor’s degree today than say in 1992 yet unemployment for college educated Americans is at modern record highs.  Another profound challenge facing American families is retirement savings (or lack thereof which is more likely the case).  Retirement is largely becoming a luxury that only a handful of families can count on.  As we look back at the last decade not all global stock markets were created equal and this is evident when we compare the US stock market to those abroad.  Finally we will examine what areas are seeing major price increases all the while overall inflation appears to be muted to average Americans.

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Jan 13 2011

The road least pillaged – S&P 500 up 90 percent from bottom but housing values down 30 percent nationwide. Wealthy store most of their wealth in stocks while most Americans have their net worth in housing. 2010 record year in foreclosures and the upcoming lost decade in housing.

There are few investments in the US that are so heavily subsidized like housing.  Residential and commercial real estate included benefit from favorable government policies to increase demand.  Some of these policies may have merit but a large part of the housing market has been injected with so many perks that the true value of a home has been stripped out.  This is what makes the crash in real estate even more dramatic.  Real estate has and is declining in value even in spite of all the generous benefits of owning.  How can that be when the government has made buying a home such a lucrative financial move on paper?  First, the purpose of buying a home has been lost in the massive investment banking and government casino machine. Instead of buying a home for a steady 30 year time period home buying turned into a giant operation where churning sales was favored over sustained and stable growth.  This was a mission set back in the 1930s when the government stepped in to subsidize the housing market.  The intent was to create stable communities and pride in owning a home.  Much of that was picked away like meat from a carcass as Wall Street figured out a way to develop archaic investment instruments to turn housing into another commodity like oil or stock options.  For all of the tragic financial issues in housing we are now likely to see a 2011 through 2020 Japanese like stalling out in home values.

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Jan 11 2011

The gambling economy – Nevada GDP contracted 6.4 percent during the crisis. A state where 1 out of 4 people is unemployed or underemployed. States trying to balance budgets with gambling and casinos.

Nevada has really taken a hard hit from the current recession.  Most Americans at some level have felt the repercussions of the current financial crisis but Nevada has felt the pangs of the crisis much deeper.  Nevada now holds the highest unemployment rate of any state in the country.  Nevada’s GDP is $131 billion with approximately $97 billion coming from the Las Vegas area.  Where Vegas goes so goes Nevada.  Las Vegas is also facing major challenges from the commercial real estate debacle.  Gambling revenues that depend on an economy with healthy discretionary spending have taken large hits and many of the commercial developments made large bets on continued growth.  That proposed growth has not come to fruition and unlike a stock that can plunge to zero, it is hard to undo a large condo project with very little buyer interest.  Whereas some areas of the economy might recover sooner, areas that depended heavily on real estate and leisure spending are falling on difficult times.

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