Sep 1 2011

While D.C. and Wall Street burns the middle class flails – top 10 percent control 98 percent of all financial security wealth. For stocks and mutual funds bottom 90 percent controls only 19 percent of total assets.

Part of the unfortunate theatre being played out in the political arena is that little focus and energy is being placed on the issues plaguing the middle class.  The interests of the big financial banks continue to dominate what politicians will discuss and the media seems content at rehashing the argument over and over like a well-trained parrot.  In the meantime we have 46,000,000 Americans on food stamps simply trying to navigate their existence in a country where the middle class is faltering.  The problem with our current political and financial system is that it has been solved like a Rubik’s Cube by the financial elite.  It is now a jigsaw puzzle to be solved and politicians are seen merely as employees for whatever cause will increase the bottom line even if it means destroying the middle class.  The Securities and Exchange Commission, the main enforcement arm against Wall Street graft has become basically an internship ground for those aspiring to big salaries at investment banks.  Now more than ever wealth is concentrated in fewer hands and this era is making the irrational and spendthrift Roaring 20s look like a walk in the financially restrained park.

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Aug 29 2011

The tragedy of the too big to fail banking sector – over $1 trillion in deposits are over the $250,000 FDIC limit. $6.5 trillion in insured deposits backed by $3.9 billion.

It is amazing how much ill placed faith is thrown into the current banking system when there is plenty of evidence of insatiable malfeasance.  The FDIC recently released its quarterly banking report and somehow dismal information was twisted as being positive.  Take for example the reality that $6.5 trillion in insured deposits are backed by $3.9 billion.  Does this give anyone any comfort?  What is even more staggering is you have $1 trillion in deposits above the $250,000 FDIC protection limit riding it out with absolutely no protection.  The banking sector is going to face dramatic problems ahead because the past issues of bad loans have yet to be realized.  Sure, accounting trickery and fancy financial magic can buy you a few years but ultimately you have to come to terms with the deep issues in the balance sheet.  The FDIC is overseeing an industry with $13 trillion in “assets” and only carries a $3.9 billion insurance fund.  It appears the wizard behind the curtain is blowing more smoke than ever.

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Aug 24 2011

Middle class retirement now largely a postcard fantasy – How Wall Street fabricated a buy and hold fairytale and jumped ship with taxpayer golden parachutes. Did baby boomers think about who they would be selling those 401k and pension stocks to?

The days of dreaming about long days playing golf on a green course and taking luxurious cruises around the world are appearing more and more like a foggy memory for those in the middle class planning for retirement.  As Wall Street bankers and hedge fund managers rob the public blind, the mission statement sold to baby boomers is starting to become a large bait and switch catchy enough to make it on a Hallmark card.  For decades Wall Street begged and lured the public in either directly or through pension funds into their web of easy money.  Save $100 a month and you’ll retire a millionaire!  As it turns out, the golden parachute was only available to a tiny fraction of the population while the oligarchy in the financial sector offloads their toxic bets onto the taxpayers struggling balance sheet.  The end game?  No retirement.  At least no retirement like those plastered on glossy mutual fund brochures.  What the Wall Street banking charlatans failed to tell you is that you eventually need to sell those stocks to use the money for real world spending.  What they also failed to mention is that the baby boomer generation is now going to sell into unrelenting headwinds of demographics bringing on a younger and poorer generation to purchase their stocks.  Of course Social Security is in the crosshairs of the financial elite since they already secured their financial piece of the pie.  You know things are bad when the Federal Reserve is stating that stocks are not exactly a winners bet in the years going forward.

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Aug 22 2011

A banking system built on lies and deception – Hiding commercial real estate losses by laundering bad loans through the Federal Reserve. Trillions of dollars in bailouts were made while banks told the public all was well.

Part of the massive challenges facing our brittle financial system is the opaque and secretive nature of the Federal Reserve.  It is difficult enough to confront a challenge with all information present but make it purposely convoluted and dark and we have a crisis of historical proportions.  The recent market volatility is simply a dire reflection of a system unsure of what is going on.  Markets despise distrust and that is what we are finding.  A few years ago we were told that the banking system was fine yet we now have data showing over $1.2 trillion in emergency loans were made to countless too big to fail banks.  In other words we were being lied to by both the Federal Reserve and the giant banks that largely created and spread this financial crisis like wildfire.  As more information leaks out we are starting to get a grim picture of how the Federal Reserve assisted and is assisting banks not only to hide residential real estate loans but also toxic commercial real estate debt.  Over $3 trillion in commercial real estate (CRE) values has evaporated since the crisis took hold yet banks continue to tell the public all is well while shifting these toxic bets onto the taxpayer balance sheet.

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Aug 17 2011

Middle class annihilation one penny at a time – 64 percent of Americans do not have adequate savings for an unexpected $1,000 expense. The crushing blow to income and household wealth.

The American middle class is furious and this is reflected in how people perceive their failed government but also a financial system that has largely profited from the failures of millions.  A recent Gallup poll shows that only 13 percent of Americans actually approve of Congress and the way they are handling their job.  This is a record low.  Of course the financial system for those too big to fail banks is doing just fine thanks to years of accommodative policy, taxpayer bailouts, and politicians that basically collect payroll checks from the HR department of these large financial institutions.  As we have noted and the media fails to report, the average per capita income in the United States is $25,000.  What is even more disturbing is that a recent poll found that 64 percent of Americans would not be able to shoulder even an unexpected expense of $1,000.  If a transmission on a car goes down or additional medical expenses hit, it will cost well over $1,000.  This is simply another reflection of how the crushing collapse of the middle class will not be televised.

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Aug 14 2011

The rise of the new gilded age – Massive market volatility is a dramatic sign of an unhealthy economy – 14 of the 28 biggest percent declines since 1950 in the S&P 500 have come after 2008. Two of those volatile days have occurred in August of 2011.

Massive stock market volatility is not a good sign for the economy and like an EKG is telling us something is troubling the heart of the nation.  The most tumultuous times in the stock market have occurred during times of great economic uncertainty.  August of 2011 has quickly brought back the troubling memories of 2008 and 2009 when the economy was melting down like the Wicked Witch of the West.  For the middle class the recent stock market rally was nothing more than a sideshow.  The real underlying economy has been falling apart like pulled pork for years so it is no surprise that we are witnessing massive volatility in the stock market yet again.  Drops of 600 points followed by surges of 500 points are not healthy.  What one would expect out of a mature economy is steady and solid growth, not volatility that is reminiscent of a hot streak in Las Vegas.  That is however a large part of the problem with our current financial system.  You have many investment banks that thrive on this kind of volatility making billions of dollars on options, derivatives, and futures even if these tools increase the underlying risk in the real economy.  For all of the drama of the last week, the markets were changed only by one percent but the rapid reversal is signifying that market volatility is back in fashion again.

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Aug 10 2011

The next massive debt bubble to crush the economy – 10 charts examining the upcoming implosion of the student loan market. $1 trillion in student loans and defaults sharply increasing.

In the land of predatory bubbles it looks like higher education is now fully caught up in the credit market implosion.  In the same debt produced vein as housing, college used to be a relatively cheap bet with decent results in the long-term.  Even if you went to public universities and picked up a degree in a field with low job prospects, at least you didn’t have the cloud of student loans hanging over your head when you graduated.  Today it is a very different ballgame and the mythology behind college is being used to lure people into institutions that are little more than paper mill factories.  Even quality institutions are having a harder time justifying tuition and fees that cost upwards of $50,000 per year (or the median household income of an American family).  Can the next major crisis come from the student loan market?  There is currently close to $1 trillion in student loan debt outstanding.  During this crisis most debt sectors contracted except for student loans.  Let us examine 10 charts to see why a bubble in student loan debt is about to implode.

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