The U.S. economy is being slowly but surely destroyed and many Americans have no idea that it is happening. There are 11 long-term trends that reveal… that there are certain underlying foundational problems that are destroying the U.S. economy a little bit more every single day. They are undeniable and they are constantly getting worse. If they are not corrected (and there is no indication that they will be) they will destroy not only our economy but also our entire way of life! Words: 2520
So says an article* posted at theeconomiccollapseblog.com which Lorimer Wilson, editor of www.munKNEE.com, has reformatted into edited […] excerpts below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) The article goes on to say:
These 11 foundational problems with our economy are discussed below: The sad truth is that it [is] hard to understate just how desperate the situation is for the U.S. economy.
Economy Trend #1: De-industrialization Of America to Continue
The United States’ economy is being de-industrialized at a pace that is almost impossible to believe – but now that millions upon millions of people have lost their jobs, more Americans than ever are starting to wake up and believe it.
Ten years ago the majority of Americans had great faith in the new “global economy” that we were all being merged into, but now the tide has turned. A recent NBC News/Wall Street Journal poll found that 69 percent of Americans now believe that free trade agreements have cost America jobs… [because] it turns out that the current system is neither “free trade” nor “fair trade”. Many other nations impose extremely high tariffs on U.S. goods and put up ridiculous barriers to American products and yet the United States has generally let everyone else openly manipulate currency rates and flood our shores with whatever cheap products they want [and] the results have been disastrous. Jobs and factories have been leaving the United States at a blinding pace. An economy without a manufacturing base does not have a bright long-term future. Yet our politicians have allowed our manufacturing base to be systematically dismantled.
The United States’ economy has lost approximately 42,400 factories since 2001 [of which] approximately 75 percent… employed over 500 workers. As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time that less than 12 million Americans were employed in manufacturing was in 1941. In 1959, manufacturing represented 28 percent of all U.S. economic output. In 2008, it represented only 11.5 percent and it continues to fall. How is the United States supposed to have a bright economic future if it consumes everything in sight and yet makes very little? Something needs to be done.
Needless to say, millions of blue collar workers now find themselves unable to find jobs. Today, 28% of all U.S. households have at least one person that is looking for a full-time job and there is no sign that our economy is going to improve much any time soon.
Economy Trend #2: U.S. Trade Deficit is Exploding
Each month, tens of billions more dollars go out of the United States’ economy than come into it. In other words, every single month the United States gets poorer.
About half of the U.S. trade deficit is now with communist China having increased nearly 300 percent between 2000 and 2009. As of the end of July, the U.S. trade deficit with China had risen 18 percent compared to the same time period a year ago.
There is a reason why China has been able to loan the U.S. government nearly a trillion dollars. They have literally been bleeding us dry. The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States. Does that sound like “fair trade” to you? [Indeed,] according to a new study conducted by the Economic Policy Institute, if the U.S. trade deficit with China continues to increase at its current rate, the U.S. economy will lose over half a million jobs this year alone and that doesn’t even take into account the trade deficit that we have with all the other nations around the world.
We have literally built China into a superpower [with] one prominent economist now projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040. It isn’t just China that is a problem. Since the implementation of [the North American Free Trade Act] NAFTA [with Canada and Mexico] in 1994, 300,000 U.S. farms have gone out of business.
Globalism has forced U.S. workers to directly compete with the cheapest labor in the world for jobs. That is not good for American workers and it is not good for America’s economy.
Economy Trend #3: Middle Class is Shrinking
As jobs continue to flee the United States and as wages continue to be depressed, America’s middle class is shrinking at an alarming rate. According to a poll taken in 2009, 61 percent of Americans “always or usually” live paycheck to paycheck. That was up substantially from 49 percent in 2008 and 43 percent in 2007.
Unfortunately, a growing number of Americans have found it impossible to make it from month to month without direct financial assistance from the federal government [with] 41 million Americans are now on food stamps. One out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government. Economic pain is everywhere.
Tens of millions of Americans now live in poverty. The U.S. Census Bureau says that 43.6 million Americans are now living in poverty and according to them that is the highest number of poor Americans that they have ever recorded in 51 years of record-keeping.
Economy Trend #4: U.S. Government Size is Expanding
No matter whether it is a Republican or a Democrat in the White House, the size of the U.S. government has continued to grow by leaps and bounds in recent years [and] it is a tremendous drain on the U.S. economy. The government produces very little value for the economy and yet costs a colossal amount to maintain.
In addition, multiplying government regulations have caused the United States to be a very difficult environment to operate a business in. The Federal Register is the main source of regulations for U.S. government agencies. In 1936, the number of pages in the Federal Register was about 2,600. Today, the Federal Register is over 80,000 pages long.
Economy Trend #5: U.S. National Debt is Constantly Growing
The United States has accumulated the biggest mountain of debt in the history of the world and every single month it gets worse. According to an official U.S. Treasury Department report to Congress, the U.S. national debt will top $13.6 trillion this year and will climb to an estimated $19.6 trillion by 2015… The truth is that the situation is actually a lot worse than that. If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion each and every year. Needless to say, that is not anywhere close to sustainable. We are literally destroying our economic future with all of this debt.
Economy Trend #6: U.S. Dollar Continues to be Devalued
The Federal Reserve constantly destroys the value of the U.S. dollar. Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power. An item that cost $20.00 in 1970 would cost you $112.35 today. An item that cost $20.00 in 1913 would cost you $440.33 today.
Inflation is like a hidden tax. The value of the dollars you are holding right now will decline a little bit more each and every month and now that the Federal Reserve is threatening to unleash another round of quantitative easing, it appears that the value of our dollars will soon be declining even more rapidly.
Economy Trend #7: Derivatives Bubble Expanding
The “Wall Street reform bill” should have done something about the horrific abuses in the derivatives markets [but,] instead, did next to nothing about derivatives and instead imposed hundreds of other useless regulations on Wall Street.
Most Americans don’t even know what derivatives are. Basically, they are side bets. Today, while they have no underlying value of their own, derivatives have taken center stage on Wall Street. Our financial markets have become a gigantic casino. The total value of all derivatives worldwide is estimated to be somewhere between 600 trillion and 1.5 quadrillion dollars and, thanks to the U.S. Congress, the derivatives bubble is still growing.
It would be hard to understate the danger that the derivatives bubble represents. The danger from derivatives is so great that Warren Buffet once called them “financial weapons of mass destruction”. When the derivatives bubble finally pops, there will not be enough money in the entire world to fix it.
Economy Trend #8: Health Care System is Disintegrating
The United States health care system is completely and totally broken. It has become a gigantic money making machine for health insurance companies, pharmaceutical corporations and greedy lawyers.
Americans pay more for health care than anyone else in the world and yet they get shockingly little in return. [In fact,] health care expenses are the number one reason why people file for personal bankruptcy in the United States and, surprisingly, most of those who get bankrupted by health care expenses actually have health insurance.
The health insurance system in the United States is a complete and total mess. Health insurance premiums are busting the budgets of tens of millions of American families and yet… large numbers of health insurance companies across the United States have announced that they plan to increase health insurance premiums in response to the new health care law [even though they don’t] actually need more money… [given that] their profits [increased] by 56 percent in 2009.
The truth is that the U.S. health care system needs to be totally and completely reinvented. The system we had before did not work. Barack Obama’s new health care system will be far worse. Meanwhile, the health care industry is literally choking the life out of the U.S. economy.
Economy Trend #9: Financial Power Is Becoming Concentrated In Fewer And Fewer Hands
Once upon a time, the United States had a very diverse financial system but today financial power is becoming concentrated in fewer and fewer hands with each passing year.
More U.S. banks fail every single week [and] the number] is on pace to far surpass the total of 140 U.S. banks that failed last year [given that] there are now nearly 900 banks (well over 10 percent of all U.S. banks) on the FDIC list of problem banks.
Meanwhile, the “too big to fail” banks continue to pick up market share. The “big four” U.S. banks (Citigroup, JPMorgan Chase, Bank of America and Wells Fargo) had approximately 22 percent of all deposits in FDIC-insured institutions back in 2000. As of June 30th of last year that figure was up to 39 percent. Putting an increasing amount of financial power into the hands of just a few elite banks is a recipe for disaster any way you want to cut it.
Economy Trend #10: Corruption On Wall Street is Rampant
Our financial system has become an absolute cesspool of corruption. In the past I have written extensively about all of the corruption that Goldman Sachs has been involved in, but they are far from alone. Bank of America, JPMorgan Chase and GMAC Mortgage have all recently suspended foreclosures in many U.S. states due to serious concerns about foreclosure procedures.[Indeed,] there is a lot of corruption that is a lot worse than that. The rampant manipulation of the gold and silver markets was completely blown open by an industry insider earlier this year, but the U.S. government had to be publicly shamed before they would even agree to look into it.
Corruption on Wall Street has become so common that it is almost impossible to keep up with it all. It seems like no matter what stone you turn over on Wall Street these days you find yet more corruption.[It begs the question:] “If the core of our financial system is so incredibly corrupt, how long will it be before it collapses in on itself?”
Economy Trend #11: Retirement Crisis is Becoming Worse
The Baby Boomers may end up bankrupting America after all. A retirement tsunami is coming that threatens to drown our nation in a sea of red ink.
Americans have not been preparing for retirement on their own… In fact, approximately half of all workers in the United States have less than $2000 saved up for retirement.
What about corporate pension plans? Are they in good shape? The answer is No. One recent study found that America’s 100 largest corporate pension plans were underfunded by $217 billion as of the end of 2008 but, sadly, the pension plans run by U.S. state governments are in even worse shape.
Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management recently calculated the combined pension liability of all 50 U.S. states. What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds. That means that collectively, the 50 U.S. state governments are 3.2 trillion dollars short of what they need to meet their pension obligations.
The biggest mess of all, however, may be the U.S. Social Security system. The sad reality is that it is nothing more than a Ponzi scheme, and the scam has just about run its course. According to the Congressional Budget Office, the Social Security system will pay out more in benefits than it receives in payroll taxes in 2010. That was not supposed to happen until at least 2016. Oops!
Things get really hairy when you start looking down the road. The present value of projected scheduled benefits surpasses earmarked revenues for entitlement programs such as Social Security and Medicare by about 46 trillion dollars over the next 75 years. Ouch!
An increasing number of Americans may not always know the specifics of what is going wrong, but more people than ever realize that something is broken. According to one recent survey, 63 percent of Americans believe that the United States is on the wrong track – and we are very much on the wrong track.
We have squandered the great wealth that our parents and grandparents left us and we are wrecking the greatest economic machine that the world has ever seen. If we do not get our act together, someday people will look back and curse this generation for how incredibly stupid we were. It is time to face facts people.
Our economy is in deep, deep, deep trouble – and so are we!