30 Reasons Why People Should Be Getting Really Nervous About the State of the U.S. Economy By lewrockwell.com
| October 28, 2010
The mainstream media is full of happy economic
news these days. The S&P 500 has shot up 16 percent
since the beginning of July. Ford Motor Company just reported
a profit that jumped nearly 70 percent in the third quarter.
It was Ford's best third quarter performance ever and it
was the 6th quarterly profit in a row for the company. Other
major firms have announced earnings that have far exceeded
expectations in recent weeks. Hooray! The pundits are proclaiming
that the economic collapse is over and that the U.S. economy
has won. It is almost enough to make one tear into a stirring
rendition of "Happy Days Are Here Again." But
perhaps we should take a moment and get a hold of ourselves
first. After all, the underlying economic fundamentals have
not changed. The same long-term trends that were ripping
the U.S. financial system apart a month or two ago are still
continuing to do so. Millions upon millions of American
families are still deeply suffering. So exactly what in
the world is going on here? Well, this is what is known
as a "sucker's rally." Those on the inside know
better than to throw money at this market. In fact, corporate
insiders are now selling off stock so fast you would think
it is going out of style. Meanwhile, hordes of innocent
rubes are jumping back into the stock market thinking that
it is the perfect time to get in.
The truth is that these "good times"
are only temporary. Don't get used to them. The following
are 30 reasons why people should be getting really, really
nervous about the state of the U.S. economy....
#1 Corporate insiders are selling off stock
at a blinding pace and are looking for the exits. Alan Newman,
the editor of the Crosscurrents newsletter, examined a number
of the top performing stocks in the market including Google,
Apple and Target and found that the ratio of corporate insider
stock sold to corporate insider stock purchased over the
last six months for those companies was 3,177 to 1. At the
group of firms that Newman looked at, corporate insiders
had purchased 38,000 shares of stock over the last six months
and yet had sold off over 120 million shares.
#2 Analysts at both Bank of America and
Goldman Sachs both believe that the U.S. Federal Reserve
is going to initiate a new round of quantitative easing
in November. It does not take a genius to figure out that
this is very likely to push up inflation and have very serious
consequences for the U.S. dollar.
#3 Economists at Goldman Sachs are projecting
that the Fed will have to purchase at least $4 trillion
in assets during this next round of quantitative easing
to get the U.S. economy moving in a positive direction once
again.
#4 In the United States today, there are
5,057 janitors with Ph.D.’s, other doctorates, or
professional degrees.
#5 Investors have very little faith in the
U.S. dollar (and in paper currencies in general) at this
point. Precious metals are soaring to obscene heights. The
price of gold has increased more than 20 percent in 2010.
The price of silver has skyrocketed about 40 percent this
year. These are not signs that indicate that the U.S. financial
system is stable.
#6 Robin Griffiths, a technical strategist
at Cazenove Capital, told CNBC on Monday that the U.S. dollar
is in danger of becoming "toxic waste."
#7 In the United States today, 317,000 waiters
and waitresses have college degrees.
#8 U.S. lending institutions repossessed
an all-time record total of 102,134 homes in the month of
September. That was the first time that home repossessions
in the U.S. had ever exceeded the 100,000 mark during a
single month.
#9 According to a Standard & Poor's/Case-Shiller
home price report that was released on Tuesday, single family
home prices in the United States declined for a second straight
month in August.
#10 In the United States today, over 18,000
parking lot attendants have college degrees.
#11 During the months of August and September,
the state of Nevada had an unemployment rate of 14.4 percent,
which was the highest in the history of the state. Not that
the rest of the country is doing any better. The state of
California has become a complete and total economic disaster
zone, and the city of Detroit, Michigan is literally dying.
#12 The "official" unemployment
rate in the United States has been at nine and a half percent
or above for 14 consecutive months.
#13 The number of people unemployed in the
state of California is approximately equivalent to the populations
of Nevada, New Hampshire and Vermont combined.
#14 According to the president of the Federal
Reserve Bank of New York, there are approximately 3 million
more vacant housing units than usual in the United States.
#15 China has reduced the export quota on
rare earth elements for the second half of 2010 by 72%,
thus strengthening their position in the world economy even
more. Rare earth elements are absolutely crucial to the
manufacture of a vast array of high technology products,
and now even more of them will have to be made in China.
#16 In 1985, the U.S. trade deficit with
China was 6 million dollars for the entire year. In the
month of August alone, the U.S. trade deficit with China
was over 28 billion dollars.
#17 Wheat, corn and other staples are absolutely
soaring in price on world markets. These higher food prices
are going to hit U.S. consumers hard.
#18 In 2007, 3 U.S. banks failed. In 2008,
25 U.S. banks failed. In 2009, 140 U.S. banks failed. Last
Friday, it was announced that 139 U.S. banks have failed
so far this year and it is not even the end of October yet.
#19 Total student loan debt in the United
States is climbing at a rate of approximately $2,853.88
per second.
#20 Back in 1980, the United States imported
approximately 37 percent of the oil that we use. Now we
import nearly 60 percent of the oil that we use.
#21 According to an analysis by the Congressional
Joint Committee on Taxation, the health care reform legislation
that Congress didn't read but passed into law anyway will
generate $409.2 billion in additional taxes on the American
people by the year 2019.
#22 Median household income in the U.S.
declined from $51,726 in 2008 to $50,221 in 2009. That was
the second yearly decline in a row.
#23 One out of every six Americans is now
enrolled in a government anti-poverty program, and yet the
number of Americans signing up for food stamps and other
social programs just continues to set new all-time records
month after month after month.
#24 The number of Americans working part-time
jobs "for economic reasons" is now the highest
it has been in at least five decades.
#25 American 15-year-olds do not even rank
in the top half of all advanced nations when it comes to
math or science literacy.
#26 According to a recent poll conducted
by CNBC, 92 percent of Americans believe that the performance
of the U.S. economy is either "fair" or "poor."
#27 After analyzing Congressional Budget
Office data, Boston University economics professor Laurence
J. Kotlikoff came to the conclusion that the U.S. government
is now facing a "fiscal gap" of $202 trillion
dollars.
#28 A trillion $10 bills, if they were
taped end to end, would wrap around the earth more than
380 times. That amount of money would still not be enough
to pay off the U.S. national debt.
#29 According to the U.S. Treasury Department,
the U.S. national debt is rapidly closing in on 14 trillion
dollars and and will climb to an estimated $19.6 trillion
by 2015.
#30 At our current pace, the Congressional
Budget Office is projecting that U.S. government public
debt will hit 716 percent of GDP by the year 2080.
The U.S. economy is in the midst of a long-term
decline. There are always going to be moments when it seems
like things are getting a bit better, but then reality will
kick in and the depressing slide will continue.
If you really want to understand what is
happening to the U.S. economy, do not become fixated on
the short-term numbers. Instead, always keep an eye on the
long-term trends.
The U.S. economy is dying. We are getting
whipped by the rest of the world and we are drowning in
a sea of debt. A little rally in the stock market is not
going to do a thing to fix our very deep fundamental economic
problems.