7 Most Dreadful Signs of America’s Economic Downfall

I find it strikingly strange to receive emails from my readers who are angry because the tone of our articles makes it sound as if the sky over America is falling and economic recovery is not going to happen. They think that I have no clue as to what I am writing about. I can only wish them a happy life and may all of their dreams come true.

But before you close your browser, I would like to present to my readers who believe that economic collapse is highly unlikely, 7 undeniable and dreadful signs or proof of the economic downfall. There are countless of evidence that the economy will come to a point that is impossible to save. I am sure many who believe that the collapse is now inevitable already know about these. However, for those who don’t, here are the most dreadful proof which is seldom heard of.

The bottom 40% of the population in America which is 120 million people owns less than 1% of the whole nation’s wealth. Yet, these 120 million poorest (and statistically most of them being African-American and Hispanic) are the reason why the economy is collapsing now. As surprising as it sounds, it is the bottom 40 percent who forced themselves to get loans and mortgages that they could not afford, and now they are defaulting almost at the same time.

What impresses me about this is the UN statistics that says a whooping 40 percent of the richest country in the world actually only owns less than 1% collectively of the nations wealth. Read the whole article here.

Pay close attention to the next two years. You will see that approximately 360,000 mortgages are scheduled to “reset” nationwide. When this happens, the mortgage monthly payment will increase by an average of $1,000 per month. Who can afford an increase of monthly payment this much? Within 2 years the US dollar will have depreciated about 35-50% and the $1,000 per month increase will become even more unaffordable. This will cause another housing crash which will completely crush the housing market. Read more about this here.

The official unemployment rate currently is at 9.9%. However, the real unemployment rate that is hidden by the government has reached 22%. Read about this here.

According to USDebtClock.org the national debt of the US has passed $13 trillion. In 2000 it was $5.7 trillion and it increased by $2 trillion within 5 years. Six months ago, the national debt was $12 trillion and in a frighteningly short period of time it is now $1 trillion more! The reason why the debt clock runs this fast is because the larger the US debt grows, the faster the interest is piling up. If you watch closely the US Debt Clock you will notice that the national debt tracker jumps to over 100,000 in less than one minute. Read the whole article here.

5 more banks were shut down by Regulators last Friday, May 28th, 2010, which brings the number of US bank failures to 78 this year alone. Read the whole article here.

Last March alone, homes that went into foreclosure reached 367,056 which is an increase of 19% since February. This amount is the highest foreclosure number since January 2005 when the first report of foreclosure statistics was first issued. Apparently Obama’s foreclosure help programs do not work. Read the whole article here.

Interest rates have already gone up and according to an assessment by New York Times rates have nowhere to go but up. This is going to cause a lot of pain and problems for consumers. The first thing that will be hit by the increasing rates is the housing market although it has just begun to rebound. The rise in mortgage interest rates will continue and therefore in the next few months it will be highly unlikely for people to take Obama’s refinancing program with a higher rate and thus trigger another wave of a housing crash. Read the whole article here.

http://blessedistruth.wordpress.com/2010/06/01/the-silence-and-solitude-of-animals/#comment-4245

Exactly how indebted one is is important, but it certainly doesn’t tell the whole picture. Any family in America can tell you that.

For example, if you looked at how much debt my husband and I held when we purchased our AZ home in 2007 versus how much debt we held when we purchased our NY home in 1998, you’d see we’re carrying a lot more debt now than then.

But that really doesn’t tell you very much unless you also look at respective levels of income, savings, equity, etc.

The same holds true for our larger American family, We the people. When we speak of our nation-state holding unsustainable levels of debt, we’re really talking about every citizen in this great nation.

As far as I know, there are two ratios we have to look at very closely and over time.

The first is “deficit-to-gdp ratio” or “US Federal Deficit As Percent Of GDP in United States.”

Obviously if you run a deficit every year you will add to total debt. i.e., you’re not paying down the debt. My husband and I aren’t debt free, far from it, but our debt is “sustainable.”

What worries a lot of Americans is that our deficits are too high every year and so “unsustainable.”

See the following:

http://www.usgovernmentspending.com/federal_deficit_chart.html

Federal Deficit As Pct GDP

Fiscal Years 1980 to 2011 Year GDP-US

$ billion Federal Deficit -fed
pct GDP

1980 2788.1 2.65 a
1981 3126.8 2.53 a
1982 3253.2 3.93 a
1983 3534.6 5.88 a
1984 3930.9 4.72 a
1985 4217.5 5.03 a
1986 4460.1 4.96 a
1987 4736.4 3.16 a
1988 5100.4 3.04 a
1989 5482.1 2.78 a
1990 5800.5 3.81 a
1991 5992.1 4.49 a
1992 6342.3 4.58 a
1993 6667.4 3.83 a
1994 7085.2 2.87 a
1995 7414.7 2.21 a
1996 7838.5 1.37 a
1997 8332.4 0.26 a
1998 8793.5 -0.79 a
1999 9353.5 -1.34 a
2000 9951.5 -2.37 a
2001 10286.2 -1.25 a
2002 10642.3 1.48 a
2003 11142.1 3.39 a
2004 11867.8 3.48 a
2005 12638.4 2.52 a
2006 13398.9 1.85 a
2007 14077.6 1.14 a
2008 14441.4 3.18 a
2009 14258.2 9.91 a
2010 14623.9 10.64 b
2011 15299 8.28 b

Legend:

a – actual reported
b – budgeted estimate in US fy11 budget

There’s a very important distinction to be made here. Notice that during the Clinton years we actually had a few good years where we ran surpluses instead of defcits.

But look at the total debt. It kept going up even when we ran surpluses!

And that was okay. Because Clinton grew the economy, i.e., he grew the pie.

Obama, on the other hand, seems to believe that he can tax and spend us back to prosperity.

The second is “debt-to-gdp ratio.”

This is the one that’s got everybody really worried about our future economic viability.

Tuesday, January 12, 2010

US Will Hit 94% Debt to GDP Ratio Next Year, Surpassing the Level Where Debt Starts Reducing Economic Growth

http://www.georgewashington2.blogspot.com/2010/01/us-will-hit-94-debt-to-gdp-ratio-next.html

Ambrose-Evans Pritchard notes:

Fitch expects the combined state and federal debt to reach 94pc of GDP next year, up from 57pc at the end of 2007.

Federal interest costs will reach 13pc of revenues, meaning that an eighth of all taxes will go to service debt.

57pc at the end of 2007 (George W. Bush)

versus

94pc of GDP next year (Barack H. Obama)

That should scare you.

So Art Laffer does us a disservice with his simplistic explanations.

The American people are smart. We get it.

Just the facts.

More later.

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