Tag: debt

THE TRUTH ABOUT JOBS IN FOUR CHARTS

If you are visually oriented, the four charts below will explain all you need to know about our “strong” job growth. LF stands for Labor Force. The BLS decides whether you are in the labor force or not, based upon whatever their politician bosses tell them to report. If you have been out of work for too long, you’re not in the labor force. If you have been turned down for 50 job openings and have thrown in the towel, you’re not in the labor force. If you take a $40,000 Obama student loan and enroll at the University of Phoenix in Transgender Studies, you’re not in the labor force.

Far more working age Americans are leaving the workforce than getting jobs.

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Wall Street and the Military are Draining Americans High and Dry

Guest Post by William Edstrom

The United States (US) government often cites $18 trillion as the amount of money that they owe, but their actual debts are higher. Much higher.

The government in the USA owes $13.2 trillion in US Treasury Bonds, $5 trillion in money borrowed by the US Federal government from Federal government trust funds like the Social Security trust fund, $0.7 trillion for state bonds issued by the 50 states, $3.7 trillion for the municipal bond market (US towns, cities and counties), $1.97 trillion still owing by Freddie Mac and Fannie Mae, mostly for bad mortgages in years gone by, $6.23 trillion owed by US government authorities other than Fannie Mae and Freddie Mac, $1.04 trillion in loans taken out by the US Federal government (e.g. government credit card balances, short term loans) and $0.63 trillion in loans owed by government authorities (e.g. their government credit card balances, short term loans). As of April 1, 2015, according to the Federal Reserve Bank’s Financial Accounts of the US report, the government in the USA has $32.77 trillion in debt excluding unfunded government pension debts and unfunded government healthcare costs

Debt is money that has to be paid. The government in the USA also has to pay $6.62 trillion for unfunded pension liabilities, as of April 1, 2015. There are thousands of government pension plans in the USA (e.g. County, State, Teacher’s, Police). The Federal Employees Pension Plan is now short $1.9 trillion according to the Fed’s March 2015 statement plus $4.7 trillion in unfunded state and municipal pension liabilities according to State Budget Solutions which calculates on actual pension returns (approx. 2.5% per year from 2009 to 2014, instead of the fantasy ‘assumption’ of an 8% return used by the Fed to guesstimate pension fund money). The largest governmental pension fund in Puerto Rico ran out money (became insolvent) in 2012 and the government now has to pay $20.5 billion for that. Pension contributions into government pension plans have been less than what these pension plans pay out to retirees which is why the government was short by $6.62 trillion for government pensions as of April 1, 2015.

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WHY WE NEED TO LIE TO OURSELVES ABOUT THE STATE OF THE ECONOMY

by Satyajit Das for The Sydney Morning Herald

Like the characters in Samuel Beckett’s Waiting for Godot, the world awaits the return of wealth and prosperity. But the global economy may be entering a period of stagnation.

Over the last 35 years, the economic growth necessary to increase living standards, increase wealth and manage growing inequality has been based increasingly on rising borrowings and financial rather than real engineering. There was reliance on debt-driven consumption. It resulted in global trade and investment imbalances, such as that between China and the US or Germany and the rest of Europe.

Everybody conspires to ignore the underlying problem, cover it up, or devise deferral strategies to kick the can down the road.

Citizens demanded and governments allowed the build-up of retirement and healthcare entitlements as well as public services to win or maintain office. The commitments were rarely fully funded by taxes or other provisions.

The 2008 global financial crisis was a warning of the unstable nature of these arrangements. But there has been no meaningful change. Since 2007, global debt has grown by US$57 trillion, or 17 per cent of the world’s gross domestic product. In many countries, debt has reached unsustainable levels, and it is unclear how or when it is to be reduced without defaults that would wipe out large amounts of savings.

Imbalances remain. Entitlement reform has proved politically difficult. Financial institutions and activity dominate many economies.

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We Are All Preppers Now

Via The Mises Institute,

Damian McBride is the former head of communications at the British treasury and former special adviser to Gordon Brown, erstwhile Prime Minister of the U.K. Yesterday he tweeted some surprising advice in response to the plunge in global equities markets.;

Advice on the looming crash, No. 1: get hard cash in a safe place now; don’t assume banks & cashpoints will be open, or bank cards will work.

 

Crash advice No. 2: do you have enough bottled water, tinned goods & other essentials at home to live a month indoors? If not, get shopping.

 

Crash advice No. 3: agree a rally point with your loved ones in case transport and communication gets cut off; somewhere you can all head to.

Evidently, McBride interprets the wipe-out of over $3 trillion in total global market cap during the three-day rout as a prelude to a much broader and deeper financial crash that will precipitate civil unrest.

 

Damian McBride @DPMcBride

Just like mid-October last year, the market howls; the Fed panics & puts the dummy back in; and we all pretend it’s OK again. It’s madness.

Damian McBride @DPMcBride

Every day the era of easy borrowing persists just means even more loans that won’t be repaid when the real crash finally comes.

Damian McBride @DPMcBride

Today is just the stock market catching up with the terror over defaults that’s been gripping the bond market for months.

According to McBride,

We were close enough in 2008 and what’s coming is on 20 times that scale.


COPS – SHAKEDOWN ARTISTS FOR THE STATE

This has been sticking in my craw since yesterday morning, so I’ll get it off my chest. I was driving to the Post Office at 10:00 am on Bustard Road. It’s a fairly rural two lane road, with wide shoulders, virtually no pedestrian traffic, and it’s not considered dangerous or hazardous. The speed limit is set at 35 mph, which is too low. Most traffic flows at 40 to 45 mph with no increase in danger to anyone. As I proceeded up the hill towards Sumneytown Pike there was one of Towamencin’s finest partially blocking the right lane with their turbo-charged brand new police car flashing its lights. He had pulled over a middle aged man in a newer pickup truck and was writing a speeding ticket.

This working class guy was probably headed to Wawa to get a coffee and a breakfast sandwich or to Lowes to get some materials for a home construction project. He was minding his own business, safely cruising along at 45 mph like hundreds of other cars do per day on that road. Now he was being shaken down by a cop, collecting revenue to sustain the bloated government budget of Towamencin. His Saturday morning trip probably got $100 more expensive. The sight irritated me, as cops increasingly become nothing more than intimidating revenue producers with guns.

On my way home I knew where to look. There was the government lackey parked on a side street out of the view of cars coming in both directions, waiting for his next victim. He wasn’t protecting the citizens of Towamencin from reckless drivers. He was adding no benefit whatsoever to society. He was nothing but a blood sucking parasite, generating dollars to pay his department’s bloated government salaries, benefits and pensions. This entire episode pissed me off, so I decided to do a little research and understand what my taxes are supporting.

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Funds For Fracking Finally Dry Up: One Last Hail Mary Pass Remains

Shale oil trades at a $13 discount to WTI. I wonder how many frackers can stay in business getting $29 for a barrel of their oil? They weren’t making profits at $100 per barrel. This is going to be an epic collapse. Wall Street is about to take it up the yazoo. The defaults, bankruptcies, and layoffs will be huge. So solly. The shale oil miracle was nothing but a debt financed Ponzi scheme.

Tyler Durden's picture

Submitted by Tyler Durden on 08/17/2015 09:58 -0400

Is Saudi Arabia on the verge of winning the war on US Shale firms? It appears the spigot of malinvestment-subsidizing liquidity that kept numerous zombie energy firms alive has been shut off almost entirely. As oil prices return to cycle lows, so credit risk has spiked to record highs and issuance of life-giving bonds has collapsed. As Reuters reports, this has opened up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks’ slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow.

 

Credit risk has soared back to record levels…

 

As public market demand for this sector has collapsed…

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Guess What Happens Next

Courtesy of Keith Dicker of IceCap Aset Management

Well, if you’re not Greeked-out by now you should be. After all, the Greek debt crisis has been spinning in and out of control for 5 years and counting.

Why should it be any different this time?

Everyone knows there is no way on this earth that Greece will ever be able to repay these debts. Unless the Greek economy can grow faster and longer than it has ever grown before, AND it can avoid the political temptation to never again spend more money than it collects in taxes – then just maybe it stands a chance of paying off some of the over $400 Billion it owes.

In today’s age of money printing, negative interest rates, and bank bailouts, many have become somewhat desensitized to “billions” and “trillions”. Yet, we assure you $400 billion for Greece is a lot of money.

For perspective, Australia owes about $1.3 trillion in various loans. If Australia suddenly entered a debt crisis on the same scale as Greece, its debt owing would skyrocket to nearly $2.5 trillion, or put another way – about $106,000 for every man, woman and child.

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The Chinese Growth Engine is Sputtering

Guest Post by Jeff Desjardins

By the turn of the millennium, China was the sixth most productive nation in the world with a GDP comparable with France or Italy at US$1.2 trillion.

Economic growth didn’t stop there, and GDP increased ten-fold over the last fifteen years to surpass US$10 trillion. In “real” terms using PPP, China is now actually the largest economy in the world.

The rest of the world has benefited extensively from China’s coming out party. Cheap products flooded the shelves of the developed world, and China bought the world’s raw materials when no one else wanted them. Unfortunately, every good time must come to an end.

A Sputtering Chinese Economy

It hasn’t exactly been a secret that China’s economy has been slowing. The above radar graph from a research note by Credit Suisse shows that the economic news out of China has been tough to swallow as of late. Today, China rattled global markets even further by announcing a devaluation of the yuan by 1.9% to combat poor exports, which fell by 8.3% in July. This is the country’s largest currency devaluation since 1994.

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The True Cause Of Greece’s Economic Failure——An Omnivorous State, Not Lazy Workers

Guest Post by

In the course of the Greek crisis, animosities between creditor countries like Germany and Greece didn’t take long to surface. They were fired up in the tabloid press, which was quick to revive various stereotypes. In Greece, Germans soon found themselves compared to their Nazi predecessors, while German tabloids inter alia complained sotto voce about those allegedly “lazy Southerners”.

 

lazy GreekThe stereotype of “lazy Greeks”

 

This complaint seemed only natural, after all, everybody knows how hard-working Germany’s citizens are compared to the siesta-prone indolent slackers inhabiting assorted Mediterranean shores, right? Not so fast, said economists. OECD studies show that the average Greek worker toils for 2,017 hours per year, the by far highest figure in Europe.

 

siestaMore stereotyping …

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The 2015 Untrustworthies Report——Why Social Security Could Be Bankrupt In 12 Years

Guest Post by

The so-called “trustees” of the social security system issued their annual report last week and the stenographers of the financial press dutifully reported that the day of reckoning when the trust funds run dry has been put off another year—-until 2034.

So take a breath and kick the can. That’s five Presidential elections away!

Except that is not what the report really says. On a cash basis, the OASDI (retirement and disability) funds spent $859 billion during 2014 but took in only $786 billion in taxes, thereby generating $73 billion in red ink.  And by the trustees’ own reckoning, the OASDI funds will spew a cumulative cash deficit of $1.6 trillion during the 12-years covering 2015-2026.

So measured by the only thing that matters—-hard cash income and outgo—-the social security system has already gone bust. What’s more, even under the White House’s rosy scenario budget forecasts, general fund outlays will exceed general revenues ex-payroll taxes by $8 trillion over the next twelve years.

Needless to say, this means there will be no general fund surplus to pay the OASDI shortfall. Uncle Sam will finance the entire $1.6 trillion cash deficit by adding to the public debt. That is, Washington plans to make social security ends meet by burying unborn taxpayers even deeper in national debt in order to fund unaffordable entitlements for the current generation of retirees.

The question thus recurs. How did the untrustworthies led by Treasury Secretary Jacob Lew, who signed the 2015 report, manage to turn today’s river of red ink into another 20 years of respite for our cowardly beltway politicians?

They did it, in a word, by redeeming phony assets; booking phony interest income on those non-existent assets; and projecting implausible GDP growth and phantom payroll tax revenues.

And that’s only the half of it!

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The World Economy in One Visualization

If itsy bitsy pie slice – Greece (.33%) – can create this much worldwide economic havoc because of their unpayble level of debt, imagine what will happen when the truth is revealed about France (3.81%), Italy (2.88%), and Spain (1.88%). China’s (13.9%) entire economic model has been built upon debt and the world consuming their output. The world has run out of money to consume their shit. Japan (6.18%) is in the midst of a demographic and debt death spiral. The U.S. (23.32%) is living on borrowed time and the continued dominance of the USD. How long will it last? We are inhabiting in a world stacked with TNT run by monkeys with matches.

Courtesy of: Visual Capitalist
Today’s data visualization is the most simple breakdown of the world economy that we’ve seen. Not only is it split to show the GDP of dozens of countries in relation to one another based on size, but it also subtly divides each economy into its main sectors: agriculture, services, and industry. The lightest shade in each country corresponds to the most primitive economic activity, which is agriculture. The medium shade is industry, and the darkest shade corresponds to services, which tends to make up a large portion of GDP of developed economies in the world economy.To take it one step further, the visualization also shades the countries by continental geography, to easily see the relative economic contributions of North America, Europe, South America, Asia, Oceania, and Africa.

Risky Loans Are ‘Driving’ US Auto Sales: 3 Charts

Tyler Durden's picture

Submitted by Tyler Durden on 07/11/2015 17:00 -0400

To be sure, we’ve made no secret of our views on the state of the US auto market.

This year, we’ve written extensively about the proliferation of subprime lending, worrisome trends in average loan terms, and, most recently, we noted the astounding fact that in Q4 2014, the average LTV for used vehicles hit 137%.

We presented what perhaps marked our most unequivocal statement to date on why the market looks dangerously frothy in “Auto Sales Reach 10 Year Highs On Record Credit, Record Loan Terms, & Record Ignorance.” In that post, the absurdities plaguing the US auto market were laid bare for all to see. Here’s a recap:

 

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