Due to the economic recession in the United States, the Americans find it very much difficult to get suitable jobs after they complete their education. As such, they are unable to pay off their student loans and are facing financial problems. Student loan debt may cause an economic mess in similarity with the mortgage crisis. As per the study by the National Association of Consumer Bankruptcy Attorneys, the Americans owe more on student loans than on credit cards. The total outstanding loans have exceeded to $1 trillion for the first time in the previous year. The student loan debt is becoming a rising threat to the US economy. It has reached about $870 billion surpassing the credit cards and car loans and these balances are expected to continue rising. [click to continue…]
Michael Barone is usually a pretty level-headed guy. He leans conservative (I think), but not so far that anyone would consider him an extremist. That’s what makes his correction of comments in a recent column all the more frightening.
Here’s Barone in Tuesday’s Washington Examiner:
In my Sunday Examiner column I noted that the national debt currently amounts to 62 percent of gross domestic product and I cited Kenneth Rogoff and Carmen Reinhart’s book This Time Is Different for the proposition that economic growth is impaired when debt reaches 90 percent of gross domestic product. However, it has been pointed out to me (see this paper by Senate Budget Committee Republicans) that these two measures of debt are incommensurate: the 62 percent figure refers to public debt outstanding while Rogoff and Reinhart’s 90 percent refers to total debt. This underlines rather than undermines my point, for total debt now amounts to 95 percent of gross domestic product. We may already be at the danger point, rather than heading there fast.
In other words, forget those five-year predictions of doom. Ignore those ten-year windows. Pay no attention to even longer forecasts.
We’re talking watch out, here it comes, get out of the way before it hits you. We’re talking now.
Craven Republican Senator Mitch McConnell, whose proposed Plan B debt reduction was applauded by more Democrats than fellow Republicans, will no doubt be disappointed to learn that Moody’s has also greeted his concept with something that can best be described as lack of enthusiasm.
A complete lack of enthusiasm, in fact.
Reuters has the unfortunate, but not unexpected information:
A U.S. government backup debt plan to raise the country’s debt ceiling and avoid imminent default could still lead to a downgrade of U.S. ratings in the next year or so, Moody’s said on Tuesday.
Senator Mitch McConnell’s “Plan B,” increasingly seen as a “Plan A” in Washington, would avoid any immediate downgrade of the coveted U.S. triple-A rating, Moody’s analyst Steven Hess told Reuters in an interview.
”But the numbers that are being discussed in terms of any possible deficit reduction coming out of this plan don’t seem to be very large,” Hess said. “Therefore this plan might result in a negative outlook on the rating.”
Hydra was the terrifying, many-headed monster of Greek mythology. When one of the heads was cut off, two new ones sprouted. For our purposes today, class, let’s think of the problems facing the United States economy as the Hydra.
For those of you who may think the use of anything Greek in this situation is an unfortunate error on our part, feel free to go with a Whack-A-Mole analogy. You can swing that hammer all you want, because the mole is going to pop up somewhere else as soon as you do.
Either analogy works to describe the situation in which the United States currently finds itself. And Moody’s just looked down the hole we dug for ourselves and said, “Sure is deep.”
Moody’s Investors Service put the U.S. under review for a credit rating downgrade as talks to raise the government’s $14.3 trillion debt limit stall, adding to concern that political gridlock will lead to a default.
The Aaa ratings of financial institutions directly linked to the U.S. government, including Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks, were also put on review for cuts, Moody’s said in a statement today.
The U.S., rated Aaa since 1917, was put on review for the first time since 1995 on concern the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low, Moody’s said. The rating would likely be reduced to the Aa range and there is no assurance that Moody’s would return its top rating even if a default is quickly cured.
“It certainly underscores the importance of passing the debt ceiling and not putting us in default status, and making sure there’s a longer term fiscal plan to contain spending and the deficit we’ve been running up over the last few years,” said Anthony Cronin, a Treasury bond trader at Societe General SA in New York, one of the 20 primary dealers that trade with the Federal Reserve. “Maybe it’s the impetus to say we’ll need more of a concession.”
Please allow us to translate the phrase “more of a concession”:
“The Americans are about to begin paying through the teeth. We just don’t know if those teeth belong to the Hydra or the mole.”
You literally wouldn’t believe this is possible if you didn’t know it’s actually happening. It just sounds like some kind of Monty Python exploration of the ludicrous.
The Congressional Budget Office has officially warned the President and Congress that our spending has become so reckless that we within ten years we will probably owe outside creditors – we hope you’re sitting down – more than the size of the entire economy.
Go back and read that sentence again because it’s entirely likely that you either didn’t believe it or didn’t comprehend it the first time around.
The CBO predicts a public debt equal to 101% of the economy in 2021. And that’s the good news. They also predict that it could rise to 187% by 2035 unless we do as Carlos Santana suggested and change our evil ways.
The good news, we suppose, is that the United States didn’t make the list. Of course, from our point of view that’s more the result of how screwed up other economies are than any glowing recommendation of our fiscal lunacy.
The countries are ranked in order of the cost to insure each country’s debt. Business Insider admits it may not be a perfect method, but they trust in the market’s ability to judge risk.
The list crosses all economic systems, the poor and the wealthy, communists, socialists, Islamic republics, democracies. But you’ll note that it doesn’t include is any Asian countries.
Today’s forecast: Early morning doom followed by gloom. Bill Gross, the guy known as the Warren Buffett of bonds, the guy who runs PIMCO, the world’s largest collection of bond funds, says the United States is worse off than Greece.
Add it all up, says Gross, and it ain’t a pretty picture: The $14.3 trillion national debt. Medicare. Medicaid. Social Security. A few other trifles. Next thing you know, we owe close to $50 trillion. Add in liabilities from the 2008 and 2009 bailout and what do we have?
Peter Ferrara penned a recent article over at the American Spectator. We think it’s a brilliant analysis of the current and future economic situation. To be completely honest, we think it’s brilliant because it agrees with everything we’ve been saying.
Unfortunately, he foresees an America that’s teetering on the edge of another recession – one that will usher us into an economic death spiral in which our debts overwhelm our ability to continue borrowing:
That is bad enough for a puny, insignificant nation like Greece, where riots increasingly leave the government dysfunctional, with the EU likely to take over the country effectively. But what is the effect when that happens to the world’s supposed superpower? America financed World War II by running up our national debt to its all-time record as a percent of GDP (for now). But that won’t be possible when we have already run ourselves into national bankruptcy.
Our potential military enemies will be quite aware of this historic vulnerability of America. Just as Reagan brought us Peace through Strength, Obamanomics will be inviting War through Weakness. With a 2013 American economic collapse that will also disable the entire West, the world’s uncivilized rogues from Russia, to China, to North Korea, to the Middle East Islamists dreaming of renewed world conquest, will all be tempted probably beyond resistance and reason to strike. They don’t need even to attack the homeland to deal America a decisive defeat. They can just decimate our suddenly overwhelmed allies, from Israel to South Korea to Taiwan to our allies in the Middle East, let alone some even in Europe.
This is one of those unfortunate situations in which we will get absolutely no joy from being able to say, “I told you so.”
Who better than Jim Rogers to know when the system is about the crash than a man whose interests are allied with the Grand Puppetmaster George Soros?
Rogers appeared on CNBC and had no good news:
“The debts that are in this country are skyrocketing,” (Rogers) said. “In the last three years the government has spent staggering amounts of money and the Federal Reserve is taking on staggering amounts of debt.
“When the problems arise next time…what are they going to do? They can’t quadruple the debt again. They cannot print that much more money. It’s gonna be worse the next time around.”
Rogers peers into his crystal ball and sees a very grim future for the world’s largest economy:
“The U.S. is the largest debtor nation in the history of the world,” he said. “The debts are going through the roof. Would you keep lending money to somebody who’s spending money and not doing anything about it? No you wouldn’t.”
The pound sterling lost 90% of its value when it was no longer the world’s reserve currency, he said, and the dollar will, too. In keeping with his philosophy he said he owns the U.S. dollar and is waiting for a rally. “If it doesn’t happen I’ll have to sell and take my losses.”
He called Federal Reserve Chairman Ben Bernanke a “disaster” who has “never been right about anything” since he’s been in Washington. “I hope he doesn’t come back with QE3 but that’s all he knows. The only thing he knows is to print money.”
He predicted that after the Fed ends its quantitative easing program, known as QE2, this month, it may come back under another name.
“They’re gonna bring it back because [Bernanke will] be terrified and Washington will be terrified,” he said. “There’s an election coming in November 2012. Washington’s gonna print more money.”
You’d think we’d be elated to find out that one of the world’s most successful investors agrees with us. But somehow it’s not working out that way.
We’re getting to the point that someone’s going to have to look up what comes after a trillion. We’re not sure what that number is, but we know it has a whole lot of zeroes. Almost as many zeroes as you can find sitting in the United States Congress.
The federal government’s financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows.
USA Today? When a reliably liberal publication like USA Today blows the whistle on a Democrat administration, you know things are going somewhat less than swimmingly.
You know how you sometimes see an event unfolding in what seems to be slow motion and yet you remain frozen in place and unable to react? That’s exactly how the EU is now reacting to the Greek fiscal fiasco.
Unlike its recently deposed leader, the International Monetary Fund is impotent. They’re pretty sure something needs to be done but no one agrees on what. So the Eurocrats have worked up a dandy selection of equally unworkable plans.
We keep hearing that it will be a fiscal Armageddon if Congress doesn’t raise the debt ceiling, that the government will shut down, that we will become a leper nation. But is that true?
Here’s a short, but informative video called “Beyond the Headlines: Understanding the Debt Ceiling” that explains that what you’ve been hearing isn’t necessarily the truth.
Or to put it another way, the pundits don’t know their asses from their elbows.
Informative as this is video is, there is one very amusing moment in it. That’s when it says that one option if the debt ceiling isn’t raised is borrowing from the Fed.
Isn’t that what’s known among drinking men as the hair of the dog that bit you?
Standard and Poor’s still rates U.S. debt as AAA, but as you know they recently downgraded the outlook to negative from stable. That means that if the government doesn’t step up to close the deficit, a ratings cut could happen in two years. Here is their exact comment:
“Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable”
Not that we don’t trust ratings agencies after the financial collapse of 2007, but could it perhaps be even worse than S&P is saying? Martin Weiss, President of Weiss Ratings, thinks so. Decidedly worse. He’s given U.S. sovereign debt a rating of “C.” He told CNBC yesterday:
This morning Standard & Poor’s issued a negative outlook on the current AAA credit rating of the United States, saying that there is a material risk that our leaders in Washington will fail to make adeal to cut our rising budget deficits and debt in any material way.
“We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013. If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.”
Furthermore, while maintaining the US’s AAA rating, they warned that there is a one in three chance that a downgrade is coming if we don’t get our act together — not in the long term, but by 2013.
Why do you have to so negative all the time? Why is your glass half-full? These are the questions I get often from friends. The problem must be that I’m not drinking the Kool-Aid like most of the country. IF you’re reading this blog, you know what I mean. Without the benefit of the Kool-Aid, it’s too easy to clearly see all the effed up things going on in the world and particularly in our own country — and the insanely stupid or socialist leaders in our government.
As for our leaders. the optimists say that the rising tide of the angered citizenry will overthrow the leftist and morons in office, and change will be on the way, righting our ship before it sinks into the sea of history. If we ever get to the point of massive political change, it will be too late — we need leadership now, the congressional numbers and the political will make drastic changes, NOW. But that’s not going to happen — this nation of whinners and as Ayn Rand calls them, looters, won’t give up their goodies and the politicians that deliver them. Yes, you and I would, but not the rest of them.
With moronic leaders in mind, if you don’t know her yet, I’d like to introduce Congresswoman Eddie Bernice Johnson from the once great state of Texas. You see Ms. Johnson doesn’t care that we have no money and are in debt up to our eyeballs. Nope, she doesn’t need to care, because she has something that trumps trillions in debt: she has the vision thing. She can’t articulate it beyond “investing” in research and education, but she’s got it man, she’s got vision! And she knows just who will pay for it.
With people like Johnson in congress, and voters in her district likely to keep her in office for life, it’s no wonder you and I are not very optimistic about our future.
R. Arthur Beckles: Barack Obama is President of all Americans, not just of African-Americans! It’s difficult for all working class Americans – black, white, brown, etc. African-Americans who don’t want to vote for Obama, can feel free to do so. But do they think that their lot...
keith: wow. Whos got the bigger stick, My @!(k is bigger than yours, your country my country, my countries poor is richer than yours. the truth of it is that in the end the civilians are going to feel the brunt of this economic downfall. i live in the U.S. and there are over 200 multi...
Anonymous: I agree with many of the above. I know people from both the US and Europe that are on disability because of health problems and the one person in Europe is receiving much more help than are the US citizens.
Sunday: BTW, before you ask why two adults only received $240 a week for unemployment, just remember that you can only receive unemployment if you were laid off. If you were fired or quit, you cannot receive unemployment. In my case, I got ill, and FMLA only applies to people who have worked at a...
EriktheRed: I like how it’s “fortunate that the crisis is confined to the E.U.”- what’s unemployment in the U.S. right now? How about the millions of foreclosures you’ve had already? Tent cities, anyone? Deficit spending at $3.5 bn a DAY? HMM!
David, Self Defense Retailer: Really? Why in the world are they doing that for Gitmo detainees? A whole soccer field? Outrageous! Maybe the EU really won’t last.
David, Stun Gun Supplier: It’s the next bubble. I wonder what Romney has to say about this. Obama’s made himself clear in his typical way. It’ll probably be worse than housing when it does.
See I told you: Who didn’t see this coming . Put a communist organizer in the White house and just wait. To bad the American populace lacks true intellect or is it just that the dummies out number the smart 20 to 1. Probably the latter. Obvious who controlls the vote with those kind of...
James: After a seriously obese person has had fat removal procedures, his/her flesh sags where excess fat used to be. World population should never have risen this high. It will be reduced. Through lower birth rates; or by more traditional means: war, disease, famine, cannabalism. I’m not a...
JoAnn: I have a real problem with Obama borrowing money to send to Greece when so many people in this country who have lost long term jobs,lost homes,living on the street, little or no food. I vote to take Obama and his family if they want to go and DROP them on a desert island some where just so...
Arkansas Slim: Update. Oil hit 105 per barrel yesterday, 2 20 12. Gas US Avg => 3.50 per gallon. Cloward Piven Theory of Economics: Tipping point of US Electorate => 51%. Nevada odds for Obama RE Election 6/10 on thier sport boards. EU/Greece set to collapse, dominos arranged. Socialistic...
kkl: America is now turning mediocre no more fun no more trips or vacations 100 bucks to fill gas tank and pasta and ramen noodles for life for usa there is no more hope no more fun just work go home work go home fill up gas tank eat shit and work no more fun thanks for nothing nobama i hope you...
Chris Marshall: Hi Janice, I just wanted to know, how would you be able to get a good investment out of the Whole Life Insurance if it costs really high? The projections usually given out by “Financial Advisors” that 12% is the usual earnings specially if it is invested in TSX or NYX...
Agent: Walt Disney funded Disney World by using the cash value in his whole life policy. You can’t say that was a mistake. Buy term for a specific need/period and buy whole for a permanent need or if you need your life insurance past age 65.
Forex Agent: As a financial advisor what I tell clients is that the main purpose of a life insurance policy is to provide a death benefit. Whether term, some sort of permanent life insurance, or a combination of the two is most appropriate depends on a number of factors including the...
Cindy: Before long they will, if not already, invade and keep track of everything you do including the privacy of your own home exploiting you and demanding that you worship them. You will be powerless to control it so you will have two choices…… ;kiss butt or commit suicide.
Space Cadet: don’t be rediculous. Glass Steagall is a red hearing. This problem is much farther reaching, from before the Nixon Administration. He took the US off the gold standard which was the pillar of the US dollar, and the reason it is the world currancy. He did that because the US...
Hervy: Very good advice, same as I give when talking to people. Clark Howard and Dave Ramsey are both good sources of information that is inline with what is written here at EC. Another good website that i tell people to go to in order to get an easy calculation of how much insurance to buy is...
BenP: This is part of the cannon fodder that will be used against Obama in 2012 and his administration. It’s not that he is horrible (he is) or worse than any other President (about the same), its that examples like these can be used to show the devil you know has got to be worse than the...
Lauren: Personally I think you sound like an idiot. The NIH spent 55,000 to promote a vacine that does not exist and, one of which, they would not fund to discover in the first place(yes, it’s ture look it up). If someone lives in an area with a lot of storms they already understand the...
Matt USA: I know I’m a little late to this discussion, but I think that the economic collapse scenario has changed somewhat in recent weeks. It appears that Europe will go first, followed by the United States who has gambled and lost on a TARP style European bailout. The real question for...
Kim: Marcy, Rep. Alan Grayson said in the attached youtube video in 2010 that Fannie Mae and Freddie Mac both own stock in MERS. How much stock and when did they own it? Would this explain their current actions? Did they move loans out of MERS and into Fannie Mae for the tax payers to bail out?...
China: @Serban Enache , You Are Wrong We are In Lot Of Trouble and you Know This , Starting In 2012 We will have Many Many Different Problems , We The Government Is Paying For All This Building , We Know Our Own Citizens Can’t Afford This Type Of Live Style , but we are building it Any way...
City On a Shining Hill: “The problem with socialism, i.e., the failed economic system being adopted by so many nations in the world today, is that in funding entitlement programs voters want in their politicians and having governments fund retirement, health care, education, etc, is that...
Rider I: How the US has historically used mineral rushes to get it out of Deficits and stop foreign economic take over. In the US’s historical past the Druids have used and impressed upon the US leadership to use mineral resources to stop economic warfare, along with military take over....
Financial Collapse: Everyone needs to get this correct… (REPOST ON TWITTER, FACEBOOK) America is controlled by the 3 privately owned states (district of columbia, the city of london, and the vatican.) Each has it’s own flag, pays no taxes and has it’s own laws. All 3 are part of...
Tm Newman: I graduated with my B.A. in psych/soc a year ago. Interned teaching math and English to fourth and seventh graders. The school shut down due to lack of funding. All the kids got shipped off to public school. I can’t find a position in my field, and there are no teaching jobs in...
hefsmaster: Been a slow couple weeks since the downgrade. News wise that is. But it gave me more time to coin a phrase. You’re a true libertarian when you piss everybody off. Which explains why everybody thinks were nuts and relegated to being a third wheel in politics. Well call me and...
PeacefulPatriot: The worst is yet to come in the realm of austere measures to keep up appearances on the global markets. The truth though is quite obvious to the sane members of society, we have reached a break point and it is the Systemic collapse of the post-industrial globalization bubble. All...
Serban Enache: Pearl Harbos was orchestrated as an operation years before WW2, by the British empire in conjunction with Imperial Japan. The japanese elite didn’t surrender even when they did not have any hope of wining, let alone after Hiroshima, though I don’t agree with the two...
hefsmaster: No, despite these guys obvious failings. He is exactly right. You think japan would have attacked us without any allies. Pearl harbor is an effect from a cause. Without hitler, point is mute. By the way lee, you haven’t copied anything in a while. You a congressman?
Serban Enache: This Larry Summers has some nerve. Is he trying to say that Hitler attacked Pearl Harbor?
Gordon Shumway: Two questions: 1. Why is it a felony for an individual to print money, but evidence of a keen insight into the arcane world of macroeconomics when a bankster does the same thing, only on a vastly greater scale? 2. Since those who are running the Fed and Treasury are supposed to be...
tim: i for one will not pay a single dr bill my sickness is caused by our government let’s take it back already raped and brusied lady liberty is not what she stood for so many years lets scrap the statue that means so little any more freedom is prison in america try being disabled for 20...
tim: well about time someone in power noticed what wool us seniors have to face daily after food shopping go to my drug store same tricks and and cost is up 25 percent then dr co-pays up another 20 % what will we do when money social security doesnt go far enough to keep us healthy
Space Cadet: Does it matter how we got here? The people in charge ‘think’ they are so smart that they will finesse our way out, while staying in power and making a ton of money for their pals. We will be left to pick up the tab and clean up the mess, as usual. My neighbors just got...