Listen to this week’s “The Financial Physician” radio show. -Lou
Click on the upper right corner PLAY arrow on player as the middle PLAY arrow is not working.
Listen to this week’s “The Financial Physician” radio show. -Lou
Click on the upper right corner PLAY arrow on player as the middle PLAY arrow is not working.
Sorry for the lack of posts recently, tax season demanded my time. I would avoid Municipal Bonds like the plague. Some economic recovery.-Lou
Fed’s Dudley Warns about Wave of Municipal Bankruptcies
by Wolf Richter, Wolf Street
It has been a persistent ugly list of municipal bankruptcies: Detroit, MI; Vallejo, San Bernardino, Stockton, and Mammoth Lakes, CA; Jefferson County, AL. Harrisburg, PA; Central Falls, RI; Boise County, ID.
There are many more aspirants for that list, including cities bigger than Detroit. Detroit was the test case for shedding debt. If bankruptcy worked in Detroit, it might work in Chicago. Illinois Gov. Bruce Rauner wants to make Chapter 9 bankruptcies legal for cities in his state, which is facing its own mega-problems.
“Bankruptcy law exists for a reason; it’s allowed in business so that businesses can get back on their feet and prosper again by restructuring their debts,” Rauner said. “It’s very important for governments to be able to do that, too.”
His plan for sparing Illinois that fate is to cut state assistance to municipalities, which doesn’t sit well with officials at these municipalities. Chicago Mayor Rahm Emanuel’s office countered that balancing the state budget on the backs of the local governments is itself a “bankrupt” idea.
Puerto Rico doesn’t even have access to a legal framework like bankruptcy to reduce its debts, but it won’t be able to service them. It owes $73 billion to bondholders, about $20,000 per-capita – more than any of the 50 states. If you own a muni bond fund, you’re probably a creditor. Bond-fund managers use its higher-yielding debt to goose their performance. But now some sort of default and debt relieve is in the works. The US Treasury Department is involved too.
“People before debt,” the people in Puerto Rico demand. It’s going to be expensive for bondholders.
That’s the ugly drumbeat in the background of New York Fed President William Dudley’s speech today at the New York Fed’s workshop, “Chapter 9 and Alternatives for Distressed Municipalities and States.”
“We at the New York Fed are committed to playing a role in ensuring the stability of this important sector,” he said, referring to the sordid finances of state and local governments. But he wasn’t talking about future bailouts by the Fed. He was issuing a warning to municipalities and their creditors about “the emerging fiscal stresses in the sector.”
It’s a big sector. State and local governments employ about 20 million people – “nearly one in seven American workers.” The sector accounts for about $2 trillion, or 11%, of US GDP. And its services like public safety, education, health, water, sewer, and transportation, are “absolutely fundamental to support private sector economic activity.”
Speaking at the National Press Club, Mr. Koskinen pleaded with more money, saying a budget boost would help them staff their overwhelmed customer service lines. He also said it would help reverse staffing cuts in their compliance division, where he said the government will lose $2 billion this year in money it would otherwise have been able to collect if it had better staffing.
Congress has cut or held the agency’s funding static for several years now, with lawmakers deeming the agency recalcitrant in solving problems, and unrepentant for having targeted tea party groups for intrusive scrutiny.
The poor customer service is growing worse at the agency. Just a couple of weeks ago Mr. Koskinen had said they were answering 43 percent of phone calls, so dropping below 40 percent suggests things have deteriorated as the April 15 tax deadline nears
The age of privacy is over welcome to 1984 and The Brave New World.-Lou
All of the Ways Big Brother Is Watching You
Privacy as we once knew it is dead. We now find ourselves in the unenviable position of being monitored, managed and controlled by our technology—specifically the technology employed by the government against the American citizenry. As a result, warns John W. Whitehead in this week’s vodcast, we are becoming a nation where even the most virtuous citizen risks becoming an outlaw.
College has become a national scam.-Lou
Every young person should see the Fed’s startling numbers on student debt
March 30, 2015
Sovereign Valley Farm, Chile
What I’m about to tell you is not my own opinion or even analysis. It’s original data that comes from the United States Federal Reserve and national credit bureaus.
The rest—nearly 2 out of 3—are either behind on payments, in all-out default, or have entered some sort of deferral program to delay making payments, with a small percentage still in school.
It’s pretty obvious that this is a giant, unsustainable bubble (more on this below). But even more important are the personal implications.
University graduates now matriculate with tens of thousands of dollars worth of debt.
Debt is another form of servitude. Like medieval serfs, debt keeps people tied to jobs they dislike in places they don’t want to be working for bosses they hate doing things that make them feel unfulfilled.
Debt makes it very difficult to walk away and start fresh.
In fact, ‘starting fresh’ is almost legally impossible when it comes to student debt. Even in US bankruptcy court, student debt cannot be discharged in almost all cases.
It is an albatross that hangs over you for a decade or more if you do make the payments, and it follows you around for the rest of your life if you do not.
(I’m not suggesting anyone default on what they owed—simply pointing out that nearly every other form of debt can be discharged EXCEPT for student debt.)
his kind of debt has a huge impact on people’s lives.
Again, according to the Federal Reserve, “[G]rowing student debt has contributed to the recent decline in the homeownership rate and to the sharp increase in parental co-residence among millennials.”
So the Fed’s own analysis shows that student debt is a cause for people in their 20s and 30s to live at home with their parents. Amazing.
This certainly hollows out the argument that a university degree is a one-way ticket to a higher salary, brighter future, and better standard of living.
Look, I’m not going to try to tell you that a university education is worthless or a cruel joke.
Excellent article on how and why we are being lied to everyday buy the government when it comes to the economy.-Lou
Why U.S. Economic ‘Statistics’ Get More and More Absurd – Jeff Nielson – Sprott Money News
Many recent commentaries have noted a distinct devolution in the numerical lies which the U.S. government calls its “economic statistics”. Numbers which used to be mere exaggerations (i.e. used to somewhat mirror the real world) have now become literally perverse: opposite to reality.
As U.S. “retail sales” collapsed at the end of last year (and now into this year) with a string of negative numbers; we’re told that somehow U.S. “consumer spending” surged by 4.3% in the fourth quarter of 2014, something which is mathematically impossible, since the two numbers must mirror each other.
With the U.S. economy showing even more obvious weakness than in previous years of this fantasy “recovery”; we’re supposed to believe that the U.S. economy just enjoyed its strongest quarters of growth in well over a decade. The economic lies are not merely far-fetched, they are totally ludicrous.
This begs the question: why pervert these “statistics” to such silly extremes? The answer will come immediately to readers the moment they turn on their business news, and hear about yet more “record highs” in the U.S.’s bubble-markets.
At this point; it’s necessary to turn the attention of readers to the themes of two previous commentaries which are of particular significance. The first commentaryconcerns the method by which all our markets are marched up and down like yo-yo’s, in near-perfect synchronicity – something which is absolutely/mathematically impossible in legitimate markets. Indeed, even in “rigged” markets there is only one means by which these markets can be led-by-the-nose, ever hour of every day: via a computerized Pied Piper.
The second commentary of note concerns the most likely time these bubble-markets will be torpedoed, allowing the sheep to be fleeced, and allowing Warren Buffett to ‘invest’ his hoard of money, which is now well in excess of $60 billion. Even in the Wonderland Matrix; no bubbles can be inflated forever. At some point the bubbles must be “popped”, or they will simply burst on their own – in an uncontrolled/uncontrollable manner.
The premise of the second commentary is that the U.S. 2016 election cycle the most likely time for the One Bank to engage in its bubble-bursting/sheep-shearing orgy. It’s also precisely the same pattern in which these financial psychopaths have engaged in the last, two great bubbles they manufactured: the dot-com bubble, and the even larger (and much more-fraudulent) U.S. housing bubble, where the preordained crashes also matched the U.S. election cycle.
The reason why this Old World Order likes to stage its crashes at the end of U.S. presidencies is both simple and obvious. Despite the fact that the bankers control both halves of the U.S. Two-Party Dictatorship (and have controlled them for over a century); the binary-minded Zombies of the U.S. population still suffer from the delusion that they are being given “a choice”.
Given this mentality; the timing of these “crashes” becomes elementary. The bubbles are burst near the end of one presidency, in order that the mouthpieces of the Corporate media can demonize that outgoing president as the villain/scapegoat – while the stooge representing the other half of the dictatorship is depicted as some sort of White Knight, riding to the rescue. In practical terms; it’s nearly identical to the system of government of the old, Soviet Union.
That’s “the Plan”. But standing squarely in the way of the plan is economic reality. And the “reality” is there has been no “economic growth”, and no “new jobs”, in this never-ending/non-existent “recovery”. Thus the extreme, teetering bubbles of (in particular) U.S. equity markets never had any substance, except for the Federal Reserve’s money-pump.
Another great piece from Michael Snyder.-Lou
33 Strange Facts About America That Most Americans Would Be Shocked To Learn
Michael Snyder, Economic Collapse Blog
Did you know that about one-fourth of the entire global prison population is in the United States? Did you know that Apple has more money than the U.S. Treasury? Did you know that if you have no debt and also have 10 dollars in your wallet that you are wealthier than 25 percent of all Americans? Did you know that by the time an American child reaches the age of 18, that child will have seen approximately 40,000 murders on television? There are some things that are great about the United States, and there are definitely some things that are not so great. Once upon a time we were the most loved and most respected nation on the entire planet, but those days are long gone.
We have wrecked our economy, we have lost our values and we have fumbled away our future. But if you look close enough, you can still see many of the things that once made this country a shining beacon to the rest of the world. This article includes some weird facts, some fun facts, but also some very troubling facts. It has been said that a spoonful of sugar helps the medicine go down, and hopefully as people enjoy reading the fun facts in this article they will also take note of the more serious facts. If we are ever going to change course as a nation, we need to come to grips with just how far we have fallen.
The following are 33 strange facts about America that most Americans would be shocked to learn…
#1 The amount of cement that China used from 2011 to 2013 was greater than the total amount of cement that the United States used during the entire 20th century.
#2 In more than half of all U.S. states, the highest paid public employee in the state is a football coach.
#4 Almost half of all Americans (47 percent) do not put a single penny out of their paychecks into savings.
#5 In 2014, police in the United States killed 1,100 people. During that same year, police in Canada killed 14 people, police in China killed 12 people and police in Germany didn’t kill anyone at all.
#7 Alaska has a longer coastline than all of the other 49 U.S. states put together.
#8 The city of Juneau, Alaska is about 3,000 square miles in size. It is actually larger than the entire state of Delaware.
I touched on this during this week’s radio show.-Lou
10 Charts Which Show We Are Much Worse Off Than Just Before The Last Economic Crisis
If you believe that ignorance is bliss, you might not want to read this article. I am going to dispel the notion that there has been any sort of “economic recovery”, and I am going to show that we are much worse off than we were just prior to the last economic crisis. If you go back to 2007, people were feeling really good about things. Houses were being flipped like crazy, the stock market was booming and unemployment was relatively low. But then the financial crisis of 2008 struck, and for a while it felt like the world was coming to an end.
Of course it didn’t come to an end – it was just the first wave of our problems. The waves that come next are going to be the ones that really wipe us out. Unfortunately, because we have experienced a few years of relative stability, many Americans have become convinced that Barack Obama, Janet Yellen and the rest of the folks in Washington D.C. have fixed whatever problems caused the last crisis. Even though all of the numbers are screaming otherwise, there are millions upon millions of people out there that truly believe that everything is going to be okay somehow. We never seem to learn from the past, and when this next economic downturn strikes it is going to do an astonishing amount of damage because we are already in a significantly weakened state from the last one.
For each of the charts that I am about to share with you, I want you to focus on the last shaded gray bar on each chart which represents the last recession. As you will see, our economic problems are significantly worse than they were just before the financial crisis of 2008. That means that we are far less equipped to handle a major economic crisis than we were the last time.
#1 The National Debt
Just prior to the last recession, the U.S. national debt was a bit above 9 trillion dollars. Since that time, it has nearly doubled. So does that make us better off or worse off? The answer, of course, is obvious. And even though Barack Obama promises that “deficits are under control”, more than a trillion dollars was added to the national debt in fiscal year 2014. What we are doing to future generations by burdening them with so much debt is beyond criminal. And so what does Barack Obama want to do now? He wants to ramp up government spending and increase the debt even faster. This is something that I covered in my previous article entitled “Barack Obama Says That What America Really Needs Is Lots More Debt“.
#2 Total Debt
Over the past 40 years, the total amount of debt in the United States has skyrocketed to astronomical heights. We have become a “buy now, pay later” society with devastating consequences. Back in 1975, our total debt level was sitting at about 2.5 trillion dollars. Just prior to the last recession, it was sitting at about 50 trillion dollars, and today we are rapidly closing in on 60 trillion dollars.
#3 The Velocity Of Money
When an economy is healthy, money tends to change hands and circulate through the system quite rapidly. So it makes sense that the velocity of money fell dramatically during the last recession. But why has it kept going down since then?
Today I discuss The Federal Reserve’s muddled statement on when they are going to raise rates. Boy they have painted themselves into the corner.-Lou