Federal Reserve Governor Kevin Warsh told an audience on Friday that the U.S. economy is in the midst of a cyclical recovery and that there are “encouraging” signs of improvement in financial markets. Many other governmental and media talking heads have uttered similar pronouncements about a “recovery” which will put the U.S. economy back on track. But are we really experiencing a recovery? If so, then why are foreclosures still hitting record levels? Why is unemployment so high? Why are so many cities and states on the verge of bankruptcy? Why are so many average Americans hurting so much? The truth is that what we are experiencing now is a period of stabilization before the “second dip” of the double-dip recession so many economists have been talking about hits. What the U.S. economy is actually in the midst of is a complete and total structural failure. The American Dream is going to permanently die for millions of American families. Millions more are going to lose their jobs and millions more are going to lose their homes. This is what we get for piling up the biggest mountain of debt in the history of the world and outsourcing much of our manufacturing and industry to places like China and India. Now we are an aging, bloated dinosaur trying to survive on a service economy and the biggest debt bubble of all time.
It would be great if we could experience at least a temporary economic recovery, because very few people are ready for a total economic meltdown right now. Most of us still need more time to prepare for what is ahead. But unfortunately almost all of the recent economic news is bad.
The following are 14 pieces of really bad news for the U.S. economy….
#1) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March. This represented an increase of almost 19 percent from February, and it was also an increase of nearly 8 percent from March 2009. In fact, the number for March 2010 was the highest monthly total since RealtyTrac began issuing its report in January 2005. That is really, really bad news for the real estate industry.
#2) And yet things are expected to get even worse for the housing market. RealtyTrac projects that there will be 4.5 million home foreclosures before the end 2010. If you figure that there are approximately 4 people per household, that is another 18 million people that will be forced out of their homes by the end of the year.
#3) Interest rates have already gone up, and most experts forecast that they will continue to increase throughout the rest of 2010 and into 2011. This is going to make existing adjustable mortgages more expensive, and this will also make it even harder for home buyers to purchase a home. Needless to say, this is likely to put significant downward pressure on housing prices.
#4) It turns out that the much celebrated foreclosure assistance program introduced by Barack Obama and the Democrats last year is helping very, very few mortgage holders, and the default rates for those who have managed to receive help are still very high. From all appearances it seems as though the U.S. government is unable to do very much at all to turn around the real estate market.
#5) The unemployment crisis continues to get worse. The number of unemployed Americans per job opening has started to increase again, hitting 5.5 in February. There just are not nearly enough jobs for everyone, and this is creating a great deal of despair among unemployed workers. Many of those who do manage to find work have only been able to obtain part-time employment. Gallup’s underemployment measure hit 20.0% on March 15th. This was up from 19.7% two weeks earlier and 19.5% at the start of the year. That is not a good trend.
#6) The IMF is forecasting that unemployment will remain high for at least two more years. Unfortunately, IMF forecasts tend to be chillingly accurate, so those Americans hoping for an employment boom in the coming months are likely to be quite disappointed.
#7) Even with the economy struggling and so many out of work, the price of gasoline continues to skyrocket. It is almost as if the 1970s have struck again and we are back in the days of the misery index. In some areas of the United States, people are already paying as much as $3.50 for a gallon of gasoline, and many experts are predicting that gasoline could hit $4.00 a gallon by the end of 2010.
#8) And health care costs show no sign of slowing down either. Even the Los Angeles Times (which is radically pro-Obama) is admitting that the new health care law will not prevent health care premiums from continuing to increase dramatically. So why did they pass that law again?
#9) Well, it turns out that the new health care bill is not good for physician-owned hospitals either. According to the executive director of Physician Hospitals of America, more than 60 doctor-owned hospitals across the United States that were in the development stage will now be canceled. Why will they be canceled? Well, it is because of the new health care law that Barack Obama and the Democrats wanted so badly. Apparently the new law singles out doctor-owned hospitals, making new doctor-owned projects ineligible to receive payments for Medicare and Medicaid patients. Who in the world came up with that bright idea?
#10) Not only that, but soon the United States will be facing a critical shortage of physicians. The U.S. health care system was already facing a shortage of approximately 150,000 doctors in the next decade or so, but thanks to the health care bill passed by Congress, that number could grow by several more hundred thousand. Ouch!
#11) Cities and states across America are facing unprecedented financial pressure. For example, many analysts believe that the city of Los Angeles is on the verge of bankruptcy. Of course the entire state of California is a financial wasteland at this point, so that is not that much of a surprise.
#12) Several prominent economic analysts are now declaring the the risk that the government of Japan will go bankrupt is very real. If Japan does financially implode, that will have major implications for the United States, as Japan is one of our biggest and most important trading partners.
#13) The world’s five biggest AAA-rated countries (including the United States) are all at risk of soaring debt costs and will have to implement austerity plans that threaten “social cohnesion”, according to a report on sovereign debt by Moody’s. To get an idea of how popular “austerity plans” are, just check out the riots that have been happening in Greece lately.
#14) Trillions have been pumped into the U.S. economy over the last couple of years and officially all we have to show for it is about 2% growth. Oh, and an exploding national debt that our children and grandchildren will never, ever be able to pay off.
The U.S. government continues to spend money like it is water, and yet the U.S. economy continues to be trapped in a death spiral. The reality is that we have created an economic nightmare from which there is no escape, and it is going to take every ounce of government spending and intervention just to keep the economy functioning somewhat normally. Unfortunately the economic crisis will become so dramatic at some point that even the government will lose control and that is when everything will really hit the fan.
So prepare yourself and your family now. Very difficult times are coming, and the vast majority of Americans will be totally unprepared for what is going to happen.
Don’t be one of them.