Smoke and mirrors economy – 47 percent of the members in Congress are millionaires. 67 percent of Senators. Fed and Treasury money close to $7 trillion.
The Federal Reserve is really deep into uncharted territory. In no other time in history has the Fed been so intricately involved in the overall economy. The Fed balance sheet has expanded to an incredible level under very little scrutiny by the public or elected officials, many who have a vested interest in keeping the status quo. The banking system has been bailed out but the working and middle class still struggle. There is an interesting narrative going on in the press. Since Wall Street is on the mend and hefty banking bonuses are once again making the rounds, every corner of the country is now somehow celebrating in this same process, at least in theory. That is simply not the case in actuality. The system has been decoupled internally. Profits are made globally with local banking subsidies. The public is left holding the bag on massive speculation and is shifted out of any prosperity. It is odd what passes for good news. The fact that Congress acknowledges that they will deal with the fiscal challenges facing our nation is applauded even though this is their job and most are already millionaires. The Fed is still deeply intertwined in the current economy.
Quantitative addiction and the allure of low interest rates – US paid $454 billion in interest payments alone in 2011. Equity in real estate for households cut in half.
Today I was looking at the total public debt outstanding and the current figure seems surreal. The total public debt outstanding is now up to $16.27 trillion. We’ve been on this path for many decades of spending more than we earn but the problem is we are reaching a peak debt situation. It is hard to say how much debt is too much debt for a country but a generally agreed upon figure is when the debt goes above 100 percent of annual GDP then issues begin to arise. The US fortunately is able to get incredibly low interest rates on world markets by a variety of methods including having the Fed use quantitative easing techniques.  Given the size of our debt, low interest rates are sold as an aid to US households but the reality is that a more important reason is to keep payments on interest lower. What are the consequences of too much debt?
Recession probabilities – For the 50 million Americans in poverty the probability of a recession is 100 percent. Growing economic divide for working class.
The probabilities of the US slipping into another official recession are growing. Don’t tell this to the 50 million people that are reportedly at the poverty level according to a new US Census report. This trend isn’t something new and it certainly is not going to be resolved overnight. We have nearly 47 million Americans receiving food stamps so the probability of slipping into another recession should not come as a shock. The fiscal cliff is not a surprise. We’ve known that unsustainable debt growth would ultimately lead to a day of reckoning. There are now rumors that a patch work for one year is going to be applied to kick the can down deeper into the future. Look at how well this approach is working in Europe. The core problem of this debt crisis has yet to be resolved. Let us examine the recession probability further.
The rise of college students applying for food stamps – Mixing of college debt, part-time work, and food stamps. Working 40 hours a week at a minimum wage job does not cover basic costs for a college education.
The drawn out election campaign has now come to an end and very little substantive action is likely to be taken to assist the middle class. Even more disturbing is how little attention was given to the growing number of poor Americans. Almost 47,000,000 million Americans are now on food stamps, a record both in nominal terms and also as a percentage of the population. Aligning with this record figure in food assistance is also the large burden of attending college. A telling trend has emerged where many college students are now applying and using food stamps to get by. At one point in the not so distant past, it was possible to take on a part-time job and attend college while coming out with little debt (or no debt). That balance is now largely gone with stagnant wages and college tuition inflation soaring through the roof. What does it say that many of our young Americans need to take on food stamps just to get through college?