The financial benefits of food stamps – Record $78 billion worth of food stamps issued in 2011. Select Wal-Mart stores pulled in 25 to 40 percent in revenues from food stamps according to a recent analysis.
When you think of food stamp usage you rarely think about big financial profits. Yet some businesses are managing to get a big piece of the food stamp pie. Last year alone the government spent a record $78 billion in food stamps. This is a large amount of money and this is why you might notice more EBT signs if you ever pay attention when you are driving around. The money when broken down by the 46 million Americans receiving this aid is not much but actually speaks to the underlying bifurcated nature of our economy. Many are stuck below poverty status and many in the middle class simply struggle to get by. The Congressional Budget Office projects that food stamp usage will be high deep into 2015. Let us examine where this money is actually going.
The contagion of the European Union and banking debt – 20 European Banks have liabilities above 50 percent of their home country GDP. Why an EU FDIC is highly unlikely in the short-term.
The crisis in Europe is boiling over yet again. The central connecting factor of all of this is too much debt relative to production. Debt in itself is not a bad thing. If you borrow modestly for a home and have sufficient income to cover your mortgage payment then this might actually be beneficial. When things go haywire is when you leverage up. You had people buying homes that were 10 to 12 times their annual income. This however is a modest example compared to investment banks that were levered 30-to-1 and in some cases even higher. The issue with the European Union is the lack of cohesion but also the amount of debt relative to their production. True colors do not shine in boom times but do come out in crisis. The issue at hand for the moment is that stronger more productive economies with moderate levels of debt will need to step in if they are to bailout the periphery where debt levels are extreme relative to the local country GDP. Politically you can see how this is not going well. In the US, even though the bailouts were geared heavily in favor of the banks, few doubt the power of the Fed in stepping in and bailing out a big bank in California all the way to New York. This is not exactly the scenario playing out in Europe.
The burden of unsupportable debt. US debt-to-GDP growing at a pace rivaling certain European nations – The dramatic problems of peak debt in 2012.
What makes this global financial crisis unique is that it is based on unsustainable levels of debt. In historical cases you would have sovereign nations defaulting on their debts but these were more isolated and clustered, not global issues. Today virtually every large crisis that is hitting is occurring because of peak debt situations. No one metric can tell you when a country will tip into crisis but there is definitely a combination of confidence breaking down and simply the inability to pay back said debt. Many countries have hit this breaking point; Iceland, Ireland, Greece, and Spain. Many other nations teeter closely on that thin line of solvency. These breaking points do not just happen overnight. They incubate and slowly expand until a pinnacle is achieved only to reach a point where action is necessary. At this point in many cases it is too late. That is why when we look at the debt to GDP ratios of countries we are quickly reminded that most are moving in the wrong direction.
Starting life in the negative net worth column. What the Fed does not want you to know about American net worth figures.
The reports on American wealth from the Federal Reserve and U.S. Census did not get the press they deserved. You would think that an overall decline of 40 percent for household net worth would get the attention of the press but that might throw a wrench into the consumption machine that they are promoting. Up until the housing bubble burst, practically every other commercial was financed by real estate firms and banking institutions. Once that money dried up it was as if nothing happened. This ability to ignore crucial figures is partly to blame for our slowly evaporating middle class. It seems people are more comfortable losing this little by little versus questioning the bigger aspects of the system. The Fed and Census reports only go up to the end of 2010. Yet if we were to go further we would realize that the typical net worth of Americans has fallen even more while a very tiny minority has been increasing their wealth at a steady clip.