Gates: NATO is risking 'dismal future'
By David Jackson, USA TODAY
Jun 10, 2011
Capping his farewell world tour, Gates warned U.S. allies in NATO that they risk "a dim, if not dismal future" if they don't begin to beef up defense operations and contribute more to military operations such as those in Libya and Afghanistan.
"Future U.S. political leaders -- those for whom the Cold War was not the formative experience that it was for me - may not consider the return on America's investment in NATO worth the cost," Gates said during a speech at a European think tank.
Gates cited the ongoing Libyan operation as an example of the shortcomings of the North American Treaty Organization, creating by the U.S. and Western allies at the dawn of the Cold War.
"The mightiest military alliance in history is only 11 weeks into an operation against a poorly armed regime in a sparsely populated country, yet many allies are beginning to run short of munitions, requiring the U.S., once more, to make up the difference," Gates said.
The retiring secretary of Defense also repeated longstanding complaints about NATO contributions to the Afghanistan war.
"Despite more than 2 million troops in uniform -- not counting the U.S. military -- NATO has struggled, at times desperately, to sustain a deployment of 25,000 to 45,000 troops," Gates said. "Not just in boots on the ground, but in crucial support assets such as helicopters, transport aircraft, maintenance, intelligence, surveillance and reconnaissance and much more."
Speaking of American politics, Gates said: "The blunt reality is that there will be dwindling appetite and patience in the U.S. Congress -- and in the American body politic writ large -- to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense."
Gates also said:
"What I've sketched out is the real possibility for a dim, if not dismal future for the trans-Atlantic alliance. Such a future is possible, but not inevitable.
The good news is that the members of NATO -- individually and collectively -- have it well within their means to halt and reverse these trends and instead produce a very different future."*******
18 Signs The Collapse Of Society Is Accelerating
09 June 2011
As the U.S. economy collapses, the thin veneer of civilization that we all take for granted is going to begin to disappear. In fact, there are already an increasing number of signs that the collapse of society is accelerating. In cities such as Chicago, roving packs of young people are "mob robbing" local businesses, randomly assaulting tourists and shoppers and are even pulling people out of vehicles. This isn't just happening in the "bad areas" anymore. Over the past couple of months this type of crime has been common in some of the wealthiest areas of Chicago. In fact, many Chicago residents are now referring to "the Magnificent Mile" as "the Mug Mile". But it isn't just in Chicago that this is happening. During this past Memorial Day weekend, cities all over the United States experienced a stunning wave of mass violence. We are supposed to be an "example" for the rest of the world, but as our economic wealth crumbles we are witnessing the collapse of society all around us. So what is going to happen when the economy gets even worse?
The United States used to be a fairly civilized society. But now very few people seem to care how they treat others. That is even the case with our own government. As you will see below, the government is now sending SWAT teams in and dragging people out of their homes over unpaid student loans.
So if the government is going to be so brutal, what kind of message does that send to our young people?
Today our young people are facing a future that looks incredibly bleak. It is hard to have faith in the "system" when the "system" simply does not work any longer.
What are you supposed to say to a young person when you know very well that there are no jobs and that there is very little hope?
Most Americans don't understand what is causing the collapse of the economy, but most of them do have a sinking feeling that something has seriously gone wrong.
For the last few years the American people have waited patiently for our politicians to "fix things", but they have not gotten the job done.
Instead, our economic situation is still declining.
So now frustration is starting to boil over, and it is only going to get worse.
The following are 18 signs that the collapse of society is accelerating....
#1 In a brand new article, Janet Tavakoli has vividly described the wave of shocking violence that is currently sweeping the city of Chicago. What she says is happening to Chicago right now is beyond alarming....
This year, all hell has broken loose in downtown Chicago. Years of under-hiring have resulted in a police force that is unprepared for wildings and gang violence. Moreover, concealed carry in Chicago is illegal, unless one follows the Constitution.
Tourists and residents have been attacked by mobs of youths on buses, on beaches, on bicycle paths, near the shops of the Magnificent Mile, and outside their homes. Mobs of shoplifters plagued "Mug Mile" stores.
Terror has descended on many of the wealthiest areas of Chicago. Some are even calling on Chicago residents to completely avoid areas like the Magnificent Mile during the weekends until more police are brought in.
Mobs of young people are "swarming" retail stores, assaulting shoppers and pedestrians and even pulling people out of their cars.
The following is one eyewitness account of the "wildings" in Chicago that Tavakoli included in her recent article....
At about 11pm last Friday night, June 3rd, I heard shouting, screaming, horns blaring and tires screeching from my apartment...When I looked out my window to the street below I saw a crowd of about 20 young people...directly across the street from the entrance to my building. They were leaning on parked cars and clogging the street. They were screaming at people walking and driving by. I watched them stop vehicles, including taxi cabs, and pull people from the vehicles...It was a frightening scene and I was sure someone was going to be hurt.
#2 If you don't pay your student loans you may find yourself getting dragged out of your home by a SWAT team.
You doubt this?
The following is how an article in The Daily Mail recently described one recent SWAT team raid in California that was apparently ordered by the Department of Education....
A father was dragged from his home and handcuffed in front of his children by a SWAT team looking for his estranged wife - to collect her unpaid student loans.
A stunned Kenneth Wright had his front door kicked in by the raiding party at 6 am yesterday before being dragged onto his front porch, handcuffed and led to a police car with his three children.
He says he was then detained for six hours while officers looked for his wife - who no longer lives at the house.
#3 One town in Connecticut was forced to shut down a beautiful new fountain because too many people were using it as a toilet.
#4 This most recent Memorial Day weekend, cities all over America literally turned into war zones. There were reports of mass violence in Miami, New York, Chicago, Charlotte, Myrtle Beach, Nashville and Boston among other places.
If you want to see video of some of the violence in Miami as it was happening, you can view it here. The video is quite disturbing so please don't let any small children view it.
#5 One of the hottest books in America right now is a "children's book" entitled "Go The F*k To Sleep".
#6 A teenage girl in Washington state recently shot her Dad with a hunting bow because he took away her cell phone.
#7 In New York City, one 32-year-old man was recently charged with sexually assaulting an 85-year-old woman.
#8 Democratic strategist James Carville recently made national headlines when he told talk show host Don Imus the following....
"You know, look — this is a humanitarian — you know, you’re smart enough to see this . . . People, you know, if it continues, we’re going to start to see civil unrest in this country. I hate to say that, but I think it’s imminently possible."
#9 According to one new study, the percentage of U.S. households that contain a married couple with children has fallen from 44.3% in 1960 to 20.2% today.
#10 In Atlanta, two dozen teens recently violently assaulted two Delta flight attendants on a train for no apparent reason. The following is how a local Atlanta newspaper described the attacks....
Their "Clockwork Orange" style blitz was over soon after it began. The teens boarded the train, headed to Hartsfield-Jackson International Airport, at the Garnett station a little after midnight seemingly intent on instilling fear. They succeeded.
“There was blood everywhere, people were hollering and screaming,” a witness told Channel 2 Action News. “We were intimidated. People were terrified. People were trying to run. But there was nowhere to run.”
#11 Federal prosecutors in Indianapolis have announced that they have broken up one of the largest child pornography rings ever discovered. It was based in Bloomington, Indiana.
Are any small towns still safe?
#12 Barack Obama's food safety chief is defending armed raids of raw milk producers (including a raid on an Amish farmer) and he says that the FDA will "keep doing our public health job".
#13 In Florida, a 45-year-old Polk County sheriff's deputy has been charged with strapping children to a desk and spanking them with sex toys.
#14 In Sioux City, Iowa a 41 year old man recently walked into the office where his boss worked and beat the living daylights out of him. The boss suffered four chipped teeth and needed surgery to repair his nose. Apparently the boss was planning to fire the man.
#15 A 20-year-old woman in Oklahoma has been charged with killing the family cat and using the blood as part of a costume she planned to wear to a Lady Gaga concert.
#16 McDonald's recently held a "National Hiring Day" and about a million Americans showed up to apply for jobs at McDonald's restaurants all around the nation. Well, in Cleveland a horrible fight broke out between some girls and it ended up with three people being run over by a car. You can view video of this incident right here. Please do not watch the video if you are sensitive to graphic violence.
#17 All over the United States, vicious restaurant brawls have been erupting with alarming frequency and many of them are being posted up on YouTube for the world to see. You can see one example of this phenomenon right here.
#18 From coast to coast, "mob robbing" has become a very disturbing trend.
So what is a "mob robbing"?
Well, basically dozens of young people storm into a store together, grab whatever they want, and storm back out again.
Recent examples of this have been caught on video in Washington D.C. and in Las Vegas.
So does anyone still doubt that we are starting to see the collapse of society?
Sadly, things are going to get a whole lot worse.
In response to a recent article entitled "The Coming Economic Hell For American Families", a frequent commenter on my site known as "El Pollo De Oro" left the following comment about the collapse of society that is beginning to unfold....
Yes, it’s going to be VERY violent in The Banana Republic of America. Carjacking, kidnapping, drug trafficking, armed robbery and murder for hire will be major growth industries in the BRA when millions of formerly middle class Americans, now the neo-poor/neo-peasants, become increasingly desperate. The horrifying violence in Mexico will become a fact of life on this side of the border, the brutal kidnappings of the Philippines and Papua New Guinea will plague the BRA as well. Formerly middle class Americans who find themselves living in shantytown slums won’t like their new accommodations, and many of them will turn to violent crime in the hope of improving their miserable circumstances.
The truth is that about the only thing keeping our society together has been the unprecedented affluence that we have been enjoying over the past few decades.
Once that affluence is gone, the true character of the American people will come out, and we may not like what we see.
That is one reason why I pound on the economic crisis this nation is facing day after day. Once our wealth is gone, there is going to be chaos in the streets of America.*******
The Coming Economic Hell For American Families
June 8th, 2011
Tens of millions of American families are about to go through economic hell and most of them don't even realize it. Most Americans don't spend a whole lot of time thinking about things like "monetary policy" or "economic cycles". The vast majority of people just want to be able to get up in the morning, go to work and provide for their families. Most Americans realize that things seem "harder" these days, but most of them also have faith that things will eventually get better. Unfortunately, things aren't going to get any better. The number of good jobs continues to decline, the number of Americans losing their homes continues to go up, people are having a much more difficult time paying their bills and our federal government is drowning in debt. Sadly, this is only just the beginning.
Since the financial collapse of 2008, the Federal Reserve and the U.S. government have taken unprecedented steps to stimulate the economy. But even with all of those efforts, we are still living in an economic wasteland.
So what is going to happen when the next wave of the economic crisis hits?
During one recent interview, Peter Schiff made the following statement....
If you look at the economic relapse that’s going on right now, look at Friday’s abysmal job numbers, look at the housing numbers, understand that all of this is taking place with record monetary and fiscal stimulus. What happens if we remove those supports?
At the end of June, the Federal Reserve's quantitative easing program is slated to end. The U.S. Congress and state legislatures from coast to coast are talking about budget cuts. The amount of borrowing and spending that has been going on is clearly unsustainable, but will the U.S. economy start shrinking again once the current "financial sugar high" has worn off?
Already, all sorts of bad economic news has been coming out and all kinds of economic indicators are turning south. The American people are becoming increasingly restless. One new poll has found that 59 percent of the American people disapprove of Barack Obama's handling of the economy (which is a new high). According to another recent poll, 63% of Americans say that they feel "not good" or "bad" about how the U.S. economy is performing.
If most Americans had good jobs, could afford their mortgages and could pay their bills, the economy would not be such a big issue.
Unfortunately, times are really tough for American families right now and they are about to get a lot tougher.
The official unemployment rate just went up to 9.1 percent, but that figure only tells part of the picture.
There are some areas of the country where it seems nearly impossible to find a decent job. Millions of Americans have fallen into depression as they find themselves unable to provide for their families.
According to CBS News, 45.1 percent of all unemployed Americans have been out of work for at least six months. That is a higher percentage than at any point during the Great Depression.
Just two years ago, the number of "long-term unemployed" in the United States was only 2.6 million. Today, that number is up to 6.2 million.
Can you imagine being out of work for 6 months or more?
How would you survive?
Just look at the chart below. What we are going through now is really unprecedented. The average duration of unemployment in this country is now close to 40 weeks....
So will things get any better soon? Well, there were only about 3 million job openings in the United States during the month of April. Normally there should be about 4.5 million job openings. The economy is slowing down once again. Good jobs are going to become even more rare.
There are millions of other Americans that are "underemployed". All over the United States you will find hard working Americans that are flipping burgers or working in retail stores because that is all they can get right now.
Most temp jobs and most part-time jobs don't pay enough to be able to provide for a family. But there are not nearly enough full-time jobs for everyone.
Sadly, the number of "middle class jobs" is about 10 percent lower than a decade ago. There are simply less tickets to the "good life" than there used to be.
But without good jobs, the American people cannot afford to buy homes.
Without good jobs, the American people cannot even afford the homes that they are in now.
U.S. home prices have fallen 33 percent since the peak of the housing bubble. That is more than they fell during the Great Depression.
This decline in housing prices has caused a lot of problems.
28 percent of all homes with a mortgage in the United States are in negative equity at this point. There are millions of American families that are now paying on mortgages that are for far more than their homes are worth.
Millions of American families literally feel trapped in their homes. They can't afford to sell their homes, and if they simply walk away nobody will approve them for new home loans for many years to come.
Many Americans are sticking it out and are staying in their homes until they simply can't pay for them anymore.
As the number of good jobs continues to decline, the number of Americans that are losing their homes continues to rise.
For the first time ever, more than a million U.S. families lost their homes to foreclosure in a single year during 2010.
If the economy slows down once again and millions more Americans lose their jobs this problem is going to get a lot worse.
Even if they aren't losing their homes yet, millions of other Americans families are finding it increasingly difficult to pay the bills.
Wages have been very flat over the past few years and yet the cost of most of the basics just seems to keep going up and up.
According to Brent Meyer, a senior economic analyst at the Federal Reserve Bank of Cleveland, the cost of food and the cost of energy have risen at an annualized rate of 17 percent over the past six months.
Have your wages gone up by 17 percent over the past six months?
As 2009 began, the average price of a gallon of gasoline in the United States was $1.83. Today it is $3.77.
American families are finding that their paychecks are going a lot less farther than they used to, but Ben Bernanke keeps insisting that we have very little inflation in 2011.
Most Americans don't care much about economic statistics - they just want to be able to do basic things like take their children to the doctor.
According to one recent survey, 26 percent of Americans have put off doctor visits because of the economy.
Sadly, soon a lot more American families will not be able to afford to go to the doctor.
According to one recent survey, 30 percent of all U.S. employers will "definitely or probably" quit offering employer-sponsored health coverage once Obamacare is fully implemented in 2014.
As the economic situation has unraveled, an increasing number of people are being forced to turn to the federal government for assistance.
One out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government.
Some of the hardest hit members of our society have been our children. Today, one out of every four American children is on food stamps.
Back in the old days, a large percentage of American families were self-sufficient, but that is no longer the case.
Back in 1850, approximately 50 percent of all Americans worked on farms.
Today, less than 2 percent of Americans do.
So these days when American families can't feed themselves what do they do?
They turn to the federal government of course.
At the moment, approximately 44 million Americans are on food stamps.
But our federal government cannot afford to spend money like this forever.
According to a recent USA Today analysis, the U.S. federal government took on $5.3 trillion in new financial obligations during 2010. USA Today says that the U.S. government now has $61.6 trillion in financial obligations that have not been paid for yet.
Who is going to end up paying that bill?
So with so much bad news, are our leaders alarmed?
According to Federal Reserve Chairman Ben Bernanke, "growth seems likely to pick up somewhat in the second half of the year."
Yeah, we'll see how that prediction works out.
Others are not so sure that everything is going to turn out okay.
Recently, James Carville warned that we could literally see rioting in the streets if the economic situation does not turn around soon. Just check out the last part of the video below....
The truth is that America is in decline. Just like with all of the great empires of the past, our empire is starting to crumble too.
A recent article in the Guardian touched on some of the reasons for America's decline....
The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.
The economic news is only part of the puzzle. This country has rejected the ancient wisdom that was passed down to us and we have rejected the principles of our founding fathers.
We have piled up the biggest mountain of debt in the history of the world and yet somehow we expected that everything would turn out okay.
Well, everything is not going to turn out okay.
All of this debt is going to come down on us like a ton of bricks and the U.S. economy is going to continue to fall apart. Millions of American families are going to lose their jobs and their homes.
Economic hell is coming.
You better get ready.*******
National Debt is a Threat to National Security
Uncontrolled national debt can lead to many national security issues: retarded economic growth, lack of capital formation, monetizing deficits
Dr. Ileana Johnson Paugh
Friday, June 3, 2011
National debt is the biggest threat to our national security. Most people’s eyes glaze over when discussion turns to business and economics. Americans know we have a huge debt with lots of zeroes but have no idea how it grew so exponentially large, where it came from, who owes it, who owns it, or how many zeroes a trillion has.
Do Americans care who is responsible for this debt, whether we can or should reduce it? Should they just change the channel when the business news flashes across the screen? Few people bother to look at the national debt clock.com, running at nano speed, showing second by second the total indebtedness of each taxpayer, man, woman, and child based on U.S. Congress’ policies and current spending of the U.S. government.
The national debt is like a disaster in a faraway place that does not affect or concern us; we can just turn off the news. Even fewer Americans realize that today’s economics is the continuation of politics by other means. Our politics and our economy are inexorably intertwined – to understand one, you must examine the other. The Federal Reserve System, our central bank, is never divorced from politics as they pretend. Its Chairman, Ben Bernanke, is a very powerful player as a monetary policy maker.
National debt or public debt is federal government’s indebtedness at a moment in time. It is the accumulation of previous budget deficits, the amount by which the government’s expenditures exceed its receipts during a specified period of time, usually a year. The government accumulates debt by running deficits because of exorbitant spending. Our government borrows money from U.S. taxpayers via Treasury bills, notes, bonds, foreign investors, and other countries.
We are borrowing billions we do not have from China in order to fund the Muslim Brotherhood’s so called “Arab Spring.”
away to third world nations. We are borrowing billions we do not have from China in order to fund the Muslim Brotherhood’s so called “Arab Spring.” This is at a time when our country is broke, several states have suffered devastating tornadoes, floods, fires and FEMA is running out of money. The Middle Eastern budding “democracy seekers,” financed and coached by the New World Order proponents, are not so peaceful and friendly to our culture after all and are not really looking for democracy in their countries.
“Since 1971, U.S. borrowed $50 trillion to produce only $13 trillion of goods and services in a 40 year period.” Egon von Greyerz, a financial analyst with Matterhorn Asset Management AG in Zurich, Switzerland, said, “From 1971 when President Nixon ended the gold-backing of the dollar, virtually all of the growth in the Western world has come from the massive increase in credit rather than from real growth in the economy.”
Until the 1980s, the U.S. government had acquired most of its debt either to finance wars or from losses of tax revenues that accompany recessions. Lately, a huge debt was acquired through out-of-control spending and interest payments on borrowing.
After WW II, the national debt briefly reached 100% of Gross Domestic Product, meaning that the money value of all goods and services produced in a year equaled total spending. In 2009, the national debt was 83.4% of GDP. President Bush increased the debt by 20% during his presidency and fighting two wars. The current president exacerbated the problem by adding to the debt burden various giveaways, stimulus I and II, unemployment benefits, the war in Libya, and other financial schemes aimed at deliberately wasting the taxpayer dollars. Economists argue that the current debt, including unfunded liabilities, is anywhere from $110-150 trillion dollars, ten times the predicted amount of the current administration.
Who owns the debt? Domestic citizens, who selfishly wish to have it all right now in order to live well, transfer debt from one generation of Americans to another, to their children and grandchildren. One branch of the U.S. government owes money to another branch and no budget is sacred from dipping into it to take from Peter in order to pay Paul, including Social Security. Their lock box was tampered with a long time ago and the key was lost.
The share of the national debt owned by foreign nationals, businesses, and governments is more worrisome as it has been rising rapidly since 2006 when it was over 52% of the total public debt. The top ten holders of American national debt are China, Japan, Caribbean Banking Center, oil exporters (OPEC), Russia, United Kingdom, Brazil, Luxemburg, Hong Kong, and Taiwan.
It is true, our national debt is measured in dollars, which we can always print in order to meet our payments. This is called monetizing the deficit. Doing so, however, creates inflation, as too much money is chasing too few goods. A responsible government should never print money in outlandish excess of the amount of goods and services produced in a year. If they do, hyperinflation will occur, and severe devaluation of the currency.
The U.S. Consumer Price Index (CPI), also known as inflation, has been stable for 200 years until the early 1900s. From 1971 to 2010, this price index has gone up 500%. Money printing and uncontrolled credit creation are the culprits. Lately, this administration’s economists have left out food and gasoline in their measurement of CPI in order to skew reality. This is disingenuous since all Americans are affected by the price of food and gas. According to professors Lawrence H. Officer and Samuel H. Williamson, it took $5.31 to buy in 2008 what it cost $1 in 1971, the year President Nixon ended the backing of the U.S. dollar by gold. Just to keep up with inflation, Americans would have to earn 5.31 times more income today than they did in 1971. Today’s dollar is only worth 19 cents when compared to 1971.
Uncontrolled national debt can lead to many national security issues: retarded economic growth, lack of capital formation, monetizing deficits
Uncontrolled national debt can lead to many national security issues: retarded economic growth, lack of capital formation, monetizing deficits (overprinting of money in excess of goods and services thus creating inflation), social turmoil, bankruptcy, revolutions, famine, and war.
The P.I.G.S., Portugal, Italy, Greece, and Spain were reluctantly admitted into the European Union in spite of their high levels of national debt, inflation, and disastrous handling of the economy. Greece, for example, has a 120% ratio of national debt to GDP. You saw the turmoil and mayhem in Greece when the administration tried to cut the generous social benefits as their only option to curb overspending. None of the European nations who accepted the euro as their national currency could print money to come out of debt, they are dependent on Brussels’ EU monetary policy.
Our current policy seems to be putting pressure on the U.S. dollar until two options remain - default on the U.S. debt, or monetizing it by printing more than $100 trillion to pay it.
If we default, as in any case of bankruptcy, creditor nations would demand payment in American assets – our oil fields, mines, land, parks, monuments, buildings, military bases, and even the indentured servitude of generations of taxpayers, similar to the reparations imposed on Germany after World War I. If we default, the dollar would crash.
If we print money ad nauseam, we would trigger a hyperinflation like the Weimar Republic that would also crash the dollar to zero.
We would recover as a society but we would be a former super-power like Greece, Rome, Spain, France, or Britain. Since we are operating in a global trade environment, we would drag the rest of the western world with us as their currencies and economies would crash as well. Famine would ensue in weaker countries and wars in others.
The current administration seems to be heading in the direction of national economy and currency obsolescence, forgiving all debts in the process, except global taxes and reparations to America’s “victims.”
*******Americans raiding retirement funds early
By Sheyna Steiner
29 April 2011
Nearly one-fifth of full-time employed Americans have raided retirement accounts in the past year to cover emergencies, according to a national Bankrate survey.
Despite increasing signs of a stabilizing U.S. economy, 19 percent of Americans -- including 17 percent of full-time workers -- have been compelled to take money from their retirement savings in the last year to cover urgent financial needs, the Financial Security Index found.
Though 80 percent of full-time workers didn't dip into retirement funds, far too many consumers are ill-prepared for emergencies, says Kim McGrigg, manager of community and media relations at Money Management International, a credit counseling agency.
"Perhaps the most alarming thing about these numbers is that they suggest a lack of other options," she says.
"Consumers generally consider using retirement funds only as a last resort."
Michael Masiello, founder of the Masiello & Associates wealth management firm in Rochester, N.Y., agrees. "I believe that 17 percent of full-time workers taking early withdrawals is a higher than normal number, and it's certainly higher than it should be," he says.
The potential consequences of tapping retirement funds include early withdrawal fees, taxes and the loss of compound earnings -- not to mention the prospect of being unable to retire.
While workers might be able to replenish the funds pilfered from tax-advantaged accounts once they regain their financial footing, one of the main benefits of long-term savings is time and compound interest. An early withdrawal of $10,000 is not just $10,000. It's actually $10,000 plus whatever that money would have earned over the lifetime of the account. Furthermore, with penalties and taxes an early $10,000 withdrawal may only yield $6,500 if you're in a 25 percent tax bracket.
Compounding gains turns money into a snowball, gaining size as it rolls forward. Without the advantages of compounding, workers who take an early withdrawal will later need to sock away more savings than they otherwise would have in order to fund retirement.
While it's fortunate that people do have the retirement savings to fall back on when they absolutely have no alternatives, they may be just delaying the day when they truly have no more resources and working is no longer be an option.
"That's the scary thing. People are turning to this as a last resort; they have exhausted their other resources. At that point there is very little in the way of alternatives," says Greg McBride, CFA, senior financial analyst at Bankrate.com.
In the years leading up to the recession, the easy availability of credit and plentiful home equity meant consumers could coast through emergencies with little money saved for a rainy day. But the Great Recession reaffirmed forgotten lessons from the Great Depression. Namely, saving money, minimizing debt and forgoing borrowing are the best insulation from financial adversity.
The survey suggests Americans increasingly feel their emergency preparedness is not what it should be. This month's Financial Security Index plunged to 93.5 from 97 in March.
"Despite data showing job creation, greater savings, lower debt burden, and rebounding household net worth, the new low in the FSI shows that people aren't feeling it," says McBride.
"Consumers are pessimistic on all five components of financial security. When you look at gasoline prices closing in on $4 a gallon and other events taking place around the globe, it can be unsettling."
12 Economic Collapse Scenarios That We Could Potentially See In 2011
Posted 21 January 2011
I like playing these games.
Could happen doesn't indicate probability of happening. For example, I could be abducted by aliens but it is more likely I will just probe myself.
Anyone care to add some probabilities to the various scenarios below?
12 Economic Collapse Scenarios That We Could Potentially See In 2011
What could cause an economic collapse in 2011? Well, unfortunately there are quite a few "nightmare scenarios" that could plunge the entire globe into another massive financial crisis. The United States, Japan and most of the nations in Europe are absolutely drowning in debt. The Federal Reserve continues to play reckless games with the U.S. dollar. The price of oil is skyrocketing and the global price of food just hit a new record high. Food riots are already breaking out all over the world. Meanwhile, the rampant fraud and corruption going on in world financial markets is starting to be exposed and the whole house of cards could come crashing down at any time. Most Americans have no idea that a horrific economic collapse could happen at literally any time. There is no way that all of this debt and all of this financial corruption is sustainable. At some point we are going to reach a moment of "total system failure".
So will it be soon? Let's hope not. Let's certainly hope that it does not happen in 2011. Many of us need more time to prepare. Most of our families and friends need more time to prepare. Once this thing implodes there isn't going to be an opportunity to have a "do over". We simply will not be able to put the toothpaste back into the tube again.
So we had all better be getting prepared for hard times. The following are 12 economic collapse scenarios that we could potentially see in 2011....
#1 U.S. debt could become a massive crisis at any moment. China is saying all of the right things at the moment, but many analysts are openly worried about what could happen if China suddenly decides to start dumping all of the U.S. debt that they have accumulated. Right now about the only thing keeping U.S. government finances going is the ability to borrow gigantic amounts of money at extremely low interest rates. If anything upsets that paradigm, it could potentially have enormous consequences for the entire world financial system.
#2 Speaking of threats to the global financial system, it turns out that "quantitative easing 2" has had the exact opposite effect that Ben Bernanke planned for it to have. Bernanke insisted that the main goal of QE2 was to lower interest rates, but instead all it has done is cause interest rates to go up substantially. If Bernanke this incompetent or is he trying to mess everything up on purpose?
#3 The debt bubble that the entire global economy is based on could burst at any time and throw the whole planet into chaos. According to a new report from the World Economic Forum, the total amount of credit in the world increased from $57 trillion in 2000 to $109 trillion in 2009. The WEF says that now the world is going to need another $100 trillion in credit to support projected "economic growth" over the next decade. So is this how the new "global economy" works? We just keep doubling the total amount of debt every decade?
#4 As the U.S. government and the Federal Reserve continue to pump massive amounts of new dollars into the system, the floor could fall out from underneath the U.S. dollar at any time. The truth is that we are already starting to see inflation really accelerate and everyone pretty much acknowledges that official U.S. governments figures for inflation are an absolute joke. According to one new study, the cost of college tuition has risen 286% over the last 20 years, and the cost of "hospital, nursing-home and adult-day-care services" rose 269% during those same two decades. All of this happened during a period of supposedly "low" inflation. So what are price increases going to look like when we actually have "high" inflation?
#5 One of the primary drivers of global inflation during 2011 could be the price of oil. A large number of economists are now projecting that the price of oil could surge well past $100 dollars a barrel in 2011. If that happens, it is going to put significant pressure on the price of almost everything else in the entire global economy. In fact, as I have explained previously, the higher the price of oil goes, the faster the U.S. economy will decline.
#6 Food inflation is already so bad in some areas of the globe that it is setting off massive food riots in nations such as Tunisia and Algeria. In fact, there have been reports of people setting themselves on fire all over the Middle East as a way to draw attention to how desperate they are. So what is going to happen if global food prices go up another 10 or 20 percent and food riots spread literally all over the globe during 2011?
#7 There are persistent rumors that simply will not go away of massive physical gold and silver shortages. Demand for precious metals has never been higher. So what is going to happen when many investors begin to absolutely insist on physical delivery of their precious metals? What is going to happen when the fact that far, far, far more "paper gold" and "paper silver" has been sold than has ever actually physically existed in the history of the planet starts to come out? What would that do to the price of gold and silver?
#8 The U.S. housing industry could plunge the U.S. economy into another recession at any time. The real estate market is absolutely flooded with homes and virtually nobody is buying. This massive oversupply of homes means that the construction of new homes has fallen off a cliff. In 2010, only 703,000 single family, multi-family and manufactured homes were completed. This was a new record low, and it was down 17% from the previous all-time record which had just been set in 2009.
#9 A combination of extreme weather and disease could make this an absolutely brutal year for U.S. farmers. This winter we have already seen thousands of new cold weather and snowfall records set across the United States. Now there is some very disturbing news emerging out of Florida of an "incurable bacteria" that is ravaging citrus crops all over Florida. Is there a reason why so many bad things are happening all of a sudden?
#10 The municipal bond crisis could go "supernova" at any time. Already, investors are bailing out of bonds at a frightening pace. State and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP. According to Meredith Whitney, the municipal bond crisis that we are facing is a gigantic threat to our financial system....
"It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States and certainly the largest threat to the U.S. economy."
Former Los Angeles mayor Richard Riordan is convinced that things are so bad that literally 90% of our states and cities could go bankrupt over the next five years....
#11 Of course on top of everything else, the quadrillion dollar derivatives bubble could burst at any time. Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn't stop. Today, most money on Wall Street is not made by investing in good business ideas. Rather, most money on Wall Street is now made by making the best bets. Unfortunately, at some point the casino is going to come crashing down and the game will be over.
#12 The biggest wildcard of all is war. The Korean peninsula came closer to war in 2010 than it had in decades. The Middle East could literally explode at any time. We live in a world where a single weapon can take out an entire city in an instant. All it would take is a mid-size war or a couple of weapons of mass destruction to throw the entire global economy into absolute turmoil.
Once again, let us hope that none of these economic collapse scenarios happens in 2011.
However, we have got to realize that we can't keep dodging these bullets forever.
As bad as 2010 was, the truth is that it went about as good as any of us could have hoped. Things are still pretty stable and times are still pretty good right now.
But instead of using these times to "party", we should be using them to prepare.
A really, really vicious economic storm is coming and it is going to be a complete and total nightmare. Get ready, hold on tight, and say your prayers.*******
Australia Heading for Economic Crunch as Families Face Financial Collapse
By: Mike Shedlock
Economics / Austrailia
Jan 04, 2011
The party is over in Australia. Many anti-dollar investors and Pollyannas living down under just don't realize it yet. Nonetheless, Australia faces an economic crunch as family finances collapse under the burden of record debts, rising interest rates and utility bills.
Please consider Australians sinking under debt burden
With banks warning they will be forced to raise mortgage rates by 0.50 per cent in 2011 and Sydney rents forecast to rise by between $160 and $190 a month, according to analysts Residex, householders look set to suffer.
Repossessions and tenant evictions are expected to rise sharply. "It's going to be tough" said Shane Oliver, chief economist at AMP Capital. "Families face many rising costs and while most people have slowed their borrowing, our debt is still growing and that's a big problem."
Despite more cautious spending in recent months, household debt is still up by 5.8 per cent on a year ago and a recent survey by Westpac found only about 20 per cent of people thought paying off debts was the best use of their money. Most households in the US, UK and much of Europe are still busily paying down their borrowings, particularly unsecured debts such as personal loans and credit cards.
"Unlike the rest of the world, Australia has slipped back into its old habits," said Steve Keen, professor of economics at the University of Western Sydney. "We're spending ourselves right back into trouble. With so much extra debt to service, we don't need interest rates to reach anything like the 9.6 per cent they hit in 2008.
"We may find repossessions spiking much more quickly than they did two years ago."
Weekly Living Costs Up $100
Real estate has peaked and so has the shopping center economic model based on the strong Australian dollar. There is no reason here to like either Australian equities or the Australian dollar. Strong commodity prices will no longer help Australia.
Australian real estate has already been hit by rising interest rates and with Weekly living costs up $100, more rate hikes may be coming.
FAMILIES face cost-of-living increases that could drain the weekly budget by up to $100 this year.
New data shows Australians are being levelled with record expenses for basic services and Sydney residents are some of the hardest hit in the country.
After floods that have wiped out crops in Queensland and NSW, fruit and vegetable prices are predicted to rise by up to 50 per cent.
Any hope the strong Australian dollar would shield motorists from increases in fuel prices have been dashed - global oil prices are tipped to hit record highs.
This year's price increases will compound the cost pressures already inflicted on households.
The trio of utility costs alone represents an extra yearly burden of about $1000 - or $20 a week - for an average household of four, while grocery bills are set to rise on average by $50 a week, based on a weekly bill of $150.
Housing affordability has taken another dive, with industry figures showing the largest annual decrease in a decade.
A report by the Real Estate Institute of Australia showed the proportion of income required to meet loan repayments increased 5.8 per cent to 34.8 per cent over last year, a 10-year high.
Additionally, the amount of rent people are paying has increased by 18.6 per cent in Sydney over three years, above the national average.
The Bureau of Statistics also identified health costs, communications services and petrol prices as having risen sharply over the year.
Both the Australian stock market and the Chinese stock market have been weak. This is in spite of the fact that commodities have been on fire. Both countries have had overheating economies led by real estate bubbles.
It will be interesting to see how the Reserve Bank of Australia handles this. Failure to hike rates would hurt the Australian dollar and increase the price of imports while hiking rates further will crush the real estate bubble.
China's problem is far more complex.
There are no good solutions when the central bank lets real estate bubbles get out of hand as has happened in the US, China, Australia, Canada, Ireland, Spain, the UK and numerous other places.
There are no good solutions when the central bank lets real estate bubbles get out of hand as has happened in the US, China, Australia, Canada, Ireland, Spain, the UK and numerous other places.
The difference so far is the US, Ireland, and Spain property bubble have popped, while those in Australia, Canada, and China are just now facing the pressure.
By Mike "Mish" Shedlock
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.
I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.
When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.*******