Tag Archives: recession

Retirees and savers are the Feds’ sacrificial lambs

Are you a retiree living on the savings you’d responsibly accumulated from a lifetime of hard work and frugality?

Are you currently among the 64.3% of adult Americans — a 30-year low — actually working who’s trying to save for your retirement, knowing how tenuous the Social Security system is (and knowing full well Social Security was never meant to provide for all of our retirement years anyway)?

Then you should know that we are being screwed by our government, via the Federal Reserve’s near-zero interest rate policy.

Tyler Durden writes for Zero Hedge, Sept. 5, 2012:

Exceptionally low interest rates are bad for banks, insurers, and, more generically, anyone wishing to save money. Of the three, it’s the situation of the savers that is most untenable. In particular, Citi notes in a recent report, those wishing to retire at 65 or thereabouts are in for a nasty surprise when they start to run the numbers.

 Citi: US Credit Outlook

Given that real yields are negative for Treasury bonds inside of 20-years, the steady stream of inflows into investment grade bond fund that hold a mixture of government, agency, and high grade corporate securities, will simply fail to return an adequate rate of return commensurate with the current savings rates of most retirement savers. What savers need to do is find higher asset returns or increase their personal savings rate.

And therein lies the crux of the problem facing the central banks.

Ideally, the Fed and ECB [European Central Bank] want to encourage investors to buy riskier assets and corporates to borrow more with the hope being that wealth effects, corporate risk taking, and Keynes’ animal spirits will revive the economy.

But so far the US has failed to respond to Fed’s treatment plan and the inflows into bond funds continue unabated while corporate net issuance is nonplused. One presumes investors are wary of returning to an asset class, like equities [stock market], that performed so miserably over the last decade amid global growth concerns.

But an unintended consequence to resisting the Fed is that the average retirement saver will need to double their rate of savings in order to be able to retire even five years later than originally planned. If and when that sort of analysis enters into the collective consciousness of the typical American, the economic impact is likely to be grim.

As we’ve seen in the UK, higher savings rates lead to lower consumption, a decline in corporate profits, and recession.

Put simply, the Federal Reserve’s near-zero interest rate policy is a backdoor tax on savers and retirees. The Obama administration is counting on both groups, being responsible people, to not cause trouble like rioting. The federal government’s policy is to do whatever is necessary to keep its deficit spending affordable because if the entitlement spigot were to turn off, half the population will riot.

Meanwhile, retirees will have to make do by eating into their principal, while those who are planning to retire will need to double-triple-quadruple their savings, as well as postpone your retirement years further into the future.

But the Catch-22 is that if the American worker tries to be responsible by saving more, that means we buy less, which means businesses have lower sales, which in turn means another recession.

The only way out of this vicious circle is a double-pronged approach:

Grow the economy and cut deficit spending!

And that’s precisely what Obama — who’d never worked in business his entire life and who had zero executive experience before entering the Oval Office — had NOT done these past 3+ years. So what makes you think he’ll do that if he gets another 4 years?

On November 6, vote for a successful businessman with a Harvard MBA and executive experience (70th Governor of Massachusetts).

On November 6, vote for a man with a degree in economics and is the chair of the House BUDGET Committee.

Vote for Romney-Ryan!


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Vonnegut Was Right – Deliberate Dumb Down to Permanent Recession

The entire movie is posted on Youtube in 12 segments.

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Barney Frank Supports the Commie "Protesters" While Seeking Wall Street Cash

The New Three Stooges

Yes, you read that right, and no, you have not accidentally swerved into the Onion.
Bawney Fwank, who I have posted about previously concerning his culpability when it comes to the financial and economic meltdown that this entire planet is now facing, actually supports those who, if they were even remotely bright enough, would be trampling the petunias into mush on his own front lawn.
Via politico.com:

Rep. Barney Frank might sympathize with the Occupy Wall Street protesters, but he’s still got friends in the financial world.
The Massachusetts Democrat is heading to New York hoping to raise tens of thousands of dollars Thursday at a fundraiser at the home of Charles Myers, a senior investment banking advisor at Evercore Partners. Myers is one of several Wall Street execs listed on the invite soliciting up to $2,500 from attendees for Frank’s reelection committee, according to a copy obtained by POLITICO.
Frank, the co-author of the sweeping financial regulatory reform bill signed into law last year, said in a recent interview with POLITICO that he didn’t see any conflict between supporting the protests and taking financial services money.
“If you take money from them, but you don’t vote [for] the things they want, how does that put you in conflict?” Frank questioned.
Frank said he supports the movement “to the extent that they obey the law” and that he wishes “that kind of energy was around two years ago when we were voting on the financial reform bill. We’d have a tougher bill.”
Frank spokesman Harry Gural said the event isn’t exclusively a Wall Street fundraiser, and will include members of the gay and lesbian community and others.

You will find the rest of the article at this link.
Justice is going to find this cretin one day – if not in this life, then most certainly the next.
When that day comes, I am going to be soooooooo glad that my name is not Barney Frank.

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Is America Headed for a Permanent Underclass?

It appears more and more economists are beginning to think so.
Via marketwatch.com:
By Howard Gold
NEW YORK (MarketWatch) — Slowly, over the last year, it’s begun to dawn on us: The economic recovery isn’t really making a dent in unemployment. 
The public knew this much earlier than economists or pundits did, and as for politicians — don’t ask!
Survey after survey showed Americans didn’t believe the economy was recovering. And people who commented on MarketWatch articles have been downright hostile to any notion that either the markets or the economy were getting better.
But economists need hard data before changing their minds. And over the past few months, more and more of them have concluded that indeed the depth of this particular recession and its roots in the financial crisis have combined with structural changes in the economy to push the so-called “natural” unemployment rate in the U.S. permanently higher.
Read Howard Gold’s analysis “White-Collar Recession, Blue-Collar Depression” on MoneyShow.com.
If they’re right, it would be bad news for millions of Americans whose prospects are bleak enough already. It also would make the U.S. economy more like the Europe we’ve routinely derided — without the social safety net European countries typically provide.
I hope I’m wrong and the fabled American ingenuity in which I strongly believe — and whose most shining star, the great Steve Jobs, died last week — kicks in with new fervor.
But it looks increasingly like that will not be a panacea this time around, either.
Listen to Charles Plosser, president of the Federal Reserve Bank of Philadelphia, in a speech a couple of weeks ago.
“These numbers are troubling, especially when more than 40% of the unemployed, or some six million people, have been out of work for 27 weeks or longer,” he said.
“Millions of unemployed workers may take longer to find jobs because their skills have depreciated or they may need to seek employment in other sectors. These structural issues will take time to resolve. Jobs and workers will need to be reallocated across the economy, which is a long and slow process.”
A structural change
Did you catch the word structural? It was no accident. Here’s Atlanta Fed president Dennis Lockhart in a speech two days earlier.
“To me, it is not clear to what degree structural factors are impeding the filling of job vacancies,” he said.
“And… it is not clear to what extent the long-term unemployed are becoming a class of permanently unemployed, creating a problem resembling the so-called structural unemployment of some European countries.”
Again, notice the use of the word structural — twice. And note how Lockhart speculated about a “class of permanently unemployed” which he compared with “some European countries.”
When top officials start speaking like this within days of each other, something’s up.
You will find the rest of the article at this link.

Mr. Gold goes on to correctly identify the horrible housing market as being one of the impediments to economic recovery. I have long felt that real estate, both commercial and residential, have always been one of the main underpinnings of our economy, as you could always count on prices to at least remain steady, if not actually go up – regardless of the economic conditions.
We do not have that anymore, and as someone who spent over twenty-five years in a related industry, I do not see it coming back anytime in the near future, as I believe we are looking at at least a decade for this to flesh itself out – perhaps even longer.
Gold also mentions that companies are sitting on piles of cash but are not hiring. I wish he had expanded on this a bit, as I think one of the main reasons is that employers are uncertain about, and not a little scared of, massive government regulations that are beginning to come on-line, both the ones that are known as well as what may be coming down the road but are yet unknown.
One thing is certain – as long as the current administration remains in power, there is not going to be any economic recovery to speak of, and it is beginning to look to me like another major downturn is just around the corner.
Better hang on tight, because I think we are in for a long, hard ride.

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Blacks' Jobless Rate is Highest in 27 Yrs


In the 2008 presidential elections, 96% of African-Americans voted for Obama.

Obama in Las Vegas, Oct. 22, 2010 (AP photo/Susan Walsh)

Obama leaves restaurant in Chicago, Oct. 31, 2010.


Annalynn Censky reports for CNNMoney.com, September 2, 2011, that yesterday’s Labor Department August jobs report was dismal, showing that the U.S. did not have even one net job gain last month, and the nation’s unemployment rate remains stuck at 9.1%.

Even more dismal is the jobless picture of blacks, surging to 16.7% in August, the highest level since 1984. In contrast, the unemployment rate for whites fell slightly to 8%.
Black men have it the worst, with joblessness at a staggeringly high 19.1%, compared to 14.5% for black women.
Black unemployment has now remained above 10% for four straight years, and given the economic sluggishness, some experts say it’s safe to predict the rate will remain above 10% for four more years.

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Global Debt – Cancer That's Metastasized

Metastasis [mətas′təsis] pl. metastases:

An active process by which tumor cells move from the primary location of a cancer by severing connections from the original cell group and establishing remote colonies. Because malignant tumors have no enclosing capsule, cells may escape, become emboli, and be transported by the lymphatic circulation or the bloodstream to implant in lymph nodes and other organs far from the primary tumor.

From “When Debt Levels Turn Cancerous,” an op-ed in the UK’s Telegraph, by Ambrose Evans-Pritchard, August 31, 2011.

Now we know where the tipping point lies. Debt becomes poisonous once it reaches 80% to 100% of GDP for governments, 90% of GDP for companies, and 85% of GDP for households. From then on, extra debt chokes growth.

Stephen Cecchetti and his team at the Bank for International Settlements [BIS] have written the definitive paper rebutting the pied pipers of ever-escalating credit. “The debt problems facing advanced economies are even worse than we thought.”

The basic facts are that combined debt in the rich club has risen from 165% of GDP thirty years ago to 310% today, led by Japan at 456% and Portugal at 363%.

“Debt is rising to points that are above anything we have seen, except during major wars. Public debt ratios are currently on an explosive path in a number of countries. These countries will need to implement drastic policy changes. Stabilization might not be enough.”

Demographic atrophy and aging costs will make this even nastier. “Rising dependency ratios put further downward pressure on trend growth, over and above the negative effects of debt.” […]

Below is a downright frightening table of debt-as-%-of-GDP of the OECD (Organization for Economic Cooperation & Development) countries:

While the United States has one of the lower combined debts at 268% of GDP, our debt level still exceeds the 80-100% level when debt becomes a metastasized cancer, choking off economic growth. The latest Labor Dept statistics for the month of August are evidence of the metastasis: Employers added no net jobs and the jobless rate remains stuck at an official 9.1% (the unofficial unemployment rate is much higher, in double digits).
Evans-Pritchard concludes that not all debt should be demonized: “Used wisely and in moderation, it clearly improves welfare. But, when it is used imprudently and in excess, the result can be disaster. And disaster we have. We must prepare for a long hard slog, for the rest of my life and yours.”
Read the full op-ed, here.
Read the BIS report on the global debt problem, here.

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11% of U.S. Houses Sit Empty

Sure doesn’t look at an economic recovery to me!
But then I don’t work for the Fraud’s administration.  😉

Nearly 11 Percent of US Houses Empty
By Diana Olick – CNBC – Jan 31, 2011

America’s home ownership rate, after holding steady for a while, took a pretty big plunge in Q4, from 66.9 percent to 66.5 percent. That’s down from the 2004 peak of 69.2 percent and the lowest level since 1998.
Homeownership is falling at an alarming pace, despite the fact that home prices have fallen, affordability is much improved and inventories of new and existing homes are still running quite high.
Bargains abound, but few are interested or eligible to take advantage.
More concerning than the home ownership rate is the vacancy rate. The Census tables don’t tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that’s only dropped by about 30 thousand in the past year. 38 million are rented, but that’s up by over a million year over year. That means more new households are choosing to rent.
Now to vacancies. There were 18.4 million vacant homes in the U.S. in Q4 ’10 (11 percent of all housing units vacant all year round), which is actually an improvement of 427,000 from a year ago, but not for the reasons you’d think.
The number of vacant homes for rent fell by 493 thousand, as rental demand rose. 471,000 homes are listed as “Held off Market” about half for temporary use, but the other half are likely foreclosures. And no, the shadow inventory isn’t just 200,000, it’s far higher than that.
So think about it. Eleven percent of the houses in America are empty. This as builders start to get more bullish, and renting apartments becomes ever more popular. Vacancies in the apartment sector have been falling steadily and dramatically, why? Because we’re still recovering emotionally from the toll of the housing crash.
Younger Americans have seen what home ownership has done to their friends and families, and many want no part of it. Credit has become very nearly elitist. Home prices, whatever your particular data provider preference might be, are still falling.

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