25 Reasons Why the U.S. Economy is Likely to be Much Worse in the Second Half of 2012 Than in the First Half
By Ben Hart
1) Justice Roberts’ decision on ObamaCare
A quick look at the economic data shows that the economic recovery stopped on virtually the same day Obama signed ObamaCare into law on March 24, 2010
This chart from The Heritage Foundation proves it:
Remember, the summer of 2010 was supposed to be the “Summer of Recovery.” Joe Biden was predicting the U.S. economy would start creating 500,000 new jobs per month that summer for as far as the eye can see.
That never happened. Ever since ObamaCare passed, the U.S. economy has been stuck at around 1.5 percent GDP growth and around 120,000 new jobs per month created, and declining for the past four months. In May, the U.S. economy added just 69,000 new jobs.
Now with the Supreme Court upholding ObamaCare, there’s no reason to think the U.S. economy will improve. We’re far more likely to see further economic deterioration, as businesses keep their cash on the sidelines until they figure out exactly how much ObamaCare is going to add to the cost of hiring a new employee. Many businesses will just give up on building new factories and plants in the United States and instead look to build them in China, India, or elsewhere.
It’s worth noting that the Obama Administration declared the recession over in June of 2009 — before a single Obama policy had kicked in.
So we were in recovery (we’ll call it “The Bush Recovery’) until Obama killed it.
2) Plunging Consumer Confidence
Consumer confidence has dropped to its lowest level since December, 2011, according to a new University of Michigan Tompson Reuters survey. Consumer confidence, which measures how consumers view their personal finances and prospects, averaged about 87 in the year before the 2008 recession. It now stands at 67.8 in June, falling from 74.3 in May.
That’s a huge drop. The U.S. economy depends on consumer spending to grow. Consumers don’t spend when they’re worried about the economy and their own personal financial health. They batten down the hatches.
3) Rising Home Foreclosure Rate
One in every 639 homeowners in America received a foreclosure notice in May — that’s just in May. That’s a staggering 9 percent increase over April and is 4 percent higher than May of 2011.
4) American home values continue to fall
Incredibly, the value of the average American home continues to fall and is at the lowest value since the housing crisis began in 2006. This according to Standard & Poor’s Case-Shiller home-price index.
Since the wealth of most Americans is tied up in their home, and since the home is by far the biggest investment for most Americans, this means Americans continue to get poorer. The wealth of the American family has declined 40 percent since 2008.
Nearly half of America’s homes are underwater — meaning they owe the mortgage holder more than the home is worth.
5) The true unemployment rate is at least 11.1% percent — not the 8.2% official unemployment rate.
If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7% then vs. 63.6% today—the U-3 unemployment rate would be 11.1%.
But if you use the broader, U-6 measure of unemployment which includes the discouraged plus part-timers who wish they had full time work. That unemployment rate is 14.5%. That’s the true unemployment rate.
Even the Obama Administration says we’re not likely to see much change for the better here in 2012.
6) The run on European banks is underway
Back if Great Depression days, you knew a run on the banks was happening because there were huge crowds outside the banks desperate for the doors to open so depositors could run in and get their money out.
We don’t see that any more. Today, depositors just take their money out electronically. So its not as dramatic. But here’s what’s happening according to a report from Citi analyst Matt King:
In Greece, Ireland, and Portugal, foreign deposits have fallen by an average of 52 percent, and foreign government bond holdings by an average of 33 percent, from their peaks. The same move in Spain and Italy, taking into account the fall that has taken place already, would imply a further $272.17 billion and $270.9 billion in capital flight respectively, skewed towards deposits in the case of Spain and towards government bonds in the case of Italy….Economic deterioration, ratings downgrades and especially a Greek exit would almost certainly significantly accelerate the timescale and increase the amounts of these outflows.”
These charts show just how dire the situation is . . .
The collapse of European banks will have a domino effect here in the U.S.
There are signs this already happening . . .
7) J.P. Morgan
The New York Times reports that JP Morgan’s trading loss was not $2 billion, but is more like $9 billion.
That starts to be real money, even for a giant banking institution like this one.
Remember, it was the collapse of the much-smaller Lehman Brothers that triggered the banking crisis in 2008 and the current economic collapse.
But what if JP Morgan goes under? Bank of America is in much shakier shape than JP Morgan. But with the bank runs now underway full throttle in Europe, the dominoes can easily start to fall here.
Then we’re back in the 1930s all over again.
8) Draconian new emissions regulations from the Obama EPA
The EPA’s avalanche of new regulations is requiring many plants and factories to be retrofitted to meet new emissionsstandards. This is causing, just so far, 106 coal-fired power plants to shut down across America. These plants produce 10 percent of America’s electric power.
No doubt more will shut down in the coming months.
No new coal plants can affordably be built with Obama’s new regulations for CO2 emissions. CO2 (carbon dioxide) is what you exhale when you breathe. It’s not a pollutant or a poison. But Obama and the EPA think it contributes to global warming, even though the earth has actually cooled during the last 10 years.
Electricity costs have been rising at about 4 percent per year under Obama. But the EPA’s most draconian regulations have yet to kick in. Many energy experts are forecasting a tripling of your monthly electricity bill by the end of 2014.
9) Obama’s Cap & Trade-by-Fiat Program
Congress rejected Obama’s so-called Cap & Trade plan to curb Co2 emissions as a way to stop global warming. So Obama is enacting his own Cap & Trade regime through regulatory fiat by the EPA, which he controls. Under his regulatory plan, U.S. businesses and industry will have to meet his Clean Energy Standard, meaning that American business and industry will be required to meet Obama’s goals for use of so-called renewable energy (even though coal, oil and natural gas are renewable energy sources, but these are not what Obama means by renewable). The trouble is: we have no renewable energy sources that can compete with oil, coal, and natural gas.
Wind? Solar? Algae? Solyndra? Ha!
10) Absurd CAFE Standards Starting to Kick In
Obama’s EPA has imposed a corporate average fuel economy (CAFE) standard requiring auto makers to build cars that allow their entire auto fleet to achieve 54.5 milers on per gallon of gas on average by 2025. The Center for Automotive Research projects this will increase the cost of a car by $10,000.
11) TRILLION-dollar-plus deficits as far as the eye can see.
For 2011, the Congressional Budget Office (CBO) projects the federal budget will show a deficit of close to $1.5 trillion. Even the rosiest economic forecasts don’t have the annual budget deficit drop to under a TRILLION for the next decade if current laws remain the same. Today’s $16 TRILLION national debt is forecast by Obama’s own Office Management and Budget to be $24 TRILLION by 2020 under current law.
12) No room left for Fed to maneuver.
The Federal Reserve is now charging banks .75% for money. That’s essentially free money for banks. The Fed can’t drop rates much further to try to pump some gas into the economy. This is the cheapest money has been in our lifetime.
The reason money is so cheap is because people are not borrowing. People are not borrowing because the business climate stinks, the stock market is where it was a decade ago, and there’s not much to invest in. Plus, the tighter regulations on credit (in the wake of the banking, credit, and housing market collapse of 2008) make it tougher for people to qualify for credit. Donald Trump and Rupert Murdoch say that even they can’t get loans anymore.
13) Biden’s admission that we are in a depression, not a recession.
Vice President Joe Biden says the American economy remains “a depression for millions and millions of Americans.”
Given the insider access he has to information as Vice President, this means things are even worse than we think.
14) Plummeting Value of the Dollar
There are two ways to measure the value of the dollar and its astonishing decline. One way is against other currencies — most of which are also plummetting in value. The second way (the better way) is against the value of gold. Here’s a chart that shows the decline of the dollar both ways:
Measuring the dollar against the value of gold is the far better more accurate indication of how the dollar is doing because the destruction of the Euro and the Yen are hiding the dollar’s true decline.
This chart shows why every day you hold onto dollars, you lose wealth. And since the stock market has declined in value since the Dow Jones Industrial Index high of 1,416 in October of 2008, stocks are not proving to be much of a hedge against your vanishing dollar value either.
The only real option for investors is to buy gold or other commodities that at least tend to keep their value. The problem with this is that gold is a non-productive investment. You don’t help put people to work by buying gold. You don’t build factories that way.
But, sadly, it makes more sense to buy gold today than invest in the stock market.
This is how deflation happens. People stop buying and investing and start buying and hoarding gold.
The recent Facebook IPO fiasco will make people even less likely to invest in the stock market — that is, invest in American business.
15) Skyrocketing Food Prices
Are you wondering why your $1 is not going very far in the supermarket?
According to CNBC: “Prices for coffee, fruit, bacon, pasta and a slew of other food items have registered gains over the past year as high as 40 percent.”
And just in April of 2012 alone (the most recent period when data is available), CNBC reports that “grapes went up nearly 30 percent, cabbage jumped about 17 percent and orange juice surged more than 5 percent.”
The cost of meat is zooming skyward also. Since 2009, the price index of livestock has risen 138%.
No wonder more and more families are relying on Tuna Helper.
16) Obama “Amnesty by Fiat” Program for Illegal Aliens
Congress rejected Obama’s so called DREAM Act — which would have granted permanent residency to illegal aliens who complete high school, who have lived in the U.S. for five years, and who have committed no felonies. So Obama enacted his own broader version of the DREAM Act by fiat Executive Order, thus directly defying Congress. According to Obama’s executive order, illegal aliens can stay in America if they are under the age of 30, have been in America for at least five years, are in school or have graduated from high school, and have committed no felonies.
An estimated 1.4 million illegal aliens qualify for this program. This will make it even tougher for unemployed American workers to get jobs and will put added financial pressure on already struggling schools, hospitals, and social services.
17) Obama’s Assault on the States
In the wake of the U.S. Supreme Court’s ruling that Arizona police have the right to check the immigration status of those they arrest for other crimes, the Obama Administration announced that it will suspend existing contracts with Arizona police over enforcement of federal immigration laws.
The Obama Department of Homeland Security also announced that it will no longer answer calls from Arizona police concerning captured illegal immigrants. The Obama Justice Department has also launched civil rights lawsuits against Phoenix Sheriff Joe Arpaio for taking it on himself to enforce U.S. immigration law in Phoenix.
In addition, the Obama Justice Department has launched lawsuits against other states that have immigration laws similar to Arizona.
The Obama Administration is doing all it can to encourage the flood of illegal aliens into United States.
18) Rising personal and business bankruptcies
For the most recent 12-month period ending in March 2012, there were 1,367,006 bankruptcy filings in U.S. bankruptcy courts. That’s compared to 901,927 bankruptcies that were filed in 2008 during the teeth of the recession.
The economy is NOT improving.
19) Rising municipal government bankruptcies
Stockton, California, is the largest American city ever to declare bankruptcy. Stockton is filing under Chapter 9 of the U.S. bankruptcy code.
But Stockton isn’t the only American city in deep financial trouble. Other cities teetering on the edge of bankruptcy include Detroit, MI; Pontiac, MI ; Salem, NJ; Camden, NJ; Harrison, NJ; Jefferson County, AL; Central Falls, RI; Strafford County, NH; Riverdale, Il.
If we start to see a casecade of municipal government bankruptcies, what will that do for the muni-bond market?
It will then become difficult, if not impossible, for local governments to finance infrastructure projects.
This puts us on the road to banana republic status.
20) Rising poverty rates
The U.S Census Bureau currently reports that 15.1% of the population is living in poverty. This is the highest number in the U.S since 1959.
21) More Americans than ever on public assistance
The New York Times reports that almost half of America now receives government benefits, and that government benefits such as Social Security and Medicare, make up nearly a fifth of Americans’ income. These programs now consume 66 cents of every dollar of federal and state revenue.
We now have 45 million Americans on food stamps — 14 percent of the population. On Obama’s first day in office, 28 million Americans were on food stamps. That’s a 43% increase in Americans on food stamps since Obama took office. In the words of New Gingrich, America has become a Food Stamp Nation.
22) A federal government actively trying to create more government dependents
More than one in seven Americans are on food stamps, but the federal government wants even more people to sign up for the safety net program.
The U.S. Department of Agriculture has been running radio ads for the past four months encouraging those eligible to enroll. The campaign is targeted at the elderly, working poor, the unemployed and Hispanics.
Here’s an example of one of these ads:
23) Unsustainable fiscal crises in state governments
We hear most about California’s budget crisis. California is running an $11 billion budget deficit for the year. But Illinois is far worse, with a staggering $44 billion budget shortfall — by far the worst in the nation.
Other states are also doing even worse than California, including . . . New Jersey with a $33.4 billion shortfall; Massachusetts $22.8 billion; and Connecticut $14 billion.
24) Taxmageddon on January 1
Starting January 1, 2013, Americans will face a $494 billion tax increase, the highest ever in one year. These tax increases include: expiration of the Bush tax cuts; expiration of the two-year FICA tax holiday; new Minimum Alternative Tax rules; the elimination or reduction of many cherished tax deductions; assorted ObamaCare taxes that start kicking in. In all there are some 20 major tax increases embedded in the ObamaCare law. A few have started already, but the most onerous ObamaCare tax increases kick in after the November 6 elections.
We will also see a dramatic change in the death tax. Under current law the estate tax exemption is scheduled to drop from $5,120,000 in 2012 to $1,000,000 in 2013, and the estate tax rate is scheduled to jump from 35% to 55%.
So let’s say you’ve worked hard all you life and would like to help your kids and grandkids get a boost in life.
That concept goes away on January 1, 2013. Unless you die between now and then, your children and grandchildren will pretty much have to start out life with nothing (or not much). Cash-poor, but land rich family farms will no longer be able to be passed onto future generations. They’ll have to be sold off to pay the death tax.
How might that affect the price of food in America?
The average American family will see a tax increase in 2013 of $4,138.
How do you think that will that affect consumer spending?
25) Curiously improving poll numbers for Obama
Despite all this, Obama’s poll numbers have been creeping up in recent days — apparently getting a bump from the Supreme Court upholding ObamaCare as Constitutional by a 5-4 vote. This means businesses will no longer assume a Romney victory on November 6th, and instead will keep cash parked on the sidelines.
Of course, if Obama does win on November 6, expect to see trillions of dollars vanish from the U.S. economy as money heads for the exits for places to invest such as China, India, and elsewhere. In other words, many of America’s innovators and producers will just pull a John Gault.
Then what happens to America?
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