Welcome to the Third World: Suburbs Become Ghettos

Posted on June 6th, 2014

Walmart woes homeless broke by Steve Sack, The Minneapolis Star Tribune

By John Rubino

Not so long ago, a reasonably-presentable American could live an hour outside of a city and commute in for a government or banking job, thus getting the best of both worlds: city-level wages and a 3,000 square foot house with a big yard for the kids.

But then municipal governments ran out of money and started laying off, while banks, traumatized by their 2009 near-death experience, cut back on mortgage and consumer lending and fired the related staff. The only other jobs available were in service industries like food and retail that paid next to nothing and didn’t offer benefits.

Meanwhile, the cost of living in and commuting from suburbia has been rising. The chart below shows the average price of a gallon of gas, a pretty good proxy for the cost of a daily commute, up by nearly 50% since 2005. At about $3.60 a gallon, the current national average price is 7 cents higher than it was a year ago, with no letup in sight.

96 Month Average Retail Price Chart

All of a sudden our hypothetical suburbanites find themselves with barely enough income to cover their mortgage or rent, let alone their health care, food (which is also way up lately) and gas. And now the kids are about to go off to college…

The result: millions of formerly middle class families living in nice suburban houses or expensive apartments are slowly going broke. The New York Times just published a long, fascinating but very depressing article on the morphing of suburbia to ghetto in California’s Inland Empire. An excerpt follows; the full article is here:

Hardship Makes a New Home in the Suburb

MORENO VALLEY, Calif. — The freeway exits around here are dotted with people asking for money, holding cardboard signs to tell their stories. The details vary only slightly and almost invariably include: Laid off. Need food. Young children.

Mary Carmen Acosta often passes the silent beggars as she enters parking lots to sell homemade ice pops, known as paletas, in an effort to make enough money to get food for her family of four. On a good day she can make $100, about double what she spends on ingredients. On a really good day, she pockets $120, the extra money offering some assurance that she will be able to pay the $800 monthly rent for her family’s three-bedroom apartment. Sometimes, usually on mornings too cold to sell icy treats, she imagines what it would be like to stand on an exit ramp herself.

“Everyone here knows they might have to be like that,” said Ms. Acosta, 40, neatly dressed in slacks and a chiffon blouse, as she waited for help from a local charity in this city an hour’s drive east of Los Angeles. Both she and her husband, Sebastian Plancarte, lost their jobs nearly three years ago. “Each time I see them I thank God for what we do have. We used to have a different kind of life, where we had nice things and did nice things. Now we just worry.”

Five decades after President Lyndon B. Johnson declared a war on poverty, the nation’s poor are more likely to be found in suburbs like this one than in cities or rural areas, and poverty in suburbs is rising faster than in any other setting in the country. By 2011, there were three million more people living in poverty in suburbs than in inner cities, according to a study released last year by the Brookings Institution. As a result, suburbs are grappling with problems that once seemed alien, issues compounded by a shortage of institutions helping the poor and distances that make it difficult for people to get to jobs and social services even if they can find them.

In no place is that more true than California, synonymous with the suburban good life and long a magnet for restless newcomers with big dreams. When taking into account the cost of living, including housing, child care and medical expenses, California has the highest poverty rate in the nation, according to a measure introduced by the Census Bureau in 2011 that considers both government benefits and living costs in different parts of the country. By that measure, roughly nine million people — nearly a quarter of the state’s residents — live in poverty.

Not long ago, the Inland Empire, as the sprawling suburban area east of Los Angeles is known, attracted people hoping to live out that good life. Before the recession, it was booming; housing developments were cropping up all the time, quickly followed by big box stores and strip malls to cater to the new residents.

The region was — and still is — the fastest growing in the state. But the jobs have never really followed the people who come here looking for cheaper housing. The median home value is $325,000 and the median rent is $1,690, according to the real estate database Zillow. That compares with $462,000 and $1,860 in Los Angeles.

For many, those costs are still unaffordable. Unemployment in the region hovers around 10 percent and nearly one-fifth of all residents live in poverty, the highest rate among the largest metropolitan areas in the country. By the official federal measure, nearly one-third of all children here are poor. The number of poor in San Bernardino and Riverside Counties nearly doubled over the last decade.

This is where poor people live now, and this is where they are going to live,” said Alan Berube, an author of the Brookings Institution study. “When poverty moved out of the inner cities it didn’t just go next door, it went 30 miles away. But at the time those families might not have been poor — they were just chasing the middle-class dream. Then, boom, that evaporated.”

Some thoughts

The theme of this series (the previous articles are here) is that much of what affluent people in general and Americans in particular have come to take for granted is turning out to be a delusion bought with debt, unrealistic energy assumptions and fraudulent bookkeeping, and is evaporating as those, um, mistakes come to light. Entitlements like Social Security and Medicare, for instance, only exist in their current forms because so much of their real cost is hidden in largely-unreported “unfunded liabilities.” Cities have been able to offer good roads and quick police response because they pay their cops and road workers with the promise of wildly unrealistic future pensions.

The concept of suburbia, meanwhile, always depended on debt and cheap energy. For a typical American family to heat and cool four times the space of its counterparts in other countries — and to move two tons of metal 100 miles each day just to get to a job — is only possible as long as the rest of the world is kept poor and therefore unable to consume fossil fuels at the North American rate. But as China, India and Brazil get into the game, energy costs are rising. Combine this with the ongoing decline in finance/government jobs, and the unworkability of modern suburbia becomes obvious.

But calling suburbia’s demise inevitable doesn’t make it any less tragic for the victims. Anyone who’s lived in an affluent suburb knows they are (or at least used to be) home to perhaps the world’s highest concentration of innately happy, optimistic beings, namely kids, dogs and adults with big houses and good jobs, none of whom are guilty of anything more than a lack of attention to macroeconomic trends. So while schadenfreude is appropriate for, say, imploding law firms or investment banks, dying suburbs just deserve our pity.    (my emphasis)

By John Rubino for Dollar Collapse

By permission John Rubino

http://dollarcollapse.com

http://dollarcollapse.com/welcome-to-the-third-world/welcome-to-the-third-world-part-13-suburbs-become-ghettos/

Will Detroit Be The First Major Chinese City In The United States?

Posted on May 19th, 2014

Chinese FlagBy Michael Snyder

Is Detroit destined to become a Chinese city?  Chinese homebuyers and Chinese businesses are starting to flood into the Motor City, and the governor of Michigan is greatly encouraging this.  In fact, he has formally asked the Obama administration for 50,000 special federal immigration visas to encourage even more immigration from China and elsewhere.  So will Detroit be the first major city in the United States to be dominated by China?  It could happen.  Once upon a time, Detroit was the greatest manufacturing city in the history of the world and it had the highest per capita income in the entire countryBut now it is a rotting, decaying, bankrupt hellhole that is in desperate need of a savior, and Michigan Governor Rick Snyder appears to be fully convinced that China can be that savior.

To Snyder, encouraging foreigners to invest money and buy up properties won’t cost the state government much, but it could potentially have great benefits

Under a plan to be unveiled Thursday, Gov. Rick Snyder will request 50,000 special federal immigration visas over the next five years to attract foreign professionals who are willing to work and live in the city.

Mr. Snyder, in an interview Wednesday, said that “this is one way for the federal government to step up to provide significant value without cost that could have a huge impact on the city’s future.”

At a news conference announcing his plan, Snyder was not shy about declaring his intentions

“Let’s send a message to the entire world: Detroit, Michigan, is open to the world.”

In other words, Snyder wants China to save Detroit since nobody in this country is going to.

Snyder has also taken a couple of additional steps to encourage immigration and foreign investment, including opening up something called “an Office for New Americans”

Opening an Office for New Americans to attract and help immigrants better adjust to life in Michigan, and designating the state as an Employer Based or EB-5 center to expedite visas and permits for immigrants who want to open business in the state with investments of at least $500,000 and 10 employees.

In essence, Snyder has done just about everything except roll out the welcome mat for the Chinese.

But this is nothing new for Governor Snyder.  In fact, he has been making overtures to China for years

Snyder, who was a businessman before starting his political career, believes that automobiles can no longer change the fate of Detroit. He said that he has learned from the history of the United States that what has made the nation great is immigrants.

In the early 1990s, Snyder went to China to develop the automobile market. After he was elected as the governor of Michigan, he made at least one trip to China every year, with the aim of recruiting talent.

He hopes that well-educated Chinese people can revitalize the Motor City in the new era. And as he desired, after Detroit announced its bankruptcy in 2013, the Chinese began to take the dying city by storm.

Rich Chinese men see Detroit as a rare opportunity for investment outside their home country.

In 2013, without any field investigation, Dongdu International Group of Shanghai — whose assets total 5 billion yuan (US$800 million) — spent US$13.6 million to buy the David Stott building and the Detroit Free Press building at auctions in September.

And when we talk about the Chinese domination of Detroit, this is not something that is just future tense.  This is something that is already happening right now.  For example, the following is an excerpt from a CNBC article that discussed how Chinese companies are already aggressively “putting down roots in Detroit”…

Dozens of companies from China are putting down roots in Detroit, part of the country’s steady push into the American auto industry.

Chinese-owned companies are investing in American businesses and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores, and hiring experienced engineers and designers in an effort to soak up the talent and expertise of domestic automakers and their suppliers.

The transformation that has taken place in that region of the country is absolutely remarkable.

48 percent of the manufacturing jobs in the state of Michigan were lost between December 2000 and December 2010.  Our trade deficit with China was largely responsible for that.

And now we are relying on China to come in and salvage the ruins of our gutted economic infrastructure.

Not only that, but the Chinese are also eagerly buying up homes at extremely depressed prices all over Detroit.

According to CNN, Detroit is already number four on the list of the top 10 destinations for Chinese homebuyers.  In many cases, Chinese buyers are scooping up properties without even looking at them first.  Just check out what one Detroit real estate broker told Quartz last July

“I have people calling and saying, ‘I’m serious—I wanna buy 100, 200 properties,’” she tells Quartz, noting that one of her colleagues recently sold 30 properties to a Chinese buyer. “They say ‘We don’t need to see them. Just pick the good ones.’”

And they aren’t just interested in Detroit.  As I have written about previously, one Chinese company known as “Sino-Michigan Properties LLC” actually had plans to buy 200 acres of land near the little town of Milan, Michigan and turn it into a “China City” with artificial lakes, a Chinese cultural center and hundreds of housing units for Chinese citizens.  For much more on how Chinese buyers are gobbling up real estate all over the nation, please see my previous article entitled “The Chinese Are Acquiring Large Chunks Of Land In Communities All Over America“.

All of this is just another indication of how rapidly the global economic landscape is changing.

Since the late 19th Century, the United States has been the most dominant economic power in the world.

But now that reign is ending.

Just recently, a new study released by the World Bank indicated that China is now the largest economy in the world in terms of purchasing power…

A report out of the World Bank shows rapidly expanding China is poised to overtake the once invincible United States as the world’s largest economy by the end of 2014.

The International Comparison Program looks at exchange rates to reveal purchasing power of different currencies and found that yuan in China will soon pack more punch than the mighty dollar.

Meanwhile, Chinese officials bashed the report as flawed, likely for fear of losing its status as a developing nation and the pollution-spewing perks that come with it.

And a couple of years ago China passed the United States and become the leader in global trade.

As the Chinese economy continues to rise and the U.S. economy continues to decline, the shift in global power is going to become even more dramatic.

Yes, let us hope for the best for our failing economy, but you also might want to teach your kids to speak Chinese just in case.     (my emphasis)

By Michael Snyder for Economic Collapse

By permission Economic Collapse Blog

http://theeconomiccollapseblog.com

http://theeconomiccollapseblog.com/archives/will-detroit-be-the-first-major-chinese-city-in-the-united-states

What’s Been and What’s Next

Posted on May 2nd, 2014

Collapse BuildingBy James Howard Kunstler

The wonder is that more Americans are not ticked off about the state of our country than whatever is happening ten thousand miles away. For instance, how come the US Department of Justice is not as avid to prosecute the pervasive racketeering in the US economy as the State Department is for provoking unnecessary wars in foreign lands on the other side of the planet, over matters that have little bearing on life here? This racketeering, by the way, amounts to a war against American citizens.

I’m speaking especially of the US military racket, the banking and finance rackets, the health care racket and the college loan racket, all of which have evolved insidiously and elegantly to swindle the public in order to support a claque of American oligarchs. In other civilized lands, health care and college are considered the highest priority public goods (i.e. responsibilities of government), and national resources are applied to support them under the theory that bankrupting people for an appendectomy or a bachelor’s degree in electrical engineering is not in the public interest. In our land, that would be considered “socialism.” Instead, we “socialize” the costs of supporting Too Big To Fail banks — so their employees can drive Beemers to their Hamptons summer house parties — and a military machine that goes around the world wrecking one country after another to support a parasitical class of contractors, lobbyists, and bought-off politicians in their northern Virginia McMansions.

Hence, the laughable conceit pinging through the news media lately that some dynastic grifter like Jeb Bush or Hillary Clinton will slide into the White House in 2016 as easily as a watermelon seed popped into a shot glass. I don’t think it’s going to work out that way. The US political system needs to be turned upside down and inside out, and I expect that it will be. Either it happens within the bounds of electoral politics, or you’ll see it playing out in the streets and the windswept plains.

Just a glance around the USA these days ought to nauseate the casual observer. We have an infrastructure for everyday life that is failing in every way imaginable. Are you disturbed by the asteroid belts of vacant strip malls outside your town? Or the empty store fronts along your Main Streets?  What do you suppose these places will be like in ten years when the mirage of shale oil dissolves in a mist of disappointment and political grievance? How are Americans going to feel, do you suppose, when gasoline just isn’t there at a price they can pay, and they are marooned in delaminating strand-board-and-vinyl houses 23 miles away from anything? Does the sheer immersive ugliness of the human imprint on the American landscape not give you the shivers?

Look at the pathetic and disgusting appearance of our cities, which for the most part present themselves as demolition derby arenas or war zones — except the strongholds of the red-white-and-blue oligarchs: Washington, San Francisco, and especially New York, Financialization Central.

What happens at the “magic moment” when Facebook stops being a narcissistic virtual playground for “selfies” and becomes a bulletin board for political revolution? Think that can’t happen here? And what if that revolution is a kind that doesn’t appeal to you — say, a revolution of race hatred, or fascist zealotry, or Marxist gangsterism of the type that took Russia hostage for 70 years?

All this is happening, incidentally, because the supposed best minds in our nation are paying no attention whatsoever to the most important story of our lifetime: the winding down of the techno-industrial global economy. It doesn’t really matter anymore why they don’t get it. Hubris. Greed. Distraction. Denial. All that matters is that they can’t be depended on and when that happens authority loses legitimacy. And when it comes to that, all bets are off.

The disintegration of Ukraine would be best understood by Americans as a mirror of ourselves and our sclerotic republic, poised to sink into poverty and disorder. Everything we do and say rings hollow now. What used to be called The Establishment has run out of ways to even pretend to save itself. We have no idea what’s next, but it’s not going to be more of what’s been.    (my emphasis)

By James Howard Kunstler

By permission James Howard Kunstler

www.kunstler.com

http://kunstler.com/clusterfuck-nation/whats-been-and-whats-next/

Why Housing Has Stalled — And Why Everything Else Will Follow

Posted on May 1st, 2014

Home For Sale Real Estate Sign and Beautiful New HouseBy John Rubino

It’s not easy being a mainstream economist. You spend your life building models that become your professional identity. And when those models fail to describe and predict reality, you’re left wondering about the meaning of it all.

The latest case in point is US housing. Keynesian economic models say that if you lower mortgage rates you get more houses bought, sold and built. A nice, simple piece of cause and effect. But today’s mortgage rates are at levels that would have incited a buying frenzy a generation ago, employment is rising — and home sales, home building and mortgage originations are all flat-lining.

Zero Hedge and Automatic Earth recently posted good discussions of the current state of the housing market. See:

Economists Stunned By Housing Fade

US Housing is Down For the Count

Both articles conclude that housing is weak and getting weaker. But the real question is what this means for the rest of the economy. Is housing a discrete sector dealing with its own supply/demand issues, or is it a sign of things to come for consumer spending, government tax revenues, and business investment?

The argument for the latter scenario is based on the idea that newly-created currency pouring into the financial system pumps up asset prices, which convinces people that they’re rich enough to indulge in new cars, new clothes and nice vacations — and more stocks, bonds and houses.

But this “wealth effect” only works when the amount of debt in the system is low enough for new paper profits to change behavior. If people already carry too much debt, then they don’t feel comfortable borrowing even at historically low interest rates, and inflated asset prices become harder and harder to support. Either they stall or start moving lower, which shifts the wealth effect into reverse and sucks the air out of the economy.

The reason that so many economists didn’t see housing rolling over and don’t think it will affect the rest of the system in any event is that most Keynesian models don’t pay attention to society’s balance sheet. A given amount of new debt is supposed to increase “aggregate demand” by the same amount whether the government and consumers are debt-free or buried under a mountain of obligations taken on in years past. That’s a false assumption of course. Liabilities matter, and the fact that debt levels, especially student loans, are hitting records probably explains why housing isn’t behaving according to script.

The other fuel for a wealth effect-driven boom is the stock market. Here again, a nice pop has coincided with a big jump in debt, in this case margin debt, which investors incur when they borrow against stocks to buy more stocks. Late last year margin debt hit a new record and since then has gone even higher. Now it’s at levels that, based on history, imply less bang for each new borrowed dollar. Going forward it will be harder for investors to generate big returns by borrowing money and buying more equities. Taking profits will begin to seem more and more prudent, until sellers swamp buyers and the markets correct.

NYSE Margin Debit and The S&P 500 Real Values Graph

Click here for a great explanation of why pretty much every stock market valuation measure is now flashing either yellow or red, from John Hussman.

Assuming that equities plateau or start falling, what does that do mean for government’s strategy of using asset bubbles to pump up the consumer economy? Probably it derails it. The question is when.

Hussman notes that periods of extreme overvaluation like today are good indicators of low average stock market returns over the next decade, but not necessarily great trading signals. Stocks might get more overvalued before they stop. But that would raise the risk of a crash, which would have an even more serious impact on investor psyches. So either way, this year or next, the wealth effect will become the poverty effect, and asset owners will become asset sellers.      (my emphasis)

By John Rubino for Dollar Collapse

By permission John Rubino

http://dollarcollapse.com

http://dollarcollapse.com/the-economy/why-housing-has-stalled-and-why-everything-else-will-follow/

Exactly Like 7 Years Ago? 2014 Is Turning Out To Be Eerily Similar To 2007

Posted on April 25th, 2014

Bubble – Photo by Jeff KubinaBy Michael Snyder

The similarities between 2007 and 2014 continue to pile up.  As you are about to see, U.S. home sales fell dramatically throughout 2007 even as the mainstream media, our politicians and Federal Reserve Chairman Ben Bernanke promised us that everything was going to be just fine and that we definitely were not going to experience a recession.  Of course we remember precisely what followed.  It was the worst economic crisis since the days of the Great Depression.  And you know what they say – if we do not learn from history we are doomed to repeat it.  Just like seven years ago, the stock market has soared to all-time high after all-time high.  Just like seven years ago, the authorities are telling us that there is nothing to worry about.  Unfortunately, just like seven years ago, a housing bubble is imploding and another great economic crisis is rapidly approaching.

Posted below is a chart of existing home sales in the United States during 2007.  As you can see, existing home sales declined precipitously throughout the year…

Existing Home Sales from Jan 2007 thru Jan 2008

Now look at this chart which shows what has happened to existing home sales in the United States in recent months.  If you compare the two charts, you will see that the numbers are eerily similar…

Existing Home Sales from July 2013 thru Mar 2014

New home sales are also following a similar pattern.  In fact, we just learned that new home sales have collapsed to an 8 month low

Sales of new single-family homes dropped sharply last month as severe winter weather and higher mortgage rates continued to slow the housing recovery.

New home sales fell 14.5% to a seasonally adjusted annual rate of 385,000, down from February’s revised pace of 449,000, the Census Bureau said.

Once again, this is so similar to what we witnessed back in 2007.  The following is a chart that shows how new home sales declined dramatically throughout that year…

US New One Family Houses Sold Jan 2007 thru Jan 2008

And this chart shows what has happened to new homes sales during the past several months.  Sadly, we have never even gotten close to returning to the level that we were at back in 2007.  But even the modest “recovery” that we have experienced is now quickly unraveling…

US New One Family Houses Sold Oct 2013 thru March 2014

If history does repeat, then what we are witnessing right now is a very troubling sign for the months to come.  As you can see from this chart, new home sales usually start going down before a recession begins.

And don’t expect these housing numbers to rebound any time soon.  The demand for mortgages has dropped through the floor.  Just check out the following excerpt from a recent article by Michael Lombardi

One of the key indicators I follow in respect to the state of the housing market is mortgage originations. This data gives me an idea about demand for homes, as rising demand for mortgages means more people are buying homes. And as demand increases, prices should be increasing.

But the opposite is happening…

In the first quarter of 2014, mortgage originations at Citigroup Inc. (NYSE/C) declined 71% from the same period a year ago. The bank issued $5.2 billion in mortgages in the first quarter of 2014, compared to $8.3 billion in the previous quarter and $18.0 billion in the first quarter of 2013. (Source: Citigroup Inc. web site, last accessed April 14, 2014.)

Total mortgage origination volume at JPMorgan Chase & Co. (NYSE/JPM) declined by 68% in the first quarter of 2014 from the same period a year ago. At JPMorgan, in the first quarter of 2014, $17.0 billion worth of mortgages were issued, compared to $52.7 billion in the same period a year ago. (Source: JPMorgan Chase & Co. web site, last accessed April 14, 2014.)

It is almost as if we are watching a replay of 2007 all over again, and yet nobody is talking about this.

Everyone wants to believe that this time will be different.

The human capacity for self-delusion is absolutely amazing.

There are a lot of other similarities between 2007 and today as well.

Just the other day, I noted that retail stores are closing in the United States at the fastest pace that we have seen since the collapse of Lehman Brothers.

Back in 2007, we saw margin debt on Wall Street spike dramatically and help fuel a remarkable run in the stock market.  Just check out the chart in this article.  But that spike in margin debt also made the eventual stock market collapse much worse than it had to be.

And just like 2007, consumer credit is totally out of control.  As I noted in one recent article, during the fourth quarter of 2013 we witnessed the biggest increase in consumer debt in the U.S. that we have seen since 2007.  Total consumer credit in the U.S. has risen by 22 percent over the past three years, and 56 percent of all Americans have “subprime credit” at this point.

Are you starting to get the picture?  It is only 7 years later, and the same things that happened just prior to the last great financial crisis are happening again.  Only this time we are in much worse shape to handle an economic meltdown.  The following is a brief excerpt from my recent article entitled “We Are In FAR Worse Shape Than We Were Just Prior To The Last Great Financial Crisis“…

None of the problems that caused the last financial crisis have been fixed.  In fact, they have all gotten worse.  The total amount of debt in the world has grown by more than 40 percent since 2007, the too big to fail banks have gotten 37 percent larger, and the colossal derivatives bubble has spiraled so far out of control that the only thing left to do is to watch the spectacular crash landing that is inevitably coming.

You can read the rest of that article right here.

For a long time, I have been convinced that this two year time period is going to represent a major “turning point” for America.

Right now, 2014 is turning out to be eerily similar to 2007.

Will 2015 turn out to be a repeat of 2008?    (my emphasis)

Please feel free to share what you think by posting a comment below…

By Michael Snyder for Economic Collapse

By permission Economic Collapse Blog

http://theeconomiccollapseblog.com

http://theeconomiccollapseblog.com/archives/exactly-like-7-years-ago-2014-is-turning-out-to-be-eerily-similar-to-2007

Nevada Standoff a Symptom of Increasing Authoritarianism

Posted on April 22nd, 2014

Ron PaulBy Ron Paul

The nation’s attention has for the past few weeks been riveted by a standoff in Nevada between armed federal agents and the Bundys, a ranching family who believe the federal government is exceeding its authority by assessing “fees” against ranchers who graze cattle on government lands. Outrage over the government’s use of armed agents to forcibly remove the Bundys’ cattle led many Americans to travel to Nevada to engage in nonviolent civil disobedience in support of the family.

The protests seem to have worked, at least for now, as the government appears to have backed off from direct confrontation. Sadly, some elected officials have inflamed the situation by labeling the Bundys and their supporters “domestic terrorists,” thus justifying any future use of force by the government. That means there is always the possibility of another deadly Waco-style raid on the Bundys or a similar group in the future.

In a state like Nevada, where 84 percent of the land is owned by the federal government, these types of conflicts are inevitable. Government ownership of land means that land is in theory owned by everyone, but in practice owned by no one. Thus, those who use the land lack the incentives to preserve it for the long term. As a result, land-use rules are set by politicians and bureaucrats. Oftentimes, the so-called “public” land is used in ways that benefit politically-powerful special interests.

Politicians and bureaucrats can, and will, arbitrarily change the rules governing the land. In the 19th century, some Americans moved to Nevada because the government promised them that they, and their descendants, would always be able to use the federally-owned land.  The Nevada ranchers believed they had an implied contract with the government allowing them to use the land for grazing. When government bureaucrats decided they needed to restrict grazing to protect the desert tortoise, they used force to drive most ranchers away.

By contrast, if the Nevada land in question was privately owned, the dispute over whether to allow the ranchers to continue to use the land would have likely been resolved without sending in federal armed agents to remove the Bundys’ cattle from the land. This is one more reason why the federal government should rid itself of all federal land holdings. Selling federal lands would also help reduce the federal deficit.

It is unlikely that Congress will divest the federal government’s land holdings, as most in government are more interested in increasing government power than in protecting and restoring private property rights.

A government that continually violates our rights of property and contract can fairly be descried as authoritarian. Of course, the politicians and bureaucrats take offense at this term, but how else do you describe a government that forbids Americans from grazing cattle on land they have used for over a century, from buying health insurance that does not meet Obamacare’s standards, from trading with Cuba, or even from drinking raw milk? That so many in DC support the NSA spying and the TSA assaults on our privacy shows the low regard that too many in government have for our rights.  

History shows us that authoritarian systems, whether fascist, communist, or Keynesian, will inevitably fail. I believe incidents such as that in Nevada show we may be witnessing the failure of the American authoritarian warfare-welfare state — and that of course would be good. This is why it is so important that those of us who understand the freedom philosophy spread the truth about how statism caused our problems and why liberty is the only solution.    (my emphasis)

By Ron Paul for the Ron Paul Institute

http://ronpaulinstitute.org/archives/featured-articles/2014/april/20/nevada-standoff-a-symptom-of-increasing-authoritarianism.aspx

Two More Victims of The Retail Apocalypse: Family Dollar And Coldwater Creek

Posted on April 21st, 2014

Family DollarBy Michael Snyder

Did you know that Family Dollar is closing 370 stores? When I learned of this, I was quite stunned. I knew that retailers that serve the middle class were really struggling right now, but I had no idea that things had gotten so bad for low end stores like Family Dollar. In the post-2008 era, dollar stores had generally been one of the few bright spots in the retail industry. As millions of Americans fell out of the middle class, they were looking to stretch their family budgets as far as possible, and dollar stores helped them do that. It would be great if we could say that the reason why Family Dollar is doing so poorly is because average Americans have more money now and have resumed shopping at retailers that target the middle class, but that is not happening. Rather, as you will see later in this article, things just continue to get even worse for Americans at the low end of the income scale.

I was also surprised to learn that Coldwater Creek is closing all of their stores

Women’s clothing retailer Coldwater Creek Inc. on Friday filed for Chapter 11 bankruptcy after failing to find a buyer said it plans to close its stores by early summer.

Coldwater Creek joins other retailers to seek protection from creditors in recent months as consumers keep a lid on spending.

The company said it plans to wind down its operations over the coming months and begin going-out-of-business sales in early May, before the traditionally busy Mother’s Day weekend.

Coldwater Creek, which has 365 stores and employs about 6,000 people, has five stores in Maryland.

I remember browsing through a Coldwater Creek with my wife and mother-in-law just last year. At the time, my mother-in-law was excited about getting one of their catalogs. But now Coldwater Creek is going out of business, and all that will be left of that store is a big, ugly, empty space.

Of course the fact that a couple of major retailers are closing stores is nothing new. This kind of thing happens year after year.

But what we are witnessing right now is really quite startling. So many retailers are closing so many stores that it is being called a “retail apocalypse“. In a previous article entitled “This Is What Employment In America Really Looks Like…“, I detailed how major U.S. retailers have already announced the closing of thousands of stores so far this year.  If the economy really was “getting better”, this should not be happening.

So why are so many stores closing?

Well, the truth is that it is because the middle class is dying. With each passing day, more Americans lose their place in the middle class and fall into poverty. The following is an excerpt from the story of one man that this has happened to. His recent piece in the Huffington Post was entitled “Next Friday, I’ll Be Living In My Car“…

For the past 13 years, I’ve mostly been doing facility management in several locations across the state. After the position turned into more of a sales role, they laid me off. Since then, I’ve been looking to find any type of work. I’ve applied for food stamps, and I’m waiting for that. I’m mostly eating soup from a food pantry.

I’ve been on several interviews — second, third, fourth interviews — and just haven’t been able to land a job for whatever reason. I definitely have the qualifications and the experience. Last week, I had a job offer that I thought was secure, and we were talking my work schedule. They decided to call me back and go with an assistant rather than a manager.

For a number of applications, I’ve dumbed down my resume. I don’t even go with a resume sometimes, just because I don’t want them to know that I’m educated and have a master’s degree. It shoots me in the foot. They don’t want me because they don’t think I’m going to stay. I don’t blame them. I was making six figures at $60-70 an hour. Now, I’m looking for a $10 an hour job.

There are millions upon millions of Americans that can identify with what that man is going through.

Once upon a time, they were living comfortable middle class lifestyles, but now they will take any jobs that they can get.

Just today I came across a statistic that shows the massive shift that is happening in this country. A decade ago, the number of women working outnumbered the number of women on food stamps by more than a 2 to 1 margin. But now the number of women on food stamps actually exceeds the number of women that have jobs.

Wow.

How could things have changed so rapidly over the course of just one decade?

And sadly, things continue to go downhill. Every day in America, more good jobs are being sent out of the country or are being replaced by technology. I really like how James Altucher described this trend the other day…

Technology, outsourcing, a growing temp staffing industry, productivity efficiencies, have all replaced the middle class.

The working class. Most jobs that existed 20 years ago aren’t needed now. Maybe they never were needed. The entire first decade of this century was spent with CEOs in their Park Avenue clubs crying through their cigars, “how are we going to fire all this dead weight?”. 2008 finally gave them the chance. “It was the economy!” they said. The country has been out of a recession since 2009. Four years now. But the jobs have not come back. I asked many of these CEOs: did you just use that as an excuse to fire people, and they would wink and say, “let’s just leave it at that.”

I’m on the board of directors of a temp staffing company with one billion dollars in revenues. I can see it happening across every sector of the economy. Everyone is getting fired. Everyone is toilet paper now.

Flush.

There is so little loyalty in corporate America these days. If you work for a major corporation, you could literally lose your job at any moment. And you can be sure that there is someone above you that is trying to figure out a way to accomplish the tasks that you currently perform much more cheaply and much more efficiently.

Most big corporations don’t care if you are personally successful or if you are able to take care of your family. What they want is to get as much out of you as possible for as little money as possible.

This is a big reason why 62 percent of all Americans make $20 or less an hour at this point.

The quality of our jobs is going down, but the cost of living just keeps going up. Just look at what is happening to food prices. For a detailed examination of this, please see my previous article entitled “Why Meat Prices Are Going To Continue Soaring For The Foreseeable Future“.

As the middle class slowly dies, less people are able to afford to buy homes. Mortgage originations at major U.S. banks have fallen to a record low, and the percentage of Americans that live in “high-poverty neighborhoods” is rising rapidly

An estimated 12.4 million Americans live in economically devastated neighborhoods, according to American Community Survey data collected from 2008 to 2012. That’s an 11 percent jump from the previous survey, conducted from 2007 to 2011. Even more startling, it’s a 72 percent increase in the population of high-poverty neighborhoods since the 2000 Census.

If nothing is done about the long-term trends that are slowly strangling the middle class to death, all of this will just be the beginning.

We will see millions more Americans lose their jobs, millions more Americans lose their homes and millions more Americans living in poverty.

The United States is being fundamentally transformed, and very few people are doing much of anything to stand in the way of this transformation. Decades of incredibly foolish decisions are starting to catch up with us, and unless something dramatic is done right away, all of these problems will soon get much, much worse.     (my emphasis)

By Michael Snyder for Economic Collapse

By permission Economic Collapse Blog

http://theeconomiccollapseblog.com

http://theeconomiccollapseblog.com/archives/two-more-victims-of-the-retail-apocalypse-family-dollar-and-coldwater-creek

Russia, China, India Bypass the Petrodollar

Posted on April 7th, 2014

Dollar Bills FloatingBy John Rubino

As it tries to punish Russia for the latter’s dismemberment of Ukraine, the West is discovering that the balance of power isn’t what it used to be. Russia is a huge supplier of oil and gas — traded in US dollars — which gives it both leverage over near-term energy flows and, far more ominous for the US, the ability to threaten the dollar’s reign as the world’s reserve currency. And it’s taking some big, active steps towards that goal. As Zero Hedge noted on Tuesday:

Russia Prepares Mega-Deal With India After Locking Up China With “Holy Grail” Gas Deal

Last week we reported that while the West was busy alienating Russia in every diplomatic way possible, without of course exposing its crushing overreliance on Russian energy exports to keep European industries alive, Russia was just as busy cementing its ties with China, in this case courtesy of Europe’s most important company, Gazprom, which is preparing to announce the completion of a “holy grail” natural gas supply deal to Beijing. We also noted the following: “And as if pushing Russia into the warm embrace of the world’s most populous nation was not enough, there is also the second most populated country in the world, India.” Today we learn just how prescient this particular comment also was, when Reuters reported that Rosneft, the world’s top listed oil producer by output, may join forces with Indian state-run Oil and Natural Gas Corp to supply oil to India over the long term, the Russian state-controlled company said on Tuesday.

Rosneft CEO Igor Sechin, an ally of President Vladimir Putin, travelled to India on Sunday, part of a wider Asian trip to shore up ties with eastern allies at a time when Moscow is being shunned by the West over its annexation of Crimea. Rosneft said it had also agreed with ONGC they may join forces in Rosneft’s yet-to-be built liquefied natural gas plant in the far east of Russia to the benefit of Indian consumers.

We just have one question: will payment for crude and LNG be made in Rubles or Rupees? Or in gold. Because it certainly won’t be in dollars.

Rosneft, which is increasing oil flows to Asia to diversify away from Europe, did not provide any additional details but said it had discussed potential cooperation with Reliance Industries and Indian Oil.

It did not have to: it is quite clear what is going on. While the US is bumbling every possible foreign policy move in Ukraine (and how could it not with John Kerry at the helm), and certainly in the middle east, where it is alienating Israel and Saudi just to get closer to Iran, Russia is aggressively cementing the next, biggest (certainly in terms of population and natural resources), and most important New Normal geopolitical Eurasian axis: China – Russia – India.

There is only one country missing – Germany. Because while diplomatically Germany is ideologically as close to the US as can be, its economy is far more reliant on China and Russia, something the two nations realize all too well. The second the German industrialists make it clear they are shifting their allegiance to the Eurasian Axis and away from the Group of 6 (ex Germany) most insolvent countries in the world, that will be the moment the days of the current reserve petrocurrency will be numbered.

To understand why trade deals between Russia, China and India are potentially huge, a little history is useful: Back in the 1970s, the US cut a deal with Saudi Arabia — at the time the world’s biggest oil producer — calling for the US to prop up the kingdom’s corrupt monarchy in return for a Saudi pledge that it would accept only dollars in return for oil. The “petrodollar” became the currency in which oil and most other goods were traded internationally, requiring every central bank and major corporation to hold a lot of dollars and cementing the greenback’s status as the world’s reserve currency. This in turn has allowed the US to build a global military empire, a cradle-to-grave entitlement system, and a credit-based consumer culture, without having to worry about where to find the funds. We just borrow from a world voracious for dollars.

But if Russia, China and India decide to start trading oil in their own currencies — or, as Zero Hedge speculates, in gold — then the petrodollar becomes just one of several major currencies. Central banks and trading firms that now hold 60% of their reserves in dollar-denominated bonds would have to rebalance by converting dollars to those other currencies. Trillions of dollars would be dumped on the global market in a very short time, which would lower the dollar’s foreign exchange value in a disruptive rather than advantageous way, raise domestic US interest rates and make it vastly harder for us to bully the rest of the world economically or militarily.

For Russia, China and India this looks like a win/win. Their own currencies gain prestige, giving their governments more political and military muscle. The US, their nemesis in the Great Game, is diminished. And the gold and silver they’ve vacuumed up in recent years rise in value more than enough to offset their depreciating Treasury bonds.

The West seems not to have grasped just how vulnerable it was when it got involved in this latest backyard squabble. But it may be about to find out.     (my emphasis)

By John Rubino for Dollar Collapse

By permission John Rubino

http://dollarcollapse.com

http://dollarcollapse.com/currency-war-2/welcome-to-the-currency-war-part-14-russia-china-india-bypass-the-petrodollar/

Tangible Versus Financial Assets: The Great Migration

Posted on April 1st, 2014

Financial Asset Allocation word cloudBy John Rubino

Wealth comes in many forms, but only two general categories: tangible and financial. Tangible wealth is made up of real, physical things like buildings, farmland, oil wells, commodities, etc. These things can be seen and touched, and – crucially – they don’t have counterparty risk. That is, no one else has to make good on a promise for a tangible asset to have value.

Financial assets like bank deposits, insurance policies, bonds, and annuities do have counterparty risk, which is to say they depend on someone else’s promise. A bank deposit, for instance, only has value if the bank is willing and able to produce that money when the account holder requests it. And a piece of paper currency is only valuable if the government manages the money supply properly. The part of the economy represented by industries that deal primarily in financial assets is known as FIRE, for finance, insurance, and real estate (real estate in this case referring to mortgages and other property loans that are packaged and traded).

Equities, because they represent ownership shares in public companies, can be either tangible or financial depending on the underlying company. A share of Exxon Mobil stock is a tangible asset because oil wells are real, while a share of Goldman Sachs or JP Morgan Chase would be financial because a bank’s wealth is primarily in the form of loans and other financial instruments.

Over long periods of time these two asset categories tend to move in and out of favor, with tangible assets being more prized in hard, uncertain times when preservation of capital is paramount and counterparty risk is suspect, and financial assets being favored when times are good and people have grown to trust major financial institutions and governments to keep promises and generate big returns.

One of the keys to successful money management is to understand which category is ascendant and therefore the more profitable/safe place to be. During a boom, one should own financial assets until they become relatively-overvalued (as they did in 1929, 1968, and 2000), then shift into tangible assets and own them until they become overvalued (1947 and 1980).

As this is written in late 2013, the world is at one of these inflection points, perhaps the biggest ever. As the following charts illustrate, during the expansion of the credit bubble that began after World War II Americans gradually became more and more optimistic about the future and more trusting of banks and governments. Because the good times seemed likely to continue, using other people’s money to achieve one’s ends came to be seen as increasingly reasonable and wise. Debt expanded and finance (i.e. the debt industry) became an ever-more important part of the economy, while manufacturing in particular and tangible assets in general became relatively less important. The FIRE economy doubled as a percent of GDP between 1947 and 2008 while manufacturing fell by nearly two-thirds. For investors, the standard portfolio of stocks, bonds and dollar cash was a great way to build wealth, with very little long-term downside risk.

Americas FIRE Economy Graph

That faith was shaken by the crash of 2008, which should have marked the end of the post-WWII cycle of credit expansion and ushered in a mass-migration out of finance and into tangible assets. Instead, the world’s fiat currency managers upped the ante, cutting interest rates to zero and flooding the system with newly-created currency in an attempt to re-inflate the financial bubble. They handed the biggest banks effectively-unlimited amounts of free money, and the banks, reluctant to lend so soon after their near-death experience, simply deposited their excess reserves with the Fed, earning a small but risk-free return. Illustrating just how much money the banks were given, even with this hyper-conservative investment strategy, the industry reported record profits in 2013.

And within the banking industry it was the major banks, as the recipients of most of the Fed’s largesse, which reaped most of the rewards. In 2013, the 1.5 percent of banks with the largest asset bases earned about 80 percent of the industry’s profits. Big-bank stocks, meanwhile, were among the best performers of the post-crash bull market. The debt monetization experiment had succeeded in lengthening what was already an extreme pendulum swing towards financial assets.

US Bank Profits Graph

So now the question becomes, will the monetary authorities be able to push the pendulum further, or was the financial asset recovery of 2009-2013 the last gasp of a dying trend? By now you know that we’re firmly in the latter camp. The expansion that began after World War II has produced extraordinary amounts of debt, leverage and complexity, from a financial standpoint achieving “peak” everything. Finance has no further to go, and the great migration out of financial assets and into tangible things is about to begin, on a scale commensurate with the historically-unprecedented size of the post-WWII credit bubble.   (my emphasis)

Excerpted from The Money Bubble, by James Turk and John Rubino.

By John Rubino for Dollar Collapse

By permission John Rubino

http://dollarcollapse.com

http://dollarcollapse.com/precious-metals/tangible-versus-financial-assets-the-great-migration/

Nationwide Home Sales Collapse: There Is No Recovery and This Chart Proves It

Posted on March 24th, 2014

American Pipe Dream by Mike Keefe, Cagle Cartoons

By Max Slavo

Now may be the best time to buy a home. At least that’s what the majority of real estate agents in America will tell you if you ask them how the housing market is doing.

They’ll cite various statistics and give you a “feel” for the market from their personal experiences to convince you this is the case. But if you’re paying attention, then it should be clear that there is, in fact, no recovery in the housing sector. And any gains we may have seen over the last few years are nothing short of a Federal Reserve fueled mirage, much like the stock market.

The following chart from Bank of America is indicative of some serious fundamental problems, not just with the housing market, but the broader economy as a whole.

Progression of First-Time US Homebuyers Graph

If you ask the experts they’ll give a host of reasons for why sales are down, as well as prognostications for why the real estate market is about to turn the corner and head back to new highs.

The weather, of course, is always to blame for lackluster sales in homes and consumer products, and that, apparently, is the case once again. But the National Association of Realtors has, for the first time ever, indicated that there is another key challenge facing home buyers.

Student debt appears to be a factor in the weak level of first-time buyers.

The biggest problems for first-time buyers are tight credit and limited inventory in the lower price ranges,” he said. “However, 20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. In our recent consumer survey, 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle.”

Brown notes the survey results are for recent homebuyers. “It’s clear there are other people who would like to buy a home that are not in the market because of debt issues, so we can expect a lingering impact of delayed home buying,” Brown added.

NAR via Zero Hedge

In short, we’re broke as a nation and we’re broke as individuals.

A recent micro documentary that discussed America’s College Debt Bubble in detail predicted that we would soon begin seeing the fall out from trillion dollar student loans. Apparently, that fall out has already begun.

But not to worry, because housing experts indicate that we may soon see home sales and prices start to rise, an effect that will be fueled by more jobs and rising incomes:

“Going forward it will take sustainable job and income growth to propel would-be-homebuyers back into the market. But with the labor market uneven at best, it may take some time before the housing industry regains the momentum seen earlier last year.”

Housing Wire

As you have probably deduced, there’s one key problem here. There is no job growth. And, any income growth already has inflation priced right in, so purchasing power will not increase and is likely to actually decrease because the rate of inflation is outpacing what Americans are being paid.

Thus, if we are awaiting a real estate recovery and the necessary steps for such a recovery require an improvement in the jobs market then you can forget about it.

The housing market is the pulse of our nation. It was the trigger event for the collapse of 2008, and it looks like it is now indicating what many of us already know: that we are in the midst of another recession within a broader depressionary trend.

Couple this with the Federal Reserve now indicating that they are pulling back on $85 billion in monthly market stimulus, and you can probably guess where this is headed next.

Welcome to Round 2.House In A Noose

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By Max Slavo for SHTF Plan

By permission Max Slavo

www.shtfplan.com

http://www.shtfplan.com/headline-news/nationwide-home-sales-collapse-there-is-no-recovery-and-this-chart-proves-it_03202014

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