Getting Ready For A Dollar Collapse? (Wall Street Journal)

By Alen Mattich | WallStreetJournal.com

August 23, 2010, 1:26 PM GMT

Could the Federal Reserve’s decision to restart its quantitative easing program trigger a dollar collapse?

That’s what John Hussman, a fund manager, argues in his latest weekly note to investors. And the case he makes is strong… as long as one ignores the fact that other central banks don’t want and are unlikely to accept a big dollar devaluation.

Hussman notes that while, longer term, currencies tend to move to equalize purchasing power between different countries, most short-term foreign exchange fluctuations hinge on interest-rate differentials. Here, differences in inflation rates and yields on offer between countries will determine the flow of capital, which, in turn, will affect relative changes in currencies. So countries with relatively high interest rates can see their currencies trade well above where they should do according to purchasing power parity arguments.

So much for the theoretical background.

Hussman then notes that two thirds of the Fed’s balance sheet is made up of securities issued by government-sponsored enterprises, namely Fannie Mae and Freddie Mac, that are being bailed out by the Treasury, which is to say these are holdings the Fed won’t be able to reverse easily. In other words, this represents the more or less permanent printing of new money.

When set against the fact that the government has lost control of its finances, the long-run inflationary threat posed by fiscal and monetary policy is huge. But the dollar’s position is made even more precarious by the zero interest rates being pursued by the Fed in response to economic weakness.

On an interest-rate parity basis, then, the dollar needs to depreciate rapidly and considerably–in order to offset the future inflationary surge and the current lack of yield.

But this is exactly what the U.S. economy needs, isn’t it? A dollar devaluation.

Well, yes, on purchasing power parity grounds, the dollar ought to be depreciating to improve the relative position of U.S. exporters. After all, the U.S. trade balance has been worsening lately, even as the economy’s rebound runs out of steam.

The problem is the speed of adjustment and the fact that a sudden dollar devaluation would likely overshoot its equilibrium level. In other words, the dollar could become too cheap too fast. Such a sudden and dramatic move could cause all sorts of disruptions and trigger a sudden and rampant bout of inflation.

And were the rest of the global economy in a healthy state and were exchange rates fully flexible, this is indeed what might happen.

But China’s dollar peg is likely to prove a drag on a massive dollar devaluation. At the same time, countries like the U.K. are likely to respond to any sudden appreciation of their own currencies with their own programs of quantitative easing. As might the European Central Bank. Or there could be more direct currency intervention–the sort the Japanese and the Swiss have tended to resort to.

The upshot is likely to be not just a U.S.-driven inflationary push, but a global one, where all countries aim to devalue their way to economic health at the same time.

The result will benefit borrowers at the expense of savers worldwide. But, then again, maybe given the state of global imbalances–too much debt in the U.S. and other Anglo-Saxon economies; too many assets held by Chinese, Japanese and oil-producing countries–maybe a massive bout of global inflation is the only way forward.

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Week in Review with Jerry Robinson

By Jerry Robinson | FTMDaily.com

What a dismal week for economic and geopolitical news!

GEOPOLITICAL TENSIONS

Of course, the big news last week came out of the Middle East. The U.S. announced new peace talks set to take place next month between Israel and the Palestinians. And after years of delays, Iran finally began loading tons of uranium fuel into their first nuclear reactor (Russian-built) on Saturday. Iran claims that they have a right to produce nuclear energy, and in an unusual gesture offered to allow oversight of their nuclear activities. Iran maintains that its intentions are peaceful.  Israel immediately denounced Iran’s new nuclear power plant calling it ‘totally unacceptable.’ In response to the news of an atomic Iran, Israeli Foreign Ministry spokesman Yossi Levy said:

“It is totally unacceptable that a country that so blatantly violates resolutions of the (United Nations) Security Council, decisions of the International Atomic Energy Agency and its commitments under the NPT (non-proliferation treaty) should enjoy the fruits of using nuclear energy.”

The U.S. appeared to disregard the political urgency of the news. Darby Holladay of the U.S. State Department told news agencies:

“We recognize that the Bushehr reactor is designed to provide civilian nuclear power and do not view it as a proliferation risk.”

However, the U.S. did admit that while Iran posed no immediate threat, they could potentially have a bomb through the conversion of fuel into weapons-grade uranium within 12 months. According to sources within Washington, U.S. and Israeli intelligence would detect such conversion “within weeks” and would have ample time to engage Iran in military strikes.

In classic form, Iran’s leader warned that an attack on the reactor would be met with a global and “painful” response.

I would expect that we will witness rising tensions followed by a full-scale war between the West and Iran within the next 18-36 months.

ECONOMIC MALAISE

On the economic front, the weekly jobless claims reached 500,000, a 9 month high. Consumer bankruptcies hit a 5 year high this week.

And it appears that the U.S. government’s “chicken in every pot” policy regarding home ownership may be coming to an end as Washington attempts to “untangle the wires” of America’s housing and mortgage crisis.

Besides, “renting” instead of “owning” is fast becoming a new normal in today’s tumultuous economy. At least so says Fortune magazine in it’s new article entitled: Five ‘new normals’ that really will stick

Flight to Safety

Flight to Safety… In other news, small investors appear to be losing their appetite for risk by fleeing the stock market for the perceived “safety” of the bond market. According to the Investment Company Institute, small investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year. Click the chart to the right for more.

No Liquidity… And in a sign that American’s lack liquidity, Fidelity Investments reported this week that hardship withdrawals from 401(k) retirement saving plans rose to the highest level in 10 years during the second quarter.

When this news is coupled with the fact that most working Americans have very little liquid savings, it offers further proof that the Mutual Fund industry has successfully trained the American public to max out their 401(k) before building adequate liquid savings reserves.

The Mutual Fund industry sponsors many popular financial commentators today who fervently preach the “max out your 401(k)” gospel. Suze Orman and Dave Ramsey are just two examples of the droves of financial personalities who have been paid handsomely to pay little attention to the importance of adequate and diversified liquidity prior to “maxing out a 401(k).”

However, as of late, “abundant liquidity” has become a hallmark of many financial gurus like Orman and Ramsey. Unfortunately, this sudden emphasis upon liquidity comes late for the millions of Americans facing foreclosures and bankruptcies.

Consider for a moment that most people’s two largest assets are their primary residences and their 401(k)’s. Both of these assets are explicitly government-controlled. Diversification is the only weapon against a cash-strapped government hungry for revenue. When the government comes looking for cash where do you think it is going to look? With nearly $20 trillion in personal retirement assets, why not slap a higher distribution tax on your 401(k) and traditional IRA? Could they? Of course. What could you do about it? Nothing. Except maybe curse the Suze Ormans and Dave Ramseys of the world who told you to stuff money into a 100% government-controlled asset. Why not just put your money into a box and hand the government the key and ask them to give it back to you at retirement? That, by the way, is the definition of a 401(k)… minus Mutual Fund fees.

Across the Pond… Since making the news a couple of months ago, the country of Greece has imposed strict austerity measures. The result? Greece is in the grip of a depression. Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies are on the rise. In addition, stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places. Has Greece entered the death spiral? You can read more here.

Big Brother Alert… There’s more troubling news on the growing threat of government intrusion.

Biometrics R&D firm Global Rainmakers Inc. (GRI) announced today that it is rolling out its iris scanning technology to create what it calls “the most secure city in the world.” In a partnership with Leon — one of the largest cities in Mexico, with a population of more than a million — GRI will fill the city with eye-scanners. That will help law enforcement revolutionize the way we live — not to mention marketers.

The intrusion of constant government monitoring is slowly becoming a reality. We are already tracked like animals. But they won’t stop until they have total and complete control.

Is the real price of gold over $2,000 right now? My weekend radio interview with GATA Chairman, Bill Murphy, offered some unusual information. According to Murphy, the artificial suppression of the price of gold has caused the precious metal to be severely undervalued. Murphy states in the interview that if the price manipulation were to end, gold would be trading at around $2300/oz! If you are interested in the precious metals sector, do yourself a favor and take time to listen to this weekend’s radio program. You can listen to the entire show here. Or, if you prefer to listen to the show on iTunes, click here.

That’s all for this update. Look for a few blog updates this week and an excellent radio program next weekend. My guest will be geopolitical and economic analyst, Puru Saxena. Mr. Saxena will be joining me from Hong Kong.

Have a prosperous week!

About Jerry Robinson

Jerry Robinson is an economist, published author, columnist, international conference speaker, and the editor of the financial website, FTMDaily.com. In addition, Robinson hosts a weekly radio program entitled Follow the Money Weekly, an hour long radio show dedicated to deciphering the week’s economic news.

Economic Recovery or Financial Armageddon? – LISTEN NOW!

Follow the Money Weekly radio host Jerry Robinson talks with popular author and financial commentator, Michael J. Panzner regarding the most pressing economic issues. The interview includes Panzner’s outlook on inflation in the U.S., as well as his opinion about precious metals and agriculture.

Part 1

Part 2

Listen to the entire radio show, and hear more interviews like this one at our website: http://www.ftmdaily.com/ftmweekly.php

Competing currency being accepted across Mid-Michigan

ConnectMidMichigan.com
Posted: 07.12.2010 at 8:13 PM

New types of money are popping up across Mid-Michigan and supporters say, it’s not counterfeit, but rather a competing currency.

Right now, you can buy a meal or visit a chiropractor without using actual U.S. legal tender.

They sound like real money and look like real money. But you can’t take them to the bank because they’re not made at a government mint. They’re made at private mints.

“I sell three or four every single day and then I get one or two back a week,” said Dave Gillie, owner of Gillies Coney Island Restaurant in Genesee Township.

Gillie also accepts silver, gold, copper and other precious metals to pay for food.

He says, if he wanted to, he could accept marbles.

“Do people have to accept dollars or money? No, they don’,” Gillie said. “They can accept anything they want or they can refuse to accept anything.”

He’s absolutely right.

The U.S. Treasury Department says the Coinage Act of 1965 says “private businesses are free to develop their own policies on whether or not to accept cash, unless there is a state law which says otherwise.”

READ MORE…

Congress to raise retirement age?

The Washington Times Online Edition

Both parties mull raising retirement age

House leaders get frank about Social Security cost

** FILE ** House Majority Leader Steny H. Hoyer, Maryland Democrat  (AP Photo)
House Majority Leader Steny H. Hoyer, Maryland Democrat (AP Photo)

By Patrice Hill

8:58 p.m., Tuesday, July 13, 2010

In a rare departure from this year’s intense political posturing over the soaring budget deficit, House leaders of both parties recently signaled that they are prepared to tackle a leading long-term liability — Social Security — by raising the retirement age.

Politicians often talk in generalities about cutting the deficit, but discussing specifics about how Congress may curb the growth of the biggest and most popular programs such as Social Security and defense is controversial and usually taboo in an election year.

But lessons learned from the debt crisis in Europe and worries that the U.S. could soon confront its own debt crisis, with annual deficits projected at about $1 trillion for years to come, may have prompted the unusually frank comments by House Majority Leader Steny H. Hoyer, Maryland Democrat, and House Minority Leader John A. Boehner, Ohio Republican.

Speaking in unrelated forums, both leaders stressed that with people living longer and enjoying better health in their senior years, the nation simply can’t afford any longer to be paying out benefits for as long as 30 years after retirement.

“We need to look at the American people and explain to them that we’re broke,” Mr. Boehner said in an interview last week with the Pittsburgh Tribune-Review.

Besides raising the retirement age for full Social Security benefits to 70 for people now 50 or younger, Mr. Boehner suggested curbing benefit growth by tying cost-of-living increases to the consumer price index rather than growth in wages, and providing benefits only to those who need them.

“If you have substantial non-Social Security income while you’re retired, why are we paying you at a time when we’re broke?” he said. “We just need to be honest with people.”

Read more…

Trade Deficit Gets Even Worse

Dirk van Dijk, CFA, On Tuesday July 13, 2010, 12:33 pm EDT

In May, the trade deficit expanded to $42.27 billion from $40.32 billion in April. Relative to a year ago, the trade deficit is up 70.0%, but May of a year ago marked the low point in the trade deficit after world trade collapsed following the 2008 financial meltdown. The May trade deficit was also significantly worse than the $39.5 billion that was expected.

If there is a silver lining in these numbers it is that it went up for the “right reason — both imports and exports are expanding. That means that world trade is growing, and that is generally a good sign for world economic growth.

For the month, our exports rose by 2.37% to $152.25 billion, and are up 21.0% from a year ago. On the other hand, our imports rose by 2.90% to $194.52 billion on the month and are up 29.1% (on a larger base) from a year ago. Thus we are well on our way towards President Obama’s objective of doubling out exports over the next five years. If the year over year pace could be maintained, we would reach the goal In less than four years.

But so what? If our imports also double over the next five years, the trade deficit will rise, not fall. The first graph below (from http://www.calculatedriskblog.com/) shows the path of imports and exports since the mid-1990’s.

While I would rather see both imports and exports rising than falling, what is most important is getting the trade deficit under control. It should be noted that the trade deficit is still not as bad as it was two years ago, when it was at $61.18 billion — and that was not an aberrant number.

The collapse in world trade that followed the financial meltdown caused a massive shrinkage in the trade deficit, and the shrinkage of the trade deficit was just about the only thing that was holding the economy together then. For example, if not for the fall in the trade deficit in the first quarter of 2009, GDP would have fallen by 9.0% instead of by “just 6.4%.

Goods Side Not So Good

The problem is entirely on the goods side of the equation; we regularly run a surplus in services. In May, the goods deficit was $54.46 billion, up from $52.54 billion in April and $35.90 billion a year ago. On the service side, our surplus fell slightly to $12.19 billion from $12.22 billion in April, but up from $11.4 billion a year ago.

Both imports and exports of goods rose, with exports up 2.84% on the month, and up 26.5% year over year. On the other hand, imports rose 3.11% for the month and are up 34.0% from a year ago. Put another way, for each dollar of goods (grain, airplanes, etc.) we sell abroad, we are buying $1.51 worth of goods (oil, clothing, toys, etc.) from overseas. That is up from $1.42 a year ago, when we simply had stopped buying anything from anybody, but down from the $1.65 level of two years ago, before it all hit the fan.

Our Thirst for Oil

Within the goods deficit, the chronic problem is our thirst for oil, although it was not the culprit in this month’s increase. The oil deficit fell to $21.46 billion in May as oil prices softened from $24.07 billion in April, but up from $13.56 billion a year ago. The increase from a year ago is mostly due to a higher price for oil.

Still, oil was responsible for 50.76% of the overall trade deficit (and 39.4% of the goods deficit) in May. While that is an improvement from the 59.7% of the total trade deficit last month (and 54.5% a year ago), it remains by far the single biggest reason we run chronic trade deficits.  The second graph (also from http://www.calculatedriskblog.com/), breaks down the trade deficit into its oil and non-oil parts.

It is clear to me that until we manage to shift away from oil as our primary transportation fuel, we are never really going to be able to solve the trade deficit problem. If we never solve the trade deficit problem, the country will go bankrupt. Cheap oil prices like we had in the late 1990’s can help ameliorate the problem in the short term, but in the long term are really destructive as they encourage more and more wasteful use of oil.

We have been facing the same basic oil problem now since Nixon was in the White House and have yet to get serious about dealing with the issue. Yes, we have tinkered around the edges, with some administrations doing a bit more productive tinkering (Carter, Obama) and other administrations paying lip service to energy conservation but actively pursuing a cheap-energy-and-use-more policy (Reagan, Bush II).

We simply do not have the reserves to be able to drill our way out of our need to import oil. We have only 2.1% of the world’s reserves, but account for 8.5% of the world’s oil production and a staggering 21.7% of the world’s consumption (data from the most recent BP statistical Review of World energy). Even before we ran into problems in the Gulf, it is clear that the problem ultimately is in the amount of oil we consume. So much for “Drill, Baby, Drill. Domestic production may be somewhat helpful, but is it going to solve the problem? No way.

Command & Control vs. Cap & Trade

To really get serious about reducing our consumption of oil would require one of two things. The first option would be strict command and control, as in rationing of oil. Other command and control procedures would be mandating new building codes and higher mileage standards for cars and trucks. That is not a path that makes a lot of sense — it is horribly inefficient, and opens up major avenues for corruption and political favoritism, particularly if one gets down to the level of rationing.

The other approach is to put a price on carbon, though either a direct carbon tax or a cap-and-trade system. To the extent a cap-and-trade system is 100% auction-based to get the permits to emit carbon, it is the economic equivalent of a carbon tax. To the extent that some parts of the economy are protected and given carbon credits for free, it is like the income tax system: loaded with loopholes, credits and deductions.

The first cap-and-trade system was put in place by the first President Bush to deal with sulfur dioxide emissions that were the key source of acid rain. It worked spectacularly well, and today acid rain is not considered a serious problem in this country (it is still a very big problem in places like China and India). It also cost FAR less than was anticipated when the program was put in place.

The key was that it put a price on the emission of sulfur. That gave an incentive to the market to do its magic. Companies instantly attacked the low-hanging fruit, and sulfur emissions plummeted.

The same thing would happen with carbon emissions if we put a price on them. Oil and coal are the biggest sources by far of carbon emissions. Natural gas, of which we have abundant domestic supplies (abundant, but not infinite or inexhaustible) produces far less carbon per BTU.

Most importantly, we have a lot of it here and it does not need to be imported. To the extent we import it, we do so from Canada, whose economy is tightly linked to ours through NAFTA. Making a major effort to shift to natural gas as a transportation fuel would be a big step in resolving the trade deficit problem.

Putting a price on carbon, or a tax on oil consumption, would encourage people to cut back on their consumption of oil. Auto companies would compete more on fuel efficiency and less on power and towing capability. They would do so because that is what customers would be interested in.

The main problem is that a tax on oil or on carbon would be somewhat regressive. The poor tend to spend a higher percentage of their income on gasoline and on electricity than do the rich. The money raised through a carbon tax (or the auctioning off of permits under a cap-and-trade system) would have to be rebated back into the economy through other tax cuts.

A weak economy is not the time to be dramatically cutting the fiscal deficit, which is what a carbon tax would do if not offset. Ideally, the revenues raised would go towards cutting other taxes that most hinder job creation, and are very regressive. Payroll taxes are just that: extremely regressive (start paying on the first dollar of income, and when you get to about $100,000 of income for the year, the Social Security taxes stop) and a hindrance to job creation (employers are directly taxed every time they say “welcome aboard to a new employee).

What Drove the Trade Deficit Increase This Time?

What really drove the increase in the trade deficit this month was the non-oil goods side. That deficit rose to $32.31 billion from $27.78 billion in April and $22.38 billion a year ago, increases of 16.3% and 44.4%, respectively. The rise is most likely related to the strength of the dollar in recent months as a result of the crisis in Europe. This is the principal transmission mechanism for the trouble on that side of the pond to affect the U.S. economy.

The trade deficit really is a much bigger problem than is the fiscal deficit. It is the trade deficit that is responsible for our being deep in debt to the rest of the world, not the budget deficit. That is something that cannot be argued, it is simply an accounting identity.

For every dollar of goods and services we buy that is more than the amount of goods and services we sell abroad each month, we have to either be selling off assets or going into debt by that amount, dollar for dollar. This month, we effectively sold off Kraft Foods (NYSE: KFTNews); if the deficit is the same size next month, we will effectively sell off Bristol Myers (NYSE: BMYNews). How much longer before we don’t have anything left? Actually it is mostly T-bills and notes that are being sold abroad, but the key point is that it is the trade deficit, not the budget deficit, that drives how far we are in hock to the rest of the world.

Think about it this way: during WWII, our budget deficits were far larger as a percentage of GDP than what we are running right now. If it were budget deficits that drove us to be in hock to the rest of the world, we would have owed just about everything to the rest of the world at the end of the war. That was not the case; we emerged from the end of the war as by far the world’s biggest creditor, not the worlds largest debtor — like we are now.

Inflation or Deflation?

The strength of the dollar in recent months is not a good thing. We need for the dollar to slowly fall in value relative to other major currencies. Yes, that would result in higher inflation, but right now, more inflation would be a good thing — the economy is on the edge of deflation. Deflation would raise real interest rates and make it impossible for many debtors to be able to repay their loans, leading many of them to default. Deflations lead to depressions, and need to be avoided at all costs.

The problem is that every country in the world wants to be a net exporter. Unfortunately, unless new trade routes are opened to Mars, that can’t happen. For too long, the U.S. consumer has been the buyer of last resort, sucking up the excess production of the rest of the world.

We have benefited from lower prices for most tradable goods. All the stuff that stocks the shelves of Wal-Mart (NYSE: WMTNews) and Target (NYSE: TGTNews) would have been much more expensive, and the Wal-Mart shoppers worse off if it were not for cheap imports from abroad. However, it has also meant fewer jobs, most notably in manufacturing in this country. It has been a party that the country has been putting on the credit card. I’m not sure exactly where the limit is on the card, but I think we must be getting close to it.

Trade Deficit – In Summation

Owing trillions of dollars to China is a very different thing than owing trillions to domestic investors and pension funds. Getting serious about reducing our consumption of oil would be a good place to start bringing down the trade deficit, and a lower dollar would also be very helpful.

The trade deficit is like a cancer on the economy. We don’t feel it acutely at any given time, but slowly but surely it is going to kill the economy. Not just put it into a recession for a few quarters (although each dollar increase in the trade deficit translates to a dollar decline in GDP) but a real tangible and permanent decline in the standard of living for the country.

The trade deficit is a far bigger problem than the budget deficit. Right now a budget deficit is needed to fill a huge gap in aggregate demand as the consumer is trying to deleverage and repair his balance sheet. There is no such temporary need for a trade deficit — it is simply harmful to the economy, both short-term and long-term.

The chronic trade surplus countries — most notably China, Japan and Germany — need to take steps to increase their domestic consumption. Their currencies need to rise in value so their consumers will buy more from the rest of the world, and the U.S. — which is by far the biggest deficit country — will buy less from them. A stronger Euro though would make the problems faced by the Southern European countries that much worse.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.

The 50 most unbelievable facts about the U.S. economy

Tyler Durden's picture

Submitted by Tyler Durden on 07/09/2010 17:02 -0500 | Zerohedge.com

As we close on another week replete with ugly economic data and the usual bizarro counterintuitive market, here is a summary of the 50 most underreported facts about the state of the US economy, courtesy of the Coto report. After reading these it almost makes sense that the market has become completely desensitized to the sad reality now pervasive in this country. Readers are encouraged to add their own observations to this list. Surely if the list is doubled, the market will go up to 72,000 instead of just 36,000.

#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.

#49) It is being projected that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.

#48) If you went out and spent one dollar every single second, it would take you more than 31,000 years to spend a trillion dollars.

#47) In fact, if you spent one million dollars every single day since the birth of Christ, you still would not have spent one trillion dollars by now.

#46) Total U.S. government debt is now up to 90 percent of gross domestic product.

#45) Total credit market debt in the United States, including government, corporate and personal debt, has reached 360 percent of GDP.

#44) U.S. corporate income tax receipts were down 55% (to $138 billion) for the year ending September 30th, 2009.

#43) There are now 8 counties in the state of California that have unemployment rates of over 20 percent.

#42) In the area around Sacramento, California there is one closed business for every six that are still open.

#41) In February, there were 5.5 unemployed Americans for every job opening.

#40) According to a Pew Research Center study, approximately 37% of all Americans between the ages of 18 and 29 have either been unemployed or underemployed at some point during the recession.

#39) More than 40% of those employed in the United States are now working in low-wage service jobs.

#38) According to one new survey, 24% of American workers say that they have postponed their planned retirement age in the past year.

#37) Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.  Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005.

#36) Mortgage purchase applications in the United States are down nearly 40 percent from a month ago to their lowest level since April of 1997.

#35) RealtyTrac has announced that foreclosure filings in the U.S. established an all time record for the second consecutive year in 2009.

#34) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in March 2010, an increase of nearly 19 percent from February, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.

#33) In Pinellas and Pasco counties, which include St. Petersburg, Florida and the suburbs to the north, there are 34,000 open foreclosure cases.  Ten years ago, there were only about 4,000.

#32) In California’s Central Valley, 1 out of every 16 homes is in some phase of foreclosure.

#31) The Mortgage Bankers Association recently announced that more than 10 percent of all U.S. homeowners with a mortgage had missed at least one payment during the January to March time period.  That was a record high and up from 9.1 percent a year ago.

#30) U.S. banks repossessed nearly 258,000 homes nationwide in the first quarter of 2010, a 35 percent jump from the first quarter of 2009.

#29) For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.

#28) More than 24% of all homes with mortgages in the United States were underwater as of the end of 2009.

#27) U.S. commercial property values are down approximately 40 percent since 2007 and currently 18 percent of all office space in the United States is sitting vacant.

#26) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010.  That was almost twice the level of a year earlier.

#25) In 2009, U.S. banks posted their sharpest decline in private lending since 1942.

#24) New York state has delayed paying bills totalling $2.5 billion as a short-term way of staying solvent but officials are warning that its cash crunch could soon get even worse.

#23) To make up for a projected 2010 budget shortfall of $280 million, Detroit issued $250 million of 20-year municipal notes in March. The bond issuance followed on the heels of a warning from Detroit officials that if its financial state didn’t improve, it could be forced to declare bankruptcy.

#22) The National League of Cities says that municipal governments will probably come up between $56 billion and $83 billion short between now and 2012.

#21) Half a dozen cash-poor U.S. states have announced that they are delaying their tax refund checks.

#20) Two university professors recently calculated that the combined unfunded pension liability for all 50 U.S. states is 3.2 trillion dollars.

#19) According to EconomicPolicyJournal.com, 32 U.S. states have already run out of funds to make unemployment benefit payments and so the federal government has been supplying these states with funds so that they can make their  payments to the unemployed.

#18) This most recession has erased 8 million private sector jobs in the United States.

#17) Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of 2010.

#16) U.S. government-provided benefits (including Social Security, unemployment insurance, food stamps and other programs) rose to a record high during the first three months of 2010.

#15) 39.68 million Americans are now on food stamps, which represents a new all-time record.  But things look like they are going to get even worse.  The U.S. Department of Agriculture is forecasting that enrollment in the food stamp program will exceed 43 million Americans in 2011.

#14) Phoenix, Arizona features an astounding annual car theft rate of 57,000 vehicles and has become the new “Car Theft Capital of the World”.

#13) U.S. law enforcement authorities claim that there are now over 1 million members of criminal gangs inside the country. These 1 million gang members are responsible for up to 80% of the crimes committed in the United States each year.

#12) The U.S. health care system was already facing a shortage of approximately 150,000 doctors in the next decade or so, but thanks to the health care “reform” bill passed by Congress, that number could swell by several hundred thousand more.

#11) According to an analysis by the Congressional Joint Committee on Taxation the health care “reform” bill will generate $409.2 billion in additional taxes on the American people by 2019.

#10) The Dow Jones Industrial Average just experienced the worst May it has seen since 1940.

#9) In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1.  Since the year 2000, that ratio has exploded to between 300 to 500 to one.

#8) Approximately 40% of all retail spending currently comes from the 20% of American households that have the highest incomes.

#7) According to economists Thomas Piketty and Emmanuel Saez, two-thirds of income increases in the U.S. between 2002 and 2007 went to the wealthiest 1% of all Americans.

#6) The bottom 40 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

#5) If you only make the minimum payment each and every time, a $6,000 credit card bill can end up costing you over $30,000 (depending on the interest rate).

#4) According to a new report based on U.S. Census Bureau data, only 26 percent of American teens between the ages of 16 and 19 had jobs in late 2009 which represents a record low since statistics began to be kept back in 1948.

#3) According to a National Foundation for Credit Counseling survey, only 58% of those in “Generation Y” pay their monthly bills on time.

#2) During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.

#1) According to the Tax Foundation’s Microsimulation Model, to erase the 2010 U.S. budget deficit, the U.S. Congress would have to multiply each tax rate by 2.4.  Thus, the 10 percent rate would be 24 percent, the 15 percent rate would be 36 percent, and the 35 percent rate would have to be 85 percent.