PrintAugust 28, 2010
Debt, Depression, Default. America is in Deep Trouble
Consumers are spending less. Small retailers are closing shop -- even cable television subscriptions are seeing a loss in revenue. Mike Shedlock of globaleconomicanalysis.blogspot.com cites reports by Jacqui Cheng of Ars Technica, Mercedes Cardon of Finance Daily, and Jon Chavez of the Toledo Blade, highlighting America's economic woes with the following:
- Cable TV companies saw a noticeable drop in the total number of subscribers... a first for an industry that has thus far seen nothing but growth.
- In Toledo, Ohio, ‘for lease' signs have proliferated along the Monroe Street-Talmadge Avenue corridor, once the crown jewel of commercial real estate. Even more shocking are signs that feature ‘free rent.'
- More small retailers have left this corridor than have arrived in the last few years.
- Saks is closing two stores in Plano, Texas and Mission Viego, California. This is in addition to stores closed in San Diego, CA; Portland, OR; and Charleston, SC.
- Abercrombie and Fitch are closing nearly 60 under-performing stores in 2010.
- Blockbuster video rental chains are slashing stores by the dozens.
- American Apparel is close to defaulting on its loans and may also have to close stores.
- Wal-Mart, which usually does well during difficult economic times, is also concerned about customers being quite cautious about spending.
- A&P will close 25 grocery stores across five states.
- American Eagle announced that 28 Martin + Osa stores would shut down.
- French Connection 17 has closed all 21 of its stores in Japan and has closed all but six of its U.S. stores.
- Winn-Dixie Stores will close 30 older and under-performing stores by September 22nd of this year.
- Bebe Stores will shut 48 facilities.
- Men's Wearhouse now plans to close 50-60 Tux stores this year.
Consider the number of people that will be laid off when these stores are closed. Think of how these store closings will affect lease prices.
Coupled with these facts is the August 26th announcement that "Standard & Poor said in order for the United States to keep its AAA-rating, it is ‘very important' for Congress to deal with the cascading United States debt. China's largest credit rating agency Dagong Global Credit Rating Company was less diplomatic: they simply downgraded the U.S. credit rating to AA."
Furthermore in Bloomberg Businessweek, Matthew Brown writes that "[w]hile the U.S. government's debt is 53 percent of GDP, one of the lowest ratios among developed nations, its debt as a percentage of revenue is 358 percent, one of the highest[.]"
Though "outright sovereign default in large advanced economies remains an extremely unlikely outcome[.]...current yields and break even inflation rates provide very little protection against the credible threat of financial oppression in any form it might take."
According to Daniel Hoffman, as of August 14, 2010:
The total amount of national debt is $13.3 trillion.
The debt per citizen is $42,983.
The debt per tax payer [remember not everyone pays taxes] is $120,194
According to the Congressional Budget Office, by 2020 the debt will explode to $23.5 trillion.
Investors Business Daily states that "no doubt alarmed at the headlong plunge into fiscal irresponsibility by both the White House and the Democrat-dominated Congress, Wall Street is starting to fret that the recklessness could touch off another financial crisis."
If the debt continues to soar, and under Obama, it will, "the dollar would implode and prices for foreign goods -- which now make up 15% of our economy -- would soar. Private investment would shrink, and along with it, private-sector GDP."
Thus, items we customarily purchase, i.e., shoes, clothes, cars would become too expensive. Consequently, the American financial woes would result in a global financial decline. The enviable American standard of living will decrease and the next generation will be saddled with insurmountable debt, not of their making.
Investors are understandably wary of investing. The economy is being crippled every day and the debt crisis brought on by the Obama administration is crippling America and future generations of Americans.
And, yet, all of this is avoidable. It is all due to unrestrained spending by the federal government. And, furthermore, the canard that the "rich will pay for it all" is nonsense. This is another refusal to face facts. According to Larry Elder, "[f]or the 2007 tax year (the latest income tax data year released by the IRS) the top 1 percent of income earners, those making over $410,000 a year, paid 40 percent of all federal income taxes. [But] the top 5 percent, those making about $160,000 a year or more, paid 60 percent of all federal income taxes." Moreover, "the rich are not the only ones to benefit from the Bush tax cuts. Extending cuts to the non-rich would ‘cost' the government about $140 billion next year. Extending the cuts to the rich would ‘cost' about $40 billion next year. If the tax cuts only benefit the rich, why would the Treasury "lose" more money from the non-rich than it would ‘lose' from the rich?"
As corporations continue to downsize, the "rich" get poorer; the middle-class get poorer and everyone suffers. As Margaret Thatcher once said, "the trouble with Socialism is that eventually you run out of other people's money."
The "tea bags" need to be thrown into the Potomac every day until Congress and Obama get the message. Better yet, the voting booth levers need to be pressed very hard come November to unseat those who are ruining America.
Hat Tip: John Rolls
Eileen can be reached at middlemarch18@gmail.com
