US - Decay Hidden by Denial & Dillusion

40 'Frightening' Facts On The Fall Of The US Economy 05-27-13 Michael Snyder of The Economic Collapse blog, via ZH

40 Statistics About The Fall Of The U.S. Economy That Are Almost Too Crazy To Believe

If you know someone that actually believes that the U.S. economy is in good shape, just show them the statistics in this article.  When you step back and look at the long-term trends, it is undeniable what is happening to us.  We are in the midst of a horrifying economic decline that is the result of decades of very bad decisions.  30 years ago, the U.S. national debt was about one trillion dollars.  Today, it is almost 17 trillion dollars.  40 years ago, the total amount of debt in the United States was about 2 trillion dollars.  Today, it is more than 56 trillion dollars.  At the same time that we have been running up all of this debt, our economic infrastructure and our ability to produce wealth has been absolutely gutted.  Since 2001, the United States has lost more than 56,000 manufacturing facilities and millions of good jobs have been shipped overseas.  Our share of global GDP declined from 31.8 percent in 2001 to 21.6 percent in 2011.  The percentage of Americans that are self-employed is at a record low, and the percentage of Americans that are dependent on the government is at a record high.  The U.S. economy is a complete and total mess, and it is time that we faced the truth.

The following are 40 statistics about the fall of the U.S. economy that are almost too crazy to believe...

#1 Back in 1980, the U.S. national debt was less than one trillion dollars.  Today, it is rapidly approaching 17 trillion dollars...

#2 During Obama's first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.

#3 The U.S. national debt is now more than 23 times larger than it was when Jimmy Carter became president.

#4 If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.

#5 The federal government is stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day.

#6 Back in 1970, the total amount of debt in the United States (government debt + business debt + consumer debt, etc.) was less than 2 trillion dollars.  Today it is over 56 trillion dollars...

#7 According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001.  That number dropped to 21.6 percent in 2011.

#8 The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.

#9 According to The Economist, the United States was the best place in the world to be born into back in 1988.  Today, the United States is only tied for 16th place.

#10 Incredibly, more than 56,000 manufacturing facilities in the United States have been permanently shut down since 2001.

#11 There are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then.

#12 According to the New York Times, there are now approximately 70,000 abandoned buildings in Detroit.

#13 When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars.  By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.

#14 Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little "m") for the entire year.  In 2012, our trade deficit with China was 315 billion dollars.  That was the largest trade deficit that one nation has had with another nation in the history of the world.

#15 Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.

#16 According to the Economic Policy Institute, the United States is losing half a million jobs to China every single year.

#17 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, less than 65 percent of all men in the United States have jobs.

#18 At this point, an astounding 53 percent of all American workers make less than $30,000 a year.

#19 Small business is rapidly dying in America.  At this point, only about 7 percent of all non-farm workers in the United States are self-employed.  That is an all-time record low.

#20 Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned.  By 2007, that figure had soared to $1.48.

#21 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

#22 According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.

#23 The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

#24 According to the U.S. Census Bureau, more than 146 million Americans are either "poor" or "low income".

#25 According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government.  Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.

#26 Overall, the federal government runs nearly 80 different "means-tested welfare programs", and at this point more than 100 million Americans are enrolled in at least one of them.

#27 Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse.  It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

#28 As I wrote recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.

#29 At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for every single household in the United States.

#30 Right now, there are approximately 56 million Americans collecting Social Security benefits.  By 2035, that number is projected to soar to an astounding 91 million.

#31 Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.

#32 Today, the number of Americans on Social Security Disability now exceeds the entire population of Greece, and the number of Americans on food stamps now exceeds the entire population of Spain.

#33 According to a report recently issued by the Pew Research Center, on average Americans over the age of 65 have 47 times as much wealth as Americans under the age of 35.

#34 U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

#35 As I mentioned recently, the homeownership rate in America is now at its lowest level in nearly 18 years.

#36 There are now 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.

#37 45 percent of all children are living in poverty in Miami, more than 50 percent of all children are living in poverty in Cleveland, and about 60 percent of all children are living in poverty in Detroit.

#38 Today, more than a million public school students in the United States are homeless.  This is the first time that has ever happened in our history.

#39 When Barack Obama first entered the White House, about 32 million Americans were on food stamps.  Now, more than 47 million Americans are on food stamps.

#40 According to one calculation, the number of Americans on food stamps now exceeds the combined populations of "Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming."

US FISCAL - Budgeting Casualties - Federal, State and Local

The Collapse Of Public Infrastructure Spending In One Chart 05-24-13 BI

The big news today is that a bridge in Washington collapsed, throwing cars into the water. Amazingly, nobody died. This may revive debate about the need to spend more on infrastructure, which would have multiple positive effects. Nothing is likely to happen, however. That being said, here's a chart of public construction spending (TLPBLCONS) as percentage of GDP. You can see, public construction spending is lower than its been in over 20 years.

US PENSIONS - A Ticking Time Bomb in a 70% Consumption Economy

Ben Bernanke's Latest Casualty: The Pension Plan 05-27-13 WaPo Report via ZH

With every passing day, the destructive consequences of Ben Bernanke's ruinous monetary policy on the broader economy become more and more apparent.

Nowhere is this more evident than the observation of a record high stock market - benefiting just a tiny portion of the population - correlating directly with the record number of Americans on food stamps - the wealth effect "trickle down", or lack thereof, for everyone else (not to mention an economic growth rate four years after the "end of the recession" that is the worst recovery in recorded history).

Less hyperbolically, this can be seen empirically in the anti-correlation between the US economy and corporate profits. Through his "central" scheming, Bernanke has turned the discounting paradigm on its face, leading to a world in which the market no longer "discounts" or anticipates any information or fundamentals, but merely cares about how big the next latest and greatest liquidity hit will be, and in which there is an inverse correlation between profitability and general economic well-being.

And so on, and so on: which is to be expected from a world gone upside down as a result of the biggest doomed economic experiment ever conducted on a global scale to preserve a system which can only survive following debt liquidation, and yet one which we are told day in and day out needs just a little bit more debt... to fix a problem resulting from record debt.

For the the latest "unintended casualty" of Bernanke and his ZIRP policy, we look at corporate pension funds, which as WaPo reports, are finally starting to crack under the weight of pervasive central planning, brought to the brink by none other than the Chairman's "good intentions."

On the surface this makes no sense: after all pension funds invest in assets - the same assets that Bernanke's policy of serial cheap credit funded bubble creation are supposed to inflate. And they do. The only problem is that pension funds also have offsetting matching liabilities: or the amount of money a company has to inject in order to cover future retiree obligations. And in a period of low discount rates brought by a record low interest rate environment, these liabilities painfully and relentlessly increase when discounting future cash needs.

Quote WaPo:

Assets held by pension plans of the firms that make up the Standard & Poor’s 500-stock index increased by $113.4 billion in 2012, according to a report by Wilshire Associates, a consulting firm. But largely because of low rates, company liabilities increased even more: by $173.6 billion. That left the median corporation’s pension plan 76.9 percent funded, with just over $3 of assets for every $4 of liabilities.

Low interest rates hurt firms that provide pensions in two ways: They are required to set aside more money to pay for future pensions even as the liabilities appearing on their balance sheets grow larger.

And therein lies the rub: because while the NPV of future benefits in a bubbly environment results in higher asset values, it is the plunging rate used in the DCF that is dooming companies to a slow, painful cash bleeding death as they scramble to prefunded already underfunded (and ever more so) liabilities.

Visually, this is as follows:

In brief: the longer ZIRP drags on, the uglier the monetary reality that private (for now) workers will have to face when they finally choose to retire.

“Low interest rates are certainly a significant issue for employers,” said Judy A. Miller, director of retirement policy for the American Society of Pension Professionals and Actuaries. “The lower the interest rates, the higher the value of the benefits you have to provide and the higher the required contributions.”

Fear not though: in a world in which the recovery is so strong, Mark-to-Market accounting for banks still has to come back four years after it was killed at the altar of central planning, corporations are the next to realize that out of sight means out of mind, and what better way to ignore the pension issue than to just move it "off the books."

[F]irms are moving pension liabilities off their books. Last year, Verizon Communications transferred $7.5 billion in pension obligations — about a quarter of its total — to Prudential Insurance, to limit its liabilities and bolster its financial profile. The move came after General Motors paid Prudential to assume $25 billion of its pension risks.

Congress is in on it too now:

Congress moved last year to provide relief from the pension damage being caused by low rates by allowing firms to temporarily use a 25-year interest rate average when calculating how much money they had to funnel into funds.

“It phases out over the next five or six years,” said Joshua D. Rauh, a Stanford University professor who studies pension plans.

But the relief does not change how pension liabilities appear on a firm’s balance sheet. In addition, firms could find that under the new law, their pension-related liabilities could quickly rise after 2013 unless interest rates return to more normal levels. This has dampened the appeal of the change for many companies.

Nothing like legislating 'magic' accounting into law, allowing companies to reap the benefit of low interest rates and soaring asset values, while pricing in the future benefits of inflation that will magically come (but not impair the asset values of course) and sweep all their underfunded liability concerns away.

Of course, since everyone is in on the scheme - most certainly the workers who stands to receive less and less the longer the lies are perpetuated - it has no chance of working. Instead, what companies are doing is simply cutting off the "welfare" illusion tentacle at the core, and finally starting to freeze pension funds.

That has left many firms to conclude that it is best to freeze their pension plans, cutting off contributions for current workers and making new employees ineligible for the benefit.

At ILM, which sells commercial insurance to building-supply manufacturers and retailers, the pension plan had been a source of pride in a benevolent company culture developed over 117 years.

“Personally, I think a pension is a tremendous benefit,” said Don W. Blackwell, ILM’s chief financial officer and treasurer. “This is a very valuable benefit to our employees. We did not want to take it away.”

But with the pension plan causing the firm to report a $8 million liability at the end of last year and with no end in sight for low interest rates, “we waved the white flag,” Blackwell said. “It was a waiting game and we blinked. We had no idea that interest rates would remain this low.”

There is still the hope and the illusion that as companies switch from traditional pensions to that most direct bubble beneficiary, the 401(k), that everyone will live happily ever after? Well no: here is the side by side comparison:

Once it froze its pension plan, ILM started to contribute 3 percent of each worker’s salary to a 401(k) plan. It’s something, but nowhere near enough to provide the same level of retirement security that the company’s pension did.

Blackwell said an employee with a $40,000 annual salary who received a 3 percent raise each year, set aside 7 percent of his pay for retirement and received a 3 percent company contribution would wind up with roughly a third less money in his retirement fund after 25 years than he would have with the pension plan.

In the private sector, surprisingly, some still prefer realism over lies:

Still, ILM employees are taking the pension fund’s demise in stride. “To be honest, I am surprised that the plan was not frozen a while back,” said Traci Barber, 42, a service center manager who has been with ILM nearly 13 years. “I was surprised when I took this job that it even offered a pension plan.”

Knotts, the firm’s vice president for human resources, said that many employees do not seem to understand the security that a pension’s guaranteed monthly payments offer in retirement. “When people get hired here,” she said, “they are not thinking about that. All of the questions are about salary and paid time off.”

She was among the executives who fretted over cutting the pension plan, deciding to back the decision even though she knew it is bad for employees. Keeping it, she said, would be even worse for the company.

David J. Riese, who retired as vice president of claims in 1997 after 16 years at ILM, said he values the security provided by his company pension. Current employees, he added, will not have it as good.

At least someone dares to admit defeat in the face of ubiquitous central planning. And as always, the private sector is the first to realize that in the New Normal, all workers will be worse off.

The question we have is how long until the same logic and methodology, which is absolutely universal, is transferred from the private to the public sector, and how long until the tens of millions of state and federal servants, most of whom do their tedious and menial tasks with a matched enthusiasm, only so they can reap the benefits of a luxurious lifetime pension upon early retirement, still based on a discounting math from the Old Normal?

Because the start of the unwind of the welfare myth, if only in the private sector for now, should be making those enforcing a collapsing statist regime, made worse by Ben Bernanke's endless tinkering in what was formerly a free market, should be making the guardians of the status quo very, very nervous... and certainly has the disciples of the Bismarckian welfare state delusion on their toes, because they can see very well what is coming down the road.