How Did The Crisis Happen?

We attempt to analyze and explain how and why we find ourselves in the greatest financial crisis since the Great Depression

Stock Buybacks at fastest pace since 2007

In yet another sign of market over-exuberance, the Wall Street Journal reports Share Repurchases Are at Fastest Clip Since Financial Crisis.

Corporations bought back $338.3 billion of stock in the first half of the year, the most for any six-month period since 2007, according to research firm Birinyi Associates. Through August, 740 firms have authorized repurchase programs, the most since 2008.
The growth in buybacks comes as overall stock-market volume has slumped, helping magnify the impact of repurchases. In mid-August, about 25% of nonelectronic trades executed at Goldman Sachs Group Inc., excluding the small, automated, rapid-fire trades that have come to dominate the market, involved companies buying back shares. That is more than twice the long-run trend, according to a person familiar with the matter.

Large Repurchases in 2014
Share Repurchases

Rewarding Investors – Not

Share Repurchases2
Contrary to the above graphic (and common wisdom), companies do not reward investors by buying back shares at inflated prices. Companies bought back the most shares in 2007, right before the crash, and the least shares at the most opportune time in 2009.

In practice, insiders buy low and sell high, and pocket cash from options all the way up. Insider activity is exactly the opposite of how companies treat shareholders.

How long can America burn up wealth?

Abandoned Packard Automobile Factory - Photo by Albert DuceHow long can this nation continue to consume more wealth than it produces?

The trade deficit is one of the biggest reasons for the decline of the U.S. economy, but many Americans don’t even understand what it is.

We are buying far more stuff from the rest of the world than they are buying from us.  That means that money is constantly leaving the country than is coming into the country.  In order to keep the game going, the nations whose products we purchase lend us the money to buy those products my purchasing our debt. Lately, we just have the Federal Reserve create new money.  Our current debt-fueled lifestyle is dependent on this cycle continuing.  In order to live like we do, we must consume more wealth than we produce.  If someday we are forced to only live on the wealth that we create, it will require a massive adjustment in our standard of living.  We have become great at consuming wealth but not so great at creating it.

But as a result of running gigantic trade deficits year after year, we have lost tens of thousands of businesses and millions of jobs. America is being deindustrialized at a staggering pace.

When the trade deficit increases, it means that even more wealth, even more jobs and even more businesses have left the United States.

In essence, we have gotten poorer as a nation.

Have you ever wondered how China has gotten so wealthy?

Just a few decades ago, they were basically a joke economically.

So how in the world did they get so powerful?

Well, one of the primary ways that they did it was by selling us far more stuff than we sold to them.  If we had refused to do business with communist China, they never would have become what they have become today.  It was our decisions that allowed China to become an economic powerhouse.

Last year, we sold 122 billion dollars of stuff to China.

That sounds like a lot until you learn that China sold 440 billion dollars of stuff to us.

We fill up our shopping carts with cheap goods that are “made in China”, and they pile up mountains of money which they lend back to us so that we can buy more.

Who is winning the game?

Following are the yearly trade deficits with China since 1990.  Can spot the trend?

1990: 10 billion dollars

1991: 12 billion dollars

1992: 18 billion dollars

1993: 22 billion dollars

1994: 29 billion dollars

1995: 33 billion dollars

1996: 39 billion dollars

1997: 49 billion dollars

1998: 56 billion dollars

1999: 68 billion dollars

2000: 83 billion dollars

2001: 83 billion dollars

2002: 103 billion dollars

2003: 124 billion dollars

2004: 162 billion dollars

2005: 202 billion dollars

2006: 234 billion dollars

2007: 258 billion dollars

2008: 268 billion dollars

2009: 226 billion dollars

2010: 273 billion dollars

2011: 295 billion dollars

2012: 315 billion dollars

2013: 318 billion dollars

It has been estimated that the U.S. economy loses approximately 9,000 jobs for every 1 billion dollars of goods that are imported from overseas, and according to the Economic Policy Institute, America is losing about half a million jobs to China every single year.

Considering the high level of unemployment that we now have in this country, can we really afford to be doing that?

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

As a result, we have lost tens of thousands of businesses and millions of jobs. Our economic infrastructure has been gutted.

Just look at what has happened to manufacturing jobs in America.  Back in the 1980s, more than 20 percent of the jobs in the United States were manufacturing jobs.  Today, only about 9 percent of the jobs in the United States are manufacturing jobs.

And we have fewer Americans working in manufacturing today than we did in 1950 even though our population has more than doubled since then…


Many people find this statistic hard to believe, but the United States has lost a total of more than 56,000 manufacturing facilities since 2001.

Millions of good paying jobs have been lost.

As a result, the middle class is disappearing and at this point 9 out of the top 10 occupations in America pay less than $35,000 a year.

For a long time, U.S. consumers attempted to keep up their middle class lifestyles by accumulating debt, but now it is apparent that middle class consumers are tapped out.

In response, major retailers are closing thousands of stores in poor and middle class neighborhoods all over the country.  You can see some amazing photos of America’s abandoned shopping malls right here.

If we could start reducing the size of our trade deficit, that would go a long way toward getting the United States back on the right economic path.

Unfortunately, Barack Obama has been negotiating a treaty in secret which is going to send the deindustrialization of America into overdrive.  The Trans-Pacific Partnership is being called the “NAFTA of the Pacific”, and it is going to result in millions more good jobs being sent to the other side of the planet where it is legal to pay slave labor wages.

According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades if current trends continue.

So what will this country look like when we lose tens of millions more jobs than we already have?

U.S. workers are being merged into a giant global labor pool where they must compete directly for jobs with people making less than a dollar an hour with no benefits.

Obama tells us that globalization is good for us and that Americans need to be ready to adjust to a “level playing field”.

The quality of our jobs has already been declining for decades, and if we continue down this path the quality of our jobs is going to get a whole lot worse and our economic infrastructure will continue to be absolutely gutted.

At one time, the city of Detroit was the greatest manufacturing city on the entire planet and it had the highest per capita income in the United States.  But today, it is a rotting, decaying hellhole that the rest of the world laughs at.

In the end, the rest of the nation is going to suffer the same fate as Detroit unless Americans are willing to stand up and fight for their economy while they still can.

National Debt Now Stands at $1.1 Million per Taxpayer

New figures released by the U.S. Department of the Treasury reveal that the total national debt has surpassed $17 trillion, up from the $10.6 trillion it was back in 2009. These new figures are staggering. The number one job of any government is to create a balanced budget. The federal government needs to come together to stop this out of control spending. They claim to have lowered the 2014 deficit, but they are still spending $492 billion more than they had in revenue.

DebtAccording to financial magazine Forbes, $17 trillion is just the tip of the ice berg. The United States has nearly a hundred times that in long-term unfunded liability, According to Forbes, the total amount of unfunded liabilities is $126 trillion, or $1.1 million per U.S. taxpayer. While the US National Debt Clock may calculate that every man, woman and child owes $55,346 in funded liabilities, it is the actual tax payers that will end up paying over $1 million in both funded and unfunded liabilities to pay this debt back.

According to the Senate Budget Committee, $3.7 trillion has been spent on welfare which according to Forbes has contributed the most to the rising debt. Social Security is not an entitlement. Taxpayers pay into this fund and expect the money they put in to be there when they retire. The problem is our federal government keeps allowing those who have not paid into it to collect from it.

According to the Forbes report, 70 percent of all federal spending is on dependency programs. America still has a staggering 46.5 million Americans living in poverty today. A report by the Senate Budget Committee shows the federal government is spending more on welfare than on education and transportation. The transportation infrastructure in this country is in dire need of repair. The American Society of Civil Engineers predicts that if nothing is done by 2020, the US investment shortfall will grow to $1.1 trillion. If the federal government spent half of what they do on welfare to fix our crumbling infrastructure, it would not only create jobs but ensure a flourishing economy.

U.S. Post Office Loses Over $47 Billion In The Past Decade

Curious what  unadulterated government efficiency looks like?

Then the following chart of USPS operating profits, pardon, losses over the past decade should be sufficient. The punchline: having generated revenues of nearly $700 billion in the past 40 quarters, the USPS has been bleeding red ink more or less consistently since 2006, and has now generated just over $47 billion in operating losses over the past ten years.

USPS Operating Income

It gets better.

From the WSJ: “The USPS said its total liabilities were $67.16 billion at the end of the period, compared with $23.16 billion in assets.”

That means the net capital deficiency, or “cost”, to keep the USPS alive, amounts to some $44 billion as of this moment (which includes $3.1 billion in contributions from the US government and a $47 billion deficit since the 1971 reorganization).

Continuing: “The Postal Service reached its $15 billion credit limit with the Treasury Department in 2012. Under law, the USPS must pay its own way. It doesn’t receive an annual taxpayer subsidy, but is reimbursed by Congress for some services such as delivering mail to the blind and overseas voters. The agency is saddled with a congressional mandate that requires it to prefund more than $5.5 billion annually for health benefits for future retirees. The service said Monday that it won’t be able to make its required $5.7 billion payment by Sept. 30.”

In other words, more pension accruals that will never be paid out until, finally, the administration has no option but to make the payment on behalf of the postal service (thank you PBGC).

Finally, one may ask: why doesn’t this bloated, anachronistic, money-losing zombie just go away and make way for the far more efficient and nimble private sector? After all, there are countless companies which could step in and do what the USPS does for a fraction of the cost?

Simple. The answer:

  • 489,727 career employees.
  • 137,037 non-career employees.

Or, as they are better known in Washington D.C., voters.

Submitted by Zerohedge

The Decline of U.S. Global Influence

Submitted by James E Miller of Mises Canada,

The world is seemingly aflame in chaos right now. The Israeli military has invaded the Gaza strip after the breaking of an 18-month cease-fire agreement. Which side broke the accord is still an open question. A commercial airliner was shot down over Ukrainian airspace. Western media and politicians assume the indefensible act of violence was committed by Russian President Vladimir Putin in an effort to conquer the contiguous area. In Iran, the government is ostensibly pursuing nuclear arms, much to the consternation of globalist tinkerers. Next door, in the Devil’s playground of Iraq, radical Islamists are causing massive amounts of destruction, including destroying historic churches from the apostolic times.


All of this disorder is the fault of waning American prestige according to Robert Fulford. In his latest column for the National Post, Fulford laments the indifference on display by President Barack Obama as violence erupts in planet’s most dangerous corner. He writes that Washington is no longer viewed as a legitimate threat by much of the world. Under the Obama presidency, he attests, “U.S. policy has become erratic and half-hearted, subject to arbitrary change without notice.” Fulford notes the lack of a strong response to the Syrian civil war as just one example where America backed away from the limelight. If the U.S. doesn’t soon take back its leadership role on the global stage, the “future looks increasingly dire.”

Fulford is far from alone in his fault-finding. Journalists from both political camps have been critical of the President of late. Arch neoconservative Charles Krauthammer called Obama’s comments on the downed Malaysia Airlines jetliner “passive” and demonstrative of a governing philosophy of disinterest. James Kirchick – the token leftist warmonger who takes great pleasure in American might displayed abroad – demanded it’s finally time for “the West to stand up to Putin” starting with U.S.-backing of the Ukrainian military.

All of these critics assume that America is capable of flipping a switch and rearranging the world’s affairs to meet its own standards. They don’t recognize the path the U.S. imperial state is on is slowly coming apart. It’s no longer the 1950s. The ceiling on Washington’s budget is getting closer by the day. The national debt is $17 trillion and counting; an unfathomable number that is impossible to maintain in perpetuity. The domestic economy is still sluggish from the 2008 market crash. The time of America’s dominance may soon be coming to an end. And the truth has yet to hit the people employed in the business of imperium.

The talking heads who opine on Sunday morning talk shows are still stuck in Cold War-mode. They refuse to face the truth about foreign policy: that there are always too many functioning  gears for good and evil to be readily apparent; and that truth and fiction often trade places depending on one’s preconceived agendas. The so-called experts forget the advice of realist Walter Lippmann who noted that rational foreign policy “consists in bringing into balance, with a comfortable surplus of power in reserve, a nation’s commitments and the nation’s power.”

More importantly, the media chattering class doesn’t seem to realize the conflicts taking place today are not the result of warring factions. The people of Iran, Ukraine, Israel, Palestine, Russia, and every other country under the influence of Western power didn’t originate their gripes from out of thin air. The incessant meddling of governments, specifically Washington, have fomented the fights we see today. Many are the direct, or indirect, result of overanxious global planning with scant knowledge of possible unintended consequences. Should the Obama Administration heed the complaints of interventionists longing for action, the result could be more death, more violence, and less peace.

The clashes going on currently have the mark of U.S. government meddling all over them. In Ukraine, the conflict between nationalists and separatists sympathetic to Russia is an immediate consequence of the overthrowing of President Viktor Yanukovych. The coup was surreptitiously supported by Washington and its sock puppet batch of non-government organizations. The annexation of Crimea and ongoing violence in the area can be traced back to Western agitation of Russia.

Iraq is more of the same calamity. Former dictator Saddam Hussein was no angel, but under his rule, radical Islamic elements were kept largely at bay. His toppling by U.S. forces has left the birthplace of civilization anything but civilized. The country, which was arbitrarily formed by European colonial powers following World War I, is slowly lurching toward a three-way split along ethnic and religious lines.  Terrorists with allegiance to the Islamic State of Iraq and Syria are wreaking havoc across the country, a spillover effect of embattled nations such as Libya. The latter battlefield is, of course, the result of Western intervention financed primarily by the U.S. government.

The experiment where America takes up where the British Empire left off appears to be finally coming to an end. It was never designed to work in permanence. The contradictions in intervention are not bringing tranquility or even supremacy. The control freaks beside the Potomac have allowed hubris to take hold. Their grip on other countries is loosening due to the very disarray they created. The irony is about this new reality is the outcome was easy to predict. Arrogance over one’s own intelligence is always a human failing. It was never possible for a cabal of political actors to guide the world’s affairs smoothly. As Friedrich Hayek wrote, “[N]o human mind can comprehend all the knowledge which guides the actions of society.”

If I had to take a guess at what drives the yearning for worldwide dominance, I would say it’s ideology. Everyone has their own, but the fervor at which interventionists opine is more passionate than most. They don’t yearn for just control, but seek a complete transformation of other peoples and cultures so that a uniform attitude is adopted by the world’s populace. Much of the propagating is done under the guise of human rights. With everyone kowtowing to the same lies of democratic celebration, liberty is dissolved.

From Alexander the Great to British rule, history, if it has a lesson, teaches us that no group of men can conquer the world. It’s simply too big, too vast, and too complex. Humanity is far too restless to sit and take orders from dictators halfway across the globe. Likewise, the outcome of intervention does not exist in a vacuum. It often has far-reaching effects that can’t be known in advance. Those decrying the decline of American power on the global scene have yet to learn these valuable lessons.

The mindset that wishes one country to have an iron-grip on world affairs is horribly naïve. Empires are not free. Washington’s credit card can’t be charged to infinity. The need for prudence is growing larger by the day. For the sake of average Americans, and peaceful citizens across the world, let’s hope it gets here sooner than later.