How Does The Crisis Affect Me?

The crisis has affected each of us. We examine examples of how the financial crisis, and the associated economic, social and political instability may affect your life and wealth in ways you never considered

The Federal Reserve and Bubbles

Many market pundits argue that the Federal Reserve is too dumb or too inept to identify asset bubbles.

By focusing on the Fed’s mental acuity (or lack thereof), these pundits are overlooking a key factor: the Fed wants asset bubbles.


Asset bubbles, at least according to the Fed’s models, will paper over the steady decline in quality of life that began in the US roughly 50 years ago.

This fact is staring everyone in the face, though few people can see past the smoke and mirrors erected by our government to identify and understand it. . Back in the 1950s, the average American family had one working parent and was able to get by just fine. Today, most families have two working parents, sometimes working more than two jobs and they’re still not able to afford a prosperous life.

A 2012 study by NYU Professor Edward Wolff found that the median net worth of American households was at a 43-YEAR LOW. The average American in the 21st century was in worse shape than his 1970s counterpart.

This process began to accelerate in the late 1990s. Looking at real media household income, one can see clearly that things have generally been downhill for nearly 20 years now.

Real Household Income

It is not coincidence that the Fed began blowing serial bubbles starting in the late 1990s. The Fed is aware on some level that quality of life in the U.S. has fallen. The Fed’s answer, rather than focus on solutions to the problems of job growth, income growth, etc. has been (and is) to blow bubbles to paper over this decline.

This is why we’ve had bubble after bubble after bubble in the last 15 years. The Fed doesn’t have a clue how to create jobs or boost incomes. Why would it? Most of the Fed’s Presidents are academics with no real world business experience.

Instead, the Fed believes in the “wealth effect” or the theory that when housing prices or stock prices increase, people feel wealthier and so go out and spend more money. This theory is baloney. People spend based on their incomes, NOT the value of their homes or portfolios.

Assets only convert into cash once the owner sells the asset. Anyone who goes out and spends more money because their home went up in value will only end up with credit card debt or home equity debt, which combined with their mortgage, puts an even greater strain on their financial resources.

The Fed wants asset bubbles because they hide the rot within the US economy. If the Fed didn’t raise stock or housing prices, people might actually start to wonder… “hey, why is my life getting more and more difficult despite the fact that I’m working all the time?”

The Fed wants bubbles. So we’re doomed to keep experiencing them and the subsequent crashes.

Originally published by Phoenix Capital Research

Feds made $100B in improper payments

From Stephen Ohlemacher of the Associated Press

  • Tax credits for families that don’t qualify.
  • Medicare payments for treatments that might not be necessary.
  • Unemployment benefits for people who are secretly working.

Federal agencies reported making $100 billion in payments last year to people who may not have been entitled to receive them.

Congressional investigators say the figure could be even higher.

“The amounts here are absolutely staggering,” said Rep. John Mica, R-Fla. “It’s over $100 billion each of the last five years. That’s a staggering half a trillion dollars in improper payments.”

Mica chairs the House Oversight government operations subcommittee, which held a hearing on improper payments Wednesday.

Each year, federal agencies are required to estimate the amount of improper payments they issue. They include overpayments, underpayments, payments to the wrong recipient and payments that were made without proper documentation.

Some improper payments are the result of fraud, while others are unintentional, caused by clerical errors or mistakes in awarding benefits without proper verification.

In 2013, federal agencies made $97 billion in overpayments, according to agency estimates. Underpayments totaled $9 billion. That adds up to $106 billion in improper payments.

The Obama administration has reduced the amount of improper payments since they peaked at $121 billion in 2010. The administration has stepped up efforts to measure improper payments, identify the cause and develop plans to reduce them, said Beth Cobert, deputy director of the White House budget office.

Federal agencies recovered more than $22 billion in overpayments last year, she said.

“We have taken an aggressive approach to attacking waste, fraud and abuse within federal agencies, and we will continue to seek out new and innovative tools to help us in this fight,” Cobert told the subcommittee.

However, a new report by the Government Accountability Office questions the accuracy of agency estimates, suggesting that the real tally could be higher. The GAO is the investigative arm of Congress.

The American Dream is alive but it will cost you $130k a year

The American Dream has been a focal point and topic of debate since the financial crisis of 2008: Citizens and politicians alike are asking whether it’s time to redefine what success looks like in the U.S.

Essentials 1
Source: USA Today

According to Howard Gold, columnist for MarketWatch and founder of GoldenEgg Investing, the white picket fence and security that hard work can bring is still alive, but it will cost you … a lot. In a USA Today article, Gold calculated that, for a family of four, living out the American Dream costs just over $130,000 a year.

“This isn’t about being rich,” Gold tells Yahoo Finance. “It’s about providing security and a good life for your children and opportunities for your children… this is probably what a good middle class to upper-middle class life in America would cost.”

Essentials 2
Source: USA Today

Considering that the average household in the United States makes $51,371 per year, it seems that the dream is unobtainable to most. In fact, according to Gold’s estimates, only one in eight, or about 16 million, American households achieve this standard of living.

“A lot of this is subjective,” Gold admits. Costs vary according to location and ideals. “In Indianapolis or Tulsa, your cost of living is much lower than if you live in New York or San Francisco, where arguably living the American dream would cost a lot more than this,” says Gold. “I even got a Twitter comment saying, ‘You should come visit us in Pennsylvania; we’re living the American Dream on $40,000 a year.’”

Essentials 3
Source: USA Today

Across the U.S., fast food and other low-wage workers have been protesting, calling for income equality and demanding a living wage. President Barack Obama has also called on Congress to raise the federal minimum wage.

In a recent press conference, the president stated that, “This increasing inequality is most pronounced in our country, and it challenges the very essence of who we are as a people.” He has also called income inequality “the defining challenge of our time” and has said it defines “everything I do in office.”

Submitted by Nicole GoodkindYahoo Finance

28.5 Million Cars Recalled By GM In The First Half Of 2014

We at Prepare and Prosper support American enterprise. Personally I have been a loyal GM customer for most of my 35 year car buying lifetime. But what is going on with GM over the past six months is just ridiculous. GM has become the biggest company joke in the history of the US – maybe global – automotive industry, putting even East Germany’s infamous Trabant to shame.

Things like following the recently announced recall of another 7.6 million cars across models from 1997 to 2014, and another 800,000 cars thrown in. GM has recalled more cars in the first six months of 2014 than it has sold in all of 2011, 2012 and 2013 combined.

Gm total recalls vs sales

It took GM over a decade to recall millions of cars with a faulty ignition switch resulted in a reported 54 accidents and 13 deaths. The actual accident and death toll will likely climb significantly before this is over. In hiding the ignition switch defect GM essentially risked the lives of every one of their customers -– millions of people — to protect their profit. Looking at the published photographs of those who died, all of them appear to be young inexperienced drivers who likely panicked when the engine turned off and they couldn’t steer the car or brake.

GM announced that it would “take a charge of up to approximately $1.2 billion in the second quarter for the cost of recall-related repairs announced in the quarter.” It now appears this “non-recurring”  charge may not be non-recurring or one-time.

Inexplicably GM’s sales have increased despite the massive recalls. Why is anyone still buying the garbage this company still makes, especially in light of the company’s admission that it will risk customer lives on a grand scale if it allows it to save shareholder value.

It may get nastier for GM now that recently the Orange County district attorney filed a civil lawsuit against GM for “intentionally concealing defects” and putting human lives at risk in order to boost profits. We expect the lawsuits to mount, and mount and mount. This recall scandal has the potential (although it is not likely) to bring down GM. We realize GM directly and indirectly supports hundreds of thousands of job but we find it impossible to support this type of negligence, incompetence, unethical and downright criminal behavior.

Below is a table laying out all the 28,470,653 cars GM has recalled in the first half of 2014. At this rate GM may recall more cars by the end of 2014 than it has made since emerging from bankruptcy!

Gm total recalls

Submitted By Zerohedge.