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Consumer
confidence spiked last December. Gas prices were lower for the third straight
month, a mild early winter meant that many consumers paid less to heat their
houses, the auto sector posted another strong month, consumers spent more on
recreation and demand for student loans increased.
Consumers
seemed inclined to spend and get deeper into debt.
November 2011
was a bad month for consumers: evolving debt went up more than eight percent
(the largest month-to-month percentage increase since 2008) and this dubious
accomplishment was accompanied by the biggest month to month growth in
overall consumer debt since 2001. December’s consumer credit debt
increased $19.3 billion to $2.5 trillion. This rise in credit card debt was
the fourth month in a row card balances grew.
 
U.S. Consumer Credit: June 2010 to Present
Trang
Nguyen www.dailyfx.com
“In a
long-awaited surge of hiring, companies added 243,000 jobs in January –
across the economy, up and down the pay scale and far more than just about
anyone expected. Unemployment fell to 8.3 percent, the lowest in three years.
At the same time, the proportion of the population working or looking for
work is its lowest in almost three decades.” Christopher S. Rugaber,
AP Economics Writer
Why did
consumers start taking on more debt since August 11th 2011? Was it because an
improving job market is giving people the courage to take on more debt?
Maybe the
increasing dependence on borrowing is an indication consumers are relying on
their credit cards to make ends meet? There were almost four unemployed
Americans vying for each job vacancy in December, year over year (yoy) January’s hourly wage increase was only 1.9
percent - the smallest yoy gain since April 2011.
Production workers fared worse, their 1.5 percent increase was the smallest
on record going back to 1965. Food cost more in December, so did medical
care.
The Labor Force
Participation Rate (LFPR) is a key economic statistic and it
just hit a new record low.
“The
plain fact is that we are warehousing a larger and larger population of
adults who are one way or another living off transfer payments,
relatives, sub-prime credit, and the black market. My suspicion is that this
negative trend and many others like it get buried by the monthly change
chatter from mainstream economists and on bubble vision, and that these
monthly deltas are so heavily manipulated as to be almost a made-up
reality. Call it the economists’ Truman Show.”
David Stockman, Former Reagan budget director talking about the BLS jobs
reports
Consumers
aren’t the only ones going into debt at record rates.
US debt increased by $1 trillion in 2008, $1.9 trillion in 2009, and $1.7
trillion in 2010. As of August 3, 2011, the country’s debt was $14.33
trillion dollars.
The federal
government recorded a budget deficit of $349 billion through the first four months
of fiscal 2012. The Congressional Budget Office (CBO) said it expects the
fiscal 2012 deficit to narrow to $1.1 trillion from $1.3 trillion in fiscal
2011. Deficits are the difference between revenue and expenditures, every
time the US deficit is above zero - expenditures are greater than revenue -
money must be borrowed and the debt is increased.
Below is
today’s debt breakdown:
United States
National Debt: $15,348,967,446,234.75
United States
National Debt Per Person: $49,015.94
United States National
Debt Per Household: $126,951.29
Total US
Unfunded Liabilities: $123,260,918,052,258.50
Total US
Unfunded Liabilities Per Person: $393,625.84
Total US
Unfunded Liabilities Per Household: $1,019,490.95
Late in 2011
the world’s population reached 7,000,000,000 people. That means the US
debt would take $2,192.70 dollars out of each and every persons
pocket to pay off.
The CBO has
estimated the US deficit will reach $1.5 trillion by 2022. US debt has increased,
just since August 2011, by over one trillion dollars.
Conclusion
Lawrence
Summers, the former Treasury secretary under Bill Clinton and President
Barack Obama’s former top economic adviser says the U.S. is not only in
the midst of a debt crisis, but also a jobs crisis and that the US needs to
take advantage of low interest rates to finance a massive infrastructure
retrofit and build program to put people back to work – cutting
spending is not the answer.
John Taylor,
Taylor Rule discoverer says
"We could get into a situation like Greece, quite frankly. People have
to realize it is a precarious situation. The debt is going to explode if we
don't make some changes. What seems to be more important is that people can
get back on track, the country can get back on
track, with just some sensible adjustments. I argue just bring spending back
to where it was in 2007. That's not so long ago. We've had an enormous
spending binge in the last few years. If we undo that binge, shouldn't be
that hard, we can get back to some sensible pro-growth policies.”
Carmen Reinhart
and Kenneth Rogoff co-authors of “This Time
is Different: Eight Centuries of Financial Folly” are sceptical of any fix and think we should get use to
present conditions because nothing is going to change for the good anytime
soon.
President
Obama’s budget for fiscal year 2012 would have increased the
country’s debt by nine trillion over ten
years - even Democrats rejected it. Obama will deliver his budget this
Monday, last year he claimed one trillion dollars in deficit reductions from
winding down the wars in Afghanistan and Iraq but that money hadn’t
even been approved.
The truth
regarding the true status of US employment, debt and budget chicanery should
be on everyone’s radar screen. Is it on yours?
If not, maybe
it should be.
Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com
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you're interested in learning more about the junior resource sector, bio-tech
and technology sectors please come and visit us at www.aheadoftheherd.com
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***
Richard
is host of Aheadoftheherd.com and invests in the junior resource sector. His
articles have been published on over 300 websites, including: Wall Street
Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse,
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***
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