One economic theory states that we can never have deflation in a long term economy. For prices to deflate would be contrary to the built-in safeguards put forth by the government agencies. The main cause of a deflation would have to be a massive withdrawal of money from the banking system. As long as the money is insured, that is unlikely to happen. I tend to agree with that theory. It is unlikely that prices will go down long term as long as people have confidence in having their money in the banks.
One of the safeguards put into effect in the 30s depended on the negotiation of wages. No one group of wages, but all American Manufacturing was based on Union wages. Inflation and wage increases went hand in hand all through the 50s and to some extent through the 60s. Nonunion people normally could do a “me too” on the backs of Union worker's negotiations. If a Union member negotiated a contract for $10 an hour plus benefits, companies tended to pay the nonunion worker just a little less. But to remain competitive in attracting people, they had to match the wages fairly close.
In that kind of atmosphere it was natural for more and more money to be printed as wages increased at a rate of at least 4.5 percent per year. You can go to almost any book on Finance and Appraisal in the Real Estate Industry for a practical guide (Read More....)
Many of the things that Americans have been able to take for granted for decades are rapidly coming to an end. The truth is that a growing economy that produces an ever-increasing amount of good jobs for a thriving middle class is not guaranteed to last forever. In fact, there are lots of signs that the middle class in America is already being ripped to shreds. The number of Americans on long-term unemployment benefits is exploding, personal bankruptcies are setting new records, foreclosures are at an all-time high and one out of every eight Americans is now on food stamps. Meanwhile, the U.S. government is absolutely drowning in debt and America is facing a pension crisis that is so immense that it is almost indescribable. Most Americans still assume that even if we do have hard times for a while things will always turn around and eventually get better than ever. But sadly, that is just not the case. The truth is that the United States is in the early stages of a devastating economic collapse, and the "new normal" is going to be incredibly difficult for a lot of Americans to adjust to.
The New Normal: Millions Of Chronically Unemployed Americans And Not Nearly Enough Jobs For Everyone
*According to one recent survey, (Read More....)
America's national debt is exploding out of control, and still most politicians in Washington D.C. don't really seem that interested in doing anything about it. Why? Well, the truth is that if the U.S. government reduces government spending that will slow down the economy, and if the economy slows down then Americans will blame the politicians, and if Americans are angry at the politicians then they will be less likely to vote them back into office. So we actually have a system where our politicians have an incentive not to do anything about the national debt. Meanwhile, the exploding debt continues to become a colossal long-term problem that threatens to destroy not only our economy, but our entire way of life. The federal budget deficit has topped $1 trillion with three months still to go in the current budget year. It is projected that the final budget deficit for 2010 will be somewhere in the neighborhood of 1.3 to 1.5 trillion dollars. But can we really afford to keep having deficits that are over a trillion dollars every single year?
No, we can't.
In (Read More....)
Most Americans believe that the U.S. economy will fully recover from this recent recession and will soon become stronger than ever. But that is definitely not what is happening. The truth is that the very foundations of the U.S. economy are coming apart and we are headed for a massive amount of financial trouble as a nation. Collectively, the U.S. government, U.S. businesses and U.S. consumers have piled up the biggest mountain of debt in the history of the world. This mountain of debt has enabled us to enjoy a spectacular standard of living for the past several decades, but now the bills are coming due and nobody seems to even realize how great of a financial disaster the U.S. now finds itself in the middle of.
The following are 10 huge flashing danger signs that show just how much of a mess the U.S. economy is in....
#1) The FDIC is opening a satellite office in the Chicago area that will accommodate up to 500 temporary staffers and contractors to manage receiverships and liquidate assets from what they are expecting will be a massive wave of failed Midwest banks.
#2) The U.S. Treasury Department announced on Tuesday that foreign holdings of U.S. Treasury securities fell by $53 (Read More....)