PM's Self Reliance Tools

Are More Financial Storms on the Horizon?

Rising oil prices ... plus higher unemployment are squeezing consumers. Without consumer spending, the hoped-for recovery on the horizon may vanish into thin air.

The broadest unemployment rate jumped to an all-time high of 16.4 percent of the workforce ... a stunning 67 percent year-over-year increase in the underlying jobless rate!

In simple terms: ONE out of every SIX Americans is now either out of work or unemployed/underemployed for economic reasons. That translates to 14.5 million unemployed workers in the U.S. today — up a record six million in the past 12-months alone.

Worse still, it is taking longer than EVER for displaced workers to find new jobs, with the duration of unemployment also at an all time record high.
Far from being a harbinger of economic recovery ahead, this tells me there's even more fall out coming in the months ahead from consumers who are likely to slash spending – it’s very easy to see on eBay, a site I often use to guage the economy.

· We witnessed one of the biggest collapses of all time in "open market paper" — mostly short-term credit provided to finance mortgages, auto loans, and other businesses. Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $662.5 billion.

· Bank lending went into the dumper. Even in the fourth quarter, when the meltdown struck, banks were still growing their loan portfolios at an annual pace of $839.7 billion. But in the first quarter, they did far more than just cut back on new lending. They actually took in loan repayments (or called in existing loans) at a much faster pace than they extended new ones! They literally pulled out of the credit markets at the astonishing pace of $856.4 billion per year, their biggest cutback of all time.

· And consumers were shoved out of the market for credit at the annual pace of $90.7 billion, the worst on record.

· The ONLY major player still borrowing money in big amounts was the United States Treasury Department, sucking up $1,442.8 billion of the credit available — and leaving LESS than nothing for the private sector.

Bottom line: The first quarter brought the greatest credit collapse of all time.
For the long-term health of our country, less debt is not a bad thing. But for 2009 and the years ahead, it's likely to be horrendous.

The Most Wealth Losses of All Time

Who is suffering the biggest and most pervasive losses? U.S. households and nonprofit organizations...

· Deep cutbacks in consumer spending ahead, plus a virtual disappearance of conspicuous consumption ...

· More massive sales declines at most of America's giant manufacturers, retail firms, transportation companies, restaurants, and more.

· Big losses replacing profits at most U.S. corporations!
NO government, even one over run with spending and fiat money printing, can replace $13.87 trillion in losses by households. Without jobs, no one is spending.

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