By Greg Hunter’s USAWatchdog.com
This week, a North Carolina newspaper headline read “Beauty Queens Feeling Squeeze of Economy.” It was a story about how pageant contestants are cutting costs by wearing dresses more than once. Some contestants are also selling old dresses and renting others to girls going to their proms. It is just one of the many small signs of how the economy is changing.
A giant flashing red light signaling trouble ahead is the news this week the Federal Deposit Insurance Corporation is now $20 billion in the hole. Let that sink in for a minute. The fund that is supposed to insure banks has a negative net worth! According to FDIC Chairman Sheila Bair, the number of banking failures will “likely rise” in the future. What the FDIC calls “problem” banks grew to 702 at the end of 2009– up from 552 at the end of September. That’s more than a 25% increase in just 3 short months. How are we going to pay for the continuing bank failures? (Click here for more on the FDIC story)
And, what about the unfunded obligations in America? A segment on FOX Business, this past Monday, was supposed to be about the $1 trillion shortfall in public pensions. It unexpectedly turned into a much bigger discussion with pension expert Jose Pinera. He dropped a bomb when he said, “You have a much bigger problem . . . You have a $100 trillion problem.” He quoted the U.S. government’s own numbers for unfunded entitlements such as Medicare and Social Security. Pinera pushed through entitlement reform in Chile 30 years ago, and now everyone there has a private account. It is a system that works. Pinera, a Harvard educated scholar, said America’s unfunded liabilities are “700% of GDP,” and it is simply a “gigantic liability.” Pinera also said, “It is like you are passengers on the Titanic” and are heading for the “iceberg of an aging population.” (Click here for the complete Pinera interview) How is America going to pay for health insurance and retirement for everybody in the country?
Syndicated columnist Thomas Friedman wrote this week, “We’ve gone from the age of government handouts to citizen givebacks, from the age of companions fly free to the age of paying for each bag.” It was a commentary on lean years ahead and how we have already eaten through the “fat years.”
I wrote about what was happening in America a year ago in a post called “Hard Right Turn.” This is not about some far right wing ideology– but a radical change of direction for the country. I wrote, “When is the economy going to get better?. . . It’s not going to get better; it is going to get different. Meaning, the economy will not return to what we have grown to consider “normal.” There is going to be a new “normal.” This is not a recession, a dip or a temporary very bad economic condition. We are witnessing a “hard right turn” in a new direction on a global scale. Many of the jobs lost in this downturn will be gone forever. A couple of changing industries I can think of are financial services and the automotive sector. The good news is that people are going to be forced to live within their means. Almost everybody rich and poor will consume less and save more. There is going to be a new age of frugality and that, as Martha Stewart says, “Is a good thing.” Thrift is the new black and this mindset is going to be in vogue for a generation or more!” (Click here to read Hard Right Turn in its entirety)
How are we to handle the lean years? The best way I think people can get ready for what’s ahead is to get out of debt. What’s coming is going to be a freak show of defaults and bailouts. The bailout part has already set in motion a money printing party the world has never seen before – and that will lead to inflation. Inflation always hurts the folks who are not rich. I guarantee your income will not keep up with the inflation that is coming. So, you must have complete control of every dollar you spend, and that means get out of debt as soon as you can.