Frederick Sheehan has a blog titled "au contrarian", which, I am sure, is a
play on the classy French phrase au contraire, meaning, as I understand
it, "to the contrary", but for a gold bug like me, all I see is the "au"
prefix, which is the symbol for gold! Gold! Fabulous gold!
Anyway, he has the news that David Rosenberg, economist at Gluskin, Shef,
"calculates that 'private incomes' (non-government jobs and transfers) in the
United States have fallen from US$8.7 trillion in the third quarter of 2008 to
$8.2 trillion in April 2010."
Now, most people would probably look at that and say, "Hmm! Incomes have only
fallen from $8.7 trillion to $8.3 in two years? A 7% loss! Not too bad!"
Obviously, they are wrong, or else I would not be writing about
this or have this stupid look on my face, and you can probably tell from my
expression that I am upset about it.
So, how bad is it? Well, there are only are only 100 million
non-government/non-taxpayer paid jobs in the whole country, so $8.7 trillion
would be an average income of $87,000, which is too much by more than a third,
meaning that transfer payments constitute the rest of the "private incomes",
meaning that those who are dependents of the government are eating us alive!
Yikes!
Worse, for an economy that now depends on borrowing to finance consumption,
remember that home equity withdrawal (HEW) in 2005 was over $800 billion. Now,
in the second quarter of 2010, this fell to a miserable $8 billion, which is
understandable when The New York Times reports, "During the great housing boom,
homeowners nationwide borrowed a trillion dollars from banks, using the soaring
value of their houses as security. Now the money has been spent and struggling
borrowers are unable or unwilling to pay it back," with the obvious result that
non-payments are rising, and "the delinquency rate on home equity loans is
higher than all other types of consumer loans, including auto loans, boat
loans, personal loans and even bank cards like Visa and MasterCard."
Of course, the government is doing everything it can to ensure that bankrupted
Americans can still spend what they don't have to spend on food, and now over
40 million Americans used food stamps in May 2010, which more than one-eighth
of the Entire Freaking Population (EFP)!
Of course, this is just the tip of the entitlement/transfer iceberg, and
according to Bill King of The King Report, "US government anti-poverty spending
has risen 89% since 2000 - from $342 billion to $647 billion. This includes
such programs as Medicaid grants, food assistance, housing vouchers, and child
nutrition programs."
So do I add $2.7 trillion in transfer payments to $647 billion for anti-poverty
programs? Wow! You can see how easily I scare myself when I don't know what I
am talking about and just start adding numbers willy-nilly.
But about dependents, and their crushing cost, I happen to be an expert.
And with the voice of experience in supporting dependents and trying, in vain,
to cut their allowances, let me tell you that with that kind of a load of
people dependent on the government, do you really think that the government
will one day stop deficit-spending unbelievable amounts of money or that the
Federal Reserve will stop creating unbelievable amounts of money for the
government to spend? Hahaha! Get real!
If you believe that, as preposterous as it sounds, then you will not be
interested to know that you should be buying gold, silver and oil, although the
rest of us who are not such complete numbskulls are Very, Very Interested
(VVI), and thus we are buying gold, silver and oil because, "Whee! This
investing stuff is easy!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2010, The Daily Reckoning.)
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