Saturday, July 9, 2011

We Are Entering Into the Next Satge of Collapse

By Reginald Kaigler (DEMCAD)

After careful examination of the economic numbers and the social trends, I am now confident enough to declare that the economy has entered a new stage in the collapse. Dmitry Orlov is a survivor of the Soviet Union and has been writing about the decline of America for years.

Stages of Collapse

Stage 1: Financial Collapse. Orlov warns that in the first stage, the financial system is compromised and as a result, the people begin to lose faith in business. We saw this when Lehman Brothers collapsed and the Dow tumbled. 401k portfolios took a massive hit in 2009. The $600 trillion derirvative bomb was finally acknowledged and the system was clearly insolvent. So what did the government do? Washington sold money from the taxpayers by pushing us faurther into debt and get the Federal Reserve the meanings of funding foreigner banks. This helped keep the zombie banks standing for a few more years, but it didn't change the overall problem of insolvency.

Stage 2: Commercial Collapse.
Orlov describes this stage as a situation where people stop believing in the market providing solutions for common economic problems. We've seeing this in America as people buy up precious metals (gold and silver). In a commercial collapse, supplies dry up and factory orders slow dramatically. In May, orders for manufactured goods climbed by 0.8%, but in April there was a 0.9% decline. Recently, the increase in orders has been driven by transportation.

According to Orlov, a society enters stage 2 when shortages of necessities become commonplace. I think we're still in stage one, but will be entering stage 2 by the end of 2011. And here's why.

1. State and Local governments Laying Workers Off
In June alone, local governments have laid off 18,000 jobs, while state governments have cut 7,000. This has been happening all year. Meanwhile, recent Labor Department figures show that the economy added a mere 18,000 jobs in May. You need well over 100,000 jobs to keep up with population growth. What this means is that a significant amount of middle class jobs are being lost and the private sector isn't making up the difference.

2. Overall Unemployment is Raising.
The U6 unemployment number jumped from 15.8% to 16.2% in May. But when you look at Zerohedge's explanation of how the federal government uses a birth/death adjustment to artifically add over 600,000 jobs to the official numbers. There's no real proof that these jobs really exist, but the federal assumes that they are being created by their formulas.

3. Poverty is Raising.
The country now has over 44.6 million people collecting food stamps. This number has increased by at least 100,000 every month. So we have a bigger increase in the number of new people on foods stamps than the increase of jobs in the entire country.

4. Deficit is Exploding.
With a current fiscal deficit of $1.5 trillion dollars and obligations of over 60 trillions, there is no way that the government is going to be able to pump money into the system without killing the value of the money. When foreign nations find an alternative to the U.S. dollar, the federal government will lost its number one tool of control and the system will implode. So this is why I think we are heading into the next stage. Tell me what you think and read about Orlov's stages here.

Stage 3: Political Collapse

This is when people lose faith in their government and the system's ability to protect them. This is already happening to a certain degree.

Stage 4: Social collapse.

This is when people lose faith in community organizations and the churches ability to help them. People become more isolated.

Stage 5: Cultural collapse.

Orlov describes this stage as when "faith in the goodness of humanity is lost." Hopefully, we won't get this far.

Dmitry Orlov's Blog

State and local governments bleeding jobs

44.6 million people on Food Stamps in April

Alternative measures of labor underutilization

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