Still to come, a doubling of the U.S. National Debt

The White House conceded that the national debt will increase by $9 trillion over the next ten years, nearly doubling a national debt that now stands at $11.67 trillion.

Until now, the White House had been estimating that the national debt would increase by $7.108 trillion between 2010 and 2019.

On Friday evening, Reuters reported that an unnamed senior administration official was saying that a report due from the Office of Management and Budget would indicate that the debt would actually increase by $9 trillion during that period, almost $2 trillion more than the administration had previously estimated.

How much is a Trlilion Dollars?
How much is $9 Trillion?
National Debt, running chart

More Unemployment and Bank Failures Expected

Though most mainstream news is citing a decline in unemployment as proof that the economy is stabilizing, the New York Times suggests that if you:

Include [those who have given up looking for a job and those part-time workers who want to be working full time] …then the rate is:

23.5 percent in Oregon

21.5 percent in both Michigan and Rhode Island and

20.3 percent in California.

The Times wrote a second article on August 7th pointing out that the unemployment rate had only declined because 400,000 people gave up their search for work and left the labor force. PhD economist John Williams wrote that accurate unemployment figures rose from 17.5% in December to 20.6% in July. Indeed, former Secretary of Labor Robert Reich wrote in April that the unemployment figures show that we are already in a depression.

[In the first Great Depression] there was a huge rally after the initial 1929 crash, before the bigger second wave down of the Great Depression hit. People forget that unemployment did not hit 25% until the fourth year of the Great Depression.

Former International Monetary Fund Chief Economist and Harvard University Economics Professor Kenneth Rogoff and University of Maryland Economics Professor Carmen Reinhart forecast in February that unemployment could reach 22% within 4 years.

Additionally, the Congressional Oversight Panel on the bailouts issued a report saying that small and medium sized banks are especially vulnerable, in part they hold greater numbers of commercial real estate loans, "which pose a potential threat of high defaults." Indeed, largely because of the commercial real estate crash, the FDIC expects 500 banks to fail in coming months.

[Excerpted from Washington’s Blog]

The American consumer is down-for-the-count and the Depression is just beginning

The American consumer is down-for-the-count. His credit lines have been cut, his home equity eviscerated, and his checking account swimming in red ink. That spells trouble for an economy that's 70% dependent on consumer spending for growth.

The Net Wealth of US households has declined from a peak of $22 trillion to just under $12 trillion in early March. Household equity has declined by 94%.

And this against the backdrop where the banks are still broke, business investment is at historic lows, consumers are on the ropes, the unemployment lines are swelling, the homeless shelters are bulging, the pawn shops are bustling, tent cities are sprouting up, and according to MarketWatch, “Corporate insiders have recently been selling their companies' shares at a greater pace than at any time since the top of the bull market in the fall of 2007.

Hundreds of banks are being kept on life-support but the FDIC is down to its last few farthings, and doesn't want to ignite a panic.

There are also worrying signs that China and other foreign investors may be ratcheting back purchases of treasuries at a time when the U.S. is seeking to fund a $1.8 trillion budget deficit.

This Depression is just beginning.

[Excerpts of an article by Mike Whitney]