Economy Plummet In 3,2,1…

In case you were wondering when the brand new economic failure would settle in… well, wonder no more! The most recent reports show that it has already begun since January. So, to all those thinking all the “fuss” about a new financial crisis in 2013 is just fear mongering… here`s some bad news: the FACTS prove not only that it`s going to happen this year…. but that it`s already happening and it`s only getting worse.

Unfortunately, these people don`t read this site unless it`s by accidents. I know the MFSP community is made of concerned Americans, who are very aware of the realities of our times and try their best to protect their families against the looming crisis. On the other hand, most Americans are completely ignorant to these events and here`s the best example of their ignorance:

source: online.wsj.com

A decline in incomes was expected in January, but the estimated numbers were wrong. According to WSJ, personal incomes dropped 3.6% in January, as the Commerce Department said Friday. However, economists surveyed by Dow Jones Newswires expected a 2.5% decline. This marks the most dramatic decline since January 1993.

Now, what`s troubling is not the income plummet itself. The fact that numbers are bigger than expected is not all that surprising. In December, the monthly income was unusually high, because companies preferred to pay out early dividends to avoid 2013 upcoming tax hikes. A lot of $billion companies, such as Wal-Mart, Oracle, and Costco Wholesale Corp chose to pay dividends to their shareholders at the end of 2012 and not wait until 2013 and pay more on taxes. Therefore, when you compare January 2013 to December 2012, it`s absolutely natural for the numbers to be bigger than estimated. So the problem doesn`t necessarily lie here, but in what`s to happen in the next three to four months. And by that, I`m referring mainly to consumer behaviour.

source: rt.com

What did Americans do when a chunk of their paychecks suddenly vanished? “Households responded to this hit to income by reducing their savings, rather than by reducing their purchases, Paul Dales of Capital Economics said in a written analysis of the report.” (www.csmonitor.com)

In January, the spending rate rose 0.2%, while the personal-savings rate dropped to 2.4% from 6.4% in December. That`s the lowest rate since November 2007. I don`t what you think of this, but I think this is completely irresponsible, especially since…

Inflation is soaring!

source: telegraph.co.uk

You don`t need to be an economists to see how obvious it is. Prices are the best indicator and judging by the amount we spend just on groceries or on gas, inflation feels as real as it gets. But people don`t seem to learn their lesson. Remember 2008, when the crisis was just about to burst, and Americans were spending much more than they actually HAD? You`d think the crisis taught them to cherish saving more than irrational spending…

Well, here we are in 2013 and, after a so-called “slow, yet steady economic growth”, as our government lies in official numbers, Americans have easily adopted their old bad habits again. Even now, barely half of the population has more money in their savings account then they owe in credit card debt. (rt.com)

And you know what`s worse? The government thinks it`s a good sign. Consumer spending accounts for ⅔ of the U.S. economy, so let people shop like crazy and get the economy back on its feet! But what happens when they don`t spend their OWN money? What happens when their savings get lower (like it`s already started to), while their debt gets higher? It`s the same vicious circle that got us into the 2008 crisis in the first place. So, for God`s sake, for once in your lives, learn something from past mistakes (especially since they`re so recent!) and stop trying to push the economy forward in a toxic manner.

 By Alec Deacon