Economic Indicators Point Towards a Collapse

Recent economic reports are out spelling bad things to come in the future. Combined with the predictions of other prominent financial forecasters the future appears grim.

The gap between the rich and the middle class is larger than it has ever been due to the bursting of the housing bubble. The richest 1% of U.S. households had a net worth 225 times greater than that of the average American household in 2009, according to analysis conducted by the Economic Policy Institute, a liberal think tank. That's up from the previous record of 190 times greater, which was set in 2004. We feel the Middle Class will soon be divided with the vast majority of these people/households becoming part of the “have nots” group.

The widening gap came even as wealthy households' average net worth tumbled 27% -- to about $14 million -- between 2007 to 2009. That's the first time that they suffered a decline since the three-year period of 1992 to 1995. Meanwhile, the average family's net worth plunged 41% -- to just $62,200 -- from 2007 to 2009, according to EPI's calculations.

"The typical person lost more because a bigger percentage of their wealth in 2007 had been the value of their home," said Heidi Shierholz, an economist with EPI. The poorest U.S. households have had a negative net worth in every reading dating back to 1962, meaning that their debts and other liabilities outweigh their assets. They fell deeper into a hole the last two years, with their net worth falling to negative $27,000 on average, or nearly twice as much as they owed two years earlier.

Net worth is a measure of a family's total assets, including real estate, bank balances, stock holdings and retirement funds, minus all of their liabilities, such as mortgages and other consumer debt. The EPI estimate uses figures from the Federal Reserve's survey of consumer finances for 2007 estimates, and the Fed's flow of funds report on household wealth for the more recent reading.

In another report, more U.S. banks are in danger of failing, even after receiving aid from the federal government, The Wall Street Journal reported Sunday. The economy has done little to improve the financial conditions of many struggling institutions, leaving 98 bailed-out banks without the capital to lift themselves out of the at-risk category, according to the Journal. That's a 15% increase from the second quarter, when 86 of the banks that had received funds from the Troubled Asset Relief Program, or TARP, were considered at risk.

Taxpayers have spent more than $2.7 billion in TARP funds on seven banks that nonetheless already have failed, while the 98 at-risk banks have together received more than $4.2 billion, the Journal reported. A Government Accountability Office report in October said that many of the failed banks should have been red flagged for their already precarious financial position during the application process.

About 10% of the country's 7,760 banks are undercapitalized, up from about 9% during the second quarter, a Federal Deposit Insurance Corp. spokesman told the Journal. Last month, a report released by the Congressional Budget Office forecast that TARP will end up costing taxpayers about $25 billion, down from the $50 billion estimated in October.

Gold and Silver are up and continue to climb; the strngnth of the dollar is down. Commodities continue their escalation in price. All facts and figures point to very bad times ahead. Be prepared. And it starts with a plan.