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Submitted by Raúl Ilargi Meijer of The Automatic Earth

The Oil Market Actually Works, And That Hurts

Please allow me to revert back again a little to what I wrote earlier today in Will Oil Kill The Zombies? I think we need to be clear on what’s going on here. The oil market actually works. And that’s a rarity in today’s world of manipulated everything, of no mark to market, of huge stock buybacks financed by zero interest rates, you know the story.

We know that the market works because of for instance this article from CNBC:

Oil Pressure Could Sock It To Stocks

 

“Oil has pretty much spooked people,” said Daniel Greenhaus, chief global strategist at BTIG. “There just isn’t a bid. With everything in energy and the oil price collapsing as it is, who is going to step in and be a buyer now? The answer is nobody.”

 

”It’s (oil) actually much weaker than the futures markets indicate. This is true for crude oil, and it’s true for gasoline. There’s a little bit of a desperation in the crude market,” said Kloza.”The Canadian crude, if you go into the oil sands, is in the $30s, and you talk about Western Canadian Select heavy crude upgrade that comes out of Canada, it’s at $41/$42 a barrel. 

 

“Bakken is probably about $54.”” Kloza said there’s some talk that Venezuelan heavy crude is seeing prices $20 to $22 less than Brent, the international benchmark. Brent futures were at $63.20 per barrel late Thursday. 

 

“In the actual physical market, it’s fallen by even more than the futures market. That’s a telling sign, and it’s telling me that this isn’t over yet. This isn’t the bottoming process. The physical market turns before the futures,” he said.

It’s not about where WTI and Brent are at any given moment. Even if WTI is down another 3.60% today so far at $57.79. Whatever WTI tells us, the real world out there trumps it by a mile and a half. The prices at which oil actually sells in the real world are way below WTO and Brent standards, a very big and scary development. There are tons of parties that will sell at any price they can get. There is no better way to drive prices down further, it’s a vicious circle down a drain.

The market is setting future prices as we go along, that’s the – inevitable – mechanism. It’s called price discovery. We knew ISIS was selling at $30 or so, but tar sands at $30 and both Canada and Venezuela heavy crude at $40, that’s way more than an outlier. At WTI standard prices, too many can’t move nearly enough product anymore, and with credit having been slashed, moving product is the sole way to survive. How much of this ongoing process would you think we have we seen to date?

Here’s one of the first oil-producing countries about which serious alarm bells are raised. It’s not Venezuela or Nigeria, it’s Canada. From MarketWatch:

Falling Oil Threatens Canada’s Bulletproof Banking System

 

While the U.S. financial system – as well as many international banks – has gotten hopped up on a wide assortment of financial opiates and stumbled through more than a dozen bank-fueled crises through the decades, Canada boasts a stellar track record of banking sobriety. However, a spectacular death spiral in crude-oil futures – West Texas Intermediate settled Thursday at $59.95, a more than five-year low – threatens to deliver a serious shock to the banking system of the U.S.’s northern neighbor, according to a research note published Thursday by Pavilion Global Markets. Canada ranks as one the world’s five largest energy producers and a net exporter of oil, according to the U.S. Energy Information Administration. So, a big drop in oil would pose several risks to Canada’s oil-dependent economy.

“The drop in oil prices, as mentioned above, will have wide-ranging implications on the Canadian economy,” Pavilion strategists Pierre Lapointe and Alex Bellefleur said in the note. It’s not just that Canada’s banks will find themselves saddled with souring loans from underwater energy producers. The problem, Pavilion argues, is that Canada’s employment rate could suffer as oil-related businesses are forced to close.

 

Here’s how they put it: “In this context, the risk to Canadian banks doesn’t stem necessarily from a narrow view of loans to oil companies, but morefrom a broad macro risk perspective. As employment in the oil industry declines, a negative income and wealth shock to many households will take place, impacting a variety of loans (credit card, mortgage) on Canadian bank balance sheets.”

This is what I’ve been hammering on for weeks: the benefits of cheap oil are no match for the destruction that touches on a thousand different parts of our economies. It doesn’t help that much of both Canadian and American oil, especially the unconventional kinds, were drowning in debt even before oil turned south with a vengeance. But that’s not even the most crucial part.

Our entire economies revolve around oil, it’s not just something that you put in your car, oil is everywhere, it’s built our world and it maintains it. And therefore the effects of a sudden 40% price drop – and counting – will be felt everywhere. What we’ve seen so far can still be labeled ‘orderly’, but that’s not going to last. Still, look at the bright side: at least you can say that for once in your life you’ve witnessed a functioning market.

via Zero Hedge http://ift.tt/1qJm42n Tyler Durden

The undisputed winner in this year’s “Worst Idea At The Wrong Time” category is the poor suburb of Ferguson, Missouri, a town which was looted, burned and generally eviscerated on several occasions in the past few months as a result of public anger first at the murder of Mike Brown and subsequently, the acquital of the police officer who shot him.

Why? Because according to Bloomberg, in order to close a municipal budget gap – and keep in mind the prevailing poverty in the region has been widely attributed as one of the reason for the escalating violence on either side of the law – Ferguson plans to boost revenue from public-safety fines and tapping reserves.

According to Ferguson’s finance director, Jeffrey Blume, revenue from violations, which already represents the city’s second-largest source of cash after sales taxes, are projected to rise to 15.7% of receipts in fiscal 2015, up from 11.8% currently. In 2013, fines brought in $2.2 million, or 11.8 percent of the city’s $18.62 million in annual revenue, according to budget documents.

This means that local cops will now have an even bigger, and more aggressive quota of miscellaneous, petty offenses to fill, in order to collect money from an already impoverished population, and in the process antagonize said population even further, more than likely leading to the same if not worse outcomes that caused the riots in the first place.

From Bloomberg:

To close a projected deficit for fiscal 2014, which ended June 30, the municipality will deplete a $10 million capital-projects reserve, Jeffrey Blume, Ferguson’s finance director, said in a telephone interview. For the current year, the city is budgeting for higher receipts from police-issued tickets.

 

“There are a number of things going on in 2014 and one is a revenue shortfall that we anticipate making up in 2015,” Blume said. “There’s about a million-dollar increase in public-safety fines to make up the difference.”

Even with the added police ticketing, the city – which will certainly incur millions in renovation and infrastructure costs as a result of what for a while seemed to be daily rioting – will see a revenue shortfall in the coming year: even with the increased ticketing, a $4.09 million budget deficit will remain for fiscal 2015. The city will bridge that gap by drawing on its $10.3 million unassigned reserve, the last of its reserve funds, Blume said. Moody’s Investors Service cited an inability to maintain reserves at satisfactory levels as a potential downgrade trigger in a report from December 2012.

In other words, very soon Ferguson may soon add Chapter 9 bankruptcy to its list of woes. But to get there it will first need to avoid being burned down all over again:

Howard Cure, head of municipal research at New York-based Evercore Wealth Management LLC, which oversees $5.2 billion, said Ferguson’s reliance on revenue from police citations may have contributed to public anger after officer Darren Wilson shot and killed 18-year-old Michael Brown.

 

“It leads to animosity and distrust that might have even spawned some of the unrest that we’re seeing,” Cure said.

 

Government dependence on police fines is a larger issue in surrounding St. Louis County, especially among its “poor” and “small” communities, Tim Fischesser, executive director of the St. Louis Municipal League, said in a telephone interview. The poverty rate in Ferguson was 22 percent in 2012, the latest year for which data is available, compared with a national average of 15 percent, according to U.S. Census Bureau data.

 

“They said they weren’t going to go after poor people, so to speak, to fund their budget, but I guess that’s changed, Fischesser said.

And so the Catch 22 of modern insolvent America emerges: while the seaboard megapolises continue to thrive on the back of the financialization of the US service economy thanks to some $300 trillion in derivatives (if only for the time being), the poorer cities in America’s heartland are caught in a toxic spiral whereby poor populations are unable to pay enough sales tax to keep city funding afloat, and so cities are forced to resort to forced, and armed, Police extraction of “municipal revenues”, adding widespread anger to what already is a combustible mix of poverty and resentment, and worsening it at every turn, until it finally all spontaneously combusts when popular anger explodes leading to such events as the Ferguson riots. This should also help explain the unprecedented, and stealthy, militarization of police forces across the United States in the past year.

Unfortunately, since there are countless other cities just like Ferguson and just as many police forces who just happen to be the last bastion of “municipal revenue collection”, the probability of future social violence across America rises exponentially.

What is more, even Wall Street has finally realized just how interconnected the problems facing America’s inner slums are:

Reliance on a revenue stream like police fines was problematic from a purely credit perspective as well, said Joe Rosenblum, director of municipal credit research at New York-based AllianceBernstein LP.

 

“Any community that faces budget issuers with a whole series of financial and social challenges you have to approach with a skeptical mind,” he said. “I’d be fairly negative on the outlook from a credit perspective.”

 

Trading in Ferguson debt indicates that investors in the $3.7 trillion municipal market have started to take note of financial issues. Yields on the city’s 2013 certificates of participation maturing in 2032 exceded 4 percent last week from 3.5 percent as prices fell below 90 cents on the dollar for the first time since issuance, according to data compiled by Bloomberg.

They will go far wider before the realization that yet another municipal US bankruptcy is inevitable. As for the fate that lies before a soon to be insolvent and very violent Ferguson, Bloomberg is politically correct: it “may risk worsening community relations with increased citations and weakening its credit standing by reducing a rainy-day fund.”

A more accurate summary is that what has happened so far in the poor St. Louis suburb is only an appetizer of what is to come, not only in Ferguson itself but across America, where kicking of responsibility, accountability and simple math, has become next to impossible.

via Zero Hedge http://ift.tt/1qIUXo1 Tyler Durden

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Decency, security, and liberty alike demand that government officials shall be subjected to the same rules of conduct that are commands to the citizen. In a government of laws, existence of the government will be imperiled if it fails to observe the law scrupulously. Our government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy. To declare that in the administration of the criminal law the end justifies the means — to declare that the government may commit crimes in order to secure the conviction of a private criminal — would bring terrible retribution. Against that pernicious doctrine this court should resolutely set its face.

 

–  Louis Brandeis, Supreme Court Justice, in 1928

While most Americans are busy Christmas shopping and making preparations for trips to see family, Congress remains hard at work doing what it does best. Giving gifts to Wall Street and trampling on citizens’ civil liberties.

I knew the plebs were about to be royally screwed a week ago when I published the post: Wall Street Moves to Put Taxpayers on the Hook for Derivatives Trades. The piece concluded with the following:

Remember what Wall Street wants, Wall Street gets. Have a great weekend chumps.

Naturally, Wall Street got what it wanted. In fact, this provision was so important to the financial oligarchs that Jaime Dimon called around to encourage our (Wall Street’s) representatives to support it. The Washington Post reports that:

While that’s bad enough, the lame duck Congress clearly didn’t consider its job done without legislating away the 4th Amendment. Here is some of what one of the only decent members of Congress, Justin Amash, wrote on Facebook:

When I learned that the Intelligence Authorization Act for FY 2015 was being rushed to the floor for a vote—with little debate and only a voice vote expected (i.e., simply declared “passed” with almost nobody in the room)—I asked my legislative staff to quickly review the bill for unusual language. What they discovered is one of the most egregious sections of law I’ve encountered during my time as a representative: It grants the executive branch virtually unlimited access to the communications of every American.

 

On Wednesday afternoon, I went to the House floor to demand a roll call vote on the bill so that everyone’s vote would have to be recorded. I also sent the letter below to every representative.

 

With more time to spread the word, we would have stopped this bill, which passed 325-100. Thanks to the 99 other representatives—44 Republicans and 55 Democrats—who voted to protect our rights and uphold the Constitution. And thanks to my incredibly talented staff.

 

###

 

Block New Spying on U.S. Citizens: Vote “NO” on H.R. 4681

 

Dear Colleague:

 

The intelligence reauthorization bill, which the House will vote on today, contains a troubling new provision that for the first time statutorily authorizes spying on U.S. citizens without legal process.

Last night, the Senate passed an amended version of the intelligence reauthorization bill with a new Sec. 309—one the House never has considered. Sec. 309 authorizes “the acquisition, retention, and dissemination” of nonpublic communications, including those to and from U.S. persons. The section contemplates that those private communications of Americans, obtained without a court order, may be transferred to domestic law enforcement for criminal investigations.

 

To be clear, Sec. 309 provides the first statutory authority for the acquisition, retention, and dissemination of U.S. persons’ private communications obtained without legal process such as a court order or a subpoena. The administration currently may conduct such surveillance under a claim of executive authority, such as E.O. 12333. However, Congress never has approved of using executive authority in that way to capture and use Americans’ private telephone records, electronic communications, or cloud data.

Now watch the following video:

Finally, this is what I think of Congress:

@SenSanders Yes, and that's because Congress is a bunch of money grubbing, treasonous cowards.

— Michael Krieger (@LibertyBlitz) December 12, 2014

via Zero Hedge http://ift.tt/1ILah9G Tyler Durden

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Ben really loved uncle Keynes

He’d often let Ben pull the reins

They both had great fun

But when they were done

Ben’s coat would be covered in stains

The Limerick King.

 

 

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Paul really loves his new sweater

 Clowns always make him feel better

 His favorite is Keynes

 A man with no brains

 Who turned the world into a debtor

The Limerick King

.

His name is Kitty Meow Keynes. The inventor of Feline Money.

 

 

 

via Zero Hedge http://ift.tt/1GwhAht williambanzai7

"Anything that becomes a mania — it ends badly," warns one bond manager, reflecting on the $550 billion of new bonds and loans issued by energy producers since 2010, "and this is a mania." As Bloomberg quite eloquently notes, the danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt – as HY energy spreads near 1000bps – all thanks to the mal-investment boom sparked by artificially low rates manufactured by The Fed. "It's been super cheap," notes one credit analyst. That is over!! As oil & gas companies are “virtually shut out of the market" and will have to "rely on a combination of asset sales" and their credit lines. Welcome to the boom-induced bust…

 

As Bloomberg reports, with oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year.

“Anything that becomes a mania — it ends badly,” said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. “And this is a mania.”

The Fed’s decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked. A report from Moody’s Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis.

Borrowing costs for energy companies have skyrocketed in the past six months…

Energy companies are no longer able to access credit…

 

“It’s been super cheap” for energy companies to obtain financing over the past five years, said Brian Gibbons, a senior analyst for oil and gas at CreditSights in New York. Now, companies with ratings of B or below are “virtually shut out of the market” and will have to “rely on a combination of asset sales” and their credit lines, he said.

The Fed’s three rounds of bond buying were a gift to small companies in the capital-intensive energy industry that needed cheap borrowing costs to thrive, according to Chris Lafakis, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

 

Quantitative easing “has been one of the keys to the fast, breakneck pace of the growth in U.S. oil production which requires abundant capital,” Lafakis said.

 

One of those to take advantage was Energy XXI, an oil and gas explorer, which has raised more than $2 billion in the bond market in the past four years.

 

The Houston-based company’s $750 million of 9.25 percent notes, issued in December 2010, have tumbled to 64 cents on the dollar from 106.3 cents in September, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They yield 27.7 percent.

 

Energy XXI got its lenders in August to waive a potential violation of its credit agreement because its debt had risen relative to its earnings, according to a regulatory filing. In September, lenders agreed to increase the amount of leverage allowed.

And the blowback is coming…

“There are distortions in multiple markets,” said Lawrence Goodman, president of the Center for Financial Stability, a monetary research group in New York. “It is like a Whac-A-Mole game: You don’t know where it is going to pop up next.”

 

…

 

“Oil companies that have high funding costs in the Eagle Ford and the Bakken shale plays are the ones that are most exposed right now due to lower crude prices,” Gary C. Evans, chief executive officer of Magnum Hunter Resources (MHR) Corp., said in a phone interview.

 

…

 

For other energy borrowers at risk, “the liquidity squeeze” will probably occur in March or April when banks re-calculate hoe much they may borrow under their credit lines based on the value of their oil reserves.

 

Deutsche Bank analysts predicted in a Dec. 8 report that about a third of companies rated B or CCC may be unable to meet their obligations should oil prices drop to $55 a barrel.

 

“If you keep oil prices low enough for long enough, there is a pretty good case that some of the weakest issuers in the high-yield space will run into cash-flow issues,” Oleg Melentyev, a New York-based credit strategist at Deutsche Bank, said in a telephone interview.

*  *  *

As we noted previously, here is Deutsche Bank's most granular research:

Here are the details:

 

 

So how big of an impact on fundamentals should we expect from the move in oil price so far and where is the true tipping point for the sector? Let’s start with some basic datapoint describing the energy sector – it is the largest single industry component of the USD DM HY index, however, given this market’s relatively good sector diversification, it only represents 16% of its market value (figure 2). Energy is noticeably tilted towards higher quality, with BB/B/CCC proportions at 53/35/12, compared to overall market at 47/37/17. We find further confirmation to this higher-quality tilt by looking at Figure 3 below, which shows its leverage being around 3.4x compared to 4.0x for overall market. Similarly, their interest coverage stands at noticeably higher levels, even having declined substantially in recent years (Figure 4).

 

 

Energy issuer leverage has increased faster than that of the rest of the market in recent years, but this trend has largely exhausted itself in recent quarters. As Figure 5 demonstrates, growth rates in total debt outstanding among US HY energy names have been only slightly higher relative to the rest of HY market. It is almost certain in our mind that with the current shakeout in this space further incremental leverage will be a lot harder to come by going forward.

 

Perhaps the most unsustainable trend that existed in energy going into this episode shown in Figure 6, which plots the sector’s overall capex expenditure, as a pct of EBITDAs. The graph averaged 150% level over the past four years, clearly the kind of development that could not sustain itself over a longer-term horizon. Our 45%-full sample of issuers reporting Q3 numbers has shown this figure coming down to 110%, a move in the right direction, and  yet a level that suggests further capacity for decline. This chart also shows, perhaps better than any other we have seen, the extent to which current economic  recovery in the US has in fact been driven by the energy development story alone.

 

 

The next question we would like to address here is to what extent the move in oil so far could translate into actual credit losses across the energy sector. To help us approach this question we are borrowing from the material we are going to discuss in-depth in next week’s report on our views on timing/extent of the upcoming default cycle. For the purposes of the current exercise we will limit ourselves to saying that we have identified total debt/enterprise value (D/EV) as an important factor helping us narrow down the list of potential defaulters. Specifically, our historical analysis shows that names that go into restructuring, on average, have their D/EV ratio at 65% two years prior to default, and, expectedly, this ratio rises all the way to 100% at the time of restructuring. From experiences in 2008-09 credit cycle we have also determined that there was a 1:3 relationship between the number of defaulting issuers and the number of issuers trading at 65%+ D/EV prior to the cycle. Again, we are going to present detailed evidence behind these assumptions in the next week’s report.

 

For the time being, we will limit ourselves to applying these metrics to current valuations in the US HY energy sector, and specifically, its single-B/CCC segment. At the moment, average D/EV metric here is 55%, up from 43% in late June, before the 26% move lower in oil. About 28 pct of energy B/CCC names are trading at 65%+ D/EV, implying an 8.5% default rate among them, assuming historical 1/3rd default probability holds. This would translate into a 4.3% default rate for the overall US HY energy sector (including BBs), and 0.7% across the US HY bond market.

 

Looking at the bond side of valuation picture, we find that energy Bs/CCCs are trading at a 270bp premium over non-Energy Bs/CCCs today (Figure 7). This premium implies incremental default rate of 4.5% (= spread * (1 – recovery) = 270 * (1-0.4) = 4.5%). Actual default rate among US HY Bs/CCCs is currently running at 3%, a level that we expect to increase to 5% next year (not to be confused with overall US HY default rate, currently running at 1.7% and expected to increase to 3.0% next year).

 

The bottom line is hardly as pretty as all those preaching that the lower the oil the better for the economy:

 

 

In the next step we are attempting to perform a stress-test on oil, defined this way: what would it take for overall US energy Bs/CCCs segment to start trading at 65%+ total debt/enterprise value? Our logic in modeling this scenario goes along the following lines: if a 25% drop in WTI since June 30th was sufficient to push their average D/EV from 43 to 55, then it would take a further 0.8x similar move in oil to get the whole sector to average 65 = (65-55)/(55-43) = 0.8x, which translates into another 20% decline in WTI from its recent low of $77 to roughly $60/bbl. If this scenario were to materialize, based on historical default incidence, we would expect to see 1/3rd of US energy Bs/CCCs to restructure, which would imply a 15% default rate for overall US HY energy, and a 2.5% contribution to the broad US HY default rate.

How should one trade an ongoing collapse in oil prices? Simple: sell B/CCC-rated energy bonds and wait to pick up 10%.

 

 

If this scenario were to materialize, the US energy Bs/CCCs would have to trade at spreads north of 1,800bp, or about a 1,000bps away from its current levels. Such a spread widening translates into a 40pt drop in average dollar price from its current level of 92pts for energy Bs/CCCs.

It gets worse, because energy CapEx is about to tumble, which means far less exploration (and US fixed investment thus GDP), far less supply, and ultimately a higher oil price.

 

 

As the market adjusts to realities of sharply lower oil prices, it is important for to remember that the US HY energy sector is a higher quality part of the market. Higher credit quality will help many of them absorb an oil price shock without jeopardizing production plans or ability to service debt. Their capex rates, expressed as a pct of EBITDAs, have already declined from an average of 150% over the past four years to roughly 110% today. We still consider this level to be high and thus subject to further pressures. This in turn should work towards slower rates of supply growth, and thus ultimately towards supporting a new floor for oil prices. A 25% in oil price so far has pushed debt/enterprise valuations among US energy B/CCC names to a point suggesting 8.5% future default probability, while their bonds are pricing in a 9.5% default probability.

And the scariest conclusion of all:

 

 

Finally, our stress-test shows that a further 20% drop in WTI to $60/bbl is likely to push the whole sector into distress, a scenario where average B/CCC  energy name will start trading at 65% D/EV, implying a 30% default rate for the whole segment. A shock of that magnitude could be sufficient to trigger a  broader HY market default cycle, if materialized.

And now back to the old "plunging oil prices are good for the economy" spin cycle.

via Zero Hedge http://ift.tt/1z3c2L4 Tyler Durden

Submitted by Michael Snyder of The Economic Collapse blog,

Did you know that 65 percent of all children in the United States live in a home that receives aid from the federal government?  We live at a time when child poverty in America is exploding.  Yes, the U.S. economy is experiencing a temporary bubble of false stability for the moment, but even during this period of false stability the gap between the wealthy and the poor continues to rapidly expand and the middle class is being systematically destroyed.  And sadly, this is having a disproportionate impact on children.  This is happening for a couple of reasons.  First of all, poorer households tend to have more children than wealthier households.  Secondly, most people tend to have children when they are in their young adult years, and right now young adults are being absolutely hammered by this economy.  As a result, things just continue to get even worse for children living in this country.

Here are 14 facts that show that the number of children in America living in poverty this Christmas is at an all-time record high…

#1 The National Center for Children in Poverty says that 45 percent of all U.S. children belong to low income families.

#2 According to a Census Bureau report that was released just this week, 65 percent of all children in America are living in a home that receives some form of aid from the federal government…

“Almost two-thirds (65 percent) of children,” said the Census Bureau, “lived in households that participated in at least one or more of the following government aid programs: Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Medicaid, and the National School Lunch Program.”

#3 According to a report recently released by UNICEF, almost one-third of all children in this country “live in households with an income below 60 percent of the national median income”.

#4 When it comes to child poverty, the United States ranks 36th out of the 41 “wealthy nations” that UNICEF looked at.

#5 An astounding 45 percent of all African-American children in America live in areas of “concentrated poverty”.

#6 40.9 percent of all children in the United States that are living with only one parent are living in poverty.

#7 These days, a lot of single mothers are really, really struggling to survive.  A decade ago, the number of women in America that had jobs outnumbered the number of women in America on food stamps by more than a 2 to 1 margin.  But now the number of women in America on food stamps actually exceeds the total number of women that have jobs.

#8 It is hard to believe, but right now 49 million Americans are dealing with food insecurity.

#9 According to a report that was released last month by the National Center on Family Homelessness, the number of homeless children in the United States has reached a new all-time high of 2.5 million.

#10 There are more than half a million homeless children in the state of California alone.

#11 One recent survey found that about 22 percent of all Americans have had to turn to a church food panty for assistance.

#12 This year, almost one out of every five households in the United States will go through the holiday season on food stamps.

#13 One of the primary reasons why kids are suffering so much is because their parents are simply not making enough money.  This is especially true for parents of young children.  For example, check out the following numbers from the Atlantic…

Since the Great Recession struck in 2007, the median wage for people between the ages of 25 and 34, adjusted for inflation, has fallen in every major industry except for health care.

 

These numbers come from an analysis of the Census Current Population Survey by Konrad Mugglestone, an economist with Young Invincibles.

 

In retail, wholesale, leisure, and hospitality—which together employ more than one quarter of this age group—real wages have fallen more than 10 percent since 2007. To be clear, this doesn’t mean that most of this cohort are seeing their pay slashed, year after year. Instead it suggests that wage growth is failing to keep up with inflation, and that, as twentysomethings pass into their thirties, they are earning less than their older peers did before the recession.

#14 Overall, the quality of the jobs in America continues to decline.  At this point, most Americans do not bring home enough income to support a middle class lifestyle for their families.  Below I have shared an excerpt from an article that I published a while back…

The following are some statistics about wages in the U.S. from a Social Security Administration report that was recently released…

 

-39 percent of American workers made less than $20,000 last year.

-52 percent of American workers made less than $30,000 last year.

-63 percent of American workers made less than $40,000 last year.

-72 percent of American workers made less than $50,000 last year.

In addition to all of these numbers, there is also a lot of anecdotal evidence that families with children are really struggling right now.

For example, McDonald’s has traditionally been a place where poor and middle class families have taken their children for a cheap meal.  But the restaurant chain just released the worst sales numbers that we have seen in more than a decade.

And the really bad news is that this is just the beginning of the economic pain for families with children.  The U.S. economy is in a bubble period right now, and the authorities have been trying with all of their might to keep the bubble inflated.

Just imagine a bodybuilder that is pressing with all of his might to do one more rep on the bench press.  That is essentially where we are at.  In a recent piece, Brian Pretti summarized some of the extraordinary measures that global central banks have taken to keep the economic bubble inflated…

Since early 2009, central banks globally have printed more than $13 trillion. In addition, governments across the planet have increased their borrowings at historic proportions (the US just crossed $18T – another new high!), all in an effort to stimulate economies and avoid deflationary pressures. Total US Federal debt has more than doubled in five years, an increase of $9.5 trillion and counting.

Despite all of these efforts, the best that we have achieved is economic stagnation.

And now it is becoming clear that the overwhelming deflationary forces around the globe are starting to win the battle.  The central banks have used up their ammunition and they still have not turned things around.  In fact, as Ambrose Evans-Pritchard so eloquently put it recently, what we see all around us is “evidence of a 1930s-style depression, albeit one that is still contained”…

What is clear is that the world has become addicted to central bank stimulus. Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another.

 

These are astonishing figures, evidence of a 1930s-style depression, albeit one that is still contained. Nobody knows what will happen as the Fed tries to break out of the stimulus trap, including Fed officials themselves.

But will it still be contained once the next major financial crash strikes?

As I discussed yesterday, there has never been a time when conditions have been more ideal for a financial crisis since the last one happened in 2008.

So as bad as things are for the children of America right now, they are only going to get worse.

In the years ahead may we all have great compassion for these victims of our incredibly foolish economic mistakes.

via Zero Hedge http://ift.tt/12EEgPu Tyler Durden