Thread: Sheep to the Slaughter: Americans Raid Savings Accounts to Stay Afloat and Maintain t

Sheep to the Slaughter: Americans Raid Savings Accounts to Stay Afloat and Maintain the Dream

Mac Slavo
January 18th, 2012
SHTFplan.com
Comments (193)

Retail parking lots may be full and Americans may be buying must-have electronics, home decor products and new cars, but where’s all the money coming from?

As we’ve suggested previously, the economic destruction following the collapse of 2008 is slowly, but surely taking its toll, forcing many people still holding on to a paradigm of consumption to dip into cash savings, retirement accounts and personal credit lines:

More than four years after the United States fell into recession, many Americans have resorted to raiding their savings to get them through the stop-start economic recovery.

In an ominous sign for America’s economic growth prospects, workers are paring back contributions to college funds and growing numbers are borrowing from their retirement accounts.

Some policymakers worry that a recent spike in credit card usage could mean that people, many of whom are struggling on incomes that have lagged inflation, are taking out new debt just to meet the costs of day-to-day living.

American households “have been spending recently in a way that did not seem in line with income growth. So somehow they’ve been doing that through perhaps additional credit card usage,” Chicago Federal Reserve President Charles Evans said on Friday.

“If they saw future income and employment increasing strongly then that would be reasonable. But I don’t see that. So I’ve been puzzled by this,” he said.

“Today, the saving rate is falling out of necessity. Food and energy prices have risen and folks don’t have as much money to spend on the things that they would like.”

Just as Americans used to borrow against the value of their homes before the property crash, now many are taking out loans from their 401(k) retirement savings plans.

Almost a third of plan participants currently have a loan outstanding, according to an upcoming survey of 150,000 holders of 401(k)s by consulting firm Aon Hewitt.

Source: Reuters

There’s nothing to be puzzled about here.

There are over 25 million people in this country whose jobs have been destroyed by economic malaise and outsourcing to foreign companies. Monetary easing and other financial machinations have forced the price of essential goods like food, gasoline and life-saving services through the roof.

Americans, still living in a world where we identify ourselves by the products we wear, what we drive and how we entertain ourselves, haven’t yet realized that the consumptive paradigm of the last 30 years is coming to an end. The majority of people, even those going through financial hard times, simply bury their heads in the sand in an effort to avoid the reality that the economy is on a trajectory as bad as, if not worse than, the Great Depression.

But, while they may be making less money – or no money at all – everything is still OK – it has to be – because the Jones family across the street always has the latest gadgets, goes on luxurious weekend getaways, eats out regularly, and they even bought a new car last month. So, if the Joneses can do it, then the economy and financial markets must really be in recovery just like those experts say on television.

On top of that, this is America, the richest nation on Earth, and its managed by the best, brightest, and most benevolent. We may have had a slight down-turn, but those people in Washington and on Wall Street know what they’re doing and they’ll make sure nothing goes wrong again.

Since all of the experts say the recession is over and everything will be returning to normal – including more jobs and regular pay increases – there’s nothing to lose.

Unsuspecting Americans being led, yet again, to financial slaughter (and perhaps worse), are willing to take the experts on their word. They’ll pull money out of their retirement accounts, bank savings account, even take on more debt than ever before, just to stay afloat in anticipation of that job, wage increase and ‘return to normal’ they’ve been promised.

This, of course, is a dream world, but millions upon millions of Americans (and Europeans too), believe that all of the fundamental problems responsible for the global meltdown a few years ago have been resolved. They still have faith in a false paradigm that has already collapsed.

The tragedy of it is that they will spend everything, believe everything they’re told, and do whatever their elected masters tell them, until they are eventually left with nothing. No financial stability. No accumulated wealth. No liberty.

Sheep to the Slaughter: Americans Raid Savings Accounts to Stay Afloat and Maintain the Dream

Market Meltdown Warning: Institutional Investors Are Offloading Stocks to Retail Buyers (That’s Us)

Mac Slavo
January 19th, 2012
SHTFplan.com
Comments (116)

As the Dow Jones appoaches 13,000 and continues to break through multi-year highs, reports over the last several months suggest that the smart money, including major trading houses and hedge funds, is heading for the exits. The latest report comes to us from none other than government bailout darling Goldman Sachs:

Earlier today we got our first clue that the smart money has stopped “distribution” and is now offloading to retail after we saw the first equity fund inflow, however tiny, in months, and only the second one out of 37 outflows since April, as reported by ICI. The second and far more important one comes from today’s Goldman sales roundup, which confirmed that following today’s latest borderline ridiculous meltup, retail investors looking for the sucker at the poker table, wouldn’t be able to find one. Here’s why. Quote Goldman: “As has been the recent trend, our cash flow remains better to sell, both from long-only and hedge funds.” And there you have it: smart money (well, relatively so) has “recently” been using every melt up chance it gets to dump the bags with the E*Trade baby. Third and final proof: “ETF flow however skewed toward better buying.” At this point retail investors may want to ask themselves: what do they know that the others, who are actively selling to them, don’t.

Source: Zero Hedge

In late November 2011, it was reported that a silent run on the banks in Europe had already begun:

As is generally the case in the financial community, the big investors which include large sovereign wealth funds and behemoth financial institutions, are one upping the public by getting out while the gettin’ is good. While mainstream media makes it seem like we are moving in a positive direction with respect to Europe, one thing should be clear: it’s a sham. This the same thing we were being told two years ago, a year ago, a month ago, a week ago. Nothing could be further from the truth.
…
Business Inside reports that a run on Europe has begun, and large institutional players are liquidating their exposure to European bonds and other assets:

Until recently, the concern about Europe has been mostly theoretical–a potential train-wreck that would occur if/when the world’s lenders decided that the continent’s problems extended beyond the basket case known as Greece and cut lending to Europe’s “core.”

Well, that concern is no longer theoretical.
It’s happening.

The world’s lenders are increasingly deciding that it’s better to be safe than sorry, and they’re pulling their money out of Europe.

Source: The Daily Sheeple

The big money players and investment firms know what’s happening in Europe, as well as the United States.

In just the last couple of days it has been reported that Greek officials arrived in the US to discuss default fears as they approach a March 2012 deadline to make good on bond payment commitments made during their last bailout cycle. For bondholders and lenders who bought into the recovery falsehood and invested money into Greece when they were first threatened with a sovereign debt default a couple of years ago, the possibility of a 50% (or more) haircut on their investments is quickly becoming reality. This has spooked investors all over the world. They know billions of dollars are about to vanish. On top of that, we have the debt of Italy, Spain and Portugal to contend with – a situation that is significantly worse than that of Greece alone.

What we’re seeing from across the Atlantic ocean is that we have massive amounts of outflows, as no one is willing to risk their money in European Union related debt (except the Federal Reserve, of course). Like we saw in the midst of the meltdown in 2008, the outflows are headed straight over to the United States into what many consider to be the last bastion of investment safety – good ‘ol U.S. Treasury bonds. This will have a direct impact on the US dollar, which according to The Daily Crux, may be set to explode to the upside in the very near future. Additionally, stock exchanges are showing technical signals which tend to appear right before market breakdowns.

On top of that, we are hearing that earnings reports for US companies will be lower than expected, with negative news reportedly outweighing positive news by a ratio of 3.5 to 1. This will put added pressure on stocks.
All of these signs suggest that, not only are investors pulling out of European bonds, but also global equities. The report from Goldman Sachs above may be confirmation of this developing capital flow trend.

Confidence in the stability of credit and equities markets around the world may very well be evaporating.

Market Meltdown Warning: Institutional Investors Are Offloading Stocks to Retail Buyers (That's Us)