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About a week and a half ago, with the media din of a “U.S. recovery” reaching a fevered-pitch, I wrote a piece titled “Why the U.S. economy CAN'T recover”, providing a big-picture overview of the health of the U.S. economy (or, rather, the lack thereof). In that piece, I focused on how the Obama “stimulus package” was not only too small to reverse the collapse of the U.S. economy, but that most of that money had been wasted in propping up U.S. bankster-oligarchs.

I also pointed out that the crushing weight of U.S. debts ($11 trillion “national debt”, $57 trillion total public/private debt, and an additional $70 trillion or so in “unfunded liabilities”) was simply overwhelming any modest economic forces pushing the economy away from collapse. Two news items this week demonstrate precisely how and why this debt-load is crushing the life out of the U.S. economy.

This week, the American Bankers Association reported that three key categories of consumer debt had just set new records for delinquencies – again. Home equity loans, home equity lines of credit, and credit card debt all broke their recent records for delinquencies (from the 1^st quarter of this year) in the 2^nd quarter.

As a reminder, during the peak of the U.S. housing bubble (and Wall Street Ponzi-scheme), U.S. homeowners extracted over $840 billion of temporary “equity” from their homes – just in 2006, alone. Now, not only are those hundreds of billions of dollars per year of additional spending-dollars missing from the U.S. economy, but these same homeowners must now repay those loans – while the home equity which “financed” those loans no longer exists.

What the new numbers from the ABA show is that these homeowners are unable to make the payments on this debt (totaling trillions of dollars) in ever-increasing numbers. Over 4% of these loans are delinquent, and should default occur, this already translates to $10's of billions in losses on bank balance sheets.

Meanwhile, credit card delinquencies rose to over 5% (strangely, most U.S. big-banks are reporting double this rate of delinquencies). This is terrible news for two reasons. First of all, credit cards are now virtually the only credit still available to a large portion of the U.S. population – given that U.S. banks are cutting consumer credit at a rate far higher than any other time in history (see “Record Plunge in U.S. Consumer Credit in July”). Rising delinquencies here indicate a large and growing number of these card-holders have already used up all this credit.

Secondly, with credit cards inflicting sky-high interest rates on the unpaid balances of card-holders, it is much more difficult to get caught up on these debt payments because of how quickly such debt compounds.

The second news item is that U.S. small- and medium-sized businesses are also slipping into arrears with their debt-payments in increasing numbers. Again, as these companies become delinquent on their debt, this implies that more and more of these companies have also used up all available credit. Reinforcing this conclusion, the Reuters article also reported that lending to small businesses – which had improved modestly in June and July – plummeted in August at an annualized rate of 20%. The significance of this is that more than half the money which U.S. companies invest in equipment, software and plants is financed by debt.

As all politicians love to point out (when they are tossing out some economic “carrot”), small businesses are the primary creator of new jobs in any economy. Quite simply, what the data indicates is that small businesses will not be providing any net job-creation in the U.S.

Put together, the following picture is presented. U.S. businesses lack either the revenues or the access to credit to increase employment – indeed, rising delinquency rates imply a continued rise in bankruptcies going forward. U.S. consumers are experiencing ever-decreasing disposable income each month, as they use up the last of their credit – and then begin to become delinquent or default on that debt.

To make a bad situation worse, U.S. banks continue to cut their lending (despite all their promises to the contrary when they were mooching their own trillions in hand-outs).

Thus, the U.S. is facing a combination of businesses which can't grow, and consumers who can't spend. As I have stated repeatedly, all talk of a “U.S. economic recovery” is nothing but malicious propaganda.

It is impossible for the U.S. to experience a “double-dip recession”, because it has not (and could not) pull out of the current plunge. All that we saw around the middle of this year was exactly the same thing which we saw the middle of last year (after the Bush “stimulus package” kicked-in). The collapse in the U.S. economy slowed down, and then as the effects of that mild stimulus wore off, it once again accelerated downward.

U.S. equity markets have been propped-up by the propaganda-machine for the last six months, in order to allow the insiders to bail-out of their own shares (see “Insider selling STILL accelerating”). With Wall Street insiders now having taken their own money off the table, it is highly likely that these manipulated markets will now be allowed to crash – crushing all the chumps who bought into all the nonsense of a “U.S. economic recovery”.

Once the sheep have been thoroughly “fleeced”, the insiders will buy back in – and then we can all watch yet another episode of the “U.S. recovery” game (by my estimate, the 6^th such episode).

“Fool me once, shame on you. Fool me five times, shame on me.”

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