The US is on the brink of an economic meltdown

This diary by Bonddad at Daily Kos is an eye-opening piece which can't help but give you cause for concern.

Bonddad does a thorough job of analysing the US economy and then presenting six fundamental reasons the current US economic condition needs to be addressed and needs to be addressed quickly. From the conclusions of Bonddad's diary:

The US economy's foundations are weak. Current job growth is poor by historical standards. This has lead to weak wage growth, forcing consumers to fund their purchases with a massive increase in debt acquisition. Because consumers have spent beyond their means, they have little savings to help them through economically difficult times. In addition, their increased use of debt makes them more susceptible to insolvency should they experience a financial problem.

At the national level, the federal government has returned to deficit spending, decreasing its effectiveness in the event of a recession. And finally, the trade deficit which is financed by foreign capital inflows could correct violently, spiking US interest rates, slowing the US economy and creating a huge financial problem.

Bonddad demonstrates that job growth is stagnant and the labor participation rate has actually dropped.

The Bush administration continually uses May 2003 as the starting point for their employment figures (largely because this was the lowest point of total establishment jobs on their watch).

True to Bush form, this is a false representation of the real picture. One needs to take a longer view to gain perspective.

Comparing Bush's establishment job growth to all other expansions since 1960 indicates Bush's job creation is the weakest of the last 40 years.
[...]
In fact, when you compare Bush's average annual percentage change in the employment numbers to all the other economic expansions in the last 40 years Bush's record of job creation comes up dead last. Bush's average annual percentage change in payroll employment is .6%. The next lowest is Clinton's expansion, where the average annual percentage change in payroll employment was 1.9% -- three times higher.

Bonddad's assessment of consumer debt is even more terrifying. Coupled with a savings rate that has now fixed itself in the negative column, a US national debt that has increased from 5.8 trillion to 8.2 trillion under Bush's leadership, personal tax revenues that have decreased by $67 billion annually, a trade deficit that will eventually have to be corrected against consumers who actually have no savings (deferred spending) and one picture starts to form: The US middle-class, with wages shrinking, jobs vanishing and no money in the bank to weather an economic correction, faces extinction.

From a Canadian standpoint, the loss of the American middle-class is more than just a disaster which will be witnessed. Canadians may not be in the same boat, but they are certainly in the dinghy being towed astern.

With the US as a major trading partner the only thing Canadian exporters and manufacturers can do to avert a concurrent disaster is to diversify export markets enough to prevent being destroyed by a US economic meltdown. To do that, Canadian producers would have to reduce dependence on US markets to much less than that of current levels while giving priority to new markets. Unfortunately, this is a part of the disaster scenario in Bonddad's post.

Canadians can't observe the US consumer debt load or miserable savings rate with any smugness. While Canada has a continuing trade surplus and a shrinking national debt, the employment participation rate has gone into negative numbers and the personal savings rate has also entered the negative column.

Given that a US economic failure would have an immediate impact on Canadian exports of raw materials and durable goods, a large swath of the Canadian middle-class would also be swept away.

Bonddad's diary is a must read. While he doesn't suggest that an economic correction is going to happen tomorrow, he describes what is now a slippery slope and the tank is certainly in sight.