Financial Collapse: 8 Signs that a Global Economic Crisis Is Coming Soon
Before the Maitreya will show up on the scene America's economy will completely collapse
This blog is LOADED with the latest as it relates to this topic...
When the banking crisis crippled global markets seven years ago, central bankers stepped in as lenders of last resort.
Profligate private-sector loans were moved on to the public-sector balance sheet and vast money-printing gave the global economy room to heal.
Time is now rapidly running out. From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt.
It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.
It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.
The FTSE 100 has now erased its gains for the year, but there are signs things could get a whole lot worse.
1 – China slowdown
China
was the great saviour of the world economy in 2008. The launching of an
unprecedented stimulus package sparked an infrastructure investment
boom. The voracious demand for commodities to fuel its construction boom
dragged along oil- and resource-rich emerging markets.
The Chinese economy has now hit a brick wall. Economic growth has
dipped below 7pc for the first time in a quarter of a century, according
to official data. That probably means the real economy is far weaker.
The People’s Bank of China has pursued several measures to boost the flagging economy. The rate of borrowing has been slashed during the past 12 months from 6pc to 4.85pc. Opting to devalue the currency was a last resort and signalled the great era of Chinese growth is rapidly approaching its endgame.
Data for exports showed an 8.9pc slump in July from the same period a year before. Analysts expected exports to fall only 0.3pc, so this was a huge miss.
The Chinese housing market is also in a perilous state. House prices have fallen sharply after decades of steady growth. For the millions who stored their wealth in property, it makes for unsettling times.
2 – Commodity collapse
The China slowdown has sent shock waves through commodity markets. The Bloomberg Global Commodity index, which tracks the prices of 22 commodity prices, fell to levels last seen at the beginning of this century.
The oil price is the purest barometer of world growth as it is the fuel that drives nearly all industry and production around the globe.
Brent crude, the global benchmark for oil, has begun falling once again after a brief rally earlier in the year. It is now hovering above multi-year lows at about $50 per barrel.
Iron ore is an essential raw material needed to feed China’s steel mills, and as such is a good gauge of the construction boom.
The benchmark iron ore price has fallen to $56 per tonne, less than half its $140 per tonne level in January 2014.
3 – Resource sector credit crisis
Billions of dollars in loans were raised on global capital markets to fund new mines and oil exploration that was only ever profitable at previous elevated prices.
With oil and metals prices having collapsed, many of these projects are now loss-making. The loans raised to back the projects are now under water and investors may never see any returns.
Nowhere has this been felt more acutely than shale oil and gas drilling in the US. Tumbling oil prices have squeezed the finances of US drillers. Two of the biggest issuers of junk bonds in the past five years, Chesapeake and California Resources, have seen the value of their bonds tumble as panic grips capital markets.
As more debt needs refinancing in future years, there is a risk the contagion will spread rapidly.
4 – Dominoes begin to fall
The great props to the world economy are now beginning to fall. China is going into reverse. And the emerging markets that consumed so many of our products are crippled by currency devaluation. The famed Brics of Brazil, Russia, India, China and South Africa, to whom the West was supposed to pass on the torch of economic growth, are in varying states of disarray.
The central banks are rapidly losing control. The Chinese stock market has already crashed and disaster was only averted by the government buying billions of shares. Stock markets in Greece are in turmoil as the economy grinds to a halt and the country flirts with ejection from the eurozone.
Earlier this year, investors flocked to the safe-haven currency of the Swiss franc but as a €1.1 trillion quantitative easing programme devalued the euro, the Swiss central bank was forced to abandon its four-year peg to the euro.
5 – Credit markets roll over
As central banks run out of silver bullets then, credit markets are desperately seeking to reprice risk. The London Interbank Offered Rate (Libor), a guide to how worried UK banks are about lending to each other, has been steadily rising during the past 12 months. Part of this process is a healthy return to normal pricing of risk after six years of extraordinary monetary stimulus. However, as the essential transmission systems of lending between banks begin to take the strain, it is quite possible that six years of reliance on central banks for funds has left the credit system unable to cope.
Credit investors are often far better at pricing risk than optimistic equity investors. In the US while the S&P 500 (orange line) continues to soar, the high yield debt market has already begun to fall sharply (white line).
6 – Interest rate shock
Interest rates have been held at emergency lows in the UK and US for around six years. The US is expected to move first, with rates starting to rise from today’s 0pc-0.25pc around the end of the year. Investors have already starting buying dollars in anticipation of a strengthening US currency. UK rate rises are expected to follow shortly after.
7 – Bull market third longest on record
The UK stock market is in its 77th month of a bull market, which began in March 2009. On only two other occasions in history has the market risen for longer. One is in the lead-up to the Great Crash in 1929 and the other before the bursting of the dotcom bubble in the early 2000s.
UK markets have been a beneficiary of the huge balance-sheet expansion in the US. US monetary base, a measure of notes and coins in circulation plus reserves held at the central bank, has more than quadrupled from around $800m to more than $4 trillion since 2008. The stock market has been a direct beneficiary of this money and will struggle now that QE3 has ended.
8 – Overvalued US market
In the US, Professor Robert Shiller’s cyclically adjusted price earnings ratio – or Shiller CAPE – for the S&P 500 stands at 27.2, some 64pc above its historic average of 16.6. On only three occasions since 1882 has it been higher – in 1929, 2000 and 2007.
The People’s Bank of China has pursued several measures to boost the flagging economy. The rate of borrowing has been slashed during the past 12 months from 6pc to 4.85pc. Opting to devalue the currency was a last resort and signalled the great era of Chinese growth is rapidly approaching its endgame.
Data for exports showed an 8.9pc slump in July from the same period a year before. Analysts expected exports to fall only 0.3pc, so this was a huge miss.
The Chinese housing market is also in a perilous state. House prices have fallen sharply after decades of steady growth. For the millions who stored their wealth in property, it makes for unsettling times.
2 – Commodity collapse
The China slowdown has sent shock waves through commodity markets. The Bloomberg Global Commodity index, which tracks the prices of 22 commodity prices, fell to levels last seen at the beginning of this century.
The oil price is the purest barometer of world growth as it is the fuel that drives nearly all industry and production around the globe.
Brent crude, the global benchmark for oil, has begun falling once again after a brief rally earlier in the year. It is now hovering above multi-year lows at about $50 per barrel.
Iron ore is an essential raw material needed to feed China’s steel mills, and as such is a good gauge of the construction boom.
The benchmark iron ore price has fallen to $56 per tonne, less than half its $140 per tonne level in January 2014.
3 – Resource sector credit crisis
Billions of dollars in loans were raised on global capital markets to fund new mines and oil exploration that was only ever profitable at previous elevated prices.
With oil and metals prices having collapsed, many of these projects are now loss-making. The loans raised to back the projects are now under water and investors may never see any returns.
Nowhere has this been felt more acutely than shale oil and gas drilling in the US. Tumbling oil prices have squeezed the finances of US drillers. Two of the biggest issuers of junk bonds in the past five years, Chesapeake and California Resources, have seen the value of their bonds tumble as panic grips capital markets.
As more debt needs refinancing in future years, there is a risk the contagion will spread rapidly.
4 – Dominoes begin to fall
The great props to the world economy are now beginning to fall. China is going into reverse. And the emerging markets that consumed so many of our products are crippled by currency devaluation. The famed Brics of Brazil, Russia, India, China and South Africa, to whom the West was supposed to pass on the torch of economic growth, are in varying states of disarray.
The central banks are rapidly losing control. The Chinese stock market has already crashed and disaster was only averted by the government buying billions of shares. Stock markets in Greece are in turmoil as the economy grinds to a halt and the country flirts with ejection from the eurozone.
Earlier this year, investors flocked to the safe-haven currency of the Swiss franc but as a €1.1 trillion quantitative easing programme devalued the euro, the Swiss central bank was forced to abandon its four-year peg to the euro.
5 – Credit markets roll over
As central banks run out of silver bullets then, credit markets are desperately seeking to reprice risk. The London Interbank Offered Rate (Libor), a guide to how worried UK banks are about lending to each other, has been steadily rising during the past 12 months. Part of this process is a healthy return to normal pricing of risk after six years of extraordinary monetary stimulus. However, as the essential transmission systems of lending between banks begin to take the strain, it is quite possible that six years of reliance on central banks for funds has left the credit system unable to cope.
Credit investors are often far better at pricing risk than optimistic equity investors. In the US while the S&P 500 (orange line) continues to soar, the high yield debt market has already begun to fall sharply (white line).
6 – Interest rate shock
Interest rates have been held at emergency lows in the UK and US for around six years. The US is expected to move first, with rates starting to rise from today’s 0pc-0.25pc around the end of the year. Investors have already starting buying dollars in anticipation of a strengthening US currency. UK rate rises are expected to follow shortly after.
7 – Bull market third longest on record
The UK stock market is in its 77th month of a bull market, which began in March 2009. On only two other occasions in history has the market risen for longer. One is in the lead-up to the Great Crash in 1929 and the other before the bursting of the dotcom bubble in the early 2000s.
UK markets have been a beneficiary of the huge balance-sheet expansion in the US. US monetary base, a measure of notes and coins in circulation plus reserves held at the central bank, has more than quadrupled from around $800m to more than $4 trillion since 2008. The stock market has been a direct beneficiary of this money and will struggle now that QE3 has ended.
8 – Overvalued US market
In the US, Professor Robert Shiller’s cyclically adjusted price earnings ratio – or Shiller CAPE – for the S&P 500 stands at 27.2, some 64pc above its historic average of 16.6. On only three occasions since 1882 has it been higher – in 1929, 2000 and 2007.
SOURCE
http://www.hangthebankers.com/
Expert: 2016 As Bad As The Great Depression
Financial Armageddon Approaches: U.S. Banks Have 247 Trillion Dollars Of Exposure To Derivatives
Overall, the biggest U.S. banks collectively have more than 247 trillion dollars of exposure to derivatives contracts.
Overall, the biggest U.S. banks collectively have more than 247 trillion dollars of exposure to derivatives contracts. That is an amount of money that is more than 13 times the size of the U.S. national debt, and it is a ticking time bomb that could set off financial Armageddon at any moment. Globally, the notional value of all outstanding derivatives contracts is a staggering 552.9 trillion dollars according to the Bank for International Settlements. The bankers assure us that these financial instruments are far less risky than they sound, and that they have spread the risk around enough so that there is no way they could bring the entire system down. But that is the thing about risk – you can try to spread it around as many ways as you can, but you can never eliminate it. And when this derivatives bubble finally implodes, there won’t be enough money on the entire planet to fix it.
A lot of readers may be tempted to quit reading right now, because “derivatives” is a term that sounds quite complicated. And yes, the details of these arrangements can be immensely complicated, but the concept is quite simple. Here is a good definition of “derivatives” that comes from Investopedia…
A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest ratesand market indexes.I like to refer to the derivatives marketplace as a form of “legalized gambling”. Those that are engaged in derivatives trading are simply betting that something either will or will not happen in the future. Derivatives played a critical role in the financial crisis of 2008, and I am fully convinced that they will take on a starring role in this new financial crisis.
And I am certainly not the only one that is concerned about the potentially destructive nature of these financial instruments. In a letter that he once wrote to shareholders of Berkshire Hathaway, Warren Buffett referred to derivatives as “financial weapons of mass destruction”…
The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.Since the last financial crisis, the big banks in this country have become even more reckless. And that is a huge problem, because our economy is even more dependent on them than we were the last time around. At this point, the four largest banks in the U.S. are approximately 40 percent larger than they were back in 2008. The five largest banks account for approximately 42 percent of all loans in this country, and the six largest banks account for approximately 67 percent of all assets in our financial system.
So the problem of “too big to fail” is now bigger than ever.
If those banks go under, we are all in for a world of hurt.
Yesterday, I wrote about how the Federal Reserve has implemented new rules that would limit the ability of the Fed to loan money to these big banks during the next crisis. So if the survival of these big banks is threatened by a derivatives crisis, the money to bail them out would probably have to come from somewhere else.
In such a scenario, could we see European-style “bail-ins” in this country?
Ellen Brown, one of the most fierce critics of our current financial system and the author of Web of Debt, seems to think so…
Dodd-Frank states in its preamble that it will “protect the American taxpayer by ending bailouts.” But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors. That includes depositors, the largest class of unsecured creditor of any bank.As I mentioned yesterday, the FDIC guarantees the safety of deposits in member banks up to a certain amount. But as Brown has pointed out, the FDIC only has somewhere around 70 billion dollars sitting around to cover bank failures.
Title II is aimed at “ensuring that payout to claimants is at least as much as the claimants would have received under bankruptcy liquidation.” But here’s the catch: under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured.
The over-the-counter (OTC) derivative market (the largest market for derivatives) is made up of banks and other highly sophisticated players such as hedge funds. OTC derivatives are the bets of these financial players against each other. Derivative claims are considered “secured” because collateral is posted by the parties.
For some inexplicable reason, the hard-earned money you deposit in the bank is not considered “security” or “collateral.” It is just a loan to the bank, and you must stand in line along with the other creditors in hopes of getting it back.
If hundreds of billions or even trillions of dollars are ultimately needed to bail out the banking system, where is that money going to come from?
It would be difficult to overstate the threat that derivatives pose to our “too big to fail” banks. The following numbers come directly from the OCC’s most recent quarterly report (see Table 2), and they reveal a recklessness that is on a level that is difficult to put into words…
Citigroup
Total Assets: $1,808,356,000,000 (more than 1.8 trillion dollars)
Total Exposure To Derivatives: $53,042,993,000,000 (more than 53 trillion dollars)
JPMorgan Chase
Total Assets: $2,417,121,000,000 (about 2.4 trillion dollars)
Total Exposure To Derivatives: $51,352,846,000,000 (more than 51 trillion dollars)
Goldman Sachs
Total Assets: $880,607,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $51,148,095,000,000 (more than 51 trillion dollars)
Bank Of America
Total Assets: $2,154,342,000,000 (a little bit more than 2.1 trillion dollars)
Total Exposure To Derivatives: $45,243,755,000,000 (more than 45 trillion dollars)
Morgan Stanley
Total Assets: $834,113,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $31,054,323,000,000 (more than 31 trillion dollars)
Wells Fargo
Total Assets: $1,751,265,000,000 (more than 1.7 trillion dollars)
Total Exposure To Derivatives: $6,074,262,000,000 (more than 6 trillion dollars)
As the “real economy” crumbles, major hedge funds continue to drop like flies, and we head into a new recession, there seems to very little alarm among the general population about what is happening.
The mainstream media is assuring us that everything is under control, and they are running front page headlines such as this one during the holiday season: “Kylie Jenner shows off her red-hot, new tattoo“.
But underneath the surface, trouble is brewing.
A new financial crisis has already begun, and it is going to intensify as we head into 2016.
And as this new crisis unfolds, one word that you are going to want to listen for is “derivatives”, because they are going to play a major role in the “financial Armageddon” that is rapidly approaching.
Gerald Celente - Trends In The News - "As Predicted: The Panic Of 2016"
58 Facts About The U.S. Economy From 2015 That Are Almost Too Crazy To Believe
The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy. This year the middle class continued to deteriorate, more Americans than ever found themselves living in poverty, and the debt bubble that we are living in expanded to absolutely ridiculous proportions. Toward the end of the year, a new global financial crisis erupted, and it threatens to completely spiral out of control as we enter 2016.
Over the past six months, I have been repeatedly stressing to my readers that so many of the exact same patterns that immediately preceded the financial crisis of 2008 are happening once again, and trillions of dollars of stock market wealth has already been wiped out globally.Some of the largest economies on the entire planet such as Brazil and Canada have already plunged into deep recessions, and just about every leading indicator that you can think of is screaming that the U.S. is heading into one. So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media. When you look at the cold, hard numbers, they tell a completely different story. The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe…FULL REPORT
Everything Central Banks Have Tried Has Failed: According To Citi's Buiter Just One Thing Remains
Seven years after ZIRP (then NIRP) was launched
and central banks grew their balance sheets by $13 trillion, in the
process inflating the biggest bubble the world has ever seen, sending
risk prices to record highs and trillions in government debt to record
negative yields, first the Fed admitted QE was
a mistake, and now the investment banks - especially those who were
bailed out and were the biggest beneficiaries of QE such as Citigroup -
admit central bank quantitative easing failed.
The reason for this failure? What we said from day one dooms all unconventional monetary policy - too much debt.
Here is Citi's Willem Buiter, finally catching up to what we said in early 2009.
So now what? Well, this.
Buiter concludes:
So let's stop pretending that the Fed has a chance in hell of reflating the economy by hiking rates just as the recession begins, and fast forward to the inevitable next step: the beginning of the end for fiat, starting with its widespread paradop above populated urban centers, much to the delight of millions of people everywhere, and a few very big and very underwater debtors, for whom runaway inflation is just what the Doctor (of economics) ordered.
Which can be summarized simply by the following table…
… and Keith Dicker’s assessment which was that “for Greece, it’s mathematically impossible to repay its debt” and that the Greek “economy continues to plummet to deeper depths and is now -33% less than where it was in 2008.”
But the truth is that for all the endless drama, Dicker continues, “the Greek debt crisis isn’t THE crisis. Rather it is simply a symptom of a much larger global debt crisis.”
The problem is that the “larger global debt crisis” is finally metastasizing and spreading to more places, all of which are large enough that they can not be simply swept under the rug, like Greece.
IceCap’s Keith Dicker continues:
Further evidence to support our view is as follows:
Canada – the collapse in oil and commodity markets has pushed the country into recession and the Canadian Dollar to decline to levels lower than that reached during the 2008 crisis.
Oil dependent provinces Alberta and Newfoundland remain in deep denial. Since everyone in these provinces have only ever experienced a booming oil market, many naively believe things will bounce back – and quickly.
Meanwhile, both Toronto and Vancouver housing markets also remain in denial as they continue to go gangbusters. Buyers today are likely buying at all-time highs.
And as we predicted last year, the Bank of Canada has cut (not raised) interest rates twice in the last 6 months.
We fully expect the Bank of Canada to eventually cut interest rates to 0% and start a money printing program as well. And for the stunner – NEGATIVE interest rates will not be that far behind.
Australia – Over the last 20 years, China has been viewed as the growth engine of the world, and justifiably so. With annual growth rates between 8% to 15%, China’s economy was literally eating every rock, stalk and barrel of practically every commodity in the world.
And naturally, any country or company that produced these commodities made a tonne of money – including Australia.
Today, China’s growth rate has slowed to about 3% which is a dramatic slow down compared to what it achieved in the past. This slowdown and China’s effort to even maintain these rates, will have significant repercussions around the world.
And the first up to bear the brunt of this slowdown is its closest supplier of raw materials – Australia.
With dark clouds on the economic horizon, the Australian government and central bank is doing everything possible to prevent the unpreventable recession.
Interest rates have been reduced to all-time historical lows, meanwhile the Australian Dollar has plummeted -25% over the last year. Yet – the negative outlook has not improved.
Brazil – Like Australia, Brazil has benefitted immensely from China’s growth. And now, also like Australia, it too is feeling the affects of the dramatic Chinese slowdown.
The economy has now declined for 12 consecutive months making it both the longest and deepest recession in 25 years.
But wait – it gets worse. Despite declining growth, inflation continues to soar higher causing interest rates to rise as well.
And if that wasn’t bad, also know that the Brazilian currency has fell off the cliff at -53%.
Sweden – Unlike Australia and Brazil, Sweden relies very little on China as a buyer of last resort. Yet, the Swedish economy is also not very hot these days.
In fact, instead of spectacular and dramatic declines in anything, it is doing the exact opposite – it just isn’t moving.
While Sweden isn’t in the Eurozone, it is smack dab next to it and that in itself is reason enough for the lack of growth. We’ve written before how the debt crisis in the Eurozone is acting like a giant, slow moving tornado that is sucking the life out of the economy and everything near by. And unfortunately for Sweden, it is very near by.
While economic growth in the Nordic state hasn’t declined, it hasn’t accelerated either – and this is what has many worried.
So worried, that the central bank shocked everyone not once but twice, by first announcing that they would begin to print money, and then when they announced that interest rates would be NEGATIVE.
These actions are so severe, that we need to repeat them:
As the global economy continues to move as we expect, there is nothing Sweden can do to change what is coming – a global recession and a significantly weaker Krona.
China, Australia, Brazil, Canada, Sweden – it is beyond us how anyone can declare the crisis isn’t spreading. Be prepared – there are going to be lots of opportunities to both make and lose money.
But first, you have to recognize what is happening.
The financial turmoil of the last 24 hours is making headlines all over the globe. It began last night in China. Very bad manufacturing data and another troubling devaluation of the yuan sent Chinese stocks tumbling to a degree that we have not seen since last August. In fact, the carnage would have probably been far, far worse if not for a new “circuit breaker” that China recently implemented. Once the CSI 300 was down 7 percent, trading was completely shut down for the rest of the day. The following comes from USA Today…FULL REPORT
GET YOUR MONEY OUT OF THE BANKS NOW!
Pounds, Euros, Dollars, Yen, Monopoly Dollars, You Name It!!!
With the worldwide economic collapse just around the corner, it’s time to prepare and think ahead BEFORE the coming collapse.
WHEN, NOT IF, this occurs, the economy will crash, the banks will close, ATMs will shut down, so-called “bail-ins” will be enforced, and you will be penniless. We are already seeing this with “test runs” in Greece, so-called “bank glitches” with several American and European banks, and it’s only a matter of time until the economic state in Greece trickles its way onto the rest of Europe, and finally onto American shores.
Start withdrawing money from your bank, little-by-little, and also think about investing in pre-paid debit/credit cards — that way you will be prepared for what’s to come!
In my video I also explain the Truth about the coming collapse, the nefarious agenda behind it, how this ties into Martial Law, and banks’ REAL initiative: STEALING YOUR MONEY.
Watch Here:
One of the many lies Kirby points out is the Fed’s recent rate hike because the economy had improved. Kirby disagrees and says, “My analysis says nothing could be further from the truth. . . . U.S. dollar reserve holdings have dropped close to $1 trillion in the last eight or nine months, and that’s on a global scale. What happens when reserves drop means that foreigners have been selling U.S. government securities. They are abandoning the dollar, and if foreigners are abandoning the dollar, the question is who’s buying them? The answer to who is buying the reserves is the U.S. Treasury itself. Specifically, it is the Exchange Stabilization Fund (ESF) within the U.S. Treasury.”
Kirby goes on to explain, “Because the ESF is buying all these Treasuries that foreign countries are pitching . . . with off-book money these Treasuries do not show up in reserve accounts. This creates a real dichotomy. You’ve got these global U.S. dollar (USD) reserves dropping, but you have this illusion or gimmickry of a strong dollar. Remember, the dollar has been strengthening for the last 9 months. The dollar can’t keep getting stronger if the world is bailing on dollars. The drop in the USD reserves doesn’t support the narrative of a strong dollar. So, something had to be done to put reserves back into the system. . . . The Fed had to give the illusion of tightening and tighten once. . . . This is their attempt . . . to make their narrative sound believable that the dollar is strong and the world isn’t abandoning U.S. government securities.”
Kirby contends that a collapse isn’t coming but is “already happening now.” Kirby
explains, “I believe we are in the process.” How has this financial
collapse been put off so long? Kirby says, “I have been known as a
conspiracy theorist, a tin foil hat wearing conspiracy theorist for the
last ten years of my life because I said the markets are rigged. Now, a
former Fed President has come out and said ‘yes, we rigged the markets.’
So, how are you left? Of course, they have rigged the markets, and the
sad thing is the rigging is going to get more extreme because these
people are acting and operating like cornered rats. Cornered rats are
very, very dangerous animals and can inflict a lot of damage. . . ”
On physical gold and silver supplies, Kirby says, “Gold and silver are not as loved here as in the Asian countries. It’s relatively more plentiful here, but that can all change in a very short period of time. At some point, the available stocks in the West will disappear, and when they start to disappear, it will seem like a bolt of lightning coming out of the clear blue sky because they will be gone in no time.”
What is Kirby’s prediction for the price of gold and silver by the end of 2016? Kirby boldly says, “I think it could be many multiples of the price right now.” What do Kirby’s billionaire contact say? Kirby reports, “They say they think we are very close to the end. I don’t want to see the end because it’s not going to be a happy day, not for me, not for you—not anyone. It’s going to change the way we live–dramatically. . . . The rate of these seizures in the equity markets are likely to quicken and intensify. Future rate hikes are off the table.”
Join Greg Hunter as he goes One-on-One with Rob Kirby of KirbyAnalytics.com.
(There is much more in the video interview.)
The reason for this failure? What we said from day one dooms all unconventional monetary policy - too much debt.
Here is Citi's Willem Buiter, finally catching up to what we said in early 2009.
In short: the ECB's attempts at reflating the economy, while admirable, have failed.We believe that a common factor in the relatively low response of real economic activity to changes in asset prices and yields is probably the fact that the euro area remains highly leveraged. The total debt of households, non-financial enterprises and the general government sector as a share of GDP is higher now than it was at the beginning of the GFC. There has been some shift from the private sector to the public sector, but the overall debt burden remains unprecedentedly high for an economy in peacetime (and for which the debt incurred during the last major war (1939-1945) has long since been worked off).
The wealth effect of higher stock prices appears to do little to boost private consumer expenditure and the lift given by higher stock prices to ‘Tobin’s q’ does not appear to have stimulated private capital expenditure much. The weaker external value of the euro has clearly increased profit margins in exporting and import-competing industries and may have boosted the stock market valuations of internationally active Eurozone-listed companies, but its effect on the volumes of exports and imports appears to be moderate (in part because a number of other countries are pinning their hopes on generating a bounce in inflation and activity through weaker exchange rates, too). Extremely low interest rates have boosted residential mortgage borrowing in Germany and caused German house prices to rise at a, by German standards, alarming year-on-year rate of six percent during several months in 2015.
Excessive indebtedness means households save much of any increase in disposable income in an attempt to pay down the debt. Highly indebted governments, prompted by necessity (limited market access) and/or by the constraints of the Stability and Growth Pact, are less likely to cut taxes or to boost public spending on real goods and services when lower debt service costs raise their disposable incomes. Corporations, even if they are not debt-constrained, are unlikely to boost investment when interest rates go down and the cost of capital falls because of persistent excess capacity amid an uncertain outlook for top-line growth and profits. Profits generated by favorable movements in asset prices (including the exchange rate) are distributed to shareholders (who save a large share of this) and used for share buybacks or debt repayment.
To the extent that monetary policy has had an effect on real activity, and will have some incremental effect on activity, it may not be entirely sustainable. This is because part of the effect has been by bringing forward demand from the future, such as major purchases, including for cars or construction. That suggests that monetary policy, even if and when it has been effective in stimulating activity, will run into diminishing returns even in sustaining the levels of activity it helped to boost.
So while the Eurozone’s IS curve may not be exactly vertical, it may well be disconcertingly close to being vertical in the future.
Well, since admission of failure means the end of the neo-Keynesian, and monetarist system, and according to some, the end of the fiat, fractional reserve system itself, one must - according to Citigroup's chief economist - pursue the only option left.The combination of a near-horizontal LM curve and a near-vertical IS curve suggests that expansionary monetary policy is by no means guaranteed to boost demand sufficiently to achieve the ECB’s inflation target, regardless of the scale on which this is pursued. What is to be done?
Why thank you for telling us 7 years later that the entire path on which global central banks set off in 2009 had been a dead end. We could say we warned you but... well, we did. Every single day."Helicopter money drops (what else?)"
Our conclusion is that, in a financially-challenged economy like the Eurozone, with policy rates close to the ELB, and with excessive leverage in both the public and private sectors, balance sheet expansion by the central bank alone may not be sufficient to boost aggregate demand by enough to achieve the inflation target in a sustained manner.
This is more than an academic curiosity. Japan has failed to achieve a sustained positive rate of inflation since its great financial crash in 1990. The balance sheet expansion of the Bank of Japan since the crisis has been remarkable but ineffective as regards the achievement of sustained positive inflation and, since 2000, the inflation target. The balance sheet of the Swiss National Bank has expanded even more impressively, again with no discernable impact on the inflation rate.
* * *
We do expect the ECB’s asset purchase program will expand considerably further, with the Eurosystem’s balance sheet reaching €4,000-4,500bn over the next year or two. But we doubt that even this will be enough to achieve the inflation target of close to but below 2% on a lasting basis. It might take even greater ECB balance sheet expansion to achieve the target.
But the larger central banks’ balance sheets get, the louder will become the voices of those that criticize the power vested in unelected and mostly unaccountable central banks. In addition, it is worth remembering that the laws and regulations that underwrite and circumscribe central bank actions were written at a time when their current range of actions, let alone the potentially even larger future ones, seemed exceedingly unlikely and maybe even (in the case of the ECB) inconceivable. Political concerns likely played a role in the SNB’s decision to rely less on its balance sheet and more on negative rates when managing its currency (and indeed allowing a sharp appreciation of the Swiss franc and greater exchange rate volatility). The ‘Audit the Fed’ movement is likely to be followed by ‘Audit the ECB’ movements and eventually by explicit limits on central bank actions as their balance sheets grow to politically unacceptable levels. We do not say that moment is near, but to dismiss the idea that political limits to the size of the central bank balance sheet exist seems naïve.
Moreover, even if the ECB were to expand its balance sheet sufficiently to achieve the inflation target in the next few years (say, to €5tn or €6tn), the monetary policy toolkit would then seem to be rather empty, with little option for stimulus if and when the next downturn hits (as it inevitably will). Experience teaches that downturns do happen – either for internal or external reasons – and sometimes happen when output gaps have not been closed. What happens then? Draghi’s answer seems to be: perhaps a balance sheet expansion to €10tn or €15tn. We are doubtful that such a course of action would be both perceived to be politically legitimate and economically effective.
So now what? Well, this.
Buiter concludes:
He is right.The case for helicopter money is therefore partly to ensure the euro area (and some other advanced economies) reflate powerfully enough to escape the liquidity trap, rather than settle in a lasting rut of low-flation and low growth, with “emergency” levels of asset purchases and interest rates becoming the norm.
* * *
In orderly markets and with the policy rate at the ELB, the central bank can talk loudly, but on its own – without the fiscal support required to turn its monetized balance sheet expansions into helicopter money drops – it carries but a small stick.
* * *
If, as seems possible, the ECB will increase, in H1 2016, the scale of its monthly asset purchases from €60bn to, say, €75bn, and if these additional purchases are concentrated on public debt, the euro area will benefit from a ‘backdoor’ helicopter money drop –something long overdue.
So let's stop pretending that the Fed has a chance in hell of reflating the economy by hiking rates just as the recession begins, and fast forward to the inevitable next step: the beginning of the end for fiat, starting with its widespread paradop above populated urban centers, much to the delight of millions of people everywhere, and a few very big and very underwater debtors, for whom runaway inflation is just what the Doctor (of economics) ordered.
2016 - 2018: TIMELINE FOR COLLAPSE
Crisis spreads to China, Australia, Brazil, Canada, Sweden
Earlier today, we posted an excerpt from IceCap Asset Management’s latest letter to investors focusing on the farce that is the Greek bailout #3.Which can be summarized simply by the following table…
… and Keith Dicker’s assessment which was that “for Greece, it’s mathematically impossible to repay its debt” and that the Greek “economy continues to plummet to deeper depths and is now -33% less than where it was in 2008.”
But the truth is that for all the endless drama, Dicker continues, “the Greek debt crisis isn’t THE crisis. Rather it is simply a symptom of a much larger global debt crisis.”
The problem is that the “larger global debt crisis” is finally metastasizing and spreading to more places, all of which are large enough that they can not be simply swept under the rug, like Greece.
IceCap’s Keith Dicker continues:
We’ve written before that governments all
around the world have borrowed too much money and the weight of these
debts are choking economic growth.
And to make matters worse – these very
same governments and their central banks have implemented various plans
that have only made matters worse.
Our view has not changed – the global
debt crisis has escalated to a point where the government bond bubble
has inflated itself to become the mother of all bubbles. It’s going to
burst, and when it does it wont be pretty.
Further evidence to support our view is as follows:
Canada – the collapse in oil and commodity markets has pushed the country into recession and the Canadian Dollar to decline to levels lower than that reached during the 2008 crisis.
Oil dependent provinces Alberta and Newfoundland remain in deep denial. Since everyone in these provinces have only ever experienced a booming oil market, many naively believe things will bounce back – and quickly.
Meanwhile, both Toronto and Vancouver housing markets also remain in denial as they continue to go gangbusters. Buyers today are likely buying at all-time highs.
And as we predicted last year, the Bank of Canada has cut (not raised) interest rates twice in the last 6 months.
We fully expect the Bank of Canada to eventually cut interest rates to 0% and start a money printing program as well. And for the stunner – NEGATIVE interest rates will not be that far behind.
Australia – Over the last 20 years, China has been viewed as the growth engine of the world, and justifiably so. With annual growth rates between 8% to 15%, China’s economy was literally eating every rock, stalk and barrel of practically every commodity in the world.
And naturally, any country or company that produced these commodities made a tonne of money – including Australia.
Today, China’s growth rate has slowed to about 3% which is a dramatic slow down compared to what it achieved in the past. This slowdown and China’s effort to even maintain these rates, will have significant repercussions around the world.
And the first up to bear the brunt of this slowdown is its closest supplier of raw materials – Australia.
With dark clouds on the economic horizon, the Australian government and central bank is doing everything possible to prevent the unpreventable recession.
Interest rates have been reduced to all-time historical lows, meanwhile the Australian Dollar has plummeted -25% over the last year. Yet – the negative outlook has not improved.
Brazil – Like Australia, Brazil has benefitted immensely from China’s growth. And now, also like Australia, it too is feeling the affects of the dramatic Chinese slowdown.
The economy has now declined for 12 consecutive months making it both the longest and deepest recession in 25 years.
But wait – it gets worse. Despite declining growth, inflation continues to soar higher causing interest rates to rise as well.
And if that wasn’t bad, also know that the Brazilian currency has fell off the cliff at -53%.
Sweden – Unlike Australia and Brazil, Sweden relies very little on China as a buyer of last resort. Yet, the Swedish economy is also not very hot these days.
In fact, instead of spectacular and dramatic declines in anything, it is doing the exact opposite – it just isn’t moving.
While Sweden isn’t in the Eurozone, it is smack dab next to it and that in itself is reason enough for the lack of growth. We’ve written before how the debt crisis in the Eurozone is acting like a giant, slow moving tornado that is sucking the life out of the economy and everything near by. And unfortunately for Sweden, it is very near by.
While economic growth in the Nordic state hasn’t declined, it hasn’t accelerated either – and this is what has many worried.
So worried, that the central bank shocked everyone not once but twice, by first announcing that they would begin to print money, and then when they announced that interest rates would be NEGATIVE.
These actions are so severe, that we need to repeat them:
1) MONEY PRINTING
2) NEGATIVE INTEREST RATES
It is hoped that these actions will cause people and companies to
loosen their wallets and start spending again. Yet, what the government
and the central bank doesn’t understand is that these actions will
actually make the problem worse.2) NEGATIVE INTEREST RATES
As the global economy continues to move as we expect, there is nothing Sweden can do to change what is coming – a global recession and a significantly weaker Krona.
China, Australia, Brazil, Canada, Sweden – it is beyond us how anyone can declare the crisis isn’t spreading. Be prepared – there are going to be lots of opportunities to both make and lose money.
But first, you have to recognize what is happening.
Current Economic Collapse News Brief
Stock Markets All Over The World Crash As We Begin 2016
The first trading day of 2016 was full of chaos and panic. It started in Asia where the Nikkei was down 582 points, Hong Kong was down 587 points, and Chinese markets experienced an emergency shutdown after the CSI 300 tumbled 7 percent. When European markets opened, the nightmare continued. The DAX was down 459 points, and European stocks overall had their worst start to a year ever. In the U.S., it looked like we were on course for a truly historic day as well.
The Dow Jones Industrial Average was down 467 points at one stage, but some very mysterious late day buying activity helped trim the loss to just 276 points at the close of the market. The sudden market turmoil caught many by surprise, but it shouldn’t have. The truth is that a whole host of leading indicators have been telling us that this is exactly what should be happening. The global financial crisis that began in 2015 is now accelerating, and my regular readers already know precisely what is coming next.The financial turmoil of the last 24 hours is making headlines all over the globe. It began last night in China. Very bad manufacturing data and another troubling devaluation of the yuan sent Chinese stocks tumbling to a degree that we have not seen since last August. In fact, the carnage would have probably been far, far worse if not for a new “circuit breaker” that China recently implemented. Once the CSI 300 was down 7 percent, trading was completely shut down for the rest of the day. The following comes from USA Today…FULL REPORT
Bail-Ins Have Begun! Banks Will Soon Shut Down!
Pounds, Euros, Dollars, Yen, Monopoly Dollars, You Name It!!!
With the worldwide economic collapse just around the corner, it’s time to prepare and think ahead BEFORE the coming collapse.
WHEN, NOT IF, this occurs, the economy will crash, the banks will close, ATMs will shut down, so-called “bail-ins” will be enforced, and you will be penniless. We are already seeing this with “test runs” in Greece, so-called “bank glitches” with several American and European banks, and it’s only a matter of time until the economic state in Greece trickles its way onto the rest of Europe, and finally onto American shores.
Start withdrawing money from your bank, little-by-little, and also think about investing in pre-paid debit/credit cards — that way you will be prepared for what’s to come!
In my video I also explain the Truth about the coming collapse, the nefarious agenda behind it, how this ties into Martial Law, and banks’ REAL initiative: STEALING YOUR MONEY.
Watch Here:
Economic Collapse Happening Now -Rob Kirby & Greg Hunter
Macroeconomic analyst Rob Kirby’s predictions of a downward spiraling economy are coming true. Kirby contends, “I think the last time we spoke, it was in early December. I suggested that a window was opening where we were very likely to see some systemic breakdowns in our financial universe to likely start occurring. Low and behold, it looks like we are seeing the beginnings of exactly what we were speaking of. The reason why we are beginning to see these things start to unfold now is that everything we’ve been told by our financial elites . . . has basically been a lie or a false flag or fraudulent.”
One of the many lies Kirby points out is the Fed’s recent rate hike because the economy had improved. Kirby disagrees and says, “My analysis says nothing could be further from the truth. . . . U.S. dollar reserve holdings have dropped close to $1 trillion in the last eight or nine months, and that’s on a global scale. What happens when reserves drop means that foreigners have been selling U.S. government securities. They are abandoning the dollar, and if foreigners are abandoning the dollar, the question is who’s buying them? The answer to who is buying the reserves is the U.S. Treasury itself. Specifically, it is the Exchange Stabilization Fund (ESF) within the U.S. Treasury.”
Kirby goes on to explain, “Because the ESF is buying all these Treasuries that foreign countries are pitching . . . with off-book money these Treasuries do not show up in reserve accounts. This creates a real dichotomy. You’ve got these global U.S. dollar (USD) reserves dropping, but you have this illusion or gimmickry of a strong dollar. Remember, the dollar has been strengthening for the last 9 months. The dollar can’t keep getting stronger if the world is bailing on dollars. The drop in the USD reserves doesn’t support the narrative of a strong dollar. So, something had to be done to put reserves back into the system. . . . The Fed had to give the illusion of tightening and tighten once. . . . This is their attempt . . . to make their narrative sound believable that the dollar is strong and the world isn’t abandoning U.S. government securities.”
On physical gold and silver supplies, Kirby says, “Gold and silver are not as loved here as in the Asian countries. It’s relatively more plentiful here, but that can all change in a very short period of time. At some point, the available stocks in the West will disappear, and when they start to disappear, it will seem like a bolt of lightning coming out of the clear blue sky because they will be gone in no time.”
What is Kirby’s prediction for the price of gold and silver by the end of 2016? Kirby boldly says, “I think it could be many multiples of the price right now.” What do Kirby’s billionaire contact say? Kirby reports, “They say they think we are very close to the end. I don’t want to see the end because it’s not going to be a happy day, not for me, not for you—not anyone. It’s going to change the way we live–dramatically. . . . The rate of these seizures in the equity markets are likely to quicken and intensify. Future rate hikes are off the table.”
Join Greg Hunter as he goes One-on-One with Rob Kirby of KirbyAnalytics.com.
(There is much more in the video interview.)