Posts tagged global
Michael Snyder: Next Great Wave of Economic Crisis – Gold, Silver, Grow Food, Alternative Energy (Video)
Published by Greg Hunter
Published on Nov 20, 2013
http://usawatchdog.com/michael-snyder… – Michael Snyder, Publisher of TheEconomicCollapseBlog.com says the next crisis, “will be like 2008 on steroids. . . . We’re living in the greatest debt bubble in the history of the planet.” Snyder suggests people need to take steps to protect themselves against this debt bubble bursting. Snyder says, “Learn how to grow good food, get alternative sources of energy, and hold gold and silver for the long term.” Join Greg Hunter as he goes One-on-One with investigative reporter Michael Snyder.
Cyprus-Style Wealth Confiscation Is Now Starting To Happen All Over The Globe
Now that “bail-ins” have become accepted practice all over the planet, no bank account and no pension fund will ever be 100% safe again. In fact, Cyprus-style wealth confiscation is already starting to happen all around the world. As you will read about below, private pension funds were just raided by the government in Poland, and a “bail-in” is being organized for one of the largest banks in Italy. Unfortunately, this is just the beginning. The precedent that was set in Cyprus is being used as a template for establishing bail-in procedures in New Zealand, Canada and all over Europe. It is only a matter of time before we see this exact same type of thing happen in the United States as well. From now on, anyone that keeps a large amount of money in any single bank account or retirement fund is being incredibly foolish.
Let’s take a look at a few of the examples of how Cyprus-style wealth confiscation is now moving forward all over the globe…
For years, there have been rumors that someday the U.S. government would raid private pension funds.
Well, in Poland it just happened.
According to Reuters, private pension funds were raided in order to reduce the size of the government debt…
Poland said on Wednesday it will transfer to the state many of the assets held by private pension funds, slashing public debt but putting in doubt the future of the multi-billion-euro funds, many of them foreign-owned.
The Polish government is doing the best that it can to make this sound like some sort of complicated legal maneuver, but the truth is that what they have done is stolen private assets without giving any compensation in return…
The Polish pension funds’ organisation said the changes may be unconstitutional because the government is taking private assets away from them without offering any compensation.
Announcing the long-awaited overhaul of state-guaranteed pensions, Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings.
He said that what remained in citizens’ pension pots in the private funds will be gradually transferred into the state vehicle over the last 10 years before savers hit retirement age.
For years, Iceland has been applauded for how they handled the last financial crisis. But now it is being proposed that the “blanket guarantee” that currently applies to all bank accounts should be reduced to 100,000 euros. Will this open the door for “haircuts” to be applied to bank account balances above that amount?…
Following the crisis in October 2008, Iceland’s government declared all deposits in domestic financial institutions were ‘blanket’ guaranteed – an Emergency Act that was reafrmed twice since. However, according to RUV, the finance minister is proposing to restrict this guarantee to only deposits less-than-EUR100,000. While some might see the removal of an ‘emergency’ measure as a positive, it is of course sadly reminiscent of the European Union “template” to haircut large depositors. This is coincidental (threatening) timing given the current stagnation of talks between Iceland bank creditors and the government over haircuts and lifting capital controls – which have restricted the outflows of around $8 billion.
European finance ministers have agreed to a plan that would make “bail-ins” the standard procedure for rescuing “too big to fail” banks in the future. The following is how CNN described this plan…
European Union finance ministers approved a plan Thursday for dealing with future bank bailouts, forcing bondholders and shareholders to take the hit for bank rescues ahead of taxpayers.
The new framework requires bondholders, shareholders and large depositors with over 100,000 euros to be first to suffer losses when banks fail. Depositors with less than 100,000 euros will be protected. Taxpayer funds would be used only as a last resort.
What this means is that if you have over 100,000 euros in a bank account in Europe, you could lose every single bit of the unprotected amount if your bank collapses.
As Zero Hedge reported on Tuesday, a “bail-in” is now being organized for the oldest bank in Italy…
Recall that three weeks ago we warned that “Monti Paschi Faces Bail-In As Capital Needs Point To Nationalization” although we left open the question of “who will get the haircut including senior bondholders and depositors…. given the small size of sub-debt in the capital structures.” Today, as many expected on the day following the German elections, the dominos are finally starting to wobble, and as we predicted, Monte Paschi, Italy’s oldest and according to many, most insolvent bank, quietly commenced a bondholder “bail in” after it said that it suspended interest payments on three hybrid notes following demands by European authorities that bondholders contribute to the restructuring of the bailed out Italian lender. Remember what Diesel-BOOM said about Cyprus – that it is a template? He wasn’t joking.
As Bloomberg reports, Monte Paschi “said in a statement that it won’t pay interest on about 481 million euros ($650 million) of outstanding hybrid notes issued through MPS Capital Trust II and Antonveneta Capital Trusts I and II.” Why these notes? Because hybrid bondholders have zero protections and zero recourse. “Under the terms of the undated notes, the Siena, Italy-based lender is allowed to suspend interest without defaulting and doesn’t have to make up the missed coupons when payments resume.” Then again hybrids, to quote the Dutchman, are just the template for the balance of the bank’s balance sheet.
Why is this happening now? Simple: the Merkel reelection is in the bag, and the EURUSD is too high (recall Adidas’ laments from last week). Furthermore, if the ECB proceeds with another LTRO as many believe it will, it will force the EURUSD even higher, surging from even more unwanted liquidity. So what to do? Why stage a small, contained crisis of course. Such as a bail in by a major Italian bank. The good news for now is that depositors are untouched. Unfortunately, with depositor cash on the wrong end of the (un)secured liability continuum it is only a matter of time before those with uninsured deposits share some of the Cypriot pain. After all, in the brave New Normal insolvent world, “it is only fair.”
Fortunately, it does not appear that this particular bail-in will hit private bank accounts (at least for now), but it does show that European officials are very serious about applying bail-in procedures when a major bank fails.
The New Zealand government has been discussing implementing a “bail-in” system to deal with any future major bank failures. The following comes from a New Zealand news source…
The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.
Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.
“Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman.
“The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank.
“Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.”
Incredibly, even Canada is moving toward adopting these “bank bail-ins”. In a previous article, I explained that “bail-ins” were even part of the new Canadian government budget…
Cyprus-style “bail-ins” are actually proposed in the new Canadian government budget. When I first heard about this I was quite skeptical, so I went and looked it up for myself. And guess what? It is right there in black and white on pages 144 and 145 of “Economic Action Plan 2013″ which the Harper government has already submitted to the House of Commons. This new budget actually proposes “to implement a ‘bail-in’ regime for systemically important banks” in Canada. “Economic Action Plan 2013″ was submitted on March 21st, which means that this “bail-in regime” was likely being planned long before the crisis in Cyprus ever erupted.
So what does all of this mean for us?
It means that the governments of the world are eyeing our money as part of the solution to any future failures of major banks.
As a result, there is no longer any truly “safe” place to put your money.
One of the best ways to protect yourself is to spread your money around. In other words, don’t put all of your eggs in one basket.
If you have your money a bunch of different places, it is going to be much harder for the government to grab it all.
But if you don’t listen to the warnings and you continue to keep all of your wealth in one giant pile somewhere, don’t be surprised when you get wiped out in a single moment someday.
Image credit: http://theeconomiccollapseblog.com
The Greatest Debt Crisis The World Has Ever Seen Is Coming
The largest mountain of debt in the history of the world just continues to grow even larger, and everyone knows that this colossal debt spiral is not going to end well. But we all keep playing along because nobody wants the party to end. Right now, there is an unprecedented ocean of red ink covering the planet. Globally, governments have never been in so much debt, corporations have never been in so much debt and consumers have never been in so much debt. But every time someone suggests that this is a problem and that we should at least try to get debt levels to settle down a bit, people start screaming that “austerity” will hurt the global economy. And of course it will. But we can’t continue to live way, way above our means indefinitely. Well, we can try, but at some point this entire house of cards is going to come crashing down and we are going to be facing the greatest economic crisis the world has ever seen.
It is kind of like watching a slow-motion train wreck that you have no chance of possibly stopping that you know will end up killing lots of innocent people. This debt crisis is going to end up destroying the global financial system, but there is not a thing that you or I can do to prevent it from happening. The unprecedented debt binge that we are witnessing right now is going to continue until someday we hit a brick wall of financial disaster. We can yell and we can scream, but it isn’t going to stop what is happening.
As the Telegraph recently noted, even the Bank for International Settlements is warning that debt levels are way too high. According to the BIS, total public and private debt levels are now 30 percent higher than they were in 2008…
“This looks like to me like 2007 all over again, but even worse,” said William White, the BIS’s former chief economist, famous for flagging the wild behavior in the debt markets before the global storm hit in 2008.
“All the previous imbalances are still there. Total public and private debt levels are 30pc higher as a share of GDP in the advanced economies than they were then, and we have added a whole new problem with bubbles in emerging markets that are ending in a boom-bust cycle,” said Mr White, now chairman of the OECD’s Economic Development and Review Committee.
The BIS can see the disaster coming, but even they have no chance of preventing it.
For the rest of this article, I am going to focus on government debt, but please keep in mind that corporate debt and consumer debt are also totally out of control globally. It would be very hard to overstate the nightmare that we are facing.
But of course national governments are the biggest offenders when it comes to debt…
Looking purely at the numbers, Japan’s medium-term fundamentals are among the bleakest in the world.
Total government debt amounts to over 200% of the country’s entire GDP– a figure so large that the Japanese government spends 51.5% of the 43 trillion yen ($430 billion) they collect in tax revenue just to pay interest!
Perhaps even more astounding is that ‘primary balance expenses,’ i.e. normal government expenditures, totaled 70.3 trillion yen, or 163% of tax revenue.
The only way they’ve managed to stay afloat is by issuing more debt, which makes the problem even worse. In fact, 46% of the 2013 budget is being financed by debt.
These guys are running out of rope. And fast.
China is facing a different sort of a problem. In that nation, the growth of private domestic debt is wildly out of control.
According to a recent World Bank report, private domestic debt in China has grown from 9 trillion dollars in 2008 to 23 trillion dollars today.
There is no way that is sustainable, and at some point that massive bubble is going to burst.
Even though some European nations have supposedly implemented “austerity measures” in recent years, debt levels continue to rise rapidly. The following are some numbers that were recently released which show that government debt to GDP ratios for some of the most financially troubled nations in Europe are absolutely soaring…
- Euroarea: 92.2%, up from 88.2% a year ago
- Greece: 160.5%, up from 136.5% a year ago
- Italy: 130.3%; up from 123.8% a year ago
- Portugal: 127.2%, up from 112.3% a year ago
- Ireland: 125.1%, up from 106.8% a year ago
- Spain: 88.2%, up from 73.0% a year ago
- Netherlands: 72.0%, up from 66.7% a year ago
Anyone that tells you that the crisis in Europe is “over” is lying to you. The debt crisis is getting worse, not better.
The United States
The biggest mountain of debt of all can be found in the United States.
30 years ago, the national debt was a little bit above a trillion dollars.
Today, it is rapidly approaching 17 trillion dollars.
At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain. And since Barack Obama entered the White House, the debt to GDP level has soared to unprecedented heights…
Sadly, this is just the beginning.
One reason for this is that the U.S. is facing some tremendous demographic challenges in the years ahead.
In other words, our population is getting older.
It is being projected that the number of Americans on Social Security will rise from 57 million today to more than 100 million in 25 years.
How in the world are we possibly going to pay for that?
Already, we are very heavily dependent on foreigners to pay our bills.
According to the U.S. Treasury, foreigners hold approximately 5.6 trillion dollars of our debt at this point.
So what would happen if we went to war with Syria and they decided to quit borrowing from us and they started dumping our debt instead?
That is a very good question.
And actually, according to Zero Hedge foreigners have already started to dump a little bit of our debt…
Today’s TIC data showed something disturbing: for the fourth month in a row, foreigners were net sellers of US Treasury paper in July, as total foreign holdings declined from $5.600 trillion to $5.590 trillion which represents 49% of total marketable debt (including the debt owned by the Fed of course). In other words, since peaking at $5.724 trillion in March, foreign-held debt has declined by $134 trillion, at a time when yields have surged on fears the Fed’s tapering of its own purchases of bonds will mean less Fed frontrunning opportunities.
We certainly cannot afford for that to continue, because we desperately need other nations to finance our reckless spending.
Our debt is wildly out of control, and the only way we can keep the entire system from collapsing is to go into even more debt.
That is a whole lot of money.
But most Americans do not consider it to be a problem because disaster has not struck yet.
Unfortunately, they simply don’t understand how quickly an exponential problem can overwhelm you. I think that the following illustration from Simon Black is particularly helpful…
Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room.
Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry.
But let’s assume that it’s an exponential leak.
At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.
By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.
For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes.
By the time that our politicians and the talking heads on the mainstream media admit that we have a debt emergency on our hands, it will probably be far, far too late.
The greatest debt crisis the world has ever seen is coming, and there is nothing that anyone can do to stop it.
But you can take measures to get prepared for it.
Please get prepared while you still can.
Image credit: http://thetruthwins.com
25 Quotes About The Coming War With Syria That Every American Should See
If Barack Obama is going to attack Syria, he is going to do it without the support of the American people, without the approval of Congress, without the approval of the United Nations, and without the help of the British. Now that the British Parliament has voted against a military strike, the Obama administration is saying that it may take “unilateral action” against Syria. But what good would “a shot across Syria’s bow” actually do? A “limited strike” is not going to bring down the Assad regime and it is certainly not going to end the bloody civil war that has been raging inside Syria. Even if the U.S. eventually removed Assad, the al-Qaeda affiliated rebels that would take power would almost certainly be even worse than Assad. Even in the midst of this bloody civil war, the rebels have taken the time and the effort to massacre entire Christian villages. Why is Barack Obama so obsessed with helping such monsters? There is no good outcome in Syria. The Assad regime is absolutely horrible and the rebels are even worse. Why would we want the U.S. military to get involved in such a mess?
It isn’t as if it is even possible for the U.S. military to resolve the conflict that is going on in that country. At the core, the Syrian civil war is about Sunni Islam vs. Shia Islam. It is a conflict that goes back well over a thousand years.
Assad is Shiite, but the majority of Syrians are Sunni Muslims. Saudi Arabia and Qatar have been pouring billions of dollars into the conflict, because they would love to see the Assad regime eliminated and a Sunni government come to power in Syria. On the other side, Iran is absolutely determined to not allow that to happen.
Saudi Arabia and Qatar have no problem with using Sunni terrorists (al-Qaeda) to achieve their political goals. And as a very important ally of the Saudis, the U.S. has been spending a lot of money to train and equip the “rebels” in Syria.
But there was a problem. The Syrian government has actually been defeating the rebels. So something had to be done.
If it could be made to look like the Assad regime was using chemical weapons, that would give the U.S. government the “moral justification” that it needed to intervene militarily on the side of the rebels. In essence, it would be a great excuse for the U.S. to be able to go in and do the dirty work of the Saudis for them.
So that is where we are today. The justification for attacking Syria that the Obama administration is giving us goes something like this…
-Chemical weapons were used in Syria.
-The rebels do not have the ability to use chemical weapons.
-Therefore it must have been the Assad regime that was responsible for using chemical weapons.
-The U.S. military must punish the use of chemical weapons to make sure that it never happens again.
Unfortunately for the Obama administration, the world is not buying it. In fact, people are seeing right through this charade.
The U.S. government spends $52,000,000,000 a year on “intelligence”, but apparently our intelligence community absolutely refuses to see the obvious. WND has been able to uncover compelling evidence that the rebels in Syria have used chemical weapons repeatedly, and yet government officials continue to insist over and over that no such evidence exists and that we need to strike Syria immediately.
Shouldn’t we at least take a little bit of time to figure out who is actually in the wrong before we start letting cruise missiles fly?
Because the potential downside of an attack against Syria is absolutely massive. As I wrote about the other day, if we attack Syria we have the potential of starting World War 3 in the Middle East.
We could find ourselves immersed in an endless war with Syria, Iran and Hezbollah which would be far more horrible than the Iraq war ever was. It would essentially be a war with Shia Islam itself, and that would be a total nightmare.
If you are going to pick a fight with those guys, you better pack a lunch. They fight dirty and they are absolutely relentless. They will never forget and they will never, ever forgive.
A full-blown war with Syria, Iran and Hezbollah would be a fight to the death, and they would not hesitate to strike soft targets all over the United States. I don’t think that most Americans have any conception of what that could possibly mean.
If the American people are going to stop this war, they need to do it now. The following are 25 quotes about the coming war with Syria that every American should see…
1. Barack Obama, during an interview with Charlie Savage on December 20, 2007: “The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation.”
2. Joe Biden, during a television interview in 2007: “The president has no constitutional authority … to take this nation to war … unless we’re attacked or unless there is proof we are about to be attacked. And if he does, if he does, I would move to impeach him.”
3. U.S. Representative Ted Poe: “Mr. President, you must call Congress back from recess immediately to take a vote on a military strike on Syria. Assad may have crossed a red line but that does not give you the authority to redline the Constitution.”
4. U.S. Representative Kurt Schrader: “I see no convincing evidence that this is an imminent threat to the United States of America.”
5. U.S. Representative Barbara Lee: “While we understand that as commander-in-chief you have a constitutional obligation to protect our national interests from direct attack, Congress has the constitutional obligation and power to approve military force, even if the United States or its direct interests (such as its embassies) have not been attacked or threatened with an attack.”
6. The New York Times: “American officials said Wednesday there was no ‘smoking gun’ that directly links President Bashar al-Assad to the attack, and they tried to lower expectations about the public intelligence presentation.”
7. U.S. Senator Rand Paul: “The war in Syria has no clear national security connection to the United States and victory by either side will not necessarily bring in to power people friendly to the United States.”
Image credit: http://theeconomiccollapseblog.com
Billionaire Issues Chilling Warning About Interest Rate Derivatives
Will rapidly rising interest rates rip through the U.S. financial system like a giant lawnmower blade? Yes, the U.S. economy survived much higher interest rates in the past, but at that time there were not hundreds of trillions of dollars worth of interest rate derivatives hanging over our financial system like a Sword of Damocles. This is something that I have been talking about for quite some time, and now a Mexican billionaire has come forward with a similar warning. Hugo Salinas Price was the founder of the Elektra retail chain down in Mexico, and he is extremely concerned that rising interest rates could burst the derivatives bubble and cause “massive bankruptcies around the globe”. Of course there are a whole lot of people out there that would be quite glad to see the “too big to fail” banks go bankrupt, but the truth is that if they go down our entire economy will go down with them. Our situation is similar to a patient with a very advanced stage of cancer. You can try to kill the cancer with drugs, but you will almost certainly kill the patient at the same time. Well, that is essentially what our relationship with the big banks is like. Our entire economic system is based on credit, and just like we saw back in 2008, if the big banks start failing credit freezes up and suddenly nobody can get any money for anything. When the next great credit crunch comes, every important number in our economy will rapidly start getting much worse.
The big banks are going to play a starring role in the next financial crash just like they did in the last one. Only this next crash may be quite a bit worse. Just check out what billionaire Hugo Salinas Price told King World News recently…
I think we are going to see a series of bankruptcies. I think the rise in interest rates is the fatal sign which is going to ignite a derivatives crisis. This is going to bring down the derivatives system (and the financial system).
There are (over) one quadrillion dollars of derivatives and most of them are related to interest rates. The spiking of interest rates in the United States may set that off. What is going to happen in the world is eventually we are going to come to a moment where there is going to be massive bankruptcies around the globe.
What is going to be left after the dust settles is gold, and some people are going to have it and some people are not. Then the problem is going to be to hold on to what you’ve got because it’s not going to be a very pleasant world.
Right now, there are about 441 trillion dollars of interest rate derivatives sitting out there. If interest rates stay about where they are right now and they don’t go much higher, we will be fine. But if they start going much higher, all bets will be off and we could see financial carnage on a scale that we have never seen before.
And at the moment the big banks have got to behave themselves because the government is investigating allegations that they have been cheating pension funds and other investors out of millions of dollars by manipulating the trading of interest rate derivatives. The following is from an article that the Telegraph posted on Friday…
The Commodity Futures Trading Commission (CFTC) is probing 15 banks over allegations that they instructed brokers to carry out trades that would move ISDAfix, the leading benchmark rate for interest rate swaps.
Pension funds and companies who invest in interest rate derivatives often deal with banks to insure against big movements in the ISDAfix rate or to speculate on changes to interest rate swaps
ISDAfix is published each morning after banks submit bids for swaps via Icap, the inter-dealer broker, in a number of currencies. The CFTC has been investigating suggestions that the banks deliberately moved the rate in order to profit on these deals.
Given the hundreds of trillions of dollars worth of interest rate derivatives trades that occur annually, even the slightest manipulation can have a substantial effect. The CFTC, which started to investigate ISDAfix after last summer’s Libor scandal has now been handed emails and phone call recordings that show the rate was deliberately moved, according to Bloomberg.
Essentially they got their hands caught in the cookie jar and so they have got to play it straight (at least for now).
Meanwhile, it looks like the Fed may not be able to keep long-term interest rates down for much longer.
The Federal Reserve has been using quantitative easing to try to keep long-term interest rates low, but now some officials over at the Fed are becoming extremely alarmed about how bloated the Fed balance sheet has become. For example, the following was recently written by the head of the Dallas Fed, Richard Fisher…
This later program is referred to as quantitative easing, or QE, by the public and as large-scale asset purchases, or LSAPs, internally at the Fed. As a result of LSAPs conducted over three stages of QE, the Fed’s System Open Market Account now holds $2 trillion of Treasury securities and $1.3 trillion of agency and mortgage-backed securities (MBS). Since last fall, when we initiated the third stage of QE, we have regularly been purchasing $45 billion a month of Treasuries and $40 billion a month in MBS, meanwhile reinvesting the proceeds from the paydowns of our mortgage-based investments. The result is that our balance sheet has ballooned to more than $3.5 trillion. That’s $3.5 trillion, or $11,300 for every man, woman and child residing in the United States.
Fisher has compared the current Fed balance sheet to a “Gordian Knot”, and he hopes that the Fed will be able to unwind this knot without creating “market havoc”…
Image credit: http://theeconomiccollapseblog.com
It Is Happening Again: 18 Similarities Between The Last Financial Crisis And Today
If our leaders could have recognized the signs ahead of time, do you think that they could have prevented the financial crisis of 2008? That is a very timely question, because so many of the warning signs that we saw just before and during the last financial crisis are popping up again. Many of the things that are happening right now in the stock market, the bond market, the real estate market and in the overall economic data are eerily similar to what we witnessed back in 2008 and 2009. It is almost as if we are being forced to watch some kind of a perverse replay of previous events, only this time our economy and our financial system are much weaker than they were the last time around.
So will we be able to handle a financial crash as bad as we experienced back in 2008? What if it is even worse this time? Considering the fact that we have been through this kind of thing before, you would think that our leaders would be feverishly trying to keep it from happening again and the American people would be rapidly preparing to weather the coming storm. Sadly, none of that is happening. It is almost as if they cannot even see the disaster that is staring them right in the face. But without a doubt, disaster is coming. The following are 18 similarities between the last financial crisis and today…
#1 According to the Bank of America Merrill Lynch equity strategy team, their big institutional clients are selling stock at a rate not seen “since 2008“.
#2 In 2008, stock prices had wildly diverged from where the economic fundamentals said that they should be. Now it has happened again.
#3 In early 2008, the average price of a gallon of gasoline rose substantially. It is starting to happen again. And remember, whenever the average price of a gallon of gasoline in the U.S. has risen above $3.80 during the past three years, a stock market decline has always followed.
#4 New home prices just experienced their largest two month drop since Lehman Brothers collapsed.
#5 During the last financial crisis, the mortgage delinquency rate rose dramatically. It is starting to happen again.
#6 Prior to the financial crisis of 2008, there was a spike in the number of adjustable rate mortgages. It is happening again.
#7 Just before the last financial crisis, unemployment claims started skyrocketing. Well, initial claims for unemployment benefits are rising again. Once we hit the 400,000 level, we will officially be in the danger zone.
#8 Continuing claims for unemployment benefits just spiked to the highest level since early 2009.
#9 The yield on 10 year Treasuries is now up to 2.60 percent. We also saw the yield on 10 year U.S. Treasuries rise significantly during the first half of 2008.
#10 According to Zero Hedge, “whenever the annual change in core capex, also known as Non-Defense Capital Goods excluding Aircraft shipments goes negative, the US has traditionally entered a recession”. Guess what? It is rapidly heading toward negative territory again.
#11 Average hourly compensation in the United States experienced its largest drop since 2009 during the first quarter of 2013.
#12 In the month of June, spending at restaurants fell by the most that we have seen since February 2008.
#13 Just before the last financial crisis, corporate earnings were very disappointing. Now it is happening again.
#14 Margin debt spiked just before the dot.com bubble burst, it spiked just before the financial crash of 2008, and now it is spiking again.
#15 During 2008, the price of gold fell substantially. Now it is happening again.
#16 Global business confidence is now the lowest that it has been since the last recession.
#17 Back in 2008, the U.S. national debt was rapidly rising to unsustainable levels. We are in much, much worse shape today.
#18 Prior to the last financial crisis, Federal Reserve Chairman Ben Bernanke assured the American people that home prices would not decline and that there would not be a recession. We all know what happened. Now he is once again promising that everything is going to be just fine.
Are the American people going to fall for it again?
Image credit: http://theeconomiccollapseblog.com
Debt Levels Are Skyrocketing To Extremely Dangerous Levels – How Long Can This Possibly Keep Going?
Never before has the world faced such a serious debt crisis. Yes, in the past there have certainly been nations that have gotten into trouble with debt, but we have never had a situation where virtually all of the major powers around the globe were all drowning in debt at the same time. And what makes this crisis even more unprecedented is that everyone on the planet is using fiat currency that is backed up by nothing. It is all just a bunch of paper and data points that people have faith in. Right now, confidence in this system is being shaken as debt levels skyrocket to extremely dangerous levels. Many are openly wondering how much longer this can possibly go on.
Just consider what is going on over in Europe right now. Even the countries that have supposedly “tried austerity” continue to rack up debt at a mind blowing pace. New numbers that have just been released show that government debt to GDP ratios for some of the most financially troubled nations in Europe are absolutely soaring…
- Euroarea: 92.2%, up from 88.2% a year ago
- Greece: 160.5%, up from 136.5% a year ago
- Italy: 130.3%; up from 123.8% a year ago
- Portugal: 127.2%, up from 112.3% a year ago
- Ireland: 125.1%, up from 106.8% a year ago
- Spain: 88.2%, up from 73.0% a year ago
- Netherlands: 72.0%, up from 66.7% a year ago
In Japan, the good news is that the nation’s budget for the fiscal year, which started on April 1, will see the government raise a higher percentage of spending from tax revenue than at any other time in the past four years. The bad news is that the government will still cover 46.3% of its spending from borrowing. The Organisation for Economic Cooperation and Development estimates that Japan’s budget deficit for 2013 amounted to 10.3% of gross domestic product.
In China, the big problem is the absolutely stunning growth of private domestic debt. According to a recent World Bank report, the total amount of credit in China has risen from 9 trillion dollars in 2008 to 23 trillion dollars today.
That increase is roughly equivalent to the entire U.S. commercial banking system.
According to financial journalist Ambrose Evans-Pritchard, the ratio of private domestic debt to GDP in China is now wildly out of control…
The 160pc debt ratio for China is based on a conservative measure of credit. Fitch says it is 200pc if you count all offshore vehicles, trusts, letters of credit etc.
This morning China Securities Journal – an arm of the regulators – said it may really be 221pc.
Well, what about the United States?
As I noted the other day, our ratio of federal government debt to GDP has shot up like a rocket since 2008…
How Does America’s Middle Class Rank Globally? #27
Well, like so much of the “American dream” we have been force fed for a generation or more, this perception is not based in reality whatsoever. Sure it may have been the case for a couple of decades immediately after World War 2. Before the military-industrial-Wall Street complex fully took over the political process, but it certainly isn’t true any longer. Myths die hard and this one is particularly pernicious because it prevents people from changing things. As James Baldwin said:
Not everything that is faced can be changed, but nothing can be changed until it is faced.
From the Huffington Post:
America is the richest country on Earth. We have the most millionaires, the most billionaires and our wealthiest citizens have garnered more of the planet’s riches than any other group in the world. We even have hedge fund managers who make in one hour as much as the average family makes in 21 years!
This opulence is supposed to trickle down to the rest of us, improving the lives of everyday Americans. At least that’s what free-market cheerleaders repeatedly promise us.
Unfortunately, it’s a lie, one of the biggest ever perpetrated on the American people.
Our middle class is falling further and further behind in comparison to the rest of the world. We keep hearing that America is number one. Well, when it comes to middle-class wealth, we’re number 27.
The most telling comparative measurement is median wealth (per adult). It describes the amount of wealth accumulated by the person precisely in the middle of the wealth distribution — fifty percent of the adult population has more wealth, while fifty percent has less. You can’t get more middle than that.
By Don Pittis, CBC News
Detroit bankruptcy: Is it a warning sign of things to come?
Detroit’s financial meltdown has lessons for Canada and the rest of the global economy, Don Pittis writes
What if Detroit isn’t a blip? What if, instead, the city’s decision to enter bankruptcy proceedings is a sign of things to come?
Crazy talk? Maybe. But that was the prediction in a recent book by Wall Street financial analyst Meredith Whitney, best known for being one of the very few mainstream analysts to foresee the 2008 banking meltdown.
Interestingly, she also predicted this week’s Detroit bankruptcy.
That may seem less impressive now that it has happened. On the other hand, the screams of outrage from lenders who are being offered 10 cents on the dollar for their billions in bonds by Detroit show that it wasn’t obvious to them.
“I wish there had been a lot more outrage over the past 10, 20 years,” said Kevyn Orr, the bankruptcy expert charged with cleaning up Detroit’s accumulated financial mess, at a news conference Friday.
- Read the latest on Detroit’s financial situation
- Detroit’s crumbling dream fuels art scene
- See photos of decaying Detroit
- Debt-laden places like Detroit offer lessons for Canadian policymakers, Don Pittis wrote in April
The fact is, long after Detroit’s decline had become obvious, the city’s government kept borrowing and lenders kept lending.
Some of the municipal debt against the future was hidden in the city’s own books in the form of off-balance-sheet pension responsibilities. Other borrowing was obvious to everyone, in the form of bonds secured — at least notionally — by Detroit’s future tax revenue.
The whole house of cards teetered on a fiction that the city would return to its former prosperity. But somewhere between 1960, when Detroit had the highest income per person in the United States, and now, the city fell into a vicious circle of decline.
As good jobs left, so did educated people. Nearly half the population is now functionally illiterate. And while loans and liabilities were accumulated when the city had nearly 2 million people, now 700,000 bear all the responsibility for its debts.
Police and fire services are abysmal. Parks are closed. The murder rate is surging. Many bondholders assumed the city would simply continue to raise taxes to cover the interest payments. But as Orr said after the bankruptcy filing, there is just no way he can raise taxes any further. If he did, more and more taxpayers would simply pull up stakes and go somewhere else.
According to Orr, this is a disaster you could have seen coming years ago. Sure, the city was irresponsible in its borrowing — but just as in the sub-prime loan collapse, it is the responsibility of lenders to make sure they will get paid. It’s as if the bondholders who lent the cash hadn’t seriously considered where the money would come from to repay their loans.
Which is exactly Meredith Whitney’s point. In her book Fate of the States: The New Geography of American Prosperity she says the Detroit crisis is far from unique. “Awash in new tax revenues, cities and states borrowed and spent as if the good times would never end. Unfortunately, they did,” Whitney says in the book written well before the current bankruptcy filing.
She says that in the wake of the U.S. property meltdown of the past few years, the cities and states that found themselves dangerously in hock were also the ones that had hidden pension debt, just like Detroit.
She says lenders have been poor at taking that into account. “State and local governments have underfunded — even non-funded — their pension funds for years now, and they can’t seem to break the habit,” Whitney writes. “In New Jersey, actual debt is at least four times greater than bonds outstanding.”
Part of Whitney’s analysis is especially interesting to Canada. Looking at the American experience, she says that the accumulation of debt in places that were formerly prosperous is contributing to a population shift to areas like the Midwest and the Dakotas, the former “flyover” states.
North of the border, we are seeing something similar as the old industrial areas of Canada struggle to deal with debt while the prairie provinces boom. In some ways Detroit is an analogy and a warning to the rest of the global economy.
Instead of taking our knocks during the bad times, governments borrowed and central banks created money to help us through, assuming that good times would soon return. If the world bounces back and returns to growth, if the tax base resumes its growth, all will be well.
That didn’t happen in Detroit. It may not happen in Greece and Portugal. As she makes very clear, while Whitney is not predicting widespread defaults, she warns that Detroit is only one of the governments that won’t be able to make their payments. In the wake of this week’s events, lenders who were skeptical of her thesis are likely to scoff a little less.
Detroit’s problems are far from over. Bankruptcy is no picnic, and the city faces at least 15 months of court battles. Provisions of Chapter 9, the bankruptcy rule for cities, have never been used for a collapse of this magnitude.
Compared to the day he took the job, Orr looks haggard. But by taking its knocks now, going through the painful process of bankruptcy draws a line under Detroit’s problems, just as it did for Chrysler and General Motors when they filed for bankruptcy almost exactly four years ago.
As Michigan governor Rick Snyder said at Friday morning’s press conference, this is a chance for Detroit to carve out a new future: “Now is our opportunity to end 60 years of decline.”
Copyright © CBC 2013
Republished with permission
Which Country Tops The Bribery Charts?
Published by TheYoungTurks
Ana Kasparian and Cenk Uygur break it down.
*Read more: http://www.usatoday.com/story/money/b…