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Global Financial Devastation

Off the keyboard of Michael Snyder

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Published on the Economic Collapse on June 29, 2015

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16 Facts About The Tremendous Financial Devastation That We Are Seeing All Over The World

As we enter the second half of 2015, financial panic has gripped most of the globe.  Stock prices are crashing in China, in Europe and in the United States.  Greece is on the verge of a historic default, and now Puerto Rico and Ukraine are both threatening to default on their debts if they do not receive concessions from their creditors.  Not since the financial crisis of 2008 has so much financial chaos been unleashed all at once.  Could it be possible that the great financial crisis of 2015 has begun?  The following are 16 facts about the tremendous financial devastation that is happening all over the world right now…

1. On Monday, the Dow fell by 350 points.  That was the biggest one day decline that we have seen in two years.

2. In Europe, stocks got absolutely smashed.  Germany’s DAX index dropped 3.6 percent, and France’s CAC 40 was down 3.7 percent.

3. After Greece, Italy is considered to be the most financially troubled nation in the eurozone, and on Monday Italian stocks were down more than 5 percent.

4. Greek stocks were down an astounding 18 percent on Monday.

5. As the week began, we witnessed the largest one day increase in European bond spreads that we have seen in seven years.

6. Chinese stocks have already met the official definition of being in a “bear market” – the Shanghai Composite is already down more than 20 percent from the high earlier this year.

7. Overall, this Chinese stock market crash is the worst that we have witnessed in 19 years.

8. On Monday, Standard & Poor’s slashed Greece’s credit rating once again and publicly stated that it believes that Greece now has a 50 percent chance of leaving the euro.

9. On Tuesday, Greece is scheduled to make a 1.6 billion euro loan repayment.  One Greek official has already stated that this is not going to happen.

10. Greek banks have been totally shut down, and a daily cash withdrawal limit of 60 euros has been established.  Nobody knows when this limit will be lifted.

11. Yields on 10 year Greek government bonds have shot past 15 percent.

12. U.S. investors are far more exposed to Greece than most people realize.  The New York Times explains…

But the question of what happens when the markets do open is particularly acute for the hedge fund investors — including luminaries like David Einhorn and John Paulson — who have collectively poured more than 10 billion euros, or $11 billion, into Greek government bonds, bank stocks and a slew of other investments.

Through the weekend, Nicholas L. Papapolitis, a corporate lawyer here, was working round the clock comforting and cajoling his frantic hedge fund clients.

“People are freaking out,” said Mr. Papapolitis, 32, his eyes red and his voice hoarse. “They have made some really big bets on Greece.”

13. The Governor of Puerto Rico has announced that the debts that the small island has accumulated are “not payable“.

14. Overall, the government of Puerto Rico owes approximately 72 billion dollars to the rest of the world.  Without debt restructuring, it is inevitable that Puerto Rico will default.  In fact, CNN says that it could happen by the end of this summer.

15. Ukraine has just announced that it may “suspend debt payments” if their creditors do not agree to take a 40 percent “haircut”.

16. This week the Bank for International Settlements has just come out with a new report that says that central banks around the world are “defenseless” to stop the next major global financial crisis.

Without a doubt, we are overdue for another major financial crisis.  All over the planet, stocks are massively overvalued, and financial markets have become completely disconnected from economic reality.  And when the next crash happens, many believe that it will be even worse than what we experienced back in 2008.  For example, just consider the words of Jim Rogers

“In the United States, we have had economic slowdowns every four to seven years since the beginning of the Republic. It’s now been six or seven years since our last stock market problem. We’re overdue for another problem.”

In Rogers’ view, low interest rates caused stock prices to increase significantly. He believes many assets are priced beyond their fundamentals thanks to the ultra-easy monetary policies by the Federal Reserve. Fed supporters argue such measures are good for investors, but Rogers takes a different view.

The Fed might tell us we don’t have to worry and that a correction or crash will never happen again. That’s balderdash! When this artificial sea of liquidity ends, we’re going to pay a terrible price. When the next economic problem occurs, it will be much worse because the debt is so much higher.”

Of course Rogers is far from alone.  A recent article by Paul B. Farrell expressed similar sentiments…

America’s 95 million investors are at huge risk. Remember the $10 trillion losses in the crash and recession of 2007-2009? The $8 trillion lost after the dot-com technology crash and recession of 2000-2003? This is the third big recession of the century. Yes, America will lose trillions again.

Especially with dead-ahead predictions like Mark Cook’s 4,000-point Dow correction. And Jeremy Grantham’s warning of a 50% crash around election time, with negative stock returns through the first term of the next president, beyond 2020. Starting soon.

Why is America so vulnerable when the next recession hits? Simple: The Fed’s cheap-money giveaway is killing America. When the downturn, correction, crash hits, it will compare to the 2008 crash. The Economist warns: “the world will be in a rotten position to do much about it. Rarely have so many large economies been so ill-equipped to manage a recession,” whatever the trigger.

Things have been relatively quiet in the financial world for so long that many have been sucked into a false sense of security.

But the underlying imbalances were always there, and they have been getting worse over time.

I believe that we are heading into a global financial collapse that will make what happened in 2008 look like a Sunday picnic by the time it is all said and done.

Global debt levels are at all-time highs, big banks all over the planet have been behaving more recklessly than ever, and financial markets are absolutely primed for a huge crash.

Hopefully things will calm down a bit as the rest of this week unfolds, but I wouldn’t count on it.

We have entered uncharted territory, and what comes next is going to shock the world.

Accidents Waiting to Happen

Off the keyboard of John Ward

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Published on the The Slog on March 25, 2015

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CRASH2 – A GLOBAL SUMMARY: #1 The United States.

Why fiscally, financially and economically, America is an accident waiting to happen.

The American ‘recovery’ that seems always to be round the corner just disappeared around another corner as 2015 Q1 draws to and end. Estimates for GDP growth have been halved (from 0.6% to 0.3%) and investment in new business premises cut by a third…from -13.3% to -19.6%. Or put another way, growth is stalling again, and 50% more ‘not expanding’ has occurred than initially thought.

So yet again, we see a ‘result’ – the soaring value of the $US – that bears no relationship at all to a very sick US economy. And still jobless numbers come in to suggest that the unemployment rate is down again at 5.5%. That doesn’t compute either….especially with the country still edging down towards deflation. The Fed’s view now is, on balance, that unemployment will stop falling “pretty soon”. My simpler view is that the figures disguise the real situation.

Janet Yellen is bit by bit dampening expectations of significant rate rises, but she’s kicking at an open door: the market bets on rate futures show that investors don’t believe the Fed can pull it off either. But the optimistic “sometime between June and September” timing remains in place. Carefully chosen euphemisms abound: “the central bank will have a tougher time nudging longer-term rates up. That would complicate efforts to return the economy to a normal footing.”

A huge proportion of the ageing, privately investing sector in the States has now been staring down the barrel of Zirp for six years. With uncertain or zero returns on commodities, bonds and gold – and near nought per cent deposit rates – the more lunatic banking firms and funds are already including dodgy “investments” in packaged portfolios: these include African currencies (always a favourite), third world stock markets, and speculative south American mining gambles. Already, regulators are calling for enhanced monitoring of Totally Madcap Syndrome in financial firms operating outside of the traditional safety net available to deposit-taking banks.

But it is inevitable that – when all income forms have been manipulated away for the Silvers – their investment managers will take on more risk in their frantic search for some level of worthwhile return.

“We are wandering into uncharted territory that’s subject to uncertainty and mistakes,” said Erik Weisman, a Boston-based money manager at MFS Investment Management, which oversees $430 billion globally.

Uncle Ben the former central banker, however, seems relaxed. Or sedated, you can never tell with Bernanke. He reassured everyone before last weekend that new regulations may act to make the next crisis much more containable than the last. The rest of us are left wondering exactly what these new regulations are, and why a stronger verb than “may” isn’t available.

Behind the words are the real meanings: without QE, the US economy splutters, and South American economies remain likely to tank. With rate rises looking less of a cert, risk is on the increase. The investment numbers and growth data show that the current US bourse levels are completely without foundation. Strong Dollar or not, the deficit is still going up. Fiscally, financially and economically, America is an accident waiting to happen.

CRASH2 – A GLOBAL SUMMARY #2: The eurozone….it’s still running, but nobody knows how to stitch the head back on.

The usual “Harken not unto what they say but rather watch what’s happening” caveat emptor applies when it comes to the eurozone.

Two immediate examples. First, the Bundesbank is forecasting an acceleration in German growth. The German economy experienced “strong expansion at the end of 2014”, Germany’s central bank said two days ago. Herr Weidemann also foresaw “a continuation of the vigorous economic ascent” in the second quarter of the year. The main drivers of this he averred, are foreign demand, private consumption and, to a lesser extent, construction.

Stripe me, those are eccentric reasons for growth. But neither domestic consumption nor construction reduce deficits. Germany does export first class engineering (from cars to tools via aircraft, watches and oil refinement hardware) but more independent sources like World’s Top Exports disagree with the central bank:

‘German export sales at the product category level were flat’

….as does Reuters…

‘German exports fell by the largest amount in five months in January, dropping more than forecast’

….and Canada’s Globe & Mail…

‘Seasonally adjusted exports decreased by 2.1 per cent on the month [of January] after a sharp rise in December, data from the statistics office showed. They missed the Reuters consensus forecast for a 1.5-per-cent drop and undershot even the lowest estimate for a 2-per-cent decline.’

….and Defense News…..

Germany’s [arms] exports fell by 43%’

It’s always good to remember that most official data these days are issued within a context…and with an agenda in mind. The euro itself is obeying this reality at the moment.

As the capital flight from the eurozone has increased of late, so too has the unwillingness of the ECB to tell us anything about it. But the reality I get from a combination of personal sources, the FT and the Wall Street Journal is that liquidity in the region is worsening at a frightening pace…and the non-agreement about anything beyond staying for dinner in Berlin last Monday if anything has made things worse.

And yet, and yet….the euro is trading at 1.36 to Sterling today. Clearly, the ECB is buying it massively in order to give out a sense of stability. But that stability is a myth: I’ll give it at most a week before another Greco-EU spat breaks out. Meanwhile, the Dollar is now up to 91% of the euro’s value. Mario will be a very happy man: his plan for a Eurodollar va bene. Richard Barley writes in the WSJ’s Heard on the Street column that the ECB “is finding it trickier to get a grip on purchases of asset-backed securities. The ECB’s efforts to revitalize Europe’s securitization market are falling short of its rhetoric.”

In the same vein, we hear the avowedly corrupt Mariano Rajoy boasting of a Spanish recovery, but the stats simply do not back him up: Spain is full to the brim with abandoned construction sites – and the airports built during the boom years offer testimony to just how wrong governments got it…and how Trichet’s ECB ignored the issue until it was far too late. Out of Spain’s 46 publicly managed airports, only 8 are making a profit.

At airports like those in Burgos, Sabadell and Albacete, the terminals are deserted, and the luggage immobile for weeks on end.

Huesca-Pirineos Airport cost €65 million, and gets just 2,781 of the predicted 160,000 passengers for the year. Commercial flights have now stopped operating through it. Ciudad Real cost Spain €1.1 billion to build, and was project to carry 2 million passengers a year. It hasn’t hosted a commercial flight since 2012. The entrance to the airport of Castellón — a €175 million project also with no commercial passengers for three years — is dominated by an 80-foot statue representing the Province’s president, Carlos Fabra. Fabra is serving a four-year prison sentence for tax fraud.

This is the eurozone disaster of falsehood, pay-offs and crazy infrastructural spending that lies at the core of the European Union so eagerly supported by Britain’s two largest Parties. It is a headless chicken running about pretending that the prognosis is good. The prognosis is death, and it is time UK voters woke up to the fact.

Knarf plays the Doomer Blues

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