Major global crisis ever:
Everything looks quite normal; your neighbours live still in their oversized houses, drive the kids to and from school in brand new luxury cars, so no one thinks about an impending economic collapse. However the truth is that most of these houses and cars are financed to the hilt by debt money, and that will be gone the moment the economy hits the wall. All of the numbers are absolutely screaming indicating that the world economy is right on track for a major global crisis.
People are impatient and their attention spans are pitifully small. Very few are willing to take a long-term view of things because everyone has become accustomed to “living in the now” and are not focusing on what is in front of them. The headlines are not screaming about a “stock market crash” or an “economic depression”, as October would have been the month to be the end of anything. But that doesn’t mean that the economy is on the mend by any kind of imagination. The RKM owned HSBC bank the biggest in the western world, says that a global recession has now begun, and the pain that we have experienced so far is just the tip of the iceberg. So don’t think it is time to relax, just continue with preparations.
The world economy is bankrupt in every aspect and in each region. Most of the EU is under real pressure while Portugal has become the latest acute country. The Portuguese Socialist Party has joined with the Communists and given the left bloc an absolute majority to govern the country, which is not accepted by President Aníbal Cacavo Silva to invite them to form the new government, as they are against austerity, and the proposed wage cuts. The socialists also want the Portuguese debt to be written down by 50 per cent, and exit the currency union. The euro already has destroyed enough European countries.
The Banks are in a mess, interest rates have got to stay at zero, otherwise every institution holding derivatives is bankrupted, as example Deutsche Bank has around $100 trillion of derivatives exposure and is not the only bank with such a massive exposure. JP Morgan as well, actually all the TBTF U.S. banks together have a staggering $250 trillion of derivatives exposure. The true value of these banks exposure is estimated to be around $500 trillion. When counter-parties fail, the $500 trillion bank total and the total global derivatives exposure of $1.5 quadrillion will sustain unimaginable losses.
Today’s economy is facing a lethal convergence of three critical factors, as the fall-out from the biggest debt bubble in history:
- Disastrous experiment with globalisation
- Massaging of data to the point where economic trends are obscured
- Most important of all, the approach of an over loaded debt default causing the absent of returns in the energy sector, derivatives, while US Treasure Bonds are dumped by China, Russia, and a host of other countries.
The perfect storm, energy, finance and the end of growth by Dr Tim Morgan Global Head of Research, read more about here.
The ‘crack-up’ phase:
The economy is in the ‘crack-up’ phase. So four things are going to shape the way the economy and the markets unfold going forward.
- First, to see is increasing desperation and extreme central bank financial repression because they painted themselves so deep into the corner that they’re lost and desperate.
- Second, an increasing market disorder and volatility. In the last three months, the stock market has behaved like a drunken sailor. But remember it’s just a bunch of robots and day traders that are mindlessly trading chart points. It has nothing to do with information or incoming data about the real world. One of these days, central banks are going to falter. And the market is going to reset violently.
- Third, look at the Baltic Dry index and it is clear the economy suffers from faltering demand for shipments and overbuilding of bulk carrier capacity as a result of this central bank-driven boom of the last 20 years. Which is going to be ripping through the financial system and the global economy in ways never seen before neither experienced. Demand has run slap up against peak debt. Resulting from central bank money printing, and this entire unprecedented monetary stimulus of about $60 trillion of new debt was added against somewhere around $15 trillion, or hardly one quarter of extra output, came in return.
- Fourth, credit has expanded 14 times in 14 years. There’s nothing like that in recorded history. The 20-year worldwide central bank credit boom has generated vast overinvestment in oil exploration, mining, manufacturing, transportation and distribution capacity worldwide. But now that the credit inflation is reaching its outer limits, and is entering the “crack-up” phase, the forces of global deflation will drive down the price of goods and many consumer services as well.
Energy consulting company Wood Mackenzie said that an estimated $1.5 trillion worth of oil projects in North America couldn’t make money when oil trades at $50 or less. Even after big spending cuts, many U.S. oil companies are struggling to pay their huge debts…
When the next crisis fully materialises, cash will be king. It will buy more everyday goods and services and will have command over drastically marked-down financial and real estate assets of every kind.
It will become extremely hard to predict what all the ramifications and cascading effects will be. But the degree of overinvestment and excess capacity in everything from shale oil exploration, to iron ore mines – dry bulk carriers – aluminium plants – steel mills – and so on, is something never has been seen before, problems will get far more worse before they get better.
Governments use deficit spending and inflation, for being able to run huge deficits, which are partially funded by the Central Bank creating money out of thin air.
Monetary inflation acts as something of a hidden tax. It is in plain language THEFT. People walk around with money in their wallets. They have money sitting in their bank accounts. But this money is essentially being taxed, by losing value due to monetary inflation.
It isn’t always possible to determine the effects of monetary inflation by looking at price inflation. Higher prices are just one consequence of monetary inflation. Monetary inflation also misallocates resources encouraging more debt and fewer saving. It tricks investors into thinking that more savings exist than really is the case.
This often leads to unsustainable bubbles, such as in stocks and real estate. Inflation hides the cost of government spending. If Central Banks were not able to create money out of thin air and help governments to fund their deficits, then people would not stand for the increased taxes.
Inflation is worse than people may think; meanwhile the destruction of fiat money is underway. Owning gold is one way to protect yourself from the Central Bankers’ deceptive policies and preserve your wealth.
Central bankers and governments destroy the value of paper currencies, they can’t hurt the value of gold. Gold has held its value through every financial crisis in history. That’s why humans have been using gold as a store of value for thousands of years.
It also is recommend keeping sufficiently cash on hand. Unlike gold, cash will lose at least some value during a crisis. But when a crisis hits, you may need cash to pay for everyday goods and services. So, keep enough cash on hand to last you and your family three to six months. Remember, it can be difficult to get cash during a crisis, as was seen in Greece and Cyprus.
Seven irrational years of zero interest rates and quantitative easing and God’s mercy have sent the stock market soaring to heights that only can be described as dizzying, but the real economy, is a bust.
An assistant professor of finance, Noah Smith, wrote an article in Bloomberg about the perils of financial engineering. Referring to the 2008 collapse, he writes:
“For decades, traders placed trades — big, highly leveraged ones — that market prices would move toward the level implied by derivative pricing models. Those bets paid off… until they didn’t… traders trusted financial engineers’ models so much that they were willing to bet they would hold true down to razor-thin precision.”
Needless to say, that razor-thin precision was as true as a blind man’s aim at night. The article goes on to explain how mathematical models will always be “plagued by some amount of ‘uncertainty.’” And of that is certain. Equally is certain that central bankers the world over will continue to use them.
It recollects one definition of insanity – doing the same thing over again and expecting different results!
During the next six months, you will see the stock market plummet by at least 50%, real estate will drop 40%, savings accounts will lose 30%, and unemployment will triple. It’s already starting to unfold.
For knowing what is going to happen, these are the particulars to be watched:
- Inevitable Stock Market Wipe-out
- Looming Home Equity Slaughter
- $46 Trillion Wealth Transfer
- Dwindling Velocity of Money
- Silent Wealth Confiscation
Ad 1. As stocks go down, investors will get margin calls and they will be forced to sell their positions immediately, which will accelerate the markets sell-off. – Another indicator is something that is often ignored by most economists; it’s called the stock market participation rate. This simply measures the volume of the stock market, and it’s at astonishingly low levels for a market selling at such high valuations.
After the last crash of 2008, many people have resisted getting back in the market that makes up for the low volume. Although the market has hit all-time highs, there aren’t a lot of people investing. Never before in history has there been a sustainable market rally on low volume.
How could the market go up if the participation rate is low and if margin debt is high? – The big factor is: Stock Buybacks — companies are borrowing money at low interest rates to buy their own stock, to improve bonus level for its top executives. Stock buybacks are running at a record rate. They are on course to exceed $1 trillion this year.
Contrary, how could the market price for gold gone down as China has been importing 2,400 tons of gold over the past two and a half years without any upward push to the gold price? This amount equals almost EXACTLY the TOTAL amount of gold mined annually around the world! How is it possible that ALL production has been purchased by China and yet the price goes down? The answer of course is quite simple unless you purposely close your eyes or disingenuously “apologise”.
“The money worldwide is FAKE. Gold is, has been and always will be REAL money. Gold is God’s money. That’s what this is about. This is about forcing the population of the world to use FAKE money and the REAL money is being accumulated.” And “SILVER is the CHEAPEST ASSET on Earth” — Bill Holter
Instead of investing in the future, companies are engaged in full blown “financial engineering” trying to make their share prices go up — even when their profit margins have been falling. It would be like you getting a home-equity line in your house, to buy your own house at a higher price, and then saying it is worth more money. That’s the kind of applied “financial engineering.”
Fewer people are trading, but they are using more margins, and they are pushing the PE ratios to dangerous new highs. These are just some of the indicators signalling that a massive collapse — which will blindside most investors — is coming very soon. A 50% correction in the stock market is actually a conservative estimate. If the market drops to its 2009 lows, it will be a 70% correction.
Ad 2. How can real-estate prices be going up, when the percentage of Americans owning homes is nearing an all-time low?
How can real estate be strong when home ownership is at a 50-year low? – Over tens of millions people lost their homes from the last crash. This created a buying opportunity for some of the largest investor funds that bought these properties at steep discounts. If anything is learned from the 2008 subprime collapse it was that real-estate prices can’t keep going up far beyond the point where homebuyers can afford them.
Prices will ultimately head back down. If you own a home – there is reason for grave concern here. One of the only reasons that they have not already gone down is because mortgage rates are still at an all-time low.
What happens when mortgage rates go back to their normal rate of 6 to 8%? All of a sudden the carrying cost of a mortgage doubles, and the price one can pay for a house goes down. If mortgage rates go back to 7.5%, home prices would have to drop 32% just to keep the same monthly payment. And be assured, mortgage rates eventually will go up, so prices must go down.
Expect real-estate prices to pull back 40% as millions are priced out of the current real-estate market, and as these big investment companies suddenly have to unload the properties they are speculating on. So much of the equity of homeowners will be wiped out in an instant.
Ad 3. The demographic effect plays an important role. After World War II ended there was a massive increase in babies being born. Births increased at an unprecedented rate for the next 18 years, causing now a retirement wave that isn’t good for the economy.
The majority of pension funds have unfunded liabilities, followed by Social Security. Statistically, there is no possible way the government can keep all of these promises. There is going to be some kind of a default. But it will not be a typical default where the payments stop coming. There will be a combination of different cuts in benefits.
One way to reduce the unfunded liabilities quickly is to simply increase the official retirement age as has been done in many of the EU countries. That will instantly wipe out tens of trillions in liabilities. The last major option is to simply reduce the payments to those collecting.
Ad 4. The slowdown in what economists calls the “velocity of money.” Most people have never heard this term – it’s simply the ratio of nominal GDP to the nominal money supply. In other words a measurement of how fast money moves through the economy.
Ad 5. The demise of fiat currency, could wipe out people’s savings. As all currencies participate in the currency war for the race to the bottom.
As the international landscape settles down, expect the value of the money in your bank account to dwindle by 30% within a year. And then expect it to continue to lose another 20% over the next few years for a total decline of 50% or more. As a result, everything you pay for will go up in price – from fuel, to utility bills, to food.
Consider this. Since the patchwork solution to “cut future spending,” debt has continued to go up at an accelerated level in the US from $14 trillion to over $18 trillion, adding about $1 trillion in debt per year.
One million seconds was 12 days ago.
One billion seconds was 31 years ago.
One trillion seconds – that was 31,000 years ago.
As mentioned above the US debt grew by more than $1 trillion in the last year that equals $33,000 per second.
How far away are we from the crash?
Historically foreign countries were happy to feed the US debt addiction through buying U.S. treasuries, but that is coming to a close:
ABC News reports: “Russia will sell U.S. Treasuries.”
China Daily writes: “China cuts U.S. Treasuries holdings.”
But it’s not just Russia and China ditching U.S. debt.
Over the last month alone, foreign countries have dropped $56 billion in U.S. Treasuries. Japan, China, Belgium, Switzerland, the United Kingdom, Mexico, France, Germany and even Israel are bailing on the US.
Here an overview of foreign T-Bond sales over the month of September.
And when other countries stopped buying US debt, there is only one choice left between, default or create more QE money out of “thin air” in order to monetise debt by buying their own debt with created money out of thin air!
And as default is no option this money printing will eventually collapse the economy, and will unleash the five above-explained aspects. Expect more unemployment, more erosion of the middle class, exploding bubbles in the bond market, student- and car loans. Investors are already worried as US debt default looms.
World War 3
Overcoming the Logic of War. “There are No Winners in a Global Conflict”. Vladimir Putin
“Recently the United States conducted the first test of the anti-missile defence system in Europe. What does this mean? It means we were right when we argued with our American partners. They were simply trying yet again to mislead the whole world and us. To put it plainly, they were lying. It was not about the hypothetical Iranian threat, which never existed. It was about an attempt to destroy the strategic balance, to change the balance of forces in their favour not only to dominate, but to have the opportunity to dictate their will to all: to their geopolitical competition and, I believe, to their allies as well. This is a very dangerous scenario, harmful to all, including, in my opinion, to the United States.
Bigger Financial Meltdown Starts Before End Of Year – Doug Casey
Macro financial expert Doug Casey contends, “I think the Depression has already started, and I call it the Greater Depression because it’s going to dwarf what happened between 1929 and 1946. It’s already started. We are just in the eye of the storm, but we are leaving that now. The average guy should buy gold. Don’t keep your savings in a bank. Store it in gold coins . . . or silver coins . . . Silver is volatile but has a much bigger upside than gold.” Follow the interview here.
Coming Global Collapse – September to December
Published on Aug 31, 2015
Global collapse by Derivatives – China’s Ghost Cities, Currency Wars – The IMF’s plans to replace the dollar – ISIS warns that it can acquire nukes from Pakistan – The Elite and a Worldwide Financial Collapse – New World Order – Ron Paul and a new U.S. Financial Crisis – Jonathan Cahn and the Shemitah – James Rickards – Jeff Berwick The Shemitah Exposed.
The first 35 minutes concerning China are specifically of interest and recommended to view. When the RKM talking head starts to talk please understand he is the cabal’s messenger to inform the public about their upcoming plan to destroy the world economy, and to implement the New World Order as soon as next year.
Gold Only Insurance for Coming Financial Armageddon
Bill Holter contends China has enormous debt problems, but a very good plan B,
“China used fiat debt to build real infrastructure, and when the system blows up, the fiat debt blows away and they are left with infrastructure. Do they have 20% bad loans? They very well could and probably do. If it is true that they are going to have a debt blow up, don’t forget China has been importing big tonnage of gold for years now. Over the last five years, they have imported 9,000 tons of gold. Their way out is the old way out. The old way out was to revalue gold higher. They could revalue gold and step up and say they will pay $50,000 or $100,000 per ounce for any and all ounces for sale. You can’t say there is not enough gold. What you can say is that it’s not priced correctly to support the system. If they have an implosion of debt, which leaves their balance sheets impaired, the way to recapitalize the balance sheets is to revalue the price of gold higher. It creates capital, in other words.” China could reprice gold to US$ 100,000 / ounce. Financial Armageddon is mathematically coming; there is absolutely no possible exit with the system intact and the rule of law.