Most of the worst financial panics in history have happened in the fall. Just recall what happened in 1929, 1987 and 2008. Well, September 2011 is about to begin and there are all kinds of signs that the financial world is about to hit the big red panic button. Wave after wave of bad economic news has come out of the United States recently, and Europe is embroiled in an absolutely unprecedented debt crisis. At this point there is a very real possibility that the euro may not even survive. So what is causing all of this? Well, over the last couple of decades a gigantic debt bubble has fueled a tremendous amount of "fake prosperity" in the western world. But for a debt bubble to keep going, the total amount of debt has to keep expanding at an ever increasing pace. Unfortunately for the global economy, sources of credit are starting to dry up. That is why you hear terms like "credit crisis" and "credit crunch" thrown around so much these days. Without enough credit to feed the monster, the debt bubble is going to burst. At this point, virtually the entire global economy runs on credit, so when this debt bubble bursts things could get really, really messy.
Nations and financial institutions would never get into debt trouble if they could always borrow as much money as they wanted at extremely low interest rates. But what has happened is that lending sources are balking at continuing to lend cheap money to nations and financial institutions that are already up to their eyeballs in debt.
For example, the yield on 2 year Greek bonds is now over 40 percent. Investors don't trust the Greek government and they are demanding a huge return in order to lend them more money.
Throughout the financial world right now there is a lot of fear. Lending conditions have gotten very tight. Financial institutions are not eager to lend money to each other or to anyone else. This "credit crunch" is going to slow down the economy. Just remember what happened back in 2008. When easy credit stops flowing, the dominoes can start falling very quickly.
Sadly, this is a cycle that can feed into itself. When credit is tight, the economy slows down and more businesses fail. That causes financial institutions to want to tighten up things even more in order to avoid the "bad credit risks". Less economic activity means less tax revenue for governments. Less tax revenue means larger budget deficits and increased borrowing by governments. But when government debt gets really high that can cause huge economic problems like we are witnessing in Greece right now. The cycle of tighter credit and a slowing economy can go on and on and on.
I spend a lot of time talking about problems with the U.S. economy, but the truth is that the rest of the world is dealing with massive problems as well right now. As bad as things are in the U.S., the reality is that Europe looks like it may be "ground zero" for the next great financial crisis.
At this point the EU essentially has three choices. It can choose much deeper economic integration (which would mean a huge loss of sovereignty), it can choose to keep the status quo going for as long as possible by providing the PIIGS with gigantic bailouts, or it can choose to end of the euro and return to individual national currencies.
Any of those choices would be very messy. At this point there is not much political will for much deeper economic integration, so the last two alternatives appear increasingly likely.
In any event, global financial markets are paralyzed by fear right now. Nobody knows what is going to happen next, but many now fear that whatever does come next will not be good.
The following are 25 signs that the financial world is about to hit the big red panic button....
#1 According to a new study just released by Merrill Lynch, the U.S. economy has an 80% chance of going into another recession.
#2 Will Bank of America be the next Lehman Brothers? Shares of Bank of America have fallen more than 40% over the past couple of months. Even though Warren Buffet recently stepped in with 5 billion dollars, the reality is that the problems for Bank of America are far from over. In fact, one analyst is projecting that Bank of America is going to need to raise 40 or 50 billion dollars in new capital.
#3 European bank stocks have gotten absolutely hammered in recent weeks.
#4 So far, major international banks have announced layoffs of more than 60,000 workers, and more layoff announcements are expected this fall. A recent article in the New York Times detailed some of the carnage....
A new wave of layoffs is emblematic of this shift as nearly every major bank undertakes a cost-cutting initiative, some with names like Project Compass. UBS has announced 3,500 layoffs, 5 percent of its staff, and Citigroup is quietly cutting dozens of traders. Bank of America could cut as many as 10,000 jobs, or 3.5 percent of its work force. ABN Amro, Barclays, Bank of New York Mellon, Credit Suisse, Goldman Sachs, HSBC, Lloyds, State Street and Wells Fargo have in recent months all announced plans to cut jobs — tens of thousands all told.
#5 Credit markets are really drying up. Do you remember what happened in 2008 when that happened? Many are now warning that we are getting very close to a repeat of that.
#6 The Conference Board has announced that the U.S. Consumer Confidence Index fell from 59.2 in July to 44.5 in August. That is the lowest reading that we have seen since the last recession ended.
#7 The University of Michigan Consumer Sentiment Index has fallen by almost 20 points over the last three months. This index is now the lowest it has been in 30 years.
#8 The Philadelphia Fed's latest survey of regional manufacturing activity was absolutely nightmarish....
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009
#9 According to Bloomberg, since World War II almost every time that the year over year change in real GDP has fallen below 2% the U.S. economy has fallen into a recession....
Since 1948, every time the four-quarter change has fallen below 2 percent, the economy has entered a recession. It’s hard to argue against an indicator with such a long history of accuracy.
#10 Economic sentiment is falling in Europe as well. The following is from a recent Reuters article....
A monthly European Commission survey showed economic sentiment in the 17 countries using the euro, a good indication of future economic activity, fell to 98.3 in August from a revised 103 in July with optimism declining in all sectors.
#11 The yield on 2 year Greek bonds is now an astronomical 42.47%.
#12 As I wrote about recently, the European Central Bank has stepped into the marketplace and is buying up huge amounts of sovereign debt from troubled nations such as Greece, Portugal, Spain and Italy. As a result, the ECB is also massively overleveraged at this point.
#13 Most of the major banks in Europe are also leveraged to the hilt and have tremendous exposure to European sovereign debt.
#14 Political wrangling in Europe is threatening to unravel the Greek bailout package. In a recent article, Satyajit Das described what has been going on behind the scenes in the EU....
The sticking point is a demand for collateral for the second bailout package. Finland demanded and got Euro 500 million in cash as security against their Euro 1,400 million share of the second bailout package. Hearing of the ill-advised side deal between Greece and Finland, Austria, the Netherlands and Slovakia also are now demanding collateral, arguing that their banks were less exposed to Greece than their counterparts in Germany and France entitling them to special treatment. At least, one German parliamentarian has also asked the logical question, why Germany is not receiving similar collateral.
#15 German Chancellor Angela Merkel is trying to hold the Greek bailout deal together, but a wave of anti-bailout "hysteria" is sweeping Germany, and now according to Ambrose Evans-Pritchard it looks like Merkel may not have enough votes to approve the latest bailout package....
German media reported that the latest tally of votes in the Bundestag shows that 23 members from Mrs Merkel's own coalition plan to vote against the package, including twelve of the 44 members of Bavaria's Social Christians (CSU). This may force the Chancellor to rely on opposition votes, risking a government collapse.
#16 Polish finance minister Jacek Rostowski is warning that the status quo in Europe will lead to "collapse". According to Rostowski, if the EU does not choose the path of much deeper economic integration the eurozone simply is not going to survive much longer....
"The choice is: much deeper macroeconomic integration in the eurozone or its collapse. There is no third way."
#17 German voters are against the introduction of "Eurobonds" by about a 5 to 1 margin, so deeper economic integration in Europe does not look real promising at this point.
#18 If something goes wrong with the Greek bailout, Greece is financially doomed. Just consider the following excerpt from a recent article by Puru Saxena....
In Greece, government debt now represents almost 160% of GDP and the average yield on Greek debt is around 15%. Thus, if Greece’s debt is rolled over without restructuring, its interest costs alone will amount to approximately 24% of GDP. In other words, if debt pardoning does not occur, nearly a quarter of Greece’s economic output will be gobbled up by interest repayments!
#19 The global banking system has a total of 2 trillion dollars of exposure to Greek, Irish, Portuguese, Spanish and Italian debt. Considering how much the global banking system is leveraged, this amount of exposure could end up wiping out a lot of major financial institutions.
#20 The head of the IMF, Christine Largarde, recently warned that European banks are in need of "urgent recapitalization".
#21 Once the European crisis unravels, things could move very rapidly downhill. In a recent article, John Mauldin put it this way....
It is only a matter of time until Europe has a true crisis, which will happen faster – BANG! – than any of us can now imagine. Think Lehman on steroids. The U.S. gave Europe our subprime woes. Europe gets to repay the favor with an even more severe banking crisis that, given that the U.S. is at best at stall speed, will tip us into a long and serious recession. Stay tuned.
#22 The U.S. housing market is still a complete and total mess. According to a recently released report, U.S. home prices fell 5.9% in the second quarter compared to a year earlier. That was the biggest decline that we have seen since 2009. But even with lower prices very few people are buying. According to the National Association of Realtors, sales of previously owned homes dropped 3.5 percent during July. That was the third decline in the last four months. Sales of previously owned homes are even lagging behind last year's pathetic pace.
#23 According to John Lohman, the decline in U.S. economic data over the past three months has been absolutely unprecedented.
#24 Morgan Stanley now says that the U.S. and Europe are "hovering dangerously close to a recession" and that there is a good chance we could enter one at some point in the next 6 to 12 months.
#25 Minneapolis Fed President Narayana Kocherlakota says that he is so alarmed about the state of the economy that he may drop his opposition to more monetary easing. Could more quantitative easing by the Federal Reserve soon be on the way?
Things have not looked this bad for global financial markets since 2008. Unless someone rides in on a white horse with trillions of dollars (or euros) of easy credit, it looks like we are headed for a massive credit crunch.
What we witnessed back in 2008 was absolutely horrifying. Very few people want to see a repeat of that. But as things in the U.S. and Europe continue to unravel, it appears increasingly likely that the next wave of the financial crisis could hit us sooner rather than later.
None of the fundamental problems that caused the crisis of 2008 have been fixed. The world financial system is still one gigantic mountain of debt, leverage and risk.
Authorities around the globe will certainly do all they can to keep things stable, but in the end it is inevitable that the house of cards is going to come crashing down.
Let us hope for the best, but let us also prepare for the worst.
@Duinsnip: “Unless someone rides in on a white horse with trillions of dollars (or euros) of easy credit,”…how prophectic!! That some one has always been recognized as the false messiah aka anti-Christ(other than). How coincidental! Revelation 6:1-17; vs.2 and I saw , and behold a white horse: and he that sat on him had a bow; and a crown was given unto him: and he went forth conquering and to conquer., 2nd seal peace taken, 3rd seal famine, 4th death, 5th martyr, 6th seal anarchy, and a great earthquake,sun became black, moon became as blood,stars fell unto earth, mighty wind and heaven departed… birth pains have already started, these are the final labor pains. When they come you can’t stop them! Seems Pandora’s box has been opened! Arab Spring leading to Muslim Brotherhood control of Mdl. East! A war brewing! It’s all working together.
The U.S. Postal Service is on the verge of collapse, with September 30, 2011 the date it becomes insolvent, unable to pay its bills.
It employs 550,000 people directly and 7 million
indirectly. Imagine what the collapse will do to the unemployment rate and our economy when this happens. Please, starting tomorrow, mail ALL your bills in with stamped letters, and do not pay any bills online. Keep doing this forever.
If we all do this, we can avert the final death blow to our economy. Otherwise we are all doomed.
Michael-I have held off saying this but is there any way you can have a web site where people can post all the religious crazy talk like there white horse/666 dribble?
Do people really believe this stuff??? Really?
How is writing this sci-fi stuff helping anything? It is no wonder this country is in such a mess if this is the best many people have as solutions.
10] Standing afar off for the fear of her torment, saying, Alas, alas, that great city Babylon, that mighty city! for in one hour is thy judgment come.
[11] And the merchants of the earth shall weep and mourn over her; for no man buyeth their merchandise any more:
Gary:
You have probably noticed that I try to allow as much free speech as possible.
After all, I have had numerous calls to censor your comments promoting socialism and I have not done it.
As for Bible prophecy, it has an amazing track record so you should check it out some time.
Michael
Perfect answer…. Thank you.
EXCELLENT response, Michael!
I would suggest to Gary2 start a blog of his own, and collect like-minded people to respond to HIS notions if he feels the need to change things so much.
Point well taken Mike-can you point me in the correct direction on bible prophesy?
I guess IMO-my socialist ideas will actually solve many of the problems of the country while all the religious crazy talk about Babylon and beasts and 666 will not.
Gary:
I am glad you asked.
Some of the first places that I like to take people to are Psalm 22, Isaiah 53 and Daniel 9:24-27. There were dozens of very specific prophecies that were fulfilled by the first coming of Jesus Christ.
For an easy to understand book that will introduce you to a lot of these concepts, I would recommend “Christianity: The Faith That Makes Sense” by Dennis McCallum.
-Michael
I’m proud of you Michael, did’nt know you had it in you.
Yes! Thank you. I couldn’t agree more.
Hmmm, those verses from the bible…remarkably like the destruction of the WTC.
The “white horse” here is the Fed, ECB and associated “soverign wealth funds” including China, Brazil, Saudi et al, to get together and buy up the debt. Similar to the Fed’s QE2 but on a truly global scale.
Once done, they can ‘retire’ some of the nastiest debt, restructure what’s actually in good shape and sell at a discount, while holding the rest on its books and rolling it over upon maturity.
That’ll fix it, at the cost of sopping up the cash reserves of nearly every central bank on the planet. And then hiding everything through an opaque process that lets them do whatever they think makes sense.
Essentially wiping the slate clean.
Doubt it’ll happen, but the alternative is unthinkable, and the precedent is clear based on recent history.
I’m looking at short ETF to ride the whirlwind to some profitability. Before you get all out of shape there, somebody has to accumulate profits and the dollars and euros might as well go to savvy investors who profit whichever way the markets go.
If I make enough to buy a car, somebody in Detroit or Stuttgart gets to feed a family, and that’s what we need the money to go somewhere, not evaporate into the ether.
That’s where short ETF come into the picture.
Just use common sense and a digital trading platform, and you’re in.
My Quote…here it is
These Government leaders with all the potential considerations will fail in their calculations and have such unintended consequences. A Global Depression that will make the U.S.1933 Depression a cake walk. War, crime, riots and famine will be the norm. A lynching of the middle class with nothing left will thrust violence upon the “Elites” and the “Rich” that the world has ever seen. If you can, leave the U.S. and find a 3rd world country where they know how to survive on nothing. You may realize then you will be one of the Blessed lucky ones. For now the growing massive debt is a smoldering volcano is like Mt. Vesuvius, that when it blasts will leave the world looking like Pompeii.
- Steve 09/11/09
Monetise gold and silver at the individual level …. in real-time. The dollar’s ultimate role was not meant to be for the role of a currency but as a real-time measure for gold-as-money, where gold is the money and the dollar bridges fiat currency pricing of goods and services with weighted bullion payments. Simple. The is why the FIXED dollar-gold peg had to be severed. Bullion’s trade value had to be set free to rise as per the market.
Wall Street says everything is fine. Buy bank stocks. They are a great value! And we know Wall Street would never lie. Oh look now they are even a better value!
If the government would take off the millions of illegal aliens who are collecting social security and medicare benefits,just this action alone would free up the money that those of us who have legally bought and paid for our social security. These people who are in the millions are living better than I am and absolutely do not deserve this. This is due to some more of this “liberal” thinking who are busy thinking of ways to wreck our country. It is time all the seniors band together and demand these people be denied all benefits and then deported. Our borders need to be closed until this country gets back on its feet again. Get rid of this bunch of liberals who care nothing about you or me. I say it is time to say Obamanos, Obama!
With all of this doom and gloom, why is it that no one writes about what to do. For instance, should people try to pay off their home, or is that a waste of time and money? What will the economic collapse look like in the every day life? I am serious, why not write an article about the everyman’s every day consequences to this event?
I recommend living life as if things are going to get better, but be prepared as if things might get worse. Continue to pay your bills, prepare for your future, work hard, play hard.
If these are the end of times (which I believe they are), then make sure you are right with God. If these aren’t the end of times, then you won’t have messed things up for yourself by losing your home, ruining your credit, etc.
I think the most important thing to do is stock up on food and water. Even the bible states that in the end of times, there will be famine. There are signs all around us that indicate the instability of the world’s food supply.
So who is going to loose? The wealthy will loose all their fake money.
Please, you bible thumpers always see in the bible what you want to see. My interpretation of the bible is as valid as yours, and I am a lot smarter than you, that makes my interpretation better than yours.
Well then, by all means, please enlighten us with all your wisdom while we sit at your feet waiting for the next pearl of wisdom to fall from your lips. Why don’t you first start by telling us exactly what it is that YOU believe, but don’t stop there, please explain to us what exactly, you BASE these beliefs ON. I will eagerly await your response.
Gary2, please show me, with facts not slogans, all the wonderful examples where socialism (or Marxism, Commie-ism, etc) was a roaring success. Cuba? USSR? UK? Chavez-land? France? former Warsaw countries???
Which of these countries were the cradle of innovation, where the airplane was invented, A/C electricity, advances in meds, the industrial revolution, etc. Where? Which ones? You think the Bible is BS?? At least it promotes thinking and shows cause and effect. I had relatives that escaped from a former Warsaw paradise. Believe me, eating from a dumpster in back of a McDonalds would be an upgrade for the average Yugoslavian, Romainian, etc. I KNOW FIRST HAND. If you really believed in that BS you would go there and live it up.
To everyone of you out there, there are three types of man/ woman on planet earth. the natural, carnal and spiritual. The natural man does not know and does not care. Like an animal he is a walking dead. The carnal knows truth but follows his five senses.and the spiritual man who believe and knows that there is a higher power, who beliees the BIBLE and the truth of the ages and the Holy Spirit of an Almighty God, and who knows that he will make it here and there, as written.
The author of this blog is a Christian who apparently has a gift for sharing with others in his writings what’s really happening in the world. You can only develop this spiritual gift by decades of dedication serving something other than one’s self. He does this blog without any payment from visitors. Think about it.
Very interesting that you should mention the need for someone to ” ride in on a white horse “. That statement is prophetic, the so called antichrist will do just that, bringing a sense of peace although it will be a false peace, he will seem to have all the answers to the worlds troubles,…..but he has a very sinister agenda.
Why would anyone call the bible names.
I agree with Michael
I have never thumped bibles in my life,
So what is the plan. If you are not raptured. Then you are here for the duration. That means you will have no money no food and the whole planet is going to be coming apart.
The Federal Reserve is bankrupting the nation… paper money will become worthless… you have to prepare yourself and your family for the financial crisis ahead.
In three years since I wrote about the housing crisis I have yet to see an article on that topic that suggests a solution. How many articles have you read that are essentially nothing more than chicken little running around and submitting evidence that the sky is falling.
Of course you are standing up to your hips in bits and pieces of sky, so you really do not need any evidence.
Have you EVER heard someone offer a solution/ How about a free market solution: Well here is one:
http://www.dnusbaum.com/fix.html
You will need a decent attention span to get through the document since it runs to 6000 words without the links
I would bet everything there is that this bubble will burst by next October prior to the elections. I would bet the farm. If it doesn’t happen now everyone will know this by next year. What would set it off is another bombing and martial law.
What’s Taking place i am new to this, I stumbled upon this I’ve discovered It positively helpful and it has helped me out loads. I’m hoping to give a contribution & assist other customers like its helped me. Great job.