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12 Signs The Economic Slowdown The Experts Have Been Warning About Is Now Here

Since the election there has been this perception among the American public that the economy is improving, but that has not been the case at all.  U.S. GDP growth for the first quarter was just revised up to 1.2 percent, but that is even lower than the average growth of just 1.33 percent that we saw over the previous ten years.  But when you look even deeper into the numbers a much more alarming picture emerges.  Commercial and industrial loan growth is declining, auto loan defaults are rising, bankruptcies are absolutely surging and we are on pace to break the all-time record for most store closings in a single year in the United States by more than 20 percent.  All of these are points that I have covered before, but today I have 12 new facts to share with you.  The following are 12 signs that the economic slowdown that the experts have been warning about is now here…

#1 According to Challenger, the number of job cuts in May was 71 percent higher than it was in May 2016.

#2 We just witnessed the third worst drop in U.S. construction spending in the last six years.

#3 U.S. manufacturing PMI fell to an 8 month low in May.

#4 Financial stocks have lost all of their gains for the year, and some analysts are saying that this is “a terrible sign”.

#5 One new survey has found that 39 percent of all millionaires “plan to avoid investing in the coming month”.  That is the highest that figure has been since December 2013.

#6 Jobless claims just shot up to a five week high of 248,000.

#7 General Motors just reported another sales decline in May, and it is being reported that the company may be preparing for “more job cuts at its American factories”.

#8 After an initial bump after Donald Trump’s surprise election victory, U.S. consumer confidence is starting to fall.

#9 Since Memorial Day, Radio Shack has officially shut down more than 1,000 stores.

#10 Payless has just increased the number of stores that it plans to close to about 800.

#11 According to the Los Angeles Times, it is being projected that 25 percent of all shopping malls in the United States may close within the next five years.

#12 Over the past 12 months, the number of homeless people living in Los Angeles County has risen by a  staggering 23 percent.

And in case those numbers have not persuaded you that the U.S. economy is heading for rough times, I would encourage you to go check out my previous article entitled “11 Facts That Prove That The U.S. Economy In 2017 Is In Far Worse Shape Than It Was In 2016” for even more eye-popping statistics.

During a bubble, it can feel like the good times are just going to keep rolling forever.

But that never actually happens in reality.

The truth is that we are in the terminal phase of the greatest debt bubble of all time, and the evidence is starting to mount that this debt bubble has just about run its course.  The following comes from Zero Hedge

A recurring theme on this website has been to periodically highlight the tremendous build up in US corporate debt, most recently in April when we showed that “Corporate Debt To EBITDA Hits All Time High.” The relentless debt build up is something which even the IMF recently noted, when in April it released a special report on financial stability, according to which 20% of US corporations were at risk of default should rates rise. It is also the topic of the latest piece by SocGen’s strategist Andrew Lapthorne who uses even more colorful adjectives to describe what has happened since the financial crisis, noting that “the debt build-up during this cycle has been incredible, particularly when compared to the stagnant progression of EBITDA.”

Lapthorne calculates that S&P1500 ex financial net debt has risen by almost $2 trillion in five years, a 150% increase, but this mild in comparison to the tripling of the debt pile in the Russell 2000 in six years. He also notes, as shown he previously, that as a result of this debt surge, interest payments cost the smallest 50% of stocks in the US fully 30% of their EBIT compared with just 10% of profits for the largest 10% and states that “clearly the sensitivity to higher interest rates is then going to be with this smallest 50%, while the dominance and financial strength of the largest 10% disguises this problem in the aggregate index measures.”

The same report noted that net debt growth in the U.S. is quickly headed toward negative territory, and the last time that happened was during the last recession.

We see similar things when we look at the 2nd largest economy on the entire planet.  According to Jim Rickards, China “has multiple bubbles, and they’re all getting ready to burst”…

China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year.

China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn.

The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account.

We just got the worst Chinese manufacturing number in about a year, and it looks like economic conditions over there are really starting to slow down as well.

Just like 2008, the coming crisis is going to be truly global in scope.

It is funny how our perspective colors our reality.  Just like in 2007, many are mocking those that are warning that a crisis is coming, but just like in 2009, after the crisis strikes many will be complaining that nobody warned them in advance about what was ahead.

And at this moment it may seem like we have all the time in the world to get prepared for the approaching storm, but once it is here people will be talking about how it seemed to hit us so quickly.

My hope is that many Americans will finally be fed up with our fundamentally flawed financial system once they realize that we are facing another horrendous economic crisis, and that in the aftermath they will finally be ready for the dramatic solutions that are necessary in order to permanently fix things.

I Feel Sick, Because The U.S. Is On The Verge Of Making An Extremely Costly Mistake

All day long I have just felt sick.  Right at this moment, we are closer to war with North Korea than we have been at any point since the Korean War ended in 1953.  If Donald Trump decides to launch a military strike against North Korea’s nuclear facilities, the consequences could be absolutely catastrophic.  The North Koreans have already promised to launch nukes at South Korea and at U.S. military bases in the region in return, and they also have vast stockpiles of chemical and biological weapons that they could use as well.  To get an idea of the chaos that just a handful of North Korean agents armed with biological weapons could unleash inside the United States, just see this article.  A military strike on North Korea could be the spark that sets off a global war in which millions of people die, and so we need to do all that we can to prevent this from happening.  My hope is that if people make enough noise that Trump will back down and decide not to attack.

Earlier today, I was sent the following piece of intel.  I was told that I could share it with all of my readers as long as I kept the name of the individual that sent it to me out of it.  According to this source, it certainly looks as though an attack is being prepared…

An O-5 silver maple leaf Air Force puke says the bomb buses in Guam are maximum loaded, fully fueled and reserves are topped off.  ‎ Reserves are only topped off just before the buses go airborne.

Kunsan has everything pointed north and ALL gates are closed…no traffic in or out.

7 air wings have been moved into the area and an augmented Carl Vinson CVN-70 (not alone) (per CMC x 2  and an O-5) has also moved into the area.

An O-5 barker and an O-6 Marine says all Easter leave has been cancelled with ALL‎ loaded up, geared up and warming up in several theaters.

Castle is locked and loaded.

Seoul is moving essential government and military personnel, as is true for U.S. Command Components and Personnel located at Yongsan‎, further south to Daegu.

AND…Red Cloud is ready to go on the war path with nobody sleeping in the wigwams, all the arrows have been taken from the box.

For those that don’t know, “Kunsan” refers to a U.S. Air Force base that is located at Gunsan Airport on the west coast of the Korean peninsula.

But just because these preparations are being made does not mean that a strike will actually happen.  In fact, there are some signs that indicate that we will not see a U.S. attack over the next several days.

For one thing, Vice President Mike Pence is scheduled to be in South Korea on Sunday and Monday.  So it would seem that it would be quite unlikely that anything would happen during that time.

In addition, Fox News is reporting that the Trump administration has come to the conclusion that military force should not be used against North Korea…

But a U.S. military official, who requested anonymity to discuss planning, said the U.S. doesn’t intend to use military force against North Korea in response to either a nuclear test or a missile launch. The official said plans could change in the unlikely event a North Korean missile targets South Korea, Japan or U.S. territory.

But of course things seem to shift hour to hour with the Trump administration.  On Thursday, NBC News was reporting that the U.S. military was poised “to launch a preemptive strike with conventional weapons against North Korea” if it looked like the North Koreans were about to conduct a nuclear weapons test…

The U.S. is prepared to launch a preemptive strike with conventional weapons against North Korea should officials become convinced that North Korea is about to follow through with a nuclear weapons test, multiple senior U.S. intelligence officials told NBC News.

North Korea has warned that a “big event” is near, and U.S. officials say signs point to a nuclear test that could come as early as this weekend.

So I don’t know what is going to happen.  But without a doubt we are very close to war with North Korea at this moment, and I am going to join with millions of others to do whatever we can to prevent that from happening.

A war with North Korea would be far different from the wars that the U.S. military has been fighting in the Middle East.  An ideology known as “Juche” is essentially the national religion of North Korea.  In Juche, the people are put at the center of everything, and “the leader” is considered to be at the center of the people.  In other words, “the leader” is almost put at the level of a deity.

It is a very sick and twisted philosophy, but here in the western world we need to understand that when we openly talk about killing Kim Jong-Un on television and on the Internet, we are essentially threatening to kill their “god”.

And the reason that is a problem is because Kim Jong-Un is surrounded by throngs of brainwashed supporters that will carry out any order that he gives them.

Here in the western world, we consider it to be highly immoral to use chemical and biological weapons against innocent civilian populations, but the North Koreans do not share those moral values.

The North Koreans consider the United States to be the great force for evil in the world, and if they feel like their way of life is being threatened by the U.S. they will not hesitate to use those sorts of weapons.

And of course they are constantly threatening to use nuclear weapons against us.  Just today I saw a report that talked about how the North Koreans are threatening to unleash “nuclear thunderbolts”, and in another report the North Koreans were quoted as saying they would “ruthlessly ravage” the United States if they are attacked…

North Korea upped its warmongering with Donald Trump today in a series of menacing boasts threatening to ‘ravage’ US troops amid fears the two countries are heading for war.

The secretive state vowed to ‘pulverize’ US bases and South Korean capital Seoul if it was threatened by the US military, which is carrying out drills on the Korean peninsula. A US aircraft carrier group is steaming towards the region.

It claimed it would ‘ruthlessly ravage’ the US if Washington attacked.

North Korea is one of the most wicked nations on the entire planet, and I would certainly greatly rejoice if their government were to fall.

But I don’t see any way that a military strike on North Korea would be successful.

If the North Koreans were able to fire even a single nuclear or chemical warhead at a major city such as Seoul or Tokyo it would be the worst foreign policy disaster in the history of the United States.  The North Koreans would certainly be blamed, but the Trump administration would also be blamed for conducting such a reckless attack in the first place.  Our relationships with our allies in the region would be permanently destroyed, and this would benefit China greatly.

Without using nukes in an overwhelming first strike (which would be unthinkable), I don’t believe that there is any possible way that we could take out all of North Korea’s nukes before they had a chance to at least fire some of them off.

And if North Korea did nuke Seoul or Tokyo or any U.S. military bases in the region, we would almost be forced to respond with nukes of our own, and that would have to be followed up by a massive ground invasion to topple the regime.

So if Donald Trump is reading this, for the good of humanity I would like to strongly urge him not to conduct a military strike on North Korea at this time.  The risk is just way too great, and if things go wrong we could easily be looking at a scenario in which millions of people end up dead.

Is The United States About To Bomb North Korea? The White House Says ‘The Clock Has Now Run Out’

I got chills when I saw a CNN report that said that a White House official has just warned that “the clock has now run out” on North Korea’s nuclear program and that “all options are on the table”.  That second phrase has been repeatedly used by members of the Trump administration in recent days, and everyone knows what it means.  When I wrote that a conflict with North Korea could be “Trump’s first war” last month, I was still hoping that cooler heads would prevail and that a military conflict could be avoided.  Unfortunately, it appears that a peaceful solution is not in the cards, and that means that the United States may soon start bombing North Korea.  And of course if that happens the North Koreans will strike back with whatever they can, and that includes nuclear weapons.

I don’t know if I have the words to effectively communicate how serious this situation could become.  We have gotten to the point where the White House is openly talking of going to war with a nuclear power

A senior White House official issued a dire warning to reporters Tuesday on the state of North Korea’s nuclear program, declaring “the clock has now run out and all options are on the table.”

“The clock has now run out, and all options are on the table,” the official said, pointing to the failure of successive administration’s efforts to negotiate an end to North Korea’s nuclear program.

Later this week, President Trump is going to meet with Chinese President Xi Jinping in Florida.  The eyes of the entire world will be on this summit, because everyone knows that Trump is going to press the Chinese leader for help on resolving the crisis with North Korea.

But what can China actually do?

The Chinese could cut off trade with North Korea, and that would definitely hurt, but North Korean leader Kim Jong Un appears to have become convinced that long range nuclear missiles are the key to the survival of his regime, and so he will never give up his nuclear program.

And the Chinese will certainly not strike North Korea militarily, and so ultimately if something is going to be done to stop North Korea from getting long range nuclear missiles it will be up to the United States.

On Tuesday morning, North Korea once again showed their defiance by firing yet another test missile into the Sea of Japan

The missile was fired from the Sinpo region at 10.40pm GMT (6.10am local time) on the communist nation’s east coast and landed into the sea off the Korean peninsula, South Korean military officials confirmed.

The rocket is believed to have flown around 37 miles before crashing into the sea. Specific details about the type of projectile were not immediately available.

Kim Jong Un conducted more missile tests in 2016 than his father did in nearly two decades.

It has become crystal clear that North Korea is not going to back down.

President Trump is still hoping that China will step up to the plate, but if the Chinese don’t he has already stated that the United States is fully prepared to “act alone”.  In fact, he made headlines all over the planet when he told the Financial Times the following: “Well if China is not going to solve North Korea, we will. That is all I am telling you.”

It doesn’t take much imagination to figure out what Trump is saying there.

Previous administrations have tried sanctions and negotiations for decades, and they all failed.

In the end, Trump is going to be faced with a choice whether to bomb North Korea or not, and four-star general Jack Keane says that bombing North Korea “may be the only option left”

A four-star general with close ties to Donald Trump has warned that military strikes are ‘rapidly’ becoming the only solution to North Korea’s nuclear program.

Jack Keane, who declined the President’s offer to become Defense Secretary last year, said bombing Kim Jong-un’s nuclear facilities ‘may be the only option left.’

But bombing North Korea is not like bombing Afghanistan, Iraq, Libya or Syria.

The North Koreans already have nuclear weapons, and the U.S. better destroy them all in an overwhelming initial assault, because Kim Jong Un will use any that survive to strike back.

If you doubt this, just consider what a very high level North Korean defector just told Lester Holt of NBC News

A senior North Korean defector has told NBC News that the country’s “desperate” dictator is prepared to use nuclear weapons to strike the United States and its allies.

Thae Yong Ho is the most high profile North Korean defector in two decades, meaning he is able to give a rare insight into the secretive, authoritarian regime.

According to Thae, North Korean dictator Kim Jong Un is “desperate in maintaining his rule by relying on his [development of] nuclear weapons and ICBM.” He was using an acronym for intercontinental ballistic missiles — a long range rocket that in theory would be capable of hitting the U.S.

North Korea is currently developing an intercontinental ballistic missile known as the “Taepodong 2” that will have a range of approximately 8000 kilometers.

In other words, it would be capable of striking cities in the western portion of the United States.

It is unthinkable that we would allow a tyrannical leader that is literally insane and that is obsessed with destroying the United States to have such a weapon.

But the moment that we start dropping bombs on North Korea we will start a war in which millions could die.  Whatever nuclear weapons are missed in the first assault will likely be fired at U.S. military bases in Japan or at South Korea’s capital city of Seoul.  Approximately 10 million people live in Seoul, so the death toll would be absolutely enormous.  And even if all North Korean nuclear devices are destroyed by the first attack, the North Koreans still have thousands of artillery guns and rocket launchers trained on Seoul, and they would not hesitate to use their vast stockpile of chemical warheads.

After the initial North Korean barrage, the fourth largest military on the entire planet would start pouring across the border in a massive invasion of South Korea.  The U.S. military would be forced to respond with large scale ground forces if South Korea would have any chance of surviving, and just like in the first Korean War the Chinese may decide to respond to that move by committing their own troops to the war on the side of North Korea.

This is a season of “wars and rumors of wars”, and most Americans have no idea how dangerously close we are to the beginning of World War III.  My hope is that a peaceful way out of this crisis can still be found, but at this point that is becoming increasingly difficult to imagine.

If Donald Trump decides to go to war with North Korea, he needs to hit them with an absolutely overwhelming first strike that takes out every single North Korean nuke, the bulk of North Korea’s artillery and rockets, and the entire North Korean leadership team within the first few minutes of the attack.

It is hard to imagine a scenario that does not involve nukes that would accomplish that.

And Donald Trump better get the public approval of South Korean and Japanese leadership before ever attempting such an attack, because they will likely pay the highest price if North Korea is able to strike back.

If South Korea or Japan balk at backing such an operation and then they get hit by North Korean nukes, the United States could lose them as friends and allies forever.

The stakes are incredibly high, and there are so many things that could go wrong.

So let us pray for peace, because the alternative is almost too horrible to imagine.

The Bank For International Settlements Warns That A Major Debt Meltdown In China Is Imminent

chinese-money-public-domainThe pinnacle of the global financial system is warning that conditions are right for a “full-blown banking crisis” in China.  Since the last financial crisis, there has been a credit boom in China that is really unprecedented in world history.  At this point the total value of all outstanding loans in China has hit a grand total of more than 28 trillion dollars.  That is essentially equivalent to the commercial banking systems of the United States and Japan combined.  While it is true that government debt is under control in China, corporate debt is now 171 percent of GDP, and it is only a matter of time before that debt bubble horribly bursts.  The situation in China has already grown so dire that the Bank for International Settlements is sounding the alarm

A key gauge of credit vulnerability is now three times over the danger threshold and has continued to deteriorate, despite pledges by Chinese premier Li Keqiang to wean the economy off debt-driven growth before it is too late.

The Bank for International Settlements warned in its quarterly report that China’s “credit to GDP gap” has reached 30.1, the highest to date and in a different league altogether from any other major country tracked by the institution. It is also significantly higher than the scores in East Asia’s speculative boom on 1997 or in the US subprime bubble before the Lehman crisis.

Studies of earlier banking crises around the world over the last sixty years suggest that any score above ten requires careful monitoring.

If you are not familiar with the Bank for International Settlements, just think of it as the capstone of the worldwide financial pyramid.  It wields enormous global power, and yet it is accountable to nobody.  The following is a summary of how the Bank for International Settlements works that comes from one of my previous articles entitled “Who Controls The Money? An Unelected, Unaccountable Central Bank Of The World Secretly Does“…

An immensely powerful international organization that most people have never even heard of secretly controls the money supply of the entire globe.  It is called the Bank for International Settlements, and it is the central bank of central banks.  It is located in Basel, Switzerland, but it also has branches in Hong Kong and Mexico City.  It is essentially an unelected, unaccountable central bank of the world that has complete immunity from taxation and from national laws.  Even Wikipedia admits that “it is not accountable to any single national government.”  The Bank for International Settlements was used to launder money for the Nazis during World War II, but these days the main purpose of the BIS is to guide and direct the centrally-planned global financial system.  Today, 58 global central banks belong to the BIS, and it has far more power over how the U.S. economy (or any other economy for that matter) will perform over the course of the next year than any politician does.  Every two months, the central bankers of the world gather in Basel for another “Global Economy Meeting”.  During those meetings, decisions are made which affect every man, woman and child on the planet, and yet none of us have any say in what goes on.  The Bank for International Settlements is an organization that was founded by the global elite and it operates for the benefit of the global elite, and it is intended to be one of the key cornerstones of the emerging one world economic system.

Normally the Bank for International Settlements is not prone to making extremely bold pronouncements, and so this warning about China seems a bit out of character.

Is something going on behind the scenes that we don’t know about?

Without a doubt, the global financial system is shakier and more vulnerable than most people would dare to imagine.  Global central banks have been on the greatest money creation spree in recorded history, and interest rates have been pushed to ridiculously low levels.

If you can believe it, approximately 10 trillion dollars worth of bonds are trading at negative interest rates right now.  This is completely and utterly irrational, and when this giant bond bubble finally explodes it is going to create a crisis unlike anything the world has ever seen before.

Just recently, Michael Pento of Pento Portfolio Strategies commented on this bubble

He said the current financial conditions are “the most dangerous markets i have ever witnessed in my entire life – and i’ve been investing for over 25 years… The membrane has been stretched so wide and so tight that its about to burst.”

Pento believes that once the bond crash happens, it will trigger a cataclysmic wave of crashes throughout the entire global financial system

Mr Pento has now warned that when policymakers signal they are set to stop buying, which will stop bond prices rising, there is going to be a devastating crash – not just in bond markets but across all investment assets.

He said: “When the bond market breaks, when that bubble bursts, it will wipe out every asset, everything will collapse together… I mean diamonds, sports cars, mutual funds, municipal bonds, fixed income, reits, collateralised loan obligations, stocks, bonds – even commodities – will collapse in tandem along with the bond bubble burst.”

Many had been anticipating that we would have already seen a major financial crash in 2016, but so far things have been pretty stable, and this has lulled many into a false sense of complacency.

But it is important to remember that we have seen corporate earnings fall for five quarters in a row, and it is expected to be six when the final numbers for the third quarter come in.

Never before in history have we had a stretch like this without major economic and financial consequences.  The following comes from a recent Fortune article which referred to an earlier piece authored by Jim Bianco…

None of this, however, is apparent from how stock market indexes have been moving lately, which unlike the charts above have been going up and to the right. “Since 1947, every time profits fell this much, or for this long, a recession was either underway or about to begin,” writes Bianco. “The only exception was the middle of 1986 to early 1987.”

If you remember, there was a pretty important event that happened in 1987: A massive stock market crash that sapped close to 30% of the S&P 500’s value in just five days.

It is only a matter of time before this earnings recession takes a major bite out of Wall Street.

Stock prices can stay at irrationally high levels for quite a while, but history has shown that every bubble bursts eventually.

And when this bubble bursts, it is going to make 2008 look like a walk in the park.

The Stock Market Crash Of 2016: Stocks Have Already Crashed In 6 Of The World’s 8 Largest Economies

Network Earth Continents - Public DomainOver the past 12 months, stock market investors around the planet have lost trillions of dollars.  Since this time last June, stocks have crashed in 6 of the world’s 8 largest economies, and stocks in the other two are down as well.  The charts that you are about to see are absolutely stunning, and they are clear evidence that a new global financial crisis has already begun.  Of course it is true that we are still in the early chapters of this new crisis and that there is much, much more damage to be done, but let us not minimize the carnage that we have already witnessed.

In general, there have been three major waves of financial panic over the past 12 months.  Late last August we saw the biggest financial shaking since the financial crisis of 2008, then in January and February there was an even bigger shaking, and now a third “wave” has begun in June.  Not all areas around the globe have been affected equally by each wave, but without a doubt this new financial crisis is a global phenomenon.

The charts that I am about to show you come from Trading Economics.  It is an absolutely indispensable website that is packed full of useful data, and I encourage everyone to check it out.

Let’s talk about China first.  The Chinese economy is the second largest on the entire planet, and since this time last year Chinese stocks are down an astounding 40 percent

Chinese Stocks

As things have started to unravel in China, the Chinese have been selling off U.S. debt and U.S. stocks like crazy.  The following comes from Bloomberg

For the past year, Chinese selling of Treasuries has vexed investors and served as a gauge of the health of the world’s second-largest economy.

The People’s Bank of China, owner of the world’s biggest foreign-exchange reserves, burnt through 20 percent of its war chest since 2014, dumping about $250 billion of U.S. government debt and using the funds to support the yuan and stem capital outflows.

While China’s sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines.

Unfortunately for China, their economy just continues to slow down, and George Soros is so alarmed by this and a potential “Brexit” that he has been selling off stocks and buying enormous amounts of gold in anticipation of an even bigger global downturn.

Japan has the third largest economy in the world, and over the past year Japanese stocks are down a total of 26 percent from the peak…

Japan Stocks

Personally, I have been extremely alarmed by what has been happening in Japan lately.  Japanese stocks were down almost 500 points last night, and overall the Nikkei is down a whopping 1,800 points so far in June.

Of course the Japanese economy as a whole is essentially a basket case at this point.  For a detailed analysis of this, please see my previous article entitled “Watch Japan – For All Is Not Well In The Land Of The Rising Sun“.

Germany has the fourth largest economy in the world, and over the past year their stocks have fallen 19 percent from the peak of the market…

German Stocks

The key thing to watch for in Germany are serious troubles at their biggest bank.  I wrote a long article about the slow-motion implosion of Deutsche Bank last month, and just this week Deutsche Bank stock hit an all-time low.

The fifth largest economy on the planet belongs to the United Kingdom, and since last June their stocks have fallen about 13 percent

British Stocks

One week from today, the “Brexit” vote will be held in the UK, and if they vote to leave the EU that could have very serious economic and financial implications for them and for the rest of Europe as well.  For an in-depth look at this, please see my previous article entitled “June 23, 2016: The Brexit Vote Could Change EVERYTHING And Plunge Europe Into Financial Chaos“.

France has the sixth largest economy in the world, and over the past year French stocks are down 20 percent from the peak of the market…

French Stocks

The French economy is really struggling these days, and we have not heard much about it in the U.S. media, but there have been tremendous riots in major cities in France in recent weeks.

The seventh largest economy on our planet belongs to India.  Even though India is facing some very serious economic problems, their stocks are doing okay for the moment.  Even though stocks in India are down over the past 12 months, we have not seen a major financial crisis over there just yet.

But there is definitely a major crisis in the eighth largest economy in the world.  Italian stocks are down a staggering 32 percent from the peak of the market.  That means approximately a third of all stock market wealth in Italy is already gone…

Italian Stocks

Earlier this year, I wrote about the horrifying collapse of the Italian banking system that has greatly accelerated since the start of 2016.  It looks like virtually all of their big banks will ultimately need to be bailed out, and this threatens to become a far bigger crisis than the crisis in Greece ever was.

And let us not leave off the ninth largest economy in the world.  Not too long ago, CNN ran an article entitled “Brazil: Economic collapse worse than feared“.  So not only are they admitting that the ninth largest economy on the globe is collapsing, they are also admitting that it is even worse than what the experts had anticipated.

So did I leave anyone off the list?

Ah yes, I haven’t even addressed what has been going on in the United States yet.

U.S. stocks did crash last August, but then they recovered.

Then they crashed again in January, but then they recovered again.

Now U.S. stocks have been taking another tumble here in June, but we are being assured that there is nothing to worry about.

Meanwhile, the underlying numbers for the U.S. economy just continue to get worse and worse and worse.  If you have any doubt about this, please see the article that I posted yesterday entitled “15 Facts About The Imploding U.S. Economy That The Mainstream Media Doesn’t Want You To See“.

Hopefully this article will clear a lot of things up.  In this piece, I have presented undeniable evidence that a new global financial crisis has begun over the past 12 months.  We have not seen global stock declines of this nature since the great financial crisis of 2008, but much worse is still to come.

I would love to be wrong about that last part.

It would be wonderful if the worst was now behind us and good times for the global financial system were ahead.

Unfortunately, every single indicator that I am watching is telling me just the opposite.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

Dozens Of Large Earthquakes Strike As Speculation Mounts That Japan’s Southern Island May Split

Kyushu EarthquakesOver the past 48 hours, our planet has been hit by literally dozens of earthquakes of magnitude 4.0 or greater, and scientists are acknowledging that what is taking place is highly unusual.  This strange shaking began toward the end of last week when the globe was struck by five major earthquakes over the space of just two days, and over the weekend the seismic activity just continued to escalate.  Very early on Saturday, Japan’s southern island of Kyushu was hit by a magnitude 7.3 earthquake, and on Saturday night a magnitude 7.8 earthquake struck off Ecuador’s Pacific coast.  It was the worst earthquake that Ecuador had experienced since 1979, and it was followed by at least 163 aftershocks.  Unfortunately, there are indications that what we have seen so far may be just the beginning.

Because the Ecuador earthquake was bigger, it is getting most of the headlines at the moment, but the truth is that what is going on in Japan is potentially far more dangerous.

Over the past week, Japan’s southern Island of Kyushu has been rocked by a series of devastating quakes, including two major ones in less than 48 hours.  The following comes from the Guardian

A second major earthquake in less than two days has shaken Japan’s southern island of Kyushu, with at least 34 people thought to have been killed, about 1,500 injured and more feared buried after building collapses and landslides.

The 7.3 magnitude earthquake struck at about 1.30am on Saturday, waking people across the island – including the thousands already in crisis centres. It caused widespread damage, with several landslides and a village evacuated over fears a dam might burst.

The mainstream media in the United States is using the term “landslides” to describe what has happened all over Kyushu, but the truth is that in many instances it would be far more accurate to say that “giant cracks” or “vast chasms” have formed.  The geography of Japan’s southern island has been fundamentally transformed, and this is beginning to cause huge concerns.  Here is more from the Guardian

One major landslide tore open a mountainside in Minamiaso village in Kumamoto prefecture, destroying a key bridge that could cut off food and other relief transport to the worst-hit area.

Another landslide hit a road, collapsing a house that fell down a ravine. In another part of the village, houses were left hanging precariously at the edge of a huge hole.

I want to show you a map which comes directly from the U.S. Geological Survey.  This map shows all of the earthquakes of magnitude 2.5 or greater that have hit Japan’s southern island over the past week.  As you look at this map, do you see a pattern?…

Kyushu Earthquakes

The dozens of earthquakes that have hit Japan’s southern island over the past week appear to form something of a straight line that divides the island in two.  Many are now speculating that geological forces are beginning to tear Kyushu in half, and if that is true, the earthquake activity that we have seen in Japan so far is probably just the tip of the iceberg.

We could potentially be talking about an event that could ultimately have far more of an impact on Japan than the tsunami of 2011.  By the time it is all said and done, entire cities could be wiped off the map and millions upon millions of Japanese citizens could be displaced.

Already, the seismic activity that has rocked Kyushu is having quite an impact on the Japanese economy

Earlier today Toyota was one of many Japanese companies to announce that it will suspend most car production across Japan as a result of critical supply chain disruptions caused by the recent destructive earthquake and numerous aftershocks. All of the major assembly lines will be shut down across its four directly-run plants, and Toyota will be halting production in stages at other group companies as well.

According to the Nikkei Asian Review, most of the Toyota group in Japan will be effectively shut down through at least the end of this upcoming week, with a production loss of as many as 50,000 vehicles, including brands such as Prius, Lexus, and Land Cruiser.

Our planet resembles something of a giant cracked egg, and the enormous tectonic plates that we are all living on are constantly in motion.  So if Japan’s southern island is in the process of slowly splitting in half, that shouldn’t exactly be a surprise.  After all, scientists assure us that Los Angeles and San Francisco will be directly next to one another someday.

And it isn’t just Japan that we need to be concerned about.  All along the “Ring of Fire”, seismic activity is increasing, and this has many of the experts completely puzzled.  The following comes from an excellent piece by Alvin Conway

This has continued to baffle many of the world’s leading geologists, who still attest the rise in the number of large earthquakes is merely a random natural occurrence. For instance, the number of large earthquakes doubled in 2014. However, here’s what scientists had to say about it: “If you think there have been more earthquakes than usual this year, you’re right. A new study finds there were more than twice as many big earthquakes in the first quarter of 2014 as compared with the average since 1979.

We have recently experienced a period that has had one of the highest rates of great earthquakes ever recorded,” said lead study author Tom Parsons, a research geophysicist with the U.S. Geological Survey (USGS) in Menlo Park, California.

If you are familiar with my work, then you already know that I believe that we have entered a period of time during which we will see seismic activity on a scale that none of us have ever experienced before.

This great shaking will combine with other factors such as financial collapse, geopolitical instability and civil unrest to produce what many have described as a “perfect storm”.  Life as we know it is in the process of fundamentally changing, and right now we are only in the very early chapters of this change.

Unfortunately, most people are ignoring the warnings and will continue to ignore them until it is far too late.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

Economic Collapse Is Erupting All Over The Planet As Global Leaders Begin To Panic

Earth Ready To Explode - Public DomainMainstream news outlets are already starting to use the phrase “economic collapse” to describe what is going on in some areas of our world right now.  For many Americans this may seem a bit strange, but the truth is that the worldwide economic slowdown that began during the second half of last year is starting to get a lot worse.  In this article, we are going to examine evidence of this from South America, Europe, Asia and North America.  Once we are done, it should be obvious that there is absolutely no reason to be optimistic about the direction of the global economy right now.  The warnings of so many prominent experts are now becoming a reality, and what we have witnessed so far are just the early chapters of a crushing economic crisis that will affect every man, woman and child in the entire world.

Let’s start with Brazil.  It has the 7th largest economy on the entire planet, and it is already enduring its worst recession in 25 years.  In fact, at the end of last year Goldman Sachs said that what was going on down there was actually a “depression“.

But now the crisis in Brazil has escalated significantly.

I want to share with you an excerpt from a recent article entitled “Brazil: Economic collapse worse than feared“.  I know, that title sounds like it comes directly from The Economic Collapse Blog, but I didn’t write it.

It actually comes from CNN

Amid political chaos, Brazil’s economic collapse is worse than its government once believed.

In the midst of rising calls to impeach President Dilma Rousseff, Brazil’s central bank announced Thursday that it now expects the country’s economy to shrink 3.5% this year.

That’s worse than the central bank’s previous estimate for a 1.9% contraction. The darker forecast matches what the International Monetary Fund projected for Brazil — Latin America’s largest country — and what many independent economists have suspected.

It is one thing for Michael Snyder to tell you that Brazil is in the midst of “economic collapse”, but it is another thing entirely for CNN to say it.

And of course I have been warning about the crisis down in Brazil for quite some time now.  For much more on this, please see my previous article entitled “The Economic Collapse Of South America Is Well Underway“.

Meanwhile, things are actually much worse in Venezuela than they are in Brazil.  Food and basic supplies are in short supply, the inflation rate has hit 720 percent, and crime is completely out of control.

The following is from an article in the Independent entitled “Venezuela is on the brink of complete economic collapse“…

The only question now is whether Venezuela’s government or economy will completely collapse first.

The key word there is “completely.” Both are well into their death throes. Indeed, Venezuela’s ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it’s hard to see that getting any better for them any time soon — or ever.

Incumbents, after all, don’t tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It’s no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.

Once again we see a very respected mainstream publication using the phrase “economic collapse” to describe what is happening in South America.

You can find some stunning video of the “economic Armageddon” that is taking place in Venezuela right here.  I would encourage you to watch that video, because what is happening down there will eventually be happening here.

Meanwhile, over in Europe the collapse of the Italian banking system has entered a disturbing new chapter.  Italy’s finance minister has called a meeting in Rome for Monday that will be focusing on a “last resort” bailout plan for the troubled banks…

Finance minister Pier Carlo Padoan has called a meeting in Rome on Monday with executives from Italy’s largest financial institutions to agree final details of a “last resort” bailout plan.

Yet on the eve of that gathering, concerns remain as to whether the plan will be sufficient to ringfence the weakest of Italy’s large banks, Monte dei Paschi di Siena, from contagion, according to people involved in the talks.

Italian bank shares have lost almost half their value so far this year amid investor worries over a €360bn pile of non-performing loans — equivalent to about a fifth of GDP. Lenders’ profitability has been hit by a crippling three-year recession.

As Italy descends into financial chaos, the rest of the continent better be paying attention.

Do you remember how hard it was for the rest of Europe to rescue Greece?

Well, Greece has the 44th largest economy on the planet.

Italy has the 8th.

It would be hard to overstate the seriousness of what is going on over in Europe, and it is not just Italy we are talking about.  All over the continent major banks are in deep trouble, and the chairman of France’s second largest  retail bank recently told reporters that “I am much more worried than I was in 2009“.

And there is very good reason for concern.  On Sunday, we learned that a major “bail-in” had just been announced for one of Austria’s most prominent banks.  The following comes from Zero Hedge

And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.

The highlights from the announcement:

Today, the Austrian Financial Market Authority (FMA) in its function as the resolution authority pursuant to the Bank Recovery and Resolution Act (BaSAG – Bundesgesetz über die Sanierung und Abwicklung von Banken) has issued the key features for the further steps for the resolution of HETA ASSET RESOLUTION AG. The most significant measures are:

  • a 100% bail-in for all subordinated liabilities,
  • a 53.98% bail-in, resulting in a 46.02% quota, for all eligible preferential liabilities,
  • the cancellation of all interest payments from 01.03.2015, when HETA was placed into resolution pursuant to BaSAG,
  • as well as a harmonisation of the maturities of all eligible liabilities to 31.12.2023.

According to the current resolution plan for HETA, the wind-down process should be concluded by 2020, although the repayment of all claims as well as the legally binding conclusion of all currently outstanding legal disputes will realistically only be concluded by the end of 2023. Only at that point will it be possible to finally distribute the assets and to liquidate the company.

The dominoes are starting to fall in Europe, and I would expect even bigger announcements in the weeks and months to come.

Over in Asia, economic chaos is beginning to prevail as well.

In China, the stock market is already down more than 40 percent from the peak, Chinese exports were down 25.4 percent on a year over year basis in February, and Chinese economic numbers overall have not been this poor since the depths of the last global recession.

At the same time, the Japanese economy is really struggling right now.  As I wrote about the other day, Japanese GDP has shrunk for two out of the last three quarters, we just saw Japanese industrial production experience the biggest one month decline that we have witnessed since the tsunami of 2011, and business sentiment has fallen to a three year low.  The Nikkei has dropped by about 5,000 points from where it was last summer, and some analysts believe that Japanese markets “are being destroyed” due to massive intervention by the Bank of Japan.

Here in the United States, we haven’t been hit quite as hard as the rest of the world just yet, but there are lots of very disturbing warning signs all around us.

At the end of last week, we learned that it is being projected that U.S. GDP will have grown by just 0.1 or 0.2 percent during the first quarter of 2016.  And on Monday corporate earnings reporting season begins, and it is expected to be a very, very bad one.  The following comes from Business Insider

We are about to get confirmation that earnings growth for America’s biggest companies was negative in the first quarter, compared to the same period a year ago.

When aluminum giant Alcoa releases its results on Monday, it will mark the unofficial start of the heaviest reporting season for S&P 500 companies.

The final scoreboard is expected to show a 9.1% earnings drop for the quarter, according to FactSet senior earnings analyst John Butters.

If these projections turn out to be accurate, it will be the fourth quarter in a row of earnings declines.  This is something that we never see outside of a recession.

And for a whole bunch more numbers which indicate that the U.S. economy is in very serious trouble, please see my previous article entitled “19 Facts That Prove Things In America Are Worse Than They Were Six Months Ago“.

Of course I am just another voice in the crowd when it comes to predicting that the U.S. economy is headed for rough times.  For example, just check out what Societe Generale economist Albert Edwards is saying

A tidal wave is coming to the US economy, according to Albert Edwards, and when it crashes it’s going to throw the economy into recession.

…the profit recession facing American corporations is going to lead to a collapse in corporate credit.

“Despite risk assets enjoying a few weeks in the sun our fail-safe recession indicator has stopped flashing amber and turned to red”

He continued:

Whole economy profits never normally fall this deeply without a recession unfolding. And with the US corporate sector up to its eyes in debt, the one asset class to be avoided — even more so than the ridiculously overvalued equity market — is US corporate debt. The economy will surely be swept away by a tidal wave of corporate default.

As you can see, it isn’t just one nation or one region of the world that we need to be concerned about.

Economic chaos is erupting literally all over the planet, and global leaders are starting to panic.

Unfortunately, they have had seven years to try to fix things since the last global recession, and they didn’t get the job done.  Anyone that believes that by some miracle they will be able to pull us out of the fire this time and that everything will somehow be okay is simply engaged in wishful thinking.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

Watch Japan – For All Is Not Well In The Land Of The Rising Sun

Tokyo - Public DomainOne of the epicenters of the global financial crisis that started during the second half of last year is Japan, and it looks like the markets in the land of the rising sun are entering yet another period of great turmoil.  The Nikkei was down another 390 points last night, and it is now down more than 1,300 points since a week ago.  Why this is so important for U.S. investors is because the Nikkei is often an early warning indicator of where the rest of the global markets are heading.  For example, the Nikkei started crashing early last December about a month before U.S. markets started crashing really hard in early January.  So the fact that the Nikkei has been falling very rapidly in recent days should be a huge red flag for investors in this country.

I want you to study the chart below very carefully.  It shows the performance of the Nikkei over the past 12 months.  As you can see, it kind of resembles a giant leaning “W”.  You can see the stock crash that started last August, you can see the second wave of the crash that began last December, and now a third leg of the crash is currently forming…

Nikkei - Federal Reserve

And of course the economic fundamentals in Japan continue to deteriorate as well.  GDP growth has been negative for two out of the last three quarters, Japanese industrial production just experienced the largest one month decline that we have seen since the tsunami of 2011, and business sentiment has sunk to a three year low.

The third largest economy on the entire planet is in a comatose state at this point, and Japanese authorities have been throwing everything but the kitchen sink at it in an attempt to revive it.  Government stimulus programs have pushed the debt to GDP ratio to 229 percent, and the quantitative easing that the Bank of Japan has been engaged in has made the Federal Reserve look timid by comparison.

But none of those extraordinary measures has been successful in stimulating the Japanese economy, so now the Bank of Japan has been been trying negative interest rates.  Unfortunately, these negative rates are also having some unintended consequences.  According to the Wall Street Journal, the negative interest rate program is putting additional stress on the Japanese financial sector…

The Bank of Japan started imposing a minus 0.1% rate on some deposits held by commercial banks in February, meaning that those banks now have to pay a small fee when they add to their money parked at the central bank. The financial sector has suffered amid worries that banks can’t pass on negative interest rate to their depositors and therefore will take a hit to their profits.

I would keep a very close eye on the big banks in Japan.  It is my conviction that there is a lot more brewing under the surface than we are being told about so far.

In addition, many analysts in Japan are complaining that all of this manipulation by the BOJ is essentially destroying normal market behavior.  The following comes from Bloomberg

Nobuyasu Atago, who also had worked at the BOJ and is now the chief economist at Okasan Securities Co., pointed out that instead of serving as a important source of cash for borrowers, the credit market has become a profit center for dealers looking to buy securities from investors and sell them to the central bank. While the strategy may be lucrative now, financial institutions face the risk of massive losses, he said.

“By making the trade with the BOJ the only source of profit, markets are exposed to unexpected volatility when that trade ends and the BOJ moves toward the exit,” Atago said. “Markets are being destroyed.”

The more global central banks try to “fix things”, the more they make our long-term imbalances even worse.

To me, it makes no sense to have a bunch of unelected, unaccountable central planners constantly monkeying with the financial system.  In a true free market system, we would allow market forces to determine the course of events.  But of course we don’t have a free market system anymore.  Instead, what we have is a heavily socialized system that is greatly manipulated by the central planners.

That is why global financial markets gyrate wildly if Janet Yellen so much as sneezes.  They know who holds all the power, and investors are constantly on edge as they wait for the latest pronouncement from our central banking overlords.

At this point, 99 percent of the global population lives in a country with a central bank.  Our world is more deeply divided than ever, and yet somehow everyone in the world has agreed to adopt this insidious system.

It sure is quite a coincidence, isn’t it?

Getting back to Japan, things are so bad now that the Japanese government is actually considering giving gift certificates directly to low-income young people.  The following originally comes from Bloomberg

The Japanese government plans to include gift certificates for low-income young people in its fiscal 2016 supplementary budget, Sankei reports, without saying who provided the information.

Recipients would be able to use them for daily necessities.

The government sees gift certificates as more effective in stimulating consumption than cash handouts, which may be deposited.

This is what the end of democracy looks like.

When the government just starts handing out money like candy, you might as well turn out the lights because the party is over.

Since 2008, global central banks have cut interest rates 637 times and they have injected approximately 12.3 trillion dollars into the global financial system through various quantitative easing programs.

Has all of this monkeying around solved our problems?

Of course not.

Instead, our long-term problems have grown progressively worse and now a new financial crisis has begun.

Keep an eye on Japan, and also keep an eye on Europe.  Huge problems are bubbling right under the surface, and when they come bursting into the open they will deeply affect the United States as well.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

Are You Kidding Me? Chinese Exports Plunge 25.4 Percent Compared To Last Year

Exports Declining - Public DomainWe just got more evidence that global trade is absolutely imploding.  Chinese exports dropped 25.4 percent during the month of February compared to a year ago, and Chinese imports fell 13.8 percent compared to a year ago.  For Chinese exports, that was the worst decline that we have seen since 2009, and Chinese imports have now fallen for 16 months in a row on a year over year basis.  The last time we saw numbers like this, we were in the depths of the worst economic downturn since the Great Depression of the 1930s.  China accounts for more global trade than any other nation (including the United States), and so this is a major red flag.  Anyone that is saying that the global economy is in “good shape” is clearly not paying attention.

If someone would have told me a year ago that Chinese exports would be 25 percent lower next February, I would not have believed it.  This is not just a slowdown – this is a historic implosion.  The following comes from Zero Hedge

Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline – the longest ever. Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows.

Chinese Exports - Zero Hedge

So much for that whole “devalue yourself to export growth” idea…

I don’t know how anyone can possibly dismiss the importance of these numbers.  As you can see, this is not just a one month aberration.  Chinese trade numbers have been declining for months, and that decline appears to be accelerating.

Another very interesting piece of news that has come out in recent days regards the massive layoffs that are coming at state industries in China.  According to Reuters, five to six million Chinese workers are going to be losing their jobs during this transition…

China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution, two reliable sources said, Beijing’s boldest retrenchment program in almost two decades.

China’s leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend nearly 150 billion yuan ($23 billion) to cover layoffs in just the coal and steel sectors in the next 2-3 years.

 

For years, the Chinese economic miracle has been fueling global economic growth, but now things are changing dramatically.

Another factor that we should discuss is the fact that the relationship between the United States and China is going downhill very rapidly.  This is something that I wrote about yesterday.  China has seized control of several very important islands in the South China Sea, and in response the Obama administration has been sailing military vessels past the islands in a threatening manner.  Most recently, Obama decided to have an aircraft carrier task force cruise past the islands, and this provoked a very angry response from the Chinese

The four-ship U.S. strike group that patrolled the disputed South China Sea was followed by Chinese warships, a show of force that prompted a hard-line response from China doubling down on its claim to nearly all of the resource-rich sea.  

China’s foreign minister said his country’s sovereignty claims are supported by history and made a veiled reference to the 5-day patrol by the Stennis Carrier Strike Group, as well as recent passes by China’s man-made islands by destroyers Lassen and Curtis Wilbur in recent months.

“The South China Sea has been subject to colonial invasion and illegal occupation and now some people are trying to stir up waves, while some others are showing off forces,” Wang Yi said, according to an Associated Press report, a day after the Stennis CSG departed the South China Sea.  “However, like the tide that comes and goes, none of these attempts will have any impact. History will prove who is merely the guest and who is the real host.”

Most Americans are not even paying attention to this dispute, but in China there is talk of war.  The Chinese are absolutely not going to back down, and it does not look like Obama is going to either.  Needless to say, a souring of the relationship between the largest economy on the planet and the second largest economy on the planet would not be a good thing for the global economy.

And of course China is far from the only country that is having economic problems.  Yesterday, I discussed how Italy’s banking system is on the verge of completely collapse.  A few days before that I discussed the economic depression that has gripped much of South America.  A new global economic crisis has already begun, and just because the United States is feeling less pain than the rest of the world so far does not mean that everything is going to be okay.

There are huge red flags in Europe, Asia and South America right now.  In addition, our neighbor to the north (Canada) is experiencing a very significant slowdown.  The irrational optimists can continue to believe that the U.S. economy will somehow escape relatively unscathed if they would like, but that is not going to be what happens.

Just like virtually everyone else on the planet, we are heading into hard times too, and this is going to become a dominant theme in the presidential campaign as we move forward into the months ahead.

Plunging Manufacturing Numbers Mean That It Is Time To Hit The Panic Button For The Global Economy

Panic Button On Keyboard - Public DomainWe haven’t seen numbers like these since the last global recession.  I recently wrote about how global trade is imploding all over the planet, and the same thing is true when it comes to manufacturing.  We just learned that manufacturing in China has now been contracting for seven months in a row, and as you will see below, U.S. manufacturing is facing “its toughest period since the global financial crisis”.  Yes, global stocks have bounced back a bit after experiencing dramatic declines during January and the first part of February, and this is something that investors are very happy about.  But that does not mean that the crisis is over.  All bear markets have their ups and downs, and this one will not be any different.  Meanwhile, the cold, hard economic numbers that keep coming in are absolutely screaming that a new global recession is here.

Just consider what is happening in China.  Manufacturing activity continues to implode, and factories are shedding jobs at the fastest pace since the last financial crisis

Chinese manufacturing suffered a seventh straight month of contraction in February.

China’s official Purchasing Managers’ Index (PMI) stood at 49.0 in February, down from the previous month’s reading of 49.4 and below the 50-point mark that separates growth from contraction on a monthly basis.

A private survey also showed China’s factories shed jobs at the fastest rate in seven years in February, raising doubts about the government’s ability to reduce industry overcapacity this year without triggering a sharp jump in unemployment.

For years, the expansion of the Chinese economy has helped fuel global economic growth.  But now things have shifted dramatically.

At this point, things are already so bad that the Chinese government is admitting that millions of workers are going to lose their jobs at state-controlled industries in China…

China’s premier told visiting U.S. Treasury Secretary Jacob Lew on Monday his government is pressing ahead with painful reforms to shrink bloated coal and steel industries that are a drag on its slowing economy and ruled out devaluing its currency as a short-cut to boosting exports.

Premier Li Keqiang’s comments to Lew on Monday were in line with a joint declaration by financial officials from the Group of 20 biggest rich and developing economies who met over the weekend in Shanghai. They pledged to avoid devaluations to boost sagging trade and urged governments to speed up reforms to boost slowing global growth.

Across all state-controlled industries, as many as six million workers could be out of a job, with almost two million in the coal industry alone.

But it isn’t just China.  Right now manufacturing activity is slowing down literally all over the planet, and this is exactly what we would expect to see if a new global recession had begun.  The following chart and analysis come from Zero Hedge

As the below table shows, 28 regions have reported so far. Seven saw improvements in their manufacturing sectors in February, twenty recorded a weakening, and India was unchanged. This means that over 70% of the world saw manufacturing sentiment deteriorate in February compared to January.

February Manufacturing Numbers - Zero Hedge

In terms of actual expansion, there were 21 countries in positive territory and 7 in negative. In particular, Greece moved from neutral to contraction territory, while Taiwan dropped below breakeven from expansion.

Unfortunately, most Americans don’t really pay much attention to what is going on in the rest of the world.  For most of us, what really matters is what is happening inside the good ole USA.

And of course the news is not good.  There were more signs of trouble for U.S. manufacturing in the February numbers, and this continues a trend that stretches back well into last year.  The following is what Chris Williamson, the chief economist at Markit, had to say about these numbers

“The February data add to signs of distress in the US manufacturing economy. Production and order book growth continues to worsen, led by falling exports. Jobs are being added at a slower pace and output prices are dropping at a rate not seen since mid-2012.

“The deterioration in the manufacturing sector’s performance since mid-2014 has broadly tracked the dollar’s rise, which makes US goods more expensive in overseas markets and leads US consumers to favour cheaper imported goods.

“With other headwinds including the downturn in the oil sector, heightened uncertainty due to financial market volatility, global growth worries and growing concerns about the presidential election, it’s no surprise that the manufacturing sector is facing its toughest period since the global financial crisis.

Over the past couple of decades, the U.S. economy has lost tens of thousands of manufacturing facilities.  We desperately need a manufacturing renaissance – not another manufacturing decline.

As good paying manufacturing jobs have been shipped overseas, they have been replaced by low paying service jobs.  As a result, the middle class is shrinking and the ranks of the poor are exploding.

It is hard to believe, but today more than 45 million Americans are on food stamps, and a significant percentage of those individuals actually have jobs.  They are called “the working poor”, and it is becoming a major crisis in this nation.

And no matter what Obama may say, unemployment remains a major problem in the United States as well.  At this point, unemployment rates in 36 states are higher than they were just before the last recession hit in 2008.

Of course a lot of people are going to look at this article and will point to the stock market gains of the past couple of weeks as evidence that “things are getting better”.  It is this kind of clueless approach that is keeping the American people from coming together on solutions to our problems.

The truth is that the United States has been experiencing economic decline for decades.  Our economic infrastructure has been gutted, the middle class is steadily deteriorating, and we have amassed the biggest pile of debt in the history of the world.

Anyone that believes that things are “just fine” is in a massive state of denial.  Consuming far more wealth than we produce is not a formula for a sustainable economy, and it is just a matter of time before we find this out the hard way.

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