Now that the Greek debt crisis has been “fixed” by a gigantic pile of more debt, many are wondering which European nation will be next to experience a massive debt crisis. Increasingly, all eyes are turning to the U.K. and their public debt that is spiralling out of control. The U.K. government’s deficit is projected to be approximately 13 percent of GDP in 2010, which is even worse than Greece’s 12.5 percent figure. Right now the public debt of the U.K. is “only” at 68 percent of GDP, but three years ago it was sitting at about 40 percent, so as you can see the national debt of the U.K. is absolutely exploding in size. In fact, it is now being projected that the public debt of the U.K. will exceed 100 percent of GDP within the next three years. Considering the fact that citizens of the U.K. are some of the most highly taxed people in the world already, there just is not much room for raising more revenue.
So obviously there is a problem.
A massive, unchecked, out of control problem that threatens to blow out the entire U.K. economy.
And considering the fact that it took just about everything that Europe could muster to bail out poor little Greece, how in the world is Europe going to be able to bail out the U.K. when their debt crisis violently erupts?
If Greece almost brought down the euro and the financial system of Europe, then what would a financial implosion in the U.K. do?
Considering the fact that the Greek economy is approximately 16% the size of the U.K. economy, it is very sobering to think what a “Greek style” debt crisis in the U.K. would mean for the entire world.
But if something is not done rapidly it will happen.
Just consider the following charts….
Now how in the world do you go from a deficit that is between 2 and 3 percent of GDP in 2007 to one that is above 11 percent in 2009? That takes some serious financial mismanagement. Not only that, but as we mentioned earlier, this year the deficit is projected to be approximately 13 percent of GDP. That is a level that is catastrophic.
Kornelius Purps, the fixed income director of Europe’s second largest bank is very open about the fact that he believes that the U.K. is likely the next European nation that will face a very serious debt crisis….
“Britain’s AAA-rating is highly at risk. The budget deficit is huge at 13% of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that.”
In fact, Morgan Stanley has already warned that there is a very strong probability that some of the rating agencies may remove the U.K.’s AAA status before 2010 is over.
If that happened, it would make the crisis that we just saw in Greece look like a Sunday picnic.
So what must be done?
Well, already world financial authorities are calling for “austerity measures” and deep budget cuts to be implemented in the U.K., but the reality is that those moves will cause deep economic pain.
In fact, Bank of England governor Mervyn King recently warned that public anger over the “austerity measures” that soon must be implemented in the U.K. will be so painful that whichever party is seen as responsible will be out of power for a generation.
The cold, hard reality is that the U.K. is in for economic pain in any event. Either they cut the budget and implement severe “austerity measures” which will hit people really hard economically, or they continue on the current course and risk a much worse version of what just happened in Greece.
Not that the rest of the world should be gloating about what is going on in the U.K. either.
The financial situation in Japan is even worse than what the U.K. is dealing with, and the United States is going to have the biggest economic downfall of them all one of these days.
As we wrote about yesterday, the sad truth is that the governments of the world are rapidly running out of money and are drowning in debt. It is a gigantic mess, and the term “sovereign debt crisis” is going to pop up in the news very regularly from now on.
You see, it is not just the financial systems of the U.S. and the U.K. that are broken. The entire world financial system is fundamentally flawed and is doomed to failure.
Right now the central banks of the world can do their best to try to hold things together with a tsunami of debt and paper money, but they are not going to be able to keep up this balancing act forever.
When it does all start coming apart and the dominoes do start falling, it is going to be a complete and total nightmare. Paper currencies around the globe will lose value at breathtaking speeds as central banks flood economies with cash in an attempt to stop the madness.
But more debt and more paper never solves anything. All it does is make the long-term problems even worse.
When the tipping point comes, things are going to move fast. Let’s just hope that we all have a good bit more time to prepare before that happens.
Most of us are aware of the very old fairly tale by Hans Christian Andersen in which two weavers promise an emperor the finest suit of clothes imaginable, but from a fabric invisible to anyone who is unfit for his position or “just hopelessly stupid”. Well, in the fairy tale it turns out that nobody wants to admit that they are “unfit” or “stupid”, so when the emperor parades before his subjects in his imaginary new suit of clothes, it takes a child to cry out: “But he isn’t wearing anything at all!” Well, many of us have been declaring that the world economy “has no clothes” for some time now, but when the anchor of NBC News declares it on national television it gets a bit more attention. During his recent appearance on The Late Show with David Letterman, NBC’s Brian Williams was asked about the world financial situation. His answer included this shocking statement: “The world has no money, and the Emperor has no clothes.”
During the interview, it was readily apparent that Williams was honestly shaken up by what had happened last Thursday in the stock market. But who can blame him? After all, most of us who watch the markets were totally stunned when the stock market dropped almost 1000 points exactly in less than an hour.
Normally a network news anchor is much more guarded and is much more careful about what is revealed to the public. But on Letterman’s show, Williams gave us a glimpse of what he really thinks about the world economic situation….
“If I wasn’t a tad too close to this, I’d probably not leave the house. But that’s how bad it is.”
A video clip that includes these jaw dropping comments by Williams is posted below….
So why did the U.S. stock market plunge so rapidly last Thursday?
Well, many have blamed the episode on a “bad trade” or a “computer glitch”. Others claim that the Greek debt crisis caused a brief panic. There are yet others who see something more insidious going on – such as Goldman Sachs seeking to remove their name from the financial headlines, or the Federal Reserve sending a message that S. 604 (the bill to audit the Federal Reserve) should not be passed.
The truth is that we will probably never know what actually caused the market to fall through the floor that afternoon.
But it did pave the way for more bailouts.
Over the weekend, European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases designed to stop the sovereign debt crisis that threatened to shatter confidence in the euro.
The Federal Reserve got into the act as well. Over the weekend the Fed promised to flood the international financial system with U.S. dollars. This was seen in the markets as a sign of “resolve” meant to keep doubt about the European economy from turning into a global crisis of confidence.
So on Monday, investors responded to these bailouts with exuberance. The Dow Jones industrial average gained 405 points that day, which was the average’s biggest one day point gain since March 23rd, 2009.
But are more bailouts, more debt and a flood of paper money really something to celebrate?
No.
The truth is that debt and paper money that continually declines in value are some of the chief causes of the financial mess that the world is now in.
In fact, Congressman Ron Paul is warning that the European bailout that was just announced will just lead to even larger financial problems in the future….
And Ron Paul is right – all of these bailouts and all of this debt will eventually cause all of the major paper currencies (including the U.S. dollar) to collapse.
The funny thing about these bailouts is that they never seem to help the average people on the street. Just take a look at the U.S. economy. We are told that Wall Street has recovered and that things are getting back to normal, and yet more Americans than ever find themselves dependent on the U.S. government for their survival.
The U.S. Department of Agriculture recently announced that 39.68 million people, or 1 out of every 8 Americans, were enrolled in the food stamp program during February, an increase of 260,000 from the previous month.
Nearly 40 million Americans on food stamps?
How in the world did that happen?
Once upon a time, the old timers would tell us that one day things would get so bad that we would all have to stand in bread lines.
Well, today food stamps are the new bread lines.
If you have to rely on the government for the very bread that you eat, what kind of a position does that put you in?
The truth is that the once great American middle class is allowing the system to slowly keep grinding them into oblivion.
Like never before in our lifetimes, wealth is being concentrated in the hands of the “lucky one percent”, while the rest of us are rapidly being marginalized.
Do you ever stop to wonder why it seems like almost everyone is either broke or up to their eyeballs in debt?
As oil continues to pour into the Gulf of Mexico at a staggering rate, many are now starting to realize that the pain from this oil spill will be felt not just for months or years – but for decades. At least 4.2 million gallons of oil (and some estimates put the total at far higher than that) are already in the Gulf of Mexico causing untold damage to the ecologically fragile Louisiana coast. The oil has already made contact with the Chandeleur Islands off of the coast of Louisiana, and over the next few days more areas are expected to see oil come ashore. But just because this disaster is unfolding in slow-motion does not mean that this is not going to be a complete and utter tragedy for the Gulf Coast region. In fact, many of those living along the Gulf Coast now fear that this oil spill is going to do far more damage to the region than Hurricane Katrina did. And after Hurricane Katrina and everything else that folks living down there have been through over the past several years, the thought of weathering another massive tragedy is almost too much.
It certainly doesn’t help that those attempting to stop the leak don’t really seem to know what they are doing. After failing to contain the oil spill with a giant concrete and steel dome, BP announced on Monday that it will make a second attempt this week using a smaller version of the dome dubbed the “Top Hat”.
“Top Hat”?
If BP was as good at stopping oil leaks as they are at coming up with cute little code names for their operations perhaps this crisis would be over by now.
But the truth is that attempting to do anything at depths of up to one mile below the surface of the Gulf of Mexico is extremely difficult.
It kind of makes you wonder what in the world we were doing drilling for oil down there in the first place.
In any event, BP is not just relying on the “Top Hat” to stop the leak.
BP is also considering plugging the damaged blowout preventer on the underwater well by pumping debris into it at high pressure. This technique is known as a “junk shot”.
Or, in other words, BP would be plugging the leak by shooting a bunch of garbage into it. One official recently described this method to CBS News this way….
“They are actually going to take a bunch of debris — some shredded up tires, golf balls and things like that — and under very high pressure shoot it into the preventer itself and see if they can clog it up to stop the leak.”
But what many media outlets are not admitting is that the “junk shot” procedure is extremely risky. In fact, some experts are warning that tinkering with the damaged blowout preventer could make the leak much worse.
But something has got to be done. Even members of the U.S. Congress are admitting that this oil could end up getting into the Loop Current and going up the east coast of the United States….
“If this gusher continues for several months, it’s going to cover up the Gulf Coast and it’s going to get down into the Loop Current and that’s going to take it down into the Florida Keys and up the east coast of Florida,” Florida Democratic Senator Bill Nelson told CNN.
To get an idea of just how devastating the oil spill in the Gulf of Mexico is already, check out the aerial footage in the video below. As you watch this video, just try to imagine how horrific this crisis is going to be if oil continues to gush into the Gulf for weeks or months….
The truth is that this has the potential to be one of the greatest tragedies in the history of the United States. The following are 8 of the reasons why the pain from the Gulf of Mexico oil spill is going to be felt for decades to come….
#1) The Fishing, Shrimping And Oyster Industries In The Gulf Are Being Destroyed
Seafood is a 2.4 billion dollar industry in the state of Louisiana. In fact, Louisiana produces more than 30 percent of the seafood originating in the continental United States.
But that is about to dramatically change. As the waters off Louisiana are being progressively poisoned by all the oil, fishermen and shrimpers are starting to realize that their lives will never be the same.
In fact, some local shrimpers in Louisiana are already predicting that it will be seven years before they can set to sea again.
So are they being overly dramatic?
No, especially when you consider the fact that fishermen in Cordova, Alaska are still struggling 21 years after the 1989 Exxon Valdez oil spill devastated the fishing industry in that region.
#2) The Damage To The Environment And Wildlife In the Gulf Is Going To Be Unprecedented
Already, environmentalists are warning that the oil spill in the Gulf of Mexico could absolutely devastate the bird population of the region. You see, nearly 75 percent of all U.S. waterfowl use Louisiana’s three million acres of wetlands to rest or nest. Once the oil spill gets into those wetlands it is going to be an absolute nightmare for those waterfowl.
But it isn’t just waterfowl that are at risk. Literally hundreds of different species that inhabit the coastal areas surrounding the Gulf of Mexico will soon be facing an oily nightmare that they don’t even know is coming. Entire ecosystems are going to be permanently altered. Florida Governor Charlie Crist recently put it this way….
“Florida is currently preparing for what we all know is an environmental disaster of unprecedented proportions for our state and Gulf of Mexico partner states.”
“It is so big and expanding so fast that it’s pretty much beyond human response that can be effective. … You’re looking at a long-term poisoning of the area. Ultimately, this will have a multidecade impact.”
#3) The Natural Beauty Of The Gulf Coast Region Will Never Be The Same
Anyone who has ever been to the Gulf Coast knows how amazingly beautiful that it can be. But once it is covered with millions of gallons of oil it will never be the same.
Brenda Prosser of Mobile, Alabama said that she wept when she saw the workers attempting to try to prevent the oil spill from spreading….
“I just started crying. I couldn’t quit crying. I’m shaking now. To know that our beach may be black or brown, or that we can’t get in the water, it’s so sad.”
And it is a great tragedy. This didn’t have to happen. But now the great natural beauty of our coasts is being destroyed and we aren’t going to be able to get it back for a long, long time as Public Service Commissioner Benjamin Stevens recently explained….
“You get hit by a hurricane and you can rebuild. But when that stuff washes up on the white sands of Pensacola Beach, you can’t just go and get more white sand.”
“It’s just going to kill us. It’s going to destroy us.”
#5) The Gulf Of Mexico Oil Spill Is Going To Greatly Contribute To The Ongoing Poisoning Of The World’s Water Supply
Over the past twenty years, the world has witnessed 30 oil spills larger than the Exxon Valdez tragedy. Both the global food chain and the world’s waters are being progressively poisoned by all of this oil. In fact, nature can simply not keep up with how fast we are poisoning the water all over the world. This current oil spill in the Gulf of Mexico is not going to help things at all.
#6) This Oil Spill Is Going To Have A Dramatic Chilling Effect On Oil Exploration
The head of the International Energy Agency is warning that this disaster will slow the exploration and development of offshore oil projects worldwide. Now that the danger of offshore drilling has become more apparent, approval of new projects is going to be much more difficult around the world, and oil companies are going to be less inclined to invest in such projects.
#7) Oil Prices Around The Globe Are Going To Rise
Oil prices have already gone up as a result of this oil spill, and they are likely to stay high for the long-term as demand continues to increase while supplies grow less quickly. As noted in point #6, this crisis is going to have a chilling effect on oil exploration, and that is going to mean less oil as we move forward. Less oil and increasing demand means that prices are going to rise, and that is not good news for the U.S. economy.
#8) The Economy Of The Gulf Coast Region Is Going To Be Devastated
Two of the major industries in the Gulf region, seafood and tourism, are going to be pretty much wiped out in the short-term. Many areas along the Gulf, particularly in Louisiana, were already economic disaster areas even before this oil spill. The truth is that economic conditions down there are simply not strong enough to weather another major tragedy.
The oil spill in the Gulf of Mexico is essentially “a slow-motion Katrina” which is going to alter the economy of the Gulf region permanently.
“A hurricane is like closing your bank account for a few days, but this here has the capacity to destroy our bank accounts.”
It is hard to even imagine the despair that those living along the Gulf Coast are feeling right now. Let’s pray for them and assist them in any way that we can, and let us hope that they get that darn leak stopped as quickly as possible.
Everywhere you turn in the financial media right now you see some “expert” declaring that the Greek debt crisis has become a “contagion” which is going to spread all over the globe and which could potentially bring down the entire world economy. Now certainly Greece has badly mismanaged their finances for decades, and without a doubt they have gotten themselves into a huge mess. But could Greece bring down the entire world economy? Hardly. The truth is that you could remove Greece from the world economy tomorrow and most people would hardly notice. The economy of Greece is only about 2% the size of the United States economy, and it takes in less than 0.1% of U.S. exports. But we are being led to believe that Greece has suddenly become the epicenter of a financial crisis which is going to bring down everything. Could it be that this Greek debt crisis is purposely being hyped and manipulated? Could it be that this Greek debt crisis is yet another example of the “problem, reaction, solution” paradigm that the global elite have employed so many times before?
Right now almost all of the governments in the western world operate debt-based economies that rely on ever-inflating amounts of paper money in order to survive. The elite international bankers of the world have made a killing by creating money out of nothing and loaning it to the nations of the world. The interest on those loans is the primary method by which the wealth of the world is slowly transferred into the hands of the ultra-wealthy. When the interest on the loans starts to become too much for a particular nation, they borrow even more money so that they can stay afloat. It is a debt trap that is designed to continue indefinitely. Even the most powerful nations in the world are caught in this debt trap. In fact, most people are absolutely amazed when they learn that it is mathematically impossible to pay off the national debt of the United States. But the United States is far from alone in that respect. Almost all of the other major nations in the world are in the exact same boat.
So what normally happens when a nation like Greece gets into big trouble is that they just go out and borrow even more money from the international bankers.
But this time the big financial powers are insisting on big budget cuts and other “austerity measures”.
So what is the deal with that?
Well, there are a couple of possibilities.
The first alternative is that the IMF and the European Central Bank actually believe that the financial situation in Greece has gotten so desperate that they could actually be forced to default on their debt and so something dramatic needs to be done. You see, the truth is that the international bankers want the game to continue no matter what. They are a parasite, and they can’t keep draining a host if the host dies. So it does them no good for the economy of Greece to completely die. So maybe they are just trying to revive the host economy (Greece) so that they can continue slowly draining the wealth of that nation.
And perhaps that is all that is happening here. After Greece agreed to the required “austerity measures”, the EU and the IMF extended to Greece the bailout loans that they needed, and on Sunday European Union finance ministers agreed to create a 750 billion euro safety net for troubled eurozone countries. The EU’s monetary affairs commissioner, Olli Rehn, says that this safety net “proves that we shall defend the euro whatever it takes.”
There are even rumors that the ECB is prepared to engage in a new round of quantitative easing. That would entail very large loans to distressed governments in the eurozone in the form of buying up their bonds.
Of course all of this “help” is just more debt that continues to put Greece into an even bigger hole, but at least Greece will not be faced with immediate default.
The second alternative is that what is going on is the financial powers of the world are deliberately hyping and manipulating the Greek debt crisis because they actually want to crash the world economy.
At this point, the debt crisis in Greece has been hyped for weeks on end, and the kind of alarm being raised about the situation is Greece just seems massively out of proportion.
After reading some of the recent news reports coming out of Europe, you would think that the world is on the verge of a financial doomsday just because of what is happening in Greece. The following excerpt from the Guardian is representative of what we have been seeing in recent days….
“The growing crisis in the eurozone threatened to undermine the global economic recovery as markets plunged across the world on fears that European leaders may not be able to contain the debt contagion spreading from Greece.”
In fact, just about wherever you turn some financial expert is coming forward with predictions that the “contagion” of the Greek debt crisis is going to spread and cause economic chaos all over the world….
“We now see herd behavior in the markets that are really pack behavior, wolfpack behavior.”
The truth is that this Greek debt crisis could end up being the first domino in a sovereign debt crisis that will sweep the globe – if that is what the international bankers want.
If the international bankers decide to cut off the ever-expanding flow of debt to the nations around the world it would create a disastrous financial crisis. Without the loans that they desperately need, country after country would plunge into an economic nightmare that most people do not even think is possible.
So would the international bankers ever do that?
They have done it before.
Just study the causes of the Great Depression.
Now there are indications that it may be getting ready to happen again.
Suddenly everyone is starting to talk about the “austerity measures” that will not only have to be implemented in Greece but all over the world.
For example, check out this recent quote from an article in the Guardian….
“Riots and strikes in Greece could be repeated in other countries which have yet to adopt their own austerity packages.”
Other countries which have yet to adopt their own austerity packages?
And it just isn’t Greece, Italy, Spain and Portugal they are talking about.
Bank of England governor Mervyn King recently warned that public anger over the “austerity measures” that soon must be implemented in the U.K. will be so intense that whatever party wins this election will be out of power for a generation.
Austerity measures in the U.K.?
Not only that, but Federal Reserve Chairman Ben Bernanke is publicly saying that United States citizens will soon have to make difficult choices between higher taxes and reduced social spending.
Why all of a sudden do nations all over the world have to implement austerity measures? Why all of a sudden are we all being told that we are going to have to tighten our belts?
Well, unless all of this was planned of course.
And that is exactly what some out there are claiming is happening. There is a belief by many that the financial powers of the world are going to create a world economic crisis (the problem) so that when everyone cries out for help (the reaction) they will be there with the solution they wish to propose (perhaps a world currency or increased global governance).
In fact, Pastor Lindsey Williams even claims that an individual who is from these elite circles has told him exactly what is coming. If you have never heard of Lindsey Williams you should really check out the video posted below. He was the one (based on inside information from his source) who correctly predicted a couple years ago that oil would go down to 50 dollars a barrel when at the time it was pushing up into record territory. When oil did in fact plunge down to 50 dollars a barrel people were not laughing at him anymore. Now, the same source has told him that a massive economic downturn is planned over the next couple of years….
So is Lindsey Williams right?
As with so many things, time will tell.
But when top banking officials all over the world start talking about “austerity measures” and the need to tighten our belts, it is best to start paying attention.
We are moving into a time of extreme economic uncertainty. To the folks that play around with hundreds of billions of dollars, you are nothing more than a pawn on a chessboard. If you believe that “things are always going to be good” and that the people with real power in this world honestly care about you then you are going to end up in a whole lot of trouble.
Now is the time to prepare while there is still time. Someday when the U.S. economy does completely collapse and you have done nothing to prepare it will be far too late.
In one of the most dizzying half-hours in stock market history, the Dow plunged nearly 1,000 points on Thursday, May 6th before bouncing back to close down 347.80 points. This represented the biggest intraday decline since 1987. But what made this crash so absolutely shocking is that it happened in the course of less than an hour. Between 2 p.m. and 3 p.m. the Dow lost over 700 points before dramatically bouncing back about 600 points. Two of the 30 stocks in the Dow, Procter & Gamble and 3M, plunged more than 30% in just 15 minutes. Accenture went from trading at around 40 dollars a share all the way down to one cent before bouncing back. Traders and investors were left completely stunned and wondering what in the world had just happened.
So what did happen?
The following are some of the most common theories being put forward to explain what happened….
#1) A Bad Trade
It has been widely suggested that a “fat finger trade” was responsible for triggering the panic. According to CNBC, “sources” have told that network that a trader (possibly at Citigroup) entered a “b” for billion instead of an “m” for million in a trade involving Procter & Gamble.
However, Citigroup has already announced that it has found “no evidence” that it was involved in any erroneous trades. In fact, a statement was released in which Citigroup spokesman Stephen Cohen said this….
“At this point, we have no evidence that Citi was involved in any erroneous transaction.”
#2) A Computer Glitch
New York Stock Exchange spokesman Rich Adamonis says that “there were a number of erroneous trades” on May 6th, and that these could have been caused by computer error.
And the truth is that trading in the financial markets is more automated and more reliant on computers than it ever has been before. Trading literally moves at lightning speed now, and a number of analysts are warning that the pace of the market is so fast at this point that it is really easy for things to spin out of control very quickly.
But if this was really primarily caused by a “computer glitch”, how are investors supposed to have any confidence at all in the market? After all, if a computer error can wipe out half your account in less than an hour, why invest at all?
#3) Cascading Stop Losses
Once the market hits certain technical levels, it is going to automatically start triggering stop loss orders. Once those stop loss orders are triggered, it will push the market down further thus triggering more stop loss orders.
While there have been some protections implemented to guard against this kind of thing, the reality is that it does still happen.
#4) Hackers
Hackers have become more sophisticated and more cunning than ever before. In fact, the bigger a target is, the more enjoyment most hackers get out of taking them down. Is it a possible that someone could have hacked in to the New York Stock Exchange?
#5) Cyberterrorism
Rogue nations and terrorist organizations have been developing their “cyber warfare” capabilities for some time now. We have been repeatedly warned that someday we will see an “Internet 9/11″. Could this stock market plunge be a preview of that?
#6) Fear Of The European Debt Crisis Spreading
There are mounting concerns in the financial markets about Greece’s financial condition and that the European debt crisis could spread around the globe.
In fact, the Dow has lost 631 points, or more than 5%, in just the last three days amidst worries about the situation in Greece. This represents the biggest three day drop since March 2009.
#7) Stop Hunting
Anyone who has spent much time in the Forex market knows what this is all about. The truth is that some of the big financial sharks in the marketplace seem to really enjoy blowing out stop losses.
So could have this have been a situation where a stop loss hunting expedition spun wildly out of control?
#8) A Real Panic
There is also the possibility that this was a real financial panic. There are huge concerns about what is going on in Europe and the currency markets are fluctuating wildly. The Dow was already down several hundred points even before the massive plunge took place. The reality is that there is a lot of fear in the financial markets right now.
But if it was a real panic, then why did the Dow bounce back so quickly? Well, it is the job of the “plunge protection team” to keep the stock market from declining too rapidly. So did the “plunge protection team” swing into action today? Well, the truth is that we will probably never know because the general public is not supposed to know when they intervene.
In any event, the next couple of days should hopefully make all of this a lot clearer. The trading during the afternoon of May 6th at the big firms will be gone over with a fine-toothed comb, and the exchanges will be closely analyzing their systems for any glitches.
It has already been announced that some of the most erroneous trades will be cancelled. The Nasdaq and NYSE’s ARCA trading unit have both said that they will cancel trades executed between 2:40 p.m. and 3 p.m. on May 6th where a stock price rose or fell more than 60 percent from the last trade in that security at 2:40 p.m.
But this episode shows just how vulnerable our financial markets really are. After witnessing what we saw today, it is going to be really hard to have confidence in the system.
In fact, even if this was just one “bad trade” or a “simple computer glitch”, the reality is that this episode is going to inject even more fear into a marketplace that is already filled with tension.
When fear grips a market things can go south very, very quickly. The truth is that markets tend to fall more quickly than they rise, and if a wave of panic starts sweeping over the financial markets we could see things get quite messy in the coming days.
At a time when the American economy is already reeling like a drunken sailor, the United States is being hit by what seems like an endless parade of horrible disasters that threaten to push the fragile financial system over the edge. The massive oil spill in the Gulf of Mexico that is now destroying not only the the entire economy of the Gulf Coast but also the entire way of life for hundreds of thousands of people is getting all the headlines right now, but it is far from the only major crisis that has hit the United States recently. The old saying, “when it rains it pours”, is certainly applicable to the United States right now. Already faced with some of the biggest economic problems in a generation, America is also being forced to deal with horrifying natural disasters, rapidly growing environmental nightmares and agricultural problems that could end up being absolutely unprecedented. So why do so many bad things keep happening to the United States? Does there come a point when the economic damage from all of these disasters just becomes too much? After all, how many body blows can the “biggest economy in the world” take and still remain standing?
Consider just a few of the major disasters that the U.S. is having to deal with….
Well, estimates vary at this point, but it is being reported that some analysts are already projecting that the costs related to the oil spill drifting toward Louisiana from a well operated by BP in the Gulf of Mexico could exceed 14 billion dollars.
The cost to the fishing industry in Louisiana alone could top 3 billion dollars, and it is being projected that the tourism industry in Florida could lose even more than that.
This is rapidly shaping up as one of the biggest environmental nightmares (perhaps the biggest) that the United States has ever had to face. In fact, there are some who are saying that this incident has already eclipsed the 1989 Exxon Valdez incident as the worst U.S. oil disaster in history.
Louisiana Governor Bobby Jindal is warning that the oil spill in the Gulf threatens the very way of life of people in his state. As bad as Hurricane Katrina was, there are those who are already claiming that this disaster will be worse than Hurricane Katrina for the region, because it will literally take years for this mess to be cleaned up. In fact, there is a very real possibility that the fishing industry may be crippled for generations by this disaster.
*The Disappearance Of The Honeybees
For the fourth year in a row in the United States, more than a third of all bee colonies have failed to survive the winter.
To be more precise, according to the annual survey by the Apiary Inspectors of America and the U.S. government’s Agricultural Research Service, the number of managed honeybee colonies in the United States fell by 33.8% last winter.
Needless to say, this is not a good trend.
In fact, it could quickly turn into an unmitigated disaster as it is estimated that a third of all that we eat depends upon honeybee pollination.
Are you starting to get the picture?
Most flowering plants require insects for pollination. The most effective insect for pollination is the honeybee.
Without honeybees, we are going to be in a world of hurt.
According to WorldNetDaily, the following is a list of just some of the crops that depend on honeybees: almonds, apples, apricots, avocados, blueberries, boysenberries, cherries, citrus fruits, cranberries, grapes, kiwi, loganberries, macadamia nuts, nectarines, olives, peaches, pears, plums, raspberries, strawberries, asparagus, broccoli, carrots, cauliflower, celery, cucumbers, cantaloupe, honeydew, onions, pumpkins, squash, watermelon, alfalfa hay and seed, cotton lint, cotton seed, legume seed, peanuts, rapeseed, soybeans, sugar beets and sunflowers.
In fact, Ohio State University’s honeybee specialist, James Tew, recently told the following to the Dayton Daily News….
“The average person should care. Bees of all species are fundamental to the operation of our ecosystem.”
So what happens if they all die off?
You don’t even want to think about that.
But certainly our scientists can find a solution, right?
Well, the World Organization for Animal Health announced on Wednesday that the huge die off of bees worldwide is not due to any one single factor.
Some of the factors for the honeybee deaths the World Organization for Animal Health included in its report include parasites, viral and bacterial infections, pesticides, and poor nutrition.
Other researchers claim that genetically modified crops and cell phone transmissions are also playing a role in the disappearance of the honeybees.
But the truth is that a “solution” seems to be very far away right now and we are running out of time.
*The Deadly Tornadoes Which Have Ravaged The Southeast
Last Sunday saw an unprecedented outbreak of tornadoes across the southeast United States. Officials said 61 tornadoes erupted as a massive storm marched across states such as Mississippi, Florida and South Carolina.
Winds inside some of the tornadoes were clocked as high as 160 mph, and one of the tornadoes had a base one and a half miles wide.
The tornadoes killed at least 12 people, and it is estimated that the damage that they caused could reach into the billions of dollars.
*The Drying Up Of The Ogallala Aquifer
Most Americans have never heard of the Ogallala Aquifer, but it is absolutely critical to food production in many areas of the United States.
The water from this massive underground lake is used to irrigate much of America’s Great Plains. But it is being drained at a rate of approximately 800 gallons per minute and it is starting to dry up.
So why is that a bad thing?
Well, the Ogallala Aquifer is a gigantic underground lake that stretches from southern South Dakota all the way through northern Texas, covering approximately 174,000 square miles.
If it gets depleted, the era of “pivot irrigation” in the region will be over. That would mean that the Great Plains could quickly turn into the Great American Desert.
America could very well see a return to the Dust Bowl days of the 1930s.
Are you prepared for that?
Even if agricultural production continues to grow normally, scientists are telling us that the world is heading for a massive global food shortage. So what happens if our food production does not increase or is even reduced?
Sadly, the United States has only enough grain stored up to give about a half a loaf of bread to every man, woman and child in the United States.
How long do you think that is going to last in the event of a major emergency?
The truth is that “the good times” we have all grown up with are not going to last forever. The United States is in big trouble economically, and all of these natural disasters and environmental problems are not helping things one bit.
We are not entitled to endless wealth and prosperity just because we are Americans. In fact, we have recklessly squandered the wealth that prior generations have left for us.
But even as the economy crumbles around them, millions of Americans will remain in denial until the day they have to cook a dinner of “mouse soup” for their starving family.
Up to this point, it seems as though most Americans have not really been too concerned about the financial meltdown that is taking place in Greece. But they should be. The truth is that the debt crisis we see playing out in Greece may soon repeat itself in some of the largest nations in the world such as Japan, the U.K. and even the United States. Once upon a time, this kind of thing only happened in third world nations, but now virtually every nation on earth has a debt problem. As the saying goes, the borrower is the servant of the lender, and so when a country like Greece gets in way, way too deep financially, it ends up having to give up a portion of its sovereignty to those controlling the purse strings. In the case of Greece, those controlling the purse strings are the IMF and the EU. But it just isn’t Greece that is in trouble. Dozens of nations are in serious financial trouble and are at the mercy of those who can bail them out. The truth is that global financial institutions like the IMF, the World Bank, the European Central Bank and the Federal Reserve are increasingly gaining power all over the globe as governments around the world continue to accumulate frightening amounts of debt.
This has been quite a week for Greece and for the other nations in Europe teetering on the edge of financial disaster. Standard & Poor’s reduced Greek debt to “junk” status, and Spain and Portugal’s debts were also downgraded substantially. These unprecedented steps by Standard & Poor’s have many concerned that this financial “contagion” could start spreading across all of Europe.
We’ll take a look at the “austerity measures” being forced on Greece in a moment, but first it is important to note that financial panic is already spreading to other nations in the region.
In Portugal, the government has announced that additional “austerity measures”, beyond those in the current three year plan, are expected to be implemented. Perhaps they wouldn’t need to take such drastic steps if they hadn’t spent all of those millions constructing those shiny new soccer stadiums a few years ago. But in any event, many analysts are now forecasting that Portugal will be the next domino to fall.
Officials in Spain are expected to announce this week that unemployment has hit 20%. But of course any nation that implements a hardcore “cap and trade” law like the one in Spain should expect unemployment to soar into the stratosphere. So they are just reaping what they have sown, but the fallout could end up being very painful. Spain’s economy is approximately five times larger than Greece’s so if Spain ends up defaulting it will create a financial nightmare for all of Europe.
There are now rumors that even Italy and Ireland are in a massive amount of trouble financially.
So will the EU and the IMF end up having to bail all of them out?
Well, for now Greece is first in line.
European officials said on Friday that the Greek government, facing a rapidly deteriorating financial situation, is close to completing negotiations for assistance from the International Monetary Fund.
So Greece is going to get the money that it needs – but it comes with strings.
Greece must surrender some of its fiscal sovereignty and adopt a three year program of severe spending cuts and higher taxes.
In fact, one major Greek newspaper says that wage and job cuts for public workers will also be ordered alongside the spending cuts and tax increases to get through what they are calling “three hard years”.
They get paid extremely well, and Greek civil servants also enjoy very generous pension benefits and early retirement.
Needless to say a lot of these Greek civil servants are not happy at all about the changes the IMF is forcing upon them, and they have called a general strike for May 5th.
For his part, the Greek Prime Minister, George Papandreou, is trying to convince the Greek people that these new spending cuts and tax increases are necessary to keep his nation afloat. According to The Associated Press, Mr. Papandreou recently told the Greek Parliament the following….
“The measures we must take, which are economic measures, are necessary for the protection of our country — for our survival, for our future, so we can stand firmly on our feet.”
There are even fears that this sovereign debt crisis could spell the end for the Euro. Back on Wednesday, the leaders of the 16 countries currently using the Euro called an emergency meeting to attempt to avert a Euro meltdown triggered by Greece’s financial collapse.
Of course the Euro is not actually going to collapse, but the fact that they all felt the need to get together and talk about this situation is quite telling.
In fact, the language used by some of the top financial authorities in the world when speaking about the Greek debt crisis is quite alarming….
Angel Gurría, head of the Organization for Economic Cooperation and Development:
“This is like Ebola. It’s threatening the stability of the financial system.”
Colin Ellis, economist at Daiwa Capital Markets:
“The time for horse-trading, prevarication and posturing is over. Arguably, the very future of the euro area is now teetering on a knife edge.”
Dominique Strauss-Kahn, head of the International Monetary Fund:
“If we don’t fix it in Greece, it may have a lot of consequences on the EU.”
But for the people of Greece, getting help with their debt means giving up their ability to determine their own affairs. They have gotten into so much debt that now they are forced to do whatever the IMF and the EU tell them to do. Of course there are many in Greece who are extremely upset by this as evidenced by the recent riots there….
But this is what happens when a nation allows itself to get into way too much debt. In fact, this has been done by design in third world nations for decades. In his extraordinary book, Confessions of an Economic Hitman, John Perkins explained how it was his job to go around the world and get third world governments to accept multibillion-dollar loans that he knew they would never be able to repay. Of course when the time came and they could not repay the loans, the big global institutions would go in and confiscate natural resources and impose “conditions” and implement “austerity measures” similar to the ones they are currently imposing on Greece.
The alarming thing today is that it just isn’t third world nations where this game is being played anymore. Now that they have perfected the blueprint, they are trying it out on nations like Greece.
The reality is that this is all part of the push towards globalization. In fact, Jean-Claude Trichet, the president of the European Central Bank, emphasized the need for global coordination in financial matters during his April 26th address at the Council on Foreign Relations.
“Global coordination” sounds nice, but just like “global governance” and “global cooperation”, it is just another way of saying that we need to transfer more power and more authority to globalist institutions.
You see, whatever problem that pops up (in this instance it is the Greek debt crisis), the solution always seems to be to transfer more power to global institutions.
In fact, as a “solution” to the global financial crisis, the IMF is proposing two new taxes on financial institutions worldwide: a “financial stability contribution” which levies a small charge on financial institution balance sheets, and a “financial activities tax”, which would tax “excess profits” and bonuses.
As the nations of the world continue to get deeper in debt, and as more power and more money is transferred to unelected global institutions, the people of the world may find their lives increasingly being run by heartless bureaucrats on the other side of the globe.
For anyone who loves freedom, that is a very sobering thought.
If you are part of the Wall Street establishment, the economic recovery is moving along quite well. Many of the biggest firms on Wall Street just handed out record-setting bonuses, the Stock Market has been moving up steadily and the DOW is back up to around 11,000. Profits at the top banks have been quite impressive lately. Bank of America, JPMorgan Chase, Citigroup and Wells Fargo combined for first quarter profits of $13.4 billion – the most in almost three years. Yes, life is quite good down on Wall Street these days. People are still buying fast cars, big yachts and homes in the Hamptons. It is almost as if “the greatest financial crisis since the Great Depression” didn’t even happen. Things are quickly getting back to “normal” for the banking elite and to many it seems like there are a lot more smiles down on Wall Street than there have been in a long, long time.
Bank of America’s chief executive officer, Brian T. Moynihan, is being quoted by Reuters as saying that “the worst of the credit cycle is clearly behind us” and that the economic growth we are experiencing is “real”.
JPMorgan CEO Jamie Dimon is quoted as saying that the U.S. economy may be poised for “a strong recovery”.
And why wouldn’t they say these things? Profits are up. Their stock portfolios are up. They are getting record bonuses. They know that if anything does go wrong again that their friends in Washington D.C. will bail them out because they are “too big to fail”.
But for tens of millions of other Americans, the economy seems like it is getting worse than ever. It is hard to explain the gut-wrenching agony that many highly-educated and highly-qualified American workers are going through as they send out hundreds of resumes only to get no response. Or the absolute frustration of only being able to get a very low paying retail job and realizing that it will not even be able to pay the mortgage – much less support an entire family. Or the soul-crushing despair of working two or three jobs and still not being able to pay the bills at the end of the month.
But these are the daily realities that millions of Americans must face now. The truth is that there are not nearly enough jobs for everyone. The number of unemployed Americans per job opening hit 5.5 in February. It is like we are all caught in some bizarre game of musical chairs, and the losers end up destitute and out in the street.
Even many of those who can get jobs find themselves in bad situations. Gallup’s underemployment measure hit 20.0% on March 15th. That was up from 19.7% two weeks earlier and 19.5% at the start of the year. A lot of very educated, very qualified people find themselves slaving away at jobs that high school students are qualified for.
But the ones being hurt the worst by this unemployment epidemic are the poor. Check out the following chart. At the end of 2009, the unemployment rate for those at the top end of the income scale in the United States was about 3%. For those at the bottom of the income scale, the unemployment rate was about 30%….
It isn’t the boys down on Wall Street that are losing their homes and their jobs.
No, they are “too big to fail”.
It is millions of ordinary Americans that are losing their homes and their jobs.
And things keep getting worse.
According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March. This was an increase of almost 19 percent from February, and it was the highest monthly total since RealtyTrac began issuing its report in January 2005.
Not only that, but RealtyTrac projects that there will be a total of 4.5 million home foreclosures by the end 2010. If you figure that there are approximately 4 people per household, that is another 18 million people that will be facing the pain of a foreclosure filing.
For many Americans, losing their home to foreclosure is just too much. For example, one man in Ohio actually decided to bulldoze his own home rather than let the bank take it in foreclosure proceedings.
Because of the extreme economic conditions, millions of Americans are in severe pain and are becoming increasingly desperate. In some of the most depressed areas, crime is absolutely spiralling out of control. So far this year in Detroit, car thefts are up 83%, robberies are up 50%, burglaries are up 20% and property destruction is up 42%.
Adding to all of this economic despair is the fact that food and gas prices are starting to shoot up.
In some areas of the United States, people are already paying as much as $3.50 for a gallon of gasoline, and many experts are now predicting that gasoline could hit $4.00 a gallon by the end of 2010.
So while the economic recovery is buzzing along quite well down on Wall Street, the reality is that for millions of other Americans things are really hard. In fact, not even the smaller banks are experiencing much of a recovery. The FDIC’s list of problem banks just hit a 17-year high.
No, the main beneficiaries of this “economic recovery” are the boys over on Wall Street. They should enjoy it while it lasts, because even harder economic times are on the way, and the reality is that none of us will be able to completely escape the economic pain that is coming.
Today financial power is being concentrated in the hands of fewer and fewer individuals. In fact, the six biggest banks in the United States now possess assets equivalent to 60 percent of America’s gross national product. Back in the 1990s that figure was less than 20 percent. These six banks – Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo – literally dictate what goes on in the U.S. banking industry. These entities are the poster children for “too big to fail”, and they donate massive amounts of cash to the campaigns of both Republicans and Democrats to ensure that they will continue to receive favorable treatment. The vast majority of Americans have had a banking account, a credit card and/or a mortgage with one of these institutions at some point. If they acted in concert, these six banks could literally bring down the U.S. economy overnight if they wanted to. Together with the Federal Reserve, these six banks represent the real financial power in America. They are the 800 pound gorilla in the room that influences nearly every major financial deal that gets done and virtually every major political decision that gets made. As the last couple of years have demonstrated, top politicians from both parties (John McCain and Barack Obama for example) will instantly jump into action and start advocating that the U.S. government spend billions upon billions of dollars when the interests of these behemoths are threatened. The frightening thing is that the power of these megabanks is growing at a frightening pace. As dozens upon dozens of smaller U.S. banks are “allowed to fail”, they either go out of existence or the Feds actually encourage these smaller banks to sell themselves to one of the big sharks. In either event, the banking power in the United States becomes further consolidated in the hands of the megabanks.
Bill Moyers recently interviewed Simon Johnson and James Kwak, the authors of a new book entitled 13 Bankers: The Wall St. Takeover and the Next Financial Meltdown. During that interview Kwak described to Moyers just how explosive the growth of the power of these megabanks has been….
Bill Moyers: And you write that they control 60 percent of our gross national product?
James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.
Does it alarm you that the banking elite have accumulated such a large amount of financial power?
It should. These institutions have the power to wreck entire economies. Just consider what happened in Greece lately. Now, it is being alleged that the megabanks are ripping off American cities with the same kinds of predatory deals that brought down the financial system in Greece.
The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.
Unfortunately, they may have actually been understating things a bit.
These megabanks have rigged the game so that the wealth of the nation is slowly transferred from us to themselves and to the international financial interests that control them.
They can make money if the markets are going up, and they can make money if the markets are going down.
For example, in a newly released email from the height of the housing crash, the CEO of Goldman Sachs bragged that his firm “made more than we lost” by betting against the housing market.
Thankfully the SEC is starting to look into the fraud that Goldman Sachs committed during this time period, but the truth is that Goldman is not likely to receive any more than a slap on the wrist for what it has done.
They are way too big, way too powerful and have too many friends in high places for them to get into any real trouble.
For example, it has come out that Barack Obama does not intend to return any of the campaign contributions that he received from Goldman Sachs. And surely they will be glad to continue to pour big money into his political coffers.
So where does that leave the rest of us?
Well, the rest of us can expect higher taxes and a lower standard of living according to the IMF. The IMF (which has deep connections to these megabanks) says that the party is “over” for nations that have been enjoying the good life. In a recent article, the Washington Post summarized the message that the IMF is trying to communicate through their recent policy papers….
To keep the global economy on track, people in the United States and the rest of the developed world need to work longer before retiring, pay higher taxes and expect less from government. And the cheap imports lining the shelves of mega-chains such as Wal-Mart and Target? They need to be more expensive.
So are you ready to work longer, pay higher taxes, expect less from government and have a lower standard of living?
That is what the IMF says we are all going to be facing in the years ahead.
We are all going to financially suffer as the megabanks continue to thrive and consolidate power.
Most of us are aware of the very old fairly tale by Hans Christian Andersen in which two weavers promise an emperor the finest suit of clothes imaginable, but from a fabric invisible to anyone who is unfit for his position or “just hopelessly stupid”. Well, in the fairy tale it turns out that nobody wants to admit that they are “unfit” or “stupid”, so when the emperor parades before his subjects in his imaginary new suit of clothes, it takes a child to cry out: “But he isn’t wearing anything at all!” Well, many of us have been declaring that the world economy “has no clothes” for some time now, but when the anchor of NBC News declares it on national television it gets a bit more attention. During his recent appearance on The Late Show with David Letterman, NBC’s Brian Williams was asked about the world financial situation. His answer included this shocking statement: “The world has no money, and the Emperor has no clothes.”
Will The U.K. Be The Next European Nation To Experience A Massive Debt Crisis?
So obviously there is a problem.
A massive, unchecked, out of control problem that threatens to blow out the entire U.K. economy.
And considering the fact that it took just about everything that Europe could muster to bail out poor little Greece, how in the world is Europe going to be able to bail out the U.K. when their debt crisis violently erupts?
If Greece almost brought down the euro and the financial system of Europe, then what would a financial implosion in the U.K. do?
Considering the fact that the Greek economy is approximately 16% the size of the U.K. economy, it is very sobering to think what a “Greek style” debt crisis in the U.K. would mean for the entire world.
But if something is not done rapidly it will happen.
Just consider the following charts….
Now how in the world do you go from a deficit that is between 2 and 3 percent of GDP in 2007 to one that is above 11 percent in 2009? That takes some serious financial mismanagement. Not only that, but as we mentioned earlier, this year the deficit is projected to be approximately 13 percent of GDP. That is a level that is catastrophic.
Kornelius Purps, the fixed income director of Europe’s second largest bank is very open about the fact that he believes that the U.K. is likely the next European nation that will face a very serious debt crisis….
“Britain’s AAA-rating is highly at risk. The budget deficit is huge at 13% of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that.”
In fact, Morgan Stanley has already warned that there is a very strong probability that some of the rating agencies may remove the U.K.’s AAA status before 2010 is over.
If that happened, it would make the crisis that we just saw in Greece look like a Sunday picnic.
So what must be done?
Well, already world financial authorities are calling for “austerity measures” and deep budget cuts to be implemented in the U.K., but the reality is that those moves will cause deep economic pain.
In fact, Bank of England governor Mervyn King recently warned that public anger over the “austerity measures” that soon must be implemented in the U.K. will be so painful that whichever party is seen as responsible will be out of power for a generation.
The cold, hard reality is that the U.K. is in for economic pain in any event. Either they cut the budget and implement severe “austerity measures” which will hit people really hard economically, or they continue on the current course and risk a much worse version of what just happened in Greece.
Not that the rest of the world should be gloating about what is going on in the U.K. either.
The financial situation in Japan is even worse than what the U.K. is dealing with, and the United States is going to have the biggest economic downfall of them all one of these days.
As we wrote about yesterday, the sad truth is that the governments of the world are rapidly running out of money and are drowning in debt. It is a gigantic mess, and the term “sovereign debt crisis” is going to pop up in the news very regularly from now on.
You see, it is not just the financial systems of the U.S. and the U.K. that are broken. The entire world financial system is fundamentally flawed and is doomed to failure.
Right now the central banks of the world can do their best to try to hold things together with a tsunami of debt and paper money, but they are not going to be able to keep up this balancing act forever.
When it does all start coming apart and the dominoes do start falling, it is going to be a complete and total nightmare. Paper currencies around the globe will lose value at breathtaking speeds as central banks flood economies with cash in an attempt to stop the madness.
But more debt and more paper never solves anything. All it does is make the long-term problems even worse.
When the tipping point comes, things are going to move fast. Let’s just hope that we all have a good bit more time to prepare before that happens.