Are you waiting for the next major wave of the global economic collapse to strike? Well, you might want to start paying attention again. Three of the ten largest economies on the planet have already fallen into recession, and there are very serious warning signs coming from several other global economic powerhouses. Things are already so bad that British Prime Minister David Cameron is comparing the current state of affairs to the horrific financial crisis of 2008. In an article for the Guardian that was published on Monday, he delivered the following sobering warning: “Six years on from the financial crash that brought the world to its knees, red warning lights are once again flashing on the dashboard of the global economy.” For the leader of the nation with the 6th largest economy in the world to make such a statement is more than a little bit concerning.
So why is Cameron freaking out?
Well, just consider what is going on in Japan. The economy of Japan is the 3rd largest on the entire planet, and it is a total basket case at this point. Many believe that the Japanese will be on the leading edge of the next great global economic crisis, and that is why it is so alarming that Japan has just dipped into recession again for the fourth time in six years…
Japan’s economy unexpectedly fell into recession in the third quarter, a painful slump that called into question efforts by Prime Minister Shinzo Abe to pull the country out of nearly two decades of deflation.
The second consecutive quarterly decline in gross domestic product could upend Japan’s political landscape. Mr. Abe is considering dissolving Parliament and calling fresh elections, people close to him say, and Monday’s economic report is seen as critical to his decision, which is widely expected to come this week.
Of course Japan is far from alone.
Brazil has the 7th largest economy on the globe, and it has already been in recession for quite a few months.
And the problems that the national oil company is currently experiencing certainly are not helping matters…
In the past five days, 23 powerful Brazilians have been arrested, with even more warrants still outstanding.
The country’s stock market has become a whipsaw, and its currency, the real, has hit a nine-year low.
All of this is due to a far-reaching corruption scandal at one massive company, Petrobras.
In the last month the company’s stock has fallen by 35%.
The 9th largest economy in the world, Italy, has also fallen into recession…
Italian GDP dropped another 0.1% in the third quarter, as expected.
That’s following a 0.2% drop in Q2 and another 0.1% decline in Q1, capping nine months of recession for Europe’s third-largest economy.
Like Japan, there is no easy way out for Italy. A rapidly aging population coupled with a debt to GDP ratio of more than 132 percent is a toxic combination. Italy needs to find a way to be productive once again, and that does not happen overnight.
Meanwhile, much of the rest of Europe is currently mired in depression-like conditions. The official unemployment numbers in some of the larger nations on the continent are absolutely eye-popping. The following list of unemployment figures comes from one of my previous articles…
Are you starting to get the picture?
The world is facing some real economic problems.
Another traditionally strong economic power that is suddenly dealing with adversity is Israel.
In fact, the economy of Israel is shrinking for the first time since 2009…
Israel’s economy contracted for the first time in more than five years in the third quarter, as growth was hit by the effects of a war with Islamist militants in Gaza.
Gross domestic product fell 0.4 percent in the July-September period, the Central Bureau of Statistics said on Sunday. It was the first quarterly decline since a 0.2 percent drop in the first three months of 2009, at the outset of the global financial crisis.
And needless to say, U.S. economic sanctions have hit Russia pretty hard.
The rouble has been plummeting like a rock, and the Russian government is preparing for a “catastrophic” decline in oil prices…
President Vladimir Putin said Russia’s economy, battered by sanctions and a collapsing currency, faces a potential “catastrophic” slump in oil prices.
Such a scenario is “entirely possible, and we admit it,” Putin told the state-run Tass news service before attending this weekend’s Group of 20 summit in Brisbane, Australia, according to a transcript e-mailed by the Kremlin today. Russia’s reserves, at more than $400 billion, would allow the country to weather such a turn of events, he said.
Crude prices have fallen by almost a third this year, undercutting the economy in Russia, the world’s largest energy exporter.
It is being reported that Russian President Vladimir Putin has been hoarding gold in anticipation of a full-blown global economic war.
I think that will end up being a very wise decision on his part.
Despite all of this global chaos, things are still pretty stable in the United States for the moment. The stock market keeps setting new all-time highs and much of the country is preparing for an orgy of Christmas shopping.
Unfortunately, the number of children that won’t even have a roof to sleep under this holiday season just continues to grow.
A stunning report that was just released by the National Center on Family Homelessness says that the number of homeless children in America has soared to an astounding 2.5 million.
That means that approximately one out of every 30 children in the United States is homeless.
Let that number sink in for a moment as you read more about this new report from the Washington Post…
The number of homeless children in the United States has surged in recent years to an all-time high, amounting to one child in every 30, according to a comprehensive state-by-state report that blames the nation’s high poverty rate, the lack of affordable housing and the effects of pervasive domestic violence.
Titled “America’s Youngest Outcasts,” the report being issued Monday by the National Center on Family Homelessness calculates that nearly 2.5 million American children were homeless at some point in 2013. The number is based on the Education Department’s latest count of 1.3 million homeless children in public schools, supplemented by estimates of homeless preschool children not counted by the agency.
The problem is particularly severe in California, which has about one-eighth of the U.S. population but accounts for more than one-fifth of the homeless children, totaling nearly 527,000.
This is why I get so fired up about the destruction of the middle class. A healthy economy would mean more wealth for most people. But instead, most Americans just continue to see a decline in the standard of living.
And remember, the next major wave of the economic collapse has not even hit us yet. When it does, the suffering of the poor and the middle class is going to get much worse.
Unfortunately, there are already signs that the U.S. economy is starting to slow down too. In fact, the latest manufacturing numbers were not good at all…
The Federal Reserve’s new industrial production data for October show that, on a monthly basis, real U.S. manufacturing output has fallen on net since July, marking its worst three-month production stretch since March-June, 2011. Largely responsible is the automotive sector’s sudden transformation from a manufacturing growth leader into a serious growth laggard, with combined real vehicles and parts production enduring its worst three-month stretch since late 2008 to early 2009.
A lot of very smart people are forecasting economic disaster for next year.
Hopefully they are all wrong, but I have a feeling that they are going to be right.
How do you fix a superpower with exploding levels of debt, that has a rapidly aging population, that consumes far more wealth than it produces, and that has scores of zombie banks that could collapse at any moment. You might think that I am talking about the United States, but I am actually talking about Europe. You see, the truth is that the European Union has a larger population than the United States does, it has a larger economy than the United States does, and it has a much larger banking system than the United States does. Most of the time I write about the horrible economic problems that the U.S. is facing, but without a doubt economic conditions in Europe are even worse at the moment. In fact, there are many (including the Washington Post) that are calling what is happening in Europe a full-blown “depression”. Sadly, this is probably only just the beginning. In the months to come things in Europe are likely to get much worse.
First of all, let’s take a look at unemployment. If the U.S. was using honest numbers, the official unemployment rate would probably be somewhere close to 10 percent. But in many nations in Europe, the official unemployment rate is already above the ten percent mark…
The official unemployment rate for the eurozone as a whole is currently 11.5 percent. The lack of good jobs is causing the middle class to shrink all over Europe, and more people than ever are becoming dependent on government assistance. European nations are well known for their generous welfare programs, but all of this spending is causing debt to GDP ratios to absolutely explode…
At the same time, the value of the euro has been steadily declining over the last six months. This is significantly reducing the purchasing power that European families have…
Many believe that the euro will ultimately go much lower than this. Nations such as Greece and Spain are already experiencing deflation, and the inflation rates in Germany and France are both currently below one percent. If the European Central Bank starts injecting lots of fresh euros into the system to combat this perceived problem, that will lift the level of inflation but it will also further erode the value of the euro.
In the long run, it would not be a surprise to see the U.S. dollar at parity with the euro.
When it happens, remember where you heard it.
The Europeans are scared to death of a deflationary depression, but that is precisely where the long-term economic trends are taking them right now. The following is from a recent Forbes article…
Market consensus believes that the eurozone is edging toward that moment when the scourge of deflation actually becomes a crippling reality. Eurozone data is constantly reminding investors that the region’s economy is barely limping along, as companies slash selling prices in a vain attempt to improve sales in the face of a weakening economy and evaporating new orders. Corporate deflationary reactions like this only hurt a company’s bottom line by squeezing profit margins even further. The obvious knock-on effect will limit resources for hiring and investing, which in turn only dampens any chances of an economic rebound, again putting the region into a bigger hole.
In a desperate attempt to avoid widespread deflation in Europe, the ECB will inevitably take action at some point.
It may not happen immediately, but when it does it will be yet another salvo in the emerging global currency war.
Speaking of currencies, it is being reported that Russia is actually considering legislation that will ban the circulation of the U.S. dollar in that nation. The following is from an article that was posted on Infowars…
Russia may ban the circulation of the United States dollar.
The State Duma has already been submitted a relevant bill banning and terminating the circulation of USD in Russia, APA’s Moscow correspondent reports.
If the bill is approved, Russian citizens will have to close their dollar accounts in Russian banks within a year and exchange their dollars in cash to Russian ruble or other countries’ currencies.
Otherwise their accounts will be frozen and cash dollars levied by police, customs, tax, border, and migration services confiscated.
That is not good news for the U.S. dollar at all.
Expect wild shifts in the foreign exchange markets in the months and years to come. Turbulent times are ahead for the dollar, the euro and the yen.
Getting back to Europe, let us hope that things stabilize over there – at least for a while.
But that might not happen. In fact, things could take a turn for the worse at any moment.
Most people don’t realize this, but European banks are even shakier than U.S. banks, and that is saying a lot.
For example, the largest bank in the strongest economy in Europe is Deutsche Bank. At this point, Deutsche Bank has approximately 75 trillion dollars worth of exposure to derivatives. That amount of money is about 20 times the size of German GDP, and it is more exposure than any U.S. bank has.
And Deutsche Bank is far from alone. All over Europe there are zombie banks that are essentially insolvent. Many of them are being propped up by their governments. Those governments know that if those banks failed that it would make their economic problems even worse.
Just like in the United States, most economic activity in Europe is fueled by debt. So those banks are needed to provide mortgages, loans and credit cards to average citizens and businesses. Unfortunately, bad debt levels and business failures continue to shoot up all over Europe.
The system is breaking down, and nobody is quite sure what is going to happen next.
So keep an eye on Europe. In particular, keep an eye on Italy. I have a feeling that big economic news is about to start coming out of Italy, and it won’t be good.
In 2014, we have been experiencing “the calm before the storm”.
But 2015 is right around the corner, and it promises to be extremely “interesting”.
There are some who believe that the next great financial crash will not begin in the United States. Instead, they are convinced that a financial crisis that begins in Europe or in Japan (or both) will end up spreading across the globe and take down the U.S. too. Time will tell if they are ultimately correct, but even now there are signs that financial trouble is already starting to erupt in both Germany and Japan. German stocks have declined 10 percent since July, and that puts them in “correction” territory. In Japan, the economy is a total mess right now. According to figures that were just released, Japanese GDP contracted at a 7.1 percent annualized rate during the second quarter and private consumption contracted at a 19 percent annualized rate. Could a financial collapse in either of those nations be the catalyst that sets off financial dominoes all over the planet?
This week, the worst German industrial production figure since 2009 rattled global financial markets. Germany is supposed to be the economic “rock” of Europe, but at this point that “rock” is starting to show cracks.
And certainly the civil war in Ukraine and the growing Ebola crisis are not helping things either. German investors are becoming increasingly jittery, and as I mentioned above the German stock market has already declined 10 percent since July…
German stocks, weighed down by the economic fallout spawned by the Ukraine-Russia crisis and the eurzone’s weak economy, are now down more than 10% from their July peak and officially in correction territory.
The DAX, Germany’s benchmark stock index, has succumbed to recent data points that show the German economy has ground to a halt, hurt in large part by the economic sanctions levied at its major trading partner, Russia, by the U.S. and European Union as a way to get Moscow to butt out of Ukraine’s affairs. The economic slowdown in the rest of the debt-hobbled eurozone has also hurt the German economy, considered the economic locomotive of Europe.
In trading today, the DAX fell as low as 8960.43, which put it down 10.7% from its July 3 closing high of 10,029.43 and off nearly 11% from its June 20 intraday peak of 10,050.98.
And when you look at some of the biggest corporate names in Germany, things look even more dramatic.
Just check out some of these numbers…
The hardest hit sectors have been retailers, industrials and leisure stocks with sports clothing giant Adidas down 37.7pc for the year, airline Lufthansa down 27pc, car group Volkswagen sliding 23.6pc and Deutchse Bank falling 20.2pc so far this year.
Meanwhile, things in Japan appear to be going from bad to worse.
The government of Japan is more than a quadrillion yen in debt, and it has been furiously printing money and debasing the yen in a desperate attempt to get the Japanese economy going again.
Unfortunately for them, it is simply not working. The revised economic numbers for the second quarter were absolutely disastrous. The following comes from a Japanese news source…
On an annualized basis, the GDP contraction was 7.1 percent, compared with 6.8 percent in the preliminary estimate. That makes it the worst performance since early 2009, at the height of the global financial crisis.
The blow from the first stage of the sales tax hike in April extended into this quarter, with retail sales and household spending falling in July. The administration signaled last week that it is prepared to boost stimulus to help weather a second stage of the levy scheduled for October 2015.
Corporate capital investment dropped 5.1 percent from the previous quarter, more than double the initial estimate of 2.5 percent.
Private consumption was meanwhile revised to a 5.1 percent drop from the initial reading of 5 percent, meaning it sank 19 percent on an annualized basis from the previous quarter, rather than the initial estimate of 18.7 percent, Monday’s report said.
For the moment, things are looking pretty good in the United States.
But as I have written about so many times, our financial markets are perfectly primed for a fall.
Other experts see things the same way. Just consider what John Hussman wrote recently…
As I did in 2000 and 2007, I feel obligated to state an expectation that only seems like a bizarre assertion because the financial memory is just as short as the popular understanding of valuation is superficial: I view the stock market as likely to lose more than half of its value from its recent high to its ultimate low in this market cycle.
At present, however, market conditions couple valuations that are more than double pre-bubble norms (on historically reliable measures) with clear deterioration in market internals and our measures of trend uniformity. None of these factors provide support for the market here. In my view, speculators are dancing without a floor.
And it isn’t just stocks that could potentially be on the verge of a massive decline. The bond market is also experiencing an unprecedented bubble right now. And when that bubble bursts, the carnage will be unbelievable. This has become so obvious that even CNBC is talking about it…
Picture this: The bond market gets spooked by a sudden interest rate scare, sending a throng of buyers streaming toward the exits, only to find a dearth of buyers on the other side.
As a result, liquidity evaporates, yields soar, and the U.S. finds itself smack in the middle of another debt crisis no one saw coming.
It’s a scenario that TABB Group fixed income head Anthony J. Perrotta believes is not all that far-fetched, considering the market had what could be considered a sneak preview in May 2013. That was the “taper tantrum,” which saw yields spike and stocks sell off after then-Federal Reserve Chairman Ben Bernanke made remarks that the market construed as indicating rates would rise sooner than expected.
If the strength of our financial markets reflected overall strength in the U.S. economy there would not be nearly as much cause for concern.
But at this point our financial markets have become completely and totally divorced from economic reality.
The truth is that our economic fundamentals continue to decay. In fact, the IMF says that China now has the largest economy on the planet on a purchasing power basis. The era of American economic dominance is ending. It is just that the financial markets have not gotten the memo yet.
Hopefully we still have at least a few more months before stock markets all over the world start crashing. But remember, we are entering the seventh year of the seven year cycle of economic crashes that so many people are talking about these days. And we are definitely primed for a global financial collapse.
Sadly, most people did not see the crash of 2008 coming, and most people will not see the next one coming either.
A lot of people that I talk to these days want to know “when things are going to start happening”. Well, there are certainly some perilous times on the horizon, but all you have to do is open up your eyes and look to see the global economic crisis unfolding. As you will see below, even central bankers are issuing frightening warnings about “dangerous new asset bubbles” and even the World Bank is declaring that “now is the time to prepare” for the next crisis. Most Americans tend to only care about what is happening in the United States, but the truth is that serious economic trouble is erupting in South America, all across Europe and in Asian powerhouses such as China and Japan. And the endless conflicts in the Middle East could erupt into a major regional war at just about any time. We live in a world that is becoming increasingly unstable, and people need to understand that the period of relative stability that we are enjoying right now is extremely vulnerable and will not last long. The following are 18 signs that the global economic crisis is accelerating as we enter the last half of 2014…
#1 The Bank for International Settlements has issued a new report which warns that “dangerous new asset bubbles” are forming which could potentially lead to another major financial crisis. Do the central bankers know something that we don’t, or are they just trying to place the blame on someone else for the giant mess that they have created?
#2 Argentina has missed a $539 million debt payment and is on the verge of its second major debt default in 13 years.
#3 Bulgaria is desperately trying to calm down a massive run on the banks that threatens of spiral out of control.
#4 Last month, household loans in the eurozone declined at the fastest rate ever recorded. Why are European banks holding on to their money so tightly right now?
#5 The number of unemployed jobseekers in France has just soared to another brand new record high.
#6 Economies all over Europe are either showing no growth or are shrinking. Just check out what a recent Forbes article had to say about the matter…
Italy’s economy shrank by 0.1% in the first three months of 2014, matching the average of the three previous quarters. After expanding 0.6% in Q2 2013, France recorded zero growth. Portugal shrank 0.7%, following positive numbers in the preceding nine months. While figures weren’t available for Greece and Ireland in Q1, neither country is showing progress. Greek GDP dropped 2.5% in the final three months of last year, and Ireland limped ahead at 0.2%.
#7 A few days ago it was reported that consumer prices in Japan are rising at the fastest pace in 32 years.
#8 Household expenditures in Japan are down 8 percent compared to one year ago.
#9 U.S. companies are drowning in massive amounts of debt, but the corporate debt bubble in China is so bad that the amount of corporate debt in China has actually now surpassed the amount of corporate debt in the United States.
#10 One Chinese auditor is warning that up to 80 billion dollars worth of loans in China are backed by falsified gold transactions. What will that do to the price of gold and the stability of Chinese financial markets as that mess unwinds?
#11 The unemployment rate in Greece is currently sitting at 26.7 percent and the youth unemployment rate is 56.8 percent.
#12 67.5 percent of the people that are unemployed in Greece have been unemployed for over a year.
#13 The unemployment rate in the eurozone as a whole is 11.8 percent – just a little bit shy of the all-time record of 12.0 percent.
#14 The European Central Bank is so desperate to get money moving through the system that it has actually introduced negative interest rates.
#15 The IMF is projecting that there is a 25 percent chance that the eurozone will slip into deflation by the end of next year.
#16 The World Bank is warning that “now is the time to prepare” for the next crisis.
#17 The economic conflict between the United States and Russia continues to deepen. This has caused Russia to make a series of moves away from the U.S. dollar and toward other major currencies. This will have serious ramifications for the global financial system as time rolls along.
#18 Of course the U.S. economy is struggling right now as well. It shrank at a 2.9 percent annual rate during the first quarter of 2014, which was much worse than anyone had anticipated.
But if U.S. economic numbers look a bit better for the second quarter, that doesn’t mean that we are out of the woods.
As I have stressed so many times, the long-term trends and the long-term balance sheet numbers are far, far more important than the short-term economic numbers.
For example, if you went to the mall today and spent a thousand dollars on candy and video games, your short-term “economic activity” would spike dramatically. But your long-term financial health would take a significant turn for the worse.
Well, when we are talking about the health of the U.S. economy or the entire global financial system we need to keep the same kinds of considerations in mind.
As for the United States, whether the level of our debt-fueled short-term economic activity goes up a little bit or down a little bit is not what is truly important.
Rather, the fact that we are nearly 60 trillion dollars in debt as a society is what really matters.
The same thing applies for the globe as a whole. Right now, the citizens of the planet are more than 223 trillion dollars in debt, and “too big to fail” banks around the world have at least 700 trillion dollars of exposure to derivatives.
So it doesn’t really matter too much whether the short-term economic numbers go up a little bit or down a little bit right now. The whole system is an inherently flawed Ponzi scheme that will inevitably collapse under its own weight.
Let us hope that this period of relative stability lasts for a while longer. It is a good thing to have time to prepare. But you would have to be absolutely insane to think that the biggest debt bubble in the history of the world is never going to burst.
If you have been waiting for the “global economic crisis” to begin, just open up your eyes and look around. I know that most Americans tend to ignore what happens in the rest of the world because they consider it to be “irrelevant” to their daily lives, but the truth is that the massive economic problems that are currently sweeping across Europe, Asia and South America are going to be affecting all of us here in the U.S. very soon. Sadly, most of the big news organizations in this country seem to be more concerned about the fate of Justin Bieber’s wax statue in Times Square than about the horrible financial nightmare that is gripping emerging markets all over the planet. After a brief period of relative calm, we are beginning to see signs of global financial instability that are unlike anything that we have witnessed since the financial crisis of 2008. As you will see below, the problems are not just isolated to a few countries. This is truly a global phenomenon.
Over the past few years, the Federal Reserve and other global central banks have inflated an unprecedented financial bubble with their reckless money printing. Much of this “hot money” poured into emerging markets all over the world. But now that the Federal Reserve has begun “tapering” quantitative easing, investors are taking this as a sign that the party is ending. Money is being pulled out of emerging markets all over the globe at a staggering pace and this is creating a tremendous amount of financial instability. In addition, the economic problems that have been steadily growing over the past few years in established economies throughout Europe and Asia just continue to escalate. The following are 20 signs that the global economic crisis is starting to catch fire…
#1 The unemployment rate in Greece has hit a brand new record high of 28 percent.
#2 The youth unemployment rate in Greece has hit a brand new record high of 64.1 percent.
#3 The percentage of bad loans in Italy is at an all-time record high.
#4 Italian industrial output declined again in December, and the Italian government is on the verge of collapse.
#5 The number of jobseekers in France has risen for 30 of the last 32 months, and at this point it has climbed to a new all-time record high.
#6 The total number of business failures in France in 2013 was even higher than in any year during the last financial crisis.
#7 It is being projected that housing prices in Spain will fall another 10 to 15 percent as their economic depression deepens.
#8 The economic and political turmoil in Turkey is spinning out of control. The government has resorted to blasting protesters with pepper spray and water cannons in a desperate attempt to restore order.
#9 It is being estimated that the inflation rate in Argentina is now over 40 percent, and the peso is absolutely collapsing.
#10 Gangs of armed bandits are roaming the streets in Venezuela as the economic chaos in that troubled nation continues to escalate.
#11 China appears to be very serious about deleveraging. The deflationary effects of this are going to be felt all over the planet. The following is an excerpt from Ambrose Evans-Pritchard’s recent article entitled “World asleep as China tightens deflationary vice“…
China’s Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons.
The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to prick China’s $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle.
This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications.
#12 There was a significant debt default by a coal company in China last Friday…
A high-yield investment product backed by a loan to a debt-ridden coal company failed to repay investors when it matured last Friday, state media reported on Wednesday, in the latest sign of financial stress in China’s shadow bank sector.
#13 Japan’s Nikkei stock index has already fallen by 14 percent so far in 2014. That is a massive decline in just a month and a half.
#14 Ukraine continues to fall apart financially…
The worsening political and economic circumstances in Ukraine has prompted the Fitch Ratings agency to downgrade Ukrainian debt from B to a pre–default level CCC. This is lower than Greece, and Fitch warns of future financial instability.
#15 The unemployment rate in Australia has risen to the highest level in more than 10 years.
#16 The central bank of India is in a panic over the way that Federal Reserve tapering is effecting their financial system.
#17 The effects of Federal Reserve tapering are also being felt in Thailand…
In the wake of the US Federal Reserve tapering, emerging economies with deteriorating macroeconomic figures or visible political instability are being punished by skittish markets. Thailand is drifting towards both these tendencies.
#18 One of Ghana’s most prominent economists says that the economy of Ghana will crash by June if something dramatic is not done.
#19 Yet another banker has mysteriously died during the prime years of his life. That makes five “suspicious banker deaths” in just the past two weeks alone.
#20 The behavior of the U.S. stock market continues to parallel the behavior of the U.S. stock market in 1929.
Yes, things don’t look good right now, but it is important to keep in mind that this is just the beginning.
This is just the leading edge of the next great financial storm.
The next two years (2014 and 2015) are going to represent a major “turning point” for the global economy. By the end of 2015, things are going to look far different than they do today.
None of the problems that caused the last financial crisis have been fixed. Global debt levels have grown by 30 percent since the last financial crisis, and the too big to fail banks in the United States are 37 percent larger than they were back then and their behavior has become even more reckless than before.
As a result, we are going to get to go through another “2008-style crisis”, but I believe that this next wave is going to be even worse than the previous one.
So hold on tight and get ready. We are going to be in for quite a bumpy ride.
If you are anxiously awaiting the arrival of the “economic collapse”, just open up your eyes and look at what is happening in Europe. The entire continent is a giant economic mess right now. Unemployment and poverty levels are setting record highs, car sales are setting record lows, and there is an ocean of bad loans and red ink everywhere you look. Over the past several years, most of the attention has been on the economic struggles of Greece, Spain and Portugal and without a doubt things continue to get even worse in those nations. But in 2014 and 2015, Italy and France will start to take center stage. France has the 5th largest economy on the planet, and Italy has the 9th largest economy on the planet, and at this point both of those economies are rapidly falling to pieces. Expect both France and Italy to make major headlines throughout the rest of 2014. I have always maintained that the next major wave of the economic collapse would begin in Europe, and that is exactly what is happening. The following are just a few of the statistics that show that an “economic collapse” is happening in Europe right now…
-The unemployment rate in the eurozone as a whole is still sitting at an all-time record high of 12.1 percent.
-It Italy, the unemployment rate has soared to a brand new all-time record high of 12.7 percent.
-The youth unemployment rate in Italy has jumped up to 41.6 percent.
-The level of poverty in Italy is now the highest that has ever been recorded.
-Many analysts expect major economic trouble in Italy over the next couple of years. The President of Italy is openly warning of “widespread social tension and unrest” in his nation in 2014.
-Citigroup is projecting that Italy’s debt to GDP ratio will surpass 140 percent by the year 2016.
-Citigroup is projecting that Greece’s debt to GDP ratio will surpass 200 percent by the year 2016.
-Citigroup is projecting that the unemployment rate in Greece will reach 32 percent in 2015.
-The unemployment rate in Spain is still sitting at an all-time record high of 26.7 percent.
-The youth unemployment rate in Spain is now up to 57.7 percent – even higher than in Greece.
-The percentage of bad loans in Spain has risen for eight straight months and recently hit a brand new all-time record high of 13 percent.
-The number of mortgage applications in Spain has fallen by 90 percent since the peak of the housing boom.
-The unemployment rate in France has risen for 9 quarters in a row and recently soared to a new 16 year high.
-For 2013, car sales in Europe were on pace to hit the lowest yearly level ever recorded.
-Deutsche Bank, probably the most important bank in Germany, is the most highly leveraged bank in Europe (60 to 1) and it has approximately 70 trillion dollars worth of exposure to derivatives.
Europe truly is experiencing an economic nightmare, and it is only going to get worse.
It would be hard to put into words the extreme desperation that unemployed workers throughout Europe are feeling right now. When you can’t feed your family and you can’t find work no matter how hard you try, it can be absolutely soul crushing.
To get an idea of the level of desperation in Spain, check out the following anecdote from a recent NPR article…
Having trouble wrapping your head around southern Europe’s staggering unemployment problem?
Look no further than a single Ikea furniture store on Spain’s Mediterranean coast.
The plans to open a new megastore next summer near Valencia. On Monday, Ikea’s started taking applications for 400 jobs at the new store.
The company wasn’t prepared for what came next.
Within 48 hours, more than 20,000 people had applied online for those 400 jobs. The volume crashed Ikea’s computer servers in Spain.
Of course that should kind of remind you of what I wrote about yesterday. We are starting to see this kind of intense competition for low paying jobs in the United States as well.
As global economic conditions continue to deteriorate, things are going to get even tougher for those on the low end of the economic food chain. Poverty rates are going to soar, even in areas where you might not expect it to happen. In fact, one new report discovered that poverty has already been rising steadily in Germany, which is supposed to be the strongest economy in the entire eurozone…
A few days before the Christmas holidays, the Joint Welfare Association published a report on the regional development of poverty in Germany in 2013 titled “Between prosperity and poverty—a test to breaking point”. The report refutes the official propaganda that Germany has remained largely unaffected by the crisis and is a haven of prosperity in Europe.
According to the report, poverty in Germany has “reached a sad record high”. Entire cities and regions have been plunged into ever deeper economic and social crisis. “The social and regional centrifugal forces, as measured by the spread of incomes, have increased dramatically in Germany since 2006,” it says. Germany faces “a test to breaking point.”
Of course poverty continues to explode on this side of the Atlantic Ocean as well. In the United States, the poverty rate has been at 15 percent or above for three years in a row. That is the first time that this has happened since the 1960s.
And this is just the beginning. The extreme recklessness of European banks such as Deutsche Bank and U.S. banks such as JPMorgan Chase, Citibank and Goldman Sachs is eventually going to cause a financial catastrophe far worse than what we experienced back in 2008.
When that crisis arrives, the flow of credit is going to freeze up dramatically and economic activity will grind to a standstill. Unemployment, poverty and all of our current economic problems will become much, much worse.
So as bad as things are right now, the truth is that this is nothing compared to what is coming.
I hope that you are getting prepared for the coming storm while you still can.
The unemployment rate in the eurozone is higher than it has ever been before. This week we learned that eurozone unemployment came in at an all-time high of 12.2 percent for September. Back in January 2012, it was sitting at just 10.4 percent. So anyone that believes that “things are getting better” in Europe is just being delusional. In fact, the economic depression in Europe just keeps getting deeper. The funny thing is that the mainstream media will barely call what is going on in Europe a “recession” even though the unemployment rates in both Spain and Greece are now much higher than anything that the United States ever experienced during the “Great Depression” of the 1930s. There haven’t been as many headlines about the financial crisis in Europe lately because the ECB has been papering over the debt problems of the periphery (at least for the moment), but the economic conditions on the ground for average Europeans just continue to get even worse. Later on in this article, you will read about a 25-year-old Spanish man with three college degrees that moved to London in a desperate search for a job who is now cleaning up poop for a living. The economic collapse of Europe continues to march on, and there is no end in sight.
All you have to do is look at the latest unemployment numbers to realize that things are getting worse in Europe.
In Italy, the unemployment rate is up to 12.5 percent.
In January 2012, less than two years ago, it was sitting at just 8.9 percent.
In Greece, the unemployment rate is up to an astounding 27.6 percent.
In January 2012, it was sitting at just 21.4 percent.
In Spain, the unemployment rate is up to 26.6 percent.
In January 2012, it was sitting at just 22.8 percent, and all the way back in January 2008 it was just 8.6 percent.
The youth unemployment statistics in the eurozone are even more horrifying…
Unemployment among the under-25s rose by 22,000 in September to 3,548,000 – nudging up youth jobless rate to 24.1%. In France, the youth jobless rate jumped from 25.6% to 26.1%, while in Italy it increased from 40.2% to 40.4%.
But as bad as those numbers are, they are nothing compared to what is going on in Spain and Greece. In Spain, the youth unemployment rate is up to 56.5 percent, and in Greece the youth unemployment rate is up to 57.3 percent.
And of course unemployment is not the only problem that the European economy is dealing with right now. The following are some more facts about the European economy that show that the economic depression in Europe just keeps getting deeper…
-European car sales are on pace to hit a 23 year low in 2013.
-The percentage of “bad loans” in Spain has soared to a new all-time record high.
-The number of mortgage applications in Spain has fallen 90 percent since the peak of the market.
-Citigroup is projecting that the unemployment rate in Greece will reach 32 percent in 2015.
-Over the last several years, Italy has experienced the biggest collapse in GDP growth that it has ever seen. Overall, the GDP of Italy has contracted by about 8 percent since 2008.
-The number of unemployed workers in Cyprus is now five times higher than it was before the financial crisis of 2008.
-It is being projected that Spain’s debt to GDP ratio will rise to nearly 100 percent by the end of next year.
-The debt to GDP ratio of Portugal is already up to 123 percent.
-The debt to GDP ratio of Italy is already up to 127 percent.
-Even though Greece has implemented a whole host of “austerity measures”, the debt to GDP ratio of Greece is now up to 156 percent.
But what these numbers cannot really communicate is the tremendous amount of pain and despair that millions upon millions of Europeans are experiencing right now.
For example, consider the story of Benjamin Serra Bosch, a 25-year-old Spanish man that moved to London in a desperate search for a job. He has three college degrees, including a Master’s Degree from the IEBS Business School in Barcelona. The following is a rough translation of a message that he recently posted on Facebook…
My name is Benjamín Serra, I have two bachelor degrees and a master’s degree, and I clean toilets.
No, it is not a joke. I do it to pay the rent for my room in London.
I’ve been working in a famous chain of cafes in the United Kingdom since May, and for the first time today, after 5 months working there, I see it clearly. I have been cleaning toilets. My thought was: “I received distinction in my two degrees and I clean other peoples’ poop in a country that isn’t my own.” Well, I also make coffee, clean the tables and wash cups.
And I am not ashamed to do so. Cleaning is a very decent job. What embarrasses me is having to do so because no one has given me an opportunity in Spain. Like me, there are many Spaniards, especially in London. “You are a plague,” I was told once here. And let’s not kid ourselves. We are not young people on an adventure to learn the language and have new experiences. We are immigrants.
I’ve always been very proud, I am not going to deny. Those who know me, you know. And I have to bust out a smile at customers who look over my shoulder as I am simply a “barista” (as they call it here). Some are so outrageous that it makes me want to pull out my University and master degrees and put them in their face. But it would not really do anything. It appears that those titles now only serve to clean the poop that I clean from the toilets in the cafe. A pity.
I thought that it deserved something better after putting so much effort in my academic life. It seems that I was wrong.
As economic conditions continue to decline all over Europe, anger and frustration with the “European experiment” continue to grow. UKIP’s Nigel Farage expressed these sentiments very eloquently during a speech on the 23rd of October when he stated that “what we are saying, large numbers of us from every single EU member state is: we don’t want that flag, we don’t want the anthem that you all stood so ram-rod straight for yesterday, we don’t want EU passports, we don’t want political union.”
Unfortunately, the elite of Europe are so obsessed with their little experiment that the only “solutions” to these economic problems that they are even willing to consider involve even more European integration.
And Americans certainly should not be looking down their noses at what is happening in Europe.
What is going on in Italy, France, Spain and Greece will be coming here soon enough. In fact, even during the midst of this so-called “economic recovery”, poverty continues to absolutely explode in the United States.
Economic conditions in both the United States and Europe have never even gotten close to where they were prior to 2008, and now the next major wave of the economic collapse is rapidly approaching.
This is just the beginning. Things are going to get much worse in the years ahead.
Now that “bail-ins” have become accepted practice all over the planet, no bank account and no pension fund will ever be 100% safe again. In fact, Cyprus-style wealth confiscation is already starting to happen all around the world. As you will read about below, private pension funds were just raided by the government in Poland, and a “bail-in” is being organized for one of the largest banks in Italy. Unfortunately, this is just the beginning. The precedent that was set in Cyprus is being used as a template for establishing bail-in procedures in New Zealand, Canada and all over Europe. It is only a matter of time before we see this exact same type of thing happen in the United States as well. From now on, anyone that keeps a large amount of money in any single bank account or retirement fund is being incredibly foolish.
Let’s take a look at a few of the examples of how Cyprus-style wealth confiscation is now moving forward all over the globe…
For years, there have been rumors that someday the U.S. government would raid private pension funds.
Well, in Poland it just happened.
According to Reuters, private pension funds were raided in order to reduce the size of the government debt…
Poland said on Wednesday it will transfer to the state many of the assets held by private pension funds, slashing public debt but putting in doubt the future of the multi-billion-euro funds, many of them foreign-owned.
The Polish government is doing the best that it can to make this sound like some sort of complicated legal maneuver, but the truth is that what they have done is stolen private assets without giving any compensation in return…
The Polish pension funds’ organisation said the changes may be unconstitutional because the government is taking private assets away from them without offering any compensation.
Announcing the long-awaited overhaul of state-guaranteed pensions, Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings.
He said that what remained in citizens’ pension pots in the private funds will be gradually transferred into the state vehicle over the last 10 years before savers hit retirement age.
For years, Iceland has been applauded for how they handled the last financial crisis. But now it is being proposed that the “blanket guarantee” that currently applies to all bank accounts should be reduced to 100,000 euros. Will this open the door for “haircuts” to be applied to bank account balances above that amount?…
Following the crisis in October 2008, Iceland’s government declared all deposits in domestic financial institutions were ‘blanket’ guaranteed – an Emergency Act that was reafrmed twice since. However, according to RUV, the finance minister is proposing to restrict this guarantee to only deposits less-than-EUR100,000. While some might see the removal of an ‘emergency’ measure as a positive, it is of course sadly reminiscent of the European Union “template” to haircut large depositors. This is coincidental (threatening) timing given the current stagnation of talks between Iceland bank creditors and the government over haircuts and lifting capital controls – which have restricted the outflows of around $8 billion.
European finance ministers have agreed to a plan that would make “bail-ins” the standard procedure for rescuing “too big to fail” banks in the future. The following is how CNN described this plan…
European Union finance ministers approved a plan Thursday for dealing with future bank bailouts, forcing bondholders and shareholders to take the hit for bank rescues ahead of taxpayers.
The new framework requires bondholders, shareholders and large depositors with over 100,000 euros to be first to suffer losses when banks fail. Depositors with less than 100,000 euros will be protected. Taxpayer funds would be used only as a last resort.
What this means is that if you have over 100,000 euros in a bank account in Europe, you could lose every single bit of the unprotected amount if your bank collapses.
As Zero Hedge reported on Tuesday, a “bail-in” is now being organized for the oldest bank in Italy…
Recall that three weeks ago we warned that “Monti Paschi Faces Bail-In As Capital Needs Point To Nationalization” although we left open the question of “who will get the haircut including senior bondholders and depositors…. given the small size of sub-debt in the capital structures.” Today, as many expected on the day following the German elections, the dominos are finally starting to wobble, and as we predicted, Monte Paschi, Italy’s oldest and according to many, most insolvent bank, quietly commenced a bondholder “bail in” after it said that it suspended interest payments on three hybrid notes following demands by European authorities that bondholders contribute to the restructuring of the bailed out Italian lender. Remember what Diesel-BOOM said about Cyprus – that it is a template? He wasn’t joking.
As Bloomberg reports, Monte Paschi “said in a statement that it won’t pay interest on about 481 million euros ($650 million) of outstanding hybrid notes issued through MPS Capital Trust II and Antonveneta Capital Trusts I and II.” Why these notes? Because hybrid bondholders have zero protections and zero recourse. “Under the terms of the undated notes, the Siena, Italy-based lender is allowed to suspend interest without defaulting and doesn’t have to make up the missed coupons when payments resume.” Then again hybrids, to quote the Dutchman, are just the template for the balance of the bank’s balance sheet.
Why is this happening now? Simple: the Merkel reelection is in the bag, and the EURUSD is too high (recall Adidas’ laments from last week). Furthermore, if the ECB proceeds with another LTRO as many believe it will, it will force the EURUSD even higher, surging from even more unwanted liquidity. So what to do? Why stage a small, contained crisis of course. Such as a bail in by a major Italian bank. The good news for now is that depositors are untouched. Unfortunately, with depositor cash on the wrong end of the (un)secured liability continuum it is only a matter of time before those with uninsured deposits share some of the Cypriot pain. After all, in the brave New Normal insolvent world, “it is only fair.”
Fortunately, it does not appear that this particular bail-in will hit private bank accounts (at least for now), but it does show that European officials are very serious about applying bail-in procedures when a major bank fails.
The New Zealand government has been discussing implementing a “bail-in” system to deal with any future major bank failures. The following comes from a New Zealand news source…
The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.
Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.
“Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman.
“The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank.
“Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.”
Incredibly, even Canada is moving toward adopting these “bank bail-ins”. In a previous article, I explained that “bail-ins” were even part of the new Canadian government budget…
Cyprus-style “bail-ins” are actually proposed in the new Canadian government budget. When I first heard about this I was quite skeptical, so I went and looked it up for myself. And guess what? It is right there in black and white on pages 144 and 145 of “Economic Action Plan 2013″ which the Harper government has already submitted to the House of Commons. This new budget actually proposes “to implement a ‘bail-in’ regime for systemically important banks” in Canada. “Economic Action Plan 2013″ was submitted on March 21st, which means that this “bail-in regime” was likely being planned long before the crisis in Cyprus ever erupted.
So what does all of this mean for us?
It means that the governments of the world are eyeing our money as part of the solution to any future failures of major banks.
As a result, there is no longer any truly “safe” place to put your money.
One of the best ways to protect yourself is to spread your money around. In other words, don’t put all of your eggs in one basket.
If you have your money a bunch of different places, it is going to be much harder for the government to grab it all.
But if you don’t listen to the warnings and you continue to keep all of your wealth in one giant pile somewhere, don’t be surprised when you get wiped out in a single moment someday.