If you have been waiting for “the next Lehman Brothers moment” which will cause the global financial system to descend into a state of mass panic, you might want to keep a close eye on German banking giant Deutsche Bank. It is approximately three times larger than Lehman Brothers was, and if the most important bank in the strongest economy in Europe were to implode, it would instantly send shockwaves rippling across the entire planet. Those that follow my work regularly know that I started sounding the alarm about Deutsche Bank beginning last September. Since that time, the bad news from Deutsche Bank has not stopped pouring in. They announced a loss of 6.8 billion euros for 2015, Moody’s just downgraded their debt to two levels above junk status, and they have been plagued by scandal after scandal. In recent months they have gotten into trouble for trying to rig precious metal prices, for committing “equity trading fraud” and for their dealings in mortgage-backed securities. The following comes from Zero Hedge…
A month after admitting to rigging precious metals markets, Deutsche Bank has been hit with a double-whammy of more alleged fraudulent behavior today and the stock is sliding. First, Reuters reports that the bank took a charge of 450 million euros for “equity trading fraud,” and then Bloomberg reports that The SEC is looking into Deutsche’s post-crisis mortgage positions.
This is a bank that is steadily bleeding money, and so the last thing that it needs is for government agencies to be putting immense pressure on it. Unfortunately for Deutsche Bank, the SEC seems determined to kick it while it is down…
Troubled Wall Street giant Deutsche Bank is under another investigation, this time by the Securities and Exchange Commission regarding the pricing and reporting of certain mortgage-backed securities.
The SEC wants to know whether the Frankfurt, Germany-based bank artificially raised the value of mortgage-backed securities in 2013 and later hid those losses for an extended period of time, Bloomberg first reported, citing people familiar with the matter.
But even if there were no scandals and no government investigations, the truth is that Deutsche Bank would be a deeply troubled bank anyway.
At one point, it was estimated that Deutsche Bank had 64 trillion dollars worth of exposure to derivatives contracts. That is an amount of money that is approximately 16 times the size of the GDP of the entire nation of Germany.
So nobody wants to see Deutsche Bank fail. It would be a financial disaster unlike anything the world has ever experienced before.
But right now things are not looking good. As you can see from this chart, the steady decline of Deutsche Bank’s stock price is eerily similar to what happened to Lehman Brothers during the months leading up to the time when it finally completely collapsed…
Earlier this year, Deutsche Bank’s stock price set a new record low, and since that time it has been hovering just above that record low.
Clearly it is no secret that Deutsche Bank is having big problems, and the outlook for the immediate future is not good. I included the following quote from Berenberg analyst James Chappell in a previous article, but I think that it bears repeating…
Too many problems still: The biggest problem is that DBK has too much leverage. On our measures, we believe DBK is still over 40x levered. DBK can either reduce assets or increase capital to rectify this. On the first path, the markets do not exist in the size nor pricing to enable it to follow this route. Going down the second path also seems impossible at the moment, as the profitability of the core business is under pressure. Seeking outside capital is also likely to be difficult as management would likely find it hard to offer any type of return on new capital invested.
In the end, I believe that Deutsche Bank will ultimately implode, but it won’t be the only one.
Meanwhile, we just got some more very disturbing news out of Asia. According to Bloomberg, Japanese exports have now fallen for seven months in a row…
Japan’s exports fell for a seventh consecutive month in April as the yen strengthened, underscoring the growing challenges to Prime Minister Shinzo Abe’s efforts to revive economic growth.
Overseas shipments declined 10.1 percent in April from a year earlier, the Ministry of Finance said on Monday. The median estimate of economists surveyed by Bloomberg was for a 9.9 percent drop. Imports fell 23.3 percent, leaving a trade surplus of 823.5 billion yen ($7.5 billion), the highest since March 2010.
When your imports are 23 percent lower than they were a year earlier, that is a clear sign that consumer demand is way, way down and that your economy is in the process of imploding.
So I will repeat what I have said a number of times before…
Watch Germany and watch Japan.
I believe that they are going to be two of the biggest stories as this new global financial crisis begins to play out.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
Mainstream news outlets are already starting to use the phrase “economic collapse” to describe what is going on in some areas of our world right now. For many Americans this may seem a bit strange, but the truth is that the worldwide economic slowdown that began during the second half of last year is starting to get a lot worse. In this article, we are going to examine evidence of this from South America, Europe, Asia and North America. Once we are done, it should be obvious that there is absolutely no reason to be optimistic about the direction of the global economy right now. The warnings of so many prominent experts are now becoming a reality, and what we have witnessed so far are just the early chapters of a crushing economic crisis that will affect every man, woman and child in the entire world.
Let’s start with Brazil. It has the 7th largest economy on the entire planet, and it is already enduring its worst recession in 25 years. In fact, at the end of last year Goldman Sachs said that what was going on down there was actually a “depression“.
But now the crisis in Brazil has escalated significantly.
I want to share with you an excerpt from a recent article entitled “Brazil: Economic collapse worse than feared“. I know, that title sounds like it comes directly from The Economic Collapse Blog, but I didn’t write it.
It actually comes from CNN…
Amid political chaos, Brazil’s economic collapse is worse than its government once believed.
In the midst of rising calls to impeach President Dilma Rousseff, Brazil’s central bank announced Thursday that it now expects the country’s economy to shrink 3.5% this year.
That’s worse than the central bank’s previous estimate for a 1.9% contraction. The darker forecast matches what the International Monetary Fund projected for Brazil — Latin America’s largest country — and what many independent economists have suspected.
It is one thing for Michael Snyder to tell you that Brazil is in the midst of “economic collapse”, but it is another thing entirely for CNN to say it.
And of course I have been warning about the crisis down in Brazil for quite some time now. For much more on this, please see my previous article entitled “The Economic Collapse Of South America Is Well Underway“.
Meanwhile, things are actually much worse in Venezuela than they are in Brazil. Food and basic supplies are in short supply, the inflation rate has hit 720 percent, and crime is completely out of control.
The following is from an article in the Independent entitled “Venezuela is on the brink of complete economic collapse“…
The only question now is whether Venezuela’s government or economy will completely collapse first.
The key word there is “completely.” Both are well into their death throes. Indeed, Venezuela’s ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it’s hard to see that getting any better for them any time soon — or ever.
Incumbents, after all, don’t tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It’s no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.
Once again we see a very respected mainstream publication using the phrase “economic collapse” to describe what is happening in South America.
You can find some stunning video of the “economic Armageddon” that is taking place in Venezuela right here. I would encourage you to watch that video, because what is happening down there will eventually be happening here.
Meanwhile, over in Europe the collapse of the Italian banking system has entered a disturbing new chapter. Italy’s finance minister has called a meeting in Rome for Monday that will be focusing on a “last resort” bailout plan for the troubled banks…
Finance minister Pier Carlo Padoan has called a meeting in Rome on Monday with executives from Italy’s largest financial institutions to agree final details of a “last resort” bailout plan.
Yet on the eve of that gathering, concerns remain as to whether the plan will be sufficient to ringfence the weakest of Italy’s large banks, Monte dei Paschi di Siena, from contagion, according to people involved in the talks.
Italian bank shares have lost almost half their value so far this year amid investor worries over a €360bn pile of non-performing loans — equivalent to about a fifth of GDP. Lenders’ profitability has been hit by a crippling three-year recession.
As Italy descends into financial chaos, the rest of the continent better be paying attention.
Do you remember how hard it was for the rest of Europe to rescue Greece?
Well, Greece has the 44th largest economy on the planet.
Italy has the 8th.
It would be hard to overstate the seriousness of what is going on over in Europe, and it is not just Italy we are talking about. All over the continent major banks are in deep trouble, and the chairman of France’s second largest retail bank recently told reporters that “I am much more worried than I was in 2009“.
And there is very good reason for concern. On Sunday, we learned that a major “bail-in” had just been announced for one of Austria’s most prominent banks. The following comes from Zero Hedge…
And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.
The highlights from the announcement:
Today, the Austrian Financial Market Authority (FMA) in its function as the resolution authority pursuant to the Bank Recovery and Resolution Act (BaSAG – Bundesgesetz über die Sanierung und Abwicklung von Banken) has issued the key features for the further steps for the resolution of HETA ASSET RESOLUTION AG. The most significant measures are:
- a 100% bail-in for all subordinated liabilities,
- a 53.98% bail-in, resulting in a 46.02% quota, for all eligible preferential liabilities,
- the cancellation of all interest payments from 01.03.2015, when HETA was placed into resolution pursuant to BaSAG,
- as well as a harmonisation of the maturities of all eligible liabilities to 31.12.2023.
According to the current resolution plan for HETA, the wind-down process should be concluded by 2020, although the repayment of all claims as well as the legally binding conclusion of all currently outstanding legal disputes will realistically only be concluded by the end of 2023. Only at that point will it be possible to finally distribute the assets and to liquidate the company.
The dominoes are starting to fall in Europe, and I would expect even bigger announcements in the weeks and months to come.
Over in Asia, economic chaos is beginning to prevail as well.
In China, the stock market is already down more than 40 percent from the peak, Chinese exports were down 25.4 percent on a year over year basis in February, and Chinese economic numbers overall have not been this poor since the depths of the last global recession.
At the same time, the Japanese economy is really struggling right now. As I wrote about the other day, Japanese GDP has shrunk for two out of the last three quarters, we just saw Japanese industrial production experience the biggest one month decline that we have witnessed since the tsunami of 2011, and business sentiment has fallen to a three year low. The Nikkei has dropped by about 5,000 points from where it was last summer, and some analysts believe that Japanese markets “are being destroyed” due to massive intervention by the Bank of Japan.
Here in the United States, we haven’t been hit quite as hard as the rest of the world just yet, but there are lots of very disturbing warning signs all around us.
At the end of last week, we learned that it is being projected that U.S. GDP will have grown by just 0.1 or 0.2 percent during the first quarter of 2016. And on Monday corporate earnings reporting season begins, and it is expected to be a very, very bad one. The following comes from Business Insider…
We are about to get confirmation that earnings growth for America’s biggest companies was negative in the first quarter, compared to the same period a year ago.
When aluminum giant Alcoa releases its results on Monday, it will mark the unofficial start of the heaviest reporting season for S&P 500 companies.
The final scoreboard is expected to show a 9.1% earnings drop for the quarter, according to FactSet senior earnings analyst John Butters.
If these projections turn out to be accurate, it will be the fourth quarter in a row of earnings declines. This is something that we never see outside of a recession.
And for a whole bunch more numbers which indicate that the U.S. economy is in very serious trouble, please see my previous article entitled “19 Facts That Prove Things In America Are Worse Than They Were Six Months Ago“.
Of course I am just another voice in the crowd when it comes to predicting that the U.S. economy is headed for rough times. For example, just check out what Societe Generale economist Albert Edwards is saying…
A tidal wave is coming to the US economy, according to Albert Edwards, and when it crashes it’s going to throw the economy into recession.
…the profit recession facing American corporations is going to lead to a collapse in corporate credit.
“Despite risk assets enjoying a few weeks in the sun our fail-safe recession indicator has stopped flashing amber and turned to red”
Whole economy profits never normally fall this deeply without a recession unfolding. And with the US corporate sector up to its eyes in debt, the one asset class to be avoided — even more so than the ridiculously overvalued equity market — is US corporate debt. The economy will surely be swept away by a tidal wave of corporate default.
As you can see, it isn’t just one nation or one region of the world that we need to be concerned about.
Economic chaos is erupting literally all over the planet, and global leaders are starting to panic.
Unfortunately, they have had seven years to try to fix things since the last global recession, and they didn’t get the job done. Anyone that believes that by some miracle they will be able to pull us out of the fire this time and that everything will somehow be okay is simply engaged in wishful thinking.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
The recent attacks in Paris and in Brussels were just the tip of the iceberg of a massive wave of Islamic terror that is soon coming to Europe. As you will see below, the Associated Press is reporting that ISIS has specially trained “at least 400 attackers” and has already sent them into Europe with specific instructions to conduct terror operations. So Barack Obama may not think that we have anything to be concerned about, but the facts on the ground tell us a completely different story. Thanks to Europe’s openness to “war refugees” from Syria, it is very easy for radical jihadists to get into countries such as France, Belgium and Germany. And once they are on European soil, there are plenty of other disgruntled Islamic refugees that they can recruit to their cause. Europe stands on the precipice of the greatest terror crisis that it has ever known, and the attacks that are coming next are likely to be far more deadly than anything we have seen so far.
As I mentioned above, the Associated Press is reporting that ISIS has already sent “at least 400″ trained fighters into Europe for the purpose of conducting terror attacks…
Security officials have told The Associated Press that the Islamic State group has trained at least 400 attackers and sent them into Europe for terror attacks.
The network of interlocking, agile and semiautonomous cells shows the reach of the extremist group in Europe even as it loses ground in Syria. The officials, including European and Iraqi intelligence officials and a French lawmaker who follows the jihadi networks, describe camps designed specifically to train for attacks against the West.
And just in case you were tempted to think that this threat was not real, you may want to consider what happened in France on Thursday.
According to NBC News, police in Paris were able to foil a terror attack that was in “the advanced stages” of planning…
Raids in northwest Paris have foiled a terrorist attack, French officials said late Thursday.
French Interior Minister Bernard Cazeneuve gave a press conference in Paris announcing there was an operation underway in Argenteuil, a commune in the northwest suburbs of Paris.
One man was arrested Thursday morning Cazeneuve said, adding that the operation thwarted a potential attack. Police were raiding his home again later Thursday evening.
The suspect was a French national who was in “the advanced stages” of a terror plot, the minister said, calling it a “major arrest.”
Of course much of the rest of the world is already solidly in the grip of Islamic terror. The number of people killed by Islamic terror attacks has been increasing year after year, but the western media only seems to get excited when an attack happens in North America or Europe.
I came across the following tweet earlier today, and it makes this point perfectly…
For instance, did you even hear about the horrific Islamic terror attack that happened in the Ivory Coast earlier this month? Gunmen opened fire on a very crowded beach in a key resort area on a beautiful Sunday afternoon, and Al-Qaeda in the Islamic Maghreb claimed responsibility for the bloodshed. The following comes from the New York Times…
Gunmen opened fire on picnickers and swimmers enjoying a perfect day at three beach resort hotels near the Ivory Coast’s capital on Sunday, killing 16 people and leaving bodies strewn across the bloodstained sand. It was the third major attack in West Africa since November, and verified fears that the spread of terrorism across the region was far from over.
The attack, on the first sunny Sunday in weeks, took place in Grand-Bassam, a popular palm tree-lined getaway for Ivorians and foreigners. Fourteen civilians and two members of the country’s special forces were killed, as well as six gunmen, according to a spokeswoman for the president.
So why do we get so bent out of shape when there is an attack in France or Belgium, but not when there is an attack in the Ivory Coast?
And what does that say about us?
As ISIS and other Islamic terror groups conduct more attacks in North America and Europe, the pressure to conduct military action in the Middle East is going to become very intense. For a long time I have been warning about the potential for World War III to erupt in Syria, and U.S. troops are already taking on a more prominent role in Iraq.
In fact, the International Business Times is reporting that U.S. marines are now “on the front line” in the fight against the Islamic State…
The Islamic State group is trying to retake control of the oil fields it lost two years ago in the semi-autonomous region of Iraqi Kurdistan by launching rockets at Kurdish and Iraqi soldiers. In an attempt to earn back the massive amount of cash it used to fund its international terrorism in 2014, the group has focused its resources on attacking Makhmur, a city just 75 miles miles from the oil-rich city of Kirkuk. So far, the group, also known as ISIS, has succeeded in outgunning the Iraqi forces in the city, but a new contingent of American Marines might change the outcome on the ground.
“Several weeks ago, thousands of Iraqi troops began occupying a tactical assembly area in Makhmur. This is part of the force generation associated with the liberation of Mosul,” Col. Steve Warren, spokesman for the fight against ISIS in Iraq and Syria, said in a press briefing this week. Mosul is the de facto ISIS headquarters in Iraq. “These Iraqi forces, along with their coalition advisers, require force protection,” Warren said. “So we constructed a small fire base to do just that.”
The U.S. Marines in Iraq are on the front line and have been tasked with protecting Iraqi units in Makhmur — a scenario President Barack Obama wanted to avoid as long as possible during his time in office.
And what happens when ISIS or another terror group is able to set off a chemical, biological or nuclear weapon in a major western city?
That would change the world literally overnight.
As I have been warning, most people have no idea how incredibly fragile our society truly is. Humanity has created weapons that are frighteningly powerful, and it is only a matter of time before terrorists acquire these weapons and begin using them.
The free and open society that we are all enjoying today is on borrowed time.
All it is going to take is the detonation of a single weapon of mass destruction in a major western city and everything will change.
The horrific terror attacks in Brussels, Belgium on March 22, 2016 are going to reverberate in our memories for years to come, and perhaps that was the intention. Terror attacks are designed to create fear and to get attention, and these attacks have definitely done both. On Tuesday morning, two huge explosions ripped through Zaventem Airport in Brussels as travelers were getting ready to board their morning flights. You can view some raw footage of one of the bomb blasts right here. Just a short while later, another huge explosion was reported at a metro station just yards away from the European Commission headquarters. At this point, CNN says that at least 30 people have died and about 230 people are wounded as a result of these bombings. But what was the real motive for these attacks? The following are 7 strange questions about the Brussels terror attacks that the mainstream media is not asking…
#1 Why would Brussels be such a prime target for terror attacks?
Most Americans don’t understand how important the city of Brussels is. For one thing, it is the headquarters of the NATO alliance, and defense ministers from 49 different nations met there last month to discuss a potential ground invasion of Syria.
Secondly, it is also the unofficial capital of the European Union. The following comes from Wikipedia…
“The European Union has no official capital, and no plans to declare one, but Brussels hosts the official seats of the European Commission, Council of the European Union, and European Council, as well as a seat (officially the second seat but de facto the most important one) of the European Parliament.”
Over the years Brussels has become a key symbol for European integration, so if you wanted to conduct an attack that the entire European Union would feel, Brussels would be a good choice. And many European leaders are already coming out and declaring that the attack on Brussels was an attack on Europe as a whole…
French President Francois Hollande said Tuesday’s attacks in Brussels that killed at least 26 people struck at “the whole of Europe”.
“Through the attacks in Brussels, the whole of Europe has been hit,” Hollande said in a statement, urging the continent to take “vital steps in the face of the seriousness of the threat”.
French Prime Minister Manuel Valls said: “We are at war. Over the past few months in Europe, we have endured several acts of war.”
#2 Was Donald Trump right about Brussels?
During an interview with Fox Business Network anchor Maria Bartiromo earlier this year, Donald Trump specifically pointed to Brussels as an example of what he wanted to avoid in this country…
The Republican presidential front-runner said Brussels, the capital of Belgium, had been particularly transformed. Belgium has been home to a number of recent terror plots, and was linked to the November attack on Paris, France, that left 130 people dead.
“You go to Brussels — I was in Brussels a long time ago, 20 years ago, so beautiful, everything is so beautiful — it’s like living in a hellhole right now,” Trump continued. “You go to these different places. There is something going on.”
#3 Why are there some Islamic ghettos in Brussels that are considered to be “off-limits” for non-Muslims?
Of course this is not just true in Brussels. All over Europe there are sections of major cities that have been completely and totally taken over by radical Muslims. In Belgium, the rapid growth of the Islamic community has some politicians dreaming of turning that nation into a Sharia-compliant country within just a couple of decades. The following comes from Infowars…
These ghettos, which are in fact large areas of Brussels, are considered off-limits to Europeans and radical Muslims will likely comprise the majority of the population within 20 years.
“I think we have to sensitize people, make them understand the advantages to having Islamic people and Islamic laws, and then it will be completely natural to have Islamic laws and we will become an Islamic state,” a Muslim politician from Brussels, Redouane Ahrouch, said to a reporter in 2012. “In Belgium, of course!”
“I am for the Sharia. Islamic law, I am for it. It is a long-term struggle that will take decades or a century, but the movement has been launched.”
#4 Does 3/22 have special occult significance?
There are some people out there that are suggesting that it was no accident that these attacks happened on 3/22. And without a doubt, we have seen other events of this nature fall on dates that have special significance for the occult. I do not know exactly what to make of all of this, but we do know that 322 is extremely significant to the Skull and Bones Society at Yale University (of which George W. Bush and John Kerry are members)…
#5 Why did Barack Obama spend less than a minute talking about the terror attacks in Brussels during his speech down in Cuba?
You would think that something this historic would deserve more than 51 seconds, but this is precisely the kind of behavior that we have come to expect from Obama over the years.
#6 Is it odd that the mainstream media so quickly reported that ISIS took full responsibility for these attacks?
It is entirely possible that ISIS was behind these attacks. But it is also entirely possible that these attacks are being blamed on ISIS by other parties with ulterior motives.
What we do know is that a “bulletin” supposedly from the Islamic State was posted on Tuesday which took full responsibility for the bombings. The following comes from WND…
“Islamic State fighters carried out a series of bombings with explosive belts and devices on Tuesday, targeting an airport and a central metro station in the center of the Belgian capital, Brussels, a country participating in the coalition against the Islamic State,” the bulletin said. “Islamic State fighters opened fire inside the Zaventem airport, before several of them detonated their explosive belts, as a martyrdom bomber detonated his explosive belt in the Maelbeek metro station.”
#7 Will the terror attacks in Brussels be used to justify a ground invasion of Syria?
These attacks have produced a tremendous amount of outrage in the western world, and already many prominent voices are calling for a U.S.-led invasion of Syria in order to finally put a permanent end to ISIS.
In fact, a former top adviser to Hillary Clinton started calling for a Syrian invasion within just hours of the attacks…
A former adviser to Hillary Clinton on Syria, Frederic C. Hof, now a Resident Senior Fellow at the Atlantic Council’s Rafik Hariri Center for the Middle East, has called for invading Syria in the wake of the deadly attacks in Brussels.
“For the better part of a year, one clear recommendation has been on the table: assemble an American-led, coalition-of-the-willing, professional ground component—one top-heavy in regional and European forces—to enter eastern Syria to close with and kill ISIS. Engaging the Syrian opposition at all levels, consistent with an executable civil-military stabilization plan, can produce an administrative structure for an ISIS-free eastern Syria. Killing ISIS in Syria can ease the migration crisis and hasten the demise of this murderous band in Iraq. And it can demonstrate to the credulously stupid that linking up with losers will be a one-way trip to self-destruction,” Hof writes.
Last month, I received quite a bit of criticism for suggesting that we could be on the verge of World War 3. But the truth is that Saudi Arabia and Turkey remain absolutely committed to the removal of the Assad regime, and now these Brussels terror attacks have conveniently shifted sentiment in Europe and in the United States in favor of a ground operation in Syria.
The current ceasefire in Syria is on the verge of completely falling apart, and if an American-led coalition does invade, that could very easily spark a major regional war. The Russians, the Iranians and Hezbollah are not just going to sit back and watch as the U.S., Saudi Arabia, Turkey and their allies march to Damascus and remove Assad.
I keep trying to warn people that 2016 is the year when everything changes, and I have a feeling that these terror attacks in Belgium are going to turn out to be exceedingly significant.
Our world is becoming more unstable with each passing day, and sometimes all it takes is a little shove to set us on a path that we never intended to go down.
I don’t have all the answers, but unlike the mainstream media, at least I am not afraid to ask the hard questions…
Should central banks create money out of thin air and give it directly to governments and average citizens? If you can believe it, this is now under serious consideration. Since 2008, global central banks have cut interest rates 637 times, they have injected 12.3 trillion dollars into the global financial system through various quantitative easing programs, and we have seen an explosion of government debt unlike anything we have ever witnessed before. But despite these unprecedented measures, the global economy is still deeply struggling. This is particularly true in Japan, in South America, and in Europe. In fact, there are 16 countries in Europe that are experiencing deflation right now. In a desperate attempt to spur economic activity, central banks in Europe and in Japan are playing around with negative interest rates, and so far they seem to only have had a limited effect.
So as they rapidly run out of ammunition, global central bankers are now openly discussing something that might sound kind of crazy. According to the Telegraph, central banks are becoming increasingly open to employing a tactic known as “helicopter money”…
Faced with political intransigence, central bankers are openly talking about the previously unthinkable: “helicopter money”.
A catch-all term, helicopter drops describe the process by which central banks can create money to transfer to the public or private sector to stimulate economic activity and spending.
Long considered one of the last policymaking taboos, debate around the merits of helicopter money has gained traction in recent weeks.
Do you understand what is being said there?
The idea is basically this – central banks would create money out of thin air and would just give it to national governments or ordinary citizens.
So who would decide who gets the money?
Well, they would.
If you are anything like me, this sounds very much like Pandora’s Box being opened.
But this just shows how much of a panic there is among central bankers right now. They know that we are plunging into a new global economic crisis, and they are desperate to find something that will stop it. And if that means printing giant gobs of money and dropping it from helicopters over the countryside, well then that is precisely what they are going to do.
In fact, the chief economist at the European Central Bank is quite adamant about the fact that the ECB can print money out of thin air and “distribute it to people” when the situation calls for it…
ECB chief Mario Draghi has refused to rule out the prospect, saying only that the bank had not yet “discussed” such matters due to their legal and accounting complexity. This week, his chief economist Peter Praet went further in hinting that helicopter drops were part of the ECB’s toolbox.
“All central banks can do it“, said Praet. “You can issue currency and you distribute it to people. The question is, if and when is it opportune to make recourse to that sort of instrument“.
Apparently memories of the Weimar Republic must have faded over in Europe, because this sounds very much like what they tried to do. I don’t know why anyone would ever want to risk going down that road again.
Here in the United States, the Federal Reserve is not openly talking about “helicopter money” just yet, but that is only because the stock market is doing okay for the moment.
Most Americans don’t realize this, but the primary reason why stocks are doing better in the U.S. than in the rest of the world is because of stock buybacks. According to Wolf Richter, corporations spent more than half a trillion dollars buying back their own stocks over the past 12 months…
During the November-January period, 378 of the S&P 500 companies bought back their own shares, according to FactSet. Total buybacks in the quarter rose 5.2% from a year ago, to $136.6 billion. Over the trailing 12 months (TTM), buybacks totaled $568.9 billion.
When corporations buy back their own stocks, that means that they are slowly liquidating themselves. Instead of pouring money into new good ideas, they are just returning money to investors. This is not how a healthy economy should work.
But corporate executives love stock buybacks, because it increases the value of their stock options. And big investors love them too, because they love to see the value of their stock holdings rise.
So we will continue to see big corporations cannibalize themselves, but there are a couple of reasons why this is starting to slow down.
Number one, corporate profits are starting to fall steadily as the economy slows down, so there will be less income to plow into these stock buybacks.
Number two, many corporations have used debt to fund buybacks, but now it is getting tougher for corporations to get new funding as corporate defaults rise.
As stock buybacks slow, this is going to put downward pressure on the market, and we will eventually catch up with the rest of the planet. At this point, many experts are still calling for stocks to fall by another 40, 50 or 60 percent from current levels. For example, the following comes from John Hussman…
From a long-term investment standpoint, the stock market remains obscenely overvalued, with the most historically-reliable measures we identify presently consistent with zero 10-12 year S&P 500 nominal total returns, and negative expected real returns on both horizons.
From a cyclical standpoint, I continue to expect that the completion of the current market cycle will likely take the S&P 500 down by about 40-55% from present levels; an outcome that would not be an outlier or worst-case scenario, but instead a rather run-of-the-mill cycle completion from present valuations. If you are a historically-informed investor who is optimistic enough to reject the idea that the financial markets are forever doomed to extreme valuations and dismal long-term returns, you should be rooting for this cycle to be completed. If you are a passive investor, you should at least align your current exposure with your investment horizon and your tolerance for cyclical risk, which we expect to be similar to what we anticipated in 2000-2002 and 2007-2009.
When the S&P 500 does fall that much eventually, the Federal Reserve will respond with emergency measures.
So yes, we may see “helicopter money” employed in Japan and in Europe first, but we will see it here someday too.
I know that a lot of people out there are feeling pretty good about things for the moment because U.S. stocks have rebounded quite a bit lately. But remember, the fundamental economic numbers just continue to get even worse. Just today we learned that existing home sales in the United States had fallen by the most in six years. That is definitely not a sign that things are “getting better”, and I keep trying to warn people that tumultuous times are dead ahead.
And if global central bankers did not agree with me, they would not be talking about the need for “helicopter money” and other emergency measures.
Millions of women in Europe are now deathly afraid to walk outside their own homes at night, and with each passing day more news reports of absolutely horrific rapes and sexual assaults come pouring in from all over the continent. So who is to blame for this epidemic of rape? I think that the answer might surprise you, because a very famous politician in the United States is at least partially responsible. But first, let’s examine why women all over Europe are living in such fear right now. I have written previously about this rape epidemic, but since that time it has gotten even worse. At this point, this plague is even affecting small towns in the far northern portions of the continent. For example, just consider what is happening in a small town in northern Sweden known as Ostersund…
Women in a town in northern Sweden have been warned not to walk alone at night in the wake of a spike in violent assaults and attempted rapes.
Police in Östersund made the unusual move to ask women not to go out unaccompanied after dark, after reports of eight brutal attacks, some by ‘men of foreign appearance’, in just over two weeks.
Speaking at a press conference on Monday, police said they ‘have never seen anything like it in Östersund’, a small town in the north of Sweden with a population of just 45,000.
Of course things were not always this way in Sweden.
At one time, Sweden had some of the lowest rates of violent crime in the world, but now the number of reported rapes in Sweden has risen by more than 1,000 percent since the mid-1970s.
So what is causing this?
A massive influx of immigrants from the Middle East and other third world nations is fundamentally changing Swedish society. During 2015, Sweden brought in an additional 163,000 migrants and refugees, and that was the highest level in all of Europe per capita.
Politically-correct Swedish citizens have opened up their arms to warmly welcome their new friends, but all of this kindness has not prevented an absolutely chilling wave of sexual crime. In particular, public pools have quickly gained a reputation as places where young Swedish women are very likely to be raped or sexually assaulted. The following is an excerpt from an outstanding article by Ingrid Carlqvist…
In 2015, when roughly 163,000 asylum seekers came to Sweden, the problems at public pools increased exponentially. More than 35,000 young people, so-called “unaccompanied refugee children,” arrived — 93% of whom are male and claim to be 16-17 years old. To prevent complete idleness, many municipalities give them free entrance to the public pools.
During the past few months, the number of reports of sexual assaults and harassment against women at public pools has been overwhelming. Most of the “children” are from Afghanistan, widely considered among the most dangerous places in the world for women. When the daily Aftonbladet visited the country in 2013, 61-year-old Fatima told the paper what it is like to be a woman in Afghanistan: “What happens if we do not obey? Well, our husbands or sons beat us of course. We are their slaves.”
In her article, Carlqvist lists example after example of sex attacks by immigrants at public pools. This is just one of those examples…
On January 21, there were reports that the number of sexual assaults had increased dramatically at the Aquanova adventure pool in Borlänge. In 2014, one case was reported; in 2015, about 20 cases were reported. The incidents involved women having their bikinis ripped off, being groped in the water slide and sexually assaulted in the restrooms. Ulla-Karin Solum, the CEO of Aquanova, told the public broadcaster Sveriges Television that many incidents “are due to cultural clashes.”
And this kind of sexual violence is not just limited to Sweden. Wherever there has been a large influx of refugees we are seeing the same things happen.
Here is one recent example from Belgium…
HORRIFIC footage has emerged of a group of young men, including five migrants, laughing, dancing and singing in Arabic as they gang rape an unconscious 17-year-old girl.
It is believed the attack happened after the girl passed out after drinking at a party.
One of the rapists later told police: “She can’t complain. Women must obey men.”
Next, here is an example from Germany…
An Algerian man who almost killed his 25-year-old student victim shouted out ‘if Allah wills it’ in Arabic as he raped her in a darkened alley, a court has heard.
The man, identified only by his first name Rheda, is accused of following the student as she walked home from a nightclub at 5am in Hannover, Germany.
Afterwards, with his victim badly beaten, he is alleged to have climbed off her and asked her if she enjoyed it.
Finally, here is a particularly disturbing example from Austria…
An Iraqi migrant has admitted to raping a ten year old boy in a Viennese swimming pool so ferociously that the boy had to be hospitalised for his injuries. The man said he knew it was wrong but couldn’t help himself as he hadn’t had sex in months.
Police investigators have ascertained that the 20 year old man entered Austria on the 13th September, travelling into the country via the Balkans.
Because most European leaders are so politically correct, they simply cannot face the truth.
In fact, some top European politicians have resorted to blaming the victims in a desperate attempt to maintain the fiction that these immigrants are responsible citizens…
One particularly divisive issue is the extent to which officials have tended to “blame the victim”, so to speak. For instance, Cologne mayor Henriette Reker drew sharp criticism for suggesting that it was German womens’ duty to prevent assaults by keeping would-be assailants “at arm’s length.”
Then there was the now infamous case of the 17-year-old Danish girl who faced a fine from police after she allegedly used “illegal” pepper spray to deter an attacker.
Okay, I promised that I would reveal a top politician in the United States that is at least partially responsible for this epidemic of rape. So let me try to explain how I arrived at my conclusion.
Most of the immigrants that are flooding into Europe are coming from areas that have been ravaged by war. In particular, more immigrants are flooding into Europe from Syria than anywhere else.
If we go back five years ago, Syria was actually a very peaceful place. In the early portions of 2011, the Arab Spring was raging, and leaders all over the Middle East were being deposed. At that time, a decision was made by officials in the Obama administration that it would be an ideal opportunity to overthrow the Assad regime in Syria as well.
Saudi Arabia, Turkey and their Sunni allies in the region were quite eager to get rid of Assad. Syria is part of “the Shiite crescent” that stretches across the Middle East, but 74 percent of all Syrians are actually Sunni. So the idea was to create a “popular uprising” that would overthrow Assad, and Syria would then be transformed into a full-fledged Sunni nation and the balance of power in the Middle East would be fundamentally altered.
This effort was spearheaded by U.S. Secretary of State Hillary Clinton. Huge protests were organized against Assad in Syria, and those protests rapidly turned violent. A civil war began, and members of “the coalition” poured millions upon millions of dollars into jihadist groups that were attempting to overthrow Assad. And at first the plan was working well. The “resistance” was taking lots of ground and it looked like they were going to be able to push all the way to Damascus and topple Assad.
But then Assad enlisted the help of Iran, Hezbollah, Shiite militias from Iran and most importantly the Russians.
Russian air power has completely turned the tide of the war, and now the Sunni militant groups are being routed. This is why Saudi Arabia and Turkey are in such a panic, and they are looking to the Obama administration to finish what it started.
Of course all of this has brought us to the brink of World War 3, and most Americans have absolutely no idea how we got here.
And it is this horrific conflict in Syria which Hillary Clinton played such a key role in starting that has caused the worst refugee crisis that Europe has experienced since World War 2.
So how will Hillary Clinton be rewarded for her fine work?
Well, it appears quite likely that she is going to become the next president of the United States, and that is a very, very depressing thought.
The Italian banking system is a “leaning tower” that truly could completely collapse at literally any moment. And as Italy’s banks begin to go down like dominoes, it is going to set off financial panic all over Europe unlike anything we have ever seen before. I wrote about the troubles in Italy back in January, but since that time the crisis has escalated. At this point, Italian banking stocks have declined a whopping 28 percent since the beginning of 2016, and when you look at some of the biggest Italian banks the numbers become even more frightening. On Monday, shares of Monte dei Paschi were down 4.7 percent, and they have now plummeted 56 percent since the start of the year. Shares of Carige were down 8 percent, and they have now plunged a total of 58 percent since the start of the year. This is what a financial crisis looks like, and just like we are seeing in South America, the problems in Italy appear to be significantly accelerating.
So what makes Italy so important?
Well, we all saw how difficult it was for the rest of Europe to come up with a plan to rescue Greece. But Greece is relatively small – they only have the 44th largest economy in the world.
The Italian economy is far larger. Italy has the 8th largest economy in the world, and their government debt to GDP ratio is currently sitting at about 132 percent.
There is no way that Europe has the resources or the ability to handle a full meltdown of the Italian financial system. Unfortunately, that is precisely what is happening. Italian banks are absolutely drowning in non-performing loans, and as Jeffrey Moore has noted, this potentially represents “the greatest threat to the world’s already burdened financial system”…
Shares of Italy’s largest financial institutions have plummeted in the opening months of 2016 as piles of bad debt on their balance sheets become too high to ignore. Amid all of the risks facing EU members in 2016, the risk of contagion from Italy’s troubled banks poses the greatest threat to the world’s already burdened financial system.
At the core of the issue is the concerning level of Non-Performing Loans (NPL’s) on banks’ books, with estimates ranging from 17% to 21% of total lending. This amounts to approximately €200 billion of NPL’s, or 12% of Italy’s GDP. Moreover, in some cases, bad loans make up an alarming 30% of individual banks’ balance sheets.
Things have already gotten so bad that the European Central Bank is now monitoring liquidity levels at Monte dei Paschi and Carige on a daily basis. The following comes from Reuters…
The European Central Bank is checking liquidity levels at a number of Italian banks, including Banca Carige and Monte dei Paschi di Siena , on a daily basis, two sources close to the matter said on Monday.
Italian banking shares have fallen sharply since the start of the year amid market concerns about some 360 billion euros of bad loans on their books and weak capital levels.
The ECB has been putting pressure on several Italian banks to improve their capital position. The regulator can decide to monitor liquidity levels at any bank it supervises on a weekly or daily basis if it has any concern about deposits or funding.
A run on the big Italian banks has already begun. Italians have already been quietly pulling billions of euros out of the banking system, and if these banks continue to crumble this “stealth run” could quickly become a stampede.
And of course panic in Italy would quickly spread to other financially troubled members of the eurozone such as Spain, Portugal, Greece and France. Here is some additional analysis from Jeffrey Moore…
A deteriorating financial crisis in Italy could risk repercussions across the EU exponentially greater than those spurred by Greece. The ripple effects of market turmoil and the potential for dangerous precedents being set by EU authorities in panicked response to that turmoil, could ignite yet more latent financial vulnerabilities in fragile EU members such as Spain and Portugal.
Unfortunately, most Americans are completely blinded to what is going on in the rest of the world because stocks in the U.S. have had a really good run for the past couple of weeks. Headlines are declaring that the risk of a new recession “has passed” and that the crisis “is over”. Meanwhile, South America is plunging into a full-blown depression, the Italian banking system is melting down, global manufacturing numbers are the worst that we have seen since the last recession, and global trade is absolutely imploding.
Other than that, things are pretty good.
Seriously, it is absolutely critical that we don’t allow ourselves to be fooled by every little wave of momentum in the stock market.
It is a fact that sales and profits for U.S. corporations are declining. This is a trend that began all the way back in mid-2014 and that has accelerated during the early stages of 2016. The following comes from Wolf Richter…
Total US business sales – not just sales by S&P 500 companies but also sales by small caps and all other businesses, even those that are not publicly traded – peaked in July 2014 at $1.365 trillion, according to the Census Bureau. By December 2015, total business sales were down 4.6% from that peak. A bad 18 months for sales! They’re back where they’d first been in January 2013!
Sales by S&P 500 companies dropped 3.8% in 2015, according to FactSet, the worst year since the Financial Crisis.
I know that a lot of people have been eagerly anticipating a complete and total global economic collapse for a long time, and many of them just want to “get it over with”.
Well, the truth is that nobody should want to see what is coming. Personally, I rejoice for every extra day, week or month we are given. Every extra day is another day to prepare, and every extra day is another day to enjoy the extremely comfortable standard of living that our debt-fueled prosperity has produced for us.
Most Americans have absolutely no idea how spoiled we really are. Even just fifty years ago, life was so much harder in this country. If we had to go back and live the way that Americans did 100 or 150 years ago, there are very few of us that would be able to successfully do that.
So enjoy the remaining days of debt-fueled prosperity while you still can, because great change is coming, and it is going to be extremely bitter for most of the population.
On Tuesday junk bonds continued to crash, the price of oil briefly dipped below 28 dollars a barrel, Deutsche Bank was forced to deny that it is on the verge of collapse, but the biggest news was what happened in Japan. The Nikkei was down a staggering 918 points, but that stock crash made very few headlines in the western world. If the Dow had crashed 918 points today, that would have been the largest single day point crash in all of U.S. history. So what just happened in Japan is a really big deal. The Nikkei is now down 23.1 percent from the peak of the market, and that places it solidly in bear market territory. Overall, a total of 16.5 trillion dollars of global stock market wealth has been wiped out since the middle of 2015. As I stated yesterday, this is what a global financial crisis looks like.
Just as we saw during the last financial crisis, the big banks are playing a starring role, and this is definitely true in Japan. Right now, Japanese banking stocks are absolutely imploding, and this is what drove much of the panic last night. The following numbers come from Wolf Richter…
- Mitsubishi UFJ Financial Group plunged 8.7%, down 47% from June 2015.
- Mizuho Financial Group plunged 6.2%, down 38% since June 2015.
- Sumitomo Mitsui plunged 6.2%, down 26% since May 2015
- Nomura plunged a juicy 9.1%, down 42% since June 2015
A lot of analysts have been very focused on the downturn in China in recent months, but I think that it is much more important to watch Japan right now.
I have become fully convinced that the Japanese financial system is going to play a central role in the initial stages of this new global financial meltdown, and so I encourage everyone to keep a close eye on the Nikkei every single night.
Meanwhile, the stock price of German banking giant Deutsche Bank crashed to a record low on Tuesday. If you will recall, Deutsche Bank reported a loss of 7.6 billion dollars in 2015, and I wrote quite a bit about their ongoing problems yesterday.
Things have gotten so bad that now Deutsche Bank has been forced to come out and publicly deny that they are in trouble…
Deutsche Bank co-CEO John Cryan moved to quell fears about the bank’s stability Tuesday with a surprise memo saying its balance sheet “remains absolutely rock-solid.”
The comments come as investors grow increasingly nervous about the health of European banks, which have taken a hit on the fall in energy prices and which face rising concerns over their cash levels.
Of course Lehman Brothers issued the same kind of denials just before they collapsed in 2008. Cryan’s comments did little to calm the markets, and even Jim Cramer saw right through them…
“You know, Deutsche Bank puts out a note saying, ‘listen, don’t worry, all good.’ Reminds me of JPMorgan saying if you have to say that you’re creditworthy then it’s already too late.”
Another thing that Lehman Brothers did just before they collapsed in 2008 was to lay off workers. We have seen a number of major banks do this lately, including Deutsche Bank…
Cryan, 55, has been seeking to boost capital buffers and profitability by cutting costs and eliminating thousands of jobs as volatile markets undermine revenue and outstanding regulatory probes raise the specter of fresh capital measures to help cover continued legal charges. The cost of protecting Deutsche Bank’s debt against default has more than doubled this year, while the shares have dropped about 42 percent.
The following chart comes from Zero Hedge. Nobody on the Internet does a better job with charts than Zero Hedge does. I would recommend visiting them right after you visit The Economic Collapse Blog each day (wink wink). This chart shows that Deutsche Bank stock has already fallen lower than it was during any point during the last financial crisis…
Deutsche Bank is the biggest and most important bank in the biggest and most important economy in the EU, and it has exposure to derivatives that is approximately 20 times Germany’s GDP.
If that doesn’t alarm you, I don’t know what will.
The biggest financial bubble in the history of the world has entered a terminal phase, and the parallels to the last financial crisis have become so apparent that just about anyone can see them at this point. Just consider some of the ominous warnings that we have seen recently…
Billionaire Carl Icahn, for example, recently raised a red flag on a national broadcast when he declared, “The public is walking into a trap again as they did in 2007.”
And the prophetic economist Andrew Smithers warns, “U.S. stocks are now about 80% overvalued.”
Smithers backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know what happened next. Stocks fell by 89% and 50%, respectively.
Even the Royal Bank of Scotland says the markets are flashing stress alerts akin to the 2008 crisis. They told their clients to “Sell Everything” because “in a crowded hall, the exit doors are small.”
And let’s not forget that famous billionaire retail magnate Hugo Salinas Price has warned that the global economy “is going into a depression“.
The chaos that we have seen this week is simply a logical progression of the crisis that began during the second half of last year. If you were to create a checklist of all the things that you would expect to see during the initial stages of a new financial crisis, all of the boxes would be checked.
In the days ahead, keep your eyes on Germany and Japan.
Yes, the Italian banking system is completely collapsing right now, but I believe that what is happening in Germany is going to be the key to the meltdown of Europe, and I am convinced that Deutsche Bank is going to be the star of the show.
Meanwhile, don’t underestimate what is taking place in Japan.
The Japanese still have the third largest economy on the entire planet, and their financial system is essentially a Ponzi scheme built on top of a house of cards that has a rapidly aging population as the foundation.
As Japan falls, that will be a signal that financial Armageddon is now upon us.
And after last night, it appears that moment is a lot closer than a lot of us may have thought.