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Global Financial Meltdown Coming? Clear Signs That The Great Derivatives Crisis Has Now Begun

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Global Financial Meltdown - Public DomainWarren Buffett once referred to derivatives as “financial weapons of mass destruction“, and it was inevitable that they would begin to wreak havoc on our financial system at some point.  While things may seem somewhat calm on Wall Street at the moment, the truth is that a great deal of trouble is bubbling just under the surface.  As you will see below, something happened in mid-September that required an unprecedented 405 billion dollar surge of Treasury collateral into the repo market.  I know – that sounds very complicated, so I will try to break it down more simply for you.  It appears that some very large institutions have started to get into a significant amount of trouble because of all the reckless betting that they have been doing.  This is something that I have warned would happen over and over again.  In fact, I have written about it so much that my regular readers are probably sick of hearing about it.  But this is what is going to cause the meltdown of our financial system.

Many out there get upset when I compare derivatives trading to gambling, and perhaps it would be more accurate to describe most derivatives as a form of insurance.  The big financial institutions assure us that they have passed off most of the risk on these contracts to others and so there is no reason to worry according to them.

Well, personally I don’t buy their explanations, and a lot of others don’t either.  On a very basic, primitive level, derivatives trading is gambling.  This is a point that Jeff Nielson made very eloquently in a piece that he recently published

No one “understands” derivatives. How many times have readers heard that thought expressed (please round-off to the nearest thousand)? Why does no one understand derivatives? For many; the answer to that question is that they have simply been thinking too hard. For others; the answer is that they don’t “think” at all.

Derivatives are bets. This is not a metaphor, or analogy, or generalization. Derivatives are bets. Period. That’s all they ever were. That’s all they ever can be.

One very large financial institution that appears to be in serious trouble with these financial weapons of mass destruction is Glencore.  At one time Glencore was considered to be the 10th largest company on the entire planet, but now it appears to be coming apart at the seams, and a great deal of their trouble seems to be tied to derivatives.  The following comes from Zero Hedge

Of particular concern, they said, was Glencore’s use of financial instruments such as derivatives to hedge its trading of physical goods against price swings. The company had $9.8 billion in gross derivatives in June 2015, down from $19 billion in such positions at the end of 2014, causing investors to query the company about the swing.

Glencore told investors the number went down so drastically because of changes in market volatility this year, according to people briefed by Glencore. When prices vary significantly, it can increase the value of hedging positions.

Last year, there were extreme price moves, particularly in the crude-oil market, which slid from about $114 a barrel in June to less than $60 a barrel by the end of December.

That response wasn’t satisfying, said Michael Leithead, a bond fund portfolio manager at EFG Asset Management, which managed $12 billion as of the end of March and has invested in Glencore’s debt.

According to Bank of America, the global financial system has about 100 billion dollars of exposure overall to Glencore.  So if Glencore goes bankrupt that is going to be a major event.  At this point, Glencore is probably the most likely candidate to be “the next Lehman Brothers”.

And it isn’t just Glencore that is in trouble.  Other financial giants such as Trafigura are in deep distress as well.  Collectively, the global financial system has approximately half a trillion dollars of exposure to these firms…

Worse, since it is not just Glencore that the banks are exposed to but very likely the rest of the commodity trading space, their gross exposure blows up to a simply stunning number:

For the banks, of course, Glencore may not be their only exposure in the commodity trading space. We consider that other vehicles such as Trafigura, Vitol and Gunvor may feature on bank balance sheets as well ($100 bn x 4?)

Call it half a trillion dollars in very highly levered exposure to commodities: an asset class that has been crushed in the past year.

The mainstream media is not talking much about any of this yet, and that is probably a good thing.  But behind the scenes, unprecedented moves are already taking place.

When I came across the information that I am about to share with you, I was absolutely stunned.  It comes from Investment Research Dynamics, and it shows very clearly that everything is not “okay” in the financial world…

Something occurred in the banking system in September that required a massive reverse repo operation in order to force the largest ever Treasury collateral injection into the repo market.   Ordinarily the Fed might engage in routine reverse repos as a means of managing the Fed funds rate.   However, as you can see from the graph below, there have been sudden spikes up in the amount of reverse repos that tend to correspond the some kind of crisis – the obvious one being the de facto collapse of the financial system in 2008:

Reverse Repo Operation

What in the world could possibly cause a spike of that magnitude?

Well, that same article that I just quoted links the troubles at Glencore with this unprecedented intervention…

What’s even more interesting is that the spike-up in reverse repos occurred at the same time – September 16 – that the stock market embarked on an 8-day cliff dive, with the S&P 500 falling 6% in that time period.  You’ll note that this is around the same time that a crash in Glencore stock and bonds began.   It has been suggested by analysts that a default on Glencore credit derivatives either by Glencore or by financial entities using derivatives to bet against that event would be analogous to the “Lehman moment” that triggered the 2008 collapse.

The blame on the general stock market plunge was cast on the Fed’s inability to raise interest rates.  However that seems to be nothing more than a clever cover story for something much more catastrophic which began to develop out sight in the general liquidity functions of the global banking system.

Back in 2008, Lehman Brothers was not “perfectly fine” one day and then suddenly collapsed the next.  There were problems brewing under the surface well in advance.

Well, the same thing is happening now at banking giants such as Deutsche Bank, and at commodity trading firms such as Glencore, Trafigura and The Noble Group.

And of course a lot of smaller fish are starting to implode as well.  I found this example posted on Business Insider earlier today

On September 11, Spruce Alpha, a small hedge fund which is part of a bigger investment group, sent a short report to investors.

The letter said that the $80 million fund had lost 48% in a month, according the performance report seen by Business Insider.

There was no commentary included in the note. No explanation. Just cold hard numbers.

Wow – how do you possibly lose 48 percent in a single month?

It would be hard to do that even if you were actually trying to lose money on purpose.

Sadly, this kind of scenario is going to be repeated over and over as we get even deeper into this crisis.

Meanwhile, our “leaders” continue to tell us that there is nothing to worry about.  For example, just consider what former Fed Chairman Ben Bernanke is saying

Former Federal Reserve chairman Ben Bernanke doesn’t see any bubbles forming in global markets right right now.

But he doesn’t think you should take his word for it.

And even if you did, that isn’t the right question to ask anyway.

Speaking at a Wall Street Journal event on Wednesday morning, Bernanke said, “I don’t see any obvious major mispricings. Nothing that looks like the housing bubble before the crisis, for example. But you shouldn’t trust me.”

I certainly agree with that last sentence.  Bernanke was the one telling us that there was not going to be a recession back in 2008 even after one had already started.  He was clueless back then and he is clueless today.

Most of our “leaders” either don’t understand what is happening or they are not willing to tell us.

So that means that we have to try to figure things out for ourselves the best that we can.  And right now there are signs all around us that another 2008-style crisis has begun.

Personally, I am hoping that there will be a lot more days like today when the markets were relatively quiet and not much major news happened around the world.

Unfortunately for all of us, these days of relative peace and tranquility are about to come to a very abrupt end.

  • stingray

    not tell us about it thats bad

    • Barry the English Teacher

      The English is down the hall

      • Ricardo

        Turn left and wait in Room 5.

  • Ms

    Another reason why a major financial collapse could happen is when the us and russia go to war. You can see on CNN that they’re posting all sorts of articles like, “U.S. diverts aircraft to avoid russian fighter in syria” and “Russia ramps up syria attacks”. Just one little bit of conflict with russia and the u.s. over there and there could be a world war 3. and when that hits the news stocks will plummet to the ground

    • Mike Smithy

      Actually, war has traditionally been bullish for stawks. That is precisely why the banksters start them.

      • J.L.W

        Wars they win. Iraq was a robbery. They will not get the oil pipeline going through Syria.

        Did you know China has a military a lot bigger than the US?

        • Malcolm Reynolds

          Did you know that china’s military is a huge pile of crap? They have no idea how to build ships, they steal every technology they have, they’re a communist outfit, no matter what capitalistic types of reforms their economy has undergone, so their leadership is … what’s the word here… compromised (?) at best. There’s no initiative in communism…

          • J.L.W

            I don’t tend to believe that coming from someone anonymous on the internet with no proof.

          • Da_Neutral_Observer

            Even if everything Malcolm Reynolds says is true, it doesn’t refute the FACT that China’s military is bigger than ours. The U.S. outfit is more advanced, but that doesn’t mean anything. It didn’t help us win Vietnam, Somalia or Iraq (even though Dubya Bush stood on an aircraft carrier and absurdly proclaimed, “mission accomplished.”) Some would say we haven’t succeeded in any initiative bigger than a black op since World War II.

          • J.L.W

            The Chinese have hugely efficient production machine. It sounds absurd.

          • Malcolm Reynolds

            Umkay, good luck with that. Otherwise, try google.

          • Gay Veteran

            google: china anti-ship ballistic missile

          • Malcolm Reynolds

            google: Sea Wiz

          • Gay Veteran

            battleships were THE height of naval power……until they weren’t.
            the same will be true for aircraft carriers

      • Malcolm Reynolds

        I wouldn’t automatically expect that to be the case this time around. Russia and China are both actively trying to overturn US hegemony in the world and the things they’re currently and likely to attack/halt/overturn whatever, probably won’t be good for stawks. Of course, defense stuff will do well, but that such a small overall sector of the market these days. Of course, the fact that we get a double pant load of our actual military gear from places like China….

      • alan

        Wars are a good cover for looting and to hide all the criminal activities.

    • J.L.W

      It’s so easy to win wars when you are bankrupt and your opponent has a gold backed currency.

    • Malcolm Reynolds

      when the us and russia go to war
      Good grief, if the events in Syria don’t have you at pucker factor 5, I don’t know what would. We’re damn near at war directly with Russia!

      • Observer

        The “Syrian Free Army” are a bunch of Islamic thoat-cutters about as bad as the Ustases and Japanese in China.

        A war with either China or Russia would justify a nationwide state of emergency due to the panic it would cause.
        Have you seen videos of the Tianjin explosion?

    • alan

      While you watch the show in the middle east your pockets are being picked. Thats how the scam works.

    • SunnyFlaSnotress

      The general media syndicates have long-enjoyed making the public hyper-vigilant in a jingoistic way. These days, I believe our cooperation levels and trade relations with the major powers that be are quite good. And even if it weren’t for that, our defenses, nukes and allies are formidable. You can get a snarky captain/pilot on either side, but it would understood as that and not necessarily cause a war.

  • Mondobeyondo

    The derivatives bubble is the one bubble that should keep everyone awake at night. Because if that one pops… well… there goes the whole ball of wax.

    Reminds me of an old “Sanford and Son” TV episode… Fred Sanford grabs his chest, and says, “Elizabeth! This is it! This is the big one!”

    • Richard

      I agree Mondobeyondo.

    • watchmanonthetower

      “Because if that one pops…”

      IF, Mondo? Is there a snowflake’s chance that it won’t?

      Seems like this one will be the ‘pop’ heard ’round the world…as intended.

    • tina

      But they always cover it up and fix . Tptb always stop tbd the Tran wreck…..yes by being fraudulent but they get it done.this crap will go on forever.

      • Hrob

        Not for long The dollar is dead. Backed by nothing
        Slowly but surely everyone is moving away from it

        • ICFubar

          That may be but until confidence in the Fed Reserve Note utterly fails the USD is the only game….until the BRICS led by China get a viable parallel system up and running without engendering WW III or some other catastrophic event takes place that the Fed can’t paper over the corruption and crony capitalism will continue will Main Street rots. We could see another great depression on Main Street while the Dow hits 25,000. Indeed if people had to line up at soup kitchens instead of receiving food stamps a depression would be highly visible now I believe

        • Davy

          You are completely wrong
          Dollar… Is the asset of last resort today
          It’s just the healthiest horse in the glue factory

    • Watchman

      It’s a question of when not if Mondobeyondo. The entire exposure to derivatives is many times larger than the combined GDP of all the nations worldwide. There won’t be enough printing presses to bailout anyone who has exposure to derivatives. The number is $1.5 Quadrillion last I checked.

  • Tim

    Zero Hedge just posted an article stating that Deutsche Bank has announced a massive loss for it’s 3rd quarter and that it may cut its dividend.

  • DJohn1

    As I understand it, derivatives are financial packages based on Mortgage Loans on Homes.
    So if the bank gets stuck with home loans going into foreclosure then that causes the derivatives packages to lose value.
    We have homes in foreclosure all over the city. The owners of these properties have walked away because they couldn’t pay the “rent” on those mortgages. So the bank is temporarily stuck with the house.
    Now the bank has insurance against this happening. The Federal Government is the insurance. The house in foreclosure must sell for at least 2/3rds of the value of the mortgage on the home. The government pays the difference. So if someone paid mortgage payments for 10 years and walks then if he has paid in 10,000 on a 100,000 dollar loan most of which is interest to the bank, the bank has to get 60,000 for the property. The government normally gives them the 30,000 under the insurance plan.
    The main problem I see here is the property being non-paying for a year or more before they can put it up for sale.

    • J.L.W

      In London there are hundreds and hundreds of properties sitting there with no one in them. This is at the same time as a ‘housing crisis’.

      Sigh.

      • DJohn1

        London does not play by the same rules as the United States concerning Real Estate.

        • J.L.W

          I know, can you be more specific about what you are referring to though? That comment doesn’t explain much.

        • J.L.W

          It is the same in a lot of debt and bubble based ways.

    • Marco

      You’re thinking of mortgage-backed securities and collateralized debt obligations. Derivatives are futures and options contracts mainly.

  • J.L.W

    Another gem from Zerohedge (Which is surely a large source of information for almost anyone in this field.) Is that when the Chinese market was closed the US stocks were going down in 2014 and when it opened the DOW crashed again.

    Which does make sense chart wise.

    I also heard that the Tianjin explosion also included EMP’s to knock out the Chinese supercomputers. So possibly there is a connection here.

  • Jazz

    Who cares about derivatives? The markets are going to the moon! 😛

    • rmc9

      …”hell” is the more likely destination for them..

      • J.L.W

        The moon has bases on it. With a lot of Annunaki like activity.

        • Marco

          HAhahahahaha. And you say you don’t need advice. Hahahahahahahahahaha.

          • J.L.W

            Why not?

            Conspiracy theorist: Someone who questions the statements of known liars.

  • Clink

    Didn’t Michael have an article similar to this a few months ago about big, bad derivatives? Yet today 10/7/15 no collapse or crash. Me thinks that doth prophesy too much Michel.

    • ian

      and last year…and the year before….and before…and before………chances are we will see it next year as well.

    • Mike Smithy

      “Me thinks”? Are you some sort of unemployed actor who works the weekend shift at the Renaissance Festival. I really hate to be anyone’s English professor. However, you need to get with the times. “Michael, I think your prophesy is too much”. There you go, I fixed it for you.

  • Alwaystomorrow

    The Economic Collapse Blog Has Issued A RED ALERT For The Last Six Months Of 2015.

    Published 6/25/2015.

    85 days until 12/31/2015.

    Lets do a count down until the end of 2015 and see just what happens.

    ——————————————————————————

    By Michael S, on July 31st, 2015.

    “And I kind of appreciate the countdown. It reminds people of my warning, and perhaps it will give some readers a renewed sense of urgency”.

    • J.L.W

      You haven’t prepped then?

      • Alwaystomorrow

        Yes I have.

        When 2008 rolled around I had ZERO debt and many other things in place that allowed me to coast through that bad time (2008-2015) without even the slightest change in lifestyle.

        I am even in a better position now than then.

        From what I read here, I do not prepare the same way people here do but if my way worked for me back then I feel comfortable it will work again.

        Everyone needs to do what they feel they need to do.

        • J.L.W

          OK, that was a little odd. No offense.

          Perhaps I should define ‘prepping’.

          Do you have enough food and water for you and your family for a month?

          • Alwaystomorrow

            Yes, I have food and water for a month.
            I have had that for years just as an everyday precaution.

            I assure you having no debt is as important if not more. Ask the people who lost their homes in the 2008+ housing issues if they felt they would be better off with a two months supply of food or no debt.

            Prepping=No debt!

          • J.L.W

            Well, I’m a bit more out of the box than you.

            I envisage the coming crash as an assault by certain countries in league with positive ET’s, against certain other countries who are in league with negative ET’s

            I didn’t get into this via economics but geopolitics.

            The way I see it: A) Stock market crash, BIG one because it’s not same as 2008 B) Societal collapse and included in this period is ‘document dumps’ about the behaviour of the ‘elite’ in the G5. C) Illuminati tribunals and golden age of mankind.

            As these things happen the negative forces will be doing their best to make sure it goes badly. So they might do things such as switch off electricity etc. Of course ‘bail ins’ is also a part of the scenario.

          • Alwaystomorrow

            I am not sure how to reply.

            Isolate yourself as best you can from the things you think will be a problem

            I look at things probably to simple. I prepare for things like a hurricane is coming, food, water etc.

            I am not very smart so I make sure my net worth is sheltered from things I do not understand. Yes I loose when markets go up but I seem to be doing just fine.

            Don’t spend your entire life worrying and preparing for something when you do not even know what the future holds.

            I told you I am simple, but I am happy and I sleep well at night as I hope you do,

          • J.L.W

            Lol. Don’t need advice. But I am happy with my preparations thus far. I have the food/ water. Physical cash. Weapons.

            It is a fluid situation obviously. I don’t know 100% I will need the supplies but it is better to be prepared.

          • Marco

            Lol, you clearly do need advice.

          • J.L.W

            Thanks for that Marco.

          • Malcolm Reynolds

            “I am not very smart”

            LMFAO! And yet you keep posting that alert shyte. HAHAHAHAHAHA! You totally made me lol.

            *****
            To outright quote and paraphrase you

            I am not very smart. I think a collapse is only when I’ve had to change my life. My posts are annoying, irritating, childish….

            but by golly people like me and I’m going to persevere.

            *****

          • Alwaystomorrow

            You can quote or paraphrase not both at the same time.

          • Malcolm Reynolds

            well, most of it was direct quotes as you know, the part where you don’t know what a collapse is, is paraphrased. So yea, I most certainly can.

          • SunnyFlaSnotress

            I like his posts, but if you don’t.. have some drinks,.. smoke some weed.. blow it off, cause not everyone thinks the same and you seem to be getting too upset and perverz minded.

          • Alwaystomorrow

            Count me in.

          • Malcolm Reynolds

            cause not everyone thinks the same
            That’s great, and when you or always refute the ridiculously numerous number of links, quotes and graphs provided by the author, then you 2 get to mock him without me reminding him (and you) what a SELF ADMITTED moron he is. If you don’t like it, don’t let the door hit ya. Or even shorter, if you don’t agree then WTF are you doing here?

          • Malcolm Reynolds

            Interesting take. ETs, meaning flying saucer ETs?

          • J.L.W

            Yes, another term might be ‘angels’. As in ET’s and ‘inner spirits’ as in New Age ‘inner spirits’ are some of the time Extra terrestrials.

            In the Batman vs Superman where trailer Jesse Eisenbergs character says… The oldest lie in America is; Demons don’t come from hell below us, they come from the Sky. Even though there are both groups beneath the surface, that is essentially true!

            Lots of biblical reference to this kind of thing. ‘Clouds’ etc. And loads of different cultures.

        • Devil Hater

          Lucifer you are A asshole and you better know it.

      • LiberalsAreHumanExcrement

        he’s been adding to his dildo collection

        • Alwaystomorrow

          Correct and thanks for the suggestions. You were right.

        • Malcolm Reynolds

          Lol, I thought he was the dildo. I stand corrected.

      • Devil Hater

        Marc Dinger’s Swoopy Nose is ready to blow off his face very soon. Stock market crash.

    • Malcolm Reynolds

      You’re still here? You would think someone that doesn’t even know what a collapse is would get bored of posting that low info, antagonistic, childish bullshyte every day.

      • SunnyFlaSnotress

        I’d like to dedicate this song to this board

        Paul Simon – Still Crazy After All These Years Lyrics

        I met my old lover
        On the street last night
        She seemed so glad to see me
        I just smiled
        And we talked about some old times
        And we drank ourselves some beers
        Still crazy after all these years
        Still crazy after all these years

        I’m not the kind of man
        Who tends to socialize
        I seem to lean on
        Old familiar ways
        And I ain’t no fool for love songs
        That whisper in my ears
        Still crazy after all these years
        Still crazy after all these years

        Four in the morning
        Crapped out
        Yawning
        Longing my life away
        I’ll never worry
        Why should I?
        Its all gonna fade

        Now I sit by my window
        And I watch the cars
        I fear I’ll do some damage
        One fine day
        But I would not be convicted
        By a jury of my peers
        Still crazy
        Still crazy
        Still crazy after all these years

    • Marco

      The funny thing reading your comments, Alwaystomorrow, versus the comments of the rest of the people here, is that you are the metaphorical calm person in the crowd, keeping his cool while others around him lose their heads. I love it. And the funny thing is they will insult you not because they hate you but because they are really freakin afraid, unintelligent, and don’t know how to stay calm. Keep doing what you are doing and I am really glad to have someone like you here.

      • Alwaystomorrow

        Thanks.

        The blog writer, Mike, occasionally will remove my countdown and when that happens I may not respond to calmly.

        Other than that I have fun watching the personalities of people, my favorite being Mr. Malcolm Reynolds.

        • Green tip

          Lol

  • Bill

    Way too much doom and gloom. Michael I implore you adopt a more balanced approach. There is good economic news out there. For example, for the past 5 years the U.S consistently been adding over 100,000 jobs each month. Auto sales are strong. The housing market is slowly recovering. The 100 million Americans not working consist mostly of baby boom retirees, full time students, and people on disability. Hopefully Sanders gets elected. Hillary is arrogant and aloof, Trump, though he has some good ideas is a powder keg waiting to explode. He have enough powder kegs. For example, the entire middle east, Russia, North Korea, and China.

    • J.L.W

      Auto sales are incredibly strong. Yeah that’s true. They’re in a ginormous subprime bubble. 14% of loans have been made to people with no credit checks.

      ‘The housing market is slowly recovering’ Vacuous idea offered with no proof. As is 100 mil statement

      Those jobs have been in the service sector, manufacturing jobs have decreased.

    • Jazz

      Yeah elect a commie. I see that working out just great. Lmao. Then we will truly have an economic collapse!

    • LiberalsAreHumanExcrement

      LMAO

    • Malcolm Reynolds

      Hopefully Sanders gets elected.

      Ok, I get it. You don’t have to slap me over the head with a sarcasm tag. Good stuff.

    • rat28

      Budget deficit has hit the lowest level and property markets are especially hot in west coast markets.. There is no collapse!!

    • rentslave

      We still don’t have sports betting.How are white males going to make any money otherwise?

    • alan

      I would vote for Trump just for the laughs.

    • Gay Veteran

      “…For example, for the past 5 years the U.S consistently been adding over 100,000 jobs each month….”

      good paying jobs, right?
      auto sales paid for by sub-prime loans?

  • GSOB

    When Jesus comes, all the bubbles would have already popped.

  • Spiffy, absolutely spiffy. What’s in your safe?

    • Alwaystomorrow

      Does that outfit you are wearing come with a white pointed hood with eye holes cut in it?

      • No, F stick, it’s not a Klan outfit. Now go find someone else to mess with.

  • Simon Sez

    This is crap. For at least the past 40 years people have been saying that the wheels are coming off and yet we are still here. If you believe this junk then you are a moron.

    • justaguest

      expect your comment to disappear

      • WVBORN56

        Why would he delete your comment when the rest of us get a good laugh at your expense? Really I’m not laughing, I feel sorry for those who can not see what is coming. With the convergence of all the prophetic end time signs now taking place it is only a matter of time before Revelation 6 comes to pass. It has only been put off because of God’s mercy and grace! That window will soon be closing.

        • SunnyFlaSnotress

          The hand of Mi ke can be a funny thing.

    • Malakie

      So explain to all of us then how this all gets ‘fixed’? How trillions in debt gets cleaned up? How all these companies stay out of going bankrupt and how none of the factual numbers really mean anything to anyone…

      Go ahead, explain it because I am dying to hear how you do…

      Anyone with any common sense can see where everything is headed.. it may not be today or tomorrow, next week or even next month.. heck we might even make another year ….. but the system is going to collapse one way or the other.. it is WAY to top heavy and there is way too much debt at a level that cannot be paid back in even the next 5 decades.

      So I am all ears… tell us how everything will be fixed and hunky dory and none of this is a real issue…

      • jsmith

        The interesting thing is that $hit happens, and there are some people here that think that it does not. I mean, it happened in 1921, 1929, and it also happened in 2008, although Fed intervention minimized that collapse by bailing out the banks. In other words it prevented a naturally occurring bubble by printing more money out of thin air. In other words it just keeps repeating because the banksters and the Fed just apply band aids and hope for the best.
        I don’t know what will happen, and I don’t think there will be total collapse, and I don’t think 50 million American’s will die, but what I do think is that we as American’s are in for a painful future in the form of national decline in our standard of living. It means we can’t be the exceptional nation any more, and that will be good because we won’t be able to afford to bomb anyone anymore. It means a devaluation of our currency. It means we have to pay more for less. Even the rich will be taking a haircut as the dollar loses value.
        This is what happens in a depression. People adjust, just like my father adjusted with the depression of the 1930’s. He was born in 1908, and what he did tell me is that all in his family had jobs, but some neighbors were knocking on his door to sell their houses at unbelievable low prices, as there just wasn’t any money. Just like today, but now the banks just take the houses away.
        The best thing to do is to just live day by day and see what happens. But do take precautions because you can’t ignore reality.

        • Malakie

          I think the reason many do believe that 50+ million will die (I think more as I will explain) is because the reality today is quite different than the great depression era.

          First, our population size is 3 or 4 times what it was back then.

          Next, today we have almost 100 MILLION people not working and on some kind of handout/welfare etc.

          Add to that those on V/A or Social Security.

          All those people rely on that money each month which means NONE of them will get anything if things collapse. They have no savings, no fallback, nothing.

          When that happens, people will start to starve, forget about paying rent or bills… FOOD will become the issue especially for families with children.

          The Cities will erupt and we will see a wave of crime and chaos the likes have never been seen. You think Ferguson or Baltimore was bad? Think again… those were but minor riots compared to what will happen in our cities.

          When the economy tanks, trucks will stop rolling, the supply chain we have currently is a “just in time” supply chain which means when the trucks stop, whatever is on the shelf is it.. Store shelves will empty in hours. And then all hell will break lose.

          Now the big question is this.. Will it be quelled in the cities somehow or will it lead to full on implosion…

          And THAT will depend on the actions the government takes. Here is why. IF the government declares martial law to try and regain control, you will see this country devolve into civil war because many Americans will NOT allow that to stand especially if the government attempts to suppress the U.S. Constitution in the process.

          The problem is this country does not have the stockpiles of food and emergency supplies to distribute in these kind of situations. We have probably around 300 million MRE’s stored by FEMA. That is ONE meal and there are 320+ million people in this country.. even if only 100 million people were needing food, that is still only 3 meals… then what?

          The government will most likely try to ‘federalize’ a lot of infrastructure based on the 2012 NDAA obama signed, from trucking to rail to farms. And if they do, you will see a LOT of Americans pick up arms and defend what is theirs. I can tell where I live in Wisconsin, every single farmer here will refuse to allow anyone, including the government, to waltz in and take their land and farms.

          Can you imagine 100 million people rioting in the cities? And then from there spreading out across the country as cities turn into war zones?

      • CharlesH

        It can’t be fixed – it’s completely broken. They’ve created this monster and now they have to feed the son of a bitch.

        • Gay Veteran

          fixed via bankruptcy

    • ready4change

      The wheels ALWAYS fall off eventually when anybody spends beyond their means- max out one credit card, get another card and transfer balance, get another card to pay for more stuff, keep raising the credit limit, spending more and more.

      If one person can manage to get into debt and not be able to swim out of it, you can bet that a US, who owes 19 Trillion, will sink eventually!

  • justaguest

    Has anyone that’s been following this blog noticed in the past 4 or 5 years that in the fall of every year the same predictions are made? Its pretty much never ending. Although I think that its possible that we could have a 2008 moment of course I am not really convinced its going to happen any time soon. Could it happen? Yes of course. Does the author of this blog have a clue that It will? Or course not. Will this comment get deleted because the author doesn’t agree with me? Of course it will. Even though the last thing that is said at the end of every article is “What do you think and post what your thoughts are below” all comments get deleted that don’t agree. I am not so sure why but I have to assume it has to do with money that is being earned from this sight. The author has become addicted to the income generated from all gloom and doom predictions. Couldi something happen in 2015 similar to 2008. Of course, will it happen? I really doubt it.

    • Alwaystomorrow

      If you noticed, he didn’t say “What do you think and post what your thoughts are below” on this story. 😉

    • Dianne

      Mike is smart good writer but im sure he even doubts his red alert now.

      • CharlesH

        I disagree with you. Michael might be more spot on then you’re giving him credit for. Too many things are happening at once. Remember…this is only Oct 8th – still a ways to go.

    • AzDi

      One thing this site does, is back up everything with the facts presented by the Fed’s or the Gov’s own figures and charts! I’d say that tells it all. However, when the Fed starts printing again, it will only delay the inevitable.

    • hellonurse

      Yeah, when I looked at the last post where “all the lights will go out ALL ACROSS THE WORLD!!!”, I was like “HUH?” I also looked him up and also typed up Shemitah together and there are articles with HIS name on it. And Shemitah is the name that the RELIGIOUS people use when they want to quote “the end of the world is near!”. I already have enough problems I’m dealing with. I don’t need this one, and I will never come back on this sight again. My stress levels are already high.

      • kathy k

        GOODBYE & GOOD LUCK

  • SunnyFlaSnotress

    The chart is impressive, but I wish we had more certain info about the spike.

  • Cyber Revengeance

    economic collapse will unfold in a slow pace.
    we need glencore to go bust then collapse may accelerate.

  • This was a very excellent article, Michael. People should really read up on this. The repo markets and derivative markets are quite simple to understand, but can be dangerous to take positions in. Readers who are unfamiliar with these “investments” are advised to head over to Investopedia for an excellent discussion and short video on repurchase agreements and then google the derivatives market. It will be plain to see why our government should NOT be involved in this type of trading.

    As for losing 48% a month, I think we all have some bummer stories so here is my worst performer: I am way long oil and energy, have been since 2013. I was all in on NSLP for 25 dollars per share. It was up 66% today – to 25 CENTS per share! Yeah…they got kicked of the NYSE last month.

    Good Luck And May Your Dow Never Jones.

  • rat28

    Don’t worry.. QE4 will be there to support the markets

    • Kim

      It won’t work.

      • Mike Smithy

        The law of diminishing returns is quite apparent in Japan’s QE insanity. Every subsequent round of QE renders less impact on growth until such a point that QE renders negative growth.

        • rat28

          Just some indication that FED will not increase interest rate, send the DJ a few hundreds points up.. Can’t wait for QE4, we will finally see DJ hitting 30,000!

  • Sam

    OK.. I really don’t particularly understand what was written above.. but, I do understand this pasted from a story on Drudge now about how China and others are selling our Treasury notes.. hidden deep in the article from the Wall Street Journal was this line.. “The Federal Reserve held $2.45 trillion of Treasury debt at the end of September and isn’t expected to sell U.S. debt soon.” Uh… where did the Fed get 2.45 trillion dollars to buy those Treasury notes ? Yes, that is intended to be sarcasm. They simply digitized the money on a computer screen. China “only” holds 1,241 Trillion according to the same article. So the Fed holds just under double what the “largest” holder of Treasury notes on the planet does ? Wow.. I hate the smell of rotten fish.. don’t you?

    • Sam

      China holds only 1.241 Trillion.. not 1,241… sorry.

    • SunnyFlaSnotress

      I’m thinking somewhere along the same line as you Sam, and believing Treasury sales are related, but I have little knowledge of the intricacies of those issues to make a broader hypothesis.
      On the bright side, I notice that after the spikes, the charts return to a mean.. so perhaps this is like a controlled financial burn.

  • Kim

    Pretty crazy what’s happening to Glencore. But who didn’t see that one coming? This should illustrate just how inextricably linked the price of oil and finance are. I mean– wow, the price of oil was a sure thing, wasn’t it?!! And it was supposed to just keep going up, right? That didn’t happen. Poor Glencore, poor Deutsche Bank. Nice knowing ya.

    Oh for sure the price of oil will go back up. But not before the damage is done. I almost feel like this economic collapse is somehow orchestrated. Almost.

  • Barry Goldwater

    What do BP and Glencore have in common ?
    Tony Hayward .
    Yes, the same Tony Hayward at the helm of BP during the Gulf disaster is now at Glencore.
    What company will Hayward wreck next ?
    I would ask readers to begin digging into the management of major businesses and you will see tentacles reaching in some surprising directions. These Corporations hold much more power over our nation than the stool pigeons they’ve placed in the Government.

  • The voice

    And slow motion painful economic collapse continues to its descent down the symbolic cliff smashing from side to side as it slowly goes down while we sit and watch in anguish and earnest for the big explosion at the bottom. I remember Micheal writing a great article about this slow motion collapse about 3 years ago. Now we will actually see it come to fruition

    • Kim

      So true. yes, this blog is very eye-opening! That’s for sure. I appreciate and am grateful for the good information we get here. It’s encouraging.

  • Kim

    From ZH:

    “Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened. In hindsight there were a few early-warning signs, but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed.”

    • Yes.

      I noticed one warning sign when going shopping, prices significantly increasing in just a few months

  • Ben

    What you you talking about? The markets are undergoing a major rebound! No economic doomsday, sorry.

    • Kurt

      Lol “buy in dips” then.

    • Ms

      yeah, that’s what they want you to think. The same banksters and elite who want a collapse and a 3rd world war can easily manipulate stocks. They are manipulating the market now so it looks like everything is going well, when in reality it’s the opposite and they do that to make sure that people won’t actually find out until it’s too late.

  • Kurt

    I just recently left Deutsche, and the atmosphere there is very shaken. There was a constant theme of “protect the bank” being passed down from execs. I watched billion $ “derivative” deals go BK in a matter of 2 months (Samson). There are too many compliance issues to mention and after conversations with associates at other major banks, it is safe to say these problems are systemic. Global Banking is comparable to that game Jenga, wondering when that next block causes collapse.

    • Mad Monkey

      Yeah, Deutsche bank just posted $7bn loss. Things are always worse than what they say. The real loss is prob. $70 -$700bn.

  • barry oldwater

    Holiday sales this year will be worse than ever, more stores will close, online sales will be flat or slightly worse than last years, people have been spending less this year than last year and its not because they are putting it in savings. I work in the fast food industry, our machines usually run 7 days through the summer to keep up with demand, just a few this year ran 6 days, the slow down that occurs at the end of winter that idles machines came earlier and lasted longer.

    • alan

      Good info, thanks for sharing. Things like that tell us a lot about what is really going on.

    • David_R59

      A pot of old fashioned porridge is a whole lot less expensive than any fast-food. It’s also much more nutritious.
      Expect sales of rolled oats to increase over the next few years.

    • carl

      Peas porridge hot, peas porridge cold. Peas porridge in the pot, 9 days old.

  • naawp2014

    As barry fiddles……

  • alan

    To cover up paper fraud, well… it requires more paper and fraud. The moon is worth 100 trillion, use it as collateral and we’re good for another 5 years.
    Of course if it ever broke it would be quite a spectical. I suspect we would be busy watching missiles fly around the middle east.

  • alan

    Like people walking down your street eyeballing your house!

    • Clemenzza

      It that the best you have? . . . . . . . Yawn.

  • ICFubar

    Jim Willie has been talking and writing about the coming and now arrived oil derivative failure for several months now. and how the big oil boys took them on to keep the effective rate of their oil sales at around $100 a barrel. The other side of this deal is held by various derivative betting banks who have lost in a very large way prompting the Fed to begin to paper over the mess to the tune of hundreds of billions a month if not a trillion. But why be surprised as this is what happened in the meltdown and according to Wall Street on Parade the Fed handed out 26-27 trillion to keep the CB debt money fractional reserve system afloat.

  • Alwaystomorrow

    During the 2008+ huge financial issues, did debt that was unable to be repaid cause any problems for anyone then?

    • Clemenzza

      Governmental and personal debt has doubled since 2008. You only print so much money before even the dumbest rube knows it’s worthless.

      • Alwaystomorrow

        I see that. 😉

  • merrileerj

    Michael, a poster says they think you are smart but that you probably doubt your predictions now….myself I thank you for letting us know what is going on, I did some prepping thanks to you. Please don’t stop or slow down your writings because your regular readers are tired of it. I need to hear it-the truth that is. Thank you.

    • carl

      2010, 2011, 2012, 2013, 2014, 2015the same prediction keeps rolling on…

      • merrileerj

        Where can I find this proof?

  • Richard O. Mann

    Crank in the fun and games being played in the Middle East by Russia, China, and Iran, and you have the makings for a really fun filled crash and burn, WW3, TV sitcom. Only problem is, not too many people will be laughing when it all breaks loose.

  • Wadayano ?

    How long have Mike and the rest of these so-called financial experts been predicting/harping global collapse and it hasn’t happened yet ???!!! … Is it just me or is anybody else sick of all these gurus always crying wolf ???!!! …

    • SunnyFlaSnotress

      December 2009 for the author.

      • Wadayano ?

        Global ? … It was also supposed to happen in September of this year – where was it ???

        • SunnyFlaSnotress

          Well I spoke with a veteran of the financial field at my gym and he was going on about this stuff before the 2008 collapse (hence I was out of the market and happily daytrading Lehman).. so those in the know have been predicting for quite a while about the USA in particular, though the bias was towards Europe and against the USA. (hence I traded the Euro ETF) We all see how that went :snicker:
          I believe Mi ke and those w/the Shemitah bug were the only ones predicting September.
          I guess the Global part didn’t come into play until the PIIGS issues was born around 2008, and from there things were always touch-and-go.

          • Wadayano ?

            …but the problem is they’ve been harping on it for so long and nothing ever happens to amount to anything that people are anymore ignoring the articles and dropping their guard. The crash of 2008 we knew was coming it was just a question of when, but we’ve endured so many before people anymore expect them from time to time and have developed a we survived them before and we’ll survive them again attitude and just roll with the punch again and again.

          • SunnyFlaSnotress

            You know you’re right. It’s the little boy crying wolf syndrome, Too much guard for too long can have repercussions. My own personal fears held me back from some good stock gains.

      • fwalker15

        Roflmao

  • David_R59

    In 2008 it occurred to me that the whole mess at that time was being purposely engineered to happen. The impending derivatives mess is also being created to collapse, on purpose.
    To what end?
    To cause massive deflation, to give TPTB an excuse to go to a cashless society, that will “protect the banks”, by not allowing the public to defend themselves by removing their cash from the banks.

    • SunnyFlaSnotress

      To keep money in the hands of the few vs the multitude.

    • carl

      2010, 2011, 2012, 2013, 2014, 2015the same prediction keeps rolling on….

  • Skye Bowen

    So, the question that remains to be answered is: Who is on the winning side of these bets?

  • carl

    2010, 2011, 2012, 2013, 2014, 2015 and still no pop. Resume normal life know. Don’t spend one second giving this any thought. It is not worth your time.

  • Joe Trevors

    To Michael & other readers & writers:

    I have a question bothering me. In previous years I used to read reports of how much money the Federal Reserve was printing & infusing into the Stock Market per month. I think it was almost $1 billion/day? Who can tell me how much money/day is currently being printed & added to stock market to prop it up? Is propping it up the reason?

    Great article today about the GAMBLING = DERIVATIVES! Thank you.

  • Jazz

    Looks like we are on to NEW highs!!! Dow above 17K again and S&P just broke 2K! Woo hoo! Another sharp rally.

  • Nanette Gray

    It will pop…the next global crisis, financial meltdown and financial collapse.

  • Tami Clements

    Yep it’s going to be the big crash!!!

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