Are we on the verge of a major worldwide economic downturn? Well, if recent warnings from prominent bankers all over the world are to be believed, that may be precisely what we are facing in the months ahead. As you will read about below, the big banks are warning that the price of oil could soon drop as low as 20 dollars a barrel, that a Greek exit from the eurozone could push the EUR/USD down to 0.90, and that the global economy could shrink by more than 2 trillion dollars in 2015. Most of the time, very few people ever actually read the things that the big banks write for their clients. But in recent months, a lot of these bankers are issuing such ominous warnings that you would think that they have started to write for The Economic Collapse Blog. Of course we have seen this happen before. Just before the financial crisis of 2008, a lot of people at the big banks started to get spooked, and now we are beginning to see an atmosphere of fear spread on Wall Street once again. Nobody is quite sure what is going to happen next, but an increasing number of experts are starting to agree that it won’t be good.
Let’s start with oil. Over the past couple of weeks, we have seen a nice rally for the price of oil. It has bounced back into the low 50s, which is still a catastrophically low level, but it has many hoping for a rebound to a range that will be healthy for the global economy.
Unfortunately, many of the experts at the big banks are now anticipating that the exact opposite will happen instead. For example, Citibank says that we could see the price of oil go as low as 20 dollars this year…
The recent rally in crude prices looks more like a head-fake than a sustainable turning point — The drop in US rig count, continuing cuts in upstream capex, the reading of technical charts, and investor short position-covering sustained the end-January 8.1% jump in Brent and 5.8% jump in WTI into the first week of February.
Short-term market factors are more bearish, pointing to more price pressure for the next couple of months and beyond — Not only is the market oversupplied, but the consequent inventory build looks likely to continue toward storage tank tops. As on-land storage fills and covers the carry of the monthly spreads at ~$0.75/bbl, the forward curve has to steepen to accommodate a monthly carry closer to $1.20, putting downward pressure on prompt prices. As floating storage reaches its limits, there should be downward price pressure to shut in production.
The oil market should bottom sometime between the end of Q1 and beginning of Q2 at a significantly lower price level in the $40 range — after which markets should start to balance, first with an end to inventory builds and later on with a period of sustained inventory draws. It’s impossible to call a bottom point, which could, as a result of oversupply and the economics of storage, fall well below $40 a barrel for WTI, perhaps as low as the $20 range for a while.
Even though rigs are shutting down at a pace that we have not seen since the last recession, overall global supply still significantly exceeds overall global demand. Barclays analyst Michael Cohen recently told CNBC that at this point the total amount of excess supply is still in the neighborhood of a million barrels per day…
“What we saw in the last couple weeks is rig count falling pretty precipitously by about 80 or 90 rigs per week, but we think there are more important things to be focused on and that rig count doesn’t tell the whole story.”
He expects to see some weakness going into the shoulder season for demand. In addition, there is an excess supply of about a million barrels of oil a day, he said.
And the truth is that many firms simply cannot afford to shut down their rigs. Many are leveraged to the hilt and are really struggling just to service their debt payments. They have to keep pumping so that they can have revenue to meet their financial obligations. The following comes directly from the Bank for International Settlements…
“Against this background of high debt, a fall in the price of oil weakens the balance sheets of producers and tightens credit conditions, potentially exacerbating the price drop as a result of sales of oil assets, for example, more production is sold forward,” BIS said.
“Second, in flow terms, a lower price of oil reduces cash flows and increases the risk of liquidity shortfalls in which firms are unable to meet interest payments. Debt service requirements may induce continued physical production of oil to maintain cash flows, delaying the reduction in supply in the market.”
In the end, a lot of these energy companies are going to go belly up if the price of oil does not rise significantly this year. And any financial institutions that are exposed to the debt of these companies or to energy derivatives will likely be in a great deal of distress as well.
Meanwhile, the overall global economy continues to slow down.
On Monday, we learned that the Baltic Dry Index has dropped to the lowest level ever. Not even during the darkest depths of the last recession did it drop this low.
And there are some at the big banks that are warning that this might just be the beginning. For instance, David Kostin of Goldman Sachs is projecting that sales growth for S&P 500 companies will be zero percent for all of 2015…
“Consensus now forecasts 0% S&P 500 sales growth in 2015 following a 5% cut in revenue forecasts since October. Low oil prices along with FX headwinds and pension charges have weighed on 4Q EPS results and expectations for 2015.”
Others are even more pessimistic than that. According to Bank of America, the global economy will actually shrink by 2.3 trillion dollars in 2015.
One thing that could greatly accelerate our economic problems is the crisis in Greece. If there is no compromise and a new Greek debt deal is not reached, there is a very real possibility that Greece could leave the eurozone.
If Greece does leave the eurozone, the continued existence of the monetary union will be thrown into doubt and the euro will utterly collapse.
Of course I am not the only one saying these things. Analysts at Morgan Stanley are even projecting that the EUR/USD could plummet to 0.90 if there is a “Grexit”…
The Greek Prime Minister has reaffirmed his government’s rejection of the country’s international bailout programme two days before an emergency meeting with the euro area’s finance ministers on Wednesday. His declaration suggested increasing minimum wages, restoring the income tax-free threshold and halting infrastructure privatisations. Should Greece stay firm on its current anti-bailout course and with the ECB not accepting Greek T-bills as collateral, the position of ex-Fed Chairman Greenspan will gain increasing credibility. He forecast the eurozone to break as private investors will withdraw from providing short-term funding to Greece. Greece leaving the currency union would convert the union into a club of fixed exchange rates, a type of ERM III, leading to further fragmentation. Greek Fin Min Varoufakis said the euro will collapse if Greece exits, calling Italian debt unsustainable. Markets may gain the impression that Greece may not opt for a compromise, instead opting for an all or nothing approach when negotiating on Wednesday. It seems the risk premium of Greece leaving EMU is rising. Our scenario analysis suggests a Greek exit taking EURUSD down to 0.90.
If that happens, we could see a massive implosion of the 26 trillion dollars in derivatives that are directly tied to the value of the euro.
We are moving into a time of great peril for global financial markets, and there are a whole host of signs that we are slowly heading into another major global economic crisis.
So don’t be fooled by all of the happy talk in the mainstream media. They did not see the last crisis coming either.
If the quadrillion dollar derivatives bubble implodes, who should be stuck with the bill? Well, if the “too big to fail” banks have their way it will be you and I. Right now, lobbyists for the big Wall Street banks are pushing really hard to include an extremely insidious provision in a bill that would keep the federal government funded past the upcoming December 11th deadline. This provision would allow these big banks to trade derivatives through subsidiaries that are federally insured by the FDIC. What this would mean is that the big banks would be able to continue their incredibly reckless derivatives trading without having to worry about the downside. If they win on their bets, the big banks would keep all of the profits. If they lose on their bets, the federal government would come in and bail them out using taxpayer money. In other words, it would essentially be a “heads I win, tails you lose” proposition.
Just imagine the following scenario. I go to Las Vegas and I place a million dollar bet on who will win the Super Bowl this year. If I am correct, I keep all of the winnings. If I lose, federal law requires you to bail me out and give me the million dollars that I just lost.
Does that sound fair?
Of course not! In fact, it is utter insanity. But through their influence in Congress, this is exactly what the big Wall Street banks are attempting to pull off. And according to the Huffington Post, there is a very good chance that this provision will be in the final bill that will soon be voted on…
According to multiple Democratic sources, banks are pushing hard to include the controversial provision in funding legislation that would keep the government operating after Dec. 11. Top negotiators in the House are taking the derivatives provision seriously, and may include it in the final bill, the sources said.
Sadly, most Americans don’t understand how derivatives work and so there is very little public outrage.
But the truth is that people should be marching in the streets over this. If this provision becomes law, the American people could potentially be on the hook for absolutely massive losses…
The bank perks are not a traditional budget item. They would allow financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp. — potentially putting taxpayers on the hook for losses caused by the risky contracts.
This is not the first time these banks have tried to pull off such a coup. As Michael Krieger of Liberty Blitzkrieg has detailed, bank lobbyists tried to do a similar thing last year…
Five years after the Wall Street coup of 2008, it appears the U.S. House of Representatives is as bought and paid for as ever. We heard about the Citigroup crafted legislation currently being pushed through Congress back in May when Mother Jones reported on it. Fortunately, they included the following image in their article:
Unsurprisingly, the main backer of the bill is notorious Wall Street lackey Jim Himes (D-Conn.), a former Goldman Sachs employee who has discovered lobbyist payoffs can be just as lucrative as a career in financial services. The last time Mr. Himes made an appearance on these pages was in March 2013 in my piece: Congress Moves to DEREGULATE Wall Street.
Fortunately, it was stopped in the Senate at that time.
But that is the thing with bank lobbyists. They are like Terminators – they never, ever, ever give up.
And they now have more of a sense of urgency then ever, because we are moving into a period of time when the big banks may begin losing tremendous amounts of money on derivatives contracts.
For example, the rapidly plunging price of oil could potentially mean gigantic losses for the big banks. Many large shale oil producers locked in their profits for 2015 and 2016 through derivatives contracts when the price of oil was above $100 a barrel. As I write this, the price of oil is down to $65 a barrel, and many analysts expect it to go much lower.
So guess who is on the other end of many of those trades?
The big banks.
Their computer models never anticipated that the price of oil would fall by more than 40 dollars in less than six months. A loss of 40, 50 or even 60 dollars per barrel would be catastrophic.
No wonder they want legislation that will protect them.
And commodity derivatives are just part of the story. Over the past couple of decades, Wall Street has been transformed into the largest casino in the history of the world. At this point, the amounts of money that these “too big to fail” banks are potentially on the hook for are absolutely mind blowing.
As you read this, there are five Wall Street banks that each have more than 40 trillion dollars in exposure to derivatives. The following numbers come from the OCC’s most recent quarterly report (see Table 2)…
Total Assets: $2,520,336,000,000 (about 2.5 trillion dollars)
Total Exposure To Derivatives: $68,326,075,000,000 (more than 68 trillion dollars)
Total Assets: $1,909,715,000,000 (slightly more than 1.9 trillion dollars)
Total Exposure To Derivatives: $61,753,462,000,000 (more than 61 trillion dollars)
Total Assets: $860,008,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $57,695,156,000,000 (more than 57 trillion dollars)
Bank Of America
Total Assets: $2,172,001,000,000 (a bit more than 2.1 trillion dollars)
Total Exposure To Derivatives: $55,472,434,000,000 (more than 55 trillion dollars)
Total Assets: $826,568,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $44,134,518,000,000 (more than 44 trillion dollars)
Those that follow my website regularly will note that the derivatives exposure for the top four banks has gone up significantly since I last wrote about this just a few months ago.
Do you want to be on the hook for all of that?
Keep in mind that the U.S. national debt is only about 18 trillion dollars at this point.
So why in the world would we want to guarantee losses that could potentially be far greater than our entire national debt?
Only a complete and utter fool would financially guarantee these incredibly reckless bets.
Please contact your representatives in Congress and tell them that you do not want to be on the hook for the derivatives losses of the big Wall Street banks.
When this derivatives bubble finally implodes and these big banks go down (and they inevitably will), we do not want them to take down the rest of us with them.
Wall Street banks are getting hit by cyber attacks every single minute of every single day. It is a massive onslaught that is not highly publicized because the bankers do not want to alarm the public. But as you will see below, one big Wall Street bank is spending 250 million dollars a year just by themselves to combat this growing problem. The truth is that our financial system is not nearly as stable as most Americans think that it is. We have become more dependent on technology than ever before, and that comes with a potentially huge downside. An electromagnetic pulse weapon or an incredibly massive cyberattack could conceivably take down part or all of our banking system at any time.
This week, the mainstream news is reporting on an attack on our major banks that was so massive that the FBI and the Secret Service have decided to get involved. The following is how Forbes described what is going on…
The FBI and the Secret Service are investigating a huge wave of cyber attacks on Wall Street banks, reportedly including JP Morgan Chase, that took place in recent weeks.
The attacks may have involved the theft of multiple gigabytes of sensitive data, according to reports. Joshua Campbell, supervisory special agent at the FBI, tells Forbes: “We are working with the United States Secret Service to determine the scope of recently reported cyber attacks against several American financial institutions.”
When most people think of “cyber attacks”, they think of a handful of hackers working out of lonely apartments or the basements of their parents. But that is not primarily what we are dealing with anymore. Today, big banks are dealing with cyberattackers that are extremely organized and that are incredibly sophisticated.
The threat grows with each passing day, and that is why JPMorgan Chase says that “not every battle will be won” even though it is spending 250 million dollars a year in a relentless fight against cyberattacks…
JPMorgan Chase this year will spend $250 million and dedicate 1,000 people to protecting itself from cybercrime — and it still might not be completely successful, CEO Jamie Dimon warned in April.
“Cyberattacks are growing every day in strength and velocity across the globe. It is going to be continual and likely never-ending battle to stay ahead of it — and, unfortunately, not every battle will be won,” Dimon said in his annual letter to shareholders.
Other big Wall Street banks have a similar perspective. Just consider the following two quotes from a recent USA Today article…
Bank of America: “Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future.”
Citigroup: “Citi has been subject to intentional cyber incidents from external sources, including (i) denial of service attacks, which attempted to interrupt service to clients and customers; (ii) data breaches, which aimed to obtain unauthorized access to customer account data; and (iii) malicious software attacks on client systems, which attempted to allow unauthorized entrance to Citi’s systems under the guise of a client and the extraction of client data. For example, in 2013 Citi and other U.S. financial institutions experienced distributed denial of service attacks which were intended to disrupt consumer online banking services. …
“… because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched, Citi may be unable to implement effective preventive measures or proactively address these methods.”
I don’t know about you, but those quotes do not exactly fill me with confidence.
Another potential threat that banking executives lose sleep over is the threat of electromagnetic pulse weapons. The technology of these weapons has advanced so much that they can fit inside a briefcase now. Just consider the following excerpt from an article that was posted on an engineering website entitled “Electromagnetic Warfare Is Here“…
The problem is growing because the technology available to attackers has improved even as the technology being attacked has become more vulnerable. Our infrastructure increasingly depends on closely integrated, high-speed electronic systems operating at low internal voltages. That means they can be laid low by short, sharp pulses high in voltage but low in energy—output that can now be generated by a machine the size of a suitcase, batteries included.
Electromagnetic (EM) attacks are not only possible—they are happening. One may be under way as you read this. Even so, you would probably never hear of it: These stories are typically hushed up, for the sake of security or the victims’ reputation.
That same article described how an attack might possibly happen…
An attack might be staged as follows. A larger electromagnetic weapon could be hidden in a small van with side panels made of fiberglass, which is transparent to EM radiation. If the van is parked about 5 to 10 meters away from the target, the EM fields propagating to the wall of the building can be very high. If, as is usually the case, the walls are mere masonry, without metal shielding, the fields will attenuate only slightly. You can tell just how well shielded a building is by a simple test: If your cellphone works well when you’re inside, then you are probably wide open to attack.
And with electromagnetic pulse weapons, terrorists or cyberattackers can try again and again until they finally get it right…
And, unlike other means of attack, EM weapons can be used without much risk. A terrorist gang can be caught at the gates, and a hacker may raise alarms while attempting to slip through the firewalls, but an EM attacker can try and try again, and no one will notice until computer systems begin to fail (and even then the victims may still not know why).
Never before have our financial institutions faced potential threats on this scale.
According to the Telegraph, our banks are under assault from cyberattacks “every minute of every day”, and these attacks are continually growing in size and scope…
Every minute, of every hour, of every day, a major financial institution is under attack.
Threats range from teenagers in their bedrooms engaging in adolescent “hacktivism”, to sophisticated criminal gangs and state-sponsored terrorists attempting everything from extortion to industrial espionage. Though the details of these crimes remain scant, cyber security experts are clear that behind-the-scenes online attacks have already had far reaching consequences for banks and the financial markets.
In the end, it is probably only a matter of time until we experience a technological 9/11.
When that day arrives, will your money be safe?
As we approach the 100 year anniversary of the creation of the Federal Reserve, it is absolutely imperative that we get the American people to understand that the Fed is at the very heart of our economic problems. It is a system of money that was created by the bankers and that operates for the benefit of the bankers. The American people like to think that we have a “democratic system”, but there is nothing “democratic” about the Federal Reserve. Unelected, unaccountable central planners from a private central bank run our financial system and manage our economy. There is a reason why financial markets respond with a yawn when Barack Obama says something about the economy, but they swing wildly whenever Federal Reserve Chairman Ben Bernanke opens his mouth. The Federal Reserve has far more power over the U.S. economy than anyone else does by a huge margin. The Fed is the biggest Ponzi scheme in the history of the world, and if the American people truly understood how it really works, they would be screaming for it to be abolished immediately. The following are 25 fast facts about the Federal Reserve that everyone should know…
#1 The greatest period of economic growth in U.S. history was when there was no central bank.
#2 The United States never had a persistent, ongoing problem with inflation until the Federal Reserve was created. In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent, and it would be even higher than that if the inflation numbers were not being so grossly manipulated.
#3 Even using the official numbers, the value of the U.S. dollar has declined by more than 95 percent since the Federal Reserve was created nearly 100 years ago.
#4 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment.
#5 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle.
#6 The following comes directly from the Fed’s official mission statement: “To provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.”
#7 It was not an accident that a permanent income tax was also introduced the same year when the Federal Reserve system was established. The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers.
#8 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression.
#9 If you can believe it, there have been 10 different economic recessions since 1950. The Federal Reserve created the “dotcom bubble”, the Federal Reserve created the “housing bubble” and now it has created the largest bond bubble in the history of the planet.
#10 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The following is a list of loan recipients that was taken directly from page 131 of the report…
Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion
#11 The Federal Reserve also paid those big banks $659.4 million in fees to help “administer” those secret loans.
#12 The Federal Reserve has created approximately 2.75 trillion dollars out of thin air and injected it into the financial system over the past five years. This has allowed the stock market to soar to unprecedented heights, but it has also caused our financial system to become extremely unstable.
#13 We were told that the purpose of quantitative easing is to help “stimulate the economy”, but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in “excess reserves” that they have parked at the Fed.
#14 Quantitative easing overwhelming benefits those that own stocks and other financial investments. In other words, quantitative easing overwhelmingly favors the very wealthy. Even Barack Obama has admitted that 95 percent of the income gains since he has been president have gone to the top one percent of income earners.
#15 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s.
#16 The Federal Reserve has argued vehemently in federal court that it is “not an agency” of the federal government and therefore not subject to the Freedom of Information Act.
#17 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized “much like private corporations“.
#18 The regional Federal Reserve banks issue shares of stock to the “member banks” that own them.
#19 The Federal Reserve system greatly favors the biggest banks. Back in 1970, the five largest U.S. banks held 17 percent of all U.S. banking industry assets. Today, the five largest U.S. banks hold 52 percent of all U.S. banking industry assets.
#20 The Federal Reserve is supposed to “regulate” the big banks, but it has done nothing to stop a 441 trillion dollar interest rate derivatives bubble from inflating which could absolutely devastate our entire financial system.
#21 The Federal Reserve was designed to be a perpetual debt machine. The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape. Since the Federal Reserve was established nearly 100 years ago, the U.S. national debt has gotten more than 5000 times larger.
#22 The U.S. government will spend more than 400 billion dollars just on interest on the national debt this year.
#23 If the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt.
#24 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. So exactly why is the Federal Reserve doing it?
#25 There are plenty of possible alternative financial systems, but at this point all 187 nations that belong to the IMF have a central bank. Are we supposed to believe that this is just some sort of a bizarre coincidence?
If the American people truly understood how the Federal Reserve system works and what it has done to us, they would be screaming for it to be abolished immediately. It is a system that was designed by international bankers for the benefit of international bankers, and it is systematically impoverishing the American people. The Federal Reserve system is the primary reason why our currency has declined in value by well over 95 percent and our national debt has gotten more than 5000 times larger over the past 100 years. The Fed creates our “booms” and our “busts”, and they have done an absolutely miserable job of managing our economy. But why do we need a bunch of unelected private bankers to manage our economy and print our money for us in the first place? Wouldn’t our economy function much more efficiently if we allowed the free market to set interest rates? And according to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. So why is the Federal Reserve doing it? Sadly, this is the way it works all over the globe today. In fact, all 187 nations that belong to the IMF have a central bank. But the truth is that there are much better alternatives. We just need to get people educated.
The following are 11 reasons why the Federal Reserve should be abolished…
#1 The Greatest Period Of Economic Growth In The History Of The United States Happened When There Was No Central Bank
Did you know that the greatest period of economic growth in U.S. history was between the Civil War and 1913? And guess what? That was a period when there was no central bank in the United States at all. The following is from Wikipedia…
The Gilded Age saw the greatest period of economic growth in American history. After the short-lived panic of 1873, the economy recovered with the advent of hard money policies and industrialization. From 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita, despite the panic of 1873. The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8%, while the GDP was also doubled.
So if our greatest period of economic prosperity was during a time when there was no Federal Reserve, then why shouldn’t we try such a system again?
#2 The Federal Reserve Is Systematically Destroying The Value Of The U.S. Dollar
The United States never had a persistent, ongoing problem with inflation until the Federal Reserve was created in 1913.
If you do not believe this, just check out the inflation chart in this article.
The Federal Reserve systematically penalizes those that try to save their money. Inflation is a tax, and the value of each one of our dollars goes down a little bit more every single day.
But over time, it really adds up. In fact, the value of the U.S. dollar has fallen by 83 percent since 1970.
Anyone that goes to the grocery store on a regular basis knows how painful inflation can be. The following is a list that shows how prices for many of the things that we buy on a regular basis absolutely skyrocketed between 2002 and 2012…
Peanut Butter: 40%
A Loaf Of White Bread: 39%
Spaghetti And Macaroni: 44%
Orange Juice: 46%
Red Delicious Apples: 43%
Ground Beef: 61%
Chocolate Chip Cookies: 39%
Even the price of water has absolutely soared in recent years. According to USA Today, water bills have actually tripled over the past 12 years in some areas of the country.
So how can the Federal Reserve get away with claiming that we are in a “low inflation” environment?
Well, what Ben Bernanke never tells you is that the way that the government calculates inflation has changed more than 20 times since 1978.
The truth is that the real rate of inflation is somewhere between five and ten percent right now, but you will never hear about this on the mainstream news.
#3 The Federal Reserve Is A Perpetual Debt Machine
The Federal Reserve system was designed to be a trap. The intent of the bankers was to trap the U.S. government in an endless debt spiral from which it could never possibly escape.
But most Americans don’t understand this. In fact, most Americans don’t even understand where money comes from.
If you don’t believe this, just go out on the street and ask regular people where money comes from. The responses will be something like this…
“Duh – I don’t know. I’ve got to get home to watch American Idol.”
This is why it is so important to get people educated. I think that most Americans would be horrified to learn that the creation of more money in our system also involves the creation of more debt.
The following is a summary of money creation that comes from one of my previous articles…
When the U.S. government decides that it wants to spend another billion dollars that it does not have, it does not print up a billion dollars.
Rather, the U.S. government creates a bunch of U.S. Treasury bonds (debt) and takes them over to the Federal Reserve.
The Federal Reserve creates a billion dollars out of thin air and exchanges them for the U.S. Treasury bonds.
So what does the Federal Reserve do with those Treasury bonds? I went on to explain what happens…
The U.S. Treasury bonds that the Federal Reserve receives in exchange for the money it has created out of nothing are auctioned off through the Federal Reserve system.
There is a problem.
Because the U.S. government must pay interest on the Treasury bonds, the amount of debt that has been created by this transaction is greater than the amount of money that has been created.
So where will the U.S. government get the money to pay that debt?
Well, the theory is that we can get money to circulate through the economy really, really fast and tax it at a high enough rate that the government will be able to collect enough taxes to pay the debt.
But that never actually happens, does it?
And the creators of the Federal Reserve understood this as well. They understood that the U.S. government would not have enough money to both run the government and service the national debt. They knew that the U.S. government would have to keep borrowing even more money in an attempt to keep up with the game.
Men like Thomas Edison and Henry Ford could not understand why we would adopt such a foolish system. For example, Thomas Edison was once quoted in the New York Times as saying the following…
That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.
Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.
But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.
Unfortunately, today most Americans don’t even understand how the system works. They just assume that we have the best system in the entire world.
Sadly, the reality is that the system is working just as the international bankers that designed it had hoped. The United States has the largest national debt in the history of the world, and we are stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day in a desperate attempt to keep the debt spiral going.
#4 The Federal Reserve Is A Centrally-Planned Financial System That Is The Antithesis Of What A Free Market System Should Be
Why do we need someone to centrally-plan our financial system?
Isn’t that the kind of thing they do in communist China?
Why do we need someone to tell us what interest rates are going to be?
Why do we need someone to determine what “the target rate of inflation” should be?
If we actually had a free market system, the free market would be the one “managing” our economy.
But instead, we have become so accustomed to central planning that any alternatives seem to be absolutely unthinkable.
For example, CNBC cannot possibly imagine a world where the Fed (or some similar institution) was not running things…
But suppose the law were taken off the books? The Fed’s job—in simple terms—is to manage the nation’s money supply and achieve the sometimes-conflicting tasks of full employment, stable prices while fighting inflation or deflation.
How would the U.S. economy then function? Something has to take its place, right?
Global markets would also need some sort of economic direction from the U.S. The Fed manages the dollar — and as the world’s leading currency, a void left by a Fed-less America could throw those markets into chaos with uncertainty about who’s managing U.S. interest rates and the American economy.
I’ve got an idea – let’s let the free market “manage” U.S. interest rates and the American economy.
I know, it’s a crazy idea, but I have a sneaking suspicion that it just might work beautifully.
#5 The Federal Reserve Creates Bubbles And Busts
Do you remember the Dotcom bubble?
Or what about the housing bubble?
By dramatically distorting interest rates and financial behavior, the Federal Reserve creates economic bubbles and the corresponding economic busts.
And guess what?
Now it is happening again.
When will the American people decide that they have had enough?
If you can believe it, there have been 10 different economic recessions since 1950. And of course the Federal Reserve even admits that it helped create the Great Depression of the 1930s.
Perhaps it is time to try something different.
#6 The Federal Reserve Is Privately Owned
It has been said that the Federal Reserve is about as “federal” as Federal Express is.
Most Americans still believe that the Federal Reserve is a “federal agency”, but that is simply not true. The following comes from factcheck.org…
The stockholders in the 12 regional Federal Reserve Banks are the privately owned banks that fall under the Federal Reserve System. These include all national banks (chartered by the federal government) and those state-chartered banks that wish to join and meet certain requirements. About 38 percent of the nation’s more than 8,000 banks are members of the system, and thus own the Fed banks.
And even the Federal Reserve itself has argued that it is “not an agency” of the federal government in court.
So why is there still so much confusion about this?
We should not be allowing a private entity that is owned and dominated by the banks to make decisions that dramatically affect the daily lives of all the rest of us.
#7 The Federal Reserve Greatly Favors The “Too Big To Fail” Banks
Since the Federal Reserve is owned by the banks, should we be surprised that it serves the interests of the banks?
In particular, the Fed has been extremely good to the “too big to fail” banks.
Over the past several decades, those banks have grown tremendously in both size and power.
Back in 1970, the five largest U.S. banks held 17 percent of all U.S. banking industry assets.
Today, the five largest U.S. banks hold 52 percent of all U.S. banking industry assets.
#8 The Federal Reserve Gives Secret Bailouts To Their Friends
The Federal Reserve is the only institution in America that can print money out of thin air and loan it to their friends any time they want to.
For example, did you know that the Federal Reserve made 16 trillion dollars in secret loans to their friends during the last financial crisis?
The following list is taken directly from page 131 of a GAO audit report, and it shows which banks received secret loans from the Fed…
Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion
If you will notice, a number of the banks listed above are foreign banks.
Why is the Fed allowed to print money out of thin air and lend it to foreign banks?
#9 The Federal Reserve Is Paying Banks Not To Lend Money
Did you know that the Federal Reserve is actually paying U.S. banks not to lend money?
That doesn’t make sense. Our economy is based on credit, and small businesses desperately need loans in order to operate.
But the Fed has decided to pay banks not to risk their money. Section 128 of the Emergency Economic Stabilization Act of 2008 allows the Federal Reserve to pay interest on “excess reserves” that U.S. banks park at the Fed.
So the big banks can just send their cash to the Fed and watch the money come rolling in risk-free.
As the chart below demonstrates, the banks have taken great advantage of this tremendous deal…
#10 The Federal Reserve Has An Astounding Track Record Of Failure
Over the past ten years, the Federal Reserve has been an abysmal failure when it comes to running the economy.
But despite a track record of failure that would make the Chicago Cubs look like a roaring success, Barack Obama actually decided to nominate Ben Bernanke for a second term as the Chairman of the Federal Reserve.
What a mistake.
Just check out some of the things that Bernanke said prior to the last financial crisis. The following is an extended excerpt from an article that I published previously…
In 2005, Bernanke said that we shouldn’t worry because housing prices had never declined on a nationwide basis before and he said that he believed that the U.S. would continue to experience close to “full employment”….
“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”
In 2005, Bernanke also said that he believed that derivatives were perfectly safe and posed no danger to financial markets….
“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”
In 2006, Bernanke said that housing prices would probably keep rising….
“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
In 2007, Bernanke insisted that there was not a problem with subprime mortgages….
“At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”
In 2008, Bernanke said that a recession was not coming….
“The Federal Reserve is not currently forecasting a recession.”
A few months before Fannie Mae and Freddie Mac collapsed, Bernanke insisted that they were totally secure….
“The GSEs are adequately capitalized. They are in no danger of failing.”
There are many, many more examples that could be listed, but hopefully you get the point.
And now it is happening again. Bernanke is telling the American people that everything is going to be just fine and that no major problems are ahead.
Do you believe him this time?
#11 The Federal Reserve Is Unaccountable To The American People
What is the most important political issue to most Americans?
Survey after survey has shown that the American people care about the economy more than anything else.
So why do we allow an unelected, unaccountable entity that is privately-owned to make our economic decisions for us?
The Federal Reserve has become so powerful that it has been called “the fourth branch of government”. Every four years, presidential candidates argue about who will be best at managing the economy, but the truth is that it is the Fed that manages our economy.
We are told that the “independence” of the Federal Reserve is absolutely critical, but don’t the American people deserve to have a say in the running of the economy?
Our system is broken. It is a system that will continue to create more bubbles and more debt until the entire thing finally collapses for good.
Thomas Jefferson once stated that if he could add just one more amendment to the U.S. Constitution it would be a ban on all government borrowing….
I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.
But instead of banning government borrowing, we have allowed ourselves to become enslaved to a system where government borrowing actually creates our money.
We do not need to have a central bank. There are much better alternatives. We just need to get people educated.
Please share this article with as many people as you possibly can. These are things that every American should know about the Fed, and we need to educate the American people about the Federal Reserve while there is still time.
They didn’t see it coming last time either. Back in 2007, President Bush, Federal Reserve Chairman Ben Bernanke and just about every prominent voice in the financial world were all predicting that we would experience tremendous economic prosperity well into the future. In fact, as late as January 2008 Bernanke boldly declared that “the Federal Reserve is not currently forecasting a recession.” At the time, only the “doom and gloomers” were warning that everything was about to fall apart. And of course we all know what happened. But just a few short years later, history seems to be repeating itself. Barack Obama, Federal Reserve Chairman Ben Bernanke and almost every prominent voice in the financial world are all promising that the U.S. “economic recovery” is going to continue even though Europe is coming apart like a 20 dollar suit. But the economic fundamentals tell a different story. Our national debt is more than $6,000,000,000,000 larger than it was back in 2008, the number of Americans on food stamps just hit another brand new all-time record, and the bankers up on Wall Street are selling gigantic mountains of the exact same kind of toxic derivatives that caused so much trouble the last time around. But all of our “leaders” swear that everything is going to be okay. You can believe them if you want, but denial is not just a river in Egypt, and another crash is inevitably coming.
Sadly, many Americans are not even going to see the crash coming because they still have faith in the “experts”. They haven’t figured out that the “experts” really do not know what they are doing.
The blind are leading the blind, and in the end the results are going to be absolutely tragic.
The following are 10 hilarious examples of how clueless our leaders are about the economy…
#1 When I first came across the following chart the other day, it made me chuckle. It is a chart that supposedly tells us the “probability” of a recession, and it was taken from the website of the Federal Reserve Bank of St. Louis. According to the chart, right now there is a 0.16% chance of a recession…
#2 Federal Reserve Chairman Ben Bernanke has also been proclaiming his belief that the U.S. economy will continue to grow. The following is an excerpt from his recent remarks to Congress…
The pause in real GDP growth last quarter does not appear to reflect a stalling-out of the recovery. Rather, economic activity was temporarily restrained by weather-related disruptions and by transitory declines in a few volatile categories of spending, even as demand by U.S. households and businesses continued to expand. Available information suggests that economic growth has picked up again this year.
And Bernanke also insists that the labor market is “improving”…
Consistent with the moderate pace of economic growth, conditions in the labor market have been improving gradually.
Of course the labor market is not actually improving. I showed this using the Fed’s own numbers the other day.
And you can put stock in Bernanke’s forecasting ability if you like, but considering his track record of failure in the past, that might not be too wise. Just check out what he was saying before the last financial crisis: “30 Ben Bernanke Quotes That Are So Stupid That You Won’t Know Whether To Laugh Or Cry“.
#3 Although Bernanke has such a nightmarish track record of failure, Warren Buffett still has faith in him. In fact, Buffett loves all of the money printing that Bernanke has been doing…
The U.S. economy might be “dead in the water” without the stimulus provided by the Federal Reserve under Chairman Ben Bernanke, according to Warren Buffett, CEO of Berkshire Hathaway.
“I think very cheap money makes things happen, it makes asset values higher. When asset values are higher, people do have a greater propensity to spend,” Buffett told CNBC.
“I think Bernanke has sort of carried the load himself during this period.”
If Buffett thinks the wild money printing that the Fed has been doing is so wonderful, then he probably would have absolutely loved living in the Weimar Republic.
#4 Barack Obama continues to insist that we do not have a debt crisis, but that we will not be able to balance the budget any time in the foreseeable future either.
Even though the national debt has grown by more than 6 trillion dollars under his leadership and our debt to GDP ratio is now well over 100%, Obama does not believe that it is a significant problem…
“We don’t have an immediate crisis in terms of debt”
And Obama certainly does not plan to even come close to balancing the budget during his second term. In fact, he openly admits that we won’t see a balanced budget at any point within the next decade…
“We’re not gonna balance the budget in 10 years”
Sadly, the truth is that the U.S. will never have a balanced budget ever again under our current system, but most of our politicians are not willing to go that far and admit that sad fact to the American people just yet.
#5 But of course it would certainly help if the U.S. government would stop wasting so much money. For example, did you know that the federal government is helping dead people get free cell phones? The following is from a recent article in the New York Post…
Dead people don’t need cell phones.
That’s the message Rep. Tim Griffin of Arkansas wants to send Congress, after he says a controversial government-backed program that helps provide phones to low-income Americans ended up sending mobiles to the dead relatives of his constituents. Griffin has introduced a bill that targets the phone hand-out program, which has ballooned into a fiscal headache for the government.
And of course a lot of living people are abusing the free cell phone program as well. Rep. Griffin says that he has heard of some people getting as many as 10 free cell phones from the government…
“I’ve also gotten calls from people who say their employees were bragging about having 10 phones.”
#6 Meanwhile, the most prominent economic journalist in the United States, Paul Krugman of the New York Times, continues to insist that it is a good thing for the government to be running up so much debt…
First of all… that trillion-dollar deficit is overwhelmingly the result of a depressed economy. And when the economy’s depressed it’s good to run a deficit. You don’t want the government to try and balance its budget right now.
Krugman is also operating under the delusion that the federal government “can’t run out of cash”, that it can just print money whenever it wants and that printing giant piles of money would not hurt anything.
The United States is a country that has its own currency–can’t run out of cash because we print the money. If you even try to think what would happen–suppose that investors get down on the United States. Even so, that would weaken the dollar, not send interest rates soaring, and that would be good. That would help our exports
It is frightening that the top economic journalist in America has such little understanding of how our system actually works. I would encourage Krugman to read a couple of my previous articles so that he won’t be so ignorant in the future…
-“Where Does Money Come From? The Giant Federal Reserve Scam That Most Americans Do Not Understand”
-“10 Things That Every American Should Know About The Federal Reserve”
#7 Many Americans have wondered why the federal government never seems to go after the big Wall Street banks. Well, now we know why. The other day, the Attorney General of the United States admitted that the federal government is very hesitant to prosecute anyone from the big banks because of what it might do to the global economy…
“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy”
So I guess we now live in a world where there is a different set of rules for the big banks, eh?
Most of us already knew that this was the case, but it is quite chilling to hear the Attorney General of the United States publicly admit this.
#8 Many of the big Wall Street banks are absolutely giddy that the Dow keeps setting new all-time highs, and many of them are projecting wonderful things ahead for the U.S. economy. For example, here is one forecast from Morgan Stanley’s Vincent Reinhart …
“In the Morgan Stanley forecast for the US, the trajectory of economic activity marks an inflection point midway through 2013. The severe financial crisis of 2008-09 necessitated significant downward adjustments by the private sector to the levels of aggregate demand and efficient supply. As the event recedes further into history, however, the drag on growth from these ongoing level adjustments plays out.
In our forecast, the expansion of real GDP steps up to around 2-3/4 percent in the second half of this year and beyond.”
#9 Vice-President Joe Biden is pushing economic optimism to ridiculous levels. Apparently he believes that most Americans are “no longer worried” that a major economic crisis is coming…
But all kidding aside, I think the American people have moved — Democrats, Republicans, independents. They know that the possibilities for this country are immense. They’re no longer traumatized by what was a traumatizing event, the great collapse in 2008. They’re no longer worried, I think, about our economy being overwhelmed either by Europe writ large, the EU, or China somehow swallowing up every bit of innovation that exists in the world. They’re no longer, I think, worried about our economy being overwhelmed beyond our shores.
And I don’t think they’re any more — there’s no — there’s very little doubt in any circles out there about America’s ability to be in position to lead the world in the 21st century, not only in terms of our foreign policy, our incredible defense establishment, but economically.
#10 Right now, many in the financial world are projecting that this will be a year to remember for the stock market. During a recent interview with Fox Business, Wharton School of Business Finance Professor Jeremy Siegel declared that the Dow will cross the 16,000 mark by the end of this year…
“I think by the end of this year, we’ll be in the 16,000 to 17,000 range.”
Of course it is true that other analysts have a much different view of things. Many of them are absolutely amazed that the U.S. economy has become so disconnected from economic reality. For example, just check out what Steve Russell and Hamish Baillie, fund managers at the Ruffer Investment Company, recently had to say…
“If this was explained to a recently arrived Martian he would no doubt be puzzled – US unemployment has almost doubled since 2007, GDP [gross domestic product] growth is a third lower and debt as a percentage of GDP is within a whisker of doubling. The market is forward looking but this is extreme”
So who is right and who is wrong?
Time will tell.
Fortunately, it appears that the American people are getting fed up with the constant stream of lies that they have been told.
According to a new Pew Research survey, just 26 percent of all Americans trust the government to do the right thing.
So what about you?
Do you trust what the government and the “experts” are telling you?
Do you trust them to do the right thing?
Feel free to post a comment with your thoughts below…
Is the stock market going to crash by the end of this year? Are we on the verge of major financial chaos on a global scale? Well, this is the time of the year when investors start getting nervous. We all remember what happened during the fall of 1929, the fall of 1987 and the fall of 2008. However, it is important to keep in mind that we do not see a stock market crash in the fall of every year. Some years the stock market cruises through the months of September, October, November and December without any problems whatsoever. But this year conditions certainly seem to be right for a “perfect storm” to develop. Technical indicators are screaming that a stock market decline is imminent and sources in the financial industry all over the world are warning that a massive crisis is on the way. What you are about to read should alarm you. But it is not a guarantee that anything will or will not happen. When Ben Bernanke gives his speech at the Jackson Hole summit on Friday he could announce to the rest of the world that the Federal Reserve has decided to launch QE3 and that the Fed will be printing up trillions of new dollars. If that happened global financial markets would leap for joy. So it is always a dangerous thing when anyone out there tries to tell you that they can “guarantee” what is about to happen in the financial world. There are just so many moving parts. But if we do not see major intervention by the governments of the world or by global central banks a major financial crisis could rapidly develop this fall. The conditions are certainly right for a stock market collapse, and we could easily see a repeat of what happened back in 2008.
The truth is that the second half of 2012 looks a little bit more like the second half of 2008 with each passing day.
Just check out what Bob Janjuah of Nomura Securities has been saying….
Based on the reasons set out earlier and also covered in my two prior notes, over the August to November period I am looking for the S&P500 to trade off down from around 1400 to 1100/1000 – in other words, I expect over the next four months to see global equity markets fall by 20% to 25% from current levels and to trade at or below the lows of 2011! US equity markets, along with parts of the EM spectrum, will I think underperform eurozone equity markets, where already very little hope resides.
Others are issuing similar warnings. For example, the following is what a couple of Bank of America analysts said in a report the other day….
Our strategists see an unusually high number of macro catalysts over the next 3-6 months that could take markets lower. We expect economic growth to disappoint in the second half of the year in anticipation of the fiscal cliff. This would exacerbate any slowdown from the deepening recession in Europe and decelerating growth in emerging markets. There is also the ongoing tension in the Middle East, the potential for a US credit downgrade and accelerating downward analyst estimate revisions. To top it off, September is seasonally the weakest month of the year for stock price returns.
There has been an unusual amount of chatter in the financial world about the September to December time frame.
That could mean something or it could mean nothing.
But is is very interesting to watch what some top financial insiders are doing with their stocks right now.
Dennis Gartman, the publisher of the Gartman Leter, has dumped all of his stocks at this point.
As I have written about previously, George Soros has dumped all of his stock in banking giants JP Morgan, Citigroup and Goldman Sachs.
Are they just being paranoid?
Or do they know something that we do not?
If you are looking for the next “Lehman Brothers moment” in the United States, you might want to watch Morgan Stanley. Morgan Stanley was heavily involved in the Facebook IPO disaster, earlier this year their credit rating was downgraded, and now there are persistent rumors that Morgan Stanley is in big trouble and that it will be allowed to fail. You can check out some of these rumors for yourself here, here and here.
But of course as I have said all along the center of the coming crisis is going to be in Europe, and many analysts agree with me. For example, the following is what the chairman of Casey Research, Doug Casey, had to say during a recent interview….
Europe is a full cycle ahead of the U.S. Its governments and its banks are both bankrupt. It’s a couple of drunks standing on the street corner holding each other up at this point. Europe is in much worse shape than the U.S. It’s highly regulated, highly taxed and much more socially unstable.
Europe is going to be the epicenter of the coming storm. Japan is waiting in the wings, as is China. This is going to be a worldwide phenomenon. Of course, the U.S. will be in it, too. We’re going to see this all over the world.
Much of southern Europe is already experiencing depression-like conditions. Unemployment in both Greece and Spain is well above 20 percent and both economies are steadily shrinking.
Money is flowing out of Spanish banks at an unprecedented rate right now. Just take a look at these charts. The only thing that is going to keep the Spanish banking system from totally collapsing is outside intervention.
But the truth is that all of Europe is in big trouble. Even German companies are slashing job right now. For example, check out what Siemens is up to….
German engineering conglomerate Siemens (SIEGn.DE) is in early internal talks to cut thousands of jobs in response to a weakening economy, particularly in Europe, a German newspaper reported.
Decisions could be made in October or November, according to daily Boersen-Zeitung, which did not specify its sources.
A Siemens spokesman declined to comment.
We are living in the greatest debt bubble in the history of the world, and at some point that bubble is going to burst in a very messy way.
It is vital that people understand that our system is not even close to sustainable.
Knowing exactly when it will collapse is not nearly as important as understanding that a collapse is absolutely inevitable.
I think what former World Bank economist Richard Duncan had to say recently is very helpful….
“The explosion in credit drove economic growth in the U.S. and around the world, and now that’s the only thing that’s keeping us from collapsing in a debt/deflation spiral,” he said. “[What] I think everybody needs to understand is that the kind of economy that we have now, it’s not capitalism. It has very little in common with capitalism. Capitalism was an economic system in which the government played very little role …. Under capitalism, gold was money and the government had nothing to do with it. Now the central bank creates the money and manipulates its value.”
And he is very right.
We aren’t seeing a failure of capitalism.
What we are witnessing is the failure of debt-based central banking.
And if you think that the global elite are not aware of what is happening then you have not been paying attention.
This summer the global elite have been preparing very hard. Either they are getting very paranoid or they know things that we do not.
If you want to catch up on what the global elite have been up to recently, check out these three articles that I have published previously….
-“Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?”
-“Startling Evidence That Central Banks And Wall Street Insiders Are Rapidly Preparing For Something BIG”
-“Jacob Rothschild, John Paulson And George Soros Are All Betting That Financial Disaster Is Coming”
If you are waiting for the nightly news to tell you what to do, then you have not learned anything.
Did anyone in the mainstream media warn you about what was about to happen back in 2008?
Of course not.
The “authorities” insisted that everything was going to be just fine and many average Americans were absolutely wiped out.
So don’t expect someone to come along and nicely inform you that your retirement savings are about to be absolutely devastated.
In this day and age it is absolutely critical for people to learn to think for themselves.
Barack Obama is not going to save you.
Mitt Romney is not going to save you.
The U.S. Congress is not going to save you. They are too busy living the high life at taxpayer expense.
The system is not looking out for you. Nobody is really going to care if your financial planning gets turned upside down. This is a cold, cruel world and you need to understand how the game is played. The financial insiders are looking out for themselves and most of them usually are able to avoid financial disaster.
Average folks like you and I are normally not so fortunate.
There are lots of warning signs that indicate that this fall could be a very turbulent time for global financial markets.
Ignore them at your own peril.
If you want to figure out what is going to happen next in the financial markets, carefully watch what the insiders are doing. Those that are “connected” have access to far better sources of information than the rest of us have, and if they hear that something big is coming up they will often make very significant moves with their money in anticipation of what is about to happen. Right now, Wall Street insiders and central banks all around the globe are making some very unusual moves. In fact, they appear to be rapidly preparing for something really big. So exactly what are they up to? In a previous article entitled “Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?“, I speculated that they may be preparing for a financial meltdown of some sort. As I noted in that article, more than 600 banking executives have resigned from their positions over the past 12 months, and I have been personally told that a substantial number of Wall Street bankers have been shopping for “prepper properties” this summer. But now even more evidence has emerged that quiet preparations are being made for an imminent financial collapse. That doesn’t guarantee that something will happen or won’t happen. Like any good detective, we are gathering clues and trying to figure out what the evidence is telling us.
Why Is George Soros Selling So Much Stock And Buying So Much Gold?
I am certainly not a fan of George Soros. He has funneled millions upon millions of dollars into organizations that are trying to take America in the exact wrong direction.
However, I do recognize that he is extremely well connected in the financial world. Soros is almost always ahead of the curve on financial matters, and if something big is going to go down George Soros is probably going to know about it ahead of time.
That is why it is very alarming that he has dumped all of his banking stocks and that he is massively hoarding gold. The following is from shtfplan.com….
In a harbinger of what may be coming our way in the Fall of 2012, billionaire financier George Soros has sold all of his equity positions in major financial stocks according to a 13-F report filed with the SEC for the quarter ending June 30, 2012.
Soros, who manages funds through various accounts in the US and the Cayman Islands, has reportedly unloaded over one million shares of stock in financial companies and banks that include Citigroup (420,000 shares), JP Morgan (701,400 shares) and Goldman Sachs (120,000 shares). The total value of the stock sales amounts to nearly $50 million.
What’s equally as interesting as his sale of major financials is where Soros has shifted his money. At the same time he was selling bank stocks, he was acquiring some 884,000 shares (approx. $130 million) of Gold via the SPDR Gold Trust.
Why would you dump over a million shares of stock in major banks and purchase more than 100 million dollars worth of gold?
Well, it would make perfect sense if you believed that a collapse of the financial system was about to happen.
Earlier this year, George Soros told the following to Newsweek….
“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”
It looks like he is putting his money where his mouth is.
Perhaps even more disturbing is what he believes is coming after the financial collapse….
As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”
That doesn’t sound good.
George Soros has told us what he believes is going to happen, and now he is making moves with his money that indicate that he is convinced that it is actually about to start happening.
But he is not the only one that has been busy accumulating gold.
Billionaire John Paulson (the one that made 20 billion dollars on the subprime mortgage meltdown) has been buying gold like crazy and his company now “has 44 percent of its $24 billion fund exposed to bullion.”
So why are Soros and Paulson buying up so much gold?
Central Banks Are Also Hoarding Gold
According to the World Gold Council, the amount of gold bought by the central banks of the world absolutely soared during the second quarter of 2012. The 157.5 metric tons of gold bought by the central banks of the world last quarter was an increase of 62.9 percent from the first quarter of 2012 and a 137.9 percent increase from the second quarter of 2011.
Prior to 2009, the central banks of the world had been net sellers of gold for about two decades. But now that has totally changed, and last quarter central banks stocked up on gold in quantities that we have not seen before….
At 157.5 metric tons, gold buying among central banks came in at its highest quarterly level since the sector became a net buyer of the precious metal in the second quarter of 2009, data in the organization’s quarterly Gold Demand Trends report show.
So why have the central banks of the world become such gold bugs?
Is there something they aren’t telling us?
Rampant Insider Selling
Wall Street insiders have been dumping a whole lot of stock this year.
In my previous article, I linked to a CNN article from back in April….
First quarter earnings have been decent, if not spectacular. And many corporate executives are issuing cautiously optimistic guidance for the rest of the year.
But while insiders’ lips are saying one thing, their wallets are saying another. The level of insider selling among S&P 500 (SPX) companies is the highest in nearly 10 years. That is not good.
A lot of insiders appear to be getting out at the top of the market while the getting is still good.
Other insiders appear to be bailing out before the bottom falls out from beneath them.
Just check out what has been happening to Facebook stock. It hit another new record low on Thursday as insiders dumped stock. The following is from a CNN article….
Facebook’s life as a public company has been a nightmare from day one, and the pain continued on Thursday as some company insiders got their first chance to dump shares.
Facebook stock hit a new intra-day low of $19.69 Thursday morning, and ended the day 6.3% lower at $19.87.
Sadly, Facebook has now lost close to half of its value since the IPO.
Will Facebook end up being the poster child for the irrational stock market bubble that we have seen over the past couple of years?
Overall, retail investors have been very busy pulling money out of stocks in recent weeks.
The following are the net inflows to equity funds over the past five weeks (in millions of dollars) according to ICI….
According to the figures above, more than 10 billion dollars has been pulled out of equity funds over the past two weeks alone.
So does this mean anything?
But it is very interesting and it bears watching.
Why Does The U.S. Government Need So Much Ammunition?
In my previous article, I also noted that the U.S. government appears to be very rapidly making preparations for something really big.
This week, it was revealed that the Social Security Administration plans to buy 174,000 hollow point bullets which will be delivered to 41 different locations all over America.
Now why in the world does the Social Security Administration need 174,000 bullets?
And why do they need hollow point bullets? Those bullets are designed to cause as much damage to internal organs as possible.
But of course this is only the latest in a series of very large purchases of ammunition by U.S. government agencies. The following is from a recent article by Paul Joseph Watson….
Back in March, Homeland Security purchased 450 million rounds of .40-caliber hollow point bullets that are designed to expand upon entry and cause maximum organ damage, prompting questions as to why the DHS needed such a large amount of powerful bullets merely for training purposes.
This was followed by another DHS solicitation asking for a further 750 million rounds of assorted bullets, including 357 mag rounds that are able to penetrate walls.
Now why in the world would the government need over a billion rounds of ammunition?
If it was the U.S. military I could understand this. You can burn through a whole lot of ammunition fighting wars.
But this makes no sense – unless they believe that big trouble is coming.
Personally, I wouldn’t blame them for getting prepared. Our economy continues to fall apart and there are signs of social decay everywhere around us.
The American people are more frustrated and more angry than at any other time in modern history. This upcoming election is only going to cause Americans to become even more angry and even more divided.
All it would take is just the right “spark” to cause this country to erupt.
It could be the upcoming election.
It could be the collapse of the financial system.
Or it might be something else.
But the conditions are definitely there for it to happen.
Unfortunately, the American public is never told to prepare because authorities never want “to panic” the general population.
We are always the last to know, and that stinks.
So don’t wait for someone to come on the television and announce that a crisis is happening.
If you wait that long, it will be too late.
Instead, open up your eyes and think for yourself.
We all need to work hard to get prepared for the coming crisis while we still can.
As you can see, Wall Street insiders, the U.S. government and the central banks of the world are busy getting prepared.
Don’t put your head in the sand.
The warning signs are there and time is running out.