Worst Job Growth In A Year – Way Below Expectations

We just got more evidence that the U.S. economy is starting to slow down.  The U.S. economy must produce somewhere around 200,000 jobs a month just to keep up with population growth, and last month we were way below that number.  In fact, the employment numbers that the government released on Friday were the worst that we have seen in an entire year.  In late 2018, the IMF is openly warning of “a second Great Depression”, and indications that another economic crisis is coming are emerging all around us.  Many had been hoping that very strong employment numbers on Friday would change that trend, but instead it was “the worst performance since last September”

Nonfarm payrolls rose just 134,000, well below Refinitiv estimates of 185,000 and the worst performance since last September, when a labor strike weighed on the numbers.

But even though the number of jobs created did not even come close to keeping up with population growth, we are told that the unemployment rate actually declined, and some media outlets are proudly touting this as some sort of “success”.

Of course other numbers actually show that the unemployment rate is rising.  The following comes from CNBC

A separate measure of unemployment that includes discouraged workers and those holding jobs part-time for economic reasons — sometimes called the “real unemployment rate” — edged higher to 7.5 percent.

And according to shadowstats.com, the actual unemployment rate in the United States right now is 21.3 percent.  That is down slightly from the peak, but it is nowhere even close to where we were before the last recession.

There are many out there that desperately want to believe that the U.S. economy is “booming”, but that simply is not accurate.

If the U.S. economy really is “booming”, then why has “the largest ever homeless encampment” that Minneapolis has ever seen just gone up?…

The Associated Press (AP) has revealed a troubling story of the largest ever homeless encampment site mostly made up of Native Americans has quickly erected just south of downtown Minneapolis, Minnesota.

City officials are scrambling to contain the situation as two deaths in recent weeks, concerns about disease and infection, illicit drug use and the coming winter season, have sounded the alarm of a developing public health crisis.

We also got another really bad piece of economic news on Friday.

According to official government numbers, the U.S. trade deficit increased once again in August

The US Census Bureau reported Friday that the trade deficit increased to $53.2 billion in August for both goods and services, up from $50.0 billion in July. The goods trade deficit, which draws most of Trump’s attention, also increased to $86.3 billion, a $3.8 billion increase from the month before.

The primary reason for the increase in the deficit was a collapse in exports, especially soybeans, which fell off by $1 billion, a 28% drop from the month prior. China, the largest buyer of US soybeans, imposed tariffs on the American crop and it appears the restrictions are taking a toll.

One of the primary goals of the trade war is to decrease the size of our trade deficit, and so far it is not working.

Financial markets responded very negatively to all of the bad economic news.  Stocks plunged for a third straight day on Friday, and the Nasdaq was hit particularly hard

US equity markets were pressured for a third straight day Friday, with all of the major averages sporting losses of at least 1% at their lows. Heavy selling pushed the tech-heavy Nasdaq down by as much as 2.1%, before rebounding and finishing with a loss of just more than 1%.

Overall, it was a very tough week on Wall Street.  The following is how Zero Hedge summarized the carnage…

 

  • US Stocks – worst 2-day drop since May
  • Small Caps, Nasdaq – biggest weekly drop in 7 months
  • Small Caps – biggest 5-week drop since Nov 2016
  • China (closed) ETF – biggest weekly drop in 7 months
  • Semis – biggest weekly drop in 6 months
  • FANGs – biggest weekly drop in 7 months
  • Homebuilders – worst.losing.streak.ever…
  • USD Index – best week in 2 months
  • HY Bonds – biggest weekly price drop in 8 months
  • IG Bonds – biggest weekly drop since Nov 2016
  • Treasury Yields – biggest weekly yield spike in 8 months
  • Yield Curve – biggest weekly steepening in 8 months
  • Gold – best weekly gain in 6 weeks

 

In particular, it is absolutely stunning what is happening to homebuilder stocks.  They have now fallen for 13 days in a row, and that could be another very clear indication that a housing crash is coming.

None of the problems that caused the crash of 2008 have been fixed.  It absolutely amazes me that some people think that you can “fix” our economy by tinkering with the tax code a little bit and getting rid of a few regulations.  A handful of marginal changes is not going to alter our long-term outlook one bit.

The truth is that our economic system requires extensive emergency surgery.  We need to abolish the Federal Reserve, abolish the IRS, abolish the income tax and start using currency that is not created by debt.  And that would just be for starters.  Our current economic system is fundamentally flawed, and in the long-term it is inevitably going to fail.  The best that anyone can do in the short-term is to keep inflating the bubbles so that things will hold together long enough until they can become somebody else’s problem.

Right now, the only way that we can achieve economic growth is by growing debt at a far faster pace than the overall economy is expanding.  That is a recipe for a long-term disaster, and everyone knows that we are in the process of committing national suicide, but nobody is really doing anything to stop it.

Sadly, it is probably going to take another major crisis before people start calling for real change, and that is extremely unfortunate.

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

 

We Just Witnessed The Biggest U.S. Bond Crash In Nearly 2 Years – What Does This Mean For The Stock Market?

U.S. bonds have not fallen like this since Donald Trump’s stunning election victory in November 2016.  Could this be a sign that big trouble is on the horizon for the stock market?  It seems like bonds have been in a bull market forever, but now suddenly bond yields are spiking to alarmingly high levels.  On Wednesday, the yield on 30 year U.S. bonds rose to the highest level since September 2014, the yield on 10 year U.S. bonds rose to the highest level since June 2011, and the yield on 5 year bonds rose to the highest level since October 2008.  And this wasn’t just a U.S. phenomenon.  We saw bond yields spike all over the developed world on Wednesday, and the mainstream media is attempting to put a happy face on things by blaming a “booming economy” for the bond crash.  But the truth is not so simple.  For U.S. bonds, Bill Gross says that it was a lack of foreign buyers that drove yields higher, and he says that this may only be just the beginning

And, according to Gross, the carnage may not end here: “Lack of foreign buying at these levels likely leading to lower Treasury prices,” echoing what we said last week. And as foreign investors pull back from US paper, look for even higher yields, and an even higher dollar, which in turn risks re-inflaming the EM crisis that had mercifully quieted down in recent weeks.

I believe that Gross is right on target.

And Jeffrey Gundlach has previously warned that when yields get to this level that it would be a “game changer”

Treasury yields soared Wednesday as economic data fostered optimism about the American economy, sending both the 10-year rate and the 30-year rate above multiyear highs, and beyond what “Bond King” Jeffrey Gundlach dubbed a “game changer.”

The DoubleLine Capital CEO wrote on Twitter in September, “Yields: On the march! 10’s above 3% again, this time without financial media concern. Watch 3.25% on 30’s. Two closes above = game changer.”

For years, it was so easy for bond traders to make money.  Bond yields just kept going down, and bond prices just kept going up.

But now the paradigm appears to be completely changing, and an enormous amount of wealth is going to be wiped out.

Normally, a rotation out of bonds is good for the stock market.  But when bonds move too quickly that is a sign of panic, and that kind of panic can easily spread to equities.  The following comes from Zero Hedge

As Bloomberg’s Cameron Crise notes, this yield move is entering the “danger zone” for stocks. The 30bps spike in the last 5 weeks falls into the cohort where average and median equity performance has been negative over the following five weeks. Do with that information what you will, but realize that with this kind of price action the bond market is not the equity market’s friend.

In essence, what that is saying is that when bond prices fall this dramatically it usually means that stock prices fall over the following five weeks.

From a longer-term perspective, bond yields are likely to continue to rise because the Federal Reserve seems determined to keep raising interest rates.

In fact, Fed Chairman Jerome Powell says that the low interest rates that we were enjoying during the Obama administration are “not appropriate anymore”

Federal Reserve Chairman Jerome Powell said the central bank has a ways to go yet before it gets interest rates to where they are neither restrictive nor accommodative.

In a question and answer session Wednesday with Judy Woodruff of PBS, Powell said the Fed no longer needs the policies that were in place that pulled the economy out of the financial crisis malaise.

“The really extremely accommodative low interest rates that we needed when the economy was quite weak, we don’t need those anymore. They’re not appropriate anymore,” Powell said.

But Powell knows that every Fed tightening cycle in history has ended in either a stock market crash or a recession.

And he knows that higher interest rates will mean higher bond yields, a stronger dollar and an escalating emerging market debt crisis.

So why is he being so hawkish?

On top of everything else, higher interest rates will also mean higher rates on mortgages, auto loans, credit cards and student loans.  The following comes from my good friend Mac Slavo

As Forbes reported, when the Federal Reserve Board (The Fed) changes the rate at which banks borrow money, this typically has a ripple effect across the entire economy including equity prices, bond interest rates, consumer and business spending, inflation, and recessions. As far as the big picture goes, there is often a delay of a year or more between when interest rates are initially raised, and when they begin to have an effect on the economy.  As consumers, however, we feel these increases almost immediately.  Americans will begin to feel the burn in the floating rate debt they are holding.  This includes credit cards, student loans, home mortgages, and equity loans because all move right along with the Fed.

This story is not going to end well.

As I have tried to explain to my readers so many times, the Federal Reserve has far, far more control over the economy than the White House does.

It is the Federal Reserve that is responsible for creating “the everything bubble”, and it is the Federal Reserve that will be responsible for ending this bubble.

And when this bubble ends, the economic pain is going to be off the charts.  Hopefully the American people will be in a mood to finally shut down the Federal Reserve at that point, because that insidious organization is truly at the heart of our long-term economic and financial problems.

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

The Stock Market Just Crashed In Italy, And Argentina Has Panic-Raised Interest Rates To 65 Percent

In the 9th largest economy in the world, the financial markets are crashing, and in the 21st largest economy in the world the central bank just raised interest rates to 65 percent to support a currency that is completely imploding.  While the mainstream media in the United States continues to be obsessed with all things Kavanaugh, an international financial crisis threatens to spiral out of control.  Stock prices are falling and currencies are collapsing all over the planet, but because the U.S. has been largely unaffected so far the mainstream media is mostly choosing to ignore what is happening.  But the truth is that this is serious.  The financial crisis in Italy threatens to literally tear the EU apart, and South America has become an economic horror show.  The situation in Brazil continues to get worse, the central bank of Argentina has just raised interest rates to 65 percent, and in Venezuela starving people are literally eating cats and dogs in order to survive.  How bad do things have to get before people will start paying attention?

On Friday, Italian stocks had their worst day in more than two years, and it was the big financial stocks that were on the cutting edge of the carnage

Shares in Italian banks .FTIT8300, whose big sovereign bond portfolios makes them sensitive to political risk, bore the brunt of selling pressure, sinking 7.3 percent as government bonds sold off and the focus turned to rating agencies.

Along with the main Italian stock index .FTMIB, the banks had their worst day since the June 2016 Brexit vote triggered a selloff across markets.

Italian bonds got hit extremely hard too.  The following comes from Business Insider

Bond markets are also suffering. The yield on the benchmark 10-year Italian bond jumped in Friday morning trading. Yields move inversely to price, with a higher yield reflecting an increased premium to hold the bond. The 10-year yield hit 3.22% in early morning trade, an increase of more than 10%.

So what sparked the sudden selloff?

Well, the new Italian government and the EU are at odds with one another, and the European elite were greatly displeased when Italy approved a new budget that was far larger than anticipated

On Thursday night, six months after the government’s ascent to power, Italy’s populist coalition government of the Five Star Movement and the Northern League finally agreed on the key tenets of its first budget.

The coalition said in a statement they had agreed to set Italy’s budget deficit at 2.4% of GDP, an increase on the current level and far above the 1.6% that technocratic finance minister Giovanni Tria had lobbied for.

It is easy to criticize Italy, but what we are doing here in the United States is just as bad if not worse.

A new 854 billion dollar spending bill just got pushed through in D.C., and it is going to continue to explode the size of our national debt.  We are going down the exact same path that all of these other nations have gone down, and in the process we are literally committing national suicide.

Just look at what is happening in Argentina.  Years of wild spending have resulted in an economy that is deep in recession.  The Argentine peso has lost approximately 50 percent of its value so far in 2018, and in a desperate attempt to stop the bleeding the central bank of Argentina just panic-raised interest rates to 65 percent.

When interest rates are at 65 percent, you don’t really have an economy anymore.

What you have is an endless nightmare.

In an emergency move, the International Monetary Fund has agreed to increase the size of Argentina’s bailout to 57 billion dollars

The International Monetary Fund and Argentina announced Wednesday an arrangement to increase resources available to the South American country by $19 billion.

The agreement, pending IMF Executive Board approval, would bring the total amount available under the program to $57.4 billion by the end of 2021, up from $50 billion.

That won’t be nearly enough to turn the situation around in Argentina, and the IMF probably knows that.

For a long time many of us have been warning of a coming global financial crisis, and now that day has arrived.

For a long time many of us have been telling you to keep a close eye on Italy, and now a day of reckoning for that very troubled nation is here.

And big problems are coming for the U.S. too.  Signs of imminent economic trouble just keep popping up, and it isn’t going to take much to push us into a new financial crisis that will be much worse than what we witnessed in 2008.

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

Oil Prices Have Been Rising And $4 A Gallon Gasoline Would Put Enormous Stress On The U.S. Economy

Thanks to increasing demand and upcoming U.S. sanctions against Iran, oil prices have been rising and some analysts are forecasting that they will surge even higher in the months ahead.  Unfortunately, that would be very bad news for the U.S. economy at a time when concerns about a major economic downturn have already been percolating.  In recent years, extremely low gasoline prices have been one of the factors that have contributed to a period of relative economic stability in the United States.  Because our country is so spread out, we import such a high percentage of our goods, and we are so dependent on foreign oil, our economy is particularly vulnerable to gasoline price shocks.  Anyone that lived in the U.S. during the early 1970s can attest to that.  If the average price of gasoline rises to $4 a gallon by the end of 2018 that will be really bad news, and if the average price of gasoline were to hit $5 a gallon that would be catastrophic for the economy.

Very early on Tuesday, the price of U.S. oil surged past $70 a barrel in anticipation of the approaching hurricane along the Gulf Coast.  The following comes from Fox Business

U.S. oil prices rose on Tuesday, breaking past $70 per barrel, after two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane.

U.S. West Texas Intermediate (WTI) crude futures were at $70.05 per barrel at 0353 GMT, up 25 cents, or 0.4 percent from their last settlement.

If we stay at about $70 a gallon, that isn’t going to be much of a problem.

But some analysts are now speaking of “an impending supply crunch”, and that is a very troubling sign.  For example, just check out what Stephen Brennock is saying

“Exports from OPEC’s third-biggest producer are falling faster than expected and worse is to come ahead of a looming second wave of U.S. sanctions,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates. “Fears of an impending supply crunch are gaining traction.”

So how high could prices ultimately go?

Well, energy expert John Kilduff is now projecting that we could see the price of gasoline at $4 a gallon by winter

Energy expert John Kilduff counts Iran sanctions as the top reason West Texas Intermediate (WTI) could climb as much as 30 percent by winter, and that could spell $4 a gallon unleaded gasoline at the pumps.

“The global market is tight and it’s getting tighter, and the big strangle around the market right now is what’s in the process of happening with Iran and the Iran sanctions,” the Again Capital founding partner said on CNBC’s “Futures Now.”

About two months from now, U.S. sanctions will formally be imposed on Iran, and that is going to significantly restrict the supply of oil available in the marketplace.

So refiners that had relied on Iranian oil are “scrambling” to find new suppliers, and this could ultimately drive oil prices much higher

Iran’s oil exports are plummeting, as refiners scramble to find alternatives ahead of a re imposition of U.S. sanctions in early November. That in turn has helped drain a glut of unsold oil.

“To the extent we’re seeing the Iran barrels lost to the market, you’re looking at a WTI price and Brent in the $85 to $95 range, potentially,” Kilduff said.

Other sources are also predicting that oil prices will rise.

Barclays is warning that “prices could reach $80 and higher in the short term”, and BNP Paribas is now anticipating that Brent crude will average $79 a barrel in 2019.

In addition to the upcoming Iranian sanctions, rising global demand for oil is also a major factor that is pushing up prices.

For example, many Americans don’t even realize that China has surpassed us and has now become the biggest crude oil importer on the entire planet

China became the world’s largest crude oil importer in 2017, surpassing the US and importing 8.4 million barrels per day.

The US only imported 7.9 million barrels per day in 2017, according to the US Energy Information Administration.

So what is the bottom line for U.S. consumers?

The bottom line is that gasoline prices are likely to jump substantially, and that is going to affect prices for almost everything else that you buy.

Excluding tech products, virtually everything else that Americans purchase has to be transported, and so the price of gasoline must be factored into the cost.

So if gasoline prices shoot up quite a bit, that means that almost everything is going to cost more.

And this would be happening at a time when inflation is already on the rise

According to data from the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers, less food and energy, hit 2.4% in July 2018. That’s its highest reading since September 2008.

Of course 2.4 percent doesn’t really sound that scary, and that is how the government likes it.

But if the rate of inflation was still calculated the way it was back in 1990, the current inflation rate would be above 6 percent.

And if the rate of inflation was still calculated the way it was back in 1980, the current inflation rate would be above 10 percent.

Inflation is a hidden tax on all of us, and it is one of the big reasons why the middle class is being eroded so rapidly.

Please do not underestimate the impact of the price of oil.  It shot above $100 a barrel in 2008, and it was one of the factors that precipitated the financial crisis later that year.

Now we are rapidly approaching another crisis point, and there are so many wildcards that could potentially cause major problems.

One of those wildcards that I haven’t even talked about in this article would be a major war in the Middle East.  One of these days it will happen, and the price of oil will instantly soar to well above $100 a barrel.

We live at a time of rising global instability, and we should all learn to start expecting the unexpected.

This article originally appeared on The Economic Collapse Blog.  About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

 

National Health Crisis! U.S. Rates of Syphilis, Gonorrhea and Chlamydia Soar To The Highest Levels Ever

America is facing a health nightmare unlike anything that we have ever experienced before.  According to the CDC, rates of syphilis, gonorrhea and chlamydia have all skyrocketed to the highest levels on record, and top health professionals are urging coordinated national action to battle this unprecedented crisis.  Even before these latest numbers, the United States had “the highest STD rates in the industrialized world”, and it is becoming exceedingly clear that things are rapidly getting worse.  So exactly what does this say about us as a society?  Sexually-transmitted diseases are spreading like wildfire, and those on the front lines are not optimistic that we will be able to turn this health crisis around any time soon.

On Tuesday, the CDC held a press conference during which they released the latest depressing numbers

Rates of syphilis, gonorrhea and chlamydia have climbed for the fourth consecutive year in the United States, the Centers for Disease Control and Prevention announced Tuesday at the National STD Prevention Conference in Washington.

Last year, nearly 2.3 million US cases of these sexually transmitted diseases were diagnosed, according to preliminary data.

That’s the highest number ever reported nationwide, breaking the record set in 2016 by more than 200,000 cases, according to the CDC.

If these diseases were just growing gradually, that would be bad enough, but according to the CDC we have truly seen “explosive” growth over the past four years

Chlamydia, a bacterial infection, remained the most common sexually transmitted disease, with more than 1.7 million reported cases. But health officials are concerned that gonorrhea cases increased a startling 67 percent between 2013 and 2017, and syphilis climbed even faster — 76 percent over those four years.

What we have been doing to fight this epidemic is clearly not working.

And according to Dr. Jonathan Mermin, we are rapidly approaching a “breaking point”

“We are sliding backward,” Dr. Jonathan Mermin, director of the CDC’s National Center for HIV/AIDS, Viral Hepatitis, STD, and TB Prevention, said in a statement. “It is evident the systems that identify, treat, and ultimately prevent STDs are strained to near-breaking point.

During her remarks to the press, Dr. Gail Bolan sounded even more ominous

“We have seen steep and sustained increases over the last five years,” said Dr. Gail Bolan, director of the Division of STD Prevention at the CDC. “Usually there are ebbs and flows, but this sustained increase is very concerning. We haven’t seen anything like this for two decades.”

Because syphilis, gonorrhea and chlamydia are not fatal, sometimes people don’t take them seriously.

But the truth is that they can have absolutely devastating health effects

Chlamydia and gonorrhea, if untreated, can leave a woman infertile. Syphilis can spread from mother to fetus, and cause the baby to have birth defects or to be stillborn.

Harvey noted that a thousand babies a year are diagnosed with congenital syphilis, despite mandatory syphilis testing when a woman is first found to be pregnant (the disease can spread to women during pregnancy).

And remember, syphilis, gonorrhea and chlamydia are just three sexually-transmitted diseases.  There are many, many others, and when you add the statistics from all of them together the numbers are absolutely staggering.

In fact, according to the New York Times approximately 110 million Americans have a sexually-transmitted disease right now.

Let that sink in.

110 million Americans.

That is more than one out of every three Americans.  And when you narrow it down to young Americans in their sexual prime, that number is much closer to one out of two.

In the wake of the CDC announcement on Tuesday, the mainstream media is blaming the usual suspects

Experts say many factors have contributed to the rapid rise, though the biggest one may be less frequent condom use. It’s less clear whether dating apps, like Tinder, have contributed in some way to the spread of STDs, though some researchers think they have.

And much is also being made of the fact that there have been cutbacks in funding for agencies that fight sexually-transmitted diseases…

Another factor driving the skyrocketing numbers of STD cases may be a decline in funding for state and local agencies working on prevention, said Michael Fraser, executive director of the Association of State and Territorial Health Officials.

“We’ve seen a tremendous increase in many areas primarily due to the eroding public health infrastructure,” he said. “The lack of funding at the state and local level to really invest in prevention work is not just about medications, it’s about disease investigators who meet with the individual who is infected and talk about their behavior and do contact tracing to try to prevent the future spread.”

One of the biggest concerns that health professionals currently have is that some of these sexually-transmitted diseases are becoming highly resistant to antibiotics.

As these new strains continue to develop, we will have no way of fighting them, and that is why some health professionals are warning about the potential for a “mega-outbreak” that would spiral totally out of control.

One candidate for that “mega-outbreak” is a strain of gonorrhea that is already being dubbed “super-gonorrhea”

Gonorrhea – or rather ‘super-gonorrhea’ – is a top contender to be that outbreak.

Some strains of the bacteria are already untreatable with the standard antibiotic, oral azithromycin.

In 2013, those resistant strains accounted for just one percent of samples tested by the CDC.

In 2017, more than four percent of tested gonorrhea samples were resistant.

It has become very clear that our society is being overwhelmed by the consequences of our own reckless behavior.

If we keep doing the same things, we will keep getting the same results, but unfortunately it is not likely that people will be changing their behavior any time soon.

This article originally appeared on The Economic Collapse Blog.  About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

The Worst Financial Nightmare In Illinois History Erupts As State Comptroller Declares ‘We Are In Massive Crisis Mode’

Margaret Thatcher once said that the big problem with socialist governments is that “they always run out of other people’s money”, and unfortunately we are witnessing this play out in a major way in the state of Illinois right now.  At this point, the Illinois state government has more than 15 billion dollars of unpaid bills.  Yes, you read that correctly.  They are already 15 billion dollars behind on their bills, and they are on pace to take in 6 billion dollars less than they are scheduled to spend in 2017.  It is the worst financial crisis in the history of Illinois, and State Comptroller Susana Mendoza sounds like she is about ready to tear her hair out in frustration

“I don’t know what part of ‘We are in massive crisis mode’ the General Assembly and the governor don’t understand. This is not a false alarm,” said Mendoza, a Chicago Democrat. “The magic tricks run out after a while, and that’s where we’re at.”

It’s a new low, even for a state that’s seen its financial situation grow increasingly desperate amid a standoff between the Democrat-led Legislature and Republican Gov. Bruce Rauner. Illinois already has $15 billion in overdue bills and the lowest credit rating of any state, and some ratings agencies have warned they will downgrade the rating to “junk” if there’s no budget before the next fiscal year begins July 1.

Would you continue to do work for the Illinois state government if you knew that they were this far behind on their bills and that it is doubtful that you would be paid any time in the foreseeable future?

Of course the answer to that question is quite obvious.  As contractual relationships break down, social services are starting to suffer, and there is not much hope that things will take a turn for the better any time soon.

At this point things have gotten so bad that the Illinois Department of Transportation is planning to cease all roadwork starting on July 1st, and even the Powerball lottery is threatening to cut all ties with the state

As reported previously, the state Transportation Department said it would stop roadwork by July 1 if Illinois entered its third consecutive fiscal year without a budget – the longest such stretch of any US state – while the Powerball lottery said it may be forced to dump Illinois over its lack of budget. For now, state workers have continued to receive pay because of court orders, but school districts, colleges and medical and social service providers are under increasing strain.

So what has caused this unprecedented crisis?

At the core, the problem is political.  A tense standoff between a Republican governor and a Democratic legislature has resulted in the state going 700 days without a budget

On May 31, Illinois will have gone 700 days without a budget, an unprecedented political failure. Also on May 31, if a budget is not passed, it could mean that the state could go until 2019—an unimaginable idea, except that senators have already imagined it.

How does a state, led by a successful businessman as governor, a brilliant political strategist in the House, and a consummate dealmaker in the Senate, end up in this kind of political disorganization? Bad political errors led to bad political incentives, and as the problem worsened, so did the political risk of solutions—and what politicians had to ask of their constituents.

This is another example of how deeply divided we are as a nation right now.  Democrats hate Republicans and Republicans hate Democrats, and it is getting to the point where the two parties cannot work together on even the most basic things.

In the end, the state of Illinois is either going to have to cut spending dramatically, raise taxes substantially or some combination of both.  And since the Democrats have very large majorities in both chambers of the state legislature, I wouldn’t count on spending being cut that much.

This is the thing with big government – it always has a tendency to get even bigger.  And the bigger government gets, the more of our money and the more of our freedom it takes away.

That is why I am a huge advocate of dramatically shrinking the size of government on the federal, state and local levels.  Like Rand Paul has often said, I want a government so small that I can barely see it.

When you let government get out of control, what you end up with is a ravenous beast that has an endless appetite for more of your money.  In Illinois, the money is all gone and the beast is desperately hungry for more.

Sadly, what is happening in Illinois is just the tip of the iceberg.  If stock prices start declining from these massively inflated levels, state pension funds all over America are going to be in crisis mode very rapidly.  And a new recession would greatly accelerate the financial problems of a whole bunch of states that are already dealing with huge budget shortfalls.

Unfortunately, experts all over the country are warning that the next major downturn is coming very quickly.  For example, just consider what Bernard Arnault just told CNBC

A financial crisis could be just around the corner, according to the chief executive of LVMH, who has described the global economic outlook as “scary”.

“For the economic climate, the present situation is…mid-term scary,” Bernard Arnault told CNBC Thursday.

“I don’t think we will be able to globally avoid a crisis when I see the interest rates so low, when I see the amounts of money flowing into the world, when I see the stock prices which are much too high, I think a bubble is building and this bubble, one day, will explode.”

There is always a price to pay for going into too much debt.

A financial day of reckoning can be delayed for a while, but eventually bad financial decisions are going to catch up with you.  The state of Illinois is learning this lesson in a very harsh manner right now, and the country as a whole is on the exact same path as Illinois.

I am often criticized for endlessly warning about America’s coming day of reckoning, but you can’t pile up the biggest mountain of debt in the history of the world without paying a price.

Just like the state of Illinois, we will pay for decades of exceedingly foolish decisions, and unfortunately this is going to cause severe economic pain throughout our entire society.

The Next Financial Crisis Has Already Arrived In Europe, And People Are Starting To Freak Out

Did you know that the sixth largest bank in Spain failed in spectacular fashion just a few days ago?  Many are comparing the sudden implosion of Banco Popular to the collapse of Lehman Brothers in 2008, and EU regulators hastily arranged a sale of the failed bank to Santander in order to avoid a full scale financial panic.  Sadly, most Americans have no idea that a new financial crisis is starting to play out over in Europe, because most Americans only care about what is going on in America.  But we should be paying attention, because the EU is the second largest economy on the entire planet, and the euro is the second most used currency on the entire planet.  The U.S. financial system is already teetering on the brink of disaster, and this new financial crisis in Europe could turn out to be enough to push us over the edge.

If EU regulators had not arranged a “forced sale” of Banco Popular to Santander, we would probably be witnessing panic on a scale that we haven’t seen since 2008 in Europe right about now.  The following comes from the Telegraph

Spanish banking giant Santander has stepped in to the rescue ailing rival Banco Popular by taking over the failing lender for €1 in a watershed deal masterminded by EU regulators to avoid a damaging collapse.

Santander will tap its shareholders for €7bn in a rights issue to raise the capital needed to shore-up Popular’s finances in a dramatic private sector rescue of Spain’s sixth-largest lender.

It will inflict losses of approximately €3.3bn on bond investors and shareholders but crucially will avoid a taxpayer bailout.

But now that a “too big to fail” bank like Banco Popular has failed, investors are immediately trying to figure out which major Spanish banks may be the next to collapse.  According to Wolf Richter, many have identified Liberbank as an institution that is highly vulnerable…

After its most tumultuous week since the bailout days of 2012, Spain’s banking system is gripped by a climate of fear, uncertainty and distrust. Rather than allaying investor nerves, the shotgun bail-in and sale of Banco Popular to Santander on Tuesday has merely intensified them. For the first time since the Global Financial Crisis, shareholders and subordinate bondholders of a failing Spanish bank were not bailed out by taxpayers; they took risks in order to make a buck, and they bore the consequences. That’s how it should be. But bank investors don’t like not getting bailed out.

Now they’re worrying it could happen again. As Popular’s final days showed, once confidence and trust in a bank vanishes, it’s almost impossible to restore them. The fear has now spread to Spain’s eighth largest lender, Liberbank, a mini-Bankia that was spawned in 2011 from the forced marriage of three failed cajas (savings banks), Cajastur, Caja de Extremadura and Caja Cantabria.

On Thursday, shares of Liberbank dropped by an astounding 20 percent, and that was followed up by another 19 percent decline on Friday.

Spanish authorities responded by banning short sales of Liberbank shares, and that caused a short-term rebound in the stock price.

But we haven’t seen this kind of chaos in European financial markets in a very long time.

Meanwhile, Nick Giambruno is sounding the alarm about a much bigger bubble.  At this moment, more than a trillion dollars worth of Italian government bonds have negative yields…

Over $1 trillion worth of Italian bonds actually have negative yields.

It’s a bizarre and perverse situation.

Lending money to the bankrupt Italian government carries huge risks. So the yields on Italian government bonds should be near record highs, not record lows.

Negative yields could not exist in a free market. They’re only possible in the current “Alice in Wonderland” economy created by central bankers.

You see, the European Central Bank (ECB) has been printing money to buy Italian government bonds hand over fist. Since 2008, the ECB and Italian banks have bought over 88% of Italian government debt, according to a recent study.

The moment that the ECB stops wildly buying Italian bonds, the party will be over and the Italian financial system will crash.  Unfortunately for Italy, the Germans are pressuring the ECB to quit printing so much money, and the Germans usually get their way in these things.

But if the Germans get their way this time, we could be facing a complete and utter nightmare very quickly.  Here is more from Nick Giambruno

Once the ECB—the only large buyer—steps away, Italian government bonds will crash and rates will soar.

Soon it will be impossible for the Italian government to finance itself.

Italian banks—which are already insolvent—will be decimated. They hold an estimated €235 billion worth of Italian government bonds. So the coming bond crash will pummel their balance sheets.

It’s shaping up to be a lovely train wreck.

And all of this is happening in the context of a global economy that appears to be headed for a major downturn.

For example, the last time that global credit growth showed down this rapidly was during the last financial crisis

From peak to trough the deceleration in global credit growth is now approaching that during the global financial crisis (-6% of global GDP), even if the dispersion of the decline is much narrower. Currently 55% of the countries in our sample have experienced a -0.3 standard deviation deterioration in their credit impulse (median over 12 months) compared to 77% of countries in Dec ’09 when the median decline was -1.4 stdev.”

Of course the last time global credit growth decelerated this dramatically, global central banks intervened on a scale that was unlike anything that we had ever seen before.

But this time around it is happening at a time when global central banks are very low on ammo

More importantly, back in 2009, not only China, but the Fed and other central banks unleashed the biggest injection of credit, i.e. liquidity, the world has ever seen resulting in the biggest asset bubble the world has ever seen. And, this time around, the Fed is set to hike for the third time in the past year, even as the ECB and BOJ are forced to soon taper as they run out of eligible bonds to monetize. All this comes at a time when US loan growth is weeks away from turning negative.

As such, what “kickstarts” the next spike in the credit impulse is unclear. What is clear is that if the traditional 3-6 month lag between credit inflection points, i.e. impulse, and economic growth is maintained, the global economy is set for a dramatic collapse some time in the second half.

There are so many experts that are warning about big economic trouble in our immediate future.  I would like to say that all of the experts that are freaking out are wrong, but I can’t do that.

I have not seen an atmosphere like this since 2008 and 2009, and everything points to an acceleration of the crisis as we enter the second half of this year.