Did you know that there are 5 “too big to fail” banks in the United States that each have exposure to derivatives contracts that is in excess of 30 trillion dollars? Overall, the biggest U.S. banks collectively have more than 247 trillion dollars of exposure to derivatives contracts. That is an amount of money that is more than 13 times the size of the U.S. national debt, and it is a ticking time bomb that could set off financial Armageddon at any moment. Globally, the notional value of all outstanding derivatives contracts is a staggering 552.9 trillion dollars according to the Bank for International Settlements. The bankers assure us that these financial instruments are far less risky than they sound, and that they have spread the risk around enough so that there is no way they could bring the entire system down. But that is the thing about risk – you can try to spread it around as many ways as you can, but you can never eliminate it. And when this derivatives bubble finally implodes, there won’t be enough money on the entire planet to fix it.
A lot of readers may be tempted to quit reading right now, because “derivatives” is a term that sounds quite complicated. And yes, the details of these arrangements can be immensely complicated, but the concept is quite simple. Here is a good definition of “derivatives” that comes from Investopedia…
A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.
I like to refer to the derivatives marketplace as a form of “legalized gambling”. Those that are engaged in derivatives trading are simply betting that something either will or will not happen in the future. Derivatives played a critical role in the financial crisis of 2008, and I am fully convinced that they will take on a starring role in this new financial crisis.
And I am certainly not the only one that is concerned about the potentially destructive nature of these financial instruments. In a letter that he once wrote to shareholders of Berkshire Hathaway, Warren Buffett referred to derivatives as “financial weapons of mass destruction”…
The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.
Since the last financial crisis, the big banks in this country have become even more reckless. And that is a huge problem, because our economy is even more dependent on them than we were the last time around. At this point, the four largest banks in the U.S. are approximately 40 percent larger than they were back in 2008. The five largest banks account for approximately 42 percent of all loans in this country, and the six largest banks account for approximately 67 percent of all assets in our financial system.
So the problem of “too big to fail” is now bigger than ever.
If those banks go under, we are all in for a world of hurt.
Yesterday, I wrote about how the Federal Reserve has implemented new rules that would limit the ability of the Fed to loan money to these big banks during the next crisis. So if the survival of these big banks is threatened by a derivatives crisis, the money to bail them out would probably have to come from somewhere else.
In such a scenario, could we see European-style “bail-ins” in this country?
Ellen Brown, one of the most fierce critics of our current financial system and the author of Web of Debt, seems to think so…
Dodd-Frank states in its preamble that it will “protect the American taxpayer by ending bailouts.” But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors. That includes depositors, the largest class of unsecured creditor of any bank.
Title II is aimed at “ensuring that payout to claimants is at least as much as the claimants would have received under bankruptcy liquidation.” But here’s the catch: under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured.
The over-the-counter (OTC) derivative market (the largest market for derivatives) is made up of banks and other highly sophisticated players such as hedge funds. OTC derivatives are the bets of these financial players against each other. Derivative claims are considered “secured” because collateral is posted by the parties.
For some inexplicable reason, the hard-earned money you deposit in the bank is not considered “security” or “collateral.” It is just a loan to the bank, and you must stand in line along with the other creditors in hopes of getting it back.
As I mentioned yesterday, the FDIC guarantees the safety of deposits in member banks up to a certain amount. But as Brown has pointed out, the FDIC only has somewhere around 70 billion dollars sitting around to cover bank failures.
If hundreds of billions or even trillions of dollars are ultimately needed to bail out the banking system, where is that money going to come from?
It would be difficult to overstate the threat that derivatives pose to our “too big to fail” banks. The following numbers come directly from the OCC’s most recent quarterly report (see Table 2), and they reveal a recklessness that is on a level that is difficult to put into words…
Total Assets: $1,808,356,000,000 (more than 1.8 trillion dollars)
Total Exposure To Derivatives: $53,042,993,000,000 (more than 53 trillion dollars)
Total Assets: $2,417,121,000,000 (about 2.4 trillion dollars)
Total Exposure To Derivatives: $51,352,846,000,000 (more than 51 trillion dollars)
Total Assets: $880,607,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $51,148,095,000,000 (more than 51 trillion dollars)
Bank Of America
Total Assets: $2,154,342,000,000 (a little bit more than 2.1 trillion dollars)
Total Exposure To Derivatives: $45,243,755,000,000 (more than 45 trillion dollars)
Total Assets: $834,113,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $31,054,323,000,000 (more than 31 trillion dollars)
Total Assets: $1,751,265,000,000 (more than 1.7 trillion dollars)
Total Exposure To Derivatives: $6,074,262,000,000 (more than 6 trillion dollars)
As the “real economy” crumbles, major hedge funds continue to drop like flies, and we head into a new recession, there seems to very little alarm among the general population about what is happening.
The mainstream media is assuring us that everything is under control, and they are running front page headlines such as this one during the holiday season: “Kylie Jenner shows off her red-hot, new tattoo“.
But underneath the surface, trouble is brewing.
A new financial crisis has already begun, and it is going to intensify as we head into 2016.
And as this new crisis unfolds, one word that you are going to want to listen for is “derivatives”, because they are going to play a major role in the “financial Armageddon” that is rapidly approaching.
The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy. This year the middle class continued to deteriorate, more Americans than ever found themselves living in poverty, and the debt bubble that we are living in expanded to absolutely ridiculous proportions. Toward the end of the year, a new global financial crisis erupted, and it threatens to completely spiral out of control as we enter 2016. Over the past six months, I have been repeatedly stressing to my readers that so many of the exact same patterns that immediately preceded the financial crisis of 2008 are happening once again, and trillions of dollars of stock market wealth has already been wiped out globally. Some of the largest economies on the entire planet such as Brazil and Canada have already plunged into deep recessions, and just about every leading indicator that you can think of is screaming that the U.S. is heading into one. So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media. When you look at the cold, hard numbers, they tell a completely different story. The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe…
#1 These days, most Americans are living paycheck to paycheck. At this point 62 percent of all Americans have less than 1,000 dollars in their savings accounts, and 21 percent of all Americans do not have a savings account at all.
#2 The lack of saving is especially dramatic when you look at Americans under the age of 55. Incredibly, fewer than 10 percent of all Millennials and only about 16 percent of those that belong to Generation X have 10,000 dollars or more saved up.
#3 It has been estimated that 43 percent of all American households spend more money than they make each month.
#4 For the first time ever, middle class Americans now make up a minority of the population. But back in 1971, 61 percent of all Americans lived in middle class households.
#5 According to the Pew Research Center, the median income of middle class households declined by 4 percent from 2000 to 2014.
#6 The Pew Research Center has also found that median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013.
#7 In 1970, the middle class took home approximately 62 percent of all income. Today, that number has plummeted to just 43 percent.
#8 There are still 900,000 fewer middle class jobs in America than there were when the last recession began, but our population has gotten significantly larger since that time.
#9 According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year.
#10 For the poorest 20 percent of all Americans, median household wealth declined from negative 905 dollars in 2000 to negative 6,029 dollars in 2011.
#11 A recent nationwide survey discovered that 48 percent of all U.S. adults under the age of 30 believe that “the American Dream is dead”.
#12 Since hitting a peak of 69.2 percent in 2004, the rate of homeownership in the United States has been steadily declining every single year.
#13 At this point, the U.S. only ranks 19th in the world when it comes to median wealth per adult.
#14 Traditionally, entrepreneurship has been one of the primary engines that has fueled the growth of the middle class in the United States, but today the level of entrepreneurship in this country is sitting at an all-time low.
#15 For each of the past six years, more businesses have closed in the United States than have opened. Prior to 2008, this had never happened before in all of U.S. history.
#16 If you can believe it, the 20 wealthiest people in this country now have more money than the poorest 152 million Americans combined.
#17 The top 0.1 percent of all American families have about as much wealth as the bottom 90 percent of all American families combined.
#18 If you have no debt and you also have ten dollars in your pocket, that gives you a greater net worth than about 25 percent of all Americans.
#19 The number of Americans that are living in concentrated areas of high poverty has doubled since the year 2000.
#20 An astounding 48.8 percent of all 25-year-old Americans still live at home with their parents.
#21 According to the U.S. Census Bureau, 49 percent of all Americans now live in a home that receives money from the government each month, and nearly 47 million Americans are living in poverty right now.
#22 In 2007, about one out of every eight children in America was on food stamps. Today, that number is one out of every five.
#23 According to Kathryn J. Edin and H. Luke Shaefer, the authors of a new book entitled “$2.00 a Day: Living on Almost Nothing in America“, there are 1.5 million “ultrapoor” households in the United States that live on less than two dollars a day. That number has doubled since 1996.
#24 46 million Americans use food banks each year, and lines start forming at some U.S. food banks as early as 6:30 in the morning because people want to get something before the food supplies run out.
#25 The number of homeless children in the U.S. has increased by 60 percent over the past six years.
#26 According to Poverty USA, 1.6 million American children slept in a homeless shelter or some other form of emergency housing last year.
#27 Police in New York City have identified 80 separate homeless encampments in the city, and the homeless crisis there has gotten so bad that it is being described as an “epidemic”.
#28 If you can believe it, more than half of all students in our public schools are poor enough to qualify for school lunch subsidies.
#29 According to a Census Bureau report that was released a while back, 65 percent of all children in the U.S. are living in a home that receives some form of aid from the federal government.
#30 According to a report that was published by UNICEF, almost one-third of all children in this country “live in households with an income below 60 percent of the national median income”.
#31 When it comes to child poverty, the United States ranks 36th out of the 41 “wealthy nations” that UNICEF looked at.
#32 An astounding 45 percent of all African-American children in the United States live in areas of “concentrated poverty”.
#33 40.9 percent of all children in the United States that are being raised by a single parent are living in poverty.
#34 There are 7.9 million working age Americans that are “officially unemployed” right now and another 94.4 million working age Americans that are considered to be “not in the labor force”. When you add those two numbers together, you get a grand total of 102.3 million working age Americans that do not have a job right now.
#35 According to a recent Pew survey, approximately 70 percent of all Americans believe that “debt is a necessity in their lives”.
#36 53 percent of all Americans do not even have a minimum three-day supply of nonperishable food and water at home.
#37 According to John Williams of shadowstats.com, if the U.S. government was actually using honest numbers the unemployment rate in this nation would be 22.9 percent.
#38 Back in 1950, more than 80 percent of all men in the United States had jobs. Today, only about 65 percent of all men in the United States have jobs.
#39 The labor force participation rate for men has plunged to the lowest level ever recorded.
#40 Wholesale sales in the U.S. have fallen to the lowest level since the last recession.
#41 The inventory to sales ratio has risen to the highest level since the last recession. This means that there is a whole lot of unsold inventory that is just sitting around out there and not selling.
#42 The ISM manufacturing index has fallen for five months in a row.
#43 Orders for “core” durable goods have fallen for ten months in a row.
#44 Since March, the amount of stuff being shipped by truck, rail and air inside the United States has been falling every single month on a year over year basis.
#45 Wal-Mart is projecting that its earnings may fall by as much as 12 percent during the next fiscal year.
#46 The Business Roundtable’s forecast for business investment in 2016 has dropped to the lowest level that we have seen since the last recession.
#47 Corporate debt defaults have risen to the highest level that we have seen since the last recession. This is a huge problem because corporate debt in the U.S. has approximately doubled since just before the last financial crisis.
#48 Holiday sales have gone negative for the first time since the last recession.
#49 The velocity of money in the United States has dropped to the lowest level ever recorded. Not even during the depths of the last recession was it ever this low.
#50 Barack Obama promised that his program would result in a decline in health insurance premiums by as much as $2,500 per family, but in reality average family premiums have increased by a total of $4,865 since 2008.
#51 Today, the average U.S. household that has at least one credit card has approximately $15,950 in credit card debt.
#52 The number of auto loans that exceed 72 months has hit at an all-time high of 29.5 percent.
#53 According to Dr. Housing Bubble, there have been “nearly 8 million homes lost to foreclosure since the homeownership rate peaked in 2004″.
#54 One very disturbing study found that approximately 41 percent of all working age Americans either currently have medical bill problems or are paying off medical debt. And collection agencies seek to collect unpaid medical bills from about 30 million of us each and every year.
#55 The total amount of student loan debt in the United States has risen to a whopping 1.2 trillion dollars. If you can believe it, that total has more than doubled over the past decade.
#56 Right now, there are approximately 40 million Americans that are paying off student loan debt. For many of them, they will keep making payments on this debt until they are senior citizens.
#57 When you do the math, the federal government is stealing more than 100 million dollars from future generations of Americans every single hour of every single day.
#58 An astounding 8.16 trillion dollars has already been added to the U.S. national debt while Barack Obama has been in the White House. That means that it is already guaranteed that we will add an average of more than a trillion dollars a year to the debt during his presidency, and we still have more than a year left to go.
What we have seen so far is just the very small tip of a very large iceberg. About six months ago, I stated that “our problems will only be just beginning as we enter 2016″, and I stand by that prediction.
We are in the midst of a long-term economic collapse that is beginning to accelerate once again. Our economic infrastructure has been gutted, our middle class is being destroyed, Wall Street has been transformed into the biggest casino in the history of the planet, and our reckless politicians have piled up the biggest mountain of debt the world has ever seen.
Anyone that believes that everything is “perfectly fine” and that we are going to come out of this “stronger than ever” is just being delusional. This generation was handed the keys to the finest economic machine of all time, and we wrecked it. Decades of incredibly foolish decisions have culminated in a crisis that is now reaching a crescendo, and this nation is in for a shaking unlike anything that it has ever seen before.
So enjoy the rest of 2015 while you still can.
2016 is almost here, and it is going to be quite a year…
Under Barack Obama, the U.S. national debt has risen from $10,626,877,048,913.08 on January 20th, 2009 to $18,795,033,928,275.59 on December 21st, 2015. That means that the debt that we are passing on to future generations has increased by 8.16 trillion dollars since Barack Obama was inaugurated. There is still a little more than a year to go in Obama’s presidency, and it is already guaranteed that Obama will add more than a trillion dollars a year to the national debt during his presidency. In fact, when you do the math, we are stealing more than 100 million dollars from future generations of Americans every single hour of every single day. It is a crime of a magnitude that is almost unimaginable, and at this point it is mathematically impossible for the U.S. government to pay off all of this debt. To say that we are in trouble would be a massive understatement.
And of course not all of the blame goes to Obama. The Republicans have had control of the House of Representatives for all but two years while Obama has been in the White House, and they have gone along with all of this reckless spending. Without the approval of the House, Obama could not spend a single penny, but the Republicans have consistently chosen not to stand up to him. In fact, the Republicans in Congress just approved another massive 1.2 trillion dollar spending bill that essentially gave the Democrats every single thing that they wanted. House Minority Leader Nancy Pelosi even admitted that the Republicans “were willing to concede so much” during the negotiations.
So why do we even have a Republican Party? They always just go along with pretty much whatever the Democrats want anyway. Why shouldn’t we just disband the Republican Party and let the Democrats completely run things? How would Washington D.C. be any different if the Republicans didn’t even exist?
At this point, even Rush Limbaugh is completely disgusted with the Republican Party…
I have a headline here from the Washington Times: “White House Declares Total Victory Over GOP in Budget Battle.” That headline’s a misnomer. There was never a battle. None of this was opposed. The Republican Party didn’t stand up to any of it, and the die has been cast for a long time on this. I know many of you are dispirited, depressed, angry, combination of all of that. But, folks, there was no other way this could go. Because two years ago when the Republican Party declared they would never do anything that would shut down the government and they would not impeach Obama, there were no obstacles in Obama’s way and there were no obstacles in the way of the Democrat Party.
Do you remember when Republican politicians were running around promising that they would defund Obamacare?
That didn’t happen.
Do you remember when Republican politicians were running around promising that they would defund Planned Parenthood?
That didn’t happen.
Do you remember when Republican politicians were running around promising that they would defund Obama’s refugee program?
That didn’t happen.
In this new spending deal, the Republicans got nothing. It was a sham, a farce and a total insult to the American people. Here is more from Rush Limbaugh…
It fully funds Planned Parenthood. That, to me, is unforgivable, with everything now known about what goes on behind closed doors at Planned Parenthood, and that the federal government, led by a Republican Party, sees fit to pay for it. It is beyond comprehension, and it is a total squandering of moral authority to fully fund the butchery at Planned Parenthood. This spending bill fully pays for Obama’s refugee plans, fully. This spending bill, this budget bill quadruples the number of visas Obama wants for foreign workers. This is even a slap at American union workers. Not the leaders. The union leaders seem to be in favor of it, but blue-collar people, known as working people, have been sold down the river along with everybody else here.
This spending bill even fully pays for every dime asked for by Obama on all of this idiocy that’s tied up into climate change. Everything Obama wanted, everything he asked for, he got. You go down the list of things, it’s there.
Even after watching all of the undercover Planned Parenthood videos that came out over the past year, the Republicans in Congress still voted to fund the harvesting and sale of body parts from aborted babies.
And surveys have found that the American people support the continued funding of Planned Parenthood by about a 2 to 1 margin. After everything that we have seen, the vast majority of Americans still want to continue giving those butchers hundreds of millions of taxpayer dollars a year.
No wonder so many people are comparing America to Nazi Germany these days. We truly have become an exceedingly wicked nation.
We like to think that we are an “example” for the rest of the planet, but in reality the only example that we are is a bad one. Our guilt has been put on display for all the world to see, and yet we just continue to race toward even more evil.
Not only did the Republicans not defund Planned Parenthood, the truth is that not a single pro-life amendment of any sort even got into the bill thanks to Paul Ryan. The following comes from lifesitenews.com…
“The bill failed to include a single major pro-life policy rider, despite the requests of over 120 members of Congress and the disturbing revelations about Planned Parenthood brought to light this year,” said Congresswoman Diane Black, R-TN, who voted against the bill.
The House Freedom Caucus offered a series of amendments to the bill defunding Planned Parenthood, strengthening conscience protections for pro-life physicians and organizations, and ending all U.S. funding for the United Nations Population Fund (UNFPA). The House Rules Committee rejected these riders earlier this week, as Speaker Paul Ryan said he did not want conservative amendments added to the bill that would drive away his Democratic colleagues.
The committee also rejected an amendment to increase vetting of refugees who enter the United States from the terrorist hotbeds of Syria and Iraq, which had previously passed the House, with 47 Democrats adding strong bipartisan support.
Like I said, the Republicans completely capitulated, just like they always do.
Now the U.S. national debt is nearly double the size that it was just before the last financial crisis struck, and our leaders continue to borrow and spend as if there is no tomorrow.
Perhaps they have convinced themselves that there will never be any consequences for acting so foolishly.
Perhaps they believe that in the end everything will turn out okay somehow.
Perhaps they are able to rationalize the theft of more than a hundred million dollars an hour from future generations of Americans.
But nothing can erase what they have done to us. The promising future that our children and our grandchildren should have had has been completely wiped out, and the leading edge of the greatest economic crisis that any of us has ever known is now upon us.
If we had done things differently, things wouldn’t have had to turn out this way. But now the die is cast, and we are all going to pay a very high price for the mistakes that have been made in Washington.
Has there ever been a major holiday more focused on materialism than the modern American Christmas? This year, Americans are planning to spend an average of 830 dollars on Christmas gifts, which represents a jump of 110 dollars over the average of 720 dollars last year. But have our incomes gone up accordingly? Of course not. In fact, real median household income in the United States has been experiencing a steady long-term decline. So in order to fund all of our Christmas spending, we have got to go into even more debt. We love to pull out our credit cards and spend money that we do not have on lots of cheap, useless stuff made on the other side of the world by workers making slave labor wages. We do the same thing year after year, and most of us have grown accustomed to the endless cycle of growing debt. In fact, one Pew survey found that approximately 70 percent of all Americans believe that “debt is a necessity in their lives”. But then we have to work our fingers to the bone to try to make the payments on all of that debt, not realizing that debt systematically impoverishes us. It may be hard to believe, but if you have a single dollar in your pocket and no debt, you have a greater net worth than 25 percent of all Americans. I know that sounds crazy, but it is true.
Overall, when you add up all forms of debt (consumer, business, local government, state government and federal government), Americans are more than 60 trillion dollars in debt.
Let that sink in for a bit.
40 years ago, that number was sitting at about 3 trillion dollars.
We have been on the greatest debt binge in the history of the world. Even though we were “the wealthiest, most prosperous nation on the entire planet”, we always had to have more. We just kept on borrowing and borrowing and borrowing from the future until we completely destroyed it.
And we still haven’t learned anything. Instead, this Christmas season we will be partying like it’s 2007…
Americans are planning on celebrating Christmas like it’s 2007.
A November survey by Gallup found that US adults are planning on spending about $830 on average on Christmas gifts this year.
That’s a huge jump from last year’s $720 average.
Notably, American consumers haven’t suggested a number that high since November 2007, when they were planning on spending $866 on average.
Sadly, our incomes simply do not justify this kind of extravagance. As Zero Hedge has pointed out, household incomes “actually peaked at least 15 years ago in 81% of U.S. counties.”
So why can’t we adjust our lifestyles to match?
Why must we always have more?
Here are more details on our declining incomes from the Visual Capitalist…
- Income peaked one year ago for many of the counties that are a part of the shale boom. This includes much of North and South Dakota, as well as parts of Texas, Nebraska, and Oklahoma. Income in Washington, D.C. and neighboring Arlington County also peaked then.
- In 1999, a total of 1,623 counties had their households reach peak income. The majority of these counties are in the Midwest and Southeast.
- The most southern part of California and parts of New England both peaked around 25 years ago.
- Many states along the Rocky Mountains such as Wyoming and Montana had counties that peaked roughly 35 years ago.
- Household income peaked in upstate New York, the northern tip of California, and southern Nevada at the same time that humans were first landing on the moon in 1969.
But you won’t hear this reported on the mainstream news, will you?
They want us to think that happy days are here again.
The following chart comes from the Federal Reserve, and it shows that real median household income in the United States has been trending down since 1999…
Americans should be having smaller Christmases instead of bigger ones, but that doesn’t fit the image of who we still think that we are.
Recently, I published an article entitled “Goodbye Middle Class: 51 Percent Of All American Workers Make Less Than 30,000 Dollars A Year” that was shared more than 44,000 times on Facebook. In that article, I included brand new figures that were just released by the Social Security Administration. As you can see, the quality of our jobs is not great…
-38 percent of all American workers made less than $20,000 last year.
-51 percent of all American workers made less than $30,000 last year.
-62 percent of all American workers made less than $40,000 last year.
-71 percent of all American workers made less than $50,000 last year.
Without a doubt, most American families should not be spending hundreds of dollars a year on Christmas gifts.
At these income levels, most American families are just barely surviving.
But once again this year, millions upon millions of Americans will flock to the malls and big box stores in a desperate attempt to make themselves happy.
Sadly, those efforts will be in vain. In fact, in a previous article I highlighted the fact that Christmas is the unhappiest season of the year. The suicide rate spikes to the highest level of the year during “the holidays”, and 45 percent of all Americans report that they dread the Christmas season. The following is an excerpt from a Psychology Today article…
We are told that Christmas, for Christians, should be the happiest time of year, an opportunity to be joyful and grateful with family, friends and colleagues. Yet, according to the National Institute of Health, Christmas is the time of year that people experience the highest incidence of depression. Hospitals and police forces report the highest incidences of suicide and attempted suicide. Psychiatrists, psychologists and other mental health professionals report a significant increase in patients complaining about depression. One North American survey reported that 45% of respondents dreaded the festive season.
In recent years, an increasing number of Americans have given up the tradition of Christmas gifts entirely, and many of them that I know seem quite happy to have done so.
Of course most people are still quite satisfied with the status quo, and there are many that will get very angry with you if you dare to suggest that the way that Americans celebrate Christmas has gotten way out of hand.
But shouldn’t it alarm us that for most Americans the biggest holiday of the year is all about the “stuff” they are going to buy, the “stuff” they are going to give and the “stuff” they are going to get?
As a society, we are obsessed with things, but those things are never going to make us happy.
Perhaps we should all take some time to reflect on the traditions that we choose to participate in and what they really mean to us during this “holiday season”…
Why won’t the American people listen to the warnings? David Stockman was a member of the U.S. House of Representatives from 1977 to 1981, and he served as the Director of the Office of Management and Budget under President Ronald Reagan from 1981 to 1985. These days, he is running a website called “Contra Corner” which I highly recommend that you check out. Stockman believes that a global “debt super-cycle” that has been building for decades is now bursting, and he is convinced that the consequences for the U.S. and for the rest of the planet will be absolutely catastrophic. His findings are very consistent with what I have been writing about on The Economic Collapse Blog, and if Stockman is correct the times ahead of us are going to be exceedingly painful.
But right now, most people don’t seem to be in the mood to listen to these types of warnings. Even though there is a mountain of evidence that the global economy has already plunged into recession, U.S. stocks had a great month in October, and so most Americans seem to think that the crisis has passed.
Of course the truth is that the stock market is not an accurate barometer of the economy and it never has been. Back in 2008, almost everything else started to go downhill before stocks did, and the same thing is happening once again. In a recent article, Stockman explained that stocks are surging to absolutely ridiculous levels even though corporate earnings are actually way down…
At this point, 75% of S&P 500 companies have reported Q3 results, and earnings are coming in at $93.80 per share on an LTM basis. That happens to be 7.4% below the peak $106 per share reported last September, and means that the market today is valuing these shrinking profits at a spritely 22.49X PE ratio.
And, yes, there is a reason for two-digit precision. It seems that in the 4th quarter of 2007 LTM earnings came in at 22.19X the S&P 500 index price. We know what happened next!
Why do so many refuse to see the parallels?
This crisis is unfolding so similarly to 2008, and yet most of the “experts” are willingly blind.
Much of the stock buying that has been happening in 2015 has been fueled by stock buybacks and by M&A (merger and acquisitions). Many firms have even been going into debt to buy back their own stocks, but now sources of financing are starting to dry up. This year we have already seen the most corporate debt downgrades since 2009, and big financial institutions are now becoming much more hesitant to loan giant stacks of cash to these large corporations at super low interest rates.
So it is very, very difficult to see how the equity markets are going to move much higher than they are right now.
Meanwhile, the global economy is starting to unravel right in front of our eyes. In his recent piece, Stockman discussed some of these data points…
In the last two days we posted the latest data on two crucial markers of global economic direction——-export shipments from Korea and export orders coming into the high performance machinery factories of Germany.
In a word, they were abysmal, and smoking gun evidence that the suzerains of Beijing have not stopped the implosion in China, and that their latest paddy wagon forays—–arresting the head of China’s third largest bank and hand-cuffing several hedge fund managers including the purported “Warren Buffett” of China—-are signs not of stabilization, but sheer desperation.
So it is not surprising that Korea’s October exports—–the first such data from anywhere in the world—were down by a whopping 16% from last year, and have now been down for 10 straight months. Needless to say, China is the number one destination for Korean exports.
Likewise, German export orders plummeted by 18% in September, and this was no one month blip.
For many more recent statistics just like these, please see my previous article entitled “18 Numbers That Scream That A Crippling Global Recession Has Arrived“.
If the global economy really was doing “just fine” as Barack Obama and others suggest, then why is the largest shipping line in the world eliminating jobs and scaling back capacity?…
A.P. Moeller-Maersk A/S is scaling back capacity and cutting jobs in the world’s largest shipping line to adapt to a drop in demand.
The Danish company, which last month lowered its profit forecast for 2015 citing a gloomier outlook for the global shipping market, will shed 4,000 jobs in its Maersk Line unit as part of a program to “simplify the organization,” it said in an e-mailed statement on Wednesday.
And why are some of the biggest banks in the western world laying off tens of thousands of workers?…
Standard Chartered Plc became the third European bank in less than two weeks to announce sweeping job cuts, bringing the total planned reductions to more than 30,000, or almost one in seven positions.
The London-based firm said Tuesday it will eliminate 15,000 jobs, or 17 percent of its workforce, as soaring bad loans in emerging markets hurt earnings. Deutsche Bank AG, based in Frankfurt, last week announced plans for 11,000 job cuts, while Credit Suisse Group AG said it would trim as many as 5,600 employees.
And if things are so great in the United States, why is Target suddenly closing stores?
The truth, of course, is that things are not great. Global GDP expressed in U.S. dollars is down 3.4 percent so far this year, and total global trade has plummeted 8.4 percent.
We have entered a major global economic slowdown, and like usual, equity markets will be the last to get the memo.
But when they finally do react, that is likely going to greatly accelerate our problems. Just like we saw in 2008, when there is fear and panic in the financial markets that tends to cause the flow of credit to freeze up. And that is something that we simply cannot afford, because the flow of credit has become the lifeblood of the global economy.
So no, “the crisis” is not “over”.
Rather, the truth is that “the crisis” is just beginning, and it will soon be making front page headlines all over the planet.
Would you pay $400,000 for a single helmet? Of course you wouldn’t – but that is precisely what the U.S. government is doing. Just the helmet for the pilot of the new F-35 Lightning II is going to cost taxpayers nearly half a million dollars. And since we are going to need 2,400 of those helmets, the total bill is going to end up approaching a billion dollars. But what is a billion dollars between friends, eh?
Sadly, our military has a very long history of wasting money like this. Back in the 1980s, the “six hundred dollar toilet seat” became quite famous. Average Americans were absolutely outraged that the government was wasting so much of our hard-earned money, and promises were made that things would change. Here is more on what transpired back then from Wikipedia…
Beginning in 1981, President Ronald Reagan began an expansion in the size and capabilities of the United States armed forces, which entailed major new expenditures on weapons procurement. By the mid-1980s, this spending became a scandal when the Project On Government Oversight reported that the Pentagon had vastly overpaid for a wide variety of items, most notoriously paying $435 for a hammer, $600 for a toilet seat, and $7,000 for a coffee pot.
But of course things haven’t changed, have they?
Instead, they have gotten even worse.
I have no idea how a single helmet could be worth $400,000.
Does it grant magic wishes?
Does it turn the user into a mutant superhero?
Here is an excerpt from the USA Today article that is reporting on this super expensive helmet…
When the joint strike fighter, the F-35 Lightning II, finally takes to the skies on its first official mission, it will be one of the most advanced and one of the most expensive planes ever.
And the pilots flying the aircraft will be wearing the most advanced and most expensive helmet ever.
The helmet will give pilots quicker access to the information they need to see and has special cameras to “see” through the bottom of the plane. But it will cost an estimated $400,000 per helmet — more than four times as much as the Air Force paid for head wear for other aircraft such as the F-16.
Is that why the helmet is so expensive?
It can help the pilot see through the bottom of the plane?
If you just go down to your local Ford dealer they will be glad to show you lots of new trucks that can “see behind them”, and the best truck on the lot only costs about $50,000.
Or better yet, if F-35 pilots really want to see what is going on underneath them they should just slap a window on the bottom of the plane.
Of course I am just being facetious, but I think that you get the point.
We all work really hard for our money, and it is quite disheartening to watch the government waste it so flippantly.
And this week the Republicans in Congress have agreed to suspend the debt ceiling for the rest of the time that Barack Obama is in the White House. In one of his final acts as House Speaker, John Boehner has given Barack Obama a wonderful parting gift…
Outgoing House Speaker John Boehner presented his newly forged budget deal to his Republican colleagues at a private meeting this morning, outlining his plan to avert another government shutdown and raise the debt ceiling as a parting gift to his successor.
The deal would increase federal spending by $80 billion over two years and raise the federal borrowing limit through 2017. The 144-page bill, which was released Monday shortly before midnight, was welcomed by Democrats who have been pushing for budget negotiations all year.
Thank you John Boehner for selling us all down the river time after time. You have done a great disservice to our nation.
This new budget agreement is actually going to significantly increase spending. Here are some more of the details from the New York Times…
For this fiscal year alone, the deal would add $50 billion in spending, divided equally between defense and domestic programs, as well as $16 billion for emergency war spending, half for the military, half for the State Department. Together, that represents an increase of $66 billion in the spending limits for 2016, not far off the $70 billion increase Mr. Obama requested in his budget.
Personally, I can’t wait to see how much of that 16 billion dollars is for lethal military aid for Ukraine. Many of you that have been following this closely know exactly what I am talking about.
Of course this budget deal still must be approved by Congress, but that is just a formality at this point. Many “conservatives” in Congress are voicing displeasure with this deal, but is anyone listening? The following comes from Business Insider…
Conservatives moved quickly to revolt over a blockbuster budget deal reached among congressional leaders and the White House early Tuesday morning, calling it a “betrayal” days before US House of Representatives Speaker John Boehner (R-Ohio) is set to leave Congress.
“This budget deal is a betrayal of all the fiscally conservative promises Republicans made in the last election. It is emblematic of why working-class Americans are angry with congressional Republicans,” said prominent right-leaning economist Stephen Moore, in a statement released by the conservative group FreedomWorks.
The Tea Party is supposed to be standing against the tax and spend agenda of the Democrats and the establishment Republicans, but enthusiasm for the Tea Party seems to be subsiding. In fact, according to Gallup support for the Tea Party has hit an all-time low of 17 percent.
So we will just continue to witness business as usual in D.C. until disaster strikes. At this point it is expected that somewhere around 100 Republicans in the House will support this deal, and with all of the Democrats on board that should be enough to get it to pass.
Since Boehner reached his first “budget deal” with Barack Obama back in 2011, the U.S. national debt has increased by $3,970,023,503,348.07. It is a betrayal of a magnitude that is difficult to put into words.
Overall, the federal government has been stealing 100 million dollars from future generations of Americans every single hour of every single day since Barack Obama first entered the White House.
When I tell most people that, I can tell that they don’t really believe me, and truthfully that statistic does sound completely and utterly ridiculous.
But it is true.
When you multiply 100,000,000 by 24 by 365 you get 876,000,000,000. And if you multiply that number by 7 (the number of years that Obama has “served” so far rounding up), you get 6.132 trillion.
Well, according to CNSNews.com the U.S. national debt has risen by more than seven and a half trillion dollars since Barack Obama was first inaugurated…
Since Obama took office, the total debt of the federal government has already increased by $7,525,761,885,381.30—rising from $10,626,877,048,913.08 on Jan. 20, 2009 to $18,152,638,934,294.38 on Oct. 23, 2015.
When you break that number down, the amount of new debt added under Obama comes to $64,134.73 per household…
The $7,525,761,885,381.30 that the total debt has increased so far during the Obama presidency equals $64,134.73 for each of the 117,343,000 households that were in the United States as of June.
Are you ready to cough up your share?
The truth is that it is already mathematically impossible for the U.S. government to pay off this debt.
What our politicians are attempting to do now is to keep borrowing money and extending the game for as long as they possibly can.
If that sounds like a really bad plan to you, that is because it is a really bad plan.
What our leaders have done to future generations of Americans is beyond criminal. But the American people have come to accept this as “normal”, and only a very small percentage of us are still complaining about it.
So the jokers in Washington will just keep on doing what they are doing until it all comes tumbling down all around them. By then, it will be far too late to do anything about it.
You can stop waiting for a global financial crisis to happen. The truth is that one is happening right now. All over the world, stock markets are already crashing. Most of these stock market crashes are occurring in nations that are known as “emerging markets”. In recent years, developing countries in Asia, South America and Africa loaded up on lots of cheap loans that were denominated in U.S. dollars. But now that the U.S. dollar has been surging, those borrowers are finding that it takes much more of their own local currencies to service those loans. At the same time, prices are crashing for many of the commodities that those countries export. The exact same kind of double whammy caused the Latin American debt crisis of the 1980s and the Asian financial crisis of the 1990s.
As you read this article, almost every single stock market in the world is down significantly from a record high that was set either earlier this year or late in 2014. But even though stocks have been sliding in the western world, they haven’t completely collapsed just yet.
In much of the developing world, it is a very different story. Emerging market currencies are crashing hard, recessions are starting, and equity prices are getting absolutely hammered.
Posted below is a list that I put together of 23 nations around the world where stock market crashes are already happening. To see the stock market chart for each country, just click the link…
6. South Korea
Of course this is just the beginning. The western world is going to feel this kind of pain as well very soon. I want to share with you an excerpt from an article that just appeared in the Telegraph entitled “Doomsday clock for global market crash strikes one minute to midnight as central banks lose control“. You see, the Telegraph is not just one of the most important newspapers in the UK – it is truly one of the most important newspapers in the entire world. When it speaks on financial matters, millions of people listen very carefully. So for the Telegraph to declare that the countdown to a “global market crash” is “one minute to midnight” is a very, very big deal…
When the banking crisis crippled global markets seven years ago, central bankers stepped in as lenders of last resort. Profligate private-sector loans were moved on to the public-sector balance sheet and vast money-printing gave the global economy room to heal.
Time is now rapidly running out. From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.
I encourage you to read the rest of that excellent article right here. It contains lots of charts and graphs, and it discusses many of the exact same things that I have been hammering on for months.
When one of the newspapers of record for the entire planet starts sounding exactly like The Economic Collapse Blog, then you know that it is late in the game.
Others are sounding the alarm about an imminent global financial crash as well. For example, just consider what Egon von Greyerz recently told King World News…
Eric, I fear that this coming September – October all hell will break loose in the world economy and markets. A lot of factors point to that, both fundamental and technical indicators and this indicates that we could have a number of shocks this autumn.
Sadly, most investors will hold stocks, bonds and property and will see any decline in value as an opportunity. It will be a long time and a very big fall before they realize that the system will not help them this time because the central bankers have run out of ammunition to save the global financial system one more time. Yes, we will see more massive money printing, but it will just make things worse. And at some stage, which could be quite soon, real fear will set in, a fear of a magnitude the world has not experienced before.
Hmm – there is another example of someone talking about September. It is funny how often that month keeps coming up.
And of course most of the major stock market crashes in U.S. history have been in the fall. Just go back and take a look at what happened in 1929, 1987, 2001 and 2008.
The “smart money” has been pulling their money out of stocks for quite a while now, and at this point a lot of others have hopped on the bandwagon. The following comes from CNBC…
The flight of investor money from U.S. stocks has turned into a stampede.
In fact, the $78.7 billion leaving domestic equity-focused funds has been worse in 2015 than it was even during the financial crisis years, when the S&P 500 tumbled some 60 percent, according to data released Friday by Morningstar. The total is the highest since 1993.
Domestic equity funds surrendered $20.4 billion in July alone and have seen $158.6 billion in redemptions over the past 12 months. Even a strong flow of money into passively managed exchange-traded funds has been unable to offset the stream to the exit among retail investors, who generally focus more on mutual funds than ETFs.
A global financial crisis has already begun.
So those that were claiming that one would not happen in 2015 are already wrong.
Over the coming months we will find out how bad it will ultimately be.
Sometimes I get criticized for talking about these things. There are a few people out there that don’t like all of the “doom and gloom” that I discuss on my website. Apparently it is a bad thing to talk about the things that really matter and we should all just be “keeping up with the Kardashians” instead.
I consider myself just to be another watchman on the wall. From our spots on the wall, watchmen such as myself all over the nation are sounding the alarm about what we clearly see coming.
If we saw what was coming and we did not warn the people, their blood would be on our hands. But if we do warn the people, then we have done our duty.
Every day I just do the best that I can with what I have been given. And there are many others just like me that are doing exactly the same thing.
Those that do not like the warning message are going to feel really stupid when things start falling apart all around them and they finally realize how wrong they truly were.
The list of nations around the globe that have collapsing economies just continues to grow. In recent weeks I have written about the ongoing saga in Greece, the stock market crash in China, the debt crisis in Puerto Rico and the economic meltdown in South America. But there are more economic flashpoints that I have not even addressed yet. For example, did you know that a full-blown economic collapse is happening in Iraq right now? And did you know that the economy of Ukraine is contracting rapidly and that it cannot pay its debts? Back in 2008, the financial crisis was primarily centered on the United States, but this time around it is turning out to be a truly global phenomenon.
When the U.S. “liberated” Iraq, the future for that nation was supposed to be incredibly bright. But instead, things have just gone from bad to worse. This has especially been true since we pulled our troops out and allowed ISIS to run buck wild. At this point unemployment in Iraq is at Great Depression levels, the economy is steadily contracting and government debt is spiraling wildly out of control…
But Iraq’s oil industry, and the government’s budget, is being squeezed by low oil prices. As a result, the nation’s finances are being hit hard: the market price is now half that needed to break even, expanding the budget deficit, forecast to return to balance until the rise of IS, to a projected 9% of GDP.
In the past, Iraq’s leaders approved budgets without seriously taking into account a drop in the price of oil. Now the severe revenue shortfall is forcing leaders to cut back on new investments. Russia’s Lukoil, Royal Dutch Shell, and Italy’s ENI are also cutting back, eyeing neighbouring Iran’s pending economic opening as a safer investment.
Despite improving its finances after the US troop withdrawal, the drop in oil prices and the rising costs of battling IS have pushed Iraq’s economy into a state of near-crisis. According to the IMF, the nation’s GDP shrank by 2.7% in 2014 and unemployment is estimated to be over 25%.
Things are even worse in another nation that was recently “liberated”. The new U.S.-friendly government in Ukraine was supposed to make things much better for average Ukrainians, but instead the economy is absolutely imploding…
The country’s GDP contracted by 6.8 percent last year, and is forecast to shrink by another 9 percent this year — a total loss of roughly 16 percent over two years.
Just like in much of southern Europe, the banks are absolutely overloaded with bad loans and the entire banking system is on the verge of total collapse. The following comes from a CNN article that was posted earlier this year…
Ukraine’s banking sector is one of the weakest parts of the economy. The key interest rates are the highest in 15 years, and experts estimate bad loans make up between one third and one half of all banking assets.
Over 40 banks have been declared bankrupt since the war began, with the country’s fourth largest lender, Delta Bank, going under earlier this week.
Just recently, the government of Ukraine declared that it could not pay its debts. We didn’t hear much about this in the United States, because the Obama administration wants us to believe that their policies over there are a success. But the truth is that Ukraine now needs a “debt restructuring deal” similar to what Greece has received in the past…
Progress between Ukraine and its creditors on a $19 billion restructuring may be losing momentum as a proposed high-level meeting was canceled amid further disagreements over terms.
Ukraine’s $2.6 billion of 2017 notes fell the most in a month after a person familiar with negotiations said a new offer put forward by Ukraine this week would be unacceptable to bondholders. Later on Wednesday, Ukraine’s Finance Ministry said that a Franklin Templeton-led creditor group should prepare an improved offer for meetings next week.
Speaking of Greece, things just continue to unravel over there. Earlier this week we witnessed the greatest one day stock market crash in Greek history, and there was more financial carnage on Wednesday. The following comes from the Economic Policy Journal…
For a second straight day, following the reopening of the Greek stock market, there were heavy losses in Greek banking stocks, with shares across the sector once again falling by about 30 percent, the bottom of their daily limit.
Bank of Piraeus and National Bank of Greece fell the most, falling by the daily limit of 30 percent t. Alpha Bank was 29.7 percent lower and Eurobank Ergasias lost 29.6 percent.
At this point you would have to be blind to not see what is happening.
A financial crisis is not just imminent – one is already starting to erupt all over the planet.
And none of us can say that we weren’t warned. In a recent piece, Bill Holter included a long list of ominous financial warnings that were issued over the past two years by either the IMF or the Bank for International Settlements…
July 2014 – BIS –BIS Issues Strong Warning on “Asset Bubbles”
July 2014 – IMF –Bloomberg: IMF Warns of Potential Risks to Global Growth
October 2014 – BIS –”No One Could Foresee this Coming”
October 2014 IMF Direct Blog — What Could Make $3.8 Trillion in global bonds go up in smoke?
October 2014 IMF Report –”Heat Wave”-Rising financial risk in the U.S.
***December 2014 – BIS –BIS Issues a new warning on markets
December 2014 – BIS —BIS Warnings on the U.S. Dollar
February 2015 – IMF – Shadow Banking — Another Warning from the IMF – This Time on “Shadow Banking”
March 2015 – Former IMF Peter Doyle – Don’t expect any warning on new crisis -Former IMF Peter Doyle: Don’t Expect any Early Warning from the IMF –
*** April 2015 IMF – Liquidity Shock –IMF Tells Regulators to Brace for Liquidity Shock
May 2015 BIS – Need New “Rules of the Game” –BIS: Time to Think about New Global Rules of the Game?
June 2015 BIS Credit Risk Report –BIS: New Credit Risk Management Report
June 2015 IMF (Jose Vinals) –IMF’s Vinals Says Central Banks May Have to be Market Makers
***BIS June 2015 (UK Telegraph) –The world is defenceless against the next financial crisis, warns BIS
July 2015 – IMF – Warns US the System is Still Vulnerable (no blog article) –IMF warns U.S.: Your financial system is (still) vulnerable
July 2015 – IMF – Warns Pension Funds Could Pose Systemic Risk (no blog article) –IMF warns pension funds could pose systemic risks to the US
Overall, there are currently 24 nations that are dealing with a major financial crisis right now, and there are another 14 nations that are right on the verge of one.
But even though a global financial crisis is already unfolding right in front of our eyes, there are people that come to my website every day and leave comments telling me that everything is going to be just fine.
So what do you think?
What do you believe the rest of this year will bring?
Please feel free to share your thoughts by posting a comment below…