America’s Rapidly Accelerating Retail Apocalypse Is Being Fueled By One Enormously Painful Economic Problem

We are in the midst of the worst retail apocalypse in American history, and it seems to be getting worse with each passing month.  Many of the “experts” blame the growth of online retailers, and without a doubt online retail sales have been surging.  In fact, I sell far more through Amazon.com than I do through any other channel.  But the truth is that online retailers are not exactly taking over the world.  At this point, 91 percent of all retail sales still take place in brick-and-mortar stores, and that means that online retailers only account for about 9 percent of all retail sales.  Sadly, there is a much bigger reason why thousands of retail stores are closing down and millions upon millions of square feet of retail space is now sitting empty all over America.  The mighty U.S. consumer base was once primarily made up of middle class Americans, but the middle class in America has been on a slow, steady death spiral for many years.

So now the experts tell us that retailers that cater to high income and low income Americans are thriving, and those that once did so well selling to the middle class are fading away

The middle is disappearing — low and middle-income customers increasingly shop at discounters and dollar stores, forcing retailers that once served these customers, like Bon-Ton and its subsidiary brands, to close shop,” analysts from intelligence firm Gartner L2 wrote in a recent report on department stores.

The slow decline of the middle class in America has had an impact on retailers that haven’t adapted to the change. Increasingly, the most successful businesses in the sector have become more distinctly split into two sections: luxury and budget stores.

When I was growing up, it seemed like almost everyone that I knew was “middle class”, and the mall was the place to go on the weekends.

But now shopping malls are dying all over the country.  In fact, one brand new report says that shopping malls have not been this empty in the U.S. since we were coming out of the last recession

U.S. malls haven’t been this empty since 2012, when the retail industry was clawing its way back after the Great Recession, according to a new report from real estate research firm Reis.

The vacancy rate at regional and super regional malls reached 8.6 percent in the second quarter of 2018, based on a survey by Reis of 77 metropolitan areas across the country. That was up from 8.4 percent in the prior period, and a high not seen since the third quarter of 2012, when the vacancy rate was 8.7 percent.

If the U.S. economy really is in “good shape”, why is this happening?

And the numbers for “local shopping centers” are actually even worse

The vacancy rate last quarter, 10.2%, was higher than at malls in part because of hundreds of Toys “R” Us store closures.

Vacancies at local shopping centers increased in more than 70% of metro areas. Indianapolis, Dayton, and Wichita had the highest rates in the country.

If you didn’t know any better, you would be tempted to think that “Space Available” and “Going Out Of Business” were two of the hottest new retailers in the entire nation.

And the numbers that I just shared with you are actually quite understated.  In one of his most recent articles, Wolf Richter explained why this is the case…

But these numbers are deceptive – because something counts as “vacant” only when the landlord tries to fill it with another retailer.

Stores that emptied out and became zombie stores in zombie malls, or the Toys ‘R’ Us stores in bad areas with zero hopes of finding another retail tenant, etc. – they’re not being counted as “vacant” retail space because they’re no longer being marketed as retail space, and the square footage of that retail space disappears from the vacant retail space stats.

That space may remain shuttered and vacant for years, with a fence around that is catching tumbleweeds, as lenders tussle over who gets what, if anything, until the land can hopefully be sold to a developer who might bulldoze the walls and build an apartment complex on it.

We have never been through anything like this in modern American history.

2017 was the worst year for retail store closings in the United States that we have ever seen.  The number of retail stores that closed approximately tripled the number from 2016, and this year we are definitely on pace to shatter the record that we set last year.

And yet Americans continue to be exceedingly optimistic.  A poll that was just released found that 55 percent of all Americans believe that our best days are still ahead of us.

Hopefully they are right, but in the short-term things are looking rather grim.

For example, just today we learned that Sears is shutting down even more stores

Sears Holdings, which owns both chains, said it informed employees Thursday that it would be shuttering nine Sears stores and one Kmart in late September. Liquidation is scheduled to begin as early as July 13, the company said in a statement.

With the additions, a total of 78 stores – 62 Sears and 16 Kmart locations – will close in September.

Of course Sears is not the only major retailer that is slowly liquidating.  Many of the biggest names in the entire retail world have announced that they are closing at least 100 locations in 2018.  The following comes from CNN

Six hundred Walgreens have closed this year, while Bon-Ton, Sears and Kmart, Best Buy, Signet Jewelers, Mattress Firm, and GNC have all closed 200 stores or more this year. Claire’s, Foot Locker, and The Children’s Place have closed 100 or more locations.

If we still had a strong middle class, this would not be happening.

Not too long ago, I shared with you some absolutely shocking numbers about the decline of the middle class, and I would like to share them with you again now…

#1 78 million Americans are participating in the “gig economy” because full-time jobs just don’t pay enough to make ends meet these days.

#2 In 2011, the average home price was 3.56 times the average yearly salary in the United States.  But by the time 2017 was finished, the average home price was 4.73 times the average yearly salary in the United States.

#3 In 1980, the average American worker’s debt was 1.96 times larger than his or her monthly salary.  Today, that number has ballooned to 5.00.

#4 In the United States today, 66 percent of all jobs pay less than 20 dollars an hour.

#5 102 million working age Americans do not have a job right now.  That number is higher than it was at any point during the last recession.

#6 Earnings for low-skill jobs have stayed very flat for the last 40 years.

#7 Americans have been spending more money than they make for 28 months in a row.

#8 In the United States today, the average young adult with student loan debt has a negative net worth.

#9 At this point, the average American household is nearly $140,000 in debt.

#10 Poverty rates in U.S. suburbs “have increased by 50 percent since 1990”.

#11 Almost 51 million U.S. households “can’t afford basics like rent and food”.

#12 The bottom 40 percent of all U.S. households bring home just 11.4 percent of all income.

#13 According to the Federal Reserve, 4 out of 10 Americans do not have enough money to cover an unexpected $400 expense without borrowing the money or selling something they own.

#14 22 percent of all Americans cannot pay all of their bills in a typical month.

#15 Today, U.S. households are collectively 13.15 trillion dollars in debt.  That is a new all-time record.

This is why so many U.S. retailers are failing.

The once mighty U.S. consumer base is being hollowed out because the middle class in America is being eviscerated.

Yes, the wealthy are doing quite well for the moment, but an increasing number of signs indicate that things are about to take a negative turn for them as well.

For instance, just consider the following example from CNBC

Manhattan real estate had its worst second quarter since the financial crisis, with prices and sales dropping and inventory rising, according to a new report.

Total sales in Manhattan fell 17 percent in the second quarter from a year ago, according a report from Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants.

If we don’t find a way to turn things around, what we have witnessed so far is just the beginning.

The middle class will continue to die, retailers all over the country will continue to go out of business, and shopping malls will continue to turn into ghost towns.

And once we plunge into another recession, all of the trends that I have been talking about in this article are going to start moving much more quickly.  We truly are on the edge of disaster, and most Americans have absolutely no idea what is coming.

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

77 Million Square Feet Of Retail Space And Counting – America’s Retail Apocalypse Is Spiraling Out Of Control In 2018

In 2017 we absolutely shattered the all-time record for retail store closings in a single year, and this year it looks like we are going to shatter the record once again.  In fact, there are some that are projecting that up to 9,000 retail stores could close by the time that we get to the end of this calendar year.  Already, the amount of retail space that has shut down is simply jaw-dropping.  If you total up all of the retail store closings that have been announced so far in 2018, it accounts for 77 million square feet of retail space.  Let that number sink in for a bit.  Many shopping centers and strip malls around the country already have a post-apocalyptic feel to them, and more “space available” signs are going up with each passing day.  And in case you are tempted to think that I am making this figure up, here it is straight from Bloomberg

At last count, U.S. store closures announced this year reached a staggering 77 million square feet, according to data on national and regional chains compiled by CoStar Group Inc. That means retailers are well on their way to surpassing the record 105 million square feet announced for closure in all of 2017.

In the end, we could shatter the all-time record that was established just last year by 20 or 30 million square feet.

At moments such as this, the phrase “retail apocalypse” doesn’t really seem to fit the gravity of what is actually taking place.

And unfortunately for the retail industry, it doesn’t appear that this crisis is going to end any time soon.  Here is more from Bloomberg

And with shifts to internet shopping and retailer debt woes continuing, there’s no indication the shakeout will end anytime soon. “A huge amount of retail real estate in the U.S. is going to meet its demise,” says James Corl, managing director and head of real estate at private equity firm Siguler Guff & Co. Property owners will “try to re-let it as a gun range or a church—or it’s going to go back to being a cornfield.”

Will retail real estate be the trigger for the next great debacle on Wall Street?

Some people think so.

A lot of major retail projects are going to go belly up, and somebody is going to be left holding the bag.

And the warning signs are definitely there.  In fact, retail sector debt defaults set a brand new record during the first quarter of 2018…

Financial stress in the retail industry is at a historic high.

Moody’s said in a report on Tuesday that retail sector defaults hit a record high during the first three months of 2018 as the rise of e-commerce and decline of malls continues to eat away at profits.

But the mainstream media is telling us that the U.S. economy is in great shape, and so everything is going to work out okay, right?

Sadly, nothing has changed regarding the long-term trends that are eating away at our economy like a cancer.  Just a few days ago I wrote about a brand new report that found that nearly 51 million U.S. households “can’t afford basics like rent and food”.  The real reason why our retailers are in decline is because the middle class is being systematically destroyed.  Once upon a time the middle class had plenty of discretionary income, but now the middle class is disappearing right in front of our eyes, but most of us are in such a state of denial that we won’t even admit what is happening.

Hopefully as stores continue to close by the hundreds people will start waking up.  The following is a list of just some of the major retailers that are closing stores in 2018

  • Abercrombie & Fitch: 60 more stores are charted to close
  • Aerosoles: Only 4 of their 88 stores are definitely remaining open
  • American Apparel: They’ve filed for bankruptcy and all their stores have closed (or will soon)
  • BCBG: 118 stores have closed
  • Bebe: Bebe is history and all 168 stores have closed
  • Bon-Ton: They’ve filed for Chapter 11 and will be closing 48 stores.
  • The Children’s Place: They plan to close hundreds of stores by 2020 and are going digital.
  • CVS: They closed 70 stores but thousands still remain viable.
  • Foot Locker: They’re closing 110 underperforming stores shortly.
  • Guess: 60 stores will bite the dust this year.
  • Gymboree: A whopping 350 stores will close their doors for good this year
  • HHGregg: All 220 stores will be closed this year after the company filed for bankruptcy.
  • J. Crew: They’ll be closing 50 stores instead of the original 20 they had announced.
  • J.C. Penney: They’ve closed 138 stores and plan to turn all the remaining ones into toy stores.
  • The Limited: All 250 retail locations have been closed and they’ve gone digital in an effort to remain in business.
  • Macy’s: 7 more stores will soon close and more than 5000 employees will be laid off.
  • Michael Kors: They’ll close 125 stores this year.
  • Payless: They’ll be closing a whopping 800 stores this year after recently filing for bankruptcy.
  • Radio Shack: More than 1000 stores have been shut down this year, leaving them with only 70 stores nationwide.
  • Rue 21: They’ll be closing 400 stores this year.
  • Sears/Kmart: They’ve closed over 300 locations.
  • ToysRUs: They’ve filed for bankruptcy but at this point, have not announced store closures, and have in fact, stated their stores will remain open.
  • Wet Seal: This place is history – all 171 stores will soon be closed.

A lot of people are blaming online retailers such as Amazon.com for the decline of brick and mortar stores, and without a doubt online sales are rising, but they still account for less than 10 percent of the entire retail industry.

And it isn’t just retailers that are closing locations.

Personally, I was greatly saddened when it was announced that Subway was planning on shutting down 500 locations in the United States…

Feeling the need to improve its store fleet amid intense competition in the sandwich industry, Subway is planning to close 500 U.S. locations this year, according to Bloomberg News.

Subway restaurants are small in size, but ubiquitous. The chain is the largest in the U.S. by store count of any quick-service chain with nearly 26,000 locations, well above the 14,000 McDonald’s (mcd, +0.29%) restaurants in this country. This has long been a point of pride for the company.

I have always been a big fan of Subway, and if they ever closed my hometown location I would be seriously distressed.

And banks are closing locations at an astounding rate as well.  In fact, from June 2016 to June 2017 the number of bank branches in the United States fell by more than 1,700.

That was the biggest decline that we have ever seen.

If the U.S. economy really was in good shape, none of this would be taking place.  Something really big is happening, and what we have seen so far is just the very small tip of a very large iceberg.

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

Venezuela Defaults On A Debt Payment – Is This The First Domino To Fall?

Did you know that Venezuela just went into default?  This should be an absolutely enormous story, but the mainstream media is being very quiet about it.  Wall Street and other major financial centers around the globe could potentially be facing hundreds of millions of dollars in losses, and the ripple effects could be felt for years to come.  Sovereign nations are not supposed to ever default on debt payments, and so this is a very rare occurrence indeed.  I have been writing about Venezuela for years, and now the crisis that has been raging in that nation threatens to escalate to an entirely new level.

Things are already so bad in Venezuela that people have been eating dogs, cats and zoo animals, but now that Venezuela has officially defaulted, there will be no more loans from the rest of the world and the desperation will grow even deeper…

Venezuela, a nation spiraling into a humanitarian crisis, has missed a debt payment. It could soon face grim consequences.

The South American country defaulted on its debt, according to a statement issued Monday night by S&P Global Ratings. The agency said the 30-day grace period had expired for a payment that was due in October.

A debt default risks setting off a dangerous series of events that could exacerbate Venezuela’s food and medical shortages.

So what might that “dangerous series of events” look like?

Well, Venezuela already has another 420 million dollars of debt payments that are overdue.  Investors around the world are facing absolutely catastrophic losses, and the legal wrangling over this crisis could take many years to resolve.  The following comes from Forbes

S&P says that it expects Venezuela to default on other bond payments. This comes as absolutely no surprise. A further $420m of bond payments are already overdue: unless Venezuela finds some dollars in a hurry, these will also go into default very soon.

S&P also warns that Venezuela could embark on a coercive debt restructuring that would in effect be default. Indeed, it has already announced its intention to do so, though as yet it has produced no plan. But we can imagine what such a debt restructuring might look like: in 2012, Greece imposed a coercive debt restructuring on private sector investors, and Argentina has restructured its dollar-denominated debt twice this century, the second time to sort out the dog’s breakfast Argentina made of the first restructuring. Investors could take substantial losses, and there would no doubt be lawsuits lasting for years. The biggest winners from distressed debt restructurings are always lawyers.

When you add this to all of the other bad news that has been coming out lately, it is easy to understand why things are starting to shift in the financial markets.

In fact, CNBC says that there is “a different tone to the markets in the last week or so”…

Another day, another down open. There’s a different tone to the markets in the last week or so.

It started last Tuesday, when an initial rally faded into a hard sell-off mid-morning. The next five trading sessions generally opened down.

Peter Tchir of Academy Securities, checked off a short list of concerns. There is progress on tax reform “but the reality is it’s not going to be as great as everyone hoped,” he said. There are questions about what the flatter yield curve means. And the recent arrests of high-ranking Saudis in an anti-corruption initiative created uncertainty in the last week and a half.

I keep writing about all of the experts that are warning of an imminent market crash, and yet most investors do not appear to be listening.

In fact, one survey found that the number of fund managers that “are taking higher-than-normal risk” is at an all-time high

According to Bank of America Merrill Lynch’s latest monthly fund-manager survey, which includes 206 panelists who manage $610 billion, investors are opting for the latter.

The firm finds that a record number of survey responders are taking higher-than-normal risk. That comes at a time when US stock market valuations are sitting close to their highest in history, creating a precarious situation in which investors are feeling emboldened at a time when they should be exhibiting caution.

This reminds me so much of what we have witnessed just prior to other market crashes.

During the euphoria of the original dotcom bubble, we were being told that Internet stocks would never go down because this was the beginning of an entirely new revolution.

And then investors lost trillions upon trillions of dollars when the market finally crashed.

Just prior to the financial crisis of 2008, we were being assured that there was nothing unusual going on with housing prices.

And then the market crashed and we were suddenly facing the worst financial crisis since the Great Depression.

Every bubble eventually bursts, and this one will burst too.  Those that do not learn from history are doomed to repeat it, and it is likely that more money will be lost during this coming crisis than during any other crisis in our entire history.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Corporations Are Defaulting On Their Debts Like It’s 2008 All Over Again

Corporate Debt Defaults - Public DomainThe Dow closed above 18,000 on Monday for the first time since July.  Isn’t that great news?  I truly wish that it was.  If the Dow actually reflected economic reality, I could stop writing about “economic collapse” and start blogging about cats or football.  Unfortunately, the stock market and the economy are moving in two completely different directions right now.  Even as stock prices soar, big corporations are defaulting on their debts at a level that we have not seen since the last financial crisis.  In fact, this wave of debt defaults have become so dramatic that even USA Today is reporting on it

Get ready to step over some landmines, investors. The number of companies defaulting on their debt is hitting levels not seen since the financial crisis, and it’s not just a problem for bondholders.

So far this year, 46 companies have defaulted on their debt, the highest level since 2009, according to S&P Ratings Services. Five companies defaulted this week, based on the latest data available from S&P Ratings Services. That includes New Jersey-based specialty chemical company Vertellus Specialties and Ohio-based iron ore producer Cliffs Natural. Of the world’s defaults this year, 37 are of companies based in the U.S.

Meanwhile, coal producer Peabody Energy (BTU) and surfwear seller Pacific Sunwear (PSUN) this week filed plans for bankruptcy protection. Shares of Peabody have dropped 97% over the past year to $2 a share and Pacific Sunwear stock is off 98% to 4 cents a share.

A lot of big companies in this country have fallen on hard times, and it looks like bankruptcy attorneys are going to be absolutely swamped with work for the foreseeable future.

So why are stock prices soaring right now?  After all, it doesn’t seem to make any sense whatsoever.

And it isn’t just a few bad apples that we are talking about.  All across the spectrum, corporate revenues and corporate earnings are down.  At this point, earnings for companies on the S&P 500 have plunged a total of 18.5 percent from their peak in late 2014, and it is being projected that corporate earnings overall will be down 8.5 percent for the first quarter of 2016 compared to one year ago.

As earnings decline, a lot of big companies are getting into trouble with debt, and we have already seen a very large number of corporate debt downgrades.  In recent interviews, I have been bringing up the fact that the average rating on U.S. corporate debt has now fallen to “BB”, which is already lower than it was at any point during the last financial crisis.

A lot of people don’t seem to believe me when I share that fact, but it is absolutely true.

One of the big reasons why corporate debt is being downgraded is because a lot of these big companies have been going into enormous amounts of debt in order to buy back their own stock.  The following comes from Wolf Richter

Downgrades ascribed to “shareholder compensation,” as Moody’s calls share buybacks and dividends, have been soaring, according to John Lonski, Chief Economist at Moody’s Capital Markets Research. The moving 12-month sum of Moody’s credit rating downgrades of US companies, jumped from 32 in March 2015, to 48 in December 2015, and to 61 in March 2016, nearly doubling within a year.

The last time the number of downgrades attributed to financial engineering reached 61 was in early 2007. It would hit its peak of 79 in mid- 2007, a few months before the beginning of the Great Recession in Q4 2007. At the time, stocks were on the verge of commencing their epic crash.

When corporations go into the market and buy back their own stock, they are slowly cannibalizing themselves.  But we have seen these stock buybacks soar to record levels for a couple of reasons.  Number one, big investors want to see stock prices go up, and so big investors tend to really like these stock buybacks and will generally support corporate executives that wish to engage in doing this.  Number two, if you are a greedy corporate executive that is heavily compensated by stock options, you very much want to see the stock price go up as well.

So the name of the game is greed, and stock buybacks have been fueling much of the rise in U.S. stock prices that we have been seeing recently.

However, the truth is that nothing in the financial world lasts forever, and this irrational bubble will ultimately come to an end as well.

Earlier today, I am across an article that included a comment from Michael Hartnett of Bank of America Merrill Lynch.  He believes that there are a lot of parallels between what is happening today and the period of time that immediately preceded the bursting of the dotcom bubble

Back then, as could be the case today, a bull market & a US-led economic recovery was rudely interrupted by a crisis in Emerging Markets. The crisis threatened to hurt Main Street via Wall Street (the Nasdaq fell 33% between Jul-Oct 1998, when [Long-Term Capital Management] went under). Policy makers panicked and monetary policy was eased (with hindsight unnecessarily). Fresh liquidity combined with apocalyptic investor sentiment very quickly morphed into a violent but narrow equity bull market/bubble in 1998/99, one which ultimately took valuations & interest rates sharply higher to levels that eventually caused a “pop”.

Like Hartnett, I definitely believe that a major “pop” is on the way, although I would like for it to be delayed for as long as possible.

Someday we will look back on these times with utter amazement.  It has been absolutely incredible how the financial markets have been able to defy economic reality for so long.

But they can’t do it forever, and according to a brand new CNN survey Americans are becoming increasingly pessimistic about where the real economy is heading…

In a new CNNMoney/E*Trade survey of Americans who have at least $10,000 in an online trading account, over half (52%) gave the U.S. economy as a “C” grade. Another 15% rated the economy a “D” or “F.”

This gloom persists despite the fact that the stock market is on the upswing again. The Dow topped 18,000 Monday for the first time since July 2015.

If some Americans think that the U.S. economy deserves a “D” or an “F” grade right now, just wait until they see what is in our immediate future.

Personally, I give our economy an “A” for being able to maintain our unsustainable debt-fueled standard of living for as long as it has.  Somehow we have managed to consume far more than we produce for decades, and the largest debt bubble in the history of the planet just keeps getting bigger and bigger and bigger.

Of course we are very much living on borrowed time at this point, but I truly hope that the bubble economy can keep going for at least a little while longer, because nobody should want to see what is coming afterwards.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

16 Facts About The Tremendous Financial Devastation That We Are Seeing All Over The World

Fireball - Devastation - Public DomainAs we enter the second half of 2015, financial panic has gripped most of the globe.  Stock prices are crashing in China, in Europe and in the United States.  Greece is on the verge of a historic default, and now Puerto Rico and Ukraine are both threatening to default on their debts if they do not receive concessions from their creditors.  Not since the financial crisis of 2008 has so much financial chaos been unleashed all at once.  Could it be possible that the great financial crisis of 2015 has begun?  The following are 16 facts about the tremendous financial devastation that is happening all over the world right now…

1. On Monday, the Dow fell by 350 points.  That was the biggest one day decline that we have seen in two years.

2. In Europe, stocks got absolutely smashed.  Germany’s DAX index dropped 3.6 percent, and France’s CAC 40 was down 3.7 percent.

3. After Greece, Italy is considered to be the most financially troubled nation in the eurozone, and on Monday Italian stocks were down more than 5 percent.

4. Greek stocks were down an astounding 18 percent on Monday.

5. As the week began, we witnessed the largest one day increase in European bond spreads that we have seen in seven years.

6. Chinese stocks have already met the official definition of being in a “bear market” – the Shanghai Composite is already down more than 20 percent from the high earlier this year.

7. Overall, this Chinese stock market crash is the worst that we have witnessed in 19 years.

8. On Monday, Standard & Poor’s slashed Greece’s credit rating once again and publicly stated that it believes that Greece now has a 50 percent chance of leaving the euro.

9. On Tuesday, Greece is scheduled to make a 1.6 billion euro loan repayment.  One Greek official has already stated that this is not going to happen.

10. Greek banks have been totally shut down, and a daily cash withdrawal limit of 60 euros has been established.  Nobody knows when this limit will be lifted.

11. Yields on 10 year Greek government bonds have shot past 15 percent.

12. U.S. investors are far more exposed to Greece than most people realize.  The New York Times explains…

But the question of what happens when the markets do open is particularly acute for the hedge fund investors — including luminaries like David Einhorn and John Paulson — who have collectively poured more than 10 billion euros, or $11 billion, into Greek government bonds, bank stocks and a slew of other investments.

Through the weekend, Nicholas L. Papapolitis, a corporate lawyer here, was working round the clock comforting and cajoling his frantic hedge fund clients.

“People are freaking out,” said Mr. Papapolitis, 32, his eyes red and his voice hoarse. “They have made some really big bets on Greece.”

13. The Governor of Puerto Rico has announced that the debts that the small island has accumulated are “not payable“.

14. Overall, the government of Puerto Rico owes approximately 72 billion dollars to the rest of the world.  Without debt restructuring, it is inevitable that Puerto Rico will default.  In fact, CNN says that it could happen by the end of this summer.

15. Ukraine has just announced that it may “suspend debt payments” if their creditors do not agree to take a 40 percent “haircut”.

16. This week the Bank for International Settlements has just come out with a new report that says that central banks around the world are “defenseless” to stop the next major global financial crisis.

Without a doubt, we are overdue for another major financial crisis.  All over the planet, stocks are massively overvalued, and financial markets have become completely disconnected from economic reality.  And when the next crash happens, many believe that it will be even worse than what we experienced back in 2008.  For example, just consider the words of Jim Rogers

“In the United States, we have had economic slowdowns every four to seven years since the beginning of the Republic. It’s now been six or seven years since our last stock market problem. We’re overdue for another problem.”

In Rogers’ view, low interest rates caused stock prices to increase significantly. He believes many assets are priced beyond their fundamentals thanks to the ultra-easy monetary policies by the Federal Reserve. Fed supporters argue such measures are good for investors, but Rogers takes a different view.

The Fed might tell us we don’t have to worry and that a correction or crash will never happen again. That’s balderdash! When this artificial sea of liquidity ends, we’re going to pay a terrible price. When the next economic problem occurs, it will be much worse because the debt is so much higher.”

Of course Rogers is far from alone.  A recent article by Paul B. Farrell expressed similar sentiments…

America’s 95 million investors are at huge risk. Remember the $10 trillion losses in the crash and recession of 2007-2009? The $8 trillion lost after the dot-com technology crash and recession of 2000-2003? This is the third big recession of the century. Yes, America will lose trillions again.

Especially with dead-ahead predictions like Mark Cook’s 4,000-point Dow correction. And Jeremy Grantham’s warning of a 50% crash around election time, with negative stock returns through the first term of the next president, beyond 2020. Starting soon.

Why is America so vulnerable when the next recession hits? Simple: The Fed’s cheap-money giveaway is killing America. When the downturn, correction, crash hits, it will compare to the 2008 crash. The Economist warns: “the world will be in a rotten position to do much about it. Rarely have so many large economies been so ill-equipped to manage a recession,” whatever the trigger.

Things have been relatively quiet in the financial world for so long that many have been sucked into a false sense of security.

But the underlying imbalances were always there, and they have been getting worse over time.

I believe that we are heading into a global financial collapse that will make what happened in 2008 look like a Sunday picnic by the time it is all said and done.

Global debt levels are at all-time highs, big banks all over the planet have been behaving more recklessly than ever, and financial markets are absolutely primed for a huge crash.

Hopefully things will calm down a bit as the rest of this week unfolds, but I wouldn’t count on it.

We have entered uncharted territory, and what comes next is going to shock the world.

Does The IMF Actually Want To Cause A Greek Debt Default?

Question Marks - Public DomainWhen it comes to geopolitics, there are often wheels working within wheels that are working within wheels.  Once in a while we get a peek behind the scenes, but for the most part the machinations of the global elite remain shrouded in mystery most of the time.  And sometimes the global elite appear to be doing things that, on the surface, do not seem to make much sense at all.  What is going on in Europe is a perfect example of this.  If everyone was negotiating honestly, I believe that a Greek debt deal would have been reached by now.  As this endless crisis has stretched on month after month, it has become increasingly apparent that more is going on here than meets the eye.  In particular, the IMF has been standing in the way of a deal time after time.  So what do IMF officials want?  Are they looking for the “unconditional surrender” of this new Greek government in order to send a message to other governments that would potentially defy them?  Or could it be possible that the IMF actually wants a Greek debt default for some other insidious reason?

When the latest Greek proposal was embraced with enthusiasm by EU officials, many hoped that this meant that the crisis would soon be resolved.  But it turns out that there is still one very important player that is not happy, and that is the IMF.  The following comes from the Wall Street Journal

But the IMF is still unhappy with key aspects of Greece’s new economic proposals and German officials were irritated by the speed with which the commission welcomed them, warning that much work needs to be done.

Greece’s plan calls for reducing the deficits in its pension system and government budget by relying heavily on raising taxes and social-security contributions, whereas the IMF wanted bigger spending cuts.

The Washington-based IMF has said Greece’s economy is already too heavily taxed and that too many additional tax increases would hurt economic growth, making it harder to pay down Greece’s debt.

It is still short of everything that should be expected,” IMF Managing Director Christine Lagarde said Monday, suggesting Greece will have to modify its proposals significantly to win the IMF’s backing.

So what would make the IMF “happy”?

Would anything short of total capitulation by the Greek government suffice?

Meanwhile, members of Syriza are expressing a high level of frustration with the compromises that Greek Prime Minister Alexis Tsipras has already agreed to.  At this point, there is even doubt whether the current Greek proposal could get through the Greek parliament.  The following comes from Bloomberg

Greek Prime Minister Alexis Tsipras is facing the first signs of dissent within his own party over his latest plan to end a five-month standoff with creditors.

Some of Syriza’s more radical and populist lawmakers expressed opposition Tuesday to the proposal as the deal’s backers called on members to see the bigger picture.

Personally, I cannot support such an agreement that is contrary to our election promises,” Dimitris Kodelas, a Syriza lawmaker associated with former Maoists, said in an interview. “I do not care about the consequences of my decision.

Despite all of the optimism that we have seen this week, the odds of a Greek debt deal getting pushed through are looking slimmer by the day.

And even if a deal somehow miraculously happens, all it would really mean is that the can has been kicked down the road for a few more months

Assuming Tsipras can force the deal through the Greek parliament, and that key creditors such as the IMF and Germany accept it too, it will do little more than buy time for negotiations on yet another rescue.

The final tranche of cash from the existing bailout should be enough to meet repayments due to the IMF and European Central Bank through the end of August. But the Greek government will then have to find more than two billion euros for both institutions in September and October.

If this week concludes with agreement between Greece and its creditors, it won’t be long before the next chapter in this drama,” said Angus Campbell, senior analyst at FxPro.

And no matter what happens by the end of this month, it is a virtual certainty that the economic depression in Greece will just continue to deepen.

At this point, normal economic activity in the nation has pretty much ground to a halt.  Just consider the following excerpt from a recent Zero Hedge article

“Business-to-business payments have almost been paused,” one Athens businessman says. “They are just rolling over postdated cheques.”

For Greek banks, mortgage loans left unserviced by strategic defaulters have become a particular headache, especially since the Syriza-led government says it is committed to protecting low-income homeowners from foreclosures on their properties

“There’s a real issue of moral hazard . . . Around 70 percent of restructured mortgage loans aren’t being serviced because people think foreclosures will only be applied to big villa owners,” one banker said.

For a long time, I have been warning that the next major economic crisis would begin in Europe before spreading across the entire globe.

Greece has a relatively small economy, but Italy, Spain and France are going down the exact same road that Greece has gone.

And what IMF officials are doing right now is that they are setting a precedent for future debt negotiations that they know are almost certainly coming with other countries in the future.

Sadly, most of my readers (being Americans) don’t really grasp the importance of what is going on over in Europe.  We are watching a horrific train wreck unfold in slow-motion, and what is going to happen over the next few weeks is going to have massive implications for the entire planet.

The Next Great European Financial Crisis Has Begun

European Financial CrisisThe Greek financial system is in the process of totally imploding, and the rest of Europe will soon follow.  Neither the Greeks nor the Germans are willing to give in, and that means that there is very little chance that a debt deal is going to happen by the end of June.  So that means that we will likely see a major Greek debt default and potentially even a Greek exit from the eurozone.  At this point, credit default swaps on Greek debt have risen 456 percent in price since the beginning of this year, and the market has priced in a 75 percent chance that a Greek debt default will happen.  Over the past month, the yield on two year Greek bonds has skyrocketed from 20 percent to more than 30 percent, and the Greek stock market has fallen by a total of 13 percent during the last three trading days alone.  This is what a financial collapse looks like, and if Greece does leave the euro, we are going to see this kind of carnage happen all over Europe.

Officials over in Europe are now openly speaking of the need to prepare for a “state of emergency” now that negotiations have totally collapsed.  At one time, it would have been unthinkable for Greece to leave the euro, but now it appears  that this is precisely what will happen unless a miracle happens…

Greece is heading for a state of emergency and an exit from the euro following the collapse of talks to agree a bailout deal, senior EU officials warned last night.

Europe must be prepared to step in otherwise Greek society would face an unprecedented crisis with power blackouts, medicine shortages and no money to pay for police, they said.

In the past, the Greeks have always buckled under pressure.  But this new Greek government was elected with a mandate to end austerity, and so far they have shown a remarkable amount of resolve.  In order for a debt deal to happen, one side is going to have to blink, and at this point it does not look like it will be the Greeks

The world’s financial markets are facing up to the possibility that Greece could soon become the first country to crash out of Europe’s single currency. Talks between Athens and its eurozone creditors have collapsed in acrimony just days before a final deadline for Greece to unlock the €7.2bn (£5.2bn) in bailout funds it needs to avoid a catastrophic debt default.

The Greek Prime Minister, Alexis Tsipras, accused the creditor powers of hidden “political motives” in their demands that Greece make further cuts to public pension payments in return for the financial aid. “We are shouldering the dignity of our people, as well as the hopes of the people of Europe,” Mr Tsipras said in a defiant statement. “We cannot ignore this responsibility. This is not a matter of ideological stubbornness. This is about democracy.”

As we approach the point of no return, both sides are preparing for the endgame.

In Greece, members of parliament have been studying what happened in Iceland a few years ago.  Many of them believe that a Greek debt default combined with a nationalization of Greek banks and a Greek exit from the euro could set the nation back on the path to prosperity fairly rapidly.  The following comes from the Telegraph

The radical wing of Greece’s Syriza party is to table plans over coming days for an Icelandic-style default and a nationalisation of the Greek banking system, deeming it pointless to continue talks with Europe’s creditor powers.

Syriza sources say measures being drafted include capital controls and the establishment of a sovereign central bank able to stand behind a new financial system. While some form of dual currency might be possible in theory, such a structure would be incompatible with euro membership and would imply a rapid return to the drachma.

The confidential plans were circulating over the weekend and have the backing of 30 MPs from the Aristeri Platforma or ‘Left Platform’, as well as other hard-line groupings in Syriza’s spectrum. It is understood that the nationalist ANEL party in the ruling coalition is also willing to force a rupture with creditors, if need be.

Meanwhile, in a desperate attempt to get the Greeks to give in at the last moment, Greek’s creditors are preparing to pull out all the stops in order to put as much financial pressure on Greece as possible

Germany’s Suddeutsche Zeitung reported that the creditors are drawing an ultimatum to the Greeks, threatening to cut off Greek access to the European payments system and forcing capital controls on the country as soon as this weekend. The plan would lead to the temporary closure of the banks, followed by a rationing of cash withdrawals.

For a long time, most in the financial world assumed that a debt deal would eventually happen.  But now reality is setting in.  As I mentioned at the top of this article, the cost to insure Greek debt has risen by an astounding 456 percent since the beginning of this year

Given these dramatic stakes, the risk of a Greek default has gone way up. One way to measure that risk is by looking at the skyrocketing price of insurance policies that would pay out if Greek bonds go bust. The cost to insure Greek debt for one year against the risk of default has skyrocketed 456% since the start of the 2015, according to FactSet data.

These insurance-like contracts, known as credit default swaps, imply there is a 75% to 80% probability of Greece defaulting on its debt, according to Jigar Patel, a credit strategist at Barclays.

The probability of a Greek default soars to a whopping 95% for five-year CDS, Patel said.

“Default is looking more and more likely,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to clients on Tuesday.

And in recent days, we have also seen Greek stocks and Greek bonds totally crash.  The following comes from CNN

The Greek stock market has plummeted 13% over the past three trading days, including a 3% drop on Tuesday alone.

In the bond market, the yield on Greek two-year debt has skyrocketed to 30.2%. A month ago, the yield was only 20%. Yields rise as bond prices fall.

Of course if there is a Greek debt default and Greece does leave the euro, it won’t just be Greece that pays the price.

As I have written about previously, there are tens of trillions of dollars in derivatives that are directly tied to currency exchange rates and 505 trillion dollars in derivatives that are directly tied to interest rates.  A “Grexit” would cause the euro to drop like a rock and interest rates all over the continent would start to go crazy.  The financial chaos that a “Grexit” would cause should not be underestimated.

And there are signs that some of Europe’s biggest banks are already on the verge of collapse.  For example, just consider what has been going on at the biggest bank in Germany.  Both of the co-CEOs at Deutsche Bank recently resigned, and it is increasingly looking as if it could soon become Europe’s version of Lehman Brothers.  The following summary of the recent troubles at Deutsche Bank comes from an article that was posted on NotQuant

Here’s a re-cap of what’s happened at Deutsche Bank over the past 15 months:

  • In April of 2014,  Deutsche Bank was forced to raise an additional 1.5 Billion of Tier 1 capital to support it’s capital structure.  Why?
  • 1 month later in May of 2014, the scramble for liquidity continued as DB announced the selling of 8 billion euros worth of stock – at up to a 30% discount.   Why again?  It was a move which raised eyebrows across the financial media.  The calm outward image of Deutsche Bank did not seem to reflect their rushed efforts to raise liquidity.  Something was decidedly rotten behind the curtain.
  • Fast forwarding to March of this year:   Deutsche Bank fails the banking industry’s “stress tests” and is given a stern warning to shore up it’s capital structure.
  • In April,  Deutsche Bank confirms it’s agreement to a joint settlement with the US and UK regarding the manipulation of LIBOR.   The bank is saddled with a massive $2.1 billion payment to the DOJ.  (Still, a small fraction of their winnings from the crime). 
  • In May,  one of Deutsche Bank’s CEOs, Anshu Jain is given an enormous amount of new authority by the board of directors.  We guess that this is a “crisis move”.  In times of crisis the power of the executive is often increased.
  • June 5:  Greece misses it’s payment to the IMF.   The risk of default across all of it’s debt is now considered acute.   This has massive implications for Deutsche Bank.
  • June 6/7:  (A Saturday/Sunday, and immediately following Greece’s missed payment to the IMF) Deutsche Bank’s two CEO’s announce their surprise departure from the company.  (Just one month after Jain is given his new expanded powers).   Anshu Jain will step down first at the end of June.  Jürgen Fitschen will step down next May.
  • June 9: S&P lowers the rating of Deutsche Bank to BBB+  Just three notches above “junk”.  (Incidentally,  BBB+ is even lower than Lehman’s downgrade – which preceded it’s collapse by just 3 months)

And that’s where we are now.  How bad is it?  We don’t know because we won’t be permitted to know.  But these are not the moves of a healthy company.

For a very long time, I have been warning that a major financial crisis was coming to Europe, and for a very long time the authorities in Europe have been able to successfully kick the can down the road.

But now it looks like we have reached the end of the road, and a day of reckoning is finally here.

Nobody is quite sure what is going to happen next, but almost everyone agrees that it isn’t going to be pretty.

So you better buckle up, because it looks like we are all in for a wild ride as we enter the second half of this year.