If You Listen Carefully, The Bankers Are Actually Telling Us What Is Going To Happen Next

World From Space - Public DomainAre we on the verge of a major worldwide economic downturn?  Well, if recent warnings from prominent bankers all over the world are to be believed, that may be precisely what we are facing in the months ahead.  As you will read about below, the big banks are warning that the price of oil could soon drop as low as 20 dollars a barrel, that a Greek exit from the eurozone could push the EUR/USD down to 0.90, and that the global economy could shrink by more than 2 trillion dollars in 2015.  Most of the time, very few people ever actually read the things that the big banks write for their clients.  But in recent months, a lot of these bankers are issuing such ominous warnings that you would think that they have started to write for The Economic Collapse Blog.  Of course we have seen this happen before.  Just before the financial crisis of 2008, a lot of people at the big banks started to get spooked, and now we are beginning to see an atmosphere of fear spread on Wall Street once again.  Nobody is quite sure what is going to happen next, but an increasing number of experts are starting to agree that it won’t be good.

Let’s start with oil.  Over the past couple of weeks, we have seen a nice rally for the price of oil.  It has bounced back into the low 50s, which is still a catastrophically low level, but it has many hoping for a rebound to a range that will be healthy for the global economy.

Unfortunately, many of the experts at the big banks are now anticipating that the exact opposite will happen instead.  For example, Citibank says that we could see the price of oil go as low as 20 dollars this year…

The recent rally in crude prices looks more like a head-fake than a sustainable turning point — The drop in US rig count, continuing cuts in upstream capex, the reading of technical charts, and investor short position-covering sustained the end-January 8.1% jump in Brent and 5.8% jump in WTI into the first week of February.

Short-term market factors are more bearish, pointing to more price pressure for the next couple of months and beyond — Not only is the market oversupplied, but the consequent inventory build looks likely to continue toward storage tank tops. As on-land storage fills and covers the carry of the monthly spreads at ~$0.75/bbl, the forward curve has to steepen to accommodate a monthly carry closer to $1.20, putting downward pressure on prompt prices. As floating storage reaches its limits, there should be downward price pressure to shut in production.

The oil market should bottom sometime between the end of Q1 and beginning of Q2 at a significantly lower price level in the $40 range — after which markets should start to balance, first with an end to inventory builds and later on with a period of sustained inventory draws. It’s impossible to call a bottom point, which could, as a result of oversupply and the economics of storage, fall well below $40 a barrel for WTI, perhaps as low as the $20 range for a while.

Even though rigs are shutting down at a pace that we have not seen since the last recession, overall global supply still significantly exceeds overall global demand.  Barclays analyst Michael Cohen recently told CNBC that at this point the total amount of excess supply is still in the neighborhood of a million barrels per day…

“What we saw in the last couple weeks is rig count falling pretty precipitously by about 80 or 90 rigs per week, but we think there are more important things to be focused on and that rig count doesn’t tell the whole story.”

He expects to see some weakness going into the shoulder season for demand. In addition, there is an excess supply of about a million barrels of oil a day, he said.

And the truth is that many firms simply cannot afford to shut down their rigs.  Many are leveraged to the hilt and are really struggling just to service their debt payments.  They have to keep pumping so that they can have revenue to meet their financial obligations.  The following comes directly from the Bank for International Settlements

“Against this background of high debt, a fall in the price of oil weakens the balance sheets of producers and tightens credit conditions, potentially exacerbating the price drop as a result of sales of oil assets, for example, more production is sold forward,” BIS said.

“Second, in flow terms, a lower price of oil reduces cash flows and increases the risk of liquidity shortfalls in which firms are unable to meet interest payments. Debt service requirements may induce continued physical production of oil to maintain cash flows, delaying the reduction in supply in the market.”

In the end, a lot of these energy companies are going to go belly up if the price of oil does not rise significantly this year.  And any financial institutions that are exposed to the debt of these companies or to energy derivatives will likely be in a great deal of distress as well.

Meanwhile, the overall global economy continues to slow down.

On Monday, we learned that the Baltic Dry Index has dropped to the lowest level ever.  Not even during the darkest depths of the last recession did it drop this low.

And there are some at the big banks that are warning that this might just be the beginning.  For instance, David Kostin of Goldman Sachs is projecting that sales growth for S&P 500 companies will be zero percent for all of 2015…

“Consensus now forecasts 0% S&P 500 sales growth in 2015 following a 5% cut in revenue forecasts since October. Low oil prices along with FX headwinds and pension charges have weighed on 4Q EPS results and expectations for 2015.”

Others are even more pessimistic than that.  According to Bank of America, the global economy will actually shrink by 2.3 trillion dollars in 2015.

One thing that could greatly accelerate our economic problems is the crisis in Greece.  If there is no compromise and a new Greek debt deal is not reached, there is a very real possibility that Greece could leave the eurozone.

If Greece does leave the eurozone, the continued existence of the monetary union will be thrown into doubt and the euro will utterly collapse.

Of course I am not the only one saying these things.  Analysts at Morgan Stanley are even projecting that the EUR/USD could plummet to 0.90 if there is a “Grexit”…

The Greek Prime Minister has reaffirmed his government’s rejection of the country’s international bailout programme two days before an emergency meeting with the euro area’s finance ministers on Wednesday. His declaration suggested increasing minimum wages, restoring the income tax-free threshold and halting infrastructure privatisations. Should Greece stay firm on its current anti-bailout course and with the ECB not accepting Greek T-bills as collateral, the position of ex-Fed Chairman Greenspan will gain increasing credibility. He forecast the eurozone to break as private investors will withdraw from providing short-term funding to Greece. Greece leaving the currency union would convert the union into a club of fixed exchange rates, a type of ERM III, leading to further fragmentation. Greek Fin Min Varoufakis said the euro will collapse if Greece exits, calling Italian debt unsustainable. Markets may gain the impression that Greece may not opt for a compromise, instead opting for an all or nothing approach when negotiating on Wednesday. It seems the risk premium of Greece leaving EMU is rising. Our scenario analysis suggests a Greek exit taking EURUSD down to 0.90.

If that happens, we could see a massive implosion of the 26 trillion dollars in derivatives that are directly tied to the value of the euro.

We are moving into a time of great peril for global financial markets, and there are a whole host of signs that we are slowly heading into another major global economic crisis.

So don’t be fooled by all of the happy talk in the mainstream media.  They did not see the last crisis coming either.

 

It Is About To Get Ugly: Oil Is Crashing And So Is Greece

Hindenburg Disaster - Public DomainThe price of oil collapsed by more than 8 percent on Wednesday, and a decision by the European Central Bank has Greece at the precipice of a complete and total financial meltdown.  What a difference 24 hours can make.  On Tuesday, things really seemed like they were actually starting to get better.  The price of oil had rallied by more than 20 percent since last Thursday, things in Europe seemed like they were settling down, and there appeared to be a good deal of optimism about how global financial markets would perform this month.  But now fear is back in a big way.  Of course nobody should get too caught up in how the markets behave on any single day.  The key is to take a longer term point of view.  And the fact that the markets have been on such a roller coaster ride over the past few months is a really, really bad sign.  When things are calm, markets tend to steadily go up.  But when the waters start really getting choppy, that is usually a sign that a big move down in on the horizon.  So the huge ups and the huge downs that we have witnessed in recent days are likely an indicator that rough seas are ahead.

A stunning decision that the European Central Bank has just made has set the stage for a major showdown in Europe.  The ECB has decided that it will no longer accept Greek government bonds as collateral from Greek banks.  This gives the European Union a tremendous amount of leverage in negotiations with the new Greek government.  But in the short-term, this could mean some significant pain for the Greek financial system.  The following is how a CNBC article described what just happened…

“The European Central Bank is telling the Greek banking system that it will no longer accept Greek bonds as collateral for any repurchase agreement the Greek banks want to conduct,” said Peter Boockvar, chief market analyst at The Lindsey Group, said in a note.

“This is because the ECB only accepts investment grade paper and up until today gave Greece a waiver to this clause. That waiver has now been taken away and Greek banks now have to go to the Greek Central Bank and tap their Emergency Liquidity Assistance facility for funding,” he said.

And it certainly didn’t take long for global financial markets to respond to this news

The Greek stock market closed hours ago, but the exchange-traded fund that tracks Greek stocks, GREK, crashed during the final minutes of trading in the US markets.

The euro is also getting walloped, falling 1.3% against the US dollar.

The EUR/USD, which had recovered to almost 1.15, fell to nearly 1.13 on news of the action taken by the ECB.

But this is just the beginning.

In coming months, I fully expect the euro to head toward parity with the U.S. dollar.

And if the new Greek government will not submit to the demands of the EU, and Greece ultimately ends up leaving the common currency, it could potentially mean the end of the eurozone in the configuration that we see it today.

Meanwhile, the oil crash has taken a dangerous new turn.

Over the past week, we have seen the price of oil go from $43.58 to $54.24 to less than 48 dollars before rebounding just a bit at the end of the day on Wednesday.

This kind of erratic behavior is the exact opposite of what a healthy market would look like.

What we really need is a slow, steady climb which would take the price of oil back to at least the $80 level.  In the current range in which it has been fluctuating, the price of oil is going to be absolutely catastrophic for the global economy, and the longer it stays in this current range the more damage that it is going to do.

But of course the problems that we are facing are not just limited to the oil price crash and the crisis in Greece.  The truth is that there are birth pangs of the next great financial collapse all over the place.  We just have to be honest with ourselves and realize what all of these signs are telling us.

And it isn’t just in the western world where people are sounding the alarm.  All over the world, highly educated professionals are warning that a great storm is on the horizon.  The other day, I had an economist in Germany write to me with his concerns.  And in China, the head of the Dagong Rating Agency is declaring that we are going to have to face “a new world financial crisis in the next few years”

The world economy may slip into a new global financial crisis in the next few years, China’s Dagong Rating Agency Head Guan Jianzhong said in an interview with TASS news agency on Wednesday.

“I believe we’ll have to face a new world financial crisis in the next few years. It is difficult to give the exact time but all the signs are present, such as the growing volume of debts and the unsteady development of the economies of the US, the EU, China and some other developing countries,” he said, adding the situation is even worse than ahead of 2008.

For a long time, I have been pointing at the year 2015.  But this year is not going to be the end of anything.  Rather, it is just going to be the beginning of the end.

During the past few years, we have experienced a temporary bubble of false stability fueled by reckless money printing and an unprecedented accumulation of debt.  But instead of fixing anything, those measures have just made the eventual crash even worse.

Now a day of reckoning is fast approaching.

Life as we know it is about to change dramatically, and most people are completely and totally unprepared for it.

There Is Hope In Understanding That A Great Economic Collapse Is Coming

Hope Despair - Public DomainIf you were about to take a final exam, would you have more hope or more fear if you didn’t understand any of the questions and you had not prepared for the test at all?  I think that virtually all of us have had dreams where we show up for an exam that we have not studied for.  Those dreams can be pretty terrifying.  And of course if you were ever in such a situation in real life, you probably did very, very poorly on that test.  The reason I have brought up this hypothetical is to make a point.  My point is that there is hope in understanding what is ahead of us, and there is hope in getting prepared.  Since I started The Economic Collapse Blog back in 2009, there have always been a few people that have accused me of spreading fear.  That frustrates me, because what I am actually doing is the exact opposite of that.  When a hurricane is approaching, is it “spreading fear” to tell people to board up their windows?  Of course not.  In fact, you just might save someone’s life.  Or if you were walking down the street one day and you saw someone that wasn’t looking and was about to step out into the road in front of a bus, what would the rational thing to do be?  Anyone that has any sense of compassion would yell out and warn that other person to stay back.  Yes, that other individual may be startled for a moment, but in the end you will be thanked warmly for saving that person from major injury or worse.  Well, as a nation we are about to be slammed by the hardest times that any of us have ever experienced.  If we care about those around us, we should be sounding the alarm.

Since 2009, I have published 1,211 articles on the coming economic collapse on my website.  Some people assume that I must be filled with worry, bitterness and fear because I am constantly dealing with such deeply disturbing issues.

But that is not the case at all.

There is nothing that I lose sleep over, and I don’t spend my time worrying about anything.  Yes, my analysis of the global financial system has completely convinced me that an absolutely horrific economic collapse is in our future.  But understanding what is happening helps me to calmly make plans for the years ahead, and working hard to prepare for what is coming gives me hope that my family and I will be able to weather the storm.

I do not believe in living my life in a state of fear, and I do not want anything that I write to ever cause fear in my readers.  The ancient Hebrew greeting “Shalom” is roughly translated as “peace” or “completeness”, and that is what we are constantly pursuing in my household.  My wife and I know that incredibly challenging times are coming, but we also know who we are, what our purpose is, and where we are headed.  We also believe that the greatest chapters of our lives are ahead even in the midst of all the chaos that is coming.

When times are the darkest, that is when light is needed the most.  Just think about it.  When you look back over history, what heroes do you admire the most?  If you truly think about it, almost all of those heroes arose during times of great adversity and conflict.

The years ahead can be a time of great adventure for you, or they can seem like hell on Earth.  It all depends on how you respond to your circumstances.

Do you want to know who is going to respond to the years ahead with fear, panic and depression?

The millions of people that have absolutely no idea what is coming and have made absolutely no preparations are going to be absolutely blindsided by the coming economic collapse.  Just like the 1930s, we are going to see people jumping out of windows and jumping in front of trains.  Others will sink into a state of despair so deep that nobody will ever be able to shake them out of it.

It doesn’t have to be that way.

Over the past five years I have spent thousands of hours studying the coming economic collapse.  In my articles you can find tens of thousands of facts and statistics that prove that the U.S. economy is hurtling toward oblivion.

It is not always the most pleasant thing to write about, but it is the truth.  And that is what matters.  If you believe that I am wrong, prove it to me.  I work very hard to put out the most accurate information that I possibly can.  So if you can prove that I am wrong, I will change my mind.

But of course that is not going to happen.  As I have stated previously, anyone with half a brain should be able to see that we are living in the greatest debt bubble in human history.  Anyone with half a brain should be able to see that the “too big to fail” banks are being extraordinarily reckless (derivatives, etc.).  Anyone with half a brain should be able to see that our formerly great manufacturing cities are being transformed into crime-infested hellholes.  Anyone with half a brain should be able to see that the middle class is dying.  Anyone with half a brain should be able to see that the exact same patterns that led up to the great financial crisis of 2008 are happening again.  Anyone with half a brain should be able to see that we simply cannot consume far more wealth than we produce as a nation indefinitely.  Anyone with half a brain should be able to see that the incredibly foolish decisions that our politicians have been making for decades have placed us on a road to utter disaster.

So it doesn’t take anyone special to do what I am doing.  I am just a “watchman on the wall” sounding the alarm the best that I can.  And there are lots of others that are doing the same thing.  We are deeply concerned about where this nation is heading, and we have been pleading with our leaders to do something about it for a long time but they have not listened to us.

Since our leaders just continue doing “business as usual”, there is not going to be a solution to our problems on the national level.

So that is why I am encouraging people to get prepared for the hard times that are coming on a family level and a community level.

Unfortunately, it seems like some people always have an excuse for not getting prepared.  In fact, a few have even gone so far as to accuse me of being “anti-faith” for suggesting that people actually get off their couches and do something to help their families deal with the nightmare on the horizon.  They seem to have the attitude that we should all just sit back and wait for God to do everything for us.

So I am not quite sure why those people get up in the morning and go to work, since they should just “trust God” to deposit paychecks into their banks.  And I am not quite sure why they ever fill up the tanks of their vehicles with gasoline, because they should be able to “trust God” to put more gas there when they need it.

I covered all of this in much more detail in my previous article entitled “Is It ‘Anti-Faith’ To Prepare For The Coming Economic Collapse?

For now, let me just state that what those people are suggesting is the exact opposite of what the Bible teaches.  Trusting God is not about sitting back and doing nothing.  In the Scriptures, we are told that faith is about stepping out and taking action on what God has revealed to us.  That includes working hard, being wise and providing for our families.  For example, just check out Proverbs 6:6-11…

Go to the ant, you sluggard! Consider her ways and be wise. Which, having no guide, overseer, or ruler, provides her bread in the summer, and gathers her food in the harvest.

How long will you sleep, O sluggard? When will you arise out of your sleep? Yet a little sleep, a little slumber, a little folding of the hands to sleep— so will your poverty come upon you like a stalker, and your need as an armed man.

In the end, each one of us needs to make the decisions that we feel are best for our own families.

So that is why it is so incredibly important not to let someone else do your thinking for you.

In America today, the average person watches 153 hours of television a month.  In addition to that, we also spend countless hours watching movies, playing video games, listening to music, reading books and surfing the Internet.

What most Americans don’t realize is that there are just six giant corporations that control almost all of that content, and that makes them immensely powerful.

These giant media corporations are constantly manipulating our attitudes, opinions and beliefs.  And at this point most Americans seem quite content to remain “plugged into the matrix” and to allow corrupt corporate executives somewhere to do their thinking for them.

I urge you to break free from that system.

Do your own research and do your own thinking.

Don’t take what I say or what anyone else says as truth without critically examining it yourself.  This can be difficult at first, because in this nation our young people are no longer trained to think critically.  Instead, we are trained to just blindly accept whatever information the system feeds us.

George Orwell once said that “during times of universal deceit, telling the truth becomes a revolutionary act“.

That perfectly describes the era that we are currently living in.

The truth does not bring fear and despair.

Rather, the truth brings hope and it sets people free.

Share the truth with as many people as you can, because we live in a world that desperately needs it.

“I Fear For What’s Coming” – 68 Percent Of Americans Believe The Country Is On The Wrong Track

Family - Photo by Eric WardAre you deeply concerned about the future of America?  Is something in your gut telling you that our system is fundamentally broken and that the mainstream media is not telling you the truth about what is happening?  If so, you are definitely not alone.  Right now, there are millions upon millions of Americans that are absolutely horrified as they watch this nation deteriorate.  In fact, according to an analysis of recent polling data conducted by Real Clear Politics, approximately 68 percent of all Americans believe that the country is on the wrong track and only 23.5 percent of all Americans believe that the country is on the right track.  And of course our problems did not appear just recently.  In fact, many of them are the result of decades of very foolish decisions and they are not going to be fixed easily.  Unfortunately, there is very little consensus among Americans about how to fix any of our problems.  There is more anger, frustration, hatred and division in the United States today than there has been in decades, and there is very little hope that the great storms that are looming on the horizon will be averted.  Those that are wise are preparing for what is coming.  Those that are not are going to be absolutely blindsided by what is rapidly approaching.

Once upon a time, America was the wealthiest nation on the entire globe by a huge margin and it had the largest and most thriving middle class the world had ever seen.  But now America is drowning in the biggest ocean of red ink in the history of the planet and the middle class is being systematically destroyed.

If you read my articles on a regular basis, you already know all of this.  But now there are certain factors that are going to cause the problems of the middle class to greatly accelerate.

For instance, just consider what Obamacare is going to do to millions of American families.

The Foundry recently posted a story that detailed the extreme hardship that Obamacare is going to impose on one middle class family in Sonora, California.  This particular family is very healthy and does not have a history of health problems.  Up until now, they have had a health insurance policy with Anthem Blue Cross Insurance that they have been very happy with.

Back in 2011, this family was paying $389 a month for health insurance.

In 2012, due to changes in California law that figure went up to $499 a month.

Now, this family has just received a letter informing them that their current plan is being canceled and that if they want a new plan it is going to cost them $1,252 a month.

Needless to say, that news did not go over very well with that family.

Just think about it.

Can you come up with an extra $753 a month for health insurance?

Most American families certainly cannot.

Well, Kate Joy and her husband sat down and started trying to figure out how they could squeeze the new health insurance policy into their budget.  It turned out that they would have to cut out a lot of things.  The following is a list of the proposed cuts that they have come up with so far

  • Stop paying the extra payment on my mortgage: $100/month
  • Stop eating out: $150/month
  • Don’t go to the movies: $36/month
  • Switch to getting a haircut every other month: $15/month
  • Stop getting manicures: $40/month
  • Stop monthly charitable donations to Wounded Warrior and Habitat for Humanity: $70/month
  • Stop saving for an annual anniversary getaway: $60/month
  • No Christmas gifts to extended family: $40/month
  • Quit buying beef at the grocery store: $100/month
  • Teeth cleaning only once per year: $30/month
  • Cancel all magazine/newspaper subscriptions: at least $30/month
  • Cut DISH service to cheaper plan: $50/month
  • Cancel land line phone service: $70/month

If they make all of those cuts, it will save the family $791 a month.

Understandably, that family is having a very hard time feeling optimistic about the future right now.  In fact, at the end of the article Kate Joy is quoted as saying the following…

“I fear for what’s coming.”

And of course her family is not the only one that is being absolutely hammered by Obamacare.

In a previous article, I discussed the results of one study which showed that health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.

 

And a different study found that health insurance premiums for healthy 30-year-old men are going to go up by an average of 260 percent under Obamacare.

All of this is going to suck a tremendous amount of “discretionary income” out of the economy.

In addition, millions upon millions of Americans are going to make the choice to go without health insurance altogether.  And considering the level of care that we get in many of these hospitals that is understandable.  For example, the body of 57-year-old Lynne Spalding was recently discovered in a stairwell at San Francisco General Hospital 17 days after she had disappeared from her hospital room.

Those that provide our “health care” don’t care about us as much as they did in the old days.  Instead, the health care industry just wants to get as much money out of us as rapidly as they can and then move on to the next victim.

And of course health care is not the only thing that middle class families have to be concerned about these days.  Our national employment crisis is getting even worse, incomes are shrinking, and Obama is pushing Congress to approve a secret treaty that will ship millions more of our jobs out of the country.

And there are certainly a lot of troubling economic signs as we head toward 2014.  Just consider the following examples…

-Pending home sales in the United States have fallen for five months in a row.

-Machinery giant Caterpillar is reporting negative retail sales growth in every region on the globe.  Historically, the sales growth of Caterpillar has been one of the most important indications of where the economy is headed next.

-Major banks are warning the Federal Reserve that they may have to start charging depositors a fee.  In other words, you may soon have to pay for the “privilege” of putting your money in the bank.

Of course this is just the beginning.  Things are going to get much, much worse in the years ahead as our economy continues to deteriorate.

And as things continue to fall apart, people are going to become a lot more desperate.  To get an idea of what is coming to America, just look at what is happening in Greece.  Some poor people in Greece have become so desperate that they are literally infecting themselves with HIV just so that they can get monthly government payments…

Suicides rose by 17% between 2007 and 2009 and to 25% in 2010, according to unofficial 2010 data (398). The Minister of Health reported a further 40% rise in the first half of 2011 compared with the same period in 2010. Suicide attempts have also increased, particularly among people reporting economic distress (610). Homicide and theft rates have doubled. HIV rates and heroin use have risen significantly, with about half of new HIV infections being self-inflicted to enable people to receive benefits of €700 per month and faster admission on to drug-substitution programmes. Prostitution has also risen, probably as a response to economic hardship. Health care access has declined as hospital budgets have been cut by about 40% (398) and it is estimated that 26 000 public health workers (9100 doctors) will lose their jobs (611). Further cuts are expected as a result of recent negotiations with the IMF and European Central Bank.

If you doubt this, you can find the original report with these findings right here.

A lot of people accuse me of being a “doom and gloomer” for writing articles like this.

A lot of people accuse me of trying to spread worry and fear.

But I do not see it that way at all.

I was recently asked what the number one issue is that has me so worried that it keeps me up at night.

Do you know what my answer was?

“Nothing.”

Nothing that I write about keeps me up at night.

I am not worried about what is coming and I do not believe in giving in to fear.

Rather, I believe that there is hope in understanding what is happening, and I believe that there is hope in getting prepared.

Do you want to know who is going to be totally giving in to worry, fear and despair in the years ahead?

The people that are not getting prepared right now.

Do you want to know who is going to be jumping off the top of tall buildings in the years ahead?

The people that are laughing at articles like this one.

For most adults in America, they primarily define their lives by their jobs, their material possessions and by all of the toys that they have accumulated.  When those things get taken away, we are going to see a national hissy fit that is absolutely unprecedented.

The Republicans are not going to save us from the storm that is coming and neither are the Democrats.

It is coming.

That is why I am urging people to get prepared on an individual basis, a family basis and a community basis.

If you prepare yourself and your family now, you will have a much better chance of surviving the coming storm.  And you will be in much better position to help those that will need your assistance.

If you think back throughout history, most of those that we consider to be the greatest “heroes” emerged during times of great crisis.

Well, another time of great crisis is coming, and this will be a tremendous opportunity for a new generation of heroes to arise.

So do not cower in fear because of what is coming.  Rather, use this time to get prepared for the greatest challenges and the greatest opportunities that you have ever known.

When things are the darkest, that is when the light is needed the most.

Choose to be a light.  America will soon need you greatly.

Mass Carnage: Stocks, Bonds, Gold, Silver, Europe And Japan All Get Pummeled

Car AccidentCan you smell that?  It is the smell of panic in the air.  As I have noted before, when financial markets catch up to economic reality they tend to do so very rapidly.  Normally we don’t see virtually all asset classes get slammed at the same time, but the bucket of cold water that Federal Reserve Chairman Ben Bernanke threw on global financial markets on Wednesday has set off an epic temper tantrum.  On Thursday, U.S. stocks, European stocks, Asian stocks, gold, silver and government bonds all over the planet all got absolutely shredded.  This is not normal market activity.  Unfortunately, there is nothing “normal” about our financial markets anymore.  Over the past several years they have been grossly twisted and distorted by the Federal Reserve and by the other major central banks around the globe.  Did the central bankers really believe that there wouldn’t be a great price to pay for messing with the markets?  The behavior that we have been watching this week is the kind of behavior that one would expect at the beginning of a financial panic.  Dick Bove, the vice president of equity research at Rafferty Capital Markets, told CNBC that what we are witnessing right now “is not normal. It is not normal for all markets to move in the same direction at the same point in time due to the same development.”  The overriding emotion in the financial world right now is fear.  And fear can cause investors to do some crazy things.  So will global financial markets continue to drop, or will things stabilize for now?  That is a very good question.  But even if there is a respite for a while, it will only be temporary.  More carnage is coming at some point.

What we have witnessed this week very much has the feeling of a turning point.  The euphoria that drove the Dow well over the 15,000 mark is now gone, and investors all over the planet are going into crisis mode.  The following is a summary of the damage that was done on Thursday…

-U.S. stocks had their worst day of the year by a good margin.  The Dow fell 354 points, and that was the biggest one day drop that we have seen since November 2011.  Overall, the Dow has lost more than 550 points over the past two days.

-Thursday was the eighth trading day in a row that we have seen a triple digit move in the Dow either up or down.  That is the longest such streak since October 2011.

-The yield on 10 year U.S. Treasuries went as high as 2.47% before settling back to 2.42%.  That was a level that we have not seen since August 2011, and the 10 year yield is now a full point above the all-time low of 1.4% that we saw back in July 2012.

– The yield on 30 year U.S. Treasuries hit 3.53 percent on Thursday.  That was the first time it had been that high since September 2011.

-The CBOE Volatility Index jumped 28 percent on Thursday.  It hit 20.49, and this was the first time in 2013 that it has risen above 20.  When volatility rises, that means that the markets are getting stressed.

-European stocks got slammed too.  The Bloomberg Europe 500 index fell more than 3 percent on Thursday.  It was the worst day for European stocks in 20 months.

-In London, the FTSE fell about 3 percent.  In Germany, the DAX fell 3.3 percent.  In France, the CAC-40 fell 3.7 percent.

-Things continue to get even worse in Japan.  The Nikkei has fallen close to 17 percent over the past month.

-Brazilian stocks have fallen by about 15 percent over the past month.

-On Thursday the price of gold got absolutely hammered.  Gold was down nearly $100 an ounce.  As I am writing this, it is trading at $1273.60.

-Silver got slammed even more than gold did.  It fell more than 8 percent.  At the moment it is trading at $19.57.  That is ridiculously low.  I have a feeling that anyone that gets into silver now is going to be extremely happy in the long-term if they are able to handle the wild fluctuations in the short-term.

-Manufacturing activity in China is contracting at a rate that we haven’t seen since the middle of the last recession.

-For the week ending June 15th, initial claims for unemployment benefits in the United States rose by about 18,000 from the previous week to 354,000.  This is a number that investors are going to be watching closely in the months ahead.

Needless to say, Thursday was the type of day that investors don’t see too often.  The following is what one stock trader told CNBC

“It’s freaking, crazy now,” said one stock trader during the 3 p.m. ET hour as the Dow sunk more than 350 points. “Even defensive sectors are getting smoked. The super broad-based sell off between commodities, bonds, equities – I wouldn’t say it’s panic, but we’ve seen aggressive selling on the lows.”

Unfortunately, this may just be the beginning.

In fact, Mark J. Grant has suggested that we may see even more panic in the short-term…

Yesterday was the first day of the reversal. There will be more days to come.

What you are seeing, in the first instance, is leverage coming off the table. With short term interest rates right off of Kelvin’s absolute Zero there was been massive leverage utilized in both the bond and equity markets. While it cannot be quantified I can tell you, dealing with so many institutional investors, that the amount of leverage on the books is giant and is now going to get covered. It will not be pretty and it will be a rush through the exit doors as the fire alarm has been pulled by the Fed and the alarms are ringing. There is also an additional problem here.

The Street is not what it was. There is not enough liquidity in the major Wall Street banks, any longer, to deal with the amount of securities that will be thrown at them and I expect the down cycle to get exacerbated by this very real issue. Bernanke is no longer at the gate and the Barbarians are going to be out in force.

If we see global interest rates start to shift in a major way, that is going to be huge.

Why?

Well, it is because there are literally hundreds of trillions of dollars worth of interest rate derivatives contracts sitting out there…

The interest rate derivatives market is the largest derivatives market in the world. The Bank for International Settlements estimates that the notional amount outstanding in June 2009 were US$437 trillion for OTC interest rate contracts, and US$342 trillion for OTC interest rate swaps. According to the International Swaps and Derivatives Association, 80% of the world’s top 500 companies as of April 2003 used interest rate derivatives to control their cashflows. This compares with 75% for foreign exchange options, 25% for commodity options and 10% for stock options.

If interest rates begin to swing wildly, that could burst the derivatives bubble that I keep talking about.

And when that house of cards starts falling, we are going to see panic that is going to absolutely dwarf anything that we have seen this week.

So keep watching interest rates, and keep listening for any mention of a problem with “derivatives” in the mainstream media.

When the next great financial crash comes, global credit markets are going to freeze up just like they did in 2008.  That will cause economic activity to grind to a standstill and a period of deflation will be upon us.  Yes, the way that the Federal Reserve and the federal government respond to such a crisis will ultimately cause tremendous inflation, but as I have written about before, deflation will come first.

It would be wise to build up your emergency fund while you still can.  When the next great financial crisis fully erupts a lot of people are going to lose their jobs and for a while it will seem like hardly anyone has any extra money.  If you have stashed some cash away, you will be in better shape than most people.

Crushed Car By UCFFool

America: #1 In Fear, Stress, Anger, Divorce, Obesity, Anti-Depressants, Etc.

America - #1 In Fear, Stress, Anger, Divorce, Obesity, Anti-Depressants, Etc. - Photo by IshupragunThe United States is a deeply unhappy place.  We are a nation that is absolutely consumed by fear, stress, anger and depression.  It isn’t just our economy that is falling apart – the very fabric of society is starting to come apart at the seams and it is because of what is happening to us on the inside.  The facts and statistics that I am going to share with you in this article are quite startling.  They are clear evidence that America is a nation that is an advanced state of decline.  We are overwhelmed by fear, stress and anxiety, and much of the time the ways that we choose to deal with those emotions lead to some very self-destructive behaviors.  Americans have experienced a standard of living far beyond the wildest dreams of most societies throughout human history, and yet we are an absolutely miserable people.  Why is this?  Why is America #1 in so many negative categories?  Why are we constantly looking for ways to escape the pain of our own lives?  Why are our families falling apart?  There is vast material wealth all around us.  So why can’t we be happy?

Just look around you.  Are most of the people around you teeming with happiness and joy?  Sadly, the truth is that most Americans are terribly stressed out.  Yeah, many of them may be able to manage to come up with a smile when they greet you, but most of the time they are consumed by internal struggles that are eating away at them like cancer.

So why is this happening?  Is modern life structured in a way that is fundamentally unhealthy?

Below I have posted a short excerpt from a message that one of Charles Hugh Smith’s readers named Kenneth Daigle recently sent to him.  I think that it does a good job of describing the incredible stress that many people contend with on a daily basis…

Think about how our culture is now structured for the average adult: STRESS, everywhere you look–commuting in horrible traffic, as you want to scream in frustration–money stress, to pay rent/house note, tuition, utilities, gas, insurances, vacations, cable bill, rising food costs, and on and on and on–stress from family problems, divorce, delinquency, drugs, crime, infidelity, keeping up with the Jones, etc.

People have too high an expectation of what they should have out of life, and get overly stressed over it all. How does all of this manifest itself? A prescription drug culture (Zoloft, Xanax, etc.) that tricks people into thinking a pill will knock back the stress, when these drugs, in my opinion, only make things worse.

I am hearing more and more that people just want to drop out from it all, as they are reaching a breaking point, and have decided less income and dependency on entitlements will reduce their stress, and is not so humiliating, so giving up working becomes more acceptable, to KEEP ONE’S SANITY.

I know I am correct, from the feedback I hear every day, and the financial media does not see this like I hear it every day. People don’t want to admit that they are too weak to deal with stress, so the financial pundits are not aware of this critical factor because they don’t talk to Joe Sixpack.

Most Americans live lives of “quiet desperation” that are punctuated by moments of great crisis.  We spend our prime years working for others (making them rich) in order to pay off debts that we have foolishly accumulated (thus making the banks even wealthier).  When most Americans reach the end of their lives, they look back and wonder what they actually accomplished.

James Altucher published an incredible article the other day entitled “Why Do People Hate Their Jobs?”  It did a great job of describing what life is like for the modern worker in America.  The following are a few of the reasons that he says people tend to hate their jobs…

-Jobs are modern-day slavery. We are paid just enough to live and not more. You are punished if you ask for more.

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-We are often verbally abused on the job and we take it because we think it’s normal that people would yell at us.

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-The government gets up to 50% of your paycheck and then 10-20% of that goes to kill people on other parts of the planet, including our own children.

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-From 7am to 7pm you are either A) going to work, B) at work, or C) coming back from work. Hence, the times when you can be most creative are garbage-compacted into your cubicle.

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-When you are paranoid at a job, you are probably correct. THEY are, in fact, talking about you and backstabbing you right now.

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-You realize that all the dollars you spent on degrees to get you a job that will make you happy were completely wasted. You were scammed but you can’t let the next generation know how stupid you were so now you become part of perpetuating the scam.

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-Your spouse is tired of hearing about your job after six months. And you couldn’t care less about hers. Ten years later you wake up next to a total stranger. 40 years later you die next to one.

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-When you were a kid you liked to draw, and read, and run, and laugh, and play, and imagine a magical world. You’re never going to do any of that again.

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-Over time everyone is getting fired and being replaced by younger, cheaper, more temporary, more robotic, versions of you. You see this but are afraid to do anything about it.

And of course when we get home from work there is even more stress.  In America today, we are witnessing a breakdown of the family unlike anything we have ever seen before.  The United States leads the world in divorce and in single person households.  We are having an increasingly difficult time relating to one another, and many of us drown our sorrows in our addictions.  We are addicted to pills, to alcohol, to food, to entertainment, to sex, to gambling, to shopping and to anything else that will make us feel good and forget about our problems for a while.

The following is a collection of facts and statistics that prove that America is being absolutely consumed by fear, stress, anger and depression…

-Suicide has now actually surpassed car accidents as the number one cause of “injury death” in the United States.

-More U.S. soldiers killed themselves than were killed in combat last year.

-As I mentioned in another article, Americans will spend more than 280 billion dollars on prescription drugs during 2013.

Nearly one out of every four women in the United States are taking antidepressants.

-The percentage of women taking antidepressants in the U.S. is higher than in any other country in the world.

-In 2010, the average teen in the U.S. was taking 1.2 central nervous system drugs.  Those are the kinds of drugs which treat conditions such as ADHD and depression.

-Children in the United States are three times more likely to be prescribed antidepressants as children in Europe are.

-According to a recent article by David Kupelian, “one-third of the nation’s employees suffer chronic debilitating stress, and more than half of all ‘millennials’ (18 to 33 year olds) experience a level of stress that keeps them awake at night, including large numbers diagnosed with depression or anxiety disorder.”

-Tens of millions of Americans use alcohol and drugs to numb the pain that they are experiencing.  In the United States today, there are about 28 million Americans with a drinking problem and about 22 million Americans use illegal drugs.

-More people have been diagnosed with mental disorders in America than anywhere else on earth.

-There are also tens of millions of Americans that try to deal with anxiety and stress by eating.  Of all the major industrialized nations, America is the most obese.  Mexico is #2.

-Back in 1962, only 13 percent of all Americans were obese.  Today, approximately 36 percent of all Americans are obese.

-Many people try to escape from the pain of reality by getting lost in entertainment.  Incredibly, the United States is tied with the UK for the highest average number of hours spent watching television each week.

-The United States has the highest divorce rate in the world by a good margin.

-The United States has the highest percentage of one person households on the entire planet.

-According to the Pew Research Center, only 51 percent of all American adults are currently married.  Back in 1960, 72 percent of all adults in the United States were married.

-At this point, approximately one out of every three children in America lives in a home without a father.

-For women under the age of 30 living in the United States today, more than half of all babies are being born out of wedlock.

-The United States has the highest child abuse death rate in the developed world.

-In the United States today, it is estimated that one out of every four girls is sexually abused before they become adults.

-The United States has the highest teen pregnancy rate in the world by a very wide margin.

-The United States produces more pornography than any other nation in the world.

-If you can believe it, there are 20 million new STD infections in the United States every single year.

-The U.S. has the highest STD infection rate in the entire industrialized world.

-It is estimated that about one out of every six Americans between the ages of 14 and 49 have genital herpes.

-Sadly, one out of every four teen girls in the U.S. has at least one sexually transmitted disease.

-The United States leads the world in eating disorder deaths.

-Nobody in the world gets more plastic surgery done than Americans do.

-Americans spend more time sitting in traffic than anyone else in the world.

-America has the highest incarceration rate and the largest total prison population in the entire world by a very wide margin.

Fear is one of the primary things that motivates the American people, and that is a very powerful weapon that can be used against us.

As I wrote about yesterday, those that commit acts of terror want to get attention and they want to create fear.

And that is exactly what the Boston Marathon bombing accomplished.  It captured the attention of the nation for days on end, and it absolutely paralyzed the entire Boston area with fear.

When we allow ourselves to be terrorized, we actually encourage more terror attacks.  When we give terrorists what they want, it just encourages more psychos to commit acts of terror.  If you don’t believe me, just check out the following links that I found posted on The Drudge Report on Monday…

*”3 Alabama hospitals evacuated after bomb threats“*

*”Connecticut Courthouse Evacuated After Bomb Threat“*

*”South Hills Village Evacuated After Bomb Threat“*

*”Rock Island neighborhood evacuated after bomb threat“*

*”Bomb threat forces evacuation of Seabreeze office building“*

The appropriate response to a terror attack is to refuse to be terrorized.  Yes, we should also work to expose and punish the individuals, organizations and governments that are behind terror.  But we should also not let terror change how we live our lives, and we should definitely not allow terror to be used as an excuse to rip our liberties and freedoms away.

Sadly, as Ron Paul has detailed, some of our politicians are already calling for “tighter security” in the aftermath of the Boston Marathon bombing…

Sadly, I expect this week’s tragic attacks in Boston to be used to justify new restrictions on liberty. Within 48 hours of the attack in Boston, at least one Congressman was calling for increased use of surveillance cameras to expand the government’s ability to monitor our actions, while another Senator called for a federal law mandating background checks before Americans can buy “explosive powder.”

I would not be surprised if the Transportation Security Administration uses this tragedy to claim new authority to “screen” Americans before they can attend sporting or other public events. The Boston attack may also be used as another justification for creating a National ID Card tied to a federal database with “biometric” information. The only thing that will stop them is if the American people rediscover the wisdom of Benjamin Franklin that you cannot achieve security by allowing government to take their liberties.

But no matter how much liberty and freedom we give up, we will never be 100% safe.  Bad people are always going to do bad things, and unfortunately we are probably going to see some pretty nightmarish things in the years ahead as the world becomes even more unstable.

If we allow the bad guys to get us so frightened that we throw out the U.S. Constitution and abandon our liberties and our freedoms, then we are the ones who lose.

Yes, the years ahead are going to be tough.  The economic collapse is going to accelerate greatly, there will be tremendous natural disasters, there will be war in the Middle East and there will be other problems that we cannot even conceive of right now.  At the same time, the American people will continue to become even angrier and even more frustrated.  According to a recent Pew Research survey, the percentage of Americans with a favorable view of the federal government is now at an all-time low.  As the economy crumbles, there will likely be great civil unrest as people demand solutions.  Unfortunately, our problems took decades to develop and they will not be solved overnight even if we did have good people in office.

So why am I saying all of this?

And why am I constantly warning about the coming economic collapse?

Is it because I want to create fear?

No, just the opposite of that.

I am a watchman on the wall.

In ancient times, a watchman would warn the people when the enemy was approaching.

When you receive the warning, there are a few different ways that you can respond to it…

#1 You can become consumed with fear and run away from the enemy.  Unfortunately, cowards never get the victory in the end.

#2 You can dismiss the warning and pretend that the enemy is not approaching.  But then when the enemy comes you will be completely unprepared.

#3 You can do everything possible to get prepared to face the enemy that is coming with strength and courage.

And that is how I would encourage all of you to approach the coming economic collapse and the other great problems that we will soon be experiencing as a nation.

Do not be afraid.

Instead, be strong and courageous and prepare well for the storms that are coming.

21 Signs That This Could Be A Long, Hot, Crazy Summer For The Global Financial System

The summer of 2012 is shaping up to be very similar to the summer of 2008.  Things look incredibly bleak for the global economy right now.  Economic activity and lending are slowing down all over the planet, and fear is starting to paralyze the entire global financial system.  Things did not look this bad back in the summer of 2011 and things certainly did not look this bad back in the summer of 2010.  It is almost as if a “perfect storm” is brewing.  Today, the global financial system is a finely balanced pyramid of risk, debt and leverage.  Such a system requires a high degree of confidence and stability.  But when confidence disappears and fear and panic take over, the house of cards can literally start collapsing at any time.  Right now we are watching a slow-motion train wreck unfold and nobody seems to know how to stop it.  Unless some kind of a miracle happens, things are going to look much different when we reach the start of 2013 than they do today.

The following are 21 signs that this could be a long, hot, crazy summer for the global financial system….

#1 There are rumors that major financial institutions are cancelling employee vacations in anticipation of a major financial crisis this summer.  The following are a couple of tweets quoted in a recent article by Kenneth Schortgen Jr….

Todd Harrison tweet: Hearing (not confirmed) @PIMCO asked employees to cancel vacations to have “all hands on deck” for a Lehman-type tail event. Confirm?

Todd M. Schoenberger tweet: @todd_harrison @pimco I heard the same thing, but I also heard the same for “some” at JPM. Heard it today at a hedge fund luncheon.

As Schortgen points out, these are not just your average Twitter users….

Todd Harrison is the CEO of the award winning internet media company Minyanville, while Todd Shoenberger is a managing principal at the Blackbay Group, and an adjunct professor of Finance at Cecil College.

#2 The Bank for International Settlements is warning that global lending is contracting at the fastest pace since the financial crisis of 2008.

#3 Unemployment in the eurozone has hit a brand new all-time record high.

#4 The government of Portugal has just announced that it will be bailing out three major banks.

#5 Many U.S. banking stocks are being hit extremely hard.  For example, Morgan Stanley stock has declined by 40 percent over the past four months.

#6 Yields on Spanish debt and yields on Italian debt have been absolutely soaring.

#7 10 year U.S. Treasury notes hit a record low on Friday because investors are scared and they are looking for safety. The following is from a recent USA Today article….

“Treasuries are at 1.46 because people are freaking out,” says Mark Vitner, senior economist at Wells Fargo Economics.

#8 New orders for factory goods in the United States have declined three times in the last four months.  That is a sign that the “economic recovery” in the U.S. has clearly stalled.

#9 U.S. job growth in May was well below expectations and the unemployment rate has increased to 8.2 percent.

#10 Economies all over the developed world are seriously slowing down right now.  The following is from a recent article by Ambrose Evans-Pritchard….

Brazil wilted in the first quarter. India grew at the slowest pace in nine years. China’s HSBC manufacturing index fell further into contraction in May, with new orders dropping sharply and inventories rising.

#11 Stocks in Japan hit a 28 year low on Monday.

#12 Over the past five years, the stock markets of Greece, Spain, Italy, Portugal, Ireland and Cyprus have all fallen by more than 50 percent.  Will we soon see similar results all over the rest of Europe?

#13 The Greek economy is literally shutting down.  Just check out the chaos that unpaid bills are already causing….

And unpaid bills are now threatening Greece’s electricity supply. State-owned Electricity Market Operator (LAGIE), a clearing house for power transactions, hasn’t paid independent power producers for electricity it bought from them. They, in turn, haven’t paid their natural gas supplier, Public Gas Corporation (Depa), which now doesn’t have the money to pay its supplier. Payment is due on June 22. Alas, its supplier is Gazprom in Russia, and they insist on getting paid. If not, they will shut the valve, and Depa won’t get the gas to supply the independent producers, which will have to take their power plants off line, removing about a third of the country’s electricity production.

#14 It is estimated that there are 273 billion dollars of failed real estate loans in the Spanish banking system.

#15 In March, 66 billion euros was pulled out of Spanish banks and sent out of the country.  That was an all-time record and that was before we even knew the results of the recent elections in Greece and France.  The numbers for April and May will almost certainly be even worse.

#16 The unemployment rate in Spain is 24.4 percent and for those under the age of 25 it is over 50 percent.

#17 Former Italian Prime Minister Silvio Berlusconi is warning that Italy may have to take drastic actions if something is not done soon….

“People are in shock. Confidence has collapsed. We have never had such a dark future,” he said. Indeed, the jobless rate for youth has jumped from 27pc to 35pc in a year. Terrorism has returned. Anarchists knee-capped the head of Ansaldo Nucleare last month. Italy’s tax office chief was nearly blinded by a letter bomb.

“If Europe refuses to listen to our demands, we should say ‘bye, bye’ and leave the euro. Or tell the Germans to leave the euro if they are not happy,” he said.

#18 It now looks like Cyprus is going to be the next European nation to need a bailout.

#19 Switzerland is threatening to implement capital controls in order to stop the massive flow of money that is coming in from banks around the rest of Europe.

#20 As I wrote about the other day, World Bank President Robert Zoellick is warning that “the summer of 2012” could end up being very similar to what we experienced back in 2008….

“Events in Greece could trigger financial fright in Spain, Italy and across the eurozone. The summer of 2012 offers an eerie echo of 2008.”

#21 Germany’s former vice-Chancellor, Joschka Fischer, is warning that the entire EU could fall apart over this crisis….

“Let’s not delude ourselves: If the euro falls apart, so will the European Union, triggering a global economic crisis on a scale that most people alive today have never experienced”

When was the last time that we saw so much bad economic news come out all at once?

2008 perhaps?

We truly live in unprecedented times.

It will be exciting to watch what happens, but it is also important to keep in mind that the coming economic crisis will cause extreme pain for millions upon millions of people.

For example, the suicide of a mother and a son due to the deteriorating economy has absolutely shocked the entire nation of Greece….

A 60-year-old Greek musician and his 91-year-old mother jumped to their deaths from their 5th floor apartment, driven to despair by financial woes. This double death is the latest in a rising epidemic of crisis-induced suicides in Greece.

­Witness accounts vary – some say the mother, who suffered from Alzheimer’s, jumped first, screaming a prayer as she plummeted to her death. Other neighbors say the mother and her son jumped together, holding hands.

But the one thing everyone seems to agree on is that the family had been struggling for a long time. The night before, Antonis Perris posted a suicide note of sorts on a popular Greek forum, saying he had no way of resolving the family’s financial issues.

“The problem is that I didn’t realize that I would need to have cash, because the economic crisis came so suddenly. Even though I have been selling our possessions, we have no cash flow, we have no money to buy food anymore and my credit card is maxed out with 22% interest rate.”

Perris continued to say that both his and his mother’s health deteriorated, and that he saw no solution to his most basic problems – getting food and medical help.

This is why it is so incredibly important to get prepared.

You don’t want something like that happening to you or anyone in your family.

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