Barack Obama actually did it. Despite enormous pressure from the government of Israel, President-elect Donald Trump and members of his own party in Congress, Barack Obama decided to stick a knife in Israel’s back at the United Nations. On Friday, the UN Security Council adopted a resolution that calls for a “two-State solution based on the 1967 lines” and that shockingly states that “the establishment by Israel of settlements in the Palestinian territory occupied since 1967, including East Jerusalem, has no legal validity”. This resolution was approved by a vote of 14 to 0, and the U.S. abstained from voting. But essentially the outcome of the vote was going to be determined by Barack Obama. For decades, the U.S. veto power on the UN Security Council has shielded Israel from these types of resolutions, but this time around Obama decided to betray Israel by allowing this vote to pass. Needless to say, this vote is going to have enormous implications for Israel, for the United States, and for the entire globe.
Just five days ago, I published one of the most important articles that I have ever written. It was entitled “The Real Reason Why America Has Been Given A Reprieve“, and in that article I explained why the U.S. has experienced a season of blessing since blocking a potential UN Security Council resolution that France wanted to introduce that would have formally divided the land of Israel in September 2015. If you have not read that article yet, please go back and read it, because it will be of great aid in understanding why this new UN Security Council resolution is so incredibly important.
As I stated in that previous article, it is my contention that the reason why things have gone so well for the United States over the past 16 months is because Barack Obama made the right decision in September 2015 and chose to protect the land of Israel from being divided.
But now that Barack Obama has reversed course and has greatly betrayed Israel, is America’s reprieve now over?
For months, I have been warning that Barack Obama may do something like this at the UN during the waning days of his presidency. You can see some examples of my previous warnings here, here and here. And I have also been warning about the severe consequences that the United States would face if our government did ultimately decide to betray Israel.
This UN Security Council resolution that was passed on Friday was originally going to be put up for a vote on Thursday. But after enormous pressure from the government of Israel and from President-elect Donald Trump, Egypt decided to withdraw the resolution that they had proposed at the last moment.
When that happened, it looked like everything was going to be okay.
However, temporary members of the UN Security Council New Zealand, Malaysia, Venezuela and Senegal immediately objected to Egypt’s move, and they indicated that they would submit the resolution for a vote if Egypt would not.
So on Friday a vote took place, and Obama did what many had been fearing. The following comes from the New York Times…
Defying extraordinary pressure from President-elect Donald J. Trump and furious lobbying by Israel, the Obama administration on Friday allowed the United Nations Security Council to adopt a contentious resolution that condemned Israeli settlement construction.
The administration’s decision not to veto the measure broke a longstanding American tradition of serving as Israel’s sturdiest diplomatic shield.
President-elect Trump publicly said that he would have vetoed this resolution, but now it will be virtually impossible for him to reverse it.
Another vote of the UN Security Council would be necessary to reverse it, and the votes simply would not be there. And even if they were, either Russia or China could use the veto power that they possess to block it.
So this resolution is going to be permanent, and it is considered to be legally binding on both Israel and the Palestinians.
It seems fitting that Barack Obama is vacationing in Hawaii while all of this drama is playing out. Perhaps while he is on the golf course he is enjoying a good laugh about how he really stuck it to his long-time nemesis Israeli Prime Minister Benjamin Netanyahu.
Needless to say, the Israeli government is absolutely furious that Obama has betrayed them. The following comes from U.S. News & World Report…
An Israeli official on Friday accused President Barack Obama of colluding with the Palestinians in a “shameful move against Israel at the U.N.” after learning the White House did not intend to veto a Security Council resolution condemning settlement construction in the West Bank and east Jerusalem the day before.
“President Obama and Secretary Kerry are behind this shameful move against Israel at the U.N.,” the official said. “The U.S administration secretly cooked up with the Palestinians an extreme anti-Israeli resolution behind Israel’s back which would be a tail wind for terror and boycotts and effectively make the Western Wall occupied Palestinian territory,” he said calling it “an abandonment of Israel which breaks decades of US policy of protecting Israel at the UN.”
You can read the full text of the UN Security Council resolution that was just adopted right here. These are some of the highlights that I pulled out of the document…
-It refers to Israel as “the occupying Power”
-It calls for a “two-State solution based on the 1967 lines”
-It speaks of a Middle East “where two democratic States, Israel and Palestine, live side by side in peace within secure and recognized borders”
-It demands “the dismantlement of all settlement outposts erected since March 2001″
-To me, the following is the key paragraph in the entire resolution…
Reaffirms that the establishment by Israel of settlements in the Palestinian territory occupied since 1967, including East Jerusalem, has no legal validity and constitutes a flagrant violation under international law and a major obstacle to the achievement of the two-State solution and a just, lasting and comprehensive peace
-It stipulates “that Israel immediately and completely cease all settlement activities in the occupied Palestinian territory, including East Jerusalem”
-It states that the UN Security Council “will not recognize any changes to the 4 June 1967 lines, including with regard to Jerusalem, other than those agreed by the parties through negotiations”
-It expresses a belief that “the cessation of all Israeli settlement activities is essential for salvaging the two-State solution, and calls for affirmative steps to be taken immediately to reverse the negative trends on the ground that are imperilling the two-State solution”
-It calls on all UN member states “to distinguish, in their relevant dealings, between the territory of the State of Israel and the territories occupied since 1967″
This is the most anti-Israel resolution that the UN Security Council has ever passed, and it never would have happened without Barack Obama’s approval.
The Israeli government and the Obama administration have had a very strained relationship for years, and this moment represents the culmination of tensions that have been building for a very long time.
But does this resolution actually represent the “division of the land of Israel” at the United Nations that so many have been waiting for?
I don’t know if I have a definitive answer to that question for you today. The language of this resolution does not directly give formal recognition to a Palestinian state, but it does speak of a “democratic state” of “Palestine”, and it does speak of “Palestinian territory”. It calls Israel “the occupying Power”, and it does say that all Israeli settlements in the West Bank and in East Jerusalem are illegal. And on top of everything else, the UN Security Council clearly stated that it “will not recognize any changes to the 4 June 1967 lines, including with regard to Jerusalem, other than those agreed by the parties through negotiations”.
So it seems clear that the UN Security Council has affirmed three major points that we have been watching for…
#1 A Palestinian state exists.
#2 The 1967 ceasefire lines represent the borders between the state of Israel and Palestine, but future negotiations between Israel and the Palestinians could alter these borders.
#3 East Jerusalem belongs to the Palestinians. This resolution does not refer to East Jerusalem as the future capital of Palestine, but that is obviously what is intended.
But perhaps another resolution will come later which will give official UN Security Council recognition to a Palestinian state.
At this point, we just don’t know.
However, what we do know is that for decades whenever the U.S. has taken steps toward dividing the land of Israel it has resulted in dramatic consequences for our nation.
It is my contention that this betrayal of Israel at the United Nations by Barack Obama represents a major turning point. I believe that America’s reprieve is now over, and that many of the things that people have been anticipating since September 2015 will start happening.
Barack Obama just made the worst decision of his entire presidency, and from this point forward nothing is ever going to be the same again.
This is one of the most important articles that I have written in a long time. The strange events of the past year and a half have befuddled and mystified many, and in this article I am going to explain why America has been given a temporary reprieve. If you go back to June 2015, I warned my readers that major financial problems were imminent, and sure enough in August 2015 we witnessed the greatest financial shaking that we had seen in seven years. I remember getting emails from my readers applauding me for absolutely nailing that prediction, but we were all concerned about what was coming next in September. If you will recall, there was more buzz about September 2015 than any other month that I can ever recall. That was the month of the last blood moon, the end of the Shemitah year and the Pope’s visit to the United States among other things. There was a tremendous amount of anticipation that the crisis that had begun in August 2015 would greatly accelerate in September and lead us into a period of cataclysmic global chaos. But that did not happen. Instead, U.S. financial markets calmed down and eventually recovered. There was a shift in the political realm as well, as the second half of 2015 marked the rise of Donald Trump. During those key months, Trump miraculously built a commanding lead in the race for the Republican nomination that none of his opponents were ever able to overcome. And now that Trump has won the election, an economic surge appears to be happening that is unlike anything that we have witnessed in many years.
Compared to much of the rest of the world, America appears to have been blessed over the past year and a half. Our financial markets have performed extremely well, the U.S. dollar is the strongest that is has been in over a decade, and jobs are coming back to the United States.
None of this was supposed to happen. In fact, our financial system was in such bad shape a year and a half ago that it was being projected that the U.S. would be on the bleeding edge of the next crisis. But instead here we stand safe, prosperous and seemingly secure.
How in the would can we explain this?
What I am about to share with you I have previously shared on national television down at Morningside, but it has been brought to my attention that I have never shared this with my readers on The Economic Collapse Blog. I apologize for this, because the past year and a half doesn’t make any sense until you understand these things.
When people look back at September 2015, they always forget the most critical event. In addition to everything else that was going on that month, France had a UN Security Council resolution all ready to go that would have permanently divided the land of Israel, that would have given formal UN Security Council recognition to a Palestinian state for the very first time, and that would have given East Jerusalem to the Palestinians as the capital of their new state.
The rest of the UN Security Council was ready to go along with the French resolution, but there was just one country standing in the way.
The United States has veto power on the UN Security Council, and so the Obama administration had the power to potentially block the resolution. After carefully considering the matter, the Obama administration decided that it was not the time for such a resolution, and so France never submitted it for a vote.
Just about everything else that Barack Obama did throughout his entire presidency was bad, but in this instance he got something completely right. The decision whether or not to divide the land of Israel was in his hands, and he made the right call.
Once this decision was made, it was almost as if someone hit a “pause button”. None of the bad things that people were forecasting ending up happening, and since that decision America has been blessed compared to the rest of the world.
And this is perfectly consistent with what God said that He would do. Starting in Genesis 12 and continuing all throughout the Scriptures, God promises to bless those that bless Israel and to curse those that curse Israel.
In this case, Barack Obama blessed Israel by preventing the UN Security Council from dividing the land, and so we were blessed as a result.
But of course there have been many other instances over the past several decades when we have been cursed as a nation for attempting to take steps toward the division of the land of Israel. One of the most notable instances took place in 1991 when George H. W. Bush got the Israelis and the Palestinians together for the very first time to discuss the dividing of the land of Israel into two states…
At that conference, the New York Times reported that Bush told Israel that “territorial compromise is essential for peace”. Needless to say, this upset a lot of people…
At the exact same time that conference was going on, the “Perfect Storm” was raging in the North Atlantic. Three major storms merged together, and instead of canceling one another out, they formed the kind of storm that is normally only seen once in a lifetime. If you will remember, Hollywood made a big blockbuster with George Clooney that was based on this storm. This gigantic storm went 1000 miles the wrong direction and slammed directly into the home of George H. W. Bush while he was at the Madrid conference talking about the need to divide the land of Israel…
Another very notable example of this phenomenon came in 2005. At that time, George W. Bush (the son of George H. W. Bush) had convinced Israel that it should pull all of the settlers out of Gaza and turn it entirely over to the Palestinians. According to the New York Times, the last of the settlers was evacuated on August 23, 2005…
On that exact same day, a little storm that came to be known as Hurricane Katrina formed over the Bahamas. It shocked forecasters by turning directly toward New Orleans, and it ultimately became the costliest natural disaster in all of U.S. history up until that time.
There are dozens more examples like this, and men like John McTernan, William Koenig and David Brennan have done a great job documenting them.
Today, 137 nations have already recognized a Palestinian state. The holdouts are mostly in North America and Europe…
France and most of the rest of Europe have been eager and ready to recognize a Palestinian state for quite a while now, but they don’t really want to move forward without the United States.
And of course they can’t officially do anything at the UN Security Council without U.S. approval.
Barack Obama had been hoping to achieve something through direct negotiations between the Israelis and the Palestinians, but those totally broke down and there is no hope that there will be any new negotiations any time soon.
So Barack Obama knows that his only shot at “leaving a legacy” in the Middle East is at the United Nations, and earlier this year he said that a UN Security Council resolution that would recognize a Palestinian state was “on the table” for the very first time…
At that time he did not indicate which way that he would go, and although there have been rumblings that something might happen, he has not taken any action yet.
But now time is running out for Obama, because his term is scheduled to end on January 20th. The advocates of a “two state solution” are becoming increasingly desperate, because they know that Donald Trump has already promised not to support a UN Security Council resolution that would divide the land of Israel. So they know that if something is going to be done, it has got to be done now.
A UN Security Council resolution would be legally binding on both the Israelis and the Palestinians, and it would be something that Donald Trump would not be able to undo. Another vote of the UN Security Council would be required to revoke a resolution once it has been passed, and the votes would not be there to do that.
So the next month is absolutely critical. The UN Security Council still has time to take action while Obama is still in office, and we know that such a move is actively being considered. For much, much more on this, please see the following articles that I have recently authored…
-“Jimmy Carter Urges Barack Obama To Divide The Land Of Israel At The United Nations Before January 20th”
-“John Bolton Warns That Obama May Divide The Land Of Israel At The UN Before The Inauguration”
-“The Danger Zone: Why Israel Greatly Fears Barack Obama’s Last Few Months In Office”
-“The New York Times Calls For Obama To Support A UN Resolution That Would Divide The Land Of Israel”
If we can get to January 20th and the land of Israel has not been divided by the UN Security Council and Donald Trump successfully takes office, perhaps our reprieve will be extended for a while.
But if Barack Obama very foolishly allows the land of Israel to be divided at the UN Security Council before January 20th, the “pause button” will be unpaused, our blessing will be turned into a curse, and all hell will break loose in America.
Optimism about the future of the U.S. economy has not been this strong since Barack Obama’s first presidential election victory in 2008. Donald Trump promised us an economic resurgence, and what is not to like so far? As I discussed earlier this week, stocks are soaring, businesses are already announcing that they are bringing jobs back to the United States, and the U.S. dollar has been lifted to levels that we haven’t seen in many years. Many are referring to this post-election surge as “Trumphoria”, and I think that is quite appropriate. Personally, I couldn’t imagine financial markets behaving this way if Hillary Clinton had won the election. Right now tens of millions of Americans are feeling deeply optimistic about the future for the first time in a very long time, and this is clearly reflected in the results of the most recent CNBC All-America Economic Survey…
The CNBC All-America Economic Survey for the fourth quarter found that the percentage of Americans who believe the economy will get better in the next year jumped an unprecedented 17 points to 42 percent, compared with before the election. It’s the highest level since President Barack Obama was first elected in 2008.
The surge was powered by Republicans and independents reversing their outlooks. Republicans swung from deeply pessimistic, with just 15 percent saying the economy would improve in the next year, to strongly optimistic, with 74 percent believing in an economic upswing. Optimism among independents doubled but it fell by more than half for Democrats. Just 16 percent think the economy will improve.
It is funny how our political perspectives so greatly shape our view of the future. Because Trump won, Democrats now have an extremely dismal opinion of where the economy is heading, while Republicans suddenly believe that happy days are here again.
Of course the truth is that the president has far less power to influence the economy than the Federal Reserve does, and so most Americans greatly overestimate what a president can do to alter our economic trajectory.
But for now most Americans (excluding Democrats) are feeling really good about where things are headed. In fact, we just learned that the University of Michigan consumer confidence survey has soared to the highest level that we have seen since 2005.
And of course the financial markets continued to roll onward and upward on Friday. The Dow was up another 142 points, and it is now less than 250 points away from the magic number of 20,000.
I never thought that we would actually get to 20,000, but thanks to “Trumphoria” we may actually get there before the wheels start coming off.
This post-election run has really been unprecedented. The following comes from CNBC…
All major indexes have been hitting record highs since the election. In fact, the Dow has notched 14 record closes since then and gains in 20 of the past 24 sessions.
The Dow, S&P 500, and Nasdaq also did something they haven’t done in more than five years: all three rose each day of this trading week. The last time all three rose every day during the same trading week was September 2011.
Wouldn’t it be great if every month during Trump’s presidency was like the last 30 days?
Trump promised that we would start winning so much that we would actually start getting tired of winning, and so far we are off to a tremendous start.
As I discussed yesterday, some of the biggest winners from “Trumphoria” have been the big banks…
The shares of Wells Fargo, the most hated bank in America these days, soared 28% over the past 30 days, Citigroup 25%, JP Morgan 26%, Goldman Sachs, which is successfully placing its people inside the Trump administration, 37%.
But is this momentum in the financial markets sustainable?
Of course not.
There are signs of emerging economic trouble all around us. For instance, Sears just announced that it lost 748 million dollars last quarter and that it plans to liquidate even more stores.
How in the world do you lose three-quarters of a billion dollars in a single quarter? If you had employees in every store literally flushing dollar bills down the toilet all day I don’t think you could lose money that quickly.
And the moment that Trump takes office, he may immediately be faced with a major financial crisis in Europe which has been sparked by the meltdown of large Italian banks. The following comes from a Forbes article entitled “Italy’s Banking Crisis Is Nearly Upon Us“…
There is a high degree of probability (approaching 90%, I’d say) that Italy will experience a severe banking crisis in the next few quarters. Perhaps they can stave off the problem for a year, but something will have to be done about the banks.
Unfortunately, it looks like things are about to get very real for Italian banking giant Monte dei Paschi di Siena. According to Reuters, the European Central Bank has turned down their request for more time to raise needed capital…
The European Central Bank has rejected a request by Italy’s Monte dei Paschi di Siena (BMPS.MI) for more time to raise capital, a source said on Friday, a decision that piles pressure on the Rome government to bail out the lender.
Italy’s third-largest bank, and the world’s oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euro ($5.3 billion) rescue plan in the face of fresh political uncertainty.
The ECB’s supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in, the source said.
But most Americans have no idea what is unfolding in Europe right now.
As Americans, we tend to be largely oblivious to what is going on in the rest of the world, and at this moment “Trumphoria” has gripped our nation.
It is certainly not wrong to celebrate the fact that we are getting Donald Trump instead of Hillary Clinton, but let us also not lose sight of the fact that we are likely to be facing some tremendous challenges very early in 2017.
Will the financial bubble that has been rapidly growing ever since Donald Trump won the election suddenly be popped once he takes office? Could it be possible that we are being set up for a horrible financial crash that he will ultimately be blamed for? Yesterday, I shared my thoughts on the incredible euphoria that we have seen since Donald Trump’s surprise victory on November 8th. The U.S. dollar has been surging, companies are announcing that they are bringing jobs back to the U.S., and we are witnessing perhaps the greatest post-election stock market rally in Wall Street history. In fact, the Dow, the Nasdaq and the S&P 500 all set new all-time record highs again on Thursday. What we are seeing is absolutely unprecedented, and many believe that the good times will continue to roll as we head into 2017.
What has been most surprising to me is how well the stocks of the big Wall Street banks have been doing. It is no secret that those banks poured a tremendous amount of money into Hillary Clinton’s campaign, and Donald Trump had some tough things to say about them leading up to election day.
So you wouldn’t think that it would be particularly good news for those banks that Trump won the election. However, we seem to be living in “Bizarro World” at the moment, and in so many ways things are happening exactly the opposite of what we would expect. Since Trump’s victory, all of the big banking stocks have been skyrocketing…
Financial stocks in particular have been on fire. Citigroup (C) and JPMorgan Chase (JPM) are up about 20% since Donald Trump defeated Hillary Clinton — and that makes them laggards!
Morgan Stanley (MS) has gained more than 25%. So has troubled Wells Fargo (WFC), despite the lingering fallout from its fake account scandal. Bank of America (BAC) is up more than 30%.
And so is Goldman Sachs (GS) — the former employer of both Treasury Secretary nominee Steven Mnuchin and Trump chief strategist Steve Bannon.
But are these stock prices justified by the fundamentals?
Of course not, but during times of euphoria the fundamentals never seem to matter much. Stocks were incredibly overvalued before the election, and now they are ridiculously overvalued.
Earlier today, a CNBC article pointed out that the cyclically-adjusted price to earnings ratio has only been higher than it is today at three points in our history…
“The cyclically adjusted P/E (CAPE), a valuation measure created by economist Robert Shiller now stands over 27 and has been exceeded only in the 1929 mania, the 2000 tech mania and the 2007 housing and stock bubble,” Alan Newman wrote in his Stock Market Crosscurrents letter at the end of November.
Newman said even if the market’s earnings increase by 10 percent under Trump’s policies “we’re still dealing with the same picture, overvaluation on a very grand scale.”
And of course a historic stock market crash immediately followed each of those three bubbles.
So are we being set up for a huge crash in early 2017?
There are some out there that believe that this is purposely being orchestrated. For example, Mike Adams of Natural News believes that the markets “will be deliberately and destructively imploded under President Trump”…
Right now, the U.S. stock market is surging, with the Dow leaping toward 20,000, a number rooted in fiscal insanity and delusional expectations. There are no fundamentals that support a 20,000 Dow, but fundamentals have long since ceased to matter in a financial world hyperventilating on debt fumes while hallucinating about utopian economic models that will soon prove to generate fools instead of real wealth.
Today I’m going on the record with a prediction that I’ll offer with near absolute certainty: The rigged markets that now seem to defy gravity will be deliberately and destructively imploded under President Trump for all the obvious reasons. There will be financial chaos like we’ve never seen before: Investors leaping off tall buildings, banks declaring extended “holidays” that freeze transactions, and California pensioners slitting their wrists after they discover their promised pension funds were just vaporized by incompetent bureaucrats.
On the other hand, there are others that believe that Trump is just walking into a very bad situation and that a crash would be inevitable no matter who was president.
History tells us that there is no possible way that stock prices can stay at this irrational level indefinitely. But for now a wave of optimism is sweeping the nation, and many of those that are caught up in it will get seriously angry with you if you try to inject a dose of reality into the conversation.
But like I said yesterday, let’s hope that the optimists are correct. A survey that was just taken of 600 business executives found that 62 percent of them were optimistic about the U.S. economy over the next 12 months.
Incredibly, that number was sitting at just 38 percent the previous quarter.
For the moment, business leaders seem to be quite thrilled that we have a business executive in the White House.
Hopefully Donald Trump’s business experience will translate well to his new position. And it is certainly my hope that he is as successful as possible.
But even during the campaign Trump talked about how stocks were in a giant bubble, and the euphoria that we have seen since his election victory has just made that bubble even larger.
Throughout U.S. history, every giant financial bubble has always ended very badly, and this time around will not be any exception.
Trump may get the blame for it when it bursts, but the truth is that the conditions for the coming crisis have been building for a very, very long time.
Italian voters have embraced the global trend of rejecting the established world order, but the “no” vote on Sunday has plunged global financial markets into a state of utter chaos. The euro has already fallen to a 20 month low, Italian government bonds are poised for a tremendous crash, and futures markets are indicating that both U.S. and European stock markets will be way down when they open on Monday. It is being projected that Italian Prime Minister Matteo Renzi’s referendum on constitutional reforms will be defeated by about 20 percentage points when all the votes have been counted, and Renzi has already announced that he plans to resign as a result. When new elections are held it looks like comedian Beppe Grillo’s Five-Star movement will come to power, and the European establishment is extremely alarmed at that prospect because Grillo wants to take Italy out of the eurozone. In the long run Italy would be much better off without the euro, but in the short-term the only thing propping up Italy’s failing banking system is support from Europe. Without that support, the 8th largest economy on the entire planet would already be in the midst of an unprecedented financial crisis.
I know that I said a lot in that first paragraph, but it is imperative that people understand how serious this crisis could quickly become.
This “no” vote virtually guarantees a major banking crisis for Italy, and many analysts fear that it could trigger a broader financial crisis all across the rest of the continent as well.
Just look at what has already happened. All of the votes haven’t even been counted yet, and the euro is absolutely plummeting…
The euro dropped 1.3 percent to $1.0505, falling below its 1 1/2-year low of $1.0518 touched late last month, and testing its key support levels where the currency has managed to rebound in the past couple of years.
A break below its 2015 March low of $1.0457 would send the currency to its lowest level since early 2003, opening a way for a test of $1, or parity against the dollar, a scenario which many market players now see as a real possibility.
In early 2014, there were times when one euro was trading for almost $1.40. For a very long time I have been warning that the euro was eventually heading for parity with the U.S. dollar, and now we are almost there.
Meanwhile, Italian government bonds are going to continue to crash following this election result. This is going to make it even more difficult for the Italian government to borrow money, and that will only aggravate their ongoing financial troubles.
But the big problem in Italy is the banks. At this moment there are eight banks in imminent danger of collapsing, and virtually all of the rest of them are in some stage of trouble. The following comes from a Bloomberg article about the crisis that Italian banks are facing right at this moment…
They’re burdened with a mountain of bad loans. Their stocks have cratered. And they have to operate in an economy prone to recession and political upheaval.
Signs have been mounting for months that Italy’s weakest lenders, and in particular Banca Monte dei Paschi di Siena SpA, were sliding toward the precipice, threatening to reignite a broader crisis.
And we may get some news regarding the fate of Banca Monte dei Paschi di Siena as early as Monday morning if what the Sydney Morning Herald is reporting is correct…
A last-gasp rescue for Monte dei Paschi di Siena, the world’s oldest surviving bank, has been thrown into doubt after reformist prime minister Matteo Renzi decisively lost a referendum on constitutional reform on Sunday.
MPS and advisers JPMorgan and Mediobanca will meet as early as Monday morning to decide whether to pull a plan to go ahead with a €5bn recapitalisation, the FT reports, citing people informed of the plan.
Senior bankers will decide whether to pursue their underwriting commitments or exercise their right to drop the transaction due to adverse market conditions, these people said. In the event the banks drop the capital plan, the Italian state is expected to nationalise the bank, say senior bankers.
If Banca Monte dei Paschi di Siena fails, major banks all over Italy (and all over the rest of Europe) could start going down like dominoes.
So what were Italians voting on anyway?
Well, the truth is that the constitutional reforms that were proposed actually sound quite boring…
“The changes involve sharply reducing the size of one of the chambers of Parliament — the Senate — shifting its powers to the executive, and eliminating the Senate’s power to bring down government coalitions.
“The amendments also shift some powers now held by the regions to the central government, thereby reducing frequent and lengthy court battles between Rome and the regional governments.”
The reason why this vote was ultimately so important is because it became a referendum on Renzi’s administration. The fact that he announced in advance that he would resign if it did not get approved gave a tremendous amount of fuel to the opposition.
So now Beppe Grillo’s Five-Star Movement stands poised to come to power, and that could be very bad news for those that are hoping to hold the common currency together.
The following is how NPR recently summarized the main goals of the Five-Star Movement…
“It calls for a government-guaranteed, universal income, abolishing Italy’s fiscal commitments to the European Union and a referendum on Italy’s membership in the Euro — a prospect that could unravel the entire single currency Eurozone.”
If Italy chooses to leave the euro, it will probably mean the end of the common currency, and the continued existence of the entire European Union would be called into question.
So this vote on Sunday was huge. The Brexit had already done a tremendous amount of damage to the long-term prospects for the European Union, and now the crisis in Italy is sending political and financial shockwaves throughout the entire continent.
Over the next few weeks, keep a close eye on the euro and on Italian government bonds.
If they both continue to crash, that will be a sign that a major European financial crisis is now upon us.
And what happens in Europe definitely does not stay in Europe.
If Europe goes down, we are going to go down too.
At this point we still have almost a month left in 2016, but 2017 is already shaping up to be a very troubling year. As always, let us hope for the best, but let us also keep preparing for the worst.
If Donald Trump truly wants to fix the economy, he must shut down the Federal Reserve. If he just tries to patch up our current system, he will fail, because it has been fundamentally flawed from the very beginning. A little over a century ago, very powerful forces on Wall Street convinced Congress to completely restructure our financial system. An immensely powerful central bank known as the Federal Reserve was created, and the goal was to transform the U.S. dollar into a debt-based currency that would continuously be inflated and to create an endless debt spiral from which the federal government could never possibly escape. Sadly, they were successful on both counts. Since the creation of the Federal Reserve, the value of the U.S. dollar has declined by approximately 98 percent and our national debt has gotten more than 5000 times larger.
Americans tend to give most of the credit or most of the blame for the performance of the U.S. economy to our presidents, but the truth is that an unelected, unaccountable group of central bankers has far more power over our economy than anyone else does. The Federal Reserve has become known as “the fourth branch of government“, but unlike the other branches of government we are told that the Fed’s decisions are “above politics” because they are “too important”. Fed officials fiercely guard their “independence”, and they fiercely resist any “interference” from Congress, the President, or the American people.
Donald Trump can try to lower taxes and reduce regulations, but what he will be able to do to influence the economy pales in comparison to the immensely powerful tools that the Fed wields. The Fed controls interest rates, the Fed controls the money supply, and the Fed regulates the banks.
To give you an idea of how enormously powerful the Fed is, I want you to pull out a dollar bill.
As you look at that dollar bill, I want you to notice that it says “Federal Reserve Note” right at the top.
In the financial world, a “note” is an instrument of debt, and the truth is that our system was designed to create as much debt as possible.
So why are we using debt-based “Federal Reserve Notes” in the first place? Shouldn’t Congress have control over our currency?
According to Article I, Section 8 of the U.S. Constitution, it is Congress that has the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.
So how did the Fed get involved?
Well, it is a very long and convoluted story, and if you are interested in the history behind it I would commend to you an excellent book by C. Edward Griffin entitled “The Creature from Jekyll Island: A Second Look at the Federal Reserve“. Basically, big money interests on Wall Street got their hooks into the White House and Congress, and they rushed through legislation right before Christmas in 1913 that created this insidious central banking system that was designed to slowly but surely take wealth from the American people and put it into their hands.
Sadly, most Americans don’t even realize that we have a debt-based currency, nor do they understand where our money comes from. In a previous article, I discussed how money is normally created by the Federal Reserve under our current system…
When the U.S. government decides that it wants to spend another billion dollars that it does not have, it does not print up a billion dollars.
Rather, the U.S. government creates a bunch of U.S. Treasury bonds (debt) and takes them over to the Federal Reserve.
The Federal Reserve creates a billion dollars out of thin air and exchanges them for the U.S. Treasury bonds.
The Federal Reserve takes the U.S. Treasury bonds that it receives in exchange for the “Federal Reserve Notes” that it gave to the government and it auctions off those bonds to the highest bidder. But of course this process always creates more debt than it does money…
The U.S. Treasury bonds that the Federal Reserve receives in exchange for the money it has created out of nothing are auctioned off through the Federal Reserve system.
There is a problem.
Because the U.S. government must pay interest on the Treasury bonds, the amount of debt that has been created by this transaction is greater than the amount of money that has been created.
So where will the U.S. government get the money to pay that debt?
Well, the theory is that we can get money to circulate through the economy really, really fast and tax it at a high enough rate that the government will be able to collect enough taxes to pay the debt.
But that never actually happens, does it?
And the creators of the Federal Reserve understood this as well. They understood that the U.S. government would not have enough money to both run the government and service the national debt. They knew that the U.S. government would have to keep borrowing even more money in an attempt to keep up with the game.
So our debt just keeps going up and up and up. While Barack Obama has been in the White House our national debt has risen by more than 9 trillion dollars, and at this moment it is sitting just under the 20 trillion dollar mark.
But we shouldn’t be surprised by this, because this is precisely what the Federal Reserve system was designed to do to us.
Many conservatives still hold to the mistaken illusion that we could somehow pay all of this debt back someday, but as I have shown in a previous article, this is mathematically impossible to do.
If the government went out today and grabbed every single dollar in existence we could not pay back the national debt, and of course we have trillions of dollars of household debt, trillions of dollars of corporate debt and trillions of dollars of state and local government debt that we need to pay back as well.
Under the current system our only hope is to keep the wheel spinning by continuing to devalue the dollar and by continuing to go into even greater amounts of debt.
And of course it isn’t just the United States that is in this predicament. At this point, almost every single nation on the entire planet has a central bank.
Even though there are extremely sharp disagreements among nations on virtually everything else, somehow central banking has achieved nearly universal adoption.
As you read this article, well over 99.9% of the population of the globe lives in a country that has a central bank.
Do you think that is just a coincidence?
Of course there are still a few very small countries such as the Federated States of Micronesia that do not have a central bank, but the only big nation not to have one is North Korea.
And you would literally have to be insane to want to live in North Korea.
But now we have an opportunity to get free from this insidious system. The truth is that we don’t have to have a central bank. In fact, the greatest period of economic growth in U.S. history was when there was no central bank.
We don’t need central planners to set our interest rates and to manipulate our money supply. They will never admit this, but the reality of the matter is that their interference in the economy often creates tremendous economic busts.
Since the Federal Reserve was created in 1913, there have been 18 distinct recessions or depressions: 1918, 1920, 1923, 1926, 1929, 1937, 1945, 1949, 1953, 1958, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2008.
Considering their track record, isn’t it time for a change?
And we don’t have to have a debt-based currency. In fact, not too long ago we had a president that decided to start issuing debt-free “United States Notes”.
Back in 1963, President John F. Kennedy issued Executive Order 11110 which authorized the U.S. Treasury to issue debt-free “United States Notes” which were directly created by the U.S. government.
He was assassinated shortly thereafter.
Most Americans don’t realize this, but many of the debt-free United States Notes that were issued under President Kennedy are still in circulation today, and President Trump could do something similar.
But will he?
It has been said that the borrower is the servant of the lender, and the Federal Reserve system has turned all of us into debt slaves.
Debt is a form of social control, and the global elite use all of this debt to dominate the planet. The total amount of debt in the world just hit a brand new record high of 152 trillion dollars, and the longer we allow the central banks to control the system the bigger this debt bubble will become.
There is a way out, and here in the United States that starts with shutting down the Federal Reserve and issuing debt-free currency. It would take someone very bold to make a move like this, and so let us hope that the man that we just elected is up to the task.
The election of Donald Trump has sent shockwaves through the U.S. economy and the U.S. financial system. Since November 8th, the Dow has hit a brand new all-time record high, the U.S. dollar has strengthened greatly, and bank stocks are way up. But not all of the economic news is good news. Unlike stocks, bonds have reacted very negatively to Trump’s election victory. The past week has been an absolute bloodbath for bond traders, and as you will see below this is going to have dramatic implications for all U.S. consumers moving forward.
Over just a two day period, more than a trillion dollars was wiped out as bond yields spiked all over the globe. As CNN has noted, this type of “violent reaction” in the bond market has only happened three other times within the past ten years…
The rate on 10-year Treasury notes has surged to 2.3%, from 1.77% before the election. Last week’s spike in Treasury rates was so big, that it had only happened three times before in the last decade.
BlackRock’s Russ Koesterich called it a “violent reaction.”
The move stands to have broad repercussions for all Americans. Not only will the U.S. government have to pay more to borrow money, but mortgage rates and car loan costs should also rise. That’s because Treasuries are used as the benchmark for many other forms of credit.
As interest rates rise, virtually everyone in our society is going to feel the pain.
Those that need an auto loan in order to purchase a vehicle are going to find that loan payments are significantly higher than they were before.
Credit card rates will also go up, and those just getting out of school will discover that their student loan payments are even more suffocating.
But the biggest impact will be felt in the housing market. The average rate on a 30-year fixed mortgage just hit the psychologically-important 4 percent barrier, and that could mean big trouble for the housing market in 2017…
The average contract rate on the popular 30-year fixed mortgage hit 4 percent, according to Mortgage News Daily, a level most didn’t expect to see until the middle of next year. Rates have now moved nearly a half a percentage point higher since Donald Trump was elected president.
“The situation on the ground is panicked. Damage control,” said Matthew Graham, chief operating officer of Mortgage News Daily. “People were trying to lock loans quickly last week and are now facing a tough choice to lock today or hope for a bounce. Many hoped for a bounce last week heading into the long weekend and we obviously didn’t get it.”
Rising interest rates was one of the key factors that precipitated the financial crisis of 2008, and many fear that it could happen again.
And without a doubt, this rise in rates is going to affect the affordability of homes that are already on the market…
“If you’re going to buy a house and your mortgage payment went up by $200 or $300, you may buy a smaller house. There’s impact on interest rate sensitive sectors, like autos and housing, and also corporate bonds themselves, where financial engineering has helped juice up the equity market,” said George Goncalves, head of rate strategy at Nomura.
In addition, rising rates will make it more difficult for those with adjustable rate mortgages to keep their homes. Foreclosure activity was already up 27 percent during the month of October, and many are projecting that we could see another giant spike in foreclosures during the months ahead that is similar to what we saw during the last financial crisis.
Many Trump supporters don’t really care what the rest of the world thinks of our new president, but this is an area where what the rest of the world thinks really, really matters.
The truth is that the rest of the planet is not all too fond of Trump, and if that makes them a lot less eager to lend us money that is a major problem.
The only way that we can maintain our massively inflated debt-fueled standard of living is to continue to borrow gigantic mountains of money from the rest of the world at ultra-low interest rates.
If the rest of the world starts demanding higher rates of return now that Trump is president, we are going to experience economic pain on a scale that most Americans don’t believe is possible.
One of our big lenders has been China, and right now they are deeply concerned about what a Trump presidency might mean. Trump has talked very tough about trade with China, and the Chinese are gearing up for a major trade war. The following comes from CNBC…
During his election campaign this year, Trump spoke of a 45 percent import tariff on all Chinese goods while failing to outline how it would work. Should any such policy come into effect, China will take a “tit-for-tat approach”, according to an opinion piece in the Global Times, a newspaper backed by the Communist party.
“A batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the U.S.,” the Global Times article read.
Most Trump supporters assume that since Trump has been a very successful businessman that he will be able to strengthen the U.S. economy.
But it isn’t that simple.
The only reason we are able to live the way that we live today is because we have been able to borrow trillions upon trillions of dollars at irrationally low interest rates.
The moment the rest of the world decides that they are not going to loan us money at irrationally low interest rates any longer the game is over, and it won’t really matter who is in the White House at that point.
So watch interest rates very carefully. If they keep going up, it is inevitable that a major economic slowdown will follow no matter what economic policies the new Trump administration implements.
The largest and most important bank in the largest and most important economy in Europe is imploding right in front of our eyes. Deutsche Bank is the 11th biggest bank on the entire planet, and due to the enormous exposure to derivatives that it has, it has been called “the world’s most dangerous bank“. Over the past year, I have repeatedly warned that Deutsche Bank is heading for disaster and is a likely candidate to be “the next Lehman Brothers”. If you would like to review, you can do so here, here and here. On September 16th, the Wall Street Journal reported that the U.S. Department of Justice wanted 14 billion dollars from Deutsche Bank to settle a case related to the mis-handling of mortgage-backed securities during the last financial crisis. As a result of that announcement, confidence in the bank has been greatly shaken, the stock price has fallen to record lows, and analysts are warning that Deutsche Bank may be facing a “liquidity event” unlike anything that we have seen since the collapse of Lehman Brothers back in 2008.
At one point on Friday, Deutsche Bank stock fell below the 10 euro mark for the first time ever before bouncing back a bit. A completely unverified rumor that was spreading on Twitter that claimed that Deutsche Bank would settle with the Department of Justice for only 5.4 billion dollars was the reason for the bounce.
But the size of the fine is not really the issue now. Shares of Deutsche Bank have fallen by more than half so far in 2016, and this latest episode seems to have been the final straw for the deeply troubled financial institution. Old sources of liquidity are being cut off, and nobody wants to be the idiot that offers Deutsche Bank a new source of liquidity at this point.
As a result, Deutsche Bank is potentially facing a “liquidity event” on a scale that we have not seen since the financial crisis of 2008. The following comes from Zero Hedge…
It is not solvency, or the lack of capital – a vague, synthetic, and usually quite arbitrary concept, determined by regulators – that kills a bank; it is – as Dick Fuld will tell anyone who bothers to listen – the loss of (access to) liquidity: cold, hard, fungible (something Jon Corzine knew all too well when he commingled and was caught) cash, that pushes a bank into its grave, usually quite rapidly: recall that it took Lehman just a few days for its stock to plunge from the high double digits to zero.
It is also liquidity, or rather concerns about it, that sent Deutsche Bank stock crashing to new all time lows earlier today: after all, the investing world already knew for nearly two weeks that its capitalization is insufficient. As we reported earlier this week, it was a report by Citigroup, among many other, that found how badly undercapitalized the German lender is, noting that DB’s “leverage ratio, at 3.4%, looks even worse relative to the 4.5% company target by 2018″ and calculated that while he only models €2.9bn in litigation charges over 2H16-2017 – far less than the $14 billion settlement figure proposed by the DOJ – and includes a successful disposal of a 70% stake in Postbank at end-2017 for 0.4x book he still only reaches a CET 1 ratio of 11.6% by end-2018, meaning the bank would have a Tier 1 capital €3bn shortfall to the company target of 12.5%, and a leverage ratio of 3.9%, resulting in an €8bn shortfall to the target of 4.5%.
The more the stock price drops, the faster other financial institutions, investors and regular banking clients are going to want to pull their money out of Deutsche Bank. And every time there is news about people pulling money out of the bank, that is just going to drive the stock price even lower.
In other words, Deutsche Bank may be entering a death spiral that may be impossible to stop without a government bailout, and the German government has already stated that there will be no bailout for Deutsche Bank.
Banking customers have a total of approximately 566 billion euros deposited with the bank, and even if a small fraction of those clients start demanding their money back it is going to cause a major, major crunch.
Deutsche Bank CEO John Cryan attempted to calm nerves on Friday by releasing a memo to employees that blamed “speculators” for the decline in the stock price…
Instead of doing what many have correctly suggested he should be doing, namely focusing on ways to raise more capital for the undercapitalized Deutsche Bank in order to stem the slow (at first) liquidity leak, first thing this morning CEO John Cryan issued another morale-boosting note to employees of Deustche Bank who have been watching their stock price crash to another record low, dipping under €10 in early trading for the first time ever. In the memo the embattled CEO worryingly did what Dick Fuld and other chief executives did when they felt the situation slipping out of control, namely blaming evil “rumor-spreading” shorts, saying “our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price. … Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.”
Just as important, Cryan confirms the Bloomberg report that “a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns.” As we explained last night, the concerns are very much justified if they spread to the biggest risk-factor for the German bank: its depositors, which collectively hold over €550 billion in liquidity-providing instruments.
If you would like to ready the full memo, you can do so right here.
One of the reasons why Deutsche Bank is considered to be so systemically “dangerous” is because it has 42 trillion euros worth of exposure to derivatives. That is an amount of money that is 14 times larger than the GDP of the entire nation of Germany.
Some firms that were derivatives clients of the bank have already gotten spooked and have moved their business to other institutions. It was this report from Bloomberg that really helped drive down the stock price of Deutsche Bank earlier this week…
The funds, a small subset of the more than 800 clients in the bank’s hedge fund business, have shifted part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’s $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person with knowledge of the situation who declined to be identified talking about confidential client matters.
“The issue here is now one of confidence,” said Chris Wheeler, a financial analyst with Atlantic Equities LLP in London.
So what comes next?
Monday is a banking holiday for Germany, so we may not see anything major happen until Tuesday.
An announcement of a major reduction in the Department of Justice fine may buy Deutsche Bank some time, but any reprieve would likely only be temporary.
What appears to be more likely is the scenario that Jeffrey Gundlach is suggesting…
But Jeffrey Gundlach, chief executive of DoubleLine Capital, said investors betting that Berlin would not rescue Deutsche could find themselves nursing big losses.
‘The market is going to push down Deutsche Bank until there is some recognition of support. They will get assistance, if need be,’ said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine.
It will be very interesting to see how desperate things become before the German government finally gives in to the pressure.
The complete and total collapse of Deutsche Bank would be an event many times more significant for the global financial system than the collapse of Lehman Brothers was. Global leaders simply cannot afford for such a thing to happen, but without serious intervention it appears that is precisely where we are heading.
Personally, I don’t know exactly what will happen next, but it will be fascinating to watch.
Things have not been this bad for the Canadian economy since the last global recession. During the second quarter of 2016, Canada’s GDP contracted at a 1.6 percent annualized rate. That was the worst number in seven years, and it was even worse than most analysts were projecting. This comes at a time when bad news is pouring in from all corners of the global economy. While things in the United States are still relatively stable for the moment, the same cannot be said for much of the rest of the planet. Canada in particular has been hit very hard by the collapse in oil prices, and the massive wildfire in northern Alberta back in May certainly did not help things. The following comes from the BBC…
The recent drop in GDP was larger than analysts had projected, but not far off the predicted 1.5% loss.
“[The figure] could have been worse, given the hit from the wildfire, and clearly confirms the disappointing downward trend in exports over the last few months,” said Sal Guatieri, senior economist at BMO Capital Markets.
In May, wildfires devastated the parts of northern Alberta where much of Canada’s oil and natural gas is produced.
For many years, high oil prices and booming exports enabled the Canadian economy to significantly outperform the U.S. economy. But now conditions have changed dramatically, and all of the economic bubbles up in Canada are starting to burst. This includes the housing bubble, as we have seen home sales in the hottest markets such as Vancouver drop through the floor late in the summer. In fact, it is being reported that home sales during the first two weeks of August in British Columbia were down a whopping 51 percent on a year over year basis.
Do you remember the housing bubble in the U.S. that helped fuel the last financial crisis? Well, a very similar bubble is now bursting up in Canada, and some investors have positioned themselves to make a tremendous amount of money when the whole thing comes violently crashing down. The following comes from Wolf Richter…
This summer, famed short seller Marc Cohodes came out of retirement (he now raises chickens on a farm in Sonoma County, CA, and sells the eggs for a fortune in San Francisco) and jumped into ring with a number of interviews on TV and in the print media, and this too rattled some nerves – largely because it hit home.
“I think it’s a money laundering-induced market,” he said as we reported at the time. “Where the local politicians, or the BC Liberals, are kept or in cahoots with the real estate brokers, developers, lawyers, that angle. And they have sought Chinese money to keep the market propped up and it won’t last,” he said. “China has capital controls on, and Vancouver has become the money laundering mecca of either the world or North America, and something is going to change and change drastically.”
If the price of oil does not rebound in a major way, the Canadian economy is going to continue to deeply struggle.
Meanwhile, one of the biggest economies in Africa is also shrinking. Nigeria is yet another oil-dependent economy that has fallen on really hard times, and during the latest quarter their GDP shrunk by 2.06 percent on an annualized basis…
Nigeria has slipped into recession, with the latest growth figures showing the economy contracted 2.06% between April and June.
The country has now seen two consecutive quarters of declining growth, the usual definition of recession.
Its vital oil industry has been hit by weaker global prices, according to the Nigerian Bureau of Statistics (NBS).
There are so many signs that indicate that the global economy has entered a new major downturn. Yes, the U.S. is doing better than almost everyone else for the moment, but this will not last indefinitely. Our planet is more interconnected than ever before, and just as we saw in 2008, big trouble on one side of the globe quickly affects the other side.
Today we also learned that the 7th largest container shipping company in the entire world has completely imploded. Total global trade has been declining for quite some time now, and it was inevitable that this sort of thing would start happening…
After years of relentless decline in the Baltic Dry index…
… today the largest casualty finally emerged on Wednesday when South Korea’s Hanjin Shipping, the country’s largest shipping firm and the world’s seventh-biggest container carrier, filed for court receivership after losing the support of its banks, leaving its assets frozen as ports from China to Spain denied access to its vessels.
Over in Europe, an emerging banking crisis continues to simmer just under the surface.
Most Americans are completely oblivious to the fact that major global financial problems could be just around the corner, but CNBC is reporting that banks over in Europe are “preparing for an economic nuclear winter situation”…
European banks, in particular, have had a very tough six months as the shock and volatility around Brexit sent banking stocks south. Major European banks like Deutsche Bank and Credit Suisse saw their shares in free-fall after the referendum’s results were announced. In the U.K., RBS was the worst-hit, with its shares plunging by more than 30 percent since June 24.
The current uncertainty over when the U.K. will start the process of quitting the EU has banks on tenterhooks. But a source told CNBC that banks are “preparing for an economic nuclear winter situation.”
Speaking on the condition of anonymity due to the sensitive nature of the topic, a source from a major investment bank told CNBC that financial services firms have put together a strategy in place that takes into account the worst-case scenario that could happen by the end of this year.
So precisely what would an “economic nuclear winter” look like?
I don’t know, but it certainly does not sound good.
We should be thankful that things have been as calm and stable as they have been so far in 2016, but nobody should be fooled into thinking that our problems have been fixed.
The truth is that the global debt bubble is at an all-time high, the banks are being more reckless and are more vulnerable than ever before, and troubling economic numbers continue to pour in from all over the planet.
The stage is certainly set for the next major global economic crisis, and it isn’t going to take much to push the world over the edge.