The Beginning Of The End
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This Is About As Good As Things Are Going To Get For The Middle Class – And It’s Not That Good

Depressed - Public DomainThe U.S. economy has had six full years to bounce back since the financial collapse of 2008, and it simply has not happened.  Median household income has declined substantially since then, total household wealth for middle class families is way down, the percentage of the population that is employed is still about where it was at the end of the last recession, and the number of Americans that are dependent on the government has absolutely exploded.  Even those that claim that the economy is “recovering” admit that we are not even close to where we used to be economically.  Many hope that someday we will eventually get back to that level, but the truth is that this is about as good as things are ever going to get for the middle class.  And we should enjoy this period of relative stability while we still can, because when the next great financial crisis strikes things are going to fall apart very rapidly.

The U.S. Census Bureau has just released some brand new numbers, and they are quite sobering.  For example, after accounting for inflation median household income in the United States has declined a total of 8 percent from where it was back in 2007.

That means that middle class families have significantly less purchasing power than they did just prior to the last major financial crisis.

And one research firm is projecting that it is going to take until 2019 for median household income to return to the level that we witnessed in 2007…

For everybody wondering why the economic recovery feels like a recession, here’s the answer: We’re still at least five years away from regaining everything lost during the 2007-2009 downturn.

Forecasting firm IHS Global Insight predicts that real median household income — perhaps the best proxy for middle-class living standards — won’t reach the prior peak from 2007 until 2019. Since the numbers are adjusted for inflation, that means the typical family will wait 12 years until their purchasing power is as strong as it was before the recession. That would be the longest period of stagnation, by far, since the Great Depression of the 1930s.

Of course that projection assumes that the economy will continue to “recover”, which is a very questionable assumption at best.

Meanwhile, total household wealth has been declining for middle class families as well.

According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.

That is a pretty substantial drop.  But you never hear our politicians (especially the Democrats) bring up numbers like that because they want us to feel good about things.

So why is all of this happening?

The biggest reason why the middle class is struggling so much is the lack of good jobs.

As the chart posted below demonstrates, the percentage of the working age population that is actually employed is still way, way below where it was prior to the last recession…

Employment Population Ratio

The “employment recovery” (the tiny little bump at the end of the chart) has been so miniscule that it is hardly even worth mentioning.

At the moment, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the U.S. population each month.

And a lot of the workers that have lost jobs since the start of the last recession have never been able to find a new one.

According to a brand new survey conducted by Rutgers University, more than 20 percent of all workers that have been laid off in the past five years still have not found a new job.

Meanwhile, the control freak bureaucrats that run this country continue to kill off small businesses.

In recent years we have seen large numbers of small businesses fail, and at this point the rate of small business ownership in the United States is at an all-time low.

As a result of everything that you have just read, the middle class is shrinking and dependence on the government is soaring.

Today, there are 49 million Americans that are dealing with food insecurity, and Americans received more than 2 trillion dollars in benefits from the federal government last year alone.

For many more statistics just like this, please see my previous article entitled “30 stats to show to anyone that does not believe the middle class is being destroyed“.

Without a doubt, things are not that good for the middle class in America these days.

Unfortunately, the next great wave of financial trouble is rapidly approaching, and once it strikes things are going to get substantially worse for the middle class.

Yes, the stock market set record high after record high this summer.  But what we have observed is classic bubble behavior.  So many of the exact same patterns that occurred just prior to previous stock market crashes are happening once again.

And it is interesting to note that September 22nd has marked important market peaks at various times throughout history…

For traders, September 22 is one of those days with a notorious history. UBS’s Art Cashin notes that September 22 marked various market highs in 1873, 1929, 1980, and even as recent as 2008.

Could the coming months be the beginning of the next major stock market decline?

Small-cap stocks are already starting to show signs of real weakness.  In fact, the Russell 2000 just hit a “death cross” for the first time in more than 2 years

The Russell 2000 has been diverging from the broader market over the last several weeks, and now technicians point out it has flashed a bearish signal. For the first time in more than two years, the small-cap index has hit a so-called death cross.

A death cross occurs when a nearer-term 50-day moving average falls below a longer-term, 200-day moving average. Technicians argue that a death cross can be a bearish sign.

None of us knows what the market is going to do tomorrow, but a lot of the “smart money” is getting out of the market right now while the getting is good.

So where is the “smart money” putting their assets?

In a previous article, I discussed how sales of gold bars to wealthy clients is way up so far this year.

And CNBC has just reported that the ultra-wealthy “are holding mountains of cash” right now…

Billionaires are holding mountains of cash, offering the latest sign that the ultra-wealthy are nervous about putting more money into today’s markets.

According to the new Billionaire Census from Wealth-X and UBS, the world’s billionaires are holding an average of $600 million in cash each—greater than the gross domestic product of Dominica.

Why are they doing this?

Are they concerned about the potential of a market crash?

And if we do see another market crash like we witnessed back in 2008, what is that going to mean for the rest of us?

2008 certainly did not destroy our economy.

But it did cause an immense amount of damage that we have never recovered from.

Now the next wave is approaching, and most people don’t even see it coming.

The Stock Market In Japan Is COLLAPSING

Stock Market Collapse In JapanDid you see what just happened in Japan?  The stock market of the 3rd largest economy on the planet is imploding.  On Tuesday, the Nikkei fell by more than 610 points.  If that sounds like a lot, that is because it is.  The largest one day stock market decline in U.S. history is only 777 points.  So far, the Dow is only down about 1000 points during this “correction”, but the Nikkei is down more than 2,300 points.  The Nikkei has dropped more than 14 percent since the peak of the market, and many analysts believe that this is only just the beginning.  Those that have been waiting for a full-blown stock market collapse may be about to get their wish.  Japan is absolutely drowning in debt, their central bank is printing money like crazy and the Japanese population is aging rapidly.  As far as economic fundamentals go, there is very little good news as far as Japan is concerned.  So will an Asian financial collapse precede the next great financial crisis in the United States?  That is what some have been predicting, and it starting to look increasingly likely.

What happened to the Nikkei early on Tuesday was absolutely breathtaking.  The following is how Bloomberg described the carnage…

At the end of January 2013, Japanese stocks trailed only Portugal for the biggest rally among developed markets. Now the Nikkei 225 Stock Average is leading declines, slumping 8.5 percent last month and today capping a 14 percent drop from its Dec. 30 peak.

Losses snowballed in Tokyo during a global retreat that has erased $2.9 trillion from equity values worldwide this year amid signs of slower growth in China and stimulus cuts by the U.S. Federal Reserve.

As Bloomberg noted, much of the blame for the financial problems that we are seeing all over the planet right now is being placed on the Federal Reserve.

The Fed created this bubble by pumping trillions of fresh dollars into the global financial system, and now they are bursting this bubble by starting to cut off the flow of easy money.

This is something that I warned would happen when the Fed decided to taper, and now RBS is warning of a “market bloodbath” unless the Federal Reserve immediately stops tapering.

Most Americans simply do not realize that our financial markets no longer resemble a free market system.  Instead, they are highly manipulated and distorted by the central banks, and the trillions of dollars of “hot money” that the Fed has poured into the global financial system has infected virtually every financial market on Earth

On Wall Street they call it “hot money”—that seemingly endless flow of cash that goes to the most profitable country du jour—but in the real economy it’s gone cold.

That hot money has come mostly in the form of a low-yielding U.S. dollar, which investors have borrowed en masse to fund investments in other higher-yielding currencies across the globe. The so-called carry trade has helped fuel an investment bonanza across the world that has boosted risk assets thanks primarily to the U.S. Federal Reserve‘s easy-money policy.

But with the Fed tiptoeing away from what initially was an $85 billion-a-month infusion of liquidity, investors are beginning to prepare themselves for a world of rising rates in which the endless cash flow to emerging market economies begins to ebb, then cease.

We never fixed any of the fundamental problems that caused the last financial crisis.  Instead, the Fed seemed to think that the solution to any problem was just to create more money.

It was an incredibly stupid approach, and now our fundamental problems are worse than ever as Marc Faber recently noted

“Total credit as a percent of the global economy is now 30 percent higher than it was at the start of the economic crisis in 2007, we have had rapidly escalating household debt especially in emerging economies and resource economies like Canada and Australia and we have come to a point where household debt has become burdensome on the system—that is, where an economic slowdown follows.”

So what comes next?

Well, unless the Fed or other central banks intervene, we are probably going to have even more carnage.

At least that is what Dennis Gartman, the editor and publisher of “The Gartman Letter”, told CNBC on Tuesday

“I just think you’re going to have a very severe, very substantive and really quite ugly correction that will probably make a lot of people wail and gnash their teeth before it’s done.”

Other analysts share his pessimism.  According to Doug Short, the vice president of research at Advisor Perspectives, the U.S. stock market “still looks 67% overvalued“.

Most sobering of all is what Richard Russell is saying.  In his 60 years of writing about financial issues, he has never been “so filled with foreboding regarding what lies ahead”

I’d be lying if I said that I wasn’t worried about the way things are going.  Frankly, I’m truly scared for myself, my family and the nation.  I have the sinking feeling that the stock market is on the edge of a crash.  If that happens, investor sentiment will turn quickly bearish.  And the bear market will start feeding on itself.  Ironically, the recent action occurred in the face of almost insane bullishness on the part of the crowd and on the part of investors.

Obviously smart heads and institutional money managers know that the US is semi dead in the water.  And all the talk about an improving economy is just wishes and hopes.  Bernanke’s dream of a flourishing new economy, improving without the need of the Fed’s help, is an idle dream.

I’ve been writing about the stock market for over 60 years and I can’t remember a time when I was so filled with foreboding regarding what lies ahead.  The primary trend of the market, like the tide of the ocean, is irresistible, and waits for no man.  What scares me the most in this current situation is that I see no clear island of safety.

You can read the rest of his very disturbing remarks right here.

U.S. stocks may not totally crash this week, this month or even this year, but without a doubt a day of reckoning is coming.  As a society, our total consumer, business and government debt is now equivalent to approximately 345 percent of GDP.

The only way that the game can continue is to keep pumping up the debt bubble even more.

Once the debt bubble stops expanding, it will start collapsing very rapidly.

Those that foolishly still have lots of money in the stock market better hope that the Federal Reserve decides to intervene in a major way very soon.

Because if they don’t, there is a very good chance that we could indeed have a “market bloodbath” on our hands.

Startling Evidence That Central Banks And Wall Street Insiders Are Rapidly Preparing For Something BIG

If you want to figure out what is going to happen next in the financial markets, carefully watch what the insiders are doing.  Those that are “connected” have access to far better sources of information than the rest of us have, and if they hear that something big is coming up they will often make very significant moves with their money in anticipation of what is about to happen.  Right now, Wall Street insiders and central banks all around the globe are making some very unusual moves.  In fact, they appear to be rapidly preparing for something really big.  So exactly what are they up to?  In a previous article entitled “Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?“, I speculated that they may be preparing for a financial meltdown of some sort.  As I noted in that article, more than 600 banking executives have resigned from their positions over the past 12 months, and I have been personally told that a substantial number of Wall Street bankers have been shopping for “prepper properties” this summer.  But now even more evidence has emerged that quiet preparations are being made for an imminent financial collapse.  That doesn’t guarantee that something will happen or won’t happen.  Like any good detective, we are gathering clues and trying to figure out what the evidence is telling us.

Why Is George Soros Selling So Much Stock And Buying So Much Gold?

I am certainly not a fan of George Soros.  He has funneled millions upon millions of dollars into organizations that are trying to take America in the exact wrong direction.

However, I do recognize that he is extremely well connected in the financial world.  Soros is almost always ahead of the curve on financial matters, and if something big is going to go down George Soros is probably going to know about it ahead of time.

That is why it is very alarming that he has dumped all of his banking stocks and that he is massively hoarding gold.  The following is from shtfplan.com….

In a harbinger of what may be coming our way in the Fall of 2012, billionaire financier George Soros has sold all of his equity positions in major financial stocks according to a 13-F report filed with the SEC for the quarter ending June 30, 2012.

Soros, who manages funds through various accounts in the US and the Cayman Islands, has reportedly unloaded over one million shares of stock in financial companies and banks that include Citigroup (420,000 shares), JP Morgan (701,400 shares) and Goldman Sachs (120,000 shares). The total value of the stock sales amounts to nearly $50 million.

What’s equally as interesting as his sale of major financials is where Soros has shifted his money. At the same time he was selling bank stocks, he was acquiring some 884,000 shares (approx. $130 million) of Gold via the SPDR Gold Trust.

Why would you dump over a million shares of stock in major banks and purchase more than 100 million dollars worth of gold?

Well, it would make perfect sense if you believed that a collapse of the financial system was about to happen.

Earlier this year, George Soros told the following to Newsweek….

“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”

It looks like he is putting his money where his mouth is.

Perhaps even more disturbing is what he believes is coming after the financial collapse….

As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”

That doesn’t sound good.

George Soros has told us what he believes is going to happen, and now he is making moves with his money that indicate that he is convinced that it is actually about to start happening.

But he is not the only one that has been busy accumulating gold.

Billionaire John Paulson (the one that made 20 billion dollars on the subprime mortgage meltdown) has been buying gold like crazy and his company now “has 44 percent of its $24 billion fund exposed to bullion.

So why are Soros and Paulson buying up so much gold?

Central Banks Are Also Hoarding Gold

According to the World Gold Council, the amount of gold bought by the central banks of the world absolutely soared during the second quarter of 2012.  The 157.5 metric tons of gold bought by the central banks of the world last quarter was an increase of 62.9 percent from the first quarter of 2012 and a 137.9 percent increase from the second quarter of 2011.

Prior to 2009, the central banks of the world had been net sellers of gold for about two decades.  But now that has totally changed, and last quarter central banks stocked up on gold in quantities that we have not seen before….

At 157.5 metric tons, gold buying among central banks came in at its highest quarterly level since the sector became a net buyer of the precious metal in the second quarter of 2009, data in the organization’s quarterly Gold Demand Trends report show.

So why have the central banks of the world become such gold bugs?

Is there something they aren’t telling us?

Rampant Insider Selling

Wall Street insiders have been dumping a whole lot of stock this year.

In my previous article, I linked to a CNN article from back in April….

First quarter earnings have been decent, if not spectacular. And many corporate executives are issuing cautiously optimistic guidance for the rest of the year.

But while insiders’ lips are saying one thing, their wallets are saying another. The level of insider selling among S&P 500 (SPX) companies is the highest in nearly 10 years. That is not good.

A lot of insiders appear to be getting out at the top of the market while the getting is still good.

Other insiders appear to be bailing out before the bottom falls out from beneath them.

Just check out what has been happening to Facebook stock.  It hit another new record low on Thursday as insiders dumped stock.  The following is from a CNN article….

Facebook’s life as a public company has been a nightmare from day one, and the pain continued on Thursday as some company insiders got their first chance to dump shares.

Facebook stock hit a new intra-day low of $19.69 Thursday morning, and ended the day 6.3% lower at $19.87.

Sadly, Facebook has now lost close to half of its value since the IPO.

Will Facebook end up being the poster child for the irrational stock market bubble that we have seen over the past couple of years?

Overall, retail investors have been very busy pulling money out of stocks in recent weeks.

The following are the net inflows to equity funds over the past five weeks (in millions of dollars) according to ICI….

7/11/2012: -537

7/18/2012: 637

7/25/2012: -2,999

8/1/2012: -6,866

8/8/2012: -3,684

According to the figures above, more than 10 billion dollars has been pulled out of equity funds over the past two weeks alone.

So does this mean anything?

Maybe.

Maybe not.

But it is very interesting and it bears watching.

Why Does The U.S. Government Need So Much Ammunition?

In my previous article, I also noted that the U.S. government appears to be very rapidly making preparations for something really big.

This week, it was revealed that the Social Security Administration plans to buy 174,000 hollow point bullets which will be delivered to 41 different locations all over America.

Now why in the world does the Social Security Administration need 174,000 bullets?

And why do they need hollow point bullets?  Those bullets are designed to cause as much damage to internal organs as possible.

But of course this is only the latest in a series of very large purchases of ammunition by U.S. government agencies.  The following is from a recent article by Paul Joseph Watson….

Back in March, Homeland Security purchased 450 million rounds of .40-caliber hollow point bullets that are designed to expand upon entry and cause maximum organ damage, prompting questions as to why the DHS needed such a large amount of powerful bullets merely for training purposes.

This was followed by another DHS solicitation asking for a further 750 million rounds of assorted bullets, including 357 mag rounds that are able to penetrate walls.

Now why in the world would the government need over a billion rounds of ammunition?

If it was the U.S. military I could understand this.  You can burn through a whole lot of ammunition fighting wars.

But this makes no sense – unless they believe that big trouble is coming.

Personally, I wouldn’t blame them for getting prepared.  Our economy continues to fall apart and there are signs of social decay everywhere around us.

The American people are more frustrated and more angry than at any other time in modern history.  This upcoming election is only going to cause Americans to become even more angry and even more divided.

All it would take is just the right “spark” to cause this country to erupt.

It could be the upcoming election.

It could be the collapse of the financial system.

Or it might be something else.

But the conditions are definitely there for it to happen.

Unfortunately, the American public is never told to prepare because authorities never want “to panic” the general population.

We are always the last to know, and that stinks.

So don’t wait for someone to come on the television and announce that a crisis is happening.

If you wait that long, it will be too late.

Instead, open up your eyes and think for yourself.

We all need to work hard to get prepared for the coming crisis while we still can.

As you can see, Wall Street insiders, the U.S. government and the central banks of the world are busy getting prepared.

Don’t put your head in the sand.

The warning signs are there and time is running out.

Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?

Something really strange appears to be happening.  All over the globe, governments and big banks are acting as if they are anticipating an imminent financial collapse.  Unfortunately, we are not privy to the quiet conversations that are taking place in corporate boardrooms and in the halls of power in places such as Washington D.C. and London, so all we can do is try to make sense of all the clues that are all around us.  Of course it is completely possible to misinterpret these clues, but sticking our heads in the sand is not going to do any good either.  Last week, it was revealed that the U.S. government has been secretly directing five of the biggest banks in America “to develop plans for staving off collapse” for the last two years.  By itself, that wouldn’t be that big of a deal.  But when you add that piece to the dozens of other clues of imminent financial collapse, a very troubling picture begins to emerge.  Over the past 12 months, hundreds of banking executives have been resigning, corporate insiders have been selling off enormous amounts of stock, and I have been personally told that a significant number of Wall Street bankers have been shopping for “prepper properties” in rural communities this summer.  Meanwhile, there have been reports that the U.S. government has been stockpiling food and ammunition, and Barack Obama has been signing a whole bunch of executive orders that would potentially be implemented in the event of a major meltdown of society.  So what does all of this mean?  It could mean something or it could mean nothing.  What we do know is that a financial collapse is coming at some point.  Over the past 40 years, the total amount of all debt in the United States has grown from about 2 trillion dollars to nearly 55 trillion dollars.  That is a recipe for financial armageddon, and it is inevitable that this gigantic bubble of debt is going to burst at some point.

In normal times, the U.S. government does not tell major banks to “develop plans for staving off collapse”.

But according to a recent Reuters article, that is apparently exactly what has been happening….

U.S. regulators directed five of the country’s biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.

The two-year-old program, which has been largely secret until now, is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.

Does it seem odd to anyone else that only five really big banks got such a warning?

And why keep it secret from the American public?

Does the federal government actually expect such a collapse to happen?

If federal officials do expect a financial collapse to occur, they would not be the only ones.  An increasing number of very respected economists are speaking about the coming financial collapse as if there is a certain inevitability about it.

For example, check out the following quote from a recent Money Morning article….

Richard Duncan, formerly of the World Bank and chief economist at Blackhorse Asset Mgmt., says America’s $16 trillion federal debt has escalated into a “death spiral,” as he told CNBC.

And it could result in a depression so severe that he doesn’t “think our civilization could survive it.”

A former World Bank executive is warning that our civilization might not survive what is coming?

That is pretty chilling.

Economist Nouriel Roubini says that he believes that the coming crisis will be even worse than 2008….

“Worse because like 2008 you will have an economic and financial crisis but unlike 2008, you are running out of policy bullets. In 2008, you could cut rates; do QE1, QE2; you could do fiscal stimulus; you could backstop/ringfence/guarantee banks and everybody else. Today, more QEs are becoming less and less effective because the problems are of solvency not liquidity. Fiscal deficits are already so large and you cannot bail out the banks because 1) there is a political opposition to it; and 2) governments are near-insolvent – they cannot bailout themselves let alone their banks. The problem is that we are running out of policy rabbits to pull out of the hat!”

Across the pond, many European officials are echoing similar sentiments.

What Nigel Farage told King World News the other day is very ominous….

Today MEP (Member European Parliament) Nigel Farage spoke with King World News about what he described as the possibility of, “a really dramatic banking collapse.”  Farage also warned that central planners want to enslave and imprison people inside of a ‘New Order,’ and he described the situation as “horrifying.”

The situation in Europe continues to get worse and worse.  The authorities in Europe have come out with “solution” after “solution”, and yet unemployment continues to skyrocket and economic conditions in the EU have deteriorated very steadily over the past 12 months.

If all of that was not bad enough, there are an increasing number of indications that Germany is actually considering leaving the euro.

Needless to say, that would be a complete and total disaster for the rest of the eurozone.

Of course there are any number of ways that the financial crisis in Europe could potentially play out.

But all of the realistic scenarios would be very bad for the global economy.

Meanwhile, our resources are dwindling, war in the Middle East could erupt at any moment and our planet is becoming increasingly unstable.  The following is from a recent article by Paul B. Farrell on Marketwatch.com….

Fasten your seat belts, soon we’ll all be shocked out of denial. Some unpredictable black swan. A global wake-up call will trigger the Pentagon’s prediction in Fortune a decade ago at the launch of the Iraq War: “By 2020 … an ancient pattern of desperate, all-out wars over food, water, and energy supplies is emerging … warfare defining human life.”

It is almost as if a “perfect storm” is brewing.

Of course the historic drought that is ravaging food production in the United States this summer is not helping matters either.  Another summer or two like this one and we could be looking at a return of Dust Bowl conditions.

Anyone that is watching what is going on in the world and is not concerned at all about what is happening is simply being delusional.

Recently, a “team of scientists, economists, and geopolitical analysts” examined the current state of the global economic system and the conclusions they reached were absolutely staggering….

One member of this team, Chris Martenson, a pathologist and former VP of a Fortune 300 company, explains their findings:

“We found an identical pattern in our debt, total credit market, and money supply that guarantees they’re going to fail. This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.

“And what’s really disturbing about these findings is that the pattern isn’t limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well.”

According to Martenson: “These systems could all implode at the same time. Food, water, energy, money. Everything.”

Hmmmm – it sounds like they have been reading The Economic Collapse Blog.

The truth is that a massive worldwide financial collapse is coming.

It is inevitable, and it is going to be extremely painful.

So what do you think about all of this?  Please feel free to post a comment with your thoughts below….

15 Potentially Massive Threats To The U.S. Economy Over The Next 12 Months

We live in a world that is becoming increasingly unstable, and the potential for an event that could cause “sudden change” to the U.S. economy is greater than ever.  There are dozens of potentially massive threats that could easily push the U.S. economy over the edge during the next 12 months.  A war in the Middle East, a financial collapse in Europe, a major derivatives crisis or a horrific natural disaster could all change our economic situation very rapidly.  Most of the time I write about the long-term economic trends that are slowly but surely ripping the U.S. economy to pieces, but the truth is that just a single really bad “black swan event” over the next 12 months could accelerate our economic problems dramatically.  If oil was cut off from the Middle East or a really bad natural disaster suddenly destroyed a major U.S. city, the U.S. economy would be thrown into a state of chaos.  Considering how bad the U.S. economy is currently performing, it would be easy to see how a major “shock to the system” could push us into the “next Great Depression” very easily.  Let us hope that none of these things actually happen over the next 12 months, but let us also understand that we live in a world that has become extremely chaotic and extremely unstable.

In the list below, you will find some “sudden change” events that are somewhat likely and some that are quite unlikely.  I have tried to include a broad range of potential “black swan events”, but there are certainly dozens more massive threats that could potentially be listed.

The following are 15 potentially massive threats to the U.S. economy over the next 12 months….

#1 War With Syria – U.S. Senator John McCain is now publicly calling for U.S. airstrikes against Syria.  A military conflict with Syria becomes more likely with each passing day.

#2 War With Iran – A war in the Middle East involving Iran could literally erupt at any time.  The following is from a Reuters news report that was issued on Monday….

President Barack Obama appealed to Benjamin Netanyahu on Monday to give sanctions time to curb Iran’s nuclear ambitions, but the Israeli prime minister offered no sign of backing away from possible military action, saying his country must be the “master of its fate.”

#3 A Disorderly Greek Debt Default – Many reporters in Europe seem to think that this is becoming increasingly likely.  So what would a disorderly Greek debt default mean for the global financial system?  A leaked report that was authored by the Institute of International Finance says that a disorderly Greek debt default would have some very serious consequences.  You can read the full text of that leaked report right here.

#4 An Economic Collapse In Spain – Spain has one of the largest economies in Europe and it is rapidly becoming a basket case.  As I have written about previously, the unemployment rate in Spain has hit 19.9 percent, and the unemployment rate for workers under the age of 25 is up to 49.9 percent.  Unfortunately, the situation in Spain continues to deteriorate.  The following is from a recent article by Marc Chandler….

However, the devolution in Spain is particularly troubling. The new fiscal compact had just been signed last week, which includes somewhat more rigorous fiscal rule and enforcement, when Spain’s PM Rajoy revealed that this year’s deficit would come in around 5.8 percent of GDP rather the 4.4 percent target. This of course follows last year’s 8.5 percent overshoot of the 6 percent target.

The problem that for Spain is that the 4.4 percent target was based on forecasts for more than 2 percent growth this year. However, in late February, the EU cuts its forecast to a 1 percent contraction. This still seems optimistic. The IMF forecasts a 1.7 percent contraction, which the Spanish government now accepts.

#5 The Price Of Gasoline – The average price of a gallon of gasoline in the United States has risen for 27 days in a row and is now up to $3.77.  Virtually all forms of economic activity are affected by the price of gasoline, and if the price of gas keeps going up it is eventually going to have dramatic consequences for the U.S. economy.

#6 The Student Loan Debt Bubble – Just like we saw with the housing bubble, the student loan debt bubble just continues to grow and grow and grow.  At some point the nearly 1 trillion dollar bubble is going to burst.  What effect will it have on our financial system when that finally happens?

#7 State And Local Government Debt Crisis – It is being reported that California is running out of cash again and there are cities all over the country that are on the verge of bankruptcy.  Could we see a significant municipal bond crisis in the next 12 months?

#8 The Collapse Of A Major U.S. Bank – A number of top U.S. banks are looking increasingly shaky.  In a recent article, David Trainer explained why he has such serious concerns about Bank of America right now….

In my opinion, there are four actions taken by financial services that signal the company is headed to serious trouble.

1. Management shake-up and major layoffs – lots of layoffs over the past year

2. Exploiting accounting rules to boost earnings – SFAS 159

3. Drawing down reserves to boost earnings: to the tune of $13.3 billion in 2011 and 2012

4. Bilking customers with new fees: tried it before and trying it again

Bank of America has taken all four steps.

#9 A Derivatives Crisis – The International Swaps and Derivatives Association recently ruled that the Greek debt deal will not trigger payouts on credit default swaps.  This is seriously shaking confidence in the global market for derivatives.  But the global financial system simply cannot afford a major derivatives crisis.

Estimates of the notional value of the worldwide derivatives market range from $600 trillion all the way up to $1.5 quadrillion.  The notional value of all derivatives held by Bank of America is approximately $75 trillion.  JPMorgan Chase is holding derivatives with a notional value of approximately $79 trillion.

When the derivatives bubble finally bursts it is going to be a financial horror show unlike anything we have ever seen.

#10 The Fall Of The Japanese Economy – The Japanese economy shrank at a 2.3 percent rate during the fourth quarter of 2011.  Japan has a debt to GDP ratio of over 200 percent and a major debt crisis involving Japan could erupt at any time.

#11 A “Solar Megastorm” – Scientists tell us that there is a “1 in 8 chance” that a “solar megastorm” will hit the earth by 2014.  A recent Daily Mail article detailed what some of the consequences of such an event would be….

‘We live in a cyber cocoon enveloping the Earth. Imagine what the consequences might be,’ Daniel Baker, of the University of Colorado’s Laboratory for Atmospheric and Space Physics told National Geographic when asked about a potential ‘megastorm’.

‘Every time you purchase a gallon of gas with your credit card, that’s a satellite transaction.

‘Imagine large cities without power for a week, a month, or a year. The losses could be $1 to $2 trillion, and the effects could be felt for years.

#12 A Major West Coast Earthquake Or Volcanic Eruption – On Monday, there was a 4.0 earthquake in San Francisco and a 6.1 earthquake in Argentina.  Is the “Ring of Fire” waking up again?

#13 Tornado Damage To Major U.S. Cities – Last year, the U.S. experienced one of the worst tornado seasons of all time.  This year, we have already seen the worst tornado outbreak ever recorded in the United States in the month of March.  A couple of towns in Indiana were completely wiped out by that outbreak.  So what should we expect when we get to the heart of tornado season this year?

#14 Severe Drought In The United States – Last summer was one of the driest summers on record in the United States, and in many areas there is simply not enough water available for farmers this year.  Some are even projecting that we could see “dust bowl conditions” return to some areas of the country eventually.

#15 An Asteroid Strike In 2013 – Although scientists tell us that the probability is extremely low, the truth is that there is a slight chance that a sizeable asteroid could hit the earth in February 2013.  The asteroid is estimated to be between 60 and 100 meters wide, and it is projected to pass by our planet “at a distance of under 27,000 km“.  If it did hit us (and scientists say that the odds of that happening are very low) it would potentially be as serious an event as the Tunguska Event in Siberia in 1908.  Mac Slavo of shtfplan.com recently described how awesome the Tunguska Event really was….

On June 30, 1908 an incoming meteor exploded approximately 5 miles above Siberia. The force of the air burst explosion, estimated at between 15 and 30 megatons, or about 1000 times bigger than the atomic bomb that destroyed Hiroshima, was so powerful that it annihilated everything in an 830 square mile area, and reports suggest that that explosion was heard up to 1000 miles away. Because of the remoteness of the impact zone, the Tunguska Event over Siberia had very little effect on the human population in the region, but the destruction of some 80 million trees in the area shows just how powerful a blast was created.

Of course there are so many other “sudden change” events that could potentially happen – a terror event in a major U.S. city, a deadly pandemic, an EMP attack, cyberterrorism or a major political scandal could all possibly cause a stock market crash and an economic collapse in the United States.

In the world that we are living in today, you just never know what is going to happen.

So what are all of you concerned about over the next 12 months?

Do you see the potential for some “black swan events” to happen?

Please feel free to post a comment with your thoughts below….

This Is What An Economic Depression Looks Like In The 21st Century

Do you want to see what a 21st century economic depression looks like?  Just look at Greece.  Once upon a time, the Greek economy was thriving, the Greek government was borrowing money like there was no tomorrow and Greek citizens were thoroughly enjoying the bubble of false prosperity that all that debt created.  Those that warned that Greece was headed for a financial collapse were laughed at and were called “doom and gloomers”.  Well, nobody is laughing now.  You see, the truth is that debt is a very cruel master.  Greeks were able to live way beyond their means for many, many years but eventually a day of reckoning arrived.  At this point, the Greek economy has been in a recession for five years in a row, and the economic crisis in that country is rapidly getting even worse.  It was just recently announced that the overall rate of unemployment in Greece has soared above 20 percent and the youth unemployment rate has risen to an astounding 48 percent.  One out of every five retail stores has been shut down and parents are literally abandoning children in the streets.  The frightening thing is that this is just the beginning.  Things are going to get a lot worse in Greece.  And in case you haven’t been paying attention, these kinds of conditions are coming to the United States as well.  We are heading down the exact same road as Greece went down, and the economic pain that this country is eventually going to suffer is going to be beyond anything that most Americans would dare to imagine.

All debt spirals eventually come to an end.  For years, Greece borrowed huge amounts of very cheap money, but there came a point when the debt became absolutely strangling and the rest of the world refused to lend the Greek government money at such cheap rates anymore.

Greece would have defaulted long before now if the EU and the IMF had not stepped in to bail them out.  But along with those bailouts came strings.  The EU and the IMF insisted that the Greek government cut spending and raise taxes.

Well, those spending cuts and tax increases caused the economy to slow down.  Tax revenues decreased and deficit reduction targets were missed.  So the EU and the IMF insisted on even more spending cuts and tax increases.

Even after all of the spending cuts and all of the tax increases that we have seen, the debt to GDP ratio in Greece is still higher than it was before the crisis began.  Today, the Greek national debt is sitting at 142 percent of GDP.

Now the EU and the IMF are demanding even more austerity measures before they will release any more bailout money.

Needless to say, the Greek people are pretty much exasperated by all of this.  They created this mess by going into so much debt, but they certainly don’t like the solutions that are being imposed upon them.

Protesters in Greece are absolutely outraged that the EU and the IMF are now demanding a 22 percent reduction in the minimum wage.

Most families in Greece are just barely surviving at this point.  Unfortunately, Greece is probably looking at depression conditions for many years to come.

Over the past three years, the size of the Greek economy has shrunk by 16 percent.

In 2012, it is being projected that the Greek economy will shrink by another 5 percent.

Sadly, that projection is probably way too optimistic.

Over the past couple of months, it has been like someone has pulled the rug out from under the Greek economy.  Just check out the following numbers from an article in the Telegraph by Ambrose Evans-Pritchard….

Another normal day at the Hellenic Statistical Authority.

We learn that:

Greece’s manufacturing output contracted by 15.5pc in December from a year earlier.

Industrial output fell 11.3pc, compared to minus 7.8pc in November.

Unemployment jumped to 20.9pc in November, up from 18.2pc a month earlier.

I have little further to add. This is what a death spiral looks like.

Can you imagine unemployment going up by 2.7 percent in one month?

This is what a 21st century economic depression looks like.

And needless to say, civil unrest is rampant in Greece.

The following is how a USA Today article described some of the protests that we saw in Greece this week….

Scores of youths, in hoods and gas masks, used sledge hammers to smash up marble paving stones in Athens’ main Syntagma Square before hurling the rubble at riot police.

The country’s two biggest labor unions stopped railway, ferry and public transport schedules, and hospitals worked on skeleton staff while most public services were disrupted. Unions were planning protests in Athens and other cities around midday.

Greek citizens are exasperated by the endless rounds of austerity that are being imposed upon them.  They wonder how far all of this is going to go.

How much higher can taxes go in Greece?  Greece already has tax rates that are among the highest in Europe….

Greece has the third highest rate of VAT in Europe, second highest gas/petrol tax, third highest tax on social insurance contributions, fifth highest VAT on alcohol, highest property tax and one of the worst corporate tax rates, without the quality of living or competitiveness to match.

How much farther can government pay be cut?  Greek civil servants have had their incomes slashed by about 40 percent since 2010.

How would you feel if your pay was reduced by 40 percent?

Large numbers of Greeks are rapidly reaching the end of their ropes.  The following is from a recent article in the Independent….

“People are scared and haven’t really realised what’s happening yet,” George Pantsios, an electrician for the country’s public power corporation, said. He has only been receiving half of his €850 monthly wage since August. “But once we all lose our jobs and can’t feed our kids, that’s when it’ll go boom and we’ll turn into Tahrir Square.”

Instead of turning violent, others are simply giving in to despair.  According to the Daily Mail, large numbers of Greek children are being abandoned because their parents simply cannot afford to take care of them anymore.  The note that one mother left with her little toddler was absolutely heartbreaking….

One mother, it said, ran away after handing over her two-year-old daughter Natasha.

Four-year-old Anna was found by a teacher clutching a note that read: ‘I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry.’

Sadly, there are an increasing number of Greeks that are giving up on life entirely.  The number of suicides in Greece rose by 40 percent during just one recent 12 month time period.

But we haven’t even seen the worst in Greece yet.  The worst is still yet to come.

And the people of Greece are going to get angrier and angrier and angrier.

According to one recent poll, about 90 percent all of Greeks are unhappy with the interim government led by Prime Minister Lucas Papademos.

This week, that government has started to fall apart.  Over just the past few days, 6 members of the 48-member government cabinet have resigned.  Not only is there real doubt if the new austerity measures will be approved, there is very real doubt if this government will be able to hold together much longer.

Frustration with the EU and the IMF has reached a fever pitch in Greece.  Just check out what Reuters is reporting….

In a letter obtained by Reuters on Friday, the Federation of Greek Police accused the officials of “…blackmail, covertly abolishing or eroding democracy and national sovereignty” and said one target of its warrants would be the IMF’s top official for Greece, Poul Thomsen.

So what is going to happen next in Greece?

The truth is that nobody knows.

But whatever kind of “deals” are reached, the reality is that nothing is going to keep Greece from continuing to experience depression-like conditions for quite some time.

Unfortunately, Greece is not an isolated case.

Portugal, Ireland, Italy and Spain are all going down the same path and Europe does not have enough money to bail all of them out.

To get an idea of how much money it would take to bail out the financially troubled nations of Europe, just check out this infographic that was recently posted on ZeroHedge.

A day of reckoning is coming for the United States as well.  As CNBC recently noted, the U.S. debt problem is far worse than the European debt problem is.

That is why I have written over and over about the U.S. national debt and about how the U.S. government is spending too much money.

Right now, the U.S. government is still able to borrow gigantic mountains of very cheap money and is spending money as if tomorrow will never come.

Well, just like we saw in Greece, when debt gets out of control a day of great pain eventually arrives.

What we are watching unfold in Greece right now is coming to America.

You better get ready.

Are George Soros, The IMF And The World Bank Purposely Trying To Scare The Living Daylights Out Of Us?

Over the past couple of weeks, George Soros, the IMF and the World Bank have all issued incredibly chilling warnings about the possibility of an impending economic collapse.  Considering the power and the influence that Soros, the IMF and the World Bank all have over the global financial system, this is very alarming.  So are they purposely trying to scare the living daylights out of us?  Soros is even warning of riots in the streets of America.  Unfortunately, way too often top global leaders say something in public because they want to “push” events in a certain direction.  Do George Soros and officials at the IMF and World Bank hope to prevent a worldwide financial collapse by making these statements, or are other agendas at work?  We may never know.  But one thing is for sure – many of the top financial officials in the world are using language that is downright “apocalyptic”, and that is not a good sign for the rest of 2012.

Right now, George Soros is saying things that he has never said before.  Just check out what George Soros recently told Newsweek….

“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”

Later on in that same article, Soros is quoted as saying that we could soon see the U.S. government using “strong-arm tactics” to crack down on rioting in the streets of major U.S. cities….

As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”

It almost sounds like George Soros is anticipating the same kind of a breakdown of society that many survivalists and preppers are getting ready for.

So how bad are things going to get?

Well, George Soros is publicly warning that the coming financial crisis could end up being even worse than 2008.  Just check out the following quotes from him that appeared in a recent Businessweek article….

Billionaire investor George Soros said Europe’s sovereign-debt woes are “more serious” than the financial crisis of 2008 and that the world faces the prospect of a “vicious circle” of deflation.

“We have a more dangerous situation now than in 2008,” Soros, 81, said in response to a question at an event in the southern Indian city of Bangalore today. “The crisis in Europe is more serious than the crash of 2008.”

But George Soros is not the only one issuing these kinds of warnings.

Once again, the head of the IMF, Christine Lagarde, has made a speech in which she openly warned that we are heading for a repeat of the “1930s”.

She told an audience in Berlin on Monday that the globe is facing “a 1930s moment, in which inaction, insularity and rigid ideology combine to cause a collapse in global demand”.

During the speech she called for a trillion more dollars to support financially troubled governments, and she made the following statement….

“It is not about saving any one country or region. It is about saving the world from a downward economic spiral.”

As I wrote about the other day, the World Bank has also been using apocalyptic language about the global financial situation.  In a shocking new report, the World Bank revised GDP growth estimates for 2012 downward very sharply, it warned that Europe could be facing financial collapse at any time, and it instructed the rest of the world to “prepare for the worst.”

The lead author of the report, Andrew Burns, said that the “importance of contingency planning cannot be stressed enough” and that if there is a major financial crisis in Europe the entire globe will be deeply affected….

“An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09.” 

So should we be alarmed that George Soros, the IMF and the World Bank are all proclaiming that a financial nightmare could be just around the corner?

Of course we should be.

Whether their motives are pure or not, they are telling the truth about the global financial situation in this case.  As I have written about so frequently, there are a whole host of signs that indicate that we could be on the verge of a major global recession.

A lot of folks in the investment world are warning that hard times are about to hit us as well.  For example, the following is what legendary investor Joseph Granville recently told Bloomberg Television….

Joseph Granville, whose “sell everything” call in 1981 sparked a decline in U.S. stocks, said the Dow Jones Industrial Average (INDU) will drop toward 8,000 this year because of waning momentum and volume.

“Volume precedes prices,” Granville, 88, a technical analyst who has been publishing the Granville Market Letter from Kansas City, Missouri for about 50 years, said in an interview on “Street Smart” on Bloomberg Television. “You are seeing much lower volume. That tells you that prices are going to go much lower, much lower than most people think possible and very few people have projected.”

Considering all of the warnings out there, it only seems prudent to prepare for the worst.

But unfortunately, a lot of people are just going to leave their holdings sitting out there like a dead duck, and they are going to be absolutely devastated by the coming financial tsunami.

Those that believe that the United States can somehow escape the coming financial storm don’t really know what they are talking about.

In fact, there was very troubling news for the U.S. dollar just the other day.  It was announced that India will start paying for its oil from Iran in a currency other than U.S. dollars.

But this is just another sign that the rest of the world is starting to reject the U.S. dollar.  For decades, the U.S. dollar has been the reserve currency of the world and this has given us a tremendous advantage.  Unfortunately for us, that is now changing.

U.S. newspapers are not talking about what is going on, but mainstream newspapers in Europe are.  Right now, some of the biggest countries in the world are working on plans to quit using U.S. dollars for the buying and selling of oil.

The following comes from a recent article in The Independent….

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

This is a very big deal, and if this gets pulled off it is going to have devastating consequences for the U.S. dollar and for the U.S. economy.

But of course when it comes to troubles for the U.S. financial system, there are a whole host of issues that could be talked about.

An environment for a “perfect storm” is developing, and most Americans have absolutely no idea what is about to happen.

Fortunately, there are some researchers out there that are working hard to sound the alarm bells.  For example, the following quote comes from a recent interview with Gerald Celente….

I believe that we have to watch out for something along the lines of an economic martial law. The European system is in collapse. The financial system in the United States is just as tenuous, if not more, and I believe they will not admit there will be a financial crash but rather they will use a geo-political issue to get the people in a state of fear and hysteria whereby they’ll then call a bank holiday or devaluation of the currency, or a hyperinflation of the currency, and blame it on somebody else.

It would be wise to listen to what experts such as Gerald Celente are saying.

Now is the time to take stock of where you are at and to make plans for the coming year.

Just because things have “always” been a certain way does not mean that they will continue to be that way.

Just because certain things have “always” worked in the past does not mean that they will continue to work in the future.

Our world is experiencing fundamental changes.  It is changing at a faster pace than we have ever seen before.  The way that we all live our lives five or ten years from now will be vastly different from how we live our lives today.

This will be a very challenging time to be alive, but it is also going to be a very exciting time to be alive.

So what do all of you think is going to happen in 2012?

Please feel free to leave a comment with your thoughts below….

2012 Will Be More Difficult Than 2011

Do you believe that 2012 will be more difficult for the global economy than 2011 was?  Well, that is what German Chancellor Angela Merkel believes.  The woman that has become the most important politician in Europe recently declared that 2012 “will no doubt be more difficult than 2011″.  The funny thing is that she has generally been one of the most optimistic public figures in Europe throughout this debt crisis.  But now even Merkel is openly admitting that 2012 is going to be a really, really bad year.  Sadly, most Americans simply do not understand how important Europe is or how interconnected the global financial system has become.  The United States actually has a smaller population and a smaller economy than the EU does.  In fact, the EU has an economy that is nearly as large as the economies of the United States and China combined.  The EU also is home to more Fortune 500 companies that the U.S. is, and the European banking system is far larger than the U.S. banking system.  Anyone that does not believe that a financial collapse in Europe will have a devastating impact on the U.S. economy is living in a fantasy world.  Americans better start paying attention to what is going on over there, because we are about to be broadsided by a massive financial tsunami originating out of Europe.

It is not just Angela Merkel that is warning that 2012 is going to be a difficult year.  The following are several more very prominent individuals that are warning that bad times are on the way….

*Citigroup’s chief equity strategist, Tobias Levkovich, recently made the following statement….

“Europe is likely to have a meaningful recession in 2012″

*Christine Lagarde, the head of the IMF, recently said that we could soon see conditions “reminiscent of the 1930s depression” and that no country on earth “will be immune to the crisis”.

* Willem Buiter, the chief economist at Citigroup, recently said the following….

“Time is running out fast.  I think we have maybe a few months — it could be weeks, it could be days — before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it.”

* Even Paul Krugman of the New York Times is sounding quite apocalyptic….

“At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro. This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira. Next stop, France.”

I have written quite a bit recently about all of the signs that parts of Europe have already entered a recession.

Well, in just the past few days even more numbers have been released that indicate that a recession has now begun in Europe…..

-Manufacturing activity in the euro zone has fallen for five months in a row.

-Bad loans in Spain recently hit a 17-year high and the unemployment rate is at a 15-year high.

-Government revenues in Spain have not been up to the level that was expected.  The Spanish government just announced that the budget deficit for 2011 is going to end up being much larger than anticipated.

-Unfortunately, it appears that virtually all sectors of the Spanish economy seem to be slowing down….

The central bank said early indicators show that Spanish tourism, exports, spending and investment have been hit, which is likely to have led to a contraction in GDP in the fourth quarter.

Of course one of the most alarming things happening in Europe is the rapid contraction of the money supply.  It is almost impossible to avoid a recession when the money supply shrinks substantially.  The following comes from an article a few days ago in the Telegraph….

Simon Ward from Henderson Global Investors said the ECB’s “narrow” M1 money figures – tracked for clues on shorter-term spending patterns – show a drastic divergence between the North and South of the eurozone. “Parts of the core may avoid recession but there is no light at the end of the tunnel for the periphery. Real M1 deposits in Greece and Portugal have been falling at an annual rate of roughly 20pc over the last six months,” he said.

Right now, the rest of Europe is heading down the same road that Greece has been traveling on for several years.

Today, Greece is essentially bankrupt and is experiencing a full-blown depression.  At this point, nobody in Europe is even pretending that Greece is going to be okay.  The following comes from a recent Der Spiegel article….

“With debts amounting to 150 percent of GNP, Greece is de facto bankrupt. Over the course of 2011, even the leading representatives of the euro zone finally accepted this fact — after having claimed its opposite a year previously.”

Greece desperately needs relief from all of this debt, but the other nations in the eurozone do not want to provide that relief.  Instead, it looks like Germany is going to ask private creditors to take an even bigger “haircut” on Greek debt than previously proposed.  The following comes from a recent Bloomberg article….

“Germany’s government declined to comment on a report that it may push for creditors to accept bigger losses on Greek debt than previously agreed upon, saying only that talks on lowering Greece’s debt level may end soon.

Germany is studying a proposal to write down 75 percent of Greek government bonds held by private creditors as part of a planned debt swap to ensure greater debt sustainability”

If Germany ends up publicly proposing this, it will shatter what confidence is left in European sovereign bonds.

There is not that much of a difference between a 75 percent haircut and a full default.  If investors are forced to take a 75 percent haircut on Greek debt, then the financial world will have to start wondering if it is just a matter of time before giant haircuts are proposed for Italian debt, Spanish debt, Portuguese debt and Irish debt as well.

Hopefully Germany will not be this stupid.

But something has to be done about Greece.  Right now the IMF is projecting that Greek debt will reach 200% of GDP at some point in 2012 if changes are not made.

Of course Greece could cut government spending even more, but the cuts that have already been made have pushed that country into a total economic nightmare.

In a recent article, I discussed how the brutal austerity measures that we have seen have plunged the economy of Greece into a full-blown depression….

Just look at what happened to Greece.  Greece was forced to raise taxes and implement brutal austerity measures.  That caused the economy to slow down and tax revenues to decline and so government debt figures did not improve as much as anticipated.  So Greece was forced to implement even more brutal austerity measures.  Well, that caused the economy to slow down even more and tax revenues declined again.  In Greece this cycle has been repeated several times and now Greece is experiencing a full-blown economic depression.  100,000 businesses have closed and a third of the population is living in poverty.  But now Germany and France intend to impose the “Greek solution” on the rest of Europe.

The “solution” that the EU and the IMF have imposed on Greece is not working.

So why are all of the other troubled nations in Europe being pushed down the same path?

Just consider the following statistics out of Greece….

*The unemployment rate for those under the age of 24 is 39 percent.

*The number of suicides has increased by 40 percent in the past year.

*Thefts and burglaries nearly doubled between 2007 and 2009.

Is that what we want to see throughout the rest of Europe?

The financial path that Europe is now on was criticized very harshly recently in the New York Times….

“Every government in Europe with the exception of Germany is bending over backwards to prove to the market that they won’t hesitate to do what it takes,” said Charles Wyplosz, a professor of economics at the Graduate Institute of Geneva. “We’re going straight into a wall with this kind of policy. It’s sheer madness.”

Yes, it is sheer madness.

Right now, authorities in Europe are desperately trying to keep a lid on this crisis.  The European Central Bank has been trying really hard to keep the yield on 10 year Italian bonds from rising above the very important 7 percent level.  But unless the ECB is prepared to spend hundreds and hundreds of billions of euros buying up Italian debt in 2012, the yield on Italian bonds is likely to go much higher eventually.

At this point, it is hard to find any economist that is optimistic about Europe or about the euro in 2012.

One of the leading economic think tanks in Europe, the Centre for Economics and Business Research, is extremely pessimistic about the future of the euro as we enter 2012….

“It now looks as though 2012 will be the year when the euro starts to break up”

In fact, they say that there is a 99 percent chance that the eurozone will break up within the next ten years.

Terry Smith, the chief executive of Tullett Prebon, recently used language that was even more apocalyptic….

“If the eurozone crisis could be solved by confident pronouncements, it would already be saved. I would be shocked if Greece does not leave the eurozone in 2012 and this does not lead the markets to test the resolve to defend the positions of Portugal, Spain, Italy and, ultimately, France.”

Yes, there are a whole lot of people out there saying that 2012 will be more difficult than 2011.

Fortunately, there are a few nations out there that are choosing to try some different things.

We aren’t hearing much about it in the United States, but right now Hungary is actually taking some measures to get their central bank under control.

The following comes from a recent article in the Telegraph….

Hungary passed laws for its central bank in a move that experts warned could jeopardise its chances of securing international bail-out funds if it needs them. Officials from the International Monetary Fund (IMF) have warned about the rules which will undermine the independence of the central bank. Hungarian prime minister Viktor Orban the country would not bow to the “European fashion that the central bank must be in a sacred state of independence”.

Of course the IMF is absolutely furious about this.  The IMF is warning that there will be no bailouts for Hungary if they mess with the “independence” of the central bank.

But hopefully more countries out there will start going after their central banks.  The truth is that it is the central banks and the endless debt spirals that they create that got us into this mess in the first place.

If central banking truly worked, Europe would not be in such a massive amount of trouble.  The euro would not be dropping like a rock and the European financial system would not be paralyzed by panic and fear.

The reality is that central banking does not work and it a colossal failure.

For example, in the United States the U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created, and the U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was created.

It is amazing that there is anyone out there that is still willing to defend central banking.

2012 is going to be one of the most interesting years that we have seen in a long, long time.

Yes, 2012 will be more difficult than 2011 was, but it will also be a great opportunity to wake people up.

Our world is changing faster than ever before, and the Internet has made it possible for average people such as you and I to significantly participate in that change.

Resolve to do what you can to make a difference in this world in 2012, because time is rapidly running out.

Emergency Essentials/BePrepared
Agora Financial
Thrive Life
FEMA Hates This

High Blood Pressure?
The End Of America?
FINCA BAYANO
Survive After Collapse

Silver.com

Camping Survival
GunMagWarehouse.com
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