Financial Institutions

Why The Puerto Rico Debt Crisis Is Such A Huge Threat To The U.S. Financial System

The debt crisis in Puerto Rico could potentially cost financial institutions in the United States tens of billions of dollars in losses. This week, Puerto Rico Governor Alejandro Garcia Padilla publicly announced that Puerto Rico’s 73 billion dollar debt is “not payable,” and a special adviser that was recently appointed to help straighten out the island’s finances said that it is “insolvent” and will totally run out of cash very shortly. At this point, Puerto Rico’s debt is approximately 15 times larger than the per capita median debt of the 50 U.S. states. Yes, the Greek debt crisis is larger, as Greece currently owes about $350 billion to the rest of the planet. But only about $14 billion of that total is owed to U.S. financial institutions. But with Puerto Rico, things are very different. Just about the entire 73 billion dollar debt is owed to U.S. financial institutions, and this could potentially cause massive problems for some extremely leveraged Wall Street firms.

There is a reason why Puerto Rico is called “America’s Greece”. In Puerto Rico today, more than 40 percent of the population is living in poverty, the unemployment rate is over 12 percent, and the economy of the small island nation has continually been in recession since 2006.

Yet all this time Puerto Rico has continued to pile up even more debt. Finally, it has gotten to the point where all of this debt is simply unpayable…

Steven Rhodes, the retired U.S. bankruptcy judge who oversaw Detroit’s historic bankruptcy and has now been retained by Puerto Rico to help solve its problems, gave a blunt assessment on Monday.

Puerto Rico “urgently needs our help,” Rhodes said. “It can no longer pay its debts, it will soon run out of cash to operate, its residents and businesses will suffer,” he added.

This is why I hammer on the danger of U.S. government debt so often. As we see with the examples of Greece and Puerto Rico, eventually a day of reckoning always arrives. And when the day of reckoning arrives, power shifts into the hands of those that you owe the money too.

It would be hard to understate just how severe the debt crisis in Puerto Rico has become. Former IMF economist Anne Krueger has gone so far as to say that it is “really dire”…

“The situation is dire, and I mean really dire,” said former IMF economist Anne Krueger, co-author of the report commissioned by the U.S. territory, which recommended debt restructuring, tax hikes and spending cuts. “The needed measures may face political resistance but failure to address the issues would affect even more the people of Puerto Rico.”

So who is going to get left holding the bag?

As I mentioned at the top of this article, major U.S. financial institutions are very heavily exposed. Income from Puerto Rican bonds is exempt from state and federal taxation, and so that made them very attractive to many U.S. investors. According to USA Today, there are 180 mutual funds that have “at least 5% of their portfolios in Puerto Rican bonds”…

The inability of the U.S. territory to repay its debt, combined with the financial crisis in Greece, would have far-reaching implications for financial markets and unsuspecting American investors. Morningstar, an investment research firm based in Chicago, estimated in 2013 that 180 mutual funds in the United States and elsewhere have at least 5% of their portfolios in Puerto Rican bonds.

It is important to keep in mind that many of these financial institutions are very highly leveraged. So just a “couple of percentage points” could mean the different between life and death for some of these firms.

And unlike what is happening with Greece, the private financial institutions that hold Puerto Rican bonds are not likely to be very eager to “negotiate”. In fact, the largest holder of Puerto Rican debt has already stated that it is very much against any kind of restructuring…

U.S. fund manager OppenheimerFunds, the largest holder of Puerto Rico debt among U.S. municipal bond funds, warned the island it stands ready to defend the terms of bonds it holds, a day after the governor said he wanted to restructure debt and postpone bond payments.

What Oppenheimer is essentially saying is that it does not plan to give Puerto Rico any slack at all. Here is more from the article that I just quoted above…

OppenheimerFunds, with about $4.5 billion exposure to Puerto Rico according to Morningstar, said it believed the island could repay bondholders while providing essential services to citizens and growing the economy. It said it stood ready “to defend the previously agreed to terms in each and every bond indenture.”

“We are disheartened that Governor Padilla, in a public forum, has called for negotiations with other creditors, representing and including the millions of individual Americans that hold Puerto Rico municipal bonds,” a spokesman for Oppenheimer said in a statement.

But Puerto Rico simply does not have the money to meet all of their debt obligations.

So somebody is not going to get paid at some point.

When that happens, those that insure Puerto Rican bonds are also going to take tremendous losses. The following comes from a recent piece by Stephen Flood…

Now, bondholders are at risk as are the funds which hold Puerto Rican bonds and, more importantly, those who insure them in the derivatives market.

Dave Kranzler, from Investment Research Dynamics has warned that there are signs that the Puerto Rico situation may not remain a local crisis for much longer.

He points out that share prices of MBIA, the bond insurers, have been plummeting. MBIA are valued at $3.9 billion whereas their exposure to Puerto Rican debt is around $4.5 billion. Kranzler reckons their exposure could even be multiples of that figure. A default could wipe them out.

He also points out that the firm’s largest shareholders are Warburg Pincus, the firm to which Timothy Geithner went after his stint as Treasury Secretary, when he helped paper over the chasms opening up in the financial system.

Did you notice the word “derivatives” in that quote?

Hmmm – who has been writing endless articles warning about the danger of derivatives for years?

Who has been warning that “this gigantic time bomb is going to go off and absolutely cripple the entire global financial system“?

When Puerto Rico defaults, bond insurers are going to be expected to step up and make huge debt service payments to investors.

But this just might bankrupt some of these big bond insurers. In fact, we have already started to see the stock prices of some of these bond insurers begin to plummet. The following comes from the Wall Street Journal…

Bond insurers MBIA Inc. and Ambac Financial Group Inc. are down again Tuesday as concerns over Puerto Rico’s ability to repay its debt multiply.

Investors fear that both firms face the potential for steep losses on their promises to backstop billions of Puerto Rico’s $72 billion of debt.

MBIA’s stock closed down 23% Monday, and fell more than 10% before rebounding Tuesday. By late afternoon, the stock was down 6%. Ambac’s stock fell 12% Monday and was off 14% Tuesday.

Of course Puerto Rico is just the tip of the iceberg of the coming debt crisis in the western hemisphere, just like Greece is just the tip of the iceberg of the coming debt crisis in Europe.

So stay tuned, because the second half of 2015 has now begun, and the remainder of this calendar year promises to be extremely “interesting”.

The 75 Trillion Dollar Shadow Banking System Is In Danger Of Collapsing

Keep an eye on the shadow banking system – it is about to be shaken to the core. According to the Financial Stability Board, the size of the global shadow banking system has reached an astounding 75 trillion dollars. It has approximately tripled in size since 2002. In the U.S. alone, the size of the shadow banking system is approximately 24 trillion dollars. At this point, shadow banking assets in the United States are even greater than those of conventional banks. These shadow banks are largely unregulated, but governments around the world have been extremely hesitant to crack down on them because these nonbank lenders have helped fuel economic growth. But in the end, we will all likely pay a very great price for allowing these exceedingly reckless financial institutions to run wild.

If you are not familiar with the “shadow banking system”, the following is a pretty good definition from investing answers.com…

The shadow banking system (or shadow financial system) is a network of financial institutions comprised of non-depository banks — e.g., investment banks, structured investment vehicles (SIVs), conduits, hedge funds, non-bank financial institutions and money market funds.

How it works/Example:

Shadow banking institutions generally serve as intermediaries between investors and borrowers, providing credit and capital for investors, institutional investors, and corporations, and profiting from fees and/or from the arbitrage in interest rates.

Because shadow banking institutions don’t receive traditional deposits like a depository bank, they have escaped most regulatory limits and laws imposed on the traditional banking system. Members are able to operate without being subject to regulatory oversight for unregulated activities. An example of an unregulated activity is a credit default swap (CDS).

These institutions are extremely dangerous because they are highly leveraged and they are behaving very recklessly. They played a major role during the financial crisis of 2008, and even the New York Fed admits that shadow banking has “increased the fragility of the entire financial system”…

The current financial crisis has highlighted the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but it has had a profound influence on the global financial system. In a market-based financial system, banking and capital market developments are inseparable: Funding conditions are closely tied to fluctuations in the leverage of market-based financial intermediaries. Growth in the balance sheets of these intermediaries provides a sense of the availability of credit, while contractions of their balance sheets have tended to precede the onset of financial crises. Securitization was intended as a way to transfer credit risk to those better able to absorb losses, but instead it increased the fragility of the entire financial system by allowing banks and other intermediaries to “leverage up” by buying one another’s securities.

Over the past decade, shadow banking has become a truly worldwide phenomenon, and thus it is a major threat to the entire global financial system. In China, shadow banking has been growing by leaps and bounds, but this has the authorities deeply concerned. In fact, according to Bloomberg one top Chinese regulator has referred to shadow banking as a “Ponzi scheme”…

Their growth had caused the man who is now China’s top securities regulator to label the off-balance-sheet products a “Ponzi scheme,” because banks have to sell more each month to pay off those that are maturing.

And what happens to all Ponzi schemes eventually?

In the end, they always collapse.

And when this 75 trillion dollar Ponzi scheme collapses, the global devastation that it will cause will be absolutely unprecedented.

Bond expert Bill Gross, who is intimately familiar with the shadow banking system, has just come out with a major warning about the lack of liquidity in the shadow banking system…

Mutual funds, hedge funds, and ETFs, are part of the “shadow banking system” where these modern “banks” are not required to maintain reserves or even emergency levels of cash. Since they in effect now are the market, a rush for liquidity on the part of the investing public, whether they be individuals in 401Ks or institutional pension funds and insurance companies, would find the “market” selling to itself with the Federal Reserve severely limited in its ability to provide assistance.

As far as shadow banking is concerned, everything is just fine as long as markets just keep going up and up and up.

But once they start falling, the whole system can start falling apart very rapidly. Here is more from Bill Gross on what might cause a “run on the shadow banks” in the near future…

Long used to the inevitability of capital gains, investors and markets have not been tested during a stretch of time when prices go down and policymakers’ hands are tied to perform their historical function of buyer of last resort. It’s then that liquidity will be tested.

And what might precipitate such a “run on the shadow banks”?

1) A central bank mistake leading to lower bond prices and a stronger dollar.

2) Greece, and if so, the inevitable aftermath of default/restructuring leading to additional concerns for Eurozone peripherals.

3) China – “a riddle wrapped in a mystery, inside an enigma”. It is the “mystery meat” of economic sandwiches – you never know what’s in there. Credit has expanded more rapidly in recent years than any major economy in history, a sure warning sign.

4) Emerging market crisis – dollar denominated debt/overinvestment/commodity orientation – take your pick of potential culprits.

5) Geopolitical risks – too numerous to mention and too sensitive to print.

6) A butterfly’s wing – chaos theory suggests that a small change in “non-linear systems” could result in large changes elsewhere. Call this kooky, but in a levered financial system, small changes can upset the status quo. Keep that butterfly net handy.

Should that moment occur, a cold rather than a hot shower may be an investor’s reward and the view will be something less than “gorgeous”. So what to do? Hold an appropriate amount of cash so that panic selling for you is off the table.

In order to avoid a shadow banking crisis, what we need is for global financial markets to stabilize and to resume their upward trends.

If stocks and bonds start crashing, which is precisely what I have projected will happen during the last half of 2015, the shadow banking system is going to come under an extreme amount of stress. If the coming global financial crisis is even half as bad as I believe it is going to be, there is no way that the shadow banking system is going to hold up.

So let’s hope that the financial devastation that we have seen so far this week is not a preview of things to come. The global financial system has been transformed into a delicately balanced pyramid of glass that is not designed to handle turbulent times. We should have never allowed the shadow banks to run wild like this, but we did, and now in just a short while we are going to get to witness a financial implosion unlike anything the world has ever seen before.

World Bank Whistleblower Karen Hudes Reveals How The Global Elite Rule The World

Karen Hudes is a graduate of Yale Law School and she worked in the legal department of the World Bank for more than 20 years. In fact, when she was fired for blowing the whistle on corruption inside the World Bank, she held the position of Senior Counsel. She was in a unique position to see exactly how the global elite rule the world, and the information that she is now revealing to the public is absolutely stunning. According to Hudes, the elite use a very tight core of financial institutions and mega-corporations to dominate the planet. The goal is control. They want all of us enslaved to debt, they want all of our governments enslaved to debt, and they want all of our politicians addicted to the huge financial contributions that they funnel into their campaigns. Since the elite also own all of the big media companies, the mainstream media never lets us in on the secret that there is something fundamentally wrong with the way that our system works.

Remember, this is not some “conspiracy theorist” that is saying these things. This is a Yale-educated attorney that worked inside the World Bank for more than two decades. The following summary of her credentials comes directly from her website…

Karen Hudes studied law at Yale Law School and economics at the University of Amsterdam. She worked in the US Export Import Bank of the US from 1980-1985 and in the Legal Department of the World Bank from 1986-2007. She established the Non Governmental Organization Committee of the International Law Section of the American Bar Association and the Committee on Multilateralism and the Accountability of International Organizations of the American Branch of the International Law Association.

Today, Hudes is trying very hard to expose the corrupt financial system that the global elite are using to control the wealth of the world. During an interview with the New American, she discussed how we are willingly allowing this group of elitists to totally dominate the resources of the planet…

A former insider at the World Bank, ex-Senior Counsel Karen Hudes, says the global financial system is dominated by a small group of corrupt, power-hungry figures centered around the privately owned U.S. Federal Reserve. The network has seized control of the media to cover up its crimes, too, she explained. In an interview with The New American, Hudes said that when she tried to blow the whistle on multiple problems at the World Bank, she was fired for her efforts. Now, along with a network of fellow whistleblowers, Hudes is determined to expose and end the corruption. And she is confident of success.

Citing an explosive 2011 Swiss study published in the PLOS ONE journal on the “network of global corporate control,” Hudes pointed out that a small group of entities — mostly financial institutions and especially central banks — exert a massive amount of influence over the international economy from behind the scenes. “What is really going on is that the world’s resources are being dominated by this group,” she explained, adding that the “corrupt power grabbers” have managed to dominate the media as well. “They’re being allowed to do it.”

Previously, I have written about the Swiss study that Hudes mentioned. It was conducted by a team of researchers at the Swiss Federal Institute of Technology in Zurich, Switzerland. They studied the relationships between 37 million companies and investors worldwide, and what they discovered is that there is a “super-entity” of just 147 very tightly knit mega-corporations that controls 40 percent of the entire global economy…

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

But the global elite don’t just control these mega-corporations. According to Hudes, they also dominate the unelected, unaccountable organizations that control the finances of virtually every nation on the face of the planet. The World Bank, the IMF and central banks such as the Federal Reserve literally control the creation and the flow of money worldwide.

At the apex of this system is the Bank for International Settlements. It is the central bank of central banks, and posted below is a video where you can watch Hudes tell Greg Hunter of USAWatchdog.com the following…

“We don’t have to wait for anybody to fire the Fed or Bank for International Settlements . . . some states have already started to recognize silver and gold, the precious metals, as currency”

Most people have never even heard of the Bank for International Settlements, but it is an extremely important organization. In a previous article, I described how this “central bank of the world” is literally immune to the laws of all national governments…

An immensely powerful international organization that most people have never even heard of secretly controls the money supply of the entire globe. It is called the Bank for International Settlements, and it is the central bank of central banks. It is located in Basel, Switzerland, but it also has branches in Hong Kong and Mexico City. It is essentially an unelected, unaccountable central bank of the world that has complete immunity from taxation and from national laws. Even Wikipedia admits that “it is not accountable to any single national government.” The Bank for International Settlements was used to launder money for the Nazis during World War II, but these days the main purpose of the BIS is to guide and direct the centrally-planned global financial system. Today, 58 global central banks belong to the BIS, and it has far more power over how the U.S. economy (or any other economy for that matter) will perform over the course of the next year than any politician does. Every two months, the central bankers of the world gather in Basel for another “Global Economy Meeting”. During those meetings, decisions are made which affect every man, woman and child on the planet, and yet none of us have any say in what goes on. The Bank for International Settlements is an organization that was founded by the global elite and it operates for the benefit of the global elite, and it is intended to be one of the key cornerstones of the emerging one world economic system.

This system did not come into being by accident. In fact, the global elite have been developing this system for a very long time. In a previous article entitled “Who Runs The World? Solid Proof That A Core Group Of Wealthy Elitists Is Pulling The Strings“, I included a quote from Georgetown University history professor Carroll Quigley from a book that he authored all the way back in 1966 in which he discussed the big plans that the elite had for the Bank for International Settlements…

[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.

And that is exactly what we have today.

We have a system of “neo-feudalism” in which all of us and our national governments are enslaved to debt. This system is governed by the central banks and by the Bank for International Settlements, and it systematically transfers the wealth of the world out of our hands and into the hands of the global elite.

But most people have no idea that any of this is happening because the global elite also control what we see, hear and think about. Today, there are just six giant media corporations that control more than 90 percent of the news and entertainment that you watch on your television in the United States.

This is the insidious system that Karen Hudes is seeking to expose. For much more, you can listen to Joyce Riley of the Power Hour interview her for an entire hour right here.

So what do you think about what Hudes is saying? Please feel free to share your thoughts by posting a comment below…

Who Controls The Global Economy? Do Not Underestimate The Power Of The Big Banks

Are the big banks really as powerful as some people say that they are? Do they really control the global economy? If y0u asked most people, they would tell you that governments control the global economy. But the campaigns of our politicians are funded by the ultra-wealthy, the big banks and the large corporations that they control. Others would tell you that the Federal Reserve and the rest of the central banks around the world control the global economy. But the truth is that the Federal Reserve was established by the bankers and for the benefit of the bankers. As you will see below, at the very core of the global economy there exists a “super-entity” of financial institutions that control an almost unimaginable amount of wealth and power. These financial institutions and the ultra-wealthy individuals behind them are really the ones that are pulling all the strings. In this world money equals power, and the borrower is the servant of the lender. When you follow the pyramid all the way to the top, it begins to become very clear who really is in control.

In business schools all over America today, instead of dreaming of starting new businesses and contributing something positive to society, most business students are dreaming of going to Wall Street and getting rich. But Wall Street doesn’t actually create or build anything of value for society. Instead, the bankers make most of their profits by essentially pushing money and paper around. In a recent article, Chris Martenson commented on this…

Today, some of the most celebrated individuals and institutions are ensconced within the financial industry; in banks, hedge funds, and private equity firms. Which is odd because none of these firms or individuals actually make anything, which society might point to as additive to our living standards. Instead, these financial magicians harvest value from the rest of society that has to work hard to produce real things of real value.

While the work they do is quite sophisticated and takes a lot of skill, very few of these firms direct capital to new efforts, new products, and new innovations. Instead they either trade in the secondary markets for equities, bonds, derivatives, and the like, which perform the ‘service’ of moving paper from one location to another while generating ‘profits.’ Or, in the case of banks, they create money out of thin air and lend it out – at interest of course.

But just because they aren’t adding much value to society does not mean that these big banks are not extremely powerful. In fact, anyone that underestimates that power of these monolithic financial institutions is being quite foolish.

A team of researchers at the Swiss Federal Institute of Technology in Zurich studied the relationships between 37 million companies and investors worldwide, and what they found was absolutely stunning.

What they discovered is that there is a “super-entity” of just 147 very tightly knit companies that controls 40 percent of the entire network…

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

So exactly who are the companies that are at the core of this “super-entity”?

Well, almost all of them are banks or financial institutions. The following is a list of the 50 “most connected” companies from the study, and the notes in parentheses are from Chris Martenson…

1. Barclays plc
2. Capital Group Companies Inc (Investment Management)
3. FMR Corporation (Financial Services)
4. AXA (Investments & Life Insurance)
5. State Street Corporation (Investment Management)
6. JP Morgan Chase & Co (Bank)
7. Legal & General Group plc (Investments & Life Insurance)
8. Vanguard Group Inc (Investment Management)
9. UBS AG (Bank)
10. Merrill Lynch & Co Inc (Bank)
11. Wellington Management Co LLP (Investment Management)
12. Deutsche Bank AG (Bank)
13. Franklin Resources Inc (Investment Management)
14. Credit Suisse Group (Bank)
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp (Bank)
17. Natixis (Investment Management)
18. Goldman Sachs Group Inc (Bank)
19. T Rowe Price Group Inc (Investment Management)
20. Legg Mason Inc (Investment Management)
21. Morgan Stanley (Bank)
22. Mitsubishi UFJ Financial Group Inc (Bank)
23. Northern Trust Corporation (Investment Management)
24. Société Générale (Bank)
25. Bank of America Corporation (Bank)
26. Lloyds TSB Group plc (Bank)
27. Invesco plc (Investment mgmt) 28. Allianz SE 29. TIAA (Investments & Insurance)
30. Old Mutual Public Limited Company (Investments & Insurance)
31. Aviva plc (Insurance)
32. Schroders plc (Investment Management)
33. Dodge & Cox (Investment Management)
34. Lehman Brothers Holdings Inc* (Bank)
35. Sun Life Financial Inc (Investments & Insurance)
36. Standard Life plc (Investments & Insurance)
37. CNCE
38. Nomura Holdings Inc (Investments and Financial Services)
39. The Depository Trust Company (Securities Depository)
40. Massachusetts Mutual Life Insurance
41. ING Groep NV (Bank, Investments & Insurance)
42. Brandes Investment Partners LP (Financial Services)
43. Unicredito Italiano SPA (Bank)
44. Deposit Insurance Corporation of Japan (Owns a lot of banks’ shares in Japan)
45. Vereniging Aegon (Investments & Insurance)
46. BNP Paribas (Bank)
47. Affiliated Managers Group Inc (Owns stakes in 27 money management firms)
48. Resona Holdings Inc (Banking Group in Japan)
49. Capital Group International Inc (Investments and Financial Services)
50. China Petrochemical Group Company

Are you starting to get the idea?

The global economy truly is completely dominated by banks and other financial institutions.

In the United States, the big banks are not just content to own other companies anymore. Now, some of our largest banks are actually starting to directly get into businesses such as “electric power production, oil refining and distribution, owning and operating of public assets such as ports and airports, and even uranium mining”. The following is an excerpt from a letter that several members of the U.S. Congress recently sent to Federal Reserve Chairman Ben Bernanke…

We write in regards to the expansion of large banks into what had traditionally been non-financial commercial spheres. Specifically, we are concerned about how large banks have recently expanded their businesses into such fields as electric power production, oil refining and distribution, owning and operating of public assets such as ports and airports, and even uranium mining.

Here are a few examples. Morgan Stanley imported 4 million barrels of oil and petroleum products into the United States in June, 2012. Goldman Sachs stores aluminum in vast warehouses in Detroit as well as serving as a commodities derivatives dealer. This “bank” is also expanding into the ownership and operation of airports, toll roads, and ports. JP Morgan markets electricity in California.

In other words, Goldman Sachs, JP Morgan, and Morgan Stanley are no longer just banks – they have effectively become oil companies, port and airport operators, commodities dealers, and electric utilities as well. This is causing unforeseen problems for the industrial sector of the economy. For example, Coca Cola has filed a complaint with the London Metal Exchange that Goldman Sachs was hoarding aluminum. JP Morgan is currently being probed by regulators for manipulating power prices in California, where the “bank” was marketing electricity from power plants it controlled. We don’t know what other price manipulation could be occurring due to potential informational advantages accruing to derivatives dealers who also market and sell commodities. The long shadow of Enron could loom in these activities.

You can read the rest of their letter right here.

This week, Goldman Sachs has been facing allegations that it has cost American consumers billions of dollars by manipulating the price of aluminum. The following is from an article that was posted on CNBC…

Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars.

The story of how this works begins in 27 industrial warehouses in the Detroit area where Goldman stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

This industrial dance has been choreographed by Goldman to exploit pricing regulations set up by an overseas commodities exchange, an investigation by The New York Times has found. The back–and-forth lengthens the storage time. And that adds many millions a year to the coffers of Goldman, which owns the warehouses and charges rent to store the metal. It also increases prices paid by manufacturers and consumers across the country.

If that sounds shady to you, that is because it is shady.

But as the big banks continue to gain even more power in our society, this kind of thing will become even more common.

So what can we do about it?

Not much.

Do you think that the media will tell us the truth about all of this? I wouldn’t count on it. At this point, there are just six giant media corporations that control more than 90 percent of the news and entertainment that you see on your television. And those six giant media corporations are very hesitant to do anything that will damage their corporate owners or their corporate advertisers.

Do you think that our politicians will do anything about all of this? I wouldn’t count on it. In national elections, the candidate that raises more money wins more than 80 percent of the time. Our politicians know where their bread is buttered, and as history has shown most of them are very good to the guys with the big checkbooks.

As I said at the top of this article, money is power, and according to a report that was released last summer, the global elite have up to 32 TRILLION dollars stashed in offshore banks around the globe.

The global economy belongs to them. We are just living in it.

But hopefully if enough people start waking up, someday we will see some significant changes.

One of my favorite musical artists of all-time, Michael W. Smith, once wrote a song that contained the following lyrics…

Tell me, how long will we grovel at the feet of wealth and power?

Tell me, how long will we bow down to that golden calf, now?

(How long will be too long)

Will the people of the world ever get sick and tired of the overwhelming power of the big banks and start demanding changes?

That is a very good question. Please feel free to share what you think by posting a comment below…

18 Indications That Europe Has Become An Economic Black Hole Which Is Going To Suck The Life Out Of The Global Economy

Summer vacation is over and things are about to get very interesting in Europe. Most Americans don’t realize this, but much of Europe shuts down for the entire month of August. I wish we had something similar in the United States. But now millions of Europeans are returning from their extended family vacations and the fun is about to begin. During August economic conditions continued to degenerate in Europe, but I figured that it wouldn’t be until after August that the European debt crisis would take center stage once again. And as I wrote about last week, if there is going to be a financial panic, it typically happens in the fall. The stock market has seen quite a nice rally over the summer, and many investors are nervous that we could see a significant “correction” very soon. The month of September has been the absolute worst month for stock performance over the past 50 years, and it has also been the absolute worst month for stock performance over the past 100 years as well. Of course that does not guarantee that anything is going to happen this year. But things in Europe continue to get worse. Unemployment rates are spiking, manufacturing activity is slowing down, housing prices are crashing and major financial institutions are failing. What is happening in Europe right now appears to be an even worse version of what happened to the United States back in 2008.

But most Americans aren’t too concerned about what is happening in Europe.

In fact, most Americans don’t believe that a European financial collapse would be much of a problem for us.

Well, just remember what happened back in 2008. When the U.S. financial system started coming apart at the seams it sparked a devastating worldwide recession which was felt in every corner of the globe.

If the European financial system implodes, the consequences could be even worse.

Why?

Europe has a larger population than the United States does.

Europe has a larger economy than the United States does.

Europe has a much, much larger banking system than the United States does.

If Europe experiences a financial collapse, the entire globe will feel the pain.

And considering how weak the U.S. economy already is, it would not take much to push us over the edge.

What is going on in Europe right now is a very, very big deal and people need to pay attention.

The following are 18 indications that Europe has become an economic black hole which is going to suck the life out of the global economy….

#1 The unemployment rate in France is up to 10 percent, and the French media is buzzing about the fact that the number of unemployed French workers has now hit the 3 million mark.

#2 The French government has just announced the nationalization of its second largest mortgage lender. Additional bailouts are likely on the way.

#3 French automaker PSA Peugeot Citroen has announced that it will be cutting more than 10,000 jobs. But of course major layoff announcements like this are coming out of Europe almost every day now.

#4 Home prices in France are falling rapidly and the recent election of a socialist president has created a bit of a panic in the French housing market….

British people with homes in France were today warned that the property market is in ‘free fall’.

A combination of factors including the election of a tax-and-spend Socialist government means that prices are tumbling.

It means an end to the boom years, when thousands of Britons poured money into rental or retirement investments across the Channel.

#5 A slow-motion bank run is happening in Spain. The amount of money being pulled out of the Spanish banking system is absolutely unprecedented. The following is from a recent Zero Hedge article….

The central bank of Spain just released the net capital outflow numbers and they are disastrous. During the month of June alone $70.90 billion left the Spanish banks and in July it was worse at $92.88 billion which is 4.7% of total bank deposits in Spain. For the first seven months of the year the outflow adds up to $368.80 billion or 17.7% of the total bank deposits of Spain and the trajectory of the outflow is increasing dramatically. Reality is reality and Spain is experiencing a full-fledged run on its banks whether anyone in Europe wants to admit it or not.

If this pace keeps up, more than 600 billion dollars will be pulled out of Spanish banks by the end of the year.

Keep in mind that the GDP of Spain for all of 2011 was just 1.49 trillion dollars.

So by the end of this year we could see the equivalent of more than 40 percent of Spanish GDP pulled out of Spanish banks and sent out of the country.

In case you were wondering, yes, that is a nightmare scenario.

#6 The unemployment rate in Spain is over 25 percent. The youth unemployment rate in Spain is well over 50 percent. Spain is a tinderbox that could be set ablaze at any moment.

#7 The yield on 10 year Spanish bonds is up to 6.85 percent. This is an unsustainable level, and if rates don’t come down on Spanish debt soon it is inevitable that Spain will end up just like Greece.

#8 On Monday it was announced that Spanish banking giant Bankia will be getting an emergency “cash injection” of between 4 and 5 billion euros. Apparently “cash injection” sounds better to the politicians than “a bailout” does.

#9 The housing crash in Spain just continues to get worse. It is being reported that some homes in Spain are being sold at a 70% discount from where they were at the peak of the market back in 2006. At this point there are approximately 2 million unsold homes in Spain.

#10 There are persistent rumors that the government of Spain will soon be forced to officially ask for a bailout from the rest of Europe. But who is going to bail them out? Most of the other governments of the eurozone are on the verge of bankruptcy themselves.

#11 Manufacturing activity in Europe has contracted for 13 months in a row. The following is from a recent Reuters report….

The downturn that began in the smaller periphery members of the 17-nation bloc is now sweeping through Germany and France and the situation remained dire in the region’s third and fourth biggest economies of Italy and Spain.

“Larger nations like France and Germany remain in reverse gear… the (manufacturing) sector is on course to act as a drag on gross domestic product in the third quarter,” said Rob Dobson, senior economist at data collator Markit.

Markit’s final Purchasing Managers’ Index (PMI) for the manufacturing sector fell from an earlier flash reading of 45.3 to 45.1, above July’s three-year low of 44.0, but notching its 13th month below the 50 mark separating growth from contraction.

#12 Chinese exports to the EU declined by 16.2 percent in July. U.S. exports to Europe have been steadily falling as well.

#13 Slovenia and Cyprus are two other eurozone members that are in desperate need of bailout money. The dominoes just keep falling and nobody seems to be able to come up with a plan to “fix” Europe.

#14 Even the “strong” economies in Europe are being dragged down now. For example, unemployment in Germany has risen for five months in a row.

#15 According to one recent poll, only about one-fourth of all Germans want Greece to remain a part of the eurozone. The odds of a breakup of the euro seem to rise with each passing day.

#16 It is now estimated that bad loans make up approximately 20 percent of all domestic loans in the Greek banking system at this point.

#17 The suicide rate in Greece is more than 30 percent higher than it was last year. People are becoming very desperate in Greece and there is no end in sight to the economic depression that they are going through.

#18 Large U.S. companies have been rapidly getting prepared for a Greek exit from the eurozone. The following is from a recent New York Times article….

Even as Greece desperately tries to avoid defaulting on its debt, American companies are preparing for what was once unthinkable: that Greece could soon be forced to leave the euro zone.

Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.

Every time European leaders get together they declare that they have “a plan” that will solve the problems that Europe is experiencing, but as we have seen things in Europe just continue to get worse with no end in sight.

A key date is coming up in the middle of this month. On September 12th, Germany’s Constitutional Court will determine the fate of the recent fiscal pact and the ESM. According to UniCredit global chief economist Erik Nielsen, if the court rules against the fiscal pact and the ESM the fallout will be catastrophic….

“If they were to surprise us by striking down Germany’s participation, I would think it’d be an utter bloodbath in markets”

But that is not the only thing that could set off a full-blown panic in the financial markets.

The truth is that Europe is teetering on the edge.

One wrong move and it is going to be 1929 all over again.

As I have maintained all along, the next wave of the economic collapse is rapidly approaching, and this time the epicenter for the crisis is going to be in Europe.

But that does not mean that things are going to be easier for the United States than last time. We have never even come close to recovering from the last recession. Most Americans families are just barely getting by. In fact, 77 percent of them are living paycheck to paycheck at least part of the time.

Right now there are millions of Americans that have lost their jobs and their homes in recent years and that feel forsaken by society.

After this next wave hits us there will be tens of millions of Americans feeling the pain of economic desperation.

The last wave of the economic collapse hurt us.

This next wave is going to absolutely devastate us.

Watch what is happening in Europe very carefully. What Greece, Spain, Italy and France are experiencing right now is going to hit us soon enough.

Greece Has Defaulted – Which Country In Europe Is Next?

Well, it is official. The restructuring deal between Greece and private investors has been pushed through and the International Swaps and Derivatives Association has ruled that this is a credit event which will trigger credit-default swap contracts. The ISDA is saying that there are approximately $3.2 billion in credit-default swap contracts on Greek debt outstanding, and most analysts expect that the global financial system will be able to absorb these losses. But still, 3.2 billion dollars is nothing to scoff at, and some of these financial institutions that wrote a lot of these contracts on Greek debt are going to be hurting. This deal with private investors may have “rescued” Greece for the moment, but the consequences of this deal are going to be felt for years to come. For example, now that Greece has gotten a sweet “haircut” from private investors, politicians in Portugal, Italy, Spain and other European nations are going to wonder why they shouldn’t get some “debt forgiveness” too. Also, private investors are almost certainly going to be less likely to want to loan money to European nations from now on. If they will be required to take a massive haircuts at some point, then why in the world would they want to lend huge amounts of money to European governments at super low interest rates? It simply does not make sense. Now that Greece has defaulted, the whole game is going to change. This is just the beginning.

The “restructuring deal” was approved by approximately 84 percent of all Greek bondholders, but the key to triggering the payouts on the credit-default swaps was the fact that Greece decided to activate the “collective action clauses” which had been retroactively inserted into these bonds. These collective action clauses force most of the rest of the bondholders to go along with this restructuring deal.

A recent article by Ambrose Evans-Pritchard explained why so many people were upset about these “collective action clauses”….

The Greek parliament’s retroactive law last month to insert collective action clauses (CACs) into its bonds to coerce creditor hold-outs has added a fresh twist. These CAC’s are likely to be activated over coming days. Use of retroactive laws to change contracts is anathema in credit markets.

If a government can go in and retroactively change the terms of a bond just before it is ready to default, then why should private investors invest in them?

That is a very good question.

But for now the buck has been passed on to those that issued the credit-default swaps. As mentioned above, the ISDA says that there are approximately $3.2 billion in Greek credit-default swaps that will need to be paid out.

However, that number assumes that a lot of hedges and offsetting swaps cancel each other out. When you just look at the raw total of swaps outstanding, the number is much, much higher. The following is from a recent article in The Huffington Post….

If you remove all hedges and offsetting swaps, there’s about $70 billion in default-insurance exposure to Greece out there, which is a little bit bigger pill for the banking system to swallow. Is it possible that some banks won’t be able to pay on their default policies? We’ll find out.

Yes, indeed. We will find out very soon.

If some counterparties are unable to pay we could soon see some big problems cascade through the financial system.

But even with this new restructuring deal with private investors, Greece is still in really bad shape.

German Finance Minister Wolfgang Schaeuble told reporters recently that it “would be a big mistake to think we are out of the woods”.

Even with this new deal, Greek debt is still projected to be only reduced to 120 percent of GDP by the year 2020. And that number relies on projections that are almost unbelievably optimistic.

In addition, there are still a whole host of very strict conditions that the Greek government must meet in order to continue getting bailout money.

Also, the upcoming Greek elections in just a few weeks could bring this entire process to an end in just a single day.

So the crisis in Greece is a long way from over.

The Greek economy has been in recession for five years in a row and it continues to shrink at a frightening pace. Greek GDP was 7.5 percent smaller during the 4th quarter of 2011 than it was during the 4th quarter of 2010.

Unemployment in Greece also continues to get worse.

The average unemployment rate in Greece in 2010 was 12.5 percent. During 2011, the average unemployment rate was 17.3 percent, and in December the unemployment rate in Greece was 21.0 percent.

Young people are getting hit the hardest. The youth unemployment rate in Greece is up to an all-time record of 51.1 percent.

The suicide rate in Greece is also at an all-time record high.

Unfortunately, there is no light at the end of the tunnel for Greece at this point. The latest round of austerity measures that are now being implemented will slow the economy down even more.

Sadly, several other countries in Europe are going down the exact same road that Greece has gone.

Investors all over the globe are wondering which one will be the “next Greece”.

Some believe that it will be Portugal. The following is from a recent article in The Telegraph….

“The rule of law has been treated with contempt,” said Marc Ostwald from Monument Securities. “This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Portugal.”

Right now, the combination of all public and private debt in Portugal comes to a grand total of 360 percent of GDP.

In Greece, the combined total of all public and private debt is about 100 percentage points less than that.

So yes, Portugal is heading for a world of hurt. The following is more about Portugal from the recent Telegraph article mentioned above….

Citigroup expects the economy to contract by 5.7pc this year, warning that bondholders may face a 50pc haircut by the end of the year. Portugal’s €78bn loan package from the EU-IMF Troika is already large enough to crowd out private creditors, reducing them to ever more junior status.

So why should anyone invest in Portuguese debt at this point?

Or Italian debt?

Or Spanish debt?

Or any European debt at all?

The truth is that the European financial system is a house of cards that could come crashing down at any time.

German economist Hans-Werner Sinn is even convinced that the European Central Bank itself could collapse.

There is a Der Spiegel article that everyone out there should read. It is entitled “Euro-Zone Central Bank System Massively Imbalanced“. It is quite technical, but if this German economist is correct, the implications are staggering.

The following is from the first paragraph of the article….

More than a year ago, German economist Hans-Werner Sinn discovered a gigantic risk on the balance sheets of Germany’s central bank. Were the euro zone to collapse, Bundesbank losses could be half a trillion euros — more than one-and-a-half times the size of the country’s annual budget.

So no, the European debt crisis is not over.

It is just getting warmed up.

Get ready for a wild ride.

The G-7 Forex Intervention Is A Perfect Example Of How Manipulated The Global Currency Market Really Is

What do governments and central banks do when they don’t like what is happening in the financial markets? They directly intervene and they manipulate the financial markets of course. On Friday, the central banks of the G-7 acted in concert to drive down the value of the surging yen. So why did they do this? Well, the fear was that a rising yen would hurt Japanese exports at a time when the economy of Japan needs all of the help that it can get. So, as central banks have been doing with increasing frequency, they directly intervened in the Forex market in order to bring about the result that they desired. Unfortunately, this is not an isolated incident. The truth is that foreign governments, central banks and large financial institutions are constantly manipulating the Forex, precious metals and stock markets all over the globe. You see, in today’s global economy the “stakes are so high” that the free market cannot be trusted.

The reality of the matter is that none of the financial markets are really “free markets” anymore. Not that they are completely rigged, but to say that they are very highly manipulated would not be a stretch.

At least this time the manipulation was made public. Of course it would have been really hard to hide the fact that all G-7 central banks intervened in the Forex on the same day.

The last time there was such a coordinated intervention in the global currency market was back in 2000 when central banks intervened to boost the struggling euro.

But the truth is that individual central banks attempt to manipulate the Forex all the time.

Some of these interventions become public. In September 2010, a bold 12 billion dollar move by the Bank of Japan to push down the value of the yen made headlines around the globe but had only limited success.

Another example of this from last year was when the Swiss National Bank experienced losses equivalent to about 15 billion dollars trying to stop the rapid rise of the Swiss franc.

Many nations around the world have become extremely sensitive to currency movements.

In particular, there are several Asian nations that are known to be constant currency manipulators. For example, Singapore is very well known for intervening in the foreign exchange market in order to benefit exporters.

And that is what this most recent intervention on behalf of the yen was all about. It was about making Japanese exports cheaper.

But who is going to say no to Japan right now? It is believed that Japan asked the G-7 to do this, and so they did.

Japanese Finance Minister Yoshihiko Noda told the media the following about this massive intervention in the marketplace by the G-7….

“Given yen moves after the tragic events that hit Japan, the United States, Britain, Canada and the European Central Bank have agreed with Japan to jointly intervene in the currency market.”

So isn’t the Forex supposed to be a free market?

If you still believe that, I have a bridge to sell you.

According to Kathleen Brooks, the research director at a major Forex trading firm, it looks like there is a certain level that global authorities simply will not allow the yen to rise to….

“It looks as though global authorities are willing to pull out all of the stops to defend the 80.00 level in dollar/yen.”

The following is the full statement released by the G-7 defending their currency intervention….

Statement of G-7 Finance Ministers and Central Bank Governors

March 18, 2011

We, the G-7 Finance Ministers and Central Bank Governors, discussed the recent dramatic events in Japan and were briefed by our Japanese colleagues on the current situation and the economic and financial response put in place by the authorities.

We express our solidarity with the Japanese people in these difficult times, our readiness to provide any needed cooperation and our confidence in the resilience of the Japanese economy and financial sector.

In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities, the authorities of the United States, the United Kingdom, Canada, and the European Central Bank will join with Japan, on March 18, 2011, in concerted intervention in exchange markets. As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We will monitor exchange markets closely and will cooperate as appropriate.

But it is not just foreign governments and central banks that manipulate financial markets.

If you want to try to make money on the Forex, you had really better know what you are doing, because most “little fish” get swallowed up and spit out.

A number of years ago I actually invested in the Forex and I rapidly learned that it is not a “clean game”. I discovered that there are industry insiders that openly confess that several of the “big fish” in the industry brazenly “stop hunt” and regularly trade against the positions of their clients.

Not that stock markets around the globe are much better. It would take thousands of pages just to document the well known cases of stock manipulation and insider trading.

And don’t get me started on the precious metals markets. As I have written about previously, very compelling evidence of manipulation in those markets has been handed to the U.S. government and they have essentially done next to nothing with that evidence.

Not that people don’t make money in the financial markets. Some people make a ton of money. But those people are experts and they know how to survive in a “dirty game”.

If you are an amateur, you really need to think twice before diving too deeply into the financial markets. If you think that you can jump into the Forex or the U.S. stock market and “get rich quick” you are in for a rude awakening.

The financial markets have become a game that is designed to funnel money to the “sharks” and to the “big boys”. Once you put your money into the game, the odds are that “the house” is going to win.

For those that still do believe that the financial markets are a good way to build wealth, at least be prudent enough to get some sound financial advice. There is no shame in having a financial professional invest your money for you.

But it is no guarantee of success either. The truth is that millions of Americans have experienced a lot of pain in the financial markets over the last few years.

As the global economy becomes even more unstable, the manipulation of the financial markets by governments and by central banks is going to become even more dramatic.

As financial markets around the world crash and rise and crash again a whole lot of people are going to be wiped out financially.

You don’t have to be one of them.

14 Reasons Why The Economic Collapse Of Japan Has Begun

The economic collapse of Japan has begun. The extent of the devastation is now becoming clear and many are now projecting that this will be the most expensive natural disaster in modern human history. The tsunami that struck Japan on March 11th swept up to 6 miles inland, destroying virtually everything in the way. Countless thousands were killed and entire communities were totally wiped out. So how does a nation that is already drowning in debt replace dozens of cities and towns that have suddenly been destroyed? Many in the mainstream media are claiming that the economy of Japan will bounce right back from this, but they are wrong. The tsunami decimated thousands of square miles. The loss of homes, cars, businesses and personal wealth is almost unimaginable. It is going to take many years to rebuild the roads, bridges, rail systems, ports, power lines and water systems that were lost. There are going to be a significant number of Japanese insurance companies and financial institutions that are going to be totally wiped out as a result of this great tragedy. Of course in the days ahead the Japanese people will band together and work hard to rebuild the nation, but the truth is that it is impossible to “bounce right back” from such a massive loss of wealth, assets and infrastructure.

Just think about what happened after Hurricane Katrina. Did the economy of New Orleans bounce right back? No, there are some areas of New Orleans today that still look like war zones.

Well, this disaster is much worse.

The truth is that this is going to be one of the defining moments in the history of Japan. Hundreds of miles along the coast of Japan have been absolutely devastated. Authorities are finding it difficult to even get food and water into some areas at this point.

Even before this great tragedy Japan was one of the nations that was on the verge of a national economic collapse. Their economy had been in the doldrums for over a decade and their national debt was well over 200 percent of GDP. Now the Japanese economy has experienced a shock from which it may never truly recover.

The Bank of Japan is already flooding the Japanese economy with new yen, and so we may indeed see some impressive “economic growth” statistics at the end of the year. But just because lots more yen are being passed around does not mean that the Japanese economy is in better shape.

The truth is that a tsunami of yen is not going to undo the damage that the tsunami of water did. A massive amount of Japanese wealth was wiped out by this disaster. An economy that was already teetering on the brink is now very likely going to plunge into oblivion.

It is fine to be optimistic, but the cold, hard reality of the situation is that this is a knockout blow for the Japanese economy. The extent of the devastation is just too great. This truly is a complete and total nightmare.

The following are 14 reasons why the economic collapse of Japan has now begun….

#1 The Bank of Japan has announced that they have decided to flood the Japanese economy with 15 trillion yen. That is the equivalent of roughly $183 billion dollars. This is going to provide needed liquidity in the short-term, but it is also going to set Japan on a highly inflationary course.

#2 Japan’s Nikkei 225 stock average declined by more than 6 percent on Monday. As the full extent of the damage becomes apparent more declines are likely.

#3 Oil refineries all over Japan have been severely damaged or destroyed. For example, six refineries that combine to process 31 percent of the oil for Japan have been totally shut down at least for now.

#4 The damage to roads, bridges, ports and rail systems is estimated to be in the billions of dollars. The damage done to power lines and water systems is almost unimaginable. It is going to take many years to rebuild the infrastructure of Japan.

#5 Right now the flow of goods and services in many areas of northern Japan has been reduced to a crawl, and this is likely to remain the case for quite some time.

#6 Many cities and towns along the east coast of Japan have essentially been completely destroyed.

#7 Japan’s nuclear industry is essentially dead in the water at this point. Even if there is not a full-blown nuclear meltdown, the events that have transpired already have frightened people enough to cause a massive public outcry against nuclear power in Japan.

#8 Japan is going to need even more oil and natural gas in the long run to replace lost nuclear energy production. Prior to this crisis, Japan derived 29 percent of its electricity from nuclear power.

#9 Japan is the second largest foreign holder of U.S. government debt, but that is about to change. Japan currently has about $882 billion in U.S. Treasury bonds and they are going to have to liquidate much of that in order to fund the rebuilding of their nation.

#10 Many factories in Japan are closing down at least temporarily. For example, Nissan has shut down four factories and Sony has shut down six factories.

#11 Toyota has shut down all production at its factories in Japan until at least March 16th.

#12 A substantial number of Japanese financial institutions and insurance companies are absolutely going to be devastated by this nightmare.

#13 Japan’s budget deficit was already 9 percent of GDP even before this tragedy. Now they are going to have to borrow lots more money to fund the rebuilding effort.

#14 Japan’s national debt was already well over 200 percent of GDP even before this tragedy. How much farther into the danger zone can they possibly go?

Sadly, as the economy of Japan goes down it is going to have a huge affect on the rest of the world as well. For example, Japan is no longer going to be able to buy up huge amounts of U.S. Treasuries. So who is going to pick up the slack? Will our government officials beg China to lend us even more money? Will the Federal Reserve just “buy” even more of our government debt?

Right now there are more questions than there are answers, but what is clear is that the Japanese economy has just been dealt an incapacitating blow. Hopefully this tragedy will bring out the best in the Japanese people, but no matter how resilient they are, the truth is that this is something that no nation would be able to bounce back from quickly.

Let us hope that the economic damage from this tragedy will be contained and will not spread to the rest of the world. The global economy is already in enough trouble, and hopefully this tragedy will not cause a cascade of economic failures to sweep the globe.