Why Is The Mainstream Media Suddenly Buzzing About “Another Global Financial Crisis”?

All of a sudden, the mainstream media is starting to sound a lot like The Economic Collapse Blog.  Throughout the Obama years, the mainstream media in the United States always seemed extremely hesitant to suggest that difficult economic times may be ahead, but now talk of “another global financial crisis” seems to be all over the place.  Is this because they truly believe that one is coming, or is it just another angle that they can use to attack Donald Trump?  In any event, it is undeniable that evidence is mounting that big trouble could be right around the corner.  European financial markets are already in meltdown mode, a major international trade war has just erupted, the worst “retail apocalypse” in modern U.S. history is accelerating, and our debt problems continue to grow with each passing day.  Normally the mainstream news is much more subdued than I am about all of this stuff, and so I was very surprised to see reporter James Pethokoukis come out with an article entitled “Here comes another global financial crisis”

Investors are increasingly worried that an escalating political crisis in Italy could lead to a populist, euroskeptic government taking power. As a result, there’s rising uncertainty about whether the country might eventually abandon the euro currency zone or default on its giant debt pile. To make things worse, the Trump administration continues to toy with the idea of a trade war with Europe and China. That would be the last thing the global economy would need if the Italian situation deteriorates further. Debt crises and trade wars are a toxic combination.

And remember, this comes just days after George Soros ominously declared that “we may be heading into another major financial crisis.”

So what has changed?

Certainly, what is happening in Italy is starting to get everyone’s attention.  Here is more from James Pethokoukis

Italy is the eurozone’s third-largest economy, 10 times the size of Greece’s. It also has the world’s third-largest sovereign debt market, some $2.7 trillion. Only Greece has a higher public debt-to-GDP ratio in the eurozone. My AEI colleague Desmond Lachman, a former International Monetary Fund official and Wall Street emerging market strategist, argues that Italy’s troubles have the potential to roil the global economy much like the 2008 Lehman bankruptcy. (The 10th anniversary of “Free Market Day” is coming!) America wouldn’t be spared.

And it isn’t just Italy.  Financial institutions all over Europe are deeply troubled, and that includes the largest bank in Germany.

On Thursday, Deutsche Bank’s stock price crashed to an all-time low.  This caused such a stir that the bank was actually forced to issue a statement about it.

I have been writing about the troubles at Deutsche Bank for a very long time.  When they finally go down for good, it is going to create a “Lehman Brothers moment” for the entire planet.  This week, there were two key revelations that led to the dramatic stock price decline.  The following comes from Wolf Richter

This came after leaked double-whammy revelations the morning: One reported by the Financial Times, that the FDIC had put Deutsche Bank’s US operations on its infamous “Problem Bank List”; and the other one, reported by the Wall Street Journal, that the Fed, as main bank regulator, had walloped the bank last year with a “troubled condition” designation, one of the lowest rankings on its five-level scoring system.

Meanwhile, the other major factor that has investors starting to panic is the beginning of an international trade war.

It takes a great deal to get the Canadians upset, but they have already retaliated against the tariffs that the Trump administration just imposed on them…

Canada will retaliate against new U.S. tariffs by imposing its own trade barriers on U.S. steel, aluminum and other products, Canadian Foreign Minister Chrystia Freeland said Thursday.

Freeland said Canada plans to slap dollar-for-dollar tariffs on the U.S. The Nafta partner’s proposed import taxes would also cover whiskey, orange juice and other food products alongside the steel and aluminum tariffs.

And it is expected that we will see retaliation from the Chinese, the Europeans and Mexico shortly.  All of this is causing a great deal of consternation on Capitol Hill, and it could mean big trouble for Republicans in November.

At the same time all of this is going on, this week we learned that 13 of Bank of America’s 19 “bear market indicators” have now been triggered.  The following summary comes from Zero Hedge

Specifically, the following indicators have now been triggered, with the latest 2 bolded:

  • Bear markets have always been preceded by the Fed hiking rates by at least 75bp from the cycle trough
  • Minimum returns in the last 12m of a bull market have been 11%
  • Minimum returns in the last 24m of a bull market have been 30%
  • 9m price return (top decile) vs. S&P 500 equalweight index
  • Consensus projected long-term growth (top decile) vs. S&P 500 equalweight index
  • We have yet to see a bear market when the 100 level had not been breached in the prior 24m
  • Similarly, we have yet to see a bear market when the 20 level had not been breached in the prior 6m
  • Companies beating on both EPS & Sales outperformed the S&P 500 by less than 1ppt within the last three quarters
  • While not always a major change, aggregate growth expectations tend to rise within the last 18m of bull markets
  • Trailing PE + CPI y/y% >20 in the prior 12m
  • Based on 1- and 3-month estimate revision trends; see footnote for more detail
  • Trailing PE + CPI (y/y%) >20 within the last 12m
  • In the preceding 12m of all but one (1961) bull market peak, the market has pulled back by 5%+ at least once

And here are the 6 indicators that have yet to ring the proverbial bell.

  • Each of the last three bear markets has started when a net positive % of banks were tightening C&I lending standards
  • Companies with S&P Quality ratings of B or lower outperform stocks rated B+ or higher
  • Forward 12m earnings yield (top decile) vs. S&P 500 equalweight index
  • A contrarian measure of sell side equity optimism; sell signal trigged in the prior 6m
  • A contrarian measure of buy side optimism
  • Does not always lead or catch every peak and all but one inversion (1970) has coincided with a bear market within 24m

Like so many others, I’ve got a bad feeling about all of this.

And so does best-selling author James Rickards.  He seems quite convinced that we are heading for the largest market collapse that anyone has ever seen

Each crisis is bigger than the one before. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.

This means that the larger size of the system implies a future global liquidity crisis and market panic far larger than the Panic of 2008.

Today, systemic risk is more dangerous than ever. Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books.

It has been 10 years since 2008, and conditions are definitely ripe for another great financial crisis.

Stay frosty my friends, because it looks like events are going to accelerate greatly in the months ahead.

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

The U.S. Has Decided To Fight Trade Wars With China, Europe, Canada And Mexico Simultaneously, And That Will Be Disastrous For The Global Economy…

One trade war may be enough to push the struggling global economy into another recession, but the U.S. government has apparently decided that it is time to fight trade wars with pretty much all of the major economies around the world at the same time.  This is utter insanity, and it is going to have disastrous consequences that will be felt all over the planet.  Yes, we need to get tough on trade.  If you have followed my work for the last eight years, than you know that I have been a very strong advocate of protecting U.S. manufacturers and U.S. workers.  But these things have got to be handled delicately, because any significant disruption at this point could lead to an absolutely crippling global economic crisis.  Negotiating on an international level requires a great deal of finesse, because if you mess up it can have monumental consequences.  For example, one thing that you shouldn’t do is make an agreement with the second largest economy in the world and then tear it up less than two weeks later

The odds of a messy trade war between the United States and China are rising again.

The Trump administration shocked the world on Tuesday by tearing up a truce with Beijing and announcing it would impose tariffs on $50 billion worth of Chinese goods and restrict Chinese investment in the United States.

Without a doubt China has been taking advantage of us for many years.  They have been slapping our goods with high tariffs and have been shamelessly stealing our intellectual property.  But the Chinese are very proud people, and now they feel like they have been slapped in the face.

So they won’t back down in a trade war, and on Wednesday they said that they “aren’t afraid of fighting one”

China is ready to retaliate after the United States revived plans to hit it with new tariffs.

“We want to reiterate that we don’t want a trade war, but we aren’t afraid of fighting one,” Chinese Foreign Ministry spokeswoman Hua Chunying said at a briefing on Wednesday.

Fighting a trade war with China would be bad enough, but it turns out that we are also starting one with the European Union.  The following comes from Zero Hedge

Time’s up! A month ago, President Trump delayed his EU steel and aluminum tariffs decision and as of Friday, that deadline is over and the US allies across Europe will face big decisions on retaliation.

Amid threats from various European leaders – and the potentially unipolar world order repressing blowback from Trump’s Iran decision and subsequent sanctions – The Wall Street Journal reports that the Trump administration, unable to win concessions from European Union counterparts ahead of a Friday deadline, is planning to make good on a threat to apply tariffs on European steel and aluminum, according to people familiar with the matter.

The announcement is reportedly likely to occur on Thursday, and will be 25% on imported steel and 10% on imported aluminum.

Other than the United States, China and the European Union are the two greatest economic powers on the entire planet.

Picking a fight with both of them at the same time is not wise.

And like China, the Europeans are pledging “swift retaliation”

The metal tariffs threaten €6.4 billion ($7.4 billion) worth of European exports, and the bloc has promised swift retaliation if it is not exempted from the trade penalties.

The European Union updated a list of American products earlier this month that would be hit with 25% tariffs if the United States moved forward. It includes US motorcycles, denim, cigarettes, cranberry juice and peanut butter.

There is more than a trillion dollars worth of trade between the United States and Europe each year, and so this is a very, very big deal.

A trade war should always be a last resort.  Every effort should have been made to negotiate a solution to our trade problems, and that does not appear to have happened.

And in addition to fighting China and Europe, the U.S. government has also decided now would be a good time to start a trade war with our neighbors here in North America as well.

In fact, tough tariffs on aluminum and steel imports from Canada and Mexico could start on Friday

The import taxes could take effect as soon as Friday.

The move is likely to have an immediate impact on global trade in steel and aluminum, particularly between the United States and Canada, the nation’s largest source of imported steel.

The decision also invites retaliation from each of the trading partners, which have vowed to erect new barriers to a range of U.S. products.

Canadians are perhaps the most polite people on the face of the planet, and so it really takes a lot to upset them.

But that is precisely what has happened, and they are pledging to “defend our workers and our industry”

“Our government always is very ready and very prepared to respond appropriately to every action. We are always prepared and ready to defend our workers and our industry,” Foreign Affairs Minister Chrystia Freeland said in Washington on Tuesday.

“Canadian steelworkers should absolutely know that the government of Canada has their back,” she said.

If we start slapping tariffs on all of our trading partners and they retaliate by slapping more tariffs on us, that isn’t suddenly going to bring manufacturing facilities and jobs back to America.

Instead, it will just result in a crippling economic slowdown.

It is true that we simply cannot continue to run a trade deficit of 40 or 50 billion dollars month after month.  The path that we are currently on is a path to national economic suicide.

But simultaneously fighting trade wars with China, Europe, Canada and Mexico is not going to solve anything.

In the end, our recklessness could ultimately be the trigger for the greatest economic crisis that any of us have ever seen.

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

European Implosion Sends Panic Through Global Markets As George Soros Warns ‘We May Be Heading For Another Major Financial Crisis’

I told you to keep your eyes on Europe.  On Tuesday, widespread panic shot through European financial markets and this deeply affected U.S. markets as well.  The Dow Jones industrial average fell 391 points, and at this point the Dow and the S&P 500 have been down for three trading sessions in a row.  But the big news is what is happening over in Europe.  Tuesday’s crash represented the largest one day move for 2 year Italian bonds ever, and Italian bank stocks are now down a whopping 24 percent from their April highs.  Overall, European banks have fallen a total of 11 percent over the last four days, and it isn’t just banks in troubled countries such as Italy and Spain that are hurting.  The biggest bank in Europe, Deutsche Bank, just keeps on tumbling and is now just barely above all-time lows.  A few days ago when I wrote that the next global economic crisis “could be just around the corner”, there were some people that criticized me for making such a statement.  Well, as you will see below, now this fact has become so obvious that even George Soros is saying it.

Those that are ignoring what is going on in Italy are making a tragic mistake.  Italy is the third largest economy in the eurozone, and even the Wall Street Journal is admitting that its bond market is “in meltdown”…

Risk aversion is back. Italy is the focal point, with its bond market in meltdown, its politics in crisis after President Sergio Mattarella blocked the formation of an antiestablishment government, and its credit rating under threat.

That is all now making bigger waves: Europe’s deepening troubles and disappointing global growth signals are sparking a sudden rally in haven bonds like U.S. Treasurys.

The next financial crisis has already arrived in Europe, and the primary reason for this crisis has to do with the giant mess that Italy’s government has become.  The following summary of the current situation comes from CNBC

Italy has been without a government since an inconclusive vote in early March, with anti-establishment political groups abandoning their efforts to form a coalition over the weekend amid a dispute with the country’s head of state.

President Sergio Mattarella, who was installed by a previous pro-EU government, refused to accept the nomination of euroskeptic candidate Paolo Savona for economy minister on Sunday.

Instead, he set the country on a path to another snap vote by appointing former International Monetary Fund (IMF) official Carlo Cottarelli as interim prime minister.

Of course the Italian parliament will never accept Cottarelli, and it looks like we are heading for snap elections in either July or August.

What is at stake in these elections is of the utmost importance to all of Europe.  As Politico recently discussed, if the Italian people continue to move toward anti-establishment parties we could actually see Italy leave the euro or even leave the EU altogether…

Italy, the third-largest EU power once Britain leaves, may sooner or later be run by two parties who agree on little other than their apparent eagerness to break stuff. It could be Italy’s debt — a default in the trillions of euros. It could be the euro, if they follow through on past promises to hold a referendum on membership in the single currency. And what’s ultimately broken could be the EU as we know it, if any such referendum goes against Brussels, as most that have been held have done.

The EU survived Brexit, but there is a lot of doubt as to whether it could also survive a defection by Italy.

During a speech on Tuesday, George Soros soberly assessed the current state of affairs in Europe.  According to Bloomberg, at one point he stated that “we may be heading for another major financial crisis.”

It is unusual for Soros to have such a gloomy tone.  He really seemed to quite pessimistic about Europe’s future, and he even went as far to say that “everything that could go wrong has gone wrong”

The stark warning from the billionaire money manager comes as Italian bond yields have jumped to multi-year highs and major emerging economies including Turkey and Argentina are struggling to contain the fallout from runaway inflation. Soros, who has been the object of ire by the government of his native Hungary, saved his gloomiest outlook for the EU.

“Everything that could go wrong has gone wrong,” he said, citing the refugee crisis and austerity policies that catapulted populists into power, as well as “territorial disintegration” exemplified by Brexit. “It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality,” he said.

I must admit that I agree with his assessment of the situation in Europe.  The EU most definitely is in “existential danger”, and I believe that we are in the beginning stages of the worst financial crisis in modern European history.

So what should be expect to see in the weeks ahead?

Well, here are three things to keep an eye on…

#1 The chaos is likely to continue for Italian financial markets.

#2 The euro is likely to continue to fall relative to the U.S. dollar.

#3 Trouble signs are likely to continue to erupt at European banking giants such as Deutsche Bank.

I have been warning about Italy, the euro and Deutsche Bank for a very long time, but because things didn’t fall apart right away a lot of people thought that the problems had been solved.

But just because something doesn’t happen in the short-term doesn’t mean that it isn’t going to happen.  The long-term trends that are destroying Europe’s financial system took a long time to mature, and we could all see what was happening, but now we have finally reached a major crisis point.

Of course the European elite could try to “extend and pretend” by pulling a few more tricks out of their sleeves, but at some point even they will lose control.  There is only so much that can be done, and those holding the reigns of power in Europe are almost out of ammunition.

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

12 Indications That The Next Major Global Economic Crisis Could Be Just Around The Corner

There have not been so many trouble signs for the global economy in a very long time.  Analysts are sounding the alarm about junk bond defaults, the smart money is getting out of stocks at an astounding rate, mortgage rates are absolutely skyrocketing, and Europe is already facing a full blown financial meltdown.  Of course expectations that another global economic crisis will happen among the general population are probably at an all-time low right now, but the reality of the matter is that we are probably closer to a new one erupting than at any point since the last one in 2008.  Since the last financial crisis our long-term debt problems have just continued to grow, and there are many that believe that the next crisis will actually be far worse than what we experienced ten years ago.

So how bad are things at this moment?

The following are 12 indications that the next major global economic crisis could be just around the corner…

#1 The “smart money” is getting out of stocks at a rate that we haven’t seen since just before the financial crisis of 2008.

#2 Moody’s is warning that a “particularly large wave” of junk bond defaults is coming.  And as I have written about so many times before, junk bonds are often an early warning indicator for a major financial crisis.

#3 According to the FDIC, a closely watched category known as “assets of problem banks” more than tripled during the first quarter of 2018.  What that means is that some really big banks are now officially in “problem” territory.

#4 U.S. Treasury bonds are having the worst start to a year since the Great Depression.

#5 Mortgage interest rates just hit a 7 year high, and they have been rising at the fastest pace in nearly 50 years.  This is going to be absolutely crippling for the real estate and housing industries.

#6 Retail industry debt defaults have hit a record high in 2018.

#7 We are on pace for the worst year for retail store closings ever.

#8 The two largest economies on the entire globe are on the verge of starting an international trade war.

#9 The 9th largest economy in the world, Italy, is in the midst of yet another financial meltdown.  In fact, this one appears to be the worst yet, and there are fears that it could spread to other areas of the eurozone.

#10 Italian banking stocks crashed really hard this week.

#11 Italian two year bond yields are the highest that they have been since the crisis of 2014.

#12 German banking giant Deutsche Bank just announced that it will be cutting another 7,000 jobs as it “seeks to turn the page on years of losses”.  Those of you that have followed my work for a long time know that I have written extensively about Deutsche Bank, and it really is amazing that it has survived for this long.  If Deutsche Bank fails in 2018, it will essentially be a “Lehman Brothers moment” for the entire planet.

The mainstream media in the United States almost entirely ignores Europe, but I believe that what is going on over there is the key right now.

Italy is a financial basket case, and Europe isn’t going to be able to handle a complete and total Italian financial collapse.  If you will remember, Europe could barely handle what happened in Greece, and the Italian economy is many times the size of Greece.

The can has been kicked down the road several times before on the Italian crisis, but now we are getting to the point where it simply won’t be able to be kicked down the road any further.

And once things start unraveling over in Europe, we will be deeply affected in the United States as well.  The global financial system is more interconnected than ever before, and at this point we are even more vulnerable than we were just prior to the crisis of 2008.

When this thing breaks loose, it won’t matter who is in the White House, who is in Congress or who is running the Federal Reserve.

When this bubble bursts there is nothing that anyone will be able to do to stop it.

Global central banks have been able to buy a few extra years of time by engaging in unprecedented levels of intervention, but now they are almost out of ammunition and events are beginning to escalate at a very frightening pace.

We shall see if they can pull another rabbit out of a hat in 2018, but I wouldn’t count on it…

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

Alarm Bells Go Off As 11 Critical Indicators Scream The Global Economic Crisis Is Getting Deeper

Alarm Clock - Public DomainEconomic activity is slowing down all over the planet, and a whole host of signs are indicating that we are essentially exactly where we were just prior to the great stock market crash of 2008.  Yesterday, I explained that the economies of Japan, Brazil, Canada and Russia are all in recession.  Today, I am mainly going to focus on the United States.  We are seeing so many things happen right now that we have not seen since 2008 and 2009.  In so many ways, it is almost as if we are watching an eerie replay of what happened the last time around, and yet most of the “experts” still appear to be oblivious to what is going on.  If you were to make up a checklist of all of the things that you would expect to see just before a major stock market crash, virtually all of them are happening right now.  The following are 11 critical indicators that are absolutely screaming that the global economic crisis is getting deeper…

#1 On Tuesday, the price of oil closed below 40 dollars a barrel.  Back in 2008, the price of oil crashed below 40 dollars a barrel just before the stock market collapsed, and now it has happened again.

#2 The price of copper has plunged all the way down to $2.04.  The last time it was this low was just before the stock market crash of 2008.

#3 The Business Roundtable’s forecast for business investment in 2016 has dropped to the lowest level that we have seen since the last recession.

#4 Corporate debt defaults have risen to the highest level that we have seen since the last recession.  This is a huge problem because corporate debt in the U.S. has approximately doubled since just before the last financial crisis.

#5 The Bloomberg U.S. economic surprise index is more negative right now than it was at any point during the last recession.

#6 Credit card data that was just released shows that holiday sales have gone negative for the first time since the last recession.

#7 As I mentioned yesterday, U.S. manufacturing is contracting at the fastest pace that we have seen since the last recession.

#8 The velocity of money in the United States has dropped to the lowest level ever recorded.  Not even during the depths of the last recession was it ever this low.

#9 In 2008, commodity prices crashed just before the stock market did, and late last month the Bloomberg Commodity Index hit a 16 year low.

#10 In the past, stocks have tended to crash about 12-18 months after a peak in corporate profit margins.  At this point, we are 15 months after the most recent peak.

#11 If you look back at 2008, you will see that junk bonds crashed horribly.  Why this is important is because junk bonds started crashing before stocks did, and right now they have dropped to the lowest point that they have been since the last financial crisis.

If just one or two of these indicators were flashing red, that would be bad enough.

The fact that all of them seem to be saying the exact same thing tells us that big trouble is ahead.

And I am not the only one saying this.  Just today, a Reuters article discussed the fact that Citigroup analysts are projecting that there is a 65 percent chance that the U.S. economy will plunge into recession in 2016…

The outlook for the global economy next year is darkening, with a U.S. recession and China becoming the first major emerging market to slash interest rates to zero both potential scenarios, according to Citi.

As the U.S. economy enters its seventh year of expansion following the 2008-09 crisis, the probability of recession will reach 65 percent, Citi’s rates strategists wrote in their 2016 outlook published late on Tuesday. A rapid flattening of the bond yield curve towards inversion would be an key warning sign.

Personally, I am convinced that we are already in a recession.  There is a lag in the official numbers, so often we don’t know that we are officially in one until it is well underway.  For example, we now know that a recession started in early 2008, but in the summer of 2008 Ben Bernanke and our top politicians were still insisting that there was not going to be a recession.  They were denying what was actually happening right in front of their eyes, and the same thing is happening now.

And of course if the government was actually using honest numbers, we would all be talking about the recession that never seems to end.  According to John Williams of shadowstats.com, honest numbers would show that the U.S. economy has continually been in recession since 2005.

But just like in 2008, the “experts” at the Federal Reserve are assuring all of us that everything is going to be just fine.  In fact, Janet Yellen is convinced that things are so rosy that she seems quite confident that the Fed will raise interest rates in December

Federal Reserve Chair Janet Yellen signaled Wednesday that the Fed is all but certain to raise interest rates this month for the first time in nearly a decade, saying that gains in the economy and labor market have met the central bank’s goals.

Her comments at the Economic Club of Washington amount to the strongest indication the Fed has provided so far that it will take action at a December 15-16 meeting.

This is the exact same kind of mistake that the Federal Reserve made back in the late 1930s.  They thought that the U.S. economy was finally recovering, and so interest rates were raised.  That turned out to be a tragic mistake.

But this time around, any mistake that the Fed makes will have global consequences.  The rising U.S. dollar is already crippling emerging markets all around the globe, and an interest rate hike will just push the U.S. dollar even higher.  For much more on this, please see my previous article entitled “The U.S. Dollar Has Already Caused A Global Recession And Now The Fed Is Going To Make It Worse“.

Many people are waiting for “the big crash”, but the truth is that almost everything has crashed already.

Oil has crashed.

Commodities have crashed.

Gold and silver have crashed.

Junk bonds have crashed.

Chinese stocks have crashed.

Dozens of other stock markets around the world have already crashed.

But the “big event” that many are waiting for is the crash of U.S. stocks.  And just like in 2008, it is inevitable that a U.S. stock crash will follow all of the other crashes that I just mentioned.

Sometimes I get criticized for issuing these kinds of alarms.  But just think of how many people could have been helped if they would have known that the financial crisis of 2008 was going to happen ahead of time.

The exact same patterns that we experienced back then are playing out once again right in front of our eyes, and the more people that we can warn in advance the better.

The U.S. Dollar Has Already Caused A Global Recession And Now The Fed Is Going To Make It Worse

Dollar Hands - Public DomainThe 7th largest economy on the entire planet, Brazil, has been gripped by a horrifying recession, as has much of the rest of South America.  But it isn’t just South America that is experiencing a very serious economic downturn.  We have just learned that Japan (the third largest economy in the world) has lapsed into recession.  So has Canada.  So has Russia.  The dominoes are starting to fall, and it looks like the global economic crisis that has already started is going to accelerate as we head into the end of the year.  At this point, global trade is already down about 8.4 percent for the year, and last week the Baltic Dry Shipping Index plummeted to a brand new all-time record low.  Unfortunately for all of us, the Federal Reserve is about to do something that will make this global economic slowdown even worse.

Throughout 2015, the U.S. dollar has been getting stronger.  That sounds like good news, but the truth is that it is not.  When the last financial crisis ended, emerging markets went on a debt binge unlike anything we have ever seen before.  But much of that debt was denominated in U.S. dollars, and now this is creating a massive problem.  As the U.S. dollar has risen, the prices that many of these emerging markets are getting for the commodities that they export have been declining.  Meanwhile, it is taking much more of their own local currencies to pay back and service all of the debts that they have accumulated.  Similar conditions contributed to the Latin American debt crisis of the 1980s, the Asian currency crisis of the 1990s and the global financial crisis of 2008 and 2009.

Many Americans may be wondering when “the next economic crisis” will arrive, but nobody in Brazil is asking that question.  Thanks to the rising U.S. dollar, Brazil has already plunged into a very deep recession

As Brazilian president Dilma Rousseff combats a slumping economy and corruption accusations, the country’s inflation surged above 10 percent while unemployment jumped to 7.9 percent, according to the latest official data. The dour state of affairs has Barclays forecasting a 4 percent economic contraction this year, followed by 3.3 percent shrinkage next year, the investment bank said in a research note last week.

The political and economic turmoil has recently driven the real, Brazil’s currency, to multiyear lows, a factor helping to stoke price pressures.

And as I mentioned above, Brazil is far from alone.  This is something that is happening all over the planet, and the process appears to be accelerating.  One of the places where this often first shows up is in the trade numbers.  The following comes from an article that was just posted by Zero Hedge

This market is looking like a disaster and the rates are a reflection of that,” warns one of the world’s largest shipbrokers, but while The Baltic Dry Freight Index gets all the headlines – having collapsed to all-time record lows this week – it is the spefics below that headline that are truly terrifying. At a time of typical seasonal strength for freight and thus global trade around the world, Reuters reports that spot rates for transporting containers from Asia to Northern Europe have crashed a stunning 70% in the last 3 weeks alone. This almost unprecedented divergence from seasonality has only occurred at this scale once before… 2008! “It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.”

Many “experts” seem mystified by all of this, but the explanation is very simple.

For years, global economic growth was fueled by cheap U.S. dollars.  But since the end of QE, the U.S. dollar has been surging, and according to Bloomberg it just hit a 12 year high…

The dollar traded near a seven-month high against the euro before the release of minutes of the Federal Reserve’s October meeting, when policy makers signaled the potential for an interest-rate increase this year.

A trade-weighted gauge of the greenback is at the highest in 12 years as Fed Chair Janet Yellen and other policy makers have made numerous pronouncements in the past month that it may be appropriate to boost rates from near zero at its Dec. 15-16 gathering. The probability the central bank will act next month has risen to 66 percent from 50 percent odds at the end of October.

But even though the wonks at the Federal Reserve supposedly know the damage that a strong dollar is already doing to the global economy, they seem poised to make things even worse by raising interest rates in December

Most Federal Reserve policymakers agreed last month that the economy “could well” be strong enough in December to withstand the Fed’s first Interest rate hike in nearly a decade, according to minutes of its meeting Oct. 27-28.

The officials said global troubles had eased and a delay could increase market uncertainty and undermine confidence in the economy.

The meeting summary provides the clearest evidence yet that a majority of Fed policymakers are leaning toward raising the central bank’s benchmark rate next month, assuming the economy continues to progress.

Considering the tremendous amount of damage that has already been done to the global economy, this is one of the stupidest things that they could possibly do.

But it looks like they are going to do it anyway.

It has been said that those that refuse to learn from history are doomed to repeat it.

And right now so many of the exact same patterns that we saw just before the great financial crisis of 2008 are playing out once again right in front of our eyes.

A lot of people out there seem to assume that once we got past the September/October time frame that we were officially out of “the danger zone”.

But that is not true at all.

The truth is that we have already entered a new global economic downturn that is rapidly accelerating, and the financial shaking that we witnessed in August was just a foreshock of what is coming next.

Let us hope that common sense prevails and the Fed chooses not to raise interest rates at their next meeting.

Because if they do, it will just make the global crisis that is now emerging much, much worse.

11 Signs That We Are Entering The Next Phase Of The Global Economic Crisis

Earth Puzzle - Public DomainWell, the Nasdaq finally did it.  It has climbed all the way back to where it was at the peak of the dotcom bubble.  Back in March 2000, the Nasdaq set an all-time record high of 5,048.62.  On Thursday, after all these years, that all-time record was finally eclipsed.  The Nasdaq closed at 5056.06, and Wall Street greatly rejoiced.  So if you invested in the Nasdaq at the peak of the dotcom bubble, you are just finally breaking even 15 years later.  Unfortunately, the truth is that stocks have not been soaring because the U.S. economy is fundamentally strong.  Just like the last two times, what we are witnessing is an irrational financial bubble.  Sometimes these irrational bubbles can last for a surprisingly long time, but in the end they always burst.  And even now there are signs of economic trouble bubbling to the surface all around us.  The following are 11 signs that we are entering the next phase of the global economic crisis…

#1 It is being projected that half of all fracking companies in the United States will be “dead or sold” by the end of this year.

#2 The rig count just continues to fall as the U.S. oil industry implodes.  Incredibly, the number of rigs in operation in the United States has fallen for 19 weeks in a row.

#3 McDonald’s has announced that it will be closing 700 “poor performing” restaurants in 2015.  Why would McDonald’s be doing this if the economy was actually getting better?

#4 As I wrote about the other day, we could be right on the verge of a Greek debt default.  In fact, we learned on Thursday that the Greek government has been “running on empty” for months…

Greece warned it will go bankrupt next week after failing to stump up enough cash to pay millions of public sector workers and its international debts.

Deputy finance minister Dimitras Mardas set alarm bells ringing yesterday when he declared the country had been ‘running on empty’ since February.

With a debt repayment deadline looming on May 1, Greece faces the deeply damaging prospect of having to snub its own employees to make a €200m payment to the International Monetary Fund.

#5 Coal accounts for approximately 40 percent of all electrical generation on the entire planet.  When the price of coal starts to drop, that is a sign that economic activity is slowing down.  Just prior to the last financial crisis in 2008, the price of coal shot up dramatically and then crashed really hard.  Well, guess what?  The price of coal has been crashing again, and it is already lower than it was at any point during the last recession.

#6 The price of iron ore has been crashing as well.  It is down 35 percent in the last nine months, and David Stockman believes that this is because of a major deflationary crisis that is brewing in China…

There is no better measure of the true contraction underway in China than the price of iron ore. The Wall Street stock peddlers will tell you not to be troubled by the 70% plunge from the 2012 highs and the 35% drop just in the last nine months. According to them, its all the fault of the big global miners who went overboard opening up massive new iron ore pits and mining infrastructure.

#7 At this point, China accounts for more total global trade than anyone else in the world.  That is why it is so alarming that Chinese imports and exports are both absolutely collapsing

China’s monthly trade data shows exports fell in March from a year ago by 14.6% in yuan terms, compared to expectations for a rise of more than 8%.

Imports meanwhile fell 12.3% in yuan terms compared to forecasts for a fall of more than 11%.

#8 The number of publicly traded companies in the United States that filed for bankruptcy during the first quarter of 2015 was more than double the number that filed for bankruptcy during the first quarter of 2014.

#9 New home sales in the United States just declined at their fastest pace in almost two years.

#10 U.S. manufacturing data has been shockingly weak lately…

On the heels of weak PMIs from Europe and Asia, Markit’s US Manufacturing PMI plunged to 54.2 in April (from 55.7). Against expectations of a rise to 55.6, this is the biggest miss on record. Of course, this is ‘post-weather’ so talking-heads will need to find another excuse as New Orders declined for the first time since Nov 2014.

#11 When priced according to “the average blue-collar hourly wage“, U.S. stocks are the most expensive that they have ever been in history right now.  To say that this financial bubble is overdue to burst is a massive understatement.

For a long time, I have been pointing to 2015 as a major “turning point” for the global financial system, and I still feel that way.

But for the first four months of this year, things have been surprisingly quiet – at least on the surface.

So what is going on?

Well, I believe that what we are experiencing right now is the proverbial “calm before the storm”.  There is all sorts of turmoil brewing just beneath the surface, but for the moment things seem like they are running along just fine to most people.  Unfortunately, this period of quiet is not going to last much longer.

And those that are “in the know” are already moving their money in anticipation of what is coming.  For example, consider the words of  Snapchat founder and CEO Evan Spiegel

Fed has created abnormal market conditions by printing money and keeping interest rates low. Investors are looking for growth anywhere they can find it and tech companies are good targets – at these values, however, all tech stocks are expensive – even looking at 5+ years of revenue growth down the road. This means that most value-driven investors have left the market and the remaining 5-10%+ increase in market value will be driven by momentum investors. At some point there won’t be any momentum investors left buying at higher prices, and the market begins to tumble. May be 10-20% correction or something more significant, especially in tech stocks.

It may not happen next week, or even next month, but big financial trouble is coming.

And when it finally arrives, it is going to shock the world, even though anyone with any sense can see the coming crisis approaching from a mile away.

18 Signs That The Global Economic Crisis Is Accelerating As We Enter The Last Half Of 2014

Accelerating - Public DomainA lot of people that I talk to these days want to know “when things are going to start happening”.  Well, there are certainly some perilous times on the horizon, but all you have to do is open up your eyes and look to see the global economic crisis unfolding.  As you will see below, even central bankers are issuing frightening warnings about “dangerous new asset bubbles” and even the World Bank is declaring that “now is the time to prepare” for the next crisis.  Most Americans tend to only care about what is happening in the United States, but the truth is that serious economic trouble is erupting in South America, all across Europe and in Asian powerhouses such as China and Japan.  And the endless conflicts in the Middle East could erupt into a major regional war at just about any time.  We live in a world that is becoming increasingly unstable, and people need to understand that the period of relative stability that we are enjoying right now is extremely vulnerable and will not last long.  The following are 18 signs that the global economic crisis is accelerating as we enter the last half of 2014…

#1 The Bank for International Settlements has issued a new report which warns that “dangerous new asset bubbles” are forming which could potentially lead to another major financial crisis.  Do the central bankers know something that we don’t, or are they just trying to place the blame on someone else for the giant mess that they have created?

#2 Argentina has missed a $539 million debt payment and is on the verge of its second major debt default in 13 years.

#3 Bulgaria is desperately trying to calm down a massive run on the banks that threatens of spiral out of control.

#4 Last month, household loans in the eurozone declined at the fastest rate ever recorded.  Why are European banks holding on to their money so tightly right now?

#5 The number of unemployed jobseekers in France has just soared to another brand new record high.

#6 Economies all over Europe are either showing no growth or are shrinking.  Just check out what a recent Forbes article had to say about the matter…

Italy’s economy shrank by 0.1% in the first three months of 2014, matching the average of the three previous quarters. After expanding 0.6% in Q2 2013, France recorded zero growth. Portugal shrank 0.7%, following positive numbers in the preceding nine months. While figures weren’t available for Greece and Ireland in Q1, neither country is showing progress. Greek GDP dropped 2.5% in the final three months of last year, and Ireland limped ahead at 0.2%.

#7 A few days ago it was reported that consumer prices in Japan are rising at the fastest pace in 32 years.

#8 Household expenditures in Japan are down 8 percent compared to one year ago.

#9 U.S. companies are drowning in massive amounts of debt, but the corporate debt bubble in China is so bad that the amount of corporate debt in China has actually now surpassed the amount of corporate debt in the United States.

#10 One Chinese auditor is warning that up to 80 billion dollars worth of loans in China are backed by falsified gold transactions.  What will that do to the price of gold and the stability of Chinese financial markets as that mess unwinds?

#11 The unemployment rate in Greece is currently sitting at 26.7 percent and the youth unemployment rate is 56.8 percent.

#12 67.5 percent of the people that are unemployed in Greece have been unemployed for over a year.

#13 The unemployment rate in the eurozone as a whole is 11.8 percent – just a little bit shy of the all-time record of 12.0 percent.

#14 The European Central Bank is so desperate to get money moving through the system that it has actually introduced negative interest rates.

#15 The IMF is projecting that there is a 25 percent chance that the eurozone will slip into deflation by the end of next year.

#16 The World Bank is warning that “now is the time to prepare” for the next crisis.

#17 The economic conflict between the United States and Russia continues to deepen.  This has caused Russia to make a series of moves away from the U.S. dollar and toward other major currencies.  This will have serious ramifications for the global financial system as time rolls along.

#18 Of course the U.S. economy is struggling right now as well.  It shrank at a 2.9 percent annual rate during the first quarter of 2014, which was much worse than anyone had anticipated.

But if U.S. economic numbers look a bit better for the second quarter, that doesn’t mean that we are out of the woods.

As I have stressed so many times, the long-term trends and the long-term balance sheet numbers are far, far more important than the short-term economic numbers.

For example, if you went to the mall today and spent a thousand dollars on candy and video games, your short-term “economic activity” would spike dramatically.  But your long-term financial health would take a significant turn for the worse.

Well, when we are talking about the health of the U.S. economy or the entire global financial system we need to keep the same kinds of considerations in mind.

As for the United States, whether the level of our debt-fueled short-term economic activity goes up a little bit or down a little bit is not what is truly important.

Rather, the fact that we are nearly 60 trillion dollars in debt as a society is what really matters.

The same thing applies for the globe as a whole.  Right now, the citizens of the planet are more than 223 trillion dollars in debt, and “too big to fail” banks around the world have at least 700 trillion dollars of exposure to derivatives.

So it doesn’t really matter too much whether the short-term economic numbers go up a little bit or down a little bit right now.  The whole system is an inherently flawed Ponzi scheme that will inevitably collapse under its own weight.

Let us hope that this period of relative stability lasts for a while longer.  It is a good thing to have time to prepare.  But you would have to be absolutely insane to think that the biggest debt bubble in the history of the world is never going to burst.