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European Banks Have Their Worst Two Day Stretch EVER As The Global Financial Crisis Intensifies

Stock Exchange Trading Floor - Public DomainOver the last two trading days, European banks have lost 23 percent of their value.  Let that number sink it for a bit.  In just a two day stretch, nearly a quarter of the value of all European banks has been wiped out.  I warned you that the Brexit vote “could change everything“, and that is precisely what has happened.  Meanwhile, the Dow was down another 260 points on Monday as U.S. markets continue to be shaken as well.  Overall, approximately three trillion dollars of global stock market wealth has been lost over the last two trading days.  That is an all-time record, and any doubt that we have entered a new global financial crisis has now been completely eliminated.

But of course the biggest news on Monday was what happened to European banks.  The Brexit vote has caused financial carnage for those institutions unlike anything that we have ever seen before.  Just check out this chart from Zero Hedge

European Banking Crash - Zero Hedge

I knew that things would be bad if the UK voted to leave the European Union, but I didn’t know that they would be this bad.

Prior to all of this, a whole bunch of “too big to fail” banks all over Europe were already in the process of imploding, and now this chaotic financial environment may push several of them into full-blown collapse mode simultaneously.  Just consider the following commentary from Wolf Richter

Healthy big banks would get over Brexit and the political turmoil it is spawning, particularly non-UK banks. But there are no healthy big banks in Europe. And non-UK banks are crashing just as hard, and some harder. This is about a banking crisis morphing into a financial crisis.

These bank stocks got crushed on Friday. And they got crushed again today. Italian banks have been reduced to penny stocks. Spanish banks are getting closer. Commerzbank, Germany’s second largest bank, and still partially owned by the German government as a consequence of the last bailout, is well on the way.

One institution that I have been warning about for months is German banking giant Deutsche Bank.  On Monday, their stock fell another 5.77 percent to a fresh all-time closing low of 13.87.  I have been convinced that Deutsche Bank is going to zero for a long time, but these days it seems in quite a hurry to get there.

Of course Deutsche Bank is far from alone.  The following are other “too big to fail” European banks that have lost at least one-fifth of their value over the past two trading days…

-Barclays
-Royal Bank of Scotland
-Lloyds Banking Group
-Credit Suisse
-BNP Paribas
-Societe Generale
-UniCredit
-Intesa SanPaolo
-Banca Monte dei Paschi di Siena
-Banco Santander
-CaixaBank

This is what a full-blown financial crisis looks like, and U.S. banks have been getting hit very hard too

The Brexit contagion is spreading as USD liquidity and counterparty risk in the interconnected global financial system has reached US banks with Goldman at 3 year lows and BofA and Citi plunging over 12%. This happens just two days after the Fed released its latest stress test results finding that none of the 33 banks tested would need additional capital in case of a “severe” financial crisis. That conclusion may be tested soon.

Meanwhile, the British pound continues to get absolutely pummeled.  As I write this, the GBP/USD is down to 1.32, and some are now warning that the British pound may hit parity with the U.S. dollar by the end of the year.

One of the reasons why I expect the British pound to continue to tumble is because the global elite have to show the British people that they made the wrong decision, and they need to scare off any other countries that would consider holding similar votes.

So it was no surprise that the elite had two of their major credit rating agencies downgrade the UK on Monday

Two major rating agencies downgraded the United Kingdom’s credit rating on Monday.

S&P Global Ratings lowered the UK to AA from AAA, with a “negative” outlook. And, Fitch cut its rating to AA from AA+, with a negative outlook as well.

And as I mentioned yesterday, Bank of America and Goldman Sachs have already projected that the UK economy is heading into recession.

As much economic and financial pain as possible will be inflicted upon the British people, and meanwhile they will be bombarded by mainstream news stories telling them that they made a stupid decision.

Hopefully the British people will stand strong and will not give in to the pressure.

But of course it isn’t just the British people that will be feeling the pain.  The Brexit vote has sent shockwaves all over the planet, and global investors are losing tremendous amounts of money.  For instance, here in the United States approximately 1.3 trillion dollars of stock market wealth has been wiped out so far…

Brexit isn’t just a European problem after all. The United Kingdom’s decision to quit the European Union is costing U.S. investors a pretty penny.

U.S.-based companies in the broad Russell 3000, including online advertising company Alphabet (GOOGL), software maker Microsoft (MSFT) and global bank JPMorgan Chase (JPM), have suffered a collective loss of $1.3 trillion since Friday’s shocker from the United Kingdom, according to a USA TODAY analysis of data from S&P Global Market Intelligence.

Hopefully tomorrow will be better.  It is very rare for global financial markets to crash for three days in a row, but it could happen.  More likely, however, is that we will see some kind of temporary bounce as long as some really negative event doesn’t hit the news.

But let there be no doubt about what has just happened.  The collapse of Lehman Brothers was the “trigger event” that really accelerated the crisis of 2008, and now it appears as though the Brexit vote will be the “trigger event” that greatly accelerates the crisis of 2016.

Global investors had already lost trillions over the past 12 months, and a full-blown financial implosion was going to happen no matter how the vote turned out, but thanks to British voters the fun and games have arrived early.

Unfortunately, only a very small fraction of the population understands just how bad things are going to get in the months ahead…

We Just Witnessed The Greatest One Day Global Stock Market Loss In World History

Money Burning - Public DomainMore stock market wealth was lost on Friday than on any other day in world history.  As you will see below, global investors lost two trillion dollars on the day following the Brexit vote.  And remember, this is on top of the trillions that global investors have already lost over the past 12 months.  It is important to understand that the Brexit vote was not the beginning of a new crisis – it has simply accelerated a global financial crisis that started last year and that was already in the process of unfolding.  As I noted on Friday, we have been waiting for “the next Lehman Brothers moment” that would really unleash fear and panic globally, and now we have it.  The next six months should be absolutely fascinating to watch.

According to CNBC, the total amount of money lost on global stock markets on Friday surpassed anything that we had ever seen before, and that includes the darkest days of the financial crisis of 2008…

Worldwide markets hemorrhaged more than $2 trillion in paper wealth on Friday, according to data from S&P Global, the worst on record. For context, that figure eclipsed the whipsaw trading sessions of the 2008 financial crisis, according to S&P analyst Howard Silverblatt.

The prior one day sell-off record was $1.9 trillion back in September of 2008, Silverblatt noted. According to S&P’s Broad Market Index, combined market capitalization is currently worth nearly $42 trillion.

And of course many of the wealthiest individuals on the planet got absolutely hammered.  According to Bloomberg, the 400 richest people in the world lost a total of $127.4 billion dollars on Friday…

The world’s 400 richest people lost $127.4 billion Friday as global equity markets reeled from the news that British voters elected to leave the European Union. The billionaires lost 3.2 percent of their total net worth, bringing the combined sum to $3.9 trillion, according to the Bloomberg Billionaires Index. The biggest decline belonged to Europe’s richest person, Amancio Ortega, who lost more than $6 billion, while nine others dropped more than $1 billion, including Bill Gates, Jeff Bezos and Gerald Cavendish Grosvenor, the wealthiest person in the U.K.

Could you imagine losing a billion dollars on a single day?

I am sure that Bill Gates and Jeff Bezos are not shivering in their boots quite yet, but what if the markets keep on bleeding like they did in 2008?

On the other hand, globalist magnate George Soros made a ton of money on Friday because he had positioned himself for a Brexit ahead of time.  The following comes from the London Independent

The billionaire who predicted Brexit would bring about “Black Friday” and a crisis for the finances of ordinary people appears to have profited hugely from the UK’s surprise exit from the EU.

George Soros is widely known as the man who “broke” the Bank of England in 1992, when he bet against the pound and made a reported £1.5bn.

Although the exact amount Mr Soros has gained after Brexit is not known, public filings show he doubled his bets earlier this year that stocks would fall.

So what will happen on Monday when the markets reopen?

Personally, I don’t think that it will be as bad as Friday.

But I could be wrong.

In early trading, Dow futures, S&P 500 futures and Nasdaq futures are all down

Dow futures fell by 90 points in early trading, while S&P 500 futures slipped 11 points, and NASDAQ futures dipped 24 points. Gold futures rose, in a reflection of sustained demand for safe-haven assets.

And at this moment, the British pound is getting absolutely crushed.  It is down to 1.33, and I would expect to see it fall a lot lower in the weeks and months to come.

Why?

Well, the truth is that now that the British people have voted to leave the EU, the globalists have to make it as painful as possible on them in order to send a warning to other nations that may consider leaving.  I think that a recent article by W. Ben Hunt explained this very well…

What’s next? From a game theory perspective, the EU and ECB need to crush the UK. It’s like the Greek debt negotiations … it was never about Greece, it was always about sending a signal that dissent and departure will not be tolerated to the countries that matter to the survival of the Eurozone (France, Italy, maybe Spain). Now they (and by “they” I mean the status quo politicians throughout the EU, not just Germany) are going to send that same signal to the same countries by hurting the UK any way they can, creating a Narrative that it’s economic death to leave the EU, much less the Eurozone. It’s not spite. It’s purely rational. It’s the smart move.

The elite need a crisis now in order to show everyone that globalism is the answer and not the problem.  If the British people were allowed to thrive once they walked away, that would only encourage more countries to go down the exact same path.  This is something that the elite are determined to avoid.

The Brexit vote has barely sunk in, and Bank of America and Goldman Sachs are already projecting a recession for the United Kingdom.  Sadly, I believe that this is what we will see happen.

But it won’t just be the British that suffer.

On Friday, European banking stocks had their worst day ever.  In particular, Deutsche Bank fell an astounding 17.49 percent to an all-time record closing low of 14.72.  I have warned repeatedly about the implosion of Deutsche Bank, and this crisis could be the catalyst for it.

In addition, I have repeatedly warned about the slow-motion meltdown that is happening in Japan.  On Friday, Japanese stocks lost 1286 points, and the yen surged in the exact opposite direction that the government is trying to send it…

Tokyo, we have a problem.

Last week, market tumult stemming from the U.K.’s vote to quit the European Union drove the British pound to its weakest levels in three decades.

Yet it also sent investors flocking to traditional safe haven assets like the U.S. dollar, gold and the yen, the latter surging against every major currency as the results of Brexit became clear: Dollar/yen spiked from a Thursday high near 107 to a two-year low near 99.

Just like in 2008, there will be days when global markets will be green.  When that happens, it will not mean that the crisis is over.

If you follow my work closely, then you know that it is imperative to look at the bigger picture.  Over the past 12 months, there have been some very nice market rallies around the world, but investors have still lost trillions of dollars overall.

What happens on any one particular day is not the story.  Rather, the key is to focus on the long-term trends.

And without a doubt, this Brexit vote could be “the tipping point” that greatly accelerates our ongoing woes…

“Brexit is the biggest global monetary shock since 2008,” said David Beckworth, a scholar at the Mercatus Center at George Mason University, in a blog post on Friday. “This could be the tipping point that turns the existing global slowdown of 2016 into a global recession.”

We were already dealing with a new global economic crisis without the Brexit vote.  But what this does is it introduces an element of panic and fear that had been missing up until this current time.

And markets do not like panic and fear very much.  In general, markets tend to go up when things are calm and predictable, and they tend to go down when chaos reigns.

Unfortunately, I believe that we are going to see quite a bit more chaos for the rest of 2016, and the trillions that were lost on Friday may turn out to be just the tip of the iceberg.

Plunging Manufacturing Numbers Mean That It Is Time To Hit The Panic Button For The Global Economy

Panic Button On Keyboard - Public DomainWe haven’t seen numbers like these since the last global recession.  I recently wrote about how global trade is imploding all over the planet, and the same thing is true when it comes to manufacturing.  We just learned that manufacturing in China has now been contracting for seven months in a row, and as you will see below, U.S. manufacturing is facing “its toughest period since the global financial crisis”.  Yes, global stocks have bounced back a bit after experiencing dramatic declines during January and the first part of February, and this is something that investors are very happy about.  But that does not mean that the crisis is over.  All bear markets have their ups and downs, and this one will not be any different.  Meanwhile, the cold, hard economic numbers that keep coming in are absolutely screaming that a new global recession is here.

Just consider what is happening in China.  Manufacturing activity continues to implode, and factories are shedding jobs at the fastest pace since the last financial crisis

Chinese manufacturing suffered a seventh straight month of contraction in February.

China’s official Purchasing Managers’ Index (PMI) stood at 49.0 in February, down from the previous month’s reading of 49.4 and below the 50-point mark that separates growth from contraction on a monthly basis.

A private survey also showed China’s factories shed jobs at the fastest rate in seven years in February, raising doubts about the government’s ability to reduce industry overcapacity this year without triggering a sharp jump in unemployment.

For years, the expansion of the Chinese economy has helped fuel global economic growth.  But now things have shifted dramatically.

At this point, things are already so bad that the Chinese government is admitting that millions of workers are going to lose their jobs at state-controlled industries in China…

China’s premier told visiting U.S. Treasury Secretary Jacob Lew on Monday his government is pressing ahead with painful reforms to shrink bloated coal and steel industries that are a drag on its slowing economy and ruled out devaluing its currency as a short-cut to boosting exports.

Premier Li Keqiang’s comments to Lew on Monday were in line with a joint declaration by financial officials from the Group of 20 biggest rich and developing economies who met over the weekend in Shanghai. They pledged to avoid devaluations to boost sagging trade and urged governments to speed up reforms to boost slowing global growth.

Across all state-controlled industries, as many as six million workers could be out of a job, with almost two million in the coal industry alone.

But it isn’t just China.  Right now manufacturing activity is slowing down literally all over the planet, and this is exactly what we would expect to see if a new global recession had begun.  The following chart and analysis come from Zero Hedge

As the below table shows, 28 regions have reported so far. Seven saw improvements in their manufacturing sectors in February, twenty recorded a weakening, and India was unchanged. This means that over 70% of the world saw manufacturing sentiment deteriorate in February compared to January.

February Manufacturing Numbers - Zero Hedge

In terms of actual expansion, there were 21 countries in positive territory and 7 in negative. In particular, Greece moved from neutral to contraction territory, while Taiwan dropped below breakeven from expansion.

Unfortunately, most Americans don’t really pay much attention to what is going on in the rest of the world.  For most of us, what really matters is what is happening inside the good ole USA.

And of course the news is not good.  There were more signs of trouble for U.S. manufacturing in the February numbers, and this continues a trend that stretches back well into last year.  The following is what Chris Williamson, the chief economist at Markit, had to say about these numbers

“The February data add to signs of distress in the US manufacturing economy. Production and order book growth continues to worsen, led by falling exports. Jobs are being added at a slower pace and output prices are dropping at a rate not seen since mid-2012.

“The deterioration in the manufacturing sector’s performance since mid-2014 has broadly tracked the dollar’s rise, which makes US goods more expensive in overseas markets and leads US consumers to favour cheaper imported goods.

“With other headwinds including the downturn in the oil sector, heightened uncertainty due to financial market volatility, global growth worries and growing concerns about the presidential election, it’s no surprise that the manufacturing sector is facing its toughest period since the global financial crisis.

Over the past couple of decades, the U.S. economy has lost tens of thousands of manufacturing facilities.  We desperately need a manufacturing renaissance – not another manufacturing decline.

As good paying manufacturing jobs have been shipped overseas, they have been replaced by low paying service jobs.  As a result, the middle class is shrinking and the ranks of the poor are exploding.

It is hard to believe, but today more than 45 million Americans are on food stamps, and a significant percentage of those individuals actually have jobs.  They are called “the working poor”, and it is becoming a major crisis in this nation.

And no matter what Obama may say, unemployment remains a major problem in the United States as well.  At this point, unemployment rates in 36 states are higher than they were just before the last recession hit in 2008.

Of course a lot of people are going to look at this article and will point to the stock market gains of the past couple of weeks as evidence that “things are getting better”.  It is this kind of clueless approach that is keeping the American people from coming together on solutions to our problems.

The truth is that the United States has been experiencing economic decline for decades.  Our economic infrastructure has been gutted, the middle class is steadily deteriorating, and we have amassed the biggest pile of debt in the history of the world.

Anyone that believes that things are “just fine” is in a massive state of denial.  Consuming far more wealth than we produce is not a formula for a sustainable economy, and it is just a matter of time before we find this out the hard way.

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