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Central Banks Now Own Stocks And Bonds Worth Trillions – And They Could Crash The Markets By Selling Them

Have you ever wondered why stocks just seem to keep going up no matter what happens?  For years, financial markets have been behaving in ways that seem to defy any rational explanation, but once you understand the role that central banks have been playing everything begins to make sense.  In the aftermath of the great financial crisis of 2008, global central banks began to buy stocks, bonds and other financial assets in very large quantities and they haven’t stopped since.  In fact, as you will see below, global central banks are on pace to buy 3.6 trillion dollars worth of stocks and bonds this year alone.  At this point, the Swiss National Bank owns more publicly-traded shares of Facebook than Mark Zuckerberg does, and the Bank of Japan is now a top-five owner in 81 different large Japanese firms.  These global central banks are shamelessly pumping up global stock markets, but because they now have such vast holdings they could also cause a devastating global stock market crash simply by starting to sell off their portfolios.

Over the years I have often been asked about the “plunge protection team”, but the truth is that global central banks are the real “plunge protection team”.  If stocks start surging higher on any particular day for seemingly no reason, it is probably the work of a central bank.  Because they can inject billions of dollars into the markets whenever they want, that essentially allows them to “play god” and move the markets in any direction that they please.

But of course what they have done is essentially destroy the marketplace.  A “free market” for stocks basically no longer exists because of all this central bank manipulation.  I really like how Bruce Wilds made this point

One indication of just how messed up and flawed the global markets have become is reflected in the way central banks across the world are now buying stocks. This has become a part of their response to correcting the forces of past excesses. Their incursion into this bastion of the free markets signals we have entered the era where true price discovery no longer exists. The central banks are often viewed as price-insensitive buyers, so this incestuous influx of money is in some ways the ultimate distortion.

According to Business Insider, global central banks are on pace to purchase an astounding 3.6 trillion dollars in stocks and bonds in 2017.

Overall, the five largest global central banks now collectively have 14.6 trillion dollars in assets on their balance sheets.

You can call this a lot of things, but it certainly isn’t free market capitalism.

The Swiss National Bank is one of the biggest offenders.  During just the first three months of this year, it bought 17 billion dollars worth of U.S. stocks, and that brought the overall total that the Swiss National Bank is currently holding to more than $80 billion.

Have you ever wondered why shares of Apple just seem to keep going up and up and up?

Well, the Swiss National Bank bought almost 4 million shares of Apple during the months of January, February and March.

And as I mentioned above, the Swiss National Bank now owns more publicly-traded shares in Facebook than Mark Zuckerberg”

Switzerland’s central bank now owns more publicly-traded shares in Facebook than Mark Zuckerberg, part of a mushrooming stock portfolio that is likely to grow yet further.

The tech giant’s founder and CEO has other ways to control his company: Zuckerberg holds most of his stake in a different class of stock. Nevertheless this example illustrates how the Swiss National Bank has become a multi-billion-dollar equity investor due to its campaign to hold down the Swiss franc.

It is now the world’s eighth-biggest public investor, data from the Official Monetary and Financial Institutions Forum show.

But as shameless as the Swiss National Bank has been, the Bank of Japan is even worse.

Today, the Nikkei is essentially a giant sham.  The Bank of Japan regularly goes in and just starts buying up everything in sight, and according to Bloomberg they are on pace to become the largest shareholder in dozens of the most prominent Japanese corporations by the end of 2017…

Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year, according to estimates compiled by Bloomberg from the central bank’s exchange-traded fund holdings.

If global central banks have the power to pump up these markets, they also have the power to crash them.

Why would they want to do such a thing?

I can answer that question with just two words…

Donald Trump.

If the Comey angle doesn’t work, the elite could try to destroy Trump by engineering an absolutely devastating stock market crash.  Close to half the U.S. population dislikes Trump anyway, and so it would be fairly easy to get them to believe that Trump’s policies have caused a new financial crisis.  Of course that would be complete nonsense, but in our society today the truth often doesn’t really matter.

And without a doubt, evidence continues to mount that the real economy is starting to slow down substantially.  For example, we just learned that bankruptcies surged once again in May.  The following comes from Wolf Richter

So here we go again. Total US business bankruptcies in May rose 4.7% year-over-year to 3,572 filings, according to the American Bankruptcy Institute. That’s up 40% from May 2015 and up 10% from May 2014.

And there’s another concern: Bankruptcy filings are highly seasonal. They peak in tax season – March or April – and then fall off. The decline in April after the peak in March was within that seasonal pattern. Over the past years, filings dropped in May. But not this year.

Without unprecedented intervention by global central banks, financial markets would have crashed long ago.

And if they keep increasing their purchases of stocks and bonds, the central banks may be able to prop things up for a while longer.

Who knows?  Perhaps with enough financial engineering they would be able to keep this bubble going for years.  Of course things would start to get really awkward once they eventually owned virtually everything, but I have a feeling that things will never get that far.

I have a feeling that global central banks will eventually find an excuse to start “unwinding their balance sheets”, and I have a feeling that it will be at a time that is highly inconvenient for President Trump.

Stock Markets All Over The World Crash As We Begin 2016

Dominoes - Public DomainThe first trading day of 2016 was full of chaos and panic.  It started in Asia where the Nikkei was down 582 points, Hong Kong was down 587 points, and Chinese markets experienced an emergency shutdown after the CSI 300 tumbled 7 percent.  When European markets opened, the nightmare continued.  The DAX was down 459 points, and European stocks overall had their worst start to a year ever.  In the U.S., it looked like we were on course for a truly historic day as well.  The Dow Jones Industrial Average was down 467 points at one stage, but some very mysterious late day buying activity helped trim the loss to just 276 points at the close of the market.  The sudden market turmoil caught many by surprise, but it shouldn’t have.  The truth is that a whole host of leading indicators have been telling us that this is exactly what should be happening.  The global financial crisis that began in 2015 is now accelerating, and my regular readers already know precisely what is coming next.

The financial turmoil of the last 24 hours is making headlines all over the globe.  It began last night in China.  Very bad manufacturing data and another troubling devaluation of the yuan sent Chinese stocks tumbling to a degree that we have not seen since last August.  In fact, the carnage would have probably been far, far worse if not for a new “circuit breaker” that China recently implemented.  Once the CSI 300 was down 7 percent, trading was completely shut down for the rest of the day.  The following comes from USA Today

Under a new market “circuit breaker” rule in China established last year, which is designed to slow down markets and halt panic in the event of moves of 5% or more, the CSI 300, a large-company stock index in mainland China was halted for 15 minutes in mid-afternoon trading after diving more than 5%. But when shares headed lower once again just minutes after the initial trading halt, and losses for the day swelled to more than 7%, the new circuit breaker rules kicked in, prompting a shutdown of mainland China’s stock market for the day, according to Bloomberg.

After the first 15 minute halt, panic set in as Chinese traders rushed to get out of their trades before the 7 percent circuit breaker kicked in.  This resulted in an absolutely chaotic seven minutes as investors made a mad dash for the exits…

The sell orders piled up fast on Monday at Shenwan Hongyuan Group, China’s fifth-biggest brokerage by market value.

China’s CSI 300 Index had just tumbled 5 percent, triggering a 15-minute trading halt, and stock investors were scrambling to exit before getting locked in by a full-day suspension set to take effect at 7 percent. When the first halt was lifted, the market reaction was swift: it took just seven minutes for losses to reach the limit as volumes surged to their highs of the day.

“Investors rushed to the door during the level-one stage of the circuit breaker as they fretted the market would go down further,” said William Wong, the head of sales trading at Shenwan Hongyuan in Hong Kong.

The financial carnage continued once the European markets opened.  Markets were red all across the continent, and things were particularly bad in Germany.  The DAX was down 459 points, and it is rapidly approaching the psychologically-important 10,000 barrier.  Overall, it was the worst start to a year that the European markets have ever experienced.

When U.S. markets opened, unexpectedly bad U.S. manufacturing data seemed to add fuel to the fire.  Monday morning we learned that our manufacturing sector is contracting at a pace that we haven’t seen since the last recession

America’s manufacturing sector shrank for the second straight month in December. The industry’s key index — ISM — hit 48.2% in December, the lowest mark since June 2009. Anything below 50% is a contraction and a month ago it hit 48.6%.

The index has fallen for six straight months.

The trend is certainly heading in a direction that would ring alarm bells,” says Sam Bullard, senior economist at Wells Fargo.

This is yet another sign that tells us that the U.S. economy has already entered the next recession.

And what happens to the markets during a recession?

They go down.

In addition to the bad data that we got from the U.S. and China, there was another number that was also extremely troubling.

South Korean exports have traditionally been considered a key leading indicator for the entire global economy, and on Monday we learned that they were down a whopping 13.8 percent in December from a year earlier…

One of the more reliable indicators of the global economy continues to confirm fears of a worldwide slowdown.

South Korean exports — also referred to as the world’s economic canary in the coal mine — fell 13.8% in December from a year earlier.

This was a deterioration from the 4.8% decline in November, and it was much worse than the 11.7% decline expected by economists.

The “nothing is happening” crowd may not be willing to admit it yet, but the truth is that a major global economic slowdown is already happening.

And what happened to global markets today is perfectly consistent with the longer term patterns that have been emerging over the past six months or so.

In the weeks and months to come, things are going to get even worse.  There will always be days when the markets are up, but don’t let those days fool you into thinking that the crisis is over.  In the western world we are so accustomed to 48 hour news cycles, and many of us seem to be incapable of focusing on trends that develop over longer periods of time.

If I was going to put together a scenario for a global financial crisis for a textbook, what we have seen over the past six months or so would be perfect.  Things are playing out exactly how they should be, and that means big trouble for the rest of 2016.

But that doesn’t mean that we have to live in fear.  In fact, I just wrote an entire article entitled “2016: A Year For Living With No Fear“.  It is when times are at their worst that our character is put to the test.  Some will respond to what happens in 2016 with courage and strength, and others will respond with fear and panic.

As things start falling apart all around us this year, how will you respond?

Gerald Celente Is Predicting That A Stock Market Crash Will Happen By The End Of 2015

New York Stock Exchange - Public DomainGerald Celente of the Trends Research Institute has just gone on the record with a prediction that there will be a stock market crash by the end of this calendar year.  If you are not familiar with Gerald Celente, he is one of the most highly respected trends forecasters in the entire world.  He has been featured on CNN, The Oprah Winfrey Show, The Today Show, Good Morning America, CBS Morning News, NBC Nightly News and Coast to Coast AM.  Personally, I have a lot of respect for him.  While it is true that not every single one of his forecasts about the future came to pass over the years, he does have a very solid track record that goes back for decades.  He correctly predicted the 1987 stock market crash, the bursting of the dotcom bubble and the financial panic of 2008.  Just a couple of days ago, he told Eric King the following: “I’m now predicting that we are going to see a global stock market crash before the end of the year.”  Celente says that it won’t just be U.S. stocks either.  He believes that crashes are also coming to “the DAX, the FTSE, the CAC, Shanghai, and the Nikkei”.  It other words, it is going to be a truly global financial crisis and he says that there is “going to be panic on the streets from Wall Street to Shanghai and from the UK down to Brazil”.

When you go out on a limb like this, you are putting your credibility on the line.  This is something that Celente has only done a few times in the past, and normally he has been spot on

Rarely do I ever put a date on market crashes. I did it in 1987 when I forecast the 1987 stock market crash — that was in the Wall Street Journal. I also forecast the ‘Panic of 2008,’ and the ‘dot-com bust’ in October of 1999, when I said it (the dot-com mania) would fail in the second quarter of 2000…

Of course Celente is far from alone.  Many others have also been warning that a new financial crisis is imminent.

For instance, just check out what David Stockman recently told CNBC

David Stockman has long warned that the stock market is on the verge of a massive collapse, and the recent price action has him even more convinced than ever that the bottom is about to fall out.

I think it’s pretty obvious that the top is in,” the Reagan administration’s OMB director said Thursday on CNBC’s “Futures Now.” The S&P 500 has traded in a historically narrow range for the better part of 2015, having moved just 1 percent higher year to date. “It’s just waiting for the knee-jerk bulls, robo traders and dip buyers to finally capitulate.”

Stockman, whose past claims have yet to come to fruition, still believes that the excessive monetary policy from central banks around the world has created a “debt supernova,” and all the signs point to “the end of the central bank enabled bubble,” which could cause a worldwide recession.

Just a few days ago, I authored an article entitled “8 Financial Experts That Are Warning That A Great Financial Crisis Is Imminent” which showed that a whole bunch of other financial experts are sounding the alarm about an implosion of the financial markets.

And before any of these warnings came out, I issued my “red alert” for the last six months of 2015 back on June 25th.

There is a growing consensus that something really, really bad is about to happen in the very near future.

You know that we are really late in the game when the mainstream media starts sounding exactly like The Economic Collapse Blog.

On July 22nd, I authored a piece entitled “Commodities Collapsed Just Before The Last Stock Market Crash – So Guess What Is Happening Right Now?

Now compare that headline to this recent one from Bloomberg: “Commodities Are Crashing Like It’s 2008 All Over Again“.

The mainstream media is starting to get it.  The exact same patterns that we witnessed just prior to the last financial crisis are playing out once again right before our very eyes.  Here is an excerpt from that Bloomberg article

Attention commodities investors: Welcome back to 2008!

The meltdown has pushed as many commodities into bear markets as there were in the month after the collapse of Lehman Brothers Holdings Inc., which spurred the worst financial crisis seven years ago since the Great Depression.

Eighteen of the 22 components in the Bloomberg Commodity Index have dropped at least 20 percent from recent closing highs, meeting the common definition of a bear market. That’s the same number as at the end of October 2008, when deepening financial turmoil sent global markets into a swoon.

This is the kind of stuff that I have been hammering on for weeks.

Another sign that we saw back in 2008 that is repeating once again is a substantial slowdown in global trade.  Over the weekend, we got some more bad news on this front from China.  The following comes from Zero Hedge

Overnight we got another acute reminder of just who is lying hunched over, comatose in the driver’s seat of global commerce: the country whose July exports just crashed by 8.3% Y/Y (and down 3.6% from the month before) far greater than the consensus estimate of only a 1.5% drop, and the biggest drop in four months following the modest June rebound by 2.8%: China.

China Exports YoY - Zero Hedge

It wasn’t just exports, imports tumbled as well by 8.1%, fractionally worse than the -8.0% consensus, and down from the -6.1% in June as China’s commodity tolling operations are suddenly mothballed.

The crisis that so many have been waiting for is here.

As the coming weeks and months play out, there will be good days and there will be bad days.  Remember, some of the biggest one day gains in U.S. stock market history happened right in the middle of the financial crisis of 2008.  So don’t get fooled by what happens on any one particular day.

Also, please do not think that this crisis will be “over” by the end of 2015.  What we are moving into is just the start of the crisis.  Things will continue to unravel as we move into 2016 and beyond.  The recession that we experienced back in 2008 and 2009 will seem like a Sunday picnic compared to what is coming by the time that everything is all said and done.

So that is why I work so hard to encourage people to get prepared.

What we are facing is not going to last for weeks or for months.

The coming crisis is going to last for years, and it is going to be painful beyond what most people would dare to imagine.

European Stocks, Chinese Stocks And Commodities Are All Crashing – Are U.S. Stocks Next?

European Stock Market Crash - Public DomainA global stock market crash has begun.  European stocks are crashing, Chinese stocks are crashing, and commodities are crashing.  And guess what?  All of those things happened before U.S. stocks crashed in the fall of 2008 too.  In so many ways, it seems like we are watching a replay of the financial crisis of 2008, but this time around the world is in far worse shape financially.  Global debt levels are at an all-time high, the 75 trillion dollar global shadow banking system could implode at any time, and there are hundreds of trillions of dollars in derivatives that threaten to wipe out major banks all over the planet.  The last major worldwide financial crash was almost seven years ago, and very little has been done since that time to prepare for the next one.  If global markets do not calm down, we could see carnage in the months ahead that is absolutely unprecedented.

For months, European authorities have been promising us that a “Grexit” is already “priced in” to the markets and that any “contagion” from the Greek crisis will be “contained”.  Of course everyone knew that was just a smokescreen.  Just in the past couple of days since the Greek “no” vote, European stocks have already been crashing.  The following comes from Zero Hedge

Does this look contained to you?

Portugal, Spain, and Italy all collapsing…

European Stocks Crashing - Zero Hedge

As I mentioned at the top of this article, European stocks started crashing well before U.S. stocks started crashing during the last financial crisis.  If you doubt this, just look at this chart, and this chart and this chart.

Will the same thing happen again this time?

And just like I have warned repeatedly, European bond yields have started to soar.  When bond yields go up, bond prices go down, so many bond investors are losing a tremendous amount of money right now.  Here is more from Zero Hedge

Who’s next?

European bond risk is anything but “contained” as GGB 10Y Yields top 18%…

European Bond Yields - Zero Hedge

If there is not a last minute deal between Greece and her creditors, what we have witnessed so far in the bond markets will just be the tip of the iceberg.  In the months ahead, we could witness a bond crash unlike anything that we have ever seen in all of history.  Just consider what Egon von Greyerz recently told Eric King…

There is no liquidity in this market and this is where we will soon see a problem. We will see the bond market totally seizing up in the next few months. Eric, people simply don’t understand that this is a much bigger problem than Greece.

So we are talking about a worldwide problem, not just a Greek problem. The majority of the $100 trillion bond market is worthless, and of course a ticking time-bomb of over $1 quadrillion worth of derivatives is linked to that. This means that, sadly, we are heading into a major contagion that will lead to financial catastrophe for the world. This will also lead to an implosion of all bubble assets across the globe.

Hmm – there is that word “derivatives” again.

It is funny how that keeps popping up.

As things unravel over in Europe, a lot of desperate Europeans are feverishly purchasing physical gold.  The following comes from Bloomberg

European investors are increasing purchases of gold as Greece’s turmoil boosts the appeal for an alternative to the euro.

Demand from Greek customers for Sovereign gold coins was double the five-month average in June, the U.K. Royal Mint said in an e-mailed statement. CoinInvest.com, an online retailer, said sales on Saturday and Sunday were the highest since Cyprus limited cash withdrawals in 2013, driven by a jump in German, French and Greek buyers.

Investors are searching for a safe haven after Greece imposed capital controls, closed banks and stopped selling gold coins to the public until at least July 6.

Meanwhile, Chinese stocks have continued to fall.  Overall, Chinese stocks have fallen 27 percent since the peak, and a whopping 3.2 trillion dollars of “paper wealth” has been wiped out in China in just the last three weeks.

At this point things are so bad that about one-fourth of all stocks in China have already suspended trading according to CNN

The turmoil in China’s stock market is so bad that some companies are calling it quits.

Over 700 Chinese companies have halted trading to “self preserve,” according to the state media. That means about a quarter of the companies listed on China’s two big exchanges — the Shanghai and Shenzhen — are no longer trading.

Desperate measures are being employed to try to stop the stock market crash in China.  For example, over the weekend an alliance of securities brokerages pledged to invest “at least 120 billion yuan” in order to stabilize stock prices

China’s top 21 securities brokerages said on Saturday they would collectively invest at least 120 billion yuan ($19.3 billion) to help stabilize the country’s stock markets after a slump of nearly 30 percent since mid-June. In addition, 57 Chinese mutual funds are reportedly investing 2.2 billion yuan in stock funds.

The Chinese central bank has gotten involved as well.  In fact, the People’s Bank of China has taken the dramatic step of actually directly loaning money to brokerages

In an extraordinary move, the People’s Bank of China has begun lending money to investors to buy shares in the flailing market. The Wall Street Journal reports this “liquidity assistance” will be provided to the regulator-owned China Securities Finance Corp, which will lend the money to brokerages, which will in turn lend to investors.

The dramatic intervention marks the first time funds from the central bank have been directed anywhere other than the banks, signalling serious concern from authorities about the crisis.

In addition, the Chinese government has taken the following steps to intervene…

-All short selling of stocks has been banned.

-China’s national social security fund has been banned from selling stocks, but they can continue to buy stocks.

-Local media has been banned from using the terms “equity disaster” and “rescue the market” in their news reports.

But despite everything that you just read, Chinese stocks have still been falling.

Meanwhile, global commodity prices are crashing.  Just check out this chart.  This is also something that happened before U.S. stocks crashed back in 2008.

Thankfully, U.S. stocks have not started crashing yet.  But it should be noted that the “smart money” in the United States has been selling stocks like crazy since the “no” vote in the Greek referendum.  And if the patterns that we witnessed seven years ago hold up, it is just a matter of time before we experience a stock market crash too.

Incredibly, there are a lot of people out there that very strongly believe that everything is going to be just fine.  They have tremendous faith in the central bankers and in our political leaders, and they are assuring all the rest of us that there is no possible way that the global financial system could be brought down again.

I truly wish that they were right.  If everything was going to be just fine, instead of writing about the coming economic collapse I could write about sports or do a blog dedicated to LOLcats.  But of course the truth is that the “hopetimists” are dead wrong.

A great shaking is coming to our world, and life as we know it is about to change in a major way.

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