The Greek government says that a “moment of truth” is coming on June 5th. Either their lenders agree to give them more money by that date, or Greece will default on a 300 million euro loan payment to the IMF. Of course it won’t technically be a “default” according to IMF rules for another 30 days after that, but without a doubt news that Greece cannot pay will send shockwaves throughout the financial world. At that point, those holding Greek bonds will start to panic as they realize that they might not get paid as well. All over Europe, there are major banks that are holding large amounts of Greek debt and derivatives that are related to the performance of Greek debt. If something is not done to avert disaster at the last moment, a default by Greece could be the spark that sets off a major European financial crisis this summer.
As I discussed the other day, neither the EU nor the IMF have given any money to Greece since August 2014. So now the Greek government is just about out of money, and without any new loans they will not be able to pay back the old loans that are coming due. In fact, things are so bad at this point that the Greek government is openly warning that it will default on June 5th…
Greece cannot make an upcoming payment to the International Monetary Fund on June 5 unless foreign lenders disburse more aid, a senior ruling party lawmaker said on Wednesday, the latest warning from Athens it is on the verge of default.
Prime Minister Alexis Tsipras’s leftist government says it hopes to reach a cash-for-reforms deal in days, although European Union and IMF lenders are more pessimistic and say talks are moving too slowly for that.
Of course this is all part of a very high stakes chess game. The Greeks believe that the Germans will back down when faced with the prospect of a full blown European financial crisis, and the Germans believe that the Greeks will eventually be feeling so much pain that they will be forced to give in to their demands.
So with each day we get closer and closer to the edge, and the Greeks are trying to do their best to let everyone know that they are not bluffing. Just today, a spokesperson for the Greek government came out and declared that unless there is a deal by June 5th, the IMF “won’t get any money”…
Greek officials now point to a race against the clock to clinch a deal before payments totaling about 1.5 billion euros ($1.7 billion) to the IMF come due next month, starting with a 300 million euro payment on June 5.
“Now is the moment that negotiations are coming to a head. Now is the moment of truth, on June 5,” Nikos Filis, spokesman for the ruling Syriza party’s lawmakers, told ANT1 television.
“If there is no deal by then that will address the current funding problem, they won’t get any money,” he said.
But the Germans know that the Greeks desperately need more money and can’t last much longer. The Greek banking system is so close to collapse that Moody’s just downgraded it again and warned that “there is a high likelihood of an imposition of capital controls and a deposit freeze” in the months ahead…
The outlook for the Greek banking system is negative, primarily reflecting the acute deterioration in Greek banks’ funding and liquidity, says Moody’s Investors Service in a new report published recently. These pressures are unlikely to ease over the next 12-18 months and there is a high likelihood of an imposition of capital controls and a deposit freeze.
The new report: “Banking System Outlook: Greece”, is now available on www.moodys.com. Moody’s subscribers can access this report via the link provided at the end of this press release.
Moody’s notes that significant deposit outflows of more than €30 billion since December 2014 have increased banks’ dependence on central bank funding. In our view, the banks are likely to remain highly dependent on central bank funding, as ongoing uncertainty regarding Greece’s support programme continues to compromise depositors’ confidence.
Unfortunately, when things really start going crazy in Greece people might be faced with much more than just frozen bank accounts. As I wrote about just a few days ago, there is a very strong possibility that we could actually see Cyprus-style wealth confiscation implemented in Greece when the banks collapse.
In fact, the Greek government is already talking about the possibility of a special tax on banking transactions…
Athens is promoting the idea of a special levy on banking transactions at a rate of 0.1-0.2 percent, while the government’s proposal for a two-tier value-added tax – depending on whether the payment is in cash or by card – has met with strong opposition from the country’s creditors.
A senior government official told Kathimerini that among the proposals discussed with the eurozone and the International Monetary Fund is the imposition of a levy on bank transactions, whose exact rate will depend on the exemptions that would apply. The aim is to collect 300-600 million euros on a yearly basis.
Fee won’t include ATM withdrawals, transactions up to EU500; in this case Greek govt projects EU300m-EU600m annual revenue from measure.
Sadly, most people living in North America (which is most of my audience) does not really care much about what happens on the other side of the world.
But they should care.
If Greece defaults and the Greek banking system collapses, stocks and bonds will crash all over Europe. Many believe that such a crash can be “contained” to just Europe, but that is really just wishful thinking.
In addition, the euro would plummet dramatically, which would cause substantial financial problems all over the planet. As I recently explained, the euro is headed to parity with the U.S. dollar and then it is going to go below parity. Before it is all said and done, the euro is going to all-time lows.
Of course the U.S. dollar is eventually going to totally collapse as well, but that comes later and that is a story for another day.
According to the Bank for International Settlements, 74 trillion dollars in derivatives are directly tied to the value of the euro, the value of the U.S. dollar and the value of other global currencies.
So if you believe that what is happening in Greece cannot have massive ramifications for the entire global financial system, you are dead wrong.
What is happening in Greece is exceedingly important, and it is time for all of us to start paying attention.
Have you ever given food to a homeless person? Well, if you do it again in the future it might be a criminal act depending on where you live. Right now, there are dozens of major U.S. cities that have already passed laws against feeding the homeless. As you will read about below, in some areas of the country you can actually be fined hundreds of dollars for just trying to give food to a hungry person. I know that sounds absolutely insane, but this is what America is turning into. Communities all over the country are attempting to “clean up the streets” by making it virtually illegal to either be homeless or to help those that are homeless. Instead of spending more money on programs to assist the homeless, local governments are bulldozing tent cities and giving homeless people one way bus tickets out of town. We are treating some of the most vulnerable members of our society like human garbage, and it is a national disgrace.
What does it say about our country when we can’t even give a warm sandwich to a desperately hungry person that is sleeping on the streets? A retired couple down in Florida named Debbie and Chico Jimenez wanted to do something positive for their community during their retirement years, so they started feeding the homeless in Daytona Beach. But recently the police decided to crack down on their feeding program and slapped everyone involved with a $373 fine…
For the past year, the Jimenezes have set up shop every Wednesday on Manatee Island in Daytona Beach, Fla., where they feed hot dogs, chicken, pasta salad and other BBQ staples to about 100 homeless people, WFTV reported. Handing out meals is just one aspect of the ministry the two founded, Spreading the Word Without Saying a Word, to help people living in poverty.
But on Wednesday, the Jimenezes said that without warning, they and four other volunteers were accosted by police, fined and told that they could be thrown in jail if they continue their program, according to NBC News.
Each of the six was fined $373 and were given 10 days to either pay up or go to court.
“We’re going to court,” Debbie Jimenez, 52, a former auto parts store manager, told NBC News. “The police don’t like it. But how can we turn our backs on the hungry? We can’t.”
Don’t the police down in Daytona Beach have something better to do with their time?
Sadly, more than 50 major cities have passed laws against feeding the homeless at this point. It appears that “cleaning up the streets” has become a big point of emphasis all over the nation.
And what the city of Camden, New Jersey just did is even worse than what happened in Daytona Beach.
Camden just bulldozed an entire tent city and dumped all of the belongings of the homeless people living there into the trash…
Hazmat teams showed up at the camps in the early morning to search for syringes. A drug-sniffing dog followed a police officer around the area. And bulldozers tossed trash and discarded belongings into dumpsters before razing the premises.
Over the past few weeks, flyers had warned people in the tent cities that this was going to happen. Yet it still seemed surreal to many of them that their communities were about to be demolished for good.
But for most of the people that were living in that tent city, there is no place else for them to go. The homeless shelters in the area are at max capacity, and so many of them will end up sleeping in the streets without any shelter at all…
Aaron Howe, the “mayor” of a tent city that had 12 tents the night before eviction day, said he had called every shelter in town and not a single place had room for him and his girlfriend.
“There’s no available spots, and the city is saying if we pitch a tent somewhere else they’re gonna rip it down,” he said. “It’s not gonna look good when there’s a bunch of homeless on the streets.”
Camden has got to be one of the most mismanaged communities in the entire country. Why is Camden spending time and money bulldozing homeless communities when it has so many other problems? For much more on the nightmare that Camden has become, please see my previous article entitled “Camden, New Jersey: One Of Hundreds Of U.S. Cities That Are Turning Into Rotting, Decaying Hellholes“.
Other big cities that are a little bit more “progressive” are attempting to get rid of their homeless populations by giving them one way tickets out of town. Some of the major cities that are doing this include San Diego and San Francisco…
When her Greyhound bus pulled into town 6 months ago, Maria Castillo got off with two bags and dream.
“Start over, start a new life,” said the 42-year-old.
Castillo had been homeless in San Diego when a social worker offered her a one-way bus ticket to Portland.
“They said come here because all the opportunities in Portland, Oregon,” she said.
But Castillo said life isn’t much better in her new town. She’s still homeless. A Unit 8 investigation found several cities from San Diego to San Francisco are providing one-way bus tickets to the homeless.
As shocking as everything that you just read is, what one lawmaker out in Hawaii is doing tops it all. In a previous article, I described how a state representative named Tom Brower has actually been using a sledgehammer to destroy shopping carts used by homeless people. Just check out the following short excerpt from an RT article that was published a few months ago…
In the past two weeks residents in Hawaii noticed what appeared to be a crazed individual carrying a sledgehammer through the streets of Honolulu, a state lawmaker looking to rid the city of homeless people by targeting their belongings.
State Representative Tom Brower (D) is currently dedicated to dealing out his own personal brand of “justice” by seeking out homeless people and destroying their possessions. Brower estimates that he has used the sledgehammer to smash at least 30 shopping carts, rendering them useless by bashing in the front wheels.
“I got tired of telling people I’m trying to pass laws. I want to do something practical that will really clean up the streets,” he told Hawaii News Now. “I find abandoned junk, specifically shopping carts, and I remove them.”
Is this how our society is going to treat those that are down on their luck from now on?
Where is the love?
Where is the compassion?
Why can’t we seem to be able to take care of these people?
The federal government sure seems to have plenty of money to waste on other things. For example, it is being reported that workers at an Obamacare processing facility in Missouri are being paid to do nothing but stare at their computers…
Employees at an ObamaCare processing center in Missouri with a contract worth $1.2 billion are reportedly getting paid to do nothing but sit at their computers.
“Their goals are set to process two applications per month and some people are not even able to do that,” a whistleblower told KMOV-TV, referring to employees hired to process paper applications for ObamaCare enrollees.
The facility in Wentzville is operated by Serco, a company owned by a British firm that was awarded $1.2 billion in part to hire 1,500 workers to handle paper applications for coverage under the law, according to The Washington Post.
The whistleblower employee told the station that weeks can pass without data entry workers receiving even a single application to process. Employees reportedly spend their days staring at their computers, according to a KMOX-TV report.
So we have millions upon millions of dollars to waste on that, but we can’t take care of our homeless population?
And without a doubt, the need to help the homeless is greater than it ever has been before. Right now, there are 1.2 million public school students in America that are homeless. That number is an all-time record, and it has grown by 72 percent since the start of the last recession.
In addition, there are 49 million Americans that are dealing with food insecurity. Even in the midst of this so-called “economic recovery“, poverty is absolutely exploding.
And it is going to get a whole lot worse. This is only just the beginning.
What is going to be needed in the years ahead is a tremendous amount of love and compassion.
But instead, it appears that hearts are becoming colder in America with each passing day.
So what do you think the solution is? Please share your thoughts by posting a comment below…
It has been called “America’s most disturbing holiday”. Black Friday is the day when millions of average Americans wait outside retail stores in the middle of the night in the freezing cold to spend more money that they do not have for more cheap Chinese-made products that they do not need. It is a day when the rest of the world makes fun of Americans for behaving like “rabid animals” and “zombies” as we indulge in a tsunami of greed. It truly is a shameful orgy of materialism for a morally bankrupt nation. It is being projected that approximately 140 million Americans will participate in this disgusting national ritual this year. Sadly, most of them have absolutely no idea that they are actively participating in the destruction of the economic infrastructure of the United States. If you don’t understand why this is true, please be sure to read this entire article all the way to the end.
The amount of merchandise that is purchased on Black Friday is absolutely staggering. For example, just consider how much stuff is sold at Wal-Mart alone…
Wal-Mart said it recorded more than 10 million register transactions between 6 p.m. and 10 p.m. Thursday in its stores and nearly 400 million page views that day on walmart.com. It sold 2.8 million towels, 2 million televisions, 1.4 million tablets, 300,000 bicycles and 1.9 million dolls. Big-ticket electronics like big-screen TVs and new videogame consoles were among the top sellers.
But each and every year, Black Friday also seems to bring out the worst in many people, and this year was certainly no exception. The following are just a few of the national headlines about the rioting and the violence that we witnessed…
-“Holiday shopping season kicks off with fights, arrests”
-“Violence flares as shoppers slug it out for best Black Friday deals”
-“Watch Screaming Mobs Fight Over Televisions At Wal-Mart”
-“Two Arrested After Stabbing Over Parking Space At Wal-Mart”
-“Rialto Walmart Thanksgiving brawl sends one police officer to hospital”
-“Walmart Ejects Customer For Filming Violent ‘Black Thursday’ Mobs”
-“Cops: Shoplifting suspect shot after dragging officer”
And sometimes the violence extends out into the parking lots and into the surrounding neighborhoods. In Las Vegas, a man that was carrying a big-screen television home from Target was shot in the leg…
According to police, a man purchased a big-screen television from the Target store near Flamingo Rd. and Maryland Pkwy. While he was walking to a nearby apartment complex, a man approached and fired a warning shot, causing the victim to drop the television, police said.
Officers tell 8 News NOW the gunman then took the television to a nearby car that was waiting, where a second man helped the gunman load the TV into the car.
The victim approached the two men and tried to get the television back. That prompted the gunman to fire several more rounds, shooting the victim in the leg.
Every year I go over to YouTube to check out the madness that breaks out on Black Friday night all over the nation. Posted below is the best compilation video from Black Friday that I could find. In particular, I love how this video compares American shoppers to zombies…
And there is one more video that I wanted to share with you. In this video, activist Mark Dice dresses up like Santa Claus and mocks Black Friday shoppers for being “parasites” and for ruining Thanksgiving…
Meanwhile, as retail stores all over America actively encourage this zombie-like behavior, police are actually cracking down on other groups of Americans that are actively trying to make this country a better place. For example, a Christian group in Lake Worth, Florida was kicked out of a public park for trying to feed the homeless on Thanksgiving. Of course this kind of thing happens all the time. In fact, dozens of major cities all over the country have now passed laws that make it illegal to feed the homeless. For much more on this, please see my previous article entitled “One Lawmaker Is Literally Smashing The Belongings Of The Homeless With A Sledgehammer“.
At the beginning of this article, I stated that those who go shopping on Black Friday “are actively participating in the destruction of the economic infrastructure of the United States”.
How could that possibly be?
Aren’t they helping the economy by spending their money?
Actually, it isn’t that simple.
Just think about it for a moment. Where are most of the “advertised specials” that people go crazy over on Black Friday actually made?
If you guessed “China”, you would be correct. In fact, it is very difficult to find any “Black Friday specials” that are actually made in the United States.
When you buy stuff made in China, you support workers and businesses in China. As I mentioned in a recent article, the U.S. economy loses approximately 9,000 jobs for every 1 billion dollars of goods that are imported from overseas.
Overall, the U.S. has run a total trade deficit with the rest of the world of more than 8 trillion dollars since 1975.
So when you look around and see lots of unemployed people, it should not be a surprise to you.
Right now, the labor force participation rate is at a 35-year-low and more than 102 million working age Americans do not have a job. That number has increased by 27 million just since the year 2000.
Because the American people are not supporting American businesses, our formerly great manufacturing cities are being transformed into rotting, festering hellholes. Just take a look at Detroit. At one time Detroit had the highest per capita income in the entire nation, but now it is a dying, bankrupt ghost town.
And of course this is happening to manufacturing cities all over the nation. Since 2001, more than 56,000 manufacturing facilities in the U.S. have permanently shut down and we have lost millions upon millions of good paying manufacturing jobs.
Back in the 1980s, more than 20 percent of the jobs in the United States were manufacturing jobs. Today, only about 9 percent of the jobs in the United States are manufacturing jobs.
Good job America. And the following are some more facts from one of my previous articles about how our massively bloated trade deficit is absolutely killing our economy…
-There are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then.
-Back in 1950, more than 80 percent of all men in the United States had jobs. Today, less than 65 percent of all men in the United States have jobs.
-When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars. By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.
-Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little “m”) for the entire year. In 2012, our trade deficit with China was 315 billion dollars. That was the largest trade deficit that one nation has had with another nation in the history of the world.
-According to the Economic Policy Institute, America is losing half a million jobs to China every single year.
-According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades if current trends continue.
Unfortunately, most Americans never stop to think about what happens when we buy stuff from China.
When we buy stuff from them, our money goes over there.
At this point, they are sitting on trillions of our dollars and they have purchased more than a trillion dollars of our debt.
Up until now, Chinese demand for our dollars has helped keep the value of the U.S. dollar artificially high. This is one of the reasons why Wal-Mart can sell you those Chinese imports so inexpensively.
And up until now, Chinese demand for our debt has helped keep long-term interest rates artificially low. So the U.S. government has been able to borrow money at ridiculously low interest rates and U.S. home buyers have been able to get mortgage rates that are well below the real rate of inflation.
But no irrational state of affairs ever lasts indefinitely, and the Chinese recently announced that they are going to quit stockpiling U.S. dollars. Many analysts believe that this means that the Chinese will soon stop stockpiling U.S. debt as well.
So enjoy those super cheap “Black Friday specials” while they last. That era is rapidly coming to an end.
Now that the Chinese have stolen tens of thousands of our businesses, millions of our jobs and trillions of our dollars, perhaps they feel that there is not much more looting to be done. Our economic infrastructure has been essentially gutted at this point. Moving forward, China can afford to let the value of the U.S. dollar fall and the value of their own currency rise because even Barack Obama admits that “those jobs are never coming back”.
And every single American that went shopping on Black Friday and bought Chinese-made goods actively participated in the ongoing destruction of the U.S. economy.
Good job America. You are a nation that is utterly consumed by materialism and greed, and you don’t even realize that you are destroying yourself with your own foolishness.
There is a reason why every fiat currency in the history of the world has eventually failed. At some point, those issuing fiat currencies always find themselves giving in to the temptation to wildly print more money. Sometimes, the motivation for doing this is good. When an economy is really struggling, those that have been entrusted with the management of that economy can easily fall for the lie that things would be better if people just had “more money”. Today, the Federal Reserve finds itself faced with a scenario that is very similar to what the Weimar Republic was facing nearly 100 years ago. Like the Weimar Republic, the U.S. economy is also struggling and like the Weimar Republic, the U.S. government is absolutely drowning in debt. Unfortunately, the Federal Reserve has decided to adopt the same solution that the Weimar Republic chose. The Federal Reserve is recklessly printing money out of thin air, and in the short-term some positive things have come out of it. But quantitative easing worked for the Weimar Republic for a little while too. At first, more money caused economic activity to increase and unemployment was low. But all of that money printing destroyed faith in German currency and in the German financial system and ultimately Germany experienced an economic meltdown that the world is still talking about today. This is the path that the Federal Reserve is taking America down, but most Americans have absolutely no idea what is happening.
It is really easy to start printing money, but it is incredibly hard to stop. Like any addict, the Fed is promising that they can quit at any time, but this month they refused to even start tapering their money printing a little bit. The behavior of the Fed is so shameful that even CNBC is comparing it to a drug addict at this point…
The danger with addictions is they tend to become increasingly compulsive. That might be one moral of this week’s events.
A few days ago, expectations were sky-high that the Federal Reserve was about to reduce its current $85 billion monthly bond purchases. But then the Fed blinked, partly because it is worried that markets have already over-reacted to the mere thought of a policy shift.
Faced with a choice of curbing the addiction or providing more hits of the QE drug, in other words, it chose the latter.
So why won’t the Fed cut back on the reckless money printing?
Well, as Peter Schiff recently noted, Fed officials seem to be convinced that any “tapering” could result in the bursting of the massive financial bubbles that they have created…
The Fed understands, as the market seems not to, that the current “recovery” could not survive without continuation of massive monetary stimulus. Mainstream economists have mistaken the symptoms of the Fed’s monetary expansion, most notably rising stock and real estate prices, as signs of real and sustainable growth. But the current asset price bubbles have nothing to do with the real economy. To the contrary, they are setting up for a painful correction that will likely be worse than the one we experienced five years ago.
As I have written about previously, the Federal Reserve is usually very careful not to do anything which will hurt the short-term interests of the financial markets and the big banks.
But at this point the Fed is caught in a trap. If it continues to pump, the financial bubbles that it has created will get even worse. If it stops, those bubbles will burst. But as Doug Kass noted recently, it is inevitable that these financial bubbles will burst at some point one way or another…
“Getting in was easy. Getting out—not so much. The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up. The longer this continues the bigger the inevitable burst.”
In essence, we can have disaster now or disaster later.
But most Americans don’t care much about what is happening on Wall Street. They just want economic conditions to get better for them and for those around them. And to this day, the mainstream media continues to sell quantitative easing to the American people as an “economic stimulus” program by the Federal Reserve.
So has quantitative easing actually been good for the U.S. economy?
For example, while the Fed has been recklessly printing money out of thin air, household incomes have actually been going down for five years in a row…
What about employment?
Don’t more Americans have jobs now?
Actually, that is not the case at all. Posted below is a chart that shows how the percentage of working age Americans with a job has changed since the year 2000. As you can see, the employment to population ratio fell from about 63 percent before the last recession down to underneath 59 percent at the end of 2009 and it has stayed there ever since…
So where is the “employment recovery”?
Can you point it out to me? Because I have been staring at this chart for a long time and I still can’t find it.
So if quantitative easing has not been good for average Americans, who has it been good for?
The wealthy, of course.
Just check out what billionaire hedge fund manager Stanley Druckenmiller told CNBC about quantitative easing the other day…
“This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.”
“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”
Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”
“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”
Sadly, Druckenmiller is exactly correct.
Since the end of the last recession, the Dow has been on an unprecedented tear…
Of course these stock prices have nothing to do with economic reality at this point, but for the moment those that are making giant piles of cash on Wall Street don’t really care.
Sadly, what very few people seem to understand is that what the Fed is doing is going to absolutely destroy confidence in our currency and in our financial system in the long-term. Yeah, many investors have been raking in huge gobs of cash right now, but in the long run this is going to be bad for everybody.
We have now entered a money printing spiral from which there is no easy exit. According to Graham Summers, the Fed has “crossed the Rubicon” and we are now “in the End Game”…
If tapering even $10-15 billion per month from $85 billion month QE programs would damage the economy, then we’re all up you know what creek without a paddle.
Put it this way… here we are, five years after 2008, and the Fed is stating point blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re already in the End Game. Period.
Most Americans don’t really understand what quantitative easing is, and most don’t really try to understand it because “quantitative easing” sounds very complicated.
But it really isn’t that complicated.
The Federal Reserve is creating gigantic mountains of money out of thin air every month, and the Fed is using all of that newly created money to buy government debt and mortgage-backed securities. Over the past several years, the value of the financial securities that the Fed has accumulated is greater than the total amount of publicly held debt that the U.S. government accumulated from the presidency of George Washington though the end of the presidency of Bill Clinton…
The same day that the Federal Reserve’s Federal Open Market Committee announced last week that the Fed would continue to buy $40 billion in mortgage-backed securities (MBS) and $45 billion in U.S. Treasury securities per month, the Fed also released its latest weekly accounting sheet indicating that it had already accumulated more Treasuries and MBS than the total value of the publicly held U.S. government debt amassed by all U.S. presidents from George Washington though Bill Clinton.
To say that this is a desperate move by the Fed would be a massive understatement. We have never seen anything like this before in U.S. history.
And look at what all of this wild money printing has done to our money supply…
In many ways, the chart above is reminiscent of what the Weimar Republic did during the early years of their hyperinflationary spiral…
Just like the Weimar Republic, our money supply is beginning to grow at an exponential pace.
So far, complete and total disaster has not struck, so most people think that everything must be okay.
But it is not.
In a previous article, I included an outstanding illustration from Simon Black that I think would be extremely helpful here as well…
Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room.
Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry.
But let’s assume that it’s an exponential leak.
At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.
By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.
For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes.
Are you starting to get the picture?
What the Federal Reserve is doing is systematically destroying the U.S. dollar, and the rest of the world is starting to take notice.
Why should they continue to lend us trillions of dollars at super low interest rates when we are exploding the size of our money supply?
It is simply not rational for other nations to continue to lend us money at less than 3 percent a year when the real rate of inflation is somewhere around 8 to 10 percent and reckless money printing by the Fed threatens to greatly accelerate the devaluation of our currency.
When QE first started, the added demand for U.S. government debt by the Federal Reserve helped drive long-term interest rates down to record low levels.
But in the long-term, the only rational response by all other buyers of U.S. government debt will be to demand a much higher rate of return because of the rapid devaluation of U.S. currency.
So QE drives down long-term interest rates in the short-term, but in the long-term the only rational direction for long-term interest rates to go is much, much higher and in recent months we have already started to see this.
The only way that the Fed can stop this is by increasing the amount of quantitative easing.
Right now, the Fed is buying roughly half a trillion dollars worth of U.S. Treasuries a year, but the U.S. government issues close to a trillion dollars of new debt and must roll over about 3 trillion dollars of existing debt each year.
If the Federal Reserve eventually decides to buy all of the debt, then interest rates won’t be a major problem. But if the Fed goes that far our financial system would be regarded as a total joke by the remainder of the globe and we would reach hyperinflation much more rapidly.
If the Federal Reserve stops buying debt completely, the financial bubbles that they have created will burst and we will rapidly be facing a financial crisis even worse than what we experienced back in 2008.
But almost whatever the Fed does at this point, the rest of the world will probably continue to start to move away from the U.S. dollar as the de facto reserve currency of the planet. This move is just beginning, but it is going to have major implications for us in the years ahead. This is a topic that I will be addressing extensively in future articles.
Most of the debate about quantitative easing has focused on the impact that it will have on the U.S. economy in the short-term.
That is a huge mistake.
Of much greatest importance is what quantitative easing means for the long-term.
The rest of the world is losing confidence in the U.S. dollar and in U.S. debt because of the reckless money printing that the Fed has been doing.
But we desperately need the rest of the world to use “the petrodollar” and to lend us the money that we need to pay our bills.
As the rest of the planet starts to reject the U.S. dollar and starts to demand a much higher rate of return to lend us money, the U.S. economy is going to experience a tremendous amount of pain.
It is hard to put into words how foolish the Federal Reserve has been. The Fed is systematically destroying what was once the strongest financial system in the world, and in the end we are all going to pay the price.
Are we running out of time? For the last several years, we have been living in a false bubble of hope that has been fueled by massive amounts of debt and bailout money. This illusion of economic stability has convinced most people that the great economic crisis of 2008 was just an “aberration” and that now things are back to normal. Unfortunately, that is not the case at all. The truth is that the financial crash of 2008 was just the first wave of our economic troubles. We have not even come close to recovering from that wave, and the next wave of the economic collapse is rapidly approaching. Our economy is like a giant sand castle that has been built on a foundation of debt and toilet paper currency. As each wave of the crisis hits us, the solutions that our leaders will present to us will involve even more debt and even more money printing. And each time, those “solutions” will only make our problems even worse. Right now, events are unfolding in Europe and in the United States that are pushing us toward the next major crisis moment. I sincerely hope that we have some more time before the next crisis overwhelms us, but as you will see, time is rapidly running out.
The following are 12 things that just happened that show the next wave of the economic collapse is almost here…
#1 According to TrimTab’s CEO Charles Biderman, corporate insider purchases of stock have hit an all-time low, and the ratio of corporate insider selling to corporate insider buying has now reached an astounding 50 to 1….
While retail is being told to buy-buy-buy, Biderman exclaims that “insiders at U.S. companies have bought the least amount of shares in any one month,” and that the ratio of insider selling to buying is now 50-to-1 – a monthly record.
#2 On Friday we learned that personal income in the United States experienced its largest one month decline in 20 years…
Personal income decreased by $505.5 billion in January, or 3.6%, compared to December (on a seasonally adjusted and annualized basis). That’s the most dramatic decline since January 1993, according to the Commerce Department.
#3 In a stunning move, Michigan Governor Rick Snyder says that he will appoint an emergency financial manager to take care of Detroit’s financial affairs…
Snyder, 54, took a step he avoided a year ago, empowering an emergency financial manager who can sweep aside union contracts, sell municipal assets, restructure services and reorder finances. He announced the move yesterday at a public meeting in Detroit.
If this does not work, Detroit will almost certainly have to declare bankruptcy. If that happens, it will be the largest municipal bankruptcy in U.S. history.
#4 On Friday it was announced that the unemployment rate in Italy had risen to 11.7 percent. That was a huge jump from 11.3 percent the previous month, and Italy now has the highest unemployment rate that it has experienced in 21 years.
#5 The youth unemployment rate in Italy has risen to a new all-time record high of 38.7 percent.
#6 On Friday it was announced that the unemployment rate in the eurozone as a whole had just hit a brand new record high of 11.9 percent.
#7 On Friday it was announced that the unemployment rate in Greece has now reached 27 percent, and it is being projected that it will reach 30 percent by the end of the year.
#8 The youth unemployment rate in Greece is now an almost unbelievable 59.4 percent.
#9 On Saturday, hundreds of thousands of protesters filled the streets of Lisbon and other Portuguese cities to protest the austerity measures that are being imposed upon them. It was reportedly the largest protest in the history of Portugal.
#10 According to Goldman Sachs, bank deposits declined all over Europe during the month of January.
#11 Over the weekend, the deputy governor of China’s central bank declared that China is prepared for a “currency war“…
A top Chinese banker said Beijing is “fully prepared” for a currency war as he urged the world to abide by a consensus reached by the G20 to avert confrontation, state media reported on Saturday.
Yi Gang, deputy governor of China’s central bank, issued the call after G20 finance ministers last month moved to calm fears of a looming war on the currency markets at a meeting in Moscow.
Those fears have largely been fuelled by the recent steep decline in the Japanese yen, which critics have accused Tokyo of manipulating to give its manufacturers a competitive edge in key export markets over Asian rivals.
#12 Italy is an economic basket case at this point, and the political gridlock in Italy is certainly not helping matters. Former comedian Beppe Grillo’s party could potentially tip the balance of power one way or the other in Italy, and over the weekend he made some comments that are really shaking things up over in Europe. For one thing, he is suggesting that Italy should hold a referendum on the euro…
“I am a strong advocate of Europe. I am in favor of an online referendum on the euro,” Beppe Grillo told Bild am Sonntag.
Such a vote would not be legally binding in Italy, where referendums can only be used to repeal laws or parts of laws, but would carry political weight. Grillo has said in the past that membership of the euro should be up to the Italian people.
In addition, Grillo is also suggesting that Italy’s debt has gotten so large that renegotiation is the only option…
In an interview with a German magazine published on Saturday, Mr Grillo said that “if conditions do not change” Italy “will want” to leave the euro and return to its former national currency.
The 64-year-old comic-turned-political activist also said Italy needs to renegotiate its €2 trillion debt.
At 127 per cent of gross domestic product (GDP), it is the highest in the euro zone after Greece.
“Right now we are being crushed, not by the euro, but by our debt. When the interest payments reach €100 billion a year, we’re dead. There’s no alternative,” he told Focus, a weekly news magazine.
He said Italy was in such dire economic straits that “in six months, we will no longer be able to pay pensions and the wages of public employees.”
And of course government debt has taken center stage in the United States as well.
The sequester cuts have now gone into effect, and they will definitely have an effect on the U.S. economy. Of course that effect will not be nearly as dramatic as many Democrats are suggesting, but without a doubt those cuts will cause the U.S. economy to slow down a bit.
And of course the U.S. economy has already been showing plenty of signs of slowing down lately. If you doubt this, please see my previous article entitled “Consumer Spending Drought: 16 Signs That The Middle Class Is Running Out Of Money“.
So what comes next?
Well, everyone should keep watching Europe very closely, and it will also be important to keep an eye on Wall Street. There are a whole bunch of indications that the stock market is at or near a peak. For example, just check out what one prominent stock market analyst recently had to say…
“Every reliable technical tool is warning of major peaking action,” said Walter Zimmerman, the senior technical analyst at United-ICAP. “This includes sentiment, momentum, classical chart patterns, and Elliott wave analysis.
“Most of the rally in the stock market since 2009 can be chalked up to the Federal Reserve’s attempt to create a ‘wealth effect’ through higher stock market prices. This only exacerbates the downside risk. Why? The stock market no is longer a lead indicator for the economy. It is instead reflecting Fed manipulation. Pushing the stock market higher while the real economy languishes has resulted in another bubble.
“The next leg down will not be a partial correction of the advance since the 2009 lows. It will be another major financial crisis. The worst is yet to come.”
Sadly, most people will continue to deny that anything is wrong until it is far too late.
Many areas of Europe are already experiencing economic depression, and it is only a matter of time before the U.S. follows suit.
Time is running out, and I hope that you are getting ready.
So what do you think?
How much time do you believe that we have left before the next wave of the economic collapse strikes?
Please feel free to post a comment with your thoughts below…