Have you noticed that our planet has begun to shake, rattle and roll? Over the past few days we have seen major volcanic eruptions in Costa Rica and Indonesia, and according to Volcano Discovery 40 volcanoes around the planet are erupting right now as you read this article. Meanwhile, earthquakes continue to shake the globe with alarming regularity. Just last week, Ecuador was hit by a magnitude 6.7 earthquake and a magnitude 6.8 earthquake in rapid succession. Overall, there have been more than 3,000 earthquakes of magnitude 1.5 or greater within the past month globally. So yes, I write constantly about the rapidly accelerating deterioration of our financial system, but the coming “collapse” is not just about money. I am convinced that we are entering a “perfect storm” in which a confluence of factors will absolutely cripple society and bring about changes that most of us would not even dare to imagine right now.
Let’s talk about the volcanic eruptions that we have seen in recent days. The eruption down in Costa Rica took authorities completely by surprise, and a thick layer of dust and ash is coating vehicles and buildings 30 miles away in the capital city of San Jose…
A volcano has erupted in central Costa Rica, belching smoke and ash up to 3,000m (9,840ft) into the air.
Hundreds of people have gone to hospital, complaining of breathing difficulties and skin problems.
Some schools were shut and some flights into the country cancelled or diverted.
People in the capital San Jose, about 45km (30 miles) west of the Turrialba volcano, said layers of ash had coated buildings and cars and there was a fierce smell of sulphur.
Leading up to this eruption, there were “swarms of small earthquakes” in the vicinity of the volcano, but scientists assured the public that these earthquake swarms were “not signs of an imminent eruption.”
Keep that in mind, because later in the article I am going to show you something.
But first let us talk about the other major eruption that is happening right now. Down in Indonesia, Mount Sinabung has violently erupted, and this is causing all sorts of chaos…
The death toll from a volcanic eruption in western Indonesia has climbed to six, an official said Sunday, with fears more could have been trapped by the hot ash.
Three people also remain in a critical condition after Mount Sinabung, a highly-active volcano on Sumatra island, unleashed a series of fresh eruptions on Saturday afternoon, disaster agency spokesman Sutopo Purwo Nugroho said.
“Nine people were struck by the hot clouds. Six died, and three others remain critical with burns,” he said, adding the injured had been taken to hospital.
According to one report, “torrents of lava” are pouring out of the volcano, and this is just one example of how volcanoes that were once considered to be “inactive” are coming to life all over the world. In fact, prior to 2010 Mount Sinabung had been dormant for about 400 years.
Meanwhile, there is “unprecedented” activity at Iceland’s very dangerous Baroabunga volcano. This one is not erupting quite yet, but we definitely want to keep an eye on it, because a major eruption there would have serious implications for Europe.
To finish this article, I would like to provide an update to a piece that I posted last week on End of the American Dream. Just prior to the eruption of the Turrialba volcano in Costa Rica, there were significant earthquake swarms in the vicinity of the volcano. Well, the exact same thing is happening at three major volcanoes in the United States right now.
I would like to share three images with you that come from Google Earth via the Pacific Northwest Seismic Network. This first image shows the earthquake activity that has taken place in the area around Mt. St. Helens in recent days. Over the past month there have been 95 earthquakes in the region, and most of them have been centered right along the core of the volcano…
This next image shows what has been happening at Mt. Rainier. Those that follow my work closely already know that I consider it to be the most dangerous mountain in America and that I believe that a major eruption of the volcano is coming in the not too distant future. There have been 36 earthquakes at Mt. Rainier over the past month, and once again most of them have occurred right along the core of the volcano…
Mt. Hood is also a very dangerous volcano. There have been 126 earthquakes in the vicinity of Mt. Hood in recent days, and in this image you can see that the earthquakes have been centered very tightly on a spot on the south face of the mountain. This is alarming because it was also the south side of Mt. St. Helens that violently erupted back in 1980…
When there are major volcanic eruptions or major earthquakes in other parts of the globe, many Americans don’t seem to care too much because they don’t think that this rise in global seismic activity is any sort of a threat to them personally.
But the truth is that the entire west coast of the United States lies along the Ring of Fire, and virtually every other section of the Ring of Fire is roaring to life these days.
At some point, there will be historic earthquakes on the west coast.
At some point, there will be historic volcanic eruptions on the west coast.
Scientists assure us that these things are inevitable.
So let us certainly hope for the best, but putting our heads in the sand and pretending that these dangers do not exist is not going to help matters one bit.
Get prepared while you still can, because at some point time will run out.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
In America today, there are close to 50 million people living in poverty and there are more than 100 million people that get money from the federal government every month. As the middle class disintegrates, poverty is climbing to unprecedented levels. Even though the stock market has been setting record high after record high, the amount of anger and frustration boiling just under the surface in our nation grows with each passing day. And now extended unemployment benefits have been cut off for 1.3 million unemployed Americans, and it is being projected that a total of 5 million unemployed Americans will lose their benefits by the end of 2014. In addition, as I have written about previously, 47 million Americans recently had their food stamp benefits reduced. The conditions for a “perfect storm” are certainly being created. So how much longer will it be until we see all of this anger and frustration boil over in the streets of our major cities? Is America about to reach a breaking point?
If you think that the title of this article is “alarmist”, you probably have not been paying attention to what has been happening over the past few weeks. For example, a 600 person brawl broke out at at movie theater in Jacksonville, Florida just the other day…
Five teenagers were arrested when a 600-person brawl broke out in a Florida movie theater’s parking lot on Christmas night.
Described by police as a “melee,” the fight occurred around 8:30 p.m. on Wednesday outside the Hollywood River City 14 movie theater in Jacksonville when a group tried to storm the theater’s doors without purchasing tickets, police said. Several had rushed an off-duty police officer working as a security guard.
The officer “administered pepper spray to disperse the group, locked the doors and called for backup, following protocol,” said Lauri-Ellen Smith, a spokeswoman for the Jacksonville Sheriff’s Office.
Soon after the pepper spray was used, “upward of 600 people moving throughout a parking lot about the size of a football field began fighting, disrupting and jumping on cars,” she said.
And a “flash mob” of “400 crazed teens” was so violent that it forced a mall in Brooklyn to shut down just a few days ago…
A wild flash mob stormed and trashed a Brooklyn mall, causing so much chaos that the shopping center was forced to close during post-Christmas sales, sources said Friday.
More than 400 crazed teens — who mistakenly thought the rapper Fabolous would perform — erupted into brawls all over Kings Plaza Shopping Center in Mill Basin on Thursday at 5 p.m., sources said.
The troublemakers looted and ransacked several stores as panicked shoppers ran for the exits and clerks scrambled to pull down metal gates.
In addition, the release of new Air Jordan sneakers caused mini-riots and brawls to break out all over the country just before Christmas.
So why is all of this happening?
Of course people will come up with all sorts of theories to explain these outbreaks of violence, but what pretty much everyone should be able to agree on is that we are seeing levels of anger and frustration rise to very dangerous levels in this country.
Right now, there are approximately 6 million Americans in the 16 to 24-year-old age group that are not in school and that are not working either. What that means is that we have an alarmingly high number of very frustrated young people that do not have anything better to do than to cause trouble.
In some of our largest cities this has become a massive problem. In fact, quite a few major U.S. cities actually have more than 100,000 “idle youth” living in them…
Just look at some of the nation’s largest cities. Chicago, Houston, Dallas, Miami, Philadelphia, New York, Los Angeles, Atlanta and Riverside, Calif., all have more than 100,000 idle youth, the Opportunity Nation report found.
But the Obama administration says that this should not be a problem. In fact, the Obama administration tells us that the unemployment rate has been steadily “declining” and that there are plenty of opportunities for everyone.
Of course that is a giant lie. Just before the last recession, about 63 percent of all working age Americans had a job. During the recession that number fell below 59 percent and it has stayed there ever since…
So the notion that we are experiencing an “employment recovery” is absolutely laughable.
But most of our politicians appear to believe this lie, and it is being used as justification to cut off extended unemployment benefits.
And the funny thing is that by cutting off these benefits, it is going to make it appear as though unemployment has gone down even more. Millions of unemployed workers that are being forced into the streets will now be counted as having “left the labor force”, and it is being projected that the unemployment rate could decline by as much as half a percentage point as a result.
What a joke.
A lot of the people that are having their benefits cut off are really hurting. For instance, consider the case of 63-year-old paralegal Laura Walker…
“Not all of us have savings and a lot of us have to take care of family because of what happened in the economy,” said Walker, of Santa Clarita, who said she has applied for at least three jobs a week and shares an apartment with her unemployed son, his wife and two children. “It’s going to put my family and me out on the streets.”
So what is she going to do?
Well, at this point she appears to be down to just one option…
“I just don’t know what to do, except pray.”
And of course the unemployed are not the only ones that have had their benefits cut. As I mentioned above, all 47 million Americans that are currently on food stamps recently had their benefits reduced. The following is an excerpt from a recent article by Mac Slavo…
Earlier this year government benefits for nutritional assistance were reduced after the expiration of emergency legislation that was enacted following the 2008 financial collapse. Nearly all of the 48 million people receiving food stamp distributions were affected. The move led to warnings from food pantries and recipients around the country who said that the $40 billion in cuts would leave many American families without the ability to put food on dinner tables across America. According to Feed America, the roughly $29 per family that would no longer appear on their EBT cards will amount to about 1.5 billion meals in 2014.
The fact that government dependence has soared to all-time highs even in the midst of this so-called “economic recovery” is just another sign that the middle class is dying. For years, middle class families have tried strategy after strategy in an attempt to survive, but now it has become apparent that the middle class is rapidly approaching a breaking point…
Rising income inequality is starting to hit home for many American households as they run short of places to reach for a few extra bucks.
As the gap between the rich and poor widened over the last three decades, families at the bottom found ways to deal with the squeeze on earnings. Housewives joined the workforce. Husbands took second jobs and labored longer hours. Homeowners tapped into the rising value of their properties to borrow money to spend.
Those strategies finally may have run their course as women’s participation in the labor force has peaked and the bursting of the house-price bubble has left many Americans underwater on their mortgages.
And even though the Obama administration and the mainstream media have tried to convince us over and over that the economy is “getting better”, most Americans are not buying it. In fact, according to a new CNN poll, 70 percent of all Americans believe that “the economy is generally in poor shape”.
As the economy continues to decline, not all Americans will respond to their desperate situations by getting violent. Many suffer quietly, hoping that things will eventually turn around for them. Unfortunately, the ranks of the suffering grow with each passing year. For example, a recent CNN article discussed the continued growth of “tent cities” all over America…
The total number of homeless people residing in tents and makeshift homes is unknown. Many of these communities are small and hidden from public view, while others claim hundreds of residents and are sprinkled through major urban areas.
Some, like those tucked under roadways, are temporary and relocate frequently. Their conditions are vile, unsanitary and fail to provide refuge from storms and winds. Then there are communities, such as Dignity Village in Portland, Oregon, that have a more sustained presence. The 13-year-old “ecovillage” set up by homeless people is hygienic and self-sufficient.
Preliminary findings by The National Law Center on Homelessness and Poverty show that tent cities have been documented in almost every state, and they’re growing.
So how do we solve these problems?
Are there any solutions that could get us out of this mess?
Of course there are. But don’t hold your breath waiting for any of them to be adopted. In fact, the American people continue to express great support for the very people that got us into this mess in the first place. For example, according to a Gallup survey that was just released, Barack Obama is the most admired man in America by a very wide margin and Hillary Clinton is the most admired woman in America by a very wide margin.
And the mainstream media will continue to tell all of us that “leaders” like Obama, Clinton, Reid, Boehner, McConnell and Pelosi can be trusted to get us out of this mess.
If you believe that, there is a bridge that I would like to sell you.
The American people need to stop having blind faith in the relentless propaganda that is being spewed at them through their televisions screens. The pretty faces that you see “reporting the news” do not care about you and they are not watching out for your best interests. The corporate-controlled news is highly scripted and it is pretty much the same whatever channel you turn to. If you have any doubt that “the news” is scripted, just check out this video…
If yields on U.S. Treasury bonds keep rising, things are going to get very messy. As I write this, the yield on 10 year U.S. Treasures has risen to 2.51 percent. If that keeps going up, it is going to be like a mile wide lawnmower blade devastating everything in its path. Ben Bernanke’s super low interest rate policies have systematically pushed investors into stocks and real estate over the past several years because there were few other places where they could get decent returns. As this trade unwinds (and it will likely not be in an orderly fashion), we are going to see unprecedented carnage. Stocks, ETFs, home prices and municipal bonds will all be devastated. And of course that will only be the beginning. What we are ultimately looking at is a sell off very similar to 2008, only this time we will have to deal with rising interest rates at the same time. The conditions for a “perfect storm” are rapidly developing, and if something is not done we could eventually have a credit crunch unlike anything that we have ever seen before in modern times.
At the moment, perhaps the most important number in the financial world is the yield on 10 year U.S. Treasuries. A lot of investors are really concerned about how rapidly it has been rising. For example, Patrick Adams, a portfolio manager at PVG Asset Management, was quoted in USA Today as saying the following on Friday…
“I am watching the 10-year U.S. bond,” says Adams. “It has to stabilize. If the yield goes significantly higher the market is going to freak out.”
If interest rates keep rising, it is going to have a dramatic effect throughout the economy. In an article that he just posted, Charles Hugh Smith explained some of the things that we might soon see…
The wheels fall off the entire financialized debtocracy wagon once yields rise. There’s nothing mysterious about this:
1. As interest rates/yields rise, all the existing bonds paying next to nothing plummet in market value
2. As mortgage rates rise, there’s nobody left who can afford Housing Bubble 2.0 prices, so home prices fall off a cliff
3. Once you can get 5+% yield on cash again, few people are willing to risk capital in the equities markets in the hopes that they can earn more than 5% yield before the next crash wipes out 40% of their equity
4. As asset classes decline, lenders are wary of loaning money against these assets; if the collateral for the loan (real estate, bonds, stocks, etc.) are in a waterfall decline, no sane lender will risk capital on a bet that the collateral will be sufficient to cover losses should the borrower default.
In addition, rapidly rising interest rates would throw the municipal bond market into absolute chaos. In fact, according to Reuters, nearly 2 billion dollars worth of municipal bond sales were postponed on Thursday because of rising rates…
The possibility of rising interest rates rocked the U.S. municipal bond market on Thursday, with prices plunging in secondary trade, investors selling off the debt, money pouring out of mutual funds and issuers postponing nearly $2 billion in new sales.
“The market got crushed,” said Daniel Berger, an analyst at Municipal Market Data, a unit of Thomson Reuters, about the widespread sell-off.
We are rapidly moving into unprecedented territory. Nobody is quite sure what comes next. One financial professional says that municipal bond investors “are in for the shock of their lives”…
“Muni bond investors are in for the shock of their lives,” said financial advisor Ric Edelman. “For the past 30 years there hasn’t been interest rate risk.”
That risk can be extreme. A one-point rise in the interest rate could cut 10 percent of the value of a municipal bond with a longer duration, he said.
Many retail buyers, though, are not ready for the change and “when it starts, it will be too late for them to react,” he said, adding that he was encouraging investors to look at their portfolio allocation and make changes to protect themselves from interest rate risks now.
Rising interest rates are playing havoc with other financial instruments as well. For example, it appears that the ETF market may already be broken. Just check out the chaos that we witnessed on Thursday…
The selling also caused disruptions in the plumbing behind several ETFs. Citigroup stopped accepting orders to redeem underlying assets from ETF issuers, after one trading desk reached its allocated risk limits. One Citi trader emailed other market participants to say: “We are unable to take any more redemptions today . . . a very rare occurrence due to capital requirements we are maxed out on the amount of collateral we have out.”
State Street said it would stop accepting cash redemption orders for municipal bond products from dealers. Tim Coyne, global head of ETF capital markets at State Street, said his company had contacted participants “to say we were not going to do any cash redemptions today”. But he added that redemptions “in kind” were still taking place.
These are the kinds of things that you would expect to see at the beginning of a financial panic.
And when there is fear in the marketplace, credit can dry up really quickly.
So are we headed for a major liquidity crisis? Well, that is what Chris Martenson believes is happening…
The early stage of any liquidity crisis is a mad dash for cash, especially by all of the leveraged speculators. Anything that can be sold is sold. As I scan the various markets, all I can find is selling. Stocks, commodities, and equities are all being shed at a rapid pace, and that’s the first clue that we are not experiencing sector rotation or other artful portfolio-dodging designed to move out of one asset class into another (say, from equities into bonds).
The bursting of the bond bubble has the potential to plunge our financial system into a crisis that would be even worse than we experienced back in 2008. Unfortunately, as Ambrose Evans-Pritchard recently noted, the bond market is dominated by just a few major players…
The Fed, the ECB, the Bank of England, the Bank of Japan, et al, own $10 trillion in bonds. China, the petro-powers, et al, own another $10 trillion. Between them they have locked up $20 trillion, equal to roughly 25pc of global GDP. They are the market. That is why Fed taper talk has become so neuralgic, and why we all watch Chinese regulators for every clue on policy.
This is one of the reasons why I write about China so much. China has a tremendous amount of leverage over the global financial system. If China starts selling bonds at about the same time that the Fed stops buying bonds we could see a shift of unprecedented proportions.
Sadly, most Americans have absolutely no idea how vulnerable the financial system is.
Most Americans have absolutely no idea that our system of finance is a house of cards built on a foundation of risk, debt and leverage.
Most Americans have complete and total faith that our leaders know what they are doing and are fully capable of keeping our financial system from collapsing.
In the end, most Americans are going to be bitterly, bitterly disappointed.
What is the second half of 2012 going to bring? Are things going to get even worse than they are right now? Unfortunately, that appears more likely with each passing day. I will admit that I am extremely concerned about the second half of 2012. Historically, a financial crisis is much more likely to begin in the fall than during any other season of the year. Just think about it. The stock market crash of 1929 happened in the fall. “Black Monday” happened on October 19th, 1987. The financial crisis of 2008 started in the fall. There just seems to be something about the fall that brings out the worst in the financial markets. But of course there is not a stock market crash every year. So are there specific reasons why we should be extremely concerned about what is coming this year? Yes, there are. The ingredients for a “perfect storm” are slowly coming together, and in the months ahead we could very well see the next wave of the economic collapse strike. Sadly, we have never even come close to recovering from the last recession, and this next crisis might end up being even more painful than the last one.
The following are 17 reasons to be extremely concerned about the second half of 2012….
#1 Historical Trends
A recent IMF research paper by Luc Laeven and Fabián Valencia showed that a banking crisis is far more likely to start in September than in any other month. The following chart is from their report….
So what will this September bring?
#2 JP Morgan
Do you remember back in May when JP Morgan announced that it would be taking a 2 billion dollar trading loss on some derivatives trades gone bad? Well, the New York Times is now reporting that the real figure could reach 9 billion dollars, but nobody really knows for sure. At some point is JP Morgan going to need a bailout? If so, what is that going to do to the U.S. financial system?
Last week, Moody’s downgraded the credit ratings of 15 major global banks. As a result, a number of them have been required to post billions of dollars in additional collateral against derivatives exposures….
Citigroup’s two-notch long-term rating downgrade from A3 to Baa2 could have led to US$500m in additional liquidity and funding demands due to derivative triggers and exchange margin requirements, according to the bank’s 10Q regulatory filing at the end of the first quarter.
Morgan Stanley – which Moody’s downgraded from A2 to Baa1 – said a two-notch downgrade from both Moody’s and Standard and Poor’s could spur an additional US$6.8bn of collateral requirements in its latest 10Q. The bank did not break down its potential collateral calls under a scenario where only Moody’s downgraded the bank below the Single A threshold.
Royal Bank of Scotland estimated it may have to post £9bn of collateral as a result of the one-notch Moody’s downgrade to Baa1 in a statement on June 21, but did not detail how much of this additional requirement was driven by margin for swaps exposures.
The worldwide derivatives market is starting to show some cracks, and at some point this is going to become a major disaster.
Remember, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. When this bubble completely bursts it is going to be impossible to fix.
#4 LEAP/E2020 Warning
LEAP/E2020 has issued a red alert for the global financial system for this fall. They are warning that the “second half of 2012” will represent a “major inflection point” for the global economic system….
The shock of the autumn 2008 will seem like a small summer storm compared to what will affect planet in several months.
In fact LEAP/E2020 has never seen the chronological convergence of such a series of explosive and so fundamental factors (economy, finances, geopolitical…) since 2006, the start of its work on the global systemic crisis. Logically, in our modest attempt to regularly publish a “crisis weather forecast”, we must therefore give our readers a “Red Alert” because the upcoming events which are readying themselves to shake the world system next September/ October belong to this category.
#5 Increasing Pessimism
One recent survey of corporate executives found that only 20 percent of them expect the global economy to improve over the next 12 months and 48 percent of them expect the global economy to get worse over the next 12 months.
The Spanish financial system is basically a total nightmare at this point. Moody’s recently downgraded Spanish debt to one level above junk status, and earlier this week Moody’s downgraded the credit ratings of 28 major Spanish banks.
According to CNBC, Spain’s short-term borrowing costs are now about three times higher than they were just one month ago….
Spain’s short-term borrowing costs nearly tripled at auction on Tuesday, underlining the country’s precarious finances as it struggles against recession and juggles with a debt crisis among its newly downgraded banks.
The yield paid on a 3-month bill was 2.362 percent, up from just 0.846 percent a month ago. For six-month paper, it leapt to 3.237 percent from 1.737 percent in May.
Needless to say, this is very, very bad news.
The situation in Italy continues to deteriorate and many analysts believe that it could be one of the next dominoes to fall. The following is from a recent Businessweek article….
The euro zone’s third-biggest economy is seen as the next domino at risk of toppling after the European Union’s June 9 deal to lend Spain $125 billion in bank bailout funds. Yields on Italy’s 10-year government bonds reached 6.2 percent on June 13, up from just 4.8 percent in March. By pushing up Italy’s borrowing costs out of fear of default, investors are making a default more likely.
A recent Fortune article detailed some of the economic fundamentals that have so many economists deeply concerned about the Italian economy right now….
The main glaring risk threats that could propel Italy down the path to become Europe’s next domino is the size of country’s outstanding debt (at €1.9 trillion or 120% of GDP); the mountain of debt it has to roll over in the next 12 months (nearly €400 billion); and the market’s cracking credibility around Prime Minister Mario Monti’s ability to reduce the country’s fiscal footprint and spur growth.
Further, fear around Italy’s creditworthiness, which has recently been expressed by near cycle highs in sovereign CDS spreads and government yields on the 10-year bond, follow some rather glaring negative fundamentals over recent quarters and years: declining GDP over the last three consecutive quarters; a rising unemployment rate (especially among its youth); deterioration in labor market competitiveness; and increased competition for export goods to its key trading partners.
I have written extensively about the financial nightmare that is unfolding in Greece. Unemployment has soared past the 20 percent mark, youth unemployment is above 50 percent, the Greek economy has contracted by close to 25 percent over the past four years and now Greek politicians are saying that a third bailout package may be necessary.
The tiny island nation of Cyprus has become the fifth member of the eurozone to formally request a bailout. This is yet another sign that the eurozone is rapidly falling apart.
German Chancellor Angela Merkel continues to promote an austerity path for Europe and she continues to maintain her very firm position against any kind of eurozone debt sharing….
Merkel, speaking to a conference in Berlin today as Spain announced it would formally seek aid for its banks, dismissed “euro bonds, euro bills and European deposit insurance with joint liability and much more” as “economically wrong and counterproductive,” saying that they ran against the German constitution.
“It’s not a bold prediction to say that in Brussels most eyes — all eyes — will be on Germany yet again,” Merkel said. “I say quite openly: when I think of the summit on Thursday I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”
In fact, Merkel says that there will be no eurobonds “as long as I live“. This means that there will be no “quick fix” for the problems that are unfolding in Europe.
#11 Bank Runs
Every single day, hundreds of millions of dollars is being pulled out of banks in southern Europe. Much of that money is being transferred to banks in northern Europe.
In a previous article I included an extremely alarming quote from a CNBC article about the unfolding banking crisis in Europe….
Financial advisers and private bankers whose clients have accounts too large to be covered by a Europe-wide guarantee on deposits up to 100,000 euros ($125,000), are reporting a “bank run by wire transfer” that has picked up during May.
Much of this money has headed north to banks in London, Frankfurt and Geneva, financial advisers say.
“It’s been an ongoing process but it certainly picked up pace a couple of weeks ago We believe there is a continuous 2-3 year bank run by wire transfer,” said Lorne Baring, managing director at B Capital, a Geneva-based pan European wealth management firm.
How long can these bank runs continue before banking systems start to collapse?
#12 Preparations For The Collapse Of The Eurozone
As I have written about previously, the smart money has already written off southern Europe. All over the continent major financial institutions are preparing for the worst. For example, just check out what Visa Europe is doing….
Visa Europe is holding weekly meetings to discuss scenarios in the event the euro zone collapses, joining other companies that are preparing for a potential breakup of the currency bloc.
Chief Commercial Officer Steve Perry said Tuesday that management at the U.K.-based credit-card company meets weekly to explore various possible outcomes, including a total collapse of the euro zone.
#13 Global Lending Is Slowing Down
All over the globe the flow of credit is beginning to freeze up. In fact, the Bank for International Settlements says that worldwide lending is contracting at the fastest pace since the financial crisis of 2008.
#14 Sophisticated Cyber Attacks On Banks
It is being reported that “very sophisticated” hackers have successfully raided dozens of banks in Europe. So far, it is being estimated that they have stolen 60 million euros….
Sixty million euro has been stolen from bank accounts in a massive cyber bank raid after fraudsters raided dozens of financial institutions around the world.
According to a joint report by software security firm McAfee and Guardian Analytics, more than 60 firms have suffered from what it has called an “insider level of understanding”.
What happens someday if we wake up and all the money in the banks is gone?
#15 U.S. Municipal Bankruptcies
All over the United States there are cities and towns on the verge of financial disaster. This week Stockton, California became the largest U.S. city to ever declare bankruptcy, but the reality is that this is only just the beginning of the municipal debt crisis….
Stockton, California, said it will file for bankruptcy after talks with bondholders and labor unions failed, making the agricultural center the biggest U.S. city to seek court protection from creditors.
“The city is fiscally insolvent and must seek Chapter 9 bankruptcy protection,” Stockton said in a statement released yesterday after its council voted 6-1 to adopt a spending plan for operating under bankruptcy protection.
#16 The Obamacare Decision
The U.S. economy is already a complete and total mess, and now the Obamacare decision is going to throw a huge wet blanket on it. All over America, small business owners are saying that they are going to have to let some workers go because they cannot afford to keep them all under Obamacare. It would be hard to imagine a more job killing law than Obamacare, and now that the Supreme Court decision has finally been announced we are going to see many businesses making some really hard decisions.
#17 The U.S. Election
It is being reported that Barack Obama is putting together an army of “thousands of lawyers” to deal with any disputes that arise over voting procedures or results. It certainly looks like this upcoming election is going to be extremely close, and there is the potential that we could end up facing another Bush v. Gore scenario where the fate of the presidency is determined in court. This campaign season is likely to be exceptionally nasty, and I fear what may happen if there is not a decisive winner on election day. The possibility of significant civil unrest is certainly there.
We definitely live in “interesting” times.
Personally, I am deeply concerned about the September, October, November time frame.
The other day, Joe Biden delivered a speech in which he made the following statement….
“It’s A Depression For Millions And Millions Of Americans”
And what Biden said was right for once. Millions of Americans are out of work right now and millions of Americans have fallen out of the middle class in recent years. If you have lost everything, it does feel like you are living through a depression.
When people lose everything, they tend to get desperate. And desperate people do desperate things – especially when they are angry.
A whole host of recent opinion polls have shown that anger and frustration in the United States are rising to unprecedented levels. The ingredients are certainly there for an explosion. Someone just needs to come along and light the fuse. We truly do live in frightening times.
Let us hope for the best, but let us also prepare for the worst.
The summer of 2012 is shaping up to be very similar to the summer of 2008. Things look incredibly bleak for the global economy right now. Economic activity and lending are slowing down all over the planet, and fear is starting to paralyze the entire global financial system. Things did not look this bad back in the summer of 2011 and things certainly did not look this bad back in the summer of 2010. It is almost as if a “perfect storm” is brewing. Today, the global financial system is a finely balanced pyramid of risk, debt and leverage. Such a system requires a high degree of confidence and stability. But when confidence disappears and fear and panic take over, the house of cards can literally start collapsing at any time. Right now we are watching a slow-motion train wreck unfold and nobody seems to know how to stop it. Unless some kind of a miracle happens, things are going to look much different when we reach the start of 2013 than they do today.
The following are 21 signs that this could be a long, hot, crazy summer for the global financial system….
#1 There are rumors that major financial institutions are cancelling employee vacations in anticipation of a major financial crisis this summer. The following are a couple of tweets quoted in a recent article by Kenneth Schortgen Jr….
Todd Harrison tweet: Hearing (not confirmed) @PIMCO asked employees to cancel vacations to have “all hands on deck” for a Lehman-type tail event. Confirm?
Todd M. Schoenberger tweet: @todd_harrison @pimco I heard the same thing, but I also heard the same for “some” at JPM. Heard it today at a hedge fund luncheon.
As Schortgen points out, these are not just your average Twitter users….
Todd Harrison is the CEO of the award winning internet media company Minyanville, while Todd Shoenberger is a managing principal at the Blackbay Group, and an adjunct professor of Finance at Cecil College.
#2 The Bank for International Settlements is warning that global lending is contracting at the fastest pace since the financial crisis of 2008.
#3 Unemployment in the eurozone has hit a brand new all-time record high.
#4 The government of Portugal has just announced that it will be bailing out three major banks.
#5 Many U.S. banking stocks are being hit extremely hard. For example, Morgan Stanley stock has declined by 40 percent over the past four months.
#6 Yields on Spanish debt and yields on Italian debt have been absolutely soaring.
#7 10 year U.S. Treasury notes hit a record low on Friday because investors are scared and they are looking for safety. The following is from a recent USA Today article….
“Treasuries are at 1.46 because people are freaking out,” says Mark Vitner, senior economist at Wells Fargo Economics.
#8 New orders for factory goods in the United States have declined three times in the last four months. That is a sign that the “economic recovery” in the U.S. has clearly stalled.
#9 U.S. job growth in May was well below expectations and the unemployment rate has increased to 8.2 percent.
#10 Economies all over the developed world are seriously slowing down right now. The following is from a recent article by Ambrose Evans-Pritchard….
Brazil wilted in the first quarter. India grew at the slowest pace in nine years. China’s HSBC manufacturing index fell further into contraction in May, with new orders dropping sharply and inventories rising.
#11 Stocks in Japan hit a 28 year low on Monday.
#12 Over the past five years, the stock markets of Greece, Spain, Italy, Portugal, Ireland and Cyprus have all fallen by more than 50 percent. Will we soon see similar results all over the rest of Europe?
#13 The Greek economy is literally shutting down. Just check out the chaos that unpaid bills are already causing….
And unpaid bills are now threatening Greece’s electricity supply. State-owned Electricity Market Operator (LAGIE), a clearing house for power transactions, hasn’t paid independent power producers for electricity it bought from them. They, in turn, haven’t paid their natural gas supplier, Public Gas Corporation (Depa), which now doesn’t have the money to pay its supplier. Payment is due on June 22. Alas, its supplier is Gazprom in Russia, and they insist on getting paid. If not, they will shut the valve, and Depa won’t get the gas to supply the independent producers, which will have to take their power plants off line, removing about a third of the country’s electricity production.
#14 It is estimated that there are 273 billion dollars of failed real estate loans in the Spanish banking system.
#15 In March, 66 billion euros was pulled out of Spanish banks and sent out of the country. That was an all-time record and that was before we even knew the results of the recent elections in Greece and France. The numbers for April and May will almost certainly be even worse.
#16 The unemployment rate in Spain is 24.4 percent and for those under the age of 25 it is over 50 percent.
#17 Former Italian Prime Minister Silvio Berlusconi is warning that Italy may have to take drastic actions if something is not done soon….
“People are in shock. Confidence has collapsed. We have never had such a dark future,” he said. Indeed, the jobless rate for youth has jumped from 27pc to 35pc in a year. Terrorism has returned. Anarchists knee-capped the head of Ansaldo Nucleare last month. Italy’s tax office chief was nearly blinded by a letter bomb.
“If Europe refuses to listen to our demands, we should say ‘bye, bye’ and leave the euro. Or tell the Germans to leave the euro if they are not happy,” he said.
#18 It now looks like Cyprus is going to be the next European nation to need a bailout.
#19 Switzerland is threatening to implement capital controls in order to stop the massive flow of money that is coming in from banks around the rest of Europe.
#20 As I wrote about the other day, World Bank President Robert Zoellick is warning that “the summer of 2012” could end up being very similar to what we experienced back in 2008….
“Events in Greece could trigger financial fright in Spain, Italy and across the eurozone. The summer of 2012 offers an eerie echo of 2008.”
#21 Germany’s former vice-Chancellor, Joschka Fischer, is warning that the entire EU could fall apart over this crisis….
“Let’s not delude ourselves: If the euro falls apart, so will the European Union, triggering a global economic crisis on a scale that most people alive today have never experienced”
When was the last time that we saw so much bad economic news come out all at once?
We truly live in unprecedented times.
It will be exciting to watch what happens, but it is also important to keep in mind that the coming economic crisis will cause extreme pain for millions upon millions of people.
For example, the suicide of a mother and a son due to the deteriorating economy has absolutely shocked the entire nation of Greece….
A 60-year-old Greek musician and his 91-year-old mother jumped to their deaths from their 5th floor apartment, driven to despair by financial woes. This double death is the latest in a rising epidemic of crisis-induced suicides in Greece.
Witness accounts vary – some say the mother, who suffered from Alzheimer’s, jumped first, screaming a prayer as she plummeted to her death. Other neighbors say the mother and her son jumped together, holding hands.
But the one thing everyone seems to agree on is that the family had been struggling for a long time. The night before, Antonis Perris posted a suicide note of sorts on a popular Greek forum, saying he had no way of resolving the family’s financial issues.
“The problem is that I didn’t realize that I would need to have cash, because the economic crisis came so suddenly. Even though I have been selling our possessions, we have no cash flow, we have no money to buy food anymore and my credit card is maxed out with 22% interest rate.”
Perris continued to say that both his and his mother’s health deteriorated, and that he saw no solution to his most basic problems – getting food and medical help.
This is why it is so incredibly important to get prepared.
You don’t want something like that happening to you or anyone in your family.