The Stock Market Just Crashed In Italy, And Argentina Has Panic-Raised Interest Rates To 65 Percent

In the 9th largest economy in the world, the financial markets are crashing, and in the 21st largest economy in the world the central bank just raised interest rates to 65 percent to support a currency that is completely imploding.  While the mainstream media in the United States continues to be obsessed with all things Kavanaugh, an international financial crisis threatens to spiral out of control.  Stock prices are falling and currencies are collapsing all over the planet, but because the U.S. has been largely unaffected so far the mainstream media is mostly choosing to ignore what is happening.  But the truth is that this is serious.  The financial crisis in Italy threatens to literally tear the EU apart, and South America has become an economic horror show.  The situation in Brazil continues to get worse, the central bank of Argentina has just raised interest rates to 65 percent, and in Venezuela starving people are literally eating cats and dogs in order to survive.  How bad do things have to get before people will start paying attention?

On Friday, Italian stocks had their worst day in more than two years, and it was the big financial stocks that were on the cutting edge of the carnage

Shares in Italian banks .FTIT8300, whose big sovereign bond portfolios makes them sensitive to political risk, bore the brunt of selling pressure, sinking 7.3 percent as government bonds sold off and the focus turned to rating agencies.

Along with the main Italian stock index .FTMIB, the banks had their worst day since the June 2016 Brexit vote triggered a selloff across markets.

Italian bonds got hit extremely hard too.  The following comes from Business Insider

Bond markets are also suffering. The yield on the benchmark 10-year Italian bond jumped in Friday morning trading. Yields move inversely to price, with a higher yield reflecting an increased premium to hold the bond. The 10-year yield hit 3.22% in early morning trade, an increase of more than 10%.

So what sparked the sudden selloff?

Well, the new Italian government and the EU are at odds with one another, and the European elite were greatly displeased when Italy approved a new budget that was far larger than anticipated

On Thursday night, six months after the government’s ascent to power, Italy’s populist coalition government of the Five Star Movement and the Northern League finally agreed on the key tenets of its first budget.

The coalition said in a statement they had agreed to set Italy’s budget deficit at 2.4% of GDP, an increase on the current level and far above the 1.6% that technocratic finance minister Giovanni Tria had lobbied for.

It is easy to criticize Italy, but what we are doing here in the United States is just as bad if not worse.

A new 854 billion dollar spending bill just got pushed through in D.C., and it is going to continue to explode the size of our national debt.  We are going down the exact same path that all of these other nations have gone down, and in the process we are literally committing national suicide.

Just look at what is happening in Argentina.  Years of wild spending have resulted in an economy that is deep in recession.  The Argentine peso has lost approximately 50 percent of its value so far in 2018, and in a desperate attempt to stop the bleeding the central bank of Argentina just panic-raised interest rates to 65 percent.

When interest rates are at 65 percent, you don’t really have an economy anymore.

What you have is an endless nightmare.

In an emergency move, the International Monetary Fund has agreed to increase the size of Argentina’s bailout to 57 billion dollars

The International Monetary Fund and Argentina announced Wednesday an arrangement to increase resources available to the South American country by $19 billion.

The agreement, pending IMF Executive Board approval, would bring the total amount available under the program to $57.4 billion by the end of 2021, up from $50 billion.

That won’t be nearly enough to turn the situation around in Argentina, and the IMF probably knows that.

For a long time many of us have been warning of a coming global financial crisis, and now that day has arrived.

For a long time many of us have been telling you to keep a close eye on Italy, and now a day of reckoning for that very troubled nation is here.

And big problems are coming for the U.S. too.  Signs of imminent economic trouble just keep popping up, and it isn’t going to take much to push us into a new financial crisis that will be much worse than what we witnessed in 2008.

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

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

The Total Amount Of Debt In The World Just Hit A Record $152,000,000,000,000 (152 Trillion)

globe-on-the-brink-of-disaster-public-domainIf anyone ever asks you how much debt there is in the world, now you will know the answer.  According to the IMF, the total amount of debt around the globe has now hit a staggering 152 trillion dollars.  That is an amount of money that is almost unimaginable, and the IMF says that it is equivalent to 225 percent of global GDP.  It is the biggest debt bubble in the history of the planet, and it is rising at an extremely alarming pace.  Experts all over the world agree that when this debt bubble finally bursts, it is going to create an economic crisis on a scale that humanity has never seen before.

When I first saw this number I was absolutely astounded at how reckless we all have become, and I was also amazed that there was hardly anything about this announcement in the mainstream media in the United States.  The following excerpt comes from a story in a major British news source

The International Monetary Fund has urged governments to take action to tackle a record $152tn debt mountain before it triggers a fresh global financial and economic crisis.

Warning that debt levels were not just high but rising, the IMF said it was vital to intervene early in order to mitigate the risks of a repeat of the damaging events that began with the collapse of the US sub-prime housing bubble almost a decade ago.

It said that new research in its half-yearly fiscal monitor covering 113 countries had shown that debt was currently 225% of global GDP, with the private sector responsible for two-thirds of the total.

Right now the mainstream media in the United States is so obsessed with Trump and Clinton that almost every other important story is pushed to the side, but it boggles my mind how this cannot be major front page news.

When we borrow money, consumption is transferred from the future to the present.  For example, if you put a 70 inch television on your credit card today, the quality of your lifestyle will immediately go up, but you won’t have that money to spend at some point in the future.  In fact, you are ultimately going to pay back significantly more money than you originally spent for the television.

So when we go into debt, we are literally destroying the future one dollar at a time.

On a national scale, what we are doing to our children, our grandchildren and all future generations of Americans is beyond criminal.  Thomas Jefferson and other founding fathers warned that government debt was simply thievery from future generations, and they were exactly right.  If future generations get the chance, they will look back and curse us for what we have done to them.

Earlier today I looked up our national debt, and it is currently sitting at $19,688,773,606,117.54.  That means that Barack Obama has officially become “the 9 trillion dollar man”.

When Barack Obama entered the White House, the U.S. government was 10.6 trillion dollars in debt, and now we are 19.6 trillion dollars in debt, and there is a very good chance that we could hit 20 trillion dollars by the time he leaves the White House on January 20th, 2017.

In a just society, the politicians that have done this to future generations of Americans would be going to jail, but instead we put them up on pedestals.

It is truly hard to grasp how much money “a trillion dollars” represents.

For instance, if you were alive when Jesus Christ was born, and you had spent a million dollars every single day since that time, you still would not have spent a trillion dollars by now.

Since Barack Obama entered the White House, we have been stealing more than 100 million dollars from future generations of Americans every single hour of every single day, and as Obama’s second term draws to a close the pace of that theft is accelerating according to Simon Black

In fact, for the 2016 fiscal year that ends in just ten more days, the US government’s debt growth of $1.36 trillion is on track to be the third biggest annual increase ever.

The only two years in all of US history that posted higher US debt growth were 2010 and 2011– the peak of the financial crisis.

Even more acutely, last month the US federal debt grew by $151.5 billion.

Not counting the financial crisis, and a few anomalous months following a debt ceiling reset, August 2016 was the single biggest expansion of US debt EVER.

How could we do this?

And I know that I have pointed the finger at Barack Obama a lot in this article, but the truth is that Republicans are highly to blame as well.

The Tea Party revolution of 2010 gave the Republicans control of the House of Representatives, and since that time they have also gained control of the Senate.  Without Republican approval, Barack Obama would not be able to spend a single penny.  The American people were counting on the Republicans to put a lid on the wild spending of Barack Obama and the Democrats, and the Republicans in Congress have completely failed.

Nobody wants to end the party.  Because without a doubt, cutting back on our wild borrowing and spending would seriously damage the economy in the present, and nobody wants to be responsible for that.

So now the only thing to do is to keep the party going for as long as possible until it ends in a horrible, fiery crash.

Overall, the total amount of debt in the United States is now roughly equivalent to 350 percent of U.S. GDP, and a day of reckoning is rapidly approaching.  Just consider what Charles Schwab’s chief investment strategist, Liz Ann Sonders, recently told Business Insider

Sonders noted that total debt — public, private, nonfinancial, and financial — had become 350% of gross domestic product, and that is already causing problems for the economy.

The question I get all the time is: When are we going to hit the wall? When are we going to hit the debt wall?” Sonders said. “I think we hit the debt wall in ’08, which unleashed a big round one of what I think will be a rolling set of crises — and not just in the US but globally.

And I very much agree with her.

We definitely “hit a wall” in 2008, but it was just “round one” of our problems.

The coming rounds are going to be even more painful, but most Americans don’t understand this.

Most Americans seem to believe that our debt-fueled standard of living can be sustained indefinitely and that there is nothing to be concerned about.

Unfortunately, the laws of economics cannot be defied forever, and eventually the American people are going to experience economic and financial pain on a scale that we have never seen before in our entire history.

The Numbers Say That A Major Global Recession Has Already Begun

Global - Public DomainThe biggest bank in the western world has just come out and declared that the global economy is “already in a recession”.  According to British banking giant HSBC, global trade is down 8.4 percent so far this year, and global GDP expressed in U.S. dollars is down 3.4 percentSo those that are waiting for the next worldwide economic recession to begin can stop waiting.  It is officially here.  As you will see below, money is fleeing emerging markets at a blistering pace, major global banks are stuck with huge loans that will never be repaid, and it looks like a very significant worldwide credit crunch has begun.  Just a few days ago, I explained that the IMF, the UN, the BIS And Citibank were all warning that a major economic crisis could be imminent.  They aren’t just making this stuff up out of thin air, but most Americans still seem to believe that everything is going to be just fine.  The level of blind faith in the system that most people are demonstrating right now is absolutely astounding.

The numbers say that the global economy has not been in this bad shape since the devastating recession that shook the world in 2008 and 2009.  According to HSBC, “we are already in a dollar recession”…

Global trade is also declining at an alarming pace. According to the latest data available in June the year on year change is -8.4%. To find periods of equivalent declines we only really find recessionary periods. This is an interesting point. On one metric we are already in a recession. As can be seen in Chart 3 on the following page, global GDP expressed in US dollars is already negative to the tune of USD 1,37trn or -3.4%. That is, we are already in a dollar recession. 

Here is the chart that Zero Hedge posted along with the quote above.  As you can see, the only time global GDP expressed in U.S. dollars has fallen faster in recent years was during the horrible recession of seven years ago…

HSBC Chart

But there are still a whole lot of incredibly clueless people running around out there claiming that “nothing is happening” even though more signs of trouble are erupting all around us every single day.

For instance, just today CNBC published an article entitled “The US is closer to deflation than you think“, and Twitter just announced that it plans to lay off 8 percent of its entire workforce.

But of course the biggest problems are happening in “emerging markets” right now.  The following is an excerpt from an article that was just published in a major British news source entitled “The world economic order is collapsing and this time there seems no way out“…

Now act three is beginning, but in countries much less able to devise measures to stop financial contagion and whose banks are more precarious. For global finance next flooded the so-called emerging market economies (EMEs), countries such as Turkey, Brazil, Malaysia, China, all riding high on sky-high commodity prices as the China boom, itself fuelled by wild lending, seemed never-ending. China manufactured more cement from 2010-13 than the US had produced over the entire 20th century. It could not last and so it is proving.

China’s banks are, in effect, bust: few of the vast loans they have made can ever be repaid, so they cannot now lend at the rate needed to sustain China’s once super-high but illusory growth rates. China’s real growth is now below that of the Mao years: the economic crisis will spawn a crisis of legitimacy for the deeply corrupt communist party. Commodity prices have crashed.

Money is flooding out of the EMEs, leaving overborrowed companies, indebted households and stricken banks, but EMEs do not have institutions such as the Federal Reserve or European Central Bank to knock up rescue packages. Yet these nations now account for more than half of global GDP. Small wonder the IMF is worried.

It is one thing for The Economic Collapse Blog to warn that “the world economic order is collapsing”, but this is one of the biggest newspapers in the UK.

I was writing about these emerging market problems back in July, but at that time very few really understood the true gravity of the situation.  But now giant banks such as Goldman Sachs are calling this the third stage of the ongoing global financial crisis.  The following comes from a recent CNBC piece entitled “Is EM turmoil the third wave of the financial crisis? Goldman thinks so“…

Emerging markets aren’t just suffering through another market rout—it’s a third wave of the global financial crisis, Goldman Sachs said.

“Increased uncertainty about the fallout from weaker emerging market economies, lower commodity prices and potentially higher U.S. interest rates are raising fresh concerns about the sustainability of asset price rises, marking a new wave in the Global Financial Crisis,” Goldman said in a note dated last week.

The emerging market wave, coinciding with the collapse in commodity prices, follows the U.S. stage, which marked the fallout from the housing crash, and the European stage, when the U.S. crisis spread to the continent’s sovereign debt, the bank said.

You know that it is late in the game when Goldman Sachs starts sounding exactly like The Economic Collapse Blog.  I have been warning about a “series of waves” for years.

When will people wake up?

What is it going to take?

The crisis is happening right now.

Of course many Americans will refuse to acknowledge what is going on until the Dow Jones Industrial Average collapses by several thousand more points.  And that is coming.  But let us all hope that day is delayed for as long as possible, because all of our lives will become much crazier once that happens.

And the truth is that many Americans do understand that bad times are on the horizon.  Just check out the following numbers that were recently reported by CNBC

The CNBC All-America Economic Survey finds views on the current state of the economy about stable, with 23 percent saying it is good or excellent and 42 percent judging it as fair. About a third say the economy is poor, up 3 points from the June survey.

But the percentage of Americans who believe the economy will get worse rose 6 points to 32 percent, the highest level since the government shutdown in 2013. And just 22 percent believe the economy will get better, 2 points lower than June and the lowest level since 2008, when the nation was gripped by recession.

If you want to believe that everything is going to be just fine somehow, then go ahead and believe that.

All I can do is present the facts.  For months I have been warning about this financial crisis, and now it is playing out as a slow-motion train wreck right in front of our eyes.

We are moving into a period of time during which events are going to start to move much more rapidly, and life as we know it is about to change in a major way for all of us.

Hopefully you have already been preparing for what is about to come.

If not, I wouldn’t want to be in your position.

Why Are The IMF, The UN, The BIS And Citibank All Warning That An Economic Crisis Could Be Imminent?

Question Sign Red - Public DomainThe warnings are getting louder.  Is anybody listening?  For months, I have been documenting on my website how the global financial system is absolutely primed for a crisis, and now some of the most important financial institutions in the entire world are warning about the exact same thing.  For example, this week I was stunned to see that the Telegraph had published an article with the following ominous headline: “$3 trillion corporate credit crunch looms as debtors face day of reckoning, says IMF“.  And actually what we are heading for would more accurately be described as a “credit freeze” or a “credit panic”, but a “credit crunch” will definitely work for now.  The IMF is warning that the “dangerous over-leveraging” that we have been witnessing “threatens to unleash a wave of defaults” all across the globe…

Governments and central banks risk tipping the world into a fresh financial crisis, the International Monetary Fund has warned, as it called time on a corporate debt binge in the developing world.

Emerging market companies have “over-borrowed” by $3 trillion in the last decade, reflecting a quadrupling of private sector debt between 2004 and 2014, found the IMF’s Global Financial Stability Report.

This dangerous over-leveraging now threatens to unleash a wave of defaults that will imperil an already weak global economy, said stark findings from the IMF’s twice yearly report.

The IMF is actually telling the truth in this instance.  We are in the midst of the greatest debt bubble the world has ever seen, and it is a monumental threat to the global financial system.

But even though we know about this threat, that doesn’t mean that we can do anything about it at this point or stop what is about to happen.

The Bank of England, the UN and the Bank for International Settlements have all issued similar ominous warnings.  The following is an excerpt from a recent article in the Guardian

The IMF’s warning echoes a chorus of others. The Bank of England’s chief economist, Andy Haldane, has argued that the world is entering the latest episode of a “three-part crisis trilogy”. Unctad, the UN’s trade and development arm, would like to see advanced economies boost public spending to offset the downturn in emerging economies. The Bank for International Settlements believes interest rates have been too low for too long, encouraging too much risk-taking in financial markets. All of them fear that the global financial system is primed for a crisis.

I particularly like Andy Haldane’s likening our current situation to a “three-part crisis trilogy”.  I think that is perfect.  And if you are familiar with movie trilogies, then you know that the last episode is usually the biggest and the baddest.

Citigroup economist Willem Buiter also believes that big trouble is on the horizon.  In fact, he is publicly warning of a “global recession” in 2016

Citigroup economist Willem Buiter looks at the world landscape and sees an economy performing substantially below potential output, which he uses as the general benchmark for the idea of a global recession. With that in mind, he said the chances of a global recession in 2016 are growing.

“We think that the evidence suggests that the global output gap is negative and that the global economy is currently growing at a rate below global potential growth. The (negative) output gap is therefore widening,” Buiter said in a note to clients. He added, “from an output gap that was probably quite close to zero fairly recently, continued sub-par global growth is likely to put the global economy back into recession, if indeed the world ever fully emerged of the recession caused by the global financial crisis.”

Usually when we are plunged into a new crisis there is some sort of “trigger event” that creates widespread panic.  Yesterday, I wrote about the ongoing problems at commodity giants such as Glencore, Trafigura and The Noble Group.  The collapse of any of them could potentially be a new “Lehman Brothers moment”.

But something else happened just yesterday that is also extremely concerning.  Just a couple of weeks ago, I warned that the biggest bank in Germany, Deutsche Bank, was on the verge of massive trouble.  Well, on Wednesday the bank announced a loss of more than 6 billion dollars for the third quarter of 2015

Deutsche Bank’s new boss John Cryan set about cleaning up Germany’s biggest bank on Thursday, revealing a record pre-tax loss of 6 billion euros ($6.7 billion) in the third quarter and warning investors of a possible dividend cut.

Write downs, impairments and litigation costs all contributed to the loss, the bank said.

Cryan became chief executive in July with a promise to cut costs. The Briton is accelerating plans to shed assets and exit countries to shrink the bank and is preparing to ax about 23,000 jobs, or a quarter of the bank’s staff, sources told Reuters last month.

Keep an eye on Germany – the problems there are just beginning.

Something else that I am closely watching is the fact that major exporting nations such as China that used to buy up lots of U.S. government debt are now dumping that debt at an unprecedented pace.  The following comes from Wolf Richter

Five large purchasers of US Treasuries – China, Russia, Norway, Brazil, and Taiwan – have changed their minds. They’re dumping Treasuries, each for their own reasons that are now coinciding. And at the fastest rate on record.

For the 12-month period ended July, sales of Treasuries by central banks around the world reached a net of $123 billion, “the biggest decline since data started to be collected in 1978,” the Wall Street Journal reported.

China, the largest foreign owner of Treasuries – its hoard peaking at $1.317 trillion in November 2013 – has been unloading with particular passion. By July, the latest data available from the US Treasury Department, China’s pile was down to $1.241 trillion.

Yes, I know, the stock market went up once again on Thursday, and all of the irrational optimists are once again telling us that everything is going to be just fine.

The truth, of course, is that everything is not going to be just fine.  Ever since I started the Economic Collapse Blog, I have never wavered in my belief that the greatest economic crisis that the United States has ever seen is coming, and I have written well over 1000 articles setting forth the case for the coming collapse in excruciating detail.  Nobody is going to be able to say that I didn’t try to warn them.

Those that have blind faith in Barack Obama, Wall Street, the Federal Reserve and the other major central banks around the planet will continue to mock the idea that a major collapse is coming for as long as they can.

But when the day of reckoning does arrive and crisis coming knocking at their doors, what will they do then?

The ‘Greek Debt Deal’ Is Already Starting To Fall Apart

Puzzle Pieces - Public DomainThe “deal that was designed to fail” has already begun to unravel.  The IMF, which was expected to provide a big chunk of the financing, has indicated that it may walk away from the deal unless Greece is granted extensive debt relief.  This is something that the Germans and their allies have resolutely refused to do.  Meanwhile, outrage is pouring in from all over Europe regarding what the Greek government is being forced to do to their own people.  Most of this anger is being directed at the Germans, but the truth is that without German money the Greek banking system and the Greek economy will completely and utterly collapse.  So even though Greek Prime Minister Alex Tsipras admits that this is a deal that he does not believe in, he is attempting to get it pushed through the Greek parliament, and we should know on Wednesday whether he was successful or not.  But even if the Greek parliament approves it, we could still see either the German or the Finnish parliaments reject it.  It seems as though nobody is really happy with this deal, and these negotiations have exposed very deep divisions within Europe.  Could this be the beginning of the end for the eurozone?

The Germans appear to believe that they can push the Greeks out of the eurozone and that everything will be okay somehow.  This is something that I wrote about extensively yesterday, and it turns out that a lot of other prominent voices agree with me.  For example, just consider what Paul Krugman of the New York Times had to say about this.  I am kind of amazed that he finally got something right…

Suppose you consider Tsipras an incompetent twerp. Suppose you dearly want to see Syriza out of power. Suppose, even, that you welcome the prospect of pushing those annoying Greeks out of the euro.

Even if all of that is true, this Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.

Greece desperately wants to stay in the euro, and they desperately want money from the rest of Europe to keep coming in.  At this point, they will agree to just about anything to keep from getting booted out of the common currency.  That is why the Germans and their allies had to make the deal so horrible.  They were attempting to find some way to make things so harsh on the Greeks that they would finally choose to walk away.

And to a certain extent it seems to be working.  Even some members of Syriza are publicly declaring that they are going to vote against this package.  The following comes from the Washington Post

Greek Energy Minister Panagiotis Lafazanis, who leads a hard-line leftist faction within Syriza, said in a statement Tuesday that the country’s creditors had “acted like cold-blooded blackmailers and economic assassins.”

Yet he also took indirect aim at Tsipras, calling on the Greek prime minister to reverse himself and tear up the agreement, which he described as a violation of the party’s ideals.

Even if Tsipras can pass the deal in Parliament, as he is expected to do, Lafazanis vowed that the Greek people would “annul it through their unity and struggle.”

Right now, the vote looks like it could be quite close.  Even though Greek Prime Minister Alex Tsipras has publicly admitted that this is a deal that “I do not believe in“, he is really pushing hard to get the votes that he needs.  In fact, according to Reuters he has been actively reaching out to opposition parties to secure votes…

Having staved off a financial meltdown, Tsipras has until Wednesday night to pass measures tougher than those rejected in a referendum days ago. With as many as 30-40 hardliners in his own ranks expected to mutiny, Tsipras will likely need the support of pro-European opposition parties to muster the 151 votes he needs to pass the law in parliament.

But even if this deal gets through parliament, it is highly questionable whether Greece will actually be able to do what is being required of them.  For instance, the 50 billion euro “privatization fund” seems to be something of a pipe dream

Privatisation agency Taiped has put out to tender assets with a nominal value of 7.7 billion euros since 2011, but has cashed in only just over 3.0 billion euros, according to 2014 figures.

On June 26 even the International Monetary Fund (IMF), one of Greece’s creditors, raised eyebrows over the idea of raking in lots of money from privatisations.

It stressed that the sale of public banking assets was supposed to raise tens of billions of euros but it was “highly unlikely that these proceeds will materialise” considering the high levels of nonperforming loans in the banking system.

It said that realistically only 500 million euros of proceeds were likely to materialise each year — at which rate it would take around 100 years to reach the 50 billion euro goal.

For the moment, though, let’s assume that the Greek parliament agrees to these demands and that by some miracle the Greek government can find a way to do everything that is being required of them.

And for the moment, let’s assume that this deal is approved by both the German and Finnish parliaments.

Even if everything else goes right, this deal can still be killed by the IMF

The International Monetary Fund has sent its strongest signal that it may walk away from Greece’s new bailout programme, arguing in a confidential analysis that the country’s debt is skyrocketing and budget surplus targets set by Athens cannot be achieved, reports FT.

In the three-page memo, sent to EU authorities at the weekend and obtained by FT, the IMF said the recent turmoil in the Greek economy would lead debt to peak at close to 200 percent of economic output over the next two years. At the start of the eurozone crisis, Athens’ debt stood at 127 percent.

In order for the IMF to participate in this new Greek bailout, the IMF must deem Greek debt to be sustainable.  And at this point that does not appear to be the case

Under its rules, the IMF is not allowed to participate in a bailout if a country’s debt is deemed unsustainable and there is no prospect of it returning to private bond markets for financing. The IMF has bent its rules to participate in previous Greek bailouts, but the memo suggests it can no longer do so.

But the Germans made it very clear that there would be no bailout unless the IMF was involved.

So what would satisfy the IMF?

The IMF study seems to indicate that massive debt relief for Greece would be required.  The following comes from Reuters

The study, seen by Reuters, said European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity extension. Or else they must make annual transfers to the Greek budget or accept “deep upfront haircuts” on existing loans.

Needless to say, those kinds of concessions are anathema to the Germans.  There is no way that anything like that could ever get through the German parliament.

But to be honest, the Germans never intended for this deal to be successful anyway.  Just consider what German Finance Minister Wolfgang Schauble told reporters on Tuesday

German Finance Minister Wolfgang Schauble made clear in Brussels on Tuesday that some members of the Berlin government think it would make more sense for Athens to leave the euro zone temporarily rather than take another bailout.

This is what Schauble and his allies have wanted all along.  This entire “deal” was crafted with the intent of creating conditions under which Greece could be forced out of the euro.

By this time tomorrow, we should know what the Greek parliament is going to do.  However, that won’t be the end of the story.  One way or another, the Germans are going to get their wish.  But once they do, I think that they will be quite surprised by the chaos that is unleashed.

Does The IMF Actually Want To Cause A Greek Debt Default?

Question Marks - Public DomainWhen it comes to geopolitics, there are often wheels working within wheels that are working within wheels.  Once in a while we get a peek behind the scenes, but for the most part the machinations of the global elite remain shrouded in mystery most of the time.  And sometimes the global elite appear to be doing things that, on the surface, do not seem to make much sense at all.  What is going on in Europe is a perfect example of this.  If everyone was negotiating honestly, I believe that a Greek debt deal would have been reached by now.  As this endless crisis has stretched on month after month, it has become increasingly apparent that more is going on here than meets the eye.  In particular, the IMF has been standing in the way of a deal time after time.  So what do IMF officials want?  Are they looking for the “unconditional surrender” of this new Greek government in order to send a message to other governments that would potentially defy them?  Or could it be possible that the IMF actually wants a Greek debt default for some other insidious reason?

When the latest Greek proposal was embraced with enthusiasm by EU officials, many hoped that this meant that the crisis would soon be resolved.  But it turns out that there is still one very important player that is not happy, and that is the IMF.  The following comes from the Wall Street Journal

But the IMF is still unhappy with key aspects of Greece’s new economic proposals and German officials were irritated by the speed with which the commission welcomed them, warning that much work needs to be done.

Greece’s plan calls for reducing the deficits in its pension system and government budget by relying heavily on raising taxes and social-security contributions, whereas the IMF wanted bigger spending cuts.

The Washington-based IMF has said Greece’s economy is already too heavily taxed and that too many additional tax increases would hurt economic growth, making it harder to pay down Greece’s debt.

It is still short of everything that should be expected,” IMF Managing Director Christine Lagarde said Monday, suggesting Greece will have to modify its proposals significantly to win the IMF’s backing.

So what would make the IMF “happy”?

Would anything short of total capitulation by the Greek government suffice?

Meanwhile, members of Syriza are expressing a high level of frustration with the compromises that Greek Prime Minister Alexis Tsipras has already agreed to.  At this point, there is even doubt whether the current Greek proposal could get through the Greek parliament.  The following comes from Bloomberg

Greek Prime Minister Alexis Tsipras is facing the first signs of dissent within his own party over his latest plan to end a five-month standoff with creditors.

Some of Syriza’s more radical and populist lawmakers expressed opposition Tuesday to the proposal as the deal’s backers called on members to see the bigger picture.

Personally, I cannot support such an agreement that is contrary to our election promises,” Dimitris Kodelas, a Syriza lawmaker associated with former Maoists, said in an interview. “I do not care about the consequences of my decision.

Despite all of the optimism that we have seen this week, the odds of a Greek debt deal getting pushed through are looking slimmer by the day.

And even if a deal somehow miraculously happens, all it would really mean is that the can has been kicked down the road for a few more months

Assuming Tsipras can force the deal through the Greek parliament, and that key creditors such as the IMF and Germany accept it too, it will do little more than buy time for negotiations on yet another rescue.

The final tranche of cash from the existing bailout should be enough to meet repayments due to the IMF and European Central Bank through the end of August. But the Greek government will then have to find more than two billion euros for both institutions in September and October.

If this week concludes with agreement between Greece and its creditors, it won’t be long before the next chapter in this drama,” said Angus Campbell, senior analyst at FxPro.

And no matter what happens by the end of this month, it is a virtual certainty that the economic depression in Greece will just continue to deepen.

At this point, normal economic activity in the nation has pretty much ground to a halt.  Just consider the following excerpt from a recent Zero Hedge article

“Business-to-business payments have almost been paused,” one Athens businessman says. “They are just rolling over postdated cheques.”

For Greek banks, mortgage loans left unserviced by strategic defaulters have become a particular headache, especially since the Syriza-led government says it is committed to protecting low-income homeowners from foreclosures on their properties

“There’s a real issue of moral hazard . . . Around 70 percent of restructured mortgage loans aren’t being serviced because people think foreclosures will only be applied to big villa owners,” one banker said.

For a long time, I have been warning that the next major economic crisis would begin in Europe before spreading across the entire globe.

Greece has a relatively small economy, but Italy, Spain and France are going down the exact same road that Greece has gone.

And what IMF officials are doing right now is that they are setting a precedent for future debt negotiations that they know are almost certainly coming with other countries in the future.

Sadly, most of my readers (being Americans) don’t really grasp the importance of what is going on over in Europe.  We are watching a horrific train wreck unfold in slow-motion, and what is going to happen over the next few weeks is going to have massive implications for the entire planet.

The Economic Depression In Greece Deepens As Tsipras Prepares To Deliver ‘The Great No’

No Cards - Public DomainAs Greece plunges even deeper into economic chaos, Greek Prime Minister Alexis Tsipras says that his government is prepared to respond to the demands of the EU and the IMF with “the great no” and that his party will accept responsibility for whatever consequences follow.  Despite years of intervention from the rest of Europe, Greece is a bigger economic mess today than ever.  Greek GDP has shrunk by 26 percent since 2008, the national debt to GDP ratio in Greece is up to a staggering 175 percent, and the unemployment rate is up above 25 percent.  Greek stocks are crashing and Greek bond yields are shooting into the stratosphere.  Meanwhile, the banking system is essentially on life support at this point.  400 million euros were pulled out of Greek banks on Monday alone.  No matter what happens in the coming days, many believe that it is now only a matter of time before capital controls like we saw in Cyprus are imposed.

Over the past several months, there have been endless high level meetings over in Europe regarding this Greek crisis, but none of them have fixed anything.  And even Jeroen Dijsselbloem admits that the odds of anything being accomplished during the meeting of eurozone finance ministers on Thursday is “very small”

Some officials believe Thursday’s meeting of eurozone finance ministers will be perhaps the last chance to stop Greece sliding into default and towards leaving the euro.

However the president of the so-called Eurogroup, Jeroen Dijsselbloem, said the chance of an accord was “very small”.

And it is certainly not just Dijsselbloem that feels this way.  At this point pretty much everyone is resigned to the fact that there is not going to be a deal any time soon.  The following comes from Reuters

“People are getting anxious on both sides. Athens expects Brussels to move. And Brussels expects Athens to move. And it’s stuck,” said a senior EU diplomat, who declined to be named.

It’s very dangerous, and we may have an accident.”

EU officials insist that it is Greece that needs to back down, but the Greeks have no intention of backing down.  Just consider the words of Greek Prime Minister Alexis Tsipras.  He says that he is not afraid to deliver “the great no” to the rest of Europe

Greek Prime Minister Alexis Tsipras said he’s ready to assume responsibility for the consequences of rejecting an unfair deal with creditors.

In a sign that he’s being taken at his word, officials from the Netherlands, Portugal and Germany said they were bracing for a breakdown in talks that could roil the currency bloc.

With a viable solution “the Greek government recently elected by the Greek people will bear the cost of carrying through,” Tsipras told reporters in Athens on Wednesday. Without one, “we will assume the responsibility to say ‘the great no’ to a continuation of the catastrophic policies.”

To me, that sounds like a man that is not going to back down.  And to call it “the great no” is not an exaggeration at all.  I think that he realizes that this “great no” will unleash financial chaos all over Europe.

For Greece, the consequences would likely be catastrophic.  At least that is what the Bank of Greece thinks

Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union. A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring.

All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership. From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South.

And no matter how confident the Germans appear to be right now, the truth is that a Greek debt default would be a complete and total nightmare for the rest of Europe as well.  The euro would drop like a rock, stocks would crash all over Europe and bond yields would go crazy.  And that is just for starters.

So we desperately need to see a deal.  But with each passing day that seems less and less likely.

In fact, a Greek parliament committee on public debt just released a new report containing their preliminary findings.  This report is not legally binding, but it does show the mood of the Greek parliament, and what this report says is absolutely stunning.  It concluded that the Greek government is under absolutely no obligation to repay its debts.  Just check out the following excerpt from the report

All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.

In other words, what this report is saying is that the Greek government should never pay back any of this debt.  That certainly is not going to sit well with the officials from the EU and the IMF.

And what happens if other financially troubled nations in the eurozone decide that their debts are “illegal” and “odious” as well?

Globally, there are more than 76 trillion dollars worth of bonds floating around out there, and the yields on those bonds are based on the assumption that they will always be paid off.  If nations such as Greece start defaulting, that will throw the entire global financial system into a state of tremendous chaos.

Of course the Greek financial system is already in a state of tremendous chaos.  At this point, many believe that it is just a matter of time before capital controls are imposed.  This is something that I have warned about in the past.  The following description of what capital controls in Greece may look like comes from Bloomberg

No one knows the specifics for Greece, but here’s what happened in Cyprus: ATM withdrawals were capped at 300 euros a person per day. Transfers of more than 5,000 euros abroad were subject to approval by a special committee. Companies needed documents for each payment order, with approvals for over 200,000 euros determined by available liquidity. Parents couldn’t send children that were studying abroad more than 5,000 euros a quarter. Cypriots traveling abroad could carry no more than 1,000 euros with them. Termination of fixed-term deposits was prohibited, while payments with credit and debit cards were capped at 5,000 euros. Checks couldn’t be cashed.

Since most Greeks do not want to have their money trapped in the banks, they have been pulling out cash and hiding it at home at a record breaking pace.  This is precisely what we would expect to see when a nation is on the verge of total financial collapse

“Everybody’s doing it,” said Joanna Christofosaki, in front of a Eurobank cash dispenser in the leafy Athens neighbourhood of Kolonaki. “Our friends have all done it. Nobody wants their money to be worthless tomorrow. Nobody wants to be unable to get at it.”

A researcher in the archaeology department at the Academy of Athens, Christofosaki said she knew plenty of people who had “€10,000 somewhere at home” and plenty of others who chose to keep their stash at the office. Was she among them? “If I was, I certainly wouldn’t tell you.”

As I wrote about yesterday, I believe that this is the beginning of the next great European financial crisis.

Eventually, it will spread all over the planet.

Unfortunately, even though global debt levels have never been higher and the signs of the coming financial implosion are all around us, most people have been lulled into a false sense of security.

Most people just assume that everything is going to turn out okay somehow.

The second half of this year is going to be much different from the first half, but most people will not be convinced until everything starts completely falling apart.

By then, it may be far too late to do anything about it.