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The Global Liquidity Squeeze Has Begun

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Squeeze Globe - Public DomainGet ready for another major worldwide credit crunch.  Today, the entire global financial system resembles a colossal spiral of debt.  Just about all economic activity involves the flow of credit in some way, and so the only way to have “economic growth” is to introduce even more debt into the system.  When the system started to fail back in 2008, global authorities responded by pumping this debt spiral back up and getting it to spin even faster than ever.  If you can believe it, the total amount of global debt has risen by $35 trillion since the last crisis.  Unfortunately, any system based on debt is going to break down eventually, and there are signs that it is starting to happen once again.  For example, just a few days ago the IMF warned regulators to prepare for a global “liquidity shock“.  And on Friday, Chinese authorities announced a ban on certain types of financing for margin trades on over-the-counter stocks, and we learned that preparations are being made behind the scenes in Europe for a Greek debt default and a Greek exit from the eurozone.  On top of everything else, we just witnessed the biggest spike in credit application rejections ever recorded in the United States.  All of these are signs that credit conditions are tightening, and once a “liquidity squeeze” begins, it can create a lot of fear.

Over the past six months, the Chinese stock market has exploded upward even as the overall Chinese economy has started to slow down.  Investors have been using something called “umbrella trusts” to finance a lot of these stock purchases, and these umbrella trusts have given them the ability to have much more leverage than normal brokerage financing would allow.  This works great as long as stocks go up.  Once they start going down, the losses can be absolutely staggering.

That is why Chinese authorities are stepping in before this bubble gets even worse.  Here is more about what has been going on in China from Bloomberg

China’s trusts boosted their investments in equities by 28 percent to 552 billion yuan ($89.1 billion) in the fourth quarter. The higher leverage allowed by the products exposes individuals to larger losses in the event of stock-market drops, which can be exaggerated as investors scramble to repay debt during a selloff.

In umbrella trusts, private investors take up the junior tranche, while cash from trusts and banks’ wealth-management products form the senior tranches. The latter receive fixed returns while the former take the rest, so private investors are effectively borrowing from trusts and banks.

Margin debt on the Shanghai Stock Exchange climbed to a record 1.16 trillion yuan on Thursday. In a margin trade, investors use their own money for just a portion of their stock purchase, borrowing the rest. The loans are backed by the investors’ equity holdings, meaning that they may be compelled to sell when prices fall to repay their debt.

Overall, China has seen more debt growth than any other major industrialized nation since the last recession.  This debt growth has been so dramatic that it has gotten the attention of authorities all over the planet

Wolfgang Schaeuble, Germany’s finance minister says that “debt levels in the global economy continue to give cause for concern.”

Singling out China in particular, Schaeuble noted that “debt has nearly quadrupled since 2007″, adding that it’s “growth appears to be built on debt, driven by a real estate boom and shadow banks.”

According to McKinsey’s research, total outstanding debt in China increased from $US7.4 trillion in 2007 to $US28.2 trillion in 2014. That figure, expressed as a percentage of GDP, equates to 282% of total output, higher than the likes of other G20 nations such as the US, Canada, Germany, South Korea and Australia.

This credit boom in China has been one of the primary engines for “global growth” in recent years, but now conditions are changing.  Eventually, the impact of what is going on in China right now is going to be felt all over the planet.

Over in Europe, the Greek debt crisis is finally coming to a breaking point.  For years, authorities have continued to kick the can down the road and have continued to lend Greece even more money.

But now it appears that patience with Greece has run out.

For instance, the head of the IMF says that no delay will be allowed on the repayment of IMF loans that are due next month…

IMF Managing Director Christine Lagarde roiled currency and bond markets on Thursday as reports came out of her opening press conference saying that she had denied any payment delay to Greece on IMF loans falling due next month.

Unless Greece concludes its negotiations for a further round of bailout money from the European Union, however, it is not likely to have the money to repay the IMF.

And we are getting reports that things are happening behind the scenes in Europe to prepare for the inevitable moment when Greece will finally leave the euro and go back to their own currency.

For example, consider what Art Cashin told CNBC on Friday

First, “there were reports in the media [saying] that the ECB and/or banking authorities suggested to banks to get rid of any sovereign Greek debt they had, which suggests that maybe the next step will be Greece exiting,” Cashin told CNBC.

Also, one of Greece’s largest newspapers is reporting that neighboring countries are forcing subsidiaries of Greek banks that operate inside their borders to reduce their risk to a Greek debt default to zero

According to a report from Kathimerini, one of Greece’s largest newspapers, central banks in Albania, Bulgaria, Cyprus, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia have all forced the subsidiaries of Greek banks operating in those countries to bring their exposure to Greek risk — including bonds, treasury bills, deposits to Greek banks, and loans — down to zero.

Once Greece leaves the euro, that is going to create a tremendous credit crunch in Europe as fear begins to spread like wildfire.  Everyone will be wondering which nation will be “the next Greece”, and investors will want to pull their money out of perceived danger zones before they get hammered.

In the past, other European nations have been willing to bend over backwards to accommodate Greece and avoid this kind of mess, but those days appear to be finished.  In fact, the finance minister of France openly admits that the French “are not sympathetic to Greece”

Greece isn’t winning much sympathy from its debt-wracked European counterparts as the country draws closer to default for failing to make bailout repayments.

“We are not sympathetic to Greece,” French Finance Minister Michael Sapin said in an interview at the International Monetary Fund-World Bank spring meetings here.

“We are demanding because Greece must comply with the European (rules) that apply to all countries,” Sapin said.

Yes, it is possible that another short-term deal could be reached which could kick the can down the road for a few more months.

But either way, things in Europe are going to continue to get worse.

Meanwhile, very disappointing earnings reports in the U.S. are starting to really rattle investors.

For example, we just learned that GE lost 13.6 billion dollars in the first quarter…

One week following the announcement that it would dismantle most of its GE Capital financing operations to instead focus on its industrial roots, General Electric reported a first quarter loss of $13.6 billion.

The results were impacted by charges relating to the conglomerate’s strategic shift. A year ago GE reported a first quarter profit of $3 billion.

That is a lot of money.

How in the world does a company lose 13.6 billion dollars in a single quarter during an “economic recovery”?

Other big firms are reporting disappointing earnings numbers too

In earnings news, American Express Co. late Thursday said its results were hurt by the strong U.S. dollar, which reduced revenue booked in other countries. Chief Executive Kenneth Chenault reiterated the company’s forecast that 2015 earnings will be flat to modestly down year over year. Shares fell 4.6%.

Advanced Micro Devices Inc. said its first-quarter loss widened as revenue slumped. The company said it was exiting its dense server systems business, effective immediately. Revenue and the loss excluding items missed expectations, pushing shares down 13%.

And just like we saw just before the financial crisis of 2008, Americans are increasingly having difficulty meeting their financial obligations.

For instance, the delinquency rate on student loans has reached a very frightening level

More borrowers are failing to make payments on their student loans five years after leaving college, painting a grim picture for borrowers, according to the Federal Reserve Bank of New York.

Student debt continues to increase, especially for people who took out loans years ago. Those who left school in the Great Recession, which ended in 2009, had particular difficulty with repayment, with many defaulting, becoming seriously delinquent or not being able to reduce their balances, the New York Fed said today.

Only 37 percent of borrowers are current on their loans and are actively paying them down, and 17 percent are in default or in delinquency.

At this point, the American consumer is pretty well tapped out.  If you can believe it, 56 percent of all Americans have subprime credit today, and as I mentioned above, we just witnessed the biggest spike in credit application rejections ever recorded.

We have reached a point of debt saturation, and the credit crunch that is going to follow is going to be extremely painful.

Of course the biggest provider of global liquidity in recent years has been the Federal Reserve.  But with the Fed pulling back on QE, this is creating some tremendous challenges all over the globe.  The following is an excerpt from a recent article in the Telegraph

The big worry is what will happen to Russia, Brazil and developing economies in Asia that borrowed most heavily in dollars when the Fed was still flooding the world with cheap liquidity. Emerging markets account to roughly half of the $9 trillion of offshore dollar debt outside US jurisdiction.

The IMF warned that a big chunk of the debt owed by companies is in the non-tradeable sector. These firms lack “natural revenue hedges” that can shield them against a double blow from rising borrowing costs and a further surge in the dollar.

So what is the bottom line to all of this?

The bottom line is that we are starting to see the early phases of a liquidity squeeze.

The flow of credit is going to begin to get tighter, and that means that global economic activity is going to slow down.

This happened during the last financial crisis, and during this next financial crisis the credit crunch is going to be even worse.

This is why it is so important to have an emergency fund.  During this type of crisis, you may have to be the source of your own liquidity.  At a time when it seems like nobody has any cash, those that do have some will be way ahead of the game.

  • K

    So many surviving on credit. You may not have to wait for the total economic collapse. The fireworks could start from the unavailability of credit.

    • L&M

      I noticed that Misses Clinton was able to campaign in a brand new “tricked” out conversation van!
      She also has a driver(she has not driven for 20? years).
      Misses Clinton seems to be doing great.

      • XSANDIEGOCA

        Gazillions flow into the Clinton Foundation from governments around the World. Whether the Clintons win or lose the next election is irrelevant, their holdings er….Foundation inflates to a Billion and they win forever.

      • Priszilla

        Show me an American politician that is not a millionaire. The masses cheer only for “celebrities”.

        They pay #20 for a football game but complain when they have to pay #10 for a flu vaccine.

  • usedup

    Thanks for the facts again- go to the US Debt Clock and look at the World Debt clocks tab- The external debt squeeze is on- these countries local debt to GDP is often growing and external debt to GDP is shrinking. This is not always the case. But an excellent tool to understand what is truly happening. Looking at the figures for Germany, France and England are especially frightening. Ireland and the rest of the PIGS are acting different in several fields. Pay attention -these world events will change the world and quickly I think.

    • Mike Smithy

      I suspect that QE4 is on the horizon sometime this year. However, I am not sure what it will entail condidering the FED has now boxed themselves into a corner and their powder is wet. Do you have any insights?

      • Guest

        I don’t see how the Fed can raise interest rates, but they probably will. I didn’t see how they could end QE, yet they did. I guess I just don’t understand the situation well enough.

        • alan

          You rename it something else and watch the stawk market go up.

        • gary hillerich

          must politely disagree..listened too a many “egg spurts”[actually decent guessers] as possible on interest rate hike possibility & all..every single one actually,[that know much more than me] say a interest rate hike is simply,absolutely,& positively impossible,& would crash the derivative system/scam, & would trigger a global derivative collapse..then again we have much more a brewin.., DHS has purchased north of 1.5 BILLLION bullets, & then we have Jade Helm 15..Ukraine..martial law police state.. we have chemtrails..,the worst [exceptionally,exceptionally dry] drought in CA. ever..a possibility of witch Hitlery or another Bush crime family member in 2016. BRICS..WWIII brewing in Ukraine.& $16 silver..HUH.. all those things going on & $16 silver!?-
          sooooo
          certainly any number of possibilites,
          but sticking with no rate increase..not ever.. but QE 4,5,6,7 to infinity is 100% possible….the dollar will die as all paper currencies do.just a matter of when..that’s another 100% er..only a matter of when..Joel Skousan has been the most correct of the “professional guessers” & he thinks we have[surprisingly] till 2020 until we see things implode, & the start of WWIII

          • Guest

            I read Joel Skousen’s stuff over ten years ago. I didn’t care for him. He doesn’t know any more than anyone else. The truth is nobody knows how this is all going to play out or how much time we have left. I know a very successful precious metals broker who is in his 80s who doesn’t believe that the U.S. Dollar will become worthless! So many conflicting views! Who’s right?

            Like I said, I’m of the opinion that the Fed can’t raise rates. But they probably will. We’ll see.

            Thanks for the comment, Gary.

          • Fred Grindle

            Can anybody tell me why almost of the financial collapses happen in Sept./Oct.? Is this coincidence or are there actual reasons?

          • Revolt to save America

            we WILL NOT be raising rates, we can’t, if we did we would have a collapse within 24 hours, jobs are too weak and spending is weak, RATE HIKE will not happen, we will just keep saying it will in 6 months, and in 6 more and in 6 more…………. question is, what will bring on the collapse. perhaps everyone so cared, RUN ON THE BANKS, a hunch, ..

          • Estaphulous

            Get ready for a Bank Holiday.

  • For those who believe in the Shemita cycle (7 years) on Finance, it is worth noting that this liquidity Squeeze is showing is ugly head in the middle of the cycle. If the cycle holds true, we should see the second half of the cycle underlining massive negative news on the Economic and Finance front until we reach around September-October, then all hell should break lose (even with all the manipulations behind the scene).

    If I’m not wrong it was also in the middle of the last Shemita (2007-2008) that the trigger of the 2008 Financial Crisis showed his ugly head (maybe someone can correct me on that?)

    In any case, we live in interesting time indeed… time to lock our seat belt…

    • alan

      I believe in people making the same mistakes over and over. Because it will be different this time!

    • Annette Smith

      I listened to Johnathan Cahn on the Shemitah. The beginning of the Shemitah has indicators that foretell what will happen at the end. I think you are correct. Wish I could find that video of his I watched.

      • horse777res

        Watch The Mystery Of The Shemitah by Rabbi Jonathan Cahn on You Tube. You can also read his book The Mystery Of The Shemitah, it came out last year.

  • T.

    Derivatives are Crashing behind the scenes. These humongous Bets require humongous amounts of Liquid Cash Assets to cover their Losses. The Fed is working like crazy to keep all this Hidden – They will be overwhelmed in the coming 3 or 4 months (by September). Then the “Collapse” of all things paper will be upon U.S. Shemita.

  • CharlesH

    Michael – THANKS SO MUCH for all the hard work you put into your articles! None of us know how this is going to play out, but what we do know is it’s going to be very very bad for so many people. This will be worldwide – just not here in the states.

    • SunnyFlaSnotress

      Yeah, it’s generous that he takes time out from being a lawyer for us. I mean, I doubt this pays as well.

    • Mixa

      … Russia invests more and
      more to the armies, and the Americans cut their budget, right now Russians must
      dump american dollar and then the america becomes bankrupt

  • Richard

    ” If you can believe it, 56 percent of all Americans have subprime credit today…”
    How does the situation change if I CAN’T believe it?

    • Joel

      Beside the point as usual… Wonder when you will stop annoying people with your self-correctness. Always commenting on the way a phrase or a word is used, never a useful comment on the topic itself.

      As I said previously, stop playing the Mother Theresa of English Grammar and get over yourself.

      • Richard

        Are you the self-appointed leader of the Dumb-Down America Movement? Because you have an awful lot of followers if you are? I’ll give you that.

        • Joel

          Relying on insult makes you better than me ah… And on what do you base yourself to think one second that I’m even an American.

          If you can believe it I’m not :-)

          If you can believe it, in case you forgot, English is an international language, not owned by the USA.

          If you can believe it, in every part of the world exist some expressions, way to speak, way to write in English which are very different than the American way.

          Again, who do you think you are to give yourself the right to correct others without any consideration for other cultures.

          If you can believe it… you are an asshole…

    • Revolt to save America

      Richard shut up, say something we want to hear, NOT English context 101.

  • GetReal4U2

    oh…and pay no attention to the new China bank being backed by everyone…except America…things are about to change…as always Michael…another great article…time is short and you are a true watchman…

    • alan

      North Korea was rejected. So the US and North Korea, Wow!

      • Mike Smithy

        Yep, it would appear that the USA is now the “isolated” one pursuant to the creation of AIIB.

  • alan

    I still think this will be a slow motion crushing collapse like a python crushing its pray. However…there always those black swan events that could be a tripping point to an overnight event.

    I suspect something this big will be seen a few days out if your looking in the right place. Since 2008 it seems everyone is watching for it like the other shoe is about to drop, which makes people jumpy. I also expect it will be triggered overseas where bankers might not have as much control. Then our bankers can point fingers and say they did it over there. When there is a panic all bets are off.

  • bob cratchette

    what do the govts do to erase debt when it gets to that point? they usually start a war and all the players are alredy poking the bear and each one is primed and ready with an itchy trigger finger

  • I say bring it on! How long, oh Lord, must this go on and on?!?

    • Guest

      It will probably go on for much longer than we think it will. They’ve kept it going this long.

      I hope something changes soon. I’m tired of being oppressed.

      • alan

        Collapse fatigue.

    • Nemnor

      They have been keeping up this decadent world-wide system through political (government) management of the crisis (i.e. through State/Collective/Welfare Capitalism – which Capitalism has inevitably transformed into).

      Through political “management”, the Capitalist economy is now not just a blind machine functioning by itself (like it was in the 1929). By transferring (displacing) the worst effects of the crisis onto the weakest countries, the ruling class (i.e. “the 1%” and their puppet governments) gives themselves the means to divide the mass of the employed and unemployed.

      This political “management” of the crisis means that this worsening economic situation is seen by, say – the Greek masses (for example), not so much as the expression of decadent/decaying world-wide Capitalism, but as a result of the “well being” of the masses in Germany. And, conversely, the SEEMING relative prosperity in Germany makes it harder for the people in Germany to understand the true nature of this serious world-wide crisis, making the Germans vulnerable to the FAKE “explanation” that the threat to their “privileged” position comes from the “laziness and irresponsibility” of the Greek masses and, as well as the waves of immigrants entering Germany (i.e. the same way some Americans tend to blame “immigrants” for their loss of jobs).

      This government “management” of the crisis strengthens a false (deformed) understanding among the masses of each country, as many people see the problems as something specific to THEIR country, and thus, mistakenly thinking there is a national solution to their problems, when the problems are really worldwide in this decayed and decaying Capitalist system, and can ONLY be permanently solved at the world level.

      For example, the minimum wage in Greece has gone down by 200 euros over the last 5 years, and pensions by 5% a year. The Greek situation is really the extreme expression of a situation which is developing to varying degrees in ALL countries, but made to appears to be a situation mostly limited to Greece and caused by Greek “mismanagement” and/or “laziness”, etc.. This helps the ruling class (i.e. “the 1%”) to create a smokescreen which makes it difficult for most people to see that what is going on in Greece (for example) is really the prevailing general tendencies in ALL countries (i.e. the lowering of the standard of living is a general tendency in this decadent world-wide Capitalist system).

      • Bill

        You make very good points except for your conclusion that Capitalism is decadent. As I have said before it not the system of Capitalism but it is the manipulation by those misusing their positions of trust.

        • Ryan

          The same argument can be made about COMMUNISM …… and any other THEORETICAL system.

    • robert h siddell, jr

      Less than 20 months but probably 6; God’s Hand will end it, Youtube: 1) “Tsunami Prophecy” Dr Green 2) “Make Viral the Destruction of America Soon Prophecy Club 2014″ 3) “The Lords Message to Obama Prophet Efrain Rodriguez” 4) In 1937, Joe Brandt saw The Big One and a picture of the POTUS: he had big ears. Words to the wise…

  • bob

    plain and simple ” the law of diminishing returns”

  • Nemnor

    The most important fact to keep in mind is that there was no real recovery from the deepened crisis of 2007/2008, that the world-wide Capitalist system has been in an ON-GOING CRISIS from since the late-60s/early-70s (i.e. the end of the “reconstruction boom” following WW-II, and at a time when most of the leading Capitalist economies began to “catch up” to the USA and began competing with the USA for a better/bigger share of the world’s market and world’s resource).

    What we had from since the world sunk into a crisis in the late-60s/early-70s were weak “recoveries” (or even PRETEND “recoveries”) that lasted for just a FEW years (i.e. NO more long-term “booms”).

    What must be clearly understood is that the world-wide Capitalist system is decadent (out-dated) and has reached a “dead end”. That the system is NOT able to permanently recover (from the on-going crisis) by economic means alone.

    The solution to the major socioeconomic issues facing the USA and the world should be obvious to any reasonable person. What do you normally do with an OUTDATED machine that has broken down (is non-functional) and would cost more to “repair” it, than if you BUILD a new and more efficient machine?

    • chris

      Let me guess – you are being a cheerleader for a new economic model anticipated by many in conspiracy and religious circles that goes hand in hand with a One World Currency and electronic ‘mark of the beast’ payment system. There’s nothing like using a crisis to bring in your new desired model is there? Particularly when you created the crisis in the first place and profited massively from it at the expense of the small firms and general population.

      • Nemnor

        chris, some may get “comfort” by believing (wishing) that the crisis the world is facing is orchestrated (controlled) by powerful people.

        In reality, the major issues facing the world is due to the world-wide Capitalist system itself – which is now decadent (decaying) and is NOT able to create long-term recovery by economic means alone.

        From during the 90s, “recoveries” are now JOB-LESS recoveries that can hardly last for more than a few years, as the world-wide Capitalist system sinks towards total collapse (chaos).

        As the Capitalist system sinks towards total collapse, there is the increasing prospect that the Capitalist system will bring about WW-III (for the same/similar reasons the system brought about WW-I and WW-II).

        • Bill

          You are another walking eagle.

          In case you can’t find a true Native American (Indian) for a translation–it means the eagle is so full of crap it can no longer function (fly).

        • chris

          A lot of people on here would, i suspect, take issue with you that the current system is indeed capitalist. When the banks are bailed out by the people and assets are propped up by the government that sounds more like crony capitalism or fascism to me.

    • Priszilla

      It doesn’t really matter.

      What matters to me is, when I have a small recovery, aka get a new job, I fill up my savings account again and start replacing old clothing and property.

      If you know how to BUILD a machine, it is also easy to MAINTAIN and REPAIR a machine to extend the life.

      Otherwise you just BUY a new one. But if you take money out of the company to pay to shareholders, you can only take out a loan to buy a new machine. And to increase the money you can give to shareholders, you don’t spend money on maintenance or repair.

      THAT’s the problem. People do this in companies, the whole society and even their own home and themselves. The trouble is, once your body is wrecked you can’t buy or build a new one.

      Once the soil is wrecked and the rainforest, you can’t buy a new one. And the tree huggers are ridiculed by those who believe money is everything.

  • Nemnor

    For those who believe that the “rise” and “fall” (i..e booms and bursts) in the world-wide Capitalist economy is somehow “controlled” by some behind the scenes manipulation, or by some “mysterious” cycle (like all this talk about a “Shemitah cycle”), please understand that – while the actions of powerful individuals and countries can indeed influence the world-wide economy, the MAIN reason for the “booms” and “bursts” in the world-wide Capitalist system is due to the INTRINSIC nature of the system. The world-wide capitalist system can NOT exist without a cycle of “booms” and “bursts” (or more accurately – “bursts” and “bigger bursts”).

    Hence, the world-wide Capitalist system will continue to be in a cycle of “on-going crisis” and “deepened crisis” REGARDLESS to any manipulation by powerful people or any mysterious (Shemitah) cycle.

    Additionally, observe that the “bursts” and “bigger bursts” are NOT always in a 7-year (Shemitah) cycle, but rather, information is manipulated to have you BELIEVE in some mysterious 7-year (Shemitah) cycle. For example, from the deepened crisis of 2007/2008, the world went back into a deepened crisis in 2010/2011 (3 to 4 years later). Then from then on, information was manipulated to have you BELIEVE there was still a “recovery” going on (so that you might not lose faith in Capitalism).

    However, notice that “recoveries” (or PRETEND “recoveries”) from deepened crisis (like that of 2007/2008) are lasting for fewer and fewer years, to the point where, eventually, the world-wide Capitalist system will be in PERMANENT “deep crisis” – and the cycle would then be from “deep crisis” to even “deeper crisis”, as the world-wide Capitalist system INEVITABLY sinks towards total collapse (chaos).

    • NinjaLulzTurtle

      Nothing mysterious, actually.

      Booms and busts must come, so why not make them less random?
      A 7 years cycle makes sense for the purpose of control, make the whole thing more predictable, espeically for the insiders.

    • Jack Frost

      Cycles exist but it is outside what normally occurs in capitalism where a willing buyer does business with a willing seller. The issue arises as it always does as some type of social issue with the government interjecting itself into the market place to suspend reality. Take payday loans. They exist because there is a need. The folks using that service are extremely high risk which is why they are outside the normal banking system. Recalling that great risk yields great rewards, extreme interest is charged. Does everyone completely repay their loans? No, not all. Could you personally loan people without means money and simply hope they repay you plus a nominal amount of interest? Probably not, but look for the Feds to cap payday loans and the vendors will either divest of that field or begin to limit it exclusively to a select few. What happens to the many others who are not now served? Will banks be made to risk depositor funds on people of poor credit history? People all talk about banksters causing the last crash in housing and derivatives. The feds mandated banks loan money to people of dubious credit worthiness or face charges. That is NOT capitalism. That is statism doing social engineering to garner votes. Fanny and Freddie bought whatever trash the banks were mandated to create to backstop the program. When it all froze up, the correct response was to stabilize the market, then systematically dismantle every entity that failed for whatever reason. But instead they made everyone drink the koolaid to avoid the hard choices. Save GM for the union votes when work rules drove them into the ground. That is NOT capitalism, which by nature is creatively destructive of losers in the marketplace, until the Feds put their political fingers on the process. There has been no economic recovery nor can there be with the ACA shackling employers to low hour career employees and many part timers below 29 hrs a week to provide healthcare to the few. That was more social justice distortion by the agency of government which was always intended as an umpire between civilian interests but has now joined in the game picking winners and losers. That aspect is why officials in sports are not allowed to place any type of bet. Yet it happens daily in DC. So the game is rigged and it isn’t in our favor, but they really don’t care because they don’t need our support. They have attended to their constituencies and are doing just fine. But please don’t blame the only economic system where people can ever improve their lot in life by their efforts. Instead blame those who have bastardized it for their own aggrandizement and to accumulate political power to make social changes.

      • Nemnor

        Jack Frost, the issues you stated as not being part of “true”/”normal” Capitalism (as being “outside” of Capitalism), is really Capitalism that has inevitably degenerated into State Capitalism (and/or Collective/welfare Capitalism). The issues you mention are really SYMPTOMS of a decadent/decaying Capitalist system.

        The “pure”/”true” Capitalism you are imagining was more so when Capitalism was on the rise and a PROGRESSIVE force – as Capitalism moved the world away from a Feudal/Agrarian economy to mainly a Capitalist economy.

        However, from about 100 years or so, Capitalism became a decadent (decaying) economic system – hence the MAIN reason for government intervention (and irrespective of the “rigging” the “corruption” and the “gaiming” going on within the system).

        As it stands now, Capitalism is NOT able to carry the Human Race into the future with TRUE abundance for all (because Capitalism inevitably concentrates wealth into the hands of a FEW). Instead, the future under Capitalism is massive world-wide poverty and massive world-wide destruction (through wars, environmental collapse and economic collapse).

    • Andreas

      Nope, booms and busts of the 2008 magnitude are not inherent in capitalism. Rather they are inherent in systems rife with government intervention.

      • Nemnor

        Andreas, actually, without government intervention, the world-wide Capitalist system was likely to have already sunk into total collapse (chaos). In fact, the violent arm of the government (i.e. the police, the army, etc) is needed to maintain (safeguard) the Capitalist system and to help prevent (they hope) the excesses that is inherent in Capitalism.

        For the last 100 years or so, one can accurately say the history of the world-wide Capitalist system had been a series of “booms” and “bursts” intermingled with TWO world wars and a series of major regional wars (right?).

        The “boom” and “burst” cycle became (more) inherent when the world-wide Capitalist system entered a stage of decadence (decay), and WW-I and then WW-II, along with major economic crises (depressions) are irrefutable evidence that the Capitalist system is in decadence.

        However, the important point you must not also miss is, not only that a “boom” and ‘burst” cycle is inherent to Capitalism, but that, from since the late-60s/early-70s, the cycle of “booms” and “bursts” are becoming shorter (now every 3 or 4 years).

        We now have a situation where there is NO more long-term “boom”, as the Capitalist system sinks into a cycle of “bursts” and “bigger bursts” (i.e. a cycle of “on-going crisis” to “deeper crisis”), intermingled with weak “recoveries” (or even PRETEND “recoveries”) that can hardly last for more than a few years.

        The PRETEND “recovery” is just so that the masses might not lose faith in Capitalism, or rather, it is to lessen the chance (they hope) that the masses begin to look for an alternative to Capitalism, as more and more people are questioning the validity and sustainability of the world-wide Capitalist system.

        • orsobubu

          I totally agree with you, but to seize the power, people need to organize in a leninist-like structure, with solid marxist theory and efficient bolshevik activity on the territory.

        • Andreas

          Yep, there were a lot of booms and busts in the last 100 years. Throughout this time, the money supply of the US has been “managed” by the federal reserve, which was introduced precisely to put an end to panics and crises. Now let me ask you: Do you think they’re doing a good job?

      • Priszilla

        It might seem the cause is government intervention. Or it could be that costs for wars are not paid by those who benefit from those wars anymore.

        Wars are done for economic benefits. Or economic destruction (if I can’t have a life, you shan’t have it either)

        You need religion or ideology to emotionally influence the fighters who won’t gain anything from the war, but will fight and die.

    • alan

      So when Rome went under what part of the 7 year shemgma did they get?

  • XSANDIEGOCA

    I believe the FED will keep the economy levitated through the election to assist Hillary. After that, I see a collapse and a declaration of emergency by the government. This will include perforce confiscation of wealth a la Cyprus. Pay off your debt and keep some money outside the banks where you can get it in a hurry. I see a year’s grace. After that, the Deluge.

    • Mike Smithy

      Perhaps you are correct? However, I have no doubt that GW Bush was carrying the water for the FED “puppet masters” and yet they could not keep the dam from breaking in September 2008. The Bush Administration only needed to covertly “shore it up” for a few more months and the culpability/deniable plausibility of the banking crisis could have been transferred to President Zero. Will the banksters pull the plug before or after the nest election? I just don’t know.

      • GetReal4U2

        the plug will be pulled during the month of September…

      • XSANDIEGOCA

        I say after the next election.

        • 35wormhole

          obama only wants to fundamentally transform america

          • Guest

            I’d say he has achieved his goal.

          • Revolt to save America

            he’s satin !, I cried after his 2nd win in the white house, the crappy thing is very few admit voting for the idiot

      • alan

        All the people with 401k’s don’t want to get wiped out. Don’t let the music stop on my watch. This is the reason I don’t have a 401k, the market can go to zero and I could care less.

        • Revolt to save America

          so what do people do ALAN, take their 401k and take the penalty, at least they won’t risk losing it in a collapse, WOW that would be a hard call to make,

    • Revolt to save America

      I love you san Diego, but I am thinking SEP OCT also, it feels more like JUNE to be honest, it’s unfolding faster than ever. also I suspect war war 3, marshall law which will allow obummer to stay in office. theres’ a presidential agenda tied to this, We can be wiped out by war or financial crisis, or flat out panic which leads to a self fulfilling prophacy

      • XSANDIEGOCA

        Thanks for the compliment ! Things are going to start happening very fast. If Hillary looks like a loser, look out!

  • chris

    Is it really a coincidence that now at the top of the share market and with the financial situation worse than before the 2008 crash that the IMF now comes out to warn everyone about the fragility of the system and also takes a hard line on Greece simultaneously. It is a bit reminiscent of Goldman Sachs, i think it was, revealing that the parcels of AAA rated mortgage debt contained a load of junk shortly to be followed by the markets crashing. Wouldn’t it be an amazing coincidence if the long anticipated massive correction that people on here have been expecting now suddenly happened, the present system collapsed and the IMF ‘proposed’ a new Global One World currency and system of which it would ‘reluctantly’ take charge. Something very fishy about all this.
    The BRICS are in the process of creating a monetary system outside of IMF and USA control. Has this rattled the IMF?

  • DJohn1

    The real loser in all of this is anyone dependent on the U.S. Dollar.
    Pensions will go broke.
    The money will inflate once again.
    The Social Security will go under.
    The welfare system will go broke.
    In the last Civil War of the 1860s the Confederate Currency died as a viable currency in the South. No one wanted it except as a collector’s item.
    We will be dealing with this Confederate Currency as well in the American Dollar.
    It will not happen. Not because of anything done, but because foreign aid has dispersed 300 million to one middle east country alone. The money has to be worth something or all that money given away will be worthless. That is a yearly event.
    What has to happen is that the interest rate has to reverse. That means the interest on savings and investments.
    House mortgages will have to return to the 10% level at least.
    We have to find a way to relieve the foreclosures.
    The current method often leaves the banks stuck.
    Get enough foreclosed homes and the bank goes under.
    All of which is against current policies.

  • trigonomomoalie

    this site cracks me up.

  • sherlock32555

    Brought to you by dumb people that never learned from the first one that they needed a refresher course of what they forgot to learn from t last one and it will be worse then the 1929 depression . So all I can say is get right with your god and hopes he will hear us all.. Back then people knew how to live off the land.and now people don’t.

    • Revolt to save America

      AMEN !

  • disqus_cczHVJhqgY

    Very interesting! My comment here is deleted! I am trying again!

    “According to McKinsey’s research, total outstanding debt in China increased from $US7.4 trillion in 2007 to $US28.2 trillion in 2014. That figure, expressed as a percentage of GDP, equates to 282% of total output, higher than the likes of other G20 nations such as the US, Canada, Germany, South Korea and Australia.”

    Where does the number come from? China’s debt to GDP is around 250% ($30 trillions debt vs. $12 trillions of GDP). However, the US debt is about $72.5 trillions vs. $18 trillion GDP, which is 403% of GDP to total debt. So do other countries like Canada $84.1 trillions, SK $33.7 trillion, and Australia 29.3 trillions Britain $90 trillions, Japan $226.1 trillions, Germany $79.9 … Those countries got more debt than that of China with very lower GDP numbers.

  • Mondobeyondo

    Squeeze the middle class… squeeze the Charmin… a liquidity squeeze is, of course, the next logical choice….

    • Bill

      Love it.

  • GetReal4U2

    Netanyahu, who also serves as finance minister, recently applied for
    Israeli membership in the Asian Infrastructure Investment Bank (AIIB),
    led by China. Analysts say the decision is evidence of Israel’s
    understanding of Asia’s rising place in global markets and the
    importance of improving relations with Asian countries..

    things are about to change VERY quickly…

    • Ryan

      “OUR ALLIES” uh-huh
      How does ISRAEL assist AMERICA with the Russian nuclear threat?
      ……………………….. Israel HELPS OUR ENEMIES.
      By far the most egregious damage done by Johnathan Pollard was to steal classified documents relating to the US Nuclear Deterrent relative to the USSR and send them to Israel. According to sources in the US State Department, Israel then turned around and traded those stolen nuclear secrets to the USSR in exchange for increased emigration quotas from the USSR to Israel. Other information that found its way from the US to Israel to the USSR resulted in the loss of American agents operating inside the USSR. Casper Weinberger, in his affidavit opposing a reduced sentence for Pollard, described the damage done to the United States thus, “[It is] difficult to conceive of a greater harm to national security than that caused by… Pollard’s treasonous behavior.”
      The United States’ nuclear deterrent cost an estimated FIVE TRILLION taxpayer dollars during the 50s and 60s to build and maintain, and less than $100,000 for Pollard to undermine. Isral now lobbies for his release, having granted him Israeli citizenship.
      Israel SOLD America’s drone/military technology to China Israel SOLD OUR miniature cooling system for missiles to China…… Israel has helped China LEAP forward with America’s technology.

  • Jester

    I can’t wait to see the U.S and world economy to collapse.
    That must sound weird but I’m tired of living
    In the society that I do. I’m tired of being a cog
    In this capitalist machine. I want freedom, liberation,
    and life. Because we are all slaves.

    I don’t want families to suffer, but that’s what
    Happens when economies crumble. :/

    • Mike

      Why don’t you try living in a state of anarchy right now and see how you like it while you still have the opportunity to come back to a life of employment and buying food from a grocery store? I bet you’d change your mind.

      • NM Rancher

        Mike what people mean is that the only way anyone will ever be free again is if the whole thing crashes and burns. No one who even has a lukewarm IQ wants what is coming but we all realize it is the one way we regain our freedom.

        • doc4cal

          Yes, sometimes revolutions and economy crashes can bring about great change and great leaders. However, more often than not, the severe situations bring about dictators and tyrants. The end is not always what we want.

          • Revolt to save America

            exactly so Jester may want it over but it may be HELL for the rest of his living days, You think you are tired of todays issues, try living where you will BEG for today to RETURN. I wish we could prop up our economy forever and not feel the pain coming, I do ot look fwd to a crash. I only know it has to correct.

          • Estaphulous

            Blood will flow in the streets.

        • Horiboyable .

          That depends on what you get on the other side. These crooks behind the curtain will be unwilling to give up there power and privilege easily. Normally, if history tells us anything we will go into a period of
          authoritarianism. They have played the public like a bunch of chumps. They have used the “terrorist” card to the max. They have already passed the laws necessary for a take over, phone tapping, email interceptions, emergency powers.

          • Randy

            But EVERYTHING is totally dependent upon the electricity being available. Do you know that if the rate payers (aka customers) cannot afford to pay their electric bills because they are out of work, or the cost of fuels is out the roof due to hyperinflation, that the power companies will have to shut down? And what about the utility workers who get paid well for doing highly dangerous jobs? If they don’t get paid, why should they come in to do their job? Who will replace those men and women who refuse to risk their life for little or no pay?
            Name me one government agency that will be able to continue operating without electricity going down the wires, PLEASE!

            Randy

    • Bill

      I hear you. Please hear me. It is the manipulators not the system.

    • Priszilla

      I can’t influence all those economies. I can only influence my own costs.

      So when I get a bit of income, I increase my savings, and invest in cost savings. Before putting my winter shoes away for next winter, I had the soles replaced. And I got me a nice warm feather/down duvet that was on sale.

      I’d love a new laptop and that holiday in Greece, but the bike is more important. And there’s still the loan to pay for my parent’s house. If I can repay it earlier I can save a lot of interest. And reduce my exposure to banks.

    • alan

      Faster the reset and purge the criminals the better.

    • R.P. Bailey

      Hello there friend,
      I suppose you have some insight to the fact that Paper Currency, which is not real wealth is soon to be reajusted in or around Sept 2015, and that all major Fiat currencies may be replaced with the SDR, Yet another Fiat paper currency from the IMF

    • Ryan

      be careful of what you wish for …………

  • SSS

    Michael, you are crazy and insane. And i am Vietnamese

    • Joel

      ??? what’s the link between you being Vietnamese and Michael being crazy and insane precisely???

      • Was wondering the same. This being said, what about using another nickname than Joel?

        • Revolt to save America

          like lee or chan or bruce lee, wait was he Vietnamese, all colors and races can be crazy,,

  • Mike

    What, like communism? What alternative system do you have in mind?

  • Bill

    You are so right. Private money freedom would end fractional reserves and end the manipulation of Capitalism.

    • PatFields

      I have no idea what you think Capitalism is, but Private Money is a quintessential complement to it, given that it’s a Social Order built upon Private Property and Individual Determinism.

      Also, Private Money wouldn’t end ‘fractional reserve’ banking, since it would exist outside the (existing) bank cabal altogether. Private Money (in accord with Common Law) would necessitate an entirely separate institution of local Metals Bourses for vaulting and exchanges, resembling ‘banks’, but rather more precisely ‘warehousing’ operations.

    • Priszilla

      You are free to use “private money” any time anywhere.
      You can pay your supplier in pennies, gold nuggets or nuts. Whatever you prefer.

      Now imagine, one supplier favours nuts, and the other screws, and a third one acorns.

      So you sell your service for 3 acorns but need 5 nuts to pay your landlord for the right to place your machine on his property.

      That was the reason to introduce the Euro.
      No more fiddling with Lira, Marks, Guilder, Francs, Krona, Zloty, Leva, Forint, etc.

  • Bill

    I have had the same posting issue at times. It has to be in the software. Intentional or not is the real question.

    • It happen often when you insert a web link into the comment. Happened to me few times also. Just need to let some time to the software for whatever reason.

      Would not be surprise it is linked to some filters.

      But none of my comments were never deleted by Michael in any way so “disqus_cczHVJhqgY” stop freakin’out. Now we have to deal with three time your comments…

      When you look into this blog and some of the comments which are clearly against Michael’s point-of-view (sometimes borderline comments) you understand that Michael leave this blog open to sharp opinions, respecting the principle of Freedom of Speech. Sure that other than me (who are long followers like I am) will agree and witness with this…

  • Priszilla

    With weekly monitoring of electricity and gas use and subsequent adjustments I was able to reduce consumption even further.

    I can’t increase my income, but I can influence my costs, so that the income lasts a bit longer without having to face a sudden cliff.

    Car insurance would cost me #100 per month. A bus ticket costs me #45 per month. A new bicycle is #400. So with permission of the landlord I fixed me that shed in the backyard to store a bike.

    With a little bit of investment of time and money you can still reduce your costs.

    And with the bike I can reduce commuting time by half, and hopefully my waistline too.
    And with the need of nutrients depending on your weight, less weight also means less need for nutrients.

  • Piper Michael

    JUBILEE…
    The only way out, for ‘the rest of us’… (F* the Elite.)
    (NOT even greater centralization…)
    The Black horseman is the scales of the money changers…
    Watch and see.

  • Priszilla

    And from all those income you were not able to get a pension insurance and health insurance, and no savings? That’s just plain dumb.

    And your small home was built in 1970? So it’s quite new.
    My parents’ home was built in 1935 and I live in a small English terraced house that’s 125 years old, and quite damp if not dried using my trusty dehumidifier.

    My current target is spending #20 per day for shopping, and won’t leave home with more than #50. I don’t pay using a card, except on the Internet, car rentals or anything costing more than #50. I don’t use direct debit with utility companies as they always get it wrong, and I am not interested in fighting to get money back that was falsely debited. They send the invoice, I correct it, they send the corrected invoice and then they get their money.

    We always take home cooked lunch to work to be heated there by microwave. When I was a kid my mum used to make the sandwiches to take to the factory. I used to wolf down 6-8 rye sandwiches with salami or cheese in no time.

    • alan

      The guy might have gone through some bad $hit. You have to be fairly smart to run a 5 million a year business. Just say’n.

      • Priszilla

        Obviously not smart enough for some risk management. I also don’t quite understand why a home from 1970 is a bad thing? Aren’t you able to take care of your own things so they don’t look like a rubbish dump after a few years?

  • It happen often when you insert a web link into the comment. Happened to me few times also. Just need to let some time to the software for whatever reason.

    Would not be surprise it is linked to some filters.

    But none of my comments were never deleted by Michael in any way so “disqus_cczHVJhqgY” stop freakin’out. Now we have to deal with three time your comments… :-)

    When you look into this blog and some of the comments which are clearly against Michael’s point-of-view (sometimes borderline comments) you understand that Michael leave this blog open to sharp opinions, respecting the principle of Freedom of Speech. Sure that other than me (who are long followers like I am) will agree and witness with this…

  • NM Rancher

    …and now you’re writing hokey “e-books” as a living (at the above link?)

  • Lane

    As usual, a great article Michael. One major suggestion for you: can you start doing more podcasts instead of, or in addition to writing? It is a lot more convenient for some/many(?) of us to listen.

    • Revolt to save America

      would you like chives on that baked potato also,, this statement just reminded me of the OVER ENTITLED people of the world who are part of the problem, It takes me 5 minutes to scan the article, and much longer if you want to hear us repeat ourselves here, but 5 minutes , KEEP ReADING,

  • Guest

    Pat, do you still comment over at Silver Doctors? I haven’t been there in a long time.

    • PatFields

      Not at the website very much, but I still lurk the original FaceBook page every day.

    • PatFields

      Weird … I thought I responded to this days ago …

      I still comment on the old SD Facebook page pretty regularly, but not so much on their web-side any more. “It’s a long story I wont repeat.”

  • Revolt to save America

    I have seen your post RE trillions 3 times now,so I guess they didn’t delete anything. 3rd times a charm, I feel like I”m reading spam, lol sorry, but your posts are not gone, scroll up. Thanks

  • Revolt to save America

    PLEASE STOP POSTING THIS< it's the 4th TIME< who are you and why do you keep posting the stats, NO NEED TO FEAR MONGER, the reality of the world is already dreadful. WHY POST THIS OVER AND OVER, please stop, thank you,

  • Estaphulous

    “The harder they come, the harder they fall.” – Bob Marley

  • rat28

    What liquidity crunch?? Every central banker is doing perpetual QE….Stock markets around the world continue to have their best bull run.. You lose out if you think you can hide under the mattress.

  • mrdale

    People refer to the failure of Capitalism – we haven’t had true capitalism for decades – what we have is crony capitalism. If we went back to capitalism and got the government out of every aspect of our lives (except those designated in the constitution) we would be on the road to recovery instead of being on the road to serfdom.

  • Raven

    Up the airy mountain
    Down the rushing glen
    They dare not go a hunting
    For fear of little men
    You see, nobody ever goes in
    And nobody ever comes out

  • M. Brandenburg

    “How in the world does a company lose 13.6 billion dollars in a single quarter during an “economic recovery”?”

    What need to be said is that the company mentioned is een sustainable energy company and as we all should know by now these company can exist because of the tax handouts they receive. Take away the taxhandouts(what has happened in a lot of countries already) and these sustainable companies fall one after another, especially, now we found so much oil and gas around the world, which makes that we can use the extremely cheap fossile fuels for the next centuries. Not only fossile fuels already were much much cheaper than their sustaineble counterparts, because of the ammounts we found there is a priceware, hich is normal when there is great competition. One thing is sure, energy prices, will only go back up if governemnt tax the bejesus out of energy.

    Furthermore, it is this cheap energy that made the US economy grow, it became cheaper to produce and the effects showed immediatly.

    On the other side we have China, where another company received a big blow on the stockmarket, not surprisingly there too it was a sustainable company that bit the dust. 19 billion dollar loss in one day. Solarpanels even while the production is heavily subsidised by the China government are in bad weather. Living in Brasil I found to earn back an investment in solarpanels, I would have to wait almost thirteen years. For me the reasin not to invest in this to be selfsufficient. almost 13 years and then hope they keep working 100% to start earning money.

    All the problems we see now, is because of Government Keyenisian financial beleives, where we can create wealth with dept, as long as we create more and more inflation. All countries in Europe have problems firstly of Governmentspending and seconf because of EU spending, livig in a dream that you can solve debt with more debts… While they speech austerity but which for them only means higher taxes for the people and still letting goverment expences growing, making the higher taxes for the people only useless, for the money is thrown in the bottomless pitt of Goverment idiocracy.

    Reading this article here, makes me wonder if people still use common sense, how on earth could you not see this coming.

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