Economic

The Global Liquidity Squeeze Has Begun

April 17, 2015 by Michael

Get 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.

Flat Broke, Living In A Moldy Basement And Relying On Food Stamps And Medicaid

April 16, 2015 by Michael

Could you imagine being a single parent and trying to survive in America today on $10.50 an hour? For a moment, I want you to imagine that you are living in a moldy apartment that is so badly maintained that rain seeps in whenever it rains. You are employed, but you are completely dependent on government programs such as food stamps and Medicaid in order to make ends meet. Sometimes you would really like to take your small child somewhere fun, like a movie theater, but you can’t really afford the gas money. You are working as hard as you can, but you never seem to get anywhere, and you feel trapped because nobody seems to want to hire you for a better job. What I have just described for you is real life for a 22-year-old single mother from Chicago named Adriana Alvarez, but there are tens of millions of other Americans that have similar stories. If every day seems like it is a soul-crushing struggle for you, I want you to know that you are not alone. The long-term economic collapse that I chronicle on my website is not just about facts and figures. It is about real people that are quietly leading lives of silent desperation, and by now it has becoming exceedingly apparent that our politicians, the mainstream media and the gigantic corporations that dominate our economy do not really care much about the rest of us at all.

Life fundamentally changes once you become a parent. Instead of living just for yourself, all of a sudden you have a precious little child that is completely and totally dependent on you. And it is absolutely heartbreaking for any parent to look into the eyes of a little child and try to explain why there is not enough food or why they can’t afford a better place to live.

With that in mind, I want you to read an excerpt from Adriana’s recent blog post entitled “What It’s Really Like To Support Yourself On McDonald’s Pay“…

I’m a single mom with a three-year-old son named Manny. To support him, I work full-time as a cashier at a McDonald’s in Chicago.

I’ve worked at McDonald’s for five years, but still make only $10.50 an hour. The only way my son and I can make it is with food stamps, Medicaid, and a child care subsidy. Most of my coworkers are in the same boat, no matter how long they’ve held their jobs.

With child care, transportation to work, food, rent, and our other basic expenses, there’s no money left over for living. Every time I think about taking Manny somewhere fun, like to a movie, I have to think about whether we can really afford the gas.

When you only make $10.50 an hour and you have a child to take care of, you are obviously very limited as far as where you can live, and where Adriana lives sounds extremely depressing…

We live in a basement apartment, because it’s all I can afford. When it rains, water seeps into the apartment. This wetness brings mold, and I can’t get rid of the smell. We can’t even leave anything on the floor, which is tough with a three-year-old. Toys or anything else on the floor may get ruined when the water comes in.

So what is the solution for Adriana?

Well, she is taking part in nationwide strikes to try to force McDonald’s to pay workers like her a livable wage.

Unfortunately, that simply is not going to happen. McDonald’s restaurants are already experiencing a sales downturn, and if they raise wages substantially they will get crushed by the competition.

And of course those jobs were never meant for people that are trying to raise families. When I was growing up, it was teenagers and senior citizens that worked at McDonald’s. I know, because I was one of those teenagers.

But now millions upon millions of Americans in their prime working years are doing these kinds of jobs. As good jobs have disappeared from our economy, the competition for the jobs that remain has become extremely intense. It is really easy to tell Adriana that she should “get a better job”, but that can be extremely difficult in this economy, especially if you don’t have much education.

I know a lot of sharp, talented, responsible people that have been unemployed for a very long time or that are working at places like McDonald’s because nobody else will hire them. I am amazed that there is not a place for their talents and abilities in the “greatest economy on Earth”. But you know what? Things are about to get a whole lot worse out there.

A few months ago, I wrote that the crashing price of oil was going to cause massive job losses in the energy industry, and now it is happening.

According to Yahoo, more than 100,000 layoffs have already been announced, and this could be just the tip of the iceberg…

Since crude prices began tumbling last year, energy companies have announced plans to lay off more than 100,000 workers around the world. At least 91,000 layoffs have already materialized, with the majority coming in oil-field-services and drilling companies, according to research by Graves & Co., a Houston consulting firm.

And remember, these are not $10.50 an hour jobs. Many of these jobs pay well into the six figures annually. These are exactly the kinds of jobs that the U.S. economy simply cannot afford to lose.

Meanwhile, Barack Obama is colluding with Congress to push through the next great job killing trade agreement. The following was in the Wall Street Journal on Thursday…

Lawmakers introduced fast-track trade legislation into the House and Senate Thursday that could pave the way for President Barack Obama to conclude a major agreement with 11 nations around the Pacific.

This agreement is called “The Trans-Pacific Partnership”, and it would result in millions more good jobs being sent overseas. For much more about this shocking betrayal of the American people, please see my previous article entitled “Obama’s Secret Treaty Would Be The Most Important Step Toward A One World Economic System“.

What our economy desperately needs is more jobs, not less jobs.

And traditionally, small businesses have been the primary engine of job growth in this country.

Unfortunately, our politicians have been absolutely killing small businesses for decades. Just look at the chart below. It comes from the U.S. Census Bureau, and it is extremely alarming. Back in 1980, nearly half of all firms in America were considered to be “young”, and those young firms accounted for almost half of all job creation. Since that time, there has been a slow, steady, depressing decline…

And as I discussed the other day, more businesses have closed in the United States than have opened for each of the past six years.

Prior to 2008, that had never happened before in all of American history.

Thank you Barack Obama.

When I talk about our “long-term economic collapse”, I am not exaggerating.

Our economy is literally dying right in front of our eyes, and it is people like Adriana Alvarez that are paying the price.

We desperately need to go back and start doing the things that once made this country so great, but unfortunately we continue running in the other direction as fast as we can.

So in the end, things are going to get much, much worse.

Things did not have to turn out this way, but these are the choices that we have made, and now we get to live with them.

Huge Trouble Is Percolating Just Under The Surface Of The Global Economy

April 15, 2015April 15, 2015 by Michael

Did you know that the number of publicly traded companies declaring bankruptcy has reached a five year high? And did you know that Chinese exports are absolutely collapsing and that Chinese economic growth in 2014 was the weakest in over 20 years? Even though things may seem to be okay on the surface for the global economy at the moment, that does not mean that big trouble is not percolating just under the surface. On Wednesday, investors cheered as stocks soared to new highs, but almost all of the economic news coming in from around the planet has been bad. The credit rating on Greek debt has been slashed again, global economic trade is really slowing down, and many of the exact same financial patterns that we saw just before the crash of 2008 are repeating once again. All of this reminds me of the months leading up to the implosion of Lehman Brothers. Most people were feeling really good about things, but huge trouble was brewing just underneath the surface. Finally, one day we learned that Lehman Brothers had “suddenly” collapsed, and then all hell broke loose.

If the economy is actually “getting better” like we are being told by the establishment media, then why are so many big companies declaring bankruptcy? According to CNBC, the number of publicly traded companies declaring bankruptcy has hit a five year high…

The number of bankruptcies among publicly traded U.S. companies has climbed to the highest first-quarter level for five years, according to a Reuters analysis of data from research firm bankruptcompanynews.com.

Plunging prices of crude oil and other commodities is one of the major reasons for the increased filings, and bankruptcy experts said a more aggressive stance by lenders may also be hurting some companies.

It is interesting to note that the price of oil is being named as one of the primary reasons why this is happening.

In an article entitled “Anyone That Believes That Collapsing Oil Prices Are Good For The Economy Is Crazy“, I warned about this. If the price of oil does not bounce back in a huge way, we are going to see a lot more companies go bankrupt, a lot more people are going to lose their jobs, and a lot more corporate debt is going to go bad.

And of course this oil crash has not just hurt the United States. All over the world, economic activity is being curtailed because of what has happened to the price of oil…

In the heady days of the commodity boom, oil-rich nations accumulated billions of dollars in reserves they invested in U.S. debt and other securities. They also occasionally bought trophy assets, such as Manhattan skyscrapers, luxury homes in London or Paris Saint-Germain Football Club.

Now that oil prices have dropped by half to $50 a barrel, Saudi Arabia and other commodity-rich nations are fast drawing down those “petrodollar” reserves. Some nations, such as Angola, are burning through their savings at a record pace, removing a source of liquidity from global markets.

If oil and other commodity prices remain depressed, the trend will cut demand for everything from European government debt to U.S. real estate as producing nations seek to fill holes in their domestic budgets.

But it isn’t just oil. We appear to be moving into a time when things are slowing down all over the place.

In a recent article, Zero Hedge summarized some of the bad economic news that has come in just this week…

Mortgage Apps tumble, Empire Fed slumps, and now Industrial Production plunges… Against expectations of a 0.3% drop MoM, US Factory Output was twice as bad at -0.6% – the worst since August 2012 (and lamost worst since June 2009). This is the 4th miss in a row.

If we are indeed heading into another economic downturn, that is really bad news, because at the moment we are in far worse shape than we were just prior to the last recession.

To help illustrate this, I want to share with you a couple of charts.

This first chart comes from the Federal Reserve Bank of St. Louis, and it shows that after you adjust for inflation, median income for the middle class is the lowest that it has been in decades…

This next chart shows that median net worth for the middle class is also the lowest that it has been in decades after you adjust for inflation…

The middle class is being systematically destroyed. For much more on this, please see this recent article that I published. And now we are on the verge of another major economic slowdown. That is not what the middle class needs at all.

We are also getting some very disturbing economic news out of China.

In 2014, economic growth in China was the weakest in more than 20 years, and Chinese export numbers are absolutely collapsing…

China’s monthly trade data shows exports fell in March from a year ago by 14.6% in yuan terms, compared to expectations for a rise of more than 8%.

Imports meanwhile fell 12.3% in yuan terms compared to forecasts for a fall of more than 11%.

This is a clear sign that global economic activity is slowing down in a big way.

In addition, Chinese home prices are now falling at a faster pace then U.S. home prices fell during the subprime mortgage meltdown…

It appeared as though things went from bad to worse nearly overnight; China’s National Bureau of Statistics said that contrary to hopes that there would be a modest rebound, the average new home price in China fell at the fastest pace on record in February, from the previous year.

Reuters reported that average new home prices in China’s 70 major cities fell 5.7 percent, year to year, in February – marking the sixth consecutive drop after January’s decline of 5.1 percent.

Things continue to get worse in Europe as well.

This week we learned that the credit rating for Greek government debt has been slashed once again…

Standard & Poor’s has just cut Greece’s credit rating to “CCC+” from “B-” with a negative outlook.

S&P said it expected Greece’s debt to be “unsustainable.” It cited the potential for dissolving liquidity in the government, banks and economy.

And according to the Financial Times, we could actually be on the verge of witnessing a Greek debt default…

Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April, according to people briefed on the radical leftist government’s thinking.

The government, which is rapidly running out of funds to pay public sector salaries and state pensions, has decided to withhold €2.5bn of payments due to the International Monetary Fund in May and June if no agreement is struck, they said.

So I hope that those that are euphoric about the performance of their stock portfolios are taking their profits while they still can.

Huge trouble is percolating just under the surface of the global economy, and it won’t be too long before the financial markets start feeling the pain.

19 Signs That American Families Are Being Economically Destroyed

April 8, 2015 by Michael

The systematic destruction of the American way of life is happening all around us, and yet most people have no idea what is happening. Once upon a time in America, if you were responsible and hard working you could get a good paying job that could support a middle class lifestyle for an entire family even if you only had a high school education. Things weren’t perfect, but generally almost everyone in the entire country was able to take care of themselves without government assistance. We worked hard, we played hard, and our seemingly boundless prosperity was the envy of the entire planet. But over the past several decades things have completely changed. We consumed far more wealth than we produced, we shipped millions of good paying jobs overseas, we piled up the biggest mountain of debt in the history of the world, and we kept electing politicians that had absolutely no concern for the long-term future of this nation whatsoever. So now good jobs are in very short supply, we are drowning in an ocean of red ink, the middle class is rapidly shrinking and dependence on the government is at an all-time high. Even as we stand at the precipice of the next great economic crisis, we continue to make the same mistakes. In the end, all of us are going to pay a very great price for decades of incredibly foolish decisions. Of course a tremendous amount of damage has already been done. The numbers that I am about to share with you are staggering. The following are 19 signs that American families are being economically destroyed…

#1 The poorest 40 percent of all Americans now spend more than 50 percent of their incomes just on food and housing.

#2 For those Americans that don’t own a home, 50 percent of them spend more than a third of their incomes just on rent.

#3 The price of school lunches has risen to the 3 dollar mark at many public schools across the nation.

#4 McDonald’s “Dollar Menu & More” now includes items that cost as much as 5 dollars.

#5 The price of ground beef has doubled since 2009.

#6 In 1986, child care expenses for families with employed mothers used up 6.3 percent of all income. Today, that figure is up to 7.2 percent.

#7 Incomes fell for the bottom 80 percent of all income earners in the United States during the 12 months leading up to June 2014.

#8 At this point, more than 50 percent of all American workers bring home less than $30,000 a year in wages.

#9 After adjusting for inflation, median household income has fallen by nearly $5,000 since 2007.

#10 According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.

#11 47 percent of all Americans do not put a single penny out of their paychecks into savings.

#12 One survey found that 62 percent of all Americans are currently living paycheck to paycheck.

#13 According to the U.S. Department of Education, 33 percent of all Americans with student loans are currently behind on their student loan debt repayments.

#14 According to one recent report, 43 million Americans currently have unpaid medical debt on their credit reports.

#15 The rate of homeownership in the U.S. has been declining for seven years in a row, and it is now the lowest that it has been in 20 years.

#16 For each of the past six years, more businesses have closed in the United States than have opened. Prior to 2008, this had never happened before in all of U.S. history.

#17 According to the Census Bureau, 65 percent of all children in the United States are living in a home that receives some form of aid from the federal government.

#18 If you have no debt at all, and you also have 10 dollars in your wallet, that you are wealthier than 25 percent of all Americans.

#19 On top of everything else, the average American must work from January 1st to April 24th just to pay all federal, state and local taxes.

All of us know people that once were doing quite well but that are now just struggling to get by from month to month.

Perhaps this has happened to you.

If you have ever been in that position, you probably remember what it feels like to have people look down on you. Unfortunately, in our society the value that we place on individuals has a tremendous amount to do with how much money they have.

So if you don’t have much money, there are a lot of people out there that will treat you like dirt. The following excerpt comes from a Washington Post article entitled “The poor are treated like criminals everywhere, even at the grocery store“…

Want to see a look of pure hatred? Pull out an EBT card at the grocery store.

Now that my kids are grown and gone, my Social Security check is enough to keep me from qualifying for government food benefits. But I remember well when we did qualify for a monthly EBT deposit, a whopping $22 — and that was before Congress cut SNAP benefits in November 2013. Like 70 percent of people receiving SNAP benefits, I couldn’t feed my family on that amount. But I remember the comments from middle-class people, the assumptions about me and my disability and what the poor should and shouldn’t be spending money on.

Have you ever seen this?

Have you ever experienced this yourself?

These days, most people on food stamps are not in that situation because they want to be. Rather, they are victims of our long-term economic collapse.

And this is just the beginning. When the next major economic crisis strikes, the suffering in this country is going to go to unprecedented levels.

As we enter that time, we are going to need a whole lot more love and compassion than we are exhibiting right now.

As a nation, we have made decades of incredibly bad decisions. As a result, we are experiencing bad consequences which are going to become increasingly more severe.

The numbers that I just shared with you are not good. But over the next several years they are going to get a whole lot worse.

Everything that can be shaken will be shaken, and life in America is about to change in a major way.

The EMP Threat: All It Would Take Is A Couple Of Explosions To Send America Back To The 1800s

April 6, 2015 by Michael

Our entire way of life can be ended in a single day. And it wouldn’t even take a nuclear war to do it. All it would take for a rogue nation or terror organization to bring us to our knees is the explosion of a couple well-placed nuclear devices high up in our atmosphere. The resulting electromagnetic pulses would fry electronics from coast to coast. Of course this could also be accomplished without any attack. Scientists tell us that massive solar storms have hit our planet before, and that it is inevitable that there will be more in the future. As you will read about below, the most recent example of this was “the Carrington Event” in 1859. If a similar burst from the sun hit us today, experts tell us that life in America could suddenly resemble life in the 1800s, and the economic damage caused could potentially be in the trillions of dollars. This is one of the greatest potential threats that we are facing as a nation, and yet Barack Obama has essentially done nothing to get us prepared.

The technology necessary to conduct such an electromagnetic pulse attack against the United States has become much more accessible in recent years. According to an article in the Wall Street Journal, even rogue nations such as North Korea and Iran either already have or will soon have the capability to hurt us in this way…

Rogue nations such as North Korea (and possibly Iran) will soon match Russia and China and have the primary ingredients for an EMP attack: simple ballistic missiles such as Scuds that could be launched from a freighter near our shores; space-launch vehicles able to loft low-earth-orbit satellites; and simple low-yield nuclear weapons that can generate gamma rays and fireballs.

If a successful, large scale EMP attack ever did take place, it would be a catastrophe beyond anything that the United States has ever seen before. The EMP Commission, which was established by Congress, says that it is likely that most of us would end up dead…

What would a successful EMP attack look like? The EMP Commission, in 2008, estimated that within 12 months of a nationwide blackout, up to 90% of the U.S. population could possibly perish from starvation, disease and societal breakdown.

In 2009 the congressional Commission on the Strategic Posture of the United States, whose co-chairmen were former Secretaries of Defense William Perry and James Schlesinger, concurred with the findings of the EMP Commission and urged immediate action to protect the electric grid. Studies by the National Academy of Sciences, the Department of Energy, the Federal Energy Regulatory Commission and the National Intelligence Council reached similar conclusions.

If you are a terrorist, a dictator or a fanatic that is looking for a “killshot” for the United States, those kinds of numbers would certainly get your attention.

And it was recently reported by WND that the Iranian military has already been playing around with such a scenario…

Peter Vincent Pry, who is executive director of a congressional advisory group called the Task Force on National and Homeland Security, raised the alarm as the agreement is about to be finalized.

He said U.S. military officials have confirmed such an Iranian plan.

“Iranian military documents describe such a scenario – including a recently translated Iranian military textbook that endorses nuclear EMP attack against the United States,” Pry wrote in a recent column in Israel’s main online media network, Aruz Sheva.

“Iran with a small number of nuclear missiles can by EMP attack threaten the existence of modernity and be the death knell of Western principles of international law, humanism and freedom,” he said.

Very chilling stuff.

And of course there are many, many others out there that would love to see the U.S. taken down other than just the Iranians.

Meanwhile, our power grid is far more vulnerable than most Americans would dare to imagine.

In previous articles, I discussed a recent Federal Energy Regulatory Commission report which stated the following…

“Destroy nine interconnection substations and a transformer manufacturer and the entire United States grid would be down for at least 18 months, probably longer.”

Are you starting to get the picture?

Our entire way of life depends upon electricity. If you take away that electricity, our society is transformed literally overnight.

A successful EMP would be an utter nightmare for this nation. Just consider what U.S. Representative Scott Perry had to say about a potential attack last year…

“The consequences of such an attack could be catastrophic; all electronics, power systems, and information systems could be shut down,” Rep. Scott Perry said in prepared remarks during an EMP hearing in May held by the U.S. House Committee on Homeland Security. “This could then cascade into interdependent infrastructures such as water, gas, and telecommunications. While we understand this is an extreme case, we must always be prepared in case a rogue state decides to utilize this technology.”

In essence, suddenly nothing would work and just about everything that we take for granted would suddenly be gone.

In a previous article, I spelled out some of the implications of such an event…

-There would be no heat for your home.
-Water would no longer be pumped into most homes.
-Your computer would not work.
-There would be no Internet.
-Your phones would not work.
-There would be no television.
-There would be no radio.
-ATM machines would be shut down.
-There would be no banking.
-Your debit cards and credit cards would not work.
-Without electricity, most gas stations would not be functioning.
-Most people would be unable to do their jobs without electricity and employment would collapse.
-Commerce would be brought to a standstill.
-Hospitals would not be able to function normally.
-You would quickly start running out of medicine.
-All refrigeration would shut down and frozen foods in our homes and supermarkets would start to go bad.

And as I mentioned above, all of this can happen even without an attack.

A direct hit from a major solar storm can cause the exact same thing.

In fact, NASA says that there is a 12 percent chance that such a storm will hit us during the next ten years…

NASA is warning that there’s a 12 percent chance an extreme solar storm will hit Earth in the next decade, sending out massive shock waves that would knock out grids across the world.

The economic impact of this doomsday scenario could exceed $2 trillion — or 20 times the cost of Hurricane Katrina, according to the National Academy of Sciences.

In recent years, we have been really lucky.

There was a close call in 2012 and another one in 2013.

The following is an excerpt from an upcoming book that I have co-authored with Barbara Fix that will soon be published entitled “Get Prepared Now”…

Most people have absolutely no idea that the Earth barely missed being fried by a massive EMP burst from the sun in 2012 and in 2013. And earlier in 2014 there was another huge solar storm which would have caused tremendous damage if it had been directed at our planet. If any of those storms would have directly hit us, the result would have been catastrophic. Electrical transformers would have burst into flames, power grids would have gone down and much of our technology would have been fried. In essence, life as we know it would have ceased to exist – at least for a time. These kinds of solar storms have hit the Earth many times before, and experts tell us that it is inevitable that it will happen again. The most famous one happened in 1859, and was known as the Carrington Event. But other than the telegraph, humanity had very little dependence on technology at the time. If another Carrington Event happened today, it would be a complete and utter nightmare. A study by Lloyd’s of London has concluded that it would have taken a $2,600,000,000,000 chunk out of the global economy, and it would take up to a decade to repair the damage. Unfortunately, scientists insist that it is going to happen at some point. The only question is when.

So keep an eye on the sun.

The giant ball of fire that we revolve around has started to behave very erratically, and it has the power to end our way of life at any time.

In fact, scientists tell us that we are about to get hit with a “glancing blow” on April 7th…

A filament of magnetism stretching halfway across the sun erupted during the late hours of April 4th (22:00-23:00 UT). The eruption split the sun’s atmosphere, hurling a CME into space and creating a “canyon of fire,” shown in a movie recorded by the Solar Dynamics Observatory: The glowing walls of the canyon trace the original channel where the filament was suspended by magnetic forces above the sun’s surface. From end to end, the structure stretches more than 300,000 km–a real Grand Canyon.

Fragments of the exploding filament formed the core of a CME that raced away from the sun at approximately 900 km/s (2 million mph): image. Most of the CME will miss Earth, but not all. The cloud is expected to deliver a a glancing blow to our planet’s magnetic field could on April 7th. High-latitude sky watchers should be alert for auroras.

The event of April 7th is not going to cause us major problems. But someday there will be a solar storm that will.

Personally, I cannot even imagine what life would be like without electricity.

Because we have become so deeply dependent on technology, most of us would have absolutely no idea how to live without it.

An electromagnetic pulse attack would be one of the fastest ways to cripple America and end the dominance of the United States in world affairs. And in this day and age, there are hundreds of millions of people around the planet that would love to see that happen.

So to not take steps to protect our power grid from such an attack is very foolish. But that is precisely what Barack Obama (and presidents before him) have chosen to do. We have technology which would mitigate the damage from an electromagnetic pulse, but rather than spend the money Obama has decided to just hope that it will never happen.

Up to this point, we have been fortunate.

But someday, our luck may run out.

5 Charts Which Show That The Next Economic Crash Is Dead Ahead

March 30, 2015March 30, 2015 by Michael

When an economic crisis is coming, there are usually certain indicators that appear in advance. For example, commodity prices usually start to plunge before a recession begins. And as you can see from the Bloomberg Commodity Index which you can find right here, this has already been happening. In addition, I have previously written about how the U.S. dollar went on a great run just before the financial collapse of 2008. This is something that has also been happening over the past few months. Some people would have you believe that nobody can anticipate the next great economic downturn and that to try to do so is just an exercise in “guesswork”. But that is not the case at all. We can look back over history and see patterns that keep repeating. And a lot of the exact same patterns that happened just before previous stock market crashes are happening again right now.

For example, let’s talk about the price of oil. There are only two times in history when the price of oil has fallen by more than 50 dollars in a six month time period. One was just before the financial crisis in 2008, and the other has just happened…

As a result of crashing oil prices, we are witnessing oil rigs shut down in the United States at a blistering pace. In fact, almost half of all oil rigs in the U.S. have already shut down. The following commentary and chart come from Wolf Richter…

In the latest week, drillers idled another 41 oil rigs, according to Baker Hughes. Only 825 rigs were still active, down 48.7% from October. In the 23 weeks since, drillers have idled 784 oil rigs, the steepest, deepest cliff-dive in the history of the data:

We are looking at a full-blown fracking bust, and this bust is already having a dramatic impact on the economies of states that are heavily dependent on the energy industry.

For example, just check out the disturbing number that just came out of Texas…

The crash in oil prices is hammering the Texas economy.

The latest manufacturing outlook index from the Dallas Fed plunged again in March, to -17.4 from -11.2 in February, indicating deteriorating business conditions in the state.

Ouch.

But this pain is going to be felt far beyond Texas. In recent years, Wall Street banks have made a massive amount of money packaging up energy industry loans, bonds, etc. and selling them off to investors.

If that sounds similar to the kind of behavior that preceded the subprime mortgage meltdown, that is because it is.

Now those loans, bonds, etc. are going bad as the fracking bust intensifies, and whoever is left holding all of this worthless paper at the end of the day is going to lose an extraordinary amount of money. Here is more from Wolf Richter…

It suited Wall Street just fine: according to Dealogic, banks extracted $31 billion in fees from the US oil and gas industry and its investors over the past five years by handling IPOs, spin-offs, “leveraged-loan” transactions, the sale of bonds and junk bonds, and M&A.

That’s $6 billion in fees per year! Over the last four years, these banks made over $4 billion in fees on just “leveraged loans.” These loans to over-indebted, junk-rated companies soared from about $40 billion in 2009 to $210 billion in 2014 before it came to a screeching halt.

For Wall Street it doesn’t matter what happens to these junk bonds and leveraged loans after they’ve been moved on to mutual funds where they can decompose sight-unseen. And it doesn’t matter to Wall Street what happens to leverage loans after they’ve been repackaged into highly rated Collateralized Loan Obligations that are then sold to others.

At the same time, we are also witnessing a slowdown in global trade. This usually happens when economic conditions are about to turn sour, and that is why it is so alarming that the total volume of global trade in January was down 1.4 percent from December. According to Tyler Durden of Zero Hedge, that was the largest drop since 2011…

Presenting the latest data from the CPB Netherlands Bureau for Economic Policy Analysis, according to which in January world trade by volume dropped by a whopping 1.4% from December: the biggest drop since 2011!

We are seeing some troubling signs in the U.S. as well.

I shared the following chart in a previous article, but it bears repeating. It comes from Charles Hugh Smith, and it shows that new orders for consumer goods are falling at a rate not seen since the last recession…

Well, what about the stock market? It was up more than 200 points on Monday. Isn’t that good news?

Yes, but the euphoria on Wall Street will not last for long.

When corporate earnings per share either start flattening out or start to decline, that is a huge red flag. We saw this just prior to the stock market crash of 2008, and it is happening again right now. The following commentary and chart come from Phoenix Capital Research…

Take a look at the below chart showing current stock levels and changes in forward Earnings Per Share (EPS). Note, in particular how divergences between EPS and stocks tend to play out (hint look at 2007-2008).

We all know what came next.

And guess what?

According to CNBC, a lot of the “smart money” is pulling their money out of the stock market right now while the getting is good…

Recent market volatility has sent stock market investors rushing for the exits and into cash.

Outflows from equity-based funds in 2015 have reached their highest level since 2009, thanks to a seesaw market that has come under pressure from weak economic data, a stronger dollar and the the prospect of monetary tightening.

Funds that invest in stocks have seen $44 billion in outflows, or redemptions, year to date, according to Bank of America Merrill Lynch. Equity funds have seen outflows in five of the last six weeks, including $6.1 billion in just the last week.

It doesn’t matter if you are a millionaire “on paper” today.

What matters is if the money is going to be there when you really need it.

At the moment, a whole lot of people have been lulled into a false sense of complacency by the soaring stock market and by the bubble of false economic stability that we have been enjoying.

But under the surface, there is a whole lot of turmoil going on.

Those that are looking for the signs are going to see the next crisis approaching well in advance.

Those that are not are going to get absolutely blindsided by what is coming.

Don’t let that happen to you.

10 Charts Which Show We Are Much Worse Off Than Just Before The Last Economic Crisis

March 18, 2015March 18, 2015 by Michael

If you believe that ignorance is bliss, you might not want to read this article. I am going to dispel the notion that there has been any sort of “economic recovery”, and I am going to show that we are much worse off than we were just prior to the last economic crisis. If you go back to 2007, people were feeling really good about things. Houses were being flipped like crazy, the stock market was booming and unemployment was relatively low. But then the financial crisis of 2008 struck, and for a while it felt like the world was coming to an end. Of course it didn’t come to an end – it was just the first wave of our problems. The waves that come next are going to be the ones that really wipe us out. Unfortunately, because we have experienced a few years of relative stability, many Americans have become convinced that Barack Obama, Janet Yellen and the rest of the folks in Washington D.C. have fixed whatever problems caused the last crisis. Even though all of the numbers are screaming otherwise, there are millions upon millions of people out there that truly believe that everything is going to be okay somehow. We never seem to learn from the past, and when this next economic downturn strikes it is going to do an astonishing amount of damage because we are already in a significantly weakened state from the last one.

For each of the charts that I am about to share with you, I want you to focus on the last shaded gray bar on each chart which represents the last recession. As you will see, our economic problems are significantly worse than they were just before the financial crisis of 2008. That means that we are far less equipped to handle a major economic crisis than we were the last time.

#1 The National Debt

Just prior to the last recession, the U.S. national debt was a bit above 9 trillion dollars. Since that time, it has nearly doubled. So does that make us better off or worse off? The answer, of course, is obvious. And even though Barack Obama promises that “deficits are under control”, more than a trillion dollars was added to the national debt in fiscal year 2014. What we are doing to future generations by burdening them with so much debt is beyond criminal. And so what does Barack Obama want to do now? He wants to ramp up government spending and increase the debt even faster. This is something that I covered in my previous article entitled “Barack Obama Says That What America Really Needs Is Lots More Debt“.

#2 Total Debt

Over the past 40 years, the total amount of debt in the United States has skyrocketed to astronomical heights. We have become a “buy now, pay later” society with devastating consequences. Back in 1975, our total debt level was sitting at about 2.5 trillion dollars. Just prior to the last recession, it was sitting at about 50 trillion dollars, and today we are rapidly closing in on 60 trillion dollars.

#3 The Velocity Of Money

When an economy is healthy, money tends to change hands and circulate through the system quite rapidly. So it makes sense that the velocity of money fell dramatically during the last recession. But why has it kept going down since then?

#4 The Homeownership Rate

Were you aware that the rate of homeownership in the United States has fallen to a 20 year low? Traditionally, owning a home has been a sign that you belong to the middle class. And the last recession was really rough on the middle class, so it makes sense that the rate of homeownership declined during that time frame. But why has it continued to steadily decline ever since?

#5 The Employment Rate

Barack Obama loves to tell us how the unemployment rate is “going down”. But as I will explain later in this article, this decline is primarily based on accounting tricks. Posted below is a chart of the civilian employment-population ratio. Just prior to the last recession, approximately 63 percent of the working age population of the United States was employed. During the recession, this ratio fell to below 59 percent and it stayed there for several years. Just recently it has peeked back above 59 percent, but we are still very, very far from where we used to be, and now the next economic downturn is rapidly approaching.

#6 The Labor Force Participation Rate

So how can Obama get away with saying that the unemployment rate has gone down dramatically? Well, each month the government takes thousands upon thousands of long-term unemployed workers and decides that they have been unemployed for so long that they no longer qualify as “part of the labor force”. As a result, the “labor force participation rate” has fallen substantially since the end of the last recession…

#7 The Inactivity Rate For Men In Their Prime Working Years

If things are “getting better”, then why are so many men in their prime working years doing nothing at all? Just prior to the last recession, the inactivity rate for men in their prime working years was about 9 percent. Today it is just about 12 percent.

#8 Real Median Household Income

Not only is a smaller percentage of Americans employed today than compared to just prior to the last recession, the quality of our jobs has gone down as well. This is one of the factors which has resulted in a stunning decline of real median household income.

I have shared these next numbers before, but they bear repeating. In America today, most Americans do not make enough to support a middle class lifestyle on a single salary. The following figures come directly from the Social Security Administration…

-39 percent of American workers make less than $20,000 a year.

-52 percent of American workers make less than $30,000 a year.

-63 percent of American workers make less than $40,000 a year.

-72 percent of American workers make less than $50,000 a year.

We all know people that are working part-time jobs because that is all that they can find in this economy. As the quality of our jobs continues to deteriorate, the numbers above are going to become even more dismal.

#9 Inflation

Even as our incomes have stagnated, the cost of living just continues to rise steadily. For example, the cost of food and beverages has gone up nearly 50 percent just since the year 2000.

#10 Government Dependence

As the middle class shrinks and the number of Americans that cannot independently take care of themselves soars, dependence on the government is reaching unprecedented heights. For instance, the federal government is now spending about twice as much on food stamps as it was just prior to the last recession. How in the world can anyone dare to call this an “economic recovery”?

So you tell me – are things “getting better” or are they getting worse?

To me, it is crystal clear that we are in much worse condition than we were just prior to the last economic crisis.

And now things are setting up in textbook fashion for the next great economic crisis. Unfortunately, most Americans are totally clueless about what is going on and the vast majority are completely and totally unprepared for what is coming.

Or could it be possible that I am wrong? Whether you agree or disagree with me, please feel free to add to the discussion by posting a comment below…

Why I Wouldn’t Want To Be A Police Officer In America Today

March 12, 2015March 12, 2015 by Michael

Can you imagine going to work each day knowing that there are lots of people out there that would love to see you dead? Despite what a lot of Americans may think, it takes real courage to be a police officer in this country today. Every time you put on that uniform and walk out the front door, it might be the very last time that you ever see your spouse and family. Yes, there is a whole lot of needless police brutality in the United States in 2015, and I am going to address that later in this article. But most police officers are just regular people that are trying to do their jobs and serve their communities. And on Wednesday, we got a reminder of just how dangerous those jobs can be. At around midnight on Wednesday, two Ferguson police officers were ambushed. A 32-year-old officer named Webster Groves was shot just beneath his right eye, and another 41-year-old officer was hit in the shoulder. Sadly, this is probably only just the beginning. Racial tensions continue to escalate, and we are on the verge of a great financial crisis which will cause economic conditions in our cities to deteriorate rapidly. By the end of this decade, I fully expect civil unrest, rioting, looting and mindless violence to become commonplace in large cities all across America. In such an environment, it will be extremely dangerous to be a police officer.

The good news for the two police officers that got shot in Ferguson is that it looks like they are going to be okay.

But the same cannot be said for many other police officers that have been ambushed over the past year.

According to CNN, the number of police officers that were shot to death increased by more than 50 percent in 2014…

The number of law enforcement officers shot to death in the line of duty is up by more than 50% this year, and the leading method of those shootings was ambush-style attack.

That’s according to the nonprofit Washington-based National Law Enforcement Officers Memorial Fund, which released its findings Tuesday.

And like I said, this is probably only just the beginning.

Sadly, a whole lot more police are going to die before this is all over.

You can try to blame this latest incident in Ferguson on a “deranged individual” if you want, but I think that the reactions that we saw on social media to these police shootings say a whole lot about where we are as a country.

In the immediate aftermath of the shootings, a lot of people were actually celebrating. The following is a sampling of comments from Twitter…

-#ChiefJackson steps down and two pigs get shot? Best day #Ferguson has had in years

-im glad 2 pigs wounded in #Ferguson lol

-#Ferguson kill the pigs

-serves those two pigs right, i hope organized public militancy continues #ferguson

-#Ferguson pigs shouldnt grab ppl; thugs deserved it. Wish it was #DarrenWilson. Sound familiar? #MichaelBrown #VonderittMyers #AntonioMartin

-Racist cops shot not gonna cry 4 pigs #Ferguson

-I heard two pigs in #Ferguson got shot? We’re they left on the ground bleeding out and dead like Mike Brown?

-hopefully they’ll be off the street for a long time. two less pigs out harassing & kidnapping people. #Ferguson

Could you imagine trying to be a police officer in Ferguson in this kind of environment?

And it isn’t as if we didn’t see this coming. Just consider an excerpt from an article that I authored a while back entitled “It’s WAR On The Streets Of America“…

The mainstream media and many national leaders on the left end of the spectrum have been stirring up strife and division for months on end. So now a toxic environment has been created which is inevitably going to lead to even more violence. At some recent “protest marches”, we have heard demonstrators enthusiastically chant extremely threatening slogans such as this: “What do we want? Dead cops!” And when news broke that Ismaaiyl Brinsley had brutally murdered two NYPD police officers, lots of very twisted people on Twitter were actually celebrating.

The sick thing is that there are a lot of people out there that actually want to turn this into a full-blown war. Some want a race war, some want a “war on cops”, and others just seem to want a general excuse for crime, looting and mayhem.

Unfortunately, if I am right, this is just a small preview of what we can expect in the years ahead. Just like we have witnessed in Ferguson, I anticipate that we will eventually see a number of our larger cities burn.

And it never had to be this way.

Why can’t we all just love, respect and honor one another?

Yes, police brutality in the United States is wildly out of control. In many areas of the nation, police officers are actually trained to bark orders, act like thugs and physically abuse people at the drop of a hat. Our entire culture of policing needs to change.

I think that John W. Whitehead put it very aptly in one of his recent commentaries…

For those of us who have managed to survive 2014 with our lives intact and our freedoms hanging by a thread, it has been a year of crackdowns, clampdowns, shutdowns, showdowns, shootdowns, standdowns, knockdowns, putdowns, breakdowns, lockdowns, takedowns, slowdowns, meltdowns, and never-ending letdowns.

We’ve been held up, stripped down, faked out, photographed, frisked, fracked, hacked, tracked, cracked, intercepted, accessed, spied on, zapped, mapped, searched, shot at, tasered, tortured, tackled, trussed up, tricked, lied to, labeled, libeled, leered at, shoved aside, saddled with debt not of our own making, sold a bill of goods about national security, tuned out by those representing us, tossed aside, and taken to the cleaners.

As I point out in my book A Government of Wolves: The Emerging American Police State, we’ve had our freedoms turned inside out, our democratic structure flipped upside down, and our house of cards left in a shambles.

We’ve had our children burned by flashbang grenades, our dogs shot, and our old folks hospitalized after “accidental” encounters with marauding SWAT teams. We’ve been told that as citizens we have no rights within 100 miles of our own border, now considered “Constitution-free zones.” We’ve had our faces filed in government databases, our biometrics crosschecked against criminal databanks, and our consumerist tendencies catalogued for future marketing overtures.

Now a large segment of our population either detests the police or is extremely fearful of ever dealing with them.

Is that a recipe for a healthy society?

Police brutality has become a permanent part of our culture, and that has got to change. If it doesn’t, protests against the police are going to get worse and worse.

But what most protesters don’t seem to understand is that we actually need the police.

Without the police, our society would descend into utter chaos very rapidly. Thanks to unchecked illegal immigration, there are approximately 1.4 million gang members roaming our cities now. And the moral decay that we see all around us is getting worse with each passing year. We are a nation that is absolutely teeming with addicts, sickos, perverts and psychopaths. I don’t even want to imagine what our society would look like without police.

Like I said, most police officers are just average people that are trying to do their jobs and serve their communities.

Unfortunately for them, their jobs are becoming a lot more difficult and a lot more dangerous.

So what do you think? Please feel free to share your thoughts by posting a comment below…

+ More