Economists

Another month, another bad jobs report. For the month of May, the U.S. economy only added 69,000 jobs and the unemployment rate rose to 8.2%. Many are calling this a total “disaster” and are worried that the U.S. economy could be headed back into another recession. Economists had been expecting 150,000 payroll jobs would be added, so the 69,000 number really shocked a lot of people. The truth is that the economy needs to add approximately 125,000 new jobs every single month just to keep the unemployment rate steady. So yes, this bad jobs report is not welcome news at all – especially for the Obama administration. When Barack Obama first took office the unemployment rate was sitting at 7.6 percent and now it is sitting at 8.2 percent. Some “recovery”, eh? But the reality is that this jobs report was really not that “devastating” even though the stock market had its worst day of the year. Unemployment in America is still about at the same level as it was back at the beginning of 2012. The tough stretch that we are going through right now is only a very small taste of the economic nightmare that is on the horizon. If you think that things are a “disaster” right now, just wait until you see what is coming.

At the moment, 53 percent of all Americans with a bachelor’s degree under the age of 25 are either unemployed or underemployed, and there are more than 100 million working age Americans that do not currently have jobs.

But this is only just the beginning.

During the next major economic downturn, the unemployment rate in the United States is going to soar well up into the double digits.

Many Americans will look back on 2010, 2011 and 2012 as “the good old days”.

Right now, there are only small pockets of the country that are total economic hellholes.

For example, Yuma, Arizona has an unemployment rate of 26 percent, and El Centro, California has an unemployment rate of 26.2 percent.

In the future, those kinds of numbers are going to become the norm all over the nation.

Sadly, most Americans have no idea what is coming.

Today, I wanted to share with you all a couple of chilling economic forecasts that I have been made aware of recently.

The first is from Raoul Pal. According to Zero Hedge, Raoul Pal “previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe… Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes.”

The following is from a Zero Hedge summary of a recent presentation by Raoul Pal….

We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…

With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.

There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.

The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…

Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations

From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.

And then do you think Japan and China would not be next?

And then do you think the US would survive unscathed?

That is the end of the fractional reserve banking system and of fiat money.

It is the big RESET.

It continues:

Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).

The whole bond market will be dead.

Short selling on bonds – banned

Short selling stocks – banned

CDS – banned

Short futures – banned

Put options – banned

All that is left is the Dollar and Gold

It only gets better. We use the term loosely:

We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.

Spend your time looking at the risks of custody, safekeeping, counterparty etc. Assume that no one and nothing is safe.

After that…we put on our tin helmets and hide until the new system emerges

So how soon does Raoul Pal think all of this is going to happen?….

From a timing perspective, I think 2012 and 2013 will usher in the end.

You can find his entire presentation entitled “The End Game” right here.

What Raoul Pal is saying lines up very well with what Steve Quayle’s anonymous international banking source is telling him….

There is no stopping this…We are still on track as I have been predicting for a while now for a fall/winter collapse of the Eurozone and naked exposure of all derivative markets the world over. Europeans will go through a major reset, after time they will recover as Europeans do not carry the type of personal debt that Americans do. It is for America that I worry. Look for these signs next:

1- JPM will be bailed out again but it will not stop the coming market crash. More details will emerge about their derivative swap failure $150 billion and counting.

2-BOA (BAC Bank of America) will fold and be absorbed into JPM as a way to prop up the bleeding Giant. JPM will get the best picking of this deal just like they got with Bear Stearns.

3- Massive layoffs at Citigroup and Wells Fargo

4- Goldman Sachs finally pays the piper, look for massive cuts there as well as BIG Losses

5- Bond market bust which leads to freeze of all bond sales

6- Derivative bust the next one will be BOA followed by Citigroup

7- All CDS shorts and swaps will freeze.

8- Total Meltdown

You can read the rest of what that source is saying right here.

As I have been saying all along, there are two keys that you need to be watching right now….

#1 Europe

#2 Derivatives

Sadly, the articles that I write about Europe tend to get far less of a response than my other articles get. Most Americans simply do not understand that what is happening in Europe right now is going to significantly affect their daily lives.

And most Americans have very little understanding of derivatives. But as you just read, there are some in the financial community that are warning that we could see the derivatives bubble burst very soon.

Time is running out. This period of relative stability that we are currently experiencing will not last forever.

You better get ready.

If the global economy is not heading for a recession, then why is global shipping slowing down so dramatically? Many economists believe that measures of global shipping such as the Baltic Dry Index are leading economic indicators. In other words, they change before the overall economic picture changes. For example, back in early 2008 the Baltic Dry Index began falling dramatically. There were those that warned that such a rapid decline in the Baltic Dry Index meant that a significant recession was coming, and it turned out that they were right. Well, the Baltic Dry Index is falling very rapidly once again. In fact, on February 3rd the Baltic Dry Index reached a low that had not been seen since August 1986. Some economists say that there are unique reasons for this (there are too many ships, etc.), but when you add this to all of the other indicators that Europe is heading into a recession, a very frightening picture emerges. We appear to be staring a global economic slowdown right in the face, and we all need to start getting prepared for that.

If you don’t read about economics much, you might not know what the Baltic Dry Index actually is.

Investopedia defines the Baltic Dry Index this way….

A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea.

When the global economy is booming, the demand for shipping tends to go up. When the global economy is slowing down, the demand for shipping tends to decline.

And right now, global shipping is slowing way, way down.

In fact, recently there have been reports of negative shipping rates.

According to a recent Bloomberg article, one company recently booked a ship at the ridiculous rate of negative $2,000 a day….

Glencore International Plc paid nothing to hire a dry-bulk ship with the vessel’s operator paying $2,000 a day of the trader’s fuel costs after freight rates plunged to all-time lows.

Glencore chartered the vessel, operated by Global Maritime Investments Ltd., a Cyprus-based company with offices in London, Steve Rodley, GMI’s U.K. managing director, said by phone today. The daily payments last the first 60 days of the charter, Rodley said. The vessel will haul a cargo of grains to Europe, putting the carrier in a better position for its next shipment, he said.

So why would anyone agree to ship goods at negative rates?

Well, it beats the alternative.

This was explained in a recent Fox Business article….

“They’re doing this because you can’t just have ships sitting. If they sit too long, then that’s hard on the ships. They have to keep them loaded and moving from port to port,” said Darin Newsom, senior commodities analyst at DTN.

If the owner of a ship can get someone to at least pay for part of the fuel and the journey will get the ship closer to its next destination, then that is better than having the ship just sit there.

But just a few short years ago (before the last recession) negative shipping rates would have been unthinkable.

Asian shipping is really slowing down as well. The following comes from a recent article in the Telegraph….

Shanghai shipping volumes contracted sharply in January as Europe’s debt crisis curbed demand for Asian goods, stoking fresh doubts about the strength of the Chinese economy.

Container traffic through the Port of Shanghai in January fell by more than a million tons from a year earlier.

So this is something we are seeing all over the globe.

Another indicator that is troubling economists right now is petroleum usage. It turns out that petroleum usage is really starting to slow down as well.

The following is an excerpt from a recent article posted on Mish’s Global Economic Trend Analysis….

As I have been telling you recently, there is some unprecedented data coming out in petroleum distillates, and they slap me in the face and tell me we have some very bad economic trends going on, totally out of line with such things as the hopium market – I mean stock market.

This past week I actually had to reformat my graphs as the drop off peak exceeded my bottom number for reporting off peak – a drop of ALMOST 4,000,000 BARRELS PER DAY off the peak usage in our past for this week of the year.

I would encourage you to go check out the charts that were posted in that article. You can find them right here. Often a picture is worth a thousand words, and those charts are quite frightening.

Over the past few days, I have been trying to make the point that nothing got fixed after the financial crisis of 2008 and that an even bigger crisis is on the way.

Yes, the stock market is flying high right now.

Yes, even “Dr. Doom” Nouriel Roubini is convinced that the stock market will go even higher.

But this rally will not last that much longer.

Wherever you look, global economic activity is slowing down. The UK economy and the German economy both actually shrank a bit in the fourth quarter of 2011. About half of all global trade involves Europe in one form or another. As Europe slows down, it is going to affect the entire planet.

Many thought that the German economy was so strong that it would not be significantly affected by the problems the rest of Europe is having, but that is turning out not to be the case.

In a new article by CBS News entitled “German economic slowdown worse than expected?“, we are told that industrial production in Germany is declining even more than anticipated….

German industrial production fell 2.9 percent in December from the month before, according to official data released Tuesday, suggesting the country’s economic slowdown could be worse than expected.

So don’t believe all the recent hype about an “economic recovery”. Europe is heading into a recession, Asia is slowing down and the U.S. will not be immune.

Despite what you hear from the mainstream media, the truth is that the U.S. economy is not improving and incredibly tough times are ahead.

Thankfully, those of us that are aware of what is happening can make preparations for the economic storm that is coming.

Others will not be so fortunate.

The Bad Jobs Report Is Just A Very Small Taste Of The Economic Nightmare That Is Coming

Why Is Global Shipping Slowing Down So Dramatically?