Global Economy

Lowest Ever: The Baltic Dry Index Plunges To 394 As Global Trade Grinds To A Standstill

January 14, 2016January 14, 2016 by Michael

For the first time ever, the Baltic Dry Index has fallen under 400. As I write this article, it is sitting at 394. To be honest, I never even imagined that it could go this low. Back in early August, the Baltic Dry Index was sitting at 1,222, and since then it has been on a steady decline. Of course the Baltic Dry Index crashed hard just before the great stock market crash of 2008 too, but at this point it is already lower than it was during that entire crisis. This is just more evidence that global trade is grinding to a halt and that 2016 is going to be a “cataclysmic year” for the global economy.

If you are not familiar with the Baltic Dry Index, here is a helpful definition from Wikipedia…

The Baltic Dry Index (BDI) is an economic indicator issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides “an assessment of the price of moving the major raw materials by sea. Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain.”

The BDI is one of the key indicators that experts look at when they are trying to determine where the global economy is heading. And right now, it is telling us that we are heading into a major worldwide economic downturn.

Some people try to dismiss the recent drop in the Baltic Dry Index by claiming that shipping rates are down because there is simply too much capacity out there these days. And I don’t dispute that. Without a doubt, too many vessels were built during the “boom years”, and now shipbuilders are paying the price. For example, Chinese shipyards reported a 59 percent decline in orders during the first 11 months of 2015…

Total orders at Chinese shipyards tumbled 59 percent in the first 11 months of 2015, according to data released Dec. 15 by the China Association of the National Shipbuilding Industry. Builders have sought government support as excess vessel capacity drives down shipping rates and prompts customers to cancel contracts. Zhoushan Wuzhou Ship Repairing & Building Co. last month became the first state-owned shipbuilder to go bankrupt in a decade.

But that doesn’t explain everything. The truth is that exports are way down all over the world. China, the United States, South Korea and many other major exporting nations have all been reporting extremely dismal export numbers. Global trade is contracting quite rapidly, and I don’t see how anyone could possibly dispute that.

The global economy is a mess, but many people are not paying any attention to the economic fundamentals because they are too busy looking at the stock market.

The stock market does not tell us how the economy is doing. If the stock market is up today that does not mean that the economy is doing well, and if the stock market is down tomorrow that does not mean that it is doing poorly.

Yes, the health of the financial markets can greatly affect the overall economy. We saw this back in 2008. When there is a tremendous amount of panic, that can cause a credit crunch and make it very difficult for money to flow through our system. The end result is a rapid slowdown of economic activity, and it is something that we will be experiencing again very soon.

But don’t let the day to day fluctuations of the stock market fool you. Just because the Dow was up 227 points today does not mean that the crisis is over. It is important to remember that stocks are not going to go down every single day. On Thursday, the Dow didn’t even regain two-thirds of what it lost on Wednesday. Even in bear markets there are up days, and some of the biggest up days in stock market history were right in the middle of the crash of 2008.

It is critical that we take a long-term view of things and not let our vision be clouded by every tick up and down in the financial markets. Initial jobless claims just hit their highest level in about six months, and companies like Macy’s and GoPro are laying off thousands of workers. Things are already bad, and they are rapidly getting worse.

And let us not forget the great amount of financial carnage that has already happened so far this year. According to CNBC, approximately 3.2 trillion dollars of stock market wealth was wiped out globally during the first 13 days of 2016…

Almost $3.2 trillion has been wiped off the value of stocks around the world since the start of 2016, according to calculations by a top market analyst.

It has also been the worst-ever start to a year for U.S. equities, said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, as both the S&P 500 and the blue-chip Dow Jones industrial average have posted their steepest losses for the first eight days trading of a year.

Over the past six months, there have now been two 10 percent “corrections” for U.S. stocks. The only other times we have seen multiple corrections like this were in 1929, 2000 and 2008. If those years seem familiar to you, that is because they should. In all three years, we witnessed historic stock market crashes.

The stunning collapse of the Baltic Dry Index is just more evidence that we have entered a global deflationary crisis. Goods aren’t moving, unemployment is rising all over the planet, and commodity prices have fallen to levels that we have not seen in over a decade.

Around the globe, there have been dramatic stock market crashes to begin the year, and we should expect to see much more market turmoil during the weeks and months to come.

If the markets have calmed down a bit for the moment, we should be very thankful for that, because we could all use some additional time to prepare for what is coming.

The debt-fueled standard of living that so many of us are enjoying today is just an illusion. And many of us won’t even understand what we have been taking for granted until it is taken away from us.

A great shaking is coming to the global economy, and the pain is going to be unimaginable. So let us enjoy every single day of relative “normalcy” while we still can, because there aren’t too many of them left.

Guess What Happened The Last Time The Price Of Oil Plunged Below 38 Dollars A Barrel?

December 7, 2015December 7, 2015 by Michael

On Monday, the price of U.S. oil dropped below 38 dollars a barrel for the first time in six years. The last time the price of oil was this low, the global financial system was melting down and the U.S. economy was experiencing the worst recession that it had seen since the Great Depression of the 1930s. As I write this article, the price of U.S. oil is sitting at $37.65. For months, I have been warning that the crash in the price of oil would be extremely deflationary and would have severe consequences for the global economy. Nations such as Japan, Canada, Brazil and Russia have already plunged into recession, and more than half of all major global stock market indexes are down at least 10 percent year to date. The first major global financial crisis since 2009 has begun, and things are only going to get worse as we head into 2016.

The global head of oil research at Societe Generale, Mike Wittner, says that his “head is spinning” after the stunning drop in the price of oil on Monday. Just like during the last financial crisis, we have broken the psychologically important 40 dollar barrier, and there are concerns that we could go much lower from here…

One analyst told CNBC that he believes that we could soon see the price of U.S. oil go all the way down to 32 dollars a barrel…

“We’re in a tug-of-war between a heavily shorted market and a glut of oil in the U.S. and globally, as Saudi Arabia continues to produce oil at elevated levels to maintain market share,” said Chris Jarvis at Caprock Risk Management, an energy markets consultancy in Frederick, Maryland.

“Couple this with a strengthening dollar as the market anticipates a U.S. rate hike this month, oil is heading lower with a near term target of $32 for WTI.”

Analysts at Goldman Sachs are even more pessimistic than that. According to Business Insider, they are saying that we could eventually see the price of oil go below 20 dollars a barrel…

At OPEC’s meeting on Friday, member countries decided to set its production level at 31.5 million barrels per day, and did not agree on what the new limit should be.

After OPEC’s meeting, commodity strategists at Goldman put out a note saying that oil prices could plunge another 50% in the coming months, as the oil market tries to rebalance the supply and demand situation.

That may sound really good to you, especially if you fill up your gas tank frequently. But the truth is that plunging oil prices are exceedingly bad for the U.S. economy as a whole. In recent years, the energy industry has been the primary engine for the creation of good jobs in this country, and now those firms are having to lay off people at a frightening pace. Not only that, CNBC’s Jim Cramer is warning that many of these firms may actually start going under if the price of oil doesn’t start going back up soon…

“This is not ‘longer and lower;’ this is ‘longer and much lower.’ There’s companies that are not going to be able to fund with futures; there’re companies that are not going to be able to get credit,” Cramer said on “Squawk on the Street.”

Cramer made his remarks after the Organization of the Petroleum Exporting Countries decided not to lower production on Friday.

“This was a devastating blow for the U.S. oil industry,” Cramer said.

On Monday, we witnessed another benchmark that we have not seen since the last financial crisis.

I watch a high yield bond ETF known as JNK very closely. On Monday, JNK broke below 35 for the first time since the financial crisis of 2008. Just like 40 dollar oil, this is a key psychological barrier.

So why is this important?

As I discussed last week, junk bonds crashed before stocks did in 2008, and now it is happening again. If form holds true, we should expect U.S. stocks to start tumbling significantly very shortly.

Meanwhile, another notable expert has come forward with a troubling forecast for the global economy in 2016. Just like Citigroup, Raoul Pal believes that there is a very significant chance that we will see a recession next year…

Former global macro fund manager Raoul Pal says there’s now a 65% chance of a global recession.

In July, Pal predicted that the Institute of Supply Management’s (ISM) manufacturing index would break the key level of 50 late in 2015.

On December 1, the ISM broke the 50 level for the first time since the 2008 recession, reaching 48.6.

“I use the ISM as a guide to the global business cycle, not just the US cycle,” Pal told Business Insider.

What amazes me is that so many people out there cannot see what is happening even though the next great crisis has already started. The evidence is all around us, and yet so many choose to be willingly blind.

Instead of fixing our problems after the last crisis, we just papered them over with lots of money printing and lots more debt. And of course all of this manipulation just made our long-term problems even worse. I really like how Peter Schiff put it recently…

What’s happening is pretty much what we would anticipate. I don’t see from the data any real economic recovery, certainly not in the United States.

We’re spending more money, but it’s not because we’re generating more wealth. We’re generating more debt. We’re using that borrowed money to consume and so temporarily it feels that we’re wealthier because we get to spend all that money… but we have to come to terms with paying the bill.

The bills are going to come due. Right now interest rates are being kept at zero which makes it possible to service the debt even though it’s impossible to repay it… at least we can service it. But once interest rates go up then we can’t even service it let alone repay it.

And then the party is going to come to an end.

Indeed – the party is coming to an end, and a new financial crisis is playing out in textbook fashion right in front of our eyes.

Hopefully you are already prepared for what is coming next, because it is going to be extremely painful for the U.S. economy.

Global Trade Is Collapsing As The Worldwide Economic Recession Deepens

October 19, 2015October 19, 2015 by Michael

When the global economy is doing well, the amount of stuff that is imported and exported around the world goes up, and when the global economy is in recession, the amount of stuff that is imported and exported around the world goes down. It is just basic economics. Governments around the world have become very adept at manipulating other measures of economic activity such as GDP, but the trade numbers are more difficult to fudge. Today, China accounts for more global trade than anyone else on the entire planet, and we have just learned that Chinese exports and Chinese imports are both collapsing right now. But this is just part of a larger trend. As I discussed the other day, British banking giant HSBC has reported that total global trade is down 8.4 percent so far in 2015, and global GDP expressed in U.S. dollars is down 3.4 percent. The only other times global trade has plummeted this much has been during other global recessions, and it appears that this new downturn is only just beginning.

For many years, China has been leading the revolution in global trade. But now we are witnessing something that is almost unprecedented. Chinese exports are falling, and Chinese imports are absolutely imploding…

Growth of exports from China has been dropping relentlessly, for years. Now this “growth” has actually turned negative. In September, exports were down 3.7% from a year earlier, the “inevitable fallout from China’s unsustainable and poorly executed credit splurge,” as Thomson Reuters’ Alpha Now puts it. Most of these exports are manufactured goods that are shipped by container to the rest of the world.

And imports into China – a mix of bulk and containerized freight – have been plunging: down 20.4% in September from a year earlier, after at a 13.8% drop in August.

This week it was announced that Chinese GDP growth had fallen to the lowest level since the last recession, and that makes sense. Global economic activity is really slowing down, and this is deeply affecting China.

So what about the United States?

Well, based on the amount of stuff that is being shipped around in our country it appears that our economy is really slowing down too. The following comes from Wolf Richter, and I shared some of it in a previous article, but I think that it bears repeating…

September is in the early phase of the make-or-break holiday shipping season. Shipments usually increase from August to September. They did this year too. The number of shipments in September inched up 1.7% from August, according to the Cass Freight Index.

But the index was down 1.5% from an already lousy September last year, when shipments had fallen from the prior month, instead of rising. And so, in terms of the number of shipments, it was the worst September since 2010.

It has been crummy all year: With the exception of January and February, the shipping volume has been lower year-over-year every month!

The index is broad. It tracks data from shippers, no matter what carrier they choose, whether truck, rail, or air, and includes carriers like FedEx and UPS.

What major retailers such as Wal-Mart are reporting also confirms that we are in a major economic slowdown. Wal-Mart recently announced that its earnings would fall by as much as 12 percent during the next fiscal year, and that caused Wal-Mart stock to drop by the most in 27 years.

And of course this is going to have a huge ripple effect. There are thousands of other companies that do business with Wal-Mart, and Reuters is reporting that they are starting to get squeezed…

Suppliers of everything from groceries to sports equipment are already being squeezed for price cuts and cost sharing by Wal-Mart Stores. Now they are bracing for the pressure to ratchet up even more after a shock earnings warning from the retailer last week.

The discount store behemoth has always had a reputation for demanding lower prices from vendors but Reuters has learned from interviews with suppliers and consultants, as well as reviewing some contracts, that even by its standards Wal-Mart has been turning up the heat on them this year.

“The ground is shaking here,” said Cameron Smith, head of Cameron Smith & Associates, a major recruiting firm for suppliers located close to Wal-Mart’s headquarters in Bentonville, Arkansas. “Suppliers are going to have to help Wal-Mart get back on track.”

Similar things are going on at some of the other biggest companies in America as well.

For instance, things have gotten so bad for McDonald’s that one franchise owner recently stated that the restaurant chain is “facing its final days”…

“McDonald’s announced in April that it would be closing 700 ‘underperforming’ locations, but because of the company’s sheer size — it has 14,300 locations in the United States alone — this was not necessarily a reduction in the size of the company, especially because it continues to open locations around the world. It still has more than double the locations of Burger King, its closest competitor.”

However, for the franchisees, the picture looks much worse than simply 700 stores closing down.

“We are in the throes of a deep depression, and nothing is changing,” a franchise owner wrote in response to a financial survey by Nomura Group. “Probably 30% of operators are insolvent.” One owner went as far as to speculate that McDonald’s is literally “facing its final days.”

Why would things be so bad at Wal-Mart and McDonald’s if the economy was “recovering”?

Come on now – let’s use some common sense here.

All of the numbers are screaming at us that we have entered a major economic downturn and that it is accelerating.

CNBC is reporting that the number of job openings in the U.S. is falling and that the number of layoffs is rising…

Job openings fell 5.3 percent in August, while a 2.6 percent rise in layoffs and discharges offset a 0.3 percent gain in hires. Finally, the amount of quits — or what Convergex calls its “take this job and shove it” indicator because it shows the percentage of workers who left positions voluntarily — fell to 56.6 percent from 57.1 percent, indicating less confidence in mobility.

And as I discussed the other day, Challenger Gray is reporting that we are seeing layoffs at major firms at a level that we have not witnessed since 2009.

We already have 102.6 million working age Americans that do not have a job right now. As this emerging worldwide recession deepens, a lot more Americans are going to lose their jobs. That is going to cause the poverty and suffering in this country to spike even more, if you can imagine that.

Just consider what authorities discovered on the streets of Philadelphia just this week…

Support is flooding in for a homeless Philadelphia family whose two-year-old son was found wandering alone in a park in the middle of the night.

Angelique Roland, 27, and Michael Jones, 24, were sleeping with their children behind cardboard boxes underneath the Fairmount Park Welcome Center in Love Park when the toddler slipped away.

The boy was found just before midnight and handed over to a nearby Southeastern Pennsylvania Transportation Authority police officer, who took him to the Children’s Hospital of Philadelphia.

He was wearing a green, long sleeve shirt, black running pants and had a diaper on, but did not have shoes or socks.

Could you imagine sleeping on the streets and not even being able to provide your two-year-old child with shoes and socks?

These numbers that I write about every day are not a game. They affect all of us on a very personal level.

Just like in 2008 and 2009, millions of Americans that are living a very comfortable middle class lifestyle today will soon lose their jobs and will end up out in the streets.

In fact, there will be people that will read this article that this will happen to.

So no, none of us should be excited that the global economy is collapsing. There is already so much pain all around us, and what is to come is beyond what most of us would even dare to imagine.

Moving Toward A One World Government, A One World Economy And A One World Religion

October 18, 2015October 18, 2015 by Michael

The global elite have never been closer to their goal of a united world. Thanks to a series of interlocking treaties and international agreements, the governance of this planet is increasingly becoming globalized and centralized, but most people don’t seem alarmed by this at all. In the past 30 days, we have seen some of the biggest steps toward a one world government, a one world economy and a one world religion that we have ever witnessed, but these events have sparked very little public discussion or debate. So please share this article with as many people as you can. We need to wake people up about this before it is too late.

From September 25th to September 27th, the United Nations launched a “new universal agenda” for humanity. Those are not my words, they actually come directly out of the core document for this new agenda. The Pope traveled to New York City to give the address that kicked off this conference, thus giving his considerable endorsement to this new plan. Virtually every nation on the entire planet willingly signed up for the 17 goals that are included in this plan, but this stunning turn of events made very few international headlines.

The United Nations is promising that if we all work together that we can turn our planet into some kind of “utopia”, but the truth is that all of this talk about “unity” masks a very insidious agenda. The following comes from a recent piece by Paul McGuire, the author of a groundbreaking new book entitled “The Babylon Code”…

The UN is not asking permission, but issuing a command that the entire planet will commit to 17 sustainable development goals and 169 sustainable development targets designed to radically transform our world by 2030. The UN 2030 plan promoted by the Pope will advance Agenda 21 on steroids. Through a controlled media the mass populations will be told that this is all about saving the environment and “ending poverty.” But that is not the true agenda of Agenda 21. The true agenda of Agenda 21 is to establish a global government, global economic system, and global religion. When UN Secretary General Ban Ki-Moon spoke of “a dream of a world of peace and dignity for all” this is no different than when the Communists promised the people a “workers paradise.”

For the general population, “the 2030 Agenda” has been rebranded as “the global goals”. On September 26th, some of the biggest names in the music world (including Beyonce) promoted these new “global goals” at the “Global Citizen Festival” that was held in Central Park. And you can watch a YouTube video where some of the most famous names on the entire planet urge all of us to get behind these new “global goals” right here.

None of this is by accident. We are being trained to think of ourselves as “global citizens” that belong to a “global community”. Decades ago, most Americans would have been up in arms over something like this. But now most people just seem to accept these changes passively. Very powerful secret societies and international organizations have been moving us in this direction for a very long time, and most Americans simply have no idea what is happening. Here is more from Paul McGuire…

The United Nations is a de facto global government and does not rule by the “consent of the governed.” The United Nations is a global government to which American politicians of both parties have surrendered our Constitutional rights. If you look at the Republican Presidential debates you see the vast majority of those running are “bought men and women.” They are there to do the bidding of their true masters, the international banking families and their interlocking secret societies. If a candidate has a different set of beliefs than the “Orwellian group think” which constitutes domestic and foreign policy, he is allowed to go only so far.

Who are these powerful elite groups and the secret societies that run them? As we extensively document in our new book, The Babylon Code, co-authored by this author and Troy Anderson, a Pulitzer Prize-nominated investigative journalist, there exists a very real network of semi-secretive and secret groups. Groups like The Council on Foreign Relations, The Trilateral Commission, Royal Institute of International Affairs, United Nations, Club of Rome, The Bilderberg Group, and others control presidents, prime ministers, media networks, politicians, CEO’s, and entire nations. You will almost never hear any substantive analysis by the media, which is controlled by these groups nor of attempts at holding them accountable by governments around the world.

Another way that our planet is being “united” is through the use of international trade agreements.

The ultimate goal is for the entire world to become a “single market” with uniform laws, rules and regulations. But as we merge our economy with the rest of the globe, the United States has been losing tens of thousands of businesses and millions of jobs as the monolithic corporations that now dominate our economy shift production to areas where labor is much cheaper. This is absolutely destroying the middle class, but very few people seem to care.

Negotiations for one of the biggest international trade treaties that the world has ever seen recently concluded. The Trans-Pacific Partnership, also known as “Obamatrade”, would represent a giant step toward a truly unified global economy. The following is an excerpt from one of my previous articles…

We have just witnessed one of the most significant steps toward a one world economic system that we have ever seen. Negotiations for the Trans-Pacific Partnership have been completed, and if approved it will create the largest trading bloc on the planet. But this is not just a trade agreement. In this treaty, Barack Obama has thrown in all sorts of things that he never would have been able to get through Congress otherwise. And once this treaty is approved, it will be exceedingly difficult to ever make changes to it. So essentially what is happening is that the Obama agenda is being permanently locked in for 40 percent of the global economy.

The United States, Canada, Japan, Mexico, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam all intend to sign on to this insidious plan. Collectively, these nations have a total population of about 800 million people and a combined GDP of approximately 28 trillion dollars.

And do you want to know who pushed really hard to give Obama fast track negotiating authority so that these negotiations could be brought to a successful conclusion?

It was the traitorous Republican leadership in Congress. They did everything that they could to pave the way for Obamatrade.

We are also seeing some stunning moves in the direction of a one world religion.

In recent years, you may have noticed that it has become very trendy to say that all religions are just different paths to the same God. In fact, many prominent religious leaders are now openly proclaiming that the two biggest faiths on the entire planet, Christianity and Islam, worship the exact same deity.

For example, just consider what the Pope is saying publicly on this matter. The following is an extended excerpt from one of my recent articles on End of the American Dream…

*****

What Pope Francis had to say at St. Patrick’s Cathedral in Manhattan has received very little coverage by the mainstream media, but it was exceedingly significant. The following is how he began his address…

I would like to express two sentiments for my Muslim brothers and sisters: Firstly, my greetings as they celebrate the feast of sacrifice. I would have wished my greeting to be warmer. My sentiments of closeness, my sentiments of closeness in the face of tragedy. The tragedy that they suffered in Mecca.

In this moment, I give assurances of my prayers. I unite myself with you all. A prayer to almighty god, all merciful.

He did not choose those words by accident. In Islam, Allah is known as “the all-merciful one”. If you doubt this, just do a Google search.

And this is not the first time Pope Francis has used such language. For instance, the following comes from remarks that he made during his very first ecumenical meeting as Pope…

I then greet and cordially thank you all, dear friends belonging to other religious traditions; first of all the Muslims, who worship the one God, living and merciful, and call upon Him in prayer, and all of you. I really appreciate your presence: in it I see a tangible sign of the will to grow in mutual esteem and cooperation for the common good of humanity.

The Catholic Church is aware of the importance of promoting friendship and respect between men and women of different religious traditions – I wish to repeat this: promoting friendship and respect between men and women of different religious traditions – it also attests the valuable work that the Pontifical Council for interreligious dialogue performs.

Pope Francis clearly believes that Christians and Muslims worship the exact same God. And so that helps to explain why he authorized “Islamic prayers and readings from the Quran” at the Vatican for the first time ever back in 2014.

*****

What is happening is undeniable.

We are steamrolling toward a one world government, a one world economy and a one world religion.

Of course we will not get there overnight. It is going to take some time, and there are going to be quite a few bumps along the way. In fact, I believe that our planet will experience an extreme amount of chaos before we actually get there.

But every major crisis will be used as an excuse to advance this agenda. Virtually every solution that the elite offer us will involve more globalization and more centralization. We will be told that all of our problems will be solved if humanity will just come together in unity.

For some, the goal of a “united planet” where we are all working together to eradicate things like poverty, war and disease makes all the sense in the world.

For others, a one world government, a one world economy and a one world religion would simply mean setting the stage for “one world tyranny”.

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

The Numbers Say That A Major Global Recession Has Already Begun

October 13, 2015October 13, 2015 by Michael

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

When will people wake up?

What is it going to take?

The crisis is happening right now.

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

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

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

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

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

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

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

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

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

Copper, China And World Trade Are All Screaming That The Next Economic Crisis Is Here

July 23, 2015July 23, 2015 by Michael

If you are looking for a “canary in a coal mine” type of warning for the entire global economy, you have a whole bunch to pick from right now. “Dr. Copper” just hit a six year low, Morgan Stanley is warning that this could be the worst oil price crash in 45 years, the Chinese economy is suddenly stalling out, and world trade is falling at the fastest pace that we have seen since the last financial crisis. In order not to see all of the signs that are pointing toward a global economic slowdown, you would have to be willingly blind. In recent months, I have been writing article after article detailing how the exact same patterns that happened just before the stock market crash of 2008 are playing out once again. We are watching a slow-motion train wreck unfold right before our eyes, and things are only going to get worse from here.

Copper is referred to as “Dr. Copper” because it does such an excellent job of indicating where economic conditions are heading next. We saw this in 2008, when the price of copper started crashing big time in the months leading up to the stock market implosion.

Well, now copper is crashing again. Just check out this chart. The price of copper plunged again on Wednesday, and it is now the lowest that it has been since the last financial crisis. Unfortunately, the forecast for the months ahead is not good. The following is what Goldman Sachs is saying about copper…

“Though we have been bearish on copper on a 12-mo forward basis for the past two and a half years, we have maintained a more bullish medium to long-term stance on the assumption of Chinese copper demand growth of 4% per annum and a major slowing in supply growth around 2017/2018 … we substantially lower our short, medium, and long-term copper price forecasts, on the back of lower Chinese copper demand growth forecasts (we have been highlighting that the risk has been skewed to the downside for some time), increased conviction in copper supply growth over the next three years, and increased conviction in the outlook for mining cost deflation in dollar terms.”

It is funny that Goldman mentioned China so prominently. Even though China’s fake GDP figures say that everything is fine over there, other numbers are painting a very dismal picture.

For instance, Chinese electrical consumption in June grew at the slowest pace that we have seen in 30 years, and capital outflows from China have reached a level that is “frightening”…

Robin Brooks at Goldman Sachs estimates that capital outflows topped $224bn in the second quarter, a level “beyond anything seen historically”.

The Chinese central bank (PBOC) is being forced to run down the country’s foreign reserves to defend the yuan. This intervention is becoming chronic. The volume is rising. Mr Brooks calculates that the authorities sold $48bn of bonds between March and June.

Charles Dumas at Lombard Street Research says capital outflows – when will we start calling it capital flight? – have reached $800bn over the past year. These are frighteningly large sums of money.

Just last month, the Chinese stock market started to crash, but the crash was interrupted when the Chinese government essentially declared a form of financial martial law.

And I don’t think that “financial martial law” is too strong of a term to use in this case. Just consider the following excerpt from a recent article in the Telegraph…

Half the shares traded in Shanghai and Shenzhen were suspended. New floats were halted. Some 300 corporate bosses were strong-armed into buying back their own shares. Police state tactics were used hunt down short sellers.

We know from a vivid account in Caixin magazine that China’s top brokers were shut in a room and ordered to hand over money for an orchestrated buying blitz. A target of 4,500 was set for the Shanghai Composite by Communist Party officials.

So a stock market crash was halted, but in doing so Chinese officials have essentially destroyed the second largest stock market in the world. China’s financial markets have lost all legitimacy, and foreigners are going to be extremely hesitant to put any money into Chinese stocks from now on.

Meanwhile, there is no hiding the fact that trade activity in China and in most of the rest of the planet is slowing down. In fact, world trade volume has now dropped by the most that we have seen since the last global recession. The following comes from Zero Hedge…

As goes the world, so goes America (according to 30 years of historical data), and so when world trade volumes drop over 2% (the biggest drop since 2009) in the last six months to the weakest since June 2014, the “US recession imminent” canary in the coalmine is drawing her last breath…

As Wolf Street’s Wolf Richter adds, this isn’t stagnation or sluggish growth. This is the steepest and longest decline in world trade since the Financial Crisis. Unless a miracle happened in June, and miracles are becoming exceedingly scarce in this sector, world trade will have experienced its first back-to-back quarterly contraction since 2009.

As you probably noted in the chart above, a decline in world trade is almost always associated with a recession.

That was certainly the case back in 2008 and 2009.

Another similarity between the last crisis and what is happening now is a crash in the price of oil.

According to Business Insider, we have just officially entered a brand new bear market for oil…

Oil is officially in a bear market.

On Thursday, West Texas Intermediate crude oil futures fell more than 1% to settle near $48.55 per barrel in New York.

A bear market is roughly defined as a 20% drop from highs. Crude has now fallen by about 20% in the last six weeks.

So what does all of this mean?

All of these signs are indicating that another great economic crisis is here, and that a global financial implosion is just around the corner.

At this point, even many of the “bulls” are sounding the alarm. For example, just consider what Henry Blodget of Business Insider is saying…

As regular readers know, for the past ~21 months I have been worrying out loud about US stock prices. Specifically, I have suggested that a decline of 30% to 50% would not be a surprise.

I haven’t predicted a crash. But I have said clearly that I think stocks will deliver returns that are way below average for the next seven to 10 years. And I certainly won’t be surprised to see stocks crash. So don’t say no one warned you!

For those that don’t know, Henry Blodget is definitely not a bear. In fact, he is one of Wall Street’s biggest cheerleaders.

So for Blodget to suggest that we could see the stock market drop by half is a really big deal.

The closer that we get to this next crisis, the clearer that everything is becoming.

Where are things going to go from here? Please feel free to add to the discussion by posting a comment below…

The Debt To GDP Ratio For The Entire World: 286 Percent

May 17, 2015 by Michael

Did you know that there is more than $28,000 of debt for every man, woman and child on the entire planet? And since close to 3 billion of those people survive on less than 2 dollars a day, your share of that debt is going to be much larger than that. If we took everything that the global economy produced this year and everything that the global economy produced next year and used it to pay all of this debt, it still would not be enough. According to a recent report put out by the McKinsey Global Institute entitled “Debt and (not much) deleveraging“, the total amount of debt on our planet has grown from 142 trillion dollars at the end of 2007 to 199 trillion dollars today. This is the largest mountain of debt in the history of the world, and those numbers mean that we are in substantially worse condition than we were just prior to the last financial crisis.

When it comes to debt, a lot of fingers get pointed at the United States, and rightly so. Just prior to the last recession, the U.S. national debt was sitting at about 9 trillion dollars. Today, it has crossed the 18 trillion dollar mark. But of course the U.S. is not the only one that is guilty. In fact, the McKinsey Global Institute says that debt levels have grown in all major economies since 2007. The following is an excerpt from the report…

Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points (Exhibit 1). That poses new risks to financial stability and may undermine global economic growth.

What is surprising is that debt has actually grown the most in China. If you can believe it, total Chinese debt has grown from 7 trillion dollars in 2007 to 28 trillion dollars today. Needless to say, that is absolutely insane…

China’s debt has quadrupled since 2007. Fueled by real estate and shadow banking, China’s total debt has nearly quadrupled, rising to $28 trillion by mid-2014, from $7 trillion in 2007. At 282 percent of GDP, China’s debt as a share of GDP, while manageable, is larger than that of the United States or Germany. Three developments are potentially worrisome: half of all loans are linked, directly or indirectly, to China’s overheated real-estate market; unregulated shadow banking accounts for nearly half of new lending; and the debt of many local governments is probably unsustainable. However, MGI calculates that China’s government has the capacity to bail out the financial sector should a property-related debt crisis develop. The challenge will be to contain future debt increases and reduce the risks of such a crisis, without putting the brakes on economic growth.

What all of this means is that our long-term global economic problems have gotten much, much worse. This short-lived period of relative stability that we have been enjoying has been fueled by unprecedented amounts of debt and voracious money printing. Anyone with half a brain should be able to see that this is a giant financial bubble, and in the end it is going to unwind very, very painfully. The following comes from a Canadian news source…

At the beginning of 2008, government accounted for a smaller portion of the debt pie than corporate, household or financial debt. It now exceeds each of those other categories.

“The current situation is much worse than in 2000 or 2007, and with interest rates near or at zero, the central banks have already used up their ammunition. Plus, the total indebtedness, especially the indebtedness of governments, is much higher than ever before,” said Claus Vogt, a Berlin-based analyst and co-author of a 2011 book titled The Global Debt Trap.

“Every speculative bubble rests on some kind of a fairy tale, a story the bubble participants believe in and use as rationalization to buy extremely overvalued stocks or bonds or real estate,” Mr. Vogt argued. “And now it is the faith in the central-planning capabilities of global central bankers. When the loss of confidence in the Fed, the ECB etc. begins, the stampede out of stocks and bonds will start. I think we are very close to this pivotal moment in financial history.”

But for the moment, the ridiculous stock market bubble continues.

Internet companies that didn’t even exist a decade ago are now supposedly worth billions upon billions of dollars even though some of them don’t make any money at all. There is even a name for this phenomenon. Internet companies that have gigantic valuations without gigantic revenue streams are being called “unicorns”…

A dizzying mix of bold ideas and lavish investments has catapulted dozens of privately held start-ups to unicorn status, defined as having market valuations of at least $1 billion often without soaring revenues to match. Social-sharing site Pinterest has soared to $11 billion. Ride-hailing company Uber is now worth a staggering $50 billion.

How long can the party last?

And these days, Wall Street even rewards companies that lose huge amounts of money quarter after quarter. For example, just check out what happened when JC Penney announced that it only lost 167 million dollars during the first quarter of 2015…

Yippee!!! JC Penney ONLY lost $167 million in the first quarter. The Wall Street shysters are ecstatic because they BEAT expectations. Buy Buy Buy.

This loss now brings JC Penney’s cumulative loss since 2011 to, drum roll please, $3.5 BILLION. They haven’t had a profitable quarter in over four years. But, they are always on the verge of that turnaround just over the horizon.

Wall Street has told you to buy this stock from $42 in 2012 to it’s current pitiful level of $9. They tout the wonderful 3.4% increase in comparable sales. They fail to mention that first quarter 2016 sales are only 30% below first quarter sales in 2011.

They fail to mention that JC Penney burned through another $274 million of cash in the first quarter. Their equity has dropped by $1 billion in the last year, while their long term debt has gone up by $500 million.

This is how irrational Wall Street has become. JC Penney is ultimately going to zero, and yet there are still people out there that are pouring huge amounts of money into that financial black hole.

Sadly, the truth is that Wall Street is headed for a very painful awakening.

What we are experiencing right now is the greatest financial bubble of all time.

What comes after that is going to be the greatest financial crash of all time.

199,000,000,000,000 dollars of debt is about to come crashing down, and the pain of this disaster will be felt by every man, woman and child on the entire planet.

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.

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