World

You Can Add Iraq And Ukraine To The List Of Economies That Are Collapsing

August 5, 2015August 5, 2015 by Michael

The list of nations around the globe that have collapsing economies just continues to grow. In recent weeks I have written about the ongoing saga in Greece, the stock market crash in China, the debt crisis in Puerto Rico and the economic meltdown in South America. But there are more economic flashpoints that I have not even addressed yet. For example, did you know that a full-blown economic collapse is happening in Iraq right now? And did you know that the economy of Ukraine is contracting rapidly and that it cannot pay its debts? Back in 2008, the financial crisis was primarily centered on the United States, but this time around it is turning out to be a truly global phenomenon.

When the U.S. “liberated” Iraq, the future for that nation was supposed to be incredibly bright. But instead, things have just gone from bad to worse. This has especially been true since we pulled our troops out and allowed ISIS to run buck wild. At this point unemployment in Iraq is at Great Depression levels, the economy is steadily contracting and government debt is spiraling wildly out of control…

But Iraq’s oil industry, and the government’s budget, is being squeezed by low oil prices. As a result, the nation’s finances are being hit hard: the market price is now half that needed to break even, expanding the budget deficit, forecast to return to balance until the rise of IS, to a projected 9% of GDP.

In the past, Iraq’s leaders approved budgets without seriously taking into account a drop in the price of oil. Now the severe revenue shortfall is forcing leaders to cut back on new investments. Russia’s Lukoil, Royal Dutch Shell, and Italy’s ENI are also cutting back, eyeing neighbouring Iran’s pending economic opening as a safer investment.

Despite improving its finances after the US troop withdrawal, the drop in oil prices and the rising costs of battling IS have pushed Iraq’s economy into a state of near-crisis. According to the IMF, the nation’s GDP shrank by 2.7% in 2014 and unemployment is estimated to be over 25%.

Things are even worse in another nation that was recently “liberated”. The new U.S.-friendly government in Ukraine was supposed to make things much better for average Ukrainians, but instead the economy is absolutely imploding…

The country’s GDP contracted by 6.8 percent last year, and is forecast to shrink by another 9 percent this year — a total loss of roughly 16 percent over two years.

Just like in much of southern Europe, the banks are absolutely overloaded with bad loans and the entire banking system is on the verge of total collapse. The following comes from a CNN article that was posted earlier this year…

Ukraine’s banking sector is one of the weakest parts of the economy. The key interest rates are the highest in 15 years, and experts estimate bad loans make up between one third and one half of all banking assets.

Over 40 banks have been declared bankrupt since the war began, with the country’s fourth largest lender, Delta Bank, going under earlier this week.

Just recently, the government of Ukraine declared that it could not pay its debts. We didn’t hear much about this in the United States, because the Obama administration wants us to believe that their policies over there are a success. But the truth is that Ukraine now needs a “debt restructuring deal” similar to what Greece has received in the past…

Progress between Ukraine and its creditors on a $19 billion restructuring may be losing momentum as a proposed high-level meeting was canceled amid further disagreements over terms.

Ukraine’s $2.6 billion of 2017 notes fell the most in a month after a person familiar with negotiations said a new offer put forward by Ukraine this week would be unacceptable to bondholders. Later on Wednesday, Ukraine’s Finance Ministry said that a Franklin Templeton-led creditor group should prepare an improved offer for meetings next week.

Speaking of Greece, things just continue to unravel over there. Earlier this week we witnessed the greatest one day stock market crash in Greek history, and there was more financial carnage on Wednesday. The following comes from the Economic Policy Journal…

For a second straight day, following the reopening of the Greek stock market, there were heavy losses in Greek banking stocks, with shares across the sector once again falling by about 30 percent, the bottom of their daily limit.

Bank of Piraeus and National Bank of Greece fell the most, falling by the daily limit of 30 percent t. Alpha Bank was 29.7 percent lower and Eurobank Ergasias lost 29.6 percent.

At this point you would have to be blind to not see what is happening.

A financial crisis is not just imminent – one is already starting to erupt all over the planet.

And none of us can say that we weren’t warned. In a recent piece, Bill Holter included a long list of ominous financial warnings that were issued over the past two years by either the IMF or the Bank for International Settlements…

July 2014 – BIS –BIS Issues Strong Warning on “Asset Bubbles”

July 2014 – IMF –Bloomberg: IMF Warns of Potential Risks to Global Growth

October 2014 – BIS –”No One Could Foresee this Coming”

October 2014 IMF Direct Blog — What Could Make $3.8 Trillion in global bonds go up in smoke?

October 2014 IMF Report –”Heat Wave”-Rising financial risk in the U.S.

***December 2014 – BIS –BIS Issues a new warning on markets

December 2014 – BIS —BIS Warnings on the U.S. Dollar

February 2015 – IMF – Shadow Banking — Another Warning from the IMF – This Time on “Shadow Banking”

March 2015 – Former IMF Peter Doyle – Don’t expect any warning on new crisis -Former IMF Peter Doyle: Don’t Expect any Early Warning from the IMF –

*** April 2015 IMF – Liquidity Shock –IMF Tells Regulators to Brace for Liquidity Shock

May 2015 BIS – Need New “Rules of the Game” –BIS: Time to Think about New Global Rules of the Game?

June 2015 BIS Credit Risk Report –BIS: New Credit Risk Management Report

June 2015 IMF (Jose Vinals) –IMF’s Vinals Says Central Banks May Have to be Market Makers

***BIS June 2015 (UK Telegraph) –The world is defenceless against the next financial crisis, warns BIS

July 2015 – IMF – Warns US the System is Still Vulnerable (no blog article) –IMF warns U.S.: Your financial system is (still) vulnerable

July 2015 – IMF – Warns Pension Funds Could Pose Systemic Risk (no blog article) –IMF warns pension funds could pose systemic risks to the US

Overall, there are currently 24 nations that are dealing with a major financial crisis right now, and there are another 14 nations that are right on the verge of one.

But even though a global financial crisis is already unfolding right in front of our eyes, there are people that come to my website every day and leave comments telling me that everything is going to be just fine.

So what do you think?

What do you believe the rest of this year will bring?

Please feel free to share your thoughts by posting a comment below…

16 Facts About The Tremendous Financial Devastation That We Are Seeing All Over The World

July 20, 2015June 29, 2015 by Michael

As we enter the second half of 2015, financial panic has gripped most of the globe. Stock prices are crashing in China, in Europe and in the United States. Greece is on the verge of a historic default, and now Puerto Rico and Ukraine are both threatening to default on their debts if they do not receive concessions from their creditors. Not since the financial crisis of 2008 has so much financial chaos been unleashed all at once. Could it be possible that the great financial crisis of 2015 has begun? The following are 16 facts about the tremendous financial devastation that is happening all over the world right now…

1. On Monday, the Dow fell by 350 points. That was the biggest one day decline that we have seen in two years.

2. In Europe, stocks got absolutely smashed. Germany’s DAX index dropped 3.6 percent, and France’s CAC 40 was down 3.7 percent.

3. After Greece, Italy is considered to be the most financially troubled nation in the eurozone, and on Monday Italian stocks were down more than 5 percent.

4. Greek stocks were down an astounding 18 percent on Monday.

5. As the week began, we witnessed the largest one day increase in European bond spreads that we have seen in seven years.

6. Chinese stocks have already met the official definition of being in a “bear market” – the Shanghai Composite is already down more than 20 percent from the high earlier this year.

7. Overall, this Chinese stock market crash is the worst that we have witnessed in 19 years.

8. On Monday, Standard & Poor’s slashed Greece’s credit rating once again and publicly stated that it believes that Greece now has a 50 percent chance of leaving the euro.

9. On Tuesday, Greece is scheduled to make a 1.6 billion euro loan repayment. One Greek official has already stated that this is not going to happen.

10. Greek banks have been totally shut down, and a daily cash withdrawal limit of 60 euros has been established. Nobody knows when this limit will be lifted.

11. Yields on 10 year Greek government bonds have shot past 15 percent.

12. U.S. investors are far more exposed to Greece than most people realize. The New York Times explains…

But the question of what happens when the markets do open is particularly acute for the hedge fund investors — including luminaries like David Einhorn and John Paulson — who have collectively poured more than 10 billion euros, or $11 billion, into Greek government bonds, bank stocks and a slew of other investments.

Through the weekend, Nicholas L. Papapolitis, a corporate lawyer here, was working round the clock comforting and cajoling his frantic hedge fund clients.

“People are freaking out,” said Mr. Papapolitis, 32, his eyes red and his voice hoarse. “They have made some really big bets on Greece.”

13. The Governor of Puerto Rico has announced that the debts that the small island has accumulated are “not payable“.

14. Overall, the government of Puerto Rico owes approximately 72 billion dollars to the rest of the world. Without debt restructuring, it is inevitable that Puerto Rico will default. In fact, CNN says that it could happen by the end of this summer.

15. Ukraine has just announced that it may “suspend debt payments” if their creditors do not agree to take a 40 percent “haircut”.

16. This week the Bank for International Settlements has just come out with a new report that says that central banks around the world are “defenseless” to stop the next major global financial crisis.

Without a doubt, we are overdue for another major financial crisis. All over the planet, stocks are massively overvalued, and financial markets have become completely disconnected from economic reality. And when the next crash happens, many believe that it will be even worse than what we experienced back in 2008. For example, just consider the words of Jim Rogers…

“In the United States, we have had economic slowdowns every four to seven years since the beginning of the Republic. It’s now been six or seven years since our last stock market problem. We’re overdue for another problem.”

In Rogers’ view, low interest rates caused stock prices to increase significantly. He believes many assets are priced beyond their fundamentals thanks to the ultra-easy monetary policies by the Federal Reserve. Fed supporters argue such measures are good for investors, but Rogers takes a different view.

“The Fed might tell us we don’t have to worry and that a correction or crash will never happen again. That’s balderdash! When this artificial sea of liquidity ends, we’re going to pay a terrible price. When the next economic problem occurs, it will be much worse because the debt is so much higher.”

Of course Rogers is far from alone. A recent article by Paul B. Farrell expressed similar sentiments…

America’s 95 million investors are at huge risk. Remember the $10 trillion losses in the crash and recession of 2007-2009? The $8 trillion lost after the dot-com technology crash and recession of 2000-2003? This is the third big recession of the century. Yes, America will lose trillions again.

Especially with dead-ahead predictions like Mark Cook’s 4,000-point Dow correction. And Jeremy Grantham’s warning of a 50% crash around election time, with negative stock returns through the first term of the next president, beyond 2020. Starting soon.

Why is America so vulnerable when the next recession hits? Simple: The Fed’s cheap-money giveaway is killing America. When the downturn, correction, crash hits, it will compare to the 2008 crash. The Economist warns: “the world will be in a rotten position to do much about it. Rarely have so many large economies been so ill-equipped to manage a recession,” whatever the trigger.

Things have been relatively quiet in the financial world for so long that many have been sucked into a false sense of security.

But the underlying imbalances were always there, and they have been getting worse over time.

I believe that we are heading into a global financial collapse that will make what happened in 2008 look like a Sunday picnic by the time it is all said and done.

Global debt levels are at all-time highs, big banks all over the planet have been behaving more recklessly than ever, and financial markets are absolutely primed for a huge crash.

Hopefully things will calm down a bit as the rest of this week unfolds, but I wouldn’t count on it.

We have entered uncharted territory, and what comes next is going to shock the world.

Greece Says That It Will Default On June 5th, And Moody’s Warns Of A ‘Deposit Freeze’

May 20, 2015 by Michael

The Greek government says that a “moment of truth” is coming on June 5th. Either their lenders agree to give them more money by that date, or Greece will default on a 300 million euro loan payment to the IMF. Of course it won’t technically be a “default” according to IMF rules for another 30 days after that, but without a doubt news that Greece cannot pay will send shockwaves throughout the financial world. At that point, those holding Greek bonds will start to panic as they realize that they might not get paid as well. All over Europe, there are major banks that are holding large amounts of Greek debt and derivatives that are related to the performance of Greek debt. If something is not done to avert disaster at the last moment, a default by Greece could be the spark that sets off a major European financial crisis this summer.

As I discussed the other day, neither the EU nor the IMF have given any money to Greece since August 2014. So now the Greek government is just about out of money, and without any new loans they will not be able to pay back the old loans that are coming due. In fact, things are so bad at this point that the Greek government is openly warning that it will default on June 5th…

Greece cannot make an upcoming payment to the International Monetary Fund on June 5 unless foreign lenders disburse more aid, a senior ruling party lawmaker said on Wednesday, the latest warning from Athens it is on the verge of default.

Prime Minister Alexis Tsipras’s leftist government says it hopes to reach a cash-for-reforms deal in days, although European Union and IMF lenders are more pessimistic and say talks are moving too slowly for that.

Of course this is all part of a very high stakes chess game. The Greeks believe that the Germans will back down when faced with the prospect of a full blown European financial crisis, and the Germans believe that the Greeks will eventually be feeling so much pain that they will be forced to give in to their demands.

So with each day we get closer and closer to the edge, and the Greeks are trying to do their best to let everyone know that they are not bluffing. Just today, a spokesperson for the Greek government came out and declared that unless there is a deal by June 5th, the IMF “won’t get any money”…

Greek officials now point to a race against the clock to clinch a deal before payments totaling about 1.5 billion euros ($1.7 billion) to the IMF come due next month, starting with a 300 million euro payment on June 5.

“Now is the moment that negotiations are coming to a head. Now is the moment of truth, on June 5,” Nikos Filis, spokesman for the ruling Syriza party’s lawmakers, told ANT1 television.

“If there is no deal by then that will address the current funding problem, they won’t get any money,” he said.

But the Germans know that the Greeks desperately need more money and can’t last much longer. The Greek banking system is so close to collapse that Moody’s just downgraded it again and warned that “there is a high likelihood of an imposition of capital controls and a deposit freeze” in the months ahead…

The outlook for the Greek banking system is negative, primarily reflecting the acute deterioration in Greek banks’ funding and liquidity, says Moody’s Investors Service in a new report published recently. These pressures are unlikely to ease over the next 12-18 months and there is a high likelihood of an imposition of capital controls and a deposit freeze.

The new report: “Banking System Outlook: Greece”, is now available on www.moodys.com. Moody’s subscribers can access this report via the link provided at the end of this press release.

Moody’s notes that significant deposit outflows of more than €30 billion since December 2014 have increased banks’ dependence on central bank funding. In our view, the banks are likely to remain highly dependent on central bank funding, as ongoing uncertainty regarding Greece’s support programme continues to compromise depositors’ confidence.

Unfortunately, when things really start going crazy in Greece people might be faced with much more than just frozen bank accounts. As I wrote about just a few days ago, there is a very strong possibility that we could actually see Cyprus-style wealth confiscation implemented in Greece when the banks collapse.

In fact, the Greek government is already talking about the possibility of a special tax on banking transactions…

Athens is promoting the idea of a special levy on banking transactions at a rate of 0.1-0.2 percent, while the government’s proposal for a two-tier value-added tax – depending on whether the payment is in cash or by card – has met with strong opposition from the country’s creditors.

A senior government official told Kathimerini that among the proposals discussed with the eurozone and the International Monetary Fund is the imposition of a levy on bank transactions, whose exact rate will depend on the exemptions that would apply. The aim is to collect 300-600 million euros on a yearly basis.

Fee won’t include ATM withdrawals, transactions up to EU500; in this case Greek govt projects EU300m-EU600m annual revenue from measure.

Sadly, most people living in North America (which is most of my audience) does not really care much about what happens on the other side of the world.

But they should care.

If Greece defaults and the Greek banking system collapses, stocks and bonds will crash all over Europe. Many believe that such a crash can be “contained” to just Europe, but that is really just wishful thinking.

In addition, the euro would plummet dramatically, which would cause substantial financial problems all over the planet. As I recently explained, the euro is headed to parity with the U.S. dollar and then it is going to go below parity. Before it is all said and done, the euro is going to all-time lows.

Of course the U.S. dollar is eventually going to totally collapse as well, but that comes later and that is a story for another day.

According to the Bank for International Settlements, 74 trillion dollars in derivatives are directly tied to the value of the euro, the value of the U.S. dollar and the value of other global currencies.

So if you believe that what is happening in Greece cannot have massive ramifications for the entire global financial system, you are dead wrong.

What is happening in Greece is exceedingly important, and it is time for all of us to start paying attention.

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.

Debt Levels Are Skyrocketing To Extremely Dangerous Levels – How Long Can This Possibly Keep Going?

July 24, 2013July 24, 2013 by Michael

Never before has the world faced such a serious debt crisis. Yes, in the past there have certainly been nations that have gotten into trouble with debt, but we have never had a situation where virtually all of the major powers around the globe were all drowning in debt at the same time. And what makes this crisis even more unprecedented is that everyone on the planet is using fiat currency that is backed up by nothing. It is all just a bunch of paper and data points that people have faith in. Right now, confidence in this system is being shaken as debt levels skyrocket to extremely dangerous levels. Many are openly wondering how much longer this can possibly go on.

Just consider what is going on over in Europe right now. Even the countries that have supposedly “tried austerity” continue to rack up debt at a mind blowing pace. New numbers that have just been released show that government debt to GDP ratios for some of the most financially troubled nations in Europe are absolutely soaring…

Euroarea: 92.2%, up from 88.2% a year ago
Greece: 160.5%, up from 136.5% a year ago
Italy: 130.3%; up from 123.8% a year ago
Portugal: 127.2%, up from 112.3% a year ago
Ireland: 125.1%, up from 106.8% a year ago
Spain: 88.2%, up from 73.0% a year ago
Netherlands: 72.0%, up from 66.7% a year ago

Meanwhile, the debt to GDP ratio in Japan is now well past the 200% mark and continues to march upward with no apparent end in sight. The following is from a recent MSN article…

In Japan, the good news is that the nation’s budget for the fiscal year, which started on April 1, will see the government raise a higher percentage of spending from tax revenue than at any other time in the past four years. The bad news is that the government will still cover 46.3% of its spending from borrowing. The Organisation for Economic Cooperation and Development estimates that Japan’s budget deficit for 2013 amounted to 10.3% of gross domestic product.

In China, the big problem is the absolutely stunning growth of private domestic debt. According to a recent World Bank report, the total amount of credit in China has risen from 9 trillion dollars in 2008 to 23 trillion dollars today.

That increase is roughly equivalent to the entire U.S. commercial banking system.

According to financial journalist Ambrose Evans-Pritchard, the ratio of private domestic debt to GDP in China is now wildly out of control…

The 160pc debt ratio for China is based on a conservative measure of credit. Fitch says it is 200pc if you count all offshore vehicles, trusts, letters of credit etc.

This morning China Securities Journal – an arm of the regulators – said it may really be 221pc.

Well, what about the United States?

As I noted the other day, our ratio of federal government debt to GDP has shot up like a rocket since 2008…

At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain. It is a giant mess, and yet our politicians continue to recklessly spend more money.

And of course state and local governments all over the nation are drowning in debt too. The bankruptcy of Detroit is forcing people to come to grips with how bad things really are. Sadly, as Meredith Whitney explained the other day, there are going to be a lot more municipal bankruptcies coming down the pipeline…

As jarring as the reality may be to accept, Detroit’s decision last week to declare bankruptcy should not be regarded as a one-off in the US municipal market – which is what the bond-peddlers are now telling their clients. The aftershocks of the largest municipal bankruptcy in US history will be staggering, and Detroit will set important precedents.

Municipal bankruptcies have historically been rare for a number of reasons – including the states’ determination to preserve their credit ratings, their access to cheap funding and the stigma of bankruptcy. But, these days, things are very different in the world of municipal finance.

At the root of the problem is the incentive system that elected officials used to face. For decades, across the US, local leaders ran up tabs for future taxpayers; they promised pensions and other benefits for public employees that have strong legal protection. That has been a great source of patronage for elected officials: they can promise all sorts of future perks to loyal supporters (state and local workers) with very little accountability on the delivery of those promises.

And of course the overall debt level in the United States continues to grow much, much faster than our overall economy is growing.

The greatest debt bubble in the history of the planet is still expanding.

How long will it be before it bursts?

That is a very good question. For now, our “leaders” appear to just be trying to keep the party going for as long as possible. They know that if they suddenly change course hard times will hit almost immediately. For example, just check out what Federal Reserve Chairman Ben Bernanke told Congress last week…

With the economy still facing risks, especially from government spending cuts, Bernanke told a congressional panel on Wednesday the Fed is still planning to trim its quantitative easing stimulus, if growth continues at a steady pace.

But expectations that the Fed was poised to start tightening monetary policy, which have sent interest rates jumping and sparked turmoil in global markets, were unwarranted, he stressed.

“I don’t think the Fed can get interest rates up very much, because the economy is weak, inflation rates are low,” Bernanke told the House Financial Services Committee.

“If we were to tighten policy, the economy would tank.”

Nobody wants the economy to “tank”, but the truth is that the more debt that we run up, the larger our long-term economic problems become.

And a growing percentage of Americans realize that something has seriously gone wrong. According to a recent Pew Research survey, 44% of all Americans believe that an economic recovery is still “a long way off“.

Unfortunately, the reality of the matter is that we are already living in the “economic recovery”.

This is about as good as it is going to get.

The truth is that the real storm has not even hit yet. When the debt bubble finally bursts, we are going to see economic chaos in this country unlike anything that we have ever experienced before.

I hope that you are getting ready.

The Rest Of The World Is Absolutely Disgusted With Our Big Brother Spying Methods

June 11, 2013June 11, 2013 by Michael

The rest of the world has found out that the U.S. government has been listening to their phone calls and watching what they do on the Internet and they do not like it one bit. Outrage has been pouring in from all over the planet, and one member of the European Parliament is even comparing the NSA to the Stasi. But instead of stepping back and reevaluating our Big Brother spying methods now that they have been revealed, Barack Obama and other leading members of Congress are defiantly declaring that there is nothing wrong with these methods and that no changes will be made. The U.S. government is going to continue to invade the privacy of the citizens of the rest of the world as much as it possibly can, and our leaders don’t seem to really care what the international response is. And make no mistake – the goal of the U.S. intelligence community is to literally know everything about everyone. The chief technology officer of the CIA, Gus Hunt, made the following shocking admission back in March: “We fundamentally try to collect everything and hang onto it forever.” He followed that statement up with this gem: “It is really very nearly within our grasp to be able to compute on all human-generated information.” In other words, they want it all, and they nearly have the capacity to gather it all already. So where does this end? Will the U.S. intelligence community ever be happy until they have every piece of data on every single person on the entire planet? Do we really want a government that collects “everything” and hangs on to it “forever”?

Thanks to Edward Snowden, the rest of the globe is starting to understand the extent to which the U.S. government has been spying on them. Needless to say, a lot of people are extremely upset about this.

In Germany (a country that knows a thing or two about Big Brother tactics), some prominent politicians are publicly denouncing the surveillance that the U.S. government has been doing on their citizens. In fact, one German politician has accused the U.S. of employing “American-style Stasi methods”…

In a guest editorial for Spiegel Online on Tuesday, Justice Minister Sabine Leutheusser-Schnarrenberger said reports that the United States could access and track virtually all forms of Internet communication were “deeply disconcerting” and potentially dangerous.

“The more a society monitors, controls and observes its citizens, the less free it is,” she said.

“The suspicion of excessive surveillance of communication is so alarming that it cannot be ignored. For that reason, openness and clarification by the U.S. administration itself is paramount at this point. All facts must be put on the table.”

Markus Ferber, a member of Merkel’s Bavarian sister party who sits in the European Parliament, went further, accusing Washington of using “American-style Stasi methods”.

In Italy, the government official in charge of data protection, Antonello Soro, said that the surveillance that the NSA is doing “would not be legal in Italy” and would be “contrary to the principles of our legislation and would represent a very serious violation”.

In Russia (another country with a long history of using Big Brother tactics), President Vladimir Putin has expressed significant concern about the NSA spying program and there are even rumors that Russia will be offering asylum to Edward Snowden…

Alexey Pushkov, head of the Duma’s international affairs committee and a vocal US critic, said on Twitter: “By promising asylum to Snowden, Moscow has taken upon itself the protection of those persecuted for political reasons. There will be hysterics in the US. They only recognise this right for themselves.”

He continued: “Listening to telephones and tracking the internet, the US special services broke the laws of their country. In this case, Snowden, like Assange, is a human rights activist.”

But even more important than what foreign politicians think about the NSA spying scandal is what average people all over the globe think. This scandal is causing millions of average people all over the planet to look at the United States with disgust and disdain. How can we hold ourselves out as the “defenders of freedom” to the rest of the globe when we are openly telling them that we are going to spy on them as much as we possibly can? How do we expect the rest of the world to look at us as “the good guys” when we are selfishly grabbing and recording all of their emails, phone calls and Internet searches without any concern for their privacy whatsoever?

What makes all of this even worse is that our top intelligence officials are making jokes about this scandal. For example, just check out the wisecracks that the Director of National Intelligence, James Clapper, was making at an awards ceremony on Friday…

With the current and past directors of national intelligence at the Omni Shoreham to honor former CIA and National Security Agency chief Michael Hayden, the result in speeches and interviews with intel professionals was a gumbo of outrage, worry and humor.

Director of National Intelligence James Clapper told the black-tie crowd of more than 700 he would “address the elephant in the room” and proceeded, to applause, to denounce “the unauthorized leaks as reprehensible and egregious.” Clapper characterized the program as completely legal, debated and reauthorized by Congress under strict oversight and by court order “to make our nation safe and secure.”

He then cracked a few jokes. “Some of you expressed surprise that I showed up—so many emails to read!” Clapper said. Greeting fellow banqueter John Pistole, the administrator of the Transportation Security Administration who recently reversed a planned policy to permit air travelers to carry certain knives on planes, Clapper said, “John, can I borrow your pocket knife?”

How in the world can he make a joke about reading our emails at a time like this?

This is how arrogant the U.S. intelligence community has become. They feel like they can do whatever they want and get away with it.

For example, back in March Clapper flat out lied to the U.S. Congress about the surveillance that the NSA is doing. When he was asked by Senator Ron Wyden if the NSA was collecting any information on the American people, Clapper completely denied it.

The following is from a transcript of that exchange…

“Does the NSA collect any type of data at all on millions or hundreds of millions of Americans?” Oregon Republican Sen. Ron Wyden asked Clapper at the March 12 hearing.

“No, sir,” Clapper responded.

“It does not?” Wyden pressed.

Clapper recanted and said: “Not wittingly. There are cases where they could, inadvertently perhaps, collect — but not wittingly.”

Apparently Clapper must have “forgotten” that the government is forcing all of the big telephone companies to turn over all of their call records to the NSA every single month.

And you know what? The truth is that the government is not just collecting “metadata” about our phone calls. The content of our calls is being recorded and stored as well. Just check out this story from the Blaze…

Hollywood actor Shia LaBeouf in 2008 during an appearance on the Tonight Show with Jay Leno detailed how he learned phone calls were allegedly being recorded.

Promoting the film “Eagle Eye,” which according to IMDb shows how “technology of everyday life [is used] to track and control,” LaBeouf told Leno that an FBI consultant for the movie said one in five phone calls made are recorded and logged.

“And I laughed at him,” LaBeouf said.

“And then he played back a phone conversation I’d had two years prior to joining the picture,” LaBouf continued.

Both Leno and LaBeouf concluded it was “extremely creepy.”

The American people, along with the people of the entire planet, deserve the truth about this.

Unfortunately, Barack Obama is certainly not going to tell us the truth, and there will probably only be a half-hearted effort by some members of Congress to get to the bottom of things.

That is why it is going to be important to take this to court, and thankfully a couple of lawsuits are already in the works.

According to U.S. News & World Report, one of these lawsuits is being filed by a former Justice Department prosecutor…

Former Justice Department prosecutor Larry Klayman amended an existing lawsuit against Verizon and a slew of Obama administration officials Monday to make it the first class-action lawsuit in response to the publication of a secret court order instructing Verizon to hand over all phone records of millions of American customers on an “ongoing, daily basis.”

Klayman told U.S. News he will file a second class-action lawsuit Wednesday in the U.S. District Court for the District of Columbia targeting government officials and each of the nine companies listed in a leaked National Security Agency slideshow as participants in the government’s PRISM program.

And according to USA Today, the ACLU has also filed a lawsuit…

National Security Agency surveillance programs came under more scrutiny Tuesday as the American Civil Liberties Union filed a lawsuit and a prominent senator and Internet giant Google called on the Obama administration to disclose more information.

In its lawsuit, the ACLU said an NSA program that harvests phone calls violates the rights of all Americans.

“The program goes far beyond even the permissive limits set by the Patriot Act and represents a gross infringement of the freedom of association and the right to privacy,” said Jameel Jaffer, the ACLU’s deputy legal director.

Hopefully these lawsuits will reveal more details about the spying that has been taking place.

There is also a “bipartisan coalition” of 86 Internet companies and civil liberties organizations that have sent a letter to Congress demanding action on these issues. You can read the full letter right here. Some of the organizations involved include the Electronic Frontier Foundation, Reddit, Mozilla, FreedomWorks, and the Center for Digital Democracy.

Will Congress listen to them?

Probably not.

But at least they are trying to do something about this.

The key will be to get the American people outraged enough about all of this that they won’t forget about it in a week or two. And that is not an easy thing to do.

There have been a couple of public opinion polls taken over the past few days that show some very curious results. A Rasmussen survey found that 59 percent of Americans are against the government secretly collecting our phone records and only 26 percent are in favor. But a Washington Post survey found that 56 percent of Americans consider the collecting of our phone records to be “acceptable” and only 41 percent consider the practice to be “unacceptable”.

How could those two surveys get such wildly different results?

A lot of it is in the way that they ask the questions.

In the end, our politicians don’t really care too much about what the general public thinks anyway. They are just going to continue to do what they have been doing and the rest of the world will continue to become even more disgusted with us.

We are recklessly destroying our global reputation and our leaders do not even seem to care. But someday America will need some friends, and when that day arrives we may find that we don’t have too many left.

Mourn For America: Whenever A Tragedy Happens They Take Even More Freedom From Us

April 21, 2013 by Michael

What in the world is happening to America? Over the past couple of decades, the federal government has used just about every major national tragedy as an excuse to take even more liberty and freedom away from us. And without a doubt, the Boston Marathon bombing was a great national tragedy. I don’t think that any of us will forget the images that we have seen over the past week. All of those responsible for this attack should be exposed, hunted down, tried and punished. Unfortunately, what always seems to happen is that it is the American people that seem to get punished the most for these tragedies. Over the past couple of decades we have been told again and again that if we will just give up a little bit more freedom that the authorities will be able to keep us safe. But you know what? It is IMPOSSIBLE for them to keep us safe. There is no way in the world that the federal government can protect us from all of the bad guys in the world. We are a country that is absolutely teeming with “soft targets” – malls, churches, schools, concerts, sporting events, etc. No matter how much money we spend, there is no way that the federal government will ever be able to provide enough security for all of those soft targets. Even if our society morphed into something that resembled George Orwell’s “1984”, the government would still never be able to guarantee our safety. Unfortunately, in the aftermath of this attack there will inevitably be calls for “increased security” and “more anti-terror legislation”. The answer always seems to be to expand the emerging police state. But it is getting to the point where all of this “security” is becoming absolutely suffocating, and yet it doesn’t seem to be keeping us any safer. So where does all of this end? Are we going to completely throw out the entire U.S. Constitution in a desperate attempt to feel a little bit safer? Or are we going to choose to live our lives without fear no matter what others may try to do to us?

Benjamin Franklin once made the following statement…

“Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.”

Sadly, the way that the American people have responded to national tragedies over the past couple of decades would have made our founding fathers greatly ashamed. The American people have been way too willing to give up liberty in exchange for the promise of safety.

We have been told that the terrorists hate us because of our liberties and freedoms. But we have also been told that in order to be “safe” from those terrorists we have got to give up those liberties and freedoms.

So who is really winning?

We seem to have forgotten some of the most basic lessons in life.

If you cower in fear when a bully comes after you, what is the bully going to do?

The bully is just going to keep coming after you because his actions are being rewarded.

Those that are trying to create fear love it when you become fearful. It is exactly what they want.

The appropriate response to a great national tragedy is to reject fear and to continue to boldly live our lives as if nobody could ever shake us.

But instead, the atmosphere of fear in America continues to grow.

And yes, there are common sense things that our government should be doing to keep bad guys away from us.

For example, the number one thing that the federal government should be doing is to secure the border. Every single day, thousands upon thousands of people that we don’t know anything about pour into this country. And yet the federal government has absolutely refused to secure our borders for decades.

Until the federal government secures our borders, they should not ask any of us to sacrifice a single ounce of liberty or freedom in the name of “national security”.

But even as the Obama administration treats our border security like a joke and continues to import huge numbers of people from radical areas of the Middle East, they continue to tell us that “domestic terror” is the next great threat that we are facing.

Many of our other politicians are buying into this philosophy as well. Senator Lindsey Graham says that the attack in Boston is a perfect example of “why the homeland is the battlefield“.

So if “the homeland is the battlefield”, then who is the enemy?

Well, a U.S. Army Reserve training presentation recently identified evangelical Christians as “religious extremists“, and since Barack Obama entered the White House there have been numerous government reports that have identified Christians, “constitutionalists”, patriots, anti-abortion activists, conspiracy theorists and gun owners as “potential terrorists”.

So where does all of this end?

Are the American people rapidly becoming the enemy?

Will we be constantly scared to death of one another?

Will the entire nation exist in a never ending environment of fear?

Will we eventually have the TSA and the Department of Homeland Security patrolling every mall, every church, every school, every concert and every sporting event?

Unfortunately, the bad guys will always be able to find a soft target, and there will be more terror attacks in the future no matter how much security we pour on. Once upon a time this nation was greatly blessed with peace and security, but now that hedge of protection is gone. The federal government could give the Department of Homeland Security trillions of dollars a year and it would not make much of a difference. We live in a world that is becoming increasingly unstable, and bad guys are going to do bad things.

Yes, there are some common sense things that we can do to make our nation more secure. At this point, the federal government is not doing most of those things.

But no matter how hard we try, bad things are going to happen. When those bad things happen, what we can control is how we respond to them.

That is why what just happened in Boston is so alarming. The entire city was put into a complete lockdown for nearly two days. It was a preview of what could happen nationwide if martial law was declared. It was an over the top display of force that clearly demonstrated to the rest of the world how incredibly frightened we are.

Some of the things we saw in Boston were absolutely disgraceful. For example, you can see video of an innocent Watertown family being ripped out of their home at gunpoint right here.

Do you know what this tells the rest of the world?

It tells them that terrorism works.

It tells them that one small incident is enough to send the entire nation into a full-blown panic attack.

You can see some more photos of martial law in Boston right here. Instead of making things better, this is just going to make the atmosphere of fear in this nation even worse.

And you know what? None of those heavily armed men even found the second suspect. He was actually found by a neighbor that had gone out to take a smoke.

Like most Americans, I absolutely hate terrorism in all the forms that it takes.

But we are not going to prevent future terrorism by treating the U.S. Constitution like a piece of trash. We have now shown the world that we are willing to throw out our most important constitutional rights the moment that a “threat” arises, and this is just going to encourage even more terrorism.

You see, those that engage in terrorism want attention and they want to create fear. When we give them attention and we allow them to create fear we give them exactly what they want.

Is there anyone out there that can defend what we just saw in Boston? I can’t imagine any American that still loves the Constitution being proud of what just happened. I think that Karl Denninger put it quite eloquently the other day…

By effectively occupying a part of the Boston metro area they made an utter mockery of the 4th Amendment. There was no “hot pursuit” and thus no argument available to them allowing searches of private property without consent or a warrant. Not only did they search without a warrant there were multiple reports through the day of seizure of firearms, among other things.

Sadly, most Americans seem to be more than willing to disregard the U.S. Constitution these days. Most of them are incredibly scared and they just want someone in a position of authority to assure them that they will be safe.

So I am sure that in the months ahead we will see “security” get even tighter in this country. With each subsequent tragedy, it will just get tighter and tighter until we can barely even breathe.

This is not the answer to any of our problems. In fact, it is just going to make many of the problems that we are facing as a nation far worse.

Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers

March 20, 2013 by Michael

Why is the global economy in so much trouble? How can so many people be so absolutely certain that the world financial system is going to crash? Well, the truth is that when you take a look at the cold, hard numbers it is not difficult to see why the global financial pyramid scheme is destined to fail. In the United States today, there is approximately 56 trillion dollars of total debt in our financial system, but there is only about 9 trillion dollars in our bank accounts. So you could take every single penny out of the banks, multiply it by six, and you still would not have enough money to pay off all of our debts. Overall, there is about 190 trillion dollars of total debt on the planet. But global GDP is only about 70 trillion dollars. And the total notional value of all derivatives around the globe is somewhere between 600 trillion and 1500 trillion dollars. So we have a gigantic problem on our hands. The global financial system is a very shaky house of cards that has been constructed on a foundation of debt, leverage and incredibly risky derivatives. We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing. And when it falls, it is going to be the largest financial disaster in the history of the planet.

The global financial system is more interconnected today than ever before, and a crisis at one major bank or in one area of the world can spread at lightning speed. As I wrote about yesterday, the entire European banking system is leveraged 26 to 1 at this point. A decline in asset values of just 4 percent would totally wipe out the equity of many of those banks, and once a financial panic begins we could potentially see major financial institutions start to go down like dominoes.

We got a small taste of what that is like back in 2008, and it is inevitable that it will happen again.

Anyone that would tell you that the current global financial system is sustainable does not know what they are talking about. Just look at the numbers that I have posted below.

The following is the global financial pyramid scheme by the numbers…

–$9,283,000,000,000 – The total amount of all bank deposits in the United States. The FDIC has just 25 billion dollars in the deposit insurance fund that is supposed to “guarantee” those deposits. In other words, the ratio of total bank deposits to insurance fund money is more than 371 to 1.

–$10,012,800,000,000 – The total amount of mortgage debt in the United States. As you can see, you could take every penny out of every bank account in America and it still would not cover it.

–$10,409,500,000,000 – The M2 money supply in the United States. This is probably the most commonly used measure of the total amount of money in the U.S. economy.

–$15,094,000,000,000 – U.S. GDP. It is a measure of all economic activity in the United States for a single year.

–$16,749,269,587,407.53 – The size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.

–$32,000,000,000,000 – The total amount of money that the global elite have stashed in offshore banks (that we know about).

–$50,230,844,000,000 – The total amount of government debt in the world.

–$56,280,790,000,000 – The total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.

–$61,000,000,000,000 – The combined total assets of the 50 largest banks in the world.

–$70,000,000,000,000 – The approximate size of total world GDP.

–$190,000,000,000,000 – The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.

–$212,525,587,000,000 – According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.

–$600,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.

Are you starting to get the picture?

Every single day, the total amount of debt will continue to grow faster than the total amount of money until the day that this bubble bursts.

What we witnessed back in 2008 was just a little “hiccup” in the system. It caused the worst economic downturn since the Great Depression, but global financial authorities were able to get things stabilized.

Next time it won’t be so easy.

The next wave of the economic collapse is quickly approaching. A full-blown economic depression has already started in southern Europe. Unemployment is at record highs and economic activity is contracting rapidly.

The major offshore banking centers in Cyprus are on the verge of collapsing. It was just announced that they will now be closed until Tuesday, but nobody really knows for sure when they will be allowed to reopen. And there is already talk that when they do reopen that there will be strict limits on how much money people can take out.

And now the IMF is warning that the three biggest banks in Slovenia are failing and that a billion euros will be needed to bail them out.

The dominoes are starting to tumble, and the United States won’t be immune. In fact, the greatest financial problems that the United States has ever seen are on the horizon.

But you can just have faith that Ben Bernanke, Barack Obama and the U.S. Congress know exactly what they are doing and will be able to save us from the coming financial collapse if you want.

The mainstream media will provide you with all of the positive economic news that you could possibly want. They are giddy about the fact that the Dow keeps hitting all-time highs and they would have us all believe that we are in the midst of a robust economic recovery. You can listen to them if you want to.

But when you are tempted to believe that everything is going to be “okay” somehow, just go back and look at the numbers there were posted above one more time.

There is no way that the global financial pyramid scheme is going to be able to hold up for too much longer. At some point it is going to totally collapse. When that happens, will you be ready?

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