Wild And Unprecedented Price Fluctuations Are Causing Financial Chaos For U.S. Businesses

In every war there is a high price to pay, and this trade war will not be any different.  The normal flow of goods and services around the globe is being severely disrupted, and even though this trade war has barely just begun, it is already having an enormous impact on the U.S. economy.  Even if we ultimately win this trade war and the Trump administration is able to achieve all of the goals that it is targeting, there will still be a great cost in the short-term.  We are going to see businesses fail, we are going to see workers get laid off, and global economic activity will inevitably contract.  Heck, at this point even Fox News is calling this trade war “economic suicide”.  We live at a time when a delicately balanced formula of economic factors allows us to live a debt-fueled standard of living that is far beyond what we actually deserve.  Now we are messing with that formula, and the consequences are likely to be far more severe than most Americans are anticipating.

Let’s start by talking about steel and aluminum.  One of the chief goals of the tariffs was to help the steel and aluminum industries, and thanks to those tariffs we have seen the price of U.S. steel rise 36 percent since the beginning of 2018…

For instance, US steel and aluminum prices have soared since the imposition of tariffs. US midwest hot-rolled coil steel price, the US steel price benchmark, soared 36% between the start of the year and the start of July. This in turn causes prices of goods made with the metal to rise.

That is good news for the U.S. economy, right?

Actually, it isn’t.

Every product that uses steel and aluminum is now going to cost more.

In many cases, a lot more.

For instance, one grill company is reporting that they have had to raise prices “by almost $350 per grill”

Middleby Residential, a California-based company that makes Lynx grills, told the Dallas Morning News that even though the company uses US steel, the recent price pressures have driven up costs by almost $350 per grill.

Do you want to pay an extra $350 for your next grill?

Retail prices for washer and dryers are surging as well.  They have increased by 20 percent compared to a year ago, and that is because prices for raw materials are skyrocketing

Whirlpool Corp trimmed its full-year profit outlook as it booked a large charge on its European operations and said it wouldn’t be able to offset the effect of steel tariffs with higher prices for consumers.

The company said Monday it now expects to pay about $350 million more this year from rising raw-material costs as it faces “a very challenging cost environment.”

Anybody that purchases any products that contain steel and/or aluminum will be feeling these prices increases.

And any business that uses steel and/or aluminum on a regular basis is going to be feeling an enormous amount of pain.  For example, the largest nail company in America is already laying off workers

When President Trump imposed a 25 percent tariff on steel imports last month, America’s largest nail manufacturer had little choice but to raise its prices. Mid Continent Nail Corporation quickly lost 50 percent of its orders as customers opted for cheaper suppliers. Within weeks, the firm had to lay off 60 workers. Up to 200 more might lose their jobs by the end of this month.

All over the country, companies are going to be forced to either raise prices, fire workers or move production facilities out of the United States.

Meanwhile, farmers all over America are facing a different problem.  Thanks to a massive decline in demand from China (thanks to tariffs that they have hit us with), prices are plummeting and warehouses are filling up with food that doesn’t have anywhere to go.

Every year, the U.S. usually imports about 14 billion dollars worth of soybeans to China, and I covered the plight of soybean farmers in a previous article.  But of course soybean farmers are far from alone.  It is being reported that more than 2.5 billion pounds of meat and poultry products that have been produced by our farmers is being stockpiled in cold-storage warehouses.  To help the agricultural community, President Trump announced 12 billion dollars in aid to farmers on Tuesday

As President Donald Trump embarks on a multistate tour through parts of the country hit heavily by trade battles, his administration said Tuesday it will direct $12 billion to farmers whose harvests have been hurt by tariffs.

But the idea faced immediate criticism from Republicans on Capitol Hill.

Responding to farm groups and the Republican discontent, administration officials said they have been working since April on a short-term plan to shore up slipping prices for soybeans, pork and other crops hit with retaliatory tariffs from China.

Sure, this will help farmers get through the trade war in the short-term, but isn’t this exactly the kind of big government socialism that we are always railing against?

And who is going to bail out the real estate industry?

CNBC is reporting that home sales fell a whopping 11.8 percent year over year in southern California last month…

Southern California home sales hit the brakes in June, falling to the lowest reading for the month in four years. Sales of both new and existing houses and condominiums dropped 11.8 percent year over year, as prices shot up to a record high, according to CoreLogic. The report covers Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties.

And do you know who has been fueling the extremely hot real estate market on the west coast?

The Chinese.

At one time they were buying up everything in sight, but now they have become net sellers of U.S. real estate.

And there are rumblings that we could soon see some sort of “national boycott” of American goods in China.  The following comes from Zero Hedge

The survey found that 54 percent of 2,000 respondents in 300 cities across China would “probably” or “definitely” stop buying US-branded goods “in the event of a trade war”. Just 13 percent said they would not.

The remaining 33 percent said they were unsure or did not at present buy US branded goods, according to the survey, conducted for FT Confidential Research (FTCR), a research unit at the Financial Times.

The survey was carried out between June 27 and July 10, mostly before the US imposed 25 percent tariffs on $34bn of Chinese goods on July 6. The move elicited an immediate tit-for-tat response from Beijing.

Of course something similar could be tried in the United States, but most Americans simply do not care if a product comes from China or not.  They are simply going to buy the cheapest stuff no matter what anyone tells them to do.

Look, I very much understand that we have been sending businesses and jobs overseas for a very long time.  I have been writing about this for years, and something had to be done.

But trying to fight trade wars with virtually everyone else on the planet simultaneously is madness, and the consequences for the U.S. economy are going to cause all of us an immense amount of pain.

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

Black Friday: Shocking Brexit Vote Result Causes The 9th Largest Stock Market Crash In U.S. History

Brexit Vote - Public DomainHas the next Lehman Brothers moment arrived?  Late Thursday night we learned that the British people had voted to leave the European Union, and this could be the “trigger event” that unleashes great financial panic all over the planet.  Of course stocks have already been crashing all over the globe over the past year, but up until now we had not seen the kind of stark fear that the crash of 2008 created following the collapse of Lehman Brothers.  The British people are certainly to be congratulated for choosing to leave the tyrannical EU, and if I could have voted I would have voted to “leave” as well.  But just as I warned 10 days ago, choosing to leave will “throw the entire continent into a state of economic and financial chaos”.  And “Black Friday” was just the beginning – the pain from this event is going to continue to be felt for months to come.

The shocking outcome of the Brexit vote caught financial markets completely off guard, and the carnage that we witnessed on Friday was absolutely staggering…

-The Dow Jones Industrial Average plunged 610 points, and this represented the 9th largest one day stock market crash in the history of the Dow.

-The Nasdaq was hit even harder than the Dow.  It declined 4.12 percent which was the biggest one day decline since 2011.

-Overall, Black Friday erased approximately 800 billion dollars of stock market wealth in the United States.

-Thursday was the worst day ever for the British pound, and investors were stunned to see it collapse to a 31 year low.

-Friday was the worst day ever for European banking stocks.

-Friday was the worst day for Italian stocks since 1997.

-Friday was the worst day for Spanish stocks since 1987.

-Japan experienced tremendous chaos as well.  The Nikkei fell an astounding 1286 points, and this was the biggest drop that we have seen in more than 16 years.

-Banking stocks all over the planet got absolutely pummeled on Black Friday.  The following comes from USA Today

Stocks of some British-based banks suffered double-digit losses in heavy U.S. trading. Barclays (BCS) shares plunged 20.48% to close at $8.89. HSBC (HSBC) shares closed down 9.04% at $30.68. And shares of Royal Bank of Scotland (RBS) plummeted 27.5% to a $5.43 close.

Top U.S. banks also suffered from the Brexit fallout, although not as badly as their British counterparts.

Shares of JPMorgan Chase (JPM) closed down 6.95% at $59.60. Bank of America (BAC) shares fell 7.41% to a $13 close. Citigroup (C) shares dropped 9.36% to close at $40.30. And Wells Fargo (WFC) closed 4.59% lower at $45.71.

-Friday was the best day for gold since the collapse of Lehman Brothers.

-George Soros made a killing on Black Friday because he had already positioned his company to greatly benefit from the Brexit vote ahead of time.

But please don’t think that “Black Friday” was just a one day thing.  As I warned before, the Brexit vote “could be the trigger that changes everything“.  And if you don’t believe me on this, perhaps you will listen to former Federal Reserve Chairman Alan Greenspan.  This is what he told CNBC on Friday…

This is the worst period, I recall since I’ve been in public service,” Greenspan said on “Squawk on the Street.”

“There’s nothing like it, including the crisis — remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away.”

I completely agree with Greenspan on this point.  This “corrosive effect” on global markets is not going to go away any time soon.  Sure there will be days when the markets are green just like there were after the collapse of Lehman Brothers, but overall the trend will be down.

Now that the United Kingdom has decided to leave the EU, financial markets have been gripped by fear and uncertainty, and there is a great deal of concern that this Brexit “could harm the economies of everyone involved”

Important British trading partners — including India and China — indicated they were worried that an exit would create regulatory and political volatility that could harm the economies of everyone involved.

The U.K.’s Treasury itself reported that its analysis showed the nation “would be permanently poorer” if it left the EU and adopted any of a number of likely alternatives. “Productivity and GDP per person would be lower in all these alternative scenarios, as the costs would substantially outweigh any potential benefit of leaving the EU,” a summary of the report said.

This threat even extends to the United States.  CNN just published an article that lists four ways the U.S. could be significantly affected by all of this…

1. Fears that the EU may be falling apart
2. Volatile markets slow down the engine of U.S. growth
3. Brexit triggers a strong dollar, which hurts U.S. trade
4. Brexit forces the Fed to rewrite its rate hike playbook

Fortunately we are now heading into the weekend, and that might have a calming effect on the markets.

Or it might just cause financial tension to build up to an extremely high level which will subsequently be released on Monday morning.

We shall see.

RCB’s Charlie McElligott is warning that Black Friday was just the beginning and that “today is the appetizer for Monday”.

And UBS derivatives strategist Rebecca Cheong says that we could see more than a hundred billion dollars of selling over the next two to three trading days

Strategies designed to mitigate risk will actually add to downward pressure in the S&P 500 over the next week as computerized selling ramps up to keep pace with falling prices. It reminds Cheong of the rapid stock selling that roiled markets in August, when the S&P 500 fell 11 percent to a 10-month low while facing similar behavior from algorithmic traders.

“The bigger the down move today, the more they have to sell, which would basically create a vicious cycle,” Cheong, head of Americas equity derivatives strategy at UBS, said in a phone interview. “We’ll see front-loaded selling in the range of $100 billion to $150 billion over the next two to three days. It could be very similar to August in terms of model-based selling.”

Personally, I am hoping for calm when the markets open on Monday.  But without a doubt, something has now shifted as a result of this Brexit vote, and things have suddenly become a whole lot more serious.

So what do you believe we will see happen next week?

Please feel free to tell us what you think by posting a comment below…

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

June 23, 2016: The Brexit Vote Could Change EVERYTHING And Plunge Europe Into Financial Chaos

Brexit - Public DomainOn June 23rd, a vote will be held in the United Kingdom to determine if Britain will stay in the European Union or not.  This is most commonly known as the “Brexit” vote, and that term was created by combining the words “Britain” and “exit”.  If the UK votes to stay in the European Union, things over in Europe will continue on pretty much as they have been.  But if the UK votes to leave, it will likely throw the entire continent into a state of economic and financial chaos.  And considering how bad the European economy is already, this could be the trigger that plunges Europe into a full-blown depression.

So if things will likely be much worse in the short-term if Britain leaves the EU, then it makes sense for everyone to vote to stay, right?

Unfortunately, it isn’t that simple.  Because this choice is not about short-term economics.  Rather, the choice is about long-term freedom.

The EU is a horribly anti-democratic bureaucratic monstrosity that is suffocating the life out of most of Europe a little bit more with each passing year.  So if I was British, I would most definitely be voting to leave the EU.

And in recent days, the campaign to leave has been rapidly picking up steam.  In fact, two of the latest major surveys show that “leave” has taken the lead

An ORB poll for the Telegraph showed 48 percent of Britons would vote to remain in the European Union, while 49 percent would vote to leave.

A YouGov poll for the Times of London showed 46 percent preferred to leave, while 39 percent wanted to remain.

Two other recent polls have “leave” ahead by 10 points, and there is another that actually has “leave” winning by 19 points.

The “leave” movement got a big boost just recently when the Sun officially endorsed that position.  The following is an excerpt from the editorial that announced this decision…

WE are about to make the biggest ­political decision of our lives. The Sun urges everyone to vote LEAVE.

We must set ourselves free from dictatorial Brussels.

Throughout our 43-year membership of the European Union it has proved increasingly greedy, wasteful, bullying and breathtakingly incompetent in a crisis.

Next Thursday, at the ballot box, we can correct this huge and ­historic mistake.

It is our last chance. Because, be in no doubt, our future looks far bleaker if we stay in.

I must say that I agree entirely with the Sun.  However, everyone needs to understand that a Brexit would be incredibly painful for the UK and for the rest of Europe in the short-term.  I think that Ambrose Evans-Pritchard of the Telegraph made this point very well in his recent column…

Let there be no illusion about the trauma of Brexit. Anybody who claims that Britain can lightly disengage after 43 years enmeshed in EU affairs is a charlatan or a dreamer, or has little contact with the realities of global finance and geopolitics.

So what could we potentially see happen?

Well, for one thing big banks like Morgan Stanley are warning that the euro and the British pound could take big hits

The pound and the euro will be hit on a Leave vote, but even if Britain decides to stay in the EU, there will be only “modest gains.” Morgan Stanley expects the pound “to weaken immediately on a vote to Leave, but by year-end we think Euro could weaken even more.”

Secondly, there is a very strong probability that financial markets all over Europe could horribly crash, and the European Central Bank and the Bank of England are already promising to provide artificial support for the markets if that happens.  The following comes from Reuters

The European Central Bank would publicly pledge to backstop financial markets in tandem with the Bank of England should Britain vote to leave the European Union, officials with knowledge of the matter told Reuters.

The preparations illustrate the heightened state of alert ahead of the June 23 referendum, which will help determine Britain’s future in trade and world affairs and also shape the EU. The pound and euro have lost value on fears a Brexit could tip the 28-member bloc into recession.

Such an announcement from the ECB would come on June 24 if an early-morning result showed that British voters had chosen to leave the EU, according to the sources.

But no matter what the consequences are, British voters should do what is right for their future and for the future of their children.

If that means leaving the EU, then so be it.

Needless to say, the prospect of “leave” winning has many among the European elite in full-blown panic mode.  For instance, just consider what the current chairman of the Bilderberg Group is saying

Just day after their mysterious annual meeting in Dresden, it appears The Bilderberg Group’s gravest concern is Brexit. While everything from The Middle East to Donald Trump was on the agenda, the remarks this week from AXA CEO (and Chairman of The Bilderberg Group) Henri de Castries that there is an “extremely high” probability that the U.K. will vote to leave the European Union and investors will face “a true landscape of uncertainties,” suggest the establishment is concerned.

If you are not familiar with the Bilderberg Group, please see my recent article on them.  Certainly the potential of a coming “Brexit” was high on the list of priorities during their recent conference, and it has been documented that the Bilderberg Group played a key role in the creation of the European Union in the first place.  So of course they are not exactly pleased that their grand experiment may now be unraveling right in front of their eyes.

Meanwhile, even without taking into account a potential “Brexit” things just continue to steadily get worse over in Europe.  On Tuesday, European stocks hit their lowest levels since the stock market crash that ended in February, and the stocks of both Deutsche Bank and Credit Suisse hit all-time record lows

The truth is that those extremely prominent European banks are headed for a collapse even without a “Brexit”.  But if there is a “leave” vote, that will just accelerate the process.

And let us not forget that major stock indexes all over Europe are already in a bear market

Meanwhile, German stocks are in a bear-market, with the DAX down 23.2% from its April 2015 peak. The French CAC 40 is down 21.8%. The Spanish Ibex 35 and the Italian MIB are down 31.4% and 32.6% respectively.

Here in the United States, the smart money is dumping stocks like crazy right now, and major investors such as George Soros are feverishly buying gold.

So why are these things happening?

Do those “in the know” have some information regarding what is about to happen over in Europe?

For a long time, I have been sounding the alarm about Europe.  If the British people vote to stay in the European Union on June 23rd, the crisis in Europe will certainly continue to escalate, it will just be at a slower pace.  But if the British people vote to leave (which they should) that could be the trigger that changes everything.

I don’t know exactly what is going to happen on the 23rd, but without a doubt we should all be watching the outcome very, very closely…

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

2015 Was The Worst Year For The Stock Market Since 2008

New Year's Eve - Public DomainIt’s official – 2015 was a horrible year for stocks.  On the last day of the year, the Dow Jones Industrial Average was down another 178 points, and overall it was the worst year for the Dow since 2008.  But of course the Dow was far from alone.  The S&P 500, the Russell 2000 and Dow Transports also all had their worst years since 2008.  Isn’t it funny how these things seem to happen every seven years?  But compared to other investments, stocks had a relatively “good” year.  In 2015, junk bonds, oil and industrial commodities all crashed hard – just like they all did just prior to the great stock market crash of 2008.  According to CNN, almost 70 percent of all investors lost money in 2015, and things are unfolding in textbook fashion for much more financial chaos in 2016.

Globally, over the past 12 months we have seen financial shaking unlike anything that we have experienced since the last great financial crisis.  During the month of August markets all over the world started to go haywire, and at one point approximately 11 trillion dollars of financial wealth had been wiped out globally according to author Jonathan Cahn.

Since that time, U.S. stocks rebounded quite a bit, but they still ended red for the year.  Other global markets were not nearly as fortunate.  Some major indexes finished 2015 down 20 percent or more, and European stocks just had their second worst December ever.

I honestly don’t understand the “nothing is happening” crowd.  The numbers clearly tell us that a global financial crisis began in 2015, and it threatens to accelerate greatly as we head into 2016.

Actually, there are a whole lot of people out there that would be truly thankful if “nothing” had happened over the past 12 months.  For example, there are five very unfortunate corporate CEOs that collectively lost 20 billion dollars in 2015…

Five CEOs of companies in the Russell 1000 index, including Nicholas Woodman of camera maker GoPro (GPRO), Sheldon Adelson of casino operator Las Vegas Sands (LVS) and even the famed investor Warren Buffett of Berkshire Hathaway (BRKA), lost more money on their companies’ shares than any other CEOs this year, according to a USA TODAY analysis of data from S&P Capital IQ.

These five CEOs were handed a whopping collective $20 billion loss on their company stock in 2015. Each and every one of these CEOs lost $1 billion or more – based on the average number of shares they’ve owned this year.

The biggest loser of the group was Warren Buffett.

He lost an astounding 7.8 billion dollars in 2015.

Do you think that he believes that “nothing happened” this past year?

And if “nothing happened”, then why are hedge funds “dropping like flies” right now?  The following comes from Zero Hedge

Two days, ago we noted that hedge funds are now dropping like flies in a year in which generating alpha has become virtually impossible for the majority of the vastly overpaid 2 and 20 “smart money” out there (and where levered beta is no longer the “sure thing” it used to be when the Fed was pumping trillions into stocks) when we reported that Seneca Capital, the $500 million multi-strat hedge fund belonging to Doug Hirsh (of Sohn Investment Conference fame), is shutting down.

And just within the last 24 hours, another very prominent hedge fund has collapsed.  SAB Capital, which once managed more than a billion dollars, is shutting down after huge losses this year.  Here is more from Zero Hedge

It turns out that despite our intention, the question was not rhetorical because just a few hours later Bloomberg answered when it reported that the latest hedge fund shutdown casualty was another iconic, long-term investor: Scott Bommer’s SAB Capital, which as of a year ago managed $1.1 billion, and which after 17 years of managing money and after dropping roughly 11% in the first eight month of 2015, has decided to return all outside client money, and converting the hedge fund into a family office (after all one has to preserve one’s offshore tax benefits).

Overall, 674 hedge funds shut down during the first nine months of this year, and the final number for 2015 will actually be far higher because the rate of closings has accelerated as we have approached the end of this calendar year.  When the final numbers come in, I would not be surprised to hear that 1,000 hedge funds had closed up shop in 2015.

Meanwhile, underlying economic conditions continue to deteriorate.

Corporate profits are steadily falling, the bond distress ratio just hit the highest level that we have seen since September 2009, and corporate debt defaults have risen to the highest level that we have seen since the last recession.

And this week we got a couple of new numbers that indicate that the U.S. economy is slowing down much faster than anticipated.

The first big surprise was the Dallas Fed’s general business activity index

The Dallas Fed’s general business activity index plunged to -20.1 in December from -4.9 in November. This was much worse than the -7.0 expected by economists.

Any reading below 0 signals contraction, and this index has been below 0 all year.

The next big surprise was the Chicago purchasing manager index

The Chicago purchasing manager index unexpectedly plunged to 42.9 in December, its lowest reading since July 2009.

Any reading below 50 signals a contraction in business activity.

This was down from 48.7 in November and much worse than the 50.0 expected by economists.

When the final numbers for the fourth quarter are in a few months from now, I believe that they will show that the U.S. economy officially entered recession territory at this time.

And the truth is that deep recessions have already started for some of the other biggest economies on the planet.  For example, I recently wrote about the deep troubles that Canada is now experiencing, and things have already gotten so bad in Brazil that Goldman Sachs is referring to that crisis as “an outright depression“.

Many people seem to assume that since I have a website called “The Economic Collapse Blog” that I must want everything to fall apart.  But that is not true at all.  I love my country, I enjoy my life, and I would be perfectly content to spend 2016 peacefully passing the time here in the mountains with my wonderful wife.  The longer things can stay somewhat “normal”, the better it is for all of us.

Unfortunately, for decades we have been making incredibly foolish decisions as a society, and the consequences of those decisions are now catching up with us in a major way.

Jonathan Cahn likes to say that “a great shaking is coming”, and I very much agree with him.

In fact, I think that it is going to be here a lot sooner than most people think.

So buckle up, because I believe that 2016 is going to be quite a wild ride.

Greece Rejects Bailout Deal – Deadline To Avoid Financial Chaos In Europe Is March 1st

No - Public DomainEurope is on the verge of a horrifying financial meltdown, and there are only a few short weeks left to avert total disaster.  On Monday, talks that were supposed to bring about yet another temporary “resolution” to the Greek debt crisis completely fell apart.  The new Greek government has entirely rejected the idea of a six month extension of the current bailout.  The Greeks want a new deal which would enable them to implement the promises that have been made to the voters.  But that is not going to fly with the Germans, among others.  They expect the Greeks to fulfill the obligations that were agreed to previously.  The two sides are not even in the same ballpark at this point, and things are starting to get very personal.  It is no secret that the new Greek government does not like the Germans, and the Germans are not particularly fond of the Greeks at this point.  But unless they can find a way to work out a deal, things could get quite messy very rapidly.  The Greek government has about three weeks of cash left, and any changes to the current bailout arrangement would have to be approved by parliaments all over Europe by March 1st.  And the stakes are incredibly high.  If there is no deal, we could see a Greek debt default, Greece could be forced to leave the eurozone and go back to the drachma, the euro could collapse to all time lows, all the banks all over Europe that are exposed to Greek government debt could be faced with absolutely massive losses, and the 26 trillion dollars in derivatives that are directly tied to the value of the euro could start to unravel.  In essence, if things go badly this could be enough to push us into a global financial crisis.

On Monday, eurozone officials tried to get the Greeks to extend the current bailout package for six months with the current austerity provisions in place.  Greek government officials responded by saying that “those who bring this back are wasting their time” and that those negotiating on behalf of the eurozone are being “unreasonable”

A Greek government official said that a draft text presented to eurozone finance ministers meeting in Brussels on Monday spoke of Greece extending its current bailout package and as such was “unreasonable” and would not be accepted.

Without specifying who put forward the text to the meeting chaired by Dutch Finance Minister Jeroen Dijsselbloem, the official said: “Some people’s insistence on the Greek government implementing the bailout is unreasonable and cannot be accepted.”

Most observers have speculated that the new Greek government would give in to the demands of the rest of the eurozone when push came to shove.

But these new Greek politicians are a different breed.  They are not establishment lackeys.  Rather, they are very principled radicals, and they are not about to be pushed around.  I certainly do not agree with their politics, but I admire the fact that they are willing to stand up for what they believe.  That is a very rare thing these days.

On Monday, Greek finance minister Yanis Varoufakis shared the following in the New York Times

I am often asked: What if the only way you can secure funding is to cross your red lines and accept measures that you consider to be part of the problem, rather than of its solution? Faithful to the principle that I have no right to bluff, my answer is: The lines that we have presented as red will not be crossed.

Does that sound like a man that is going to back down to you?

Meanwhile, the other side continues to dig in as well.

Just consider the words of the German finance minister

Wolfgang Schaeuble, the German finance minister, accused the Greek government of “behaving irresponsibly” by threatening to tear up agreements made with the eurozone in return for access to the loans which are all that stand between Greece and financial collapse.

“It seems like we have no results so far. I’m quite skeptical. The Greek government has not moved, apparently,” he said.

“As long as the Greek government doesn’t want a program, I don’t have to think about options.”

Global financial markets are still acting as if they fully expect a deal to get done eventually.

I am not so sure.

And without a doubt, time is running short.  As I mentioned above, something has got to be finalized by March 1st.  The following comes from the Wall Street Journal

Any changes to the content or expiration date of Greece’s existing €240 billion ($273 billion) bailout have to be decided by Friday, to give national parliaments in Germany, Finland and the Netherlands enough time to approve them before the end of the month. Without such a deal, Greece will be on its own on March 1, cut loose from the rescue loans from the eurozone and the International Monetary Fund that have sustained it for almost five years.

So what happens if there is no deal and Greece is forced to leave the eurozone?

Below, I have shared an excerpt from an article that details what Capital Economics believes would happen in the event of a “Grexit”…

  • The drachma would be back. The euro would be effectively abandoned, and Greece would return to the drachma, its previous currency (it might take a new name). The drachma would likely tumble in value against the euro as soon as it was issued, and how much the government could print quickly would be a big issue.
  • It would have to be fast, with capital controls. There would be people trying to pull their money out of Greece’s banks en masse. The Greek government would have to make that illegal pretty quickly. The European Central Bank drew up Grexit plans in 2012, and might be dusting them off now.
  • European life support for Greek banks would be withdrawn. Greek banks can currently access emergency liquidity assistance from the ECB, which would be removed if Greece left the euro.
  • Likely unrest and disorder. Barclays expects that this sudden economic collapse would “aggravate social unrest”, and notes that historically similar moves have caused a 45-85% devaluation of the currency. Capital Economics suggests that the drop could be more mild, closer to 20%, and Oxford Economics says 30%.
  • Greece would resume economic policymaking. Greece’s central bank would probably start doing its own QE programme, and the government would likely return to running deficits, no longer restrained by bailout rules (though investors would probably want large returns, given the risk of another default).
  • Inflation would spike immediately, but both Capital Economics and Oxford Economics say that should be temporary. It might look a bit like Russia this year — with the new currency in freefall until it finds its level against the euro, prices inside Greece would rise at dramatic speed. The inflation might be temporary, however, because with unemployment above 20%, Greece has plenty of spare labour slack to produce more.

That certainly does not sound good.

And once Greece leaves, everyone would be wondering who is next, because there are quite a few other deeply financially troubled nations in the eurozone.

David Stockman believes that Spain is a prime candidate…

In spite of the “recovery” in Spain, close to 24% are still unemployed. That statistic explains Pessimism in the Streets.

The crisis is here to stay according to significant majority of Spaniards. The general perception is that the current situation in which the country is negative and far from getting better, can only stay stagnant or even worse.

A Metroscopia poll published in El País makes it clear that the Spanish are unhappy with the current state of the country. Five out of six (83%) see the economic situation as “bad”, while more than half of the remaining perceive “regular”.

Right now, Europe is already teetering on the brink of an economic depression.

If this Greek debt crisis is not resolved, it could set in motion a chain of events which could start collapsing financial institutions all over Europe.

Yes, we have been here before and a deal has always emerged in the end.

But this time is different.  This time very idealistic radicals are running things in Greece, and the “old guard” in Europe has no intention of giving in to them.

So let’s watch and see how this game of “chicken” plays out.

I have a feeling that it is not going to end well.

Is There Going To Be A Stock Market Crash In The Fall?

Is the stock market going to crash by the end of this year?  Are we on the verge of major financial chaos on a global scale? Well, this is the time of the year when investors start getting nervous.  We all remember what happened during the fall of 1929, the fall of 1987 and the fall of 2008.  However, it is important to keep in mind that we do not see a stock market crash in the fall of every year.  Some years the stock market cruises through the months of September, October, November and December without any problems whatsoever.  But this year conditions certainly seem to be right for a “perfect storm” to develop.  Technical indicators are screaming that a stock market decline is imminent and sources in the financial industry all over the world are warning that a massive crisis is on the way.  What you are about to read should alarm you.  But it is not a guarantee that anything will or will not happen.  When Ben Bernanke gives his speech at the Jackson Hole summit on Friday he could announce to the rest of the world that the Federal Reserve has decided to launch QE3 and that the Fed will be printing up trillions of new dollars.  If that happened global financial markets would leap for joy.  So it is always a dangerous thing when anyone out there tries to tell you that they can “guarantee” what is about to happen in the financial world.  There are just so many moving parts.  But if we do not see major intervention by the governments of the world or by global central banks a major financial crisis could rapidly develop this fall.  The conditions are certainly right for a stock market collapse, and we could easily see a repeat of what happened back in 2008.

The truth is that the second half of 2012 looks a little bit more like the second half of 2008 with each passing day.

Just check out what Bob Janjuah of Nomura Securities has been saying….

Based on the reasons set out earlier and also covered in my two prior notes, over the August to November period I am looking for the S&P500 to trade off down from around 1400 to 1100/1000 – in other words, I expect over the next four months to see global equity markets fall by 20% to 25% from current levels and to trade at or below the lows of 2011! US equity markets, along with parts of the EM spectrum, will I think underperform eurozone equity markets, where already very little hope resides.

Others are issuing similar warnings.  For example, the following is what a couple of Bank of America analysts said in a report the other day….

Our strategists see an unusually high number of macro catalysts over the next 3-6 months that could take markets lower. We expect economic growth to disappoint in the second half of the year in anticipation of the fiscal cliff. This would exacerbate any slowdown from the deepening recession in Europe and decelerating growth in emerging markets. There is also the ongoing tension in the Middle East, the potential for a US credit downgrade and accelerating downward analyst estimate revisions. To top it off, September is seasonally the weakest month of the year for stock price returns.

There has been an unusual amount of chatter in the financial world about the September to December time frame.

That could mean something or it could mean nothing.

But is is very interesting to watch what some top financial insiders are doing with their stocks right now.

Dennis Gartman, the publisher of the Gartman Leter, has dumped all of his stocks at this point.

As I have written about previously, George Soros has dumped all of his stock in banking giants JP Morgan, Citigroup and Goldman Sachs.

Are they just being paranoid?

Or do they know something that we do not?

If you are looking for the next “Lehman Brothers moment” in the United States, you might want to watch Morgan Stanley.  Morgan Stanley was heavily involved in the Facebook IPO disaster, earlier this year their credit rating was downgraded, and now there are persistent rumors that Morgan Stanley is in big trouble and that it will be allowed to fail.  You can check out some of these rumors for yourself here, here and here.

But of course as I have said all along the center of the coming crisis is going to be in Europe, and many analysts agree with me.  For example, the following is what the chairman of Casey Research, Doug Casey, had to say during a recent interview….

Europe is a full cycle ahead of the U.S. Its governments and its banks are both bankrupt. It’s a couple of drunks standing on the street corner holding each other up at this point. Europe is in much worse shape than the U.S. It’s highly regulated, highly taxed and much more socially unstable.

Europe is going to be the epicenter of the coming storm. Japan is waiting in the wings, as is China. This is going to be a worldwide phenomenon. Of course, the U.S. will be in it, too. We’re going to see this all over the world.

Much of southern Europe is already experiencing depression-like conditions.  Unemployment in both Greece and Spain is well above 20 percent and both economies are steadily shrinking.

Money is flowing out of Spanish banks at an unprecedented rate right now.  Just take a look at these charts.  The only thing that is going to keep the Spanish banking system from totally collapsing is outside intervention.

But the truth is that all of Europe is in big trouble.  Even German companies are slashing job right now. For example, check out what Siemens is up to….

German engineering conglomerate Siemens (SIEGn.DE) is in early internal talks to cut thousands of jobs in response to a weakening economy, particularly in Europe, a German newspaper reported.

Decisions could be made in October or November, according to daily Boersen-Zeitung, which did not specify its sources.

A Siemens spokesman declined to comment.

We are living in the greatest debt bubble in the history of the world, and at some point that bubble is going to burst in a very messy way.

It is vital that people understand that our system is not even close to sustainable.

Knowing exactly when it will collapse is not nearly as important as understanding that a collapse is absolutely inevitable.

I think what former World Bank economist Richard Duncan had to say recently is very helpful….

“The explosion in credit drove economic growth in the U.S. and around the world, and now that’s the only thing that’s keeping us from collapsing in a debt/deflation spiral,” he said. “[What] I think everybody needs to understand is that the kind of economy that we have now, it’s not capitalism. It has very little in common with capitalism. Capitalism was an economic system in which the government played very little role …. Under capitalism, gold was money and the government had nothing to do with it. Now the central bank creates the money and manipulates its value.”

And he is very right.

We aren’t seeing a failure of capitalism.

What we are witnessing is the failure of debt-based central banking.

And if you think that the global elite are not aware of what is happening then you have not been paying attention.

This summer the global elite have been preparing very hard.  Either they are getting very paranoid or they know things that we do not.

If you want to catch up on what the global elite have been up to recently, check out these three articles that I have published previously….

-“Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?

-“Startling Evidence That Central Banks And Wall Street Insiders Are Rapidly Preparing For Something BIG

-“Jacob Rothschild, John Paulson And George Soros Are All Betting That Financial Disaster Is Coming

If you are waiting for the nightly news to tell you what to do, then you have not learned anything.

Did anyone in the mainstream media warn you about what was about to happen back in 2008?

Of course not.

The “authorities” insisted that everything was going to be just fine and many average Americans were absolutely wiped out.

So don’t expect someone to come along and nicely inform you that your retirement savings are about to be absolutely devastated.

In this day and age it is absolutely critical for people to learn to think for themselves.

Barack Obama is not going to save you.

Mitt Romney is not going to save you.

The U.S. Congress is not going to save you.  They are too busy living the high life at taxpayer expense.

The system is not looking out for you.  Nobody is really going to care if your financial planning gets turned upside down.  This is a cold, cruel world and you need to understand how the game is played.  The financial insiders are looking out for themselves and most of them usually are able to avoid financial disaster.

Average folks like you and I are normally not so fortunate.

There are lots of warning signs that indicate that this fall could be a very turbulent time for global financial markets.

Ignore them at your own peril.

Trouble

The global economy is heading for a massive amount of trouble in the months ahead.  Right now we are seeing the beginning of a credit crunch that is shaping up to be very reminiscent of what we saw back in 2008.  Investors and big corporations are pulling huge amounts of money out of European banks and nobody wants to lend to those banks right now.  We could potentially see dozens of “Lehman Brothers moments” in Europe in 2012.  Meanwhile, bond yields on sovereign debt are jumping through the roof all over Europe.  That means that European nations that are already drowning in debt are going to find it much more expensive to continue funding that debt.  It would be a huge understatement to say that there is “financial chaos” in Europe right now.  The European financial system is in so much trouble that it is hard to describe.  The instant that they stop receiving bailout money, Greece is going to default.  Portugal, Italy, Ireland, Spain and quite a few other European nations are also on the verge of massive financial problems.  When the financial dominoes start to fall, the U.S. financial system is going to be dramatically affected as well, because U.S. banks have a huge amount of exposure to European debt.  The other day, I noted that investor Jim Rogers is saying that the coming global financial collapse “is going to be worse” than 2008.  Sadly, it looks like he is right on the money.  We are in a lot of trouble my friends, and things are going to get really, really ugly.

The sad thing is that we never have recovered from the last major financial crisis.  Right now, the U.S. economy is far weaker than it was back in 2007.  So what is going to happen if we get hit with another financial tsunami?  The following is what PIMCO CEO Mohamed El-Erian said recently….

“What’s most terrifying, we are having this discussion about the risk of recession at a time when unemployment is already too high, at a time when a quarter of homeowners are underwater on their mortgages, at a time then the fiscal deficit is at 9 percent and at a time when interest rates are at zero.”

Can things really get much worse than they are now?

Unfortunately, yes they can.

Not that things are not really, really bad right now.

In Los Angeles earlier this week, approximately 10,000 people lined up for free turkey dinners.

So how many people will be lining up for free food when the unemployment rate in the U.S. soars into double digits?

Right now there is so much economic pain in America that it is hard to describe.  According to a recent report from one nonprofit group, 45 percent of all people living in the United States “do not have enough money to cover housing, food, healthcare and other basic expenses”.

If this is where we are at now, how much trouble will we be in as a nation if a financial crisis worse than 2008 hits us in 2012?

The primary cause of the coming financial crisis will almost certainly be the financial meltdown that we are seeing unfold in Europe.

The economic downturn that began in 2008 caused the debt levels of quite a few European nations to soar to unprecedented heights.  It has gotten to the point where the debts of many of those nations are no longer sustainable.

So investors are starting to demand much higher returns for the much greater risk associated with investing in the bonds of those countries.

But that makes it much more expensive for those troubled nations to fund their debts, and that means that their financial troubles get even worse.

Over the past 12 months, what we have seen happen to bond yields over in Europe has been nothing short of amazing.

Just check out this chart of what has been happening to the yield on 2 year Italian bonds over the past 12 months.

And keep in mind that these bond yields have been spiking even while the European Central Bank has been buying up unprecedented mountains of bonds in an attempt to keep bond yields low.

There has been a fundamental loss of faith in the financial system, and it is not just happening in Europe.

Just check out this chart.  As that chart shows, credit default swap spreads all over the globe are absolutely skyrocketing and are now higher than we have seen at any point since the great financial crisis that shook the world during 2008 and 2009.

Panic and fear are everywhere – especially in Europe.  In fact, it looks like a run on the banks has already begun in Europe.

The following comes from a recent article in The Economist….

“We are starting to witness signs that corporates are withdrawing deposits from banks in Spain, Italy, France and Belgium,” an analyst at Citi Group wrote in a recent report. “This is a worrying development.”

Nobody wants to lend money to European banks right now.  There is a feeling that they are all vulnerable and could fail at any time, and this lack of confidence actually makes that possibility even more likely.

The following is a short excerpt from a recent CNBC article….

Money-market funds in the United States have quite dramatically slammed shut their lending windows to European banks. According to the Economist, Fitch estimates U.S. money market funds have withdrawn 42 percent of their money from European banks in general.

And for France that number is even higher — 69 percent. European money-market funds are also getting in on the act.

So what can be done?

Well, in a different CNBC article, Mitchell Goldberg was quoted as saying that even “a bazooka” is not going to be good enough to fix this situation….

“It’s too late for a bazooka,” said Mitchell Goldberg, president of ClientFirst Strategy. “Now we need inter-continental ballistic missiles. This is getting worse very quickly.”

This is kind of like watching a horrific car wreck happen in very slow motion.

The financial system of Europe is dying and everybody can see what is happening but nobody can seem to find a way to fix it.

Not that we are solving our own problems here in the United States.

The vaunted “supercommittee” that was supposed to get a handle on our debt problem was a complete and utter failure.

Barack Obama has shown that he has no clue what to do when it comes to the economy, and Ben Bernanke has been preoccupied with roaming around the country trying to get people to feel more “warm and fuzzy” about the Federal Reserve.

The Federal Reserve actually has more power over our economy than anyone else.  But instead of fixing things they only keep making things even worse.

The only people that the Fed seems to be helping are the banksters.

What you are about to read should really, really upset you.  According to a recent article in the Wall Street Journal, the Federal Reserve has actually been tipping off their upcoming moves to top financial professionals.  In turn, these financial professionals have been using that information to make a lot of money for themselves and for their clients….

Hours after an Aug. 15 meeting with Federal Reserve Chairman Ben Bernanke in his office, Nancy Lazar made a hasty call to investor clients: The Fed was dusting off an obscure 1960s-era strategy known as Operation Twist.

The news pointed to a boom in long-term bonds.

It was a good call. Over the next five weeks, prices on 10-year Treasury bonds soared, offering double-digit returns in an otherwise dismal year.

By the time the Fed announced its $400 billion Operation Twist on Sept. 21, the window for quick profits had all but slammed shut.

Ms. Lazar is among a group of well-connected investors and analysts with access to top Federal Reserve officials who give them a chance at early clues to the central bank’s next policy moves, according to interviews and hundreds of pages of documents obtained by The Wall Street Journal through open records searches.

You just can’t make stuff like this up.  The corruption at the Federal Reserve is totally out of control.  After nearly 100 years of total failure, it is time to shut down the Federal Reserve.

Not that Barack Obama should get a free pass for the role that he has played in this economic downturn.  He inherited a complete mess from Bush and has made it even worse.

Today, millions of business owners are so frustrated with Washington D.C. that they don’t know what to do.

For example, one business owner down in Georgia has posted signs with the following message on all of his company’s trucks….

“New Company Policy: We are not hiring until Obama is gone.”

The business environment in this country becomes more toxic with each passing year, and the federal government has already strangled millions of small businesses out of existence.

In addition, politicians from both parties continue to stand aside as tens of thousands of businesses, millions of jobs and hundreds of billions of dollars of our wealth get shipped out of the country.

During 2010, an average of 23 manufacturing facilities a day were shut down in the United States.  We are committing national economic suicide, and the top politicians in both political parties keep cheering for more.

Well, millions of ordinary Americans can see what is happening and they are preparing for the worst.

The following report comes from an article that was recently posted on the website of the local CBS affiliate in St. Louis….

A chain of three stores that sells survival food and gear reports a jump in sales to people who are getting prepared for the “possible collapse” of society.

“We had to order fifty cases of the meals ready to eat to keep up with the demand in the past three months,” said manager Steve Dorsey at Uncle Sam’s Safari Outfitters Inc. in Webster Groves. “That’s not normal.  Usually we sell 20 to 30 cases in a whole year.”

So are you prepared for the coming collapse?

If you still have a great job and things are still going well for you, then you should definitely be thankful.  Compared to the rest of the world, most of us are incredibly blessed.

But let there be no doubt, the U.S. economy is going to get a lot worse in the years ahead.

Just because you have a job today does not mean that you will have one tomorrow.

Just because you have a nice car and a big home today does not mean that you will have them tomorrow.

We all need to try to become a lot less dependent on “the system”, because “the system” is failing.

A whole lot of trouble is coming.

You better get ready.

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