12 Things That Just Happened That Show The Next Wave Of The Economic Collapse Is Almost Here

12 Things That Just Happened That Show The Next Wave Of The Economic Collapse Is Almost HereAre we running out of time?  For the last several years, we have been living in a false bubble of hope that has been fueled by massive amounts of debt and bailout money.  This illusion of economic stability has convinced most people that the great economic crisis of 2008 was just an “aberration” and that now things are back to normal.  Unfortunately, that is not the case at all.  The truth is that the financial crash of 2008 was just the first wave of our economic troubles.  We have not even come close to recovering from that wave, and the next wave of the economic collapse is rapidly approaching.  Our economy is like a giant sand castle that has been built on a foundation of debt and toilet paper currency.  As each wave of the crisis hits us, the solutions that our leaders will present to us will involve even more debt and even more money printing.  And each time, those “solutions” will only make our problems even worse.  Right now, events are unfolding in Europe and in the United States that are pushing us toward the next major crisis moment.  I sincerely hope that we have some more time before the next crisis overwhelms us, but as you will see, time is rapidly running out.

The following are 12 things that just happened that show the next wave of the economic collapse is almost here…

#1 According to TrimTab’s CEO Charles Biderman, corporate insider purchases of stock have hit an all-time low, and the ratio of corporate insider selling to corporate insider buying has now reached an astounding 50 to 1….

While retail is being told to buy-buy-buy, Biderman exclaims that “insiders at U.S. companies have bought the least amount of shares in any one month,” and that the ratio of insider selling to buying is now 50-to-1 – a monthly record.

#2 On Friday we learned that personal income in the United States experienced its largest one month decline in 20 years

Personal income decreased by $505.5 billion in January, or 3.6%, compared to December (on a seasonally adjusted and annualized basis). That’s the most dramatic decline since January 1993, according to the Commerce Department.

#3 In a stunning move, Michigan Governor Rick Snyder says that he will appoint an emergency financial manager to take care of Detroit’s financial affairs…

Snyder, 54, took a step he avoided a year ago, empowering an emergency financial manager who can sweep aside union contracts, sell municipal assets, restructure services and reorder finances. He announced the move yesterday at a public meeting in Detroit.

If this does not work, Detroit will almost certainly have to declare bankruptcy.  If that happens, it will be the largest municipal bankruptcy in U.S. history.

#4 On Friday it was announced that the unemployment rate in Italy had risen to 11.7 percent.  That was a huge jump from 11.3 percent the previous month, and Italy now has the highest unemployment rate that it has experienced in 21 years.

#5 The youth unemployment rate in Italy has risen to a new all-time record high of 38.7 percent.

#6 On Friday it was announced that the unemployment rate in the eurozone as a whole had just hit a brand new record high of 11.9 percent.

#7 On Friday it was announced that the unemployment rate in Greece has now reached 27 percent, and it is being projected that it will reach 30 percent by the end of the year.

#8 The youth unemployment rate in Greece is now an almost unbelievable 59.4 percent.

#9 On Saturday, hundreds of thousands of protesters filled the streets of Lisbon and other Portuguese cities to protest the austerity measures that are being imposed upon them.  It was reportedly the largest protest in the history of Portugal.

#10 According to Goldman Sachs, bank deposits declined all over Europe during the month of January.

#11 Over the weekend, the deputy governor of China’s central bank declared that China is prepared for a “currency war“…

A top Chinese banker said Beijing is “fully prepared” for a currency war as he urged the world to abide by a consensus reached by the G20 to avert confrontation, state media reported on Saturday.

Yi Gang, deputy governor of China’s central bank, issued the call after G20 finance ministers last month moved to calm fears of a looming war on the currency markets at a meeting in Moscow.

Those fears have largely been fuelled by the recent steep decline in the Japanese yen, which critics have accused Tokyo of manipulating to give its manufacturers a competitive edge in key export markets over Asian rivals.

#12 Italy is an economic basket case at this point, and the political gridlock in Italy is certainly not helping matters.  Former comedian Beppe Grillo’s party could potentially tip the balance of power one way or the other in Italy, and over the weekend he made some comments that are really shaking things up over in Europe.  For one thing, he is suggesting that Italy should hold a referendum on the euro…

“I am a strong advocate of Europe. I am in favor of an online referendum on the euro,” Beppe Grillo told Bild am Sonntag.

Such a vote would not be legally binding in Italy, where referendums can only be used to repeal laws or parts of laws, but would carry political weight. Grillo has said in the past that membership of the euro should be up to the Italian people.

In addition, Grillo is also suggesting that Italy’s debt has gotten so large that renegotiation is the only option…

In an interview with a German magazine published on Saturday, Mr Grillo said that “if conditions do not change” Italy “will want” to leave the euro and return to its former national currency.

The 64-year-old comic-turned-political activist also said Italy needs to renegotiate its €2 trillion debt.

At 127 per cent of gross domestic product (GDP), it is the highest in the euro zone after Greece.

“Right now we are being crushed, not by the euro, but by our debt. When the interest payments reach €100 billion a year, we’re dead. There’s no alternative,” he told Focus, a weekly news magazine.

He said Italy was in such dire economic straits that “in six months, we will no longer be able to pay pensions and the wages of public employees.”

And of course government debt has taken center stage in the United States as well.

The sequester cuts have now gone into effect, and they will definitely have an effect on the U.S. economy.  Of course that effect will not be nearly as dramatic as many Democrats are suggesting, but without a doubt those cuts will cause the U.S. economy to slow down a bit.

And of course the U.S. economy has already been showing plenty of signs of slowing down lately.  If you doubt this, please see my previous article entitled “Consumer Spending Drought: 16 Signs That The Middle Class Is Running Out Of Money“.

So what comes next?

Well, everyone should keep watching Europe very closely, and it will also be important to keep an eye on Wall Street.  There are a whole bunch of indications that the stock market is at or near a peak.  For example, just check out what one prominent stock market analyst recently had to say

“Every reliable technical tool is warning of major peaking action,” said Walter Zimmerman, the senior technical analyst at United-ICAP. “This includes sentiment, momentum, classical chart patterns, and Elliott wave analysis.

“Most of the rally in the stock market since 2009 can be chalked up to the Federal Reserve’s attempt to create a ‘wealth effect’ through higher stock market prices. This only exacerbates the downside risk. Why? The stock market no is longer a lead indicator for the economy. It is instead reflecting  Fed manipulation. Pushing the stock market higher while the real economy languishes has resulted in another bubble.

“The next leg down will not be a partial correction of the advance since the 2009 lows. It will be another major financial crisis. The worst is yet to come.”

Sadly, most people will continue to deny that anything is wrong until it is far too late.

Many areas of Europe are already experiencing economic depression, and it is only a matter of time before the U.S. follows suit.

Time is running out, and I hope that you are getting ready.

So what do you think?

How much time do you believe that we have left before the next wave of the economic collapse strikes?

Please feel free to post a comment with your thoughts below…

Jeff Rowley Big Wave Surfer wipeout Photo Jaws Peahi by Xvolution Media

The Coming Derivatives Panic That Will Destroy Global Financial Markets

When financial markets in the United States crash, so does the U.S. economy.  Just remember what happened back in 2008.  The financial markets crashed, the credit markets froze up, and suddenly the economy went into cardiac arrest.  Well, there are very few things that could cause the financial markets to crash harder or farther than a derivatives panic.  Sadly, most Americans don’t even understand what derivatives are.  Unlike stocks and bonds, a derivative is not an investment in anything real.  Rather, a derivative is a legal bet on the future value or performance of something else.  Just like you can go to Las Vegas and bet on who will win the football games this weekend, bankers on Wall Street make trillions of dollars of bets about how interest rates will perform in the future and about what credit instruments are likely to default.  Wall Street has been transformed into a gigantic casino where people are betting on just about anything that you can imagine.  This works fine as long as there are not any wild swings in the economy and risk is managed with strict discipline, but as we have seen, there have been times when derivatives have caused massive problems in recent years.  For example, do you know why the largest insurance company in the world, AIG, crashed back in 2008 and required a government bailout?  It was because of derivatives.  Bad derivatives trades also caused the failure of MF Global, and the 6 billion dollar loss that JPMorgan Chase recently suffered because of derivatives made headlines all over the globe.  But all of those incidents were just warm up acts for the coming derivatives panic that will destroy global financial markets.  The largest casino in the history of the world is going to go “bust” and the economic fallout from the financial crash that will happen as a result will be absolutely horrific.

There is a reason why Warren Buffett once referred to derivatives as “financial weapons of mass destruction”.  Nobody really knows the total value of all the derivatives that are floating around out there, but estimates place the notional value of the global derivatives market anywhere from 600 trillion dollars all the way up to 1.5 quadrillion dollars.

Keep in mind that global GDP is somewhere around 70 trillion dollars for an entire year.  So we are talking about an amount of money that is absolutely mind blowing.

So who is buying and selling all of these derivatives?

Well, would it surprise you to learn that it is mostly the biggest banks?

According to the federal government, four very large U.S. banks “represent 93% of the total banking industry notional amounts and 81% of industry net current credit exposure.”

These four banks have an overwhelming share of the derivatives market in the United States.  You might not be very fond of “the too big to fail banks“, but keep in mind that if a derivatives crisis were to cause them to crash and burn it would almost certainly cause the entire U.S. economy to crash and burn.  Just remember what we saw back in 2008.  What is coming is going to be even worse.

It would have been really nice if we had not allowed these banks to get so large and if we had not allowed them to make trillions of dollars of reckless bets.  But we stood aside and let it happen.  Now these banks are so important to our economic system that their destruction would also destroy the U.S. economy.  It is kind of like when cancer becomes so advanced that killing the cancer would also kill the patient.  That is essentially the situation that we are facing with these banks.

It would be hard to overstate the recklessness of these banks.  The numbers that you are about to see are absolutely jaw-dropping.  According to the Comptroller of the Currency, four of the largest U.S. banks are walking a tightrope of risk, leverage and debt when it comes to derivatives.  Just check out how exposed they are…

JPMorgan Chase

Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)

Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)

Citibank

Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)

Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)

Bank Of America

Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)

Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)

Goldman Sachs

Total Assets: $114,693,000,000 (a bit more than 114 billion dollars – yes, you read that correctly)

Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)

That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 362 times greater than their total assets.

To get a better idea of the massive amounts of money that we are talking about, just check out this excellent infographic.

How in the world could we let this happen?

And what is our financial system going to look like when this pyramid of risk comes falling down?

Our politicians put in a few new rules for derivatives, but as usual they only made things even worse.

According to Nasdaq.com, beginning next year new regulations will require derivatives traders to put up trillions of dollars to satisfy new margin requirements.

Swaps that will be allowed to remain outside clearinghouses when new rules take effect in 2013 will require traders to post $1.7 trillion to $10.2 trillion in margin, according to a report by an industry group.

The analysis from the International Swaps and Derivatives Association, using data sent in anonymously by banks, says the trillions of dollars in cash or securities will be needed in the form of so-called “initial margin.” Margin is the collateral that traders need to put up to back their positions, and initial margin is money backing trades on day one, as opposed to variation margin posted over the life of a trade as it fluctuates in value.

So where in the world will all of this money come from?

Total U.S. GDP was just a shade over 15 trillion dollars last year.

Could these rules cause a sudden mass exodus that would destabilize the marketplace?

Let’s hope not.

But things are definitely changing.  According to Reuters, some of the big banks are actually urging their clients to avoid new U.S. rules by funneling trades through the overseas divisions of their banks…

Wall Street banks are looking to help offshore clients sidestep new U.S. rules designed to safeguard the world’s $640 trillion over-the-counter derivatives market, taking advantage of an exemption that risks undermining U.S. regulators’ efforts.

U.S. banks such as Morgan Stanley (MS.N) and Goldman Sachs (GS.N) have been explaining to their foreign customers that they can for now avoid the new rules, due to take effect next month, by routing trades via the banks’ overseas units, according to industry sources and presentation materials obtained by Reuters.

Unfortunately, no matter how banks respond to the new rules, it isn’t going to prevent the coming derivatives panic.  At some point the music is going to stop and some big financial players are going to be completely and totally exposed.

When that happens, it might not be just the big banks that lose money.  Just take a look at what happened with MF Global.

MF Global has confessed that it “diverted money” from customer accounts that were supposed to be segregated.  A lot of customers may never get back any of the money that they invested with those crooks.  The following comes from a Huffington Post article about the MF Global debacle, and it might just be a preview of what other investors will go through in the future when a derivatives crash destroys the firms that they had their money parked with…

Last week when customers asked for excess cash from their accounts, MF Global stalled. According to a commodity fund manager I spoke with, MF Global’s first stall tactic was to claim it lost wire transfer instructions. Then instead of sending an overnight check, it sent the money snail mail, including checks for hundreds of thousands of dollars. The checks bounced. After the checks bounced, the amounts were still debited from customer accounts and no one at MF Global could or would reverse the check entries. The manager has had to intervene to get MF Global to correct this.

How would you respond if your investment account suddenly went to “zero” because the firm you were investing with “diverted” customer funds for company use and now you have no way of recovering your money?

Keep an eye on the large Wall Street banks.  In a previous article, I quoted a New York Times article entitled “A Secretive Banking Elite Rules Trading in Derivatives” which described how these banks dominate the trading of derivatives…

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

According to the article, the following large banks are represented at these meetings: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.

When the casino finally goes “bust”, you will know who to blame.

Without a doubt, a derivatives panic is coming.

It will cause the financial markets to crash.

Several of the “too big to fail” banks will likely crash and burn and require bailouts.

As a result of all this, credit markets will become paralyzed by fear and freeze up.

Once again, we will see the U.S. economy go into cardiac arrest, only this time it will not be so easy to fix.

Do you agree with this analysis, or do you find it overly pessimistic?  Please feel free to post a comment with your thoughts below…

10 Signs That The American People Are Starting To Freak Out About The Condition Of The Economy

All over America, restlessness and frustration are growing. It has now been almost three years since the great financial crash of 2008, and yet the U.S. economy is still a complete and total mess.  In fact, there are all sorts of signs that things are about to get even worse, and the American people are just about fed up.  Virtually every major poll, survey and measure of consumer confidence shows that the American people are becoming more pessimistic about the economy.  Millions of hard working Americans that worked their fingers to the bone for their employers and that did everything “right” are sitting at home on their couches tonight staring blankly at the television.  Many of them still have a hard time believing that they were laid off and that there is nobody out there that wants to give them a good job.  There are millions of other Americans that won’t get much sleep tonight because they will spend much of the night rolling around in bed wondering how they are possibly going to be able to pay the mortgage.  We have never faced such an extended economic downturn in modern U.S. history, and a lot of people are starting to freak out about the condition of the economy.  As Gerald Celente likes to say: “When people lose everything and have nothing left to lose – they lose it.”

Every single month, the number of good jobs continues to go down.  Wall Street actually rewards companies that have a good “outsourcing strategy”.  As I have written about previously, a growing percentage of the jobs that are being “created” these days are very low paying jobs.  But you can’t support a family, pay a mortgage or even afford decent health insurance on what you would make stocking shelves at Target or passing out buckets of chicken for KFC.

The American people keep waiting for “hope” and “change” to show up, but all they get instead are more helpings of “despair” and “frustration”.

Sadly, most Americans still cling to the hope that if the “next election” will just turn out the right way that things will be okay.  But the truth is that things seem to stay on pretty much the same course no matter who we put into office.

For many years the status quo seemed to be okay for most people, but now we are starting to reap the results of the economic seeds that we have sown.

Now our economic decline is starting to accelerate and people are starting to panic.  Most Americans may not know why all of this is happening, but what many of them do know is that something in their gut is telling them that things have gone terribly, terribly wrong somehow.

The following are 10 signs that the American people are starting to freak out about the condition of the economy….

#1 Things have already gotten so bad that Americans will literally trample one another just to get on a waiting list for rental assistance vouchers.  Just check out the following excerpt from a local news report about a recent incident in Texas….

At least eight people were hurt Thursday morning while scrambling to line up for a limited number of Dallas County rental vouchers — after waiting for hours in their cars.

People lined up Thursday morning to apply for Dallas County Section 8 housing vouchers. Dallas County sheriff’s spokesman Kim Leach estimated the crowd at about 5,000.

Video of this incident is posted below.  One of the people that was trampled was a pregnant woman….

#2 Almost every measurement of consumer confidence is going down.  For example, the Conference Board’s consumer confidence index fell from 61.7 in May to 58.5 in June.

#3 The Reuters/University of Michigan consumer sentiment index has fallen to 63.8 after being at 71.5 in June.  It is now the lowest that it has been since the last recession “ended”.

#4 The Rasmussen Consumer Index is down 9 points from a month ago.

#5 A recent poll taken by Rasmussen found that 68 percent of Americans believe that we are actually in a recession right now.

#6 According to Gallup, the percentage of Americans that lack confidence in U.S. banks is now at an all-time high of 36%.

#7 In many areas of the United States this summer, just about anything that is not bolted down is being stolen by people that are desperate for money.

#8 According to one recent poll, 39 percent of Americans believe that the U.S. economy has now entered a “permanent decline”.

#9 Another recent survey found that 48 percent of Americans believe that it is likely that another great Depression will begin within the next 12 months.

#10 According to a brand new Reuters/Ipsos poll, 63 percent of Americans believe that the nation is on the wrong track.  That figure is three percent higher than it was last month.

One of the only things preventing chaos from breaking out in the streets of our cities from coast to coast is government handouts.

Today, almost 20 percent of all personal income in the United States comes from benefits provided by the federal government.

You don’t believe this?  Just check out what the New York Times recently had to say….

Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics.

There are tens of millions of Americans that are living “on the edge”, but at least the massive government handout programs are enabling most of them to survive.

So what happens when the checks from the government stop coming?

Look, I am not advocating that the “welfare society” that we have become is a good thing.  Today, Americans receive more in direct government benefits than they pay in taxes.  That is not even close to sustainable.

What I am pointing out is that tens of millions of Americans that are deeply suffering are currently being pacified by these government handouts.  Once the handouts are cut significantly or taken away completely it is going to unleash a lot of anger and frustration.

Of course what the American people really need are good jobs that will give them dignity and allow them to provide for their families, but millions of those keep getting shipped out of the country.

So the only thing that millions of Americans still have to hang on to are their government benefits.  Once that changes a whole lot of people are going to throw a fit.

In fact, we are already seeing some really bizarre behavior across the United States.  In many areas of the country we are literally watching society crumble right in front of our very eyes.

If you doubt this, just check out these two articles….

1) “Americans Gone Wild

2) “18 Signs The Collapse Of Society Is Accelerating

But not all Americans will resort to lawless behavior.  In fact, there are a lot of really good, hard working people out there that this economy has left behind.

There are some people that have put in decades of hard work only to see their dreams shrivel up over the past few years.

Some of the stories people send me are absolutely heartbreaking.  I have looked at each and every comment that has been left on The Economic Collapse over the past couple of years.  Needless to say, it has taken a huge investment of my time to go through more than 20,000 comments.  But in the process I have gotten a very good idea of what people are going through across the nation.

So how badly are people hurting?  Well, a reader identified as “Anna44” recently shared with us what some of her family members have been going through in this economy….

My B-I-L was a dealership owner/manager who worked long hours over 38 years and had to close his doors when Saturn was dissolved. When his dealership went under, 72 others lost their job. That’s 72 families who took a hit. He lost his home, everything. A few of his former employees lost their homes as well eventually. They were not lazy or WORTHLESS. It took him a year and a half to finally find something, but now he lives in a hotel unable to qualify for a house or apartment. This is an educated man who competed nationwide for top dog and got it more then once. His biggest fault? He’s almost 60, young enough to need the work, but too old to be hired.

As for my husband- 26 years AF officer, handling millions & billions on International & National levels has just entered his 7th month of unemployment. Two tours abroad- lazy he is NOT. He doesn’t qualify for unemployment, nor is he counted because he gets a retirement check. He wants and needs to work- yet there is little out there. If he doesn’t find something soon, we too will lose the home we sunk every cent into after 20 years of saving for it!

All across America tonight there are similar stories.  People have done everything “right” all of their lives and they are frustrated that now they have been pushed to the edge of poverty by this economy.

Unfortunately, it looks like things may soon get even worse.  Economist David Rosenberg recently told CNBC the following….

“We’re just one small shock away from the economy going back into recession.”

That is not what the American people want to hear.

What they want to hear is that things are about to get better.

What they want to hear is that things are going to get back to normal soon.

Sadly, that is just not going to be the case.

The economy is going to get worse and worse, and the frustration and the anger of the American people is just going to continue to grow.

 

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