Crisis

18 Signs That The Banking Crisis In Europe Has Just Gone From Bad To Worse

With each passing day, the banking crisis in Europe escalates.  European banks are having their credit ratings downgraded in waves, bond yields are soaring and billions of euros are being pulled out of banks all across the eurozone.  The situation in Europe is rapidly going from bad to worse.  It is almost like watching air being let out of a balloon.  The key to any financial system is confidence, and right now confidence in banks in Greece, Italy, Spain and Portugal is declining at an alarming rate.  When things hit the fan in Europe, it is going to be much safer to have your money in Swiss banks or German banks than in Greek banks, Spanish banks or Italian banks.  Millions of people in Europe are starting to realize that a “euro” is not necessarily always going to be a “euro” and they are starting to panic.  The Greek banking system is already on the verge of total collapse, and at this rate it is only a matter of time before we see some major Spanish and Italian banks start to fail.  In fact it has already been announced that the fourth largest bank in Spain, Bankia, will be getting bailed out by the Spanish government.  It is only a matter of time before we hear more announcements like this.  Right now, events are moving so quickly in Europe that it is hard to keep up with them all.  But this is what usually happens in the financial world.  When things go well, it tends to happen over an extended period of time.  When things fall apart, it tends to happen very rapidly.

And at the moment, things across the pond are moving at a pace that is absolutely breathtaking.

The following are 18 signs that the banking crisis in Europe has just gone from bad to worse….

#1 Moody’s has announced that it has downgraded the credit ratings of 16 Spanish banks.  Included was Banco Santander, the largest bank in the eurozone.

#2 Shares of the fourth largest bank in Spain, Bankia, dropped 14 percent on Thursday.

#3 Overall, shares of Bankia have declined by 61 percent since last July.

#4 Shares of the largest bank in Italy, Unicredit, dropped by about 6 percent on Thursday.

#5 According to CNBC, a Spanish bond auction on Thursday went very poorly….

The Spanish Treasury had to pay around 5 percent to attract buyers of three- and four-year bonds. The longer-dated paper sold with a yield of 5.106 percent, way above the 3.374 percent the last time it was auctioned.

#6 The yield on 10 year Spanish bonds is back above 6 percent.

#7 In recent days, about eight times more money than usual has been pulled out of Greek banks.

#8 Fitch has slashed the long-term credit rating for Greece from B- to CCC.

#9 The European Central Bank has cut off direct lending to at least 4 Greek banks.

#10 According to a recent German documentary, financial records at the Ministry of Finance in Athens are being stored in garbage bags and shopping carts.

#11 The euro hit a 4 month low against the U.S. dollar on Thursday.

#12 It has been announced that the Spanish economy and the Italian economy are officially in recession.

#13 The Spanish government is becoming increasingly concerned about the bad loans that are mounting at major Spanish banks.  The following is from a recent Bloomberg article….

The government has asked lenders to increase provisions for bad debt by 54 billion euros ($70 billion) to 166 billion euros. That’s enough to cover losses of about 50 percent on loans to property developers and construction firms, according to the Bank of Spain. There wouldn’t be anything left for defaults on more than 1.4 trillion euros of home loans and corporate debt.

Taking those into account, banks would need to increase provisions by as much as five times what the government says, or 270 billion euros, according to estimates by the Centre for European Policy Studies, a Brussels-based research group. Plugging that hole would increase Spain’s public debt by almost 50 percent or force it to seek a bailout, following in the footsteps of Ireland, Greece and Portugal.

#14 Civil unrest is rising to dangerous levels in Italy.  The Italian government has assigned bodyguards to 550 individuals and has increased security at about 14,000 locations in response to recent violence related to the economic crisis.

#15 Governments all over Europe are rapidly making preparations for a Greek exit from the euro.  The following is from a recent article in the Guardian….

The British government is making urgent preparations to cope with the fallout of a possible Greek exit from the single currency, after the governor of the Bank of England, Sir Mervyn King, warned that Europe was “tearing itself apart”.

#16 According to CNBC, the banking crisis in Europe is beginning to affect global trade….

The euro zone debt crisis is affecting trade as companies shy away from dealing with firms and banks in countries deemed at risk of contagion, a senior banker said on Thursday.

#17 Moody’s downgraded the credit ratings of 26 Italian banks on Monday.

#18 Moody’s has announced that it is reviewing the credit ratings of 114 more European financial institutions.

Newspapers all over the globe are speaking breathlessly of a potential Greek exit from the euro, but it is very unlikely to happen before the next Greek election on June 17th.

The rest of Europe is going to continue to financially support Greece until a new government takes power.

If the new government is willing to accept the previous bailout agreements, then financial support for Greece will continue.

If the new government is not willing to accept the previous bailout agreements, then financial support for Greece will stop.

If that happens, the bank runs in Europe will likely become a lot worse.

But for now, Greece almost certainly has at least one more month in the euro.

Beyond that, there is no telling what is going to happen.

Greece is the first domino.  If Greece falls, you can count on others to eventually start tumbling as well.

The second half of 2012 is going to be fascinating to watch.

Hopefully things will not be as bad as many of us now fear they may be.

The Too Big To Fail Banks Are Now Much Bigger And Much More Powerful Than Ever

The Democrats, the Republicans and especially Barack Obama promised that something would be done about the too big to fail banks so that they would never again be a threat to destroy our financial system.  Well, those promises have not been kept and the too big to fail banks are now much bigger and much more powerful than ever.  The assets of the five biggest U.S. banks were equivalent to about 43 percent of U.S. GDP before the financial crisis.  Today, the assets of the five biggest U.S. banks are equivalent to about 56 percent of U.S. GDP.  So if those banks were “too big to fail” before, then what are they now?  They continue to gobble up smaller banks at a brisk pace, and they continue to pile up debt and risky investments as if a day of reckoning will never come.  But of course a day of reckoning is coming, and when it arrives they will be expecting more bailouts just like they got the last time.

The size of these monolithic financial institutions is truly difficult to comprehend.  They completely dominate our financial system and everywhere you look they are constantly absorbing more wealth and more power.  The following comes from a recent Bloomberg article….

Five banks — JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc., Wells Fargo & Co. (WFC), and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy

Despite all of the talk from the politicians, they just keep getting bigger and bigger and bigger.

So why isn’t anything ever done?

Well, one reason is because these gigantic financial entities funnel huge quantities of cash into political campaigns.

For example, Barack Obama gives nice speeches about the dangers of the too big to fail banks, but he is also more than happy to take their campaign contributions.  Goldman Sachs, JPMorgan Chase and Citigroup were all ranked among his top 10 donors during the 2008 campaign.

So do you really expect that Barack Obama is going to bite the hands that feed him?

Of course he is not going to do that.

The truth is that the Obama administration and the Federal Reserve have done everything they can to make life very comfortable for the big Wall Street banks.

During the last financial crisis, the too big to fail banks were absolutely showered with bailouts.

Meanwhile, hundreds of small and mid-size banks were allowed to die.

When representatives from those small and mid-size banks contacted the federal government for help, often they were told to try to find a larger bank that would be willing to buy them.

Sadly, the last financial crisis simply accelerated the consolidation of the banking industry in the United States that has been going on for several decades.

Today, there are less than half as many banks in the United States as there were back in 1984.

So where did all of those banks go?

They were either purchased by bigger banks or they were allowed to go out of existence.

This banking consolidation trend has allowed the big Wall Street banks to absolutely explode in size.

Back in 1970, the 5 biggest U.S. banks held 17 percent of all U.S. banking industry assets.

Today, the 5 biggest U.S. banks hold 52 percent of all U.S. banking industry assets.

So where will this end?

That is a good question.

The funny thing is that Federal Reserve Chairman Ben Bernanke and other Fed officials keep giving speeches where they warn of the dangers of having banks that are “too big to fail”.  For example, during a recent presentation to students at George Washington University, Bernanke made the following statement about the U.S. banking system….

“But clearly, it is something fundamentally wrong with a system in which some companies are ‘too big to fail.'”

So does that mean that Bernanke is against the too big to fail banks?

Of course not.

The truth is that he showered those banks with trillions of dollars in bailout money during the last financial crisis.

The amount of money in secret loans that some of the big Wall Street banks received from the Federal Reserve was absolutely staggering.  The following figures come directly from a GAO report….

Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Bank of America – $1.344 trillion
Goldman Sachs – $814 billion
JP Morgan Chase – $391 billion

Bernanke has shown that he is willing to move heaven and earth to protect those big banks.

So what did those banks do with all that money?

They certainly didn’t lend it to us.  Lending to individuals and small businesses by those big banks actually went down immediately after those bailouts.

Instead, one thing that those banks did was they started putting massive amounts of money into commodities.

One of those commodities was food.

Over the past few years, big Wall Street banks have made huge amounts of money speculating on the price of food.  This has caused food prices all over the globe to soar and it has caused tremendous hardship for hundreds of millions of families around the planet.  The following is from a recent article in The Independent….

Speculation by large investment banks is driving up food prices for the world’s poorest people, tipping millions into hunger and poverty. Investment in food commodities by banks and hedge funds has risen from $65bn to $126bn (£41bn to £79bn) in the past five years, helping to push prices to 30-year highs and causing sharp price fluctuations that have little to do with the actual supply of food, says the United Nations’ leading expert on food.

Hedge funds, pension funds and investment banks such as Goldman Sachs, Morgan Stanley and Barclays Capital now dominate the food commodities markets, dwarfing the amount traded by actual food producers and buyers.

Goldman Sachs alone has earned hundreds of millions of dollars in profits from food speculation.

Can you imagine what kind of mindset it takes to do this?

Can you imagine taking food out of the mouths of hungry families on the other side of the world so that you and your fellow employees can pad your bonus checks?

It really is disgusting.

But that is the way the game is played.

It is set up so that the big guy will win and the little guy will lose.

The other day I wrote about how this is particularly true when it comes to our system of taxation.

Well, since that article I have discovered some new numbers that were just released by Citizens for Tax Justice.  Some of the things that they have uncovered are absolutely amazing….

Between 2008 and 2011, Verizon made a total profit of $19.8 billion and yet paid an effective tax rate of -3.8%.

Between 2008 and 2011, General Electric made a total profit of $19.6 billion and yet paid an effective tax rate of -18.9%.

Between 2008 and 2011, Boeing made a total profit of $14.8 billion and yet paid an effective tax rate of -5.5%.

Between 2008 and 2011, Pacific Gas & Electric made a total profit of $6 billion and yet paid an effective tax rate of -8.4%.

So why should middle class families continue to be suffocated by outrageous tax rates when hugely profitable corporations such as General Electric are able to get away with paying nothing?

Our current tax system is an utter abomination and should be completely thrown out.

But as is the case with so many other things, our current system is going to persist because the “big guys” really enjoy the status quo and they are the ones that fund political campaigns.

It would be bad enough if the “big guys” were beating us on a level playing field.

But the truth is that the game has been dramatically tilted in their favor and they know that the politicians are going to take care of them whenever they need it.

So what is going to happen the next time the too big to fail banks get into trouble?

They will almost certainly get bailed out again.

Unfortunately, the big Wall Street banks continue to treat the financial system as if it was a gigantic casino.  The derivatives bubble just continues to grow larger and larger, and it could burst and absolutely devastate the entire global financial system at any time.

According to the New York Times, the too big to fail banks have complete domination over derivatives trading.  Every month a secret meeting that includes representatives from JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup is held in New York to coordinate their control over the derivatives marketplace.  The following is how the New York Times describes those meetings….

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.

When the derivatives market fully implodes, there will not be enough money in the world to bail everyone out.  According to the Comptroller of the Currency, the too big to fail banks have exposure to derivatives that is absolutely outrageous.  Just check out the following numbers….

JPMorgan Chase – $70.1 Trillion

Citibank – $52.1 Trillion

Bank of America – $50.1 Trillion

Goldman Sachs – $44.2 Trillion

So what happens when that house of cards comes crashing down?

Well, those big banks will come crying to the federal government again.

They will want more bailouts.

They will claim that if we don’t give them the money that they need that the entire financial system will collapse.

And yes, if several of the too big to fail banks were to collapse all at once the consequences would be almost unimaginable.

But of course all of this could have been avoided if we would have made much wiser decisions upstream.

Our financial system is more vulnerable than it ever has been before, and the too big to fail banks just continue to grow.

The lessons from the financial crisis of 2008 have gone unheeded, and we are steamrolling toward an even greater crash.

What a mess.

Tony Robbins, Ron Paul And Ben Bernanke All Agree: The National Debt Crisis Could Destroy America

Is there one thing that Tony Robbins, Ron Paul and Ben Bernanke can all agree on?  Yes, there actually is.  Recently they have all come forward with warnings that the national debt crisis could destroy America if something is not done.  Unfortunately, our politicians continue to spend us into oblivion as if there will never be any consequences.  When Barack Obama took office, the U.S. national debt was 10.6 trillion dollars.  Today, it is 15.6 trillion dollars and it is rising at the rate of about 150 million dollars an hour.  During the Obama administration so far, the U.S. government has accumulated more debt than it did from 1776 to 1995.  The United States now has a debt to GDP ratio of over 100 percent, and another credit rating agency downgraded U.S. debt earlier this month.  Any talk of a positive economic future is utter nonsense as long as we are bleeding red ink as a nation far faster than we ever have before.  It is absolutely immoral to wreck the financial future of our children and our grandchildren and to leave them with a bill for the greatest mountain of debt in the history of the world, but that is exactly what we are doing.  Unless our current debt-based financial system is thrown out, there are only two ways that this game is going to play out.  One would involve absolutely bitter austerity and deflation unlike anything ever seen before, and the other would involve nightmarish hyperinflation.  Either path would be hellish beyond what most Americans could possibly imagine.

Unfortunately, we are running out of time as a nation.  You know that things are late in the game when the head of the Federal Reserve starts using apocalyptic language to talk about the national debt.  The following is what Federal Reserve Chairman Ben Bernanke told Congress recently….

Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences. Over the longer term, the current trajectory of federal debt threatens to crowd out private capital formation and thus reduce productivity growth. To the extent that increasing debt is financed by borrowing from abroad, a growing share of our future income would be devoted to interest payments on foreign-held federal debt. High levels of debt also impair the ability of policymakers to respond effectively to future economic shocks and other adverse events.

Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy. Although historical experience and economic theory do not indicate the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point.

The sick thing about this is that the Federal Reserve system is actually designed to generate government debt.  The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was created back in 1913.  So it is kind of ironic that the head of the organization that was designed to perpetually generate U.S. government debt is now warning that there is too much of it.

But Ben Bernanke is far from alone in warning about the danger of our exploding national debt.

For example, world famous motivational speaker Tony Robbins is also warning that the national debt crisis could destroy our future.

These days, most people throw around the phrase “a trillion dollars” without ever really grasping what it means.

In the video posted below, Tony Robbins uses a fun illustration to help put in perspective how large a “trillion dollars” really is.

If you had a million seconds to do something, would you consider that to be a long time?

Well, it turns out that a million seconds is only about 12 days.

What about a billion seconds?  Is that a long period of time?

Well, yes, a billion seconds is close to 32 years.  So that is definitely a lot longer than a million seconds.

What about a trillion seconds?

How long do you think that is?

Well, a trillion seconds is about 31,688 years.

So when we talk about how the U.S. government is stealing more than a trillion dollars from future generations every single year, we are talking about an absolutely massive amount of money.

The Tony Robbins video about the national debt crisis posted below has started to go viral all over the Internet.  If you have not seen it yet, I definitely recommend taking a few minutes to watch it….

So why are our politicians not doing anything about the U.S. debt crisis?

Well, it is because most of them value getting elected over and over again above doing what is right for future generations.

For the past four decades, the United States has been enjoying a 15 trillion dollar party.  All of this borrowed money has enabled us to live far, far beyond our means.

If our politicians voted to severely cut spending or to raise taxes dramatically at this point, our economy would suddenly readjust to a more realistic standard of living.  But that would be extremely painful and most Americans voters would be absolutely furious.  They would demand that someone “fix” the economy immediately.  But the truth is that what we have been enjoying all these years has not been real.  It has been bought with trillions of dollars stolen from future generations.  But most of our politicians just want to keep the party rolling as long as humanly possible so that they can keep getting voted back into office.

Fortunately, there are a few politicians that are willing to stand up and tell the truth about our national debt crisis.  For example, in the video posted below Ron Paul scolds the rest of Congress for continuing to vote for debt limit increase after debt limit increase….

Unfortunately, the American people seem to prefer politicians that endlessly lie to them about how bad things really are.

For example, back at the beginning of the Bush administration we were promised that we would be swimming in gigantic surpluses by now.

That didn’t exactly work out, now did it?

Barack Obama promised us that he would cut the size of the federal budget deficit in half by the end of his first term.

Well, guess what?

He lied too.

Things just continue to get worse and worse.

Since 1975, we have added more than 15 trillion dollars to the national debt.  In fact, the U.S. national debt is now more than 22 times larger than it was when Jimmy Carter became president.

A lot of talking heads on television continue to assure us that everything is going to be okay, but the truth is that we are about to experience some absolutely devastating consequences for decades of really bad decisions.

For example, the rest of the world is rapidly losing faith in our currency and the reign of the U.S. dollar as the primary world reserve currency is in serious danger of coming to an end.  When that happens, gasoline, food and just about everything else that you buy is going to be a lot more expensive.

Already, there are very ominous signs that the rest of the world is getting tired of financing our endless spending.  In 2011, the Federal Reserve bought approximately 61 percent of all new government debt issued by the U.S. Treasury Department.  This is not supposed to happen.  The Federal Reserve is not supposed to be monetizing our debt and this is something that Congress should be looking into.

Also, at this time of the year people love to complain about the outrageous amount of taxes that most hard working Americans have to pay, but the truth is that eventually it will likely get a whole lot worse.

Just look at Greece.  Taxes in Greece have been raised to suffocating levels, government spending has been slashed to the bone and yet they are still running up more debt.

That is going to happen in the United States at some point too, especially if our leaders choose the path of austerity and deflation.

You can’t hide from debt forever.

Have you ever run up debt on a credit card?

A lot of us did that when we were young and foolish, and it can be a lot of fun on the way up.

But eventually a day of reckoning comes and it is extremely painful to find yourself drowning in credit card debt.

Well, we are rapidly approaching our credit limit as a nation.

Some hard choices will have to be made, and there will be a lot of pain.

The false prosperity that we are enjoying now is going to disappear.

Now is the time to prepare for the massive economic shift that is coming.  In the coming economic environment, those that are currently living month to month and those that are 100% dependent on the system are going to be in a huge amount of trouble.

Instead of wildly spending money as if the good times will never end like most Americans are, now is the time to get out of debt, to become more self-sufficient and to set aside the money, resources and supplies you will need to weather the storm that is rapidly approaching.

Anyone with half a brain should be able to see that a gigantic economic collapse is coming.

Use the time that you still have left to prepare the best that you can.

27 Statistics About The European Economic Crisis That Are Almost Too Crazy To Believe

The economic crisis in Europe continues to get worse and eventually it is going to unravel into a complete economic nightmare.  All over Europe, national governments have piled up debts that are completely unsustainable.  But whenever they start significantly cutting government spending it results in an economic slowdown.  So politicians in Europe are really caught between a rock and a hard place.  They can’t keep racking up these unsustainable debts, but if they continue to cut government spending it is going to push their economies into deep recession and their populations will riot.  Greece is a perfect example of this.  Greece has been going down the austerity road for several years now and they are experiencing a full-blown economic depression, riots have become a way of life in that country and their national budget is still not anywhere close to balanced.  Americans should pay close attention to what is going on in Europe, because this is what it looks like when a debt party ends.  Most of the nations in the eurozone have just started implementing austerity, and yet unemployment in the eurozone is already the highest it has been since the euro was introduced.  It has risen for 10 months in a row and is now up to 10.8 percent.  Sadly, it is going to go even higher.  As economies across Europe slide into recession, that is going to put even more pressure on the European financial system.  Most Americans do not realize this, but the European banking system is absolutely enormous.  It is nearly four times the size that the U.S. banking system is.  When the European banking system crashes (and it will) it is going to reverberate around the globe.  The epicenter of the next great financial crisis is going to be in Europe, and it is getting closer with each passing day.

The following are 27 statistics about the European economic crisis that are almost too crazy to believe….

Greece

#1 The Greek economy shrank by 6 percent during 2011, and it has been shrinking for five years in a row.

#2 The average unemployment rate in Greece in 2010 was 12.5 percent.  During 2011, the average unemployment rate was 17.3 percent, and now the unemployment rate in Greece is up to 21.8 percent.

#3 The youth unemployment rate in Greece is now over 50 percent.

#4 The unemployment rate in the port town is Perama is about 60 percent.

#5 In Greece, 20 percent of all retail stores have closed down during the economic crisis.

#6 Greece now has a debt to GDP ratio of approximately 160 percent.

#7 Some of the austerity measures that have been implemented in Greece have been absolutely brutal.  For example, Greek civil servants have had their incomes slashed by about 40 percent since 2010.

#8 Despite all of the austerity measures, it is being projected that Greece will still have a budget deficit equivalent to 7 percent of GDP in 2012.

#9 Greece is still facing unfunded liabilities in future years that are equivalent to approximately 800 percent of GDP.

#10 In the midst of all the poverty in Greece, several serious diseases are making a major comeback.  The following comes from a recent article in the Guardian….

The incidence of HIV/Aids among intravenous drug users in central Athens soared by 1,250% in the first 10 months of 2011 compared with the same period the previous year, according to the head of Médecins sans Frontières Greece, while malaria is becoming endemic in the south for the first time since the rule of the colonels, which ended in the 1970s.

Spain

#11 The unemployment rate in Spain is now up to 23.6 percent.

#12 The youth unemployment rate in Spain is now over 50 percent.

#13 The total value of all toxic loans in Spain is equivalent to approximately 13 percent of Spanish GDP.

#14 The GDP of Spain is about 1.4 trillion dollars.  The three largest Spanish banks have approximately 2.7 trillion dollars in assets and they are all on the verge of failing.

#15 Home prices in Spain fell by 11.2 percent during 2011.

#16 The number of property repossessions in Spain rose by 32 percent during 2011.

#17 The ratio of government debt to GDP in Spain will rise by more than 11 percent during 2012.

#18 On top of everything else, Spain is dealing with the worst drought it has seen in 70 years.

Portugal

#19 The unemployment rate in Portugal is up to 15 percent.

#20 The youth unemployment rate in Portugal is now over 35 percent.

#21 Banks in Portugal borrowed a record 56.3 billion euros from the European Central Bank in March.

#22 It is being projected that the Portuguese economy will shrink by 5.7 percent during 2012.

#23 When you add up all forms of debt in Portugal (government, business and consumer) the total is equivalent to approximately 360 percent of GDP.

Italy

#24 Youth unemployment in Italy is up to 31.9 percent – the highest level ever.

#25 Italy’s national debt is approximately 2.7 times larger than the national debts of Greece, Ireland and Portugal put together.

#26 If you add the maturing debt that the Italian government must roll over in 2012 to the projected budget deficit, it comes to approximately 23.1 percent of Italy’s GDP.

#27 Italy now has a debt to GDP ratio of approximately 120 percent.

So why hasn’t Europe crashed already?

Well, the powers that be are pulling out all their tricks.

For example, the European Central Bank decided to start loaning gigantic mountains of money to European banks.  That accomplished two things….

1) It kept those European banks from collapsing.

2) European banks used that money to buy up sovereign bonds and that kept interest rates down.

Unfortunately, all of this game playing has also put the European Central Bank in a very vulnerable position.

The balance sheet of the European Central Bank has expanded by more than 1 trillion dollars over the past nine months.  The balance sheet of the European Central Bank is now larger than the entire GDP of Germany and the ECB is now leveraged 36 to 1.

So just how far can you stretch the rubberband before it snaps?

Perhaps we are about to find out.

The European financial system is leveraged like crazy right now.  Even banking systems in countries that you think of as “stable” are leveraged to extremes.

For example, major German banks are leveraged 32 to 1, and those banks are holding a massive amount of European sovereign debt.

When Lehman Brothers finally collapsed, it was only leveraged 30 to 1.

You can’t solve a debt crisis with more debt.  But the European Central Bank has been able to use more debt to kick the can down the road a few more months.

At some point the sovereign debt bubble is going to burst.

All financial bubbles eventually burst.

What goes up must come down.

Right now, the major industrialized nations of the world are approximately 55 trillion dollars in debt.

It has been a fun ride, but this fraudulent pyramid of risk, debt and leverage is going to come crashing down at some point.

It is only a matter of time.

Already, there are a whole bunch of signs that some very serious economic trouble is on the horizon.

Hopefully we still have a few more months until it hits.

But in this day and age nothing is guaranteed.

What does seem abundantly clear is that the current global financial system is inevitably going to fail.

When it does, what “solutions” will our leaders try to impose upon us?

That is something to think about.

The Shocking Truth About Unemployment In America In One Chart

The mainstream media is not telling you the truth about unemployment in the United States.  The percentage of working age Americans that are employed is not increasing.  In March 2010, 58.5 percent of all working age Americans had a job.  In March 2012, 58.5 percent of all working age Americans had a job.  So if the employment rate is exactly the same as it was two years ago, then how in the world can the Obama administration claim that things have gotten significantly better since then?  According to the Bureau of Labor Statistics, the official unemployment rate in the United States was 9.8 percent in March 2010 and it declined to 8.2 percent in March 2012.  So how is this possible if the percentage of working age Americans that have jobs hasn’t moved?  Well, what they do is they claim that there are millions upon millions of Americans that have “left the labor force”.  In other words, they claim that there are millions upon millions of unemployed Americans that don’t want jobs anymore.  Of course that is a total farce, but the mainstream media and most Americans are buying it.  They actually believe that the unemployment rate is going down.  But the truth is that the unemployment crisis in America has not subsided.  In fact, we are pretty much exactly where we were two years ago, and things are about to get a whole lot worse.

If you want to know the shocking truth about unemployment in America, all you need to do is to look at one chart.  The chart posted below shows the change in the employment-population ratio over the past few years.  What the employment-population ratio measures is the percentage of working age Americans that actually have jobs.  As you can see, it fell dramatically during 2008 and 2009, and since then it has been hovering between 58 and 59 percent….

So there has been no employment recovery, and this is very odd because the employment-population ratio always bounces back after a recession.

The chart posted below shows how the employment-population ratio has changed since the late 1940s.  The shaded areas represent recessions.  Please take note that after every single recession (other than the current one) the employment-population ratio has always bounced back substantially.

During the most recent recession, the employment-population ratio fell farther than it had during any other recession in the post-World War II era.

If these were normal economic times, it would have been reasonable to expect a huge surge in hiring by now.

But we have not seen that.

Instead, the employment rate in the United States has been remarkably flat for more than two years.

So Barack Obama should not even begin to say anything at all about a “recovery” until the employment rate at least breaks the 59 percent barrier.

In the past I have written about how fraudulent the employment statistics put out by the federal government are.

Well, fortunately there are some folks up on Capitol Hill that are starting to take notice of this phenomenon as well.  There is a new bill in Congress that would change the way that the unemployment rate is calculated….

A Republican lawmaker is intensifying his push for legislation that would change how the government measures the unemployment rate. 

Rep. Duncan Hunter (R-Calif.) intends to press GOP leaders to move his bill to include the number of individuals who gave up looking for work in the percentage of jobless claims.

Of course there is probably not a chance that such a bill would ever get through the Senate, but at least some lawmakers are trying to get people to notice what is going on.

The sad truth of the matter is that the employment crisis in America is still about as bad as it was a couple of years ago.

Do you remember a couple of months ago when Barack Obama spoke with the wife of an unemployed engineer and asked her to send his resume to the White House?

Well, it turns out that the unemployed engineer still doesn’t have a job….

More than two months after President Barack Obama asked for Darin Wedel’s résumé, the phone is quiet, e-mails are no longer flooding in and the long-sought-after job interviews — which had begun to be scheduled — have petered out.

“Not even recruiting companies are calling anymore,” said Jennifer Wedel, the Fort Worth mother of two who chatted online this year with Obama about her out-of-work husband.

She says his job search has been hurt by a program to hire skilled foreign workers.

But Barack Obama is doing the same thing on a national level.

He is promising all of us that things are improving and that there will be lots of jobs for everyone soon, but it is all a lie.

The truth is that this period of relative stability that has been purchased by unprecedented levels of government debt will soon give way to even more economic trouble.

One of my readers recently brought to my attention a list of some of the major companies that are currently getting rid of workers….

Ford will be laying off 1,200 assembly line workers later on this month.

Pittsburgh-based paint and coating manufacturer PPG has announced that it will be laying off 2,000 workers.

J.C. Penney recently laid off 600 workers and has plans to lay off another 300 workers in July.

Lockheed Martin has announced that it will be laying off hundreds of workers.

Dow Chemical has announced that hundreds of workers are going to be laid off.

Yahoo has formally announced that it will be getting rid of about 2,000 workers.

Sony has announced plans to eliminate 10,000 jobs globally.

Even Oprah Winfrey is laying off workers.  Oprah is reducing the size of the staff at the OWN network by 20 percent.

Meanwhile, our economy continues to bleed jobs at an astounding pace.  At a time when American workers desperately need jobs, millions of them continue to be sent overseas.

In fact, even some jobs that you would think would be impossible to outsource are being given to foreigners.  Just recently, ABC News did a major report on all of the roads and bridges all over the United States that are being built by Chinese companies.  If you have not seen that report yet, you can view it online right here.

If you go into a Wal-Mart or a dollar store and you start turning over products you will find that huge numbers of them are made in China and that very few of them are made in the United States.  China is absolutely dominating us on the global economic stage.  Last year our trade deficit with China was the largest trade deficit that one nation has had with another nation in the history of the world.  Yet we continue to pursue the exact same trade policies year after year.

So how is the American economy ever supposed to recover if we continue to play to lose?

As a nation we spend far more than we make, we consume far more than we produce and our federal government implements thousands of new business-crippling regulations every single year.

If you still have a good job, you should treasure it and you should try to hold on to it for as long as you can.  Soon the next major economic downturn will be upon us and millions more Americans will lose their jobs and their homes.

Things did not have to turn out this way, but we made horribly bad decisions for decades and now the consequences are catching up with us.

You better get ready.

10.7 Percent: Unemployment In Europe Is Worse Than It Was At The Peak Of The Last Recession

The unemployment rate in the eurozone is now 10.7 percent.  That is the highest the unemployment rate has been since the introduction of the euro.  The unemployment rate in the eurozone never got any higher than 10.2 percent during the last recession.  This is very troubling news.  It was just recently announced that the eurozone has entered another recession, and already the unemployment rate is hitting new record highs.  So how bad are things going to get in the months to come?  The truth is that the problems for Europe are just starting.  The European sovereign debt crisis continues to get worse, and another major global financial crisis is going to be here way too soon.  The EU as a whole has a larger population, a larger banking system and more Fortune 500 companies than the United States does.  When the financial system of Europe crashes, the entire world is going to feel it.

Some of the unemployment numbers coming out of Europe are absolutely staggering.

Unemployment in Spain is 19.9 percent.

Unemployment in Greece is 23.3 percent.

And when you look at youth unemployment the numbers are far worse.

The unemployment rate for workers under the age of 25 is 48.1 percent in Greece and 49.9 percent in Spain.

If you look carefully at the photos of the austerity riots happening in Spain and in Greece you will notice that the vast majority of the protesters are young people.

Instead of getting better, the unemployment numbers in Europe just keep getting worse.  Many analysts were shocked by these new numbers.  The following is from a CNN article….

“This is appalling,” said Carl Weinberg, chief economist at High Frequency Economics, highlighting that the unemployment rate following the collapse of Lehman Brothers peaked at 10.2%.

Appalling indeed.

The frightening thing is that we haven’t even had a major financial crisis in Europe yet.  So far, the powers that be have been able to keep Greece from defaulting and have been able to keep major banks all over Europe from collapsing.

But there are quite a few signs that the “moment of reckoning” for Europe is rapidly approaching….

-The European Central Bank announced on Tuesday that it would no longer take Greek bonds as collateral from European banks. That is a really bad sign.

-Major European banks are revealing unexpectedly huge losses on Greek debt.  The following is from a Reuters article….

The scars of Greece’s debt crisis were laid bare in heavy losses from a string of European banks on Thursday, and bosses warned the region’s precarious finances would continue to threaten economic growth and earnings.

From France to Germany, Britain to Belgium, four of the region’s biggest banks lined up to reveal they lost more than 8 billion euros (6.8 million pounds) last year from their Greek bonds holdings.

“We are in the worst economic crisis since 1929,” Credit Agricole chief executive Jean-Paul Chifflet said.

-The International Swaps and Derivatives Association has ruled that the Greek debt deal will not trigger payouts on credit default swaps.  This is going to make it less likely that private bondholders will voluntarily agree to the debt deal.

This ruling is also seriously shaking confidence in credit default swaps.  After all, they are supposed to be “insurance” in case something happens.  But if they aren’t going to pay out when you need them, what good are they?

-Voters in Germany are sick and tired of pouring money into a black hole.  One recent opinion poll in Germany showed that Germans are overwhelmingly against more bailouts for Greece.

Some German politicians are becoming very open about their feelings for Greece.  For example, Interior Minister Hans-Peter Friedrich said the following in a recent interview with Der Spiegel….

“Greece’s chances to regenerate itself and become competitive are surely greater outside the monetary union than if it remains in the euro area.” He added that he did not support a forced exit. “I’m not talking about throwing Greece out, but rather about creating incentives for an exit that they can’t pass up.”

-In Greece, news publications are openly portraying German Chancellor Angela Merkel as Hitler.  Far left political parties that oppose the bailouts are surging in the polls and anger and frustration are reaching unprecedented levels.

The following is from a recent article in The Guardian….

There is a growing animosity towards Germany on the streets of Athens. Angela Merkel bears most of the hostility with one of Greece’s newspapers last week mocking the chancellor up as a Nazi on its front page.

Niki Fidaki, 40, says Greeks are angry at Germany and the troika’s demands for higher taxes and public services cuts. “People can’t afford to pay the tax. My pay has gone down, but my taxes have gone up. But, I’m a lucky one – half of my friends don’t have jobs. Greeks hate that they are asking us to pay all the time when we don’t have the money. Families have no work, they have kids to look after but no money to pay for anything.”

As I have written about before, Greece is already going through a devastating economic depression.  The people of Greece are not in the mood to be pushed much further.

The eurozone is a powder keg that could explode at any time.

So why is the U.S. economy doing so much better than the European economy right now?

Well, a big reason is because we haven’t seen any austerity in the United States yet.

Barack Obama is funding our false prosperity by borrowing 150 million dollars an hour from our children and our grandchildren.

Of course all of this reckless borrowing is going to make the eventual collapse of our financial system far worse, but right now Americans don’t seem to care.  The only thing the mainstream media seems to care about is that some of our economic numbers are getting slightly better.

The sad thing is that our government is spending a lot of this money on some of the most stupid things that you could possibly imagine.

Did you know that the Obama administration just spent $750,000 on a brand new soccer field for detainees held at Guantanamo Bay?

I wish I had a $750,000 soccer field to play on.

I would love that.

Look, when the federal government quits stealing more than a trillion dollars a year from future generations things are going to look a whole lot different in this country.

So pay attention to what is going on in Europe.

That is where we are headed eventually.

Warning Signs That We Should Prepare For The Worst

The warning signs are all around us.  All we have to do is open up our eyes and look at them.  Almost every single day there are more prominent voices in the financial world telling us that a massive economic crisis is coming and that we need to prepare for the worst.  On Wednesday, it was the World Bank itself that issued a very chilling warning.  In an absolutely startling report, the World Bank revised GDP growth estimates for 2012 downward very sharply, warned that Europe could be on the verge of a devastating financial crisis, and declared that the rest of the world better “prepare for the worst.”  You would expect to hear this kind of thing on The Economic Collapse Blog, but this is not the kind of language that you would normally expect to hear from the stuffed suits at the World Bank.  Obviously things have gotten bad enough that nobody is even really trying to deny it anymore.  Andrew Burns, the lead author of the report, said that if the sovereign debt crisis gets even worse we could be looking at an economic crisis that could be even worse than the last one: “An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09.”  Burns also stated that the “importance of contingency planning cannot be stressed enough.”  In other words, Burns is saying that it is time to prepare for the worst.  So are you ready?

But of course it isn’t just the World Bank that is warning about these things.  The chorus of voices that is warning about the next great financial crisis just seems to grow by the day.

Some of these voices were profiled in a Bloomberg article the other day entitled “Apocalypse How? Dire ’12 Forecasts“.  The following is just a sampling of quotes from that article….

-John Mauldin, president of Millennium Wave Advisors: “We’ve got a cancer. That cancer is debt”

-Mark Spitznagel of Universa Investments: “Too much malinvestment has been kept alive, and history shows an inevitable wipeout, which started in 2000.”

-Michael Panzner of Financial Armageddon: “The fundamental outlook is even worse now than it was a few weeks ago, given (the lack of positive) developments in Europe and growing evidence that the economies of major countries around the world are deteriorating fast.”

If you have time, you should go check out the rest of that article.  It really is fascinating.

When this crisis is over, all sorts of people are going to be running around claiming that they predicted it.  But it does not take a genius to see what is coming.  All you have to do is open up your eyes and look at the flashing red warning signs.

So what should we all be looking for next?

March 20th is a key date to keep your eye on.  That is the day when Greece will either makes its 14.5 billion euro bond payment or it will default.

Greece does not have a prayer of making that payment without help.  If Greece can convince the EU and the IMF to release the next scheduled bailout payment and if Greece can reach a satisfactory deal with private bondholders, then the coming Greek default might be “orderly”.  But if something goes wrong, the coming Greek default might be quite “disorderly”.

At this point, almost everyone in the financial world is anticipating a Greek default of one form or another….

-Edward Parker, the managing director for Fitch’s sovereign and supranational group in Europe, the Middle East and Africa, recently declared that a Greek default is inevitable….

“It is going to happen. Greece is insolvent so it will default.”

-Moritz Kraemer, the head of S&P’s European sovereign ratings unit, made the following statement on Bloomberg Television on Monday:

“Greece will default very shortly. Whether there will be a solution at the end of the current rocky negotiations I cannot say.”

-Richard McGuire, a strategist at Dutch bank Rabobank, was recently quoted by CNBC as saying the following….

“People often ask if Greece is going to default which … is a misnomer because Greece is (already) defaulting”

-Diane Swonk, the chief economist at Mesirow Financial in Chicago, says that the default by Greece will probably be an “orderly” one but that the situation could change at any moment….

“It appears at the moment that the market is accepting a Greek default as inevitable, and it will be an orderly default. But that can change on a dime.”

But whether there is a default or not, the reality is that Greece is already experiencing a full-blown economic depression.  In Greece, 20 percent of all retail stores have already shut down.  The unemployment rate for those under the age of 24 is now at 39 percent.  Large numbers of Greeks are trying to get themselves and their money out of the country while they still can.

Pessimism regarding Greece is at an all-time high.  Michael Fuchs, the deputy leader of Angela Merkel’s political party, recently made the following statement….

“I don’t think that Greece, in its current condition, can be saved.”

But of course Greece is not the only declining economy in Europe by a long shot.

Italy has a much larger economy, and if Italy totally collapses it will be an absolute nightmare for the entire globe.

Right now, the Bank of Italy is forecasting a significant recession for the Italian economy in 2012.  The following is from a statement that Bank of Italy has just released….

“The uncertainty that surrounds the medium-term perspectives of the Italian economy … are extraordinarily high and are directly linked to the evolution of the eurozone debt crisis”

Italy’s youth unemployment rate has hit the highest level ever, and nearly all sectors of the Italian economy are showing signs of slowing down.

Plus there is the looming problem of Italian debt.  As I wrote about yesterday, when you add the maturing debt that the Italian government must roll over in 2012 to their projected budget deficit, it comes to 23.1 percent of Italy’s GDP.

Originally it was hoped that the economic problems in Europe could be contained to just a few countries.  But now it has become clear that is just not going to happen.

Trends forecaster Gerald Celente recently explained to ABC Australia that much of Europe is already essentially experiencing an economic depression….

“If you live in Greece, you’re in a depression; if you live in Spain, you’re in a depression; if you live in Portugal or Ireland, you’re in a depression,” Celente said. “If you live in Lithuania, you’re running to the bank to get your money out of the bank as the bank runs go on. It’s a depression. Hungary, there’s a depression, and much of Eastern Europe, Romania, Bulgaria. And there are a lot of depressions going on [already].”

The troubling news out of Europe just seems to keep coming in waves.  Here are some more recent examples….

-Manufacturing activity in the euro zone has fallen for five months in a row.

-Germany’s economy actually contracted during the 4th quarter of 2011.

-It is being reported that the Spanish economy contracted during the 4th quarter of 2011.

-Bad loans in Spain recently hit a 17-year high and the unemployment rate is at a 15-year high.

So will all of this economic trouble eventually spread to the United States?

Of course it will.

The global economy is more interconnected today than ever.  Back in 2008 the financial crisis that started on Wall Street ended up devastating economies all over the planet.  The same thing will happen during this next great financial crisis.

Only this time the U.S. is in a much weaker position.  The U.S. debt problem has gotten much worse since the last crisis.

During 2008, our national debt crossed the 10 trillion dollar mark.  Less than 4 years later, we have crossed the 15 trillion dollar mark.

So what are we going to do the next time large numbers of banks fail and unemployment skyrockets?

Where are we going to get the money to bail out all of those banks and to take care of all of those newly unemployed people?

Some people say that socialism is the answer, but the truth is that we are already a socialist welfare state.  If you can believe it, nearly half of all Americans live in a household that receives some form of financial benefits from the U.S. government.

During the next great crisis, the number of people that are dependent on the government will go even higher.

If you don’t want to end up dependent on the government, you should heed the warning signs and you should use this time to prepare for the hard times that are coming.

When even the World Bank tells us to hope for the best but to prepare for the worst, you know that it is late in the game.

Unfortunately, the vast majority of people out there only believe what they want to believe.  They don’t want to believe that a great economic crisis is coming, and so when it does happen they are going to be absolutely blindsided by it.

The Coming European Superstate That Germany Plans To Cram Down The Throats Of The Rest Of Europe

A lot of people were puzzled about what German Chancellor Angela Merkel meant when she recently stated that the ultimate solution to the financial crisis in the EU would “mean more Europe, not less Europe”.  Well, now we are finding out.  A leaked internal German government memo entitled “The Future of the EU: Required Integration Policy Improvements for the Creation of a Stability Union” actually proposes the creation of a “European Monetary Fund” which would be given the power to run the economies of troubled European nations.  This “stability union” would be quickly followed by the creation of a full-fledged “political union”.  Essentially, this leaked memo proposes the creation of a “European Superstate” which will be crammed down the throats of the rest of Europe whether they like it or not.  National sovereignty would be a thing of the past and European bureaucrats would run everything.  Of course this will never be accepted by the people of Europe until they feel the bitter pain of the coming financial collapse, but we are starting to see that there is already a clear plan for what the Germans wish to implement in the aftermath of the coming crisis.

A lot of people have just assumed that if there is a massive financial collapse in Europe and the euro crashes that it will mean that end of the euro and potentially the breakup of the EU.  But that is not what the Germans have planned at all.

An article in the Telegraph has posted details about the leaked internal German government memo mentioned above.  It really is startling to see that a full-fledged “political union” in Europe is being discussed at the highest levels of the German government….

The six-page memo, by the German foreign office, argues that Europe’s economic powerhouses should be able to intervene in how beleaguered eurozone countries are run.

The confidential blueprint sets out Germany’s plan to tackle the eurozone debt crisis by creating a “stability union” that will be “immediately followed by moves “on the way towards a political union”.

It will prompt fears that Germany’s euro crisis plans could result in a European super-state with spending and tax plans set in Brussels.

Can you imagine what Europe would look like under such a plan?

National sovereignty would be a thing of the past.

Another article in the Telegraph says that the leaked memo proposes that immediately a “European Monetary Fund” should be set up that would have the power to take over and run the economies of European nations that get into too much debt.  But according to the memo this would just be an intermediate step toward a full “political union”….

The six-page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.

The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled The future of the EU: required integration policy improvements for the creation of a Stability Union, declares that the treaty changes are a first stage “in which the EU will develop into a political union”. “The debate on the way towards a political union must begin as soon as the course toward stability union is charted,” it concludes.

As the crisis in Europe has gotten worse, the Germans have become more aggressive about throwing their weight around.  At this point, German Chancellor Angela Merkel is the most important politician in Europe and she has been taking the lead in responding to this financial crisis.

As I have written about previously, there have been persistent rumors that French President Nicolas Sarkozy and German Chancellor Angela Merkel have been “secretly plotting” to create a “new eurozone” that will fundamentally change the way that Europe is run.

For example, the following is from an article that recently came out  in the Telegraph….

France is drawing up plans to create a breakaway organisation of eurozone countries with its own treaty, parliament and headquarters – a move that could significantly undermine the existing European Union.

That same article also talked about the goals that France and Germany are hoping to achieve through all of this….

France and Germany are understood to want to strengthen the union between eurozone countries with new taxes and legal measures to stop nations borrowing and spending too much in future.

Of course it is important to note that there is no way that the people of Europe are going to go for any of this right now.

But after feeling the pain of a massive financial collapse for a while will they change their minds?

What is clear is that the status quo is not going to last much longer.  Something has got to change.  Unfortunately, Germany and France seem determined to push the rest of Europe in the direction of creating a European Superstate.

If you want to get a really good idea of what is happening in Europe right now, just check out this video of a recent speech by Nigel Farage on the floor of the European Parliament on November 16th, 2011.  Trust me, it is worth the couple of minutes that it takes to watch it.

But before fundamental structural changes take place in Europe, we are going to see an absolutely crippling financial collapse first.  With each passing day, there are more signs that things are rapidly unraveling.  The following are just a few of the noteworthy news items from Europe that have come out over the past week….

*In Italy there were violent clashes between protesters and police after Mario Monti unveiled his new austerity program.  To get an idea of how crazy things are getting over in Italy, just check out this video.

*Just like what happened when austerity was implemented in Greece, it looks like Italy is now headed down the road toward a major recession.  Industrial orders in Italy for the month of September declined by 8.5 percent.  That is really, really bad news.

*The EFSF has already been forced to buy up huge numbers of its own bonds.  That essentially means that the EFSF is already a bad joke.

*Dozens of big banks all over Europe have been downgraded in recent weeks.  Even German banks are getting downgraded now.  The other day, Moody’s downgraded the ratings of 10 major German banks.

An increasing number of people that work in the financial world are starting to get really freaked out about everything that is going on.

The following is what Mark Mobius, head of the emerging markets desk at Templeton Asset Management, had to say recently….

“There is definitely going to be another financial crisis around the corner, because we haven’t solved any of the things that caused the previous crisis.”

Willem Buiter, the chief economist of Citigroup, believes that if something is not done quickly, there will be a financial collapse in Europe in very short order….

“Time is running out fast.  I think we have maybe a few months — it could be weeks, it could be days — before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it. So they have to act now.”

Ann Barnhardt of Barnhardt Capital Management actually shut down her entire firm because she could no longer guarantee that the money her clients were putting into the futures and options markets would be safe.  Posted below are extended excerpts from the open letter that she recently released to the public.  Normally I would not post such extended excerpts, but in this case I believe that they are warranted.  What Barnhardt has written should be a huge wake up call for all of us.  It is refreshing (and a bit frightening) to get an honest assessment of the corruption in the financial world from someone that has made a good living in that world.  The following is how she began her letter….

It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.

The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

So how did the MF Global collapse wreck the system?  Barnhardt went on to explain this….

The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.

Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.

Even more frightening, Barnhardt says that the MF Global collapse is just the “tip of the iceberg” and that more collapses like this are about to happen….

I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.

So what does Barnhardt say that we should all do?  She is actually recommending that everyone should completely abandon the futures and options markets….

And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism.

Remember, a few weeks ago I warned you all that a massive derivatives crisis is coming.  Anyone that plays around with derivatives at this point is playing with fire.  Barnhardt says that she will never reopen her firm until Barack Obama is removed from office and fundamental reforms to the financial system have been implemented….

Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.

We are on the verge of a financial crisis that could potentially be just as bad (or even worse) than the financial crisis of 2008.

Right now, 2012 is shaping up as a very, very bad year.

As I have written about previously, when European leaders proposed that private Greek bondholders should take a “50% haircut”, they massively undermined faith in the European financial system.

Now panic and fear are in the air and it is unlikely that financial markets will be calmed any time soon.

Already, there are early signs of the kind of massive credit crunch that almost brought about “the end of the world” in financial markets back in 2008.

For example, a CNBC article that was posted on Friday reported that the flow of credit in Europe is seriously drying up….

Fear over European banks’ exposure to risky government debt stalked markets and harried bank executives on Friday, as unsecured lending between banks evaporated and the cost of secured loans rose.

And as a recent article posted on Zero Hedge discussed, a similar thing is starting to happen in the United States….

The entire dollar funding market is now at levels not seen since the Lehman collapse and is effectively frozen. Only this time it is much, much worse as never before has the global central bank cadre been assumed and implied to be backstopping the global liquidity cascade. Ex-out the implied backstop by the monetary authorities, and liquidity is now locked up more than ever in the history of capital markets.

So what should we do about this?

We should take action and get prepared for what is coming.

Unfortunately, an increasing number of Americans seem to be “checking out” instead.  According to a recent Gallup poll, alcohol consumption in the United States has hit a 25 year high.  More than one out of every ten Americans over the age of 12 is on prescription antidepressants, and most American families spend endless hours staring at the television in an attempt to escape the pain and the frustration that they constantly feel.

Hopefully by working together we can help more Americans (and more Europeans as well) to wake up, to get off their couches, and to take action in a positive way.

Time is running out and the economic crisis is rapidly getting worse.

We don’t have any time to waste.

+ More