Global Financial System

11 Quotes That Show How Worried The Financial World Is About Europe Right Now

The recent elections in France and in Greece have thrown the global financial system into an uproar.  Fear and worry are everywhere and nobody is quite sure what is going to happen next.  All of the financial deals that Greece has made over the past few years may be null and void.  Nobody is going to know for sure until a new government is formed, and at this point it looks like that is not going to happen and that there will need to be new elections in June.  All of the financial deals that France has made over the past few years may be null and void as well.  New French President Francois Hollande seems determined to take France on a path away from austerity.  But can France really afford to keep spending money that it does not have?  France has already lost its AAA credit rating and French bond yields have started to move up toward dangerous territory.  And Greek politicians are delusional if they think they have any other choice other than austerity.  Without European bailout money (which they won’t get if they don’t honor their current agreements), nobody is going to want to lend Greece a dime.

And all of this talk about “austerity” is kind of silly anyway.  It isn’t as if either France or Greece was going to have a balanced budget any time soon.  Both nations were still running up huge amounts of debt even under the “austerity” budgets.

But the citizens of both nations have sent a clear message that they are not going to tolerate even a slowdown in government spending.  They want to go back to the debt-fueled prosperity of the last several decades, even if it makes their long-term financial problems a lot worse.

Unfortunately, as I mentioned earlier, Greece does not have that option.  Without the bailout money that they are scheduled to get, Greece does not have a prayer of avoiding a disorderly default.  Private investors would have to be insane to lend Greece money if the bailout deal falls apart.  Greece desperately needs the help of the EU, the ECB and the IMF and the only way they are going to get it is if they abide by the terms of the agreements that have already been reached.

The only way that Greece can avoid austerity at this point would be to leave the euro.  Nobody would want to lend money to Greece under that scenario either, but Greece could choose to print huge amounts of their own national currency if they wanted to.

The situation is different in France.  Investors are still willing to lend to France at reasonable interest rates, but if France chooses to run up huge amounts of additional debt at some point they will end up just like Greece.

What is even more important in the short-term is the crumbling of the French/German alliance on European fiscal matters.  Angela Merkel and Nicolas Sarkozy were a united front, but now Merkel and Hollande are likely to have conflict after conflict.

Instead of moving in one clear direction, the eurozone is now fractured and tensions are rising.

So what comes next?

Well, investors are not certain what comes next and that has many of them deeply concerned.

The following are 11 quotes that show how worried the financial world is about Europe right now….

#1 Tres Knippa of Kenai Capital Management: “What is going on in Europe is an absolute disaster…the risk-on trade is not the place to be. I want to be out of equities and very, very defensive because the situation in Europe just got worse after those elections.”

#2 Mark McCormick, currency strategist at Brown Brothers Harriman: “We’re going to have higher tensions, more uncertainty and most likely a weaker euro.”

#3 Nick Stamenkovic, investment strategist at RIA Capital Markets in Edinburgh: “Investors are questioning whether Greece will be a part of the single currency at the end of this year.”

#4 Jörg Asmussen, a European Central Bank executive board member: “Greece needs to be aware that there is no alternative to the agreed reform program if it wants to remain a member of the eurozone”

#5 Tristan Cooper, sovereign debt analyst at Fidelity Worldwide Investment: “A Greek eurozone exit is on the cards although the probability and timing of such an event is uncertain.”

#6 Art Cashin: “Here’s the outlook on Greece from Wall Street watering holes. If a coalition government is formed or looks to be formed, global markets may rally. Any coalition is unlikely to make progress on goals, since austerity is political suicide. There will likely be another election around June 10/17. A workable majority/plurality remains unlikely, so back to square one. Therefore, Greece will be unable to attain goals by the deadline (June 30). Lacking aid funds, pensions are suspended and government workers are laid off. Protestors take to the streets and government is forced to revert to drachma to avoid social chaos. Pass the peanuts, please.”

#7 John Noonan, Senior Forex Analyst with Thomson Reuters in Sydney: “Sentiment is very bearish, The euro is under a lot of pressure right now. I get the feeling that it’s going to be a nasty move lower for the euro finally”

#8 Kenneth S. Rogoff, a professor of economics at Harvard: “A Greek exit would underscore that there’s no realistic long-term plan for Europe, and it would lead to a chaotic endgame for the rest of the euro zone.”

#9 Chris Tinker of Libra Investment Services: “It’s a binary decision. If Greece gets itself to the point where the European administration says, ‘We can’t play this game anymore,’ that starts a domino effect”

#10 Nicolas Véron, a senior fellow at Bruegel: “France has very limited fiscal space and actually has to engage in fiscal consolidation”

#11 80-year-old Greek citizen Panagiota Makri: “I’m confused. I feel numb and confused. Only God can save us now”

All of this comes at a time when much of Europe is already descending into a new recession.  Economies all over Europe are contracting and unemployment rates are skyrocketing.  Until things start improving, there is going to continue to be a lot of civil unrest across Europe.

Meanwhile, things are not so great in the United States either.

JPMorgan Chase CEO Jamie Dimon claims that the U.S. economy is holding a “royal straight flush“, but the only part of that he got right was the “flush” part.

There are 100 million working age Americans that do not have jobs, the middle class continues to shrink, the rising cost of food and the rising cost of gas are severely stretching the budgets of millions of American families and the federal government continues to run up gigantic amounts of debt.

When Europe descends into financial chaos, the United States is not going to escape it.  The financial crisis of 2008 deeply affected the entire globe, and so will the next great financial crisis.

Let us hope that we still have a little bit more time before the next great financial crisis strikes, but things in Europe are rapidly unraveling and at some point the dominoes are going to begin to fall.

22 Red Flags That Indicate That Very Serious Doom Is Coming For Global Financial Markets

If you enjoy watching financial doom, then you are quite likely to really enjoy the rest of 2012.  Right now, red flags are popping up all over the place.  Corporate insiders are selling off stock like there is no tomorrow, major economies all over Europe continue to implode, the IMF is warning that the eurozone could actually break up and there are signs of trouble at major banks all over the planet.  Unfortunately, it looks like the period of relative stability that global financial markets have been enjoying is about to come to an end.  A whole host of problems that have been festering just below the surface are starting to manifest, and we are beginning to see the ingredients for a “perfect storm” start to come together.  The greatest global debt bubble in human history is showing signs that it is getting ready to burst, and when that happens the consequences are going to be absolutely horrific.  Hopefully we still have at least a little bit more time before the global financial system implodes, but at this point it doesn’t look like anything is going to be able to stop the chaos that is on the horizon.

The following are 22 red flags that indicate that very serious doom is coming for global financial markets….

#1 According to CNN, the level of selling by insiders at corporations listed on the S&P 500 is the highest that it has been in almost a decade.  Do those insiders know something that the rest of us do not?

#2 Home prices in the United States have fallen for six months in a row and are now down 35 percent from the peak of the housing market.  The last time that home prices in the U.S. were this low was back in 2002.

#3 It is now being projected that the Greek economy will shrink by another 5 percent this year.

#4 Despite wave after wave of austerity measures, Greece is still going to have a budget deficit equivalent to about 7 percent of GDP in 2012.

#5 Interest rates on Italian and Spanish sovereign debt are rapidly rising.  The following is from a recent RTE article….

Spain’s borrowing rate nearly doubled in a short-term debt auction as investors fretted over the euro zone’s determination to deal with its debts. 

And Italy raised nearly €3.5 billion in a short-term bond sale today but at sharply higher interest rates amid fresh concerns over the euro zone outlook, the Bank of Italy said.

#6 The government of Spain recently announced that its 2011 budget deficit was much larger than originally projected and that it probably will not meet its budget targets for 2012 either.

#7 Amazingly, bad loans now make up 8.15 percent of all loans on the books of Spanish banks.  That is the highest level in 18 years.  The total value of all toxic loans in Spain is equivalent to approximately 13 percent of Spanish GDP.

#8 One key Spanish stock index has already fallen by more than 19 percent so far this year.

#9 The Spanish government has announced a ban on all cash transactions larger than 2,500 euros.  Many are interpreting this as a panic move.

#10 It is looking increasingly likely that a major bailout for Spain will be needed.  The following is from a recent Reuters article….

Economic experts watching Spain don’t know how much money will be needed or precisely when, but some are near certain that Madrid will eventually seek a multi-billion euro bailout for its banks, and perhaps even for the state itself.

#11 Analysts at Moody’s Analytics are warning that Italy has now reached financially unsustainable territory….

“Italy is already out of fiscal space, in our estimate.” said Moody’s. “Its debt levels relative to GDP already exceed a manageable level. The manageable limit for Italian 10-year bond yields is estimated at 4.2pc. As of Wednesday, Italian 10-year yields were 5.46pc.”

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

#13 There is even trouble in European nations that have been considered relatively stable up to this point.  For example, the Dutch government collapsed on Monday after austerity talks broke down.

#14 The head of the IMF, Christine Lagarde, says that there are “dark clouds on the horizon” for the global economy.

#15 The top economist for the IMF, Olivier Blanchard, recently made this statement: “One has the feeling that at any moment, things could get very bad again.”

#16 A recent IMF report admitted that the current financial crisis could lead to the break up of the eurozone….

Under these circumstances, a break-up of the euro area could not be ruled out. The financial and real spillovers to other regions, especially emerging Europe, would likely be very large.

This could cause major political shocks that could aggravate economic stress to levels well above those after the Lehman collapse.

#17 George Soros is publicly declaring that the European Union could soon experience a collapse similar to what happened to the Soviet Union.

#18 A member of the European Parliament, Nigel Farage, stated during one recent interview that it is inevitable that some major banks in Europe will collapse….

There are going to be some serious banking collapses and the impact of that on some sovereign states, will be serious. I’m afraid we’ve gotten to a point where we really can’t stop this now. We’re beginning to reach a stage where however much false money you create, the problem becomes bigger than the people trying to solve it. We are very close to that point.

When I talk about the threats and the risk that this thing could wind up in some kind of rebellion, some sort of awful social cataclysm, they (other European politicians) are now very worried indeed. They will talk to you in private, but in public, nobody dares utter a word.

I think the deterioration, in the last two or three weeks, in the eurozone is very serious indeed. It’s the bond spreads in Italy and Spain. It’s the fact that youth unemployment is now over 50% in some of these Mediterranean countries.

It’s riot and disorder on the streets. And yet a month ago I was here and there was Herman Van Rumpuy telling us, ‘We’ve turned the corner. Everything is solved. There are no more problems with the eurozone.’ What a pack of jokers they look like.”

#19 The IMF is projecting that Japan will have a debt to GDP ratio of 256 percent by next year.

#20 Goldman Sachs is projecting that the S&P 500 will fall by about 11 percent by the end of 2012.

#21 Over the past six months, hundreds of prominent bankers have resigned all over the globe.  Is there a reason why so many are suddenly leaving their posts?

#22 The 9 largest U.S. banks have a total of 228.72 trillion dollars of exposure to derivatives.  That is approximately 3 times the size of the entire global economy.  It is a financial bubble so immense in size that it is nearly impossible to fully comprehend how large it is.

The financial crisis of 2008 was just a warm up act for what is coming.  The too big to fail banks are larger than ever, the governments of the western world are in far more debt than they were back then, and the entire global financial system is more unstable and more vulnerable than ever before.

But this time the epicenter of the financial crisis will be in Europe.

Outside of Europe, most people simply do not understand how truly nightmarish the European economic crisis really is.

Spain, Italy and Portugal are all heading for an economic depression and Greece is already in one.

The European Central Bank was able to kick the can down the road a little bit by expanding its balance sheet by about a trillion dollars over the last nine months, but the truth is that the underlying problems in Europe just continue to get worse and worse.

It truly is like watching a horrible car wreck happen in slow motion.

The good news is that there is still a little time to get yourself into a better position for the next financial crisis.  Don’t leave yourself financially exposed to the next crash.

Sadly, just like back in 2008, most people will never even see this next crisis coming.

So do you have any other red flags to add to the list above?  Please feel free to post a comment with your thoughts below….

Greece Has Defaulted – Which Country In Europe Is Next?

Well, it is official.  The restructuring deal between Greece and private investors has been pushed through and the International Swaps and Derivatives Association has ruled that this is a credit event which will trigger credit-default swap contracts.  The ISDA is saying that there are approximately $3.2 billion in credit-default swap contracts on Greek debt outstanding, and most analysts expect that the global financial system will be able to absorb these losses.  But still, 3.2 billion dollars is nothing to scoff at, and some of these financial institutions that wrote a lot of these contracts on Greek debt are going to be hurting.  This deal with private investors may have “rescued” Greece for the moment, but the consequences of this deal are going to be felt for years to come.  For example, now that Greece has gotten a sweet “haircut” from private investors, politicians in Portugal, Italy, Spain and other European nations are going to wonder why they shouldn’t get some “debt forgiveness” too.  Also, private investors are almost certainly going to be less likely to want to loan money to European nations from now on.  If they will be required to take a massive haircuts at some point, then why in the world would they want to lend huge amounts of money to European governments at super low interest rates?  It simply does not make sense.  Now that Greece has defaulted, the whole game is going to change.  This is just the beginning.

The “restructuring deal” was approved by approximately 84 percent of all Greek bondholders, but the key to triggering the payouts on the credit-default swaps was the fact that Greece decided to activate the “collective action clauses” which had been retroactively inserted into these bonds.  These collective action clauses force most of the rest of the bondholders to go along with this restructuring deal.

A recent article by Ambrose Evans-Pritchard explained why so many people were upset about these “collective action clauses”….

The Greek parliament’s retroactive law last month to insert collective action clauses (CACs) into its bonds to coerce creditor hold-outs has added a fresh twist. These CAC’s are likely to be activated over coming days. Use of retroactive laws to change contracts is anathema in credit markets.

If a government can go in and retroactively change the terms of a bond just before it is ready to default, then why should private investors invest in them?

That is a very good question.

But for now the buck has been passed on to those that issued the credit-default swaps.  As mentioned above, the ISDA says that there are approximately $3.2 billion in Greek credit-default swaps that will need to be paid out.

However, that number assumes that a lot of hedges and offsetting swaps cancel each other out.  When you just look at the raw total of swaps outstanding, the number is much, much higher.  The following is from a recent article in The Huffington Post….

If you remove all hedges and offsetting swaps, there’s about $70 billion in default-insurance exposure to Greece out there, which is a little bit bigger pill for the banking system to swallow. Is it possible that some banks won’t be able to pay on their default policies? We’ll find out.

Yes, indeed.  We will find out very soon.

If some counterparties are unable to pay we could soon see some big problems cascade through the financial system.

But even with this new restructuring deal with private investors, Greece is still in really bad shape.

German Finance Minister Wolfgang Schaeuble told reporters recently that it “would be a big mistake to think we are out of the woods”.

Even with this new deal, Greek debt is still projected to be only reduced to 120 percent of GDP by the year 2020.  And that number relies on projections that are almost unbelievably optimistic.

In addition, there are still a whole host of very strict conditions that the Greek government must meet in order to continue getting bailout money.

Also, the upcoming Greek elections in just a few weeks could bring this entire process to an end in just a single day.

So the crisis in Greece is a long way from over.

The Greek economy has been in recession for five years in a row and it continues to shrink at a frightening pace.  Greek GDP was 7.5 percent smaller during the 4th quarter of 2011 than it was during the 4th quarter of 2010.

Unemployment in Greece also continues to get worse.

The average unemployment rate in Greece in 2010 was 12.5 percent.  During 2011, the average unemployment rate was 17.3 percent, and in December the unemployment rate in Greece was 21.0 percent.

Young people are getting hit the hardest.  The youth unemployment rate in Greece is up to an all-time record of 51.1 percent.

The suicide rate in Greece is also at an all-time record high.

Unfortunately, there is no light at the end of the tunnel for Greece at this point.  The latest round of austerity measures that are now being implemented will slow the economy down even more.

Sadly, several other countries in Europe are going down the exact same road that Greece has gone.

Investors all over the globe are wondering which one will be the “next Greece”.

Some believe that it will be Portugal.  The following is from a recent article in The Telegraph….

“The rule of law has been treated with contempt,” said Marc Ostwald from Monument Securities. “This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Portugal.”

Right now, the combination of all public and private debt in Portugal comes to a grand total of 360 percent of GDP.

In Greece, the combined total of all public and private debt is about 100 percentage points less than that.

So yes, Portugal is heading for a world of hurt.  The following is more about Portugal from the recent Telegraph article mentioned above….

Citigroup expects the economy to contract by 5.7pc this year, warning that bondholders may face a 50pc haircut by the end of the year. Portugal’s €78bn loan package from the EU-IMF Troika is already large enough to crowd out private creditors, reducing them to ever more junior status.

So why should anyone invest in Portuguese debt at this point?

Or Italian debt?

Or Spanish debt?

Or any European debt at all?

The truth is that the European financial system is a house of cards that could come crashing down at any time.

German economist Hans-Werner Sinn is even convinced that the European Central Bank itself could collapse.

There is a Der Spiegel article that everyone out there should read.  It is entitled “Euro-Zone Central Bank System Massively Imbalanced“. It is quite technical, but if this German economist is correct, the implications are staggering.

The following is from the first paragraph of the article….

More than a year ago, German economist Hans-Werner Sinn discovered a gigantic risk on the balance sheets of Germany’s central bank. Were the euro zone to collapse, Bundesbank losses could be half a trillion euros — more than one-and-a-half times the size of the country’s annual budget.

So no, the European debt crisis is not over.

It is just getting warmed up.

Get ready for a wild ride.

8 Reasons Why The Greek Debt Deal May Not Stop A Chaotic Greek Debt Default

The global financial system is not a game of checkers.  It is a game of chess.  All over the world today, news headlines are proclaiming that this new Greek debt deal has completely eliminated the possibility of a chaotic Greek debt default.  Unfortunately, that is simply not the case.  Rather, the truth is that this new deal actually “sets the table” for a Greek debt default.  When I was studying and working in the legal arena, I learned that sometimes you make an agreement so that you can get the other side to break it.  That may sound very strange to the average person on the street, but this is how the game is played at the highest levels.  It is all about strategy.  And in this case, the new debt deal imposes such strict conditions on Greece that it is almost inevitable that Greece will fail to meet some of them.  When Greece does fail, Germany and the other northern European nations may try to claim that they “did everything that they could” but that Greece just did not “live up to its obligations”.  So does this mean that we will definitely see a chaotic Greek debt default?  No.  What this does mean is that the chess pieces are being moved into position for one.

The following are 8 reasons why the Greek debt deal may not stop a chaotic Greek debt default….

#1 Greece Is Being Set Up To Fail

The terms of this new debt deal impose some incredibly harsh austerity measures on Greece and from now on the Greek government will be subject to “permanent monitoring” by EU officials.

In other words, they will be under a microscope.

Any violation of the terms of the debt deal could be used as a pretext to bring down the hammer and cut off bailout funds.  Potentially, this could even happen just a few weeks from now.

It has become obvious that there are many politicians in Europe that would very much like to kick Greece out of the euro.  In a recent column, the International Business Editor of The Telegraph summed up the situation this way….

It is clear that Berlin, Helsinki, and the Hague have taken the decision to eject Greece from the euro whatever the country now does. Even if Greece complies to the letter with the impossible terms of the EU-IMF Troika, it will not make any difference. A fresh pretext will be found.

#2 The Next Greek Election Could Bring An End To The Bailout Deal Overnight

The next national Greek elections are scheduled for April.  Political parties opposed to the bailout have been surging in recent polls.  It is becoming increasingly likely that the next Greek government will abandon this new deal entirely.

The following is what hedge fund manager Dennis Gartman told CNBC about what is likely to happen after the next elections….

“A new government is going to come to power following elections that shall take place sometime this spring, and if anyone anywhere believes that the next Greek government shall do anything other than abrogate all the agreements made with the ‘troika,’ then we have a bridge we’d like to sell them at a very high price”

With each passing day anger and frustration inside Greece continue to rise, and those that are currently holding power in Greece are becoming very unpopular.

One current member of Greek Parliament recently talked about what he thinks will happen in the aftermath of the next election….

“If we achieve a Left-dominated government, we will politely tell the Troika to leave the country, and we may need to discuss an orderly return to the Drachma”

#3 This Bailout Deal Is Going To Make Economic Conditions In Greece Even Worse

In a previous article, I listed some of the new austerity measures that are being imposed on Greece by this new agreement….

The EU and the IMF are demanding that Greece fire 15,000 more government workers immediately and a total of 150,000 government workers by 2015.

The EU and the IMF are demanding that wages for government workers be cut by another 20 percent.

The EU and the IMF are demanding that the minimum wage be slashed by more than 20 percent.

The EU and the IMF are also demanding significant reductions in unemployment benefits and pension benefits.

The austerity measures that have already been implemented over the past few years have already pushed Greece into an economic depression.

These new austerity measures will deepen that depression.

At the moment, the Greek national debt is sitting at about 160 percent of GDP.

We are being told that these new austerity measures will reduce that ratio to 120 percent by 2020, but already there are many in the financial world that are calling such a goal “comical“.

Even with this new deal, the Greek national debt is still completely and total unsustainable.  A “confidential report” produced by analysts from the European Central Bank, the European Commission, and the International Monetary Fund says the following about what this new debt deal is likely to accomplish….

There are notable risks. Given the high prospective level and share of senior debt, the prospects for Greece to be able to return to the market in the years following the end of the new program are uncertain and require more analysis. Prolonged financial support on appropriate terms by the official sector may be necessary. Moreover, there is a fundamental tension between the program objectives of reducing debt and improving competitiveness, in that the internal devaluation needed to restore Greece competitiveness will inevitably lead to a higher debt to GDP ratio in the near term. In this context, a scenario of particular concern involves internal devaluation through deeper recession (due to continued delays with structural reforms and with fiscal policy and privatization implementation). This would result in a much higher debt trajectory, leaving debt as high as 160 percent of GDP in 2020. Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it.

The GDP of Greece fell by 6.8 percent during 2011.

2012 was already expected to be even worse, and all of these new austerity measures certainly are not going to help things.

And every time the Greek economy contracts that makes a chaotic debt default even more likely.

#4 The Greek Parliament Must Still Vote On This Bailout Deal

It is anticipated that the Greek Parliament will vote on this new agreement on Wednesday.

It is expected to pass.

But when it comes to Greece these days, there are no guarantees.

#5 The Greek Constitution Must Still Be Modified

Under the terms of this new agreement, Greece is being required to change its constitution.

The following is how an article in The Economist describes this requirement….

Over the next two months Greece has promised to adopt legislation “ensuring that priority is granted to debt-servicing payments”, with a view to enshrining this in the constitution “as soon as possible”. These arrangements may not amount to the budget  “commissar” once threatened by some creditors, but the effect may be pretty much the same.

So will this actually get done?

We will see.

Forcing a sovereign country to modify its constitution is a very serious thing.  If I was a Greek citizen, I would be highly insulted by this.

#6 Several European Parliaments Still Need To Approve This Deal

The German Parliament still must approve this new agreement.  This is also the case for the Netherlands and Finland as well.

Many politicians in all three nations have been highly critical of the Greek bailouts.

It is expected that all of these parliaments will approve this deal, but you just never know.

#7 Private Investors Still Have To Agree To This New Deal

Private investors are being asked to take a massive “haircut” on Greek debt.  The following is how the size of the “haircut” was described by a USA Today article….

Banks, pension funds and other private investors are being asked to forgive some €107 billion ($142 billion) of the total €206 billion ($273 billion) in devalued Greek government bonds they hold.

There is absolutely no guarantee that a solid majority of private investors will agree to this.

In the end, probably the only thing that is guaranteed is that litigation regarding this “haircut” is likely to stretch on for many years to come.

#8 The Global Financial Community Still Expects Greece To Default

Almost all of the analysts that were projecting a chaotic Greek debt default are still projecting one today.  Yes, many of them believe that “the can has been kicked down the road” for a few months, but most of them are still convinced that a default by Greece is inevitable.

The following comes from a Bloomberg article that was released after the Greek debt deal was announced….

“The danger of Greece saving itself into economic depression and having to default and exit the common currency zone remains substantial,” said Christian Schulz, an economist at Berenberg Bank in London. Jennifer McKeown of Capital Economics Ltd. repeated her forecast that Greece will quit the euro by the end of the year.

The odds that this agreement will survive for very long are not great.

It will be nearly impossible for Greece to meet all of the conditions being imposed upon it by this new deal.  All of the politicians in northern Europe that are just itching to cut off aid to Greece will soon have the excuse that they need for doing so.

And the Greek people could decide to bring all of this to an end very quickly.  If they elect a new government in April that does not support this bailout agreement, the game will be over.

So don’t be fooled by all the headlines.

A chaotic Greek debt default has not been averted.

The truth is that a chaotic Greek debt default is now closer than ever.

Are George Soros, The IMF And The World Bank Purposely Trying To Scare The Living Daylights Out Of Us?

Over the past couple of weeks, George Soros, the IMF and the World Bank have all issued incredibly chilling warnings about the possibility of an impending economic collapse.  Considering the power and the influence that Soros, the IMF and the World Bank all have over the global financial system, this is very alarming.  So are they purposely trying to scare the living daylights out of us?  Soros is even warning of riots in the streets of America.  Unfortunately, way too often top global leaders say something in public because they want to “push” events in a certain direction.  Do George Soros and officials at the IMF and World Bank hope to prevent a worldwide financial collapse by making these statements, or are other agendas at work?  We may never know.  But one thing is for sure – many of the top financial officials in the world are using language that is downright “apocalyptic”, and that is not a good sign for the rest of 2012.

Right now, George Soros is saying things that he has never said before.  Just check out what George Soros recently told Newsweek….

“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”

Later on in that same article, Soros is quoted as saying that we could soon see the U.S. government using “strong-arm tactics” to crack down on rioting in the streets of major U.S. cities….

As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”

It almost sounds like George Soros is anticipating the same kind of a breakdown of society that many survivalists and preppers are getting ready for.

So how bad are things going to get?

Well, George Soros is publicly warning that the coming financial crisis could end up being even worse than 2008.  Just check out the following quotes from him that appeared in a recent Businessweek article….

Billionaire investor George Soros said Europe’s sovereign-debt woes are “more serious” than the financial crisis of 2008 and that the world faces the prospect of a “vicious circle” of deflation.

“We have a more dangerous situation now than in 2008,” Soros, 81, said in response to a question at an event in the southern Indian city of Bangalore today. “The crisis in Europe is more serious than the crash of 2008.”

But George Soros is not the only one issuing these kinds of warnings.

Once again, the head of the IMF, Christine Lagarde, has made a speech in which she openly warned that we are heading for a repeat of the “1930s”.

She told an audience in Berlin on Monday that the globe is facing “a 1930s moment, in which inaction, insularity and rigid ideology combine to cause a collapse in global demand”.

During the speech she called for a trillion more dollars to support financially troubled governments, and she made the following statement….

“It is not about saving any one country or region. It is about saving the world from a downward economic spiral.”

As I wrote about the other day, the World Bank has also been using apocalyptic language about the global financial situation.  In a shocking new report, the World Bank revised GDP growth estimates for 2012 downward very sharply, it warned that Europe could be facing financial collapse at any time, and it instructed the rest of the world to “prepare for the worst.”

The lead author of the report, Andrew Burns, said that the “importance of contingency planning cannot be stressed enough” and that if there is a major financial crisis in Europe the entire globe will be deeply affected….

“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.” 

So should we be alarmed that George Soros, the IMF and the World Bank are all proclaiming that a financial nightmare could be just around the corner?

Of course we should be.

Whether their motives are pure or not, they are telling the truth about the global financial situation in this case.  As I have written about so frequently, there are a whole host of signs that indicate that we could be on the verge of a major global recession.

A lot of folks in the investment world are warning that hard times are about to hit us as well.  For example, the following is what legendary investor Joseph Granville recently told Bloomberg Television….

Joseph Granville, whose “sell everything” call in 1981 sparked a decline in U.S. stocks, said the Dow Jones Industrial Average (INDU) will drop toward 8,000 this year because of waning momentum and volume.

“Volume precedes prices,” Granville, 88, a technical analyst who has been publishing the Granville Market Letter from Kansas City, Missouri for about 50 years, said in an interview on “Street Smart” on Bloomberg Television. “You are seeing much lower volume. That tells you that prices are going to go much lower, much lower than most people think possible and very few people have projected.”

Considering all of the warnings out there, it only seems prudent to prepare for the worst.

But unfortunately, a lot of people are just going to leave their holdings sitting out there like a dead duck, and they are going to be absolutely devastated by the coming financial tsunami.

Those that believe that the United States can somehow escape the coming financial storm don’t really know what they are talking about.

In fact, there was very troubling news for the U.S. dollar just the other day.  It was announced that India will start paying for its oil from Iran in a currency other than U.S. dollars.

But this is just another sign that the rest of the world is starting to reject the U.S. dollar.  For decades, the U.S. dollar has been the reserve currency of the world and this has given us a tremendous advantage.  Unfortunately for us, that is now changing.

U.S. newspapers are not talking about what is going on, but mainstream newspapers in Europe are.  Right now, some of the biggest countries in the world are working on plans to quit using U.S. dollars for the buying and selling of oil.

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

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

This is a very big deal, and if this gets pulled off it is going to have devastating consequences for the U.S. dollar and for the U.S. economy.

But of course when it comes to troubles for the U.S. financial system, there are a whole host of issues that could be talked about.

An environment for a “perfect storm” is developing, and most Americans have absolutely no idea what is about to happen.

Fortunately, there are some researchers out there that are working hard to sound the alarm bells.  For example, the following quote comes from a recent interview with Gerald Celente….

I believe that we have to watch out for something along the lines of an economic martial law. The European system is in collapse. The financial system in the United States is just as tenuous, if not more, and I believe they will not admit there will be a financial crash but rather they will use a geo-political issue to get the people in a state of fear and hysteria whereby they’ll then call a bank holiday or devaluation of the currency, or a hyperinflation of the currency, and blame it on somebody else.

It would be wise to listen to what experts such as Gerald Celente are saying.

Now is the time to take stock of where you are at and to make plans for the coming year.

Just because things have “always” been a certain way does not mean that they will continue to be that way.

Just because certain things have “always” worked in the past does not mean that they will continue to work in the future.

Our world is experiencing fundamental changes.  It is changing at a faster pace than we have ever seen before.  The way that we all live our lives five or ten years from now will be vastly different from how we live our lives today.

This will be a very challenging time to be alive, but it is also going to be a very exciting time to be alive.

So what do all of you think is going to happen in 2012?

Please feel free to leave a comment with your thoughts below….

2012 Will Be More Difficult Than 2011

Do you believe that 2012 will be more difficult for the global economy than 2011 was?  Well, that is what German Chancellor Angela Merkel believes.  The woman that has become the most important politician in Europe recently declared that 2012 “will no doubt be more difficult than 2011”.  The funny thing is that she has generally been one of the most optimistic public figures in Europe throughout this debt crisis.  But now even Merkel is openly admitting that 2012 is going to be a really, really bad year.  Sadly, most Americans simply do not understand how important Europe is or how interconnected the global financial system has become.  The United States actually has a smaller population and a smaller economy than the EU does.  In fact, the EU has an economy that is nearly as large as the economies of the United States and China combined.  The EU also is home to more Fortune 500 companies that the U.S. is, and the European banking system is far larger than the U.S. banking system.  Anyone that does not believe that a financial collapse in Europe will have a devastating impact on the U.S. economy is living in a fantasy world.  Americans better start paying attention to what is going on over there, because we are about to be broadsided by a massive financial tsunami originating out of Europe.

It is not just Angela Merkel that is warning that 2012 is going to be a difficult year.  The following are several more very prominent individuals that are warning that bad times are on the way….

*Citigroup’s chief equity strategist, Tobias Levkovich, recently made the following statement….

“Europe is likely to have a meaningful recession in 2012”

*Christine Lagarde, the head of the IMF, recently said that we could soon see conditions “reminiscent of the 1930s depression” and that no country on earth “will be immune to the crisis”.

* Willem Buiter, the chief economist at Citigroup, recently said the following….

“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.”

* Even Paul Krugman of the New York Times is sounding quite apocalyptic….

“At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro. This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira. Next stop, France.”

I have written quite a bit recently about all of the signs that parts of Europe have already entered a recession.

Well, in just the past few days even more numbers have been released that indicate that a recession has now begun in Europe…..

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

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

-Government revenues in Spain have not been up to the level that was expected.  The Spanish government just announced that the budget deficit for 2011 is going to end up being much larger than anticipated.

-Unfortunately, it appears that virtually all sectors of the Spanish economy seem to be slowing down….

The central bank said early indicators show that Spanish tourism, exports, spending and investment have been hit, which is likely to have led to a contraction in GDP in the fourth quarter.

Of course one of the most alarming things happening in Europe is the rapid contraction of the money supply.  It is almost impossible to avoid a recession when the money supply shrinks substantially.  The following comes from an article a few days ago in the Telegraph….

Simon Ward from Henderson Global Investors said the ECB’s “narrow” M1 money figures – tracked for clues on shorter-term spending patterns – show a drastic divergence between the North and South of the eurozone. “Parts of the core may avoid recession but there is no light at the end of the tunnel for the periphery. Real M1 deposits in Greece and Portugal have been falling at an annual rate of roughly 20pc over the last six months,” he said.

Right now, the rest of Europe is heading down the same road that Greece has been traveling on for several years.

Today, Greece is essentially bankrupt and is experiencing a full-blown depression.  At this point, nobody in Europe is even pretending that Greece is going to be okay.  The following comes from a recent Der Spiegel article….

“With debts amounting to 150 percent of GNP, Greece is de facto bankrupt. Over the course of 2011, even the leading representatives of the euro zone finally accepted this fact — after having claimed its opposite a year previously.”

Greece desperately needs relief from all of this debt, but the other nations in the eurozone do not want to provide that relief.  Instead, it looks like Germany is going to ask private creditors to take an even bigger “haircut” on Greek debt than previously proposed.  The following comes from a recent Bloomberg article….

“Germany’s government declined to comment on a report that it may push for creditors to accept bigger losses on Greek debt than previously agreed upon, saying only that talks on lowering Greece’s debt level may end soon.

Germany is studying a proposal to write down 75 percent of Greek government bonds held by private creditors as part of a planned debt swap to ensure greater debt sustainability”

If Germany ends up publicly proposing this, it will shatter what confidence is left in European sovereign bonds.

There is not that much of a difference between a 75 percent haircut and a full default.  If investors are forced to take a 75 percent haircut on Greek debt, then the financial world will have to start wondering if it is just a matter of time before giant haircuts are proposed for Italian debt, Spanish debt, Portuguese debt and Irish debt as well.

Hopefully Germany will not be this stupid.

But something has to be done about Greece.  Right now the IMF is projecting that Greek debt will reach 200% of GDP at some point in 2012 if changes are not made.

Of course Greece could cut government spending even more, but the cuts that have already been made have pushed that country into a total economic nightmare.

In a recent article, I discussed how the brutal austerity measures that we have seen have plunged the economy of Greece into a full-blown depression….

Just look at what happened to Greece.  Greece was forced to raise taxes and implement brutal austerity measures.  That caused the economy to slow down and tax revenues to decline and so government debt figures did not improve as much as anticipated.  So Greece was forced to implement even more brutal austerity measures.  Well, that caused the economy to slow down even more and tax revenues declined again.  In Greece this cycle has been repeated several times and now Greece is experiencing a full-blown economic depression.  100,000 businesses have closed and a third of the population is living in poverty.  But now Germany and France intend to impose the “Greek solution” on the rest of Europe.

The “solution” that the EU and the IMF have imposed on Greece is not working.

So why are all of the other troubled nations in Europe being pushed down the same path?

Just consider the following statistics out of Greece….

*The unemployment rate for those under the age of 24 is 39 percent.

*The number of suicides has increased by 40 percent in the past year.

*Thefts and burglaries nearly doubled between 2007 and 2009.

Is that what we want to see throughout the rest of Europe?

The financial path that Europe is now on was criticized very harshly recently in the New York Times….

“Every government in Europe with the exception of Germany is bending over backwards to prove to the market that they won’t hesitate to do what it takes,” said Charles Wyplosz, a professor of economics at the Graduate Institute of Geneva. “We’re going straight into a wall with this kind of policy. It’s sheer madness.”

Yes, it is sheer madness.

Right now, authorities in Europe are desperately trying to keep a lid on this crisis.  The European Central Bank has been trying really hard to keep the yield on 10 year Italian bonds from rising above the very important 7 percent level.  But unless the ECB is prepared to spend hundreds and hundreds of billions of euros buying up Italian debt in 2012, the yield on Italian bonds is likely to go much higher eventually.

At this point, it is hard to find any economist that is optimistic about Europe or about the euro in 2012.

One of the leading economic think tanks in Europe, the Centre for Economics and Business Research, is extremely pessimistic about the future of the euro as we enter 2012….

“It now looks as though 2012 will be the year when the euro starts to break up”

In fact, they say that there is a 99 percent chance that the eurozone will break up within the next ten years.

Terry Smith, the chief executive of Tullett Prebon, recently used language that was even more apocalyptic….

“If the eurozone crisis could be solved by confident pronouncements, it would already be saved. I would be shocked if Greece does not leave the eurozone in 2012 and this does not lead the markets to test the resolve to defend the positions of Portugal, Spain, Italy and, ultimately, France.”

Yes, there are a whole lot of people out there saying that 2012 will be more difficult than 2011.

Fortunately, there are a few nations out there that are choosing to try some different things.

We aren’t hearing much about it in the United States, but right now Hungary is actually taking some measures to get their central bank under control.

The following comes from a recent article in the Telegraph….

Hungary passed laws for its central bank in a move that experts warned could jeopardise its chances of securing international bail-out funds if it needs them. Officials from the International Monetary Fund (IMF) have warned about the rules which will undermine the independence of the central bank. Hungarian prime minister Viktor Orban the country would not bow to the “European fashion that the central bank must be in a sacred state of independence”.

Of course the IMF is absolutely furious about this.  The IMF is warning that there will be no bailouts for Hungary if they mess with the “independence” of the central bank.

But hopefully more countries out there will start going after their central banks.  The truth is that it is the central banks and the endless debt spirals that they create that got us into this mess in the first place.

If central banking truly worked, Europe would not be in such a massive amount of trouble.  The euro would not be dropping like a rock and the European financial system would not be paralyzed by panic and fear.

The reality is that central banking does not work and it a colossal failure.

For example, in the United States the U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created, and the U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was created.

It is amazing that there is anyone out there that is still willing to defend central banking.

2012 is going to be one of the most interesting years that we have seen in a long, long time.

Yes, 2012 will be more difficult than 2011 was, but it will also be a great opportunity to wake people up.

Our world is changing faster than ever before, and the Internet has made it possible for average people such as you and I to significantly participate in that change.

Resolve to do what you can to make a difference in this world in 2012, because time is rapidly running out.

Prophets Of Doom: 12 Shocking Quotes From Insiders About The Horrific Economic Crisis That Is Almost Here

We are getting so close to a financial collapse in Europe that you can almost hear the debt bubbles popping.  All across the western world, governments and major banks are rapidly becoming insolvent.  So far, the powers that be are keeping all of the balls in the air by throwing around lots of bailout money.  But now the political will for more bailouts is drying up and the number of troubled entities seems to grow by the day.  Right now the western world is facing a debt crisis that is absolutely unprecedented in world history.  Europe has had a tremendously difficult time just trying to keep Greece afloat, and several much larger European countries are now on the verge of a major financial crisis.  In addition, there is a growing number of very large financial institutions all over the western world that are also rapidly approaching a day of reckoning.  The global financial system is a sea or red ink, and when we get to the point where there are hundreds of ships going under how is it going to be possible to bail all of them out?  The quotes that you are about to read show that quite a few top financial and political insiders know that things cannot hold together much longer and that a horrific economic crisis is coming.  We built the global financial system on a foundation of debt, leverage and risk and now this house of cards that we have created is about to come tumbling down.

A lot of people in politics and in the financial world know what is about to happen.  Once in a while they will even be quite candid about it with the media.

As I have written about previously, Europe is on the verge of a financial collapse.  If things go really badly, things could totally fall apart in a few weeks.  But more likely it will be a few more months until the juggling act ends.

Right now, the banking system in Europe is coming apart at the seams.  Because the global financial system is so interconnected today, when major European banks start to fail it is going to have a cascading effect across the United States and Asia as well.

The financial crisis of 2008 plunged us into the deepest recession since the Great Depression.

The next financial crisis could potentially hit the world even harder.

The following are 12 shocking quotes from insiders that are warning about the horrific economic crisis that is almost here….

#1 George Soros: “Financial markets are driving the world towards another Great Depression with incalculable political consequences. The authorities, particularly in Europe, have lost control of the situation.”

#2 PIMCO CEO Mohammed El-Erian: “These are all signs of an institutional run on French banks. If it persists, the banks would have no choice but to delever their balance sheets in a very drastic and disorderly fashion. Retail depositors would get edgy and be tempted to follow trading and institutional clients through the exit doors. Europe would thus be thrown into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession, and significantly worsens the outlook for the global economy.”

#3 Attila Szalay-Berzeviczy, global head of securities services at UniCredit SpA (Italy’s largest bank): “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”

#4 Stefan Homburg, the head of Germany’s Institute for Public Finance: “The euro is nearing its ugly end. A collapse of monetary union now appears unavoidable.”

#5 EU Parliament Member Nigel Farage: “I think the worst in the financial system is yet to come, a possible cataclysm and if that happens the gold price could go (higher) to a number that we simply cannot, at this moment, even imagine.”

#6 Carl Weinberg, the chief economist at High Frequency Economics: “At this point, our base case is that Greece will default within weeks.”

#7 Goldman Sachs strategist Alan Brazil: “Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”

#8 International Labour Organization director general Juan Somavia recently stated that total unemployment could “increase by some 20m to a total of 40m in G20 countries” by the end of 2012.

#9 Deutsche Bank CEO Josef Ackerman: “It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels.”

#10 Alastair Newton, a strategist for Nomura Securities in London: “We believe that we are just about to enter a critical period for the eurozone and that the threat of some sort of break-up between now and year-end is greater than it has been at any time since the start of the crisis”

#11 Ann Barnhardt, head of Barnhardt Capital Management, Inc.: “It’s over. There is no coming back from this. The only thing that can happen is a total and complete collapse of EVERYTHING we now know, and humanity starts from scratch. And if you think that this collapse is going to play out without one hell of a big hot war, you are sadly, sadly mistaken.”

#12 Lakshman Achuthan of ECRI: “When I call a recession…that means that process is starting to feed on itself, which means that you can yell and scream and you can write a big check, but it’s not going to stop.”

*****

In my opinion, the epicenter of the “next wave” of the financial collapse is going to be in Europe.  But that does not mean that the United States is going to be okay.  The reality is that the United States never recovered from the last recession and there are already a lot of signs that we are getting ready to enter another major recession.  A major financial collapse in Europe would just accelerate our plunge into a new economic crisis.

If you want to read something that will really freak you out, you should check out what Dr. Philippa Malmgren is saying.  Dr. Philippa Malmgren is the President and founder of Principalis Asset Management.  She is also a former member of the Bush economic team. You can find her bio right here.

Malmgren is claiming that Germany is seriously considering bringing back the Deutschmark.  In fact, she claims that Germany is very busy printing new currency up.  In a list of things that we could see happen over the next few months, she included the following….

“The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up.”

This is quite a claim for someone to be making.  You would think that someone that used to work in the White House would not make such a claim unless it was based on something solid.

If Germany did decide to leave the euro, you would see an implosion of the euro that would be truly historic.

But as I have written about previously, it should not surprise anyone that the end of the euro is being talked about because the euro simply does not work.

The only way that the euro would have had a chance of working is if all of the governments using the euro would have kept debt levels very low.

Unfortunately, the financial systems of the western world are designed to push governments into high levels of debt.

The truth is that the euro was doomed from the very beginning.

Now we are approaching a day of reckoning.  We have been living in the greatest debt bubble in the history of the world, but the bubble is ending.  There are several ways that the powers that be could handle this, but all of them will lead to greater financial instability.

In the end, we will see that the debt-fueled prosperity that the western world has been enjoying for decades was just an illusion.

Debt is a very cruel master.  It will almost always bring more pain and suffering than you anticipated.

It is easy to get into debt, but it can be very difficult to get out of debt.

There is no way that the western world can unwind this debt spiral easily.

The only way that another massive economic crisis can be put off for even a little while would be for the powers that be to “kick the can down the road” a little farther by creating even more debt.

But in the end, you can never solve a debt problem with more debt.

The next several years are going to be an incredibly clear illustration of why debt is bad.

When the dominoes start to fall, we are going to witness a financial avalanche which is going to destroy the finances of millions of people.

You might want to try to get out of the way while you still can.

18 Signs That Global Financial Markets Smell Blood In The Water

Can you smell it?  There is blood in the water.  Global financial markets are in turmoil.  Banking stocks are getting slaughtered right now.  European bond yields are absolutely soaring.  Major corporations are announcing huge layoffs.  The entire global financial system appears to be racing toward another major crisis.  So could we potentially see a repeat of 2008?  Sadly, when the next big financial crisis happens it might be worse than 2008.  Back in the middle of 2008, the U.S. national debt was less than 10 trillion dollars.  Today it is over 14 trillion dollars. Back in 2008, none of the countries in the EU were on the verge of financial collapse.  Today, several of them are.  This time if the global financial system starts falling apart the big governments around the world are not going to be able to do nearly as much to support it.  That is why what is happening right now is so alarming.  As signs of weakness spread, the short sellers and the speculators are starting to circle.  They can smell the money.

Back in 2008, bank stocks led the decline.  Today, that appears to be happening again.  The “too big to fail” banks are getting absolutely pummeled right now.  Most people don’t have much sympathy for the banksters, but if we do see a repeat of 2008 they are going to be cutting off credit and begging for massive bailouts once again, and that would not be good news for the economy.

In Europe, the EU sovereign debt crisis just seems to get worse by the day.  Bond yields for the PIIGS are going haywire.  The higher the yields go, the worse the crisis is going to get.

Meanwhile, as I have written about previously, a bad mood has descended on world financial markets. Pessimism is everywhere and fear is spreading.  The short sellers and the speculators are eager to jump on any sign of weakness.  Investors all over the globe are extremely nervous right now.

So what happens next?

Well, nobody knows for sure.

But things certainly do not look good.

The following are 18 signs that global financial markets smell blood in the water….

#1 Banks stocks are absolutely getting hammered right now.  Bank of America hit a 52 week low on Monday.  Bank of America shares declined 4 percent to $9.61.

#2 So far this year, Bank of America stock is down about 27 percent.

#3 Bloomberg is reporting that Bank of America may be forced to increase its capital cushion by 50 billion dollars.

#4 Shares of Goldman Sachs and Morgan Stanley are near two year lows.

#5 Shares in Citigroup fell 2.5 percent on Monday.

#6 Moody’s recently warned that it may be forced to downgrade the debt ratings of Bank of America, Citigroup and Wells Fargo.

#7 Barclays Capital, Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley are all either considering staff cuts or are already laying workers off.

#8 The deputy European director of the International Monetary Fund says that the Greek debt crisis is “on a knife’s edge“.

#9 Moody’s has slashed Ireland’s bond rating all the way to junk status.

#10 The yield on 2 year Portuguese bonds is now over 20 percent, the yield on 2 year Irish bonds is now over 23 percent and the yield on 2 year Greek bonds is now over 35 percent.

#11 Shares of Italy’s largest bank dropped by a whopping 6.4% on Monday.

#12 On Monday, the yield on 10 year Italian bonds was the highest it has been since the euro was adopted.

#13 On Monday, the yield on 10 year Spanish bonds was also the highest it has been since the euro was adopted.

#14 Shares of Germany’s largest bank fell by a staggering 7% on Monday and are down a total of 22% so far this month.

#15 Citigroup’s chief economist, William Buiter, says that without direct intervention by the ECB there is going to be a wave of sovereign defaults across Europe….

“Nothing stands in the way of multiple sovereign defaults except the ECB: they are the only game in town, there is nothing else”

#16 Cisco has announced plans to axe 16 percent of its workers.

#17 Borders Group has announced that it will be liquidating all remaining assets.  That means that 399 stores will be closed and 10,700 workers will lose their jobs.

#18 During times of great crisis, many investors seek safe havens for their money.  On Monday, the price of gold shot past $1600 an ounce.

These are not normal financial times.  The worldwide debt bubble is starting to burst and nobody is quite sure what is going to happen next.  Certainly we are going to continue to see financial authorities all over the world do their best to keep the system going.  But as we saw in 2008, things can spiral out of control very quickly.

Just remember, back at the beginning of 2008 very few people would have ever imagined that the biggest financial institutions in America would be begging for hundreds of billions of dollars in bailouts by the end of that year.

When confidence disappears, the game can change very quickly.  To the vast majority of economists it would have been unimaginable that the yield on 2 year Greek bonds would be over 35 percent in mid-2011.

But here we are.

The entire global financial system is a house of cards built on a foundation of sand.  It is more vulnerable today than it has been at any other time since World War II.  When a couple of major dominoes fall, it is likely to set off a massive chain reaction.

The global financial system of today was not designed with safety and security in mind.  It was designed for greedy people to be able to make as much money as possible as quickly as possible.  The banksters don’t care about the greater good of mankind.  What they care about is making huge piles of cash.

There is way too much risk, way too much debt and way too much leverage in the global financial marketplace.  You would have thought that 2008 should have been a major wake up call for financial authorities around the world, but very few significant changes have been made since that time.

The financial news is just going to keep getting worse.  This financial system is simply unsustainable.  It is fundamentally unsound.  The reality is that financial bubbles cannot keep expanding forever.  Eventually they must burst.

Over the next few weeks, keep a close eye on banking stocks and keep a close eye on European bond yields.

Hopefully things will stabilize.

Hopefully the next wave of the financial collapse is not about to hit us.

Hopefully the entire global financial system is not on the verge of a major implosion.

But you might want to get prepared just in case.

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