Remembering PRESTAGS

Highs and lows

Vegetarian korma

IKEA breakfast

Has The Entire World Gone Mad?

Am I the only person who thinks World War III is a really bad idea?

I wish I lived in a remote village in New Zealand.

There is Still Trust in This World

I'm glad there is still some trust in this world.

A bit down my street is an Italian Deli, and every morning the bread and milk is delivered a couple of hours before the store opens. It is safe enough to leave the deliveries outside the door and nobody steals them.

Something nice for a change.

Good Riddance to America's Worst President

I can't wait until America's worst and most unconstitutional President leaves the White House.

This smug, arrogant, pathological liar leaves the country in economic ruins. The numbers simply do not lie. 

Not to mention Obama's genocide in Libya, Syria and Yemen. So many slaughtered Christians and barely a whisper from Obama because he actually hates Christians. So many slaughtered muslims as well.

At least this sick bastard won't be able to get up every morning and play with his drones and undertake extrajudicial murder at his will around the world.

And don't get me started on his mass murder of babies and support for every deviancy.

Good riddance.

EDEE - Its all about the ecomomy

Although I do not have half the cities yet, I have flown an explorer through Paul's island looking for a TR city to nuke. (A strategy he taught me, although it is more to strike at the morale of the defenders than to reduce transports, for which the air force does a grand job.) What astonished me is all these low but useful cities producing nothing! Nilch! Nanda! Niente! Apart from Bakes Beans for the front.

Notice also the oil resource being ignored! In my empire, the oil resources are so heavily exploited that I could put every city under production. But I wait until they hit 100%, as they grow quickly below that level and slowly after.

Now Paul may claim that is a 105% city is only going to produce a plane every 11 turns, but multiply that by 30 and that is 3 planes a turn that Paul can only dream of.

The end is nigh. Might I suggest something different for a change:

All is quiet on the western front

Edmund Halley set a high benchmark when he predicted the date of the arrival of a comet and the part of the sky it would appear in.  In one stroke he removed the mysticism from comets and showed how mathematics would revolutionise our lives. He did have an enormously powerful ally - the genius of Issac Newton who discovered the theory of gravity and showed how it impacted all the bodies in our solar system. However, he backed up that theory by an exhaustive search for past sightings of comets. Just pause for a second and imagine the effort that would take in 18th century England. No internet, no glossy books on comets, and no local library. In fact most of the data he trawled would have been in bizarre books of semi-religious rantings and of dubious accuracy.

How we wish that weather forecasters, political pundits and economic futurists could even approximate to the brilliant success of Edmund.

Thus I turn to us bloggers poor attempts to emulate Edmund's greatness. I note today that at the close of trading for 11 November 2015, the Dow Jones is unremarkable.

While I have little respect for the lack of insight behind this index, I do acknowledge that if the world economy collapsed, it would have a sharp downward line, as shown in the graph of the Great Depression.

So, I think we can safely conclude that the markets have not crashed and the world economy is puttering along in a generally uninspired fashion. Prediction: Rememberance Day Crash, Status: Debunked!

What about my own humble prediction a few weeks later? I promise you it does not come close to the meticulousness of Edmund's, and I suggest that is remains as a prediction mostly due to the fact that it is still a future possibility. The big problem with my prediction is that I need the US to stop pumping money into their economy before it will work. There has to be a few months for the investors to detect that their market trading investments are now worthless - it won't happen the day after the interest rates rise:

This is something I was expecting to have happened by now. If it doesn't happen before mid December, I'll have to go out and buy my copy of Yeoman the old fashioned way.

Sorry - I could not resist another picture of Peter's generals partying on my economic surpluses.

Let me finish with one more Huzzah! for a brilliant "Man in White Coat", who even knew we would see a comet in 1986!

 

Pre-Tremors Continue

I have been watching the markets closely since the late August "Pre-Tremor" (according to me) or "Adjustment" (according to the Python). I maintain my position that this was only a warning, like a pre-tremor before an earthquake, and that the big crash is not long away. I stick by my date of Remembrance Day 2015.

Basically all the major stock markets are in slow decline. The United States is the most volatile, but this is because of massive interventions by the Plunge Protection Team (aka Federal Reserve) to buy stocks back to keep artificially inflating the price. This is completely short sighted if not actually economic vandalism because (1) the more money that is printed to artificially inflate stock prices the less effect each dollar has over time, (2) in a collapsing system where the fundamental problem is debt, this only increases debt, and (3) it is a misallocation of funds from what would help ordinary people and the economy generally, and create jobs (eg infrastructure like roads, railways, hospitals etc) to what only helps -temporarily- the 1% that own most of the stocks.

The great deception, that more and more commentators are now talking about and should be blindingly obvious to everybody, is that the stock market has stopped being an indicator of the real health of the economy. With growing unemployment, collapsing commodity prices, decreasing trade, increasing public and private debt etc the stock market has ceased to be a valid indicator. This is precisely what happens when the stock market is so manipulated. In fact it ceases to be a market at all. There is no true price discovery, which makes prices false, which inevitably leads to collapse. Only the hardest of hard assets with no counterparty risk will survive what is coming.

My favourite financial analyst - Egon von Greyerz - gave some more warnings yesterday:

"We have come to the end of an era based on credit creation, money printing and manipulation.  It’s also been an era where we have lost many of the moral and ethical values that are necessary for a civilized society".

"The upheaval in coming years will not just be financial.  Sadly all areas of life on earth will be affected, be it health, lack of food, water, personal security, social unrest, wars, and much more.  And the social security net that people in the West have been used to will totally disappear.  This safety net has not rested on a firm foundation, but merely on quick sand, consisting of printed money and debt".

 

Is this the end of the world as we know it?

Regular readers of this blog will note that Paul predicted the end of the world as we know it for 11 November 2015. The good thing about this prediction is that we will be here to observe it and can potentially take action to ameliorate it (unlike the prediction that the sun will burn up the Earth in 5 billion years, or that the run-away expansive force in our neck of the universe will ripe atoms apart in 100 billion years).

So the question is, what exactly is predicted and how sure can we be of the end. Certainly the market volatility of this week would have had many preppers bundling the family into the armored car and heading off to their bunker in the woods.  The world stock markets lost 5 trillion USD in one day. Where did it go? Was every member of the human race suddenly is debt to the tune of 1000 USD? How much CO_² was pumped into the atmosphere by the cremation?

The fact is that while a lot seemed to happen, in fact very little did happen. The world of finance is based on valuing everything so that everything can be compared. But there is no text book that one can look up that gives you the value of anything. So markets are invented and the value of something simply becomes the cost to acquire it. If one day enough people wake up and decide that, like the plastic toy your kids desperately needed last week, they just don't want something any more, the cost to acquire it goes down. The toy itself is in no way changed, is not different, does  nothing less. It is just able to be purchased for less. Of course, every sales person in the world knows that if you want to move some stock that no one buys, offer it at 20-50% less (preferably in big red letters). That is when the bargain hunters step in, or as the finance dudes call it, the level of support. This looks like an indication that the product is now undervalued, but it is not. It simply means that the bargain hunters have seen these cycles for a while, and they are confident that the price will rise again, at which point they can cash in, and maybe go on the lecture circuit.

Are the bargain hunters right? Not always; many do go bankrupt. However, unlike a medical trial, there is no mandatory reporting, so I could not tell you how often the bargain hunters are right, but using the line of reasoning based on Darwinism, enough must for them still to exist.

So what does this have to do with the price of rice in China?

China

China stock market has been in "freefall" for some of this week. This comes after several months of decline for Shanghai Composite Index. (A stock market index is a clever calculation to assess how a stock market is going. It is usually an aggregate of the values of indicative stocks traded at that market. The Dow Jones is a more meaningless form of index where every indicative stock is presumed to have one share. The All Ords is an attempt at an improvement, by taking the volume of shares times the price. This means, though that an usual day for one high volume stock, or a "two speed economy", makes it move a bit bizarrely.)  In China there are many indices, but we westerners like the focus on the Shanghai Composite Index, perhaps because the stocks there are more related to the global economy, but probably also for a similar reason that we call the country China (probably from the Qin Dynasty); a lack of willingness to understand the whole nation. (Interestingly, the Arabs call us Ferengi because we look French, so probably are. So next time you talk about the Chinese, remember the Bastille.)

The Shanghai Composite index is down because that part of the Chinese economy is being valued less by financial traders. This will continue until bargain hunters step in and push it back up.

A quick glance at the chart on the right up to mid year would leave you the impression that something unsustainable is happening. Now we are back to the value for April of this year. It looks sharp, but consider you owned an house and it doubled in value over the last three years; you would be pretty happy. Suppose is doubled again in the last two months. You would say that was B*** S***, and you would be right. Now it as gone into free fall and is worth just double again. Most of us would say "Well, I have to live somewhere, and it is still worth twice the price three years ago, and it hasn't changed, so I'll stay". This is what the business people will be doing. The traders are the ones who are suffering - they are paying off their Rolls Royce on the idea that the growth would continue and then they could buy Bill Gates outright in 5 more years, but they have just too much cocaine in their blood stream.

There is a good article in the economist (The Great Fall of China) that makes the following good points:

• China is still mostly a command economy, so behaves differently to market economies, and even those behave bizarrely at times
• The property market in China dwarfs the equity market, and it is doing OK
• The Chinese economy is changing towards a service based economy, much like ours did earlier. Change = pain.
• The government are making errors. Errors are not uncommon in all governments, and even in ecclesiastical bodies
• The right choice versus the wrong choice is only known in hindsight.

So what does this mean for the man on the land?

Australia

Modern China is very good and very bad for China. it is very good because it has an enormous appetite for commodities, and we have lots of those. This means that money keeps coming into Australia out of proportion to the effort put in - iron was created by a supernova that seeded our corner of the galaxy. All we need to do is get the stuff onto boats. Unfortunately, lots of other countries saw that we were making money and built their own iron ore mines. The world is awash with ore now, so our price is down. (Still the same iron, just at a lower price.) We are a bit addicted to the old price, and to the mass of investment that happened during the mining boom. (Ask the US market traders how depressing life becomes when free cash is turned off.) We are now suffering withdrawal symptoms; like a crack addict, nothing else seems to matter except getting the fix again.

China is also very bad for Australia (and the rest of the first world) because most manufacturing jobs are heading there because of worker income disparities. It is even cheaper to get your frozen berries from half way across the world than from the NSW south coast. While this does make me worry (particularly given that I play my wargames in a macro economic fashion, and avoid any foreign dependencies), it is as relevant to my life right now as the Roman occupation was to Jesus: It is a bit dangerous, but there is little point stressing over something that I have so little control over.

It means that the future for Australia is in the services industry, at least until the standard of living rises in the emerging economies to make our workforce competitive.

So after a massive waffle, a prediction:

Prediction

In my view, stock and bond markets are currently valued on the level of money that the governments are willing to pump into them. I think this pumping will mostly cease around the world early next year if not before. (The Japanese will never cease doing it!) This will lead to a dampening of values - a correction of about 10%-20% between February and Easter.) I think this will become positive for people, because the traders will stop investing in companies that collect money from government pumps and resume investing in companies that actually do something, and to do something you need workers.

For me personally, that means that I have shifted my super into cash and mean to keep it that way until such time as I see a decent market shock, or until my birthday. (If it does not happen by then, I am in error.) However, I have a stock portfolio for my son and I am leaving that in place because the pain of capital gains tax overrides my good intentions. Better to have a day in the sun and a son who is 10% poorer than to spend s week in front of the computer stressing about the errors I am making.

Some Quotes Following a Dramatic Week

 

From Clive Mound, of Gold Seek:

"Many lesser markets around the world are toppling, but somehow the big Western markets of Europe, Japan and the US are staying aloft. If you have ever made a sand castle on the beach and watched what happened when the tide comes in, you will recall that it is the weaker outer ramparts and smaller turrets that collapse first, and the big central towers that hold out the longest. The weaker outer ramparts and smaller turrets are the Emerging Markets which are already crumbling, and it won’t be long until the big central towers – the big Western Markets, go the same way – everything is pointing to it".

From Egon von Greyerz of Matterhorn Asset Management:

Eric King:  “So with the Dow down over 530 points today, is this the collapse you’ve been predicting already beginning to unfold?”

Egon von Greyerz:  “Eric, it’s already happening all around us but the world doesn’t see it.  The world economy has already started to disintegrate.  Only the first four days of this week $2.5 trillion of market capitalization has been wiped out in global stock markets.  So the world is in denial…

... Eric, the perfect storm has now started.  And this storm will turn into a hurricane probably within the next two months.  So in the next 60 – 90 days we will see all stock markets go down by at least 25 – 30 percent and likely a lot more.  And we could see gold reaching $2,000 and silver $50 within that time...

...I’m fully aware that this sounds extreme, but all this is the end of the 100-year bubble of credit explosion that now must implode.  And the gold price will just be a reflection of the fall of paper currencies to their intrinsic value of zero.”

From Gregory Mannarino of Traders Choice:

"This is a global problem.  It is insurmountable.  It can never be paid back in any possible way.  It’s too huge.  It’s the mechanism of the system that simply demands the relentless acquisition of debt in perpetuity.  Once we admit we can’t borrow anymore, we have a debt crisis.  That is what we are seeing here.  How are they trying to fix it?  The same old way by fueling it with debt.  All this is doing is growing the Frankenstein, the monster of debt even larger.”

From Michael Pento of Pento Portfolio Strategies:

"It is now becoming empirically obvious to any objective observer that the philosophy of money printing to generate growth is a complete failure. That bankrupt philosophy led to the biggest bubble of all: the QE-induced faith in central banks’ ability to save the world. The collapse of this deluded fantasy will be the most devastating reality check of all".

From Paul:

"What part of Sodom and Gomorrah don't they understand?"

From Michael Snyder of the Economic Collapse Blog:

"In the coming days, we are likely to see even more emerging markets devalue their currencies in a global “race to the bottom”.  But this “race to the bottom” presents a great danger to financial markets.  As I have written about previously, there are 74 trillion dollars in derivatives globally that are tied to the value of currencies.  As foreign exchange rates start flying around all over the place, there are going to be financial institutions out there that are going to be losing obscene amounts of money.

I cannot say the “d word” enough.  Derivatives are going to play a starring role during this financial collapse, and so that is a word that you will want to be listening for very carefully in the weeks and months to come.

Tick tick tick.

A Plunge? A Correction? Or the Start of the Crash?

It is not even two weeks since my last prediction of an economic crash and the world's markets have given a loud groan and major wobble.

At least the mainstream news is not spouting all that 'recovery' bullshit because things are so obviously bad now. After this last week on world markets there is now open talk of a "Plunge" and a "Correction". My question is: ... is this the start of the "Crash"?

My prediction for a global economic crash was that this would occur by 11 November 2015. Python disagreed, and predicted there would only be a "Correction" and that this would happen next year. We are going to have to establish some definitions or benchmarks for the terms "Correction" and "Crash". There are many and varied definitions out there and, subject to the Python's thoughts, I propose the following which are my own creations:

A Correction = [A] a rapid decline in stock market prices of about 10% [B] in at least one of the world's major stock markets [C] accompanied by negative movements in at least one other major financial sector (eg commodities, bonds, real estate prices) [D] that has as an underlying cause normal cyclical events or natural market forces adjusting asset prices and [E]  is not accompanied by a recession.

A Global Crash = [A] a rapid decline in stock market prices of over 30% [B] in nearly all of the world's stock markets including all major stock markets [C] accompanied by severe negative movements in most of the other major financial sectors (eg commodities, bonds, real estate prices) [D] that has as an underlying cause systemic and incurable problems in the whole financial system and [E]  is accompanied by a severe recession or depression.

Query whether the "Correction" has already happened this past week. The following charts well illustrate the stock market drops that took place and which even the mainstream media including the Australian media is describing as a "Plunge". Of course the corporate controlled media continues to hide the underlying reasons - massive money printing and out of control global debt - so we all keep being happy and ever so trustful of the government and central banks that caused this economic time bomb in the first place.

Remember this is just the last week!!:

In terms of "The CRASH" we should remember that a stock market crash has already occured in no less than 23 countries (as distinct from a global crash). And some of these are well developed nations. I don't believe the markets in the United States, Europe and Australia can remain immune from these other market crashes, and this is just another sign that the big global crash is imminent. Just look at Singapore, Taiwan, South Korea and Malaysia.

Zero Hedge has reported: "Of course this is just the beginning.  The western world is going to feel this kind of pain as well very soon.  I want to share with you an excerpt from an article that just appeared in the Telegraph entitled “Doomsday clock for global market crash strikes one minute to midnight as central banks lose control“... When one of the newspapers of record for the entire planet starts sounding exactly like The Economic Collapse Blog, then you know that it is late in the game... ...A global financial crisis has already begun. So those that were claiming that one would not happen in 2015 are already wrong. [I think this includes Python] Over the coming months we will find out how bad it will ultimately be."

 

THE TERRIFYING DARK YEARS

It seems like ever since I was prepared to put a date on the economic collapse, others far better informed than I have begun to commit to a date.

I do believe the terrifying dark years (to steal the phrase from King World News) are almost upon us.

I'm going to track these dates.

Gerald Celente, who edits Trends Research and publishes the Trends Journal, and who has an enviable track record with economic predictions, has just given the date as by the end of the year, ie by 31 December 2015. I have listened to Celente's podcasts for many years. According to Celente:

"I’m now predicting that we are going to see a global stock market crash before the end of the year.  It’s not only going to be the Dow, it’s going to be the DAX, the FTSE, the CAC, Shanghai, and the Nikkei.  There’s going to be panic on the streets from Wall Street to Shanghai and from the UK down to Brazil.  You are going to see one market after another begin to collapse".

My favourite 'Gold Bug' commentator Egon von Greyerz, the Founder and Managing Partner of Matterhorn Asset Management AG in Switzerland, has just given the date as by the end of Autumn, ie by 30 November 2015. According to von Greyerz:

"We will see major calamities starting in the autumn.  It will be the most massive shock to the system and to people.  We could also have geopolitical problems.  All major countries will send in their Plunge Protection Teams but they will only be able to stop the hemorrhaging for only a brief moment in time.  And to support markets as well as the financial system there will be money printing in the tens of billions of dollars initially and even more later.

The bottom line is that I’m looking at the risk and the risk is that this is the scenario that will unfold.  This is what investors must prepare for.  People should not hold major assets in banks and they should not hold general stocks and bonds because they will lose massive value.  

 

Gold and silver will end their 4-year corrections and finally start rising substantially.  Eventually prices will be many multiples of what you see quoted today for gold and silver.  But sadly, Eric, I think we are now entering what I wrote about a few years ago, which means that the dark years are about to begin and people need to be prepared for the coming turmoil".

I also read today that Larry Edelson, a senior analyst at Weiss Research (I have never heard of this person but I needed to find someone who predicted the collapse earlier than me!) has given a date of 7 October 2015:

"On October 7, 2015, the first economic supercycle since 1929 will trigger a global financial crisis of epic proportions. It will bring Europe, Japan and the United States to their knees, sending nearly one billion human beings on a roller-coaster ride through hell for the next five years. A ride like no generation has ever seen. I am 100% confident it will hit within the next few months".

So, here are the predictions thus far:

Larry Edelson - 7 October 2015

Paul - 11 November 2015

Egon von Greyerz - 30 November 2015

Gerald Celente - 31 December 2015

A Pi For Python?

The Python has been asking me to put a date on the economic collapse, and to bet my PRESTAGS Yeoman game on it. I've already told him I'm not an economist or financial expert and my Yeoman game is too precious.

However, I will put my money where my mouth is and commit something to my prediction. And I will give a date.

I predict the economic collapse will happen by Remembrance Day 2015, in other words by 11 November 2015. And if I am wrong I will give Python a small but sexy little computer on which he can install his Python language. I already have the computer, new in its packaging.

Now the question is, if I am right what will the Python give me?

 

The Coming Crash, The Bubble and the Ka-Poom Theory

While I continue to read lots of rubbish from politicians about the "recovery", I am starting to notice more and more commentators put their reputations on the line and predict (like me although I have no economic or financial reputation whatsoever {and for the benefit of Python, I like my Yeoman game}) that a crash is imminent.

The charts of doom continue. A couple more this week, and significant ones: US home ownership is at the lowest level since 1967, and US wages growth is at the slowest pace on record. Unless a recovery is measured by the economic circumstances of the top 1% (who interestingly own the media) this aint no recovery.

The endless money printing (sorry, "quantitative easing") by central banks is not working. I remain amazed that anyone would actually think money printing could possibly work, it being economics 101 that printing money has never worked in history. Ever.

I read a great article by Chris Martenson (Peak Prosperity Website) who described very well that printing money and central bank interventions have only acted to elevate share prices and create a giant stock market bubble where prices are more and more removed from reality as the bubble expands:

"Whether the central banks can keep all of their carefully-propped equity and bond markets elevated throughout the next part of the cycle remains to be seen.  We know they will try very hard. They certainly are increasingly willing to use any all tools at their disposal to keep the status quo going for as long as possible. 

Whether it’s the People’s Bank of China stepping in to the market to buy 10% stakes in major Chinese corporations in a matter of weeks, the Bank Of Japan becoming the majority owner of key ETFs in the Japanese markets, or the Swiss National Bank purchasing $100 billion of various global equities, we see the same desperation. Equity prices are being propped, jammed and extended higher and higher without regard to risk or repurcussions.

It makes us wonder: Why haven’t humans ever thought to print their way to prosperity before?

Well, that’s the problem. They have.

And it has always ended up disastrously.  History shows that the closest thing that economics has to an inviolable law is: There’s no such thing as a free lunch.

Sadly, all of our decision-makers are trying their hardest to ignore that truth".

Chris Martenson also included a chart that illustrates perhaps more than any other how the effectiveness of money printing is a self-defeating process. The money printing (in addition to many other evils like cheap credit fostering mal-investment) creates debt which over time has less and less impact in creating real economic growth as measured by increases in GDP.

The chart below shows that between 1947 and 1952, when the middle class was expanding, each new dollar of debt increased GDP by $4.61. Today the number is $0.08. In other words, today it takes $12.50 of new debt to boost GDP by $1. There is a word for this kind of trend. Unsustainable.

I have more recently being turning my mind to what the crash will look like. There are different theories. Almost all of the crash prophets predict that the stock market will do what all bubbles eventually do - burst. But what happens then?

One of the theories is the Ka-Poom theory which was proffered by Erik Janszen but well described by Chris Martenson:

"Basically it [the Ka-Poom theory] states that the end of a bubble era begins with a sharp deflationary event (the ‘Ka’ part of the title), but ends in a highly inflationary blow-off, (the ‘Poom’).

It’s a one-two punch. Down then up.

The reason you get the deflationary portion is simply because bubbles always burst. They are seeking a pin from the moment they are born.

The logic for the inflationary secondary reaction is that the central banks always respond to deflation with more money printing. Ironically, this is a doomed attempt to stem the damage caused by their prior money printing efforts.

They never learn.

So that’s what we’re looking for: a deflationary crunch savage enough to scare the central banks into opening the monetary spigots even wider. But this next time, we think they’ll seek to goose economic growth by giving money directly to the people as well as non-bank corporations.

And we think that deflationary bust has already begun. Our record-high stock markets simply somehow haven’t gotten the memo yet".

If this theory is correct it is the double whammy. Deflation - the asset destroyer, and steroids for debt. Then Inflation - cancer for cash. And the consequences of both for an economy: destruction of wealth, especially for the middle and lower classes, massive unemployment, massive poverty, destruction of the revenue base for social services, elimination of healthy credit for business growth, evisceration of pension and retirement funds etc etc.

I am attracted to the Ka-Poom theory but I have a twist of my own to add. I believe while an economy as an entire construct can have a mathematical average number for the price of everything that is either deflationary or inflationary (ie average prices are falling or increasing) it is possible to have both existing in an economy at the same time for different things, such as to be highly destructive for average families. In other words, the prices of essential things like food and electricity can be going up, while the prices of other assets (like real estate)  can be going down. This is the worst of all worlds for ordinary people and there are many precedents for this including (already at the present time) China, parts of the United States, parts of London etc.

If the Ka-Poom theory is correct the first sign will be deflation. In the opinion of Chris Martenson this has already begun, and Australia may be hit early:

"Deflation is back on the front burner and it's going to destroy all of the careful central planning and related market manipulation of the past 6 years.

Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. Tanking commodity prices are confirming that idea.

Whole groups of enterprises involved in mining and energy are about to be destroyed. And the commodity-heavy nations of Canada, Australia and Brazil are in for a very rough ride."

The above image was the one I intended to end with for this post. I'm not quite sure it captures the gravity of the situation.

The $223,300,000,000,000 Ponzi Scheme

Michael T. Snyder writes a great blog called "The Economic Collapse". He expresses far more eloquently than I the various signs that point to the coming financial catastrophe, which I have also been warning about.

Michael has posted some startling numbers, which I repeat, that leave one in no doubt that the greedy bastards running this planet have just ended up with a giant Ponzi scheme. Just look at these:

–$1,280,000,000,000 – Most people are really surprised when they hear this number.  Right now, there is only 1.28 trillion dollars worth of U.S. currency floating around out there.

–$17,555,165,805,212.27 – This is the size of the U.S. national debt.  It has grown by more than 10 trillion dollars over the past ten years.

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

–$48,611,684,000,000 – This is the total exposure that Goldman Sachs has to derivatives contracts.

–$59,398,590,000,000 – This is the total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.  40 years ago, this number was just a little bit above 2 trillion dollars.

–$70,088,625,000,000 – This is the total exposure that JPMorgan Chase has to derivatives contracts.

–$71,830,000,000,000 – This is the approximate size of the GDP of the entire world.

–$75,000,000,000,000 – This is approximately the total exposure that German banking giant Deutsche Bank has to derivatives contracts.

–$100,000,000,000,000 – This is the total amount of government debt in the entire world.  This amount has grown by $30 trillion just since mid-2007.

–$223,300,000,000,000 – This is the approximate size of the total amount of debt in the entire world.

–$236,637,271,000,000 – According to the U.S. government, this is the total exposure that the top 25 banks in the United States have to derivatives contracts.  But those banks only have total assets of about 9.4 trillion dollars combined.  In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 25 to 1.

–$710,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives contracts generally fall within this range.  At the high end of the range, the ratio of derivatives exposure to global GDP is about 21 to 1.

Now you know why nearly all the world is forced to have interest rates of 0%, and why the nutters in charge are trying to expand negative interest rates. Unfortunately, they have been so greedy that even if they were to succeed in forcing all of us ordinary folk into repaying the debt based world they have created, the debt is now simply too big.

Some of the elite know this crash is coming. Why do you think they are flat out creating the infrastructure for a police state. They want to stay in their mansions, albeit surrounded by barbed wire and militarised police. For the rest of us, who knows how we will survive the chaos.

Michael has also written his first novel which is available at amazon. I think I'm going to have a nice 'relaxing' afternoon and have a read of it.

 

4 More Charts of Doom

Every day brings further charts that support the coming economic collapse.

World Trade volume has dropped by over 2% being the biggest drop since the recession in 2009. Some economists say this is the real canary in the coal mine.

Over the last four quarters there has been a net private capital outflow from China of $800 billion. As I posted on 19 July, China can no longer be regarded as a genuine market economy and the risks of investing there have increased dramatically.

Oil prices have been crashing since the end of last year, and have fallen again to US$50 per barrel.

And last but not least, the total commodities index is at a low not seen since 2002.

I can't see how the whole financial Ponzi scheme can be kept going much after October 2015.

 

Closer to the Economic Collapse: The "Roach Motel"

I believe the recent stock market crash in China was a forewarning of what is in store for the rest of the world, only worse. About a week ago, China's four-week-long stock market rout had wiped out nearly 30% off the Shanghai Composite Index since its highs of June 2015.

The most remarkable thing about the Chinese crash is that our media are now reporting that the situation is "normalised" and the crash has stopped. The only reason the crash has stopped is because Beijing has ordered (1) shareholders with more than a 5-percent interest must stop selling shares; (2) directors, supervisors, and senior management personnel are barred from reducing their holdings; (3) there is the threat of imprisonment for those who may have been contemplating a short in the Chinese markets; and (4) trading in two-thirds of the stocks on the exchange have been halted.

In short, China took measures that equate to nothing less than an abandonment of a market economy. The value of the current stock market - effectively frozen - is now completely artificial and grossly inflated. At the end of the day China is still a one party state with a communist government that plays around with free market economics, but at heart China remains a command economy as recent events have proven.

Michael Pento has aptly described the Chinese market as now being nothing more than a "roach motel". No sane person would invest in the Chinese stock market now: "A market is a place where buyers and sellers freely meet and price is discovered. What China has now created is a roach motel where money moves in but it can’t easily move out, if it can move out at all. So all technical and fundamental analysis goes out the door. And those who choose to participate in this charade are left waiting for Beijing’s next decision on how to direct the market."

While not as bad as China, Western stock markets are increasingly manipulated, and propped up by central bank money printing. The entire world is now drowning in debt, and when the crash comes to the West is the only option to "do a China" and abandon the market economy?  Will we be reduced to a "roach motel" as well?

Are There Any Modern Day Spartans?

I have predicted a coming economic crash and harped on about this again and again. 

Nothing has happened to change my mind and I think the crash is closer than ever. All that is needed is an event to trigger an avalanche of debt defaults and derivative calls and the whole house of cards will come crashing down. Some commentators call these "black swan" events and they liken them to that last little snow flake that drops on a huge build up of snow, with the tiny extra weight causing a complete collapse.

One possible black swan event (or snowflake) is a Greek exit from the EU. I don't want an economic collapse which will mean trying to survive in Great Depression like conditions for possibly a decade, but I do despise the European Union. The whole EU monetary experiment that has made banks and not people the centre of economics, and has now created a massive debt based economic system and austerity for increasing numbers of European citizens. Somebody has to say enough is enough and perhaps it will be the Greeks.

Before I hear that the Greeks deserve everything they get because they lived beyond their means we should remember basic true capitalism.

If a bank makes bad loans it is the fault of the bank, and the borrower can be bankrupted but the bank's shareholders (who reap all the profits when the bank makes good loans) also lose out and the bank may even collapse. The losers are the two parties to the transaction. There is nothing wrong with this, and in fact it is healthy in a genuine competitive market.

Not so in the new world of the EU and bank-centric vulture capitalism. Now when a bank makes bad loans the borrower can be bankrupted but the bank is bailed out by government funds in the form of loans from central banks (either from the government of the country itself or in the EU often from other countries). This means the entire country which happened to have a bad bank operating is punished by interest on massive loans and austerity for its citizens. So the individual borrower is punished, the bank where ultimate responsibility lies is not punished, the citizens of the central bank in the lending country are punished (their taxes being socialism for banks) and the citizens of the recipient country (many of whom may be good savers and debt free) are punished. Completely unfair and in fact rewards bad lending practices.

I am constantly amazed that so many intelligent people can't see the flaws in this economic structure and that citizens of supposedly well educated and developed nations put up with it. I believe this is a sign of how all powerful banks have now become. In fact they are so powerful that they have achieved "bail-in" legislation in many nations, with the EU aiming to have this in all member countries within two months. This is no more and no less than blatant theft of depositor funds. 

Combined with the bail-ins will be greater and greater restrictions on cash, to force digital banking, which in turn will facilitate bail-ins (the first theft) plus facilitate negative interest rates (the second theft) plus facilitate whatever new and varied taxes (third theft) a bankrupt political-economic system can come up with. I suspect it will be some kind of levy based upon the climate agenda. The speed with which this is happening is frightening.

Over the last seven years since the 2008 financial crisis we have already seen big strides towards an almost exclusive digital financial system and the consolidation of nearly everybody's finances into a smaller and smaller number of mega banks. Even in Australia there are much fewer banks and credit societies. It is easier to slaughter pigs when they are in the same pen, and so it is easy to steal funds when everyone has been herded into a few institutions.

My contempt for the current economic structures is so strong that I want the Greeks (or some other nation) to do an Iceland and break away from the whole corrupt and unjust system. Iceland remember just let the banks fail in 2008 and actually jailed some of the bankers. There was a huge uproar (mostly from British banks that had invested in bad Icelandic banks) but now Iceland is thriving and is a genuine independent and happy nation. We had some modern day Vikings so how about some modern day Spartans!

The media of course never includes a proper discussion of the real economics or of the absurdity and injustice of  the Greek situation. You never hear that a "bail in" by the ECB or the IMF does not mean that money is going to the Greek people and their hospitals and schools, it just means that bad banks are being bailed out or other European banks that made bad loans to Greece are being bailed out.

There is a legal concept caused "odious debt". In international law, odious debt is a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion. Greece should declare much of its debt odious and simply refuse to pay. Also, jail some corrupt former politicians and advisers from merchant banks like Goldman Sachs for good measure.

While the media portrays Greece as a tiny little nation at the mercy of the EU, I read an interesting commentary this morning that perhaps Greece holds all the cards: 

"The underlying problem is that financial decisions at the ECB are being made for political reasons. Politicians are trying to pretend that the ECB can continue to create money out of thin air and keep giving Greece a liquidity lifeline. This misguided thinking has consequences, and reality is about to hit home, which raises an interesting question.

Which side is closer to reality? Greece or the so-called troika of the IMF, ECB and EU? I think Greece holds all the cards. 

Greece is still generating income from tax revenue, even in its weakened economic state. The problem Greece faces is that it cannot possibly meet its social spending commitments as well as carry its crippling debt burden. 

The lenders have refused to grant Greece any debt relief, which was the basic plank of Greece’s negotiating stance with the troika. The troika opposed debt relief because if they grant it to Greece, for the sake of European unity it will need to be granted to every other overleveraged welfare state, which is more than half of the countries in Europe.

Greece can go it alone. It won’t be easy, but it can be done. And it will be much easier to accomplish without the €320 billion debt burden hanging over its head. Greece can just walk away, like Greece and many other countries have repeatedly done throughout history. 

Greece wouldn’t be able to borrow again for a long while, but it probably shouldn’t anyway because it has learned its lesson – debt can be unmanageable.

There is one last point about Greece worth mentioning:  Greece is clearly preparing for a default. 

The Athens government has asked all cities and other governmental bodies to move their available cash into accounts at the central bank. This is being reported in the mainstream media as a way for the central government to get its hands on more cash, but that is not correct. 

It is to prevent the ECB from taking this cash of governmental bodies when the ECB finally bails-in the private Greek banks. In other words, in a bail-in the ECB takes the euros deposited in private banks, but not the euros deposited in the central bank. So by putting their euro deposits into the central bank, Greece’s governmental bodies can keep their money out of the hands of the ECB. It’s just more evidence that Greece – not the troika – holds all the cards." 

The EU has grown into more than a corrupt economic system. It is also an ever growing inefficient bureaucracy, a meddling nannie state, a gigantic social engineer, a vehicle for United States foreign policy against the genuine interests of Europe, and above all a vehicle for a perpetual war against Christianity in Europe. The collapse of the EU can't come quick enough for me.

You Heard it from Me First

This post records for posterity an email I sent to the other PRESTAGS this afternoon.

For those paying attention there is an accelerated war on cash taking place, especially in Europe.  It is already illegal in many countries to make transactions in cash for anything over a very low amount.

The authorities will tell you this is to counter organized crime and terrorism etc. “Terrorists use cash so we must stop it”. Terrorists also eat food, so do we ban food?

The real agenda is three-fold.

First, to enforce negative interest rates which are already in place in many countries especially in Europe. They will literally take (I say steal) money out of your account.

Second, to enforce the bank bail in laws which are in place in almost every country including Australia. Remember Cyprus, when they took (stole) bank deposits over a certain amount. Old fashioned capitalism was that if a bank went bust, the shareholders of the bank lost out, which is fair since they owned the bank and they appointed the decision makers who ran the bank. Not now. We are in a post capitalism world, a world of corrupt crony and vulture finances, where a bust bank means the depositors lose their money. And no, you can’t hide your cash in the mattress in a cashless society.

Third, and this is the really scary one: economic totalitarianism. When society is cashless, the government has total control over your finances and economic life. Every transaction is recorded. The accounts of “dissidents” can be frozen or stolen. “Taxes” can be raised and immediately collected at any point in any amount. Expenditure can be enforced if they want to “stimulate” the economy. Expenditure can be penalized if they want to “cool down” the economy. Debt can be imposed on people against their will. What is missing: individual freedom and choices, old fashioned values about saving etc.

The central and private banks have caused a massive crisis and they plan to save their arses this time by taking away the liberty of basically the entire world.

At least Australia still has its own currency, and our economic condition is slightly better than most.

One is forced now to think about Revelation 13.16-18:

[16] And he shall make all, both little and great, rich and poor, freemen and bondmen, to have a character in their right hand, or on their foreheads. [17] And that no man might buy or sell, but he that hath the character, or the name of the beast, or the number of his name. [18] Here is wisdom. He that hath understanding, let him count the number of the beast. For it is the number of a man: and the number of him is six hundred sixty-six.

Here are some scary articles:

http://www.prisonplanet.com/secret-meeting-in-london-to-end-cash.html 

http://kingworldnews.com/time-is-running-out-to-escape-the-system-as-the-war-on-cash-destroys-the-last-vestiges-of-freedom/

http://armstrongeconomics.com/archives/31028

Sitting Bull Says (2)

Nasty, Evil Thing

The other day I was driving along and I could hear a "thump, thump" sound. The thumps got quicker the faster I drove, so it was obviously something on one of the tyres.

When I got home I discovered a nasty evil thing with 6 long staples embedded in the tyre. I managed to get it out, and then commenced the process of seeing whether the tyre would slowly deflate. So far OK, but I have lost two tyres over the last few years to nails hiding in pot-holes.

I must say the roads in Sydney have slowly degenerated, and they remind me more and more of the roads in the Philippines. Where do all of our massive taxes go? We have become one of the highest taxing countries on earth (high income tax, GST, stamp duties, rafts of levies and tolls) but we don't have the infrastructure and great health care etc that other high taxing countries have. Too much is wasted on middle class welfare, high tech military expenditure, vomit machines like the ABC and SBS, and who knows what else.

When I see this nasty evil thing that was hiding in a pot-hole I see the decline of our once wealthy nation. We are now a debt ridden second rate country (both government debt and private debt), we have lost the cream of our manufacturing and even farming sectors, we are dumbed down, and we subsist on servicing tourists and selling stuff we dig up for ever decreasing prices. The worst thing is that change is unlikely. This is because so much of our population receives some kind of payment from the government that self-interest and mediocre outlook prevents any meaningful reform.

 

2 Things that are VERY wrong with the World

1.    1% of the world's population own almost half of the entire wealth of the planet.

2.    More people in the world have access to a mobile phone than to a toilet.

More and More Charts of Doom

To add to previous charts of doom, there are more and more appearing every day.

If things are this bad, one must ask: surely the government knows? Surely economists know? I believe many in the powers that be are aware of the coming crash, and the better economists are warning us. There are plenty of clues and warnings around us.

Here is one warning:

Here is one clue:

Downright Lies

How can you possibly fix the economy if you don't acknowledge the problem in the first place.

Last Friday the delusional Obama administration applauded the latest 'statistics' from the BLS - the Bureau of Labor Statistics. I prefer to call it these Bullshit Labor Statistics.

The BLS 'statistics' supposedly show that total nonfarm payroll employment increased by 295,000 in February, and the total unemployment rate edged down to 5.5 percent.

This is crap. Since 1994 the BLS rules were changed so as not to count 'long-term discouraged workers', ie the long term unemployed. These people are still unemployed. The BLS figures also do not count another category which includes short term unemployed workers who have stopped looking for work and other  marginally attached workers, and workers who are part-time but want to work full-time.

When you add and adjust for these other categories the true unemployment rate is 23.2% which is an economic crisis level.

The BLS 'statistics' also hide other important information about the context and quality of jobs, and whether the jobs reflect a healthy or an unhealthy economy.

In reality, the context and quality is at an alarming low level:

1.    Since February 2008, the size of the U.S. population has grown by 16.8 million people, but the number of full-time jobs has actually decreased by 140,000.

2.    The percentage of working age Americans that have a job right now is still about the same as it was during the depths of the last recession.  The chart below shows how the employment-population ratio has changed for the worse since the beginning of the decade.

3.    Nearly 33 percent of Americans above age 16 are not part of the workforce, the highest number since 1978. As at February 2015, 92,898,000 Americans above age 16 are not part of the labor force. When President Obama took office in January 2009 this figure was 80,529,000, so the number has increased by nearly 12 million.

4.    The quality of jobs continues to decline.  Right now, only 44% of U.S. adults are employed for 30 or more hours each week.

5.    Many millions of Americans are forced to take part-time jobs because that is all they can find. A staggering 39% of American workers make less than $20,000 a year, 52% of American workers make less than $30,000 a year, and almost three quarters or 72% of American workers make less than $50,000 a year.

6.    The average duration of unemployment for an unemployed worker is still about twice as long as it was just prior to the last recession.

The United States is not just a nation in decline, but a nation in denial.

Bankrupt Bankers Trying to Start a War

The following article has just appeared in the Washington Post:

"U.S. military combat vehicles paraded Wednesday through an Estonian city that juts into Russia, a symbolic act that highlighted the stakes for both sides amid the worst tensions between the West and Russia since the Cold War. The armored personnel carriers and other U.S. Army vehicles that rolled through the streets of Narva, a border city separated by a narrow frontier from Russia, were a dramatic reminder of the new military confrontation in Eastern Europe.

The soldiers from the U.S. Army’s Second Cavalry Regiment were taking part in a military parade to mark Estonia’s Independence Day. Narva is a vulnerable border city separated by a river from Russia. It has often been cited as a potential target for the Kremlin if it wanted to escalate its conflict with the West onto NATO territory".

To my mind this is blatant military aggression by the United States. Just imagine the uproar if Russian troops were exercising on the American border in Canada or Mexico. Note also the deliberate false assumptions in the propaganda article which I have highlighted. There is no evidence whatsoever that Russia has any plans to attack Estonia or that it wants to escalate any conflict with the West. It is in fact NATO that has been building more and more bases closer and closer to Russia, and the US that staged the coup in Ukraine, not to mention the infamous missiles in Poland that America said are a 'defence against Iran' (you can't make this stuff up).

Estonia needs to be very careful playing these games with the US. It has a Russian speaking population of 24%. If Russia agitates them, or even arms them as insurgents, the tiny country of Estonia will become engulfed in civil war and become a disaster and hell hole just like the Ukraine - and it will be America that started it.

The recent assassination of Russian opposition leader Boris Nemtsov also has the smell of American corruption and interference about it. Putin is more popular than ever in Russia and there would be no advantage to him in being involved in something like this. Nemtsov, although a loud mouth, had no impact on Putin’s 85% approval rating. Nemtsov’s support resided in the Washington-funded NGOs in Russia. But America, desperate to stir up trouble in Russia, may have decided they can get more mileage out of this opposition leader dead than alive.

What is really happening? The psychopaths on Wall Street that control the US know that an economic crash is coming. They will do anything, even start a world war, to hide their culpability. Washington’s reckless and irresponsible destruction of the trust achieved by Reagan and Gorbachev has resurrected the possibility of nuclear war from the grave in which Reagan and Gorbachev buried it. Again, as during the Cold War the specter of nuclear Armageddon stalks the earth. It is unbelievable how far the United States has fallen. 

A Grilled Cheese Sandwich and the Coming Economic Collapse

I have previously posted about the coming economic collapse.

This grilled cheese sandwich may not be a chart, but it is another sign of what is wrong with our current economic situation.

Let me explain.

The trillions and trillions of money printing have not created a recovery or improved economic circumstances for the vast majority of people. All that has been created is easy money for Wall Street, and a massively over-inflated stock market that only benefits the 1% who trade in shares. This over-inflation is now a bubble that is going to do what bubbles always do: burst.

Traditionally, a company's stock price is a reflection of the combined value of the company's underlying assets, plus perhaps a realistic margin for future growth potential and return on investment (cash flow through dividends). In the current bubble, many companies have a share price that vastly exceeds - and I mean VASTLY exceeds - the combined value of their assets and any objectively reasonable allowance for future growth or dividend cash flow.

A good example is The Grilled Cheese Truck Inc. which trades on the OTCQX marketplace under the ticker GRLD. This publicly listed company has 18 million shares and a recent stock price of $6 giving the company a market value of about $108 million.

But what are the underlying assets? According to the company’s financial statements, it has about $1 million of assets which include four (yes, only four!) grilled cheese trucks and almost $3 million in liabilities. In the third quarter of 2014, the company had sales of almost $1 million, on which it had a net loss of more than  $900,000. In short, and notwithstanding that the grilled cheese sandwiches may be excellent, the company is trading at in excess of $100 million over valuation. For those who bought shares low and sold high, great money. For those who bought more recently, disaster when the crash comes.

[This paragraph will make Python happy] The economic recession of 1973-1975, which John Michael Young lived through, was nothing compared to what we will have to endure when the crash comes.

When people tell you that the high stock market equals a recovery, just think of the grilled cheese sandwich.

More Charts of Doom

Here are four more charts, to add to the already significant pile of negative economic news, that dispel the myth of a US economic recovery. If the US has been experiencing a recovery for the last few years I would sure hate to see a recession let alone a depression.

Real Median Household Income has not increased since 2000.

Student Debt has risen dramatically and now totals a ridiculous $1.2 trillion.

Child Poverty has risen, and in the United States a staggering one third of children live in households earning less than 60% of the median income. In many so called 'First World' countries this figure is above 20%, and even in Australia it is above 10%.

Home Ownership in the United States has been declining for the last 10 years.

The Charts of Doom: More on the Coming Economic Crash

There is a great article by Michael Snyder that summarises why he believes the great crash is imminent. I agree with him. I actually searched for charts for everything that Snyder says, and he is correct. These charts tell a story that clearly illustrate that the so called "recovery" is a monumental lie.

I quote his key points as follows (and highlight my "favourite" bits):

The signs of the times are everywhere – all you have to do is open up your eyes and look at them.  When a pregnant woman first goes into labor, the birth pangs are usually fairly moderate and are not that close together.  But as the time for delivery approaches, they become much more frequent and much more intense. 

Baltic Dry Index

Economically, what we are experiencing right now are birth pangs of the coming Great Depression.  As we get closer to the crisis that is looming on the horizon, they will become even more powerful.  This week, we learned that the Baltic Dry Index has fallen to the lowest level that we have seen in 29 years.  The Baltic Dry Index also crashed during the financial collapse of 2008, but right now it is already lower than it was at any point during the last financial crisis.  (The Baltic Dry Index (BDI) measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets).

Commodity Prices

In addition, “Dr. Copper” and other industrial commodities continue to plunge.  This almost always happens before we enter an economic downturn. 

Orders for Durable Goods

Meanwhile, as I mentioned the other day, orders for durable goods are declining.  This is also a traditional indicator that a recession is approaching.  The warning signs are there – we just have to be open to what they are telling us.

And of course there are so many more parallels between past economic downturns and what is happening right now.

Stock Market Volatility

For example, volatility has returned to the markets in a big way.  On Tuesday the Dow was down about 300 points, on Wednesday it was down another couple hundred points, and then on Thursday it was up a couple hundred points.

This is precisely how markets behave just before they crash.  When markets are calm, they tend to go up.  When markets get really choppy and start behaving erratically, that tells us that a big move down is usually coming.

Currency Implosion

At the same time, almost every major global currency is imploding.  For much more on this, see the amazing charts in this article.

In particular, I am greatly concerned about the collapse of the euro.  The Swiss would not have decoupled their currency from the euro if it was healthy.  And political events in Greece are certainly not going to help things either.  Economic conditions across Europe just continue to get worse, and the future of the eurozone itself is very much in doubt at this point.  And if the eurozone does break up, a European economic depression is almost virtually assured – at least in the short term.

Oil Crash

And I haven’t even mentioned the oil crash yet.

There is only one other time in all of history when the price of oil collapsed by more than 60 dollars, and that was just prior to the horrific financial crisis of 2008.

Since the last financial crisis, the oil industry has been a huge source for job growth in this country.  The following is an excerpt from a recent CNN article…

The oil sector has added over a half million jobs — many of them high paying — since the recession ended in June 2009. That’s 13% of all US job growth over that period.

Now energy companies and related sectors are laying off thousands. Expect that trend to continue, bears say.

But losing good jobs is just the tip of the iceberg of this oil crisis.

At this point, the price of oil has already dropped to a catastrophically low level.  The longer it stays at this level, the more damage that it is going to do.  If the price of oil stays at this level for all of 2015, we are going to have a complete and total financial nightmare on our hands…

For the first time in 18 years, oil exporters are pulling liquidity out of world markets rather than putting money in. The world is now fast approaching a world reserve currency shift. If we see 8 to 12 months at these oil prices; U.S. shale industry will be wiped out. The effect on junk bonds will cascade to the rest of the stock market and U.S. economy.

…and this time there will be nothing left to catch the falling knife before it hits the American economy right in the heart. Not the FED nor the U.S. government can stop what’s coming. Liquidity will freeze up, our credit will be downgraded, the stock market will start to collapse, and then we can expect the FED to come in and hyper-inflate the dollar. This will cause the world to finish abandoning the world reserve currency in the last rungs of trade. This will be the end of the petrodollar.

Emerging Markets Debt

As economic problems spread around the world, a number of “emerging markets” are in danger of having their debt downgraded.  And many investment funds have rules that prohibit them from holding any debt that is not “investment grade”.  Therefore, we could potentially see some of these giant funds dumping massive amounts of emerging market debt if downgrades happen.

This is a really big deal.  As a Business Insider article recently detailed, we could be talking about hundreds of billions of dollars…

Russia this week became the first of the major economies to lose its investment grade status from Standard & Poor’s, falling out off the top ratings category for credits deemed to have a low risk of default for the first time in a decade.

If Moody’s and Fitch follow, conservative investors barred from owning junk securities must sell their holdings. JPMorgan estimates this means they may ditch $6 billion in Russian government rouble and dollar debt.

Russia may have company. Almost $260 billion worth of sovereign and corporate bonds – nearly a tenth of outstanding emerging market (EM) debt – is in danger of being relegated to junk, according to David Spegel, head of emerging debt at BNP Paribas, who calls such credits “falling angels”.

Derivatives

And no article of this nature would be complete without mentioning derivatives.

I could not possibly overemphasize the danger that the 700 trillion dollar derivatives bubble poses to the global financial system.

As we enter the coming Great Depression, derivatives are going to play a starring role.  Wall Street has been pumped full of funny money by global central banks, and our financial markets have been transformed into the greatest casino in the history of the world.  When this house of cards comes crashing down, and it will, it is going to be a financial disaster unlike anything that the planet has ever seen.

Consequences of Money Printing

I really like the way that David Stockman put it the other day…

The global financial system is literally booby-trapped with accidents waiting to happen owing to six consecutive years of massive money printing by nearly every central bank in the world.

Over that span, the collective balance sheet of the major central banks has soared by nearly $11 trillion, meaning that honest price discovery has been virtually destroyed. This massive “bid” for existing financial assets based on credit confected from thin air drove long-term bond yields to rock bottom levels not seen in 600 years since the Black Plague; and pinned money market costs at zero—-for 73 months running.

What is the consequence of this drastic financial repression along the entire yield curve? The answer is bond prices which keep rising regardless of credit risk, inflation or taxes; and rampant carry trade speculation that can’t get out of its own way because  central banks have made the financial gamblers’ cost of goods—the “funding” cost of their trades—-essentially zero.

No More Monetary Firepower

Of course I am not the only one warning that a new Great Depression is coming.  For instance, just consider what British hedge fund manager Crispin Odey is saying…

British hedge fund manager Crispin Odey thinks we’ve entered an economic downturn that is “likely to be remembered in a hundred years,” and central banks won’t be able to stop it.

In his Odey Asset Management investor letter dated Dec. 31, Odey writes that the shorting opportunity “looks as great as it was in 07/09.”

“My point is that we used all our monetary firepower to avoid the first downturn in 2007-09,” [Kevin Rudd comes to mind!] he writes, “so we are really at a dangerous point to try to counter the effects of a slowing China, falling commodities and EM incomes, and the ultimate First World Effects. This is the heart of the message. If economic activity far from picks up, but falters, then there will be a painful round of debt default.”

Those in the Know

Even though most average citizens are completely oblivious to what is happening, many among the elite are heeding the warning signs and are feverishly getting prepared.  As Robert Johnson told a stunned audience at the World Economic Forum the other day, they are “buying airstrips and farms in places like New Zealand“.  They can see the horrifying storm forming on the horizon and they are preparing to get out while the getting is good.

It can be very frustrating to write about economics, because things in the financial world can take an extended period of time to play out.  Sadly, most people these days have extremely short attention spans.  We live in a world of iPhones, iPads, YouTube videos, Facebook updates and 48 hour news cycles.  People no longer are accustomed to thinking in long-term time frames, and if something does not happen right away we tend to get bored with it.

But the economic world is not like a game of “Angry Birds”.  Rather, it is very much like a game of chess.

And unfortunately for us, checkmate is right around the corner.

What is even more scary than Snyder's analysis, is that he doesn't even mention other indicators of declining economic activity. I can think of three big ones:

Unemployment

A real recovery generates jobs growth. We all know what unemployment is. The true unemployment figures are disastrous, especially in the United States. Even in Australia unemployment is rising.

Velocity of Money

The velocity of money is the frequency with which a single unit of currency or the total money supply turns over within the economy in a given year. This is also called the velocity of circulation. When an economy is recovering or doing well this is going up. However, right now it is declining.

Personal Savings Rate

When economies recover and grow the personal savings rate rises. This reflects a population that does not struggle from pay-check to pay-check, and it indicates an increase in general wealth. Currently, the personal savings rate is going down.

There are many other measures of economic health that can be looked at, for example the poverty rate, the food insecurity index, the income wealth gap, the distribution of property ownership, the bankruptcy rate, the percentage of full time versus casual jobs etc etc. The news on all these other fronts is bad news.

These charts do not lie. We are not living in a post recession recovery economy. The crash is coming.

This Will Be The Year

That it all collapses.

Little printed pieces of paper with dead people on them are not wealth.

The derivatives market the world over is larger than the world’s economy many times over.

Plunge protection teams = rigged markets with a thumb constantly on the scale, able to go up endlessly, but never allowed to go back down, ever.

The markets all consist of computers trading amongst one another, high frequency trading is all that makes up the market, and if they slow down it collapses.

The Federal Reserve is buying the vast majority of all treasuries. Somewhere north of 70% of all treasuries are being purchased by the Fed.

The Federal reserve is a group of privately owned banks, with no reserves, and is not federal.

There isn’t a company on the stock exchange that has a share price reflective of its assets.

Governments around the world have only kept the illusion going though endless money printing, endless quantitative easing, endless operation twist, endless buying of mortgage backed securities. Printing money. Every single time in history that this has been tried has ended in grief.

The flow of billions and billions of money printing props up the banks and US stocks, it does not build infrastructure or stimulate small businesses or assist the needy. It does not even assist anyone other than the top 1%. That is the 1% that owns 50% of the entire wealth of the planet.

Theft and corruption are now legal. There is no legal system left when it comes to HSBC laundering their money through the drug cartels, or MF global and the evaporation of 1.5 billion dollars in segregated client funds, and the list of illegalities by JP Morgan and others reads like a rap sheet. Not a single person from Wall Street as gone to jail since the 2008 financial crisis. Steal $100 and you go to jail for 10 years. Steal $1 billion and you get a bonus and you are "too important to fail".

Theft of assets and gold of foreign nations is now the order of the day, from Libya to Cyprus, to the Ukranian gold, to financial warfare and killing anyone who threatens to leave the system or opt out.

Libor rigging, was just one more example of rigged interest rates world wide in order to keep the financial system propped up a little longer and the illusion going. There is no law in this financial system.

Finally the transfer of all banker debt, all corporate debts world wide onto the backs of nation states. This has turned our once elected governments into nothing more than an extension of corporations, and has made private debt, all of it, public debt, and national debt. This is theft and corruption at it’s highest.

Theft has many new words. "Bail in" means your bank deposits will be stolen. "Necessary inflation" means your cash will be stolen, bit by bit. "Climate levy" means your assets will be taxed in new ways. "Too big to fail" means your taxes will pay for large corporation mistakes, but not for small businesses. "International treaty obligations" means the top 1% use tax havens and trusts and pay no tax. "Austerity" means you and your children pay for government and large corporation debts.

Now once the entire system collapses, it won’t just be banks going under, it won’t just be companies failing, it will be nation states collapsing.

That is why they need hollow point bullets, NSA spying, drones, coffins, guard towers, continuity of government plans, militarized police, and terrorists to give the excuses needed to create it all, catalog it all, and spy on everyone. The state does not fear terrorists. The state fears its own citizens when the house of cards comes down.

The end is near. It has reached a climax. We are now in global financial warfare, which may very well go hot, and has done so in many places and regions. The brick wall so to speak has been reached in Russia which hasn’t allowed a color revolution, and refuses to play if you believe it.

The EU is now printing money. The Swiss just made the decision to exit the game early, and now you will see the rush for the exits as to not be the last one standing at a dead man’s party.

Question is, will people beg for an Icelandic solution, the arrest of those financially responsible, a refusal to pay the debt of failed corporations.

Or will they beg for a Greek solution, the candy and handouts to continue, some government jobs and pensions to be protected, and the auctioning of all monuments, national treasures and assets to be handed over to the banks, and those responsible for the destruction of free people to be rewarded with more wealth.

Every nation is in debt, every state is in debt, every city is in debt, and every person is in debt. It has become a planet of world wide debt.

Those who are going to come in and pretend to save you, do not have the money to do it with, and if you are foolish enough to pretend that they do, then you deserve the slavery you will get.

As I write the 1% fly into Davos in their lear jets to pontificate to the rest of the world. Just watch, everything will be about the average person making sacrifices or changing their expectations or being taxed in new ways. All for the good of the planet 1% of course. No matter what they say the tax havens will stay. The mega corporations will still be above international law.

But even the super rich cannot hold the house of cards together for much longer. Unrestrained greed is about to have global consequences.

Find a cave and lock the door.