Home » Posts tagged 'financial crisis' (Page 19)
Tag Archives: financial crisis
The Next Great European Financial Crisis Has Begun
The Next Great European Financial Crisis Has Begun
The Greek financial system is in the process of totally imploding, and the rest of Europe will soon follow. Neither the Greeks nor the Germans are willing to give in, and that means that there is very little chance that a debt deal is going to happen by the end of June. So that means that we will likely see a major Greek debt default and potentially even a Greek exit from the eurozone. At this point, credit default swaps on Greek debt have risen 456 percent in price since the beginning of this year, and the market has priced in a 75 percent chance that a Greek debt default will happen. Over the past month, the yield on two year Greek bonds has skyrocketed from 20 percent to more than 30 percent, and the Greek stock market has fallen by a total of 13 percent during the last three trading days alone. This is what a financial collapse looks like, and if Greece does leave the euro, we are going to see this kind of carnage happen all over Europe.
Officials over in Europe are now openly speaking of the need to prepare for a “state of emergency” now that negotiations have totally collapsed. At one time, it would have been unthinkable for Greece to leave the euro, but now it appears that this is precisely what will happen unless a miracle happens…
Greece is heading for a state of emergency and an exit from the euro following the collapse of talks to agree a bailout deal, senior EU officials warned last night.
Europe must be prepared to step in otherwise Greek society would face an unprecedented crisis with power blackouts, medicine shortages and no money to pay for police, they said.
…click on the above link to read the rest of the article…
Manufacturing in Canada Sags, Triggers Chilling References to Financial Crisis
Manufacturing in Canada Sags, Triggers Chilling References to Financial Crisis
It’s also happening in the US, but it’s much worse in Canada.
In the US, May industrial production dropped “unexpectedly,” as it was roundly called on Monday, by 0.2%, according to the Federal Reserve. The index value has now dropped from month to month since December, except in March when it was unchanged. The Empire State Manufacturing Survey, also released on Monday, confirmed this sort of scenario, ending up in the negative (-2.0) for the second time in three months.
But in Canada, manufacturing is getting hit hard – and not just because of the oil bust, though it plays a big role. Originally the hope was that a lower Canadian dollar would boost manufacturing through increased exports. The loonie dropped 17% against the US dollar from January 2014 through mid-March 2015, though it has ticked up a smidgen since. But the theory didn’t work out.
Manufacturing sales fell 2.1% to C$49.8 billion in April, seasonally and inflation adjusted, Statistics Canada reported today. The index can be jumpy from month to month. For example, sales of food dropped 5.7% in April, the largest monthly drop since August 2013, after rising 3.4% in March. But the problem isn’t limited to one month. Sales are now down 7.3% from July 2014, the largest and steepest such decline since the Financial Crisis. This is what this trend looks like:
The biggest culprits in April were food (-5.7%), aerospace products and parts (-17.8%), petroleum and coal products (-2.7%), motor vehicles (-2.5%), and machinery (-2.7%). Of note, sales of machinery for the mining and oil & gas sectors plunged 30% year over year.
…click on the above link to read the rest of the article…
The One Bank, Revisited
The One Bank, Revisited
Approximately two years ago; a commentary was published entitled “The One Bank”. The empirical foundation for the article (and the paradigm) was an extensive computer model, produced by a trio of academics at a university in Switzerland, and originally reviewed in an article from Forbes.
The gist of the computer modeling was that a single “super-entity”, by itself, controlled roughly 40% of the global economy. The term “super-entity” is simply a synonym for monopoly. The research further stipulated that ¾ of the 140+ (gigantic) corporate fronts which comprised this mega-monopoly were financial intermediaries (i.e. banks), hence the title, The One Bank.
The research names “names”. Goldman Sachs, JPMorgan, Bank of America, Morgan Stanley, Citigroup, Deutsche Bank, Barclays, Credit Suisse, UBS, Merrill Lynch, Bear Stearns, and Lehman Brothers are among the Big Banks listed as being tentacles of this enormous, financial crime syndicate. Note that the latter names on that list are deceased, (supposed) “casualties” of the Crash of ’08. But with all of these financial tentacles part of a single whole; this proves that the bail-outs which came after that event, and even the crash itself were pure fraud.
All of these financial losses were internal: one tentacle of the crime syndicate (supposedly) “losing money” to another tentacle of the same entity, meaning they were just phony, paper-losses which never really existed. The tentacle on the receiving end of the “losses” was enriched by that amount, meanwhile the tentacle on the losing end was indemnified via (fraudulent) taxpayer-funded “bail-outs”. Heads I win; tails you lose.
…click on the above link to read the rest of the article…
Gold Verses Fractional Reserves Part 2
Gold Verses Fractional Reserves Part 2
The Harmful Consequences
We have now to examine the harm that the system does whether or not the pressure to reduce the reserve requirements is continuously successful.
Let us begin with a situation in, say, Ruritania, which has a fractional-reserve gold standard and a central bank, but in which business activity has not been fully satisfactory. The central bank then either lowers the discount rate or creates more member-bank reserves by buying government securities or it does both. As a result, business is encouraged to increase its borrowing and to launch on new enterprises, and the banks are now able to extend the new credit demanded.
As a consequence of the increased supply of money and credit, prices in Ruritania rise, and so do employment and money incomes. As a further result, Ruritanians buy more goods from abroad. As another result, Ruritania becomes a better place to sell to and a poorer place to buy from. It therefore develops an adverse balance of trade or payments. If neighboring countries are also on a gold basis, and inflating less than Ruritania, the exchange rate for the rurita declines, and Ruritania is obliged to export more gold. This reduces its reserves and forces it to contract its currency and credit. More immediately, it obliges Ruritania to increase its interest rates to attract funds instead of losing them. But this rise in interest rates makes many projects unprofitable that previously looked profitable, shrinks the volume of credit, lowers demand and prices, and brings on a recession or a financial crisis.
If neighboring countries are also inflating, or expanding the volume of their money and credit at as fast a rate, a crisis in Ruritania may be postponed; but the crisis and the necessary readjustment are all the more violent when they finally occur.
…click on the above link to read the rest of the article…
Global Trade Dives Most since the Financial Crisis
Global Trade Dives Most since the Financial Crisis
How great was the global economy in the first quarter?
We know the US economy was crummy. The revised GDP estimate will likely sink into red mire. Hence the heated proposals these days, including at the Fed, to apply “a second round of seasonal adjustment” that would “correct” the first-quarter GDP estimate, no matter how bad, into positive territory. An elegant way of covering up an unsightly sore.
So was it just a crummy quarter in the US, or was it a global thing, in which case we might have to apply a “second round of” whatever to adjust the global downturn out of the picture?
Because here is the thing: in the first quarter, one of the crucial measures of the global economy – global trade – slumped the most since the Financial Crisis. But ironically, it wasn’t because of the USA.
The CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs, just released its latest Merchandise World Trade Monitor, which covers global import volumes as well as global export volumes. The index dropped 0.1% in March to 136.5, after having already dropped 0.7% in February, and 1.7% in January. The index, which was set at 100 in 2005, is now down 2.5% from the peak of 140.0 in December. That 3.5-point decline was the sharpest since the Financial Crisis.
This chart, going back to January 2012, doesn’t exactly inspire confidence in the current state of the global economy:
To mitigate the volatility of these kinds of monthly numbers, the CPB offers a measure of trade volume “momentum,” which it defines as “the change in the three months average up to the report month relative to the average of the preceding three months.”
…click on the above link to read the rest of the article…
Economic inequality: 10 reasons why we can’t beat it
Even the OECD says inequality is bad. But making it go away is much tougher
It almost feels like an old story. Ever since the economy crashed in 2008 a growing chorus of voices has warned that inequality was wiping out the middle class and damaging society.
This week the Organization for Economic Co-operation and Development, the rich countries` think-tank, made headlines for declaring that growing inequality is not only bad for social cohesion, but is actually cutting points off economic growth.
- Precarious jobs holding back young workers, OECD finds
- Canadian cities unlikely to mimic L.A. on minimum wage
If we all agree, why is it such an intractable problem? The story is complex, but here are just a few reasons why inequality is so hard to fix.
1. Equality where?
While inequality within rich countries has been getting worse, many point out that global inequality has been shrinking.
Countries like the U.S. and Canada used to consume a majority of the world’s wealth. As the rich and middle class in places like China and India get a bigger piece of the action, some argue that morally, increasing global equality outweighs a relative decline in wealth by some people in the rich world.
2. Free trade and globalization
The push to create open trade between countries means that the low- and unskilled workers of rich countries are increasingly competing directly with workers in China, Bangladesh, Vietnam and India. Even within North America, industrial jobs often move to where wages are lowest, meaning middle class industrial jobs disappear.
3. Automation
Even in developing countries, manufacturers are replacing jobs withrobots and automation. Here in North America, computerized processes are already taking jobs done by factory workers, clerical workers and even professionals as clever software learns to search legal titles and write simple news stories.
…click on the above link to read the rest of the article…
Seven Things You Need to Know About Inequality
Seven Things You Need to Know About Inequality
The gap between rich and poor is growing, but there are solutions, says The Tyee’s author of ‘A Better Place on Earth.
In recent weeks I’ve had the chance to talk at launches in Victoria and Vancouver about economic inequality and my bestselling book A Better Place on Earth: The Search for Fairness in Super Unequal British Columbia.
There’s been attention from Global News, the Vancouver Sun, CBC radio, CKNW and other media outlets. B.C. Booklook said I should be gagged for spreading “malicious truths.”
Following are seven key facts I think you should know about the growing gap between rich and poor in B.C. and elsewhere:
1. Inequality has been rising for three decades: Anyone in a city in British Columbia is well aware that while some people have wealth counted in the billions of dollars, others sleep in doorways and eat from food banks. What we know from experience is borne out by statistics, which show that inequality has grown in Canada, like in much of the economically developed world, since the 1980s. In B.C. the gap has grown even faster, with inequality spiking from below the Canadian average to well above it in the early 2000s. The top 10 per cent now hold 56.2 per cent of the wealth in the province, the biggest share anywhere in Canada.
2. High inequality has many consequences: Research from around the world shows that greater inequality is associated with all kinds of negatives, including worse health outcomes, poorer education, more teen pregnancy, greater substance abuse, higher rates of mental illness and higher levels of incarceration. It is also linked to reduced opportunity, where children are likely to be stuck in the same income bracket as their parents. Inequality makes economies weaker, since many people in the bottom and middle tiers lack buying power. It is frequently cited by economists as a key reason why the recovery from the 2008 financial crisis has been so lacklustre. We’re all affected.
…click on the above link to read the rest of the article…
The Debt To GDP Ratio For The Entire World: 286 Percent
The Debt To GDP Ratio For The Entire World: 286 Percent
Did you know that there is more than $28,000 of debt for every man, woman and child on the entire planet? And since close to 3 billion of those people survive on less than 2 dollars a day, your share of that debt is going to be much larger than that. If we tookeverything that the global economy produced this year and everything that the global economy produced next year and used it to pay all of this debt, it still would not be enough. According to a recent report put out by the McKinsey Global Institute entitled “Debt and (not much) deleveraging“, the total amount of debt on our planet has grown from 142 trillion dollars at the end of 2007 to 199 trillion dollars today. This is the largest mountain of debt in the history of the world, and those numbers mean that we are in substantially worse condition than we were just prior to the last financial crisis.
When it comes to debt, a lot of fingers get pointed at the United States, and rightly so. Just prior to the last recession, the U.S. national debt was sitting at about 9 trillion dollars. Today, it has crossed the 18 trillion dollar mark. But of course the U.S. is not the only one that is guilty. In fact, the McKinsey Global Institute says that debt levels have grown in all major economies since 2007. The following is an excerpt from the report…
Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points (Exhibit 1). That poses new risks to financial stability and may undermine global economic growth.
…click on the above link to read the rest of the article…
A Tale Of Two Graphs——Why Bubble Finance Will Fail
A Tale Of Two Graphs——Why Bubble Finance Will Fail
On Friday the BLS reported, among other things, that full-time employment in April had dropped by 252,000 from the prior month and that the weekly earnings of production workers had risen by the grand sum of 67 cents (0.1%) before inflation and taxes. But why should still another confirmation that the main street job market is dead in the water stop the robo-traders from another romp higher?
In fact, this incongruous spectacle of dead wages and soaring financial assets has been going on for several decades now——a transparently obvious trend obfuscated by the unrelenting recency bias of the MSM and the authorized Wall Street/Washington narrative. So let Friday’s incongruous stock market rip serve as a portal into the ugly interior history of how central bank bubble finance has fostered an existential crisis in what remains of American capitalism.
On the main street side, this isn’t a matter of sluggish recovery from a mysterious financial crisis that arrived, apparently, on a comet from deep space in September 2008. Alas, for three decades running now, the constant dollar weekly wages of full-time workers have been flat as a pancake.
And let’s be clear. We are not talking here about after school jobs held by quasi-perpetual students, the meager pay of moonlighting moms or the episodic work gigs of society’s tens of million of loosely attached drifters.
…click on the above link to read the rest of the article…
There Is No Solution To The Crisis
There Is No Solution To The Crisis
A long, long time ago…
it was the 16 September 1992, Black Wednesday, when the British Government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism(ERM) after it was unable to keep the pound above its agreed lower limit in the ERM. A certain Mr.Soros, made over £1 billion profit by short selling sterling while costing the Treasury £27billion of foreign currency reserves trying to prop up the Pound and a tidy £3.4 billion loss.
Fast forward to now and one of the upshots of the 2008 crisis was that central banks eunuchized the commercial banks through Dodd Frank and other such regulations, for such embarrassing situations could never be repeated for a central bank. So they took full control without impunity.
Now initially I believe that it was with good intent. Too big to fail was something unacceptable. That governments should not have to foot the bill for the ineptitude of banks and hedge funds who invested in other funds because they had a good “name” (a nice name with words in them like “enhanced” or “high”, not because they were of reputable background),without the faintest idea of what they were investing in was indeed a joke.
And it could be argued that the Fed and ECB were correct in hiding all the problems from the general population. The idea being that the economy is entirely built on sentiment.
Tell people every day that things are OK, fudge economic numbers and plaster over the cracks in the hope that eventually it will all rectify itself, then people will actually start believing ,spending and therefore improving the economy and that the debt can be repaid via tax receipts.
…click on the above link to read the rest of the article…
For Heaven’s Sake: Hedge!
For Heaven’s Sake: Hedge!
Q: How do you make a small fortune on Wall Street?
A: Start with a large fortune.
~ old investing adage
Last fall, I wrote an article titled Defying Gravity that warned of the absurd price levels that stocks and bonds had risen to.
The piece first looked at the unbroken multi-year march upward in prices through the myriad money-printing cycles of the world’s central banks, as well as the near-extinction of bearish investors on Wall Street — which it then contrasted with the vast gap between valuations and the underlying weak economic data, deteriorating chart technicals, and evidence that the “smart money” was exiting the market. The takeaway? Prudence strongly recommended moving to cash and hedging one’s open market positions.
Less than a month later, the stock market abruptly dropped by 7%. Those who didn’t seek safety in advance were left licking their wounds, panicked not knowing if the painful down-draft was over.
Fortunately for them, the Federal Reserve jawboned it’s willingness to step in further if needed, the ECB announced a trillion-Euro stimulus program, the Bank of Japan waded into domestic and foreign markets as a buyer of last resort, and China’s central bank continued its staggering balance sheet expansion. Collectively, this put a floor on the markets, which soon climbed back to record highs.
Where We Are Now
So here we are roughly six months later, and the same warning bells are ringing — just louder this time.
Yes, stocks recovered from their brief October swoon, and yes, they are at — or very close to — their all-time highs. Indeed, everything is so awesome that investor sentiment has never been more positive. If you worry that having too many people on the same side of the boat is a sign of complacency and over-confidence, the following chart should frighten you:
…click on the above link to read the rest of the article…
The Financial Markets Now Control Everything
The Financial Markets Now Control Everything
The entire economic and political structure is now dependent in one way or another on the continued expansion of financial markets.
The financial markets don’t just dominate the economy–they now control everything. In 1999, the BBC broadcast a 4-part documentary by Adam Curtis, The Mayfair Set ( Episode 1: “Who Pays Wins” 58 minutes), that explored the way financial markets have come to dominate not just the economy but the political process and society.
In effect, politicians now look to the markets for policy guidance, and any market turbulence now causes governments to quickly amend their policies to “rescue” the all-important markets from instability.
This is a global trend that has gathered momentum since the program was broadcast in 1999, as The Global Financial Meltdown of 2008-09 greatly reinforced the dominance of markets.
It’s not just banks that have become too big to fail; the markets themselves are now too influential and big to fail.
Curtis focuses considerable attention on the way in which seemingly “good” financial entities such as pension funds actively enabled the “bad” corporate raiders of the 1980s by purchasing the high-yield junk bonds the raiders used to finance their asset-stripping ventures.
This increasing dependence of “good” entities on players making risky bets and manipulating markets has created perverse incentives to keep the financial bubble-blowing going with government backstops and changing the rules to mask systemic leverage and risk.
The government must prop up markets, not just to insure the cash keeps flowing into political campaign coffers, but to save pension funds and the “wealth effect” that is now the sole driver of “growth” (expanding consumption) other than debt.
…click on the above link to read the rest of the article…
11 Signs That We Are Entering The Next Phase Of The Global Economic Crisis
11 Signs That We Are Entering The Next Phase Of The Global Economic Crisis
Well, the Nasdaq finally did it. It has climbed all the way back to where it was at the peak of the dotcom bubble. Back in March 2000, the Nasdaq set an all-time record high of 5,048.62. On Thursday, after all these years, that all-time record was finally eclipsed. The Nasdaq closed at 5056.06, and Wall Street greatly rejoiced. So if you invested in the Nasdaq at the peak of the dotcom bubble, you are just finally breaking even 15 years later. Unfortunately, the truth is that stocks have not been soaring because the U.S. economy is fundamentally strong. Just like the last two times, what we are witnessing is an irrational financial bubble. Sometimes these irrational bubbles can last for a surprisingly long time, but in the end they always burst. And even now there are signs of economic trouble bubbling to the surface all around us. The following are 11 signs that we are entering the next phase of the global economic crisis…
#1 It is being projected that half of all fracking companies in the United States will be “dead or sold” by the end of this year.
#2 The rig count just continues to fall as the U.S. oil industry implodes. Incredibly, the number of rigs in operation in the United States has fallen for 19 weeks in a row.
#3 McDonald’s has announced that it will be closing 700 “poor performing” restaurants in 2015. Why would McDonald’s be doing this if the economy was actually getting better?
#4 As I wrote about the other day, we could be right on the verge of a Greek debt default. In fact, we learned on Thursday that the Greek government has been “running on empty” for months…
…click on the above link to read the rest of the article…
Guess What Happened The Last Time Bond Yields Crashed Like This?…
Guess What Happened The Last Time Bond Yields Crashed Like This?…
If a major financial crisis was approaching, we would expect to see the “smart money” getting out of stocks and pouring into government bonds that are traditionally considered to be “safe” during a crisis. This is called a “flight to safety” or a “flight to quality“. In the past, when there has been a “flight to quality” we have seen yields for German government bonds and U.S. government bonds go way down. As you will see below, this is exactly what we witnessed during the financial crisis of 2008. U.S. and German bond yields plummeted as money from the stock market was dumped into bonds at a staggering pace. Well, it is starting to happen again. In recent months we have seen U.S. and German bond yields begin to plummet as the “smart money” moves out of the stock market. So is this another sign that we are on the precipice of a significant financial panic?
Back in 2008, German bonds actually began to plunge well before U.S. bonds did. Does that mean that European money is “smarter” than U.S. money? That would certainly be a very interesting theory to explore. As you can see from the chart below, the yield on 10 year German bonds started to fall significantly during the summer of 2008 – several months before the stock market crash in the fall…
So what are German bonds doing today?
As you can see from this next chart, the yield on 10 year German bonds has been steadily falling since the beginning of last year. At this point, the yield on 10 year German bonds is just barely above zero…
…click on the above link to read the rest of the article…
Money from Heaven, Path to Hell
Money from Heaven, Path to Hell
What the Fed is going on?!
The free-flowing money from the Fed appears to be “Money from heaven” at this point. And in some ways it absolutely is – but only if you take advantage of it personally and decide to protect yourself by locking in these “artificial” gains you’ve been given. Because this “Money from heaven” will undoubtedly become a “Path to hell.”
But it doesn’t have to. Why take unnecessary risks? “Paper gains” aren’t profits until they are realized. Millions of people are rudely reminded of this every time the stock market takes a dump. And if you’re forced to sell due to a myriad of reasons such as Required Minimum Distributions, margin calls, basic income needs, college tuition, emergencies, debt balloon payments, etc. – that’s precisely when “paper losses” suddenly become actual losses.
I know, I know, you might say, “No problem, I just won’t sell then. I’ll wait for it to come back.”
“It will come back” is not an investment strategy! It’s financial disaster. Especially as it pertains to the stock market and mutual funds, which historically have taken far longer to recover losses than in most other non-correlated investment strategies. Sorry to be the bearer of bad news: if you wait until the stock market drops, you’ve already lost. You’ll either lose by selling or lose by not selling and waiting. It’s a lose-lose proposition.
We might be tempted to rewrite the recent past as ancient history. The folks who had the majority of their money in mutual funds when they retired or were planning to retire around 2001 or 2008? Instead of taking profits when they could have and then continuing their growth in other non-correlated investments, they have spent all those years just trying to dig and claw their way out of the hole, hoping to get back to even. But “hope” is not an investment strategy either!
…click on the above link to read the rest of the article…
