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Jim Rickards Warns that Tsunami of Debt Could Upend the Economy
Jim Rickards Warns that Tsunami of Debt Could Upend the Economy
At some point, an economic problem deepens so much that the piper has to be paid. Both in the U.S. and globally, one of those problems appears to be mountains of debt.
Jim Rickards recently issued a dire proclamation about the global debt situation:
Current global debt levels are simply not sustainable. Debt actually is sustainable if the debt is used for projects with positive returns and if the economy supporting the debt is growing faster than the debt itself. But neither of those conditions applies today.
In other words, most of the global debt we’re racking up isn’t being used for productive purposes. Instead it’s being used to service “benefits, interest and discretionary spending,” according to Rickards.
This debt growth should continue. According to the Institute of International Finance (IIF), global debt is expected to pass $255 trillion by the end of this year, and they don’t see the pace of debt accumulation slowing down.
In fact, you can see below how the official global debt has already skyrocketed from about $80 trillion in 1999 to this new record:
Zero Hedge reports that, by year’s end, the global debt will be “roughly equivalent to a record 330% of global GDP.”
With debt outpacing growth by such a large margin, we are fast approaching a day of reckoning. And when that day arrives, it could be disastrous.
Rickards: “It’s a Catastrophic Global Debt Crisis Waiting to Happen”
Another Zero Hedge artjcle reports:
The world bank looked at the four major episodes of debt increases that have occurred in more than 100 countries since 1970 — the Latin American debt crisis of the 1980s, the Asian financial crisis of the late 1990s and the global financial crisis from 2007 to 2009.
…click on the above link to read the rest of the article…
The Masses Are Being Conditioned to Ignore the Economic Bubble
The Masses Are Being Conditioned to Ignore the Economic Bubble
In the second week of October, after the “partial” U.S.-China trade deal was announced to much fanfare, I made this prediction:
US and Chinese officials rarely waste an opportunity to use trade talk headlines to head-fake markets with false hope. Rumors of a “partial” or tentative trade deal are circulating today, with MORE trade talks in a month or two. In other words, “more trade talks” means there is no deal of any substance and there’s plenty of time for the whole thing to fall apart once again. I give it less than a month. In the meantime, there will be plenty of other distractions for the general public, including the impeachment circus, tariffs against Europe, tensions in Syria, the Brexit mess, etc, etc.
My estimate was incorrect; it took a little over one month for the whole thing to fall apart. That said, I think the primary point remains the same. The trade war is not going to end anytime soon and there is a very good reason why this is the case: It serves the globalist agenda as a perfect distraction for the collapse of the “Everything Bubble” and the launch of the global economic reset into a what the elites call a “new world order”.
But let’s go back for a moment to understand what just happened. A month ago, the trade deal was treated as essentially done. China had partially folded on most of Trump’s demands and Trump was going to pull off a major economic victory just in time for the 2020 election season. The Dow was going to rocket past 30,000 and Trump’s second term was now assured. This was the narrative in the majority of the alternative media, and I have to say, it is sad to see so many otherwise intelligent analysts make such a huge blunder.
…click on the above link to read the rest of the article…
The Economic Crash So Far: A Look At The Real Numbers
The Economic Crash So Far: A Look At The Real Numbers
There are many problems when attempting to track a faltering economy. For one, the people in government generally do not want the public to know when the system is in decline because this looks bad for them. They prefer to rig statistical indicators as much as possible and hope that no one notices. When the crash occurs, they then claim that “no one saw it coming” and the disaster “came out of nowhere”, so how could they be to blame?
I have even heard it argued that political leaders, including the president, have a “duty” to lie about the state of the economy because once they admit to the decline they will cause a panic and perpetuate the crisis. This is stupidity. If an economic system is in disrepair and is built on a faulty foundation, then the problems should be identified and fixed immediately. The weak businesses should be culled, not bailed out. The wasteful government spending should be cut, not increased. The downturn should not be hidden and prolonged for years or decades. In most cases, this only makes the inevitable crash far worse and more damaging.
Another factor, which some people might call “conspiracy theory” – but it has been proven time and time again in history – is that the money elites have a tendency to engineer economic disasters while deliberately hiding the real statistics from the public. Why? Well, if the real data was widely disseminated, then a crash would not be much of a surprise and the populace could be prepared for it. I suspect the elites hide the data because they WANT the crash to be a surprise. The bigger the shock, the bigger the psychological effect on the masses. This fear and confusion allows them to make changes in the power structure of a nation or of the entire world that they would not be able to accomplish otherwise.
…click on the above link to read the rest of the article…
Central Bank Hints at a “Big Reset” and Reveals a Possible Solution
Central Bank Hints at a “Big Reset” and Reveals a Possible Solution
It’s not every day you hear a major financial institution hint at the possibility of the entire economic system collapsing.
The reason major financial institutions (and the mainstream financial media) shy away from a negative outlook on the economy is out of fear of triggering a kind of “self-fulfilling prophecy.” People stampeding to sell stocks and pull money out of banks could cause a vicious cycle of declines and losses.
And so these institutions tend to be positive, no matter what is really happening. But if a hungry bear is standing behind you in the woods, do you want to be “optimistic” and hope it isn’t there?
Maybe reality has finally started to sink in. Zero Hedge captured the stark state of the “system” by quoting an article from the Dutch Central Bank:
An article published by the De Nederlandsche Bank (DNB), or Dutch Central Bank, has shocked many with its claim that “if the system collapses, the gold stock can serve as a basis to build it up again. Gold bolsters confidence in the stability of the central bank’s balance sheet and creates a sense of security.”
After a part of the international banking system states the words “if the system collapses”, the obvious question to ask is:
Do they think the system will actually collapse?
Of course, it’s hard to tell exactly what will happen, and when.
That said, the DNB is moving about 31% of their gold to a military facility. They stated, “The Dutch central bank is moving part of the national gold reserves to a temporary home in Haarlem ahead of a permanent move to the new DNB Cash Centre at military premises in Zeist.”
…click on the above link to read the rest of the article…
Here’s How the New U.S.-China Trade Talks May End
Here’s How the New U.S.-China Trade Talks May End
With the U.S. and China in the midst of a new round of high level trade talks, this Thursday marks 22 months since tariffs were launched and the trade war began. Far from being “easy to win”, the trade war has lasted far longer than most analysts in the mainstream and alternative media predicted. In past articles, I have warned that the trade war itself is probably not meant to be won at all; rather, it is a massive distraction and a convenient scapegoat as global banks set the implosion of the Everything Bubble in motion. I continue to stand by this assessment, which is why I think it is unlikely that the current talks with China will accomplish much of anything.
This conclusion runs in stark contrast to all the hype we heard in the investment community in September. The way stock markets levitated, one would have thought a deal was assured. Never underestimate the power of blind optimism, I suppose. I believe there are a very limited number of end games to the meeting, none of which will result in an actual “deal”. However, it’s important to understand the dynamics at play here.
First and foremost, if we are to approach the trade war from a mere surface examination, there is really no incentive for China to capitulate to Trump’s demands. There is only one year left until the 2020 elections, and while BOTH economies are certainly seeing a downward plunge, China is hardly crippled by tariffs on exports to the U.S. China can simply bide its time, waiting to see how the U.S. election unfolds. The more unstable the U.S. economy is in 2020, the less likely it will be that Trump will win a second term.
…click on the above link to read the rest of the article…
Gold Prices Will Keep Rising Because Crash Conditions Are Becoming Obvious
Gold Prices Will Keep Rising Because Crash Conditions Are Becoming Obvious
The price movements of precious metals are difficult for some people to understand. In the world of equities, investors are mesmerized by tickers day in and day out, and market movements occur minute by minute. This realm of investment teaches people to shorten their memories, their attention spans and their patience. In the world of gold and silver, however, investors buy and sell according to cycles that last years – oftentimes decades. It is the complete antithesis to stocks.
This is why gold catches a lot of ignorant criticism at times. The “barbaric relic” does not behave the way day traders want it to behave. It sleeps, they ignore it or laugh at it, and then it explodes. It is not surprising that your average stock market player is usually caught completely off guard when an economic crisis hits Main Street, while the average gold investor already saw the event coming many months in advance. The gold mentality lends itself to caution, observation and historical relevance. The stock market mentality lends itself to carelessness and the denial of history.
I would acknowledge here that there is plenty of evidence of paper market manipulation of gold and silver to the downside by major banks like JP Morgan. Any investor in metals should take this into account. However, it is also important to realize that in moments of economic uncertainty, the physical market can and does overtake paper manipulation, and prices rise anyway. This is exactly what happened in the lead up to the 2008 crash, and it’s happening again today.
…click on the above link to read the rest of the article…
Wealth Bubble Leaves U.S. Economy in Uncharted Territory
Wealth Bubble Leaves U.S. Economy in Uncharted Territory
There have been numerous signs that the U.S. is likely to go through another major recession at some point. And regardless of when or if a recession happens, it won’t change the fact that the U.S. economy is already in hot water.
At MarketWatch, the “hot water” is explained in terms of a U.S. “wealth bubble” that reveals a peculiar pattern:
Today the United States sits in the midst of the largest wealth bubble in post-World War II history, as measured by household net worth (or wealth) relative to gross domestic product. As I showed in detail recently in the Journal of Business Economics, only two other postwar bubbles come close, with peaks in 1999 and 2006, just prior to the tech stock crash and the Great Recession.
The largest wealth bubble (household net worth relative to GDP) is shown in a chart from the same article. (Shaded areas are recessions):
As you can see at the bottom, the wealth bubble is “5 times the size” of the GDP.
But notice how the wealth bubble “pops” just before the 2000 and 2008 recessions. If you look at the end of the blue line, it appears the largest wealth bubble since World War II may already be popping.
Also notice how the green line dips before the 2000 tech stock “recession,” and the red line before the 2008 recession (caused mainly by subprime mortgages).
But according to the MarketWatch report, there’s another crucial detail to point out:
In both prior bubbles, the crashes led to a drop in the value of net worth to about 4 times GDP. Even that level remained high relative to prior history, since in no single quarter before 1998 had the household net worth-to-GDP ratio ever reached 4.0 or higher.
With that being said, according to the chart above:
…click on the above link to read the rest of the article…
Imminent Recession Risk “Doubled” – 3 Signals Sounding the Alarm
Imminent Recession Risk “Doubled” – 3 Signals Sounding the Alarm
It’s been more than 10 years since the last economic recession. Since the U.S. economy generally operates in cycles, it looks like the time is drawing near for another.
In fact, late last year the Dow Jones took a dive, but that was likely just an appetizer for the course to come…
A recent piece from Bloomberg reported the risk of a recession has “more than doubled this year as leading economic indicators deteriorate, the yield curve inverts and monetary policy tightens,” referencing a note by Guggenheim Partners.
And, according to CIO Scott Minerd, it appears the next recession could last longer than the previous one (emphasis ours):
The next recession will not be as severe as the last one, but it could be more prolonged than usual because policymakers at home and abroad have limited tools to fight the downturn…
Guggenheim oversees $200 billion as an investment banking firm. They issued this dire warning along with major concerns about corporate debt, a severe stock market drop, and uncertainty about the Fed.
Debt, Yield Curve Inversion & QE Signaling Recession Risk
We’ve previously reported that U.S. National, corporate, and consumer debt are at all-time highs. This dangerous “debt trifecta” has even gotten the attention of several billionaires.
Rising national debt currently tops $22 trillion. Corporate debt topped $6 trillion at the end of 2018. And the “ATM” of consumer debt has hit $4 trillion. Americans are tapped out. Combined together, this signal alone should sound recession alarms.
But this is just one of multiple major warning signs…
The yield curve is dangerously close to inverting at only 16 basis points between 2- and 10-year treasuries. What’s even more troubling is yield curve inversion has preceded every major recession over the last 50 years.
…click on the above link to read the rest of the article…
Why Dollar Dominance Drops to Lowest Mark Since 2013
Why Dollar Dominance Drops to Lowest Mark Since 2013
According to the IMF, the U.S. dollar is known as the “Global Reserve Currency”. There are a number of reasons for this, but mainly because it’s backed by the U.S. economy.
That economy is fraught with uncertainty at the moment. But that isn’t the only issue plaguing the U.S. dollar’s dominance in the global markets.
Wolf Richter writes that the U.S. dollar’s status as reserve currency is dipping to levels not seen since 2013:
But the amount of USD-denominated exchange reserves ticked down to $6.62 trillion, and the dollar’s share of global foreign exchanges reserves dropped to 61.7%, the lowest since 2013.
This is not good. Last year, pressure on the dollar as global reserve currency was threatened by both Russia and China in “petro-currency” wars. Even smaller countries were attempting to apply pressure on the dollar, including Germany.
As you can see from the chart below, the U.S. dollar may have been slowly losing steam since 2001 with the arrival of the euro (source):
But perhaps more alarming is the dollar seems to be slipping down towards 1991 levels, where according to the same chart, it accounted for only 46% of the global reserve.
If the dollar keeps dropping, that could severely impact purchasing power and, under current market tensions, possibly drive inflation out of control.
The Dollar’s “Doldrums” Could Trigger Even More Uncertainty
The Balance explained in a recent article how a decline in the U.S. dollar typically happens:
The U.S. dollar declines when the dollar’s value is lower compared to other currencies in the foreign exchange market. It means the dollar index falls.
But the dollar index (DXY) isn’t declining, at least for the moment. It has remained fairly steady since June 2018 after recovering from a loss of over 4% in January.
…click on the above link to read the rest of the article…
The Reasons Behind The Relentless Ideological Onslaught Against Free Markets
The Reasons Behind The Relentless Ideological Onslaught Against Free Markets
I sometimes think that the free market concept is treated like The Hunchback of Notre-Dame’s Quasimodo in the long novel of global economic history. It is considered ugly and undesirable by most people who judge it at a mere glance without bothering to understand it. It is a bogeyman; a scapegoat for numerous societal problems that it has nothing to do with. In reality, the only time free markets do cause trouble is when they are manipulated or misused by elitists seeking to turn them into something other than free markets. And, even when free markets display their great value and internal beauty, many still prefer other systems that are intrinsically corrupt but flashier on the surface.
There are many reasons behind this persistent attitude. However, they are not coincidental or natural. Human beings actually tend to gravitate toward free markets over and over again in history, and away from centralized government interference and dominance in economic trade. But whenever they do, they get hammered down by the-powers-that-be. In our modern era, establishment elites have chosen to be more subtle (for now) and dissuade people from free markets through disinformation and propaganda.
To break it all down to a simple observation – Whenever disaster strikes economically, free markets are blamed. Whenever something is fixed, even if that fix is a temporary band-aid on a sucking chest wound, government involvement and socialism are applauded. And so the cycle continues until free markets become a pariah with no place in our world and centralization becomes the prevailing answer to everything.
Free market trade is ever present at a local level and always has been. But, those who favor globalism are hell-bent on putting an end to any and all private unregulated commerce forever.
…click on the above link to read the rest of the article…
Hyperinflation History May Provide Valuable Lessons for Fed’s “Target”
From Birch Gold Group
Hyperinflation History May Provide Valuable Lessons for Fed’s “Target”
In April of 1980 inflation peaked at a staggering 14.76%. That same year, the Fed triggered a rise in interest rates to near 20% around the same time, employing the controversial “Volcker Rule.”
Paul Solman explained in a 2009 PBS Newshour:
If by “interest rates” you mean the rate set by the Fed — the Fed funds rate — it rose to TWENTY PERCENT in 1980. But no, it was not inaction but just the opposite: a deliberate rise in rates triggered by inflation.
And as you can see in the chart below, the 1980s also represented the 3rd highest average inflation percentage in a decade since 1913:
So inflation rose dramatically, and the Fed employed a dramatic strategy, hiking rates through the roof.
But as you look at the same chart, it’s also clear three other decades had severe inflationary periods as well. Each time that happens in the U.S. the dollar loses buying power quickly as prices for food, energy, and fuel go through the roof.
Serious hyperinflation can happen relatively quickly. Venezuela is a recent example, where it only took about 5 yearsfor the local bolivar to lose 90% of its value. Inflation soared to a ridiculous 1.37 million percent.
We also have historic examples of severe hyperinflation. From 1921-1923 the Weimar Republic of Germany suffered massive inflation. Sovereign Man highlighted, “a single egg at the market would cost millions of marks” during this economic upheaval.
Oddly enough, Germany’s hyperinflation came not too long after a decision to print money became standard policy. (Sound familiar?)
Zimbabwe also had a period of massive war-based hyperinflation in 2008-09 after printing money and devaluing its currency.
These hyperinflation horror stories beg the question, will the Fed’s “target” of 2-3% inflation per year be effective?
…click on the above link to read the rest of the article…
Corporate Share Buybacks Increasing at Alarming Rate… Again
Photo by Mike Kalasnik | CC BY | Photoshopped from original
Corporate Share Buybacks Increasing at Alarming Rate…Again
Corporations have been using buybacks to “rob Peter to pay Paul” since the Reagan administration created laws that allow it.
According to a Goldman Sachs chart, 2018 was a record year for buybacks, which neared $800 billion for S&P 500 companies alone:
Even though these companies bought back shares, which should have spurred investment in more companies, that didn’t keep the S&P from dropping 6 percent by the end of 2018. But corporations are still getting a benefit…
“Buyback Monsters” Perform Market Illusion
This “sleight of hand” illusion allowed Apple to increase their market cap by $118 billion in 2018 on news that it would complete share buybacks in the amount of $210 billion.
They used tax incentives along with other forms of capital to complete the buyback. This move only helped Apple’s economy and their shareholders.
But they’re not the only company that has pulled off this amazing magical feat. Home Depot and “nearly 80 others”are also dipping into the “buyback gravy train.”
Home Depot is in a class of corporations I call “buyback monsters,” companies that have reduced their share count outstanding by at least 25 percent since 2010. It is by no means alone. Nearly 80 companies in the S&P 500 have reduced their share count by at least 25 percent since 2010, and more than 100 (20 percent) have reduced their share count by 20 percent or more, including some of the best-known companies in America.
Using Home Depot’s 35% share buyback as an example, a CNBC article highlighted another implication of being a member of the “buyback monster” club:
All other metrics being equal, Home Depot’s 35 percent share count reduction means that earnings appear 35 percent better, without any change in “fundamentals” like revenues, costs or taxes.
…click on the above link to read the rest of the article…
Gold Will Become the Next Global Currency of Choice
Gold Will Become the Next Global Currency of Choice
With a wobbly stock market, falling Treasury yields and rampant geopolitical strife, the focus on gold as an asset has been intense as of late. The metal’s price gains reflect this, as gold recently proved able to hold above a key resistance level, which holds bullish implications.
But according to Kitco, Sprott CEO Peter Grosskopf sees gold moving past its role as a mere asset and eventually returning to its status as a true global currency. In an interview, Grosskopf explained that this will be fueled by ballooning global debt, which will ultimately debase all fiat currencies.
As Grosskopf pointed out, recent data shows that the global debt rests above $244 trillion and, as such, is more than three times larger than the global economy itself. Whether governments decide to deal with this through quantitative easing or financial repression, he says gold prices will invariably spike.
The recognition of gold’s role in wealth preservation is on the rise, said Grosskopf, with investors increasingly shying away from fiat currencies and moving into gold. The widespread loss of faith in not just assets, but currencies as well, is already in effect, with Grosskopf’s firm noticing more interest from all corners of the investment spectrum.
“We think the overall trend for gold is positive because it is being accumulated,” said the CEO. “It’s being accumulated by central banks; it’s being accumulated by billionaires, it’s been accumulated by endowments and it’s more accepted as a class of currencies in portfolios.”
This New Catalyst Will Drive Silver Prices Higher in 2019
Money Morning’s Peter Krauth writes silver’s recent pullback below the $16 level was not only expected, but also irrelevant for its long-term picture. Even after the pullback, the metal remains up 12% since November, and Krauth sees more gains coming in the near future.
…click on the above link to read the rest of the article…
Debt Trifecta at All-Time Highs – Billionaires Panic
Debt Trifecta at All-Time Highs – Billionaires Panic
The “trifecta” of national, corporate, and consumer debt has reached all-time highs, and could prove to be catastrophic if a recession hits.
Let’s start by quickly bringing each part of this debt trifecta up to date as much as possible…
U.S. National Debt
The national debt, ever on the rise, currently sits at around $22 trillion:
In just the short decade since 2008, the debt has jumped from $10.6 trillion to $22 trillion. It also comes with a deficit that’s currently over $1 trillion currently. The interest payments alone may be forming a “black hole” from which the U.S. may never escape.
These facts alone should raise concern in any interested observer.
Corporate Debt
The total amount of corporate debt has never stopped rising since 1950. Corporations have taken on a record level of debt since 2007.
You can see the steady rise in corporate debt liabilities here:
One of the main problems with this type of debt, aside from getting repaid, is that some corporations are using it to buy back shares of stock. Instead of this “sleight of hand,” you’d think that they should be using it to fund growth and create jobs.
But one thing is certain, the piper will need to be paid at some point. When that happens, who knows what can happen to the economy.
Consumer Debt
Total consumer debt is near $4 trillion, and has been rising steadily since 1975. But it has risen a staggering 47%since 2008, and shows no signs of stopping.
The chart below reveals this economic “ATM” at work:
When interest rates rise, as they have been thanks to the Fed’s recent spat of rate hikes, they will eventually get high enough that consumers won’t be able to get loans, or repay them.
Economic growth requires that consumers buy things and obtain credit. If they can’t do either, the consequences could be dire.
Now, this debt-fueled trifecta has caused panic among some billionaires.
…click on the above link to read the rest of the article…
Government Shutdown Reveals Nasty Truth About Americans’ Savings
Government Shutdown Reveals Nasty Truth About Americans’ Savings
The temporarily-ended government shutdown didn’t have had a large effect on the U.S. economy, but it may have revealed something disturbing about the savings of 80% of Americans.
They aren’t prepared if the economy get worse.
MarketWatch published some recent findings in an op-ed (emphasis ours):
Why do a few weeks without pay turn into a crisis for many families? Simple: Nearly 80% of Americans live paycheck to paycheck. That’s a problem when you have little to no savings. In fact, it’s akin to playing financial Russian roulette.
And the problem is terrifyingly pervasive. According to a recent GoBankingRates survey, only 21% of Americans have more than $10,000 in savings, with nearly 60% having less than $1,000 in savings.
The findings come from a recent GoBankingRates survey, which contained the following chart reflecting MarketWatch’s findings:
With interest rates on the rise and the economy at levels of uncertainty not seen since 2008, it’s crucial for Americans to buffer their income with some sort of hedge.
Without reliable “go-to” savings and a plan, there could be tough times ahead if the market continues diving into recession.
But the nasty truth appears to be most Americans don’t have enough savings, if any at all, to get them through the tough times.
Right now, government-reported unemployment is the lowest it’s been since 2000. But as you can see from the chart below, a recession tends to follow the “lowest” unemployment rates:
It’s not for sure that this is a signal of an imminent recession, but it sure seems like enough circumstantial evidence to consider looking into your savings options. That, and the fact that the shutdown has only been “ended” until February 15. After that, we may see “Part II.”
And the shutdown isn’t only affecting individuals. It even drew the attention of top CEOs.
…click on the above link to read the rest of the article…
