Home » Posts tagged 'economic crisis'

Tag Archives: economic crisis

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Pandemic Pandemania Causes Global Economic Crisis

Pandemic Pandemania Causes Global Economic Crisis 

billboard saying "Will the last person leaving seattle turn out the lights?"

Back in the oil-embargo recession of the early 70s when Boeing was Seattle’s economy and was laying off thousands of Seattleites, a billboard on the edge of town by Sea-Tac Airport read, “Will the last person leaving Seattle turn the lights out?” (Boeing had gone from 100,800 employees in 1967 to 38,690 in 1971.) 

Since Seattle is the first area where the coronavirus made landfall in the US, I’ll present Seattle’s viral transformation in the last forty-eight hours (about two weeks since the first cases were reported) as an anecdote for the extremely rapid changes already sweeping many cities in the US as outbreaks begin to show elsewhere.

You may recall I recently wrote that the COVID-19 virus, whether it grew to become one of the world’s great killers or just the cause of one of the world’s great panics, would certainly bring rapid economic damage. It would also help take down the stock market by accelerating us into recession, which is how I’ve been predicting this bull run will finally die. (See “COVID-19 (Coronavirus) Economic Impact Sweeps Down on Global Economy Like a Fat Black Swan.”)

The crisis has now become economic suicide because it is not the death of millions of people that is tearing the economy apart; it is the fear that there may be deaths of millions of people that is causing humanity to tear the already fragile fabric of the global economy apart with actions taken on the political level, the corporate level and the individual consumer level. It is a fabric already worn thin by two years of trade wars, moth-eaten by corruption and greed, and badly woven in the first place from materially flawed economic ideas, patched with bailouts.

…click on the above link to read the rest of the article…

Federal Reserve Chair Jerome Powell Insists There Won’t Be A Recession When All The Evidence Suggests Otherwise

Federal Reserve Chair Jerome Powell Insists There Won’t Be A Recession When All The Evidence Suggests Otherwise

It’s happening again.  Just like last time around, the head of the Federal Reserve is telling us that there won’t be a recession even though all of the evidence suggests otherwise.  Just before the recession of 2008, Federal Reserve Chair Ben Bernanke told the country that “the Federal Reserve is not currently forecasting a recession”, and shortly thereafter we plunged into the worst economic downturn since the Great Depression of the 1930s.  This time, it is Federal Reserve Chair Jerome Powell that is attempting to prop things up by making positive statements that are not backed up by reality.  Speaking to a group at the University of Zurich, Powell insisted that the Fed is “not at all” anticipating that there will be a recession…

Federal Reserve Chairman Jerome Powell said Friday that he doesn’t “at all” expect the U.S. to enter a recession, though he hinted the central bank will likely cut interest rates as expected this month.

“Our main expectation is not at all that there will be a recession,” Powell said in a panel discussion at the University of Zurich.

Meanwhile, things are literally falling apart all around us.  Just a few days ago, I put together a list of 28 data points that clearly indicate that a recession is imminent, and since then we have gotten even more bad news.

For instance, we just learned that Fred’s will be filing for bankruptcy and closing more than 500 stores

Discount merchandise retailer and pharmacy chain Fred’s filed for Chapter 11 bankruptcy Monday with plans to close all of its stores.

The company plans to liquidate its assets, punctuating a swift collapse of its operations that involved a cascading series of store closures in recent months.

 …click on the above link to read the rest of the article…

The Next Economic Crisis and the Looming Post-Multipolar System

 The Next Economic Crisis and the Looming Post-Multipolar System

The Impending Crisis

At one time, specifically during the post-World War 2 Bretton Woods era, it looked like as if the capitalist model could be indefinitely sustainable and avoid plunging the world into major world conflicts. That era began to come to an end during the stagflation crisis of the 1970s, and came to a complete end at the end of the Cold War which ushered in the era of the so-called “globalization” which took form of unbridled competition for markets and resources. At first this competition did not show many signs of trouble. There were many “emerging markets” created as a result of the collapse of the Soviet bloc into which Western corporations could expand. However, the law of diminishing returns being what it is, the initial rapid economic growth rates could not be sustained and attempts to goose it using extremely liberal central bank policies, to the point of zero and even negative interest rates, succeeded in inflating—and bursting—several financial “bubbles”. Even today’s US economy bears many hallmarks of such a bubble, and it is only one of many. Sooner or later the proverbial “black swan” event will unleash a veritable domino effect of popping bubbles and plunge the global economy into a crisis of a magnitude it has not seen since the 1930s. A crisis against which the leading world powers have few weapons to deploy, since they have expended their monetary and fiscal “firepower” on the 2008 crisis, to little avail. The low interest rates and high levels of national debt mean that the next big crisis will not be simply “more of the same.” It will fundamentally rearrange the global economy.

 …click on the above link to read the rest of the article…

As The Perfect Storm Approaches, Most Americans Are Partying Instead Of Preparing

As The Perfect Storm Approaches, Most Americans Are Partying Instead Of Preparing

I can’t think of a time when Americans were more apathetic about getting prepared, and yet this is exactly the time when the urgency to get prepared should be at the highest.  Earlier today, my wife Meranda and I were discussing the fact that every single element of “the perfect storm” is coming together just as we had anticipated.  One by one, the pieces are all falling into place, and I share the most recent things that my research has uncovered with all of you on a daily basis.  Unfortunately, most Americans are absolutely convinced that there is no reason to get prepared for hard times because everything is going to be just great.  In America today, most people either believe that the future is going to be totally wonderful or that the future will be totally wonderful once we get rid of Trump.  Because so many of us have adopted one of these false narratives, most Americans are partying instead of preparing, and that is going to mean big trouble when things really start going haywire.

Are you familiar with “the rule of three”?  I just looked it up on Google, and this is how it is defined…

“You can survive for 3 Minutes without air (oxygen) or in icy water. You can survive for 3 Hours without shelter in a harsh environment (unless in icy water) You can survive for 3 Days without water (if sheltered from a harsh environment) You can survive for 3 Weeks without food (if you have water and shelter)”

Of course these numbers are not exact.  For example, many have gone without food for more than 3 weeks without serious problems.  But in general, this is a pretty good guideline for survival.

 …click on the above link to read the rest of the article…

The Bubble’s Losing Air. Get Ready for a Crisis

The Bubble’s Losing Air. Get Ready for a Crisis

Investors need to focus on their response to financial stresses in an era in which policymakers will be constrained.

Not much to do once it pops.

Photographer: Spencer Platt/Getty Images

The “everything bubble” is deflating. The fact that it’s happening relatively slowly shouldn’t blind us to the real threat: The world is dangerously underestimating how hard it’ll be to deal with the fallout once it pops.

Frothy markets can’t disguise the warning signs. The shift to tighter monetary policies in the West is putting pressure on global equity and real-estate values. Even more critically, it’s weakening credit markets. Over-indebted emerging markets face headwinds from rising borrowing costs and dollar shortages.

At the same time, investors are underestimating how disruptive trade conflicts and sanctions could turn out to be. That’s not to mention rising non-financial risks — from the legal difficulties of the U.S. administration, to the U.K.’s Brexit debacle, to political instability in France, Germany, Italy and even Saudi Arabia. Uncertainty will impact the real economy, primarily through the wealth effect of declining asset values and a reduced supply of credit.

Investors need to start focusing on how best to respond to a new crisis. The choices are more limited than many realize. Historically, central banks have needed to slash official rates as much as 4-5 percent in order to offset the effects of a financial crisis or an economic slowdown. That’s why former U.S. Federal Reserve Chair Janet Yellen talked about the need to raise rates in good times — to provide room to cut when necessary.

…click on the above link to read the rest of the article…

Former Malaysian PM Warns Of “Economic Crisis” If Brent Trades Below $70

Najib Razak, the former prime minister of Malaysia, warned that the country is headed for an economic collision of massive proportions should ICE Brent Crude contracts trade below $70. As of Friday, Brent Crude contracts settled at 70.18, which he also warned that Moody’s decision to downgrade the country’s credit rating to negative could be imminent.

The former prime minister, who was previously arrested in July for involvement in the 1MDB scandal, explained in a Facebook post that the recent bear market in oil would see the country’s deficit explode and the Malaysian ringgit continue to depreciate as the Federal Reserve signals further rate hikes.

“The pressure on the government’s fiscal position will double,” Razak warned.

This, Razak said, the country would have to issue a higher dividend to cushion the shortfall in revenue for Petronas, the country’s national petroleum company.

In doing so, he said that could severely impact Malaysia’s credit rating for 2019.

“This is when oil prices are said to be high and stable. But what if oil prices drop?… What buffer do we have to cushion an oil crisis, if it happens again?,” he questioned.

On Thursday, Moody’s affirmed the A1 domestic issuer and foreign currency senior unsecured ratings of Petronas but altered its outlook from stable to negative.

“The rating agency also affirmed the A1 rating for Petronas Capital Ltd’s senior unsecured notes and the US$15 billion medium-term note (MTN) programme as well as sukuk issued through Petronas Global Sukuk Ltd, but changed its outlook to negative from stable.

Moody’s said the rating action was due to the government’s announcement that Petronas would be paying RM26 billion in dividends in 2018 and RM54 billion (inclusive of a one-off special dividend of RM30 billion) in 2019,” Free Malaysia Today.

…click on the above link to read the rest of the article…

From Economic Crisis to World War III

income inequality usAndrew Lichtenstein/Corbis via Getty Images

From Economic Crisis to World War III

The response to the 2008 economic crisis has relied far too much on monetary stimulus, in the form of quantitative easing and near-zero (or even negative) interest rates, and included far too little structural reform. This means that the next crisis could come soon – and pave the way for a large-scale military conflict.

BEIJING – The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict

The 2008-09 global financial crisis almost bankrupted governments and caused systemic collapse. Policymakers managed to pull the global economy back from the brink, using massive monetary stimulus, including quantitative easing and near-zero (or even negative) interest rates.

But monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.

Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment.

The lack of structural reform has meant that the unprecedented excess liquidity that central banks injected into their economies was not allocated to its most efficient uses. Instead, it raised global asset prices to levels even higher than those prevailing before 2008.

…click on the above link to read the rest of the article…

The Establishment Must Undermine Alternative Economists As Crisis Unfolds

The Establishment Must Undermine Alternative Economists As Crisis Unfolds

There is a notion within the mainstream media that certain economic indicators are unassailable; they never stop being reliable. The way they look at and report on the system is rather outdated and extremely limited in scope; showcasing and cherry picking only net-positive statistics, even if those stats don’t represent reality. The result is a kind of holographic view of the financial structure; a mirage of a healthy and vibrant foundation that simply does not exist.

This fraudulent view appeals to the masses for a time because it provides fuel for false hopes. In economics, an analyst must always account for two major factors: the hard math and human psychology. These factors tend to conflict during times when a financial bubble is present, and they tend to converge when such bubbles implode. One must never underestimate the power of public psychology, though. Even when the math is screaming that danger is present in the system, a naive and misinformed populace (coupled with central bank manipulation) can keep a dead economy in a state of profane reanimation for much longer than seems logically possible.

This magic show only lasts for so long, however, and eventually the truth strikes those with blind faith in the machine brutally and without mercy.

On the financial side of the great farce, most of the “positive” signs we see are purely debt driven. Cheap debt and credit liquidity has kept zombie banks alive for years beyond their expiration date, but it has also trickled down into main street, where we see extensive commercial retail development and a spike in employment opportunities. Of course, the box stores and construction are being undertaken by developers deep in the red, and most of the debt will not be paid off for years, if at all.

…click on the above link to read the rest of the article…

Bernanke, Geithner and Paulson Still Don’t Have a Clue About the Financial Crisis

Bernanke, Geithner and Paulson Still Don’t Have a Clue About the Financial Crisis

NYT readers were no doubt disturbed to see a column in  which former Fed Reserve Board chair Ben Bernanke, Obama Treasury Secretary Timothy Geithner, and Bush Treasury Secretary Henry Paulson patted themselves on the back for their performance in the financial crisis. First, as they acknowledge in the piece, all three completely failed to see the crisis coming.

During the years when house prices were getting way out of line with both their long-term trend and rents, Bernanke was a Fed governor, then head of the Council of Economic Advisers, and then Fed chair. He openly dismissed the idea that the run-up in house prices could pose any threat to the economy. Henry Paulson was at Goldman Sachs until he became Treasury Secretary in the middle of 2006. As the bank’s CEO he was personally profiting from the bubble as the bank played a central role in securitizing mortgage backed securities. Timothy Geithner was president of the New York Fed, where he was paid over $400,000 a year to make sure that the Wall Street banks were not taking on excessive risk.

It is bad enough that these three didn’t see the crisis coming, but they still seem utterly clueless. They tell readers:

“Productivity growth was slowing, wages were stagnating, and the share of Americans who were working was shrinking. That put pressure on family incomes even as inequality rose and upward social mobility declined. The desire to maintain relative living standards no doubt contributed to a surge in household borrowing before the crisis.”

Actually productivty growth didn’t begin to slow until 2006, as the bubble was hitting its peak. Growth was quite strong from 2000 to 2005, which means the cause of wage stagnation in those years must lie elsewhere.

…click on the above link to read the rest of the article…

 

Economic Crisis Looms In Iran As Sanctions Bite

Economic Crisis Looms In Iran As Sanctions Bite

Tehran by night

In a little over two months, painful U.S. sanctions on Iran’s oil sector will take effect, but the Iranian economy is already showing signs of strain.

Iran’s currency, the rial, has fallen by more than half since the start of the year. There is now a thriving black market for U.S. dollars as the rial continues to plunge.

The turmoil has the government engaging in a bit of a circling firing squad. In July, the head of the central bank was sacked. In early August, the labor minister was ousted and just this past weekend the economy minister was removed.

The reshuffling and purging of top officials suggests that hardliners in Tehran are gaining ground against the government of President Hassan Rouhani, a moderate by comparison. “Rouhani’s failure to respond to the economic crisis with gut and grit has further isolated him,” Ali Vaez, the director of the Iran Project at the International Crisis Group, told the Wall Street Journal. “Even his erstwhile allies in the parliament are deserting what they believe is a sinking ship.”

But even though the economic indicators look poor, Rouhani’s real failure in the eyes of the hardliners has been political. That is, his government made the mistake of trusting the United States when it agreed to the 2015 nuclear deal. The Trump administration’s withdrawal from the pact earlier this year was proof in Tehran that opening up and negotiating with the U.S. on the nuclear program was a miscalculation. Rouhani has been in trouble since then, and the economic pain related to the re-implementation of U.S. sanctions is merely compounding the problem.

…click on the above link to read the rest of the article…

Greece Economic Crisis Declared Over: It Isn’t

Mainstream media is all aglow over the alleged end of the Greek economic crisis. Mainstream media is wrong.

Can-Kicking Deal

This was another can-kicking announcement according to Eurointelligence.

Here it is. Finally, a deal on debt relief for Greece. It is a fudge of sorts, but a deal that ends the eight-year-long Greek debt crisis – for now. These are the main components of the deal:

  • A €15bn loan disbursement at the end of the programme, of which €3.3bn can be used to buy back IMF loans;
  • A 10-year extension of the EFSF loans, and a ten-year deferral of interest payments and amortization starting from 2033; and
  • A return of profits from Greek bonds (SMP and ANFA) held by Eurozone central banks, a total of €4bn, with semi-annual payments and subject to reform targets.

There is no growth clause, no interest-rate cuts, no major buyback programme. This is not debt relief in the way the IMF defines it, but debt relief of the kicking-the-can-the-road variety.

It also leaves Greece with a significant exposure to IMF loans. Even if Greece were to use the €3.3bn to buy back IMF loans, that still leaves €7.1bn to be repaid by 2024.

The IMF abstained almost entirely from the debate as it is now officially leaving the programme and will only participate in the post-memorandum oversight, writes Kathimerini. Christine Lagarde refused to make any statements about Greece. What this means for the IMF role after the programme ends is yet to be seen.

So this is it, after eight years, three bailout programmes and endless eurogroup meetings. And with debt nearly at 180% of GDP, there is still the potential for things to turn wrong. But for now, everyone seems happy.

…click on the above link to read the rest of the article…

Crash & Burn & the Sixth Wave

QUESTION: Martin, as all members do, I really do thank you and appreciate you for your knowledge and insight. I am a business owner – Real Water and do approximately $10 million in annual sales right now. As a concerned citizen, I have also run for political office and was elected to the Nevada State Assembly in 2015. With Republican control, our legislature pushed through the largest tax increase in our State’s history in the name of more money for education (I led the opposition against the tax, but failed in preventing it). Of course, our latest school ratings came out and we are still ranked at the bottom – 50th. More government is NOT the solution!

I completely understand we are headed for a financial crash and burn. You have frequently stated that the only reason you are doing what you are doing is for your posterity. Other than personal preparation, extra food, don’t be in bonds, etc., what do you believe is the most beneficial thing we can do to help our country come out of the crash and burn with more freedom and limited government (like our Founders so emphatically intended) as opposed to the other potential of totalitarianism that you frequently warn us about? What is the most effective way to rally the troops so to say to help push our civilization in the proper direction?

To an elevated lifestyle,

ANSWER: The Government always thinks that throwing more money at something make it better. I have NEVER seen where that has EVER corrected any such trend. The problem lies in the total mismanagement. Governments are simply incapable of operating even a bubblegum machine. They completely fail to understand the economy, human nature, or society as a whole. The only way to actually correct such a problem is to privatize. That installs actual management and employees must actually perform. Government unions demand benefits and they negotiate with themselves. This is why the entire socialist agenda is collapsing.

…click on the above link to read the rest of the article…

Hidden No More, The Currency Wars Take Center Stage

Hidden No More, The Currency Wars Take Center Stage

The market stands on a sinkhole, waiting for the next feather to drop. A feather that will bring down the system and send us into another economic crisis that will make the 2008 crash look like an opening act.

For years, I and many others within the precious metals space have written about a hidden war unfolding behind the scenes. To those with wide open eyes, you can see it, you can feel it. I am speaking of the currency and trade wars that Jim Rickards has written extensively about in many of his books—and now, things have ratcheted up to a whole new level.

Over the course of the past week, the jawboning from the US government has turned into action, and they have placed a number of trade tariffs on China . This is part of a campaign promise that President Trump made, and it appears he intends to keep it, no matter how much it might “rock the boat.”

These steps caught many investors off guard, including seasoned market veterans, as they have been so used to the government making bold statements but never following through with any real action.

Not this time. And the stock market is reflecting this new reality.

Chinese markets were sent for a roller coaster of a ride yesterday, dropping by 3-5% throughout the day, with key stocks dropping over 10% alone. A sea of red could be seen across the charts as the once-cold trade war turned hot.

Today, it is the US markets’ turn, as China fired back overnight, sending Western markets plummeting.

These actions sent the plunge protection team into full swing, resulting in this morning’s pre-open bounce . Unfortunately, I don’t see them being able to hold back the floodgates for too long, as this trade war will only accelerate from this point on. Neither side looks willing to back down.

…click on the above link to read the rest of the article…

 

How Will Gold Prices Behave During Economic Crisis?

gold prices during economic crisis

It is generally well known in economic circles and in the general public that precious metals, including gold, tend to be the go-to investment during times of fiscal uncertainty. There is a good reason for this. Precious metals have foundation qualities that provide trade stability; these include inherent rarity (rather than artificially engineered rarity such as that associated with cryptocurrencies), tangibility (you can hold gold in your hand, and it is relatively difficult to destroy), and precious metals are easy to trade. Unless you are attempting to make transactions overseas, or in denominations of billions of dollars, precious metals are the most versatile, tangible trading platform in existence.

There are some limitations to metals, but the most commonly parroted criticisms of gold are generally incorrect. For example, consider the argument that the limited quantities of gold and silver stifle liquidity and create a trade environment where almost no one has currency to trade because so few people can get their hands on precious metals. This is a naive notion built upon a logical fallacy.

Gold backed paper currencies existed for centuries in tandem with the metals trade. Liquidity was rarely an issue, and when such events did occur, they were short lived. In fact, the last great liquidity crisis occurred in 1914, the same year the Federal Reserve began operations and the same year that WWI started. This crisis was, as always, practically fabricated by central banks around the world. Benjamin Strong, the head of the New York Fed in 1914 and an agent of the JP Morgan syndicate, had interfered with the normal operations of gold flows into the U.S. and thus sabotaged the natural functions of the gold standard.

Central banks in Germany, France and England also applied influence to disrupt currency and gold flows, causing a global panic. This engineered disruption seemed to take place through conscious co-operation between central banks. Does any of this sound familiar?

…click on the above link to read the rest of the article…

Stock Market Plunges: Down 1,175 Sparking Recession Fears

Stock Market Plunges: Down 1,175 Sparking Recession Fears

stock-crash-dynamite

Many analysts have predicted an economic crisis is just over the horizon. Could the stock market’s recent plunge be the recession they’ve said is long overdue?

The drop amounted to just a 4.6% drop, which doesn’t seem like much; but it’s the biggest decline since August 2011, during the European debt crisis. But it was nowhere close to the destruction on Black Monday in 1987 or the financial crisis of 2008. Still, for investors watching the steady upward climb since Election Day, it was alarming. The plunge pushed stocks closer to what’s called a correction, or a 10% decline from their most recent high point. The S&P 500 is down almost 8% from its all-time high.

Although stocks went into a freefall yesterday, the Dow had been down 1,600 points.  A small rally recovered some of the losses. According to CNN Money, the rout in U.S. markets continued to ripple around the globe. Japan’s Nikkei index plunged 4% in Tuesday morning trading while the S&P/ASX 200 in Australia dropped 3%. The recent sell-off wiped out the Dow and S&P 500 gains for the year and left the Nasdaq barely in positive territory for 2018.

The trouble in the market began early last week when investors began focusing on a number of lingering concerns. If the economy gets much stronger, it could touch off inflation, which, according to CNN, has been mysteriously missing for the nine years of the post-crisis recovery. But Peter Schiff has begged to differ, saying that the United States has not experienced a “growth story” but an “inflation story.”

“People are dealing with the shock of seeing real inflation for the first time in a while,” said Bruce McCain, chief investment strategist at Key Private Bank. Investors have also been nervously watching the bond market, where yields have been creeping higher. But many analysts claim the next recession will begin in the bond market.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
Click on image to purchase