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– “Large challenges loom for the global economy to prevent a second Great Depression” warn IMF
– Massive government debts and eroded fiscal buffers since 2008 suggest global dominos await a single market crash
– 2008 crisis measures cast long, dark “terrifying” shadow

Is another “Great Depression” on the horizon?

It would be easier to dismiss these words from Nouriel Roubini, Marc Faber or other doom-and-gloom prognosticators. Coming from Christine Lagarde’s team, though, they take on a new dimension of scary.

The International Monetary Fund head isn’t known for breathlessness on the world stage. And yet the IMF sounded downright alarmist in its latest Global Financial Stability report, stating that “large challenges loom for the global economy to prevent a second Great Depression.”

Even some market bears were taken aback. “Why,” asks Michael Snyder of The Economic Collapse Blog would the IMF use this phrase “in a report that they know the entire world will read?”

Perhaps because, unfortunately, the findings of other referees of global risks – including the Bank for International Settlements – hint at similar dislocations.

Ten years after the Lehman Brothers crisis, these worrisome warnings that will be explored in depth at this week’s annual IMF meeting in Bali. The tranquil setting, though, will offer few respites from cracks appearing in markets everywhere – from Italy to China to Southeast Asia, where currencies are cratering like it’s 1998 again.

Source: Wikipedia

Potential flashpoints and a long line of dominos

Italy is the current flashpoint – and the latest target of “domino effect” chatter in frothy world markets. China’s shadow-banking bubble, and the extreme opacity and regulations that enable it, also came in for criticism. And, of course, the 800-pound beast in any room where global investors gather these days: Donald Trump’s assault on world trade.

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

Warren Buffett Explains Bubbles: But He Doesn’t Know We Are In One

September 13, 2018

Warren Buffett Explains Bubbles: But He Doesn’t Know We Are In One

Buffet explains bubbles: “People see neighbors ‘dumber than they are’ getting rich.”

Warren Buffett explains Why Bubbles Happen

Buffett was asked by CNBC’s Andrew Ross Sorkin if he is worried another crisis will happen again.

“Well there will be one sometime,” Buffett said in an interview for CNBC’s “Crisis on Wall Street: The Week That Shook the World” documentary. The documentary airs Wednesday night at 10 p.m. ET/PT.

“People start being interested in something because it’s going up, not because they understand it or anything else. But the guy next door, who they know is dumber than they are, is getting rich and they aren’t,” he said. “And their spouse is saying can’t you figure it out, too? It is so contagious. So that’s a permanent part of the system.”

That last paragraph perfectly explains Bitcoin. Most of those investing in cryptos have little idea how they work, or what they are even buying.

Buffet made no mention of the corporate bond bubble, the equities bubble, or even the crypto bubble. He does not see any bubbles now, at least that he mentioned.

Symptom or Cause?

Buffett confuses a symptom (rampant speculation) with the true cause

The Fed (central banks in general), keep interest rates too low, too long
Fractional reserve lending
Moral hazards like bank bailouts
Poor fiscal policies and massive government debt

In short, there is no free market in anything and thus no valid price discovery. There would always be speculation, but Fed policies and fractional reserve lending are the root cause of bubbles.

Draghi Admits He Cannot Stop Buying Gov’t Debt

February 28, 2018

Draghi Admits He Cannot Stop Buying Gov’t Debt

Draghi has realized that he has singlehandedly destroyed the European bond market. Besides the fact that it is illegal to short government bonds, he has come face to face with the stark reality that IF the ECB stops buying government bonds, there will be NO BIDat these price levels. Interest rates will skyrocket dramatically. On the German 10-year bond, once we see a monthly closing above .79, we are looking at a DOUBLING of rates and that is in Germany. Once rates rise above 1.55, then expect it to rapidly DOUBLE again.

Consequently, Mario Draghi has been warned there is a serious problem. He told the Economic and Monetary Affairs Committee of the European Parliament that he would maintain a very loose monetary policy because it was necessary despite the upturn in the euro area. He said that INFLATION remains critically dependent on a strong push using monetary policy. Of course, you would assume that after 10 years of this policy and there is no sign of a major return of inflation, that you would start to question the entire Quantity of Money Theory.

Draghi said Monday that he will continue to include the billion-dollar bond purchase program and he will reinvest expiring bonds exactly OPPOSITE of the policy at the Federal Reserve. While the dollar-bears keep calling for the end of the Greenback, they are deaf, dumb and blind when it comes to international capital flows or monetary policy outside the USA.

Draghi realizes that he is subsidizing the European governments. He is not stimulating the economy, he simply has them on life-support. Stopping the bond program will lead to a major crisis when there is NO BID for government bonds.

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

India Enters the Sovereign Debt Crisis

February 22, 2018

India Enters the Sovereign Debt Crisis

I have warned continually that the Sovereign Debt Crisis will unfold not so much by people selling government debt, but by the lack of people buying new debt. The greatest peril is when there is NO BID for the new issues because all governments are operating a PONZI scheme. The sell new debt to pay off maturing debt. Currently, holders of Indian government debt have been dumping 4.7 billion rupees ($73 million) of government bonds on average every day this year, according to data from the Clearing Corp. of India. Last year, their net daily sales totaled 368 million rupees.

The Sovereign Debt Crisis emerges when the government is unable to raise enough cash to pay off the maturing debt. India has crossed that threshold so as we have warned, the Sovereign Debt Crisiswill begin from outside the USA and spread to the core. This is how all Empires, nations, and city-states collapse.

We Give Up! Government Spending And Deficits Soar Pretty Much Everywhere – John Rubino

December 2, 2017

We Give Up! Government Spending And Deficits Soar Pretty Much Everywhere – John Rubino

A recurring pattern of the past few decades involves governments promising to limit their borrowing, only to discover that hardly anyone cares. So target dates slip, bonds are issued, and the debts keep rising.

This time around the timing is especially notable, since eight years of global growth ought to be producing tax revenues sufficient to at least moderate the tide of red ink. But apparently not.

In Japan, for instance, government debt is now 250% of GDP, a figure which economists from, say, the 1990s, would have thought impossible.

Over the past decade the country’s leaders have proposed a series of plans for balancing the budget, and actually did manage to shrink debt/GDP slightly in 2016.

But now they seem to have given up, and are looking for excuses to keep spending:

Japan plans extra budget of $24-26 billion for fiscal 2017

(Hellenic Shipping News) – Japan’s government is set to compile an extra budget worth around 2.7-2.9 trillion yen ($24-26 billion) for the fiscal year to March 2018, with additional bond issuance of around 1 trillion yen to help fund the spending, government sources told Reuters. Following October’s big election win, Prime Minister Shinzo Abe’s cabinet has made plans to beef up childcare support, boost productivity at small and medium-sized companies, and strengthen competitiveness of the farm, fishery and forestry industries.

In the UK, a balanced budget has been pushed back from 2025 to 2031:

Britain in the red until 2031: Bid to balance the books pushed back yet again

(Daily Mail) – Philip Hammond’s ambition to get Britain’s finances back into the black receded further last night – as the Treasury watchdog said he would struggle to eliminate the deficit before 2031. The Chancellor had promised to balance the books by 2025. The target has been pushed back twice already, after George Osborne’s pledge in his 2010 Budget to balance the books ‘within five years’, before he revised the figure to 2020.

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

The Kids Are Not Alright

November 13, 2017

The Kids Are Not Alright

Debt initially dazzles and deceives, then it disappoints, disillusions, devastates, and destroys.

The thing governments do best is borrow. Performance varies across the range of their purported functions—warfare, maintenance of public order, provision of goods and services, redistribution, regulation—but they all go into debt. The structure of governments and their underlying philosophies also vary, but there’s one commonality. They are set up to optimize their own borrowing. Thus, central banks are essential.

There is a cottage industry devoted to the minutia of central bank personnel, policies, and pronouncements and what they mean for humanity’s future. Actually, cottage industry is not a correct characterization. No cottage industry could generate the kind of money paid to central banking’s acolytes.

After months of speculation, President Trump named Jerome Powell as the next Chair of the Board of Governors of the Federal Reserve System. If you know why the Fed exists and how it operates, the speculation was so much dross. The Federal Reserve exists to “facilitate” the US government’s issuance of debt. Mr. Powell will do what Janet Yellen, Benjamin Bernanke, Alan Greenspan, Paul Volker, G. William Miller, Arthur Burns, and every chairperson has done on back to the first one, Charles Hamlin: make it easier for the government to borrow. All of the other candidates would have done the same.

Central banks, their fiat debt, and ostensibly private banking systems that either control or are controlled by governments (take your pick) have facilitated unprecedented global governmental indebtedness. Suppressed interest rates and pyramiding debt via fractional reserve banking, securitization, and derivatives have led to record private indebtedness as well. The totals so dwarf the world’s productive capacities as measured, albeit imperfectly, by gross domestic product figures that the comparison yields an inescapable conclusion: most of this debt cannot be repaid.

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

Visualizing $63 Trillion Of World Debt

October 29, 2017

Visualizing $63 Trillion Of World Debt

If you add up all the money that national governments have borrowed, it tallies to a hefty $63 trillion.

Courtesy of: Visual Capitalist

In an ideal situation, governments are just borrowing this money to cover short-term budget deficits or to finance mission critical projects. However, as Visual Capitalist’s Jeff Desjardins notes, around the globe, countries have taken to the idea of running constant deficits as the normal course of business, and too much accumulation of debt is not healthy for countries or the global economy as a whole.

The U.S. is a prime example of “debt creep” – the country hasn’t posted an annual budget surplus since 2001, when the federal debt was only $6.9 trillion (54% of GDP). Fast forward to today, and the debt has ballooned to roughly $20 trillion (107% of GDP), which is equal to 31.8% of the world’s sovereign debt nominally.

THE WORLD DEBT LEADERBOARD

In today’s infographic, we look at two major measures: (1) Share of global debt as a percentage, and (2) Debt-to-GDP.

Let’s look at the top five “leaders” in each category, starting with share of global debt on a nominal basis:

Together, just these five countries together hold 66% of the world’s debt in nominal terms – good for a total of $41.6 trillion.

Next, here’s the top five for Debt-to-GDP:

While only Italy and Japan here are considered major economies on a global scale, the high debt levels of countries like Greece or Portugal are also important to monitor.

In the IMF’s baseline scenario, Greece’s government debt will reach 275% of its GDP by 2060, when its financing needs will represent 62% of GDP.

– A recent IMF report, obtained by Bloomberg

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

The Italian experiment and the truth about government debt

October 9, 2017

The Italian experiment and the truth about government debt

Money is a slippery concept. Today we think of it as paper certificates and coins. But actually, anything that is generally accepted in trade can be considered money. The rise of cryptocurrencies is demonstrating this truth. In wartime scarce but desirable and easily transported commodities such as cigarettes, alcohol, jewelry and valuable paintings can act as currency.

Debt is defined as money owed to another person or entity such as a corporation. It is an obligation to pay the money back, usually by a specified date at an agreed rate of interest. Certain kinds of debt, especially government bonds, are traded daily in the world’s money markets. So confident are investors that some government bonds, especially U.S. Treasury bonds, will pay the agreed interest and be redeemed in full at maturity that they treat them as if they were cash—because they can be converted into cash in an instant in world markets.

But is government debt what we think it is? Consider the poor Italians who recently announced that they will try paying for government services with tax credits—essentially reducing a person’s tax bill in exchange for services rendered or products delivered. The reason is simple. The Italian government is hard pressed for revenue which is paid in Euros, a currency which the government does not control and therefore cannot create more of.

The tax credit scheme gets around this inconvenience. But it also makes possible a far more interesting possibility. As the writer of the linked piece points out, what if instead of making book entries in a taxpayer’s account, the Italian government issued paper tax credit certificates that could be used to pay taxes?

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

The Globalists Are Systematically Destroying America’s Middle Class

October 2, 2017

The Globalists Are Systematically Destroying America’s Middle Class

When people are dependent on the government they are much easier to control. We are often told that we are not “compassionate” when we object to the endless expansion of government social programs, but that is not how the debate should be framed. In America today, well over 100 million people receive money from the federal government each month, and the number of Americans that are truly financially independent is continually shrinking. In fact, only 25 percent of all Americans have more than $10,000 in savings right now according to one survey. If we eventually get to the point where virtually all of us are dependent on the government for our continued existence, that would give the globalists a very powerful tool of control. In the end, they want as many of us dependent on the government as possible, because those that are dependent on the government are a lot less likely to fight against their agenda.

Back in 1992, the bottom 90 percent of American income earners brought in more than 60 percent of the country’s income. But last year that figure slipped to just 49.7 percent. The wealth of our society is increasingly being concentrated at the very top, and the middle class is steadily being eroded. Surveys have found that somewhere around two-thirds of the country is living paycheck to paycheck at least part of the time, and so living on the edge has become a way of life for most Americans.

Earlier today, I came across a Business Insider article that was bemoaning the fact that the U.S. economy seems to be rather directionless at this point…

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

Debt Nightmare: Does Anyone Actually Care That Our Exploding National Debt Is Destroying Our Future?

September 12, 2017

Debt Nightmare: Does Anyone Actually Care That Our Exploding National Debt Is Destroying Our Future?

When will America finally wake up? The borrower is the servant of the lender, and we now have a colossal 20 trillion dollar chain around our collective ankles. We have willingly enslaved ourselves, our children and our grandchildren, and yet our addiction is so insatiable that we continue to add more than 100 million dollars to our debt load every single hour of every single day. The national debt is sitting at a grand total of $20,162,176,797,904.13 at this moment, but now that the debt ceiling has been lifted that number is expected to shoot up very rapidly toward 21 trillion dollars by the end of the year. The national debt had been held down by accounting tricks to keep it under the debt limit for many months, but every time this has happened before we have seen the national debt absolutely explode back to projected levels once the debt ceiling was raised.

But very few of our “leaders” in Washington seem to care that we are in the process of committing national suicide. There is no possible way that we will be able to continue to be the most powerful economy on the planet if we continue down this road. During Obama’s eight years in the White House, we added more than 9 trillion dollars to the national debt. That certainly improved things in the short-term, because if we could go back and take 9 trillion dollars out of the economy over the past 8 years we would be in an absolutely nightmarish economic depression right now.

But even with all of this borrowing and spending, our economy has still only grown at an average rate of just 1.33 percent a year over the last 10 years.

And by going into so much debt, we are literally destroying the future for our children and our grandchildren.

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

The Government Debt Paradox: Pick Your Poison

September 9, 2017

The Government Debt Paradox: Pick Your Poison

Lasting Debt

“Rule one: Never allow a crisis to go to waste,” said President Obama’s Chief of Staff Rahm Emanuel in November of 2008. “They are opportunities to do big things.”

Rahm Emanuel looks happy. He should be – he is the mayor of Chicago, which is best described as crisis incarnate. Or maybe the proper term is perma-crisis? Anyway, it undoubtedly looks like a giant opportunity from his perspective, a gift that keeps on giving, so to speak. [PT] Photo credit: Ashlee Rezin / Sun-Times

At the time of his remark, Emanuel was eager to exploit the 2008 financial crisis to raid the public treasury. With the passage of the American Recovery and Reinvestment Act in February 2009, Emanuel’s wish was granted. The Obama administration had the opportunity to do big things.

Politically, the passage of the Recovery Act was a huge success. Washington was able to dole out funds to their preferred projects like never before. What could be better for a Congressman than to direct massive amounts of funds to infrastructure, healthcare, energy, security, law enforcement, and just about everything else?

Some Congressman even directed money to bridges and buildings that were then named after them. No doubt, this flattered their egos. But what it really did was memorialize their political swindle.

Economically, the Recovery Act was a great big dud. The money was frittered away without producing any lasting wealth. However, it did produce lasting debt. Since the Recovery Act’s passage, the U.S. national debt has nearly doubled from roughly $10.6 trillion to nearly $20 trillion.

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

ECB – Draghi & Tapering

September 4, 2017

ECB – Draghi & Tapering

The European Central Bank (ECB) is expected to begin reducing its bond purchases gradually tampering its stimulation program of Quantitative Easing (QE). Nevertheless, reliable sources tell of the ECB being extremely cautious fearing what will happen if buyers do not appear and rates begin to rise sharply. The difference between the ECB and the Fed is stark. The ECB owns 40% of Eurozone government debt. The Fed does not even come close.

Obviously, the European financial markets have become addicted to the unprecedented inflow of cheap money even though there has been no appreciable rise in economic growth or inflation as was expected. This raises the question only asked behind the curtain: Will the economy spiral downward if QE ends? The Fed never reached the levels of ECB’s QE program so there is no comparison with the States.

The ECB expects to gradually lower the constant QE purchases of government debt in the Eurozone, which has really kept the governments on life-support. In part, this is why Macron is pushing to federalize Europe in its budgetary and financial markets. There is a fear that there will be severe distortions on the exchanges in the months ahead. What is hoped is that the Euro will decline and make the difficult weaning more tolerable by increasing exports and creating inflation. A lower currency will help to stimulate the Eurozone whereas a rising currency will only add to the deflationary pressures.

The ECB will most likely allow bonds to simply mature rather than sell them back to the marketplace. Any news of the ECB actually selling bonds would send a wave of panic through the European markets. Thus, the only practical way to approach this is to (1) reduce purchases and (2) allow current holding to mature and hopefully they money will be reinvested by the private sector.

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

When Assets (Such as Real Estate) Become Liabilities

December 27, 2016

When Assets (Such as Real Estate) Become Liabilities

December 27, 2016

It will be the middle class that accepted the notion that “real estate is the foundation of family wealth” that will be stripmined by higher taxes on immobile assets such as real estate.

Correspondent Joel M. submitted an article that struck me as a harbinger of the future: In Greece, Property Is Debt:

“At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. Not necessarily because some feckless uncle left them with a pile of debt at the end of his revels; they are turning their backs on what used to be a pillar of Greece’s economy and society: real estate.

Growing personal debt, declining incomes and ever higher taxes as Greece’s depression grinds on have turned property and the dream of easy money into dread of a catastrophic burden.

After many years in which only very valuable properties were taxed, many Greeks went from paying almost no taxes on real estate to not having enough money to pay.

In 2010, property taxes accounted for 0.26 percent of gross domestic product, while this year they are around 2 percent, according to state budget figures. ‘Suddenly, the state treated the Greeks as if they were rich, at the precise moment that they ceased to be rich.’

Among the many disruptions of the past few years, this one shows how traditional conceptions — and a sense of security — can be shattered. With a history full of wars, bankruptcies and rampant inflation, Greeks had always seen land as a haven.

But it is private debt — at 222 billion euros last year — that may prove an even greater danger. This shows in government revenues. With the unified tax, ownership of every kind of property is now subject to taxation.

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

Essential history: ‘Forever debt’ Federal Reserve system invented to pay interest without ever ever ever repaying debt – definition of ‘Ponzi scheme’

February 26, 2016

Essential history: ‘Forever debt’ Federal Reserve system invented to pay interest without ever ever ever repaying debt – definition of ‘Ponzi scheme’

Posted on February 25, 2016 by Carl Herman

Ponzi scheme: criminal fraud of paying existing “investors” only and always from new “investors.” Collapse occurs without new “investors” and/or existing “investors” panic to cash-in.

The US Federal Reserve is based on the 1694-created Bank of England because this model allows government finance with debt that is never meant to be repaid. It is an “investment” model that pays interest guaranteed through tax collection. Its invention was to finance England’s government and military in a history of continuous centuries of war.

It’s cleverness allowed British finance to fund a short-term empire over rival European powers.

Although we can appreciate this historical manipulation, this is a Ponzi scheme because the system collapses without new “investors” of government debt securities.

This Ponzi scheme model is our US Federal Reserve System today:

not “US Federal” but admitted privately-owned,
without “Reserve” other than creating what is used for money out of nothing,
not a “System” but literal criminal fraud because it doesn’t create its claimed “monetary supply,” but the Orwellian opposite of a “debt supply” that is adding negative numbers forever.

US Treasury securities of bills, notes, and bonds continuously mature and must be repaid if the owner chooses to cash-in rather than renew the debt security. The US federal government debt is now $19 trillion, having risen over a trillion each year of the Obama administration.

This amount of total debt compared with ~100 million US households means that the average US household of ~$50,000 annual income owes ~$190,000 each should investors withdraw from this US government funding scheme. If your household income is more than $50,000, then use this ratio to estimate your share for repayment; for example, a $150,000 annual family income would owe $570,000 if US Treasury holders requested repayment rather than continue rolling-over their loans to the US government.

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

The Damage Has Been Done And The Consequences Will Be Suffered: “Have a Healthy Storage of Food, Precious Metals and Necessary Supplies”

January 1, 2016

The Damage Has Been Done And The Consequences Will Be Suffered: “Have a Healthy Storage of Food, Precious Metals and Necessary Supplies”

While the band plays on and Americans celebrate New Year’s many have no idea what may be in store in 2016. Mainstream financial pundits like to paint a rosy picture of the current economic conditions, suggesting that the government’s green shoots of yesteryear have now turned to full blown money trees, wherein consumers are spending, businesses are selling and everyone has an unlimited flow of cash.

But as noted by analysts at CrushTheStreet.com in their latest video report, “what we have become accustomed to in terms of normal is rapidly coming to an end.”

Indeed, with the Federal Reserve recently having raised interest rates, corporate bond markets starting to crack, and abysmal sales numbers over the holiday season, 2016 could very well spell disaster for financial markets, including government bonds.

So serious is the potential destruction to come that, according to the report, you’d better be ready with an alternate monetary mechanism of exchange such as gold or silver, as well as food and other stockpiles to mitigate supply disruptions and shortages.

Watch Perfect Storm Market Collapse courtesy of Crush The Street:

What we have become accustomed to in terms of normal is rapidly coming to an end… the global monetary experiment is literally bursting at the seams.

…

The economy is more dependent now than ever on the circulation of increasing systemic leverage.

…

The damage has been done and the consequences will be suffered… A loss of faith in the dollar will be a loss of faith in credit… and when perceived value in credit is lost, prices in the bond markets will collapse… Already we are seeing bonds outside of government debt implode.

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

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