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Financial and precious metals expert Egon von Greyerz (EvG) says don’t expect the global financial situation to get better anytime soon. EvG says, “You know what the politicians are doing now? Theresa May is my best example. These politicians are just running around posing and acting, but they are not achieving anything, and they are not achieving anything because the world is in a mess. What we are seeing the beginning of is the decline of the western world economy, which means the whole world economy. . . . There is no use in putting a time period on it, that it’s going to happen this year or next year. The trend is clear. We know that the world economy is in a mess. It’s going to decline, and in my view, it’s going to be a rapid decline.. . . Gold will reflect all of this, and currencies will be totally debased. . . . You don’t need a lot, you might only need another few snowflakes to trigger this avalanche. It could come in a month or in three months time because the system is a fake system. . . . I count $2 quadrillion in money. If you add debt, unfunded liabilities and the risk of derivatives, you come up to $2 quadrillion of debt and liabilities. The global GDP is $70 trillion. . . . So, you are talking about 30 times global GDP.”

What could go wrong? EvG says, “You don’t need much to go wrong. It will happen. They have no remedy anymore. 2007 to 2009, I have said many times that was a rehearsal. The real thing is coming now or in the next few years, and no money printing will ever stop it. They will try, but they will fail. This is why you will get the depressionary hyperinflation, and when that fails you get the implosion of the system.

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

World economy at risk of another financial crash, says IMF

October 4, 2018

World economy at risk of another financial crash, says IMF

Debt is above 2008 level and failure to reform banking system could trigger crisis

The floor of the New York stock exchange in September 2008. Photograph: Richard Drew/AP

The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reformsneeded to protect the system from reckless behaviour, the International Monetary Fund has warned.

With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.

Much has been done to shore up the reserves of banks in the last 10 years and to put in place more rigorous oversight of the financial sector, but “risks tend to rise during good times, such as the current period of low interest rates and subdued volatility, and those risks can always migrate to new areas”, the IMF said, adding, “supervisors must remain vigilant to these unfolding events”.

A dramatic rise in lending by the so-called shadow banks in China and the failure to impose tough restrictions on insurance companies and asset managers, which handle trillions of dollars of funds, are highlighted by the IMF as causes for concern.

The growth of global banks such as JP Morgan and the Industrial and Commercial Bank of China to a scale beyond that seen in 2008, leading to fears that they remain “too big fail”, also registers on the IMF’s radar.

The warning from the IMF Global Financial Stability report echoes similar concerns that complacency among regulators and a backlash against international agreements, especially from Donald Trump’s US administration, has undermined efforts to prepare for another downturn.

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

David Stockman: The World Economy Is At An Epochal Pivot

August 14, 2018

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David Stockman: The World Economy Is At An Epochal Pivot

A ‘Great Reset’ approaches

David Stockman warns that the global economy has reached an “epochal pivot”, a moment when the false prosperity created from $trillions in printed money by the world’s central banks lurches violently into reverse.

There are few people alive who understand the global economy and its (mis)management better than David Stockman — former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier — which is why his perspective is not to be dismissed lightly. He knows intimately how how our political and financial systems work, as well as what their vulnerabilities are.

And Stockman thinks the top for the current asset price bubble era is in — specificially, he thinks it hit its apex in January 2018. As this “Everything Bubble” prepares to burst, Stockman estimates the risk of economic crisis is as great, if not greater than, the 2008 Great Financial Crisis because of the radical and unsustainable monetary policy expansion the central banks have pursued over the past decade.

This has caused the prices of stocks, bonds, real estate and most other assets to appreciate at rates that have no basis in the ongoing income/cash flow of the global economy. In short, they are wildly overvalued.

A key condition that Stockman has been waiting to see, that serves as a signal the bubble’s bursting is nigh, is the concentration of speculative capital into fewer and fewer stocks as the “good” options for investors shrink. We now clearly see this in the FAANG complex (a topic covered in detail in our recent report The FAANG-nary In The Coal Mine)

Stockman’s main warning is that there’s no bid underneath this market — that when perception shifts from greed to fear, the bottom is much farther down than most investors realize. In his words, it’s “rigged for implosion”.

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

Unprecedented Housing Bailout Revealed, As China Property Sales Drop For First Time In 30 Months

October 21, 2017

Unprecedented Housing Bailout Revealed, As China Property Sales Drop For First Time In 30 Months

Back in March, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth will keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing: three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US with the remainder invested financial assets.

Beijing knows this, of course, which is why China periodically and consistently reflates its housing bubble, hoping that the popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process.

The other reason why China is so eager to keep its housing sector inflated – and risk bursting bubbles – is that as shown in the chart below, in 2016 the rise of property prices boosted household wealth in 37 tier 1 and tier 2 cities by RMB24 trillion, almost twice the total local disposable income of RMB12.9 trillion. For any Fed readers out there, that’s how you create a wealth effect, fake as it may be.

Unfortunately for China, whose record credit creation in 2017, and certainly in the months leading up to the 19th Chinese Communist Party Congress which started last week, has been the primary catalyst for the “global coordinated growth”, the good times are now again over, and according to the latest real estate data released last week, property sales in China dropped for the first time since March 2015, or more than two-and-half years, in September and housing starts slowed sharply reinforcing concerns that robust growth in the world’s second-largest economy is starting to cool.

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

World Economies in Trouble: Middle East Oil Exports Lower Than 40 Years Ago

December 7, 2016

WORLD ECONOMIES IN TROUBLE: Middle East Oil Exports Lower Than 40 Years Ago

Yes, it’s true. Middle East net oil exports are less than they were 40 years ago. How could this be? Just yesterday, Zerohedge released a news story stating that OPEC oil production reached a new record high of 34.19 million barrels per day. To the typical working-class stiff, driving a huge four-wheel drive truck pulling a RV and a trailer behind it with three ATV’s on it, this sounds like great news.

Unfortunately for the Middle East, this isn’t something to celebrate. Why? Well, let’s just say, there’s more to the story than record oil production.

While the Middle East oil companies were busy working hard (spending money hand over fist) to produce this record oil production, their wonderful citizens were working even harder to consume as much oil as they could get their hands on.

In the past 40 years, Middle East domestic oil consumption surged more than six times from 1.5 million barrels per day (mbd) in 1976, to 9.6 mbd in 2015. This had a seriously negative impact on rising Middle East oil production:

middle-east-oil-production-vs-net-exports

According to the 2016 BP Statistical Review, the Middle East produced 30.10 mbd of oil in 2015 compared to 22.35 mbd in 1976. This was a growth of 7.75 mbd. However, Middle East domestic oil consumption increased from 1.51 mbd in 1976 to 9.57 mbd in 2015. Thus, the Middle Eastern economies devoured an additional 8.06 mbd of oil during that 40 year time-period.

NOTE: The production data shown in the chart above only represents Middle East oil production. OPEC members not included are Algeria, Angola, Ecuador, Gabon, Libya, Nigeria and Venezuela. I only listed the production data for the Middle East as the data was readily available.

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

Negative Interest Rates Destroying the World Economy

April 18, 2016

Negative Interest Rates Destroying the World Economy

QUESTION: Mr. Armstrong, I think I am starting to see the light you have been shining. Negative interest rates really are “completely insane”. I also now see that months after you wrote about central banks were trapped, others are now just starting to entertain the idea. Is this distinct difference in your views that eventually become adopted with time because you were a hedge fund manager?

Just curious;

Bob

Summers-Larry-Career ANSWER: I believe the answer is rather simple. How can anyone pretend to be analysts if they have never traded? It would be like a man writing a book explaining how it feels to give birth. You cannot analyze what you have never done. It is just impossible. Those who cannot teach and those who can just do. Negative interest rates are fueling deflation. People have less income to spend so how is this beneficial? The Fed always needed 2% inflation. The father of negative interest rates is Larry Summers. He teaches or has been in government. He is not a trader and is clueless about how markets function. I warned that this idea of negative interest rates was very dangerous.

Yes, I have warned that the central banks are trapped. Their QE policies have totally failed. There were numerous “analysts” without experience calling for hyperinflation, collapse of the dollar, yelling the Fed is increasing the money supply so buy gold. The inflation never appeared and gold declined. Their reasoning was so far off the mark exactly as people like Larry Summers. These people become trapped in their own logic it becomes irrational gibberish. They only see one side of the coin and ignore the rest.

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

The World Economy Wreckers Of Beijing

March 10, 2016

The World Economy Wreckers Of Beijing

The desperate suzerains of the Red Ponzi are incorrigible. There appears to be no insult to economic rationality that they will not attempt in order to perpetuate their power, privileges and rule.

So now comes the most preposterous gambit yet. Namely, a veritable tsunami of state handouts to foster, yes, capitalist entrepreneurs!

That’s right. As described by Bloomberg, Premier Li Keqiang gave the word, and, presto, nearly $340 billion poured into an instantly confected army of purported venture capital funds run by local government officialdom all over the land.

China is getting into the venture capital business in a big way. A really, really big way.

The country’s government-backed venture funds raised about 1.5 trillion yuan ($231 billion) in 2015, tripling the amount under management in a single year to 2.2 trillion yuan ($340 billion), according to data compiled by the consultancy Zero2IPO Group. That’s the biggest pot of money for startups in the world and almost five times the sum raised by other venture firms last year globally, according to London-based consultancy Preqin Ltd.

Really? These are the same folks who built themselves a 1.2 billion ton steel industry in less than two decades, representing double what they can actually use and far more capacity than the rest of the world combined. That freakish industrial eruption is now tumbling into a red hole of losses, decay, abandonment and waste, but never mind. Now the Beijing comrades are going to seed venture capitalists at 5X the rate of the entire planet?

It puts you in mind of Mao’s Great Leap Forward, which endeavored to put a steel furnace in every Chinese farmer’s back yard. Of course, when they melted down their plows and hoes for scrap, the resulting leap was not exactly forward.

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

What’s Holding Back the World Economy?

February 10, 2016

What’s Holding Back the World Economy?

NEW YORK – Seven years after the global financial crisis erupted in 2008, the world economy continued to stumble in 2015. According to the United Nations’ report World Economic Situation and Prospects 2016, the average growth rate in developed economies has declined by more than 54% since the crisis. An estimated 44 million people are unemployed in developed countries, about 12 million more than in 2007, while inflation has reached its lowest level since the crisis.

More worryingly, advanced countries’ growth rates have also become more volatile. This is surprising, because, as developed economies with fully open capital accounts, they should have benefited from the free flow of capital and international risk sharing – and thus experienced little macroeconomic volatility. Furthermore, social transfers, including unemployment benefits, should have allowed households to stabilize their consumption.

But the dominant policies during the post-crisis period – fiscal retrenchment and quantitative easing (QE) by major central banks – have offered little support to stimulate household consumption, investment, and growth. On the contrary, they have tended to make matters worse.

In the US, quantitative easing did not boost consumption and investment partly because most of the additional liquidity returned to central banks’ coffers in the form of excess reserves. The Financial Services Regulatory Relief Act of 2006, which authorized the Federal Reserve to pay interest on required and excess reserves, thus undermined the key objective of QE.

Indeed, with the US financial sector on the brink of collapse, the Emergency Economic Stabilization Act of 2008 moved up the effective date for offering interest on reserves by three years, to October 1, 2008. As a result, excess reserves held at the Fed soared, from an average of $200 billion during 2000-2008 to $1.6 trillion during 2009-2015. Financial institutions chose to keep their money with the Fed instead of lending to the real economy, earning nearly $30 billion – completely risk-free – during the last five years.

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

The Death Throes of Oil

February 3, 2016

The Death Throes of Oil

PRINCETON – The price of oil is often regarded as a sort of thermometer to measure the health of the world economy. What is less often noted is that it can also serve as a barometer – warning of approaching geopolitical storms. Indeed, the dramatic plunge in the price of a barrel of crude – from nearly $150 in June 2008 to around $30 today – is likely to fuel continued upheaval far beyond the world’s energy and commodity markets, with particularly worrying implications for the European Union.

Sinking oil prices are clearly correlated with financial instability, but the lines of causation do not point in the direction most pundits seem to believe. On the contrary, when the price of oil rises, so do costs in most rich, industrialized economies; thus, a rising oil price acts as a brake on growth. Surges in the price of oil led to global recessions in 1973, 1979, 2000, and 2008.

The reverse is also true. An economic slowdown will likely produce a price drop, which can be a financial boon for governments and consumers alike. After the collapse of Lehman Brothers in 2008, oil prices plummeted in anticipation of economic stagnation, only to recover substantially as vigorous growth continued in emerging markets. Viewed in this light, the recent drop in oil prices is unsurprising, as it follows signs of weakness in every major emerging market (with the possible exception of India).

Furthermore, oil prices today are subject to a powerful source of downward pressure: the expectation that the world economy will be restructured in response to worries about climate change. Current efforts to curb global warming may not have much bite, but in the long term, the fact that fossil fuels are major contributors to the rise in atmospheric carbon dioxide and thus climate change is likely to prompt policymakers – and investors – to take serious action.

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

Global Debt Is MORE THAN TWICE AS BIG As the Entire World Economy … What Does It Mean?

March 3, 2015

Global Debt Is MORE THAN TWICE AS BIG As the Entire World Economy … What Does It Mean?

The Guardian reports that global debt has grown by $57 trillion dollars – to $199 trillion dollars – since the 2008 financial crisis.

How much is that? It’s a big number … but what does it actually mean?

The Guardian notes that global debt is now more than twice the size of the entire global economy:

Total debt as a share of GDP stood at 286% in the second quarter of 2014 compared with 269% in the fourth quarter of 2007.

(That’s more than 2.8 times the size of the world economy).

And it will only keep getting worse:

Government debt-to-GDP ratios will to continue to rise over the next five years in a number of countries including Japan, the US and most European countries ….

While the mainstream press talks about “deleveraging”, the fact is that many households are going deeper into debt:

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

The global financial system stands on the brink of second credit crisis

February 10, 2015

The global financial system stands on the brink of second credit crisis

The world financial system stands on the brink of a second credit crisis as interbank lending shows increasing risk

The world economy stands on the brink of a second credit crisis as the vital transmission systems for lending between banks begin to seize up and the debt markets fall over. The latest round of quantitative easing from the European Central Bank will buy some time but it looks like too little too late.

It was the collapse of US house prices back in 2007 that resulted in the seizure of the credit markets and banking crisis of 2008. And it would be easy to lay the blame for the 2008 financial crisis at the doorstep of American home owners, easy but wrong. The collapse of the US housing market was not the cause of the crisis, it was merely a symptom of the more insidious ills of cheap credit, low risk and the promise of another bailout round the corner.

The Keynesian pump priming that has taken place on a colossal scale across the world is failing. The Chinese economy was growing at 12pc in 2010, but that slowed to 7.7pc in 2013 and 7.4pc last year — its weakest in 24 years. Economists expect Chinese growth to slow to 7pc this year. It is the once booming property sector that has turned into a bust, and is now dragging down the wider economy as the bubble deflates.

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

World heading for financial crisis worse than in 2008 — China’s Dagong rating agency head

February 5, 2015

World heading for financial crisis worse than in 2008 — China’s Dagong rating agency head

A setback in the growth model focused on credit-based consumption may become a source of a new crisis

BEIJING, February 4. /TASS/. The world economy may slip into a new global financial crisis in the next few years, China’s Dagong Rating Agency Head Guan Jianzhong said in an interview with TASS news agency on Wednesday.

“I believe we’ll have to face a new world financial crisis in the next few years. It is difficult to give the exact time but all the signs are present, such as the growing volume of debts and the unsteady development of the economies of the US, the EU, China and some other developing countries,” he said, adding the situation is even worse than ahead of 2008.”

“The current crisis in Russia is caused by Western countries’ sanctions rather than internal factors. If we look at the US and the EU countries, their crises were caused by internal and not external factors,” the president of China’s Dagong rating agency said.

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

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The Guardian reports that global debt has grown by $57 trillion dollars – to $199 trillion dollars – since the 2008 financial crisis.

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