Been meaning to make a few comments before sending this off, but the last week really got away from me, so I’m going to get this off right now. The above “subject title” was sourced from the excellent article just below. There is some incredible info here, but if your time is extremely limited, I would strongly recommend the first article just below is a must read. Hope you benefit from the material. Take care.
The Most Dangerous Time Ever – World Financial System Now At The Edge Of A Black Hole
With continued uncertainty in global markets, today the man who has become legendary for his predictions on QE, historic moves in currencies, and major global events, told King World News this is the most dangerous time ever, with the world financial system now at the edge of a black hole.
The Most Dangerous Time Ever
World Economy Now At The Most Dangerous Point, Egon von Greyerz: “The world economy is now at its most dangerous point in history. In virtually every major country or region, there are problems of a magnitude which individually could trigger a collapse of the financial system. Because of the interconnectivity of the financial system, when the first domino starts falling, there is no possibility to stop all the other unstable dominos from crashing one after the other in quick succession. The world is now staring down a deflationary black hole that is on the verge of sucking into it all global debt of $250 trillion plus unfunded liabilities and derivatives of another $2 quadrillion or so. That would be the end of the financial system as we know it. Governments and central bankers around the world are of course totally aware of this and are standing with their fingers ready to push the button for the biggest money printing bonanza that the world has ever experienced.
Massive Global Debt Bubble
Look at Europe – Deutsche Bank, which is one of the biggest in the world, is valued at 1% of its asset value and it has derivatives which are standing at 20x German GDP. The share price is telling us that Deutsche Bank is bust. And so are Greek banks, Italian, Spanish, Portuguese, French banks, etc.
ECB money printing of €80 billion a month or €1 trillion per year is having no effect. Central banks are now pushing on a string. The bail out of Italy’s fourth largest bank, Monte dei Paschi, is failing. Germany is totally against the ECB stepping in, and the Italian government doesn’t want to bail-in the depositors. That would be a political disaster. Non-performing loans in Italy are 20% of assets and growing. It confirms my view that no debts, bank or sovereign, will ever be repaid.
Trouble In Japan…
The news from around the world is just getting worse by the day. Japan’s 80 trillion yen ($.8 trillion) printing program is having no effect. Bank of Japan Governor (Kamikaze) Kuroda is totally lost. He is currently buying all the bonds that the Bank of Japan is issuing. The BoJ is a top 10 shareholder in 90% of Japanese stocks. So not only is the BoJ holding Japanese bonds that they can never repay, but they are desperately trying to support the Japanese stock market. Just as the bonds will become worthless, they are likely to lose at least 90% on their stock holdings. The balance sheet of the BoJ is now approaching 0.5 quadrillion yen ($5 trillion) which makes them the biggest money printer in the world. But it won’t stop there. Kuroda’s latest folly is to hold the 10-year bond interest rate at 0% for an undetermined period. As investors start dumping Japanese bonds, the BoJ will need to print unlimited amounts of yen and increase debt exponentially to keep rates at zero. This is a policy which is guaranteed to fail.
The debt explosion in emerging markets has created a disastrous situation for many countries. Corporate debt in these markets has grown massively in the last ten years and is now standing at $25 trillion. Without continued growth of exports and higher commodity prices, these countries will go into a deflationary spiral. According to the Bank for International Settlements, the Debt/GDP ratio in China is 3x greater than what the BIS calls a dangerous level. The growth of Chinese debt from $2 trillion to $32 trillion in this century has probably created the credit bubble of all bubbles. A lot of this money has gone to big infrastructure projects that have zero value and yield no return. Bad debts in China are estimated at $2 trillion but are probably considerably higher.
And The U.S.
In the US, corporate debt has grown from $2 trillion to $6 trillion in the last 10 years. A lot of this debt has been used for share buybacks and have thus not created any economic value except for a few shareholders and executives. And US Federal debt will have doubled from $10 trillion to $20 trillion during Obama’s presidency. This is an absolutely remarkable and unacceptable increase, and a clear sign of a country on the road to bankruptcy. No country that runs real budget deficits every year for 55 years has any chance of survival. The only reason the US economy hasn’t collapsed yet is that the dollar is still the reserve currency of the world. But the dollar doesn’t deserve to be a reserve currency. Against the Swiss Franc for example, the dollar is down 77% since 1971.
And against gold, history’s only surviving currency, the dollar is down 97% since 1971. It is only a matter of time before the dollar starts its final journey to its intrinsic value of zero and so will many other currencies.
World Financial System At The Edge Of A Black Hole
Thus we are standing on the edge of a black hole that could very easily cause a deflationary implosion of all financial assets and all debt. No government is talking about this and no central banker dares to mention the seriousness of the present situation. There is only the smallest final snowflake that can push the world over the edge and start the deflationary avalanche. It is really surprising that central banks dare to hold back on the biggest printing program ever for so long. Because they only need to be a few seconds late and they will not be able to stop the collapse.
Let’s assume that a miracle happens and central banks will intervene in time and print tens of trillions of and eventually hundreds or even quadrillions of dollars, euros, yen etc. We will then see a hyperinflationary period which will be bigger than both the Weimar Republic or Zimbabwe for the simple reason that the figures involved now are much greater.
But we know of course that we cannot create wealth by printing worthless pieces of paper or creating zeros in a computer. So sadly, the world will not be saved by this money printing which will only create more debt. It is of course impossible to solve a problem by the same means that caused it in the first place.
Hyperinflation Followed By A Deflationary Collapse
After the hyperinflation, which will have solved nothing but instead created an even bigger problem, we will still see a deflationary collapse. This will be absolutely necessary to get rid of all the debt and the bubble assets. It will be like a forest fire that will get rid of all the dead wood and create the foundation for new, strong growth not lumbered by debt. This is the only way that the world can progress and grow, totally free from debt, decadence, and the all the false values that the current era has created.
It will not be easy to protect yourself against the coming upheaval. It is likely to involve social unrest, wars, famine, disease and massive suffering for most people. During this period of transition, money will be needed as a method of payment or for barter. Throughout periods of crisis, whether inflationary or deflationary, gold has always functioned as money. During the hyperinflationary period, gold will reflect the destruction of paper money and appreciate substantially both in inflationary terms as well as in real terms.
The All-Important Flight To Safety
What most people don’t realize is that gold also does very well in deflationary times. If we get the deflationary implosion that I have discussed above, there will be no financial system for a while and gold will be one of the few methods of payments. This is why gold will also be excellent protection in a deflationary period, although the nominal value will be much lower than in a hyperinflationary period.
Thus, with the current unprecedented risk in the financial system and the world economy, physical gold, and some silver, will be the best insurance and protection that anyone can hold.”
I am writing this article over a two-day period. The reason is that the Japanese Central Bank and the Federal Reserve are both meeting this week and will make major policy statements on Wednesday. I am writing this part on Tuesday.
I am interested to see if the Fed will raise interest rates a miniscule amount or if they will be too timid to even try that.
While there is much happy talk about an improving economy the numbers are painting a far darker picture. The employment numbers are so far off even the most uninformed and uncaring person knows that “full employment” is a pipe dream here in the USA. As a matter of fact David Stockman reported that 52% of the “new jobs” since 2009 are actually BLS (Bureau of Labor Statistics) guesses about new business startups.
Too bad that it was also reported that more businesses have been closing since 2010 than opening for the first time in recorded US history! In addition, how many are part-time jobs?
It was reported that imports coming into Los Angeles and Long Beach are down 4.3% year over year and that was BEFORE the Hanjin (one of the world’s top ten shipping container carriers) bankruptcy. This says a LOT about the expectations for holiday sales in my opinion. The current numbers could wind up extremely low when reported but should rebound at least somewhat when the Hanjin cargo at sea finally makes it ashore.
Many times it has been said that if the stock market is rising it is good for the incumbents in politics. I believe that is because, in usual times, it would reflect a strong economy. These days, it reflects an overactive Fed and other central banks “printing” money and buying assets and artificially raising prices. This exercise has done NOTHING for us regular folks and HOPEFULLY we will let them know what we think of these policies shortly.
Remember I am writing this before the Fed and BOJ statements. I see no reason that the Fed would raise rates except to save face. I also have no idea what will happen in Japan. Add to the fact that we don’t know what Kuroda (Japan Central Bank) will say we also don’t know how the markets may react. Don’t forget that the last time they went to negative interest rates and increased their buying efforts the markets reacted in the exact opposite way they were intended to act.
The Yen was supposed to fall but rose in value and the Nikkei index was supposed to rise but fell from 18,000 to below 15,000 before rising back to around 16,500 today (9-20). Not exactly promoting confidence! Let’s not forget that this same Nikkei was just shy of 39,000 in 1989- how’s that for a non-recovery?
If you held the Nikkei index from 1989-2016 (27 years) your net return would be -57.7% or an average annual return of -2.136%. This has happened even with the Japanese Central Bank being the major buyer of this index for the past two years or so. This should be interesting!
With all of this interference and asset purchases the latest reports from Japan show a collapsing economy. Imports decreased 17.3% in August and exports shrank 9.6% during the same time period.
(Thank you Gerald Celente)
So far, it appears that the Bank of Japan has committed to an inflation target (again) that makes it appear they won’t give up no matter how much data shows that their plan doesn’t work. Marcel Thielian says that there is concern on the committee about the sustainability of the bond buying program in particular (I mentioned that in a short period of time they would run out of bonds to buy and own the market). He also said that this announcement will allow them to scale back purchases later on.
Another part of this “plan” is to be able to, by fiat, be able to impose their will on the yield curve. It appears they want to keep shorter term rates lower and longer term rates higher than the short rates for the benefit of the banks which borrow short and lend long- the exact circumstance that led to liquidity problems and bank failures in 2008- what could go wrong???
So far, as is fairly usual, the stock markets like what they have heard. Globally markets are up as I write this but it could turn far higher or fall flat after we hear from the Fed.
The last meeting resulted in a short-term sharp rise in markets followed by a sharp pullback. Time will tell!
Well the Fed did not raise rates and the stock markets and metals are going higher as I write this but the proof to me as to how the markets are going to react will be over the next few days and weeks.
Each time the Fed kicks the can down the road it appears to me that the credibility that the Fed has enjoyed gets eroded more and more each time.
To follow up on something that I wrote about last week- after this announcement ALL assets are moving higher together. Beware if this changes direction because it is likely that all assets will move in the same direction at that time also.
Mike Savage, ChFC Financial Advisor
2642 Route 940 Pocono Summit, Pa 18346
Raymond James Financial Services, Inc. Member FINRA/SIPC
http://www.zerohedge.com/news/2016-09-22/ Why The Coming Wave Of Defaults Will Be Devastating “Bad debt is like dead wood piling up in the forest. Eventually it starts choking off new growth, and Nature’s solution is a conflagration–a raging forest fire that turns all the dead wood into ash. The fire of defaults and deleveraging is the only way to open up new areas for future growth. Unfortunately, central banks have attempted to outlaw the healthy credit cycle. In effect, central banks have piled up dead wood (debt that will never be paid back) to the tops of the trees, and this is one fundamental reason why global growth is stagnant.”
http://kingworldnews.com/protect-yourself-as-china-seizes-control-of-the-internet/ “Today (Oct. 1st.) also marks not just the milestone of the yuan joining the SDR but another official milestone as well. It’s the day in which the U.S. begins the process of handing control over the Internet from our Department of Commerce to a consortium of international bodies of which China will be paramount”.
“This is not Charlotte that’s out here. These are outside entities that are coming in and causing these problems. These are not protestors, these are criminals.”“We’ve got the instigators that are coming in from the outside. They were coming in on buses from out of state. If you go back and look at some of the arrests that were made last night. I can about say probably 70% of those had out-of-state IDs. They’re not coming from Charlotte.”
As shocking as this statement is, it should not be a total surprise. 18 months ago, as the riots flared in Ferguson, there was one man pulling the strings of this ‘domestic false flag’… George Soros. In an apparent effort to “keep the media’s attention on the city and to widen the scope of the incident to focus on interrelated causes — not just the overpolicing and racial discrimination narratives that were highlighted by the news media in August,” liberal billionaire George Soros donated $33million to social justice organizations which helped turn events in Ferguson from a local protest into a national flashpoint.
http://www.oftwominds.com/blogsept16/median9-16.html “Supporters of the status quo nearly wet their pants with joy when the Census Bureau reported that real (adjusted for inflation) median household income rose 5.2% between 2014 and 2015. Too bad it was completely bogus: the supposed increase in everyone’s income is pure statistical trickery”.
http://beforeitsnews.com/gold-and-precious-metals/2016/09/dear-obama-how-does-a-60-increase-in-nyc-homelessness-constitute-a-recovery-2958620.html “If this is what a “recovery” looks like to Obama we would certainly like to better understand how he would define a recession”.
http://www.oftwominds.com/blogsept16/3-stages9-16.html “The burdens of an increasingly self-serving hierarchy are falling most heavily on the middle and upper-middle class, while bread and circuses (i.e. Medicaid-paid opiates) are freely distributed to the restless masses to distract them from the immense concentration of wealth and power at the top of the pyramid”.
Is the economy in a Depression? Not if you’re a corporate bigwig skimming vast gains from corporate buybacks funded by the Fed’s free money for financiers. But if you’re a wage earner who’s seen your pay, hours and benefits cut while your healthcare costs have skyrocketed–well, if it isn’t a Depression, it’s a very close relative of a Depression”.
http://www.zerohedge.com/news/2016-09-22/charlotte-riots-what-they-are-not-telling-you “What was unfolding in Charlotte – and may still be – is not a protest. It’s a violent, unjustified riot by criminals and thugs. The question is why is the media giving it legitimacy by still referring to it as a protest?
As Watson points out, if mobs of white supremacists were looting stores, setting fires, attacking journalists and shooting guns, would the media call it a protest”?