An Unfolding Economic Collapse?

Posted by on Monday, September 26, 2011 · 14 Comments 

 

I’ve been on a bit of a hiatus lately due to some work related commitments, but still staying abreast of what’s occurring in the world.

The biggest issue we face is the unfolding economic situation and the focus is now revolving around what’s happening in Europe.  What’s occurring is a both a sovereign debt crisis and a banking crisis.  The sovereign debt crisis was spawned largely by the transfers of debts from the banking systems to certain governments in the Eurozone.  Now  sovereigns like Greece and Italy are in trouble, and the banks that thought they were covered via the backdoor bailouts and forced austerity measures are now also in trouble.  After having saddled these governments in debt and austerity in an effort to preserve themselves, the banks are now finding that there’s no more blood in the turnip and they may have to take some losses.  The only problem with that is that both the French and German banking systems have a lot of exposure to Greece in particular and although US Bank exposure is supposed to be “manageable”,  exposure to other countries which may wind up defaulting may be an issue.  That doesn’t factor in the largely unregulated derivative exposure tied into all of this that no one has a real handle on.  The bottom line is that the problems of Europe will be washing up on these shores soon enough.  This is not a crisis of the Eurozone alone, but is worldwide in scope.

Basically, much of the banking system worldwide is insolvent and lacks sufficient assets to cover deposits, so depositors’ money is at risk.  In Europe, in what appears to be shades of the Great Depression, there are bank runs quietly occurring as those who are in the know withdraw their money to seek safety.   US Treasurys have been the main beneficiary of this flight to safety, but that’s only a temporary haven as the problems we have here aren’t much different than those in Europe.  Our sovereigns within the borders of the US are the states and many of them are in a fiscal straight jacket. 

From what I can see, there’s not much that can be done at this point and I just get the feeling that the powers that be are about to pull the plug now that some have safely gotten onto lifeboats.  Unfortunately, most of the rest of us are  have seats in steerage and many are blissfully unaware of what’s getting ready to go down. 

Here’s a trader sounding the alarm during a BBC interview.  Personally, this guy strikes me as a bit suspicious as he willingly admits that he’s looking to make money from a down market and I don’t put people past making comments that setup the sort of “tradeable” fear and panic that allows some to make money while sewing panic among others.  This works in the reverse as well (think booming housing and stock markets of the recent past).  Plus a search on the web turns up little on what exactly his background is.  Notwithstanding that,  he makes some good points about how traders generally think.  The comments about Goldman Sachs ruling the world while millions of people are about to get fleeced of their savings is something to take note of.  The latter has been occurring all along even as we speak. 

 

 

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  • Chase

    The Satanic Psychopaths are professional pirates and thieves. Stealing your money, whether through the private issuing of your currency, or through government confiscation, is what they are good at. In response to the numerous requests for a description of how I see things playing out, I submit the following:

    1. First comes the silver and gold COMEX price suppression. In spite-of diminishing inventories in both metals, futures contracts and put options will continue to be manufactured against the markets. The goal is to keep the sheeple away from anything with real value during the plundering process. This will create a very real shortage of silver and gold as smart investors buy the metals at a deep discount.

    2. The Stock Market Crash comes first. Trillions of wealth will transfer hands as shorts against the S&P and other Indexes will continue to escalate. Insurance companies, banks, Mutual Funds, ETFs and other institutional investors will dump their holdings on command. Stock prices will go down, while Index Options capture all of the transferred wealth.

    3. Near the end of the market collapse the Federal Reserve will begin a series of interest rate hikes to trash all existing debt with a fixed interest rate. This will decimate the bond market. By the way, you can also buy Short Options against bonds and Call Options on Interest rates. More wealth transferred from the poor suckers that actually trust these people!  http://www.moneyteachers.org/Economic+Collapse+Script.htm

    • http://theafricanamericanclarioncall.com Greg L

      >>The goal is to keep the sheeple away from anything with real value
      during the plundering process. This will create a very real shortage of
      silver and gold as smart investors buy the metals at a deep discount.<>>Near the end of the market collapse the Federal Reserve will begin a
      series of interest rate hikes to trash all existing debt with a fixed
      interest rate. This will decimate the bond market. <<<

      At some point, the risk premium on all debt will be fully priced in everywhere as the banks scour the globe for profits.  The Fed doesn't fully control the out portion of the yield curve however, so the hikes will likely come from market forces beyond the Fed's control.   Yes, the bond market will be toast along with a whole slew of government budgets.

  • Anonymous

    I do not see a vast world wide conspiracy. I do see companies like Goldman, Sachs looking ahead and seeing juicy opportunities. The investment advice of the trader is as old as investing itself and certainly has no novelty.

    • http://theafricanamericanclarioncall.com Greg L

      Well conspiracies do require quite a bit to pull off.  At a minimum it requires that a group of people or institutions collude in secret to put something over some unsuspecting soul.  So, yes, I'd tend to agree that the threshold to be met is quite high to accuse someone of conspiracy.

      But what is really going on over the the Eurozone?  What are the ECB and the European Stabilization Fund trying to do here?  Basically, they're attemping to do the same thing that the Fed and the TARP attempted to do here; bail out the imprudent lending practices of the banks using the public purse.  The Greece parliament today passed a very unpopular property tax as a condition of getting the second tranche of money to keep them going temporarily until they ultimately default.  This comes on top of harsh austerity measures and the sell off of state assets to banking interests.  The whole discussion a couple weeks back about issuing Eurobonds was another proposed taxpayer financed bailout designed to ring fence banking institutions from the free market consequences of their imprudent lending decisions.  There appears to be a lot of interest in using the public purse in Europe, as has occurred here, to suspend free market forces, often using sleight of hand moves to hide the attempts.  It's a collusive effort involving governments (which have been fully purchased by banking interests) and global financial institutions.  So, I'd say this rises to a conspiracy and it involves avoidance of losses by transferring them to the public.

      As to this trader, although I agree with some of what he says, I'd have to say he's more about garnering attention for himself and his business.  But, that's the case with half the talking heads one sees on CNBC and the rest of the financial talk shows.

      ________________________________

      • Anonymous

        “There appears to be a lot of interest in using the public purse in Europe, as has occurred here, to suspend free market forces, often using sleight of hand moves to hide the attempts”
        .
        My view is western countries long ago forgot about thrift and let the good times roll. Just before leaving office James Madison vetoed a highway bill with his explanation being (not quite his exact words) the federal government wasn’t intended to be your sugar daddy.
        .
        It’s been all downhill since then.

        • http://theafricanamericanclarioncall.com Greg L

          >>>My view is western countries long ago forgot about thrift and let the
          good times roll. Just before leaving office James Madison vetoed a
          highway bill with his explanation being (not quite his exact words) the
          federal government wasn’t intended to be your sugar daddy.<<<

          Well, when stated broadly, we can both agree that the absence of thrift, incompetence  and out and out theft form the path to where we're at now.  Where we'd depart would be the specifics.  I happen to believe the welfare state is best exhibited by the military industrial  complex,  banking and big business in general.  You'd likely argue that Great Society welfare spending and social security are the problems here in the US.  The government has been a sugar daddy and the entities I mentioned have been the largest recipients of its largess.  
          .

          • Anonymous

            “Where we’d depart would be the specifics”
            .
            In the end, it’s welfare, whether to industry or private persons. Granted, a blind granny living in a dump of an apartment is far more sympathetic than say Lockheed- Martin. It could be well argued both forms of welfare serve useful purposes or detriments. Granny eats a little better, Lockheed employs 1,000′s of workers (who then pay taxes so granny can eat).
            .
            I thought the Great Society was a good idea at the time but now that those programs have a history, a different approach might have been better. We have discussed this in previous posts.
            .
            I caught a little bit of Obama’s push for his “jobs” program yesterday. He did his absolute best to play on emotions.  One problem the Republicans have is explaining why some of the Democrat reform bills have done harm, the details are complex and down right boring. Playing the emotions is easy and gets approval fast. The end result is the American public has little understanding of what is going on, all they know is policeman get fired and business moves offshore.

            • http://theafricanamericanclarioncall.com Greg L

              >>>I caught a little bit of Obama’s push for his “jobs” program yesterday.
              He did his absolute best to play on emotions.  One problem the
              Republicans have is explaining why some of the Democrat reform bills
              have done harm, the details are complex and down right boring. Playing
              the emotions is easy and gets approval fast. The end result is the
              American public has little understanding of what is going on, all they
              know is policeman get fired and business moves offshore.<<<

              Albeit for different reasons than those of the conservative ilk, I'm no longer paying much attention to what Obama says.  He's in campaign mode and there's not much the government can do about widespread unemployment other than ameliorate the pain.  That's not to suggest that some jobs tied into infrastructure rebuilding wouldn't be helpful, but in the long term curtailing free trade agreements and building industries/jobs here would be helpful in the longer term.  That's something that's not on the table.

              There's  little practical difference between either political party as far as policy implementation.  Sure, while campaigning, the politicians will try to act like they're different and they may talk differently, but from the standpoint of policy implementation, there's little difference.  This is why many see Obama's administration being an extension of the Bush administration with the exception of being "softer and gentler" Basically I see the  US political system being under the control of of the elites in this country, but that's hidden underneath the vitriol exchanged between the two sides with the republicans being the main source of much of this. 

              Because of that, for the first time in my life, I've concluded that the vote makes absolutely no difference, at least as far as national contests are concerned.  That makes it hard to justify taking up time getting involved in it as one is basically participating in a farce.   I'm certain that I'm not alone in thinking that.

              • Anonymous

                “Because of that, for the first time in my life, I’ve concluded that the vote makes absolutely no difference, at least as far as national contests are concerned.  That makes it hard to justify taking up time getting involved in it as one is basically participating in a farce.   I’m certain that I’m not alone in thinking that.”
                .
                Gregg, you have a LOT of company. I understand your feelings. People like Michael Savage think it’s just a game, the Democrats get a turn to rape and pillage, then the Republicans take their turn. Alex Jones feels there are men in a back room directing the fall of the west. 100′s of others fall somewhere in between.
                .
                As I have stated previously, I do not see men sitting in back rooms pulling levers (okay, some levers are being pulled). I think we have a perfect storm of financial events and those on the top have the best information, the best friends and the best allies  (and the bank roll) to take advantage of the situation. Little work is required, just sit there and the money falls into their laps.
                .
                As for free trade, currency valuation and the long term future, I am finding the Japanese are in the same boat we are. The strong yen coupled with countries like China and South Korea stealing away their industries leave many Japanese wondering about their future. Thinking back to the 70′s and early 80′s, Americans thought they were going to be eaten alive by the Japanese. How things have changed.
                .
                Maybe we should all marry a San Francisco Democrat and then go for a solar/alternative energy grant. We’ll all be sittin’ pretty then.

                • http://theafricanamericanclarioncall.com Greg L

                  >>>As I have stated previously, I do not see men sitting in back rooms pulling levers (okay, some levers are being pulled). I think we have a perfect storm of financial events and those on the top have the best information, the best friends and the best allies  (and the bank roll) to take advantage of the situation. Little work is required, just sit there and the money falls into their laps.<<<
                  Conspiracy takes a lot to pull off, not the least of which is the silence of the conspirators, but much of this is facilitated when you have a very small group of people who are "in" on the scheme.  The complexity and opaqueness of the current economic system ensures it's lack of transparency and that provides the cover for those who conspired to make profits at the expense of the rest of us.  And yes, they did conspire IMO.

                  Many people, including myself, predicted the disastrous outcome of the Fed's loose money policy which was actually in effect beginning with the Clinton administration.  It was no surprise that some would have grabbed free money and engaged in all sorts of speculation to make outsized profits.  They were certainly helped along in that effort by the rolling back regulations and policing.  All of our problems stem from this and no one has attempted to hold those to account who've created the problem.  This is so, because these same people have conspired to control the political system as well.
                  This is far more than a perfect storm.  It was one that was created.

                  ________________________________

  • Anonymous

    Welcome back!

    I was getting a bit worried, and was forming a squad for a search and rescue
    mission. I’m glad to see that that won’t be necessary.

    Didn’t you write recently that this nation having the ability to print its own money
    was one of the reason that we’re not yet feeling the economic pinch that’s
    squeezing other nations?

    I heard recently the following: Because we’re able to print our own money, this
    very act alone cancels some of our debts. Not quite sure why that would be the case, but the person saying it has the credentials to make such a pronouncement.

    To make money off the misery of others is not a soul-expanding aspiration.
    For that reason, I could never do what this trader is doing. I’m not judging
    him, his acts are a better judge of who he is than I could ever be.

    Using economic catastrophes to accumulate vast amounts of money for himself and others as his
    lifelong ambition, is bereft of the humanity that gives richness to our
    experience. Small wonder, then, that so many materialists resort to drugs, and material things to
    take the place of what’s missing in their lives.

    According to this trader, we all have to become financial experts, or end up on the heap of broken dreams, and victims of other people’s greed.

    • http://theafricanamericanclarioncall.com Greg L

      >>>I heard recently the following: Because we’re able to print our own money, this
      very
      act alone cancels some of our debts. Not quite sure why that would be
      the case, but the person saying it has the credentials to make such a
      pronouncement<<<

      I'm glad to be back.  In addition to work related issues, I've also been recovering from a torn Achilles heel.  I had an operation a couple of months back to sew it back together and have just now come off crutches.  Thank God for that as my movements were very restricted.  There are a lot of places you can't go and things you can't do on crutches.  I was just about to e-mail you.

      The statement above is true.  The Fed's money printing is designed to do two things; create speculative profits for the Wall Street crowd by allowing them to borrow "free" money.  In many instances, they can borrow at a low interest rate and just invest in something safe like US Treasuries and pocket the difference between the interest they get on the bonds and what the money cost them.  Effectively, you and I are paying that interest in a sort of back door bailout.  The other aspect is reducing the debt.  Debt is generally static, so if I can inflate the currency by printing more of it, this eases debt burdens.  So if I bought a house 30 years ago taking out a $ 20,000 mortgage and through the wonders of inflation, that house is now worth $ 2,000,000, my debt burden now is far lighter.  The main reason my house is worth so much more is mainly due to inflation or money printing. 

      Inflation has been on a tear since the 1970's, but was really enshrined as a mechanism IMO to reduce the burdens of government debt under Greenspan's tenure as Fed Chair.  With manufacturing having slipped away, the economy transitioned to a financialization scheme with money printing as a core feature fueling the profits of the Wall Street crowd while allowing unbridled government spending (read military industrial complex) while keeping taxes "low".  Amazingly, some folks want to keep this deal going, but it's collapsing under its own weight.

      • Anonymous

        “There are a lot of places you can’t go and things you can’t do on crutches.  I was just about to e-mail you.”

        True. We never know just how valuable our limbs are to us until we lose them, short-term or long-term. I had to fight the impulse to e-mail you: All was well the last time I wrote expressing concern.

        Thanks for the explanation on money printing. I have clarity now.

        • http://theafricanamericanclarioncall.com Greg L

          Fortunately, I'm back on my feet, but it will take a while to get full range of motion.

          Gaining clarity on some of these issues is a challenge for all of us really. Often I feel the issues that are the most impactful are frequently either not discussed or made so "complex" so as to not be transparent.  This is definitely the case with the Federal Reserve.  Even its name is misleading in that it implies that it's a agency of the government.  It is not.  It is a private bank owned by other private banks so it should come as no surprise that they'll act in their own interests rather than ours.  But just like everything else that really matters, this is somewhat hidden and little understood by most of us and yet is the root cause of many of our problems.  Basically, a group of private bankers control a major part of the economy and we hand our taxes over to them and others. He who controls the money actually rules and all else is an illusion really.

          ________________________________

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