US Economic Collapse: What Would Happen?

economy happened on September 16, 2008. This is the day the Reserve Primary Fund “broke the buck”—the value of the fund’s holdings dropped below $1 per share.1

Panicked investors withdrew billions from money market accounts where businesses keep cash to fund day-to-day operations.2 If withdrawals had gone on for even a week, and if the Fed and the U.S. government had not stepped in to shore up the financial sector, the entire economy would likely have ground to a halt. Trucks would have stopped rolling, grocery stores would have run out of food, and businesses would have been forced to shut down.

Read more at: US Economic Collapse: What Would Happen?

Britain: The overlooked Brexit scenario: what happens if we remain? - by Matt Clinch

In the approach to the ‘No Deal’ Brexit on October 31 barely a day has gone by without dire warnings of supply disruptions, food and drug shortages, renewed Irish border Troubles, a ferocious general election, a potential independent Scotland and the break-up of the UK - and the diminution of UK influence on the world stage.

Assurances about last-minute preparations seem to cut little ice as businesses anxiously appraise emergency supply lines. And more households are opting to stock up on items ranging from tinned foods to loo rolls.

Former Prime Minister Gordon Brown has now called for a full analysis to be made of the consequences of a ‘No Deal’ outcome – and a suspension of the ‘No Deal’ departure date of Hallowe’en.

But strangely, there is a missing forecast here: a set of outcome prognostications that has been glaringly absent: what would life be like if, after all the political hullabaloo and fears of an economic hit, the UK opted to Remain?

Read more: The overlooked Brexit scenario: what happens if we remain?

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USA - Economy: 3 Uncommon Signs That Economic Collapse Could Happen Soon - by Peter Reagan

As stocks continue to climb and the U.S. economy sustains its third longest period of expansion in history, market forecasters are seeking clues for when our next crisis may strike.

So far, three uncommon signals have them worried.

Here’s an explanation of the three uncommon signs causing alarm, and what they mean for your savings...

As stocks continue to climb and the U.S. economy sustains its third longest period of expansion in history, market forecasters are seeking clues for when our next crisis may strike.

So far, three uncommon signals have them worried.

Here’s an explanation of the three uncommon signs causing alarm, and what they mean for your savings...

Sign #1: Resurgence of Synthetic CDOs

Depending on how the underlying asset performs, derivatives can generate either massive gains or crushing losses.

But it’s when big banks and financial institutions start gambling in derivatives that things become especially dangerous. And that’s exactly what happened in the case of our last crisis: A slew of “too big to fail” organizations took on excessive risk through derivatives (mortgage-backed securities and others), and they couldn’t shoulder their losses when the bets went bad.

Sign #2: Lenders Loosening Mortgage Standards

Well, there are two main incentives for banks to lend recklessly:

1. Increasing competition from other banks, and...
2. Decreasing demand for credit.

Sign #3: The “Skyscraper Index”

In the case of our last crisis, both of those incentives came into play

Followers of the index today believe conditions are shaping up for it to be proven right once again, as cities across China, India, Saudi Arabia, and the U.S. erect another round of the tallest skyscrapers in history.

A good example of this is in Denver where a Manhattan developer is moving forward with plans to build a 1,000-foot skyscraper, which would dwarf all the other buildings in Denver.

 Read more: 3 Uncommon Signs That Economic Collapse Could Happen Soon

US Economy: Record Global Sell-Off of U.S. Debt Could Trigger Economic Collapse

Foreign governments buy U.S. debt because of the dollar's status as the world's reserve currency – the American economy has long been viewed as a safe place to invest. That's why the amount of U.S. debt held by foreign nations has increased more than six-fold since 2001.

But that's all changing now – events that could spark a U.S. economic collapse are already underway…

The Wall Street Journal revealed recently that China – the largest holder of U.S. investments – is ridding itself of its U.S. government bonds at the fastest rate in history.

In fact, a global sell-off of epic proportion is taking place.

Central banks in China, Russia, Brazil, and Taiwan are selling U.S. government bonds at such a pace that it's caused the most dramatic shift in the $12.8 trillion Treasury market since the 2008-2009 financial crisis.

Foreign official net sales of U.S. Treasury debt maturing in at least one year hit $123 billion in the 12 months ended in July, according to Deutsche Bank Securities Chief International Economist Torsten Slok, reported WSJ. That's the biggest decline since data started to be collected in 1978.

By contrast, foreign central banks purchased $27 billion of U.S. notes and bonds in the prior 12-month period.

Foreign central bankers' massive offloading of U.S. debt sends this dangerous signal…

Read more: WARNING: Record Global Sell-Off of U.S. Debt Could Trigger Economic Collapse

The Economic Pipe Dream: The Mother Of All Asset Bubbles Will Burst In 2016 - by Nouriel Roubini

In February 2013, NYU professor Nouriel Roubini made the call that US markets had entered the "mother of all asset bubbles.

With the rally in stocks that we've seen this year and a surge in high-yield debt issuance, Roubini said we're now at the midpoint of the bubble, in an interview with Yahoo Finance.

Next year may see more gains across markets, but the bubble, bigger than the one before the 2008 recession, could pop in 2016. \

 Read more: Roubini The Mother Of All Asset Bubbles Will Burst In 2016 - Business InsideR

Global Economy: New doomsday poll: 99.9% risk of 2014 crash - by Paul B. Farrell

Economic collapse

Global risks are accelerating. This is our fourth major poll update of industry leaders: A critical review of their warnings from early last year when we first predicted a 87% risk of a crash: Bernanke’s Fed saw an “unsustainable bubble” ... Gross: “credit supernova” ... Gundlach: “kaboom ahead” ... Ellis: “Don’t own bonds” ... Shilling: “shocker” ... Roubini: “Prepare for perfect storm” ... Shiller: “Irrational exuberance is back” ... Schiff: “Doubling down” on “doomsday” prediction ... InvestmentNews’ warning 90,000 advisers: “tick, tick ... boom!”

A few weeks later the crash risk was up to 98%. Then a dramatic preholiday uptick in investor sentiment. America’s collective unconscious tired of negativity after a Halloween headline: “Economic guillotine dead ahead.” A week later, 2014 became the “Year of the Boom.” Bank of America’s chief strategist screamed: “Bet on the bulls now.” The Great Gatsby spirit was celebrating the holidays“ 

Even old grumpy Dr. Doom, celeb economist Nouriel Roubini, began humming a happy tune all over television: “A global recovery is going to occur, get into equities.” 

What really happened? Fed politics. Short-term, Larry Summers withdrew as a candidate for the Fed chairman’s job. Dark cloud lifted as Janet Yellen become the pick. Wall Street cheered, Bernanke’s easy-money printing presses would not screw up their year-end bonuses. Plus Main Street was mentally exhausted, tired of the bad news, relentless political drama. We needed a holiday break. 

By Thanksgiving, “irrational exuberance” was accelerating in full holiday tilt: Headline: “Shiller’s hot P/Es will power a roaring bull till 2017,” and 2014 got branded the “Katy Perry market!” A week later, a Thanksgiving headline added: “10 reasons to be a bull in 2014.” 

But long term? What’s really ahead for America in 2014? Warning, something bigger is hiding in the deep shadows of our collective brain. At a recent lunch with an old friend, one of the world’s more successful commodities traders, he confirmed that “something” was dead ahead. But not just another brief statistical shift in sentiment. Not a medium-term volatility shift. America, the world, are in a historic transition, a paradigm shift, a mysterious upheaval that few will grasp till it moves further along.

Read more: New doomsday poll: 99.9% risk of 2014 crash - Paul B. Farrell - MarketWatch

Stock Markets Warning: Stocks Will Plunge by 50% this year

It is only a matter of time before the stock market plunges by 50% or more, according to several reputable experts.

“We have no right to be surprised by a severe and imminent stock market crash,” explains Mark Spitznagel, a hedge fund manager who is notorious for his hugely profitable billion-dollar bet on the 2008 crisis. “In fact, we must absolutely expect it."

Unfortunately Spitznagel isn’t alone.

“We are in a gigantic financial asset bubble,” warns Swiss adviser and fund manager Marc Faber. “It could burst any day.”

Faber doesn’t hesitate to put the blame squarely on President Obama’s big government policies and the Federal Reserve’s risky low-rate policies, which, he says, “penalize the income earners, the savers who save, your parents — why should your parents be forced to speculate in stocks and in real estate and everything under the sun?”

Billion-dollar investor Warren Buffett is rumored to be preparing for a crash as well. The “Warren Buffett Indicator,” also known as the “Total-Market-Cap to GDP Ratio,” is breaching sell-alert status and a collapse may happen at any moment.

So with an inevitable crash looming, what are Main Street investors to do?

One option is to sell all your stocks and stuff your money under the mattress, and another option is to risk everything and ride out the storm.

But according to Sean Hyman, founder of Absolute Profits, there is a third option.

“There are specific sectors of the market that are all but guaranteed to perform well during the next few months,” Hyman explains. “Getting out of stocks now could be costly.”

Read more: Warning: Stocks Will Collapse by 50

Argentina: The ‘Walking Dead’: Dealing with the economic collapse - by Veronique de Miguel

If today you were to arrive in Argentina with a 10 dollar bill in your hand, you would experience scenes similar to a “Walking Dead” episode. Immediately, tens of people – including the government – would perceive the green breath of life in your pocket and pursue you with one single intention: obtaining your dollar bill. 

Jokes aside, the economic collapse in Argentina, and in particular its eternal romance with the American dollar, is at its maximum boiling point and ready to explode. Like millions of Argentines, I have to deal with this chaotic period, uncertainties, unknowns and a super-inflation that makes a visit to the grocery store an adventure full of unpleasant surprises with the unexpected rise in price of absolutely everything. And don’t get me started on lines of credit or plans for future payments.

The average Argentine is so used to distrusting his own currency that it was a tradition to save one’s money in dollars, until the government banned this practice. The people continued doing it, of course, except they started to buy much more expensive black market dollars in exchange caves. The summary of the current situation is that the government intends to remedy the fall of reserves with currency printing, which is not supported in the same way by the dollar. The calculation is simple, many more pesos and fewer dollars in reserve to support them, means more pesos needed for each dollar. This is called devaluation, and it’s making a lot of people very upset.

The average citizen suffers in this financial mess. Still, President Cristina Fernández denies any economic crisis is present even when, among other measures, the government has announced a freeze on prices of commodities.

Despite big ads on storefronts, those products are often missing from the shelves of supermarkets. It is common to see posters in empty shelves announcing that you are allowed to buy only item per person.

Prices of all products constantly increase day by day. Consequently, the consumption of some basic items like bread, milk and other similar items is falling at an alarming rate. People don’t buy bread – as it is a very expensive good now – and have to get along with crackers. The price of vegetables has almost become a state matter.


Read more: The ‘Walking Dead’: Dealing with the economic collapse in Argentina | Voxxi

Global Economy: DEBT MASQUERADING AS GROWTH

The market Oracle reports: "The greatest economic, political and societal collapse in recorded history is unfolding and has been doing so ever since the final denouement of partially sound money occurred at Bretton Woods II in August 1971 – thereby allowing governments, the financial systems and elites to substitute money printed out of thin air and politically correct/corrupt legislation for sound economic policies.  This process has been unfolding for 40 years and is nearing its demise.  

Growth now is a function of expanding credit, financing government and consumer consumption and calling it GDP.  The developed world has become Something for nothing societies are like locusts they eat everything right down to its roots, including next year’s seed corn.  They will issue debt until it no longer can be sold. 

They will print money until it is no longer accepted.  This process is well established and underway (think Venezuela, Greece, Argentina, this is the future).  To illustrate the LACK of GROWTH, look at this chart of GDP from Chris Wood at CLSA and subtract the deficit:

Most economists are PREDICTING accelerating GDP growth in 2014; you sure wouldn’t come to that conclusion based upon median family incomes since 2008;  

Or the crash in PERSONAL incomes over the last year  

As you can see, the only period that compares to this CURRENT CRASH in disposable income in the last 20 years was the crash of 2007-2009.  Do you think this reflects a robust economy in 2014 as predicted by the MSM and Keynesians?  To grow the economy, we must borrow money to finance spending and report it as GDP.  DEBT MASQUERADING as GROWTH! 

Now, the developed world’s economies have been hollowed out (by runaway regulation, taxes and crony capitalism) and much of the wealth creation occurs in the emerging world.  Crony capitalists and their minions in government just attack the private sector where future growth and productivity must come from. 
 
They carve it up and destroy the future creative destruction (aka “Capitalism”) which must occur for growing middle classes and economies.  The powers that be are MINTING fire hoses of NEW money, creating at least 8000 million dollars/yen a DAY (2 million million a year or 2+ trillion per year) to support the global economy, bankrupt sovereigns and financial systems.   

Very little BAD can happen when they are printing and injecting this amount of money into the financial system and government coffers on a daily/yearly basis. “Currencies don’t float they just SINK at different rates”

Asset-backed economies provide the ILLUSION of growth in the developed world driven by currency depreciation (ASSET prices rise/reprice as the purchasing power of the currency they are denominated in sinks) and never-ending leverage to fund consumption and HIGHER ASSET prices.  This is insane behavior, but now is the last refuge of the powers that be.
 
Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule." 

EU-Digest

Switzerland: Inequality may spark unrest, Davos elites worry - by David Cay Johnston

Davos Economic Forum: the have's versus the have not's

There’s trouble coming as the chasm between the richest of the rich and everyone else continues to widen. So says a report prepared by the World Economic Forum, the nonprofit foundation that hosts its annual conference of business leaders in Davos, Switzerland, popular with the world’s billionaires.

The forum’s 14th annual assessment of risks, issued just ahead of the Davos gathering, makes clear that social instability, whether measured in mere riots or in bloody revolutions, is the likely outcome of increasing inequality.

The report speaks of a lost generation of young people worldwide who are finishing school only to find a paucity of jobs, which in turn creates pressure to lower wages.

“Widening gaps between the richest and poorest citizens threaten social and political stability as well as economic development,” the report said.

Three of the report sponsors are specialists in pricing risk, the American insurance broker and risk advisory firm Marsh & McLennan and the European insurers Swiss Re and Zurich Insurance Group.

The four-day Davos conference, which begins today, will draw six dozen or so billionaires this year as well as several hundred other people rich enough to have their own jets. Davos will also draw a far larger crowd of government officials, vendors of financial services and journalists.

That those at the apex of the global economy brought forth this report should end the debate over whether inequality poses a problem, but it won’t.

To those who deny inequality is a problem, or herald inequality as an economic good, the report can be dismissed as simply the claims of an interest group. And why trust what billionaires say any more than what a minority of economists, sociologists and writers (including me) has been pointing out for two decades?

Read more: Inequality may spark unrest, Davos elites worry | Al Jazeera America