THE CRASH
OK - We've got economy on the brain. All day, I tried to continue an economic post I had started, but I was again too sick/fatigued. I worked on the Lucy post, which took hours - because my computer has been seriously ill. It overheats even in OK temps, usually when it is being besieged by incoming IP/signals. The assault on its poor sub-human cortex is inducing schizophrenia.
So, real quick here... Wall Street has plunged a total of about 1600 points lately. This is a serious crash - a crash predicted by countless economists. But, this is only the beginning. I have never seen a deep drop on a Friday, especially a two-day drop, which did not enter Monday with another fall, and turmoil. So, the trouble will likely continue somewhat, at least, on Monday. News of an Asian market drop tonight will pretty much seal this forecast. Additionally, this drop is a little unusual, in August, usually a more stable/slow month. The anticipated CRASH is due for between September 15 and very early October. This September crash is probably going to be huge, for various converging reasons. So, I think what we are looking at NOW is not the crash per se. It is a foreshadowing of a greater crash in 3-6 weeks or so.
I will be posting more on economics ASAP. (The new owner of my house will be visitting some time soon, and I need to start cleaning yet AGAIN, etc.). For now, here are a few things...
Look at the successive posts by the EconomicCollapseBlog, as the crisis unfolded last week:
Birth Pangs Of The Coming Great Depression - (earlier) (repost)
8 Financial Experts That Are Warning That A Great Financial Crisis Is Imminent - (earlier)
12 Signs That An Imminent Global Financial Crash Has Become Even More Likely - (earlier)
Why Are So Many People Freaking Out About A Stock Market Crash In The Fall Of 2015? - August 19.
We Have Already Witnessed The First 1300 Points Of The Stock Market Crash Of 2015 - August 20.
This 2-day Stock Market Crash Was Larger Than Any 1-day Stock-Market Crash In US History - August 21.
(Rather than view every link above, I suggest you simply go over to http://theeconomiccollapseblog.com/ and view all, recent, and a page or two back).
The posts above in BOLD are suggested reading. They note several of the people who have been predicting a major crash in the Fall. There is a plethora of economic, psychological and superstitious reasons behind these predictions. Once Gerald Celente jumped on board with his prediction, that was the tipping point, as far as rad-progressive readership goes. Gerald Celente Is Predicting That A Stock Market Crash Will Happen By The End Of 2015
Perceptions proceeded to shape reality, and our first crash began last Thursday. We could have a total loss of 2000+ points by Tuesday. It could even become a major week-long tumble. However, (imo), there is an equal chance of some stabilisation, judging from recent market habits, (and riggings). The true crash will probably hit by about September 30. Double and triple crashes are common - this is what happened in 2008.
Somewhere back around 2009?... 2010?... I said to the crazy Commie Gardener neighbour that I KNEW that a second crash was coming, one day. I knew this by observations on the economy. But I also knew this, as I told him, by observing social psychology. After the 2008 crash, people's attitudes did not change. Their approaches. Their values and plans. Nothing about the dumb-shit status quo mentality, which has been feeding these vapid bubbles, did not adjust. In the face of urgent reality, the culture of denial simply coasted along in self-righteousness and self-assurance and militant narcissism.
And all the big-head sheeple did nothing while billions were handed away to banks and corporations which were, "Too big to fail." Now, there are even bigger, and FEWER, banks, even MORE "too big to fail", and there is not much more money to dole out. The Fed-Government has already been spinning into debt, QE 'printing' more funny money, as the vanguard of the global currency wars. What is left to assuage the mega-banks? Pensions. Taxes. Savings accounts. "Austerity." It's gunning for our shores.
You ain't seen nothin yet! We have been treading along, sweeping reality under the rugs, playing games of blame, cheating and corruption - turning the place into a National Insecurity State, as if more and more control of the people will ultimately save the economy. Certain NAZI-related corporations have been such Welfare Queens, they are getting to the point of forgetting about cajoling profits from consumers, and taking up FORCING sub-serviants to comply, through the power of a parasitised government.
I also wrote that the crash of the global economy is certain, not just because there are trillion$ more Derivatives than the world can cover; and not just because the Chinese economy was bound to crash, and so affect trade and bonds; and not just because the Banks were knee-deep in blood money, drugs, manipulated commodities markets, and manipulated LIBOR, etc., rates, but because oil prices were declining, AND THE BALTIC DRY INDEX WAS FALLING FAST.
What is this all about? Read about this and more in my important post, "RUNNING ON EMPTY" - (This post is not yet tagged. You are welcomed to view my other tags under "economy" and "economics").
(There is also the question of Greece, which you can find (partly) here - http://madman101.livejournal.com/1640892.html)
Some more signs?
Did You Know That The U.S. No Longer Has Any Strategic Grain Reserves At All?
46 million Americans go to food banks, and long lines for dwindling food supplies begin at 6:30 AM
One big example of bank corruption: HSBC Bank: Secret Origins To Laundering The World’s Drug Money
Who else has been predicting this crash scenario?
Federal Reserve Insider Alan Greenspan Warns: There Will Be a “Significant Market Event… Something Big Is Going To Happen” - Febr. 22, 2015.
Alan Greenspan is no radical. Nor were the corporations, banks and wealthy individuals, who betrayed themselves, as they bought up gold, silver, and dumped stock. Add China, India and Russia to this gang of wingnuts.
In NationalSecurity.news, the doomsday clock has been ticking away the minutes, and now: World economy's doomsday clock strikes minute to midnight as financial system collapses / Doomsday clock for global market crash strikes one minute to midnight as central banks lose control.... China currency devaluation signals endgame leaving equity markets free to collapse under the weight of impossible expectations - VIDEO See also London Telegraph.
Investment expert warns of financial collapse this year, says to invest in a secure, rural farm
I have so many accumulated links concerning the coming crashes, I am only posting a few recent ones in this post! One major indication of the coming crash has been the simmering and seething currency wars, which have involved many Asian countries, with the USA at the lead. With the collapse of China's stock market, (just after the Greek 'agreement'), which was fed by slowing growth, including a declining real estate bubble - then by forced government controls - China was moved to further devalue it's Yuan, to bring exports up competitively. This move was the primary trigger of our current stock market declines!
-At midnight tonight, the news report is that Asian stock markets are in a tumble. Down 8.5%.-
This paper war, pushed greatly by debt, has been one major sign that the global economy has been headed for serious collapse, and also military confrontations, (which are currently under-way overtly and covertly). I will be posting more about the currency war soon. U.S. stock market collapsing as global currency war heats up
Here is a video from NaturalNews, which I have not seen, but which sounds worth viewing. It predicted the oncoming train, and apparently remains very relevant now: 'Systemic Market Crash' video
Thom Hartmann, a progressive liberal, has thrown his own tinfoil hat into the ring, when he wrote, "The Coming Economic Crash of 2016"
Remember when Alan Greenspan, (see above), safely recanted, and said that his own captaining of the economy, before 2008, had been a greatly mistaken fault of irrational exuberance? His Ayn-Rand inspired delusions were WRONG. Believe it or not, there have been other important actors who have come out against the reckless Reaganomics which they had once so brazenly promulgated? That is not to mention all the whistleblowers and hackers, (many of whom have been knocked off in an alleged fashion). One pivotal person to recant was Ronald Reagan's own budget director, prime advocate of TRICKLE-DOWN ECONOMICS, David Stockman!
Lately, David Stockman has been quietly gaining traction, attacking the mistakes of the present, (and of the misrepresented), and warning that an economic collapse was coming soon. Tinfoil hats off to David Stockman.
David Stockman: The Collapse of the American Imperium
David Stockman, former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier is an insider's insider. Few people understand the ways in which Washington DC, The Fed, and Wall Street work and intersect better than he does.
He's extremely concerned by the "perfect storm" he sees of concurrent failures in US policy across foreign, monetary, economic, and fiscal fronts...
"The Cacophony Of Fed Confusion," David Stockman Warns Will Lead To "Economic Calamity" - 3/19/14.
"We never should have painted ourselves so deep in this QE corner in the first place," chides David Stockman, "because the whole predicate [of Fed policy] is false." The author of The Great Deformation holds nothing back in this brief 3-minute primer of everything is wrong with the American economic system (and the CNBC anchors definitely did not want to hear)...
David Stockman: The Global Economy Has Entered The Crack-Up Phase
David Stockman: The Global Economy Has Entered The Crack-Up Phase
David Stockman: The Global Economy Has Entered The Crack-Up Phase.............
02/16/2015 - Submitted by Adam Taggart via Peak Prosperity...... READ ON:
Few people 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.
David is now loudly warning that events have entered the crack-up phase, which he predicts will be defined by the following 4 developments:
Increasingly desperate moves by the world's central banks
Increased market volatility and losses
Deflation in industrial and commodity prices
Decreasing demand due to Peak Debt
As the crack-up phase gains momentum, he predicts an increasing number of "financial breaks" that will add to the unpredictability and instability of the environment for investors. Even 'dancing close to the door' sounds excessively risky at this point.
We’re in the crack-up phase. I think there are four big characteristics of that which are going to shape the way the economy and the markets unfold as we go forward.
You’re going to see increasing desperation and extreme central bank financial repression because they have gotten themselves painted so deep into the corner that they're lost and desperate. Almost week by week, we have another central bank - this week, it was Sweden - lowering their money market rates into negative territory. The Swiss Bank is already there, the Denmark Bank is there, the ECB is there on the deposit rate, the Bank of Japan’s there. All of the central banks of the world now are desperately driving interest rates into negative territory. I believe that they’re lost; they're in a race to the bottom whether they acknowledge it or not. The central bank of China can’t sit still much longer when the reminbi has appreciated something like 30% against the Japanese yet because of the massive bubble of monetary expansion that’s being created there. So that’s the first thing going on. Central banks out of control in a race to the bottom, sliding by the seat of their pants, making up really incoherent theories as they go.
The second thing is increasing market disorder and volatility. In the last three months, the stock market has behaved like a drunken sailor. But it’s really just a bunch of robots and day traders that have traded chart points until somebody can figure out what is happening directionally in the world. It has nothing to do with information or incoming data about the real world. We have today the 10-year German bond trading at 29.5 basis points. Well, the German economy’s been reasonably strong, fueling the Chinese boom. That export boom is over. The Chinese economy is faltering. Germany is going to have its own problems. But clearly, 29 basis points on a 10-year is irrational, even in the case of Germany, to say nothing of the 160 available today on the 10-year for Spain and Italy.
Both of those countries are in deep, deep fiscal decline. There is no obvious way for them to dig out of the debt trap that they’re in. It’s going to get worse over time. There’s huge risk in those bonds, especially because there’s no guarantee that the EU will remain intact or the euro will survive. Why in the world would anybody in their right mind be owning Italian debt at 160 other than the fact that they’re front-running the massive purchases that Draghi has promised and the Germans have acquiesced to over the next year or two. But that only kicks the can down the road. One of these days, the central banks are going to falter and the market is going to reset violently to prices that reflect the true risk on all this sovereign debt and the pretty cloudy outlook that’s ahead for the world market.
We now have something like four trillion worth of sovereign debt spread over Japanese issues, the major European countries that are trading at negative yields. Obviously, that is one, irrational and second, completely unsustainable. And yet, it’s another characteristic of what I call these disorderly markets. Investment is now coming home to roost. It will be driving a huge deflation of commodity and industrial prices worldwide. You can see that in iron ore, now barely holding $60 from a peak of $200. Obviously, it’s seen in the whole oil patch. Look at the Baltic Dry Index. That is a measure, one, of faltering demand for shipments and, two, massive overbuilding of bulk carrier capacity as a result of this central bank driven boom that we’ve had in the last 10 to 20 years. So that is going to be ripping through the financial system, the global economy, in ways that we’ve never before experienced. And so therefore, in ways that are hard to predict what all, you know, the ramifications and cascading effects will be. But clearly, it’s something that we haven’t seen in modern times or ever before - the degree of over investment, excess capacity, and everything from iron ore mines to dry vault carriers, aluminum plants, steel mills, and on down the line.
And then, finally, clearly, demand has run smack up against peak debt -- I think that’s the right word for it. We had a tremendous study come out in the last week or so from McKinsey, who do a pretty good job of trying to calculate, track and total up the amount of credit outstanding, public and private, in the world. We’re now at the $200 Trillion threshold. That’s up from only about $140 Trillion at the time of the crisis. So we’ve had a $60 Trillion expansion worldwide of debt just since 2008. During that same period, though, the GDP of the world saw a little more than $15 trillion from $55 or mid-$50s, roughly, to $70 Trillion. So we’ve generated, because of central bank money printing and all of this unprecedented monetary stimulus, we’ve generated something like $60 Trillion of new debt in the world and have barely gotten $15-17 billion of new GDP for all of that effort. And I think that is a measure of why the fundamental era is changing. That the boom is over and the crackup is under way when you see that kind of minimal yield from the vast amount of new debt that has been generated.
Now I’d only wrap this up by calling attention to the fact that within that global total of $200 billion, the numbers from China are even more startling. At the time of the crisis, let’s go back to 2000, China had $2 Trillion of credit outstanding. It’s now $28 Trillion. So we’ve had just massive 14X growth in 14 years. There’s nothing like that in recorded history, nor is there any plausible reason to believe that an economy, which is basically under a command-and-control system that is run from the top down to the party cadres, could possibly create $26 Trillion in new debt in that period of time without massive inefficiencies in waste and mistakes everywhere within the systems, especially since they have no markets. They have no feedback mechanisms. It all comes cascading down from the top and everybody lies to the next party above them. And I think the system is irrationally out of control.
In any event, my point was that at the time of the 2008 crisis, China had allegedly - if you believe their numbers, which no one really should - but as reported, they had $5 Trillion worth of GDP. It’s now $10. So they’ve gained $5 Trillion of GDP. Their debt at the time of the crisis was $7 Trillion, now it’s $28. So the debt is up more than $20 Trillion while the GDP is up just $5 Trillion. These are extreme unsustainable deformations, if I can use that word, that just scream out, “Danger ahead. Mayhem has happened.” And the unwinding of this and the resolution of this is not going to be pretty.
Listen to an interview with David Stockman (54m:29s) - or read the transcript!
What's more? Links galour! (For researchers). ContraCorner.com - & - davidstockmanscontracorner.com - &c...
Central Banks Are Crack Dealers and Faith Healers
Here comes Wall Street's latest toxic waste oil linked notes which blow up under 80
Historical dominoes rise of the welfare state and keynesian central banking
Michael Krieger
Today's turbulent financial markets stay out of harms way
The implosion is near: Signs of the bubbles last days
zerohedge.com - 1
zerohedge.com - 2
Why Russia and China are buying gold according to economics professor
So, real quick here... Wall Street has plunged a total of about 1600 points lately. This is a serious crash - a crash predicted by countless economists. But, this is only the beginning. I have never seen a deep drop on a Friday, especially a two-day drop, which did not enter Monday with another fall, and turmoil. So, the trouble will likely continue somewhat, at least, on Monday. News of an Asian market drop tonight will pretty much seal this forecast. Additionally, this drop is a little unusual, in August, usually a more stable/slow month. The anticipated CRASH is due for between September 15 and very early October. This September crash is probably going to be huge, for various converging reasons. So, I think what we are looking at NOW is not the crash per se. It is a foreshadowing of a greater crash in 3-6 weeks or so.
I will be posting more on economics ASAP. (The new owner of my house will be visitting some time soon, and I need to start cleaning yet AGAIN, etc.). For now, here are a few things...
Look at the successive posts by the EconomicCollapseBlog, as the crisis unfolded last week:
Birth Pangs Of The Coming Great Depression - (earlier) (repost)
8 Financial Experts That Are Warning That A Great Financial Crisis Is Imminent - (earlier)
12 Signs That An Imminent Global Financial Crash Has Become Even More Likely - (earlier)
Why Are So Many People Freaking Out About A Stock Market Crash In The Fall Of 2015? - August 19.
We Have Already Witnessed The First 1300 Points Of The Stock Market Crash Of 2015 - August 20.
This 2-day Stock Market Crash Was Larger Than Any 1-day Stock-Market Crash In US History - August 21.
(Rather than view every link above, I suggest you simply go over to http://theeconomiccollapseblog.com/ and view all, recent, and a page or two back).
The posts above in BOLD are suggested reading. They note several of the people who have been predicting a major crash in the Fall. There is a plethora of economic, psychological and superstitious reasons behind these predictions. Once Gerald Celente jumped on board with his prediction, that was the tipping point, as far as rad-progressive readership goes. Gerald Celente Is Predicting That A Stock Market Crash Will Happen By The End Of 2015
Perceptions proceeded to shape reality, and our first crash began last Thursday. We could have a total loss of 2000+ points by Tuesday. It could even become a major week-long tumble. However, (imo), there is an equal chance of some stabilisation, judging from recent market habits, (and riggings). The true crash will probably hit by about September 30. Double and triple crashes are common - this is what happened in 2008.
Somewhere back around 2009?... 2010?... I said to the crazy Commie Gardener neighbour that I KNEW that a second crash was coming, one day. I knew this by observations on the economy. But I also knew this, as I told him, by observing social psychology. After the 2008 crash, people's attitudes did not change. Their approaches. Their values and plans. Nothing about the dumb-shit status quo mentality, which has been feeding these vapid bubbles, did not adjust. In the face of urgent reality, the culture of denial simply coasted along in self-righteousness and self-assurance and militant narcissism.
And all the big-head sheeple did nothing while billions were handed away to banks and corporations which were, "Too big to fail." Now, there are even bigger, and FEWER, banks, even MORE "too big to fail", and there is not much more money to dole out. The Fed-Government has already been spinning into debt, QE 'printing' more funny money, as the vanguard of the global currency wars. What is left to assuage the mega-banks? Pensions. Taxes. Savings accounts. "Austerity." It's gunning for our shores.
You ain't seen nothin yet! We have been treading along, sweeping reality under the rugs, playing games of blame, cheating and corruption - turning the place into a National Insecurity State, as if more and more control of the people will ultimately save the economy. Certain NAZI-related corporations have been such Welfare Queens, they are getting to the point of forgetting about cajoling profits from consumers, and taking up FORCING sub-serviants to comply, through the power of a parasitised government.
I also wrote that the crash of the global economy is certain, not just because there are trillion$ more Derivatives than the world can cover; and not just because the Chinese economy was bound to crash, and so affect trade and bonds; and not just because the Banks were knee-deep in blood money, drugs, manipulated commodities markets, and manipulated LIBOR, etc., rates, but because oil prices were declining, AND THE BALTIC DRY INDEX WAS FALLING FAST.
What is this all about? Read about this and more in my important post, "RUNNING ON EMPTY" - (This post is not yet tagged. You are welcomed to view my other tags under "economy" and "economics").
(There is also the question of Greece, which you can find (partly) here - http://madman101.livejournal.com/1640892.html)
Some more signs?
Did You Know That The U.S. No Longer Has Any Strategic Grain Reserves At All?
46 million Americans go to food banks, and long lines for dwindling food supplies begin at 6:30 AM
One big example of bank corruption: HSBC Bank: Secret Origins To Laundering The World’s Drug Money
Who else has been predicting this crash scenario?
Federal Reserve Insider Alan Greenspan Warns: There Will Be a “Significant Market Event… Something Big Is Going To Happen” - Febr. 22, 2015.
Alan Greenspan is no radical. Nor were the corporations, banks and wealthy individuals, who betrayed themselves, as they bought up gold, silver, and dumped stock. Add China, India and Russia to this gang of wingnuts.
In NationalSecurity.news, the doomsday clock has been ticking away the minutes, and now: World economy's doomsday clock strikes minute to midnight as financial system collapses / Doomsday clock for global market crash strikes one minute to midnight as central banks lose control.... China currency devaluation signals endgame leaving equity markets free to collapse under the weight of impossible expectations - VIDEO See also London Telegraph.
Investment expert warns of financial collapse this year, says to invest in a secure, rural farm
I have so many accumulated links concerning the coming crashes, I am only posting a few recent ones in this post! One major indication of the coming crash has been the simmering and seething currency wars, which have involved many Asian countries, with the USA at the lead. With the collapse of China's stock market, (just after the Greek 'agreement'), which was fed by slowing growth, including a declining real estate bubble - then by forced government controls - China was moved to further devalue it's Yuan, to bring exports up competitively. This move was the primary trigger of our current stock market declines!
-At midnight tonight, the news report is that Asian stock markets are in a tumble. Down 8.5%.-
This paper war, pushed greatly by debt, has been one major sign that the global economy has been headed for serious collapse, and also military confrontations, (which are currently under-way overtly and covertly). I will be posting more about the currency war soon. U.S. stock market collapsing as global currency war heats up
Here is a video from NaturalNews, which I have not seen, but which sounds worth viewing. It predicted the oncoming train, and apparently remains very relevant now: 'Systemic Market Crash' video
Thom Hartmann, a progressive liberal, has thrown his own tinfoil hat into the ring, when he wrote, "The Coming Economic Crash of 2016"
Remember when Alan Greenspan, (see above), safely recanted, and said that his own captaining of the economy, before 2008, had been a greatly mistaken fault of irrational exuberance? His Ayn-Rand inspired delusions were WRONG. Believe it or not, there have been other important actors who have come out against the reckless Reaganomics which they had once so brazenly promulgated? That is not to mention all the whistleblowers and hackers, (many of whom have been knocked off in an alleged fashion). One pivotal person to recant was Ronald Reagan's own budget director, prime advocate of TRICKLE-DOWN ECONOMICS, David Stockman!
Lately, David Stockman has been quietly gaining traction, attacking the mistakes of the present, (and of the misrepresented), and warning that an economic collapse was coming soon. Tinfoil hats off to David Stockman.
David Stockman: The Collapse of the American Imperium
David Stockman, former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier is an insider's insider. Few people understand the ways in which Washington DC, The Fed, and Wall Street work and intersect better than he does.
He's extremely concerned by the "perfect storm" he sees of concurrent failures in US policy across foreign, monetary, economic, and fiscal fronts...
"The Cacophony Of Fed Confusion," David Stockman Warns Will Lead To "Economic Calamity" - 3/19/14.
"We never should have painted ourselves so deep in this QE corner in the first place," chides David Stockman, "because the whole predicate [of Fed policy] is false." The author of The Great Deformation holds nothing back in this brief 3-minute primer of everything is wrong with the American economic system (and the CNBC anchors definitely did not want to hear)...
David Stockman: The Global Economy Has Entered The Crack-Up Phase
David Stockman: The Global Economy Has Entered The Crack-Up Phase
David Stockman: The Global Economy Has Entered The Crack-Up Phase.............
02/16/2015 - Submitted by Adam Taggart via Peak Prosperity...... READ ON:
Few people 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.
David is now loudly warning that events have entered the crack-up phase, which he predicts will be defined by the following 4 developments:
Increasingly desperate moves by the world's central banks
Increased market volatility and losses
Deflation in industrial and commodity prices
Decreasing demand due to Peak Debt
As the crack-up phase gains momentum, he predicts an increasing number of "financial breaks" that will add to the unpredictability and instability of the environment for investors. Even 'dancing close to the door' sounds excessively risky at this point.
We’re in the crack-up phase. I think there are four big characteristics of that which are going to shape the way the economy and the markets unfold as we go forward.
You’re going to see increasing desperation and extreme central bank financial repression because they have gotten themselves painted so deep into the corner that they're lost and desperate. Almost week by week, we have another central bank - this week, it was Sweden - lowering their money market rates into negative territory. The Swiss Bank is already there, the Denmark Bank is there, the ECB is there on the deposit rate, the Bank of Japan’s there. All of the central banks of the world now are desperately driving interest rates into negative territory. I believe that they’re lost; they're in a race to the bottom whether they acknowledge it or not. The central bank of China can’t sit still much longer when the reminbi has appreciated something like 30% against the Japanese yet because of the massive bubble of monetary expansion that’s being created there. So that’s the first thing going on. Central banks out of control in a race to the bottom, sliding by the seat of their pants, making up really incoherent theories as they go.
The second thing is increasing market disorder and volatility. In the last three months, the stock market has behaved like a drunken sailor. But it’s really just a bunch of robots and day traders that have traded chart points until somebody can figure out what is happening directionally in the world. It has nothing to do with information or incoming data about the real world. We have today the 10-year German bond trading at 29.5 basis points. Well, the German economy’s been reasonably strong, fueling the Chinese boom. That export boom is over. The Chinese economy is faltering. Germany is going to have its own problems. But clearly, 29 basis points on a 10-year is irrational, even in the case of Germany, to say nothing of the 160 available today on the 10-year for Spain and Italy.
Both of those countries are in deep, deep fiscal decline. There is no obvious way for them to dig out of the debt trap that they’re in. It’s going to get worse over time. There’s huge risk in those bonds, especially because there’s no guarantee that the EU will remain intact or the euro will survive. Why in the world would anybody in their right mind be owning Italian debt at 160 other than the fact that they’re front-running the massive purchases that Draghi has promised and the Germans have acquiesced to over the next year or two. But that only kicks the can down the road. One of these days, the central banks are going to falter and the market is going to reset violently to prices that reflect the true risk on all this sovereign debt and the pretty cloudy outlook that’s ahead for the world market.
We now have something like four trillion worth of sovereign debt spread over Japanese issues, the major European countries that are trading at negative yields. Obviously, that is one, irrational and second, completely unsustainable. And yet, it’s another characteristic of what I call these disorderly markets. Investment is now coming home to roost. It will be driving a huge deflation of commodity and industrial prices worldwide. You can see that in iron ore, now barely holding $60 from a peak of $200. Obviously, it’s seen in the whole oil patch. Look at the Baltic Dry Index. That is a measure, one, of faltering demand for shipments and, two, massive overbuilding of bulk carrier capacity as a result of this central bank driven boom that we’ve had in the last 10 to 20 years. So that is going to be ripping through the financial system, the global economy, in ways that we’ve never before experienced. And so therefore, in ways that are hard to predict what all, you know, the ramifications and cascading effects will be. But clearly, it’s something that we haven’t seen in modern times or ever before - the degree of over investment, excess capacity, and everything from iron ore mines to dry vault carriers, aluminum plants, steel mills, and on down the line.
And then, finally, clearly, demand has run smack up against peak debt -- I think that’s the right word for it. We had a tremendous study come out in the last week or so from McKinsey, who do a pretty good job of trying to calculate, track and total up the amount of credit outstanding, public and private, in the world. We’re now at the $200 Trillion threshold. That’s up from only about $140 Trillion at the time of the crisis. So we’ve had a $60 Trillion expansion worldwide of debt just since 2008. During that same period, though, the GDP of the world saw a little more than $15 trillion from $55 or mid-$50s, roughly, to $70 Trillion. So we’ve generated, because of central bank money printing and all of this unprecedented monetary stimulus, we’ve generated something like $60 Trillion of new debt in the world and have barely gotten $15-17 billion of new GDP for all of that effort. And I think that is a measure of why the fundamental era is changing. That the boom is over and the crackup is under way when you see that kind of minimal yield from the vast amount of new debt that has been generated.
Now I’d only wrap this up by calling attention to the fact that within that global total of $200 billion, the numbers from China are even more startling. At the time of the crisis, let’s go back to 2000, China had $2 Trillion of credit outstanding. It’s now $28 Trillion. So we’ve had just massive 14X growth in 14 years. There’s nothing like that in recorded history, nor is there any plausible reason to believe that an economy, which is basically under a command-and-control system that is run from the top down to the party cadres, could possibly create $26 Trillion in new debt in that period of time without massive inefficiencies in waste and mistakes everywhere within the systems, especially since they have no markets. They have no feedback mechanisms. It all comes cascading down from the top and everybody lies to the next party above them. And I think the system is irrationally out of control.
In any event, my point was that at the time of the 2008 crisis, China had allegedly - if you believe their numbers, which no one really should - but as reported, they had $5 Trillion worth of GDP. It’s now $10. So they’ve gained $5 Trillion of GDP. Their debt at the time of the crisis was $7 Trillion, now it’s $28. So the debt is up more than $20 Trillion while the GDP is up just $5 Trillion. These are extreme unsustainable deformations, if I can use that word, that just scream out, “Danger ahead. Mayhem has happened.” And the unwinding of this and the resolution of this is not going to be pretty.
Listen to an interview with David Stockman (54m:29s) - or read the transcript!
What's more? Links galour! (For researchers). ContraCorner.com - & - davidstockmanscontracorner.com - &c...
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