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A Warning Sign For The World

Any financial system that is based on debt is doomed to fail.  Today, we are living in the greatest debt bubble that the world has ever seen, and if all of a sudden people could not use credit to buy things our economy would immediately ground to a halt.  Unfortunately, no debt bubble can last forever.  When this current debt bubble finally bursts, faith in the financial system is going to disappear, credit is going to freeze up and there […]

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Any financial system that is based on debt is doomed to fail.  Today, we are living in the greatest debt bubble that the world has ever seen, and if all of a sudden people could not use credit to buy things our economy would immediately ground to a halt.  Unfortunately, no debt bubble can last forever.  When this current debt bubble finally bursts, faith in the financial system is going to disappear, credit is going to freeze up and there is going to be a massive wave of bank failures.  Right now, Greece is a warning sign for the world.  Nobody wants to lend money to Greece, the Greek banking system is dying, one out of every four businesses has already shut down, unemployment is soaring and the Greek economy has now been in recession for five years in a row.  Sadly, the economic implosion in Greece is rapidly accelerating.  The Greek economy shrunk at a 7 percent annual rate during the 4th quarter of 2011.  That wasn’t supposed to happen.  Things were supposed to be getting better in Greece by now.  But instead the Greek depression is getting even worse, and very soon the rest of the world is going to be going through what Greece is currently experiencing.

Unfortunately, most in the mainstream media are treating what is happening in Greece as an “isolated incident” rather than as a very serious warning sign for the world.

Thankfully, there are at least a few reporters out there that are realizing the gravity of the situation.  The following is how one reporter from the New York Times recently described what life is like in Greece now….

By many indicators, Greece is devolving into something unprecedented in modern Western experience. A quarter of all Greek companies have gone out of business since 2009, and half of all small businesses in the country say they are unable to meet payroll. The suicide rate increased by 40 percent in the first half of 2011. A barter economy has sprung up, as people try to work around a broken financial system. Nearly half the population under 25 is unemployed. Last September, organizers of a government-sponsored seminar on emigrating to Australia, an event that drew 42 people a year earlier, were overwhelmed when 12,000 people signed up. Greek bankers told me that people had taken about one-third of their money out of their accounts; many, it seems, were keeping what savings they had under their beds or buried in their backyards. One banker, part of whose job these days is persuading people to keep their money in the bank, said to me, “Who would trust a Greek bank?”

Can you imagine?

Greece is experiencing a full-blown economic collapse and nobody can see a light at the end of the tunnel at this point.

As I have written about previously, the overall rate of unemployment in Greece has now risen above 20 percent and the youth unemployment rate in Greece has soared to an astounding 48 percent.

Deleveraging can be an extremely painful process.  Greece has been forced to try to reduce the size of its budget deficit, but every time it cuts government spending that causes economic activity (and thus government revenues) to slow down as well.

Now the EU and the IMF are demanding that even more very painful austerity measures be implemented in Greece even though Greece is already experiencing a full-blown depression.

The EU and the IMF are demanding that Greece fire 15,000 more government workers immediately and a total of 150,000 government workers by 2015.

The EU and the IMF are demanding that wages for government workers be cut by another 20 percent.

The EU and the IMF are demanding that the minimum wage be slashed by more than 20 percent.

The EU and the IMF are also demanding significant reductions in unemployment benefits and pension benefits.

Of course all of those cuts are going to make the short-term economic conditions in Greece even worse.

The rioting, looting and burning of buildings that we are witnessing right now in Greece is likely to continue for quite some time as exasperated citizens attempt to express their frustrations to politicians that simply do not seem to care.

According to the National Confederation of Greek Commerce, recent rioting resulted in damage to 153 businesses in Athens.  45 of those businesses were totally destroyed.

You can view some stunning footage of the current rioting in Greece right here.

Despite all of the austerity measures that have already been implemented, the truth is that Greece is very likely to default soon anyway.

There is a very good chance that the new austerity agreement that the Greek parliament just approved will never be implemented.  There are new elections scheduled for April and the current party in power is polling in the single digits.

The new Greek government is likely to look much different from the current one, and nobody knows for sure if the new government will follow through on any of the promises being made by the current government.

In addition, the German parliament must approve this new deal with Greece, and the German parliament is not scheduled to vote on it until February 27th.  Considering the mood in Germany right now, approval is not guaranteed.

So there are all kinds of things that could go wrong with the “deals” that are currently being discussed.  The truth is that a Greek default in the coming months seems to become more likely by the day.

Some in the financial world almost seem eager for a Greek default.  The following is what Jon Moulton, the chairman of Better Capital, recently told CNBC….

“If I was Greek, I wouldn’t be going for these measures, I’d be going for default and getting it over with. Would you like two to three years of pain or 20?”

But a disorderly Greek default would not be a pleasant thing for the global economy at all.  A recent article in the Guardian detailed what some of the consequences of a Greek default and exit from the eurozone might be….

But default and “re-drachmatisation” would be a costly and chaotic process. In the long term the euro might be strengthened if some of its weaker members headed for the door. But in the short term banks across the eurozone might have to be closed to prevent a run on the single currency as investors speculated about which country might be next. A new wave of bank nationalisations would be likely to follow as lenders counted their losses on now worthless Greek debt.

Capital controls would have to be imposed and borders shut to stop money flooding out of Greece. Portugal, Italy and Spain would come under intense pressure from investors wary about the risk of another victim. Banks everywhere, already reluctant to lend, would cut back hard, nervous about their exposure to the bonds of all Europe’s crisis-hit states.

And the financial crisis in Europe is going to continue to spread well beyond Greece.  Moody’s Investors Service just downgraded the credit ratings of six European nations.  The following is how Bloomberg described the downgrades….

Spain was downgraded to A3 from A1 with a negative outlook, Italy was downgraded to A3 from A2 with a negative outlook and Portugal was downgraded to Ba3 from Ba2 with a negative outlook, Moody’s said. It also reduced the ratings of Slovakia, Slovenia and Malta.

Countries such as Italy, Spain, Portugal, Ireland and Hungary are heading down the exact same road that Greece has gone.  Greece was the first one to experience a full-blown depression, but soon Greece will have a lot of company.

Greece is most definitely a warning sign for the world.  If you keep recklessly piling up debt, eventually a day of reckoning comes.  It is inevitable.

But Barack Obama does not seem to understand this.  He continues to pile another 150 million dollars on to our national debt every single hour.  He knows that cutting spending significantly right now would hurt the economy and that would significantly hurt his chances for another term.

Needless to say, Barack Obama is not likely to do anything that is going to significantly hurt his chances for another four years in the White House.

So we continue to roll on toward disaster.

The U.S. financial system is like a car with no brakes that is heading straight toward a 5,000 foot drop at 100 miles an hour.

It is all going to seem like fun and games to some people until we hit the canyon floor.

Once that happens, nobody will be laughing.

— The Economic Collapse Blog

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6 Things That Can Make or Break The Stock Market In 2018

Credit Suisse is out early with its forecasts for US stocks and the economy next year, and they are bullish. 

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Credit Suisse is out early with its forecasts for US stocks and the economy next year, and they are bullish.

The firm’s equity strategists see the S&P 500 rising to 2,987 by year-end, implying an annualized gain of about 11%. They forecast earnings-per-share growth of 6% to 7% over the next two years, from $130 this year to $147 in 2019.

“Our market views are predicated on a supportive economic backdrop, with benign recessionary risks and a pickup in near-term indicators,” said the US equity strategists led by Jonathan Golub, in a note on Tuesday. “While we expect more muted longer-term growth, this has focused corporations on cost containment and the return of capital to shareholders, extended the business cycle and lowered discount rates.”

Credit Suisse is also betting on the continued outperformance of favored sectors in 2017. The tech sector remains the team’s favorite even though it’s expensive relative to earnings. And, they expect financials to outperform due to deregulation.

“Our forecasts are built upon the most historically important drivers of corporate profits and stock prices,” Golub wrote. “That said, many things can alter the market’s path over the near term.”

Trump policy

Trump policy

Andy Kiersz/Business Insider

The group of stocks that would benefit the most from a corporate-tax cut surged after the election but slid only until recently. This suggests investors were doubtful about President Donald Trump’s plan.

“We expect that the proposed tax plan will be difficult to pass, or will have less of an impact than hoped for,” Golub said.

“While we believe that the market would initially applaud such actions, we anticipate that the investment conversation would quickly shift toward higher potential deficits and wage inflation, both negatives for stocks.”

New Fed leadership

Trump said two weeks ago Friday that he would make an announcement on who will lead the Fed after Chair Janet Yellen’s term ends in February. He is reportedly considering policy hawks including Kevin Warsh and John Taylor.

“We believe that there are two key issues surrounding Yellen’s replacement that could unsettle the market: (1) a change in the perceived independence of the Fed, and (2) an end to the period of uber-dovish policy.”

Volatility

Stocks have historically rallied when the CBOE Volatility Index is very low.

“Market volatility has been extremely low throughout the recovery, with the VIX currently reading 9.7,” Golub said. “This has led many pundits to characterize investors as complacent and the market vulnerable to a pullback. We disagree with these assertions.”

Currency

Currency

Credit Suisse

The trade-weighted dollar has slumped 9% this year.

“Our work indicates a 10:1 ratio between currency moves and corporate profits (in the opposite direction). Unfortunately, the dollar’s move is much more muted when measured on a year-over-year basis [-3.3%], and is therefore a much smaller consideration in our forecasts.”

North Korea

North Korea

Credit Suisse

The concern is not a North Korean attack — which investors aren’t expecting — but what happens if the US government punishes one of its major trading partners: China.

“While such actions would likely be targeted, with little economic impact, they have the potential to escalate, disrupting global growth.”

The chart shows that the recent improvement in China’s economy has benefitted US companies.

Hurricanes

The impact of Hurricanes Irma and Harvey, and the recovery efforts, will skew many economic indicators over the next few months.

“Separately, we would not be surprised to see some companies using these natural disasters as an opportunity to conveniently take write-downs,” Golub said.

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Is White-Collar Crime a Threat to Wall Street?

The stock market has had nightmares in the past and we cannot rule that out from happening again in the future, not even with the introduction of new financial regulation policies designed to prevent a financial crisis like the one witnessed in 2008-09.

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The stock market has had nightmares in the past and we cannot rule that out from happening again in the future, not even with the introduction of new financial regulation policies designed to prevent a financial crisis like the one witnessed in 2008-09.

While only one person, Credit Suisse (NYSE:CS) executive Kareem Serageldin, was convicted in relation to the global financial crisis of 2008, investigations over the years have revealed  there probably should have been more. According to findings, the financial crisis of 2008 had more to do with white-collar crime than a natural market meltdown.

The biggest issue when it comes to white-collar crime however, especially in securities fraud, is there are a lot of gray areas. Since markets are unpredictable, it has often proven difficult to pin these malpractices on individuals.

In most cases, the company, its shareholders and even employees are the ones who suffer the consequences.

For instance, in a Financial Times feature on Eric Ben-Artzi, the Deutsche Bank (NYSE:DB) whistleblower who exposed the bank’s improper accounting practices, the bank’s former risk management officer accused the SEC of performing a disappointing investigation. Ben-Artzi actually turned down the $8.25 million offered to him by the SEC for his role in exposing the company.

In the article, Ben-Artzi argues that by forcing the bank to pay $55 million rather than prosecuting the individuals involved in the crime, the SEC had allowed top executives at the bank to retire with “multimillion-dollar bonuses based on the misrepresentation of the bank’s balance sheet.” On the flipside, the bank’s shareholders and general employees ended up suffering the consequences as they were forced to bear the burden of their managers’ accounting treachery.

This is a clear example of what happens when things go wrong in these so-called “too big to fail” companies. Top executives who are often at fault for planning and executing such malpractices are also deemed “too big to jail,” thereby transferring the burden to the company, the shareholders and rank-and-file employees. This happens on Wall Street, in multinational institutions and even within the confines of government parastatals.

According to Vikas Bajaj, a criminal defense attorney who regularly defends people accused of white-collar crimes, corporate fraud is often pinned on the wrong victims and at times can “devastate personal and professional life for a very long time, making it difficult to secure employment, rent a home, secure a government student loan or obtain a professional license.” However, gathering the right evidence and speaking to the right people can help to strengthen the defense, while getting a white-collar crime defense attorney can ensure the true story emerges, thereby protecting the rights and the future of the accused, notes Bajaj.

But as we have seen, investigators do tend to go for the least protected individuals when it comes to white-collar crime. This does not rectify the long-term impact on the company in question and we have witnessed many companies go down the drain due to major financial malpractices.

While most people view corporate fraud as any practice that wrongly represents the financial position of a company or anything that results in money being lost without a trace, sometimes ignorance and negligence can amount to white-collar crime. For instance, banks are mandated to perform thorough credit checks before issuing loans to individuals and businesses. Yet, defaults from loans and mortgages are what fueled the magnitude of the 2008 global financial crisis.

In short, lenders did not do their homework before issuing loans. It was high-risk lending fueled by the then-booming housing market, which was shortly followed by several credit defaults and then the global financial crisis. While various financial regulations like the Dodd-Frank Act and Basel III Rules have since been introduced to avert the possibility of another financial crisis triggered by the banking sector, accounting misrepresentation like in the case of Deutsche Bank could end up taking the market back to those dark times.

Had it not for Ben-Artzi, who knows whether the malpractice at Deutsche Bank would ever have been uncovered? Who knows how many more companies are doing the same thing on Wall Street? According to World Finance‘s Emily Cashen, “the same reckless behavior behind the 2008 global crash continues to run rampant on Wall Street and unless this vicious cycle can somehow be broken, the global banking system may spiral into fresh disaster.”

Conclusion

White-collar crime on Wall Street is real and could be one of the biggest undetected threats the financial markets could be facing. The various regulatory bodies tasked with the responsibility of investigating and prosecuting the individuals responsible seem to be reluctant to do so on the belief of some being “too big to jail.” Often, the innocent and defenseless end up bearing the burden of their managers’ crimes, losing their jobs and even being put behind bars.

Disclosure: I have no positions in any stocks mentioned in this article.

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Is It Wrong To Question The Official Story When Tragedy Strikes?

Of course, when there is news, it should be reported. Today it is reported sensationally, as entertainment. Is it meant to inform, or induce?

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via The Daily Bell

The media says, “Jump.” And the public responds in unison, “How high?”

“As high as you ever have jumped before, except maybe after 9/11, or the Kennedy assassination.”

Of course, when there is news, it should be reported. Today it is reported sensationally, as entertainment. Is it meant to inform, or induce?

Which came first, the media’s obsession with violence, or the public demand for violence? In the 1990’s as violent crime in America dropped, the media filled more and more time slots with stories about violence.

By the end of the 90’s the public was clamoring for the government to do somethingabout what they assumed was a rising trend in violent crime.

Was that orchestrated? The government certainly benefits from a hysterical public begging them to help. It certainly gives the government an important role in the daily life of an average citizen. But this alone doesn’t mean that it was a conspiracy. Acknowledging that the government benefitted from the media’s overreporting of crime is not the same as suggesting the government actively pushed the media to do so.

But why not wonder? Exercise those thought processes.

It is a known fact that thousands of journalists were at one time on the payroll of the CIA. It was called Operation Mockingbird, and agents would place false stories in publications like the New York Times, and Time.

So when it comes to the case of the fake 90’s crime wave, it makes sense to wonder if a similar program still exists. The courts have ruled that FBI agents can legally impersonate journalists in the course of an investigation.

Do we need to discover the actual program in order to speculate? Well, I certainly wouldn’t say that it is happening without knowing for sure. But we can acknowledge a historical fact and draw a parallel between that and a similar contemporary trend. In such circumstances, it makes sense to be skeptical.

Either way, we shouldn’t fall prey to the media’s manipulations about such things, regardless of the catalyst. So why not remind people that in the past, lies from the government shaped public opinion?

But there are some cases when questioning, wondering, and speculating is considered downright wrong.

When it is most important to speak freely, you can’t.

How do I walk the line between my inherent mistrust of the government media complex and sincere compassion and empathy for victims of tragedy?

Is it wrong to question official narratives after a tragic event? Is it disrespectful to wonder if there isn’t more to the story? Should I censor myself to avoid appearing insensitive, when I want to talk about inconsistencies in the media tale, or the motives that various groups could have to lie about such events?

I think it is especially important to be able to talk freely when it comes to tragedy. The more potential an event has for exploitation, the more possibilities should be explored.

If we are conditioned to hold our tongues, to suppress our curiosity and skepticism when it comes to tragedy, then the worst actors in any given situation win. Those in power need only create a tragedy, and it becomes impossible to question the official narrative. Otherwise, you are disrespectful and uncaring.

When someone is gravely wounded, you don’t slap a band-aid over it. You’ve got to clean out the wound. And that hurts in the moment. But in the long run, it is necessary to prevent infection.

We should wonder if 9/11 was a false flag attack. I don’t think it is disrespectful to the victims to do so. I think it would be more disrespectful to unquestioningly believe the official story. The official story comes from the people who have the most to gain.

Did the terrorists who carried out the attack on the twin towers have anything to gain? Well maybe if they believed the whole 72 virgins thing. But in real life, they died. Suiciding bombing is a thing that people do, however, so it certainly can’t be ruled out.

Did Osama Bin Laden have a lot to gain? Well again, it is tough to understand the motivation of terrorists. Apparently, they think killing innocent people accomplishes something. But now he is dead.

And what about the official storytellers, the ones who investigated, and revealed the true culprits behind 9/11?

Their gains remain. They gained the power to easily declare wars and conduct military operations. Money was poured into the defense budget. Agencies like Homeland Security and the TSA sprang into existence.

Attention was diverted from missing money at the Pentagon. The PATRIOT Act was passed. Due process was no longer a concern.

“Mission Accomplished” in Iraq; the glory of killing Bin Laden. The public became desensitized to war. America helped toppled regimes in Libya and Egypt, and support a civil war in Syria.

These things alone don’t prove anything. But it looks awfully suspicious. The ones who we rely on for information about what happened had the most to gain from the attack. They are the ones who will “solve” the problems.

It is a conflict of interest even if the official story is true. It just so happens that their recommendations on the best course of action were the very things that would grow their power, expand their budget, and swell their ranks.

Again we have a historical fact to turn to for comparison. The Joint Chiefs of Staff under Kennedy floated the idea of carrying out a false flag against American citizens to get them involved in a war with Cuba. It was called Operation Northwoods. Kennedy told them if they ever mentioned the idea of murdering innocent Americans again, he would have them tried for treason.

Well, we all know what happened to Kennedy, but that is a whole rabbit hole of its own. What we know for sure, is that as early as the 1960’s people in the U.S. government wanted to commit false flag attacks against Americans to provoke war. And the leader most vehemently opposed was assassinated.

Incidentally, the Kennedy Administration approved of Operation Mockingbird.

May I Speak Freely?

I want to wonder, and I want to speculate. I get as angry and sad as anyone else with a properly developed conscience when horrible things happen. I want those responsible held accountable. And it is against my skeptical nature to accept an official story without digging for more evidence. Horror does not paralyze my desire to question the official narrative and wonder about inconsistencies.

One thing that strikes me about all of the mass shootings of the past few years, is the great diversity in location and venue.

A college in Virginia. An elementary school in Connecticut. A mall in Washington. A nightclub in Florida. A church in North Carolina. A movie theater in Colorado. A political meet and greet in Arizona. The streets of California. A concert on the Vegas strip.

If someone wanted to strike fear into the hearts of Americans, they could not have chosen a better range of targets. The message would be whatever place you live, wherever you go in public, whatever your age, job, or social status, you are not safe.

Maybe that is the truth. And maybe it is random.

We are told these were all carried out by lone a lone gunman–or a married couple in one case.

But why are there so often witness reports of a second gunman? Could it be chalked up to confusion?

The victims tragically lost their lives. Their families lost loved ones, which will impact them for the rest of their lives. The American people lose their sense of security and their rights. Relationships deteriorate as bitter disagreements turn personal, blame abounds, fingers point, defenses go up.

And after so many tragedies, the culprit is left dead. Is that justice?

Who benefits? The dead guy on the 32nd floor?

The Democrats who want gun control? The Republicans who want militarized police? The media who get a bump in ratings? The Generals who want war? A government that “never let(s) a good crisis go to waste”?

I want this madness to stop. We know how the media wants it to play out. They will get their ratings with division and bitter disagreement. The government always gets more power, more relevance, more opportunity to insert itself into the everyday lives of Americans.

That is why it is so necessary to look deeper, to ask those tough questions that we don’t even want to consider as a possibility. We can’t sit by silently wondering if we are being told the truth or fed lies. It is not disrespectful to question the official story. It would be a miscarriage of justice to accept it without protest, as we are told is what should be done in times of crisis.

The only other option is to play into the hands of the media and government, whether they be orchestrators or opportunists. When we replay the same old arguments and put forth the same stale solutions, when we look to them for information and solutions, they win.

Question everything. Clean out the wounds. It may hurt to get in there deep. But if we don’t, the infection will grow and fester, as it always has before.

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