Major Warning For The World’s Economy

The collapse of the euro is accelerating, and it looks like we could be staring a major European financial crisis right in the face early in 2017.  On Thursday, the EUR/USD fell all the way to $1.0366 at one point before rebounding slightly.  That represents the lowest that the euro has been relative to the U.S. dollar since January 2003.  Ever since 2011, I have been relentlessly warning that the euro is heading for parity with the U.S. dollar.  When the EUR/USD was trading at about $1.40 that must have seemed like crazy talk, but I never wavered.  I just kept warning people that the euro was going to weaken greatly relative to the U.S. dollar.  Here is one example from March 2015: “How many times have I said it?  The euro is heading to all-time lows.  It is going to go to parity with the U.S. dollar, and then it is eventually going to go below parity.”  After Thursday, we are almost there, and once we do hit parity that is going to be a sign that all sorts of chaos is about to erupt in Europe.

For years, so many people that write about our coming economic problems have been proclaiming that the death of the U.S. dollar is imminent.

But I have always taken a different approach.  I have always maintained that the collapse of the euro comes first, and that the death of the U.S. dollar happens some time later.

So many people have wanted to get rid of all of their dollars in anticipation of the coming crisis, but that is a huge mistake.

First of all, without exception everyone needs an emergency fund that can cover at least six months of expenses in case there is a job loss, a health emergency or all hell breaks loose for some reason.

Secondly, cash is going to be king during the initial stages of the coming crisis.  Later on the U.S. dollar will rapidly lose value, but at first it will pay to have significant amounts of cash available to you.

Most people out there seem to think that a strong dollar is great news and that it is a sign of good things to come under Donald Trump.

But the truth is that an overly strong U.S. dollar is actually very bad news for the global economy.

For the U.S., a strong dollar hurts our imports and tends to drag down our GDP.

For the rest of the world, a strong dollar makes it more expensive to borrow money.  The economic boom in the developing world following the last financial crisis was fueled by mountains of cheap dollars that were borrowed at ultra-low interest rates.  But now the U.S. dollar is surging and interest rates are spiking, and that is starting to cause major problems.

It now takes much more local currency to pay back those dollar-denominated loans that were made in emerging markets during the boom times.  If the U.S. dollar continues to rise we are going to see a staggering number of defaults, and a credit crunch in many areas of the globe seems inevitable at this point.

Of course the big thing to keep an eye on over the coming weeks is the rapidly unfolding crisis in Italy.  The Italians have the 8th largest economy on the entire planet, and we are in the process of watching their entire banking system completely implode.

In fact, their third largest bank is in imminent danger of collapse, and according to Reuters this could trigger “a wider banking and political crisis in Italy”…

Italy’s government is ready to pump 15 billion euros into Monte dei Paschi di Siena (BMPS.MI) and other ailing banks, sources said, as the country’s third-largest lender pushes ahead with a private rescue plan that is widely expected to fail.

The world’s oldest bank has until Dec. 31 to raise 5 billion euros ($5.2 billion) in equity or face being wound down by the European Central Bank, potentially triggering a wider banking and political crisis in Italy.

If needed, the government will pump 15 billion euros into the Siena-based lender and several other smaller banks to prevent that, two sources close to the matter said on Thursday.

This is so much more serious than the ongoing economic depression in Greece.

Greece is just the 44th largest economy on the planet, and we saw how much trouble Europe had trying to bail them out.

So what is the rest of Europe going to do when financial collapse hits Italy?

Here in the United States very few people are interested in hearing about a “global financial crisis” right at this moment, because in the aftermath of the election most people are feeling really good about where things are heading.  Just consider the following three facts that I pulled out of a Bloomberg article

#1 “The National Association of Homebuilders’ index of sentiment soared to an 11-year high in December, despite the sizable rise in bond yields since the election.”

#2 “The University of Michigan’s December index of consumer confidence also continued its upward post-election trend, rising to 98. A sub-index that tracks respondents’ opinion of the government’s economic policies spiked to levels not seen since 2009.”

#3 “The National Federation of Independent Businesses’ index of optimism among small businesses posted its sharpest surge since 2009 in November to reach 98.4. An expected improvement in business conditions among small business owners surveyed after Nov. 8 was the largest contributor to the improvement in the headline print.”

Hopefully happy days will stick around for a while.

But it won’t last forever.

As I have warned so many times, the coming crisis is going to hit Europe first, and the United States will join the party not too long after.

And a key marker that we have been watching for is almost here.  The euro is going to hit parity with the U.S. dollar just like I have been warning, and once that takes place expect events to start accelerating significantly.

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  • JohnDille

    Trump has promised to improve the prospects of the “forgotten men and women” of America. To do it, he’s assembling a team of 1 percenters who have profited handsomely from the very trends that have weakened the middle class..

    Much of Trump’s economic team is now in place, assuming a friendly Republican Senate confirms the nominees, which seems likely.

    TREASURY Steve Mnuchin, a former Goldman Sachs (GS) banker, hedge-fund manager and film financier known for earning hundreds of millions of dollars buying and reviving IndyMac, a California bank that failed in 2008. He made much of his fortune by repossessing tens of thousands of homes during the Great Recession.

    COMMERCE Wilbur Ross, a private-equity billionaire who has profited from investments in distressed industries such as steel, coal and textiles. He made most of his fortune helping a number of corporations offshore their operations to China and Mexico and Bangladesh, costing the United States well over a million jobs, mostly during the Reagan and Bush Senior years…. long before NAFTA.

    LABOR Andy Puzder, a lawyer who’s CEO of the CKE Restaurant Holdings, which operates Hardee’s, Carl’s Jr. and other chains. Puzder is aggressively anti labor, and even wants to eliminate the minimum wage. He has been sued numerous times for hiring illegal immigrants, which even now makes up a near majority of hi companies labor force.
    LOOKS LIKE YOU IDIOT REPUBLICANS HAVE PICKED A REAL WINNER!!! YOU VOTED FOR TRUMP BECAUSE HE PROMISED TO HELP WORKING PEOPLE… AND HE WILL… HE WILL HELP MORE WORKING PEOPLE BCOME HOMELESS THAN ANY PRESIDENT SINCE HERBERT HOOVER… AND MAYBE EVEN MORE THAN HOOVER!!!

  • moosegringo

    WHY DO YOU KEEP RESPONDING? I told you in an earlier post that I delight in wasting your time – idiot. I haven’t read one more of your idiotic posts (since the first lame-brained one). If yours is the mentality of the typical liberal mind – NO WONDER YOU LOST. Imagine 4 years of Trump – the possibilities are endless. Imagine 4 years of Hillary (or Obama if he imposes martial law) – four MORE years of corruption, graft, pandering to our enemies and general political stupidity. But YOUR next response will be about how corrupt Republicans are. Again, if you haven’t followed the news, WE WON, now go back to your corner, stick your finger in “wherever” and STFU. (I just love throwing sh..t back at these stupid liberal clowns who have no clue how the world or the economy work, what it means to be an American and, most importantly, why NOBODY cares about their dumb opinions),

  • JohnDille

    WHY DO YOU KEEP RESPONDING??? YOU MUST BE A BORED BRAINLESS RIGHT WINGER!!! TRUMP LOST… GET OVER IT!!! OR… TRUMP WON… AND AMERICA LOST.. SO GET USED TO IT!!! MEANWHILE… I INTEND TO KEEP RUBBING IT IN… MAYBE YOU RIGHT WING REPUBICAN IDIOTS WILL EVENTUALLY REALIZE JUST HOW STUPID YOU ARE… AND HOW CORRUPT YOUR REPUBLICAN MASTERS ARE!!! WE LIBERALS ALREADY KNOW HOW STUPID YOU ARE… AND HOW CORRUPT… AND DANGEROUS… YOUR RICH REPUBLICAN MASTERS ARE!

  • moosegringo

    Why do you keep responding? You must be a bored, intellectually challenged liberal who can only spew the same stuff OVER and OVER and OVER again (CAPS added for emphasis – not like your childish proclivity to use CAPS all the time). Didn’t read the above post either. Just fun making you waste your time. Oh, and as Obama once said: “WE WON !”. So STFU.

  • JohnDille

    IF YOU LOVE WASTING TIME… WHY DON’T YOU LEARN TO READ??? THEN YOU WILL REALIZE WHAT AN IDIOT YOU ARE… AND THAT EVERYTHING THAT YOUR RICH REPUBLICAN MASTERS HAVE TOLD YOU YOUR ENTIRE LIFE… IS NOTHING BUT SELF SERVING LIES!!! WHICH MEANS THAT YOU HAVE WASTED YOUR ENTIRE LIFE LISTENING TO THEM, AND DOING WHAT THEY WANT YOU TO DO!!!

  • moosegringo

    I choose not to read crap from flagrantn gassholes,. Didn’t read your last one either. Just love wasting your time.

  • JohnDille

    IF YOU COULD NOT READ WHAT I SAID… CLEARLY YOU ARE A POORLY EDUCATED WHITE GUY AND TRUMP SUPPORTER… THEN WHY DID YOU EVEN COMMENT??? YOU RIGHT WINGERS ARE JUST NOT TOO BRIGHT, I GUESS!!!

  • moosegringo

    Didn’t even bother reading the above – it probably contains the same trite as always. Let me repeat: STFU.

  • JohnDille

    WHATS THE MATTER… DOES THE TRUTH MAKE YOU MAD??? NOT TO WORRY… THE TRUTH MAKES MOST OF YOU RIGHT WINGERS MAD… BECAUSE IT CONTRADICTS EVERTHING THAT FOX NEWS… AND THE RIGHT WING TALK SHOW LIARS… AND NOW.. VLADIMIR PUTIN… TELLS YOU GULLIBLE IDIOTS!!! MEANWHILE… YOU RIGHT WINGERS REALLY HATE THE FIRST AMENDMENT, DON’T YOU!!! IT MAKES YOU WANT TO EXERCISE YOUR SECOND AMENDMENT RIGHTS… GIVEN TO YOU BY SLAVE OWNERS WHO DEMANDED THE RIGHT TO MURDER ANY SLAVE WHO TRIED TO STAND UP FOR HIMSELF!!! THOSE SLAVE OWNERS WERE JUST TYPICAL RIGHT WINGERS, WEREN’T THEY??? THEY WOULD HAVE BEEN RIGHT AT HOME IN TRUMP’S NEW FASCIST AMERCA!!!

  • moosegringo

    STFU

  • JohnDille

    TRUMP WILL DO GREAT THINGS… FOR THE RICH!!! JUST CHEAT, STEAL FROM, AND ROB ALL YOUR FELLOW AMERICANS, AND THUS BECOME RICH… AND TRUMP WILL DO GREAT THINGS FOR YOU, TOO!!! AT THE EXPENSE OF EVERYONE ELSE, OF COURSE! ALL THE REST OF US WILL HAVE TO BEWARE OF THAT YELLOW AND BROWN STUFF THAT RAINS DOWN ONTO US, AS TRUMP REVIVES… AND DOUBLES DOWN… ON REAGANS TRICKLE DOWN ECONOMIC POLICIES AND PRACTICES!!!

  • JohnDille

    NOT TO WORRY… TRUMP WILL FIX ALL THIS!!! TRUMP WAS ELECTED BY IDIOTS WHO THINK THE US ECONOMY IS WEAK AND DOOMED TO COLLAPSE… EVEN THOUGH THE US ECONOMY HAS BEEN JUST ABOUT THE STRONGEST AND SAFEST IN THE WORLD….FOR THE LAST 7 YEARS!!! SO… TRUMP WILL FIX THINGS BY…. DESTROYING THE US ECONOMY, AND THUS MAKING THE REST OF THE WORLD’S ECONOMIC SYSTEM MORE HEALTHY AND SAFE THAN THE US ECONOMY!!! RIGHT WING REPUBLICAN GROUP THINK WILL BE ON FULL DISPLAY, IN CONCERT WITH RIGHT WING REPUBLICAN ARROGANCE AND MONUMENTAL STUPIDITY!!!

  • Eileen

    I have a bad feeling about the metrics. Although I have confidence that Trump can manage things better than his opponent, I still think we are in for some tough times