Latest from LEAP 2020 is out. Click here for detailed summary of their publication. This is an European perspective.
Layout of the full article :
1. World recession in sight
2. The banks’ doubtful business
3. Tax haven all hell
4. Neo-protectionism between regional blocs
5. Emerging nations’ strategy in gold
6. The Fed’s last bullets
7. Euroland : national unity governments and the ECB to the rescue
8. High risk strategies
If anyone is “shocked, shocked” in the next crisis meltdown that their funds are missing, it will not be because no one formally announced it.
No need to guess what will happen on the next CDS collapse. They will “bail-in” your money. Click here for the details.
It is clear that on the next crisis, Europe will collect bank accounts and brokerage funds and in the US, they will collect brokerage funds, 401ks, and pension funds.
Groovygirl forgot to link up to the latest and greatest LEAP 2020 report out of Europe from April 16, 2013.That was when gold was tanking. Ended up better this week, we shall see what the new temp trading channel is soon.
Once again, Charles Hugh Smith of Of Two Minds, explains the facts beautifully.
If you want to know what will happen and why, this is it.
Examine point three very carefully.
3. Since the only endgames to ballooning debts and declining household incomes are runaway inflation or renunciation of debt, the Status Quo has only one choice left to preserve its neofeudal arrangement: do more of what has failed spectacularly, i.e. inflate more asset bubbles as a way to mask the system’s phantom collateral for a few more months or perhaps years.
Unfortunately for central banks and their politico cronies, serial asset bubbles face the headwinds of diminishing returns. All the Fed and Federal agencies had to do to launch the first housing bubble was lower interest rates and encourage subprime mortgages.
Take a look at that Case-Shiller House Price Chart, can you say unsustainable? The Fed is purchasing billions in mortgages each month and the US government is insuring any and all new mortgages and it is still a basic flat line. Spending lots of money just to stay in place….unsustainable.
And take a look at that stock market chart, adjusted for CPI (which is the lowest inflation indicator), stocks have not rebounded. But you would never guess that from listening to the financial talking heads. With this chart in mind, there is still movement up for stock prices, but just keep in mind that is up just to get where you were in 2007. And look at the scary volatility in the stock market since 2007. Bumpy ride.
But the scariest chart, the one that will ensure an economic depression for the next 20 years (whether that is a deflationary depression or a hyperinflationary depression or both, one after the other). It is the spread between real income and real expenses and the widening of that gap that will keep the US in a depressive economic situation for years to come.That spread can happen in a deflation or hyperinflation, same outcome for Main Street. And Main Street, the consumer, is 70% of GDP.
That increasing spread will make sure more defaulted consumer and mortgage debt, lower GDP, and more bail outs and bail-ins for entities holding that debt. Add to this an aging population those income naturally declines after retirement.
These charts tell the whole story.
Derivatives are the big problem, as Jim Sinclair points out here.
Derivatives are never impacted right away, the trigger travels around and eventually causes the next contraction in global debt. This happens because the majority of global derivatives are not regulated or tracked, so no one knows how they are connected to Cyprus or Greece or anything else. So, we just have to wait and see.
Should be interesting.
Click here for Martin Armstrong’s latest release entitled Eurozone Deposits-Not Safe dated March 31, 2013.
groovygirl is feeling much better, thanks for your notes of encouragement. Lots of good blog posts on Martin’s site, gg just picked this one as it is pretty important. All eyes are on Europe as we figure out the real impact of Cyprus and find out how the new precedent of confiscating deposits will impact Europe as its debt implodes.
Well, that went well….
Nigel Farage gives some not-so-subtle advice….get your money out of Europe!
Now, I am sure British banks are more than willing to take frightened European depositors’ money for safe keeping, but the Cyprus main attraction this week shows us two things: a small country can do major damage to the global banking system and nothing is off the table to preserve the failing banking and debt system. That means any country, any bank, anywhere….
Now that apparently the IMF has back-tracked from the “one-time-tax-on” deposits. Look for a reprieve before they try something else the next crisis. Such as, they will not announce it beforehand?
Can’t wait for the 2014 German election!
You will have to take steps to preserve the purchasing power of your own savings.
Next bank run. New Zealand. Click here. Question: why would any politician look at the global political reaction to Cyprus this week and say, “hey, let’s do something like that”?
In other news, gold looks good.
Totallygroovygirlfriday wanted to address (or just put her two cents in) the ongoing national discussion of wealth inequality (which will only get louder).
First, groovygirl acknowledges that we have a huge wealth spread in the United States and most of the world. But some of the discussion of late has blamed centralization, political capture and monopolies for that wealth inequality. Groovygirl is not sure these are the sole reasons. The danger in making these our only assumptions is that if we get the cause wrong, our solution might be a failure (under the best political and fair environment). And we will not solve the main problem, but just create new ones.
So, let’s review Charles Hugh Smith’s latest blog post and the link to the viral video making the rounds. Click on the links to review.
Charles suggests that wealth inequality exists because:
Wealth comes from earned and unearned (rent, dividends, etc.) income and capital appreciation, so it’s no surprise that the income of the wealthiest segment has also far outpaced the lower 95%:
Check out that wonderful chart of the rise of the 5% from 1913 to 2008.
Charles continues:
I have long held that the greatest source of wealth inequality is political: those with great wealth have captured the for-sale machinery of governance, and “persuaded” the Central State to carve out quasi-monopolies and cartels that enable artificially high premiums. They also buy subsidies, exceptions and tax breaks for their income streams.
Although, gg agrees with the above, she would add that the types of investments that the top 5% have been disproportionately gaining on are primarily debt-expansion driven.
Groovygirl looks at that 100-year chart and doesn’t see all political cartels (well, maybe one, The Federal Reserve), but she sees a debt creation long-term cycle that is primarily fueled by The Federal Reserve System that has run its final cycle course and popped.
So groovygirl is saying this looks to her like a debt collapse (the Winter Cycle) may take care of the wide income spread. But she will also acknowledge that the top 5% has a political pull on where new debt creation goes now, and especially in the last two decades.
But see how the top five-percent’s wealth has risen and fallen with the debt crisis of the last decade? We can fully expect it to fall again when debt completely collapses.
Is gg just seeing long cycles everywhere? Probably, that is what she does best. It is her main perspective. Keep that in mind.
Later in Charles’ post, in which he does a wonderful job of explaining how technology will not solve the unemployment problem, he says that the best solution for inequality is:
An economy in which surplus is distributed to decentralized communities rather than being concentrated in the Central State and its financial Elites, where the spoils are divided up according to bought-and-paid-for political favoritism, is perhaps the most efficient, practical, sustainable and fair distribution system possible in an era of structural labor surplus.
Charles is firmly in the camp that decentralization will help solve the wealth gap. groovygirl is not so sure. (Having said that, groovygirl is in favor of more decentralization than we have now for other reasons.) But she is not so sure that we can decentralize the system in a fair manner in the middle of a collapsing debt crisis. The time to decentralize, gg’s opinion, was during the massive debt expansion of the late 80′s and 90′s.
GG contends that a debt collapse will force decentralization anyway. And if we move to create laws and taxes that equalize wealth during the debt collapse, this might force a chaotic decentralization or decentralize things that are better done on a centralized level for the health and benefit of society. GG is sure everyone has their own opinion on what those things might be.
It is entirely possible that laws equalizing wealth during a debt collapse will stifle capital creation and economic activity at a de-central and central level after the collapse, causing the poor and middle class to be poorer and the wealthy to hoard assets and capital for a longer period of time and thus, the economy to lag longer than necessary.
Throw into the mix that government (at any level) creates new laws that are a reaction to the past or present, rarely in anticipation of a fast-changing future that helps all locales.
So, groovygirl is suggesting that we look for a systemic change that will address as smooth a transition as possible from expanding debt to no debt and make local vs. central a secondary discussion under that umbrella. Local government can be just as corrupt, political, reactionary, and debt driven as a central one. But they can also be better than central government at quickly addressing key issues and organizing efficient plans during a crisis.
Right now we have an unfair distribution of debt that creates ongoing income and resources inequality. When the debt collapses, we may have no assets, no income, and/or no resources to distribute to anyone equally or unequally, while having laws on the books that hinders use of the capital and assets that are left standing.
It is groovygirl’s opinion that what we have now is not working and will not work in a debt collapse, it is crony capitalism and give free markets a bad name. But she is cautious that we should choose our next system and its accompanying laws in a proactive way, not a reactionary way. If we do not, and gg is not confident that we will, be prepared for a protracted and long economic depression.
Just some thoughts…..feel free to share yours in the comment section. Thanks for reading.
The largest financial crime in history that has never been acknowledged or prosecuted.
Here is a very extensive article on Libor. It covers the impact on the State of California and the cities of California. And the scam that they are running on their investors and their taxpayers. By the way, this is not “fixed”, even though the Libor scam has been exposed.
States and Cities are still vulnerable to high interest rates. And CA is like a whole country in its economy and debt, bigger than Greece. This is another way that debt is being passed to taxpayers and the pensioners will get screwed out of money to pay investors.
This systemic problem of state and city debt will not be fixed until it collapses and resets.
Bruce Krasting bought the recent CIA’s economic global numbers via zerohedge. Click here.
Bruce found these numbers very interesting and so did groovygirl. The numbers are provided by the countries themselves, so I am sure they are under the true numbers.
Take a look of that increase in global debt and credit. It increased by the trillions! Think about how that number is probably low because of reporting bias and the lack of transparency in the credit derivative market? Think about how much debt implosion is being covered to just break even, let alone increase. This is the greatest wealth transfer in history. Debt from investors to taxpayers and assets from everyone to the controlling corporations of the globe.
At some point the taxpayers will not put up with bailouts, governments will resort to devaluing or revaluing fiat currencies, faulting on sovereign debt, and/or use of pensions for government debt.
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