The Calm Before The Economic Collapse Part 1 – Episode 76

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In this report we will discuss the latest news on the economic collapse. The world, stock market and the economy always seems to be ok right before the economic collapse.  The stock market is going up, the real estate is going up and people feel like everything is going ok and the people believe the economy is on the right track. But what they don’t realize is that the economy is teetering on collapse.

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Current News


Nikkei Plunges Another 5% But “Unsourced” Stick Save Arrives Just In Time

The Nikkei dropped 737 points this morning, they are losing control but some unnamed source helped and is trying to hold the damn from bursting. The damn has many cracks and they are getting bigger

  • One look at the 5%+ plunge in the Nikkei overnight and one would be allowed to wonder if this was it for Abenomics: with a 15% drop from recent highs, what’s worse is that even the “wealth effect” Mrs Watanabe fanatics would be excused from having much hope going foward. The problem, however, is that in a world in which only the USDJPY matters as a risk signal, and only the stock market remains as a last bastion of “hope”, the overnight weakness pushing the dollar yen to just 50 pips above 100 threatened to crush the manipulated rally and force everyone to doubt the sustainability of central planning. So, sure enough, literally seconds we got the much needed stick save without which everything could have come tumbling down, namely based on an unsourced article out of Reuters that Japan’s Public Pension Fund is considering a change to its portfolio strategy that could allow domestic equity share of investments to rise in rallying market. The immediate result was an instantaneous surge in the USDJPY which in turn dragged global risk higher across the board, simply due to what algos deemed as yet another procyclical last minute rescue. More importantly this was nothing but a squeeze catalyst coming at just the right time before market open to prevent a rout in global equities. Ironically, that we are back to the Reuters “sticksave” unsourced article, indicates just how weak the reality behind the scenes must be.

Is This Why Social Unrest In Europe Has Been Subdued (For Now)?

When even the political elite are voicing concerns about the possible social implications of youth unemployment rates in Europe being so egregiously high, you know that there are problems. The question many have is that until now riots have been few and far between (most notably Sweden and Switzerland recently); so why are the main areas of massive unemployment not seeing the widespread chaos? The answer, perhaps unsurprisingly, is in government handouts but as Stratfor notes, time is running out for the benefit-beholden generation and perhaps the governments will finally see what so many have been fearful of.

‘Keeping euro afloat at all costs behind catastrophic EU unemployment’

So when the central banks and the governments tells us the economy is getting better what do they really mean?  If the economy was getting better would unemployment continually go up, would they need to change the unemployment calculation?

  • The EU needs to reverse its macroeconomic policies and stop supporting the euro if it doesn’t want record unemployment to result in civil disorder and political problems, Dr. Stephen Davies from the Institute of Economic Affairs told RT.
  • Skyrocketing youth unemployment is becoming the greatest concern for European nations. EU leaders are sounding the alarm over an entire generation who they fear will never find jobs.
  • At a Paris conference, Germany, Italy and France have urged for action to avert a continent-wide catastrophe, with over 7.5 million young people across Europe currently out of work.
  • Even Germany, which has the strongest economy in Europe, is suffering from joblessness as unemployment in the country increased four times above expert expectations this May.
  • Education director at the Institute of Economic Affairs, Dr. Stephen Davies, believes that the set measures to cope with record unemployment in the EU won’t require a lot of funding, but only the desire to reform from the European politicians.
  • RT: Nearly one in four youngsters in the EU is unemployed. Why are European leaders only addressing this now?
  • Stephen Davies: That’s a very good question. You quoted the overall average, but in Greece it’s a catastrophic 65 per cent. It’s 50 per cent in Spain. And it’s actually a minor miracle that this hasn’t led to a more serious social and political unrest that it has already. It’s quite surprising that it’s taken [the EU leaders] to do it. I think it’s because they thought that the problem would sort itself out, but it’s become obvious that it won’t.

Cyprus Bank Deposits Plunge By Most Ever During “Capital Controls” Month

Anybody really surprised, would you keep your money in the bank?

  • Following the improvised and very confused bail-in of the Cypriot banking system in mid/late March, one of the key requirements was to contain the liquidity within territorial Cyprus, and prevent the outflows of critical bank funding liabilities – i.e., deposits – abroad thus causing a waterfall cascade of ever increasing capital needs and bigger and better bailouts. Thus capital controls, which two months after the bailout, are still in place. Judging by just released Cyprus Central Bank data they failed. Because even though the deposit outflow in March, when the fiasco happened, was a moderate €3.8 billion, which the European politicians promptly pointed to as confirmation of a job well done, it was the April outflow that was the jawdropping number.
  • In a month in which deposit flight should have been largely contained, Cyprus banks saw a record outflow of 6.4 billion, or 10% of its entire deposit base, in one month!
  • But the sad punchline is that while deposit flight by domestic residents was an unfortunate if explainable €3 billion, it was the €3.1 billion in deposit reduction by “Non-Euro Residents” – read Russians, who circumvented capital controls, and pulled a whopping 16% of their entire deposits held in the tiny and now completely insolvent island nation.
  • Total Cyprus bank deposits: no need to show the arrow at the right side.

 The Other Great Rotation?

Is cash really king? Sure doesn’t look like it to me.  Gold is rising, oh no Mr. B we need to smack it down below $1400

  • It appears that the USD is no longer the cleanest dirty shirt – but precious metals, perhaps? And amid all this chaos in fiat and non-fiat currency markets, equities and bonds remain somewhat stoic. This is the biggest 2-day drop in the USD in 19 months. These are chaotic movements in colossal markets (that dwarf equity market capitalization) – but of course, none of that matters.

The Student Loan Delinquency Rate In The United States Has Hit A Brand New Record High

Riddle me this Batman, if unemployment continues to go down like the government and the fed tells us, why are college graduates having a tough time finding real jobs? The answer, the government changed the unemployment equation and the numbers are fake and there are no real jobs for them.

  • 37 million Americans currently have outstanding student loans, and the delinquency rate on those student loans has now reached a level never seen before. According to a new report that was just released by the U.S. Department of Education, 11 percent of all student loans are at least 90 days delinquent. That is a brand new record high, and it is almost double the rate of a decade ago. Total student loan debt exceeds a trillion dollars, and it is now the second largest category of consumer debt after home mortgages. The student loan debt bubble has been growing particularly rapidly in recent years. According to the Federal Reserve, the total amount of student loan debt has risen by 275 percent since 2003. That is a staggering figure. Millions upon millions of young college graduates are entering the “real world” only to discover that they are already financially crippled for decades to come by oppressive student loan debt burdens. Large numbers of young people are even putting off buying homes or getting married simply because of student loan debt.
  • So why is this happening? Well, a big part of the problem is that the cost of college tuition has gotten wildly out of control. Since 1978, the cost of college tuition has risen even more rapidly then the cost of medical care has. Tuition costs at public universities have risen by 27 percent over the past five years, and there appears to be no end in sight.
  • We keep encouraging our young people to take out all of the loans that are necessary to pay for college, because a college education is supposedly the “key” to their futures.
  • But is that really the case?
  • Sadly, the reality of the matter is that millions of young Americans are graduating from college only to discover that the jobs that they were promised simply do not exist.
  • In fact, at this point about half of all college graduates are working jobs that do not even require a college degree.

Dollar could be in danger as the world’s currency

  • Though the US dollar continues to reign as the foreign reserve currency of choice, a new International Monetary Fund analysis shows that the currency has slumped to a 15-year low, heightening concerns that it may lose that status.
  • While the dollar currently constitutes 62 per cent of the $6 trillion in foreign holdings by the world’s central banks, when a historical view is taken into account, Dick Bove, vice president of equity research at Rafferty Capital Markets says the dollar’s actual percentage of total money supply worldwide has gone from 90 per cent in 1952 to about 15 per cent today.
  • Bove, like many other analysts, believes that the rise of the Chinese currency, the yuan, is at the expense of the US dollar’s dominance as a safe haven.
  • “Generally speaking, it is not believed by the vast majority that the American dollar will be overthrown,” says Dick Bove.
  • “But it will be, and this defrocking may occur in as short a period as five to 10 years,” he tells CNBC.
  • The repercussions of the dollar’s decline as the foreign currency holding of choice would be more than a symbolic hit to America’s economic standing. With a budget deficit exceeding $1 trillion per year, if the dollar were to decline against other currencies the US would find itself in the uncomfortable position of having to pay back this debt.
  • Bove goes further, arguing that the deadlock in Congress over the federal budget, and the now-mandatory cuts designated by the sequestration, are eroding confidence in America’s fiscal state.
  • “The ratings agencies are already arguing that the government’s debt may be too highly rated. Plus, the United States Congress, in both its houses, as well as the president are demonstrating a total lack of fiscal credibility,” says Bove.


 Housing Has ‘Recovered’! People Are Buying Even Where Renting Is A Far Better Deal; Jeff Gundlach: “There Is No Such Thing As Economic Analysis Anymore”

  • They’re buying even where renting is a far better deal
  • In many top markets, it’s cheaper to rent than buy.
  • That’s according to an analysis done by Stern Agee home-builder analyst Jay McCanless, who compared the “fully-loaded price” (mortgage + fees, insurance and taxes) vs. renting. In the 25 top markets of the builders he follows (which excludes New York and Los Angeles but includes Chicago, Indianapolis, Houston, Washington D.C. and San Francisco among others), it’s cheaper to rent instead of buy in 13 markets at an interest rate of 3.5%.
  • hat number grows to 17 in the “rent” camp when rates reach 4%, and to 20 when rates reach 5%. The five markets where it would still be better to buy than rent at rates of 5% are Chicago, Tampa, Sarasota, Miami and Atlanta.
  • The interesting takeaway is that builders are seeing growing demand anyway.

the average time for a foreclosed property to sell just hit a record at nearly 400 days across the entire nation.

In short, per Zillow 44% of all mortgage’d homeowners — the core of US housing demand & supply — are Zombies; 60% when including those lacking sufficient income or credit needed for a loan. As a result, the nations’ “Maximum Potential Demand” profile has been gutted.


Bernanke: There’s No Housing Bubble to Go Bust

  • Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

Real estate: busts don’t follow booms

  • A new report shows modest connection between housing booms and later busts
  • The FDIC report points out that busts that have followed booms have tended to be rather mild, more stagnation that catastrophe. No housing bust that followed a boom during the past 25 years exceeded a 20 percent average price drop.
  • Furthermore, the correlation between boom and bust seems weak. The FDIC reports, “In just 9 of 54 unique boom episodes prior to 1998…did a bust subsequently occur within a five-year window.”


One thought on “The Calm Before The Economic Collapse Part 1 – Episode 76

  1. All fiat currency has been flowing toward the East and South for quite some time now, away from North America. China, except Hong Kong and Macau, is currently being as irresponsible with their money as the West has been since 1971.

    Russia has currency, and Putin knows that the West is no threat, despite Obama’s saber-rattling. Mongolia and Southeast Asia are currently good places for start up businesses, especially Singapore, Hong Kong, and Indonesia. Most any Latin American country except for Argentina are, too. Look for the BRICS bank start up.

    Myanmar is currently rising from the ashes, from the formerly communist Burma that it was. Myanmar is looking for young, foreign entrepreneurs to continue its development toward the 22d Century.

    The worldwide central banks are keeping the Western stock markets propped up. It’s just a matter of time before the West crashes and burns.

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