Regular readers will know how often I've spoken of current economic news and events, so I won't bother repeating it all here. Suffice it to say that right now there are three reports that very seriously concern me. Any one of the factors they describe, or more than one of them working together, has the potential to knock over our fiscal and economic house of cards.
First, the top court in Germany is currently hearing arguments on whether or not that country's participation in and support for the European Monetary Union's fiscal bailout/rescue policies is legal in terms of Germany's constitution. If it rules in the negative, Germany will be forced to halt its funding of those programs, which will instantly bring them to a grinding halt. That, in turn, may cause the collapse of the Eurozone, already mired in other economic woes. This case is of absolutely critical importance not only to Europe, but also to the rest of the world - because if the Eurozone collapses, the financial and economic damage will ripple outwards around the globe.
Second, I've already spoken about the dangers confronting Japan's economy. Kyle Bass describes the current situation there as 'adding a Ponzi scheme to a Ponzi scheme', and warns that 'They already spend 50% of tax revenue on debt service. If [interest] rates [on Japanese bonds] go up, it's game over.' Phoenix Capital goes even further, asking 'Will Japan trigger a global financial meltdown?'
This is what it looks like when a Central Bank begins to lose control. And what’s happening in Japan today will be coming to the US in the not so distant future.
If you think the Fed is not terrified of this, think again. The Fed has pumped over $1 trillion into foreign banks, hoping to stop the mess from getting to the US. As Japan is showing us, the Fed will fail.
Investors, take note… the financial system is sending us major warnings…
If you are not already preparing for a potential market collapse, now is the time to be doing so.
There's more at the link. I think Phoenix Capital is right to be worried, as a fiscal collapse in Japan would have a similar effect on the world economy to a collapse of the Eurozone.
Finally, Karl Denninger provides what he calls 'A SEVERE Storm Warning' about the US economy.
Note that the absolute level of debt to GDP ... refuses to go under 350%; it has now started rising again but is entirely coming from two sectors -- business credit and the Federal Government.
The problem with this paradigm is that we're doing the same thing that led to the 2008 blowup -- we've learned exactly nothing. In real terms our GDP is in fact contracting by about $500 billion a quarter, after adjusting for debt expansion -- that's $2 trillion a year, more or less.
This is real purchasing power out of your pocket.
. . .
This is all bad. The imminent danger signals, however, are found here:
The gap between corporate equity prices and tangible assets is greater now than it was in 2007 -- materially so. Equity values are higher and tangible assets are lower.
This is not (yet) to the level of 1999/2000, but it's getting there and we didn't have to go that far last time to get a nasty blow-up. All it takes is something going wrong -- like, for instance, in Japan or Europe.
Again, more at the link - and, as indicated above, the chances of something going wrong in either Japan and/or Europe, right now, are pretty darn high.
Folks, I've been predicting serious economic meltdown for some time now, as have many other authorities. Read the signs of the times for yourselves, and make up your own minds. Right now, I believe we're balancing precariously atop an economic house of cards. One tap on any of the cards, and . . .