Friday, October 09, 2015
Is the world ready for a US$3 trillion crash? The IMF tells us it’s on the way whether investors are prepared or not.
In a recently released white paper, the IMF identified a “triad” of risks that made a global securities crash almost inevitable. This triad has to do with the amount of debt assumed by public and private players along with a reduction in market liquidity. More on that below. Despite such analyses, investors are currently showing an extraordinary aptitude to shrug off even the most dire predictions and market events. Just today the Dow was up nearly 130 points, and one wonders what investors see in averages that are so obviously inflated. A month or so ago, the Dow plunged over 1,000 points intraday and nothing has changed fundamentally to rule out that kind of drop again – or even worse, much worse. CNBC stock speculator Jim Cramer believes Fed reluctance to raise rates is at the heart of recent upward market action. In an article this week he writes that he was surprised to learn from Fed notes that a rate hike was not “even close to happening” during the last Fed meeting.
Cramer really doesn’t make any judgments about the Fed or its market posture, which more and more seems to resemble that of a deer frozen in the headlights of a looming disaster. But others are not so shy. The CEO of Morgan Stanley, James Gorman, is on record as saying the Fed should have raised rates by now. He said at an event at the University Stern School of business that the "The Fed has kept rates too low too long," He also said he believed the Fed would have to raise rates in 2015 – though more and more it looks like that may not happen. One thing is certain: There IS a debt crisis even though the mainstream media does not report on it usually, certainly not at length or in detail. For this reason, the recent IMF report has received some mainstream attention. In analysis of the recent report, the UK Telegraph writes that a “$3 trillion corporate credit crunch looms as debtors face day of reckoning.”
According to the Telegraph, the Fund claimed there was “no margin for error for policymakers” and described three risks that could cut world growth by three percent or more: indebted corporate balance sheets, overwhelming sovereign debt and reduced market liquidity (participation). The IMF believes that the era of cheap money is almost over because of a credit cycle that will inevitably tighten on the long end where the Fed has less control. The volatile market situation in China is of no help and will probably worsen. Of course, the IMF’s analysis is accompanied by suggestions that inevitably calls for increased activism and centralization by governmental authorities. In the EU, the IMF wants a “banking union” that basically means all banking activities for EU nations will be coordinated out of Brussels and by the ECB itself. Second, the IMF is demanding that central banks around the world be "accommodative" when it comes to rates. In other words, either keep rates where they are or move them lower, if possible. The IMF claims that three percent of global growth is at stake if authorities do not manage markets and economies worldwide. This is to be expected and doesn’t provide any insights as to how the current grim scenario took hold. In truth, the very remedies that the IMF suggests are the ones that have brought the Western economies to their proverbial knees. Overly low rates and government interference in the markets have made the current environment prone to precipitous disaster. One thing is for sure, this record level of low/zero/negative interest rates, which are by any measure the lowest in human history has created a debt bubble of monstrous proportions. Whether it be household, corporate, government or financial debt... they have all increased dramatically since 2007 alone. Financial sector debt has increased by 21%, government debt by 75%, corporate debt by 70% and household debt by 21%!  Total global debt now stands over $200 trillion up from $142 trillion just eight years ago. This is why if interest rates ever do rise significantly the entire financial and economic system will collapse. At that point a level of QE needed to keep financial institutions afloat will send currencies into near-instant hyperinflation. There WILL be more catastrophes. It’s just a matter of time. Our Shemitah analysis and Shemitah trends show us that the underlying economic fragility cannot be addressed by policy makers and will play out sooner or later. It is supposed to happen this way. The world is being shoved toward a truly global economy but it will take a series of terrible events to move it there. These are being prepared even now, and once more Shemitah plays a significant role in organizing them. While the Shemitah year and end-day are passed, we have now entered the once-every-49 year period called the Jubilee or Super Shemitah. The reverberations of the Shemitah end-day and the trends cultivated by the recent Shemitah year are with us even now, as they have been before. In 1987, for instance, Black Monday didn’t come until nearly a month after Shemitah end-day and thus it is quite feasible to make a case that the next few months are very dangerous times financially, economically and geopolitically. The jubilee, or Super Shemitah, began on September 23 of this year and already we’ve seen some interesting events. Recently, Israeli jets were intercepted over Syria by Russian jets in a tense standoff. Saudi Arabia is attacking Yemen and the US is back in action in Afghanistan. Most significantly, Russia has just become militarily active in the Middle East, agitating the Pentagon severely and Zbigniew Brzezinski says the US should retaliate against Russia for attacking the US backed al-Qaeda and ISIS forces. A clash with Russia and China certainly signals the possibility of WWIII. Meanwhile, slowing levels of growth are worrying mainstream analyst. The specter haunting Wall Street is one of (further) recession in 2016 at a time when monetary inflation makes it increasingly difficult for central banks to print in sufficient quantity to stave off corporate and even sovereign bankruptcies. Couple a deepening of the current worldwide depression (for that is what it really is) with significant market plunges that central banks are powerless to defuse, and you have a recipe for a concatenation of catastrophes that will rival or even outdo the Great Depression itself. We’ve been on the forefront of analyzing these trends and predicting them via our Shemitah analysis. To subscribe to our TDV newsletter that regularly suggests winning trades for subscribers along with alternative, international lifestyles that can help protect your wealth and your family in these dangerous, please visit http://www.SurviveShemitah.com We hope you join our thousands of new subscribers in taking advantage of the analysis and services we offer as part of a kind of emergency “one-stop shop.” We continuously provide you with the resources you need and are dedicated to doing so even as this ongoing, systemic crisis worsens. You need to stick with us. Things are not going to get better anytime soon. |
Anarcho-Capitalist. Libertarian. Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks. Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast. Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences including his own, Anarchapulco, as well as regularly in the media including CNBC, CNN and Fox Business.
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