22/11/11 - 17 Quotes About The Coming Global Financial Collapse That Will Make Your Hair Stand Up

Is the world on the verge of another massive global financial collapse?  Yes.  The western world is drowning in an ocean of debt unlike anything the world has ever seen before, and our financial markets are gigantic casinos that are dependent on huge mountains of risk and leverage remaining very stable.  In the end, this house of cards that has been built on a foundation of sand is going to come crashing down in a horrifying manner.  Usually in this column I go on and on about why things will soon get much worse.  But today I am going to take a bit of a break.  Today, I am going to let some of the top financial professionals in the world tell you why things will soon get much worse.  Many of the quotes that you are about to read just might make the hair on the back of your neck stand up.  Most people out there have no idea what is about to happen.  Most people out there are working hard and are busy preparing for the holidays and they are hopeful that the economy will turn around soon.  But that is not going to happen.  We are heading for another major global financial collapse, and when it happens the U.S. economy is going to get even worse.

The epicenter for the coming global financial collapse is almost certainly going to be in Europe.  As you will see below, financial professionals all over the world are sounding the alarm about Europe.  It is a disaster that everyone can see coming but that nobody seems to be able to prevent.

Of course the failure of the "supercommittee" in the United States certainly is not helping matters.  There is already talk that we may soon see another downgrade for U.S. debt.  It is hard to even describe how incompetent the U.S. Congress is.

There is a tremendous lack of leadership both in the United States and in Europe right now.  The financial world is more interconnected than ever before, and when the financial dominoes start to fall it is going to take a miracle to keep a complete and total disaster from unfolding.

So when the time comes, who is going to step forward and provide that leadership?

That is a really, really good question.

Right now, panic and fear are spreading like wildfire in the financial world and nobody knows for sure what is going to happen next.

But one thing is for certain.  Pessimism is growing stronger by the day.

The following are 17 quotes about the coming global financial collapse that will make your hair stand up....

#1 Credit Suisse's Fixed Income Research unit: "We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks."

#2 Willem Buiter, chief economist at Citigroup: "Time is running out fast.  I think we have maybe a few months -- it could be weeks, it could be days -- before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it."

#3 Jim Reid of Deutsche Bank: "If you don't think Merkel's tone will change then our investment advice is to dig a hole in the ground and hide."

#4 David Rosenberg, a senior economist at Gluskin Sheff in Toronto: "Lenders are finding it difficult to finance their day-to-day operations with short-term funding. This is a lot like 2008 but with more twists."

#5 Christian Stracke, the head of credit research for Pimco: "This is just a repeat of what we saw in 2008, when everyone wanted to see toxic assets off the banks’ balance sheets"

#6 Paul Krugman of the New York Times: "At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro. This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira. Next stop, France."

#7 Paul Hickey of Bespoke Investment Group: "More and more, we are hearing anecdotal comments from individual and professionals that this is the most difficult environment they have ever experienced as the market is like a fish flopping around after being taken out of the water."

#8 Bob Janjuah of Nomura International: "Germany appears to be adamant that full political and fiscal integration over the next decade (nothing substantive will happen over the short term, in my view) is the only option, and ECB monetisation is no longer possible. I really think it is that clear and simple. And if I am wrong, and the ECB does a U-turn and agrees to unlimited monetisation, I will simply wait for the inevitable knee-jerk rally to fade before reloading my short risk positions. Even if Germany and the ECB somehow agree to unlimited monetisation I believe it will do nothing to fix the insolvency and lack of growth in the eurozone. It will just result in a major destruction of the ECB‟s balance sheet which will force an ECB recap. At that point, I think Germany and its northern partners would walk away. Markets always want short, sharp, simple solutions."

#9 Dan Akerson, CEO of General Motors: "The ’08 recession, which was a credit bubble that manifested itself through primarily the real estate market, that was a serious stress....This is much more serious."

#10 Francesco Garzarelli of Goldman Sachs: "Pressures on Euro area sovereign bond markets have progressively intensified and spread like a wildfire."

#11 Jim Rogers: "In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still – be careful"

#12 Dr. Pippa Malmgren, the President and founder of Principalis Asset Management who once worked in the White House as an adviser to President Bush: "Market forces are increasingly determining what the options are and foreclosing on options policymakers thought they had. One option which is now under discussion involves permitting a country to temporarily leave the Euro, return to its native currency, devalue, commit to returning to the Euro at a better debt to GDP ratio, a better exchange rate and a better growth trajectory and yet not sacrifice its EU membership. I would like to say for the record that this is precisely the thought process that I expected to evolve,but when I proposed this possibility back in 2009, and again in September 2010, I had a 100% response from clients and others that this was “impossible” and many felt it was “ridiculous”. They may be right but this is the current state of the discussion. The Handelsblatt in Germany has reported this conversation, but wrongly assumes that the country that will exit is Germany. I think that Germany will have to exit if the Southern European states do not. Germany’s preference is to stay in the Euro and have the others drop out. The problem has been the Germans could not convince the others to walk away. But, now, market pressures are forcing someone to leave. Germany is pushing for that someone to be Italy. They hope that this would be a one off exception, not to be repeated by any other country. Obviously, though, if Italy leaves the Euro and reverts to Lira then the markets will immediately and forcefully attack Spain, Portugal and even whatever is left  of the already savaged Greeks. These countries will not be able to compete against a devalued Greece or Italy when it come to tourism or even infrastructure. But, the principal target will be France. The three largest French banks have roughly 450 billion Euros of exposure to Italian debt. So, further sovereign defaults are certainly inevitable, but that is true under any scenario. Growth and austerity will not do the trick, as ZeroHedge rightly points out. Ultimately, I will not be at all surprised to see Europe’s banking system shut for days while the losses and payments issues are worked out. People forget that the term “bank holiday” was invented in the 1930’s when the banks were shut for exactly the same reason."

#13 Daniel Clifton, a policy strategist with Strategas Research Partners on the potential for more downgrades of U.S. debt: "We would expect further downgrades, a first downgrade from Moody’s and Fitch and possibly a second downgrade from S&P."

#14 Warren Buffett on the problems in the eurozone: "The system as presently designed has revealed a major flaw. And that flaw won’t be corrected just by words. Europe will either have to come closer together or there will have to be some other rearrangement because this system is not working"

#15 David Kostin, equity strategist for Goldman Sachs: "The wide range of possible outcomes on both the super committee process and the unstable political economy in Europe drives our view that investors should assume the worst while hoping for the best."

#16 Mark Mobius, the head of the emerging markets desk at Templeton Asset Management: "There is definitely going to be another financial crisis around the corner"

#17 Gerald Celente, founder of The Trends Research Institute: "The whole system is going down. Pull your money out your Fidelity account, your Scwhab accout, and your ETFs."

Are you starting to get the picture?

When so many top financial professionals are freaking out like this, perhaps the rest of us should start paying attention.

They are telling us that "time is running out".

They are telling us that "there is definitely going to be another financial crisis".

They are telling us that this "is going to be worse" than 2008.

They are telling us that "the whole system is going down".

Yes, a devastating financial collapse really is coming.  Just like in 2008, it will seem like the "end of the world" while it is happening, but it won't be.  It will severely damage our financial system and our economy, but it will not finish us off.

Think of it this way.  When you build a sand castle at the beach, it doesn't get totally wiped out by the first wave or the second wave that hits it.  Each wave does significant damage, but the destruction of your sand castle is a process.

It is the same thing with the U.S. economy.  We once had the most incredible economic machine that the world has ever seen.  It is constantly being guttedand the financial crisis of 2008 hit us really hard, but we are still doing okay.

After this next financial crisis we will be in even worse shape.  But we will still be breathing.

More "waves" will come after this next financial crisis.  If we continue on the road that we are on, our economy will progressively get worse and worse.

Not everyone will agree with this analysis, and that is okay.  In the end, time will reveal the truth to all of us.

Right now, we all need to get ready for the next wave that is about to hit us.  A lot of people are going to lose their jobs over the next few years.  Hopefully you are prepared for that.

17/11/11 - Why the mounting energy crisis and debt-bomb will lead to the meltdown of Japan

  

November 17, 2011 – TOKYO – The International Energy Agency has estimated that Japan would need to spend $3 billion per month on additional oil and LNG in 2012 if the country’s nuclear power output falls to zero next year, the executive director of the International Energy Agency, Maria van der Hoeven, told reporters Wednesday. Speaking to Platts in Tokyo, van der Hoeven said that Japan would need an extra 460,000 b/d of oil and 30 billion cubic meters of gas in 2012 if the country had no nuclear power output. When asked about Japan’s winter oil and gas demand outlook, Van der Hoeven declined to comment as the country’s actual demand situation would depend on the country’s nuclear output situation, which remained uncertain. Japan is about to enter its winter power demand season, which normally runs through December-March, and the weather and nuclear utilization rates have a direct impact on crude, fuel oil and LNG consumption for thermal power generation. Japanese power utilities have hiked their oil and LNG consumption to make up for their shortfall in nuclear output in the wake of the devastating March 11 earthquake, and subsequent nuclear outages across the country amid safety concerns. Only 11 nuclear reactors are currently operating in Japan with a combined capacity of 9.864 GW, representing 20% of the country’s total installed capacity of 48.96 GW spread over 54 reactors, according to Platts calculations. It is widely expected that none of the nuclear plants shut for scheduled maintenance would be allowed to restart any time soon because of stress test conditions imposed by the government in July. If none of the nuclear reactors are allowed to restart in the coming months, Japan is scheduled to lose its nuclear output completely in April or May 2012 because of the Japanese regulation that requires nuclear power plants to carry out scheduled maintenance at their reactors at least once every 13 months. If this happens, it would be the first time Japanese nuclear power production has fallen to zero since it commenced in 1966. Speaking at a press conference in Tokyo, van der Hoeven expressed her concern over rising crude oil prices that will have “negative impact” on ailing economies in Europe and “poor developing countries.” -Platt 

Western financial treasuries bubble: “Because fears are spreading about even top-rated European states, investors favour relatively safer U.S. Treasuries and JGBs,” said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch. The European debt woes have benefited JGBs, which have attracted safe-haven bids thanks to Japan’s ability to finance its debt domestically despite its huge debt burden, now standing at 200 percent of GDP. -Reuters 

To put this crisis into perspective, investors favor the so-called ‘relative safety’ of U.S. Treasuries and Japanese Government Bonds and it is precisely this kind of thinking that should keep us all up at night. Such a move by the world’s financial wizards is the long-term equivalent of burning money. Why? Japan’s debt to GDP ratio is already at 200%. That means for every $1 (or Yen) the entire Japanese economy is capable of generating in a given year- there’s $2 more in debt that it has to repay. When you spend more than you have; you’re bankrupt. When you spend more than you’re capable of producing- you’re a black-hole. If that hole wasn’t too large for Tokyo to climb out of, consider this- Japan has to maintain the health and retirement of one of the largest aging populations in the industrialized world; it has to pay down in deficit, become immune to the Eurozone debt cancer, avoid any more natural disasters, and it has to nearly rebuild its entire energy infrastructure from ground-zero while importing nearly all of its oil and natural gas. Sadly, the U.S. is no better off. The Federal Reserve, the U.S. Central Bank or Lender of last resort, has now become the largest holder of U.S. debt in the world- exceeding the obligations of even China. All this is happening during a recession and under the shadow of a potential conflict looming for the U.S. in the Middle East with Iran and under a U.S. budget deficit crisis that has already pierced the $15 trillion dollar mark. To put a trillion dollars in some kind of substantial context, if you opened a business at the time of  Christ, 2000 years ago, and if you lost one million dollars a day in that business; it would still take you another 700 years to lose a trillion dollars. It’s an inconceivable amount of money. Total U.S. debt obligations now actually exceed $54 trillion dollars. If that wasn’t bad enough, sovereign debt is causing bond markets in Europe to implode. Insured risk markets will follow- including the unregulated $600 trillion dollar derivatives market which will topple banks and sovereign treasuries will follow that disembowelment. People who think the modern world as we know it can’t possibly end apparently didn’t hang around in class long enough to realize there was homework. – (c) The Extinction Protocol

17/11/11 - The next financial crisis will be ‘hellish’ warns asset manager

    

November 17, 2011 – WASHINGTON - “There is definitely going to be another financial crisis around the corner,” says hedge fund legend Mark Mobius, “because we haven’t solved any of the things that caused the previous crisis.” We’re raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out. We raised it again after seeing the remarks of Mr. Mobius, chief of the $50 billion emerging markets desk at Templeton Asset Management. Speaking in Tokyo, he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world’s major banks are tangled up. Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. That squares with Mobius’ guess of 10 times the world’s annual GDP. “Are the derivatives regulated?” asks Mobius. “No. Are you still getting growth in derivatives? Yes.” In other words, something along the lines of securitized mortgages is lurking out there, ready to trigger another crisis as in 2007-08. And what of the derivatives sitting on the balance sheet of the Federal Reserve? Here’s another factor behind our heightened state of alert. “Through quantitative easing efforts alone,” says Euro Pacific Capital’s Michael Pento, “Ben Bernanke has added $1.8 trillion of longer-term GSE debt and mortgage-backed securities (MBS).” Think about that for a moment. The Fed’s entire balance sheet totaled around $800 billion before the 2008 crash, nearly all of it Treasuries. Now the Fed holds more than double that amount in mortgage derivatives alone, junk that the banks needed to clear off their own balance sheets. “As the size of the Fed’s balance sheet ballooned,” continues Mr. Pento, “the dollar amount of capital held at the Fed has remained fairly constant. Today, the Fed has $52.5 billion of capital backing a $2.7 trillion balance sheet. “Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out.” -Yahoo

14/11/11 - Former British PM Tony Blair warns of catastrophe if Eurozone collapses

November 14, 2011 – LONDON – Former British Prime Minister Tony Blair warned on Sunday that the collapse of the euro would be “catastrophic” and urged Europe to move fast to support the currency. Blair said European leaders faced “very difficult and painful” choices and a “long-term framework of credibility” was needed to see off the crisis. Speaking following the resignation of Italian Prime Minister Silvio Berlusconi on Saturday, Blair said there had “never been a tougher time to be a leader than right now.” But he said the “whole weight” of European institutions – including the European Central Bank – must get behind the euro if it was to survive. He told BBC TVthat economies had to align and that “the myth that the Italian and German economies were the same – that 10-year myth has now evaporated.” Measures required to bring stability to the euro would be painful, he warned, but added: “If the single currency broke up, it would be catastrophic.” Blair, who was premier for a decade until 2007, was also asked if his former finance minister Gordon Brown had been right to push hard for Britain to stay out of the euro when Labour was in power. “He was right, although I would also say by the way, I was never in favor of doing it unless the economics were right,” Blair replied. British Prime Minister David Cameron will meet German Chancellor Angela Merkel in Berlin on Friday for talks on the euro’s difficulties and the economy. Cameron said on Friday there was still “a big question mark” over the future of the Eurozone and stressed it was not in Britain’s interests for the single currency to break up but the government is “preparing for every eventuality.” –Channel News Asia