Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
You Can’t Afford Not to Invest in This Latest Yesla Technology - 1st Apr 15
Election Forecast 2015 - Coalition Economic Recovery vs Labour Collapse - 1st Apr 15
Bitcoin Price Down Move Still in the Cards - 31st Mar 15
No Body Understands Debt - Living in a Free-Lunch World - 31st Mar 15
Will Gold Win Out Against the US Dollar? - 31st Mar 15
Middle East Balance of Power Matures - 31st Mar 15
Ed Miliband Debate Election 2015 Analysis - Labour Spending, Debt and Economic Collapse - 31st Mar 15
Gold and Misery, Strange Bedfellows - 31st Mar 15
Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It - 31st Mar 15
Don’t Celebrate the U.S. Housing Market Recovery Yet - 30th Mar 15
A Middle East Nuclear Holocaust - 30th Mar 15
Peak Gold? – Goldman Sachs Research Warns of Peak Gold Production - 30th Mar 15
With Yemen Burning, Arab Spring II Is Underway - 30th Mar 15
No FED Bets From the BIS - 30th Mar 15
Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - 30th Mar 15
Economic Recovery, Geopolitics and Detergents - 30th Mar 15
U.S. Dollar, Commodities and the Gold Miners GDXJ ETF Analysis - 30th Mar 15
Stock Market Short-term Downtrend - 30th Mar 15
David Cameron Election 2015 Debate Facts Check - Employment, Immigration, Debt & Deficit - 29th Mar 15
Stock Market About Ready to Crash! - 29th Mar 15
Reflections in a Golden Eye - Gold Market Rejection, Repatriation and Redemption - 28th Mar 15
Stock Market Inflection Point - 28th Mar 15
Gold And Silver - What Moved Price? Bab el-Mandeb And Uranus Square Pluto. What?! - 28th Mar 15
Stock Market Investment Parachutes; Do You Have Yours? - 28th Mar 15
Peak Gold Misunderstanding, is Gold About to Run Out? - 28th Mar 15
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

Fasten-Your-Seatbelt, Financial Markets Heading For Heavy Turbulence

Stock-Markets / Financial Markets 2012 Aug 29, 2012 - 03:27 AM GMT

By: DK_Matai

Stock-Markets

Best Financial Markets Analysis ArticleFor every one corporate executive distinguished member of the ATCA 5000, who expects the global economy to improve over the next 12 months, there are at least two senior executives who now expect the global economy to get worse over the coming 12 months.  In the aftermath of the Beijing Olympics, four years ago, Lehman Brothers collapsed in mid-September 2008.  Are we heading for a similar outcome in the autumn or fall of 2012 post the London Olympics? The last few months of 2012 could really mark a major inflection point in the next phase of a global systemic crisis and the inadequate solutions proffered by those in authority to address the crisis so far.  Sadly, we have never even come close to recovering from the last global financial crisis which began in August 2007 and this next crisis might -- should it arrive in late 2012 -- end up being even more painful than the last one.  Having said that, there's a clear top 5% of beneficiaries from the last global financial crisis who have profited from quantitative easing and other monetary and financial policies to the detriment of the remaining 95% who have by and large seen their disposable income go down whilst inflation has ratcheted upwards.


Perfect Storm

Are there specific reasons why we should be collectively concerned about what is coming towards the latter part of 2012? Yes, the ingredients for a "perfect storm" are slowly coming together, and in the next few months we could very well see the next wave of a massive financial correction with the potential for a further economic downturn.  A recent IMF research paper by Luc Laeven and Fabián Valencia showed that a banking crisis is far more likely to start in September than in any other month in any given year.  Historically, a global financial crisis is much more likely to begin in the autumn or fall than during any other season of the year.  For example, the stock market crash of 1929 began in late October. "Black Monday" happened on October 19th, 1987 and the major global financial crisis of 2008 also started in September-October.  Further, one increasingly finds the following asymmetric threats buried almost on a daily basis underneath the "Business-as-usual" newspaper headlines:

1.  Fall-off in International Trade, Global Recession and Rising Unemployment:  There is no obvious engine of global growth visible anywhere -- neither in emerging markets like China, India and Brazil and nor within Europe -- and the myth of the robust “US recovery” is fast being exposed as a fallacy.   In the last few years, the Eurozone has gone through a crisis-of-confidence of an intensity and depth unrivalled since the beginning of the European construction project after the Second World War.  In the coming weeks and months, all the major powers of the world -- including the US, China and Japan -- may have to face an identical process of reckoning as global demand tails off sharply.  Inability to control or slow down rising long-term unemployment is a major contributory factor to falling global demand for products and services and rising need for government spending programmes.  This chasm exposes the failure of monetary and fiscal policies that are based on "pure austerity" measures to stimulate growth. 

2.  Global Lending Crisis:  All over the globe the flow of credit is beginning to freeze up. The Bank for International Settlements in Basel, Switzerland, states that worldwide lending is contracting at the fastest pace since the financial crisis of 2008.  Lack of “miracle” solutions as in 2008-2009, because of the growing impotence of many of the major central banks including the US Federal Reserve, European Central Bank, Bank of Japan, Bank of England coupled with high levels of indebtedness, suggests that the room for further flexibility now no longer exists.

3. Growing Insolvency of the Western Banking and Financial System:  Rapid decline of the whole of the Western asset-backed retirement system including pension funds because of the loss of annuity income and anaemic yields is no longer just an academic issue.  In parallel, Credit Default Swaps (CDS) insurance instruments for many Western banks including the top names in Europe are now trading higher than in the months leading up to the collapse of Lehman Brothers.  So, something major is afoot.  Credibility is in freefall for almost all countries as they assume the twin load of public and private excessive debt.  This is having a detrimental effect on the financial assets held by banks such as domestic government bonds that are being downgraded and devalued as well as falling real estate prices which together underpin their balance sheets.

4.  Derivatives:  Credit rating agencies downgraded the ratings of a number of major global banks at the start of this summer. As a result, many of them have been required to post billions of dollars in additional collateral against derivatives exposures.  The quadrillion dollar derivatives pyramid is a dangerous edifice to keel over.  If it begins to give, it will spark off a chain reaction of events leading to a systemic crisis.  The total size of the derivatives pyramid is at least 20 times larger than the GDP of the entire world.

5.  US Municipal and State Bankruptcies:  All over the United States there are cities and towns as well as entire states on the verge of financial catastrophe as tax revenues are shrinking fast relative to their ongoing spending commitments. Stockton in California has now become the largest US city ever to declare bankruptcy, but the reality is that this is only just the beginning of the local and state government debt crisis.  If the police and the garbage collectors cannot be paid, how does one maintain law and order in such circumstances?  This is a recipe for civil discord and unrest.

6. Growing Geo-Political Divisions:  Disagreements within the world’s “monolithic” powers such as the US, China, Japan, Russia and the large economies in the European Union -- Germany, France, UK, Italy and Spain -- do not bode well to being able to resolve the next global financial and economic crisis together.  Geopolitical tensions -- particularly in the Middle East -- are approaching the point of a regional explosion in the context of Iran-and-Israel as well as Syria.  Lasting global geopolitical blockage at the United Nations is going to make it difficult to be able to resolve these crises diplomatically in the near future.

7. Ineffective International Alliances: G20, G8, Rio+20, WTO etc are proving to be ineffective in 2012 and are unable to repeat the magic of their earlier years. 

Conclusion

From the vantage point of the summer of 2012, it appears plausible that the final few months of this year may prove to be a potential game changer. Whether there is some kind of financial markets correction with attendant consequences for a global economic downturn; further breakdown in social and political stability; or extreme evasive political action to avoid such circumstances remains to be seen.  At any rate it is going to be interesting to observe how all these converging events now in mid-flight are going to land together.  It is likely that there may be cascading second-order risks as several of these primary asymmetric risks manifest simultaneously.  Please fasten your seat-belt.  There is extreme turbulence just ahead!

What are your thoughts, observations and views? We are hosting an Expert roundtable on this issue at ATCA 24/7 on Yammer.

By DK Matai

www.mi2g.net

Asymmetric Threats Contingency Alliance (ATCA) & The Philanthropia

We welcome your participation in this Socratic dialogue. Please access by clicking here.

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic expert initiative founded in 2001 to resolve complex global challenges through collective Socratic dialogue and joint executive action to build a wisdom based global economy. Adhering to the doctrine of non-violence, ATCA addresses asymmetric threats and social opportunities arising from climate chaos and the environment; radical poverty and microfinance; geo-politics and energy; organised crime & extremism; advanced technologies -- bio, info, nano, robo & AI; demographic skews and resource shortages; pandemics; financial systems and systemic risk; as well as transhumanism and ethics. Present membership of ATCA is by invitation only and has over 5,000 distinguished members from over 120 countries: including 1,000 Parliamentarians; 1,500 Chairmen and CEOs of corporations; 1,000 Heads of NGOs; 750 Directors at Academic Centres of Excellence; 500 Inventors and Original thinkers; as well as 250 Editors-in-Chief of major media.

The Philanthropia, founded in 2005, brings together over 1,000 leading individual and private philanthropists, family offices, foundations, private banks, non-governmental organisations and specialist advisors to address complex global challenges such as countering climate chaos, reducing radical poverty and developing global leadership for the younger generation through the appliance of science and technology, leveraging acumen and finance, as well as encouraging collaboration with a strong commitment to ethics. Philanthropia emphasises multi-faith spiritual values: introspection, healthy living and ecology. Philanthropia Targets: Countering climate chaos and carbon neutrality; Eliminating radical poverty -- through micro-credit schemes, empowerment of women and more responsible capitalism; Leadership for the Younger Generation; and Corporate and social responsibility.

© 2012 Copyright DK Matai - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014