We Just Witnessed the Worst Week for Global Financial Markets in 3 Years - By Michael Snyder - http://theeconomiccollapseblog.com/archives/just-witnessed-worst-week-global-financial-markets-3-years
Is this the start of the next major financial crisis? The nightmarish collapse of the price of oil is creating panic in financial markets all over the planet. On June 16th, U.S. oil was trading at a price of $107.52. Since then, it has fallen by almost 50 dollars in less than 6 months. This has only happened one other time in our history. In the summer of 2008, the price of oil utterly collapsed and we all remember what happened after that. Well, the same patterns that we witnessed back in 2008 are happening again. As the price of oil crashed in 2008, so did prices for a whole host of other commodities. That is happening again. Once commodities started crashing, the market for junk bonds started to implode. That is also happening again. Finally, toward the end of 2008, we witnessed a horrifying stock market crash. Could we be on the verge of another major one? Last week was the worst week for the Dow in more than three years, and stock markets all over the world are crashing right now. Bad financial news continues to roll in from the four corners of the globe on an almost hourly basis. Have we finally reached the "tipping point" that so many have been warning about?
What we witnessed last week is being described as "a bloodbath" that was truly global in scope. The following is how Zero Hedge summarized the carnage...
*WTI's 2nd worst week in over 3 years (down 10 of last 11 weeks)
*Dow's worst worst week in 3 years
*Financials worst week in 2 months
*Materials worst week since Sept 2011
*VIX's Biggest week since Sept 2011
*Gold's best week in 6 months
*Silver's last 2 weeks are best in 6 months
*HY Credit's worst 2 weeks since May 2012
*IG Credit's worst week in 2 months
*10Y Yield's best week since June 2012
*US Oil Rig Count worst week in 2 years
*The USDollar's worst week since July 2013
*USDJPY's worst week since June 2013
*Portugal Bonds worst week since July 2011
*Greek stocks worst week since 1987
The stock market meltdown in Greece is particularly noteworthy. After peaking in March, the Greek stock market is down 40 percent since then. That includes a 20 percent implosion in just the past three trading days.
And it isn't just Greece. Financial markets all over Europe are in turmoil right now. In addition to crashing oil prices, there is also renewed concern about the fundamental stability of the eurozone. Many believe that it is inevitable that it is headed for a break up. As a result of all of this fear, European stocks also had their worst week in over three years...
European stock markets closed sharply lower on Friday, posting their biggest weekly loss since August 2011, as commodity prices continued to fall and and shares in oil-related firms came under renewed pressure from the weak price for crude.
The pan-European FTSEurofirst 300 unofficially ended 2.6 percent lower, down 5.9 percent on the week as the energy sector once again weighed heavily on wider benchmarks, falling over 3 percent.
But despite all of the carnage that we witnessed in the U.S. and in Europe last week, things are actually far worse for financial markets in the Middle East.
Just check out what happened on the other side of the planet on Sunday...
Stock markets in the Persian Gulf got drilled Sunday as worries about further price declines grew. The Dubai stock index fell 7.6% Sunday, the equivalent of a 1,313-point plunge in the Dow Jones industrial average. The Saudi Arabian market fell 3.3%.
Overall, Dubai stocks are down a whopping 23 percent over the last two weeks, and full-blown stock market crashes are happening in Qatar and Kuwait too.
Like I said, this is turning out to be a truly global financial panic.
Another region to keep an eye on is South America. Argentina is a financial basket case, the Brazilian stock market is tanking big time, and the implied probability of default on Venezuelan debt is now up to 93 percent...
Swaps traders are almost certain that Venezuela will default as the rout in oil prices pressures government finances and sends bond prices to a 16-year low.
Benchmark notes due 2027 dropped to 43.75 cents on the dollar as of 11:35 a.m. in New York, the lowest since September 1998, as crude extended a bear market decline. The upfront cost of contracts to insure Venezuelan debt against non-payment for five years is at 59 percent, bringing the implied probability of default to 93 percent, the highest in the world.
So what does all of this mean for the future?
Are we experiencing a repeat of 2008?
Could what is ahead be even worse than that?
Or could this just be a temporary setback?
Recently, Howard Hill shared a few things that he looks for to determine whether a major financial crisis is upon us or not...
The first condition is a serious market sector correction.
According to some participants in the market for energy company bonds and loans, such a correction is already underway and heading toward a meltdown (the second condition). Others are more sanguine, and expect a recovery soon.
That smaller energy companies have issued more junk-rated debt than their relative size in the economy isn't under debate. Of a total junk bond market estimated around $1.2 trillion, about 18% ($216 billion, according to a Bloomberg estimate) has been issued by energy-related companies. Yet those companies represent a far smaller share of the economy or stock market capitalization among the universe of junk-rated companies.
If the beaten-down prices for junk energy bonds don't stabilize or recover a bit, we might see the second condition: a spiral of distressed sales of bonds and loans. This could happen if junk bond mutual funds or other large holders sell into an unfriendly market at low prices, and then other holders of those bonds succumb to the pressure of fund redemptions or margin calls and sell at even lower prices.
The third condition, which we can't determine directly, would be pressure on Credit Default Swap dealers or hedge funds to make deposits as the prices of the CDS move against them. AIG was taken down when collateral demands were made to support existing CDS agreements, and nobody knew it until they were going under. There simply isn't a way to know whether banks or dealers are struggling until the effect is already metastasizing.
I think that he makes some really good points.
In particular, I think that watching how junk bonds perform over the next few weeks will be extremely telling.
Last week was truly a bloodbath for high yield debt.
But perhaps things will stabilize this week.
Let's hope so, because this is the closest that we have been to another major financial crisis since 2008.
There Is Hope In Understanding That A Great Economic Collapse Is Coming - By Michael Snyder - http://theeconomiccollapseblog.com/archives/hope-understanding-great-economic-collapse-coming
If you were about to take a final exam, would you have more hope or more fear if you didn't understand any of the questions and you had not prepared for the test at all? I think that virtually all of us have had dreams where we show up for an exam that we have not studied for. Those dreams can be pretty terrifying. And of course if you were ever in such a situation in real life, you probably did very, very poorly on that test. The reason I have brought up this hypothetical is to make a point. My point is that there is hope in understanding what is ahead of us, and there is hope in getting prepared. Since I started The Economic Collapse Blog back in 2009, there have always been a few people that have accused me of spreading fear. That frustrates me, because what I am actually doing is the exact opposite of that. When a hurricane is approaching, is it "spreading fear" to tell people to board up their windows? Of course not. In fact, you just might save someone's life. Or if you were walking down the street one day and you saw someone that wasn't looking and was about to step out into the road in front of a bus, what would the rational thing to do be? Anyone that has any sense of compassion would yell out and warn that other person to stay back. Yes, that other individual may be startled for a moment, but in the end you will be thanked warmly for saving that person from major injury or worse. Well, as a nation we are about to be slammed by the hardest times that any of us have ever experienced. If we care about those around us, we should be sounding the alarm.
Since 2009, I have published 1,211 articles on the coming economic collapse on my website. Some people assume that I must be filled with worry, bitterness and fear because I am constantly dealing with such deeply disturbing issues.
But that is not the case at all.
There is nothing that I lose sleep over, and I don't spend my time worrying about anything. Yes, my analysis of the global financial system has completely convinced me that an absolutely horrific economic collapse is in our future. But understanding what is happening helps me to calmly make plans for the years ahead, and working hard to prepare for what is coming gives me hope that my family and I will be able to weather the storm.
I do not believe in living my life in a state of fear, and I do not want anything that I write to ever cause fear in my readers. The ancient Hebrew greeting "Shalom" is roughly translated as "peace" or "completeness", and that is what we are constantly pursuing in my household. My wife and I know that incredibly challenging times are coming, but we also know who we are, what our purpose is, and where we are headed. We also believe that the greatest chapters of our lives are ahead even in the midst of all the chaos that is coming.
When times are the darkest, that is when light is needed the most. Just think about it. When you look back over history, what heroes do you admire the most? If you truly think about it, almost all of those heroes arose during times of great adversity and conflict.
The years ahead can be a time of great adventure for you, or they can seem like hell on Earth. It all depends on how you respond to your circumstances.
Do you want to know who is going to respond to the years ahead with fear, panic and depression?
The millions of people that have absolutely no idea what is coming and have made absolutely no preparations are going to be absolutely blindsided by the coming economic collapse. Just like the 1930s, we are going to see people jumping out of windows and jumping in front of trains. Others will sink into a state of despair so deep that nobody will ever be able to shake them out of it.
It doesn't have to be that way.
Over the past five years I have spent thousands of hours studying the coming economic collapse. In my articles you can find tens of thousands of facts and statistics that prove that the U.S. economy is hurtling toward oblivion.
It is not always the most pleasant thing to write about, but it is the truth. And that is what matters. If you believe that I am wrong, prove it to me. I work very hard to put out the most accurate information that I possibly can. So if you can prove that I am wrong, I will change my mind.
But of course that is not going to happen. As I have stated previously, anyone with half a brain should be able to see that we are living in the greatest debt bubble in human history. Anyone with half a brain should be able to see that the "too big to fail" banks are being extraordinarily reckless (derivatives, etc.). Anyone with half a brain should be able to see that our formerly great manufacturing cities are being transformed into crime-infested hellholes. Anyone with half a brain should be able to see that the middle class is dying. Anyone with half a brain should be able to see that the exact same patterns that led up to the great financial crisis of 2008 are happening again. Anyone with half a brain should be able to see that we simply cannot consume far more wealth than we produce as a nation indefinitely. Anyone with half a brain should be able to see that the incredibly foolish decisions that our politicians have been making for decades have placed us on a road to utter disaster.
So it doesn't take anyone special to do what I am doing. I am just a "watchman on the wall" sounding the alarm the best that I can. And there are lots of others that are doing the same thing. We are deeply concerned about where this nation is heading, and we have been pleading with our leaders to do something about it for a long time but they have not listened to us.
Since our leaders just continue doing "business as usual", there is not going to be a solution to our problems on the national level.
So that is why I am encouraging people to get prepared for the hard times that are coming on a family level and a community level.
Unfortunately, it seems like some people always have an excuse for not getting prepared. In fact, a few have even gone so far as to accuse me of being "anti-faith" for suggesting that people actually get off their couches and do something to help their families deal with the nightmare on the horizon. They seem to have the attitude that we should all just sit back and wait for God to do everything for us.
So I am not quite sure why those people get up in the morning and go to work, since they should just "trust God" to deposit paychecks into their banks. And I am not quite sure why they ever fill up the tanks of their vehicles with gasoline, because they should be able to "trust God" to put more gas there when they need it.
I covered all of this in much more detail in my previous article entitled "Is It 'Anti-Faith' To Prepare For The Coming Economic Collapse?"
For now, let me just state that what those people are suggesting is the exact opposite of what the Bible teaches. Trusting God is not about sitting back and doing nothing. In the Scriptures, we are told that faith is about stepping out and taking action on what God has revealed to us. That includes working hard, being wise and providing for our families. For example, just check out Proverbs 6:6-11...
Go to the ant, you sluggard! Consider her ways and be wise. Which, having no guide, overseer, or ruler, provides her bread in the summer, and gathers her food in the harvest.
How long will you sleep, O sluggard? When will you arise out of your sleep? Yet a little sleep, a little slumber, a little folding of the hands to sleep- so will your poverty come upon you like a stalker, and your need as an armed man.
In the end, each one of us needs to make the decisions that we feel are best for our own families.
So that is why it is so incredibly important not to let someone else do your thinking for you.
In America today, the average person watches 153 hours of television a month. In addition to that, we also spend countless hours watching movies, playing video games, listening to music, reading books and surfing the Internet.
What most Americans don't realize is that there are just six giant corporations that control almost all of that content, and that makes them immensely powerful.
These giant media corporations are constantly manipulating our attitudes, opinions and beliefs. And at this point most Americans seem quite content to remain "plugged into the matrix" and to allow corrupt corporate executives somewhere to do their thinking for them.
I urge you to break free from that system.
Do your own research and do your own thinking.
Don't take what I say or what anyone else says as truth without critically examining it yourself. This can be difficult at first, because in this nation our young people are no longer trained to think critically. Instead, we are trained to just blindly accept whatever information the system feeds us.
George Orwell once said that "during times of universal deceit, telling the truth becomes a revolutionary act".
That perfectly describes the era that we are currently living in.
The truth does not bring fear and despair.
Rather, the truth brings hope and it sets people free.
Share the truth with as many people as you can, because we live in a world that desperately needs it.
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