Mother of All US Bubbles
From 1951 through 1997, the nominal net worth of US households rose from $1.239 trillion to $34.407 trillion - a total 46 year increase of 2,678%. Throughout this period, the net worth of US households as a percentage of US GDP remained in a very narrow range of 318.2% to 391.5% - with a 46 year average US household net worth/GDP percentage of 355.3%.
In the 1Q of 1998, the Dow Jones soared by 891.5 points to a new record high of 8,799.8 - causing the net worth of US households to rise to a record 407.2% of GDP - exceeding 400% for the first time ever. Two years later in the 1Q of 2000, the net worth of US households topped out at a record 443.3% of GDP. This represented the very peak of the dot-com bubble.
As the dot-com bubble burst, US household net worth/GDP collapsed over the following 2 1/2 years to a 3Q 2002 bottom of 385.5%. It undoubtedly would have fallen to well below its 1951-1997 mean of 355.3%, if not for the Federal Reserve lowering the Fed Funds Rate from its 2000 peak of 6.5% down to a mid-2003 low of 1% - in an attempt to reinflate the dot-com bubble. Although unsuccessful at doing so, the Fed did create a new even larger asset bubble in the Real Estate market, which peaked in the 1Q of 2007 with the net worth of US households topping out at a record 472.8% of GDP!
The net worth of US households as a % of GDP peaked during the Real Estate Bubble at a level that was 29.5 percentage points above the 2000 dot-com bubble peak. Over the following two years as the Real Estate Bubble burst, US household net worth/GDP crashed to a 1Q 2009 financial crisis bottom of 382.1% - 3.4 percentage points below its post dot-com bubble bottom. It would have declined dramatically lower if not for the Federal Reserve lowering the Fed Funds Rate from its 2007 peak of 5.25% down to a record low of 0%-0.25%.
Last quarter, after six straight years of near 0% interest rates - US household net worth/GDP hit a new record high of 480.8%, nearly 3 standard deviations above the 1951-2015 mean of 374.7%. We are currently experiencing the Mother of All US Bubbles, and the Fed is scared to even raise rates back up to 1%. When this bubble bursts, US household net worth/GDP will need to correct down to a new record low of less than 318.2% - to counteract the damages caused by the Fed's artificial suppression of rates over such a prolonged period.
Any attempts to reinflate the current Mother of All US Bubbles - will undoubtedly result in hyperinflation!
Warn Your Friends Now....
The Economic Depression in Greece Deepens As Tsipras Prepares To Deliver 'The Great No' - By Michael Snyder -
http://theeconomiccollapseblog.com/archives/the-economic-depression-in-greece-deepens-as-tsipras-prepares-to-deliver-the-great-no As Greece plunges even deeper into economic chaos, Greek Prime Minister Alexis Tsipras says that his government is prepared to respond to the demands of the EU and the IMF with "the great no" and that his party will accept responsibility for whatever consequences follow. Despite years of intervention from the rest of Europe, Greece is a bigger economic mess today than ever. Greek GDP has shrunk by 26 percent since 2008, the national debt to GDP ratio in Greece is up to a staggering 175 percent, and the unemployment rate is up above 25 percent. Greek stocks are crashing and Greek bond yields are shooting into the stratosphere. Meanwhile, the banking system is essentially on life support at this point. 400 million euros were pulled out of Greek banks on Monday alone. No matter what happens in the coming days, many believe that it is now only a matter of time before capital controls like we saw in Cyprus are imposed.
Over the past several months, there have been endless high level meetings over in Europe regarding this Greek crisis, but none of them have fixed anything. And even Jeroen Dijsselbloem admits that the odds of anything being accomplished during the meeting of eurozone finance ministers on Thursday is "very small"...
Some officials believe Thursday's meeting of eurozone finance ministers will be perhaps the last chance to stop Greece sliding into default and towards leaving the euro.
However the president of the so-called Eurogroup, Jeroen Dijsselbloem, said the chance of an accord was "very small".
And it is certainly not just Dijsselbloem that feels this way. At this point pretty much everyone is resigned to the fact that there is not going to be a deal any time soon. The following comes from Reuters...
"People are getting anxious on both sides. Athens expects Brussels to move. And Brussels expects Athens to move. And it's stuck," said a senior EU diplomat, who declined to be named.
"It's very dangerous, and we may have an accident."
EU officials insist that it is Greece that needs to back down, but the Greeks have no intention of backing down. Just consider the words of Greek Prime Minister Alexis Tsipras. He says that he is not afraid to deliver "the great no" to the rest of Europe...
Greek Prime Minister Alexis Tsipras said he's ready to assume responsibility for the consequences of rejecting an unfair deal with creditors.
In a sign that he's being taken at his word, officials from the Netherlands, Portugal and Germany said they were bracing for a breakdown in talks that could roil the currency bloc.
With a viable solution "the Greek government recently elected by the Greek people will bear the cost of carrying through," Tsipras told reporters in Athens on Wednesday. Without one, "we will assume the responsibility to say 'the great no' to a continuation of the catastrophic policies."
To me, that sounds like a man that is not going to back down. And to call it "the great no" is not an exaggeration at all. I think that he realizes that this "great no" will unleash financial chaos all over Europe.
For Greece, the consequences would likely be catastrophic. At least that is what the Bank of Greece thinks...
Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and - most likely - from the European Union. A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring.
All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership. From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South.
And no matter how confident the Germans appear to be right now, the truth is that a Greek debt default would be a complete and total nightmare for the rest of Europe as well. The euro would drop like a rock, stocks would crash all over Europe and bond yields would go crazy. And that is just for starters.
So we desperately need to see a deal. But with each passing day that seems less and less likely.
In fact, a Greek parliament committee on public debt just released a new report containing their preliminary findings. This report is not legally binding, but it does show the mood of the Greek parliament, and what this report says is absolutely stunning. It concluded that the Greek government is under absolutely no obligation to repay its debts. Just check out the following excerpt from the report...
All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika's arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.
In other words, what this report is saying is that the Greek government should never pay back any of this debt. That certainly is not going to sit well with the officials from the EU and the IMF.
And what happens if other financially troubled nations in the eurozone decide that their debts are "illegal" and "odious" as well?
Globally, there are more than 76 trillion dollars worth of bonds floating around out there, and the yields on those bonds are based on the assumption that they will always be paid off. If nations such as Greece start defaulting, that will throw the entire global financial system into a state of tremendous chaos.
Of course the Greek financial system is already in a state of tremendous chaos. At this point, many believe that it is just a matter of time before capital controls are imposed. This is something that I have warned about in the past. The following description of what capital controls in Greece may look like comes from Bloomberg...
No one knows the specifics for Greece, but here's what happened in Cyprus: ATM withdrawals were capped at 300 euros a person per day. Transfers of more than 5,000 euros abroad were subject to approval by a special committee. Companies needed documents for each payment order, with approvals for over 200,000 euros determined by available liquidity. Parents couldn't send children that were studying abroad more than 5,000 euros a quarter. Cypriots traveling abroad could carry no more than 1,000 euros with them. Termination of fixed-term deposits was prohibited, while payments with credit and debit cards were capped at 5,000 euros. Checks couldn't be cashed.
Since most Greeks do not want to have their money trapped in the banks, they have been pulling out cash and hiding it at home at a record breaking pace. This is precisely what we would expect to see when a nation is on the verge of total financial collapse...
"Everybody's doing it," said Joanna Christofosaki, in front of a Eurobank cash dispenser in the leafy Athens neighbourhood of Kolonaki. "Our friends have all done it. Nobody wants their money to be worthless tomorrow. Nobody wants to be unable to get at it."
A researcher in the archaeology department at the Academy of Athens, Christofosaki said she knew plenty of people who had "?10,000 somewhere at home" and plenty of others who chose to keep their stash at the office. Was she among them? "If I was, I certainly wouldn't tell you."
As I wrote about yesterday, I believe that this is the beginning of the next great European financial crisis.
Eventually, it will spread all over the planet.
Unfortunately, even though global debt levels have never been higher and the signs of the coming financial implosion are all around us, most people have been lulled into a false sense of security.
Most people just assume that everything is going to turn out okay somehow.
The second half of this year is going to be much different from the first half, but most people will not be convinced until everything starts completely falling apart.
By then, it may be far too late to do anything about it.
The Next Great European Financial Crisis Has Begun - By Michael Snyder -
http://theeconomiccollapseblog.com/archives/the-next-great-european-financial-crisis-has-begun The Greek financial system is in the process of totally imploding, and the rest of Europe will soon follow. Neither the Greeks nor the Germans are willing to give in, and that means that there is very little chance that a debt deal is going to happen by the end of June. So that means that we will likely see a major Greek debt default and potentially even a Greek exit from the eurozone. At this point, credit default swaps on Greek debt have risen 456 percent in price since the beginning of this year, and the market has priced in a 75 percent chance that a Greek debt default will happen. Over the past month, the yield on two year Greek bonds has skyrocketed from 20 percent to more than 30 percent, and the Greek stock market has fallen by a total of 13 percent during the last three trading days alone. This is what a financial collapse looks like, and if Greece does leave the euro, we are going to see this kind of carnage happen all over Europe.
Officials over in Europe are now openly speaking of the need to prepare for a "state of emergency" now that negotiations have totally collapsed. At one time, it would have been unthinkable for Greece to leave the euro, but now it appears that this is precisely what will happen unless a miracle happens...
Greece is heading for a state of emergency and an exit from the euro following the collapse of talks to agree a bailout deal, senior EU officials warned last night.
Europe must be prepared to step in otherwise Greek society would face an unprecedented crisis with power blackouts, medicine shortages and no money to pay for police, they said.
In the past, the Greeks have always buckled under pressure. But this new Greek government was elected with a mandate to end austerity, and so far they have shown a remarkable amount of resolve. In order for a debt deal to happen, one side is going to have to blink, and at this point it does not look like it will be the Greeks...
The world's financial markets are facing up to the possibility that Greece could soon become the first country to crash out of Europe's single currency. Talks between Athens and its eurozone creditors have collapsed in acrimony just days before a final deadline for Greece to unlock the ?7.2bn (£5.2bn) in bailout funds it needs to avoid a catastrophic debt default.
The Greek Prime Minister, Alexis Tsipras, accused the creditor powers of hidden "political motives" in their demands that Greece make further cuts to public pension payments in return for the financial aid. "We are shouldering the dignity of our people, as well as the hopes of the people of Europe," Mr Tsipras said in a defiant statement. "We cannot ignore this responsibility. This is not a matter of ideological stubbornness. This is about democracy."
As we approach the point of no return, both sides are preparing for the endgame.
In Greece, members of parliament have been studying what happened in Iceland a few years ago. Many of them believe that a Greek debt default combined with a nationalization of Greek banks and a Greek exit from the euro could set the nation back on the path to prosperity fairly rapidly. The following comes from the Telegraph...
The radical wing of Greece's Syriza party is to table plans over coming days for an Icelandic-style default and a nationalization of the Greek banking system, deeming it pointless to continue talks with Europe's creditor powers.
Syriza sources say measures being drafted include capital controls and the establishment of a sovereign central bank able to stand behind a new financial system. While some form of dual currency might be possible in theory, such a structure would be incompatible with euro membership and would imply a rapid return to the drachma.
The confidential plans were circulating over the weekend and have the backing of 30 MPs from the Aristeri Platforma or 'Left Platform', as well as other hard-line groupings in Syriza's spectrum. It is understood that the nationalist ANEL party in the ruling coalition is also willing to force a rupture with creditors, if need be.
Meanwhile, in a desperate attempt to get the Greeks to give in at the last moment, Greek's creditors are preparing to pull out all the stops in order to put as much financial pressure on Greece as possible...
Germany's Suddeutsche Zeitung reported that the creditors are drawing an ultimatum to the Greeks, threatening to cut off Greek access to the European payments system and forcing capital controls on the country as soon as this weekend. The plan would lead to the temporary closure of the banks, followed by a rationing of cash withdrawals.
For a long time, most in the financial world assumed that a debt deal would eventually happen. But now reality is setting in. As I mentioned at the top of this article, the cost to insure Greek debt has risen by an astounding 456 percent since the beginning of this year...
Given these dramatic stakes, the risk of a Greek default has gone way up. One way to measure that risk is by looking at the skyrocketing price of insurance policies that would pay out if Greek bonds go bust. The cost to insure Greek debt for one year against the risk of default has skyrocketed 456% since the start of the 2015, according to FactSet data.
These insurance-like contracts, known as credit default swaps, imply there is a 75% to 80% probability of Greece defaulting on its debt, according to Jigar Patel, a credit strategist at Barclays.
The probability of a Greek default soars to a whopping 95% for five-year CDS, Patel said.
"Default is looking more and more likely," Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to clients on Tuesday.
And in recent days, we have also seen Greek stocks and Greek bonds totally crash. The following comes from CNN...
The Greek stock market has plummeted 13% over the past three trading days, including a 3% drop on Tuesday alone.
In the bond market, the yield on Greek two-year debt has skyrocketed to 30.2%. A month ago, the yield was only 20%. Yields rise as bond prices fall.
Of course if there is a Greek debt default and Greece does leave the euro, it won't just be Greece that pays the price.
As I have written about previously, there are tens of trillions of dollars in derivatives that are directly tied to currency exchange rates and 505 trillion dollars in derivatives that are directly tied to interest rates. A "Grexit" would cause the euro to drop like a rock and interest rates all over the continent would start to go crazy. The financial chaos that a "Grexit" would cause should not be underestimated.
And there are signs that some of Europe's biggest banks are already on the verge of collapse. For example, just consider what has been going on at the biggest bank in Germany. Both of the co-CEOs at Deutsche Bank recently resigned, and it is increasingly looking as if it could soon become Europe's version of Lehman Brothers. The following summary of the recent troubles at Deutsche Bank comes from an article that was posted on NotQuant...
Here's a re-cap of what's happened at Deutsche Bank over the past 15 months:
*In April of 2014, Deutsche Bank was forced to raise an additional 1.5 Billion of Tier 1 capital to support it's capital structure. Why?
*1 month later in May of 2014, the scramble for liquidity continued as DB announced the selling of 8 billion euros worth of stock - at up to a 30% discount. Why again? It was a move which raised eyebrows across the financial media. The calm outward image of Deutsche Bank did not seem to reflect their rushed efforts to raise liquidity. Something was decidedly rotten behind the curtain.
*Fast forwarding to March of this year: Deutsche Bank fails the banking industry's "stress tests" and is given a stern warning to shore up it's capital structure.
*In April, Deutsche Bank confirms it's agreement to a joint settlement with the US and UK regarding the manipulation of LIBOR. The bank is saddled with a massive $2.1 billion payment to the DOJ. (Still, a small fraction of their winnings from the crime).
*In May, one of Deutsche Bank's CEOs, Anshu Jain is given an enormous amount of new authority by the board of directors. We guess that this is a "crisis move". In times of crisis the power of the executive is often increased.
*June 5: Greece misses it's payment to the IMF. The risk of default across all of it's debt is now considered acute. This has massive implications for Deutsche Bank.
*June 6/7: (A Saturday/Sunday, and immediately following Greece's missed payment to the IMF) Deutsche Bank's two CEO's announce their surprise departure from the company. (Just one month after Jain is given his new expanded powers). Anshu Jain will step down first at the end of June. Jürgen Fitschen will step down next May.
*June 9: S&P lowers the rating of Deutsche Bank to BBB+ Just three notches above "junk". (Incidentally, BBB+ is even lower than Lehman's downgrade - which preceded it's collapse by just 3 months)
And that's where we are now. How bad is it? We don't know because we won't be permitted to know. But these are not the moves of a healthy company.
For a very long time, I have been warning that a major financial crisis was coming to Europe, and for a very long time the authorities in Europe have been able to successfully kick the can down the road.
But now it looks like we have reached the end of the road, and a day of reckoning is finally here.
Nobody is quite sure what is going to happen next, but almost everyone agrees that it isn't going to be pretty.
So you better buckle up, because it looks like we are all in for a wild ride as we enter the second half of this year.
U.S. Dollar Substitute to Go Public on Oct 20th?
05.21.2015 by Kelly Brown, Stansberry Research
The International Monetary Fund is one of the most secretive and powerful organizations in the world.
They monitor the financial health of more than 185 countries. they establish global money rules. and provide "bail-out" assistance to bankrupt nations.
And on Oct 20th of this year, the IMF is expected to announce a reserve currency alternative to the U.S. dollar, which will send hundreds of billions of dollars moving around the world, literally overnight.
According to Juan Zarate, who helped implement financial sanctions while serving in George W. Bush's Treasury department, "Once the [other currency] becomes an alternative to the dollar, rules of the game begin to change."
And Leong Sing Chiong, Assistant Managing Director at a major central bank, said this dollar alternative "is likely to transform the financial landscape in the next 5-10 years."
According to currency expert, Dr. Steve Sjuggerud (recently featured on CNBC, and Bloomberg),
"I've been active in the markets for over two decades now. but I've never seen anything that could move so much money, so quickly. Hundreds of billions of dollars could change hands in a single day after this announcement is made."
"The announcement will start a domino effect, that will basically determine who in America gets rich in the years to come. and who struggles."
Dr. Sjuggerud says if you own any U.S. assets-and that includes stocks, bonds, real estate, or just cash in a bank account-you should be aware of what's about to happen, and know how to prepare.
Experts say this announcement, expected Oct. 20th, could trigger one of the most profound transfers of wealth in our lifetime.
But as Dr. Sjuggerud explains, if you understand what's taking place, and can get ahead of this move, you can not only protect your money, but safely make a small fortune in the next few years.
Dr. Steve Sjuggerud and his research team have put together a full analysis on not only what this announcement means for the economy, but also how it could affect you, your money, and your investments, personally.
05.21.2015 by Kelly Brown, Stansberry Research
They monitor the financial health of more than 185 countries. they establish global money rules. and provide "bail-out" assistance to bankrupt nations.
And on Oct 20th of this year, the IMF is expected to announce a reserve currency alternative to the U.S. dollar, which will send hundreds of billions of dollars moving around the world, literally overnight.
According to Juan Zarate, who helped implement financial sanctions while serving in George W. Bush's Treasury department, "Once the [other currency] becomes an alternative to the dollar, rules of the game begin to change."
And Leong Sing Chiong, Assistant Managing Director at a major central bank, said this dollar alternative "is likely to transform the financial landscape in the next 5-10 years."
According to currency expert, Dr. Steve Sjuggerud (recently featured on CNBC, and Bloomberg),
"I've been active in the markets for over two decades now. but I've never seen anything that could move so much money, so quickly. Hundreds of billions of dollars could change hands in a single day after this announcement is made."
"The announcement will start a domino effect, that will basically determine who in America gets rich in the years to come. and who struggles."
Dr. Sjuggerud says if you own any U.S. assets-and that includes stocks, bonds, real estate, or just cash in a bank account-you should be aware of what's about to happen, and know how to prepare.
Experts say this announcement, expected Oct. 20th, could trigger one of the most profound transfers of wealth in our lifetime.
But as Dr. Sjuggerud explains, if you understand what's taking place, and can get ahead of this move, you can not only protect your money, but safely make a small fortune in the next few years.
Dr. Steve Sjuggerud and his research team have put together a full analysis on not only what this announcement means for the economy, but also how it could affect you, your money, and your investments, personally.
BE SURE TO CHECK OUT MY ALL NEW PROPHECY AND CREATION DESIGN WEBSITES. THERE IS A LOT TO SEE AND DO..........
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