GLOBAL FINANCIAL CRISIS: 7.3.15 - 16 Facts about the Tremendous Financial Devastation That We Are Seeing All Over the World

16 Facts about the Tremendous Financial Devastation That We Are Seeing All Over the World - By Michael Snyder - http://theeconomiccollapseblog.com/archives/16-facts-about-the-tremendous-financial-devastation-that-we-are-seeing-all-over-the-world
 
As we enter the second half of 2015, financial panic has gripped most of the globe.  Stock prices are crashing in China, in Europe and in the United States.  Greece is on the verge of a historic default, and now Puerto Rico and Ukraine are both threatening to default on their debts if they do not receive concessions from their creditors.  Not since the financial crisis of 2008 has so much financial chaos been unleashed all at once.  Could it be possible that the great financial crisis of 2015 has begun?  The following are 16 facts about the tremendous financial devastation that is happening all over the world right now...
 
1. On Monday, the Dow fell by 350 points.  That was the biggest one day decline that we have seen in two years.
 
2. In Europe, stocks got absolutely smashed.  Germany's DAX index dropped 3.6 percent, and France's CAC 40 was down 3.7 percent.
 
3. After Greece, Italy is considered to be the most financially troubled nation in the eurozone, and on Monday Italian stocks were down more than 5 percent.
 
4. Greek stocks were down an astounding 18 percent on Monday.
 
5. As the week began, we witnessed the largest one day increase in European bond spreads that we have seen in seven years.
 
6. Chinese stocks have already met the official definition of being in a "bear market" - the Shanghai Composite is already down more than 20 percent from the high earlier this year.
 
7. Overall, this Chinese stock market crash is the worst that we have witnessed in 19 years.
 
8. On Monday, Standard & Poor's slashed Greece's credit rating once again and publicly stated that it believes that Greece now has a 50 percent chance of leaving the euro.
 
9. On Tuesday, Greece is scheduled to make a 1.6 billion euro loan repayment.  One Greek official has already stated that this is not going to happen.
 
10. Greek banks have been totally shut down, and a daily cash withdrawal limit of 60 euros has been established.  Nobody knows when this limit will be lifted.
 
11. Yields on 10 year Greek government bonds have shot past 15 percent.
 
12. U.S. investors are far more exposed to Greece than most people realize.  The New York Times explains...
 
But the question of what happens when the markets do open is particularly acute for the hedge fund investors - including luminaries like David Einhorn and John Paulson - who have collectively poured more than 10 billion euros, or $11 billion, into Greek government bonds, bank stocks and a slew of other investments.
 
Through the weekend, Nicholas L. Papapolitis, a corporate lawyer here, was working round the clock comforting and cajoling his frantic hedge fund clients.
 
"People are freaking out," said Mr. Papapolitis, 32, his eyes red and his voice hoarse. "They have made some really big bets on Greece."
 
13. The Governor of Puerto Rico has announced that the debts that the small island has accumulated are "not payable".
 
14. Overall, the government of Puerto Rico owes approximately 72 billion dollars to the rest of the world.  Without debt restructuring, it is inevitable that Puerto Rico will default.  In fact, CNN says that it could happen by the end of this summer.
 
15. Ukraine has just announced that it may "suspend debt payments" if their creditors do not agree to take a 40 percent "haircut".
 
16. This week the Bank for International Settlements has just come out with a new report that says that central banks around the world are "defenseless" to stop the next major global financial crisis.
 
Without a doubt, we are overdue for another major financial crisis.  All over the planet, stocks are massively overvalued, and financial markets have become completely disconnected from economic reality.  And when the next crash happens, many believe that it will be even worse than what we experienced back in 2008.  For example, just consider the words of Jim Rogers...
 
"In the United States, we have had economic slowdowns every four to seven years since the beginning of the Republic. It's now been six or seven years since our last stock market problem. We're overdue for another problem."
 
In Rogers' view, low interest rates caused stock prices to increase significantly. He believes many assets are priced beyond their fundamentals thanks to the ultra-easy monetary policies by the Federal Reserve. Fed supporters argue such measures are good for investors, but Rogers takes a different view.
 
"The Fed might tell us we don't have to worry and that a correction or crash will never happen again. That's balderdash! When this artificial sea of liquidity ends, we're going to pay a terrible price. When the next economic problem occurs, it will be much worse because the debt is so much higher."
 
Of course Rogers is far from alone.  A recent article by Paul B. Farrell expressed similar sentiments...
 
America's 95 million investors are at huge risk. Remember the $10 trillion losses in the crash and recession of 2007-2009? The $8 trillion lost after the dot-com technology crash and recession of 2000-2003? This is the third big recession of the century. Yes, America will lose trillions again.
 
Especially with dead-ahead predictions like Mark Cook's 4,000-point Dow correction. And Jeremy Grantham's warning of a 50% crash around election time, with negative stock returns through the first term of the next president, beyond 2020. Starting soon.
 
Why is America so vulnerable when the next recession hits? Simple: The Fed's cheap-money giveaway is killing America. When the downturn, correction, crash hits, it will compare to the 2008 crash. The Economist warns: "the world will be in a rotten position to do much about it. Rarely have so many large economies been so ill-equipped to manage a recession," whatever the trigger.
 
Things have been relatively quiet in the financial world for so long that many have been sucked into a false sense of security.
 
But the underlying imbalances were always there, and they have been getting worse over time.
 
I believe that we are heading into a global financial collapse that will make what happened in 2008 look like a Sunday picnic by the time it is all said and done.
 
Global debt levels are at all-time highs, big banks all over the planet have been behaving more recklessly than ever, and financial markets are absolutely primed for a huge crash.
 
Hopefully things will calm down a bit as the rest of this week unfolds, but I wouldn't count on it.
 
We have entered uncharted territory, and what comes next is going to shock the world.

 

 

 

Why The Puerto Rico Debt Crisis Is Such A Huge Threat To The U.S. Financial System - By Michael Snyder - http://theeconomiccollapseblog.com/archives/why-the-puerto-rico-debt-crisis-is-such-a-huge-threat-to-the-u-s-financial-system

 
The debt crisis in Puerto Rico could potentially cost financial institutions in the United States tens of billions of dollars in losses.  This week, Puerto Rico Governor Alejandro Garcia Padilla publicly announced that Puerto Rico's  73 billion dollar debt is "not payable," and a special adviser that was recently appointed to help straighten out the island's finances said that it is "insolvent" and will totally run out of cash very shortly.  At this point, Puerto Rico's debt is approximately 15 times larger than the per capita median debt of the 50 U.S. states.  Yes, the Greek debt crisis is larger, as Greece currently owes about $350 billion to the rest of the planet.  But only about $14 billion of that total is owed to U.S. financial institutions.  But with Puerto Rico, things are very different.  Just about the entire 73 billion dollar debt is owed to U.S. financial institutions, and this could potentially cause massive problems for some extremely leveraged Wall Street firms.
 
There is a reason why Puerto Rico is called "America's Greece".  In Puerto Rico today, more than 40 percent of the population is living in poverty, the unemployment rate is over 12 percent, and the economy of the small island nation has continually been in recession since 2006.
 
Yet all this time Puerto Rico has continued to pile up even more debt.  Finally, it has gotten to the point where all of this debt is simply unpayable...
 
Steven Rhodes, the retired U.S. bankruptcy judge who oversaw Detroit's historic bankruptcy and has now been retained by Puerto Rico to help solve its problems, gave a blunt assessment on Monday.
 
Puerto Rico "urgently needs our help," Rhodes said. "It can no longer pay its debts, it will soon run out of cash to operate, its residents and businesses will suffer," he added.
 
This is why I hammer on the danger of U.S. government debt so often.  As we see with the examples of Greece and Puerto Rico, eventually a day of reckoning always arrives.  And when the day of reckoning arrives, power shifts into the hands of those that you owe the money too.
 
It would be hard to understate just how severe the debt crisis in Puerto Rico has become.  Former IMF economist Anne Krueger has gone so far as to say that it is "really dire"...
 
"The situation is dire, and I mean really dire," said former IMF economist Anne Krueger, co-author of the report commissioned by the U.S. territory, which recommended debt restructuring, tax hikes and spending cuts. "The needed measures may face political resistance but failure to address the issues would affect even more the people of Puerto Rico."
 
So who is going to get left holding the bag?
 
As I mentioned at the top of this article, major U.S. financial institutions are very heavily exposed.  Income from Puerto Rican bonds is exempt from state and federal taxation, and so that made them very attractive to many U.S. investors.  According to USA Today, there are 180 mutual funds that have "at least 5% of their portfolios in Puerto Rican bonds"...
 
The inability of the U.S. territory to repay its debt, combined with the financial crisis in Greece, would have far-reaching implications for financial markets and unsuspecting American investors. Morningstar, an investment research firm based in Chicago, estimated in 2013 that 180 mutual funds in the United States and elsewhere have at least 5% of their portfolios in Puerto Rican bonds.
 
It is important to keep in mind that many of these financial institutions are very highly leveraged.  So just a "couple of percentage points" could mean the different between life and death for some of these firms.
 
And unlike what is happening with Greece, the private financial institutions that hold Puerto Rican bonds are not likely to be very eager to "negotiate".  In fact, the largest holder of Puerto Rican debt has already stated that it is very much against any kind of restructuring...
 
U.S. fund manager OppenheimerFunds, the largest holder of Puerto Rico debt among U.S. municipal bond funds, warned the island it stands ready to defend the terms of bonds it holds, a day after the governor said he wanted to restructure debt and postpone bond payments.
 
What Oppenheimer is essentially saying is that it does not plan to give Puerto Rico any slack at all.  Here is more from the article that I just quoted above...
 
OppenheimerFunds, with about $4.5 billion exposure to Puerto Rico according to Morningstar, said it believed the island could repay bondholders while providing essential services to citizens and growing the economy. It said it stood ready "to defend the previously agreed to terms in each and every bond indenture."
 
"We are disheartened that Governor Padilla, in a public forum, has called for negotiations with other creditors, representing and including the millions of individual Americans that hold Puerto Rico municipal bonds," a spokesman for Oppenheimer said in a statement.
 
But Puerto Rico simply does not have the money to meet all of their debt obligations.
 
So somebody is not going to get paid at some point.
 
When that happens, those that insure Puerto Rican bonds are also going to take tremendous losses.  The following comes from a recent piece by Stephen Flood...
 
Now, bondholders are at risk as are the funds which hold Puerto Rican bonds and, more importantly, those who insure them in the derivatives market.
 
Dave Kranzler, from Investment Research Dynamics has warned that there are signs that the Puerto Rico situation may not remain a local crisis for much longer.
 
He points out that share prices of MBIA, the bond insurers, have been plummeting. MBIA are valued at $3.9 billion whereas their exposure to Puerto Rican debt is around $4.5 billion. Kranzler reckons their exposure could even be multiples of that figure. A default could wipe them out.
 
He also points out that the firm's largest shareholders are Warburg Pincus, the firm to which Timothy Geithner went after his stint as Treasury Secretary, when he helped paper over the chasms opening up in the financial system.
 
Did you notice the word "derivatives" in that quote?
 
Hmmm - who has been writing endless articles warning about the danger of derivatives for years?
 
Who has been warning that "this gigantic time bomb is going to go off and absolutely cripple the entire global financial system"?
 
When Puerto Rico defaults, bond insurers are going to be expected to step up and make huge debt service payments to investors.
 
But this just might bankrupt some of these big bond insurers.  In fact, we have already started to see the stock prices of some of these bond insurers begin to plummet.  The following comes from the Wall Street Journal...
 
Bond insurers MBIA Inc. and Ambac Financial Group Inc. are down again Tuesday as concerns over Puerto Rico's ability to repay its debt multiply.
 
Investors fear that both firms face the potential for steep losses on their promises to backstop billions of Puerto Rico's $72 billion of debt.
 
MBIA's stock closed down 23% Monday, and fell more than 10% before rebounding Tuesday. By late afternoon, the stock was down 6%. Ambac's stock fell 12% Monday and was off 14% Tuesday.
 
Of course Puerto Rico is just the tip of the iceberg of the coming debt crisis in the western hemisphere, just like Greece is just the tip of the iceberg of the coming debt crisis in Europe.
 
So stay tuned, because the second half of 2015 has now begun, and the remainder of this calendar year promises to be extremely "interesting".

Troubled Greece - by Hal Lindsey - http://www.hallindsey.com/ww-7-1-2015/
 
On Tuesday night, Greece became the first developed nation to default on a loan from the International Monetary Fund.  The causes, ramifications, and proposed solutions to the Greek debt crisis are a lesson in how quickly the Antichrist could come to power.
 
The nation of Greece is no stranger to debt and default.  It has existed in its present state for 194 years.  In 90 of those years, it has either been in default or in debt restructuring.  Until 2006, the Greek government guaranteed lifelong job security to all public sector workers.  In politics, votes were won by promises of prosperity.  Trying to pay for that prosperity eventually brought the country to its knees. 
 
In 2008, the worldwide recession hit Greece hard.  In the following years, they made several deals with eurozone nations that allowed Greece to receive the loans it needed to keep the government afloat.  But to receive those loans, the Greeks had to institute increasingly severe austerity programs.  It was a deadly cycle.  The Greek economy was addicted to government spending.  When big spending ended, everything went south. 
 
Newspapers say that Greece has been in a "recession" since 2009, but the word should be "depression."  In March, the Greek unemployment rate stood at 26% after an earlier high of almost 30%.
 
That level of crisis opens the door to a radical leader.  To gain power, he has to do two things.  He must tell people what they want to hear, and he must make it believable.
 
Prime Minister Alexis Tsipras is an ultra-liberal.  He's not married to his "partner," a woman he met at a "Communist Youth of Greece" meeting.  One of their children is named in honor of Che Guevara, the communist revolutionary who was sometimes known as "Castro's brain."  An atheist, he's the first Greek Prime Minister to take a secular, rather than Greek Orthodox, oath of office.
 
Years of austerity seemed to be bearing no fruit.  So the country turned to Tsipras who promised to end the austerity programs that Greeks believe were strangling their economy.  Last year, he won an overwhelming electoral victory.  He took office in January as the youngest Greek Prime Minister since 1865.
 
Things have only gotten worse.  But so far, Tsipras has done a masterful job of blaming his country's problems on past leaders and on present creditors.  After he closed the banks and ordered draconian money controls on his citizens, he tweeted that European authorities were using their financial position to "stifle the will of the Greek people."
 
In a public referendum on Sunday, Greek citizens will decide for themselves the kind of future they want.  They can vote to accept European money along with more of the austerity that has made their lives so difficult.  Or they vote to reject the austerity imposed by other countries.  That would probably mean losing the euro, and eventually leaving the EU.  Of course, even then, they will face austerity.  But this austerity will be imposed, not by the EU, but by the lack of money.
 
Even though 65% of Greeks say they want to stay in the eurozone, their Prime Minister is urging them to vote "No."  In fact, he says if they vote "Yes," he will resign.  What will happen to Greece and the EU if they reject Europe's offer?  It's anyone guess.
 
In a BBC man-on-the-street interview a few days ago in Athens, a local resident said, "The EU can't afford to let us fail so we should continue to say no and they will blink and give us a better deal."
 
He may be right.  The EU may decide to give in.  The problem is that Greece isn't the only EU nation in a debt crisis.  Give Greece a special deal, and several EU countries - including Portugal, Ireland, Italy, and Spain - could insist on the same deal.  The EU can't afford many more nations like Greece.
 
This is more than a global economic event.  As a minister and former pastor, it breaks my heart to see such suffering.  Think about what it would be like to have your life's savings in a bank in a country that might confiscate it.  Imagine working forty years expecting a certain pension, only to have most of it taken away just as you're set to retire.  Imagine stocking up on toilet paper this week because next week the store shelves could be bare.
 
Some would argue that they got what was coming to them.  After all, they elected leaders who promised them lots of loot.  They lived high and enjoyed the good times while they lasted.  But not all of them.  Many were frugal.  They lived within their means.  They saved.  They chose not to buy luxuries so that they could put money aside for another day.  Now the frugal and the spendthrifts find themselves in the same boat.  In this alternate version of Aesop's fable, the ant and the grasshopper end up starving together.
 
Could such financial upheaval happen in the United States?  Of course it could!  Jason Russell wrote in Tuesday's Washington Examiner, "United States' projected debt over the next 25 years looks a lot like Greece's over the past 25."
 
He was talking about our present trajectory with the economy humming along at a decent if unspectacular pace.  He's not saying we will be in a Greece-like condition if the economy hits some unexpected bumps.  He's saying that if the U.S. simply stays on its present course, with all things continuing to go okay, it will find itself in the same crisis the Greeks now face in a surprisingly short time.
 
But economies do hit unexpected bumps.  Bad things do happen.  In light of that, 25 years is highly optimistic.  Several factors make the current economic house of cards vulnerable to a sudden and catastrophic collapse.
 
Economic upheaval creates desperation, and economic desperation will one day open the door to Antichrist.

   The Greek government announced that the country's stock market and banks would remain closed until Monday, July 6. The government also instituted "capital controls," including a strict 60 euro per day limit on ATM withdrawals for all Greek citizens.
 Markets around the world sold off following the news this weekend. The benchmark Euro STOXX 600 Index closed down 2.7% today, while here in the U.S., the S&P 500 fell nearly 2%. Stocks didn't trade in Greece due to the market closure, but the FTSE Greek 20 Fund (GREK) plunged more than 20% in U.S. trading.

 

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