![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/quotes_7a.gif)
Agriculture • Food-Price Crisis Signals Imminent Hyperinflation
Food-Price Crisis Signals Imminent Hyperinflation
Written by Jeff Nielson
Monday, 14 January 2013 14:43
Attempting to decipher the global picture regarding food prices, food inventories, and food production is not akin to navigating a labyrinth. A deluge of misleading propaganda and short-term ‘noise’ from the mainstream media means anyone attempting to decipher these parameters is likely to encounter a plethora of “dead-ends” and “wrong turns.”
Those following agricultural markets and agricultural prices have seen two, general trends emerging over the past decade: rapidly rising (nominal) prices and steadily falling inventories. This flies directly in the face of the most basic of all supply/demand fundamentals.
Yes, falling inventories are supposed to lead to rising prices. However, those rising prices are then supposed to naturally lead to both falling demand (because of higher prices) and rising supply (because of higher prices) – with the rebuilding of inventories an inevitable result.
Yet despite the largest price-spike in the price of agricultural commodities in 40 years, inventories remain depressed, and critical stock-to-use ratios remain close to multi-decade lows. So why has the global economy ceased to respond to basic supply/demand stimuli? Because our subsidy-saturated global agriculture model is so absurdly broken.
[Source: United Nations Food and Agriculture Organization]
While fiscally-irresponsible Western governments continue to whine (and do little else) about their exploding debts and deficits, utterly massive (and still-growing) farm subsidies remain untouched. Western agricultural subsidies (direct and indirect) now amount to somewhere in excess of $100 billion/year; however these subsidies are so endemic and heavily-disguised that coming up with an exact figure would be a Herculean task.
For example, much of the U.S.’s corn subsidies are in fact listed/described as “ethanol subsidies”. The preferential prices (and access) given to U.S. farmers for (precious) water supplies does not even seem to be counted as a “subsidy”, despite the tremendous quantities of subsidized water being directed toward (what is now) the U.S.’s “banana economy.” U.S. soya bean farmers received nearly $30 billion in “direct subsidies” alone from 1995 – 2011, with subsidized water not even mentioned.
There are two obvious and inevitable effects of long-term agriculture subsidies, and long-term subsidies in general: artificially low prices and depressed production. Let me repeat this: the effect of these permanent subsidies on agricultural commodities means that crop prices (and food prices) would have been spiraling upwards even more rapidly otherwise.
Put another way, crop prices (and food prices) are not “high” today. Rather, the debauched paper which our bankers (and governments) call “money” has been plummeting in value so rapidly that even with nominal prices spiraling here, in real dollars agriculture prices remain extremely depressed – explaining the relentless, long-term deterioration of inventories.
The dynamics are simple. Heavily-subsidized (Western) agricultural products are dumped in markets all over the world. Poorer, less-developed nations cannot compete with those subsidies, and thus subsidized Western agricultural products have bankrupted 10’s of millions of small farmers all over the world – and taken that land out of cultivation, further depressing supplies/inventories.
Those reactionaries in the U.S. incensed over Mexican “illegal aliens” can thank the “farm lobby” in the U.S. (i.e. Monsanto), as it is 100% responsible for the flood of Mexican migrants into the U.S. Massive corn-subsidies in the U.S. bankrupted millions of Mexican corn-farmers. With no other options for survival, these farmers made their only logical choice: they migrated to the place where they knew that the corn which they used to grow was now being grown – the U.S.
Of course, there is a huge difference in the new agricultural model for these Mexican “farmers”. Before being bankrupted by U.S. subsidies, they owned-and-farmed their own land; and the profits from that agriculture were their own. Today, they are nothing but subsistence-level slaves for U.S. Agri-Corporations like Monsanto.
The numbers are clear. Approximately 95% of U.S. “agricultural workers” are ethnic Mexicans, and more than half of those are “undocumented.” This wave of Mexican migrants over the past 20 years has occurred at the same time that U.S. corn-subsidies increased by 300%. Those who claimed that “slavery ended” in the U.S. with the Civil War were obviously premature.
The only exception to the steady collapse of the world’s vital cereal grains (the key component of the global food supply) has been a sudden reversal of the collapse of global rice inventories. However, this rebound in rice production has come almost exclusively from the frantic increase in rice-planting by Asian governments – fueled by (you guessed it) large, government subsidies.
Here Asia’s governments are trapped. They did not start the subsidies game. They are not the ones destroying the world’s monetary system (and all its currencies) with exponentially-increasing money-printing. Excessive agriculture subsidies are solely the fault of the West, and the reason for those subsidies is solely to hide the collapse in value of the bankers’ paper.
How high would food prices be without the $100’s of billions per year in global, agricultural subsidies? High enough to drop 100’s of millions more people below the poverty line (with a growing percentage of that total coming from Western societies), and to put (at least) 10’s of millions of the already-poor on a direct path to starvation.
The manipulation of the entire global agricultural complex through excessive subsidization and artificially low prices can only have one, possible outcome: a complete collapse of inventories; a global food-availability crisis; and a much, much greater explosion in prices than if there had never been any of this subsidization.
Naturally the (corrupt) Corporate Media tells us none of this. It’s always “bad weather” here or “drought” there, and rarely any long-term data to provide readers with any sort of clear, overall perspective. However, rarely (if ever) does the entire world experience benign weather for even a single growing-year. And multi-decade lows in inventory levels do not arise from “one drought.”
Understand the futility of this game. The suppression of global agriculture (and food) prices is intended to hide the total collapse in the value of our paper currencies; because it is the collapse in confidence that such a price-spiral would induce which is the inevitable trigger for hyperinflation.
However, with the only possible end-result being an even more-mammoth price-spike, and thus an even more-mammoth collapse in confidence in the bankers’ debauched paper; they will inevitably cause the very phenomenon which they are trying (so desperately) to prevent. With the final outcome a mathematical certainty, the only remaining variable is timing.
Note too how this gross distortion of agricultural markets has greatly amplified the risk of short-term disruptions to the global food supply. With the U.S. now the world’s, great Banana Republic (thanks to massive hand-outs to the Agri-Corporations); the U.S. currently produces roughly 1/3 of the world’s corn and soya beans.
This absurd over-concentration of global agricultural production in the U.S. not only makes feeding the world highly dependent on the weather of one nation (the U.S.); but makes it equally vulnerable to its corrupt/insane agriculture policies.
The obvious example is ethanol, where the ridiculously excessive ethanol subsidies mean that the U.S. currently wastes roughly 40% of its annual corn crop producing the world’s most-inefficient (and most heavily-subsidized) bio fuel. Put another way, insane U.S. government ethanol policies by themselves waste more than 10% of total, global corn production.
There’s still one final dimension of insanity to the subsidy-distorted global food production model. In our modern world, dominated by Western agricultural corporations shipping their products (literally) halfway around the world; roughly ¼ of the global food supply spoils in transit.
Obviously without massive Western subsidization, much more of the global food supply would be grown locally. If that were to happen, the percentage of global food production wasted by spoilage in transit would be sure to plummet.
Instead, we have the Western Agriculture Model. Countless millions of small farmers bankrupted, and doomed to poverty and/or slavery. Insane/dangerous over-concentration of agricultural production in Western (corporate) agricultural production. An unbelievable percentage of total, global food production completely wasted – as a direct result of Western agricultural imperialism.
At the end of it all: the collapse of the global food supply; a massive, global food-supply crisis; and a resulting price-shock for food prices which will doom countless millions to starvation. And after all of that, the bankers’ worthless Western currencies are still certain to plummet to zero via the ensuing hyperinflation.
http://bullionbullscanada.com/intl-comm … rinflation
Statistics: Posted by yoda — Tue Jan 15, 2013 2:55 pm
View full post on opinions.caduceusx.com
Other • Warnings That A Massive Stock Market Crash Is Imminent
Warnings That A Massive Stock Market Crash Is Imminent
In the financial world, the month of October is synonymous with stock market crashes. So will a massive stock market crash happen this year? You never know. The truth is that our financial system is even more vulnerable than it was back in 2008, and financial experts such as Doug Short, Peter Schiff, Robert Wiedemer and Harry Dent are all warning that the next crash is rapidly approaching. We are living in the greatest debt bubble in the history of the world and Wall Street has been transformed into a giant casino that is based on a massive web of debt, risk and leverage. When that web breaks we are going to see a stock market crash that is going to make 2008 look like a Sunday picnic. Yes, the Federal Reserve has tried to prevent any problems from erupting in the financial markets by initiating another round of quantitative easing, but 40 billion dollars a month will not be nearly enough to stop the massive collapse that is coming. This will be explained in detail toward the end of the article. Hopefully we will get through October (and the rest of this year) without seeing a stock market collapse, but without a doubt one is coming at some point. Those on the wrong end of the coming crash are going to be absolutely wiped out.
A lot of people focus on the month of October because of the history of stock market crashes in this month. This history was detailed in a recent USA Today article….
When it comes to wealth suddenly disappearing, October can be diabolically frightful. The stock market crash of 1929 that led to the Great Depression occurred in October. So did the 22.6% plunge suffered by the Dow Jones industrial average in 1987 on "Black Monday."
The scariest 19-day span during the 2008 financial crisis also went down in October, when the Dow plunged 2,675 points after investors fearing a financial collapse went on a panic-driven stock-selling spree that resulted in five of the 10 biggest daily point drops in the iconic Dow’s 123-year history.
So what will we see this year?
Only time will tell.
If a stock market crash does not happen this month or by the end of this year, that does not mean that the experts that are predicting a stock market crash are wrong.
It just means that they were early.
As I have said so many times, there are thousands upon thousands of moving parts in the global financial system. So that makes it nearly impossible to predict the timing of events with perfect precision. Financial conditions are constantly shifting and changing.
But without a doubt another major financial collapse similar to what happened back in 2008 (or even worse) is on the way. Let’s take a look at some of the financial experts that are predicting really bad things for our financial markets in the months ahead….
Doug Short
According to Doug Short, the vice president of research at Advisor Perspectives, the stock market is somewhere between 33% and 51% overvalued at this point. In a recent article he offered the following evidence to support his position….
? The Crestmont Research P/E Ratio (more)
? The cyclical P/E ratio using the trailing 10-year earnings as the divisor (more)
? The Q Ratio, which is the total price of the market divided by its replacement cost (more)
? The relationship of the S&P Composite price to a regression trendline (more)
Peter Schiff
Peter Schiff, the CEO of Euro Pacific Capital, has been one of the leading voices in the financial community warning people about the crisis that is coming.
During a recent interview with Fox Business, Schiff stated that the massive financial collapse that we witnessed back in 2008 "wasn’t the real crash" and he boldly declared that the "real crash is coming".
So is Schiff right?
We shall see.
Robert Wiedemer
Economist Robert Wiedemer warned people what was coming before the crash of 2008, and now he is warning that what is coming next is going to be even worse….
"The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012."
Harry Dent
Financial author Harry Dent believes that the stock market could fall by as much as 60 percent in the coming months. He is convinced that stocks are hugely overvalued right now….
"We have the greatest debt bubble in history. We will see a worldwide downturn. And when you are in this type of recessionary environment stocks should be trading at five to seven times earnings."
So are these guys right?
We shall see.
But I do find it interesting that some of the biggest names in the financial world are currently making moves as if they also believe that a massive financial crisis is coming.
For example, as I have written about previously, George Soros has dumped all of his holdings in banking giants JP Morgan, Citigroup and Goldman Sachs.
Infamous billionaire hedge fund manager John Paulson, the man who made somewhere around 20 billion dollars betting against the U.S. housing market during the last financial crisis, is making massive bets against the euro right now.
So where are these financial titans putting their money?
According to the Telegraph, both of these men are pouring enormous amounts of money into gold….
There was also news last week in an SEC filing that both George Soros and John Paulson had increased their investment in SPDR Gold Trust, the world’s largest publicly traded physical gold exchange traded fund (ETF).
Mr Soros upped his stake in the ETF to 884,400 shares from 319,550 and Mr Paulson bought 4.53m shares, bringing his stake to 21.3m.
At the current price of about $156 a share, these are new investments of about $88m of Mr Soros’ cash and more than $700m from Mr Paulson’s funds. These are significant positions.
So why would they do this?
Why would they pour millions upon millions of dollars into gold?
Well, it would make perfect sense to put so much money into gold if a massive financial crisis was coming.
So is the next financial crisis imminent?
We will see.
Most "financial analysts" that appear in the mainstream media would laugh at the notion that a stock market crash is imminent.
Most of them would insist that everything is going to be perfectly fine for the foreseeable future.
In fact, most of them are convinced that quantitative easing is going to cause stocks to go even higher.
After all, isn’t quantitative easing supposed to be good for stocks?
Didn’t I write an article just last month that detailed how quantitative easing drives up stock prices?
Yes I did.
So how can I be writing now about the possibility of a stock market crash?
Aren’t I contradicting myself?
Not at all.
Let me explain.
The first two rounds of quantitative easing did indeed drive up stock prices. The same thing will happen under QE3, unless the effects of QE3 are overwhelmed by a major crisis.
For example, if we were to see a total collapse of the derivatives market it would render QE3 totally meaningless.
Estimates of the notional value of the worldwide derivatives market range from 600 trillion dollars all the way up to 1.5 quadrillion dollars. Nobody knows for sure how large the market for derivatives is, but everyone agrees that it is absolutely massive.
When we are talking about amounts that large, the $40 billion being pumped into the financial system each month by the Federal Reserve during QE3 would essentially be the equivalent of spitting into Niagara Falls. It would make no difference at all.
Most Americans do not understand what "derivatives" are, so they kind of tune out when people start talking about them.
But they are very important to understand.
Essentially, derivatives are "side bets". When you buy a derivative, you are not investing in anything. You are just gambling that something will or will not happen.
I explained this more completely in a previous article entitled "The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System"….
A derivative has no underlying value of its own. A derivative is essentially a side bet. Usually these side bets are highly leveraged.
At this point, making side bets has totally gotten out of control in the financial world. Side bets are being made on just about anything you can possibly imagine, and the major Wall Street banks are making a ton of money from it. This system is almost entirely unregulated and it is totally dominated by the big international banks.
Over the past couple of decades, the derivatives market has multiplied in size. Everything is going to be fine as long as the system stays in balance. But once it gets out of balance we could witness a string of financial crashes that no government on earth will be able to fix.
Five very large U.S. banks (including Goldman Sachs, JP Morgan and Bank of America) have combined exposure to derivatives in excess of 250 trillion dollars.
Keep in mind that U.S. GDP for 2011 was only about 15 trillion dollars.
So we are talking about an amount of money that is almost inconceivable.
That is why I cannot talk about derivatives enough. In fact, I apologize to my readers for not writing about them more.
If you want to understand the coming financial collapse, one of the keys is to understand derivatives. Our entire financial system has been transformed into a giant casino, and at some point all of this gambling is going to cause a horrible crash.
Do you remember the billions of dollars that JP Morgan announced that they lost a while back? Well, that was caused by derivatives trades gone bad. In fact, they are still not totally out of those trades and they are going to end up losing a whole lot more money than they originally anticipated.
Sadly, that was just the tip of the iceberg. Much, much worse is coming. When you hear of a major "derivatives crisis" in the news, you better run for cover because it is likely that the entire house of cards is about to start falling.
And don’t get too caught up in the exact timing of predictions.
If a stock market crash does not happen this month, don’t think that the storm has passed.
A major financial crisis is coming. It might not happen this week, this month or even this year, but without a doubt it is approaching.
And when it arrives it is going to be immensely painful and it is going to change all of our lives.
http://theeconomiccollapseblog.com/arch … s-imminent
Statistics: Posted by yoda — Thu Oct 04, 2012 12:09 am
View full post on opinions.caduceusx.com
Other • Re: Warnings That A Massive Stock Market Crash Is Imminent
Dylan Grice Writes His Most Negative Note Ever: ‘I Am More Worried Than I Have Ever Been’
Matthew Boesler | Oct. 2, 2012
www.investmentweek.co.uk
SocGen strategist Dylan Grice is known for being pretty bearish in general, but this could take the cake.
Check out the way Dylan Grice begins his latest missive:
I am more worried than I have ever been about the clouds gathering today (which may be the most wonderful contrary indicator you could hope for…). I hope they pass without breaking, but I fear the defining feature of coming decades will be a Great Disorder of the sort which has defined past epochs and scarred whole generations.
What’s this Great Disorder? Grice is talking about monetary easing by the world’s central banks.
Grice is concerned that, as history has shown, currency debasement will lead to "social debasement," or a rise in social disorder as trust breaks down on a large scale.
And the social debasement is already easy to see in the United States, according to Grice. He writes, "The 99% blame the 1%, the 1% blame the 47%, the private sector blames the public sector, the public sector returns the sentiment … the young blame the old, everyone blame the rich … yet few question the ideas behind government or central banks …"
Grice says we’ve been living through "what might be the largest credit inflation in financial history, a credit hyperinflation."
That "credit hyperinflation," however, has only served to enrich those at the top at the expense of those at the bottom.
Grice says even Keynes recognized this effect, which is why "it’s ironic so many of today’s crude Keynesians support QE so enthusiastically."
The Keynes quote Grice references:
“By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some."
Grice writes that the "credit hyperinflation" referred to above has been increasing inequality in the United States for years:
Median US household incomes have been stagnant for the best part of twenty years…yet inequality has surged. While a record number of Americans are on food stamps, the top 1% of income earners are taking a larger share of total income than since the peak of the 1920s credit inflation. Moreover, the growth in that share has coincided almost exactly with the more recent credit inflation.
These phenomena are inflation’s hallmarks. In the Keynes quote above, he alludes to the artificial and iniquitous redistribution of wealth inflation imposes on society without being specific. What actually happens is that artificially created money redistributes wealth towards those closest to it, to the detriment of those furthest away.
And all this is contributing to the "social debasement" of America.
Grice looks at some examples from history where currency debasement led to a complete breakdown of the social fabric of communities like the Roman Empire, France during the revolutionary period at the end of the 18th century, and Weimar Germany.
In every case, citizens turned on each other as a sharply devalued currency led to a breakdown of trust between members of society.
A perhaps lesser-known incident that Grice brings to light, however, is a period in Britain during the late 16th and early 17th centuries when the country was rocked by witch trials:
Société Générale
Grice concludes with a warning: "All I see is more of the same — more money debasement, more unintended consequences and more social disorder. Since I worry that it will be Great Disorder, I remain very bullish on safe havens."
Read more: http://www.businessinsider.com/socgens- … z28JHWgy9h
Statistics: Posted by yoda — Thu Oct 04, 2012 12:41 am
View full post on opinions.caduceusx.com
Warnings That A Massive Stock Market Crash Is Imminent
In the financial world, the month of October is synonymous with stock market crashes. So will a massive stock market crash happen this year? You never know. The truth is that our financial system is even more vulnerable than it was back in 2008, and financial experts such as Doug Short, Peter Schiff, Robert Wiedemer and Harry Dent are all warning that the next crash is rapidly approaching. We are living in the greatest debt bubble in the history of the world and Wall Street has been transformed into a giant casino that is based on a massive web of debt, risk and leverage. When that web breaks we are going to see a stock market crash that is going to make 2008 look like a Sunday picnic. Yes, the Federal Reserve has tried to prevent any problems from erupting in the financial markets by initiating another round of quantitative easing, but 40 billion dollars a month will not be nearly enough to stop the massive collapse that is coming. This will be explained in detail toward the end of the article. Hopefully we will get through October (and the rest of this year) without seeing a stock market collapse, but without a doubt one is coming at some point. Those on the wrong end of the coming crash are going to be absolutely wiped out.
A lot of people focus on the month of October because of the history of stock market crashes in this month. This history was detailed in a recent USA Today article….
When it comes to wealth suddenly disappearing, October can be diabolically frightful. The stock market crash of 1929 that led to the Great Depression occurred in October. So did the 22.6% plunge suffered by the Dow Jones industrial average in 1987 on “Black Monday.”
The scariest 19-day span during the 2008 financial crisis also went down in October, when the Dow plunged 2,675 points after investors fearing a financial collapse went on a panic-driven stock-selling spree that resulted in five of the 10 biggest daily point drops in the iconic Dow’s 123-year history.
So what will we see this year?
Only time will tell.
If a stock market crash does not happen this month or by the end of this year, that does not mean that the experts that are predicting a stock market crash are wrong.
It just means that they were early.
As I have said so many times, there are thousands upon thousands of moving parts in the global financial system. So that makes it nearly impossible to predict the timing of events with perfect precision. Financial conditions are constantly shifting and changing.
But without a doubt another major financial collapse similar to what happened back in 2008 (or even worse) is on the way. Let’s take a look at some of the financial experts that are predicting really bad things for our financial markets in the months ahead….
Doug Short
According to Doug Short, the vice president of research at Advisor Perspectives, the stock market is somewhere between 33% and 51% overvalued at this point. In a recent article he offered the following evidence to support his position….
? The Crestmont Research P/E Ratio (more)
? The cyclical P/E ratio using the trailing 10-year earnings as the divisor (more)
? The Q Ratio, which is the total price of the market divided by its replacement cost (more)
? The relationship of the S&P Composite price to a regression trendline (more)
Peter Schiff
Peter Schiff, the CEO of Euro Pacific Capital, has been one of the leading voices in the financial community warning people about the crisis that is coming.
During a recent interview with Fox Business, Schiff stated that the massive financial collapse that we witnessed back in 2008 “wasn’t the real crash” and he boldly declared that the “real crash is coming”.
So is Schiff right?
We shall see.
Robert Wiedemer
Economist Robert Wiedemer warned people what was coming before the crash of 2008, and now he is warning that what is coming next is going to be even worse….
“The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”
Harry Dent
Financial author Harry Dent believes that the stock market could fall by as much as 60 percent in the coming months. He is convinced that stocks are hugely overvalued right now….
“We have the greatest debt bubble in history. We will see a worldwide downturn. And when you are in this type of recessionary environment stocks should be trading at five to seven times earnings.”
So are these guys right?
We shall see.
But I do find it interesting that some of the biggest names in the financial world are currently making moves as if they also believe that a massive financial crisis is coming.
For example, as I have written about previously, George Soros has dumped all of his holdings in banking giants JP Morgan, Citigroup and Goldman Sachs.
Infamous billionaire hedge fund manager John Paulson, the man who made somewhere around 20 billion dollars betting against the U.S. housing market during the last financial crisis, is making massive bets against the euro right now.
So where are these financial titans putting their money?
According to the Telegraph, both of these men are pouring enormous amounts of money into gold….
There was also news last week in an SEC filing that both George Soros and John Paulson had increased their investment in SPDR Gold Trust, the world’s largest publicly traded physical gold exchange traded fund (ETF).
Mr Soros upped his stake in the ETF to 884,400 shares from 319,550 and Mr Paulson bought 4.53m shares, bringing his stake to 21.3m.
At the current price of about $156 a share, these are new investments of about $88m of Mr Soros’ cash and more than $700m from Mr Paulson’s funds. These are significant positions.
So why would they do this?
Why would they pour millions upon millions of dollars into gold?
Well, it would make perfect sense to put so much money into gold if a massive financial crisis was coming.
So is the next financial crisis imminent?
We will see.
Most “financial analysts” that appear in the mainstream media would laugh at the notion that a stock market crash is imminent.
Most of them would insist that everything is going to be perfectly fine for the foreseeable future.
In fact, most of them are convinced that quantitative easing is going to cause stocks to go even higher.
After all, isn’t quantitative easing supposed to be good for stocks?
Didn’t I write an article just last month that detailed how quantitative easing drives up stock prices?
Yes I did.
So how can I be writing now about the possibility of a stock market crash?
Aren’t I contradicting myself?
Not at all.
Let me explain.
The first two rounds of quantitative easing did indeed drive up stock prices. The same thing will happen under QE3, unless the effects of QE3 are overwhelmed by a major crisis.
For example, if we were to see a total collapse of the derivatives market it would render QE3 totally meaningless.
Estimates of the notional value of the worldwide derivatives market range from 600 trillion dollars all the way up to 1.5 quadrillion dollars. Nobody knows for sure how large the market for derivatives is, but everyone agrees that it is absolutely massive.
When we are talking about amounts that large, the $40 billion being pumped into the financial system each month by the Federal Reserve during QE3 would essentially be the equivalent of spitting into Niagara Falls. It would make no difference at all.
Most Americans do not understand what “derivatives” are, so they kind of tune out when people start talking about them.
But they are very important to understand.
Essentially, derivatives are “side bets”. When you buy a derivative, you are not investing in anything. You are just gambling that something will or will not happen.
I explained this more completely in a previous article entitled “The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System“….
A derivative has no underlying value of its own. A derivative is essentially a side bet. Usually these side bets are highly leveraged.
At this point, making side bets has totally gotten out of control in the financial world. Side bets are being made on just about anything you can possibly imagine, and the major Wall Street banks are making a ton of money from it. This system is almost entirely unregulated and it is totally dominated by the big international banks.
Over the past couple of decades, the derivatives market has multiplied in size. Everything is going to be fine as long as the system stays in balance. But once it gets out of balance we could witness a string of financial crashes that no government on earth will be able to fix.
Five very large U.S. banks (including Goldman Sachs, JP Morgan and Bank of America) have combined exposure to derivatives in excess of 250 trillion dollars.
Keep in mind that U.S. GDP for 2011 was only about 15 trillion dollars.
So we are talking about an amount of money that is almost inconceivable.
That is why I cannot talk about derivatives enough. In fact, I apologize to my readers for not writing about them more.
If you want to understand the coming financial collapse, one of the keys is to understand derivatives. Our entire financial system has been transformed into a giant casino, and at some point all of this gambling is going to cause a horrible crash.
Do you remember the billions of dollars that JP Morgan announced that they lost a while back? Well, that was caused by derivatives trades gone bad. In fact, they are still not totally out of those trades and they are going to end up losing a whole lot more money than they originally anticipated.
Sadly, that was just the tip of the iceberg. Much, much worse is coming. When you hear of a major “derivatives crisis” in the news, you better run for cover because it is likely that the entire house of cards is about to start falling.
And don’t get too caught up in the exact timing of predictions.
If a stock market crash does not happen this month, don’t think that the storm has passed.
A major financial crisis is coming. It might not happen this week, this month or even this year, but without a doubt it is approaching.
And when it arrives it is going to be immensely painful and it is going to change all of our lives.
I hope you are ready for that.
View full post on The Economic Collapse
Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?
Something really strange appears to be happening. All over the globe, governments and big banks are acting as if they are anticipating an imminent financial collapse. Unfortunately, we are not privy to the quiet conversations that are taking place in corporate boardrooms and in the halls of power in places such as Washington D.C. and London, so all we can do is try to make sense of all the clues that are all around us. Of course it is completely possible to misinterpret these clues, but sticking our heads in the sand is not going to do any good either. Last week, it was revealed that the U.S. government has been secretly directing five of the biggest banks in America “to develop plans for staving off collapse” for the last two years. By itself, that wouldn’t be that big of a deal. But when you add that piece to the dozens of other clues of imminent financial collapse, a very troubling picture begins to emerge. Over the past 12 months, hundreds of banking executives have been resigning, corporate insiders have been selling off enormous amounts of stock, and I have been personally told that a significant number of Wall Street bankers have been shopping for “prepper properties” in rural communities this summer. Meanwhile, there have been reports that the U.S. government has been stockpiling food and ammunition, and Barack Obama has been signing a whole bunch of executive orders that would potentially be implemented in the event of a major meltdown of society. So what does all of this mean? It could mean something or it could mean nothing. What we do know is that a financial collapse is coming at some point. Over the past 40 years, the total amount of all debt in the United States has grown from about 2 trillion dollars to nearly 55 trillion dollars. That is a recipe for financial armageddon, and it is inevitable that this gigantic bubble of debt is going to burst at some point.
In normal times, the U.S. government does not tell major banks to “develop plans for staving off collapse”.
But according to a recent Reuters article, that is apparently exactly what has been happening….
U.S. regulators directed five of the country’s biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.
The two-year-old program, which has been largely secret until now, is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.
Does it seem odd to anyone else that only five really big banks got such a warning?
And why keep it secret from the American public?
Does the federal government actually expect such a collapse to happen?
If federal officials do expect a financial collapse to occur, they would not be the only ones. An increasing number of very respected economists are speaking about the coming financial collapse as if there is a certain inevitability about it.
For example, check out the following quote from a recent Money Morning article….
Richard Duncan, formerly of the World Bank and chief economist at Blackhorse Asset Mgmt., says America’s $16 trillion federal debt has escalated into a “death spiral,” as he told CNBC.
And it could result in a depression so severe that he doesn’t “think our civilization could survive it.”
A former World Bank executive is warning that our civilization might not survive what is coming?
That is pretty chilling.
Economist Nouriel Roubini says that he believes that the coming crisis will be even worse than 2008….
“Worse because like 2008 you will have an economic and financial crisis but unlike 2008, you are running out of policy bullets. In 2008, you could cut rates; do QE1, QE2; you could do fiscal stimulus; you could backstop/ringfence/guarantee banks and everybody else. Today, more QEs are becoming less and less effective because the problems are of solvency not liquidity. Fiscal deficits are already so large and you cannot bail out the banks because 1) there is a political opposition to it; and 2) governments are near-insolvent – they cannot bailout themselves let alone their banks. The problem is that we are running out of policy rabbits to pull out of the hat!”
Across the pond, many European officials are echoing similar sentiments.
What Nigel Farage told King World News the other day is very ominous….
Today MEP (Member European Parliament) Nigel Farage spoke with King World News about what he described as the possibility of, “a really dramatic banking collapse.” Farage also warned that central planners want to enslave and imprison people inside of a ‘New Order,’ and he described the situation as “horrifying.”
The situation in Europe continues to get worse and worse. The authorities in Europe have come out with “solution” after “solution”, and yet unemployment continues to skyrocket and economic conditions in the EU have deteriorated very steadily over the past 12 months.
If all of that was not bad enough, there are an increasing number of indications that Germany is actually considering leaving the euro.
Needless to say, that would be a complete and total disaster for the rest of the eurozone.
Of course there are any number of ways that the financial crisis in Europe could potentially play out.
But all of the realistic scenarios would be very bad for the global economy.
Meanwhile, our resources are dwindling, war in the Middle East could erupt at any moment and our planet is becoming increasingly unstable. The following is from a recent article by Paul B. Farrell on Marketwatch.com….
Fasten your seat belts, soon we’ll all be shocked out of denial. Some unpredictable black swan. A global wake-up call will trigger the Pentagon’s prediction in Fortune a decade ago at the launch of the Iraq War: “By 2020 … an ancient pattern of desperate, all-out wars over food, water, and energy supplies is emerging … warfare defining human life.”
It is almost as if a “perfect storm” is brewing.
Of course the historic drought that is ravaging food production in the United States this summer is not helping matters either. Another summer or two like this one and we could be looking at a return of Dust Bowl conditions.
Anyone that is watching what is going on in the world and is not concerned at all about what is happening is simply being delusional.
Recently, a “team of scientists, economists, and geopolitical analysts” examined the current state of the global economic system and the conclusions they reached were absolutely staggering….
One member of this team, Chris Martenson, a pathologist and former VP of a Fortune 300 company, explains their findings:
“We found an identical pattern in our debt, total credit market, and money supply that guarantees they’re going to fail. This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.
“And what’s really disturbing about these findings is that the pattern isn’t limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well.”
According to Martenson: “These systems could all implode at the same time. Food, water, energy, money. Everything.”
Hmmmm – it sounds like they have been reading The Economic Collapse Blog.
The truth is that a massive worldwide financial collapse is coming.
It is inevitable, and it is going to be extremely painful.
So what do you think about all of this? Please feel free to post a comment with your thoughts below….
View full post on The Economic Collapse