For the last several months there have been warnings of a coming economic storm, with many forecasting serious financial calamity by the Fall of this year.
But for the last several years America has appeared to remain fairly insulated from overt crisis. We were told that a recovery had taken hold, jobs were returning and consumer confidence had reached new highs, propaganda which drove millions of investors back into stock markets and real estate. No one in the mainstream world, it seems, believes there’s anything to be concerned about.
The biggest culprit in the collapse in spending intentions was the middle class (those making between $50 and $100K) but mostly the wealthy, those with incomes over $100K. It was the latter whose spending expectations dropped to, you guessed it, the lowest in series history.
The U.S. economy is driven by one thing: consumer spending, much of it based on credit.
As the chart above shows, spending has collapsed. And that can really only mean one thing going forward. America is not about to enter a recession, we are already in one right here and now.
It has been suggested that the collapse of the debt bubble could lead to shortages of the most basic necessities for survival. Analyst Greg Mannarino recently warned that because the growth, including population growth, we’ve seen over the last two decades has been dependent on credit, once that credit is frozen it will have ramifications that most people can’t even imagine as a possibility:
Did you see what just happened? The devaluation of the yuan by China triggered the largest one day drop for that currency in the modern era. This caused other global currencies to crash relative to the U.S. dollar, the price of oil hit a six year low, and stock markets all over the world were rattled. The Dow fell 212 points on Tuesday, and Apple stock plummeted another 5 percent.
As we hurtle toward the absolutely critical months of September and October, the unraveling of the global financial system is beginning to accelerate. At this point, it is not going to take very much to push us into a full-blown worldwide financial crisis. The following are 12 signs that indicate that a global financial crash has become even more likely after the events of the past few days…
#1 The devaluation of the yuan on Tuesday took virtually the entire planet by surprise (and not in a good way). The following comes from Reuters…
China’s 2 percent devaluation of the yuan on Tuesday pushed the U.S. dollar higher and hit Wall Street and other global equity markets as it raised fears of a new round of currency wars and fed worries about slowing Chinese economic growth.
#2 One of the big reasons why China devalued the yuan was to try to boost exports. China’s exports declined 8.3 percent in July, and global trade overall is falling at a pace that we haven’t seen since the last recession.
#3 Now that the Chinese have devalued their currency, other nations that rely on exports are indicating that they might do the same thing. If you scan the big financial news sites, it seems like the term “currency war” is now being bandied about quite a bit.
#4 This is the very first time that the 50 day moving average for the Dow has moved below the 200 day moving average in the last four years. This is known as a “death cross”, and it is a very troubling sign. We are just about at the point where all of the most common technical signals that investors typically use to make investment decisions will be screaming “sell”.
#5 The price of oil just closed at a brand new six year low. When the price of oil started to decline back in late 2014, a whole lot of people were proclaiming that this would be a good thing for the U.S. economy. Now we can see just how wrong they were.
#6 This week we learned that OPEC has been pumping more oil than we thought, and it is being projected that this could cause the price of oil to plunge into the 30s…
#7 In a recent article, I explained that the collapse in commodity prices that we are witnessing right now is eerily similar to what we witnessed just before the stock market crash of 2008. On Tuesday, things got even worse for commodities as the price of copper closed at a brand new six year low.
#8 The South American debt crisis of 2015 continues to intensify. Brazil’s government bonds have been downgraded to just one level above junk status, and the approval rating of Brazil’s president has fallen into the single digits.
#9 Just before the financial crisis of 2008, a surging U.S. dollar put an extraordinary amount of stress on emerging markets. Now that is happening again. Emerging market stocks just hit a brand new four year low on Tuesday thanks to the stunt that China just pulled.
#10 Things are not so great in the United States either. The ratio of wholesale inventories to sales in the United States just hit the highest level since the last recession. What that means is that there is a whole lot of stuff sitting in warehouses out there that is waiting to be sold in an economy that is rapidly slowing down.
#11 Speaking of slowing down, the growth of consumer spending in the United States has just plummeted to multi-year lows.
#12 Deep inside, most of us can feel what is coming. According to Gallup, the number of Americans that believe that the economy is getting worse is almost 50 percent higher than the number of Americans that believe that the economy is getting better.
Things are lining up perfectly for a global financial crisis and a major recession beginning in the fall and winter of 2015.
But just because things look like they will happen a certain way does not necessarily mean that they will. All it takes is a single “event” of some sort to change everything.
On Wednesday a London-based think tank said war games by NATO and Russia increase the possibility of “dangerous military encounters” and war on the European continent.
According to Ian Kearns, director of the London-based European Leadership Network, war games and military preparation “are contributing to a climate of mistrust” that has “on occasion become the focal point for some quite close encounters between the NATO and Russian militaries.”
“While spokespeople may maintain that these operations are targeted against hypothetical opponents, the nature and scale of them indicate otherwise: Russia is preparing for a conflict with NATO, and NATO is preparing for a possible confrontation with Russia,” Kearns said.
NATO and Russia have conducted huge military exercises since the coup in Ukraine.
The report highlights two: NATO’s “Allied Shield” exercise in June and Russia’s “snap exercise” held in March that involved 80,000 military personnel.
“These tensions are further aggravated and elevated into a sense of unpredictability when the exercises are not pre-notified or publicly announced beforehand, as is apparently the case with a number of Russian exercises,” the report states.
Numerous “near encounters” have occurred, including a narrowly-avoided collision between an airliner and a Russian aircraft near Copenhagen.
The encounters reveal “the fact that both NATO and Russia have moved significant air assets into closer proximity to each other,” according to Dangerous Brinkmanship, a report issued in November by the European Leadership Network.
“It is also worrying that military deployments and exercises along the joint NATO-Russia border proceed on what appears to be a self-perpetuating cycle of action-reaction.”
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