When Will Financial Armageddon Begin?By Greg Hunter
USAWatchdog.com
A little more than two years ago, economist John Williams of shadowstats.com predicted a “severe recession” was coming and soon. At the time, I was working as an investigative correspondent for CNN. I interviewed Williams for a story about the coming financial crisis. Most so-called experts, at the time, did not see the financial meltdown coming, let alone that all the banks were in trouble. Williams’ assessment of the economy was spot on in 2008. I don’t see how you can characterize what we have now as anything but a “severe recession.” Accurate information is the first and foremost reason to use someone as a source when you are a journalist. In my experience, what I have gotten from Williams has been stellar. (Click here for the 2008 CNN story featuring Williams and his predictions for the President in 2012.) (Click here for shadowstats.com)
Williams also predicted 2 years ago we would have a “hyperinflationary depression” within 10 years. Then, about a year ago, he revised his prediction and narrowed the window to “five years.” The day before last Friday’s dismal jobs report, Williams said, “. . . the timing of the looming U.S. financial Armageddon is coming into better focus, with increasingly high risk of it breaking within the next six months to a year.”
“Financial Armageddon . . . within the next six months to a year.” I called Williams to see why the odds of calamity have accelerated. He told me on the phone last night, “What is happening now to bring the timing into focus is the economy IS turning down. It is no longer the perspective the economy is going to turn down. That, in turn, will eventually trigger all the problems with the dollar, the debt and the deficit.”
For confirmation the economy is rolling over, look no further than the awful jobs report from the government last Friday. The Bureau of Labor Statistics (BLS) reported July payrolls fell 131,000. To add insult to injury, the June jobs number was revised downward. The economy lost 221,000 jobs which is considerably more than the 125,000 the government reported last month.
You want more confirmation the economy is in the tank? Also, last week, the government revealed a record 40.8 million Americans are now on food stamps. More budget woes can be seen at the state level. Congress just passed an emergency aid package worth $26 billion to save teachers’ jobs around the country. States are facing $200 billion in shortfalls in the coming months. California is one of the worst, with a $19 billion budget hole to fill and a $500 billion in underfunded pensions . Commercial and residential real estate is still losing value, and set to take another plunge.
So, what’s the government doing about the economy? The Fed has set interest rates at near 0% for more than a year and a half. The economy is not taking off. According to a recent article from financial writer Jim Willie, who has a PhD in Statistics, “Never in US history has a recession struck after several extended months of emergency ultra-low interest rates. This will be the first such occurrence. The policy response from the USFed must therefore be limited. They cannot reduce the official interest rate, unless below 0% (which did happen briefly in Japan). The nation stands on the doorstep of hyper-inflation. The only available tool within the USFed tool bag is Printing Pre$$ activity, pure monetization of both USTreasurys and USAgency Mortgage Bonds.” (For the complete Willie article click here.)
How much of a chance is there the Fed will just print money to pay bills? When asked how the Fed was going to stop the slide in the economy on CNBC, St. Louis Fed President James Bullard said, “Quantitative Easing is our best bet.” For us regular folks, QE means printing money out of thin air. I talked about this in a recent post called “Money Printing Is Our Best Bet.”
How fast could things go downhill when real trouble starts? Mallory Factor at Forbes laid it out nicely in an article last week called “Collapse In Internet Time.” Factor writes, “In an age when billions of dollars in securities are traded in nanoseconds, when a 24-hour news cycle seems long, why should national decline be exempt from what the Germans call Zeitgeist, the spirit of the age? The Book of Revelation, speaking allegorically of ancient Rome, states, “Alas! Alas! You great city, you mighty city, Babylon! For in a single hour your judgment has come.” Ancient Rome surely did not expect its sudden fall any more than the Soviet Union did in 1991, or than America does now.” (Click here for the complete Forbes article.)
Ultimately, the immense debt and deficits of the United States will crush the dollar. In his most recent report, Williams says, “The unfolding renewed decline in economic activity now is likely to be one of the proximal triggers for an even greater systemic solvency crisis, one that will pummel the U.S. dollar, threaten the solvency of the U.S. government and set the stage for a hyperinflation in the United States. In turn, such a crisis would exacerbate the intensifying downturn into a hyperinflationary great depression.”
No one knows exactly when the buck will buckle, but it looks like the dollar will take a short walk off a tall building a lot sooner than later.
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"Staring Into the Abyss" by Martin Armstrong
Martin Armstrong is probably the top economist in the world. Even Jim Sinclair bows to his prognostications and we all know how smart Sinclair is. Armstrong is presently in jail for refusing to give the government the software he created that was able to uncover the formula for what makes the world markets work and thus predict future market action with accuracy. He writes letters from Jail....when he can. This latest letter needs to be read and understood by all. He tells us what we all mostly know and that is that we are on the verge of the end of western civilization...
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Please click on the link for the entire letter.
http://www.martinarmstrong.org/files/Staring-into-the-Abyss-7-31-2010.pdf The purpose of these reports is to broaden the understanding that is so vital to our personal survival. Government cannot save us, and will only assist the very economic disaster we face. This is a Sovereign Debt Crisis that threatens our core survival.
There is no plan to ever pay off debts. The majority of debt increase- is paying interest perpetually to roll over without any long-term plan. What you see in Greece and in the States is that we have run out of other people's money.
The Socialists keep pointing to the rich. But to fund the deficits, we need to borrow now from foreign lands. We ran out of money domestically and to support the current system, like Greece, we need foreign capital. But all governments are facing the same crisis and we are on the verge of another widespread government default. Adam Smith Warned in his Wealth of Nations that in 1776, no government ever paid off their debt and had always defaulted. We will have no choice either.
There is no hope that politicians will save us, for they only form committees to investigate after the shtf. They will NOT risk their career for a future problem that may hit on someone else's watch. There was a politician and a average man standing on top of the Sears‘ Tower when a gust of wind blew them off.The average man being a realistic pessimist, immediately sees he is about to die and begins praying. The politicians, the ultimate optimist, can-be heard saying -"Well so far so good!" as he passes the 4th floor.
At Princeton Economics, our mission was simply to gather global data and to bring that together to create the world's largest and most comprehensive computer system and model that would monitor the world capital flows. By creating that model, all the fallacies of market and economic theories were revealed. The world is far more dynamic and every change even in a distant land can alter the course of the global economy.
Just as has been shown with the turmoil in Greece, a CONTAGION takes place and now capital begins to look around at all countries. We can no more comprehend the future by looking only at domestic issues today than we can do so in every other area, such as disease and the spread of flu.
We live in a NEW DYNAMIC GLOBAL ECONOMY where capital rushes around fleeing political changes and taxes just as it is attracted by prosperity. All the people who migrated to the United States in the 19th and 20th Centuries, came for the same reasons as those still coming from Mexico - jobs and prosperity. In the 19th Century, America was said to have so much wealth, its streets were paved in gold. We must now look to both the past and the entire world to understand where we now are today.
When all is said and done, no matter how we spin the story, we are in the final stages of the collapse of Western Society as we know it. By that I do not mean the sky will fall and people will be running through the streets naked fighting over 2 week old bread. That did not even happen with the fall of Rome, nor with Communism in China and Russia. It is possible that our political ruling class become so desperate that they take the tyranny path to extort every dime from the people hoping to hold on to the fleeting moments of past glories.
When it is all said and done, we will ask how was this citadel of the earthly powers of man fallen, and laying motionless and prostrate on the ground before all the great empires that have expired before it. The answer will be the same, DEBT and FISCAL MISMANAGEMENT. Our greatest problem has been our arrogance and presumption that we have conquered history and the laws of PRACTICAL ECONOMICS do not apply.
When empires die, the clash between private and public assets swings into the hyperactive mode. Those who see only the Dow crumble and fall to 1400 because that is what happened in 1929, fail to ever understand that such an event took place because of DEFLATION that was created by the fact that the dollar rose to extreme levels when everyone else was defaulting in 1931. This is WHY Roosevelt confiscated gold and devalued the dollar by raising gold from $20 to $35. Money was still something tangible. Today, we are looking at a massive sovereign debt default on a worldwide level.
Under a situation from the European view in 1931, the ONLY thing to survive was tangible assets. That is not merely gold, but shares in corporations with tangible value.
VELOCITY is always the key for as it declines due to people hoarding money you get DEFLATION. When people are afraid the money will become worthless (paper or debased coinage), they spend it faster before it depreciates and that creates HYPERINFLATION at the other extreme. It all depends on where the CONFIDENCE resides - with government or within the private sector. We are headed into the latter.
I have been working at full speed to get this book complete. I have passed the 300 page mark and I am deeply in debt to those assisting me on the outside to get me the reference material I need to ensure this is more than just an opinion, but also authoritative. Adam Smith in his Wealth of Nations wrote in his final volume about PublicDebt and what he asked was why people had ever considered lending money to government quality. I have been working on this issue in great detail.
Smith stated that never had any government EVER paid off its debt and that was in 1776. He was correct. I am assembling all the defaults that are.a subject that no one seems to want to talk about..Yet, there are stark and monumental conclusions that emerge from such a longlist of defaults.
Society does NOT end as the doomsday crowd portray. This seems to be just their desire or opinion. Many seem to wish disaster upon the world for they feel cheated and did not become rich with the crowd. But those sorts of claims are truly the exception. The fall of Rome ended in disaster as people fled cities and the population of Rome itself fell from 1 million to just 30,000. That was what the Romans called suburbium and why we still today call moving out of the city to the suburbs. That flight took place because of the collapse in the Rule of Law and unprecedented taxation that set in motion a migration that eventually led to feudalism.
Today, we have no place to go. We have run out of room. It is possible that government becomes so hostile that they will call the troops out against our own people. But that does NOT always succeed.The troops in China and Russia hesitated.to slaughter the people. In the famous Nika Revolt in Constantinople of January 532 ("Nika" means conquer), the Emperor Justinian feared for his life because the troops would not defend him. He was lucky that there were foreign mercenaries that were nearby and they came to his aid and slaughtered about 30,000 citizens who had gathered in the Hippodrome (local stadium where the chariot races took place).
In most cases, there is no civil war. Typically, the government collapses. In ancient times they may assassinate the head of state, but that tended to be more in the line of monarchs who ruled for life. The Puritans cut off the head of Charles I in England, but that was just when "the slave" becomes king, he becomes even more ruthless than the person he overthrows. Oliver Cromwell put his own portrait on the coinage as if he was king. Napoleon crowned himself Emperor, and Stalin murdered over 20 million people after claiming injustice of the monarch Nicholas Romanov, murdering him and his whole family in July 1918.
Clearly, sometimes revolution produces far worse alternatives.Yet the unifying trend firm ties all of these events together is FISCAL MISMANAGEMENTand a DEBT CRISIS. This is far more serious than a mere 1929 correction.
When governments collapse, it can get very, very nasty. This is when tangible items of value, gold, art, and MOVABLE objects has a basic barter worth. Land typically declines to its basic value NON—LEVERAGED cash value. Even during the Great Depression, land that was valued at $1.20 in the mid 1800s per acre fell to 30 cents. This is caused by the LACK of any credit to allow borrowing that is LEVERAGE in the real estate market.
A 30 year mortgage brings forward 30 years of future income today. It is not money yet earned. Even when we look at Spain and France,one must ask WHY these two European nations have failed to climb to the level of being the Financial Capitol of Europe? Both nations adopted the Economic Conquest Model. In plain words, this was the Roman model of plunder.
They sought to advance by conquest gathering all the money they could from foreign lands.They FAILED to look at their people as any sort of a worthwhile resource. They did not seek to develop industry. They did to some extent support merchantilism. However, in the case of Spain, they were so busy just extorting gold and silver from America, in fact they spent it long before the ships ever arrived. They did not use that money -to develop the economy. They imported the menial labor from France, and spent the money on fatal conquest attempts like the conquest of Netherlands and the Spanish Armada against England.
Charles I (1516-1556) of Spain was also the Holy Roman Emperor Charles V(1519-1556). He exploited Spain-to further his glorified interests as Emperor and sent the nation into bankruptcy. Spain defaulted on its debt in 1557, 1570 in Antwerp, 1575, 1596, 1607, 1647, 1662,1695,and 1697 just for starters.
Both France and Spain were serial defaulters. Why would anyone lend them money cannot be rationally explained. This is why after wiping out both the German and Italian bankers, the Financial Capitol unwed to Amsterdam. When a (Dutch) king took over England in 1689, and William of Orange brought Dutch ideas with him the Financial Capital moved to London.
During the Panic of 1896 when the US was bankrupt, J.P. Morgan convinced his British banking friends to lend to the US Treasury. After World War I, London gave up the Financial Capitol to New York.
In 2000, New York had 60% of the world IPO market. Because of the outrageous decline in the Rule of Law in the United States, that has fallen to less than 5% and now foreign companies no longer feel it is prestigious to be listed in New York.
The US is losing that status rapidly and the limp ending DEBT CRISIS will be the final straw.
We have a front—row seat to what will prove to be the most economic interesting times in the history of man. Will we turn to internal war or international war over a DEBT CRISIS our public officials refuse to discuss at all? Or can we save society and preserve our CULTURE for our children? These are the most important questions that need to be answered authoritatively.
Meanwhile, the markets are performing according to script. The one thing about the market and FREE MARKET THEORY, which the socialists hate, is that the markets are NEVER wrong. It our job to interpret what they are trying to tell us for they collectively see all truth and cut through all the crap. The socialists hate this theory because they want to manipulate society and the finances to achieve their Marxist goals that are unsupportable.
The problem is the markets are making a critical staging decision at this time. They are sorting out the whole idea of a DOUBLE DIP, how far, and how will this effect the future in terms of months, years,decades, and centuries.
The markets are deciding the extent of a FAKE—OUT MOVE that means there is typically a move in the OPPOSITE direction- from the true direction the market will adopt. we look into August, there still to be that this upcoming month will the decision point.The main vital support during August lies at 9295 with the major support at the 8050 level.
