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…Economically we are experiencing the birth pangs of the coming Great Depression and, as we get
closer to the crisis that is looming on the horizon, they will become even more powerful. The warning signs are all there – we just have to be open to what they are telling us. This article identifies the many parallels between past economic downturns and what is happening right now.
By Michael Snyder (theeconomiccollapseblog.com). The original article* was posted under the title Birth Pangs Of The Coming Great Depression.
Here’s what’s happening right now with:
The Baltic Dry Index
The Baltic Dry Index also crashed during the financial collapse of 2008, but right now it is already lower than it was at any point during the last financial crisis. In fact, it has fallen to the lowest level that we have seen in 29 years.
Dr. Copper
“Dr. Copper” and other industrial commodities continue to plunge. This almost always happens before we enter an economic downturn.
Durable Goods Orders
Orders for durable goods are declining. This is also a traditional indicator that a recession is approaching.
Stock Market Volatility
Volatility has returned to the markets in a big way. On Tuesday the Dow was down about 300 points, on Wednesday it was down another couple hundred points, and then on Thursday it was up a couple hundred points. This is precisely how markets behave just before they crash. When markets are calm, they tend to go up. When markets get really choppy and start behaving erratically, that tells us that a big move down is usually coming.
Global Currency Wars
Almost every major global currency is imploding (see the amazing charts in this article). In particular, I am greatly concerned about the collapse of the euro. The Swiss would not have decoupled their currency from the euro if it was healthy, and political events in Greece are certainly not going to help things either.
Eurozone Economic Conditions
Economic conditions across Europe just continue to get worse, and the future of the eurozone itself is very much in doubt at this point. Indeed, if the eurozone does break up, a European economic depression is almost virtually assured – at least in the short term.
Price of Oil
There is only one other time in all of history when the price of oil collapsed by more than 60 dollars, and that was just prior to the horrific financial crisis of 2008…At this point, the price of oil has already dropped to a catastrophically low level. The longer it stays at this level, the more damage that it is going to do. If the price of oil stays at this level for all of 2015, we are going to have a complete and total financial nightmare on our hands…
Emerging Market Debt
As economic problems spread around the world, a number of “emerging markets” are in danger of having their debt downgraded and many investment funds have rules that prohibit them from holding any debt that is not “investment grade”. Therefore, we could potentially see some of these giant funds dumping massive amounts of emerging market debt – hundreds of billions of dollars – if downgrades happen.
[Indeed, according to] a Business Insider article Russia this week became the first of the major economies to lose its investment grade status from Standard & Poor’s, falling out off the top ratings category for credits deemed to have a low risk of default for the first time in a decade. If Moody’s and Fitch follow, conservative investors barred from owning junk securities must sell their holdings. JPMorgan estimates this means they may ditch $6 billion in Russian government rouble and dollar debt.Russia may have company. Almost $260 billion worth of sovereign and corporate bonds – nearly a tenth of outstanding emerging market (EM) debt – is in danger of being relegated to junk, according to David Spegel, head of emerging debt at BNP Paribas, who calls such credits “falling angels”.
Derivatives
…I could not possibly overemphasize the danger that the 700 trillion dollar derivatives bubble poses to the global financial system. As we enter the coming Great Depression, derivatives are going to play a starring role. Wall Street has been pumped full of funny money by global central banks, and our financial markets have been transformed into the greatest casino in the history of the world. When this house of cards comes crashing down, and it will, it is going to be a financial disaster unlike anything that the planet has ever seen and yes, global central banks are very much responsible for setting the stage for what we are about to experience…
I Am NOT Alone
I am not the only one warning that a new Great Depression is coming.
a) British hedge fund manager Crispin Odey thinks we’ve entered an economic downturn that is “likely to be remembered in a hundred years,” and central banks won’t be able to stop it…[and] that the shorting opportunity “looks as great as it was in 07/09.”
b) Robert Johnson told a stunned audience at the World Economic Forum the other day, the elite are heeding the warning signs and are feverishly getting prepared by “buying airstrips and farms in places like New Zealand“. They can see the horrifying storm forming on the horizon and they are preparing to get out while the getting is good.
It can be very frustrating to write about economics, because things in the financial world can take an extended period of time to play out because, sadly, most people these days have extremely short attention spans…[and are] no longer accustomed to thinking in long-term time frames…but the economic world is not like a game of “Angry Birds”. Rather, it is very much like a game of chess and, unfortunately for us, checkmate is right around the corner.
[The above article is presented by Lorimer Wilson, editor of www.munKNEE,com and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
*Original Source: http://theeconomiccollapseblog.com/archives/birth-pangs-coming-great-depression (Copyright © 2015 The Economic Collapse)
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