Is The U.S. Government Stockpiling Food In Anticipation Of A Major Economic Crisis?
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Is The U.S. Government Stockpiling Food In Anticipation Of A Major Economic Crisis?
Is the U.S. government stockpiling huge amounts of food and supplies in anticipation that something bad is about to happen? Is something about to cause a major economic crisis that will require large quantities of emergency food? For a while, I have been hearing things about the government storing food through the grapevine and I have not been sure what to think about those rumors. Well, today I received a phone call that blew me away. I debated for quite a while before I decided whether or not to share this information with you all.
Normally I do not like to talk about anything unless I am able to prove it by pointing to an article in the mainstream media. But the source of the information that I am about to share with you is rock solid. I cannot reveal his name, so you will just have to trust me on that. Hopefully the following information will be one more “dot” as we all try to connect the dots about what is really going on out there.
A Self Sustaining Source Of Fresh Meat,Vegetables And Clean Drinking Water
This morning I received a call from a very prominent person in the storable food industry. He has asked me not to reveal his name. I have been dealing with him for an extended period of time and I consider him to be a rock-solid source. When I talked to him today, he had just received a huge order for storable food from a U.S. government source. He told me that the dollar amount of the order was in the “five figures”.
When he asked about why so much food was being ordered, the government source told him essentially that “you know what is coming”. When pushed further, the government official did not elaborate.
It was unclear whether this was part of a larger food stockpiling program by the government. Perhaps this order was just part of the normal preparations that government agencies make for potential emergencies.
Nobody could blame the government for storing up some emergency food. That is something that we all should be doing.
RELATED : Stockpiling food, ammo and fishing supplies for SHTF
The truth is that the government is taking emergency preparedness very seriously these days. For example, you can see video of a high-level NASA official urging NASA employees to develop preparedness plans for their own families.
But what if this is a sign of something bigger?
Earlier this year, FEMA issued an RFI (Request For Information) that inquired about the availability of 140 million meals of emergency food. Apparently the food was meant to be stored up in case there was a “catastrophic disaster event”.
Financial advice and preparedness
Unfortunately, shortages have not been limited to storable food. Most Americans don’t realize this, but there is a significant shortage of certain pharmaceutical drugs in many areas of the country right now.
In addition, it is not just in the United States where food is being aggressively stored up. Noted that governments all over the globe are now stockpiling food….(source)
RELATED : Food Riots Are Coming
How to Prepare an Emergency Kit for a Global Food Shortage
In the event of a global food crisis, it is vital to be prepared. The key to preparedness is storing food that is easy to get a hold of, will last for several years or even decades, and is somewhat nutrient-dense. While it is always important to purchase high quality organic foods, in the event of a food crisis it is often essential to exercise your survival skills, which may mean it is hard to come across optimal food sources.
How to build your survival kit like a Special Forces soldier so your family will have the basics even if you have to run…
RELATED : Are They Arming for Riots Across America? Homeland Stockpiling “Less Lethal Specialty Munitions”
2016 Will Be One Disaster After Another-Egon von Greyerz
Financial expert Egon von Greyerz says the recent Fed rate hike will not help the financial markets. Greyerz predicts, “I think we will have one disaster after another, first in the junk bond market, then in emerging markets and, after that, the subprime markets. Subprime car loans and student loans I see as another massive problem area. It is going to be one thing after another that will unravel. Since 2008, when the world almost went under, we have printed or increased credit by 50% or by $70 trillion, and the world economy is still struggling to survive. I think the real change in confidence will come down when markets come down. . . . I think things will come down very quickly.”
Von Greyerz, who was a top European banker and stock market expert for nearly 20 years, points out, “World trade is coming down dramatically. . . .The Fed is totally out of sync with reality. This is a world market. The U.S. is not an island unto itself. . . . The sad think is the Fed has created a massive bubble. They should have increased rates a long time ago. By not letting the market forces take their due course, we now see in the U.S. the most massive asset bubble ever in history. That would not have happened if they would not have kept interest rates at 0% for 7 years. . . . There is nothing that justifies a rate increase, at this point, except the face saving measure taken by the Fed. They had told the market this, and they didn’t dare to do anything else. . . . I think what will happen now is this quarter of percent will not last for very long. It will have to come down. . . . All the indicators are that we are going to get shocks going into 2016, and their increases they are forecasting are not going to happen. It is more likely that they are going to lower rates.”
On currencies, von Greyerz says, “I think currencies worldwide will continue to come down, and the dollar is overvalued and is going to come down. Of course, that will mean people will start selling bonds. We know that the bond market is the biggest bubble in the world.”
Von Greyerz goes on to say, “I do not think the banking system will survive in its present form because the amount of debt outstanding will never be repaid. They will start with bail-ins, but that won’t be sufficient. Sadly, the depositors’ money will not be sufficient. To stop bank runs now, they are stopping people from taking out cash. That is not what people are going to want to see in the next year or so.”
So, what is the timing of the coming calamity? Von Greyerz admits he does not know, but contends, “We are not just talking about the U.S., we are talking about a global level. . . . Once it turns, it is going to happen very quickly. So, when will the turn come? The turn will not only be in the credit markets, but it will also be in the stock markets, and there will be a total loss of confidence. I am happy to admit that I thought these things would have happened already. I have been premature, but I look at risk. To me, you have got to buy your fire insurance before the fire, and we are likely to have a fire in the near term future.”
Greeks Told To Declare Cash "Under The Mattress", Jewelry And Precious Stones
When earlier today we read a report in the Greek Enikonomia, according to which Greek taxpayers would be forced to declare all cash "under the mattress" (including inside) or boxes that contain more than 15,000 euros as well as jewelry and precious stones (including gold) worth over 30,000 euros, starting in 2016, we assumed this has to be some early April fools joke or a mistake.
After all, this would be merely the first step toward full-blown asset confiscation, conducted so many times by insolvent governments throughout history, once the government cracks down on those who made a "mistake" in their asset declaration form or simply refuse to fill such a declaration, thereby making all their assets eligible for government confiscation.
It was not a joke.
Here is the take of Keep Talking Greece, whose stunned response mirrors ours.
Cash "under the mattress" totaling more than 15,000 euro, jewelry and other valuable items such as diamonds and gemstones, should be declared to electronic system of tax authorities, Taxisnet, as of 1 January 2016. Next to properties and vehicles and shares, now the taxpayers will also have to declare their deposits. And not only that. They will have to fill if they rent bank lockers and if yes, also the name of the bank and the branch, even if abroad.
http://www.zerohedge.com/news/2015-12-01/greeks-told-declare-cash-under-mattress-jewelry-and-precious-stones
If You Expect to Live Through the Coming Economic Collapse, You Better Read This
I am so sorry that I feel compelled to unleash the realities of such a hellish nightmare that is beginning to engulf this country. The United States is in the early stages of an economic meltdown. I apologize to the cognitive dissonance crowd, but your days of ignorant bliss are coming to and end. How can I be so sure?
We live in country that only takes in $2 trillion dollars per year, yet we are looking at the most staggering debt in world history:
1. $18 trillion dollar deficit and that is the good news.
2. $240 trillion dollar unfunded and mandated liabilities (e.g. Medicare and Social Security).
3. $1.5 quadrillion dollar credit swap derivative debt that the bankers have managed to pass along to the people. The interest alone, on the derivatives debt, was $505 trillion dollars last year.
Do you really need a calculator to figure out that we cannot pay off this debt in the 21st century, the 51st century or the 91st century? Some of you will wonder, “Can’t we just start a war and take what we need”? The entire GDP of the planet is only $70 trillion dollars. Subsequently, we cannot even steal enough resources to buy our way out of this debt.
I get emails like the following everyday asking me what they can do to survive what is coming.
Hi Dave,
My name is XXXXX and IT live and work in Phoenix, Arizona. I have been following you, Steve Quayle, the Haggmann’s and Alex Jones for the past several years. Unfortunately, I am not a man of wealth and neither is that of my family. I have an okay job at a bank in Scottsdale as a financial analyst but can’t ever seem to put enough funds away to be able to escape from what’s coming. I really wish I could buy some land up north and just build a bunker. Any suggestions for those of us specifically in Phoenix on what groups we can join to trade ideas, share, barter and possibly even participate with for bugging out when the time comes? I’m able to cut back on some bills, primarily school loans to contribute to an escape plan or place. I figured you would be the best guy who would know what to do since you’re local and also well prepared and informed. Help, suggestions and prayers for me are welcome. I look forward to hearing from you.
To this gentleman, I do not think that most people will be able to avoid the dangers that will soon be loosed against us.
The Rampaging Hordes of the Zombie Apocalypse
Who is going to survive is more a matter of luck and Divine Providence, than it is skill and preparation. However, there are definitely some things you can do t0 increase your odds. First, let’s take a brief look at the odds.
According to Statistic Brain there are 12,800,000 Americans on welfare, 46,700,000 on food stamps or SNAP, 5,600,000 on unemployment, with a total government spending on welfare annually of approximately $132 billion and this does not even include food stamps or unemployment. These people comprise the army of the Zombie Apocalypse. These people will be your worst nightmare who will be knocking your door down when the welfare gravy train stops coming,
CAN YOU IMAGINE 50 MILLION AMERICANS RAMPAGING THROUGH THE STREETS LOOKING FOR THEIR NEXT MEAL?
In today’s environment, anyone who discusses the importance of individual preparation and personal responsibility, due to the fact that we live in very troubled times, are often labeled as fear mongers. Upon closer examination, the real fear mongers are the very people who are responsible for perpetuating the present set of crises.
The Real Fear Mongers
Once you get beyond the labels of “conspiracy theorist” and “fear monger” and you realize that you have an obligation to protect your family, there are some simple common sense things that one can do in order to increase their odds of survival following the coming economic collapse. In both 1929 and 2008, there was literally no warning when the economy crashed. The same will hold true for 2015, you will get no warning. In fact, you may choose to look at this article as your first and last warning.
1. The Creation of a Fake-Identity
It may be necessary to become invisible in the event you think you believe that your name could be on a (Red) list because roundups will usually occur in dire situations. Therefore, the creation of a pseudo-identity could become very important.
2. It Takes Money to Prepare
I have committed much effort, time and resources illustrating how a coming economic collapse is unavoidable and how the elite have conspired to steal as many of your assets as possible prior to the collapse. There are some common sense things one can do which could increase the chances of surviving a major societal meltdown resulting from an economic collapse. If you have any doubts as to what is coming, I strongly encourage you to read what I have written about on this topic over the past several months. Ray Charles could see that our economy will not be around much longer in its present form. Your can read these storieshere, here, here, here, here, here, here, here, here, here, here, here, here and here.
If you have read the articles at the above links, you should have concluded that it is the height of stupidity to leave your life savings in an institution that is planning to steal from you. You need to divert your cash, other than the ability to pay basic bills, in preparation for what is coming.
Getting your money out of the bank has become an art form and you need to be careful. In a future article, I will be revealing steps you can take in order secure your money from the institutions that are presently holding you hostage. I cannot promise you that you will be able to retrieve all of your assets. However, I can promise you that if you do not act, you will lose everything and you will lack needed supplies to weather what is coming.
I would strongly suggest that you keep your gas tank filled and you have plenty of cash, food and ammunition on hand. It is better to be safe than sorry.
3. Make a List and Check It Twice
Buy a good prepper book. Holly Deyo is an excellent source for this information (www.standdeyo.com). In the interim, procure your food, water, guns, ammo and home security adjustments. If you do not have a big dog, consider obtaining a pair. These animals will be your companion, home security system and ally if someone attempts to breach your home with bad intent. Of course, you will have to store dog food as well.
Sit down and construct a list of what you will Make a Listneed after reading a good prepper book.
Make all of you purchases in cash! You do not want to let the wrong people know what you are up to.
4. Rural Vs. Urban
We have to live our lives for today and it may not be possible to move to a rural area because of your job. However, one survivalist that I was speaking with estimates that the rate of survival for a country in economic chaos would be 10 times higher for rural residents as opposed to urban residents. Consider buying a place in an isolated area and commuting to work in the interim.
5. Pay Off Your Mortgage
If you have a CD, a 401k or any other long-term investment, you might want toconsider taking the penalty and executing a withdrawal and apply what’s left of the principal, usually about 50% of the original value, and paying down your major debts.The key word here is “consider”. Because nobody can accurately predict the time frames of these kinds of events, one has to judiciously decide for themselves what is the best course of action.
After an economic collapse, you most likely will not have a job and your retirement and savings will likely be wiped out and confiscated. That is why it would be wise to pay down your debt while you can afford to do so because after the collapse, there will still be foreclosures and repossessions and if you and your family survive, you could be on the street if you cannot pay your bills.
6. Buy Gold and Silver While You Can Afford It
Goldman Sachs has been shorting gold. The elite have been hording gold as have the BRICS. These entities are telling you, by action, what medium of exchange is going to be of value following the collapse that is coming.
Storing gold and silver is an economic survival strategy which will pay dividends after the smoke begins to clear in the post-collapse era.
7. Practice Austerity Before Austerity Is Imposed On You
It is critical to immediately eliminate all unnecessary expenses. Give yourself some operating capital. You may be able to purchase a bug-out residence in a rural area. You will certainly be able to afford more survival gear.
In order to increase your immediate cash flow, start an at-home business. Start a business which has virtually no upfront and startup costs. Even if you are not able to generate much income, you will create a legal tax evasion strategy in which you can legally deduct many of your present activities and expenses (e.g. mileage, the purchase of any office supply, etc.) including survival gear.
8. Create and Store Your Own Food
With regard to storing food, you need to do so immediately. I recommend storing two years worth of food. However, you need to master the art of growing food inside your home. There are plenty of resources which can teach you how to do that. However, you would be wise if you would create a hiding place in which you can store food and water safely in a hidden location. If you are ever robbed, you will not have exhausted your food supplies. You are most likely to be robbed by FEMA or one of their mercenary groups (e.g. Academia) during the beginning of the crisis because food and water will be used as weapons to control you. I am personally aware of FEMA going to selected homeowners in order to track a family’s reserve food and water supplies. Remember, water is sunlight and temperature sensitive. There are plenty of prepper manuals that you can consult for instructions on how to meet these needs.
The biggest threat to survival is death due to dehydration and starving to death. Contaminated water will also pose a threat. There are plenty of places to purchase large drums and obtain water tablets for water purification purposes. Obtain a pair of water filters in case you have to go mobile to survive.
Finally, learn to grow your own food within your residence. Your garden will likely be raided by humans and hungry animals alike. There are plenty of prepper manuals which can teach you how to accomplish this task.
9. Personal Supplies
Of course you will need toothpaste, toiletries, eating utensils, etc. For a complete list of personal items see Steve Quayles list on his website.
10. Stockpile Medicines and Medical Supplies
If you or your family has a chronic health condition, it is critical that you have 6 months to a year in medicine. Also, you should research natural alternatives to treatment for health conditions in case you are not able to meet this goal due to the inability to obtain prescriptions. Don’t forget to obtain some pain medication and antibiotics in case of unforeseen emergencies. Make a trip to Mexico and sneak across medication in old pill bottles in order to escape detection by the Border Patrol who will ask you if you obtained medication in Mexico when you come back across the border.
If you can safely ration your existing medication doses, do so and store the excesses. Make sure you also have a first aid kit. Take a First Aid class including CPR at your local fire station. Do not forget your hygiene supplies.
Some are thinking that this is a lot of work. My response would be, how bad do you want you and your family to survive?
11. Guns and Ammunition
Regardless of your moral convictions, ask yourself if you want your family to survive.
Buy your guns off the books from private parties and at gun shows. “Keep guns for show and guns for go”. In other words, have a safe location that you can bury guns so that when gun confiscation begins, you will not be left totally defenseless.
America needs to not only create safe and secure homes, but to create as many Warsaw ghettos as possible (look it up). We need to make ourselves a hard country to conquer and occupy. We cannot stop a treasonous leader from handing off the country to some foreign entity (e.g. the UN). However, occupation of America should be problematic for the blue-helmet wearing Russians, Chinese and other proxy forces training on our soil to occupy us.
It is recommended that you have 3 types of weapons: (1) pistols for close in fighting; (2) shotguns for defense of the entrance to your home; and, (3) a rifle with a scope in order to fight back against long-range snipers that do not want to storm your home because you appear to be prepared. Immediately, obtain weapons instruction for you and your family, firearms training and then practice! Conduct mock raids on your residence so that you can see your vulnerabilities. An armed populace makes a people more feared by an abusive government. If I had not gun training at all, I would opt for a shotgun with regard to home defense.
Do not forget about gas masks for each member of your family and make sure to store extras. If you have the means to obtain body armor, do so now, because Congress is preparing to outlaw the private use of body armor.
12. Obtain Night Vision Equipment
If your family is located in a fixed location, the challenges of defending your property go up exponentially at night because you cannot see where the threat is coming from. Night vision equipment is not cheap, but your family is literally defenseless without it after the sun goes down.
13. Prepare to Survive in the Raw Elements and Build a New Culture for Your Family
It is possible that you can learn to survive in the raw elements without heating and central air conditioning. You may not have lights. Obtain flashlights, many batteries and a hand crank radio. Make sure you have clothes befitting all weather that you may encounter because a crisis that begins in January, may not be over by August.
Take a weekend and pretend the grid is down. This will allow you to see firsthand what supplies you will need. When should you perform this drill? There is no time like the present. Also, take a camping weekend where you simulate having to “bug out”.
To people with generators, congratulations on your foresight. However, if you are the only house on the block with lights, how long do you think it will be until you have unwanted visitors with bad intent?
Don’t forget about procuring non-electronic forms of entertainment. This should include board games and educational materials for your children. You will want to establish some normalcy for the sake of your children. You are preparing to adopt a new way of life. Make the new life worth living.
I would also recommend that every personal library contain The Constitution of the United States. After the chaos subsides, we will need to rebuild. You will not want to live in a “might makes right” society.
14. Prepare Yourself Physically
If you are on the run, you may have to travel up to 20 miles per day. Get in shape, begin to walk, jog or run. The better shape you are in, the better.
Take self-defense classes. Many of these classes are offered free of charge at churches and community centers.
Practice shooting on a regular basis. If you can afford it, take gun safety and shooting lessons.
15. Do Not Tell Anyone
If your four adjacent neighbors broach the topic of preparedness, gauge the situation and then make an informed decision. If your neighbors are on board with preparing, that will help you form a defensive perimeter and a mutual alliance pact. Otherwise, tell nobody of your preparation plans. Do not tell your friends, family members, and co-workers. Make your preparations in cash or cashier’s checks as much as possible. Limit the paper trail to you. You do not want the government to know that you are prepared because you could be the first one on your block that is visited at 3AM. You and your mate should prepare in stealth. Kids talk and so do their friends.
Once you have your allies established, begin to trade and barter because the existing system may not be available for much longer.
16. You Need to Become the Neighborhood Nut Because There is Safety In Numbers
Never offer what you are doing to prepare or how far along you are with your preparations. However, you will need allies because you cannot guard your property 24/7/365. So, how do you recruit neighbors to become your allies without telling them what you are up to? Simple, with each neighbor that is convinced and understands what is at stake, you should feign ignorance and act as if you and your neighbor are learning prepping together. Teach your awake neighbor how to prepare. You will need allies to help protect your family and resources and it is not likely that you can do this alone.
17. PREPARE YOURSELF SPIRITUALLY AND BE SURE TO PRAY!
Survival is never guaranteed, salvation is! And do not forget one of your most important resources, your Bible.
Conclusion
There is a time to stop talking and to start doing. That time would be now. The economy is going to collapse, the only question is when. Of course if fail to prepare, this administration will be all to happy to lend you a helping hand.
On March 27, under the auspices of DHS, Special Operations forces practiced political dissident extraction drills in Ft. Lauderdale, FL. I took this as a personal declaration of war against the American people. This image should motivate you to prepare.
May good fortune and God’s blessings follow all with regard to what is coming. Please prepare while you still have time.
The Economic Doomsday Clock Is Closer To Midnight
Prisoner’s Dilemma describes when two purely rational entities may not cooperate even if it is in their best interests to do so, thereby replacing known risks for unknown risks. In an arms race when two superpowers possess the ability to destroy each other, the optimal solution is disarmament and peace. If the superpowers do not trust one another completely, the natural course of action is proliferation of conflict through nuclear armament despite great peril to all. This non-cooperation, selfishness, and conflict, ironically results in an equilibrium of peace, but with massive risk.
Global central banks are engaged in an arms race of devaluation resulting in suboptimal outcomes for all parties and greater systemic risk. In this year alone 49 central banks have cut rates or devalued their currencies to gain a competitive edge and since 2008 there have been over 600 rate cuts worldwide. Globally we have printed over 14 trillion dollars since the end of the financial crisis. The global economy did not de-leverage from the 2008 crash but instead doubled down as global debt has increased a staggering 40% since 2007. The pace of global growth is slowing with the World Bank lowering GDP projections from 3% to 2.5%, and emerging economies from China to Brazil are struggling. Global currency reserves outside the US have declined over $1 trillion USD from their peak in August 2014 as foreign central banks have sold dollars to offset the ill effects of capital flight and commodity declines.
The last time the world economy experienced declines in reserves of this magnitude was right before the crash of 2008. Cross-asset volatility is rising from the lowest levels in three decades yet markets remain complacent with the expectation that central banks will always support asset prices.
http://www.zerohedge.com/news/2015-10-15/economic-doomsday-clock-closer-midnight
America’s cities will collapse into utter chaos the day the EBT cards stop working
It will certainly be “the day the music died“… and perhaps millions of Americans as well. What day is that? The day that all electronic cash transactions cease to function. The hardest hit will be Americans on the lowest rungs of the economic ladder – families who exist on government-subsidized food programs. As reported recently by All News Pipeline, recent outages in the processing of Electronic Benefits Transfer (EBT) cards – financial transaction instruments that operate like bank debit cards – have caused concern among society watchers who are rightly convinced that any long-term disruption in service will inevitably lead to massive unrest and the breakdown of civil society, especially in urban centers.
Is this the very scenario that was seen by David Wilkerson in a vision many years ago, in which he saw the following? “For ten years I have been warning about a thousand fires coming to New York City. It will engulf the whole megaplex, including areas of New Jersey and Connecticut. Major cities all across America will experience riots and blazing fires—such as we saw in Watts, Los Angeles, years ago.” “There will be riots and fires in cities worldwide. There will be looting—including Times Square, New York City. What we are experiencing now is not a recession, not even a depression. We are under God’s wrath.”
As noted by Tom Chatham of Project Chesapeake, more than 50 percent of Americans currently receive some form of government payment, whether it is in the form of a welfare benefit, government pension or military pay. In a widespread electronic outage scenario, those payments would become impossible to process, leaving tens of millions of Americans unable to purchase basic goods and services. At the same time, legacy government benefit programs such as Social Security and Medicare are running out of funds; soon, both will be running annual deficits. This is in addition to the fact that the federal government is more than $18 trillion in debt and owes some $97 trillion in currently unfunded liability payments. CONTINUE
Deflation Warning: The Next Wave
The signs of deflation are now flashing all over the globe. In our estimation, the possibility of an associated financial crisis is now dangerously high over the next few months.
As we’ve been saying for a while, our preferred model for how things are going to unfold follows the Ka-Poom! Theory as put out by Erik Janszen of iTulip.com.
That theory states that this epic debt bubble will ultimately burst first by deflation (the "Ka!") before then exploding (the "Poom!") in hyperinflation due to additional massive money printing efforts by frightened global central bankers acting in unison.
First an inwards collapse, then an outwards explosion. Ka-Poom!
We’ve been tracking the deflationary impulse for a while, and declared deflation the winner back in July of this year.
A Failed Strategy
What exactly do we mean by deflation? Back in 2008 the central banks of the developed world, as well as China, had a choice:
admit that prior policies geared towards encouraging borrowing at a faster rate than income growth were a horrible idea, or
double down and push those failed policies even harder
As we all know, they chose option #2. And so here we are, just 8 years later, with nearly $60 trillion in new debt piled on top of the prior mountain -- while GDP grew by only $12 trillion over the same time period:
(Source)
[Note: Global nominal GDP is projected to be $68.6 trillion in 2015, virtually unchanged from 2013]
In other words, instead of saying to ourselves: Hmmm.... it was probably a terrible idea to pile up debt at 2x the rate of income growth, what the world did instead was to double down on that terrible idea and pile on more debt at 5x the rate(!) of nominal GDP growth.
Talk about not learning from your past mistakes....
At any rate, what all of that money printing, lower interest rates and new debt creation did was force capital over the globe to look for some place to go. Absent any really good and creative ideas, that money primarily chased yield. It piled into risk assets like stocks and junk bonds, often in bubble-like fashion (meaning, in haste), and without proper due diligence.
The only way the central bank “strategy” (and we use that word very loosely) could have worked was if very rapid economic growth emerged to justify the accumulated levels of debt, comprised of both old and new borrowing. Central banks were indeed hoping such growth would materialize and lesson the burden of servicing the interest on all that debt.
But that growth, quite predictably (as forecasted by us among many others), did not emerge.
Perhaps Japan’s experience should have tipped the central bankers off as to why not. For several decades now, Japan has served as a warning: too much debt is the malady, not the cure.
So here we are. What are we to make of it all? It's our view that the financial markets are important to monitor because they will signal to us when sentiment has shifted, and let us know in advance that events will unfold at a faster pace.
Judging from the market action over the past month, we think that shift has happened. And we're increasingly concerned that this next ‘correction’ could be pretty rough for a lot of folks.
Bright Red Warning Lights
The global economy is downshifting fast, and there are lots of flashing red warning lights indicating as much.
Doug Noland has captured the emerging market pain caused by the hot money that is now flooding out of those territories, as well as provided a great explanation of the bubble dynamics in play:
The Federal Reserve is flailing and global currency markets are in disarray. Notably, the Brazilian real dropped more than 10% in five sessions, before Thursday’s sharp recovery reversed much of the week’s loss. This week the Colombian peso dropped 3.0%, and the Chilean peso fell 3.1%. The Mexican peso dropped 1.9%.
The Malaysian ringgit sank 4.5% for the week, with the South Korean won down 2.7% and the Indonesia rupiah losing 2.2%. The Singapore dollar fell 1.8%. The South African rand sank 4.4% and the Turkish lira fell 1.4%.
Notably, market dislocation was not limited to EM. The Norwegian krone was hit for 4.4%, and the Swedish krona lost 2.0%. The British pound declined 2.3%. The Australian dollar also lost 2.3%.
The global Bubble is bursting – hence financial conditions are tightening. Bubbles never provide a convenient time to tighten monetary policy. Best practices would require central bankers to tighten early before Bubble Dynamics take firm hold. Central bankers instead nurture and accommodate Bubble excess. It ensures a policy dead end.
As the unfolding EM crisis gathered further momentum this week, the transmission mechanism to the U.S. has begun to clearly show itself. While “full retreat” may be a little too strong at this point, the global leveraged speculating community is backpedaling. Biotech stocks suffered double-digit losses this week, as a significant Bubble deflates in earnest. It’s also worth noting that the broader market underperformed.
(Source)
What does it mean when we see currencies in retreat across the globe? It means that the hot, speculator money is rushing out of weaker economies and back towards the stronger center. This is consistent with a liquidity crisis, one where all the borrowed money used to spark all those heady asset gains and falling yields on the way out do the exact opposite on the way back.
And Doug is exactly right – there’s never a good time to pop a bubble. So the central bankers just sit, paralyzed, afraid to even raise rates by a token amount for fear that the daisy-chain of global bubbles will burst as a result. They needn’t fear: the bubbles will burst no matter what the Fed, et al., does.
A credit default swap (CDS) is a bit of insurance you can buy if you own a bond and are worried that the issuer may default on it. In a stable climate, the cost of that insurance (measured in percentage points above the stated yield on that debt) is pretty flat. It's usually close to the yield of the bond in question.
So you might have to pay 1% to 2% (i.e. 100 to 200 basis points) above the yield on, say a Brazilian ten year bond, to insure it against a default. As things begin to break down and become less certain, that cost will rise.
Now take a look at this chart of recent emerging market CDS 'spreads':
(Source)
See those CDS ‘spreads’ blowing out to the upside? That’s the sort of thing I was tracking in 2008 that gave me a clear, early warning that things were about to fall apart. While these levels are not (yet) flashing the same level of danger that we are seeing in the CDS paper for Glencore (which is almost certain to go bankrupt now), or for US shale drillers (tons of bankruptcies coming there, too), these are pretty serious warning signs to see in sovereign debt.
Why would the sovereign debt of Russia, Turkey, Brazil, and Malaysia be spiking right now? Because the hot money is flooding out of those countries. There's now an elevated risk that they may default on their bonds in the future.
These emerging market countries are being squeezed from every direction. But the worst pain is being experience by those that borrowed heavily in dollars (or other stable currencies). From the WSJ (Sept 29), we see the magnitude of the predicament for companies located in EM nations:
Developing-country firms quadrupled their borrowing from around $4 trillion in 2004 to well over $18 trillion last year, with China accounting for a major share.
Now, prospects in industrializing economies are weakening fast even as the U.S. Federal Reserve is getting set to raise interest rates for the first time in nearly a decade, a move that will raise borrowing costs around the world.
The burden of 26% larger average corporate debt ratios and higher interest rates come as commodity prices plummet, a staple export for many emerging-market economies.
Compounding problems, many firms borrowed heavily in dollars. As the greenback surges against the value of local currency revenues, it makes repaying those loans increasingly difficult.
(Source)
So the afflicted countries are going to see vastly weaker exports, plunging currencies, and their local corporations unable to pay off dollar-denominated loans -- on borrowing that ballooned from $4 trillion in 2004 to over $18 trillion just 11 years later. It’s an amazing statistic, one of many fostered by a cluster of central banks that know everything about blowing bubbles but nothing about ending them.
The punch line from the above article is this: “That massive debt build-up means it is “vital” for authorities to be increasingly vigilant, especially to threats to systemically important companies and the firms they have links to, including banks and other financial firms, the IMF said.”
Decoded, that means that $18 trillion is a big number. If even a small portion of that goes into default, it could easily drag down whole swaths of the developed world’s financial corporate structure. A systemic crisis that would begin on the edge but rapidly spread to the center.
Well, based on the DDBAX ETF which holds bonds priced in local currencies, we can get a sense of the pain those EM companies are feeling which have dollar denominated loans, but conduct business in their local currency:
Ouch! Based on the above chart, the past year has been painful indeed for those emerging market corporations and governments. No sign of a bottom yet either.
Not So Fast There….
One so-called ‘bright spot’ in the world economy is the US, which supposedly is doing better than everyone else. As you know, I consider US GDP statistics to be nearly useless because of all the statistical tricks and gimmicks that are now deployed (such as now counting ‘intangibles’ to go along with Owner Occupied Rent which records the price value of people not paying themselves rent, etc.,) to make things look better than they are.
So I’m having trouble believing that the US economy is doing well when our major trading partner to the south is struggling so much due to a huge drop drop in exports:
Mexico factory exports slump by most in over 6-1/2 years in Aug
Sept 25, 2015
(Reuters) - Mexico's factory-made exports slumped in August by the most in more than 6-1/2 years after uneven growth in the first half of 2015, data showed on Friday, while consumer imports rose.
Manufactured exports sank 7.2 percent in August compared with July, falling back after two months of gains, the national statistics agency said in a statement. It was the biggest month-on-month drop since December 2008, data showed.
Mexico exports mostly manufactured goods like cars and televisions and about three-quarters are sent to the United States.
(Source)
It’s hard to imagine that the US economy is doing fine when a major trading partner who exports 75% of its finished product to the US is experiencing a deep export slump.
But it’s not just Mexico that's seeing a big decline in export activity:
For the first seven months of 2015, U.S. exports dropped 5.6% to $895.7 billion. The value of South Korean exports shrank a revised 14.9% in August from a year earlier, the sharpest fall in six years, as shipments to China dropped. Chinese imports in August fell 13.8% in dollar terms from a year earlier, after an 8.1% decrease in July.
(Source – WSJ)
If this keeps up, 2015 will see the worst global trade performance since…wait for it…2008. For the US, 2015 will be the first year that exports have declined since the financial crisis. Ditto for a number of other countries.
Beyond exports, the surveys of US manufacturing and service sector activity are also flashing recession warning signs. In fact, the manufacturing survey has only been this low in the past during prior recessions. Maybe this time is different?
(Source)
On the plus side for the US: reasonably robust housing activity, low initial claims for unemployment, and growing income and expenditures. But the data for some of these is suspect (nearly 100 million working-age adults are not counted in the workforce), and in other areas, not robust enough to hang too many hopes on.
Add it all up, and there are a number of signs that not only is the US economy is far from robust, it may even be teetering on the verge of a recession. But the global economic landscape is decidedly tilted towards contraction, not expansion.
Why is all this important? Because seeing these signs early enough gives us a better chance to mentally, financially, and physically prepare for the next shock. The press does a very good job of constantly painting everything in a rosy light, and that’s fine, but it’s not very helpful if it also misleads.
Lots of people are woefully unprepared for what’s coming next. For many it will be a shock. Not because they couldn’t see it coming years in advance and made their own mental and financial adjustments on their own terms, but because they wouldn’t. Preferring to avoid an unpleasant truth they put it out of sight and out of mind, hoping that somehow things would work out in their favor.
In Part 2: From Deflation To Hyperinflation, we detail out the likeliest progression of the unfolding deflationary rout and the inevitable tsunami of money printing that the central banks will respond with, unleashing the final hyperinflationary chapter.
Epocalypse Soon: The Great Economic Collapse Is Happening
I use the term “epocalypse” to name the last days of the global economy as we know it — a global economic collapse of biblical proportion. It iseconomic,epochal, an apocalypse that will change the world and a collapse … all in one word that sounds the right size for what I’m talking about. Call it the “Great Collapse” or the “Epocalypse.” Whatever you call it, it’s about to change the world.
RELATED : AMERICA’S DEATH ZONES: WHERE NOT TO BE WHEN IT HITS THE FAN
I am referring to an economic crisis so big that the global economy will be forever different after those days. This economic collapse has already begun throughout the world, but I am holding off on using the title “Epocalypse Now” until the US stock market joins the crash. That’s the point at which we’re all in (i.e., at a level where everyone knows it and denial that it is happening falls apart). I anticipate making that call in a matter of days now. Here is where we stand at present:
Economic collapse is already global
Open your eyes to a wider scope than just the US stock market, and it’s as if a fog lifts all around you to reveal a war-ravaged landscape. It may not be like the landscape described in the New Te