Friday, August 14, 2015

World's Central Banks Will Soon Implode

I feel like I need to say this every once in a while....but please remember that I'm posting headlines that I run across and making some comments on them... that's all.  I don't write the articles and of course many times don't agree with all that is in them.  It's the headlines that usually strike me as interesting and lead me to post about it.

With that being said, I receive numerous articles sent to my inbox from a place called Phoenix Capital Research.  A lot of times their predictions on what they see coming lines up with what I see coming.  However, I take a lot of what they are saying with a grain of salt because they are in the money business of trying to sell investment newsletters via of course they want to DISTURB their readers into believing they can't live without the advice of Phoenix Capital Research.

Here is what they sent me a few days ago....they are saying the financial collapse of 2008 is just a "warm up" for this next collapse.

The Central Banks Will Soon Implode Taking Down the Financial System

For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.

All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. If the below chart was a problem BEFORE 2008… there is no way that things are better now. After all, we’ve just added another $10 trillion in debt to the US system.

Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.

However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction.

So it’s little surprise that no one would admit the facts: that the Fed and other Central Banks not only don’t have a clue how to fix the problem, but that they actually have almost no incentive to do so.

So here are the facts:

1)   The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion. 

2)   The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.

3)   Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.

4)   Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.

5)   The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.

6)   The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

We are heading for a crisis that will be exponentially worse than 2008. The global Central Banks have literally bet the financial system that their theories will work.  They haven’t. All they’ve done is set the stage for an even worse crisis in which entire countries will go bankrupt.

The situation is clear: the 2008 Crisis was the warm up. The next Crisis will be THE REAL Crisis. The Crisis in which Central 


I love this sentence;  A 5th grader would tell you that you cannot solve a debt problem by issuing more debt.

As a financial consultant, I have often used an example of hypothetical clients coming to my office and saying, "Dennis, we have car loans, boats loans, huge mortgage payment, student loans plus we have about $50,000 in credit card debt at 18% interest.  What should we do?  We don't have enough income to pay all our outstanding bills!"  

Would it be good advice for me to tell them, "No problem! Just apply for 10 more credit cards and keep taking cash advances on each of them to make the payments on your unsustainable lifestyle! Now go have a good day, buy some wine and order some pizza's delivered because life is short and your deserve to have some fun!"

Of course not.  That would be tragic advice.

Clearly, USA has a problem with wanting a lifestyle that they can't afford and is unsustainable...but the politicians can't be elected if they tell us this bad news.  The only ones who can be elected are the ones who tell us what we want to hear!  "Keep spending!  Buy that truck!  Buy that house!  Buy that boat!  Take those loans!  It's all good for the economy!"

The Bible says that the world is heading towards a ONE WORLD ECONOMY and that one day the ANTICHRIST will sit in authority over it.  So if we know that a NEW SYSTEM is coming, we also know that the current financial system needs to get out of the way to pave the way for the new one.

Could the collapse be starting any day now that forever changes the lifestyle of America?  Could we be enjoying the last days of "normal" life in America right now?  Would you blame God if He collapsed this nation right now and judged it for our murderous, gluttonous, drug-filled, porn-filled, debt laden, Christ-rejecting ways?

Nope.  If a collapse of America happens, NONE of us should be standing around with our mouths agape saying, "Wow!  What just happened!!  Everything was going along so smoothly!  We didn't have a care in the world just a few days ago....and now look at this!"


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