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The progression of world events unfolds in accordance with the anticipations mapped out by LEAP/E2020 during these last few quarters. Euroland has finally come out from its political torpor and short-termism since François Hollande’s election (1) as France’s president and the Greeks have just confirmed their willingness to resolve their problems within Euroland (2) thus contradicting all the Anglo-Saxon media and Euro sceptics’ “forecasts”. From now on, Euroland (in fact the EU minus the United Kingdom) will therefore be able to move forward and create a true project of political integration, economic efficiency and democratization over the 2012-2016 period as LEAP/E2020 anticipated last February (GEAB N°62. It’s positive news but, for the coming six-month periods, this “second Renaissance” of the European project (3) will really be the only good news at world level.
All the other components of the global situation are in fact pointed in a negative, even catastrophic, direction. Here again, the main media are starting to echo a long-standing situation anticipated by our team for summer 2012. Indeed, in one form or another, more often on the inside pages than in big headlines (monopolized for months by Greece and the Euro (4)), one now finds the following 13 topics:
1. Global recession (no engine of growth anywhere / end of the myth of the “US recovery”) (5)
2. Growing insolvency of the Western banking and financial system and henceforth partially recognized as such
3. Growing frailty of key financial assets such as sovereign debts, real estate and CDSs underpinning the world’s major banks’ balance sheets
4. Fall off in international trade (6)
5. Geopolitical tensions (in particular in the Middle East) approaching the point of a regional explosion
6. Lasting global geopolitical blockage at the UN
7. Rapid collapse of the whole of the Western asset-backed retirement system (7)
8. Growing political divisions within the world’s “monolithic” powers (USA, China, Russia)
9. Lack of “miracle” solutions as in 2008 /2009, because of the growing impotence of many of the major Western central banks (Fed, BoE, BoJ) and States’ indebtedness
10. Credibility in freefall for all countries having to assume the double load of public and excessive private debt (8)
11. Inability to control/slow down the advance of mass and long-term unemployment
12. Failure of monetarist and financial stimulus policies such as “pure” austerity policies
13. Quasi-systematic ineffectiveness henceforth of the alternative or recent international closed groups, G20, G8, Rio+20, WTO,… on all the key topics of what is no longer in fact a world agenda absent any consensus: economy, finances, environment, conflict resolution, fight against poverty…
The shock of the autumn 2008 will seem like a small summer storm compared to what will affect planet in several months.
In fact LEAP/E2020 has never seen the chronological convergence of such a series of explosive and so fundamental factors (economy, finances, geopolitical…) since 2006, the start of its work on the global systemic crisis. Logically, in our modest attempt to regularly publish a “crisis weather forecast”, we must therefore give our readers a “Red Alert” because the upcoming events which are readying themselves to shake the world system next September/ October belong to this category.
What is the second half of 2012 going to bring? Are things going to get even worse than they are right now? Unfortunately, that appears more likely with each passing day. I will admit that I am extremely concerned about the second half of 2012. Historically, a financial crisis is much more likely to begin in the fall than during any other season of the year. Just think about it. The stock market crash of 1929 happened in the fall. "Black Monday" happened on October 19th, 1987. The financial crisis of 2008 started in the fall. There just seems to be something about the fall that brings out the worst in the financial markets. But of course there is not a stock market crash every year. So are there specific reasons why we should be extremely concerned about what is coming this year? Yes, there are. The ingredients for a "perfect storm" are slowly coming together, and in the months ahead we could very well see the next wave of the economic collapse strike. Sadly, we have never even come close to recovering from the last recession, and this next crisis might end up being even more painful than the last one.
The following are 17 reasons to be extremely concerned about the second half of 2012....
#1 Historical Trends
A recent IMF research paper by Luc Laeven and Fabián Valencia showed that a banking crisis is far more likely to start in September than in any other month. The following chart is from their report....
#2 JP Morgan
Do you remember back in May when JP Morgan announced that it would be taking a 2 billion dollar trading loss on some derivatives trades gone bad? Well, the New York Times is now reporting that the real figure could reach 9 billion dollars, but nobody really knows for sure. At some point is JP Morgan going to need a bailout? If so, what is that going to do to the U.S. financial system?
Last week, Moody's downgraded the credit ratings of 15 major global banks. As a result, a number of them have been required to post billions of dollars in additional collateral against derivatives exposures....
#4 LEAP/E2020 Warning
LEAP/E2020 has issued a red alert for the global financial system for this fall. They are warning that the "second half of 2012" will represent a "major inflection point" for the global economic system....
#5 Increasing Pessimism
One recent survey of corporate executives found that only 20 percent of them expect the global economy to improve over the next 12 months and 48 percent of them expect the global economy to get worse over the next 12 months.
The Spanish financial system is basically a total nightmare at this point. Moody's recently downgraded Spanish debt to one level above junk status, and earlier this week Moody's downgraded the credit ratings of 28 major Spanish banks.
The situation in Italy continues to deteriorate and many analysts believe that it could be one of the next dominoes to fall. The following is from a recent Businessweek article....
I have written extensively about the financial nightmare that is unfolding in Greece. Unemployment has soared past the 20 percent mark, youth unemployment is above 50 percent, the Greek economy has contracted by close to 25 percent over the past four years and now Greek politicians are saying that a third bailout package may be necessary.
The tiny island nation of Cyprus has become the fifth member of the eurozone to formally request a bailout. This is yet another sign that the eurozone is rapidly falling apart.
German Chancellor Angela Merkel continues to promote an austerity path for Europe and she continues to maintain her very firm position against any kind of eurozone debt sharing....
#11 Bank Runs
Every single day, hundreds of billions of dollars is being pulled out of banks in southern Europe. Much of that money is being transferred to banks in northern Europe.
#12 Preparations For The Collapse Of The Eurozone
As I have written about previously, the smart money has already written off southern Europe. All over the continent major financial institutions are preparing for the worst. For example, just check out what Visa Europe is doing....
#13 Global Lending Is Slowing Down
All over the globe the flow of credit is beginning to freeze up. In fact, the Bank for International Settlements says that worldwide lending is contracting at the fastest pace since the financial crisis of 2008.
#14 Sophisticated Cyber Attacks On Banks
It is being reported that "very sophisticated" hackers have successfully raided dozens of banks in Europe. So far, it is being estimated that they have stolen 60 million euros....
#15 U.S. Municipal Bankruptcies
All over the United States there are cities and towns on the verge of financial disaster. This week Stockton, California became the largest U.S. city to ever declare bankruptcy, but the reality is that this is only just the beginning of the municipal debt crisis....
#16 The Obamacare Decision
The U.S. economy is already a complete and total mess, and now the Obamacare decision is going to throw a huge wet blanket on it. All over America, small business owners are saying that they are going to have to let some workers go because they cannot afford to keep them all under Obamacare. It would be hard to imagine a more job killing law than Obamacare, and now that the Supreme Court decision has finally been announced we are going to see many businesses making some really hard decisions.
#17 The U.S. Election
It is being reported that Barack Obama is putting together an army of "thousands of lawyers" to deal with any disputes that arise over voting procedures or results. It certainly looks like this upcoming election is going to be extremely close, and there is the potential that we could end up facing another Bush v. Gore scenario where the fate of the presidency is determined in court. This campaign season is likely to be exceptionally nasty, and I fear what may happen if there is not a decisive winner on election day. The possibility of significant civil unrest is certainly there.
Not bad thinking my friend. Canned goods could be as good if not better investment than precious metals A box of beans, rice, pasta and spagetti sauces in your closet can give you greater comfort than a pocket full of silver coins. (silver coins aint bad either!)
Originally posted by TechUnique
I think its about time I fill up my cupboards a little bit more. I dread the day we make a new global currency for western nations.. seems to be way too close for comfort!
The Federal Reserve has a growing list of reasons to remain accommodative and to become even more accommodative, as the need for additional easing becomes more apparent.