Michael Snyder - THE ECONOMIC COLLAPSE BLOG: Robert Kiyosaki And Harry Dent Warn That Financial Armageddon Is Imminent

Robert Kiyosaki And Harry Dent Warn That Financial Armageddon Is Imminent Posted: 30 Mar 2016  Michael Snyder  THE ECONOMIC COLLAPSE BLOG Financial experts Robert Kiyosaki and Harry Dent are both warning that the next major economic crash is in our very near future.  Dent is projecting that the Dow will fall to “5,500 to 6,000 by late 2017″, and Kiyosaki actually originally projected that a great crash was coming in 2016 all the way back in 2002.   Of course we don’t exactly have to wait for things to get bad.  The truth is that things are not really very good at the moment by any stretch of the imagination.  Approximately one-third of all Americans don’t make enough money to even cover the basic necessities, 23 percent of adults in their prime working years are not employed, and corporate debt defaults have exploded to the highest level that we have seen since the last financial crisis.  But if Kiyosaki and Dent are correct, economic conditions in this country will soon get much, much worse than this. During a recent interview, Harry Dent really went out on a limb by staking his entire reputation on a prediction that we would experience “the biggest global bubble burst in history” within the next four years… There will be… and I will stake my entire reputation on this… we are going to see the biggest global bubble burst in history in the next four years… There’s only one way out of this bubble and that is for it to burst… all this stuff is going to reset back to where it should be without all this endless debt, endless printed money, stimulus and zero interest rate policy. And of course he is far from alone.  Without a doubt, we are currently in the terminal phases of the greatest financial bubble the world has ever known, and it is exceedingly difficult to see any way that it will not end very, very badly. Ultimately, Dent believes that we could see U.S. stocks lose two-thirds of their value by late next year… The Dow, I’m projecting, will hit 5,500 to 6,000 by late 2017… just in the next year and a half or so.  That’ll be most of the damage… then it will rally and there’ll be some aftershocks into 2020… my four cycles point down into early 2020 and then they start one after the other to turn up… I think the worst will be over by 2020, but the worst of that will be by the end of 2017. If that does happen, it will be a far worse crash than what we experienced back in 2008, and the economic consequences will be absolutely terrifying. Another highly respected financial expert that is making similar claims is Robert Kiyosaki.  My wife is a big fan of his books, and I have always held him in high regard. But what I didn’t realize is that he had actually predicted that there would be a major financial crash all the way back in 2002… Fourteen years ago, the author of a series of popular personal-finance books predicted that 2016 would bring about the worst market crash in history, damaging the financial dreams of millions of baby boomers just as they started to depend on that money to fund retirement. Broader U.S. stock markets are recovering from the worst 10-day start to a year on record. But Robert Kiyosaki — who made that 2016 forecast in the 2002 book “Rich Dad’s Prophecy” — says the meltdown is under way, and there’s little investors can do but buy gold or silver and hope the Federal Reserve slows the slide. I agree with Kiyosaki that one way that investors can shield their wealth is by getting gold and silver.  In a recent article, I explained exactly why I believe that silver in particular is ridiculously undervalued right now. Kiyosaki also believes that the coming crash could be delayed a bit if the Federal Reserve decided to embark on another round of quantitative easing.  But even if that happens, Kiyosaki is absolutely convinced that eventually “it’s all going to come down”… Kiyosaki told MarketWatch that the combination of demographics and global economic weakness makes the next crash inevitable — but the Fed could stave it off with another round of quantitative easing, which might stimulate the economy. The Fed turned more dovish at its March meeting, with the central bank penciling in fewer interest-rate hikes this year than were previously part of its implied framework. The Fed signaled those hikes would happen more slowly than had been anticipated earlier, owing to a weak global economic environment and a volatile stock market. “The big question [whether] we do ‘QE4,’” said Kiyosaki. “If we do, the stock market will come roaring back, but it’s not rocket science. If we stop printing money, it crashes; if we print money, it goes up. But, eventually, it’s all going to come down.” Another voice that I have come to respect is Jim Rickards.  He is not quite as apocalyptic as Kiyosaki or Dent, but without a doubt he is deeply concerned about where the global economy is headed… Global growth is slowing both because of weakness in developed economies like Europe and Japan, and weakness in some of the emerging markets champions such as China, Brazil and Russia. The limits of monetary policy have been reached. The evidence is now clear that negative interest rates don’t stimulate spending; they are only good for devaluation in the ongoing currency wars. World trade is shrinking; a rare phenomenon usually associated with recession or depression. And he is exactly right.  The economic downturn that we are witnessing is truly global in scope.  Brazil has plunged into an economic depression, the Italian banking system is in the process of completely melting down, and Japan has implemented negative interest rates in a desperate attempt to keep their Ponzi scheme going but it really isn’t working.  In fact, Japanese industrial production just crashed by the most that we have seen since the tsunami of 2011. Here in the United States, investors are generally feeling pretty good right now because stocks have rebounded substantially in recent weeks.  However, Rickards is warning that this rebound is very temporary… Stocks are clearly in a bubble. The stock market is ignoring the strong dollar, which in turn hurts exports and devalues overseas earnings. It is also ignoring declining corporate earnings, imminent defaults in the energy sector, and declining global growth in general. Never mind. As long as money is cheap and leverage is plentiful, there’s no reason not to bid up stock prices, and wait for the greater fool to bid them up some more. There is so much that we could learn from all these three men. Sadly, just like we saw in 2008, most Americans are ignoring the warnings. The mainstream media has conditioned the public to trust them, and right now the mainstream media is insisting that everything is going to be just fine. So will everything be just fine as the months roll along? We will just have to wait and see…

Financial Armageddon Approaches: U.S. Banks Have 247 Trillion Dollars Of Exposure To Derivatives- Michael Snyder THE ECONOMIC COLLAPSE blog

Financial Armageddon Approaches: U.S. Banks Have 247 Trillion Dollars Of Exposure To Derivatives

Posted: 29 Dec 2015 Michael Snyder  THE ECONOMIC COLLAPSE blog

Did you know that there are 5 “too big to fail” banks in the United States that each have exposure to derivatives contracts that is in excess of 30 trillion dollars?  Overall, the biggest U.S. banks collectively have more than 247 trillion dollars of exposure to derivatives contracts.  

That is an amount of money that is more than 13 times the size of the U.S. national debt, and it is a ticking time bomb that could set off financial Armageddon at any moment.  Globally, the notional value of all outstanding derivatives contracts is a staggering 552.9 trillion dollars according to the Bank for International Settlements.  The bankers assure us that these financial instruments are far less risky than they sound, and that they have spread the risk around enough so that there is no way they could bring the entire system down.  But that is the thing about risk – you can try to spread it around as many ways as you can, but you can never eliminate it.  And when this derivatives bubble finally implodes, there won’t be enough money on the entire planet to fix it.

A lot of readers may be tempted to quit reading right now, because “derivatives” is a term that sounds quite complicated.  And yes, the details of these arrangements can be immensely complicated, but the concept is quite simple.  Here is a good definition of “derivatives” that comes from Investopedia…

A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets includestocks, bonds, commodities, currencies, interest rates and market indexes.

I like to refer to the derivatives marketplace as a form of “legalized gambling”.  Those that are engaged in derivatives trading are simply betting that something either will or will not happen in the future.  Derivatives played a critical role in the financial crisis of 2008, and I am fully convinced that they will take on a starring role in this new financial crisis.

And I am certainly not the only one that is concerned about the potentially destructive nature of these financial instruments.  In a letter that he once wrote to shareholders of Berkshire Hathaway, Warren Buffett referred to derivatives as “financial weapons of mass destruction”…

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.

Since the last financial crisis, the big banks in this country have become even more reckless.  And that is a huge problem, because our economy is even more dependent on them than we were the last time around.  At this point, the four largest banks in the U.S. are approximately 40 percent larger than they were back in 2008.  The five largest banks account for approximately 42 percent of all loans in this country, and the six largest banks account for approximately 67 percent of all assets in our financial system.

So the problem of “too big to fail” is now bigger than ever.

If those banks go under, we are all in for a world of hurt.

Yesterday, I wrote about how the Federal Reserve has implemented new rules that would limit the ability of the Fed to loan money to these big banks during the next crisis.  So if the survival of these big banks is threatened by a derivatives crisis, the money to bail them out would probably have to come from somewhere else.

In such a scenario, could we see European-style “bail-ins” in this country?

Ellen Brown, one of the most fierce critics of our current financial system and the author of Web of Debt, seems to think so…

Dodd-Frank states in its preamble that it will “protect the American taxpayer by ending bailouts.” But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors. That includes depositors, the largest class of unsecured creditor of any bank.
Title II is aimed at “ensuring that payout to claimants is at least as much as the claimants would have received under bankruptcy liquidation.” But here’s the catch: under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured.
The over-the-counter (OTC) derivative market (the largest market for derivatives) is made up of banks and other highly sophisticated players such as hedge funds. OTC derivatives are the bets of these financial players against each other. Derivative claims are considered “secured” because collateral is posted by the parties.
For some inexplicable reason, the hard-earned money you deposit in the bank is not considered “security” or “collateral.” It is just a loan to the bank, and you must stand in line along with the other creditors in hopes of getting it back.

As I mentioned yesterday, the FDIC guarantees the safety of deposits in member banks up to a certain amount.  But as Brown has pointed out, the FDIC only has somewhere around 70 billion dollars sitting around to cover bank failures.

If hundreds of billions or even trillions of dollars are ultimately needed to bail out the banking system, where is that money going to come from?

It would be difficult to overstate the threat that derivatives pose to our “too big to fail” banks.  The following numbers come directly from the OCC’s most recent quarterly report (see Table 2), and they reveal a recklessness that is on a level that is difficult to put into words…

Citigroup

Total Assets: $1,808,356,000,000 (more than 1.8 trillion dollars)

Total Exposure To Derivatives: $53,042,993,000,000 (more than 53 trillion dollars)

JPMorgan Chase

Total Assets: $2,417,121,000,000 (about 2.4 trillion dollars)

Total Exposure To Derivatives: $51,352,846,000,000 (more than 51 trillion dollars)

Goldman Sachs

Total Assets: $880,607,000,000 (less than a trillion dollars)

Total Exposure To Derivatives: $51,148,095,000,000 (more than 51 trillion dollars)

Bank Of America

Total Assets: $2,154,342,000,000 (a little bit more than 2.1 trillion dollars)

Total Exposure To Derivatives: $45,243,755,000,000 (more than 45 trillion dollars)

Morgan Stanley

Total Assets: $834,113,000,000 (less than a trillion dollars)

Total Exposure To Derivatives: $31,054,323,000,000 (more than 31 trillion dollars)

Wells Fargo

Total Assets: $1,751,265,000,000 (more than 1.7 trillion dollars)

Total Exposure To Derivatives: $6,074,262,000,000 (more than 6 trillion dollars)

As the “real economy” crumbles, major hedge funds continue to drop like flies, and we head into a new recession, there seems to very little alarm among the general population about what is happening.

The mainstream media is assuring us that everything is under control, and they are running front page headlines such as this one during the holiday season: “Kylie Jenner shows off her red-hot, new tattoo“.

But underneath the surface, trouble is brewing.

A new financial crisis has already begun, and it is going to intensify as we head into 2016.

And as this new crisis unfolds, one word that you are going to want to listen for is “derivatives”, because they are going to play a major role in the “financial Armageddon” that is rapidly approaching.

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My heart yearns for the glory of the Lord Jesus to be revealed in the earth, touching the hearts and souls of men, women and children in each and every nation. As we see the days become darker, we believe that the Lord God of Israel will show Himself strong, and prove that He is the Way, the Truth and the Life, as He says He is. 

I wrote this book for you who also long to walk in strong faith, courage and commitment to the end, for whatever the Lord has planned and purposed for you and I. Together, as the Body of Christ, and the glorious Bride that we will become, we will one day see His Kingdom come, His will be done, on earth as it is in heaven. 

The Gospel, the Good News of salvation, will be declared, and that which is just and good will for all eternity overcome the evil one. I sincerely believe we are living in the end of days, as prophetic words have been rapidly fulfilled since the re-birth of Israel in 1948. Jesus Himself had said that when we see the fig tree budding, we know that the time is near. 

This book, my 10th published in the last three years (all between 2013-2015) and before my 61st birthday, is very special to me. I sense it is something the Lord put on my heart to do several months ago, giving it that “urgency of getting it done and out there” feel as I wrote. Originally these chapters were Now Think On This messages. 

It was amazing to me how many were done in September and October of 2015 alone, as the Holy Spirit would speak a word or sentence to me, and I would write soon after. I am truly grateful for His impartation, and acknowledge Jesus (Yeshua), my Lord and Savior, above all. 

The photos I have included in the book are primarily ones I took (exceptions noted), both to document history and to share another way the Lord also speaks to His Body. Capturing moments of the Holy Spirit action, especially in the two “fire” photos, were exciting. In both cases I wasn’t even aware of it until they were “developed”. 

I trust this book will both encourage you and cause you to re-commit yourself - to know the Lord’s will for your life, do all you can to allow Him to direct your steps, and be the light in these dark days we desperately need and have been called upon by the Lord to be. 

I am with you, arm in arm! 

Ahava (love in Hebrew) and shalom (peace), 

Steve Martin

Founder 

Love For His People