How The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash - Micahel Snyder THE ECONOMIC COLLAPSE BLOG

How The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash Posted: 13 Mar 2017   Micahel Snyder  THE ECONOMIC COLLAPSE BLOG Most Americans do not understand this, but the truth is that the Federal Reserve has far more power over the U.S. economy than anyone else does, and that includes Donald Trump.  Politicians tend to get the credit or the blame for how the economy is performing, but in reality it is an unelected, unaccountable panel of central bankers that is running the show, and until something is done about the Fed our long-term economic problems will never be fixed.   For an extended analysis of this point, please see this article.  In this piece, I am going to explain why the Federal Reserve is currently setting the stage for a recession, a new housing crisis and a stock market crash, and if those things happen unfortunately it will be Donald Trump that will primarily get the blame. On Wednesday, the Federal Reserve is expected to hike interest rates, and there is even the possibility that they will call for an acceleration of future rate hikes… Economists generally believe the central bank’s median estimate will continue to call for three quarter-point rate increases both this year and in 2018. But there’s some risk that gets pushed to four as inflation nears the Fed’s annual 2% target and business confidence keeps juicing markets in anticipation of President Trump’s plan to cut taxes and regulations. During the Obama years, the Federal Reserve pushed interest rates all the way to the floor, and this artificially boosted the economy.  In a recent article, Gail Tverberg explained how this works… With falling interest rates, monthly payments can be lower, even if prices of homes and cars rise. Thus, more people can afford homes and cars, and factories are less expensive to build. The whole economy is boosted by increased “demand” (really increased affordability) for high-priced goods, thanks to the lower monthly payments. Asset prices, such as home prices and farm prices, can rise because the reduced interest rate for debt makes them more affordable to more buyers. Assets that people already own tend to inflate, making them feel richer. In fact, owners of assets such as homes can borrow part of the increased equity, giving them more spendable income for other things. This is part of what happened leading up to the financial crash of 2008. But the opposite is also true. When interest rates rise, borrowing money becomes more expensive and economic activity slows down. For the Federal Reserve to raise interest rates right now is absolutely insane.  According to the Federal Reserve Bank of Atlanta’s most recent projection, GDP growth for the first quarter of 2017 is supposed to be an anemic 1.2 percent.  Personally, it wouldn’t surprise me at all if we actually ended up with a negative number for the first quarter. As Donald Trump has explained in detail, the U.S. economy is a complete mess right now, and we are teetering on the brink of a new recession. So why in the world would the Fed raise rates unless they wanted to hurt Donald Trump? Raising rates also threatens to bring on a new housing crisis.  Interest rates were raised prior to the subprime mortgage meltdown in 2007 and 2008, and now we could see history repeat itself.  When rates go higher, it becomes significantly more difficult for families to afford mortgage payments… The rate on a 30-year fixed mortgage reached its all-time low in November 2012, at just 3.31%. As of this week, it was 4.21%, and by the end of 2018, it could go as high as 5.5%, forecasts Matthew Pointon, a property economist for Capital Economics. He points out that for a homeowner with a $250,000 mortgage fixed at 3.8%, annual payments are $14,000. If that homeowner moved to a similarly-priced home but had a 5.5% rate, their annual payments would rise by $3,000 a year, to $17,000. Of course stock investors do not like rising rates at all either.  Stocks tend to rise in low rate environments such as we have had for the past several years, and they tend to fall in high rate environments. And according to CNBC, a “coming stock market correction” could be just around the corner… Investors are in for a rude awakening about a coming stock market correction — most just don’t know it yet. No one knows when the crash will come or what will cause it — and no one can. But what’s worse for most investors is they have no clue how much they stand to lose when it inevitably happens. “If you look at the market historically, we have had, on average, a crash about every eight to 10 years, and essentially the average loss is about 42 percent,” said Kendrick Wakeman, CEO of financial technology and investment analytics firm FinMason. If stocks start to fall, how low could they ultimately go? One technical analyst that has a stunning record of predicting short-term stock market declines in recent years is saying that the Dow could potentially drop “by more than 6,000 points to 14,800″… But if the technical stars collide, as one chartist predicts, the blue-chip gauge could soon plunge by more than 6,000 points to 14,800. That’s nearly 30% lower, based on Friday’s close. Sandy Jadeja, chief market strategist at Master Trading Strategies, claims several predicted stock market crashes to his name — all of them called days, or even weeks, in advance. (He told CNBC viewers, for example, that the August 2015 “Flash Crash” was coming 18 days before it hit.) He’s also made prescient calls on gold and crude oil. And he’s extremely concerned about what this year could bring for investors. “The timeline is rapidly approaching” for the next potential Dow meltdown, said Jadeja, who shares his techniques via workshops and seminars. Most big stock market crashes tend to happen in the fall, and that is what I portray in my novel, but the truth is that they can literally happen at any time.  If you have not seen my recent rant about how ridiculously overvalued stocks are at this moment in history, you can find it right here.  Whether you want to call it a “crash”, a “correction”, or something else, the truth is that a major downturn is coming for stocks and the only question is when it will strike. And when things start to get bad, most of the blame will be dumped on Trump, but it won’t primarily be his fault. It was the Federal Reserve that created this massive financial bubble, and they will also be responsible for popping it.  Hopefully we can get the American people to understand how these things really work so that accountability for what is coming can be placed where it belongs.

The Day The Lights Go Out And The Trucks Stop Running - Micahel Snyder THE ECONOMIC COLLAPSE BLOG

The Day The Lights Go Out And The Trucks Stop Running Posted: 29 Aug 2016 Micahel Snyder  THE ECONOMIC COLLAPSE BLOG What would happen if some sort of major national emergency caused a massive transportation disruption that stopped trucks from running?  The next time you talk to a trucker, please thank them for their service, because without their hard work none of our lives would be possible.   In America today, very few of us live a truly independent lifestyle, and that means that we rely on the system to provide what we need.  Most of us take for granted that there will always be plenty of goods at Wal-Mart and at the grocery store whenever we need more “stuff”, and most of us never give a second thought to how all of that “stuff” gets there.   Well, the truth is that most of it is brought in by trucks, and if the trucks stopped running for some reason the entire country would devolve into chaos very rapidly. Earlier today, I came across a quote from Alice Friedemann that detailed what we would be facing during a major national transportation disruption very nicely… Within a week, in roughly this order, grocery stores would be out of dairy and other items that are delivered many times a day. And by the week, the shelves would be empty. Hospitals, pharmacies, factories, and many other businesses also get several deliveries a day, and they’d be running out of stuff the first day. And the second day, there’s be panic and hoarding. And restaurants, pharmacies would close. ATM’s would be out of money. Construction would stop. There’d be increasing layoffs. Increasing enormous amounts of trash not getting picked up, 685,000 tons a day. Service stations would be closed. Very few people would be working. And the livestock would start to be hungry from lack of feed deliveries. Then within two weeks, clean water supplies would run out. Within four weeks to eight weeks, there wouldn’t be coal delivered to power plants and electricity would start shutting down. And when that happened, about a quarter of our pipelines use electricity, and so natural gas plants wouldn’t be fed natural gas and they’d start shutting down. There is so much infrastructure that we take for granted that would suddenly become very vulnerable in this type of scenario.  There are countless numbers of workers out there that never get any glory that do the hard work of maintaining our nuclear power plants, our natural gas pipelines, our electrical grid, etc.  If they suddenly were not able to do their jobs, the consequences would be absolutely catastrophic.  The following comes from Tess Pennington… They rarely mention the dozens of nuclear power plants that litter the United States. If no one is there to operate them, how long before they melt down and bury millions of survivors under a radioactive cloud? Then there are the 12,000 facilities around the country that store large quantities of toxic or flammable chemicals, and reside close to residential areas. 2,500 of these sites contain chemicals in quantities that, if a catastrophic accident were to occur, could affect 10,000 to 1 million people each. And let’s not forget the 2.5 million miles of oil and gas pipelines that can be found in every state. They suffer hundreds of leaks and ruptures every year, and are much more likely to explode when they aren’t maintained. That detail seems to be conveniently forgotten by post-apocalyptic films. And finally, most post-apocalyptic movies will forget to mention what happens when there aren’t any functional fire departments. Aside from the obvious consequences, like whole neighborhoods routinely burning to the ground, who’s going to put out landfill fires that are occasionally radioactive? For most Americans, a major national emergency of this magnitude may seem unimaginable right now.  But the truth is that it isn’t difficult to see how this kind of scenario could happen.   The Yellowstone supervolcano is becoming increasingly active, a single large asteroid could change all of our lives in a single moment, a crippling pandemic could bring normal life in America to a complete standstill, a terror attack involving weapons of mass destruction would spread panic and fear like wildfire, and a historic earthquake along the New Madrid fault, the Cascadia Subduction zone or any of the major faults in California could literally change the geography of our entire continent. In addition, a massive EMP burst from a nuclear weapon or from the sun could fry our power grid and send us back into the stone age in a single moment.  This is something that I have written about extensively, and those that want to minimize this threat simply don’t know what they are talking about. And an electromagnetic pulse is not even required to cause very serious problems with our electrical grid.  For instance, just consider what happened in Ukraine toward the end of last year… On December 23rd, 2015, the Prykarpattyaoblenergo power distribution station in Ukraine was hit by a carefully coordinated cyber-attack that was months in the making. The technicians lost control of their cursors as they watched hackers open breakers and take circuit after circuit offline, plunging 230,000 residents into darkness. The hackers took backup power of the stations offline, plunging the electrical workers into darkness too, and worse yet, they even rewrote the low-level firmware that controls the electrical transformers. The attack had come after months of careful infiltration and planning by a dedicated team of elite cyber-warfare specialists and the result was devastating. Even months later, technicians struggled to regain full capacity in the electrical grid due to the overwriting of firmware. With Ukrainian moves to nationalize power companies, it is possible that the powerful and Putin-connected Russian oligarchs who own large parts of Ukraine’s infrastructure were sending a message: we can shut down the system anytime we want. The truth is that we are far more vulnerable than most of us would like to admit. So what would you do if “normal life” suddenly came to an end and you no longer had access to food, water or power? How would you and your family respond? Hopefully you would continue to act in a civilized manner, but history has shown that many people would not. Desperate people do desperate things, and it would only take a matter of days for some people to become violent… Before long, getting mugged or being a victim of some type of crime is as unpredictable and as common as a car accident. You’ll realize everyone in the neighborhood has now beefed up security on their homes. All your family, friends, and coworkers have experienced a mugging, carjacking, or worse. You’ll have no choice but to accept this new way of life and count on basic safety measures (a form of passive denial) or further learn to defend yourself and remain in a constant state of alert (a very stressful state over time). It’s difficult emotionally, mentally, and physically to remain on high alert 24/7 for any length of time. Most people will revert to a form of passive denial until the next incident happens to them or a family member. And even though things may seem relatively stable for the moment, concern about what is coming is one of the factors that has led an increasing number of Americans to arm themselves.  According to a brand new study from the Pew Research Center, 44 percent of all American homes now have a gun.  Just two years ago, a different study found that number was sitting at just 31 percent. The way that we are living our lives right now will not last indefinitely. At some point a major national emergency will strike, and when that day arrives we could suddenly be facing major power grid and transportation disruptions. Are you prepared for that? If not, you might want to do so while you still have time.

Global Financial Meltdown Coming? Clear Signs That the Great Derivatives Crisis Has Now Begun

A trader works underneath a television screen showing Federal Reserve Chair Janet Yellen announcing that the Federal Reserve will leave interest rates unchanged on the floor of the New York Stock Exchange in New York. (Reuters)

Global Financial Meltdown Coming? Clear Signs That the Great Derivatives Crisis Has Now Begun

10/9/2015 MICHAEL SNYDER  charisma news

Warren Buffett once referred to derivatives as "financial weapons of mass destruction," and it was inevitable that they would begin to wreak havoc on our financial system at some point. While things may seem somewhat calm on Wall Street at the moment, the truth is that a great deal of trouble is bubbling just under the surface.

Something happened in mid-September that required an unprecedented $405 billion surge of Treasury collateral into the repo market. I know—that sounds very complicated, so I will try to break it down more simply for you. It appears that some very large institutions have started to get into a significant amount of trouble because of all the reckless betting they have been doing.

This is something I have warned would happen over and over again. In fact, I have written about it so much that my regular readers are probably sick of hearing about it. But this is what is going to cause the meltdown of our financial system.

Many out there get upset when I compare derivatives trading to gambling, and perhaps it would be more accurate to describe most derivatives as a form of insurance. The big financial institutions assure us that they have passed off most of the risk on these contracts to others and so there is no reason to worry according to them.

Well, personally I don't buy their explanations, and a lot of others don't either. On a very basic, primitive level, derivatives trading is gambling. This is a point that Jeff Nielson made very eloquently in a piece he recently published:

No one "understands" derivatives. How many times have readers heard that thought expressed (please round-off to the nearest thousand)? Why does no one understand derivatives? For many, the answer to that question is that they have simply been thinking too hard. For others; the answer is that they don't "think" at all.

Derivatives are bets. This is not a metaphor, or analogy, or generalization. Derivatives are bets. Period. That's all they ever were. That's all they ever can be.

One very large financial institution that appears to be in serious trouble with these financial weapons of mass destruction is Glencore. At one time, Glencore was considered to be the 10th-largest company on the entire planet, but now it appears to be coming apart at the seams, and a great deal of their trouble seems to be tied to derivatives. The following comes from Zero Hedge:

Of particular concern, they said, was Glencore's use of financial instruments such as derivatives to hedge its trading of physical goods against price swings. The company had $9.8 billion in gross derivatives in June 2015, down from $19 billion in such positions at the end of 2014, causing investors to query the company about the swing.

Glencore told investors the number went down so drastically because of changes in market volatility this year, according to people briefed by Glencore. When prices vary significantly, it can increase the value of hedging positions.

Last year, there were extreme price moves, particularly in the crude-oil market, which slid from about $114 a barrel in June to less than $60 a barrel by the end of December.

That response wasn't satisfying, said Michael Leithead, a bond fund portfolio manager at EFG Asset Management, which managed $12 billion as of the end of March and has invested in Glencore's debt.

According to Bank of America, the global financial system has about $100 billion of exposure overall to Glencore. So if Glencore goes bankrupt, it will be a major event. At this point, Glencore is probably the most likely candidate to be "the next Lehman Brothers."

And it isn't just Glencore that is in trouble. Other financial giants, such as Trafigura, are in deep distress as well. Collectively, the global financial system has approximately a half-trillion dollars of exposure to these firms:

Worse, since it is not just Glencore that the banks are exposed to but very likely the rest of the commodity trading space, their gross exposure blows up to a simply stunning number:

For the banks, of course, Glencore may not be their only exposure in the commodity trading space. We consider that other vehicles such as Trafigura, Vitol and Gunvor may feature on bank balance sheets as well ($100 bn x 4?)

Call it a half-trillion dollars in very highly levered exposure to commodities: an asset class that has been crushed in the past year.

The mainstream media are not talking much about any of this yet, and that is probably a good thing. But behind the scenes, unprecedented moves are already taking place.

When I came across the information I am about to share with you, I was absolutely stunned. It comes from Investment Research Dynamics, and it shows clearly that everything is not "OK" in the financial world:

Something occurred in the banking system in September that required a massive reverse repo operation in order to force the largest-ever Treasury collateral injection into the repo market. Ordinarily the Fed might engage in routine reverse repos as a means of managing the Fed funds rate.

However, there have been sudden spikes up in the amount of reverse repos that tend to correspond the some kind of crisis—the obvious one being the de facto collapse of the financial system in 2008:

What in the world could possibly cause a spike of that magnitude?

Well, that same article that I just quoted links the troubles at Glencore with this unprecedented intervention:

What's even more interesting is that the spike-up in reverse repos occurred at the same time—Sept. 16—that the stock market embarked on an 8-day cliff dive, with the S&P 500 falling 6 percent in that time period. You'll note that this is around the same time that a crash in Glencore stock and bonds began. It has been suggested by analysts that a default on Glencore credit derivatives either by Glencore or by financial entities using derivatives to bet against that event would be analogous to the "Lehman moment" that triggered the 2008 collapse.

The blame on the general stock market plunge was cast on the Fed's inability to raise interest rates. However that seems to be nothing more than a clever cover story for something much more catastrophic which began to develop out sight in the general liquidity functions of the global banking system.

---

Back in 2008, Lehman Brothers was not "perfectly fine" one day and then suddenly collapsed the next. There were problems brewing under the surface well in advance.

Well, the same thing is happening now at banking giants such as Deutsche Bank, and at commodity trading firms such as Glencore, Trafigura and The Noble Group.

And of course a lot of smaller fish are starting to implode as well. I found this example posted on Business Insider recently:

On Sept. 11, Spruce Alpha, a small hedge fund which is part of a bigger investment group, sent a short report to investors.

The letter said that the $80 million fund had lost 48 percent in a month, according the performance report seen by Business Insider.

There was no commentary included in the note. No explanation. Just cold hard numbers.

Wow—how do you possibly lose 48 percent in a single month?

It would be hard to do that, even if you were actually trying to lose money on purpose.

Sadly, this kind of scenario is going to be repeated over and over as we get even deeper into this crisis.

Meanwhile, our "leaders" continue to tell us that there is nothing to worry about. For example, just consider what former Fed Chairman Ben Bernanke said:

Former Federal Reserve chairman Ben Bernanke doesn't see any bubbles forming in global markets right now.

But he doesn't think you should take his word for it.

And even if you did, that isn't the right question to ask anyway.

Speaking at a Wall Street Journal event on Wednesday morning, Bernanke said, "I don't see any obvious major mispricings. Nothing that looks like the housing bubble before the crisis, for example. But you shouldn't trust me."

I certainly agree with that last sentence. Bernanke was the one telling us that there was not going to be a recession back in 2008, even after one had already started. He was clueless back then and he is clueless today.

Most of our "leaders" either don't understand what is happening or they are not willing to tell us.

So that means that we have to try to figure things out for ourselves the best that we can. And right now there are signs all around us that another 2008-style crisis has begun.

Personally, I am hoping there will be a lot more days like today, when the markets were relatively quiet and not much major news happened around the world.

Unfortunately for all of us, these days of relative peace and tranquility are about to come to a very abrupt end.

Michael T. Snyder is the publisher of The Economic Collapse Blog and author of The Beginning of the End.

For a limited time, we are extending our celebration of the 40th anniversary of Charisma. As a special offer, you can get 40 issues of Charisma magazine for only $40!

NEW - Life in the Spirit is your Spirit-filled teaching guide. Encounter the Holy Spirit, hear God speak to you, and enjoy timeless teachings on love, mercy and forgiveness.LEARN MORE!