It’s only about a month and a half into 2016, yet financial markets all over the world have been a volatile rollercoaster ride to say the least, strongly reminiscent of the times preceding the 2008 financial collapse if not worse. In fact, global markets lost an estimated $3.17 trillion in just the first two weeks and $16.5 trillion in the last six months. According to Bloomberg, “global equities’ are off to the worst-ever start to a year” and according to JP Morgan, “Twenty-one of the 22 biggest emerging markets tracked by JP Morgan have seen a downgrade in its 2016 consensus economic growth forecast.”
Many people will often categorize this as just a blip on the radar and pass it off as a minor correction in the system, however, looking deeper past the surface-level headlines, one can see some interesting word choices being expressed by some major financial players. George Soros, mega globalist investor and hedge fund operator, recently said,
“When I look at the financial markets, there is a serious challenge that reminds me of the crisis of 2008.”
Additionally, the Royal Bank of Scotland warned investors that they face a “cataclysmic year” and recommended that they “sell everything except high quality bonds. This is about return of capital not return on capital. In a crowded hall, exit doors are small.” If that wasn’t bad enough, William White, chairmen of OECD and former chief economist of the Bank For International Settlements (the Central bank of central banks), said,
“the situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially used up.”
Although many financial analysts in the mainstream media are known to sugarcoat things and outright lie, when huge players in the markets make these kind of statements, it’s wise to listen, as they usually have unwavering optimism so as to gain advantage, save the system, and keep the public out of the loop. It wasn’t too long ago in 2008 when analysts were painting the picture of a healthy economy and encouraging people to buy only to see it collapse the next day seemingly “out of nowhere.” Those that said otherwise, like Peter Schiff, were laughed at and called crazy.
So what is causing all the commotion and should people be worried? To answer this question let’s attempt to break down the current system (at least to the best of our ability) by looking at ten data sets that might bring some type of clarity as to what is going on in the global system and the reasoning behind its impending breakdown and potential collapse.
1) Fundamentally Flawed Design
Before anything else, it should first be understood that the underlying systemic structure of economic systems around the world are fundamentally flawed by design. This primarily has to do with a few factors: fiat money– money printed and backed by nothing but law; fractional reserve banking– a method of banking which allows banks to create/loan out way more money then they actually hold in reserve; the debt based monetary system– all new money created is a instrument of debt that needs to be paid back, usually with an interest payment attached; private central banks– central bank, which dictates the monetary policy of a country is a private institution with unelected leaders and shareholders; and finally, the world reserve currency– where countries conduct large amounts of international trade in a particular currency/currencies, therefore need high reserves of that currency (U.S. dollar is currently the world reserve currency).
Now this is a very important, yet complex set of issues that takes some time to wrap your head around and fully understand, so it’s strongly suggested that anyone not familiar with these topics to read the following article and watch the following video for much more context on the subject. One cannot truly understand the current financial system without understanding the fundamentals first. This topic will make much more sense by first learning the basics.
To give people the short version: the major problem is that the entire system is essentially a Ponzi scheme, in which more consumption and more money printing/more debt is continually required in order to make the principal and interest payments that are currently due on existing debt. This inevitably creates a debt spiral, which traps society in a never-ending pile of debt, which it can’t mathematically get out of without collapse. This is essentially why inflation is always rising and the market seems to crashes every seven or so years.
Another major problem is that control over the monetary supply is in the hands of private banks, thus giving more power over the flow of currency to banks and private individuals then that of the government, let alone the people, for which the entire system is supposed to be built. Everyone knows money makes the world go round, therefore the private central banks are the true puppet masters behind the scenes, with the U.S. in particular being the main source as the world reserve currency. These fundamental flaws culminate in a supreme imbalance of power and wealth amongst the people of a population and amongst nations; and are the main reasons why the wealth inequality present today is completely out of control.
2) Wealth Inequality
One of the most fundamental problems in the U.S. economy, and really the world economy overall, is wealth inequality. No matter one’s ideology, there is obviously a problem when 60 people have more wealth then half the words population combined. Wealth inequality is largely due to the nexus of private capital and public/government control, which inevitably has led to the centralization of power and wealth globally on almost unprecedented levels. In almost all the major economic markets today, there exists a cartel of mega corporations who dominate the industry, whether it’s banking, agriculture, finance, oil, insurance, natural resources, media, pharmaceutical, health, defense, and many others. Essentially they combine to own most of the market share, becoming too big to fail in the process.
The problem is that the private entities have hijacked the government for their own personal benefit, which rewards them with subsidies, tax loopholes, rigged regulations, government contracts, and taxpayer bailouts. This makes it next to impossible for small businesses to compete, causing many to fail or get bought out by the big boys. Small businesses simply don’t have the access to the same amount of capital these major corporations do, as well as the logistics and government connections to get away with the same things. This has led to a complete disappearance of the middle class, killing entrepreneurship and stunting the circulation of money within the economy. The money at the top can only be spent on so much and keep so many businesses and jobs alive.
Another major problem with wealth inequality is on a macro-level where it is enriching some countries (predominantly the west) at the expense of others. The U.S. in particular, being the world reserve currency, gets to print money off its printing press and export it in exchange for assets in order to provide liquidity with which other countries can engage in international trade. It can’t be denied that this is unjustly keeping many third world countries in a perpetual cycle of debt and poverty. This has resulted in major ongoing geo-political currency wars, which often lead to actual wars. In fact, almost all wars throughout history have much less to do with hate and all the more to do with unjust financial systems and crony banking by the establishment class. This is better thought of as the “1% of the 1%.” This extreme wealth inequality is producing very weak domestic economies, which look now on the verge of collapse.
3) Prolonged Weak Domestic Economies
When there is this level of economic inequality, there is no vibrant middle class to drive the economy, as well as only one central system at the top running the show, as opposed to a decentralized and diversified structure. The effect of this often shows up in the hard data as low consumer spending, high unemployment/lack of full-time good paying jobs, low manufacturing in the west/slave wages in the developing countries, low savings, high debt, low interest rates, weak balance of trade, low bond-yields, and just an overall weak flow of money. Good money flow is very important in a strong, balanced, and fair economy, as it keeps money rotating around within the population. It should come as no surprise that all of the symptoms mentioned above are ever-present in the current financial system as well as an overall slowdown in international trade. When these symptom are present in the system, political unrest and financial depressions are usually soon to follow.
On a more global level, there are even bigger factors that are affecting domestic economies and their ability to cater to the population. One major factor is that many governments rely heavily on the profits of oil in order to maintain a healthy economy and pay off their large debts. This is very worrisome now because there is a major oversupply of oil in the market, which is driving the price of oil way down, affecting emerging countries like Brazil, Russia, Saudi Arabia, and Venezuela. This ties into a larger problem of countries having to rely on either imports or exports to keep their economy healthy, which inevitably leaves them vulnerable to macro-economic problems; such as speculation and foreign dependence. Though no one operates in a bubble, having one’s domestic economy rely too heavily on foreign trade or open to speculative foreign investment, can be quite dangerous, especially when other powerful entities don’t have your best interest in mind and cheat to make a quick buck.
Finally, a major factor very few are talking about is the advancement of technology and its unavoidable impact on the economy. Technology is becoming very advanced and inevitably taking jobs away from people, which can be good, but at the same time requires a shift in economic design. Technology is also favoring those big businesses that can afford it, lowering their costs and need for human labor. All these factors add up to very unhealthy domestic economies, in which only those on top make a profit. However, even the rich run into trouble over time with this type of economy, which is why central banks and governments have stepped in to artificially prop them up. This has created major equity bubbles in a variety of areas and essentially just prolonged the eventual collapse.
4) Massive Equity Bubbles
There are many tools at the disposal of central banks and governments, which can be used to “stimulate” weak economies. The most common weapon of choice is monetary policy in the form of money printing and easy lending, which pumps large amounts of easy, fast credit into areas those in charge want to prop up. This is part of Keynesian economics, where governments try to “stimulate” spending during a recession or depression by having the Federal Reserve enact monetary policy (credit/debt expansion), while the government enacts fiscal policy by investing in its infrastructure. The problem is that the money usually goes to banks, which then gets lent to the major corporate players as if that is the infrastructure the people want saved. Investment and stock prices go up for the big guys, but the underlining failures of unemployment, weak money flow, and inequality remain.
This is supposed to be a short-run tactic, but what has happened (especially since 2008) is that money printing has continued at high rates for a prolonged period of time (Quantitative Easing). The newly printed money at low-to-zero interest rates drives equity prices up and spurs investment, but only artificially since the economy is still very weak and consumption is low. This creates massive equity bubbles of overvaluation that inevitably will pop if the economy does not improve; ripping apart many people’s retirement and savings accounts in the process. Inflation also rises as a result, indirectly hurting the middle and lower class through higher prices. In fact, the majority of the population hardly receives any benefit from this newly injected money into the economy. They might get a cookie or two in some extra part-time work, but ultimately it’s doing more harm than good by kicking the can down the road and furthering the wealth gap.
These equity bubbles can currently be found everywhere, as most bonds, real estate, and stocks are highly overvalued. It’s only the continuous money printing that is giving the semblance of rising equities and a strong economy; but in reality it is nothing but artificial growth that is temporarily floating to the top of the economic pyramid. It’s not just equity which is overvalued, as many currencies are propped up much higher then their economies would suggest (specifically the U.S. dollar) due to inflated assets and geopolitical power. This however does not come without a price, as exploding debt is presenting a monumental global hurdle that may be completely unavoidable. The piper must be paid.
5) Ridiculous Amounts Of Debt
As stated earlier, all new money created is done so as an instrument of debt, which inevitably must be paid back to someone, and usually with interest attached. So while it might inflate equity in the short-term and give the appearance of a recovery, it sacrifices long-term growth and prosperity for future generations by unloading massive amounts of debt onto them which they will eventually have to pay back. This has been accelerated since 2008 like no other time in history, as the system piled up debt at interest rates that were either extremely low, zero, or in some forms negative! Negative interest rates basically means that entities have to pay to keep their money in the bank, even though they are already unsecured creditors and the bank can take massive gambles with their money. Essentially, people may start losing money by holding it in the bank.
Due to a central banking money-printing bonanza, almost every country in the world is bankrupt, with many having unplayable amounts of debt. The U.S. in particular is completely bankrupt and showing no signs of coming out anytime soon. Not only are governments broke, but most banks are insolvent, many corporations are under heavy stress due to debt, and a high number of bonds are being relegated to junk. As debt puts a stranglehold on markets, it is likely that downgrades, defaults, and financial fraud are soon to be showing up at high frequencies. As stated earlier, the very design of the system requires ever-increasing amounts of debt to keep the Ponzi scheme going, which is why the can keeps getting kicked down the road.
Eventually the system hits a breaking point where it can no longer hold any more debt, essentially collapsing under its own weight. Many argue this is happening now as we speak. The more it goes on, the worse it gets. Unfortunately, the elite have become blinded to greed and shortsightedness, operating in a short game mindset of money-now and deal-with-problems-and long-term-growth-later, leaving little to no safety net to catch the fall.
6) High Risk and Short Game Mentality
The current system didn’t just spring out of nowhere, it has been building up for some time. Unfortunately, most moneymaking and government entities have become solely focused on making a profit in the short-term to payoff its stockholders and maintain job security. Developing long-term strategies which are beneficial for overall economic health have taken a back seat. No entity wants to personally sacrifice their position while others continue to play the game, just like no business person wants their entity to collapse on their own watch. This has led to a greedy and volatile global economy with very little security in place to protect it in the long-term. Risk levels are through the roof, especially since the whole system is highly centralized. One problem sets off a chain reaction all over the world. These people running the show think they can play God with the economy and control or fix it all, but in reality their ignorance and self-indulgence is only making the problem worse. Everyone knows that lies only lead to more lies, which inevitable make it worse in the end when it all comes unraveled.
Nothing demonstrates the extreme risk in the system like the derivatives market, which is basically a massive gambling arena for speculators. It is leading to a massive derivatives credit bubble and all kinds of speculation that is affecting market prices in unusual ways that don’t always reflect reality. It leaves some of the biggest banks in the world, which hold a lot of the people’s assets, highly exposed to covering large debts. This is especially scary when banks already are highly leveraged due to fractional reserve banking and low reserve requirements. If this 1.12 Quadrillion market were to pop, which it did to a large degree from credit default swaps in 2008, it will bring the whole system down and leave a great deal of people out of a lot of their hard-earned money. There is no doubt that it will happen again if this criminal activity is allowed to continue unabated.
7) Rampant Criminal And Illegal Activity
The whole system wouldn’t have gotten this bad without the rampant criminal and illegal activity that happens on an almost daily basis. One major area in which this is obvious is the precious metals markets, which are supposed to act as a hedge against a weak economy, but is fixed artificially low to hide the reality. One way this happens is by flooding the market with paper receipts to precious metals, which drives the price down due to over-supply. Since many don’t actually own their physical metals, there can be far more paper receipts to metals than actual physical supply. Just like with the banks, if the public were to wake up and realize that the economy is weak and limited physical supply is far below actual supply, a run on the physical metals markets would drive the price up and leave a lot of owners of paper metal receipts empty-handed.
Other major issues include rigged markets, fraudulent accounting, fudged economic data, funneled drug money, inaccurate press releases, withheld information, and buying off government officials, all of which fall by the wayside with little to no legal repercussions. Then there is the plunge protection team, which consists of high frequency traders that can conduct large financial trades in mere milliseconds, sometimes single-handedly driving the market up out of nowhere. Many speculate that the Exchange Stabilization Fund and the Global Collateral Account are the sources of hidden capital that artificially pump up markets through high frequency trades and capitalization of numerous junk assets that logically many would not want to buy. This keeps the players at top of the pyramid propped up financially; at least temporarily. Unfortunately, very few are even aware of any of these tactics, as they simply don’t have good information to reference and learn from, nor care to research deeper into anything alternative to mainstream.
8) Poor Information
This blatant manipulation and usury of money largely persists because the information the media is giving people is total nonsense and propaganda. Media does not reflect reality, and in some ways is the exact opposite. The reason being is that those who control and manipulate the markets are the same ones who own and control the media. Media is largely tied to advertising, finance, and government (Operation Mockingbird), therefore, these entities are almost always depicted in a good light, while their crimes and deceptions are buried and ignored. The public is completely misinformed and constantly buys into economic numbers and forecasts that are deliberately fudged to give the appearance of a healthy economy. This favors the elite insiders because they can pull out of markets before they collapse and then enter back in to consolidate by buying up assets for pennies on the dollar. It’s not just the economic system either, it’s the geo-political system that is falsely reported on, which inevitably has large affects on economic markets. People simply don’t understand how the system works on a micro or macro level because they have been taught nothing but lies and half-truths that represent a false economic matrix. This has led to a sleeping and misinformed public, too naïve and confused to do anything about it.
However, the game is starting to change, largely in part to the expansion of the Internet. The Internet has unleashed an unprecedented data dump of information out into the public that previously was next to impossible to obtain and dig up. Although a majority of people still don’t know where to find this information, or care to find it, there is a small but growing majority of people who do care and are starting to understand how it all really works. This group is no doubt making an impact on the global economy, as fraud and manipulation are harder to hide, causing more people to wake up and markets to slowly adjust to reality. Going even deeper, there is a large amount of data to suggest that the collapsing financial system is part of a much larger global reset in the world financial system with all types of geo-political ramifications.
9) Global Reset
With the U.S. being the world reserve currency, it has prospered greatly due to the fact that it can print fiat debt dollars in exchange for real assets, coupled with using its military to fight anyone trying to break away from this system. It also has the advantage of having a deal with OPEC, which requires those countries to trade their oil in U.S. dollars, also known as the Petrodollar system. Many countries are starting to understand the absurdity of doing all their international trade in U.S. dollars, as they realize they are getting screwed over by the system. It keeps the dollar and its allies artificially high, while keeping other currencies artificially low. As a result, many countries are beginning to break away from the U.S. petrodollar system and beginning to conduct international trade in other currencies and assets. This could be potentially catastrophic for the U.S. dollar, as its extreme expansion in supply over many years as the world reserve currency could come home to roost causing a potential worst-case scenario of hyperinflation.
There are already clear signs of de-dollarization throughout the world, as China and Russia are dumping massive amounts of treasury stock, therefore depleting high portions of their reserves. To help the transition, a new central bank called BRICS (Brazil, Russia, India, China, and South Africa) has formed to provide adequate liquidity for international trade outside the dollar. This has allowed agreements between nations wishing to trade outside the dollar to pop up all over. It also appears that the IMF is setting up the SDR to be the world reserve currency of the new world order and replace the dollar. It also seems the world is setting up a new geo-political order of increased world governance through “free-trade” deals and international institutions like the World Trade Organization, the United Nations, and the Bank For International Settlements among others. These are just some of the many solutions being offered by the establishment elite in order to solve the problem which they created.
10) Uncertain Solutions
Without doubt, the elite know a financial reset is coming. In fact they might actually be the ones facilitating it. Unlike before, low central bank confidence and weak balance sheets are making it increasingly difficult for central banks to come in and save the day any longer. It doesn’t mean they wont try, as solutions to the problem are already being offered; such as mandatory bail-ins, negative interest rates, more central bank money printing, and even a move to a cashless society. All these solutions however, are only kicking the can down the road and solely benefiting the elite establishment.
There is hardly any long-term solutions being offered which realistically help the people and rebuild the middle class. In many ways, if the situation becomes worse, the world could be on the verge of massive political revolution, increased social unrest, and even world war 3. Many are speculating that the western elite are pushing for world war 3 as a way of not only protecting the continuation of the current system, but as a way of masking a financial collapse and resetting the system while keeping the current power network camouflaged and in tact. There are many others who further speculate that the west is intentionally being set up for systemic collapse, so as to bring about a new world order, whereas international governance starts to take hold and the world economy starts to operate under one central system. A new world economic order could be a good thing, but the question is who is controlling it?
As far as the common person is concerned, getting informed remains the number one priority. Only when one is informed can one make sound decisions. This includes waking up family and friends, as hard as that may be. If one believes gold and silver to be intrinsically valuable and fixed artificially low, then inevitably it will jump if equity bubbles pop. Therefore, hedging your position by buying some physical metals might be a logical place to start, as its been an historic place to protect ones assets in bad financial times.
Another place might be Bitcoin, which is a decentralized crypto-currency with a fixed supply that does not hold strong attachments to the current economic system. Invest at your own risk, but nonetheless, diversifying one’s portfolio is something everyone needs to think about, especially if one has a family or holds all their money in a bank. People who hold their money in the bank are unsecured creditors and thus will not be getting much of their money back if it does collapse.
Finally, having supplies on hand such as food, water, and various other emergency goods may be smart, as a major collapse in centralized systems could bring about a shortage of supplies in local markets. History has demonstrated time and time again that collapse and hyperinflation does happen, and there is no reason to think the U.S. is somehow immune to it now. No matter one’s ideology, there is something fundamentally wrong with the way the economic system currently works, and it unavoidably must be addressed moving into the future.
Please research more on your own and come to your own conclusions. This article is only a best attempt to explain a very complex system. Only you can decide what is right for you and inevitable we must decide what’s right for us. One question that should be on everyone’s mind is whether the cure for the system is to keep it centralized but put new leaders in place, or whether it needs to be decentralized, and a new system should emerge to replace it. Whatever one believes, I would at least recommend that people take the time to entertain the ideas presented here with a clear and open mind; it’s better to be safe than sorry. The people’s full understanding of what is actually happening could not only help you prosper, but could very well determine what the system will look like in the future.
(Some good resources to learn more about what’s going on in the financial system include: The Dollar Vigilante, The X22 Report, James Corbett, Mike Maloney, SGT Report, Zero Hedge, and Andy Hoffman to name just a few)
Sources: https://www.youtube.com/watch?v=uwxDIAKJ4c8, http://www.zerohedge.com/news/2016-01-20/soon-comes-deluge, http://www.wsj.com/articles/oil-sinks-below-28-a-barrel-to-12-year-low-1453267718, https://www.rt.com/business/325911-low-oil-prices-bad/, http://www.zerohedge.com/news/2016-01-01/not-transitory-year-junk-bonds, http://www.zerohedge.com/news/2016-01-15/us-consumer-officially-hibernation-retail-sales-end-weakest-year-2009-control-group-, http://wolfstreet.com/2015/12/01/brazil-just-keeps-getting-worse-and-worse/, http://www.bloomberg.com/news/articles/2016-01-20/u-s-index-futures-tumble-as-global-stock-rout-deepens-in-asia, https://www.dollarvigilante.com/blog/2016/01/21/worldwide-market-collapse-continues-europe-us-japan-oil-crushed-bitcoin-and-gold-soar.html