Are we rapidly approaching a moment of reckoning for the global financial system? August is likely to be a relatively slow month as most of Europe is on vacation, but after that we will be moving into a "danger zone" where just about anything could happen. Historically, a financial crisis has been more likely to happen in the fall than during any other time, and this fall is shaping up to be a doozy. Much of the focus of the financial world is on whether or not the euro is going to break up, but even if the authorities in Europe are able to keep the euro together we are still facing massive problems. Countries such as Greece and Spain are already experiencing depression-like conditions, and much of the rest of the globe is sliding into recession. Unemployment has already risen to record levels in some parts of Europe, major banks all over Europe are teetering on the brink of insolvency, and the flow of credit is freezing up all over the planet. If things take a really bad turn, this crisis could become much worse than the financial crisis of 2008 very quickly.

All over the world people are starting to write about the possibility of a major economic crisis starting this fall.

For example, a recent article in the International Business Times discussed how some economists around the globe are fearing the worst for the coming months....

The consensus? The world economy has entered a final countdown with three months left, and investors should pencil in a collapse in either August or September.

Citing a theory he has been espousing since 2010 that predicts "a future lack of policy flexibility from the monetary and fiscal side," Jim Reid, a strategist at Deutsche Bank, wrote a note Tuesday that gloated "it feels like Europe has proved us right."

"The U.S. has the ability to disprove the universal nature of our theory," Reid wrote, but "if this U.S. cycle is of completely average length as seen using the last 158 years of history (33 cycles), then the next recession should start by the end of August."

The global financial system is so complex and there are so many thousands of moving parts that it is always difficult to put an exact date on anything. In fact, history is littered with economists that have ended up looking rather foolish by putting a particular date on a prediction.

But without a doubt we are starting to see storm clouds gather for this fall.

The following are 11 more signs that time is quickly running out for the global financial system....

#1 A number of very important events regarding the financial future of Europe are going to happen in the month of September. The following is from a recent Reuters article that detailed many of the key things that are currently slated to occur during that month....

In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.

On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy - or what do if one or both were to topple.

#2 Reuters is reporting that Spanish Economy Minister Luis de Guindos has suggested that Spain may need a 300 billion euro bailout.

#3 Spain continues to slide deeper into recession. The Spanish economy contracted 0.4 percent during the second quarter of 2012 after contracting 0.3 percent during the first quarter.

#4 The unemployment rate in Spain is now up to 24.6 percent.

#5 According to the Wall Street Journal, a new 30 billion euro hole has been discovered in the financial rescue plan for Greece.

#6 Morgan Stanley is projecting that the unemployment rate in Greece will exceed 25 percent in 2013.

#7 It is now being projected that the Greek economy will shrink by a total of 7 percent during 2012.

#8 German Finance Minister Wolfgang Schäuble says that the rest of Europe will not be making any more concessions for Greece.

#9 The UK economy has now plunged into a deep recession. During the second quarter of 2012 alone, the UK economy contracted by 0.7 percent.

#10 The Dallas Fed index of general business activity fell dramatically to -13.2 in July. This was a huge surprise and it is yet another indication that the U.S. economy is rapidly heading into a recession.

#11 As I have written about previously, a banking crisis is more likely to happen in the fall than at any other time during the year. The global financial system will enter a "danger zone" starting in September, and none of us need to be reminded that the crashes of 1929, 1987 and 2008 all happened during the second half of the year.

So is there any hope on the horizon?

European leaders have tried short-term solution after short-term solution and none of them have worked.

Now countries all over Europe are sliding into depression and the authorities in Europe seem to be all out of answers. The following is what one eurozone diplomat said recently....

"For two years we've been pumping up the life raft, taking decisions that fill it with just enough air to keep it afloat even though it has a leak," the diplomat said. "But now the leak has got so big that we can't pump air into the raft quickly enough to keep it afloat."

The boat is filling up with water faster than they can bail it out.

So what is the solution?

Well, some of the top names in economics on both sides of the Atlantic are urging authorities to keep the debt bubble pumped up by printing lots and lots more money.

For example, even though the U.S. government is already running trillion dollar deficits New York Times "economist" Paul Krugman is boldly proclaiming that now is the time to print and borrow even more money. He is proud to be a Keynesian, and he says that "you should be a Keynesian, too."

Across the pond, the International Business Editor of the Telegraph, Ambrose Evans-Pritchard, is strongly urging the ECB to print more money....

Needless to say, I will be advocating 1933 monetary stimulus à l'outrance, or trillions of asset purchases through old fashioned open-market operations through the quantity of money effect (NOT INTEREST RATE 'CREDITISM') to avert deflation – and continue doing so until nominal GDP is restored to its trend line, at which point the stimulus can be withdrawn again.

But is more money and more debt really the solution to anything?

In the United States, M2 recent surpassed the 10 trillion dollar mark for the first time ever. It has increased in size by more than 5 times over the past 30 years.

Unfortunately, our debt has been growing much faster than GDP has over that time period.

For example, during the second quarter of 2012 U.S. government debt grew by 274.3 billion dollars but U.S. GDP only grew by 117.6 billion dollars.

Our problem is not that there is not enough money floating around.

Our problem is that there is way, way too much debt.

But this is how things always go with fiat currencies.

There is always the temptation to print more.

That is one of the big reasons why every single fiat currency in history has eventually collapsed.

Printing more money will not solve our problems. It will just cause our problems to take a different form.

In the end, nothing that the authorities can do will be able to avert the crisis that is coming.

A lot of people are starting to realize this, and that is one reason why we are seeing so much economic pessimism right now.

For example, according to a new Rasmussen poll only 14 percent of all Americans believe that children in America today will be "better off" than their parents.

That is an absolutely stunning figure, but it just shows us where we are at.

Our economy has been in decline for a long time, and now we are rapidly approaching another major downturn.

You better buckle up, because this downturn is not going to be pleasant at all.

Monday, April 2, 2012

WAKE UP AMERICA!

10 Reasons Why The Reign Of The Dollar As The World Reserve Currency Is About To Come To An End

The U.S. dollar has probably been the closest thing to a true global currency that the world has ever seen. For decades, the use of the U.S. dollar has been absolutely dominant in international trade. This has had tremendous benefits for the U.S. financial system and for U.S. consumers, and it has given the U.S. government tremendous power and influence around the globe. Today, more than 60 percent of all foreign currency reserves in the world are in U.S. dollars. But there are big changes on the horizon. The mainstream media in the United States has been strangely silent about this, but some of the biggest economies on earth have been making agreements with each other to move away from using the U.S. dollar in international trade. There are also some oil producing nations which have begun selling oil in currencies other than the U.S. dollar, which is a major threat to the petrodollar system which has been in place for nearly four decades. And big international institutions such as the UN and the IMF have even been issuing official reports about the need to move away form the U.S. dollar and toward a new global reserve currency. So the reign of the U.S. dollar as the world reserve currency is definitely being threatened, and the coming shift in international trade is going to have massive implications for the U.S. economy.

A lot of this is being fueled by China. China has the second largest economy on the face of the earth, and the size of the Chinese economy is projected to pass the size of the U.S. economy by 2016. In fact, one economist is even projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.

So China is sitting there and wondering why the U.S. dollar should continue to be so preeminent if the Chinese economy is about to become the number one economy on the planet.

Over the past few years, China and other emerging powers such as Russia have been been quietly making agreements to move away from the U.S. dollar in international trade. The supremacy of the U.S. dollar is not nearly as solid as most Americans believe that it is.

As the U.S. economy continues to fade, it is going to be really hard to argue that the U.S. dollar should continue to function as the primary reserve currency of the world. Things are rapidly changing, and most Americans have no idea where these trends are taking us.

The following are 10 reasons why the reign of the dollar as the world reserve currency is about to come to an end....

#1 China And Japan Are Dumping the U.S. Dollar In Bilateral Trade

A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other. This was an incredibly important agreement that was virtually totally ignored by the U.S. media. The following is from a BBC report about that agreement....

China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade.

The deal will allow firms to convert the Chinese and Japanese currencies directly into each other.

Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.

#2 The BRICS (Brazil, Russia, India, China, South Africa) Plan To Start Using Their Own Currencies When Trading With Each Other

The BRICS continue to flex their muscles. A new agreement will promote the use of their own national currencies when trading with each other rather than the U.S. dollar. The following is from a news source in India....

The five major emerging economies of BRICS -- Brazil, Russia, India, China and South Africa -- are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders here Thursday.

The two agreements that will enable credit facility in local currency for businesses of BRICS countries will be signed in the presence of the leaders of the five countries, Sudhir Vyas, secretary (economic relations) in the external affairs ministry, told reporters here.

The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 percent over the last few years, but at $230 billion, remains much below the potential of the five economic powerhouses.

#3 The Russia/China Currency Agreement

Russia and China have been using their own national currencies when trading with each other for more than a year now. Leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade.

#4 The Growing Use Of Chinese Currency In Africa

Who do you think is Africa's biggest trading partner?

It isn't the United States.

In 2009, China became Africa's biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on that continent.

A report from Africa’s largest bank, Standard Bank, recently stated the following....

“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”

China seems absolutely determined to change the way that international trade is done. At this point, approximately 70,000 Chinese companies are using Chinese currency in cross-border transactions.

#5 The China/United Arab Emirates Deal

China and the United Arab Emirates have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other.

The UAE is a fairly small player, but this is definitely a threat to the petrodollar system. What will happen to the petrodollar if other oil producing countries in the Middle East follow suit?

#6 Iran

Iran has been one of the most aggressive nations when it comes to moving away from the U.S. dollar in international trade. For example, it has been reported that India will begin to use gold to buy oil from Iran.

Tensions between the U.S. and Iran are not likely to go away any time soon, and Iran is likely to continue to do what it can to inflict pain on the United States in the financial world.

#7 The China/Saudi Arabia Relationship

Who imports the most oil from Saudi Arabia?

It is not the United States.

Rather, it is China.

As I wrote about the other day, China imported 1.39 million barrels of oil per day from Saudi Arabia in February, which was a 39 percent increase from one year earlier.

Saudi Arabia and China have teamed up to construct a massive new oil refinery in Saudi Arabia, and leaders from both nations have been working to aggressively expand trade between the two nations.

So how long is Saudi Arabia going to stick with the petrodollar if China is their most important customer?

That is a very important question.

#8 The United Nations Has Been Pushing For A New World Reserve Currency

The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world.

In particular, one UN report envisions "a new global reserve system" in which the U.S. no longer has dominance....

"A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency."

#9 The IMF Has Been Pushing For A New World Reserve Currency

The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world.

In particular, one IMF paper entitled "Reserve Accumulation and International Monetary Stability" that was published a while back actually proposed that a future global currency be named the "Bancor" and that a future global central bank could be put in charge of issuing it....

"A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing."

#10 Most Of The Rest Of The World Hates The United States

Global sentiment toward the United States has dramatically shifted, and this should not be underestimated.

Decades ago, we were one of the most loved nations on earth.

Now we are one of the most hated.

If you doubt this, just do some international traveling.

Even in Europe (where we are supposed to have friends), Americans are treated like dirt. Many American travelers have resorted to wearing Canadian pins so that they will not be treated like garbage while traveling over there.

If the rest of the world still loved us, they would probably be glad to continue using the U.S. dollar. But because we are now so unpopular, that gives other nations even more incentive to dump the dollar in international trade.

So what will happen if the reign of the U.S. dollar as the world reserve currency comes to an end?

Well, some of the potential effects were described in a recent article by Michael Payne....

"The demise of the dollar will also bring radical changes to the American lifestyle. When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. It will bring very undesirable changes to the American lifestyle through massive inflation, high interest rates on mortgages and cars, and substantial increases in the cost of food, clothing and gasoline; it will have a detrimental effect on every aspect of our lives."

Most Americans don't realize how low the price of gasoline in the United States is compared to much of the rest of the world.

There are areas in Europe where they pay about twice what we do for gasoline. Yes, taxes have a lot to do with that, but the fact that the U.S. dollar is used for almost all oil transactions also plays a significant role.

Today, America consumes nearly a quarter of the world's oil. Our entire economy is based upon our ability to cheaply transport goods and services over vast distances.

So what happens if the price of gasoline doubles or triples from where it is at now?

In addition, if the reign of the U.S. dollar as global reserve currency ends, the U.S. government is going to have a much harder time financing its debt.

Right now, there is a huge demand for U.S. dollars and for U.S. government debt since countries around the world have to keep huge reserves of U.S. currency lying around for the sake of international trade.

But what if that all changed?

What if the appetite for U.S. dollars and U.S. debt dried up dramatically?

That is something to think about.

At the moment, the global financial system is centered on the United States.

But that will not always be the case.

The things talked about in this article will not happen overnight, but it is important to note that these changes are picking up steam.

Under the right conditions, a shift in momentum can become a landslide or an avalanche.

Clearly, the conditions are right for a significant move away from the U.S. dollar in international trade.

So when will this major shift occur?

Only time will tell.

Sunday, November 20, 2011

Paradise Valley Sales Analysis for Shirley

There have been Four closed sales in Paradise Valley, Arizona in 2011; Where the home was listed for Over 5 Million.

5802 E. Cholla Lane

Started at $8,900,000......Sold for $4,225,000

Roughly 9,450 square feet

523 Days on Market (11-09-2009)

5937 N. La Colina

Started at $5,000,000

Closed 11-11-2011

$4,345,000 AT ABSOLUTE AUCTION

Approx. 9523 square feet

49 days on market

8644 N. Morning Glory

Started at $6,900,000 (10-12-2009)

Closed 1-14-2011 $4,500,000

310 Days on market

7001 N. Longlook

Started at $7,950,000

Closed 5-25-2011 $5,500,000

436 Days on market

UNDER CONTRACT:

5600 N. Saguaro

Started at $23,000,000

Currently Listed for $14,000,000

1382 Days on Market

Approx. 14,304 square feet

Foreclosure auction scheduled 06-01-2012

oustanding Balance indicated $8,455,535

Wednesday, October 26, 2011

$600 Trillion is the LOW Estimate

The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System

Most people have no idea that Wall Street has become a gigantic financial casino. The big Wall Street banks are making tens of billions of dollars a year in the derivatives market, and nobody in the financial community wants the party to end. The word "derivatives" sounds complicated and technical, but understanding them is really not that hard. A derivative is essentially a fancy way of saying that a bet has been made. Originally, these bets were designed to hedge risk, but today the derivatives market has mushroomed into a mountain of speculation unlike anything the world has ever seen before. Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion. Keep in mind that the GDP of the entire world is only somewhere in the neighborhood of $65 trillion. The danger to the global financial system posed by derivatives is so great that Warren Buffet once called them "financial weapons of mass destruction". For now, the financial powers that be are trying to keep the casino rolling, but it is inevitable that at some point this entire mess is going to come crashing down. When it does, we are going to be facing a derivatives crisis that really could destroy the entire global financial system.

Most people don't talk much about derivatives because they simply do not understand them.

Perhaps a couple of definitions would be helpful.

The following is how a recent Bloomberg article defined derivatives....

Derivatives are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates.

The key word there is "speculation". Today the folks down on Wall Street are speculating on just about anything that you can imagine.

The following is how Investopedia defines derivatives....

A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

A derivative has no underlying value of its own. A derivative is essentially a side bet. Usually these side bets are highly leveraged.

At this point, making side bets has totally gotten out of control in the financial world. Side bets are being made on just about anything you can possibly imagine, and the major Wall Street banks are making a ton of money from it. This system is almost entirely unregulated and it is totally dominated by the big international banks.

Over the past couple of decades, the derivatives market has multiplied in size. Everything is going to be fine as long as the system stays in balance. But once it gets out of balance we could witness a string of financial crashes that no government on earth will be able to fix.

The amount of money that we are talking about is absolutely staggering. Graham Summers of Phoenix Capital Research estimates that the notional value of the global derivatives market is $1.4 quadrillion, and in an article for Seeking Alpha he tried to put that number into perspective....

If you add up the value of every stock on the planet, the entire market capitalization would be about $36 trillion. If you do the same process for bonds, you’d get a market capitalization of roughly $72 trillion.
The notional value of the derivative market is roughly $1.4 QUADRILLION.
I realize that number sounds like something out of Looney tunes, so I’ll try to put it into perspective.
$1.4 Quadrillion is roughly:
-40 TIMES THE WORLD’S STOCK MARKET.
-10 TIMES the value of EVERY STOCK & EVERY BOND ON THE PLANET.
-23 TIMES WORLD GDP.

It is hard to fathom how much money a quadrillion is.

If you started counting right now at one dollar per second, it would take 32 million years to count to one quadrillion dollars.

Yes, the boys and girls down on Wall Street have gotten completely and totally out of control.

In an excellent article that he did on derivatives, Webster Tarpley described the pivotal role that derivatives now play in the global financial system....

Far from being some arcane or marginal activity, financial derivatives have come to represent the principal business of the financier oligarchy in Wall Street, the City of London, Frankfurt, and other money centers. A concerted effort has been made by politicians and the news media to hide and camouflage the central role played by derivative speculation in the economic disasters of recent years. Journalists and public relations types have done everything possible to avoid even mentioning derivatives, coining phrases like “toxic assets,” “exotic instruments,” and – most notably – “troubled assets,” as in Troubled Assets Relief Program or TARP, aka the monstrous $800 billion bailout of Wall Street speculators which was enacted in October 2008 with the support of Bush, Henry Paulson, John McCain, Sarah Palin, and the Obama Democrats.

Most people do not realize this, but derivatives were at the center of the financial crisis of 2008.

They will almost certainly be at the center of the next financial crisis as well.

For many, alarm bells went off the other day when it was revealed that Bank of America has moved a big chunk of derivatives from its failing Merrill Lynch investment banking unit to its depository arm.

So what does that mean?

An article posted on The Daily Bail the other day explained that it means that U.S. taxpayers could end up holding the bag....

This means that the investment bank's European derivatives exposure is now backstopped by U.S. taxpayers. Bank of America didn't get regulatory approval to do this, they just did it at the request of frightened counterparties. Now the Fed and the FDIC are fighting as to whether this was sound. The Fed wants to "give relief" to the bank holding company, which is under heavy pressure.
This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input.

So did you hear about this on the news?

Probably not.

Today, the notional value of all the derivatives held by Bank of America comes to approximately $75 trillion.

JPMorgan Chase is holding derivatives with a notional value of about $79 trillion.

It is hard to even conceive of such figures.

Right now, the banks with the most exposure to derivatives are JPMorgan Chase, Bank of America, Goldman Sachs, Citigroup, Wells Fargo and HSBC Bank USA.

Morgan Stanley also has tremendous exposure to derivatives.

You may have noticed that these are some of the "too big to fail" banks.

The biggest U.S. banks continue to grow and they continue to get even more power.

Back in 2002, the top 10 U.S. banks controlled 55 percent of all U.S. banking assets. Today, the top 10 U.S. banks control 77 percent of all U.S. banking assets.

These banks have gotten so big and so powerful that if they collapsed our entire financial system would implode.

You would have thought that we would have learned our lesson back in 2008 and would have done something about this, but instead we have allowed the "too big to bail" banks to become bigger than ever.

And they pretty much do whatever they want.

A while back, the New York Times published an article entitled "A Secretive Banking Elite Rules Trading in Derivatives". That article exposed the steel-fisted control that the "too big to fail" banks exert over the trading of derivatives. Just consider the following excerpt from the article....

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.
The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

So what institutions are represented at these meetings?

Well, according to the New York Times, the following banks are involved: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.

Why do those same five names seem to keep popping up time after time?

Sadly, these five banks keep pouring money into the campaigns of politicians that supported the bailouts in 2008 and that they know will bail them out again when the next financial crisis strikes.

Those that defend the wild derivatives trading that is going on today claim that Wall Street has accounted for all of the risks and they assume that the issuing banks will always be able to cover all of the derivative contracts that they write.

But that is a faulty assumption. Just look at AIG back in 2008. When the housing market collapsed AIG was on the wrong end of a massive number of derivative contracts and it would have gone "bust" without gigantic bailouts from the federal government. If the bailouts of AIG had not happened, Goldman Sachs and a whole lot of other people would have been left standing there with a whole bunch of worthless paper.

It is inevitable that the same thing is going to happen again. Except next time it may be on a much grander scale.

When "the house" goes "bust", everybody loses. The governments of the world could step in and try to bail everyone out, but the reality is that when the derivatives market comes totally crashing down there won't be any government on earth with enough money to put it back together again.

A horrible derivatives crisis is coming.

It is only a matter of time.

Stay alert for any mention of the word "derivatives" or the term "derivatives crisis" in the news. When the derivatives crisis arrives, things will start falling apart very rapidly.

MacDaddyPaddy

Friday, September 7, 2012

9/11/2012