As I have said in another post: anything is possible. The only thing we know with certainty is that we live in a world full of uncertainty. This story explains how economists and investment gurus have been predicting economic Armageddon since the book of Genesis. Is The U.S. Economy Going To Crash This Year?
It’s call business cycles. It’s how any economy works. Things go well for a while, people buy more, factories turn out more products, banks lend more, people buy more, factories turn our more products… Until one day, for whatever reason, the cycle reverts itself: people buy less, factories produce less, banks lend less.
Here’s what you need to know: when things are good everyone expects them to be good forever. So it’s always – always – a big surprise when the cycle reverts (it always does). When things are bad, everyone expects them to get worse and worse.
So if you have the stamina, guts and capital, be a contrarian. You will not only make a lot of money – you will also live a happier, more balanced life.
The collapse has already begun (just have a look at the statistics on American economy over the years ). History teaches us that there is a trend in the development of ‘civilisations’: rise, climax, fall. America is no exception to this rule.
Will the American economy collapse?
It is very probable.
The key thing that will collapse the whole economy are the derivatives. The derivative is a security or a contract between two or more parties that depend or derive from an underlying asset. In simple words, a derivative is a bet on everything you can imagine, generally on stocks, currency pairs, commodities, etc. The problem is that the banks are working too hard to profit from derivatives, and there is formed a huge bubble that will explode the whole economy. The total value of the global derivative market is at least $ 700 trillion (over 1 quadrillion according to other sources), while the global GDP is only $ 70 trillion. The derivative is a speculative instrument because it has not a real value, but a speculative value which depends on the underlying asset.
Imagine this way – I bet $1000 that a stock of $100 value will go up. My competitor bets $500 that it will go down. I have more friends that believe my prediction, and they also bet on the same $100 stock that it will go up. Moreover, some of my friends would like to bet on the fact that I will win. So, my prediction will gather $1000 000 that depend on a $100 stock. In case the stock price falls, all of my friends, including me, will lose the money. It is a disaster for us, but we paid the price, and it is OK because we HAD this money. However, the banks got exposed to derivative so much, that when the derivatives market will collapse, there won’t be enough money to pay. In fact, all of the stocks, commodities, and money in the world won’t be enough to pay for this derivative failure.
You probably remember that the 2008 crisis was caused by a housing bubble, in which the CDOs were they key thing – in fact another form of derivative. At that time, the US government helped the weakening banks (5 too big to fail banks) with money (except the Lehman Brothers, which was bankrupt). Well, when this collapse will happen (derivative), no one will be able to offer a bailout or to help the banks – it will be a total collapse.
Now, there is a cycle of bubbles that in the end lead to a crash. The first was the dot com bubble, when people trusted the internet companies too much, and at some point the stock market dropped.
Here is the housing bubble that lead to the 2008 crisis:
Now, here is the derivative market (at the present moment its level is higher than the peak on the chart):
Do you see any similarities? The derivative market is at its peak and will collapse soon. Why? Because it is a bubble, and there is no real value behind all these derivative – they are only speculative.
There are 4 US banks that have a 95% share of the total US derivative market, yet their assets cost 10 to 20 times less than the derivative exposure.
These banks will be responsible for the future collapse, the same as they were responsible for the 2008 crisis.
In fact, Warren Buffet once referred to derivatives as ‘financial weapons of mass destruction’.
Here is the exposure of US big banks against their assets:
- Total Assets: $2,573,126,000,000 (about 2.6 trillion dollars)
- Total Exposure To Derivatives: $63,600,246,000,000 (more than 63 trillion dollars)
- Total Assets: $1,842,530,000,000 (more than 1.8 trillion dollars)
- Total Exposure To Derivatives: $59,951,603,000,000 (more than 59 trillion dollars)
- Total Assets: $856,301,000,000 (less than a trillion dollars)
- Total Exposure To Derivatives: $57,312,558,000,000 (more than 57 trillion dollars)
Bank Of America
- Total Assets: $2,106,796,000,000 (a little bit more than 2.1 trillion dollars)
- Total Exposure To Derivatives: $54,224,084,000,000 (more than 54 trillion dollars)
- Total Assets: $801,382,000,000 (less than a trillion dollars)
- Total Exposure To Derivatives: $38,546,879,000,000 (more than 38 trillion dollars)
- Total Assets: $1,687,155,000,000 (about 1.7 trillion dollars)
- Total Exposure To Derivatives: $5,302,422,000,000 (more than 5 trillion dollars)
Since the United States was first established, the U.S. government has run up a total debt of a bit more than 18 trillion dollars. It is the biggest mountain of debt in the history of the planet, and it has grown so large that it is literallyat this point.
But the top five banks in the list above each have exposure to derivatives that is more than twice the size of the national debt, and several of them have exposure to derivatives that is more than three times the size of the national debt.
That is why I keep saying that there will not be enough money in the entire world to bail everyone out when this derivatives bubble finally implodes
The stock market is now the most overvalued it has been in history, save the period leading up to the 1929 market crash. Even factoring in the Trump tax cuts, stocks are roughly 80% overvalued. The only other times in our history when stock prices have been this high relative to earnings, a huge stock market crash and economic collapse has always followed.
Several noted economists and distinguished investors are warning of a stock market crash and economic collapse . Jim Rogers, who founded the Quantum Fund with George Soros, went apocalyptic when he said, “A $68 trillion ‘Biblical’ economic collapse is poised to wipe out millions of Americans.” Mark Faber, Dr. Doom himself, recently told that “investors are on the Titanic” and stocks are about to “endure a gut-wrenching drop that would rival the greatest stock market crash history.” And the prophetic economist Andrew Smithers warns, “U.S. stocks are now about 80% overvalued.” Smithers backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know that a horrible stock market crash and economic collapse happened next. Stocks fell by 89% and 50%, respectively.
Even the Royal Bank of Scotland says the markets are flashing stress alerts akin to the 2008 crisis. They told their clients to “Sell Everything” because “in a crowded hall, the exit doors are small.” James Dale Davidson is the famed economist who correctly predicted the collapse of 1999 and 2007. Davidson now warns, “There are three key economic indicators screaming SELL. They don’t imply that a 50% economic collapse is looming – it’s already at our doorstep.”
John Rubino for a critical update of the economy and the looming financial crisis and dollar collapse. They discuss the Trump presidency overseeing a historic crash, They also discuss the pension bubble, which is at the point of no return. Are You Prepared For The Coming Economic Collapse And The Next Great Depression? Economic collapse and financial crisis is rising any moment. Getting informed about collapse and crisis may earn you, or prevent to lose money.