(News & Editorial/ The Fiscal Cliff Looms)
“The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market. But it could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up and the breakdown of the whole monetary system.”…… Ludwig von Mises, 1949
A. What is the Fiscal Cliff?
4 Oct, 2012, The Ready Store
As the presidential debates evidenced last night, the economy is a major concern for many Americans. In fact, several people have been mentioning the “fiscal cliff” when calling in and talking with our customer service team.
So, what is the fiscal cliff?
The “fiscal cliff” is a term that refers to the problem that the government will face at the end of the year when the terms of the Budget Control Act of 2011 are scheduled to take effect. They include items of tax increases, drastic spending cuts, debt limits, and unemployment benefit expirations.
The following link (copy & paste) takes you to a CBS news report, explanation of the Fiscal Cliff:
President George W. Bush’s signed tax cuts into effect during 2001 and 2003. In 2010, President Barack Obama signed a two year extension of those tax cuts. At the end of the year, those tax cuts are set to expire and the tax rates will be raised to what they were before the Bush tax cuts. That translates into a tax increase for more than 80 percent of Americans.
So, you remember those debt limit negotiations a few months ago? Theeeey’re back! The two parties had settled on the Budget Control Act of 2012 during their negotiations to increase the nation’s debt limit.
The Act set up a “super committee” to negotiate a deal to reform taxes and reduce entitlements. In order to motivate the super committee, the Act put in place automatic spending cuts that would take place if the super committee failed to reach an agreement. The super committee did fail. That means that at the end of the year, there will be about $1 trillion of automatic spending cuts over the next 10 years beginning January 1. Half of those cuts will be to the Department of Defense’s budget.
Another thing with those debt limit negotiations: The two parties only agreed to raise the nation’s debt limit long enough to get past the elections in November. That means that around the end of the year, there will be another debate about what to do about the debt ceiling. If Congress fails to reach an agreement and does not increase the debt ceiling, the federal government will likely default on many promised payments.
Congress has steadily increased the length of time that a person can receive unemployment benefits since the recession in 2008. The last extension is set to expire at the end of 2012. While this probably wouldn’t be a problem in other years, this could present a problem when coupled with all the other cuts in the Budget Control Act.
Possible Effects of the Fiscal Cliff
The Congressional Budget Office (CBO) has expressed the concern that the fiscal cliff would slide the U.S. economy into a significant recession. According to the CBO’s report, the economy would shrink by 2.9 percent in the first half of 2013 and by 0.5 percent during the whole year. The fiscal cliff would also potentially raise the unemployment rate from 8.1 to 9.1 percent.
A positive point coming out of the fiscal cliff is that it would slow the deficit. During 2013, the CBO projects that the nation would only increase their deficit by $641 billion instead of $1.13 trillion.
B. Into the Meat Grinder: A “Market Meltdown the Likes of Which We’ve Never Seen Is Upon Us”
28 August 2012, SHTFplan.com, Mac Slavo
Pasted from: <http://www.shtfplan.com/charlie-mcgrath/into-the-meat-grinder-a-major-market-meltdown-the-likes-of-which-weve-never-seen-is-upon-us_08282012>
America is about to be put through the meat grinder and despite what President Obama or Governor Mitt Romney say they will do to fix the fundamental issues facing our country, the end result is inevitable.
Neither the Republicans or the Democrats can change what’s coming, because the fact is, they are equally responsible for where we are today.
As Charlie McGrath of Wide Awake News notes, it’s no longer just bloggers and alternative media in the fringe corners of the internet warning about the coming collapse of life in America as we have come to know it.
The crisis of reality is being forecast by some of the most elite institutions and insiders in the world, and we’d better be paying attention.
I want to give you a few predictions and then tell I’ll you who they’re from. It might surprise you.
Prediction number 1: We’re heading headlong into a financial meat grinder.
Prediction number 2: We’re about to plunge off a financial cliff.
Prediction number 3: Major market meltdown the likes of which we’ve never seen is upon on us.
This wasn’t from some alternative media site or somebody that’s peddling gloom and doom.
The first one is from JP Morgan, the second from Ben Bernanke, and the third was from Steven Rattner, former Obama Treasury adviser.
The IMF and the US Congressional budget office are both warning about the largest tax increase and the largest spending cut in history hitting this country.
They’re doing this for a reason.
It isn’t because it’s not going to happen. It is because it’s going to happen.
When it all comes crashing down, when it all comes falling apart, when the sovereign debt landmine explodes around this planet we will be sitting here in a deflationary spiral, the likes of which we have never seen. They will be sitting there ready to swoop in and grab up everything at bargain basement, bottom of the dollar prices. It will be the Tulip bubble all over again. You will be sitting there holding nothing and then blaming your neighbor for being here.
These same criminal elite that promised to end wars, that promised to audit the Federal Reserve, that promised to get our financial house in order, are continuing to expand the power, the role and the control of government.
“Alert! Into the Meat Grinder We Go”, YouTube video live link below:
At this point it is our position that there is nothing – absolutely nothing – that will be done to change the course on which we’ve embarked over the last several decades. The consequences of years of spending, borrowing and centralization of control cannot be reversed.
The system as it exists today, where we enjoy relative wealth, stability and peace, will inevitably experience a complete reset.
The elite know this is coming, as evidenced by their recent actions and the whispers on Wall Street and throughout the upper echelons of finance and government.
C. Is There Going To Be A Stock Market Crash In The Fall?
28 August 2012, The Economic Collapse,
Is the stock market going to crash by the end of this year? Are we on the verge of major financial chaos on a global scale? Well, this is the time of the year when investors start getting nervous. We all remember what happened during the fall of 1929, the fall of 1987 and the fall of 2008. However, it is important to keep in mind that we do not see a stock market crash in the fall of every year. Some years the stock market cruises through the months of September, October, November and December without any problems whatsoever. But this year conditions certainly seem to be right for a “perfect storm” to develop. Technical indicators are screaming that a stock market decline is imminent and sources in the financial industry all over the world are warning that a massive crisis is on the way. In fact, the Telegraph ran a story with the following shocking headline the other day: “Market crash ‘could hit within weeks’, warn bankers”. What you are about to read should alarm you. But it is not a guarantee that anything will or will not happen. When Ben Bernanke gives his speech at the Jackson Hole summit on Friday he could announce to the rest of the world that the Federal Reserve has decided to launch QE3 and that the Fed will be printing up trillions of new dollars. If that happened global financial markets would leap for joy. So it is always a dangerous thing when anyone out there tries to tell you that they can “guarantee” what is about to happen in the financial world. There are just so many moving parts. But if we do not see major intervention by the governments of the world or by global central banks a major financial crisis could rapidly develop this fall. The conditions are certainly right for a stock market collapse, and we could easily see a repeat of what happened back in 2008.
The truth is that the second half of 2012 looks a little bit more like the second half of 2008 with each passing day.
For example, credit default swaps are soaring just like we saw back during the last financial crisis. The following is from a recent article in the Telegraph by Harry Wilson and Philip Aldrick….
“Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group’s implosion nearly three years ago.
Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender’s bonds against default is now £343,540.”
The Telegraph also published some ominous warnings from anonymous banking executives in their recent article….
“The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” said one senior London-based bank executive.”
One anonymous banker was even bold enough to predict a “market shock” for “September or October”….
“I think we are heading for a market shock in September or October that will match anything we have ever seen before,” said a senior credit banker at a major European bank.”
Of course there are analysts on this side of the pond that are incredibly bearish right now as well. The warnings from Europe line up very well with what Bob Janjuah of Nomura Securities has been saying….
“Based on the reasons set out earlier and also covered in my two prior notes, over the August to November period I am looking for the S&P500 to trade off down from around 1400 to 1100/1000 – in other words, I expect over the next four months to see global equity markets fall by 20% to 25% from current levels and to trade at or below the lows of 2011! US equity markets, along with parts of the EM spectrum, will I think underperform eurozone equity markets, where already very little hope resides.”
Others are issuing similar warnings. Just check out what a couple of Bank of America analysts said in a report the other day….
“Our strategists see an unusually high number of macro catalysts over the next 3-6 months that could take markets lower. We expect economic growth to disappoint in the second half of the year in anticipation of the fiscal cliff. This would exacerbate any slowdown from the deepening recession in Europe and decelerating growth in emerging markets. There is also the ongoing tension in the Middle East, the potential for a US credit downgrade and accelerating downward analyst estimate revisions. To top it off, September is seasonally the weakest month of the year for stock price returns.”
There has been an unusual amount of chatter in the financial world about the September to December time frame.
That could mean something or it could mean nothing.
But is is very interesting to watch what some top financial insiders are doing with their stocks right now.
Dennis Gartman, the publisher of the Gartman Leter, has dumped all of his stocks at this point.
As I have written about previously, George Soros has dumped all of his stock in banking giants JP Morgan, Citigroup and Goldman Sachs.
Are they just being paranoid?
Or do they know something that we do not?
If you are looking for the next “Lehman Brothers moment” in the United States, you might want to watch Morgan Stanley. Morgan Stanley was heavily involved in the Facebook IPO disaster, earlier this year their credit rating was downgraded, and now there are persistent rumors that Morgan Stanley is in big trouble and that it will be allowed to fail. You can check out some of these rumors for yourself here, here and here.
But of course as I have said all along the center of the coming crisis is going to be in Europe, and many analysts agree with me. For example, the following is what the chairman of Casey Research, Doug Casey, had to say during a recent interview….
“Europe is a full cycle ahead of the U.S. Its governments and its banks are both bankrupt. It’s a couple of drunks standing on the street corner holding each other up at this point. Europe is in much worse shape than the U.S. It’s highly regulated, highly taxed and much more socially unstable.
Europe is going to be the epicenter of the coming storm. Japan is waiting in the wings, as is China. This is going to be a worldwide phenomenon. Of course, the U.S. will be in it, too. We’re going to see this all over the world.”
Much of southern Europe is already experiencing depression-like conditions. Unemployment in both Greece and Spain is well above 20 percent and both economies are steadily shrinking.
Money is flowing out of Spanish banks at an unprecedented rate right now. Just take a look at these charts. The only thing that is going to keep the Spanish banking system from totally collapsing is outside intervention.
But the truth is that all of Europe is in big trouble. Even German companies are slashing job right now. For example, check out what Siemens is up to….
“German engineering conglomerate Siemens (SIEGn.DE) is in early internal talks to cut thousands of jobs in response to a weakening economy, particularly in Europe, a German newspaper reported.
Decisions could be made in October or November, according to daily Boersen-Zeitung, which did not specify its sources.
A Siemens spokesman declined to comment.”
We are living in the greatest debt bubble in the history of the world, and at some point that bubble is going to burst in a very messy way.
It is vital that people understand that our system is not even close to sustainable.
Knowing exactly when it will collapse is not nearly as important as understanding that a collapse is absolutely inevitable.
I think what former World Bank economist Richard Duncan had to say recently is very helpful….
“The explosion in credit drove economic growth in the U.S. and around the world, and now that’s the only thing that’s keeping us from collapsing in a debt/deflation spiral,” he said. “[What] I think everybody needs to understand is that the kind of economy that we have now, it’s not capitalism. It has very little in common with capitalism. Capitalism was an economic system in which the government played very little role …. Under capitalism, gold was money and the government had nothing to do with it. Now the central bank creates the money and manipulates its value.”
And he is very right.
We aren’t seeing a failure of capitalism.
What we are witnessing is the failure of debt-based central banking.
And if you think that the global elite are not aware of what is happening then you have not been paying attention.
This summer the global elite have been preparing very hard. Either they are getting very paranoid or they know things that we do not.
If you want to catch up on what the global elite have been up to recently, check out these three articles that I have published previously…. [If the hyper links below don’t work, copy/paste the text into your browser and the sites will be available. Mr Larry]
-“Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?“
If you are waiting for the nightly news to tell you what to do, then you have not learned anything.
Did anyone in the mainstream media warn you about what was about to happen back in 2008?
Of course not.
The “authorities” insisted that everything was going to be just fine and many average Americans were absolutely wiped out.
So don’t expect someone to come along and nicely inform you that your retirement savings are about to be absolutely devastated.
In this day and age it is absolutely critical for people to learn to think for themselves.
Barack Obama is not going to save you.
Mitt Romney is not going to save you.
The U.S. Congress is not going to save you. They are too busy living the high life at taxpayer expense.
The system is not looking out for you. Nobody is really going to care if your financial planning gets turned upside down. This is a cold, cruel world and you need to understand how the game is played. The financial insiders are looking out for themselves and most of them usually are able to avoid financial disaster.
Average folks like you and I are normally not so fortunate.
There are lots of warning signs that indicate that this fall could be a very turbulent time for global financial markets.
Ignore them at your own peril.