From our group:
Dear Neighbors and Loved Ones-
It is with great sadness and concern that we come to you with the news that the Next Great Depression has arrived, along with the specter of war. Last Friday’s stock downturn was the 9th worst day in the history of the US stock market, and the 888 point drop was larger than the 777 point loss on September 29, 2008 and the biggest selloff in four years. (LINK, LINK). Any efforts to recover from these losses will hit a brick wall with the fact that the US has $7.7 – 9.0 TRILLLION coming due this next December as the Bush tax cuts end.
The Mother Of All Crashes (MOAC) is here, and will not go away for a long time. We are in more debt, have decimated our manufacturing capability by outsourcing, and we are involved in three major global conflicts and currency wars that assure our destruction. The BEST that we can HOPE for is a ‘Greece’ situation. However, when we look at the socio-economic situation in Greece, the hair on the backs of our neck stand on end.
In Greece all the personal and corporate pensions have been crushed, protests are rampant, people cannot feed themselves, and ‘austerity’ taxing and working well beyond retirement is a ‘given’ situation. People have sold their homes and are living in houses with multiple families to stay off the streets. Government foreclosures have been halted to prevent a flood of homeless into society. Pensions have been looted, and the run on banks have forced banks to institute ridiculously low daily withdrawals on accounts.
Mothers in Greece cannot care for their newborn children to the point that babies have been left on the doorsteps of police stations and fire departments in the hopes that the government will care for the children. The situation has become so bad that outside government building cardboard boxes have been placed with flashing lights on top, so that when a baby is put into the box the light flashes and the baby can be taken into care (Ref: Economist ‘V’ at roguemoney.net).
As bad as that is, things will get worse on Greece. With the agreement for austerity measures approved, the EU is moving for more pain on the people in Greece (more austerity), and is fast tracking mortgage foreclosures that will make hundreds of thousands of people homeless, and clears the way for ‘bail-ins’ where failed banks walk away from all business and give their depositors worthless shares of the failed bank. With the exception of the babies in boxes, we see all these things resting on the US public soon. Legislation and actions are moving in the same direction here in the US for pensions, banks, multiple family dwellings, foreclosures, and evictions. If you think that the FDIC will come to your rescue with insurance on your bank account – think again. Recent legislation (passed while the US public was sleeping) defines account holders as ‘unsecured investors,’ and the policies for ‘bail-in’ are in place.
Wars and Currency Wars
CHINA – Many proxy conflicts are underway, as well as nation-states positioning for ground troop and possibly regional tactical nuclear conflict. Back in June China accused Morgan Stanley of shorting the SHCOMP (Chinese stock market) and responded with selling off US treasuries (LINK). The Chinese stock market ‘crash’ on 27 July was its largest in history and was blamed on (you guessed it) Morgan Stanley. As the Chinese market (apparently) came under attack forcing the SHCOMP market from 5200 to 3500 the Chinese responded with: 1) cyber-attacks on our telecoms/internet through Brazil and China (Huntsville/Madison was one of the targets); 2) kicking the US out of Djibouti; 3) dumping $500 Billion in US treasury bonds; and 4) a series of Chinese currency devaluations that cost the US hundreds of billions of $. The US responded with rejecting China out of the IMF Special Drawing Rights (international loan access to the US/UK led central banks), and maybe something more sinister.
On August 11 China devalued its currency by 2%. On August 12 there was a horrible explosion in Tianjin that was suspicious in nature to the point that some think that the US did it in retaliation to devaluing their currency. (LINK, LINK). If you haven’t seen the explosion, we suggest that you look at it (LINK, LINK, LINK). People who believe that this was no accident point to the circumferential compression fractures in the soil around the 5 acre explosion crater that seem to indicate that the explosion was a subsurface event (not a surface accidental fire / explosion). The location and timing of the explosion also adds fuel to the fire that this was not an accident – as the crater is 2 miles from ECO City (LINK) in Tianjin, where the Asian Infrastructure Investment Bank (AIIB) will be officially started next month; which is a rival to the US/UK IMF, World Bank, Bank of International Settlements. Time will tell.
[Note: As I write this (2pm CST, Sunday, 23AUG15) there has been a large explosion at Sagamihara US military base supply depot in Japan, about 30 miles ESW of Tokyo.]
RUSSIA – News reports coming out of Russia and Ireland report that 90,000 Russian troops, an unknown number of main battle tanks, as well as (tactical) nuclear capable ‘Iskander’ missiles are moving to the Ukraine border with orders that include the use of tactical nuclear weapons (LINK,LINK). Apparently Russia believes that the Trident Juncture (LINK) military exercise is a cover for deploying assets to attack Russia and is planning to unleash nuclear weapons if that happens. Regardless, things do not look good at all (LINK).
The US Economy
The last two business days we have seen a definite downturn in sentiment and momentum in the markets. The whole world is feeling the recession as the German DAX, UK FTSE, etc.; suffered significant losses. In the last two weeks the DOW executed a ‘Death Cross’ pattern where the 50 day moving average broke significantly below the 200 day moving average. What this means in layman’s terms is that the market is going down and there is no upward momentum to slow it down, let alone stop it.
What we see is a continued downtrend next week, trending downward until a significant downward break in mid- to late September. This will break the confidence of savvy institutional investors who know about the $7.7 – 9.0 Trillion debt and ending Bush tax break coming due in December, and they will not come back into the market. That major support will be gone.
Foreign investment will scramble for the exits, and this will likely destroy the derivatives market that has underpinned this economy, and (just like in 1987, and 2001) you will not be able to sell your stock equities because: 1) there will be no buyers, and 2) executing a trade will be next to impossible as the brokers will take their phones off the hooks.
This crash will usher in a wave of employee firings as businesses cope with the deflationary shift where no one buys anything other than absolute necessities as fear grows. This fear cycle will feed on itself until we have violence in the streets.
To add insult to extreme injury: 1) the AIIB will be unveiled in (September or possibly in October) as a fiscally responsible alternative to the colossally indebted IMF/WB/BIS. Some 56 nations are charter members and over 130 are participants. 2) In October 9-10 in Lima Peru the IMF will have its fall meeting, and may set forth the plan to devalue/normalize currencies (this will hurt the US very badly as we have crushing debt). 3) The Chinese government will disclose its gold holdings (which are likely ~20,000 metric tonnes compared to our US advertised 8,000 tonnes), and may disclose it all in an effort to destroy the US economy. Regardless China will press for a full and open disclosure audit of our gold holdings, which will reveal that our national treasury has been looted.
What to Expect
These next few weeks to months will reveal the ugly side of our economy and society. Starting next week we can expect sharp drops, and ‘circuit breaker’ actions that try to slow the freefall we have begun. By no later than October we can expect violence on the streets as people lose their jobs, banks close their teller windows and refuse to give people their money, and welfare checks stop. If the ‘just in time’ delivery logistics fail we will be in real (lethal) trouble as the winter will bring bitter cold to the northeast with problems delivering fuel for heat. A war in the Ukraine and/or the Middle East will skyrocket gas prices, but delivery and usage will likely be next to nothing.
Natural disasters are on track to be a problem, and increase as time goes on. It was recently reported that Nevada has had over 5,000 earthquakes this past year (LINK), and the USG issued at least two ‘imminent earthquake’ warnings in the past month (LINK). The meteor that hit Iran on 31 July may or may not be part of the increase in meteor activity… we will see (LINK).
Observations and Considerations
If you are a person that has been relying on creature comforts and material goods for your foundation of stability, you are likely in a bad spot. As time goes on we see that our money, material goods, and comforts are coming to an end… a very bad and violent end. As always, The Madison institute Association admonishes everyone to call on The God Of The Bible in trying times like these. Our minds, in general, are just not ready for what is to come. HE is a God of comfort and love to those who believe in HIM, and heated fury to those who are against HIS WILL. Please lean on HIM. If you do not know how, or need some guidance on this you can call one of our board members 256-468-3161 (George), or 256-425-3013 (Bud).
At this time one should consider plans to have cash on hand, food, transportation (gas), and a place to go that is safe if anything should happen. It would also be wise to have your important papers and medications on hand to be with you as well. The recent past events (like the flash conflagration at Bridge Street a week ago) should be a reminder that our society is very fragile and can turn… deadly… on a dime.